TITLE 12: REINSURANCE 7.

Not having received any formal reply from ASIAN, FIELDMEN'S sent
anew a letter on February 17, 1962 reminding ASIAN of the December 7
SEC. 97. A contract of reinsurance is one by which an insurer procures a third person letter regarding the cancellation of all the reinsurance treaties and cessions
to insure him against loss or liability by reason of such original insurance. as of December 31, 1961. 
8. At the same time FIELDMEN'S requested ASIAN to submit its final
SEC. 98. Where an insurer obtains reinsurance, except under automatic reinsurance accounting of all cessions made to the former for the preceding months
treaties, he must communicate all the representations of the original insured, and also when the reinsurance agreements were in force.
all the knowledge and information he possesses, whether previously or subsequently 9. one of the risks reinsured with FIELDMENS, issued in favor of the
acquired, which are material to the risk. Government Service Insurance System, became a liability when the insured
property was burned on February 16, 1962. 
SEC. 99. A reinsurance is presumed to be a contract of indemnity against liability, 10. Since the policy was issued on July 1, 1961, it was supposed to expire on
and not merely against damage. July 1, 1962.
11. The next day, February 17, ASIAN immediately notified FIELDMEN'S of
SEC. 100. The original insured has no interest in a contract of reinsurance. said fire loss. 
12. And on February 26, 1962 ASIAN sent its reply stating, among other
things, as follows: “we beg to reiterate that your letter of December 7, 1961,
1.) FIELDMEN’S v. ASIAN SURETY terminating said treaties by December 31, 1961, is not in accordance with
G.R. No. L-23447 July 31, 1970 the terms thereof, since there was no prior three months' notice. However,
PETITIONER: FIELDMEN'S INSURANCE CO., INC considering the attitude express (sic) in your aforesaid letter of December 7,
RESPONDENTS: ASIAN SURETY & INSURANCE, CO., INC. and THE 1961, we are willing to waive provision that said treaties may be cancelled
HONORABLE COURT OF APPEALS,  on December 31st of any year, and will consider them cancelled at the end
TOPIC: REINSURANCE of three (3) months from December 7, 1961, by which time we shall be able
to render the final accounting you desire.”
13. FIELDMEN’s convinced that it sufficiently sent a notice of termination
1. On various dates — between April 11, 1960 and January 9, 1961 — the
dated September 19, 1961 and hence no more liability as regards its
Asian Surety & Insurance Company, Inc. and the Fieldmen's insurance
resinsurance agreements with ASIAN filed a petition for declaratory
Company, Inc. entered into seven (7) reinsurance agreements or treaties
relief with the Court of First Instance of Manila to seek a declaration
2. under the general terms of which, Asian Surety , as the ceding company
that all the reinsurance contracts entered into between them had
undertook to cede to Fieldmen’s, as the reinsuring company, a specified
terminated as of December 31, 1961 and to obtain an order directing
portion of the amount of insurance underwritten by ASIAN upon payment
ASIAN to render final accounting of the transactions between them
to FIELDMEN'S of a proportionate share of the gross rate of the premium
with respect to said reinsurance treaties as of the cut-off date.
applicable with respect to each cession after deducting a commission.
14. ASIAN denied having received FIELDMEN'S letter dated September 19,
3. Said agreements or treaties were to, take effect from certain specific dates
1961, and argued that even assuming it did, FIELDMEN'S could not have
and were to be in force until cancelled by either party upon previous notice
terminated the reinsurance treaties as of December 31, 1961 because the
of at least three (3) months by registered mail to the other party, the
letter was merely an expression of FIELDMEN'S desire to cancel the
cancellation to take effect as of the 31st of December of the year in which
treaties and not a formal notice of cancellation as contemplated in their
the notice was given.
reinsurance agreements. 
4. On September 19, 1961 FIELDMEN'S, by means of registered mail, served
15. By way of special defense Asian contended that even if the September 19
notice to ASIAN expressing its desire to be relieved from all participation in
letter were considered sufficient notice of cancellation — thereby rendering
its various treaties with the latter effective December 31, 1961. ASIAN did
the reinsurance agreements terminated as of December 31, 1961 — the
not a reply.
liability of FIELDMEN'S with respect to policies or cessions issued under
5. On December 7, 1961 FIELDMEN'S sent another letter to ASIAN
two of the said agreements prior to their cancellation continued to have full
expressing regrets at alleged violations committed by ASIANS with respect
force and effect until the stated expiry dates of such policies or cession.
to the various treaties between them; 
16. CFI RULED IN FAVOR OF ASIANS, CA AFFIRMED. 
6. in the same letter, FIELDMENS reiterated its position that it would
consider itself "no longer at risk for any reinsurance and/or cession" given
by ASIAN which might be in force on December 31, 1961. 
ISSUE: Whether or not said cancellation had the effect of terminating also the such termination to take effect on the 31st of December of the year in which
liability of FIELDMEN'S as reinsurer with respect to policies or cessions issued notice was given, ASIAN made express reference only to the provisions in
prior to the termination of the principal reinsurance contracts or treaties. (NO) the two agreements marked as Annexes A and B to the petition that "the
liability of FIELDMEN'S under any current cession ... shall continue in full
 Of the six reinsurance contracts under consideration two contain provisions, force and effect until their natural expiry ...;
which clearly and expressly recognize the continuing effectivity of policies (2) that the same provisions, and no other, were relied upon as a
ceded under them for reinsurance notwithstanding the cancellation of the special defense on the question of FIELDMEN'S continued liability; and (3)
contracts themselves.  that in ASIAN'S prayer for relief in its answer it was only with respect to
 Thus, as already noted hereinabove, Article 10 of the Facultative Obligatory those two agreements that ASIAN asked for a declaration that the cessions
Reinsurance Treaty Fire "that in the event of termination of this on reinsurance issued prior to their cancellation would continue in full force
Agreement ..., the liability of the Fieldmen's under current cessions and effect until their natural expiry. In other words, ASIAN was quite
shall continue in full force and effect until their natural expiry ...;" and the willing that no similar declaration be made by the Court with respect to the
4th paragraph of Article VI of the Personal Accident Reinsurance Treaty  other agreements, obviously because no risk reinsured pursuant thereto had
states: become an actual liability. And since those agreements had been cancelled
o On the termination of this Agreement from any cause whatever, the as of December 31, 1961, there is no point in the prayer for declaratory
liability of the REINSURER (Fieldmen's) under any current judgment concerning them.
cession including any amounts due to be ceded under the terms of
this Agreement and which are not cancelled in the ordinary course FIELDMEN CANNOT ASK FOR RECISSION BECAUSE THE ACTION
of business shall continue in full force until their expiry unless the FILED WAS ONE FOR DECLARATORY RELIEF. 
COMPANY (Asian) shall, prior to the thirty-first December next
following such notice, elect to withdraw the existing cessions ....  the petition contains no averments which would constitute grounds for
 Insofar as the two reinsurance agreements with the express rescission. Neither are there any findings of fact in the decision of the Court
stipulations aforequoted are concerned there is clearly no merit in of Appeals upon which rescission may be predicated. 
FIELDMEN'S claim that their cancellation carried with it ipso  If anything, the thrust of said decision is that ASIAN was not guilty of any
facto the termination of all reinsurance cessions thereunder.  substantial breach of the contracts which would warrant such a step. And
 Such cessions continued to be in force until their respective dates this Conclusion, being factual in nature, is binding and conclusive upon this
of expiration. Since it was under one of said agreements, namely, Court.
the Facultative Obligatory Reinsurance Treaty-Fire, that the
reinsurance cession corresponding to the GSIS policy had been
made, FIELDMEN'S cannot avoid liability which arose by reason
of the burning of the insured property.

PETITION FOR DECLARATORY RELIEF IS MOOT

 The said agreements have been cancelled, and it does not appear that any
claim by or liability in favor of the insured has actually arisen under any of
the reinsurance cessions made prior to such cancellation.
  Future conflicts of the same nature as those which have motivated the
present action can of course be obviated by using mare precise and definite
terminology in the reinsurance agreements which the parties may enter into
henceforth.
 It is significant to note in this connection:
(1) that in ASIAN'S answer to the petition below, particularly to
the allegation in paragraph III concerning the right of either party to
terminate the reinsurance agreements upon at least three months' notice,
2.) PIONEER INSURANCE & SURETY (petitioner) VS. CA, CONSTANCIO successors and assigns, all sums and amounts of money which it or its
MAGLANA AND JACOB LIM (respondents) representatives should or may pay or cause to be paid or become liable to
pay on them of whatever kind and nature.
GR 84157 July 28, 1989 6. On June 10, 1965, Lim doing business under the name and style of SAL
executed in favor of Pioneer as deed of chattel mortgage as security for the
latter's suretyship in favor of the former. It was stipulated therein that Lim
JACOB LIM (petitioner) VS. CA, PIONEER INSURANCE & SURETY, transfer and convey to the surety the two aircrafts. The deed (Exhibit D)
was duly registered with the Office of the Register of Deeds of the City of
BORDER MACHINERY AND HEAVY EQUIPMENT CO., FRANCISCO
Manila and with the Civil Aeronautics Administration pursuant to the
AND MODESTO CERVANTES AND CONSTANCIO MAGLANA
Chattel Mortgage Law and the Civil Aeronautics Law (Republic Act No.
(respondents) 776), respectively.
GR 84157 July 28, 1989 7. Lim defaulted on his subsequent installment payments, JDA request
payments from the surety. Pioneer paid a total sum of P298,626.12.
8. Pioneer filed a petition for the extrajudicial foreclosure of the chattel
Doctrine: In general a reinsurer, on payment of a loss acquires the same rights by mortgage.
subrogation as are acquired in similar cases where the original insurer pays a 9. The Cervanteses and Maglana filed a third party claim alleging that they are
[Link] rules of practice in actions on original insurance policies are in general co-owners of the aircrafts.
applicable to actions or contracts of reinsurance. 10. Pioneer filed an action for judicial foreclosure with an application for a writ
of preliminary attachment against Lim, Cervanteses, Bormacheco and
Maglana.
11. Lim, Cervanteses, Bormacheco and Maglana: they were not privies to the
FACTS contacts signed by Lim.
12. TRIAL COURT: Lim is liable to pay Pioneer P311K plus damages and
1. 1965 – Jacob Lim was engaged in the airline business as owner-operator of
pay the respondents ½ of P311K; but dismissed its complaints against all
Southern Air Lines (SAL) as single proprietorship.
other respondents.
2. May 17, 1965 – Japan Domestic Airlines (JDA) and Lim entered into and
13. CA: modified; complaint against all respondents was dismissed award of
executed a sales contract for the sale and purchase of 2 DC-3A Type
damages sustained.
Aircrafts and 1 set of necessary spare parts in the sum of $109K to be paid
in installments.
3. May 22, 1965 – Pioneer Insurance (Insurer) as surety, executed and issued ISSUE: WON petitioner had already collected the proceeds of the reinsurance on its
its Surety Bond in favor of JDA, in behalf of its principal, Lim, for the bond in favor of the jda and that it cannot represent a reinsurer to recover the amount
balance of the price of the aircrafts and spare parts.
from herein private respondents as defendants in the trial court or WON respondents
4. It appears that Border Machinery and Heavy Equipment Company, Inc.
had no interest in the reinsurance contract as this is strictly between pioneer as the
(Bormaheco), Francisco and Modesto Cervantes (Cervanteses) and
Constancio Maglana (respondents in both petitions) contributed some funds insured and the reinsuring company pursuant to sec. 98 of the insurance code
used in the purchase of the above aircrafts and spare parts. The funds were
supposed to be their contributions to a new corporation proposed by Lim to
expand his airline business. They executed two (2) separate indemnity
agreements (Exhibits D-1 and D-2) in favor of Pioneer, one signed by
Maglana and the other jointly signed by Lim for SAL, Bormaheco and the HELD: NO. WHEREFORE, the instant petitions are DISMISSED. The questioned
Cervanteses decision of the Court of Appeals is AFFIRMED.
5. The indemnity agreements stipulated that the indemnitors principally
agree and bind themselves jointly and severally to indemnify and hold and
save harmless Pioneer from and against any/all damages, losses, costs,
damages, taxes, penalties, charges and expenses of whatever kind and RULING
nature which Pioneer may incur in consequence of having become surety G.R. No. 84197
upon the bond/note and to pay, reimburse and make good to Pioneer, its
Petitioner questions the ruling of the CA: 7. Petitioner contends:
a. it is at a loss where respondent court based its finding that
1. No merit in Pioneer’s appeal. It is undisputed that Pioneer had reinsured petitioner was paid by its reinsurer in the aforesaid amount, as this
its risk of liability under the surety bond in favor of JDA and matter has never been raised by any of the parties herein both in
subsequently collected the proceeds of such reinsurance in the sum of their answers in the court below and in their respective briefs with
P295,000.00. respondent court;
b. even assuming hypothetically that it was paid by its reinsurer, still
none of the respondents had any interest in the matter since the
a. Respondents' alleged obligation to Pioneer amounts to
reinsurance is strictly between the petitioner and the re-insurer
P295,000.00, hence, Pioneer’s instant action for the recovery of
pursuant to section 91 of the Insurance Code;
the amount of P298,666.28 from respondents will no longer
c. pursuant to the indemnity agreements, the petitioner is entitled to
prosper. Pioneer Pioneer is not the real party in interest to institute
recover from respondents Bormaheco and Maglana; and
the instant action as it does not stand to be benefited or injured by
d. the principle of unjust enrichment is not applicable considering that
the judgment.
whatever amount he would recover from the co-indemnitor will be
paid to the reinsurer.
2. Pioneer's contention that it is representing the reinsurer to recover the 8. The records belie the petitioner's contention that the issue on the
amount from respondents, hence, it instituted the action is utterly devoid of reinsurance money was never raised by the parties.
merit.
TRIAL COURT made the following findings:
3. Pioneer did not even present any evidence that it is the attorney-in-fact of
the reinsurance company, authorized to institute an action for and in behalf
9. It appearing that Pioneer reinsured its risk of liability under the surety bond
of the latter. To qualify a person to be a real party in interest in whose name
it had executed in favor of JDA, collected the proceeds of such reinsurance
an action must be prosecuted, he must appear to be the present real owner of
in the sum of P295,000, and paid with the said amount the bulk of its
the right sought to be enforced 
alleged liability to JDA under the said surety bond, it is plain that on this
score it no longer has any right to collect to the extent of the said amount.
4. Based on the foregoing premises, Pioneer cannot be considered as the real
party in interest as it has already been paid by the reinsurer the sum of
10. On the question of why it is Pioneer, instead of the reinsurance company,
P295,000.00 — the bulk of respondents' alleged obligation to Pioneer.
that is suing respondents for the amount paid to it by the reinsurers,
notwithstanding that the cause of action pertains to the latter, Pioneer says:
5. In addition to the said proceeds of the reinsurance received by Pioneer from The reinsurers opted instead that the Pioneer Insurance & Surety
its reinsurer, the former was able to foreclose extra-judicially one of the Corporation shall pursue alone the case.. . . . Pioneer Insurance & Surety
subject airplanes and its spare engine, realizing the total amount of Corporation is representing the reinsurers to recover the amount.' In other
P37,050.00 from the sale of the mortgaged chattels. Adding the sum of words, insofar as the amount paid to it by the reinsurers Pioneer is suing
P37,050.00, to the proceeds of the reinsurance amounting to P295,000.00, it respondents as their attorney-in-fact.
is patent that Pioneer has been overpaid in the amount of P33,383.72
considering that the total amount it had paid to JDA totals to only
11. But in the first place, there is not the slightest indication in the complaint
P298,666.28.
that Pioneer is suing as attorney-in- fact of the reinsurers for any amount.
Lastly, and most important of all, Pioneer has no right to institute and
6. To allow Pioneer to recover from respondents the amount in excess of maintain in its own name an action for the benefit of the reinsurers. It is
P298,666.28 would be tantamount to unjust enrichment as it has already well-settled that an action brought by an attorney-in-fact in his own name
been paid by the reinsurance company of the amount Pioneer has paid to instead of that of the principal will not prosper, and this is so even where the
JDA as surety of defendant Lim vis-a-vis defendant Lim's liability to JDA. name of the principal is disclosed in the complaint.
Well settled is the rule that no person should unjustly enrich himself at the
expense of another (Article 22, New Civil Code)
12. The total amount paid by Pioneer to JDA is P299,666.29. Since Pioneer has
collected P295,000.00 from the reinsurers, the uninsured portion of what it
 paid to JDA is the difference between the two amounts, or P3,666.28. This 17. It is clear from the records that Pioneer sued in its own name and not as
is the amount for which Pioneer may sue respondents, assuming that the an attorney-in-fact of the reinsurer.
indemnity agreement is still valid and effective.
13. But since the amount realized from the sale of the mortgaged chattels are 18. Accordingly, the appellate court did not commit a reversible error in
P35,000.00 for one of the airplanes and P2,050.00 for a spare engine, or a dismissing the petitioner's complaint as against the respondents for the
total of P37,050.00, Pioneer is still overpaid by P33,383.72. Therefore, reason that the petitioner was not the real party in interest in the
Pioneer has no more claim against respondents.  complaint and, therefore, has no cause of action against the
respondents.
14. The payment to the petitioner made by the reinsurers was not disputed in
the appellate court. Considering this admitted payment, the only issue that 19. Apart from the foregoing proposition, the indemnity agreement ceased to be
cropped up was the effect of payment made by the reinsurers to the valid and effective after the execution of the chattel mortgage.
petitioner.
20. Testimonies of respondents Francisco Cervantes and Modesto Cervantes.
15. Therefore, the petitioner's argument that the respondents had no interest in
the reinsurance contract as this is strictly between the petitioner as insured 21. Pioneer Insurance, knowing the value of the aircrafts and the spare parts
and the reinsuring company pursuant to Section 91 (should be Section 98) involved, agreed to issue the bond provided that the same would be
of the Insurance Code has no basis. mortgaged to it, but this was not possible because the planes were still in
Japan and could not be mortgaged here in the Philippines. As soon as the
a. In general a reinsurer, on payment of a loss acquires the same aircrafts were brought to the Philippines, they would be mortgaged to
rights by subrogation as are acquired in similar cases where Pioneer Insurance to cover the bond, and this indemnity agreement would
the original insurer pays a loss be cancelled.

b. The rules of practice in actions on original insurance policies G.R. No. 84157
are in general applicable to actions or contracts of reinsurance.
ISSUE: WON Maglana et al must share in the loss as general partners.
c. Hence the applicable law is Article 2207: If the Pioneers property
has been insured, and he has received indemnity from the RULING: No. There was no de facto partnership. Ordinarily, when co-investors
insurance company for the injury or loss arising out of the wrong agreed to do business through a corporation but failed to incorporate, a de facto
or breach of contract complained of, the insurance company shall partnership would have been formed, and as such, all must share in the losses and/or
be subrogated to the rights of the insured against the wrongdoer or gains of the venture in proportion to their contribution. But in this case, it was shown
the person who has violated the contract. If the amount paid by the that Lim did not have the intent to form a corporation with Maglana et al. This can be
insurance company does not fully cover the injury or loss, the inferred from acts of unilaterally taking out a surety from Pioneer Insurance and not
aggrieved party shall be entitled to recover the deficiency from the using the funds he got from Maglana et al. The record shows that Lim was acting on
person causing the loss or injury. his own and not in behalf of his other would-be incorporators in transacting the sale
of the airplanes and spare parts.
16. In Manila Mahogany Manufacturing Corporation v. Court of Appeals, Note
that if a property is insured and the owner receives the indemnity from the
insurer, it is provided in said article that the insurer is deemed subrogated to
the rights of the insured against the wrongdoer and if the amount paid by the
insurer does not fully cover the loss, then the aggrieved party is the one
entitled to recover the deficiency. Evidently, under this legal provision, the
real party in interest with regard to the portion of the indemnity paid is the
insurer and not the insured
3.) Gibson vs. Revilla (Frain) “Intervention” refers to the proceeding by which one not originally a party to
an action is permitted, on his own application, to appear therein and join one of
92 SCRA 219, No. L-41432 July 30, 1979 the original parties in maintaining the action or defense, or to assert a claim or
Topic: Reinsurance defense against some or all of the parties to the proceeding as originally
instituted. Such a third party may, upon the discretion of the court, become a
Keyword/s: Shipments of copper, gold and silver concentrates party to a pending proceedings between, others for the protection of some rights
or interest alleged by him to be affected by such proceedings.
Petitioner: IVOR ROBERT DAYTON GIBSON
 Intervention is not a matter of absolute right but may be permitted by the
Respondents: HON. PEDRO A. REVILLA, in his official capacity as Presiding
court when the applicant shows facts which satisfy the requirements of the
Judge of Branch XIII, Court of First Instance of Rizal, and LEPANTO statute authorizing intervention.
CONSOLIDATED MINING COMPANY  Under our rules of Court, what qualifies a person to intervene is:
o his possession of a legal interest in the matter in litigation, or in the
success of either of the parties, or an interest against both; or
FACTS o when he is so situated as to be adversely affected by a distribution
or other disposition of property in the custody of the court or an
officer thereof.

The legal interest as qualifying factor: must be of a direct and immediate character so
that the intervenor will either gain or lose by the direct legal operation of the
judgment.

 The interest must be actual and material, a concern which is more than mere
curiosity, or academic or sentimental desire; it must not be indirect and
contingent, indirect and remote, conjectural, consequential or collateral.
 However, permission to intervene is subject to the sound discretion of the
court, the exercise of which is limited by considering “whether or not the
intervention will unduly delay or prejudice the adjudication of the rights of
the original parties and whether or not the intervenor’s rights may be fully
protected in a separate proceeding.”
 Once judicial discretion is exercised, the action of the court cannot be
reviewed or controlled by mandamus however erroneous it may be, except
ISSUE: WON the lower court committed reversible error in refusing the intervention only when there is an arbitrary or capricious exercise of discretion, in which
case, the fault is correctible by mandamus if there be no other adequate and
of petitioner Ivor Robert Dayton Gibson in the suit between Lepanto and Malayan.
speedy remedy.
(NO)

GIBSON: submits that the respondent Judge, in refusing to permit/allow him to

** ON INTERVENTION ** intervene, incorrectly interpreted and/or appreciated the purpose/intent of the
pertinent rules of procedure and that the respondent Judge erred:
RULE: Sec. 2, Rule 12 of the Rules of Court on Intervention
(1) In concluding that to allow the intervention of herein petitioner “would definitely
disrupt the trial” and “would certainly unduly delay the proceedings,” when such
apprehension appears to be clearly immaterial in determining when intervention is
proper or not;
(2) In viewing the alleged availability of another recourse on the part of herein  The high probability that these other re-insurers may likewise intervene if
petitioner to protect his interest, i.e. separate action, as an added justification to deny the latter’s motion is granted is not an arbitrary assumption of the Court.
his intervention, despite the fact that the applicable rule of procedure in this regard  Considering petitioner’s assertion that he will have the opportunity to show,
(Section 2, Rule 12) does not preclude intervention even if another separate action is among others, that the losses and damages purportedly sustained by
appropriate and/or available; and Lepanto occcurred not from the perils of the seas but from perils of the
ships; that Lepanto is not the real party in interest; that it has no cause of
(3) In its obvious disregard of the very rule (Section 2, Rule 12) precisely designed to action; and neither has it complied with its obligations under the policy
apply on cases where intervention is sought, thereby-departing from the accepted and which makes the filing of the complaint premature (p. 118, Records Reply
usual procedure under the premises. to Opposition) if petitioner is allowed to intervene, We hold that there is
good and sufficient basis for the Court a quo to declare that the trial
between Lepanto and Malayan would be definitely disrupted and would
certainly unduly delay the proceedings between the parties especially at the
SC: Respondent Judge committed no error of law in denying petitioner’s Motion to stage where Lepanto had already rested its case and that the issues would
Intervene. And neither has he abused his discretion in his denial of petitioner’s also be compounded as more parties and more matters will have to be
Motion for Intervention. litigated.

** ON SEPARATE ACTION **
We reject the contention that the question regarding delay in the adjudication of the
rights of the original contending parties should assume a secondary role to the GIBSON: This rights would not be fully protected in a separate proceeding because a
primary and imperative requirement that the legal interest of the would-be intervenor decision in favor of Lepanto, declaring Malayan liable on its insurance policies
in the matter under litigation must be clearly shown and that once clearly shown, the would necessarily and injuriously affect his interests which interest as a re-insurer of
fact that his intervention may work to delay a little the main conflict between the Malayan’s risk is not only inchoate but material, direct and immediate and for such
parties should not by itself justify the denial of intervention. interest to be in any manner prejudiced without first giving petitioner a chance to be
heard would be violative of due process.
 For the Court to permit intervention, it must be shown that movant is
possessed of legal interest in the matter in litigation or otherwise qualified  A decision in favor of Malayan, recognizing it as not liable under its
under the first paragraph of Section 2, and the Court must also consider the insurance policies, could subject him to the danger of having to admit that
matters mentioned in paragraph (b) thereof. Malayan had not breached its insurance contract with the entity (Lloyds) of
 The latter are not and should not be taken as secondary to the former for which petitioner is the leading syndicate member.
both must concur since they are equally important, requisite and necessary  By the very nature of a contract of reinsurance and considering that the re-
for consideration in the exercise of discretion by the Court to allow or insurer is obliged ‘to pay as may be paid thereon’ (referring to the original
disallow intervention. policies), it will serve better the ends of justice if a full disclosure of all
 The law does not make any distinction. pertinent facts and issues is made with the participation of the movant at
 Each case must be decided according to its facts and merits, subject to the this trial where his interests have been and are already inevitably at stake.
discretion of the Court.

LEPANTO: Gibson will have his day in court and his rights can be fully protected in
We agree that since movant Ivor Robert Dayton Gibson appears to be only one of a separate proceeding.
several re-insurers of the risks and liabilities assumed by Malayan Insurance
Company, Inc., it is highly probable that other re-insurers may likewise intervene.  If it loses the case against Malayan, Gibson cannot possibly be liable to
Malayan for indemnity on the reinsurances.
 There are 63 other syndicate members of Lloyds, the 26 companies in the  If Lepanto wins, then Gibson, the 63 other syndicate members of Lloyds,
“I.L.U.” group holding a 34.705% reinsurance interest and the 2 “Other the 26 companies in the “I.L.U.” group holding a 34.705% reinsurance
Companies” holding the balance of the reinsurances, as listed in Annex “A” interest and the 2 “Other Companies” holding the balance of the
Sur-Rejoinder to Lepanto’s Rejoinder, pp. 136-138, Records. reinsurances are free either to pay Malayan or to resist Malayan and thus
 force Malayan to sue in whatever country most of them, qualitatively and
not quantitatively, may be served with summons.
SC: Respondent Judge committed no reversible error in further sustaining the fourth
ground of Lepanto’s Opposition to the Motion to Intervene that the rights, if any, of
SC: Respondent Judge committed no reversible error in further sustaining the fourth petitioner are not prejudiced by the present suit and will be fully protected in a
ground of Lepanto’s Opposition to the Motion to Intervene that the rights, if any, of separate action against him and his coinsurers by Malayan.
petitioner are not prejudiced by the present suit and will be fully protected in a
separate action against him and his coinsurers by Malayan.
NOTE! Gibson himself admits that “(o)f course, petitioner, if finally sued in London,
(he) could avail himself of remedies available to him” and that “such a procedure, if
** ON OBLIGATION TO PAY ** not entirely time-consuming, would actually beg the issue on hand. He believes that
his defenses on the claims ventilated in the court a quo can be appreciated only here;
GIBSON: He has to pay once Malayan is finally adjudged to pay Lepanto because of
elsewhere in view of the peculiar circumstances surrounding Lepanto’s claims the
the very nature of a contract of reinsurance and considering that the re-insurer is
basic issue will be obfuscated and perhaps even obliterated by arguments on
obliged ‘to pay as may be paid thereon’ (original policies), although this is subject to
procedural niceties.” However, such a procedural problem is no legal ground to
other stipulations and conditions of the reinsurance contract, is without merit.
compel allowance of and insist on his intervention.

RULE: The general rule in the law of reinsurance is that the re-insurer is entitled to
FALLO: WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby
avail itself of every defense which the re-insured (which is Malayan) might urge in
dismissed, No costs.
an action by the person originally insured (which is Lepanto),
SO ORDERED.
“Sec. 1238.—In an action on a contract of reinsurance, as a general rule the
reinsurer is entitled to avail itself of every defense which the reinsured might urge in
an action by the person originally insured; x x x”

The same rule is stated otherwise in 44 Am. Jur. 2d, Sec. 1862, p. 793, as follows:

“Moreover, where an action is brought against the reinsurer by the reinsured, the
former may assert any defense that the latter might have made in an action on the
policy of original insurance.” (Eagle Ins. Co. vs. Lafayette Ins. Co., 9 Ind. 443)

As to the effect of the clause “to pay as may be paid thereon” contained in
petitioner’s re-insurance contract, Arnould, on the Law of Marine Insurance and
Average, 13th Ed., Vol. 1, Section 327, p. 315, states the rule, thus:

“It has been decided that this clause does not preclude the reinsurer from insisting-
upon proper proof that a loss strictly within the terms of the original policy has
taken place.”

“This clause does not enable the original underwriter to recover from his re-insurer
to an extent beyond the subscription of the latter.”
4.)ARTEX DEVELOPMENT CO., INC., plaintiff-appellee, vs. WELLINGTON ISSUE: WON Artex can recover the balance of the loss reinsured with or through
INSURANCE CO., INC., defendant-appellant. Alexander and Alexander, Inc. of New York, U.S.A., amounting to P397,813.00
(NO)

TOPIC: REINSURANCE
FALLO: ACCORDINGLY, as prayed for by plaintiff-appellee in brief, the
judgment of the lower court is affirmed, with the modification that the remaining
DOCTRINE: Section 91 of the Insurance Act provides that, "The original insured liability of defendant appellant to plaintiff-appellee in accordance with the "collateral
has no interest in a contract of reinsurance.” Unless there is a specific grant in, or agreement" of April 10, 1969 is fixed at P397,813.00 with twelve (12%) percent
assignment of, reinsurance contract in favor of the insured or a manifest intention of interest per annum until 10 April 1969, attorney's fees of fifteen (15%) percent of the
the contracting parties to the insurance contrary to grant such benefit or favor to the recovery, and cost of suit.
insured, not being privy to the reinsurance contract, has no cause of action against
the reinsurer.

RATIO:
FACTS:
 There is no single clause in the reinsurance contracts has been cited by the
1. Wellington Insurance Co., Inc. insured for P24,346,509.00 the buildings, stocks insurer that would justify its claim that they contained a stipulation pour
and machinery of plaintiff Artex Development Co., Inc., against loss or damage autrui in favor of the insured, and whereby "plaintiff-appellee is deemed to
by fire or lighting have agreed to look solely to the reinsurers for indemnity in case of loss."
2. said properties were insured for an additional sum of P833,034.00
3. Wellington insured Artex against business interruption (use and occupancy) for
P5,200,000.00 (REINSURANCE with Alexander and Alexander, Inc.) Article 1311, NCC. - If a contract should contain some stipulation in favor of a
4. the buildings, stocks and machineries of Artex spinning department were burned third person, he may demand its fulfillment provided he communicated his
so a notice of the loss and damage was given to Wellington, and the loss was acceptance to the obligor before its revocation. A mere incidental benefit or
referred to the adjuster interest of a person is not sufficient. The contracting parties must have clearly and
5. According to the report of the adjusters: deliberately conferred favor upon a third person.
a. the total property loss = P10,106,554.40
b. total business interruption loss = P3,000,000.00
6. Wellington paid Artex P6,481,870.07 for the property loss suffered by the  Contracts take effect only between the parties, their assigns and heirs (with
insured and P1,864,134.08 on its business interruption loss, leaving a balance of the heir being not liable beyond the value of the property he received from
P3,624,683.43 and P1,748,460.00, respectively the decedent)
7. Counsel of Artex filed a manifestation stating that “in view of the Deeds of  Uy Tam vs. Leonard: the Court held that the "intent of the contracting
Discharge . . . the only remaining liability subject of litigation shall be that parties to benefit third party by means of such stipulations pour autrui must
proportion of the loss reinsured with or through Alexander and Alexander, Inc. clearly expressed, and hence, a clause in a contractor's executed solely in
of New York, U.S.A., namely, P397,813.00 — the rest having been paid and favor of the City of Manila and condition pay for all labor and materials
settled per the said deeds. . . ” cannot be construed stipulation pour autrui available to materialmen who
8. LOWER COURT: ordered defendant insurer to pay plaintiff-insured the balance supplied certain materials to the contractor for use in the performance of the
of the insured property loss of P3,624,683.43 and its ascertained business latter's contract with the city.”
interruption loss of P1,748,460.00 with interest and attorney's fees  Artex, not being a party or privy to Wellington’s reinsurance contracts,
9. Wellington argues that the lower court should have ruled instead "that plaintiff- therefore, could not directly demand enforcement of such insurance
appellant cause of action (as insured) should have been directed against the contracts
reinsurers and not against defendant-appellant"  Wellington’s contention that the insured should be deemed have agreed to
look solely to the reinsurers for indemnity case of loss, since it was evident
 that with its mere P500,000. paid-up capital stock, it had to secure
reinsurance coverage the over P24-million fire insurance coverage of the
policy issued by it to plaintiff-insured, is manifestly untenable
 Assuming that Artex could avail of the reinsurance contracts and directly
sue the reinsurers for payment of the loss, still such assumption would not
in any way affect or cancel out Wellington's direct contractual liability to
Artex under the insurance policy to indemnify plaintiff for the property
losses.
 Artex’s right as insured to sue the insurer directly and solely would thereby
not be affected or curtailed in any way, without prejudice to insurer in turn
filing a third party complaint or separate suit against its reinsurers

The insured, not being a privy to the reinsurance contract, cannot be granted
such benefit or favor of the reinsurance proceeds. However, if there is a specific
grant in, or assignment of, the reinsurance contract OR a manifest intention of
the contracting parties to the insurance, the insured can claim such proceeds.

In this case, since Artex is not a privy to the contract of reinsurance between
Wellington and Alexander and Alexander Inc. of NY, ARTEX CANNOT
RECOVER THE BALANCE OF THE LOSS REINSURED.
5.) Avon Insurance PLC., et al. v. CA (G.R. No. 97642) the general public the impression that it had been engaging, or intends to
engage in its ordinary and usual business undertakings in the country. The
*Not in the gdrive. Taken from: reinsurance treaties between the petitioners and Worldwide Surety and
[Link] Insurance were made through an international insurance broker, and not
g-r-no-97642/* through any entity or means remotely connected with the Philippines.
Moreover, there is authority to the effect that a reinsurance company is not
doing business in a certain state merely because the property or lives which
* Also Check this  [Link] * are insured by the original insurer company are located in that state. The
reason for this is that a contract of reinsurance is generally a separate and
Facts:
distinct arrangement from the original contract of insurance, whose
 Respondent Yupangco Cotton Mills engaged to secure with Worldwide contracted risk is insured in the reinsurance agreement. Hence, the original
Security and Insurance Co. several of its properties which were then insured has generally no interest in the contract of reinsurance.
covered by reinsurance treaties between Worldwide Security and several
foreign reinsurance companies, including herein petitioners. These
reinsurance agreements had been made through an international broker
acting for Worldwide Security. While the policies are in effect, Yupangco’s
properties were razed in fire giving rise to their indemnification. Worldwide
acknowledged a remaining balance and assigned to Yupangco all
reinsurance proceeds still collectible from all the reinsurance companies.
Thus, as assignee and original insured, Yupangco instituted a collection suit
against petitioners. Petitioners averred that they are foreign corporations not
doing business in the Philippines therefore cannot be subject to the
jurisdiction of its courts. CA found for Yupangco.

Issue: Whether or not petitioners are foreign corporations doing business in the
Philippines.

Ruling: NO.

 To qualify the petitioners’ business of reinsurance within the Philippine

forum, resort must be made to the established principles in determining
what is meant by “doing business in the Philippines.” The term ordinarily
implies a continuity of commercial dealings and arrangements, and
contemplates, to that extent, the performance of acts or works or the
exercise of the functions normally incident to and in progressive
prosecution of the purpose and object of its organization.

 As it is, private respondent has made no allegation or demonstration of the

existence of petitioners’ domestic agent, but avers simply that they are
doing business not only abroad but in the Philippines as well. It does not
appear at all that the petitioners had performed any act which would give