G.R. No. L-28237 - Bay View Hotel, Inc. vs. Ker and Co., Ltd.

Bay View Hotel, Inc. was the lessee and operator of the Manila Hotel.
Bay View Hotel, Inc. secured a fidelity guarantee bond from Ker & Co., Ltd. for accountable employees against acts of fraud and dishonesty.
Ker & Co., Ltd. acted as the Philippine general agent of Phoenix Assurance Co., Ltd., a foreign corporation licensed to do insurance business in the Philippines.
The fidelity guarantee bond involved accountable employee Tomas E. Ablaza, who served as cashier.

Bay View Hotel, Inc. discovered that Ablaza had a cash shortage and unremitted collections totaling P42,490.95.
Bay View Hotel, Inc. filed claims for payment under the fidelity guarantee bond.
Ker & Co., Ltd. denied and refused indemnification and payment.

Bay View Hotel, Inc. filed a complaint dated August 30, 1965 docketed as Civil Case No. 63181 before the Court of First Instance of Manila.
Ker & Co., Ltd. answered and justified its refusal based on:

Non-compliance with conditions stipulated in the insurance policy.
Non-presentation of evidence regarding the charges of dishonesty and misrepresentation against Ablaza.
Non-production of documents to prove the alleged loss.
Ker & Co., Ltd. claimed it was merely an agent and not liable under the policy.

On June 22, 1966, Ker & Co., Ltd. filed a request for admission, furnishing Bay View Hotel, Inc.’s counsel with a copy.
The request sought admission of the following matters:

On February 14, 1967, Bay View Hotel, Inc. applied to Phoenix Assurance Co., Ltd. for a fidelity guarantee bond through a proposal form, annexed to Ker & Co.’s answer as Annex A.
A policy was issued on January 22, 1958 by Phoenix Assurance Co., Ltd. in favor of Bay View Hotel, Inc., renewed from time to time with amendments; the final copy at the time of alleged defalcation was annexed as Annex B.
Bay View Hotel, Inc.’s claim under the policy was denied by Phoenix Assurance Co., Ltd. by a letter dated June 18, 1965, sent by registered mail on June 22, 1965; a true copy of the letter was annexed as Annex C.

Bay View Hotel, Inc. did not answer the request for admission within the period prescribed by the rules.
On July 6, 1966, Ker & Co., Ltd. filed a Motion to Dismiss on Affirmative Defense, insisting that under Sec. 2, Rule 26 of the Rules of Court, the matters were deemed impliedly admitted and that the proper party was Phoenix and not Ker & Co.
Bay View Hotel, Inc. opposed, arguing that the remedy was not dismissal but amendment to include indispensable parties.
Ker & Co. replied and reiterated that it acted as an agent and that the case should be dismissed, with Bay View Hotel, Inc. directed to file action against Phoenix.
On August 1, 1966, Bay View Hotel, Inc. filed a Motion for Leave to Admit Amended Complaint, attaching a copy of the complaint as amended, this time impleading Phoenix as a defendant.
On August 16, 1966, Ker & Co. and Phoenix filed their joint answer to the amended complaint.
Ker & Co. again argued it was only an agent and not liable.
Phoenix averred that under Condition 8 of the insurance policy, Bay View Hotel, Inc. was deemed to have abandoned its claim for failing to seek arbitration within twelve (12) months from June 22, 1965, the date of receipt of the denial letter.
Defendants sought dismissal through a procedural mechanism.

After issues were joined, defendants filed a motion for summary judgment on August 24, 1966.
The trial court granted the motion and dismissed the case in its decision dated November 4, 1966.
Bay View Hotel, Inc. moved for reconsideration, which the trial court ...(Subscriber-Only)

Whether the trial court committed grave abuse of discretion in giving legal effect to Ker & Co.’s request for admission against Phoenix, which was not a party defendant when the request was filed.
Whether the trial court erred in giving legal effects to admissions arising under the original complaint after Bay View Hotel, Inc. amended the complaint by impleading Phoenix.

Whether Condition No. 8 required arbitration as a condition precedent to suit in a situation where Phoenix denied liability entirely.
Whether the contractual arbitration requirement applied only when there was a dispute as to the amount of liability, as opposed to a total denial of liability.
Whether the failure to request arbitration within twelve (12) months from receipt of denial barred Bay View Hotel, Inc.’s action.

Ruling:

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Ratio:

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