PRUDENTIAL GUARANTEE and ASSURANCE, INC. vs.

EQUINOX LAND
CORPORATION, respondent.
FACTS: Before us for resolution is the instant Petition for Review on Certiorari
assailing the Decision1 of the Court of Appeals.
The undisputed facts of the case, as established by the Construction
Industry Arbitration Commission (CIAC) and affirmed by the Court of Appeals,
are:
Sometime in 1996, Equinox Land Corporation (Equinox), respondent,
decided to construct five (5) additional floors to its existing building, the Eastgate
Centre, located at 169 EDSA, Mandaluyong City.
It then sent invitations to bid to various building contractors. Four (4)
building contractors, including JMarc Construction & Development Corporation
(JMarc), responded.
Finding the bid of JMarc to be the most advantageous, Equinox
offered the construction project to it. Equinox formally awarded to JMarc the
contract to build the extension for a consideration of P37,000,000.00.
JMarc submitted to Equinox two (2) bonds, namely: (1) a surety bond
issued by Prudential Guarantee and Assurance, Inc. (Prudential), herein
petitioner, in the amount of P9,250,000.00 to guarantee the unliquidated portion
of the advance payment payable to JMarc; and (2) a performance bond likewise
issued by Prudential in the amount of P7,400,000.00 to guarantee JMarcs
faithful performance of its obligations under the construction agreement.
Equinox and JMarc signed the contract and related documents.
Under the terms of the contract, JMarc would supply all the labor, materials,
tools, equipment, and supervision required to complete the project.
In accordance with the terms of the contract, Equinox paid JMarc a
downpayment of P9,250,000.00 equivalent to 25% of the contract price.
JMarc did not adhere to the terms of the contract. It failed to submit
the required monthly progress billings for the months of March and April 1997. Its
workers neglected to cover the drainpipes, hence, they were clogged by wet
cement. This delayed the work on the project.
JMarc requested a series of unscheduled cash advances and
advance payments from Equinox, explaining it had encountered cash problems.
Equinox granted JMarcs request to prevent delay.
After three months, JMarc submitted its first progress billing showing
that it had accomplished only 7.3825% of the construction work estimated at
P2,731,535.00. After deducting the advanced payments, the net amount payable
to JMarc was only P1,285,959.12. Of this amount, Equinox paid JMarc only
P697,005.12 because the former paid EXAN P588,954.00 for concrete mix.
EXAN refused to deliver concrete mix to the project site due to
JMarcs recurring failure to pay on time. Faced with a looming delay in the
project schedule, Equinox acceded to EXANs request that payments for the
concrete mix should be remitted to it directly.
JMarc submitted its second progress billing showing that it
accomplished only 16.0435% of the project after 4 months of construction work.
Based on the contract and its own schedule, JMarc should have accomplished at
least 37.70%.
Faced with the problem of delay, Equinox formally gave JMarc one
final chance to take remedial steps in order to finish the project on time. However,
JMarc failed to undertake any corrective measure.
After five months, Equinox terminated its contract with JMarc and took
over the project. On the same date, Equinox sent Prudential a letter claiming
relief from JMarcs violations of the contract.
On July 11, 1997, the work on the project stopped. The personnel of
both Equinox and JMarc jointly conducted an inventory of all materials, tools,
equipment, and supplies at the construction site. They also measured and
recorded the amount of work actually accomplished. As of July 11, 1997, JMarc
accomplished only 19.0573% of the work or a shortage of 21.565% in violation of
the contract.
The cost of JMarcs accomplishment was only P7,051,201.00. In
other words, Equinox overpaid JMarc in the sum of P3,974,300.25. In addition,
Equinox also paid the wages of JMarcs laborers, the billings for unpaid supplies,
and the amounts owing to subcontractors of JMarc in the total sum of
P664,998.09.
On the 6th month, Equinox filed with the Regional Trial Court (RTC),
Branch 214, Mandaluyong City a complaint for sum of money and damages
against JMarc and Prudential. Equinox prayed that JMarc be ordered to
reimburse the amounts corresponding to its (Equinox) advanced payments and
unliquidated portion of its downpayment; and to pay damages. Equinox also
prayed that Prudential be ordered to pay its liability under the bonds.

In its answer, JMarc alleged that Equinox has no valid ground for
terminating their contract. For its part, Prudential denied Equinoxs claims and
instituted a cross-claim against JMarc for any judgment that might be rendered
against its bonds.
During the hearing, Prudential filed a motion to dismiss the complaint
on the ground that pursuant to Executive Order No. 1008, it is the CIAC which
has jurisdiction over it. The trial court granted Prudentials motion and dismissed
the case.
Equinox filed with the CIAC a request for arbitration, docketed as
CIAC Case No. 17-99. Prudential submitted a position paper contending that the
CIAC has no jurisdiction over it since it is not a privy to the construction contract
between Equinox and JMarc; and that its surety and performance bonds are not
construction agreements, thus, any action thereon lies exclusively with the proper
court.
On December 21, 1999, the CIAC rendered its Decision in favor of
Equinox and against JMarc and Prudential. The amount of P5,239,285.34 shall
be paid by respondent JMarc and respondent Prudential, jointly and severally,
with interest.
Thereupon, Prudential filed with the Court of Appeals a petition for
review. On February 2, 2000, the CIAC amended its Award by reducing the total
liability of JMarc to Equinox to P4,060,780.21.
Dissatisfied, Equinox filed with the Court of Appeals another petition
for review. This case was consolidated with CA-G.R. SP No. 56491 filed by
Prudential.
On November 23, 2001, the Court of Appeals rendered its Decision:
WHEREFORE, the Amended Decision dated February 2, 2000 is AFFIRMED
with MODIFICATION in the amount of P5,958,167.09 (in view of the additional
award of P500,000.00 as nominal and temperate damages and P100,000.00 in
attorneys fees), and AFFIRMED in all other respects.
HELD: The issue raised before us is whether the Court of Appeals erred in (1)
upholding the jurisdiction of the CIAC over the case; and (2) finding Prudential
solidarily liable with JMarc for damages.
On the first issue, basic is the rule that administrative agencies are
tribunals of limited jurisdiction and as such, can only wield such powers as are
specifically granted to them by their enabling statutes.
After having voluntarily invoked before the RTC the jurisdiction of
CIAC, Prudential is estopped to question its jurisdiction. As we held in
Lapanday Agricultural & Development Corporation v. Estita,5 the active
participation of a party in a case pending against him before a court or a quasijudicial body is tantamount to a recognition of that courts or quasi-judicial bodys
jurisdiction and a willingness to abide by the resolution of the case and will bar
said party from later on impugning the courts or quasi-judicial bodys jurisdiction.
Anent the second issue, it is not disputed that Prudential entered into
a suretyship contract with JMarc. Section 175 of the Insurance Code defines a
suretyship as "a contract or agreement whereby a party, called the suretyship,
guarantees the performance by another party, called the principal or obligor, of
an obligation or undertaking in favor of a third party, called the obligee. It includes
official recognizances, stipulations, bonds, or undertakings issued under Act
5368, as amended."
Corollarily, Article 2047 of the Civil Code provides that suretyship
arises upon the solidary binding of a person deemed the surety with the principal
debtor for the purpose of fulfilling an obligation.
In Castellvi de Higgins and Higgins v. Seliner,9 we held that while a
surety and a guarantor are alike in that each promises to answer for the debt or
default of another, the surety assumes liability as a regular party to the
undertaking and hence its obligation is primary.
In Security Pacific Assurance Corporation v. Tria-Infante,10 we
reiterated the rule that while a contract of surety is secondary only to a valid
principal obligation, the suretys liability to the creditor is said to be direct,
primary, and absolute. In other words, the surety is directly and equally bound
with the principal. Thus, Prudential is barred from disclaiming that its liability with
JMarc is solidary.
WHEREFORE, we DENY the petition. The assailed Decision of the
Court of Appeals (Third Division) dated November 23, 2001 in CA-G.R. SP No.
56491 and CA-G.R. SP No. 57355 is AFFIRMED in toto. Costs against
petitioner.

PHILIPPINE PRYCE ASSURANCE CORPORATION vs. THE COURT

OF APPEALS and GEGROCO, INC.
FACTS: Petitioner, Interworld Assurance Corporation (the company now
carries the corporate name Philippine Pryce Assurance Corporation),
was the butt of the complaint for collection of sum of money, filed on May
13, 1988 by respondent, Gegroco, Inc. before the Makati Regional Trial
Court.
The complaint alleged that petitioner issued two surety bonds
(No. 0029, dated July 24, 1987 and No. 0037, dated October 7, 1987) in
behalf of its principal Sagum General Merchandise for FIVE HUNDRED
THOUSAND (P500,000.00) PESOS and ONE MILLION (1,000,000.00)
PESOS, respectively.
On June 16, 1988, summons, together with the copy of the
complaint, was served on petitioner. Within the reglementary period, two
successive motions were filed by petitioner praying for a total of thirty
(30) days extention within which to file a responsible pleading.
In its Answer, dated July 29, 1988, but filed only on August 4,
1988, petitioner admitted having executed the said bonds, but denied
liability because allegedly 1) the checks which were to pay for the
premiums bounced and were dishonored hence there is no contract to
speak of between petitioner and its supposed principal; and 2) that the
bonds were merely to guarantee payment of its principal's obligation,
thus, excussion is necessary.
On the scheduled date for pre-trial conference, only the
counsel for petitioner appeared while both the representative of
respondent and its counsel were present. The counsel for petitioner
manifested that he was unable to contact the Vice-President for
operations of petitioner, although his client intended to file a third party
complaint against its principal.
On October 14, 1988, petitioner filed a "Motion with Leave to
Admit Third-Party Complaint" with the Third-Party Complaint attached.
On this same day, in the presence of the representative for both
petitioner and respondent and their counsel, the pre-trial conference was
re-set to December 1, 1988. Meanwhile on November 29, 1988, the court
admitted the Third Party Complaint and ordered service of summons on
third party defendants. 4
On scheduled conference in December, petitioner and its
counsel did not appear notwithstanding their notice in open court.
However, when the case was called for pre-trial conference on February
1, 1989, petitioner was again not presented by its officer or its counsel,
despite being duly notified. Hence, upon motion of respondent, petitioner
was considered as in default and respondent was allowed to present
evidence ex-parte.
On March 6, 1989, a decision was rendered by the trial court,
the dispositive portion reads: WHEREFORE, judgment is hereby
rendered in favor of the plaintiff and against the defendant Interworld
Assurance Corporation to pay the amount of P1,500,000.00 representing
the principal of the amount due, plus legal interest thereon from April 7,
1988, until date of payment; and P20,000.00 as and for attorney's fees. 8
Petitioner's "Motion for Reconsideration and New Trial" dated
April 17, 1989, having been denied it elevated its case to the Court of
Appeals which however, affirmed the decision of the trial court as well as
the latter's order denying petitioner's motion for reconsideration.
HELD: We do not find any reversible error in the conclusion reached by
the court a quo.
Relying on Section 1, Rule 20 of the Rules of court, petitioner
argues that since the last pleading, which was supposed to be the thirdparty defendant's answer has not been filed, the case is not yet ripe for
pre-trial. This argument must fail on three points.
First, the trial court asserted, and we agree, that no answer to
the third party complaint is forthcoming as petitioner never initiated the
service of summons on the third party defendant. Moreover, we observed
that all copies of notices and orders issued by the court for petitioner's

counsel were returned with the notation "Return to Sender, Unclaimed."

Yet when he chose to, he would appear in court despite supposed lack of
notice.
Second, petitioner cannot just disregard the court's order to be
present during the pre-trial and give a flimsy excuse, such as that the
answer has yet to be filed. The pre-trial is mandatory in any action, the
main objective being to simplify, abbreviate and expedite trial, if not to
fully dispense with it.
Third, the court of Appeals properly considered the third-party
complaint as a mere scrap of paper due to petitioner's failure to pay the
requisite docket fees.
Finally, there is reason to believe that partitioner does not really
have a good defense. Petitioner hinges its defense on two arguments,
namely: a) that the checks issued by its principal which were supposed to
pay for the premiums, bounced, hence there is no contract of surety to
speak of; and 2) that as early as 1986 and covering the time of the
Surety Bond, Interworld Assurance Company (now Phil. Pryce) was not
yet authorized by the insurance Commission to issue such bonds.
The Insurance Code states that:
Sec. 177. The surety is entitled to payment of the
premium as soon as the contract of suretyship or
bond is perfected and delivered to the obligor. No
contract of suretyship or bonding shall be valid and
binding unless and until the premium therefor has
been paid, except where the obligee has accepted
the bond, in which case the bond becomes valid and
enforceable irrespective of whether or not the
premium has been paid by the obligor to the surety. .
. . (emphasis added)
The above provision outrightly negates petitioner's first
defense. In a desperate attempt to escape liability, petitioner further
asserts that the above provision is not applicable because the
respondent allegedly had not accepted the surety bond, hence could not
have delivered the goods to Sagum Enterprises. This statement clearly
intends to muddle the facts as found by the trial court and which are on
record.
In the first place, petitioner, in its answer, admitted to have
issued the bonds subject matter of the original action. 19 Secondly, the
testimony of Mr. Leonardo T. Guzman, witness for the respondent,
reveals that the principal was required to submit to respondent Surety
Bond to guaranty payment of the spare parts to be purchased.
On the other hand, petitioner's defense that it did not have
authority to issue a Surety Bond when it did is an admission of fraud
committed against respondent. No person can claim benefit from the
wrong he himself committed. A representation made is rendered
conclusive upon the person making it and cannot be denied or disproved
as against the person relying thereon. 22
WHEREFORE, in view of the foregoing, the decision of the
Court of Appeals dismissing the petition before them and affirming the
decision of the trial court and its order denying petitioner's Motion for
Reconsideration are hereby AFFIRMED. The present petition is
DISMISSED for lack of merit.

REPUBLIC OF THE PHILIPPINES, Represented by the COMMISSIONER

OF INTERNAL REVENUE v. SUNLIFE ASSURANCE COMPANY OF
CANADA,
FACTS: Having satisfactorily proven to the Court of Tax Appeals, to the
Court of Appeals and to this Court that it is a bona fide cooperative,
respondent is entitled to exemption from the payment of taxes on life
insurance premiums and documentary stamps. Not being governed by
the Cooperative Code of the Philippines, it is not required to be
registered with the Cooperative Development Authority in order to avail
itself of the tax exemptions. Significantly, neither the Tax Code nor the
Insurance Code mandates this administrative registration.
Before us is a Petition for Review[1] under Rule 45 of the Rules
of Court, seeking to nullify the Decision[2] and Resolution[3] of the Court
of Appeals.
Sun Life is a mutual life insurance company organized and
existing under the laws of Canada. It is registered and authorized by the
Securities and Exchange Commission and the Insurance Commission to
engage in business in the Philippines as a mutual life insurance company
with principal office at Paseo de Roxas, Legaspi Village, Makati City.
On October 20, 1997, Sun Life filed with the [Commissioner of
Internal Revenue] (CIR) its insurance premium tax return for the third
quarter of 1997 and paid the premium tax in the amount of
P31,485,834.51.
For the period covering August 21 to December 18, 1997,
petitioner filed with the CIR its [documentary stamp tax (DST)]
declaration returns and paid the total amount of P30,000,000.00.
On December 29, 1997, the [Court of Tax Appeals] (CTA)
rendered its decision in Insular Life Assurance Co. Ltd. v. [CIR], which
held that mutual life insurance companies are purely cooperative
companies and are exempt from the payment of premium tax and DST.
This pronouncement was later affirmed by this court in [CIR] v. Insular
Life Assurance Company, Ltd. Sun Life surmised that[,] being a mutual
life insurance company, it was likewise exempt from the payment of
premium tax and DST.
Hence, on August 20, 1999, Sun Life filed with the CIR an
administrative claim for tax credit of its alleged erroneously paid premium
tax and DST for the aforestated tax periods.
For failure of the CIR to act upon the administrative claim for
tax credit and with the 2-year period to file a claim for tax credit or refund
dwindling away and about to expire, Sun Life filed with the CTA a petition
for review on August 23, 1999.
In its petition, it prayed for the issuance of a tax credit
certificate in the amount of P61,485,834.51 representing P31,485,834.51
of erroneously paid premium tax for the third quarter of 1997 and
P30,000[,000].00 of DST on policies of insurance from August 21 to
December 18, 1997.
Sun Life stood firm on its contention that it is a mutual life
insurance company vested with all the characteristic features and
elements of a cooperative company or association as defined in [S]ection
121 of the Tax Code.
Primarily, the management and affairs of Sun Life were
conducted by its members; secondly, it is operated with money collected
from its members; and, lastly, it has for its purpose the mutual protection
of its members and not for profit or gain.
On November 12, 2002, the CTA found in favor of Sun Life.
Quoting largely from its earlier findings in Insular Life Assurance
Company, Ltd. v. [CIR], which it found to be on all fours with the present
action.
Seeking reconsideration of the decision of the CTA, the CIR
argued that Sun Life ought to have registered, foremost, with the
Cooperative Development Authority before it could enjoy the exemptions
from premium tax and DST extended to purely cooperative companies or
associations under [S]ections 121 and 199 of the Tax Code. For its
failure to register, it could not avail of the exemptions prayed for.

Moreover, the CIR alleged that Sun Life failed to prove that ownership of
the company was vested in its members who are entitled to vote and
elect the Board of Trustees among [them].
Notwithstanding these arguments, the CTA denied the CIRs
motion for reconsideration.
In upholding the CTA, the CA reasoned that respondent was a
purely cooperative corporation duly licensed to engage in mutual life
insurance business in the Philippines. Thus, respondent was deemed
exempt from premium and documentary stamp taxes, because its affairs
are managed and conducted by its members with money collected from
among themselves, solely for their own protection, and not for profit. Its
members or policyholders constituted both insurer and insured who
contribute, by a system of premiums or assessments, to the creation of a
fund from which all losses and liabilities were paid. The dividends it
distributed to them were not profits, but returns of amounts that had been
overcharged them for insurance.
HELD: The Petition has no merit.
First Issue: Whether Respondent Is a Cooperative
The Tax Code defines a cooperative as an association
conducted by the members thereof with the money collected from among
themselves and solely for their own protection and not for profit.[8]
Without a doubt, respondent is a cooperative engaged in a mutual life
insurance business.
First, it is managed by its members. Both the CA and the CTA
found that the management and affairs of respondent were conducted by
its member-policyholders.[9]
A stock insurance company doing business in the Philippines
may alter its organization and transform itself into a mutual insurance
company.[10] Respondent has been mutualized or converted from a
stock life insurance company to a nonstock mutual life insurance
corporation[11] pursuant to Section 266 of the Insurance Code of
1978.[12] On the basis of its bylaws, its ownership has been vested in its
member-policyholders who are each entitled to one vote;[13] and who, in
turn, elect from among themselves the members of its board of
trustees.[14] Being the governing body of a nonstock corporation, the
board exercises corporate powers, lays down all corporate business
policies, and assumes responsibility for the efficiency of
management.[15]
Second, it is operated with money collected from its members.
Since respondent is composed entirely of members who are also its
policyholders, all premiums collected obviously come only from them.[16]
The member-policyholders constitute both insurer and
insured[17] who contribute, by a system of premiums or assessments, to
the creation of a fund from which all losses and liabilities are paid.[18]
The premiums[19] pooled into this fund are earmarked for the payment of
their indemnity and benefit claims.
Third, it is licensed for the mutual protection of its members,
not for the profit of anyone.
As early as October 30, 1947, the director of commerce had
already issued a license to respondent -- a corporation organized and
existing under the laws of Canada -- to engage in business in the
Philippines. In the Philippines, the insurance commissioner also granted
it annual Certificates of Authority to transact life insurance business.
A mutual life insurance company is conducted for the benefit of
its member-policyholders,[23] who pay into its capital by way of
premiums. To that extent, they are responsible for the payment of all its
losses.[24] The cash paid in for premiums and the premium notes
constitute their assets x x x.[25] In the event that the company itself fails
before the terms of the policies expire, the member-policyholders do not
acquire the status of creditors.[26] Rather, they simply become debtors
for whatever premiums that they have originally agreed to pay the
company, if they have not yet paid those amounts in full, for [m]utual
companies x x x depend solely upon x x x premiums.[27] Only when the
premiums will have accumulated to a sum larger than that required to

pay for company losses will the member-policyholders be entitled to a

pro rata division thereof as profits.[28]
Contributing to its capital, the member-policyholders of a
mutual company are obviously also its owners.[29] Sustaining a dual
relationship inter se, they not only contribute to the payment of its losses,
but are also entitled to a proportionate share[30] and participate alike[31]
in its profits and surplus.
Where the insurance is taken at cost, it is important that the
rates of premium charged by a mutual company be larger than might
reasonably be expected to carry the insurance, in order to constitute a
margin of safety. The table of mortality used will show an admittedly
higher death rate than will probably prevail; the assumed interest rate on
the investments of the company is made lower than is expected to be
realized; and the provision for contingencies and expenses, made
greater than would ordinarily be necessary.[32] This course of action is
taken, because a mutual company has no capital stock and relies solely
upon its premiums to meet unexpected losses, contingencies and
expenses.
Sharing in the common fund, any member-policyholder may
choose to withdraw dividends in cash or to apply them in order to reduce
a subsequent premium, purchase additional insurance, or accelerate the
payment period. Although the premium made at the beginning of a year
is more than necessary to provide for the cost of carrying the insurance,
the member-policyholder will nevertheless receive the benefit of the
overcharge by way of dividends, at the end of the year when the cost is
actually ascertained. The declaration of a dividend upon a policy reduces
pro tanto the cost of insurance to the holder of the policy. That is its
purpose and effect.[34]
The so-called dividend that is received by memberpolicyholders is not a portion of profits set aside for distribution to the
stockholders in proportion to their subscription to the capital stock of a
corporation.[37] One, a mutual company has no capital stocks to which
subscription is necessary; there are no stockholders to speak of, but only
members. And, two, the amount they receive does not partake of the
nature of a profit or income. The quasi-appearance of profit will not
change its character. It remains an overpayment, a benefit to which the
member-policyholder is equitably entitled.[38]
Verily, a mutual life insurance corporation is a cooperative that
promotes the welfare of its own members. It does not operate for profit,
but for the mutual benefit of its member-policyholders. They receive their
insurance at cost, while reasonably and properly guarding and
maintaining the stability and solvency of the company.[39] The economic
benefits filter to the cooperative members. Either equally or
proportionally, they are distributed among members in correlation with
the resources of the association utilized.[40]
It does not follow that because respondent is registered as a
nonstock corporation and thus exists for a purpose other than profit, the
company can no longer make any profits.[41] Earning profits is merely its
secondary, not primary, purpose. In fact, it may not lawfully engage in
any business activity for profit, for to do so would change or contradict its
nature[42] as a non-profit entity.[43] It may, however, invest its corporate
funds in order to earn additional income for paying its operating
expenses and meeting benefit claims. Any excess profit it obtains as an
incident to its operations can only be used, whenever necessary or
proper, for the furtherance of the purpose for which it was organized.[44]
Second Issue:Whether CDA Registration Is Necessary
Under the Tax Code although respondent is a cooperative,
registration with the Cooperative Development Authority (CDA)[45] is not
necessary in order for it to be exempt from the payment of both
percentage taxes on insurance premiums.
We have already determined that respondent is a cooperative.
The distinguishing feature of a cooperative enterprise[63] is the mutuality
of cooperation among its member-policyholders united for that
purpose.[64] So long as respondent meets this essential feature, it does

not even have to use[65] and carry the name of a cooperative to operate
its mutual life insurance business. Gratia argumenti that registration is
mandatory, it cannot deprive respondent of its tax exemption privilege
merely because it failed to register. The nature of its operations is clear;
its purpose well-defined. Exemption when granted cannot prevail over
administrative convenience.
Third Issue:Whether Respondent Is Exempted from Premium Taxes
and DST
Having determined that respondent is a cooperative that does
not have to be registered with the CDA, we hold that it is entitled to
exemption from both premium taxes and documentary stamp taxes
(DST).
The Tax Code is clear. On the one hand, Section 121 of the
Code exempts cooperative companies from the 5 percent percentage tax
on insurance premiums. On the other hand, Section 199 also exempts
from the DST, policies of insurance or annuities made or granted by
cooperative companies. Being a cooperative, respondent is thus exempt
from both types of taxes.
WHEREFORE, the Petition is hereby DENIED, and the
assailed Decision and Resolution are AFFIRMED. No pronouncement as
to costs.

HERMINIA Q. KANAPI vs. THE INSULAR LIFE ASSURANCE CO.,

LTD. (1954)
FACTS: On August 1, 1848, the defendant insurance company issued a
policy on the life of plaintiff's husband, Henry G. Kanapi, whereby
defendant undertook to pay to plaintiff as beneficiary, upon the death of
the insured, the sum of P5,000 if the death be due to natural causes and
an additional P5,000 if the death be due to accidental means, payment of
this additional sum being provided for in the "Accidental Death Benefit
Policy Clause" appended to and forming part of the policy but expressly
made subject to the exception that the clause would not apply where
death resulted from injury "intentionally inflicted by a third party."
During the life of the policy, the insured died from a bullet
wound inflicted, without provocation, by one Conrado Quemosing, who,
as author of the killing, was found guilty of murder and sentenced to
prison.
Upon receiving proof of the insured's death, defendant paid
plaintiff P5,000, but refused to pay the additional P5,000 claimed upon
the accidental death benefit clause on the ground that, as the injured
died from an injury intentionally inflicted by a third party, the clause did
not apply. The present action is for the recovery of the additional sum.
Upholding defendant's stand, the lower court dismissed the
action, whereupon plaintiff appealed to this Court, and the question for us
to determine is whether plaintiff is entitled to the additional P5,000
claimed under the accident benefit clause of the policy.
HELD: This clause provide for the payment of the sum upon proof "that
the death of the Insured resulted directly from bodily injury affected
through external and violent means sustained in an accident . . . and
independently of all other clauses."
But far from proving that the insured died from bodily injury
sustained in an accident, the agreed facts are to the effect that the
insured was murdered, thus making it indisputable that his death resulted
from injury "intentionally inflicted by a third party"; which is one of the
exceptions to the accident benefit clause, according to which the benefit
shall not apply to death resulting from "(5) Any injury received . . . (e) that
has been inflicted intentionally by a third party, either with or without
provocation on the part of the Insured, and whether or not the attack or
the defense by the third party was caused by a violation of the law by the
Insured. . . ."
There is nothing to the suggestion that the case comes under
exception 5 (d) or that portion of it which excepts from the benefit any
injury received "in any assault provoked by the Insured", it being argued
that by express mention of provoked assault an unprovoked one is
inferentially excluded.
The inference is not admissible because where the injury is
inflicted without provocation the case comes within the terms of
exception 5 (e), which, is, therefore, the one that should be applied.
We find the decision appealed from to be in accordance with
law and the facts. It is, therefore, affirmed, with costs.

EMILIA T. BIAGTAN, JUAN T. BIAGTAN, JR., MIGUEL T. BIAGTAN,

GIL T. BIAGTAN and GRACIA T. BIAGTAN vs.
THE INSULAR LIFE ASSURANCE COMPANY, LTD. (1972)
FACTS: This is an appeal from the decision of the Court of First Instance
of Pangasinan.
Juan S. Biagtan was insured with defendant Insular Life
Assurance Company under Policy No. 398075 for the sum of P5,000.00
and, under a supplementary contract denominated "Accidental Death
Benefit Clause, for an additional sum of P5,000.00 if "the death of the
Insured resulted directly from bodily injury effected solely through
external and violent means sustained in an accident ... and
independently of all other causes."
The clause, however, expressly provided that it would not apply
where death resulted from an injury "intentionally inflicted by another
party."
On the night of May 20, 1964, or during the first hours of the
following day a band of robbers entered the house of the insured Juan S.
Biagtan. The band of robbers were charged in and convicted by the
Court of First Instance of Pangasinan for robbery with homicide; that in
committing the robbery, the robbers, on reaching the staircase landing on
the second floor, rushed towards the door of the second floor room,
where they suddenly met a person near the door of oneof the rooms who
turned out to be the insured Juan S. Biagtan who received thrusts from
their sharp-pointed instruments, causing wounds on the body of said
Juan S. Biagtan resulting in his death.
Plaintiffs, as beneficiaries of the insured, filed a claim under the
policy. The insurance company paid the basic amount of P5,000.00 but
refused to pay the additional sum of P5,000.00 under the accidental
death benefit clause, on the ground that the insured's death resulted from
injuries intentionally inflicted by third parties and therefore was not
covered.
Plaintiffs filed suit to recover, and after due hearing the court a
quo rendered judgment in their favor. Hence the present appeal by the
insurer.
HELD: The only issue here is whether under the facts are stipulated and
found by the trial court the wounds received by the insured at the hands
of the robbers nine in all, five of them mortal and four non-mortal
were inflicted intentionally.
The court, in ruling negatively on the issue, stated that since
the parties presented no evidence and submitted the case upon
stipulation, there was no "proof that the act of receiving thrust (sic) from
the sharp-pointed instrument of the robbers was intended to inflict injuries
upon the person of the insured or any other person or merely to scare
away any person so as to ward off any resistance or obstacle that might
be offered in the pursuit of their main objective which was robbery."
The trial court committed a plain error in drawing the
conclusion it did from the admitted facts. Nine wounds were inflicted
upon the deceased, all by means of thrusts with sharp-pointed
instruments wielded by the robbers. This is a physical fact as to which
there is no dispute. So is the fact that five of those wounds caused the
death of the insured. Whether the robbers had the intent to kill or merely
to scare the victim or to ward off any defense he might offer, it cannot be
denied that the act itself of inflicting the injuries was intentional.
It should be noted that the exception in the accidental benefit
clause invoked by the appellant does not speak of the purpose
whether homicidal or not of a third party in causing the injuries, but
only of the fact that such injuries have been "intentionally" inflicted this
obviously to distinguish them from injuries which, although received at
the hands of a third party, are purely accidental.
This construction is the basic idea expressed in the coverage
of the clause itself, namely, that "the death of the insured resulted directly
from bodily injury effected solely through external and violent means
sustained in an accident ... and independently of all other causes." A gun

which discharges while being cleaned and kills a bystander; a hunter who
shoots at his prey and hits a person instead; an athlete in a competitive
game involving physical effort who collides with an opponent and fatally
injures him as a result: these are instances where the infliction of the
injury is unintentional and therefore would be within the coverage of an
accidental death benefit clause such as that in question in this case.
But where a gang of robbers enter a house and coming face to
face with the owner, even if unexpectedly, stab him repeatedly, it is
contrary to all reason and logic to say that his injuries are not intentionally
inflicted, regardless of whether they prove fatal or not. As it was, in the
present case they did prove fatal, and the robbers have been accused
and convicted of the crime of robbery with homicide.
The case of Calanoc vs. Court of Appeals, 98 Phil. 79, is relied upon by
the trial court in support of its decision. The facts in that case, however,
are different from those obtaining here (SEE DIGEST). Under those
circumstances this Court held that it could not be said that the killing was
intentional for there was the possibility that the malefactor had fired the
shot to scare people around for his own protection and not necessarrily
to kill or hit the victim. A similar possibility is clearly ruled out by the facts
in the case now before Us. For while a single shot fired from a distance,
and by a person who was not even seen aiming at the victim, could
indeed have been fired without intent to kill or injure, nine wounds
inflicted with bladed weapons at close range cannot conceivably be
considered as innocent insofar as such intent is concerned. The manner
of execution of the crime permits no other conclusion.
Thus, it has been held that "intentional" as used in an accident
policy excepting intentional injuries inflicted by the insured or any other
person, etc., implies the exercise of the reasoning faculties,
consciousness and volition. 1 Where a provision of the policy excludes
intentional injury, it is the intention of the person inflicting the injury that is
controlling. 2 If the injuries suffered by the insured clearly resulted from
the intentional act of a third person the insurer is relieved from liability as
stipulated. 3
WHEREFORE, the decision appealed from is reversed and the
complaint dismissed, without pronouncement as to costs.

VIRGINIA CALANOC vs. COURT OF APPEALS and THE PHILIPPINE

AMERICAN LIFE INSURANCE CO. (1955)
FACTS: This suit involves the collection of P2,000 representing the value
of a supplemental policy covering accidental death which was secured by
one Melencio Basilio from the Philippine American Life Insurance
Company.
The case originated in the Municipal Court of Manila and
judgment being favorable to the plaintiff it was appealed to the court of
first instance. The latter court affirmed the judgment but on appeal to the
Court of Appeals the judgment was reversed and the case is now before
us on a petition for review.
Melencio Basilio was a watchman of the Manila Auto Supply
located at the corner of Avenida Rizal and Zurbaran. He secured a life
insurance policy from the Philippine American Life Insurance Company in
the amount of P2,000 to which was attached a supplementary contract
covering death by accident.
On January 25, 1951, he died of a gunshot wound on the
occasion of a robbery committed in the house of Atty. Ojeda at the corner
of Oroquieta and Zurbaan streets. Virginia Calanoc, the widow, was paid
the sum of P2,000, face value of the policy, but when she demanded the
payment of the additional sum of P2,000 representing the value of the
supplemental policy, the company refused alleging, as main defense,
that the deceased died because he was murdered by a person who took
part in the commission of the robbery and while making an arrest as an
officer of the law which contingencies were expressly excluded in the
contract and have the effect of exempting the company from liability.
The circumstances surrounding the death of Melencio Basilio
show that when he was killed at about seven o'clock in the night of
January 25, 1951, he was on duty as watchman of the Manila Auto
Supply at the corner of Avenida Rizal and Zurbaran;
That it turned out that Atty. Antonio Ojeda who had his
residence at the corner of Zurbaran and Oroquieta, a block away from
Basilio's station, had come home that night and found that his house was
well-lighted, but with the windows closed;
That getting suspicious that there were culprits in his house,
Atty. Ojeda retreated to look for a policeman and finding Basilio in khaki
uniform, asked him to accompany him to the house with the latter
refusing on the ground that he was not a policeman, but suggesting that
Atty. Ojeda should ask the traffic policeman on duty at the corner of Rizal
Avenue and Zurbaran;
That Atty. Ojeda went to the traffic policeman at said corner
and reported the matter, asking the policeman to come along with him, to
which the policeman agreed; that on the way to the Ojeda residence, the
policeman and Atty. Ojeda passed by Basilio and somehow or other
invited the latter to come along;
That as the tree approached the Ojeda residence and stood in
front of the main gate which was covered with galvanized iron, the fence
itself being partly concrete and partly adobe stone, a shot was fired;
That immediately after the shot, Atty. Ojeda and the policeman
sought cover; that the policeman, at the request of Atty. Ojeda, left the
premises to look for reinforcement; that it turned out afterwards that the
special watchman Melencio Basilio was hit in the abdomen, the wound
causing his instantaneous death.
It is contended in behalf of the company that Basilio was killed
which "making an arrest as an officer of the law" or as a result of an
"assault or murder" committed in the place and therefore his death was
caused by one of the risks excluded by the supplementary contract which
exempts the company from liability. This contention was upheld by the
Court of Appeals.
HELD: We dissent from the above findings of the Court of Appeals.
For one thing, Basilio was a watchman of the Manila Auto
Supply which was a block away from the house of Atty. Ojeda where
something suspicious was happening which caused the latter to ask for

help. While at first he declied the invitation of Atty. Ojeda to go with him
to his residence to inquire into what was going on because he was not a
regular policeman, he later agreed to come along when prompted by the
traffic policeman, and upon approaching the gate of the residence he
was shot and died. The circumstance that he was a mere watchman and
had no duty to heed the call of Atty. Ojeda should not be taken as a
capricious desire on his part to expose his life to danger considering the
fact that the place he was in duty-bound to guard was only a block away.
In volunteering to extend help under the situation, he might have thought,
rightly or wrongly, that to know the truth was in the interest of his
employer it being a matter that affects the security of the neighborhood.
No doubt there was some risk coming to him in pursuing that errand, but
that risk always existed it being inherent in the position he was holding.
He cannot therefore be blamed solely for doing what he believed was in
keeping with his duty as a watchman and as a citizen. And he cannot be
considered as making an arrest as an officer of the law, as contended,
simply because he went with the traffic policeman, for certainly he did not
go there for that purpose nor was he asked to do so by the policeman.
Much less can it be pretended that Basilio died in the course of
an assault or murder considering the very nature of these crimes. In the
first place, there is no proof that the death of Basilio is the result of either
crime for the record is barren of any circumstance showing how the fatal
shot was fired. Perhaps this may be clarified in the criminal case now
pending in court as regards the incident but before that is done anything
that might be said on the point would be a mere conjecture.
Nor can it be said that the killing was intentional for there is the
possibility that the malefactor had fired the shot merely to scare away the
people around for his own protection and not necessarily to kill or hit the
victim. In any event, while the act may not exempt the triggerman from
liability for the damage done, the fact remains that the happening was a
pure accident on the part of the victim. The victim could have been either
the policeman or Atty. Ojeda for it cannot be pretended that the
malefactor aimed at the deceased precisely because he wanted to take
his life.
We take note that these defenses are included among the risks
exluded in the supplementary contract which enumerates the cases
which may exempt the company from liability.
While as a general rule "the parties may limit the coverage of
the policy to certain particular accidents and risks or causes of loss, and
may expressly except other risks or causes of loss therefrom" (45 C. J. S.
781-782), however, it is to be desired that the terms and phraseology of
the exception clause be clearly expressed so as to be within the easy
grasp and understanding of the insured, for if the terms are doubtful or
obscure the same must of necessity be interpreted or resolved against
the one who has caused the obscurity. (Article 1377, new Civil Code)
And so it has been generally held that the "terms in an insurance policy,
which are ambiguous, equivocal, or uncertain . . . are to be construed
strictly and most strongly against the insurer, and liberally in favor of the
insured so as to effect the dominant purpose of indemnity or payment to
the insured, especially where a forfeiture is involved" (29 Am. Jur., 181),
and the reason for this rule is that he "insured usually has no voice in the
selection or arrangement of the words employed and that the language of
the contract is selected with great care and deliberation by experts and
legal advisers employed by, and acting exclusively in the interest of, the
insurance company." (44 C. J. S., p. 1174.)
We are therefore persuaded to conclude that the
circumstances unfolded in the present case do not warrant the finding
that the death of the unfortunate victim comes within the purview of the
exception clause of the supplementary policy and, hence, do not exempt
the company from liability.
Wherefore, reversing the decision appealed from, we hereby
order the company to pay petitioner-appellant the amount of P2,000, with
legal interest from January 26, 1951 until fully paid, with costs.

SIMON DE LA CRUZ vs. THE CAPITAL INSURANCE and SURETY

CO., INC. (1966)
FACTS: This is an appeal by the Capital Insurance & Surety Company,
Inc., from the decision of the Court of First Instance of Pangasinan (in Civ
Case No. U-265), ordering it to indemnify therein plaintiff Simon de la
Cruz for the death of the latter's son, to pay the burial expenses, and
attorney's fees.
Eduardo de la Cruz, employed as a mucker in the ItogonSuyoc Mines, Inc. in Baguio, was the holder of an accident insurance
policy (No. ITO-BFE-170) underwritten by the Capital Insurance & Surety
Co., Inc.
In connection with the celebration of the New Year, the ItogonSuyoc Mines, Inc. sponsored a boxing contest for general entertainment
wherein the insured Eduardo de la Cruz, a non-professional boxer
participated.
In the course of his bout with another person, likewise a nonprofessional, of the same height, weight, and size, Eduardo slipped and
was hit by his opponent on the left part of the back of the head, causing
Eduardo to fall, with his head hitting the rope of the ring.
He was brought to the Baguio General Hospital the following
day. The cause of death was reported as hemorrhage, intracranial, left.
Simon de la Cruz, the father of the insured and who was
named beneficiary under the policy, thereupon filed a claim with the
insurance company for payment of the indemnity under the insurance
policy.
As the claim was denied, De la Cruz instituted the action in the
Court of First Instance of Pangasinan for specific performance.
Defendant insurer set up the defense that the death of the insured,
caused by his participation in a boxing contest, was not accidental and,
therefore, not covered by insurance. After due hearing the court rendered
the decision in favor of the plaintiff which is the subject of the present
appeal.
HELD: It is not disputed that during the ring fight with another nonprofessional boxer, Eduardo slipped, which was unintentional. At this
opportunity, his opponent landed on Eduardo's head a blow, which sent
the latter to the ropes. That must have caused the cranial injury that led
to his death.
Eduardo was insured "against death or disability caused by
accidental means". Appellant insurer now contends that while the death
of the insured was due to head injury, said injury was sustained because
of his voluntary participation in the contest. It is claimed that the
participation in the boxing contest was the "means" that produced the
injury which, in turn, caused the death of the insured. And, since his
inclusion in the boxing card was voluntary on the part of the insured, he
cannot be considered to have met his death by "accidental means".
The terms "accident" and "accidental", as used in insurance
contracts, have not acquired any technical meaning, and are construed
by the courts in their ordinary and common acceptation. Thus, the terms
have been taken to mean that which happen by chance or fortuitously,
without intention and design, and which is unexpected, unusual, and
unforeseen. 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 cause and, therefore, not
expected.1
Appellant however, would like to make a distinction between
"accident or accidental" and "accidental means", which is the term used
in the insurance policy involved here. It is argued that to be considered
within the protection of the policy, what is required to be accidental is the
means that caused or brought the death and not the death itself. It may
be mentioned in this connection, that the tendency of court decisions in
the United States in recent years is to eliminate the fine distinction
between the terms "accidental" and "accidental means" and to consider
them as legally synonymous.2

But, even if we take appellant's theory, the death of the insured

in the case at bar would still be entitled to indemnification under the
policy. The generally accepted rule is that, death or injury does not result
from accident or accidental means within the terms of an accident-policy
if it is the natural result of the insured's voluntary act, unaccompanied by
anything unforeseen except the death or injury.3 There is no accident
when a deliberate act is performed unless some additional, unexpected,
independent, and unforeseen happening occurs which produces or
brings about the result of injury or death.4 In other words, where the
death or injury is not the natural or probable result of the insured's
voluntary act, or if something unforeseen occurs in the doing of the act
which produces the injury, the resulting death is within the protection of
policies insuring against death or injury from accident.
In the present case, while the participation of the insured in the
boxing contest is voluntary, the injury was sustained when he slid, giving
occasion to the infliction by his opponent of the blow that threw him to the
ropes of the ring. Without this unfortunate incident, that is, the
unintentional slipping of the deceased, perhaps he could not have
received that blow in the head and would not have died. The fact that
boxing is attended with some risks of external injuries does not make any
injuries received in the course of the game not accidental. In boxing as in
other equally physically rigorous sports, such as basketball or baseball,
death is not ordinarily anticipated to result. If, therefore, it ever does, the
injury or death can only be accidental or produced by some unforeseen
happening or event as what occurred in this case.
Furthermore, the policy involved herein specifically excluded
from its coverage (e) Death or disablement consequent upon the
Insured engaging in football, hunting, pigsticking, steeplechasing, poloplaying, racing of any kind, mountaineering, or motorcycling.
Death or disablement resulting from engagement in boxing
contests was not declared outside of the protection of the insurance
contract. Failure of the defendant insurance company to include death
resulting from a boxing match or other sports among the prohibitive risks
leads inevitably to the conclusion that it did not intend to limit or exempt
itself from liability for such death.5
Wherefore, in view of the foregoing considerations, the
decision appealed from is hereby affirmed, with costs against appellant.

FINMAN GENERAL ASSURANCE CORPORATION vs. THE

HONORABLE COURT OF APPEALS and JULIA SURPOSA (1992)
FACTS: This is a petition for certiorari with a prayer for the issuance of a
restraining order and preliminary mandatory injunction to annul and set
aside the decision of the Court of Appeals, 1 affirming the decision of the
Insurance Commission 2 in ordering petitioner Finman General
Assurance Corporation to pay private respondent Julia Surposa the
proceeds of the personal accident Insurance policy with interest.
It appears on record that on October 22, 1986, deceased,
Carlie Surposa was insured with petitioner Finman General Assurance
Corporation under Finman General Teachers Protection Plan Master
Policy No. 2005 and Individual Policy No. 08924 with his parents,
spouses Julia and Carlos Surposa, and brothers Christopher, Charles,
Chester and Clifton, all surnamed, Surposa, as beneficiaries. 3
While said insurance policy was in full force and effect, the
insured, Carlie Surposa, died on October 18, 1988 as a result of a stab
wound inflicted by one of the three (3) unidentified men without
provocation and warning on the part of the former as he and his cousin,
Winston Surposa, were waiting for a ride on their way home along RizalLocsin Streets, Bacolod City after attending the celebration of the
"Maskarra Annual Festival."
Thereafter, private respondent and the other beneficiaries of
said insurance policy filed a written notice of claim with the petitioner
insurance company which denied said claim contending that murder and
assault are not within the scope of the coverage of the insurance policy.
On February 24, 1989, private respondent filed a complaint
with the Insurance Commission which subsequently rendered a decision,
the pertinent portion of which reads: In the light of the foregoing. we find
respondent liable to pay complainant the sum of P15,000.00 representing
the proceeds of the policy with interest.
On July 11, 1991, the appellate court affirmed said decision.
Hence, petitioner filed this petition alleging grove abuse of
discretion on the part of the appellate court in applying the principle of
"expresso unius exclusio alterius" in a personal accident insurance policy
since death resulting from murder and/or assault are impliedly excluded
in said insurance policy considering that the cause of death of the
insured was not accidental but rather a deliberate and intentional act of
the assailant in killing the former as indicated by the location of the lone
stab wound on the insured. Therefore, said death was committed with
deliberate intent which, by the very nature of a personal accident
insurance policy, cannot be indemnified.
HELD: We do not agree.
The terms "accident" and "accidental" as used in insurance
contracts have not acquired any technical meaning, and are construed by
the courts in their ordinary and common acceptation. Thus, the terms
have been taken to mean that which happen by chance or fortuitously,
without intention and design, and which is unexpected, unusual, and
unforeseen. 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 cause and, therefore, not
expected.
The generally accepted rule is that, death or injury does not
result from accident or accidental means within the terms of an accidentpolicy if it is the natural result of the insured's voluntary act,
unaccompanied by anything unforeseen except the death or injury. There
is no accident when a deliberate act is performed unless some additional,
unexpected, independent, and unforeseen happening occurs which
produces or brings about the result of injury or death. In other words,
where the death or injury is not the natural or probable result of the
insured's voluntary act, or if something unforeseen occurs in the doing of
the act which produces the injury, the resulting death is within the
protection of the policies insuring against death or injury from accident. 5

As correctly pointed out by the respondent appellate court in its

decision:

In the case at bar, it cannot be pretended that Carlie Surposa

died in the course of an assault or murder as a result of his voluntary act
considering the very nature of these crimes.
In the first place, the insured and his companion were on their
way home from attending a festival. They were confronted by unidentified
persons. The record is barren of any circumstance showing how the stab
wound was inflicted. Nor can it be pretended that the malefactor aimed at
the insured precisely because the killer wanted to take his life.
In any event, while the act may not exempt the unknown
perpetrator from criminal liability, the fact remains that the happening was
a pure accident on the part of the victim. The insured died from an event
that took place without his foresight or expectation, an event that
proceeded from an unusual effect of a known cause and, therefore, not
expected. Neither can it be said that where was a capricious desire on
the part of the accused to expose his life to danger considering that he
was just going home after attending a festival. 6
Furthermore, the personal accident insurance policy involved
herein specifically enumerated only ten (10) circumstances wherein no
liability attaches to petitioner insurance company for any injury, disability
or loss suffered by the insured as a result of any of the stimulated
causes. The principle of " expresso unius exclusio alterius" the
mention of one thing implies the exclusion of another thing is therefore
applicable in the instant case since murder and assault, not having been
expressly included in the enumeration of the circumstances that would
negate liability in said insurance policy cannot be considered by
implication to discharge the petitioner insurance company from liability
for, any injury, disability or loss suffered by the insured. Thus, the failure
of the petitioner insurance company to include death resulting from
murder or assault among the prohibited risks leads inevitably to the
conclusion that it did not intend to limit or exempt itself from liability for
such death.
Article 1377 of the Civil Code of the Philippines provides that:
The interpretation of obscure words or stipulations in a contract shall not
favor the party who caused the obscurity.
Moreover, it is well settled that contracts of insurance are to be
construed liberally in favor of the insured and strictly against the insurer.
Thus ambiguity in the words of an insurance contract should be
interpreted in favor of its beneficiary. 7
WHEREFORE, finding no irreversible error in the decision of
the respondent Court of Appeals, the petition for certiorari with restraining
order and preliminary injunction is hereby DENIED for lack of merit