Harvardian Colleges v. Country Bankers Insurance Corp.

1 CARA 2

Facts:

> Harvardian is a family corporation, the stockholders of which are Ildefonso Yap, Virginia King Yap
and their children.

> Prior to Aug. 9, 1979, an agent of Country Bankers proposed to Harvardian to insure its school
building. Although at first reluctant, Harvardian agreed.

> Country Banks sent an inspector to inspect the school building and agreed to insure the same for
P500,000 for which Harvardian paid an annual premium of P2,500.

> On Aug. 9, 1979, Country Bankers issued to Harvardian a fire insurance policy. On March 12,
1980, (39 days before I was born hehehehe )during the effectivity of said insurance policy, the
insured property was totally burned rendering it a total loss.

> A claim was made by plaintiff upon defendant but defendant denied it contending that plaintiff
had no insurable interest over the building constructed on the piece of land in the name of the late
Ildefonso Yap as owner.

> It was contended that both the lot and the building were owned by Ildefonso Yap and NOT by the
Harvardian Colleges.

Issue:

Whether or not Harvardian colleges has a right to the proceeds.

Held:

Harvardian has a right to the proceeds.

Regardless of the nature of the title of the insured or even if he did not have title to the property
insured, the contract of fire insurance should still be upheld if his interest in or his relation to the
property is such that he will be benefited in its continued existence or suffer a direct pecuniary loss
from its destruction or injury. The test in determining insurable interest in property is whether one
will derive pecuniary benefit or advantage from its preservation, or will suffer pecuniary loss or
damage from its destruction, termination or injury by the happening of the event insured against.

1
Here Harvardian was not only in possession of the building but was in fact using the same for several
years with the knowledge and consent of Ildefonso Yap. It is reasonably fair to assume that had the
building not been burned, Harvardian would have been allowed the continued use of the same as
the site of its operation as an educational institution. Harvardian therefore would have been directly
benefited by the preservation of the property, and certainly suffered a pecuniary loss by its being
burned.

Lessons Applicable: Existing Interest (Insurance)

Laws Applicable: Article 1504,Article 1263, Article 2207 of the Civil Code, Section 13 of Insurance
Code

FACTS:

Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. while Levi Strauss
(Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks owned by Levi Strauss & Co

IMC and LSPI separately obtained from Insurance Company of North America fire insurance policies
for their book debt endorsements related to their ready-made clothing materials which have been
sold or delivered to various customers and dealers of the Insured anywhere in the Philippines which
are unpaid 45 days after the time of the loss

February 25, 1991: Gaisano Superstore Complex in Cagayan de Oro City, owned by Gaisano Cagayan,
Inc., containing the ready-made clothing materials sold and delivered by IMC and LSPI was
consumed by fire.

February 4, 1992: Insurance Company of North America filed a complaint for damages against
Gaisano Cagayan, Inc. alleges that IMC and LSPI filed their claims under their respective fire
insurance policies which it paid thus it was subrogated to their rights

Gaisano Cagayan, Inc: not be held liable because it was destroyed due to fortuities event or force
majeure

RTC: IMC and LSPI retained ownership of the delivered goods until fully paid, it must bear the loss
(res perit domino)

CA: Reversed - sales invoices is an exception under Article 1504 (1) of the Civil Code to res perit
domino

ISSUE: W/N Insurance Company of North America can claim against Gaisano Cagayan for the debt
that was isnured

HELD: YES. petition is partly GRANTED. order to pay P535,613 is DELETED

insurance policy is clear that the subject of the insurance is the book debts and NOT goods sold and
delivered to the customers and dealers of the insured

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ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein
is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods
are at the buyer's risk whether actual delivery has been made or not, except that:

(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership in the goods has been retained by the seller merely to
secure performance by the buyer of his obligations under the contract, the goods are at the buyer's
risk from the time of such delivery;

IMC and LSPI did not lose complete interest over the goods. They have an insurable interest until full
payment of the value of the delivered goods. Unlike the civil law concept of res perit domino, where
ownership is the basis for consideration of who bears the risk of loss, in property insurance, one's
interest is not determined by concept of title, but whether insured has substantial economic interest
in the property

Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether
real or personal, or any relation thereto, or liability in respect thereof, of such nature that a
contemplated peril might directly damnify the insured." Parenthetically, under Section 14 of the
same Code, an insurable interest in property may consist in: (a) an existing interest; (b) an inchoate
interest founded on existing interest; or (c) an expectancy, coupled with an existing interest in that
out of which the expectancy arises.

Anyone has an insurable interest in property who derives a benefit from its existence or would suffer
loss from its destruction.

it is sufficient that the insured is so situated with reference to the property that he would be liable to
loss should it be injured or destroyed by the peril against which it is insured

an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or
possession of, the subject

matter of the insurance, and neither the title nor a beneficial interest is requisite to the existence of
such an interest

insurance in this case is not for loss of goods by fire but for petitioner's accounts with IMC and LSPI
that remained unpaid 45 days after the fire - obligation is pecuniary in nature

obligor should be held exempt from liability when the loss occurs thru a fortuitous event only holds
true when the obligation consists in the delivery of a determinate thing and there is no stipulation
holding him liable even in case of fortuitous event

Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or destruction of
anything of the same kind does not extinguish the obligation (Genus nunquan perit)

The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as
insurer and IMC as the insured, but also the amount paid to settle the insurance claim

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Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract complained
of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or
the person who has violated the contract.

As to LSPI, no subrogation receipt was offered in evidence.

Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of the
amount of P535,613

Harding v. Commercial Union Assurance Company- Willful Misstatement

38 PHIL 464

Facts:

> Henry Harding bought a car for 2T in 1915. He then gave the car to his wife Mrs. Harding.

> While Mrs. Harding was having the car repaired at the Luneta Garage (Luneta was an agent of
Smith Bell and Co., which in turn is Commercial Unions agent), the latter induced Mrs. Harding to
insure the care with Commercial.

> Mrs. Harding agreed, and Smith Bell sent an agent to Luneta Garage, who together with the
manager of LUneta, appraised the car and declared that its present value was P3T. This amt was
written in the proposal form which Mrs. Harding signed.

> Subsequently, the car was damaged by fire. Commercial refused to pay because the cars present
value was only 2.8T and not 3T.

Issue:

Whether or not Commercial is liable.

Held:

Commercial is liable.

Where it appears that the proposal form, while signed by the insured was made out by the person
authorized to solicit the insurance (Luneta and Smith Bell) the facts stated in the proposal, even if
incorrect, will not be regarded as warranted by the insured, in the absence of willful misstatement.
Under such circumstances, the proposal is to be regarded as the act of the insurer.

Lessons Applicable: Existing Interest (Insurance)

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Laws Applicable:

FACTS:

Mariano R. Barretto, constructed a house for Placida A. Jose sold the house to Antonina Lampano for
P6,000

The house was destroyed by fire during which Lampano still owed Jose P2,000 as evidenced by a
promissory note. Jose also owed Barretto P2,000 for the construction.

After the completion of the house and before it was destroyed, Mariano R. Barretto took out an
insurance policy upon it in his own name, with the consent of Placida A. Jose, for the sum of P4,000.
After its destruction, he collected P3,600 from the insurance company, having paid in premiums the
sum of P301.50

Lampano filed a complaint against Barreto and Jose alleging that Jose in a verbal agreement told her
that the policy will be delivered to her so she should collected P3,600 from each of them

RTC: favored Jose ordering Barreto to pay him P1,298.50 and offsetting the P2,000

Barreto alone appealed

ISSUE: W/N Barreto had insurable interest in the house and could insure it for his it for his own
protection

HELD: YES. reversed and Barretto is absolved

Where different persons have different interests in the same property, the insurance taken by one in
his own right and in his own interest does not in any way insure to the benefit of another

A contract of insurance made for the insurer's (insured) indemnity only, as where there is no
agreement, express or implied, that it shall be for the benefit of a third person, does not attach to or
run with the title to the insured property on a transfer thereof personal as between the insurer and
the insured.

Barretto had an insurable interest in the house. He construed the building, furnishing all the
materials and supplies, and insured it after it had been completed

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FAC

FEB Leasing and Finance Corporation (FEB) leased equipment and motor vehicles to JVL Food
Products with a monthly rental of P170,494

At the same date, Vicente Ong Lim Sing, Jr. (Lim) an executed an Individual Guaranty Agreement
with FEB to guarantee the prompt and faithful performance of the terms and conditions of the lease
agreement

JVL defaulted in the payment of the monthly rentals resulting to arrears of P3,414,468.75 and
refused to pay despite demands

FEB filed a complaint for damages and replevin against JVL, Lim and John Doe

JVL and Lim admitted the existence of the lease agreement but asserted that it is in reality a sale of
equipment on installment basis, with FEB acting as the financier

RTC: Sale on installment and the FEB elected full payment of the obligation so for the unreturned
units and machineries the JVL and Lim are jointly and severally liable to pay

CA: granted FEB appeal that it is a financial lease agreement under Republic Act (R.A.) No. 8556 and
ordered JVL and Lim jointly and severally to pay P3,414,468.75

ISSUE: W/N JVL and Lim should jointly and severally be liable for the insured financial lease

HELD: YES. CA affirmed.

contract of adhesion is as binding as any ordinary contract

The Lease Contract with corresponding Lease Schedules with Delivery and Acceptance Certificates is,
in point of fact, a financial lease within the purview of R.A. No. 8556

FEB leased the subject equipment and motor vehicles to JVL in consideration of a monthly periodic
payment of P170,494.00. The periodic payment by petitioner is sufficient to amortize at least 70% of
the purchase price or acquisition cost of the said movables in accordance with the Lease Schedules
with Delivery and Acceptance Certificates.

JVL entered into the lease contract with full knowledge of its terms and conditions.

Lim, as a lessee, has an insurable interest in the equipment and motor vehicles leased.

In the financial lease agreement, FEB did not assume responsibility as to the quality, merchantability,
or capacity of the equipment. This stipulation provides that, in case of defect of any kind that will be
found by the lessee in any of the equipment, recourse should be made to the manufacturer. The
financial lessor, being a financing company, i.e., an extender of credit rather than an ordinary
equipment rental company, does not extend a warranty of the fitness of the equipment for any
particular use. Thus, the financial lessee was precisely in a position to enforce such warranty directly
against the supplier of the equipment and not against the financial lessor. We find nothing contra
legem or contrary to public policy in such a contractual arrangement

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-6442 Sep 21, 1954

Lessons Applicable: Existing Interest (Insurance)

Laws Applicable: Sec. 13 of the Insurance Code

FACTS:

Tomas Lianco and the Archbishop entered into a contract of lease on a parcel of landowned by
church

As lessee, Lianco erected a building on the leased portion of the churchs land.

Lianco transferred ownership of this building to Kaw Eng Si,who later transferred the same to
Golangco.

Transfers were made without the consent of the Archbishop

The Archbishop filed an ejectment case against Lianco, who appears to be occupants of the premises
building with others paying rent to Golangco.

The right of Golangco to receive rent on the building was judicially recognized in a case decided
between Lianco and others occupying the premises pursuant to a compromise agreement.

The Archbishop did not exercise his option to question Golangcos rights as lessee

April 7,1949: Golangco applied for fire insurance with Traders Insurance and Surety Co.

fire insurance policy states: "that all insurancecovered under said policy, includes the 'rent or
othersubject matter of insurance in respect of or inconnection with any building or any property
contained in any building"

June 5, 1949: the building premises was burned so Golangco requested Traders Insurance to pay
the insurance amount of 10,000 including the amount of rent P1,100 monthly.

Traders insurance refused to pay the insurance for the rent averring that Golangco has no insurable
interest

ISSUE: W/N Golangco has insurable interest on the rent of the building premises which may
lawfully/validly be subject of insurance?

HELD: YES.

Sec. 13 of the Insurance Code

Every interest in the property, whether real or personal, or any relation thereto, or liability in respect
thereof of such nature that a contemplated peril might directly damnify the insured, is an insurable
interest.

Both at the time of the issuance of the policy and at the time of the fire, Golangco was in legal
possession of the premises, collecting rentals from its occupant.

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The argument of Traders Insurance that a policy of insurance must specify the interest of the
insured in the property insured, if he is not the absolute owner thereof, is not meritorious because it
was the Traders, not Golangco, who prepared that policy, and it cannot take advantage of its own
acts to plaintiff's detriment; and, in any case, this provisionwas substantially complied with by
Golangco when he made a full and clear statement of his interests to Trader's manager.

The contract between Lianco and the Archbishop only forbade Lianco from transferring 'his rights as
LESSEE but the contracts Lianco made in favor of Kaw Eng Siand plaintiff Golangco did not transfer
such rights; hence no written consent thereto was necessary. At worst, the contract would be
voidable, but not a void contract, at the option of the Archbishop and it does not appear that it was
ever exercised raders Insurance and Surety Co. v. Golangco- Insurance Proceeds

95 PHIL 826

Facts:

> A decision was rendred in Civil Case No. 6306 granting Golangco the right to collect rentals from a
building in Sta. Cruz, Manila.

> Golangco then sought fire insurance from Traders. Before the policy was issued, Golangco made a
full and clear exposal of his interests in the premises, i.e. that he was not the owner

> The fire policy that defendant issued covered only all of Golangcos interest in the premises and
his right to collect the rentals.

> The building burned down in a fire and Golangco sought to collect from Traders. Traders denied
any liability on the ground that since Golangco was not the owner of the premises then he had no
insurable interest in the same and consequently, he could not collect the insurance proceeds.

Issue:

Whether or not plaintiff can claim the insurance proceeds.

Held.

YES.

Both at the time of the issuance of the policy and at the time of the fire, plaintiff Golangco was in
legal possession of the premises, collecting rentals from its occupant. It seems plain that if the
premises were destroyed as they were, by fire, Golangco would be, as he was, directly damnified
thereby; and hence he had an insurable interest therein.

Lopez v. Del Rosario

44 PHIL 98

Facts:

> Benita Del Rosario is the owner of a bonded warehouse in Manila where copra and other
merchandise are deposited.

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> Among those who had copra deposited in the warehouse was Froilan Lopez, the owner of 14
warehouse receipts with a declared value of P107,990.40 in his name.

> Del Rosario secured insurance on the warehouse and its contents with 5 different insurance
companies in the amount of P404,800.

> All policies were in the name of Del Rosario, except for one (with Natl Insurance Co.) for 40T, in
favor of Compania Copra de Tayabas.

> The warehouse and its contents were destroyed by fire. When Bayne, a fire loss adjuster, failed to
effect a settlement between the Insurance companies and Del Rosario, the latter authorized Atty.
Fisher to negotiate with the Companies.

> An agreement was reached to submit the matter to arbitration. The claims by different people
who had stored copra in the warehouse were settled with the exception of Friolan Lopez.

> A case was filed in CFI by Lopez. The court awarded him the sum of P88,492.21 with legal interest.

Issue:

Whether or not Del Rosario acted as the agent of Lopez in taking out the insurance on the contents
of the warehouse or whether she acted as the reinsurer of the copra.

Held:

She acted as the agent of Lopez.

The agency can be deduced from the warehouse receipts, the insurance policies and the
circumstances surrounding the transaction. Under any aspect, Del Rosario is liable. The law is that a
policy effected by a bailee and covering by its terms in his own property and property held in trust,
inures, in the event of loss, equally and proportionately to the benefit of all owners of the property
insured. Even if one secured insurance covering his own goods and goods stored with him, and even
if the owner of the stored goods did not request or know the insurance, and did not ratify it before
the payment of the loss, it has been held by a reputable court that the warehouseman is liable to the
owner of such stored goods for his share.

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Insurance Case Digest: San Miguel Brewery V. Law Union And Rock Insurance Co. (1920)

G.R. No. L-14300 January 19, 1920k

Lessons Applicable:

Mortgagor (Insurance)

Measure of Insurable Interest (Insurance)

Effect of Change of Interest in Thing Insured (Insurance)

Effect of transfer of thing insured (Insurance)

Laws Applicable: sec. 16,sec. 19 (now sec. 20),sec. 50,sec.55 (now sec. 58) of the Insurance Code (all
old law)

FACTS:

In the contract of mortgage, the owner P.D. Dunn had agreed, at his own expense, to insure the
mortgaged property for its full value and to indorse the policies in such manner as to authorize the
Brewery Company to receive the proceeds in case of loss and to retain such part thereof as might be
necessary to satisfy the remainder then due upon the mortgage debt. Instead, however, of effecting
the insurance himself Dunn authorized and requested the Brewery Company to procure insurance
on the property in the amount of P15,000 at Dunn's expense.

San Miguel insured the property only as mortgagee.

Dunn sold the propert to Henry Harding. The insurance was not assigned by Dunn to Harding.

When it was destroyed by fire, the two companies settled with San Miguelto the extent of the
mortgage credit.

RTC: Absolved the 2 companies from the difference. Henry Harding is not entitled to the difference
between the mortgage credit and the face value of the policies.

Henry Harding appealed.

ISSUE:

1. W/N San Miguel has insurable interest as mortgagor only to the extent of the mortgage credit -
YES

2. W/N Harding has insurable interest as owner - NO

HELD: affirmed

section 19 of the Insurance Act:

10
a change of interest in any part of a thing insured unaccompanied by a corresponding change of
interest in the insurance, suspends the insurance to an equivalent extent, until the interest in the
thing and the interest in the insurance are vested in the same person

section 55:

the mere transfer of a thing insured does not transfer the policy, but suspends it until the same
person becomes the owner of both the policy and the thing insured

Undoubtedly these policies of insurance might have been so framed as to have been "payable to the
San Miguel Brewery, mortgagee, as its interest may appear, remainder to whomsoever, during the
continuance of the risk, may become the owner of the interest insured." (Sec 54, Act No. 2427.) Such
a clause would have proved an intention to insure the entire interest in the property, not merely the
insurable interest of the San Miguel Brewery, and would have shown exactly to whom the money, in
case of loss, should be paid. But the policies are not so written.

The blame for the situation thus created rests, however, with the Brewery rather than with the
insurance companies, and there is nothing in the record to indicate that the insurance companies
were requested to write insurance upon the insurable interest of the owner or intended to make
themselves liable to that extent

If by inadvertence, accident, or mistake the terms of the contract were not fully set forth in the
policy, the parties are entitled to have it reformed. But to justify the reformation of a contract, the
proof must be of the most satisfactory character, and it must clearly appear that the contract failed
to express the real agreement between the parties

Lessons Applicable: When Insurable Interest Must Exist (Insurance)

Laws Applicable:

FACTS:

Azucena Palomo bought a parcel of land and building from Rolando Gonzales and assumed a
mortgage of the building in favor of S.S.S. which was insured with S.S.S. Accredited Group of Insurers

April 19, 1975: Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of
P100,000 and to secure it, the land and building was mortgaged

June 11, 1975: Pedro Palomo secured a Fire Insurance Policy covering the building for P50,000 with
Zenith Insurance Corporation

July 16, 1975: another Fire Insurance policy was procured from Philippine British Assurance
Company, covering the same building for P50,000 and the contents thereof for P70,000

Before the occurrence of the peril insured against the Palomos had already paid their credit due the

July 31, 1975: building and the contents were totally razed by fire

Palomo was able to claim P41,546.79 from Philippine British Assurance Co., P11,877.14 from Zenith
Insurance Corporation and P5,936.57 from S.S.S. Group of Accredited Insurers but Travellers Multi-

11
Indemnity refused so it demanded the balance from the other three but they refused so they filed
against them

Insurance Commission, CFI: absolved Travellers on the basis that Arsenio Cua was claiming and NOT
Tai Tong Chuache

Palomo Appealed

Travellers reasoned that the policy is endorsed to Arsenio Chua, mortgage creditor

Tai Tong Chuache & Co. filed a complaint in intervention claiming the proceeds of the fire Insurance
Policy issued by travellers

affirmative defense of lack of insurable interest that before the occurrence of the peril insured
against the Palomos had already paid their credit due the petitioner

ISSUE: W/N Tai Tong Chuache & Co. has insurable interest

HELD: YES. Travellers Multi-Indemnity Corporation to pay Tai Tong Chuache & Co.

when the creditor is in possession of the document of credit, he need not prove non-payment for it
is presumed

The validity of the insurance policy taken b petitioner was not assailed by private respondent.
Moreover, petitioner's claim that the loan extended to the Palomos has not yet been paid was
corroborated by Azucena Palomo who testified that they are still indebted to herein petitioner

Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the partnership.
Being an agent, it is understood that he acted for and in behalf of the firm

Upon its failure to prove the allegation of lack of insurable interest on the part of the petitioner,
Travellers must be held liableIn the case now before us the proof is entirely insufficient to authorize
reformation.

Bachrach v. British American Insurance Co. - Insurance Proceeds

17 PHIL 555

Facts:

> Bachrach insured properties of its general furniture shop with British. The properties were
subsequently destroyed by fire.

> Bachrach claims from the insurance company. The claim was denied on the ff grounds:

o The policy was allegedly forfeited because the insured stored varnishes and paints within the
premises;

o Insured stored gasoline in the building; and

o Bachrach executed a chattel mortgage on the properties insured without the consent of the
insured.

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Issue:

Whether or not Bachrach can claim the proceeds of the policy.

Held:

Yes.

The policy was NOT forfeited due to the strong paints and varnishes. There was no express provision
pertaining to it and these paints and varnishes are incidental to the business of the insured to keep
the furniture in a saleable condition. The gasoline stored within the premises was in the reservoir of
the car and thus does not violate any provision in the policy. There is no express prohibition against
the execution of a chattel mortgage on the property insured.

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