Insurance Fulltext Part 1

8/13/2019 Insurance Fulltext Part 1

1/38

PHILAMCARE HEALTH SYSTEMS, INC.,petitioner, vs. COURT OF

APPEALS and JULITA TRINOS, respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a

health care coverage with petitioner Philamcare Health Systems, Inc. In the

standard application form, he answered no to the following uestion!

Have you or any of your family members ever consulted or been treated for

high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or

peptic ulcer" #If $es, give details%.i&'(

The application was approved for a period of one year from )arch ', '*++ to

)arch ', '*+*. ccordingly, he was issued Health -are greement o.

P/'/'*0. 1nder the agreement, respondent2s husband was entitled to avail

of hospitali3ation benefits, whether ordinary or emergency, listed therein. He

was also entitled to avail of 4out5patient benefits6 such as annual physical

e7aminations, preventive health care and other out5patient services.

1pon the termination of the agreement, the same was e7tended for another

year from )arch ', '*+* to )arch ', '**/, then from )arch ', '**/ to June

', '**/. The amount of coverage was increased to a ma7imum sum of

P89,///.// per disability.ii&:(

;uring the period of his coverage, Ernani suffered a heart attac< and was

confined at the )anila )edical -enter #))-% for one month beginning )arch

*, '**/. =hile her husband was in the hospital, respondent tried to claim thebenefits under the health care agreement. However, petitioner denied her

claim saying that the Health -are greement was void. ccording to

petitioner, there was a concealment regarding Ernani2s medical history.

;octors at the ))- allegedly discovered at the time of Ernani2s confinement

that he was hypertensive, diabetic and asthmatic, contrary to his answer in

the application form. Thus, respondent paid the hospitali3ation e7penses

herself, amounting to about P8>,///.//.

fter her husband was discharged from the ))-, he was attended by a

physical therapist at home. ?ater, he was admitted at the -hinese @eneral

Hospital. ;ue to financial difficulties, however, respondent brought her

husband home again. In the morning of pril 'A, '**/, Ernani had fever and

was feeling very wea,///.// plus interest, until the

amount is fully paid to plaintiff who paid the sameG

:. ;efendants to pay the reduced amount of moral damages of

P'/,///.// to plaintiffG

A. ;efendants to pay the reduced amount ofP'/,///.// as e7emplary

damages to plaintiffG

0. ;efendants to pay attorney2s fees of P:/,///.//, plus costs of suit.

SC CB;EBE;.iii&A(

Cn appeal, the -ourt of ppeals affirmed the decision of the trial court but

deleted all awards for damages and absolved petitioner Beverente. iv&0(

Petitioner2s motion for reconsideration was denied.v&9( Hence, petitioner

brought the instant petition for review, raising the primary argument that a


2/38

health care agreement is not an insurance contractG hence the

4incontestability clause6 under the Insurance -odevi&>( does not apply.

Petitioner argues that the agreement grants 4living benefits,6 such as medical

chec


3/38

greement is issued on this application and the full )embership ee

according to the mode of payment applied for is actually paid during the

lifetime and good health of proposed )embersG that no information acuired

by any Bepresentative of Philam-are shall be binding upon Philam-are

unless set out in writing in the applicationG that any physician is, by these

presents, e7pressly authori3ed to disclose or give testimony at anytime

relative to any information acuired by him in his professional capacity upon

any uestion affecting the eligibility for health care coverage of the Proposed

)embers and that the acceptance of any greement issued on this

application shall be a ratification of any correction in or addition to this

application as stated in the space for Home Cffice Endorsement.7i&''(

#1nderscoring ours%

In addition to the above condition, petitioner additionally reuired the

applicant for authori3ation to inuire about the applicant2s medical history,

thus!

I hereby authori3e any person, organi3ation, or entity that has any record or


4/38

1nder Section :8 of the Insurance -ode, 4a concealment entitles the inFured

party to rescind a contract of insurance.6 The right to rescind should be

e7ercised previous to the commencement of an action on the contract. 7vii&'8(

In this case, no rescission was made. Desides, the cancellation of health

care agreements as in insurance policies reuire the concurrence of the

following conditions!

'. Prior notice of cancellation to insuredG

:. otice must be based on the occurrence after effective date of the

policy of one or more of the grounds mentionedG

A. )ust be in writing, mailed or delivered to the insured at the address

shown in the policyG

0. )ust state the grounds relied upon provided in Section >0 of the

Insurance -ode and upon reuest of insured, to furnish facts on which

cancellation is based.7viii&'+(

one of the above pre5conditions was fulfilled in this case. =hen the terms of

insurance contract contain limitations on liability, courts should construe them

in such a way as to preclude the insurer from non5compliance with his

obligation.7i7&'*( Deing a contract of adhesion, the terms of an insurance

contract are to be construed strictly against the party which prepared the

contract the insurer.77&:/( Dy reason of the e7clusive 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.77i&:'( This is

eually applicable to Health -are greements. 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 e7clusionary clauses of doubtful import should be strictly construed

against the provider.77ii&::(

nent the incontestability of the membership of respondent2s husband, we

uote with approval the following findings of the trial court!

#1%nder the title -laim procedures of e7penses, the defendant Philamcare

Health Systems Inc. had twelve months from the date of issuance of the

greement within which to contest the membership of the patient if he had

previous ailment of asthma, and si7 months from the issuance of the

agreement if the patient was sic< of diabetes or hypertension. The periods

having e7pired, the defense of concealment or misrepresentation no longer

lie.77iii&:A(

inally, 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 e7penses. It is not

controverted that respondent paid all the hospital and medical e7penses. She

is therefore entitled to reimbursement. The records adeuately prove the

e7penses incurred by respondent for the deceased2s hospitali3ation,

medication and the professional fees of the attending physicians.77iv&:0(

WHEREFORE, in view of the foregoing, the petition is ;EIE;. The assailed

decision of the -ourt of ppeals dated ;ecember '0, '**9 is IB)E;.

SC CB;EBE;.

;avide, Jr., -.J., #-hairman%, Puno, and Kapunan, JJ., concur.


5/38

i

ii

iii

iv

v

vi

vii

viii

i7MAYER STEEL PIPE CORPORATION and HONGKONG GOVERNMENT SUPPLIES

DEPARTMENT,petitioners, vs. COURT OF APPEALS, SOUTH SEA SURETY AND INSURANCE

CO., INC. and t! CHARTER INSURANCE CORPORATION, respondents.

D E C I S I O N

PUNO, J.:

This is a petition for review on certiorarito annul and set aside the ;ecision of respondent -ourt of

ppeals dated ;ecember '0, '**9&'( and its Besolution dated ebruary ::, '**>&:( in [email protected]. -L

o. 09+/9 entitled )ayer Steel Pipe -orporation and Hong


6/38

intentional misconduct on the part of the insured. The dispositive portion of the decision states!

=HEBECBE, Fudgment is hereby rendered ordering the defendants Fointly and severally, to pay the

plaintiffs the following!

'. the sum euivalent in Philippine currency of HKM:**,A09.A/ with legal rate of interest as of the

filing of the complaintG

:. P'//,///.// as and for attorneyNs feesG and

A. costs of suit.

SC CB;EBE;.&9(

Private respondents elevated the case to respondent -ourt of ppeals.

Bespondent court affirmed the finding of the trial court that the damage is not due to factory defect and

that it was covered by the Oall ris% of the -arriage of @oods by Seact since it was filed only on pril '8, '*+>, more than two years from the time the goods were

unloaded from the vessel. Section A#>% of the -arriage of @oods by Sea ct provides that Othe 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.O

Bespondent court ruled that this provision applies not only to the carrier but also to the insurer, citing

ilipino )erchants Insurance -o., Inc. vs. leFandro.&>(

Hence this petition with the following assignments of error!

'. The respondent -ourt of ppeals erred in holding that petitionersN cause of action had already

prescribed on the mista


7/38

The ilipino )erchants case is different from the case at bar. In ilipino )erchants, it was the insurer

which filed a claim against the carrier for reimbursement of the amount it paid to the shipper. In the

case at bar, it was the shipper which filed a claim against the insurer. The basis of the shipperNs claim

is the Oall ris% of

the -arriage of @oods by Sea ct applies to the insurer, it meant that the insurer, li


8/38

7 7 7 7 7 7 7 7 7

Cn January :8, :///, respondent -ommissioner of Internal Bevenue &-IB( sent petitioner a formal

demand letter and the corresponding assessment notices demanding the payment of deficiency ta7es,

including surcharges and interest, for the ta7able years '**> and '**8 in the total amount of

P::0,8/:,>0'.'+. 7777

The deficiency &documentary stamp ta7 #;ST%( assessment was imposed on petitioner2s health careagreement with the members of its health care program pursuant to Section '+9 of the '**8 Ta7 -ode

7777

7 7 7 7 7 7 7 7 7

Petitioner protested the assessment in a letter dated ebruary :A, :///. s respondent did not act on

the protest, petitioner filed a petition for review in the -ourt of Ta7 ppeals #-T% see and '**8 deficiency documentary stamp ta7 assessment and

ordered petitioner to desist from collecting the same is BELEBSE; and SET SI;E.

Bespondent is ordered to pay the amounts of P99,80>,A9:.'* and P>+,09/,:9+.8A as deficiency;ocumentary Stamp Ta7 for '**> and '**8, respectively, plus :9Q surcharge for late payment and

:/Q interest per annum from January :8, :///, pursuant to Sections :0+ and :0* of the Ta7 -ode,

until the same shall have been fully paid.

SC CB;EBE;.

Petitioner moved for reconsideration but the - denied it. Hence, petitioner filed this case.

7 7 7 7 7 7 7 7 7

In a decision dated June ':, ://+, the -ourt denied the petition and affirmed the -2s decision. =e

held that petitioner2s health care agreement during the pertinent period was in the nature of non5lifeinsurance which is a contract of indemnity, citing Blue Cross Healthcare, Inc. v. OlivaresAand

Philamcare Health Systems, Inc. v. CA.0=e also ruled that petitioner2s contention that it is a health

maintenance organi3ation #H)C% and not an insurance company is irrelevant because contracts

between companies li


9/38

1nable to accept our verdict, petitioner filed the present motion for reconsideration and supplemental

motion for reconsideration, asserting the following arguments!

#a% The ;ST under Section '+9 of the ational Internal Bevenue of '**8 is imposed only on a

company engaged in the business of fidelity bonds and other insurance policies. Petitioner, as an

H)C, is a service provider, not an insurance company.

#b% The -ourt, in dismissing the appeal in CIR v. Philippine National Ban, affirmed in effect the -2sdisposition that health care services are not in the nature of an insurance business.

#c% Section '+9 should be strictly construed.

#d% ?egislative intent to e7clude health care agreements from items subFect to ;ST is clear, especially

in the light of the amendments made in the ;ST law in ://:.

#e% ssuming ar!uen"o that petitioner2s agreements are contracts of indemnity, they are not those

contemplated under Section '+9.

#f% ssuming ar!uen"o that petitioner2s agreements are a


10/38

To avail of petitioner2s health care programs, the individual members are reuired to sign and e7ecute

a standard health care agreement embodying the terms and conditions for the provision of the health

care services. The same agreement contains the various health care services that can be engaged by

the enrolled member, i.e., preventive, diagnostic and curative medical services. E7cept for the curative

aspect of the medical service offered, the enrolled member may actually ma


11/38

b% ma


12/38

purpose of the insurance statutes to regulate all arrangements for assumption or distribution of ris


13/38

In fact, a substantial portion of petitioner2s services covers preventive and diagnostic medical services

intended to


14/38

the part of the member. In case of e7posure of the member to liability, he would be entitled to

indemnification by petitioner.

urthermore, the fact that petitioner must relieve its member from liability by paying for e7penses

arising from the stipulated contingencies belies its claim that its services are prepaid. The e7penses to

be incurred by each member cannot be predicted beforehand, if they can be predicted at all. Petitioner

assumes the ris< of paying for the costs of the services even if they are significantly and substantially

more than what the member has Oprepaid.O Petitioner does not bear the costs alone but distributes or

spreads them out among a large group of persons bearing a similar ris


15/38

against all suits for damages for malpractice is one of insurance, and the corporation will be deemed

as engaged in the business of insurance. 1nli


16/38

urthermore, militating in convincing fashion against the imposition of ;ST on petitioner2s health care

agreements under Section '+9 of the IB- of '**8 is the provision2s legislative history. The te7t of

Section '+9 came into 1.S. law as early as '*/0 when H)Cs and health care agreements were not

even in e7istence in this Furisdiction. It was imposed under Section ''>, rticle I of ct o. ''+*

#otherwise , to wit!

BTI-?E I

Sta/ Ta4!'on Specified CbFects

Section ''>. There shall be levied, collected, and paid for and in respect to the several bonds,

debentures, or certificates of stoc< and indebtedness, and other documents, instruments, matters, and

things mentioned and described in this section, or for or in respect to the vellum, parchment, or paper

upon which such instrument, matters, or things or any of them shall be written or printed by any

person or persons who shall ma,

rticle I of ct o. ''+* was completely reproduced as Section A/ #l%, rticle III of ct o. :AA*.The

very detailed and e7clusive enumeration of items subFect to ;ST was thus retained.

Cn ;ecember A', '*'>, Section A/ #l%, rticle III of ct o. :AA* was again reproduced as Section

'>/0 #l%, rticle IL of ct o. :>98 #dministrative -ode%. 1pon its amendment on )arch '/, '*'8,

the pertinent ;ST provision became Section '00* #l% of ct o. :8'', otherwise > #the IB- of '*A*%,

which codified all the internal revenue laws of the Philippines. In an amendment introduced by B 0/

on Cctober ', '*0>, the ;ST rate was increased but the provision remained substantially the same.

Thereafter, on June A, '*88, the same provision with the same ;ST rate was reproduced in P; ''9+#IB- of '*88% as Section :A0. 1nder P;s '098 and '*9*, enacted on June '', '*8+ and Cctober

'/, '*+0 respectively, the ;ST rate was again increased./avvphi/

Effective January ', '*+>, pursuant to Section 09 of P; '**0, Section :A0 of the IB- of '*88 was

renumbered as Section '*+. nd under Section :A of EC08:8A dated July :9, '*+8, it was again

renumbered and became Section '+9.

Cn ;ecember :A, '**A, under B 8>>/, Section '+9 was amended but, again, only with respect to

the rate of ta7.

otwithstanding the comprehensive amendment of the IB- of '*88 by B +0:0 #or the IB- of

'**8%, the subFect legal provision was retained as the present Section '+9. In ://0, amendments to

the ;ST provisions were introduced by B *:0A0+but Section '+9 was untouched.

Cn the other hand, the concept of an H)C was introduced in the Philippines with the formation of

Dancom Health -are -orporation in '*80. The same pioneer H)C was later reorgani3ed and

renamed Integrated Health -are Services, Inc. #or Intercare%. However, there are those who claim that

Health )aintenance, Inc. is the H)C industry pioneer, having set foot in the Philippines as early as

'*>9 and having been formally incorporated in '**'. fterwards, H)Cs proliferated uic


17/38

currently, there are A> registered H)Cs with a total enrollment of more than : million.0*

=e can clearly see from these two histories #of the ;ST on the one hand and H)Cs on the other% that

when the law imposing the ;ST was first passed, H)Cs were yet un/when it availed of the ta7 amnesty under B *0+/ on ;ecember

'/, ://8. It paid P9,':8,'0*./+ representing 9Q of its net worth as of the year ended ;ecember A',

://9 and complied with all reuirements of the ta7 amnesty. 1nder Section >#a% of B *0+/, it is

entitled to immunity from payment of ta7es as well as additions thereto, and the appurtenant civil,

criminal or administrative penalties under the '**8 IB-, as amended, arising from the failure to pay

any and all internal revenue ta7es for ta7able year ://9 and prior years.>'

ar from disagreeing with petitioner, respondent manifested in its memorandum!

Section > of &B *+0/( provides that availment of ta7 amnesty entitles a ta7payer to immunity from

payment of the ta7 involved, including the civil, criminal, or administrative penalties provided under the

'**8 &IB-(, for ta7 liabilities arising in ://9 and the preceding years.

In view of petitioner2s availment of the benefits of &B *+0/(, and without conceding the merits of this

case as discussed above, "!'&nd!nt (&n(!d!' tat ')( ta4 a/n!'t0 !4t$n%)$'!' t! ta4

*$a1$*$t$!' & !t$t$&n!". This admission, however, is not meant to preclude a revocation of the
http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt49http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt50http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt51http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt52http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt53http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt54http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt55http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt56http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt57http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt58http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt59http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt60http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt61http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt49http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt50http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt51http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt52http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt53http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt54http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt55http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt56http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt57http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt58http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt59http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt60http://www.lawphil.net/judjuris/juri2009/sep2009/gr_167330_2009.html#fnt61


18/38

amnesty granted in case it is found to have been granted under circumstances amounting to ta7 fraud

under Section '/ of said amnesty law.>:#Emphasis supplied%

urthermore, we held in a recent case that ;ST is one of the ta7es covered by the ta7 amnesty

program under B *0+/.>AThere is no other conclusion to draw than that petitioner2s liability for ;ST

for the ta7able years '**> and '**8 was totally e7tinguished by its availment of the ta7 amnesty under

B *0+/.

I' T! C&)"t &)nd 0 A M$n)t! R!'&*)t$&n In An&t!" Ca'!

Petitioner raises another interesting issue in its motion for reconsideration! whether this -ourt is bound

by the ruling of the ->0in CIR v. Philippine National Ban>9that a health care agreement of

Philamcare Health Systems is not an insurance contract for purposes of the ;ST.

In support of its argument, petitioner cites the ugust :*, ://' minute resolution of this -ourt

dismissing the appeal in Philippine National Ban #@.B. o. '0+>+/%.>>Petitioner argues that the

dismissal of @.B. o. '0+>+/ by minute resolution was a Fudgment on the meritsG hence, the -ourt

should apply the - ruling there that a health care agreement is not an insurance contract.

It is true that, although contained in a minute resolution, our dismissal of the petition was a disposition

of the merits of the case. =hen we dismissed the petition, we effectively affirmed the - ruling being

uestioned. s a result, our ruling in that case has already become final.>8=hen a minute resolution

denies or dismisses a petition for failure to comply with formal and substantive reuirements, the

challenged decision, together with its findings of fact and legal conclusions, are deemed sustained.>+

Dut what is its effect on other cases"

=ith respect to the same subFect matter and the same issues concerning the same parties, it

constitutes res 0u"icata.>*However, if other parties or another subFect matter #even with the same

parties and issues% is involved, the minute resolution is not binding precedent. Thus, in CIR v. Baier1

Nicel,8/

the -ourt noted that a previous case, CIR v. Baier1Nicel8'

$n#&*#$n% t! 'a/! a"t$!' andt! 'a/! $'')!', was previously disposed of by the -ourt thru a minute resolution dated ebruary

'8, ://A sustaining the ruling of the -. onetheless, the -ourt ruled that t! "!#$&)' (a'! a3d5

n& 1!a"$n% on the latter casebecausethe two cases involved different subFect matters as they were

concerned with the ta7able income of different ta7able years.8:

Desides, there are substantial, not simply formal, distinctions between a minute resolution and a

decision. The constitutional reuirement under the first paragraph of Section '0, rticle LIII of the

-onstitution that the facts and the law on which the Fudgment is based must be e7pressed clearly and

distinctly applies only to decisions, not to minute resolutions. minute resolution is signed only by the

cler< of court by authority of the Fustices, unli+/, petitioner cannot

successfully invo


19/38

system made possible by uantity purchasing of services and economies of scale. They offer

advantages over the pay5for5service system #wherein individuals are charged a fee each time they

receive medical services%, including the ability to control costs. They protect their members from

e7posure to the high cost of hospitali3ation and other medical e7penses brought about by a fluctuating

economy. ccordingly, they play an important role in society as partners of the State in achieving its

constitutional mandate of providing its citi3ens with affordable health services.

The rate of ;ST under Section '+9 is euivalent to ':.9Q of the premium charged.80Its imposition will

elevate the cost of health care services. This will in turn necessitate an increase in the membership

fees, resulting in either placing health services beyond the reach of the ordinary wage earner or

driving the industry to the ground. t the end of the day, neither side wins, considering the

indispensability of the services offered by H)Cs.

WHEREFORE, the motion for reconsideration is GRANTED.The ugust '>, ://0 decision of the

-ourt of ppeals in [email protected]. SP o.8/08*is REVERSED andSET ASIDE. The '**> and '**8

deficiency ;ST assessment against petitioner is hereby CANCELLED andSET ASIDE. Bespondent

is ordered to desist from collecting the said ta7.

o costs.

SO ORDERED.

7DIONISIA, EULOGIO, MARINA, GUILLERMO and NORERTO a** ')"na/!d GUINGON,

plaintiffs5appellees,

vs.

ILUMINADO DEL MONTE, JULIO AGUILAR and CAPITAL INSURANCE and SURETY CO., INC.,

defendants.

CAPITAL INSURANCE and SURETY CO., INC.,defendant5appellant.

)eneroso Almario an" Associates $or plainti$$s1appellees.

Achacoso an" Associates $or "e$en"ant1appellant.

ENGON, J.P., J.:

Julio guilar owned and operated several Feepneys in the -ity of )anila among which was one with

plate number P1J5:/>5)anila, '*>'. He entered into a contract with the -apital Insurance Surety

-o., Inc. insuring the operation of his Feepneys against accidents with third5party liability. s a

conseuence thereof an insurance policy was e7ecuted by the -apital Insurance Surety -o., Inc.,

the pertinent provisions of which in so far as this case is concerned contains the following!

Section II 23IABI3I-4 -O -H5 P&B3IC

'. The -ompany, will, subFect to the limits of liability, indemnify the Insured in the event of accident

caused by or arising out of the use of the )otor Lehicles or in connection with the loading or

unloading of the )otor Lehicles, against all sums including claimantNs costs and e7penses which the

Insured shall become legally liable to pay in respect of!

a. death of or bodily inFury to any person

b. damage to property

;uring the effectivity of such insurance policy on ebruary :/, '*>' Iluminado del )onte, one of the

drivers of the Feepneys operated by guilar, while driving along the intersection of Juan ?una and

)oro streets, -ity of )anila, bumped with the Feepney abovementioned one @ervacio @uingon who

had Fust alighted from another Feepney and as a conseuence the latter died some days thereafter.

corresponding information for homicide thru rec


20/38

s a corollary to such action, the heirs of @ervacio @uingon filed an action for damages praying that

the sum of P+:,88'.+/ be paid to them Fointly and severally by the defendants, driver Iluminado del

)onte, owner and operator Julio guilar, and the -apital Insurance Surety -o., Inc. or failure to

answer the complaint, ;el )onte and guilar were declared in default. -apital Insurance Surety

-o., Inc. answered, alleging that the plaintiff has no cause of action against it. ;uring the trial the

following facts were stipulated!

-C1BT! The -ourt wants to find if there is a stipulation in the policy whereby the insured is insured

against liability to third persons who are not passengers of Feeps.

?)BIC! s far as I :G p. >9 Bec. on ppeal%

Cn ugust :8, '*>:, the -ourt of irst Instance of )anila rendered its Fudgment with the following

dispositive portion!

=HEBECBE, Fudgment is rendered sentencing Iluminado del )onte and Julio guilar Fointly and

severally to pay plaintiffs the sum of P+,98:.*9 as damages for the death of their father, plus

P',///.// for attorneyNs fees plus costs.

The defendant -apital Insurance and Surety -o., Inc. is hereby sentenced to pay the plaintiffs the sum

of ive Thousand #P9,///.//% Pesos plus ive Hundred #P9//.//% Pesos as attorneyNs fees and costs.

These sums of P9,///.// and P9//.// adFudged against -apital Insurance and Surety -o., Inc. shall

be applied in partial satisfaction of the Fudgment rendered against Iluminado del )onte and Julio

guilar in this case.

SC CB;EBE;.

The case was appealed to the -ourt of ppeals which appellate court on September A/, '*>A certified

the case to 1s because the appeal raises purely uestions of law.

The issues raised before 1s in this appeal are #'% s the company agreed to indemnify the insured

Julio guilar, is it only the insured to whom it is liable" #:% )ust Julio guilar first show himself to be

entitled to indemnity before the insurance company may be held liable for the same" #A% Plaintiffs not

being parties to the insurance contract, do they have a cause of action against the companyG and #0%

;oes the fact that the insured is liable to the plaintiffs necessarily mean that the insurer is liable to the

insured"

In the discussion of the points thus raised, what is paramount is the interpretation of the insurancecontract with the aim in view of attaining the obFectives for which the insurance was ta, Bule A%. The policy, on the

other hand, contains a clause stating!

E.Action A!ainst Company

o action shall lie against the -ompany unless, as a condition precedent thereto, the Insured shall

have fully complied with all of the terms of this Policy, nor until the amount of the InsuredNs obligation

to pay shall have been finally determined either by Fudgment against the Insured after actual trial or by

written agreement of the Insured, the claimant, and the -ompany.

ny person or organi3ation or the legal representative thereof who has secured such Fudgment or

written agreement shall thereafter be entitled to recover under this policy to the e7tent of the insurance

afforded by the Policy. othing contained in this policy shall give any person or organi3ation any right

to Foin the -ompany as a co5defendant in any action against the Insured to determine the InsuredNs

liability.


21/38

Dan


22/38

=herefore, the Fudgment appealed from is affirmed in toto. -osts against appellant. So ordered.

ONIFACIO ROS., INC., ET AL.,plaintiffs5appellants,

vs.

ENRIUE MORA, ET AL.,defendants5appellees.

). a!saysay $or plainti$$s1appellants.

A%a" Santos an" Pa%lo $or "e$en"ant1appellee H. 5. Reyes, Inc.

(. P. Santilla an" A. . Hi"al!o, (r. $or other "e$en"ant1appellee.

CASTRO, J.:

This is an appeal from the decision of the -ourt of irst Instance of )anila, Dranch L, in civil case

0++:A, affirming the decision of the )unicipal -ourt of )anila, declaring the H.S. Beyes, Inc. as

having a better right than the Donifacio Dros., Inc. and the yala uto Parts -ompany, appellants

herein, to the proceeds of motor insurance policy 5/>'9, in the sum of P:,//:.8A, issued by the State

Donding Insurance -o. Inc., and directing payment of the said amount to the H. Beyes, Inc.

Enriue )ora, owner of Cldsmobile sedan model '*9>, bearing plate o. W-5 mortgaged the same tothe H.S. Beyes, Inc., with the condition that the former would insure the automobile with the latter as

beneficiary. The automobile was thereafter insured on June :A, '*9* with the State Donding

Insurance -o., Inc., and motor car insurance policy 5/>'9 was issued to Enriue )ora, the pertinent

provisions of which read!

'. The -ompany #referring to the State Donding Insurance -o., Inc.% will, subFect to the ?imits of

?iability, indemnify the Insured against loss of or damages to the )otor Lehicle and its accessories

and spare parts whilst thereonG #a% by accidental collision or overturning or collision or overturning

conseuent upon mechanical brea


23/38

1pon the theory that the insurance proceeds should be paid directly to them, the Donifacio Dros. Inc.

and the yala uto Parts -o. filed on )ay +, '*>' a complaint with the )unicipal -ourt of )anila

against Enriue )ora and the State Donding Insurance -o., Inc. for the collection of the sum of

P:,//:.8A The insurance company filed its answer with a counterclaim for interpleader, reuiring the

Donifacio Dros. Inc. and the H.S. Beyes, Inc. to interplead in order to determine who has better right to

the insurance proceeds in uestion. Enriue )ora was declared in default for failure to appear at the

hearing, and evidence against him was received e# parte. However, the counsel for the DonifacioDros. Inc., yala uto Parts -o. and State Donding Insurance -o. Inc. submitted a stipulation of

facts, on the basis of which are )unicipal -ourt rendered a decision declaring the H.S. Beyes, Inc. as

having a better right to the disputed amount and ordering State Donding Insurance -o. Inc. to pay to

the H. S. Beyes, Inc. the said sum of P:,//:.8A. rom this decision, the appellants elevated the case

to the -ourt of irst Instance of )anila which the stipulation of facts was reproduced. Cn Cctober '*,

'*>: the latter court rendered a decision, affirming the decision of the )unicipal -ourt. The Donifacio

Dros. Inc. and the yala uto Parts -o. moved for reconsideration of the decision, but the trial court

denied the motion. Hence, this appeal.

The main issue raised is whether there is privity of contract between the Donifacio Dros. Inc. and the

yala uto Parts -o. on the one hand and the insurance company on the other. The appellants arguethat the insurance company and Enriue )ora are parties to the repair of the car as well as the

towage thereof performed. The authority for this assertion is to be found, it is alleged, in paragraph 0

of the insurance contract which provides that Othe insured may authori3e the repair of the )otor

Lehicle necessitated by damage for which the company may be liable under the policy provided that

#a% the estimated cost of such repair does not e7ceed the uthori3ed Bepair ?imit, and #b% a detailed

estimate of the cost is forwarded to the company without delay.O It is stressed that the H.H. Dayne

dFustment -ompanyNs recommendation of payment of the appellantsN bill for materials and repairs for

which the latter drew a chec< for P:,//:.8A indicates that )ora and the H.H. Dayne dFustment -o.

acted for and in representation of the insurance company.

This argument is, in our view, beside the point, because from the undisputed facts and from thepleadings it will be seen that the appellantsN alleged cause of action rests e7clusively upon the terms

of the insurance contract. The appellants see< to recover the insurance proceeds, and for this

purpose, they rely upon paragraph 0 of the insurance contract document e7ecuted by and between

the State Donding Insurance -ompany, Inc. and Enriue )ora. The appellants are not mentioned in

the contract as parties thereto nor is there any clause or provision thereof from which we can infer that

there is an obligation on the part of the insurance company to pay the cost of repairs directly to them.

It is fundamental that contracts ta


24/38

have easily inserted in the contract a stipulation to that effect. To hold now that the original parties to

the insurance contract intended to confer upon the appellants the benefit claimed by them would

reuire us to ignore the indespensable reuisite that a stipulationpour autrui must be clearly

e7pressed by the parties, which we cannot do.

s regards paragraph 0 of the insurance contract, a perusal thereof would show that instead of

establishingprivity %et+een the appellants and the insurance company, such stipulation merely

establishes the procedure that the insured has to follow in order to be entitled to indemnity for repair.

This paragraph therefore should not be construed as bringing into e7istence in favor of the appellants

a right of action against the insurance company as such intention can never be inferred therefrom.

nother cogent reason for not recogni3ing a right of action by the appellants against the insurance

company is that Oa policy of insurance is a distinct and independent contract between the insured and

insurer, and third persons have no right either in a court of euity, or in a court of law, to the proceeds

of it, unless there be some contract of trust, e7pressed or implied between the insured and third

person.O9In this case, no contract of trust, e7pressed or implied e7ists. =e, therefore, agree with the

trial court that no cause of action e7ists in favor of the appellants in so far as the proceeds of

insurance are concerned. The appellantsN claim, if at all, is merely euitable in nature and must bemade effective through Enriue )ora who entered into a contract with the Donifacio Dros. Inc. This

conclusion is deducible not only from the principle governing the operation and effect of insurance

contracts in general, but is clearly covered by the e7press provisions of section 9/ of the Insurance

ct which read!

The insurance shall be applied e7clusively to the proper interests of the person in whose name it is

made unless otherwise specified in the policy.

The policy in uestion has been so framed that O?oss, if any, is payable to H.S. Beyes, Inc.,O which

unmista/+%.

Indeed, according to sec. ':/ of the Insurance ct, a loss may be either total or partial.

ccordingly, the Fudgment appealed from is hereby affirmed, at appellantsN cost.

JUANITA P. PINEDA, a''$'t!d 10 !" )'1and, CRISPIN PINEDA, and LILIA SAYOC,

petitioners, vs. COURT OF APPEALS and TERESITA A. GONALES, a''$'t!d 10 !" )'1and,

FRANCISCO G. GONALES, respondents.

D E C I S I O N

CARPIO, J.:

The -ase

This petition for review on certiorari&'( see ugust '**A in [email protected]. SP o. :+>9' as well as the Besolution dated 0 )arch '**0 denying the

motion for reconsideration. In its assailed decision, the -ourt of ppeals declared void the orders&A( of

the Begional Trial -ourt&0( of -avite -ity dated '/ January '**:, 9 ebruary '**: and A/ pril '**:,

and made the preliminary inFunction permanent. In the first order, the trial court declared that Teresita

. @on3ales, despite notice, failed to appear at the hearing of the motion to surrender Transfer


25/38

-ertificate of Title o. T5'>/+0 and to file opposition to the motion. In the second order, the trial court

declared void the original and owner2s duplicate of Transfer -ertificate of Title o. T5'>/+0 and

ordered the reinstatement of Transfer -ertificate of Title o. T5+A>'. In the third order, the trial court

denied the motions to lift the first order and to reconsider the second order.

The acts

Cn 0 January '*+:, the Spouses Lirgilio and dorita Denite3 #4Spouses Denite36% mortgaged a houseand lot #4Property6% covered by Transfer -ertificate of Title o. T5+A>' #4T-T +A>'6% in favor of Juanita

P. Pineda #4Pineda6% and ?eila P. Sayoc #4Sayoc6%. The real estate mortgage secured the Spouses

Denite32s loan of P:0A,/// with a one5year maturity period.&9( Pineda and Sayoc did not register the

mortgage with the Begister of ;eeds. The Spouses Denite3 delivered the owner2s duplicate of T-T

+A>' to Pineda.

Cn * ovember '*+A, with the consent of Pineda, the Spouses Denite3 sold the house,&>( which was

part of the Property, to Clivia @. )oFica #4)oFica6%. Cn the same date, )oFica filed a petition for the

issuance of a second owner2s duplicate of T-T +A>' alleging that she 4purchased a parcel of land6&8(

and the 4owner2s duplicate copy of T-T o. T5+A>' was lost.6&+(

Cn 8 ;ecember '*+A, the trial court granted the petition. The Begister of ;eeds of -avite -ity issued

the second owner2s duplicate of T-T +A>' in the name of the Spouses Denite3.

Cn ': ;ecember '*+A, the Spouses Denite3 sold the lot&*( covered by T-T +A>' to )oFica. =ith the

registration of the deed of sale and presentation of the second owner2s duplicate of T-T +A>', the

Begister of ;eeds cancelled T-T +A>' and issued Transfer -ertificate of Title o. T5'A'A+ #4T-T

'A'A+6% in the name of )oFica.

Cn :: ebruary '*+9, )oFica obtained a loan of P:*/,/// from Teresita . @on3ales #4@on3ales6%.

)oFica e7ecuted a promissory note and a deed of mortgage over the Property in favor of @on3ales.

@on3ales registered this deed of mortgage with the Begister of ;eeds of -avite -ity who annotatedthe mortgage on T-T 'A'A+ as Entry o. AA:/*.

)eanwhile, on + )ay '*+9, Pineda and Sayoc filed a complaint before the Begional Trial -ourt&'/( of

-avite -ity, doc90, against the Spouses Denite3 and )oFica. The

complaint prayed for the cancellation of the second owner2s duplicate of T-T +A>' and the award of

moral damages and attorney2s fees.

In their answer, the Spouses Denite3 admitted selling to )oFica the Property which was already

subFect to a previous mortgage in favor of Pineda and Sayoc. The Spouses Denite3 claimed that

under theAcno+le"!ment o$ In"e%te"ness,&''( )oFica, with the conformity of Pineda and Sayoc,

agreed to assume the balance of the mortgage debt of the Spouses Denite3 to Pineda and Sayoc.

The Spouses Denite3 denied any '. The Spouses Denite3 prayed for the dismissal of the complaint and the award

of moral damages and attorney2s fees. The Spouses Denite3 also prayed that in case the court would

render Fudgment in favor of Pineda and Sayoc, only )oFica should be held liable.

Cn the other hand, )oFica denied conspiring with the Spouses Denite3 and committing fraud in filing

the petition for the issuance of a second owner2s duplicate of T-T +A>'. )oFica stated that the

Spouses Denite3 sold to her the Property. )oFica claimed that upon the e7ecution of the deed of sale,

the Spouses Denite3 delivered to her the owner2s duplicate of T-T +A>'. However, )oFica alleged that

the owner2s duplicate of T-T +A>' was lost.

)oFica also asserted that she verified with the Begister of ;eeds of -avite -ity the provision in the

deed of sale that the Property was free from all liens and encumbrances and found the same to be

true. )oFica added that on learning of the Spouses Denite32s mortgage with Pineda and Sayoc, she

signed theAcno+le"!ment o$ In"e%te"ness. )oFica contended that since Pineda, for herself and

Sayoc, conformed to this agreement, Pineda and Sayoc had no personality to file the complaint.

)oFica further alleged that Pineda and Sayoc were in estoppel from challenging the validity of the

second owner2s duplicate of T-T +A>' because Pineda and Sayoc, despite notice, failed to oppose


26/38

the reconstitution of the title.

)oFica maintained that the Spouses Denite3 are indispensable parties because T-T +A>' was in their

name. )oFica also asserted that she did not breach theAcno+le"!ment o$ In"e%te"ness since she

had paid the Spouses Denite3 an amount more than their debt to Pineda and Sayoc. )oFica

contended that had the Spouses Denite3 paid the amount to Pineda and Sayoc, there would have

been no obligation to assume. )oFica prayed for the dismissal of the complaint and the award of

moral and e7emplary damages and attorney2s fees.

;uring the pendency of the case, Pineda caused the annotation on '+ ugust '*+> of a notice of lis

pen"enson the original of T-T +A>' with the Begister of ;eeds.

fter trial, the trial court rendered a ;ecision dated '9 June '*+8, the dispositive portion of which

reads!

=HEBECBE, in view of the foregoing, the -ourt hereby renders Fudgment declaring the second

owner2s duplicate of T-T o. T5+A>' of the land records of -avite as null and void and the Begister of

;eeds of -avite -ity is hereby ordered upon payment of the corresponding legal fees the annotation

of this pronouncement in its record and the revival of the first owner2s duplicate with the same faithand credit before its alleged loss. The counterclaim of defendants Denite3es is hereby dismissed. o

pronouncement as to costs.

SC CB;EBE;.&':(

Cn 8 ;ecember '*+8, )oFica defaulted in paying her obligation to @on3ales. Hence, @on3ales

e7traFudicially foreclosed the mortgage. Cn :8 January '*++, @on3ales purchased at public auction

the Property for P0:A,:00.++.

or failure of )oFica to redeem the Property, @on3ales consolidated the title to the Property. Cn :*

)arch '*+*, @on3ales e7ecuted the corresponding ffidavit of -onsolidation.

Cn A/ )arch '*+*, the Begister of ;eeds of -avite -ity cancelled T-T 'A'A+, which was in )oFica2s

name, and issued Transfer -ertificate of Title o. T5'>/+0 #4T-T '>/+06% in the name of @on3ales.

T-T '>/+0 contained Entry o. A99:/, the notice of lis pen"ensdated '+ ugust '*+> in relation to

-ivil -ase o. 0>90.&'A( The Begister of ;eeds annotated on T-T '>/+0 the notice of lis pen"ens,

even though T-T 'A'A+ did not contain such annotation.

)eanwhile, dissatisfied with the trial court2s decision, the Spouses Denite3 and )oFica appealed to the

-ourt of ppeals, doc ;ecember '**', Pineda and Sayoc filed a motion with the trial court for the

issuance of an order reuiring @on3ales to surrender the owner2s duplicate of T-T '>/+0 to theBegister of ;eeds of -avite -ity.

In its Crder dated '/ January '**: #4first order6%, the trial court declared that @on3ales, despite notice,

failed to appear at the hearing and to oppose the motion to surrender T-T '>/+0. In the same order,

the trial court directed @on3ales to file a memorandum. @on3ales received this order on :/ January

'**:.


27/38


28/38

'>/+0 because @on3ales was then out of the country.

ssuming that the trial court could validly act on the motion of Pineda and Sayoc, the -ourt of ppeals

declared that the orders nevertheless contravened Section '/8 of P; '9:*. This provision of law

reuires a hearing before the court can act on a petition to surrender a duplicate certificate of title.

The Issues

Petitioners raise the following issues for resolution!

'. =hether a notice of lis pen"ensbinds a subseuent purchaser of the property to the outcome

of the pending case.

:. =hether T-T 'A'A+ and T-T '>/+0, being derived from the void second owner2s duplicate of

T-T +A>', are also void.

A. =hether a separate action should be filed to cancel T-T '>/+0.

0. =hether @on3ales was an innocent purchaser for value.

9. =hether @on3ales was denied due process of law.

The Buling of the -ourt

=e deny the petition.

;ali"ity o$ -C- /


29/38

duplicate of T-T +A>'.

Therefore, T-T 'A'A+ issued in the name of )oFica is void. However, what is void is the transfer

certificate of title and notthe title over the Property. The title refers to the ownership of the Property

covered by the transfer certificate of title while the transfer certificate of title merely evidences that

ownership. certificate of title is not euivalent to title as the -ourt e7plained in!ee "e# $hen% v.

Court of Appeals!&:'(

777 "he certificate referred to is that docuent issued &y the 'e%ister of Deeds #nown as the

"ransfer Certificate of "itle ("C"). *y title, the law refers to ownership which is represented &y

that docuent. Petitioner apparently confuses certificate with title. Placing a parcel of land under

the mantle of the Torrens system does not mean that ownership thereof can no longer be disputed.

Cwnership is different from a certificate of title. The T-T is only the best proof of ownership of a piece

of land. Desides, the certificate cannot always be considered as conclusive evidence of ownership.

)ere issuance of the certificate of title in the name of any person does not foreclose the possibility that

the real property may be under co5ownership with persons not named in the certificate or that the

registrant may only be a trustee or that other parties may have acuired interest subseuent to the

issuance of the certificate of title. "o repeat, re%istration is not the equivalent of title, &ut is onlythe &est evidence thereof. "itle as a concept of ownership should not &e confused with the

certificate of title as evidence of such ownership althou%h &oth are interchan%ea&le. 777

#Emphasis supplied%

o0ica*s -itle

The prior mortgage of the Property by the Spouses Denite3 to Pineda and Sayoc did not prevent the

Spouses Denite3, as owners of the Property, from selling the Property to )oFica. mortgage is

merely an encumbrance on the property and does not e7tinguish the title of the debtor who does not

lose his principal attribute as owner to dispose of the property.&::( The law even considers void a

stipulation forbidding the owner of the property from alienating the mortgaged immovable.&:A(

Since the Spouses Denite3 were the undisputed owners of the Property, they could validly sell and

deliver the Property to )oFica. The e7ecution of the notari3ed deed of sale between the Spouses

Denite3 and )oFica had the legal effect of actual or physical delivery. Cwnership of the Property

passed from the Spouses Denite3 to )oFica.&:0( The nullity of the second owner2s duplicate of T-T

+A>' did not affect the validity of the sale as between the Spouses Denite3 and )oFica.

)onzales* -itle

fter the sale of the Property to her, )oFica obtained a loan from @on3ales secured by a real estate

mortgage over the Property. @on3ales registered this mortgage on :: ebruary '*+9 with the

Begister of ;eeds who annotated the mortgage on the void T-T 'A'A+ in )oFica2s name. The nullityof T-T 'A'A+ did not automatically carry with it the nullity of the annotation of @on3ales2 mortgage.

The rule is that a mortgage annotated on a void title is valid if the mortgagee registered the mortgage

in good faith.&:9( In *lanco v. +squierdo,&:>( the -ourt held!

That the certificate of title issued in the name of ructuosa Esuierdo is a nullity, the same having

been secured thru fraud, is not here in uestion. The only uestion for determination is whether the

defendant ban< is entitled to the protection accorded to 4innocent purchasers for value6, which phrase,

according to sec. A+ of the ?and Begistration ?aw, includes an innocent ort%a%ee for value. The

uestion, in our opinion, must be answered in the affirmative.

The trial court, in the decision complained of, made no finding that the defendant mortgagee ban< wasa party to the fraudulent transfer of the land to ructuosa Esuierdo. Indeed, there is nothing alleged

in the complaint which may implicate said defendant mortgagee in the fraud, or Fustify a finding that it

acted in bad faith. Cn the other hand, the certificate of title was in the name of the mortgagor

ructuosa Esuierdo when the land was mortgaged by her to the defendant ban


30/38

et al. vs. yroso, *9 Phil., '+9G 9/ Cff. @a3., &'/( 0+A+, Joauin vs. )adrid, et al., '/> Phil., '/>/%.

*ein% thus an innocent ort%a%ee for value, its ri%ht or lien upon the land ort%a%ed ust &e

respected and protected, even if the ort%a%or o&tained her title thereto thru fraud.The remedy

of the persons preFudiced is to bring an action for damages against those causing the fraud, 777.

#Emphasis supplied%

Thus, the annotation of @on3ales2 mortgage on T-T 'A'A+ was valid and operated to bind the

Property and the world, despite the invalidity of T-T 'A'A+.

@on3ales registered her mortgage in good faith. @on3ales had no actual notice of the prior

unregistered mortgage in favor of Pineda and Sayoc. To bind third parties to an unregistered

encumbrance, the law reuires actual notice.&:8( The fact that )oFica, who sold the Property to

@on3ales, had actual notice of the unregistered mortgage did not constitute actual notice to @on3ales,

absent proof that @on3ales herself had actual notice of the prior mortgage. Thus, @on3ales acuired

her rights as a mortgagee in good faith.

=hen )oFica defaulted in paying her debt, @on3ales caused the e7traFudicial foreclosure of the

mortgaged Property. @on3ales purchased the mortgaged Property as the sole bidder at the public

auction sale. or )oFica2s failure to redeem the foreclosed Property within the prescribed period,

@on3ales consolidated her title to the Property. bsent any evidence to the contrary, the sale at public

auction of the Property to @on3ales was valid. Thus, the title or ownership of the Property passed

from )oFica to @on3ales. t this point, therefore, @on3ales became the owner of the Property.

=hen @on3ales purchased the Property at the auction sale, Pineda and Sayoc had already

annotated the lis pen"enson the original of T-T +A>', which remained valid. However, the mortgage

of @on3ales was validly registered prior to the notation of the lis pen"ens. The subseuent annotation

of the lis pen"enscould not defeat the rights of the mortgagee or the purchaser at the auction sale

who derived their rights under a prior mortgage validly registered. The settled rule is that the auction

sale retroacts to the date of the registration of the mortgage,&:+( putting the auction sale beyond the

reach of any intervening lis pen"ens, sale or attachment. s the -ourt e7plained in Caviles, Jr. v.

*autista!&:*(

=e have also consistently ruled that an auction or e7ecution sale retroacts to the date of levy of the

lien of attachment. =hen the subFect property was sold on e7ecution to the petitioners, this sale

retroacted to the date of inscription of petitioners2 notice of attachment on Cctober >, '*+:. The earlier

registration of the petitioners2 levy on preliminary attachment gave them superiority and preference in

rights over the attached property as against respondents.

ccordingly, we rule that the e7ecution sale in favor of the petitioner -aviles spouses was anterior and

superior to the sale of the same property to the respondent Dautista spouses on Cctober '+, '*+:.

The right of petitioners to the surrender of the owner2s duplicate copy of T-T o. 98//> covering the

subFect property for inscription of the certificate of sale, and for the cancellation of said certificate of

title and the issuance of a new title in favor of petitioners cannot be gainsaid.

contrary rule would ma


31/38

Pineda and Sayoc were negligent in not registering their mortgage, which ultimately led to this

controversy. Had Pineda and Sayoc registered their mortgage, their rights as prior mortgagees would

have prevailed over that of @on3ales. Pineda and Sayoc were also negligent in not foreclosing their

mortgage ahead of @on3ales, when they could have done so as early as 0 January '*+A after the

Spouses Denite3 defaulted on their loan.&AA( In contrast, the loan of )oFica fell due only on 8

;ecember '*+8.

Since @on3ales vigilantly e7ercised her right to foreclose the mortgaged Property ahead of Pineda

and Sayoc, @on3ales2 mortgage would still prevail over the mortgage of Pineda and Sayoc even if

@on3ales2 mortgage was not validly registered. The unregistered mortgage of Pineda and Sayoc was

e7tinguished upon foreclosure of @on3ales2 mortgage even assuming for the sa'. The complaintof Pineda and Sayoc simply prayed for the cancellation of the second owner2s duplicate of T-T +A>'

and the award of damages.&A0(

The notice of lis pen"enswould only bind @on3ales to the declaration of nullity of the second owner2s

duplicate of T-T +A>'. @on3ales could not use T-T 'A'A+, as a void issue of the void second

owner2s duplicate of T-T +A>', to secure a new T-T in her name. This is the legal conseuence of

the notice of lis pen"ens, which would have bound @on3ales had the registration of her mortgage

been void. However, the declaration of nullity of T-T 'A'A+ would still not ma


32/38

Ca9)*$' and D&*&"$n& &" a!**!!.

F$*!/&n Ca9at&" &" a!**ant.

CONCEPCION, J.:

The issue before us is whether a personal accident insurance which Oinsures for inFuries andor death

as a result of murder or assault or attempt thereatO is a life insurance, within the purview of Bule A*,

section ':, subdivision #, garnished and levied e7ecution on the

sum of P8,///.//, out of the PA/,///.// a due from the -apital Insurance Surety -o., Inc., to said

defendant, as beneficiary under a personal accident policy issued by said company to defendantNshusband, ?uis )orales, who died, on ugust :>, '*9/, by assassination. Invo.//. Desides, the period for the policy was stipulated

for one year, and considerations as to age, health, occupation and other personal circumstances were

not ta


33/38

granted to it to transact business covers fire, marine, surety, fidelity, accident, motor car, and

miscellaneous insurance, e7cept life insurance. rom this circumstance alone, not to mention many

others, there are abundant indications that there e7ists a fundamental distinction between life

insurance and accident insurance. s counsel for oppositor has clearly pointed out, an accident policy

merely insures the person from inFury and or death resulting from murder, assault, or an attempt

thereat, while in life insurance policy, what is insured is the life of the subFect for a definite number of

years. rom the authorities uoted by the oppositor, this -ourt is fully convinced that an accidentpolicy is fundamentally different from a life insurance policy, especially if this -ourt ta )e. 999.

n insurance on life is a contract by which the insurer, for a stipulated sum, engages to pay a certain

amount of money if another dies within the time limited by the policy. -ason vs. Cwens, :> S. E. 89,

8>, '// @a. '0:.

?ife insurance includes in which the payment of the insurance money is contingent upon the loss of

life. Dowless vs. )utual Den. Health ccident ssNn, -.-.. La. **. :d 00. 0+, 0*.

contract for life insurance is really a contract for insurance for one year in consideration of an

advanced premium, with the right of assured to continue it from year to year upon payment of a

premium as stipulated. )utual ?ife Ins. -o. '// Pa '8:, '+/.

In its broader sense, Olife insuranceO includes accident insurance, since life is insured under either

contract. merican Trust Dan', ''' .?.B.

9*.

1nder statute providing that Nany life insuranceN on life of husband shall insure to benefit of widow and

children e7empt from husbandNs debt, proceeds of policy insuring against death by accident insured to

widowNs benefit free from husbandNs debts. -ode '*A:, D +09>. merican Trust Dan


34/38

O?ife insuranceO includes all policies of insurance in which payment of insurance money is contingent

upon loss of life. . . . Smith vs. Euitable ?ife ssur. Soc. of 1.S., +* S.=. :d '>9, '>8, '>* Tenn. 088.

Insurance policy including a death benefit and a health or accident disability benefit constituted a Olife

insurance policyO within meaning of laws '*:>, c. ''+, S. 'A0, imposing privilege ta7 on insurance

companies with different rates as between life insurance companies and other companies, in view ofprovisions of -ode '*/>, ss :98>, :9*+ #HemingwayNs -ode '*:8, ss 9+A/, 9+9>%, and ?aw '*:0, c.

'*', s I #HemingwayNs -ode '*:8, s 9**9%G it being immaterial that in some policy forms the health

and disability feature was more valuable asent a showing that death provision was inserted to avoid

the higher ta7. 1niversal ?ife Ins. -o. vs. State, ':' So. +0*, +9/, '99 )iss. A9+.O #:9 =ords

Phrases :>/, :>', :>:.%

=hen the application was made, Harris =. Bimmer carried life insurance with the Euitable ?ife

ssurance Society, for M'/,///, payable upon proof of death, with a provision that upon death by

accident the amount of insurance payable would be increased to M:/,///. The plaintiff insisted thatthis was life insurance, a disclosure of which was not called for in uestion '/, while the defendant

insisted it was accident insurance that should have been disclosed and further insisted that, it being a

fact material to the ris< the failure to disclose the policy in the Euitable ?ife ssurance Society

rendered the policy issued to the applicant void. . . .

The court might have gone further and held that the failure of the applicant to characteri3e the

insurance in the Euitable ?ife ssurance Society as accident insurance did not constitute a false

answer to the inuiry of what accident or health insurance he was carrying. The policy in the Euitable

?ife ssurance Society covered loss of life from natural as well as e7ternal and accidental causes, andwas life insurance. The mere addition of the double indemnity clause providing for increased

insurance upon proof of death by accident did not divest the policy of its character of insurance on life,

or ma, '9' .=. 9*A, ?.B.. '*'>, 089G Uimmer vs. -entral ccidental -o., :/8 Pa. 08:, 9> . '//AG

=right vs. raternities Health ccident ssNn. '/8 )e. 0'+, 8+. 089, A: ?.B.. #.S.%0>'G

)etropolitan ?ife Ins. -o. vs. Ins. -omNr :/+ )ass. A+>, *0 .E. 088G Standard ?ife ccident Ins.

-o. vs. -aroll, +> . 9>8, 0' ?.B.. '*0G =ahl vs. Interstate Dusiness )enNs ccident ssNn :/' IowaG

'A99, :/8 .=. A*9, 9/ .?.B. 'A88.O #Provident ?ife ccident Ins. -o. vs. Bimmer, ': S. =. :d

Series, A>9, A>8.%

or this reason, and because the above5uoted provision of the Bules of -ourt ma


35/38

enactment of this statute would not be advanced by the construction of the law upon which the

petitioners insist. #merican Trust Dan0.%

=herefore, the order appealed from is reversed, and the garnishment in dispute hereby set aside and

uashed, with the costs of this instance against plaintiff rancisca @allardo. It is so ordered.

7ii

7iii

7iv

7v

7vi

7vii

7viiiSUN INSURANCE OFFICE, LTD., petitioner,

vs.

THE HON. COURT OF APPEALS and NERISSA LIM, respondents.

CRU, J.:

The petitioner issued Personal ccident Policy o. /9>+8 to eli7 ?im, Jr. with a face value of

P://,///.//. Two months later, he was dead with a bullet wound in his head. s beneficiary, his wife

erissa ?im sought payment on the policy but her claim was reFected. The petitioner agreed that there

was no suicide. It argued, however that there was no accident either.

Pilar alagon, ?imNs secretary, was the only eyewitness to his death. It happened on Cctober >, '*+:,

at about '/ oNcloc< in the evening, after his motherNs birthday party. ccording to alagon, ?im was in

a happy mood #but not drun


36/38

The widow sued the petitioner in the Begional Trial -ourt of Uamboanga -ity and was sustained.

The petitioner was sentenced to pay her P://,///.//, representing the face value of the policy, with

interest at the legal rateG P'/,///.// as moral damagesG P9,///.// as e7emplary damagesG

P9,///.// as actual and compensatory damagesG and P9,///.// as attorneyNs fees, plus the costs of

the suit. This decision was affirmed on appeal, and the motion for reconsideration was denied. The

petitioner then came to this -ourt to fault the -ourt of ppeals for approving the payment of the claim

and the award of damages.

The term OaccidentO has been defined as follows!

The words OaccidentO and OaccidentalO have never acuired any technical signification in law, and

when used in an insurance contract are to be construed and considered according to the ordinary

understanding and common usage and speech of people generally. In5substance, the courts are

practically agreed that the words OaccidentO and OaccidentalO mean that which happens by chance or

fortuitously, without intention or design, and which is une7pected, unusual, and unforeseen. The

definition that has usually been adopted by the courts is that an accident is an event that ta


37/38

dangerous and should therefore be handled cautiously in every case.

That posture is arguable. Dut what is not is that, as the secretary testified, ?im had removed the

maga3ine from the gun and believed it was no longer dangerous. He e7pressly assured her that the

gun was not loaded. It is submitted that ?im did not willfully e7pose himself to needless peril when he

pointed the gun to his temple because the fact is that he thought it was not unsafe to do so. The act

was precisely intended to assure alagon that the gun was indeed harmless.

The contrary view is e7pressed by the petitioner thus!

ccident insurance policies were never intended to reward the insured for his tendency to show off or

for his miscalculations. They were intended to provide for contingencies. Hence, when I miscalculate

and Fump from the Wue3on Dridge into the Pasig Biver in the belief that I can overcome the current, I

have wilfully e7posed myself to peril and must accept the conseuences of my act. If I drown I cannot

go to the insurance company to as< them to compensate me for my failure to swim as well as I

thought I could. The insured in the case at bar deliberately put the gun to his head and pulled the

trigger. He wilfully e7posed himself to peril.

The -ourt certainly agrees that a drowned man cannot go to the insurance company to as< forcompensation. That might frighten the insurance people to death. =e also agree that under the

circumstances narrated, his beneficiary would not be able to collect on the insurance policy for it is

clear that when he braved the currents below, he "eli%erately e7posed himself to a no+n peril.

The private respondent maintains that ?im did not. That is where she says the analogy fails. The

petitionerNs hypothetical swimmer


38/38

e7penses, the law deems the award of costs as sufficient. =

=HEBECBE, the challenged decision of the -ourt of ppeals is IB)E; in so far as it holds the

petitioner liable to the private respondent in the sum of P://,///.// representing the face value of the

insurance contract, with interest at the legal rate from the date of the filing of the complaint until the full

amount is paid, but )C;IIE; with the deletion of all awards for damages, including attorneyNs fees,

e7cept the costs of the suit.

SC CB;EBE;.

7i7

77

77i

77ii

77iii

77iv

Insurance Fulltext Part 1

Documents

Transcript of Insurance Fulltext Part 1