INSURANCE || Batch 1 (Cases 9-17)
CASE 09: FIREMAN’S FUND INSURANCE COMPANY AND THE FIRESTONE TIRE
AND RUBBER COMPANY OF THE PHILIPPINES v JAMILA & COMPANY - Rebecca
Flores
Topic: Subrogation
DOCTRINE: When the insurance company pays for the loss, such payment operates as
an equitable assignment to the insurer of the property and all remedies which the insured
may have for the recovery thereof. That right is not dependent upon, nor does it grow out
of, any privity of contract, or upon written assignment of claim, and payment to the insured
makes the insurer an assignee in equity.
FACTS
1. Jamila/Veterans PH Scouts Security Agency contracted to supply security guards to
Firestone. Jamila assumed responsibility for the acts of its security guards.
2. First Quezon City Insurance executed a bond for P20K to guarantee Jamila’s
obligation under that contract.
3. Later on Firestone’s properties valued at P11,925 were allegedly lost due to the acts
of its employees who connived with Jamila’s security guard
4. Fireman’s Fund, as insurer paid to Firestone the amount of the loss and Fireman’s
Fund was subrogated to Firestone’s right to get reimbursement from Jamila. Jamila
and its surety (First Quezon Insurance) failed to pay the amount of the loss.
5. Fireman invoked Article 2207, as the insurer Fireman’s Fund is entitled to go after the
person or entity that violated its contractual commitment to answer for the loss insured
against.
6. Jamila contends that it did not consent to the subrogation of Fireman’s Fund to
Firestone’s right to get reimbursement from Jamila and its surety. Further arguing that
legal subrogation under Art 2207 of the Civil Code requires the debtor’s consent and
that according to Art 1302, the instant case is not among the cases mentioned when
legal subrogation can take place.
ISSUE: WON Fireman’s Fund can subrogate to the rights of Jamilia?
RULING: YES! Article 2207 is a restatement of a settled principle of American
jurisprudence. Subrogation has been referred to as the doctrine of substitution. It „is an
arm of equity that may guide or even force one to pay a debt for which an obligation was
incurred but which was in whole or in part paid by another.
Subrogation is founded on principles of justice and equity, and its operation is governed by
principles of equity. It rests on the principle that substantial justice should be attained
regardless of form, that is, its basis is the doing of complete, essential, and perfect justice
between all the parties without regard to form.
Subrogation is a normal incident of indemnity insurance. Upon payment of the loss, the
insurer is entitled to be subrogated pro tanto to any right of action which the insured may
have against the third person whose negligence or wrongful act caused the loss
When the insurance company pays for the loss, such payment operates as an equitable
assignment to the insurer of the property and all remedies which the insured may have for
the recovery thereof. That right is not dependent upon, nor does it grow out of, any privity
of contract, or upon written assignment of claim, and payment to the insured makes the
insurer an assignee in equity
Batch 4 GO4 (2015)Z
DIPOSITIVE: Costs against Jamila. Fireman Fund won!
CASE 10: PAN MALAYAN INSURANCE V. CA – CHARLENE DACARA
Topic: Subrogation
DOCTRINE: Article 2207 of the Civil Code is founded on the well-settled principle of
subrogation. If the insured property is destroyed or damaged through the fault or
negligence of a party other than the assured, then the insurer, upon payment to the
assured, will be subrogated to the rights of the assured to recover from the wrongdoer to
the extent that the insurer has been obligated to pay. Payment by the insurer to the
assured operates as an equitable assignment to the former of all remedies which the latter
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
or upon written assignment of claim. It accrues simply upon payment of the insurance
claim by the insurer.
FACTS: Petitioner PanMalay was an insurer of the car of Canlubang Automotive
Resources Corp. While the policy was still in effect, the insured car was allegedly hit by a
pick-up owned by Erlinda Fabie but driven by another person. The car suffered damages in
the amount of P42,052.00. PanMalay defrayed the cost of repair of the insured car. It then
demanded reimbursement from Fabie and her driver of said amount, but to no avail.
Petitioner filed a complaint against private respondent before the RTC. It averred that the
damages caused to the insured car were settled under the “own damage” coverage of the
insurance policy. Private respondent filed a motion to dismiss arguing that under the "own
damage" clause of the insurance policy precluded subrogation under Article 2207 of the
Civil Code, since indemnification thereunder was made on the assumption that there was
no wrongdoer or no third party at fault.
RTC: The complaint was dismissed and ruled that payment under the “own damage”
clause was an admission by the insurer that the damage was caused by the assured
and/or its representatives.
CA: Affirmed the trial court’s ruling but on different ground. Applying the ejusdem generis
rule, CA held that Section III-I of the policy, which was the basis for the settlement of the
claim against insurance, did not cover damage arising from collision or overturning due to
the negligence of 3rd parties as one of the insurable risks.
ISSUE: WON PanMalay subrogated to the rights of Canlubang against the driver and his
employer?
RULING: YES. Art. 2207 of the civil code states that “If the plaintiffs property has been
insured, and he has received indemnity from the insurance company for the injury or loss
arising out of the wrong or breach of contract complained of, the insurance company shall
be subrogated to the rights of the insured against the wrongdoer or the person who has
violatedthe contract.” This was founded on the well-settled principle of subrogation. If the
insured property is destroyed or damaged through the fault or negligence of a party other
than the assured, the insurer, upon payment to the assured, will be subrogated to the
rights of the assured to recover from the wrongdoer to the extent that the insurer has been
obligated to pay. Payment by the insurer to the assured operates as an equitable
assignmentto the former of all remedies, which the latter may have against the third party
whose negligence or wrongful act caused the loss.
There are a few recognized exceptions to this rule:
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INSURANCE || Batch 1 (Cases 9-17)
1. where the assured by his own act releases the wrongdoer or third party liable for
the loss or damage
2. where the insurer pays the assured the value of the lost goods without notifying
the carrier who has in good faith settled the assured's claim for loss
3. where the insurer pays the assured for a loss which is not a risk covered by the
policy, thereby effecting "voluntary payment"
None of these exceptions are present in this case.
AS to the Trial Court’s ruling: When Panmalay utilized the phrase “own damage”-- a
pharase which, incidentally, is not found in the insurance policy—to define the basis for its
settlement, it simply meant that it had assumed to reimburse the costs for repairing the
damage to the insured vehicle.
It is in this sense that the so-called “own damage” coverage of policy is different from the
“3rd party liability” coverage and from the “property damae” coverage.
As to the Court of Appeals’ ruling: CA’s ruling that the coverage of the insured risks under
Section III-I of the policy does not include damage to the insured vehicle arising from
collision or overturning due to negligent acts of a 3rd party, has no merit.
Not only is it an erroneous interpretation of the provisions of the section, but it also violates
a fundamental rule on the interpretation of property insurance contracts where
interpretation should be liberally in favor of the assured and strictly against the insurer in
cases of disagreement between the parties.
The meaning advanced by Panmalay regarding the coverage of Section III-I of the policy is
undeniable more beneficial to Canlubang than that insisted upon by the CA.
In any case, the very parties to the policy, Canlubang and Panmalay, were not shown to be
in disagreement regarding the meaning and coverage of Section III-I. Hence, it was
improper for CA to assert its own interpretation of the contract that is contrary to the clear
understanding and intention of the parties to it.
Thus, SC held that Panmalay, as subrogee, has no legal obstacle from filing the complaint
for damages against the 3rd parties responsible for the damage to the car.
DISPOSITIVE: Petitioner won.
CASE 11: SVERIGES ANGFARTYGS ASSURANS FORENIN vs. GAN (1967). –Olive
Cachapero
Topic: Subrogation Article 2027, Civil Code
DOCTRINE: [A]n insurer who pays the insured for loss or liability not covered by the policy
is not subrogated to the latter. However, even assuming that there was unwarranted — or
"volunteer" — payment, plaintiff could still recover what it paid — in effect — to the carrier
from defendant shipper under Art. 1236 of the Civil Code which allows a third person who
pays on behalf of another to recover from the latter, although there is no subrogation.
FACTS: Defendant Qua Chee Gan shipped on board the S.S. NAGARA, as per bills of
lading Exhs. A and B, 2,032,000 kilos of bulk copra at Siain, Quezon, consigned to DAL
International Trading Co., in Gdynia, Poland. The vessel first called at the port of
Karlshamn, Sweden, where it unloaded 969,419 kilos of bulk copra. Then, it proceeded to
Batch 4 GO4 (2015)Z
Gdynia where it unloaded the remaining copra shipment. The actual outturn weights in the
latter port showed that only 1,569,429 kilos were discharged. Because of the alleged
confirmed cargo shortage, the Polish cargo insurers had to indemnify the consignee for the
value thereof. Thereafter, the former sued the shipowner, the Swedish East Asia Company,
in Gothenburg, Sweden. The latter, in turn sued, defendant and had it summoned to
Gothenburg. A settlement was effected between the Polish cargo insurers and the
shipowner. Plaintiff, as the indemnity insurer for the latter, paid approximately $60,733.53
to the Polish insurers. Claiming to have been subrogated to the rights of the carrier, plaintiff
sued defendant before the CFI of Manila to recover U.S. $60,733.53 plus 17% exchange
tax, with legal interest, as the value of the alleged cargo short shipment.
Defendant filed a motion to dismiss on the ground of prescription under the Carriage of
Goods by Sea Act. The lower court ruled that plaintiff's insurance policy did not cover the
short shipment, reasoning that unless the same — as the best evidence — were
presented, it could not be conclusively determined if "liability for short shipment" was a
covered risk.
ISSUE: WON plaintiff is subrogated to the rights of the carrier.
RULING: NO. [T]he rule is that an insurer who pays the insured for loss or liability not
covered by the policy is not subrogated to the latter. However, even assuming that there
was unwarranted — or "volunteer" — payment, plaintiff could still recover what it paid — in
effect — to the carrier from defendant shipper under Art. 1236 of the Civil Code which
allows a third person who pays on behalf of another to recover from the latter, although
there is no subrogation. But since the payment here was without the knowledge and
consent of defendant, plaintiff's right of recovery is defeasible by the former's defenses
since the Code is clear that the recovery is only up to the amount by which the defendant
was benefited.
CASE 12: RIZAL SURETY v. MANILA RAILROAD COMPANY (1968) – Michelle Sy
Topic: Subrogation (Art. 2027 NCC)
DOCTRINE: Insurer after paying the claim of the insured for damages under the insurance
is subrogated merely to the rights of the insured and therefore can necessarily recover only
that to what was recoverable by the insured.
FACTS: On or about November 29, 1960, the vessel, SS Flying trader, loaded on board at
Genoa, Italy for shipment to Manila, among other cargoes, 6 cases OMH Special Single
Colour Offset Press machine, for which Bill of Lading No. 1 was issued, consigned to
Suter, Inc.
On or about January 16, 1961, the vessel arrived in Manila and subsequently discharged
complete and in good order the aforementioned shipment into the custody of defendant
Manila Port Service as arrastre operator.
While one of the six cases was being lifted and loaded by the crane of Manila Port Service
into the consignee’s truck, it was dropped by the crane and as a consequence the machine
was heavily damaged.
The plaintiff, as the insurer, paid the consignee the amount of P16,500 representing
damages by way of costs of replacement parts and repairs to put the machine on a
working condition. The plaintiff also paid P16,680.70 to the International Adjustment
Bureau as adjuster’s fee.
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INSURANCE || Batch 1 (Cases 9-17)
The paragraph 15 of the management contract between the Bureau of Customs and
Manila Port Service states that the Company’s liability is limited to P500.00 per package
unless the value of the goods is otherwise, specified, declared or manifested and the
corresponding arrastre has been paid.
The lower court ordered the defendants, jointly and severally to pay the plaintiff the amount
of P500.00. on appeal, it was stated that the plaintiff could recover in full based on Article
2207 of the Civil Code.
ISSUE: Whether or not the insurance company can collect more than what was stipulated
in the Management Contract?
RULING: No. The literal language of Article 2207, however, does not warrant such an
interpretation. It is there made clear that in the event that the property has been insured
and the Insurance Company has paid the indemnity for the injury or loss sustained, it "shall
be subrogated to the rights of the insured against the wrong-doer or the person who has
violated the contract."
Plaintiff-appellant Insurance Company, therefore, cannot recover from defendants an
amount greater than that to which the consignee could lawfully lay claim. The management
contract is clear. The amount is limited to Five Hundred Pesos (P500.00).
Plaintiff-appellant Rizal Surety and Insurance Company, having been subrogated merely to
the rights of the consignee, its recovery necessarily should be limited to what was
recoverable by the insured. The lower court therefore did not err when in the decision
appealed from, it limited the amount which defendants were jointly and severally to pay
plaintiff-appellants to "Five Hundred Pesos (P500.00) with legal interest thereon from
January 31, 1962, the date of the filing of the complaint, . . . ."
DISPOSITIVE: The Decision appealed from is affirmed.
CASE 13: ST. PAUL FIRE & MARINE INSURANCE CO. VS. MACONDRAY & CO., INC.
(1976)
Author: Carlo Guevara
Topic: Subrogation, Article 2027 Civil Code.
DOCTRINE: Insurance carrier is subrogated merely to rights of the assured and can
recover from common carrier only the amount recoverable by the latter.
FACTS: Winthrop Products, Inc., of U.S.A., shipped aboard the SS "Tai Ping", owned and
operated by Wilhelm Wilhelmsen, 218 cartons and drums of drugs and medicine, with the
freight prepaid, which were consigned to Winthrop-Stearns Inc., Manila, Philippines. The
shipment was insured by the shipper against loss and/or damage with the St. Paul Fire &
Marine Insurance Company.
The SS "Tai Ping" arrived at the Port of Manila and discharged its shipment into the
custody of Manila Port Service, the arrastre contractor for the Port of Manila. The said
shipment was discharged complete and in good order with the exception of one (1) drum
and several cartons which were in bad order condition. Hence, the consignee filed a claim
in the amount of P1,109.67 representing the C.I.F. value of the damaged drum and cartons
of medicine with the carrier, herein defendants-appellees and the Manila Port Service.
Batch 4 GO4 (2015)Z
Both refused to pay the claim. Consequently, the consignee filed its claim with the insurer,
St. Paul Fire & Marine Insurance Co., and the insurance company, on the basis of such
claim, paid to the consignee the insured value of the lost and damaged goods, including
other expenses in connection therewith, in the total amount of $1,134.46
As subrogee of the rights of the shipper and/or consignee, the insurer, St. Paul Fire &
Marine Insurance Co., instituted with the CFI the present action against the defendants for
the recovery of said amount plus costs. Defendants resisted the action, contending that the
whole cargo was delivered to the consignee in the same condition in which it was received
from the carrying vessel; that their rights, duties and obligations as arrastre contractor at
the Port of Manila are governed by and subject to the terms, conditions and limitations
contained in the Management Contract between the Bureau of Customs and Manila Port
Service, and their liability is limited to the invoice value of the goods, but in no case more
than P500.00 per package, pursuant to the said Management Contract; and that they are
not the agents of the carrying vessel in the receipt and delivery of cargoes in the Port of
Manila.
The defendants Macondray & Co., Inc., Barber Steamship Lines, Inc. and Wilhelm
Wilhelmsen also contested the claim alleging that if any damage was sustained by the
shipment while it was under the control of the vessel, such damage was caused by
insufficiency of packing, force majeure and/or perils of the sea, and that they, in good faith
and for the purpose only of avoiding litigation without admitting liability to the consignee,
offered to settle the latter's claim in full by paying the corresponding C.I.F. value, but their
offer was declined by the consignee and/or the plaintiff.
The lower court rendered judgment ordering the defendants to pay to the plaintiff, jointly
and severally. Plaintiff-appellant argues that, as subrogee of the consignee, it should be
entitled to recover from the defendants appellees the amount of $1,134.46 which it actually
paid to the consignee and which represents the value of the lost and damaged shipment
as well as other legitimate expenses. Defendants appellees are not insurers of the goods,
and as such they should not be made to pay the insured value.
ISSUE: WON the insurance carrier can recover the said amount claimed.
RULING: YES, the plaintiff-appellant, as insurer, after paying the claim of the insured for
damages under the insurance, is subrogated merely to the rights of the assured. As
subrogee, it can recover only the amount that is recoverable by the latter. Since the right of
the assured, in case of loss or damage to the goods, is limited or restricted by the
provisions in the bill of lading, a suit by the insurer as subrogee necessarily is subject to
like limitations and restrictions.
DISPOSITIVE: Respondent Won. Decision is affirmed.
CASE 14: NATIONAL UNION FIRE LNSURANCE V. STOLT NIELSEN – Patrick
Mendoza
Topic: Subrogation
DOCTRINE:: By subrogation, it became privy to the Charter Party as fully as the SHIPPER
before the latter was indemnified, because as subrogee it stepped into the shoes of the
SHIPPER-ASSURED and is subrogated merely to the latter's rights. It can recover only the
amount that is recoverable by the assured.
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INSURANCE || Batch 1 (Cases 9-17)
FACTS: United Coconut Chemicals, Inc. shipped 404.774 metric tons of distilled C6-C18
fatty acid on board MT "Stolt Sceptre," a tanker owned by Stolt-Nielsen Philippines Inc. ,
from Bauan, Batangas, Philippines, consigned to "Nieuwe Matex" at Rotterdam,
Netherlands, covered by Tanker Bill of Lading BL No. BAT-1. The shipment was insured
under a marine cargo policy with Petitioner National Union Fire Insurance Company of
Pittsburg, a non-life American insurance corporation, through its settling agent in the
Philippines, the American International Underwriters (Philippines), Inc. A Bill of Lading was
present , containing a general statement of incorporation of the terms of a Charter Party
between the Shipper, namely, United Coconut Chemicals Inc., and Parcel Tankers, Inc.,
entered into in Greenwich, Connecticut, U.S.A. Upon receipt of the goods in Netherlands,
they were found to be discolored. The insurer indemnified the shipper because of this.
As a subrogee of the shipper, the insurer filed suit against the carrier, Stolt-Nielsen. The
latter moved to dismiss the case, as they claim it is an arbitrable one, the Bill of Lading
being its basis which contained provisions relating to a Charter Party. The RTC deferred
the motion, and the appellate court reversed the RTC, and ordered the case for arbitration.
ISSUE: WON the claim of the insurer against the carrier is an arbitrable one.
RULING: We hold, therefore, that the INSURER cannot avoid the binding effect of the
arbitration clause. By subrogation, it became privy to the Charter Party as fully as the
SHIPPER before the latter was indemnified, because as subrogee it stepped into the
shoes of the SHIPPER-ASSURED and is subrogated merely to the latter's rights. It can
recover only the amount that is recoverable by the assured. And since the right of action of
the SHIPPER-ASSURED is governed by the provisions of the Bill of Lading, which
includes by reference the terms of the Charter Party, necessarily, a suit by the INSURER is
subject to the same agreements
DISPOSITIVE: Yes, the case is an arbitrable one, Stolt-Nielsen wins the case, as it cannot
escape liability arising from the Charter Party Provisions included in the Bill of Lading as it
is a subrogee of the rights of the shipper.
CASE 15: CEBU SHIPYARD V. WILLIAM LINES, INC.
Author: Geloace
Topic: Subrogation
DOCTRINE:
When the insurer, after due verification of the merit and validity of the insurance claim of
the assured, pays the latter the total amount covered by its insurance policy, it becomes
subrogated to the right of the latter to recover the insured loss from the liable party.
FACTS:
1. Cebu Shipyard is a domestic corporation engaged in the business of dry-docking and
repairing of marine vessels while the private respondent Prudential, a domestic
corporation, is in the business of non-life insurance.
2. William Lines, Inc. is in the shipping business. It was the owner of M/V Manila City, a
luxury passenger-cargo vessel, which caught fire and sank. At the time of the
accident, the vessel as insured with Prudential for P45M.
3. Petitioner was also insured by Prudential for 3 rd party liability under a Ship repairer’s
Legal Liability for Insurance Policy, such was for P10M. William Lines, Inc. brought its
vessel to the Cebu Shipyard for annual dry-docking and repair. After the subject
vessel was transferred to the docking quay, it caught fire and sank resulting to its loss.
Batch 4 GO4 (2015)Z
4. William Lines, Inc. filed a complaint for damages against petitioner alleging that the
fire which broke out was the result of CSEW’s negligence and lack of care. An
amended complaint was filed impleading Prudential as co-plaintiff after the latter had
paid William Lines, Inc. the value of the hull and machinery insurance on the M/V
Manila City. As a result of the payment, Prudential was subrogated to the claim of P45
million, representing the value of the insurance it paid.
5. The trial court issued a decision against petitioner Cebu Shipyards. The Court of
Appeals affirmed the said decision.
6. Petitioner claims that Prudential is not entitled to be subrogated to the rights of William
Lines, Inc. theorizing that (1) the fire which gutted M/V Manila City was an excluded
risk (2) it is a co-assured under the Marine Hull Insurance Policy.
ISSUE: WON Prudential was subrogated to the rights of William Lines, Inc. upon its
payment of the total amount covered in the insurance policy.
RULING: YES. Clause 20 of the Work Order in question is clear in the sense that it
requires William Lines to maintain insurance on the vessel during the period of dry-docking
or repair. Concededly, such a stipulation works to the benefit of CSEW as the ship repairer.
However, the fact that CSEW benefits from the said stipulation does not automatically
make it as a co-assured of William Lines. The intention of the parties to make each other a
co-assured under an insurance policy is to be gleaned principally from the insurance
contract or policy itself and not from any other contract or agreement because the
insurance policy denominates the assured and the beneficiaries of the insurance. The hull
and machinery insurance procured by William Lines, Inc. from Prudential named only
"William Lines, Inc." as the assured. There was no manifestation of any intention of William
Lines, Inc. to constitute CSEW as a co-assured under subject policy. It is axiomatic that
when the terms of a contract are clear its stipulations control. Thus, when the insurance
policy involved named only William Lines, Inc. as the assured thereunder, the claim of
CSEW that it is a co-assured is unfounded.
DISPOSITIVE: Petition was denied and petitioner was not allowed to limit its liability based
on the contract.
CASE 16: MANILA MAHOGANY MANUFACTURING CORP. v. CA (1967)
Author: Ralph Agbisit
Topic: Subrogation
DOCTRINE: The right of subrogation can only exist after the insurer has paid the insured,
otherwise the insured will be deprived of his right to full indemnity. If the insurance
proceeds are not sufficient to cover the damages suffered by the insured, then he may sue
the party responsible for the damage for the remainder. To the extent of the amount he has
already received from the insurer, the insurer enjoys the right of subrogation. Since the
insurer can be subrogated to only such rights as the insured may have, should the insured,
after receiving payment from the insurer, release the wrongdoer who caused the loss, the
insurer loses his rights against the latter. But in such a case, the insurer will be entitled to
recover from the insured, whatever it has paid to the latter, unless the release was made
with the consent of the insurer.
FACTS: Manila Mahogany Manufacturing Corp. (petitioner) insured its Mercedes Benz 4-
door sedan with Zenith Insurance Corp. (respondent). The insured vehicle was bumped
and damaged by a truck owned by San Miguel Corp. For the damage cause, respondent
paid petitioner P5,000 in an amicable settlement. Petitioner’s general manager executed a
Release of Claim, subrogating respondent to all its right to action against San Miguel.
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INSURANCE || Batch 1 (Cases 9-17)
Thereafter, respondent wrote Insurance Adjusters Inc. to demand reimbursement, alleging
that San Miguel has already paid petitioner P4,500 for the damagers to petitioner’s motor
vehicle, as evidenced by a cash voucher and a Release of Claim executed by the General
Manager of petitioner, discharging San Miguel from “all actions, claims, demands the rights
of action that now exist or hereafter develop arising out of or as a consequence of the
accident.” Respondent thus demanded from petitioner, reimbursement of the sum of
P4,500 paid by San Miguel Corp. Petitioner refused.
ISSUE: Whether or not Zenith Insurance Corp. is subrogated in the rights of Manila
Mahogany Manufacturing Corp. against San Miguel Corp?
Batch 4 GO4 (2015)Z
attention of the Court. Hence, the Court holds that in accordance with Article 2207 of the
Civil Code the amount of P35,000.00 should be deducted from the amount awarded as
damages. Said article provides:
Art. 2207. Xxx If the amount paid by the insurance company does not fully cover the
injury or loss, the aggrieved party shall be entitled to recover the deficiency from the
person causing the loss or injury.
DISPOSITIVE: WHEREFORE, the decision of the Court of Appeals is affirmed and
modified and deducted the award since the insurer had already paid the a portion of the
amount claimed

HELD: YES. If a property is insured and the owner receives the indemnity from the insurer,
it is provided in Art. 2207 of the New Civil Code that the insurer is deemed subrogated to
the rights of the insured against the wrongdoer and if the amount paid by the insurer does
not fully cover the loss, then the aggrieved party is the one entitled to recover the
deficiency. Under this legal provision, the real party in interest with regard to the portion of
the indemnity paid is the insurer and not the insured.

In this case, petitioner is entitled to keep the sum of P4,500 paid by San Miguel under its
clear right to file a deficiency claim for damages incurred, against the wrongdoer, should
the insurance company not fully pay for the injury caused. However, when petitioner
released San Miguel from any liability, petitioner’s right to retain the sum of P5,000 no
longer existed, thereby entitling private respondents to recover the same.

CASE 17: F.F. Cruz v CA – Dennis Reyes

Topic: Subrogation

DOCTRINE: in Article 2207. Upon payment of the loss incurred by the insured, the insurer
is entitled to be subrogated pro tanto to any right of action which the insured may have
against the third person whose negligence or wrongful act caused the loss.

FACTS: The furniture manufacturing shop of petitioner was situated adjacent to the
residence of private respondents. Private respondent, Gregorio Mable, first approached
the petitioner's plant manager to request that a firewall be constructed between the shop
and private respondents' residence. The request was repeated several times but they fell
on deaf ears.

A fire broke out in petitioner's shop. Petitioner's employees tried to put out the fire, but their
efforts proved futile. The fire spread to private respondents' house. Both the shop and the
house were razed to the ground. The cause of the conflagration was never discovered.
Private respondents collected P35,000.00 on the insurance on their house and the
contents thereof.

Private respondents filed an action for damages against petitioner. Trial Court awarded
damages in favor of the private respondent; Court of Appeals: affirmed the decision of the
trial court

ISSUE: Even though the Respondent received a sum of money (P35,000) from the insurer,
can the latter collect from the petitioner

RULING: The Court finds that petitioner is liable for damages to private respondents, the
fact that private respondents have been indemnified by their insurer in the amount of
P35,000.00 for the damage caused to their house and its contents has not escaped the
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