SECOND DIVISION

G.R. No. 172156               November 23, 2007

MALAYAN INSURANCE CO., INC., Petitioner, 

DECISION

TINGA, J.:

We consider whether an insurer, in an action for recoupment instituted in its capacity as the subrogee of the
insured, may be conferred favorable relief even if it failed to introduce in evidence the insurance contract or policy,
or even allege the existence nay recite the substance and attach a copy of such document in the complaint. The
answer is as self-evident as meets the eye.

This Petition for Review under Rule 45 was filed by petitioner Malayan Insurance Co., Inc. (Malayan), 2 assailing the
Decision3 dated 23 December 2005 of the Court of Appeals in C.A. G.R. SP No. 90505, as well as its
Resolution4dated 5 April 2006 denying petitioner’s motion for reconsideration.

The facts require little elaboration. Around 1 February 1995, Fasco Motors Group loaded 120 pieces of "motors" on
board China Airlines Flight 621 bound for Manila from the United States. The cargo was to be delivered to
consignee ABB Koppel, Inc. (ABB Koppel). 5 When the cargo arrived at the Ninoy Aquino International Airport, it was
discharged without exception and forwarded to People’s Aircargo & Warehousing Corp.’s (Paircargo’s) warehouse
for temporary storage pending release by the Bureau of Customs. Paircargo remained in possession of the cargo
until 7 March 1995, at which point respondent Regis Brokerage Corp. (Regis) withdrew the cargo and delivered the
same to ABB Koppel at its warehouse.6 When the shipment arrived at ABB Koppel’s warehouse, it was discovered
that only 65 of the 120 pieces of motors were actually delivered and that the remaining 55 motors, valued at
US$2,374.35, could not be accounted for.7

The shipment was purportedly insured with Malayan by ABB Koppel. Demand was first made upon Regis and
Paircargo for payment of the value of the missing motors, but both refused to pay. 8 Thus, Malayan paid ABB
Koppel the amount of ₱156,549.55 apparently pursuant to its insurance agreement, and Malayan was on that basis
subrogated to the rights of ABB Koppel against Regis and Paircargo. 9 On 24 June 1996, Malayan filed a complaint
for damages against Regis and Paircargo with the Metropolitan Trial Court (MeTC) of Manila, Branch 9. In the
course of trial, Malayan presented Marine Risk Note No. RN-0001-19832 (Marine Risk Note) dated 21 March 1995
as proof that the cargo was insured by Malayan.10

The MeTC rendered a Decision11 dated 25 May 2001 adjudging Regis alone liable to Malayan in the amount of
₱156,549.00 as actual damages, ₱15,000.00 as attorney’s fees, and costs of suits. With the exception of the award
of attorney’s fees, the MeTC decision was affirmed on appeal to the Regional Trial Court (RTC) of Manila, through a
Decision dated 28 February 2005.12

Regis filed a petition for review with the Court of Appeals seeking the reversal of the MeTC and RTC decisions. On
23 December 2005, the Court of Appeals promulgated its decision vacating the RTC judgment and ordering the
dismissal of Malayan’s complaint. The central finding that formed the Court of Appeals decision was that the
Marine Risk Note presented as proof that the cargo was insured was invalid. 13 It was observed that the Marine Risk
Note was procured from Malayan only on 21 March 1995, when in fact the insured, ABB Koppel, had learned of the
partial loss of the motors as early as 7 March 1995. 14 The appellate court noted that under Section 3 of the
Insurance Code, the past event which may be insured against must be unknown to the parties and so for that
reason the insurance contract in this case violated Section 3. The Court of Appeals further ruled that the due
execution and authenticity of the subrogation receipt presented before the trial court by Malayan were not duly
proven since the signatories thereto were not presented by Malayan before the trial court to identify their
signatures thereon, and neither was evidence presented to establish the genuineness of such signatures. 15

Malayan filed a motion for reconsideration with the Court of Appeals where it contended that the Marine Risk
Note is "an open policy per Marine Open Cargo Policy No. OPEN POLICY-0001-00410 issued

before February 1, 1995."16 The motion was denied by the appellate court, 17 which pointed out that Malayan "did
not present the aforecited marine open cargo policy as would indicate the date of its issuance." 18

Hence, the present petition instituted by Malayan. According to Malayan, the lost cargo was insured not only by
the Marine Risk Note but by the anteceding Marine Insurance Policy No. M/OP/95/0001-410 (Marine Insurance
Policy) which it issued in favor of ABB Koppel on 20 January 1995, or many days before the motors were
transported to Manila. A copy of the Marine Insurance Policy was attached to the present petition, but it is clear
and no pretense was made that said policy had not been presented at the trial.

The key arguments raised before us by Malayan flow from the existence of the Marine Insurance Policy. Pains are
taken to establish that there existed as between Malayan and ABB Koppel an "open policy" under Section 60 of the
Insurance Code, wherein the value of the thing insured is not agreed upon but left to be ascertained in case of loss,
and that the Marine Risk Note was nothing but a determination of the value of the thing insured pursuant to the
open policy as established by the Marine Insurance Policy. Unfortunately for Malayan, the Court could not
attribute any evidentiary weight to the Marine Insurance Policy.

It is elementary that this Court is not a trier of facts. We generally refer to the trial court and the Court of Appeals
on matters relating to the admission and evaluation of the evidence. In this case, while the trial courts and the
Court of Appeals arrived at differing conclusions, we essentially agree with the Court of Appeals’ analysis of
Malayan’s cause of action, and its ordained result. It appeared that at the very instance the Marine Risk Note was
offered in evidence, Regis already posed its objection to the admission of said document on the ground that such
was "immaterial, impertinent and irrelevant to this case because the same was issued on March 21, 1995 which is
after the occurrence of the loss on February 1, 1995." 19 Because the trial courts failed to duly consider whether the
Marine Risk Note sufficiently established a valid insurance covering the subject motors, the Court of Appeals acted
correctly in the exercise of its appellate jurisdiction in setting aside the appealed decisions.

Tellingly, Malayan’s argument before this Court is not that the Court of Appeals erred in its evaluation of the
Marine Risk Note following that document’s terms alone, but that the appellate court could not consider the
import of the purported Marine Insurance Policy. Indeed, since no insurance policy was presented at the trial by
Malayan, or even before the Court of Appeals,20 there certainly is no basis for this Court to admit or consider the
same, notwithstanding Malayan’s attempt to submit such document to us along with its present petition. As we
recently held:

Similarly, petitioner in this case cannot "enervate" the COMELEC's findings by introducing new evidence before this
Court, which in any case is not a trier of facts, and then ask it to substitute its own judgment and discretion for that
of the COMELEC.

The rule in appellate procedure is that a factual question may not be raised for the first time on appeal, and
documents forming no part of the proofs before the appellate court will not be considered in disposing of the
issues of an action. This is true whether the decision elevated for review originated from a regular court or an
administrative agency or quasi-judicial body, and whether it was rendered in a civil case, a special proceeding, or a
criminal case. Piecemeal presentation of evidence is simply not in accord with orderly justice. 21
Since the Marine Insurance Policy was never presented in evidence before the trial court or the Court of Appeals
even, there is no legal basis to consider such document in the resolution of this case, reflective as that document
may have been of the pre-existence of an insurance contract between Malayan and ABB Koppel even prior to the
loss of the motors. In fact, it appears quite plain that Malayan’s theory of the case it pursued before the trial court
was that the perfected insurance contract which it relied upon as basis for its right to subrogation was not the
Marine Insurance Policy but the Marine Risk Note which, unlike the former, was actually presented at the trial and
offered in evidence. The Claims Processor of Malayan who testified in court in behalf of his employer actually
acknowledged that the "proof that ABB Koppel insured the [shipment] to [Malayan]" was the Marine Risk Note,
and not the Marine Insurance Policy.22 Even the very complaint filed by Malayan before the MeTC stated that
"[t]he subject shipment was insured by [Malayan] under Risk Note No. 0001-19832," 23 and not by the Marine
Insurance Policy, which was not adverted to at all in the complaint. 24

Thus, we can only consider the Marine Risk Note in determining whether there existed a contract of insurance
between ABB Koppel and Malayan at the time of the loss of the motors. However, the very terms of the Marine
Risk Note itself are quite damning. It is dated 21 March 1995, or after the occurrence of the loss, and specifically
states that Malayan "ha[d] this day noted the above-mentioned risk in your favor and hereby guarantee[s] that this
document has all the force and effect of the terms and conditions in the Corporation’s printed form of the
standard Marine Cargo Policy and the Company’s Marine Open Policy." It specifies that at risk are the 120 pieces of
motors which unfortunately had already been compromised as of the date of the Marine Risk Note itself. 25

Certainly it would be obtuse for us to even entertain the idea that the insurance contract between Malayan and
ABB Koppel was actually constituted by the Marine Risk Note alone. We find guidance on this point in Aboitiz
Shipping Corporation v. Philippine American General Insurance, Co.,26 where a trial court had relied on the contents
of a marine risk note, not the insurance policy itself, in dismissing a complaint. For this act, the Court faulted the
trial court in "[obviously mistaking] said Marine Risk Note as an insurance policy when it is not." 27 The Court
proceeded to characterize the marine risk note therein as "an acknowledgment or declaration of the private
respondent confirming the specific shipment covered by its Marine Open Policy, the evaluation of the cargo, and
the chargeable premium,"28 a description that is reflective as well of the present Marine Risk Note, if not of marine
risk notes in this country in general.

Malayan correctly points out that the Marine Risk Note itself adverts to "Marine Cargo Policy Number Open Policy-
0001-00410" as well as to "the standard Marine Cargo Policy and the Company’s Marine Open Policy." What the
Marine Risk Note bears, as a matter of evidence, is that it is not apparently the contract of insurance by itself, but
merely a complementary or supplementary document to the contract of insurance that may have existed as
between Malayan and ABB Koppel. And while this observation may deviate from the tenor of the assailed Court of
Appeals’ Decision, it does not presage any ruling in favor of petitioner. Fundamentally, since Malayan failed to
introduce in evidence the Marine Insurance Policy itself as the main insurance contract, or even advert to said
document in the complaint, ultimately then it failed to establish its cause of action for restitution as a subrogee of
ABB Koppel.

Malayan’s right of recovery as a subrogee of ABB Koppel cannot be predicated alone on the liability of the
respondent to ABB Koppel, even though such liability will necessarily have to be established at the trial for
Malayan to recover. Because Malayan’s right to recovery derives from contractual subrogation as an incident to an
insurance relationship, and not from any proximate injury to it inflicted by the respondents, it is critical that
Malayan establish the legal basis of such right to subrogation by presenting the contract constitutive of the
insurance relationship between it and ABB Koppel. Without such legal basis, its cause of action cannot survive.

Our procedural rules make plain how easily Malayan could have adduced the Marine Insurance
Policy.1âwphi1 Ideally, this should have been accomplished from the moment it filed the complaint. Since the
Marine Insurance Policy was constitutive of the insurer-insured relationship from which Malayan draws its right to
subrogation, such document should have been attached to the complaint itself, as provided for in Section 7, Rule 9
of the 1997 Rules of Civil Procedure:
SECTION 7. Action or defense based on document.—Whenever an action or defense is based upon a written
instrument or document, the substance of such instrument or document shall be set forth in the pleading, and the
original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the
pleading, or said copy may with like effect be set forth in the pleading.

Thus, in an action to enforce or rescind a written contract of lease, the lease contract is the basis of the action and
therefore a copy of the same must either be set forth in the complaint or its substance recited therein, attaching
either the original or a copy to the complaint.29 The rule has been held to be imperative, mandatory and not
merely directory, though must be given a reasonable construction and not be extended in its scope so as to work
injustice.30 It was incumbent on Malayan, whose right of subrogation derived from the Marine Insurance Policy, to
set forth the substance of such contract in its complaint and to attach an original or a copy of such contract in the
complaint as an exhibit. Its failure to do so harbingers a more terminal defect than merely excluding the Marine
Insurance Policy as relevant evidence, as the failure actually casts an irremissible cloud on the substance of
Malayan’s very cause of action. Since Malayan alluded to an actionable document, the contract of insurance
between it and ABB Koppel, as integral to its cause of action against Regis and Paircargo, the contract of insurance
should have been attached to the complaint.

It may be that there is no specific provision in the Rules of Court which prohibits the admission in evidence of an
actionable document in the event a party fails to comply with the requirement of the rule on actionable
documents under Section 7, Rule 9.31 Yet such qualification does not provide safe harbor for Malayan as it did not
even present the Marine Insurance Policy at the trial, relying instead on the Marine Risk Note only and by its
lonesome to constitute the insurer-insured relationship between it and ABB Koppel, or more precisely as stated in
its Formal Offer of Evidence, "to prove that the shipment subject of this case was covered by an insurance policy
with the plaintiffs."32 Before the MeTC, Regis objected to the admission of the Marine Risk Note on the ground of
immateriality and irrelevance because it "was issued on March 21, 1995 which is after the occurrence of the loss
on February 1, 1995."33 The Court of Appeals upheld this objection of Regis as basis for the dismissal of the
complaint. In our view, Malayan may have not been of the precise belief that the Marine Risk Note is the insurance
contract itself as even the purpose stated in its Formal Offer may admit to an interpretation that alludes to "an
insurance policy with the plaintiffs" that may stand independent of the Marine Risk Note. Yet if that were so, it
remains incomprehensible and inexcusable why Malayan neglected to attach it to its complaint as required by
Section 7, Rule 9, or even offer it in the Marine Insurance Policy which constitutes the insurance contract as
evidence before the trial court.

It cannot be denied from the only established facts that Malayan and ABB Koppel comported as if there was an
insurance relationship between them and documents exist that evince the presence of such legal relationship. But
under these premises, the very insurance contract emerges as the white elephant in the room – an obdurate
presence which everybody reacts to, yet legally invisible as a matter of evidence since no attempt had been made
to prove its corporeal existence in the court of law. It may seem commonsensical to conclude anyway that there
was a contract of insurance between Malayan and ABB Koppel since they obviously behaved in a manner that
indicates such relationship, yet the same conclusion could be had even if, for example, those parties staged an
elaborate charade to impress on the world the existence of an insurance contract when there actually was none.
While there is absolutely no indication of any bad faith of such import by Malayan or ABB Koppel, the fact that the
"commonsensical" conclusion can be drawn even if there was bad faith that convinces us to reject such line of
thinking.

The Court further recognizes the danger as precedent should we sustain Malayan’s position, and not only because
such a ruling would formally violate the rule on actionable documents. Malayan would have us effectuate an
insurance contract without having to consider its particular terms and conditions, and on a blind leap of faith that
such contract is indeed valid and subsisting. The conclusion further works to the utter prejudice of defendants such
as Regis or Paircargo since they would be deprived the opportunity to examine the document that gives rise to the
plaintiff’s right to recover against them, or to raise arguments or objections against the validity or admissibility of
such document. If a legal claim is irrefragably sourced from an actionable document, the defendants cannot be
deprived of the right to examine or utilize such document in order to intelligently raise a defense. The inability or
refusal of the plaintiff to submit such document into evidence constitutes an effective denial of that right of the
defendant which is ultimately rooted in due process of law, to say nothing on how such failure fatally diminishes
the plaintiff’s substantiation of its own cause of action.

Indeed, in the absence of any evidentiary consideration of the actual Marine Insurance Policy, the substance of
Malayan’s right to recovery as the subrogee of ABB Koppel is not duly confirmed. There can be no consideration of
the particular terms and conditions in the insurance contract that specifically give rise to Malayan’s right to be
subrogated to ABB Koppel, or to such terms that may have absolved Malayan from the duty to pay the insurance
proceeds to that consignee. The particular date as to when such insurance contract was constituted cannot be
established with certainty without the contract itself, and that point is crucial since there can be no insurance on a
risk that had already occurred by the time the contract was executed. Since the documents in evidence and
testimonies allude to "marine insurance" or "marine risk note," it also is a legitimate question whether the
particular marine insurance relationship between Malayan and ABB Koppel also covers cargo delivered not by
ships at sea but by airplane flights, as had occurred in this case. Only the actual policy itself could definitively settle
such a question.

We can even note legitimate questions concerning the integrity or viability of the Marine Insurance Policy as
belatedly presented before this court. For one, Regis observes that the "Marine Cargo Policy Number" as
denominated in the Risk Note reads: "Open Policy-0001-00410," while the copy of the Marine Insurance Policy
submitted before us is numbered "M/OP/95001-410." The variance may ultimately be explainable, yet the non-
presentation of the Marine Insurance Policy before the trial court precludes the due evaluation of the reason for
the difference in numbering.

All told, we hold that Malayan was not able to establish its cause of action as stated in its complaint, based as it
was on its right to be subrogated to ABB Koppel under the insurance contract which it failed to present as an
actionable document, or as evidence before the trial court. The result reached by the Court of Appeals – the
dismissal of the instant complaint – is thus correct. As such, there is no need to consider the other issues raised in
the petition.

WHEREFORE, the petition is DENIED. Costs against petitioner.

SO ORDERED.

DANTE O. TINGA
Associate Justice