Heirs of George Y. Poe vs. Malayan Insurance Company, Inc.

A timely motion for reconsideration gives the appellant a fresh 15-day period to appeal under the Neypes rule, counted from receipt of the order denying the motion; and an insurer that admits issuing a third-party liability policy but fails to present it to prove limited liability may be held solidarily liable with the insured for the full damages awarded.

George Y. Poe's widow and children sought damages from Rhoda Santos, the owner of the ten-wheeler truck that struck him, and from Malayan Insurance Company, Inc. (MICI), which insured the truck under Policy No. CV-293-007446-8. MICI's defense centered on the limited nature of its liability under the insurance policy and on the timeliness of its appeal. The dispute required the SC to apply the fresh-period rule in appeals and to determine whether an insurer may be held solidarily liable with its insured for third-party liability.

On 26 January 1996 at about 4:45 a.m., George Y. Poe was waiting for a ride to work in front of Capital Garments Corporation, Ortigas Avenue Extension, Barangay Dolores, Taytay, Rizal, when a ten-wheeler Isuzu hauler truck with Plate No. PMH-858 ran over him. The truck was owned by Rhoda Santos and driven by Willie Labrador, and it was insured with Malayan Insurance Company, Inc. (MICI) under Policy No. CV-293-007446-8. George's widow Emercelinda and their children Flerida and Fernando filed a Complaint for damages against Rhoda and MICI in the RTC, Branch 73, Antipolo City, docketed as Civil Case No. 93-2705.

In their Joint Answer, Rhoda and MICI admitted the allegations in paragraphs 2, 3, and 4 of the Complaint and admitted that the truck was insured with MICI, but claimed that MICI's liability attached only if there was a judicial pronouncement that Rhoda and Willie were liable and that its liability was subject to the limitations set forth in the insurance policy. They denied liability for George's death, averring that the accident was caused by George's negligent act of surreptitiously and unexpectedly crossing the road, which caught Willie by surprise; that Willie tried to swerve the truck to the right but the vehicle still came into contact with George; and that Rhoda had always exercised the diligence of a good father of a family in the selection and supervision of Willie.

After pre-trial, trial on the merits ensued. Petitioners presented and offered evidence in support of their claims and then rested. The hearings for the reception of Rhoda and MICI's evidence were scheduled, but they failed to adduce their evidence despite several postponements. On 9 June 1995, upon petitioners' motion, the RTC declared that Rhoda and MICI had waived their right to present evidence and ordered the parties to submit their respective Memoranda within 15 days, after which the case would be deemed submitted for decision. Rhoda and MICI filed a Motion for Reconsideration, which the RTC denied on 11 August 1995. They then filed a Petition for Certiorari, Mandamus, Prohibition and Injunction with the CA, docketed as CA-G.R. SP No. 38948; the CA denied due course on 29 April 1996, and the SC dismissed their Petition for Certiorari in G.R. No. 126244 on 30 September 1996, with Entry of Judgment made on 8 November 1996.

On 28 February 2000, the RTC rendered a Decision ordering Rhoda and MICI to pay jointly and solidarily to petitioners moral damages of P100,000.00; actual damages for loss of earning capacity of P805,984.00; P36,000.00 for funeral expenses; P50,000.00 as exemplary damages; P50,000.00 for attorney's fees plus P1,500.00 per court appearance; and costs. MICI received a copy of the Decision on 14 March 2000. On 22 March 2000, MICI and Rhoda filed a Motion for Reconsideration. On 24 January 2001, the RTC issued an Order modifying the Decision, dismissing the case against MICI, reducing actual damages for loss of earning capacity to P102,106.00, and awarding P50,000.00 as death indemnity. Petitioners filed a Motion for Reconsideration, to which MICI filed a Vigorous Opposition. On 15 June 2001, the RTC granted petitioners' Motion for Reconsideration, set aside the 24 January 2001 Order, and reinstated the 28 February 2000 Decision. MICI received a copy of the 15 June 2001 Order on 27 June 2001. On 9 July 2001, MICI filed a Notice of Appeal; Rhoda did not join.

Petitioners filed an Opposition to the Notice of Appeal and a Motion for the Issuance of a Writ of Execution. On 6 September 2001, the RTC denied MICI's Notice of Appeal as filed out of time, reckoned from MICI's receipt of the 28 February 2000 Decision on 14 March 2000, and granted the Motion for Execution. MICI filed a Petition for Certiorari under Rule 65 with the CA, docketed as CA-G.R. SP No. 67297. The CA granted the Petition on 26 June 2002, recalled and set aside the 6 September 2001 Order, directed the RTC to approve MICI's Notice of Appeal, and ordered it to refrain from executing the writ. The CA denied petitioners' Motion for Reconsideration on 29 November 2002.

• Timeliness of Appeal: Petitioners argued that MICI's Notice of Appeal was filed out of time because the 15-day period should be reckoned from MICI's receipt of the 28 February 2000 Decision on 14 March 2000; after MICI filed its Motion for Reconsideration on 22 March 2000, only seven days remained, and the 15 June 2001 Order did not give MICI a fresh 15-day period.

• Timeliness of Appeal: MICI countered that the 15 June 2001 Order was in reality a new Decision, giving it a fresh 15-day period; it received the Order on 27 June 2001 and filed its Notice of Appeal on 9 July 2001, within the period.
• Limited Liability: MICI asserted that its liability as insurer was limited and that it should not be held solidarily liable with Rhoda for all damages; its liability attached only upon a judicial pronouncement that Rhoda and Willie were liable and was subject to the limitations in the insurance policy.
• Negligence and Diligence: MICI denied liability, claiming that George surreptitiously and unexpectedly crossed the road, catching Willie by surprise, and that Rhoda exercised the diligence of a good father of a family in selecting and supervising Willie.

• Timeliness of Notice of Appeal: Whether the CA committed grave abuse of discretion in ruling that MICI filed its Notice of Appeal within the reglementary period.
• Solidary Liability of Insurer: Whether MICI may be held solidarily liable with Rhoda for the damages awarded despite its claim of limited liability under the insurance policy.
• Damages: Whether the amounts awarded for funeral expenses, loss of earning capacity, moral damages, death indemnity, and attorney's fees are proper.

• Timeliness of Notice of Appeal: No. The CA correctly held that MICI's Notice of Appeal was timely under the fresh-period rule; MICI filed it on 9 July 2001, 12 days after receiving the 15 June 2001 Order on 27 June 2001.
• Solidary Liability of Insurer: Yes. MICI admitted it was the insurer but failed to present the policy to prove any limitation; it is solidarily liable with Rhoda for the full damages.
• Damages: The SC recomputed loss of earning capacity at P611,386.92 and retained funeral expenses of P36,000.00, moral damages of P100,000.00, death indemnity of P50,000.00, and attorney's fees of P50,000.00 plus P1,500.00 per court appearance.

• Timeliness of Notice of Appeal: Under Rule 41, Section 3 of the 1997 Rules of Court, an appeal must be taken within 15 days from notice of the judgment or final order appealed from, and a timely motion for reconsideration interrupts that period. In Neypes vs. Court of Appeals, the SC laid down the fresh period rule: a party that files a motion for reconsideration has a fresh 15 days from receipt of the order denying the motion within which to file a notice of appeal. The SC applied Neypes retroactively because rules of procedure may be given retroactive effect to actions pending and undetermined at the time of their passage, and Neypes was promulgated on 14 September 2005 while the present Petition was still pending. Here, MICI received the 15 June 2001 Order, which reinstated the 28 February 2000 Decision, on 27 June 2001, and filed its Notice of Appeal on 9 July 2001, or 12 days later. The Notice was therefore timely. The RTC's reckoning from 14 March 2000 was erroneous because the 24 January 2001 Order had dismissed the case against MICI, and the 15 June 2001 Order reinstated the 28 February 2000 Decision. Although remand would ordinarily follow, the SC decided the merits because the case had been pending for almost sixteen years and the records were complete.
• Solidary Liability of Insurer: A solidary obligation cannot lightly be inferred; it exists only when the obligation expressly so states, when the law so provides, or when the nature of the obligation so requires. Under an indemnity contract against third-party liability, the insurer is directly liable to the injured party up to the extent of the insurance policy and that required by law, but it cannot be held solidarily liable with the insured and other parties at fault beyond that amount because the insurer's liability arises from contract while the insured's liability is based on tort under the Civil Code. In Vda. de Maglana vs. Consolacion, the insurer sufficiently established its limited liability, so the injured party could recover from the insurer only up to the coverage and the balance from the insured. Here, MICI admitted it was the insurer of the truck that killed George, but it never presented the insurance policy. As the party asserting limited liability, MICI had the burden of proving it. The policy was in the custody and absolute control of MICI as insurer and/or Rhoda as insured, and MICI's failure to present it gave rise to the presumption that its presentation would be prejudicial to MICI. Without proof of the existence and extent of the alleged limitation, the SC concluded that MICI had agreed to fully indemnify third-party liabilities, so there was no difference in the amounts recoverable from Rhoda or MICI and their liabilities were solidary.
• Damages: Under Article 2199 of the Civil Code, actual damages are awarded only for pecuniary loss duly proved. The SC sustained the P36,000.00 funeral expenses because petitioners presented receipts and held a wake for two days at their residence and another two days at Loyola Memorial Park. For loss of earning capacity, Article 2206 of the Civil Code allows compensation to the heirs, and the SC applied the net earning capacity formula: life expectancy = 2/3 x [80 - age at death], and net earning capacity = life expectancy x (gross annual income - reasonable and necessary living expenses). The SC used the figures in the records, including monthly income of P6,946.00, gross annual income of P83,352.00, living expenses at 50% or P41,676.00, and life expectancy of 14.67 years, yielding P611,386.92. The SC sustained the P100,000.00 moral damages because petitioners testified to intense suffering from George's sudden death, and the P50,000.00 death indemnity in accordance with current rulings. It also awarded P50,000.00 attorney's fees plus P1,500.00 per court appearance under Article 2008 of the Civil Code, following Metro Manila Transit Corporation vs. Court of Appeals.

• Fresh period rule (Neypes doctrine) — A timely motion for reconsideration gives the appellant a fresh 15-day period to appeal, counted from receipt of the order denying the motion. The SC applied it retroactively to MICI's Notice of Appeal because the rule is procedural and the case was pending when Neypes was promulgated.
• Insurer's direct but non-solidary liability — Under a third-party liability insurance contract, the insurer is directly liable to the injured party up to the policy coverage, but it is not solidarily liable with the insured because the insurer's liability arises from contract while the insured's liability is based on tort. The SC held MICI solidarily liable only because it failed to prove the policy's limitation.
• Burden of proof and adverse inference — The party alleging a fact, including limited liability, must prove it. Failure to produce evidence in one's control gives rise to the presumption that the evidence would be prejudicial. The SC applied this to MICI's failure to present the insurance policy.
• Net earning capacity formula — Life expectancy is computed as 2/3 x [80 - age of deceased at time of death]; net earning capacity is life expectancy x (gross annual income - reasonable and necessary living expenses). Absent proof, living expenses are fixed at 50% of gross annual income. The SC used this to award P611,386.92.
• Remand not necessary — The SC may decide a case on the merits instead of remanding it when the records are complete, the trial court has received all the evidence, or public interest demands an early disposition. The SC applied this due to the almost sixteen-year pendency of the case.

• "To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to appeal their cases, the Court deems it practical to allow a fresh period of 15 days within which to file the notice of appeal in the Regional Trial Court, counted from receipt of the order dismissing a motion for a new trial or motion for reconsideration." — The SC quoted this from Neypes and applied it to hold MICI's Notice of Appeal timely.
• "The direct liability of the insurer under indemnity contracts against third party liability does not mean, however, that the insurer can be held solidarily liable with the insured and/or the other parties found at fault, since they are being held liable under different obligations." — The SC stated the general rule that an insurer's liability is not solidary with the insured's tort liability.
• "The failure of respondent MICI to present the insurance policy - which, understandably, is not in petitioners' possession, but in the custody and absolute control of respondent MICI as the insurer and/or Rhoda as the insured - gives rise to the presumption that its presentation is prejudicial to the cause of respondent MICI." — The SC used this adverse inference to reject MICI's claim of limited liability.
• "Given the admission of respondent MICI that it is the insurer of the truck involved in the accident that killed George, and in the utter absence of proof to establish both the existence and the extent/amount of the alleged limited liability of respondent MICI as insurer, the Court could only conclude that respondent MICI had agreed to fully indemnify third-party liabilities." — The SC concluded that MICI's liability was solidary with Rhoda for the full damages.

• Neypes vs. Court of Appeals, G.R. No. 141524, 14 September 2005, 469 SCRA 633 — Controlling precedent; laid down the fresh period rule, which the SC applied retroactively to MICI's Notice of Appeal.
• Vda. de Maglana vs. Consolacion, G.R. No. 60506, 6 August 1992, 212 SCRA 218 — Distinguished; the insurer there sufficiently established its limited liability, unlike MICI.
• Villa Rey Transit, Inc. vs. Court of Appeals, G.R. No. L-25499, 18 February 1970, 31 SCRA 511 — Followed for the computation of net earning capacity.
• Metro Manila Transit Corporation vs. Court of Appeals, 359 Phil. 18 (1998) — Followed for the rule that an insurer is not solidarily liable beyond the policy coverage and for the award of attorney's fees.
• Republic vs. Court of Appeals, 447 Phil. 385 (2003) — Cited for the retroactive application of procedural rules to pending cases.
• De los Santos vs. Vda de Mangubat, G.R. No. 149508, 10 October 2007, 535 SCRA 411 — Cited for the rule that procedural law may be applied retroactively without violating vested rights.
• Lao vs. People, G.R. No. 159404, 27 June 2008, 556 SCRA 120 — Cited for avoiding remand in the interest of speedy justice.
• Candano Shipping Lines, Inc. vs. Sugata-on, G.R. No. 163212, 13 March 2007, 518 SCRA 221 — Cited for the net earning capacity formula and the 50% living expenses rule.

• Rule 41, Section 3, 1997 Rules of Court — An appeal must be taken within 15 days from notice of the judgment or final order appealed from; a timely motion for reconsideration interrupts the period. The SC applied this with the fresh period rule.
• Rule 131, Section 1, Rules of Court — The party alleging a fact has the burden of proving it. The SC applied this to MICI's claim of limited liability.
• Article 2176, Civil Code — Whoever causes damage to another by fault or negligence is obliged to pay for the damage; this is a quasi-delict. The SC cited this as the basis of the insured's liability.
• Article 2180, Civil Code — Employers are liable for damages caused by their employees acting within the scope of their assigned tasks. The SC cited this in relation to Rhoda's liability as owner/employer.
• Article 2199, Civil Code — Actual damages are awarded only for pecuniary loss duly proved. The SC applied this to the funeral expenses.
• Article 2206, Civil Code — In addition to death indemnity, the defendant is liable for the loss of earning capacity of the deceased, paid to the heirs. The SC applied this in computing P611,386.92.
• Article 2008, Civil Code — Attorney's fees may be granted when a party is compelled to litigate or incur expenses to protect his interest by reason of an unjustified act of the other party. The SC awarded P50,000.00 plus P1,500.00 per court appearance.