ANSELMO SERAFIN, PLAINTIFF-APPELLEE, VS. NICANDRO FILART AND JOSE CHUA, DEFENDANT, PERLA COMPANIA DE SEGUROS, INC., DEFENDANT-APPELLANT.

Serafin versus Filart

The Case

This is the case of Serafin versus Filart. Anselmo Serafin, a tailor from Carmen, Cebu, sued Nicandro Filart, the owner of a mini bus, Jose Chua, the driver, and Perla Compania de Seguros, the insurer, for damages arising from a collision that fractured his left arm. The action was one for damages with an application for a writ of preliminary attachment. The case matters because it draws the line between two very different obligations that arise from one accident: the tort liability of the carrier and its driver under the Civil Code, and the contractual liability of the insurer under the insurance policy. The Court tells us that the insurer is directly suable by the injured third person, but is never solidarily liable with the insured, and that its exposure is capped by the amount it actually undertook to insure.

Procedural History

Anselmo Serafin filed his complaint for damages with application for a writ of preliminary attachment before the Regional Trial Court of Cebu City. The trial court denied the writ of attachment, and denied his motion for reconsideration as well. After trial, the Regional Trial Court rendered judgment in favor of the plaintiff and against the defendants, declaring them jointly, solidarily and severally liable for medical and hospitalization expenses, moral damages, exemplary damages, litigation expenses, and attorney's fees. Both Nicandro Filart and Perla Compania de Seguros appealed to the Supreme Court. Because Nicandro Filart failed to submit proof of payment of the docket fees, his appeal was dismissed. The appeal of Perla Compania de Seguros was given due course, and the Supreme Court resolved only the question of the insurer's liability.

Facts

On the sixteenth of July, nineteen hundred ninety-three, Anselmo Serafin went to Cebu City to buy cloth for his two tailoring shops. On his way home to Carmen, he boarded at the terminal a mini bus owned by his neighbor Nicandro Filart and driven by Jose Chua. He found a seat on the left portion of the vehicle, three passengers away from the rear. Because the traffic was slow moving, he fell asleep during the trip.

He was awakened only when the mini bus collided with a tricycle at Cabahug Street, Jagobiao, Mandaue City, injuring his left elbow. He reported the incident at the Consolacion Police Station and then sought treatment. Because the first clinic was not properly equipped, he went to Chong Hua Hospital, where he was confined for five days and where stainless steel was placed inside his hand to correct and align the fracture. His left hand remained immobile for about six months, making it difficult for him to practice his profession. He spent thirty thousand pesos for his hospitalization, and when he asked Nicandro Filart to contribute ten thousand pesos, the latter refused, saying he had no money.

Nicandro Filart and Jose Chua told a different story. They claimed that the mini bus was already full, that the driver did not stop to pick up Anselmo Serafin for fear of a traffic violation, and that the latter simply held on to the metal bars at the left rear portion of the vehicle without the driver's consent. On this theory, they argued that he was not a passenger at all. Jose Chua was served summons but filed no answer, and no order of default was issued. During trial, Perla Compania de Seguros asked to be dropped as a party because Anselmo Serafin had already received five thousand pesos from it under the no fault clause of the policy. The trial court denied the motion, holding that the payment was mandated by law and was not a final settlement of the entire claim.

Issues

• Whether or not Anselmo Serafin was a bona fide passenger of the mini bus at the time of the accident.
• Whether or not Perla Compania de Seguros may be held solidarily liable with Nicandro Filart and Jose Chua for the full amount of the judgment.
• Whether or not the insurer's liability is limited to the five thousand pesos it paid under the no fault clause.

Applicable Provisions

Section 378 of the Insurance Code is the provision the trial court invoked when it refused to drop the insurer from the case, and it bears on why the five thousand peso payment did not end the claim:

Section 378 of the Insurance Code provides that the payment made by the insurer under the no fault clause is mandated by law and the same shall not be construed as a final settlement of the entire claim.

The Court also applied the rule on solidary obligations, which it stated as follows:

There is solidary liability only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires.

This rule governs the second issue, because it tells us that solidarity is never presumed and must have a clear source in the contract, the law, or the nature of the obligation.

Ruling

On the first issue, the Court held that the question was already closed. Since Nicandro Filart failed to perfect his appeal, the finding of the trial court that he was negligent, and that Anselmo Serafin was a bona fide passenger of his mini bus, had become final. The Court expressly said that the non-perfection of the appeal puts to rest any question of the trial court's finding of negligence along with the status of Anselmo Serafin as a bona fide passenger.

On the second issue, the Court agreed with the insurer that it could not be held solidarily liable. The liability of the insured carrier or vehicle owner is based on tort under the Civil Code, while the liability of the insurer arises from contract, particularly the insurance policy. They are held liable under different obligations. The Court explained that the direct liability of the insurer under an indemnity contract against third party liability does not mean that the insurer can be held solidarily liable with the insured and the other parties at fault. The third party liability of the insurer extends only to the extent of the insurance policy and that required by law, and any award beyond the insurance coverage is the sole liability of the insured and the other parties at fault.

On the third issue, the Court held that the insurer was not without obligation. As the party asserting a limited liability, Perla Compania de Seguros carried the burden of evidence to establish its claim, and it failed to discharge that burden. It never presented the insurance policy, which was in its own custody and absolute control, and this failure gave rise to the presumption that its presentation would be prejudicial to its cause. Its unsubstantiated allegations about the limits of the insurance were not ventilated below and could not be raised for the first time on appeal. Worse for the insurer, the cash voucher it itself offered showed that the policy was taken with Nicandro Filart as the assured and the insured amount was forty thousand pesos, not five thousand pesos. Since Anselmo Serafin had already received five thousand pesos under the no fault clause, the Court held the insurer liable for the remaining thirty-five thousand pesos only.

Doctrine

First, where the insurance contract provides for indemnity against liability to third persons, the liability of the insurer is direct, and the third person may sue the insurer directly. Second, that direct liability does not make the insurer solidarily liable with the insured and the other parties at fault, because the liability of the insured is based on tort while that of the insurer arises from contract. Third, solidarity is never presumed; it exists only when the obligation expressly so states, when the law so provides, or when the nature of the obligation so requires. Fourth, the liability of the insurer is limited to the amount of the insurance coverage, and any excess is the sole liability of the insured. Fifth, a party who asserts a limited liability has the burden of proving it, and the unexplained failure to produce a document within that party's control raises the presumption that the evidence would be prejudicial to it.

Disposition

The trial court's decision was affirmed with modification: Perla Compania de Seguros was held liable to Anselmo Serafin up to thirty-five thousand pesos only, with any excess to be claimed from the insured Nicandro Filart.

Remember This

The one line to memorize is that the insurer's liability is direct but not solidary, and it is capped by the coverage it actually undertook to insure. Examiners like to use this case to test the distinction between tort liability and contractual liability, the rule that solidarity cannot be lightly inferred, and the burden of proof that falls on an insurer who claims its liability is limited.