FIRST DIVISION

[G.R. No. L-25920. January 30, 1970.]

CCC INSURANCE CORPORATION, Petitioner, v. COURT OF APPEALS (Fourth Division) and CARLOS F. ROBES, Respondents.

Kalaw & Felipe for Petitioner.

Adalia B. Francisco for Respondents.

SYLLABUS

1. MOTOR VEHICLES; MOTOR VEHICLES OFFICE; LICENSE, PRIMA FACIE PROOF OF QUALIFICATION TO DRIVE. — The issuance of a driving license
without previous examination does not necessarily imply that the license issued is invalid. It is proof that the Motor Vehicles Office official considered
Reyes, the driver of the insured-appellee, qualified to operate motor vehicles, and the insured was entitled to rely upon such license. As the law
stood in 1961, when the claim arose, the examinations could be dispensed with in the discretion of the Motor Vehicles Office officials.

2. REMEDIAL LAW; PRACTICE AND PROCEDURE; PRACTICE OF DELEGATING RECEPTION OF EVIDENCE TO COMMISSIONER, AUTHORIZED. — There
is nothing basically wrong with the practice of delegating to a commissioner, 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. ID.; ID.; ISSUES NOT SEASONABLY RAISED, DEEMED WAIVED. — We note that the issue that the proceedings in the trial court were irregular
and invalid was brought up by the appellant insurance company for the first time only in its motion for reconsideration filed in the Court of Appeals.
It was not raised in the trial court, where the defect could still be remedied. This circumstance precludes ventilation of the issue of validity of the
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 (Perlas v. Ehrman, 53 Phil. 607). It is a procedural point that can be
waived by consent of the parties, express or implied. (Luzon Stevedoring Corp. v. PSC, I-5458, 16 September 1953)

DECISION

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

Petition for review of the decision of the Court of Appeals, affirming that of the Court of First Instance of Rizal (Quezon City) allowing insurance
indemnification of plaintiff for his damaged car and the payment of attorney’s fees.

The following facts are not in dispute: chanrob1es virtual 1aw library

On 1 March 1961, Carlos F. Robes took an insurance, with the CCC Insurance Corporation, on his Dodge Kingsway car against loss or damage
through accident for an amount not exceeding P8,000.00 (Policy No. MC-1156). On 25 June 1961, and during the effectivity of the policy, the
insured vehicle, while being driven by the owner’s driver, became involved in a vehicle collision along Rizal Avenue Extension, Potrero, Malabon, Rizal
The car was damaged, and the repair was estimated to cost P5,300.00.

As the insurance company refused either to pay for the repair or to cause the restoration of the car to its original condition, Robes instituted Civil
Case No. Q-6063 in the Court of First Instance of Rizal for recovery not only of the amount necessary for the repair of the insured car but also of
actual and moral damages, attorneys’ fees and costs. Resisting plaintiff’s claim, the insurance company disclaimed liability for payment, alleging that
there had been violation of the insurance contract because the one driving the car at the time of the incident was not an "authorized driver." cralaw virtua1aw library

After due hearing, judgment was rendered for the plaintiff, and defendant insurer was ordered to pay unto the former the cost of repair of the car in
the sum of P5,031.28; the sum of P150.00, for 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.

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 court’s award to plaintiff of the amount of P5,013.28 as cost of repairs, and of actual damages 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 eliminated on the ground that it was too speculative. Not content, the insurance company filed the present petition for
review of the aforesaid decision of the Court of Appeals on two grounds: (1) that the proceedings observed in the trial court were irregular and
invalid; and (2) that the damage to the insured car was not covered by the insurance policy because at the time of the accident it was being driven
by one who was not an authorized driver.

The second issue constitutes the main contention of herein appellant, and will be considered 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 the
insurance policy: jgc:chanrobles.com.ph

"AUTHORIZED DRIVER: jgc:chanrobles.com.ph

"Any of the following: chanrob1es virtual 1aw library

(a) The insured;

(b) Any person driving on the Insured’s order or with his permission, provided that the person driving is permitted in accordance with licensing 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." (Italics ours)

It has been found as a fact by the Court of Appeals that Domingo Reyes, the driver who was at the wheel of the insured car at the time of the
accident, does not know how to read and write; 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.

In holding that the damage sustained by the car comes within the coverage of the insurance policy, the Court of Appeals argued that since Reyes’
purported driver’s license (Exhibit "A") bears all the earmarks of a duly issued license, then it is a public document, and petitioner insurance
company then has the burden of disproving its genuineness, which the latter has failed to do. In this respect the Court of Appeals ruled: jgc:chanrobles.com.ph

". . . The fact that the Cavite Agency of the Motor Vehicles Office states that Drivers License No. 271703 DP was not issued by that office, does not
remove the possibility that said office may have been mistaken or that said license was issued by another agency. Indeed Exhibit 13 shows that a
certain Gloria Presa made the notation thereon "no license issued" and which notation was the basis of the 1st Indorsement, Exhibit 12, signed by
the MVO Cavite City Agency’s officer-in-charge. Neither Gloria Presa nor the officer-in-charge Marciano A. Monzon was placed on the witness stand 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
possession of a driver’s license issued by the Motor Vehicles Office which on its face appears to have been regularly issued." cralaw virtua1aw library

In effect, the Court of Appeals found that the driver’s license No. 271703 DP was genuine, that is, one really issued by the Motor Vehicles Office or
its authorized deputy; and this finding of fact is now conclusive and may not be questioned in this appeal.

Nevertheless, the appellant insurer insists that, under the established facts of this case, Reyes, being admittedly one 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.

The fatal flaw in appellant’s argument is that it studiously ignores the provisions of law existing at 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 2363, 1

"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." (Italics supplied)

and reinforcing such discretion, Section 26 of the Act prescribes further: jgc:chanrobles.com.ph

"SEC. 26. Issuance of chauffeur’s license; professional badge: If, after examination, or without the same, the Chief, Motor Vehicles Office or his
deputies, believe the applicant to possess the necessary qualifications and knowledge, they shall issue to such applicant a license to operate as
chauffeur . . ." (Italics supplied)

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 arose, the examinations could be dispensed with in the discretion of the Motor Vehicles Office 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 circumstances surrounding
such issuance showed that it was irregular.

The issuance of the license is proof that the Motor Vehicles Office official considered Reyes, the 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, 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 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.

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 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 court; and no notice thereof was sent to the parties, contrary to the specific provisions of Rule 33 of the Rules of
Court.

Actually there is nothing basically wrong with the practice of delegating to a commissioner, 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 not against its referral to the clerk of court but against the
alleged non-observance of the prescribed steps in connection with such delegation.

We find no cause sufficient to invalidate the proceedings had in the trial court. We note that this issue was brought up by the appellant insurance
company for the first time only in its motion for reconsideration filed in the Court of Appeals. It was not raised in the trial court, where the defect
could still be remedied. This circumstance precludes ventilation of the issue of validity of the 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 parties, express or implied. 5

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 appointing the clerk as commissioner, or of notice of the submission of his report to the court. Furthermore, appellant
has presented no proof that the clerk of court committed any mistake or 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 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

WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against appellant CCC Insurance Corporation.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando, Teehankee and Barredo, JJ., concur.

EN BANC

[G.R. No. L-17312. November 29, 1965.]

ARTURO R. TANCO, JR., Plaintiff-Appellee, v. THE PHILIPPINE GUARANTY COMPANY, Defendant-Appellant.

Manuel Y. Macias and Julio R. Vicencio for Plaintiff-Appellee.

 Rufino Luna and Josue H. Gustilo, for Defendant-Appellant.

SYLLABUS

1. INSURANCE; AUTOMOBILE; WHEN INSURER EXEMPT FROM LIABILITY; CASE AT BAR. — The automobile insurance policy sued upon in the instant
case exempts the insurer company from liability for any accident loss, damage or liability caused, sustained or incurred while the vehicle is being
driven by any person other than an authorized driver. The policy defines the term "authorized driver" to be the insured himself or any person driving
on the insured’s order or with his permission provided he is permitted to drive under the licensing laws. In the case at bar, plaintiff’s brother, who
was at the wheel at the time of the collision, did not have a valid license because the one he had obtained had already expired and had not been
renewed as required by Section 31 of the Motor Vehicle Law. That he had renewed his license one week after the accident did not cure the
delinquency or revalidate the license which had already expired.

DECISION

MAKALINTAL, J.:

Plaintiff’s automobile, while being driven at the southern approach of the Jones bridge by his brother Manuel Tanco on September 1, 1959, figured in
a collision with a pick-up delivery van, as a result of which both vehicles were damaged. Plaintiff paid for repairs the total sum of P2,536.99 and then
filed his claim with defendant company under a car insurance policy issued by the latter. The claim was rejected, whereupon suit was commenced in
the Municipal Court of Manila, whence it was elevated on appeal to the Court of First Instance of Manila, which gave judgment for plaintiff in the
amount stated, plus interest at 8% and P500.00 as attorney’s fees. Appeal was taken by defendant directly to this Court, there being no dispute as
to the facts.

The policy sued upon covers, up to a certain limit, loss or damage to the insured vehicle as well as damage to property of third persons as a
consequence of or incident to the operation of said vehicle. There is an exception clause however, which provides that "the company shall not be
liable in respect of any accident, loss, damage or liability cause, sustained or incurred . . . whilst (the insured vehicle) is . . . being driven by or is for
the purpose of being driven by him in the charge of any person other than an Authorized Driver." The policy defines the term "Authorized Driver" to
be the insured himself and" (b) any person driving on the Insured’s order or with his permission, provided that the person driving is permitted in
accordance with the licensing or other laws or regulations to drive the Motor Vehicle or has been permitted and is not disqualified by order of a court
of law or by reason of any enactment or regulation in that behalf from driving such Motor Vehicle." cralaw virtua1aw library

At the time of the collision plaintiff’s brother, who was at the wheel, did not have a valid license, the one he had obtained for the year 1958 not
having been renewed on or before the last working day of February 1959, as required by section 31 of the Motor Vehicle Law, Act No. 3992. That
section states that any license not so renewed "shall become delinquent and invalid," and section 21 states that "except as otherwise specifically
provided in this Act no person shall operate any motor vehicle on the public highways without having procured a license for the current year, nor
while such license is delinquent, invalid suspended or revoked." cralaw virtua1aw library

In rendering judgment for plaintiff the trial court adverted to the absence of evidence that Manuel Tanco had been "disqualified by order of a court of
law or by reason of any enactment or regulation in that behalf from driving such motor vehicle," and ruled that if there is any ambiguity in the
definition of the term "authorized driver" in the policy the ambiguity should be construed in favor of plaintiff, since the policy had been prepared in
its entirety by defendant. The trial court’s advertence is true as a matter of fact; and its ruling is correct as a matter of law. But neither one nor the
other is relevant in this case. Appellant does not rely on the portion of the proviso in the policy quoted by the court but on that which states that "the
person driving is permitted in accordance with the licensing or other laws." And as to this there is no ambiguity whatsoever, because the Motor
Vehicle Law expressly prohibits any person from operating a motor vehicle on the highways without a license for the current year or while such
license is delinquent or invalid. That Manuel Tanco renewed his license on September 8, 1959, one week after the accident, did not cure the
delinquency or revalidate the license which had already expired.

We are not aware that the question presented here has been decided by this Court in any previous case. Indeed all the authorities cited by the
parties consist of decisions of courts in the United States. We note, however , that those relied upon by appellee are not in point by reason of
material differences in the facts issues presented. In Messersmith v. American Fidelity Co., 187 App. Div. 35, 175 N.Y. Supp. 169; and Fireman’s
Fund Insurance Co. v. Haley, 129 Miss. 525, 90 So. 635, the question was whether the insured could recover on an automobile policy for damage
sustained in a collision which occurred while the vehicle was being driven in violation of law in the first case by an infant at the instance of the
insured, and in the second by the insured himself beyond the statutory speed limit. In neither case was there a provision in the policy expressly
excluding liability by reason of the particular violation involved. We have no reason to disagree with the pronouncement of the court in the second
case, after citing the first, that "if such a defense (that the vehicle was being driven in violation of law) were permissible automobile insurance would
be practically valueless."cralaw virtua1aw library

In MacMahon v. Pearlman 13 N.E. 154-156, a Massachusetts case, the defense of the insurer was also the violation of law by the insured, namely,
that she was driving without a license; but as stated in the decision, "the casualty company does not urge that the unlawful conduct is forbidden in
the express terms, (but) that because of public policy it ought not to be compelled to pay damages." The court, citing Messersmith v. American
Fidelity Co., supra, similarly allowed recovery, saying that to restrict such insurance to cases where there has been no violation of criminal law or
ordinance would reduce indemnity to a shadow.

In the case before Us now appellant’s defense does not rest on the general proposition that if a law is violated at the time of the accident which
causes the damage or injury there can be no recovery but rather on a specific provision in the policy that appellant shall not be liable if the accident
occurs while the vehicle is being driven by any person other than an authorized driver and that an authorized driver, if not the insured himself is one
who is acting on his order or with his permission, provided he is permitted to drive under the licensing laws.

The cases cited by appellant are apropos. In Crahan v. Automobile Underwriters, Inc., Et Al., 176 A. (Pa.) 817, a clause in the policy excluding loss
while the motor vehicle "is being operated by any person prohibited by law from driving an automobile" was held to be free from doubt or ambiguity,
reasonable in its terms and in furtherance of the policy of the law prohibiting unlicensed drivers to operate motor vehicles. In Zabonick v. Ralston Et.
Al., 261 N.W. (Mich.) 316, the insured was driving with an expired license, in violation of law (Act No. 91 of the Public Acts of 1931), when the
accident occurred. Under a provision in the policy that the insurer "shall not be liable while the automobile is operated . . . by any person prohibited
by law from driving," the insurance company was absorbed, the Supreme Court of Michigan saying: "To require a person to secure an operator’s
license and meet certain requirements before driving an automobile is a regulation for the protection of life and property, the wisdom of which can
scarcely be questioned. The Legislature has also provided that every three years such licenses expire and may be renewed under certain conditions.
If one fails to comply with the regulation, the statute says, he or she shall not drive a motor vehicle upon the highway. Under the terms of the
contract, while under such statutory prohibition, plaintiff could not recover under his policy. To permit such recovery, notwithstanding the lack of a
driver’s license, would tend to undermine the protection afforded the public by virtue of Act No. 91." cralaw virtua1aw library

The exclusion clause in the contract invoked by appellant is clear. It does not refer to violations of law in general, which indeed would tend to render
automobile insurance practically a sham, but to a specific situation where a person other than the insured himself, even upon his order or with his
permission, drives the motor vehicle without a license or with one that has already expired. No principle of law or of public policy militates against
the validity of such a provision.

The judgment appealed from is reversed, with costs.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Dizon, Regala, Bengzon, J.P. and Zaldivar, JJ., concur.

THIRD DIVISION

G.R. No. 173773 : November 28, 2012

PARAMOUNT INSURANCE CORPORATION, Petitioner, v. SPOUSES YVES and MARIA TERESA REMONDEULAZ, Respondents.

DECISION

PERALTA, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal and setting aside of the Decision 1 dated ςrνll

April 12, 2005 and Resolution2 dated July 20, 2006 of the Court of Appeals in CA-G.R. CV No. 61490.
ςrνll

The undisputed facts follow.

On May 26, 1994, respondents insured with petitioner their 1994

Toyota Corolla sedan under a comprehensive motor vehicle insurance policy for one year.

During the effectivity of said insurance, respondents car was unlawfully taken. Hence, they immediately reported the theft to the Traffic Management
Command of the PNP who made them accomplish a complaint sheet. In said complaint sheet, respondents alleged that a certain Ricardo Sales
(Sales) took possession of the subject vehicle to add accessories and improvements thereon, however, Sales failed to return the subject vehicle
within the agreed three-day period.

As a result, respondents notified petitioner to claim for the reimbursement of their lost vehicle. However, petitioner refused to pay.

Accordingly, respondents lodged a complaint for a sum of money against petitioner before the Regional Trial Court of Makati City (trial court) praying
for the payment of the insured value of their car plus damages on April 21, 1995.

After presentation of respondents evidence, petitioner filed a Demurrer to Evidence.

Acting thereon, the trial court dismissed the complaint filed by respondents. The full text of said Order 3 reads:
ςrνll chanroblesvirtuallawlibrary

Before the Court is an action filed by the plaintiffs, spouses Yves and Maria Teresa Remondeulaz against the defendant, Paramount Insurance
Corporation, to recover from the defendant the insured value of the motor vehicle.

It appears that on 26 May 1994, plaintiffs insured their vehicle, a 1994 Toyota Corolla XL with chassis number EE-100-9524505, with defendant
under Private Car Policy No. PC-37396 for Own Damage, Theft, Third-Party Property Damage and Third-Party Personal Injury, for the period
commencing 26 May 1994 to 26 May 1995. Then on 1 December 1994, defendants received from plaintiff a demand letter asking for the payment of
the proceeds in the amount of PhP409,000.00 under their policy. They alleged the loss of the vehicle and claimed the same to be covered by the
policys provision on "Theft." Defendant disagreed and refused to pay.

It appears, however, that plaintiff had successfully prosecuted and had been awarded the amount claimed in this action, in another action (Civil Case
No. 95-1524 entitled Sps. Yves and Maria Teresa Remondeulaz versus Standard Insurance Company, Inc.), which involved the loss of the same
vehicle under the same circumstances although under a different policy and insurance company. This, considered with the principle that an insured
may not recover more than its interest in any property subject of an insurance, leads the court to dismiss this action.

SO ORDERED.4 ςrνll

Not in conformity with the trial courts Order, respondents interposed an appeal to the Court of Appeals (appellate court).

In its Decision dated April 12, 2005, the appellate court reversed and set aside the Order issued by the trial court, to wit: chanroblesvirtuallawlibrary

Indeed, the trial court erred when it dismissed the action on the ground of double recovery since it is clear that the subject car is different from the
one insured with another insurance company, the Standard Insurance Company. In this case, defendant-appellee herein petitioner denied the
reimbursement for the lost vehicle on the ground that the said loss could not fall within the concept of the "theft clause" under the insurance policy x
xx

xxx

WHEREFORE, the October 7, 1998 Order of the Regional Trial Court of Makati City, Branch 63, is hereby REVERSED and SET ASIDE

x x x.

SO ORDERED.5 ςrνll

Petitioner, thereafter, filed a motion for reconsideration against said Decision, but the same was denied by the appellate court in a Resolution dated
July 20, 2006.
Consequently, petitioner filed a petition for review on certiorari before this Court praying that the appellate courts Decision and Resolution be
reversed and set aside.

In its petition, petitioner raises this issue for our resolution: chanroblesvirtuallawlibrary

Whether or not the Court of Appeals decided the case a quo in a way not in accord with law and/or applicable jurisprudence when it promulgated in
favor of the respondents Remondeulaz, making Paramount liable for the alleged "theft" of respondents vehicle. 6 ςrνll

Essentially, the issue is whether or not petitioner is liable under the insurance policy for the loss of respondents vehicle.

Petitioner argues that the loss of respondents vehicle is not a peril covered by the policy. It maintains that it is not liable for the loss, since the car
cannot be classified as stolen as respondents entrusted the possession thereof to another person.

We do not agree.

Adverse to petitioners claim, respondents policy clearly undertook to indemnify the insured against loss of or damage to the scheduled vehicle when
caused by theft, to wit: chanroblesvirtuallawlibrary

SECTION III LOSS OR DAMAGE

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

(a) by accidental collision or overturning, or collision or overturning consequent upon mechanical breakdown or consequent upon wear and tear;

(b) by fire, external explosion, self-ignition or lightning or burglary, housebreaking or theft;

(c) by malicious act;

(d) whilst in transit (including the process of loading and unloading) incidental to such transit by road, rail, inland waterway, lift or
elevator.7ςrνll

Apropos, we now resolve the issue of whether the loss of respondents vehicle falls within the concept of the "theft clause" under the insurance
policy.

In People v. Bustinera,8 this Court had the occasion to interpret the "theft clause" of an insurance policy. In this case, the Court explained that
ςrνll

when one takes the motor vehicle of another without the latters consent even if the motor vehicle is later returned, there is theft there being intent
to gain as the use of the thing unlawfully taken constitutes gain.

Also, in Malayan Insurance Co., Inc. v. Court of Appeals, 9 this Court held that the taking of a vehicle by another person without the permission or
ςrνll

authority from the owner thereof is sufficient to place it within the ambit of the word theft as contemplated in the policy, and is therefore,
compensable.

Moreover, the case of Santos v. People 10 is worthy of note. Similarly in Santos, the owner of a car entrusted his vehicle to therein petitioner Lauro
ςrνll

Santos who owns a repair shop for carburetor repair and repainting. However, when the owner tried to retrieve her car, she was not able to do so
since Santos had abandoned his shop. In the said case, the crime that was actually committed was Qualified Theft. However, the Court held that
because of the fact that it was not alleged in the information that the object of the crime was a car, which is a qualifying circumstance, the Court
found that Santos was only guilty of the crime of Theft and merely considered the qualifying circumstance as an aggravating circumstance in the
imposition of the appropriate penalty. The Court therein clarified the distinction between the crime of Estafa and Theft, to wit: chanroblesvirtuallawlibrary

x x x The principal distinction between the two crimes is that in theft the thing is taken while in estafa the accused receives the property and
converts it to his own use or benefit. However, there may be theft even if the accused has possession of the property. If he was entrusted only with
the material or physical (natural) or de facto possession of the thing, his misappropriation of the same constitutes theft, but if he has the juridical
possession of the thing his conversion of the same constitutes embezzlement or estafa. 11 ςrνll

In the instant case, Sales did not have juridical possession over the vehicle. Hence, it is apparent that the taking of repondents vehicle by Sales is
without any consent or authority from the former.

Records would show that respondents entrusted possession of their vehicle only to the extent that Sales will introduce repairs and improvements
thereon, and not to permanently deprive them of possession thereof. Since, Theft can also be committed through misappropriation, the fact that
Sales failed to return the subject vehicle to respondents constitutes Qualified Theft. Hence, since repondents car is undeniably covered by a
Comprehensive Motor Vehicle Insurance Policy that allows for recovery in cases of theft, petitioner is liable under the policy for the loss of
respondents vehicle under the "theft clause."

All told, Sales act of depriving respondents of their motor vehicle at, or soon after the transfer of physical possession of the movable property,
constitutes theft under the insurance policy, which is compensable. 12 ςrνll

WHEREFORE, the instant petition is DENIED. The Decision dated April 12, 2005 and Resolution dated July 20, 2006 of the Court of Appeals are
hereby AFFIRMED in toto. ςrαlαωlιbrαr

SO ORDERED.

Endnotes:

SECOND DIVISION

[G.R. No. 96452. May 7, 1992.]

PERLA COMPANIA DE SEGUROS, INC., Petitioner, v. THE COURT OF APPEALS, HERMINIO LIM and EVELYN LIM, Respondents.

[G.R. No. 96493. May 7, 1992.]

FCP CREDIT CORPORATION, Petitioner, v. THE COURT OF APPEALS, Special Third Division, HERMINIO LIM and EVELYN LIM,, Respondents.
 Yolanda Quisumbing-Javellana and Nelson A. Loyola for Petitioner.

Wilson L. Tee for respondents Hermenio and Evelyn Lim.

SYLLABUS

1. COMMERCIAL LAW; INSURANCE; LOSS OF MOTOR VEHICLE THRU THEFT; NO CAUSAL CONNECTION BETWEEN POSSESSION OF A VALID
DRIVER’S LICENSE AND LOSS OF VEHICLE THRU THEFT. — It is worthy to note that there is no causal connection between the possession of a valid
driver’s license and the loss of a vehicle. To rule otherwise would render car insurance practically a sham since an insurance company can easily
escape liability by citing restrictions which are not applicable or germane to the claim, thereby reducing indemnity to a shadow.

2. ID.; ID.; INSURANCE POLICY MEANT TO BE ADDITIONAL SECURITY TO PRINCIPAL CONTRACT; CASE AT BAR. — The insurance policy was
therefore meant to be an additional security to the principal contract, that is, to insure that the promissory note will be paid in case the automobile is
lost through accident or theft. The Chattel Mortgage Contract provided that:" ‘THE SAID MORTGAGOR COVENANTS AND AGREES THAT HE/IT WILL
CAUSE THE PROPERTY/IES HEREIN-ABOVE MORTGAGED TO BE INSURED AGAINST LOSS OR DAMAGE BY ACCIDENT, THEFT AND FIRE FOR A
PERIOD OF ONE YEAR FROM DATE HEREOF AND EVERY YEAR THEREAFTER UNTIL THE MORTGAGE OBLIGATION IS FULLY PAID WITH AN
INSURANCE COMPANY OR COMPANIES ACCEPTABLE TO THE MORTGAGEE IN AN AMOUNT NOT LESS THAN THE OUTSTANDING BALANCE OF THE
MORTGAGE OBLIGATION; THAT HE/IT WILL MAKE ALL LOSS, IF ANY, UNDER SUCH POLICY OR POLICIES, PAYABLE TO THE MORTGAGEE OR ITS
ASSIGNS AS ITS INTERESTS MAY APPEAR AND FORTHWITH DELIVER SUCH POLICY OR POLICIES TO THE MORTGAGEE, . . .’" It is clear from the
abovementioned provision that upon the loss of the insured vehicle, the insurance company Perla undertakes to pay directly to the mortgagor or to
their assignee, FCP, the outstanding balance of the mortgage at the time of said loss under the mortgage contract.

3. CIVIL LAW; CONTRACTS; CHATTEL MORTGAGE; MERELY AN ACCESSORY TO PROMISSORY NOTE; PRINCIPAL CONTRACT UNAFFECTED BY
WHATEVER BEFALLS ACCESSORY CONTRACT; CASE AT BAR. — The chattel mortgage constituted over the automobile is merely an accessory
contract to the promissory note. Being the principal contract, the promissory note is unaffected by whatever befalls the subject matter of the
accessory contract. Therefore, the unpaid balance on the promissory note should be paid, and not just the installments due and payable before the
automobile was carnapped, as erronously held by the Court of Appeals.

4. ID.; DAMAGES; MAKER NOT LIABLE FOR INTEREST, LIQUIDATED DAMAGES AND ATTORNEY’S FEES STIPULATED IN PROMISSORY NOTE
REMAINING UNPAID DUE TO INSURER’S DENIAL OF A VALID CLAIM; CASE AT BAR. — Because petitioner Perla had unreasonably denied their valid
claim, private respondents should not be made to pay the interest, liquidated damages and attorney’s fees as stipulated in the promissory note. As
mentioned above, the contract of indemnity was procured to insure the return of the money loaned from petitioner FCP, and the unjustified refusal of
petitioner Perla to recognize the valid claim of the private respondents should not in any way prejudice the latter.

5. ID.; ID.; AWARD FOR MORAL AND EXEMPLARY DAMAGES, AS WELL AS ATTORNEY’S FEES LEFT TO SOUND DISCRETION OF THE COURT; CASE AT
BAR. — As to the award of a moral damages, exemplary damages and attorney’s fees, private respondents are legally entitled to the same since
petitioner Perla had acted in bad faith by unreasonably refusing to honor the insurance claim of the private respondents. Besides, awards for moral
and exemplary damages, as well as attorney’s fees are left to the sound discretion of the Court. Such discretion, if well exercised, will not be
disturbed on appeal.

DECISION

NOCON, J.:

These are two petitions for review on certiorari, one filed by Perla Compania de Seguros, Inc. in G.R. No. 96452, and the other by FCP Credit
Corporation in G.R. No. 96493 both seeking to annul and set aside the decision dated July 30, 1990 1 of the Court of Appeals in CA-G.R. No. 13037,
which reversed the decision of the Regional Trial Court of Manila, Branch VIII in Civil Case No. 83-19098 for replevin and damages. The dispositive
portion of the decision of the Court of Appeals reads, as follows: jgc:chanrobles.com.ph

"WHEREFORE, the decision appealed from is reversed and appellee Perla Compania de Seguros, Inc. is ordered to indemnify appellants Herminio and
Evelyn Lim for the loss of their insured vehicle; while said appellants are ordered to pay appellee FCP Credit Corporation all the unpaid installments
that were due and payable before the date said vehicle was carnapped; and appellee Perla Compania de Seguros, Inc. is also ordered to pay
appellants moral damages of P12,000.00 for the latter’s mental sufferings, exemplary damages of P20,000.00 for appellee Perla Compania de
Seguros. Inc.’s unreasonable refusal on sham grounds to honor the just insurance claim of appellants by way of example and correction for public
good, and attorney’s fees of P10,000.00 as a just and equitable reimbursement for the expenses incurred therefor by appellants, and the costs of
suit both in the lower court and in this appeal." 2

The facts as found by the trial court are as follows: chanrob1es virtual 1aw library

On December 24, 1981, private respondents spouses Herminio and Evelyn Lim executed a promissory note in favor of Supercars, Inc. in the sum of
P77,940.00, payable in monthly installments according to the schedule of payment indicated in said note, 3 and secured by a chattel mortgage over
a brand new red Ford Laser 1300 5DR Hatchback 1981 model with motor and serial No. SUPJYK-03780, which is registered under the name of
private respondent Herminio Lim 4 and insured with the petitioner Perla Compania de Seguros, Inc. (Perla for brevity) for comprehensive coverage
under Policy No. PC/41PP-QCB-43383. 5

On the same date, Supercars, Inc., with notice to private respondents spouses, assigned to petitioner FCP Credit Corporation (FCP for brevity) its
rights, title and interest on said promissory note and chattel mortgage as shown by the Deed of Assignment. 6

At around 2:30 P.M. of November 9, 1982, said vehicle was carnapped while parked at the back of Broadway Centrum along N. Domingo Street,
Quezon City. Private respondent Evelyn Lim, who was driving said car before it was carnapped, immediately called up the Anti-Carnapping Unit of
the Philippine Constabulary to report said incident and thereafter, went to the nearest police substation at Araneta, Cubao to make a police report
regarding said incident, as shown by the certification issued by the Quezon City police. 7

On November 10, 1982, private respondent Evelyn Lim reported said incident to the Land Transportation Commission in Quezon City, as shown by
the letter of her counsel to said office, 8 in compliance with the insurance requirement. She also filed a complaint with the Headquarters.
Constabulary Highway Patrol Group. 9

On November 11, 1982, private respondent filed a claim for loss with the petitioner Perla but said claim was denied on November 18, 1982 10 on the
ground that Evelyn Lim, who was using the vehicle before it was carnapped, was in possession of an expired driver’s license at the time of the loss of
said vehicle which is in violation of the authorized driver clause of the insurance policy, which states, to wit: chanrobles virtual lawlibrary

"AUTHORIZED DRIVER: chanrob1es virtual 1aw library

Any of the following: (a) The Insured (b) Any person driving on the Insured’s order, or with his permission. Provided that the person driving is
permitted, in accordance with the licensing or other laws or regulations, to drive the Scheduled Vehicle, or has been permitted and is not disqualified
by order of a Court of Law or by reason of any enactment or regulation in that behalf." 11

On November 17, 1982, private respondents requested from petitioner FCP for a suspension of payment on the monthly amortization agreed upon
due to the loss of the vehicle and, since the carnapped vehicle was insured with petitioner Perla, said insurance company should be made to pay the
remaining balance of the promissory note and the chattel mortgage contract.

Perla, however, denied private respondents’ claim. Consequently, petitioner FCP demanded that private respondents pay the whole balance of the
promissory note or to return the vehicle 12 but the latter refused.

On July 25, 1983, petitioner FCP filed a complaint against private respondents, who in turn filed an amended third party complaint against petitioner
Perla on December 8, 1983. After trial on the merits, the trial court rendered a decision, the dispositive portion of which reads.

"WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows: chanrob1es virtual 1aw library

1. Ordering defendants Herminio Lim and Evelyn Lim to pay, jointly and severally, plaintiff the sum of P55,055.93 plus interest thereon at the rate of
24% per annum from July 2, 1983 until fully paid;

2. Ordering defendants to pay plaintiff P5,000.00 as and for attorney’s fees; and the costs of suit.

Upon the other hand, likewise, ordering the DISMISSAL of the Third Party Complaint filed against Third-Party Defendant." 13

Not satisfied with said decision, private respondents appealed the same to the Court of Appeals, which reversed said decision.

After petitioners’ separate motions for reconsideration were denied by the Court of Appeals in its resolution of December 10, 1990, petitioners filed
these separate petitions for review on certiorari.

Petitioner Perla alleged that there was grave abuse of discretion on the part of the appellate court in holding that private respondents did not violate
the insurance contract because the authorized driver clause is not applicable to the "Theft" clause of said Contract.

For its part, petitioner FCP raised the issue of whether or not the loss of the collateral exempted the debtor from his admitted obligations under the
promissory note particularly the payment of interest, litigation expenses and attorney’s fees. chanrobles.com.ph : virtual law library

We find no merit in Perla’s petition.

The comprehensive motor car insurance policy issued by petitioner Perla undertook to indemnify the private respondents against loss or damages to
the car (a) by accidental collision or overturning, or collision or overturning consequent upon mechanical breakdown or consequent upon wear and
tear; (b) by fire, external explosion, self-ignition or lightning or burglary, housebreaking or theft; and (c) by malicious act. 14

Where a car is admittedly, as in this case, unlawfully and wrongfully taken without the owner’s consent or knowledge, such taking constitutes theft,
and, therefore, it is the "THEFT" clause, and not the "AUTHORIZED DRIVER" clause, that should apply. As correctly stated by the respondent court in
its decision: jgc:chanrobles.com.ph

". . . Theft is an entirely different legal concept from that of accident. Theft is committed by a person with the intent to gain or, to put it in another
way, with the concurrence of the doer’s will. On the other hand, accident, although it may proceed or result from negligence, is the happening of an
event without the concurrence of the will of the person by whose agency it was caused. (Bouvier’s Law Dictionary, Vol. I, 1914 ed., p. 101).

Clearly, the risk against accident is distinct from the risk against theft. The ‘authorized driver clause’ in a typical insurance policy as in contemplation
or anticipation of accident in the legal sense in which it should be understood, and not in contemplation or anticipation of an event such as theft. The
distinction — often seized upon by insurance companies in resisting claims from their assureds — between death occurring as a result of accident
and death occurring as a result of intent may, by analogy, apply to the case at bar. Thus, if the insured vehicle had figured in an accident at the time
she drove it with an expired license, then, appellee Perla Compania could properly resist appellants’ claim for indemnification for the loss or
destruction of the vehicle resulting from the accident. But in the present case, the loss of the insured vehicle did not result from an accident where
intent was involved; the loss in the present case was caused by theft, the commission of which was attended by intent." 15

It is worthy to note that there is no causal connection between the possession of a valid driver’s license and the loss of a vehicle. To rule otherwise
would render car insurance practically a sham since an insurance company can easily escape liability by citing restrictions which are not applicable or
germane to the claim, thereby reducing indemnity to a shadow.

We however find the petition of FCP meritorious.

This Court agrees with petitioner FCP that private respondents are not relieved of their obligation to pay the former the installments due on the
promissory note on account of the loss of the automobile. The chattel mortgage constituted over the automobile is merely an accessory contract to
the promissory note. Being the principal contract, the promissory note is unaffected by whatever befalls the subject matter of the accessory contract.
Therefore, the unpaid balance on the promissory note should be paid, and not just the installments due and payable before the automobile was
carnapped, as erronously held by the Court of Appeals.

However, this does not mean that private respondents are bound to pay the interest, litigation expenses and attorney’s fees stipulated in the
promissory note. Because of the peculiar relationship between the three contracts in this case, i. e., the promissory note, the chattel mortgage
contract and the insurance policy, this Court is compelled to construe all three contracts as intimately interrelated to each other, despite the fact that
at first glance there is no relationship whatsoever between the parties thereto.
Under the promissory note, private respondents are obliged to pay Supercars, Inc. the amount stated therein in accordance with the schedule
provided for. To secure said promissory note, private respondents constituted a chattel mortgage in favor of Supercars, Inc. over the automobile the
former purchased from the latter. The chattel mortgage, in turn, required private respondents to insure the automobile and to make the proceeds
thereof payable to Supercars, Inc. The promissory note and chattel mortgage were assigned by Supercars, Inc. to petitioner FCP, with the knowledge
of private respondents. Private respondents were able to secure an insurance policy from petitioner Perla, and the same was made specifically
payable to petitioner FCP. 16

The insurance policy was therefore meant to be an additional security to the principal contract, that is, to insure that the promissory note will still be
paid in case the automobile is lost through accident or theft. The Chattel Mortgage Contract provided that: chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

"‘THE SAID MORTGAGOR COVENANTS AND AGREES THAT HE/IT WILL CAUSE THE PROPERTY/IES HEREIN-ABOVE MORTGAGED TO BE INSURED
AGAINST LOSS OR DAMAGE BY ACCIDENT, THEFT AND FIRE FOR A PERIOD OF ONE YEAR FROM DATE HEREOF AND EVERY YEAR THEREAFTER
UNTIL THE MORTGAGE OBLIGATION IS FULLY PAID WITH AN INSURANCE COMPANY OR COMPANIES ACCEPTABLE TO THE MORTGAGEE IN AN
AMOUNT NOT LESS THAN THE OUTSTANDING BALANCE OF THE MORTGAGE OBLIGATION; THAT HE/IT WILL MAKE ALL LOSS, IF ANY, UNDER SUCH
POLICY OR POLICIES, PAYABLE TO THE MORTGAGEE OR ITS ASSIGNS AS ITS INTERESTS MAY APPEAR AND FORTHWITH DELIVER SUCH POLICY OR
POLICIES TO THE MORTGAGEE, . . .’" 17

It is clear from the abovementioned provision that upon the loss of the insured vehicle, the insurance company Perla undertakes to pay directly to
the mortgagor or to their assignee, FCP, the outstanding balance of the mortgage at the time of said loss under the mortgage contract. If the claim
on the insurance policy had been approved by petitioner Perla, it would have paid the proceeds thereof directly to petitioner FCP, and this would
have had the effect of extinguishing private respondents’ obligation to petitioner FCP. Therefore, private respondents were justified in asking
petitioner FCP to demand the unpaid installments from petitioner Perla.

Because petitioner Perla had unreasonably denied their valid claim, private respondents should not be made to pay the interest, liquidated damages
and attorney’s fees as stipulated in the promissory note. As mentioned above, the contract of indemnity was procured to insure the return of the
money loaned from petitioner FCP, and the unjustified refusal of petitioner Perla to recognize the valid claim of the private respondents should not in
any way prejudice the latter.

Private respondents can not be said to have unduly enriched themselves at the expense of petitioner FCP since they will be required to pay the latter
the unpaid balance of its obligation under the promissory note.

In view of the foregoing discussion, We hold that the Court of Appeals did not err in requiring petitioner Perla to indemnify private respondents for
the loss of their insured vehicle. However, the latter should be ordered to pay petitioner FCP the amount of P55,055.93, representing the unpaid
installments from December 30, 1982 up to July 1, 1983, as shown in the statement of account prepared by petitioner FCP, 18 plus legal interest
from July 2, 1983 until fully paid. chanrobles lawlibrary : rednad

As to the award of moral damages, exemplary damages and attorney’s fees, private respondents are legally entitled to the same since petitioner
Perla had acted in bad faith by unreasonably refusing to honor the insurance claim of the private respondents. Besides, awards for moral and
exemplary damages, as well as attorney’s fees are left to the sound discretion of the Court. Such discretion, if well exercised, will not be disturbed
on appeal. 19

WHEREFORE, the assailed decision of the Court of Appeals is hereby MODIFIED to require private respondents to pay petitioner FCP the amount of
P55,055.93, with legal interest from July 2, 1983 until fully paid. The decision appealed from is hereby affirmed as to all other respects. No
pronouncement as to costs.

SO ORDERED.

Melencio-Herrera, Paras, Padilla and Regalado, JJ., concur.