View full case

PARAMOUNT LIFE v. CHERRY T. CASTRO

FACTS:

These Petitions for Review on Certiorari under Rule 45 involve a Complaint for Declaration of Nullity of Individual Insurance Contract filed by Paramount Life & General Insurance Corporation (Paramount) against Cherry T. Castro and Glenn Anthony T. Castro (Castros). The Complaint was filed before the Regional Trial Court, Makati City, Branch 61 (RTC) on 2 July 2009.

The Petition in G.R. No. 195728 assails the Court of Appeals (CA) Decision and Resolution in CA-G.R. SP No. 113972, which remanded the case to the RTC for the admission of the Castros' Third-Party Complaint against the Philippine Postal Savings Bank, Incorporated (PPSBI).

The Petition in G.R. No. 211329 assails the RTC Resolution in Civil Case No. 09-599, which deemed the Motion to Dismiss filed by the Castros as expunged from the records. The RTC had previously declared the Castros as in default for failure to attend the pretrial.

The Petitions have been consolidated since they involve the same parties, arise from the same facts, and raise interrelated issues.

The case involves an individual insurance coverage issued by Paramount to Virgilio J. Castro, Cherry's husband and Glenn's father, who obtained a housing loan from PPSBI. Paramount denied the claim for death benefits under the insurance coverage, citing Virgilio's alleged material misrepresentation and concealment of his health condition when applying for the insurance. On 2 July 2009, Paramount filed a Complaint seeking to declare the insurance contract null and void. The Castros argued that Virgilio did not make any material misrepresentation and counterclaimed for damages and breach of contract by Paramount.

In G.R. No. 195728, the Castros sought to include PPSBI as a party defendant, but the RTC denied their motion. They subsequently filed a motion for leave to file a third-party complaint, which was also denied by the RTC. The Castros filed a Petition for Certiorari with the CA, which partially granted their petition and allowed the filing of a third-party complaint against PPSBI.

In G.R. No. 211329, the Castros filed a Motion to Dismiss the Complaint on the ground of failure to prosecute and to present evidence ex parte. The RTC denied the motion, treating it as a mere scrap of paper due to the Castros' default status. The Castros filed a Petition for Review assailing the RTC's denial of their motion.

ISSUES:

  1. Whether the PPSBI can be impleaded as a third-party defendant in the nullification case instituted by Paramount.

  2. Whether the inclusion of the PPSBI as a third-party defendant is proper and necessary.

  3. Whether there are grounds for the inhibition of Judge Ruiz;

  4. Whether the defendants were properly declared as in default for failure to appear at pretrial.

RULING:

  1. Yes, the PPSBI can be impleaded as a third-party defendant in the nullification case instituted by Paramount. The Court recognizes the inseparable interest of the bank, as the policyholder of the group policy, in the validity of the individual insurance certificates issued by Paramount. The PPSBI need not institute a separate case since its cause of action is intimately related to that of Paramount as against the Castros.

  2. Yes, the inclusion of the PPSBI as a third-party defendant is proper and necessary. The Castros stand to incur a bad debt to the PPSBI in the event that Paramount succeeds in nullifying Virgilio's Individual Insurance Certificate. The admission of a third-party complaint is based on the causal connection between the plaintiff's claim in the complaint and the claim for contribution, indemnity, or other relief of the defendant against the third-party defendant. In this case, the Castros' claim against Paramount is directly related to the PPSBI's interest as the mortgagee-bank and policyholder of the group insurance policy.

  3. The issue of Judge Ruiz's inhibition is unmeritorious. The rule that a judge should inhibit himself when his ruling is subject to review is applicable when judges are tasked to review their own decisions on appeal, not when their decisions are being appealed to another tribunal.

  4. The lower court did not issue an order of default, but instead ordered the plaintiff to present evidence ex parte in accordance with the rules. The Castros could have availed themselves of appropriate legal remedies when the issue was not resolved by the Court of Appeals (CA), but they did not. They cannot now resurrect the issue through a Comment before the Supreme Court.

PRINCIPLES:

  • The purpose of mortgage redemption insurance is to protect both the mortgagee and the mortgagor by applying the insurance proceeds to the payment of the mortgage debt in the event of the mortgagor's unexpected demise.

  • The provisions of the group insurance policy that ensure direct payment by the insurer to the bank prevail over any nullification of the individual insurance certificate.

  • The inclusion of a third-party defendant is proper when there is a causal connection between the plaintiff's claim and a claim for contribution, indemnity, or other relief of the defendant against the third-party defendant.

  • The admission of a third-party complaint aims to avoid circuitry of action, unnecessary proliferation of lawsuits, and to expeditiously dispose of all issues arising from one particular set of facts in one litigation.

  • The third-party defendant may raise defenses, counterclaims, or cross-claims, including defenses that the third-party plaintiff may have against the original plaintiff. The third-party defendant may also assert a counterclaim against the original plaintiff in respect of the latter's claim against the third-party plaintiff.

  • A judge should inhibit himself when his ruling is subject to review applies when judges are tasked to review their own decisions on appeal, not when their decisions are being appealed to another tribunal.

  • Failure to file a responsive pleading within the reglementary period is the sole ground for an order of default under Rule 9. On the other hand, failure of the defendant to appear at the pre-trial conference results in the plaintiff being allowed to present evidence ex parte under Rule 18.