FIRST DIVISION[G.R. No. 154514. July 28, 2005]WHITE GOLD MARINE SERVICES, INC., petitioner, vs. PIONEER INSURANCE AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD., respondents.D E C I S I O NQUISUMBING, J.:This petition for review assails the Decision[1] dated July 30, 2002 of the Court of Appeals in CA-G.R. SP No. 60144, affirming the Decision[2] dated May 3, 2000 of the Insurance Commission in I.C. Adm. Case No. RD-277. Both decisions held that there was no violation of the Insurance Code and the respondents do not need license as insurer and insurance agent/broker.The facts are undisputed.White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity coverage for its vessels from The Steamship Mutual Underwriting Association (Bermuda) Limited (Steamship Mutual) through Pioneer Insurance and Surety Corporation (Pioneer). Subsequently, White Gold was issued a Certificate of Entry and Acceptance.[3] Pioneer also issued receipts evidencing payments for the coverage. When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage.Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latters unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual violated Sections 186[4] and 187[5] of the Insurance Code, while Pioneer violated Sections 299,[6] 300[7] and 301[8] in relation to Sections 302 and 303, thereof.The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a license because it was not engaged in the insurance business. It explained that Steamship Mutual was a Protection and Indemnity Club (P & I Club). Likewise, Pioneer need not obtain another license as insurance agent and/or a broker for Steamship Mutual because Steamship Mutual was not engaged in the insurance business. Moreover, Pioneer was already licensed, hence, a separate license solely as agent/broker of Steamship Mutual was already superfluous.The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the appellate court distinguished between P & I Clubs vis--vis conventional insurance. The appellate court also held that Pioneer merely acted as a collection agent of Steamship Mutual.In this petition, petitioner assigns the following errors allegedly committed by the appellate court,FIRST ASSIGNMENT OF ERRORTHE COURT A QUO ERRED WHEN IT RULED THAT RESPONDENT STEAMSHIP IS NOT DOING BUSINESS IN THE PHILIPPINES ON THE GROUND THAT IT COURSED . . . ITS TRANSACTIONS THROUGH ITS AGENT AND/OR BROKER HENCE AS AN INSURER IT NEED NOT SECURE A LICENSE TO ENGAGE IN INSURANCE BUSINESS IN THE PHILIPPINES.SECOND ASSIGNMENT OF ERRORTHE COURT A QUO ERRED WHEN IT RULED THAT THE RECORD IS BEREFT OF ANY EVIDENCE THAT RESPONDENT STEAMSHIP IS ENGAGED IN INSURANCE BUSINESS.THIRD ASSIGNMENT OF ERRORTHE COURT A QUO ERRED WHEN IT RULED, THAT RESPONDENT PIONEER NEED NOT SECURE A LICENSE WHEN CONDUCTING ITS AFFAIR AS AN AGENT/BROKER OF RESPONDENT STEAMSHIP.FOURTH ASSIGNMENT OF ERRORTHE COURT A QUO ERRED IN NOT REVOKING THE LICENSE OF RESPONDENT PIONEER AND [IN NOT REMOVING] THE OFFICERS AND DIRECTORS OF RESPONDENT PIONEER.[9]Simply, the basic issues before us are (1) Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines? (2) Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?The parties admit that Steamship Mutual is a P & I Club. Steamship Mutual admits it does not have a license to do business in the Philippines although Pioneer is its resident agent. This relationship is reflected in the certifications issued by the Insurance Commission.Petitioner insists that Steamship Mutual as a P & I Club is engaged in the insurance business. To buttress its assertion, it cites the definition of a P & I Club in Hyopsung Maritime Co., Ltd. v. Court of Appeals[10] as an association composed of shipowners in general who band together for the specific purpose of providing insurance cover on a mutual basis against liabilities incidental to shipowning that the members incur in favor of third parties. It stresses that as a P & I Club, Steamship Mutuals primary purpose is to solicit and provide protection and indemnity coverage and for this purpose, it has engaged the services of Pioneer to act as its agent.Respondents contend that although Steamship Mutual is a P & I Club, it is not engaged in the insurance business in the Philippines. It is merely an association of vessel owners who have come together to provide mutual protection against liabilities incidental to shipowning.[11] Respondents aver Hyopsung is inapplicable in this case because the issue in Hyopsung was the jurisdiction of the court over Hyopsung.Is Steamship Mutual engaged in the insurance business?Section 2(2) of the Insurance Code enumerates what constitutes doing an insurance business or transacting an insurance business. These are:(a) making or proposing to make, as insurer, any insurance contract;(b) making, or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety;(c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code;(d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.. . .The same provision also provides, the fact that no profit is derived from the making of insurance contracts, agreements or transactions, or that no separate or direct consideration is received therefor, shall not preclude the existence of an insurance business.[12]The test to determine if a contract is an insurance contract or not, depends on the nature of the promise, the act required to be performed, and the exact nature of the agreement in the light of the occurrence, contingency, or circumstances under which the performance becomes requisite. It is not by what it is called.[13]Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.[14]In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to a marine adventure.[15] Section 99[16] of the Insurance Code enumerates the coverage of marine insurance.Relatedly, a mutual insurance company is a cooperative enterprise where the members are both the insurer and insured. In it, the members all contribute, by a system of premiums or assessments, to the creation of a fund from which all losses and liabilities are paid, and where the profits are divided among themselves, in proportion to their interest.[17] Additionally, mutual insurance associations, or clubs, provide three types of coverage, namely, protection and indemnity, war risks, and defense costs.[18]A P & I Club is a form of insurance against third party liability, where the third party is anyone other than the P & I Club and the members.[19] By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance business.The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of authority mandated by Section 187[20] of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to collect payments in its behalf. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer, must secure a license from the Insurance Commission.Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer or insurance company is allowed to engage in the insurance business without a license or a certificate of authority from the Insurance Commission.[21]Does Pioneer, as agent/broker of Steamship Mutual, need a special license?Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration[22] issued by the Insurance Commission. It has been licensed to do or transact insurance business by virtue of the certificate of authority[23] issued by the same agency. However, a Certification from the Commission states that Pioneer does not have a separate license to be an agent/broker of Steamship Mutual.[24]Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for Steamship Mutual. Section 299 of the Insurance Code clearly states:SEC. 299 . . .No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance company doing business in the Philippines or any agent thereof, without first procuring a license so to act from the Commissioner, which must be renewed annually on the first day of January, or within six months thereafter. . .Finally, White Gold seeks revocation of Pioneers certificate of authority and removal of its directors and officers. Regrettably, we are not the forum for these issues.WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated July 30, 2002 of the Court of Appeals affirming the Decision dated May 3, 2000 of the Insurance Commission is hereby REVERSED AND SET ASIDE. The Steamship Mutual Underwriting Association (Bermuda) Ltd., and Pioneer Insurance and Surety Corporation are ORDERED to obtain licenses and to secure proper authorizations to do business as insurer and insurance agent, respectively. The petitioners prayer for the revocation of Pioneers Certificate of Authority and removal of its directors and officers, is DENIED. Costs against respondents.SO ORDERED.Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

[1] Rollo, pp. 28-41. Penned by Associate Justice Delilah Vidallon-Magtolis, with Associate Justices Candido V. Rivera, and Sergio L. Pestao concurring.[2] CA Rollo, pp. 43-51.[3] Id. at 103.[4] SEC. 186. No person, partnership, or association of persons shall transact any insurance business in the Philippines except as agent of a person or corporation authorized to do the business of insurance in the Philippines, unless possessed of the capital and assets required of an insurance corporation doing the same kind of business in the Philippines and invested in the same manner; nor unless the Commissioner shall have granted to him or them a certificate to the effect that he or they have complied with all the provisions of law which an insurance corporation doing business in the Philippines is required to observe.Every person, partnership, or association receiving any such certificate of authority shall be subject to the insurance laws of the Philippines and to the jurisdiction and supervision of the Commissioner in the same manner as if an insurance corporation authorized by the laws of the Philippines to engage in the business of insurance specified in the certificate.[5] SEC. 187. No Insurance Company shall transact any insurance business in the Philippines until after it shall have obtained a certificate of authority for that purpose from the Commissioner upon application therefor and payment by the company concerned of the fees hereinafter prescribed.. . .[6] SEC. 299. No insurance company doing business in the Philippines, nor any agent thereof, shall pay any commission or other compensation to any person for services in obtaining insurance, unless such person shall have first procured from the Commissioner a license to act as an insurance agent of such company or as an insurance broker as hereinafter provided.No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance company doing business in the Philippines or any agent thereof, without first procuring a license so to act from the Commissioner, . . .[7] SEC. 300. Any person who for compensation solicits or obtains insurance on behalf of any insurance company or transmits for a person other than himself an application for a policy or contract of insurance to or from such company or offers or assumes to act in the negotiating of such insurance shall be an insurance agent within the intent of this section and shall thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance agent is subject.[8] SEC. 301. Any person who for any compensation, commission or other thing of value acts or aids in any manner in soliciting, negotiating or procuring the making of any insurance contract or in placing risk or taking out insurance, on behalf of an insured other than himself, shall be an insurance broker within the intent of this Code, and shall thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance broker is subject.[9] Rollo, pp. 144-145.[10] No. L-77369, 31 August 1988, 165 SCRA 258, 260.[11] Rollo, p. 176.[12] THE INSURANCE CODE OF THE PHILIPPINES, Section 2(2).[13] 43 AM JUR. 2d Insurance Sec. 4 (1982).[14] Rufus B. Rodriguez, The Insurance Code of the Philippines Annotated 4 (4th ed., 1999), citing BUIST M. ANDERSON, Vance on Insurance 83 (3rd ed., 1951).[15] Eduardo F. Hernandez and Antero A. Peasales, Philippine Admiralty and Maritime Law 612 (1st ed., 1987).[16] SEC. 99. Marine insurance includes:(1) Insurance against loss of or damage to:(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, securities, choses in action, evidences of debt, valuable papers, bottomry, and respondentia interests and all other kinds of property and interests therein, in respect to, appertaining to or in connection with any and all risks or perils of navigation, transit or transportation, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting shipment, or during any delays, storage, trasshipment, or reshipment incident thereto, including war risks, marine builders risks, and all personal property floater risks.(b) Person or property in connection with or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss of or damage arising out of or in connection with the construction, repair, operation, maintenance or use of the subject matter of such insurance (but not including life insurance or surety bonds nor insurance against loss by reason of bodily injury to any person arising out of the ownership, maintenance, or use of automobiles).(c) Precious stones, jewels, jewelry, precious metals, whether in course of transportation or otherwise.(d) Bridges, tunnels and other instrumentalities of transportation and communication (excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage); piers, wharves, docks and slips, and other aids to navigation and transportation, including dry docks and marine railways, dams and appurtenant facilities for the control of waterways.(2) Marine protection and indemnity insurance, meaning insurance against, or against legal liability of the insured for loss, damage, or expense incident to ownership, operation, chartering, maintenance, use, repair, or construction of any vessel, craft or instrumentality in use in ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person.[17] Supra, note 13 at Sec. 65.[18] Howard Bennett, The Law of Marine Insurance 236 (1996).[19] Supra, note 15 at 733.[20] Supra, note 5.[21] Supra, note 12 at Sec. 187.[22] CA Rollo, p. 154.[23] Id. at 153.[24] Id. at 112. Certification issued by the Insurance Commission which certified that Pioneer is not a registered broker for any foreign corporation.

Republic of the PhilippinesSUPREME COURTBaguio CitySECOND DIVISIONETERNAL GARDENS MEMORIALG.R. No. 166245PARK CORPORATION,Petitioner,Present:CARPIO MORALES,- versus -Acting Chairperson,TINGA,VELASCO, JR.,CHICO-NAZARIO,[footnoteRef:2] and [2: Additional member as per February 6, 2008 raffle.]

BRION, JJ.THE PHILIPPINE AMERICANPromulgated:LIFE INSURANCE COMPANY,Respondent.April 9, 2008x-----------------------------------------------------------------------------------------xD E C I S I O NVELASCO, JR., J.:The CaseCentral to this Petition for Review on Certiorari under Rule 45 which seeks to reverse and set aside the November 26, 2004 Decision[footnoteRef:3][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 [3: [1] Rollo, pp. 45-54. Penned by Associate Justice Santiago Javier Ranada and concurred in by Associate Justices Marina L. Buzon (Chairperson) and Mario L. Guaria III.]

The FactsOn December 10, 1980, respondent Philippine American Life Insurance Company (Philamlife) entered into an agreement denominated as Creditor Group Life Policy No. P-1920[footnoteRef:4][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. [4: [2] Records, pp. 57-62.]

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.[footnoteRef:5][3] [5: [3] Id. at 58.]

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,[footnoteRef:6][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. [6: [4] Id. at 139.]

Eternal sent a letter dated August 20, 1984[footnoteRef:7][5] to Philamlife, which served as an insurance claim for Chuangs death. Attached to the claim were the following documents: (1) Chuangs 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) Assureds Certificate. [7: [5] Id. at 160.]

In reply, Philamlife wrote Eternal a letter on November 12, 1984,[footnoteRef:8][6] requiring Eternal to submit the following documents relative to its insurance claim for Chuangs death: (1) Certificate of Claimant (with form attached); (2) Assureds 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. [8: [6] Id. at 162.]

Eternal transmitted the required documents through a letter dated November 14, 1984,[footnoteRef:9][7] which was received by Philamlife on November 15, 1984. [9: [7] Id. at 163.]

After more than a year, Philamlife had not furnished Eternal with any reply to the latters insurance claim. This prompted Eternal to demand from Philamlife the payment of the claim for PhP 100,000 on April 25, 1986.[footnoteRef:10][8] [10: [8] Id. at 164.]

In response to Eternals demand, Philamlife denied Eternals insurance claim in a letter dated May 20, 1986,[footnoteRef:11][9] a portion of which reads: [11: [9] Id. at 165.]

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 Creditors 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 attorneys fees.SO ORDERED.The RTC found that Eternal submitted Chuangs application for insurance which he accomplished before his death, as testified to by Eternals witness and evidenced by the letter dated December 29, 1982, stating, among others: Encl: Phil-Am Life Insurance Application Forms & Cert.[footnoteRef:12][10] It further ruled that due to Philamlifes inaction from the submission of the requirements of the group insurance on December 29, 1982 to Chuangs death on August 2, 1984, as well as Philamlifes acceptance of the premiums during the same period, Philamlife was deemed to have approved Chuangs application. The RTC said that since the contract is a group life insurance, once proof of death is submitted, payment must follow. [12: [10] Rollo, p. 44.]

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.[footnoteRef:13][11] [13: [11] Id. at 54.]

The CA based its Decision on the factual finding that Chuangs application was not enclosed in Eternals 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 Philamlifes 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 Courts RulingAs 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 petitioners 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.[footnoteRef:14][12] (Emphasis supplied.) [14: [12] G.R. No. 156360, January 14, 2005, 448 SCRA 220, 228-229.]

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 Eternals 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 Chuangs insurance application.The evidence on record supports Eternals 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.[footnoteRef:15][13] The burden of evidence has shifted to Philamlife, which must prove that the letter did not contain Chuangs insurance application. However, Philamlife failed to do so; thus, Philamlife is deemed to have received Chuangs insurance application. [15: [13] Rules of Court, Rule 130, Sec. 26. ]

To reiterate, it was Philamlifes bounden duty to make sure that before a transmittal letter is stamped as received, the contents of the letter are correct and accounted for. Philamlifes allegation that Eternals 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,[footnoteRef:16][14] that, if considered, might affect the result of the case.[footnoteRef:17][15] [16: [14] People v. Jaberto, G.R. No. 128147, May 12, 1999, 307 SCRA 93, 102.] [17: [15] People v. Oliquino, G.R. No. 171314, March 6, 2007, 517 SCRA 579, 588.]

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:]AIt 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:QWhere is the original?[Mendoza:]AAs 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.[footnoteRef:18][16] [18: [16] TSN, September 13, 1990, p. 8.]

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.[footnoteRef:19][17] [19: [17] G.R. No. 136105, October 23, 2001, 368 SCRA 102, 108.]

We reiterated the above ruling in Merencillo v. People: Minor discrepancies or inconsistencies do not impair the essential integrity of the prosecutions 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.[footnoteRef:20][18] [20: [18] G.R. Nos. 142369-70, April 13, 2007, 521 SCRA 31, 43.]

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 Eternals 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 latters 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.[footnoteRef:21][19] (Emphasis supplied.) [21: [19] G.R. No. 119599, March 20, 1997, 270 SCRA 242, 254.]

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.[footnoteRef:22][20] [22: [20] G.R. No. 125678, March 18, 2002, 379 SCRA 356, 366.]

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 partys 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.[footnoteRef:23][21] [23: [21] R. E. Keeton & A. I. Widiss, Insurance Law A Guide to Fundamental Principles, Legal Doctrines and Commercial Practices 77-78.]

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 Philamlifes 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 attorneys fees in the amount of PhP 10,000.No costs. SO ORDERED.PRESBITERO J. VELASCO, JR. Associate JusticeWE CONCUR:CONCHITA CARPIO MORALES Acting ChairpersonDANTE O. TINGA ARTURO D. BRIONAssociate Justice Associate JusticeMINITA V. CHICO-NAZARIOAssociate JusticeA T T E S T A T I O NI attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.CONCHITA CARPIO MORALES Acting ChairpersonC E R T I F I C A T I O NPursuant to Section 13, Article VIII of the Constitution, and the Division Acting Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.REYNATO S. PUNO Chief Justice

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Republic of the PhilippinesSUPREME COURTManilaTHIRD DIVISIONG.R. No. 150094 August 18, 2004FEDERAL EXPRESS CORPORATION, petitioner, vs.AMERICAN HOME ASSURANCE COMPANY and PHILAM INSURANCE COMPANY, INC., respondents.

D E C I S I O N

PANGANIBAN, J.:Basic is the requirement that before suing to recover loss of or damage to transported goods, the plaintiff must give the carrier notice of the loss or damage, within the period prescribed by the Warsaw Convention and/or the airway bill.The CaseBefore us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the June 4, 2001 Decision2 and the September 21, 2001 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 58208. The assailed Decision disposed as follows:"WHEREFORE, premises considered, the present appeal is hereby DISMISSED for lack of merit. The appealed Decision of Branch 149 of the Regional Trial Court of Makati City in Civil Case No. 95-1219, entitled 'American Home Assurance Co. and PHILAM Insurance Co., Inc. v. FEDERAL EXPRESS CORPORATION and/or CARGOHAUS, INC. (formerly U-WAREHOUSE, INC.),' is hereby AFFIRMED and REITERATED."Costs against the [petitioner and Cargohaus, Inc.]."4The assailed Resolution denied petitioner's Motion for Reconsideration.The FactsThe antecedent facts are summarized by the appellate court as follows:"On January 26, 1994, SMITHKLINE Beecham (SMITHKLINE for brevity) of Nebraska, USA delivered to Burlington Air Express (BURLINGTON), an agent of [Petitioner] Federal Express Corporation, a shipment of 109 cartons of veterinary biologicals for delivery to consignee SMITHKLINE and French Overseas Company in Makati City, Metro Manila. The shipment was covered by Burlington Airway Bill No. 11263825 with the words, 'REFRIGERATE WHEN NOT IN TRANSIT' and 'PERISHABLE' stamp marked on its face. That same day, Burlington insured the cargoes in the amount of $39,339.00 with American Home Assurance Company (AHAC). The following day, Burlington turned over the custody of said cargoes to Federal Express which transported the same to Manila. The first shipment, consisting of 92 cartons arrived in Manila on January 29, 1994 in Flight No. 0071-28NRT and was immediately stored at [Cargohaus Inc.'s] warehouse. While the second, consisting of 17 cartons, came in two (2) days later, or on January 31, 1994, in Flight No. 0071-30NRT which was likewise immediately stored at Cargohaus' warehouse. Prior to the arrival of the cargoes, Federal Express informed GETC Cargo International Corporation, the customs broker hired by the consignee to facilitate the release of its cargoes from the Bureau of Customs, of the impending arrival of its client's cargoes."On February 10, 1994, DARIO C. DIONEDA ('DIONEDA'), twelve (12) days after the cargoes arrived in Manila, a non-licensed custom's broker who was assigned by GETC to facilitate the release of the subject cargoes, found out, while he was about to cause the release of the said cargoes, that the same [were] stored only in a room with two (2) air conditioners running, to cool the place instead of a refrigerator. When he asked an employee of Cargohaus why the cargoes were stored in the 'cool room' only, the latter told him that the cartons where the vaccines were contained specifically indicated therein that it should not be subjected to hot or cold temperature. Thereafter, DIONEDA, upon instructions from GETC, did not proceed with the withdrawal of the vaccines and instead, samples of the same were taken and brought to the Bureau of Animal Industry of the Department of Agriculture in the Philippines by SMITHKLINE for examination wherein it was discovered that the 'ELISA reading of vaccinates sera are below the positive reference serum.'"As a consequence of the foregoing result of the veterinary biologics test, SMITHKLINE abandoned the shipment and, declaring 'total loss' for the unusable shipment, filed a claim with AHAC through its representative in the Philippines, the Philam Insurance Co., Inc. ('PHILAM') which recompensed SMITHKLINE for the whole insured amount of THIRTY NINE THOUSAND THREE HUNDRED THIRTY NINE DOLLARS ($39,339.00). Thereafter, [respondents] filed an action for damages against the [petitioner] imputing negligence on either or both of them in the handling of the cargo."Trial ensued and ultimately concluded on March 18, 1997 with the [petitioner] being held solidarily liable for the loss as follows:'WHEREFORE, judgment is hereby rendered in favor of [respondents] and [petitioner and its Co-Defendant Cargohaus] are directed to pay [respondents], jointly and severally, the following:1. Actual damages in the amount of the peso equivalent of US$39,339.00 with interest from the time of the filing of the complaint to the time the same is fully paid.2. Attorney's fees in the amount of P50,000.00 and3. Costs of suit.'SO ORDERED.'"Aggrieved, [petitioner] appealed to [the CA]."5Ruling of the Court of AppealsThe Test Report issued by the United States Department of Agriculture (Animal and Plant Health Inspection Service) was found by the CA to be inadmissible in evidence. Despite this ruling, the appellate court held that the shipping Receipts were a prima facie proof that the goods had indeed been delivered to the carrier in good condition. We quote from the ruling as follows:"Where the plaintiff introduces evidence which shows prima facie that the goods were delivered to the carrier in good condition [i.e., the shipping receipts], and that the carrier delivered the goods in a damaged condition, a presumption is raised that the damage occurred through the fault or negligence of the carrier, and this casts upon the carrier the burden of showing that the goods were not in good condition when delivered to the carrier, or that the damage was occasioned by some cause excepting the carrier from absolute liability. This the [petitioner] failed to discharge. x x x."6Found devoid of merit was petitioner's claim that respondents had no personality to sue. This argument was supposedly not raised in the Answer or during trial.Hence, this Petition.7The IssuesIn its Memorandum, petitioner raises the following issues for our consideration: "I.Are the decision and resolution of the Honorable Court of Appeals proper subject for review by the Honorable Court under Rule 45 of the 1997 Rules of Civil Procedure?"II.Is the conclusion of the Honorable Court of Appeals petitioner's claim that respondents have no personality to sue because the payment was made by the respondents to Smithkline when the insured under the policy is Burlington Air Express is devoid of merit correct or not?"III.Is the conclusion of the Honorable Court of Appeals that the goods were received in good condition, correct or not?"IV.Are Exhibits 'F' and 'G' hearsay evidence, and therefore, not admissible?"V.Is the Honorable Court of Appeals correct in ignoring and disregarding respondents' own admission that petitioner is not liable? and"VI.Is the Honorable Court of Appeals correct in ignoring the Warsaw Convention?"8Simply stated, the issues are as follows: (1) Is the Petition proper for review by the Supreme Court? (2) Is Federal Express liable for damage to or loss of the insured goods?This Court's RulingThe Petition has merit.Preliminary Issue:Propriety of ReviewThe correctness of legal conclusions drawn by the Court of Appeals from undisputed facts is a question of law cognizable by the Supreme Court.9In the present case, the facts are undisputed. As will be shown shortly, petitioner is questioning the conclusions drawn from such facts. Hence, this case is a proper subject for review by this Court.Main Issue:Liability for DamagesPetitioner contends that respondents have no personality to sue -- thus, no cause of action against it -- because the payment made to Smithkline was erroneous.Pertinent to this issue is the Certificate of Insurance10 ("Certificate") that both opposing parties cite in support of their respective positions. They differ only in their interpretation of what their rights are under its terms. The determination of those rights involves a question of law, not a question of fact. "As distinguished from a question of law which exists 'when the doubt or difference arises as to what the law is on a certain state of facts' -- 'there is a question of fact when the doubt or difference arises as to the truth or the falsehood of alleged facts'; or when the 'query necessarily invites calibration of the whole evidence considering mainly the credibility of witnesses, existence and relevancy of specific surrounding circumstance, their relation to each other and to the whole and the probabilities of the situation.'"11Proper PayeeThe Certificate specifies that loss of or damage to the insured cargo is "payable to order x x x upon surrender of this Certificate." Such wording conveys the right of collecting on any such damage or loss, as fully as if the property were covered by a special policy in the name of the holder itself. At the back of the Certificate appears the signature of the representative of Burlington. This document has thus been duly indorsed in blank and is deemed a bearer instrument.Since the Certificate was in the possession of Smithkline, the latter had the right of collecting or of being indemnified for loss of or damage to the insured shipment, as fully as if the property were covered by a special policy in the name of the holder. Hence, being the holder of the Certificate and having an insurable interest in the goods, Smithkline was the proper payee of the insurance proceeds.SubrogationUpon receipt of the insurance proceeds, the consignee (Smithkline) executed a subrogation Receipt12 in favor of respondents. The latter were thus authorized "to file claims and begin suit against any such carrier, vessel, person, corporation or government." Undeniably, the consignee had a legal right to receive the goods in the same condition it was delivered for transport to petitioner. If that right was violated, the consignee would have a cause of action against the person responsible therefor.Upon payment to the consignee of an indemnity for the loss of or damage to the insured goods, the insurer's entitlement to subrogation pro tanto -- being of the highest equity -- equips it with a cause of action in case of a contractual breach or negligence.13 "Further, the insurer's subrogatory right to sue for recovery under the bill of lading in case of loss of or damage to the cargo is jurisprudentially upheld."14In the exercise of its subrogatory right, an insurer may proceed against an erring carrier. To all intents and purposes, it stands in the place and in substitution of the consignee. A fortiori, both the insurer and the consignee are bound by the contractual stipulations under the bill of lading.15Prescription of ClaimFrom the initial proceedings in the trial court up to the present, petitioner has tirelessly pointed out that respondents' claim and right of action are already barred. The latter, and even the consignee, never filed with the carrier any written notice or complaint regarding its claim for damage of or loss to the subject cargo within the period required by the Warsaw Convention and/or in the airway bill. Indeed, this fact has never been denied by respondents and is plainly evident from the records.Airway Bill No. 11263825, issued by Burlington as agent of petitioner, states:"6. No action shall be maintained in the case of damage to or partial loss of the shipment unless a written notice, sufficiently describing the goods concerned, the approximate date of the damage or loss, and the details of the claim, is presented by shipper or consignee to an office of Burlington within (14) days from the date the goods are placed at the disposal of the person entitled to delivery, or in the case of total loss (including non-delivery) unless presented within (120) days from the date of issue of the [Airway Bill]."16Relevantly, petitioner's airway bill states:"12./12.1 The person entitled to delivery must make a complaint to the carrier in writing in the case:12.1.1 of visible damage to the goods, immediately after discovery of the damage and at the latest within fourteen (14) days from receipt of the goods;12.1.2 of other damage to the goods, within fourteen (14) days from the date of receipt of the goods;12.1.3 delay, within twenty-one (21) days of the date the goods are placed at his disposal; and12.1.4 of non-delivery of the goods, within one hundred and twenty (120) days from the date of the issue of the air waybill.12.2 For the purpose of 12.1 complaint in writing may be made to the carrier whose air waybill was used, or to the first carrier or to the last carrier or to the carrier who performed the transportation during which the loss, damage or delay took place."17Article 26 of the Warsaw Convention, on the other hand, provides:"ART. 26. (1) Receipt by the person entitled to the delivery of baggage or goods without complaint shall be prima facie evidence that the same have been delivered in good condition and in accordance with the document of transportation.(2) In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and, at the latest, within 3 days from the date of receipt in the case of baggage and 7 days from the date of receipt in the case of goods. In case of delay the complaint must be made at the latest within 14 days from the date on which the baggage or goods have been placed at his disposal.(3) Every complaint must be made in writing upon the document of transportation or by separate notice in writing dispatched within the times aforesaid.(4) Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part."18Condition PrecedentIn this jurisdiction, the filing of a claim with the carrier within the time limitation therefor actually constitutes a condition precedent to the accrual of a right of action against a carrier for loss of or damage to the goods.19 The shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of action.20The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The fundamental reasons for such a stipulation are (1) to inform the carrier that the cargo has been damaged, and that it is being charged with liability therefor; and (2) to give it an opportunity to examine the nature and extent of the injury. "This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims."21When an airway bill -- or any contract of carriage for that matter -- has a stipulation that requires a notice of claim for loss of or damage to goods shipped and the stipulation is not complied with, its enforcement can be prevented and the liability cannot be imposed on the carrier. To stress, notice is a condition precedent, and the carrier is not liable if notice is not given in accordance with the stipulation.22 Failure to comply with such a stipulation bars recovery for the loss or damage suffered.23Being a condition precedent, the notice must precede a suit for enforcement.24 In the present case, there is neither an allegation nor a showing of respondents' compliance with this requirement within the prescribed period. While respondents may have had a cause of action then, they cannot now enforce it for their failure to comply with the aforesaid condition precedent.In view of the foregoing, we find no more necessity to pass upon the other issues raised by petitioner.We note that respondents are not without recourse. Cargohaus, Inc. -- petitioner's co-defendant in respondents' Complaint below -- has been adjudged by the trial court as liable for, inter alia, "actual damages in the amount of the peso equivalent of US $39,339."25 This judgment was affirmed by the Court of Appeals and is already final and executory.26WHEREFORE, the Petition is GRANTED, and the assailed Decision REVERSED insofar as it pertains to Petitioner Federal Express Corporation. No pronouncement as to costs.SO ORDERED.Corona, and Carpio-Morales, JJ., concur.Sandoval-Gutierrez, J., on leave.

Footnotes1 Rollo, pp. 14-33.2 Id., pp. 35-43. Twelfth Division. Penned by Justice Martin S. Villarama Jr., with the concurrence of Justices Conrado M. Vasquez Jr. (Division chair) and Alicia L. Santos (member).3 Id., pp. 45-47.4 Assailed CA Decision, p. 9; rollo, p. 43.5 Id., pp. 1-3 & 35-37.6 Id., pp. 8 & 42.7 The case was deemed submitted for decision on September 20, 2002, upon this Court's receipt of respondents' Memorandum, signed by Atty. Mary Joyce M. Sasan. Petitioner's Memorandum, signed by Atty. Emiliano S. Samson, was received by this Court on August 28, 2002.8 Petitioner's Memorandum, p. 10; rollo, p. 116. Citations omitted.9 Pilar Development Corp. v. IAC, 146 SCRA 215, December 12, 1986.10 Exhibit "D"; records, p. 142.11 Bernardo v. CA, 216 SCRA 224, December 7, 1992, per Campos Jr., J.12 Exhibit "N"; records, p 159.13 Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., 212 SCRA 194, August 5, 1992 (citing Fireman's Fund Insurance Company, Inc. v. Jamila & Company, Inc., 70 SCRA 323, April 7, 1976).14 Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., supra, p. 201, per Regalado, J. (citing National Development Company v. Court of Appeals, 164 SCRA 593, August 19, 1988).15 Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., supra.16 Exhibit "B" of respondent; records, p. 139-A. This airway bill was issued on January 26, 1994.17 Exhibit "5-a" of Federal Express; records, p. 189-A.18 51 OG 5091-5092, October 1955.19 Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., supra.20 Government of the Philippine Islands v. Inchausti & Co., 24 Phil. 315, February 14, 1913; Triton Insurance Co. v. Jose, 33 Phil. 194, January 14, 1916.21 Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., supra, p. 208, per Regalado, J.22 Id. (citing 14 Am. Jur. 2d, Carriers 97; Roldan v. Lim Ponzo & Co., 37 Phil. 285, December 7, 1917; Consunji v. Manila Port Service, 110 Phil. 231, November 29, 1960).23 Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., supra, pp. 208-209.24 Philippine American General Insurance Co. Inc v. Sweet Lines, Inc., supra.25 The insured value of the goods lost.26 Entry of judgment in the Supreme Court was made on March 11, 2003.

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Republic of the PhilippinesSUPREME COURTManilaTHIRD DIVISIONMALAYAN INSURANCE CO., INC.,Petitioner,- versus -RODELIO ALBERTO andENRICO ALBERTO REYES,Respondents.G.R. No. 194320Present:VELASCO, JR., J., Chairperson,PERALTA,MENDOZA, REYES,[footnoteRef:24]* and [24: * Additional member per Special Order No. 1178 dated January 26, 2012.]

PERLAS-BERNABE, JJ.Promulgated:February 1, 2012

x-----------------------------------------------------------------------------------------xD E C I S I O NVELASCO, JR., J.:The CaseBefore Us is a Petition for Review on Certiorari under Rule 45, seeking to reverse and set aside the July 28, 2010 Decision[footnoteRef:25][1] of the Court of Appeals (CA) and its October 29, 2010 Resolution[footnoteRef:26][2] denying the motion for reconsideration filed by petitioner Malayan Insurance Co., Inc. (Malayan Insurance). The July 28, 2010 CA Decision reversed and set aside the Decision[footnoteRef:27][3] dated February 2, 2009 of the Regional Trial Court, Branch 51 in Manila. [25: [1] Rollo, pp. 16-26. Penned by Associate Justice Josefina Guevara-Salonga and concurred in by Associate Justices Mariflor P. Punzalan Castillo and Franchito N. Diamante. ] [26: [2] Id. at 29-30.] [27: [3] Id. at 64-70. Penned by Presiding Judge Gregorio B. Clemea, Jr.]

The FactsAt around 5 oclock in the morning of December 17, 1995, an accident occurred at the corner of EDSA and Ayala Avenue, Makati City, involving four (4) vehicles, to wit: (1) a Nissan Bus operated by Aladdin Transit with plate number NYS 381; (2) an Isuzu Tanker with plate number PLR 684; (3) a Fuzo Cargo Truck with plate number PDL 297; and (4) a Mitsubishi Galant with plate number TLM 732.[footnoteRef:28][4] [28: [4] Id. at 17.]

Based on the Police Report issued by the on-the-spot investigator, Senior Police Officer 1 Alfredo M. Dungga (SPO1 Dungga), the Isuzu Tanker was in front of the Mitsubishi Galant with the Nissan Bus on their right side shortly before the vehicular incident. All three (3) vehicles were at a halt along EDSA facing the south direction when the Fuzo Cargo Truck simultaneously bumped the rear portion of the Mitsubishi Galant and the rear left portion of the Nissan Bus. Due to the strong impact, these two vehicles were shoved forward and the front left portion of the Mitsubishi Galant rammed into the rear right portion of the Isuzu Tanker.[footnoteRef:29][5] [29: [5] Id. at 17-18]

Previously, particularly on December 15, 1994, Malayan Insurance issued Car Insurance Policy No. PV-025-00220 in favor of First Malayan Leasing and Finance Corporation (the assured), insuring the aforementioned Mitsubishi Galant against third party liability, own damage and theft, among others. Having insured the vehicle against such risks, Malayan Insurance claimed in its Complaint dated October 18, 1999 that it paid the damages sustained by the assured amounting to PhP 700,000.[footnoteRef:30][6] [30: [6] Id.]

Maintaining that it has been subrogated to the rights and interests of the assured by operation of law upon its payment to the latter, Malayan Insurance sent several demand letters to respondents Rodelio Alberto (Alberto) and Enrico Alberto Reyes (Reyes), the registered owner and the driver, respectively, of the Fuzo Cargo Truck, requiring them to pay the amount it had paid to the assured. When respondents refused to settle their liability, Malayan Insurance was constrained to file a complaint for damages for gross negligence against respondents.[footnoteRef:31][7] [31: [7] Id. at 18.]

In their Answer, respondents asserted that they cannot be held liable for the vehicular accident, since its proximate cause was the reckless driving of the Nissan Bus driver. They alleged that the speeding bus, coming from the service road of EDSA, maneuvered its way towards the middle lane without due regard to Reyes right of way. When the Nissan Bus abruptly stopped, Reyes stepped hard on the brakes but the braking action could not cope with the inertia and failed to gain sufficient traction. As a consequence, the Fuzo Cargo Truck hit the rear end of the Mitsubishi Galant, which, in turn, hit the rear end of the vehicle in front of it. The Nissan Bus, on the other hand, sideswiped the Fuzo Cargo Truck, causing damage to the latter in the amount of PhP 20,000. Respondents also controverted the results of the Police Report, asserting that it was based solely on the biased narration of the Nissan Bus driver.[footnoteRef:32][8] [32: [8] Id. at 18-19.]

After the termination of the pre-trial proceedings, trial ensued. Malayan Insurance presented the testimony of its lone witness, a motor car claim adjuster, who attested that he processed the insurance claim of the assured and verified the documents submitted to him. Respondents, on the other hand, failed to present any evidence.In its Decision dated February 2, 2009, the trial court, in Civil Case No. 99-95885, ruled in favor of Malayan Insurance and declared respondents liable for damages. The dispositive portion reads:WHEREFORE, judgment is hereby rendered in favor of the plaintiff against defendants jointly and severally to pay plaintiff the following:1. The amount of P700,000.00 with legal interest from the time of the filing of the complaint;2. Attorneys fees of P10,000.00 and;3. Cost of suit.SO ORDERED.[footnoteRef:33][9] [33: [9] Id. at 69-70.]

Dissatisfied, respondents filed an appeal with the CA, docketed as CA-G.R. CV No. 93112. In its Decision dated July 28, 2010, the CA reversed and set aside the Decision of the trial court and ruled in favor of respondents, disposing:WHEREFORE, the foregoing considered, the instant appeal is hereby GRANTED and the assailed Decision dated 2 February 2009 REVERSED and SET ASIDE. The Complaint dated 18 October 1999 is hereby DISMISSED for lack of merit. No costs.SO ORDERED.[footnoteRef:34][10] [34: [10] Id. at 25.]

The CA held that the evidence on record has failed to establish not only negligence on the part of respondents, but also compliance with the other requisites and the consequent right of Malayan Insurance to subrogation.[footnoteRef:35][11] It noted that the police report, which has been made part of the records of the trial court, was not properly identified by the police officer who conducted the on-the-spot investigation of the subject collision. It, thus, held that an appellate court, as a reviewing body, cannot rightly appreciate firsthand the genuineness of an unverified and unidentified document, much less accord it evidentiary value.[footnoteRef:36][12] [35: [11] Id. at 22.] [36: [12] Id. at 24.]

Subsequently, Malayan Insurance filed its Motion for Reconsideration, arguing that a police report is a prima facie evidence of the facts stated in it. And inasmuch as they never questioned the presentation of the report in evidence, respondents are deemed to have waived their right to question its authenticity and due execution.[footnoteRef:37][13] [37: [13] Id. at 88.]

In its Resolution dated October 29, 2010, the CA denied the motion for reconsideration. Hence, Malayan Insurance filed the instant petition.The IssuesIn its Memorandum[footnoteRef:38][14] dated June 27, 2011, Malayan Insurance raises the following issues for Our consideration: [38: [14] Id. at 99-107.]

IWHETHER THE CA ERRED IN REFUSING ADMISSIBILITY OF THE POLICE REPORT SINCE THE POLICE INVESTIGATOR WHO PREPARED THE SAME DID NOT ACTUALLY TESTIFY IN COURT THEREON. IIWHETHER THE SUBROGATION OF MALAYAN INSURANCE IS IMPAIRED AND/OR DEFICIENT.On the other hand, respondents submit the following issues in its Memorandum[footnoteRef:39][15] dated July 7, 2011: [39: [15] Id. at 110-115.]

IWHETHER THE CA IS CORRECT IN DISMISSING THE COMPLAINT FOR FAILURE OF MALAYAN INSURANCE TO OVERCOME THE BURDEN OF PROOF REQUIRED TO ESTABLISH THE NEGLIGENCE OF RESPONDENTS.IIWHETHER THE PIECES OF EVIDENCE PRESENTED BY MALAYAN INSURANCE ARE SUFFICIENT TO CLAIM FOR THE AMOUNT OF DAMAGES.IIIWHETHER THE SUBROGATION OF MALAYAN INSURANCE HAS PASSED COMPLIANCE AND REQUISITES AS PROVIDED UNDER PERTINENT LAWS.Essentially, the issues boil down to the following: (1) the admissibility of the police report; (2) the sufficiency of the evidence to support a claim for gross negligence; and (3) the validity of subrogation in the instant case.Our RulingThe petition has merit. Admissibility of the Police ReportMalayan Insurance contends that, even without the presentation of the police investigator who prepared the police report, said report is still admissible in evidence, especially since respondents failed to make a timely objection to its presentation in evidence.[footnoteRef:40][16] Respondents counter that since the police report was never confirmed by the investigating police officer, it cannot be considered as part of the evidence on record.[footnoteRef:41][17] [40: [16] Id. at 101.] [41: [17] Id. at 113.]

Indeed, under the rules of evidence, a witness can testify only to those facts which the witness knows of his or her personal knowledge, that is, which are derived from the witness own perception.[footnoteRef:42][18] Concomitantly, a witness may not testify on matters which he or she merely learned from others either because said witness was told or read or heard those matters.[footnoteRef:43][19] Such testimony is considered hearsay and may not be received as proof of the truth of what the witness has learned. This is known as the hearsay rule.[footnoteRef:44][20] [42: [18] Rules of Court, Rule 130, Sec. 36.] [43: [19] D.M. Consunji, Inc. v. CA, G.R. No. 137873, April 20, 2001, 357 SCRA 249, 253-254.] [44: [20] Id. at 254.]

As discussed in D.M. Consunji, Inc. v. CA,[footnoteRef:45][21] Hearsay is not limited to oral testimony or statements; the general rule that excludes hearsay as evidence applies to written, as well as oral statements. [45: [21] Id.]

There are several exceptions to the hearsay rule under the Rules of Court, among which are entries in official records.[footnoteRef:46][22] Section 44, Rule 130 provides: [46: [22] Id.]

Entries in official records made in the performance of his duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law are prima facie evidence of the facts therein stated.In Alvarez v. PICOP Resources,[footnoteRef:47][23] this Court reiterated the requisites for the admissibility in evidence, as an exception to the hearsay rule of entries in official records, thus: (a) that the entry was made by a public officer or by another person specially enjoined by law to do so; (b) that it was made by the public officer in the performance of his or her duties, or by such other person in the performance of a duty specially enjoined by law; and (c) that the public officer or other person had sufficient knowledge of the facts by him or her stated, which must have been acquired by the public officer or other person personally or through official information. [47: [23] G.R. Nos. 162243, 164516 & 171875, December 3, 2009, 606 SCRA 444, 525; citing Africa v. Caltex, 123 Phil. 272, 277 (1966).]

Notably, the presentation of the police report itself is admissible as an exception to the hearsay rule even if the police investigator who prepared it was not presented in court, as long as the above requisites could be adequately proved.[footnoteRef:48][24] [48: [24] Id. at 525-526.]

Here, there is no dispute that SPO1 Dungga, the on-the-spot investigator, prepared the report, and he did so in the performance of his duty. However, what is not clear is whether SPO1 Dungga had sufficient personal knowledge of the facts contained in his report. Thus, the third requisite is lacking.Respondents failed to make a timely objection to the police reports presentation in evidence; thus, they are deemed to have waived their right to do so.[footnoteRef:49][25] As a result, the police report is still admissible in evidence. [49: [25] Asian Construction and Development Corporation v. COMFAC Corporation, G.R. No. 163915, October 16, 2006, 504 SCRA 519, 524.]

Sufficiency of EvidenceMalayan Insurance contends that since Reyes, the driver of the Fuzo Cargo truck, bumped the rear of the Mitsubishi Galant, he is presumed to be negligent unless proved otherwise. It further contends that respondents failed to present any evidence to overturn the presumption of negligence.[footnoteRef:50][26] Contrarily, respondents claim that since Malayan Insurance did not present any witness who shall affirm any negligent act of Reyes in driving the Fuzo Cargo truck before and after the incident, there is no evidence which would show negligence on the part of respondents.[footnoteRef:51][27] [50: [26] Rollo, p. 105.] [51: [27] Id. at 113.]

We agree with Malayan Insurance. Even if We consider the inadmissibility of the police report in evidence, still, respondents cannot evade liability by virtue of the res ipsa loquitur doctrine. The D.M. Consunji, Inc. case is quite elucidating:Petitioners contention, however, loses relevance in the face of the application of res ipsa loquitur by the CA. The effect of the doctrine is to warrant a presumption or inference that the mere fall of the elevator was a result of the person having charge of the instrumentality was negligent. As a rule of evidence, the doctrine of res ipsa loquitur is peculiar to the law of negligence which recognizes that prima facie negligence may be established without direct proof and furnishes a substitute for specific proof of negligence.The concept of res ipsa loquitur has been explained in this wise:While negligence is not ordinarily inferred or presumed, and while the mere happening of an accident or injury will not generally give rise to an inference or presumption that it was due to negligence on defendants part, under the doctrine of res ipsa loquitur, which means, literally, the thing or transaction speaks for itself, or in one jurisdiction, that the thing or instrumentality speaks for itself, the facts or circumstances accompanying an injury may be such as to raise a presumption, or at least permit an inference of negligence on the part of the defendant, or some other person who is charged with negligence.x x x where it is shown that the thing or instrumentality which caused the injury complained of was under the control or management of the defendant, and that the occurrence resulting in the injury was such as in the ordinary course of things would not happen if those who had its control or management used proper care, there is sufficient evidence, or, as sometimes stated, reasonable evidence, in the absence of explanation by the defendant, that the injury arose from or was caused by the defendants want of care.One of the theoretical bases for the doctrine is its necessity, i.e., that necessary evidence is absent or not available.The res ipsa loquitur doctrine is based in part upon the theory that the defendant in charge of the instrumentality which causes the injury either knows the cause of the accident or has the best opportunity of ascertaining it and that the plaintiff has no such knowledge, and therefore is compelled to allege negligence in general terms and to rely upon the proof of the happening of the accident in order to establish negligence. The inference which the doctrine permits is grounded upon the fact that the chief evidence of the true cause, whether culpable or innocent, is practically accessible to the defendant but inaccessible to the injured person.It has been said that the doctrine of res ipsa loquitur furnishes a bridge by which a plaintiff, without knowledge of the cause, reaches over to defendant who knows or should know the cause, for any explanation of care exercised by the defendant in respect of the matter of which the plaintiff complains. The res ipsa loquitur doctrine, another court has said, is a rule of necessity, in that it proceeds on the theory that under the peculiar circumstances in which the doctrine is applicable, it is within the power of the defendant to show that there was no negligence on his part, and direct proof of defendants negligence is beyond plaintiffs power. Accordingly, some courts add to the three prerequisites for the application of the res ipsa loquitur doctrine the further requirement that for the res ipsa loquitur doctrine to apply, it must appear that the injured party had no knowledge or means of knowledge as to the cause of the accident, or that the party to be charged with negligence has superior knowledge or opportunity for explanation of the accident.The CA held that all the requisites of res ipsa loquitur are present in the case at bar:There is no dispute that appellees husband fell down from the 14th floor of a building to the basement while he was working with appellants construction project, resulting to his death. The construction site is within the exclusive control and management of appellant. It has a safety engineer, a project superintendent, a carpenter leadman and others who are in complete control of the situation therein. The circumstances of any accident that would occur therein are peculiarly within the knowledge of the appellant or its employees. On the other hand, the appellee is not in a position to know what caused the accident. Res ipsa loquitur is a rule of necessity and it applies where evidence is absent or not readily available, provided the following requisites are present: (1) the accident was of a kind which does not ordinarily occur unless someone is negligent; (2) the instrumentality or agency which caused the injury was under the exclusive control of the person charged with negligence; and (3) the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured. x x x.No worker is going to fall from the 14th floor of a building to the basement while performing work in a construction site unless someone is negligent[;] thus, the first requisite for the application of the rule of res ipsa loquitur is present. As explained earlier, the construction site with all its paraphernalia and human resources that likely caused the injury is under the exclusive control and management of appellant[;] thus[,] the second requisite is also present. No contributory negligence was attributed to the appellees deceased husband[;] thus[,] the last requisite is also present. All the requisites for the application of the rule of res ipsa loquitur are present, thus a reasonable presumption or inference of appellants negligence arises. x x x.Petitioner does not dispute the existence of the requisites for the application of res ipsa loquitur, but argues that the presumption or inference that it was negligent did not arise since it proved that it exercised due care to avoid the accident which befell respondents husband.Petitioner apparently misapprehends the procedural effect of the doctrine. As stated earlier, the defendants negligence is presumed or inferred when the plaintiff establishes the requisites for the application of res ipsa loquitur. Once the plaintiff makes out a prima facie case of all the elements, the burden then shifts to defendant to explain. The presumption or inference may be rebutted or overcome by other evidence and, under appropriate circumstances a disputable presumption, such as that of due care or innocence, may outweigh the inference. It is not for the defendant to explain or prove its defense to prevent the presumption or inference from arising. Evidence by the defendant of say, due care, comes into play only after the circumstances for the application of the doctrine has been established.[footnoteRef:52][28] [52: [28] Supra note 19, at 257-260; citations omitted.]

In the case at bar, aside from the statement in the police report, none of the parties disputes the fact that the Fuzo Cargo Truck hit the rear end of the Mitsubishi Galant, which, in turn, hit the rear end of the vehicle in front of it. Respondents, however, point to the reckless driving of the Nissan Bus driver as the proximate cause of the collision, which allegation is totally unsupported by any evidence on record. And assuming that this allegation is, indeed, true, it is astonishing that respondents never even bothered to file a cross-claim against the owner or driver of the Nissan Bus.What is at once evident from the instant case, however, is the presence of all the requisites for the application of the rule of res ipsa loquitur. To reiterate, res ipsa loquitur is a rule of necessity which applies where evidence is absent or not readily available. As explained in D.M. Consunji, Inc., it is partly based upon the theory that the defendant in charge of the instrumentality which causes the injury either knows the cause of the accident or has the best opportunity of ascertaining it and that the plaintiff has no such knowledge, and, therefore, is compelled to allege negligence in general terms and to rely upon the proof of the happening of the accident in order to establish negligence.As mentioned above, the requisites for the application of the res ipsa loquitur rule are the following: (1) the accident was of a kind which does not ordinarily occur unless someone is negligent; (2) the instrumentality or agency which caused the injury was under the exclusive control of the person charged with negligence; and (3) the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured.[footnoteRef:53][29] [53: [29] Id. at 259.]

In the instant case, the Fuzo Cargo Truck would not have had hit the rear end of the Mitsubishi Galant unless someone is negligent. Also, the Fuzo Cargo Truck was under the exclusive control of its driver, Reyes. Even if respondents avert liability by putting the blame on the Nissan Bus driver, still, this allegation was self-serving and totally unfounded. Finally, no contributory negligence was attributed to the driver of the Mitsubishi Galant. Consequently, all the requisites for the application of the doctrine of res ipsa loquitur are present, thereby creating a reasonable presumption of negligence on the part of respondents. It is worth mentioning that just like any other disputable presumptions or inferences, the presumption of negligence may be rebutted or overcome by other evidence to the contrary. It is unfortunate, however, that respondents failed to present any evidence before the trial court. Thus, the presumption of negligence remains. Consequently, the CA erred in dismissing the complaint for Malayan Insurances adverted failure to prove negligence on the part of respondents.Validity of SubrogationMalayan Insurance contends that there was a valid subrogation in the instant case, as evidenced by the claim check voucher[footnoteRef:54][30] and the Release of Claim and Subrogation Receipt[footnoteRef:55][31] presented by it before the trial court. Respondents, however, claim that the documents presented by Malayan Insurance do not indicate certain important details that would show proper subrogation. [54: [30] Rollo, p. 106, Exhibit D. ] [55: [31] Id., Exhibit E.]

As noted by Malayan Insurance, respondents had all the opportunity, but failed to object to the presentation of its evidence. Thus, and as We have mentioned earlier, respondents are deemed to have waived their right to make an objection. As this Court held in Asian Construction and Development Corporation v. COMFAC Corporation:The rule is that failure to object to the offered evidence renders it admissible, and the court cannot, on its own, disregard such evidence. We note that ASIAKONSTRUCTs counsel of record before the trial court, Atty. Bernard Dy, who actively participated in the initial stages of the case stopped attending the hearings when COMFAC was about to end its presentation. Thus, ASIAKONSTRUCT could not object to COMFACs offer of evidence nor present evidence in its defense; ASIAKONSTRUCT was deemed by the trial court to have waived its chance to do so.Note also that when a party desires the court to reject the evidence offered, it must so state in the form of a timely objection and it cannot raise the objection to the evidence for the first time on appeal. Because of a partys failure to timely object, the evidence becomes part of the evidence in the case. Thereafter, all the parties are considered bound by any outcome arising from the offer of evidence properly presented.[footnoteRef:56][32] (Emphasis supplied.) [56: [32] Supra note 25.]

Bearing in mind that the claim check voucher and the Release of Claim and Subrogation Receipt presented by Malayan Insurance are already part of the evidence on record, and since it is not disputed that the insurance company, indeed, paid PhP 700,000 to the assured, then there is a valid subrogation in the case at bar. As explained in Keppel Cebu Shipyard, Inc. v. Pioneer Insurance and Surety Corporation:Subrogation is the substitution of one person by another with reference to a lawful claim or right, so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities. The principle covers a situation wherein an insurer has paid a loss under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy. It contemplates full substitution such that it places the party subrogated in the shoes of the creditor, and he may use all means that the creditor could employ to enforce payment.We have held that payment by the insurer to the insured operates as an equitable assignment to the insurer of all the remedies that the insured may have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract. It accrues simply upon payment by the insurance company of the insurance claim. The doctrine of subrogation has its roots in equity. It is designed to promote and to accomplish justice; and is the mode that equity adopts to compel the ultimate payment of a debt by one who, in justice, equity, and good conscience, ought to pay.[footnoteRef:57][33] [57: [33] G.R. Nos. 180880-81 & 180896-97, September 25, 2009, 601 SCRA 96, 141-142. ]

Considering the above ruling, it is only but proper that Malayan Insurance be subrogated to the rights of the assured.WHEREFORE, the petition is hereby GRANTED. The CAs July 28, 2010 Decision and October 29, 2010 Resolution in CA-G.R. CV No. 93112 are hereby REVERSED and SET ASIDE. The Decision dated February 2, 2009 issued by the trial court in Civil Case No. 99-95885 is hereby REINSTATED.No pronouncement as to cost.SO ORDERED.PRESBITERO J. VELASCO, JR. Associate JusticeWE CONCUR:DIOSDADO M. PERALTAAssociate JusticeJOSE CATRAL MENDOZABIENVENIDO L. REYES Associate Justice Associate JusticeESTELA M. PERLAS-BERNABEAssociate JusticeA T T E S T A T I O NI attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.PRESBITERO J. VELASCO, JR.Associate JusticeChairpersonC E R T I F I C A T I O NPursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. RENATO C. CORONA Chief Justice

FIRST DIVISIONBLUE CROSS HEALTH CARE,G.R. No. 169737INC.,Petitioner,Present:PUNO, C.J., Chairperson,SANDOVAL-GUTIERREZ,- v e r s u s -CORONA,AZCUNA andLEONARDO-DE CASTRO, JJ.NEOMI[footnoteRef:58]* and DANILO OLIVARES, [58: * The petition spelled the name of respondent as Noemi Olivares but in the decision of the Court of Appeals, Neomi was used since she signed as such in the verification and certificate of non-forum shopping attached to her complaint.]

Respondents.Promulgated:February 12, 2008x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - xD E C I S I O NCORONA, J.:This is a petition for review on certiorari[footnoteRef:59][1] of a decision[footnoteRef:60][2] and resolution[footnoteRef:61][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,[footnoteRef:62][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.[footnoteRef:63][5] [59: [1] Under Rule 45 of the Rules of Court.] [60: [2] Penned by Associate Justice Japar B. Dimaampao and concurred in by Associate Justices Martin S. Villarama, Jr. and Edgardo F. Sundiam of the Former Fifteenth Division of the Court of Appeals; rollo, pp. 17-25. ] [61: [3]Id., pp. 27-28.] [62: [4]Penned by Judge Romeo F. Barza; id., pp. 38-43.] [63: [5]Penned by Judge Perpetua Atal-Pao; id., pp. 44-47.]

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,[footnoteRef:64][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.[footnoteRef:65][7] [64: [6]Id., p. 178.] [65: [7]Id., p. 39.]

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,[footnoteRef:66][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.[footnoteRef:67][9] [66: [8]Id., p. 18. ] [67: [9]Id., p. 39.]

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.[footnoteRef:68][10] They thereafter filed a complaint for collection of sum of money against petitioner in the MeTC on January 8, 2003.[footnoteRef:69][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. [68: [10]Id., p. 109.] [69: [11]Id., p. 38.]

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 informatio