THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY vs.

THE AUDITOR
GENERAL GR L-19255 January 18, 1968
SANCHEZ, J.

FACTS
The Philippine American Life Insurance Co. (Philam) and, foreign corporation, American
International Reinsurance Co. (AIRCO) entered into a reinsurance treaty where Philam agreed to
reinsure with AIRCO the excess of life insurance on the lives of persons written by Philam. In
their agreement it is also stipulated that even though Philam is already on a risk for its maximum
retention under policies previously issued, when new policies are applied for and issued they can
cede automatically any amount, within the limits specified.
No question ever arose with respect to the remittances made by Philamlife to Airco
before July 16, 1959, the date of approval of the Margin Law.
Subsequently, the Central Bank of the Philippines collected the sum of P268,747.48 as
foreign exchange margin on Philamlife remittances to Airco made subsequent to July 16, 1959.
Philam then filed with the CB a claim for refund for the same amount arguing that the
reinsurance premiums remitted were paid on January 1950 and is therefore exempt from the 25%
foreign exchange margin fee. The Acting legal counsel of the Monetary board resolved that
reinsurance contracts entered into and approved by the Central Bank before July 17, 1959 are
exempt from the payment of the 25% foreign exchange margin, even if remittances thereof are
made after July 17, 1959.
Still the Auditor of the CB denied Philam’s claim for refund and reconsideration was
denied.

ISSUE
Was Philam’s claim covered by the exemption?

RULING
No. For an exemption to come into play, there must be a reinsurance policy or, as in the
reinsurance treaty provided, a “reinsurance cession” which may be automatic or facultative.
To distinguish, a reinsurance policy is a contract of indemnity one insurer makes with another to
protect the first insurer from a risk it has already assumed. On the other hand, a reinsurance
treaty is merely an agreement between two insurance companies whereby one agrees to
surrender and the other to accept reinsurance business pursuant to provisions specified in the
treaty. Treaties are contracts for insurance; reinsurance policies or cessions are contracts of
insurance.
Although the reinsurance treaty precedes the Margin Law by over nine years nothing in that
treaty obligates PHILAM to remit to AIRCO a fixed, certain, and obligatory sum by way of
reinsurance premiums. All that the reinsurance treaty provides on this point is that PHILAM
“agrees to reinsure.” The treaty speaks of a probability; not a reality.
PHILAM’s obligation to remit reinsurance premiums becomes fixed and definite upon
the execution of the reinsurance cession. Because, for every life insurance policy surrendered to
AIRCO, PHILAM agrees to pay premium. It is only after a reinsurance cession is made that
payment of reinsurance premium may be exacted, as it is only after PHILAM seeks to remit that
reinsurance premium that the obligation to pay the margin fee arises.
 WALLEM PHILIPPINES SHIPPING INC. and SEACOAST MARITIME
CORPORATION vs. PRUDENTIAL GUARANTEE & ASSURANCE INC. and COURT
OF APPEALS
G.R. No. 152158 February 7, 2003
MENDOZA, J.

FACTS
Private respondent Prudential Guarantee & Assurance Inc. (Prudential) brought an action
for damages and attorney’s fees against Wallem Philippines Shipping, Inc. (Wallem) and
Seacoast Maritime Corporation (Seacoast). Private respondent Prudential sought the recovery of
the sum of P995,677.00, representing the amount it had paid to its insured, General Milling
Corporation (GMC), for alleged shortage incurred in the shipment of Indian Toasted Soyabean
Extraction Meal, Yellow, with 6% legal interest thereon from the date of filing of the complaint
up to and until the same is fully paid, and 25% of the claim as attorney’s fees. Wallem denied
liability for damage or loss to the shipment. To prove its claim for indemnity, Prudential
presented witnesses. The trial court ruled that private respondent Prudential failed to prove by
clear, convincing, and competent evidence that there was a shortage in the shipment. On appeal,
the Court of Appeals reversed. Petitioner Wallem moved for reconsideration, but its motion was
denied.

ISSUE
Is Wallem liable?

RULING
No.
There could have been no spillage while the shipment was on board the vessel because,
the hatches were closed. As the bill of lading indicated that the contract of carriage was under a
said to weigh clause, the shipper is solely responsible for the loading while the carrier is
oblivious of the contents of the shipment.
Even if the shortage can be definitively determined, Wallem still cannot be held liable
because of the failure of Prudential to present the contract of insurance or a copy thereof.
Prudential claims that it is subrogated to the rights of GMC pursuant to their insurance contract.
For this purpose, it submitted a subrogation receipt (Exh. J) and a marine cargo risk note (Exh.
D). However, as the trial court pointed out, this is not sufficient. As GMCs subrogee, Prudential
can exercise only those rights granted to GMC under the insurance contract. The contract of
insurance must be presented in evidence to indicate the extent of its coverage. The insurance
contract has not been presented. It is curious that the petitioner disregarded this rule, knowing
that the best evidence of the insurance contract was its original copy. Failure to present this
original (or even a copy of it), for reasons the Court cannot comprehend, must prove fatal to this
petition.