G.R. No. 223134 – VICENTE G. HENSON, JR., PETITIONER, v. UCPB GENERAL INSURANCE CO., INC.

,
RESPONDENT

PHILIPPINE SUPREME COURT DECISIONS

EN BANC

G.R. No. 223134, August 14, 2019

VICENTE G. HENSON, JR., PETITIONER, v. UCPB GENERAL INSURANCE CO., INC., RESPONDENT.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated November 13, 2015 and the
Resolution3 dated February 26, 2016 of the Court of Appeals (CA) in CA-G.R. SP. No. 138147, which
affirmed the Orders dated June 10, 20144 and September 22, 20145 of the Regional Trial Court of
Makati City, Branch 138 (RTC) in Civil Case No. 10-885, ruling that the suit filed by respondent UCPB
General Insurance Co., Inc. (respondent) has yet to prescribe, and resultantly, allowing the inclusion of
petitioner Vicente G. Henson, Jr. (petitioner) as party-defendant to the same.

The Facts

From 1989 to 1999, National Arts Studio and Color Lab6 (NASCL) leased the front portion of the ground
floor of a two (2)-storey building located in Sto. Rosario Street, Angeles City, Pampanga, then owned by
petitioner.7 In 1999, NASCL gave up its initial lease and instead, leased the right front portion of the
ground floor and the entire second floor of the said building, and made renovations with the building’s
piping assembly.8 Meanwhile, Copylandia Office Systems Corp. (Copylandia) moved in to the ground
floor.9 On May 9, 2006, a water leak occurred in the building and damaged Copylandia’s various
equipment, causing injury to it in the amount of P2,062,640.00.10 As the said equipment were insured
with respondent,11 Copylandia filed a claim with the former. Eventually, the two parties settled on
November 2, 2006 for the amount of P1,326,342.76.12 This resulted in respondent’s subrogation to the
rights of Copylandia over all claims and demands arising from the said incident.13 On May 20, 2010,
respondent, as subrogee to Copylandia’s rights, demanded from, inter alia, NASCL for the payment of
the aforesaid claim, but to no avail.14 Thus, it filed a complaint for damages15 against NASCL, among
others, before the RTC, docketed as Civil Case No. 10-885.16

Meanwhile, sometime in 2010, petitioner transferred the ownership of the building to Citrinne Holdings,
Inc. (CHI), where he is a stockholder and the President.17

On October 6, 2011, respondent filed an Amended Complaint (Second Amendment),18 impleading CHI
as a party-defendant to the case, as the new owner of the building. However, on April 21, 2014,
respondent filed a Motion to Admit Attached Amended Complaint and Pre-Trial Brief (Third
[A]mendment),19 praying that petitioner, instead of CHI, be impleaded as a party-defendant to the case,
considering that petitioner was then the owner of the building when the water leak damage incident
happened.20

In the said complaints, respondent faults: (a) NASCL for its negligence in not properly maintaining in
good order the comfort room facilities where the renovated building’s piping assembly was utilized; and
(b) CHI/petitioner, as the owner of the building, for neglecting to maintain the building’s drainage
system in good order and in tenantable condition. According to respondent, such negligence on their
part directly resulted in substantial damage to Copylandia’s various equipment amounting to
P2,062,640.00.21

CHI opposed22 the motion principally on the ground of prescription, arguing that since respondent’s
cause of action is based on quasi-delict, it must be brought within four (4) years from its accrual on May
9, 2006. As such, respondent is already barred from proceeding against CHI/petitioner, especially since
the latter never received any prior demand from the former.23

The RTC Ruling

The RTC pointed out that respondent’s cause of action against the party-defendants, including
petitioner, arose when it paid Copylandia’s insurance claim and became subrogated to the rights and
claims of the latter in connection with the water leak damage incident. Since respondent was merely
enforcing its right of subrogation, the prescriptive period is ten (10) years based on an obligation created
by law reckoned from the date of Copylandia’s indemnification, or on November 2, 2006. As such,
respondent’s claim against petitioner has yet to prescribe when it sought to include the latter as party-
defendant on April 21, 2014.26

CHI moved for reconsideration,27 which was, however, denied in an Order28 dated September 22,
2014. Aggrieved with his inclusion as party-defendant to the case, petitioner filed a petition for
certiorari29 under Rule 65 of the Rules of Court before the CA, docketed as CA-G.R. SP. No. 138147.

The CA Ruling

In a Decision30 dated November 13, 2015, the CA affirmed the RTC ruling. It held that respondent’s
cause of action has not yet prescribed since it was not based on quasi-delict, which must be brought
within four (4) years from the date of the occurrence of the negligent act. Rather, it is based on an
obligation created by law, which has a longer prescriptive period often (10) years reckoned from its
accrual.31

Undaunted, petitioner moved for reconsideration,32 but the same was denied in a Resolution33 dated
February 26, 2016; hence, this petition.

The Issue Before the Court

The issue for the Court’s Resolution is whether or not respondent’s claim has yet to prescribe.
The Court’s Ruling

In ruling that respondent’s claim against petitioner has yet to prescribe, the courts a quo cited Vector
Shipping Corporation v. American Home Assurance Company (Vector).34 In that case, therein petitioner
Vector Shipping Corporation (Vector) entered into a contract of affreightment with Caltex Philippines,
Inc. (Caltex) for the transport of the latter’s goods. In connection therewith, Caltex insured its goods
with therein respondent American Home Assurance Company (American Home). During transport on
December 20, 1987, Vector’s ship collided with another vessel and sank, resulting in the total loss of
Caltex’s goods. On July 12, 1988, American Home fully indemnified Caltex for its loss in the amount of
P7,455,421.08, and thereafter, filed a suit against, inter alia, Vector for the recovery of such amount on
March 5, 1992. Initially, the RTC ruled that American Home’s claim against Vector has prescribed as it
was based on a quasi-delict which should have been filed within four (4) years from the time Caltex
suffered a total loss of its goods. However, the CA reversed the ruling, holding that the claim has yet to
prescribe as it is based on a breach of Vector’s contract of affreightment with Caltex, which has a longer
prescriptive period often (10) years, again reckoned from the time of the loss.35 The Court, in Vector,
agreed with the CA that the claim has yet to prescribe, but qualified that “the present action was not
upon a written contract, but upon an obligation created by law,”36viz.:

We concur with the CA’s ruling that respondent’s action did not yet prescribe. The legal provision
governing this case was not Article 1146 of the Civil Code, but Article 1144 of the Civil Code, which
states:

Article 1144. The following actions must be brought within ten years from the time the cause of action
accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

We need to clarify, however, that we cannot adopt the CA’s characterization of the cause of action as
based on the contract of affreightment between Caltex and Vector, with the breach of contract being
the failure of Vector to make the M/T Vector seaworthy, so as to make this action come under Article
1144 (1), supra. Instead, we find and hold that the present action was not upon a written contract, but
upon an obligation created by law. Hence, it came under Article 1144 (2) of the Civil Code. This is
because the subrogation of respondent to the rights of x x x the insured was by virtue of the express
provision of law embodied in Article 2207 of the Civil Code, to wit:

Article 2207. If the plaintiffs property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract complained of,
the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the
person who has violated the contract. If the amount paid by the insurance company does not fully cover
the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing
the loss or injury.
The juridical situation arising under Article 2207 of the Civil Code is well explained in Pan Malayan
Insurance Corporation v. [CA,37] as follows:

Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured
property is destroyed or damaged through the fault or negligence of a party other than the assured,
then the insurer, upon payment to the assured, will be subrogated to the rights of the assured to
recover from the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the
insurer to the assured operates as an equitable assignment to the former of all remedies which the
latter may have against the third party whose negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written
assignment of claim. It accrues simply upon payment of the insurance claim by the insurer [Compañia
Maritima v. Insurance Company of North America, 120 Phil. 998 (1964); Fireman’s Fund Insurance
Company v. Jamila & Company, Inc., 162 Phil. 421 (1976)].

Verily, the contract of affreightment that Caltex and Vector entered into did not give rise to the legal
obligation of Vector and Soriano to pay the demand for reimbursement by respondent because it
concerned only the agreement for the transport of Caltex’s petroleum cargo. As the Court has aptly put
it in Pan Malayan Insurance Corporation v. [CA], supra, respondent’s right of subrogation pursuant to
Article 2207, supra, was “not dependent upon, nor d[id] it grow out of, any privity of contract or upon
written assignment of claim [but] accrue[d] simply upon payment of the insurance claim by the insurer.”

Considering that the cause of action accrued as of the time respondent actually indemnified Caltex in
the amount of P7,455,421.08 on July 12, 1988, the action was not yet barred by the time of the filing of
its complaint on March 5, 1992, which was well within the 10-year period prescribed by Article 1144 of
the Civil Code.38 (Emphases and underscoring supplied)

In Vector, the Court held that the insured’s (i.e., American Home’s) claim against the debtor (i.e., Vector)
was premised on the right of subrogation pursuant to Article 2207 of the Civil Code and hence, an
obligation created by law. While indeed American Home was entitled to claim against Vector by virtue of
its subrogation to the rights of the insured (i.e., Caltex), the Court failed to discern that no new
obligation was created between American Home and Vector for the reason that a subrogee only steps
into the shoes of the subrogor; hence, the subrogee-insurer only assumes the rights of the subrogor-
insured based on the latter’s original obligation with the debtor.

To expound, subrogation’s legal effects under Article 2207 of the Civil Code are primarily between the
subrogee-insurer and the subrogor-insured: by virtue of the former’s payment of indemnity to the latter,
it is able to acquire, by operation of law, all rights of the subrogor-insured against the debtor. The
debtor is a stranger to this juridical tie because it only remains bound by its original obligation to its
creditor whose rights, however, have already been assumed by the subrogee. In Vector’s case, American
Home was able to acquire ipso jure all the rights Caltex had against Vector under their contract of
affreightment by virtue of its payment of indemnity. If at all, subrogation had the effect of obliging
Caltex to respect this assumption of rights in that it must now recognize that its rights against the
debtor, i.e., Vector, had already been transferred to American Home as the subrogee-insurer. In other
words, by operation of Article 2207 of the Civil Code, Caltex cannot deny American Home of its right to
claim against Vector. However, the subrogation of American Home to Caltex’s rights did not alter the
original obligation between Caltex and Vector.

Accordingly, the Court, in Vector, erroneously concluded that “the cause of action [against Vector]
accrued as of the time [American Home] actually indemnified Caltex in the amount of P7,455,421.08 on
July 12, 1988.”39 Instead, it is the subrogation of rights between Caltex and American Home which arose
from the time the latter paid the indemnity therefor. Meanwhile, the accrual of the cause of action that
Caltex had against Vector did not change because, as mentioned, no new obligation was created as
between them by reason of the subrogation of American Home. The cause of action against Vector
therefore accrued at the time it breached its original obligation with Caltex whose right of action just so
happened to have been assumed in the interim by American Home by virtue of subrogation. “[A] right of
action is the right to presently enforce a cause of action, while a cause of action consists of the operative
facts which give rise to such right of action.”40

The foregoing application hews more with the fundamental principles of civil law, especially on the well-
established doctrines on subrogation. Article 1303 of the Civil Code states that “[s]ubrogation transfers
to the person subrogated the credit with all the rights thereto appertaining, either against the debtor or
against third persons x x x.” In Loadstar Shipping Company, Inc. V. Malayan Insurance Company, Inc.,41
the Court had clearly explained that because of the nature of subrogation as a mode of “creditor-
substitution,” the rights of a subrogee cannot be superior to the rights possessed by a subrogor, viz.:

The rights of a subrogee cannot be superior to the rights possessed by a subrogor. “Subrogation is the
substitution of one person in the place of another with reference to a lawful claim or right, so that he
who is substituted succeeds to the rights of the other in relation to a debt or claim, including its
remedies or securities. The rights to which the subrogee succeeds are the same as, but not greater than,
those of the person for whom he is substituted, that is, he cannot acquire any claim, security or remedy
the subrogor did not have. In other words, a subrogee cannot succeed to a right not possessed by the
subrogor. A subrogee in effect steps into the shoes of the insured and can recover only if the insured
likewise could have recovered.”

Consequently, an insurer indemnifies the insured based on the loss or injury the latter actually suffered
from. If there is no loss or injury, then there is no obligation on the part of the insurer to indemnify the
insured. Should the insurer pay the insured and it turns out that indemnification is not due, or if due, the
amount paid is excessive, the insurer takes the risk of not being able to seek recompense from the
alleged wrongdoer. This is because the supposed subrogor did not possess the right to be indemnified
and therefore, no right to collect is passed on to the subrogee.42 (Emphases and underscoring supplied)
Despite its error, Vector had aptly cited the case of Pan Malayan Insurance Corporation v. CA (Pan
Malayan),43 wherein it was explained that subrogation, under Article 2207 of the Civil Code, operates as
a form of “equitable assignment”44 whereby “the insurer, upon payment to the assured, will be
subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has
been obligated to pay.”45It is characterized as an “equitable assignment” since it is an assignment of
credit without the need of consent – as it was, in fact, mentioned in Pan Malayan, “[t]he right of
subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written
assignment of claim. It accrues simply upon payment of the insurance claim by the insurer.”46It is only
to this extent that the equity aspect of subrogation must be understood. Indeed, subrogation under
Article 2207 of the Civil Code allows the insurer, as the new creditor who assumes ipso jure the old
creditor’s rights without the need of any contract, to go after the debtor, but it does not mean that a
new obligation is created between the debtor and the insurer. Properly speaking, the insurer, as the
new creditor, remains bound by the limitations of the old creditor’s claims against the debtor, which
includes, among others, the aspect of prescription. Hence, the debtor’s right to invoke the defense of
prescription cannot be circumvented by the mere expedient of successive payments of certain insurers
that purport to create new obligations when, in fact, what remains subsisting is only the original
obligation. Verily, equity should not be stretched to the prejudice of another.

To better understand the concept of legal subrogation under Article 2207 of the Civil Code as a form of
“equitable assignment,” it deserves mentioning that there exist intricate differences between
assignment and subrogation, both in their legal and conventional senses. In Ledonio v. Capitol
Development Corporation:47

An assignment of credit has been defined as an agreement by virtue of which the owner of a credit
(known as the assignor), by a legal cause – such as sale, dation in payment or exchange or donation –
and without need of the debtor’s consent, transfers that credit and its accessory rights to another
(known as the assignee), who acquires the power to enforce it, to the same extent as the assignor could
have enforced it against the debtor.

On the other hand, subrogation, by definition, is the transfer of all the rights of the creditor to a third
person, who substitutes him in all his rights. It may either be legal or conventional. Legal subrogation is
that which takes place without agreement but by operation of law because of certain acts. Conventional
subrogation is that which takes place by agreement of parties.

Although it may be said that the effect of the assignment of credit is to subrogate the assignee in the
rights of the original creditor, this Court still cannot definitively rule that assignment of credit and
conventional subrogation are one and the same.

A noted authority on civil law provided a discourse on the difference between these two transactions, to
wit –
Conventional Subrogation and Assignment of Credits. – In the Argentine Civil Code, there is essentially
no difference between conventional subrogation and assignment of credit. The subrogation is merely
the effect of the assignment. In fact[,] it is expressly provided (Article 769) that conventional redemption
shall be governed by the provisions on assignment of credit.

Under our Code, however, conventional subrogation is not identical to assignment of credit. In the
former, the debtor’s consent is necessary; in the latter, it is not required. Subrogation extinguishes an
obligation and gives rise to a new one; assignment refers to the same right which passes from one
person to another. The nullity of an old obligation may be cured by subrogation, such that the new
obligation will be perfectly valid; but the nullity of an obligation is not remedied by the assignment of
the creditor’s right to another. X x x

This Court has consistently adhered to the foregoing distinction between an assignment of credit and a
conventional subrogation. Such distinction is crucial because it would determine the necessity of the
debtor’s consent. In an assignment of credit, the consent of the debtor is not necessary in order that the
assignment may fully produce the legal effects. What the law requires in an assignment of credit is not
the consent of the debtor, but merely notice to him as the assignment takes effect only from the time he
has knowledge thereof. A creditor may, therefore, validly assign his credit and its accessories without
the debtor’s consent. On the other hand, conventional subrogation requires an agreement among the
parties concerned – the original creditor, the debtor, and the new creditor. It is a new contractual
relation based on the mutual agreement among all the necessary parties.48 (Emphases and
underscoring supplied)

As discussed above, in an assignment of credit, the consent of the debtor is not necessary in order that
the assignment may fully produce legal effects (as notice to the debtor suffices); also, in assignment, no
new contractual relation between the assignee/new creditor and debtor is created. On the other hand,
in conventional subrogation, an agreement between all the parties concerning the substitution of the
new creditor is necessary. Meanwhile, legal subrogation produces the same effects as assignment and
also, no new obligation is created between the subrogee/new creditor and debtor. As observed in
commentaries on the subject:

The effect of legal subrogation is to transfer to the new creditor the credit and all the rights and actions
that could have been exercised by the former creditor either against the debtor or against third persons,
be they guarantors or mortgagors. Simply stated, except only for the change in the person of the
creditor, the obligation subsists in all respects as before the novation.49 (Emphasis supplied)

Unlike assignment, however, legal subrogation, to produce effects, does not need to be agreed upon by
the subrogee and subrogor, unlike the need of an agreement between the assignee and assignor. As
mentioned, “[l]egal subrogation is that which takes place without agreement but by operation of law
because of certain acts,”50 as in the case of payment of the insurer under Article 2207 of the Civil Code.

In sum, as legal subrogation is not equivalent to conventional subrogation, no new obligation is created
by virtue of the insurer’s payment under Article 2207 of the Civil Code; also, as legal subrogation is not
the same as an assignment of credit (as the former is in fact, called an “equitable assignment”), no
privity of contract is needed to produce its legal effects. Accordingly, “the insurer can take nothing by
subrogation but the rights of the insured, and is subrogated only to such rights as the insured possesses.
This principle has been frequently expressed in the form that the rights of the insurer against the
wrongdoer cannot rise higher than the rights of the insured against such wrongdoer, since the insurer as
subrogee, in contemplation of law, stands in the place of the insured and succeeds to whatever rights he
may have in the matter. Therefore, any defense which a wrongdoer has against the insured is good
against the insurer subrogated to the rights of the insured,”51 and this would clearly include the
defense of prescription.

Based on the above-discussed considerations, the Court must heretofore abandon the ruling in Vector
that an insurer may file an action against the tortfeasor within ten (10) years from the time the insurer
indemnifies the insured. Following the principles of subrogation, the insurer only steps into the shoes of
the insured and therefore, for purposes of prescription, inherits only the remaining period within which
the insured may file an action against the wrongdoer. To be sure, the prescriptive period of the action
that the insured may file against the wrongdoer begins at the time that the tort was committed and the
loss/injury occurred against the insured. The indemnification of the insured by the insurer only allows it
to be subrogated to the former’s rights, and does not create a new reckoning point for the cause of
action that the insured originally has against the wrongdoer.

Be that as it may, it should, however, be clarified that this Court’s abandonment of the Vector doctrine
should be prospective in application for the reason that judicial decisions applying or interpreting the
laws or the Constitution, until reversed, shall form part of the legal system of the Philippines.52 Unto
this Court devolves the sole authority to interpret what the law means, and all persons are bound to
follow its interpretation. As explained in De Castro v. Judicial and Bar Council:53

Judicial decisions assume the same authority as a statute itself and, until authoritatively abandoned,
necessarily become, to the extent that they are applicable, the criteria that must control the actuations,
not only of those called upon to abide by them, but also of those duty-bound to enforce obedience to
them.54

Hence, while the future may ultimately uncover a doctrine’s error, it should be, as a general rule,
recognized as a “good law” prior to its abandonment.55 In Philippine International Trading Corporation
Commission on Audit,56 it was elucidated that:

It is consequently clear that a judicial interpretation becomes a part of the law as of the date that law
was originally passed, subject only to the qualification that when a doctrine of this Court is overruled
and a different view is adopted, and more so when there is a reversal thereof, the new doctrine should
be applied prospectivelv and should not apply to parties who relied on the old doctrine and acted in
good faith. To hold otherwise would be to deprive the law of its quality of fairness and justice then, if
there is no recognition of what had transpired prior to such adjudication.57 (Emphasis and underscoring
supplied)

In Pesca v. Pesca58 the Court further elaborated:

The “doctrine of stare decisis,” ordained in Article 8 of the Civil Code, expresses that judicial decisions
applying or interpreting the law shall form part of the legal system of the Philippines. The rule follows
the settled legal maxim – “legis interpretado legis vim obtinet” – that the interpretation placed upon the
written law by a competent court has the force of law. The interpretation or construction placed by the
courts establishes the contemporaneous legislative intent of the law. The [said interpretation or
construction] would thus constitute a part of that law as of the date the statute is enacted. It is only
when a prior ruling of this Court finds itself later overruled, and a different view is adopted, that the new
doctrine may have to be applied prospectively in favor of parties who have relied on the old doctrine
and have acted in good faith in accordance therewith under the familiar rule of “lex prospicit, non
respicit.”59 (Emphasis and underscoring supplied)

With these in mind, the Court therefore sets the following guidelines relative to the application of
Vector and this Decision vis-a-vis the prescriptive period in cases where the insurer is subrogated to the
rights of the insured against the wrongdoer based on a quasi-delict:

1. For actions of such nature that have already been filed and are currently pending before the courts at
the time of the finality of this Decision, the rules on prescription prevailing at the time the action is filed
would apply. Particularly:

(a) For cases that were filed by the subrogee-insurer during the applicability of the Vector ruling (i.e.,
from Vector’s finality on August 15, 201360 up until the finality of this Decision), the prescriptive period
is ten (10) years from the time of payment by the insurer to the insured, which gave rise to an obligation
created by law.

Rationale: Since the Vector doctrine was the prevailing rule at this time, issues of prescription must be
resolved under Vector’s parameters.

(b) For cases that were filed by the subrogee-insurer prior to the applicability of the Vector ruling (i.e.,
before August 15, 2013), the prescriptive period is four (4) years from the time the tort is committed
against the insured by the wrongdoer.

Rationale: The Vector doctrine, which espoused unique rules on legal subrogation and prescription as
aforedescribed, was not yet a binding precedent at this time; hence, issues of prescription must be
resolved under the rules prevailing before Vector, which, incidentally, are the basic principles of legal
subrogation vis-a-vis prescription of actions based on quasi-delicts.

2. For actions of such nature that have not yet been filed at the time of the finality of this Decision:
(a) For cases where the tort was committed and the consequent loss/injury against the insured occurred
prior to the finality of this Decision, the subrogee-insurer is given a period not exceeding four (4) years
from the time of the finality of this Decision to file the action against the wrongdoer; provided, that in all
instances, the total period to file such case shall not exceed ten (10) years from the time the insurer is
subrogated to the rights of the insured.

Rationale: The erroneous reckoning and running of the period of prescription pursuant to the Vector
doctrine should not be taken against any and all persons relying thereon because the same were based
on the then-prevailing interpretation and construction of the Court. Hence, subrogees-insurers, who are,
effectively, only now notified of the abandonment of Vector, must be given the benefit of the present
doctrine on subrogation as ruled in this Decision.

However, the benefit of the additional period (i.e., not exceeding four [4] years) under this Decision
must not result in the insured being given a total of more than ten (10) years from the time the insurer is
subrogated to the rights of the insured (i.e., the old prescriptive period in Vector); otherwise, the insurer
would be able to unduly propagate its right to file the case beyond the ten (10)-year period accorded by
Vector to the prejudice of the wrongdoer.

(b) For cases where the tort was committed and the consequent loss/injury against the insured occurred
only upon or after the finality of this Decision, the Vector doctrine would hold no application. The
prescriptive period is four (4) years from the time the tort is committed against the insured by the
wrongdoer.

Rationale: Since the cause of action for quasi-delict and the consequent subrogation of the insurer
would arise after due notice of Vector’s abandonment, all persons would now be bound by the present
doctrine on subrogation as ruled in this Decision.

Application to the Case at Bar

In this case, it is undisputed that the water leak damage incident, which gave rise to Copylandia’s cause
of action against any possible defendants, including NASCL and petitioner, happened on May 9, 2006. As
this incident gave rise to an obligation classified as a quasi-delict, Copylandia would have only had four
(4) years, or until May 9, 2010, within which to file a suit to recover damages.61 When Copylandia’s
rights were transferred to respondent by virtue of the latter’s payment of the former’s insurance claim
on November 2, 2006, as evidenced by the Loss and Subrogation Receipt,62 respondent was likewise
bound by the same prescriptive period. Since it was only on: (a) May 20, 2010 when respondent made
an extrajudicial demand to NASCL, and thereafter, filed its complaint; (b) October 6, 2011 when
respondent amended its complaint to implead CHI as party-defendant; and (c) April 21, 2014 when
respondent moved to further amend the complaint in order to implead petitioner as party-defendant in
lieu of CHI, prescription – if adjudged under the present parameters of legal subrogation under this
Decision – should have already set in.

However, it must be recognized that the prevailing rule applicable to the pertinent events of this case is
Vector. Pursuant to the guidelines stated above, specifically under guideline 1 (a), the Vector doctrine –
which was even relied upon by the courts a quo – would then apply. Hence, as the amended
complaint63 impleading petitioner was filed on April 21, 2014, which is within ten (10) years from the
time respondent indemnified Copylandia for its injury/loss, i.e., on November 2, 2006, the case cannot
be said to have prescribed under Vector. As such, the Court is constrained to deny the instant petition.

WHEREFORE, the petition is DENIED. The Decision dated November 13, 2015 and the Resolution dated
February 26, 2016 of the Court of Appeals in CA-G.R. SP No. 138147 are hereby AFFIRMED with
MODIFICATION based on the guidelines stated in this Decision.

SO ORDERED.

Bersamin, C. J., I dissent.

Carpio, (Senior Associate Justice), Leonen, Gesmundo, J. Reyes, Jr., Carandang, Inting, and Zalameda, JJ.,
concur.