Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-16215 June 29, 1963

SIMEON DEL ROSARIO, plaintiff-appellee, vs.THE EQUITABLE INSURANCE AND CASUALTY CO., INC., defendant-appellant.

Vicente J. Francisco and Jose R. Francisco for plaintiff-appellee.K. V. Faylona for defendant-appellant.

PAREDES, J.:

On February 7, 1957, the defendant Equitable Insurance and Casualty Co., Inc., issued Personal Accident Policy No. 7136 on the life of Francisco del Rosario, alias Paquito Bolero, son of herein plaintiff-appellee, binding itself to pay the sum of P1,000.00 to P3,000.00, as indemnity for the death of the insured. The pertinent provisions of the Policy, recite:

Part I. Indemnity For Death

If the insured sustains any bodily injury which is effected solely through violent, external, visible and accidental means, and which shall result, independently of all other causes and within sixty (60) days from the occurrence thereof, in the Death of the Insured, the Company shall pay the amount set opposite such injury:

Section 1. Injury sustained other than those specified below unless excepted hereinafter. . . . . . . .

P1,000.00

Section 2. Injury sustained by the wrecking or disablement of a railroad passenger car or street railway car in or on which the Insured is travelling as a farepaying passenger. . . . . . . .

P1,500.00

Section 3. Injury sustained by the burning of a church, theatre, public library or municipal administration building while the Insured is therein at the commencement of the fire. . . . . . . .

P2,000.00

Section 4. Injury sustained by the wrecking or disablement of a regular passenger elevator car in which the Insured is being conveyed as a passenger (Elevator in mines excluded) P2,500.00

Section 5. Injury sustained by a stroke of lightning or by a cyclone. . . . . . . .

P3,000.00x x x x x x x x x

Part VI. Exceptions

This policy shall not cover disappearance of the Insured nor shall it cover Death, Disability, Hospital fees, or Loss of Time, caused to the insured:

. . . (h) By drowning except as a consequence of the wrecking or disablement in the Philippine waters of a passenger steam or motor vessel in which the Insured is travelling as a farepaying passenger; . . . .

A rider to the Policy contained the following:

IV. DROWNING

It is hereby declared and agreed that exemption clause Letter (h) embodied in PART VI of the policy is hereby waived by the company, and to form a part of the provision covered by the policy.

On February 24, 1957, the insured Francisco del Rosario, alias Paquito Bolero, while on board the motor launch "ISLAMA" together with 33 others, including his beneficiary in the Policy, Remedios Jayme, were forced to jump off said launch on account of fire which broke out on said vessel, resulting in the death of drowning, of the insured and beneficiary in the waters of Jolo. 1wph1.t

On April 13, 1957, Simeon del Rosario, father of the insured, and as the sole heir, filed a claim for payment with defendant company, and on September 13, 1957, defendant company paid to him (plaintiff) the sum of P1,000.00, pursuant to Section 1 of Part I of the policy. The receipt signed by plaintiff reads

RECEIVED of the EQUITABLE INSURANCE & CASUALTY CO., INC., the sum of PESOS ONE THOUSAND (P1,000.00) Philippine Currency, being settlement in full for all claims and demands against said Company as a result of an accident which occurred on February 26, 1957, insured under out ACCIDENT Policy No. 7136, causing the death of the Assured.

In view of the foregoing, this policy is hereby surrendered and CANCELLED.

LOSS COMPUTATION

Amount of Insurance P1,000.00__________v v v v v

On the same date (September 13, 1957), Atty. Vicente J. Francisco, wrote defendant company acknowledging receipt by his client (plaintiff herein), of the P1,000.00, but informing said company that said amount was not the correct one. Atty. Francisco claimed

The amount payable under the policy, I believe should be P1,500.00 under the provision of Section 2, part 1 of the policy, based on the rule of pari materia as the death of the insured occurred under the circumstances similar to that provided under the aforecited section.

Defendant company, upon receipt of the letter, referred the matter to the Insurance Commissioner, who rendered an opinion that the liability of the company was only P1,000.00, pursuant to Section 1, Part I of the Provisions of the policy (Exh. F, or 3). Because of the above opinion, defendant insurance company refused to pay more than P1,000.00. In the meantime, Atty. Vicente Francisco, in a subsequent letter to the insurance company, asked for P3,000.00 which the Company refused, to pay. Hence, a complaint for the recovery of the balance of P2,000.00 more was instituted with the Court of First Instance of Rizal (Pasay City, Branch VII), praying for it further sum of P10,000.00 as attorney's fees, expenses of litigation and costs.

Defendant Insurance Company presented a Motion to Dismiss, alleging that the demand or claim is set forth in the complaint had already been released, plaintiff having received the full amount due as appearing in policy and as per opinion of the Insurance Commissioner. An opposition to the motion to dismiss, was presented by plaintiff, and other pleadings were subsequently file by the parties. On December 28, 1957, the trial court deferred action on the motion to dismiss until termination of the trial of the case, it appearing that the ground thereof was not indubitable. In the Answer to the complaint, defendant company practically admitted all the allegations therein, denying only those which stated that under the policy its liability was P3,000.00.

On September 1, 1958, the trial court promulgated an Amended Decision, the pertinent portions of which read

x x x x x x x x x

Since the contemporaneous and subsequent acts of the parties show that it was not their intention that the payment of P1,000.00 to the plaintiff and the signing of the loss receipt exhibit "1" would be considered as releasing the defendant completely from its liability on the policy in question, said intention of the parties should prevail over the contents of the loss receipt "1" (Articles 1370 and 1371, New Civil Code).

". . . . Under the terms of this policy, defendant company agreed to pay P1,000.00 to P3,000.00 as indemnity for the death of the insured. The insured died of drowning. Death by drowning is covered by the policy the pertinent provisions of which reads as follows:

x x x x x x x x x

"Part I of the policy fixes specific amounts as indemnities in case of death resulting from "bodily injury which is effected solely thru violence, external, visible and accidental means" but, Part I of the Policy is not applicable in case of death by drowning because death by drowning is not one resulting from "bodily

injury which is affected solely thru violent, external, visible and accidental means" as "Bodily Injury" means a cut, a bruise, or a wound and drowning is death due to suffocation and not to any cut, bruise or wound."

x x x x x x x x x

Besides, on the face of the policy Exhibit "A" itself, death by drowning is a ground for recovery apart from the bodily injury because death by bodily injury is covered by Part I of the policy while death by drowning is covered by Part VI thereof. But while the policy mentions specific amounts that may be recovered for death for bodily injury, yet, there is not specific amount mentioned in the policy for death thru drowning although the latter is, under Part VI of the policy, a ground for recovery thereunder. Since the defendant has bound itself to pay P1000.00 to P3,000.00 as indemnity for the death of the insured but the policy does not positively state any definite amount that may be recovered in case of death by drowning, there is an ambiguity in this respect in the policy, which ambiguity must be interpreted in favor of the insured and strictly against the insurer so as to allow greater indemnity.

x x x x x x x x x

. . . plaintiff is therefore entitled to recover P3,000.00. The defendant had already paid the amount of P1,000.00 to the plaintiff so that there still remains a balance of P2,000.00 of the amount to which plaintiff is entitled to recover under the policy Exhibit "A".

The plaintiff asks for an award of P10,000.00 as attorney's fees and expenses of litigation. However, since it is evident that the defendant had not acted in bad faith in refusing to pay plaintiff's claim, the Court cannot award plaintiff's claim for attorney's fees and expenses of litigation.

IN VIEW OF THE FOREGOING, the Court hereby reconsiders and sets aside its decision dated July 21, 1958 and hereby renders judgment, ordering the defendant to pay plaintiff the sum of Two Thousand (P2,000.00) Pesos and to pay the costs.

The above judgment was appealed to the Court of Appeals on three (3) counts. Said Court, in a Resolution dated September 29, 1959, elevated the case to this Court, stating that the genuine issue is purely legal in nature.

All the parties agree that indemnity has to be paid. The conflict centers on how much should the indemnity be. We believe that under the proven facts and circumstances, the findings and conclusions of the trial court, are well taken, for they are supported by the generally accepted principles or rulings on insurance, which enunciate that where there is an ambiguity with respect to the terms and conditions of the policy, the same will be resolved against the one responsible thereof. It should be recalled in this connection, that generally, the insured, has little, if any, participation in the preparation of the policy, together with the drafting of its terms and Conditions. The interpretation of obscure stipulations in a contract should not favor the party who cause the obscurity (Art. 1377, N.C.C.), which, in the case at bar, is the insurance company.

. . . . And so it has been generally held that the "terms in an insurance policy, which are ambiguous, equivocal or uncertain . . . are to be construed strictly against, the insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where a forfeiture is involved," (29 Am. Jur. 181) and the reason for this rule is that the "insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by expert and legal advisers employed by, and acting exclusively in the interest of, the insurance company" (44 C.J.S. 1174). Calanoc v. Court of Appeals, et al., G.R. No. L-8151, Dec. 16, 1955.

. . . . Where two interpretations, equally fair, of languages used in an insurance policy may be made, that which allows the greater indemnity will prevail. (L'Engel v. Scotish Union & Nat. F. Ins. Co., 48 Fla. 82, 37 So. 462, 67 LRA 581 111 Am. St. Rep. 70, 5 Ann. Cas. 749).

At any event, the policy under consideration, covers death or disability by accidental means, and the appellant insurance company agreed to pay P1,000.00 to P3,000.00. is indemnity for death of the insured.

In view of the conclusions reached, it would seem unnecessary to discuss the other issues raised in the appeal.

The judgment appealed from is hereby affirmed. Without costs.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-23491 July 31, 1968

TAURUS TAXI CO., INC., FELICITAS V. MONJE, ET AL., plaintiffs-appellees, vs.THE CAPITAL INSURANCE & SURETY CO., INC., defendant-appellant.

Vergara and Dayot for plaintiffs-appellees. Achacoso, Nera and Ocampo for defendant-appellant.

FERNANDO, J.:

The principal legal question in this appeal from a lower court decision, ordering defendant-appellant The Capital Insurance & Surety Co., Inc. to pay the plaintiff-appellee Taurus Taxi Co., Inc. as well as plaintiffs-appellees, widow and children of the deceased Alfredo Monje, who, in his lifetime, was employed as a taxi driver of such plaintiff-appellee, "the sum of P5,000.00 with interest thereon at the legal rate from the filing of the complaint until fully paid," with P500.00 as attorney's fees and the costs of the suit, is whether or not a provision in the insurance contract that defendant-appellant will indemnify any authorized driver provided that [he] is not entitled to any indemnity under any other policy, it being shown that the deceased was paid his workman's compensation from another insurance policy, should defeat such a right to recover under the insurance contract subject of this suit. The lower court answered in the negative. Its holding cannot be successfully impugned.

The appealed decision stated at the outset that the motion for judgment on the pleadings filed by the plaintiffs was granted, the defendant having no objection and the issue presented being capable of resolution without the need of presenting any evidence. Then the decision continues: "Alfredo Monje, according to the complaint, was employed as taxi driver by the plaintiff Taurus Taxi Co., Inc. On December 6, 1962, the taxi he was driving collided with a Transport Taxicab at the intersection of Old Sta. Mesa and V. Mapa Streets, Manila, resulting in his death. At the time of the accident, there was subsisting and in force Commercial Vehicle Comprehensive Policy No. 101, 737 ... issued by the defendant to the Taurus Taxi Co., Inc. The amount for which each passenger, including the driver, is insured is P5,000.00. After the issuance of policy No. 101, 737, the defendant issued the Taurus Taxi Co., Inc. Indorsement No. 1 which forms part of the policy ... " 1 Reference was then made to plaintiff-appellee Felicitas Monje being the widow of the taxi driver, the other plaintiffs-appellees with the exception of the Taurus Taxi Co., Inc., being the children of the couple. After which it was noted that plaintiff Taurus Taxi Co., Inc. made representations "for the payment of the insurance benefit corresponding to her and her children since it was issued in its name, benefit corresponding to her and her children, ... but despite demands ... the defendant refused and still refuses to pay them." 2

On the above facts, the liability apparently clear, the defenses interposed by defendant insurance company being in the opinion of the lower court without merit, the aforesaid judgment was rendered. This being a direct appeal, to us on questions of law, the facts as found by the lower court cannot be controverted.

Defendant-appellant Capital Insurance & Surety Co. Inc. alleged as the first error of the lower court its failure to hold "that in view of the fact that the deceased Alfredo Monje was entitled to indemnity under another insurance policy issued by Ed. A. Keller Co., Ltd., the heirs of the said deceased are not entitled to indemnity under the insurance policy issued by appellant for the reason that the latter policy contains a stipulation that "the company will indemnify any authorized driver provided that such authorized driver is not entitled to indemnity under any other policy." " 3 In the discussion of the above error, defendant-appellant stated the following: "The facts show that at the time of his death, the deceased Alfredo Monje, as authorized driver and employee of plaintiff Taurus Taxi Co., Inc., was entitled to indemnity under another insurance policy, then subsisting, which was Policy No. 50PH-1605 issued by Ed. A. Keller Co., Ltd. to plaintiff Taurus Taxi Co., Inc. As a matter of fact, the indemnity to which the deceased Alfredo Monje was entitled under the said Policy No. 50PH-1605 was paid by Ed. A. Keller Co., Ltd. to the heirs of Alfredo Monje on December 28, 1962, as evidenced by the records of W.C.C. Case No. A88637 entitled "Felicitas V. Monje, et al. vs. Taurus Taxi Co., Inc.", Regional Office No. 4, Department of Labor, Manila ... " 4

The above defense, based on a fact which was not disputed, was raised and rightfully rejected by the lower court. From its own version, defendant-appellant would seek to escape liability on the plea that the workman's compensation to which the deceased driver was rightfully entitled was settled by the employer through a policy issued by another insurance firm. What was paid therefore was not indemnity but compensation.

Since what is prohibited by the insurance policy in question is that any "authorized driver of plaintiff Taurus Taxi Co., Inc." should not be "entitled to any indemnity under any policy", it would appear indisputable that the obligation of defendant-appellant under the policy had not in any wise been extinguished. It is too well-settled to need the citation of authorities that what the law requires enters into and forms part of every contract. The Workmen's Compensation Act, explicitly requires that an employee suffering any injury or death arising out of or in the course of employment be compensated. The fulfillment of such statutory obligation cannot be the basis for evading the clear, explicit and mandatory terms of a policy.

In the same way as was held in Benguet Consolidated, Inc. v. Social Security System 5 that sickness benefits under the Social Security Act may be recovered simultaneously with disability benefits under the Workmen's Compensation Act, the previous payment made of the compensation under such legislation is no obstacle by virtue of a clause like that invoked by defendant-appellant to the payment of indemnity under the insurance policy.

Assuming however that there is a doubt concerning the liability of defendant-appellant insurance firm, nonetheless, it should be resolved against its pretense and in favor of the insured. It was the holding in Eagle Star Insurance, Ltd. v. Chia Yu 6 that courts are to regard "with extreme jealousy" limitations of liability found in insurance policies and to construe them in such a way as to preclude the insurer from non-compliance with his obligation. In other words, to quote a noted authority on the subject, "a contract of insurance couched in language chosen by the insurer is, if open to the construction contended for by the insured, to be construed most strongly, or strictly, against the insurer and liberally in favor of the contention of the insured, which means in accordance with the rule contra proferentem." 7 Enough has been said therefore to dispose of the first assigned error.

The point is made in the second alleged error that the lower court ought to have held "that by joining the heirs of Alfredo Monje as a party plaintiff, plaintiff Taurus Taxi Co., Inc. committed a breach of policy condition and thus forfeited whatever benefits, if any, to which it might be entitled under appellant's policy." 8 The basis for such an allegation is one of the conditions set forth in the policy. Thus: " "5. No admission, offer, promise or payment shall be made by or on behalf of the insured without the written consent of the Company which shall be entitled if it so desires to take over and conduct in his name the defense or settlement of any claim or to prosecute in his name for its own benefit any claim for indemnity or damages or otherwise and shall have full discretion in the conduct of any proceedings and in the settlement of any claim and the Insured shall give all such information and assistance as the Company may require ... " 9

Such a plea is even less persuasive. It is understandable then why the lower court refused to be swayed by it. The plaintiff Taurus Taxi Co., inc. had to join the suit on behalf of the real beneficiaries, the heirs of the deceased driver, who are the other plaintiffs as it was a party to the policy.

Moreover, as noted in the decision appealed from: "The institution of the action cannot possibly be construed as an admission, offer, promise, or payment by the company, for it merely seeks to enforce, by court action, the only legal remedy available to it, its rights under the contract of insurance to which it is a party. To consider, furthermore, the commencement of an action by the insured, alone or with others, as a breach of the policy, resulting in forfeiture of the benefits thereunder, to place in the hands of the insurer the power to nullify at will the whole contract of insurance by the simple expedient of refusing to make payment and compelling the insured to bring a suit to enforce the policy." 10

To so construe the policy to yield a contrary result is to put a premium on technicality. If such a defense is not frowned upon and rejected, the time will come when the confidence on the part of the public in the good faith of insurance firms would be minimized, if not altogether lost. Such a deplorable consequence ought to be avoided and a construction of any stipulation that would be fraught with such a risk repudiated. What the lower court did then cannot be characterized as error.

The third error assigned, namely, that the lower court should have considered the filing of the complaint against defendant-appellant as unjust and unwarranted, is, in the light of the above, clearly without merit.

WHEREFORE, the appealed decision of the lower court ordering defendant-appellant "to pay the plaintiffs the sum of P5,000.00 with interest thereon at the legal rate from the filing of the complaint until fully paid, P500.00 as attorney's fees," 11 with costs is affirmed. Costs against defendant-appellant.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-25920 January 30, 1970CCC INSURANCE CORPORATION, petitioner, vs.COURT OF APPEALS (Fourth Division) and CARLOS F. ROBES, respondents.Kalaw and Felipe for petitioner.

Adalia B. Francisco for respondents.

REYES, J.B.L., J.:Petition for review of the decision of the Court of Appeals, affirming that of the Court of First Instance of Rizal (Quezon City) allowing insurance indemnification of plaintiff for his damaged car and the payment of attorney's fees.

The following facts are not in dispute:

On 1 March 1961, Carlos F. Robes took an insurance, with the CCC Insurance Corporation, on his Dodge Kingsway car against loss or damage through accident for an amount not exceeding P8,000.00 (Policy No. M1156). On 25 June 1961, and during the effectivity of the policy, the insured vehicle, while being driven by the owner's driver, became involved in a vehicular collision along Rizal Avenue Extension, Potrero, Malabon, Rizal. The car was damaged, and the repair was estimated to cost P5,300.00.

As the insurance company refused either to pay for the repair or to cause the restoration of the car to its original condition, Robes instituted Civil Case No. Q-6063 in the Court of First Instance of Rizal for recovery not only of the amount necessary for the repair of the insured car but also of actual and moral damages, attorneys' fees and costs. Resisting plaintiff's claim, the insurance company disclaimed liability for payment, alleging that there had been violation of the insurance contract because the one driving the car at the time of the incident was not an "authorized driver."

After due hearing, judgment was rendered for the plaintiff, and defendant insurer was ordered to pay unto the former the cost of repair of the car in the sum of P5,031.28; the sum of P150.00, for the hauling and impounding of the car at the repair shop; P2,000.00 as actual damages; and P1,000.00 as attorneys' fees, plus costs.

The insurance company went to the Court of Appeals, raising inter alia the questions of the qualification of plaintiff's driver to operate the insured vehicle and the correctness of the trial court's award to plaintiff of the amount of P5,013.28 as cost of repairs, and of actual damages and attorneys' fees. In its decision of 31 January 1966, the Court of Appeals affirmed the ruling of the lower court except the award of actual damages in the sum of P2,000.00, which was eliminated on the ground that it was too speculative. Not content, the insurance company filed the present petition for review of the aforesaid decision of the Court of Appeals on two grounds: (1) that the proceedings observed in the trial court were irregular and invalid; and (2) that the damage to the insured car was not covered by the insurance policy because at the time of the accident it was being driven by one who was not an authorized driver.

The second issue constitutes the main contention of herein appellant, and will be considered first. It is vigorously urged by the insurer that the one driving the insured vehicle at the time of the accident was not an authorized driver thereof within the purview of the following provision of the insurance policy:

AUTHORIZED DRIVER:

Any of the following: (a) The insured;

(b) Any person driving on the Insured's order or with his permission, provided that the person driving is permitted in accordance with licensing laws or regulations to drive the motor vehicle covered by this Policy, or has been so permitted and is not disqualified by order of a court of law or by reason of any enactment or regulation from driving such Motor Vehicle. (Emphasis ours)

It has been found as a fact by the Court of Appeals that Domingo Reyes, the, driver who was at the wheel of the insured car at the time of the accident, does not know how to read and write; that he was able to secure a driver's license, without passing any examination therefor, by paying P25.00 to a certain woman; and that the Cavite agency of the Motor Vehicles Office has certified not having issued Reyes' purported driver's license No. 271703 DP.

In holding that the damage sustained by the car comes within the coverage of the insurance policy, the Court of Appeals argued that since Reyes' purported driver's license (Exhibit "A") bears all the earmarks of a duly issued license, then it is a public document, and petitioner insurance company then has the burden of disproving its genuineness, which the latter has failed to do. In this respect the Court of Appeals ruled:

... . The fact that the Cavite Agency of the Motor Vehicles Office states that Driver's License No. 271703 DP was not issued by that office, does not remove the possibility that said office may have been mistaken or that said license was issued by another agency. Indeed Exhibit 13 shows that a certain Gloria Presa made the notation thereon "no license issued" and which notation was the basis of the 1st Indorsement, Exhibit 12, signed by the MVO Cavite City Agency's officer-in-charge. Neither Gloria Presa nor the officer-in-charge Marciano A. Monzon was placed on the witness stand to be examined in order to determine whether said license is indeed void. As it is, as heretofore pointed out, the fact remains that Domingo Reyes is in possession of a driver's license issued by the Motor Vehicles Office which on its face appears to have been regularly issued.

In effect, the Court of Appeals found that the driver's license No. 271703 DP was genuine, that is, one really issued by the Motor Vehicles Office or its authorized deputy; and this finding of fact is now conclusive and may not be questioned in this appeal.

Nevertheless, the appellant insurer insists that, under the established facts of this case, Reyes, being admittedly one who cannot read and write, who has never passed any examination for drivers, and has not applied for a license from the duly constituted government agency entrusted with the duty of licensing drivers, cannot be considered an authorized driver.

The fatal flaw in appellant's argument is that it studiously ignores the provisions of law existing at the time of the mishap. Under Section 24 of the Revised Motor Vehicles Law, Act 3992 of the Philippine Legislature, as amended by Republic Acts Nos. 587, 1204 and 2863,1

An examination or demonstration to show any applicant's ability to operate motor vehicles may also be required in the discretion of the Chief, Motor Vehicles Office or his deputies. (Emphasis supplied)

and reinforcing such discretion, Section 26 of the Act prescribes further:

SEC. 26. Issuance of chauffeur's license; professional badge: If, after examination, or without the same, the Chief, Motor Vehicles Office or his deputies, believe the applicant to possess the necessary qualifications and knowledge, they shall issue to such applicant a license to operate as chauffeur ... (Emphasis supplied)

It is thus clear that the issuance of a driving license without previous examination does not necessarily imply that the license issued is invalid. As the law stood in 1961, when the claim arose, the examinations could be dispensed with in the discretion of the Motor Vehicles Office official officials. Whether discretion was abused in issuing the license without examination is not a proper subject of inquiry in these proceedings, though, as a matter of legislative policy, the discretion should be eliminated. There is no proof that the owner of the automobile knew that the circumstance surrounding such issuance showed that it was irregular.

The issuance of the license is proof that the Motor Vehicles Office official considered Reyes, the driver of the insured- appellee, qualified to operate motor vehicles, and the insured was entitled to rely upon such license. In this connection, it should be observed that the chauffeur, Reyes, had been driving since 1957,2 and without mishap, for all the record shows. Considering that, as pointed out by the Court of Appeals, the weight of authority is in favor of a liberal interpretation of the insurance policy for the benefit of the party insured, and strictly against the insurer, We find no reason to diverge from the conclusion reached by the Court of Appeals that no breach was committed of the above-quoted provision of the policy.

The next issue assigned is anchored on the fact that the decision of the trial court was based on evidence presented to and received by the clerk of court who acted as commissioner, although allegedly, there was no

written court order constituting him as such commissioner, no written request for his commission was made by the parties; he did not take an oath prior to entering into the discharge of his commission; no written report of his findings was ever submitted to the court; and no notice thereof was sent to the parties, contrary to the specific provisions of Rule 33 of the Rules of Court.

Actually there is nothing basically wrong with the practice of delegating to a commissioner, usually the clerk of court, who is a duly sworn court officer, the reception of both parties and for him to submit a report thereon to the court. In fact, this procedure is expressly sanctioned by Revised Rule 33 of the Rules of Court.3 Petitioner's objection in this case, however, is directed not against its referral to the clerk of court but against the alleged non-observance of the prescribed steps in connection with such delegation.

We find no cause sufficient to invalidate the proceedings had in the trial court. We note that this issue was brought up by the appellant insurance company or the first time only in its motion for reconsideration filed in the Court of Appeals. It was not raised in the trial court, where the defect could still be remedied. This circumstance precludes ventilation of the issue of validity of the hearing at this stage; for, if such irregularity is to vitiate the proceeding, the question should have been seasonably raised, i.e., either before the parties proceeded with the hearing or before the court handed down its ruling.4 It is a procedural point that can be waived by consent of the parties, express or implied.5

For the same reason, appellant cannot insist now on the annulment of the proceeding on the basis of alleged lack of written consent of the parties to the commission, or of an order appointing the clerk as commissioner, or of notice of the submission of his report to the court. Furthermore, appellant has presented no proof that the clerk of court committed any mistake or abuse in the performance of the task entrusted to him, or that the trial court was not able to properly appreciate the evidence in the case because it was received by another person. If indeed there were errors at all, they would be non-prejudicial and could not justify the holding of a new trial, as urged by herein petitioner. 6

WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against appellant CCC Insurance Corporation.

FIRST DIVISION

[G.R. No. L-28772. September 21, 1983.]

ASSOCIATION OF BAPTISTS FOR WORLD EVANGELISM, INC., Plaintiff, v. FIELDMENS INSURANCE CO., INC., Defendant-Appellant.

SYLLABUS

1. MERCANTILE LAW; INSURANCE; COMPREHENSIVE POLICY; UNLAWFUL AND WRONGFUL TAKING OF VEHICLE FOR A JOY RIDE CONSTITUTES THEFT WITHIN THE MEANING OF INSURANCE POLICY; RECOVERY FOR DAMAGE NOT BARRED BY THE ILLEGAL USE OF THE VEHICLE. The Comprehensive Policy issued by the insurance company includes loss of or damage to the motor vehicle by "burglary . . . or theft." It is settled that the act of Catiben in taking the vehicle for a joy ride to Toril, Davao City, constitutes theft within the meaning of the insurance policy and that recovery for damage to the car is not barred by the illegal use of the car by one of the station boys.

2. ID.; ID.; ID.; ID.; ID.; LIABILITY OF INSURER UNDER THE THEFT CLAUSE OF AN INSURANCE POLICY; PRIOR CONVICTION NOT REQUIRED IN AN ACTION FOR RECOVERY ON AN AUTOMOBILE INSURANCE; CASE AT BAR. There need be no prior conviction for the crime of theft to make an insurer liable under the theft clause of the policy. Upon the facts stipulated by the parties it is admitted that Catiben had taken the vehicle for a joy ride and while the same was in his possession he bumped it against an electric post resulting in damages. That act is theft within a policy of insurance. In a civil action for recovery on an automobile insurance, the question whether a person using a certain automobile at the time of the accident stole it or not is to be determined by a fair preponderance of evidence and not by the rule of criminal law requiring proof of guilt beyond reasonable doubt (Villacorta v. Insurance Commission, 100 SCRA 467 [1980]). Besides, there is no provision in the policy requiring prior criminal conviction for theft.

R E S O L U T I O N

MELENCIO-HERRERA, J.:

This case for "Indemnity for Damages and Attorneys Fees" was elevated to this Tribunal by the then Court of Appeals on a question of law.

The Stipulation of Facts submitted by the parties before the Court of First Instance of Davao, Branch I, in Case No. 3789, reads as follows:jgc:chanrobles.com.ph

"COMES the parties in the above entitled case, through their respective counsels and to this Honorable Court respectfully submit the following stipulations of facts:chanrob1es virtual 1aw library

1. That plaintiff is a religious corporation duly organized and registered under the laws of the Philippines, while defendant is also a domestic corporation duly organized and existing under the laws of the Philippines;

2. That plaintiff, having an insurable interest in a Chevrolet Carry-all, 1955 Model, with Motor No. 032433272555 and Plate No. E-73317 covered by Registration Certificate No. 288141 Rizal, issued by the Davao Motor Vehicles Office Agency No. 20 and owned by Reverend Clinton Bonnel, insured said vehicle with the defendant under Fieldmens Insurance Co., Inc. Private Car Comprehensive Policy No. 22 Jl 1107, attached hereto as Annex A to A-2 against loss or damage up to the amount of P5,000.00;

3. That in the latter part of 1961, through plaintiffs representative, Dr. Antonio Lim, the aforementioned Chevrolet Carry-all was placed at the Jones Monument Mobilgas Service Station at Davao City, under the care of said stations operator, Rene Te so that said carry-all could be displayed as being for sale, with the understanding that the latter or any of his station

boys would receive a 2% commission should they sell said vehicle.

4. That on the night of January 18, 1962, Romeo Catiben one of the boys at the aforementioned Jones Monument Service Station and a nephew of the wife of Rene Te who is residing with them, took the aforementioned chevrolet carry-all for a joy ride to Toril, Davao City, without the prior permission, authority or consent of either the plaintiff or its representative Dr. Antonio Lim, or of Rene Te, and on its way back to Davao City, said vehicle, due to some mechanical defect accidentally bumped an electric post causing actual damages valued at P5,518.61.

5. That the issue before the Honorable Court is whether or not for the damage to the abovementioned Chevrolet Carry-all to be compensable under the aforementioned Fieldmens Private Car Comprehensive Policy No. 22 JL 11107, there must be a prior criminal conviction of Romeo Catiben for theft.

WHEREFORE, it is respectfully prayed that this Honorable Court render judgment on the facts and issues above stipulated after the parties shall have submitted their respective memoranda."cralaw virtua1aw library

The Trial Court rendered judgment based on the facts stipulated and ordered defendant insurance company to pay plaintiff association the amount of P5,000.00 as indemnity for the damage sustained by the vehicle, P2,000.00 for attorneys fees, and costs. Dissatisfied, the insurance company interposed an appeal to the Appellate Court, docketed as CA-G.R. No. 33543-R, which as above stated, elevated it to this instance.chanrobles.com:cralaw:red

We affirm. The Comprehensive Policy issued by the insurance company includes loss of or damage to the motor vehicle by "burglary . . . or theft." It is settled that the act of Catiben in taking the vehicle for a joy ride to Toril, Davao City, constitutes theft within the meaning of the insurance policy and that recovery for damage to the car is not barred by the illegal use of the car by one of the station boys.

". . . where a car is admittedly as in this case unlawfully and wrongfully taken by some people, be they employees of the car shop or not to whom it had been entrusted, and taken on a long trip to Montalban without the owners consent or knowledge, such taking constitutes or partakes of the nature of theft as defined in Article 308 of the Revised Penal Code, viz.(W)ho are liable for theft. Theft is committed by any person who, with intent to gain but without violence against or intimidation of persons nor force upon things, shall take personal property of another without the latters consent, for purposes of recovering the loss under the policy in question."cralaw virtua1aw library

". . . the Court sustains as the better view that which holds that when a person, either with the object of going to a certain place, or learning how to drive, or enjoying a free ride, takes possession of a vehicle belonging to another, without the consent of its owner, he is guilty of theft because by taking possession of the personal property belonging to another and using it, his intent to gain is evident since he derives therefrom utility, satisfaction, enjoyment and pleasure. Justice Ramon C. Aquino cites in his work Groizard who holds that the use of a thing constitutes gain and Cuello Calon who calls it hurto de uso. 1

There need be no prior conviction for the crime of theft to make an insurer liable under the theft clause of the policy. Upon the facts stipulated by the parties it is admitted that Catiben had taken the vehicle for a joy ride and while the same was in his possession he bumped it against an electric post resulting in damages. That act is theft within a policy of insurance. In a civil action for recovery on an automobile insurance, the question whether a person using a certain automobile at the time of the accident stole it or not is to be determined by a fair preponderance of evidence and not by the rule of criminal law requiring proof of guilt beyond reasonable doubt. 2 Besides, there is no provision in the policy requiring prior criminal conviction for theft.chanroblesvirtualawlibrary

ACCORDINGLY, finding no error in the judgment appealed from, the same is hereby affirmed.

Costs against defendant Fieldmens Insurance Co., Inc.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-28866 March 17, 1972FE DE JOYA LANDICHO, in her own behalf and as judicial guardian of her minor children, RAFAEL J. LANDICHO and MA. LOURDES EUGENIA LANDICHO,plaintiffs-appellees, vs.GOVERNMENT SERVICE INSURANCE SYSTEM,defendant-appellant. .Vedasto J. Hernandez for plaintiffs-appellees.Government Corporate Counsel Leopoldo M. Abellera and Trial Attorney Arsenio J. Magpale defendant-appellant.

CONCEPCION, C.J.:pAppeal of the Government Service Insurance System hereinafter referred to as GSIS, for the sake of brevity from a decision of the Court of First Instance of Manila directing said defendant to pay to the plaintiffs-appellees, Fe de Joya Landicho and her minor children, Rafael J. and Maria Lourdes Eugenia, both surnamed Landicho, the sum of P15,800, with interest thereon, at the legal rate, from September 26, 1967, until fully paid, in addition to the sum of P1,000, as and for attorney's fees, and the costs.

The facts are not in dispute. On June 1, 1964, the GSIS issued in favor of Flaviano Landicho, a civil engineer of the Bureau of Public Works, stationed at Mamburao, Mindoro Occidental, optional additional life insurance policy No. OG-136107 in the sum of P7,900. The policy states on its face:

This insurance is granted subject to the terms and conditions hereinafter set forth and in consideration of the "Information" therefor and of the payment on the day this Policy takes effect of the monthly premiums stated above, due from and payable by the Insured, and the like payments on the last day of every month during the lifetime of the Insured until maturity of this Policy or until prior death of the Insured.

On page 2 of said policy, condition No. 1 provides, in part: .

1. PAYMENT OF PREMIUMS: .

... . Premiums are due and payable at the Office of the System in Manila or at any of its branches. When any premium or installment thereof remains unpaid after its due date, such due date is the date of default in payment of premiums. The mere possession of this Policy does not imply that it is in force unless the premiums due thereon are paid on time or the policy has sufficient cash value to keep it in force.

Condition No. 18, on page 8 of the policy, is of the following tenor: .

18. ENTIRE CONTRACT IN THIS POLICY: .

This Policy together with the "Information" sheet signed by the Insured, a copy of which is attached hereto, is issued under the provisions of Commonwealth Act No. 186, as amended, and constitutes the entire contract.

All statements made by the Insured shall, in the absence of fraud, be deemed representations and no warranties, and no statement shall void the Policy or be used as a defense to claim hereunder unless it be contained in written information and a copy of such information be endorsed upon or attached to the Policy when issued.

Before the issuance of said policy, the insured had filed an application, by filing and signing a printed form of the GSIS on the basis of which the policy was issued. Paragraph 7 of said application States:

7. I hereby declare that all the above statements and answers as well as those I may make to the System's Medical Examiner in continuation of this application, to be true and co direct to the best of my knowledge and belief, and I hereby agree as follows: .

a. That this declaration, with the answers to be given by me to the Medical Officer, shall be made the basis the policy and form part of the same; .

b. That acceptance of my policy issued on this application will constitute a ratification by me of any correction or addition to this application made by the System; .

c. That this application serves as a letter of authority to the Collecting Officer of our Office thru the GSIS to deduct from my salary the monthly premium in the amount of P33.36, beginning the month of May, 1964, and every month thereafter until notice of its discontinuance shall have beenreceived from the System; .

d. That the failure to deduct from my salary the month premiums shall not make the policy lapse, however, the premium account shall be considered as indebtedness which, I bind myself to pay the System; .

e. That my policy shall be made effective on the first day of the month next following the month the first premium is paid; provided, that it is not more ninety (90) days before or after the date of the medical examination,was conducted if required." .

While still under the employment of the Bureau of Public Works, Mr. Landicho met his death, on June 29, 1966, in an airplane crash in Mindoro. Thereupon, Mrs. Landicho, in her own behalf and that of her co-plaintiffs and minor children, Rafael J. and Maria Lourdes Eugenia, filed with the GSIS a claim for P15,800, as the double indemnity due under policy No. OG-136107, because of the untimely death of the insured owing to said accident. The GSIS denied the claim, upon the ground that the policy had never been in force because, pursuant to subdivision (e) of the above-quoted paragraph 7 of the application, the policy "shall be ... effective on the first day of the month next following the month the first premium is paid," and no premium had ever been paid on said policy. Upon refusal of the GSIS to reconsider its stand, this action was filed, September 22, 1967, in the Court of First Instance of Manila, in which the GSIS reiterated its aforementioned defense. Thereafter submitted by both parties for judgment on the pleadings, upon the ground thatthe case involve purely questions of law, said court rendered, in due course, its abovementioned decision, from which the GSIS has taken the present appeal.

The main issue therein is whether or not the insurance policy in question has ever been in force, not a single premium having been paid thereon. In support of the affirmative, plaintiffs invoke the stipulation in the policy to the effect that the information contained in the application filed by the insured shall form part of the contract between him and the GSIS, and, especially, subdivisions (c) and (d) of paragraph 7 of said application stating that the same shall serve "as a letter of authority to the Collecting Officer of our Office" the Bureau of Public Works "thru the GSIS to deduct from my salary the monthly premium in the amount of P33.36 beginning the month of May, 1964, and every month thereafter," and that "failure to deduct from my salary the monthly premiums shall not make the policy lapse, however, the premium account shall be considered as indebtedness which, I" the insured "bind myself to pay the System." 1 The GSIS maintains, however, the negative, relying upon subdivision (e) of the same paragraph No. 7, which provides that the "policy shall be made effective on the first day of the month next following the month the first premium is paid." Under this theory, subdivisions (c) and (d) of said paragraph 7 would not apply unless and until the first premium shall have been actually paid, pursuant to subdivision (e) of the same paragraph.

Although it may not be entirely farfetched, this view is not likely to be in accord with the understanding of many, if not most, government employees who obtain an optional additional life insurance policy. As a consequence, the actual receipt by them of their full pay without any deduction for premiums on their optional additional life insurance policies may not impart to them the warning which, otherwise, it would necessarily convey that said policy is not, as yet, in force, for they are liable to believe "that failure to deduct" from the salary of the insured "the monthly premiums shall not" in the language of subdivision (d) "make the policy lapse" and that "the premiums account shall be considered as indebtedness," to be paid or deducted later, because, after all, the so called "payment" of premiums is nothing but a "paper" or "accounting" process, whereby funds are merely transferred, not physically, but constructively, from one office of the government to another. In other words, the language, of subdivisions (c), (d) and (e) is such as to create an ambiguity that should be resolved against the party responsible therefor defendant GSIS, as the party who prepared and furnished the application form and in favor of the party misled thereby, the insured employee.

Indeed, our Civil Code provides:

The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. 2

This is particularly true as regards insurance policies, in respect of which it is settled that the " "terms in an insurance policy, which are ambiguous, equivocal, or uncertain ... are to be construed strictly and most strongly against the insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where a forfeiture is involved" (29 Am. Jur., 181), and the reason for this rule is the "insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company." (44 C.J.S., p. 1174.) 3.

The equitable and ethical considerations justifying the foregoing view are bolstered up by two (2) factors, namely:

(a) The aforementioned subdivision (c) states "that this application serves as a letter of authority to the Collecting Officer of our Office" the Bureau of Public Works "thru the GSIS to deduct from my salary the monthly premium in the amount of P33.36." No such deduction was made and, consequently, not even the first premium "paid" because the collecting officer of the Bureau of Public Works was not advised by the GSIS to make it (the deduction) pursuant to said authority. Surely, this omission of the GSIS should not inure to its benefit. .

(b) The GSIS had impliedly induced the insured to believe that Policy No. OG-136107 was in force, he having been paid by the GSIS the dividends corresponding to said policy. Had the insured had the slightest inkling that the latter was not, as yet, effective for non-payment of the first premium, he would have, in all probability, caused the same to be forthwith satisfied.

WHEREFORE, the decision appealed from should be, it is hereby affirmed, with costs against the defendant-appellant, Government Service Insurance System. It is so ordered. .

EN BANC

[G.R. No. L-20383. May 24, 1967.]

THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, Petitioner-Appellee, v. SOCIAL SECURITY COMMISSION, Respondent-Appellant.

Solicitor General Arturo A. Alafriz, Solicitor Camilo D. Quiason, L. L. Javellana & L. B. Topacio for Respondent-Appellant.

Manuel Lim, Manuel Macias, Ricardo T. Bancod and Associates for Petitioner-Appellee.

SYLLABUS

1. COURT OF FIRST INSTANCE; JURISDICTION TO ISSUE PROHIBITION WITH PRELIMINARY INJUNCTION AGAINST THE SSC. A writ of prohibition may be issued only by a superior court to an inferior court, corporation, board or person, to prevent the latter from usurping or exercising a jurisdiction or power it does not have (Moran on Rules of Court, 1963 ed. p. 157). Section 5(a) of Republic Act No. 1161 confers on the Social Security Commission the power to determine and settle claims, which power partakes of a quasi-judicial function. In the exercise of said power, the Commission is not inferior to courts of first instance, in much the same way as the Public Service Commission, as a board performing quasi judicial functions, is not inferior to said courts. The quasi-judicial nature of the functions of the Social Security Commission is emphasized by its authority, expressly granted by said Section 5 (a), to promulgate rules and regulations governing "the filing, determination and settlement of claims." Hence, the lower court had no jurisdiction to issue the writ of prohibition therein prayed for by the appellee.

2. SOCIAL SECURITY COMMISSION; WHEN SHALL IT BE SUED IN COURTS OF FIRST INSTANCE. The Commission performs administrative, as well as quasi-judicial functions. Although, it can sue and be sued in courts of first instance, either as regards its administrative functions, or in the otherwise when the act complained of forms part of its quasi-judicial functions.

3. ID.; CIRCULAR DOES NOT CONSTITUTE DECISION. Although Circular No. 34 bears the approval of the Chairman of the Commission, said approval does not constitute a "decision" thereof, as the term is used in section 5, which regulates the judicial review of such decision. Indeed, a "decision" connotes the adjudication or settlement of a controversy, and the same did not exist between the System and the plaintiff when the Chairman of the Commission affixed his signature to said Circular No. 34 on or before November 6, 1960.

4. ID.; DUTY OF COMPLAINING ENTITY OF PERSON TO SUBMIT HIS OR HER OBJECTION TO THE SYSTEM FOR DETERMINATION BEFORE THE SAME IS SUBMITTED FOR JUDICIAL REVIEW. It is only fair and just, as well as administratively expedient, that before judicial review could be sought, appellees objection to the aforementioned circular be previously submitted to and to and passed upon by the Commission, for, pursuant to Section 5(b) the Social Security Act, the judicial review of "any decision of the Commission shall be permitted only after any party claiming to be aggrieved thereby has exhausted his remedies before the Commission."

5. ID.; PROHIBITION, ACTION FOR; REQUISITE. The general rule applicable to actions for certiorari and prohibition against tribunal, board or officer is that the aggrieved party must seek therefrom a reconsideration of the decision complained of so that the latter will have an opportunity to correct the error or mistake complained of. No such reconsideration has been asked by plaintiff herein. Hence, it has no cause of action for prohibition, which does not lie except in the absence of appeal or any other plain, speedy and adequate remedy in the ordinary course of law.

6. ID.; QUESTION OF COVERAGE; JURISDICTION. Rep. Act No. 4857, Sec. 2 of which amended Sec. 5 (c) of Rep. Act No. 1161 provides that "any dispute arising under this Act with respect to coverage, etc. shall be cognizable by the Commission . . ." Hence, there can be no question that any dispute with respect to coverage is cognizable by the Commission.

D E C I S I O N

CONCEPCION, C.J.:

Appeal, taken by the Social Security Commission, from a decision of the Court of First Instance of Manila, the dispositive part of which reads:jgc:chanrobles.com.ph

"IN VIEW OF THE FOREGOING, judgment is hereby rendered (1) holding that plaintiffs agents, solicitors or under writers are not employees of plaintiff. The Philippine American Life Insurance Company and that plaintiff is not their employer as the plaintiffs said insurance agents, solicitors or underwriters do not fall under the compulsory coverage of the Social Security System; (2) commanding defendant Social Security Commission to desist absolutely from taking criminal action against plaintiffs officers under the provisions of Section 28(e) and (f) of the Social Security Act, and from requiring plaintiff to remit contributions to the defendant Social Security Commission or its administrative arm, the Social Security System, to be applied to the coverage of plaintiffs said agents, solicitors or underwriters under the Social Security Act, without pronouncement as to costs."cralaw virtua1aw library

On November 6, 1960, the Social Security System hereinafter referred to as the System issued, with the approval of the Chairman of the Social Security Commission hereinafter referred to as the Commission Circular No. 34 (Exhibit A), requiring all insurance firms to submit immediately the names of their agents, solicitors or underwriters, who, pursuant to the Social Security Act 1 hereinafter referred to as the Act are employees of said firms, subject to compulsory coverage of the System, and to pay the corresponding premiums, based on the actual commissions received by each agent during each month.

Sometime later, the System, through the manager of its Production Department, sent to the Philippine American Life Insurance Company hereinafter referred to as the plaintiff the communication Exhibit B, dated February 11, 1961, enclosing therewith SSS Form R-1-A.1, advising plaintiff that, pursuant to said Circular No. 34, the insurance agents thereof are considered its employees, subject to compulsory coverage under said Act, and urging plaintiff to accomplish said SSS Form (for the purpose of supplying the necessary data concerning said agents, solicitors and underwriters) and to submit the same, within ten (10) days, to avoid the penalties provided for by law. This "advice" was reiterated in another letter (Exhibit B-1 of the same officer, dated March 3, 1961. Plaintiff replied to these letters with a communication (Exhibit C), dated March 7, 1961, objecting to the aforementioned compulsory coverage upon the ground that plaintiffs insurance agents, solicitors or underwriters are not its employees. Still, on May 14, 1961, the System sent to plaintiff another letter (Exhibit D), with several copies of SSS Form R-1-A.1, with the request that these forms be accomplished and submitted, as soon as possible, to facilitate early adjudication of the coverage of its agents under the System.

Instead of complying with this request, on May 30, 1961, plaintiff commenced, in the Court of First Instance of Manila, the present action, for prohibition with preliminary injunction against the Commission to restrain the latter 1) from compelling plaintiff to remit contributions to the administrative branch of the System, as an incident of the alleged inclusion of plaintiffs agents, solicitors or underwriters in the compulsory coverage of the System, and 2) from prosecuting plaintiff and its officers for their refusal to make the aforementioned contributions upon the theory that said agents of the plaintiff are not employees thereof.

After appropriate proceedings, the lower court rendered the aforementioned decision. Hence, the present appeal to this Court, since questions purely of law are involved therein, namely: 1) whether or not the trial court had jurisdiction to hear and decide this case; 2) whether plaintiff has a cause of action against the Commission; and 3) whether insurance agents of a life insurance company, like plaintiff herein, are its employees, for purposes of the compulsory coverage under the System.

The System maintains that the first two issues should be resolved in the negative, upon the ground, inter alia, that decisions of the Commission may not be reviewed by courts of first instance, not only because the two have the same rank, but, also, because said decisions are, pursuant to the Act 2 reviewable by the Court of Appeals, on questions of law and fact, or by the Supreme Court, on questions purely of law; that plaintiff has no cause of action against the Commission, inasmuch as the former has not appealed to the latter from the action taken by the System upon the question of coverage, under the Act; and that plaintiff has not exhausted the administrative remedies available thereto under the same. 3

Upon the other hand, plaintiff urges an affirmative answer, upon the theory that the Commission is, at least, a board within the meaning of Rule 67 of the Rules of Court of 1940; 4 that being empowered by law to sue and be sued, the Commission may sue and be sued in any court of the Philippines; that Section 5 of Republic Act No. 1161 is inapplicable to the case at

bar, because the question of coverage, herein involved, is not a "claim" within the purview of said section; that the issue whether a given person is an employee of a particular firm and subject to coverage under the said Act, is not one that plaintiff is bound to submit to the Commission in the first instance; that where the employer-employee relationship is contested, the ruling of the Commission to the effect that such relationship exists presents a legal dispute, which may not be decided unilaterally by the Commission; that the theory of the Commission to the effect that is has the same rank as courts of first instance may be true insofar only as the settlements of "claims," but not as regards the question of compulsory coverage; that an appeal from the System to the Commission would have been an empty gesture, for all actions of and proceedings in the System are under the direction and control of the Commission, and Circular No. 34 (Exhibit A) bears the approval of the Commission, through its chairman, apart from the fact that the Commission was poised to take criminal action against the plaintiff and its officers to compel them to obey the ruling complained of; and that the insistence of the Commission on enforcing its ruling regarding said coverage amounts to an act performed without or in excess of jurisdiction or with grave abuse of discretion.

We find that the appeal taken by the Commission is well-founded for the present action is one for a writ of prohibition, which may be issued only by a superior court to an inferior court, corporation, board or person, to prevent the latter from usurping or exercising a jurisdiction or power it does not have (3 Moran on Rules of Court, 1963 ed., p. 157). Section 5 (a) of the Act acknowledges in the Commission the power to determine and settle claims, which partakes of a quasi-judicial function, in the exercise of which, the Commission is not inferior to courts of first instance, in much the same way as the Public Service Commission, as a board performing quasi-judicial functions, is not inferior to said courts. 5 The quasi-judicial nature of the functions of the Commission is emphasized by its authority, expressly granted by said Section 5 (a), to promulgate rules and regulations governing "the filing, determination and settlement of claims." Hence, the lower court had no jurisdiction to issue the writ of prohibition prayed for.

Besides, the Commission performs administrative, as well as quasi-judicial, functions. Although it can sue and be sued in courts of first instance, either as regards its administrative functions, or in the enforcement and protection of its private rights, the rule is otherwise when the act complained of forms part of its quasi-judicial functions. For this reason, Section 5 (c) of said Act, explicitly provides, in connection with "decisions" of the Commission, or the determinations thereof in the exercise of said functions, that the same "may be reviewed both upon the law and the facts by the Court of Appeals," or, "if the decision of the Commission involves only questions of law, . . . by the Supreme Court."cralaw virtua1aw library

What is more, pursuant to Section 5 (b) of said Act, the judicial review of "any decision of the Commission . . . shall be permitted only after any party claiming to be aggrieved thereby has exhausted his remedies before the Commission." In the case at bar, plaintiff has not exhausted its remedies before the Commission. The Commission has not even been given a chance to render a decision on the issue raised by plaintiff herein, because the latter has not appealed to the Commission from the action taken by the System in insisting upon the enforcement of Circular No. 34 (Exh. A).

It is true that the same bears the approval of the Chairman of the Commission. Even if this fact were construed as an approval of the Circular by the Commission itself, such approval would not constitute a "decision" thereof; as the term is used in said section 5, which regulates the judicial review of such decision. Indeed, a "decision" connotes the adjudication or settlement of a controversy, and the same did not exist between the System and the plaintiff when the Chairman of the Commission affixed his signature to said Circular No. 34, on or before November 6, 1960. The issue did not arise until March 7, 1961, when plaintiff expressed its objection to the circular upon the ground that the agents, solicitors and underwriters thereof are not its employees. It is only fair and just, therefore, as well as administratively expedient, that before a judicial review could be sought, said issue be previously submitted to and passed upon by the Commission, on appeal from the action taken or contemplated to be taken by the System, since, prior to such submission to and determination by the Commission, the same had no occasion to consider the specific reasons adduced by the plaintiff in support of its objection to said Circular No. 34.

But, even if the approval of the circular by the Chairman of the Commission were hypothetically regarded as a decision or proof of a decision of the Commission itself, still section 5 (b) ordains positively that a judicial review of said decision "shall be permitted only after any party claiming to be aggrieved thereby has exhausted his remedies before the Commission." In other words, he must first seek therefrom a reconsideration of the decision complained of. This, by the way, is the general rule applicable to actions for certiorari and prohibition against a tribunal, board or officer, who must first be given, through a motion for reconsideration, an opportunity to correct the error or mistake complained of. No such reconsideration has been asked by plaintiff herein. Hence, it has no cause of action for prohibition, which does not lie except in the absence of appeal or any other plain, speedy and adequate remedy in the ordinary course of law.

It is surged that the Commission had already made clear its intention to prosecute criminally the plaintiff and its officers.

This is not true. The one which no more than intimated such intention was not the Commission, but the System. Precisely, an appeal from the latter to the former, which admittedly has control over the System, would have been a plain, speedy and adequate remedy in the ordinary course of law. Moreover, it appeared from the acts of the System the danger of prosecution was not imminent or even proximate. Indeed, the letter Exhibit B, urging plaintiff to" please accomplish and submit the enclosed SSS Form R-1-A. 1 . . . within ten days . . . to avoid the penalties provided by law," was written by the "Manager, Production Department" of the System, which is not in charge of the prosecution of violators of the Act. Then, again, over two (2) months after plaintiff had objected to the compulsory coverage of its agents, solicitors and underwriters, or on May 14, 1961, the System wrote to the plaintiff the letter Exhibit D, enclosing therewith several copies of SSS Form R-1-A.1, with the entreatment that the same be "please" accomplished and submitted to "facilitate early adjudication of the compulsory coverage" of its agents "under the system," and winding up with the "hope" of receiving the "form properly accomplished as soon as possible." The System thus implied that plaintiff could then seek an adjudication or decision on said coverage by the Commission. At any rate, had plaintiff appealed to the Commission, the latter could have restrained the System from causing the plaintiff and its officers from being prosecuted criminally, during the pendency of the appeal. In short, once again, the same was a plain, speedy and adequate remedy in the ordinary course of law.

Inasmuch as the lower court had no jurisdiction to hear and decide this case and, at any rate, plaintiff has no cause of action against the Commission, it is unnecessary to pass upon the third issue raised by plaintiff herein. In fact, said issue has become moot on account of the approval of Republic Act No. 4857, on September 1, 1966, section 2 of which amended section 5 (a) of Republic Act No. 1161, to read as follows:jgc:chanrobles.com.ph

"Any dispute arising under this Act with respect to coverage, entitlement to benefits, collection and settlement of premium contributions and penalties hereon, or any other matter related thereto, shall be cognizable by the Commission, and any case filed with the Commission with respect thereto shall be heard by the Commission, or any of its members, or by hearing officers duly authorized by the Commission, and decided within twenty days after the submission of the evidence. The filing, determination and settlement of claims shall be governed by the rules and regulations promulgated by the Commission." (Emphasis supplied.).

Hence, there can be no question not that any dispute with respect to coverage is cognizable by the Commission.

Wherefore, the decision appealed from is hereby reversed and another one shall be entered, dismissing the complaint herein, with costs against plaintiff-appellee the Philippine American Life Insurance Company. It is so ordered.

FIRST DIVISION

[G.R. No. 138941. October 8, 2001]

AMERICAN HOME ASSURANCE COMPANY, petitioner, vs. TANTUCO ENTERPRISES, INC., respondent.

D E C I S I O N

PUNO, J.:

Before us is a Petition for Review on Certiorari assailing the Decision of the Court of Appeals in CA-G.R. CV No. 52221 promulgated on January 14, 1999, which affirmed in toto the Decision of the Regional Trial Court, Branch 53, Lucena City in Civil Case No. 92-51 dated October 16, 1995.

Respondent Tantuco Enterprises, Inc. is engaged in the coconut oil milling and refining industry. It owns two oil mills. Both are located at its factory compound at Iyam, Lucena City. It appears that respondent commenced its business operations with only one oil mill. In 1988, it started operating its second oil mill. The latter came to be commonly referred to as the new oil mill.

The two oil mills were separately covered by fire insurance policies issued by petitioner American Home Assurance Co., Philippine Branch.[1] The first oil mill was insured for three million pesos (P3,000,000.00) under Policy No. 306-7432324-3 for the period March 1, 1991 to 1992.[2] The new oil mill was insured for six million pesos (P6,000,000.00) under Policy No. 306-7432321-9 for the same term.[3] Official receipts indicating payment for the full amount of the premium were issued by the petitioner's agent.[4]

A fire that broke out in the early morning of September 30,1991 gutted and consumed the new oil mill. Respondent immediately notified the petitioner of the incident. The latter then sent its appraisers who inspected the burned premises and the properties destroyed. Thereafter, in a letter dated October 15, 1991, petitioner rejected respondents claim for the insurance proceeds on the ground that no policy was issued by it covering the burned oil mill. It stated that the description of the insured establishment referred to another building thus: Our policy nos. 306-7432321-9 (Ps 6M) and 306-7432324-4 (Ps 3M) extend insurance coverage to your oil mill under Building No. 5, whilst the affected oil mill was under Building No. 14.[5]

A complaint for specific performance and damages was consequently instituted by the respondent with the RTC, Branch 53 of Lucena City. On October 16, 1995, after trial, the lower court rendered a Decision finding the petitioner liable on the insurance policy thus:

WHEREFORE, judgment is rendered in favor of the plaintiff ordering defendant to pay plaintiff:

(a) P4,406,536.40 representing damages for loss by fire of its insured property with interest at the legal rate;

(b) P80,000.00 for litigation expenses;

(c) P300,000.00 for and as attorneys fees; and

(d) Pay the costs.

SO ORDERED.[6]

Petitioner assailed this judgment before the Court of Appeals. The appellate court upheld the same in a Decision promulgated on January 14, 1999, the pertinent portion of which states:

WHEREFORE, the instant appeal is hereby DISMISSED for lack of merit and the trial courts Decision dated October 16, 1995 is hereby AFFIRMED in toto.

SO ORDERED.[7]

Petitioner moved for reconsideration. The motion, however, was denied for lack of merit in a Resolution promulgated on June 10, 1999.

Hence, the present course of action, where petitioner ascribes to the appellate court the following errors:

(1) The Court of Appeals erred in its conclusion that the issue of non-payment of the premium was beyond its jurisdiction because it was raised for the first time on appeal.[8]

(2) The Court of Appeals erred in its legal interpretation of 'Fire Extinguishing Appliances Warranty' of the policy.[9]

(3) With due respect, the conclusion of the Court of Appeals giving no regard to the parole evidence rule and the

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principle of estoppel is erroneous.[10]

The petition is devoid of merit.

The primary reason advanced by the petitioner in resisting the claim of the respondent is that the burned oil mill is not covered by any insurance policy. According to it, the oil mill insured is specifically described in the policy by its boundaries in the following manner:

Front: by a driveway thence at 18 meters distance by Bldg. No. 2.

Right: by an open space thence by Bldg. No. 4.

Left: Adjoining thence an imperfect wall by Bldg. No. 4.

Rear: by an open space thence at 8 meters distance.

However, it argues that this specific boundary description clearly pertains, not to the burned oil mill, but to the other mill. In other words, the oil mill gutted by fire was not the one described by the specific boundaries in the contested policy.

What exacerbates respondents predicament, petitioner posits, is that it did not have the supposed wrong description or mistake corrected. Despite the fact that the policy in question was issued way back in 1988, or about three years before the fire, and despite the Important Notice in the policy that Please read and examine the policy and if incorrect, return it immediately for alteration, respondent apparently did not call petitioners attention with respect to the misdescription.

By way of conclusion, petitioner argues that respondent is barred by the parole evidence rule from presenting evidence (other than the policy in question) of its self-serving intention (sic) that it intended really to insure the burned oil mill, just as it is barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong, because it retained the policy without having the same corrected before the fire by an endorsement in accordance with its Condition No. 28.

These contentions can not pass judicial muster.

In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in giving effect to the insurance.[11] In view of the custom of insurance agents to examine buildings before writing policies upon them, and since a mistake as to the identity and character of the building is extremely unlikely, the courts are inclined to consider that the policy of insurance covers any building which the parties manifestly intended to insure, however inaccurate the description may be.[12]

Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind, that what the parties manifestly intended to insure was the new oil mill. This is obvious from the categorical statement embodied in the policy, extending its protection:

On machineries and equipment with complete accessories usual to a coconut oil mill including stocks of copra, copra cake and copra mills whilst contained in the new oil mill building, situate (sic) at UNNO. ALONG NATIONAL HIGH WAY, BO. IYAM, LUCENA CITY UNBLOCKED.[13] (emphasis supplied.)

If the parties really intended to protect the first oil mill, then there is no need to specify it as new.

Indeed, it would be absurd to assume that respondent would protect its first oil mill for different amounts and leave uncovered its second one. As mentioned earlier, the first oil mill is already covered under Policy No. 306-7432324-4 issued by the petitioner. It is unthinkable for respondent to obtain the other policy from the very same company. The latter ought to know that a second agreement over that same realty results in its overinsurance.

The imperfection in the description of the insured oil mills boundaries can be attributed to a misunderstanding between the petitioners general agent, Mr. Alfredo Borja, and its policy issuing clerk, who made the error of copying the boundaries of the first oil mill when typing the policy to be issued for the new one. As testified to by Mr.Borja:

Atty. G. Camaligan:

Q: What did you do when you received the report?

A: I told them as will be shown by the map the intention really of Mr. Edison Tantuco is to cover the new oil mill that is why when I presented the existing policy of the old policy, the policy issuing clerk just merely (sic) copied the wording from the old policy and what she typed is that the description of the boundaries from the old policy was copied but she inserted covering the new oil mill and to me at that time the important thing is that it covered the new oil mill because it is just within one compound and there are only two oil mill[s] and so just enough, I had the policy prepared. In fact, two policies were prepared having the same date one for the old one and the other for the new oil mill and exactly the same

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policy period, sir.[14] (emphasis supplied)

It is thus clear that the source of the discrepancy happened during the preparation of the written contract.

These facts lead us to hold that the present case falls within one of the recognized exceptions to the parole evidence rule. Under the Rules of Court, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his pleading, among others, its failure to express the true intent and agreement of the parties thereto.[15] Here, the contractual intention of the parties cannot be understood from a mere reading of the instrument. Thus, while the contract explicitly stipulated that it was for the insurance of the new oil mill, the boundary description written on the policy concededly pertains to the first oil mill. This irreconcilable difference can only be clarified by admitting evidence aliunde, which will explain the imperfection and clarify the intent of the parties.

Anent petitioners argument that the respondent is barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong, we find that the same proceeds from a wrong assumption. Evidence on record reveals that respondents operating manager, Mr. Edison Tantuco, notified Mr. Borja (the petitioners agent with whom respondent negotiated for the contract) about the inaccurate description in the policy. However, Mr. Borja assured Mr. Tantuco that the use of the adjective new will distinguish the insured property. The assurance convinced respondent that, despite the impreciseness in the specification of the boundaries, the insurance will cover the new oil mill. This can be seen from the testimony on cross of Mr. Tantuco:

"ATTY. SALONGA:

Q: You mentioned, sir, that at least in so far as Exhibit A is concern you have read what the policy contents.(sic)

Kindly take a look in the page of Exhibit A which was marked as Exhibit A-2 particularly the boundaries of the property insured by the insurance policy Exhibit A, will you tell us as the manager of the company whether the boundaries stated in Exhibit A-2 are the boundaries of the old (sic) mill that was burned or not.

A: It was not, I called up Mr. Borja regarding this matter and he told me that what is important is the word new oil mill. Mr. Borja said, as a matter of fact, you can never insured (sic) one property with two (2) policies, you will only do that if you will make to increase the amount and it is by indorsement not by another policy, sir."[16]

We again stress that the object of the court in construing a contract is to ascertain the intent of the parties to the contract and to enforce the agreement which the parties have entered into. In determining what the parties intended, the courts will read and construe the policy as a whole and if possible, give effect to all the parts of the contract, keeping in mind always, however, the prime rule that in the event of doubt, this doubt is to be resolved against the insurer. In determining the intent of the parties to the contract, the courts will consider the purpose and object of the contract.[17]

In a further attempt to avoid liability, petitioner claims that respondent forfeited the renewal policy for its failure to pay the full amount of the premium and breach of the Fire Extinguishing Appliances Warranty.

The amount of the premium stated on the face of the policy was P89,770.20. From the admission of respondents own witness, Mr. Borja, which the petitioner cited, the former only paid it P75,147.00, leaving a difference of P14,623.20. The deficiency, petitioner argues, suffices to invalidate the policy, in accordance with Section 77 of the Insurance Code.[18]

The Court of Appeals refused to consider this contention of the petitioner. It held that this issue was raised for the first time on appeal, hence, beyond its jurisdiction to resolve, pursuant to Rule 46, Section 18 of the Rules of Court.[19]

Petitioner, however, contests this finding of the appellate court. It insists that the issue was raised in paragraph 24 of its Answer, viz.:

24. Plaintiff has not complied with the condition of the policy and renewal certificate that the renewal premium should be paid on or before renewal date.

Petitioner adds that the issue was the subject of the cross-examination of Mr. Borja, who acknowledged that the paid amount was lacking by P14,623.20 by reason of a discount or rebate, which rebate under Sec. 361 of the Insurance Code is illegal.

The argument fails to impress. It is true that the asseverations petitioner made in paragraph 24 of its Answer ostensibly spoke of the policys condition for payment of the renewal premium on time and respondents non-compliance with it. Yet, it did not contain any specific and definite allegation that respondent did not pay the premium, or that it did not pay the full amount, or that it did not pay the amount on time.

Likewise, when the issues to be resolved in the trial court were formulated at the pre-trial proceedings, the question of the supposed inadequate payment was never raised. Most significant to point, petitioner fatally neglected to present, during the whole course of the trial, any witness to testify that respondent indeed failed to pay the full amount of the premium. The thrust of the cross-examination of Mr. Borja, on the other hand, was not for the purpose of proving this fact. Though it

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briefly touched on the alleged deficiency, such was made in the course of discussing a discount or rebate, which the agent apparently gave the respondent. Certainly, the whole tenor of Mr. Borjas testimony, both during direct and cross examinations, implicitly assumed a valid and subsisting insurance policy. It must be remembered that he was called to the stand basically to demonstrate that an existing policy issued by the petitioner covers the burned building.

Finally, petitioner contends that respondent violated the express terms of the Fire Extinguishing Appliances Warranty. The said warranty provides:

WARRANTED that during the currency of this Policy, Fire Extinguishing Appliances as mentioned below shall be maintained in efficient working order on the premises to which insurance applies:

- PORTABLE EXTINGUISHERS

- INTERNAL HYDRANTS

- EXTERNAL HYDRANTS

- FIRE PUMP

- 24-HOUR SECURITY SERVICES

BREACH of this warranty shall render this policy null and void and the Company shall no longer be liable for any loss which may occur.[20]

Petitioner argues that the warranty clearly obligates the insured to maintain all the appliances specified therein. The breach occurred when the respondent failed to install internal fire hydrants inside the burned building as warranted. This fact was admitted by the oil mills expeller operator, Gerardo Zarsuela.

Again, the argument lacks merit. We agree with the appellate courts conclusion that the aforementioned warranty did not require respondent to provide for all the fire extinguishing appliances enumerated therein. Additionally, we find that neither did it require that the appliances are restricted to those mentioned in the warranty. In other words, what the warranty mandates is that respondent should maintain in efficient working condition within the premises of the insured property, fire fighting equipments such as, but not limited to, those identified in the list, which will serve as the oil mills first line of defense in case any part of it bursts into flame.

To be sure, respondent was able to comply with the warranty. Within the vicinity of the new oil mill can be found the following devices: numerous portable fire extinguishers, two fire hoses,[21] fire hydrant,[22] and an emergency fire engine.[23] All of these equipments were in efficient working order when the fire occurred.

It ought to be remembered that not only are warranties strictly construed against the insurer, but they should, likewise, by themselves be reasonably interpreted.[24] That reasonableness is to be ascertained in light of the factual conditions prevailing in each case. Here, we find that there is no more need for an internal hydrant considering that inside the burned building were: (1) numerous portable fire extinguishers, (2) an emergency fire engine, and (3) a fire hose which has a connection to one of the external hydrants.

IN VIEW WHEREOF, finding no reversible error in the impugned Decision, the instant petition is hereby DISMISSED.

SO ORDERED.

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