Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-16215 June 29, 1963

SIMEON DEL ROSARIO, plaintiff-appellee,

vs.
THE EQUITABLE INSURANCE AND CASUALTY CO., INC., defendant-appellant.

Vicente J. Francisco and Jose R. Francisco for plaintiff-appellee.

K. V. Faylona for defendant-appellant.

PAREDES, J.:

On February 7, 1957, the defendant Equitable Insurance and Casualty Co., Inc., issued Personal
Accident Policy No. 7136 on the life of Francisco del Rosario, alias Paquito Bolero, son of herein
plaintiff-appellee, binding itself to pay the sum of P1,000.00 to P3,000.00, as indemnity for the death
of the insured. The pertinent provisions of the Policy, recite:

Part I. Indemnity For Death

If the insured sustains any bodily injury which is effected solely through violent, external,
visible and accidental means, and which shall result, independently of all other causes and
within sixty (60) days from the occurrence thereof, in the Death of the Insured, the Company
shall pay the amount set opposite such injury:

Section 1. Injury sustained other than those specified

below unless excepted hereinafter. . . . . . . . P1,000.00

Section 2. Injury sustained by the wrecking or

disablement of a railroad passenger car or street railway
car in or on which the Insured is travelling as a farepaying
passenger. . . . . . . . P1,500.00

Section 3. Injury sustained by the burning of a church,

theatre, public library or municipal administration building
while the Insured is therein at the commencement of the
fire. . . . . . . . P2,000.00

Section 4. Injury sustained by the wrecking or

disablement of a regular passenger elevator car in which
the Insured is being conveyed as a passenger (Elevator
in mines excluded) P2,500.00

Section 5. Injury sustained by a stroke of lightning or by a

cyclone. . . . . . . . P3,000.00

xxx xxx xxx

 Part VI. Exceptions

This policy shall not cover disappearance of the Insured nor shall it cover Death, Disability,
Hospital fees, or Loss of Time, caused to the insured:

. . . (h) By drowning except as a consequence of the wrecking or disablement in the

Philippine waters of a passenger steam or motor vessel in which the Insured is travelling as
a farepaying passenger; . . . .

A rider to the Policy contained the following:

IV. DROWNING

It is hereby declared and agreed that exemption clause Letter (h) embodied in PART VI of the policy
is hereby waived by the company, and to form a part of the provision covered by the policy.

On February 24, 1957, the insured Francisco del Rosario, alias Paquito Bolero, while on board the
motor launch "ISLAMA" together with 33 others, including his beneficiary in the Policy, Remedios
Jayme, were forced to jump off said launch on account of fire which broke out on said vessel,
resulting in the death of drowning, of the insured and beneficiary in the waters of Jolo. 1äwphï1.ñët

On April 13, 1957, Simeon del Rosario, father of the insured, and as the sole heir, filed a claim for
payment with defendant company, and on September 13, 1957, defendant company paid to him
(plaintiff) the sum of P1,000.00, pursuant to Section 1 of Part I of the policy. The receipt signed by
plaintiff reads —

RECEIVED of the EQUITABLE INSURANCE & CASUALTY CO.,

INC., the sum of PESOS — ONE THOUSAND (P1,000.00) Philippine
Currency, being settlement in full for all claims and demands against
said Company as a result of an accident which occurred on February
26, 1957, insured under out ACCIDENT Policy No. 7136, causing the
death of the Assured.

In view of the foregoing, this policy is hereby surrendered and

CANCELLED.

LOSS COMPUTATION

Amount of Insurance P1,000.00

__________
vvvvv

On the same date (September 13, 1957), Atty. Vicente J. Francisco, wrote defendant company
acknowledging receipt by his client (plaintiff herein), of the P1,000.00, but informing said company
that said amount was not the correct one. Atty. Francisco claimed —

The amount payable under the policy, I believe should be P1,500.00 under the provision of
Section 2, part 1 of the policy, based on the rule of pari materia as the death of the insured
occurred under the circumstances similar to that provided under the aforecited section.
Defendant company, upon receipt of the letter, referred the matter to the Insurance Commissioner,
who rendered an opinion that the liability of the company was only P1,000.00, pursuant to Section 1,
Part I of the Provisions of the policy (Exh. F, or 3). Because of the above opinion, defendant
insurance company refused to pay more than P1,000.00. In the meantime, Atty. Vicente Francisco,
in a subsequent letter to the insurance company, asked for P3,000.00 which the Company refused,
to pay. Hence, a complaint for the recovery of the balance of P2,000.00 more was instituted with the
Court of First Instance of Rizal (Pasay City, Branch VII), praying for it further sum of P10,000.00 as
attorney's fees, expenses of litigation and costs.

Defendant Insurance Company presented a Motion to Dismiss, alleging that the demand or claim is
set forth in the complaint had already been released, plaintiff having received the full amount due as
appearing in policy and as per opinion of the Insurance Commissioner. An opposition to the motion
to dismiss, was presented by plaintiff, and other pleadings were subsequently file by the parties. On
December 28, 1957, the trial court deferred action on the motion to dismiss until termination of the
trial of the case, it appearing that the ground thereof was not indubitable. In the Answer to the
complaint, defendant company practically admitted all the allegations therein, denying only those
which stated that under the policy its liability was P3,000.00.

On September 1, 1958, the trial court promulgated an Amended Decision, the pertinent portions of
which read —

xxx xxx xxx

Since the contemporaneous and subsequent acts of the parties show that it was not their
intention that the payment of P1,000.00 to the plaintiff and the signing of the loss receipt
exhibit "1" would be considered as releasing the defendant completely from its liability on the
policy in question, said intention of the parties should prevail over the contents of the loss
receipt "1" (Articles 1370 and 1371, New Civil Code).

". . . . Under the terms of this policy, defendant company agreed to pay P1,000.00 to
P3,000.00 as indemnity for the death of the insured. The insured died of drowning. Death by
drowning is covered by the policy the pertinent provisions of which reads as follows:

xxx xxx xxx

"Part I of the policy fixes specific amounts as indemnities in case of death resulting
from "bodily injury which is effected solely thru violence, external, visible and
accidental means" but, Part I of the Policy is not applicable in case of death by
drowning because death by drowning is not one resulting from "bodily injury which is
affected solely thru violent, external, visible and accidental means" as "Bodily Injury"
means a cut, a bruise, or a wound and drowning is death due to suffocation and not
to any cut, bruise or wound."

xxx xxx xxx

Besides, on the face of the policy Exhibit "A" itself, death by drowning is a ground for
recovery apart from the bodily injury because death by bodily injury is covered by Part I of
the policy while death by drowning is covered by Part VI thereof. But while the policy
mentions specific amounts that may be recovered for death for bodily injury, yet, there is not
specific amount mentioned in the policy for death thru drowning although the latter is, under
Part VI of the policy, a ground for recovery thereunder. Since the defendant has bound itself
to pay P1000.00 to P3,000.00 as indemnity for the death of the insured but the policy does
 not positively state any definite amount that may be recovered in case of death by drowning,
there is an ambiguity in this respect in the policy, which ambiguity must be interpreted in
favor of the insured and strictly against the insurer so as to allow greater indemnity.

xxx xxx xxx

. . . plaintiff is therefore entitled to recover P3,000.00. The defendant had already paid the
amount of P1,000.00 to the plaintiff so that there still remains a balance of P2,000.00 of the
amount to which plaintiff is entitled to recover under the policy Exhibit "A".

The plaintiff asks for an award of P10,000.00 as attorney's fees and expenses of litigation.
However, since it is evident that the defendant had not acted in bad faith in refusing to pay
plaintiff's claim, the Court cannot award plaintiff's claim for attorney's fees and expenses of
litigation.

IN VIEW OF THE FOREGOING, the Court hereby reconsiders and sets aside its decision
dated July 21, 1958 and hereby renders judgment, ordering the defendant to pay plaintiff the
sum of Two Thousand (P2,000.00) Pesos and to pay the costs.

The above judgment was appealed to the Court of Appeals on three (3) counts. Said Court, in a
Resolution dated September 29, 1959, elevated the case to this Court, stating that the genuine issue
is purely legal in nature.

All the parties agree that indemnity has to be paid. The conflict centers on how much should the
indemnity be. We believe that under the proven facts and circumstances, the findings and
conclusions of the trial court, are well taken, for they are supported by the generally accepted
principles or rulings on insurance, which enunciate that where there is an ambiguity with respect to
the terms and conditions of the policy, the same will be resolved against the one responsible thereof.
It should be recalled in this connection, that generally, the insured, has little, if any, participation in
the preparation of the policy, together with the drafting of its terms and Conditions. The interpretation
of obscure stipulations in a contract should not favor the party who cause the obscurity (Art. 1377,
N.C.C.), which, in the case at bar, is the insurance company.

. . . . And so it has been generally held that the "terms in an insurance policy, which are
ambiguous, equivocal or uncertain . . . are to be construed strictly against, the insurer, and
liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment
to the insured, especially where a forfeiture is involved," (29 Am. Jur. 181) and the reason for
this rule is that the "insured usually has no voice in the selection or arrangement of the words
employed and that the language of the contract is selected with great care and deliberation
by expert and legal advisers employed by, and acting exclusively in the interest of, the
insurance company" (44 C.J.S. 1174). Calanoc v. Court of Appeals, et al., G.R. No. L-8151,
Dec. 16, 1955.

. . . . Where two interpretations, equally fair, of languages used in an insurance policy may
be made, that which allows the greater indemnity will prevail. (L'Engel v. Scotish Union &
Nat. F. Ins. Co., 48 Fla. 82, 37 So. 462, 67 LRA 581 111 Am. St. Rep. 70, 5 Ann. Cas. 749).

At any event, the policy under consideration, covers death or disability by accidental means, and the
appellant insurance company agreed to pay P1,000.00 to P3,000.00. is indemnity for death of the
insured.
In view of the conclusions reached, it would seem unnecessary to discuss the other issues raised in
the appeal.

The judgment appealed from is hereby affirmed. Without costs.

Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Dizon and Regala, JJ.,
concur.
Makalintal, J., reserves his vote.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-21380 May 20, 1966

MISAMIS LUMBER CORPORATION, plaintiff and appellee,

vs.
CAPITAL INSURANCE and SURETY CO., INC., defendant and appellant.

Achacoso, Nera and Ocampo for defendant and appellant.

F. Capistrano, Jr. for plaintiff and appellee.

REYES, J.B.L., J.:

Plaintiff-appellee Misamis Lumber Corporation, under its former name, Lanao Timber Mills, Inc.,
insured its Ford Falcon motor car for the amount of P14,000 with the defendant-appellant, Capital
Insurance & Surety Company, Inc. The pertinent provisions of the policy provided, as follows:

1. The Company will subject to the Limits of Liability indemnify the Insured against loss or
damage to the Motor Vehicle and its accessories and spare parts whilst thereon.

2. (a) by accidental collision or overturning or collision or overturning consequent when

mechanical breakdown or consequent upon wear and tear.

xxx xxx xxx

3. At its option, the Company may pay in cash the amount of the loss or damage or may
repair, reinstate or replace the Motor Vehicle or any part thereof or its accessories or spare
parts. The liability of the Company shall not exceed the value of the parts lost or damaged
and the reasonable cost of fitting such parts or the value of the Motor Vehicle at the time of
the loss or damage whichever is the loss. The Insured's estimate of value stated in the
schedule shall be the maximum amount payable by the Company in respect of any claim for
loss or damage. 1äwp hï1.ñ ët

xxx xxx xxx

4. The Insured may authorize the repair of the Motor Vehicle necessitated by damage for
which the Company may be liable under this policy provided that:
 (a) the estimated cost of such repair does not exceed the authorized Repair Limit.

(b) a detailed estimate of the cost is forwarded to the Company without delay.

and providing also that the authorized repair limit is P150.00.

At around eleven o'clock in the evening of 25 November 1961, and while the above-mentioned
insurance policy was in force, the insured car, while traveling along in Aurora Boulevard in front of
the Pepsi-Cola plant in Quezon City, passed over a water hole which the driver did not see because
an oncoming car did not dim its light. The crankcase and flywheel housing of the car broke when it
hit a hollow block lying alongside the water hole. At the instance of the plaintiff-appellee, the car was
towed and repaired by Morosi Motors at its shop at 1906 Taft Avenue Extension at a total cost of
P302.27.

On 29 November 1961, when the repairs on the car had already been made, the plaintiff-appellee
made a report of the accident to the defendant-appellant Capital Insurance & Surety Company.

Since the defendant-appellant refused to pay for the total cost of to wage and repairs, suit was filed
in the municipal court originally.

The case before Us is now a direct appeal on a point of law from the judgment of the Court of First
Instance of Manila finding for the plaintiff and against the defendant-insurer in its Civil Case No.
51757. Per our resolution on 13 February 1964, it was resolved to proceed with the case without the
appellee's brief, which was filed late.

The defendant-appellant admits liability in the amount of P150, but not for any excess thereof.

The lower court did not exonerate the said appellant for the excess because, according to it, the
company's absolution would render the insurance contract one-sided and that the said insurer had
not shown that the cost of repairs in the sum of P302.27 is unreasonable, excessive or padded, nor
had it shown that it could have undertaken the repairs itself at less expense.

The above reasoning is beside the point, because the insurance policy stipulated in paragraph 4 that
if the insured authorizes the repair the liability of the insurer, per its sub-paragraph (a), is limited to
P150.00. The literal meaning of this stipulation must control, it being the actual contract, expressly
and plainly provided for in the policy (Art. 1370, Civil Code; Young vs. Midland Textile Ins. Co., 30
Phil. 617; Ty vs. First Nat. Surety & Assur. Co., Inc., L-16138-45, 29 April 1961).

The lower court's recourse to legal hermeneutics is not called for because paragraph 4 of the policy
is clear and specific and leaves no room for interpretation. The interpretation given is even
unjustified because it opposes what was specifically stipulated. Thus, it will be observed that the
policy drew out not only the limits of the insurer's liability but also the mechanics that the insured had
to follow to be entitled to full indemnity of repairs. The option to undertake the repairs is accorded to
the insurance company per paragraph 2. The said company was deprived of the option because the
insured took it upon itself to have the repairs made, and only notified the insurer when the repairs
were done. As a consequence, paragraph 4, which limits the company's liability to P150.00, applies.

The insurance contract may be rather onerous ("one-sided", as the lower court put it), but that in
itself does not justify the abrogation of its express terms, terms which the insured accepted or
adhered to and which is the law between the contracting parties.
Finally, to require the insurer to prove that the cost of the repairs ordered by the insured is
unreasonable, as the appealed decision does, when the insurer was not given an opportunity to
inspect and assess the damage before the repairs were made, strikes Us as contrary to elementary
justice and equity.

For the foregoing reasons, the appealed decision is hereby modified by ordering the defendant-
appellant Capital Insurance & Surety Company, Inc. to pay not more than P150.00 to the plaintiff-
appellee Misamis Lumber Corporation. Each party shall bear its own costs and attorney's fees.

Bengzon, C.J., Bautista Angelo, Concepcion, Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., and
Sanchez, JJ., concur.
Zaldivar, J., took no part.