Silhouette B.

Adobas
Insurance Law
Atty. Rodney P. Ato

Republic vs. Sunlife Assurance

473 SCRA 129 / 14 October 2005

FACTS:
Sun Life is a mutual life insurance company organized and existing under the
laws of Canada. It is registered and authorized by the Securities and Exchange
Commission and the Insurance Commission to engage in business in the Philippines as
a mutual life insurance company with principal office at Paseo de Roxas, Legaspi
Village, Makati City.
ISSUE:
Is Sun Life a Life insurance company?
HELD:
No, it is not.
Respondent, Sun Life, was a purely cooperative corporation duly licensed to
engage in mutual life insurance business in the Philippines. Thus, respondent was
deemed exempt from premium and documentary stamp taxes, because its affairs are
managed and conducted by its members with money collected from among themselves,
solely for their own protection, and not for profit. Its members or policyholders
constituted both insurer and insured who contribute, by a system of premiums or
assessments, to the creation of a fund from which all losses and liabilities were paid.
The dividends it distributed to them were not profits, but returns of amounts that had
been overcharged them for insurance.

Kenneth B. Minglana
Insurance Law
Atty. Rodney P. Ato

New World International Devt. vs. NYK-FilJapan Shipping

656 SCRA 129 2011

FACTS:
A contract of all-risk marine insurance was entered into between New World Intl
and Seaboard Eastern Insurance. This concerns 3 generator sets to be bought all the
way from the United States and to be delivered in Manila. The same generators were
transported by NYK-FilJapan Shipping. When it arrived in Manila, it was found out that
said generators were seriously damaged and it could no longer be repaired. New World
filed to claim the proceeds with Seaboard. Seaboard did not settle the claim but instead,
it required New world to present an itemize list of damage parts with corresponding
values. New world did not comply hence Seaboard refused to process the claim.
More than a year later, New World sued for specific performance plus damages
against the shipper NYK and the insurer, Seaboard. Lower Court ruled that although the
shipper was at fault, the same cause of action has been barred by prescription under
section 3 (6) of COGSA which sets a period within which to file a claim against the
shipper. The same court also absolved the insurer from any liability since its right to
subrogation has been impaired by the same prescriptive period.
ISSUE:
Whether or not the refusal of Seaboard to process the claim for failure to give
itemized list of damage parts is valid.
HELD:
Seaboards refusal to process the claim is invalid. Section 241 of the Insurance
Code provides that no insurance company doing business in the Philippines shall refuse
without just cause to pay or settle claims arising under coverages provided by its
policies. And, under Section 243, the insurer has 30 days after proof of loss is received
and ascertainment of the loss or damage within which to pay the claim. If such
ascertainment is not had within 60 days from receipt of evidence of loss, the insurer has
90 days to pay or settle the claim. And, in case the insurer refuses or fails to pay within
the prescribed time, the insured shall be entitled to interest on the proceeds of the policy
for the duration of delay at the rate of twice the ceiling prescribed by the Monetary
Board. In the instant case, Seaboard was not justified in requiring the insured to present
an itemized list of damage parts. What was entered into between them was an all-risk
marine insurance. Said itemized list was not even part of the insurance policy.
Furthermore, Seaboard also failed to formally reject the claim. Since Seaboard refused
to settle the claim without just cause as stated under Art. 241, It must be held liable not
only for the face value of the policy but also damages and interest.

Sundae June A. Jugao

Insurance Law
Atty. Rodney P. Ato

Mapalad Aisporna vs. The Court of Appeals

G.R. No. L-39419 April 12, 1982

FACTS:
A Personal Accident Policy was issued by Perla Compania de Seguros, through
its authorized agent Rodolfo Aisporna, for a period of 12 months with the beneficiary
designated as Ana M. Isidro. The insured died by violence during lifetime of policy. For
reason unexplained, an information was filed against petitioner Mapalad Aisporna,
Rodolfos wife, for violation of Section 189 of the Insurance Act or acting as agent in the
insurance application of one Eugenio S. Isidro, for and in behalf of Perla Compania de
Seguros, Inc., without securing the certificate of authority from the office of the
Insurance Commissioner. Mapalad contends that being the wife of true agent, Rodolfo,
she naturally helped him in his work, as clerk, and that policy was merely a renewal and
was issued because Isidro had called by telephone to renew, and at that time, her
husband, Rodolfo, was absent and so she left a note on top of her husbands desk to
renew. On 2 August 1971, the trial court found Mapalad guilty, which was also affirmed
by the appellate court. Hence, the present recourse was filed.
ISSUE:
Is Aisporna an insurance agent within the scope or intent of the Insurance Act?
HELD:
No. Legislative intent must be ascertained from a consideration of the statute as
a whole. The particular words, clauses and phrases should not be studied as detached
and isolated expressions, but the whole and every part of the statute must be
considered in fixing the meaning of any of its parts and in order to produce harmonious
whole. In the present case, the first paragraph of Section 189 prohibits a person from
acting as agent, subagent or broker in the solicitation or procurement of applications for
insurance without first procuring a certificate of authority so to act from the Insurance
Commissioner; while the second paragraph defines who is an insurance agent within
the intent of the section; while the third paragraph prescribes the penalty to be imposed
for its violation. The appellate courts ruling that the petitioner is prosecuted not under
the second paragraph of Section 189 but under its first paragraph is a reversible error,
as the definition of insurance agent in paragraph 2 applies to the paragraph 1 and 2 of
Section 189, which is any person who for compensation shall be an insurance agent
within the intent of this section. Without proof of compensation, directly or indirectly,
received from the insurance policy or contract, Mapalad Aisporna may not be held to
have violated Section 189 of the Insurance Act. It must be noted that the information, in
the case at bar, does not allege that the negotiation of an insurance contracts by the
accused with Eugenio Isidro was one for compensation. This allegation is essential, and
having been omitted, a conviction of the accused could not be sustained. After going
over the records of this case, we are fully convinced, as the Solicitor General maintains,
that accused did not violate Section 189 of the Insurance Act.

Junyvil B. Tumbaga
Insurance Law
Atty. Rodney P. Ato

Phil. American Life Insurance Company v. Ansaldo

234 SCRA 509 (July 26, 1994)

FACTS:
Ramon M. Paterno, Jr. sent a letter dated April 17, 1986 to Insurance
Commissioner alleging certain problems encountered by agents, supervisors, managers
and public consumers of the Philippine American Life Insurance Company (Philamlife).
During the hearing Ramon stated that the contract of agency is illegal. Philamlife
through its president De los Reyes contended that the Insurance Commissioner as a
quasi-judicial body cannot rule on the matter.
ISSUE 1:
Whether or not the business of insurance covers the contract of agency.
ISSUE 2:
Whether or not the Insurance Commissioner had jurisdiction over the legality
of the Contract of Agency between Philamlife and its agents.
HELD 1:
No. The business of insurance does not cover the relationship affecting the
insurance company and its agents but is limited to adjudicating claims and complaints
filed by the insured against the insurance company.
While the subject of Insurance Agents and Brokers is discussed under Chapter
IV, Title I of the Insurance Code, the provisions of said Chapter speak only of the
licensing requirements and limitations imposed on insurance agents and brokers.
As Supreme Court ruled in Great Pacific Life Assurance Corporation v.
Judico, 180 SCRA 445 (1989);
Insurance company may have two classes of agents who sell its insurance
policies:
(1) salaried employees who keep definite hours and work under the
control and supervision of the company - governed by the Contract of
Employment and the provisions of the Labor Code
(2) registered representatives, who work on commission basis. - governed
by the Contract of Agency and the provisions of the Civil Code on the
Agency
HELD 2:
No, it does not have jurisdiction. Since the contract of agency entered into
between Philamlife and its agents is not included within the meaning of an insurance
business, Section 2 of the Insurance Code cannot be invoked to give jurisdiction over
the same to the Insurance Commissioner. Expressio unius est exclusio alterius.
Insurance Commissioner cannot assume jurisdiction over controversies between
the insurance companies and their agents. The Insurance Code does not have
provisions governing the relations between insurance companies and their agents. It
follows that the Insurance Commissioner, cannot in the exercise of its quasi-judicial
powers, assume jurisdiction over controversies between the insurance companies and
their agents.

William Joseph Z. Radaza

Insurance Law
Atty. Rodney P. Ato

Smith, Bell, and Co., Inc. vs. CA and Joseph Bengzon Chua
267 SCRA 530, Feb. 6, 1997

FACTS:
Plaintiff-appellee bought and imported from Taiwan goods for delivery in Manila.
The shipment was insured by First Insurance Co. which is a foreign insurance company.
Petitioner Smith, Bell & Co. was the claim agent of First Insurance in the Philippines.
Upon receipt by plaintiff-appellee of the cargo, it was found to be damaged.
Accordingly, plaintiff-appellee filed with Smith, Bell & Co. a formal statement of claim
and demand for settlement of the value lost. Smith, Bell & Co. conveyed the claim to its
principal - First Insurance, and later informed plaintiff-appellee that its principal offered
only 50% of the claim as redress.
The said offer was not acceptable to plaintiff-appellee, so it sought recovery from
Smith, Bell & Co. for the full amount of its loss, but the latter did not settle the claim of
plaintiff. Thus, plaintiff filed a case against Smith, Bell & Co. for settlement of its claim.
Smith, Bell and Co. denied liability on the ground that it is only a claim agent
therefore it cannot be made solidarily liable with the principal insurance company.
ISSUE:
Whether or not a local settling or claim agent of a disclosed principal foreign
insurance company can be held jointly and severally liable with said principal under the
latters marine cargo insurance policy.
RULING:
A local claim agent of a foreign insurance company cannot be held jointly and
severally liable with its principal under the latters marine cargo insurance policy.
The scope and extent of the functions of an adjustment and settlement agent,
such as Smith, Bell and Co. do not include personal liability. Its functions are merely to
settle and adjust claims in behalf of its principal if those claims are proven and
undisputed, and if the claim is disputed or is disapproved by the principal, like in the
instant case, the agent does not assume any personal liability.
Such claim agent, as a representative of the foreign insurance company, is
tasked only to receive legal processes on behalf of its principal and not to answer
personally for any insurance claims as can be gathered from Sec. 190 of the Insurance
Code.
In addition, being a mere agent and representative, petitioner is also not the real
party in interest in this case. The cause of action of plaintiff-appellee is based on a
contract of insurance under which Smith, Bell and Co. was not a party.

Aurora Luanne R. Cembrano

Insurance Law
Atty. Rodney P. Ato
Tongko vs. The Manufacturers Life Insurance Co. Phils, Inc.
570 SCRA 503 2008

FACTS:
Manufacturers Life Insurance Co. Phils, Inc. Manulife is a domestic
corporation engaged in life insurance business. Manulife, through its President started a
professional relationship with Gregorio V. Tongko by virtue of a Career Agents
Agreement. The Agreement contains requirements and codes of conduct to which
Tongko, as agent, must comply. Because of Tongkos failure to meet the demands of
the company, his services were terminated.
Tongko filed a Complaint with NLRC against Manulife for illegal dismissal
alleging that there was an employer-employee relationship because Manulife gave him
specific directive on how to manage his area of responsibility, thus Manulife exercised
control over him. Manulife argued otherwise and further contended that the labor arbiter
has no jurisdiction over the case.
ISSUES:
1. Whether or not Tongko was an employee of Manulife.
2. Whether or not the Labor Arbiter has jurisdiction over the case.
HELD:
1. Tongko was an employee of Manulife.
Following the four-fold test or the control test, the Court ruled that if the specific rules
and regulations that are enforced against insurance agents or managers are such
that would directly affect the means and methods by which such agents or managers
would achieve the objectives set by the insurance company, they are employees of
the insurance company. In the instant case, the fact that Tongko was obliged to
obey and comply with the codes of conduct demonstrated the power of control
exercised by the company over him.
2. Since there exists an employer-employee relationship between the two parties, the
NLRC validly exercises jurisdiction over the case at bar.

Christine Mae Navarra

Insurance Law
Atty. Rodney P. Ato

Gregorio V. Tongko vs. The Manufacturers

Life Insurance Co. Phils, Inc. and Renato A. Vergel De Dios
G.R. No. 167622 June 29, 2010

FACTS:
Petitioner Gregorio Tongko entered into a Career Agents Agreement with
respondent Manulife. As an agent, his duties consisted of, among others, canvassing
for applications for group policies and other products of the company. Subsequently,
Tongko was named unit manager, branch manager, and regional sales manager. But
when he failed to comply with policies of Manulife, his Agency Agreement was
terminated.
Tongko filed a complaint with the NLRC Arbitration Branch. He essentially alleged
despite the clear terms of the letter terminating his Agency Agreement that he was
Manulifes employee before he was illegally dismissed. The labor arbiter decreed that
no employer-employee relationship existed between the parties. However, the NLRC
reversed the labor arbiters decision on appeal. When the case went to the CA, it
sustained the labor Arbiters decision. Manulife asserts that the labor tribunals have no
jurisdiction over Tongkos claim as he was not its employee as characterized in the fourfold test.
ISSUE:
Has the labor arbiter jurisdiction over his complaint for illegal dismissal?
HELD:
No. Given the anemic state of the evidence, particularly on the requisite
confluence of the factors that would show an employer-employee relationship, the court
cannot conclusively find that the relationship exists in the present case, even if such
relationship only refers to Tongkos additional functions. While a rough deduction can be
made, the answer will not be fully supported by the substantial evidence needed.Under
this legal situation, the only conclusion that can be made is that the absence of
evidence showing Manulifes control over Tongkos contractual duties points to the
absence of any employer-employee relationship between Tongko and Manulife.
In the context of the established evidence, Tongko remained an agent all along;
although his subsequent duties made him a lead agent with leadership role, he was
nevertheless only an agent whose basic contract yields no evidence of means-andmanner control.
In the case, it is a matter that the labor tribunals cannot rule upon in the absence
of an employer-employee relationship. Jurisdiction over the matter belongs to the courts
applying the laws of insurance, agency and contracts.

Albert G. Cong
Insurance Law
Atty. Rodney P. Ato

Villacorta vs. The Insurance Commission

10 SCRA 467 (1980)

FACTS:
Jewel Villacorta owned a Colt Lancer car which she insured with Empire
Insurance Company against own damage, theft and third party liability. While the car
was in the repair shop, one of the employees of the latter took it out for a joyride after
which it figured in a vehicular accident. This resulted to the death of the driver and some
of the passengers as well as extensive damage to the car. Villacorta filed a claim for
total loss with the said insurance company. However, the company denied the claim on
the ground that the accident did not fall within the provisions of the policy either for the
Own damage or theft coverage, invoking the policy provision on authorized driver
clause. The Insurance Commission further stated that the car was not stolen and
therefore not covered by the theft clause because it is not evident that the person who
took the car for a joyride intends to permanently deprive the insured of her car.
ISSUE:
Should the insurer company pay the claim.
RULING:
Yes. Where the insureds car is wrongfully taken without the insureds consent
from the car service and repair shop to whom it had been entrusted for check-up and
repairs (assuming that such taking was for a joy ride, in the course of which it was
totally smashed in an accident), the insurer is liable and must pay the insured for the
total loss of the insured vehicle under the theft clause of the policy. Assuming, despite
the totally inadequate evidence, that the taking was temporary and for a joy ride, the
Court sustained as the better view that which holds that when a person, either with the
object of going to a certain place, or learning how to drive, or enjoying a free ride, takes
possession of a vehicle belonging to another, without the consent of its owner, he is
guilty of theft because by taking possession of the personal property belonging to
another and using it, his intent to gain is evident since he derives therefrom utility,
satisfaction, enjoyment and pleasure.

Rogaciano Quico III

Insurance Law
Atty. Rodney P. Ato

James Stokes vs. Malayan Insurance Co., Inc.

G.R. No. L-34768, 24 February 1984 127 SCRA 766

FACTS:
Daniel Adolfson had a subsisting Malayan car insurance policy with coverage
against own damage as well as 3rd party liability when his car figured in a vehicular
accident with another car, resulting to damage to both vehicles. At the time of the
accident, Adolfsons car was being driven by James Stokes, who was authorized to do
so by Adolfson. Stokes, an Irish tourist who had been in the Philippines for only 90
days, had a valid and subsisting Irish drivers license but without a Philippine drivers
license. Adolfson filed a claim with Malayan but the latter refused to pay contending that
Stokes was not an authorized driver under the Authorized Driver clause of the
insurance policy in relation to Section 21 of the Land Transportation Office.
ISSUE:
Whether or not Malayan is liable to pay the insurance claim of Adolfson.
HELD:
NO. A contract of insurance is a contract of indemnity upon the terms and
conditions specified therein. When the insurer is called upon to pay in case of loss or
damage, he has the right to insist upon compliance with the terms of the contract. If the
insured cannot bring himself within the terms and conditions of the contract, he is not
entitled as a rule to recover for the loss or damage suffered. For the terms of the
contract constitute the measure of the insurers liability, and compliance therewith is a
condition precedent to the right of recovery. At the time of the accident, Stokes had
been in the Philippines for more than 90 days. Hence, under the law, he could not drive
a motor vehicle without a Philippine drivers license. He was therefore not an
authorized driver under the terms of the insurance policy in question, and Malayan
was right in denying the claim of the insured. Acceptance of premium within the
stipulated period for payment thereof, including the agreed period of grace, merely
assures continued effectivity of the insurance policy in accordance with its terms. Such
acceptance does not prevent the insurer from interposing any valid defense under the
terms of the insurance policy. The principle of estoppel is an equitable principle rooted
upon natural justice which prevents a person from going back on his own acts and
representations to the prejudice of another whom he has led to rely upon them. The
principle does not apply to the instant case. In accepting the premium payment of the
insured, Malayan was not guilty of any inequitable act or representation. There is
nothing inconsistent between acceptance of premium due under an insurance policy
and the enforcement of its terms.

Mary Christine Anthonette M. Salise-Punzalan

Insurance Law
Atty. Rodney P. Ato

Perla Compania de Seguros, Inc. vs. The Court of Appeals,

Herminio Lim and Evelyn Lim
G.R. No. 96452 May 7, 1992
FCP Credit Corporation vs. The Court of Appeals, Special Third Division,
Herminio Lim and Evelyn Lim
G.R. No. 96493 May 7, 1992

FACTS:
Spouses Lim bought a car through a promissory note in favor of Superstars,
payable in monthly installments and secured a chattel mortgage registered under the
name of the spouses and insured with the petitioner Perla Compania de Seguros, Inc.
Later the Supercars with notice to the spouses assigned to petitioner FCP Credit
Corporation. Said vehicle while parked at the back of the Broadway was carnapped.
Private respondent Evelyn Lim who was driving the car before it was carnapped
immediately report the same to the authorities. Respondent filed a claim for loss with
the petitioner Perla but said claim was denied on the ground that Evelyn Lim, who was
using the vehicle before it was carnapped, was in possession of an expired drivers
license at the time of the loss of said vehicle which is in violation of the authorized driver
clause of the insurance policy.
ISSUE:
Whether or not the authorized driver clause is applicable in this case.
HELD:
No. The comprehensive motor car insurance policy issued by petitioner Perla
undertook to indemnify the private respondents against loss or damage to the car (a) by
accidental collision or overturning, or collision or overturning consequent upon
mechanical breakdown or consequent upon wear and tear; (b) by fire, external
explosion, self-ignition or lightning or burglary, housebreaking or theft; and (c) by
malicious act. Where a car is admittedly, as in this case, unlawfully and wrongfully taken
without the owner's consent or knowledge, such taking constitutes theft, and, therefore,
it is the "THEFT"' clause, and not the "AUTHORIZED DRIVER" clause that should
apply.
It is worthy to note that there is no causal connection between the possession of
a valid driver's license and the loss of a vehicle. To rule otherwise would render car
insurance practically a sham since an insurance company can easily escape liability by
citing restrictions which are not applicable or germane to the claim, thereby reducing
indemnity to a shadow.

Silhouette B. Adobas
Insurance Law
Atty. Rodney P. Ato

Virgilio D. Imson vs. Hon. Court of Appeals, Holiday Hills Stock

and Breeding Farm Corporation, FNCB Finance Corporation
G.R. No. 106436 December 3, 1994

FACTS:
The case at bench arose from a vehicular collision on December 11, 1983,
involving petitioner's Toyota Corolla and a Hino diesel truck registered under the names
of private respondents FNCB Finance Corporation and Holiday Hills Stock and Breeding
Farm Corporation. The collision seriously injured petitioner and totally wrecked his car.
The petitioner filed with the RTC Baguio City a Complaint for Damages Sued were
private respondents as registered owners of the truck; truck driver Felix B. Calip, Jr.; the
beneficial owners of the truck, Gorgonio Co Adarme, Felisa T. Co (also known as Felisa
Tan), and Cirilia Chua Siok Bieng, and the truck insurer, Western Guaranty Corporation.
In 1987, petitioner and defendant insurer, entered into a compromise agreement. In
consequence of the compromise agreement, the trial court dismissed the Complaint for
Damages against Western Guaranty Corporation. The private respondent moved to
dismiss the case against all the other defendants. It argued that since they are all
indispensable parties under a common cause of action, the dismissal of the case
against defendant insurer must result in the dismissal of the suit against all of them.
ISSUE:
Is a compulsory motor vehicle insurer indispensable party to the case?
HELD:
No, it is not an indispensable party. With respect to defendant Western
Guaranty Corporation, petitioner's cause of action is based on contract. He seeks to
recover from the insurer on the basis of the third party liability clause of its insurance
contract with the owners of the truck. This is acknowledged by the second paragraph of
the compromise agreement between petitioner and defendant insurer, thus:
2. In full settlement of its liability under the laws and the said insurance
contract, defendant Western Guaranty shall pay plaintiff (herein petitioner)
the amount of P70,000.00 upon the signing of this compromise
agreement.
He is not indispensable if his presence would merely permit complete relief
between him and those already parties to the action, or will simply avoid multiple
litigation.
It is true that all of petitioner's claims in civil case is premised on the wrong
committed by defendant truck driver. Concededly, the truck driver is an indispensable
party to the suit. The other defendants, however, cannot be categorized as
indispensable parties. They are merely proper parties to the case. Proper parties have
been described as parties whose presence is necessary in order to adjudicate the
whole controversy, but whose interests are so far separable that a final decree can be
made in their absence without affecting them. It is easy to see that if any of them had
not been impleaded as defendant, the case would still proceed without prejudicing the
party not impleaded. Thus, if petitioner did not sue Western Guaranty Corporation, the
omission would not cause the dismissal of the suit against the other defendants. Even
without the insurer, the trial court would not lose its competency to act completely and
validly on the damage suit. The insurer, clearly, is not an indispensable party.

Kenneth B. Minglana
Insurance Law
Atty. Rodney P. Ato

Fortune Insurance and Surety Co., Inc. vs. CA

244 SCRA 308 / May 23, 1995

FACTS:
A theft or robbery insurance policy was entered into between Fortune Insurance
and Producers Bank subject to the exception that losses arising from the acts of
dishonest employees or representatives are not covered. An armored car owned by
Producers Bank was robbed while travelling along Taft Avenue, Pasay. It was found out
that the driver and security guard assigned to the said armored car were co-principals in
the said robbery. When PB filed a claim for the proceeds of the policy, the same was
denied by Fortune on the ground that the loss was brought about by the acts of PBs
own employees hence it falls under the exception clause.
ISSUES:
1. What particular provisions under the Insurance Code are to be applied in order to
resolve the instant case?
2. WON Fortune insurance is liable.
HELD:
1. Except with respect to compulsory motor vehicle liability insurance, the Insurance
Code contains no other provisions applicable to casualty insurance or to robbery
insurance in particular. These contracts are, therefore, governed by the general
provisions applicable to all types of insurance. Outside of these, the rights and
obligations of the parties must be determined by the terms of their contract,
taking into consideration its purpose and always in accordance with the general
principles of insurance law.
2. Fortune Insurance is not liable. For the purpose of the cash transfer, the security
guard and the driver are to be considered as authorized representative of the
Bank hence the loss falls under the exception clause. This is because, taking into
consideration the terms of the contract and its purpose, the Insurer clearly sought
to protect itself from liability arising from acts of persons who have unrestricted
access to the money of the Bank.

Sundae June A. Jugao

Insurance Law
Atty. Rodney P. Ato

Santiago Syjuco, Inc., vs. Hon. Jose Tecson

116 SCRA 685 / Sept. 21, 1982

FACTS:
Private respondents executed a consolidated promissory note in favor of
petitioner by virtue of which they bound themselves to pay petitioner the principal sum
of P2,460,000. The payment of this loan was secured by a mortgage on the parcels of
Registered land, together with all the improvements thereon. The maturity of the
promissory note was extended to November 8, 1967. Having failed to pay said loan,
petitioner started proceedings for the extrajudicial foreclosure of the mortgage and a
sale by public auction in connection therewith was scheduled for December 27, 1968
after proper publication.
Private respondents filed a bond for to postpone the scheduled auction sale. A
motion for reconsideration file by the petitioner of that action was denied.
In still another move to forestall the foreclosure of the mortgage in question, on
June 28, 1979, respondents filed a motion to discharge the mortgage on the ground that
the bond they posted had novated the mortgage.
ISSUE:
Whether or not the filing of the bonds resulted in the novation of the mortgage,
hence, the foreclosure thereof can no longer proceed.
HELD:
No. The posting of the bond does not result to novation of the contract. More
importantly, in its comment of November 23, 1981, petitioner submitted to this Court a
certification of the Insurance Commissioner to the effect that the bondsmen of
respondents, namely, "Travellers Multi-Indemnity Insurance Corporation and Travellers
Insurance and Surety Corporation are one and the same entity and that the Certificate
of Authority of Travellers Insurance and Surety Corporation to transact non-life
insurance business in the Philippines was not renewed on July 1, 1981 for cause. The
company has been ordered to cease and desist from taking any new risks of any kind or
character until such time as its authority to do business is restored by this Commission."
From the said certification, it results that the bonds much relied upon by private
respondents have already virtually lost their force and effect as of July 1, 1981. It is not
unreasonable for petitioner to be apprehensive as to whether or not it can still recover
on said bonds, Of course, private respondents' offer to file a new bond may remedy the
situation. But until accepted by petitioner, which from what the records show it is not
disposed to do, all discussions regarding said bonds vis-a-vis the points of novation,
etc. raised by private respondents would seem to be an exercise in futility.

William Joseph Z. Radaza

Insurance Law
Atty. Rodney P. Ato

Finman General Assurance Corp. vs. Inocencio, et.al.

179 SCRA 480, Nov. 15,1989

FACTS:
Pan Pacific Overseas Recruiting Services was granted a license to operate as a
recruitment agency by the Philippine Overseas Employment Administration (POEA). In
accordance with the Rules and Regulations of POEA, Pan Pacific posted a surety bond
issued by petitioner Finman.
Private respondents William Inocencio and others were promised employment by
Pan Pacific in consideration of certain fees and charges. However, Pan Pacific did not
secure the employment of private respondents and instead went in hiding.
As a result, private respondents filed a complaint against Pan Pacific before the
POEA. The POEA Administrator impleaded Finman as party respondent in the said
complaint being the surety of Pan Pacific.
In answer, Finman denied liability claiming that the POEA had no jurisdiction over
surety bonds since that jurisdiction is vested in the Insurance Commissioner or the
regular courts, and that private respondents had no cause of action because Finman is
not a privy to the transactions between private respondents and Pan Pacific.
ISSUE:
Whether or not the POEA has authority to implead Finman and order it to pay
private respondents refund of their money on the basis of the surety bond it issued.
RULING:
The POEA has the authority to implead Finman and order it to refund private
respondents. Finman cannot dispute the direct and solidary nature of its obligations
under its own surety bond. Under Section 176 of the Insurance Code (PD 612), the
liability of a surety in a surety bond is joint and several with the principal obligor.
In the case at bar, the POEA held, and the Secretary of Labor affirmed, that Pan
Pacific had violated Article 32 of the Labor Code as well as Article 34 (a). There is,
hence, no question that, both under the Labor Code and the POEA Rules and
Regulations, Pan Pacific had violated at least one of the conditions for the grant and
continued use of the recruitment license granted to it. There can, similarly, be no
question that the POEA Administrator and the Secretary of Labor are authorized to
require Pan Pacific to refund the placement fees it had charged private respondents
without securing employment for them and to impose a fine upon Pan Pacific.
Under Article 31 of the Labor Code, the Secretary of Labor shall have the
exclusive power to determine, decide, order or direct payment from, or application of,
the cash or surety bond for any claim or injury covered and guaranteed by the bonds.
Public policy will be effectively negated if POEA and the Department of Labor and
Employment were held powerless to compel a surety company to make good on its
solidary undertaking in the same quasi-judicial proceeding where the liability of the
principal obligor, the recruitment or employment agency, is determined.