G.R. No. L-52756, 12 October 1987, 154 SCRA 650

FACTS:

Petitioner insured its Mercedes Benz 4-door sedan with respondent insurance company . The insured vehicle was bumped and damaged by a truck owned by San Miguel Corporation (SMC). For the damage caused, respondent company paid petitioner ₱ 5,000.00 in amicable settlement. Petitioner’s general manager executed a Release of Claim, subrogating respondent company to all its right to action against San Miguel Corp. Respondent company wrote the Insurer Adjusters, Inc. to demand reimbursements from San Miguel Corporation of the amount it had paid petitioner. Insurer Adjusters, Inc. refused reimbursement alleging that SMC had already paid petitioner ₱ 4,500.00 for the damages to petitioner’s motor vehicle, as evidenced by a cash voucher and Release of Claim executed by the General Manager of petitioner discharging SMC from “ all actions, claims, demands the right of action that now exist or hereafter develop arising out of or as a consequence of the accident.

Respondent demanded the ₱ 4,500.00 amount from petitioner. Petitioner refused. Suit was filed for recovery. City Court ordered petitioner to pay respondent. CFI affirmed. CA affirmed with modification that petitioner was to pay respondent the total amount of ₱ 5,000.00 it had received from respondent.

Petitioner’s argument: Since the total damages were valued at P9,486.43 and only ₱ 5,000.00 was received by petitioner from respondent, petitioner argues that it was entitled to go after SMC to claim the additional which was eventually paid to it.

Respondent’s argument: No qualification to its right of subrogation.

ISSUE:

Whether or not the insured should pay the insurer despite that the subrogation in the Release of Claim was conditioned on recovery of the total amount of damages that the insured has sustained.

RULING:

NO. Supreme Court said there being no other evidence to support its allegation that a gentleman’s agreement existed between the parties, not embodied in the Release of Claim, such Release of Claim must be taken as the best evidence of the intent and purpose of the parties. CA was correct in holding petitioner should reimburse respondent ₱ 5,000.00.

When Manila Mahogany executed another release claim discharging SMC from all rights of action after the insurer had paid the proceeds of the policy – the compromise agreement of ₱ 5,000.00– the insurer is entitled to recover from the insured the amount of insurance money paid. Petitioner by its own acts released SMC, thereby defeating respondent’s right of subrogation, the right of action against the insurer was also nullified.

Since the insurer can be subrogated to only such rights as the insured may have, should the insured, after receiving payment from the insurer, release the wrongdoer who caused the loss, the insurer losses his rights against the latter. But in such a case, the insurer will be entitled to recover from the insured whatever it has paid to the latter, unless the release was made with the consent of the insurer.

*Case digest by Princess Dianne Kris S. Decierdo, LLB-IV, Andres Bonifacio College Law School, SY 2018-2019