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70 SUPREME COURT REPORTS ANNOTATED

Fieldmen's Insurance Co., Inc. vs. Vda. de Songco

No. L-24833. September 23, 1968.

FIELDMEN'S INSURANCE Co., INC., petitioner, vs.

MERCEDES VARGAS VDA. DE SONGCO; ET AL. and
COURT OF APPEALS, respondents.

Insurance; Nature of contract.—To borrow once again from

the language of the Qua Chee Gan opinion: "The contract of
insurance is one of perfect good faith (uberrima fides) not for the
insured alone, but equally so for the insurer; in fact, it is more so
for the latter, since its dominant bargaining position carries with
it stricter responsibility."
Same; Where insurer is estopped from disclaiming
responsibility; Case at bar.—The insurer knew all along that the
insured owned a private vehicle and not a common carrier. Its
agents even discounted the fears of the latter, not once but twice,
that his privately owned vehicle might not fall within the terms of
the common carrier insurance policy. Held: This is a case where
the doctrine of estoppel undeniably calls for application. It is now
beyond question that where inequitable conduct is shown by an
insurance firm, it is "estopped from enforcing forfeitures in its f
avor, in order to forestall fraud or imposition on the insured."
After petitioner had led the insured to believe that he could
qualify under the common carrier liability insurance policy, and
to enter into contract of insurance paying the premiums due, it
could not, thereafter, in any litigation arising out of such
representation, be permitted to change its stand to the detriment
of the heirs of the insured. As estoppel is primarily based on the
doctrine of good faith and the avoidance of harm that will befall
the innocent party due to its injurious reliance, the failure to
apply it in this case would result in a gross travesty of justice.
Same; Ambiguities in contract; Against whom and how
interpreted.—It is a well-known rule that ambiguities or
obscurities must be strictly interpreted against the party that
caused them. This rigid application of the rule on ambiguities has
become necessary in view of current business practices. The
courts cannot ignore that nowadays monopolies, cartels and

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concentration of capital, endowed with overwhelming economic

power, manage to impose upon parties dealing with them
cunningly prepared

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VOL. 25, SEPTEMBER 23, 1968 71

Fieldmen's Insurance Co., Inc. vs. Vda. de Songco

'agreements' that the weaker party may not change one whit, his
participation in the 'agreement' being reduced to the alternative
to 'take it or leave it' labelled since Raymond Saleilees 'contracts
by adherence' (contrats d'adhesion), in contrast to those entered
into by parties bargaining on an equal f ooting, such contracts (of
which policies of insurance and international bills of lading are
prime example) obviously call for greater strictness and vigilance
on the part of the court of justice with a view to protecting the
weaker party from abuses and imposition, and prevent their
becoming traps for the unwary. (Citing Qua Chee Gan case).

REVIEW of a decision of the Court of Appeals.

The facts are stated in the resolution of the Court.

     Jose S. Suarez for petitioner.
     Eligio G. Lagman for respondents.

FERNANDO, J.:

An insurance firm, petitioner Fieldmen's Insurance Co.,

Inc., was not allowed to escape liability under a common
carrier insurance policy on the pretext that what was
insured, not once but twice, was a private vehicle and not a
common carrier, the policy being issued upon the insistence
of its agent who discounted fears of the insured that his
privately owned vehicle might not fall within its terms. the
insured moreover being "a man of scant education",
finishing only the first grade. So it was held in a decision of
the lower court thereafter affirmed by respondent Court of
Appeals. Petitioner in seeking the review of the above
decision of respondent Court of Appeals cannot be so
sanguine as to entertain the belief that a different outcome
could be expected. To be more explicit, we sustain the
Court of Appeals.
The facts as found by respondent Court of Appeals,
binding upon us, follow: "This is a peculiar case. Federico
Songco of Floridablanca, Pampanga, a man of scant
education, being only a first grader x x x, owned a private
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jeepney with Plate No. 41-289 for the year 1960. On

September 15, 1960, as such private vehicle owner, he was
induced by Fieldmen's Insurance Company Pampanga
agent Benjamin Sambat to apply for a Common

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72 SUPREME COURT REPORTS ANNOTATED

Fieldmen's Insurance Co., Inc. vs. Vda. de Songco

Carrier's Liability Insurance Policy covering his motor

vehicle x x x. Upon paying an annual premium of P16.50,
defendant Fieldmen's Insurance Company, Inc. issued on
September 19, 1960, Common Carriers Accident Insurance
Policy No. 45-HO-4254 x x x the duration of which will be
for one (1) year, effective September 15, 1960 to September
15, 1961. On September 22, 1961, the defendant company,
upon payment of the corresponding premium, renewed the
policy by extending the coverage f rom October 15, 1961 to
October 15, 1962. This time Federico Songco's private
jeepney carried Plate No. J-68136-Pampanga-1961 x x x.
On October 29, 1961, during the effectivity of the renewed
policy, the insured vehicle while being driven by Rodolfo
Songco, a duly licensed driver and son of Federico (the
vehicle owner) collided with a car in the municipality of
Calumpit, province of Bulacan, as a result of which mishap
Federico Songco, (father) and Rodolfo Songco (son) died,
Carlos Songco (another son), the latter's wife, Angelita
Songco, and a family friend by the name of 1Jose Manuel
sustained physical injuries of varying degree."
It was further shown according to the decision of
respondent Court of Appeals: "Amor Songco, 42-year-old
son of deceased Federico Songco, testifying as witness,
declared that when insurance agent Benjamin Sambat was
inducing his father to insure his vehicle, he butted in
saying: "That cannot be, Mr. Sambat, because our vehicle is
an 'owner' private vehicle and not for passengers/ to which
agent Sambat replied: 'whether our vehicle was an 'owner'
type or for passengers it could be insured because their
company is not owned by the Government and the
Government has nothing to do with their company. So they
could do what they please whenever they believe a vehicle
is insurable' x x x. In spite of the fact that the present case
was filed and tried in the CFI of Pampanga, the defendant
company did not even care to rebut Amor Songco's
testimony by calling on the witness-stand agent 2
Benjamin
Sambat, its Pampanga Field Representative."

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_______________

1 Brief for Defendant-Appellant, Appendix A, pp. 27-28.

2 Ibid, p. 31.

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VOL. 25, SEPTEMBER 23, 1968 73

Fieldmen's Insurance Co., Inc. vs. Vda. de Songco

The plaintiffs in the lower court, likewise respondents here,

were the surviving widow and children of the deceased
Federico Songco as well as the injured passenger Jose
Manuel. On the above facts they prevailed, as had been
mentioned, in the lower court and in the respondent Court
of Appeals.
The basis for the favorable judgment is the doctrine
announced in Qua 3 Chee Gan v. Law Union and Rock
Insurance Co., Ltd., with Justice J. B. L. Reyes speaking
for the Court. It is now beyond question that where
inequitable conduct is shown by an insurance firm, it is
"estopped from enforcing forfeitures in its favor,
4
in order to
forestall fraud or imposition on the insured."
As much, if not much more so than the Qua Chee Gan
decision, this is a case where the doctrine of estoppel
undeniably calls for application. After petitioner Fieldmen's
Insurance Co., Inc. had led the insured Federico Songco to
believe that he could qualify under the common carrier
liability insurance policy, and to enter into contract of
insurance paying the premiums due, it could not,
thereafter, in any litigation arising out of such
representation, be permitted to change its stand to the
detriment of the heirs of the insured. As estoppel is
primarily based on the doctrine of good faith and the
avoidance of harm that will befall the innocent party due to
its injurious reliance, the failure to apply it in this case
would result in a gross travesty of justice.
That is all that needs be said insofar as the first alleged
error of respondent Court of Appeals is concerned,
petitioner being adamant in its far-from-reasonable plea
that estoppel could not be invoked by the heirs of the
insured as a bar to the alleged breach of warranty and
condition in the policy. It would now rely on the fact that
the insured owned a private vehicle, not a common carrier,
something which it knew all along, when not once but twice
its agent, no doubt without any objection in its part,
exerted the utmost pressure on the insured, a man of scant
education, to enter into such a contract.
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________________

3 98 Phil. 85 (1955).
4 Ibid, p. 92,

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74 SUPREME COURT REPORTS ANNOTATED

Fieldmen's Insurance Co., Inc. vs. Vda. de Songco

Nor is there any merit to the second alleged error of

respondent Court that no legal liability was incurred under
the policy5 by petitioner. Why liability under the terms of
the policy was inescapable was set forth in the decision of
respondent Court of Appeals. Thus: "Since some of the
conditions contained in the policy Issued by the defendant-
appellant were impossible to comply with under the
existing conditions at the time and 'inconsistent with the
known facts,' the insurer 'is estopped from asserting breach
of such conditions.' From this jurisprudence, we find no
valid reason to deviate and consequently hold that the
decision appealed from should be affirmed. The injured
parties, to wit, Carlos Songco, Angelito Songco and Jose
Manuel, for whose hospital and medical expenses the
defendant company was being made liable, were
passengers of the jeepney at the time of the occurrence, and
Rodolfo Songco, for whose burial expenses the defendant
company was also being made liable was the driver of the
vehicle in question. Except for the fact, that they were not
fare-paying passengers, their status
6
as beneficiaries under
the policy is recognized therein."
Even if it be assumed that there was an ambiguity, an
excerpt from the Qua Chee Gan decision would reveal anew
the weakness of petitioner's contention. Thus: "Moreover,
taking into account the well known rule that ambiguities or
obscurities must be strictly interpreted against the party
that caused them, the 'memo of warranty' invoked by
appellant bars the latter from questioning the existence of
the appliances called for in the insured premises, since its
initial expression, 'the undernoted appliances for the
extinction of fire being kept on the premises insured hereby,
x x x it is hereby warranted

_______________

5 The policy provided as f ollows: " 'The company will, subject to the
limits of liability and under terms of this policy, indemnify the insured in
the event of accident caused by or arising-out of the use of motor vehicle

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against all sums which the insured will become liable to pay in respect of:
death or bodily injury to any fare-paying passenger including the driver,
conductor, and/or inspector who is riding in the motor vehicle insured at
the time of the accident or injury/ (RA 9)." (Brief for Defendant-Appellant,
p. 36.)
6 Ibid, p. 37,

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VOL. 25, SEPTEMBER 23, 1968 75

Fieldmen's Insurance Co., Inc. vs. Vda. de Songco

x x x', admits of interpretation as an admission of the

existence of such appliances which appellant cannot 7
now
contradict, should the parol evidence rule apply."
To the same effect is the following citation from the
same leading case: "This rigid application of the rule on
ambiguities has become necessary in view of current
business practices. The courts cannot ignore that nowadays
monopolies, cartels and concentration of capital, endowed
with overwhelming economic power, manage to impose
upon parties dealing with them cunningly prepared
'agreements' that the weaker party may not change one
whit, his participation in the 'agreement' being reduced to
the alternative to take it or leave it' labelled since
Raymond Saleilles 'contracts by adherence' (contrats
d'adhesion), in contrast to those entered into by parties
bargaining on an equal footing, such contracts (of which
policies of insurance and international bills of lading are
prime examples) obviously call for greater strictness and
vigilance on the part of courts of justice with a view to
protecting the weaker party from abuses and imposition,
and prevent their becoming traps for the unwary (New
Civil Code, Article 24; Sent. of Supreme
8
Court of Spain, 13
Dec. 1934, 27 February 1942) ."
The last error assigned which would find fault with the
decision of respondent Court of Appeals insofar as it
affirmed the lower court award for exemplary damages as
well as attorney's fees is, on its face, of no persuasive force
at all.
The conclusion that inescapably emerges f rom the
above is the correctness of the decision of respondent Court
of Appeals sought to be reviewed. For, to borrow once again
from the language of the Qua Chee Gan opinion: "The
contract of insurance is one of perfect good faith (uberrima
fides) not for the insured alone, but equally so for the
insurer; in fact, it is more so for the latter, since its

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dominant bargaining
9
position carries with it stricter
responsibility."

_______________

7 98 Phil 85, 92-93 (1955),

8 Ibid, p. 95.
9 Ibid, p. 96.

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76 SUPREME COURT REPORTS ANNOTATED

C. A. Chiong Shipping Co. vs. Workmen's Compensation
Commission

This is merely to stress that.while the morality of the

business world is not the morality of institutions of
rectitude like the pulpit and the academe, it cannot
descend so low as to be another name for guile or deception.
Moreover, should it happen thus, no court of justice should
allow itself to lend its approval and support.
We have no choice but to recognize the monetary
responsibility of petitioner Fieldmen's Insurance Co., Inc. It
did not succeed in its persistent effort to avoid complying
with its obligation in the lower court and the Court of
Appeals. Much less should it find any receptivity from us
for its unwarranted and unjustified plea to escape from its
liability.
WHEREFORE, the decision of respondent Court of
Appeals of July 20, 1965, is affirmed in its entirety. Costs
against petitioner Fieldmen's Insurance Co., Inc.

     Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal,

Zaldivar, Sanchez, Castro and Angeles, JJ., concur.

Decision affirmed.

_______________

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