FIELDMEN'S INSURANCE CO., INC.,vs. ASIAN SURETY & INSURANCE, CO., INC.

and CA (1970)
MAKALINTAL, J.:

SUMMARY: Asian and Fieldmen entered into reinsurance contracts. Fieldmen submitted notice of cancellation of their
agreement on Sept and Dec 1961. No reply from Asian. On Feb 1962, GSIS property was burned, this being covered by the
reinsurance contract. Fieldmen denied liability stating that they already sufficiently cancelled their agreement with Asian.
Fieldmen filed a petition for declaratory relief from CFI. CFI held Fieldmen still liable for GSIS incident. CA affirmed. SC held that
Fieldmen is still liable as it is clearly stated in their contract that it shall continue to be in force. Judgment affimed

DOCTRINE:
Where the reinsurance contracts in question contain provisions which clearly and expressly recognize the continuing effectivity
of policies ceded under them for reinsurance notwithstanding the cancellation of the contracts themselves, their cancellation
does not carry with it ipso facto the termination of all reinsurance cessions thereunder. Such cessions continued to be in force
until their respective dates of expiration.

FACTS:

 On various dates the Asian Surety & Insurance and the Fieldmen's insurance entered into 7 reinsurance agreements.
ASIAN undertook to cede to FIELDMEN’S, as the reinsuring company, a specified portion of the amount of insurance
underwritten by ASIAN upon payment to FIELDMEN'S of a share of the premium.

 Agreements were to take effect until cancelled by either party upon previous notice of at least 3 months by registered
mail to the other party, the cancellation to take effect as of the 31st of December of the year in which notice was given.

 Sept and Dec 1961: FIELDMEN’S sent letters to ASIAN expressing its desire to cancel all agreements between them as
of DEC 31, 1961 alleging that ASIAN had already incurred numerous violations. ASIAN received but did not reply

 Feb 1962: FIELDMEN’S sent another letter to ASIAN reiterating cancellation and requests for final accounting

 Meanwhile one of the risks reinsured by FIELDMENS issued in favor of the GSIS became a liability when the insured
property was burned on Feb 1962. The next day ASIAN sent letter to FIELDMEN’S notifying them of the loss

 FIELDMEN’S filed a petition for declaratory relief with CFI alleging its first letter of notification on SEPT 19, 1961 was
sufficient to meet the 3-month period before cancellation and to obtain an order directing ASIAN to render final
accounting of the transactions between them with respect to said reinsurance treaties as of the cut-off date.

 CFI DECISION: 6 of 7 agreements are cancelled as of DEC 1961 but agreed with ASIAN that FIELDMEN’S is still liable for
as long the previously contracted policies are still valid. It also ordered FIELDMEN'S to make an accounting with ASIAN
within 30 days.

 CA: Affirmed with modification, the order for accounting was eliminated

ISSUE: WON cancellation had the effect of terminating also the liability of FIELDMEN'S as reinsurer with respect to policies or
cessions issued prior to the termination of the principal reinsurance contracts or treaties? (N)

HELD: NO
 Contained in 2 agreements regarding GSIS contains the ff provisions:
o Article 10 of the Facultative Obligatory Reinsurance Treaty Fire provides "that in the event of termination of this
Agreement ..., the liability of the Fieldmen's under current cessions shall continue in full force and effect until
their natural expiry ...;" and the 4th paragraph of Article VI of the Personal Accident Reinsurance Treaty states:

o 4. On the termination of this Agreement from any cause whatever, the liability of the REINSURER (Fieldmen's)
under any current cession including any amounts due to be ceded under the terms of this Agreement and which are
not cancelled in the ordinary course of business shall continue in full force until their expiry unless the COMPANY
(Asian) shall, prior to the thirty-first December next following such notice, elect to withdraw the existing cessions

 It is therefore clear that FIELDMEN’S is still liable despite the cancellation. Such cessions continued to be in force
until their respective dates of expiration. GSIS policy still valid and subsisting at time of loss. FIELDMEN’S IS LIABLE
  No need to go into other arguments (did not mention what they are) because the cancellation of the agreements made
them moot.

 SC : ASIAN only claims continued liability of FIELDMEN’s as to the 2 agreements that had the provision cited above (as
compared to the other 4 cancelled agreements wherein FIELDMEN’S liability had terminated with the contracts). Also,
SC held that that this action is for declaratory relief and not one for rescission and no grounds found by lower courts
that can justify rescission anyway.

DISPOSITIVE: Petition Denied. Judgement affirmed