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~upreme <lI:ourt
fflanila

FIRST DIVISION

NOTICE

Sirs/Mesdames:

Please take notice that the Court, First Division, issued a Resolution
dated July 5, 2023, which reads as follows:

"G.R. No. 252785 (UCPB General Insurance Company, Inc. v.

Frabelle Fishing Corporation). - In this Petition for Review on Certiorari 1
(Petition) under Rule 45 of the Rules of Court, petitioner UCPB General
Insurance Company, Inc. (petitioner) seeks to reverse and set aside the
Resolutions dated 11 December 2019 2 and 30 June 2020 3 ; and reinstate the
Resolution4 dated 25 July 2019 promulgated by the Court of Appeals (CA)
in CA-G.R. CV. No. 111705.

Antecedents

The case involves an insurance claim made under a marine hull policy
issued by petitioner UCPB General Insurance Company, Inc. (UCPB Gen) in
favor of respondent Frabelle Fishing Corporation (Frabelle ), a corporation
engaged in domestic and international deep-sea fishing and domestic and
.overseas shipping. 5 Initially, UCPB Gen allowed the claim and paid the
insured amount. Later on, UCPB Gen sought to recover the amount paid to
Frabelle due to alleged bad faith and misrepresentations made by Frabelle

1
Rollo, pp. 9-70.
2
Id. at 84-89. Penned by Associate Justice Edwin D. Sorongon and concurred in by Associate Justices
Celia C. Librea-Leagogo and Geraldine C. Fiel-Macaraig.
3
Id. at 91-94. Penned by Associate Justice Edwin D. Sorongon and concurred in by Associate Justices
Celia C. Librea-Leagogo and Geraldine C. Fiel-Macaraig.
4
Id. at 75-82. Penned by Associate Justice Edwin D. Sorongon and concurred in by Associate Justices
Celia C. Librea-Leagogo and Geraldine C. Piel-Macaraig.
5
Id. at 95.

- over - eighteen (18) pages ...

376
Resolution 2 G.R. No. 252785
July 5, 2023

which should have avoided recovery under the marine hull policy. 6 Thi
eventually led UCPB Gen to file a Complaint7 with Very Urgent Prayer Jo
Issuance of Writ of Preliminary Attachment (Complaint) before the Regiona
Trial Court (RTC) of Makati City, Branch 46, against Frabelle and anothe
entity, FFC Subic Seafoods Corporation (FFC Subic). 8

Based on the Complaint, Frabelle obtained from UCPB Gen Marin

Hull Policy No. MH-HMH-HO-12-0000044-01 9 for its several fishin
vessels, namely: ALPINE PINK; AMARYLLIS; GOLDEN SAPPHIRE;
SUNFLOWER 88; SILVER QUEEN; VANILLA; ZINNIA 5; GOLDE
SHOWER 888; SUNFLOWER 888; JASMIN 88; APPLE BLOSSOM 888;
GLAXINIA 888; PRJMROSE 888; VANDA 888; MISTLETOE 888 and
ORCHIDS 888. 10 The policy was valid for a period of one year from 14
November 2012 to 14 November 2013. 11

After Policy No. MH-HMH-HO-12-0000044-01 expired, Frabelle

renewed the policy. On 09 December 2013, UCPB Gen issued renewal
Policy No. MH-HMH-HO-13-0000029-02 12 providing insurance coverage
for the same fishing vessels from 14 November 2013 to 14 November
2014. 13

Both policies contained a "Disclosure Obligation" provision which

states that:

"Failure by the assured to disclose all material information to

insurers of misrepresentation of any material information whether
deliberately or i1mocently prior to attachment of the policy shall entitle
insurers to treat this policy as void from inception at underwriter's
discretion. Furthermore, the assured and assurecl's insurance agent shall be
under a continuing duty to disclose any material change in circumstance
throughout the currency of this policy and failure to do so shall similarly
entitle underwriters to treat this policy as void from inception arising
hereunder. 14

On 03 February 2014, within the period covered by the renewal

policy, Frabelle through its insurance broker, Winebrenner & Ifiigo
Insurance Brokers, Inc., informed UCPB Gen that its vessel, APPLE
BLOSSOM 888, capsized and sank on 02 February 2014 while on dry-dock
at the shipyard Tsuneishi Heavy Industries (Cebu), Inc. (Tsuneishi). The

6
ld.atlOI.
7
Id . at 95-106.
8
Id.
9
Id.at393-413 .
10
Id. at 96.
11 Id .
12
Id. at 414-434.
13
Id. at 96.
,. Id.

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376
. Resolution 3 G.R. No. 252785
July 5, 2023

same day, Frabelle served its claim letter to Tsuneishi holding it liable for th
loss of APPLE BLOSSOM 888. 15

UCPB Gen conducted an investigation and found out that on 1

October 2013, FFC Subic was the one that brought the vessel to Tsuneish·
for dry docking and repair. While APPLE BLOSSOM 888 was undergoin
repair and refloating operations, the vessel listed on her starboard an
eventually sank." UCPB Gen also found out that the loss was due to
Tsuneishi 's gross negligence and omission in failing to take prope
corrective measures to ensure the vessel's safety after being refloated. As a
.result, Frabelle declared a total loss with UCPB Gen in the amount o ·
US$2,500,000.00, which is the same amount declared by Frabelle in the
policy. 16

UCPB Gen paid Frabelle the amount US$2,050,000.00. By right of

subrogation, UCPB Gen sent a letter dated 11 August 2015 to Tsuneishi
asking for reimbursement. Tsuneishi replied that a Compromise Agreement
has been reached between it and FFC SUBIC without recourse. 17 Tsuneishi
also cited a confidentiality clause that proscribes further disclosure of the
terms of the agreement. 18 A series of exchanges ensued between UCPB Gen
and Tsuneishi but to no avail.

On 05 November 2015, UCPB Gen sought confirmation from Frabelle

regarding the Compromise Agreement entered into between Tsuneishi and
FFC Subic/Frabelle. On 27 November 2015, Frabelle replied confirming the
settlement
. agreement with Tsuneishi. It claimed that the . settlement was
reached to maintain good business relations; not to compensate for the
'damage sustained by the vessel but to answer for other losses suffered. 19

UCPB Gen sent a demand letter to Frabelle on 17 December 2015 for

the retun1 of the insurance proceeds. FFC Subic was likewise furnished with
a copy of the demand letter. Neither Frabelle nor FFC Subic replied to the
letter. 20

On 31 May 2016, UCPB Gen received a copy of the Certificate of

Ownership 21 issued by the Maritime Industry Authority (MARINA)
indicating that as of 05 September 2013, Frabelle no longer owned APPLE
BLOSSOM 888, and that FFC Subic is its new owner. This was three

15
Id.
16
Id. at 97.
i1 . Id.
18
Id . at 164.
19
• Id. at 173-174.
20
Id. at 98.
21
Id. at 177.

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376
Resolution 4 G.R. No. 252785
July 5, 2023

months before Frabelle obtained the renewal policy. 22

Hence, the Complaint, stating that the fraudulent and deceptive acts o
Frabelle breached the "Disclosure Obligations" provision of the policy. I
also claimed that Frabelle no longer has insurable interest at the time of the
loss. Regarding FFC Subic, UCPB Gen stated that the former acted in bad
faith and was guilty of fraud in choosing to remain silent on the entire
ordeal. 23

In supp01i for its application for the issuance of the Writ o ·

Preliminary Attachment, UCPB Gen claimed that based on Sec. 1( d), Rule
57 of the Rules of Court, the deliberate and fraudulent acts of Frabelle and
FFC Subic entitle it to the issuance of the said writ. An ex-parte hearing for
the preliminary attachment was conducted by the RTC on 29 July 2016. 24

On 22 August 2016, the RTC issued an Order25 granting the prayer for
the issuance of a Writ of Preliminary Attachment conditioned upon the .
posting of a bond in the amount ofUS$2,050,000.00 or its peso equivalent. 26

Meanwhile, Frabelle filed its Answer with Compulsory

Counterclaim. 27 Frabelle claimed that it never concealed transferring
ownership of APPLE BLOSSOM 888. The fleet insurance covers several
vessels and during the effectivity of the renewal policy, Frabelle amended
the policy to reflect the c01Tect insured's name of the vessel. UCPB Gen
acknowledged this change when it issued an Endorsement Schedule 28 on
February 2014. 29

Frabelle also asserted that UCPB Gen denied their claim twice, not for
concealment but on the alleged breach of the Condition Valuation Survey. 30
Despite such denial, UCPB Gen paid Frabelle · the amount of
US$2,050,000.00 on 11 June 2015, more than a year after the loss. Frabelle's
.ins1u-ance broker even wrote UCPB Gen for the difference between the
amount paid and the insured value of the vessel. UCPB Gen refused to pay
the balance for alleged breach of the terms of the insurance, but maintained
that the previous amount paid was made on an ex-gratia or voluntary basis
to preserve goodwill. This also explains why UCPB Gen never issued a
subrogation receipt. 3 1 UCPB Gen is therefore estopped from recovering the

22
Id.at99.
23
ld.atl00-101.
24 fd .
25
Id. at 178-1 82.
26 Id.
27
Id . at 183-199.
28
Id . at 4 78-479.
29
Id. at 191.
30
Id . at 187.
31
Id. at 187-188.

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376
Resolution 5 G.R. No. 252785
July 5, 2023

amount it paid ex-gratia. 32

After both parties filed their respective pre-trial briefs, Frabelle filed a
Motion for Summary Judgment. UCPB Gen believes that Frabelle concealed
the matter of transferring ownership of APPLE BLOSSOM 888 to FFC
Subic. But Frabelle asse1is the contrary: UCPB Gen was aware of the
transfer when it executed the Endorsement Letter naming FFC Subic as the
insured. Besides, UCPB Gen paid the amount on an ex-gratia basis. Thus,
for Frabelle, there is no genuine issue and that the Complaint should be
dismissed.

UCPB Gen filed a Comment/Opposition33 to the Frabelle's Motion.

Ruling of the RTC

On 26 April 2018, the RTC issued an Order34 granting Frabelle's

Motion for Summary Judgement and dismissing the Complaint. The RTC
declared that the documents and correspondences made by UCPB Gen
disprove any form of concealment on the part of Frabelle. 35 The dispositive
portion of the RTC's Order reads:

WHEREFORE, premises considered, defendant Frabelle Fishing

Corporation's Motion/or Summary Judgment filed on 04 August 2017 to
be well-taken, the same is hereby GRANTED, and judgment is hereby
rendered DISMISSING the present Complaint.

SO ORDERED. 36

A series of submissions · were made by both parties, including a

Motion for Reconsideration filed by UCPB Gen on 22 May 2018, which, the
RTC Denied its Order dated 28 August 2018. 37 The dispositive portion of the
said Order reads:

WHEREFORE, premises considered, finding no cogent reason

why this Court should reconsider its Order dated 26 April 2018, plaintiff
UCPB General Insurance Company, Inc. 's Motion for Reconsideration
filed on 22 May 2018 is hereby ordered DENIED for lack of merit.

SO ORDERED. 38

32
Id. at 192.
33
fd. at 307-315.
34
Id. at 540-549.
35 Id.
36
Id. at 549.
37
Id. at 550-555.
38
Id. at 555 .

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376
Resolution 6 G.R. No. 252785
July 5, 2023

On 07 September 2018, UCPB Gen filed an appeal under Sec. 4, Rule

41 of the Rules of Court. In turn, Frabelle filed a Motion to Dismiss Appeal:
stating that the proper remedy was to file a Petition for Review under Rule
45, and not an ordinary appeal under Rule 41. 39

Ruling of the CA

Initially, the CA, in its Resolution 40 dated 25 July 2019, denied

Frabelle's Motion to Dismiss Appeal and ordered the latter to file its
Appellee's Brief. The dispositive portion thereof reads:

WHEREFORE, without prejudice to the main case, the instant

Motion To Dismiss Appeal is DENIED for lack of merit. Accordingly,
defendant-appellee is hereby ORDERED to file its Appellee's Brief
within thirty (30) days from notice to which plaintiff-appellant may file its
Reply Brief within twenty (20) days from receipt of the Appellee's Brief.

SO ORDERED. 41

On Motion for Reconsideration with Motion to Defer Submission of

Appellee's Brief, however, the CA in its Resolution42 dated 11 December
2019, dismissed the appeal. 43 The dispositive portion thereof reads:

WHEREFORE, premises considered, the instant Motion for

Reconsideration is GRANTED. The July 25, 2019 Resolution of this
Court is hereby REVERSED and SET ASIDE. Consequently, the Appeal
is hereby DISMISSED.

SO ORDERED. 44

It was UCPB Gen's tum to move for reconsideration, but the CA

denied the same through a Resolution45 dated 30 June 2020, the dispositive
portion of which reads:

WHEREFORE, premises considered, the Motion for

Reconsideration is DENIED for lack of merit.

SO ORDERED. 46

39
Id. at 523.
40
Id. at 75-82.
41
Id. at 82.
42
Id. at 84-89.
41 Id.
44
Id. at 88.
45
.. Id. at 91-94.
46
Id. at 94.

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376
Resolution 7 G.R. No. 252785
July 5, 2023

Hence, the present Petition before this Court. 47

Issues

The instant Petition ascribes numerous errors on the part of the CA. 48
Upon careful scrutiny, these errors are limited to the following:

1) Whether or not the ordinary appeal under Rule 41 was

correctly dismissed by the CA for raisin·g pure questions of
law, hence, the proper remedy is an appeal by certiorari under
Rule 45.

2) Whether or not Frabelle is liable for concealment, thus

voids the policy.

3) Whether or not Frabelle no longer had insurable interest

at the time of the loss, thus is not entitled to recover under the
policy.

4) Whether or not UCPB Gen is entitled to recover the

amount of US$2,050,000.00 it paid to Frabelle.

Ruling of the Court

The Petition does not impress.

I.

Ordinarily, the remedy of an adverse party in assailing the Regional

Trial Court's summary judgment involving both questions of fact and law is
ordinary appeal to the Court of Appeals under Rule 41 of the then Rules of
Court, viz. :

RULE 41 - Section 2. Modes of appeal. -

(a) Ordinary appeal. - The appeal to the Court of Appeals in cases

decided by the Regional Trial Court in the exercise of its original
jurisdiction shall be taken by filing a notice of appeal with the court which

47
Id. at 9-70.
48
Jd. at 33-35 .

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376
Resolution 8 G.R. No. 252785
July 5, 2023

rendered the judgment or final order appealed from and serving a copy
thereof upon the adverse party. No record on appeal shall be required
except in special proceedings and other cases of multiple or separate
appeals where law on these Rules so require. In such cases, the record on
appeal shall be filed and served in like manner.

In instances, however, where only questions of law are raised, then the
appropriate remedy is to file a petition for review on certiorari under Rule
45 of the Rules of Court.

It is not uncommon on appeals from summary judgment to involve

pure questions of law. This is because of the nature of summary judgments·.
A summary judgment is a procedural technique that is proper under, Rule 35
of the Rules only if there is no genuine issue as to the existence of a material
fact, and that the moving party is entitled to a judgment as a matter of law. It
is a method intended to expedite or promptly dispose of cases where the
facts appear undisputed and certain from the pleadings, depositions,
admissions, and affidavits on record. The term genuine issue is defined as an
issue of fact that calls for the presentation of evidence as distinguished from
an issue that is sham, fictitious, contrived, set up in bad faith and patently
u!1substantial so as not to constitute a genuine issue for trial. The court can
determine this on the basis of the pleadings, admissions, documents,
affidavits, and/or counter-affidavits submitted by the parties to the court.
Where the facts pleaded by the parties are disputed or contested, proceedings
for a summary judgment cannot take the place of a trial. 49

Jurisprudence dictates that there is a "question of law" when the doubt

or difference arises as to what the law is on a certain set of facts or
circumstances; on the other hand, there is a "question of fact" when the issue
raised on appeal pertains to the truth or falsity of the alleged facts. The test
for determining whether the supposed error was one of "law" or "fact" is not
the appellation given by the parties raising the same; rather, it is whether the
reviewing court can resolve the issues raised without evaluating the
,evidence, in which case, it is a question of law; otherwise, it is one of fact. In
other words, where there is no dispute as to the facts, the question of
whether or not the conclusions drawn from these facts are correct is a
question of law. However, if the question posed requires a re-evaluation of
the credibility of witnesses, or the existence or relevance of surrounding
circumstances and their relationship to each other, the issue is factual. 50

Applying these concepts, if an appeal is made not to question a

material fact, but to determine what the law should be based on an

49
See Trade and Investment Development Corporation of the Philippines v. Philippine Veterans Bank,
G.R. No. 233850, 01 July 2019.
50
Bases Conversion Development Authority v Reyes, 711 Phil. 631,639 (2013), citing Cucueco v Cou~t
ofAppeals, 484 Phil. 254, 264-265 (2004).

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376
Resolution 9 G.R. No . 252785
July 5, 2023

undisputed set of facts, then it is apparent that the appeal is reduced to pure
questions of law.

In this case, UCPB Gen raises the following issues in its Appellant's
'Brief 1: ·

1) Whether or not defendant Frabelle in not disclosing the material

information of ownership of "Apple Blossom 888" at the time it renewed
the policy and during the currency of the policy but prior to the loss of the
vessel , violated the DISCLOSURE OBLIGATION provision in the policy
rendering it void ab initio?

2) Whether or not defendant Frabelle at the time it renewed Policy

No. MI-I-HMH-HO-13-0000029-02 on December 09, 2013 and at the time
of the loss of "Apple Blossom 888" on February 02, 2014, has insurable
interest in the said vessel?

3) Whether or not defendant Frabelle was guilty of fraud and in bad

faith in filing insurance claim for the lost vessel which caused plaintiff to
release to Frabelle the amount of US$2,050,000.00?

4) Whether or not plaintiff is entitled to recover the said amount of

US$2,050,000.00 from defendant Frabelle?

5) Whether or not plaintiff is entitled to attorney's fees? 52

Although these issues are framed that way, they all revolve to the: 1)
the execution of the Endorsement dated February 2014; 2) the subsequent
payment of the US$2,050,000.00; 3) the letter explaining that the payment
was made ex-gratia; and 4) the legal implication they have on UCPB Gen's
cause of action. The Endorsement, the payment, and the Letter are clearly
undisputed by the parties. What is disputed is the possible implication they
have on the case. For Us, this is exactly what a question of law means: the
facts are established and the only thing left for determination is to apply the
law based on these facts.

For example, regarding the first issue, UCPB Gen ascribes as an error
on the part of the RTC:

"[I]n finding that the Endorsement issued by UCPB GEN declared

that "the correct insured 's name for vessel Apple Blossom 888 should be as
follows: FRABELLE FISHING CORPORATION AND FFC SUBIC
SEAFOODS CORPORATION" thereby making it appear that FRABELLE
and FFC Subic are both owners of the vessel. In any event, the Endorsement
which was issued only on February 19, 2014 and effective only from
February 18, 2014 to November 14, 2014, after the loss of the vessel, and

51
Rollo, pp. 506-539.
52
fd . at 52 1.

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376
Resolution 10 G.R. No. 252785
July 5, 2023

long after the vessel's ownership was transfe1red to FFC Subic 011
September 05, 2013, did not change FRABELLE'S misrepresentation to
U~PB GEN when it filed the claim and demanded payment, that at the time
of- renewal of the policy and at the time of loss, FRABELLE was the owner
of the vessel. 53

But it otherwise states the following in support of its argument:

76. In any event, contrary to the trial court's observation, the

endorsement which was issue only on February 19, 2014 and effective only
from February 18, 2014 to November 14, 2014, after the loss of the vessel
and long after the vessel's ownership was fransferred to FFC Subic on
September 05 , 2013, did not change FRABELLE's misrepresentation to
UCPB GEN that at the time of renewal of the policy and at the time of loss,
FRABELLE was the owner of the vessel.

, 77. The document will speak for itself. The Endorsement requested
by FRABELLE from UCPB GEN became effective only on February 18,
2014. So that prior to February 18, 2014 or at the time of the renewal of the
policy on November 14, 2013 and the time of loss of the vessel on February
02, 2014, the vessel, as represented by FRABELLE to UCPB GEN when
FRABELLE filed the claim, was still owned by the latter. Thus, it was of no
moment that UCPB GEN issued the Endorsement changing the correct
insured's name from Frabelle Fishing Corporation to FFC Subic Seafoods
Corporation because its effectivity was only on February 18, 2014. 54

It is undisputed that Frabelle transferred ownership of the vessel to

FFC Subic prior to the renewal of the policy. It is also undisputed that UCPB
·Gen issued the Endorsement after the loss of the vessel. What is disputed is
the transfer of ownership may still be legally classified as either concealment
or material misrepresentation, despite UCPB Gen's Endorsement. This is not
a question of fact, since it does not concern itself with the truth or falsity of
the allegations; rather it requires the application or interpretation of the law
based on a fixed set of facts.

There is a total of 108 paragraphs in the Appellant's Brief and the

Court does not wish to make a run down and classify each and every one of
these paragraphs as to whether they involve questions of fact or law. But
definitely, the appeal involves pure questions of law, and no matter how
UCPB Gen bends or twists, a mere recitation and inte1jection of undisput~d
facts would never change the nature of the appeal involving pure questions
of law.

Section 2, Rule 41 of the Rules of Court provides for two modes of

appealing a judgment or final order of the RTC in the exercise of its original
'jurisdiction:

53
Id. at 530-531.
54
Id. at 53 1-532.

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376
Resolution 11 G.R. No. 252785
July 5, 2023

(a) If the issues raised involve questions of fact or mixed questions of fact
and law, the proper recourse is an ordinary appeal to the CA in accordance
with Rule 41 in relation to Rule 44 of the Rules of Court; and

(b) If the issues raised involve only questions of law, the appeal shall be to
the Court by petition for review on certiorari in accordance with Rule 45
of the Rules of Court.

If a party raises only questions of law through an ordinary appeal

taken under Rule 41, Section 2, Rule 50 of the Rules (such as in the case at
bar) provides that the said appeal shall be dismissed. 55

Accordingly, the CA is not at fault in issuing the questioned

Resolutions dated 11 December 2019 and 30 June 2020, since the appeal
involved pure questions of law, hence, dismissible.

We can actually close the discussion on the dismissible character of

UCPB Gen's appeal. But for the paiiies' peace of mind, We might as well
address the other substantive points raised by UCPB Gen.

II.

UCPB Gen argues that Frabelle was guilty .of concealment and
misrepresentation when the latter failed to inform of the transfer ownership
of APPLE BLOSSOM 888 to FFC Subic. For UCPB Gen, this voids th·e
policy.

The Insurance Code defines concealment as a neglect to communicate

that which a party knows and ought to communicate.56 In addition, the
.Insurance Code provides .for the following obligations of the parties and the
consequences for failure to comply with these obligations:

Section 27. A concealment whether intentional or unintentional entitles the

injured party to rescind a contract of insurance.

Section 28. Each party to a contract of insurance must communicate to the

other, in good faith, all facts within his knowledge which are material to
the contract and as to which he makes no warranty, and which the other
has not the means of ascertaining.

Section 29. An intentional and fraudulent omission, on the part of one

insured, to communicate information of matters proving or tending to
prove the falsity of a warranty, entitles the insurer to rescind.

55
Rollo, pp. 84-89.
56
Sec. 26, fnsurance Code of the Philippines.

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376
Resolution 12 G.R. No. 252785
July 5, 2023

Section 30. Neither party to a contract of insurance is bound to

communicate information of the matters following, except in answer to the
inquiries of the other:

l. Those which the other knows;

2. Those which, in the exercise of ordinary care, the other ought to

know, and of which the former has no reason to suppose him ignorant;

3. Those of which the other waives communication;

4. Those which prove or tend to prove the existence of a risk excluded

by a warranty, and which are not otherwise material; and

5. Those which relate to a risk excepted from the policy and which are
not otherwise material.

Section 31. Materiality is to be determined not by the event, but solely by

the probable and reasonable influence of the facts upon the party to whom
the communication is due, in forming his estimate of the disadvantages of
the proposed contract, or in making his inquiries.

xxxx

Section 33 . The right to information of material facts may be waived,

either by the terms of insurance or by neglect to make inquiry as to such
facts, where they are distinctly implied in other facts of which information
is communicated.

xxxx

In addition, the following specific prov1s10ns on concealment are

exclusive to marine insurance :

SUB-TITLE 1-C
CONCEALMENT

Section 109. In marine insurance, each party is bound to communicate, in

addition to what is required by Section 28, all the information which he
possesses, material to the risk, except such as is mentioned in Section 30,
and to state the exact and whole truth in relation to all matters that he
represents, or upon inquiry discloses or assumes to disclose.

Section 110. In marine insurance, information of the belief or expectation of

a third person, in reference to a material fact, is material.

Section 111. A person insured by a contract of marine insurance is presumed

to have lmowledge, at the time of insuring, of a prior loss, if the information
might possibly have reached him in the usual mode of transmission and at
the usual rate of communication.

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376
Resolution 13 G.R. No. 252785
July 5, 2023

Section 112. A concealment in a marine insurance, in respect to any of the

following matters, does not vitiate the entire contract, but merely exonerates
the insurer from a loss resulting from the risk concealed:

(a) The national character of the insured;

(b) The liability of the thing insured to capture and detention;

(c) The liability to seizure from breach of foreign laws of trade;

(d) The want of necessary documents; and

(e) The use of false and simulated papers.

On the other hand, the Insurance Code does not define what
representation or misrepresentation means in insurance contracts, but
nonetheless, states that a representation is deemed false when the facts fail to
correspond with its assertions or stipulations. 57 In addition, the following
provisions specific to marine insurance, states that:

SUB-TITLE 1-D
REPRESENTATION

Section 113. If a representation by a person insured by a contract of marine

insurance, is intentionally false in any material respect, or in respect of any
fact on which the character and nature of the risk depends, the insurer may
rescind the entire contract.

Section 114. The eventual falsity of a representation as to expectation does

not, in the absence of fraud, avoid a contract ofmarine insurance.

The effect of concealment, whether intentional or unintentional,

entitles the injured party to rescind a contract of insurance.58 Just like in
concealment, the effect of a misrepresentation or a representation becoming
false is to entitle the injured party to rescind the contract. 59 Based on the
tenor of these provisions of the Insurance Code, the right to rescission is not
automatic, and the party entitled to it may either enforce or waive the right to
rescind the contract.

In this case, Frabelle transferred ownership of APPLE BLOSSOM

888 to FFC Subic sometime in September 2013, just a few months shy prior
.to the expiration of the original insurance policy. At some point, UCPB Gen
became aware of the transfer of ownership, but instead of rescinding the
policy, UCPB Gen issued an Endorsement, correcting the insured's name for
APPLE BLOSSOM 888 and even aclmowledging its continued liability

57
Sec. 44, Insurance Code of the Philippines.
58
Sec. 27, Insurance Code of the Philippines.
59
Sec. 45, Insurance Code of the Philippines.

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376
Resolution 14 G.R. No. 252785
July 5, 2023

under the renewed policy. To an extent, there was concealment and

misrepresentation, but the conduct of UCPB Gen after learning such transfer
of ownership indicates a constructive waiver to enforce the right to rescind
the policy by reason of concealment or misrepresentation.

More importantly, having acknowledged in the Endorsement, not just

the transfer of ownership, but also the continued liability under the policy,
then UCPB Gen is estopped from asserting the right to rescind the policy. In
Lazo v. Republic Surety & Insurance Co., Inc. ,60 the Court discussed that
."the principle of estoppel would step in to prevent the plaintiffs from going
back upon their own acts and representations to the prejudice of the other
party who relied upon them. The same is a principle of equity and natural
justice, expressly adopted in the Civil Code and articulated as one of the
conclusive presumptions in the Rules of Court. 61

In Edillon v. Manila Bankers Life Insurance Corp., 62 the Court also

found that an insurance corporation's inaction to revoke the policy despite a
departure from the exclusionary condition against persons over 60 years of
age. Where the claimant declared in her application that she was 65 years
old at the time of filed, the Court held that there was sufficient time for the
insurance company to process the application and to notice the claimant's
age and cancel the policy on that ground if it was minded to do so. If the
insurance company failed to act, it is either because it was willing to waive
such disqualification; or, through the negligence or incompetence of its
employees for which it has only itself to blame, it simply overlooked such
fact. Under the circumstances, the insurance corporation is already deemed
·in estoppel. 63

Lastly, Section 48 of the Insurance Code provides that "Whenever a

right to rescind a contract of insurance is given to the insurer by any
provision of this chapter, such right must be exercised previous to the
commencement of an action on the contract."

Therefore, notwithstanding the existence of the "Disclosure

Obligation" as an exclusionary condition, UCPB Gen is deemed estopped
from rescinding or revoking the marine hull insurance policy. As early as 03
February 2014, Frabelle had already notified UCPB Gen on ·the loss it
suffered. Thereafter UCPB Gen paid Frabelle the amount 9f
US$2,050,000.00. On 11 August 2015, UCPB Gen demanded
reimbursement from the shipyard-carrier which caused the loss,. by way of
subrogation. In 17 December 2015, UCPB asked for the return of the

60
· 142 Phil. 329 (1970).
61
Id. at 330.
62
202 Phil. 508 ( 1982).
63
Id. at 509.

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376
Resolution 15 G.R. No. 252785
July 5, 2023

proceeds it paid, even before it found out on 31 May 2016 that Frabelle n
l~mger owned the vessel which has been transferred to FFC Subic. It wa
only after all these events that UCPB Gen filed a complaint invoking th
grounds of concealment and misrepresentation. By these acts, · UCPB Ge
failed to exercise its right to rescind before action on the contract
commenced. Hence it must suffer the consequences of its inaction.

III.

Anent the issue of insurable interest, UCPB Gen contends that th

moment Frabelle transferred ownership of APPLE BLOSSOM 888 to FFC
Subic, it lost any insurable interest over the vessel.

An insurable interest is one of the most basic and essential

·requirements in an insurance contract. In general, an insurable interest is that
interest which a person is deemed to have in the subject matter insured,
where he has a relation or connection with or concern in it, such that the
person will derive pecuniary benefit or advantage from the preservation o
the subject matter insured and will suffer pecuniary loss or damage from its
destruction, termination, or injury by the happening of the event insured
against. 64 The existence of an insurable interest gives a person the legal right
to insure the subject matter of the policy of insurance. 65

The case of UCPB General Insurance Co., Inc. v. Asgard Corrugated

Box Maniifacturing Corporation, 66 gave a detailed discussion on what
constitutes insurable interest in property:

Section 13 of the Insurance Code defines insurable interest as

"every interest in property, whether real or personal, or any relation thereto,
or liability in respect thereof, of such nature that a contemplated peril might
directly damnify the insured." Parenthetically, under Section 14 of the same
Code, an insurable interest in property may consist in: (a) an existing
interest, like that of an owner or lienholder; (b) an inchoate interest founded
on existing interest, like that of a stockholder in corporate property; or (c) an
expectancy, coupled with an existing interest in that out of which the
expectancy arises, like that of a shipper of goods in the profits he expects to
make from the sale thereof.

Therefore, an insurable interest in property .does not necessarily

imply a property interest in, or a · lien upon, or possession of, the subject
matter of the insurance, and neither the title nor a beneficial interest is
requisite to the existence of such an interest. It is sufficient that the insured
is so situated with reference to the property that he would be liable to loss

64
lalican v. The Insular L{fe Assurance Company limited, 613 Phil. 518, 534 (2009); See 44 C.J.S, 870,
cited in De Leon, The Insurance Code of the Philippines Annotated (2002 ed.), p. 85.
65
lalican v. The Insular life Assurance Company Limited, id, citing De Leon, The Insurance Code of the
Philippines Annotated (2002 ed.), p. 86.
66
G.R. No. 244407, 26 January 2021.

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376
Resolution 16 G.R. No. 252785
July 5, 2023

should it be injured or destroyed by the peril against which it is insured.

Anyone has an insurable interest in prope11y who derives a benefit from its
existence or would suffer loss from its destruction.

Insurable interest in property is not limited to property ownership in

the subject matter of the insurance~ Where the interest of the insured in or
'
his relation to, the property is such that he will be benefitted by its continued
existence, or will suffer a direct pecuniary loss by its destruction, his
contract of insurance will be upheld, although he has no legal or equitable
title. A husband would thus have an insurable interest in the paraphernal
property of his wife since the fruits thereof belong the conjugal partnership
and may be used for the support of the family.

In addition to what constitutes insurable interest, the time as to whe

such interest exists is also material. The law marks two moments in which
insurable interest in property must exist: a) at the time the insurance takes
effect; and b) at the time the loss occurs.67 Thus, it is safe to say that in
between those periods, the lack of insurable interest will not avoid liability.

Marine insurance is a type of property insurance, thus, insurable

.interest must not only be present at the time the insurance was obtained but
also at the time of the loss.

We agree that Frabelle, having transferred ownership over APPLE

BLOSSSOM 888 at the time of the loss no longer possessed insurable
interest over the vessel. But this matter has been rendered completely
irrelevant by the subsequent payment made by UCPB Gen on 11 June 2015
in the amount of US$,2,050,000.00.

Initially, UCPB Gen denied the claim, but more than a year after the
loss, it eventually paid Frabelle. As to why UCPB Gen paid despite denying
any liability, its letter dated 14 August 2015 yields the answer:

Subject: Insured: Frabelle Fishing Corporation

Vessel: M/V "Apple Blossom 888:
Nature of Loss: Sank at Balamban, Cebu

x xx x

Upon the representation of Winebrenner and Frabelle, we agreed to

settle on an ex-gratia basis and for business consideration. However, as
is usual in these situations, the amount of settlement is subject to the
approval of reinsurers. The email dated 10 Jul 2015 of our Mr. Joel Libo-on
and the meetings before then were precisely to make clear to all parties. We
quote from the said email as follows:

"1. We declined the settlement of the claim due to policy violation,

67
Sec. 19, Insurance Code of the Philippines.

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376
Resolution 17 G.R. No. 252785
July 5, 2023

but upon representation of the Insured and Winebrenner, we agree to settle

for business consideration. This, however, requires agreement to also of
the reinsurers.

"2. We discussed the settlement with all our reinsurers and so far we
have secured the agreement of 82% which includes UCPB Gen's shares"'

We regret to advise that at this time, even afier a rather protracted

negotiations, we are still unable to reverse the earlier position of the rest of
our reinsurers. Given this development, no further settlement is expected
and the earlier payment of USD2,050,000.00 is the final settlement of this
loss (Emphasis supplied.)

UCPB Gen never felt liable to Frabelle under the contract of insurance I
.!
and it was clearly a "business consideration" that compelled UCPB Gen to
make payment on an ex gratia basis.

Black's Law Dictionary defines ex gratia as something [do11:e or paid]:

"out of grace; as a matter of grace, favor. or indulgence; gratuitous.

A term applied to anything accorded as a favor; as distinguished from that
which may be demanded ex debito. as a matter 6f right. 68

In insurance, an ex gratia claim payment is a comrnercial payment of

a claim by insurers to the insured, when there is no legal liability for that
.claim under the policy, or no proof of legal liability. 69 The insurer that makes
the payment of insurance claims ex-gratia proves voluntary compensation to
the insured even though there is no obligation from the insurer to provide
compensation to the insured.

There is no law regulating or reqmnng ex gratia payments by

insurers. But since these payments are made voluntarily and without
assuniing any legal liability, then the normal principles governing insurance
no longer applies. The principle behind an insurance contract is the
agreement to indemnify the insured from losses or damages arising from an
unlmown or contingent event. 70 In this case, the payment was niade not as
but out of gratuity and for the purpose of maintaining good busine~s
relationship, a matter clearly beyond insurance.

WHEREFORE, premises considered, the instant .Petition is hereby

DENIED. Accordingly the Resolutions of the Comi of Appeals dated . 11
December 2019 and 30 June 2020 in CA-G.R. CV No. 111705 are
.AFFIR1\1ED.

68
Black's Law Dictionary. 573 (6 th Ed. 1990).
69
Lexis Nexis Glossary
70
Sec. !(a), Insurance Code of the Philippines.

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r
376
Resolution 18 G.R. No. 252785
July 5, 2023

SO ORDERED." Gesmundo, C.J., on official leave.

By authority of the Court:

LIBRADA C. BUENA
Division Clerk of Court

by:

MARIA TERESA B. SIBULO

Deputy Division Clerk of Court-r-cil""'
376
SEP o 1 2023
ASTORGA & REPOL LAW OFFICES Court of Appeals (x)
Counsel for Petitioner 1000 Manila
Unit 2105, Philippine AXA Life Centre Building (CA-G.R. CV No. 111705)
Sen. Gil Puyat cor. Ayala Avenues
1226 Makati City ALFONSO M. CRUZ LAW OFFICES
Counsel for Respondent
I 0th Floor, Philippine AXA Life Centre Building
Ayala cor. Sen. Gil Puyat Avenues
1226 Makati City

The Hon. Presiding Judge

Regional Trial Court, Branch 132
1200 Makati City
(Civil Case No. R-MKT-16-01203-CV)

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