FAR EASTERN SURETY & INSURANCE COMPANY, INC., PETITIONER, VS. SOCORRO DANCEL VDA. DE MISA, ARACELI MARIA PINTO AND LA MALLORCA, RESPONDENTS.

Appeal by petition for review from a judgment of the Court of
Appeals, in its Case CA-G.R. No. 30846-R, sentencing the Far Eastern Surety
& Insurance Company to indemnify La Mallorca on
its insurance contract for P9,661.50.

The record discloses that on 3 September 1957 the two respondents, Socorro Dancel Vda. de
Misa and Araceli Pinto,
hired a taxicab operated by respondent La Mallorca in
Quezon City.  While proceeding south toward the
Archbishop’s Palace in Shaw Boulevard, the taxicab collided with a gravel and
sand truck, driven by one Faustino Nabor, that was
proceeding in the opposite direction.  As
a result, the two passengers of the La Mallorca
taxicab were injured, and filed suit for damages against the taxicab company in
the Court of First Instance.  The
operator denied liability, but instituted a third party complaint against
herein appellant, Far Eastern Surety and Insurance Company, to recoup from the
latter, based on its Common Carrier’s Accident Insurance No. CCA 106, any
damages that might be recovered by the plaintiffs
taxicab passengers.  The insurer,
likewise, denied responsibility.

After trial, the Court of First Instance of Quezon
City awarded to plaintiffs Vda. de
Misa and Pinto (now respondents) actual, moral, and
exemplary damages and attorney’s fees, payable by the taxicab operator, La Mallorca; and sentenced the insurance company to pay to La Mallorca P10,000.00 on its third party liability insurance.

On appeal, the Court of Appeals, while holding that the collision
was due to the fault of the driver of the sand truck, nevertheless held the
taxicab operator liable in damages to the passengers of its motor vehicle on
the strength of its representation that the passengers were insured against
accidents, as shown by the sticker affixed to the taxicab; and, overruling the
defense of the insurance company that it was not answerable except for whatever
amounts the insured might be legally liable for in the event of accident caused
by, or arising out of, the use of the motor vehicle, the appellate court
adjudged the said insurer answerable to La Mallorca
in view of its third party liability insurance contract.  As a result, it rendered judgment on appeal
in the following terms:

“IN VIEW WHEREOF, judgment affirmed with modi­fications; so
that; 1st, on the complaint, appellant La Mallorca is
sentenced to pay unto appellee, Socorro Dancel Vda. de Misa the sum of P3,910.00 plus P1,000.00 attor­ney’s fees;
and unto appellee, Araceli
Pinto, the sum of P3,751.50 plus P1,000.00 attorney’s fees; and pursuant to
Art. 2210, of the New Civil Code, this Court orders that the P3,910.00 awarded
unto Socorro Dancel and the P3,751.50 awarded unto Araceli Pinto shall earn interest from the date of the
promulgation of this decision; and 2ndly, On the third party complaint,
condemning Far Eastern Surety and Insurance Co. Inc., to pay unto La Mallorca the sum of P4,910.00 corresponding to Socorro Dancel, and P4,751.50 corresponding to Araceli
Pinto; costs against appellants La Mallorca and Far
Eastern Surety and Insurance Company.

“SO
ORDERED.”

Unable to secure reconsideration, the insurance company appealed
to this Court, but La Mallorca did not.

The decision of the Court of Appeals not having been appealed by
the taxicab company, the same is now final as far as that entity is concerned, and may not be modified by this
Court.  The insurance company’s first and
second assignments of error, regarding the correctness of the appealed judgment
in holding La Mallorca responsible to the taxicab
passengers, must be, therefore, overruled. 
The only issue before this Court at this stage of the litigation is
whether or not the appel­lant insurer is liable to the insured on its policy of
insurance.

In affirming the responsibility of the insurer, the Court of
Appeals reasoned out in this wise:

“‘In the first place, as we have said earlier, the Far Eastern
Surety is not liable under the insurance contract because the assured La Mallorca is not ‘legally liable’ to the plaintiffs-appellees.  But in
the very remote event that the La Mallorca is held
‘legally liable’ and for which reason that the Far Eastern Surety may be called
upon to answer under the insurance contract, it is the stand of this
representation that it cannot be answerable to the full extent of its maximum
liability of P5,000.00 per passenger.’

‘For one thing, the Far Eastern Surety’s liability under the
insurance contract does not extend to moral, compensatory and exemplary
damages, and attorney’s fees.  Its
insurance liability is limited to actual phy­sical injuries.  This is so because under the Common Carrier’s
Accident Insurance Contract and its Third Party Liability Insurance Rider
(Annex “C” of the Third-Party Complaint please see page 59 of the
Record on Appeal), the liability of the Far Eastern Surety is defined as follows:  –

‘1.  The
Company will subject to the Limits of Liabi­lity indemnify the Insured in the
event of accident caused by or arising out of the use of the Motor Vehicle or
in connection with the loading or unloading of the Motor Vehicle against all
sums including claimant’s costs and expense which the Insured shall become
legally liable to pay in respect of.

(a)   death of or bodily injury to any person

(b)   damage to property

‘The above-quoted stipulation exempts the Far Eastern Surety from
paying damages other than actual bodily injuries sustained by third parties.’
Brief for the Third-Party-Defendant-Appellant Far Eastern Surety & Insurance Company, Inc., pages 12-13;

“but this is wrong, because since La
Mallorca has been found to be ‘legally liable’, it
must follow that Far Eastern Surety must now answer unto it as its insurer,
only that the total liability per passenger
should not exceed P5,000.00; nor is it correct for Far
Eastern to say that it should answer only for ‘actual bodily injuries’ and to
no other, for what the stipulation above copied says and what it
therefore must mean is that said Company:

‘will . . . 
indemnify the Insured in the event of accident caused by or arising out
of the use of the Motor Vehicle . . . against all sums . . . which the Insured
shall become legally liable in respect of . . . bodily injury’;

“otherwise stated, the ‘bodily
injury’ is only required to be the cause
of the liability of Far Eastern, but its liability should extend to ‘all sums
which the Insured shall become legally liable’, only that this should not
exceed P5,000.00; the result of all these will be to sustain the decision
appealed from, with the corres­ponding deductions outlined above;”

We agree with the
appellant that the decision of the Court of Appeals on this point is not
legally tenable, for the reason that the policy of insurance limited the
recovery of the insured to “all sums including claimant’s”
(passengers in this case) “cost and expenses which the Insured shall
become legally liable” in the “event of accident caused by or
arising out of the use of the Motor Vehicle”; and the appealed decision
itself shows that the indemnity awarded to the pass­engers of the La Mallorca taxicab was not because of the accident but was
exclusively predicated on the representation made by the taxicab company to its
passengers that the latter were insured against accidents.  This is plain from the consideranda
made in the appealed decision (pages 10-11):

“ . . . . . . . . . . . . . . . . . . . . . . . indeed, the
notice in the sticker evidently being intended in order to court the riding
public patronizing La Mallorca, and being placed
there right in the taxi, the only meaning  that can be given to it, – and
certainly it must have a meaning for it could not have been there placed
if intended to be useless, – was that La Mallorca
bound itself, in its contract of carriage, with that additional stipulation
therein indicated, that the passengers were ‘Insured’, and if there be any
ambiguity in its meaning, such ambiguity must be construed most strongly
against the party causing the ambiguity, 1377 New Civil Code; and having that
as a basis, this Court must find that La Mallorca had
indeed, insured its passengers and since such a stipulation was not at
all illegal, it must bind La Mallorca, and would be
enough to render it liable for injuries to the passengers thereof, even though
it had not been at fault, i.e., that the damage had come from a fortuitous
event coming from the fault of a third party for which it was not responsible,
since the Law also dictates that:

‘ART. 1174 – Except
in cases expressly spe­cified by the law, or when it is otherwise declared
by stipulation, or when the nature of the obligation requires the
assumption of risk, no person shall be responsible for those events which could
not be foreseen, or which, though foreseen, are inevitable.’ Art. 1174, New
Civil Code;

and the result
must be that La Mallorca would have to answer just
the same and the 3rd and 4th assignment of error must have to be overruled; and
this will take the discussion to the amount of damages awarded, subject of the
5th error.”

While the decision
correctly held that La Mallorca was in estoppel, and could not be heard to deny that its
passengers were insured, it does not necessarily follow that the estoppel, likewise, applied to the appellant insurer.  The Court of Appeals concurred in the finding
of the trial court that only the negligence
of the driver of the sand and gravel truck was the causative factor of the
mishap, and made no pronouncement that the driver of the taxicab in any way
contributed thereto; so that, had it not been for its representation that its
passengers were insured, the taxicab company would not have been liable at
all.  As it does not appear that the
insurance company authorized or consented to, or even knew of, the
representation made by the taxicab company to its passengers, it follows that
the source of the award of damages against the taxicab company was beyond, or
outside of, the contemplation of the parties to the contract of Accident
Insurance No. CCA 106, and that the insurer may not be
held liable for such damages.

WHEREFORE, the
decision of the Court of Appeals is modified, by eliminating therefrom the award against the appellant, Far Eastern
Insurance Co., Inc., in favor of the taxicab operator, La Mallorca,
including the sharing of the costs of litigation, which shall be exclusively
borne by the latter entity.  Without costs in this instance.

Concepcion, C.J., Dizon,
Makalintal, Sanchez, Castro, Angeles, Fernando, and Capistrano, JJ., concur.

Zaldivar,
J., on leave, did not take part.