Case Summary (G.R. No. 188376)
Key Dates
Policy issued: 29 March 1967; effective 18 April 1967–18 April 1968.
Accident: 19 December 1967.
Trial court judgment: 27 April 1970.
Court of Appeals judgment: 22 February 1973.
Supreme Court decision: 26 September 1988.
Applicable Law and Legal Sources
Primary statutory provisions applied: Articles 2176, 2180, 2184, and 1217 of the Civil Code (as quoted and applied in the decision). Contract law principles governing insurance contracts (indemnity) and equitable subrogation as described in the cited authorities. For constitutional reference, the decision was rendered in 1988; the 1987 Philippine Constitution is the applicable constitutional framework at the time of the decision.
Procedural Posture
Plaintiff Vallejos sued Sio Choy (owner), Malayan Insurance (insurer of the jeep under a private car comprehensive policy with third‑party liability coverage), and PANTRANCO. Sio Choy cross‑claimed against the insurer for indemnity. Malayan Insurance filed a third‑party complaint against San Leon Rice Mill, Inc., asserting the driver was the mill’s employee acting within the scope of his employment. Trial rendered judgment for plaintiff against Sio Choy, Malayan Insurance, and San Leon Rice Mill, Inc.; Court of Appeals affirmed with modification that San Leon Rice Mill had no obligation to indemnify the insurer. The Supreme Court granted review limited to whether San Leon Rice Mill, Inc. is liable to reimburse the petitioner insurer for amounts the insurer may be ordered to pay.
Facts Established by the Courts
Malayan Insurance issued a comprehensive private car policy to Sio Choy with third‑party liability coverage up to P20,000 and own‑damage coverage up to P600. On 19 December 1967, the insured jeep, driven by Juan P. Campollo (an employee of San Leon Rice Mill, Inc.), collided with a PANTRANCO bus; Vallejos, a passenger in the jeep, sustained injuries. The trial court awarded Vallejos P29,103 (actual, lost income, moral damages, attorney’s fees) and held Sio Choy, Malayan Insurance, and San Leon Rice Mill, Inc. jointly and severally liable, subject to the insurer’s P20,000 policy limit. PANTRANCO’s counterclaims were dismissed for lack of proof.
Issues Presented
- Whether the trial court and Court of Appeals were correct in holding Malayan Insurance solidarily liable with Sio Choy and San Leon Rice Mill, Inc. to Vallejos.
- Whether Malayan Insurance, having paid under its policy, is entitled to reimbursement from San Leon Rice Mill, Inc.
Supreme Court Holding — Solidary Liability
The Supreme Court held that only Sio Choy (owner) and San Leon Rice Mill, Inc. (employer of the driver) are solidarily liable to Vallejos for the P29,103 awarded. The insurer’s liability is contractual (indemnity under the third‑party clause) and distinct in nature from the tort liability of the owner and employer. Consequently, the insurer cannot properly be characterized as a solidary obligor together with the principal tortfeasors. The Court explained that treating the insurer as a solidary debtor would conflict with the nature of insurance contracts and the doctrine of solidary obligations because a creditor could then demand entire performance from the insurer beyond the policy limit, contradicting the contractual policy cap.
Supreme Court Holding — Subrogation and Reimbursement
The Court ruled that, if Malayan Insurance pays up to its policy limit of P20,000, it becomes subrogated to the insured’s (Sio Choy’s) rights against the third party (San Leon Rice Mill, Inc.). Subrogation operates as an equitable assignment of the insured’s remedies upon payment by the insurer and does not depend on privity of contract. Consequently, by virtue of payment, the insurer stands in the insured’s shoes and may seek reimbursement from co‑obligors. Applying Article 1217 (payment by one solidary debtor gives the payor a right to claim from co‑debtors their respective shares), the Court determined the insurer is entitled to be reimbursed pro tanto from San Leon Rice Mill, Inc. for the insurer’s share of the obligation.
Calculation of Reimbursement
The trial award against the solidary debtors totaled P29,103. If the insurer pays P20,000 under its policy, the Court computed the insurer’s equitable right of contribution from San Leon Rice Mill, Inc. as one‑half of the entire obligation (1/2 of P29,103), yielding P14,551.50. The Court ordered that the judgment be affirmed with the modification that only Sio Choy and San Leon Rice Mill, Inc. are solidarily liable to Vallejos and that the insurer, upon payment to Vallejos up to P20,000, is e
...continue readingCase Syllabus (G.R. No. 188376)
Case Caption, Reportation and Nature of Review
- Reported as 248 Phil. 1, Second Division, G.R. No. L-36413, decided September 26, 1988.
- Mode of review: Petition for certiorari (review on certiorari) of the judgment of the Court of Appeals (Third Division) in CA-G.R. No. 47319-R, dated 22 February 1973.
- The Supreme Court entry on the petition is authored under the name PADILLA, J., with concurring Justices named at the end of the decision (Melencio-Herrera (Chairman), Paras, Sarmiento and Regalado, JJ., concur).
- Footnotes within the source indicate ancillary authorship references: “[*] Penned by Justice Ramon C. Fernandez, concurred in by Justices Hermogenes Concepcion, Jr. and Emilio A. Gancayco.” and “[**] Penned by Judge Vicente M. Santiago, Jr.” (as contained in the source material).
Parties and Roles
- Petitioner: Malayan Insurance Co., Inc. (insurer).
- Private respondent/insured: Sio Choy (owner of the insured Willys jeep; insured under a Private Car Comprehensive Policy).
- Plaintiff in the trial court / respondent: Martin C. Vallejos (injured passenger).
- Other respondents/defendants: San Leon Rice Mill, Inc. (employer of the driver) and Pangasinan Transportation Co., Inc. (PANTRANCO — owner of the passenger bus involved in the collision).
- Driver of the insured jeep at time of accident: Juan P. Compollo (an employee of San Leon Rice Mill, Inc.).
Antecedent Facts — Insurance Policy and Vehicle
- On 29 March 1967 Malayan Insurance Co., Inc. issued to private respondent Sio Choy a Private Car Comprehensive Policy No. MRO/PV-15753.
- Policy period: effective 18 April 1967 to 18 April 1968.
- Insured vehicle: a Willys jeep, Motor No. ET-03023, Serial No. 351672, Plate No. J-21536, Quezon City, 1967.
- Coverage specified: “own damage” not to exceed P600.00 and “third-party liability” in the amount of P20,000.00.
Facts of the Accident
- Date and time: 19 December 1967, at about 3:30 o’clock in the afternoon.
- Location: national highway in Barrio San Pedro, Rosales, Pangasinan.
- Events: The insured Willys jeep, driven by Juan P. Compollo (employee of San Leon Rice Mill, Inc.), collided with a passenger bus belonging to Pangasinan Transportation Co., Inc. (PANTRANCO).
- Consequences: Damage to the insured jeep; injuries to driver Juan P. Compollo and to passenger Martin C. Vallejos.
Trial Court Proceeding (Civil Case No. U-2021, CFI Pangasinan)
- Plaintiff Vallejos filed suit against Sio Choy, Malayan Insurance Co., Inc., and PANTRANCO to recover damages: P15,000 reimbursement for medical/hospital expenses; P6,000 lost income; P51,000 actual, moral and compensatory damages; and P5,000 attorney’s fees (amounts as pleaded by plaintiff).
- PANTRANCO’s answer and position:
- Alleged the jeep of Sio Choy was operated at excessive speed and bumped PANTRANCO bus, which allegedly had moved to and stopped at the highway shoulder to avoid the jeep.
- Asserted it exercised diligence of a good father of a family in selection/supervision of employees and maintenance of its vehicles.
- Prayed to be absolved from liability.
- Sio Choy and Malayan Insurance Co., Inc.’s position:
- Denied liability and alleged fault was solely imputable to PANTRANCO.
- Sio Choy later filed a separate answer with a cross-claim against Malayan Insurance Co., Inc.:
- Alleged he had paid Vallejos P5,000 for hospitalization and other expenses.
- Alleged existence of the Private Car Comprehensive Policy obligating Malayan Insurance to indemnify Sio Choy for damage to his motor vehicle and for liability to third persons during the policy period.
- Prayed for reimbursement by the insurer for any amounts he may be ordered to pay.
- Malayan Insurance sought and was granted leave to file a third-party complaint against San Leon Rice Mill, Inc.:
- Allegation: Driver Juan P. Compollo was an employee of San Leon Rice Mill, Inc., acting within the scope of his duties (and not an employee of Sio Choy), making San Leon Rice Mill, Inc. liable under Article 2180 of the Civil Code.
- Relief sought: Judgment against San Leon Rice Mill, Inc. to make it liable for amounts claimed by plaintiff and/or to reimburse/indemnify petitioner for any sums petitioner may be ordered to pay.
Trial Court Judgment (dated 27 April 1970 — Civil Case No. U-2021)
- Judgment rendered in favor of plaintiff Vallejos and against Sio Choy, Malayan Insurance Co., Inc., and third-party defendant San Leon Rice Mill, Inc., jointly and severally, as follows:
- P4,103.00 as actual damages.
- P18,000.00 representing unearned income for three years.
- P5,000.00 as moral damages.
- P2,000.00 as attorney’s fees.
- Total awarded: P29,103.00, plus costs.
- Trial court qualification in respect of Malayan Insurance Co., Inc.: its liability limited to P20,000.00 (the third-party liability limit under the policy).
- Findings re: PANTRANCO: No satisfactory proof of cost of damage to its bus; no award in its favor; its counterclaim for attorney’s fees dismissed for lack of proof.
Court of Appeals Ruling (CA-G.R. No. 47319-R, dated 22 February 1973)
- The Court of Appeals affirmed the trial court’s judgment that Sio Choy, San Leon Rice Mill, Inc., and Malayan Insurance Co., Inc. are jointly and severally liable for the damages awarded to Vallejos.
- The appellate court ruled, however, that San Leon Rice Mill, Inc. had no obligation to indemnify or reimburse Malayan Insurance Co., Inc. because San Leon Rice Mill, Inc. was not a privy to the insurance contract between Sio Choy and the insurer.
Issues Presented on Certiorari to the Supreme Court
- Two principal issues identified by the Supreme Court:
- (1) Whether the trial court, as upheld by the Court of Appeals, was correct in holding Malayan Insurance Co., Inc. and respondents Sio Choy and San Leon Rice Mill, Inc. “solidarily liable” to Vallejos.
- (2) Whether petitioner (Malayan Insurance) is entitled to be reimbursed by San Leon Rice Mill, Inc. for any amount petitioner may be adjudged to pay Vallejos under the insurance policy.
Supreme Court’s First Issue Analysis — Nature and Basis of Liabilities
- Trial court and Court of Appeals found petitioner and respondents Sio Choy and San Leon Rice Mill, Inc. jointly and severally liable; Supreme Court disagreed with holding the insurer solidarily liable.
- Source of Sio Choy’s liability:
- Owner’s liability under Article 2184, Civil Code:
- Quoted text: “Art. 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the former, who was in the vehicle, could have, by the use of due diligence, prevented the misfortune. It is disputably presumed that a driver was negligent, if he had been found guilty of reckless driving or violating traffic regulations at least twice within the next preceding two months. 'If the owner was not in the motor vehicle, the provisions of article 2180 are applicable.'”
- Owner’s liability under Article 2184, Civil Code:
- Source of San Leon Rice Mill, Inc.’s liability:
- Employer’s liability under Article 2180, Civil Code:
- Quoted text: “Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible. x x x x x x x x x 'Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. x x x x x x x
- Employer’s liability under Article 2180, Civil Code: