G.R. No. 223134 - Dissenting Opinion

G.R. No. 223134, August 14, 2019,
♦ Decision, Perlas-Bernabe, [J]
♦ Dissenting Opinion, Bersamin, [C J]
♦ Concurring Opinion, Caguioa, [J]
♦ Dissenting Opinion, Reyes, [J]
♦ Concurring Opinion, Lazaro-Javier, [J]

VICENTE G. HENSON, JR., PETITIONER, VS. UCPB GENERAL INSURANCE CO., INC., RESPONDENT.

The majority opinion overturns the ruling in Vector Shipping Corporation v. American Home Assurance Company1 wherein the Court has held that subrogation under Article 2207 of the Civil Code gives rise to a cause of action created by law; hence, the applicable prescriptive period is 10 years.

I submit that the present case has not given the Court any grounds to warrant the overturn. The dictum in Vector Shipping Corporation v. American Home Assurance Company remains good law in the context of Article 2207 of the Civil Code.

National Arts Studio and Color Lab (National Arts Studio) leased for the period from 1989 to 1999 the front portion of the ground floor of a two-storey building then owned by Vicente G. Henson (Henson) located on Sto. Rosario Street in Angeles City, Pampanga.2 In 1999, National Arts Studio leased the right front portion of the ground floor and the entire second floor of the building, and renovated its piping assembly. Meanwhile, Copylandia Office Systems Corporation (Copylandia) moved to the ground floor.3

A water leak occurred in the building on May 9, 2006 and damaged Copylandia's various equipment to.the tune of ₱2,062.640.00.4 Copylandia filed its claim for indemnity with respondent UCPB General Insurance Co., Inc. (UCPBGen), the insurer of its equipment.5 On November 2, 2006, Copylandia and UCPBGen agreed to settle for P1,326,342.76,6 thereby subrogating UCPBGen to the rights of Copylandia arising from the water leak incident. On May 20, 2010, UCPBGen demanded payment from National Arts Studio, but without success.7 Hence, UCPBGen sued National Arts Studio, among others, for damages in the Regional Trial Court (RTC) in Makati City. The suit, docketed as Civil Case No. 10-885, was raffled to Branch 138 of the RTC.8

In 2010, Henson transferred the ownership of the building to Citrinne Holdings, Inc. (CTI), wherein he was a stockholder and the President at the same time.9

UCPBGen amended its complaint on October 6, 2011 to implead CTI as a party-defendant by virtue of its being the new owner of the building. UCPBGen later changed its mind, and filed on April 21, 2014 a Motion to Admit Attached Amended Complaint and Pre-Trial Brief praying that Henson, instead of CTI, be impleaded as the party-defendant considering that he was the owner of the building at the time of the water leak incident.10

CTI opposed the motion principally on the ground of prescription, and contended that UCPBGen's cause of action, having arisen from quasi-delict, must be brought within four years from its accrual on May 9, 2006.11

On June 10, 2014, the RTC directed the dropping of CTI as a party-defendant and the joining of Henson as one of the party-defendants.12 It observed that UCPBGen's cause of action against the defendants, including Henson, arose when it paid Copylandia's insurance claim and thereby became subrogated to the latter's rights and claims arising from the water leak incident; that UCPBGen was merely enforcing its right of subrogation which prescribed in 10 years reckoned from the date of Copylandia's indemnification on November 2, 2006; and that UCPBGen's claim against Henson had yet to prescribe on April 21, 2014 when it sought to include him as party-defendant.

On his part, Henson brought a petition for certiorari in the Court of Appeals (CA).

On November 13, 2015, the CA rendered its decision upholding the ruling of the RTC.14 The CA agreed that UCPBGen's cause of action was not based on quasi-delict, but on an obligation created by law, and, as such, the prescriptive period was 10 years reckoned from its accrual.

After the CA denied Henson's motion for reconsideration on February 26, 2016,15 he appealed to the Court.

The issue for consideration is whether or not the CA correctly ruled that UCPBGen's cause of action was based on an obligation created by law that prescribed in 10 years.16

The majority opinion concludes that because the insurer merely stepped into the shoes of the insured, its cause of action against the debtor was already barred by prescription considering that the cause of action was in the nature of a quasi-delict that was subject to the prescriptive period of four years.18

I submit that the ruling on prescription in Vector Shipping Corporation v. American Home Assurance Company is the applicable rule for this case.

Article 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.1âшphi1

To me, the letter and intent of the law are too clear and forthright to be ignored. Subrogation of the insurer under Article 2207 of the Civil Code gives rise to an obligation created by law. With the clarity and forthrightness of the legal provision on the nature of subrogation as an obligation arising from law, the cause of action based on subrogation prescribes in 10 years pursuant to Article 1144(2) of the Civil Code.

The Court pointed this out in Vector Shipping Corporation v. American Home Assurance Company, thusly:

In Fireman's Fund Insurance Company v. Jamila & Company, Inc.,20 the Court has expounded on the rule enunciated under Article 2207 of the Civil Code, viz.:

Article 2207 is a restatement of a settled principle of American jurisprudence. Subrogation has been referred to as the doctrine of substitution. It "is an arm of equity that may guide or even force one to pay a debt for which an obligation was incurred but which was in whole or in part paid by another" (83 C.J.S. 576, 578, note 16, citing Fireman's Fund Indemnity Co. vs. State Compensation Insurance Fund, 209 Pac. 2d 55).

There is no question that the right of subrogation is a creature of equity, owing its origin at common law,22 and later evolved as a doctrine through the decision of Lord Hardwicke in Randal v. Cockran.23 Lord Hardwicke pronounced in Randal v. Cockran that:

x x x The person originally sustaining the loss was the owner; but after satisfaction made to him, the insurer.

No doubt, but from that time, as to the goods themselves, if restored in specie, or compensation made for them, the assured stands as a trustee for the insurer, in proportion for what he paid.24

As can be seen, the doctrine of subrogation essentially holds that an insurer who has fully indemnified an insured against a loss covered by a contract of insurance between them may ordinarily enforce, in the insurer's own name, any right of recourse available to the insured. The role of equity comes into play once the insurer has indemnified the insured. Payment is the crucial event that allows the insurer to succeed to the rights of the insured. Unless the insurer pays pursuant to the policy, there is no loss that he has sustained and, therefore, there arises no right of recovery.25

Since the time of the pronouncement in Randal v. Cockran, therefore, it has been judicially recognized that the insurer's payment to the insured produces the following effects, namely:

The automatic transfer of rights from the payor to the payee occurs at the moment of payment, and it takes place by act of law.27 Yet, the ipso jure transfer of rights from the insured to the insurer does not result to a simple case of assignment.1âшphi1

Under insurance law principles, assignment varies from subrogation in both the method of creation and the results produced.28

Subrogation arises by operation of law when the insurer pays either a portion or the entire amount of property damages an insured individual claims under a policy, and may exist even without a statute or agreement that provides for it.29 Subrogation accompanies payment, and carries with it only the limited claim to reimbursement, arising as it does upon payment to discharge a third person's indebtedness.30 If the insurer has a right to subrogation, Philippine laws - particularly Article 2207 of the Civil Code - confer upon the insurer the status of a real party-in-interest with regard to the indemnity paid. That the insurer becomes the real party-in-interest after subrogation was aptly explained in Philippine Airlines, Inc. v. Heald Lumber Company,31 whereby the Court clarified that:

In contrast, assignment is preceded by an agreement by virtue of which the owner of a credit (known as the assignor), by a legal cause - such as sale, dation in payment, exchange or donation - and without need of the debtor's consent, transfers that credit and its accessory rights to another (known as the assignee), who thereby acquires the power to enforce it, to the same extent as the assignor could have enforced it against the debtor.33 Unlike the right to subrogation that arises only upon the insurer's payment of the insured's claim, assignment of the insured's property damage claim may take place even before the damage occurs.34 After the assignment of the claims of the insured, the insurer becomes the real party-in-interest and may bring a claim in its own name against the tortfeasor or the latter's insurer.35

The only similarity that the doctrine of subrogation and the concept of assignment share is that the transferee has no right independent of the transferor. In insurance, the insurer can only enforce the rights that the insured has; consequently, the insurer, as the person paying for the loss, cannot assume a better right than the insured, or person being indemnified. Yet, it must be recalled that subrogation, as an equitable principle, is supposed to ensure that the person who actually caused damages will eventually pay for those damages.36 To underscore, this allowance of subrogation has its roots in the equitable doctrine of preventing unjust enrichment.37

If we adhere to the majority opinion's holding that subrogation is akin to assignment, which means that the insurer merely steps into the shoes of the insured, then an insurance claim filed after or even near the end of the prescriptive period to bring an action arising from quasi-delict may possibly defeat the fundamental purpose of subrogation as an arm of equity and justice. Moreover, the majority opinion's submission overrides the fact that the insurer's cause of action, or his right to recover the indemnity, only arises by reason of the payment made by the insurer independent of any agreement with the insured. Thus, once the insured received the payment, he is no longer the loser because his loss has been remedied by the insurer.38 At that point, the insurer became the loser and his right to recover the payment he made to the insured then arises by operation of law.

Based on the foregoing, the dictum in Vector Shipping Corporation v. American Home Assurance Company, that subrogation gives rise to an action created by operation of law, and that, consequently, the action prescribes in 10 years reckoned from the moment of payment, is unassailable. With UCPBGen's cause of action against Henson, which accrued on November 2, 2006, not yet prescribed by April 21, 2014 when UCPBGen impleaded him as a party-defendant, Civil Case No. 10-885 should be allowed to prosper against him.

ACCORDINGLY, I vote to DENY the petition for review on certiorari; and to AFFIRM the November 13, 2015 decision and February 26, 2016 resolution of the Court of Appeals promulgated in C.A.-G.R. SP No. 138147.