Dela Fuente vs. Fortune Life Insurance Co.

Where a debtor takes out a life insurance policy on his own life and designates his creditor as beneficiary, the creditor-beneficiary is entitled to recover the insured's outstanding obligation at the time of death, up to the face value of the policy, regardless of the amount owed when the policy took effect. The insurer bears the burden of proving that the insured's death falls within an excepted risk such as suicide, and must do so through admissible evidence meeting the preponderance standard.

Susan Co Dela Fuente (Susan) invested sums of money in the lending business of Reuben Protacio (Reuben), making her a creditor of Reuben. Reuben applied for a life insurance policy with Fortune Life Insurance Co., Inc. (Fortune) in the amount of ₱15,000,000.00, naming Susan as the revocable beneficiary. The policy contained a self-destruction clause providing that death by self-destruction within two years from the policy date would be governed by the pertinent provisions of the Insurance Code, with a refund of premiums if the death was not compensable. The arrangement was intended to secure Reuben's debt to Susan, with the policy assigned to her as creditor up to the extent of his indebtedness.

On February 17, 2011, Susan Co Dela Fuente invested ₱2,000,000.00 in the lending business of Reuben Protacio. She made additional investments of ₱1,000,000.00 on March 3, 2011 and another ₱1,000,000.00 on March 14, 2011, bringing her total investment to ₱4,000,000.00 before the insurance policy took effect. On March 10, 2011, Reuben applied for a life insurance policy with Fortune Life Insurance Co., Inc. in the amount of ₱15,000,000.00, naming Susan as the revocable beneficiary. Policy No. 61761 was issued on March 25, 2011 after the premium of ₱82,500.00 was paid. The policy contained a self-destruction clause stating that in case of death of the insured by self-destruction within two years from the policy date, the pertinent provisions of the Insurance Code shall apply, and where the death is not compensable, the insurer shall refund the premiums actually paid less indebtedness. On March 28, 2011, Susan invested an additional ₱12,000,000.00 in Reuben's business, bringing her total investment to ₱16,000,000.00.

On April 15, 2011, Reuben died of a gunshot wound to the chest. Medico Legal Report No. M-239-2011 prepared by Dr. Voltaire P. Nulud confirmed the cause of death as a gunshot wound to the trunk. About a month after the policy was issued, Susan submitted a copy of Policy No. 61761 to claim its proceeds. Fortune conducted an investigation and uncovered a Clinical Abstract executed by Dr. Allen Pagayatan, who stated that he interviewed Randolph Protacio, Reuben's brother, within minutes after Randolph brought Reuben to the emergency room of Makati Medical Center. According to Dr. Pagayatan's account of the interview, Randolph stated that prior to the shooting incident, Reuben had intimated that he already wanted to die, and that after Randolph thought he had pacified Reuben and left the room, he heard a gunshot and found Reuben bleeding. Based on this information, Fortune denied Susan's claim and refunded ₱80,643.00 representing the premiums paid less service charge, which Susan refused to accept.

Susan thereafter filed a complaint for a sum of money and damages against Fortune. Fortune argued that Susan had no insurable interest over the life of Reuben at the time the policy was secured, asserting that her investment was only ₱3,000,000.00 when the policy was issued and that ₱2,000,000.00 had already been refunded to her by Rossana Ajon, a business partner of Reuben. Fortune further contended that Reuben's death was due to suicide, an excepted risk under the policy. The RTC found in favor of Susan, ruling that Fortune failed to establish by preponderance of evidence that Reuben committed suicide, and that the statement Randolph gave to Dr. Pagayatan could not be admitted as res gestae because a considerable amount of time had lapsed, depriving it of spontaneity. The CA reversed the RTC, holding that the evidence proved suicide: it found Randolph's statement to Dr. Pagayatan to be spontaneous and admissible as res gestae, and gave credence to the testimony of Dr. Raquel Fortun, a forensic pathologist engaged by Fortune, who opined that the bullet trajectory supported a deliberate self-inflicted shot. Susan filed the present petition assailing the CA's ruling.

• Accidental Death: Susan insisted that Reuben's death was compensable because he died when he accidentally fired his gun while cleaning it, and argued that the CA erred in holding that the absence of a gun cleaning kit disproved accidental shooting.
• Inadmissibility of Randolph's Statement: Susan argued that Dr. Pagayatan's testimony on the information Randolph relayed to him is inadmissible and cannot be considered part of res gestae because it was not spontaneously given, more than 15 minutes having elapsed between the shooting and the alleged statement at the emergency room.
• Bias of Expert Witness: Susan claimed that the testimony of Dr. Fortun is biased and weak since she is an expert witness hired by Fortune.
• Impartiality of Dr. Nulud: Susan posited that the CA should have appreciated Dr. Nulud's open-mindedness in entertaining the possibility that Reuben killed himself as a sign of impartiality, noting that his opinion was based on the absence of muzzle imprint, the direction and trajectory of the bullet, and the negative paraffin examination result.
• Laches Bar on Timeliness Objection: Susan asserted that Fortune is barred by laches from questioning the timeliness of the filing of the petition because the belated filing of the Motion for Reconsideration was not raised in the Comment/Opposition to Susan's Motion for Reconsideration before the CA.

• Timeliness of Petition: Fortune highlighted that Susan belatedly filed her Motion for Reconsideration of the CA Decision, having received it on March 1, 2016 but filing only on March 17, 2016, or 16 days after receipt, one day beyond the reglementary period under Section 1, Rule 52 of the Rules of Court.
• Excepted Risk of Suicide: Fortune maintained that Reuben's death was an excepted risk, pointing to the absence of a cleaning kit or any cleaning material at the scene as disproving Susan's claim of accidental shooting while cleaning a gun.
• Admissibility of Res Gestae: Fortune argued that Randolph's statement to Dr. Pagayatan qualified as part of res gestae, an exception to the hearsay rule, having been spontaneously given under circumstances that would bar fabrication.
• Credence to Expert Testimony: Fortune submitted that the CA correctly gave credence to the testimony of Dr. Fortun, a known forensic pathologist, who opined that Reuben committed suicide.
• Limitation of Liability: Fortune argued that even if liable, its liability should be limited to ₱1,000,000.00 because Susan's investment at the time the policy took effect was only ₱3,000,000.00, of which ₱2,000,000.00 had already been returned by Rossana, and the additional ₱12,000,000.00 was invested after the policy took effect.

• Laches/Waiver of Timeliness Objection: Whether Fortune is barred by laches from questioning the timeliness of the filing of the petition because the issue on the belated filing of the Motion for Reconsideration was not raised in the Comment/Opposition to Susan's Motion for Reconsideration.
• Burden of Proving Excepted Risk: Whether the insurer carries the burden of proving that the insured's death was caused by suicide or self-destruction.
• Admissibility of Res Gestae Statement: Whether the statement Randolph gave to Dr. Pagayatan qualifies as part of res gestae and is admissible as an exception to the hearsay rule.
• Sufficiency of Evidence on Suicide: Whether the evidence presented by Fortune is sufficient to prove by preponderance of evidence that Reuben committed suicide.
• Extent of Insurable Interest and Recovery: Whether Susan, as creditor of Reuben and beneficiary of the policy, is entitled to the entire face value of the policy in the amount of ₱15,000,000.00 despite the fact that her insurable interest at the time the policy took effect was only ₱4,000,000.00 and Rossana had already returned ₱2,000,000.00.

• Laches/Waiver of Timeliness Objection: Yes. Fortune is barred from raising the belated filing of the motion for reconsideration in its Comment to the petition, having failed to interpose any objection on timeliness in its Comment/Opposition before the CA.
• Burden of Proving Excepted Risk: Yes. The burden of proving suicide as the cause of death to avoid liability rests on the insurer, not the beneficiary, pursuant to the principle that an insurer seeking to defeat a claim based on an exception in the policy must establish that the loss falls within the exception.
• Admissibility of Res Gestae Statement: No. The statement Randolph gave to Dr. Pagayatan is not the res gestae contemplated by the Rules, as Dr. Pagayatan was neither a participant, victim, nor spectator to the death, and Randolph himself was not a participant, victim, or spectator to the act in controversy.
• Sufficiency of Evidence on Suicide: No. Fortune failed to discharge its burden of proving by preponderance of evidence that Reuben's death was caused by suicide, the testimony of Dr. Fortun being based solely on documentary evidence without a personal autopsy, and the police investigation report concluding the death was accidental.
• Extent of Insurable Interest and Recovery: Yes, in part. Susan is entitled to recover Reuben's outstanding obligation at the time of his death, capped at the policy's face value of ₱15,000,000.00, but the ₱2,000,000.00 already received from Rossana must be deducted, yielding ₱14,000,000.00.

• Laches/Waiver of Timeliness Objection: Although Susan's Motion for Reconsideration before the CA was filed 16 days after receipt of the assailed Decision—one day beyond the 15-day reglementary period under Section 1, Rule 52 of the Rules of Court—the Court relaxed the rules under exceptional circumstances where stringent application would result in manifest injustice, as Susan stood to lose her entire investment over a one-day delay. Moreover, because Fortune did not interpose any objection to the timeliness of the motion in its Comment/Opposition before the CA, it was deemed to have waived the issue and could no longer raise it in its Comment to the petition before the Supreme Court. The doctrine of laches barred Fortune from belatedly questioning the filing's timeliness.

• Burden of Proving Excepted Risk: Citing United Merchants Corp. vs. Country Bankers Insurance Corp., the Court reaffirmed the principle that an insurer who seeks to defeat a claim because of an exception or limitation in the policy bears the burden of establishing that the loss comes within the purview of the exception. If a loss is proved apparently within a contract of insurance, the burden is upon the insurer to establish that the loss arose from an excepted cause or one for which it is not liable. In the context of life insurance, the burden of proving suicide as the cause of death to avoid liability rests on the insurer. Fortune therefore had the obligation to prove suicide to defeat Susan's claim.

• Admissibility of Res Gestae Statement: Section 42 of Rule 130 of the Rules of Court allows statements made by a person while a startling occurrence is taking place or immediately prior or subsequent thereto as part of res gestae. In People vs. Dianos, the Court explained that the exclamations contemplated are those made by participants, victims, or spectators to a crime, immediately before, during, or immediately after the commission, when the circumstances are such that the statements constitute spontaneous reaction inspired by the excitement of the occasion, with no opportunity to deliberate or fabricate. Dr. Pagayatan was neither a participant, victim, nor spectator to Reuben's death; he merely repeated what Randolph relayed to him. Randolph himself was also not a participant, victim, or spectator to the act in controversy, as nobody witnessed Reuben take his own life. The information relayed through multiple layers cannot be admitted as proof of the veracity of its content and does not qualify as res gestae.

• Sufficiency of Evidence on Suicide: The CA erroneously relied on Dr. Fortun's testimony, which was confined to documentary evidence—the medico-legal report, investigation report, and photographs—without conducting a personal autopsy on Reuben's body, which had already been cremated. Between Dr. Fortun, who did not examine the body, and Dr. Nulud, who actually conducted the autopsy and prepared the medico-legal report, the latter's findings deserved greater weight. Dr. Nulud concluded the wound was not self-inflicted based on three factors: (1) the distance range of the firearm from the wound's point of entry resulting in the absence of muzzle imprinting; (2) the direction and trajectory of the bullet; and (3) the negative paraffin examination on the victim's hands. Dr. Fortun herself admitted that an accidental shooting producing a front-to-back trajectory was "not impossible," contradicting her own conclusion that the trajectory indicated a deliberate self-inflicted shot. Dr. Fortun also lacked expertise in forensic chemistry, rendering her testimony on gunpowder residue without weight. The Final Investigation Report prepared by PO3 Caramat concluded that Reuben died of an accidental gunshot wound, based on the absence of a direct witness and the information that Reuben told his brother he was cleaning his gun before the shot rang out. Fortune failed to refute Dr. Nulud's findings, and the totality of evidence supported the conclusion of accidental death rather than suicide.

• Extent of Insurable Interest and Recovery: Fortune's argument that liability should be limited to the amount owed when the policy took effect was belied by the Endorsement Letter issued by Fortune's own Senior Manager, which stated that the policy was assigned to Susan "as creditor, up to the extent of the indebtedness, the balance if any, to the designated beneficiaries"—language that did not restrict recovery to the indebtedness existing at the time of effectivity. Section 10(c) of the Insurance Code recognizes insurable interest in any person under a legal obligation for the payment of money. Drawing on Crotty vs. Union Mutual Life Ins. Co. of Maine and Professor Sulpicio Guevara's treatise, the Court distinguished between a policy taken by a debtor on his own life made payable to his creditor and one taken by a creditor on the life of his debtor. Where the debtor insures his own life for the benefit of his creditor, the creditor is entitled to the value of the outstanding obligation at the time of death, up to the policy's face value. Reuben intended the policy as collateral for his debt. Susan's total investment at the time of Reuben's death was ₱16,000,000.00, exceeding the ₱15,000,000.00 face value. However, applying the State's policy against wagering contracts and principles of equity, the ₱2,000,000.00 already received from Rossana was deducted, yielding a recoverable amount of ₱14,000,000.00.

• Burden of Proof on Excepted Risks in Insurance — An insurer who seeks to defeat a claim because of an exception or limitation in the policy has the burden of establishing that the loss comes within the purview of the exception or limitation. If loss is proved apparently within a contract of insurance, the burden is upon the insurer to establish that the loss arose from a cause which is excepted or for which it is not liable. In life insurance, the burden of proving suicide as the cause of death to avoid liability rests on the insurer.

• Res Gestae under Section 42, Rule 130 — Statements made by a person while a startling occurrence is taking place or immediately prior or subsequent thereto, with respect to the circumstances thereof, may be given in evidence as part of the res gestae. The exclamations and statements contemplated must be made by participants, victims, or spectators to the crime, immediately before, during, or immediately after the commission, when the circumstances are such that the statements constitute spontaneous reaction inspired by the excitement of the occasion, with no opportunity for the declarant to deliberate and fabricate. A witness who merely repeats what was relayed to him by another person who was not a participant, victim, or spectator to the act cannot testify to such statement as res gestae.

• Insurable Interest of a Creditor-Beneficiary — Under Section 10(c) of the Insurance Code, every person has an insurable interest in the life of any person under a legal obligation to him for the payment of money. Where a debtor in good faith insures his life for the benefit of his creditor, the creditor is entitled to the value of the debtor's outstanding obligation at the time of death, up to the face value of the policy. The insurable interest is not limited to the amount owed at the time the policy took effect. Amounts already recovered from other sources must be deducted to prevent unjust enrichment, and the maximum recoverable amount is capped at the policy's face value.

• Distinction Between Debtor-Originated and Creditor-Originated Policies — Where a debtor takes out a policy on his own life and makes it payable to his creditor, full payment of the debt does not invalidate the policy, and the creditor is entitled to the outstanding obligation at the time of death up to the face value. Where a creditor takes out a policy on the life of his debtor, the insuring creditor can only recover such amount as remains unpaid at the time of the debtor's death; if the whole debt has been paid, recovery is no longer permissible.

• "An insurer who seeks to defeat a claim because of an exception or limitation in the policy has the burden of establishing that the loss comes within the purview of the exception or limitation. If loss is proved apparently within a contract of insurance, the burden is upon the insurer to establish that the loss arose from a cause of loss which is excepted or for which it is not liable, or from a cause which limits its liability." — This passage articulates the controlling doctrine on the allocation of burden of proof when an insurer invokes an excepted risk, here applied to require Fortune to prove suicide.

• "Here, Dr. Pagayatan was neither a participant, victim, or spectator to the death of Reuben. He merely repeated in court what was relayed to him by Randolph who was also not a participant, victim or spectator to the act in controversy." — This passage defines the limits of the res gestae exception, establishing that double-hearsay relayed through a non-witness cannot qualify as a spontaneous statement under Section 42, Rule 130.

• "The insurable interest of Susan is not limited to just what Reuben owed her at the time the policy took effect. Instead, she becomes entitled to the value of Reuben's outstanding obligation at the time of his death the maximum recoverable amount of which is the face value of the policy." — This passage states the ratio decidendi on the extent of a creditor-beneficiary's insurable interest under a debtor-originated policy, capping recovery at the face value while extending it to the full outstanding obligation at death.

• United Merchants Corp. vs. Country Bankers Insurance Corp., 690 Phil. 734 (2012) — Controlling precedent on the burden of proof for excepted risks; the insurer bears the burden of establishing that the loss falls within an exception or limitation in the policy. Followed and applied to require Fortune to prove suicide.

• People vs. Dianos, 357 Phil. 871 (1998) — Cited for the canonical formulation of the res gestae exception to the hearsay rule, requiring that statements be made by participants, victims, or spectators spontaneously during or immediately after a startling occurrence. Followed to exclude Randolph's relayed statement.

• Crotty vs. Union Mutual Life Ins. Co. of Maine, 144 U.S. 621 — U.S. Supreme Court precedent cited as instructive on the distinction between debtor-originated and creditor-originated policies. Applied to determine that Susan, as beneficiary of a policy taken by Reuben on his own life, was entitled to recover the outstanding obligation at the time of death up to the face value.

• Nacar vs. Gallery Frames and/or Felipe Bordey, Jr., 716 Phil. 267 (2013) — Controlling precedent on the applicable legal interest rates. Applied to impose 12% per annum interest from the date of filing of the complaint until June 30, 2013, and 6% per annum from July 1, 2013 until full satisfaction.

• Philippine Bank of Communications vs. Court of Appeals, 805 Phil. 964 (2017) — Cited for the proposition that under exceptional circumstances, such as when stringent application of the rules will result in manifest injustice, the Court may set aside technicalities and proceed with the petition.

• Section 1, Rule 52, Rules of Court — Provides that a motion for reconsideration of a judgment or final resolution must be filed within 15 days from notice thereof, with proof of service on the adverse party. Applied to determine that Susan's motion was filed one day late, but the Court relaxed the rule under exceptional circumstances to avoid manifest injustice.

• Section 36, Rule 130, Rules of Court — Provides the general rule that a witness can testify only to facts of personal knowledge derived from personal perception. Cited to establish the default rule against hearsay before discussing exceptions.

• Section 42, Rule 130, Rules of Court — Defines res gestae as an exception to the hearsay rule, allowing statements made by a person while a startling occurrence is taking place or immediately prior or subsequent thereto. Applied to exclude Randolph's statement relayed through Dr. Pagayatan, as neither qualified as a declarant with personal knowledge of the startling occurrence.

• Section 3, Insurance Code (Republic Act No. 10607) — Requires the presence of insurable interest for a contract of insurance to be valid, embodying the State's policy against wagering contracts. Applied to confirm the validity of the policy and to ensure recovery was limited to the extent of actual indebtedness.

• Section 10(c), Insurance Code (Republic Act No. 10607) — Enumerates insurable interest in the life and health of any person under a legal obligation to the insured for the payment of money. Applied to establish Susan's insurable interest as Reuben's creditor.

• Bangko Sentral ng Pilipinas Monetary Board Circular No. 799 — Took effect on July 1, 2013, modifying the imposable interest rates. Applied through the framework in Nacar to impose 12% interest per annum until June 30, 2013 and 6% per annum thereafter.

Peralta, C.J., Caguioa, Zalameda, and Gaerlan, JJ., concurred.