Loss The insurance company went to the Court of Appeals, raising inter alia the questions of the

qualification of plaintiff's driver to operate the insured vehicle and the correctness of the trial
Title 9 Secs 85-89, PD 612 as amended by RA 10607, De Leon pages 277-297 court's award to plaintiff of the amount of P5,013.28 as cost of repairs, and of actual damages
1. Claim defined and attorneys' fees. In its decision of 31 January 1966, the Court of Appeals affirmed the ruling
of the lower court except the award of actual damages in the sum of P2,000.00, which was
2. Loss defined; scope of loss; see also Art. 1189, Civil Code
eliminated on the ground that it was too speculative. Not content, the insurance company filed
3. Transfer of Claim after loss occurs-Section 85, IC
the present petition for review of the aforesaid decision of the Court of Appeals on two grounds:
4. Liability of insurer for loss-Section 86, IC (1) that the proceedings observed in the trial court were irregular and invalid; and (2) that the
5. Extension of the principle of proximate cause-Section 87, IC damage to the insured car was not covered by the insurance policy because at the time of the
6. Where proximate cause is an excepted peril-Section 88-IC accident it was being driven by one who was not an authorized driver.
7. Liability of insurer for loss due to wilful act; due to negligence-Section 89, IC

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX The second issue constitutes the main contention of herein appellant, and will be considered
Republic of the Philippines first. It is vigorously urged by the insurer that the one driving the insured vehicle at the time of
the accident was not an authorized driver thereof within the purview of the following provision of
SUPREME COURT
the insurance policy:
Manila
EN BANC
  AUTHORIZED DRIVER:
G.R. No. L-25920 January 30, 1970
CCC INSURANCE CORPORATION, petitioner, Any of the following: (a) The insured;
vs.
COURT OF APPEALS (Fourth Division) and CARLOS F. ROBES, respondents.
Kalaw and Felipe for petitioner. (b) Any person driving on the Insured's order or with his permission,
provided that the person driving is permitted in accordance with licensing
Adalia B. Francisco for respondents.
laws or regulations to drive the motor vehicle covered by this Policy, or has
been so permitted and is not disqualified by order of a court of law or by
reason of any enactment or regulation from driving such Motor Vehicle.
REYES, J.B.L., J.: (Emphasis ours)

Petition for review of the decision of the Court of Appeals, affirming that of the Court of First It has been found as a fact by the Court of Appeals that Domingo Reyes, the, driver who was at
Instance of Rizal (Quezon City) allowing insurance indemnification of plaintiff for his damaged the wheel of the insured car at the time of the accident, does not know how to read and write;
car and the payment of attorney's fees. that he was able to secure a driver's license, without passing any examination therefor, by
paying P25.00 to a certain woman; and that the Cavite agency of the Motor Vehicles Office has
certified not having issued Reyes' purported driver's license No. 271703 DP.
The following facts are not in dispute:

In holding that the damage sustained by the car comes within the coverage of the insurance
On 1 March 1961, Carlos F. Robes took an insurance, with the CCC Insurance Corporation, on
policy, the Court of Appeals argued that since Reyes' purported driver's license (Exhibit "A")
his Dodge Kingsway car against loss or damage through accident for an amount not exceeding
bears all the earmarks of a duly issued license, then it is a public document, and petitioner
P8,000.00 (Policy No. M1156). On 25 June 1961, and during the effectivity of the policy, the
insurance company then has the burden of disproving its genuineness, which the latter has
insured vehicle, while being driven by the owner's driver, became involved in a vehicular
failed to do. In this respect the Court of Appeals ruled:
collision along Rizal Avenue Extension, Potrero, Malabon, Rizal. The car was damaged, and the
repair was estimated to cost P5,300.00.
... . The fact that the Cavite Agency of the Motor Vehicles Office states that
Driver's License No. 271703 DP was not issued by that office, does not
As the insurance company refused either to pay for the repair or to cause the restoration of the
remove the possibility that said office may have been mistaken or that said
car to its original condition, Robes instituted Civil Case No. Q-6063 in the Court of First Instance
license was issued by another agency. Indeed Exhibit 13 shows that a
of Rizal for recovery not only of the amount necessary for the repair of the insured car but also
certain Gloria Presa made the notation thereon "no license issued" and
of actual and moral damages, attorneys' fees and costs. Resisting plaintiff's claim, the insurance
which notation was the basis of the 1st Indorsement, Exhibit 12, signed by
company disclaimed liability for payment, alleging that there had been violation of the insurance
the MVO Cavite City Agency's officer-in-charge. Neither Gloria Presa nor
contract because the one driving the car at the time of the incident was not an "authorized
the officer-in-charge Marciano A. Monzon was placed on the witness stand
driver."
to be examined in order to determine whether said license is indeed void.
As it is, as heretofore pointed out, the fact remains that Domingo Reyes is in
After due hearing, judgment was rendered for the plaintiff, and defendant insurer was ordered to possession of a driver's license issued by the Motor Vehicles Office which
pay unto the former the cost of repair of the car in the sum of P5,031.28; the sum of P150.00, for on its face appears to have been regularly issued.
the hauling and impounding of the car at the repair shop; P2,000.00 as actual damages; and
P1,000.00 as attorneys' fees, plus costs.
In effect, the Court of Appeals found that the driver's license No. 271703 DP was genuine, that not against its referral to the clerk of court but against the alleged non-observance of the
is, one really issued by the Motor Vehicles Office or its authorized deputy; and this finding of fact prescribed steps in connection with such delegation.
is now conclusive and may not be questioned in this appeal.
We find no cause sufficient to invalidate the proceedings had in the trial court. We note that this
Nevertheless, the appellant insurer insists that, under the established facts of this case, Reyes, issue was brought up by the appellant insurance company or the first time only in its motion for
being admittedly one who cannot read and write, who has never passed any examination for reconsideration filed in the Court of Appeals. It was not raised in the trial court, where the defect
drivers, and has not applied for a license from the duly constituted government agency entrusted could still be remedied. This circumstance precludes ventilation of the issue of validity of the
with the duty of licensing drivers, cannot be considered an authorized driver. hearing at this stage; for, if such irregularity is to vitiate the proceeding, the question should have
been seasonably raised, i.e., either before the parties proceeded with the hearing or before the
court handed down its ruling.4 It is a procedural point that can be waived by consent of the
The fatal flaw in appellant's argument is that it studiously ignores the provisions of law existing at
parties, express or implied.5
the time of the mishap. Under Section 24 of the Revised Motor Vehicles Law, Act 3992 of the
Philippine Legislature, as amended by Republic Acts Nos. 587, 1204 and 2863, 1
For the same reason, appellant cannot insist now on the annulment of the proceeding on the
basis of alleged lack of written consent of the parties to the commission, or of an order
An examination or demonstration to show any applicant's ability to operate
appointing the clerk as commissioner, or of notice of the submission of his report to the court.
motor vehicles may also be required in the discretion of the Chief, Motor
Furthermore, appellant has presented no proof that the clerk of court committed any mistake or
Vehicles Office or his deputies. (Emphasis supplied)
abuse in the performance of the task entrusted to him, or that the trial court was not able to
properly appreciate the evidence in the case because it was received by another person. If
and reinforcing such discretion, Section 26 of the Act prescribes further: indeed there were errors at all, they would be non-prejudicial and could not justify the holding of
a new trial, as urged by herein petitioner. 6
SEC. 26. Issuance of chauffeur's license; professional badge: If, after
examination, or without the same, the Chief, Motor Vehicles Office or his WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against appellant
deputies, believe the applicant to possess the necessary qualifications and CCC Insurance Corporation.
knowledge, they shall issue to such applicant a license to operate as
chauffeur ... (Emphasis supplied)
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando, Teehankee and
Barredo, JJ., concur.
It is thus clear that the issuance of a driving license without previous examination does not
necessarily imply that the license issued is invalid. As the law stood in 1961, when the claim
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
arose, the examinations could be dispensed with in the discretion of the Motor Vehicles Office
official officials. Whether discretion was abused in issuing the license without examination is not
a proper subject of inquiry in these proceedings, though, as a matter of legislative policy, the
discretion should be eliminated. There is no proof that the owner of the automobile knew that the
circumstance surrounding such issuance showed that it was irregular.

The issuance of the license is proof that the Motor Vehicles Office official considered Reyes, the Insurance Case Digest: CCC Insurance Corp. V. CA (1970)
driver of the insured- appellee, qualified to operate motor vehicles, and the insured was entitled
to rely upon such license. In this connection, it should be observed that the chauffeur, Reyes,
G.R. No. L-25920 January 30, 1970
had been driving since 1957,2 and without mishap, for all the record shows. Considering that, as
pointed out by the Court of Appeals, the weight of authority is in favor of a liberal interpretation of
the insurance policy for the benefit of the party insured, and strictly against the insurer, We find Lessons Applicable: Motor vehicle liability insurance - "Authoried Driver Clause" (Insurance)
no reason to diverge from the conclusion reached by the Court of Appeals that no breach was
committed of the above-quoted provision of the policy. Laws Applicable: 

The next issue assigned is anchored on the fact that the decision of the trial court was based on
evidence presented to and received by the clerk of court who acted as commissioner, although
allegedly, there was no written court order constituting him as such commissioner, no written FACTS:
request for his commission was made by the parties; he did not take an oath prior to entering
into the discharge of his commission; no written report of his findings was ever submitted to the  Carlos F. Robes insured with the CCC Insurance Corporation his Dodge Kingsway car against
court; and no notice thereof was sent to the parties, contrary to the specific provisions of Rule 33
of the Rules of Court. loss or damage through accident for an amount not exceeding P8,000
 June 25 1961: Carlos' driver Domingo Reyes met a vehicular collision along Rizal
Actually there is nothing basically wrong with the practice of delegating to a commissioner, Avenue Extension, Potrero, Malabon, Rizal
usually the clerk of court, who is a duly sworn court officer, the reception of both parties and for
him to submit a report thereon to the court. In fact, this procedure is expressly sanctioned by
Revised Rule 33 of the Rules of Court.3 Petitioner's objection in this case, however, is directed
 Ccc Insurance Corporation denied his claim reasoning that the driver was not an "authorized
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
driver"
 Reyes, who cannot read and write, who has never passed any examination for
drivers, and has not applied for a license from the duly constituted government agency entrusted with
the duty of licensing drivers, cannot be considered an authorized driver
 AUTHORIZED DRIVER:
 Any of the following: 
Country Bankers Insurance Corp. v. Lianga Bay and Community Multi-Purpose Cooperative
(a) The insured; G.R.No. 136914, 25 January 2002, 308 SCRA 559
(b)    Any person driving on the Insured's order or with his permission, provided FACTS:
1. Respondent, Llanga Bay and Community Multi-Purpose Cooperative, and petitioner entered
that the person driving is permitted in accordance with licensing laws or regulations into a contract of fire insurance to protect respondent’s stocks-in-trade against fire loss, damage
to drive the motor vehicle covered by this Policy, or has been so permitted and is or liability for P200,000.00;
not disqualified by order of a court of law or by reason of any enactment or
2. The respondent’s building was gutted in a fire resulting in the total loss of the respondent’s
regulation from driving such Motor Vehicle.  stocks-in-trade, pieces of furniture and fixtures, equipment and records.
 RTC: favored Robes and CCC was order to pay
ISSUE: W/N Domingo Reyes was an authorized driver 3. The petitioner denied the insurance claim on the ground that the building was set on fire by
two (2) NPA rebels who wanted to obtain canned goods, rice and medicines as provisions for
their comrades in the forest, and that such loss was an excepted risk under paragraph No. 6 of
the policy conditions of Fire Insurance Policy.
HELD: YES. CA affirmed
4. Paragraph 6 provides that the insurance does not cover any loss or damage through or in
consequence of mutiny, riot, military or popular uprising, insurrection, rebellion, revolution,
 Court of Appeals found that the driver's license No. 271703 DP was genuine military or usurped power.
 Domingo Reyes is in possession of a driver's license issued by the Motor Vehicles
5. RTC – Found for the respondent; CA – affirmed RTC’s decision
Office which on its face appears to have been regularly issued
 Neither Gloria Presa nor the officer-in-charge Marciano A. Monzon was placed on ISSUE:
the witness stand to be examined in order to determine whether said license is indeed void
 Section 24 of the Revised Motor Vehicles Law, Act 3992 of the Philippine Whether the stocks-in-trade were burned by NPA rebels and thus an excepted risk under the fire
insurance policy.
Legislature, as amended by Republic Acts Nos. 587, 1204 and 2863,1
HELD:
An examination or demonstration to show any applicant's ability to operate motor vehicles may also
be required in the discretion of the Chief, Motor Vehicles Office or his deputies. NO.

 Section 26 of the Act prescribes further:

A party is bound by his own affirmative allegations. This is a well-known postulate echoed in
Section 1 of Rule 131 of the Revised Rules of Court. Each party must prove his own affirmative
SEC. 26.    Issuance of chauffeur's license; professional badge: If, after examination, or without the allegations by the amount of evidence required by law which in civil cases, as in this case, is
preponderance of evidence, to obtain a favorable judgment. In the instant case, the petitioner
same, the Chief, Motor Vehicles Office or his deputies, believe the applicant to possess the necessary does not dispute that the respondent’s stocks-in-trade were insured against fire loss, damage or
qualifications and knowledge, they shall issue to such applicant a license to operate as chauffeur ...  liability under Fire Insurance Policy No. F- 1397 and that the respondent lost its stocks-in-trade
in a fire that occurred on July 1, 1989, within the duration of said fire insurance. The petitioner,
 There is no proof that the owner of the automobile knew that the circumstance surrounding however, posits the view that the cause of the loss was an excepted risk under the terms of the
such issuance showed that it was irregular fire insurance policy. Where a risk is excepted by the terms of a policy which insures against
other perils or hazards, loss from such a risk constitutes a defense which the insurer may urge,
 the weight of authority is in favor of a liberal interpretation of the insurance policy for the
since it has not assumed that risk, and from this it follows that an insurer seeking to defeat a
benefit of the party insured, and strictly against the insurer  claim because of an exception or limitation in the policy has the burden of proving that the loss
Labels: 1970, Authoried Driver Clause, Case Digest, G.R. No. L-25920, insurance, insurance comes within the purview of the exception or limitation set up. If a proof is made of a loss
case digest, January 30, Motor Vehicle Liability Insurance apparently within a contract of insurance, the burden is upon the insurer to prove that the loss
arose from a cause of loss which is excepted or for which it is not liable, or from a cause which
limits its liability. Stated elsewise, since the petitioner in this case is defending on the ground of
non-coverage and relying upon an exemption or exception clause in the fire insurance policy, it Juarbal, INP Investigator, dated July 1, 1989; (b) the Sworn Statement of Jose
has the burden of proving the facts upon which such excepted risk is based, by a Lomocso; and (c) the Sworn Statement of Ernesto Urbiztondo.
preponderance of evidence. But petitioner failed to do so. The Sworn Statements of Jose
Lomocso and Ernesto Urbiztondo are inadmissible in evidence, for being hearsay, inasmuch as
they did not take the witness stand and could not therefore be cross-examined. The petitioner’s The petitioner, however, denied the insurance claim on the ground that, based on
evidence to prove its defense is sadly wanting and thus, gives rise to its liability to the the submitted documents, the building was set on fire by two (2) NPA rebels who
respondent under Fire Insurance Policy No. F-1397. wanted to obtain canned goods, rice and medicines as provisions for their comrades
in the forest, and that such loss was an excepted risk under paragraph No. 6 of the
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX policy conditions of Fire Insurance Policy No. F-1397, which provides:

SECOND DIVISION This insurance does not cover any loss or damage occasioned by or through or in
G.R. No. 136914 - January 25, 2002 consequence, directly or indirectly, of any of the following occurrences, namely:
COUNTRY BANKERS INSURANCE CORPORATION, Petitioner, vs. LIANGA BAY
AND COMMUNITY MULTI-PURPOSE COOPERATIVE, INC., Respondent. xxx - xxx - xxx

DE LEON, JR., J.: (d) Mutiny, riot, military or popular uprising, insurrection, rebellion, revolution,
military or usurped power.
Before us is a petition for review on certiorari of the Decision 1 of the Court of
Appeals2 dated December 29, 1998 in CA-G.R. CV Case No. 36902 affirming in Any loss or damage happening during the existence of abnormal conditions
toto the Decision3 dated December 26, 1991 of the Regional Trial Court of Lianga, (whether physical or otherwise) which are occasioned by or through or in
Surigao del Sur, Branch 28, in Civil Case No. L-518 which ordered petitioner consequence, directly or indirectly, of any of said occurrences shall be deemed to be
Country Bankers Insurance Corporation to fully pay the insurance claim of loss or damage which is not covered by this insurance, except to the extent that the
respondent Lianga Bay and Community Multi-Purpose Cooperative, Inc., under Fire Insured shall prove that such loss or damage happened independently of the
Insurance Policy No. F-1397, for loss sustained as a result of the fire that occurred existence of such abnormal conditions.
on July 1, 1989 in the amount of Two Hundred Thousand Pesos (P200,000.00), with
interest at twelve percent (12%) per annum from the date of filing of the complaint
until fully paid, as well as Fifty Thousand Pesos (P50,000.00) as actual damages, Finding the denial of its claim unacceptable, the respondent then instituted in the
Fifty Thousand Pesos (P50,000.00) as exemplary damages, Five Thousand Pesos trial court the complaint for recovery of "loss, damage or liability" against petitioner.
(P5,000.00) as litigation expenses, Ten Thousand Pesos (P10,000.00) as attorney's The petitioner answered the complaint and reiterated the ground it earlier cited to
fees, and the costs of suit. deny the insurance claim, that is, that the loss was due to NPA rebels, an excepted
risk under the fire insurance policy.

The facts are undisputed:

In due time, the trial court rendered its Decision dated December 26, 1991 in favor
of the respondent, declaring that:
The petitioner is a domestic corporation principally engaged in the insurance
business wherein it undertakes, for a consideration, to indemnify another against
loss, damage or liability from an unknown or contingent event including fire while Based on its findings, it is therefore the considered opinion of this Court, as it so
the respondent is a duly registered cooperative judicially declared insolvent and holds, that the defenses raised by defendant-Country Bankers has utterly crumbled
represented by the elected assignee, Cornelio Jamero. on account of its inherent weakness, incredibility and unreliability, and after
applying those helpful tools like common sense, logic and the Court's honest
appraisal of the real and actual situation obtaining in this area, such defenses
It appears that sometime in 1989, the petitioner and the respondent entered into a remains (sic) unimpressive and unconvincing, and therefore, the defendant-Country
contract of fire insurance. Under Fire Insurance Policy No. F-1397, the petitioner Bankers has to be irreversibly adjudged liable, as it should be, to plaintiff-Insolvent
insured the respondent's stocks-in-trade against fire loss, damage or liability during Cooperative, represented in this action by its Assignee, Cornelio Jamero, and thus,
the period starting from June 20, 1989 at 4:00 p.m. to June 20, 1990 at 4:00 p.m., ordering said defendant-Country Bankers to pay the plaintiff-Insolvent Cooperative,
for the sum of Two Hundred Thousand Pesos (P200,000.00). as follows:

On July 1, 1989, at or about 12:40 a.m., the respondent's building located at 1. To fully pay the insurance claim for the loss the insured-plaintiff sustained as a
Barangay Diatagon, Lianga, Surigao del Sur was gutted by fire and reduced to result of the fire under its Fire Insurance Policy No. F-1397 in its full face value
ashes, resulting in the total loss of the respondent's stocks-in-trade, pieces of of P200,000.00 with interest of 12% per annum from date of filing of the complaint
furnitures and fixtures, equipments and records. until the same is fully paid;

Due to the loss, the respondent filed an insurance claim with the petitioner under its 2. To pay as and in the concept of actual or compensatory damages in the total sum
Fire Insurance Policy No. F-1397, submitting: (a) the Spot Report of Pfc. Arturo V. of P50,000.00;
3. To pay as and in the concept of exemplary damages in the total sum defeat a claim because of an exception or limitation in the policy has the burden of
of P50,000.00; proving that the loss comes within the purview of the exception or limitation set up.
If a proof is made of a loss apparently within a contract of insurance, the burden is
upon the insurer to prove that the loss arose from a cause of loss which is excepted
4. To pay in the concept of litigation expenses the sum of P5,000.00;
or for which it is not liable, or from a cause which limits its liability. 6 Stated else
wise, since the petitioner in this case is defending on the ground of non-coverage
5. To pay by way of reimbursement the attorney's fees in the sum of P10,000.00; and relying upon an exemption or exception clause in the fire insurance policy, it
and has the burden of proving the facts upon which such excepted risk is based, by a
preponderance of evidence.7 But petitioner failed to do so.
6. To pay the costs of the suit.
The petitioner relies on the Sworn Statements of Jose Lomocso and Ernesto
For being unsubstantiated with credible and positive evidence, the "counterclaim" is Urbiztondo as well as on the Spot Report of Pfc. Arturo V. Juarbal dated July 1,
dismissed. 1989, more particularly the following statement therein:

IT IS SO ORDERED. xxx investigation revealed by Jose Lomocso that those armed men wanted to get
can goods and rice for their consumption in the forest PD investigation further
disclosed that the perpetrator are member (sic) of the NPA PD end. x x x
Petitioner interposed an appeal to the Court of Appeals. On December 29, 1998, the
appellate court affirmed the challenged decision of the trial court in its entirety.
Petitioner now comes before us via the instant petition anchored on three (3) A witness can testify only to those facts which he knows of his personal knowledge,
assigned errors,4 to wit: which means those facts which are derived from his perception. 8 Consequently, a
witness may not testify as to what he merely learned from others either because he
was told or read or heard the same. Such testimony is considered hearsay and may
1. THE HONORABLE COURT OF APPEALS FAILED TO APPRECIATE AND GIVE not be received as proof of the truth of what he has learned. Such is the hearsay
CREDENCE TO THE SPOT REPORT OF PFC. ARTURO JUARBAL (EXH. 3) AND rule which applies not only to oral testimony or statements but also to written
THE SWORN STATEMENT OF JOSE LOMOCSO (EXH. 4) THAT THE evidence as well.9
RESPONDENT'S STOCK-IN-TRADE WAS BURNED BY THE NPA REBELS,
HENCE AN EXCEPTED RISK UNDER THE FIRE INSURANCE POLICY.
The hearsay rule is based upon serious concerns about the trustworthiness and
reliability of hearsay evidence inasmuch as such evidence are not given under oath
2. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING PETITIONER or solemn affirmation and, more importantly, have not been subjected to cross-
LIABLE FOR 12% INTEREST PER ANNUM ON THE FACE VALUE OF THE examination by opposing counsel to test the perception, memory, veracity and
POLICY FROM THE FILING OF THE COMPLAINT UNTIL FULLY PAID. articulateness of the out-of-court declarant or actor upon whose reliability on which
the worth of the out-of-court statement depends.10
3. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THE
PETITIONER LIABLE FOR ACTUAL AND EXEMPLARY DAMAGES, LITIGATION Thus, the Sworn Statements of Jose Lomocso and Ernesto Urbiztondo are
EXPENSES, ATTORNEYS FEES AND COST OF SUIT. inadmissible in evidence, for being hearsay, inasmuch as they did not take the
witness stand and could not therefore be cross-examined.
A party is bound by his own affirmative allegations. This is a well-known postulate
echoed in Section 1 of Rule 131 of the Revised Rules of Court. Each party must There are exceptions to the hearsay rule, among which are entries in official
prove his own affirmative allegations by the amount of evidence required by law records.11 To be admissible in evidence, however, three (3) requisites must concur,
which in civil cases, as in this case, is preponderance of evidence, to obtain a to wit:
favorable judgment.5

(a) that the entry was made by a public officer, or by another person specially
In the instant case, the petitioner does not dispute that the respondent's stocks-in- enjoined by law to do so;
trade were insured against fire loss, damage or liability under Fire Insurance Policy
No. F- 1397 and that the respondent lost its stocks-in-trade in a fire that occurred
on July 1, 1989, within the duration of said fire insurance. The petitioner, however, (b) that it was made by the public officer in the performance of his duties, or by
posits the view that the cause of the loss was an excepted risk under the terms of such other person in the performance of a duty specially enjoined by law; and
the fire insurance policy.
(c) that the public officer or other person had sufficient knowledge of the facts by
Where a risk is excepted by the terms of a policy which insures against other perils him stated, which must have been acquired by him personally or through official
or hazards, loss from such a risk constitutes a defense which the insurer may urge, information.12
since it has not assumed that risk, and from this it follows that an insurer seeking to
The third requisite was not met in this case since no investigation, independent of with reasonable certainty. Accordingly, where the demand is established with
the statements gathered from Jose Lomocso, was conducted by Pfc. Arturo V. reasonable certainty, the interest shall begin to run from the time the claim is made
Juarbal. In fact, as the petitioner itself pointed out, citing the testimony of Pfc. judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be
Arturo Juarbal,13 the latter's Spot Report "was based on the personal knowledge of so reasonably established at the time the demand is made, the interest shall begin
the caretaker Jose Lomocso who witnessed every single incident surrounding the to run only from the date the judgment of the court is made (at which time the
facts and circumstances of the case." This argument undeniably weakens the quantification of damages may be deemed to have been reasonably ascertained).
petitioner's defense, for the Spot Report of Pfc. Arturo Juarbal relative to the The actual base for the computation of legal interest shall, in any case, be on the
statement of Jose Lomocso to the effect that NPA rebels allegedly set fire to the amount finally adjudged.
respondent's building is inadmissible in evidence, for the purpose of proving the
truth of the statements contained in the said report, for being hearsay.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
The said Spot Report is admissible only insofar as it constitutes part of the paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
testimony of Pfc. Arturo V. Juarbal since he himself took the witness stand and was this interim period being deemed to be by then an equivalent to a forbearance of
available for cross-examination. The portions of his Spot Report which were of his credit.
personal knowledge or which consisted of his perceptions and conclusions are not
hearsay. The rest of the said report relative to the statement of Jose Lomocso may
In the said case of Eastern Shipping, the Court further observed that a
be considered as independently relevant statements gathered in the course of
"forbearance" in the context of the usury law is a "contractual obligation of lender or
Juarbal's investigation and may be admitted as such but not necessarily to prove
creditor to refrain, during a given period of time, from requiring the borrower or
the truth thereof.14
debtor to repay a loan or debt then due and payable."

The petitioner's evidence to prove its defense is sadly wanting and thus, gives rise
Considering the foregoing, the insurance claim in this case is evidently not a
to its liability to the respondent under Fire Insurance Policy No. F-1397.
forbearance of money, goods or credit, and thus the interest rate should be as it is
Nonetheless, we do not sustain the trial court's imposition of twelve percent (12%)
hereby fixed at six percent (6%) computed from the date of filing of the complaint.
interest on the insurance claim as well as the monetary award for actual and
exemplary damages, litigation expenses and attorney's fees for lack of legal and
valid basis. We find no justification for the award of actual damages of Fifty Thousand Pesos
(P50,000.00). Well-entrenched is the doctrine that actual, compensatory and
consequential damages must be proved, and cannot be presumed. 16 That part of the
Concerning the application of the proper interest rates, the following guidelines
dispositive portion of the Decision of the trial court ordering the petitioner to pay
were set in Eastern Shipping Lines, Inc. v. Court of Appeals and Mercantile
actual damages of Fifty Thousand Pesos (P50,000.00) has no basis at all. The
Insurance Co., Inc.:15
justification, if any, for such an award of actual damages does not appear in the
body of the decision of the trial court. Neither is there any testimonial and
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, documentary evidence on the alleged actual damages of Fifty Thousand Pesos
delicts or quasi-delicts, is breached, the contravenor can be held liable for damages. (P50,000.00) to warrant such an award. Thus, the same must be deleted.
The provisions under Title XVIII on "Damages" of the Civil Code govern in
determining the measure of recoverable damages.
Concerning the award of exemplary damages for Fifty Thousand Pesos
(P50,000.00), we likewise find no legal and valid basis for granting the same. Article
II. With regard particularly to an award of interest in the concept of actual and 2229 of the New Civil Code provides that exemplary damages may be imposed by
compensatory damages, the rate of interest, as well as the accrual thereof, is way of example or correction for the public good. Exemplary damages are imposed
imposed, as follows: not to enrich one party or impoverish another but to serve as a deterrent against or
as a negative incentive to curb socially deleterious actions. They are designed to
permit the courts to mould behavior that has socially deleterious consequences, and
1. When the obligation is breached, and it consists in the payment of a sum of
its imposition is required by public policy to suppress the wanton acts of an
money, i.e., a loan or forbearance of money, the interest due should be that which
offender. However, it cannot be recovered as a matter of right. It is based entirely
may have been stipulated in writing. Furthermore, the interest due shall itself earn
on the discretion of the court. We find no cogent and valid reason to award the
legal interest from the time it is judicially demanded. In the absence of stipulation,
same in the case at bar.
the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code. With respect to the award of litigation expenses and attorney's fees, Article 2208 of
the New Civil Code17 enumerates the instances where such may be awarded and, in
all cases, it must be reasonable, just and equitable if the same were to be granted.
2. When an obligation, not constituting a loan or forbearance of money, is breached,
Attorney's fees as part of damages are not meant to enrich the winning party at the
an interest on the amount of damages awarded may be imposed at the discretion of
expense of the losing litigant. They are not awarded every time a party prevails in a
the court at the rate of 6% per annum. No interest, however, shall be adjudged on
suit because of the policy that no premium should be placed on the right to
unliquidated claims or damages except when or until the demand can be established
litigate.18 The award of attorney's fees is the exception rather than the general rule.
As such, it is necessary for the court to make findings of facts and law that would
bring the case within the exception and justify the grant of such award. We find The insured property was totally destroyed by fire.
none in this case to warrant the award by the trial court of litigation expenses and
attorney's fees in the amounts of Five Thousand Pesos (P5,000.00) and Ten
Thousand Pesos (P10,000.00), respectively, and therefore, the same must also be
deleted.
Phoenix refused to pay Paris-Manila upon presentment of the claim. It also refused to appoint an
arbitrator under the provisions of section 17 of the policy.
WHEREFORE, the appealed Decision is MODIFIED. The rate of interest on the
adjudged principal amount of Two Hundred Thousand Pesos (P200,000.00) shall be
six percent (6%) per annum computed from the date of filing of the Complaint in
the trial court. The awards in the amounts of Fifty Thousand Pesos (P50,000.00) as
Phoenix’s defense:
actual damages, Fifty Thousand Pesos (P50,000.00) as exemplary damages, Five
Thousand Pesos (P5,000.00) as litigation expenses, and Ten Thousand Pesos
(P10,000.00) as attorney's fees are hereby DELETED. Costs against the petitioner.  The policy in question was issued "to one Peter Johnson, as proprietor of Paris-Manila
Perfumery Co.,"
o the company was not the insured named in the policy, and that the insurance was
SO ORDERED. of no legal force and effect with the company
 The policy of insurance did not cover any loss or damage occasioned by explosion,"
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur. o the loss was occasioned by an explosion, and was not covered by the policy
 The policy provides that, if the claim is fraudulent, and that any false declaration was made or
used to obtain it, all benefits are thereby forfeited
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXX o the claim of the plaintiff is fraudulent as to the quantity and value of the insured
property at the time of the fire
 The policy becomes forfeited if a loss is occasioned by the willful act or connivance of the
PARIS-MANILA PERFUME CO. v. PHOENIX ASSURANCE CO. insured
o the loss in question was caused by the willful act of Peter Johnson, and it prays
GR No. L-25845 December 17, 1926 that plaintiff's complaint be dismissed, with costs.

By Kylie Dado
Lower Court: In favor of Paris-Manila

Topic: Loss & Notice of Loss

ISSUE; W/N Paris-Manila may claim on the policy

FACTS:
SC: YES

Paris-Manila Perfume – engaged in the manufacture of perfumery and toilet articles

Where a fire insurance company issued a policy insuring certain property against loss by fire, and the
Phoenix Assurance – corp organized under the laws of Great Britain, engaged in the fire insurance insured property was destroyed by fire during the life of the policy, and the company contended that the
business in the PH fire was the result of an explosion, which was the primary cause of the fire, the burden of proof of that
fact is on the company, and for want of such proof, the company is liable.

Phoenix issued a fire policy to Paris-Manila

 The cause of the explosion was and is unknown and wholly a matter of conjecture. Neither
 Amount: P13K Peter Johnson nor Francisco Banta (the only persons in the building at the time) claimed that
 With the knowledge of Phoenix, the property was also insured in two other companies either of them saw anything explode.
  Both Johnson and Banta testified that they heard an explosion, and when they looked around, transfer the barge to a safer place but it refused so around the midnight, the
they saw fire and felt heat. There is no evidence as to whether the fire was started before or
after the explosion. Neither is there any competent testimony as to the cause of the barge sunk along with 29,210 cases of Pale Pilsen and 500 cases of Cerveza
explosion. Negra totalling to P1,346,197
 The factory where the fire occurred was filled with numerous kinds of essences and oils used  When SMC claimed against ANCO it stated that they agreed that it would
in the manufacture of perfumery and with a quantity of alcohol and manufactured perfumes,
all of which were of a highly inflammable nature, and the fire may have started from any one not be liable for any losses or damages resulting to the cargoes by reason of
of a number of reasons. fortuitous event and it was agreed to be insured with FGU for 20,000 cases
or P858,500

Section 6 excludes only the damages which are the direct result of the explosion itself, and that it does  ANCO filed against FGU
not except damages which occurred from the fire occurring after the explosion, even though the  FGU alleged that ANCO and SMC failed to exercise ordinary
explosion may have been the primary cause of the fire. But assuming, without deciding, that if it be a diligence or the diligence of a good father of the family in the care and
fact that the fire resulted from an explosion that that fact, if proven, would be a complete defense, the supervision of the cargoes
burden of the proof of that fact is upon the defendant, and upon that point, there is a failure of proof.
 RTC: ANCO liable to SMC and FGU liable for 53% of the lost cargoes
There is no competent evidence as to whether the explosion caused the fire or the fire caused the
 CA affirmed
explosion.
ISSUE: W/N FGU should be exempted from liability to ANCO for the lost cargoes
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX because of a fortuitous event and negligence of ANCO 

Insurance Case Digest: FGU Insurance Corporation V. CA (2005)

 G.R.No. 137775  March 31, 2005

HELD: YES. Affirmed with modification.  Third-party complainant is dismissed.
Lessons Applicable: Loss caused by negligence of the insured (Insurance)
 Art. 1733.  Common carriers, from the nature of their business and for reasons of
FACTS: public policy are bound to observe extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them, according to all the circumstances
 Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co of each case.
To, was engaged in the shipping business operating two common carriers Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734,
 M/T ANCO tugboat  1735, and 1745 Nos. 5, 6, and 7 . . .
 D/B Lucio barge - no engine of its own, it could not maneuver by
itself and had to be towed by a tugboat for it to move from one place to  Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration
another. of the goods, unless the same is due to any of the following causes only:
 September 23 1979: San Miguel Corporation (SMC) shipped from Mandaue o Flood, storm, earthquake, lightning, or other natural disaster or
City, Cebu, on board the D/B Lucio, for towage by M/T ANCO: calamity;
 25,000 cases Pale Pilsen and 350 cases Cerveza Negra -  Art. 1739. In order that the common carrier may be exempted from
consignee SMC’s Beer Marketing Division (BMD)-Estancia Beer Sales Office, responsibility, the natural disaster must have been the proximate and only
Estancia, Iloilo cause of the loss.  However, the common carrier must exercise due diligence to
 15,000 cases Pale Pilsen and 200 cases Cerveza Negra - prevent or minimize loss before, during and after the occurrence of flood, storm,
consignee SMC’s BMD-San Jose Beer Sales Office, San Jose, Antique or other natural disaster in order that the common carrier may be exempted
 September 30, 1979: D/B Lucio was towed by the M/T ANCO arrived from liability  for the loss, destruction, or deterioration of the goods . . . 
and M/T ANCO left the barge immediately  Caso fortuito or force majeure 
 The clouds were dark and the waves were big so SMC’s District  extraordinary events not foreseeable or avoidable, events that could not be foreseen,
Sales Supervisor, Fernando Macabuag, requested ANCO’s representative to or which though foreseen, were inevitable
 5. On October 01, 1979, 10pm, the crew of D/B Lucio abandoned the vessel because
 not enough that the event should not have been foreseen or anticipated, as is
the barges rope attached to the wharf was cut off by the big waves.
commonly believed but it must be one impossible to foresee or to avoid - not in this case
 other vessels in the port of San Jose, Antique, managed to transfer to 6. Thus, ANCO failed to deliver to SMCs consignee 29,210 cases of Pale Pilsen and 550
another place cases of Cerveza Negra. The value amounted to P1,346,197. SMC filed a complaint
for Breach of Contract of Carriage and Damages against ANCO for the amount
 To be exempted from responsibility, the natural disaster should have been the proximate and aforesaid plus interest & damages
only cause of the loss. There must have been no contributory negligence on the part
of the common carrier.   7. Upon Ang Guis death, ANCO, as a partnership, was dissolved. Hence, SMC filed a
second amended complaint impleading the surviving partner, Co To and the Estate of
 there was blatant negligence on the part of M/T ANCO’s crewmembers, first in Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang.
leaving the engine-less barge D/B Lucio at the mercy of the storm without the assistance of the
tugboat, and again in failing to heed the request of SMC’s representatives to have the barge 8. ANCO admitted that the cases of beer were indeed loaded on the vessel belonging to
them. It claimed however that it had an agreement with SMC that ANCO would not be
transferred to a safer place liable for any losses or damages resulting to the cargoes by reason of fortuitous
 When evidence show that the insured’s negligence or recklessness is so gross as to be event. Since the cases of beer Pale Pilsen and Cerveza Negra were lost by reason of
sufficient to constitute a willful act, the insurer must be exonerated. a storm, a fortuitous event which battered and sunk the vessel in which they were
loaded, they should not be held liable. 
 ANCO’s employees is of such gross character that it amounts to a wrongful act which must
exonerate FGU from liability under the insurance contract 9. ANCO filed a Third-Party Complaint against FGU alleging that before the vessel of
ANCO left for San Jose, the cargoes were insured with FGU. ANCO alleged that the
 both the D/B Lucio and the M/T ANCO were blatantly negligent.
third-party defendant corporation should be held liable to indemnify or reimburse
ANCO whatever amounts, or damages, it may be required to pay to SMC.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
10. The trial court found that while the cargoes were indeed lost due to fortuitous event,
there was failure on ANCOs part to observe the degree of diligence required. The trial
PET: FGU Insurance Corporation court thus held the Estate of Ang Gui and Co To liable to SMC for the amount of the
RES: CA; San Miguel Corporation (SMC); Estate of Ang Gui represented by Lucio, Julian, Jaime, all lost shipment. FGU liable to bear 53% of the amount of the lost cargoes.CA affirmed
surnamed Ang; Co To in toto.

These are two separate Petitions for review assailing the decision of the Court of Appeals which I.
affirmed the decision of RTC of Cebu City. WON ANCO exercised due diligence?

1. Evidence shows that Anco Enterprises Company (ANCO), a partnership between Ang II.
Gui and Co To, was engaged in the shipping business. It owned the M/T ANCO WON respondent Court of Appeals committed grave abuse of discretion in holding FGU
tugboat and the D/B Lucio barge which were operated as common carriers. liable under the insurance contract considering the circumstances surrounding the loss of
the cargoes?
2. Since the D/B Lucio had no engine of its own, it could not maneuver by itself and had
to be towed by a tugboat for it to move from one place to another.
I. NO.
3. On September 23, 1979, SMC shipped from Mandaue City, on board the D/B Lucio for ANCO claims that their crewmembers exercised due diligence to prevent or minimize the loss of
towage by M/T ANCO: the cargoes but their efforts proved no match to the forces unleashed by the typhoon. The
a. Bill of Lading #1: 25,000 cases of Pale Pilsen + 350 cases of Cerveza argument does not persuade.
Negra to Estancia, Iloilo
b. Bill of Lading #2: 15,000 cases of Pale Pilsen + 200 cases of Cerveza Caso fortuito or force majeure by definition, are extraordinary events not foreseeable or
Negra to San Jose, Antique avoidable, events that could not be foreseen, or which though foreseen, were inevitable. It is
therefore not enough that the event should not have been foreseen or anticipated, as is
4. When the barge and tugboat arrived at Antique in the afternoon, the clouds over the commonly believed but it must be one impossible to foresee or to avoid. In this case, the
area were dark and the waves were already big. SMCs Supervisor, Fernando calamity which caused the loss of the cargoes was not unforeseen nor was it unavoidable. In
Macabuag, requested ANCOs representative to transfer the barge to a safer place fact, the other vessels in the port of San Jose, Antique, managed to transfer to another place, a
because the vessel might not be able to withstand the big waves. ANCO did not heed circumstance which prompted SMCs District Sales Supervisor to request that the D/B Lucio be
likewise transferred.
the request because he was confident.
To be exempted from responsibility, the natural disaster should have been the proximate and On January 15, 1982, Adora remitted this payment to MICO,together with other payments.
only cause of the loss. There must have been no contributory negligence on the part of the
common carrier.
On January 18, 1982, Pinca's property was completely burned.
II. FGU not liable.
It is a basic rule in insurance that the carelessness and negligence of the insured or his agents On February 5, 1982, Pinca's payment was returned by MICO to Adora on the ground that her policy had
constitute no defense on the part of the insurer. This rule however presupposes that the loss has been cancelled earlier. But Adora refused to accept it.
occurred due to causes which could not have been prevented by the insured, despite the
exercise of due diligence.
In due time, Pinca made the requisite demands for payment, which MICO rejected. She then went to the
Insurance Commission. It is because she was ultimately sustained by the public respondent that the
The question now is whether there is a certain degree of negligence on the part of the insured or
petitioner has come to us for relief.
his agents that will deprive him the right to recover under the insurance contract. According to
the Court, while mistake and negligence of the master or crew are incident to navigation and
constitute a part of the perils that the insurer is obliged to incur, such negligence or recklessness Issue of the Case:
must not be of such gross character as to amount to misconduct or wrongful acts; otherwise,
such negligence shall release the insurer from liability under the insurance contract.
Whether or not petitioner liable, for it alleged that the insurance policy was already cancelled due to non-
In the case at bar, both the trial court and the appellate court had concluded from the evidence payment of premium.
that the crewmembers of both the D/B Lucio and the M/T ANCO were blatantly negligent.
Ruling:
Taking into account the circumstances present in the instant case, concludes that the blatant
negligence of ANCOs employees is of such gross character that it amounts to a wrongful act
which must exonerate FGU from liability under the insurance contract. On the merits, it must also fail. MICO's arguments that there was no payment of premium and that the
policy had been cancelled before the occurence of the loss are not acceptable. Its contention that the claim
was allowed without proof of loss is also untenable.

The petitioner relies heavily on Section 77 of the Insurance Code providing that:
J. Notice and proof of loss
SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is exposed to the peril
Title 10, Section 90-94, PD 612 as amended by RA 10607, De Leon pages 277-297 insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued
1. Conditions before and after loss by an insurance company is valid and binding unless and until the premium thereof has been paid, except
2. Notice of loss to insurer-Sec. 90, IC in the case of a life or an industrial life policy whenever the grace period provision applies.
3. Proof of loss-Sec.91. 92, 93, 94 IC
-meaning and nature; form;purpose; burden of proof of loss; defects; delay.
The above provision is not applicable because payment of the premium was in fact eventually made in this
case. Notably, the premium invoice issued to Pinca at the time of the delivery of the policy on June 7,
Digested by: Anne 1981 was stamped "Payment Received" of the amoung of P930.60 on "12-24-81" by Domingo Adora.
This is important because it suggests an understanding between MICO and the insured that such payment
Subject: Insurance could be made later, as agent Adora had assured Pinca. In any event, it is not denied that this payment was
actually made by Pinca to Adora, who remitted the same to MICO.
Topic: cancellation of insurance policy for non-payment of premium
MALAYAN INSURANCE CO., INC. (MICO), petitioner, vs. GREGORIA CRUZ ARNALDO, in It is not disputed that the premium was actually paid by Pinca to Adora on December 24, 1981, who
her capacity as the INSURANCE COMMISSIONER, and CORONACION PINCA, respondents. received it on behalf of MICO, to which it was remitted on January 15, 1982. What is questioned is the
G.R. No. L-67835 October 12, 1987 validity of Pinca's payment and of Adora's authority to receive it.

Facts of the Case:

MICO's acknowledgment of Adora as its agent defeats its contention that he was not authorized to receive
the premium payment on its behalf. It is clearly provided in Section 306 of the Insurance Code that:
On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private respondent, P14,000.00
effective July 22, 1981, until July 22, 1982.
SEC. 306. xxx xxx xxx

On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent the
Any insurance company which delivers to an insurance agant or insurance broker a policy or contract of
corresponding notice to Pinca.
insurance shall be demmed to have authorized such agent or broker to receive on its behalf payment of
any premium which is due on such policy or contract of insurance at the time of its issuance or delivery or
On December 24, 1981, payment of the premium for Pinca was received by Domingo Adora, agent of which becomes due thereon.
MICO.
On the other hand Article 64 (except "nonpayment of premium") provided the cancellation was made in On the other hand, there is the flat denial of Pinca, who says she never received the claimed cancellation
accordance therewith and with Article 65. and who, of course, did not have to prove such denial Considering the strict language of Section 64 that no
insurance policy shall be cancelled except upon prior notice, it behooved MICO's to make sure that the
cancellation was actually sent to and received by the insured.
Section 64 reads as follows:

Adora. incidentally, had not been informed of the cancellation either and saw no reason not to accept the
SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice
said payment.
thereof to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence,
after the effective date of the policy, of one or more of the following:
Petition denied. Malayan Insurance Co., Inc. is liable.
(a) non-payment of premium;
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
(b) conviction of a crime arising out of acts increasing the hazard insured against;
Malayan Insurance Co. Inc. v Arnaldo (Insurance)
(c) discovery of fraud or material misrepresentation;
G.R. No. L-67835 October 12, 1987
MALAYAN INSURANCE CO., INC. (MICO), petitioner, vs. GREGORIA CRUZ ARNALDO, in her
(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against; capacity as
the INSURANCE COMMISSIONER, and CORONACION PINCA, respondents.
(e) physical changes in the property insured which result in the property becoming uninsurable;or
FACTS:
On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private respondent,
(f) a determination by the Commissioner that the continuation of the policy would violate or would place Coronacion Pinca, Fire Insurance Policy No. F-001-17212 on her property for the amount of
the insurer in violation of this Code. P14,000.00 effective July 22, 1981, until July 22, 1982.
On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent
As for the method of cancellation, Section 65 provides as follows: the corresponding notice to Pinca.
On December 24, 1981, payment of the premium for Pinca was received by Domingo Adora, agent of
MICO. On January 15, 1982, Adora remitted this payment to MICO, together with other payments.
SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or On January 18, 1982, Pinca's property was completely burned.
delivered to the named insured at the address shown in the policy, and shall state (a) which of the grounds
set forth in section sixty-four is relied upon and (b) that, upon written request of the named insured, the DECISION OF LOWER COURTS:
insurer will furnish the facts on which the cancellation is based. (1) Insurance Commission: granted claim for compensation for burned property. 

A valid cancellation must, therefore, require concurrence of the following conditions: ISSUE:
Whether there was a valid insurance contract at the time of the loss.
(1) There must be prior notice of cancellation to the insured;
RULING:
(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the Yes.
grounds mentioned; A valid cancellation must, therefore, require concurrence of the following conditions:
(1) There must be prior notice of cancellation to the insured;
(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the address (2) The notice must be based on the occurrence, after the effective date of the policy, of one or more
shown in the policy; of the grounds mentioned;
(3) The notice must be
(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon written (a) in writing,
request of the insured, the insurer will furnish the facts on which the cancellation is based. (b) mailed, or delivered to the named insured,
(c) at the address shown in the policy;
There is no proof that the notice, assuming it complied with the other requisites mentioned above, was (4) It must state
actually mailed to and received by Pinca. All MICO's offers to show that the cancellation was (a) which of the grounds mentioned in Section 64 is relied upon and
communicated to the insured is its employee's testimony that the said cancellation was sent "by mail (b) that upon written request of the insured, the insurer will furnish the facts on which the
through our mailing section." without more. The petitioner then says that its "stand is enervated (sic) by
cancellation is based.
the legal presumption of regularity and due performance of duty." (not realizing perhaps that "enervated"
means "debilitated" not "strengthened"). MICO's claims it cancelled the policy in question on October 15, 1981, for non-payment of premium.
To support this assertion, it presented one of its employees, who testified that "the original of the
endorsement and credit memo" —presumably meaning the alleged cancellation — "were sent the
assured by mail through our mailing section" However, there is no proof that the notice, assuming it justice”. The assertion is correct, but does not give him any justification for submitting false
complied with the other requisites mentioned above, was actually mailed to and received by Pinca. proofs. Their falsity is the best evidence of the fraudulent character and the unmeritoriousness of
We also look askance at the alleged cancellation, of which the insured and MICO's agent himself had plaintiff’s claim.
no knowledge, and the curious fact that although Pinca's payment was remitted to MICO's by its
agent on January 15, 1982, MICO sought to return it to Adora only on February 5, 1982, after it The fact of the filing of the inventory as of 15 January 1960 should be considered as true, since
presumably had learned of the occurrence of the loss insured against on January 18, 1982. These there is no evidence to the contrary. However, it was an error of the trial court of accepting as
circumstances make the motives of the petitioner highly suspect, to say the least, and cast serious true the actual existence at the burned premises of the stocks mentioned in the inventory.
doubts upon its candor and bona fides. 
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Six (6) of the many copies of the invoices submitted by the plaintiff to the adjusters uncover a
clear case of fraud and misrepresentation
Yu Ban Chuan vs. Fieldmen’s Insurance Co
Posted on September 9, 2015 Manager of one of the suppliers denied signing the purchase invoice in favor of petitioner
There were dubious invoices issued by fictitious companies.
Yu Ban Chuan v Fieldmen’s Insurance Co (1965) There were invoices indicating that merchandise were delivered to the new place of business
even way before it transferred on 15 January 1960.

FACTS
Yu Ban Chuan is a chinese man doing business of wholsesale deaing in gereneral merhcandise The plaintiff, Yu Ban Chuan, adopted a uniform, too uniform, in fact, to be believed, explanation
and school supplies under the name of CMC Trading. His business was first situated in Nueva for all the invoices: that he did not buy the merchandise at the companies’ addresses but bought
Street, Manila. While at this place, plainitff insured against first his stock merchandise with open from the agents who brought the goods to him; that the originals of the invoices were burned
policies from 2 insurance companies. When he transferred his business to Muelle de Binondo. and that he requested for true copies from the agents whom he met casually in the streets after
Manila, his 2 insurers agreed to have the coverage of his policy transferred to the new premises the fire and these agents delivered the exhibits to him; but he did not remember, or know the
and acknowledged the existence of co insurance. names of these agents, nor did he know their whereabouts.

Less than a month after his transfer, Yu Buan’s business establishment in Binondo was totally In other words, he wants the court to believe also that these agents performed a vanishing act
destroyed by fire. after each one of them had turned in the copy of each invoice to the plaintiff.

Because of Yu Ban’s non-compliance or failure to submit the required documents and the The plaintiff adheres to the inventory as the immaculate basis for the actual worth of stocks that
adjusters’ demand in subsequent letters that he submit additional papers, the adjusters and Yu were burned, on the ground that it was made from actual count, and in compliance with law. But
Ban engaged in an exchange of communications, until finally Fieldman’s Insurance rejected Yu this inventory is not binding on the defendants, since it was prepared without their intervention.
Ban’s claims, and denied liability under their respective policies, evidently upon their respective
adjusters’ recommendations.
It is well to note that plaintiff had every reason to show that the value of his stock of goods
exceeded the amount of insurance that he carried. And the inventory, having been made prior to
The plaintiff commenced suit in the Court of First Instance of Manila, and the defendants the fire, was no proof of the existence of these goods at the store when the fire occurred.
answered the complaint with identical special defenses; to wit:
Insured’s failure to prove the loss claimed;
false and fraudulent claim; and True, there were merchandise that were actually destroyed by fire. But when fraud is conceived,
arson or causes not independent of the will of the insured; and counterclaims for the annulment what is true is subtly hidden by the schemer beneath proper and legal appearances, including
of the policies. the preparation of the inventory.

In proving the value of his loss, the plaintiff relied upon a merchandise inventory as of 31 The filing of collection suits for unpaid purchases against Yu Ban Chuan, however valid these
December 1959, which he had allegedly submitted on 15 January 1960 to the Bureau of Internal may be, do not legitimize his fraudulent claim against the insurers in the present case, nor show
Revenue. that the goods allegedly delivered were at the store when the fire.

ISSUE XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Whether Yu Ban is bound to provide the insurance company a proof of loss. XXXX

HELD: NO. 43 Phil. 633

Shielding himself under Section 82 of the Insurance Act, the plaintiff asserts that in submitting
his proof of loss he was “not bound to give such proof as would be necessary in a court of
STATEMENT For the purpose of proving the number of cases of goods in the building, the plaintiff offered and
introduced in evidence certain original books of entry which were kept in the Chinese language,
The plaintiff was a merchant engaged in the purchase and sale of bolt goods in the city of together with a translation of them into Spanish, from which it appears that in the month of
Manila , with his place of business in a bodega at 926-930 Calle Jaboneros, which he occupied in March, 1919, he had 50 cases in stock, and that during the months of April, May, and June, he
common with the Eastern Asia Commercial Company. The building was constructed of stone bought 87 cases, making a total of 137 cases of piece goods, during which time he sold 71 cases,
with an upper framework of wood and an iron roof. and, hence, it is claimed that at the time of the fire, he had 66 cases left, of which 16 only were
The defendants are fire insurance companies duly licensed to do business in the Philippine salvaged.
Islands . It appears that the trial court attached much importance to the original entries in plaintiff's
On March 31, 1919 , the Northern Assurance Company, for a premium of P250, issued its policy books. It may be that he did purchase 87 other cases in the months of April, May, and June, and
against loss from fire for the period of one year to and in favor of the plaintiff for P10,000 on his that from and out of the total, he sold only 71 cases, but the vital question here is the number of
stock of piece goods in the bodega, subject to certain terms and provisions therein stated. On the cases of piece goods that were in the bodega at the time of the fire. The books offered in evidence
same day and for a like premium, the Commercial Assurance Company, Limited, issued its policy might tend to prove that, during the months of April, May, and June, the plaintiff purchased 87
on the same property for the same period for $10,000. April 7, 1919 , the Yorkshire Insurance cases of goods, and that he had 50 cases in stock in the month of March, from and out of which
Company issued its policy on the same goods for another P10,000 for the same period. April 14, he sold 71 cases, but the entries made in the books are not any evidence that the goods when
1919 , the Scottish Union and National Insurance Company also issued its policy to him on the purchased were delivered to, and placed in, this particular bodega, or that when sold, they were
same goods for P10,000 for the period of one year. taken from, and out of, that bodega.

June 24, 1919 , about 4.40 a. m., while all of the policies were in force and effect, a fire occurred It appears that the fire alarm was promptly turned in, and that the fire department reached the
in that portion of the building occupied by the Eastern Asia Commercial Company, resulting in a building within two or three minutes after the alarm, and that it guarded and remained in
loss and damage to the plaintiff's goods, which were insured. At the time of the fire, he claims possession of the premises for about three days, and that at intervals during that period, it threw
that he was the owner of 66 cases of bolt goods in the bodega, and that there was a total loss of water on the remains of the building to prevent the fire from spreading. All witnesses, both for
50 cases, and that the remaining 16 were seriously damaged. After making proof of his claims the plaintiff and the defendants, agree that, after the fire, there were about 16 cases of piece
and the failure to agree witb the insurance companies after some negotiations as to the amount goods found, 3 of which were in a burned condition. It further appears that the cases were baled
of his loss, the plaintiff commenced this action against the Yorkshire Insurance Company and in boxes and contained goods of different kinds and quality, and were more or less in the form of
the Scottish Union and National Insurance Company, in which he seeks to recover from each of bolt goods. Although numerous persons were at and around the fire, no witness was called or
them the full amount of their respective policies. testified that there was any evidence remaining of the 50 cases of piece goods, which the plaintiff
claims were destroyed. The stubborn fact remains that 16 cases were found, 3 of which were a
For answer, the companies admit the issuance of the policies and that they were in force and total loss as to the value of the goods which they contained, but there is no evidence anywhere in
effect, but contend that not more than 16 cases of plaintiff's goods were destroyed from which he the record that, after the fire, anything was found or remained of the 50 cases, and it is the
received P6,888, the amount of their salvage value, and, in substance, admit their liability for the theory of the plaintiff that the 50 cases were completely destroyed and consumed by the fire,
difference between the actual value of the 16 cases and their salvage value. As a further and and, for such reason, there was not any physical evidence left of their destruction. In the very
separate defense, they allege that plaintiff submitted fraudulent proof of the amount of his loss, nature of things, there would be some evidence of the existence of the other 50 cases. It appears
and that, for such reason, he is not entitled to recover anything. They also contend that the that all of the cases were piled or thrown together in the same portion of the building. It was a
plaintiff violated the express terms of the policies in keeping his goods in the same building common, ordinary fire, which, at all times, the fire department had under control, and there was
where hemp was stored. only a partial destruction of the building. The walls were of stone, and remained standing.
Portions of the floor were of cement, and the ceiling and roof fell inside the walls and were
As a result of the trial, the lower court rendered judgment against each defendant for P8,373.10, largely consumed. Although plaintiff's goods were in the same building, they were in a separate
from which both appeal, assigning eight different errors, the first four of which go to the weight and distinct portion from that which Was occupied by the Eastern Asia Commercial Company
of the evidence. Fifth, that the court should have found that plaintiff made a fraudulent claim. where hemp was stored. The burden was upon the plaintiff to prove the amount of his loss by a
Sixth, that the court erred in not finding that the policies were violated by the storing of preponderance of the evidence. It is admitted that 16 cases were found in the building after the
plaintiff's goods in the same building where hemp was stored. Seventh, that the policies should fire, 3 of which were seriously damaged, and that, outside of the damage from smoke and water,
have been forfeited, because of the storage of gasoline in violation of their terms, and, eighth, in the other 13 were intact. The record shows that all of the 66 cases were together in one and the
denying the defendants' motion for a new trial. same portion of the building. There is no evidence which shows or tends to show why all of the
50 cases in dispute were completely consumed by the fire, and no particle of any one of them was
Johns, J.:
left remaining, and why the other 16 cases were found in the building after the fire and were not
The only question involved is one of fact over which there is a sharp conflict in the evidence, and totally destroyed, and, yet, it is admitted that 16 cases were found in the building after the fire. It
upon which the lower court found for the plaintiff. By agreement between the parties, the piece is common, ordinary, horse sense that, in a fire of that nature, something would have been left or
goods remaining after the fire were sold for P6,888, which, after deducting the expenses, left a found after the fire, which would tend to show the loss and destruction of portions of some of the
net sum of P6,507.60, which plaintiff received. Neither is there any dispute about the issuance of other 50 cases, and that all evidence of the existence of everyone of them would not be
the policies or any of their terms or provisions. All parties agree that, after the fire, 16 cases of completely destroyed and consumed by the fire. In other words, it is not reasonable that the
piece goods were found in the building, all of which were more or less damaged, and which the identity of the 50 cases would be completely destroyed and wiped out of existence, and that the
defendants admit at the time of the fire were of the value of P14,102.27. In his proof of claim, the identity of the other 16 should remain, 13 of which were intact. It stands to reason that, if the 50
plaintiff contended that when the fire occurred, he had 66 cases of piece goods in his place of cases were totally destroyed, the other 16 cases would also have been destroyed, and that there
business, which were of the value of P51,427.96, and that, after deducting the salvage, his net would not have been any evidence left of their identity. It is not reasonable that a fire of that
loss was P44,539.96, and that the total amount of insurance which he should receive under the nature and volume would destroy every identity and particle of 50 cases of bolt, piece goods, and
four policies was P33,492.40. Hence, the only question involved is the amount and value of the leave 16 other cases in the same part of the building partially injured, only three of which were a
goods which plaintiff had in the building at the time of the fire. total loss as to their value.
Although it is true that, where there is a sharp conflict in the evidence, the decision of the trial The validity of the clause above quoted is sustained by numerous uniform decisions, and is valid.
court, which saw and heard the witnesses testify, should have some weight, yet, after careful
thought, as we construe the record, the plaintiff has failed to prove his case by a preponderance Here, the facts existing at and after the fire are conclusive evidence that there were only 16 cases
of the evidence, except as to the 16 cases, the loss of which is admitted by the defendants. The of goods in the bodega at the time of the fire, and the majority of this court are of the opinion
fire was seen by a large number of people, and if it be a fact that the plaintiff had 66 cases of that plaintiff's claim is not only fraudulent, but that he knew it was fraudulent at the time it was
piece goods in the building at the time, it was his duty to have offered the evidence of some made, and that, for such reason, he is not entitled to recover anything.
disinterested eyewitness as to the identity of the pieces or particles remaining of the 50 cases, The judgment of the lower court is reversed, and the complaint dismissed, with costs in favor of
and of the physical facts, for the purpose of showing that the 50 cases were in the bodega at the the appellants. So ordered.
time of the fire.
Araullo, C. J., Johnson, Street, Avancena Villamor, Ostrand, and Romualdez, JJ., concur.
Although the original entries in plaintiff's books would be evidence which should have some
weight as to the amount of stock which he had in March, and which he purchased during the XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
months of April, May, and June, and what he sold during that time, such entries are of but little,
if any, value as to the amount of goods which he had in the bodega at the time of the fire. In any
event, they are not sufficient to overcome the absence of any evidence of the physical facts
existing after the fire, and the rule of reason that the 50 cases of goods would not be consumed
and completely wiped out of existence, without leaving some evidence of their destruction, which
could be found among the remains and debris in the building after the fire.
The plaintiff did not offer any evidence of the remains or physical conditions of the 50 cases after
the fire, or anything which was found or left from the effects of the fire, tending to show that the
50 cases were destroyed and consumed by the fire. His evidence was confined and limited to
proof of the number of cases which from time to time were in the bodega before the fire for the
purpose of proving the number of cases which were in the building at the time of the fire, and
upon that point there is a material conflict in the evidence of his own witnesses, and their
testimony is not clear or convincing.
The defendants' evidence was largely confined to the physical conditions existing at the time of
the fire, and on that question all of their witnesses are clear and emphatic, that no evidence
remained tending to show the existence and loss of the 50 cases.
George B. Blake was foreman of the fire department, was there a few minutes after the alarm,
and had charge of the fire. He was called as a witness for the defense, and his evidence of what he
saw and the surrounding circumstances is clear and convincing. He testified that he did not see
more than 16 cases, and that there was no evidence of any loss, destruction, or damage of any
more than 16 cases.
On account of its importance, we have given this case careful thought and consideration. All the
members of this court are of the opinion that the plaintiff lost 16 cases only in the fire which are
of the admitted value of P14,102.27, from which he received P6,507.60 net, as salvage, leaving
his actual loss at P7,594.67. Upon all those questions, this court is a unit.
Among other conditions of the policy, section 13 provides:
"If the claim be in any respect fraudulent, or if any false declaration be made or used in support
thereof, or if any fraudulent means or devices are used by the Insured or anyone acting on his
behalf to obtain any benefit under this Policy; or, if the loss or damage be occasipned by the
wilful act, or with the connivance of the Insured; or, if the Insured or anyone acting on his behalf
shall hinder or obstruct the Company in doing any of the acts referred to in Condition 12; or, if
the claim be made and rejected and an action or suit be not commenced within three months
after such rejection, or (in case of an Arbitration taking place in pursuance of the 18th Condition
of this Policy) within three months after the Arbitrator or Arbitrators or Umpire shall have made
their award, all benefit under this Policy shall be forfeited."

Under all of the surrounding facts and circumstances, it is the opinion of the writer that this
section should not be enforced, and that the plaintiff should have judgment for the amount of his
actual loss. Be that as it may, the majority of the court are of the opinion that the above analysis
of the facts not only establishes the amount of plaintiff's actual loss, but that it also is conclusive
that plaintiff's claim was fraudulent, and that he knew it was fraudulent when he made it. His
proof of claim was for 66 cases of piece goods of the actual value of P51,427.96 and this court
finds the amount of his actual loss to be P7,594.67.