INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
G.R. No. L-5915             March 31, 1955
EAGLE STAR INSURANCE CO., LTD., KURR STEAMSHIP
CO., INC., ROOSEVELT STEAMSHIP AGENCY, INC., and
LEIF HOEGH & COMPANY, A/S., petitioners, 
vs.
CHIA YU, respondent.
REYES, A., J.:
On January 15, 1946, Atkin, Kroll & Co., loaded on the S. S.
Roeph Silverlight owned and operated by Leigh Hoegh &
Co., A/S, of San Francisco California, 14 bales of assorted
underwear valued at P8,085.23 consigned to Chia Yu in the
City of Manila. The shipment was insured against all risks by
Eagle Star Ins. Co. of San Francisco, California, under a
policy issued to the shipper and by the latter assigned to the
consignee. The vessel arrived in Manila on February 10,
1946, and on March 4 started discharging its cargo into the
custody of the Manila Terminal Co., Inc., which was then
operating the arrastre service for the Bureau of Customs. But
the 14 bales consigned to Chia Yu only 10 were delivered to
him as the remaining 3 could not be found. Three of those
delivered were also found damaged to the extent of 50 per
cent.
Chia Yu claimed indemnity for the missing and damaged
bales. But the claim was declined, first, by the carrier and
afterward by the insurer, whereupon Chia Yu brought the
present action against both, including their respective agents
in the Philippines. Commenced in the Court of First Instance
of Manila on November 16, 1948, or more than two years
after delivery of the damaged bales and the date when the
missing bales should have been delivered, the action was
resisted by the defendants principally on the ground of
prescription. But the trial court found for plaintiff and
rendered judgment in his favor for the sum claimed plus legal
interest and costs. The judgment was affirmed by the Court
of Appeals, and the case is now before us on appeal
by certiorari.
Except for the controversy as to the amount for which the
carrier could be held liable under the terms of the bill of
lading, the only question presented for determination is
whether plaintiff's action has prescribed.
On the part of the carrier the defense of prescription is made
to rest on the following stipulation of the bill of lading:
1
In any event the carrier and the ship shall be
discharged from all liability in respect of loss or
damage unless suit is brought within one year after
the delivery of the goods or the date when the
goods should have been delivered.
The stipulation is but a repetition of a provision contained in
section 3 (6) of the United States Carriage of Goods by Sea,
Act of 1936, which was adopted and made applicable to the
Philippines by Commonwealth Act 65 and by express
agreement incorporated by reference in the bill of lading.
Following our decision in Chua Kuy vs. Everett Steamship
Corporation,1 G. R. No L-5554 (May 27, 1953) and in E. R.
Elser, Inc., et al., vs. Court of Appeals,. et al.,2 G. R. No. L-
6517 (November 29, 1954) giving force and effect to this kind
of stipulation in bills of lading covering shipments from the
United States to the Philippines, we have to hold that
plaintiff's failure to bring his action "within one year after the
delivery of the goods or the date when the goods should
have been delivered" discharged the carrier from all liability.
This dispenses with the necessity of deciding how much
could be recovered from the carrier under the terms of the
bill of lading.
The case for the insurer stands on a different footing, for its
claim of prescription is founded upon the terms of the policy
and not upon the bill of lading. Under our law the time limit
for bringing a civil action upon a written contract is ten years
after the right of action accrues. (Sec. 43, Act 190; Art. 1144,
New Civil Code.) But counsel for the insurer claim that this
statutory in the policy:
No suit action on this Policy, for the recovery of
any claim, shall be sustainable in any Court of law
or equity unless the insured shall have fully
complied with all the terms and conditions of this
Policy nor unless commenced with twelve (12)
months next after the happening of the loss . . .
To this we cannot agree.
In the case of E. Macias & Co. vs. China Fire Insurance &
Co., Ltd., et al., 46 Phil. 345, relied upon by the insurer, this
Court held that a clause in an insurance policy providing that
an action upon the policy by the insured must be brought
within a certain time is, if reasonable, valid and will prevail
over statutory limitations of the action. That decision,
however, was rendered before the passage of Act 4101,
which amended the Insurance Act by inserting the following
section in chapter one thereof:
SEC. 61-A. — Any condition, stipulation or
agreement in any policy of insurance, limiting the
time for commencing an action thereunder to a
period of less than one year from the time when
the cause of action accrues, is void.
As "matters respecting a remedy, such as the bringing of
suit, admissibility of evidence, and statute of limitations,
depend upon the law of the place where the suit is brought"
(Insular Government vs. Frank, 13 Phil. 236), any policy
clause repugnant to this amendment to the Insurance Act
cannot be given effect in an action in our courts.
Examining the policy sued upon in the present case, we find
that its prescriptive clause, if given effect in accordance with
the terms of the policy, would reduce the period allowed the
insured for bringing his action to less than one year. This is
so because the said clause makes the prescriptive period
begin from the happening of the loss and at the same time
provides that the no suit on the policy shall be sustainable in
any court unless the insured shall have first fully complied
with all the terms and conditions of the policy, among them
that which requires that, as so as the loss is determined,
written claim therefor be filed with the carrier and that the
letter to the carrier and the latter's reply should be attached
to the claim papers to be sent to the insurer. It is obvious that
compliance with this condition precedent will necessarily
consume time and thus shorten the period for bringing suit to
less than one year if the period is to begin, as stated in the
policy, from "the happening of the loss." Being contrary to the
law of the forum, such stipulation cannot be given effect.
It may perhaps be suggested that the policy clause relied on
by the insurer for defeating plaintiff's action should be given
the construction that would harmonize it with section 61-A of
the Insurance Act by taking it to mean that the time given the
insured for bringing his suit is twelve months after the cause
of action accrues. But the question then would be: When did
the cause of action accrue? On that question we agree with
the court below that plaintiff's cause of action did not accrue
until his claim was finally rejected by the insurance company.
This is because, before such final rejection, there was no
real necessity for bringing suit. As the policy provides that
the insured should file his claim, first, with the carrier and
then with the insurer, he had a right to wait for his claim to be
finally decided before going to court. The law does not
encourages unnecessary litigation.
At this junction it should be explained that while the decision
of the Court of Appeals states that the claim against the
insurance company "was finally rejected o April 22, 1947, as
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
correctly concluded by the court below," it is obvious from
the context and we find it to be a fact that the date meant
was April 22, 1948, for this was the date when, according to
the finding of the trial court, the insurance company in
London rejected the claim. The trial court's decision says:
On September 21, 1946, after Roosevelt
Steamship Agency Inc., and Manila Terminal Co.,
Inc., denied plaintiff's claim, a formal insurance
claim was filed with Kerr & Co., Ltd., local agents
of Eagle Star Insurance Co., Ltd., (Exh. L.)Kerr &
Co., Ltd., referred the insurance claim to Eagle
Star Insurance Co., Ltd. in London but the latter,
after insistent request of plaintiffs for action,
rejected the claim on April 22, 1948, giving as its
reasons the lapse of the expiry day of the risks
covered by the policy and returned the claim
documents only in August of 1948. (pp. 87-88,
Record on Appeal.)
Furthermore, there is nothing in the record to show that the
claim was rejected in the year 1947, either by the insurance
company in London or its settling agents in the Philippines,
while on the other hand defendant's own Exhibit L-1 is
indisputable proof that it was on 22nd April 1948" that the
settling agents informed the claimant "that after due and
careful consideration, our Principals confirm our declination
of this claim." It not appearing that the settling agents'
decision on claims against their principals were not subject to
reversal or modification by the latter, while on the contrary
the insurance policy expressly stipulates, under the heading
"Important Notice," that the said agents "have authority to
certify only as to the nature, cause and extent of the
damage," and it furthermore appearing that a reiteration of
plaintiffs claim was made to the principals and the latter gave
it due course since only "after due and careful consideration"
did they confirm the action taken by the agents, we conclude
that, for the purpose of the present action, we should
consider plaintiff's claim to have been finally rejected by the
insurer on April 22, 1948. Having been filed within twelve
months form that date, the action cannot be deemed to have
prescribed even on the supposition that the period given the
insured for bringing suit under the prescriptive clause of the
policy is twelve months after the accrual of the cause of
action.
In concluding, we may state that contractual limitations
contained in insurance policies are regarded with extreme
jealousy by courts and will be strictly construed against the
insurer and should not be permitted to prevent a recovery
2
when their just and honest application would not produce
that result. (46 C. J. S. 273.)
Wherefore, the judgment appealed from is reversed with
respect to the carrier and its agents but affirmed with respect
to the insurance company and its agents, with costs against
the latter.
G.R. No. 82036 May 22, 1997
TRAVELLERS INSURANCE & SURETY
CORPORATION, petitioner,  physician that they should bring the patient to the National
vs.
HON. COURT OF APPEALS and VICENTE
MENDOZA, respondents.
HERMOSISIMA, JR., J.:
The petition herein seeks the review and reversal of the
decision 1 of respondent Court of Appeals 2 affirming in
totothe judgment 3 of the Regional Trial Court 4 in an action
for damages 5 filed by private respondent Vicente Mendoza,
Jr. as heir of his mother who was killed in a vehicular
accident.
Before the trial court, the complainant lumped the erring
taxicab driver, the owner of the taxicab, and the alleged
insurer of the vehicle which featured in the vehicular accident
into one complaint. The erring taxicab was allegedly covered
by a third-party liability insurance policy issued by petitioner
Travellers Insurance & Surety Corporation.
The evidence presented before the trial court established the
following facts:
At about 5:30 o'clock in the morning of July 20, 1980, a 78-
year old woman by the name of Feliza Vineza de Mendoza
was on her way to hear mass at the Tayuman Cathedral.
While walking along Tayuman corner Gregorio Perfecto
Streets, she was bumped by a taxi that was running fast.
Several persons witnessed the accident, among whom were
Rolando Marvilla, Ernesto Lopez and Eulogio Tabalno. After
the bumping, the old woman was seen sprawled on the
pavement. Right away, the good Samaritan that he was,
Mavilla ran towards the old woman and held her on his lap to
inquire from her what had happened, but obviously she was
already in shock and could not talk. At this moment, a private
jeep stopped. With the driver of that vehicle, the two helped
board the old woman on the jeep and brought her to the
Mary Johnston Hospital in Tondo.
. . . Ernesto Lopez, a driver of a passenger jeepney plying
along Tayuman Street from Pritil, Tondo, to Rizal Avenue
and vice-versa, also witnessed the incident. It was on his
return trip from Rizal Avenue when Lopez saw the plaintiff
and his brother who were crying near the scene of the
accident. Upon learning that the two were the sons of the old
woman, Lopez told them what had happened. The Mendoza
brothers were then able to trace their mother at the Mary
Johnston Hospital where they were advised by the attending
Orthopedic Hospital because of her fractured bones. Instead,
the victim was brought to the U.S.T. Hospital where she
expired at 9:00 o'clock that same morning. Death was
caused by "traumatic shock" as a result of the severe injuries
she sustained . . .
. . . The evidence shows that at the moment the victim was
bumped by the vehicle, the latter was running fast, so much
so that because of the strong impact the old woman was
thrown away and she fell on the pavement. . . . In truth, in
that related criminal case against defendant Dumlao . . . the
trial court found as a fact that therein accused "was driving
the subject taxicab in a careless, reckless and imprudent
manner and at a speed greater than what was reasonable
and proper without taking the necessary precaution to avoid
accident to persons . . . considering the condition of the
traffic at the place at the time aforementioned" . . . Moreover,
the driver fled from the scene of the accident and without
rendering assistance to the victim. . . .
. . . Three (3) witnesses who were at the scene at the time
identified the taxi involved, though not necessarily the driver
thereof. Marvilla saw a lone taxi speeding away just after the
bumping which, when it passed by him, said witness noticed
to be a Lady Love Taxi with Plate No. 438, painted maroon,
with baggage bar attached on the baggage compartment and
with an antenae [sic] attached at the right rear side. The
same descriptions were revealed by Ernesto Lopez, who
further described the taxi to have . . . reflectorized
decorations on the edges of the glass at the back . . . A third
witness in the person of Eulogio Tabalno . . . made similar
descriptions although, because of the fast speed of the taxi,
he was only able to detect the last digit of the plate number
which is "8". . . . [T]he police proceeded to the garage of
Lady Love Taxi and then and there they took possession of
such a taxi and later impounded it in the impounding area of
the agency concerned. . . . [T]he eyewitnesses . . . were
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
unanimous in pointing to that Lady Love Taxi with Plate No.
438, obviously the vehicle involved herein.
. . . During the investigation, defendant Armando Abellon, the
registered owner of Lady Love Taxi bearing No. 438-HA
Pilipinas Taxi 1980, certified to the fact "that the vehicle was
driven last July 20, 1980 by one Rodrigo Dumlao. . ." . . . It
was on the basis of this affidavit of the registered owner that
caused the police to apprehend Rodrigo Dumlao, and
consequently to have him prosecuted and eventually
convicted of the offense . . . . . . . [S]aid Dumlao absconded
in that criminal case, specially at the time of the promulgation
of the judgment therein so much so that he is now a fugitive
from justice.6
Private respondent filed a complaint for damages against
Armando Abellon as the owner of the Lady Love Taxi and
Rodrigo Dumlao as the driver of the Lady Love taxicab that
bumped private respondent's mother. Subsequently, private
respondent amended his complaint to include petitioner as
the compulsory insurer of the said taxicab under Certificate
of Cover No. 1447785-3.
After trial, the trial court rendered judgment in favor of private
respondent, the dispositive portion of which reads:
WHEREFORE, judgment is hereby
rendered in favor of the plaintiff, or more
particularly the "Heirs of the late Feliza
Vineza de Mendoza," and against
defendants Rodrigo Dumlao, Armando
Abellon and Travellers Insurance and
Surety Corporation, by ordering the
latter to pay, jointly and severally, the
former the following amounts:
(a) The sum of P2,924.70, as actual and compensatory
damages, with interest thereon at the rate of 12% per annum
from October 17, 1980, when the complaint was filed, until
the said amount is fully paid;
(b) P30,000.00 as death indemnity;
(c) P25,000.00 as moral damages;
(d) P10,000.00 as by way of corrective or exemplary
damages; and
3
(e) Another P10,000.00 by way of attorney's fees and other
litigation expenses.
Defendants are further ordered to pay,
jointly and severally, the costs of this
suit.
SO ORDERED. 7
Petitioner appealed from the aforecited decision to the
respondent Court of Appeals. The decision of the trial court
was affirmed by respondent appellate court. Petitioner's
Motion for Reconsideration 8 of September 22, 1987 was
denied in a Resolution 9 dated February 9, 1988.
Hence this petition.
Petitioner mainly contends that it did not issue an insurance
policy as compulsory insurer of the Lady Love Taxi and that,
assuming arguendo that it had indeed covered said taxicab
for third-party liability insurance, private respondent failed to
file a written notice of claim with petitioner as required by
Section 384 of P.D. No. 612, otherwise known as the
Insurance Code.
We find the petition to be meritorious.
I insurer of the Lady Love taxicab because the trial court never
When private respondent filed his amended complaint to
implead petitioner as party defendant and therein alleged
that petitioner was the third-party liability insurer of the Lady
Love taxicab that fatally hit private respondent's mother,
private respondent did not attach a copy of the insurance
contract to the amended complaint. Private respondent does
not deny this omission.
It is significant to point out at this juncture that the right of a
third person to sue the insurer depends on whether the
contract of insurance is intended to benefit third persons also
or only the insured.
[A] policy . . . whereby the insurer
agreed to indemnify the insured "against
all sums . . . which the Insured shall
become legally liable to pay in respect
of: a. death of or bodily injury to any
person . . . is one for indemnity against
liability; from the fact then that the
insured is liable to the third person, such
third person is entitled to sue the insurer.
The right of the person injured to sue the
insurer of the party at fault (insured),
depends on whether the contract of
insurance is intended to benefit third
persons also or on the insured And the
test applied has been this: Where the
contract provides for indemnity against
liability to third persons, then third
persons to whom the insured is liable
can sue the insurer. Where the contract
is for indemnity against actual loss or
payment, then third persons cannot
proceed against the insurer, the contract
being solely to reimburse the insured for
liability actually discharged by him thru
payment to third persons, said third
persons' recourse being thus limited to
the insured alone. 10
Since private respondent failed to attach a copy of the
insurance contract to his complaint, the trial court could not
have been able to apprise itself of the real nature and
pecuniary limits of petitioner's liability. More importantly, the
trial court could not have possibly ascertained the right of
private respondent as third person to sue petitioner as
saw nor read the insurance contract and learned of its terms
and conditions.
Petitioner, understandably, did not volunteer to present any
insurance contract covering the Lady Love taxicab that fatally
hit private respondent's mother, considering that petitioner
precisely presented the defense of lack of insurance
coverage before the trial court. Neither did the trial court
issue a subpoena duces tecum to have the insurance
contract produced before it under pain of contempt.
We thus find hardly a basis in the records for the trial court to
have validly found petitioner liable jointly and severally with
the owner and the driver of the Lady Love taxicab, for
damages accruing to private respondent.
Apparently, the trial court did not distinguish between the
private respondent's cause of action against the owner and
the driver of the Lady Love taxicab and his cause of action
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
against petitioner. The former is based on torts and quasi-
delicts while the latter is based on contract. Confusing these
two sources of obligations as they arise from the same act of
the taxicab fatally hitting private respondent's mother, and in
the face of overwhelming evidence of the reckless
imprudence of the driver of the Lady Love taxicab, the trial
court brushed aside its ignorance of the terms and conditions
of the insurance contract and forthwith found all three — the
driver of the taxicab, the owner of the taxicab, and the
alleged insurer of the taxicab — jointly and severally liable
for actual, moral and exemplary damages as well as
attorney's fees and litigation expenses. This is clearly a
misapplication of the law by the trial court, and respondent
appellate court grievously erred in not having reversed the
trial court on this ground.
While it is true that where the insurance
contract provides for indemnity against
liability to third persons, such third
persons can directly sue the insurer,
however, the direct liability of the insurer
under indemnity contracts against third-
party liability does not mean that the
insurer can be held solidarily liable with
the insured and/or the other parties
found at fault. The liability of the insurer
is based on contract; that of the insured
is based on tort. 11
Applying this principle underlying solidary
obligation and insurance contracts, we ruled in one
case that:
In solidary obligation, the creditor may
enforce the entire obligation against one
of the solidary debtors. On the other
hand, insurance is defined as "a contract
whereby one undertakes for a had issued the insurance contract over the Lady Love
consideration to indemnify another
against loss, damage or liability arising
from an unknown or contingent event."
In the case at bar, the trial court held
petitioner together with respondents Sio
Choy and San Leon Rice Mills Inc.
solidarily liable to respondent Vallejos
for a total amount of P29,103.00, with
the qualification that petitioner's liability
is only up to P20,000.00. In the context
of a solidary obligation, petitioner may
be compelled by respondent Vallejos to
4
pay the entire obligation of P29,103.00,
notwithstanding the qualification made
by the trial court. But, how can petitioner
be obliged to pay the entire obligation
when the amount stated in its insurance
policy with respondent Sio Choy for
indemnity against third-party liability is
only P20,000.00? Moreover, the
qualification made in the decision of the
trial court to the effect that petitioner is
sentenced to pay up to P20,000.00 only
when the obligation to pay P29,103.00 is
made solidary is an evident breach of
the concept of a solidary obligation. 12
The above principles take on more significance in the light of
the counter-allegation of petitioner that, assuming arguendo
that it is the insurer of the Lady Love taxicab in question, its
liability is limited to only P50,000.00, this being its standard
amount of coverage in vehicle insurance policies. It bears
repeating that no copy of the insurance contract was ever
proffered before the trial court by the private respondent,
notwithstanding knowledge of the fact that the latter's
complaint against petitioner is one under a written contract.
Thus, the trial court proceeded to hold petitioner liable for an
award of damages exceeding its limited liability of
P50,000.00. This only shows beyond doubt that the trial
court was under the erroneous presumption that petitioner
could be found liable absent proof of the contract and based
merely on the proof of reckless imprudence on the part of the
driver of the Lady Love taxicab that fatally hit private
respondent's mother.
II
Petitioner did not tire in arguing before the trial court and the
respondent appellate court that, assuming arguendo that it
taxicab, private respondent's cause of action against
petitioner did not successfully accrue because he failed to
file with petitioner a written notice of claim within six (6)
months from the date of the accident as required by Section
384 of the Insurance Code.
At the time of the vehicular incident which resulted in the
death of private respondent's mother, during which time the
Insurance Code had not yet been amended by Batas
Pambansa (B.P.) Blg. 874, Section 384 provided as follows:  manifest bad faith, petitioner company
Any person having any claim upon the
policy issued pursuant to this chapter
shall, without any unnecessary delay,
present to the insurance company
concerned a written notice of claim
setting forth the amount of his loss,
and/or the nature, extent and duration of
the injuries sustained as certified by a
duly licensed physician. Notice of claim
must be filed within six months from
date of the accident, otherwise, the
claim shall be deemed waived. Action or
suit for recovery of damage due to loss
or injury must be brought in proper
cases, with the Commission or the
Courts within one year from date of
accident, otherwise the claimant's right
of action shall prescribe [emphasis
supplied].
In the landmark case of Summit Guaranty and Insurance
Co., Inc. v. De Guzman, 13 we ruled that the one year
prescription period to bring suit in court against the insurer
should be counted from the time that the insurer rejects the
written claim filed therewith by the insured, the beneficiary or
the third person interested under the insurance policy. We
explained:
It is very obvious that petitioner
company is trying to use Section 384 of
the Insurance Code as a cloak to hide
itself from its liabilities. The facts of
these cases evidently reflect the
deliberate efforts of petitioner company
to prevent the filing of a formal action
against it. Bearing in mind that if it
succeeds in doing so until one year
lapses from the date of the accident it
could set up the defense of prescription,
petitioner company made private
respondents believe that their claims
would be settled in order that the latter
will not find it necessary to immediately
bring suit. In violation of its duties to
adopt and implement reasonable
standards for the prompt investigation of
claims and to effectuate prompt, fair and
equitable settlement of claims, and with
devised means and ways of stalling the
settlement proceeding . . . [N]o steps
were taken to process the claim and no
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
rejection of said claim was ever made
even if private respondent had already
complied with all the requirements. . . .  vs.
This Court has made the observation
that some insurance companies have
been inventing excuses to avoid their
just obligations and it is only the State
that can give the protection which the
insuring public needs from possible
abuses of the insurers. 14
It is significant to note that the aforecited Section 384 was
amended by B.P. Blg. 874 to categorically provide that
"action or suit for recovery of damage due to loss or injury
must be brought in proper cases, with the Commissioner or
the Courts within one year from denial of the claim,
otherwise the claimant's right of action shall prescribe"
[emphasis ours]. 15
We have certainly ruled with consistency that the prescriptive
period to bring suit in court under an insurance policy, begins
to run from the date of the insurer's rejection of the claim
filed by the insured, the beneficiary or any person claiming
under an insurance contract. This ruling is premised upon
the compliance by the persons suing under an insurance
contract, with the indispensable requirement of having filed
the written claim mandated by Section 384 of the insurance
Code before and after its amendment. Absent such written
claim filed by the person suing under an insurance contract,
no cause of action accrues under such insurance contract,
considering that it is the rejection of that claim that triggers
the running of the one-year prescriptive period to bring suit in
court, and there can be no opportunity for the insurer to even
reject a claim if none has been filed in the first place, as in
the instant case.
The one-year period should instead be
counted from the date of rejection by the
insurer as this is the time when the
cause of action accrues. . . .
In Eagle Star Insurance Co., Ltd., et
al. vs. Chia Yu, this Court ruled:
The plaintiff's cause of action did not
accrue until his claim was finally rejected
by the insurance company. This is
because, before such final rejection,
5
there was no real necessity for bringing
suit.
The philosophy of the above
pronouncement was pointed out in the
case of ACCFA vs. Alpha Insurance and
Surety Co., viz:
Since a cause of action requires, as
essential elements, not only a legal right
of the plaintiff and a correlative
obligation of the defendant but also an
act or omission of the defendant in
violation of said legal right, the cause of
action does not accrue until the party
obligated refuses, expressly or impliedly,
to comply with its duty. 16
When petitioner asseverates, thus, that no written claim was
filed by private respondent and rejected by petitioner, and
private respondent does not dispute such asseveration
through a denial in his pleadings, we are constrained to rule
that respondent appellate court committed reversible error in
finding petitioner liable under an insurance contract the
existence of which had not at all been proven in court. Even
if there were such a contract, private respondent's cause of
action can not prevail because he failed to file the written
claim mandated by Section 384 of the Insurance Code. He is
deemed, under this legal provision, to have waived his rights
as against petitioner-insurer.
WHEREFORE, the instant petition is HEREBY GRANTED.
The decision of the Court of Appeals in CA-G.R. CV No.
09416 and the decision of the Regional Trial Court in Civil
Case No. 135486 are REVERSED and SET ASIDE insofar
as Travelers Insurance & Surety Corporation was found
jointly and severally liable to pay actual, moral and
exemplary damages, death indemnity, attorney's fees and
litigation expenses in Civil Case No. 135486. The complaint
against Travellers Insurance & Surety Corporation in said
case is hereby ordered dismissed.
No pronouncement as to costs.
SO ORDERED.
G.R. No. L-54140 October 14, 1986
FILIPINO MERCHANTS INSURANCE COMPANY,
INC., petitioner, 
HONORABLE JOSE ALEJANDRO, Presiding Judge of
Branch XXVI of the Court of First Instance of Manila and
FROTA OCEANICA BRASILIERA, respondents.
G.R. No. L-62001 October 14, 1986
FILIPINO MERCHANTS INSURANCE COMPANY,
INC., petitioner, 
vs.
HONORABLE ALFREDO BENIPAYO, Presiding Judge of
Branch XVI of the Court of First Instance of Manila and
AUSTRALIA-WEST PACIFIC LINE, respondents.
GUTIERREZ, JR., J.:
These consolidated petitions raise the issue of whether or
not the one-year period within which to file a suit against the
carrier and theship, in case of damage or loss as provided
for in the Carriage of Goods by Sea Act applies to the insurer
of the goods.
On August 3, 1977, plaintiff Choa Tiek Seng filed a
complaint, docketed as Civil Case No. 109911, against the
petitioner before the then Court of First Instance of Manila for
recovery of a sum of money under the marine insurance
policy on cargo. Mr. Choa alleged that the goods he insured
with the petitioner sustained loss and damage in the amount
of P35,987.26. The vessel SS Frotario which was owned and
operated by private respondent Frota Oceanica Brasiliera,
(Frota) discharged the goods at the port of Manila on
December 13, 1976. The said goods were delivered to the
arrastre operator E. Razon, Inc., on December 17, 1976 and
on the same date were received by the consignee-plaintiff.
On December 19, 1977, the petitioner filed its amended
answer disclaiming liability, imputing against the plaintiff the
commission of fraud and counterclaiming for damages.
On January 9, 1978, the petitioner filed a third-party
complaint against the carrier, private respondent Frota and
the arrastre contractor, E. Razon, Inc. for indemnity,
subrogation, or reimbursement in the event that it is held
liable to the plaintiff.
Meanwhile, on August 10, 1977, Joseph Benzon Chua filed a
similar complaint against the petitioner which was docketed
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
as Civil Case No. 110061, for recovery under the marine
insurance policy for cargo alleging that the goods insured
with the petitioner sustained loss and damage in the sum of
P55,996.49.
The goods were delivered to the plaintiff-consignee on or
about January 25-28, 1977.
On May 31, 1978, the petitioner filed its answer. On
September 28, 1978, it filed an amended third-party
complaint against respondent carrier, the Australia-West
Pacific Line (Australia-West).
In both cases, the private respondents filed their respective
answers and subsequently filed a motion for preliminary
hearing on their affirmative defense of prescription. The
private respondents alleged in their separate answers that
the petitioner is already barred from filing a claim because
under the Carriage of Goods by Sea Act, the suit against the
carrier must be filed within one year after delivery of the
goods or the date when the goods should have been
delivered... 
The petitioner contended that the provision relied upon by
the respondents applies only to the shipper and not to the
insurer of the goods.
On April 30, 1980, the respondent judge in Civil Case No.
109911, upheld respondent Frota and dismissed the
petitioner's third-party complaint. Likewise, on August 31,
1982, the respondent judge in Civil Case No. 110061
dismissed the petitioner's third-party complaint against
respondent Australia-West on the ground that the same was
filed beyond the prescriptive period provide in Section 3 (6)
of the Carriage of Goods by Sea Act of 1936. These both
cases, the petitioner appealed to us on a pure question of
law, raising the issue of whether or not the prescriptive
period of one year under the said Act also applies to an
insurer such as herein petitioner.
The petitioner maintains that the one-year prescriptive period
cannot cover an insurer which has not settled the claim of its
insured because it cannot be considered as the person
referred to in the applicable provision of the said Act that has
the duty or right to give notice of loss or damage to the
carrier or to sue such carrier within the period of one year
and that where an insurer does not settle the claim of its
insured it cannot be considered as subrogated to the rights
of said insured that would then authorize it to sue the carrier
within the time-bar of one year. The petitioner further
6
contends that the period for the filing of a third-party
complaint must be reckoned from the date when the principal
action was filed, that is, from the time the insured filed a suit
against the petitioner, because the third-party complaint is
merely an incident of the main action.
On the other hand, the respondents argue that the one-year
prescriptive period within which to file a case against the
carrier also applies to a claim filed by an insurer who stands
as a subrogee to the insured and that the third-party
complaint filed by the petitioner cannot be reckoned from the
firing of the main action because such complaint is
independent of, and separate and distinct from the insured's
action against the petitioner.
The lower courts did not err.
Section 3(b) of the Carriage of Goods by Sea Act provides:
(6) Unless notice of loss or damage and
the general nature of such loss or
damage be given in writing to the carrier
or his agent at the port of discharge
before or at the time of the removal of
the goods into the custody of the person
entitled to delivery thereof under the
contract of carriage, such removal shall
be prima facie evidence of the delivery
by the carrier of the goods as described
in the bill of lading. If the loss or damage
is not apparent, the notice must be given
within three days of the delivery.
Said notice of loss or damage may be
endorsed upon the receipt for the goods
given by the person taking delivery
thereof.
The notice in writing need not be given if
the state of the goods has at the time of
their receipt been the subject of joint
survey or inspection.
In any event the carrier and the ship
shall be discharged from all liability in
respect of loss or damage unless suit is
brought within one year after delivery of
the goods or the date when the goods
should have been delivered: Provided,
that if a notice of loss or damage, either
apparent or concealed, is not given as
provided for in this section, that fact shall
not affect or prejudice the right of the
shipper to bring the suit within one year
after the delivery of the goods or the
date when the goods should have been
delivered.
In the case of any actual or
apprehended loss or damage, the carrier
and the receiver shall give all
reasonable facilities to each other for
inspecting and tallying the goods.
(Emphasis supplied) Philippine
Permanent and General Statutes
(Revised Edition, Vol. 1, pp. 663-666).
Chua Kuy v. Everett Steamship Corporation (93 Phil 207,
213-214), expounds on the extent of the applicability of the
aforequoted provision. We ruled:
Neither do we find tenable the claim that
the prescriptive period contained in said
act can only be invoked by the shipper,
excluding all other parties to the
transaction. While apparently the proviso
contained in the portion of section 3(6)
of the act we have quoted gives the
impression that the right to file suit within
one year after delivery of the goods
applies to the shipper alone, however,
reading the proviso in conjunction with
the rest of section 3(6), it at once
becomes apparent that the conclusion
drawn by petitioner is unwarranted. In
the first place, said section provides that
the notice of loss or damage for which a
claim for indemnity may be made should
be given in writing to the carrier at the
port of discharge before or at the time of
the removal of the goods, and if the loss
or damage is not apparent said notice
should be given 'within three days on
delivery.' From the language of this
section, it seems clear that the notice of
loss or damage is required to be filed not
necessarily by the shipper but also by
the consignee or any legal holder of the
bill of lading. In fact, said section
requires that the notice be given at the
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
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port of discharge and the most logical
party to file the notice is either the
consignee or the endorsee of the bill of
lading. In the second place, a study of
the historical background of this
particular provision will show that
although the word shipper is used in the
proviso referred to by the petitioner, the
intention of the law was not to exclude
the consignee or endorsee of the bill of
lading from bringing the action but
merely to limit the filing of the same
within one year after the delivery of the
goods at the port of discharge. [The
Southern Cross, 1940, A. M. C. 59
(SDNY); Lindgren v. Farley, 1938 A. M.
C. 805 (SDNY)].
Arnold W. Knauth, an eminent authority
on admiralty, commenting on this
proviso, says:
xxx xxx xxx
It seems evident that this language does
not alter the sense of the text of the
Hague Rules; it merely reiterates in
another form the rule already laid down.
Curiously, the proviso seems limited to
the rights of shippers, and might strictly
be construed not to give any rights to
consignees, representatives, or
subrogated parties; whereas the Hague
Rules phraseology is broader. As the
Act contains both phrases, it would
seem to be as broad as the broader of
the two forms of words. (Ocean Bills of
Lading, by Knauth, p. 229).
Clearly, the coverage of the Act includes the insurer of the
goods. Otherwise, what the Act intends to prohibit after the
lapse of the one-year prescriptive period can be done
indirectly by the shipper or owner of the goods by simply
filing a claim against the insurer even after the lapse of one
year. This would be the result if we follow the petitioner's
argument that the insurer can, at any time, proceed against
the carrier and the ship since it is not bound by the time-bar
provision. In this situation, the one-year limitation will be
practically useless. This could not have been the intention of
the law which has also for its purpose the protection of the
carrier and the ship from fraudulent claims by having
7
"matters affecting transportation of goods by sea be decided denied liability on the ground that by their own doing, the
in as short a time as possible" and by avoiding incidents plaintiffs had prevented the petitioner from being subrogated
which would "unnecessarily extend the period and permit to their respective rights against the herein respondents by
delays in the settlement of questions affecting the filing a suit after the one-year prescriptive period. The
transportation." (See The Yek Tong Fire and Marine situation, however, does not obtain in the present case. The
Insurance Co., Ltd., v. American President Lines, Inc., 103 plaintiffs in the civil cases below gave extra-judicial notice to
Phil. 1125-1126). their respective carriers and filed suit against the petitioner
well within one year from their receipt of the goods. The
petitioner had plenty of time within which to act. In Civil Case
In the case of Aetna Insurance Co. v. Luzon Stevedoring
No. 109911, the petitioner had more than four months to file
Corporation (62 SCRA 11, 15), we denied the appeal of an
a third-party complaint while in Civil Case No. 110061, it had
insurance company which filed a suit against the carrier after
more than five months to do so. In both instances, however,
the lapse of one year. We ruled:
the petitioner failed to file the appropriate action.
There is no merit in the appeal. The trial
WHEREFORE, IN VIEW OF THE FOREGOING, the
court correctly held that the one-year
petitions in G. R. No. 54140 and G. R. No. 62001 are hereby
statutory and contractual prescriptive
DISMISSED for lack of merit. Costs against the petitioner.
period had already expired when
appellant company filed on April 7, 1965
its action against Barber Line Far East SO ORDERED.
Service. The one-year period
commenced on February 25, 1964 when
G.R. No. L-24566           July 29, 1968
the damaged cargo was delivered to the
consignee. (See Chua Kuy v. Everrett
Steamship Corporation, 93 Phil. 207; AGRICULTURAL CREDIT & COOPERATIVE FINANCING
Yek Tong Fire & Marine Insurance Co., ADMINISTRATION (ACCFA), plaintiff-appellant, 
Ltd. v. American President Lines, Inc., vs.
103 Phil. 1125). ALPHA INSURANCE & SURETY CO., INC., defendant-
appellee, 
RICARDO A. LADINES, ET AL., third party-defendants-
We likewise agree with the respondents that the third-party
appellees.
complaint of the petitioner cannot be considered to have
been filed upon the filing of the main action because
although it can be said that a third-party complaint is but REYES, J.B.L., J.:
ancilliary to the main action (Eastern Assurance and Surety
Corporation v. Cui 105 SCRA 622), it cannot abridge,
Appeal, on points of law, against a decision of the Court of
enlarge, nor modify the substantive rights of any litigant. It
First Instance of Manila, in its Case No. 43372, upholding a
creates no substantive rights. Thus, unless there is some
motion to dismiss. 
substantive basis for the third-party Plaintiff's claim, he
cannot utilized the filing of such action to acquire any right of
action against the third-party defendant. (See also Francisco, At issue is the question whether or not the provision of a
The Revised Rules of Court in the Philippines, Vol. 1, 1973 fidelity bond that no action shall be had or maintained
Ed., p. 507). The petitioner can only rightfully file a third-party thereon unless commenced within one year from the making
complaint against the respondents if, in the first place, it can of a claim for the loss upon which the action is based, is valid
still validly maintain an action against the latter. or void, in view of Section 61-A of the Insurance Act
invalidating stipulations limiting the time for commencing an
action thereon to less than one year from the time the cause
In the case at bar, the petitioner's action has prescribed
of action accrues. 
under the provisions of the Carriage of Goods by Sea Act.
Hence, whether it files a third-party complaint or chooses to
maintain an independent action against herein respondents Material to this decision are the following facts: 1äwphï1.ñët
is of no moment. Had the plaintiffs in the civil cases below
filed an action against the petitioner after the one-year
prescriptive period, then the latter could have successfully
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
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According to the allegations of the complaint, in order to
guarantee the Asingan Farmers' Cooperative Marketing
Association, Inc. (FACOMA) against loss on account of
"personal dishonesty, amounting to larceny or estafa of its
Secretary-Treasurer, Ricardo A. Ladines, the appellee, Alpha
Insurance & Surety Company had issued, on 14 February
1958, its bond, No. P-FID-15-58, for the sum of Five
Thousand Pesos (P5,000.00) with said Ricardo Ladines as
principal and the appellee as solidary surety. On the same
date, the Asingan FACOMA assigned its rights to the
appellant, Agricultural Credit Cooperative and Financing
Administration (ACCFA for short), with approval of the
principal and the surety.  Section 61-A of the Insurance Act (No. 2427), as amended
During the effectivity of the bond, Ricardo Ladines converted
and misappropriated, to his personal benefit, some
P11,513.22 of the FACOMA funds, of which P6,307.33
belonged to the ACCFA. Upon discovery of the loss, ACCFA
immediately notified in writing the survey company on 10
October 1958, and presented the proof of loss within the
period fixed in the bond; but despite repeated demands the
surety company refused and failed to pay. Whereupon,
ACCFA filed suit against appellee on 30 May 1960. 
Defendant Alpha Insurance & Surety Co., Inc., (now
appellee) moved to dismiss the complaint for failure to state
a cause of action, giving as reason that (1) the same was
filed more than one year after plaintiff made claim for loss,
contrary to the eighth condition of the bond, providing as
follows: .
EIGHT LIMITATION OF ACTION
No action, suit or proceeding shall be had or
maintained upon this Bond unless the same be
commenced within one year from the time of
making claim for the loss upon which such action,
suit or proceeding, is based, in accordance with
the fourth section hereof.
(2) the complaint failed to show that plaintiff had filed civil or
criminal action against Ladines, as required by conditions 4
and 11 of the bond; and (3) that Ladines was a necessary
and indispensable party but had not been joined as such. 
At first, the Court of First Instance denied dismissal; but,
upon reconsideration, the court reversed its original stand,
and dismissed the complaint on the ground that the action
was filed beyond the contractual limitation period (Record on
Appeal, pages 56-59).  & SURETY COMPANY, INC., respondents.
8
Hence, this appeal.  by taking it to mean that the time given the insured
We find the appeal meritorious. 
A fidelity bond is, in effect, in the nature of a contract of
insurance against loss from misconduct, and is governed by
the same principles of interpretation: Mechanics Savings
Bank & Trust Co. vs. Guarantee Company, 68 Fed. 459; Pao
Chan Wei vs. Nemorosa, 103 Phil. 57. Consequently, the
condition of the bond in question, limiting the period for
bringing action thereon, is subject to the provisions of
by Act 4101 of the pre-Commonwealth Philippine
Legislature, prescribing that —
 
SEC. 61-A — A condition, stipulation or agreement
in any policy of insurance, limiting the time for
commencing an action thereunder to a period of
less than one year from the time when the cause
of action accrues is void.  (New Civil Code, Article 1144). The case of Ang vs. Fulton
Since a "cause of action" requires, as essential elements, not
only a legal right of the plaintiff and a correlative obligation of
the defendant but also "an act or omission of the defendant
in violation of said legal right" (Maao Sugar Central vs.
Barrios, 79 Phil. 666), the cause of action does not accrue
until the party obligated refuses, expressly or impliedly, to
comply with its duty (in this case, to pay the amount of the
bond). The year for instituting action in court must be
reckoned, therefore, from the time of appellee's refusal to
comply with its bond; it can not be counted from the
creditor's filing of the claim of loss, for that does not import
that the surety company will refuse to pay. In so far,
therefore, as condition eight of the bond requires action to be
filed within one year from the filing of the claim for loss, such
stipulation contradicts the public policy expressed in Section
61-A of the Philippine Insurance Act. Condition eight of the
bond, therefore, is null and void, and the appellant is not
bound to comply with its provisions. 
In Eagle Star Insurance Co. vs. Chia Yu, 96 Phil. 696, 701,
this Court ruled: .1äwphï1.ñët
It may perhaps be suggested that the policy clause
relied on by the insurer for defeating plaintiff's
action should be given the construction that would
harmonize it with section 61-A of the Insurance Act
for bringing his suit is twelve months after the
cause of action accrues. But the question then
would be: When did the cause of action accrue?
On that question we agree with the court below
that plaintiff's cause of action did not accrue until
his claim was finally rejected by the insurance
company. This is because, before such final
rejection, there was no real necessity for bringing
suit. As the policy provides that the insured should
file his claim, first, with the carrier and then with
the insurer, he had a right to wait for his claim to
be finally decided before going to court. The law
does not encourage unnecessary litigation.
The discouraging of unnecessary litigation must be deemed
a rule of public policy, considering the unrelieved congestion
in the courts. 
As a consequence of the foregoing, condition eight of the
Alpha bond is null and void, and action may be brought
within the statutory period of limitation for written contracts
Fire Insurance Co., 2 S.C.R.A. 945 (31 July 1961), relied
upon by the Court a quo, is no authority against the views
herein expressed, since the effect of Section 61-A of the
Insurance Law on the terms of the Policy or contract was not
there considered. 
The condition of previous conviction (paragraph b, clause 4,
of the contract) having been deleted by express agreement
and the surety having assumed solidary liability, the other
grounds of the motion to dismiss are equally untenable. A
creditor may proceed against any one of the solidary
debtors, or some or all of them simultaneously (Article 1216,
New Civil Code). 
WHEREFORE, the appealed order granting the motion to
dismiss is reversed and set aside, and the records are
remanded to the Court of First Instance, with instructions to
require defendant to answer and thereafter proceed in
conformity with the law and the Rules of Court. Costs against
appellee. So ordered.
G.R. No. 103883 November 14, 1996
JACQUELINE JIMENEZ VDA. DE GABRIEL, petitioner, 
vs.
HON. COURT OF APPEALS and FORTUNE INSURANCE
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
VITUG, J.:
The petition for review on certiorari in this case seeks the
reversal of the decision 1 of the Court of Appeals setting
aside the judgment of the Regional Trial Court of Manila,
Branch 55, which has ordered private respondent Fortune
Insurance & Surety Company, Inc., to pay petitioner
Jacqueline Jimenez vda. de Gabriel, the surviving spouse
and beneficiary in an accident (group) insurance of her
deceased husband, the amount of P100,000.00, plus legal
interest.
Marcelino Gabriel, the insured, was employed by Emerald
Construction & Development Corporation ("ECDC") at its
construction project in Iraq. He was covered by a personal
accident insurance in the amount of P100,000.00 under a
group policy 2 procured from private respondent by ECDC for
its overseas workers. The insured risk was for "(b)odily injury
caused by violent accidental external and visible means
which injury (would) solely and independently of any other
cause" 3 result in death or disability.
On 22 May 1982, within the life of the policy, Gabriel died in
Iraq. A year later, or on 12 July 1983, ECDC reported
Gabriel's death to private respondent by telephone. 4 Among
the documents thereafter submitted to private respondent
were a copy of the death certificate 5 issued by the Ministry
of Health of the Republic of Iraq — which stated
REASON OF DEATH: UNDER
EXAMINATION NOW — NOT YET
KNOWN 6 —
and an autopsy report 7 of the National Bureau of
Investigation ("NBI") to the effect that "(d)ue to
advanced state of postmortem decomposition,
cause of death (could) not be
determined." 8 Private respondent referred the
insurance claim to Mission Adjustment Service,
Inc.
Following a series of communications between petitioner and
private respondent, the latter, on 22 September 1983,
ultimately denied the claim of ECDC on the ground of
prescription. 9 Petitioner went to the Regional Trial Court of
Manila. In her complaint against ECDC and private
respondent, she averred that her husband died of
electrocution while in the performance of his work and
prayed for the recovery of P100,000.00 for insurance
indemnification and of various other sums by way of actual,
9
moral, and exemplary damages, plus attorney's fees and
costs of suit.
Private respondent filed its answer, which was not verified,
admitting the genuineness and due execution of the
insurance policy; it alleged, however, that since both the
death certificate issued by the Iraqi Ministry of Health and the
autopsy report of the NBI failed to disclose the cause of
Gabriel's death, it denied liability under the policy. In
addition, private respondent raised the defense of
"prescription," invoking Section 384 10 of the Insurance Code.
Later, private respondent filed an amended answer, still
unverified, reiterating its original defenses but, this time,
additionally putting up a counterclaim and a crossclaim.
The trial court dismissed the case against ECDC for the
failure of petitioner to take steps to cause the service of the
fourth alias summons on ECDC. The dismissal was without
prejudice.
The case proceeded against private respondent alone. On
28 May 1987, the trial court rendered its decision 11 in favor
(partly) of petitioner's claim. In arriving at its conclusion, the
trial court held that private respondent was deemed to have
waived the defense, i.e., that the cause of Gabriel's death
was not covered by the policy, when the latter failed to
impugn by evidence petitioner's averment on the matter.
With regard to the defense of prescription, the court
considered the complaint to have been timely filed or within
one (1) year from private respondent's denial of the claim.
Petitioner and private respondent both appealed to the Court
of Appeals. Petitioner contended that the lower court should
have awarded all the claims she had asked for. Private
respondent asserted, on its part, that the lower court erred in
ruling (a) that the insurer had waived the defense that
Gabriel's death was not caused by the insured peril ("violent
accidental external and visible means") specified in the
policy and (b) that the cause of action had not prescribed.
The Court of Appeals, on 18 September 1991, reversed the
decision of the lower court. The appellate court held that
petitioner had failed to substantiate her allegation that her
husband's death was caused by a risk insured against. The
appellate court observed that the only evidence presented by
petitioner, in her attempt to show the circumstances that led
to the death of the insured, were her own affidavit and a
letter allegedly written by a co-worker of the deceased in Iraq
which, unfortunately for her, were held to be both
hearsay. 12
The motion for reconsideration was denied. 13
Petitioner's recourse to this Court must also fail.
On the issue of "prescription," private respondent correctly
invoked Section 384 of the Insurance Code; viz:
Sec. 384. Any person having any claim
upon the policy issued pursuant to this
chapter shall, without any unnecessary
delay, present to the insurance company
concerned a written notice of claim
setting forth the nature, extent and
duration of the injuries sustained as
certified by a duly licensed physician.
Notice of claim must be filed within six
months from date of the accident,
otherwise, the claim shall be deemed
waived. Action or suit for recovery of
damage due to loss or injury must be
brought, in proper cases, with the
Commissioner or the Courts within one
year from denial of the claim, otherwise,
the claimant's right of action shall
prescribe.
The notice of death was given to private
respondent, concededly, more than a year after
the death of petitioner's husband. Private
respondent, in invoking prescription, was not
referring to the one-year period from the denial of
the claim within which to file an action against an
insurer but obviously to the written notice of claim
that had to be submitted within six months from the
time of the accident.
Petitioner argues that private respondent must be deemed to
have waived its right to controvert the claim, that is, to show
that the cause of death is an excepted peril, by failing to
have its answers (to the Request for Admission sent by
petitioner) duly verified. It is true that a matter of which a
written request for admission is made shall be deemed
impliedly admitted "unless, within a period designated in the
request, which shall not be less than ten (10) days after
service thereof, or within such further time as the court may
allow on motion and notice, the party to whom the request is
directed serves upon the party requesting the admission a
sworn statement either denying specifically the matters of
which an admission is requested or setting forth in detail the
reasons why he cannot truthfully either admit or deny those
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
matters;" 14 however, the verification, like in most cases
required by the rules of procedure, is a formal, not
jurisdictional, requirement, and mainly intended to secure an
assurance that matters which are alleged are done in good
faith or are true and correct and not of mere speculation.
When circumstances warrant, the court may simply order the
correction of unverified pleadings or act on it and waive strict
compliance with the rules in order that the ends of justice
may thereby be served. 15 In the case of answers to written
requests for admission particularly, the court can allow the
party making the admission, whether made expressly or
deemed to have been made impliedly, "to withdraw or
amend it upon such terms as may be just." 16
The appellate court acted neither erroneously nor with grave
abuse of discretion when it seconded the court a quoand
ruled:
As to the allegation of the plaintiff-
appellant that the matters requested by
her to be admitted by the defendant-
appellant under the Request for
Admission were already deemed
admitted by the latter for its failure to
answer it under oath, has already been
properly laid to rest when the lower court
in its Order of May 28, 1987 correctly
ruled:
At the outset, it must be stressed that the defendant indeed
filed a written answer to the request for
admission, sans verification. The case of Motor Service
Co., Inc. vs. Yellow Taxicab Co., Inc., et al. may not
therefore be controlling, or actually opposite. In said case,
there was an absolute failure on the part of the defendant to
answer the request for admission, and thus the court was
justified in rendering a summary judgment. Here, however,
as clearly intimated elsewhere above, the defendant
answered in writing practically every question posed in the
request for admission. The Court believes, under the peculiar
circumstance, that the more controlling jurisprudence on the
mater would be those cited by the defendant in its
memorandum, particularly the case of Quimpo vs. de la
Victoria, 46 SCRA 139.
Prescinding from the foregoing, there is
absolutely no basis in fact and in law for
the lower court to hold that the appellant
insurance company was deemed to
have waived the defense, that the death
of plaintiff-appellant's husband was not
10
caused by violent accidental external
and visible means' as contemplated in
the insurance policy. The Death
Certificate (Exh. 9) and the Autopsy
Report (Exh. 10), more than
controverted the allegation of the
plaintiff-appellant as to the cause of
death of her husband. 17
The insurance policy expressly provided that to be
compensable, the injury or death should be caused by
"violent accidental external and visible means." In attempting
to prove the cause of her husband's death, all that petitioner
could submit were a letter sent to her by her husband's co-
worker, stating that Gabriel died when he tried to haul water
out of a tank while its submerged motor was still
functioning, 18 and petitioner's sinumpaang
salaysay 19 which merely confirmed the receipt and stated
contents of the letter. Said the appellate court in this regard:
. . . . It must be noted that the only
evidence presented by her to prove the
circumstances surrounding her
husband's death were her purported
affidavit and the letter allegedly written
by the deceased co-worker in Iraq. The
said affidavit however suffers from
procedural infirmity as it was not even
testified to or identified by the affiant
(plaintiff-appellant) herself. This self-
serving affidavit therefore is a mere
hearsay under the rules, . . . .
xxx xxx xxx
In like manner, the letter allegedly
written by the deceased's co-worker
which was never identified to in court by
the supposed author, suffers from the
same defect as the affidavit of the
plaintiff-appellant. 20
Not one of the other documents submitted, to wit,
the POEA decision, dated 06 June 1984, 21 the
death certificate issued by the Ministry of Health of
Iraq and the NBI autopsy report, 22 could give any
probative value to petitioner's claim. The POEA
decision did not make any categorical holding on
the specific cause of Gabriel's death. Neither did
the death certificate issued by the health
authorities in Iraq nor the NBI autopsy report
provide any clue on the cause of death. All that
appeared to be clear was the fact of Gabriel's
demise on 22 May 1982 in Iraq.
Evidence, in fine, is utterly wanting to establish that the
insured suffered from an accidental death, the risk covered
by the policy. In an accident insurance, the insured's
beneficiary has the burden of proof in demonstrating that the
cause of death is due to the covered peril. Once that fact is
established, the burden then shifts to the insurer to show any
excepted peril that may have been stipulated by the parties.
An "accident insurance" is not thus to be likened to an
ordinary life insurance where the insured's death, regardless
of the cause thereof, would normally be compensable. The
latter is akin in property insurance to an "all risk" coverage
where the insured, on the aspect of burden of proof, has
merely to show the condition of the property insured when
the policy attaches and the fact of loss or damage during the
period of the policy and where, thereafter, the burden would
be on the insurer to show any "excluded peril." When,
however, the insured risk is specified, like in the case before
us, it lies with the claimant of the insurance proceeds to
initially prove that the loss is caused by the covered peril.
While petitioner did fail in substantiating her allegation that
the death of her husband was due to an accident,
considering, however, the uncertainty on the real cause of
death, private respondent might find its way clear into still
taking a second look on the matter and perhaps help ease
the load of petitioner's loss.
WHEREFORE, the decision appealed from is AFFIRMED.
No costs.
SO ORDERED.
G.R. No. 82509 August 16, 1989
COUNTRY BANKERS INSURANCE CORP. (Formerly
Country Bankers Insurance & Surety Co. Inc.), petitioner,
vs.
THE TRAVELLERS INSURANCE AND SURETY CORP.,
and THE HONORABLE COURT OF
APPEALS, respondents.
CORTES, J.:
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
In the instant case, the Court is once again asked to resolve
the issue of whether the one-year prescriptive period under
Section 384 of the Insurance Code, prior to its amendment
by Batas Pambansa Blg. 874, should commence to run from
the date of the accident or from the rejection of the claim by
the insurer.
The Court, after a careful examination of the pleadings filed
in this case, i.e., the Petition and its Annexes, the Comment,
Reply, Rejoinder and Sur-Rejoinder, considered the issues
joined and the case submitted for decision.
The pertinent facts of this case are undisputed:  shall, without any unnecessary delay,
On May 24, 1979, a vehicular accident occurred involving a
Toyota Land Cruiser with Plate No. KE-890 H '78 owned by
Philippine Technical Consultants Inc. (PTCI) and an Isuzu
Cargo Truck bearing Plate No. 6M-116 T Phil. '78 registered
in the name of Avelino Matundan. The Toyota Land Cruiser,
which was driven by Norlito R. Limen had stopped at a red
light along Epifanio de los Santos Avenue when it was
bumped from behind by the Isuzu Cargo Truck driven by
Alfredo Sion. The Toyota Land Cruiser suffered extensive
damage so that its owner declared a total loss and claimed
the proceeds of the insurance policy issued by petitioner
Country Bankers Insurance Corporation. Finding the claim to
be meritorious, petitioner paid PTCI the amount of eighty-
three thousand four hundred seventy pesos
(P83,470.00).lâwphî1.ñèt As subrogee to all rights and
causes of action of PTCI, petitioner demanded
reimbursement from the driver and owner of the Isuzu Cargo
truck and from private respondent travellers Insurance as the
insurer of the truck, but the latter failed to act on petitioner's
claim.  the "(a)ction or suit for recovery of
On October 14, 1980, petitioner filed a complaint in the
Regional Trial Court (RTC) of Manila against the private
respondent, the driver and the owner of the truck. On August
2,1985, the RTC rendered a decision in favor of the
petitioner and ordered private respondent to pay petitioner
the amount paid to PTCI, but dismissed the complaint as
against the other two defendants. The dispositive portion of
the decision reads as follows:  On the other hand, petitioner company contends that the
WHEREFORE, judgment is hereby
rendered: 
1. Ordering defendant corporation to pay
plaintiff corporation the total amount of
P83,470.00 with interest thereon at the
11
legal rate computed from the time of the
filing of this case until full payment is
made;  reimburse to petitioner the amount paid by the latter to PTCI
2. Ordering defendant corporation to pay
plaintiff corporation twenty (20%)
percent of the principal amount
awarded, as attorney's fees; and  Section 384 of the Insurance Code (prior to its amendment
3. Ordering defendant corporation to pay
costs of this suit. [Rollo, p. 13.]  Any person having any claim upon the
On appeal, the Court of Appeals (CA) affirmed the finding of
the RTC that it was the negligence and recklessness of
Alfredo Sion, the driver of the Isuzu Cargo Truck, which led
to the vehicular accident. The CA also held that as the
insurer of the truck, private respondent is liable to herein
petitioner as the subrogee to all the rights and causes of
action of the owner of the damaged Toyota Land Cruiser.
Nevertheless, the CA dismissed the complaint on the ground
that petitioner's cause of action had prescribed. Respondent
court held that: 
xxx xxx xxx
Defendant's defense that the action has
prescribed is found meritorious. The
accident occurred on 24 May 1979, but
the complaint was not filed until 14
October 1980, or almost seventeen (17)
months after the accident. Section 384
of the Insurance Code mandates that
damage due to loss or injury must be
brought, in proper cases, with the courts
within one year from the date of the
accident, otherwise the claimant's right
of action shall prescribe.". . .  then concluded that since the complaint was filed after
xxx xxx xxx
[CA Decision, p. 4; Rollo, p. 26]
Petitioner moved to reconsider the CAs decision but on
March 14,1988 the CA issued a resolution denying
petitioner's motion for reconsideration. Petitioner now comes
before this Court by way of petition for review on certiorari.  that even assuming that the one-year prescriptive period
There is no dispute that respondent insurance company is
liable as the insurer of the Isuzu Cargo Truck and should
for the damage sustained by the Toyota Land Cruiser. The
sole issue in the instant case is whether or not petitioner's
cause of action had prescribed. 
by B.P. 874) provides that: 
policy issued pursuant to this chapter
present to the insurance company
concerned a written notice of claim
setting forth the amount of his loss,
and/or the nature, extent and duration of
the injuries sustained as certified by a
duly licensed physician. Notice of claim
must be filed within six months from
date of the accident, otherwise, the
claim shall be deemed waived. Action or
suit for recovery of damage due to loss
or injury must be brought in proper
cases, with the Commission or the
Courts within one year from date of
accident, otherwise the claimant's right
of action shall prescribe. [Emphasis
supplied]. 
In its decision, the CA held that the two periods provided for
in Section 384 are mandatory and must always concur.
Respondent Court argues that no claim will prosper even if a
notice of claim is filed within six (6) months from the date of
the accident if the action in court is filed more than one year
therefrom. Neither will an action filed within one year from
the date of the accident prosper, if no claim was filed with the
insurer within six (6) months from the said accident. The CA
almost seventeen (17) months from the date of the accident,
petitioner's cause of action had prescribed. 
finding of respondent court that its cause of action had
prescribed is erroneous since the one-year prescriptive
period under Section 384 of the Insurance Code is counted
not from the date of the accident but from the date of the
rejection of the claim by the insurer. Petitioner further argues
should be counted from the date of the accident, the running
of the period of prescription was interrupted when petitioner
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
filed a notice of claim with respondent insurance company
since under the Civil Code an extra-judicial demand is
sufficient to interrupt the running of the prescriptive period.  two months after the accident. This was followed by a letter
The Court finds merit in the petition. 
The controversy on the proper interpretation of Section 384
of the Insurance Code before its amendment by B.P. 874
has already been settled by this Court in the case of Summit
Guaranty & Insurance Co., Inc. v. De Guzman [G.R. Nos.
50997, L-48679, L-48758, June 30,1987,151 SCRA 389.]
which involves similar facts. In rejecting the insurance
company's defense of prescription, the Court held that:  appeal that Section 384 of the Insurance Code was invoked
Petitioner company is trying to use
Section 384 of the Insurance Code as a
cloak to hide itself from its liabilities. The
facts of these cases * evidently reflect
the deliberate efforts of petitioner
company to prevent the filing of a formal
action against it. Bearing in mind that if it
succeeds in doing so until one year
lapses from the date of the accident it
could set up the defense of prescription,
petitioner company made private
respondents believe that their claims
would be settled in order that the latter
will not find it necessary to immediately
bring suit. In violation of its duties to
adopt and implement reasonable
standards for the prompt investigation of
claims, and with manifest bad faith,
petitioner company devised means and
ways of stalling settlement proceedings
[Summit, supra, at 395]. 
To prevent the insurance company from evading its
responsibility to the insured through this clever scheme, and
to protect the insuring public against similar acts by other
insurance companies, the Court held that the one-year
period under Section 384 should be counted not from the
date of the accident but from the date of the rejection of the
claim by the insurer [Summit, supra, at 397]. The Court
further held that it is only from the rejection of the claim by
the insurer that the insured's cause of action accrued since a
cause of action does not accrue until the party obligated
refuse, expressly or impliedly, to comply with its duty
[ACCFA v. Alpha Insurance and Surety Co., G.R. No. L-
24566, July 29,1968, 24 SCRA 151].
12
In the instant case, petitioner sent a notice of claim to
respondent insurance company as early as July 26, 1979 or
dated August 3, 1979 urging respondent insurance company
to take it appropriate action" on petitioner's claim. However, it
was only a year later, on August 3, 1980 that respondent
replied to petitioner's letter informing it that they could not
take appropriate action on petitioners claim because the
attending adjuster was still negotiating the case. Two months
later, when respondent insurance company still failed to act
on its claim, petitioner filed the present case in court. During
the hearing before the RTC, respondent insurance company
never raised the defense of prescription. It was only on
by respondent insurance company and the CA, relying on
the plain language of the law, dismissed the case on the
ground of prescription.
In the light of the Court's decision in the Summit case,
respondent insurance company can no longer invoke Section
384 to defeat petitioner's claim. As aforestated, it was
precisely to prevent unscrupulous insurance companies from
using Section 384 in evading their responsibilities that the
Court applied Section 384 strictly against insurance
companies in the Summit case.
The requirement that any claim or action for recovery of
damage under an insurance policy must be brought within
one year from the date of the accident was intended to
ensure that suits be brought by the insured while evidence
as to the origin and cause of destruction have not yet
disappeared [See Ang v. Fulton Fire Ins., Co., G.R. No. L-
15862, July 31, 1961, 2 SCRA 945.).lâwphî1.ñèt This is to
enable the insurance companies to make proper assessment
of whether or not the insured can recover and, if so, to
determine the amount recoverable. However, where, as in
this case, the delay in bringing the suit against the insurance
company was not caused by the insured or its subrogee but
by the insurance company itself, it is unfair to penalize the
insured or its subrogee by dismissing its action against the
insurance company on the ground of prescription. The latter
should bear the consequences of its failure to act promptly
on the insured's claim. Under the law, insurance companies
are duty bound to adopt and implement reasonable
standards for the prompt, fair and equitable settlement of
claims [Section 241, Insurance Code].
Therefore, considering the attendant facts of this case, the
Court finds that the doctrine laid down in the Summitcase is
applicable, and accordingly holds that petitioner's cause of
action has not prescribed. 
It might not be amiss to state that Section 384 was amended
in 1985 by Batas Pambansa Blg. 874. The amendment was
inserted by the then Batasang Pambansa after realizing that
Section 384 of the Insurance Code has created so many
problems for the insuring public [Summit, supra at p. 398].
Thus, as amended, the law now provides that: 
Any person having any claim upon the
policy issued pursuant to this chapter
shall, without any unnecessary delay,
present to the insurance company
concerned a written notice of claim
setting forth the nature, extent and
duration of the injuries sustained as
certified by a duly licensed physician.
Notice of claim must be filed within six
months from date of the accident
otherwise, the claim shall be deemed
waived. Action or suit for recovery of
damage due to loss or injury must be
brought in proper cases, with the
Commissioner or the Courts within one
year from denial of the claim, otherwise
the claimant's right of action shall
prescribe. [Emphasis supplied]. 
WHEREFORE, the petition for certiorari is GRANTED. The
appealed decision of the Court of Appeals is hereby
REVERSED and that of the Regional Trial Court
REINSTATED. 
SO ORDERED.
April 19, 2016
G.R. No. 195728
PARAMOUNT LIFE & GENERAL INSURANCE
CORPORATION, Petitioner, 
vs.
CHERRY T. CASTRO and GLENN ANTHONY T.
CASTRO, Respondents.
x-----------------------x
G.R. No. 211329
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
CHERRY T. CASTRO and GLENN ANTHONY T.
CASTRO, Petitioners,  and Glenn's father - obtained a housing loan from the PPSBI
vs.
PARAMOUNT LIFE & GENERAL INSURANCE
CORPORATION, Respondent
DECISION
SERENO, CJ:
These Petitions for Review on Certiorari under Rule 45 of the
Rules of Court originate from a Complaint1 for Declaration of
Nullity of Individual Insurance Contract (Civil Case No. 09-
5992). The Complaint was instituted by Paramount Life and
General Insurance Corporation (Paramount) against Cherry
T. Castro and Glenn Anthony T. Castro (Castro’s) and filed
before the Regional Trial Court, Makati City, Branch 61
(RTC), on 2 July 2009.
The Petition3 docketed as G.R. No. 195728 assails the Court
of Appeals (CA) Decision4 dated 4 October 2010 and
Resolution5 dated 21 February 2011 in CA-G.R. SP No.
113972. The CA remanded the case to the RTC for the
admission of the Castro's Third-Party Complaint against the
Philippine Postal Savings Bank, Incorporated (PPS BI). 6
On the other hand, the Petition 7 docketed as G.R. No.
211329 assails the Resolution8 of the RTC in Civil Case No.
09-599 dated 11 February 2014. The trial court ordered that
the Motion to Dismiss filed by the defendants (the Castro’s)
be deemed expunged from the records, as they had
previously been declared to be in default. Nonetheless, due
to the protracted nature of the proceedings, the RTC allowed
the plaintiff no more than two settings for the presentation of
evidence.9
These Petitions have been consolidated as they involve the
same parties, arise from an identical set of facts, and raise
interrelated issues. 10 The Court resolves to dispose of these
cases jointly.
FACTS OF THE CASE
In 2004, the PPSBI applied for and obtained insurance from
Paramount, 11 which accordingly issued Group Master Policy
No. G-08612 effective 1 September 2004. Under Section 20,
Article IV of the said policy, "all death benefits shall be
payable to the creditor, PPSBI, as its interest may appeal." 13
13
Meanwhile, Virgilio J. Castro (Virgilio) - Cherry's husband
in the amount of Pl .5 million. 14 PPSBI required Virgilio to
apply for a mortgage redemption insurance (MRI) from
Paramount to cover the loan. 15 In his application for the said
insurance policy, Virgilio named Cherry and Glenn as
beneficiaries. 16 Paramount issued Certificate No. 041913
effective 12 March 2008 in his favor, subject to the terms and
conditions of Group Master Policy No. G-086. 17
On 26 February 2009, Virgilio died of septic
shock. 18 Consequently, a claim was filed for death benefits
under the individual insurance coverage issued under the
group policy. 19 Paramount however denied the claim, on the
ground of the failure of Virgilio to disclose material
information, or material concealment or
misrepresentation.20 It said that when Virgilio submitted his
insurance application on 12 March 2008, he made some
material misrepresentations by answering "no" to questions
on whether he had any adverse health history and whether
he had sought medical advice or consultation concerning it.
Paramount learned that in 2005, Virgilio had sought
consultation in a private hospital after complaining of a dull
pain in his lumbosacral area. 21 Because of the alleged
material concealment or misrepresentation, it declared
Virgilio's individual insurance certificate (No. 041913)
rescinded, null, and absolutely void from the very
beginning.22
On 2 July 2009, Paramount filed a Complaint 23 with the RTC
docketed as Civil Case No. 09-599. It prayed that Application
and Insurance Certificate No. 041913 covering the individual
insurance of Virgilio be declared null and void by reason of
material concealment and misrepresentation. It also prayed
for attorney's fees and exemplary damages.24
In their Answer with Counterclaim, 25 the Castro’s argued that
Virgilio had not made any material misrepresentation. They
contended that he had submitted the necessary evidence of
insurability to the satisfaction of
Paramount. They further argued that by approving Virgilio's
application, Paramount was estopped from raising the
supposed misrepresentations. 26 The Castro’s made a
counterclaim for actual and exemplary damages, as well
as attorney's fees, for the alleged breach of contract by
Paramount arising from its refusal to honor its obligation as
insurer of the Pl.5 million loan.27
STATEMENT OF THE CASES
G.R. No. 195728
On 29 October 2009, the Castros filed a motion 28 to include
the PPSBI as an indispensible party-defendant. The RTC
thereafter denied the motion, reasoning that Paramount's
Complaint could be fully resolved without the PPSBI's
participation. 29
Consequently, the Castro’s filed a Motion for Leave to File a
Third Party-Complaint and to Admit Attached Third-Party
Complaint.30 They argued that due to the death of Virgilio,
and by virtue of Group Policy No. G-086 in· relation to
Certificate No. 041913, PPSBI stepped into the shoes of
Cherry and Glen under the principle of "indemnity,
subrogation, or any other reliefs" found in Section 22, Rule 6
of the Rules of Court.31 This motion was likewise denied, on
the ground that "what the defendants herein want is the
introduction of a controversy that is entirely foreign and
distinct from the main cause." 32 The Castro’s Motion for
Reconsideration was again denied in a Resolution 33 dated 19
April 2010
On 13 May 2010, the Castro’s assailed the RTC Resolutions
through a Petition for Certiorari filed with the CA. 34They
likewise subsequently filed a Motion for Leave of Court to
File and to Admit Attached Supplemental Petition for
Review.35
In its Decision36 dated 4 October 2010, the CA partially
granted the Petition by allowing a third-party complaint to be
filed against the PPSBI. It ruled that the Castro’s were freed
from the obligation to pay the bank by virtue of subrogation,
as the latter would collect the loan amount pursuant to the
MRI issued by Paramount in Virgilio's favor. 37 Paramount
moved for reconsideration, but the CA denied the motion
through a Resolution38 dated 21 February 2011.
On 11 April 2011, Paramount filed a Petition for Review
under Rule 45, arguing that the case could be fully
appreciated and resolved without involving the PPSBI as a
third-party defendant in Civil Case No. 09-599.39
G.R. No. 211329
Meanwhile, on 7 January 2014, the Castro’s filed a Motion to
Dismiss40 the Complaint on the ground of failure to prosecute
for an unreasonable length of time without justifiable cause
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
and to present evidence ex parte pursuant to a court order.
In a Resolution41 dated 11 February 2014, the RTC denied
the motion. Owing to its previous Order dated 26 May 2010,
which declared the Castro’s as in default for failure to attend
the pretrial, the RTC treated the Motion to Dismiss as a mere
scrap of paper and expunged it from the records.
The Castro’s come straight to this Court via a Petition for
Review42 under Rule 45, assailing the RTC Resolution dated
11 February 2014.
THE ISSUES
1. Whether the CA erred in remanding the case to the R TC
for the admission of the Third-Party Complaint against
PPSBI
2. Whether the RTC erred in denying the Motion to Dismiss
filed by the Castro’s
THE COURT'S RULING
G.R. No. 195728
The Castro’s sought to implead the PPSBI as a third-party
defendant in the nullification case instituted by Paramount.
They theorized that by virtue of the death of Virgilio and the
mandate of the group insurance policy in relation to his
individual insurance policy, the PPSBI stepped into the
shoes of Cherry and Glenn. According to the Castro’s, upon
Virgilio's death, the obligation to pay the third-party
defendant (PPSBI) passed on to Paramount by virtue of the
Mortgage Redemption Insurance,43 and not to them as
Virgilio's heirs.
In Great Pacific Life Assurance Corp. v. Court of
Appeals,  44 we defined mortgage redemption insurance as a
device for the protection of both the mortgagee and the
mortgagor:
On the part of the mortgagee, it has to enter into such form
of contract so that in the event of the unexpected demise of
the mortgagor during the subsistence of the mortgage
contract, the proceeds from such insurance will
be applied to the payment of the mortgage debt, thereby
relieving the heirs of the mortgagor from paying the
14
obligation. In a similar vein, ample protection is given to the
mortgagor under such a concept so that in the event of
death, the mortgage obligation will be extinguished by the
application of the insurance proceeds to the mortgage
indebtedness.45
In this case, the PPSBI, as the mortgagee-bank, required
Virgilio to obtain an MRI from Paramount to cover his
housing loan. The issuance of the MRI, as evidenced by the
Individual Insurance Certificate in Virgilio's favor, was
derived from the group insurance policy issued by
Paramount in favor of the PPSBI. Paramount undertook to
pay the PPSBI "the benefits in accordance with the
Insurance Schedule, upon receipt and approval of due proof
that the member has incurred a loss for which benefits are
payable."46
Paramount, in opposing the PPSBI's inclusion as a third-
party defendant, reasons that it is only seeking the
nullification of Virgilio's individual insurance certificate, and
not the group insurance policy forged between it and the
PPSBI. It concludes that the nullification action it filed has
nothing to do with the PPSBI.
We disagree.
Should Paramount succeed in having the individual
insurance certificate nullified, the PPSBI shall then proceed
against the Castro’s. This would contradict the provisions of
the group insurance policy that ensure the direct payment by
the insurer to the bank:
Notwithstanding the provision on Section 22 "No
Assignment" of Article IV Benefit Provisions, and in
accordance with provisions of Section 6 "Amendment of this
Policy" under Article II General Provisions of the Group
Policy, it is hereby agreed that all death benefits shall be
payable to the Creditor, Philippine Postal Savings
Bank as its interest may appeal.47 (Emphasis supplied.)
In allowing the inclusion of the PPSBI as a third-party
defendant, the Court recognizes the inseparable interest of
the bank (as policyholder of the group policy) in the validity of
the individual insurance certificates issued by Paramount.
The PPSBI need not institute a separate case, considering
that its cause of action is intimately related to that of
Paramount as against the Castro’s. The soundness of
admitting a third-party complaint hinges on causal
connection between the claim of the plaintiff in his complaint
and a claim for contribution, indemnity or other relief of the
defendant against the third-party defendant. 48 In this case,
the Castro’s stand to incur a bad debt to the PPSBI - the
exact event that is insured against by Group Master Policy
No. G-086 - in the event that Paramount succeeds in
nullifying Virgilio's Individual Insurance Certificate.
Paramount further argues that the propriety of a third-party
complaint rests on whether the possible third-party defendant
(in this case PPSBI) can raise the same defenses that the
third-party plaintiffs (the Castro’s) have against the plaintiff.
However, the Rules do not limit the third-party defendant's
options to such a condition. Thus:
Section 13. Answer to third (fourth, etc.)-party complaint. – A
third (fourth, etc.)-party defendant may allege in his answer
his defenses, counterclaims or cross-claims, including such
defenses that the third (fourth, etc.)-party plaintiff may have
against the original plaintiffs claim. In proper cases, he may
also assert a counterclaim against the original plaintiff in
respect of the latter's claim against the third-party plaintiff. 49
As seen above, the same defenses the third-party plaintiff
has against the original plaintiff are just some of the
allegations a third-party defendant may raise in its answer.
Section 13 even gives the third-party defendant the
prerogative to raise a counterclaim against the original
plaintiff in respect of the latter's original claim against the
defendant/third-party plaintiff.
In Firestone Tire & Rubber Co. of the Phil. v.
Tempongko,  50 We ruled that a defendant is permitted to
bring in a third-party defendant to litigate a separate cause of
action in respect of the plaintiffs claim against a third party in
the original and principal case. The objective is to avoid
circuitry of action and unnecessary proliferation of lawsuits,
as well as to expeditiously dispose of the entire subject
matter arising from one particular set of facts, in one
litigation.
The CA correctly ruled that to admit the Castro’s Third-Party
Complaint, in which they can assert against the PPSBI an
independent claim they would otherwise assert in another
action, would prevent multiplicity of suits.51Considering also
that the original case from which these. Present Petitions
arose has not yet been resolved, the Court deems it proper
to have all the parties air all their possible grievances in the
original case still pending with the RTC.
Finally, the Court resolves the legal issues allegedly ignored
by the CA, to wit: 1) whether legal grounds exist for the
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
inhibition of Judge Ruiz (the presiding judge); and 2) whether
the defendants were properly declared
as in default for failure to appear at pretrial.
The first issue is unmeritorious. Counsel for the Castro’s
postulates that since six rulings of the judge are being
assailed for grave abuse of discretion, the judge should
inhibit himself.52 According to counsel, no judge shall sit in
any case if the latter's ruling is subject to review. The Court
reminds counsel that the rule contemplates a scenario in
which judges are tasked to review their own decisions on
appeal, not when their decisions are being appealed to
another tribunal.
With regard to the second issue, counsel apparently
confuses a declaration of default under Section 3 53 of Rule 9
with the effect of failure to appear under Section 554 of Rule
18. Failure to file a responsive pleading within the
reglementary period is the sole ground for an order of default
under Rule 9.55 On the other hand, under Rule 18, failure of
the defendant to appear at the pre-trial conference results in
the plaintiff being allowed to present evidence ex parte. The
difference is that a declaration of default under Rule 9 allows
the Court to proceed to render judgment granting the
claimant such relief as his pleading may warrant; while the
effect of default under Rule 18 allows the plaintiff to present
evidence ex parte and for the Court to render judgment on
the basis thereof. The lower com1 may have declared
defendants therein as in default; however, it did not issue an
order of default, rather, it ordered the plaintiff to present
evidence ex parte in accordance with the Rules. In any case,
the Castro’s could have availed themselves of appropriate
legal remedies when the CA failed to resolve the issue, but
they did not. They cannot now resurrect the issue through a
Comment before this Court.
G.R. No. 211329
As regards G.R. No. 211329, this Court finds that outright
denial of the Petition is warranted, pursuant to our ruling
in Rayos v. City of Manila. 56 In that case, We ruled that an
order denying a motion to dismiss is interlocutory and,
hence, not appealable. 57 That ruling was based on Section 1
(b), Rule 41 of the Rules of Court, as amended, which
provides:
SECTION 1. Subject of appeal. - An appeal may be taken
from a judgment or final order that completely disposes of
15
the case, or of a particular matter therein when declared by
these Rules to be appealable.
No appeal may be taken from:
xxxx
(b) An interlocutory order;
xxxx
In all the above instances where the judgment or final order
is not appealable, the aggrieved party may file an
appropriate special civil action under Rule 65.
In the present case, the RTC's denial of the Motion to
Dismiss was an interlocutory order, as it did not finally
dispose of the case. On the contrary; the denial paved way
for the case to proceed until final adjudication by the trial
court.
Upon denial of their Motion to Dismiss, the Castro’s were not
left without any recourse. In such a situation, the aggrieved
party's remedy is to file a special civil action for certiorari
under Rule 65 of the Rules of Court. However, the aggrieved
parties herein resorted to filing a Petition for Review under
Rule 45 before this Court. Even if the present Petition is
treated as one for certiorari under Rule 65, it must still be
dismissed for violation of the principle of hierarchy of courts.
This well-settled principle dictates that petitioners should
have filed the Petition for Certiorari with the CA, and not
directly with this Court.
WHEREFORE, premises considered, the Petitions in G.R.
Nos. 195728 and 211329 are DENIED.
SO ORDERED.
G.R. No. 76452 July 26, 1994
PHILIPPINE AMERICAN LIFE INSURANCE COMPANY
and RODRIGO DE LOS REYES, petitioners,  complaint.
vs.
HON. ARMANDO ANSALDO, in his capacity as Insurance
Commissioner, and RAMON MONTILLA PATERNO,
JR., respondents.
QUIASON, J.:
This is a petition for certiorari and prohibition under Rule 65
of the Revised Rules of Court, with preliminary injunction or
temporary restraining order, to annul and set aside the Order
dated November 6, 1986 of the Insurance Commissioner and
the entire proceedings taken in I.C. Special Case No. 1-86.
We grant the petition.
The instant case arose from a letter-complaint of private
respondent Ramon M. Paterno, Jr. dated April 17, 1986, to
respondent Commissioner, alleging certain problems
encountered by agents, supervisors, managers and public
consumers of the Philippine American Life Insurance
Company (Philamlife) as a result of certain practices by said
company.
In a letter dated April 23, 1986, respondent Commissioner
requested petitioner Rodrigo de los Reyes, in his capacity as
Philamlife's president, to comment on respondent Paterno's
letter.
In a letter dated April 29, 1986 to respondent Commissioner,
petitioner De los Reyes suggested that private respondent
"submit some sort of a 'bill of particulars' listing and citing
actual cases, facts, dates, figures, provisions of law, rules
and regulations, and all other pertinent data which are
necessary to enable him to prepare an intelligent reply"
(Rollo, p. 37). A copy of this letter was sent by the Insurance
Commissioner to private respondent for his comments
thereon.
On May 16, 1986, respondent Commissioner received a
letter from private respondent maintaining that his letter-
complaint of April 17, 1986 was sufficient in form and
substance, and requested that a hearing thereon be
conducted.
Petitioner De los Reyes, in his letter to respondent
Commissioner dated June 6, 1986, reiterated his claim that
private respondent's letter of May 16, 1986 did not supply the
information he needed to enable him to answer the letter-
On July 14, a hearing on the letter-complaint was held by
respondent Commissioner on the validity of the Contract of
Agency complained of by private respondent.
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
In said hearing, private respondent was required by
respondent Commissioner to specify the provisions of the
agency contract which he claimed to be illegal.
On August 4, private respondent submitted a letter of
specification to respondent Commissioner dated July 31,
1986, reiterating his letter of April 17, 1986 and praying that
the provisions on charges and fees stated in the Contract of
Agency executed between Philamlife and its agents, as well
as the implementing provisions as published in the agents'
handbook, agency bulletins and circulars, be declared as null
and void. He also asked that the amounts of such charges
and fees already deducted and collected by Philamlife in
connection therewith be reimbursed to the agents, with
interest at the prevailing rate reckoned from the date when
they were deducted.
Respondent Commissioner furnished petitioner De los Reyes
with a copy of private respondent's letter of July 31, 1986,
and requested his answer thereto.
Petitioner De los Reyes submitted an Answer dated
September 8, 1986, stating inter alia that:
(1) Private respondent's letter of August
11, 1986 does not contain any of the
particular information which Philamlife
was seeking from him and which he
promised to submit.
(2) That since the Commission's quasi-
judicial power was being invoked with
regard to the complaint, private
respondent must file a verified formal
complaint before any further
proceedings.
In his letter dated September 9, 1986, private respondent
asked for the resumption of the hearings on his complaint.
On October 1, private respondent executed an affidavit,
verifying his letters of April 17, 1986, and July 31, 1986.
In a letter dated October 14, 1986, Manuel Ortega,
Philamlife's Senior Assistant Vice-President and Executive
Assistant to the President, asked that respondent
Commission first rule on the questions of the jurisdiction of
the Insurance Commissioner over the subject matter of the
16
letters-complaint and the legal standing of private
respondent.
On October 27, respondent Commissioner notified both
parties of the hearing of the case on November 5, 1986.
On November 3, Manuel Ortega filed a Motion to Quash
Subpoena/Notice on the following grounds;
1. The Subpoena/Notice has no legal
basis and is premature because:
(1) No complaint sufficient in form and contents has been
filed;
(2) No summons has been issued nor received by the
respondent De los Reyes, and hence, no jurisdiction has
been acquired over his person;
(3) No answer has been filed, and hence, the hearing
scheduled on November 5, 1986 in the Subpoena/Notice,
and wherein the respondent is required to appear, is
premature and lacks legal basis.
II. The Insurance Commission has no jurisdiction over;
(1) the subject matter or nature of the action; and
(2) over the parties involved (Rollo, p. 102).
In the Order dated November 6, 1986, respondent
Commissioner denied the Motion to Quash. The dispositive
portion of said Order reads:
NOW, THEREFORE, finding the position
of complainant thru counsel tenable and
considering the fact that the instant case
is an informal administrative litigation
falling outside the operation of the
aforecited memorandum circular but
cognizable by this Commission, the
hearing officer, in open session ruled as
it is hereby ruled to deny the Motion to
Quash Subpoena/Notice for lack of merit
(Rollo, p. 109).
Hence, this petition.
II
The main issue to be resolved is whether or not the
resolution of the legality of the Contract of Agency falls within
the jurisdiction of the Insurance Commissioner.
Private respondent contends that the Insurance
Commissioner has jurisdiction to take cognizance of the
complaint in the exercise of its quasi-judicial powers. The
Solicitor General, upholding the jurisdiction of the Insurance
Commissioner, claims that under Sections 414 and 415 of
the Insurance Code, the Commissioner has authority to
nullify the alleged illegal provisions of the Contract of
Agency.
III
The general regulatory authority of the Insurance
Commissioner is described in Section 414 of the Insurance
Code, to wit:
The Insurance Commissioner shall have the duty to see that
all laws relating to insurance, insurance companies and other
insurance matters, mutual benefit associations and trusts for
charitable uses are faithfully executed and to perform the
duties imposed upon him by this Code, . . . 
On the other hand, Section 415 provides:
In addition to the administrative sanctions provided
elsewhere in this Code, the Insurance Commissioner is
hereby authorized, at his discretion, to impose upon
insurance companies, their directors and/or officers and/or
agents, for any willful failure or refusal to comply with, or
violation of any provision of this Code, or any order,
instruction, regulation or ruling of the Insurance
Commissioner, or any commission of irregularities, and/or
conducting business in an unsafe and unsound manner as
may be determined by the the Insurance Commissioner, the
following:
(a) fines not in excess of five hundred pesos a day; and
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
A plain reading of the above-quoted provisions show that the
Insurance Commissioner has the authority to regulate the
business of insurance, which is defined as follows:
(2) The term "doing an insurance business" or "transacting
an insurance business," within the meaning of this Code,
shall include
(a) making or proposing to make, as insurer, any insurance
contract;
(b) making, or proposing to make, as surety, any contract of
suretyship as a vocation and not as merely incidental to any
other legitimate business or activity of the surety; (c) doing
any kind of business, including a reinsurance business,
specifically recognized as constituting the doing of an
insurance business within the meaning of this Code; (d)
doing or proposing to do any business in substance
equivalent to any of the foregoing in a manner designed to
evade the provisions of this Code. (Insurance Code, Sec.
2[2]; Emphasis supplied).
Since the contract of agency entered into between Philamlife
and its agents is not included within the meaning of an
insurance business, Section 2 of the Insurance Code cannot
be invoked to give jurisdiction over the same to the
Insurance Commissioner. Expressio unius est exclusio
alterius.
With regard to private respondent's contention that the quasi-
judicial power of the Insurance Commissioner under Section
416 of the Insurance Code applies in his case, we likewise
rule in the negative. Section 416 of the Code in pertinent
part, provides:
The Commissioner shall have the power
to adjudicate claims and complaints
involving any loss, damage or liability for
which an insurer may be answerable
under any kind of policy or contract of
insurance, or for which such insurer may
be liable under a contract of suretyship,
or for which a reinsurer may be used
under any contract or reinsurance it may
have entered into, or for which a mutual
benefit association may be held liable
under the membership certificates it has
issued to its members, where the
amount of any such loss, damage or
liability, excluding interest, costs and
attorney's fees, being claimed or sued
upon any kind of insurance, bond,
reinsurance contract, or membership
17
certificate does not exceed in any single January 16, 2017
claim one hundred thousand pesos.
G.R. No. 207277
A reading of the said section shows that the quasi-judicial
power of the Insurance Commissioner is limited by law "to
MALAYAN INSURANCE CO., INC., YVONNE S.
claims and complaints involving any loss, damage or liability
YUCHENGCO, ATTY. EMMANUEL G. VILLANUEVA,
for which an insurer may be answerable under any kind of
SONNY RUBIN,1 ENGR. FRANCISCO MONDELO, and
policy or contract of insurance, . . ." Hence, this power does
MICHAEL REQUIJO,2 Petitioners. 
not cover the relationship affecting the insurance company
vs.
and its agents but is limited to adjudicating claims and
EMMA CONCEPCION L. LIN,3 Respondent.
complaints filed by the insured against the insurance
company.
DECISION
While the subject of Insurance Agents and Brokers is
discussed under Chapter IV, Title I of the Insurance Code, DEL CASTILLO, J.:
the provisions of said Chapter speak only of the licensing
requirements and limitations imposed on insurance agents
Assailed in this Petition for Review on Certiorari4 are the
and brokers.
December 21, 2012 Decision5 of the Court of Appeals (CA)
and its May 22, 2013 Resolution 6 in CA-GR. SP No. 118894,
The Insurance Code does not have provisions governing the both of which found no grave abuse of discretion in the twin
relations between insurance companies and their agents. It Orders issued by the Regional Trial Court (RTC) of Manila,
follows that the Insurance Commissioner cannot, in the Branch 52, on September 29, 2010 7 and on January 25,
exercise of its quasi-judicial powers, assume jurisdiction over 20118 in Civil Case No. 10-122738.
controversies between the insurance companies and their
agents.
Factual Antecedents
We have held in the cases of Great Pacific Life Assurance
On January 4, 2010, Emma Concepcion L. Lin (Lin) filed a
Corporation v. Judico, 180 SCRA 445 (1989),
Complaint9 for Collection of Sum of Money with Damages
and Investment Planning Corporation of the Philippines v.
against Malayan Insurance Co., Inc. (Malayan), Yvonne
Social Security Commission, 21 SCRA 904 (1962), that an
Yuchengco (Yvonne), Atty. Emmanuel Villanueva, Sonny
insurance company may have two classes of agents who sell
Rubin, Engr. Francisco Mondelo, Michael Angelo Requijo
its insurance policies: (1) salaried employees who keep
(collectively, the petitioners), and the Rizal Commercial and
definite hours and work under the control and supervision of
Banking Corporation (RCBC). This was docketed as Civil
the company; and (2) registered representatives, who work
Case No. 10-122738 of Branch 52 of the Manila RTC.
on commission basis.
Lin alleged that she obtained various loans from RCBC
Under the first category, the relationship between the
secured by six clustered warehouses located at Plaridel,
insurance company and its agents is governed by the
Bulacan; that the five warehouses were insured with
Contract of Employment and the provisions of the Labor
Malayan against fire for ₱56 million while the remaining
Code, while under the second category, the same is
warehouse was insured for ₱2 million; that on February 24,
governed by the Contract of Agency and the provisions of
2008, the five warehouses were gutted by fire; that on April
the Civil Code on the Agency. Disputes involving the latter
8, 2008 the Bureau of Fire Protection (BFP) issued a Fire
are cognizable by the regular courts.
Clearance Certification to her (April 8, 2008 FCC) after
having determined that the cause of fire was accidental; that
WHEREFORE, the petition is GRANTED. The Order dated despite the foregoing, her demand for payment of her
November 6, 1986 of the Insurance Commission is SET insurance claim was denied since the forensic investigators
ASIDE. hired by Malayan claimed that the cause of the fire was
arson and not accidental; that she sought assistance from
the Insurance Commission (IC) which, after a meeting
SO ORDERED.
among the parties and a conduct of reinvestigation into the
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
cause/s of the fire, recommended that Malayan pay Lin's
insurance claim and/or accord great weight to the BFP's
findings; that in defiance thereof, Malayan still denied or
refused to pay her insurance claim; and that for these
reasons, Malayan's corporate officers should also be held
liable for acquiescing to Malayan's unjustified refusal to pay
her insurance claim.
As against RCBC, Lin averred that notwithstanding the loss
of the mortgaged properties, the bank refused to go after
Malayan and instead insisted that she herself must pay the
loans to RCBC, otherwise, foreclosure proceedings would
ensue; and that to add insult to injury, RCBC has been
compounding the interest on her loans, despite RCBC's
failure or refusal to go after Malayan.
Lin thus prayed in Civil Case No. 10-122738 that judgment
be rendered ordering petitioners to pay her insurance claim
plus interest on the amounts due or owing her; that her loans
and mortgage to RCBC be deemed extinguished as of
February 2008; that RCBC be enjoined from foreclosing the
mortgage on the properties put up as collaterals; and that
petitioners he ordered to pay her ₱l,217,928.88 in the
concept of filing foes, costs of suit,₱l million as exemplary
damages, and ₱500,000.00 as attorney’s fees.
Some five months later, or on June 17, 2010, Lin filed before
the IC an administrative case 10 against Malayan,
represented this time by Yvonne. This was docketed as
Administrative Case No. 431.
In this administrative case, Lin claimed that since it had been
conclusively found that the cause of the fire was "accidental,"
the only issue left to be resolved is whether Malayan should
be held liable for unfair claim settlement practice under
Section 241 in relation to Section 247 of the Insurance Code
due to its unjustified refusal to settle her claim; and that in
consequence of the foregoing failings, Malayan's license to
operate as a non-life insurance company should be revoked
or suspended, until such time that it fully complies with the IC
Resolution ordering it to accord more weight to the BFP's
findings.
On August 17, 2010, Malayan filed a motion to dismiss Civil
Case No. 10-122738 based on forum shopping. It argued
that the administrative case was instituted to prompt or incite
IC into ordering Malayan to pay her insurance claim; that the
elements of forum shopping are present in these two cases
because there exists identity of parties since Malayan's
individual officers who were impleaded in the civil case are
18
also involved in the administrative case; that the same
interests are shared and represented in both the civil and
administrative cases; that there is identity of causes of action
and reliefs sought in the two cases since the administrative
case is merely disguised as an unfair claim settlement
charge, although its real purpose is to allow Lin to recover
her insurance claim from Malayan; that Lin sought to obtain
the same reliefs in the administrative case as in the civil
case; that Lin did not comply with her sworn undertaking in
the Certification on Non-Forum Shopping which she attached
to the civil case, because she deliberately failed to notify the
RTC about the pending administrative case within five days
from the filing thereof.
This motion to dismiss drew a Comment/Opposition, 11 which
Lin filed on August 31, 2010.
Ruling of the Regional Trial Court
12
In its Order of September 29, 2010,  the RTC denied the
Motion to Dismiss, thus:
WHEREFORE, the MOTION TO DISMISS filed by
[petitioners] is hereby DENIED for lack of merit.
Furnish the parties through their respective [counsels] with a
copy each [of] the Order.
SO ORDERED.13
The RTC held that in the administrative case, Lin was
seeking a relief clearly distinct from that sought in the civil
case; that while in the administrative case Lin prayed for the
suspension or revocation of Malayan's license to operate as
a non-life insurance company, in the civil case Lin prayed for
the collection of a sum of money with damages; that it is
abundantly clear that any judgment that would be obtained in
either case would not be res judicata to the other, hence,
there is no forum shopping to speak of.
In its Order of January 25, 2011, 14 the RTC likewise denied,
for lack of merit, petitioners' Motion for Reconsideration.
Ruling of the Court of Appeals
Petitioners thereafter sued out a Petition for Certiorari and
Prohibition15 before the CA. However, in a Decision 16dated
December 21, 2012, the CA upheld the RTC, and disposed
as follows:
WHEREFORE absent grave abuse of discretion on the part
of respondent Judge, the Petition for Certiorari and
Prohibition (with Temporary Restraining Order and
Preliminary Injunction) is DISMISSED.
SO ORDERED.17
The CA, as did the RTC, found that Lin did not commit forum
shopping chiefly for the reason that the issues raised and the
reliefs prayed for in the civil case were essentially different
from those in the administrative case, hence Lin had no duty
at all to inform the RTC about the institution or pendency of
the administrative case.
The CA ruled that forum shopping exists where the elements
of litis pendentia concurred, and where a final judgment in
one case will amount to res judicata in the other. The CA
held that of the three elements of forum shopping viz., (l)
identity of parties, or at least such parties as would represent
the same interest in both actions, (2) identity of rights
asserted and reliefs prayed for, the relief being founded on
the same facts, and (3) identity of the two proceedings such
that any judgment rendered in one action will, regardless of
which party is successful, amount to res judicata in the other
action under consideration, only the first element may be
deemed present in the instant case. The CA held that there
is here identity of parties in the civil and administrative cases
because Lin is the complainant in both the civil and
administrative cases, and these actions were filed against
the same petitioners, the same RCBC and the same
Malayan, represented by Yvonne, respectively. It held that
there is however no identity of rights asserted and reliefs
prayed for because in the civil case, it was Lin's assertion
that petitioners had violated her rights to recover the full
amount of her insurance claim, which is why she
prayed/demanded that petitioners pay her insurance claim
plus damages; whereas in the administrative case, Lin's
assertion was that petitioners were guilty of unfair claim
settlement practice, for which reason she prayed that
Malayan's license to operate as an insurance company be
revoked or suspended; that the judgment in the civil case,
regardless of which party is successful, would not amount
to res judicata in the administrative case in view of the
different issues involved, the dissimilarity in the quantum of
evidence required, and the distinct mode or procedure to be
observed in each case.
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
Petitioners moved for reconsideration 18 of the CA's Decision,
but this motion was denied by the CA in its Resolution of
May 22, 2013.19
Issues
Before this Court, petitioners instituted the present
Petition,20 which raises the following issues:
The [CA] not only decided questions of substance contrary to
law and the applicable decisions of this Honorable Court, it
also sanctioned a flagrant departure from the accepted and
usual course of judicial proceedings.
A.
The [CA] erred in not dismissing the Civil Case on the
ground of willful and deliberate [forum shopping] despite the
fact that the civil case and the administrative case both seek
the payment of the same fire insurance claim.
B.
The [CA] erred in not dismissing the civil case for failure on
the part of [Lin] to comply with her undertaking in her
verification and certification of non-forum shopping appended
to the civil complaint.21
Petitioners' Arguments
In praying for the reversal of the CA Decision, petitioners
argue that regardless of nomenclature, it is Lin and no one
else who filed the administrative case, and that she is not a
mere complaining witness therein; that it is settled that only
substantial identity of parties is required for res judicata to
apply; that the sharing of the same interest is sufficient to
constitute identity of parties; that Lin has not denied that the
subject of both the administrative case and the civil case
involved the same fire insurance claim; that there is here
identity of causes of action, too, because the ultimate
objective of both the civil case and the administrative case is
to compel Malayan to pay Lin's fire insurance claim; that
although the reliefs sought in the civil case and those in the
administrative case are worded differently, Lin was actually
asking for the payment of her insurance claim in both cases;
that it is well-entrenched that a party cannot escape the
operation of the principle in res judicata that a cause of
action cannot be litigated twice just by varying the form of
19
action or the method of presenting the case; that Go v.
Office of the Ombudsman22is inapplicable because the issue
in that case was whether there was unreasonable delay in
withholding the insured's claims, which would warrant the
revocation or suspension of the insurers' licenses, and not
whether the insurers should pay the insured's insurance
claim; that Almendras Mining Corporation v. Office of the
Insurance Commission23does not apply to this case either,
because the parties in said case agreed to submit the case
for resolution on the sole issue of whether the revocation or
suspension of the insurer's license was justified; and that
petitioners will suffer irreparable injury as a consequence of
having to defend themselves in a case which should have
been dismissed on the ground of forum shopping.
Respondents Arguments
Lin counters that as stressed in Go v. Office of the
Ombudsman,  24 an administrative case for unfair claim
settlement practice may proceed simultaneously with, or
independently of, the civil case for collection of the insurance
proceeds filed by the same claimant since a judgment in one
will not amount to res judicata to the other, and vice
versa, due to the variance or differences in the issues, in the
quantum of evidence, and in the procedure to be followed in
prosecuting the cases; that in this case the CA cited the
teaching in Go v. Office of the Ombudsman that there was
no grave abuse of discretion in the RTC's dismissal of
petitioners' motion to dismiss; that the CA correctly held that
the RTC did not commit grave abuse of discretion in denying
petitioners' motion to dismiss because the elements of forum
shopping were absent; that there is here no identity of parties
because while she (respondent) is the plaintiff in the civil
case, she is only a complaining witness in the administrative
case since it is the IC that is the real party in interest in the
administrative case; that the cause of action in the civil case
consists of Malayan's failure or refusal to pay her insurance
claim, whereas in the administrative case, it consists of
Malayan's unfair claim settlement practice; that the issue in
the civil case is whether Malayan is liable to pay Lin's
insurance claim, while the issue in the administrative case is
whether Malayan's license to operate should be revoked or
suspended for engaging in unfair claim settlement practice;
and that the relief sought in the civil case consists in the
payment of a sum of money plus damages, while the relief in
the administrative case consists of the revocation or
suspension of Malayan's license to operate as an insurance
company. According to Lin, although in the administrative
case she prayed that the IC Resolution ordering Malayan to
accord weight to the BFP's findings be declared final, this did
not mean that she was therein seeking payment of her
insurance claim, but rather that the IC can now impose the
appropriate administrative sanctions upon Malayan; that if
Malayan felt compelled to pay Lin's insurance claim for fear
that its license to operate as an insurance firm might be
suspended or revoked, then this is just a logical result of its
failure or refusal to pay the insurance claim; that the
judgment in the civil case will not amount to res judicata in
the administrative case, and vice versa, pursuant to the case
law ruling in Go v. Office of the Ombudsman25and
in Almendras v. Office of the Insurance Commission,  26 both
of which categorically allowed the insurance clain1ants
therein to file both a civil and an administrative case against
insurers; that the rule against forum shopping was designed
to serve a noble purpose, viz., to be an instrument of justice,
hence, it can in no way be interpreted to subvert such a
noble purpose.
Our Ruling
We deny this Petition. We hold that the case law rulings in
the Go and Almendras cases27 control and govern the case
at bench.
First off, it is elementary that "an order denying a motion to
dismiss is merely interlocutory and, therefore, not
appealable, x x x to x x x avoid undue inconvenience to the
appealing party by having to assail orders as they are
promulgated by the court, when all such orders may be
contested in a single appeal."28
Secondly, petitioners herein utterly failed to prove that the
RTC, in issuing the assailed Orders, acted with grave abuse
of discretion amounting to lack or excess of jurisdiction. "It is
well-settled that an act of a court or tribunal may only be
considered to have been done in grave abuse of discretion
when the same was performed in a capricious or whimsical
exercise of judgment which is equivalent to lack or excess of
jurisdiction."29 "[F]or grave abuse of discretion to exist, the
abuse of discretion must be patent and gross so as to
amount to an evasion of a positive duty or a virtual refusal to
perform a duty enjoined by law, or to act at all in
contemplation of law."30
In the present case, petitioners basically insist that Lin
committed willful and deliberate forum shopping which
warrants the dismissal of her civil case because it is not
much different from the administrative case in terms of the
parties involved, the causes of action pleaded, and the reliefs
prayed for. Petitioners also posit that another ground
warranting the dismissal of the civil case was Lin's failure to
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
notify the RTC about the pendency of the administrative case
within five days from the filing thereof.
These arguments will not avail. The proscription against
forum shopping is found in Section 5, Rule 7 of the Rules of
Court, which provides:
SEC. 5. Certification against forum shopping. --The plaintiff
or principal party shall certify under oath in the complaint or
other initiatory pleading asserting a claim for relief, or in a
sworn certification annexed thereto and simultaneously filed
therewith; (a) that he has not theretofore commenced any
action or filed any claim involving the same issues in any
court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein;
(b) if there is such other pending action or claim, a complete
statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action or claim has
been filed or is pending, he shall report that fact within five
(5) days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not
be curable by mere amendment of the complaint or other
initiatory pleading but shall be cause for the dismissal of the
case without prejudice, unless otherwise provided, upon
motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings
therein shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and criminal
actions. If the acts of the party or his counsel clearly
constitute willful and deliberate forum shopping, the same
shall be ground for summary dismissal with prejudice and
shall constitute direct contempt, as well as a cause for
administrative sanctions. (n)
The above-stated rule covers the very essence of forum
shopping itself, and the constitutive elements
thereof viz., the cognate concepts of litis pendentia and res
judicata -
x x x [T]he essence of forum shopping is the filing of multiple
suits involving the same parties for the same cause of action,
either simultaneously or successively, for the purpose of
obtaining a favorable judgment. It exists where the elements
of litis pendentia are present or where a final judgment in
one case will amount to res judicata in another. On the other
hand, for litis pendentia to be a ground for the dismissal of
an action, the following requisites must concur: (a) identity of
parties, or at least such parties who represent the same
20
interests in both actions; (b) identity of rights asserted and two hundred thirty-two and to provide for the licensing of
relief prayed for, the relief being founded on the same facts; persons selling such contracts, and to issue such reasonable
and (c) the identity with respect to the two preceding rules and regulations governing the same.
particulars in the two cases is such that any judgment that
may be rendered in the pending case, regardless of which
The Commissioner may issue such rulings, instructions,
party is successful, would amount to res judicata in the other
circulars, orders[,] and decisions as he may deem necessary
case.31
to secure the enforcement of the provisions of this Code,
subject to the approval of the Secretary of Finance [DOF
Res judicata, in turn, has the following requisites: "(1) the Secretary]. Except as otherwise specified, decisions made
former judgment must be final; (2) it must have been by the Commissioner shall be appealable to the [DOF
rendered by a court having jurisdiction over the subject Secretary].' (Italics supplied)
matter and over the parties; (3) it must be a judgment on the
merits; and (4) there must be, between the first and second
which Section also specifies the authority to which a decision
actions, (a) identity of parties, (b) identity of subject matter,
of the Insurance Commissioner rendered in the exercise of
and (c) identity of cause of action."32
its regulatory function may be appealed.
"The settled rule is that criminal and civil cases are
The adjudicatory authority of the Insurance Commissioner is
altogether different from administrative matters, such that
generally described in Section 416 of the Insurance Code, as
the disposition in the first two will not inevitably govern the
amended, which reads as follows:
third and vice versa."33In the context of the case at bar,
matters handled by the IC are delineated as either regulatory
or adjudicatory, both of which have distinct characteristics, 'Sec. 416. The Commissioner shall have the power to
as postulated in Almendras Mining Corporation v. Office of adjudicate claims and complaints involving any loss, damage
the Insurance Commission:34 or liability for which an insurer may be answerable under any
kind of policy or contract of insurance, or for which such
insurer may be liable under a contract of suretyship, or for
The provisions of the Insurance Code (Presidential Decree
which a reinsurer may be sued under any contract or
[P.D.] No. 1460), as amended, clearly indicate that the Office
reinsurance it may have entered into, or for which a mutual
of the [IC] is an administrative agency vested
benefit association may be held liable under the membership
with regulatory power as well as with adjudicatory authority.
certificates it has issued to its members, where the amount
Among the several regulatory or non-quasi-judicial duties of
of any such loss, damage or liability, excluding interests,
the Insurance Commissioner under the Insurance Code is
cost and attorney’s  fees, being claimed or sued upon any
the authority to issue, or refuse issuance of, a Certificate of
kind of insurance, bond, reinsurance contract, or
Authority to a person or entity desirous of engaging in
membership certificate does not exceed in any single claim
insurance business in the Philippines, and to revoke or
one hundred thousand pesos.
suspend such Certificate of Authority upon a finding of the
existence of statutory grounds for such revocation or
suspension. The grounds for revocation or suspension of an xxxx
insurer's Certificate of Authority are set out in Section 241
and in Section 247 of the Insurance Code as amended. The
The authority to adjudicate granted to the Commissioner
general regulatory authority of the Insurance Commissioner
under this section shall be concurrent with that of the civil
is described in Section 414 of the Insurance Code, as
courts, but the filing of a complaint with the Commissioner
amended, in the following terms:
shall preclude the civil courts from taking cognizance of a
suit involving the same subject matter.' (Italics supplied)
'Section 414. The Insurance Commissioner shall have the
duty to see that all laws relating to insurance, insurance
Continuing, Section 416 (as amended by Batas Pambansa
companies and other insurance matters, mutual benefit
(B.P.) Blg. 874) also specifies the authority to which appeal
associations, and trusts for charitable uses are faithfully
may be taken from a final order or decision of the
executed and to perform the duties imposed upon him by
Commissioner given in the exercise of his adjudicatory or
this Code, and shall, notwithstanding any existing laws to the
quasi-judicial power:
contrary, have sole and exclusive authority to regulate the
issuance and sale of variable contracts as defined in section
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
'Any decision, order or ruling rendered by the Commissioner
after a hearing shall have the force and effect of a
judgment. Any party may appeal from a final order, ruling or
decision of the Commissioner by filing with the
Commissioner within thirty days from receipt of copy of such
order, ruling or decision a notice of appeal to the
Intermediate Appellate Court (now the Court of Appeals) in
the manner provided for in the Rules of Court for appeals
from the Regional Trial Court to the Intermediate Appellate
Court (now the Court of Appeals)
x x x x'
It may be noted that under Section 9 (3) of B.P. Big. 129,
appeals from a final decision of the Insurance Commissioner
rendered in the exercise of his adjudicatory authority now fall
within the exclusive appellate jurisdiction of the Court of
Appeals.35
Go v. Office of the Ombudsman36reiterated the above-stated
distinctions vis-a-vis the principles enunciating that a civil
case before the trial court involving recovery of payment of
the insured's insurance claim plus damages, can proceed
simultaneously with an administrative case before the
IC.37 Expounding on the foregoing points, this Court said -
**The findings of the trial court will not necessarily foreclose
the administrative case before the [IC], or [vice versa]. True,
the parties are the same, and both actions are predicated on
the same set of facts, and will require identical evidence. But
the issues to be resolved, the quantum of evidence, the
procedure to be followed[,] and the reliefs to be adjudged by
these two bodies are different.
Petitioner's causes of action in Civil Case No. Q-95-23135
are predicated on the insurers' refusal to pay her fire
insurance claims despite notice, proofs of losses and other
supporting documents. Thus, petitioner prays in her
complaint that the insurers be ordered to pay the full-insured
value of the losses, as embodied in their respective policies.
Petitioner also sought payment of interests and damages in
her favor caused by the alleged delay and refusal of the
insurers to pay her claims. The principal issue then that must
be resolved by the trial court is whether or not petitioner is
entitled to the payment of her insurance claims and
damages. The matter of whether or not there is
unreasonable delay or denial of the claims is merely an
incident to be resolved by the trial court, necessary to
ascertain petitioner's right to claim damages, as prescribed
by Section 244 of the Insurance Code.
21
On the other hand, the core, if not the sole bone of
contention in Adm. Case No. RD-156, is the issue of whether
or not there was unreasonable delay or denial of the claims
of petitioner, and if in the affirmative, whether or not that
would justify the suspension or revocation of the insurers'
licenses.
Moreover, in Civil Case No. Q-95-23135, petitioner must
establish her case by a preponderance of evidence, or
simply put, such evidence that is of greater weight, or more
convincing than that which is offered in opposition to it. In
Adm. Case No. RD-156, the degree of proof required of
petitioner to establish her claim is substantial
evidence, which has been defined as that amount of relevant
evidence that a reasonable mind might accept as adequate
to justify the conclusion.
In addition, the procedure to be followed by the trial court is
governed by the Rules of Court, while the [IC] has its own set
of rules and it is not bound by the rigidities of technical rules
of procedure. These two bodies conduct independent means
of ascertaining the ultimate facts of their respective cases
that will serve as basis for their respective decisions.1âwphi1
If, for example, the trial court finds that there was no
unreasonable delay or denial of her claims, it does not
automatically mean that there was in fact no such
unreasonable delay or denial that would justify the revocation
or suspension of the licenses of the concerned insurance
companies. It only means that petitioner failed to prove by
preponderance of evidence that she is entitled to damages.
Such finding would not restrain the [IC], in the exercise of its
regulatory power, from making its own finding of
unreasonable delay or denial as long as it is supported by
substantial evidence.
While the possibility that these two bodies will come up with
conflicting resolutions on the same issue is not far-fetched,
the finding or conclusion of one would not necessarily be
binding on the other given the difference in the issues
involved, the quantum of evidence required and the
procedure to be followed.
Moreover, public interest and public policy demand the
speedy and inexpensive disposition of administrative cases.
Hence, Adm. Case No. RD-156 may proceed alongside Civil
Case No. Q-95-23135.38
As the aforecited cases are analogous in many aspects to
the present case, both in respect to their factual backdrop
and in their jurisprudential teachings, the case law ruling in
the Almendras and in the Go cases must apply with
implacable force to the present case. Consistency alone
demands - because justice cannot be inconsistent - that the
final authoritative mandate in the cited cases must produce
an end result not much different from the present case.
All told, we find that the CA did not err in holding that the
petitioners utterly failed to prove that the RTC exhibited
grave abuse of discretion, amounting to lack or excess of
jurisdiction, which would justify the issuance of the
extraordinary writ of certiorari.39
WHEREFORE, the Petition is DENIED. The December 21,
2012 Decision and the May 22, 2013 Resolution of the Court
of Appeals in CA-GR. SP No. 118894 are
hereby AFFIRMED.
Costs against petitioners.
SO ORDERED.
G.R. No. L-31845 April 30, 1979
GREAT PACIFIC LIFE ASSURANCE
COMPANY, petitioner, 
vs.
HONORABLE COURT OF APPEALS, respondents.
G.R. No. L-31878 April 30, 1979
LAPULAPU D. MONDRAGON, petitioner, 
vs.
HON. COURT OF APPEALS and NGO HING, respondents.
DE CASTRO, J.:
The two above-entitled cases were ordered consolidated by
the Resolution of this Court dated April 29, 1970, (Rollo, No.
L-31878, p. 58), because the petitioners in both cases seek
similar relief, through these petitions for certiorari by way of
appeal, from the amended decision of respondent Court of
Appeals which affirmed in toto the decision of the Court of
First Instance of Cebu, ordering "the defendants (herein
petitioners Great Pacific Ligfe Assurance Company and
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
Mondragon) jointly and severally to pay plaintiff (herein
private respondent Ngo Hing) the amount of P50,000.00 with
interest at 6% from the date of the filing of the complaint, and
the sum of P1,077.75, without interest.
It appears that on March 14, 1957, private respondent Ngo
Hing filed an application with the Great Pacific Life
Assurance Company (hereinafter referred to as Pacific Life)
for a twenty-year endownment policy in the amount of
P50,000.00 on the life of his one-year old daughter Helen
Go. Said respondent supplied the essential data which
petitioner Lapulapu D. Mondragon, Branch Manager of the
Pacific Life in Cebu City wrote on the corresponding form in
his own handwriting (Exhibit I-M). Mondragon finally type-
wrote the data on the application form which was signed by
private respondent Ngo Hing. The latter paid the annual
premuim the sum of P1,077.75 going over to the Company,
but he reatined the amount of P1,317.00 as his commission
for being a duly authorized agebt of Pacific Life. Upon the
payment of the insurance premuim, the binding deposit
receipt (Exhibit E) was issued to private respondent Ngo
Hing. Likewise, petitioner Mondragon handwrote at the
bottom of the back page of the application form his strong
recommendation for the approval of the insurance
application. Then on April 30, 1957, Mondragon received a
letter from Pacific Life disapproving the insurance application
(Exhibit 3-M). The letter stated that the said life insurance
application for 20-year endowment plan is not available for
minors below seven years old, but Pacific Life can consider
the same under the Juvenile Triple Action Plan, and advised
that if the offer is acceptable, the Juvenile Non-Medical
Declaration be sent to the company.
The non-acceptance of the insurance plan by Pacific Life
was allegedly not communicated by petitioner Mondragon to
private respondent Ngo Hing. Instead, on May 6, 1957,
Mondragon wrote back Pacific Life again strongly
recommending the approval of the 20-year endowment
insurance plan to children, pointing out that since 1954 the
customers, especially the Chinese, were asking for such
coverage (Exhibit 4-M).
It was when things were in such state that on May 28, 1957
Helen Go died of influenza with complication of
bronchopneumonia. Thereupon, private respondent sought
the payment of the proceeds of the insurance, but having
failed in his effort, he filed the action for the recovery of the
same before the Court of First Instance of Cebu, which
rendered the adverse decision as earlier refered to against
both petitioners.
22
The decisive issues in these cases are: (1) whether the The aforequoted provisions printed on Exhibit E show that
binding deposit receipt (Exhibit E) constituted a temporary the binding deposit receipt is intended to be merely a
contract of the life insurance in question; and (2) whether provisional or temporary insurance contract and only upon
private respondent Ngo Hing concealed the state of health compliance of the following conditions: (1) that the company
and physical condition of Helen Go, which rendered void the shall be satisfied that the applicant was insurable on
aforesaid Exhibit E. standard rates; (2) that if the company does not accept the
application and offers to issue a policy for a different plan,
the insurance contract shall not be binding until the applicant
1. At the back of Exhibit E are condition precedents required
accepts the policy offered; otherwise, the deposit shall be
before a deposit is considered a BINDING RECEIPT. These
reftmded; and (3) that if the applicant is not ble according to
conditions state that: 
the standard rates, and the company disapproves the
application, the insurance applied for shall not be in force at
A. If the Company or its agent, shan any time, and the premium paid shall be returned to the
have received the premium deposit ... applicant. 
and the insurance application, ON or
PRIOR to the date of medical
Clearly implied from the aforesaid conditions is that the
examination ... said insurance shan be
binding deposit receipt in question is merely an
in force and in effect from the date of
acknowledgment, on behalf of the company, that the latter's
such medical examination, for such
branch office had received from the applicant the insurance
period as is covered by the
premium and had accepted the application subject for
deposit ..., PROVIDED the company
processing by the insurance company; and that the latter will
shall be satisfied that on said date the
either approve or reject the same on the basis of whether or
applicant was insurable on standard
not the applicant is "insurable on standard rates." Since
rates under its rule for the amount of
petitioner Pacific Life disapproved the insurance application
insurance and the kind of policy
of respondent Ngo Hing, the binding deposit receipt in
requested in the application. 
question had never become in force at any time.
D. If the Company does not accept the
Upon this premise, the binding deposit receipt (Exhibit E) is,
application on standard rate for the
manifestly, merely conditional and does not insure outright.
amount of insurance and/or the kind of
As held by this Court, where an agreement is made between
policy requested in the
the applicant and the agent, no liability shall attach until the
application but issue, or offers to issue a
principal approves the risk and a receipt is given by the
policy for a different plan and/or
agent. The acceptance is merely conditional and is
amount ..., the insurance shall not be in
subordinated to the act of the company in approving or
force and in effect until the applicant
rejecting the application. Thus, in life insurance, a "binding
shall have accepted the policy as issued
slip" or "binding receipt" does not insure by itself (De Lim vs.
or offered by the Company and shall
Sun Life Assurance Company of Canada, 41 Phil. 264).
have paid the full premium thereof. If the
applicant does not accept the policy, the
deposit shall be refunded. It bears repeating that through the intra-company
communication of April 30, 1957 (Exhibit 3-M), Pacific Life
disapproved the insurance application in question on the
E. If the applicant shall not have been
ground that it is not offering the twenty-year endowment
insurable under Condition A above, and
insurance policy to children less than seven years of age.
the Company declines to approve the
What it offered instead is another plan known as the Juvenile
application the insurance applied for
Triple Action, which private respondent failed to accept. In
shall not have been in force at any time
the absence of a meeting of the minds between petitioner
and the sum paid be returned to the
Pacific Life and private respondent Ngo Hing over the 20-
applicant upon the surrender of this
year endowment life insurance in the amount of P50,000.00
receipt. (Emphasis Ours). 
in favor of the latter's one-year old daughter, and with the
non-compliance of the abovequoted conditions stated in the
disputed binding deposit receipt, there could have been no
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
insurance contract duly perfected between thenl Accordingly,
the deposit paid by private respondent shall have to be
refunded by Pacific Life.  year endowment plan was ever duly
As held in De Lim vs. Sun Life Assurance Company of
Canada, supra, "a contract of insurance, like other contracts,
must be assented to by both parties either in person or by
their agents ... The contract, to be binding from the date of
the application, must have been a completed contract, one
that leaves nothing to be dione, nothing to be completed,
nothing to be passed upon, or determined, before it shall
take effect. There can be no contract of insurance unless the
minds of the parties have met in agreement."
We are not impressed with private respondent's contention
that failure of petitioner Mondragon to communicate to him
the rejection of the insurance application would not have any
adverse effect on the allegedly perfected temporary contract
(Respondent's Brief, pp. 13-14). In this first place, there was
no contract perfected between the parties who had no
meeting of their minds. Private respondet, being an
authorized insurance agent of Pacific Life at Cebu branch
office, is indubitably aware that said company does not offer
the life insurance applied for. When he filed the insurance
application in dispute, private respondent was, therefore,
only taking the chance that Pacific Life will approve the
recommendation of Mondragon for the acceptance and
approval of the application in question along with his
proposal that the insurance company starts to offer the 20-
year endowment insurance plan for children less than seven
years. Nonetheless, the record discloses that Pacific Life had
rejected the proposal and recommendation. Secondly,
having an insurable interest on the life of his one-year old
daughter, aside from being an insurance agent and an
offense associate of petitioner Mondragon, private
respondent Ngo Hing must have known and followed the
progress on the processing of such application and could not
pretend ignorance of the Company's rejection of the 20-year
endowment life insurance application.
At this juncture, We find it fit to quote with approval, the very
apt observation of then Appellate Associate Justice Ruperto
G. Martin who later came up to this Court, from his
dissenting opinion to the amended decision of the
respondent court which completely reversed the original
decision, the following:
Of course, there is the insinuation that
neither the memorandum of rejection
(Exhibit 3-M) nor the reply thereto of
appellant Mondragon reiterating the
23
desire for applicant's father to have the daughter is typically a mongoloid child. Such a congenital
application considered as one for a 20- physical defect could never be ensconced nor disguished.
Nonetheless, private respondent, in apparent bad faith,
communicated to Ngo; Hing, father of withheld the fact materal to the risk to be assumed by the
the minor applicant. I am not quite insurance compary. As an insurance agent of Pacific Life, he
conninced that this was so. Ngo Hing, as ought to know, as he surely must have known. his duty and
father of the applicant herself, was responsibility to such a material fact. Had he diamond said
precisely the "underwriter who wrote this significant fact in the insurance application fom Pacific Life
case" (Exhibit H-1). The unchallenged would have verified the same and would have had no choice
statement of appellant Mondragon in his but to disapprove the application outright. 
letter of May 6, 1957) (Exhibit 4-M),
specifically admits that said Ngo Hing
The contract of insurance is one of perfect good faith
was "our associate" and that it was the
uberrima fides meaning good faith, absolute and perfect
latter who "insisted that the plan be
candor or openness and honesty; the absence of any
placed on the 20-year endowment plan."
concealment or demotion, however slight [Black's Law
Under these circumstances, it is
Dictionary, 2nd Edition], not for the alone but equally so for
inconceivable that the progress in the
the insurer (Field man's Insurance Co., Inc. vs. Vda de
processing of the application was not
Songco, 25 SCRA 70). Concealment is a neglect to
brought home to his knowledge. He
communicate that which a partY knows aDd Ought to
must have been duly apprised of the
communicate (Section 25, Act No. 2427). Whether
rejection of the application for a 20-year
intentional or unintentional the concealment entitles the
endowment plan otherwise Mondragon
insurer to rescind the contract of insurance (Section 26, Id.:
would not have asserted that it was Ngo
Yu Pang Cheng vs. Court of Appeals, et al, 105 Phil 930;
Hing himself who insisted on the
Satumino vs. Philippine American Life Insurance Company,
application as originally filed, thereby
7 SCRA 316). Private respondent appears guilty thereof. 
implictly declining the offer to consider
the application under the Juvenile Triple
Action Plan. Besides, the associate of We are thus constrained to hold that no insurance contract
Mondragon that he was, Ngo Hing was perfected between the parties with the noncompliance of
should only be presumed to know what the conditions provided in the binding receipt, and
kind of policies are available in the concealment, as legally defined, having been comraitted by
company for minors below 7 years old. herein private respondent. 
What he and Mondragon were
apparently trying to do in the premises
WHEREFORE, the decision appealed from is hereby set
was merely to prod the company into
aside, and in lieu thereof, one is hereby entered absolving
going into the business of issuing
petitioners Lapulapu D. Mondragon and Great Pacific Life
endowment policies for minors just as
Assurance Company from their civil liabilities as found by
other insurance companies allegedly do.
respondent Court and ordering the aforesaid insurance
Until such a definite policy is however,
company to reimburse the amount of P1,077.75, without
adopted by the company, it can hardly
interest, to private respondent, Ngo Hing. Costs against
be said that it could have been bound at
private respondent. 
all under the binding slip for a plan of
insurance that it could not have, by then
issued at all. (Amended Decision, Rollo, SO ORDERED.
pp- 52-53). 
G.R. No. L-41794             August 30, 1935
2. Relative to the second issue of alleged concealment. this
Court is of the firm belief that private respondent had
deliberately concealed the state of health and piysical SEGUNDINA MUSÑGI, ET AL., plaintiffs-appellees, 
vs.
condition of his daughter Helen Go. Wher private regpondeit
WEST COAST LIFE INSURANCE CO., defendant-appellant.
supplied the required essential data for the insurance
application form, he was fully aware that his one-year old
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
IMPERIAL, J.:
The plaintiffs, as beneficiaries, brought suit against the
defendant to recover the value of two life insurance policies.
The defendant appealed from a judgment sentencing it to
pay the plaintiffs the amount of said policies, and the costs.
The principal facts of the case are embodied in the following
written stipulation entered into by the parties:
1. That Arsenio T. Garcia was insured by the
defendant company in the sum of P5,000 as
evidenced by Policy No. 129454 effective as of
July 25, 1931, hereby attached and marked as
Exhibit A;
2. That the said Arsenio T. Garcia was again
insured by the defendant company in the sum of
P10,000 effective as of October 20, 1931, as
evidenced by Policy No. 130381 hereby attached
and marked as Exhibit B;
3. That the two policies aforementioned were valid
and subsisting at the time of the death of the
insured on December 30, 1932; the fact of said
death is evidenced by the accompanying death
certificate issued by the Civil Register of Pasay,
Rizal, which is marked as Exhibit C;
4. That the plaintiffs herein are the beneficiaries in
said policies, Segundina Musñgi of Policy No.
129454, and Buenaventura Garcia of Policy No.
130381;
5. That demand was made upon the defendant
company for the payment of the two policies above
referred to, but the defendant company refused to
pay on the grounds stated in the answer.
The two policies were issued upon applications filed by the
insured on July 20, 1931 and October 15, of the same year,
respectively. In both applications, the insured had to answer
inquiries as to his state of health and that of his family, which
he did voluntarily. In each of the said applications the
following question was asked: "1. What physician or
practitioner or any other person not named above have you
consulted or been treated by, and for what illness, or
ailment? (If none, so state.)" In the first application, the
insured answered "None", and in the second, "No". These
24
answers of the insured as well as his other statements
contained in his applications were one of the causes or
considerations for the issuance of the policies, and they so
positively appear therein. After the death of the insured and
as a result of the demand made by the beneficiaries upon
the defendant to pay the value of the policies, the latter
discovered that the aforementioned answers were false and
fraudulent, because the truth was that the insured, before
answering and signing the applications and before the
issuance of the policies, had been treated in the General
Hospital by a lady physician for different ailments. It
indisputably appears that between May 13 and 19, 1929, the
insured had entered the General Hospital in Manila, and was
treated by Doctor Pilar V. Cruz for peptic ulcer and chronic
catarrhal nasopharyngitis; on August 5, 1930, he entered the
same hospital and was treated by the same physician for
chronic pyelocystitis and for incipient pulmonary tuberculosis;
on the 13th of the same month he returned to the hospital
and was treated by the same physician for chronic
suppurative pyelocystitis and for chronic bronchitis; on the
20th of the same month he again entered the hospital and
was treated by the same doctor for acute tracheo-bronchitis
and chronic suppurative pyelocystitis; on the 27th of the
same month he again entered the same hospital and was
treated for the same ailments; on December 11, 1930, he
again entered the hospital and was treated for the same
ailments; on the 18th of the same month, he again entered
the hospital and was treated for the same ailments; on the
28th of the same month he again entered the hospital and
was treated for the same ailments, and, finally, on January
11, 1931, he again entered the hospital and was treated by
the same doctor for the same ailments.
The defendant contended at the outset that the two policies
did not create any valid obligation because they were
fraudulently obtained by the insured. The appealed decision
holds that the health of the insured before the acceptance of
his applications and the issuance of the policies could neither
be discussed nor questioned by the defendant, because the
insured was examined by three physicians of the company
and all of them unanimously certified that he was in good
health and that he could be properly insured. The question
here is not whether the physicians' reports or the answers
which the insured gave to them relative to his health were
correct or not. It is admitted that such information was
substantially correct, in the sense that the physicians of the
defendant who examined the insured, for failure to make a
detailed examination, did not discover the ailments suffered
by the insured. However, the question raised for our
determination is whether the two answers given by the
insured in his applications are false, and if they were the
cause, or one of the causes, which induced the defendant to
issue the policies. On the first point, the facts above set out
leave no room for doubt. The insured knew that he had
suffered from a number of ailments, including incipient
pulmonary tuberculosis, before subscribing the applications,
yet he concealed them and omitted the hospital where he
was confined as well as the name of the lady physician who
treated him. That this concealment and the false statements
constituted fraud, is likewise clear, because the defendant by
reason thereof accepted the risk which it would otherwise
have flatly refused. When not otherwise specially provided
for by the Insurance Law, the contract of life insurance is
governed by the general rules of the civil law regarding
contracts. Article 1261 of the Civil Code provides that there is
no contract unless there should be, in addition to consent
and a definite object, a consideration for the obligation
established. And article 1276 provides that the statement of
a false consideration shall render the contract void. The two
answers being one of the considerations of the policies, and
it appearing that they are false and fraudulent, it is evident
that the insurance contracts were null and void and did not
give rise to any right to recover their value or amount. A
similar case was already decided by this court in Argente vs.
West Coast Life Insurance Co. (51 Phil., 725). In that case
the insured concealed from the physician who examined her
that she had consulted and had been treated by another
physician for cerebral congestion and Bell's Palsy, and that
she was addicted to alcohol, so much so that on one
occasion she was confined in the San Lazaro Hospital
suffering from "alcoholism"; this court held that such
concealments and false and fraudulent statements rendered
the policy null and void. In discussing the legal phase of the
case, this court said:
One ground for the rescission of a contract of
insurance under the Insurance Act is a
"concealment", which in section 25 is defined as "A
neglect to communicate that which a party knows
and ought to communicate". Appellant argues that
the alleged concealment was immaterial and
insufficient to avoid the policy. We cannot agree. In
an action on a life insurance policy where the
evidence conclusively shows that the answers to
questions concerning diseases were untrue, the
truth or falsity of the answers become the
determining factor. If the policy was procured by
fraudulent representations, the contract of
insurance apparently set forth therein was never
legally existent. It can fairly be assumed that had
the true facts been disclosed by the assured, the
insurance would never have been granted.
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
In Joyce, The Law of Insurance, second edition, asked. And if insured while being examined for life codes the important inquiries are whether the
volume 3, Chapter LV, is found the following: insurance, and knowing that she had heart concealment was willful and related to a matter
disease, falsely stated that she was in good health, material to the risk.
and though she could not read the application, it
"Concealment exists where the assured has
was explained to her and the questions asked
knowledge of a fact material to the risk, and xxx     xxx     xxx
through an interpreter, and the application like the
honesty, good faith and fair dealing requires that
policy contained a provision that no liability should
he should communicate it to the assured, but he
be incurred unless the policy was delivered while "If the assured has exclusive knowledge of
designedly and intentionally withholds the same.
the insured was in good health, the court properly material facts, he should fully and fairly disclose
directed a verdict for the insurer, though a witness the same, whether he believes them material or
"Another rule is that if the assured undertakes to who was present at the examination testified that not. But notwithstanding this general rule it will not
state all the circumstances affecting the risk, a full the insured was not asked whether she had heart infrequently happen, especially in life risks, that the
and fair statement of all is required. disease. assured may have a knowledge actual or
presumed of material facts, and yet entertain an
honest belief that they are not material. ... The
"It is also held that the concealment must, in the xxx     xxx     xxx
determination of the point whether there has or
absence of inquiries, be not only material, but
has not been a material concealment must rest
fraudulent, or the fact must have been intentionally
"The basis of the rule vitiating the contract in cases largely in all cases upon the form of the questions
withheld; so it is held under English law that if no
of concealment is that it misleads or deceives the propounded and the exact terms of the contract.
inquiries are made and no fraud or design to
insurer into accepting the risk, or accepting it at the Thus, where in addition to specifically named
conceal enters into the concealment the contract is
rate of premium agreed upon. The insurer, relying diseases the insured was asked whether he had
not avoided. And it is determined that even though
upon the belief that the assured will disclose every had any sickness within ten years, to which he
silence may constitute misrepresentation or
material fact within his actual or presumed answered "No", and it was proven that within that
concealment it is not of itself necessarily so as it is
knowledge, is misled into a belief that the period he had had a slight attack of pharyngitis, it
a question of fact. Nor is there a concealment
circumstance withheld does not exist, and he is was held a question properly for the jury whether
justifying a forfeiture where the fact of insanity is
thereby induced to estimate the risk upon a false such an inflammation of the throat was a
not disclosed no questions being asked
basis that it does not exist. The principal question, "sickness" within the intent of the inquiry, and the
concerning the same. . . .
therefore, must be, Was the assurer misled or court remarked on the appealed decision that if it
deceived into entering a contract obligation or in could be held as a matter of law that the policy
"But it would seem that if a material fact is actually fixing the premium of insurance by a withholding of was thereby avoided, then it was a mere devise on
known to the assured, its concealment must of material information or facts within the assured's the part of insurance companies to obtain money
itself necessarily be a fraud, and if the fact is one knowledge or presumed knowledge? without rendering themselves liable under the
which the assured ought to know, or is presumed policy. . . .
to know, the presumption of knowledge ought to
"It therefore follows that the assurer in assuming a
place the assured in the same position as in the
risk is entitled to know every material fact of which ". . . The question should be left to the jury whether
former case with relation to material facts; and if
the assured has exclusive or peculiar knowledge, the assured truly represented the state of his
the jury in such cases find the fact material, and
as well as all material facts which directly tend to health so as not to mislead or deceive the insurer;
one tending to increase the risk, it is difficult to see
increase the hazard or risk which are known by the and if he did not deal in good faith with the insurer
how the inference of a fraudulent intent or
assured, or which ought to be or are presumed to in that matter, then the inquiry should be made,
intentional concealment can be avoided. And it is
be known by him. And a concealment of such facts Did he know the state of his health so as to be
declared that if a material fact is concealed by
vitiates the policy. "It does not seem to be able to furnish a proper answer to such questions
assured it is equivalent to a false representation
necessary ... that the ... suppression of the truth as are propounded. A Massachusetts case, if
that it does not exist and that the essentials are the
should have been willful." If it were but an construed as it is frequently cited, would be
truth of the representations whether they were
inadvertent omission, yet if it were material to the opposed to the above conclusion; but, on the
intended to mislead and did insurer accept them
risk and such as the plaintiff should have known to contrary, it sustains it, for the reason that
as true and act upon them to his prejudice. So it is
be so, it would render the policy void. But it is held symptoms of consumption had so far developed
decided that under a stipulation voiding the policy
that if untrue or false answers are given in themselves within a few months prior to effecting
for concealment or misrepresentation of any
response to inquiries and they relate to material the insurance as to induce a reasonable belief that
material fact or if his interest is not truly stated or is
facts the policy is avoided without regard to the the applicant had that fatal disease, and we should
other than the sole and unconditional ownership
knowledge or fraud of assured, although under the further construe this case as establishing the rule
the facts are unimportant that insured did not
statute statements are representations which must that such a matter cannot rest alone upon the
intend to deceive or withhold information as to
be fraudulent to avoid the policy. So under certain assured's belief irrespective of what is a
encumbrances even though no questions were
25
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
reasonable belief, but that it ought to be judged by
the criterion whether the belief is one fairly
warranted by the circumstances. A case in
Indiana, however, holds that if the assured has
some affection or ailment of one or more of the
organs inquired about so well-defined and marked
as to materially derange for a time the functions of
such organ, as in the case of Bright's disease, the
policy will be avoided by a nondisclosure,
irrespective of the fact whether the assured knew
of such ailment or not. . . ."
In view of the foregoing, we are of the opinion that the
appellant's first two assignments of error are well founded,
wherefore, the appealed judgment is reversed and the
defendant absolved from the complaint, with the costs of
both instances to the plaintiffs. So ordered.
G.R. No. 105135 June 22, 1995
SUNLIFE ASSURANCE COMPANY OF
CANADA, petitioner,  court decided in favor of private respondents. The dispositive
vs.
The Hon. COURT OF APPEALS and Spouses ROLANDO
and BERNARDA BACANI, respondents.
QUIASON, J.:
This is a petition for review for certiorari under Rule 45 of the
Revised Rules of Court to reverse and set aside the Decision
dated February 21, 1992 of the Court of Appeals in CA-G.R.
CV No. 29068, and its Resolution dated April 22, 1992,
denying reconsideration thereof.
We grant the petition.
I Reinaldo D. Raymundo of the Chinese General Hospital on
On April 15, 1986, Robert John B. Bacani procured a life
insurance contract for himself from petitioner. He was issued
Policy No. 3-903-766-X valued at P100,000.00, with double
indemnity in case of accidental death. The designated
beneficiary was his mother, respondent Bernarda Bacani.
On June 26, 1987, the insured died in a plane crash.
Respondent Bernarda Bacani filed a claim with petitioner,
seeking the benefits of the insurance policy taken by her son.
26
Petitioner conducted an investigation and its findings
prompted it to reject the claim.
In its letter, petitioner informed respondent Bernarda Bacani,
that the insured did not disclose material facts relevant to the
issuance of the policy, thus rendering the contract of
insurance voidable. A check representing the total premiums
paid in the amount of P10,172.00 was attached to said letter.
Petitioner claimed that the insured gave false statements in
his application when he answered the following questions:
5. Within the past 5 years have you:
a) consulted any doctor or other health practitioner?
b) submitted to:
EGG?
X-rays?
blood tests?
other tests?
c) attended or been admitted to any hospital or other medical
facility?
6. Have you ever had or sought advice for:
xxx xxx xxx
b) urine, kidney or bladder disorder? (Rollo, p. 53)
The deceased answered question No. 5(a) in the affirmative
but limited his answer to a consultation with a certain Dr.
February 1986, for cough and flu complications. The other
questions were answered in the negative (Rollo, p. 53).
Petitioner discovered that two weeks prior to his application
for insurance, the insured was examined and confined at the
Lung Center of the Philippines, where he was diagnosed for
renal failure. During his confinement, the deceased was
subjected to urinalysis, ultra-sonography and hematology
tests.
On November 17, 1988, respondent Bernarda Bacani and
her husband, respondent Rolando Bacani, filed an action for
specific performance against petitioner with the Regional
Trial Court, Branch 191, Valenzuela, Metro Manila. Petitioner
filed its answer with counterclaim and a list of exhibits
consisting of medical records furnished by the Lung Center
of the Philippines.
On January 14, 1990, private respondents filed a "Proposed
Stipulation with Prayer for Summary Judgment" where they
manifested that they "have no evidence to refute the
documentary evidence of concealment/misrepresentation by
the decedent of his health condition (Rollo, p. 62).
Petitioner filed its Request for Admissions relative to the
authenticity and due execution of several documents as well
as allegations regarding the health of the insured. Private
respondents failed to oppose said request or reply thereto,
thereby rendering an admission of the matters alleged.
Petitioner then moved for a summary judgment and the trial
portion of the decision is reproduced as follows:
WHEREFORE, judgment is hereby
rendered in favor of the plaintiffs and
against the defendant, condemning the
latter to pay the former the amount of
One Hundred Thousand Pesos
(P100,000.00) the face value of
insured's Insurance Policy No. 3903766,
and the Accidental Death Benefit in the
amount of One Hundred Thousand
Pesos (P100,000.00) and further sum of
P5,000.00 in the concept of reasonable
attorney's fees and costs of suit.
Defendant's counterclaim is hereby
Dismissed (Rollo, pp. 43-44).
In ruling for private respondents, the trial court concluded
that the facts concealed by the insured were made in good
faith and under a belief that they need not be disclosed.
Moreover, it held that the health history of the insured was
immaterial since the insurance policy was "non-medical".
Petitioner appealed to the Court of Appeals, which affirmed
the decision of the trial court. The appellate court ruled that
petitioner cannot avoid its obligation by claiming
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
concealment because the cause of death was unrelated to
the facts concealed by the insured. It also sustained the
finding of the trial court that matters relating to the health
history of the insured were irrelevant since petitioner waived
the medical examination prior to the approval and issuance
of the insurance policy. Moreover, the appellate court agreed
with the trial court that the policy was "non-medical" (Rollo,
pp. 4-5).
Petitioner's motion for reconsideration was denied; hence,
this petition.
II
We reverse the decision of the Court of Appeals.
The rule that factual findings of the lower court and the
appellate court are binding on this Court is not absolute and
admits of exceptions, such as when the judgment is based
on a misappreciation of the facts (Geronimo v. Court of
Appeals, 224 SCRA 494 [1993]).
In weighing the evidence presented, the trial court concluded
that indeed there was concealment and misrepresentation,
however, the same was made in "good faith" and the facts
concealed or misrepresented were irrelevant since the policy
was "non-medical". We disagree.
Section 26 of The Insurance Code is explicit in requiring a
party to a contract of insurance to communicate to the other,
in good faith, all facts within his knowledge which are
material to the contract and as to which he makes no
warranty, and which the other has no means of ascertaining.
Said Section provides:
A neglect to communicate that which a
party knows and ought to communicate,
is called concealment.
Materiality is to be determined not by the event, but solely by
the probable and reasonable influence of the facts upon the
party to whom communication is due, in forming his estimate
of the disadvantages of the proposed contract or in making
his inquiries (The Insurance Code, Sec. 31).
The terms of the contract are clear. The insured is
specifically required to disclose to the insurer matters relating
to his health.
27
The information which the insured failed to disclose were concealment employed by the insured. It must be
material and relevant to the approval and issuance of the emphasized that rescission was exercised within the two-
insurance policy. The matters concealed would have year contestability period as recognized in Section 48 of The
definitely affected petitioner's action on his application, either Insurance Code.
by approving it with the corresponding adjustment for a
higher premium or rejecting the same. Moreover, a
WHEREFORE, the petition is GRANTED and the Decision of
disclosure may have warranted a medical examination of the
the Court of Appeals is REVERSED and SET ASIDE.
insured by petitioner in order for it to reasonably assess the
risk involved in accepting the application.
SO ORDERED.
In Vda. de Canilang v. Court of Appeals, 223 SCRA 443
(1993), we held that materiality of the information withheld G.R. No. 113899 October 13, 1999
does not depend on the state of mind of the insured. Neither
does it depend on the actual or physical events which ensue.
GREAT PACIFIC LIFE ASSURANCE CORP., petitioner,
vs.
Thus, "goad faith" is no defense in concealment. The COURT OF APPEALS AND MEDARDA V.
insured's failure to disclose the fact that he was hospitalized LEUTERIO, respondents.
for two weeks prior to filing his application for insurance,
raises grave doubts about his bonafides. It appears that such
QUISUMBING, J.:
concealment was deliberate on his part.
This petition for review, under Rule 45 of the Rules of Court,
The argument, that petitioner's waiver of the medical
assails the Decision 1 dated May 17, 1993, of the Court of
examination of the insured debunks the materiality of the
Appeals and its Resolution 2 dated January 4, 1994 in CA-
facts concealed, is untenable. We reiterate our ruling
G.R. CV No. 18341. The appellate court affirmed in toto the
in Saturnino v. Philippine American Life Insurance Company,
judgment of the Misamis Oriental Regional Trial Court,
7 SCRA 316 (1963), that " . . . the waiver of a medical
Branch 18, in an insurance claim filed by private respondent
examination [in a non-medical insurance contract] renders
against Great Pacific Life Assurance Co. The dispositive
even more material the information required of the applicant
portion of the trial court's decision reads:
concerning previous condition of health and diseases
suffered, for such information necessarily constitutes an
important factor which the insurer takes into consideration in WHEREFORE, judgment is rendered
deciding whether to issue the policy or not . . . " adjudging the defendant GREAT
PACIFIC LIFE ASSURANCE
CORPORATION as insurer under its
Moreover, such argument of private respondents would
Group policy No. G-1907, in relation to
make Section 27 of the Insurance Code, which allows the
Certification B-18558 liable and ordered
injured party to rescind a contract of insurance where there is
to pay to the DEVELOPMENT BANK OF
concealment, ineffective (See Vda. de Canilang v. Court of
THE PHILIPPINES as creditor of the
Appeals, supra).
insured Dr. Wilfredo Leuterio, the
amount of EIGHTY SIX THOUSAND
Anent the finding that the facts concealed had no bearing to TWO HUNDRED PESOS (P86,200.00);
the cause of death of the insured, it is well settled that the dismissing the claims for damages,
insured need not die of the disease he had failed to disclose attorney's fees and litigation expenses in
to the insurer. It is sufficient that his non-disclosure misled the complaint and counterclaim, with
the insurer in forming his estimates of the risks of the costs against the defendant and
proposed insurance policy or in making inquiries (Henson v. dismissing the complaint in respect to
The Philippine American Life Insurance Co., 56 O.G. No. 48 the plaintiffs, other than the widow-
[1960]). beneficiary, for lack of cause of action. 3
We, therefore, rule that petitioner properly exercised its right The facts, as found by the Court of Appeals, are as follows:
to rescind the contract of insurance by reason of the
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
A contract of group life insurance was executed between
petitioner Great Pacific Life Assurance Corporation
(hereinafter Grepalife) and Development Bank of the
Philippines (hereinafter DBP). Grepalife agreed to insure the
lives of eligible housing loan mortgagors of DBP.
On November 11, 1983, Dr. Wilfredo Leuterio, a physician
and a housing debtor of DBP applied for membership in the
group life insurance plan. In an application form, Dr. Leuterio
answered questions concerning his health condition as
follows:
7. Have you ever had, or consulted, a physician for a heart
condition, high blood pressure, cancer, diabetes, lung;
kidney or stomach disorder or any other physical
impairment?
Answer: No. If so give details _____________.
8. Are you now, to the best of your knowledge, in good
health?
Answer: [x] Yes [ ] NO. 4
On November 15, 1983, Grepalife issued Certificate No. B-
18558, as insurance coverage of Dr. Leuterio, to the extent
of his DBP mortgage indebtedness amounting to eighty-six
thousand, two hundred (P86,200.00) pesos.1âwphi1.nêt
On August 6, 1984, Dr. Leuterio died due to "massive
cerebral hemorrhage." Consequently, DBP submitted a
death claim to Grepalife. Grepalife denied the claim alleging
that Dr. Leuterio was not physically healthy when he applied
for an insurance coverage on November 15, 1983. Grepalife
insisted that Dr. Leuterio did not disclose he had been
suffering from hypertension, which caused his death.
Allegedly, such non-disclosure constituted concealment that
justified the denial of the claim.
On October 20, 1986, the widow of the late Dr. Leuterio,
respondent Medarda V. Leuterio, filed a complaint with the
Regional Trial Court of Misamis Oriental, Branch 18, against
Grepalife for "Specific Performance with Damages." 5During
the trial, Dr. Hernando Mejia, who issued the death
certificate, was called to testify. Dr. Mejia's findings, based
partly from the information given by the respondent widow,
stated that Dr. Leuterio complained of headaches
presumably due to high blood pressure. The inference was
28
not conclusive because Dr. Leuterio was not autopsied,
hence, other causes were not ruled out.
On February 22, 1988, the trial court rendered a decision in
favor of respondent widow and against Grepalife. On May
17, 1993, the Court of Appeals sustained the trial court's
decision. Hence, the present petition. Petitioners interposed
the following assigned errors:
1. THE LOWER COURT ERRED IN HOLDING
DEFENDANT-APPELLANT LIABLE TO THE
DEVELOPMENT BANK OF THE PHILIPPINES (DBP)
WHICH IS NOT A PARTY TO THE CASE FOR PAYMENT
OF THE PROCEEDS OF A MORTGAGE REDEMPTION
INSURANCE ON THE LIFE OF PLAINTIFF'S HUSBAND
WILFREDO LEUTERIO ONE OF ITS LOAN BORROWERS,
INSTEAD OF DISMISSING THE CASE AGAINST
DEFENDANT-APPELLANT [Petitioner Grepalife] FOR LACK
OF CAUSE OF ACTION.
2. THE LOWER COURT ERRED IN NOT DISMISSING THE
CASE FOR WANT OF JURISDICTION OVER THE
SUBJECT OR NATURE OF THE ACTION AND OVER THE
PERSON OF THE DEFENDANT.
3. THE LOWER COURT ERRED IN ORDERING
DEFENDANT-APPELLANT TO PAY TO DBP THE AMOUNT
OF P86,200.00 IN THE ABSENCE OF ANY EVIDENCE TO
SHOW HOW MUCH WAS THE ACTUAL AMOUNT
PAYABLE TO DBP IN ACCORDANCE WITH ITS GROUP
INSURANCE CONTRACT WITH DEFENDANT-
APPELLANT.
4. THE LOWER COURT ERRED IN HOLDING THAT
THERE WAS NO CONCEALMENT OF MATERIAL
INFORMATION ON THE PART OF WILFREDO LEUTERIO
IN HIS APPLICATION FOR MEMBERSHIP IN THE GROUP
LIFE INSURANCE PLAN BETWEEN DEFENDANT-
APPELLANT OF THE INSURANCE CLAIM ARISING FROM
THE DEATH OF WILFREDO LEUTERIO. 6
Synthesized below are the assigned errors for our resolution:
1. Whether the Court of Appeals erred in holding petitioner
liable to DBP as beneficiary in a group life insurance contract
from a complaint filed by the widow of the
decedent/mortgagor?
2. Whether the Court of Appeals erred in not finding that Dr.
Leuterio concealed that he had hypertension, which would
vitiate the insurance contract?
3. Whether the Court of Appeals erred in holding Grepalife
liable in the amount of eighty six thousand, two hundred
(P86,200.00) pesos without proof of the actual outstanding
mortgage payable by the mortgagor to DBP.
Petitioner alleges that the complaint was instituted by the
widow of Dr. Leuterio, not the real party in interest, hence the
trial court acquired no jurisdiction over the case. It argues
that when the Court of Appeals affirmed the trial court's
judgment, Grepalife was held liable to pay the proceeds of
insurance contract in favor of DBP, the indispensable party
who was not joined in the suit.
To resolve the issue, we must consider the insurable interest
in mortgaged properties and the parties to this type of
contract. The rationale of a group insurance policy of
mortgagors, otherwise known as the "mortgage redemption
insurance," is a device for the protection of both the
mortgagee and the mortgagor. On the part of the mortgagee,
it has to enter into such form of contract so that in the event
of the unexpected demise of the mortgagor during the
subsistence of the mortgage contract, the proceeds from
such insurance will be applied to the payment of the
mortgage debt, thereby relieving the heirs of the mortgagor
from paying the obligation. 7 In a similar vein, ample
protection is given to the mortgagor under such a concept so
that in the event of death; the mortgage obligation will be
extinguished by the application of the insurance proceeds to
the mortgage indebtedness. 8 Consequently, where the
mortgagor pays the insurance premium under the group
insurance policy, making the loss payable to the mortgagee,
the insurance is on the mortgagor's interest, and the
mortgagor continues to be a party to the contract. In this type
of policy insurance, the mortgagee is simply an appointee of
the insurance fund, such loss-payable clause does not make
the mortgagee a party to the contract. 9
Sec. 8 of the Insurance Code provides:
Unless the policy provides, where a
mortgagor of property effects insurance
in his own name providing that the loss
shall be payable to the mortgagee, or
assigns a policy of insurance to a
mortgagee, the insurance is deemed to
be upon the interest of the mortgagor,
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
who does not cease to be a party to the
original contract, and any act of his, prior
to the loss, which would otherwise avoid
the insurance, will have the same effect,
although the property is in the hands of
the mortgagee, but any act which, under
the contract of insurance, is to be
performed by the mortgagor, may be
performed by the mortgagee therein
named, with the same effect as if it had
been performed by the mortgagor.
The insured private respondent did not cede to the
mortgagee all his rights or interests in the insurance, the
policy stating that: "In the event of the debtor's death before
his indebtedness with the Creditor [DBP] shall have been
fully paid, an amount to pay the outstanding indebtedness
shall first be paid to the creditor and the balance of sum
assured, if there is any, shall then be paid to the
beneficiary/ies designated by the debtor." 10 When DBP
submitted the insurance claim against petitioner, the latter
denied payment thereof, interposing the defense of
concealment committed by the insured. Thereafter, DBP
collected the debt from the mortgagor and took the
necessary action of foreclosure on the residential lot of
private respondent. 11 In Gonzales La O vs. Yek Tong Lin
Fire & Marine Ins. Co. 12 we held:
Insured, being the person with whom the
contract was made, is primarily the
proper person to bring suit thereon. * *
* Subject to some exceptions, insured
may thus sue, although the policy is
taken wholly or in part for the benefit of
another person named or unnamed, and
although it is expressly made payable to
another as his interest may appear or
otherwise. * * * Although a policy issued
to a mortgagor is taken out for the
benefit of the mortgagee and is made
payable to him, yet the mortgagor may
sue thereon in his own name, especially
where the mortgagee's interest is less
than the full amount recoverable under
the policy, * * *.
And in volume 33, page 82, of the same
work, we read the following:
Insured may be regarded as the real
party in interest, although he has
29
assigned the policy for the purpose of
collection, or has assigned as collateral
security any judgment he may obtain. 13
And since a policy of insurance upon life or health may pass
by transfer, will or succession to any person, whether he has
an insurable interest or not, and such person may recover it
whatever the insured might have recovered, 14the widow of
the decedent Dr. Leuterio may file the suit against the
insurer, Grepalife.
The second assigned error refers to an alleged concealment
that the petitioner interposed as its defense to annul the
insurance contract. Petitioner contends that Dr. Leuterio
failed to disclose that he had hypertension, which might have
caused his death. Concealment exists where the assured
had knowledge of a fact material to the risk, and honesty,
good faith, and fair dealing requires that he should
communicate it to the assured, but he designedly and
intentionally withholds the same. 15
Petitioner merely relied on the testimony of the attending
physician, Dr. Hernando Mejia, as supported by the
information given by the widow of the decedent. Grepalife
asserts that Dr. Mejia's technical diagnosis of the cause of
death of Dr. Leuterio was a duly documented hospital record,
and that the widow's declaration that her husband had
"possible hypertension several years ago" should not be
considered as hearsay, but as part of res gestae.
On the contrary the medical findings were not conclusive
because Dr. Mejia did not conduct an autopsy on the body of
the decedent. As the attending physician, Dr. Mejia stated
that he had no knowledge of Dr. Leuterio's any previous
hospital confinement. 16 Dr. Leuterio's death certificate stated
that hypertension was only "the possible cause of death."
The private respondent's statement, as to the medical history
of her husband, was due to her unreliable recollection of
events. Hence, the statement of the physician was properly
considered by the trial court as hearsay.
The question of whether there was concealment was aptly
answered by the appellate court, thus:
The insured, Dr. Leuterio, had answered
in his insurance application that he was
in good health and that he had not
consulted a doctor or any of the
enumerated ailments, including
hypertension; when he died the
attending physician had certified in the
death certificate that the former died of
cerebral hemorrhage, probably
secondary to hypertension. From this
report, the appellant insurance company
refused to pay the insurance claim.
Appellant alleged that the insured had
concealed the fact that he had
hypertension.
Contrary to appellant's allegations, there
was no sufficient proof that the insured
had suffered from hypertension. Aside
from the statement of the insured's
widow who was not even sure if the
medicines taken by Dr. Leuterio were for
hypertension, the appellant had not
proven nor produced any witness who
could attest to Dr. Leuterio's medical
history . . .
xxx xxx xxx
Appellant insurance company had failed
to establish that there was concealment
made by the insured, hence, it cannot
refuse payment of the claim. 17
The fraudulent intent on the part of the insured must be
established to entitle the insurer to rescind the
contract.18Misrepresentation as a defense of the insurer to
avoid liability is an affirmative defense and the duty to
establish such defense by satisfactory and convincing
evidence rests upon the insurer. 19 In the case at bar, the
petitioner failed to clearly and satisfactorily establish its
defense, and is therefore liable to pay the proceeds of the
insurance.1âwphi1.nêt
And that brings us to the last point in the review of the case
at bar. Petitioner claims that there was no evidence as to the
amount of Dr. Leuterio's outstanding indebtedness to DBP at
the time of the mortgagor's death. Hence, for private
respondent's failure to establish the same, the action for
specific performance should be dismissed. Petitioner's claim
is without merit. A life insurance policy is a valued
policy. 20 Unless the interest of a person insured is
susceptible of exact pecuniary measurement, the measure of
indemnity under a policy of insurance upon life or health is
the sum fixed in the policy. 21 The mortgagor paid the
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
premium according to the coverage of his insurance, which
states that:
The policy states that upon receipt of
due proof of the Debtor's death during
the terms of this insurance, a death
benefit in the amount of P86,200.00
shall be paid.
In the event of the debtor's death before
his indebtedness with the creditor shall
have been fully paid, an amount to pay
the outstanding indebtedness shall first
be paid to the Creditor and the balance
of the Sum Assured, if there is any shall
then be paid to the beneficiary/ies
designated by the debtor." 22(Emphasis
omitted)
However, we noted that the Court of Appeals' decision was
promulgated on May 17, 1993. In private respondent's
memorandum, she states that DBP foreclosed in 1995 their
residential lot, in satisfaction of mortgagor's outstanding loan.
Considering this supervening event, the insurance proceeds
shall inure to the benefit of the heirs of the deceased person
or his beneficiaries. Equity dictates that DBP should not
unjustly enrich itself at the expense of another (Nemo cum
alterius detrimenio protest). Hence, it cannot collect the
insurance proceeds, after it already foreclosed on the
mortgage. The proceeds now rightly belong to Dr. Leuterio's
heirs represented by his widow, herein private respondent
Medarda Leuterio.
WHEREFORE, the petition is hereby DENIED. The Decision
and Resolution of the Court of Appeals in CA-G.R. CV 18341
is AFFIRMED with MODIFICATION that the petitioner is
ORDERED to pay the insurance proceeds amounting to
Eighty-six thousand, two hundred (P86,200.00) pesos to the
heirs of the insured, Dr. Wilfredo Leuterio (deceased), upon
presentation of proof of prior settlement of mortgagor's
indebtedness to Development Bank of the Philippines. Costs
against petitioner.1âwphi1.nêt
SO ORDERED.
G.R. No. 125678      March 18, 2002
30
PHILAMCARE HEALTH SYSTEMS, INC., petitioner,  again. In the morning of April 13, 1990, Ernani had fever and
vs. was feeling very weak. Respondent was constrained to bring
COURT OF APPEALS and JULITA TRINOS, respondents.  him back to the Chinese General Hospital where he died on
the same day.
YNARES-SANTIAGO, J.:
On July 24, 1990, respondent instituted with the Regional
Trial Court of Manila, Branch 44, an action for damages
Ernani Trinos, deceased husband of respondent Julita
against petitioner and its president, Dr. Benito Reverente,
Trinos, applied for a health care coverage with petitioner
which was docketed as Civil Case No. 90-53795. She asked
Philamcare Health Systems, Inc. In the standard application
for reimbursement of her expenses plus moral damages and
form, he answered no to the following question:
attorney’s fees. After trial, the lower court ruled against
petitioners, viz:
Have you or any of your family members ever
consulted or been treated for high blood pressure,
WHEREFORE, in view of the forgoing, the Court
heart trouble, diabetes, cancer, liver disease,
renders judgment in favor of the plaintiff Julita
asthma or peptic ulcer? (If Yes, give details).1
Trinos, ordering:
The application was approved for a period of one year from
1. Defendants to pay and reimburse the medical
March 1, 1988 to March 1, 1989. Accordingly, he was issued
and hospital coverage of the late Ernani Trinos in
Health Care Agreement No. P010194. Under the agreement,
the amount of P76,000.00 plus interest, until the
respondent’s husband was entitled to avail of hospitalization
amount is fully paid to plaintiff who paid the same;
benefits, whether ordinary or emergency, listed therein. He
was also entitled to avail of "out-patient benefits" such as
annual physical examinations, preventive health care and 2. Defendants to pay the reduced amount of moral
other out-patient services. damages of P10,000.00 to plaintiff;
Upon the termination of the agreement, the same was 3. Defendants to pay the reduced amount
extended for another year from March 1, 1989 to March 1, of P10,000.00 as exemplary damages to plaintiff;
1990, then from March 1, 1990 to June 1, 1990. The amount
of coverage was increased to a maximum sum of
4. Defendants to pay attorney’s fees of
P75,000.00 per disability.2
P20,000.00, plus costs of suit.
During the period of his coverage, Ernani suffered a heart
SO ORDERED.3
attack and was confined at the Manila Medical Center (MMC)
for one month beginning March 9, 1990. While her husband
was in the hospital, respondent tried to claim the benefits On appeal, the Court of Appeals affirmed the decision of the
under the health care agreement. However, petitioner denied trial court but deleted all awards for damages and absolved
her claim saying that the Health Care Agreement was void. petitioner Reverente.4 Petitioner’s motion for reconsideration
According to petitioner, there was a concealment regarding was denied.5 Hence, petitioner brought the instant petition for
Ernani’s medical history. Doctors at the MMC allegedly review, raising the primary argument that a health care
discovered at the time of Ernani’s confinement that he was agreement is not an insurance contract; hence the
hypertensive, diabetic and asthmatic, contrary to his answer "incontestability clause" under the Insurance Code6 does not
in the application form. Thus, respondent paid the apply.1âwphi1.nêt
hospitalization expenses herself, amounting to about
P76,000.00.
Petitioner argues that the agreement grants "living benefits,"
such as medical check-ups and hospitalization which a
After her husband was discharged from the MMC, he was member may immediately enjoy so long as he is alive upon
attended by a physical therapist at home. Later, he was effectivity of the agreement until its expiration one-year
admitted at the Chinese General Hospital. Due to financial thereafter. Petitioner also points out that only medical and
difficulties, however, respondent brought her husband home hospitalization benefits are given under the agreement
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
without any indemnification, unlike in an insurance contract
where the insured is indemnified for his loss. Moreover, since
Health Care Agreements are only for a period of one year, as
compared to insurance contracts which last
longer,7 petitioner argues that the incontestability clause
does not apply, as the same requires an effectivity period of
at least two years. Petitioner further argues that it is not an
insurance company, which is governed by the Insurance
Commission, but a Health Maintenance Organization under
the authority of the Department of Health.
Section 2 (1) of the Insurance Code defines a contract of
insurance as an agreement whereby one undertakes for a
consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event. An
insurance contract exists where the following elements
concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the
happening of the designated peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general
scheme to distribute actual losses among a large
group of persons bearing a similar risk; and
5. In consideration of the insurer’s promise, the
insured pays a premium.8
Section 3 of the Insurance Code states that any contingent
or unknown event, whether past or future, which may
damnify a person having an insurable interest against him,
may be insured against. Every person has an insurable
interest in the life and health of himself. Section 10 provides:
Every person has an insurable interest in the life
and health:
(1) of himself, of his spouse and of his children;
(2) of any person on whom he depends wholly or
in part for education or support, or in whom he has
a pecuniary interest;
31
(3) of any person under a legal obligation to him
for the payment of money, respecting property or
service, of which death or illness might delay or
prevent the performance; and
(4) of any person upon whose life any estate or
interest vested in him depends.
In the case at bar, the insurable interest of respondent’s
husband in obtaining the health care agreement was his own
health. The health care agreement was in the nature of non-
life insurance, which is primarily a contract of
indemnity.9 Once the member incurs hospital, medical or any
other expense arising from sickness, injury or other
stipulated contingent, the health care provider must pay for
the same to the extent agreed upon under the contract.
Petitioner argues that respondent’s husband concealed a
material fact in his application. It appears that in the
application for health coverage, petitioners required
respondent’s husband to sign an express authorization for
any person, organization or entity that has any record or
knowledge of his health to furnish any and all information
relative to any hospitalization, consultation, treatment or any
other medical advice or examination.10 Specifically, the
Health Care Agreement signed by respondent’s husband
states:
We hereby declare and agree that all statement
and answers contained herein and in any
addendum annexed to this application are full,
complete and true and bind all parties in interest
under the Agreement herein applied for, that there
shall be no contract of health care coverage unless
and until an Agreement is issued on this
application and the full Membership Fee according
to the mode of payment applied for is actually paid
during the lifetime and good health of proposed
Members; that no information acquired by any
Representative of PhilamCare shall be binding
upon PhilamCare unless set out in writing in the
application; that any physician is, by these
presents, expressly authorized to disclose or give
testimony at anytime relative to any information
acquired by him in his professional capacity upon
any question affecting the eligibility for health care
coverage of the Proposed Members and that the
acceptance of any Agreement issued on this
application shall be a ratification of any correction
in or addition to this application as stated in the
space for Home Office
Endorsement.11 (Underscoring ours)
In addition to the above condition, petitioner additionally
required the applicant for authorization to inquire about the
applicant’s medical history, thus:
I hereby authorize any person, organization, or
entity that has any record or knowledge of my
health and/or that of __________ to give to the
PhilamCare Health Systems, Inc. any and all
information relative to any hospitalization,
consultation, treatment or any other medical
advice or examination. This authorization is in
connection with the application for health care
coverage only. A photographic copy of this
authorization shall be as valid as the
original.12 (Underscoring ours)
Petitioner cannot rely on the stipulation regarding
"Invalidation of agreement" which reads:
Failure to disclose or misrepresentation of any
material information by the member in the
application or medical examination, whether
intentional or unintentional, shall automatically
invalidate the Agreement from the very beginning
and liability of Philamcare shall be limited to return
of all Membership Fees paid. An undisclosed or
misrepresented information is deemed material if
its revelation would have resulted in the declination
of the applicant by Philamcare or the assessment
of a higher Membership Fee for the benefit or
benefits applied for.13
The answer assailed by petitioner was in response to the
question relating to the medical history of the applicant. This
largely depends on opinion rather than fact, especially
coming from respondent’s husband who was not a medical
doctor. Where matters of opinion or judgment are called for,
answers made in good faith and without intent to deceive will
not avoid a policy even though they are untrue.14 Thus,
(A)lthough false, a representation of the
expectation, intention, belief, opinion, or judgment
of the insured will not avoid the policy if there is no
actual fraud in inducing the acceptance of the risk,
or its acceptance at a lower rate of premium, and
this is likewise the rule although the statement is
material to the risk, if the statement is obviously of
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
the foregoing character, since in such case the
insurer is not justified in relying upon such
statement, but is obligated to make further inquiry.
There is a clear distinction between such a case
and one in which the insured is fraudulently and
intentionally states to be true, as a matter of
expectation or belief, that which he then knows, to
be actually untrue, or the impossibility of which is
shown by the facts within his knowledge, since in
such case the intent to deceive the insurer is
obvious and amounts to actual
fraud.15(Underscoring ours)
The fraudulent intent on the part of the insured must be
established to warrant rescission of the insurance
contract.16 Concealment as a defense for the health care
provider or insurer to avoid liability is an affirmative defense
and the duty to establish such defense by satisfactory and
convincing evidence rests upon the provider or insurer. In
any case, with or without the authority to investigate,
petitioner is liable for claims made under the contract. Having
assumed a responsibility under the agreement, petitioner is
bound to answer the same to the extent agreed upon. In the
end, the liability of the health care provider attaches once the
member is hospitalized for the disease or injury covered by
the agreement or whenever he avails of the covered benefits
which he has prepaid.
Under Section 27 of the Insurance Code, "a concealment
entitles the injured party to rescind a contract of insurance."
The right to rescind should be exercised previous to the
commencement of an action on the contract. 17 In this case,
no rescission was made. Besides, the cancellation of health
care agreements as in insurance policies require the
concurrence of the following conditions:
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective
date of the policy of one or more of the grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the
address shown in the policy;
4. Must state the grounds relied upon provided in Section 64
of the Insurance Code and upon request of insured, to
furnish facts on which cancellation is based.18
32
None of the above pre-conditions was fulfilled in this case.
When the terms of insurance contract contain limitations on
liability, courts should construe them in such a way as to
preclude the insurer from non-compliance with his
obligation.19 Being a contract of adhesion, the terms of an
insurance contract are to be construed strictly against the
party which prepared the contract – the insurer.20 By reason
of the exclusive control of the insurance company over the
terms and phraseology of the insurance contract, ambiguity
must be strictly interpreted against the insurer and liberally in
favor of the insured, especially to avoid forfeiture.21 This is
equally applicable to Health Care Agreements. The
phraseology used in medical or hospital service contracts,
such as the one at bar, must be liberally construed in favor of
the subscriber, and if doubtful or reasonably susceptible of
two interpretations the construction conferring coverage is to
be adopted, and exclusionary clauses of doubtful import
should be strictly construed against the provider.22
Anent the incontestability of the membership of respondent’s
husband, we quote with approval the following findings of the
trial court:
(U)nder the title Claim procedures of expenses,
the defendant Philamcare Health Systems Inc. had
twelve months from the date of issuance of the
Agreement within which to contest the
membership of the patient if he had previous
ailment of asthma, and six months from the
issuance of the agreement if the patient was sick
of diabetes or hypertension. The periods having
expired, the defense of concealment or
misrepresentation no longer lie.23
Finally, petitioner alleges that respondent was not the legal
wife of the deceased member considering that at the time of
their marriage, the deceased was previously married to
another woman who was still alive. The health care
agreement is in the nature of a contract of indemnity. Hence,
payment should be made to the party who incurred the
expenses. It is not controverted that respondent paid all the
hospital and medical expenses. She is therefore entitled to
reimbursement. The records adequately prove the expenses
incurred by respondent for the deceased’s hospitalization,
medication and the professional fees of the attending
physicians.24
WHEREFORE, in view of the foregoing, the petition
is DENIED. The assailed decision of the Court of Appeals
dated December 14, 1995 is AFFIRMED.
SO ORDERED.
November 28, 2016
G.R. No. 204736
MANULIFE PHILIPPINES, INC.1, Petitioner 
vs.
HERMENEGILDA YBAÑEZ, Respondent
DECISION
DEL CASTILLO, J.:
Assailed in this Petition for Review on Certiorari2 are the April
26, 2012 Decision3 of the Court of Appeals (CA) in CA-G.R.
CV No. 95561 and its December 10, 2012 Resolution 4 which
affirmed the April 22, 2008 Decision5 and the June 15, 2009
Order6 of the Regional Trial Court (RTC), Branch 57, Makati
City in Civil Case No. 04-1119.
Factual Antecedents
Before the RTC of Makati City, Manulife Philippines, Inc.
(Manulife) instituted a Complaint7 for Rescission of Insurance
Contracts against Hermenegilda Ybañez (Hermenegilda) and
the BPI Family Savings Bank (BPI Family). This was
docketed as Civil Case No. 04-1119.
It is alleged in the Complaint that Insurance Policy Nos.
6066517-18 and 6300532-69 (subject insurance policies)
which Manulife issued on October 25, 2002 and on July 25,
2003, respectively, both in favor of Dr. Gumersindo Solidum
Ybañez (insured), were void due to concealment or
misrepresentation of material facts in the latter's applications
for life insurance, particularly the forms entitled Non-Medical
Evidence dated August 28, 2002 (NME),10Medical Evidence
Exam dated September 10, 2002 (MEE),11 and the
Declaration of Insurability in the Application for Life
Insurance (DOI) dated July 9, 2003;12 that He1menegilda,
wife of the said insured, was revocably designated as
beneficiary in the subject insurance policies; that on
November 17, 2003, when one of the subject insurance
policies had been in force for only one year and three
months, while the other for only four months, the insured
died; that on December 10, 2003, Hermenegilda, now widow
to the said insured, filed a Claimant's Statement-Death
Claim13 with respect to the subject insurance policies; that
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
the Death Certificate dated November 17, 2003 14 stated that
the insured had "Hepatocellular CA., Crd Stage 4, secondary
to Uric Acid Nephropathy; SAM Nephropathy recurrent
malignant pleural effusion; NASCVC"; that Manulife
conducted an investigation into the circumstances leading to
the said insured's death, in view of the aforementioned
entries in the said insured's Death Certificate; that Manulife
thereafter concluded that the insured misrepresented or
concealed material facts at the time the subject insurance
policies were applied for; and that for this reason Manulife
accordingly denied Hermenegilda's death claims and
refunded the premiums that the insured paid on the subject
insurance policies.15
Manulife also set forth in said Complaint the details of the
insured's supposed misrepresentation/s or concealment/s, to
wit:
2.6. On the basis of the authority granted by [Hermenegilda]
in her Claimant's
Statement (Annex "H"), [Manulife] conducted an investigation
[into] the Insured's medical records and history, and
discovered that the Insured concealed material facts which
the law, good faith, and fair dealing required him to reveal
when he answered the [NME] (Annex ''C"), [the MEE] (Annex
"D"), and [the DOI] (Annex "E"), as follows:
(1) Insured's confinement at the Cebu Doctors' Hospital
[CDH] from 27 December 2000 to 3l December 2000,
wherein he underwent total parotidectomy on 28 December
2000 due to the swelling of his right parotid gland and the
presence of a tumor, and was found to have had a history of
being hypertensive, and his kidneys have become atretic or
shrunken. A copy of each of the Admission and Discharge
Record and PGIS' Interns' Progress Notes and Operative
Record of the [CDH] is attached hereto and made an integral
part hereof as Annex "K", "K-1", and "K-2'', respectively.
(2) Insured's confinement at the CDH from 9 May 2002 to 14
May 2002, wherein he was diagnosed to have acute
pancreatitis, in addition to being hypertensive. A copy [of]
each of the Insured's Admission and Discharge Record and
Doctor's History/Progress Notes is attached hereto and
made an integral part hereof as Annex "L" and "L-1",
respectively.
(3) Insured's diagnosis for leptospirosis in 2000. A copy [of]
each of the Insured's Admission and Discharge Record and
33
History Sheet is attached hereto and made an integral part
hereof as Annex "M" and "M-1",respectively.
x x xx
2.8. Due to the Insured's concealment of material facts at the
time the subject insurance policies were applied for and
issued, [Manulife] exercised its right to rescind the subject
insurance contracts and denied the claims on those policies.
xxxx16
Manulife thus prayed that judgment be rendered finding its
act of rescinding the subject insurance policies proper;
declaring these subject insurance policies null and void; and
discharging it from any obligation whatsoever under these
policies.17
In her Answer, Hermenegilda countered that:
6. [Manulife's own insurance agent, Ms. Elvira Monteclaros
herself] assured [the insured,] that there would be no
problem regarding the application for the insurance policy. In
fact, it was Monteclaros who filled up everything in the
questionnaire (Annex "C" of the [C]omplaint), so that [all that
the insured needed to do was sign it,] and it's done. [It was
also Ms. Monteclaros who herself] checked in advance all
the boxes in Annex "C," [that the insured himself was
required to answer or check].
xxxx
10. The four grounds for denial as enumerated in Annex "N"
of the complaint are refuted as follows:
1) [The insured's] hospital confinement on 27 December
2000 at [the CDH was] due to right parotid swelling
secondary to tumor [for which he] underwent Parotidectomy
on 28 December 2000. (- There is an obvious scar and
disfigurement in the right side of [the insured's] face, in front,
and below his ear. This [ought to] have been easily noticed
by [Manulife's company] physician, Dr. [Winifredo] Lumapas.
2) [The insured's] history of Hypertension [has been] noted
03 years prior to [the insured's] admission on 27 December
2000. (This is not something serious or fatal)
3) [The insured's] history of Leptospirosis in 2000. (This is
not confirmed)
4) [The insured's] hospital confinement [at the CDH] on 09
May 2002 with findings of Acute Pancreatitis (This is related
to the gallstones of [the insured]. When the gallbladder is
diseased, distention is impossible and its pressure-regulating
function is lost - a fact that may explain high incidence of
pancreatitis in patient with cholecystic disease. [The insured]
had cholecystitis, so his acute pancreatitis is related to the
cholecystitis and chol[e]lithiasis (gallstones).
x x xx
11. [Manulife] accepted [the insured's] application, and now
that a claim for the benefits [is] made, [Manulife now] says
that [the insured] misrepresented and concealed his past
illnesses[!] In the form filled up by [Dr. Winifredo F.
Lumapas,] Manulife's [company] physician, dated 9/10/02,
[the insured] checked the column which says ''yes" [to] the
following questions:
• Have you had electrocardiograms, when, why, result?
([Manulife's company physician] wrote the answer which
stated that result was normal.) ' .
• Have you seen a doctor, or had treatment operation on
hospital case during the last five years?
12. x x x It is rather strange that [the insured's] parotidectomy
was not included in the report when the scar of that operation
can not be concealed because it caused a disfigurement in
the right side. of his face in front and below his ear. This is
just too obvious to be overlooked by [Manulife's company
physician] who examined and interviewed [the insured]
before accepting the policy. x x x
13. x x x [Undoubtedly, Manulife] had the option to inquire
further [into the insured's physical condition, because the
insured had given it authority to do so] based on the authority
given by [the insured. And how come that Manulife] was able
to gather all [these] information now and not before [the
insured] was ensured? x x x
xxxx
16. Moreover, in the comments of [the said] Dr. Lumapas,
(Annex "D" of the Complaint), he said the physical condition
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
of [the] then prospective insurance policy holder, [the
insured, was] "below average". x x x [Estoppel now bars
Manulife from claiming the contrary.]
17. [Especially] worth noting are the [following] comments of
[the said Dr. Lumapas, on the insured's answer to the
questionnaires] - (Annex "D" of the Complaint ). [to wit:]
"4.d. Have you had any electrocardiograms, when, why,
result. "Yes"
- on June 2002 at CDH, Cebu City
= Cardiac clearance for surgery
= Result normal
16. Have you seen a doctor, or had treatment, operation or
hospital care during the last 5 years? "Yes" admitted at
[CDH,] Cebu City by Dr. Lamberto Garcia and Dr. Jorge Ang
for Chronic Calculous Chol[e]cystitis
=Cholecystectomy done [J]une 7[,] 2002 by Dr. Ang
=Biopsy: Gallbladder Chronic Calculous Cholestitis
=CBC, Hepatitis Panel done – all negative results except
hepatitis antigen(+)
18. Do you consume alcohol beverages? If so, how
much? Yes, consumes 1-2 shots of whisky during socials.
25. The abdomen - Abnormality of any viscus, genitalia or
evidence of hemia or operation - post cholecystectomy scar.
26. The head and neck - vision, optic, fundi, hearing, speech,
thyroid etc. Yes wears eyeglasses for reading. (This is where
[Manulife's company physician] should have written the scar
of [the insured's] parotidectomy as shown in the picture).
32. From your knowledge of this person would you consider
his/ her health to be Average [] Below average[/] Poor []
(Underscoring ours)
34
18. It is interesting to note that the answers in the insurance
agent's form for [the insured] (Annex "C" of the Complaint)
did not jibe with the answers [made by] Dr. Lumapas in
Annex "D" of the Complaint. This only boosts Hermenegilda's
claim that x x x indeed, it was the Manulife's agent herself,
(Ms. Montesclaros) who checked all the items in the said
form to speed up the insurance application and its approval,
[so she could] get her commission as soon as possible.
19. In fine, at the time when both insurance policies in
question were submitted for approval to [Manulife, the latter
had had all the forewarnings that should have put it on guard
or on notice that things were not what it wanted them to be,
reason enough to bestir it into exercising greater prudence
and caution to further inquire into] the health or medical
history of [the insured]. In particular, Manulife ought to have
noted the fact that the insured was at that time already 65
years old, x x x that he had a previous operation, and x x x
that his health was "below average. x x x18
On November 25, 2005, BPI Family filed a
Manifestation19 praying that either it be dropped from the
case or that the case be dismissed with respect to it (BPI
Family), because it no longer had any interest in the subject
insurance policies as asssignee because the insured’s
obligation with it (BPI Family) had already been settled or
paid. Since no objection was interposed to this prayer by
either Manulife or Hermenegilda, the RTC granted this
prayer in its Order of
November 25, 2005.20
Then in the Second Order dated November 25, 2005,21 the
RTC considered the pre-trial as te1minated. Trial then
ensued.
Manulife presented its sole witness in the person of Ms.
Jessiebelle Victoriano (Victoriano ), the Senior Manager of its
Claims and Settlements Department.22 The oral testimony of
this witness chiefly involved identifying herself as the Senior
Manager of Manulife's Claims and Settlements Department
and also identifying the following pieces of evidence;23 the
subject insurance policies; NME, MEE, DOI; the Assignment
of Policy No. 6066517-1 to BPI Family as collateral, dated
July 9, 2003; its Letter dated July 10, 2003 re: assignment of
said Policy; death claim filed by Hermenegilda on December
10, 2003; the insured's Death Certificate; the Marriage
Contract between the insured and Hermenegilda; copies of
CDH's Admission and Discharge Records of the insured for
December 2000 re: parotidectomy; copies of CDH's PGIS'
Interns' Notes and CDH Operative Record dated December
28, 2000 re: hypertension; copies of CDH's Admission and
Discharge Record of the insured for May 2002, and the
Doctor's History/Progress Notes re: acute pancreatitis and
hypertension; copies of CDH's Admission and Discharge
Record of the insured for October 2003 re: leptospirosis;
letters dated March 24, 2004 to Hermenegilda and BPI
Family; and BPI Checks deposited on April 10, 2004 and
May 14, 2004 to the bank accounts of BPI Family and
Hermenegilda, respectively, representing the premium
refund.
In its Order of October 2, 2006, 24 the RTC admitted all these
exhibits.
Like Manulife, Hermenegilda, in amplication of her case, also
called only one witness to the witness stand: her counsel of
record, Atty. Edgardo Mayol (Atty. Mayol), whose testimony
focused on his professional engagement with Hermenegilda
and the monetary expenses he incurred in attending to the
hearings in this case.25 Hermenegilda thereafter filed her
Formal Offer of Evidence26 wherein she proffered the
following: NME, MEE, DOI, the insured's driver's license, her
letter dated May 8, 2004 protesting the denial by Manulife of
her insurance claim, the contract of services between her
and Atty. Mayol, the official receipts for plane tickets,
terminal fees, and boarding passes, attesting to Atty. Mayol's
plane travels to and from Cebu City to attend to this case.
These were all admitted by the RTC.27
Ruling of the Regional Trial Court
After due proceedings, the RTC dismissed Manulife's
Complaint, thus:
WHEREFORE, premises duly considered, judgment is
hereby rendered DISMISSING the instant case for
insufficiency of evidence.
[Manulife] is hereby ordered to pay [Hermenegilda] actual
expenses in the sum of ₱40,050.00 and attorney's fees in
the sum of ₱l00,000.1âwphi1 [Hermenegilda's] claim for
moral and exemplary damages is denied for lack of
evidence.
SO .ORDERED.28
The RTC found no merit at all in Manulife's Complaint for
rescission of the subject insurance policies because it utterly
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Cases
failed to prove that the insured had committed the alleged
misrepresentation/s or concealment/s. In fact, Victoriano, the
one and only witness that Manulife called to the witness
stand, gave no first-hand, direct evidence at all relative to the
particulars of the alleged misrepresentation/s or
concealment/s that the insured allegedly practiced or
committed against it. This witness did not testify at all in
respect to the circumstances under which these
documentary exhibits were executed, nor yet about what
these documentary exhibits purported to embody. The RTC
stressed that the CDH medical records that might or could
have established the insured's misrepresentation/s or
concealment/s were inadmissible for being hearsay, because
Manulife did not present the physician or doctor, or any
responsible official of the CDH, who could confirm the due
execution and authenticity of its medical records; that if
anything, Manulife itself admitted in its Reply29 that its very
own company physician, Dr. Winifredo Lumapas, had duly
noted the insured's scar, even as the same company
physician also categorized in the MEE the insured's health
as "below average"; and that in short, it is evident that
Manulife thus had had ample opportunity to verify and to
inquire further into the insured' s medical history
commencing from the date of the MEE but opted not to do
so; and that if things did not come up to its standards or
expectations, it was totally at liberty to reject the insured's
applications altogether, or it could have demanded a higher
premium for the insurance coverage.
The RTC further ruled that Hermenegilda was entitled to
attorney's fees in the sum of ₱l00,000.00 and actual
expenses in the amount of ₱40,050.00, because she was
compelled to litigate to defend her interest against Manulife'
s patently unjustified act in rejecting her clearly valid and
lawful claim. The RTC also found merit in Hermenegilda’s
claims relative to the expenses she paid her Cebu-based
counsel.
In its Order of June 15, 2009,30 the RTC denied for lack of
merit Manulife's motion for reconsideration31 and
Hermenegilda's motion for partial reconsideration.32
From the RTC's Decision, Manulife filed a Notice of
Appeal33 which was given due course by the RTC in its Order
of June 11, 2010.34
Ruling of the Court of Appeals
35
In its appellate review, the CA virtually adopted en toto the
findings of facts made by, and the conclusions of law arrived
at, by the RTC. Thus, the CA decreed:
WHEREFORE, the instant appeal is DENIED. The assailed
Decision dated April 22, 2008 and Order dated June 15,
2009 of the Regional Trial Court of Makati, Branch 57, are
hereby AFFIRMED.
SO ORDERED.35
The CA, like the RTC, found Manulife's Complaint bereft of
legal and factual bases. The CA ruled that it is settled that
misrepresentation or concealment in insurance is an
affirmative defense, which the insurer must establish by
convincing evidence if it is to avoid liability; and that in this
case the one and only witness presented by Manulife utterly
failed to prove the basic elements of the alleged
misrepresentation/s or concealment/s of material facts
imputed by Manulife against the now deceased insured. The
CA held that there is no basis for Manulife's claim that it is
exempted from the duty of proving the insured's supposed
misrepresentation/s or concealment/s, as these had
allegedly been admitted already in Hermenegilda's Answer;
that in the absence of authentication by a competent witness,
the purported CDH medical records of the insured are
deemed hearsay hence, inadmissible, and devoid of
probative value; and that the medical certificate, even if
admitted in evidence as an exception to the hearsay rule,
was still without probative value because the physician or
doctor or the hospital's official who issued it, was not called
to the witness stand to validate it or to attest to it.
Manulife moved for reconsideration36 of the CA's Decision,
but this was denied by the CA in its Resolution of December
10, 2012;37 hence, the present recourse.
Issue
Whether the CA committed any reversible error in affirming
the RTC Decision dismissing Manulife's Complaint for
rescission of insurance contracts for failure to prove
concealment on the part of the insured.
Our Ruling
The present recourse essentially challenges anew the
findings of fact by both the RTC and the CA that the
Complaint for rescission of the insurance policies in question
will not prosper because Manulife failed to prove
concealment on the part of the insured. This is not allowed. It
is horn-book law that in appeal by certiorari to this Court
under Rule 45 of the Revised Rules of Court, the findings of
fact by the CA, especially where such findings of fact are
affirmatory or confirmatory of the findings of fact of the RTC,
as in this case, are conclusive upon this Court. The reason is
simple: this Court not being a trial court, it does not embark
upon the task of dissecting, analyzing, evaluating, calibrating
or weighing all over again the evidence, testimonial or
documentary, that the parties adduced during trial. Of
course, there are exceptions to this rule, such as (1) when
the conclusion is grounded upon speculations, surmises or
conjectures; (2) when the inference is manifestly mistaken,
absurd or impossible; (3) when there is a grave abuse of
discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are
conflicting; (6) when there is no citation of specific evidence
on which the factual findings are based; (7) when the
findings of absence of facts is contradicted by the presence
of evidence on record; (8) when the findings of the CA are
contrary to the findings of the RTC; (9) when the CA
manifestly overlooked certain relevant and undisputed facts
that, if properly considered, would justify a different
conclusion; (10) when the findings of the CA are beyond the
issues of the case; and (11) when the CA’s findings are
contrary to the admission of both parties.38 We are satisfied
that none of these exceptions obtains in the Petition at
bench. Thus, this Court must defer to the findings of fact of
the RTC – as affirmed or confirmed by the CA – that
Manulife’s Complaint for rescission of the insurance policies
in question was totally bereft of factual and legal bases
because it had utterly failed to prove that the insured had
committed the alleged misrepresentation/s or concealment/s
of material facts imputed against him. The RTC correctly
held that the CDH’s medical records that might have
established the insured’s purported misrepresentation/s or
concealment/s was inadmissible for being hearsay, given the
fact that Manulife failed to present the physician or any
responsible official of the CDH who could confirm or attest to
the due execution and authenticity of the alleged medical
records. Manulife had utterly failed to prove by convincing
evidence that it had been beguiled, inveigled, or cajoled into
selling the insurance to the insured who purportedly with
malice and deceit passed himself off as thoroughly sound
and healthy, and thus a fit and proper applicant for life
insurance. Manulife's sole witness gave no evidence at all
relative to the particulars of the purported concealment or
misrepresentation allegedly perpetrated by the insured. In
fact, Victoriano merely perfunctorily identified the
documentary exhibits adduced by Manulife; she never
testified in regard to the circumstances attending the
execution of these documentary exhibits much less in regard
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
to its contents. Of course, the mere mechanical act of
identifying these documentary exhibits, without the
testimonies of the actual participating parties thereto, adds
up to nothing. These documentary exhibits did not
automatically validate or explain themselves. "The fraudulent
intent on the part of the insured must be established to entitle
the insurer to rescind the contract. Misrepresentation as a
defense of the insurer to avoid liability is an affirmative
defense and the duty to establish such defense by
satisfactory and convincing evidence rests upon the
insurer."39 For failure of Manulife to prove intent to defraud on
the part of the insured, it cannot validly sue for rescission of
insurance contracts.
WHEREFORE, the Petition is DENIED. The assailed
Decision of the Court of Appeals dated April 26, 2012 in CA-
G.R. CV No. 95561 and its December 10, 2012 Resolution,
are AFFIRMED.
SO ORDERED.
G.R. No. L-30685 May 30, 1983
NG GAN ZEE, plaintiff-appellee,  policy was also for P20,000.00. It
vs.
ASIAN CRUSADER LIFE ASSURANCE
CORPORATION, defendant-appellant.
ESCOLIN, J.:
This is an appeal from the judgment of the Court of First
Instance of Manila, ordering the appellant Asian-Crusader
Life Assurance Corporation to pay the face value of an
insurance policy issued on the life of Kwong Nam the
deceased husband of appellee Ng Gan Zee.
Misrepresentation and concealment of material facts in
obtaining the policy were pleaded to avoid the policy. The
lower court rejected the appellant's theory and ordered the
latter to pay appellee "the amount of P 20,000.00, with
interest at the legal rate from July 24, 1964, the date of the
filing of the complaint, until paid, and the costs. "  Insurance Co., Ltd, but this was declined
The Court of Appeals certified this appeal to Us, as the same
involves solely a question of law.  Assurance Co., Ltd. to Kwong Nam in
On May 12, 1962, Kwong Nam applied for a 20-year
endowment insurance on his life for the sum of P20,000.00,
with his wife, appellee Ng Gan Zee as beneficiary. On the
same date, appellant, upon receipt of the required premium
36
from the insured, approved the application and issued the
corresponding policy. On December 6, 1963, Kwong Nam
died of cancer of the liver with metastasis. All premiums had
been religiously paid at the time of his death. 
On January 10, 1964, his widow Ng Gan Zee presented a
claim in due form to appellant for payment of the face value
of the policy. On the same date, she submitted the required
proof of death of the insured. Appellant denied the claim on
the ground that the answers given by the insured to the
questions appealing in his application for life insurance were
untrue. 
Appellee brought the matter to the attention of the Insurance
Commissioner, the Hon. Francisco Y. Mandamus, and the
latter, after conducting an investigation, wrote the appellant
that he had found no material concealment on the part of the
insured and that, therefore, appellee should be paid the full
face value of the policy. This opinion of the Insurance
Commissioner notwithstanding, appellant refused to settle its
obligation.  that the amount applied for was
Appellant alleged that the insured was guilty of
misrepresentation when he answered "No" to the following
question appearing in the application for life insurance- 
Has any life insurance company ever
refused your application for insurance or
for reinstatement of a lapsed policy or
offered you a policy different from that
applied for? If, so, name company and
date. 
In its brief, appellant rationalized its thesis thus:  Insular Life Assurance Co., Ltd. was for
... As pointed out in the foregoing
summary of the essential facts in this
case, the insured had in January, 1962,
applied for reinstatement of his lapsed
life insurance policy with the Insular Life
by the insurance company, although
later on approved for reinstatement with
a very high premium as a result of his
medical examination. Thus
notwithstanding the said insured
answered 'No' to the [above] question
propounded to him. ... 1
The lower court found the argument bereft of factual basis;
and We quote with approval its disquisition on the matter- 
On the first question there is no
evidence that the Insular Life Assurance
Co., Ltd. ever refused any application of
Kwong Nam for insurance. Neither is
there any evidence that any other
insurance company has refused any
application of Kwong Nam for
insurance. 
... The evidence shows that the Insular
Life Assurance Co., Ltd. approved
Kwong Nam's request for reinstatement
and amendment of his lapsed insurance
policy on April 24, 1962 [Exh. L-2
Stipulation of Facts, Sept. 22, 1965).
The Court notes from said application for
reinstatement and amendment, Exh. 'L',
P20,000.00 only and not for P50,000.00
as it was in the lapsed policy. The
amount of the reinstated and amended
results, therefore, that when on May 12,
1962 Kwong Nam answered 'No' to the
question whether any life insurance
company ever refused his application for
reinstatement of a lapsed policy he did
not misrepresent any fact. 
... the evidence shows that the
application of Kwong Nam with the
the reinstatement and amendment of his
lapsed insurance policy-Policy No.
369531 -not an application for a 'new
insurance policy. The Insular Life
Assurance Co., Ltd. approved the said
application on April 24, 1962. Policy No.
369531 was reinstated for the amount of
P20,000.00 as applied for by Kwong
Nam [Exhs. 'L', 'L-l' and 'L-2']. No new
policy was issued by the Insular Life
connection with said application for
reinstatement and amendment. Such
being the case, the Court finds that there
is no misrepresentation on this matter. 2
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Cases
Appellant further maintains that when the insured was
examined in connection with his application for life insurance,
he gave the appellant's medical examiner false and
misleading information as to his ailment and previous
operation. The alleged false statements given by Kwong
Nam are as follows:  means of ascertaining, and as to which
Operated on for a Tumor [mayoma] of
the stomach. Claims that Tumor has
been associated with ulcer of stomach.
Tumor taken out was hard and of a
hen's egg size. Operation was two [2]
years ago in Chinese General Hospital
by Dr. Yap. Now, claims he is
completely recovered. 
To demonstrate the insured's misrepresentation, appellant
directs Our attention to: 
[1] The report of Dr. Fu Sun Yuan the physician who treated
Kwong Nam at the Chinese General Hospital on May 22,
1960, i.e., about 2 years before he applied for an insurance
policy on May 12, 1962. According to said report, Dr. Fu Sun
Yuan had diagnosed the patient's ailment as 'peptic ulcer' for
which, an operation, known as a 'sub-total gastric resection
was performed on the patient by Dr. Pacifico Yap; and  to establish such a defense by satisfactory and convincing
[2] The Surgical Pathology Report of Dr. Elias Pantangco
showing that the specimen removed from the patient's body
was 'a portion of the stomach measuring 12 cm. and 19 cm.
along the lesser curvature with a diameter of 15 cm. along
the greatest dimension.  appellant's medical examiner that the tumor for which he was
On the bases of the above undisputed medical data showing
that the insured was operated on for peptic ulcer", involving
the excision of a portion of the stomach, appellant argues
that the insured's statement in his application that a tumor,
"hard and of a hen's egg size," was removed during said
operation, constituted material concealment. 
The question to be resolved may be propounded thus: Was
appellant, because of insured's aforesaid representation,
misled or deceived into entering the contract or in accepting
the risk at the rate of premium agreed upon? 
The lower court answered this question in the negative, and
We agree.  and operation of the insured.  On 18 June 1982, Jaime Canilang consulted Dr. Wilfredo B.
Section 27 of the Insurance Law [Act 2427] provides: 
37
Sec. 27. Such party a contract of
insurance must communicate to the
other, in good faith, all facts within his
knowledge which are material to the
contract, and which the other has not the
he makes no warranty. 3
Thus, "concealment exists where the assured had
knowledge of a fact material to the risk, and honesty, good
faith, and fair dealing requires that he should communicate it
to the assurer, but he designedly and intentionally withholds
the same." 4
It has also been held "that the concealment must, in the
absence of inquiries, be not only material, but fraudulent, or
the fact must have been intentionally withheld." 5
Assuming that the aforesaid answer given by the insured is
false, as claimed by the appellant. Sec. 27 of the Insurance
Law, above-quoted, nevertheless requires that fraudulent
intent on the part of the insured be established to entitle the
insurer to rescind the contract. And as correctly observed by
the lower court, "misrepresentation as a defense of the
insurer to avoid liability is an 'affirmative' defense. The duty
evidence rests upon the defendant. The evidence before the
Court does not clearly and satisfactorily establish that
defense." 
It bears emphasis that Kwong Nam had informed the
operated on was "associated with ulcer of the stomach." In
the absence of evidence that the insured had sufficient
medical knowledge as to enable him to distinguish between
"peptic ulcer" and "a tumor", his statement that said tumor
was "associated with ulcer of the stomach, " should be
construed as an expression made in good faith of his belief
as to the nature of his ailment and operation. Indeed, such
statement must be presumed to have been made by him
without knowledge of its incorrectness and without any
deliberate intent on his part to mislead the appellant. 
While it may be conceded that, from the viewpoint of a
medical expert, the information communicated was
imperfect, the same was nevertheless sufficient to have
induced appellant to make further inquiries about the ailment
Section 32 of Insurance Law [Act No. 24271 provides as
follows: 
Section 32. The right to information of
material facts maybe waived either by
the terms of insurance or by neglect to
make inquiries as to such facts where
they are distinctly implied in other facts
of which information is communicated. 
It has been held that where, upon the face of the application,
a question appears to be not answered at all or to be
imperfectly answered, and the insurers issue a policy without
any further inquiry, they waive the imperfection of the answer
and render the omission to answer more fully immaterial. 6
As aptly noted by the lower court, "if the ailment and
operation of Kwong Nam had such an important bearing on
the question of whether the defendant would undertake the
insurance or not, the court cannot understand why the
defendant or its medical examiner did not make any further
inquiries on such matters from the Chinese General Hospital
or require copies of the hospital records from the appellant
before acting on the application for insurance. The fact of the
matter is that the defendant was too eager to accept the
application and receive the insured's premium. It would be
inequitable now to allow the defendant to avoid liability under
the circumstances." 
Finding no reversible error committed by the trial court, the
judgment appealed from is hereby affirmed, with costs
against appellant Asian-Crusader life Assurance
Corporation. 
SO ORDERED.
G.R. No. 92492 June 17, 1993
THELMA VDA. DE CANILANG, petitioner, 
vs.
HON. COURT OF APPEALS and GREAT PACIFIC LIFE
ASSURANCE CORPORATION, respondents.
FELICIANO, J.:
Claudio and was diagnosed as suffering from "sinus
tachycardia." The doctor prescribed the following fro
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
him: Trazepam, a tranquilizer; and Aptin, a beta-blocker
drug. Mr. Canilang consulted the same doctor again on 3
August 1982 and this time was found to have "acute
bronchitis."
On next day, 4 August 1982, Jaime Canilang applied for a
"non-medical" insurance policy with respondent Great Pacific
Life Assurance Company ("Great Pacific") naming his wife,
Thelma Canilang, as his beneficiary.1 Jaime Canilang was
issued ordinary life insurance Policy No. 345163, with the
face value of P19,700, effective as of 9 August 1982.
On 5 August 1983, Jaime Canilang died of "congestive heart
failure," "anemia," and "chronic anemia." 2 Petitioner, widow
and beneficiary of the insured, filed a claim with Great
Pacific which the insurer denied on 5 December 1983 upon
the ground that the insured had concealed material
information from it.
Petitioner then filed a complaint against Great Pacific with
the Insurance Commission for recovery of the insurance
proceeds. During the hearing called by the Insurance
Commissioner, petitioner testified that she was not aware of
any serious illness suffered by her late husband 3 and that,
as far as she knew, her husband had died because of a
kidney disorder.4 A deposition given by Dr. Wilfredo Claudio
was presented by petitioner. There Dr. Claudio stated that
he was the family physician of the deceased Jaime
Canilang5 and that he had previously treated him for "sinus
tachycardia" and "acute bronchitis." 6 Great Pacific for its part
presented Dr. Esperanza Quismorio, a physician  concealment as the state of his health at the time of the filing
and a medical underwriter working for Great Pacific. 7 She
testified that the deceased's insurance application had been
approved on the basis of his medical declaration.8 She
explained that as a rule, medical examinations are required
only in cases where the applicant has indicated in his
application for insurance coverage that he has previously
undergone medical consultation and hospitalization. 9
In a decision dated 5 November 1985, Insurance
Commissioner Armando Ansaldo ordered Great Pacific to
pay P19,700 plus legal interest and P2,000.00 as attorney's
fees after holding that:
1. the ailment of Jaime Canilang was
not so serious that, even if it had been
disclosed, it would not have affected
Great Pacific's decision to insure him;
38
2. Great Pacific had waived its right to material concealment in stating his state
inquire into the health condition of the of health;
applicant by the issuance of the policy
despite the lack of answers to "some of
2. . . . at any rate, the non-disclosure of
the pertinent questions" in the insurance
certain facts about his previous health
application;
conditions does not amount to fraud and
private respondent is deemed to have
3. there was no intentional concealment waived inquiry thereto.  11
on the part of the insured Jaime
Canilang as he had thought that he was
The medical declaration which was set out in the application
merely suffering from a minor ailment
for insurance executed by Jaime Canilang read as follows:
and simple cold;  10 and
MEDICAL DECLARATION
4. Batas Pambansa Blg. 847 which
voids an insurance contract, whether or
not concealment was intentionally I hereby declare that:
made, was not applicable to Canilang's
case as that law became effective only
(1) I have not been confined in any
on 1 June 1985.
hospital, sanitarium or infirmary,
nor receive any medical or surgical
On appeal by Great Pacific, the Court of Appeals reversed advice/attention within the last five (5)
and set aside the decision of the Insurance Commissioner years.
and dismissed Thelma Canilang's complaint and Great
Pacific's counterclaim. The Court of Appealed found that the
(2) I have never been treated nor
use of the word "intentionally" by the Insurance
consulted a physician for a heart
Commissioner in defining and resolving the issue agreed
condition, high blood pressure, cancer,
upon by the parties at pre-trial before the Insurance
diabetes, lung, kidney, stomach
Commissioner was not supported by the evidence; that the
disorder, or any other physical
issue agreed upon by the parties had been whether the
impairment.
deceased insured, Jaime Canilang, made a material
of insurance application, justifying respondent's denial of the (3) I am, to the best of my knowledge, in
claim. The Court of Appeals also found that the failure of good health.
Jaime Canilang to disclose previous medical consultation
and treatment constituted material information which should
have been communicated to Great Pacific to enable the EXCEPTIONS:
latter to make proper inquiries. The Court of Appeals finally
held that the Ng Gan Zee case which had ________________________________
involved misrepresentation was not applicable in respect of ________________________________
the case at bar which involves concealment. ________________
Petitioner Thelma Canilang is now before this Court on a GENERAL DECLARATION
Petition for Review on Certiorari alleging that:
I hereby declare that all the foregoing
1. . . . the Honorable Court of Appeals, answers and statements are complete,
speaking with due respect, erred in not true and correct. I hereby agree that if
holding that the issue in the case agreed there be any fraud or misrepresentation
upon between the parties before the in the above statements material to the
Insurance Commission is whether or not risk, the INSURANCE COMPANY upon
Jaime Canilang "intentionally" made discovery within two (2) years from the
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
effective date of insurance shall have
the right to declare such insurance null
and void. That the liabilities of the
Company under the said
Policy/TA/Certificate shall accrue and
begin only from the date of
commencement of risk stated in the
Policy/TA/Certificate, provided that the
first premium is paid and the
Policy/TA/Certificate is delivered to, and
accepted by me in person, when I am in
actual good health.
Signed at Manila his 4th day of August,
1992.
We note that in addition to the negative statements made by
Mr. Canilang in paragraph 1 and 2 of the medical
declaration, he failed to disclose in the appropriate space,
under the caption "Exceptions," that he had twice consulted
Dr. Wilfredo B. Claudio who had found him to be suffering
from "sinus tachycardia" and "acute bronchitis."
The relevant statutory provisions as they stood at the time
Great Pacific issued the contract of insurance and at the
time Jaime Canilang died, are set out in P.D. No. 1460, also
known as the Insurance Code of 1978, which went into effect
on 11 June 1978. These provisions read as follows:
Sec. 26. A neglect to communicate
that which a party knows and ought to
communicate, is called a concealment.
xxx xxx xxx
Sec. 28. Each party to a contract of
insurance must communicate to the
other, in good faith, all factors within his
knowledge which are material to the
contract and as to which he makes no
warranty, and which the other has not
the means of ascertaining. (Emphasis
supplied)
Under the foregoing provisions, the information concealed
must be information which the concealing party knew and
"ought to [have] communicate[d]," that is to say, information
which was "material to the contract." The test of materiality is
39
contained in Section 31 of the Insurance Code of 1978 which
reads:
Sec. 31. Materially is to be determined
not by the event, but solely by
the probable and reasonable influence
of the facts upon the party to whom the
communication is due, in forming his
estimate of the disadvantages of the
proposed contract, or in making his
inquiries. (Emphasis supplied)
"Sinus tachycardia" is considered present "when the heart
rate exceeds 100 beats per minute."  13 The symptoms of this
condition include pounding in the chest and sometimes
faintness and weakness of the person affected. The
following elaboration was offered by Great Pacific and set
out by the Court of Appeals in its Decision:
Sinus tachycardia is defined as sinus-
initiated; heart rate faster than 100 beats
per minute. (Harrison' s Principles of
Internal Medicine, 8th ed. [1978], p.
1193.) It is, among others, a common
reaction to heart disease, including
myocardial infarction, and heart failure
per se. (Henry J.L. Marriot,
M.D., Electrocardiography, 6th ed.,
[1977], p. 127.) The medication
prescribed by Dr. Claudio for treatment
of Canilang's ailment on June 18, 1982,
indicates the condition that said
physician was trying to manage. Thus,
he prescribed Trazepam, (Philippine
Index of Medical Specialties (PIMS),
Vol. 14, No. 3, Dec. 1985, p. 112) which
is anti-anxiety, anti-convulsant, muscle-
relaxant; and Aptin, (Idem, p. 36) a
cardiac drug, for palpitations and
nervous heart. Such treatment could
have been a very material information to
the insurer in determining the action to
be take on Canilang's application for life
insurance coverage.  14
We agree with the Court of Appeals that the information
which Jaime Canilang failed to disclose was material to the
ability of Great Pacific to estimate the probable risk he
presented as a subject of life insurance. Had Canilang
disclosed his visits to his doctor, the diagnosis made and
medicines prescribed by such doctor, in the insurance
application, it may be reasonably assumed that Great Pacific
would have made further inquiries and would have probably
refused to issue a non-medical insurance policy or, at the
very least, required a higher premium for the same
coverage.  15 The materiality of the information withheld by
Great Pacific did not depend upon the state of mind of Jaime
Canilang. A man's state of mind or subjective belief is not
capable of proof in our judicial process, except through proof
of external acts or failure to act from which inferences as to
his subjective belief may be reasonably drawn. Neither does
materiality depend upon the actual or physical events which
ensue. Materiality relates rather to the "probable and
reasonable influence of the facts" upon the party to whom
the communication should have been made, in assessing
the risk involved in making or omitting to make further
inquiries and in accepting the application for insurance; that
"probable and reasonable influence of the facts" concealed
must, of course, be determined objectively, by the judge
ultimately.
The insurance Great Pacific applied for was a "non-medical"
insurance policy. In Saturnino v. Philippine-American Life
Insurance Company,  16 this Court held that:
. . . if anything, the waiver of medical
examination [in a non-medical insurance
contract] renders even more material
the information required of the applicant
concerning previous condition of health
and diseases suffered, for such
information necessarily constitutes an
important factor which the insurer takes
into consideration in deciding whether to
issue the policy or
not . . . .  17 (Emphasis supplied)
The Insurance Commissioner had also ruled that the failure
of Great Pacific to convey certain information to the insurer
was not "intentional" in nature, for the reason that Jaime
Canilang believed that he was suffering from minor ailment
like a common cold. Section 27 of the Insurance Code of
1978 as it existed from 1974 up to 1985, that is, throughout
the time range material for present purposes, provided that:
Sec. 27. A concealment entitles the
injured party to rescind a contract of
insurance.
The preceding statute, Act No. 2427, as it stood
from 1914 up to 1974, had provided:
INSURANCE – PART FOUR: Payment of Proceeds and Filing of Claims – PART FIVE: Grounds for Rescission
Cases
Sec. 26. A concealment, whether because of the discomfort and concern brought about by his
intentional or unintentional, entitles the experiencing "sinus tachycardia."
injured party to rescind a contract of
insurance. (Emphasis supplied)
We find it difficult to take seriously the argument that Great
Pacific had waived inquiry into the concealment by issuing
Upon the other hand, in 1985, the Insurance Code of 1978 the insurance policy notwithstanding Canilang's failure to set
was amended by  out answers to some of the questions in the insurance
B.P. Blg. 874. This subsequent statute modified Section 27 application. Such failure precisely constituted concealment
of the Insurance Code of 1978 so as to read as follows: on the part of Canilang. Petitioner's argument, if accepted,
would obviously erase Section 27 from the Insurance Code
of 1978.
Sec. 27. A concealment whether
intentional or unintentional entitles the
injured party to rescind a contract of It remains only to note that the Court of Appeals finding that
insurance. (Emphasis supplied) the parties had not agreed in the pretrial before the
Insurance Commission that the relevant issue was whether
or not Jaime Canilang had intentionally concealed material
The unspoken theory of the Insurance Commissioner
information from the insurer, was supported by the evidence
appears to have been that by deleting the phrase "intentional
of record, i.e., the Pre-trial Order itself dated 17 October
or unintentional," the Insurance Code of 1978 (prior to its
1984 and the Minutes of the Pre-trial Conference dated 15
amendment by B.P. Blg. 874) intended to limit the kinds of
October 1984, which "readily shows that the word
concealment which generate a right to rescind on the part of
"intentional" does not appear in the statement or definition of
the injured party to "intentional concealments." This
the issue in the said Order and Minutes."  18
argument is not persuasive. As a simple matter of grammar,
it may be noted that "intentional" and "unintentional" cancel
each other out. The net result therefore of the phrase WHEREFORE, the Petition for Review is DENIED for lack of
"whether intentional or unitentional" is precisely to leave merit and the Decision of the Court of Appeals dated 16
unqualified the term "concealment." Thus, Section 27 of the October 1989 in C.A.-G.R. SP No. 08696 is hereby
Insurance Code of 1978 is properly read as referring to AFFIRMED. No pronouncement as to the costs.
"any concealment" without regard to whether such
concealment is intentional or unintentional. The phrase
SO ORDERED.
"whether intentional or unintentional" was in fact superfluous.
The deletion of the phrase "whether intentional or
unintentional" could not have had the effect of imposing an
affirmative requirement that a concealment must be
intentional if it is to entitle the injured party to rescind a
contract of insurance. The restoration in 1985 by B.P. Blg.
874 of the phrase "whether intentional or unintentional"
merely underscored the fact that all throughout (from 1914 to
1985), the statute did not require proof that concealment
must be "intentional" in order to authorize rescission by the
injured party.

In any case, in the case at bar, the nature of the facts not
conveyed to the insurer was such that the failure to
communicate must have been intentional rather than merely
inadvertent. For Jaime Canilang could not have been
unaware that his heart beat would at times rise to high and
alarming levels and that he had consulted a doctor twice in
the two (2) months before applying for non-medical
insurance. Indeed, the last medical consultation took place
just the day before the insurance application was filed. In all
probability, Jaime Canilang went to visit his doctor precisely
40