FIGURACION VDA. DE MAGLANA, EDITHA M. CRUZ, ERLINDA M. MASESAR, LEONILA M. MALLARI, GILDA ANTONIO AND THE MINORS LEAH, LOPE, JR., AND ELVIRA, ALL SURNAMED MAGLANA, HEREIN REPRES…

The nature of the liability of an insurer sued together with the
insured/operator-owner of a common carrier which figured in an accident causing
the death of a third person is
sought to be defined in this petition for certiorari.

The facts as found by the trial court are as follows:

“x x x. Lope Maglana
was an employee of the Bureau of Customs whose work station was at Lasa, here
in Davao City. On December 20, 1978,
early morning,Lope Maglana was on his way to his work station, driving a
motorcycle owned by the Bureau of Customs. At Km. 7, Lanang, he met an accident that resulted in his death. He died on the spot. The PUJ jeep that bumped the deceased was
driven by Pepito Into, operated and owned by defendant Destrajo. From the investigation conducted by the
traffic investigator, the PUJ jeep was overtaking another passenger jeep that
was going towards the city poblacion. While overtaking, the PUJ jeep of defendant Destrajo running abreast
with the overtaken jeep, bumped the motorcycle driven by the deceased who was
going towards the direction of Lasa, Davao City. The point of impact was on the lane of the motorcycle and the
deceased was thrown from the road and met his untimely death.”^[1]

Consequently, the heirs of Lope Maglana, Sr., herein petitioners,
filed an action for damages and attorney’s fees against operator Patricio Destrajo and the Afisco
Insurance Corporation (AFISCO for brevity) before the then Court of First
Instance of Davao, Branch II.^[2]
An information for homicide thru reckless imprudence was also filed against Pepito Into.

During the pendency of the civil case, Into was sentenced to
suffer an indeterminate penalty of one (1) year, eight (8) months and one (1)
day of prision correccional, as minimum, to four (4) years, nine
(9) months and eleven (11) days of prision correccional, as
maximum, with all the accessory penalties provided by law, and to indemnify the
heirs of Lope Maglana, Sr. in the amount of twelve thousand pesos (P12,000.00)
with subsidiary imprisonment in case of insolvency, plus five thousand pesos
(P5,000.00) in the concept of moral and exemplary damages with costs. No appeal was interposed by the accused who
later applied for probation.

On December 14, 1981, the lower court rendered a
decision finding that Destrajo had not exercised sufficient diligence as the
operator of the jeepney. The
dispositive portion of the decision reads:

“WHEREFORE, the Court finds judgment in favor of the
plaintiffs against defendant Destrajo, ordering him to pay plaintiffs the sum
of P28,000.00 for loss of income; to pay plaintiffs the sum of P12,000.00 which
amount shall be deducted in the event judgment in Criminal Case No. 3527-D
against the driver, accused Into, shall have been enforced; to pay plaintiffs
the sum of P5,901.70 representing funeral and burial expenses of the deceased;
to pay plaintiffs the sum of P5,000.00 as moral damages which shall be deducted
in the event judgment (sic) in Criminal Case No. 3527-D against the driver,
accused Into; to pay plaintiffs the sum of P3,000.00 as attorney’s fees and to
pay the costs of suit.

The defendant insurance company is ordered to reimburse defendant
Destrajo whatever amounts the latter shall have paid only up to the extent of
its insurance coverage.

SO ORDERED.”^[3]

Petitioners filed a motion for the reconsideration of the second
paragraph of the dispositive portion of the decision contending that AFISCO
should not merely be held secondarily liable because the Insurance Code
provides that the insurer’s liability is “direct and primary and/or jointly and
severally with the operator of the vehicle, although only up to the extent of
the insurance coverage.”^[4]
Hence, they argued that the P20,000.00 coverage of the insurance policy issued by AFISCO, should have
been awarded in their favor.

In its comment on the motion for reconsideration, AFISCO argued
that since the Insurance Code does not expressly provide for a solidary
obligation, the presumption is that the obligation is joint.

In its Order of February 9, 1982, the lower court denied the
motion for reconsideration ruling that since the insurance contract “is in
the nature of suretyship, then the liability of the insurer is secondary only
up to the extent of the insurance coverage.”^[5]

Petitioners filed a second motion for reconsideration reiterating
that the liability of the insurer is direct, primary and solidary with the
jeepney operator because the petitioners became direct beneficiaries under the
provision of the policy which, in effect, is a stipulation pour autrui.^[6]
This motion was likewise denied for lack of merit.

Hence, petitioners filed the instant petition for certiorari which, although
it does not seek the reversal of the lower court’s decision in its entirety,
prays for the setting aside or modification of the second paragraph of the
dispositive portion of said decision. Petitioners reassert their position that the insurance company is
directly and solidarily liable with the negligent operator up to the extent of
its insurance coverage.

We grant the petition.

The particular provision of the insurance policy on which
petitioners base their claim is as follows:

“SECTION 1 –- LIABILITY TO THE PUBLIC

1.  The Company will, subject
to the Limits of Liability, pay all sums necessary to discharge liability of
the insured in respect of

(a)   
death of or bodily injury to any THIRD PARTY

(b)   
x x x.

2.  x x x.

3.  In the event of the death
of any person entitled to indemnity under this Policy, the Company will, in
respect of the liability incurred to such person indemnify his personal
representatives in terms of, and subject to the terms and conditions
hereof.”^[7]

The above-quoted provision leads to no other conclusion but that
AFISCO can be held directly liable by petitioners. As this Court ruled in Shafer vs. Judge,
RTC of Olongapo City, Br. 75,
“[w]here an insurance policy insures directly against liability, the insurer’s
liability accrues immediately upon the occurrence of the injury or event upon
which the liability depends, and does not depend on the recovery of judgment by
the injured party against the insured.”^[8] The
underlying reason behind the third party liability (TPL) of the Compulsory
Motor Vehicle Liability Insurance is “to protect injured persons against
the insolvency of the insured who causes such injury, and to give such injured
person a certain beneficial interest in the proceeds of the policy x x x.”^[9]
Since petitioners had received from AFISCO the sum of P5,000.00 under the
no-fault clause. AFISCO’s liability is
now limited to P15,000.00.

However, we cannot agree that AFISCO is likewise solidarily liable
with Destrajo. In Malayan Insurance
Co., Inc. v. Court of Appeals,^[10]
this Court had the opportunity to resolve the issue as to the nature of the
liability of the insurer and the insured vis-a-vis the third party injured in
an accident. We categorically ruled
thus:

“While it is true that where the insurance contract provides
for indemnity against liability to third persons, such third persons can
directly sue the insurer, however, the direct liability of
the insurer under indemnity contracts against
third party liability does not mean that
the insurer can be held solidarily liable
with the insured and/or the other parties
found at fault. The
liability of the insurer is based on
contract; that of the insured is based
on tort.

In the case at bar, petitioner as insurer of Sio Choy, is liable to
respondent Vallejos (the injured third party), but it cannot, as incorrectly
held by the trial court, be made ‘solidarily’ liable with the two principal
tortfeasors, namely respondents Sio Choy and San Leon Rice Mill, Inc. For if petitioner-insurer
were solidarily liable with said two (2) respondents by
reason of the indemnity contract against
third party liability – under which an insurer can be
directly sued by a third party – this will result in
a violation of the principles underlying
solidary obligation and insurance contracts.”
(underscoring supplied)

The Court then
proceeded to distinguish the extent of the liability and manner of enforcing the
same in ordinary contracts from that of insurance contracts. While in solidary obligations, the creditor
may enforce the entire obligation against one of the solidary debtors, in an
insurance contract, the insurer undertakes for a consideration to indemnify the
insured against loss, damage or liability arising from an unknown or contingent
event.^[11] Thus, petitioner therein, which, under the insurance contract is liable
only up to P20,000.00, can not be made soli­darily liable with the insured for
the entire obligation of P29,013.00 otherwise there would result “an
evident breach of the concept of solidary obligation.”

Similarly, petitioners herein cannot validly claim that AFISCO,
whose liability under the insurance policy is also P20,000.00, can be held solidarily liable with Destrajo for the total amount of P53,901.70 in
accordance with the decision of the lower court. Since under both the law and the insurance policy, AFISCO’s
liability is only up to P20,000.00, the second paragraph of the dispositive portion of the
decision in question may have unwittingly sown confusion among the petitioners
and their counsel. What should have
been clearly stressed as to leave no room for doubt was the liability of AFISCO under the explicit terms of the insurance contract.

In fine, we conclude that the liability of AFISCO based on the
insurance contract is direct, but not solidary with that of Destrajo which is
based on Article 2180 of the Civil Code.^[12] As
such, petitioners have the option either to claim the P15, 000 from AFISCO and
the balance from Destrajo or enforce the entire judgment from Destrajo subject
to reimbursement from AFISCO to the extent of the insurance coverage.

While the petition seeks a definitive ruling only on the nature
of AFISCO’s liability, we noticed that the lower court erred in the computation
of the probable loss of income. Using
the formula: 2/3 of (80-56) x
P12,000.00, it awarded P28,800.00.^[13] Upon
recomputation, the correct amount is P192,000.00, Being a “plain
error,” we opt to correct the same.^[14]
Furthermore, in accordance with prevailing jurisprudence, the death indemnity
is hereby increased to P50,000.00.^[15]

WHEREFORE, premises considered, the present petition is
hereby GRANTED. The award of P28,800.00
representing loss of Income is INCREASED
to P192,000.00 and the death indemnity of P12,000.00 to P50,000.00.

SO ORDERED.

Gutierrez, Jr., (Chairman), Bidin, and Davide, Jr., JJ., concur.

Feliciano, J., in the result.

^[1]
Decision, p. 5; Annex “A” to Petition, Rollo, p. 27.

^[2]
Civil Case No. 12706.

^[3]
Rollo, pp. 31-32.

^[4]
Motion for Reconsideration, p. 2; Rollo, p. 34.

^[5]
Rollo, pp. 37-38.

^[6]
Ibid., pp. 39-43.

^[7]
Ibid, p. 41.

^[8]
G.R. No. 78848, November 14, 1988, 167 SCRA 386, 391.

^[9]
Ibid.

^[10]
L-36413, September 26, 1988, 165 SCRA 536, 544.

^[11]
Supra, at p. 544 citing The Imperial Insurance, Inc. v.
David, L-32425, November 21, 1984, 133 SCRA 317 and Philippine Phoenix Surety
Insurance Co. v. Woodworks, Inc., L-25317, August 6,1979, 92 SCRA
419. See: Quiombing v. Court of Appeals, G.R. No.
93010, August 30, 1990, 189 SCRA 325, 328 re concept of solidary obligation.

^[12]
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry.

^[13]
Decision, p. 9, Annex “A”, Rollo, p. 31; Citing Villa Rey Transit, Inc. v.
Court of Appeals, L-25499, February 18, 1970, 31 SCRA 511 and Davila vs.
Philippine Airlines, L-28512, February 28, 1973, 49 SCRA 497.

^[14]
Section 7, Rule 51, Rules of Court.

^[15]
Dangwa Transportation Co., Inc. v. Court of Appeals, G.R. No. 95582,
October 7, 1991, 202, SCRA 574.