Case Summary (G.R. No. 253716)
Petitioner and Claim Summary
PGMC obtained an insurance policy covering 100 brand‑new Sinotruck Howo 6x4 Tipper LHD units at P2,084,109.88 per unit (total P208,410,988.00), effective 12 noon August 8, 2011 to 12 noon August 8, 2012, insuring “all risks of physical loss or damage due to external causes” subject to enumerated exceptions. After the October 3, 2011 incident, PGMC sought adjustment and payment of the claim; Mercantile denied liability citing excluded perils (strikes, riots, civil commotion, insurrection, rebellion). PGMC filed suit for breach of obligation and recovery.
Key Dates and Procedural Posture
- Policy period: August 8, 2011 – August 8, 2012.
- Complaint filed in RTC Makati: August 29, 2013.
- RTC Decision (Branch 147): November 6, 2017 — judgment for PGMC (P183,260,779.32).
- Re‑raffled RTC Resolution (Branch 132): May 9, 2018 — denied defendant’s reconsideration, granted partial reconsideration for plaintiff on interest and attorney’s fees.
- Court of Appeals Decision: December 4, 2019 — reversed RTC and dismissed complaint.
- Supreme Court Decision: petition denied; CA judgment affirmed with modification (dismissal on ground loss caused by excepted peril).
Applicable Law and Authorities Considered
- 1987 Constitution (applicable as decision post‑1990).
- Presidential Decree No. 612 (The Insurance Code), particularly Sections 13–14 on insurable interest.
- Rules of Court (formal offer of evidence provisions and best evidence rule, Rule 130).
- Relevant jurisprudence cited: cases on interpretation of insurance contracts, burden of proof in all‑risk policies, exceptions and liberality in admitting evidence (e.g., DBP Pool v. RMN; Filipino Merchants Ins. Co. v. CA; Choa Tiek Seng; PeAoso v. Dona; Spouses Bautista v. Del Valle).
Trial Court Findings (RTC)
The RTC found that PGMC proved loss and damage to 89 insured trucks and awarded P183,260,779.32. The RTC construed any ambiguous policy terms in favor of the insured and against the insurer, relying on the doctrine that contract ambiguities are resolved for the insured in adhesion contracts. The RTC did not give credence to Mercantile’s contention that the incident fell within excluded risks of riot, civil commotion, insurrection, or rebellion. Some documentary exhibits offered later were not admitted because they were not marked during pre‑trial or trial; Mercantile’s Motion to Admit its Formal Offer of Evidence (FOE) was not resolved by the trial court before decision.
Court of Appeals Ruling (CA) and Reasoning
The CA reversed and dismissed the complaint. Its principal bases were: (1) the RTC purportedly failed to consider the purposes for which Mercantile offered its documentary exhibits because it did not rule on Mercantile’s Motion to Admit Formal Offer of Evidence; and (2) PGMC failed to establish insurable interest in the trucks, since the contracts of sale were presented as mere photocopies and thus did not satisfy the best evidence rule. Because CA concluded PGMC had no insurable interest, it found no need to resolve whether the proximate cause was an excluded peril.
Issues Presented to the Supreme Court
- Whether the CA erred in inferring that the RTC did not consider Mercantile’s documentary exhibits and their intended purposes given the RTC’s failure to rule on Mercantile’s FOE.
- Whether the CA erred in finding that PGMC failed to prove an insurable interest over the damaged trucks.
Supreme Court Analysis — Formal Offer of Evidence and Admission of Documents
The Court acknowledged the general rule that evidence not formally offered cannot be used and that the purpose for which it is offered must be specified; failure to formally offer evidence can amount to waiver. Nonetheless, the Court emphasized prudential and equitable considerations: rules of procedure are tools to attain justice and may be applied liberally where warranted. The Court found that: (a) Mercantile did file a formal offer of evidence and the RTC’s failure to rule on it was not attributable to Mercantile; (b) the RTC’s decision repeatedly referred to Mercantile’s exhibits, showing the court considered them for purposes relevant to its findings; (c) many exhibits were common exhibits adopted by both parties; and (d) strict exclusion or remand would cause undue delay or unfairness. Applying precedents that allow admitting evidence not formally offered when (i) the evidence was duly identified by recorded testimony and (ii) incorporated into the records, the Court concluded the RTC did consider the documentary exhibits and applied a liberal construction to avoid technicality.
Supreme Court Analysis — Insurable Interest (Definition and Application)
Citing Section 13 of PD No. 612 and settled doctrine, the Court reiterated that insurable interest exists when a party would benefit from the continued existence of property or suffer a direct pecuniary loss from its destruction; such interest is not limited to legal title. The Court noted the insurance policy named PGMC as the insured and that PGMC had physical possession and a substantial economic interest in the trucks at the time of loss. The Court held that Mercantile could not take inconsistent positions (treating the policy as valid while contesting PGMC’s insurable interest based on photocopied sales contracts), and found that PGMC had established an insurable interest by preponderance: it possessed and used the trucks in its business and stood to suffer direct pecuniary loss from their destruction.
Supreme Court Analysis — Burden of Proof Under an All‑Risk Policy and Characterization of Peril
Under the all‑risk nature of the policy, once the insured proves loss, the insurer bears the burden to prove that the loss falls within an exception enumerated in the policy. The Court emphasized that an all‑risk policy covers all causes except those specifically excluded; therefore, to avoid liability the insurer must show the proximate cause is an excluded peril. The Court examined the factual matrix of the October 3, 2011 attacks and considered the plain, ordinary meanings of “riot,” “civil commotion,” “insurrection,” and “rebellion.” Although some elements could suggest riot or civil commotion, the totality of facts—simultaneous raids on three mining sites by about 300 armed persons who identifi
Case Syllabus (G.R. No. 253716)
Case Title, Citation, and Court
- Supreme Court Third Division, G.R. No. 253716, July 10, 2023; reported at 943 Phil. 708.
- Petition for Review on Certiorari filed by Platinum Group Metals Corporation (PGMC) assailing the Court of Appeals Decision dated December 4, 2019 and Resolution dated September 25, 2020 in CA‑G.R. CV No. 111021.
- Decision of the Supreme Court penned by Justice Inting; concurrence by Caguioa (Chairperson), Gaerlan, Dimaampao, and Singh, JJ.
Nature of the Case
- Action for breach of obligation and recovery under Special Risks Policy No. EF-04010/11 (Insurance Policy) seeking P208,410,988.00 (insurance proceeds).
- Central legal questions: (a) whether the trial court considered defendant’s documentary exhibits and purposes for which they were offered; (b) whether PGMC proved insurable interest in the insured trucks; and (c) whether the loss fell within excepted perils under the policy.
Antecedent Facts (As Alleged by PGMC)
- PGMC is engaged in mine exploration, development, processing and marketing of nickel ore and value‑added products for export markets.
- In August 2011 PGMC obtained an insurance policy from Mercantile in the amount of P208,410,988.00 covering 100 brand new Sinotruck Howo 6x4 Tipper LHD Model No. ZZ3257M3241 at P2,084,109.88 per unit, effective from 12 noon of August 8, 2011 to 12 noon of August 8, 2012.
- Policy described as covering “all risk[s] of physical loss or damage due to external causes x x x” subject to enumerated exceptions.
- On October 3, 2011, at least 300 armed persons identifying themselves as members of the Communist Party of the Philippines/New People’s Army/Nationalist Democratic Front (CNN) simultaneously raided and seized control of three mining companies in Claver, Surigao del Norte, including PGMC’s plant site in Sitio Kinalablaban, Brgy. Cagdianao, Claver.
- During the raid PGMC employees and security personnel were held hostage for several hours; attackers denounced environmental destruction, refusal to pay revolutionary taxes, and blamed government officials for allowing large‑scale mining; attackers fired shots and burned facilities, equipment, and vehicles.
- PGMC alleged 89 of the insured trucks were destroyed and deemed totally lost as a result of the October 3, 2011 incident.
Insurance Claim and Pre‑litigation Correspondence
- October 5, 2011: PGMC’s EVP, Atty. Dante R. Bravo, requested Penta Insurance Broker Services, Inc. (Penta), PGMC’s broker, to send an adjuster to assess and validate damage and to assist in the claim against Mercantile.
- August 24, 2012: PGMC sent final demand to Penta and Mercantile for payment of insurance proceeds of P208,410,988.00 within five days.
- August 29, 2012: Mercantile denied the claim through its EVP Atty. Honoria J. Ramajo, asserting exclusion of “riot and civil commotion” and, alternatively, insurrection and rebellion as excluded risks.
RTC Proceeding — Pleadings and Issues Raised
- PGMC filed Complaint (Aug. 29, 2013) for breach and recovery of insurance proceeds, plus 6% legal interest, attorney’s fees (at least P500,000.00), and costs.
- Mercantile’s Answer denied entitlement and pleaded exclusion under Policy Conditions paragraph 21(g) (strikes, lockouts, labor disturbances, riots, civil commotions, etc.) and 21(h) (enemy attack, invasion, insurrection, rebellion, revolution, civil war, seizure/confiscation, etc.). It also raised multiple affirmative defenses and procedural objections (jurisdiction, venue, party‑in‑interest, failure of conditions precedent, forum‑shopping certification, etc.).
- PGMC’s Reply/Amended Reply reiterated authorization of Atty. Bravo to verify filings, asserted essential elements of cause of action, and denied applicability of policy exceptions.
Trial Proceedings, Evidence and Formal Offers
- PGMC presented nine witnesses, including Atty. Bravo and police and company personnel; filed a Formal Offer of Evidence (PGMC’s FOE).
- RTC admitted Exhibits “A” to “L” but denied admission of Exhibits “M” to “S” for not being marked during pre‑trial and trial; PGMC’s motion for reconsideration on this denial was denied.
- Mercantile filed a Motion for Reconsideration with Motion to Admit Formal Offer of Evidence and lodged its Formal Offer of Evidence (Mercantile’s FOE); the RTC initially lifted submission for decision but did not rule on Mercantile’s FOE and later denied PGMC’s Motion to Mark and Admit Exhibits M–S.
- PGMC later filed Tenders of Excluded Evidence and Proffer of Proof for Exhibits M–S and for attorney’s fees evidence.
RTC Decision (Branch 147) and Subsequent RTC Resolution (Branch 132)
- RTC Branch 147 Decision dated November 6, 2017: rendered judgment in favor of PGMC, ordering Mercantile to pay P183,260,779.32 (principal award); denied other claims for lack of basis. RTC did not accept Mercantile’s characterization of the incident as riot, civil commotion, insurrection, or rebellion and invoked doctrine that ambiguous policy terms are construed in favor of the assured and strictly against the insurer (citing Alpha Insurance and Surety Co v. Arsenia Sonia Castor).
- PGMC sought partial reconsideration; Mercantile sought reconsideration and filed motion to inhibit presiding judge; case re‑raffled to Branch 132.
- RTC Branch 132 Resolution dated May 9, 2018: denied Mercantile’s motion for reconsideration and granted PGMC’s partial reconsideration, adding 6% interest from filing date (Aug. 30, 2013), attorney’s fees of Php18,000,000.00, and Php4,470,766.05 as costs of suit.
Court of Appeals Decision and Resolution
- CA Decision dated December 4, 2019 reversed the RTC decisions and set aside the RTC Decision and Resolution; dismissed PGMC’s Complaint.
- CA bases:
- Noted the RTC did not rule on Mercantile’s Motion to Admit FOE and concluded the RTC would have acted differently had it considered the purposes for which Mercantile’s exhibits were offered.
- Found P