Insurance Cases CENIZA

7/25/2019 Insurance Cases CENIZA

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Gaisano v Insurance G.R. No. 147839 June 8, 2006

Facts: IMC and Levi Strauss (Phi ls .) Inc. (LSPI) separa tely obtained from respondent

fire i nsura nce policies with book debt endorsements. The ins urance polic ies provide

for coverage on "book debts i n connection with ready-made clothing material s which

have been sol d or deli vered to va rious customers a nd dealers of the Insured

anywhere in the Phili ppines."

The poli cies defined book debts as the "unpaid a ccount still a ppearing in the Book ofAccount of the Insu red 45 days after the time of the loss c overed under this Poli cy."

The policies also provide for the following conditions:

1. Warr anted that the Company s hall not be lia ble for any unpaid account in respect

of the merchandis e sold and delivered by the Insu red which are outstanding at the

date of loss for a period in excess of six (6) months from the date of the covering

invoice or actual delivery of the merchandise whichever shall first occur.

2. War ranted that the Ins ured shall s ubmit to the Company within twelve (12 ) days

after the cl ose of every cal endar month all amount shown in their books of accounts

as unpaid and thus become receivable i tem from their cus tomers and deal ers.

Gaisa no is a customer and dealer of the products of IMC a nd LSPI. On February 25,

1991, the Gai sano Superstore Complex in Cagayan de Or o City, owned by petitioner,

was consumed by fi re. Incl uded in the items los t or destroyed in the fir e were stocks

of ready-made cl othing materials sold a nd delivered by IMC and LSPI.

Insura nce of America fil ed a complaint for damages agai nst Gaisano. It al leges that

IMC and LSPI were pa id for their cl aims a nd that the unpaid a ccounts of petitioner on

the s ale and deli very of ready-made clothing materia ls with IMC was P2,119,205.00

while with LSPI i t was P535,613.00.

The RTC rendered i ts decisi on dismissing Insurance's complaint. It held that the firewas purely accidental; that the cause of the fire was not attributable to the

negligence of the petitioner. Also, it sai d that IMC and LSPI retained owners hip of the

delivered goods and must bear the loss .

The CA rendered i ts decis ion and set aside the decis ion of the RTC. I t ordered Gai sano

to pay Insurance the P 2 million and the P 500,000 the latter paid to IMC and Levi

Strauss.

Hence this petition.

Iss ues: 1. WON the CA erred in construing a fir e insurance policy on book debts as

one covering the unpaid a ccounts of IMC and LSPI since s uch insurance applies to loss

of the ready-made cl othing materia ls sold and delivered to petitioner

2. WON IMC bears the risk of loss because it expressly reserved ownership of the

goods by stipula ting in the sales i nvoices that "[i]t is further agreed that merely for

purpose of securing the payment of the purchase pri ce the above descr ibed

merchandi se remains the property of the vendor until the purchas e price thereof is

fully pai d."

3. WON petitioner i s li able for the unpaid ac counts

4. WON i t has been establis hed that petitioner ha s outstanding accounts with IMC

and LSPI.

Held: No. Yes. Yes. Yes but account with LSPI unsubstantiated. Petition partly granted.

Ratio: 1. Nowhere i s it provided in the questioned i nsura nce policies that the subj ect

of the i nsurance is the goods s old and delivered to the customers and deal ers of the

insured.

Thus, what were ins ured agains t were the ac counts of IMC and LSPI with petitioner

which remained unpaid 45 days a fter the l oss through fire, and not the loss or

destruction of the goods delivered.

2. The present cas e clearl y fall s under paragra ph (1), Article 1504 of the Civil Code:

ART. 1504. Unless otherwise agreed, the goods remain at the sell er's ris k until the

ownershi p therein i s transferred to the buyer, but when the ownershi p therein is

transferred to the buyer the goods are at the buyer's risk whether actual delivery has

been made or not, except that:

(1) Where delivery of the goods has been made to the buyer or to a bailee for thebuyer, in pur suance of the contract and the ownershi p in the goods ha s been retained

by the s eller merely to secure performance by the buyer of his obli gations under the

contract, the goods are at the buyer's ris k from the time of such deli very

Thus, when the s eller retai ns ownership only to insure that the buyer wil l pay i ts debt,

the ris k of loss is borne by the buyer. Petitioner bears the risk of loss of the goods

delivered.

IMC and LSPI ha d an i nsurable interest until full payment of the val ue of the deli vered

goods. Unli ke the ci vil law concept of res perit domino, where ownershi p is the basis

for consi deration of who bears the ris k of loss, in property i nsura nce, one's interest


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is not determined by concept of title, but whether i nsured has substanti al economic

interest in the property.

Section 13 of our Insurance Code defines insurable interest as "every interest in

property, whether real or personal, or any relation thereto, or li ability in respect

thereof, of such nature that a contemplated peril might directly damnify the insur ed."

Parentheticall y, under Section 14 of the sa me Code, an i nsura ble interest in property

may cons ist i n: (a) an existing i nterest; (b) an inchoate interest founded on existing

interest; or (c) a n expectancy, coupl ed with an existing interest in that out of whic h

the expectancy ari ses.

Anyone has an ins urable interest in property who derives a benefit from its exis tence

or would s uffer loss from its destruction. Indeed, a vendor or sell er retains an

insur able interest in the property sol d so long as he has a ny interest therein, in other

words, so long as he would suffer by its destruction, as where he has a vendor's li en.

In this ca se, the ins urabl e interest of IMC and LSPI pertain to the unpai d accounts

appearing in their Books of Account 45 days after the time of the l oss covered by the

policies.

3. Petitioner's argument that it i s not li able because the fir e is a fortuitous eventunder Article 117432 of the Civil Code is mis plac ed. As held earli er, petitioner bears

the loss under Articl e 1504 (1) of the Civil Code.

Moreover, it must be stressed that the ins urance in this ca se is not for los s of goods

by fire but for petitioner's acc ounts with IMC and LSPI that remained unpai d 45 days

after the fire. Accordingly, petitioner's obl igation is for the payment of money. As

corr ectly stated by the CA, where the obl iga tion cons ists in the payment of money,

the failure of the debtor to make the payment even by reason of a fortuitous event

shal l not r elieve him of hi s l iability. The rational e for this is that the rule that an obligor

should be held exempt fr om li ability when the loss oc curs thru a fortuitous event only

holds true when the obli gation consists in the deli very of a determinate thing andthere is no stipula tion holding him liable even in cas e of fortuitous event. It does not

apply when the obliga tion is pecuniary i n nature.

Under Article 1263 of the Civi l Code, "[i]n an obligatio n to deli ver a generic thing, the

loss or destruction of anything of the sa me kind does not extinguish the obli gation."

This rule is based on the princi ple that the genus of a thing ca n never perish. An

obliga tion to pay money i s generic; therefore, it is not excused by fortuitous loss of

any s pecific property of the debtor.

4. With respect to IMC, the r espondent has a dequately establi shed its cla im. The P 3

m cl aim has been proven. The subrogation receipt, by itself, is suffici ent to establishnot only the r elationshi p of respondent as i nsurer and IMC as the insured, but also

the amount pai d to settle the i nsur ance claim. The right of subrogati on accrues simply

upon pa yment by the ins urance company of the insurance cl aim Respondent's action

agai nst petitioner i s squar ely sanctioned by Article 2207 of the Civil Code which

provides:

Art. 2207. If the pla intiff's property has been i nsured, and he has received i ndemnity

from the i nsuranc e company for the injur y or loss a rising out of the wrong or breach

of c ontract complai ned of, the insur ance company shall be subrogated to the rights

of the ins ured agains t the wrongdoer or the person who ha s vi olated the contract.

As to LSPI, respondent failed to present sufficient evidence to prove its cause of

action. There was no evidence that respondent has been subrogated to any ri ght

which LSPI may have aga inst petitioner. Fail ure to substantiate the cl aim of

subrogation is fatal to petitioner's case for recovery of P535,613.00.


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FIRST FIL-SIN LENDING CORPORATION, petitioner, vs. GLORIA D.

PADILLO, respondent.

D E C I S I O N

YNARES-SANTIAGO, J.:

Before us is a petition for review under Rule 45 of the Rules of Court, seeking a

reversal of the Court of Appeals decis ion in CA-G.R. CV No. 7518 3[1]dated October

16, 2003, which reversed and set as ide the decis ion of the Regional Tri al Court of

Manila, Branch 21 in Civil Case No. 00-96235.

On July 22, 1997, respondent Gloria D. Padillo obtained a P500,000.00 loan from

petitioner Firs t Fil-Si n Lending Corp. On September 7, 1997, respondent obtained

another P500,000.00 loa n from petitioner. In both instances, respondent executed a

promissor y note and dis clos ure statement.[2]

For the first loan, respondent made 13 monthly interest payments of P22,500.00

each before s he settled the P500,000.00 outstandi ng princ ipal obligation on February

2, 199 9. As regards the second loan, respondent made 11 monthly i nterest payments

of P25,000.00 each before paying the pri ncipal l oan of P500,000.00 on February 2,

1999.[3]In sum, respondent pa id a total of P792,500.00 for the fir st loan and

P775,000.00 for the second loan.

On January 27, 2 000, respondent filed an action for sum of money agai nst herein

petitioner before the Regional Tri al Court of Manil a. Alleging that she only agreed to

pay interest at the rates of 4.5% and 5% per annum, respectively, for the two l oans,

and not 4.5% and 5% per month, respondent sought to recover the amounts she

allegedly paid in excess of her actual obligations.

On October 1 2, 2001,[4]the trial c ourt dismissed respondents complaint, and on the

counterclaim, ordered her to pay petitioner P311,125.00 with legal interest fromFebruary 3, 1999 until fully pa id plus 10% of the amount due a s attorneys fees and

costs of the suit.[5]The trial court ruled that by i ss uing checks representing interest

payments at 4.5% and 5% monthly interest rates, respondent is now estopped from

questioning the provisions of the promiss ory notes.

On appeal, the Court of Appeals (CA) reversed and set aside the decision of the court

a quo, the dispos itive portion of which r eads:

IN VIEW OF ALL THE FOREGOING, the appeal ed deci si on is REVERSED and SET

ASIDE and a new one entered: (1) ordering Firs t Fil-Sin Lending Corporation to return

the amount of P114,000.00 to Gloria D. Padillo, and (2) deleting the award of

attorneys fees in favor of appellee. Other clai ms and counterclaims are dismissed for

lac k of suffici ent causes. No pronouncement as to cost.

SO ORDERED.[6]

The appell ate court rul ed that, bas ed on the dis closure statements executed by

respondent, the interest rates shoul d be imposed on a monthly bas is but only for the

3-month term of the loan. Thereafter, the legal interest rate will apply. The CA also

found the penalty cha rges pegged at 1% per day of delay highly uncons cionable as itwould translate to 365% per annum. Thus, it was reduced to 1% per month or 12%

per annum.

Hence, the instant petition on the following as si gnment of errors:

I

THE COURT OF APPEALS ERRED IN FINDING THAT THE APPLICABLE INTEREST SHOULD

BE THE LEGAL I NTEREST OF TWELVE PER CENT (12%) PER ANNUM DESPI TE THE CLEAR

AGREEMENT OF THE PARTIES ON ANOTHER APPLI CABLE RATE.

II

THE COURT OF APPEALS ERRED IN IMPOSI NG A PENALTY COMPUTED AT THE RATE

OF TWELVE PER CENT (12%) PER ANNUM DESPITE THE CLEAR AGREEMENT OF THE

PARTIES ON ANOTHER APPLICABLE RATE.

III

THE COURT OF APPEALS ERRED IN DELETING THE ATTORNEYS FEES AWARDED BY THE

REGIONAL TRIAL COURT.[7]

Petitioner mai ntains that the tri al court and the CA are correct in r uling that the

interest rates are to be imposed on a monthly and not on a per annum basis.However, it ins is ts that the 4.5% and 5 % monthly interest shal l be imposed until the

outstanding obligations have been fully paid.

As to the penal ty charges, petitioner argues that the 12% per annum penal ty imposed

by the CA in lieu of the 1% per day as agreed upon by the parties violates their

freedom to stipula te terms a nd conditions as they may deem proper.

Petitioner fi nally contends that the CA erred in deleting the tria l courts award of

attorneys fees ar guing that the same is anchored on sound and legal ground.

Respondent, on the other hand, avers that the i nterest on the loans i s per annum as

expressly s tated in the promiss ory notes and di scl osure statements. The pr ovision asto a nnual i nterest rate is cl ear and requires no room for i nterpretation. Respondent
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ass erts that any ambiguity in the promiss ory notes and dis closure statements s hould

not favor petitioner since the loan documents were prepared by the latter.

We agree with respondent.

Perusal of the promis sory notes a nd the di scl osure statements pertinent to the July

22, 1997 a nd September 7, 19 97 loan obli gations of r espondent cl early and

unambiguously provide for interest rates of 4.5% per annum and 5% per annum,

respectively. Nowhere was it s tated that the interest ra tes sha ll be appli ed on amonthly basis.

Thus, when the terms of the agreement are clear and expli cit that they do not j ustify

an attempt to read into i t any a ll eged intention of the pa rties , the terms a re to be

understood li teral ly just as they appear on the face of the contract.[8] It is only in

instances when the la nguage of a contract is ambiguous or obs cure that courts ought

to appl y certain establi shed rules of construction in order to ascertain the supposed

intent of the parties. However, these ru les will not be used to make a new contrac t

for the parties or to rewrite the old one, even if the contract is inequitabl e or harsh.

They are appl ied by the court merely to r esolve doubts and ambiguities within the

framework of the agreement.[9]

The lower court and the CA mistook the Loan Trans actions Summary for the

Discl osure Statement. The former was pr epared exclusi vely by petitioner and merely

summarizes the payments made by respondent and the income earned by petitioner.

There was no mention of any interest rates and having been prepared exclusi vely by

petitioner, the s ame is sel f servi ng. On the contrary, the Dis closur e Statements were

signed by both parties and categorically stated that interest rates were to be imposed

annual ly, not monthly.

As s uch, since the terms and condi tions contained in the promiss ory notes a nd

disc losure statements are cl ear and unambiguous, the s ame must be given ful l force

and effect. The expressed intention of the parties as l aid down on the loa n documents

controls.

Also, reformation cannot be resorted to as the documents have not been assailed on

the ground of mutual mistake. When a party sues on a written contract and no

attempt is made to show any vic e therein, he cannot be al lowed to lay cl aim for more

than what i ts clear s tipulations accord. His omission cannot be arbitrarily supplied by

the courts by what their own notions of j ustice or equity may dictate. [10]

Notably, petitioner even admitted that i t was solely respons ible for the preparation

of the l oan documents, a nd that i t fail ed to corr ect the pro formanote p.a. to per

month.[11]Sinc e the mis take is exclus ively attributed to petitioner, the s ame should

be char ged against it. This unil ateral mistake cannot be taken agai nst respondent

who merely affi xed her si gnature on the pro forma loan agreements. As between two

parties to a wri tten agreement, the party who gave ri se to the mis take or error in the

provisions of the same is estopped from asserting a contrary intention to that

contained therein. The checks issued by respondent do not clearl y and convincingly

prove that the real intent of the pa rties is to apply the interest ra tes on a monthly

basi s. Absent any proof of vice of consent, the promiss ory notes and di scl osure

statements remain the best evidence to ascertain the real intent of the parties.

The s ame promiss ory note provides that x x x any and al l remaini ng amount due on

the principal upon maturi ty hereof shal l earn interest at the rate of _____ from date

of maturity until full y paid. The CA thus properl y imposed the l egal interest of 12%

per annum from the time the loans matured until the same has been fully paid on

February 2, 1999. As decreed in Eastern Shipping Lines, Inc. v. Court of Appeals,[12]in

the absence of stipulation, the rate of interest shall be 12% per annum to be

computed from default.

As regards the penalty charges, we agree with the CA in ruling that the 1% penalty

per day of delay is hi ghly unconscionable. Applying Article 1229 of the Ci vil Code,

courts sha ll equitably reduce the penal ty when the princi pal obligation has been

partly or irregularly complied with, or if it is iniquitous or unconscionable.

With regard to the attorneys fees, the CA correctly deleted the award in favor of

petitioner s ince the trial c ourts decision does not reveal any explici t basis for such an

award. Attorneys fees are not a utomatical ly awarded to every winning l itigant. It

must be shown that any of the instances enumerated under Art. 220 8 [13]of the Civil

Code exists to j ustify the awar d thereof.[14]Not one of such instances exists here.

Besides, by fil ing the complai nt, respondent was merely ass erting her ri ghts which,

after due deliberations, proved to be lawful, pro per and vali d.

WHEREFORE, in vi ew of the foregoing, the October 16 , 2003 decis ion of the Court ofAppeals in CA-G.R. CV No. 75183 is AFFIRMED with the MODIFI CATION that the

interest rates on the July 22, 1997 and September 7, 1997 l oan obliga tions of

respondent Gloria D. Padillo from petitioner First Fil-Sin Lending Corporation be

imposed and computed on a per annum bas is, and upon their r espective maturities,

the interest rate of 12% per annum shal l be imposed until full payment. In addi tion,

the penalty at the ra te of 12% per a nnum shal l be imposed on the outstanding

obli gations from date of default until full pa yment.

SO ORDERED.
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Malayan Insurance Corp vs CA G.R. 119599 March 20, 1997

Facts:TKC Marketing imported 3,000 metric tons of s oya from Bra zil to Manila . It was

insur ed by Malayan at the val ue of almost 20 mill ion pesos. The vessel, however, was

stranded on South Africa because of a lawsui t regarding the possessi on of the s oya.

TKC consulted Malayan on recovery of the amount, but the latter claimed that it

wasnt covered by the pol icy. The soya was s old in Africa for Php 10 mil li on, but TKC

wanted Malayan to shoulder the remaining value of 10 million as well.

Petitioner filed s uit due to Mala yans reticence to pay. Malayan cl aimed that arrest

by civil authorities wasnt covered by the poli cy. The trial cour t ruled in TKCs favor

with damages to boot. The appellate court affirmed the decision under the reason

that cl ause 12 of the policy regarding an excepted ri sk due to ar rest by ci vil a uthorities

was deleted by Section 1 .1 of the Institute War Clauses which covered ordi nary

arrests by civi l authorities. Failure of the cargo to ar rive was als o covered by the Theft,

Pil ferage, and Non-delivery Cl ause of the contract. Hence this petition.

Iss ues: 1. WON the arrest of the vessel was a ri sk covered under the subj ect

insurance policies.

2. WON the i nsurance polic ies must strictly construed against the insur er.

Held: Yes. Yes. Petition dis missed.

Ratio: 1. Section 12 or the "Free from Capture & Seizure Clause" states: "Warr anted

free of capture, seizure, arr est, restrai nt or detai nment, and the cons equences

thereof or of any attempt thereat Should Cla use 12 be deleted, the relevant current

institute war cl auses s hall be deemed to form part of this ins uran ce.

This was real ly replaced by the subsection 1.1 of section 1 of Ins titute War Clauses

(Cargo) which inc luded the ris ks excluded from the standar d form of English Marine

Policy by the clause warranted free of capture, seizure, arrest, restraint ordetainment, and the consequences thereof of hostil ities or warl ike operati ons,

whether there be a declara tion of war or not.

The petitioners claim that the Institute War Clauses can be operative in case of

hostili ties or warlike operations on account of its heading "Ins titute War Cl auses" is

not tenable. It reiterated the CAs stand that its interpretation in recent years to

incl ude seizure or detention by civi l authorities seems consis tent with the general

purposes of the cl ause. This i nterpretation was regardless of the fact whether the

arrest was in war or by civil authorities.

The petitioner was s aid to have confused the I nstitute War cla uses and the F.C.S. in

English law.

It stated that "the F.C. & S. Clause was "origina lly incorporated in insur ance po licies

to eli minate the ris ks of warlike operations". It also averred that the F.C. & S. Clause

appli es even if there be no war or warlike operations. In the same vein, i t contended

that subs ection 1.1 of Section 1 of the I nstitute War Claus es (Cargo) "pertained

exclusi vely to warl ike operations" and yet it als o s tated that "the deletion of the F.C.

& S. Cl ause and the consequent incorpor ation of subsection 1.1 of Section 1 of the

Institute War Clauses (Cargo) was to i nclude "arrest, etc. even if it were n ot a result

of hostilities or warlike operations."

The court found that the insurance agency tried to interpret executive and political

acts as those not inc luding ordina ry arrests in the exceptions of the FCS claus e , and

cla ims that the War Claus es now incl uded executive and poli tical acts without

including ordinary arrests in the new stipulation.

A s trained interpretation which is unnatural a nd forced, a s to lead to an abs urd

conclusion or to render the policy nonsensical, should, by all means, be avoid ed.

2. Indemnity and liability insurance policies are construed in accordance with the

general rule of resolvi ng any ambiguity therein in favor of the insured, where the

contract or poli cy is prepared by the insurer. A contract of insuranc e, being a contr actof adhesion, means that any ambiguity should be resolved agai nst the insurer.


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VERANDIA VS CA

The two consolidated cases involved herein stemmed from the issuance by Fidelity

and Surety Insurance Company of the Philippines (Fidelity for short) of its Fire

Insura nce Poli cy No. F-18876 effective between June 23, 1980 and June 23, 1981

covering Rafael (Rex) Verendia's r esidential buil ding located at Tuli p Drive, Beverly

Hill s, Antipolo, Rizal i n the amount of P385 ,000.00. Designated as benefici ary was the

Monte de Pi edad & Savings Bank. Verendia als o insured the same buildi ng with two

other companies, namely, The Country Bankers Insurance for P56,000.00 under

Polic y No. PDB-80-1913 expir ing on May 12, 198 1, and The Development Insur ance

for P400,000.00 under Policy No. F-48867 expiring on June 30, 198l.

Whil e the three fire ins urance policies were in force, the i nsured property was

completely destroyed by fire on the early morning of December 28, 1980. Fidel ity

was ac cordingly informed of the loss and despite demands, refused payment under

its poli cy, thus prompting Verendia to fi le a complaint with the then Court of First

Instance of Quezon Ci ty, praying for payment of P385 ,000.00, legal i nterest thereon,

plus attorney's fees and litigation expenses. The complaint was later amended to

incl ude Monte de Piedad as an "unwill ing defendant" (P. 16, Record).

Answering the complaint, Fidelity, among other things, averred that the policy was

avoided by r eason of over-i nsura nce; that Verendia malic iously represented that the

building at the time of the fire was leased under a contract executed on June 25, 1980

to a c ertain Roberto Gar cia, when actuall y it was a Marcelo Garci a who was the

lessee.

On May 24, 198 3, the trial court rendered a decis ion, per Judge Rodolfo A. Ortiz,

ruli ng in favor of Fidelity. In sustaini ng the defenses s et up by Fidelity, the tria l court

ruled that Paragra ph 3 of the polic y was als o violated by Verendia in that the i nsured

fail ed to i nform Fideli ty of his other i nsura nce coverages with Coun try Bankers

Insura nce and Development Insurance.

Verendia appealed to the then I ntermedia te Appella te Court a nd in a decision

promulgated on March 31, 1986, (CA-G.R. No. CV No. 028 95, Coquia, Zosa,

Bartol ome, and Ejerci to (P), JJ.), the appell ate court reversed for the foll owing

reasons: (a) there was no misr epresentation concerning the lease for the contract

was si gned by Marcelo Garcia i n the name of Roberto Garcia ; and (b) Para graph 3 of

the poli cy contract requiri ng Verendia to give notice to Fidelity of other contracts of

insur ance was waived by Fidelity as s hown by its conduct in attempting to s ettle the

clai m of Verendia (pp. 32-33, Rollo of G.R. No. 76399).

Fidelity received a copy of the appell ate court's decis ion on April 4, 1986, but insteadof di rectly filing a motion for r econsideration within 15 days therefrom, Fidelity filed

on April 21, 1986, a motion for extensi on of 3 days within which to fil e a motion for

reconsideration. The motion for extension was not fil ed on April 19, 1986 which was

the 15th da y after receipt of the decisi on because sai d 15th day was a Sa turday and

of course, the fol lowing day was a Sunday (p. 14., Rollo of G.R. No. 75605). The

motion for extension was granted by the appellate court on April 30, 1986 (p.

15. ibid.), but Fi delity had in the meantime filed i ts motion for reconsideration on

April 24, 1986 (p. 16, ibid.).

Verendia filed a motion to expunge from the record Fideli ty's motion for

reconsideration on the ground that the motion for extension was filed out of time

because the 15th day from receipt of the decision which fell on a Saturday was

ignored by Fidel ity, for indeed, so Verendia contended, the Intermediate Appell ate

Court has personnel receiving pleadings even on Saturdays.

The motion to expunge was denied on June 17, 1986 (p. 27, ibid.) a nd after a motion

for reconsideration was similarly brushed aside on July 22, 1986 (p. 30, ibid .), the

petition herein docketed as G.R. No. 75605 was initiated. Subsequently, or more

specific ally on October 21, 198 6, the appell ate court denied Fi delity's motion for

reconsideration and a ccount thereof. Fideli ty filed on March 31, 1986 , the petition

for review on certiorari now docketed as G.R. No. 76399. The two petitions, inter-

related as they are, were consolidated

(p. 54, Rollo of G.R. No. 76399) and thereafter given due course.

Before we c an even begin to look into the merits of the main case whic h is the

petition for review oncertiorari, we must firs t determine whether the decis ion of the

appel la te court may stil l be reviewed, or whether the same is beyond further judicial

scrutiny. Stated otherwise, before anything else, inquiry must be made into the issue

of whether Fidelity could have legall y asked for an extension of the 15 -day

reglementary period for appeali ng or for moving for reconsideration.

As early as 1944, this Court through Justice Ozaeta already pronounced the doctrinethat the pendency of a motion for extension of time to perfect an appeal does not

sus pend the running of the period sought to be extended (Garci a vs . Buenaventura

74 Phil . 611 [1944]). To the s ame effect were the rul ings in Gibbs vs. CFI of Manila (80

Phil. 160 [1948]) Bello vs. Fernando (4 SCRA 138 [1962]), andJoe vs. King(20 SCRA

1120 [1967]).

The above cas es notwithstanding and because the Rule s of Court do not expressly

prohibit the filing of a motion for extension of time to file a motion for

reconsideration i n regard to a final order or judgment, magistra tes, incl uding those

in the Court of Appeals , held sha rply divided opini ons on whether the peri od for

appeali ng which als o includes the period for moving to reconsi der may be extended.The matter was not defini tely settled until this Court i ssued its Resolution


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in Habaluyas Enterprises, Inc. vs. Japson (142 SCRA [19 86]), declari ng that beginni ng

one month from the promulgation of the resolution on May 3 0, 1986

. . . the rule s hall be strictly enforced that no motion for extension of time to file a

motion for new trial or reconsideration shal l be filed . . . (at p. 212.)

In the i nstant case, the motion for extensi on was fi led and granted before June 30,

1986, although, of course, Verendia's motion to expunge the motion for

reconsideration was not finally disposed until July 22, 1986, or after the dictumin Habaluyashad taken effect. Seemingly, therefore, the fi li ng of the motion for

extension c ame before its formal pr oscri ption under Habaluyas, for which r eason we

now turn our attention to G.R. No. 76399.

Reduced to bar e essential s, the iss ues Fideli ty raises therein are: (a) whether or not

the contract of l ease submitted by Verendia to support hi s cl aim on the fire ins urance

polic y constitutes a fal se declar ation which would forfeit his benefits under Section

13 of the pol icy and (b) whether or not, in s ubmitting the subrogation receipt in

evidence, Fi deli ty had in effect agreed to settle Verendia's cl ai m in the amount stated

in said receipt.1

Verging on the factual , the i ssue of the veracity or fal si ty of the lease contract could

have been better resol ved by the appell ate court for , in a petiti on for review

on certiorari under Rule 45, the jur is diction of this Court is l imited to the review of

errors of l aw. The appella te court's findings of fact are, therefore, c onclus ive upon

this Court except in the foll owing cases: (1) when the conclusi on i s a finding grounded

entirely on speculation, surmises, or conjectures; (2) when the inference made is

manifestly absurd, mistaken, or impossi ble; (3) when there is grave abus e of

disc retion in the appr eciation of facts; (4) when the judgment is premis ed o n a

misapprehension of facts; (5) when the findings of fact ar e conflicting; and (6) when

the Court of Appeals in making its fi ndings went beyond the is sues of the case and

the sa me are contrary to the admiss ions of both appell ant and appellee (Ronquillo v.Court of Appeals, 195 SCRA 43 3 [199 1]). In view of the confli cting findings of the trial

court and the appella te court on i mportant issues in these consoli dated cases and it

appearing that the appell ate court judgment is ba sed on a misa pprehensi on of facts,

this Court sha ll review the evidence on record.

The contract of leas e upon which Verendia r elies to support his cla im for insurance

benefits, was entered into between him and one Robert Garci a, marr ied to Helen

Cawinia n, on June 25, 1980 (Exh. "1"), a c ouple of days after the effectivi ty of the

insur ance policy. When the rented residential bui lding was r azed to the ground on

December 28, 1980, it appears that Robert Gar cia (or Roberto Gar cia) was still within

the premis es. However, a ccording to the investi gation report prepared by Pat.Eleuterio M. Buenviaje of the Antipolo police, the building appeared to have "no

occupant" and that Mr. Roberto Garcia was "renting on the otherside (sic) portion of

said compound"

(Exh. "E"). These pieces of evidence bel ie Verendia's uncorrobor ated testimony that

Marcelo Garcia , whom he c onsidered as the real lessee, was occupying the buil ding

when it was burned (TSN, July 27, 19 82, p.10).

Robert Garcia disappeared after the fire. It was only on October 9, 1981 that an

adjus ter was able to l ocate him. Robert Garci a then executed an affidavi t before the

Nationa l Intelli gence and Securi ty Authori ty (NISA) to the effect that he was not the

lessee of Verendia's house and that his signature on the contract of lease was a

complete forgery. Thus , on the s trength of these fac ts, the adjuster submitted a

report dated December 4, 1981 recommending the denial of Verendia 's cla im (Exh.

"2").

Ironically, during the trial, Verendia admitted that it was not Robert Garcia who

si gned the lease contract. Accordi ng to Verendia, i t was si gned by Marcelo Garcia,

cousi n of Robert, who had been paying the rentals al l the while. Verendia, however,

fail ed to explai n why Marcelo ha d to si gn his cousi n's name when he in fact was

paying for the r ent and why he (Verendia) hi mself, the lessor , all owed such a ruse.

Fidelity's conclusions on these proven facts appear, therefore, to have sufficient

bases; Verendia concocted the lease contract to deflect r esponsibil ity for the fire

towards a n all eged "less ee", infl ated the val ue of the property by the al leged monthly

rental of P6,500 when in fact, the Provinci al Assessor of Rizal had ass essed the

property's fair market value to be only P40,300.00, i nsured the same property with

two other i nsura nce companies for a total coverage of around P900,000, and created

a dead-end for the adjuster by the dis appearance of Robert Garci a.

Basically a contract of indemnity, an insurance contract is the law between the

parties (Paci fic Banking Corporation vs. Court of Appeals 1 68 SCRA 1 [1988]). Its terms

and conditions constitute the measure of the insurer's liability and compliance

therewith is a condition precedent to the insured's right to recovery from the insurer

(Oriental Assurance Corporation vs. Court of Appeals , 200 SCRA 459 [1991],

citing Perla Compania de Seguros, Inc. vs. Court of Appeals , 185 SCRA 7 41 [1991]). As

it is a ls o a contract of adhesi on, an insura nce contract should be l iberally construed

in favor of the insur ed and s trictly agai nst the insur er company whi ch usually

prepares it (Western Guaranty Corporation vs. Court of Appeals, 187 SCRA 652

[1980]).

Consi dering, however, the foregoing di scussion pointing to the fact that Verendia

used a false lease contract to support his claim under Fire Insurance Policy No. F-

18876, the terms of the pol icy should be strictly construed agains t the insured.

Verendia fai led to li ve by the terms of the pol ic y, specifically Section 13 thereof which


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is expressed in terms that are clear and unambiguous, that all benefits under the

polic y shall be forfeited "If the cl aim be in any respect fraudul ent, or i f any false

declaration be made or used i n support thereof, or i f any fraudul ent means or devises

are used by the Ins ured or anyone acting in his behalf to obtain a ny benefit under the

polic y". Verendia, having presented a fal se declaration to support his cl aim for

benefits in the form of a fraudul ent lease contract, he forfeited al l benefits therein

by vir tue of Section 13 of the pol icy in the absence of proof that Fideli ty waived s uch

provision (Pacific Banking Corporation vs. Court of Appeals, supra). Worse yet, by

presenting a fal se lease contract, Verendia, reprehensi bly di sregarded the principle

that insurance contracts are uberrimae fidaeand demand the most abundant good

faith (Velas co vs. Apostol, 173 SCRA 228 [1989]).

There is al so no reason to conclude that by submitting the subrogation receipt as

evidence in court, Fideli ty bound its elf to a "mutual agreement" to settle Verendia 's

clai ms in consideration of the amount of P142,685.77. Whil e the said r eceipt appears

to have been a fil led-up form of Fideli ty, no representative of Fideli ty had signed it. It

is even incomplete as the blank spa ces for a witness a nd his a ddress are not fill ed up.

More significantly, the same receipt states that Verendia had received the aforesaid

amount. However, that Verendia had not received the amount stated therein, isproven by the fact that Verendia himself fil ed the complai nt for the ful l amount of

P385,000.00 stated in the poli cy. It might be that there had been efforts to settle

Verendia's cl aims, but surely, the subrogation receipt by itself does not prove that a

settlement had been arr ived at and enforced. Thus, to interpr et Fideli ty's

presentation of the subr ogation receipt in evidence as indi cative of its a ccession to

its "terms" is not only wanting in ra tional bas is but would be s ubstituting the wil l of

the Court for that of the parties.

WHEREFORE, the petition in G.R. No. 7560 5 is DISMISSED. The petition i n G.R. No.

7639 9 is GRANTED and the decis ion of the then Intermedia te Appellate Court under

review is REVERSED and SET ASIDE and that of the tria l court is hereby REINSTATEDand UPHELD.

SO ORDERED.


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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 by certiorari seeks the nulli fication ofthe decision1ofrespondent Court

of Appeals in CA-G.R. CV No. 13 866 which reversed the decision of the Regional Trial

Court, Branch LVII at Lucena City, jointlydeciding Civil Cases Nos. 6-84, 7-84 and8-84

thereof and consequently ordered the di smiss al of the afor esaid actions filed by

herein petitioners.

The undisputed background of this cas e as found bythe court a quo and a doptedby

respondent court, being s ustai ned by the evidence on record, we hereby reproduc e

the same with approval . 2

The antecedents of this case showthat Julian Syand Jose Sy Bang have formed abusiness partnership i nthe City ofLucena. Under the business name of New Life

Enterprises, the partnership engaged in the sale ofconstruction

materials atits placeofbusiness , a two storey buil ding situated at Iyam, Lucena City.

Thefacts show that Julian Sy insured the stocks intrade of New Life Enterpriseswith

Western Guaranty Corporation, Reliance Surety and Ins urance. Co., I nc., and

Equitable Insurance Corporation.

On May15,1981,WesternGuaranty Corporation issuedFireInsurancePolicyNo.

37201 in the amount ofP350,000.00. This pol icy was renewed on May, 13, 1982.

On July 30,1981, Reliance Surety a nd Insurance Co., Inc. i ss ued Fire Insurance PolicyNo. 69135inthe amount of P300,000 .00 (Renewed under Renewal

CertificateNo.41997)Anadditional insurancewasissuedbythesamecompanyon

November 12,1981underFireInsurancePoli cy No. 71547 in the amount of

P700,000.00.

OnFebruary8,1982,EquitableInsurance

CorporationissuedFireInsurancePolicyNo.39328 i n the amount of P200,000.00.

Thus whenthebuildingoccupiedbytheNew Life Enterprises

was gutted byfireatabout2:00 o'clockinthemorningofOctober19,1982,the

stocksin the tradeinsidesaidbuildingwereinsured against

firein thetotal amountofP1,550,000.00.

Accordingtothecertificationissuedbythe Headquarters,Phil ippine Constabulary

/Integrated National Pol ice, CampCrame,thecauseoffirewas

electrical innature.Accordingtothe plaintiffs,

thebuildingand thestocks insidewereburned.

After thefire,Julian Sywenttotheagentof

RelianceInsurancewhomheaskedtoaccompanyhim to the

officeofthecompanyso thathecan file his claim.Heaverredthat in supportofhis

claim,he submittedthefireclearance,the insurancepolicies and inventory

ofstocks.He further testified thatthe three ins urance companies ar e sister

companies,and as amatter of factwhen hewas following-uphisclaimwith

Equitable Insura nce, the Clai msManagertoldhimto go first to Reliance

Insuranceand ifsaidcompany agrees topay,they would alsopay. Thesame

treatment was given him bytheotherinsurance

companies.Ultimately,thethree insurancecompanies denied plaintiffs' claim for

payment.

In its letterofdenial datedMarch9,1983, (Exhibit "C" No.8-

84) WesternGuarantyCorporationthroughClaimsManagerBernardS.Razontoldt

he plaintiffthat his claim"isdeniedforbreachofpolicyconditions."RelianceInsurancepurveyed the same

message in its letter da ted November 23, 1982 and signedbyExecutiveVice-

PresidentMary Dee Co(Exhibit"C"No.7-84)whichsaidthat "plaintiff's

claimis deniedforbreachofpolicy conditions." Theletterofdenial receivedbythe

plaintifffromEquitableInsur ance Corporation (Exhibit"C" No. 6-84) was of the s ame

tenor,as said letter dated February 22, 1983, and signed by Vice-President

Elma R.Bondad,said"wefindthatcertain

policyconditionswereviolated,therefore, we regret, wehavetodenyyourclaim,

as itis hereby denied in its entirety."

InrelationtothecaseagainstRelianceSuretyandInsuranceCompany,acertainAtty. Serafin D.Dator,actingin behalf of

the plaintiff,sentaletterdatedFebruary13,1983 (Exhibit "G-l"No 7-

84) toExecutive Vice-President Mary Dee Co asking thathe beinformed as to

thespecificpolicy conditions allegedly violatedbytheplaintiff.Inherreply-letter

dated March 30,1983,ExecutiveVice-PresidentMary Dee Co informed Atty.

DatorthatJulianSyviolated Policy Condition No. "3" whichrequirestheinsured

togivenoticeofany insuranceorinsurances already effected covering the stocks in

trade. 3

Because of the denial of their claims forpaymentbythe three (3)insurance

companies,petitioner filedseparatecivilactionsagainsttheformerbeforethe Regional Trial


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CourtofLucenaCity,whichcaseswereconsolidatedfor trial,

andthereafter thecourtbelowrendered its decisi on on December 19, l9 86 with the

following dis position:

WHEREFORE,judgment in theabove-entitled cases is rendered in the fol lowing

manner, viz:

1. In Civil CaseNo.6-84,judgment is rendered for the

plaintiffNewLifeEnterprisesand against the defendant Equitable InsuranceCorporation orderingthe lattertopaytheformer the sum of

TwoHundred Thousand(P200,000.00)Pesos and

consideringthatpaymentoftheclaimofthe insuredhasbeenunreasonablydenied,

pursuanttoSec.244 ofthe InsuranceCode,defendant is furtherordered topay the

plaintiffattorney's fees in the amount of Twenty Thousa nd (P20,000.00)

Pesos.Allsums ofmoney tobepaidbyvirtue hereofshallbearinterestat12%per

annum (pursuant toSec.244ofthe InsuranceCode)from

February14,1983,(91stdayfromNovember 16, 1982,whenSworn Statement of

Fire Claim was receivedfromtheinsured)until theyarefully paid;

2. In Civil CaseNo.7-84,judgment is renderedfortheplaintiffJulianSyand againstthedefendantRelianceSuretyand Insurance Co.,

Inc.,orderingthe lattertopay theformerthe sum

ofP1,000,000.00(P300,000.00underPolicy

No.69135and P700,000.00underPolicyNo.71547)

andconsideringthatpaymentoftheclaimofthe

insuredhas beenunreasonablydenied,pursuantto

Sec.244ofthe InsuranceCode,defendant is further ordered

topaytheplaintifftheamountof P100,000.00 a s a ttorney's fees.

All sums of money to bepaidbyvirtuehereof shal l bearinterestat12%per

annum (pursuantto Sec. 244ofthe InsuranceCode)fromFebruary14, 1983,(91stdayfromNovember 16,

1982whenSworn Statement ofFireClaimwas receivedfromthe i nsured) until they

are fully paid;

3. I n Civil Case No.8-84, judgment is rendered for

theplaintiffNewLifeEnterprisesandagainstthedefendantWesternGuarantyCorp

oration ordering the lattertopaythesumofP350,000.00

totheConsolidatedBankand TrustCorporation,

LucenaBranch,LucenaCity,as stipulatedonthe

faceofPolicyNo.37201,andconsideringthat payment of the

aforementionedsumofmoney has beenunreasonablydenied,pursuanttoSec.244 ofthe Insurance Code,

defendant is furtherorderedtopay the plaintiffattorney's fees in theamountof

P35,000.00.

All sums of money to be pai d byvirtuehereofshall bear interest at 12%per

annum (pursuanttoSec. 244 of the Ins urance Code)fromFebruary5, 1982, (91st day

from 1st week of November 1983when insured filedformalclaimforfullindemnity

accordi ng to adj uster Vetremar DelaMerced)until they are fully paid. 4

Asaforestated, respondent Court ofAppealsreversed saidjudgmentof the trialcourt, hence this petitionthe cr uxwherein i s whether or not Conditions Nos. 3

and 27of the insurancecontractswereviolatedbypetitioners thereby resul ting in

theirforfeitureofal l thebenefitsthereunder.

ConditionNo.3ofsaidinsurancepolicies,otherwise known as

the"Other InsuranceClause,"is uniformlycontained inal l theaforestated

insurancecontractsofhereinpetitioners, as follows:

3. The insured shall givenoticetotheCompany

ofany insuranceorinsurances already effected, orwhich

maysubsequentlybeeffected, c overing any oftheproperty or properties

consistingofstocksintrade,goodsin process

and/orinventoriesonlyhereby insured,and unless

suchnoticebegivenandtheparticularsofsuch

insuranceorinsurances bestatedthereinor endorsed on this policy pursuant to

Section 50 of the Insurance Code,byoronbehalfoftheCompany

beforetheoccurrenceofany loss ordamage,all benefits underthis policyshall be

deemed forfeited, provided however, that this condition shall notappl y when the

total insuranceor insurances in force at thetimeof lossordamagenotmorethan

P200,000.00. 5

Petitionersadmitthattherespectiveinsurancepolicies

issuedbyprivaterespondents did notstateorendorse thereon

theother insurancecoverageobtainedorsubsequently effected on the same stocks

in trade for the loss of which compensation is claimedby petitioners.6Thepolicy

issuedbyrespondentWesternGuarantyCorporation(Western) did not

declarerespondentRelianceSuretyand InsuranceCo., Inc. (Reliance)and

respondent Equitable Insurance Corporation (Equitable)as co-

insurersonthesamestocks,

whileReliance's Policies coveringthesamestocksdidnot

likewisedeclareWesternand Equitableas suchco-insurers. It is

furtheradmittedbypetitioners thatEquitable'spolicy stated "nil" i n the space

thereon r equiring indication of any co-i nsuranc e although therewerethree (3)poli cies subsisting on the same stocks in trade atthetimeofthe loss,namely, that of


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Western in theamountofP350,000.00 a ndtwo(2)poli cies of Reliance in the total

amount of P1,000,000.00. 7

In other words, the coveragebyother insuranceorco-insurance effected

orsubsequentlyarrangedbypetitioners were neitherstatednorendorsed in the

polic ies of the three (3) private respondents, war ranting forfeitureofall benefits

thereunder ifwearetofollowtheexpress stipul ation in the a forequoted Policy

Condition No. 3.

Petitioners contend that they arenottobeblamedfor the omissions,

allegingthatinsuranceagentLeonAlvarez (for Western) and Yap Kam Chuan (for

Relianceand Equitable) knew about the existence of the additional

insurancecoverage and that they were not informed abouttherequirementthat

such other or additional insurance should bestatedin the

policy,as theyhavenotevenreadpolicies.8These contentions cannot pass judicial

muster.

The terms ofthecontractareclearand unambiguous.

The insuredis specificallyrequiredtodisclosetothe insurer a ny other insur ance and

its particularswhichhemay have effected on thesamesubjectmatter. Theknowledge of such insurance

bythe insurer'sagents,evenassumingthe acquisition thereof by the former,

is notthe"notice"that wouldestop the i nsurers from denying theclai m. Besides, the

so-c al led theory of imputed knowledge, that is , knowledge of the agent is

knowledgeofthe principal,asidefrombeing

ofdubious applicabilityherehas likewisebeenroundly

refutedbyrespondentcourtwhose factual findings wefind acc eptable.

Thus,itpoints outthatwhile petitionerJulianSy

claimedthathehadinformedinsuranceagentAlvarez regardi ng the co-ins urance on

the property, he contradictedhimselfbyinexplicablyclaimingthathehad notreadthe termsof the policies; that

YapDamChuancouldnotlikewise have obtained such

knowledgeforthesamereason,asidefrom the fact that

the insurancewithWesternwas obtainedbefore those of

Relianceand Equitable;and thattheconclusionof

thetrial courtthatRelianceandEquitableare"sister

companies"is anunfoundedconjecturedrawnfromthe mere fact that Yap Kam

Chuan was anagentforbothcompanieswhich also had the

sameinsuranceclaims adjuster.Availmentof the

services ofthesameagentsandadjusters bydifferent companies is a

commonpracticein the insurancebusinessand such facts

donotwarrantthespeculativeconclusionofthe tria l cour t.

Furthermore, whenthewordsand languageofdocuments are clear and plain

orreadilyunderstandablebyan ordi nary reader thereof, there is absol utely no room

for interpretationor construction anymore.9Courts arenot allowed to make

contracts fortheparties;rather,theywill intervene

onlywhentheterms ofthepolicyareambiguous, equivocal,

oruncertain.10Theparties mustabidebythe

terms ofthecontractbecausesuchtermsconstitutethe

measureofthe insurer'sliabilityandcompliancetherewith is a

conditionprecedenttothe insured's rightofrecovery from the insurer.11

While it is a cardinal principleofinsurancela wthata policy or contract

ofinsuranceis tobeconstruedliberally

infavorofthe insuredandstrictlyagainsttheinsurer

company,yetcontractsofinsurance,likeothercontracts, are to be construed

according to thesenseand meaningofthe terms which

theparties themselveshaveused.Ifsuchterms are clear and

unambiguous,theymustbetakenand understood intheir plain,ordinary and

popular sense. 12Moreover, obligations arisingfromcontractshavetheforceoflaw

between thecontractingparties and shouldbecompliedwith in good faith.13

Petitioners should be aware ofthefactthatapartyis not relieved of the duty to

exercis e the ordinar y care and prudencethatwouldbeexacted in relationto other

contracts.The conformity of the insured to the terms of the

policyis impliedfromhis failureto express any disagreement with

whatis provided for.14Itmaybetrue that themajorityrule, as cited

bypetitioners,is thatinjured

persons mayacceptpolicieswithoutreadingthem, and thatthis is not

negligenceper se.15 But, this is not without any exception. It is a nd was incumbent

uponpetitioner Sy to read the insurance contracts, and this can be reasonably

expected ofhimconsideringthathehas beena businessman si nce 196516and the

contract concerns indemnity in case ofloss in his money-makingtradeofwhich

important considerationhecouldnothavebeenunawareas it was pre-in case of

los s in his money-making trade of which i mportant consideration he could not have

been una ware as it was precis ely the reason for his procuri ng the same.

Wereiterateourpronouncement in Pioneer Insurance and Surety Corporation vs.

Yap:17

. . .Andconsideringtheterms ofthepolicywhichrequiredthe insuredtodeclareother


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insurances,thestatement in questionmustbedeemed tobeastatement (warranty)

binding on both insur er and ins ured, that there were noother insurance on the

property. . . .

Theannotationthen, mustbedeemed tobeawarrantythatthepropertywas not

insur ed byany other policy. Viol ation thereofentitledthe insurerto rescind (Sec. 69,

Insura nce Act).Suchmisrepresentation is fatal in thelightof ourviews in Santa Ana

vs. Commercial Union Assurance Company, Ltd., 55Phil . 329. Thematerialityofnon-

disclosureof other i nsurance poli cies i s not open to doubt.

xxx xxx xxx

The obvious purposeof the aforesai d requirement in thepolicy is topreventover-

insur ance and thus avert the perpetration of fr aud.Thepubli c, as well a s the insurer,

is interested in preventing the si tuation in whichafirewouldbe profitable to

the insured.Accordingto Justice Story: "The ins ured has norighttocomplain,forhe

assents to comply withal l thestipulationson

his side,in ordertoentitlehimselftothe

benefitofthecontract,which,uponreasonor principle, he

has norighttoaskthecourtto dispense with the performanceofhis ownpartoftheagreement, and yet to bindtheother partyto

obligations,which,butforthosestipula tions, would not have been entered i nto."

Subsequently, i n the cas e of Pacific Banking Corporation vs. Court of Appeals, et

al., 18we held:

It is not disputed that the insuredfailedto reveal before the

lossthreeother insurances.As found by the Court

ofAppeals,byreasonofsaidunrevealed i nsurances, the insuredhad been guiltyof a

falsedeclaration;aclearmisrepresentationand a vital one because where

the insuredhadbeenasked to reveal butdid not,thatwas deception.Otherwise

stated, had the insurerknownthattherewere many co-i nsurances, it c ould

havehesitatedor pl ainly desis ted from entering intosuchcontract.

Hence, theinsuredwas guiltyofclearfraud(Rollo, p. 25).

Petitioner's contentionthattheallegationof fraud is but

amere inferenceorsuspicionis untenable. In fact, concreteevidenceoffraudor

fals e declar ation by theinsuredwas furnishedbythe petitioner itself when the facts

allegedin the policy underclauses"Co-InsurancesDeclared"and

"OtherInsuranceClause"arematerially different from the actua l number ofco-

insurancestakenover thesubjectproperty.Consequently, "thewhole foundation of

the contract fails, the riskdoesnotattachandthepolicyneverbecomes acontract

between the parties."Representations offactsare the

foundationofthecontractand if the foundation does not

exist,thesuperstructuredoes notarise.Falsehoodin suchrepresentationsis not

shown to vary or addtothecontract,orto terminate a contract which has

oncebeen made,but to showthatnocontracthas ever

existed(Tolentino,Commercial LawsofthePhilippines, p.

991,Vol.II ,8thEd.,)Avoidorinexistent contract is one which has no

forceandeffect from the very beginning, as i f it had neverbeenentered into, and

which cannot be validatedeitherbytimeor by ratification

(Tongoyvs.C.A.,123 SCRA99 (1983); Avil a v. C.A., 145 SCRA, 1986).

Asthe insurancepolicyagainst fire expressl y required that notice s hould be gi ven by

the insuredofother insuranceuponthesame property, the total absenceof such

noticenullifies the policy.

Tofurtherwarrantand jus tifytheforfeitureofthe

benefitsunderthe insurancecontractsinvolved,weneed

merelytoturntoPolicyConditionNo.15thereof,which reads in part:

15. . . . ifanyfalsedeclarationbemadeor used insupportthereof,. .

.al l benefitsunderthis Policy shall be forfeited . . . .19

Additionally,insofar astheliabilityofrespondent

Relianceis concerned, itis notdeniedthatthecomplaint for recovery was filed in

court by petitioners only on January31,1984,oraftermorethanone(1)yearhad

elapsedfrompetitioners'receiptofthe insurers'letterof

denial onNovember 29,1982.PolicyConditionNo.27of their insurance contract

with Reli ance provides:

27. Action or suit

clause. Ifaclaimbemadeand rejectedand anactionorsuitbenotcommenced

eitherin the InsuranceCommission orany courtofcompetentjur is dictionofnotice

ofsuch rejection,orin caseofarbitrationtakingplace

as provided herein,withintwelve (12)monthsafter due

noticeoftheawardmadebythearbitrator orarbitrators

orumpire,thentheclaimshallforall purposes be

deemed tohavebeen abandonedand shallnot thereafter be recoverable

hereunder. 20

On this poi nt, the tria l cour t ruled:

. . . However, becauseofthepeculiar circumstances ofthis case,we hesitate

in concludingthatplaintiff'srighttoventilatehis claimin courthas beenbarredbyr

easonofthe timeconstraintprovided in the insurancecontract. It is


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evidentthatafterthe plaintiffhadreceived

the letterofdenial,hestillfounditnecessarytobe informed ofthespecificcauseso

rreasons for thedenial ofhis claim,reason forwhichhis lawyer, Atty. Dator

deemed itwisetosenda letterofinquirytothedefendantwhich was answered by

defendant's ExecutiveVice-Presidentin aletter datedMarch30,1983, . . .

.Assuming,gratuitously,thatthe letterofExecutiveVice-President MaryDee Co

dated March 30, 1983, was received byplaintiff onthesamedate,the period

ofli mitation should starttorunonlyfromsaid date in the spir it of fai r play and equity.

. . . 21

Wehaveperforce to reject this theoryofthecourt below for being contrar y to what

we have heretofore declared:

Itis importanttonote theprinciplelaid down bythisCourtin thecaseofAng vs.

Fulton Fire Insurance Co.(2 SCRA945 [1961])towit:

Thecondition containedin aninsurancepolicythatclaims mustbepresented within

one year

afterrejectionis notmerelyaprocedural requirementbutanimportantmatter

essential to a prompt settlement ofclaims against insurance companies as itdemandsthatinsurancesuitsbebroughtby the insuredwhiletheevidenceas tothe

originandcauseofdestructionhavenot yet disappeared.

Inenunciatingtheabove-citedprinciple, this Courthad definitely

settledtherationaleforthe necessityofbringingsuitsagainsttheInsurer

withinoneyearfromtherejectionoftheclai m. The contention

oftherespondents thattheone-yearprescriptive perioddoes

notstarttorun until thepetitionforreconsideration had beenresolvedbythe insur

er,runs countertothedeclaredpurpose forrequiringthatan

actionorsuitbefiledin the Insurance Commissionorin acourtofcompetent

jur is dictionfromthedenial oftheclaim. Touphold respondents' contention wouldcontradict anddefeat the very pri ncipl e which this Court had l aid down.Moreover,

itcan easilybeusedbyinsured persons as a scheme or device to waste time

until anyevidencewhichmaybeconsideredagains tthem is destroyed.

xxx xxx xxx

While in the Eagle Star case (96 Phil. 701),

thisCourtusesthephrase"finalrejection",the

samecannotbetakentomeantherejectionofa petition forreconsiderationas

insisted by respondents.

Suchwas clearlynotthemeaningcontemplatedbythis Court.The insurancepolicyi

n said caseprovides thatthe insuredshouldfile his claim first, with

thecarrierand thenwiththe insurer. The"final rejection"beingreferredto in said

case i s the rejection by the insura ncecompany. 22

Furthermore, assumingarguendo thatpetitioners feltthe

legitimateneedtobeclarifiedas tothepolicycondition violated,there was a

consi derable lapse of time from their receipt of the ins urer's clarificatory letter dated

March 30, 1983,upto the time the complaint was filed in court on

January31,1984.Theone-yearprescriptiveperiodwasyet

toexpireonNovember 29,1983,orabouteight(8)months from the

receiptoftheclarificatory letter,butpetitioners let the

periodlapsewithoutbringingtheiractionin court.

Weaccordingly findno"peculiarcircumstances"sufficient to

relaxtheenforcement oftheone-yearprescriptiveperiod and

we, therefore, holdthatpetitioners' cla im was definitely filed out of time.

WHEREFORE, finding no cogentreasontodisturbthe judgment

ofrespondentCourtofAppeals,thesameisherebyAFFIRMED.

SO ORDERED.


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DIOSDADO C. TY,plai ntiff-appellant,

vs.

FILIPINAS COMPAIA DE SEGUROS, et al., defendants-appellees.

BARRERA, J.:

These are appeals ins tituted by Diosda do C. Ty from a si ngle decis ion of the Court of

First Instance of Manil a (in Civ. Cases Nos. 26343, 26344, 26404, 264 05, 26406,

26442, which were tried together), dis missing the six s epara te complaints he filedagains t six i nsurance companies (Filipinas Compaia de Seguros, People's Surety &

Insurance Co., Inc., South Sea Surety & Insurance Co., Inc., The Philippine Guaranty

Company, Inc., Universal I nsurance & Indemnity Co., a nd Plari del Surety & Insurance

Co., Inc.) for col lection from each of them, of the sum of P650.00, as compensa tion

for the disability of his left hand.

The facts of these cases are not controverted:

Plai ntiff-appellant was an employee of Broadway Cotton Factory at Grac e Park,

Caloocan Ci ty, working as mechanic operator, with monthly s ala ry of P185.00. In the

latter part of 1953, he took Personal Accident Policies from several insurance

companies, among which ar e herein defendants-appellees, on di fferent

dates,1effective for 12 months . Duri ng the effectivi ty of these poli cies , or on

December 24, 1953, a fire broke out in the fac tory where plai ntiff was working. As he

was trying to put out s aid fir e with the help of a fi re extinguisher, a heavy obj ect fell

upon hi s l eft hand. Plaintiff r eceived treatment at the National Orthopedic Hospital

from December 26, 1953 to February 8, 1954, for the following i njuri es, to wit:

(1) Fracture, simple, oraximal pha lanx, i ndex finger, left;

(2) Fracture, compound, communite proxi mal phal anx, middle finger, left and 2nd

phalanx simple;

(3) Fracture, compound, communite phalanx, 4th finger, left;

(4) Fracture, simple, middle phalanx , middle finger, left;

(5) Lacerated wound, sutured, vola r as pect, small finger, left;

(6) Fracture, simple, chip, head, 1st phal anx 5th di git, left.

which inj uries, the attending surgeon c ertified, would cause temporary total

disability of appellant's left hand.

As the i nsura nce companies refused to pay hi s clai m for compensation under the

polic ies by reason of the sai d disa bility of hi s l eft hand, Ty fi led motions i n the

Municipa l Court of Manil a, which rendered favorabl e decis ion. On appeal to the

Court of First Instance by the insura nce companies, the cases were di smiss ed on the

ground that under the uniform terms of the i nsuranc e policies, partial disability of

the ins ured caused by loss of either hand to be compensable, the los s must resul t in

the amputation of that hand. Hence, these appeals by the insured.1wph1.t

Plaintiff-appellant is basing his claim for indemnity under the provision of the

insurance contract, uniform in all the cases, which reads:

"INDEMNITY FOR TOTAL OR PARTIAL DISABILITY

If the Insured sus tains any Bodily Injury which i s effected sol ely through vi olent,

external , vis ibl e and accidental means, and whic h shall not prove fatal but shall result,

independently of all other caus es and within sixty (60) days from the oc currence,

thereof, in Total or Pa rtial Disability of the Insur ed, the Company sha ll pay, subject to

the exceptions a s provi ded for hereinafter, the amount set opposite such inj ury.

PARTIAL DISABILITY

LOSS OF:

Either Hand P650.00

The los s of a hand sha ll mean the loss , by amputation through the bones of the wrist.

Appellant contends that to be entitled to indemnifica tion under the foregoing

provis ion, it i s enough that the ins ured is di sabled to such an extent that he cannot

substantia lly perform all acts or duties of the kind necessar y in the prosecution of his

busi ness. It is argued that what is compensable is the dis ability a nd not the

amputation of the hand. The defini tion of what cons titutes los s of ha nd, placed in the

contract, accordi ng to appellant, consequently, makes the provis ion ambiguous and

cal ls for the interpretation thereof by this Court.

This is not the firs t time that the proper c onstruction of this provis ion, which is

uniformly carried in personal accident policies, has been questioned. Herein

appella nt himself has already brought this matter to the a ttention of this Court in

connection with the other a ccident polic ies which he took and under which he ha d

tried to col lect indemnity, for the i dentical inj ury that is the bas is of the claims in

these ca ses. And, we had a lready rul ed:

Whi le we sympathize with the pla inti ff or his employer, for whose benefit the poli cies

were is sued, we c an not go beyond the cl ear and express conditions of the ins urance

poli cies, all of which definite partial disabi lity as los s of either ha nd

by amputationthrough the bones of the wris t. There was no such amputation in the


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case at bar. All that was found by the trial court, which i s not dis puted on appeal, was

that the physi cal injuries "caus ed temporary total di sabi lity of plai ntiff's left hand."

Note that the disability of plaintiff's hand was merely temporary, having been caused

by fractures of the index, the middle and the fourth fingers of the left hand.

We might add that the agreement contai ned in the insur ance poli cies is the law

between the pa rties. As the terms of the poli cies are clear, express and specifi c that

only amputation of the left hand should be considered as a loss thereof, an

interpretation that would include the mere fracture or other temporary disability notcovered by the pol ici es would certainly be unwarranted.2

We find no reas on to depart from the foregoing rul i ng on the matter.

Plai ntiff-appellant cannot come to the courts and cla im that he was misl ed by the

terms of the contract. The provision is clear enough to inform the party entering into

that contract that the l oss to be considered a dis ability entitled to i ndemnity, must

be severanc e or amputation of that affected member from the body of the ins ured.

Wherefore, fi nding no error in the decisi on appealed from, the s ame is hereby

affirmed, without costs. So ordered.

Concepcion, Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and

Sanchez, JJ., concur.


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GULF RESORTS, INC., petitioner, vs. PHILIPPINE CHARTER INSURANCE

CORPORATION, respondent.

D E C I S I O N

PUNO, J.:

Before the Court is the petition for certiorari under Rule 45 of the Revis ed Rules of

Court by petitioner GULF RESORTS, I NC., agai nst respondent PHILIPPINE CHARTER

INSURANCE CORPORATION. Petitioner ass ails the appella te court decision [1]which

dismis sed its two appeals a nd affirmed the judgment of the trial cour t.

For review are the warri ng interpretations of petitioner and respondent on the scope

of the insur ance companys liability for earthquake damage to petitioners properties.

Petitioner avers that, pursuant to i ts earthquake shock endorsement rider, Ins urance

Polic y No. 319 44 covers all da mages to the pr operties within i ts resort caus ed by

earthquake. Respondent contends that the r ider li mits its liability for loss to the two

swimming pools of petitioner.

The facts as establi shed by the court a quo, and affirmed by the a ppell ate court are

as follows:

[P]lai ntiff is the owner of the Pl aza Resort si tuated at Agoo, La Union and had its

properties in sa id resort insured origina lly with the American Home Assurance

Company (AHAC-AIU). In the first four i nsura nce policies issued by AHAC-AIU from

1984-85; 1985-86; 1986-1987 ; and 1987-88 (Exhs. C, D, E a nd F; al so Exhs. 1, 2, 3 and

4 respectively), the risk of l oss from earthquake shock was extended only to pl aintiffs

two swimming pools , thus, earthquake shock endt. (I tem 5 only) (Exhs. C-1; D-1, and

E and two (2) swimming pools only (Exhs. C-1; D-1, E a nd F-1). Item 5 in those policies

referred to the two (2) swimming pools only (Exhs. 1-B, 2-B, 3-B and F-2); that

subsequently AHAC(AIU) iss ued in plaintiffs favor Policy No. 206 -4182383-0 covering

the period March 14, 1988 to Mar ch 14, 198 9 (Exhs. G als o G-1) and in s aid pol icy theearthquake endorsement cla use as indicated in Exhibits C-1, D-1, Exhibits E and F-1

was deleted and the entry under Endorsements/Warranties at the time of issue read

that plai ntiff renewed i ts policy with AHAC (AIU) for the period of March 14, 1989 to

March 14, 1990 under Poli cy No. 206 -4568061-9 (Exh. H) which ca rri ed the entry

under Endors ement/Warr anties at Time of Is sue, whic h read Endors ement to Incl ude

Earthquake Shock (Exh. 6 -B-1) i n the amount of P10,700.00 and pai d P42,658.14

(Exhs. 6-A and 6-B) as premium thereof, computed as fol lows:

Item -P7,691,000.00 - on the Clubhouse only

@ .392%;

1,500,000.00 - on the furniture, etc.

contained in the building

above-mentioned@ .490%;

393,000.00- on the two s wimming

pools, only (against the

peril of earthquake

shock only) @ 0.100%

116,600.00- other buildings include

as foll ows:

a) Til ter House- P19,800.00- 0.551%

b) Power House- P41,000.00- 0.551%

c) House Shed- P55,000.00 -0.540%

P100,000.00 for furni ture, fixtures,

lines air-con and

operating equipment

that pla inti ff agreed to ins ure with defendant the pr operties covered by AHAC (AIU)

Poli cy No. 206-4568061-9 (Exh. H) provided that the pol icy wording and rates in said

poli cy be copied in the pol icy to be i ssued by defendant; that defendant i ssued Policy

No. 31944 to plaintiff covering the period of March 14, 1990 to March 14, 1991

for P10,700,600.00 for a total premium of P45,159.92 (Exh. I); that i n the

computation of the premium, defendants Polic y No. 31944 (Exh. I), which is the policy

in question, contained on the ri ght-hand upper portion of page 7 thereof, the

following:

Rate-Various

Premium - P37,420.60 F/L

2,061.52 Typhoon

1,030.76 EC

393.00 ES
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Doc. Stamps 3 ,068.10

F.S.T. 776.89

Prem. Tax 409 .05

TOTAL 45,159.92;

that the above break-down of premiums shows that pl aintiff paid onl y P393.00 as

premium agains t earthquake shock (ES); that in al l the six ins urance policies (Exhs. C,D, E, F, G and H), the premium against the peril of earthquake shock is the same, that

is P393.00 (Exhs. C and 1-B; 2-B and 3-B-1 and 3 -B-2; F-02 and 4-A-1; G-2 and 5-C-1;

6-C-1; iss ued by AHAC (Exhs. C, D, E, F, G and H) and in Poli cy No. 31944 iss ued by

defendant, the shock endorsement provide(sic):

In cons idera tion of the payment by the insur ed to the company of the

sum incl uded additiona l premium the Company agrees, notwithstanding what is

stated in the pri nted condi tions of this poli cy due to the contrary, that this insur ance

covers los s or da mage to s hock to any of the property ins ured by this Policy

occasi oned by or through or in c onsequence of earthquake (Exhs. 1 -D, 2-D, 3-A, 4-B,

5-A, 6-D and 7-C);

that in Exhibi t 7-C the word i ncluded above the underli ned portion was deleted; that

on July 16, 1990 an earthquake struck Central Luzon and Northern Luzon and

plai ntiffs properties covered by Policy No. 31944 i ssued by defendant, incl uding the

two swimming pools in i ts Agoo Playa Resort were damaged.[2]

After the earthquake, petitioner adv is ed respondent that it would be making a claim

under its Insurance Policy No. 31944 for damages on its properties. Respondent

instructed petitioner to file a formal cl aim, then as si gned the investigation of the

clai m to an independent cla ims adjuster, Bayne Adjusters and Surveyors, Inc. [3]On

July 30, 1990, respondent, through its adjuster, requested petitioner to submitvarious documents in support of i ts claim. On August 7, 1 990, Bayne Adjusters and

Surveyors, Inc., through its Vice-President A.R. de Leon,[4]rendered a preliminary

report[5]finding extensive damage caused by the earthquake to the clubhouse and to

the two swimming pools. Mr. de Leon stated that except for the swimming pools, all

affected items have no coverage for earthquake shocks .[6]On August 11, 1990 ,

petitioner filed its formal demand[7]for settlement of the damage to al l its properties

in the Agoo Playa Resort. On August 23, 1990, respondent denied petitioners claim

on the ground that its ins urance policy only afforded earthquake s hock coverage to

the two swimming pools of the resort.[8]Petitioner and respondent fai led to a rrive at

a settlement.[9]Thus, on January 24, 1991, petitioner filed a complaint[10]with the

regional tri al court of Pasi g praying for the payment of the following:

1.) The sum of P5,427,779.00, representing loss es sustained by the ins ured

properti es, with interest thereon, as computed under par . 29 of the poli cy (Annex B)

until fully paid;

2.) The sum of P428,842.00 per month, representing conti nuing loss es sustained by

plaintiff on account of defendants refusal to pay the claims;

3.) The sum of P500,000.00, by way of exemplary da mages;

4.) The sum of P500,000.00 by way of attorneys fees a nd expenses of l itigation;

5.) Costs.[11]

Respondent fi led i ts Answer with Special a nd Affirmative Defenses with Compulsory

Counterclaims.[12]

On February 21, 1994, the l ower court a fter tri al r uled in favor of the respondent, viz:

The a bove schedule clearl y shows that pl aintiff paid only a premium of P393.00

agai nst the peril of earthquake s hock, the same premium it pa id agai nst earthquake

shock only on the two swimming pools in all the policies issued by AHAC(AIU)

(Exhibits C, D, E, F and G). From this fact the Court must consequently agree with the

position of defendant that the endorsement rider (Exhibit 7-C) means that only the

two swimming pools were insured agai nst earthquake shock.

Plai ntiff correctly poi nts out that a poli cy of i nsurance is a contract of adhesi on hence,

where the la nguage used in an insur ance contract or appl ication is s uch as to create

ambiguity the same should be resol ved agai nst the party respons ibl e therefor, i.e.,

the insurance company which prepared the contract. To the mind of [the] Court, the

language used in the pol icy i n li tigation is clear and unambiguous hence there is no

need for interpretation or construction but only a ppli cation of the provis ions therein.

From the above observations the Court finds that only the two (2) swimming poolshad earthquake shock coverage and were heavi ly damaged by the earthquake which

struck on July 16, 1990. Defendant having admitted that the damage to the swimming

pools was apprai sed by defendants adj uster atP386,000.00, defendant must, by

virtue of the contract of insura nce, pay pla intiff sai d amount.

Because it is the findi ng of the Court a s stated i n the immediately preceding

paragraph that defendant is liable only for the damage caused to the two (2)

swimming pools and that defendant ha s made known to plai ntiff its wil lingness and

readiness to settle sai d liability, there is no bas is for the grant of the other damages

prayed for by plaintiff. As to the counterclaims of defendant, the Court does not

agree that the a ction filed by pl aintiff i s baseless and highly s peculative since such
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action is a l awful exercis e of the pl aintiffs right to come to Court in the honest belief

that their Complaint is meritorious. The prayer, therefore, of defendant for damages

is likewise denied.

WHEREFORE, premises considered, defendant i s ordered to pay plai ntiffs the sum of

THREE HUNDRED EIGHTY SIX THOUSAND PESOS (P386,000.00 ) representing damage

to the two (2) swimming pools, with interest at 6% per annum from the date of the

filing of the Complaint until defendants obligation to plaintiff is fully paid.

No pronouncement as to costs.[13]

Petitioners Motion for Reconsideration was denied. Thus, petitioner filed an a ppeal

with the Court of Appeals based on the following ass igned errors: [14]

A. THE TRIAL COURT ERRED IN FINDING THAT PLAINTIFF-APPELLANT CAN ONLY

RECOVER FOR THE DAMAGE TO ITS TWO SWIMMING POOLS UNDER ITS FIRE POLICY

NO. 31944, CONSIDERING ITS PROVISIONS, THE CIRCUMSTANCES SURROUNDING

THE ISSUANCE O F SAID POLICY AND THE ACTUATIONS OF THE PARTIES SUBSEQUENT

TO THE EARTHQUAKE OF JULY 16, 1990 .

B. THE TRIAL COURT ERRED IN DETERMINING PLAINTIFF-APPELLANTS RIGHT TORECOVER UNDER DEFENDANT-APPELLEES POLICY (NO. 3194 4; EXH I) BY LIMITING

ITSELF TO A CONSIDERATION OF THE SAID POLICY ISOLATED FROM THE

CIRCUMSTANCES SURROUNDING ITS ISSUANCE AND THE ACTUATIONS OF THE

PARTIES AFTER THE EARTHQUAKE OF JULY 16, 1990 .

C. THE TRIAL COURT ERRED IN NOT HOLDING THAT PLAINTIFF-APPELLANT IS

ENTITLED TO THE DAMAGES CLAI MED, WI TH INTEREST COMPUTED AT 24% PER

ANNUM ON CLAIMS ON PROCEEDS OF POLICY.

On the other hand, respondent fil ed a partia l appeal, assailing the lower courts fa ilure

to award i t attorneys fees and damages on its compulsor y countercla im.

After review, the appell ate court affirmed the decis i on of the tria l court and rul ed,

thus:

However, after carefull y perus ing the documentary evidence of both parti es, We are

not convi nced that the l ast two (2) i nsuranc e contracts (Exhs. G and H), which the

plai ntiff-appellant had with AHAC (AIU) and upon which the s ubject insurance

contract with Phil ippine Charter Insur ance Corporation is s aid to have been based

and copi ed (Exh. I), covered an extended earthquake shock insurance on al l the

insured properties.

x x x

We a ls o find that the Court a quo was correct i n not granting the pla intiff-appellants

prayer for the i mposition of interest 24% on the ins urance claim and 6% on loss of

income allegedly amounting to P4,280,000.00. Since the defendant-appellant has

expressed its willi ngness to pay the damage caused on the two (2) s wimming pools,

as the Court a quo and this Court correctly found it to be li able only, it then cannot

be sa id that it was i n default and therefore liabl e for interest.

Coming to the defendant-appell ants pra yer for an a ttorneys fees, long -standing i s the

rule that the a ward thereof i s subj ect to the sound dis cretion of the court. Thus, ifsuch di scretion is well -exercised, it will not be dis turbed on a ppeal (Castro et al. v.

CA, et al., G.R. No. 11 5838 , July 18, 2002). Moreover, bei ng the awar d thereof an

exception r ather than a rul e, it is necessary for the court to make findings of fa cts and

la

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