G.R. No. 78860 - Perla Compania De Seguros, Inc. vs. Court of Appeals

Case Summary (G.R. No. 78860)

Factual Background

Private respondent Milagros Cayas owned a Mazda passenger bus insured by Perla Compania de Seguros, Inc. under policy No. LT0/60CC-04241 issued February 3, 1978. On December 17, 1978, the bus was involved in an accident in Naic, Cavite that injured several passengers. One injured passenger, Edgardo Perea, sued Cayas in the Court of First Instance of Cavite in Civil Case No. NC-794. Three other injured passengers — Rosario del Carmen, Ricardo Magsarili and Charlie Antolin — settled with Cayas for P4,000 each.

Proceedings in Civil Case No. NC-794

At the pre-trial of Civil Case No. NC-794, Cayas failed to appear and was declared in default. After trial, the court rendered judgment in favor of Perea ordering Cayas to pay P10,000 for medical expenses, P10,000 exemplary damages, P5,000 moral damages, and P7,000 attorney’s fees, with costs.

Administrative and Subsequent Civil Action

When execution of the NC-794 judgment loomed, Cayas filed a complaint against PCSI with the Office of the Insurance Commissioner seeking P40,000 plus legal and other expenses but later withdrew that complaint. On November 11, 1981, she filed Civil Case No. N-4161 in the Court of First Instance of Cavite against PCSI seeking reimbursement for amounts she had paid claimants, compensation for injured victims up to P50,000, and attorney’s fees.

Trial Court Disposition in Civil Case No. N-4161

Civil Case No. N-4161 was initially dismissed motu proprio for failure to prosecute, but the dismissal was reconsidered and set aside. PCSI was declared in default at one point and a default judgment was rendered ordering PCSI to pay P50,000, P5,000 moral damages, and P5,000 attorney’s fees; that default judgment was later set aside after PCSI’s motion. After trial on the merits, the trial court ordered PCSI to pay Cayas P50,000 under its maximum liability in the policy and P5,000 attorney’s fees, but denied Cayas’ claim for moral damages for lack of proof.

Appeal to the Court of Appeals

PCSI appealed to the Court of Appeals, which affirmed the trial court decision in toto on May 8, 1987. PCSI’s motion for reconsideration before the Court of Appeals was denied, prompting the present petition for review on certiorari to the Supreme Court.

Issue Presented

The principal issue before the Court was the extent of petitioner’s liability to private respondent under the insurance policy; specifically, whether petitioner’s obligation was limited to P12,000 per person and whether Cayas could recover reimbursement for the P4,000 payments each to the three claimants in the absence of the insurer’s written consent as required by the policy.

Petitioner’s Contentions

Perla Compania de Seguros, Inc. contended that its liability under the insurance policy was contractually limited to P12,000 per person and P50,000 per accident, and that Cayas failed to secure the insurer’s written consent prior to settling with the three injured passengers; therefore, petitioner argued it was not liable to reimburse those settlements and that overall liability should be capped at P12,000 for Perea’s claim.

Respondent’s Contentions

Milagros Cayas argued that petitioner should be held liable to indemnify her for the amounts paid to all injured passengers and that the insurer wrongfully disavowed its contractual obligation by declining reimbursement. She relied on the judgment against her in Civil Case No. NC-794 and on equitable considerations that she paid claimants to avoid further suits and the detention of the insured vehicle.

Trial and Appellate Findings Recapitulated

The trial court concluded that petitioner improperly disavowed liability under the policy and found that it had not proven that Cayas’ lack of cooperation caused the adverse result in NC-794. The trial court denied moral damages to Cayas for lack of proof but awarded P5,000 attorney’s fees because she proved she engaged counsel to protect her rights. The Court of Appeals affirmed these findings and the awards in toto.

Supreme Court’s Analysis on Contractual Limits of Liability

The Court held that the insurance policy expressly limited petitioner’s liability to P12,000 per person for passenger bodily injury and to P50,000 per accident. The Court observed that the per person limit complied with the statutory minimum then in force, Section 377, Presidential Decree No. 612, retained by P.D. No. 1460, Insurance Code of 1978, and that contractual stipulations not contrary to law or public policy were binding between the parties under Art. 1306, Civil Code.

Supreme Court’s Analysis on Written Consent Condition

The Court examined the policy condition requiring the insured to obtain the insurer’s written consent before making any admission, offer, promise or payment in settlement of any claim. The Court held that this condition was valid, reasonable and designed to prevent collusion, and that Cayas admitted in testimony that she did not obtain written consent before paying the three claimants P4,000 each. Consequently, the Court concluded Cayas was precluded from seeking reimbursement for those settlements.

Supreme Court’s Ruling on Excess Award and Attorney’s Fees

The Court found error in the lower courts’ awarding of P50,000 to Cayas where proven loss amounted to P44,000, describing an insurance indemnity as not an instrument for enrichment; the insurer’s contractual limits must be observed. The Court affirmed the award of attorney’s fees in the amount of P5,000. Applying these conclusions, the Court modified the judgment and ordered petitioner to pay Cayas P12,000 with legal interest from promulgation of the trial court decision until fully paid, plus P5,000 attorney’s fees, and made no pronouncement as to costs.

Legal Pr

Case Syllabus (G.R. No. 78860)

Parties and Posture

Perla Compania de Seguros, Inc. was the petitioner and the insurer under Motor Vehicle Policy No. LT0/60CC-04241 issued February 3, 1978.
Milagros Cayas was the private respondent and the registered owner of the Mazda bus involved in the accident.
The petition was filed to review the decision of the Court of Appeals which affirmed the judgment of the Regional Trial Court of Cavite, Branch XVI.
The sole legal contest on review concerned the extent of Perla Compania de Seguros, Inc.'s contractual liability under the insurance policy.

Key Facts

The insured passenger bus was involved in an accident on December 17, 1978 in Naic, Cavite, injuring several passengers.
Passenger Edgardo Perea instituted Civil Case No. NC-794 against Milagros Cayas and obtained a judgment in her default awarding P10,000 for medical expenses, P10,000 exemplary damages, P5,000 moral damages, and P7,000 attorney's fees.
Three other injured passengers, Rosario del Carmen, Ricardo Magsarili, and Charlie Antolin, accepted settlements of P4,000 each from Milagros Cayas.
Milagros Cayas paid the three settlements without obtaining any written consent from Perla Compania de Seguros, Inc. prior to making those payments.
Milagros Cayas initially sought relief from the Insurance Commissioner and later filed Civil Case No. N-4161 in the Court of First Instance of Cavite against Perla Compania de Seguros, Inc. for reimbursement and damages.

Procedural History

Civil Case No. N-4161 was initially dismissed for failure to prosecute, but the dismissal was later set aside and plaintiff was allowed to adduce evidence ex parte after the insurer was declared in default.
The trial court rendered a judgment by default ordering Perla Compania de Seguros, Inc. to pay P50,000 and attorney's fees of P5,000, which was later set aside and the case proceeded to trial.
The Regional Trial Court ultimately rendered judgment ordering Perla Compania de Seguros, Inc. to pay P50,000 under the maximum liability of the policy and P5,000 attorney's fees.
The Court of Appeals, in a decision with Jose A.R. Melo as ponente, affirmed the RTC decision in toto.
Perla Compania de Seguros, Inc. filed the present petition for certiorari to this Court seeking limitation of liability to amounts actually due under the policy.

Contractual Terms

The insurance policy expressly limited liability to P12,000 per person for passenger bodily injury and P50,000 per accident as the maximum liability.
The policy contained a conditions clause requiring the insured to secure the insurer's written consent before making any admission, offer, promise, or payment in settlement of a claim.
The policy provision permitted the company to take over and conduct the defense or settlement of any claim in the insured