Title
Perla Compania De Seguros, Inc. vs. Court of Appeals
Case
G.R. No. 78860
Decision Date
May 28, 1990
Milagros Cayas sought reimbursement from insurer PCSI after her insured bus caused injuries. Court ruled PCSI liable only for P12,000 per policy limits, denied claims for unauthorized settlements, and upheld attorney’s fees.

Case Summary (G.R. No. 78860)

Perea’s Lawsuit and Default Judgment

Passenger Edgardo Perea filed Civil Case No. NC-794 against Cayas in the Cavite CFI. Cayas failed to appear at pre-trial, was declared in default, and the court awarded Perea P10,000 for actual damages, P10,000 exemplary damages, P5,000 moral damages, P7,000 attorney’s fees, plus costs. Three other injured passengers—Rosario del Carmen, Ricardo Magsarili, and Charlie Antolin—accepted separate P4,000 settlements from Cayas.

Indemnity Actions and Procedural Postures

Cayas first sought relief from the Insurance Commissioner but withdrew. She then filed Civil Case No. N-4161 in Cavite CFI requesting PCSI to pay P50,000 under the policy plus attorney’s fees. The suit was initially dismissed for lack of prosecution, later reinstated, and in default yielded a P50,000 award. PCSI successfully moved to vacate that decision, leading to a full trial.

Court of First Instance Decision in N-4161

After trial, the CFI ordered PCSI to pay Cayas P50,000 (policy limit), P5,000 moral damages, and P5,000 attorney’s fees. The trial court found no convincing proof of moral suffering but awarded counsel fees for services rendered to protect Cayas’s rights under the policy.

Court of Appeals Ruling

On May 8, 1987, the Court of Appeals affirmed the CFI decision in toto. It rejected PCSI’s defenses that Cayas’s negligence caused the default in NC-794 and that liability had not been established, holding these issues resolved by prior determinations and outside the insurer’s contractual obligations.

Supreme Court’s Scope of Review and Issue

The Supreme Court limited its review to the extent of PCSI’s contractual liability under the policy. Factual findings concerning Cayas’s alleged negligence and execution of the NC-794 judgment were deemed final. The sole legal question became whether the insurer’s liability extended beyond P12,000 per person and whether conditions precedent had been met.

Policy Limits and Contractual Liability

The policy’s clear stipulations capped PCSI’s liability at P12,000 per injured passenger and P50,000 per accident. Under Art. 1306, Civil Code, these terms are binding if not contrary to law or public policy. The P12,000 per-person limit complied with P.D. No. 612, § 377, mandating at least that minimum coverage.

Condition Precedent and Written Consent Requirement

The policy required the insured to obtain the insurer’s written consent before settling any claim. Cayas admitted in testimony that no such consent was secured for the P4,000 payments to del Carmen, Magsarili, and Antolin. Absent compliance, she could not recover those amounts from PCSI.

Interpretation and Literal Application of Contract Terms

Contracts are private law between parties and must be enforced according to their plain language. The Supreme Court reaffirmed precedents holding that insurers’

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