G.R. No. 239989 . July 13, 2020
PIONEER INSURANCE & SURETY CORPORATION, PETITIONER, VS. CARMEN G. TAN ALSO KNOWN AS CARMEN S.F. GATMAYTAN AND/OR UNKNOWN OWNER/PROPRIETOR OF SAVE MORE DRUG DOING BUSINESS UNDER THE NAME AND STYLE OF SAVE MORE DRUG, RESPONDENT.

FACTS

Petitioner Pioneer Insurance & Surety Corporation issued a fire insurance policy to United Laboratories, Inc. (Unilab) covering stocks of pharmaceutical products. Some of these insured goods were delivered to respondent Carmen G. Tan, proprietor of Save More Drug, and stored in her warehouse. The Delivery Receipts stipulated that the goods remained the property of Unilab until fully paid, but the risk of loss from any cause was transferred to the buyer upon delivery. On August 28, 2004, a fire destroyed the Save More warehouse and the Unilab goods stored therein. Unilab filed a claim and received P13,430,528.22 from petitioner, after which it executed a Release Claim and a Loss and Subrogation Receipt in favor of petitioner. Petitioner, by right of subrogation, then filed a complaint for damages against respondent to recover the amount paid. In her Answer, respondent admitted she was a buyer of Unilab’s products and defended that the fire was accidental. The Regional Trial Court (RTC) ruled in favor of petitioner, holding respondent liable. On appeal, the Court of Appeals (CA) initially affirmed the RTC but later, upon respondent’s motion for reconsideration, reversed itself in an Amended Decision, dismissing the complaint after finding that the contract between respondent and Unilab was one of consignment, not sale, making respondent an agent of Unilab and thus not liable to petitioner. Petitioner assails this reversal, arguing that the CA erred in allowing respondent to change her theory of defense on appeal.

ISSUE

Whether the Court of Appeals erred in allowing respondent to change her theory of defense on appeal by claiming the contract was one of consignment, and consequently, whether petitioner can recover from respondent based on its right of subrogation.

RULING

Yes. The Supreme Court granted the petition, reversed the Amended Decision and Resolution of the Court of Appeals, and reinstated the Decision of the RTC. The Court held that the CA erred in considering the new issue raised for the first time on appeal. Respondent, in her Answer with Counterclaim, admitted the allegations in the complaint that she was a buyer of Unilab’s products, and her defense throughout the trial was that the loss was due to a fortuitous event. The theory that the contract was one of consignment was never raised nor discussed before the trial court. Points of law, theories, issues, and arguments not brought to the attention of the lower court cannot be raised for the first time on appeal, as it violates the dictates of fair play, due process, and justice. Since the contract was one of sale and it was uncontroverted that the destroyed goods were unpaid, Unilab retained insurable interest, and the risk of loss was on respondent upon delivery. By right of subrogation, petitioner, as insurer, was entitled to collect from respondent after satisfying Unilab’s claim. The stipulation on attorney’s fees was also upheld.