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Sections 1-9

11. Filipinas Compana De Seguros vs. Christern

Facts: On October 1, 1941 Christern Huenefeld, & Co., Inc. obtained from Filipinas Cia. de Seguros, fire policy No. 29333 in
the sum of P1000,000, covering merchandise contained in a building located at No. 711 Roman Street, Binondo Manila.
On February 27, 1942, or during the Japanese military occupation, the building and insured merchandise were burned. The
total loss suffered by the respondent was fixed at P92,650. Filipinas refused to pay the claim on the ground that the policy
in favor of Christern had ceased to be in force on the date the United States declared war against Germany (Christern
though organized under and by virtue of the laws of the Philippines, being controlled by the German subjects and Filipinas
being a company under American jurisdiction when said policy was issued).
Filipinas however, in pursuance of the order of the Director of Bureau of Financing, Philippine Executive Commission,
dated April 9, 1943, paid to Christern the sum of P92,650 on April 19, 1943.
CFI of Manila August 6, 1946; Filipinas to recover from Christern the sum of P92,650
= accdg. to Filipinas: the insured merchandise were burned up after the policy issued in 1941 in favor of Christern has
ceased to be effective because of the outbreak of the war between the United States and Germany on December 10, 1941,
and that the payment made during the Japanese military occupation was under pressure

Corp., had to close its branch office in Manila by reason of the Japanese occupation, i.e. from January 2, 1942, until the
year 1945.
Case 2:
Spouses Tomas Ruiz and Agustina Peralta. Their premiums were initially annually but subsequently changed to quarterly.
The last quarterly premium was delivered on on November 18, 1941 and it covered the period until January 31, 1942.
Upon the Japanese occupation, the insurer and insured were not able to deal with each other. Because the insured had
borrowed on the policy P234.00 in January, 1941, the cash surrender value of the policy was sufficient to maintain the
policy in force only up to September 7, 1942. Tomas Ruiz died on February 16, 1945 with Agustina Peralta as beneficiary.
Her demand for payment was refused on the ground of non-payment of the premiums.
Plaintiffs maintain that, as beneficiaries, they are entitled to receive the proceeds of the policies minus all sums due for
premiums in arrears. They allege that non-payment of the premiums was caused by the closing of defendant's offices in
Manila during the Japanese occupation and the impossible circumstances created by war.
Defendant on the other hand asserts that the policies had lapsed for non-payment of premiums, in accordance with the
contract of the parties and the law applicable to the situation.
The lower court absolved the defendant. Hence this appeal.

CFI dismissed the action without pronouncement as to costs. CA affirmed, with costs.
SC appeal by certiorari from the decision of the CA
Issue: W/N Christern became a public enemy thus not entitled to claims
Held: YES. There is no question that majority of the stockholders of the respondent corporation were German subjects.
The Philippine Insurance Law, in section 8, provides that "anyone except a public enemy may be insured." It stands to
reason that an insurance policy ceases to be allowable as soon as an insured becomes a public enemy.
The purpose of war is to cripple the power and exhaust the resources of the enemy, and it is inconsistent that one country
should destroy its enemy's property and repay in insurance the value of what has been so destroyed, or that it should in
such manner increase the resources of the enemy.
Christern having become an enemy corporation on December 10, 1941, the insurance policy issued in its favor on October
1, 1941, by Filipinas had ceased to be valid and enforcible, and since the insured goods were burned after December 10,
1941, and during the war, Christern was not entitled to any indemnity under said policy from Filipinas.
However, elementary rules of justice (in the absence of specific provision in the Insurance Law) require that the premium
paid by Filipi nas for the period covered by its policy from December 11, 1941, should be returned. However, Filipinas will
be entitled to recover only the equivalent, in actual Philippines currency of P92,650 paid on April 19, 1943, in accordance
with the rate fixed in the Ballantyne scale.
12. Constantino vs. Asia Life Insurance
Case 1:
The life of Arcadio Constantino was insured with Asia Life Insurance Company for a term of 20 years with Paz Lopez de
Constantino as beneficiary. The first premium covered the period up to September 26, 1942. After the first premium, no
further premiums were paid. The insured died on September 22, 1944. Asia Life Insurance Company, being an American

Issue: W/N the beneficiary in a life insurance policy may recover the amount thereof although the insured died after
repeatedly failing to pay the stipulated premiums, such failure having been caused by the last war in the Pacific.
HELD: NO. Affirmed lower court
It would seem that pursuant to the express terms of the policy, non-payment of premium produces its avoidance.
Forfeitures of insurance policies are not favored, but courts cannot for that reason alone refuse to enforce an insurance
contract according to its meaning. Nevertheless, inasmuch as the non-payment of premium was the consequence of war, it
should be excused and should not cause the forfeiture of the policy.
3 Rules in case of war:
1. Connecticut Rule
2 elements in the consideration for which the annual premium is paid:
- mere protection for the year
- privilege of renewing the contract for each succeeding year by paying the premium for that year at the time
agreed upon
payment of premiums is a condition precedent, the non-performance would be illegal necessarily defeats the right to
renew the contract
2. New York Rule - greatly followed by a number of cases
- war between states in which the parties reside merely suspends the contracts of the life insurance, and that, upon tender
of all premiums due by the insured or his representatives after the war has terminated, the contract revives and becomes
fully operative
3. United States Rule
- contract is not merely suspended, but is abrogated by reason of non-payments is peculiarly of the essence of the contract
- it would be unjust to allow the insurer to retain the reserve value of the policy, which is the excess of the premiums paid
over the actual risk carried during the years when the policy had been in force

It should be noted that the parties contracted not only for peacetime conditions but also for times of war, because the
policies contained provisions applicable expressly to wartime days. The logical inference, therefore, is that the parties
contemplated uninterrupted operation of the contract even if armed conflict should ensue.
The fundamental character of the undertaking to pay premiums and the high importance of the defense of non-payment
thereof, was specifically recognized.
Facts: A contract of group life insurance was executed between Grepalife and DBP. The former agreed to insure the lives of
eligible housing loan mortgagors of DBP. Dr. Leuterio applied membership in the group life insurance plan. He answered in
the application form that he has never consulted a physician for heart condition, high blood pressure, cancer, diabetes,
lung, kidney, or stomach disorder or any other physical impairment, and that to the best of his knowledge he is in good
condition. During the subsistence of the insurance he died from massive cerebral hemorrhage. Grepalife denied the claim
because of concealment since it was discovered that he had high blood. His widow filed a claim.
Issue: Whether or not there was misrepresentation so as to warrant denial of claim; Whether or not the widow of Leuterio
is a real party in interest
Held: The Supreme Court ruled that there was no sufficient proof that the insured suffered from hypertension. It is a wellsettled ruled that the fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the
contract. As regards the second issue, the widow can be regarded as real party in interest because in mortgage redemption
insurance the mortgagor and not the mortgagee is the contracting party. The mortgagor merely assigns the proceeds to
the mortgagee. Therefore, since by principle of succession the widow may claim.
Facts: Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00; 1 year policy and
covered the stock trading of dry goods.
The policy noted the requirement that
"3. The insured shall give notice to the Company of any insurance or insurances already effected, or which may
subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or
inventories only hereby insured, and unless notice be given and the particulars of such insurance or insurances be stated
therein or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the
occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this
condition shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than

w/o informing him or securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the
The Insurance Commission then ordered the respondent company to pay complainant the sum of P100,000.00 with
interest and attorneys fees. CA reversed the decision of the Insurance Commission because it found that the petitioner
knew of the existence of the two other policies issued by the PFIC.
1. W/N the petitioner had not disclosed the two insurance policies when he obtained the fire insurance and thereby
violated Condition 3 of the policy.
2. W/N he is prohibited from recovering
Held: Yes. No. Petition Granted
1. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC. His letter of 18 January
1991 to the private respondent conclusively proves this knowledge. His testimony to the contrary before the Insurance
Commissioner and which the latter relied upon cannot prevail over a written admission made ante litem motam. It was,
indeed, incredible that he did not know about the prior policies since these policies were not new or original.
2. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of insurance policies
should be construed most strictly against those for whose benefits they are inserted, and most favorably toward those
against whom they are intended to operate.
With these principles in mind, Condition 3 of the subject policy is not totally free from ambiguity and must be meticulously
analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to double insurance, and (b) the nullity of
the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained.
Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total insurance in force at the
time of loss does not exceed P200,000.00, the private respondent was amenable to assume a co-insurer's liability up to a
loss not exceeding P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the rationale behind the
incorporation of "other insurance" clause in fire policies is to prevent over-insurance and thus avert the perpetration of
fraud. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the
property's value, the insured may have an inducement to destroy the property for the purpose of collecting the insurance.
The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured.

The petitioners stocks were destroyed by fire. He then filed a claim which was subsequently denied because the
petitioners stocks were covered by two other fire insurance policies for Php 200,000 issued by PFIC. The basis of the
private respondent's denial was the petitioner's alleged violation of Condition 3 of the policy.


Facts: Cherie Palileo (debtor-mortgagor) filed a complaint against Beatriz Cosio (creditor-mortgagee) praying that their
transaction be one of a loan with an equitable mortgage to secure the payment of the loan. The original counsel of Cosio
Atty. Guerrero being appointed Undersecretary of Foreign Affairs so she forgot the date of the trial and she was

Geagonia then filed a complaint against the private respondent in the Insurance Commission for the recovery of
P100,000.00 under fire insurance policy and damages. He claimed that he knew the existence of the other two policies.
But, he said that he had no knowledge of the provision in the private respondent's policy requiring him to inform it of the
prior policies and this requirement was not mentioned to him by the private respondent's agent.

It is a loan of P12,000 secured by a "Conditional Sale of Residential Building" with right to repurchase. After the execution
of the contract, Cosio insured in her name the building with Associated Insurance & Surety Co. against fire. The building
was partly destroyed by fire so she claimed an indemnity of P13,107. Palileo demanded that the amount of insurance
proceeds be credited to her loan

The Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge of the existence
of the two fire insurance policies obtained from the PFIC; that it was Cebu Tesing Textiles w/c procured the PFIC policies

RTC: it is a loan with equitable mortgage so the insurance proceeds should be credited to the loan and refund the

Issue: W/N Cosio as mortgagee is entitled to the insurance proceeds for her own benefit
Held: YES. Collection of insurance proceeds shall not be deemed to have compensated the obligation of the Palileo to
Cosio, but bars the Cosio from claiming its payment from the Palileo; and Cosio shall pay to Palileo P810 representing the
overpayment made by Palileo by way of interest on the loan.
When the mortgagee may insure his interest in the property independently of the mortgagor , upon the destruction of the
property the insurance money paid to the mortgagee will not inure to the benefit of the mortgagor, and the amount due
under the mortgage debt remains unchanged. The mortgagee, however, is not allowed to retain his claim against the
mortgagor, but it passes by subrogation to the insurer, to the extent of the insurance money paid.
It is true that there are authorities which hold that "If a mortgagee procures insurance on his separate interest at his own
expense and for his own benefit, without any agreement with the mortgagor with respect thereto, the mortgagor has no
interest in the policy, and is not entitled to have the insurance proceeds applied in reduction of the mortgage debt" But
these authorities merely represent the minority view. "The general rule and the weight of authority is, that the insurer is
thereupon subrogated to the rights of the mortgagee under the mortgage. This is put upon the analogy of the situation of
the insurer to that of a surety."
Considering the foregoing rules, it would appear that the lower court erred in declaring that the proceeds of the insurance
taken out by the defendant on the property mortgaged inured to the benefit of the plaintiff and in ordering said defendant
to deliver to the plaintiff the difference between her indebtedness and the amount of insurance received by the
defendant, for, in the light of the majority rule we have above enunciated, the correct solution should be that the
proceeds of the insurance should be delivered to the defendant but that her claim against the plaintiff should be
considered assigned to the insurance company who is deemed subrogated to the rights of the defendant to the extent of
the money paid as indemnity.
Consistent with the foregoing pronouncement, we therefore modify the judgment of the lower court as follows:(1) the
transaction had between the plaintiff and defendant as shown in Exhibit A is merely an equitable mortgage intended to
secure the payment of the loan of P12,000;(2) that the proceeds of the insurance amounting to P13,107.00 was properly
collected by defendant who is not required to account for it to the plaintiff; (3) that the collection of said insurance
proceeds shall not be deemed to have compensated the obligation of the plaintiff to the defendant, but bars the latter
from claiming its payment from the former; and (4) defendant shall pay to the plaintiff the sum of P810.00 representing
the overpayment made by plaintiff by way of interest on the loan. No pronouncement as to costs.
Sections 10-25

Hilario Gercioo Insured

Sun Life Assurance Co. of Canada Insurer

Andrea Zialcitao Beneficiary

Policy No. 161481 - Policy on the life of Hilario Gercio aka twenty-year endowment policy

Insurance company agreed to insure the life of Hilario Gercio for the sum of P2,000, to be paid him on February
1, 1930, or if the insured should die before said date, then to his wife, Mrs. Andrea Zialcita, should she survive
him. The policy did not include any provision reserving to the insured the right to change the beneficiary. On the
date the policy was issued, Andrea Zialcita was the lawful wife of Hilario Gercio. Andrea was later convicted of
the crime of adultery. Decree of divorce was issued. Hilario Gercio formally notified the Sun Life Assurance Co. of
Canada that he had revoked his donation in favor of Andrea Zialcita and that he had designated in her stead his

present wife, Adela Garcia de Gercio, as the beneficiary of the policy. Insurance company refused to accede to
Grecios demands.

Complaint (mandamus nature) is to compel the defendant Sun Life Assurance Co. of Canada to change the
beneficiary in the policy issued

Trial court - In favor of the plaintiff without costs, and ordered the defendant company to eliminate from the
insurance policy the name of Andrea Zialcita as beneficiary and to substitute therefor such name as the plaintiff
might furnish to the defendant for that purpose.

Issue: W/N the insured the husband has the power to change the beneficiary the former wife and to name
instead his actual wife, where the insured and the beneficiary have been divorced and where the policy of insurance does
not expressly reserve to the insured the right to change the beneficiary.
Held: The wife has an insurable interest in the life of her husband. The beneficiary has an absolute vested interest in the
policy from the date of its issuance and delivery. So when a policy of life insurance is taken out by the husband in which
the wife is named as beneficiary, she has a subsisting interest in the policy.
If the husband wishes to retain to himself the control and ownership of the policy he may so provide in the
policy. But if the policy contains no provision authorizing a change of beneficiary without the beneficiarys consent, the
insured cannot make such change.
A life insurance policy of a husband made payable to the wife as beneficiary, is the separate property of the
beneficiary and beyond the control of the husband. The effect of the decree of divorce: dissolve the community property
as soon as such decree becomes final.
There is no provision in the Philippine Law permitting the beneficiary in a policy for the benefit of the wife of the
husband to be changed after a divorce. In the absence of a statute to the contrary, that if a policy is taken out upon a
husbands life the wife is named as beneficiary therein, a subsequent divorce does not destroy her rights under the policy.
The same has been the ruling by the State of California, from which our Insurance Code is mostly taken from: a
person who procures a policy upon his own life, payable to a designated beneficiary, although he pays the premiums
himself, and keeps the policy in his exclusive possession, has no power to change the beneficiary, unless the policy itself, or
the charter of the insurance company, so provides.
2. The Insular Life Assurance Company vs. Ebrado

Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with a rider for Accidental Death.
He designated Carponia T. Ebrado as the revocable beneficiary in his policy. He referred to her as his wife.

Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made liable to pay the coverage in
the total amount of P11,745.73, representing the face value of the policy in the amount of P5,882.00 plus the
additional benefits for accidental death.

Carponia T. Ebrado filed with the insurer a claim for the proceeds as the designated beneficiary therein, although
she admited that she and the insured were merely living as husband and wife without the benefit of marriage.

Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is the
one entitled to the insurance proceeds.

Insular commenced an action for Interpleader before the trial court as to who should be given the proceeds. The
court declared Carponia as disqualified.
Issue: W/N a common-law wife named as beneficiary in the life insurance policy of a legally married man can claim the
proceeds in case of death of the latter?

Held: No.
Section 50 of the Insurance Act which provides that "the insurance shall be applied exclusively to the proper interest of the
person in whose name it is made"
The word "interest" highly suggests that the provision refers only to the "insured" and not to the beneficiary, since a
contract of insurance is personal in character. Otherwise, the prohibitory laws against illicit relationships especially on
property and descent will be rendered nugatory, as the same could easily be circumvented by modes of insurance.
When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is governed by the
general rules of the civil law regulating contracts. And under Article 2012 of the same Code, any person who is forbidden
from receiving any donation under Article 739 cannot be named beneficiary of a fife insurance policy by the person who
cannot make a donation to him. Common-law spouses are barred from receiving donations from each other.
Article 739 provides that void donations are those made between persons who were guilty of adultery or concubinage at
the time of donation.
There is every reason to hold that the bar in donations between legitimate spouses and those between illegitimate ones
should be enforced in life insurance policies since the same are based on similar consideration. So long as marriage
remains the threshold of family laws, reason and morality dictate that the impediments imposed upon married couple
should likewise be imposed upon extra-marital relationship.
A conviction for adultery or concubinage isnt required exacted before the disabilities mentioned in Article 739 may
effectuate. The article says that in the case referred to in No. 1, the action for declaration of nullity may be brought by the
spouse of the donor or donee; and the guilty of the donee may be proved by preponderance of evidence in the same
The underscored clause neatly conveys that no criminal conviction for the offense is a condition precedent. The law plainly
states that the guilt of the party may be proved in the same acting for declaration of nullity of donation. And, it would be
sufficient if evidence preponderates.
The insured was married to Pascuala Ebrado with whom she has six legitimate children. He was also living in with his
common-law wife with whom he has two children.
Facts: Alejandra was issued by the Philippine American Life Insurance Co. a life insurance policy under a twenty year
endowment plan with a face value of 5k pesos. Her husband Delfin Nario and minor Ernesto Nario were designated as
irrevocable beneficiaries. Alejandra applied for a loan on such policy mentioned with the Insurance company which loan
she, as policy holder, was entitled to avail of under one of the provisions of the policy since such policy has been in force
for three years to use such proceeds for her sons expenses in school. Such application had the signature of Delfin Nario in
two capacities: one as an irrevocable beneficiary and two as the father-guardian of such minor and legal administrator to
the minors properties. The insurance company denied the application stating that the policy holder, when obtaining the
written consent for the minor son, must not only be given by his father as legal guardian but it must also be authorized by
the court in a competent guardianship proceeding. Because of such denial, Alejandra said shed like to surrender the policy
to such insurance company which, under its provisions, she was allowed to do plus receive 520 pesos. The insurance
company denied the surrender of the policy which led the Spouses to file a suit against the Philippine American Life
Insurance Co. in the CFI seeking to compel them to grant their policy loan application and/or to accept such surrender of
the policy. The contention of the insurance company was that that inasmuch as the policy loan application and the
surrender of the policy involved acts of disposition and alienation of the property rights of the minor, said acts are not
within the powers of the legal administrator, hence, mere written consent given by the father-guardian, for and in behalf

of the minor son, without any court authority therefor, was not a sufficient compliance of the law, and it (defendant
Insurance Company) was, therefore, justified in refusing to grant and in disapproving the proposed transactions in
question. The lower court stated that the minor son, as one of the designated irrevocable beneficiaries, acquired a vested
right to all benefits accruing to the policy, including that of obtaining a policy loan to the extent stated in the schedule of
values attached to the policy; that the proposed transactions in question (policy loan and surrender of policy) involved acts
of disposition or alienation of the minors properties for which the consent given by the father-guardian for and in behalf
of the minor son, must be with the requisite court authority and in the case at bar, such consent was given by the fatherguardian without any judicial authority; said court, agreeing with defendants contention, sustained defendants
affirmative defense, and rendered, on January 28, 1964, its decision dismissing plaintiffs complaint. Petitioner appealed
directly to this Court, contending that the minors interest amounted to only one-half of the policys cash surrender value
of P520.00; that under the Revised Rules of Court, payment of the wards debts is within the powers of the guardian,
where no realty is involved; hence, there is no reason why the father may not validly agree to the proposed transaction on
behalf of the minor without need of court authority.
Issue: How much is the vested interest of the beneficiaries in the policy? Is it based on the full face value of the policy or
the cash surrender value?
Held: (I think ito yung pinakaissue) The interest or right of the beneficiaries in the policy should be measured on its full face
value and not on its cash surrender value, for in case of death of the insured, said beneficiaries are paid on the basis of its
face value and in case the insured should discontinue paying premiums, the beneficiaries may continue paying it and are
entitled to automatic extended term or paid-up insurance options, etc. and that said vested right under the policy cannot
be divisible at any given time. The Court also held that the transactions in question (policy loan and surrender of policy)
constitute acts of disposition or alienation of property rights and not merely of management or administration because
they involve the incurring or termination of contractual obligations.
As above noted, the full face value of the policy is P5,000.00 and the minors vested interest therein, as one of the two (2)
irrevocable beneficiaries, consists of one-half () of said amountor P2,500.00. (Ito medyo persons and civpro na but baka
tanungin ni maam so ilalagay ko na din) Article 320 of NCC- The father, or in his absence the mother, is the legal
administrator of the property pertaining to the child under parental authority. If the property is worth more than two
thousand pesos, the father or mother shall give a bond subject to the approval of the Court of First Instance.
Article 326 of NCC When the property of the child is worth more than two thousand pesos, the father or mother shall be
considered a guardian of the childs property, subject to the duties and obligations of guardians under the Rules of Court.
Revised Rules of Court - SEC. 7. Parents as guardians. When the property of the child under parental authority is worth
two thousand pesos or less, the father or the mother, without the necessity of court appointment, shall be his legal
guardian. When the property of the child is worth more than two thousand pesos, the father or the mother shall be
considered guardian of the child's property, with the duties and obligations of guardians under these rules, and shall
file the petition required by Section 2 hereof. For good reasons the court may, however, appoint another suitable person.
It appearing that the minor beneficiarys vested interest or right on the policy exceeds two thousand pesos (P2,000.00);
that plaintiffs did not file any guardianship bond to be approved by the court; plaintiffs should have, but, had not, filed a
formal application or petition for guardianship, plaintiffs-parents cannot possibly exercise the powers vested on them, as
legal administrators of their childs property. As there was no such petition and bond, the consent given by the fatherguardian, for and in behalf of the minor son, without prior court authorization, to the policy loan application and the
surrender of said policy, was insufficient and ineffective, and defendant-appellee was justified in disapproving the
proposed transactions in question. The result would be the same even if we regarded the interest of the ward to be worth
less than P2,000.00. While the father or mother would in such event be exempt from the duty of filing a bond, and
securing judicial appointment, still the parents authority over the estate of the ward as a legal-guardian would not extend
to acts of encumbrance or disposition, as distinguished from acts of management or administration. By analogy, since the

law merely constitutes the parent as legal administrator of the childs property (which is a general power), the parent
requires special authority for the acts above specified, and this authority can be given only by a court. This restricted
interpretation of the parents authority becomes all the more necessary where as in the case before us, there is no bond to
guarantee the ward against eventual losses.

1. W/N the designation of the irrevocable beneficiaries could be changed or amended without the consent of all the
irrevocable beneficiaries.
2. W/N the irrevocable minor beneficiaries could give consent to the change in designation

4. Villanueva vs. Oro

(Insurance Proceeds)

Held: No to both. Petition dismissed.

> West Coast Life Insurance Company issued two policies of insurance on the life of Esperanza Villanueva, one for 2T,
maturing April 1, 1943; and other for 3T maturing Mar. 31, 1943.
> In both policies, West agreed to pay 2T either to Esperanza if still living on Apr 1, 1943; or to beneficiary Bartolome
Villanueva, or the father of the insured immediately upon receipt of the proof of death of Esperanza.
> The policy also gave her the right to change the beneficiary.
> In 1940, Bartolome died, and he was substituted as beneficiary under the policies by Mariano, Esparanzas brother.
> Esperanza died in 1944 without having collected the insurance proceeds. Adverse claims for the proceeds were
presented by the estate of Esperanza on one hand and by Mariano on the other.
> CFI held that the estate of Esperanza was entitled to the proceeds to the exclusion of the beneficiary.
Issue: W/N the beneficiary is entitled to the proceeds.
Held: NO.
Under the policies, the insurer obligated itself to pay the insurance proceeds to: (1) the insured if the latter lived on the
dates of maturity; or (2) the beneficiary if the insured died during the continuance of the policies. The first contingency
excludes the second, and vice versa. In other words, as the insured Esperanza was living on April 1 and March 31, 1943,
the proceeds are payable exclusively to her or to her estate unless she had before her death otherwise assigned the
matured policies.
The beneficiary could be entitled to said proceeds only in default of the first contingency. To sustain the beneficiarys
claim would be to altogether eliminate from the policies the condition that the insurer agrees to pay to the insured if
This conclusion tallies with American Authorities who say that: The interest of the insured in the proceeds of the insurance
depends upon his survival of the expiration of the endowment period. Upon the insureds death, within the period, the
beneficiary will take, as against the personal representatives the endowment period, the benefits are payable to him or to
his assignee, notwithstanding a beneficiary is designated in the policy. (AmJur and Couch Cyclopedia of Insurance Law)
5. Philam vs. Pineda
Facts: Pineda procured an ordinary life insurance policy from the petitioner company and designated his wife and children
as irrevocable beneficiaries. He then filed a petition to amend the designation of the beneficiaries in his life policy from
irrevocable to revocable. The judge granted the request. Petitioner promptly filed a motion but was denied. Hence, this

Under the Insurance Act, the beneficiary designated in a life insurance contract cannot be changed without the consent of
the beneficiary because he has a vested interest in the policy.
There was an express stipulation to this effect: It is hereby understood and agreed that, notwithstanding the provisions of
this policy to the contrary, inasmuch as the designation of the primary/contingent beneficiary/beneficiaries in this Policy
has been made without reserving the right to change said beneficiary/ beneficiaries, such designation may not be
surrendered to the Company, released or assigned; and no right or privilege under the Policy may be exercised, or
agreement made with the Company to any change in or amendment to the Policy, without the consent of the said
The alleged acquiescence of the six (6) children beneficiaries of the policy cannot be considered an effective ratification
due to the fact that they were minors. Neither could they act through their father insured since their interests are quite
divergent from one another.
Therefore, the parent-insured cannot exercise rights and/or privileges pertaining to the insurance contract, for otherwise,
the vested rights of the irrevocable beneficiaries would be rendered inconsequential.
Of equal importance is the well-settled rule that the contract between the parties is the law binding on both of them and
for so many times, this court has consistently issued pronouncements upholding the validity and effectivity of contracts.
Likewise, contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of
their stipulations, for contracts are obligatory, no matter in what form they may be, whenever the essential requisites for
their validity are present
The change in the designation of was not within the contemplation of the parties. The lower court instead made a new
contract for them. It acted in excess of its authority when it did so.
6. Basilia Berdin Vda. de Consuegra vs. GSIS
Jose Consuegra
- at the time of his death employed as a shop foreman of the office of the District Engineer in the province of Surigao del
Norte; Member of the GSIS
- contracted two marriages during his lifetime
- Rosario Diaz on July 15, 1937, out of which marriage were born two children Jose Consuegra, Jr. and Pedro Consuegra
(both predeceased their father)
- Basilia Berdin, on May 1, 1957 (contracted in good faith, with the first marriage is still subsisting), out of which marriage
were born seven children, Juliana Consuegra, Pacita Consuegra, Maria Lourdes Consuegra, Jose Consuegra, Rodrigo
Consuegra, Lenida Consuegra and Luz Consuegra
Proceeds of his life insurance were paid by the GSIS to petitioner Basilia Berdin and her children who were the
beneficiaries named in the policy.

Consuegra was entitled to retirement insurance benefits in the sum of P6,304.47 equivalent to his 22.5028 years
if service in the GSIS (Premise: the legislative passed a law granting retirement benefits to government employees, hence
this disputed retirement insurance)
Consuegra did not designate any beneficiary who would receive the retirement insurance benefits due to him.
Rosario Diaz (first wife) filed a claim with the GSIS asking that the retirement insurance benefits be paid to her as the only
legal heir of Consuegra considering that the deceased did not designate any beneficiary with respect to his retirement
insurance benefits. Basilia Berdin and her children likewise filed a similar claim.

RTC: Ordered Filipino Merchants to pay Choa and reimburse from Compagnie Maritime Des Chargeurs Reunis and third
party defendant E. Razon, Inc.
CA: Affirmed but modified by adjudicating the third party complaint
Filipino Merchants contended that Chao has no insurable interest and therefore the policy should be void and that it was
fraud that it did not disclose of such fact

Rosario Diaz, Basilia Berdin and her children filed a petition for mandamus with preliminary injunction praying that they be
declared the legal heirs and exclusive beneficiaries of the retirement insurance of Jose Consuegra.

HELD: YES. CA affirmed.

Trial courts decision: - share between the 2 families

Berdins contention: Because the deceased Jose Consuegra failed to designate the beneficiaries in his retirement
insurance, the appellants, who were the beneficiaries named in the life insurance should automatically be considered the
beneficiaries to receive the retirement insurance benefits, to the exclusion of respondent Rosario Diaz
ISSUE: To whom should the retirement insurance benefits be paid?
HELD: - share for both families
Remember, the second marriage was contracted in good faith. The GSIS offers two separate and distinct systems of
benefits to its members. One is the life insurance and the other is the retirement insurance. These two distinct systems of
benefits are paid out from two distinct and separate funds that are maintained by the GSIS.
In the case of the proceeds of a life insurance, the same are paid to whoever is named the beneficiary in the life
insurance policy. As in the case of a life insurance provided for in the Insurance Act, the beneficiary in a life insurance
under the GSIS may not necessarily be an heir of the insured. The insured in a life insurance may designate any person as
beneficiary unless disqualified to be so under the provisions of the Civil Code. And in the absence of any beneficiary named
in the life insurance policy, the proceeds of the insurance will go to the estate of the insured. Retirement insurance is
primarily intended for the benefit of the employee to provide for his old age, or incapacity, after rendering service in the
government for a required number of years. If the employee reaches the age of retirement, he gets the retirement
benefits even to the exclusion of the beneficiary or beneficiaries named in his application for retirement insurance. The
beneficiary of the retirement insurance can only claim the proceeds of the retirement insurance if the employee dies
before retirement. If the employee failed or overlooked to state the beneficiary of his retirement insurance, the retirement
benefits will accrue to his estate and will be given to his legal heirs in accordance with law, as in the case of a life insurance
if no beneficiary is named in the insurance policy.
7. Filipino Merchants Insurance Co. vs. CA
Laws Applicable: Section 13 of the Insurance Code
FACTS: Choa Tiek Seng, consignee of the shipment of fishmeal loaded, insured in "all risks policy" 600 metric tons of
fishmeal in new gunny bags of 90 kilos each from Bangkok, Thailand to Manila against all risks under warehouse to
warehouse terms but only 59.940 metric tons was imported. When it was unloaded unto the arrastre contractor E. Razon,
Inc. and Filipino Merchants's surveyor ascertained and certified that in such discharge 105 bags were in bad order
condition which was reflected in the survey report of Bad Order cargoes. Before delivery to Choa, E. Razon's Bad Order
Certificate showed that a total of 227 bags in bad order condition. Choa brought an action against Filipino Merchants
Insurance Co. who brought a third party complaint against Compagnie Maritime Des Chargeurs Reunis and/or E. Razon,

ISSUE: W/N Choa Tiek Seng as consignee of the shipment has insurable interest

GR: the burden of proof is upon the insured to show that a loss arose from a covered peril, but under an "all risks" policy
the burden is not on the insured to prove the precise cause of loss or damage for which it seeks compensation. The insured
under an "all risks insurance policy" has the initial burden of proving that the cargo was in good condition when the policy
attached and that the cargo was damaged when unloaded from the vessel; thereafter, the burden then shifts to the
insurer to show the exception to the coverage. - none was shown = liable
Section 13 of the Insurance Code defines insurable interest in property 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.
As vendee/consignee of the goods in transit has such existing interest. His interest over the goods is based on the
perfected contract of sale. The perfected contract of sale between him and the shipper of the goods operates to vest in
him an equitable title even before delivery or before be performed the conditions of the sale. The contract of shipment,
whether under F.O.B., C.I.F., or C. & F. as in this case, is immaterial in the determination of whether the vendee has an
insurable interest or not in the goods in transit.
Article 1523 of the Civil Code provides that where, in pursuance of a contract of sale, the seller is authorized or required to
send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for, the purpose of
transmission to the buyer is deemed to be a delivery of the goods to the buyer, the exceptions to said rule not obtaining in
the present case. The Court has heretofore ruled that the delivery of the goods on board the carrying vessels partake of
the nature of actual delivery since, from that time, the foreign buyers assumed the risks of loss of the goods and paid the
insurance premium covering them. C & F contracts are shipment contracts. The term means that the price fixed includes in
a lump sum the cost of the goods and freight to the named destination. It simply means that the seller must pay the costs
and freight necessary to bring the goods to the named destination but the risk of loss or damage to the goods is
transferred from the seller to the buyer when the goods pass the ship's rail in the port of shipment. Moreover, the issue of
lack of insurable interest was not among the defenses averred in petitioners answer.
FACTS: Dunn mortgaged a parcel of land to SMB to secure a debt of 10 thousand pesos. Mortgage contract stated that
Dunn was to have the property insured at his own expense, authorizing SMB to choose the insurers and to receive the
proceeds thereof and retain so much of the proceeds as would cover the mortgage debt. Dunn likewise authorized SMB to
take out the insurance policy for him. Brias, SMBs general manager, approached Law Union for insurance to the extent of
15 thousand pesos upon the property. In the application, Brias stated that SMBs interest in the property was merely that
of a mortgagee. Law Union, not wanting to issue a policy for the entire amount, issued one for P7,500 and procured
another policy of equal amount from Filipinas Cia de Seguros. Both policies were issued in the name ofSMB only and
contained no reference to any other interests in the property. Both policies required assignments to be approved and
noted on the policy. Premiums were paid by SMB and charged to Dunn. A year later, the policies were renewed. In 1917,
Dunn sold the property to Harding, but no assignment of the policies was made to the latter. Property was destroyed by
fire. SMB filed an action in court to recover on the policies. Harding was made a defendant because by virtue of the sale,

he became the owner of the property, although the policies were issued in SMBs name. SMB sought to recover the
proceeds to the extent of its mortgage credit with the balance to go to Harding. Insurance Companies contended that they
were not liable to Harding because their liability under the policies was limited to the insurable interests of SMB only. SMB
eventually reached a settlement with the insurance companies and was paid the balance of its mortgage credit. Harding
was left to fend for himself. Trial court ruled against Harding. Hence the appeal.
ISSUE: W/N the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies.
HELD: No. Under the Insurance Act, the measure of insurable interest in the property is the extent to which the insured
might be damnified by the loss or injury thereof. Also it is provided in the Insurance Act that the insurance shall be applied
exclusively to the proper interest of the person in whose name it is made. Undoubtedly, SMB as the mortgagee of the
property, had an insurable interest therein; but it could NOT, an any event, recover upon the two policies an amount in
excess of its mortgage credit. By virtue of the Insurance Act, neither Dunn nor Harding could have recovered from the two
policies. With respect to Harding, when he acquired the property, no change or assignment of the policies had been
undertaken. An additional insuperable obstacle is found in the fact that the ownership of the property had been changed,
prior to the loss, without any corresponding change having been effected in the policy of insurance. In section 19 of the
Insurance Act we find it stated that 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. Again in section 55 it is declared that 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 Sane 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 policies might have been worded
differently so as to protect the owner, but this was not done.
Facts: The spouses Nilo Cha and Stella Uy-Cha were lessees who entered into a lease contract with CKS Development
Corporation as lessor. According to stipulation in such lease contract, it states that the lessee should not insure against fire
the chattels, merchandise, textiles, goods and effects placed at any store or space leased in the premises without getting
the consent of the lessor. It also states that if they do obtain such insurance without the consent of the lessor, such is
deemed assigned to the lessor for its own benefit. However, the spouses still insured their merchandise inside the leased
premises against fire for 500k pesos with United Insurance Co. Inc. without the consent of CKS. CKS learned about this and
wrote United a demand letter stating that the proceeds of insurance should be paid directly to CKS by virtue of the lease
agreement. United refused. Hence, a complaint was filed against United and Cha spouses. The lower court ordered United
and Cha spouses to pay CKS. Such was affirmed by the court of appeals. Hence this petition.
Issue: W/N such stipulation of the lease contract entered into between CKS and Cha spouses is valid.
Held: No. It is, of course, basic in the law on contracts that the stipulations contained in a contract cannot be contrary to
law, morals, good customs, public order or public policy. Sec. 18. No contract or policy of insurance on property shall be
enforceable except for the benefit of some person having an insurable interest in the property insured. A non-life
insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract
of indemnity. Insurable interest in the property insured must exist at the time the insurance takes effect and at the time
the loss occurs.] The basis of such requirement of insurable interest in property insured is based on sound public policy: to

prevent a person from taking out an insurance policy on property upon which he hasno insurable interest and collecting
the proceeds of said policy in case of loss of the property.
In such a case, the contract of insurance is a mere wager which is void under Section 25 of the Insurance Code, which
provides: SECTION 25. Every stipulation in a policy of Insurance for the payment of loss, whether the person insured has
or has not any interest in the property insured, or that the policy shall be received as proof of such interest, and every
policy executed by way of gaming or wagering, is void. In the present case, it cannot be denied that CKS has no insurable
interest in the goods and merchandise inside the leased premises under the provisions of Section 17 of the Insurance Code
which provide. Section 17. The measure of an insurable interest in property is the extent to which the insured might be
damnified by loss of injury thereof. Therefore, respondent CKS cannot, under the Insurance Code a special law be
validly a beneficiary of the fire insurance policy taken by the petitioner-spouses over their merchandise. This insurable
interest over said merchandise remains with the insured, the Cha spouses. The automatic assignment of the policy to CKS
under the provision of the lease contract previously quoted is void for being contrary to law and/or public policy. The
proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella Uy-Cha. The insurer (United)
cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the
property insured.
Facts: The plaintiffs allege that on the 19th of March, 1918, in the City of Manila, the plaintiff, Domingo Garcia, then a
merchant and owner of a bazaar known as Las Novedades in the district of Legaspi, municipality and Province of Albay,
entered into a contract with the defendant whereby it insured his merchandise in the sum of P15,000 at a premium of
P300 per annum; that in consideration of such premium, the defendant issued its fire insurance policy No. 1951 in favor of
the plaintiff, not on the merchandise in the building, but on the building which contained the merchandise; that for such
reason the policy does not contain the true agreement and intent of the parties; that the plaintiff was not the owner of,
and did not have any interest in, the building; and that the policy was so issued through error, carelessness and negligence
of the defendant. That on august 30, 1919, Garcia executed a mortgage to the plaintiff Bank on the merchandise insured
by the defendant, and that with the consent of the defendant, the plaintiff endorsed the policy to the Bank; that on
February 6, 1920, and while the policy was in force and effect, a fire took place which destroyed the merchandise in the
building of the value of P20,000, together with the building itself; that demand was made upon the defendant for the
payment of P15,000, as provided for in the policy, and that payment was refused. The defendant contended that the Bank,
which then had the possession of the policy, knew that it covered the building and did not insure the merchandise. That,
having such knowledge, it was the duty of the Bank to notify the defendant, and having failed to do so, it cannot now
contend that the policy was issued through a mistake.
Issue: W/N Hong Kong Fire and Marine Insurance should pay the claim.
Held: Yes. Garcia had his dealings with the officials of the branch Bank at Legaspi where he was doing business as a
merchant, of which the officials of that Bank had knowledge. Under such facts, the presumption of knowledge, if any, on
the part of the Bank would be that the policy was on the merchandise. Be that as it may, when the defendant received the
letter from the Bank, it knew from its own records that the policy was issued on the building, and, as a matter of fair
dealing, it should have notified the Bank that the policy was on the building. Under these circumstances it seems clear and
manifest that the insured, as well as the manager of the National Bank at Legaspi, who was interested in the policy,
because the same secured a loan of P6,000 made to Domingo Garcia, have been in the belief that it was not the building
but the merchandise that was insured. There is, therefore, ground for the contention that the plaintiff would be entitled to
recover on the policy for the loss of the building.
FACTS: E. M. Bachrach insured goods belonging to a general furniture store, such as iron and brass bedsteads, toilet
tables, chairs, ice boxes, bureaus, washstands, mirrors, and sea-grass furniture stored in the ground floor and first story of

house and dwelling with an authorized agent of the British American Assurance Company. The properties were
subsequently destroyed by fire. British American Assurance Company denied the claim of petitioner alleging that:o
interest in certain of the goods covered by the said policy is trasnferred to Macke to secure certain obligations assumed by
Macke and on behalf of Bachracho they willfully placed a gasoline can containing 10 gallons of gasoline close to the insured
ISSUE: W/N Bachrach can claim
HELD: YES. As to the first issue, the alienation clause (forfeiture if the interest in the property pass from the insured) shall
not be applicable. As held by the trial court, there is no alienation within the meaning of the insurance law until the
mortgage acquires a right to take possession by default under the terms of the mortgage. No such right is claimed to have
accrued in the case at bar, and the alienation clause is therefore inapplicable. As to the second issue, the court cannot find
that there is a preponderance of evidence showing that the plaintiff did actually set fire or cause fire to be set to the goods
in question. Keeping of inflammable oils on the premises, though prohibited by the policy, does not void it if such keeping
is incidental to the business. It may be added that there was no provision in the policy prohibiting the keeping of paints
and varnishes upon the premises where the insured property was stored. If the company intended to rely upon a condition
of that character, it ought to have been plainly expressed in the policy.
FACTS: 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) 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 rendered a decision purporting that the contract was a 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. The CA
granted FEBs 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
ISSUES: W/N JVL and Lim should jointly and severally be liable for the insured financial lease
W/N Lim has insurable interest in the motor vehicles and equipment leased
HELD: With regard to the first issue, the validity of Lease No. 27:95:20 between FEB and JVL should be upheld. A contract
of adhesion is as binding as any ordinary contract. JVL entered into the lease contract with full knowledge of its terms and
conditions. The contract was in force for more than four years. Since its inception on March 9, 1995, JVL and Lim never
questioned its provisions. They only attacked the validity of the contract after they were judicially made to answer for their
default in the payment of the agreed rentals. As to the second issue, Lim has an insurable interest. The stipulation in
Section 14 of the leased contract, that the equipment shall be insured at the cost and expense of the lessee against loss,
damage, or destruction from fire, theft, accident, or other insurable risk for the full term of the lease, is a binding and valid
stipulation. Petitioner, as a lessee, has an insurable interest in the equipment and motor vehicles leased. Section 17 of the
Insurance Code provides that the measure of an insurable interest in property is the extent to which the insured might be
damnified by loss or injury thereof. It cannot be denied that JVL will be directly damnified in case of loss, damage, or
destruction of any of the properties leased.
FACTS: Petitioners were the legitimate wife and children of Loreto Maramag (Loreto), while respondents were Loretos
illegitimate family. Loreto designated respondents as beneficiaries in his life insurance policies from Insular Life Assurance

Company, Ltd. (Insular) and Great Pacific Life Assurance Corporation (Grepalife). Petitioners insituted in the RTC a petition
for revocation and/or reduction of insurance proceeds for being void and/or inofficious, with prayer for a temporary
restraining order (TRO) and a writ of preliminary injunction. Pursuant to the motion to dismiss incorporated in Insular and
Grepalifes respective answers, the TC dismissed the complaint with respect to the illegitimate children, who are the the
designated primary beneficiaries in the life insurance policies, for lack of cause action. However, trial court ruled that the
action may proceed against the concubine, Insular Life, and Grepalife. CA dismissed the case for lack of jurisdiction for
filing beyond reglementary period.
ISSUE: W/N the members of the legitimate family entitled to the proceeds of the insurance for the concubine
HELD: No. Petitioners are third parties to the insurance contracts with Insular and Grepalife and, thus, are not entitled to
the proceeds thereof. Accordingly, respondents Insular and Grepalife have no legal obligation to turn over the insurance
proceeds to petitioners. The revocation of Eva as a beneficiary in one policy and her disqualification as such in another are
of no moment considering that the designation of the illegitimate children as beneficiaries in Loretos insurance policies
remains valid. Because no legal proscription exists in naming as beneficiaries the children of illicit relationships by the
insured, the shares of Eva in the insurance proceeds, whether forfeited by the court in view of the prohibition on
donations under Article 739 of the Civil Code or by the insurers themselves for reasons based on the insurance contracts,
must be awarded to the said illegitimate children, the designated beneficiaries, to the exclusion of petitioners. It is only in
cases where the insured has not designated any beneficiary, or when the designated beneficiary is disqualified by law to
receive the proceeds,] that the insurance policy proceeds shall redound to the benefit of the estate of the insured.
14. Gaisano vs. Insurance
IMC and Levi Strauss (Phils.) Inc. (LSPI) separately obtained from respondent fire insurance policies with book debt
endorsements. The insurance policies provide for coverage on "book debts in connection with ready-made clothing
materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines."
The policies defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45 days after
the time of the loss covered under this Policy." The policies also provide for the following conditions:
1. Warranted that the Company shall not be liable for any unpaid account in respect of the merchandise sold and delivered
by the Insured which are outstanding at the date of loss for a period in excess of six (6) months from the date of the
covering invoice or actual delivery of the merchandise whichever shall first occur.
2. Warranted that the Insured shall submit to the Company within twelve (12) days after the close of every calendar month
all amount shown in their books of accounts as unpaid and thus become receivable item from their customers and dealers.
Gaisano is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the Gaisano Superstore Complex
in Cagayan de Oro City, owned by petitioner, was consumed by fire. Included in the items lost or destroyed in the fire were
stocks of ready-made clothing materials sold and delivered by IMC and LSPI.
Insurance of America filed a complaint for damages against Gaisano. It alleges that IMC and LSPI were paid for their claims
and that the unpaid accounts of petitioner on the sale and delivery of ready-made clothing materials with IMC was
P2,119,205.00 while with LSPI it was P535,613.00.
The RTC rendered its decision dismissing Insurance's complaint. It held that the fire was purely accidental; that the cause
of the fire was not attributable to the negligence of the petitioner. Also, it said that IMC and LSPI retained ownership of the
delivered goods and must bear the loss.
The CA rendered its decision and set aside the decision of the RTC. It ordered Gaisano to pay Insurance the P 2
million and the P 500,000 the latter paid to IMC and Levi Strauss. Hence this petition.

1. W/N the CA erred in construing a fire insurance policy on book debts as one covering the unpaid accounts of IMC and
LSPI since such insurance applies to loss of the ready-made clothing materials sold and delivered to petitioner
2. W/N IMC bears the risk of loss because it expressly reserved ownership of the goods by stipulating in the sales invoices
that "[i]t is further agreed that merely for purpose of securing the payment of the purchase price the above described
merchandise remains the property of the vendor until the purchase price thereof is fully paid."
3. W/N petitioner is liable for the unpaid accounts
4. W/N it has been established that petitioner has outstanding accounts with IMC and LSPI.
Held: No. Yes. Yes. Yes but account with LSPI unsubstantiated. Petition partly granted.
1. Nowhere is it provided in the questioned insurance policies that the subject of the insurance is the goods sold and
delivered to the customers and dealers of the insured.
Thus, what were insured against were the accounts of IMC and LSPI with petitioner which remained unpaid 45 days after
the loss through fire, and not the loss or destruction of the goods delivered.
2. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code:
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
Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss is borne by the
buyer. Petitioner bears the risk of loss of the goods delivered.
IMC and LSPI had 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. Indeed, a vendor or seller retains an insurable interest in the property sold so long as he has any interest
therein, in other words, so long as he would suffer by its destruction, as where he has a vendor's lien. In this case, the
insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after the
time of the loss covered by the policies.
3. Petitioner's argument that it is not liable because the fire is a fortuitous event under Article 117432 of the Civil Code is
misplaced. As held earlier, petitioner bears the loss under Article 1504 (1) of the Civil Code.
Moreover, it must be stressed that the 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. Accordingly, petitioner's obligation is for the payment of
money. As correctly stated by the CA, where the obligation consists in the payment of money, the failure of the debtor to
make the payment even by reason of a fortuitous event shall not relieve him of his liability. The rationale for this is that the
rule that an 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. It does not apply when the obligation is pecuniary in nature.
Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the loss or destruction of anything of the
same kind does not extinguish the obligation." This rule is based on the principle that the genus of a thing can never perish.
An obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any specific property of the debtor.

4. With respect to IMC, the respondent has adequately established its claim. The P 3 m claim has been proven. 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. The right of subrogation accrues simply upon payment by
the insurance company of the insurance claim Respondent's action against petitioner is squarely sanctioned by Article
2207 of the Civil Code which provides:
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, respondent failed to present sufficient evidence to prove its cause of action. There was no evidence that
respondent has been subrogated to any right which LSPI may have against petitioner. Failure to substantiate the claim of
subrogation is fatal to petitioner's case for recovery of P535,613.00.
15. Rizal Commercial Banking Corporation vs. CA
Lessons Applicable: Assignee (Insurance)
RCBC Binondo Branch initially granted a credit facility of P30M to Goyu & Sons, Inc. GOYUs applied again and through
Binondo Branch key officer's Uys and Laos recommendation, RCBCs executive committee increased its credit facility to
P50M to P90M and finally to P117M. As security, GOYU executed 2 real estate mortgages and 2 chattel mortgages in favor
of RCBC. GOYU obtained in its name 10 insurance policy on the mortgaged properties from Malayan Insurance Company,
Inc. (MICO). In February 1992, he was issued 8 insurance policies in favor of RCBC. April 27, 1992: One of GOYUs factory
buildings was burned so he claimed against MICO for the loss who denied contending that the insurance policies were
either attached pursuant to writs of attachments/garnishments or that creditors are claiming to have a better right
GOYU filed a complaint for specific performance and damages at the RTC.
RCBC, one of GOYUs creditors, also filed with MICO its formal claim over the proceeds of the insurance policies, but said
claims were also denied for the same reasons that MICO denied GOYUs claims
RTC: Confirmed GOYUs other creditors (Urban Bank, Alfredo Sebastian, and Philippine Trust Company) obtained their
writs of attachment covering an aggregate amount of P14,938,080.23 and ordered that 10 insurance policies be deposited
with the court minus the said amount so MICO deposited P50,505,594.60.
Another Garnishment of P8,696,838.75 was handed down
RTC: favored GOYU against MICO for the claim, RCBC for damages and to pay RCBC its loan
CA: Modified by increasing the damages in favor of GOYU
In G.R. No. 128834, RCBC seeks right to intervene in the action between Alfredo C. Sebastian (the creditor) and GOYU (the
debtor), where the subject insurance policies were attached in favor of Sebastian
RTC and CA: endorsements do not bear the signature of any officer of GOYU concluded that the endorsements favoring
RCBC as defective.
ISSUE: W/N RCBC as mortgagee, has any right over the insurance policies taken by GOYU, the mortgagor, in case of the
occurrence of loss
HELD: YES. Mortgagor and a mortgagee have separate and distinct insurable interests in the same mortgaged property,
such that each one of them may insure the same property for his own sole benefit

although it appears that GOYU obtained the subject insurance policies naming itself as the sole payee, the intentions of the
parties as shown by their contemporaneous acts, must be given due consideration in order to better serve the interest of
justice and equity. Eight endorsement documents were prepared by Alchester in favor of RCBC
MICO, a sister company of RCBC
GOYU continued to enjoy the benefits of the credit facilities extended to it by RCBC.
GOYU is at the very least estopped from assailing their operative effects.
The two courts below erred in failing to see that the promissory notes which they ruled should be excluded for bearing
dates which are after that of the fire, are mere renewals of previous ones
RCBC has the right to claim the insurance proceeds, in substitution of the property lost in the fire. Having assigned its
rights, GOYU lost its standing as the beneficiary of the said insurance policies
insurance company to be held liable for unreasonably delaying and withholding payment of insurance proceeds, the delay
must be wanton, oppressive, or malevolent - not shown
Sebastians right as attaching creditor must yield to the preferential rights of RCBC over the Malayan insurance policies as
first mortgagee.