1

IVOR ROBERT DAYTON GIBSON, petitioner, the cargo's contribution relative to the 'Hermonsa'
vs. HON. PEDRO A. REVILLA, in his official capacity as and from March 27, 1972 as to the cargo's
Presiding Judge of Branch XIII, Court of First Instance of Rizal, contribution relative to the 'General Aguinaldo;'
and LEPANTO CONSOLIDATED MINING COMPANY,
respondents. (iii) the amount of P1,831,695.75 as interest-free loan
due plaintiff from defendant be declared repayable
GUERRERO, J.:1wph1.t upon and only to the extent of any corresponding
This is a petition for review 1 seeking to set aside the Order of the recovery from the owners of the 'Hermosa' and
Court of First Instance of Rizal Branch XIII, presided by respondent 'General Aguinaldo; ...
Judge Pedro A. Revilla, in Civil Case No. 20046 entitled "Lepanto
Consolidated Mining Company versus Malayan Insurance Lepanto also sought payment of interest on delayed loan amounts, exemplary
damages of at least P500,000.00, attorney's fees and other litigation
Company, Inc." denying the motion of the petitioner Ivor Robert
expenses, and other cumulative and/or alternative reliefs as may be lawful,
Dayton Gibson for leave to intervene in said case, and to order the just or equitable in the premises.
respondent Judge to admit him as intervenor therein.
The civil suit thus instituted by Lepanto against Malayan was
FACTS: founded on the fact that on Sept. 9, 1971, Malayan issued Marine
Lepanto Consolidated Mining Company (Lepanto) filed on Sept 27, Open Policy No. LIDC-MOP-001/71 covering shipments of copper,
1974 in the CFI of Rizal a complaint with a plea for preliminary gold and silver concentrates in bulk from Poro, San Fernando, La
mandatory injunction against Malayan Insurance Company, Inc., Union to Tacoma, Washington or to other places in the U.S. which
(Malayan), seeking the following relief: Lepanto may make on and after Aug 1, 1971 and until the
cancellation of the policy upon 30 days' written notice.
(a) upon the firing of this complaint, a writ of preliminary
mandatory injunction be issued directing defendant to Thereafter, Malayan obtained reinsurance abroad through
advance to plaintiff an interest-free loan of P1,831,695.75; Sedgwick, Collins & Co., Limited, a London insurance brokerage.
and
The Memorandum of Insurance issued by Sedgwick to Malayan on
(b) upon trial on the merits Sept 24, 1971 listed 3 groups of underwriters or re-insurers and
their reinsurance interest are as follows:
(i) an accounting or average adjustments be made for Lloyds 62.808%
the liquidation of the general average losses, Companies (I.L.U.) 34.705%
damages and expenses arising from the marine
Other Companies 2.487% 100.000%
accidents subject of this action and the
determination of the contributions due from subject
cargoes under the Policy; 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,
(ii) defendant be ordered to pay plaintiff the amounts which syndicate number petitioner Ivor Robert Dayton Gibson
under item (i) above, with interest thereon at the claims to be himself.
rate of 12% per annum, from Feb 20, 1972 as to
 2

In Nov, 1971, a cargo of concentrates was shipped by Lepanto on Thereafter, the cargo was transhipped to Tacoma on board
the M/V Hermosa at Poro, San Fernando, La Union destined for another vessel.
Tacoma, Washington.
Lepanto notified Malayan and another insurer, Commercial Union
During the sea voyage, while the vessel was in the Northern Pacific in London in Nov and Dec, 1971 of the accidents.
Ocean south of Japan on or about Nov. 11, 1971, it encountered
heavy weather and rough seas which caused it to roll, pitch and Formal claims under the open policy were also filed by Lepanto
vibrate heavily so that certain shifting boards in the vessel broke with Malayan in March and July, 1972 upon the conclusion of the
and part of the cargo shifted transversely, thereby causing a list. voyages and the determination of the shortweight.

The vessel deviated to Moji, Japan and after the shifting boards The claims were denied by Malayan tentatively at first claiming that
were repaired and/or replaced, it proceeded on its trip to Tacoma, it needed time to determine whether or not the marine accidents
but about the end of the month, the ship once again met with strong resulted from the inherent vice or nature of the cargo and finally
winds, monsoon rains, severe winter and very rough seas and it Malayan rejected Lepanto's insurance claim for the reason that the
roiled, pitched and vibrated heavily so other shifting boards broke cargoes were inherently vicious on loading and such condition
and part of the cargo also shifted causing a heavier list. caused the listing of the vessel.

The captain of the boat, fearing that the vessel might sink, sailed Hence, the complaint filed by Lepanto against Malayan in Civil
to Osaka and unloaded the cargo. Case No. 20046 for the interest-free loan to Lepanto as stipulated
in the policy computed at P1,831,695.75.
Expenses were incurred by Lepanto relative to the cargo while in
Japan but eventually the cargo was transhipped to Tacoma via Malayan filed a motion to dismiss the case on three grounds: 1.
another vessel. 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
Also in Nov, 1971, another cargo of concentrates was shipped by action; and 3. that the claim set forth in the complaint has been
Lepanto on board the MIV General Aguinaldo at Poro, San extinguished.
Fernando, La Union and destined for Tacoma, Washington.
On Dec 4, 1974, Malayan's motion to dismiss was denied.
Similarly, during the sea voyage on or about Nov 30, 1971 in the
Northern Pacific Ocean southeast of Japan, it met with heavy On Jan 17, 1975, Malayan filed its Answers incorporating as part
weather and rough seas, causing it to pitch, roll and vibrate heavily of its special and affirmative defenses the following allegations:
so that certain shifting boards in the vessel broke and part of the t.hqw
cargo shifted transversely which caused the listing of the vessel (5) Defendant acted in good faith in rejecting plaintiff's insurance
claims, not only because of the circumstances and reasons set
The captain, fearing also that the vessel The captain, fearing also forth in the preceding sub-paragraphs (1) to (4) which defendant
that the vessel might sink, sailed for Miyako, Japan, unloaded the had been reasonably led to believe by reports of reputed experts
cargo and expenses were incurred relative to the cargo while in and/or by legal advice as justifying rejection,
Japan.
 3

but also because, as plaintiff had been repeatedly told, it is under concentrates aboard the MV "Hermosa" and the MV "General
constraint, on one hand, by customs of the insurance trade to Aguinaldo" shipped by Lepanto Consolidated Mining Co., Inc. to
adhere to the decisions of the lead insurers, and on another hand, American Smelting & Refining Co. from Poro Point, San Fernando,
by its contract with its reinsurer which among others, prohibit La Union, to Tacoma, Washington for which defendant issued
settlement of the reinsured claims without the reinsurer's assent. Policy No. LIDC-MOP-001/71 dated Sept 9, 1971, in the amount of
20% of the declared value of each shipment but not to exceed US
On Jan 27, 1975, Lepanto filed its reply. $2,000,000 per shipment.

On Jan 30, 1975, the Court denied Lepanto's motion for mandatory 3. Prior to these two shipments and after defendant Malayan
preliminary injunction "without prejudice to reconsider the said contracted with Lepanto to insure these two (2) copper
motion after the pre-trial of this case shall have been concluded." concentrates shipments against risks of loss and damage,
defendant Malayan in turn, re-insured its liabilities for losses and
On March 19, 1975, the first pre-trial conference was held and on damages in accordance with the terms of their reinsurance
March 25, 1975, the parties filed their Stipulation of Facts and contract.
Issues, which Stipulations was approved en toto in the trial court's
order of April 1, 1975. 4. After the defendant Malayan filed Answer to this suit, movant
was informed that defendant made express reservations "to file in
Subsequently, pre-trial conferences were held on April 3, 1975, due time a third-party complaint against the lead insurers and/or its
May 21, 1975, and June 19, 1975 when Lepanto concluded its reinsurers" (par. XVIII, Answer).
evidence.
5. Movant has a legal interest in the subject matter of litigation in
Defendant through counsel reserved its right to make a formal offer that he stands to be held liable to pay on its re-insurance contract
of its evidence at the continuation of the hearing scheduled on July should judgment be rendered requiring the defendant to pay the
16, 1975. claim of the plaintiff.

Then on June 25, 1975, petitioner Ivor Robert Dayton Gibson filed 6. To avoid multiplicity of suits and allow all parties who have any
a motion to intervene as defendant, which motion is as follows: relation to the cause of action, whether legally or in equity, to
ventilate expeditiously every issue relevant to the suit, it is
MOTION TO INTERVENE respectfully submitted that movant be allowed to intervene as a
COMES NOW Ivor Robert Dayton Gibson, Reinsurer in the above- defendant in the interest of justice.
entitled case, through undersigned counsel, and to this Honorable
Court respectfully & Heges that: 7. By the very nature of a contract of reinsurance and considering
1. Movant is of legal age, a British citizen, with address at Lloyd's that the reinsurer is obliged "to pay as may be paid thereon"
Lime Street, London, EC 3; (referring to the original policies), although this is subject to other
stipulations and conditions of the re-insurance contract, it will serve
2. Movant is the leading re-insurer of the risks and liabilities better the ends of justice if a full disclosure of all pertinent facts and
assumed by defendant Malayan Insurance Co., Inc. in a contract issues is made with the participation of the movant at this trial
of marine insurance involving 2 separate shipments of copper' where his interests have been and are already inevitably at stake.
 4

Counsel for the movant submitted the foregoing motion for the 4. The filing of an independent and separate suit proposed by
consideration and resolution of the Court on June 30, 1975. The the plaintiff is condemned by the basic and fundamental
motion to intervene was opposed by Lepanto on the following principles against multiplicity of suits.
grounds:
1. Movant Ivor Robert Dayton Gibson has no legal interest in On July 26, 1975, Lepanto filed a Rejoinder to the movant's "Reply
the matter in litigation or in the success of either plaintiff or to Opposition."
defendant;
On July 28, 1975, Malayan made a manifestation that it had no
2. Movant is estopped by his laches from intervening in this objection to the "Motion to Intervene" of Ivor Robert Dayton Gibson
action; and on July 31, 1975, movant made a Sur-Rejoinder to Lepanto's
Rejoinder.
3. The intervention is intended for delay and if allowed, win
unduly delay the proceedings between plaintiff and On August 18, 1975, the Court a quo resolved to deny the Motion
defendant; and
for Intervention in the following:
4. The rights, if any, of movant are not prejudiced by the
present suit and win be fully protected in a separate action ORDER
against him and his co-insurers by defendant herein. Ivor Robert Dayton Gibson, thru counsel, has presented before this
Court a motion to intervene on June 25, 1975. In his motion, he
Replying to Lepanto's opposition, movant Ivor Robert Dayton alleges that he is a British citizen with address at Lloyd's Lime
Gibson contended that Street, London, EC3; that he is the leading re-insurer of the risks
1. Contrary to oppositors contention, movant Gibson has a and liabilities assumed by defendant Malayan Insurance
legal interest in the matter in litigation because a contract Company, Inc. in the contract of marine insurance involving the
of reinsurance between the defendant Malayan Insurance shipments subject of the instant suit. He further contends that he
Company, Inc. and the movant herein is a contract of has a legal interest in the subject matter of litigation for he stands
indemnity against liability, and not merely against damage, liable on his reinsurances contract should judgment be rendered
and therefore, movant has a direct and immediate interest against the defendant and that this intervention would avoid a
in the success of defendant Malayan Insurance Company, multiplicity of suits. Plaintiff vigorously opposed the motion
Inc.; contending that movant Ivor Robert Dayton Gibson has no legal
interest in the matter in litigation or in the success of either parties
2. Neither estoppel nor laches applies to the movant since the in this suit; that he is estopped by laches; that the intervention is
motion to intervene was filed seasonably on June 25, 1975 intended for delay and will unduly delay the proceedings between
during the period of introduction of evidence by defendant plaintiff and defendant; and that movant will not be prejudiced by
Malayan; the present suit and can be fully protected in any separate action
which defendant may file against him and his co-insurers.
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
 5

Considering the grounds of the opposition, the Court believes that thereof.
the third and fourth grounds raised in the opposition appear highly (a) Motion for intervention. A person desiring to intervene shall
meritorious. Since movant Ivor Robert Dayton Gibson appears to file a motion for leave of court with notice upon all the parties to the
be only one of several re-insurers of the risks and liabilities action.
assumed by Malayan Insurance Company, Inc., it is highly (b) Discretion of court. In allowing or disallowing a motion for
probable that other re-insurers may likewise intervene. This would intervention, the court, in the exercise of discretion, shall consider
definitely disrupt the trial between plaintiff and defendant, the whether or not the intervention will unduly delay or prejudice the
principal protagonists in this suit. To allow the intervention would adjudication of the rights of the original parties and whether or not
certainly unduly delay the proceedings between plaintiff and the intervenor's rights may be fully protected in a separate
defendant especially at this stage where plaintiff had already proceeding.
rested its case. It would also compound the issues as more parties (c) Complaint or answer in intervention. The intervention shall
and more matters will have to be litigated. At any rate, Ivor Robert be made by complaint filed and served in a regular form, and may
Dayton Gibson may protect whatever interest he has in a separate be answered as if it were an original complaint; but where
action. intervenor unites with the defendant in resisting the claims of the
IN VIEW OF ALL THE FOREGOING, the Court resolves to deny plaintiff, the intervention may be made in the form of an answer to
the motion for intervention. the complaint,
SO ORDERED. (d) Time. Unless a different period is fixed by the court, the
Pasig, Rizal, August 18, 1975. t.hqw complaint or answer in intervention shall be filed within ten (10)
(SGD) PEDRO A. REVILLA days from notice of the order permitting such intervention.
Judge According to pertinent jurisprudence, the term "intervention" refers
Not satisfied with the denial of his Motion to Intervene, petitioner to the proceeding by which one not originally a party to an action
now comes before Us seeking to set aside the order of denial and is permitted, on his own application, to appear therein and join one
to order the respondent Judge to admit him as intervenor. By of the original parties in maintaining the action or defense, or to
resolution of this Court dated November 17, 1975, the petition was assert a claim or defense against some or all of the parties to the
denied due course for lack of merit, but upon petitioner's motion for proceeding as originally instituted. Such a third party may, upon
reconsideration, the petition was allowed in the Resolution of the discretion of the court, become a party to a pending
February 18, 1976, treating it as a special civil action. proceedings between others for the protection of some rights or
The principal issue is whether the lower court committed reversible interest alleged by him to be affected by such proceedings. 2
error in refusing the intervention of petitioner Ivor Robert Dayton Intervention is not a matter of absolute right but may be permitted
Gibson in the suit between Lepanto and Malayan. by the court when the applicant shows facts which satisfy the
We lay down the law on Intervention as found in Sec. 2, Rule 12 of requirements of the statute authorizing intervention.3 Under our
the Rules of Court: t.hqw rules of Court, what qualifies a person to intervene is his
Section 2. Intervention. A person may, before or during a trial, possession of a legal interest in the matter in litigation, or in the
be permitted by the court, in its discretion, to intervene in an action, success of either of the parties, or an interest against both; or when
if he has legal interest in the matter in litigation, or in the success he is so situated as to be adversely affected by a distribution or
of either of the parties or an interest against both, or when he is so other disposition of property in the custody of the court or an officer
situated as to be adversely affected by a distribution or other thereof. 4 As regards the legal interest as qualifying factor, tills
disposition of property in the custody of the court or of an officer Court has ruled that such interest must be of a direct and
 6

immediate character so that the intervenor wig either gain or lose In his petition, petitioner submits that the respondent Judge, in
by the direct legal operation of the judgment. The interest must be refusing to permit/allow him to intervene in Civil Case No. 20046,
actual and material, a concern which is more than mere curiosity, incorrectly interpreted and/or appreciated the purpose/intent of the
or academic or sentimental desire; it must not be indirect and pertinent rules of procedure that govern intervention of parties in a
contingent, indirect and remote, conjectural, consequential or given action and that the respondent Judge erred: (1) In concluding
collateral. 5 However, notwithstanding the presence of a legal that to allow the intervention of herein petitioner "would definitely
interest, permission to intervene is subject to the sound discretion disrupt the trial" and "would certainly unduly delay the
of the court, the exercise of which is limited by considering I proceedings," when such apprehension appears to be clearly
'whether or not the intervention will unduly delay or prejudice the immaterial in determining when intervention is proper or not; (2) In
adjudication of the rights of the original parties and whether or not viewing the alleged availability of another recourse on the part of
the intervenor's rights may be fully protected in a separate herein petitioner to protect his interest, i.e. separate action, as an
proceeding. 6 Once judicial discretion is exercised, the action of the added justification to deny his intervention, despite the fact that the
court cannot be reviewed or controlled by mandamus however applicable rule of procedure in this regard (Section 2, Rule 12)
erroneous it may be, except only when there is an arbitrary or does not preclude intervention even if another separate action is
capricious exercise of discretion, in which case, the fault is appropriate and for available; and (3) In its obvious disregard of
correctible by mandamus if there be no other adequate and speedy the very rule (Section 2, Rule 12) precisely designed to apply on
remedy. 7 cases where intervention is sought, thereby departing from the
accepted and usual procedure under the premises.
As may be noted in the questioned Order, respondent Judge After carefully considering the arguments of both the petitioner and
denied the Motion to Intervene on the last two grounds of Lepanto's Lepanto, the facts and circumstances obtaining in the case at bar
Opposition, namely: "3. The intervention is intended for delay and and applying Rule 12, Sec. 2 of the Rules of Court and the
if allowed, will unduly delay the proceedings between plaintiff and doctrines enunciated by the Supreme Court on the matter, We rule
defendant; and 4. The rights, if any, of movant are not prejudiced that the respondent Judge committed no error of law in denying
by the present suit and will be fully protected in a separate action petitioner's Motion to Intervene. And neither has he abused his
against him and his co-insurers by defendant herein. discretion in his denial of petitioner's Motion for Intervention.
It is quite crystal clear that the questioned Order of the respondent
Respondent Judge, reasoning out his Order, ruled that "(s)ince Court was based strictly and squarely on Section 2(b) of Rule 12
movant Ivor Robert Dayton Gibson appears to be only one of which specifically directs the Court in allowing or disallowing a
several co-insurers of the risks and liabilities assumed by Malayan motion for intervention in the exercise of discretion to consider
Insurance Company, Inc., it is highly probable that other re- whether or not the intervention will unduly delay or prejudice the
insurers may likewise intervene. This would definitely disrupt the adjudication of the rights of the original parties and whether or not
trial between plaintiff and defendant, the principal protagonists in the intervenor's rights may be fully protected in a separate
this suit. To allow the intervention would certainly unduly delay the proceeding. The Court a quo has specifically and correctly
proceedings between plaintiff and defendant especially at this complied with the Rule's mandate and We cannot fault the
stage where plaintiff had already rested its case. It would also respondent Judge therefore.
compound the issues as more parties and more matters will have We reject the contention of the petitioner that the question
to be litigated. At any rate, Ivor Robert Dayton Gibson may protect regarding delay in the adjudication of the rights of the original
whatever interest he has in a separate action." contending parties, while recognized as factors in allowing or
 7

disallowing intervention, should assume a secondary role to the Robert Dayton Gibson appears to be only one of several re-
primary and imperative requirement that the legal interest of the insurers of the risks and liabilities assumed by Malayan Insurance
would-be intervenor in the matter under litigation must be clearly Company, Inc., it is highly probable that other re- insurers may
shown and that once the legal interest of the would be intervenor likewise intervene. The record shows that aside from the petitioner
is clearly shown, the fact that his intervention may work to delay a there are sixty-three (63) other syndicate members of Lloyds, the
little the main conflict between the parties should not by itself justify twenty-six (26) companies in the " I.L.U. " group holding a 34.705
the denial of intervention. % reinsurance interest and the two (2) "Other Companies" holding
the balance of the reinsurances, as listed in Annex "A", Sur-
Petitioner's contention is untenable. Rejoinder to Lepanto's Rejoinder, pp. 136-138, Records. The high
probability that these other re-insurers like the petitioner herein
The first paragraph of Section 2, Rule 12 prescribes the time to may likewise intervene if the latter's motion is granted is not an
intervene and also who may intervene, that is, one who has legal arbitrary assumption of the Court. Considering petitioner's
interest in the matter in litigation, or in the success of either of the assertion that he will have the opportunity to show, among others,
parties or an interest against both or when he is so situated as to that the losses and damages purportedly sustained by Lepanto
be adversely affected by a distribution or other disposition of occurred not from the perils of the seas but from perils of the ships;
property in the custody of the court or of an officer thereof that Lepanto is not the real party in interest; that it has no cause of
Paragraph (b) of the same section directs what matter are to be action; and, neither has it complied with its obligations under the
considered in exercising discretion to snow or disallow a motion for policy which makes the filing of the complaint premature (p. 118,
intervention, which are whether or not the intervention will unduly Records, Reply to Opposition) if petitioner is allowed to intervene,
delay or prejudice the adjudication of the rights of the original We hold that there is good and sufficient basis for the Court a quo
parties and whether or not the intervenor's rights may be fully to declare that. the trial between Lepanto and Malayan would be
protected in a separate proceeding. Clearly, for the Court to permit definitely disrupted and would certainly unduly delay the
intervention, it must be shown that movant is possession of legal proceedings between the parties especially at the stage where
interest in the matter in litigation or otherwise qualified under the Lepanto had already rested its case and that the issues would also
first paragraph of Section 2, and the Court must also consider the be compounded as more parties and more matters will have to be
matters mentioned in paragraph (b) thereof. The latter are not and litigated. In other words, the Court's discretion is justified and
should not be taken as secondary to the former for both must reasonable.
concur since they are equally important, requisite and necessary
for consideration in the exercise of discretion by the Court to allow We also hold that respondent Judge committed no reversible error
or disallow intervention. We cannot invest nor render primary or in further sustaining the fourth ground of Lepanto's Opposition to
secondary importance to either of these requirements for the law the Motion to Intervene that the rights, if any, of petitioner are not
does not make any distinction. Each case must be decided prejudiced by the present suit and win be fully protected in a
according to its facts and merits, subject to the discretion of the separate action against him and his co-insurers by Malayan.
Court.
From the particular facts and circumstances of the case at bar, We Petitioner contends that this rights would not be fully protected in a
are satisfied that the respondent Judge has not abused his separate proceeding because "(a) decision in favor of Lepanto,
discretion in denying petitioner's Motion to Intervene. We agree declaring Malayan liable on its insurance policies would
with the holding of the respondent Court that since movant Ivor necessarily and injuriously affect the interests of petitioner,
 8

(which) interest as a re-insurer of Malayan's risk is not only Specifically, the rule is stated thus t.hqw
inchoate but material, direct and immediate and for such interest Sec. 1238. In an action on a contract of reinsurance, as a
to be in any manner prejudiced without first giving petitioner a general rule the reinsurer is entitled to avail itself of every defense
chance to be heard would be violative of due process. Upon the which the reinsured might urge in an action by the person originally
other hand, a decision in favor of Malayan, recognizing it as not insured; ...
liable under its insurance policies, could subject petitioner to the The same rule is stated otherwise in 44 An-L Jur. 2d, Sec. 1862,
danger of having to admit that Malayan had not breached its p. 793, as follows: t.hqw
insurance contract with the entity (Lloyds) of which petitioner is the Moreover, where an action is brought against the reinsurer by the
leading syndicate member." (Petitioner's Memorandum p. 230, reinsured, the former may assert any defense that the latter might
Records). Petitioner also asserts that "by the very nature of a have made in an action on the policy of original insurance. (Eagle
contract of reinsurance and considering that the re-insurer is Ins. Co. vs. Lafayette, Ins. Co., 9 Ind. 443)
obliged 'to pay as may be paid thereon' (referring to the original As to the effect of the clause "to pay as may be paid thereon"
policies), although this is subject to other stipulations and contained in petitioner's re-insurance contract, Arnould, on the Law
conditions of the reinsurance contract, it will serve better the ends of Marine Insurance and Average, 13th Ed., Vol. 1, Section 327, p.
of justice if a full disclosure of all pertinent facts and issues is made 315, states the rule, thus: t.hqw
with the participation of the movant at this trial where his interests It has been decided that this clause does not preclude the reinsurer
have been and are already inevitably at stake." (Petition, p. 18, from insisting upon proper proof that a loss strictly within the terms
Records). of the original policy has taken place.
On the contrary, Lepanto insists that petitioner win have his day in This clause does not enable the original underwriter to recover
court and his rights can be fully protected in a separate proceeding. from his re-insurer to an extent beyond the subscription of the
According to Lepanto, if it loses the case against Malayan, latter.
petitioner cannot possibly be liable to Malayan for indemnity on the It is significant and revealing that petitioner himself admits in his
reinsurances. If Lepanto wins, then petitioner, the sixty-three (63) Memorandum, p. 231, Records, that "(o)f course, petitioner, if
other syndicate members of Lloyds, the twenty-six (26) companies finally sued in London, (he) could avail himself of remedies
in the "I.L.U." group holding a 34.705% reinsurance interest and available to him." He adds that "such a procedure, if not entirely
the two (2) "Other Companies" holding the balance of the time-consuming, would actually beg the issue on hand. Petitioner
reinsurances are free either to pay Malayan or to resist Malayan believes that his defenses on the claims ventilated in the court a
and thus force Malayan to sue in whatever country most of them, quo can be appreciated only here; elsewhere in view of the peculiar
qualitatively and not quantitatively, may be served with summons. circumstances surrounding Lepanto's claims the basic issue win
Petitioner's contention that he has to pay once Malayan is finally be obfuscated and perhaps even obliterated by arguments on
adjudged to pay Lepanto because of the very nature of a contract procedural niceties." However, such a procedural problem is no
of reinsurance and considering that the re-insurer is obliged 'to pay legal ground to compel allowance of and insist on his intervention.
as may be paid thereon' (referring to the original policies), although WHEREFORE, IN VIEW OF THE FOREGOING, the petition is
this is subject to other stipulations and conditions of the hereby dismiss. No costs.
reinsurance contract, is without merit. The general rule in the law SO ORDERED.
of reinsurance is that the re-insurer 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).
 9

AVON INSURANCE PLC., ET AL. V. CA (G.R. NO. 97642) and Insurance were made through an international insurance
broker, and not through any entity or means remotely connected
Facts: with the Philippines. Moreover, there is authority to the effect that
Respondent Yupangco Cotton Mills engaged to secure with a reinsurance company is not doing business in a certain state
Worldwide Security and Insurance Co. several of its properties merely because the property or lives which are insured by the
which were then covered by reinsurance treaties between original insurer company are located in that state. The reason for
Worldwide Security and several foreign reinsurance companies, this is that a contract of reinsurance is generally a separate and
including herein petitioners. These reinsurance agreements had distinct arrangement from the original contract of insurance, whose
been made through an international broker acting for Worldwide contracted risk is insured in the reinsurance agreement. Hence, the
Security. While the policies are in effect, Yupangcos properties original insured has generally no interest in the contract of
were razed in fire giving rise to their indemnification. Worldwide reinsurance.
acknowledged a remaining balance and assigned to Yupangco all Indeed, if a foreign corporation does not do business here, there
reinsurance proceeds still collectible from all the reinsurance would be no reason for it to be subject to the States regulation. As
companies. Thus, as assignee and original insured, Yupangco we observed, in so far as the State is concerned, such foreign
instituted a collection suit against petitioners. Petitioners averred corporation has no legal existence. Therefore, to subject such
that they are foreign corporations not doing business in the corporation to the courts jurisdiction would violate the essence of
Philippines therefore cannot be subject to the jurisdiction of its sovereignty.
courts. CA found for Yupangco.
Issue:
Whether or not petitioners are foreign corporations doing business TORRES, JR., J.:
in the Philippines. Just how far can our court assert jurisdiction over the persons of
Ruling: NO. foreign entities being charged with contractual liabilities by
To qualify the petitioners business of reinsurance within the residents of the Philippines?
Philippine forum, resort must be made to the established principles Appealing from the Court of Appeals October 11, 1990 Decision[if
in determining what is meant by doing business in the Philippines. in CA-G.R. No. 22005, petitioners claim that the trial courts
The term ordinarily implies a continuity of commercial dealings and jurisdiction does not extend to them, since they are foreign
arrangements, and contemplates, to that extent, the performance reinsurance companies that are not doing business in the
of acts or works or the exercise of the functions normally incident Philippines. Having entered into reinsurance contracts abroad,
to and in progressive prosecution of the purpose and object of its petitioners are beyond the jurisdictional ambit of our courts and
organization. cannot be rendered summons through extraterritorial service, as
As it is, private respondent has made no allegation or under Section 17, Rule 14 of the Rules of Court, nor through the
demonstration of the existence of petitioners domestic agent, but Insurance Commissioner, under Section 14. Private respondent
avers simply that they are doing business not only abroad but in Yupangco Cotton Mills contend on the other hand that petitioners
the Philippines as well. It does not appear at all that the petitioners are within our courts cognitive powers, having submitted voluntarily
had performed any act which would give the general public the to their jurisdiction by filing motions to dismiss the private
impression that it had been engaging, or intends to engage in its respondents suit below.
ordinary and usual business undertakings in the country. The
reinsurance treaties between the petitioners and Worldwide Surety
 10

The antecedent facts, as found by the appellate court, are as with in the respective effectivity periods of Policies 20719 and
follows: 25896, the properties therein insured were razed by fire , thereby
Respondent Yupangco Cotton Mills filed a complaint against several giving rise to the obligation of the insurer to indemnify the
foreign reinsurance companies (among which are petitioners) to collect Yupangco Cotton Mills. Partial payments were made by Worldwide
their alleged percentage liability under contract treaties between the Surety and Insurance and some of the reinsurance companies.
foreign insurance companies and the international insurance broker C.J. On May 2, 1983, Worldwide Surety and Insurance, in a deed of
Boatright, acting as agent for respondent Worldwide Surety and Assignment, acknowledge a remaining balance of P19,444,447.75
Insurance Company. Inasmuch as petitioners are not engaged in business still due Yupangco Cotton Mills, and assigned to the latter all
in the Philippines with no offices, places of business or agents in the reinsurance proceeds still collectible from all the foreign
Philippines, the reinsurance treaties having been rendered abroad, service reinsurance companies. Thus, in its interest as assignee and
of summons upon motion of respondent Yupangco, was made upon original insured, Yupangco Cotton Mills instituted this collection
petitioners through the office of the Insurance Commissioner. Petitioners, suit against the petitioners.
by counsel on special appearance, seasonably filed motions to dismiss Service of summons upon the petitioners was made by notification
disputing the jurisdiction of respondent Court and the extra-territorial to the Insurance Commissioner, pursuant to Section 14, Rule 14 of
service of summons. Respondent Yupangco filed its opposition to the the Rules of Court.
motion to dismiss, petitioners filed their reply, and respondent Yupangco
filed its rejoinder. In an order dated April 30, 1990 respondent Court In a Petition for Certiorari filed with the Court of Appeals, petitioners
denied the motions to dismiss and directed petitioners to file their answer. submitted that respondent Court has no jurisdiction over them,
On May 29, 1990, petitioners filed their notice of appeal. In an order dated being all foreign corporations not doing business in the Philippines
June 4, 1990, respondent court denied due course to the appeal. with no office, place of business or agents in the Philippines. The
remedy of Certiorari was resorted to by petitioners on the premise
To this day, trial on the merits of the collection suit has not that if petitioners had filed an answer to the complaint as ordered
proceeded as in the present petition, petitioners continue by the respondent court, they would risk abandoning the issue of
vigorously to dispute the trial courts assumption of jurisdiction over jurisdiction. Moreover, extra-territorial service of summons on
them. petitioners is null and void because the complaint for collection is
It will be remembered that in the plaintiffs complaint, it was not one affecting plaintiffs status and not relating to property within
contended that on July 6, 1979 and on October 1, 1980, Yupangco the Philippines.
Cotton Mills engaged to secure with Worldwide Security and The Court of Appeals found the petition devoid of merit, stating
Insurance Co. Inc., several of its properties for the periods July 6, that:
1979 to July 6, 1980 as under Policy No. 20719 for a coverage of 1. Petitioners were properly served with summons and whatever
P100,000,000.00 and from October 1, 1980 to October 1, 1981, defect, if any, in the service of summons were cured by their
under Policy No. 25896, also for P100,000,000.00. Both contracts voluntary appearance in court, via motion to dismiss.
were covered by reinsurance treaties between Worldwide Surety 2. Even assuming that petitioners have not yet voluntarily
and Insurance and several foreign reinsurance companies, appeared as co-defendants in the case below even after having
including the petitioners. The reinsurance arrangements had been filed the motion to dismiss adverted to, still the situation does not
made through international broker C.J. Boatright and Co. Ltd., deserve dismissal of the complaint as far as they are concerned,
acting as agent of Worldwide Surety and Insurance. since as held by this Court in Linger Fisher GMBH vs. IAC, 125
As fate would have it, on December 16, 1979 and May 2, 1981, SCRA 253.
 11

A case should not be dismissed simply because an original summons was 2. While the complaint before the Honorable Trial Court is for a sum of
wrongfully served. It should be difficult to conceive for example, that money, not affecting status or relating to property, petitioners (then
when a defendant personally appears before a court complaining that he defendants) can submit themselves voluntarily to the jurisdiction of
had not been validly summoned, that the case filed against him should be Philippine Courts, even if there is no extra-judicial (sic) service of
dismissed. An alias summons can be actually served on said defendant. summons upon them.
3. Being reinsurers of respondent Worlwide Surety and Insurance 3. The voluntary appearance of the petitioners (then defendants) before
of the risk which the latter assumed when it issued the fire the Honorable Trial Court amounted, in effect, to voluntary submission
insurance policies in dispute in favor of respondent Yupangco, to its jurisdiction over their persons.
petitioners cannot now validly argue that they do not do business In the decisions of the courts below, there is much left to
in this country. At the very least, petitioners must be deemed to speculation and conjecture as to whether or not the petitioners
have engaged in business in the Philippines no matter how isolated were determined to be doing business in the Philippines or not.
or singular such business might be, even on the assumption that To qualify the petitioners business of reinsurance within the
among the local domestic insurance corporations of this country, it Philippine forum, resort must be made to established principles in
is only in favor of Worldwide Surety and Insurance that they have determining what is meant by doing business in the Philippines. In
ever reinsured any risk arising from reinsurance within the territory. Communication Materials and Design, Inc. et. al vs. Court of
4. The issue of whether or not petitioners are doing business in the Appeals, was observed that:
country is a matter best reffered to a trial on the merits of the case There is no exact rule of governing principle as to what constitutes doing
and so should be addressed there. or engaging in or transacting business. Indeed, such case must be judged
Maintaining its submission that they are beyond the jurisdiction of in the light of its peculiar circumstances, upon its peculiar facts and upon
the Philippine Courts, petitioners are now before us, stating: the language of the statute applicable. The true test, however, seems to be
Petitioners, being foreign corporations, as found by the trial court, not whether the foreign corporation is continuing the body or substance of the
doing business in the Philippines with no office, place of business or business or enterprise for which it was organized.
agents in the Philippines, are not subject to the jurisdiction of the Article 44 of the Omnibus Investments Code of 1987 defines the phrase
Philippine courts. to include:
The complaint for sum of money being a personal action not affecting 'soliciting orders, purchases, service contracts opening offices, whether
status or relating to property, extraterritorial service of summons on called liaison offices of branches; appointing representatives or
petitioners all not doing business in the Philippines is null and void. distributors who are domiciled in the Philippines or who in any calendar
The appearance of counsel for petitioners being explicitly by special year stay in the Philippines for a period or periods totaling one hundred
appearance without waiving objections to the jurisdiction over their eighty (180) days or more; participating in the management, supervision
persons or the subject matter and the motions do dismiss having excluded or control of any domestic business firm, entity or corporation in the
non-jurisdictional grounds, there is no voluntary submission to the Philippines, and any other act or acts that imply a continuity or
jurisdiction of the trial court. commercial dealings or arrangements and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions
For its part, private respondent Yupangco counter-submits: normally incident to and in progressive prosecution of, commercial gain
1. Foreign corporations, such as petitioners, not doing business in the or of purpose and object of the business organization.
Philippines, can be sued in the Philippine Courts, not withstanding The term ordinarily implies a continuity of commercial dealings and
petitioners claim to the contrary. arrangements, and contemplates, to that extent, the performance
of acts or works or the exercise of the functions normally incident
 12

to and in progressive prosecution of the purpose and object of its original insurer company are located in that state.
organization.
A single act or transaction made in the Philippines, however, could The reason for this is that a contract or reinsurance is generally a
not qualify a foreign corporation to be doing business in the separate and distinct arrangement from the original contract of
Philippines, if such singular act is not merely incidental or casual, insurance, whose contracted risk is insured in the reinsurance
but indicates the foreign corporations intention to do business in agreement.
the Philippines.
There is no sufficient basis in the records which would merit the Hence, the original insured has generally no interest in the contract
institution of this collection suit in the Philippines. More specifically, of reinsurance.
there is nothing to substantiate the private respondents submission
that the petitioners had engaged in business activities in this A foreign corporation, is one which owes its existence to the laws
country. This is not an instance where the erroneous service of of another state, and generally has no legal existence within the
summons upon the defendant can be cured by the issuance and state in which it is foreign. In Marshall Wells Co. vs. Elser, it was
service of alias summons, as in the absence of showing that held that corporations have no legal status beyond the bounds of
petitioners had been doing business in the country, they cannot be sovereignty by which they are created. Nevertheless, it is widely
summoned to answer for the charges leveled against them. accepted that foreign corporations are, by reason of state comity,
allowed to transact business in other states and to sue in the courts
The Court is cognizant of the doctrine is Signetics Corp. vs. Court of such fora. In the Philippines foreign corporations are allowed
of Appeals that for the purpose of acquiring jurisdiction by way of such privileges, subject to certain restrictions, arising from the
summons on a defendant foreign corporation, there is no need to states sovereign right of regulation.
prove first the fact that defendant is doing business in the
Philippines. The plaintiff only has to allege in the complaint that the Before a foreign corporation can transact business in the country,
defendant has an agent in the Philippines for summons to be it must first obtain a license to transact business here and secure
validly served thereto, even without prior evidence advancing such the proper authorizations under existing law.
factual allegation.
As it is, private respondent has made no allegation or If a foreign corporation engages in business activities without the
demonstration of the existence of petitioners domestic agent, but necessary requirements, it opens itself to court actions against it,
avers simply that they are doing business not only abroad but in but it shall not be allowed maintain or intervene in an action, suit or
the Philippines as well. It does not appear at all that the petitioners proceeding for its own account in any court or tribunal or agency in
had performed any act which would give the general public the the Philippines.
impression that it had been engaging, or intends to engage in its
ordinary and usual business undertakings in the country. The The purpose of the law in requiring that foreign corporations doing
reinsurance treaties between the petitioners and Worldwide Surety business in the country be licensed to do so, is to subject the
and Insurance were made through an international insurance foreign corporations doing business in the Philippines to the
brokers, and not through any entity of means remotely connected jurisdiction of the courts, otherwise, a foreign corporation illegally
with the Philippines. Moreover there is authority to the effect that a doing business here because of its refusal or neglect to obtain the
reinsurance company is not doing business in a certain state required license and authority to do business may successfully
merely because the property of lives which are insured by the though unfairly plead such neglect or illegal act so as to avoid
 13

service and thereby impugn the jurisdiction of the local courts. the Court would be guilty of sorcery; extracting substance out of
The same danger does not exist among foreign corporations that nothingness. In addition, the assertion that a resident of the
are indubitably not doing business in the Philippines. Indeed, if a Philippines will be inconvenienced by an out-of-town suit against a
foreign corporation does not do business here, there would be no foreign entity, is irrelevant and unavailing to sustain the
reason for it to be subject to the States regulation. As we observed, continuance of a local action, for jurisdiction is not dependent upon
in so far as State is concerned, such foreign corporation has no the convenience or inconvenience of a party.
legal existence. Therefore, to subject such corporation to the
courts jurisdiction would violate the essence of sovereignty. It is also argued that having filed a motion to dismiss in the
In the alternative, private respondent submits that foreign proceedings before the trial court, petitioners have thus
corporations not doing business in the Philippines are not exempt acquiesced to the courts jurisdiction, and they cannot maintain the
from suits leveled against them in courts, citing the case of contrary at this juncture.
Facilities Management Corporation vs. Leonardo Dela Osa, et.. This argument is at the most, flimsy.
al.where we ruled that indeed, if a foreign corporation, not engaged In civil cases, jurisdiction over the person of the defendant is
in business in the Philippines, is not barred from seeking redress acquired either by his voluntary appearance in court and his
from Courts in the Philippines, a fortiori, that same corporation submission to its authority or by service of summons.
cannot claim exemption from being sued in the Philippines Courts
for acts done against a person or persons in the Philippines. Fundamentally, the service of summons is intended to give official
We are not persuaded by the position taken by the private notice to the defendant or respondent that an action had been
respondent. In Facilities Management case, the principal issue commenced against it. The defendant or respondent is thus put on
presented was whether the petitioner had been doing business in guard as to the demands of the plaintiff as stated in the complaint.
the Philippines, so that service of summons upon its agent as
under Section 14, Rule 14 of the Rules of Court can be made in The service of summons, upon the defendant becomes an
order that the Court of First Instance could assume jurisdiction over important element in the operation of a courts jurisdiction upon a
it. The court ruled that the petitioner was doing business in the party to a suit, as service of summons upon the defendant is the
Philippines, and that by serving summons upon its resident agent, means by which the court acquires jurisdiction over his person.
the trial court had effectively acquired jurisdiction. In that case, the
court made no prescription as the absolute suability of foreign Without service of summons, or when summons are improperly
corporations not doing business in the country, but merely made, both the trial and the judgment, being in violation of due
discounts the absolute exemption of such foreign corporations process, are null and void, unless the defendant waives the service
from liabilities particularly arising from acts done against a person of summons by voluntarily appearing and answering the suit.
or persons in the Philippines.
As we have found, there is no showing that petitioners had When a defendant voluntarily appears, he is deemed to have
performed any act in the country that would place it within the submitted himself to the jurisdiction of the court.
sphere of the courts jurisdiction. A general allegation standing
alone, that a party is doing business in the Philippines does not This is not, however, always the case. Admittedly, and without
make it so. A conclusion of fact or law cannot be derived from the subjecting himself to the courts jurisdiction, the defendant in an
unsubstantiated assertions of parties notwithstanding the action can, by special appearance object to the courts assumption
demands of convenience or dispatch in legal actions, otherwise, on the ground of lack of jurisdiction.
 14

If he so wishes to assert this defense, he must do so seasonably before Us would just be useless and a waste of time.
by motion for the purpose of objecting to the jurisdiction of the
court, otherwise, he shall be deemed to have submitted himself to ACCORDINGLY, the decision appealed from dated October
that jurisdiction. In the case of foreign corporations, it has been 11, 1990, is SET ASIDE and the instant petition is hereby
held that they may seek relief against the wrongful assumption of GRANTED. The respondent Regional Trial Court of Manila, Branch
jurisdiction by local courts. In Time, Inc. vs. Reyes, it was held that 51 is declared without jurisdiction to take cognizance of Civil Case
the action of a court in refusing to rule of deferring its ruling on a No. 86-37932, and all its orders and issuances in connection
motion to dismiss for lack or excess of jurisdiction is correctable by therewith are hereby ANNULLED and SET ASIDE. The
a writ of prohibition or certiorari sued out in the appellate court even respondent court is hereby ORDERED to DESIST from
before trial on the merits is had. The same remedy is available maintaining further proceeding in the case aforestated.
should the motion to dismiss be denied, and the court, over the SO ORDERED.
foreign corporations objections, theratens to impose its jurisdiction
upon the same.

If the defendant, besides setting up in a motion to dismiss his

objections to the jurisdiction of the court, alleges at the same time
any other ground for dismissing the action, or seeks an affirmative
refief in the motion, he is deemed to have submitted himself to the
jurisdiction of the court.

In this instance, however, the petitioners from the time they filed
their motions to dismiss, their submission have been consistently
and unfailingly to object to the trial courts assumption of
jurisdiction, anchored on the fact that they are all foreign
corporations not doing business in the Philippines.

As we have consistently held, if the appearance of a party in a suit

is precisely to question the jurisdiction of the said tribunal over the
person of the defendant, then this appearance is not equivalent to
service of summons, nor does is constitute an acquiescence to the
courts jurisdiction.

Thus it cannot be argued that the petitioners had abandoned their

objections to the jurisdiction of the court, as their motions to dismiss
in the trial court, and all their subsequent posturings, were all in
protest of the private respondent's insistence on holding them so
answer a charge in a forum where they believe they are not subject
to. Clearly, to continue the proceedings in a case such as those