Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No.72878 April 15, 1988

ALMENDRAS MINING CORPORATION, petitioner,
vs.
OFFICE OF THE INSURANCE COMMISSION and COUNTRY BANKERS INSURANCE
CORPORATION,respondents.
Augusto G. Gatmaytan for petitioner.
Romeo G. Velasquez for respondents.
RESOLUTION

FELICIANO, J.:
At about two-thirty in the morning of 3 September 1984, the marine cargo vessel LCT "Don Paulo,"
while on a voyage from Davao to Mariveles, Bataan, was forced ground somewhere in the vicinity of
Sogod, Tablas Island, Romblon after having been hit by strong winds and tidal waves brought about
by tropical typhoon "Nitang." Later that same day, petitioner Almendras Mining Corporation
("Almendras"), owner of the vessel, executed and filed the corresponding Marine
Protest. 1 Subsequently, in a letter dated 6 September 1984, 2 petitioner Almendras formally notified the
vessel's insurer, private respondent Country Bankers Insurance Corporation ("Bankers"), of its intention to
file a provisional claim for indemnity for damages sustained by the vessel. 3
Immediately following the marine casualty, private respondent Bankers commissioned the services
of Audemus Adjustment Corporation, which estimated the insurer's liability at P2,187,983.00, or the
equivalent of seventy percent (70%) of all expenses necessary for the repair of the vessel. Private
respondent accepted and approved this estimate.
Salvage operations on the LCT "Don Paulo" were commenced on 5 September 1984. By 24
September 1984, the vessel had been towed to and docked at the Philippine National Oil
Corporation (PNOC) marine facility in Bauan, Batangas where repair work on the same was
subsequently performed by the PNOC Marine Corporation.
Delay, however, overtook the repair work on the LCT 'Don Paulo.' Private respondent Bankers
explained that the delay was due to the unavailability of spare parts needed in the repair of the
vessel's four (4) damaged engines. Notwithstanding this explanation, petitioner Almendras, on 18

April 1985, filed with the public respondent office of the Insurance Commission an administrative
complaint 4 (docketed as Administrative Case No. 006) against private respondent Bankers. In its
complaint, petitioner Almendras sought (1) revocation or suspension of private respondent Bankers'
Certificate of Authority to engage in the insurance business; (2) an administrative directive ordering
immediate completion of all repair work on and delivery to petitioner of the LCT "Don Paulo;" and (3)
damages.
At the initial hearings on Administrative Case No. 006 held before public respondent Commission,
private respondent Bankers agreed to replace the four (4) damaged engines of the LCT "Don Paulo"
with one (1) brand new engine and three (3) reconditioned engines. This entailed a total additional
cost of P3,000,000.00, seventy percent (70%) of which private respondent Bankers had previously
obligated itself, as insurer, to shoulder. For its part, petitioner Almendras agreed to pay a thirty
percent (30%) share in the cost, but only after it had inspected one of the proposed replacement
engines a brand new Caterpillar D-3408 marine engine which petitioner had claimed was not a
suitable replacement for the vessel's damaged main engine.
Inspection of the Caterpillar D-3408 engine took place at the premises of the Actrade Machinery
Corporation (supplier of the engine) on 16 July 1985 in the presence of representatives of both
petitioner and private respondent. Engineers of the PNOC Marine Corporation who conducted the
inspection found said engine to have met the engineering requirements of the LCT "Don Paulo;"
private respondent Bankers thus anticipated a favorable response in this regard from petitioner
Almendras.
The following day, however, petitioner Almendras, reiterating its claim that the proposed Caterpillar
D-3408 engine was not at par with the vessel's original but damaged main engine, demanded
instead cash settlement of its insurance claim. This unexpected turn of events moved the Insurance
Commissioner to terminate the hearing then in progress and to require private respondent Bankers
to submit its Answer to the complaint of petitioner Almendras.
Meanwhile, on 13 August 1985, petitioner Almendras filed a separate civil action for damages
(docketed as Civil Case No. 3120-P) with the Regional Trial Court of Pasay City. 5
At the 23 August 1985 Commission hearing both parties agreed to submit Administrative Case No.
006 for resolution on a single issuei.e,whether or not revocation or suspension of private
respondent Bankers' Certificate of Authority to engage in the insurance business was justified and
proper under the circumstances of this case.
On 23 October 1985, public respondent Commission, through the Insurance Commissioner, issued a
Resolution 6ordering the dismissal of petitioner Almendras' complaint. It was found by the Insurance
Commissioner that failure by private respondent Bankers to settle promptly and expeditiously the
insurance claim of petitioner Almendras was attributable to the latter's own act of insisting on cash
settlement thereof, even after the parties had already agreed upon outright replacement of the vessel's
damaged engines. The Insurance Commissioner also stated in his resolution that, assuming that private
respondent Bankers had incurred in delay in the repair of the LCT "Don Paulo," nevertheless, there was
nothing in the record of the case to show that such delay was unreasonable or was the result of any unfair
claim settlement practice as defined under the Insurance Code, as amended as would warrant
revocation or suspension of private respondent's Certificate of Authority.

Petitioner Almendras' Motion for Reconsideration was denied for lack of merit by public respondent
Commission on 11 November 1985. 7
In the present Petition for certiorari filed with this Court on 28 November 1985, petitioner Almendras
presents only one issue for determination-i.e., whether or not there the valid and substantial grounds
to revoke or suspend private respondent Bankers' Certificate of Authority to engage in the insurance
business. Public respondent Commission would, however, raise as an additional issue the argument
that the present Petition for certiorari is improperly filed, that appeal to the Secretary of Finance from
public respondent Commission's disputed Resolution and Order is the proper recourse for petitioner
under the facts and circumstances of this case. 8
Viewed in the light of the facts obtaining in Administrative Case No. 006 and the pertinent legal
provisions on the matter, we hold that the Court has no jurisdiction to try and decide the instant
Petition.
The provisions of the Insurance Code (Presidential Decree No. 1460), as amended, clearly indicate
that the Office of the Insurance Commission is an administrative agency vested
with regulatory power as well as withadjudicatory authority. Among the several regulatory or nonquasi-judicial duties of the Insurance Commissioner under the Insurance Code is the authority to
issue, or refuse issuance of, a Certificate of Authority to a person or entity desirous of engaging in
insurance business in the Philippines, 9 and to revoke or suspend such Certificate of Authority upon a
finding of the existence of statutory grounds for such revocation or suspension. The grounds for
revocation or suspension of an insurer's Certificate of Authority are set out in Section 241 10 and in Section
247 11 of the Insurance Code as amended. The general regulatory authority of the Insurance
Commissioneris described in Section 414 of the Insurance Code, as amended, in the following terms:
Section 414. The Insurance Commissioner shall have the duty to see that all laws
relating to insurance, insurance companies and other insurance matters, mutual
benefit associations, and trusts for charitable uses are faithfully executed and to
perform the duties imposed upon him by this Code, and shall, not withstanding any
existing laws to contrary, have sole and exclusive authority to regulate the issuance
and sale of variable contracts as defined in section two hundred thirty-two and to
provide for the licensing of persons selling such contracts, and to issue such
reasonable rules and regulations governing the same.
The Commissioner may issue such rulings, instructions, circulars, orders and
decisions as he may deem necessary to secure the enforcement of the provisions of
this Code, subject to the approval of the Secretary of Finance. Except as otherwise
specified decisions made by the Commissioner shall be appealable to the Secretary
of Finance. (Emphasis supplied)
which Section also specifies the authority to which a decision of the Insurance Commissioner
rendered in the exercise of its regulatory function may be appealed.
The adjudicatory authority of the Insurance Commissioner is generally described in Section 416 of
the Insurance Code, as amended, which reads as follows:

Sec. 416. The Commissioner shall have the power to adjudicate claims and
complaints involving any loss, damage or liability for which an insurer may be
answerable under any kind of policy or contract of insurance, or for which such
insurer may be liable under a contract of membership, or for which a reinsurer may
be sued under any contract or reinsurance it may have entered into, or for which a
mutual benefit association may be held liable under the membership certificates it
has issued to its members, where the amount of any such loss, damage or liability,
excluding interests, cost and attorney's fees, being claimed or sued upon any kind of
insurance, bond, reinsurance contract, or membership certificate does not exceed in
any single claim one hundred thousand pesos.
xxx xxx xxx
The authority to adjudicate granted to the Commissioner under this section shall be
concurrent with that of the civil courts, but the filing of a complaint with the
Commissioner shall preclude the civil courts from taking cognizance of a suit
involving the same subject matter. (Emphasis supplied)
Continuing, Section 416 (as amended by B.P. Blg. 874) also specifies the authority to which appeal
may be taken from a final order or decision of the Commissioner given in the exercise of his
adjuclicatory or quasi-judicial power:
Any decision, order or ruling rendered by the Commissioner after a hearing shall
have the force and effect of a judgment. Any party may appeal from a final order,
ruling or decision of the Commissioner by filing with the Commissioner within thirty
days from receipt of copy of such order, ruling or decision a notice of appeal to the
Intermediate Appellate Court (now the Court of appeals) in the manner provided for
in the Rules of Court for appeals from the Regional Trial Court to the Intermediate
Appellate Court (now the Court of Appeals).
xxx xxx xxx (Emphasis supplied)
It may be noted that under Section 9 (3) of B.P. Blg. 129, appeals from a final decision of the
Insurance Commissioner rendered in the exercise of his adjudicatory authority now fall within
the exclusive appellate jurisdiction of the Court of Appeals.
Petitioner Almendras in his Complaint filed with the Insurance Commission, originally sought
remedies which would have required the Insurance Commissioner to adjudicate on matters
pertaining to performance and satisfaction by private respondent Bankers of its legal obligations
under its Contract of Insurance (policy No. MH-HO/84-305) with petitioner Almendras. The Court
observes, however, that both parties had agreed at the 23 August 1985 hearing before the
Insurance Commissioner to submit the case for resolution on the sole issue of whether or not
revocation or suspension of private respondent Bankers' Certificate of Authority to engage in
insurance business was justified. The scope of the issues involved having been so limited the
Insurance Commissioner was left with the task of determining whether or not private respondent
Bankers was guilty of an act or acts constituting a statutory ground for revocation or suspension of

its Certificate of Authority. Clearly, therefore, the Insurance Commissioner's disputed Resolution and
Order was issued in the performance of administrative and regulatory duties and fucntion and should
have been appealed by petitioner to the Office of the Secretary of Finance.
Petitioner Almendras in effect invoked only the Commissioner's regulatory authority to determine
whether or not private respondent Bankers had violated provisions of the Insurance Code, as
amended. Petitioner had chosen to litigate the substantive aspects of its insurance claim against
Bankers in a different forum a judicial one for it instituted a separate civil action for damages
before the Regional Trial Court of Pasay City, on 13 August 1985, that is, after efforts at amicable
settlement of Administrative Case No. 006 had failed. Petitioner Almendras had in fact to go before a
judicial forum and to limit the proceedings before the Insurance Commissioner to regulatory, nonjudicial, matters; the claim of petitioner Almendras was in excess of P100,000.00 and, therefore, fen
outside the quasi-judicial jurisdiction of the Insurance Commissioner under Section 416 of the
Insurance Code, as amended.
We conclude that petitioner Almendras remedy after its Motion for Reconsideration in Administrative
Case No. 006 had been denied by public respondent Commission was to interpose an appeal to the
Secretary of Finance. The present Petition for certiorari is neither proper nor an appropriate
substitute for such an appeal.
WHEREFORE, the Petition for certiorari is DISMISSED. Costs against petitioner.
SO ORDERED.
Fernan (Chairman), Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 131399

October 17, 2003

ANGELITA AMPARO GO, petitioner,

vs.
OFFICE OF THE OMBUDSMAN, INSURANCE COMMISSIONER EDUARDO T. MALINIS and
NORBERTO F. CASTRO, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Angelita
Amparo Go seeks the reversal of the Resolution of the Office of the Ombudsman in OMB-0-96-2225
dismissing her charges against Insurance Commissioner Eduardo T. Malinis and Hearing Officer
Norberto F. Castro for Violation of Section 3 [e] of Republic Act No. 3019, otherwise known as AntiGraft and Corrupt Practices Act, which provides:
Sec. 3. Corrupt practices of public officers. -- In addition to acts omissions of public officers already
penalized by existing law, the following shall constitute corrupt practices of any public officer and are
hereby declared to be unlawful:
...
(e) Causing any undue injury to any party, including the Government, or giving any private party any
unwarranted benefits, advantage or preference in the discharge of his official, administrative or
judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence. This
provision shall apply to officers and employees of offices or government corporations charged with
the grant of licenses or permits or other concessions.
The facts of the case are as follows:
Petitioner is the Treasurer and Vice-President of Wear Me Garment Manufacturing Inc. whose
business and factory are located in Nadurata St., Grace Park, Caloocan City. Due to a fire on July
12, 1993 that gutted down Wear Me Garments factory as well as its machineries and stocks,
petitioner filed separate insurance claims against each of the following 14 insurance companies:
(1) Prudential Guarentee & Assurance Inc. P 5,000,000.00
(2) Oriental Assutance Corporation P 3,500,000.00
(3) Cibeles Insurance Corporation P 1,000,000.00
(4) Pioneer Asia Insurance Corporation P 1,500,000.00
(5) Western Guaranty Corp. P 2,500,000.00
(6) Liberty Insurance Corporation P 4,000,000.00
(7) Filipino Merchants Insurance Co. P 1,000,000.00
(8) Reliance Surety & Insurance Co., Inc. P 500,000.00
(9) Central Surety & Insurance Co. P 2,000,000.00
(10) Phil. British Assurance Corporation P 1,500,000.00
(11) Philippine First Insurance Co., Inc. P 1,500,000.00

(12) Blue Cross Insurance Co., Inc. P 2,500,000.00

(13) Commonwealth Insurance Co. P 2,000,000.00
(14) Imperial Insurance Co. Inc. P 1,278,000.00
which total P29,778,000.00.
Feeling that the resolutions of her claims have been unduly delayed, petitioner sought the assistance
of the Insurance Commission (Commission for brevity) through her letter dated January 18,
1994.1 Acting on said letter, the Public Assistance & Information Division of the Commission held a
conference on February 15, 1994 wherein petitioner and the insurance companies respective
representatives met. The insurers manifested their official stance to deny the claims of petitioner.2 As
a result, the conference was terminated without prejudice to petitioners option to pursue other legal
remedies.3
Petitioner then sought the intercession of several members and committees of the Legislature, such
as, then Senate President Edgardo Angara,4 Senator Heherson Alvarez and the Senate Blue Ribbon
Committee5 and the House Committee on Banks and Financial Intermediaries,6 accusing the
Commission of acting in conspiracy with the insurance companies in denying and delaying her
claims.7 The legislators and the committees sent communications to the Commission regarding
petitioners claims.8 Acting on the matter, the Commission conducted several meetings with
petitioner and the insurance companies in order to settle the claims. The Commission apprised the
legislators and their committees of the actions taken by the Commission and vehemently denied
petitioners accusations.9
On June 20, 1994, petitioner filed with the Commission a complaint for Revocation and/or
Suspension of Licenses against the fourteen insurance companies, docketed as Adm. Case No. RD156, based on alleged violation by the insurance companies and their respective adjusters of
Section 241 (b), (c), (d) and (e) of the Insurance Code, as amended, to wit:
SEC. 241. (1) No insurance company doing business in the Philippines shall refuse, without just
cause, to pay or settle claims arising under coverages provided by its policies, nor shall any such
company engage in unfair claim settlement practices. Any of the following acts by an insurance
company, if committed without just cause and performed with such frequency as to indicate a
general business practice, shall constitute unfair claim settlement practices:
...
(b) Failing to acknowledge with reasonable promptness pertinent communications with respect to
claims arising under its policies;
(c) Failing to adopt and implement reasonable standards for the the prompt investigation of claims
arising under its policies;

(d) Not attempting in good faith to effectuate prompt, fair and equitable settlement of claims
submitted in which liability has become reasonably clear; or
(e) Compelling policyholders to institute suits to recover amounts due under its policies by offering
without justifiable reason substantially less than the amount ultimately recovered in suits brought by
them.
mandating prompt investigation and settlement of claims.10
Consequently, the Commission informed the concerned legislative bodies that they could not
mediate any longer petitioners claims against the insurers because to do so will conflict with its
position to maintain strict impartiality in the adjudication of Adm. Case No. RD-156. 11
Preliminary hearings were conducted in Adm. Case No. RD-156.12 On November 24, 1994, the
complaint was amended including therein several adjusters as party-defendants. 13 Petitioner also
filed a Joint Affidavit, together with her husband,14 and a Motion to Admit Amended Complaint and
Affidavit in Lieu of Direct Testimony.15
On February 27, 1995, while Adm. Case No. RD-156 is pending before the Commission, petitioner
filed with the Regional Trial Court of Quezon City (Branch 222) a civil case for Specific Performance
with Damages, docketed as Civil Case No. Q-95-23135, against the same defendants in Adm. Case
No. RD-156.16 The complaint prayed that defendants be ordered to perform their respective
obligations as insurers under the insurance policies and to pay damages and attorneys fees. 17
On March 28, 1995, the pre-trial in Adm. Case No. RD-156 was terminated and consolidated
hearings on the case ensued.18 In its Order dated May 17, 1995, the Commission admitted
petitioners Amended Complaint and Joint Affidavit.19 Consolidated/joint hearings on the case then
proceeded.20
On motion to dismiss by two of the insurers, the Commission ordered the suspension of Adm. Case
No. RD-156 until final determination of Civil Case No. Q-95-23135.21 The Commission was of the
opinion that the administrative case for revocation/suspension of license of respondents and the civil
case for specific performance with the Regional Trial Court involve the same set of parties, facts and
circumstances; and that the determination by the Commission of the validity of the claims might
conflict with that of the court, or vice-versa.22
Aggrieved, petitioner filed with the Office of the Ombudsman a Complaint-Affidavit against
Commissioner Malinis and Hearing Officer Castro of the Regulation Division, charging them of
Violation of Section 3 [e] of Rep. Act No. 3019, as herein quoted earlier.
In a gist, petitioner alleges in her Complaint-Affidavit, as follows:
Some time in March 1994, petitioner went to the office of respondent Commissioner Malinis to
discuss her claims and he informed her that he can settle the claims. However, because respondent
Malinis did not fulfill his promise, she decided to file Adm. Case No. RD-156, which was raffled to
respondent Castro. Petitioner again visited respondent Malinis on May 20, 1994, and the latter told

her that he will settle the claims if she gives him 50% of it. In order for petitioner to accede to
respondent Malinis demand, he ordered Castro to conduct separate hearings on the claims. Castro
admitted to petitioner that it was respondent Malinis who instructed him to conduct separate
hearings. Petitioner asked respondent Malinis to consolidate the hearings but instead, Malinis again
propositioned that he will settle her claims if petitioner gives him 50%. Respondent Malinis then
ordered the suspension of Adm. Case No. RD-156 in his Order dated August 29, 1995, which is
patently void since he was not the hearing officer, and the order violates E.O. No. 26 and Insurance
Circular Memorandum 1-93 on the early disposition of insurance claims. 23
In his Counter-Affidavit, respondent Malinis denies petitioners allegations. 24 He contends that the
Commission attended to petitioners claims as early as January 1994 and that despite the fact that it
was beyond the jurisdiction of the Commission and the insurance companies refused to grant the
claims, he nevertheless exerted efforts to mediate the dispute.25
Respondent Castro also denies petitioners accusations. He maintains that he did not tell petitioner
that the holding of separate hearings was upon the instructions of Commissioner Malinis, as in fact,
records show that joint hearings were held in Adm. Case No. RD-156; and, that the suspension of
Adm. Case No. RD-156 was based on a motion to dismiss filed by the insurance companies, after
due hearing on the motion.26
Graft Investigation Officer Ginez-Jabalde recommended the dismissal of the charges against
respondents per Resolution dated January 13, 1997. However, Ombudsman Desierto ordered
further clarificatory hearings.27 On March 18, 1997, a clarificatory hearing was held wherein
respondent Castro explained that although he scheduled separate hearings, it was because the
situation called for it as there were various insurance companies, adjusters and issues involved in
the claims.28
Thereafter, the Ombudsman approved the recommendation of the Graft Investigation Officer to
dismiss the charges against respondents.29 Upon denial by the Ombudsman of her motion for
reconsideration,30 petitioner filed the present petition for review on certiorari.
Petitioner raises the following issues:
CAN AN ADMINISTRATIVE CASE PENDING BEFORE AN ADMINISTRATIVE TRIBUNAL BE
PURSUED UNABATED AND INDEPENDENTLY DESPITE SUBSEQUENT FILING OF A CIVIL
CASE IN A REGULAR COURT OF JUSTICE WHEREIN IN BOTH CASES, IT (sic) INVOLVE THE
SAME PARTIES AND RELATIVELY INVOLVE THE SAME INCIDENT?
WHETHER THE CONDUCT OF A (sic) SEPARATE HEARINGS FOR EACH RESPONDENTS (sic)
CONSISTING OF FOURTEEN (14) INSURANCE COMPANIES AND SIX (6) ADJUSTMENT
COMPANIES ON THE ONE HAND AND ONE (1) COMPLAINANT ON THE OTHER HAND,
RESORTED BY THE HEARING OFFICER IN AN ADMINISTRATIVE CASE PREDICATED ON THE
SAME ISSUE AND THE SAME SET OF FACTS AND CIRCUMSTANCES, AND THE SUBSEQUENT
SUSPENSION OF THE PROCEEDINGS THEREON VIOLATES SECTION 16, ARTICLE IV OF THE
CONSTITUTION AS WELL AS EXECUTIVE ORDER NO. 26 AND INSURANCE MEMORANDUM
CIRCULAR 1-93 MANDATING THE SPEEDY DISPOSITION OF ADMINISTRATIVE CASES. 31

The Court finds the petition devoid of merit. The Ombudsman did not commit any grave abuse of
discretion when it found no probable cause and dismissed the Complaint-Affidavit against
respondents.
The Ombudsman resolved to dismiss the charges against respondents as the latter were able to
satisfactorily explain the reason for the holding of separate hearings, i.e., expediency, and the
Commission is allowed under its rules of procedure to order the suspension of Adm. Case No. RD156. The Ombudsman concluded:
The conduct of separate hearings and issuance of the Order were all done in the regular
performance of duties by the respondents Insurance Commissioner and Hearing Officer respetively
(sic). Moreover, they were done within the purview of the rules of procedure governing the functions
of the Insurance Commission.
Finally, complainant failed to substantiate her charge with any concrete evidence, thus we can
simply regard the charge against respondent Eduardo T. Malinis and Norberto F. Castro as if it does
not exist at all.32
Petitioner insists that the filing of Civil Case No. Q-95-23135 before the regular court does not abate
or suspend the proceedings in Adm. Case No. RD-156. Petitioner argues further that the holding of
separate hearings violates her constitutional right to the speedy disposition of her case.
It has been the Courts policy to refrain from interfering with the Ombudsmans exercise of its
investigatory and prosecutory powers, unless there are good and compelling reasons to rule
otherwise.33 We find no cogent reason that justifies the reversal of the dismissal of the charges
against respondents.
In her Affidavits, petitioner alleges that respondent Malinis act of demanding 50% of the insurance
claims, instructing respondent Castro to conduct separate hearings, and suspending Adm. Case No.
RD-156, caused her undue injury and gave the insurance companies unwarranted benefits,
advantage and preference.34 Aside from such bare allegations, there is nothing on record proving
that respondent Malinis in fact demanded such 50%, or that the holding of the separate hearings and
the suspension of the proceedings were done in order to coerce petitioner into acceding to Malinis
demand.
Petitioner argues that respondent Malinis did not deny her accusations and failed to answer the
charges against him, indicating therefore the truth of her allegations.35 Indeed, the general rule is that
failure to deny allegations in the complaint results in admission thereof. 36 Such rule, however, is not
absolute and admits of exceptions.37 InFlorentino Atillo III vs. Court of Appeals, Amancor, Inc. and
Michell Lhuillier,38 we held that in spite of the presence of judicial admissions in a partys pleading,
the trial court is still given leeway to consider other evidence presented; 39 or, as in the present case,
the absence of evidence for the petitioner to prove her claim.
It is fundamental that upon him who alleges rests the burden of proof; 40 hence, it is incumbent upon
petitioner to prove her allegations with competent evidence. 41 She cannot simply rely on respondent

Malinis failure to specifically deny her allegations to prove that there was such an illegal proposition.
Respondents may not be indicted on mere presumptions.
A review of the records shows that petitioner failed to prove her claim such that respondents may not
be indicted for the acts complained of. As aptly found by the Ombudsman, there was no concrete
evidence presented by petitioner to substantiate her charge.42
To establish probable cause for Violation of Section 3[e] of R.A. 3019, the following elements must
be present:
(1) The accused is a public officer or a private person charged in conspiracy with the former;
(2) The said public officer commits the prohibited acts during the performance of his or her official
duties or in relation to his or her public positions;
(3) That he or she causes undue injury to any party, whether the government or a private party;
(4) Such undue injury is caused by giving unwarranted benefits, advantage or preference to such
parties; and
(5) That the public officer has acted with manifest partiality, evident bad faith or gross inexcusable
negligence.43
The causing of undue injury or the giving of any unwarranted benefits, advantage or preference
through manifest partiality, evident bad faith or gross inexcusable negligence constitutes the very act
punished under the foregoing section.44
Petitioner complains that she found it "difficult and burdensome to prosecute her case against the
insurers not to mention that she had been rendered despondent by the loss of her business due
to conflagration."45 Such difficulty and burden, however, do not, per se, constitute the undue injury
contemplated by law.
Jurisprudence has consistently interpreted the term "undue injury" as synonymous to "actual
damage."46 In Llorente, Jr. vs. Sandiganbayan,47 we explained the concept of "undue injury" as an
element of the offense punishable under Section 3 [e] of Rep. Act No. 3019, to wit:
Undue has been defined as "more than necessary, not proper, [or] illegal;" and injury as "any
wrong or damage done to another, either in his person, rights, reputation or property[;] [that is, the]
invasion of any legally protected interest of another." Actual damage, in the context of these
definitions, is akin to that in civil law.

Petitioner may have been fraught with attending and litigating her claims against each of the
fourteen insurers as well as the insurance adjusters, individually, but inconvenience is certainly not
constitutive of undue injury.48

Moreover, petitioner failed to show that the conduct of separate hearings was done by respondents
through manifest partiality, evident bad faith or gross inexcusable negligence.
Records show that as early as January 1994, when petitioner first brought the matter of the delay in
her insurance claims to the Commission, respondent Malinis, upon the request of petitioner, exerted
efforts to mediate between her and the insurance companies in order to amicably settle the claims
notwithstanding the fact that it was beyond the jurisdictional amount cognizable by the Commission
under the Insurance Code, as amended.
1awphi1.nt

Paragraph 1, Section 416 of the Code provides that the Insurance Commissioner shall have the
power to adjudicate claims and complaints involving any loss, damage or liability for which an insurer
may be answerable under any kind of policy or contract of insurance where the amount of any such
loss, damage or liability does not exceed in any single claim one hundred thousand pesos. When the
insurance companies made known their official position to deny the claims, respondent Malinis
persisted in holding meetings between the parties. It was only after petitioner formally filed a
complaint for Revocation and/or Suspension of Licenses with the Commission that settlement
discussions were discontinued as it may compromise the Commissions impartiality.49 These clearly
are not indicative of evident bad faith, manifest partiality or gross inexcusable negligence on
respondents part. Thus, respondent Malinis cannot be faulted for attempting to mediate among the
parties.
Records also show that the separate hearings on the case were held only during the early part of the
proceedings in Adm. Case No. RD-156, particularly on August 15, 16, 17, 1994, and September 6, 7,
8, 9, 12, 13, 14, 16, 19, 20, 21, 22, 23, 1994.50 During the clarificatory hearing held before the Office
of the Ombudsman, respondent Castro explained that the conduct of separate hearings was
necessary because petitioners claims involved several insurance companies, adjusters and peculiar
issues for each of the companies.51 What petitioner conveniently omitted to add is that
consolidated/joint hearings were in fact held on August 25, 29, 1994, April 6, 1995, May 12, 1995,
June 5, 1995, and July 3, 1995.52 This negates petitioners allegation that respondents were
deliberately holding separate hearings to her prejudice. Notably, it was during the hearing of July 3,
1995 that the motion to dismiss the Amended Complaint was heard and argued before respondent
Castro who eventually decided to order the suspension of the proceedings. 53
The fact that the Commission suspended the proceedings due to the pendency of Civil Case No. Q95-23135 does not constitute an indictable offense under Section 3 [e] of R.A. No. 3019.
In Almendras Mining Corporation vs. Office of the Insurance Commission,54 the Court expounded on
the two-fold powers of the Insurance Commission under the Insurance Code, as amended, 55 to wit:
. . . the Office of the Insurance Commission is an administrative agency vested with regulatory power
as well as with adjudicatory authority. Among the several regulatory or non-quasi-judicial duties of
the Insurance Commissioner under the Insurance Code is the authority to issue, or refuse issuance
of, a Certificate of Authority to a person or entity desirous of engaging in insurance business in the
Philippines, and to revoke or suspend such Certificate of Authority upon a finding of the existence of
statutory grounds for such revocation or suspension. The grounds for revocation or suspension of an
insurer's Certificate of Authority are set out in Section 241 and in Section 247 of the Insurance Code

as amended. The general regulatory authority of the Insurance Commissioner is described in

Section 414 of the Insurance Code, as amended, in the following terms:
Sec. 414. The Insurance Commissioner shall have the duty to see that all laws relating to insurance,
insurance companies and other insurance matters, mutual benefit associations, and trusts for
charitable uses are faithfully executed and to perform the duties imposed upon him by this Code,
and shall, notwithstanding any existing laws to the contrary, have sole and exclusive authority to
regulate the issuance and sale of variable contracts as defined in section two hundred thirty-two and
to provide for the licensing of persons selling such contracts, and to issue such reasonable rules and
regulations governing the same.
...
The adjudicatory authority of the Insurance Commissioner is generally described in Section 416 of
the Insurance Code, as amended, which reads as follows:
Sec. 416. The Commissioner shall have the power to adjudicate claims and complaints involving any
loss, damage or liability for which an insurer may be answerable under any kind of policy or contract
of insurance, or for which such insurer may be liable under a contract of suretyship, or for which a
reinsurer may be sued under any contract or reinsurance it may have entered into, or for which a
mutual benefit association may be held liable under the membership certificates it has issued to its
members, where the amount of any such loss, damage or liability, excluding interests, cost and
attorney's fees, being claimed or sued upon any kind of insurance, bond, reinsurance contract, or
membership certificate does not exceed in any single claim one hundred thousand pesos.
(Emphasis supplied)
Under its adjudicatory authority, the Insurance Commission has the original jurisdiction to adjudicate
and settle insurance claims and complaints where the amount being claimed does not exceed in any
single claim one hundred thousand pesos, as provided in Section 416 of the Code. Such original
jurisdiction is concurrent with that of the Metropolitan Trial Courts, the Municipal Trial Courts and the
Municipal Circuit Trial Courts.56
In addition to such adjudicatory power, the Commissioner has the regulatory authority to revoke or
suspend the certificate or authority of an insurance company upon finding the legal grounds for such
revocation or suspension under Sections 241 and 247 of the Insurance Code. Section 241 is quoted
in the early part of herein Decision. Section 247 provides:
SEC. 247. If the Commissioner is of the opinion upon examination or other evidence that any
domestic or foreign insurance company is in an unsound condition, or that it has failed to comply
with the provisions of law or regulations obligatory upon it, or that its condition or methods of
business is such as to render its proceedings hazardous to the public or to its policyholders, or that
its paid-up capital stock, in the case of a domestic stock company, or its available cash assets, in the
case of domestic mutual company, or its security deposits, in the case of a foreign company, is
impaired or deficient, or that the margin of solvency required of such company is deficient, the
Commissioner is authorized to suspend or revoke all certificates of authority granted to such
insurance company, its officers and agents, and no new business shall thereafter be done by such

company or for such company by its agent in the Philippines while such suspension, revocation or
disability continues or until its authority to do business is restored by the Commission. Before
restoring such authority, the Commissioner shall required the company concerned to subject to him
a business plan showing the companys estimated receipts and disbursements, as well as the basis
therefore, for the next succeeding three years. (As amended by P.D. No. 1455)
Petitioner pursued her fire insurance claims through the regular courts when she filed Civil Case No.
Q-95-23135 for Specific Performance with Damages with the RTC-Quezon City (Branch 222), her
claims being beyond the jurisdiction of the Commission. In resolving petitioners claims, the trial
court must therefore determine whether there was unreasonable denial or withholding of the claims
by the insurance companies.
On the other hand, in Adm. Case No. RD-156 pending before the Insurance Commission, the
Commissioner is called upon to determine whether there was unreasonable delay or withholding of
the claims, as petitioners action is one for the Revocation and/or Suspension of Licenses on
grounds of alleged violations of Section 241 (b), (c), (d) and (e) of the Insurance Code, as amended,
on prompt investigation and settlement of claims. The jurisdiction of the Commission in this case is
one that calls for the exercise of its regulatory or non-quasi-judicial duty, i.e., the authority to revoke
or suspend an insurers certificate of authority.57 Aside from the revocation/suspension of license, the
Insurance Commissioner also has the discretion to impose upon the erring insurance companies
and its directors, officers and agents, fines and penalties, as set out in Section 415, viz.:
SEC. 415. In addition to the administrative sanction provided elsewhere in this Code, the Insurance
Commissioner is hereby authorized, at his discretion, to impose upon insurance companies, their
directors and/or officers and/or agents, for any willful failure or refusal to comply with, or violation of
any provision of this Code, or any order, instruction, regulation or ruling of the Insurance
Commissioner, or any commission of irregularities, and/or conducting business in an unsafe or
unsound manner as may be determined by the Insurance Commissioner, the following:
(a) Fines not in excess of five hundred pesos a day; and
(b) Suspension, or after due hearing, removal of directors and/or officers and/or agents.
The findings of the trial court will not necessarily foreclose the administrative case before the
Commission, or vice versa. True, the parties are the same, and both actions are predicated on the
same set of facts, and will require identical evidence. But the issues to be resolved, the quantum of
evidence, the procedure to be followed and the reliefs to be adjudged by these two bodies are
different.
Petitioners causes of action in Civil Case No. Q-95-23135 are predicated on the insurers refusal to
pay her fire insurance claims despite notice, proofs of losses and other supporting documents. Thus,
petitioner prays in her complaint that the insurers be ordered to pay the full-insured value of the
losses, as embodied in their respective policies.58 Petitioner also sought payment of interests and
damages in her favor caused by the alleged delay and refusal of the insurers to pay her
claims.59 The principal issue then that must be resolved by the trial court is whether or not petitioner
is entitled to the payment of her insurance claims and damages. The matter of whether or not there

is unreasonable delay or denial of the claims is merely an incident to be resolved by the trial court,
necessary to ascertain petitioners right to claim damages, as prescribed by Section 244 of the
Insurance Code.
On the other hand, the core, if not the sole bone of contention in Adm. Case No. RD-156, is the
issue of whether or not there was unreasonable delay or denial of the claims of petitioner, and if in
the affirmative, whether or not that would justify the suspension or revocation of the insurers
licenses.
Moreover, in Civil Case No. Q-95-23135, petitioner must establish her case by a preponderance of
evidence, or simply put, such evidence that is of greater weight, or more convincing than that which
is offered in opposition to it.60 In Adm. Case No. RD-156, the degree of proof required of petitioner to
establish her claim is substantial evidence, which has been defined as that amount of relevant
evidence that a reasonable mind might accept as adequate to justify the conclusion. 61
In addition, the procedure to be followed by the trial court is governed by the Rules of Court, 62 while
the Commission has its own set of rules63 and it is not bound by the rigidities of technical rules of
procedure.64 These two bodies conduct independent means of ascertaining the ultimate facts of their
respective cases that will serve as basis for their respective decisions.
1a\^/phi1.net

If, for example, the trial court finds that there was no unreasonable delay or denial of her claims, it
does not automatically mean that there was in fact no such unreasonable delay or denial that would
justify the revocation or suspension of the licenses of the concerned insurance companies. It only
means that petitioner failed to prove by preponderance of evidence that she is entitled to damages.
Such finding would not restrain the Insurance Commission, in the exercise of its regulatory power,
from making its own finding of unreasonable delay or denial as long as it is supported by substantial
evidence.
While the possibility that these two bodies will come up with conflicting resolutions on the same
issue is not far-fetched, the finding or conclusion of one would not necessarily be binding on the
other given the difference in the issues involved, the quantum of evidence required and the
procedure to be followed.
Moreover, public interest and public policy demand the speedy and inexpensive disposition of
administrative cases.65
Hence, Adm. Case No. RD-156 may proceed alongside Civil Case No. Q-95-23135.
The suspension of Adm. Case No. RD-156 by respondents, albeit erroneous, is not sufficient indicia
of evident bad faith, manifest partiality or gross inexcusable negligence. Respondents mistaken
sense of prudence and judgment, dictated the suspension of the proceedings. To hold respondents
responsible for such error would be nothing short of harassment. For no one called upon to try the
facts or interpret the law in the process of administering justice can be infallible in his judgment. 66
WHEREFORE, the instant petition for review on certiorari is hereby DENIED for lack of merit.
However, in the interest of orderly administration of justice, the Insurance Commission is directed to

proceed with immediate dispatch in conducting the hearings of Adm. Case No. RD-156 to determine
whether or not the licenses of the insurance companies and adjusters may be revoked or suspended
as prayed for by petitioner.
No costs.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, Callejo, Sr., and Tinga, JJ., concur.

Philamlife v. Ansaldo Jurisdiction of the Insurance

Commissioner
234 SCRA 509
Facts:
> Ramon M. Paterno sent a letter-complaint to the Insurance Commissioner alleging certain
problems encountered by agents, supervisors, managers and public consumers of the Philamlife as
a result of certain practices by said company.
> Commissioner requested petitioner Rodrigo de los Reyes, in his capacity as Philamlife's president,
to comment on respondent Paterno's letter.
> The complaint prays that provisions on charges and fees stated in the Contract of Agency
executed between Philamlife and its agents, as well as the implementing provisions as published in
the agents' handbook, agency bulletins and circulars, be declared as null and void. He also asked
that the amounts of such charges and fees already deducted and collected by Philamlife in
connection therewith be reimbursed to the agents, with interest at the prevailing rate reckoned from
the date when they were deducted
> Manuel Ortega, Philamlife's Senior Assistant Vice-President and Executive Assistant to the
President, asked that the Commissioner first rule on the questions of the jurisdiction of the Insurance
Commissioner over the subject matter of the letters-complaint and the legal standing of Paterno.

> Insurance Commissioner set the case for hearing and sent subpoena to the officers of Philamlife.
Ortega filed a motion to quash the subpoena alleging that the Insurance company has no jurisdiction
over the subject matter of the case and that there is no complaint sufficient in form and contents has
been filed.
> The motion to quash was denied.

Issue:
Whether or not the insurance commissioner had jurisdiction over the legality of the Contract of
Agency between Philamlife and its agents.

Held:
No, it does not have jurisdiction.
The general regulatory authority of the Insurance Commissioner is described in Section 414 of the
Insurance Code, to wit:
"The Insurance Commissioner shall have the duty to see that all laws relating to insurance,
insurance companies and other insurance matters, mutual benefit associations and trusts for
charitable uses are faithfully executed and to perform the duties imposed upon him by this
Code, . . . ."

On the other hand, Section 415 provides:

"In addition to the administrative sanctions provided elsewhere in this Code, the Insurance
Commissioner is hereby authorized, at his discretion, to impose upon insurance companies, their
directors and/or officers and/or agents, for any willful failure or refusal to comply with, or violation of
any provision of this Code, or any order, instruction, regulation or ruling of the Insurance
Commissioner, or any commission of irregularities, and/or conducting business in an unsafe or
unsound manner as may be determined by the Insurance Commissioner, the following:
a) fines not in excess of five hundred pesos a day; and
b) suspension, or after due hearing, removal of directors and/or officers and/or agents."

A plain reading of the above-quoted provisions show that the Insurance Commissioner has the
authority to regulate the business of insurance, which is defined as follows:

"(2)
The term 'doing an insurance business' or 'transacting an insurance business,' within the
meaning of this Code, shall include (a) making or proposing to make, as insurer, any insurance
contract; (b) making, or proposing to make, as surety, any contract of suretyship as a vocation and
not as merely incidental of the surety; (c) doing any kind of business, including a reinsurance
business, specifically recognized as constituting the doing of an insurance business within the
meaning of this Code; (d) doing or proposing to do any business in substance equivalent to any of
the foregoing in a manner designed to evade the provisions of this Code. (Insurance Code, Sec. 2
[2])
Since the contract of agency entered into between Philamlife and its agents is not included within the
meaning of an insurance business, Section 2 of the Insurance Code cannot be invoked to give
jurisdiction over the same to the Insurance Commissioner. Expressio unius est exclusio alterius.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 71905 August 13, 1986
MIDLAND INSURANCE CORPORATION, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, & SISENANDO VILLAREAL, respondent.
Reynaldo P. Melendres for respondent Sisenando Villareal.

ALAMPAY, J.:
The petition for review on certiorari in this case seeks the nullification of the Order of the respondent
Intermediate Appellate Court under date August 14, 1985, dismissing the appeal of herein petitioner
despite respondent Court's letter-advice, dated February 8, 1985 directing the filing of petitionerappellant's brief.
The factual background of this case indicates that on October 1, 1984, a judgment was rendered by
the Insurance Commission in favor of complaint-appellee, Sisenando Villareal, and against herein
petitioner Midland Insurance Corporation. Petitioner received a copy of the decision on October 5,
1984 and it filed a motion for reconsideration of said judgment on October 17, 1984. This motion was
denied in an Order dated October 26, 1984. On November 7, 1984, petitioner filed with the
Insurance Commission its notice of appeal from the subject decision to respondent Intermediate
Appellate Court (IAC). This appeal was docketed as AC-G.R. SP No. 04928 of said court.
Petitioner's appeal was initially-accepted by the IAC as can be gleaned from the letter-advice dated
February 8, 1985, notifying petitioner's counsel to file appellant's brief. However, a Motion to Dismiss

appeal dated March 1, 1985 was filed by the complainant-appellee on the ground that the petitioner
herein, as the appellant in said AC-G.R. SP No. 04928 failed to perfect its appeal within the
reglementary period. Despite the opposition thereto interposed by petitioner Midland Insurance
Corporation, the Respondent IAC, on August 14, 1985 granted the stated Motion to Dismiss on the
ground that by said court's computation of the elapsed period from the date of receipt by herein
petitioner of the decision of the Insurance Commission to the time the notice of appeal was filed
before said Commission and notice of appeal and manifestation submitted to the IAC on December
5, 1984, it would appear that petitioner's appeal was belatedly made.
Respondent court in dismissing the petition said:
Respondent-appellant's contention that under Batas Pambansa Blg. 129 the
reglementary period of 15 days from receipt of the decision or judgment within which
to file an appeal is not applicable to quasi-judicial agencies such as the Insurance
Commission, is gratuitous. The applicable rule is explicit in No. 12(c)**, providing for
appellate procedure under the Interim Rules which state that 'appeals to the
Intermediate Appellate Court from quasi-judicial bodies shall continue to be governed
by the provisions of Republic Act No. 5434 insofar as the same is not inconsistent
with the provisions of B.P. Blg. 129. The pertinent provisions in Rep. Act No. 5434
provide:
SEC. 2. Appeals to the Court of Appeals shall be filed within the fifteen (15) days
from notice of the ruling, award, order, decision or judgment ... .
xxx xxx xxx
There is no conflict between the period to appeal in R.A. No. 5434 and Sec. 39, B.P.
129 which provides:
Appeals. The period for appeal from final orders, resolutions, awards, judgments,
or decisions of any court in all cases shall be fifteen (15) days counted from the
notice of the final order, resolution, award, judgment, or decision appealed from:
Provided, however, That in habeas corpus cases, the period for appeal shall be fortyeight (48) hours from the notice of the judgment appeal from.
xxx xxx xxx
(Decision, AC-G.R. SP No. 04928, p. 92, Rollo, p. 16)
The petitioner's case, however, rests on the assumption that it had timely filed its appeal on
November 7, 1984 because Section 2 of Republic Act No. 5434 which governs appeals originating
from quasi-judicial bodies grants a party ten (10) days from notice of the resolution denying a Motion
for Reconsideration. As notice of the denial of petitioner's motion for reconsideration by the
Insurance Commission was received by petitioner on October 30, 1984, the latter maintains that it
had ten (10) days thereafter or until November 9, 1984 within which to file its appeal and this was

filed with the IAC on November 7, 1984. Petitioner's submission is that the appeal was thus filed
within the reglementary period.
We find the petition impressed with merit and fully agree with the petitioner's submission regarding
the timeliness of its appeal.
It can be gleaned from the powers and duties of the Insurance Commissioner enumerated in
Sections 414-416, 187, and 241 of the Insurance Code performs quasi-judicial functions a term
which applies to the action, discretion, etc., of public administrative officers or bodies, who are
required to investigate facts, or ascertain the existence of facts, hold hearings, and draw conclusions
from them, as a basis for their official action and to exercise discretion of a judicial nature (Black's
Law Dictionary, Fifth Ed., 1979, p. l121).
It is paragraph 22(c) of the Interim Rules and Guidelines, relative to the Implementation of the
Judiciary Reorganization Act of 1981 (Batas Pambansa Blg. 129) which prescribes the procedure to
be taken in the Appellate Court with respect to appeals originating from Quasi-Judicial Bodies. It
reads as follows:
Paragraph 22(c) Appeals from Quasi-Judicial Bodies.-The appeals to the
Intermediate Appellate Court from quasi-judicial bodies shall continue to be governed
by the provisions of Republic Act No. 5434 insofar as the same is not inconsistent
with the provisions of B.P. Blg. 129.
Section 2 of R.A. 5434 explicitly provides:
Sec. 2. Appeals to the Court of Appeals shall be filed within fifteen (15) days from
notice of the ruling, award, order, decision or judgment or from the date of its last
publication if required by law for its effectivity or in case a motion for reconsideration
is filed within that period of fifteen (15) days, then within ten (10) days from Notice or
publication when required by law, of the resolution denying the motion for
reconsideration. No more than one motion for reconsideration shall be allowed by
any part. ... . (Emphasis supplied)
We find that petitioner herein is correct in maintaining that its appeal was timely filed. Petitioner's
motion for reconsideration was denied by the Insurance Commission and advice of such denial was
received by petitioner on October 30, 1984. As petitioner would then have ten (10) days from
October 30, 1984 or until November 9, 1984, its appeal was well within the ten day period within
which an appeal can be made to the respondent Intermediate Appellate Court.
What We note is that Respondent IAC fell into error because it failed to consider and apply the
pivotal Section 2 of R.A. 5434, which recites that "in case a motion for reconsideration is filed within
that period of fifteen (15) days, then within ten (10) days from Notice or publication, when required
by law, of the resolution denying the motion for reconsideration ... ." Respondent's court's failure to
do so led to its erroneous conclusion.

It should be considered that while Section 39 of B.P. Blg. 129, in conjunction with Section 19(a) of
the Interim Rules, fixes a uniform fifteen (15) day period for appeal from notice of the final order,
resolution, award, judgment or decision of any court Section 22(c) of the Interim Rules, however,
applies in particular to appeals to the Intermediate Appellate Court from quasi-judicial bodies. Said
Section 22(c) explicitly refers to the provisions of R.A. 5434, of which Section 2 thereof, had already
been above cited. There is no inconsistency between said section and B.P. 129 or its implementing
guidelines. B.P. 129 may not be said to have repealed said provision of R.A. 5434 for the Interim
Rules even expressly refer to said Section 2 of R.A. 5434. Said Section 2 should, therefore, be
applied.
It should be stressed that the provision in Section 2 of R.A. No. 5434 which allows an additional ten
(10) days from notice of the denial of the motion for reconsideration does not extend the period for
appeal but merely furnishes an automatic ten-day allowance in the event that a motion for
reconsideration is interposed within the appeal period. In other words, this particular provision
becomes operative only if a motion for reconsideration is filed during the fifteen-day period. The
period for appeal remains untouched by Section 2 of R.A. 5434. Private respondent's submission,
therefore, that this interpretation runs counter to the avowed intent of the Judiciary Reorganization
Act to set a uniform and thus shorter period for appeals does not possess a persuasive ring.
Furthermore, even if viewed in the light of Section 416, paragraph 7 of the Insurance Code (P.D.
612, as amended), which decrees that "... any party may appeal from a final order, ruling or decision
of the Commissioner by filing with the Commissioner within thirty (30) days from receipt of copy of
such order, ruling or decision a notice of appeal ...," the timeliness of the petitioner's appeal to the
Intermediate Appellate Court stands unassailable. Petitioner received notice of the decision of the
Insurance Commissioner on October 5, 1984 and filed a motion for reconsideration on October 17,
1984, thereby availing of eleven (11) days of the thirty (30) days limit in Section 416, par. 7, adverted
to above. Consequently, when petitioner received a copy of the Order denying said motion for
reconsideration on October 30, 1984, petitioner still had in its favor a total of nineteen (19) days from
the aforestated date inasmuch as the motion for reconsideration would suspend the running of the
thirty-day period prescribed for filing notice of appeal with the Insurance Commission (Rule 41,
Section 3, Rules of Court). Obviously, the filing of the notice of appeal on November 7, 1984 did not
exceed the remaining nineteen (19) days afforded to petitioner.
Thus, whether it be B.P. 129 or R.A. 5434 or the provisions of the Insurance Code, P.D. 612, as
amended, that should be considered and applied, the appeal in subject case made by Midland
Insurance Corporation must be deemed to be still timely filed.
It is also significant to note that in the recent decision of this Court in Gimenez Stockbrokerage and
Co. Inc., vs. Securities and Exchange Commission, No. L-68568, December 26, 1984, 133 SCRA
840-841, We therein held
... the SEC erred in holding that the thirty-day period provided for in section 6 of
Presidential Decree No. 902-A was modified by section 39 of the Judiciary Revamp
Law, Batas Pambansa Big. 129, which provides for a period of fifteen days for
appealing from final orders, resolutions, awards, judgments or decisions of any court.
The SEC is not a Court. It is an administrative agency.

In the same manner that the SEC was held to be an administrative agency, with quasi-judicial
functions, the same consideration would apply to the Insurance Commission. Consequently, the
period of appeal from final orders, decisions, resolutions or awards of said Insurance Commission
may not be necessarily modified or limited by section 39 of Batas Pambansa Blg. 129.
IN VIEW OF ALL THE FOREGOING, the Order of the respondent Intermediate Appellate Court,
dated August 14, 1985, dismissing petitioner's appeal is hereby SET ASIDE and it is directed to give
due course to the petitioner's appeal in accordance with the rules and procedure prescribed therefor
by said court.
No pronouncement as to costs.
Feria (Chairman), Fernan, Gutierrez, Jr., and Paras, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G. R. No. L-51539 December 14, 1981
SUMMIT GUARANTY & INSURANCE COMPANY, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS (Tenth Division), HONORABLE GREGORIA CRUZ
ARNALDO, in her capacity as Insurance Commissioner, and LEONARDO
CERTEZA, respondents.

CONCEPCION JR., J.:

Petition for certiorari, prohibition and mandamus, with a prayer for a restraining order, to annul and
set aside the orders of the respondent Court of Appeals issued in Case CA-G.R. No. SP-09113
entitled: "Summit Guaranty & Insurance Co., Inc., petitioner, versus Hon. Insurance Commissioner
and Leonardo Certeza, respondents", as well as the decision of the Insurance Commissioner in I.C.
Case No. 631, entitled: "Leonardo Certeza, complainant, versus Summit Guaranty & Insurance Co.,
Inc., respondent", to restrain the Insurance Commissioner from further proceeding with I.C. Case No.
631, and to direct the said Insurance Commissioner to dismiss the complaint against the petitioner.
The undisputed facts show that the Certeza & Sons, Inc. acquired from Felipe Uy a Toyota Jeep with
Motor No. 12 RC 369122, insured with the herein petitioner, Summit Guaranty & Insurance Co., Inc.,
under a private car comprehensive Policy No. 181764 for third-party liability in the amount of
P20,000.00 for the period from October 19, 1976 to October 19, 1977. The said policy was endorsed

by the insurance company to Certeza & Sons, Inc. per Indorsement No. PC-0043/77, effective
January 13, 1977.
On August 20, 1977, the insured vehicle, while travelling along E. Lopez St., Jaro, Iloilo, driven by
Rico Certeza, sideswiped a pedestrian and collided with a jeepney owned by a certain Daniel Dorillo.
The accident caused the death of George Certeza, a passenger in the insured vehicle, injuries to the
pedestrian Tony Posa, and injuries to passengers in the jeepney.
The injured were taken to the Iloilo Mission Hospital and Gov. Benito Lopez Memorial Hospital.
Medical and hospitalization expenses incurred therein amounted to P15,000.00, more or less, which
Leonardo Certeza settled by executing two (2) promissory notes in the amount of P8,344.80 for the
injured pedestrian Tony Posa and P6,344.80 for the passengers of the other vehicle, in favor of the
Iloilo Mission Hospital and Gov. Benito Lopez Memorial Hospital, respectively. Subsequently,
demand for payment of the hospitalization and medical expense of the injured and indemnity for the
death of George Certeza in the amount of P20,000.00 was made upon the insurance company.
When the insurance company failed to pay, a complaint against the insurance company was filed
with the Insurance Commission on January 31, 1978, docketed therein as I.C. Case No. 631. 1
After appropriate proceedings, judgment was rendered against the insurance company on February
9, 1979, as follows:
In view of the foregoing, judgment is hereby rendered ordering respondent company
to indemnify complainant the sum of P20,000 with interest provided for in Section
244 of the Insurance Code (P.D. 612) from the date the complaint was filed until fully
satisfied, plus the sum of P1,000 as attorney's fees, with costs. 2
From the above judgment, the petitioner appealed to the Court of Appeals, docketed therein as CAG.R. No. SP-09113 3 and on May 10, 1979, the respondent appellate court dismissed the petition for
review. 4 The petitioner moved for the reconsideration of the resolution, 5 but its motion was denied on
May 31, 1979. 6 Whereupon, the petitioner filed the present recourse.
The petitioner claims that the resolutions issued by the respondent Court of Appeals on May 10 and
31, 1979 in CA-G.R. No.SP-09113 are null and void for having been issued without jurisdiction; and
that the Insurance Commission erred in ordering petitioner to pay the private respondent Leonardo
Certeza the value of the policy.
The petitioner argues that the Court of Appeals has no appellate jurisdiction over decisions, rulings
and orders of the Insurance Commissioner.
The contention is meritorious. Section 416 of the Insurance Code, as amended by Presidential
Decree No. 1455 which took effect on June 11, 1978, provides that appeals from decisions, orders,
and rulings of the Insurance Commissioner should be addressed to the Supreme Court. The
pertinent portion of said Section reads, as follows:
Any decision, order or ruling rendered by the Commissioner after a hearing shall
have the force and effect of a judgment. Any party may appeal from a final order,

ruling or decision of the Commissioner by filing with the Commissioner within thirty
days from receipt of copy of such order, ruling or decision a notice of appeal and with
the Supreme Court twelve printed or mimeographed copies of a petition for certiorari
or review of such order, ruling or decision, as the case may be. A copy of the petition
shall be served upon the Commissioner and upon the adverse party, and proof of
service thereof attached to the original of the petition. (Emphasis supplied).
Petitioner, however, is estopped, on ground of public policy, from invoking the plea of lack of
jurisdiction after submitting itself to the jurisdiction of the Court of Appeals and assailing its
jurisdiction only after an adverse judgment was rendered against the petitioner. It appears that
Presidential Decree No. 1455, transferring jurisdiction over appeals from decisions, orders and
rulings of the Insurance Commissioner to the Supreme Court, was enacted on June 11, 1978, long
before the Insurance Commissioner rendered a decision against the petitioner on February 2, 1979.
This decree notwithstanding, petitioner filed a notice of appeal, serving notice that it is appealing the
judgment of the Insurance Commissioner to the Court of Appeals, 7 and filed with the Court of Appeals,
an urgent motion for extension of time within which to submit a petition for review. 8 The motion was
granted, 9and the petitioner submitted its petition for review with the Court of Appeals on April 25,
1979. 10 Nowhere in its petition for review did the petitioner raise the question of lack of jurisdiction.
Petitioner merely claimed therein that the Insurance Commissioner erred in finding private respondent
entitled to the payment of indemnity. Then, after the Court of Appeals had dismissed the petition on May
10, 1979, the petitioner filed a motion for the reconsideration of the resolution. 11 Again, the petitioner valid
not question the jurisdiction of the Court of Appeals. On the contrary, the petitioner maintained "that this
Honorable Tribunal (Court of Appeals) acquired jurisdiction over the case from the time the notice of
appeal from the decision was filed seasonably by herein petitioner with the Office of the Insurance
Commissioner." It is only in the petition under consideration that the petitioner has raised for the first time
the issue of lack of jurisdiction. The petitioner can not be permitted to belatedly raise the issue of lack of
jurisdiction. In the case of Tijam vs. Sibonghanoy, 12 this Court said:
A party may be estopped or barred from raising a question in different ways and for
different reasons. Thus we speak of estoppel in pais, or estoppel by deed or by
record, and of estoppel bylaches.
Laches, in a general sense, is failure or neglect, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence or omission
to assert a right within a reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it.
The doctrine of laches or of 'stale demands' is based upon grounds of public policy
which requires, for the peace of society, the discouragement of stale claims and,
unlike the statute of limitations is not a mere question of time but is principally a
question of the inequity or unfairness of permitting a right or claim to be enforced or
asserted.
It has been held that a party cannot invoke the jurisdiction of a court to secure
affirmative relief against his opponent and, after obtaining or failing to obtain such
relief, repudiate or question that same jurisdiction (Dean vs. Dean, 136 Or. 694, 86
A.L.R. 79). In the case just cited, by way of explaining the rule, it was further said that

the question whether the court had jurisdiction either of the subject matter of the
action or of the parties was not important in such cases because the party is barred
from such conduct not because the judgment or order of the court is valid and
conclusive as an adjudication, but for the reason that such a practice can not be
tolerated-obviously for reasons of public policy.
Furthermore, it has also been held that after voluntarily submitting a cause and
encountering an adverse decision on the merits, it is too late for the loser to question
the jurisdiction or power of the court (Pease vs. Rathbun-Jones etc., 243 U.S. 273,
61 L.Ed. 715; 37 S. Ct. 283; St. Louis etc. vs. McBride, 141 U.S. 127,35 L.Ed.659).
And in Littleton vs. Burges, 16 Wyo. 58, the Court said that it is not right for a party
who has affirmed and invoked the jurisdiction of a court in a particular matter to
secure an a affirmative relief, to afterwards deny that same action to escape a
penalty.
Upon this same principle is what We said in the three cases mentioned in the
resolution of the Court of Appeals of May 20, 1963 (supra)to the effect that we
frown upon the "undesirable practice" of a party submitting his case for decision and
then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction,
when adverseas well as in Pindangan etc. vs. Dans, et. al., G.R. L-14591,
September 26, 1962- Montelibano, et al. vs. Bacolod-Murcia Milling Co., Inc., G.R. L15092; Young Men Labor Union etc. vs. The Court of Industrial Relations, et al., G.R.
No. L-20307, Feb. 26, 1965, and Mejia vs. Lucas, 100 PhiL p. 277.
At any rate, the defense of the petitioner that it is exempt from liability under the insurance contract
is without merit. The excepted risk provision in the insurance policy reads, as follows:
(1) death of or bodily injury to any person in the employment of the insured arising
out of and in the course of such employment or death or bodily injury to any person
being a member of the Insured's household who is a passenger in the Motor Vehicle.
Under the aforequoted provision, the insurer is exempt from liability in cases of. (1) death or injury to
any person in the employment of the insured arising out of and in the course of such employment;
and (2) death or injury to a member of the Insured's household who is a passenger in the motor
vehicle.
In the instant case, there is no evidence that the deceased George Certeza was an employee of the
insured Certeza & Sons, Inc. and that his death arose out of and in the course of employment, as to
exempt the petitioner from liability. The claim of the petitioner that " It is the burden of private
respondent to prove that GEORGE CERTEZA who is his son is not an employee of this family
corporation," 13 is untenable. Section 1, Rule 131 of the Revised Rules of Court provides that "each party
must prove his own affirmative allegation." The rule imposes upon the defendant who alleges an
affirmative matter in avoidance of plaintiff's claim or cause of action, upon which the issue is taken by the
plaintiff, the burden of establishing the facts which are thus alleged by presenting proof in support
thereof. 14Thus, in the case of Paris-Manila Perfume Co. vs. Phoenix Assurance Company, 15 where a fire
insurance company issued a policy insuring certain property against loss by fire, but did not cover any
loss or damage occasioned by an explosion, and the insured property was destroyed by fire during the life

of the policy, and the insurance company contended that the fire was the result of an explosion which was
the primary cause of the fire, the Court held that the burden of proof of that fact is on the insurance
company, and for want of proof, the insurance company is liable.

There is, likewise, no evidence that the deceased George Certeza was a member of the household
of the insured. While Leonardo Certeza, the father of the deceased is an officer in the Certeza &
Sons, Inc., it cannot be implied that the deceased is a member of the household of the insured since
the insured is a corporation that has a personality separate and distinct from its officers and
stockholders.
WHEREFORE, the petition should be, as it is hereby, DENIED. The judgment of the Insurance
Commission in I.C. Case No. 631, entitled: "Leonardo Certeza, complainant, versus Summit
Guaranty & Insurance Company, Inc., respondent," is AFFIRMED. The temporary restraining order
heretofore issued is hereby lifted and set aside. With costs against the petitioner Summit Guaranty &
Insurance Co., Inc.
SO ORDERED.
Barredo (Chairman), Abad Santos, De Castro and Ericta, JJ., concur.
Escolin J., took no part.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 115278 May 23, 1995

FORTUNE INSURANCE AND SURETY CO., INC., petitioner,
vs.
COURT OF APPEALS and PRODUCERS BANK OF THE PHILIPPINES, respondents.

DAVIDE, JR., J.:

The fundamental legal issue raised in this petition for review on certiorari is whether the petitioner is
liable under the Money, Security, and Payroll Robbery policy it issued to the private respondent or
whether recovery thereunder is precluded under the general exceptions clause thereof. Both the trial
court and the Court of Appeals held that there should be recovery. The petitioner contends
otherwise.

This case began with the filing with the Regional Trial Court (RTC) of Makati, Metro Manila, by
private respondent Producers Bank of the Philippines (hereinafter Producers) against petitioner
Fortune Insurance and Surety Co., Inc. (hereinafter Fortune) of a complaint for recovery of the sum
of P725,000.00 under the policy issued by Fortune. The sum was allegedly lost during a robbery of
Producer's armored vehicle while it was in transit to transfer the money from its Pasay City Branch to
its head office in Makati. The case was docketed as Civil Case No. 1817 and assigned to Branch
146 thereof.
After joinder of issues, the parties asked the trial court to render judgment based on the following
stipulation of facts:
1. The plaintiff was insured by the defendants and an insurance
policy was issued, the duplicate original of which is hereto attached
as Exhibit "A";
2. An armored car of the plaintiff, while in the process of transferring
cash in the sum of P725,000.00 under the custody of its teller,
Maribeth Alampay, from its Pasay Branch to its Head Office at 8737
Paseo de Roxas, Makati, Metro Manila on June 29, 1987, was
robbed of the said cash. The robbery took place while the armored
car was traveling along Taft Avenue in Pasay City;
3. The said armored car was driven by Benjamin Magalong Y de
Vera, escorted by Security Guard Saturnino Atiga Y Rosete. Driver
Magalong was assigned by PRC Management Systems with the
plaintiff by virtue of an Agreement executed on August 7, 1983, a
duplicate original copy of which is hereto attached as Exhibit "B";
4. The Security Guard Atiga was assigned by Unicorn Security
Services, Inc. with the plaintiff by virtue of a contract of Security
Service executed on October 25, 1982, a duplicate original copy of
which is hereto attached as Exhibit "C";
5. After an investigation conducted by the Pasay police authorities,
the driver Magalong and guard Atiga were charged, together with
Edelmer Bantigue Y Eulalio, Reynaldo Aquino and John Doe, with
violation of P.D. 532 (Anti-Highway Robbery Law) before the Fiscal of
Pasay City. A copy of the complaint is hereto attached as Exhibit "D";
6. The Fiscal of Pasay City then filed an information charging the
aforesaid persons with the said crime before Branch 112 of the
Regional Trial Court of Pasay City. A copy of the said information is
hereto attached as Exhibit "E." The case is still being tried as of this
date;

7. Demands were made by the plaintiff upon the defendant to pay the
amount of the loss of P725,000.00, but the latter refused to pay as
the loss is excluded from the coverage of the insurance policy,
attached hereto as Exhibit "A," specifically under page 1 thereof,
"General Exceptions" Section (b), which is marked as Exhibit "A-1,"
and which reads as follows:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in report of
xxx xxx xxx
(b) any loss caused by any dishonest, fraudulent or
criminal act of the insured or any officer, employee,
partner, director, trustee or authorized
representative of the Insured whether acting alone or
in conjunction with others. . . .
8. The plaintiff opposes the contention of the defendant and contends
that Atiga and Magalong are not its "officer, employee, . . . trustee or
authorized representative . . . at the time of the robbery. 1
On 26 April 1990, the trial court rendered its decision in favor of Producers. The dispositive portion
thereof reads as follows:
WHEREFORE, premises considered, the Court finds for plaintiff and against
defendant, and
(a) orders defendant to pay plaintiff the net amount of
P540,000.00 as liability under Policy No. 0207 (as
mitigated by the P40,000.00 special clause deduction
and by the recovered sum of P145,000.00), with
interest thereon at the legal rate, until fully paid;
(b) orders defendant to pay plaintiff the sum of
P30,000.00 as and for attorney's fees; and
(c) orders defendant to pay costs of suit.
All other claims and counterclaims are accordingly dismissed forthwith.
SO ORDERED. 2
The trial court ruled that Magalong and Atiga were not employees or representatives of Producers. It
Said:

The Court is satisfied that plaintiff may not be said to have selected and engaged
Magalong and Atiga, their services as armored car driver and as security guard
having been merely offered by PRC Management and by Unicorn Security and which
latter firms assigned them to plaintiff. The wages and salaries of both Magalong and
Atiga are presumably paid by their respective firms, which alone wields the power to
dismiss them. Magalong and Atiga are assigned to plaintiff in fulfillment of
agreements to provide driving services and property protection as such in a
context which does not impress the Court as translating into plaintiff's power to
control the conduct of any assigned driver or security guard, beyond perhaps entitling
plaintiff to request are replacement for such driver guard. The finding is accordingly
compelled that neither Magalong nor Atiga were plaintiff's "employees" in avoidance
of defendant's liability under the policy, particularly the general exceptions therein
embodied.
Neither is the Court prepared to accept the proposition that driver Magalong and
guard Atiga were the "authorized representatives" of plaintiff. They were merely an
assigned armored car driver and security guard, respectively, for the June 29, 1987
money transfer from plaintiff's Pasay Branch to its Makati Head Office. Quite plainly
it was teller Maribeth Alampay who had "custody" of the P725,000.00 cash being
transferred along a specified money route, and hence plaintiff's then designated
"messenger" adverted to in the policy. 3
Fortune appealed this decision to the Court of Appeals which docketed the case as CA-G.R. CV No.
32946. In its decision 4 promulgated on 3 May 1994, it affirmed in toto the appealed decision.
The Court of Appeals agreed with the conclusion of the trial court that Magalong and Atiga were
neither employees nor authorized representatives of Producers and ratiocinated as follows:
A policy or contract of insurance is to be construed liberally in favor of the insured
and strictly against the insurance company (New Life Enterprises vs. Court of
Appeals, 207 SCRA 669; Sun Insurance Office, Ltd. vs. Court of Appeals, 211 SCRA
554). Contracts of insurance, like other contracts, are to be construed according to
the sense and meaning of the terms which the parties themselves have used. If such
terms are clear and unambiguous, they must be taken and understood in their plain,
ordinary and popular sense (New Life Enterprises Case, supra, p. 676; Sun
Insurance Office, Ltd. vs. Court of Appeals, 195 SCRA 193).
The language used by defendant-appellant in the above quoted stipulation is plain,
ordinary and simple. No other interpretation is necessary. The word "employee" must
be taken to mean in the ordinary sense.
The Labor Code is a special law specifically dealing with/and specifically designed to
protect labor and therefore its definition as to employer-employee relationships
insofar as the application/enforcement of said Code is concerned must necessarily
be inapplicable to an insurance contract which defendant-appellant itself had

formulated. Had it intended to apply the Labor Code in defining what the word
"employee" refers to, it must/should have so stated expressly in the insurance policy.
Said driver and security guard cannot be considered as employees of plaintiffappellee bank because it has no power to hire or to dismiss said driver and security
guard under the contracts (Exhs. 8 and C) except only to ask for their replacements
from the contractors. 5
On 20 June 1994, Fortune filed this petition for review on certiorari. It alleges that the trial court and
the Court of Appeals erred in holding it liable under the insurance policy because the loss falls within
the general exceptions clause considering that driver Magalong and security guard Atiga were
Producers' authorized representatives or employees in the transfer of the money and payroll from its
branch office in Pasay City to its head office in Makati.
According to Fortune, when Producers commissioned a guard and a driver to transfer its funds from
one branch to another, they effectively and necessarily became its authorized representatives in the
care and custody of the money. Assuming that they could not be considered authorized
representatives, they were, nevertheless, employees of Producers. It asserts that the existence of an
employer-employee relationship "is determined by law and being such, it cannot be the subject of
agreement." Thus, if there was in reality an employer-employee relationship between Producers, on
the one hand, and Magalong and Atiga, on the other, the provisions in the contracts of Producers
with PRC Management System for Magalong and with Unicorn Security Services for Atiga which
state that Producers is not their employer and that it is absolved from any liability as an employer,
would not obliterate the relationship.
Fortune points out that an employer-employee relationship depends upon four standards: (1) the
manner of selection and engagement of the putative employee; (2) the mode of payment of wages;
(3) the presence or absence of a power to dismiss; and (4) the presence and absence of a power to
control the putative employee's conduct. Of the four, the right-of-control test has been held to be the
decisive factor. 6 It asserts that the power of control over Magalong and Atiga was vested in and
exercised by Producers. Fortune further insists that PRC Management System and Unicorn Security
Services are but "labor-only" contractors under Article 106 of the Labor Code which provides:
Art. 106. Contractor or subcontractor. There is "labor-only" contracting where the
person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such persons are performing
activities which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as
if the latter were directly employed by him.
Fortune thus contends that Magalong and Atiga were employees of Producers, following the ruling
in International Timber Corp. vs. NLRC 7 that a finding that a contractor is a "labor-only" contractor is
equivalent to a finding that there is an employer-employee relationship between the owner of the project
and the employees of the "labor-only" contractor.

On the other hand, Producers contends that Magalong and Atiga were not its employees since it had
nothing to do with their selection and engagement, the payment of their wages, their dismissal, and
the control of their conduct. Producers argued that the rule in International Timber Corp. is not
applicable to all cases but only when it becomes necessary to prevent any violation or circumvention
of the Labor Code, a social legislation whose provisions may set aside contracts entered into by
parties in order to give protection to the working man.
Producers further asseverates that what should be applied is the rule in American President Lines
vs. Clave, 8 to wit:
In determining the existence of employer-employee relationship, the following
elements are generally considered, namely: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employee's conduct.
Since under Producers' contract with PRC Management Systems it is the latter which assigned
Magalong as the driver of Producers' armored car and was responsible for his faithful discharge of
his duties and responsibilities, and since Producers paid the monthly compensation of P1,400.00 per
driver to PRC Management Systems and not to Magalong, it is clear that Magalong was not
Producers' employee. As to Atiga, Producers relies on the provision of its contract with Unicorn
Security Services which provides that the guards of the latter "are in no sense employees of the
CLIENT."
There is merit in this petition.
It should be noted that the insurance policy entered into by the parties is a theft or robbery insurance
policy which is a form of casualty insurance. Section 174 of the Insurance Code provides:
Sec. 174. Casualty insurance is insurance covering loss or liability arising from
accident or mishap, excluding certain types of loss which by law or custom are
considered as falling exclusively within the scope of insurance such as fire or marine.
It includes, but is not limited to, employer's liability insurance, public liability
insurance, motor vehicle liability insurance, plate glass insurance, burglary and theft
insurance, personal accident and health insurance as written by non-life insurance
companies, and other substantially similar kinds of insurance. (emphases supplied)
Except with respect to compulsory motor vehicle liability insurance, the Insurance Code contains no
other provisions applicable to casualty insurance or to robbery insurance in particular. These
contracts are, therefore, governed by the general provisions applicable to all types of insurance.
Outside of these, the rights and obligations of the parties must be determined by the terms of their
contract, taking into consideration its purpose and always in accordance with the general principles
of insurance law. 9
It has been aptly observed that in burglary, robbery, and theft insurance, "the opportunity to defraud
the insurer the moral hazard is so great that insurers have found it necessary to fill up their
policies with countless restrictions, many designed to reduce this hazard. Seldom does the insurer

assume the risk of all losses due to the hazards insured against." 10 Persons frequently excluded
under such provisions are those in the insured's service and employment. 11 The purpose of the exception
is to guard against liability should the theft be committed by one having unrestricted access to the
property. 12 In such cases, the terms specifying the excluded classes are to be given their meaning as
understood in common speech. 13 The terms "service" and "employment" are generally associated with
the idea of selection, control, and compensation. 14
A contract of insurance is a contract of adhesion, thus any ambiguity therein should be resolved
against the insurer, 15 or it should be construed liberally in favor of the insured and strictly against the
insurer. 16 Limitations of liability should be regarded with extreme jealousy and must be construed
in such a way, as to preclude the insurer from non-compliance with its obligation. 17 It goes without saying
then that if the terms of the contract are clear and unambiguous, there is no room for construction and
such terms cannot be enlarged or diminished by judicial construction. 18
An insurance contract is a contract of indemnity upon the terms and conditions specified therein. 19 It
is settled that the terms of the policy constitute the measure of the insurer's liability. 20 In the absence of
statutory prohibition to the contrary, insurance companies have the same rights as individuals to limit their
liability and to impose whatever conditions they deem best upon their obligations not inconsistent with
public policy.
With the foregoing principles in mind, it may now be asked whether Magalong and Atiga qualify as
employees or authorized representatives of Producers under paragraph (b) of the general
exceptions clause of the policy which, for easy reference, is again quoted:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in respect of
xxx xxx xxx
(b) any loss caused by any dishonest, fraudulent or criminal act of the
insured or any officer, employee, partner, director, trustee or
authorized representative of the Insured whether acting alone or in
conjunction with others. . . . (emphases supplied)
There is marked disagreement between the parties on the correct meaning of the terms "employee"
and "authorized representatives."
It is clear to us that insofar as Fortune is concerned, it was its intention to exclude and exempt from
protection and coverage losses arising from dishonest, fraudulent, or criminal acts of persons
granted or having unrestricted access to Producers' money or payroll. When it used then the term
"employee," it must have had in mind any person who qualifies as such as generally and universally
understood, or jurisprudentially established in the light of the four standards in the determination of
the employer-employee relationship, 21 or as statutorily declared even in a limited sense as in the case
of Article 106 of the Labor Code which considers the employees under a "labor-only" contract as
employees of the party employing them and not of the party who supplied them to the employer. 22

Fortune claims that Producers' contracts with PRC Management Systems and Unicorn Security
Services are "labor-only" contracts.
Producers, however, insists that by the express terms thereof, it is not the employer of
Magalong. Notwithstanding such express assumption of PRC Management Systems and
Unicorn Security Services that the drivers and the security guards each shall supply to
Producers are not the latter's employees, it may, in fact, be that it is because the contracts
are, indeed, "labor-only" contracts. Whether they are is, in the light of the criteria provided for
in Article 106 of the Labor Code, a question of fact. Since the parties opted to submit the
case for judgment on the basis of their stipulation of facts which are strictly limited to the
insurance policy, the contracts with PRC Management Systems and Unicorn Security
Services, the complaint for violation of P.D. No. 532, and the information therefor filed by the
City Fiscal of Pasay City, there is a paucity of evidence as to whether the contracts between
Producers and PRC Management Systems and Unicorn Security Services are "labor-only"
contracts.
But even granting for the sake of argument that these contracts were not "labor-only" contracts, and
PRC Management Systems and Unicorn Security Services were truly independent contractors, we
are satisfied that Magalong and Atiga were, in respect of the transfer of Producer's money from its
Pasay City branch to its head office in Makati, its "authorized representatives" who served as such
with its teller Maribeth Alampay. Howsoever viewed, Producers entrusted the three with the specific
duty to safely transfer the money to its head office, with Alampay to be responsible for its custody in
transit; Magalong to drive the armored vehicle which would carry the money; and Atiga to provide the
needed security for the money, the vehicle, and his two other companions. In short, for these
particular tasks, the three acted as agents of Producers. A "representative" is defined as one who
represents or stands in the place of another; one who represents others or another in a special
capacity, as an agent, and is interchangeable with "agent." 23
In view of the foregoing, Fortune is exempt from liability under the general exceptions clause of the
insurance policy.
WHEREFORE , the instant petition is hereby GRANTED. The decision of the Court of Appeals in
CA-G.R. CV No. 32946 dated 3 May 1994 as well as that of Branch 146 of the Regional Trial Court
of Makati in Civil Case No. 1817 are REVERSED and SET ASIDE. The complaint in Civil Case No.
1817 is DISMISSED.
No pronouncement as to costs.
SO ORDERED.
Bellosillo and Kapunan, JJ., concur.
Padilla, J., took no part.
Quiason, J., is on leave.

Facts: On June 29, 1987, Producers Bank of the

Philippines armored vehicle was robbed, in transit, of
seven hundred twenty-five thousand pesos (Php
725,000.00) that it was transferring from its branch in
Pasay to its main branch in Makati. To mitigate their loss,
they claim the amount from their insurer, namely Fortune
Insurance and Surety Co..
Fortune Insurance, however, assails that the general
exemption clause in the Casualty Insurance coverage had
a general exemption clause, to wit:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in
respect of
xxx xxx xxx
(b) any loss caused by any dishonest, fraudulent or
criminal act of the insured or any officer, employee,
partner, director, trustee or authorized representative of
the Insured whether acting alone or in conjunction with
others. . . .
And, since the driver (Magalong) and security guard
(Atiga) of the armored vehicle were charged with three
others as liable for the robbery, Fortune denies Producers
Bank of its insurance claim.

The trial court and the court appeals ruled in favor of

recovery, hence, the case at bar.
Issue: Whether recovery is precluded under the general
exemption clause.
Held: Yes, recovery is precluded under the general
exemption clause.
Howsoever viewed, Producers entrusted the three with the
specific duty to safely transfer the money to its head office,
with Alampay to be responsible for its custody in transit;
Magalong to drive the armored vehicle which would
carry the money; and Atiga to provide the needed security
for the money, the vehicle, and his two other companions.
In short, for these particular tasks, the three acted as
agents of Producers. A "representative" is defined as one
who represents or stands in the place of another; one who
represents others or another in a special capacity, as an
agent, and is interchangeable with "agent." 23
In view of the foregoing, Fortune is exempt from liability
under the general exceptions clause of the insurance
policy.

Cha v. Cha - Insurable Interest

277 SCRA 690 (1997)
Facts:

> Spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract with CKS
Development Corporation (CKS), as lessor.
> One of the stipulations of the one (1) year lease contract states: "18. . . . The LESSEE shall not
insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store
or space in the leased premises without first obtaining the written consent and approval of the
LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent of the LESSOR then
the policy is deemed assigned and transferred to the LESSOR for its own benefit; . . ."
> Notwithstanding the above stipulation, the Cha spouses insured against loss by fire their
merchandise inside the leased premises for Five Hundred Thousand (P500,000.00) with the United
Insurance without the written consent CKS.
> On the day that the lease contract was to expire, fire broke out inside the leased premises. When
CKS learned of the insurance earlier procured by the Cha spouses (without its consent), it wrote the
United a demand letter asking that the proceeds of the insurance contract (between the Cha
spouses and United) be paid directly to CKS, based on its lease contract with the Cha spouses.
> United refused to pay CKS, alleging that the latter had no insurable interest. Hence, the latter filed
a complaint against the Cha spouses and United.

Issue:
Whether or not CKS can claim the proceeds of the fire insurance.

Held:
NO. CKS has no insurable interest.
Sec. 18 of the Insurance Code provides:
"Sec. 18. No contract or policy of insurance on property shall be enforceable except for the benefit of
some person having an insurable interest in the property insured."

A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their
merchandise is primarily a contract of indemnity. Insurable interest in the property insured must exist
at the time the insurance takes effect and at the time the loss occurs. The basis of such requirement
of insurable interest in property insured is based on sound public policy: to prevent a person from

taking out an insurance policy on property upon which he has no insurable interest and collecting the
proceeds of said policy in case of loss of the property.

In the present case, it cannot be denied that CKS has no insurable interest in the goods and
merchandise inside the leased premises under the provisions of Section 17 of the Insurance Code
which provide:
"Section 17.
The measure of an insurable interest in property is the extent to which the insured
might be damnified by loss of injury thereof."

Therefore, CKS cannot, under the Insurance Code a special law be validly a beneficiary of the
fire insurance policy taken by the petitioner-spouses over their merchandise. This insurable interest
over said merchandise remains with the insured, the Cha spouses. The automatic assignment of the
policy to CKS under the provision of the lease contract previously quoted is void for being contrary to
law and/or public policy. The proceeds of the fire insurance policy thus rightfully belong to the
spouses Nilo Cha and Stella Uy-Cha (herein co-petitioners). The insurer (United) cannot be
compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable
interest in the property insured.

THIRD DIVISION
HEIRS OF LORETO C. MARAMAG,
represented by surviving spouse
VICENTA PANGILINAN MARAMAG,
Petitioners,
- versus -

G.R. No. 181132

Present:

YNARES-SANTIAGO, J.,
EVA VERNA DE GUZMAN MARAMAG, Chairperson,
CARPIO,*
ODESSA DE GUZMAN MARAMAG,
CORONA,**
KARL BRIAN DE GUZMAN
NACHURA, and
MARAMAG, TRISHA ANGELIE
PERALTA, JJ.
MARAMAG, THE INSULAR LIFE
ASSURANCE COMPANY, LTD., and
Promulgated:
GREAT PACIFIC LIFE ASSURANCE

CORPORATION,
Respondents.

June 5, 2009

x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

This is a petition[1] for review on certiorari under Rule 45 of the Rules, seeking to
reverse and set aside the Resolution[2] dated January 8, 2008 of the Court of
Appeals (CA), in CA-G.R. CV No. 85948, dismissing petitioners appeal for lack of
jurisdiction.
The case stems from a petition[3] filed against respondents with the Regional Trial
Court, Branch 29, for revocation and/or reduction of insurance proceeds for being
void and/or inofficious, with prayer for a temporary restraining order (TRO) and a
writ of preliminary injunction.
The petition alleged that: (1) petitioners were the legitimate wife and
children of Loreto Maramag (Loreto), while respondents were Loretos illegitimate
family; (2) Eva de Guzman Maramag (Eva) was a concubine of Loreto and a
suspect in the killing of the latter, thus, she is disqualified to receive any proceeds
from his insurance policies from Insular Life Assurance Company, Ltd. (Insular)
[4]
and Great Pacific Life Assurance Corporation (Grepalife); [5] (3) the illegitimate
children of LoretoOdessa, Karl Brian, and Trisha Angeliewere entitled only to onehalf of the legitime of the legitimate children, thus, the proceeds released to Odessa
and those to be released to Karl Brian and Trisha Angelie were inofficious and
should be reduced; and (4) petitioners could not be deprived of their legitimes,
which should be satisfied first.
In support of the prayer for TRO and writ of preliminary injunction,
petitioners alleged, among others, that part of the insurance proceeds had already

been released in favor of Odessa, while the rest of the proceeds are to be released
in favor of Karl Brian and Trisha Angelie, both minors, upon the appointment of
their legal guardian. Petitioners also prayed for the total amount of P320,000.00 as
actual litigation expenses and attorneys fees.
In answer,[6] Insular admitted that Loreto misrepresented Eva as his legitimate wife
and Odessa, Karl Brian, and Trisha Angelie as his legitimate children, and that they
filed their claims for the insurance proceeds of the insurance policies; that when it
ascertained that Eva was not the legal wife of Loreto, it disqualified her as a
beneficiary and divided the proceeds among Odessa, Karl Brian, and Trisha
Angelie, as the remaining designated beneficiaries; and that it released Odessas
share as she was of age, but withheld the release of the shares of minors Karl Brian
and Trisha Angelie pending submission of letters of guardianship. Insular alleged
that the complaint or petition failed to state a cause of action insofar as it sought to
declare as void the designation of Eva as beneficiary, because Loreto revoked her
designation as such in Policy No. A001544070 and it disqualified her in Policy No.
A001693029; and insofar as it sought to declare as inofficious the shares of
Odessa, Karl Brian, and Trisha Angelie, considering that no settlement of Loretos
estate had been filed nor had the respective shares of the heirs been
determined. Insular further claimed that it was bound to honor the insurance
policies designating the children of Loreto with Eva as beneficiaries pursuant to
Section 53 of the Insurance Code.
In its own answer[7] with compulsory counterclaim, Grepalife alleged that Eva was
not designated as an insurance policy beneficiary; that the claims filed by Odessa,
Karl Brian, and Trisha Angelie were denied because Loreto was ineligible for
insurance due to a misrepresentation in his application form that he was born on
December 10, 1936 and, thus, not more than 65 years old when he signed it in
September 2001; that the case was premature, there being no claim filed by the
legitimate family of Loreto; and that the law on succession does not apply where
the designation of insurance beneficiaries is clear.
As the whereabouts of Eva, Odessa, Karl Brian, and Trisha Angelie were not
known to petitioners, summons by publication was resorted to. Still, the
illegitimate family of Loreto failed to file their answer.Hence, the trial court, upon
motion of petitioners, declared them in default in its Order dated May 7, 2004.

During the pre-trial on July 28, 2004, both Insular and Grepalife moved that the
issues raised in their respective answers be resolved first. The trial court ordered
petitioners to comment within 15 days.
In their comment, petitioners alleged that the issue raised by Insular and Grepalife
was purely legal whether the complaint itself was proper or not and that the
designation of a beneficiary is an act of liberality or a donation and, therefore,
subject to the provisions of Articles 752[8] and 772[9] of the Civil Code.
In reply, both Insular and Grepalife countered that the insurance proceeds belong
exclusively to the designated beneficiaries in the policies, not to the estate or to the
heirs of the insured. Grepalife also reiterated that it had disqualified Eva as a
beneficiary when it ascertained that Loreto was legally married to Vicenta
Pangilinan Maramag.
On September 21, 2004, the trial court issued a Resolution, the dispositive portion
of which reads
WHEREFORE, the motion to dismiss incorporated in the answer of
defendants Insular Life and Grepalife is granted with respect to
defendants Odessa, Karl Brian and Trisha Maramag. The action shall
proceed with respect to the other defendants Eva Verna de Guzman,
Insular Life and Grepalife.
SO ORDERED.[10]

In so ruling, the trial court ratiocinated thus

Art. 2011 of the Civil Code provides that the contract of insurance is
governed by the (sic) special laws. Matters not expressly provided for in
such special laws shall be regulated by this Code. The principal law on
insurance is the Insurance Code, as amended. Only in case of deficiency
in the Insurance Code that the Civil Code may be resorted to. (Enriquez
v. Sun Life Assurance Co., 41 Phil. 269.)
The Insurance Code, as amended, contains a provision regarding to
whom the insurance proceeds shall be paid. It is very clear under Sec. 53

thereof that the insurance proceeds shall be applied exclusively to the

proper interest of the person in whose name or for whose benefit it is
made, unless otherwise specified in the policy. Since the defendants are
the ones named as the primary beneficiary (sic) in the insurances (sic)
taken by the deceased Loreto C. Maramag and there is no showing that
herein plaintiffs were also included as beneficiary (sic) therein the
insurance proceeds shall exclusively be paid to them. This is because the
beneficiary has a vested right to the indemnity, unless the insured
reserves the right to change the beneficiary. (Grecio v. Sunlife Assurance
Co. of Canada, 48 Phil. [sic] 63).
Neither could the plaintiffs invoked (sic) the law on donations or the
rules on testamentary succession in order to defeat the right of herein
defendants to collect the insurance indemnity. The beneficiary in a
contract of insurance is not the donee spoken in the law of donation. The
rules on testamentary succession cannot apply here, for the insurance
indemnity does not partake of a donation. As such, the insurance
indemnity cannot be considered as an advance of the inheritance which
can be subject to collation (Del Val v. Del Val, 29 Phil. 534). In the case
of Southern Luzon Employees Association v. Juanita Golpeo, et al., the
Honorable Supreme Court made the following pronouncements[:]
With the finding of the trial court that the proceeds to
the Life Insurance Policy belongs exclusively to the
defendant as his individual and separate property, we agree
that the proceeds of an insurance policy belong exclusively
to the beneficiary and not to the estate of the person whose
life was insured, and that such proceeds are the separate
and individual property of the beneficiary and not of the
heirs of the person whose life was insured, is the doctrine in
America. We believe that the same doctrine obtains in
these Islands by virtue of Section 428 of the Code of
Commerce x x x.
In [the] light of the above pronouncements, it is very clear that the
plaintiffs has (sic) no sufficient cause of action against defendants
Odessa, Karl Brian and Trisha Angelie Maramag for the reduction and/or
declaration of inofficiousness of donation as primary beneficiary (sic) in
the insurances (sic) of the late Loreto C. Maramag.

However, herein plaintiffs are not totally bereft of any cause of

action. One of the named beneficiary (sic) in the insurances (sic) taken
by the late Loreto C. Maramag is his concubine Eva Verna De
Guzman. Any person who is forbidden from receiving any donation
under Article 739 cannot be named beneficiary of a life insurance policy
of the person who cannot make any donation to him, according to said
article (Art. 2012, Civil Code). If a concubine is made the beneficiary, it
is believed that the insurance contract will still remain valid, but the
indemnity must go to the legal heirs and not to the concubine, for
evidently, what is prohibited under Art. 2012 is the naming of the
improper beneficiary. In such case, the action for the declaration of
nullity may be brought by the spouse of the donor or donee, and the guilt
of the donor and donee may be proved by preponderance of evidence in
the same action (Comment of Edgardo L. Paras, Civil Code of
the Philippines, page 897). Since the designation of defendant Eva Verna
de Guzman as one of the primary beneficiary (sic) in the insurances (sic)
taken by the late Loreto C. Maramag is void under Art. 739 of the Civil
Code, the insurance indemnity that should be paid to her must go to the
legal heirs of the deceased which this court may properly take
cognizance as the action for the declaration for the nullity of a void
donation falls within the general jurisdiction of this Court. [11]

Insular[12] and Grepalife[13] filed their respective motions for reconsideration,

arguing, in the main, that the petition failed to state a cause of action. Insular
further averred that the proceeds were divided among the three children as the
remaining named beneficiaries. Grepalife, for its part, also alleged that the
premiums paid had already been refunded.
Petitioners, in their comment, reiterated their earlier arguments and posited that
whether the complaint may be dismissed for failure to state a cause of action must
be determined solely on the basis of the allegations in the complaint, such that the
defenses of Insular and Grepalife would be better threshed out during trial.
On June 16, 2005, the trial court issued a Resolution, disposing, as follows:
WHEREFORE, in view of the foregoing disquisitions, the
Motions for Reconsideration filed by defendants Grepalife and Insular
Life are hereby GRANTED. Accordingly, the portion of the Resolution

of this Court dated 21 September 2004 which ordered the prosecution of

the case against defendant Eva Verna De Guzman, Grepalife and Insular
Life is hereby SET ASIDE, and the case against them is hereby ordered
DISMISSED.
SO ORDERED.[14]

In granting the motions for reconsideration of Insular and Grepalife, the trial court
considered the allegations of Insular that Loreto revoked the designation of Eva in
one policy and that Insular disqualified her as a beneficiary in the other policy such
that the entire proceeds would be paid to the illegitimate children of Loreto with
Eva pursuant to Section 53 of the Insurance Code. It ruled that it is only in cases
where there are no beneficiaries designated, or when the only designated
beneficiary is disqualified, that the proceeds should be paid to the estate of the
insured. As to the claim that the proceeds to be paid to Loretos illegitimate children
should be reduced based on the rules on legitime, the trial court held that the
distribution of the insurance proceeds is governed primarily by the Insurance Code,
and the provisions of the Civil Code are irrelevant and inapplicable. With respect
to the Grepalife policy, the trial court noted that Eva was never designated as a
beneficiary, but only Odessa, Karl Brian, and Trisha Angelie; thus, it upheld the
dismissal of the case as to the illegitimate children. It further held that the matter of
Loretos misrepresentation was premature; the appropriate action may be filed only
upon denial of the claim of the named beneficiaries for the insurance proceeds by
Grepalife.
Petitioners appealed the June 16, 2005 Resolution to the CA, but it dismissed the
appeal for lack of jurisdiction, holding that the decision of the trial court
dismissing the complaint for failure to state a cause of action involved a pure
question of law. The appellate court also noted that petitioners did not file within
the reglementary period a motion for reconsideration of the trial courts Resolution,
dated September 21, 2004, dismissing the complaint as against Odessa, Karl Brian,
and Trisha Angelie; thus, the said Resolution had already attained finality.
Hence, this petition raising the following issues:

a.
In determining the merits of a motion to dismiss for
failure to state a cause of action, may the Court consider matters which
were not alleged in the Complaint, particularly the defenses put up by
the defendants in their Answer?
b.
In granting a motion for reconsideration of a motion to
dismiss for failure to state a cause of action, did not the Regional Trial
Court engage in the examination and determination of what were the
facts and their probative value, or the truth thereof, when it premised the
dismissal on allegations of the defendants in their answer which had not
been proven?
c.
x x x (A)re the members of the legitimate family entitled
to the proceeds of the insurance for the concubine? [15]

In essence, petitioners posit that their petition before the trial court should
not have been dismissed for failure to state a cause of action because the finding
that Eva was either disqualified as a beneficiary by the insurance companies or that
her designation was revoked by Loreto, hypothetically admitted as true, was raised
only in the answers and motions for reconsideration of both Insular and
Grepalife. They argue that for a motion to dismiss to prosper on that ground, only
the allegations in the complaint should be considered. They further contend that,
even assuming Insular disqualified Eva as a beneficiary, her share should not have
been distributed to her children with Loreto but, instead, awarded to them, being
the legitimate heirs of the insured deceased, in accordance with law and
jurisprudence.
The petition should be denied.
The grant of the motion to dismiss was based on the trial courts finding that the
petition failed to state a cause of action, as provided in Rule 16, Section 1(g), of the
Rules of Court, which reads
SECTION 1. Grounds. Within the time for but before filing the answer
to the complaint or pleading asserting a claim, a motion to dismiss may
be made on any of the following grounds:
xxxx

(g) That the pleading asserting the claim states no cause of action.

A cause of action is the act or omission by which a party violates a right of another.
[16]
A complaint states a cause of action when it contains the three (3) elements of a
cause of action(1) the legal right of the plaintiff; (2) the correlative obligation of
the defendant; and (3) the act or omission of the defendant in violation of the legal
right. If any of these elements is absent, the complaint becomes vulnerable to a
motion to dismiss on the ground of failure to state a cause of action.[17]
When a motion to dismiss is premised on this ground, the ruling thereon
should be based only on the facts alleged in the complaint. The court must resolve
the issue on the strength of such allegations, assuming them to be true. The test of
sufficiency of a cause of action rests on whether, hypothetically admitting the facts
alleged in the complaint to be true, the court can render a valid judgment upon the
same, in accordance with the prayer in the complaint. This is the general rule.
However, this rule is subject to well-recognized exceptions, such that there
is no hypothetical admission of the veracity of the allegations if:
1.
2.
3.
4.
5.

the falsity of the allegations is subject to judicial notice;

such allegations are legally impossible;
the allegations refer to facts which are inadmissible in evidence;
by the record or document in the pleading, the allegations appear
unfounded; or
there is evidence which has been presented to the court by stipulation
of the parties or in the course of the hearings related to the case.[18]

In this case, it is clear from the petition filed before the trial court that,
although petitioners are the legitimate heirs of Loreto, they were not named as
beneficiaries in the insurance policies issued by Insular and Grepalife. The basis of
petitioners claim is that Eva, being a concubine of Loreto and a suspect in his
murder, is disqualified from being designated as beneficiary of the insurance
policies, and that Evas children with Loreto, being illegitimate children, are
entitled to a lesser share of the proceeds of the policies. They also argued that

pursuant to Section 12 of the Insurance Code, [19] Evas share in the proceeds should
be forfeited in their favor, the former having brought about the death of
Loreto. Thus, they prayed that the share of Eva and portions of the shares of
Loretos illegitimate children should be awarded to them, being the legitimate heirs
of Loreto entitled to their respective legitimes.
It is evident from the face of the complaint that petitioners are not entitled to
a favorable judgment in light of Article 2011 of the Civil Code which expressly
provides that insurance contracts shall be governed by special laws, i.e., the
Insurance Code. Section 53 of the Insurance Code states
SECTION 53. The insurance proceeds shall be applied
exclusively to the proper interest of the person in whose name or for
whose benefit it is made unless otherwise specified in the policy.

Pursuant thereto, it is obvious that the only persons entitled to claim the insurance
proceeds are either the insured, if still alive; or the beneficiary, if the insured is
already deceased, upon the maturation of the policy.[20] The exception to this rule is
a situation where the insurance contract was intended to benefit third persons who
are not parties to the same in the form of favorable stipulations or indemnity. In
such a case, third parties may directly sue and claim from the insurer.[21]
Petitioners are third parties to the insurance contracts with Insular and
Grepalife and, thus, are not entitled to the proceeds thereof. Accordingly,
respondents Insular and Grepalife have no legal obligation to turn over the
insurance proceeds to petitioners. The revocation of Eva as a beneficiary in one
policy and her disqualification as such in another are of no moment considering
that the designation of the illegitimate children as beneficiaries in Loretos
insurance policies remains valid. Because no legal proscription exists in naming as
beneficiaries the children of illicit relationships by the insured, [22] the shares of Eva
in the insurance proceeds, whether forfeited by the court in view of the prohibition
on donations under Article 739 of the Civil Code or by the insurers themselves for
reasons based on the insurance contracts, must be awarded to the said illegitimate
children, the designated beneficiaries, to the exclusion of petitioners. It is only in
cases where the insured has not designated any beneficiary,[23] or when the

designated beneficiary is disqualified by law to receive the proceeds, [24] that the
insurance policy proceeds shall redound to the benefit of the estate of the insured.
In this regard, the assailed June 16, 2005 Resolution of the trial court should
be upheld. In the same light, the Decision of the CA dated January 8, 2008 should
be sustained. Indeed, the appellate court had no jurisdiction to take cognizance of
the appeal; the issue of failure to state a cause of action is a question of law and not
of fact, there being no findings of fact in the first place.[25]
WHEREFORE, the petition is DENIED for lack of merit. Costs against
petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-44059 October 28, 1977
THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-appellee,
vs.
CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO, defendants-appellants.

MARTIN, J.:
This is a novel question in insurance law: Can a common-law wife named as beneficiary in the life
insurance policy of a legally married man claim the proceeds thereof in case of death of the latter?
On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd.,
Policy No. 009929 on a whole-life for P5,882.00 with a, rider for Accidental Death for the same
amount Buenaventura C. Ebrado designated T. Ebrado as the revocable beneficiary in his policy. He
to her as his wife.
On October 21, 1969, Buenaventura C. Ebrado died as a result of an t when he was hit by a failing
branch of a tree. As the policy was in force, The Insular Life Assurance Co., Ltd. liable to pay the
coverage in the total amount of P11,745.73, representing the face value of the policy in the amount
of P5,882.00 plus the additional benefits for accidental death also in the amount of P5,882.00 and

the refund of P18.00 paid for the premium due November, 1969, minus the unpaid premiums and
interest thereon due for January and February, 1969, in the sum of P36.27.
Carponia T. Ebrado filed with the insurer a claim for the proceeds of the Policy as the designated
beneficiary therein, although she admits that she and the insured Buenaventura C. Ebrado were
merely living as husband and wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts
that she is the one entitled to the insurance proceeds, not the common-law wife, Carponia T. Ebrado.
In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life Assurance
Co., Ltd. commenced an action for Interpleader before the Court of First Instance of Rizal on April
29, 1970.
After the issues have been joined, a pre-trial conference was held on July 8, 1972, after which, a
pre-trial order was entered reading as follows:
+.wph!1

During the pre-trial conference, the parties manifested to the court. that there is no
possibility of amicable settlement. Hence, the Court proceeded to have the parties
submit their evidence for the purpose of the pre-trial and make admissions for the
purpose of pretrial. During this conference, parties Carponia T. Ebrado and Pascuala
Ebrado agreed and stipulated: 1) that the deceased Buenaventura Ebrado was
married to Pascuala Ebrado with whom she has six (legitimate) namely;
Hernando, Cresencio, Elsa, Erlinda, Felizardo and Helen, all surnamed Ebrado; 2)
that during the lifetime of the deceased, he was insured with Insular Life Assurance
Co. Under Policy No. 009929 whole life plan, dated September 1, 1968 for the sum
of P5,882.00 with the rider for accidental death benefit as evidenced by Exhibits A for
plaintiffs and Exhibit 1 for the defendant Pascuala and Exhibit 7 for Carponia Ebrado;
3) that during the lifetime of Buenaventura Ebrado, he was living with his commonwife, Carponia Ebrado, with whom she had 2 children although he was not legally
separated from his legal wife; 4) that Buenaventura in accident on October 21, 1969
as evidenced by the death Exhibit 3 and affidavit of the police report of his death
Exhibit 5; 5) that complainant Carponia Ebrado filed claim with the Insular Life
Assurance Co. which was contested by Pascuala Ebrado who also filed claim for the
proceeds of said policy 6) that in view ofthe adverse claims the insurance company
filed this action against the two herein claimants Carponia and Pascuala Ebrado; 7)
that there is now due from the Insular Life Assurance Co. as proceeds of the policy
P11,745.73; 8) that the beneficiary designated by the insured in the policy is
Carponia Ebrado and the insured made reservation to change the beneficiary but
although the insured made the option to change the beneficiary, same was never
changed up to the time of his death and the wife did not have any opportunity to write
the company that there was reservation to change the designation of the parties
agreed that a decision be rendered based on and stipulation of facts as to who
among the two claimants is entitled to the policy.

Upon motion of the parties, they are given ten (10) days to file their simultaneous
memoranda from the receipt of this order.
SO ORDERED.
On September 25, 1972, the trial court rendered judgment declaring among others, Carponia T.
Ebrado disqualified from becoming beneficiary of the insured Buenaventura Cristor Ebrado and
directing the payment of the insurance proceeds to the estate of the deceased insured. The trial
court held:
+.wph!1

It is patent from the last paragraph of Art. 739 of the Civil Code that a criminal
conviction for adultery or concubinage is not essential in order to establish the
disqualification mentioned therein. Neither is it also necessary that a finding of such
guilt or commission of those acts be made in a separate independent action brought
for the purpose. The guilt of the donee (beneficiary) may be proved by
preponderance of evidence in the same proceeding (the action brought to declare
the nullity of the donation).
It is, however, essential that such adultery or concubinage exists at the time
defendant Carponia T. Ebrado was made beneficiary in the policy in question for the
disqualification and incapacity to exist and that it is only necessary that such fact be
established by preponderance of evidence in the trial. Since it is agreed in their
stipulation above-quoted that the deceased insured and defendant Carponia T.
Ebrado were living together as husband and wife without being legally married and
that the marriage of the insured with the other defendant Pascuala Vda. de Ebrado
was valid and still existing at the time the insurance in question was purchased there
is no question that defendant Carponia T. Ebrado is disqualified from becoming the
beneficiary of the policy in question and as such she is not entitled to the proceeds of
the insurance upon the death of the insured.
From this judgment, Carponia T. Ebrado appealed to the Court of Appeals, but on July 11, 1976, the
Appellate Court certified the case to Us as involving only questions of law.
We affirm the judgment of the lower court.
1. It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new Insurance
Code (PD No. 612, as amended) does not contain any specific provision grossly resolutory of the
prime question at hand. Section 50 of the Insurance Act which provides that "(t)he insurance shag be
applied exclusively to the proper interest of the person in whose name it is made" 1 cannot be validly
seized upon to hold that the mm includes the beneficiary. The word "interest" highly suggests that the
provision refers only to the "insured" and not to the beneficiary, since a contract of insurance is personal
in character. 2 Otherwise, the prohibitory laws against illicit relationships especially on property and
descent will be rendered nugatory, as the same could easily be circumvented by modes of insurance.
Rather, the general rules of civil law should be applied to resolve this void in the Insurance Law. Article
2011 of the New Civil Code states: "The contract of insurance is governed by special laws. Matters not
expressly provided for in such special laws shall be regulated by this Code." When not otherwise
specifically provided for by the Insurance Law, the contract of life insurance is governed by the general

rules of the civil law regulating contracts. 3 And under Article 2012 of the same Code, "any person who is
forbidden from receiving any donation under Article 739 cannot be named beneficiary of a fife insurance
policy by the person who cannot make a donation to him. 4 Common-law spouses are, definitely, barred
from receiving donations from each other. Article 739 of the new Civil Code provides:
+.wph!1

The following donations shall be void:

1. Those made between persons who were guilty of adultery or concubinage at the
time of donation;
Those made between persons found guilty of the same criminal offense, in
consideration thereof;
3. Those made to a public officer or his wife, descendants or ascendants by reason
of his office.
In the case referred to in No. 1, the action for declaration of nullity may be brought by
the spouse of the donor or donee; and the guilt of the donee may be proved by
preponderance of evidence in the same action.
2. In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is
concerned. Both are founded upon the same consideration: liberality. A beneficiary is like a donee,
because from the premiums of the policy which the insured pays out of liberality, the beneficiary will
receive the proceeds or profits of said insurance. As a consequence, the proscription in Article 739 of
the new Civil Code should equally operate in life insurance contracts. The mandate of Article 2012
cannot be laid aside: any person who cannot receive a donation cannot be named as beneficiary in
the life insurance policy of the person who cannot make the donation. 5 Under American law, a policy of
life insurance is considered as a testament and in construing it, the courts will, so far as possible treat it
as a will and determine the effect of a clause designating the beneficiary by rules under which wins are
interpreted. 6
3. Policy considerations and dictates of morality rightly justify the institution of a barrier between
common law spouses in record to Property relations since such hip ultimately encroaches upon the
nuptial and filial rights of the legitimate family There is every reason to hold that the bar in donations
between legitimate spouses and those between illegitimate ones should be enforced in life insurance
policies since the same are based on similar consideration As above pointed out, a beneficiary in a
fife insurance policy is no different from a donee. Both are recipients of pure beneficence. So long as
manage remains the threshold of family laws, reason and morality dictate that the impediments
imposed upon married couple should likewise be imposed upon extra-marital relationship. If
legitimate relationship is circumscribed by these legal disabilities, with more reason should an illicit
relationship be restricted by these disabilities. Thus, in Matabuena v. Cervantes, 7 this Court, through
Justice Fernando, said:
+.wph!1

If the policy of the law is, in the language of the opinion of the then Justice J.B.L.
Reyes of that court (Court of Appeals), 'to prohibit donations in favor of the other
consort and his descendants because of and undue and improper pressure and
influence upon the donor, a prejudice deeply rooted in our ancient law;" por-que no

se enganen desponjandose el uno al otro por amor que han de consuno' (According
to) the Partidas (Part IV, Tit. XI, LAW IV), reiterating the rationale 'No Mutuato amore
invicem spoliarentur' the Pandects (Bk, 24, Titl. 1, De donat, inter virum et uxorem);
then there is very reason to apply the same prohibitive policy to persons living
together as husband and wife without the benefit of nuptials. For it is not to be
doubted that assent to such irregular connection for thirty years bespeaks greater
influence of one party over the other, so that the danger that the law seeks to avoid is
correspondingly increased. Moreover, as already pointed out by Ulpian (in his lib. 32
ad Sabinum, fr. 1), 'it would not be just that such donations should subsist, lest the
condition 6f those who incurred guilt should turn out to be better.' So long as
marriage remains the cornerstone of our family law, reason and morality alike
demand that the disabilities attached to marriage should likewise attach to
concubinage.
It is hardly necessary to add that even in the absence of the above pronouncement,
any other conclusion cannot stand the test of scrutiny. It would be to indict the frame
of the Civil Code for a failure to apply a laudable rule to a situation which in its
essentials cannot be distinguished. Moreover, if it is at all to be differentiated the
policy of the law which embodies a deeply rooted notion of what is just and what is
right would be nullified if such irregular relationship instead of being visited with
disabilities would be attended with benefits. Certainly a legal norm should not be
susceptible to such a reproach. If there is every any occasion where the principle of
statutory construction that what is within the spirit of the law is as much a part of it as
what is written, this is it. Otherwise the basic purpose discernible in such codal
provision would not be attained. Whatever omission may be apparent in an
interpretation purely literal of the language used must be remedied by an adherence
to its avowed objective.
4. We do not think that a conviction for adultery or concubinage is exacted before the disabilities
mentioned in Article 739 may effectuate. More specifically, with record to the disability on "persons
who were guilty of adultery or concubinage at the time of the donation," Article 739 itself provides:

+.wph!1

In the case referred to in No. 1, the action for declaration of nullity may be brought by
the spouse of the donor or donee; and the guilty of the donee may be proved by
preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the offense is a condition
precedent. In fact, it cannot even be from the aforequoted provision that a prosecution is needed. On
the contrary, the law plainly states that the guilt of the party may be proved "in the same acting for
declaration of nullity of donation. And, it would be sufficient if evidence preponderates upon the guilt
of the consort for the offense indicated. The quantum of proof in criminal cases is not demanded.
In the caw before Us, the requisite proof of common-law relationship between the insured and the
beneficiary has been conveniently supplied by the stipulations between the parties in the pre-trial
conference of the case. It case agreed upon and stipulated therein that the deceased insured
Buenaventura C. Ebrado was married to Pascuala Ebrado with whom she has six legitimate

children; that during his lifetime, the deceased insured was living with his common-law wife,
Carponia Ebrado, with whom he has two children. These stipulations are nothing less thanjudicial
admissions which, as a consequence, no longer require proof and cannot be contradicted. 8 A fortiori,
on the basis of these admissions, a judgment may be validly rendered without going through the rigors of
a trial for the sole purpose of proving the illicit liaison between the insured and the beneficiary. In fact, in
that pretrial, the parties even agreed "that a decision be rendered based on this agreement and
stipulation of facts as to who among the two claimants is entitled to the policy."
ACCORDINGLY, the appealed judgment of the lower court is hereby affirmed. Carponia T. Ebrado is
hereby declared disqualified to be the beneficiary of the late Buenaventura C. Ebrado in his life
insurance policy. As a consequence, the proceeds of the policy are hereby held payable to the
estate of the deceased insured. Costs against Carponia T. Ebrado.
SO ORDERED.
Teehankee (Chairman), Makasiar, Mu;oz Palma, Fernandez and Guerrero, JJ., concur.

1wph1.t

Insular v Ebrado G.R. No. L-44059 October 28,

1977
Facts:
J. Martin:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with a rider for
Accidental Death. He designated Carponia T. Ebrado as the revocable beneficiary in his policy. He
referred to her as his wife.
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made liable to pay
the coverage in the total amount of P11,745.73, representing the face value of the policy in the
amount of P5,882.00 plus the additional benefits for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as the designated beneficiary
therein, although she admited that she and the insured were merely living as husband and wife
without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts
that she is the one entitled to the insurance proceeds.
Insular commenced an action for Interpleader before the trial court as to who should be given the
proceeds. The court declared Carponia as disqualified.
Issue: WON a common-law wife named as beneficiary in the life insurance policy of a legally married
man can claim the proceeds in case of death of the latter?
Held: No. Petition
Ratio:
Section 50 of the Insurance Act which provides that "the insurance shall be applied exclusively to
the proper interest of the person in whose name it is made"

The word "interest" highly suggests that the provision refers only to the "insured" and not to the
beneficiary, since a contract of insurance is personal in character. Otherwise, the prohibitory laws
against illicit relationships especially on property and descent will be rendered nugatory, as the same
could easily be circumvented by modes of insurance.
When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is
governed by the general rules of the civil law regulating contracts. And under Article 2012 of the
same Code, any person who is forbidden from receiving any donation under Article 739 cannot be
named beneficiary of a fife insurance policy by the person who cannot make a donation to him.
Common-law spouses are barred from receiving donations from each other.
Article 739 provides that void donations are those made between persons who were guilty of
adultery or concubinage at the time of donation.
There is every reason to hold that the bar in donations between legitimate spouses and those
between illegitimate ones should be enforced in life insurance policies since the same are based on
similar consideration. So long as marriage remains the threshold of family laws, reason and morality
dictate that the impediments imposed upon married couple should likewise be imposed upon extramarital relationship.
A conviction for adultery or concubinage isnt required exacted before the disabilities mentioned in
Article 739 may effectuate. The article says that in the case referred to in No. 1, the action for
declaration of nullity may be brought by the spouse of the donor or donee; and the guilty of the
donee may be proved by preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the offense is a condition
precedent. The law plainly states that the guilt of the party may be proved in the same acting for
declaration of nullity of donation. And, it would be sufficient if evidence preponderates.
The insured was married to Pascuala Ebrado with whom she has six legitimate children. He was
also living in with his common-law wife with whom he has two children.

Vda. De Consuegra v. GSIS Retirement Insurance Benefits

37 SCRA 315
Facts:

> Jose Consuegra was employed as a shop foreman of the Office of the District Engineer in Surigao
Del Norte.
> When he was still alive, he contracted two marriages:
o

First Rosario Diaz; 2 children = Jose Consuegra Jr. and Pedro but both predeceased him

2nd Basilia Berdin; 7 children. (this was contracted in GF while the first marriage subsisted)

> Being a GSIS member when he died, the proceeds of his life insurance were paid by the GSIS to
Berdin and her children who were the beneficiaries named in the policy.
> Since he was in the govt service for 22.5028 years, he was entitled to retirement insurance
benefits, for which no beneficiary was designated.
> Both families filed their claims with the GSIS, which ruled that the legal heirs were Diaz who is
entitled to one-half or 8/16 of the retirement benefits and Berdin and her children were entitled to the
remaining half, each to receive an equal share of 1/16.
> Berdin went to CFI on appeal. CFI affirmed GSIS decision.

Issue:
To whom should the retirement insurance benefits be paid?

Held:
Both families are entitled to half of the retirement benefits.
The beneficiary named in the life insurance does NOT automatically become the beneficiary in the
retirement insurance. When Consuegra, during the early part of 1943, or before 1943, designated
his beneficiaries in his life insurance, he could NOT have intended those beneficiaries of his life
insurance as also the beneficiaries of his retirement insurance because the provisions on retirement
insurance under the GSIS came about only when CA 186 was amended by RA 660 on June 18,
1951.

Sec. 11(b) clearly indicates that there is need for the employee to file an application for retirement
insurance benefits when he becomes a GSIS member and to state his beneficiary. The life
insurance and the retirement insurance are two separate and distinct systems of benefits paid out
from 2 separate and distinct funds.

In case of failure to name a beneficiary in an insurance policy, the proceeds will accrue to the estate
of the insured. And when there exists two marriages, each family will be entitled to one-half of the
estate.

SSS v. Davac - SSS Benefits

17 SCRA 863
Facts:
> Davac was an SSS member, and designated Candelaria Davac, his alleged wife, as his
beneficiary.
> When he died, both his first wife, Lourdes and his second wife, Candelaria filed claims for the
death benefits.
> Due to the conflicting claims, the SSS filed a petition praying that both of them be required to
interplead and litigate the conflicting claims.
> The death benefits were awarded to Candelaria Davac.

Issue:
Who is entitled to the SSS benefits?

Held:

Candelaria.
Under the SSS Act, the beneficiary as recorded by the employees employer is the one entitled to the
death benefits, hence they should go to Candelaria. Lourdes contends that the designation made in
the person of Candelaria who is party in a bigamous marriage is null and void for being against Art.
739 of the CC. SC held that the disqualification mentioned in Art. 739 is NOT applicable to
Candelaria, because she was not guilty of concubinage , there bieing NO proof that she had actual
knowledge of the previous marriage of her husband.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-21642

July 30, 1966

SOCIAL SECURITY SYSTEM, petitioner-appellee,

vs.
CANDELARIA D. DAVAC, ET AL., respondents;
LOURDES Tuplano, respondent-appellant.
J. Ma. Francisco and N. G. Bravo for respondent-appellant.
Office of the Solicitor General Arturo A. Alafriz, Solicitor Camilo D. Quiason and E. T. Duran for
petitioner-appellee.
BARRERA, J.:
This is an appeal from the resolution of the Social Security Commission declaring respondent
Candelaria Davac as the person entitled to receive the death benefits payable for the death of
Petronilo Davac.
The facts of the case as found by the Social Security Commission, briefly are: The late Petronilo
Davac, a former employee of Lianga Bay Logging Co., Inc. became a member of the Social Security
System (SSS for short) on September 1, 1957. As such member, he was assigned SS I.D. No. 08007137. In SSS form E-1 (Member's Record) which he accomplished and filed with the SSS on
November 21, 1957, he designated respondent Candelaria Davac as his beneficiary and indicated
his relationship to her as that of "wife". He died on April 5, 1959 and, thereupon, each of the
respondents (Candelaria Davac and Lourdes Tuplano) filed their claims for death benefit with the
SSS. It appears from their respective claims and the documents submitted in support thereof, that
the deceased contracted two marriages, the first, with claimant Lourdes Tuplano on August 29,
1946, who bore him a child, Romeo Davac, and the second, with Candelaria Davac on January 18,
1949, with whom he had a minor daughter Elizabeth Davac. Due to their conflicting claims, the
processing thereof was held in abeyance, whereupon the SSS filed this petition praying that

respondents be required to interpose and litigate between themselves their conflicting claims over
the death benefits in question.
1wph1.t

On February 25, 1963, the Social Security Commission issued the resolution referred to above, Not
satisfied with the said resolution, respondent Lourdes Tuplano brought to us the present appeal.
The only question to be determined herein is whether or not the Social Security Commission acted
correctly in declaring respondent Candelaria Davac as the person entitled to receive the death
benefits in question.
Section 13, Republic Act No. 1161, as amended by Republic Act No. 1792, in force at the time
Petronilo Davac's death on April 5, 1959, provides:
1. SEC. 13. Upon the covered employee's death or total and permanent disability under such
conditions as the Commission may define, before becoming eligible for retirement and if
either such death or disability is not compensable under the Workmen's Compensation Act,
he or, in case of his death, his beneficiaries, as recorded by his employer shall be entitled to
the following benefit: ... . (emphasis supplied.)
Under this provision, the beneficiary "as recorded" by the employee's employer is the one entitled to
the death benefits. In the case of Tecson vs. Social Security System, (L-15798, December 28, 1961),
this Court, construing said Section 13, said:
It may be true that the purpose of the coverage under the Social Security System is
protection of the employee as well as of his family, but this purpose or intention of the law
cannot be enforced to the extent of contradicting the very provisions of said law as contained
in Section 13, thereof, ... . When the provision of a law are clear and explicit, the courts can
do nothing but apply its clear and explicit provisions (Velasco vs. Lopez, 1 Phil, 270;
Caminetti vs. U.S., 242 U.S. 470, 61 L. ed. 442).
But appellant contends that the designation herein made in the person of the second and, therefore,
bigamous wife is null and void, because (1) it contravenes the provisions of the Civil Code, and (2) it
deprives the lawful wife of her share in the conjugal property as well as of her own and her child's
legitime in the inheritance.
As to the first point, appellant argues that a beneficiary under the Social Security System partakes of
the nature of a beneficiary in life insurance policy and, therefore, the same qualifications and
disqualifications should be applied.
Article 2012 of the New Civil Code provides:
ART. 2012. Any person who is forbidden from receiving any donation under Article 739
cannot be named beneficiary of a life insurance policy by the person who cannot make any
donation to him according to said article.
And Article 739 of the same Code prescribes:

ART. 739. The following donations shall be void:

(1) Those made between persons who were guilty of adultery or concubinage at the time of
the donation;
xxx

xxx

xxx

Without deciding whether the naming of a beneficiary of the benefits accruing from membership in
the Social Security System is a donation, or that it creates a situation analogous to the relation of an
insured and the beneficiary under a life insurance policy, it is enough, for the purpose of the instant
case, to state that the disqualification mentioned in Article 739 is not applicable to herein appellee
Candelaria Davac because she was not guilty of concubinage, there being no proof that she had
knowledge of the previous marriage of her husband Petronilo.1
Regarding the second point raised by appellant, the benefits accruing from membership in the Social
Security System do not form part of the properties of the conjugal partnership of the covered
member. They are disbursed from a public special fund created by Congress in pursuance to the
declared policy of the Republic "to develop, establish gradually and perfect a social security system
which ... shall provide protection against the hazards of disability, sickness, old age and death." 2
The sources of this special fund are the covered employee's contribution (equal to 2- per cent of
the employee's monthly compensation);3 the employer's contribution (equivalent to 3- per cent of
the monthly compensation of the covered employee);4 and the Government contribution which
consists in yearly appropriation of public funds to assure the maintenance of an adequate working
balance of the funds of the System.5 Additionally, Section 21 of the Social Security Act, as amended
by Republic Act 1792, provides:
SEC. 21. Government Guarantee. The benefits prescribed in this Act shall not be
diminished and to guarantee said benefits the Government of the Republic of the Philippines
accepts general responsibility for the solvency of the System.
From the foregoing provisions, it appears that the benefit receivable under the Act is in the nature of
a special privilege or an arrangement secured by the law, pursuant to the policy of the State to
provide social security to the workingmen. The amounts that may thus be received cannot be
considered as property earned by the member during his lifetime. His contribution to the fund, it may
be noted, constitutes only an insignificant portion thereof. Then, the benefits are specifically declared
not transferable,6 and exempted from tax legal processes, and lien.7Furthermore, in the settlement of
claims thereunder the procedure to be observed is governed not by the general provisions of law,
but by rules and regulations promulgated by the Commission. Thus, if the money is payable to the
estate of a deceased member, it is the Commission, not the probate or regular court that determines
the person or persons to whom it is payable.8 that the benefits under the Social Security Act are not
intended by the lawmaking body to form part of the estate of the covered members may be gathered
from the subsequent amendment made to Section 15 thereof, as follows:
SEC. 15. Non-transferability of benefit. The system shall pay the benefits provided for in
this Act to such persons as may be entitled thereto in accordance with the provisions of this

Act. Such benefits are not transferable, and no power of attorney or other document
executed by those entitled thereto in favor of any agent, attorney, or any other individual for
the collection thereof in their behalf shall be recognized except when they are physically and
legally unable to collect personally such benefits: Provided, however, That in the case of
death benefits, if no beneficiary has been designated or the designation there of is void, said
benefits shall be paid to the legal heirs in accordance with the laws of succession. (Rep. Act
2658, amending Rep. Act 1161.)
In short, if there is a named beneficiary and the designation is not invalid (as it is not so in this case),
it is not the heirs of the employee who are entitled to receive the benefits (unless they are the
designated beneficiaries themselves). It is only when there is no designated beneficiaries or when
the designation is void, that the laws of succession are applicable. And we have already held that the
Social Security Act is not a law of succession.9
Wherefore, in view of the foregoing considerations, the resolution of the Social Security Commission
appealed from is hereby affirmed, with costs against the appellant.
So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, concur.

Basic PrinciplesG.R. No. 167622 June 29, 2010GREGORIO V. TONGKO,

Petitioner,vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A.
VERGELDE DIOS,
Respondents. Topic: Basic PrinciplesFacts: The contractual relationship between Tongko
and The Manufacturers Life Insurance Co.(Phils.), Inc. (Manulife)had two basic phases.
The first or initial phase began on July 1, 1977,under a Career Agents Agreement
(Agreement) that provided:It is understood and agreed that the Agent is an independent
contractor and nothingcontained herein shall be construed or interpreted as creating
an employer-employeerelationship between the Company and the Agent. The second
phase started in 1983 when Tongko was named Unit Manager in ManulifesSales
Agency Organization. In 1990, he became a Branch Manager. Six years later (or
in1996), Tongko became a Regional Sales Manager. Tongkos gross earnings consisted
of commissions, persistency income, and managementoverrides. Since the beginning,
Tongko consistently declared himself self-employed in hisincome tax returns.Manulife
eventually terminated the Agency Agreement with Tongko for his failure to align
hisdirections with the avowed company policies.Issue: existence of an employment
relationshipRuling:At the very least, three sets of laws namely, the Insurance Code, the
Labor Code and theCivil Code have to be considered in looking at the present case.
Not to be forgotten, too, isthe Agreement that the parties adopted to govern their
relationship for purposes of sellingthe insurance the company offers.Under the
Insurance Code, the agent must, as a matter of qualification, be licensed andmust also
act within the parameters of the authority granted under the license and underthe
contract with the principal.On the other hand, the Civil Code defines an agent as a

"person [who] binds himself torender some service or to do something in representation

or on behalf of another, with theconsent or authority of the latter."
16
While this is a very broad definition that on its face mayeven encompass an
employment relationship, the distinctions between agency andemployment are
sufficiently established by law and jurisprudence.

Generally, the determinative element is the control exercised over the one
renderingservice. The employer controls the employee both in the results and in the
means andmanner of achieving this result. The principal in an agency relationship, on
the other hand,also has the prerogative to exercise control over the agent in
undertaking the assigned taskbased on the parameters outlined in the pertinent
laws. The Agreement, by its express terms, is in accordance with the Insurance Code
model whenit provided for a principal-agent relationship, and thus cannot lightly be set
aside nor simplybe considered as an agreement that does not reflect the parties true
intent. This intent,incidentally, is reinforced by the system of compensation the
Agreement provides, whichlikewise is in accordance with the production-based sales
commissions the Insurance Codeprovides. That Tongko assumed a leadership role but
nevertheless wholly remained an agent is theinevitable conclusion that results from the
reading of the Agreement (the only agreement onrecord in this case) and his continuing
role thereunder as sales agent, from the perspectiveof the Insurance and the Civil
Codes and in light of what Tongko himself attested to as hisrole as Regional Sales
Manager.Evidence indicates that Tongko consistently clung to the view that he was an
independentagent selling Manulife insurance products since he invariably declared
himself a business orself-employed person in his income tax returns.
This consistency with, and action madepursuant to the Agreement were pieces of
evidence that were never mentionednor considered in our Decision of November
7, 2008.
Had they been considered, theycould, at the very least, serve as Tongkos admissions
against his interest. Strictly speaking, Tongkos tax returns cannot but be legally
significant because he certified under oath theamount he earned as gross business
income, claimed business deductions, leading to hisnet taxable income.What, to
Tongko, serve as evidence of labor law control are the codes of conduct thatManulife
imposes on its agents in the sale of insurance. The mere presentation of codes orof
rules and regulations, however, is not per se indicative of labor law control as the law
and jurisprudence teach us. The general law on agency expressly allows the principal
an element of control over theagent in a manner consistent with an agency relationship.
In this sense, these controlmeasures cannot be read as indicative of labor law
control. Foremost among these are thedirectives that the principal may impose on
the agent to achieve the assigned tasks, to theextent that they do not involve the means
and manner of undertaking these tasks. The lawlikewise obligates the agent to render
an account; in this sense, the principal may impose onthe agent specific instructions on
how an account shall be made, particularly on the matterof expenses and
reimbursements. To these extents, control can be imposed through rulesand regulations
without intruding into the labor law concept of control for purposes

of employment.From jurisprudence, an important lesson that the first Insular Life case
teaches us is that acommitment to abide by the rules and regulations of an insurance
company does not ipsofacto make the insurance agent an employee. Neither do
guidelines somehow restrictive of the insurance agents conduct necessarily indicate
"control" as this term is defined in jurisprudence.
Guidelines indicative of labor law "control," as the first Insular Lifecase tells us,
should not merely relate to the mutually desirable result intendedby the
contractual relationship; they must have the nature of dictating
the means

or methods to be employed in attaining the result, or of fixing the methodology and

of binding or restricting the party hired to the use of these means. In fact, results-wise,
theprincipal can impose production quotas and can determine how many agents, with
specificterritories, ought to be employed to achieve the companys objectives. These
aremanagement policy decisions that the labor law element of control cannot reach. Our
rulingin these respects in the first Insular Life case was practically reiterated in
Carungcong. Thus,as will be shown more fully below, Manulifes codes of conduct,
30
all of which do not intrudeinto the insurance agents means and manner of conducting
their sales and only controlthem as to the desired results and Insurance Code norms,
cannot be used as basis for afinding that the labor law concept of control existed
between Manulife and Tongko.In light of these conclusions, the sufficiency of Tongkos
failure to comply with the companyguidelines, as a ground for termination of Tongkos
agency, is a matter that the labortribunals cannot rule upon in the absence of an
employer-employee relationship. Jurisdictionover the matter belongs to the courts
applying the laws of insurance, agency and contracts
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 115278 May 23, 1995

FORTUNE INSURANCE AND SURETY CO., INC., petitioner,
vs.
COURT OF APPEALS and PRODUCERS BANK OF THE PHILIPPINES, respondents.

DAVIDE, JR., J.:

The fundamental legal issue raised in this petition for review on certiorari is whether the petitioner is
liable under the Money, Security, and Payroll Robbery policy it issued to the private respondent or
whether recovery thereunder is precluded under the general exceptions clause thereof. Both the trial
court and the Court of Appeals held that there should be recovery. The petitioner contends
otherwise.
This case began with the filing with the Regional Trial Court (RTC) of Makati, Metro Manila, by
private respondent Producers Bank of the Philippines (hereinafter Producers) against petitioner
Fortune Insurance and Surety Co., Inc. (hereinafter Fortune) of a complaint for recovery of the sum
of P725,000.00 under the policy issued by Fortune. The sum was allegedly lost during a robbery of
Producer's armored vehicle while it was in transit to transfer the money from its Pasay City Branch to
its head office in Makati. The case was docketed as Civil Case No. 1817 and assigned to Branch
146 thereof.
After joinder of issues, the parties asked the trial court to render judgment based on the following
stipulation of facts:
1. The plaintiff was insured by the defendants and an insurance
policy was issued, the duplicate original of which is hereto attached
as Exhibit "A";
2. An armored car of the plaintiff, while in the process of transferring
cash in the sum of P725,000.00 under the custody of its teller,
Maribeth Alampay, from its Pasay Branch to its Head Office at 8737
Paseo de Roxas, Makati, Metro Manila on June 29, 1987, was
robbed of the said cash. The robbery took place while the armored
car was traveling along Taft Avenue in Pasay City;
3. The said armored car was driven by Benjamin Magalong Y de
Vera, escorted by Security Guard Saturnino Atiga Y Rosete. Driver
Magalong was assigned by PRC Management Systems with the
plaintiff by virtue of an Agreement executed on August 7, 1983, a
duplicate original copy of which is hereto attached as Exhibit "B";
4. The Security Guard Atiga was assigned by Unicorn Security
Services, Inc. with the plaintiff by virtue of a contract of Security
Service executed on October 25, 1982, a duplicate original copy of
which is hereto attached as Exhibit "C";
5. After an investigation conducted by the Pasay police authorities,
the driver Magalong and guard Atiga were charged, together with
Edelmer Bantigue Y Eulalio, Reynaldo Aquino and John Doe, with
violation of P.D. 532 (Anti-Highway Robbery Law) before the Fiscal of
Pasay City. A copy of the complaint is hereto attached as Exhibit "D";

6. The Fiscal of Pasay City then filed an information charging the

aforesaid persons with the said crime before Branch 112 of the
Regional Trial Court of Pasay City. A copy of the said information is
hereto attached as Exhibit "E." The case is still being tried as of this
date;
7. Demands were made by the plaintiff upon the defendant to pay the
amount of the loss of P725,000.00, but the latter refused to pay as
the loss is excluded from the coverage of the insurance policy,
attached hereto as Exhibit "A," specifically under page 1 thereof,
"General Exceptions" Section (b), which is marked as Exhibit "A-1,"
and which reads as follows:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in report of
xxx xxx xxx
(b) any loss caused by any dishonest, fraudulent or
criminal act of the insured or any officer, employee,
partner, director, trustee or authorized
representative of the Insured whether acting alone or
in conjunction with others. . . .
8. The plaintiff opposes the contention of the defendant and contends
that Atiga and Magalong are not its "officer, employee, . . . trustee or
authorized representative . . . at the time of the robbery. 1
On 26 April 1990, the trial court rendered its decision in favor of Producers. The dispositive portion
thereof reads as follows:
WHEREFORE, premises considered, the Court finds for plaintiff and against
defendant, and
(a) orders defendant to pay plaintiff the net amount of
P540,000.00 as liability under Policy No. 0207 (as
mitigated by the P40,000.00 special clause deduction
and by the recovered sum of P145,000.00), with
interest thereon at the legal rate, until fully paid;
(b) orders defendant to pay plaintiff the sum of
P30,000.00 as and for attorney's fees; and
(c) orders defendant to pay costs of suit.

All other claims and counterclaims are accordingly dismissed forthwith.

SO ORDERED. 2
The trial court ruled that Magalong and Atiga were not employees or representatives of Producers. It
Said:
The Court is satisfied that plaintiff may not be said to have selected and engaged
Magalong and Atiga, their services as armored car driver and as security guard
having been merely offered by PRC Management and by Unicorn Security and which
latter firms assigned them to plaintiff. The wages and salaries of both Magalong and
Atiga are presumably paid by their respective firms, which alone wields the power to
dismiss them. Magalong and Atiga are assigned to plaintiff in fulfillment of
agreements to provide driving services and property protection as such in a
context which does not impress the Court as translating into plaintiff's power to
control the conduct of any assigned driver or security guard, beyond perhaps entitling
plaintiff to request are replacement for such driver guard. The finding is accordingly
compelled that neither Magalong nor Atiga were plaintiff's "employees" in avoidance
of defendant's liability under the policy, particularly the general exceptions therein
embodied.
Neither is the Court prepared to accept the proposition that driver Magalong and
guard Atiga were the "authorized representatives" of plaintiff. They were merely an
assigned armored car driver and security guard, respectively, for the June 29, 1987
money transfer from plaintiff's Pasay Branch to its Makati Head Office. Quite plainly
it was teller Maribeth Alampay who had "custody" of the P725,000.00 cash being
transferred along a specified money route, and hence plaintiff's then designated
"messenger" adverted to in the policy. 3
Fortune appealed this decision to the Court of Appeals which docketed the case as CA-G.R. CV No.
32946. In its decision 4 promulgated on 3 May 1994, it affirmed in toto the appealed decision.
The Court of Appeals agreed with the conclusion of the trial court that Magalong and Atiga were
neither employees nor authorized representatives of Producers and ratiocinated as follows:
A policy or contract of insurance is to be construed liberally in favor of the insured
and strictly against the insurance company (New Life Enterprises vs. Court of
Appeals, 207 SCRA 669; Sun Insurance Office, Ltd. vs. Court of Appeals, 211 SCRA
554). Contracts of insurance, like other contracts, are to be construed according to
the sense and meaning of the terms which the parties themselves have used. If such
terms are clear and unambiguous, they must be taken and understood in their plain,
ordinary and popular sense (New Life Enterprises Case, supra, p. 676; Sun
Insurance Office, Ltd. vs. Court of Appeals, 195 SCRA 193).

The language used by defendant-appellant in the above quoted stipulation is plain,

ordinary and simple. No other interpretation is necessary. The word "employee" must
be taken to mean in the ordinary sense.
The Labor Code is a special law specifically dealing with/and specifically designed to
protect labor and therefore its definition as to employer-employee relationships
insofar as the application/enforcement of said Code is concerned must necessarily
be inapplicable to an insurance contract which defendant-appellant itself had
formulated. Had it intended to apply the Labor Code in defining what the word
"employee" refers to, it must/should have so stated expressly in the insurance policy.
Said driver and security guard cannot be considered as employees of plaintiffappellee bank because it has no power to hire or to dismiss said driver and security
guard under the contracts (Exhs. 8 and C) except only to ask for their replacements
from the contractors. 5
On 20 June 1994, Fortune filed this petition for review on certiorari. It alleges that the trial court and
the Court of Appeals erred in holding it liable under the insurance policy because the loss falls within
the general exceptions clause considering that driver Magalong and security guard Atiga were
Producers' authorized representatives or employees in the transfer of the money and payroll from its
branch office in Pasay City to its head office in Makati.
According to Fortune, when Producers commissioned a guard and a driver to transfer its funds from
one branch to another, they effectively and necessarily became its authorized representatives in the
care and custody of the money. Assuming that they could not be considered authorized
representatives, they were, nevertheless, employees of Producers. It asserts that the existence of an
employer-employee relationship "is determined by law and being such, it cannot be the subject of
agreement." Thus, if there was in reality an employer-employee relationship between Producers, on
the one hand, and Magalong and Atiga, on the other, the provisions in the contracts of Producers
with PRC Management System for Magalong and with Unicorn Security Services for Atiga which
state that Producers is not their employer and that it is absolved from any liability as an employer,
would not obliterate the relationship.
Fortune points out that an employer-employee relationship depends upon four standards: (1) the
manner of selection and engagement of the putative employee; (2) the mode of payment of wages;
(3) the presence or absence of a power to dismiss; and (4) the presence and absence of a power to
control the putative employee's conduct. Of the four, the right-of-control test has been held to be the
decisive factor. 6 It asserts that the power of control over Magalong and Atiga was vested in and
exercised by Producers. Fortune further insists that PRC Management System and Unicorn Security
Services are but "labor-only" contractors under Article 106 of the Labor Code which provides:
Art. 106. Contractor or subcontractor. There is "labor-only" contracting where the
person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such persons are performing
activities which are directly related to the principal business of such employer. In

such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as
if the latter were directly employed by him.
Fortune thus contends that Magalong and Atiga were employees of Producers, following the ruling
in International Timber Corp. vs. NLRC 7 that a finding that a contractor is a "labor-only" contractor is
equivalent to a finding that there is an employer-employee relationship between the owner of the project
and the employees of the "labor-only" contractor.
On the other hand, Producers contends that Magalong and Atiga were not its employees since it had
nothing to do with their selection and engagement, the payment of their wages, their dismissal, and
the control of their conduct. Producers argued that the rule in International Timber Corp. is not
applicable to all cases but only when it becomes necessary to prevent any violation or circumvention
of the Labor Code, a social legislation whose provisions may set aside contracts entered into by
parties in order to give protection to the working man.
Producers further asseverates that what should be applied is the rule in American President Lines
vs. Clave, 8 to wit:
In determining the existence of employer-employee relationship, the following
elements are generally considered, namely: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employee's conduct.
Since under Producers' contract with PRC Management Systems it is the latter which assigned
Magalong as the driver of Producers' armored car and was responsible for his faithful discharge of
his duties and responsibilities, and since Producers paid the monthly compensation of P1,400.00 per
driver to PRC Management Systems and not to Magalong, it is clear that Magalong was not
Producers' employee. As to Atiga, Producers relies on the provision of its contract with Unicorn
Security Services which provides that the guards of the latter "are in no sense employees of the
CLIENT."
There is merit in this petition.
It should be noted that the insurance policy entered into by the parties is a theft or robbery insurance
policy which is a form of casualty insurance. Section 174 of the Insurance Code provides:
Sec. 174. Casualty insurance is insurance covering loss or liability arising from
accident or mishap, excluding certain types of loss which by law or custom are
considered as falling exclusively within the scope of insurance such as fire or marine.
It includes, but is not limited to, employer's liability insurance, public liability
insurance, motor vehicle liability insurance, plate glass insurance, burglary and theft
insurance, personal accident and health insurance as written by non-life insurance
companies, and other substantially similar kinds of insurance. (emphases supplied)

Except with respect to compulsory motor vehicle liability insurance, the Insurance Code contains no
other provisions applicable to casualty insurance or to robbery insurance in particular. These
contracts are, therefore, governed by the general provisions applicable to all types of insurance.
Outside of these, the rights and obligations of the parties must be determined by the terms of their
contract, taking into consideration its purpose and always in accordance with the general principles
of insurance law. 9
It has been aptly observed that in burglary, robbery, and theft insurance, "the opportunity to defraud
the insurer the moral hazard is so great that insurers have found it necessary to fill up their
policies with countless restrictions, many designed to reduce this hazard. Seldom does the insurer
assume the risk of all losses due to the hazards insured against." 10 Persons frequently excluded
under such provisions are those in the insured's service and employment. 11 The purpose of the exception
is to guard against liability should the theft be committed by one having unrestricted access to the
property. 12 In such cases, the terms specifying the excluded classes are to be given their meaning as
understood in common speech. 13 The terms "service" and "employment" are generally associated with
the idea of selection, control, and compensation. 14
A contract of insurance is a contract of adhesion, thus any ambiguity therein should be resolved
against the insurer, 15 or it should be construed liberally in favor of the insured and strictly against the
insurer. 16 Limitations of liability should be regarded with extreme jealousy and must be construed
in such a way, as to preclude the insurer from non-compliance with its obligation. 17 It goes without saying
then that if the terms of the contract are clear and unambiguous, there is no room for construction and
such terms cannot be enlarged or diminished by judicial construction. 18
An insurance contract is a contract of indemnity upon the terms and conditions specified therein. 19 It
is settled that the terms of the policy constitute the measure of the insurer's liability. 20 In the absence of
statutory prohibition to the contrary, insurance companies have the same rights as individuals to limit their
liability and to impose whatever conditions they deem best upon their obligations not inconsistent with
public policy.
With the foregoing principles in mind, it may now be asked whether Magalong and Atiga qualify as
employees or authorized representatives of Producers under paragraph (b) of the general
exceptions clause of the policy which, for easy reference, is again quoted:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in respect of
xxx xxx xxx
(b) any loss caused by any dishonest, fraudulent or criminal act of the
insured or any officer, employee, partner, director, trustee or
authorized representative of the Insured whether acting alone or in
conjunction with others. . . . (emphases supplied)
There is marked disagreement between the parties on the correct meaning of the terms "employee"
and "authorized representatives."

It is clear to us that insofar as Fortune is concerned, it was its intention to exclude and exempt from
protection and coverage losses arising from dishonest, fraudulent, or criminal acts of persons
granted or having unrestricted access to Producers' money or payroll. When it used then the term
"employee," it must have had in mind any person who qualifies as such as generally and universally
understood, or jurisprudentially established in the light of the four standards in the determination of
the employer-employee relationship, 21 or as statutorily declared even in a limited sense as in the case
of Article 106 of the Labor Code which considers the employees under a "labor-only" contract as
employees of the party employing them and not of the party who supplied them to the employer. 22
Fortune claims that Producers' contracts with PRC Management Systems and Unicorn Security
Services are "labor-only" contracts.
Producers, however, insists that by the express terms thereof, it is not the employer of
Magalong. Notwithstanding such express assumption of PRC Management Systems and
Unicorn Security Services that the drivers and the security guards each shall supply to
Producers are not the latter's employees, it may, in fact, be that it is because the contracts
are, indeed, "labor-only" contracts. Whether they are is, in the light of the criteria provided for
in Article 106 of the Labor Code, a question of fact. Since the parties opted to submit the
case for judgment on the basis of their stipulation of facts which are strictly limited to the
insurance policy, the contracts with PRC Management Systems and Unicorn Security
Services, the complaint for violation of P.D. No. 532, and the information therefor filed by the
City Fiscal of Pasay City, there is a paucity of evidence as to whether the contracts between
Producers and PRC Management Systems and Unicorn Security Services are "labor-only"
contracts.
But even granting for the sake of argument that these contracts were not "labor-only" contracts, and
PRC Management Systems and Unicorn Security Services were truly independent contractors, we
are satisfied that Magalong and Atiga were, in respect of the transfer of Producer's money from its
Pasay City branch to its head office in Makati, its "authorized representatives" who served as such
with its teller Maribeth Alampay. Howsoever viewed, Producers entrusted the three with the specific
duty to safely transfer the money to its head office, with Alampay to be responsible for its custody in
transit; Magalong to drive the armored vehicle which would carry the money; and Atiga to provide the
needed security for the money, the vehicle, and his two other companions. In short, for these
particular tasks, the three acted as agents of Producers. A "representative" is defined as one who
represents or stands in the place of another; one who represents others or another in a special
capacity, as an agent, and is interchangeable with "agent." 23
In view of the foregoing, Fortune is exempt from liability under the general exceptions clause of the
insurance policy.
WHEREFORE , the instant petition is hereby GRANTED. The decision of the Court of Appeals in
CA-G.R. CV No. 32946 dated 3 May 1994 as well as that of Branch 146 of the Regional Trial Court
of Makati in Civil Case No. 1817 are REVERSED and SET ASIDE. The complaint in Civil Case No.
1817 is DISMISSED.
No pronouncement as to costs.

SO ORDERED.
Bellosillo and Kapunan, JJ., concur.
Padilla, J., took no part.
Quiason, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 92383 July 17, 1992

SUN INSURANCE OFFICE, LTD., petitioner,
vs.
THE HON. COURT OF APPEALS and NERISSA LIM, respondents.

CRUZ, J.:
The petitioner issued Personal Accident Policy No. 05687 to Felix Lim, Jr. with a face value of
P200,000.00. Two months later, he was dead with a bullet wound in his head. As beneficiary, his wife
Nerissa Lim sought payment on the policy but her claim was rejected. The petitioner agreed that
there was no suicide. It argued, however that there was no accident either.
Pilar Nalagon, Lim's secretary, was the only eyewitness to his death. It happened on October 6,
1982, at about 10 o'clock in the evening, after his mother's birthday party. According to Nalagon, Lim
was in a happy mood (but not drunk) and was playing with his handgun, from which he had
previously removed the magazine. As she watched television, he stood in front of her and pointed
the gun at her. She pushed it aside and said it might he loaded. He assured her it was not and then
pointed it to his temple. The next moment there was an explosion and Lim slumped to the floor. He
was dead before he fell. 1
The widow sued the petitioner in the Regional Trial Court of Zamboanga City and was
sustained. 2 The petitioner was sentenced to pay her P200,000.00, representing the face value of the
policy, with interest at the legal rate; P10,000.00 as moral damages; P5,000.00 as exemplary damages;
P5,000.00 as actual and compensatory damages; and P5,000.00 as attorney's fees, plus the costs of the
suit. This decision was affirmed on appeal, and the motion for reconsideration was denied. 3 The
petitioner then came to this Court to fault the Court of Appeals for approving the payment of the claim and
the award of damages.
The term "accident" has been defined as follows:

The words "accident" and "accidental" have never acquired any technical signification in law, and
when used in an insurance contract are to be construed and considered according to the ordinary
understanding and common usage and speech of people generally. In-substance, the courts are
practically agreed that the words "accident" and "accidental" mean that which happens by chance or
fortuitously, without intention or design, and which is unexpected, unusual, and unforeseen. The
definition that has usually been adopted by the courts is that an accident is an event that takes place
without one's foresight or expectation an event that proceeds from an unknown cause, or is an
unusual effect of a known case, and therefore not expected. 4
An accident is an event which happens without any human agency or, if happening through human
agency, an event which, under the circumstances, is unusual to and not expected by the person to
whom it happens. It has also been defined as an injury which happens by reason of some violence
or casualty to the injured without his design, consent, or voluntary co-operation. 5
In light of these definitions, the Court is convinced that the incident that resulted in Lim's death was
indeed an accident. The petitioner, invoking the case of De la Cruz v. Capital Insurance, 6 says that
"there is no accident when a deliberate act is performed unless some additional, unexpected,
independent and unforeseen happening occurs which produces or brings about their injury or death."
There was such a happening. This was the firing of the gun, which was the additional unexpected and
independent and unforeseen occurrence that led to the insured person's death.
The petitioner also cites one of the four exceptions provided for in the insurance contract and
contends that the private petitioner's claim is barred by such provision. It is there stated:
Exceptions
The company shall not be liable in respect of
1. Bodily injury
xxx xxx xxx
b. consequent upon
i) The insured person attempting to commit suicide or willfully exposing himself to
needless peril except in an attempt to save human life.
To repeat, the parties agree that Lim did not commit suicide. Nevertheless, the petitioner contends
that the insured willfully exposed himself to needless peril and thus removed himself from the
coverage of the insurance policy.
It should be noted at the outset that suicide and willful exposure to needless peril are in pari
materia because they both signify a disregard for one's life. The only difference is in degree, as
suicide imports a positive act of ending such life whereas the second act indicates a reckless risking
of it that is almost suicidal in intent. To illustrate, a person who walks a tightrope one thousand
meters above the ground and without any safety device may not actually be intending to commit
suicide, but his act is nonetheless suicidal. He would thus be considered as "willfully exposing
himself to needless peril" within the meaning of the exception in question.

The petitioner maintains that by the mere act of pointing the gun to hip temple, Lim had willfully
exposed himself to needless peril and so came under the exception. The theory is that a gun is per
se dangerous and should therefore be handled cautiously in every case.
That posture is arguable. But what is not is that, as the secretary testified, Lim had removed the
magazine from the gun and believed it was no longer dangerous. He expressly assured her that the
gun was not loaded. It is submitted that Lim did not willfully expose himself to needless peril when he
pointed the gun to his temple because the fact is that he thought it was not unsafe to do so. The act
was precisely intended to assure Nalagon that the gun was indeed harmless.
The contrary view is expressed by the petitioner thus:
Accident insurance policies were never intended to reward the insured for his
tendency to show off or for his miscalculations. They were intended to provide for
contingencies. Hence, when I miscalculate and jump from the Quezon Bridge into the
Pasig River in the belief that I can overcome the current, I have wilfully exposed
myself to peril and must accept the consequences of my act. If I drown I cannot go to
the insurance company to ask them to compensate me for my failure to swim as well
as I thought I could. The insured in the case at bar deliberately put the gun to his
head and pulled the trigger. He wilfully exposed himself to peril.
The Court certainly agrees that a drowned man cannot go to the insurance company to ask for
compensation. That might frighten the insurance people to death. We also agree that under the
circumstances narrated, his beneficiary would not be able to collect on the insurance policy for it is
clear that when he braved the currents below, he deliberately exposed himself to a known peril.
The private respondent maintains that Lim did not. That is where she says the analogy fails. The
petitioner's hypothetical swimmer knew when he dived off the Quezon Bridge that the currents below
were dangerous. By contrast, Lim did not know that the gun he put to his head was loaded.
Lim was unquestionably negligent and that negligence cost him his own life. But it should not
prevent his widow from recovering from the insurance policy he obtained precisely against accident.
There is nothing in the policy that relieves the insurer of the responsibility to pay the indemnity
agreed upon if the insured is shown to have contributed to his own accident. Indeed, most accidents
are caused by negligence. There are only four exceptions expressly made in the contract to relieve
the insurer from liability, and none of these exceptions is applicable in the case at bar. **
It bears noting that insurance contracts are as a rule supposed to be interpreted liberally in favor of
the assured. There is no reason to deviate from this rule, especially in view of the circumstances of
this case as above analyzed.
On the second assigned error, however, the Court must rule in favor of the petitioner. The basic
issue raised in this case is, as the petitioner correctly observed, one of first impression. It is evident
that the petitioner was acting in good faith then it resisted the private respondent's claim on the
ground that the death of the insured was covered by the exception. The issue was indeed debatable
and was clearly not raised only for the purpose of evading a legitimate obligation. We hold therefore
that the award of moral and exemplary damages and of attorney's fees is unjust and so must be
disapproved.
In order that a person may be made liable to the payment of moral damages, the law
requires that his act be wrongful. The adverse result of an action does not per
se make the act wrongful and subject the act or to the payment of moral damages.

The law could not have meant to impose a penalty on the right to litigate; such right
is so precious that moral damages may not be charged on those who may exercise it
erroneously. For these the law taxes costs. 7
The fact that the results of the trial were adverse to Barreto did not alone make his act in
bringing the action wrongful because in most cases one party will lose; we would be
imposing an unjust condition or limitation on the right to litigate. We hold that the award of
moral damages in the case at bar is not justified by the facts had circumstances as well
as the law.

If a party wins, he cannot, as a rule, recover attorney's fees and litigation expenses,
since it is not the fact of winning alone that entitles him to recover such damages of
the exceptional circumstances enumerated in Art. 2208. Otherwise, every time a
defendant wins, automatically the plaintiff must pay attorney's fees thereby putting a
premium on the right to litigate which should not be so. For those expenses, the law
deems the award of costs as sufficient. 8
WHEREFORE, the challenged decision of the Court of Appeals is AFFIRMED in so far as it holds
the petitioner liable to the private respondent in the sum of P200,000.00 representing the face value
of the insurance contract, with interest at the legal rate from the date of the filing of the complaint
until the full amount is paid, but MODIFIED with the deletion of all awards for damages, including
attorney's fees, except the costs of the suit.
SO ORDERED.
Grio-Aquino, Medialdea and Bellosillo, JJ., concur.