Alpha Plus International Enterprises Corp. vs. Philippine Charter Insurance Corp.

An amended complaint that introduces new demands not specified in the original complaint supersedes the original and is deemed filed on its own date for purposes of prescription; the relation-back doctrine applies only when the amendment does not introduce new issues, causes of action, or demands. The twelve-month prescriptive period in a fire insurance policy stipulated pursuant to Section 63 of the Insurance Code means one year or 365 days, reckoned from the insured's receipt of the notice of final rejection of the claim.

Petitioner Alpha Plus International Enterprises Corporation is a company engaged in the optical media business that obtained two fire insurance policies from respondent Philippine Charter Insurance Corporation (PCIC) covering the period June 9, 2007 to June 9, 2008. The insurance policies contained Condition No. 27, an action-or-suit clause requiring the insured to commence an action within twelve months from receipt of notice of rejection of a claim, failing which the claim would be deemed abandoned. This stipulation was made pursuant to Section 63 of the Insurance Code, which voids any policy condition limiting the time for commencing an action to less than one year from accrual of the cause of action.

Petitioner Alpha Plus International Enterprises Corporation, a company engaged in the optical media business, obtained two fire insurance policies from respondent Philippine Charter Insurance Corporation covering the period from June 9, 2007 to June 9, 2008. On February 24, 2008, petitioner's warehouse was gutted by fire, destroying equipment and machinery stored therein. Petitioner sought to recover under its insurance policies, but PCIC denied the claim in a letter dated January 22, 2009, which petitioner received on January 24, 2009. The parties exchanged clarification and reply letters but failed to arrive at a settlement.

On January 20, 2010, Alpha Plus filed a Complaint before Branch 84 of the RTC of Malolos, Bulacan against PCIC and its officers for Specific Performance, Collection of Sum of Money and Damages, docketed as Civil Case No. 41-M-2010. Petitioner prayed that respondents be ordered to pay the amount due under the insurance coverage plus legal interest as actual damages, not less than P1 million as exemplary damages, not less than P1 million as attorney's fees, and costs of suit. The initial docket fees paid amounted to P42,545.00, representing only the P1 million claim for exemplary damages and the P1 million for attorney's fees. The original complaint's prayer for actual damages did not specify any definite amount.

On February 9, 2010, petitioner filed an Amended Complaint praying for similar reliefs but this time specifically claiming P300 million as actual damages and seeking payment of "two (2) times the legal interest per annum on the proceeds of the policies for the duration of the delay." Petitioner paid additional docket fees of P6,056,465.00 for the P300 million claim. Respondents filed Motions to Dismiss on grounds of lack of cause of action and insufficient payment of docket fees, but these were denied by the RTC. In their Answer Ad Cautelam with Compulsory Counterclaim, respondents averred that petitioner's insurance claim was already barred by prescription based on Condition No. 27 of the fire insurance policies.

Respondents thereafter filed a Motion for Preliminary Hearing of Affirmative Defenses and/or Motion to Dismiss, anchored on the RTC's alleged failure to acquire jurisdiction due to insufficient docket fees, lack of cause of action, and prescription. The RTC denied the motion in its Order dated April 5, 2011, finding that petitioner had paid the balance of required docket fees and declining to rule on the prescription issue. Respondents' Motion for Reconsideration was denied in the RTC's Order dated June 21, 2011. Respondents then filed a Petition for Certiorari under Rule 65 before the Court of Appeals, which granted the petition, nullified the RTC Orders, and ordered the dismissal of the civil case on the ground of prescription. The CA computed the prescriptive period using 360 days and found that prescription had already set in, criticizing the RTC for remaining silent on the issue.

• Reckoning of Prescriptive Period: Petitioner insisted that the prescriptive period should have been counted from the filing of its original complaint on January 20, 2010, and not from the filing of the amended complaint on February 9, 2010. As a rule, when the amended complaint does not introduce new issues or causes of action, the suit is deemed to have commenced on the date the original complaint was filed.
• No New Cause of Action: Petitioner asserted that its amended complaint did not introduce new or different causes of action, and therefore the prescriptive period should be reckoned from the filing of the original complaint, which was filed within the one-year period from receipt of the rejection notice.

• Prescription from Amended Complaint: Respondents countered that the CA correctly reckoned the prescriptive period from the date of filing of the Amended Complaint on February 9, 2010, because petitioner alleged the amount of P300 million as its insurance claim only in the amended complaint.
• Insufficient Docket Fees in Original Complaint: Respondents argued that in the original complaint, petitioner merely paid P42,545.00 as docket fees, and it was only upon filing the amended complaint that additional docket fees of P6,056,465.00 were paid for the P300 million claim, demonstrating that new demands were introduced.
• Action Already Barred: Respondents maintained that petitioner received the notice denying its insurance claim on January 24, 2009, giving it until January 24, 2010 to bring a court action. Since the amended complaint was filed only on February 9, 2010, the action had clearly prescribed.

• Prescription of Insurance Claim: Whether the petitioner's complaint before the RTC had already prescribed when it was filed.
• Reckoning of Prescriptive Period: Whether the prescriptive period should be counted from the filing of the original complaint or from the filing of the amended complaint.

• Prescription of Insurance Claim: Yes. The action had prescribed, the amended complaint having been filed on February 9, 2010, beyond the one-year period ending January 24, 2010.
• Reckoning of Prescriptive Period: From the amended complaint. Because the amended complaint introduced new demands not specified in the original complaint, it superseded the original and was deemed filed on its own date, February 9, 2010, when prescription had already set in.

• Prescription of Insurance Claim: The prescriptive period for an insurance claim is governed by Section 63 of the Insurance Code and the corresponding stipulation in the policy. Section 63 voids any policy condition limiting the time for commencing an action to less than one year from accrual of the cause of action. Condition No. 27 of the parties' fire insurance policies required the insured to commence an action within twelve months from receipt of notice of rejection. Consistent with Sun Insurance Office, Ltd. vs. Court of Appeals and New Life Enterprises vs. Court of Appeals, the twelve-month period means one year or 365 days, not 360 days as the CA had held. Article 13 of the Civil Code likewise provides that when the law speaks of a year, it is understood to be equivalent to 365 days. The prescriptive period is reckoned from the "final rejection" of the claim, which means the denial by the insurer in the first instance, not the denial of a motion or request for reconsideration. Petitioner received the notice of rejection on January 24, 2009, giving it until January 24, 2010 to file its action. The rationale for the one-year requirement is that it is not merely procedural but essential to prompt settlement of claims, ensuring that suits are brought while evidence as to the origin and cause of destruction has not yet disappeared.

• Reckoning of Prescriptive Period: The general rule is that an amended complaint supersedes the original complaint, which is deemed withdrawn and no longer considered part of the record. The filing of an amended pleading does not retroact to the date of the filing of the original pleading; the statute of limitations runs until the submission of the amendment. An exception exists where the amendment merely supplements and amplifies facts originally alleged, in which case it relates back to the date of commencement of the action. This exception applies only when the amended complaint does not introduce new issues, causes of action, or demands. In this case, the original complaint's prayer for actual damages did not specify any definite amount, while the amended complaint specified P300 million and claimed double legal interest per annum on the policy proceeds. The disparity was further evidenced by the additional docket fees of P6,056,465.00 paid for the amended complaint. Because new demands were introduced, the original complaint was deemed abandoned and rendered functus officio, and the relation-back doctrine did not apply. The suit was therefore deemed commenced on February 9, 2010, the date the amended complaint was filed—already beyond the January 24, 2010 deadline.

• Relation-Back Doctrine for Amended Pleadings — An amendment that merely supplements and amplifies facts originally alleged in the complaint relates back to the date of commencement of the action and is not barred by the statute of limitations that expired after service of the original complaint. However, when the amended complaint introduces new issues, causes of action, or demands, the amendment does not relate back; the original complaint is deemed abandoned and functus officio, and the suit is deemed commenced on the date the amended complaint is filed. The Court applied this doctrine by finding that the amended complaint's specification of P300 million in actual damages and double legal interest constituted new demands not alleged in the original complaint, precluding application of the relation-back doctrine.

• One-Year Prescriptive Period for Insurance Claims — The twelve-month period stipulated in an insurance policy for commencing an action after rejection of a claim, when made pursuant to Section 63 of the Insurance Code, means one year or 365 days, not 360 days. The prescriptive period is reckoned from the insured's receipt of the notice of "final rejection," which is the denial in the first instance, not the denial of a motion for reconsideration. The Court applied this by computing the period from January 24, 2009 (date of receipt of rejection) to January 24, 2010, correcting the CA's use of 360 days.

• Insurance Contract as Law Between the Parties — A contract of insurance is the law between the parties, and its terms and conditions constitute the measure of the insurer's liability. Compliance with policy stipulations is a condition precedent to the insured's right of recovery. The Court relied on this principle to enforce Condition No. 27 of the fire insurance policies as binding on petitioner.

• "An amended complaint supersedes an original one. As a consequence, the original complaint is deemed withdrawn and no longer considered part of the record." — This passage articulates the general rule on the effect of filing an amended pleading on the original, which is central to the Court's holding that the prescriptive period must be reckoned from the date of the amended complaint.

• "Thus, when the amended complaint does not introduce new issues, cause of action, or demands, the suit is deemed to have commenced on the date the original complaint was filed." — This states the exception to the general rule—the relation-back doctrine—which the Court found inapplicable because the amended complaint introduced new demands.

• "We hold that the 12-month period in Condition No. 27 of the parties' fire insurance policies should refer to the period of one (1) year, or 365 days, in line with Section 63 of the Insurance Code and prevailing jurisprudence." — This corrects the Court of Appeals' use of 360 days and establishes the proper computation of the prescriptive period in insurance policies stipulated pursuant to Section 63 of the Insurance Code.

• "The 'final rejection' simply means denial by the insurer of the claims of the insured and not the rejection or denial by the insurer of the insured's motion or request for reconsideration. The rejection referred to should be construed as the rejection in the first instance." — This defines the starting point of the prescriptive period, clarifying that subsequent requests for reconsideration do not toll or reset the one-year period.

• Sun Insurance Office, Ltd. vs. Court of Appeals, 272-A Phil. 158-160 (1991) — Followed. Interpreted the twelve-month period in an insurance policy as referring to one year, pursuant to Section 63 of the Insurance Code. The Court relied on this to hold that the prescriptive period is 365 days, not 360.

• New Life Enterprises vs. Court of Appeals, G.R. No. 94071, March 31, 1992 — Followed. Adopted a similar stance interpreting the twelve-month period as one year, and cited for the proposition that the one-year requirement is essential to prompt settlement of insurance claims.

• Mercado vs. Spouses Espina, 704 Phil. 551 (2013) — Cited for the rule that an amended complaint supersedes the original complaint, which is deemed withdrawn and no longer part of the record.

• Wallem Philippines Shipping, Inc. vs. S.R. Farms, Inc., 638 Phil. 333 (2010) — Cited for the exception that an amendment which merely supplements and amplifies facts originally alleged relates back to the date of commencement of the action, and for the rule that the filing of an amended pleading does not retroact to the date of the original.

• Verzosa vs. Court of Appeals, 359 Phil. 435-436 (1998) — Cited for the proposition that when the amended complaint does not introduce new issues, causes of action, or demands, the suit is deemed commenced on the date the original complaint was filed.

• H.H. Hollero Construction, Inc. vs. Government Service Insurance System and Pool of Machineries Insurers, 744 Phil. 17 (2014) — Cited for the rule that the prescriptive period for the insured's action for indemnity should be reckoned from the "final rejection" of the claim, defined as denial in the first instance.

• Section 63, Insurance Code — Provides that any condition, stipulation, or agreement in a policy of insurance limiting the time for commencing an action to less than one year from accrual of the cause of action is void. Applied to validate Condition No. 27 of the fire insurance policies and to establish that the twelve-month period means one year or 365 days.

• Condition No. 27, Fire Insurance Policies — The action-or-suit clause requiring the insured to commence an action within twelve months from receipt of notice of rejection of a claim, failing which the claim is deemed abandoned. Applied as the contractual basis for the prescriptive period, interpreted in conjunction with Section 63 of the Insurance Code.

• Article 13, Civil Code — Provides that when the law speaks of a year, it is understood to be equivalent to 365 days. Applied to confirm that the twelve-month period in the insurance policy corresponds to 365 days, not 360 days as the CA had held.

Leonen (Chairperson), Inting, Delos Santos, and J. Lopez, JJ., concurred.