G.R. No. 94071 - New Life Enterprises, et al. vs. Court of Appeals, et al.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 94071 March 31, 1992
NEW LIFE ENTERPRISES and JULIAN SY,petitioners,
vs.
HON. COURT OF APPEALS, EQUITABLE INSURANCE CORPORATION, RELIANCE SURETY AND INSURANCE CO., INC. and WESTERN GUARANTY CORPORATION,respondents.
REGALADO,J.:
This appeal bycertiorariseeks the nullification ofthe decision1ofrespondent Court of Appeals in CA-G.R. CV No. 13866 which reversed the decision of the Regional Trial Court, Branch LVII at LucenaCity, jointlydeciding Civil Cases Nos. 6-84, 7-84 and8-84 thereof and consequently ordered the dismissal of the aforesaid actions filed by herein petitioners.
The undisputed background of this case asfound bythe courta quoand adoptedby respondent court, being sustained by the evidence on record, we hereby reproduce the same with approval.2
The antecedents of this case showthat Julian Syand Jose Sy Bang have formeda business partnership inthe City ofLucena. Under the business name of New Life Enterprises, the partnership engaged inthe sale ofconstruction materialsatitsplaceofbusiness, a two storey building situated at Iyam, LucenaCity. Thefacts show that Julian Sy insured the stocks intrade of New Life Enterpriseswith Western Guaranty Corporation, Reliance Surety and Insurance. Co., Inc., and Equitable Insurance Corporation.
On May15,1981,WesternGuaranty Corporation issuedFireInsurancePolicyNo. 37201 in the amount ofP350,000.00. This policy was renewed on May, 13, 1982.
On July 30,1981, Reliance Surety and Insurance Co., Inc. issued Fire InsurancePolicy No. 69135inthe amount of P300,000.00 (Renewed under Renewal CertificateNo.41997)Anadditional insurancewasissuedbythesamecompanyon November12,1981underFireInsurancePolicy No. 71547 in the amount of P700,000.00.
OnFebruary8,1982,EquitableInsurance CorporationissuedFireInsurancePolicyNo.39328 in the amount of P200,000.00.
ThuswhenthebuildingoccupiedbytheNew Life Enterprises wasguttedbyfireatabout2:00 o'clockinthemorningofOctober19,1982,the stocksinthe tradeinsidesaidbuildingwereinsured against fireinthetotalamountofP1,550,000.00. Accordingtothecertificationissuedbythe Headquarters,Philippine Constabulary /Integrated National Police, CampCrame,thecauseoffirewas electricalinnature.Accordingtotheplaintiffs, thebuildingandthestocksinsidewereburned. Afterthefire,JulianSywenttotheagentof RelianceInsurancewhomheaskedtoaccompanyhim to the officeofthecompanysothathecanfile hisclaim.Heaverredthatinsupportofhis claim,he submittedthefireclearance,the insurancepoliciesand inventory ofstocks.He further testified thatthe three insurance companies are sister companies,andasamatterof factwhenhewas following-uphisclaimwith Equitable Insurance, the ClaimsManagertoldhimto go first to Reliance Insuranceandifsaidcompany agreestopay,they would alsopay. Thesame treatmentwasgiven him bytheotherinsurance companies.Ultimately,thethreeinsurancecompanies denied plaintiffs' claim for payment.
In its letterofdenialdatedMarch9,1983, (Exhibit "C" No.8-84)WesternGuarantyCorporationthroughClaimsManagerBernardS.Razontoldthe plaintiffthat his claim"is deniedforbreachofpolicyconditions."RelianceInsurancepurveyed the same message in its letter dated November 23, 1982andsignedbyExecutiveVice-PresidentMary Dee Co(Exhibit"C"No.7-84)whichsaidthat "plaintiff's claimisdeniedforbreachofpolicy conditions." Theletterofdenialreceivedbythe plaintifffromEquitableInsurance Corporation(Exhibit"C" No. 6-84) was of the same tenor,as said letter dated February 22, 1983, and signed by Vice-President ElmaR.Bondad,said"wefindthatcertain policyconditionswereviolated,therefore, we regret, wehavetodenyyourclaim, asitis hereby denied in its entirety."
InrelationtothecaseagainstReliance SuretyandInsuranceCompany,acertainAtty.Serafin D.Dator,actinginbehalf of the plaintiff,sentaletterdatedFebruary13,1983 (Exhibit "G-l"No 7-84)toExecutive Vice-President Mary Dee Co askingthathe beinformedasto thespecificpolicy conditions allegedly violatedbytheplaintiff.Inherreply-letter dated March 30,1983,ExecutiveVice-PresidentMary Dee Co informed Atty. DatorthatJulianSyviolated Policy Condition No. "3"whichrequirestheinsured togivenoticeofanyinsuranceorinsurancesalready effected covering the stocks in trade.3
Because of the denial of theirclaimsforpaymentbythe three (3)insurance companies,petitionerfiledseparate civilactionsagainsttheformerbeforetheRegionalTrial CourtofLucenaCity,whichcaseswereconsolidatedfor trial, andthereafterthecourtbelowrendereditsdecision on December 19, l986 with the following disposition:
WHEREFORE,judgmentintheabove-entitledcases is rendered in the following manner, viz:
1. In Civil CaseNo.6-84,judgment isrendered for the plaintiffNewLifeEnterprisesandagainst the defendant Equitable Insurance Corporation orderingthelattertopaytheformer the sum of TwoHundredThousand(P200,000.00)Pesos and consideringthatpaymentoftheclaimoftheinsuredhasbeenunreasonablydenied,pursuanttoSec.244oftheInsuranceCode,defendantisfurtherorderedtopaytheplaintiffattorney'sfees in the amount of Twenty Thousand (P20,000.00) Pesos.Allsumsofmoneytobepaidbyvirtue hereofshallbearinterestat12%per annum(pursuant toSec.244oftheInsuranceCode)from February14,1983,(91stdayfromNovember16, 1982,whenSwornStatementof Fire Claim wasreceivedfromtheinsured)untiltheyarefully paid;
2. In Civil CaseNo.7-84,judgmentisrenderedfortheplaintiffJulianSyandagainst thedefendantRelianceSuretyandInsurance Co., Inc.,orderingthelattertopaytheformerthe sum ofP1,000,000.00(P300,000.00underPolicy No.69135andP700,000.00underPolicyNo.71547) andconsideringthatpaymentoftheclaimofthe insuredhasbeenunreasonablydenied,pursuantto Sec.244oftheInsuranceCode,defendantis further ordered topaytheplaintifftheamountof P100,000.00 as attorney's fees.
All sums of money to bepaidbyvirtuehereof shall bearinterestat12%per annum(pursuantto Sec. 244oftheInsuranceCode)fromFebruary14, 1983, (91stdayfromNovember16, 1982whenSwornStatementofFireClaimwasreceivedfromthe insured) until they are fully paid;
3. In Civil Case No.8-84, judgment is rendered for theplaintiffNewLifeEnterprisesandagainstthedefendantWesternGuarantyCorporation ordering thelattertopaythesumofP350,000.00 totheConsolidatedBankandTrustCorporation, LucenaBranch,LucenaCity,asstipulatedonthe faceofPolicyNo.37201,andconsideringthat payment of the aforementionedsumofmoneyhasbeen unreasonablydenied,pursuanttoSec.244oftheInsurance Code, defendantisfurtherorderedtopay the plaintiffattorney'sfeesintheamountof P35,000.00.
All sums of money to be paid byvirtuehereofshall bear interest at 12%per annum(pursuanttoSec. 244 of the Insurance Code)fromFebruary5, 1982, (91st day from 1st week of November 1983when insuredfiledformalclaimforfullindemnity according to adjuster VetremarDelaMerced)until they are fully paid.4
Asaforestated,respondent Court ofAppealsreversed saidjudgmentof the trial court, hence thispetitionthe cruxwherein is whether or not Conditions Nos. 3 and27of theinsurancecontractswereviolatedbypetitionersthereby resulting in theirforfeitureofallthebenefitsthereunder.
ConditionNo.3ofsaidinsurancepolicies,otherwise known as the"OtherInsuranceClause,"isuniformlycontained inalltheaforestated insurancecontractsofhereinpetitioners, as follows:
3. The insured shallgivenoticetotheCompany ofanyinsuranceorinsurancesalready effected,orwhich maysubsequentlybeeffected, covering anyoftheproperty or properties consistingofstocksintrade,goodsinprocess and/orinventoriesonlyherebyinsured,andunless suchnoticebegivenandtheparticularsofsuch insuranceorinsurancesbestatedthereinor endorsed on this policy pursuant to Section 50 of the Insurance Code,byoronbehalfoftheCompany beforetheoccurrenceofanylossordamage,all benefits underthispolicyshall be deemed forfeited,providedhowever, that this condition shallnotapply when the total insuranceor insurances in force at thetimeoflossordamagenotmorethan P200,000.00.5
Petitionersadmitthattherespectiveinsurancepolicies issuedbyprivaterespondentsdidnotstateorendorse thereon theotherinsurancecoverageobtainedorsubsequently effected on the same stocks in trade for the loss of which compensationisclaimedby petitioners.6Thepolicy issuedbyrespondentWesternGuarantyCorporation(Western) did not declarerespondentRelianceSuretyandInsuranceCo., Inc. (Reliance)and respondent Equitable Insurance Corporation(Equitable)asco-insurersonthesamestocks, whileReliance'sPoliciescoveringthesamestocksdidnot likewisedeclareWesternandEquitableassuchco-insurers. It is furtheradmittedbypetitionersthatEquitable'spolicy stated "nil" in the space thereon requiring indication of any co-insurance although therewerethree (3) policies subsisting on the same stocks in trade atthetimeofthe loss,namely, that of Western in theamountofP350,000.00 andtwo(2)policies of Reliance in the total amount of P1,000,000.00.7
In other words, the coveragebyotherinsuranceorco-insurance effected orsubsequentlyarrangedbypetitioners were neitherstatednorendorsedinthe policies of the three (3) private respondents, warranting forfeitureofall benefits thereunderifwearetofollowtheexpress stipulation in the aforequoted Policy Condition No. 3.
Petitioners contend that they arenottobeblamedfor the omissions, allegingthatinsuranceagentLeonAlvarez (for Western) and Yap Kam Chuan (for RelianceandEquitable) knew about the existence of the additional insurancecoverage and that they were not informedabouttherequirementthat such other or additional insurance shouldbestatedinthe policy,astheyhavenotevenreadpolicies.8These contentions cannot pass judicial muster.
The terms ofthecontractareclearandunambiguous. Theinsuredisspecificallyrequiredtodisclosetothe insurer any other insurance and its particularswhichhemay have effected on the samesubjectmatter.Theknowledgeof such insurance bytheinsurer'sagents,evenassumingthe acquisition thereof by the former, isnotthe"notice"that wouldestop the insurers from denying theclaim. Besides, the so-called theory of imputed knowledge, that is, knowledge of the agent is knowledgeoftheprincipal,asidefrombeing ofdubiousapplicabilityherehaslikewisebeenroundly refutedbyrespondentcourtwhosefactualfindingswefind acceptable.
Thus,itpoints outthatwhile petitionerJulianSy claimedthathehadinformedinsuranceagentAlvarez regarding the co-insurance on the property, he contradicted himselfbyinexplicablyclaimingthathehadnotreadthe termsof the policies; that YapDamChuancouldnotlikewise have obtained such knowledgeforthesamereason,asidefrom the fact that theinsurancewithWesternwasobtainedbefore those of RelianceandEquitable;andthattheconclusionof thetrialcourtthatRelianceandEquitableare"sister companies"isanunfoundedconjecturedrawnfromthemere fact that Yap Kam Chuan was anagentforbothcompanieswhich also had the sameinsuranceclaimsadjuster.Availmentof the servicesofthesameagentsandadjustersbydifferent companies is a commonpracticeintheinsurancebusinessand such facts donotwarrantthespeculativeconclusionofthe trial court.
Furthermore,whenthewordsandlanguageofdocuments are clear and plain orreadilyunderstandablebyan ordinary reader thereof, there is absolutely no room for interpretationor construction anymore.9Courtsarenot allowed to make contracts fortheparties;rather,theywill intervene onlywhenthetermsofthepolicyareambiguous, equivocal, oruncertain.10Thepartiesmustabidebythe termsofthecontractbecausesuchtermsconstitutethe measureoftheinsurer'sliabilityandcompliancetherewith is a conditionprecedenttotheinsured'srightofrecovery from the insurer.11
While it is a cardinal principleofinsurancelawthata policy or contract ofinsuranceistobeconstruedliberally infavoroftheinsuredandstrictlyagainsttheinsurer company,yetcontractsofinsurance,likeothercontracts, are to be construed according to thesenseandmeaningofthe terms which thepartiesthemselveshaveused.Ifsuchterms are clear and unambiguous,theymustbetakenandunderstood intheir plain,ordinary and popular sense.12Moreover, obligationsarisingfromcontractshavetheforceoflaw between thecontractingpartiesandshouldbecompliedwith in good faith.13
Petitioners should be aware ofthefactthatapartyis not relieved of the duty to exercise the ordinary care and prudencethatwouldbeexactedinrelationto other contracts.The conformity of the insured to the terms of the policyisimpliedfromhisfailureto expressany disagreement with whatisprovidedfor.14Itmaybetrue that themajorityrule, as cited bypetitioners,isthatinjured personsmayacceptpolicieswithoutreadingthem,and thatthis is not negligenceper se.15But, thisis not without any exception.It is and was incumbent uponpetitioner Sy to read the insurance contracts, and this can be reasonably expected ofhimconsideringthathehasbeena businessman since 196516andthe contract concerns indemnity in case oflossinhismoney-makingtradeofwhich important considerationhecouldnothavebeenunawareasit was pre-in case of loss in his money-making trade of which important consideration he could not have been unaware as it was precisely the reason for his procuring the same.
WereiterateourpronouncementinPioneer Insurance and Surety Corporation vs. Yap:17
. . . Andconsideringthetermsofthepolicywhichrequiredtheinsuredtodeclareotherinsurances,thestatementinquestionmustbedeemedtobeastatement (warranty) binding on bothinsurer and insured, that there were noother insurance on the property. . . .
Theannotationthen,mustbedeemed tobeawarrantythatthepropertywasnot insured byany other policy. Violationthereofentitledtheinsurerto rescind (Sec. 69, Insurance Act).Suchmisrepresentation is fatal in thelightof ourviewsinSanta Ana vs. Commercial Union Assurance Company, Ltd.,55Phil. 329. Thematerialityofnon-disclosureof other insurance policies is not open to doubt.
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The obvious purposeof the aforesaid requirementinthepolicy istopreventover-insurance and thus avert the perpetration of fraud.Thepublic, as well as the insurer, isinterested in preventing the situation inwhichafirewouldbe profitable to theinsured.Accordingto Justice Story: "The insured has norighttocomplain,forhe assents to comply withallthestipulationson hisside,inordertoentitlehimselftothe benefitofthecontract,which,uponreasonor principle, he hasnorighttoaskthecourtto dispense with the performanceofhisownpartofthe agreement, and yet to bindtheotherpartyto obligations,which,butforthosestipulations, would not have been entered into."
Subsequently, in the case ofPacific Banking Corporation vs. Court of Appeals, et al.,18we held:
It is not disputed that theinsuredfailedto reveal before the lossthreeotherinsurances.As found by the Court ofAppeals,byreasonofsaidunrevealed insurances, the insuredhadbeen guiltyof a falsedeclaration;aclearmisrepresentationand a vital one because where theinsuredhadbeenasked to reveal butdidnot,thatwasdeception.Otherwise stated, had the insurerknownthattherewere many co-insurances, it could havehesitatedor plainly desisted from enteringintosuchcontract. Hence,theinsuredwasguiltyofclearfraud(Rollo, p. 25).
Petitioner'scontentionthattheallegationof fraud is but amereinferenceorsuspicionisuntenable. In fact, concreteevidenceoffraudor false declaration by theinsuredwasfurnishedbythe petitioner itself when the facts allegedinthe policy underclauses"Co-InsurancesDeclared"and "OtherInsuranceClause"aremateriallydifferent from the actual number ofco-insurancestakenover thesubjectproperty.Consequently,"thewhole foundation of the contract fails, the riskdoesnotattachandthepolicyneverbecomesacontract between the parties."Representationsoffactsare the foundationofthecontractand if thefoundation does not exist,thesuperstructuredoes notarise.Falsehoodinsuchrepresentationsisnot shown to vary oraddtothecontract,orto terminate a contract which has oncebeenmade,but to showthatnocontracthas ever existed(Tolentino,CommercialLawsofthePhilippines, p. 991,Vol.II,8thEd.,)Avoidorinexistent contract is one which has no forceandeffectfrom the very beginning, as if it had neverbeenenteredinto, and which cannot be validatedeitherbytimeor by ratification (Tongoyvs.C.A.,123SCRA99 (1983); Avila v. C.A., 145 SCRA, 1986).
Astheinsurancepolicyagainst fire expressly required that notice should be given by theinsuredofotherinsuranceuponthesame property, thetotalabsenceof such noticenullifies the policy.
Tofurtherwarrantandjustifytheforfeitureofthe benefitsundertheinsurancecontractsinvolved,weneed merelytoturntoPolicyConditionNo.15thereof,which reads in part:
15. . . . ifanyfalsedeclarationbemadeor used insupportthereof,. . .allbenefitsunderthis Policy shall be forfeited . . . .19
Additionally,insofarastheliabilityofrespondent Relianceisconcerned,itisnotdeniedthatthecomplaint for recovery was filed in court by petitioners only on January31,1984,oraftermorethanone(1)yearhad elapsedfrompetitioners'receiptoftheinsurers'letterof denialonNovember29,1982.PolicyConditionNo.27of their insurance contract with Reliance provides:
27.Action or suit clause.—Ifaclaimbemadeandrejectedandanactionorsuitbenotcommenced eitherintheInsuranceCommissionoranycourtofcompetentjurisdictionofnoticeofsuch rejection,orincaseofarbitrationtakingplace asprovidedherein,withintwelve(12)monthsafter due noticeoftheawardmadebythearbitratororarbitrators orumpire,thentheclaimshallforall purposes be deemedtohavebeenabandonedandshallnot thereafter be recoverable hereunder.20
On this point, the trial court ruled:
. . . However,becauseofthepeculiar circumstances ofthiscase,we hesitate inconcludingthatplaintiff'srighttoventilatehisclaimincourthasbeenbarredbyreasonofthetimeconstraintprovidedintheinsurancecontract. It is evidentthataftertheplaintiffhadreceived theletterofdenial,hestillfounditnecessarytobeinformedofthespecificcausesorreasons for thedenialofhisclaim,reasonforwhichhis lawyer, Atty. Dator deemeditwisetosenda letterofinquirytothedefendantwhichwasansweredby defendant'sExecutiveVice-Presidentinaletter datedMarch30,1983, . . . .Assuming,gratuitously,thattheletterofExecutiveVice-President MaryDee Co dated March 30, 1983, was receivedbyplaintiff onthesamedate,the period oflimitation should starttorunonlyfromsaid date in the spirit of fair play and equity. . . .21
Wehaveperforce to reject this theoryofthecourt below for being contrary to what we have heretofore declared:
Itisimportanttonotetheprinciplelaid down bythisCourtinthecaseofAng vs. Fulton Fire Insurance Co.(2 SCRA945 [1961])towit:
Theconditioncontainedinaninsurancepolicythatclaimsmustbepresented within one year afterrejectionisnotmerelyaproceduralrequirementbutanimportantmatter essential to a prompt settlementofclaims against insurance companies as it demandsthatinsurancesuitsbebroughtby theinsuredwhiletheevidenceastothe originandcauseofdestructionhavenot yet disappeared.
Inenunciatingtheabove-citedprinciple, this Courthaddefinitely settledtherationaleforthe necessityofbringingsuitsagainsttheInsurer withinoneyearfromtherejectionoftheclaim. The contention oftherespondentsthattheone-yearprescriptive perioddoes notstarttorununtilthepetitionforreconsiderationhadbeenresolvedbytheinsurer,runscountertothedeclaredpurpose forrequiringthatan actionorsuitbefiledinthe Insurance Commissionorinacourtofcompetent jurisdictionfromthedenialoftheclaim. Touphold respondents' contention would contradict anddefeat the very principle which this Court had laiddown.Moreover, itcaneasilybeusedbyinsured persons as a scheme or device to waste time untilanyevidencewhichmaybeconsideredagainstthem is destroyed.
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While in the Eagle Star case (96 Phil.701), thisCourtusesthephrase"finalrejection",the samecannotbetakentomeantherejectionofa petition forreconsiderationas insisted by respondents. SuchwasclearlynotthemeaningcontemplatedbythisCourt.Theinsurancepolicyin said caseprovidesthattheinsuredshouldfile his claim first, with thecarrierandthenwiththe insurer. The"finalrejection"beingreferredtoinsaid case is the rejection by the insurancecompany.22
Furthermore, assumingarguendothatpetitionersfeltthe legitimateneedtobeclarifiedastothepolicycondition violated,there was a considerable lapse of time from their receipt of the insurer's clarificatory letter dated March 30, 1983,upto the time the complaint was filedincourt on January31,1984.Theone-yearprescriptiveperiodwasyet toexpireonNovember29,1983,orabouteight(8)months from the receiptoftheclarificatoryletter,butpetitioners let the periodlapsewithoutbringingtheiractionincourt. Weaccordinglyfindno"peculiarcircumstances"sufficient to relaxtheenforcementoftheone-yearprescriptiveperiod and we,therefore,holdthatpetitioners' claim was definitely filed out of time.
WHEREFORE, finding no cogentreasontodisturbthe judgment ofrespondentCourtofAppeals,thesameisherebyAFFIRMED.
SO ORDERED.
Melencio-Hererra and Nocon, JJ., concur.
Paras, J., took no part.
Padilla, J., took no part.
Footnotes
1 JusticeSerafinV.C. Guingona,ponente,with Justices Gloria C. Paras and Bonifacio A. Cacdac, Jr., concurringRollo, 51.
2 Per Judge Hoover S. Abling.
3Rollo, 34-36.
4Ibid., 32-33.
5 Exhibits "20-c", "18-b","14-b";Folder ofExhibit, 20, 29, 31.
6 Memorandum for Petitioners, 13.
7Rollo, 35.
8 Memorandum for the Petitioners, 13.
9 Marina PortServices, Inc. vs. Iniego, et al., 181 SCRA 304 (1990).
10 Pan MalayanInsurance Corporation vs. Courtof Appeals, et al., 184 SCRA 54 (1990).
11 Perla Compania deSeguros, Inc. vs. CourtofAppeals,et al., 185 SCRA 741 (1990).
12 Sun Insurance Office,Ltd.vs.CourtofAppeals,etal., 195 SCRA 193 (1991).
13 Article 1159, Civil Code.
14 AngGiok Chip, etc. vs. Springfield Fire & Marine Insurance Company, 56 SCRA 375 (1931).
15 Vance on Insurance, 1951 ed., 257; Memorandum for the Petitioners, 22.
16 TSN, February 11, 1986, 28.
17 61 SCRA426 (1974), citingGeneralInsurance & SuretyCorporationvs. NgHua,106Phil. 1117, 1119-1120(1960).
18 168 SCRA 1 (1988).
19 Exhibits"20-d","18-e, "14-e";FolderofExhibits,21, 30, 33.
20 Exhibit "14-f"; Folder of Exhibits, 33.
21Rollo, 49.
22 Sun Insurance Office,Ltd.vs.CourtofAppeals,etal.,supra, Fn. 12.