IVOR ROBERT DAYTON GIBSON, PETITIONER, VS. HON. PEDRO A. REVILLA, IN HIS OFFICIAL CAPACITY AS PRESIDING JUDGE OF BRANCH XIII, COURT OF FIRST INSTANCE OF RIZAL, AND LEPANTO CONSO…

This is a petition for review^[1]
seeking to set aside the Order of the Court of First Instance of Rizal, Branch XIII, presided by respondent Judge Pedro A. Revilla, in Civil Case No. 20046 entitled “Lepanto Consolidated Mining Company versus Malayan
Insurance Company, Inc.” denying the motion of the petitioner Ivor Robert Dayton Gibson for leave to intervene in said
case, and to order the respondent Judge to admit him as intervenor
therein.

The antecedent facts of this case are as follows:

Lepanto Consolidated Mining Company
(hereinafter referred to as Lepanto) filed on
September 27, 1974 in the Court of First Instance of Rizal,
Branch XIII a complaint with a plea for preliminary mandatory injunction
against Malayan Insurance Company, Inc., (hereinafter referred to as Malayan),
docketed as Civil Case No. 20046 seeking the following relief:

“(a)  upon the filing of this complaint, a writ of
preliminary mandatory injunction be issued directing defendant to advance to plaintiff
an interest-free loan of P1,831.695.75; and

(b)    upon trial on the merits –

(i)       
an accounting or average adjustments be made for
the liquidation of the general average losses, damages and expenses arising
from the marine accidents subject of this action and the determination of the
contributions due from subject cargoes under the Policy;

(ii)     
defendant be ordered to pay plaintiff the
amounts under item (i) above, with interest thereon
at the rate of 12% per annum, from February
20, 1972 as to the cargo’s contribution relative to the ‘Hermosa’
and from March 27, 1972 as
to the cargo’s contribution relative to the ‘General Aguinaldo‘;

(iii)    
the amount of P1,831,695.75 as interest-free
loan due plaintiff from defendant be declared repayable upon and only to the
extent of any corresponding recovery from the owners of the ‘Hermosa’ and
‘General Aguinaldo‘;”

Lepanto also sought payment of interest
on delayed loan amounts, exemplary damages of at least P500,000.00, attorney’s
fees and other litigation expenses, and other cumulative and/or alternative reliefs as may be lawful, just or equitable in the
premises.

The civil suit thus instituted by Lepanto
against Malayan was founded on the fact that on Sept. 9, 1971, Malayan issued Marine Open Policy No.
LIDC-MOP-001/71 covering all shipments of copper, gold and silver concentrates
in bulk from Poro, San Fernando, La Union to Tacoma,
Washington or to other places in the United States which Lepanto
may make on and after August 1, 1971 and until the cancellation of the policy
upon thirty (30) days’ written notice.

Thereafter, Malayan obtained reinsurance abroad through Sedgwick,
Collins & Co., Limited, a London
insurance brokerage.  The Memorandum of
Insurance issued by Sedgwick to Malayan on September 24, 1971 listed three groups of underwriters or reinsurers and their reinsurance interest are as follows:

Lloyds                          62.808%

Companies (I.L.U.)      34.705%

Other Companies         2.487%

100.000%

At the top of the list of underwriting members of Lloyds is
Syndicate No. 448, assuming 2.48% of the risk assumed by the reinsurer, which syndicate number peti­tioner Ivor Robert Dayton Gibson claims to be himself.

In November, 1971, a cargo of concentrates was shipped by Lepanto on the M/V Hermosa at Poro,
San Fernando, La Union destined for
Tacoma, Washington.  During the sea voyage, while the vessel was
in the Northern Pacific Ocean south of Japan on or about Nov. 11, 1971, it
encountered heavy weather and rough seas which caused it to roll, pitch and
vibrate heavily so that certain shifting boards in the vessel broke and part of
the cargo shifted transversely, thereby causing a list.  The vessel deviated to Moji, Japan and after
the shifting boards were repaired and/or replaced, it proceeded on its trip to
Tacoma, but about the end of the month, the ship once again met with strong
winds, monsoon rains, severe winter and very rough seas and it rolled, pitched
and vibrated heavily so other shifting boards broke and part of the cargo also
shifted causing a heavier list.  The
captain of the boat, fearing that the vessel might sink, sailed to Osaka
and unloaded the cargo.  Expenses were
incurred by Lepanto relative to the cargo while in Japan
but eventually the cargo was transhipped to Tacoma
via another vessel.

Also in November, 1971, another cargo of concentrates was shipped
by Lepanto on board the M/V General Aguinaldo at Poro, San
Fernando, La Union and destined for Tacoma,
Washington. 
Similarly, during the sea voyage on or about November 30, 1971 in the Northern
Pacific Ocean southeast of Japan,
it met with heavy weather and rough seas, causing it to pitch, roll and vibrate
heavily so that certain shifting boards in the vessel broke and part of the
cargo shifted transversely which caused the listing of the vessel.  The captain, fearing also that the vessel
might sink, sailed for Miyako,
Japan, unloaded the cargo
and expenses were incurred relative to the cargo while in Japan.  Thereafter, the cargo was transhipped
to Tacoma on board another vessel.

Lepanto notified Malayan and another
insurer, Commercial Union in London
in November and December, 1971 of the accidents.  Formal claims under the open policy were also
filed by Lepanto with Malayan in March and July, 1972
upon the conclusion of the voyages and the determination of the shortweight.

The claims were denied by Malayan tentatively at first claiming
that it needed time to determine whether or not the marine accidents resulted
from the inherent vice or nature of the cargo and finally Malayan rejected Lepanto’s insurance claim for the reason that the cargoes
were inherently vicious on loading and such condition caused the listing of the
vessel.

Hence, the complaint filed by Lepanto
against Malayan in Civil Case No. 20046 for the interest-free loan to Lepanto as stipulated in the policy computed at
P1,831.695.75.

Malayan filed a motion to dismiss the case on three grounds:  1. that the instant case has been brought in
the name of other than the real party in interest; 2. that the complaint states
no cause of action; and 3. that the claim set forth in the complaint has been
extinguished.

On December 4, 1974,
Malayan’s motion to dismiss was denied. 
On January 17, 1975,
Malayan filed its Answer incorporating as part of its special and affirmative
defenses the following allegations:

“(5)  Defendant acted in good faith in rejecting
plaintiff’s insurance claims, not only because of the circumstances and reasons
set forth in the preceding sub-paragraphs (1) to (4) which defendant had been
reasonably led to believe by reports of reputed experts and/or by legal advice
as justifying rejection, but also because, as plaintiff had been repeatedly
told, it is under constraint, on one hand, by customs of the insurance trade to
adhere to the decisions of the lead insurers, and on another hand, by its
contract with its reinsurer which among others,
prohibit settlement of the reinsured claims without the reinsurer’s
assent.”

On January 27, 1975,
Lepanto filed its reply.  On January
30, 1975, the Court denied Lepanto’s
motion for mandatory preliminary injunction “without prejudice to
reconsider the said motion after the pre-trial of this case shall have been
concluded.” On March 19, 1975,
the first pre-trial conference was held and on March 25, 1975, the parties filed their Stipulation of
Facts and Issues, which Stipulations was approved en toto
in the trial court’s order of April 1,
1975.

Subsequently, pre-trial conferences were held on April 3, 1975, May 21, 1975, and June 19, 1975 when Lepanto
concluded its evidence.  Defendant
through coun­sel reserved its right to make a formal offer of its evidence at
the continuation of the hearing scheduled on July 16, 1975.

Then on June 25, 1975,
petitioner Ivor Robert Dayton Gibson filed a motion
to intervene as defendant, which motion is as follows:

“MOTION
TO INTERVENE

COMES NOW Ivor Robert Dayton
Gibson, Reinsurer in the above-entitled case, through
undersigned counsel, and to this Honorable Court respectfully alleges that:

1.      
Movant is of legal
age, a British citizen, with address at Lloyd’s Lime
Street, London, EC3;

2.      
Movant is the leading
re-insurer of the risks and liabilities assumed by defendant Malayan Insurance
Co., Inc. in a contract of marine insurance involving two (2) separate
shipments of copper concentrates aboard the MV “Hermosa” and the MV
“General Aguinaldo” shipped by Lepanto Consolidated Mining Co., Inc. to American Smelting
& Refining Co. from Poro Point, San Fernando, La
Union, to Tacoma, Washington for which defendant issued Policy No.
LIDC-MOP-001/71 dated September 9, 1971,
in the amount of 20% of the declared value of each shipment but not to exceed
US$2,000,000 per shipment.

3.      
Prior to these two shipments and after defendant
Malayan contracted with Lepanto to insure these two
(2) copper concentrates shipments against risks of loss and damage, defendant
Malayan, in turn, re-insured its liabilities with movant
who undertook to indemnify defendant for losses and damages in accordance with
the terms of their reinsurance contract.

4.      
After the defendant Malayan filed Answer to this
suit, movant was informed that defendant made express
reservations ‘to file in due time a third-party complaint against the lead
insurers and/or its re­insurers‘ (par. XVIII,
Answer).

5.      
Movant has a legal
interest in the subject matter of litigation in that he stands to be held
liable to pay on its re-insurance contract should judgment be rendered
requiring the defendant to pay the claim of the plaintiff.

6.      
To avoid multiplicity of suits and allow all
parties who have any relation to the cause of action, whether legally or in
equity, to ventilate expeditiously every issue relevant to the suit, it is
respectfully submitted that movant be allowed to
intervene as a defendant in the interest of justice.

7.      
By the very nature of a contract of reinsurance
and considering that the reinsurer is obliged ‘to pay
as may be paid thereon’ (referring to the original policies), although this is
subject to other stipulations and conditions of the re-insurance contract, it
will serve better the ends of justice if a full disclosure of all pertinent
facts and issues is made with the participation of the movant
at this trial where his interests have been and are already inevitably at
stake.”

Counsel for the movant submitted the
foregoing motion for the consideration and resolution of the Court on June 30, 1975.  The motion to intervene was opposed by Lepanto on the following grounds:  1. Movant Ivor Robert Dayton Gibson has no legal interest in the
matter in litigation or in the success of either plaintiff or defendant; 2. Movant is estopped by his laches from intervening in this action; 3. The intervention
is intended for delay and if allowed, will unduly delay the proceedings between
plaintiff and defendant; and 4. The rights, if any, of movant
are not prejudiced by the present suit and will be fully protected in a separate
action against him and his co-insurers by defendant herein.

Replying to Lepanto’s opposition, movant Ivor Robert Dayton Gibson
contended that 1. Contrary to oppositor’s contention,
movant Gibson has a legal interest in the matter in
litigation because a contract of reinsurance between the defendant Malayan
Insurance Company, Inc. and the movant herein is a
contract of indemnity against liability, and not merely against damage, and
therefore, movant has a direct and immediate interest
in the success of defendant Malayan Insurance Company, Inc.; 2. Neither estoppel nor laches applies to
the movant since the motion to intervene was filed
seasonably on June 25, 1975
during the period of introduction of evidence by defendant Malayan; 3. The
intervention is not intended for delay; movant is
merely asserting a legal right or interest in the pending case with the request
for opportunity to appear and be joined so that he could protect or assert such
right or interest; and 4. The filing of an independent and separate suit
proposed by the plaintiff is condemned by the basic and fundamental principles
against multiplicity of suits.

On July 26, 1975,
Lepanto filed a Rejoinder to the movant’s
“Reply to Opposition.” On July
28, 1975, Malayan made a manifestation that it had no objection to
the “Motion to Intervene” of Ivor Robert
Dayton Gibson and on July 31, 1975,
movant made a Sur-Rejoinder
to Lepanto’s Rejoinder.

On August 18, 1975,
the Court a quo resolved to deny the Motion for Intervention in the
following:

“ORDER

Ivor Robert Dayton Gibson, thru counsel,
has presented before this Court a motion to intervene on June 25, 1975. 
In his motion, he alleges that he is a British citizen with address at
Lloyd’s Lime Street, London,
EC3; that he is the leading re-insurer of the risks and liabilities assumed by
defendant Malayan Insurance Company, Inc. in the contract of marine insurance
involving the shipments subject of the instant suit.  He further contends that he has a legal interest
in the subject matter of litigation for he stands liable on his re-insurance
contract should judgment be rendered against the defendant and that this
intervention would avoid a multiplicity of suits.  Plaintiff vigorously opposed the motion
contending that movant Ivor
Robert Dayton Gibson has no legal interest in the matter in litigation or in
the success of either parties in this suit; that he is estopped
by laches; that the intervention is intended for
delay and will unduly delay the proceedings between plaintiff and defendant;
and that movant will not be prejudiced by the present
suit and can be fully protected in any separate action which defendant may file
against him and his co-insurers.

Considering the grounds of the opposition, the Court believes that
the third and fourth grounds raised in the opposition appear highly
meritorious.  Since movant
Ivor Robert Dayton Gibson appears to be only one of
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.  This would definitely disrupt
the trial between plaintiff and defendant, the principal protagonists in this
suit.  To allow the intervention would
certainly unduly delay the proceedings between plaintiff and defendant
especially at this stage where plaintiff had already rested its case.  It would also compound the issues as more
parties and more matters will have to be litigated.  At any rate, Ivor
Robert Dayton Gibson may protect whatever interest he has in a separate action.

IN VIEW OF ALL THE FOREGOING, the Court resolves to deny the motion
for intervention.

SO ORDERED.

Pasig,
Rizal, August
18, 1975.

(SGD.) PEDRO A.
REVILLA

J u d g e”

Not satisfied with the denial of his Motion to Intervene, petitioner
now comes before Us seeking to set aside the order of denial and to order the
respondent Judge to admit him as intervenor.  By resolution of this Court dated November
17, 1975, the petition was denied due course for lack of merit, but upon petitioner’s
motion for reconsideration, the petition was allowed in the Resolution of
February 18, 1976, treating it as a special civil action.

The principal issue is whether the lower court committed
reversible error in refusing the intervention of petitioner Ivor
Robert Dayton Gibson in the suit between Lepanto and
Malayan.

We lay down the law on Intervention as found in Sec. 2, Rule 12
of the Rules of Court:

“Section 2. 
Intervention.  – A person may,
before or during a trial, be permitted by the court, in its discretion, to
intervene in an action, if he has legal interest in the matter in litigation,
or in the success of either of the parties or an interest against both, or 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 of an officer thereof.

(a)   
Motion for intervention.  – A person desiring to intervene shall file a
motion for leave of court with notice upon all the parties to the action.

(b)   
Discretion of court.  – In allowing or disallowing a motion for
intervention, the court, in the exercise of discretion, shall consider 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.

(c)   
Complaint or answer in intervention. – The
intervention shall be made by complaint filed and served in a regular form, and
may be answered as if it were an original complaint; but where intervenor unites with the defendant in resisting the
claims of the plaintiff, the intervention may be made in the form of an answer
to the complaint.

(d)   
Time. – Unless a different period is fixed by
the court, the complaint or answer in intervention shall be filed within ten (10)
days from notice of the order permitting such intervention.”

According to pertinent jurisprudence, the term
“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 the original parties in maintaining the action or defense, or to
assert a claim or 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 party to a pending
proceedings between others for the protection of some rights or interest
alleged by him to be affected by such proceedings.^[2]

Intervention is not a matter of absolute right but may be
permitted by the court when the applicant shows facts which satisfy the
requirements of the statute authorizing intervention.^[3]
Under our Rules of Court, what qualifies a person to intervene is 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 when he is so
situated as to be adversely a-fected by a distribution
or other disposition of property in the custody of the court or or an officer thereof.^[4]
As regards the legal interest as qualifying factor, this Court has ruled that
such interest 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.^[5]
However, notwithstanding the presence of a legal interest, 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.”^[6]
Once judicial discretion is exercised, the action of the court cannot be
reviewed or controlled by mandamus however erroneous it may be, except
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 speedy remedy.^[7]

As may be noted in the questioned Order, respondent Judge denied
the Motion to Intervene on the last two grounds of Lepanto’s
Opposition, namely:  “3. The intervention
is intended for delay and if allowed, will unduly delay the proceedings between
plaintiff and defendant; and 4. The rights, if any, of movant
are not prejudiced by the present suit and will be fully protected in a
separate action against him and his co-insurers by defendant herein.”

Respondent Judge, reasoning out his Order, ruled that “(s)ince movant Ivor
Robert Dayton Gibson appears to be only one of several co-insurers of the risks
and liabilities assumed by Malayan Insurance Company, Inc., it is highly
probable that other re-insurers may likewise intervene.  This would definitely disrupt the trial
between plaintiff and defendant, the principal protagonists in this suit.  To allow the intervention would certainly
unduly delay the proceedings between plaintiff and defendant especially at this
stage where plaintiff had already rested its case.  It would also compound the issues as more
parties and more matters will have to be litigated.  At any rate, Ivor
Robert Dayton Gibson may protect whatever interest he has in a separate
action.”

In his petition, petitioner submits that the respondent Judge, in
refusing to permit/allow him to intervene in Civil Case No. 20046, incorrectly
interpreted and/or appreciated the purpose/intent of the pertinent rules of
procedure that govern intervention of parties in a given action and that the
respondent Judge erred:  (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 petitioner to protect
his interest, i.e. separate action, as an added justification to deny his intervention,
despite the fact that the applicable rule of procedure in this regard (Section
2, Rule 12) does not preclude intervention even if another separate action is
appropriate and/or available; and (3) In its obvious disregard of the very rule
(Section 2, Rule 12) precisely designed to apply on cases where intervention is
sought, thereby departing from the accepted and usual procedure under the
premises.

After carefully considering the arguments of both the petitioner
and Lepanto, the facts and circumstances obtaining in
the case at bar and applying Rule 12, Sec. 2 of the Rules of Court and the
doctrines enunciated by the Supreme Court on the matter, We rule that the
respondent Judge committed no error of law in denying petitioner’s Motion to
Intervene.  And neither has he abused his
discretion in his denial of petitioner’s Motion for Intervention.

It is quite crystal clear that the questioned Order of the
respondent Court was based strictly and squarely on Section 2(b) of Rule 12
which specifically directs the Court in allowing or disallowing a motion for
intervention in the exercise of discretion to consider 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.  The Court a quo has specifically and
correctly complied with the Rule’s mandate and We cannot fault the respondent
Judge therefor.

We reject the contention of the petitioner that the question
regarding delay in the adjudication of the rights of the original contending
parties, while recognized as factors in allowing or disallowing intervention,
should assume a secondary role to the primary and imperative requirement that
the legal interest of the would-be intervenor in the
matter under litigation must be clearly shown and that once the legal interest
of the would be intervenor is clearly shown, the fact
that his intervention may work to delay a little the main conflict between the
parties should not by itself justify the denial of intervention.

Petitioner’s contention is untenable.  The first paragraph of Section 2, Rule 12
prescribes the time to intervene and also who may intervene, that is, one who
has legal interest in the matter in litigation, or in the success of either of
the parties or an interest against both or 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 of an officer thereof. 
Paragraph (b) of the same section directs what matters are to be
considered in exercising discretion to allow or disallow a motion for
intervention, which are 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.  Clearly, 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 under the first paragraph of Section 2, and the Court must also
consider the matters mentioned in paragraph (b) thereof.  The latter are not and should not be taken as
secondary to the former for both must concur since they are equally important,
requisite and necessary for consideration in the exercise of discretion by the
Court to allow or disallow intervention. 
We cannot invest nor render primary or secondary importance to either of
these requirements for the law does not make any distinction.  Each case must be decided according to its
facts and merits, subject to the discretion of the Court.

From the particular facts and circumstances of the case at bar,
We are satisfied that the respondent Judge has not abused his discretion in
denying petitioner’s Motion to Intervene. 
We agree with the holding of the respondent Court that since movant Ivor Robert Dayton Gibson
appears to be only one of 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.  The
record shows that aside from the petitioner there are sixty-three (63) other
syndicate members of Lloyds, the twenty-six (26) companies in the
“I.L.U.” group holding a 34.705% reinsurance interest and the two (2)
“Other Companies” holding the balance of the reinsurances, as listed
in Annex “A”, Sur-Rejoinder to Lepanto’s Rejoinder, pp. 136-138, Records.  The high probability that these other
re-insurers like the petitioner herein may likewise intervene if the latter’s
motion is granted is not an arbitrary assumption of the Court.  Considering petitioner’s assertion that he
will have the opportunity to show, among others, that the losses and damages
purportedly sustained by Lepanto occurred 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 action; and, neither
has it complied with its obligations under the policy which makes the filing of
the complaint premature (p. 118, Records, Reply 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 stage where Lepanto had already rested its case and that the issues
would also be compounded as more parties and more matters will have to be
litigated.  In other words, the Court’s
discretion is justified and reasonable.

We also hold that 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 petitioner
are not prejudiced by the present suit and will be fully protected in a
separate action against him and his co-insurers by Malayan.

Petitioner contends that his rights would not be fully protected
in a separate proceeding because “(a) decision in favor of Lepanto, declaring Malayan liable on its insurance policies
would necessarily and injuriously affect the interests of petitioner, (which)
interest as a re-insurer of Malayan’s risk is not only inchoate but material,
direct and immediate and for such interest to be in any manner prejudiced
without first giving petitioner a chance to be heard would be violative of due process. 
Upon the other hand, a decision in favor of Malayan, recognizing it as
not liable under its insurance policies, could subject petitioner to the danger
of having to admit that Malayan had not breached its insurance contract with
the entity (Lloyds) of which petitioner is the leading syndicate member.”
(Petitioner’s Memorandum, p. 230, Records). 
Petitioner also asserts that “by the very nature of a contract of
re-insurance and considering that the re-insurer is obliged ‘to pay as may be
paid thereon’ (referring to the original policies), although this is subject to
other stipulations and conditions of the reinsurance contract, it will serve
better the ends of justice if a full disclosure of all pertinent facts and
issues is made with the participation of the movant
at this trial where his interests have been and are already inevitably at
stake.” (Petition, p. 18, Records).

On the contrary, Lepanto insists that
petitioner will have his day in court and his rights can be fully protected in
a separate proceeding.  According to Lepanto, if it loses the case against Malayan, petitioner
cannot possibly be liable to Malayan for indemnity on the reinsurances.  If Lepanto wins,
then petitioner, the sixty-three (63) other syndicate members of Lloyds, the
twenty-six (26) companies in the “I.L.U.” group holding a 34.705%
reinsurance interest and the two (2) “Other Companies” holding the balance
of the 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.

Petitioner’s contention that he has to pay once Malayan is
finally adjudged to pay Lepanto because of the very
nature of a contract of reinsurance and considering that the re-insurer is
obliged ‘to pay as may be paid thereon’ (referring to the original policies),
although this is subject to other stipulations and conditions of the
reinsurance contract, is without merit. 
The general rule in the law of reinsurance is that the reinsurer is entitled to avail itself of every defense
which the re-insured (which is Malayan) might urge in an action by the person
originally insured (which is Lepanto).  Speci­fically, the rule is stated thus ?

“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” (48 C.J.S., p. 230)

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. I, Section 327, p. 315, states the rule, thus:

“It has been decided that this clause does not preclude the
re-insurer 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.”

It is significant and revealing that petitioner himself admits in
his Memorandum, p. 231, Records, that “(o)f course, petitioner, if finally
sued in London, (he) could avail
himself of remedies available to him.” He adds that “such a
procedure, if not entirely time-consuming, would actually beg the issue on
hand.  Petitioner believes that his
defenses on the claims ventilated in the court a quo can be appreciated
only here; elsewhere in view of the peculiar circumstances surrounding Lepanto’s claims the basic issue will be obfuscated and
perhaps even obliterated by arguments on procedural niceties.” However,
such a procedural problem is no legal ground to compel allowance of and insist
on his intervention.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is
hereby dismissed.  No costs.

SO ORDERED.

Teehankee, (Chairman), Makasiar, Fernandez, De Castro, and Melencio-Herrera, JJ., concur.

^[1]
Treated as a special civil action.

^[2]
59 AM JUR 2d, 553; Gutierrez v. Villegas, G.R. No. L-11848, May 31, 1962, 5 SCRA 313.

^[3]
AM JUR, supra, 565.

^[4]
Rule 12, Section 2.

^[5]
Garcia v. David, 67 Phil. 279 (1939); Hacienda Sapang
Palay Tenant’s League v. Yatco,
G.R. No. L-14651, February 29, 1960;
AM JUR, supra, 567; Batama Farmers’
Cooperative Marketing Association, Inc. v. Rosal,
G.R. No. L-30526, November 29, 1971,
42 SCRA 408.

^[6] Balane v. De Guzman, G.R. No. L-21281, May 24, 1967, 20 SCRA 177.

^[7] Tavera-Luna v. Nable, 67
Phil. 340 (1939); Dizon v. Romero, G.R. No.
L-26252, December 24, 1968,
26 SCRA 452.