G.R. No. L-11497; August 16, 1957
PHILIPPINE AIR LINES, INC., plaintiff-appellant, vs. HEALD LUMBER COMPANY, defendant-appellee.

FACTS

Prior to June 4, 1954, Lepanto Consolidated Mines chartered a helicopter from Philippine Air Lines (PAL) for a flight from Nichols Field Airport to Mankayan, Mountain Province. On that date, the helicopter, piloted by Capt. Gabriel G. Hernandez and Lt. Rex M. Imperial, crashed within the logging area of Heald Lumber Company after colliding with the defendant’s tramway steel cables, resulting in the destruction of the helicopter and the death of both officers. PAL had insured the helicopter for P80,000 and each officer for P20,000 with various insurance companies in London. Following the crash, the insurance companies paid PAL a total indemnity of P120,000. PAL claimed it sustained additional uninsured damages totaling P103,347.82. On March 2, 1956, PAL filed a complaint to recover from Heald Lumber Company: (a) P120,000, which it asserted “on behalf and for the benefit of said insurers,” holding the amount in trust for them; and (b) P103,347.82 for its own consequential and moral damages. The defendant moved to dismiss, arguing that PAL had no cause of action for the P120,000, as the right to sue belonged to the insurance companies. The lower court ordered PAL to amend its complaint by either deleting the claim for P120,000 or joining the insurance companies as parties plaintiff. PAL moved for reconsideration, which was denied, and upon its refusal to amend, the court deemed the complaint limited to the claim for P103,347.82. PAL appealed.

ISSUE

Whether the lower court erred in ruling that Philippine Air Lines, Inc. is not the real party in interest respecting the claim for P120,000 (the insurance proceeds) and in ordering the deletion of that claim from the complaint.

RULING

No, the lower court did not err. The Supreme Court affirmed the lower court’s orders. The Court held that under Philippine law, specifically Article 2207 of the New Civil Code, when an insured property is damaged and the owner receives indemnity from the insurer, the insurer is subrogated to the rights of the insured against the wrongdoer. If the insurance payment does not fully cover the loss, the insured may recover the deficiency. Therefore, regarding the portion of the loss covered by insurance (P120,000), the real party in interest is the insurer, not the insured (PAL). The Court rejected PAL’s theory, based on American authorities, that the insured could sue for the entire loss as a trustee for the insurer because the loss exceeded the insurance payment. The Court emphasized that Philippine law differs from the American rule cited. Furthermore, for a party to sue as a trustee for another under the Rules of Court, the trust must be an express trust, which was not present here. Consequently, PAL was not the proper party to sue for the recovery of the P120,000 paid by the insurers.