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  • Cha v. Court of Appeals

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    Rebecca Chan
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    1. The Supreme Court ruled that a stipulation in a lease contract assigning fire insurance proceeds to the lessor, CKS Development Corporation, was invalid because the lessor had no insurable interest over the lessees' merchandise inside the leased premises. 2. Under the Insurance Code, an insurable interest is required for property insurance policies to prevent them from becoming mere wagers. 3. While the lessees, Sps. Cha, were liable for violating the lease contract by obtaining insurance without consent, that issue was separate from CKS's invalid claim to the insurance proceeds based on the lease stipulation. The petition was granted and proceeds were awarded to Sps. Cha.

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    1. The Supreme Court ruled that a stipulation in a lease contract assigning fire insurance proceeds to the lessor, CKS Development Corporation, was invalid because the lessor had no insurable interest over the lessees' merchandise inside the leased premises. 2. Under the Insurance Code, an insurable interest is required for property insurance policies to prevent them from becoming mere wagers. 3. While the lessees, Sps. Cha, were liable for violating the lease contract by obtaining insurance without consent, that issue was separate from CKS's invalid claim to the insurance proceeds based on the lease stipulation. The petition was granted and proceeds were awarded to Sps. Cha.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
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    117 views1 page

    Cha v. Court of Appeals

    Uploaded by

    Rebecca Chan
    1. The Supreme Court ruled that a stipulation in a lease contract assigning fire insurance proceeds to the lessor, CKS Development Corporation, was invalid because the lessor had no insurable interest over the lessees' merchandise inside the leased premises. 2. Under the Insurance Code, an insurable interest is required for property insurance policies to prevent them from becoming mere wagers. 3. While the lessees, Sps. Cha, were liable for violating the lease contract by obtaining insurance without consent, that issue was separate from CKS's invalid claim to the insurance proceeds based on the lease stipulation. The petition was granted and proceeds were awarded to Sps. Cha.

    Copyright:

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    Cha v. Court of Appeals G.R. No. 124520 J.

    Padilla Doctrine: Insurable interest is a requirement in property insured which is based on sound public policy to prevent a person from taking out an insurance policy and collecting proceeds on property which he has no insurable interest. To allow any stipulation to the contrary would make the insurance contract a mere wager which is void under the Insurance Code. Facts: Sps. Cha entered into a contract of lease with respondent, CKS Development Corporation (CKS), over the premises with a stipulation that no fire insurance policies shall be taken by the lessees without the written consent and approval of the lessor. Failure to comply with such stipulation, the policy shall be deemed assigned and transferred to the lessor for its own benefit. Despite the stipulation, the Sps. Cha took out an insurance policy with United Insurance Co. Inc. (United) against fire over the merchandise inside the leased premises without consent. A fire broke out inside the leased premises and CKS demanded that proceeds be paid directly to it based on the lease contract. United refused to pay CKS and the latter filed a complaint against both the Sps. Cha and United. Trial court rendered decision in favor of respondent, ordering United to pay CKS, which was affirmed by the Court of Appeals upon appeal. Issue: Whether or not the assignment and transfer of policy to CKS is a valid stipulation in the contract of lease? Held: No. A non-life insurance policy such as the fire insurance policy taken in this case is a contract of indemnity and an insurable interest must exist at the time the insurance takes effect and at the time of loss as provided in Sec. 19 of the Insurance Code. Such requirement is necessary on the basis of public policy and in this case, without insurable interest on the part of CKS, the contract becomes a mere wager which is void under Sec. 25 of the Insurance Code. Therefore, CKS cannot become a valid beneficiary since he has no insurable interest over the merchandise and the automatic assignment stipulated in the lease contract is void for being contrary to law and public policy. United cannot pay the proceeds to CKS on the basis of the contract and any liability of the Cha for violating their lease contract is a separate and distinct issue from the one resolved in this case. Petition is granted, reversing the decision of the Court of Appeals, and awarding the proceeds of the fire insurance to petitioners, Sps. Cha. August 18, 1997

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