Pioneer Insurance & Surety Corp. v. Fortun
REITERATIONFacts
The Antecedents: Spouses Ong, owners of Discount Restaurant, insured their employees' liabilities with Overseas Insurance Corporation (OIC) under Policy No. WC-1714, effective October 16, 1973, to October 16, 1974. On May 18, 1973, while the policy was in force, an employee, Soledad Saura, died of illness. Her heirs filed a compensation claim against the Ongs and OIC. The Department of Labor awarded P6,000.00 to the heirs and P61.00 in fees. Procedural History: OIC refused to pay the award. The Ongs sued OIC to compel payment. OIC's defense included that the Ongs had not yet paid the award and that OIC was under receivership with Pioneer Insurance and Surety Corporation (Pioneer) as statutory receiver. The Ongs amended their complaint to include Pioneer as a defendant. The Regional Trial Court initially ruled in favor of the Ongs, ordering OIC to pay, and absolving Pioneer. Subsequently, the Judge motu proprio amended the decision to make Pioneer subsidiarily liable in case OIC failed to pay. The Petition: Pioneer appealed the amended decision, arguing it should not be held liable as a statutory receiver for a claim that arose before its appointment and that Section 251 of the Insurance Code exempts it from liability for acts done in good faith.
Issue(s)
Whether the respondent Judge erred in pronouncing Pioneer, as statutory receiver, subsidiarily liable for the Ongs' claim under the insurance policy. Whether respondent Judge erred in not dismissing the amended complaint against Pioneer, considering Section 251 of the Insurance Code exempts receivers from liability for acts done in good faith in the exercise of their powers, and whether this exemption prohibits suits against a receiver in their representative capacity.
Ruling
The petition is granted. The order of August 24, 1976, amending the earlier decision, is set aside, and the decision of August 19, 1976, is reinstated in toto. The judgment may be satisfied from any available assets of OIC in the custody of Pioneer as receiver.
Ratio Decidendi
On the issue of Pioneer's subsidiary liability: The Supreme Court held that the respondent Judge erred in making Pioneer subsidiarily liable. The claim of the Ongs against OIC arose from an award for the death of an employee, which occurred on May 18, 1973. Pioneer was appointed as OIC's receiver almost a year later. Therefore, Pioneer was a complete stranger to the insurance contract, the award, and the events that gave rise to the Ongs' claim against OIC. The principle of res inter alios acta dictates that contracts take effect only between the parties. Since Pioneer was not a party to the insurance policy or the events leading to the claim, it could not be held liable, even subsidiarily, for a claim that matured before its appointment as receiver. The Court emphasized that the amended judgment making Pioneer liable on its own account was erroneous and must be reversed. On the issue of exemption under Section 251 of the Insurance Code: The Supreme Court clarified that Section 251 of the Insurance Code, which exempts receivers from liability for acts done or omitted in good faith in the exercise of their powers, cannot be construed to prohibit suits against a receiver in their representative capacity as custodian and manager of the assets of the entity under receivership. Such a construction would lead to inequity and injustice. The exemption applies only to acts performed in good faith by the receiver in the discharge of their duties, not to actions brought upon claims against the entity under receivership, especially those that matured before the receivership. Therefore, Pioneer was properly impleaded as a representative of OIC, allowing the private respondents to pursue their claim against the assets under receivership. The Court stated that the exemption does not apply to actions brought upon claims against the person or property under receivership and not, in any event upon claims which matured before the receivership was established.
Main Doctrine
A statutory receiver appointed for an insurance corporation under the Insurance Code is not liable for claims that matured prior to its appointment, as it is a stranger to the insurance contract and the events giving rise to the claim.