G.R. No. 191258 - People vs. Garrido y Elorde

Paramount Life & General Insurance Corporation (hereinafter "Paramount") filed a Complaint for Declaration of Nullity of an Individual Insurance Contract against Cherry T. Castro and Glenn Anthony T. Castro (hereinafter "Castros") before the Regional Trial Court (RTC), Makati City, Branch 61 on 2 July 2009.
The Complaint sought the nullification of the Individual Insurance Certificate No. 041913 issued under Group Master Policy No. G-086, citing material concealment or misrepresentation by Virgilio J. Castro, the deceased husband/father of the Castros.

In 2004, the Philippine Postal Savings Bank, Incorporated (PPSBI) applied for and obtained insurance coverage from Paramount under a group policy, with provisions that death benefits were to be paid to the creditor (PPSBI).
Virgilio J. Castro obtained a housing loan from PPSBI, and as a condition, he was required to secure a mortgage redemption insurance (MRI) from Paramount.
Paramount issued Certificate No. 041913 on 12 March 2008 in Virgilio’s favor, naming Cherry and Glenn as beneficiaries, subject to the terms of the group policy.

Virgilio J. Castro died on 26 February 2009 of septic shock, triggering a claim for death benefits under the individual insurance policy.
Paramount denied the claim on the ground that Virgilio had materially misrepresented his health status in his insurance application by answering “no” to inquiries regarding adverse health history even though he had previously sought medical consultation in 2005.
As a result, Paramount declared the insurance certificate null, void, and rescinded from the outset and subsequently initiated legal proceedings.

In Civil Case No. 09-599 at the RTC, Paramount’s Complaint was joined by the issue of whether the Castros’ counterclaim for damages for breach of contract (stemming from non-payment by Paramount) might be affected by the nullification of the insurance certificate.
The Castros attempted to implead the PPSBI as an indispensable third-party defendant by arguing that by virtue of the MRI, the bank had stepped into the shoes of the Castros upon Virgilio’s death.
The RTC denied the motion to include PPSBI, prompting the Castros to file a motion for leave to file a third-party complaint that was also denied, leading to the appellate review of these decisions in the Court of Appeals (CA).
The CA, in its 4 October 2010 Decision, partially granted the petition by allowing the inclusion of PPSBI as a third-party defendant, reasoning that such inclusion was necessary to prevent multiplicity of suits and ensure the expeditious resolution of all interrelated claims.
Paramount subsequently filed a Petition for Review under Rule 45 assailing the CA’s decision, while on a separate track, the Castros filed a Motion to Dismiss the Complaint for failure to prosecute promptly, which was denied by the RTC on 11 February 2014.
The two petitions (G.R. Nos. 195728 and 211329) were eventually consolidated by the Supreme Court, given their identical factual background and overlapping issues.

Whether the Court of Appeals erred in remanding the case back to the RTC for the admission of the third-party complaint implicating PPSBI.
Whether the inclusion of PPSBI as a third-party defendant is consistent with the interrelated interests of the parties under the group insurance policy.

Whether the RTC erred in denying the Motion to Dismiss filed by the Castros on the grounds of failure to prosecute and in presenting evidence ex parte.
Whether the Castros’ arguments regarding default and the alleged abuse of discretion in handling pretrial proceedings were properly addressed by the RTC and the CA.

Whether legal grounds existed for the inhibition of the presiding judge on the basis that multiple rulings were being assailed.
Whether the declaration of the defendants’ default was proper by conflating the rules on responsive pleading (Rule 9) and failure to appear (Rule 18).