FIRST DIVISIONG.R. No. 124520 August 18, 1997Spouses NILO CHA and STELLA UY CHA, and UNITED INSURANCE CO., INC., petitioners, vs.COURT OF APPEALS and CKS DEVELOPMENT CORPORATION, respondents.PADILLA, J.:This petition for review on certiorari under Rule 45 of the Rules of Court seeks to set aside a decision of respondent Court of Appeals.The undisputed facts of the case are as follows:1. Petitioner-spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract with private respondent CKS Development Corporation (hereinafter CKS), as lessor, on 5 October 1988.2. One of the stipulations of the one (1) year lease contract states:18. . . . The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in the leased premises without first obtaining the written consent and approval of the LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent of the LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own benefit; . . . 13. Notwithstanding the above stipulation in the lease contract, the Cha spouses insured against loss by fire the merchandise inside the leased premises for Five Hundred Thousand (P500,000.00) with the United Insurance Co., Inc. (hereinafter United) without the written consent of private respondent CKS.4. On the day that the lease contract was to expire, fire broke out inside the leased premises.5. When CKS learned of the insurance earlier procured by the Cha spouses (without its consent), it wrote the insurer (United) a demand letter asking that the proceeds of the insurance contract (between the Cha spouses and United) be paid directly to CKS, based on its lease contract with the Cha spouses.6. United refused to pay CKS. Hence, the latter filed a complaint against the Cha spouses and United.7. On 2 June 1992, the Regional Trial Court, Branch 6, Manila, rendered a decision * ordering therein defendant United to pay CKS the amount of P335,063.11 and defendant Cha spouses to pay P50,000.00 as exemplary damages, P20,000.00 as attorney's fees and costs of suit.8. On appeal, respondent Court of Appeals in CA GR CV No. 39328 rendered a decision ** dated 11 January 1996, affirming the trial court decision, deleting however the awards for exemplary damages and attorney's fees. A motion for reconsideration by United was denied on 29 March 1996.In the present petition, the following errors are assigned by petitioners to the Court of Appeals:ITHE HONORABLE COURT OF APPEALS ERRED IN FAILING TO DECLARE THAT THE STIPULATION IN THE CONTRACT OF LEASE TRANSFERRING THE PROCEEDS OF THE INSURANCE TO RESPONDENT IS NULL AND VOID FOR BEING CONTRARY TO LAW, MORALS AND PUBLIC POLICYIITHE HONORABLE COURT OF APPEALS ERRED IN FAILING TO DECLARE THE CONTRACT OF LEASE ENTERED INTO AS A CONTRACT OF ADHESION AND THEREFORE THE QUESTIONABLE PROVISION THEREIN TRANSFERRING THE PROCEEDS OF THE INSURANCE TO RESPONDENT MUST BE RULED OUT IN FAVOR OF PETITIONERIIITHE HONORABLE COURT OF APPEALS ERRED IN AWARDING PROCEEDS OF AN INSURANCE POLICY TO APPELLEE WHICH IS NOT PRIVY TO THE SAID POLICY IN CONTRAVENTION OF THE INSURANCE LAWIVTHE HONORABLE COURT OF APPEALS ERRED IN AWARDING PROCEEDS OF AN INSURANCE POLICY ON THE BASIS OF A STIPULATION WHICH IS VOID FOR BEING WITHOUT CONSIDERATION AND FOR BEING TOTALLY DEPENDENT ON THE WILL OF THE RESPONDENT CORPORATION. 2The core issue to be resolved in this case is whether or not the aforequoted paragraph 18 of the lease contract entered into between CKS and the Cha spouses is valid insofar as it provides that any fire insurance policy obtained by the lessee (Cha spouses) over their merchandise inside the leased premises is deemed assigned or transferred to the lessor (CKS) if said policy is obtained without the prior written consent of the latter.It is, of course, basic in the law on contracts that the stipulations contained in a contract cannot be contrary to law, morals, good customs, public order or public policy. 3Sec. 18 of the Insurance Code provides:Sec. 18. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured.A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract of indemnity. Insurable interest in the property insured must exist at the time the insurance takes effect and at the time the loss occurs. 4 The basis of such requirement of insurable interest in property insured is based on sound public policy: to prevent a person from taking out an insurance policy on property upon which he has no insurable interest and collecting the proceeds of said policy in case of loss of the property. In such a case, the contract of insurance is a mere wager which is void under Section 25 of the Insurance Code, which provides:Sec. 25. Every stipulation in a policy of Insurance for the payment of loss, whether the person insured has or has not any interest in the property insured, or that the policy shall be received as proof of such interest, and every policy executed by way of gaming or wagering, is void.In the present case, it cannot be denied that CKS has no insurable interest in the goods and merchandise inside the leased premises under the provisions of Section 17 of the Insurance Code which provide:Sec. 17. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof.Therefore, respondent CKS cannot, under the Insurance Code a special law be validly a beneficiary of the fire insurance policy taken by the petitioner-spouses over their merchandise. This insurable interest over said merchandise remains with the insured, the Cha spouses. The automatic assignment of the policy to CKS under the provision of the lease contract previously quoted is void for being contrary to law and/or public policy. The proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella Uy-Cha (herein co-petitioners). The insurer (United) cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property insured.The liability of the Cha spouses to CKS for violating their lease contract in that the Cha spouses obtained a fire insurance policy over their own merchandise, without the consent of CKS, is a separate and distinct issue which we do not resolve in this case.WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 39328 is SET ASIDE and a new decision is hereby entered, awarding the proceeds of the fire insurance policy to petitioners Nilo Cha and Stella Uy-Cha.SO ORDERED.

G.R. No. 147839 June 8, 2006GAISANO CAGAYAN, INC. Petitioner, vs.INSURANCE COMPANY OF NORTH AMERICA, Respondent.D E C I S I O NAUSTRIA-MARTINEZ, J.:Before the Court is a petition for review on certiorari of the Decision1 dated October 11, 2000 of the Court of Appeals (CA) in CA-G.R. CV No. 61848 which set aside the Decision dated August 31, 1998 of the Regional Trial Court, Branch 138, Makati (RTC) in Civil Case No. 92-322 and upheld the causes of action for damages of Insurance Company of North America (respondent) against Gaisano Cagayan, Inc. (petitioner); and the CA Resolution dated April 11, 2001 which denied petitioner's motion for reconsideration.The factual background of the case is as follows:Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks owned by Levi Strauss & Co.. IMC and LSPI separately obtained from respondent fire insurance policies with book debt endorsements. The insurance policies provide for coverage on "book debts in connection with ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines."2 The policies defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this Policy."3 The policies also provide for the following conditions: 1. Warranted that the Company shall not be liable for any unpaid account in respect of the merchandise sold and delivered by the Insured 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. Warranted that the Insured shall submit to the Company within twelve (12) days after the close of every calendar month all amount shown in their books of accounts as unpaid and thus become receivable item from their customers and dealers. x x x4 x x x xPetitioner is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City, owned by petitioner, was consumed by fire. Included in the items lost or destroyed in the fire were stocks of ready-made clothing materials sold and delivered by IMC and LSPI. On February 4, 1992, respondent filed a complaint for damages against petitioner. It alleges that IMC and LSPI filed with respondent their claims under their respective fire insurance policies with book debt endorsements; that as of February 25, 1991, the unpaid accounts of petitioner on the sale and delivery of ready-made clothing materials with IMC was P2,119,205.00 while with LSPI it was P535,613.00; that respondent paid the claims of IMC and LSPI and, by virtue thereof, respondent was subrogated to their rights against petitioner; that respondent made several demands for payment upon petitioner but these went unheeded.5 In its Answer with Counter Claim dated July 4, 1995, petitioner contends that it could not be held liable because the property covered by the insurance policies were destroyed due to fortuities event or force majeure; that respondent's right of subrogation has no basis inasmuch as there was no breach of contract committed by it since the loss was due to fire which it could not prevent or foresee; that IMC and LSPI never communicated to it that they insured their properties; that it never consented to paying the claim of the insured.6 At the pre-trial conference the parties failed to arrive at an amicable settlement.7 Thus, trial on the merits ensued. On August 31, 1998, the RTC rendered its decision dismissing respondent's complaint.8 It held that the fire was purely accidental; that the cause of the fire was not attributable to the negligence of the petitioner; that it has not been established that petitioner is the debtor of IMC and LSPI; that since the sales invoices state that "it is further agreed that merely for purpose of securing the payment of purchase price, the above-described merchandise remains the property of the vendor until the purchase price is fully paid", IMC and LSPI retained ownership of the delivered goods and must bear the loss. Dissatisfied, petitioner appealed to the CA.9 On October 11, 2000, the CA rendered its decision setting aside the decision of the RTC. The dispositive portion of the decision reads:WHEREFORE, in view of the foregoing, the appealed decision is REVERSED and SET ASIDE and a new one is entered ordering defendant-appellee Gaisano Cagayan, Inc. to pay:1. the amount of P2,119,205.60 representing the amount paid by the plaintiff-appellant to the insured Inter Capitol Marketing Corporation, plus legal interest from the time of demand until fully paid;2. the amount of P535,613.00 representing the amount paid by the plaintiff-appellant to the insured Levi Strauss Phil., Inc., plus legal interest from the time of demand until fully paid.With costs against the defendant-appellee.SO ORDERED.10 The CA held that the sales invoices are proofs of sale, being detailed statements of the nature, quantity and cost of the thing sold; that loss of the goods in the fire must be borne by petitioner since the proviso contained in the sales invoices is an exception under Article 1504 (1) of the Civil Code, to the general rule that if the thing is lost by a fortuitous event, the risk is borne by the owner of the thing at the time the loss under the principle of res perit domino; that petitioner's obligation to IMC and LSPI is not the delivery of the lost goods but the payment of its unpaid account and as such the obligation to pay is not extinguished, even if the fire is considered a fortuitous event; that by subrogation, the insurer has the right to go against petitioner; that, being a fire insurance with book debt endorsements, what was insured was the vendor's interest as a creditor.11 Petitioner filed a motion for reconsideration12 but it was denied by the CA in its Resolution dated April 11, 2001.13 Hence, the present petition for review on certiorari anchored on the following Assignment of Errors:THE COURT OF APPEALS ERRED IN HOLDING THAT THE INSURANCE IN THE INSTANT CASE WAS ONE OVER CREDIT.THE COURT OF APPEALS ERRED IN HOLDING THAT ALL RISK OVER THE SUBJECT GOODS IN THE INSTANT CASE HAD TRANSFERRED TO PETITIONER UPON DELIVERY THEREOF.THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS AUTOMATIC SUBROGATION UNDER ART. 2207 OF THE CIVIL CODE IN FAVOR OF RESPONDENT.14 Anent the first error, petitioner contends that the insurance in the present case cannot be deemed to be over credit since an insurance "on credit" belies not only the nature of fire insurance but the express terms of the policies; that it was not credit that was insured since respondent paid on the occasion of the loss of the insured goods to fire and not because of the non-payment by petitioner of any obligation; that, even if the insurance is deemed as one over credit, there was no loss as the accounts were not yet due since no prior demands were made by IMC and LSPI against petitioner for payment of the debt and such demands came from respondent only after it had already paid IMC and LSPI under the fire insurance policies.15 As to the second error, petitioner avers that despite delivery of the goods, petitioner-buyer IMC and LSPI assumed the risk of loss when they secured fire insurance policies over the goods. Concerning the third ground, petitioner submits that there is no subrogation in favor of respondent as no valid insurance could be maintained thereon by IMC and LSPI since all risk had transferred to petitioner upon delivery of the goods; that petitioner was not privy to the insurance contract or the payment between respondent and its insured nor was its consent or approval ever secured; that this lack of privity forecloses any real interest on the part of respondent in the obligation to pay, limiting its interest to keeping the insured goods safe from fire.For its part, respondent counters that while ownership over the ready- made clothing materials was transferred upon delivery to petitioner, IMC and LSPI have insurable interest over said goods as creditors who stand to suffer direct pecuniary loss from its destruction by fire; that petitioner is liable for loss of the ready-made clothing materials since it failed to overcome the presumption of liability under Article 126516 of the Civil Code; that the fire was caused through petitioner's negligence in failing to provide stringent measures of caution, care and maintenance on its property because electric wires do not usually short circuit unless there are defects in their installation or when there is lack of proper maintenance and supervision of the property; that petitioner is guilty of gross and evident bad faith in refusing to pay respondent's valid claim and should be liable to respondent for contracted lawyer's fees, litigation expenses and cost of suit.17 As a general rule, in petitions for review, the jurisdiction of this Court in cases brought before it from the CA is limited to reviewing questions of law which involves no examination of the probative value of the evidence presented by the litigants or any of them.18 The Supreme Court is not a trier of facts; it is not its function to analyze or weigh evidence all over again.19 Accordingly, findings of fact of the appellate court are generally conclusive on the Supreme Court.20 Nevertheless, jurisprudence has recognized several exceptions in which factual issues may be resolved by this Court, such as: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the CA went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.21 Exceptions (4), (5), (7), and (11) apply to the present petition.At issue is the proper interpretation of the questioned insurance policy. Petitioner claims that the CA erred in construing a fire insurance policy on book debts as one covering the unpaid accounts of IMC and LSPI since such insurance applies to loss of the ready-made clothing materials sold and delivered to petitioner. The Court disagrees with petitioner's stand. It is well-settled that when the words of a contract are plain and readily understood, there is no room for construction.22 In this case, the questioned insurance policies provide coverage for "book debts in connection with ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines."23 ; and defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this Policy."24 Nowhere is it provided in the questioned insurance policies that the subject of the insurance is the goods sold and delivered to the customers and dealers of the insured. Indeed, when the terms of the agreement are clear and explicit that they do not justify an attempt to read into it any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract.25 Thus, what were insured against were the accounts of IMC and LSPI with petitioner which remained unpaid 45 days after the loss through fire, and not the loss or destruction of the goods delivered. Petitioner argues that IMC bears the risk of loss because it expressly reserved ownership of the goods by stipulating in the sales invoices that "[i]t is further agreed that merely for purpose of securing the payment of the purchase price the above described merchandise remains the property of the vendor until the purchase price thereof is fully paid."26 The Court is not persuaded. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code:ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when the ownership 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 the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such delivery; (Emphasis supplied)x x x xThus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss is borne by the buyer.27 Accordingly, petitioner bears the risk of loss of the goods delivered.IMC and LSPI did not lose complete interest over the goods. They have an insurable interest until full payment of the value of the delivered goods. Unlike the civil law concept of res perit domino, where ownership is the basis for consideration of who bears the risk of loss, in property insurance, one's interest is not determined by concept of title, but whether insured has substantial economic interest in the property.28 Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured." Parenthetically, under Section 14 of the same Code, an insurable interest in property may consist in: (a) an existing interest; (b) an inchoate interest founded on existing interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises. Therefore, an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or possession of, the subject matter of the insurance, and neither the title nor a beneficial interest is requisite to the existence of such an interest, it is sufficient that the insured is so situated with reference to the property that he would be liable to loss should it be injured or destroyed by the peril against which it is insured.29 Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction.30 Indeed, a vendor or seller retains an insurable interest in the property sold so long as he has any interest therein, in other words, so long as he would suffer by its destruction, as where he has a vendor's lien.31 In this case, the insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after the time of the loss covered by the policies.The next question is: Is petitioner liable for the unpaid accounts?Petitioner's argument that it is not liable because the fire is a fortuitous event under Article 117432 of the Civil Code is misplaced. As held earlier, petitioner bears the loss under Article 1504 (1) of the Civil Code. Moreover, it must be stressed that the insurance in this case is not for loss of goods by fire but for petitioner's accounts with IMC and LSPI that remained unpaid 45 days after the fire. Accordingly, petitioner's obligation is for the payment of money. As correctly stated by the CA, where the obligation consists in the payment of money, the failure of the debtor to make the payment even by reason of a fortuitous event shall not relieve him of his liability.33 The rationale for this is that the rule that an obligor should be held exempt from liability when the loss occurs thru a fortuitous event only holds true when the obligation consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case of fortuitous event. It does not apply when the obligation is pecuniary in nature.34 Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation." If the obligation is generic in the sense that the object thereof is designated merely by its class or genus without any particular designation or physical segregation from all others of the same class, the loss or destruction of anything of the same kind even without the debtor's fault and before he has incurred in delay will not have the effect of extinguishing the obligation.35 This rule is based on the principle that the genus of a thing can never perish. Genus nunquan perit.36 An obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any specific property of the debtor.37 Thus, whether fire is a fortuitous event or petitioner was negligent are matters immaterial to this case. What is relevant here is whether it has been established that petitioner has outstanding accounts with IMC and LSPI. With respect to IMC, the respondent has adequately established its claim. Exhibits "C" to "C-22"38 show that petitioner has an outstanding account with IMC in the amount of P2,119,205.00. Exhibit "E"39 is the check voucher evidencing payment to IMC. Exhibit "F"40 is the subrogation receipt executed by IMC in favor of respondent upon receipt of the insurance proceeds. All these documents have been properly identified, presented and marked as exhibits in court. The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as insurer and IMC as the insured, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.41 Respondent's action against petitioner is squarely sanctioned by Article 2207 of the Civil Code which provides:Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. x x xPetitioner failed to refute respondent's evidence.As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. No evidentiary weight can be given to Exhibit "F Levi Strauss",42 a letter dated April 23, 1991 from petitioner's General Manager, Stephen S. Gaisano, Jr., since it is not an admission of petitioner's unpaid account with LSPI. It only confirms the loss of Levi's products in the amount of P535,613.00 in the fire that razed petitioner's building on February 25, 1991. Moreover, there is no proof of full settlement of the insurance claim of LSPI; no subrogation receipt was offered in evidence. Thus, there is no evidence that respondent has been subrogated to any right which LSPI may have against petitioner. Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of the amount of P535,613.00.WHEREFORE, the petition is partly GRANTED. The assailed Decision dated October 11, 2000 and Resolution dated April 11, 2001 of the Court of Appeals in CA-G.R. CV No. 61848 are AFFIRMED with the MODIFICATION that the order to pay the amount of P535,613.00 to respondent is DELETED for lack of factual basis. No pronouncement as to costs.SO ORDERED.

BLUE CROSS HEALTH CARE, INC., Petitioner, vs. NEOMI* and DANILO OLIVARES, Respondents.

D E C I S I O N

CORONA, J.:

This is a petition for review on certiorari[1] of a decision[2] and resolution[3] of the Court of Appeals (CA) dated July 29, 2005 and September 21, 2005, respectively, in CA-G.R. SP No. 84163 which affirmed the decision of the Regional Trial Court (RTC), Makati City, Branch 61 dated February 2, 2004 in Civil Case No. 03-1153,[4] which in turn reversed the decision of the Metropolitan Trial Court (MeTC), Makati City, Branch 66 dated August 5, 2003 in Civil Case No. 80867.[5]

Respondent Neomi T. Olivares applied for a health care program with petitioner Blue Cross Health Care, Inc., a health maintenance firm. For the period October 16, 2002 to October 15, 2003,[6] she paid the amount of P11,117. For the same period, she also availed of the additional service of limitless consultations for an additional amount of P1,000. She paid these amounts in full on October 17, 2002. The application was approved on October 22, 2002. In the health care agreement, ailments due to pre-existing conditions were excluded from the coverage.[7]

On November 30, 2002, or barely 38 days from the effectivity of her health insurance, respondent Neomi suffered a stroke and was admitted at the Medical City which was one of the hospitals accredited by petitioner. During her confinement, she underwent several laboratory tests. On December 2, 2002, her attending physician, Dr. Edmundo Saniel,[8] informed her that she could be discharged from the hospital. She incurred hospital expenses amounting to P34,217.20. Consequently, she requested from the representative of petitioner at Medical City a letter of authorization in order to settle her medical bills. But petitioner refused to issue the letter and suspended payment pending the submission of a certification from her attending physician that the stroke she suffered was not caused by a pre-existing condition.[9]

She was discharged from the hospital on December 3, 2002. On December 5, 2002, she demanded that petitioner pay her medical bill. When petitioner still refused, she and her husband, respondent Danilo Olivares, were constrained to settle the bill.[10] They thereafter filed a complaint for collection of sum of money against petitioner in the MeTC on January 8, 2003.[11] In its answer dated January 24, 2003, petitioner maintained that it had not yet denied respondents' claim as it was still awaiting Dr. Saniel's report.

In a letter to petitioner dated February 14, 2003, Dr. Saniel stated that:This is in response to your letter dated February 13, 2003. [Respondent] Neomi T. Olivares called by phone on January 29, 2003. She stated that she is invoking patient-physician confidentiality. That she no longer has any relationship with [petitioner]. And that I should not release any medical information concerning her neurologic status to anyone without her approval. Hence, the same day I instructed my secretary to inform your office thru Ms. Bernie regarding [respondent's] wishes.xxx xxx xxx[12]In a decision dated August 5, 2003, the MeTC dismissed the complaint for lack of cause of action. It held:xxx the best person to determine whether or not the stroke she suffered was not caused by pre-existing conditions is her attending physician Dr. Saniel who treated her and conducted the test during her confinement. xxx But since the evidence on record reveals that it was no less than [respondent Neomi] herself who prevented her attending physician from issuing the required certification, petitioner cannot be faulted from suspending payment of her claim, for until and unless it can be shown from the findings made by her attending physician that the stroke she suffered was not due to pre-existing conditions could she demand entitlement to the benefits of her policy.[13]On appeal, the RTC, in a decision dated February 2, 2004, reversed the ruling of the MeTC and ordered petitioner to pay respondents the following amounts: (1) P34,217.20 representing the medical bill in Medical City and P1,000 as reimbursement for consultation fees, with legal interest from the filing of the complaint until fully paid; (2) P20,000 as moral damages; (3) P20,000 as exemplary damages; (4) P20,000 as attorney's fees and (5) costs of suit.[14] The RTC held that it was the burden of petitioner to prove that the stroke of respondent Neomi was excluded from the coverage of the health care program for being caused by a pre-existing condition. It was not able to discharge that burden.[15]

Aggrieved, petitioner filed a petition for review under Rule 42 of the Rules of Court in the CA. In a decision promulgated on July 29, 2005, the CA affirmed the decision of the RTC. It denied reconsideration in a resolution promulgated on September 21, 2005. Hence this petition which raises the following issues: (1) whether petitioner was able to prove that respondent Neomi's stroke was caused by a pre-existing condition and therefore was excluded from the coverage of the health care agreement and (2) whether it was liable for moral and exemplary damages and attorney's fees.

The health care agreement defined a pre-existing condition as:x x x a disability which existed before the commencement date of membership whose natural history can be clinically determined, whether or not the Member was aware of such illness or condition. Such conditions also include disabilities existing prior to reinstatement date in the case of lapse of an Agreement. Notwithstanding, the following disabilities but not to the exclusion of others are considered pre-existing conditions including their complications when occurring during the first year of a Members coverage:I.Tumor of Internal Organs

II. Hemorrhoids/Anal Fistula

III. Diseased tonsils and sinus conditions requiring surgery

IV. Cataract/Glaucoma

V. Pathological Abnormalities of nasal septum or turbinates

VI. Goiter and other thyroid disorders

VII.Hernia/Benign prostatic hypertrophy

VIII. Endometriosis

IX. Asthma/Chronic Obstructive Lung disease

X.Epilepsy

XI.Scholiosis/Herniated disc and other Spinal column abnormalities

XII.Tuberculosis

XIII.Cholecysitis

XIV.Gastric or Duodenal ulcer

XV.Hallux valgus

XVI.Hypertension and other Cardiovascular diseases

XVII.Calculi

XVIII.Tumors of skin, muscular tissue, bone or any form of blood dyscracias

XIX.Diabetes Mellitus

XX.Collagen/Auto-Immune disease

After the Member has been continuously covered for 12 months, this pre-existing provision shall no longer be applicable except for illnesses specifically excluded by an endorsement and made part of this Agreement.[16]Under this provision, disabilities which existed before the commencement of the agreement are excluded from its coverage if they become manifest within one year from its effectivity. Stated otherwise, petitioner is not liable for pre-existing conditions if they occur within one year from the time the agreement takes effect.

Petitioner argues that respondents prevented Dr. Saniel from submitting his report regarding the medical condition of Neomi. Hence, it contends that the presumption that evidence willfully suppressed would be adverse if produced should apply in its favor.[17]

Respondents counter that the burden was on petitioner to prove that Neomi's stroke was excluded from the coverage of their agreement because it was due to a pre-existing condition. It failed to prove this.[18]

We agree with respondents.

In Philamcare Health Systems, Inc. v. CA,[19] we ruled that a health care agreement is in the nature of a non-life insurance.[20] It is an established rule in insurance contracts that when their terms contain limitations on liability, they should be construed strictly against the insurer. These are contracts of adhesion the terms of which must be interpreted and enforced stringently against the insurer which prepared the contract. This doctrine is equally applicable to health care agreements.[21]

Petitioner never presented any evidence to prove that respondent Neomi's stroke was due to a pre-existing condition. It merely speculated that Dr. Saniel's report would be adverse to Neomi, based on her invocation of the doctor-patient privilege. This was a disputable presumption at best.

Section 3 (e), Rule 131 of the Rules of Court states:Sec. 3. Disputable presumptions. The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence:xxx xxx xxx

(e) That evidence willfully suppressed would be adverse if produced.Suffice it to say that this presumption does not apply if (a) the evidence is at the disposal of both parties; (b) the suppression was not willful; (c) it is merely corroborative or cumulative and (d) the suppression is an exercise of a privilege.[22] Here, respondents' refusal to present or allow the presentation of Dr. Saniel's report was justified. It was privileged communication between physician and patient.

Furthermore, as already stated, limitations of liability on the part of the insurer or health care provider must be construed in such a way as to preclude it from evading its obligations. Accordingly, they should be scrutinized by the courts with extreme jealousy[23] and care and with a jaundiced eye.[24] Since petitioner had the burden of proving exception to liability, it should have made its own assessment of whether respondent Neomi had a pre-existing condition when it failed to obtain the attending physician's report. It could not just passively wait for Dr. Saniel's report to bail it out. The mere reliance on a disputable presumption does not meet the strict standard required under our jurisprudence.

Next, petitioner argues that it should not be held liable for moral and exemplary damages, and attorney's fees since it did not act in bad faith in denying respondent Neomi's claim. It insists that it waited in good faith for Dr. Saniel's report and that, based on general medical findings, it had reasonable ground to believe that her stroke was due to a pre-existing condition, considering it occurred only 38 days after the coverage took effect.[25]

Wedisagree.

The RTC and CA found that there was a factual basis for the damages adjudged against petitioner. They found that it was guilty of bad faith in denying a claim based merely on its own perception that there was a pre-existing condition:[Respondents] have sufficiently shown that [they] were forced to engage in a dispute with [petitioner] over a legitimate claim while [respondent Neomi was] still experiencing the effects of a stroke and forced to pay for her medical bills during and after her hospitalization despite being covered by [petitioners] health care program, thereby suffering in the process extreme mental anguish, shock, serious anxiety and great stress. [They] have shown that because of the refusal of [petitioner] to issue a letter of authorization and to pay [respondent Neomi's] hospital bills, [they had] to engage the services of counsel for a fee of P20,000.00. Finally, the refusal of petitioner to pay respondent Neomi's bills smacks of bad faith, as its refusal [was] merely based on its own perception that a stroke is a pre-existing condition. (emphasis supplied)This is a factual matter binding and conclusive on this Court.[26] We see no reason to disturb these findings.

WHEREFORE, the petition is hereby DENIED. The July 29, 2005 decision and September 21, 2005 resolution of the Court of Appeals in CA-G.R. SP No. 84163 are AFFIRMED.

Treble costs against petitioner.

SO ORDERED.

[G.R. No. 166245, April 09, 2008]

ETERNAL GARDENS MEMORIAL PARK CORPORATION, PETITIONER, VS. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, RESPONDENT.

D E C I S I O N

VELASCO JR., J.:

The Case

Central to this Petition for Review on Certiorari under Rule 45 which seeks to reverse and set aside the November 26, 2004 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 57810 is the query: May the inaction of the insurer on the insurance application be considered as approval of the application?

The Facts

On December 10, 1980, respondent Philippine American Life Insurance Company (Philamlife) entered into an agreement denominated as Creditor Group Life Policy No. P-1920[2] with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. The amount of insurance coverage depended upon the existing balance of the purchased burial lots. The policy was to be effective for a period of one year, renewable on a yearly basis.

The relevant provisions of the policy are:ELIGIBILITY.

Any Lot Purchaser of the Assured who is at least 18 but not more than 65 years of age, is indebted to the Assured for the unpaid balance of his loan with the Assured, and is accepted for Life Insurance coverage by the Company on its effective date is eligible for insurance under the Policy.

EVIDENCE OF INSURABILITY.

No medical examination shall be required for amounts of insurance up to P50,000.00. However, a declaration of good health shall be required for all Lot Purchasers as part of the application. The Company reserves the right to require further evidence of insurability satisfactory to the Company in respect of the following:1. Any amount of insurance in excess of P50,000.00.2. Any lot purchaser who is more than 55 years of age.LIFE INSURANCE BENEFIT.

The Life Insurance coverage of any Lot Purchaser at any time shall be the amount of the unpaid balance of his loan (including arrears up to but not exceeding 2 months) as reported by the Assured to the Company or the sum of P100,000.00, whichever is smaller. Such benefit shall be paid to the Assured if the Lot Purchaser dies while insured under the Policy.

EFFECTIVE DATE OF BENEFIT.

The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company.[3]Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers, together with a copy of the application of each purchaser, and the amounts of the respective unpaid balances of all insured lot purchasers. In relation to the instant petition, Eternal complied by submitting a letter dated December 29, 1982,[4] containing a list of insurable balances of its lot buyers for October 1982. One of those included in the list as "new business" was a certain John Chuang. His balance of payments was PhP 100,000. On August 2, 1984, Chuang died.

Eternal sent a letter dated August 20, 1984[5] to Philamlife, which served as an insurance claim for Chuang's death. Attached to the claim were the following documents: (1) Chuang's Certificate of Death; (2) Identification Certificate stating that Chuang is a naturalized Filipino Citizen; (3) Certificate of Claimant; (4) Certificate of Attending Physician; and (5) Assured's Certificate.

In reply, Philamlife wrote Eternal a letter on November 12, 1984,[6] requiring Eternal to submit the following documents relative to its insurance claim for Chuang's death: (1) Certificate of Claimant (with form attached); (2) Assured's Certificate (with form attached); (3) Application for Insurance accomplished and signed by the insured, Chuang, while still living; and (4) Statement of Account showing the unpaid balance of Chuang before his death.

Eternal transmitted the required documents through a letter dated November 14, 1984,[7] which was received by Philamlife on November 15, 1984.

After more than a year, Philamlife had not furnished Eternal with any reply to the latter's insurance claim. This prompted Eternal to demand from Philamlife the payment of the claim for PhP 100,000 on April 25, 1986.[8]

In response to Eternal's demand, Philamlife denied Eternal's insurance claim in a letter dated May 20, 1986,[9] a portion of which reads:The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal Gardens Memorial Park in October 1982 for the total maximum insurable amount of P100,000.00 each. No application for Group Insurance was submitted in our office prior to his death on August 2, 1984.

In accordance with our Creditor's Group Life Policy No. P-1920, under Evidence of Insurability provision, "a declaration of good health shall be required for all Lot Purchasers as party of the application." We cite further the provision on Effective Date of Coverage under the policy which states that "there shall be no insurance if the application is not approved by the Company." Since no application had been submitted by the Insured/Assured, prior to his death, for our approval but was submitted instead on November 15, 1984, after his death, Mr. John Uy Chuang was not covered under the Policy. We wish to point out that Eternal Gardens being the Assured was a party to the Contract and was therefore aware of these pertinent provisions.

With regard to our acceptance of premiums, these do not connote our approval per se of the insurance coverage but are held by us in trust for the payor until the prerequisites for insurance coverage shall have been met. We will however, return all the premiums which have been paid in behalf of John Uy Chuang.Consequently, Eternal filed a case before the Makati City Regional Trial Court (RTC) for a sum of money against Philamlife, docketed as Civil Case No. 14736. The trial court decided in favor of Eternal, the dispositive portion of which reads:WHEREFORE, premises considered, judgment is hereby rendered in favor of Plaintiff ETERNAL, against Defendant PHILAMLIFE, ordering the Defendant PHILAMLIFE, to pay the sum of P100,000.00, representing the proceeds of the Policy of John Uy Chuang, plus legal rate of interest, until fully paid; and, to pay the sum of P10,000.00 as attorney's fees.

SO ORDERED.The RTC found that Eternal submitted Chuang's application for insurance which he accomplished before his death, as testified to by Eternal's witness and evidenced by the letter dated December 29, 1982, stating, among others: "Encl: Phil-Am Life Insurance Application Forms & Cert."[10] It further ruled that due to Philamlife's inaction from the submission of the requirements of the group insurance on December 29, 1982 to Chuang's death on August 2, 1984, as well as Philamlife's acceptance of the premiums during the same period, Philamlife was deemed to have approved Chuang's application. The RTC said that since the contract is a group life insurance, once proof of death is submitted, payment must follow.

Philamlife appealed to the CA, which ruled, thus:WHEREFORE, the decision of the Regional Trial Court of Makati in Civil Case No. 57810 is REVERSED and SET ASIDE, and the complaint is DISMISSED. No costs.

SO ORDERED.[11]The CA based its Decision on the factual finding that Chuang's application was not enclosed in Eternal's letter dated December 29, 1982. It further ruled that the non-accomplishment of the submitted application form violated Section 26 of the Insurance Code. Thus, the CA concluded, there being no application form, Chuang was not covered by Philamlife's insurance.

Hence, we have this petition with the following grounds:

The Honorable Court of Appeals has decided a question of substance, not therefore determined by this Honorable Court, or has decided it in a way not in accord with law or with the applicable jurisprudence, in holding that:I. The application for insurance was not duly submitted to respondent PhilamLife before the death of John Chuang;II. There was no valid insurance coverage; andIII. Reversing and setting aside the Decision of the Regional Trial Court dated May 29, 1996.The Court's Ruling

As a general rule, this Court is not a trier of facts and will not re-examine factual issues raised before the CA and first level courts, considering their findings of facts are conclusive and binding on this Court. However, such rule is subject to exceptions, as enunciated in Sampayan v. Court of Appeals:(1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the [CA] went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings [of the CA] are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.[12] (Emphasis supplied.)In the instant case, the factual findings of the RTC were reversed by the CA; thus, this Court may review them.

Eternal claims that the evidence that it presented before the trial court supports its contention that it submitted a copy of the insurance application of Chuang before his death. In Eternal's letter dated December 29, 1982, a list of insurable interests of buyers for October 1982 was attached, including Chuang in the list of new businesses. Eternal added it was noted at the bottom of said letter that the corresponding "Phil-Am Life Insurance Application Forms & Cert." were enclosed in the letter that was apparently received by Philamlife on January 15, 1983. Finally, Eternal alleged that it provided a copy of the insurance application which was signed by Chuang himself and executed before his death.

On the other hand, Philamlife claims that the evidence presented by Eternal is insufficient, arguing that Eternal must present evidence showing that Philamlife received a copy of Chuang's insurance application.

The evidence on record supports Eternal's position.

The fact of the matter is, the letter dated December 29, 1982, which Philamlife stamped as received, states that the insurance forms for the attached list of burial lot buyers were attached to the letter. Such stamp of receipt has the effect of acknowledging receipt of the letter together with the attachments. Such receipt is an admission by Philamlife against its own interest.[13] The burden of evidence has shifted to Philamlife, which must prove that the letter did not contain Chuang's insurance application. However, Philamlife failed to do so; thus, Philamlife is deemed to have received Chuang's insurance application.

To reiterate, it was Philamlife's bounden duty to make sure that before a transmittal letter is stamped as received, the contents of the letter are correct and accounted for.

Philamlife's allegation that Eternal's witnesses ran out of credibility and reliability due to inconsistencies is groundless. The trial court is in the best position to determine the reliability and credibility of the witnesses, because it has the opportunity to observe firsthand the witnesses' demeanor, conduct, and attitude. Findings of the trial court on such matters are binding and conclusive on the appellate court, unless some facts or circumstances of weight and substance have been overlooked, misapprehended, or misinterpreted,[14] that, if considered, might affect the result of the case.[15]

An examination of the testimonies of the witnesses mentioned by Philamlife, however, reveals no overlooked facts of substance and value.

Philamlife primarily claims that Eternal did not even know where the original insurance application of Chuang was, as shown by the testimony of Edilberto Mendoza:Atty. Arevalo:

Q Where is the original of the application form which is required in case of new coverage?

[Mendoza:]

A It is [a] standard operating procedure for the new client to fill up two copies of this form and the original of this is submitted to Philamlife together with the monthly remittances and the second copy is remained or retained with the marketing department of Eternal Gardens.

Atty. Miranda:

We move to strike out the answer as it is not responsive as counsel is merely asking for the location and does not [ask] for the number of copy.

Atty. Arevalo:

Q Where is the original?

[Mendoza:]

A As far as I remember I do not know where the original but when I submitted with that payment together with the new clients all the originals I see to it before I sign the transmittal letter the originals are attached therein.[16]

In other words, the witness admitted not knowing where the original insurance application was, but believed that the application was transmitted to Philamlife as an attachment to a transmittal letter.

As to the seeming inconsistencies between the testimony of Manuel Cortez on whether one or two insurance application forms were accomplished and the testimony of Mendoza on who actually filled out the application form, these are minor inconsistencies that do not affect the credibility of the witnesses. Thus, we ruled in People v. Paredes that minor inconsistencies are too trivial to affect the credibility of witnesses, and these may even serve to strengthen their credibility as these negate any suspicion that the testimonies have been rehearsed.[17]

We reiterated the above ruling in Merencillo v. People:Minor discrepancies or inconsistencies do not impair the essential integrity of the prosecution's evidence as a whole or reflect on the witnesses' honesty. The test is whether the testimonies agree on essential facts and whether the respective versions corroborate and substantially coincide with each other so as to make a consistent and coherent whole.[18]In the present case, the number of copies of the insurance application that Chuang executed is not at issue, neither is whether the insurance application presented by Eternal has been falsified. Thus, the inconsistencies pointed out by Philamlife are minor and do not affect the credibility of Eternal's witnesses.

However, the question arises as to whether Philamlife assumed the risk of loss without approving the application.

This question must be answered in the affirmative.

As earlier stated, Philamlife and Eternal entered into an agreement denominated as Creditor Group Life Policy No. P-1920 dated December 10, 1980. In the policy, it is provided that:EFFECTIVE DATE OF BENEFIT.

The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company.An examination of the above provision would show ambiguity between its two sentences. The first sentence appears to state that the insurance coverage of the clients of Eternal already became effective upon contracting a loan with Eternal while the second sentence appears to require Philamlife to approve the insurance contract before the same can become effective.

It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latter's interest. Thus, in Malayan Insurance Corporation v. Court of Appeals, this Court held that:Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared by the insurer. A contract of insurance, being a contract of adhesion, par excellence, any ambiguity therein should be resolved against the insurer; in other words, it should be construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations.[19] (Emphasis supplied.)In the more recent case of Philamcare Health Systems, Inc. v. Court of Appeals, we reiterated the above ruling, stating that:When the terms of insurance contract contain limitations on liability, courts should construe them in such a way as to preclude the insurer from non-compliance with his obligation. Being a contract of adhesion, the terms of an insurance contract are to be construed strictly against the party which prepared the contract, the insurer. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract, ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured, especially to avoid forfeiture.[20]Clearly, the vague contractual provision, in Creditor Group Life Policy No. P-1920 dated December 10, 1980, must be construed in favor of the insured and in favor of the effectivity of the insurance contract.

On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon a party's purchase of a memorial lot on installment from Eternal, an insurance contract covering the lot purchaser is created and the same is effective, valid, and binding until terminated by Philamlife by disapproving the insurance application. The second sentence of Creditor Group Life Policy No. P-1920 on the Effective Date of Benefit is in the nature of a resolutory condition which would lead to the cessation of the insurance contract. Moreover, the mere inaction of the insurer on the insurance application must not work to prejudice the insured; it cannot be interpreted as a termination of the insurance contract. The termination of the insurance contract by the insurer must be explicit and unambiguous.

As a final note, to characterize the insurer and the insured as contracting parties on equal footing is inaccurate at best. Insurance contracts are wholly prepared by the insurer with vast amounts of experience in the industry purposefully used to its advantage. More often than not, insurance contracts are contracts of adhesion containing technical terms and conditions of the industry, confusing if at all understandable to laypersons, that are imposed on those who wish to avail of insurance. As such, insurance contracts are imbued with public interest that must be considered whenever the rights and obligations of the insurer and the insured are to be delineated. Hence, in order to protect the interest of insurance applicants, insurance companies must be obligated to act with haste upon insurance applications, to either deny or approve the same, or otherwise be bound to honor the application as a valid, binding, and effective insurance contract.[21]

WHEREFORE, we GRANT the petition. The November 26, 2004 CA Decision in CA-G.R. CV No. 57810 is REVERSED and SET ASIDE. The May 29, 1996 Decision of the Makati City RTC, Branch 138 is MODIFIED. Philamlife is hereby ORDERED:

(1) To pay Eternal the amount of PhP 100,000 representing the proceeds of the Life Insurance Policy of Chuang;

(2) To pay Eternal legal interest at the rate of six percent (6%) per annum of PhP 100,000 from the time of extra-judicial demand by Eternal until Philamlife's receipt of the May 29, 1996 RTC Decision on June 17, 1996;

(3) To pay Eternal legal interest at the rate of twelve percent (12%) per annum of PhP 100,000 from June 17, 1996 until full payment of this award; and

(4) To pay Eternal attorney's fees in the amount of PhP 10,000.

No costs.

SO ORDERED.

ManilaFIRST DIVISIONG.R. NO. 147039 January 27, 2006DBP POOL OF ACCREDITED INSURANCE COMPANIES, Petitioner, vs.RADIO MINDANAO NETWORK, INC., Respondent.D E C I S I O NAUSTRIA-MARTINEZ, J.:This refers to the petition for certiorari under Rule 45 of the Rules of Court seeking the review of the Decision1 dated November 16, 2000 of the Court of Appeals (CA) in CA-G.R. CV No. 56351, the dispositive portion of which reads:Wherefore, premises considered, the appealed Decision of the Regional Trial Court of Makati City, Branch 138 in Civil Case No. 90-602 is hereby AFFIRMED with MODIFICATION in that the interest rate is hereby reduced to 6% per annum.Costs against the defendants-appellants.SO ORDERED.2The assailed decision originated from Civil Case No. 90-602 filed by Radio Mindanao Network, Inc. (respondent) against DBP Pool of Accredited Insurance Companies (petitioner) and Provident Insurance Corporation (Provident) for recovery of insurance benefits. Respondent owns several broadcasting stations all over the country. Provident covered respondents transmitter equipment and generating set for the amount of P13,550,000.00 under Fire Insurance Policy No. 30354, while petitioner covered respondents transmitter, furniture, fixture and other transmitter facilities for the amount of P5,883,650.00 under Fire Insurance Policy No. F-66860. In the evening of July 27, 1988, respondents radio station located in SSS Building, Bacolod City, was razed by fire causing damage in the amount of P1,044,040.00. Respondent sought recovery under the two insurance policies but the claims were denied on the ground that the cause of loss was an excepted risk excluded under condition no. 6 (c) and (d), to wit:6. This insurance does not cover any loss or damage occasioned by or through or in consequence, directly or indirectly, of any of the following consequences, namely:(c) War, invasion, act of foreign enemy, hostilities, or warlike operations (whether war be declared or not), civil war.(d) Mutiny, riot, military or popular rising, insurrection, rebellion, revolution, military or usurped power.3The insurance companies maintained that the evidence showed that the fire was caused by members of the Communist Party of the Philippines/New Peoples Army (CPP/NPA); and consequently, denied the claims. Hence, respondent was constrained to file Civil Case No. 90-602 against petitioner and Provident.After trial on the merits, the Regional Trial Court of Makati, Branch 138, rendered a decision in favor of respondent. The dispositive portion of the decision reads:IN VIEW THEREOF, judgment is rendered in favor of plaintiff. Defendant Provident Insurance Corporation is directed to pay plaintiff the amount of P450,000.00 representing the value of the destroyed property insured under its Fire Insurance Policy plus 12% legal interest from March 2, 1990 the date of the filing of the Complaint. Defendant DBP Pool Accredited Insurance Companies is likewise ordered to pay plaintiff the sum of P602,600.00 representing the value of the destroyed property under its Fire Insurance Policy plus 12% legal interest from March 2, 1990.SO ORDERED.4Both insurance companies appealed from the trial courts decision but the CA affirmed the decision, with the modification that the applicable interest rate was reduced to 6% per annum. A motion for reconsideration was filed by petitioner DBP which was denied by the CA per its Resolution dated January 30, 2001.5Hence, herein petition by DBP Pool of Accredited Insurance Companies,6 with the following assignment of errors:Assignment of ErrorsTHE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT THERE WERE NO SUFFICIENT EVIDENCE SHOWING THAT THE APPROXIMATELY TENTY [sic] (20) ARMED MEN WHO CUSED [sic] THE FIRE AT RESPONDENTS RMN PROPERTY AT BACOLOD CITY WERE MEMBERS OF THE CPP-NPA.THE HONORABLE COURT OF APPEALS ERRED WHEN IT ADJUDGED THAT RESPONDENT RMN CANNOT BEHELD [sic] FOR DAMAGES AND ATTORNEYS FEES FOR INSTITUTING THE PRESENT ACTION AGAINST THE PETITIONER UNDER ARTICLES 21, 2208, 2229 AND 2232 OF THE CIVIL CODE OF THE PHILIPPINES.7Petitioner assails the factual finding of both the trial court and the CA that its evidence failed to support its allegation that the loss was caused by an excepted risk, i.e., members of the CPP/NPA caused the fire. In upholding respondents claim for indemnity, the trial court found that:The only evidence which the Court can consider to determine if the fire was due to the intentional act committed by the members of the New Peoples Army (NPA), are the testimony [sic] of witnesses Lt. Col. Nicolas Torres and SPO3 Leonardo Rochar who were admittedly not present when the fire occurred. Their testimony [sic] was [sic] limited to the fact that an investigation was conducted and in the course of the investigation they were informed by bystanders that "heavily armed men entered the transmitter house, poured gasoline in (sic) it and then lighted it. After that, they went out shouting "Mabuhay ang NPA" (TSN, p. 12., August 2, 1995). The persons whom they investigated and actually saw the burning of the station were not presented as witnesses. The documentary evidence particularly Exhibits "5" and "5-C" do not satisfactorily prove that the author of the burning were members of the NPA. Exhibit "5-B" which is a letter released by the NPA merely mentions some dissatisfaction with the activities of some people in the media in Bacolod. There was no mention there of any threat on media facilities.8The CA went over the evidence on record and sustained the findings of the trial court, to wit:To recapitulate, defendants-appellants presented the following to support its claim, to wit: police blotter of the burning of DYHB, certification of the Negros Occidental Integrated National Police, Bacolod City regarding the incident, letter of alleged NPA members Celso Magsilang claiming responsibility for the burning of DYHB, fire investigation report dated July 29, 1988, and the testimonies of Lt. Col. Nicolas Torres and SFO III Leonardo Rochas. We examined carefully the report on the police blotter of the burning of DYHB, the certification issued by the Integrated National Police of Bacolod City and the fire investigation report prepared by SFO III Rochas and there We found that none of them categorically stated that the twenty (20) armed men which burned DYHB were members of the CPP/NPA. The said documents simply stated that the said armed men were believed to be or suspected of being members of the said group. Even SFO III Rochas admitted that he was not sure that the said armed men were members of the CPP-NPA, thus:In fact the only person who seems to be so sure that that the CPP-NPA had a hand in the burning of DYHB was Lt. Col. Nicolas Torres. However, though We found him to be persuasive in his testimony regarding how he came to arrive at his opinion, We cannot nevertheless admit his testimony as conclusive proof that the CPP-NPA was really involved in the incident considering that he admitted that he did not personally see the armed men even as he tried to pursue them. Note that when Lt. Col. Torres was presented as witness, he was presented as an ordinary witness only and not an expert witness. Hence, his opinion on the identity or membership of the armed men with the CPP-NPA is not admissible in evidence.Anent the letter of a certain Celso Magsilang, who claims to be a member of NPA-NIROC, being an admission of person which is not a party to the present action, is likewise inadmissible in evidence under Section 22, Rule 130 of the Rules of Court. The reason being that an admission is competent only when the declarant, or someone identified in legal interest with him, is a party to the action.9The Court will not disturb these factual findings absent compelling or exceptional reasons. It should be stressed that a review by certiorari under Rule 45 is a matter of discretion. Under this mode of review, the jurisdiction of the Court is limited to reviewing only errors of law, not of fact.10 Moreover, when supported by substantial evidence, findings of fact of the trial court as affirmed by the CA are conclusive and binding on the parties,11 which this Court will not review unless there are exceptional circumstances. There are no exceptional circumstances in this case that would have impelled the Court to depart from the factual findings of both the trial court and the CA. Both the trial court and the CA were correct in ruling that petitioner failed to prove that the loss was caused by an excepted risk. Petitioner argues that private respondent is responsible for proving that the cause of the damage/loss is covered by the insurance policy, as stipulated in the insurance policy, to wit:Any loss or damage happening during the existence of abnormal conditions (whether physical or otherwise) which are occasioned by or through in consequence directly or indirectly, of any of the said occurrences shall be deemed to be loss or damage which is not covered by the insurance, except to the extent that the Insured shall prove that such loss or damage happened independently of the existence of such abnormal conditions.In any action, suit or other proceeding where the Companies allege that by reason of the provisions of this condition any loss or damage is not covered by this insurance, the burden of proving that such loss or damage is covered shall be upon the Insured.12An insurance contract, being a contract of adhesion, should be so interpreted as to carry out the purpose for which the parties entered into the contract which is to insure against risks of loss or damage to the goods. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations.13The "burden of proof" contemplated by the aforesaid provision actually refers to the "burden of evidence" (burden of going forward).14 As applied in this case, it refers to the duty of the insured to show that the loss or damage is covered by the policy. The foregoing clause notwithstanding, the burden of proof still rests upon petitioner to prove that the damage or loss was caused by an excepted risk in order to escape any liability under the contract.Burden of proof is the duty of any party to present evidence to establish his claim or defense by the amount of evidence required by law, which is preponderance of evidence in civil cases. The party, whether plaintiff or defendant, who asserts the affirmative of the issue has the burden of proof to obtain a favorable judgment. For the plaintiff, the burden of proof never parts.15 For the defendant, an affirmative defense is one which is not a denial of an essential ingredient in the plaintiffs cause of action, but one which, if established, will be a good defense i.e. an "avoidance" of the claim.16 Particularly, in insurance cases, where a risk is excepted by the terms of a policy which insures against other perils or hazards, loss from such a risk constitutes a defense which the insurer may urge, since it has not assumed that risk, and from this it follows that an insurer seeking to defeat a claim because of an exception or limitation in the policy has the burden of proving that the loss comes within the purview of the exception or limitation set up. If a proof is made of a loss apparently within a contract of insurance, the burden is upon the insurer to prove that the loss arose from a cause of loss which is excepted or for which it is not liable, or from a cause which limits its liability.17 Consequently, it is sufficient for private respondent to prove the fact of damage or loss. Once respondent makes out a prima facie case in its favor, the duty or the burden of evidence shifts to petitioner to controvert respondents prima facie case.18 In this case, since petitioner alleged an excepted risk, then the burden of evidence shifted to petitioner to prove such exception. It is only when petitioner has sufficiently proven that the damage or loss was caused by an excepted risk does the burden of evidence shift back to respondent who is then under a duty of producing evidence to show why such excepted risk does not release petitioner from any liability. Unfortunately for petitioner, it failed to discharge its primordial burden of proving that the damage or loss was caused by an excepted risk.Petitioner however, insists that the evidence on record established the identity of the author of the damage. It argues that the trial court and the CA erred in not appreciating the reports of witnesses Lt. Col Torres and SFO II Rochar that the bystanders they interviewed claimed that the perpetrators were members of the CPP/NPA as an exception to the hearsay rule as part of res gestae.A witness can testify only to those facts which he knows of his personal knowledge, which means those facts which are derived from his perception.19 A witness may not testify as to what he merely learned from others either because he was told or read or heard the same. Such testimony is considered hearsay and may not be received as proof of the truth of what he has learned. The hearsay rule is based upon serious concerns about the trustworthiness and reliability of hearsay evidence inasmuch as such evidence are not given under oath or solemn affirmation and, more importantly, have not been subjected to cross-examination by opposing counsel to test the perception, memory, veracity and articulateness of the out-of-court declarant or actor upon whose reliability on which the worth of the out-of-court statement depends.20Res gestae, as an exception to the hearsay rule, refers to those exclamations and statements made by either the participants, victims, or spectators to a crime immediately before, during, or after the commission of the crime, when the circumstances are such that the statements were made as a spontaneous reaction or utterance inspired by the excitement of the occasion and there was no opportunity for the declarant to deliberate and to fabricate a false statement. The rule in res gestae applies when the declarant himself did not testify and provided that the testimony of the witness who heard the declarant complies with the following requisites: (1) that the principal act, the res gestae, be a startling occurrence; (2) the statements were made before the declarant had the time to contrive or devise a falsehood; and (3) that the statements must concern the occurrence in question and its immediate attending circumstances.21The Court is not convinced to accept the declarations as part of res gestae. While it may concede that these statements were made by the bystanders during a startling occurrence, it cannot be said however, that these utterances were made spontaneously by the bystanders and before they had the time to contrive or devise a falsehood. Both SFO III Rochar and Lt. Col. Torres received the bystanders statements while they were making their investigations during and after the fire. It is reasonable to assume that when these statements were noted down, the bystanders already had enough time and opportunity to mill around, talk to one another and exchange information, not to mention theories and speculations, as is the usual experience in disquieting situations where hysteria is likely to take place. It cannot therefore be ascertained whether these utterances were the products of truth. That the utterances may be mere idle talk is not remote.At best, the testimonies of SFO III Rochar and Lt. Col. Torres that these statements were made may be considered as independently relevant statements gathered in the course of their investigation, and are admissible not as to the veracity thereof but to the fact that they had been thus uttered.22Furthermore, admissibility of evidence should not be equated with its weight and sufficiency.23 Admissibility of evidence depends on its relevance and competence, while the weight of evidence pertains to evidence already admitted and its tendency to convince and persuade.24 Even assuming that the declaration of the bystanders that it was the members of the CPP/NPA who caused the fire may be admitted as evidence, it does not follow that such declarations are sufficient proof. These declarations should be calibrated vis--vis the other evidence on record. And the trial court aptly noted that there is a need for additional convincing proof, viz.:The Court finds the foregoing to be insufficient to establish that the cause of the fire was the intentional burning of the radio facilities by the rebels or an act of insurrection, rebellion or usurped power. Evidence that persons who burned the radio facilities shouted "Mabuhay ang NPA" does not furnish logical conclusion that they are member [sic] of the NPA or that their act was an act of rebellion or insurrection. Additional convincing proof need be submitted. Defendants failed to discharge their responsibility to present adequate proof that the loss was due to a risk excluded.25 While the documentary evidence presented by petitioner, i.e., (1) the police blotter; (2) the certification from the Bacolod Police Station; and (3) the Fire Investigation Report may be considered exceptions to the hearsay rule, being entries in official records, nevertheless, as noted by the CA, none of these documents categorically stated that the perpetrators were members of the CPP/NPA.26 Rather, it was stated in the police blotter that: "a group of persons accompanied by one (1) woman all believed to be CPP/NPA more or less 20 persons suspected to be CPP/NPA,"27 while the certification from the Bacolod Police station stated that " some 20 or more armed men believed to be members of the New Peoples Army NPA,"28 and the fire investigation report concluded that "(I)t is therefore believed by this Investigating Team that the cause of the fire is intentional, and the armed men suspected to be members of the CPP/NPA where (sic) the ones responsible "29 All these documents show that indeed, the "suspected" executor of the fire were believed to be members of the CPP/NPA. But suspicion alone is not sufficient, preponderance of evidence being the quantum of proof. All told, the Court finds no reason to grant the present petition.WHEREFORE, the petition is DISMISSED. The Court of Appeals Decision dated November 16, 2000 and Resolution dated January 30, 2001 rendered in CA-G.R. CV No. 56351 are AFFIRMED in toto.SO ORDERED.

MANILA MAHOGANY MANUFACTURING CORPORATION vs. COURT OF APPEALS AND ZENITH INSURANCE CORPORATION (G.R.No. L-52756 (October12, 1987)... FACTS: Petitioner Manila Mahogany Manufacturing Corporation insured its Mercedes Benz4-door sedan with respondent Zenith Insurance Corporation. The insured vehicle was bumped and damaged by a truck owned by San Miguel Corporation. For the damage caused, respondent company paid petitioner five thousand pesos(P5,000.00) in amicable settlement. Petitioner's general manager executed a Release of Claim, subrogating respondent company to all its right to action against San Miguel Corporation. Thereafter, respondent company wrote Insurance Adjusters, Inc. to demand reimbursement from San Miguel Corporation of the amount it had paid petitioner. Insurance Adjusters, Inc. refused reimbursement, alleging that San Miguel Corporation had already paid petitioner P4, 500.00 for the damages to petitioner's motor vehicle, as evidenced by a cash voucher and a Release of Claim executed by the General Manager ofpetitioner discharging San Miguel Corporation from "all actions, claims, demands the rights ofaction that now exist or hereafter develop arising out of or asa consequence of the accident."RespondentinsurancecompanythusdemandedfrompetitionerreimbursementofthesumofP4, 500.00 paid by San Miguel Corporation. Petitioner refused; hence, the instant case.ISSUE:Whether or not the respondent insurance company is subrogated to the rights of the petitioner against San MiguelCorporationHELD: YESRULING: The Supreme Court held that if a property is insured and the owner receives the indemnity from the insurer, it is provided in [Article 2207 of the New Civil Code] that the insurer isdeemed subrogatedto the rights of the insured against the wrongdoer and if the amount paid by the insurer does not fully cover the loss, then the aggrieved party isthe one entitled to recover thedeficiency. Under this legal provision, the real party in interest with regard to the portion of the indemnity paid is the insurerand not the insured. Hence, petitioner is entitled to keep the sum of P4,500.00 paid by San Miguel Corporation under its clear right to file a deficiency claim for damages incurred, against the wrongdoer, should the insurance company not fully pay for the injury caused (Article 2207, New Civil Code).However, when petitionerreleased San Miguel Corporation from any liability, petitioner's right to retain the sumof P5, 000.00 no longerexisted, thereby entitling private respondent to recover thesame. The right of subrogation can only exist after the insurer has paid the insured otherwise the insured willbe deprived of his right to full indemnity. If the insurance proceeds are not sufficient to cover the damages suffered by the insured, then he may sue the party responsible for the damage for the remainder. To the extent of the amount he has already received from, the insurer enjoysthe right of subrogation. Since the insurer can be subrogated to only such rights as the insured may have, should the insured ,after receiving payment from the insurer, release the wrongdoer who caused the loss, the insurer loses his rights against the latter. But in such a case, the insurer will be entitled to recover from the insured whatever ithas paid to the latter, unless the releasewas made with the consent of the insurer.See MoreGREAT PACIFIC LIFE v. CA (LEUTERIO)316 SCRA 677QUISUMBING; October 13, 1999NATUREPetition for Review of CA decisionFACTS- A contract of group life insurance was executedbetween petitioner Great Pacific Life AssuranceCorporation (hereinafter Grepalife) and DevelopmentBank of the Philippines (hereinafter DBP). Grepalifeagreed to insure the lives of eligible housing loanmortgagors of DBP.- In Nov. 1983, Dr. Wilfredo Leuterio, a physician anda housing debtor of DBP applied for membership inthe group life insurance plan. In an application form,Dr. Leuterio answered Qs concerning his healthcondition as follows:Q: Have you ever had, or consulted, a physician fora heart condition, high blood pressure, cancer,diabetes, lung, kidney or stomach disorder or anyother physical impairment? No.Q: Are you now, to the best of your knowledge, ingood health? Yes.- Grepalife issued an insurance coverage of Dr.Leuterio, to the extent of his DBP mortgageindebtedness of P86,200.00. In Aug. 1984, Dr.Leuterio died due to "massive cerebral hemorrhage."DBP submitted a death claim to Grepalife. Grepalifedenied the claim because Dr. Leuterio was notphysically healthy when he applied for an insurance.Grepalife insisted that Dr. Leuterio did not disclose hehad been suffering from hypertension, which causedhis death. Allegedly, such non-disclosure constitutedconcealment that justified the denial of the claim.- Herein respondent Medarda Leuterio, widow, filed acomplaint with RTC against Grepalife for "SpecificPerformance with Damages." Dr. Mejia, who issuedthe death certificate, testified that Dr. Leuteriocomplained of headaches presumably due to highblood pressure. The inference was not conclusivebecause Dr. Leuterio was not autopsied, hence, othercauses were not ruled out.- RTC ruled in favor of respondent widow and againstGrepalife. CA sustained the RTC decision. Hence, thepresent petition.ISSUES1. WON CA erred in holding petitioner liable to DBPas beneficiary in a group life insurance contract froma complaint filed by the widow of thedecedent/mortgagor2. WON CA erred in not finding that Dr. Leuterioconcealed that he had hypertension, which wouldvitiate the insurance contract3. WON CA erred in holding Grepalife liable forP86,200.00 without proof of the actual outstandingmortgage payable by the mortgagor to DBPHELD1. NORatio Insured, being the person with whom thecontract was made, is primarily the proper person tobring suit. Subject to some exceptions, insured maythus sue, although the policy is taken wholly or inpart for the benefit of another person named orunnamed, and although it is expressly made payableto another as his interest may appear or otherwise.Although a policy issued to a mortgagor is taken outfor the benefit of the mortgagee and is made payableto him, yet the mortgagor may sue thereon in hisown name, especially where the mortgagee's interestis less than the full amount recoverable under thepolicy. (See Sec. 8, Insurance Code)Reasoning[a] The insured private respondent did not cede tothe mortgagee all his rights or interests in theinsurance, the policy stating that: In the event ofthe debtor's death before his indebtedness with theCreditor (DBP) shall have been fully paid, an amountto pay the outstanding indebtedness shall first bepaid to the creditor and the balance of sum assured,if there is any, shall then be paid to thebeneficiary/ies designated by the debtor. When DBPsubmitted the insurance claim against Grepalife, thelatter denied payment thereof, interposing thedefense of concealment committed by the insured.Thereafter, DBP collected the debt from themortgagor and took the necessary action offoreclosure on the residential lot of privaterespondent.[b] Since a policy of insurance upon life or healthmay pass by transfer, will or succession to anyperson, whether he has an insurable interest or not,and such person may recover it whatever the insuredmight have recovered, the widow of the decedent Dr.Leuterio may file the suit against the insurer,Grepalife.2. NORatio The fraudulent intent on the part of theinsured must be established to entitle the insurer torescind the contract. Misrepresentation as a defenseof the insurer to avoid liability is an affirmativedefense and the duty to establish such defense bysatisfactory and convincing evidence rests upon theinsurer. In the case at bar, the petitioner failed toclearly and satisfactorily establish its defense, and istherefore liable to pay the proceeds of the insurance.Reasoning[a] The insured, Dr. Leuterio, had answered in hisinsurance application that he was in good health andthat he had not consulted a doctor or any of theenumerated ailments, including hypertension; whenINSURANCE Page 44he died the attending physician had certified in thedeath certificate that the former died of cerebralhemorrhage, probably secondary to hypertension.From this report, petitioner Grepalife refused to paythe insurance claim. It alleged that the insured hadconcealed the fact that he had hypertension.[b] Contrary to Grepalifes allegations, there was nosufficient proof that the insured had suffered fromhypertension. Aside from the statement of theinsured's widow who was not even sure if themedicines taken by Dr. Leuterio were forhypertension, the appellant had not proven norproduced any witness who could attest to Dr.Leuterio's medical history.[c] Grepalife had failed to establish that there wasconcealment made by the insured, hence, it cannotrefuse payment of the claim.3. NO- Considering the supervening event that DBPforeclosed in 1995 their residential lot, in satisfactionof mortgagor's outstanding loan, the insuranceproceeds shall inure to the benefit of the heirs of thedeceased person or his beneficiaries. Equity dictatesthat DBP should not unjustly enrich itself at theexpense of another. Hence, it cannot collect theinsurance proceeds, after it already foreclosed on themortgage. The proceeds now rightly belong to Dr.Leuterio's heirs represented by his widow, hereinprivate respondent.- The Court ruled this issue based on the clearprovisions of the policy. The mortgagor paid thepremium according to the coverage of his insurance,which states that: "The policy states that uponreceipt of due proof of the Debtor's death during theterms of this insurance, a death benefit in theamount of P86,200.00 shall be paid In the event ofthe debtor's death before his indebtedness with thecreditor shall have been fully paid, an amount to paythe outstanding indebtedness shall first be paid tothe Creditor and the balance of the Sum Assured, ifthere is any shall then be paid to the beneficiary/iesdesignated by the debtor." From this, it is clear thatGrepalife is liable and that Dr. Leuterios heirs mustget the proceeds.Disposition Petition DENIED. CA Decision AFFIRMEDwith modification.

DBP POOL OF ACCREDITED INSURANCE v.RADIO MINDANAO NETWORK480 SCRA 314MARTINEZ; January 27, 2006NATUREPetition for certiorariFACTS- In the evening of July 27, 1988, the radio station ofRadio Mindanao Network located at the SSS Buildingin Bacolod City was burned down causing damage inthe amount of over one million pesos. Respondentsought to recover under two insurance policies butthe claims were denied on the basis that the case ofthe loss was an excepted risk under condition no. 6(c) and (d), to wit:6. This insurance does not cover any loss or damageoccasioned by or through or in consequence, directlyor indirectly, of any of the following consequences,namely:(c) War, invasion, act of foreign enemies, hostilities,or warlike operations (whether war be declared ornot), civic war.(d) Mutiny, riot, military or popular uprising,insurrection, rebellion, revolution, military or usurpedpower.- The insurers maintained that based on witnessesand evidence gathered at the site, the fire wascaused by the members of the Communist Party ofthe Philippines/New Peoples Army. Hence the refusalto honor their obligations.- The trial court and the CA found in favor of therespondent. In its findings, both courts mentionedthe fact that there was no credible evidencepresented that the CCP/NPA did in fact cause the firethat gutted the radio station in Bacolod.ISSUEWON the insurance companies are liable to pay RadioMindanao Network under the insurance policiesHELDYES- The Court will not disturb the factual findings of theappellant and trial courts absent compelling reason.Under this mode of review, the jurisdiction of thecourt is limited to reviewing only errors of law.- Particularly in cases of insurance disputes withregard to excepted risks, it is the insurancecompanies which have the burden to prove that theloss comes within the purview of the exception orlimitation set up. It is sufficient for the insured toprove the fact of damage or loss. Once the insuredmakes out a prima facie case in its favor, the duty orburden of evidence shifts to the insurer to controvertsaid prima facie case.Disposition Petit