G.R. No. L-11497. August 16, 1957

Sometime  prior to  June  4, 1954, the  Lepanto Consolidated  Mines chartered a helicopter belonging  to plaintiff to make a flight  on said date from its base at  Nichols Field airport  to the  former’s  camp located  at Mankayan, Mountain Province.   The helicopter took  oft on  said date with Capt. Gabriel G. Hernandez  as pilot and Lt.  Rex M. Imperial as first officer.  No other person was on board. The  helicopter failed to reach its destination for the reason that, while on flight  within the logging area of defendant, it  collided with defendant’s  tramway steel  cables some-where in Ampusungan, Mankayan, Mt. Province, resulting in  its destruction  and the death  of Capt. Hernandez  and Lt. Imperial.  Plaintiff  insured at its  expense the helicopter for P80,000 and  the two  officers who piloted the same for P20.000 each with various insurance companies in London.   As a result of the crash, the insurance companies paid to plaintiff a total indemnity of P120,000.  Nevertheless, plaintiff sustained additional  damages  totalling P103,347.82 which were not recovered by insurance.

On March 2,1956, plaintiff commenced the present action to recover from defendant  (a)  the sum of P120,000 paid to the plaintiff by  the insurance  companies as indemnity for the loss of the  helicopter and the death of Capt. Hernandez and Lt. Imperial; and (b)  the sum of P103,347.82 representing consequential and moral damages which plaintiff claims it had incurred  as  a result of the loss of the helicopter  and the  death of the officers above-mentioned. With regard  to the  claim  of P120,000.00, the complaint alleges that said  helicopter  and officers  having been duly insured with  numerous insurance  companies, and having been paid the aforesaid amount as value of the helicopter and reimbursement for the compensation paid to the heirs of the deceased officers, plaintiff is now asserting this claim “on behalf and for the benefit of said insurers,” and in the prayer it  claims  that said  amount of P120,000  “shall be held by plaintiff in trust for the insurer.”  As regards the other claim for P103.347.82, plaintiff states that the same represents  additional damages sustained by it “upon its own account.”

On March 20, 1956, defendant filed a  motion to dismiss invoking,  among other  grounds,  the following:  Plaintiff seeks to recover,  among  other items, the sum of P120,000 representing the proceeds  of  various  insurance policies which have already  been paid to it by “numerous insurance companies.”   It is  evident that plaintiff has.no cause of action against defendant for if anyone should sue defendant for its recovery, it will only be the insurance companies.

Plaintiff, opposing this motion, contends that “inasmuch as the loss sustained exceeded  the amount of insurance the  right  of action against  defendant which allegedly negligently  caused the  loss remained  with the  insured (plaintiff)  for  the  entire  loss and the action must be brought  by it in  its own name as the real party in interest, it merely holding  in  trust  for the insurers so much of the recovery as corresponds to the amount received as indemnity from the insurers.”

The court,  acting  on the motion,  issued  an order on April 16, 1956 the pertinent portion of which reads: “As to the first allegation that insurance companies have paid a portion of Plaintiff’s damages, this Court believes that the real  parties  in interest are the insurance  companies concerned so that Plaintiff should  either delete this allegation or  bring in the  insurance companies  as  parties plaintiff.”  Accordingly,  the court  ordered plaintiff to amend its complaint as above indicated,  within a period of ten (10) days from receipt of  the  order.

Plaintiff  filed  a motion for  reconsideration which was denied.   And having manifested its decision not to amend the complaint as  above indicated,  the  lower court, in a subsequent order, made it clear that such move of plaintiff amounts  to a deletion of the portion objected to  and so the complaint  should be  deemed  limited  to  the  additional damages covered  by  paragraph 9  thereof.   Plaintiff  appealed from both  orders.

The only question to be  determined is  whether  “The lower court erred in ruling that plaintiff is not the real party in  interest respecting the claim for P120,000.00 and in ordering deleted that claim  from  the complaint.”

It is appellant’s theory  that, inasmuch  as the  loss it has sustained exceeds the amount  of insurance paid to it by the insurers, the right of action  to  recover the entire loss  from the wrongdoer remains with the insured and so the action must be  brought in  its  own  name  as real party in interest.  To the extent of the amount received by  it  as indemnity  from the insurers,  plaintiff  would then be acting as trustee for them.

In support of this contention, appellant cites American authorities  the most representative of which we quote:

“Sec. 1358. Under Statute, where. Loss Exceeds Insurance Paid.— Under statutes providing that every action must he prosecuted in the name of  the real party in interest, it is generally held  that if the insurance paid by an insurer covers only a portion of the loss, the insurer is not the real party in interest, but rather, the right of action against the wrongdoer who caused the loss remains in the insured for the entire loss, and the action must  be brought by him in his own name. This rule has been said to rest upon the theory that the insured sustains toward the insurer the relation of trustee,  and also upon the  right of the  wrongdoer not to have the  cause of action against him split up so that he is compelled to defend  two actions  for  the same  wrong.”  (20  Am.  Jur., p.  1016)  (Italics supplied)

While the above is the rule under American Statutes, the rule on  the matter is  different in the Philippines.  In this jurisdiction,  we  have our  own legal provision which in substance differs from the American law.  We refer to Article 2207 of the New Civil Code which provides:

“ART. 2207.  If the plaintiff’s property has been insured, and he has received indemnity  from the insurance company for the  injury or loss arising out of the wrong or breach of  contract complained of the insurance company shall  be  subrogated  to the rights  of  the insured  against the wrongdoer or the person who has violated  the contract. If the amount paid by the insurance company does  not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.”

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.  The reason  is obvious.   The  payment  of the  indemnity by the insurer  to the insured does  not make the latter a trustee of the former as in the American law.  This matter being statutory, the same must be governed by our own law in this jurisdiction.

This  interpretation  finds support  in  the explanatory note  given  by  the  Code  Commission in  proposing  the adoption of  the article  under  consideration.  Thus,  said Commission, in its report on the proposed Civil  Code of the Philippines, referring to the  article in question, says:

“The rule in article 2227 (Art.  2207 of the Code, as enacted) about insurance indemnity  is different from  the  American  law. Said article  provides:

“Art.  2227.  If the  plaintiff’s  property has been insured,  and he has received indemnity from the insurance company for the injury or loss arising’ out of the wrong or breach of  contract complained of the insurance company shall be subrogated  to the  rights of the insured against the wrongdoer  or the  person who has violated the contract.  If the amount paid by the  insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing- the loss or injury.’

“According  to American jurisprudence, the fact that the plaintiff has been indemnified by an insurance company  cannot lessen the .damages to be paid by the  defendant.  Such rule gives more damages than those actually suffered by  the plaintiff, and the  defendant, if also sued by the insurance company for reimbursement, would have to pay in many cases twice the damages he has  caused.  The proposed article  would seem  to be a better adjustment of the rights of the  three parties concerned.”  (Report of the  Code Commission on the Proposed Civil Code of the Philippines,  p. 73) (Italics supplied)

It  is insisted that despite the subrogation of the insurer  to. the rights of the insured,  the  latter can  still bring the action in its name because the  subrogation vests in the latter the character  of a trustee  charged with the duty to  pay to  the insurer so much of the recovery as corresponds  to  the amount it  had received as  a partial indemnity.   This cannot  be true in  this jurisdiction, for before a person can sue for the benefit of another under a trusteeship,  he  must be “a trustee of an express  trust” (Section 3,  Rule  3, Rules  of Court).   Thus,  under  this provision, “in order that  a trustee  may sue  or be  sued alone, it is essential that his trust should be express, that is, a trust created  by the direct and positive acts of the     parties, by some writing, deed,  or will or by proceedings in  court.  The  provision does  not apply in  cases  of implied trust, that is, a trust which may be inferred merely from the acts of the parties or from other circumstances” (Moran, Comments on the Rules of Court, Vol. I, 1952 Ed.,  p. 35).

It  is  also  contended that  to  adopt  a contrary rule to what  is authorized by  the American  statutes  would be    splitting a cause of  action or  promoting multiplicity of     suits  which  should be  avoided.  This  contention  cannot     also hold water considering that under  our  rules both the    insurer  and  the insured may join as  plaintiffs  to press    their claims  against the wrongdoer when the same arise   out of the same transaction or event.   This is authorized   by Section 6,  Rule 3,  of  the  Rules of Court.   Former    Chief Justice Moran  gives a number of instances where      this joinder  may  be effected, some of which are  quoting   hereunder for purposes  of  illustration:  

1. “For instance, A, B, C,  and D are owners, respectively, .of four houses destroyed by fire caused by sparks coming from a  defective  chimney of a passing locomotive owned by the Manila Railroad Company.   Under the  old procedure, the  four owners cannot join in a  single complaint for  damages against  the  Manila  Railroad  Company,  for the  reason  that they  do not have a  community  of interest in the same subject of the litigation, each of them being interested  in  recovering’ the value of his  house alone.   Under the  new    procedure, they may join  in a single complaint, for a right to relief is  alleged  to exist in their  favor severally arising out  of the   same  cause, namely, the single negligent act of the defendant by   which the four houses were  destroyed by fire, and which is also a common question of fact to all of the four plaintiffs.”

2. “Again, several farmers, depending upon a system for the irrigation of their crops, have sustained damages by reason  of the diversion  of the “water from  said system  by the defendant company.

Under the old  procedure,  those several farmers cannot unite in a single action,  they having no community of  interest in the same subject, for each of them is.interested in the damages to his  own farm and not in those of the others. But, under the new procedure, they may join in a single  action, for their right to relief arises from the same occurrence, namely, the diversion of the water from the aforesaid system, which is also  a question of fact common to all of them.”

3. “If, in a collision of motor cars,  a chauffeur sustained personal injuries and  damages  are caused to  the car he was driving two causes  of  action arise: one, in favor of the chauffeur for the injuries caused to his person,  and another, in favor of the owner of the car for the damages caused thereto.  Under the old procedure, it is doubtful whether the owner and the chauffeur may  join in  a single complaint, “because  they are not interested in the same subject  each  of  them  claiming  a different and separate kind of  damages, but under tho new procedure, they may join, because a right of relief exists in their favor  arising out of the  same transaction or occurrence) namely, the collision, and  a question of  fact will arise at the trial common to both of  them,” (Moran, Comments, on the Rules of Court, Vol. I,  1952 Ed., pp. 42-43)

Wherefore, the orders appealed from are affirmed, with costs against appellant.

Paras,  C. J., Padilla, Montemayar, Reyes, A., Labrador, Concepcion, Endencia and Felix,  JJ., concur.