Insurance Last Batch 1

INSURANCE LAST BATCH 1
[G.R. No. 103883. November 14, 1996.] ordinary life insurance where the insured's death,
regardless of the cause thereof, would normally be
JACQUELINE JIMENEZ VDA. DE GABRIEL vs. compensable. The latter is akin in property insurance to an
COURT OF APPEALS and FORTUNE INSURANCE & "all risk" coverage where the insured, on the
SURETY COMPANY, INC. aspect of burden of proof, has merely to show the
condition of the property insured when the policy attaches
1. MERCANTILE LAW; INSURANCE; SECTION 384 OF THE and the fact ofloss or damage during the period of the policy
INSURANCE CODE; PRIVATE RESPONDENT CORRECTLY and where, thereafter, the burden would be on the insurer to
INVOKED "PRESCRIPTION" UNDER SAID SECTION 384; show any "excluded peril." When, however, the insured risk is
REASON. On the issue of "prescription," private respondent specified, like in the case before us, it lies with the
correctly invoked Section 384 of the Insurance Code; viz.: claimant of the insurance proceeds to initially prove that the
"Sec. 384. Any person having any claim upon the policy loss is caused by the covered peril.
issued pursuant to this chapter shall, without any unnecessary
delay, present to the insurance company concerned a written 3. REMEDIAL LAW; CIVIL PROCEDURE; VERIFICATION;
notice of claim setting forth the nature, extent and VERIFICATION IS A FORMAL, NOT JURISDICTIONAL,
duration of the injuries sustained as certified by a duly REQUIREMENT AND MAINLY INTENDED TO SECURE AN
licensed physician. Notice of claim must be filed within six ASSURANCE THAT THE MATTER ALLEGED ARE DONE IN GOOD
months from date of the accident, otherwise, the claim shall FAITH OR ARE TRUE AND CORRECT. Petitioner argues that
be deemed waived. Action or suit for recovery of damage due private respondent must be deemed to have waived its right
to loss or injury must be brought, in proper cases, with the to controvert the claim, that is, to show that the
Commissioner or the Courts within one year from denial of the cause of death is an excepted peril, by failing to have its
claim, otherwise, the claimant's right of action shall answers (to the Request for Admission sent by petitioner) duly
prescribe." The notice of death was given to private verified. It is true that a matter of which a written request for
respondent, concededly, more than a year after the admission is made shall be deemed impliedly admitted
death of petitioner's husband. Private respondent, in invoking "unless, within a period designated in the request, which shall
prescription, was not referring to the one-year period from the not be less than ten (10) days after service thereof, or within
denial of the claim within which to file an action against an such further time as the court may allow on motion and
insurer but obviously to the written notice of claim that had to notice, the party to whom the request is directed serves upon
be submitted within six months from the timeof the accident. the party requesting the admission a sworn statement either
denying specifically the matters of which an admission is
2. ID.; ACCIDENT INSURANCE; IN AN ACCIDENT INSURANCE requested or setting forth in detail the reasons why he cannot
(UNLIKE IN AN ORDINARY LIFE INSURANCE), THE INSURED'S truthfully either admit or deny those matters"; however, the
BENEFICIARY HAS THE BURDEN OF PROOF IN verification, like in most cases required by the
DEMONSTRATING THAT THE CAUSE OF DEATH IS DUE TO THE rules of procedure, is a formal, not jurisdictional, requirement,
COVERED PERIL. The insurance policy expressly provided and mainly intended to secure an assurance that matters
that to be compensable, the injury or death should be caused which are alleged are done in good faith or are true and
by "violent accidental external and visible means." In correct and not of mere speculation. When circumstances
attempting to prove the cause of her husband's death, all that warrant, the court may simply order the
petitioner could submit were a letter sent to her by her correction of unverified pleadings or act on it and waive strict
husband's co-worker, stating that Gabriel died when he tried compliance with the rules in order that the ends of justice
to haul water out of a tank while its submerged motor was still may thereby be served. In the case of answers to written
functioning, and petitioner's sinumpaang salaysay which requests for admission particularly, the courtcan allow the
merely confirmed the receipt and stated contents of the letter. party making the admission, whether made expressly or
Said the appellate court in this regard: ". . . . It must be noted deemed to have been made impliedly, "to withdraw or amend
that the only evidence presented by her to prove the it upon such terms as may be just."
circumstances surrounding her husband's death were her
purported affidavit and the letter allegedly written by the The petition for review on certiorari in this case seeks the
deceased co-worker in Iraq. The said affidavit however suffers reversal of the decision 1 of the Court of Appeals setting aside
from procedural infirmity as it was not even testified to or the judgment of the Regional Trial Court ofManila, Branch 55,
identified by the affiant (plaintiff-appellant) herself. This self- which has ordered private respondent Fortune Insurance &
serving affidavit therefore is a mere hearsay under the rules, . Surety Company, Inc., to pay petitioner Jacqueline
. . . "In like manner, the letter allegedly written by the Jimenez vda. de Gabriel, the surviving spouse and beneficiary
deceased's co-worker which was never identified to in an accident (group) insurance of her deceased husband,
in court by the supposed author, suffers from the same defect the amount of P100,000.00, plus legal interest.
as the affidavit of the plaintiff-appellant." Not one of the other
documents submitted, to wit, the POEA decision, dated 06 Marcelino Gabriel, the insured, was employed by Emerald
June 1984, the death certificate issued by the Construction & Development Corporation ("ECDC") at its
Ministry of Health of Iraq and the NBI autopsy report, could construction project in Iraq. He was covered by a personal
give any probative value to petitioner's claim. The POEA accident insurance in the amount of P100,000.00 under a
decision did not make any categorical holding on the specific group policy 2 procured from private respondent by ECDC for
cause of Gabriel's death. Neither did the death certificate its overseas workers. The insured risk was for "(b)odily injury
issued by the health authorities in Iraq nor the NBI autopsy caused by violent accidental external and visible means which
report provide any clue on the cause of death. All that injury (would) solely and independently of any other
appeared to be clear was the fact of Gabriel's demise on 22 cause" 3 result in death or disability.
May 1982 in Iraq. Evidence, in fine, is utterly wanting to
establish that the insured suffered from an accidental death, On 22 May 1982, within the life of the policy, Gabriel died in
the risk covered by the policy. In an accident insurance, the Iraq. A year later, or on 12 July 1983, ECDC reported Gabriel's
insured's beneficiary has the burden of proof in demonstrating death to private respondent by telephone. 4Among the
that the cause of death is due to the covered peril. Once that documents thereafter submitted to private respondent were a
fact is established, the burden then shifts to the insurer to copy of the death certificate 5 issued by the
show any excepted peril that may have been stipulated by the Ministry of Health of the Republic of Iraq which stated
parties. An "accident insurance" is not thus to be likened to an
"REASON OF DEATH: UNDER EXAMINATION NOW NOT YET On the issue of "prescription," private respondent correctly
KNOWN " invoked Section 384 of the Insurance Code; viz:
and an autopsy report 7 of the National "Sec. 384. Any person having any claim upon the policy
Bureau of Investigation ("NBI") to the effect that "(d)ue to issued pursuant to this chapter shall, without any unnecessary
advanced state of postmortem decomposition, cause of death delay, present to the insurance company concerned a written
(could) not be determined." 8 Private respondent referred the notice of claim setting forth the nature, extent and
insurance claim to Mission Adjustment Service, Inc. duration of the injuries sustained as certified by a duly
licensed physician. Notice of claim must be filed within six
Following a series of communications between petitioner and months from date of the accident, otherwise, the claim shall
private respondent, the latter, on 22 September 1983, be deemed waived. Action or suit for recovery of damage due
ultimately denied the claim of ECDC on the to loss or injury must be brought, in proper cases, with the
groundof prescription. 9 Petitioner went to the Regional Commissioner or the Courts within one year from denial of the
Trial Court of Manila. In her complaint against ECDC and claim, otherwise, the claimant's right of action shall
private respondent, she averred that her husband prescribe."
died ofelectrocution while in the performance of his work and
prayed for the recovery of P100,000.00 for insurance The notice of death was given to private respondent,
indemnification and of various other sums by way ofactual, concededly, more than a year after the death of petitioner's
moral, and exemplary damages, plus attorney's fees and husband. Private respondent, in invoking prescription, was not
costs of suit. referring to the one-year period from the denial of the claim
within which to file an action against an insurer but obviously
Private respondent filed its answer, which was not verified, to the written noticeof claim that had to be submitted within
admitting the genuineness and due execution of the insurance six months from the time of the accident.
policy; it alleged, however, that since both the death
certificate issued by the Iraqi Ministry of Health and the Petitioner argues that private respondent must be deemed to
autopsy report of the NBI failed to disclose the have waived its right to controvert the claim, that is, to show
cause of Gabriel's death, it denied liability under the policy. In that the cause of death is an excepted peril, by failing to have
addition, private respondent raised the its answers (to the Request for Admission sent by petitioner)
defense of "prescription," invoking Section 384 10 of the duly verified. It is true that a matter of which a written request
Insurance Code. Later, private respondent filed an amended for admission is made shall be deemed impliedly admitted
answer, still unverified, reiterating its original defenses but, "unless, within a period designated in the request, which shall
this time, additionally putting up a counterclaim and a not be less than ten (10) days after service thereof, or within
crossclaim. such further time as the court may allow on motion and
notice, the party to whom the request is directed serves upon
The trial court dismissed the case against ECDC for the the party requesting the admission a sworn statement either
failure of petitioner to take steps to cause the service of the denying specifically the matters of which an admission is
fourth alias summons on ECDC. The dismissal was without requested or setting forth in detail the reasons why he cannot
prejudice. truthfully either admit or deny those matters;" 14 however,
the verification, like in most cases required by the
The case proceeded against private respondent alone. On 28 rules of procedure, is a formal, not jurisdictional, requirement,
May 1987, the trial court rendered its decision 11 in favor and mainly intended to secure an assurance that matters
(partly) of petitioner's claim. In arriving at its conclusion, the which are alleged are done in good faith or are true and
trial court held that private respondent was deemed to have correct and not of mere speculation. When circumstances
waived the defense, i.e., that the cause of Gabriel's death was warrant, the court may simply order the
not covered by the policy, when the latter failed to impugn by correction of unverified pleadings or act on it and waive strict
evidence petitioner's averment on the matter. With regard to compliance with the rules in order that the ends of justice
the defense of prescription, the court considered the may thereby be served. 15 In the case of answers to written
complaint to have been timely filed or within one (1) year requests for admission particularly, the court can allow the
from private respondent's denial of the claim. party making the admission, whether made expressly or
deemed to have been made impliedly, "to withdraw or amend
Petitioner and private respondent both appealed to
it upon such terms as may be just." 16
the Court of Appeals. Petitioner contended that the
lower court should have awarded all the claims she had asked The appellate court acted neither erroneously nor with grave
for. Private respondent asserted, on its part, that the abuse of discretion when it seconded the court a quo and
lower court erred in ruling (a) that the insurer had waived the ruled:
defense that Gabriel's death was not caused by the insured
peril ("violent accidental external and visible means") "As to the allegation of the plaintiff-appellant that the matters
specified in the policy and (b) that the cause of action had not requested by her to be admitted by the defendant-appellant
prescribed. under the Request for Admission were already deemed
admitted by the latter for its failure to answer it under oath,
The Court of Appeals, on 18 September 1991, reversed the has already been properly laid to rest when the lower court in
decision of the lower court. The appellate court held that its Order of May 28, 1987 correctly ruled:
petitioner had failed to substantiate her allegation that her
husband's death was caused by a risk insured against. The "At the outset, it must be stressed that the defendant indeed
appellate court observed that the only evidence presented by filed a written answer to the request for
petitioner, in her attempt to show the circumstances that led admission, sans verification. The case of Motor Service Co.,
to the death of the insured, were her own affidavit and a letter Inc. vs. Yellow Taxicab Co., Inc., et al.may not therefore be
allegedly written by a co-worker of the deceased in Iraq controlling, or actually opposite. In said case, there was an
which, unfortunately for her, were held to be both hearsay. 12 absolute failure on the part of the defendant to answer the
request for admission, and thus the court was justified in
The motion for reconsideration was denied. 13 rendering a summary judgment. Here, however, as clearly
intimated elsewhere above, the defendant answered in writing
Petitioner's recourse to this Court must also fail.
practically every question posed in the request for admission. While petitioner did fail in substantiating her allegation that
The Court believes, under the peculiar circumstance, that the the death of her husband was due to an accident, considering,
more controlling jurisprudence on the matter would be those however, the uncertainty on the real cause ofdeath, private
cited by the defendant in its memorandum, particularly the respondent might find its way clear into still taking a second
case of Quimpovs. de la Victoria, 46 SCRA 139.' look on the matter and perhaps help ease the
load of petitioner's loss. WHEREFORE, the decision appealed
"Prescinding from the foregoing, there is absolutely no basis in from is AFFIRMED. No costs.
fact and in law for the lower court to hold that the appellant
insurance company was deemed to have waived the defense, [G.R. No. 138060. September 1, 2004.]
that the death of plaintiff-appellant's husband was not caused
by violent accidental external and visible means' as WILLIAM TIU, doing business under the name and style
contemplated in the insurance policy. The Death Certificate of D Rough Riders, and VIRGILIO TE LASPIAS vs.
(Exh. 9) and the Autopsy Report (Exh. 10), more than PEDRO A. ARRIESGADO, BENJAMIN CONDOR, SERGIO
controverted the allegation of the plaintiff-appellant as to the PEDRANO and PHILIPPINE PHOENIX SURETY AND
cause of death of her husband." 17 INSURANCE, INC
The insurance policy expressly provided that to be This is a petition for review on certiorari under Rule 45 of the
compensable, the injury or death should be caused by "violent Rules of Court from the Decision 1 of the Court of Appeals in
accidental external and visible means." In attempting to prove CA-G.R. CV No. 54354 affirming with modification the
the cause of her husband's death, all that petitioner could Decision 2 of the Regional Trial Court, 7th Judicial Region,
submit were a letter sent to her by her husband's co-worker, Cebu City, Branch 20, in Civil Case No. CEB-5963 for breach of
stating that Gabriel died when he tried to haul water out of a contract of carriage, damages and attorneys fees, and the
tank while its submerged motor was still functioning, 18 and Resolution dated February 26, 1999 denying the motion for
petitioner's sinumpaang salaysay 19 which merely confirmed reconsideration thereof.
the receipt and stated contents of the letter. Said the
The following facts are undisputed:
appellate court in this regard.
At about 10:00 p.m. of March 15, 1987, the cargo truck
". . . It must be noted that the only evidence presented by her
marked Condor Hollow Blocks and General Merchandise
to prove the circumstances surrounding her husband's death
bearing plate number GBP-675 was loaded with firewood in
were her purported affidavit and the letter allegedly written
Bogo, Cebu and left for Cebu City. Upon reaching Sitio Aggies,
by the deceased co-worker in Iraq. The said affidavit however
Poblacion, Compostela, Cebu, just as the truck passed over a
suffers from procedural infirmity as it was not even testified to
bridge, one of its rear tires exploded. The driver, Sergio
or identified by the affiant (plaintiff-appellant) herself. This
Pedrano, then parked along the right side of the national
self-serving affidavit therefore is a mere hearsay under the
highway and removed the damaged tire to have it vulcanized
rules, . . . xxx xxx xxx
at a nearby shop, about 700 meters away. 3 Pedrano left his
"In like manner, the letter allegedly written by the deceased's helper, Jose Mitante, Jr. to keep watch over the stalled vehicle,
co-worker which was never identified to in court by the and instructed the latter to place a spare tire six fathoms
supposed author, suffers from the same defect as the away4 behind the stalled truck to serve as a warning for
affidavit of the plaintiff-appellant." 20 oncoming vehicles. The trucks tail lights were also left on. It
was about 12:00 a.m., March 16, 1987.
Not one of the other documents submitted, to wit, the POEA
decision, dated 06 June 1984, 21 the death certificate issued At about 4:45 a.m., D Rough Riders passenger bus with plate
by the Ministry of Health of Iraq and the NBI autopsy number PBP-724 driven by Virgilio Te Laspias was cruising
report, 22 could give any probative value to petitioner's claim. along the national highway of Sitio Aggies, Poblacion,
The POEA decision did not make any categorical holding on Compostela, Cebu. The passenger bus was also bound for
the specific cause of Gabriel's death. Neither did the death Cebu City, and had come from Maya, Daanbantayan, Cebu.
certificate issued by the health authorities in Iraq nor the NBI Among its passengers were the Spouses Pedro A. Arriesgado
autopsy report provide any clue on the cause of death. All that and Felisa Pepito Arriesgado, who were seated at the right
appeared to be clear was the fact of Gabriel's demise on 22 side of the bus, about three (3) or four (4) places from the
May 1982 in Iraq. front seat. cAEaSC
Evidence, in fine, is utterly wanting to establish that the As the bus was approaching the bridge, Laspias saw the
insured suffered from an accidental death, the risk covered by stalled truck, which was then about 25 meters away. 5 He
the policy. In an accident insurance, the insured's beneficiary applied the breaks and tried to swerve to the left to avoid
has the burden of proof in demonstrating that the hitting the truck. But it was too late; the bus rammed into the
cause of death is due to the covered peril. Once the fact is trucks left rear. The impact damaged the right side of the bus
established, the burden then shifts to the insurer to show any and left several passengers injured. Pedro Arriesgado lost
excepted peril that may have been stipulated by the parties. consciousness and suffered a fracture in his right colles. 6 His
An "accident insurance" is not thus to be likened to an wife, Felisa, was brought to the Danao City Hospital. She was
ordinary life insurance where the insured's death, later transferred to the Southern Island Medical Center where
regardless of the cause thereof, would normally be she died shortly thereafter. 7
compensable. The latter is akin in property insurance to an
Respondent Pedro A. Arriesgado then filed a complaint for
"all risk" coverage where the insured, on the
breach of contract of carriage, damages and attorneys fees
aspect of burden of proof, has merely to show the
before the Regional Trial Court of Cebu City, Branch 20,
condition of the property insured when the policy attaches
against the petitioners, D Rough Riders bus operator William
and the fact of loss or damage during the period of the policy
Tiu and his driver, Virgilio Te Laspias on May 27, 1987. The
and where, thereafter, the burden would be on the insurer to
respondent alleged that the passenger bus in question was
show any "excluded peril." When, however, the insured risk is
cruising at a fast and high speed along the national road, and
specified, like in the case before us, it lies with the
that petitioner Laspias did not take precautionary measures
claimant of the insurance proceeds to initially prove that the
to avoid the accident. 8 Thus:
loss is caused by the covered peril.
6. That the accident resulted to the death of the plaintiffs head-on, but despite his efforts to avoid damage to property
wife, Felisa Pepito Arriesgado, as evidenced by a Certificate of and physical injuries on the passengers, the right side portion
Death, a xerox copy of which is hereto attached as integral of the bus hit the cargo trucks left rear. The petitioners
part hereof and marked as ANNEX A, and physical injuries further alleged, thus:
to several of its passengers, including plaintiff himself who
suffered a COLLES FRACTURE RIGHT, per Medical 5. That the cargo truck mentioned in the aforequoted
Certificate, a xerox copy of which is hereto attached as paragraph is owned and registered in the name of the third-
integral part hereof and marked as ANNEX B hereof. party defendant Benjamin Condor and was left unattended by
its driver Sergio Pedrano, one of the third-party defendants, at
7. That due to the reckless and imprudent driving by the time of the incident;
defendant Virgilio Te Laspias of the said Rough Riders
passenger bus, plaintiff and his wife, Felisa Pepito Arriesgado, 6. That third-party defendant Sergio Pedrano, as driver of the
failed to safely reach their destination which was Cebu City, cargo truck with marked (sic) Condor Hollow Blocks &
the proximate cause of which was defendant-drivers failure to General Merchandise, with Plate No. GBP-675 which was
observe utmost diligence required of a very cautious person recklessly and imprudently parked along the national highway
under all circumstances. of Compostela, Cebu during the vehicular accident in
question, and third-party defendant Benjamin Condor, as the
8. That defendant William Tiu, being the owner and operator registered owner of the cargo truck who failed to exercise due
of the said Rough Riders passenger bus which figured in the diligence in the selection and supervision of third-party
said accident, wherein plaintiff and his wife were riding at the defendant Sergio Pedrano, are jointly and severally liable to
time of the accident, is therefore directly liable for the breach the third-party plaintiffs for whatever liability that may be
of contract of carriage for his failure to transport plaintiff and adjudged against said third-party plaintiffs or are directly
his wife safely to their place of destination which was Cebu liable of (sic) the alleged death of plaintiffs wife;
City, and which failure in his obligation to transport safely his
passengers was due to and in consequence of his failure to 7. That in addition to all that are stated above and in the
exercise the diligence of a good father of the family in the answer which are intended to show reckless imprudence on
selection and supervision of his employees, particularly the part of the third-party defendants, the third-party plaintiffs
defendant-driver Virgilio Te Laspias. 9 hereby declare that during the vehicular accident in question,
third-party defendant was clearly violating Section 34, par. (g)
The respondent prayed that judgment be rendered in his favor of the Land Transportation and Traffic Code . . . xxx xxx xxx
and that the petitioners be condemned to pay the following
damages: 10. That the aforesaid passenger bus, owned and operated by
third-party plaintiff William Tiu, is covered by a common
1). To pay to plaintiff, jointly and severally, the amount of carrier liability insurance with Certificate of Cover No. 054940
P30,000.00 for the death and untimely demise of plaintiffs issued by Philippine Phoenix Surety and Insurance, Inc., Cebu
wife, Felisa Pepito Arriesgado; City Branch, in favor of third-party plaintiff William Tiu which
covers the period from July 22, 1986 to July 22, 1987 and that
2). To pay to plaintiff, jointly and severally, the amount of the said insurance coverage was valid, binding and subsisting
P38,441.50, representing actual expenses incurred by the during the time of the aforementioned incident (Annex A as
plaintiff in connection with the death/burial of plaintiffs wife; part hereof);
3). To pay to plaintiff, jointly and severally, the amount of 11. That after the aforesaid alleged incident, third-party
P1,113.80, representing medical/hospitalization expenses plaintiff notified third-party defendant Philippine Phoenix
incurred by plaintiff for the injuries sustained by him; EDaHAT Surety and Insurance, Inc., of the alleged incident hereto
mentioned, but to no avail;
4). To pay to plaintiff, jointly and severally, the amount of
P50,000.00 for moral damages; 12. That granting, et arguendo et arguendi, if herein third-
party plaintiffs will be adversely adjudged, they stand to pay
5). To pay to plaintiff, jointly and severally, the amount of damages sought by the plaintiff and therefore could also look
P50,000.00 by way of exemplary damages; up to the Philippine Phoenix Surety and Insurance, Inc., for
contribution, indemnification and/or reimbursement of any
6). To pay to plaintiff, jointly and severally, the amount of
liability or obligation that they might [be] adjudged per
P20,000.00 for attorneys fees;
insurance coverage duly entered into by and between third-
7). To pay to plaintiff, jointly and severally, the amount of party plaintiff William Tiu and third-party defendant Philippine
P5,000.00 for litigation expenses. Phoenix Surety and Insurance, Inc.; . . . 12
PLAINTIFF FURTHER PRAYS FOR SUCH OTHER RELIEFS AND The respondent PPSII, for its part, admitted that it had an
REMEDIES IN LAW AND EQUITY. 10 existing contract with petitioner Tiu, but averred that it had
already attended to and settled the claims of those who were
The petitioners, for their part, filed a Third-Party injured during the incident. 13 It could not accede to the claim
Complaint 11 on August 21, 1987 against the following: of respondent Arriesgado, as such claim was way beyond the
respondent Philippine Phoenix Surety and Insurance, Inc. scheduled indemnity as contained in the contract of
(PPSII), petitioner Tius insurer; respondent Benjamin Condor, insurance. 14
the registered owner of the cargo truck; and respondent
Sergio Pedrano, the driver of the truck. They alleged that After the parties presented their respective evidence, the trial
petitioner Laspias was negotiating the uphill climb along the court ruled in favor of respondent Arriesgado. The dispositive
national highway of Sitio Aggies, Poblacion, Compostela, in a portion of the decision reads:
moderate and normal speed. It was further alleged that the
WHEREFORE, in view of the foregoing, judgment is hereby
truck was parked in a slanted manner, its rear portion almost
rendered in favor of plaintiff as against defendant William Tiu
in the middle of the highway, and that no early warning
ordering the latter to pay the plaintiff the following amounts:
device was displayed. Petitioner Laspias promptly applied
the brakes and swerved to the left to avoid hitting the truck
1. The sum of FIFTY THOUSAND PESOS (P50,000.00) as moral The appellate court rendered judgment affirming the trial
damages; courts decision with the modification that the awards for
moral and exemplary damages were reduced to P25,000. The
2. The sum of FIFTY THOUSAND PESOS (P50,000.00) as dispositive portion reads: HDTcEI
exemplary damages;
WHEREFORE, the appealed Decision dated November 6, 1995
3. The sum of THIRTY-EIGHT THOUSAND FOUR HUNDRED is hereby MODIFIED such that the awards for moral and
FORTY-ONE PESOS (P38,441.00) as actual damages; exemplary damages are each reduced to P25,000.00 or a total
of P50,000.00 for both. The judgment is AFFIRMED in all other
4. The sum of TWENTY THOUSAND PESOS (P20,000.00) as respects. SO ORDERED. 18
attorneys fees;
According to the appellate court, the action of respondent
5. The sum of FIVE THOUSAND PESOS (P5,000.00) as costs of Arriesgado was based not on quasi-delict but on breach of
suit; contract of carriage. As a common carrier, it was incumbent
upon petitioner Tiu to prove that extraordinary diligence was
SO ORDERED. 15
observed in ensuring the safety of passengers during
According to the trial court, there was no dispute that transportation. Since the latter failed to do so, he should be
petitioner William Tiu was engaged in business as a common held liable for respondent Arriesgados claim. The CA also
carrier, in view of his admission that D Rough Rider ruled that no evidence was presented against the respondent
passenger bus which figured in the accident was owned by PPSII, and as such, it could not be held liable for respondent
him; that he had been engaged in the transportation business Arriesgados claim, nor for contribution, indemnification
for 25 years with a sole proprietorship; and that he owned 34 and/or reimbursement in case the petitioners were adjudged
buses. The trial court ruled that if petitioner Laspias had not liable.
been driving at a fast pace, he could have easily swerved to
The petitioners now come to this Court and ascribe the
the left to avoid hitting the truck, thus, averting the
following errors committed by the appellate court:
unfortunate incident. It then concluded that petitioner
Laspias was negligent. I. THE HONORABLE COURT OF APPEALS ERRED IN NOT
DECLARING RESPONDENTS BENJAMIN CONDOR AND SERGIO
The trial court also ruled that the absence of an early warning
PEDRANO GUILTY OF NEGLIGENCE AND HENCE, LIABLE TO
device near the place where the truck was parked was not
RESPONDENT PEDRO A. ARRIESGADO OR TO PETITIONERS
sufficient to impute negligence on the part of respondent
FOR WHATEVER LIABILITY THAT MAY BE ADJUDGED AGAINST
Pedrano, since the tail lights of the truck were fully on, and
THEM.
the vicinity was well lighted by street lamps. 16 It also found
that the testimony of petitioner Tiu, that he based the II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING
selection of his driver Laspias on efficiency and in-service PETITIONERS GUILTY OF NEGLIGENCE AND HENCE, LIABLE TO
training, and that the latter had been so far an efficient and RESPONDENT PEDRO A. ARRIESGADO.
good driver for the past six years of his employment, was
insufficient to prove that he observed the diligence of a good III. THE HONORABLE COURT OF APPEALS ERRED IN FINDING
father of a family in the selection and supervision of his PETITIONER WILLIAM TIU LIABLE FOR EXEMPLARY DAMAGES,
employees. ATTORNEYS FEES AND LITIGATION EXPENSES.
After the petitioners motion for reconsideration of the said IV. THE HONORABLE COURT OF APPEALS ERRED IN NOT
decision was denied, the petitioners elevated the case to the FINDING RESPONDENT PHILIPPINE PHOENIX SURETY AND
Court of Appeals on the following issues: INSURANCE, INC. LIABLE TO RESPONDENT PEDRO A.
ARRIESGADO OR TO PETITIONER WILLIAM TIU. 19
I WHETHER THIRD PARTY DEFENDANT SERGIO PEDRANO WAS
RECKLESS AND IMPRUDENT WHEN HE PARKED THE CARGO According to the petitioners, the appellate court erred in
TRUCK IN AN OBLIQUE MANNER; failing to appreciate the absence of an early warning device
and/or built-in reflectors at the front and back of the cargo
II WHETHER THE THIRD PARTY DEFENDANTS ARE JOINTLY AND truck, in clear violation of Section 34, par. (g) of the Land
SEVERALLY LIABLE DIRECTLY TO PLAINTIFF-APPELLEE OR TO Transportation and Traffic Code. They aver that such violation
DEFENDANTS-APPELLANTS FOR WHATEVER LIABILITY THAT is only a proof of respondent Pedranos negligence, as
MAY BE ADJUDGED TO THE SAID DEFENDANTS-APPELLANTS; provided under Article 2185 of the New Civil Code. They also
question the appellate courts failure to take into account that
III WHETHER DEFENDANT-APPELLANT VIRGILIO TE LASPIAS
the truck was parked in an oblique manner, its rear portion
WAS GUILTY OF GROSS NEGLIGENCE;
almost at the center of the road. As such, the proximate cause
IV WHETHER DEFENDANT-APPELLANT WILLIAM TIU HAD of the incident was the gross recklessness and imprudence of
EXERCISED THE DUE DILIGENCE OF A GOOD FATHER OF A respondent Pedrano, creating the presumption of negligence
FAMILY IN THE SELECTION AND SUPERVISION OF HIS DRIVERS; on the part of respondent Condor in supervising his
employees, which presumption was not rebutted. The
V GRANTING FOR THE SAKE OF ARGUMENT THAT DEFENDANT- petitioners then contend that respondents Condor and
APPELLANT WILLIAM TIU IS LIABLE TO PLAINTIFF-APPELLEE, Pedrano should be held jointly and severally liable to
WHETHER THERE IS LEGAL AND FACTUAL BASIS IN AWARDING respondent Arriesgado for the payment of the latters claim.
EXCESSIVE MORAL DAMAGES, EX[E]MPLARY DAMAGES,
ATTORNEYS FEES AND LITIGATION EXPENSES TO PLAINTIFF- The petitioners, likewise, aver that expert evidence should
APPELLEE; have been presented to prove that petitioner Laspias was
driving at a very fast speed, and that the CA could not reach
VI WHETHER THIRD PARTY DEFENDANT PHILIPPINE PHOENIX such conclusion by merely considering the damages on the
SURETY AND INSURANCE, INC. IS LIABLE TO DEFENDANT- cargo truck. It was also pointed out that petitioner Tiu
APPELLANT WILLIAM TIU. 17 presented evidence that he had exercised the diligence of a
good father of a family in the selection and supervision of his
drivers.
The petitioners further allege that there is no legal and factual This is clearly one of fact, not reviewable by the Court in a
basis to require petitioner Tiu to pay exemplary damages as petition for review under Rule 45. 22
no evidence was presented to show that the latter acted in a
fraudulent, reckless and oppressive manner, or that he had an On this ground alone, the petition is destined to fail.
active participation in the negligent act of petitioner Laspias.
However, considering that novel questions of law are likewise
Finally, the petitioners contend that respondent PPSII admitted involved, the Court resolves to examine and rule on the merits
in its answer that while it had attended to and settled the of the case.
claims of the other injured passengers, respondent
Petitioner Laspias
Arriesgados claim remained unsettled as it was beyond the
Was negligent in driving
scheduled indemnity under the insurance contract. The
The Ill-fated bus
petitioners argue that said respondent PPSII should have
settled the said claim in accordance with the scheduled In his testimony before the trial court, petitioner Laspias
indemnity instead of just denying the same. HIAESC claimed that he was traversing the two-lane road at
Compostela, Cebu at a speed of only forty (40) to fifty (50)
On the other hand, respondent Arriesgado argues that two of
kilometers per hour before the incident occurred. 23 He also
the issues raised by the petitioners involved questions of fact,
admitted that he saw the truck which was parked in an
not reviewable by the Supreme Court: the finding of
oblique position at about 25 meters before impact,24 and
negligence on the part of the petitioners and their liability to
tried to avoid hitting it by swerving to the left. However, even
him; and the award of exemplary damages, attorneys fees
in the absence of expert evidence, the damage sustained by
and litigation expenses in his favor. Invoking the principle of
the truck 25 itself supports the finding of both the trial court
equity and justice, respondent Arriesgado pointed out that if
and the appellate court, that the D Rough Rider bus driven by
there was an error to be reviewed in the CA decision, it should
petitioner Laspias was traveling at a fast pace. Since he saw
be geared towards the restoration of the moral and exemplary
the stalled truck at a distance of 25 meters, petitioner
damages to P50,000 each, or a total of P100,000 which was
Laspias had more than enough time to swerve to his left to
reduced by the Court of Appeals to P25,000 each, or a total of
avoid hitting it; that is, if the speed of the bus was only 40 to
only P50,000.
50 kilometers per hour as he claimed. As found by the Court
Respondent Arriesgado also alleged that respondents Condor of Appeals, it is easier to believe that petitioner Laspias was
and Pedrano, and respondent Phoenix Surety, are parties with driving at a very fast speed, since at 4:45 a.m., the hour of
whom he had no contract of carriage, and had no cause of the accident, there were no oncoming vehicles at the opposite
action against. It was pointed out that only the petitioners direction. Petitioner Laspias could have swerved to the left
needed to be sued, as driver and operator of the ill-fated bus, lane with proper clearance, and, thus, could have avoided the
on account of their failure to bring the Arriesgado Spouses to truck. 26 Instinct, at the very least, would have prompted him
their place of destination as agreed upon in the contract of to apply the breaks to avert the impending disaster which he
carriage, using the utmost diligence of very cautious persons must have foreseen when he caught sight of the stalled truck.
with due regard for all circumstances. As we had occasion to reiterate: IacHAE
Respondents Condor and Pedrano point out that, as correctly A man must use common sense, and exercise due reflection in
ruled by the Court of Appeals, the proximate cause of the all his acts; it is his duty to be cautious, careful and prudent, if
unfortunate incident was the fast speed at which petitioner not from instinct, then through fear of recurring punishment.
Laspias was driving the bus owned by petitioner Tiu. He is responsible for such results as anyone might foresee and
According to the respondents, the allegation that the truck for acts which no one would have performed except through
was not equipped with an early warning device could not in culpable abandon. Otherwise, his own person, rights and
any way have prevented the incident from happening. It was property, and those of his fellow beings, would ever be
also pointed out that respondent Condor had always exercised exposed to all manner of danger and injury. 27
the due diligence required in the selection and supervision of
We agree with the following findings of the trial court, which
his employees, and that he was not a party to the contract of
were affirmed by the CA on appeal:
carriage between the petitioners and respondent Arriesgado.
A close study and evaluation of the testimonies and the
Respondent PPSII, for its part, alleges that contrary to the
documentary proofs submitted by the parties which have
allegation of petitioner Tiu, it settled all the claims of those
direct bearing on the issue of negligence, this Court as shown
injured in accordance with the insurance contract. It further
by preponderance of evidence that defendant Virgilio Te
avers that it did not deny respondent Arriesgados claim, and
Laspias failed to observe extraordinary diligence as a driver
emphasizes that its liability should be within the scheduled
of the common carrier in this case. It is quite hard to accept
limits of indemnity under the said contract. The respondent
his version of the incident that he did not see at a reasonable
concludes that while it is true that insurance contracts are
distance ahead the cargo truck that was parked when the
contracts of indemnity, the measure of the insurers liability is
Rough Rider [Bus] just came out of the bridge which is on an
determined by the insureds compliance with the terms
(sic) [more] elevated position than the place where the cargo
thereof.
truck was parked. With its headlights fully on, defendant
The Courts Ruling driver of the Rough Rider was in a vantage position to see the
cargo truck ahead which was parked and he could just easily
At the outset, it must be stressed that this Court is not a trier have avoided hitting and bumping the same by maneuvering
of facts. 20 Factual findings of the Court of Appeals are final to the left without hitting the said cargo truck. Besides, it is
and may not be reviewed on appeal by this Court, except (sic) shown that there was still much room or space for the
when the lower court and the CA arrived at diverse factual Rough Rider to pass at the left lane of the said national
findings. 21 The petitioners in this case assail the finding of highway even if the cargo truck had occupied the entire right
both the trial and the appellate courts that petitioner Laspias lane thereof. It is not true that if the Rough Rider would
was driving at a very fast speed before the bus owned by proceed to pass through the left lane it would fall into a canal
petitioner Tiu collided with respondent Condors stalled truck. considering that there was much space for it to pass without
hitting and bumping the cargo truck at the left lane of said
national highway. The records, further, showed that there was that the carrier must show the utmost diligence of very
no incoming vehicle at the opposite lane of the national cautious persons as far as human care and foresight can
highway which would have prevented the Rough Rider from provide, or that the accident was caused by fortuitous
not swerving to its left in order to avoid hitting and bumping event. 41 As correctly found by the trial court, petitioner Tiu
the parked cargo truck. But the evidence showed that the failed to conclusively rebut such presumption. The negligence
Rough Rider instead of swerving to the still spacious left lane of petitioner Laspias as driver of the passenger bus is, thus,
of the national highway plowed directly into the parked cargo binding against petitioner Tiu, as the owner of the passenger
truck hitting the latter at its rear portion; and thus, the (sic) bus engaged as a common carrier. 42
causing damages not only to herein plaintiff but to the cargo
truck as well. 28 The Doctrine of
Last Clear Chance
Indeed, petitioner Laspias negligence in driving the bus is Is Inapplicable in the
apparent in the records. By his own admission, he had just Case at Bar
passed a bridge and was traversing the highway of
Compostela, Cebu at a speed of 40 to 50 kilometers per hour Contrary to the petitioners contention, the principle of last
before the collision occurred. The maximum speed allowed by clear chance is inapplicable in the instant case, as it only
law on a bridge is only 30 kilometers per hour. 29 And, as applies in a suit between the owners and drivers of two
correctly pointed out by the trial court, petitioner Laspias colliding vehicles. It does not arise where a passenger
also violated Section 35 of the Land Transportation and Traffic demands responsibility from the carrier to enforce its
Code, Republic Act No. 4136, as amended: contractual obligations, for it would be inequitable to exempt
the negligent driver and its owner on the ground that the
Sec. 35. Restriction as to speed. (a) Any person driving a other driver was likewise guilty of negligence. 43 The common
motor vehicle on a highway shall drive the same at a careful law notion of last clear chance permitted courts to grant
and prudent speed, not greater nor less than is reasonable recovery to a plaintiff who has also been negligent provided
and proper, having due regard for the traffic, the width of the that the defendant had the last clear chance to avoid the
highway, and or any other condition then and there existing; casualty and failed to do so. Accordingly, it is difficult to see
and no person shall drive any motor vehicle upon a what role, if any, the common law of last clear chance
highway at such speed as to endanger the life, limb and doctrine has to play in a jurisdiction where the common law
property of any person, nor at a speed greater than will permit concept of contributory negligence as an absolute bar to
him to bring the vehicle to a stop within the assured clear recovery by the plaintiff, has itself been rejected, as it has
distance ahead. 30 been in Article 2179 of the Civil Code. 44
Under Article 2185 of the Civil Code, a person driving a Thus, petitioner Tiu cannot escape liability for the death of
vehicle is presumed negligent if at the time of the mishap, he respondent Arriesgados wife due to the negligence of
was violating any traffic regulation. 31 petitioner Laspias, his employee, on this score. EcHTCD
Petitioner Tiu failed to Respondents Pedrano and Condor were likewise

Overcome the presumption Negligent
Of negligence against him as
One engaged in the business In Phoenix Construction, Inc. v. Intermediate Appellate
Of common carriage Court, 45 where therein respondent Dionisio sustained injuries
when his vehicle rammed against a dump truck parked askew,
The rules which common carriers should observe as to the the Court ruled that the improper parking of a dump truck
safety of their passengers are set forth in the Civil without any warning lights or reflector devices created an
Code, Articles 1733, 32 1755 33 and 1756. 34 In this case, unreasonable risk for anyone driving within the vicinity, and
respondent Arriesgado and his deceased wife contracted with for having created such risk, the truck driver must be held
petitioner Tiu, as owner and operator of D Rough Riders bus responsible. In ruling against the petitioner therein, the Court
service, for transportation from Maya, Daanbantayan, Cebu, elucidated, thus:
to Cebu City for the price of P18.00. 35 It is undisputed that
the respondent and his wife were not safely transported to the . . . In our view, Dionisios negligence, although later in point
destination agreed upon. In actions for breach of contract, of time than the truck drivers negligence, and therefore
only the existence of such contract, and the fact that the closer to the accident, was not an efficient intervening or
obligor, in this case the common carrier, failed to transport his independent cause. What the petitioners describe as an
passenger safely to his destination are the matters that need intervening cause was no more than a foreseeable
to be proved. 36 This is because under the said contract of consequence of the risk created by the negligent manner in
carriage, the petitioners assumed the express obligation to which the truck driver had parked the dump truck. In other
transport the respondent and his wife to their destination words, the petitioner truck driver owed a duty to private
safely and to observe extraordinary diligence with due regard respondent Dionisio and others similarly situated not to
for all circumstances. 37 Any injury suffered by the impose upon them the very risk the truck driver had created.
passengers in the course thereof is immediately attributable Dionisios negligence was not that of an independent and
to the negligence of the carrier. 38 Upon the happening of the overpowering nature as to cut, as it were, the chain of
accident, the presumption of negligence at once arises, and it causation in fact between the improper parking of the dump
becomes the duty of a common carrier to prove that he truck and the accident, nor to sever the juris vinculum of
observed extraordinary diligence in the care of his liability. . . xxx xxx xxx
passengers. 39 It must be stressed that in requiring the
We hold that private respondent Dionisios negligence was
highest possible degree of diligence from common carriers
only contributory, that the immediate and proximate
and in creating a presumption of negligence against them, the
cause of the injury remained the truck drivers lack of due
law compels them to curb the recklessness of their drivers. 40
care.. . . 46
While evidence may be submitted to overcome such
In this case, both the trial and the appellate courts failed to
presumption of negligence, it must be shown that the carrier
consider that respondent Pedrano was also negligent in
observed the required extraordinary diligence, which means
leaving the truck parked askew without any warning lights or
reflector devices to alert oncoming vehicles, and that such Isuzu Forward Bus blue mixed
failure created the presumption of negligence on the part of
his employer, respondent Condor, in supervising his PLATE NO. SERIAL/CHASSIS MOTOR
employees properly and adequately. As we ruled in Poblete v. NO. AUTHORIZED UNLADEN
Fabros: 47
NO. CAPACITY WEIGHT
It is such a firmly established principle, as to have virtually
PBP-724 SER450-1584124 677836 50 6 Cyls. Kgs.
formed part of the law itself, that the negligence of the
employee gives rise to the presumption of negligence on the SECTION 1/11 *LIMITS OF LIABILITY PREMIUMS
part of the employer. This is the presumed negligence in the
selection and supervision of employee. The theory of PAID
presumed negligence, in contrast with the American doctrine
of respondeat superior, where the negligence of the employee A. THIRD PARTY LIABILITY P50,000.00
is conclusively presumed to be the negligence of the
employer, is clearly deducible from the last paragraph of B. PASSENGER LIABILITY Per Person Per Accident
Article 2180 of the Civil Code which provides that the P12,000.00 P50,000 P540.00 52
responsibility therein mentioned shall cease if the employers
In its Answer 53 to the Third-Party Complaint, the respondent
prove that they observed all the diligence of a good father of
PPSII admitted the existence of the contract of insurance, in
a family to prevent damages. . . . 48
view of its failure to specifically deny the same as required
The petitioners were correct in invoking respondent Pedranos under then Section 8(a), Rule 8 of the Rules of Court, 54 which
failure to observe Article IV, Section 34(g) of the Rep. Act No. reads:
4136, which provides:
Sec. 8. How to contest genuineness of such documents.
(g) Lights when parked or disabled. Appropriate parking When an action or defense is founded upon a written
lights or flares visible one hundred meters away shall be instrument copied in or attached to the corresponding
displayed at a corner of the vehicle whenever such vehicle is pleading as provided in the preceding section, the
parked on highways or in places that are not well-lighted or is genuineness and due execution of the instrument shall be
placed in such manner as to endanger passing traffic. TCHcAE deemed admitted unless the adverse party, under oath,
specifically denies them, and sets forth what he claims to be
The manner in which the truck was parked clearly endangered the facts; but the requirement of an oath does not apply when
oncoming traffic on both sides, considering that the tire the adverse party does not appear to be a party to the
blowout which stalled the truck in the first place occurred in instrument or when compliance with an order for inspection of
the wee hours of the morning. The Court can only now the original instrument is refused.
surmise that the unfortunate incident could have been
averted had respondent Condor, the owner of the truck, In fact, respondent PPSII did not dispute the existence of such
equipped the said vehicle with lights, flares, or, at the very contract, and admitted that it was liable thereon. It claimed,
least, an early warning device. 49 Hence, we cannot subscribe however, that it had attended to and settled the claims of
to respondents Condor and Pedranos claim that they should those injured during the incident, and set up the following as
be absolved from liability because, as found by the trial and special affirmative defenses:
appellate courts, the proximate cause of the collision was the
Third party defendant Philippine Phoenix Surety and
fast speed at which petitioner Laspias drove the bus. To
Insurance, Inc. hereby reiterates and incorporates by way of
accept this proposition would be to come too close to wiping
reference the preceding paragraphs and further states THAT
out the fundamental principle of law that a man must respond

for the foreseeable consequences of his own negligent act or
omission. Indeed, our law on quasi-delicts seeks to reduce the 8. It has attended to the claims of Vincent Canales, Asuncion
risks and burdens of living in society and to allocate them Batiancila and Neptali Palces who sustained injuries during the
among its members. To accept this proposition would be to incident in question. In fact, it settled financially their claims
weaken the very bonds of society. 50 per vouchers duly signed by them and they duly executed
Affidavit[s] of Desistance to that effect, xerox copies of which
The Liability of Respondent PPSII as Insurer
are hereto attached as Annexes 1, 2, 3, 4, 5, and 6
The trial court in this case did not rule on the liability of respectively;
respondent PPSII, while the appellate court ruled that, as no
9. With respect to the claim of plaintiff, herein answering third
evidence was presented against it, the insurance company is
party defendant through its authorized insurance adjuster
not liable.
attended to said claim. In fact, there were negotiations to that
A perusal of the records will show that when the petitioners effect. Only that it cannot accede to the demand of said
filed the Third-Party Complaint against respondent PPSII, they claimant considering that the claim was way beyond the
failed to attach a copy of the terms of the insurance contract scheduled indemnity as per contract entered into with third
itself. Only Certificate of Cover No. 054940 51 issued in favor party plaintiff William Tiu and third party defendant (Philippine
of Mr. William Tiu, Lahug, Cebu City signed by Cosme H. Phoenix Surety and Insurance, Inc.). Third party Plaintiff
Boniel was appended to the third-party complaint. The date of William Tiu knew all along the limitation as earlier stated, he
issuance, July 22, 1986, the period of insurance, from July 22, being an old hand in the transportation business; 55 . . .
1986 to July 22, 1987, as well as the following items, were
Considering the admissions made by respondent PPSII, the
also indicated therein:
existence of the insurance contract and the salient terms
SCHEDULED VEHICLE thereof cannot be dispatched. It must be noted that after filing
its answer, respondent PPSII no longer objected to the
MODEL MAKE TYPE OF COLOR BLT FILE NO. presentation of evidence by respondent Arriesgado and the
insured petitioner Tiu. Even in its Memorandum 56 before the
BODY Court, respondent PPSII admitted the existence of the
contract, but averred as follows:
Petitioner Tiu is insisting that PPSII is liable to him for . . . While the immediate beneficiaries of the standard of
contribution, indemnification and/or reimbursement. This has extraordinary diligence are, of course, the passengers and
no basis under the contract. Under the contract, PPSII will pay owners of cargo carried by a common carrier, they are not the
all sums necessary to discharge liability of the insured subject only persons that the law seeks to benefit. For if common
to the limits of liability but not to exceed the limits of liability carriers carefully observed the statutory standard of
as so stated in the contract. Also, it is stated in the contract extraordinary diligence in respect of their own passengers,
that in the event of accident involving indemnity to more than they cannot help but simultaneously benefit pedestrians and
one person, the limits of liability shall not exceed the the passengers of other vehicles who are equally entitled to
aggregate amount so specified by law to all persons to be the safe and convenient use of our roads and highways. The
indemnified. 57 law seeks to stop and prevent the slaughter and maiming of
people (whether passengers or not) on our highways and
As can be gleaned from the Certificate of Cover, such buses, the very size and power of which seem to inflame the
insurance contract was issued pursuant to the Compulsory minds of their drivers. Article 2231 of the Civil Code explicitly
Motor Vehicle Liability Insurance Law. It was expressly authorizes the imposition of exemplary damages in cases
provided therein that the limit of the insurers liability for each ofquasi-delicts if the defendant acted with gross negligence.
person was P12,000, while the limit per accident was pegged . . . 66
at P50,000. An insurer in an indemnity contract for third party
liability is directly liable to the injured party up to the extent The respondent Pedro A. Arriesgado, as the surviving spouse
specified in the agreement but it cannot be held solidarily and heir of Felisa Arriesgado, is entitled to indemnity in the
liable beyond that amount. 58 The respondent PPSII could not amount of P50,000.00. 67
then just deny petitioner Tius claim; it should have paid
P12,000 for the death of Felisa Arriesgado, 59 and respondent The petitioners, as well as the respondents Benjamin Condor
Arriesgados hospitalization expenses of P1,113.80, which the and Sergio Pedrano are jointly and severally liable for said
trial court found to have been duly supported by receipts. The amount, conformably with the following pronouncement of
total amount of the claims, even when added to that of the the Court in Fabre, Jr. vs. Court of Appeals: 68
other injured passengers which the respondent PPSII claimed
The same rule of liability was applied in situations where the
to have settled, 60 would not exceed the P50,000 limit under
negligence of the driver of the bus on which plaintiff was
the insurance agreement.
riding concurred with the negligence of a third party who was
Indeed, the nature of Compulsory Motor Vehicle Liability the driver of another vehicle, thus causing an accident.
Insurance is such that it is primarily intended to provide In Anuran v. Buo, Batangas Laguna Tayabas Bus Co. v.
compensation for the death or bodily injuries suffered by Intermediate Appellate Court, and Metro Manila Transit
innocent third parties or passengers as a result of the Corporation v. Court of Appeals, the bus company, its driver,
negligent operation and use of motor vehicles. The victims the operator of the other vehicle and the driver of the vehicle
and/or their dependents are assured of immediate financial were jointly and severally held liable to the injured passenger
assistance, regardless of the financial capacity of motor or the latters heirs. The basis of this allocation of liability was
vehicle owners. 61 As the Court, speaking through Associate explained in Viluan v. Court of Appeals, thus:
Justice Leonardo A. Quisumbing, explained in Government
Nor should it make difference that the liability of petitioner
Service Insurance System v. Court of Appeals: 62
[bus owner] springs from contract while that of respondents
However, although the victim may proceed directly against [owner and driver of other vehicle] arises from quasi-delict. As
the insurer for indemnity, the third party liability is only up to early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56
the extent of the insurance policy and those required by law. Phil. 177, that in case of injury to a passenger due to the
While it is true that where the insurance contract provides for negligence of the driver of the bus on which he was riding and
indemnity against liability to third persons, and such persons of the driver of another vehicle, the drivers as well as the
can directly sue the insurer, the direct liability of the insurer owners of the two vehicles are jointly and severally liable for
under indemnity contracts against third party liability does not damages. Some members of the Court, though, are of the
mean that the insurer can be held liable in solidum with the view that under the circumstances they are liable on quasi-
insured and/or the other parties found at fault. For the liability delict. 69
of the insurer is based on contract; that of the insured carrier
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY
or vehicle owner is based on tort . . .
GRANTED. The Decision of the Court of Appeals is AFFIRMED
Obviously, the insurer could be held liable only up to the with MODIFICATIONS:
extent of what was provided for by the contract of insurance,
(1) Respondent Philippine Phoenix Surety and Insurance, Inc.
in accordance with the CMVLI law. At the time of the incident,
and petitioner William Tiu are ORDERED to pay, jointly and
the schedule of indemnities for death and bodily injuries,
severally, respondent Pedro A. Arriesgado the total amount of
professional fees and other charges payable under a CMVLI
P13,113.80;
coverage was provided for under the Insurance Memorandum
Circular (IMC) No. 5-78 which was approved on November 10, (2) The petitioners and the respondents Benjamin Condor and
1978. As therein provided, the maximum indemnity for death Sergio Pedrano are ORDERED to pay, jointly and severally,
was twelve thousand (P12,000.00) pesos per victim. The respondent Pedro A. Arriesgado P50,000.00 as indemnity;
schedules for medical expenses were also provided by said P26,441.50 as actual damages; P50,000.00 as moral
IMC, specifically in paragraphs (C) to (G). 63 damages; P50,000.00 as exemplary damages; and P20,000.00
as attorneys fees.
Damages to be Awarded
[G.R. No. L-20853. May 29, 1967.]
The trial court correctly awarded moral damages in the
amount of P50,000 in favor of respondent Arriesgado. The BONIFACIO BROS., INC., ET AL., vs. ENRIQUE MORA, ET
award of exemplary damages by way of example or correction AL.,.
of the public good, 64 is likewise in order. As the Court
ratiocinated in Kapalaran Bus Line v. Coronado: 65 1. CONTRACTS; CONTRACTS TAKE EFFECT ONLY BETWEEN THE
PARTIES THERETO; EXCEPTION. It is fundamental that
contracts take effect only between the parties thereto, except 4. The Insured may authorize the repair of the Motor Vehicle
on some specific instances provided by law where the necessitated by damage for which the Company may he liable
contract contains some stipulation in favor of a third person under this Policy provided that: (a) The estimated cost of
(Art. 1311, Civil Code). Such stipulation is known as such repair does not exceed the Authorized Repair Limit. (b) A
stipulation pour autrui or a provision in favor of a third person detailed estimate of the cost is forwarded to the Company
not a party to the contract. Under this doctrine, a third person without delay, subject to the condition that 'Loss, if any, is
is allowed to avail himself of a benefit granted to him by the payable to H.S. Reyes, Inc.', by virtue of the fact that said
terms of the contract, provided that the contracting parties Oldsmobile sedan was mortgaged in favor of the said H.S.
have clearly and deliberately conferred a favor upon such Reyes, Inc. and that under a clause in said insurance policy,
person (Art. 1311, Civil Code; Uy Tam, et al. vs. Leonard, 30 any loss was made payable to the H.S. Reyes, Inc. as
Phil.. 471 ). Consequently, a third person not a party to the Mortgagee; xxx xxx xxx
contract has no action against the parties thereto, and cannot
generally demand the enforcement of the same (Manila During the effectivity of an insurance contract, the car met
Railroad Co. vs. Compaia Transatlantica, 38 Phil. 676). with an accident. The insurance company then assigned the
accident to the H.H. Bayne Adjustment Co. for investigation
2. ID.; STIPULATION POUR AUTRUI; HOW TO DETERMINE and appraisal of the damage. Enrique Mora, without the
WHETHER A THIRD PERSON HAS AN ENFORCEABLE INTEREST knowledge and consent of the H.S. Reyes, Inc., authorized the
IN THE CONTRACT. The question of whether a third person Bonifacio Bros. Inc. to furnish the labor and materials, some of
has an enforceable interest in a contract, must be settled by which were supplied by the Ayala Auto Parts Co. For the cost
determining whether the contracting parties intended to of labor and materials, Enrique Mora was billed at P2,102.73
tender him such an interest by deliberately inserting terms in through the H. H. Bayne Adjustment Co. The insurance
their agreement with the avowed purpose of conferring a company, after claiming a franchise in the amount of P100,
favor upon such third person. In this connection, this Court drew a check in the amount of P2,002.73, as proceeds of the
has laid down the rule that the fairest test to determine insurance policy, payable to the order of Enrique Mora or H.S.
whether the interest of a third person in a contract is a Reyes, Inc., and entrusted the check to the H.H. Bayne
stipulation pour autrui or merely an incidental interest, is to Adjustment Co. for disposition and delivery to the proper
rely upon the intention of the parties as disclosed by their party. In the meantime, the car was delivered to Enrique Mora
contract ( Uy Tam, et al. vs. Leonard, supra). without the consent of the H.S. Reyes, Inc., and without
payment to the Bonifacio Bros. Inc. and Ayala Auto Parts Co.
3. ID.; NATURE OF INSURANCE POLICY. A policy of insurance of the cost of repairs and materials.
is a distinct and independent contract between the insured
and insurer, and third persons have no right either in a court Upon the theory that the insurance proceeds should be paid
of equity, or in a court of law, to the proceeds of it, unless directly to them, the Bonifacio Bros. Inc. and the Ayala Auto
there be some contract of trust, expressed or implied, by the Parts Co. filed on May 8, 1961 a complaint with the Municipal
insured and third person (Lampano vs. Jose, 30 Phil. 537). Court of Manila against Enrique Mora and the State Bonding &
Insurance Co. Inc. for the collection of the sum of P2,002.73.
This is an appeal from the decision of the Court of First The insurance company filed its answer with a counterclaim
Instance of Manila, Branch XV, in civil case 48823, affirming for interpleader, requiring the Bonifacio Bros. Inc. and the H.S.
the decision of the Municipal Court of Manila, declaring the Reyes, Inc. to interplead in order to determine who has a
H.S. Reyes, Inc. as having a better right than the Bonifacio better right to the insurance proceeds in question. Enrique
Bros. Inc. and the Ayala Auto Parts Company, appellants Mora was declared in default for failure to appear at the
herein, to the proceeds of motor insurance policy A-0615, in hearing, and evidence against him was received ex parte.
the sum of P2,002.73, issued by the State Bonding & However, the counsel for the Bonifacio Bros. Inc., Ayala Auto
Insurance Co. Inc., and directing payment of the said amount Parts Co. and State Bonding & Insurance Co. Inc. submitted a
to the H.S. Reyes, Inc. stipulation of facts, on the basis of which the Municipal Court
rendered a decision declaring the H.S. Reyes, Inc. as having a
Enrique Mora, owner of an Oldsmobile sedan model 1956, better right to the disputed amount, and ordering the State
bearing plate No. QC - 8088, mortgaged the same to the H.S. Bonding & Insurance Co. Inc. to pay to the H.S Reyes, Inc. the
Reyes, Inc., with the condition that the former would insure said sum of P2,002.73. From this decision, the herein
the automobile, with the latter as beneficiary. The automobile appellants elevated the case to the Court of First Instance of
was thereafter insured on June 23, 1959 with the State Manila before which the stipulation of facts was reproduced.
Bonding & Insurance Co. Inc., and motor car insurance policy On October 19, 1962 the latter court rendered a decision,
A-0615 was issued to Enrique Mora, the pertinent provisions affirming the decision of the Municipal Court. The Bonifacio
of which read: Bros. Inc. and the Ayala Auto Parts Co. moved for
reconsideration of the decision, but the trial court denied the
"1. The Company (referring to the State Bonding & Insurance
motion. Hence, this appeal.
Co., Inc) will, subject to the Limits of Liability, indemnify the
Insured against loss of or damages to the Motor Vehicle and The main issue raised is whether there is privity of contract
its accessories and spare parts whilst thereon; (a) by between the Bonifacio Bros. Inc and the Ayala Auto Parts Co.
accidental collision or overturning or collision or overturning on the one hand and the insurance company on the other. The
consequently upon mechanical breakdown or consequent appellants argue that the insurance company and Enrique
upon wear and tear. xxx xxx xxx Mora are parties to the repair of the car as well as the to wage
thereof performed. The authority for this assertion is to be
2. At its own option the Company may pay in cash the amount
found, it is alleged, in paragraph 4 of the insurance contract
of the loss or damage or may repair, reinstate, or replace the
which provides that "the insured may authorize the repair of
Motor Vehicle or any part thereof or its accessories or spare
the Motor Vehicle necessitated by damage for which the
parts. The liability of the Company shall not exceed to value of
company may liable under the policy provided that (a) the
the parts whichever is the less. The Insured's estimate of
estimated cost of such repair does not exceed the Authorized
value stated in the schedule will be the maximum amount
Repair Limit, and (b) a detailed estimate of the cost is
payable by the Company in respect of any claim for loss or
forwarded to the company without delay." It is stressed that
damage. xxx xxx xxx
the H.H. Bayne Adjustment Company's recommendation of
payment of the appellants' bill for materials and repairs for
which the latter drew a check for P2,002.73 indicates that the insured and insurer, and third persons have no right either
Mora and the H.H. Bayne Adjustment Co. acted for and in in a court of equity, or in a court of law, to the proceeds of it,
representation of the insurance company. unless there be some contract of trust, expressed or implied,
by the insured and third person". 5 In this case, no contract of
This argument is, in our view, beside the point, because from trust, expressed or implied exists. We, therefore, agree with
the undisputed facts and from the pleadings it will be seen the trial court that no cause of action exists in favor of the
that the appellants' alleged cause of action rests exclusively appellants in so far as the proceeds of insurance are
upon the terms of the insurance contract. The appellants seek concerned. The appellant's claim, if at all, is merely equitable
to recover the insurance proceeds, and for this purpose, they in nature and must be made effective through Enrique Mora
rely upon paragraph 4 of the insurance contract document who entered into a contract with the Bonifacio Bros Inc. This
executed by and between the State Bonding & Insurance conclusion is deducible not only from the principle governing
Company, Inc. and Enrique Mora. The appellants are not the operation and effect of insurance contracts in general, but
mentioned in the contract as parties thereto; nor is there any is clearly covered by the express provisions of section 50 of
clause or provision thereof from which we can infer that there the Insurance Act which read:
is an obligation on the part of the insurance company to pay
the cost of repairs directly to them. It is fundamental that "The insurance shall be applied exclusively to the proper
contracts take effect only between the parties thereto, except interest of the person in whose name it is made unless
in some specific instances provided by law where the contract otherwise specified in the policy."
contains some stipulation in favor of a third person. 1 Such
stipulation is known as stipulation pour autrui or a provision in The policy in question has been so framed that "Loss, if any, is
favor of a third person not a party to the contract. Under this payable to H. S. Reyes, Inc." which unmistakably shows the
doctrine, a third person is allowed to avail himself of a benefit intention of the parties.
granted to him by the terms of the contract, provided that the
The final contention of the appellants is that the right of the H.
contracting parties have clearly and deliberately conferred a
S. Reyes, Inc. to the insurance proceeds arises only if there
favor upon such person. 2 Consequently a third person not a
was loss and not where there is mere damage as in the
party to the contract has no action against the parties thereto,
instant case. Suffice it to say that any attempt to draw a
and cannot generally demand the enforcement of the
distinction between "loss" and "damage" is uncalled for,
same. 3 The question of whether a third person has an
because the word "loss" in insurance law embraces injury or
enforceable interest in a contract, must be settled by
damage.
determining whether the contracting parties intended to
tender him such an interest by deliberately inserting terms in "Loss in insurance, defined. The injury or damage sustained
their agreement with the avowed purpose of conferring a by the insured in consequence of the happening of one or
favor upon such third person. In this connection, this Court more of the accidents or misfortune against which the insurer,
has laid down the rule that the fairest test to determine in consideration of the premium, has undertaken to indemnify
whether the interest of a third person in a contract is a the insured." (1 Bouv. Ins. No. 1215; Black's Law Dictionary;
stipulation pour autrui or merely an incidental interest, is to Cyclopedic Law Dictionary, cited in Martin's Phil. Commercial
rely upon the intention of the parties as disclosed by their Laws, Vol. 1, 1961 ed. p. 608).
contract. 4 In the instant case the insurance contract does not
contain any words or clauses to disclose an intent to give any Indeed, according to sec. 120 of the Insurance Act, a loss may
benefit to any repairmen or material men in case of repair of be either total or partial. Accordingly, the judgment appealed
the car in question. The parties to the insurance contract from is hereby affirmed, at appellants' cost.
omitted such stipulation, which is a circumstance that
supports the said conclusion. On the other hand, the "loss
payable" clause of the insurance policy stipulates that "Loss, if
any, is payable to H.S. Reyes, Inc." indicating that it was only
the H.S. Reyes, Inc. which they intended to benefit.
We likewise observe from the brief of the State Bonding &

Insurance Company that it has vehemently opposed the
assertion or pretension of the appellants that they are privy to [G.R. No. L-44059. October 28, 1977.]
the contract. If it were the intention of the Insurance Company
to make itself liable to the repair shop or material men, it THE INSULAR LIFE ASSURANCE COMPANY,
could have easily inserted in the contract a stipulation to that LTD., vs. CARPONIA T. EBRADO and PASCUALA VDA. DE
effect. To hold now that the original parties to the insurance EBRADO.
contract intended to confer upon the appellants the benefit
claimed by them would require as to ignore the indispensable This is a novel question in insurance law: Can a common-law
requisite that a stipulation pour autrui must be clearly wife named as beneficiary in the life insurance policy of a
expressed by the parties, which we cannot do. legally married man claim the proceeds thereof in case of
death of the latter?
As regards paragraph 4 of the insurance contract, a perusal
thereof would show that instead of establishing privity On September 1, 1968, Buenaventura Cristor Ebrado was
between the appellant and the insurance company, such issued by The Insular Life Assurance Co., Ltd., Policy No.
stipulation merely establishes the procedure that the insured 009929 on a whole-life plan for P5,882.00 with a rider for
has to follow in order to be entitled to indemnity for repair. Accidental Death Benefits for the same amount.
This paragraph therefore should not be construed as bringing Buenaventura C. Ebrado designated Carponia T. Ebrado as the
into existence in favor of the appellants a right of action revocable beneficiary in his policy. He referred to her as his
against the insurance company as such intention can never wife.
be inferred therefrom.
On October 21, 1969, Buenventura C. Ebrado died as a result
Another cogent reason for not recognizing a right of action by of an accident when he was hit by a falling branch of a tree.
the appellants against the insurance company is that "a policy As the insurance policy was in force, The Insular Life
of insurance is a distinct and independent contract between Assurance Co., Ltd. stands liable to pay the coverage of the
policy in an amount of P11,745.73, representing the face Ebrado and directing the payment of the insurance proceeds
value of the policy in the amount of P5,882.00 plus the to the estate of the deceased insured. The trial court held:
additional benefits for accidental death also in the amount of
P5,882.00 and the refund of P18.00 paid for the premium due "It is patent from the last paragraph of Art. 739 of the Civil
November, 1969, minus the unpaid premiums and interest Code that a criminal conviction for adultery or concubinage is
thereon due for January and February, 1969, in the sum of not essential in order to establish the disqualification
P36.27. mentioned therein. Neither is it also necessary that a finding
of such guilt or commission of those acts be made in a
Carponia T. Ebrado filed with the insurer a claim for the separate independent action brought for the purpose. The
proceeds of the policy as the designated beneficiary therein, guilt of the donee (beneficiary) may be proved by
although she admits that she and the insured Buenaventura preponderance of evidence in the same proceeding (the
C. Ebrado were merely living as husband and wife without the action brought to declare the nullity of the donation).
benefit of marriage. Pascuala Vda. de Ebrado also filed her
claim as the widow of the deceased insured. She asserts that It is, however, essential that such adultery or concubinage
she is the one entitled to the insurance proceeds, not the exists at the time defendant Carponia T. Ebrado was made
common-law wife, Carponia T. Ebrado. LLjur beneficiary in the policy in question for the disqualification
and incapacity to exist and that it is only necessary that such
In doubt as to whom the insurance proceeds shall be paid, the fact be established by preponderance of evidence in the trial.
insurer, The Insular Life Assurance Co., Ltd. commenced an Since it is agreed in their stipulation above-quoted that the
action for Interpleader before the Court of First Instance of deceased insured and defendant Carponia T. Ebrado were
Rizal on April 29, 1970. living together as husband and wife without being legally
married and that the marriage of the insured with the other
After the issues have been joined, a pre-trial conference was defendant Pascuala Vda. de Ebrado was valid and still existing
held on July 8, 1972, after which, a pre-trial order was entered at the time the insurance in question was purchased there is
reading as follows: no question that defendant Carponia T. Ebrado is disqualified
from becoming the beneficiary of the policy in question and as
"During the pre-trial conference, the parties manifested to the such she is not entitled to the proceeds of the insurance upon
court that there is no possibility of amicable settlement. the death of the insured." Cdpr
Hence, the Court proceeded to have the parties submit their
evidence for the purposes of the pre-trial and make From this judgment, Carponia T. Ebrado appealed to the Court
admissions for the purpose of pre-trial. During this of Appeals, but on July 11, 1976, the Appellate Court certified
conference, parties Carponia T. Ebrado and Pascuala Ebrado the case to Us as involving only questions of law.
agreed and stipulated: 1) that the deceased Buenaventura
Ebrado was married to Pascuala Ebrado with whom she has We affirm the judgment of the lower court.
six (legitimate) namely; Hernando, Cresencio, Elsa, Erlinda,
Felizardo and Helen, all surnamed Ebrado; 2) that during the 1. It is quite unfortunate that the Insurance Act (RA 2327, as
lifetime of the deceased, he was insured with Insular Life amended) or even the new Insurance Code (PD No. 612, as
Assurance Co. Under Policy No. 009929 whole life plan, dated amended) does not contain any specific provision grossly
September 1, 1968 for the sum of P5,882.00 with the rider for resolutory of the prime question at hand. Section 50 of the
accidental death benefit as evidenced by Exhibits A for Insurance Act which provides that "(t)he insurance shall be
plaintiffs and Exhibit 1 for the defendant Pascuala and Exhibit applied exclusively to the proper interest of the person in
7 for Carponia Ebrado; 3) that during the lifetime of whose name it is made" 1 cannot be validly seized upon to
Buenaventura Ebrado, he was living with his common-law hold that the same includes the beneficiary. The word
wife, Carponia Ebrado, with whom she had 2 children although interest" highly suggests that the provision refers only to the
he was not legally separated from his legal wife; 4) that insured" and not to the beneficiary, since a contract of
Buenaventura Ebrado died by accident on October 21, 1969 insurance is personal in character. 2 Otherwise, the
as evidenced by the death certificate Exhibit 3 and affidavit of prohibitory laws against illicit relationships especially on
the police report of his death Exhibit 5; 5) that complainant property and descent will be rendered nugatory, as the same
Carponia Ebrado filed claim with the Insular Life Assurance Co. could easily be circumvented by modes of insurance. Rather,
which was contested by Pascuala Ebrado who also filed claim the general rules of civil law should be applied to resolve this
for the proceeds of said policy; 6) that in view of the adverse void in the Insurance Law Article 2011 of the New Civil Code
claims the insurance company filed this action against the two states: "The contract of insurance is governed by special
herein claimants Carponia and Pascuala Ebrado; 7) that there laws. Matters not expressly provided for in such special laws
is now due from the Insular Life Assurance Co. as proceeds of shall be regulated by this Code." When not otherwise
the policy P11,745.73; 8) that the beneficiary designated by specifically provided for by the Insurance Law, the contract of
the insured in the policy is Carponia Ebrado and the insured life insurance is governed by the general rules of the civil law
made reservation to change the beneficiary but although the regulating contracts. 3 And under Article 2012 of the same
insured made the option to change the beneficiary, same was Code, "any person who is forbidden from receiving any
never changed up to the time of his death and the legal wife donation under Article 739 cannot be named beneficiary of a
did not have any opportunity to write the company that there life insurance policy by the person who cannot make a
was reservation to change the designation of the beneficiary; donation to him." 4Common-law spouses are, definitely,
9) the parties agreed that a decision be rendered based on barred from receiving donations from each other. Article 739
this agreement and stipulation of facts as to who among the of the new Civil Code provides:
two claimants is entitled to the policy.
"The following donations shall be void:
"Upon motion of the parties, they are given ten (10) days to
"1. Those made between persons who were guilty of adultery
file their simultaneous memoranda from the receipt of this
or concubinage at the time of donation;
order. SO ORDERED."
"Those made between persons found guilty of the same
On September 25, 1972, the trial court rendered judgment
criminal offense, in consideration thereof;
declaring, among others, Carponia T. Ebrado disqualified from
becoming beneficiary of the insured Buenaventura Cristor
"3. Those made to a public officer or his wife, descendants or test of scrutiny. It would be to indict the framers of the Civil
ascendants by reason of his office. Code for a failure to apply a laudable rule to a situation which
in its essentials cannot be distinguished. Moreover, if it is at
"In the case referred to in No. 1, the action for declaration of all to be differentiated the policy of the law which embodies a
nullity may be brought by the spouse of the donor or deeply rooted notion of what is just and what is right would be
donee; and the guilt of the donee may be proved by nullified if such irregular relationship instead of being visited
preponderance of evidence in the same action." with disabilities would be attended with benefits. Certainly a
legal norm should not be susceptible to such a reproach. If
2. In essence, a life insurance policy is no different from a civil there is every any occasion where the principle of statutory
donation insofar as the beneficiary is concerned. Both are construction that what is within the spirit of the law is as
founded upon the same consideration: liberality. A beneficiary much a part of it as what is written, this is it. Otherwise the
is like a donee, because from the premiums of the policy basic purpose discernible in such codal provision would not be
which the insured pays out of liberality, the beneficiary will attained. Whatever omission may be apparent in an
receive the proceeds or profits of said insurance. As a interpretation purely literal of the language used must be
consequence, the proscription in Article 739 of the new Civil remedied by an adherence to its avowed objective."
Code should equally operate in life insurance contracts. The
mandate of Article 2012 cannot be laid aside: any person who 4. We do not think that a conviction for adultery or
cannot receive a donation cannot be named as beneficiary in concubinage is exacted before the disabilities mentioned in
the life insurance policy of the person who cannot make the Article 739 may effectuate. More specifically, with regard to
donation. 5 Under American law, a policy of life insurance is the disability on "persons who were guilty of adultery or
considered as a testament and in construing it, the courts will, concubinage at the time of the donation," Article 739 itself
so far as possible treat it as a will and determine the effect of provides:
a clause designating the beneficiary by rules under which wills
are interpreted. 6 "In the case referred to in No. 1, the action for declaration of
nullity may be brought by the spouse of the donor or
3. Policy considerations and dictates of morality rightly justify donee; and the guilt of the donee may be proved by
the institution of a barrier between common-law spouses in preponderance of evidence in the same action."
regard to property relations since such relationship ultimately
encroaches upon the nuptial and filial rights of the legitimate The underscored clause neatly conveys that no criminal
family. There is every reason to hold that the bar in donations conviction for the disqualifying offense is a condition
between legitimate spouses and those between illegitimate precedent. In fact, it cannot even be gleaned from the
ones should be enforced in life insurance policies since the aforequoted provision that a criminal prosecution is needed.
same are based on similar consideration. As above pointed On the contrary, the law plainly states that the guilt of the
out, a beneficiary in a life insurance policy is no different from party may be proved "in the same action" for declaration of
a donee. Both the recipients of pure beneficence. So long as nullity of donation. And, it would be sufficient if evidence
marriage remains the threshold of family laws, reason and preponderates upon the guilt of the consort for the offense
morality dictate that the impediments imposed upon married indicated. The quantum of proof in criminal cases is not
couple should likewise be imposed upon extra-marital demanded.
relationship. If legitimate relationship is circumscribed by
these legal disabilities, with more reason should an illicit In the case before Us, the requisite proof of common-law
relationship be restricted by these disabilities. Thus, relationship between the insured and the beneficiary has been
in Matabuena v. Cervantes, 7 this Court, through Justice conveniently supplied by the stipulations between the parties
Fernando, said: in the pre-trial conference of the case. It case agreed upon
and stipulated therein that the deceased insured
Buenaventura C. Ebrado was married to Pascuala Ebrado with
whom she has six legitimate children; that during his lifetime,
"If the policy of the law is, in the language of the opinion of the deceased insured was living with his common-law wife,
the then Justice J.B.L. Reyes of that court (Court of Appeals), Carponia Ebrado, with whom he has two children. These
`to prohibit donations in favor of the other consort and his stipulations are nothing less than judicial admissions which, as
descendants because of fear and undue and improper a consequence, no longer require proof and cannot be
pressure and influence upon the donor, a prejudice deeply contradicted. 8A fortiori, on the basis of these admissions, a
rooted in our ancient law;" por-que no se enganen judgment may be validly rendered without going through the
desponjandose el uno al otro por amor que han de consuno' rigors of a trial for the sole purpose of proving the illicit liaison
(According to) the Partidas (Part IV, Tit. XI, LAW IV), reiterating between the insured and the beneficiary. In fact, in that pre-
the rationale `No Mutuato amore invicem spoliarentur' of the trial, the parties even agreed "that a decision be rendered
Pandects (Bk, 24, Titl. 1 De donat, inter virum et uxorem); based on this agreement and stipulation of facts as to who
then there is very reason to apply the same prohibitive policy among the two claimants is entitled to the policy." Cdpr
to persons living together as husband and wife without the
benefit of nuptials. For it is not to be doubted that assent to ACCORDINGLY, the appealed judgment of the lower court is
such irregular connection for thirty years bespeaks greater hereby affirmed. Carponia T. Ebrado is hereby declared
influence of one party over the other, so that the danger that disqualified to be the beneficiary of the late Buenaventura C.
the law seeks to avoid is correspondingly increased. Moreover, Ebrado in his life insurance policy. As a consequence, the
as already pointed out by Ulpian (in his lib. 32 ad Sabinum, fr. proceeds of the policy are hereby held payable to the estate
1), `it would not be just that such donations should subsist, of the deceased insured. Costs against Carponia T. Ebrado. SO
lest the condition of those who incurred guilt should turn out ORDERED.
to be better.' So long as marriage remains the cornerstone of
our family law, reason and morality alike demand that the [G.R. No. L-28093. January 30, 1971.]
disabilities attached to marriage should likewise attach to
BASILIA BERDIN VDA. DE CONSUEGRA; JULIANA,
concubinage.
PACITA, MARIA LOURDES, JOSE, JR., RODRIGO, LINEDA,
It is hardly necessary to add that even in the absence of the and LUIS, all surnamed CONSUEGRA,petitioners-
above pronouncement, any other conclusion cannot stand the appellants, vs. GOVERNMENT SERVICE INSURANCE
SYSTEM, COMMISSIONER OF PUBLIC HIGHWAYS, stipulation of facts, prayed that the same be admitted and
HIGHWAY DISTRICT ENGINEER OF SURIGAO DEL NORTE, approved and that judgment be rendered on the basis of the
COMMISSIONER OF CIVIL SERVICE, and ROSARIO stipulation of facts. On March 7, 1967, the court below
DIAZ, respondents-appellees. rendered judgment, the pertinent portions of which are
quoted hereunder:
Appeal on purely questions of law from the decision of the
Court of First Instance of Surigao del Norte, dated March 7, "This Court, in conformity with the foregoing stipulation of
1967, in its Special Proceeding No. 1720. facts, likewise is in full accord with the parties with respect to
the authority cited by them in support of said stipulation and
The pertinent facts, culled from the stipulation of facts which is herein-below cited for purposes of this judgment, to
submitted by the parties, are the following: wit:
The late Jose Consuegra, at the time of his death, was 'When two women innocently and in good faith are legally
employed as a shop foreman of the office of the District united in holy matrimony to the same man, they and their
Engineer in the province of Surigao-del Norte. In his lifetime, children, born of said wedlock, will be regarded as legitimate
Consuegra contracted two marriages, the first with herein children and each family be entitled to one half of the estate.
respondent Rosario Diaz, solemnized in the parish church of Lao & Lao vs. Dee Tim, 45 Phil. 739; Estrella vs. Laong Masa,
San Nicolas de Tolentino, Surigao, Surigao, on July 15, 1937, Inc., (CA) 39 OG 79; Pisalbon vs. Bejec, 74 Phil. 88.
out of which marriage were born two children, namely, Jose
Consuegra, Jr. and Pedro Consuegra, but both predeceased "WHEREFORE, in view of the above premises, this Court is of
their father; and the second, which was contracted in good the opinion that the foregoing stipulation of facts is in order
faith while the first marriage was subsisting, with herein and in accordance with law and the same is hereby approved.
petitioner Basilia Berdin, on May 1, 1957 in the same parish Judgment, therefore, is hereby rendered declaring the
and municipality, out of which marriage were born seven petitioner Basilia Berdin Vda. de Consuegra and her co-
children, namely, Juliana, Pacita, Maria Lourdes, Jose, Rodrigo, petitioners Juliana, Pacita, Maria Lourdes, Jose Jr., Rodrigo,
Lenida and Luz, * all surnamed Consuegra. Lenida and Luis, all surnamed Consuegra, beneficiary and
entitled to one-half (1/2) of the retirement benefit in the
Being a member of the Government Service Insurance System amount of Six Thousand Three Hundred Four Pesos and
(GSIS, for short) when Consuegra died on September 26, Fourty-Seven Centavos (P6,304.47) due to the deceased Jose
1965, the proceeds of his life insurance under policy No. Consuegra from the Government Service Insurance System or
601801 were paid by the GSIS to petitioner Basilia Berdin and the amount of P3,152.235 to be divided equally among them
her children who were the beneficiaries named in the policy. in the proportional amount of 1/16 each. Likewise, the
Having been in the service of the government for 22.5028 respondent Rosario Diaz Vda. de Consuegra is hereby
years, Consuegra was entitled to retirement insurance declared beneficiary and entitled to the other half of the
benefits in the sum of P6,304.47 pursuant to Section 12(c) retirement benefit of the late Jose Consuegra or the amount of
of Commonwealth Act 186 as amended by Republic Acts 1616 P3,152.235. The case with respect to the Highway District
and 3836. Consuegra did not designate any beneficiary who Engineer of Surigao del Norte is hereby ordered dismissed."
would receive the retirement insurance benefits due to him.
Respondent Rosario Diaz, the widow by the first marriage, Hence the present appeal by herein petitioners-appellants,
filed a claim with the GSIS asking that the retirement Basilia Berdin and her children.
insurance benefits be paid to her as the only legal heir of
Consuegra, considering that the deceased did not designate It is the contention of appellants that the lower court erred in
any beneficiary with respect to his retirement insurance not holding that the designated beneficiaries in the life
benefits. Petitioner Basilia Berdin and her children, likewise, insurance of the late Jose Consuegra are also the exclusive
filed a similar claim with the GSIS, asserting that being the beneficiaries in the retirement insurance of said deceased. In
beneficiaries named in the life insurance policy of Consuegra, other words, it is the submission of appellants that because
they are the only ones entitled to receive the retirement the deceased Jose Consuegra failed to designate the
insurance benefits due the deceased Consuegra. Resolving beneficiaries in his retirement insurance, the appellants who
the conflicting claims, the GSIS ruled that the legal heirs of were the beneficiaries named in the life insurance should
the late Jose Consuegra were Rosario Diaz, his widow by his automatically be considered the beneficiaries to receive the
first marriage who is entitled to one-half, or 8/16, of the retirement insurance benefits, to the exclusion of respondent
retirement insurance benefits, on the one hand; and Basilia Rosario Diaz. From the arguments adduced by appellants in
Berdin, his widow by the second marriage and their seven their brief We gather that it is their stand that the system of
children, on the other hand, who are entitled to the remaining life insurance and the system of retirement insurance, that
one-half, or 8/16, each of them to receive an equal share of are provided for in Commonwealth Act 186 as amended, are
1/16. simply complementary to each other, or that one is a part or
an extension of the other, such that whoever is named the
Dissatisfied with the foregoing ruling and apportionment beneficiary in the life insurance is also the beneficiary in the
made by the GSIS, Basilia Berdin and her children 1 filed on retirement insurance when no such beneficiary is named in
October 10, 1966 a petition for mandamus with preliminary the retirement insurance.
injunction in the Court of First Instance of Surigao naming as
respondents the GSIS, the Commissioner of Public Highways, The contention of appellants is untenable.
the Highway District Engineer of Surigao del Norte, the
It should be noted that the law creating the Government
Commissioner of Civil Service, and Rosario Diaz, praying that
Service Insurance System is Commonwealth Act 186 which
they (petitioners therein) be declared the legal heirs and
was enacted by the National Assembly on November 14,
exclusive beneficiaries of the retirement insurance of the late
1936. As originally approved, Commonwealth Act
Jose Consuegra, and that writ of preliminary injunction be
186 provided for the compulsory membership in the
issued restraining implementation of the adjudication made
Government Service Insurance System of all regularly and
by the GSIS. October 26, 1966, the trial court issued an order
permanently appointed officials and employees of the
requiring therein respondents to file their respective answer
government, considering as automatically insured on life all
refrained from issuing the writ of preliminary injunction
such officials and employees, and issuing to them the
prayed for. On February 11, 1967, the parties submitted a
corresponding membership policy under the terms and yet amended, and the only benefits then provided for in said
conditions as provided in the Act. 2 Com. Act 186 were those that proceed from a life insurance.
Upon entering the government service Consuegra became a
Originally, Commonwealth Act 186 provided for life insurance compulsory member of the GSIS, being automatically insured
only. Commonwealth Act 186 was amended by Republic Act on his life, pursuant to the provisions of Com. Act 186 which
660 which was enacted by the Congress of the Philippines on was in force at the time. During 1943 the operation of the
June 16, 1951, and, among others, the amendatory Act Government Service Insurance System was suspended
provided that aside from the system of life insurance under because of the war, and the operation was resumed sometime
the Government Service Insurance System there was also in 1946. When Consuegra designated his beneficiaries in his
established the system of retirement insurance. Thus, We will life insurance he could not have intended those beneficiaries
note in Republic Act 660 that there is a chapter on life of his life insurance s also the beneficiaries of his retirement
insurance and another chapter on retirement insurance because the provisions on retirement insurance
insurance. 3 Under the chapter on life insurance are sections under the GSIS came about only when Com. Act 186 was
8, 9 and 10 of Commonwealth Act 186, as amended; and amended by Rep. 660 on June 16, 1951. Hence, it cannot be
under the chapter on retirement insurance are sections 11, said that cause herein appellants were designated
12, 13 and 13-A. On May 31, 1957, Republic Act 1616 was beneficiaries Consuegra's life insurance they automatically
enacted by Congress, amending section 12 of Commonwealth became beneficiaries also of his retirement insurance. Rep.
Act 186 as amended by Republic Act 660, by adding thereto Act 660 added to Com. Act 186 provisions regarding
two new subsections, designated as subsections (b) and (c). retirement insurance, which are Sections 11, 12, and 13 of
This subsection (c) of section 12 of Commonwealth Act 186, Com. Act 186, as amended. Subsection (b) of Section 11 of
as amended by Republic Acts 660,1616 and 3096, was again Com. Act 186, as amended by Rep. Act 660, provides as
amended by Republic Act 3836 which was enacted on June 22, follows:
1963. The pertinent provisions of subsection (c) of Section 12
of Commonwealth Act 186, as thus amended and reamended, "(b) Survivors benefit. Upon death before he becomes
read as follows: eligible for retirement, his beneficiaries as recorded in the
application for retirement annuity filed with the System shall
"(c) Retirement is likewise allowed to a member, regardless of be paid his own premiums with interest of three per centum
age, who has rendered at least twenty years of service. The per annum, compounded monthly. If on his death he is eligible
benefit shall, in addition to the return of his personal for retirement, then the automatic retirement annuity or the
contributions plus interest and the payment of the annuity chosen by him previously shall be paid accordingly."
corresponding employer's premiums described in subsection
(a) of Section 5 hereof, without interest, be only a gratuity The above-quoted provisions of subsection (b) of Section 11
equivalent to one month's salary for every year of service, of Commonwealth Act 186, as amended by Rep. Act 660,
based on the highest rate received, but not to exceed twenty clearly indicate that there is need for the employee to file an
four months; Provided, That the retiring officer or employee application for retirement insurance benefits when he
has been in the service of the said employer or office for at becomes a member of the GSIS, and he should state in his
least four years, immediately preceding his retirement. xxx application the beneficiary of his retirement insurance. Hence,
xxx xxx the beneficiary named in the life insurance does not
automatically become the beneficiary in the retirement
"The gratuity is payable by the employer or office concerned insurance unless the same beneficiary in the life insurance is
which is hereby authorized to provide the necessary so designated in the application for retirement insurance.
appropriation to pay the same from any unexpended items of
appropriations. Section 24 of Commonwealth Act 186, as amended by Rep.
Act 660, provides for a life insurance fund and for a retirement
"Elective or appointive officials and employees paid gratuity insurance fund. There was no such provision in Com. Act 186
under this subsection shall be entitled to the commutation of before it was amended by Rep. Act 660. Thus, subsections (a)
the unused vacation and sick leave, based on the highest rate and (b) of Section 24 of Commonwealth Act 186, as amended
received, which they may have to their credit at the time of by Rep. Act 660, partly read as follows:
retirement."
"(a) Life insurance fund. This shall consist of
Jose Consuegra died on September 26, 1965, and so at the all premiums for life insurance benefit and/or earnings and
time of his death he had acquired rights under the savings therefrom. It shall meet death claims as they may
abovequoted provisions of subsection (c) of Section 12 of arise or such equities as any member may be entitled to,
Com. Act 186, as finally amended by Rep. Act 3836 on June under the conditions of his policy, and shall maintain the
22, 1963. When Consuegra died on September 26, 1965, he required reserves to the end of guaranteeing the fulfillment of
had to his credit 22.5028 years of service in the government, the life insurance contracts issued by the System . . ."
and pursuant to the above-quoted provisions of subsection (c)
of Section 12 of Com. Act 186, as amended, on the basis of "(b) Retirement insurance fund. This shall consist of
the highest rate of salary received by him which was P282.83 all contributions for retirement insurance benefit and of
per month, he was entitled to receive retirement insurance earnings and savings therefrom. It shall meet annuity
benefits in the amount of P6,304.47. This is the retirement payments an establish the required reserves to the end of
benefits that are the subject of dispute between the guaranteeing the fulfillment of the contracts issued by the
appellants, on the one hand, and the appellee Rosario Diaz, System . . ."
on the other, in the present case. The question posed is: to
whom should this retirement insurance benefits of Jose Thus, We see that the GSIS offers two separate and distinct
Consuegra be paid, because he did not, or failed to, designate systems of benefits to its members one is the life insurance
the beneficiary of his retirement insurance? and the other is the retirement insurance. These two distinct
systems of benefits are paid out from two distinct and
If Consuegra had 22.5028 years of service in the government separate funds that are maintained by the GSIS.
when he died on September 26, 1965, it follows that he
started in the government service sometime during the early In the case of the proceeds of a life insurance, the same are
part of 1943, or before 1943. In 1943 Com. Act 186 was not paid to whoever is named the beneficiary in the life insurance
policy. As in the case of a life insurance provided for in the was contracted in good faith. The lower court has correctly
Insurance Act (Act 2427, as amended), the beneficiary in a life applied the ruling of this Court in the case of Lao, et al. vs.
insurance under the GSIS may not necessarily be an heir of Dee Tim, et al., 45 Phil. 739, as cited in the stipulation of facts
the insured. The insured in a life insurance may designate any and in the decision appealed from. 5 In the recent case of
person as beneficiary unless disqualified to be so under the Gomez vs. Lipana, L-23214, June 30, 1970, 6 this Court, in
provisions of the Civil Code. 4 And in the absence of any construing the rights of two women who were married to the
beneficiary named in the life insurance policy, the proceeds of same man a situation more or less similar to the case of
the insurance will go to the estate of the insured. appellant Basilia Berdin and appellee Rosario Diaz held
"that since the defendant's first marriage has not been
Retirement insurance is primarily intended for the benefit of dissolved or declared void the conjugal partnership
the employee to provide for his old age, or incapacity, after established by that marriage has not ceased. Nor has the first
rendering service in the government for a required number of wife lost or relinquished her status as putative heir of her
years. If the employee reaches the age of retirement, he gets husband under the new Civil Code, entitled to share in his
the retirement benefits even to the exclusion of the estate upon his death should she survive him. Consequently,
beneficiary or beneficiaries named in his application for whether as conjugal partner in a still subsisting marriage or as
retirement insurance. The beneficiary of the retirement such putative heir she has an interest in the husband's share
insurance can only claim the proceeds of the retirement in the property here in dispute.. " And with respect to the right
insurance if the employee dies before retirement. If the of the second wife, this Court observed that although the
employee failed or overlooked to state the beneficiary of his second marriage can be presumed to be void ab initio as it
retirement insurance, the retirement benefits will accrue his was celebrated while the first marriage was still subsisting,
estate and will be given to his legal heirs in accordance with still there is need for judicial declaration of such nullity. And
law, as in the case of a life insurance if no beneficiary is inasmuch as the conjugal partnership formed by the second
named in the insurance policy. marriage was dissolved before judicial declaration of its
nullity, "[t]he only just and equitable solution in this case
It is Our view, therefore, that the respondent GSIS had would be to recognize the right of the second wife to her
correctly acted when it ruled that the proceeds of the share of one-half in the property acquired by her and her
retirement insurance of the late Jose Consuegra should husband, and consider the other half as pertaining to the
divided equally between his first living wife Rosario on the one conjugal partnership of the first marriage."
hand, and his second wife Basilia Berdin his children by her,
on the other; and the lower court did not commit error when it WHEREFORE, the decision appealed from is affirmed. with
confirmed the action of the GSIS, it being accepted as a fact costs against petitioners-appellants. It is so ordered.
that the second marriage of Jose Consuegra to Basilia Berdin

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INSURANCE LAST BATCH 1

Petitioner Tiu failed to Respondents Pedrano and Condor were likewise

We likewise observe from the brief of the State Bonding &

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