G.R.No.

L-44059 October 28, 1977

THEINSULAR LIFE ASSURANCE COMPANY, LTD., plaintiffappellee,
vs.
CARPONIAT. EBRADO and PASCUALA VDA. DE
EBRADO, defendants-appellants.

3) As the policy was in force, The Insular Life Assurance Co.,

Ltd.Liable to pay the coverage in the total amount of
P11,745.73, representing theface value of the policy in the
amount of P5,882.00 plus the additionalbenefits for accidental
death also in the amount of P5,882.00 and the refund
ofP18.00 paid for the premium due November, 1969, minus
the unpaid premiums andinterest thereon due for January and
February, 1969, in the sum of P36.27.

MARTIN,J.:

FACTS:
1) On September 1, 1968, Buenaventura Cristor Ebrado was
issued by TheLife Assurance Co., Ltd., Policy No. 009929 on a
whole-life for P5,882.00 witha, rider for Accidental Death for
the same amount. Buenaventura C. Ebradodesignated T.
Ebrado as the revocable beneficiary in his policy. He to her
ashis wife.

2) On October 21, 1969, Buenaventura C. Ebrado died as a

result of an twhen he was hit by a failing branch of a tree.

4) Carponia T. Ebrado filed with the insurer a claim for the

proceeds ofthe Policy as the designated beneficiary therein,
although she admits that sheand the insured Buenaventura C.
Ebrado were merely living as husband and wifewithout the
benefit of marriage.

5) Pascuala Vda. de Ebrado also filed her claim as the

widow of thedeceased insured. She asserts that she is the one
entitled to the insuranceproceeds, not the common-law wife,
Carponia T. Ebrado.

6) In doubt as to whom the insurance proceeds shall be

paid, the insurer,The Insular Life Assurance Co., Ltd.

commenced an action for Interpleaderbefore the Court of First

Instance of Rizal on April 29, 1970.

7) After the issues have been joined, a pre-trial conference

was held onJuly 8, 1972. During this conference, parties
Carponia T. Ebrado and PascualaEbrado agreed and
stipulated among others that:
a. that the deceasedBuenaventura Ebrado was married to
Pascuala Ebrado with whom she has six
(legitimate)namely; Hernando, Cresencio, Elsa, Erlinda,
Felizardo and Helen, all surnamedEbrado;
b. that during the lifetime of Buenaventura Ebrado, he was
livingwith his common-wife,Carponia Ebrado, with whom she
had 2 children although he was not legallyseparated from his
legal wife;

8) The trial court rendered judgment declaring among others,

Carponia T.Ebrado disqualified from becoming beneficiary of
the insured BuenaventuraCristor Ebrado and directing the
payment of the insurance proceeds to the estateof the
deceased insured. From this judgment, Carponia T. Ebrado
appealed to theCourt of Appeals, but the Appellate Court
certified the case to the SupremeCourt as involving only
questions of law.

ISSUE: Whether acommon-law wife named as beneficiary in

the life insurance policy of a legallymarried man can claim the
proceeds thereof in case of death of the latter

HELD: No. It is quiteunfortunate that the Insurance Act (RA

2327, as amended) or even the new InsuranceCode (PD No.
612, as amended) does not contain any specific provision
grossly resolutoryof the prime question at hand. Section50 of
the Insurance Act which provides that "(t)he insurance
shall beapplied exclusively to the proper interest of the
person in whose name it ismade" cannot be validly
seizedupon to hold that the mm includes the beneficiary.
The word"interest" highly suggests that the provision
refers only to the"insured" and not to the beneficiary,
since a contract of insuranceis personal in
character. Otherwise, the prohibitory laws against
illicitrelationships especially on property and descent will be
rendered nugatory, asthe same could easily be circumvented
by modes of insurance. Rather, the general rules of civil law
should beapplied to resolve this void in the Insurance
Law. Article 2011 of the NewCivil Code states: "The contract
of insurance is governed by special laws.Mattersnot expressly
provided for in such special laws shall be regulated by this
Code." When nototherwise specifically provided for by the
Insurance Law, the contract of lifeinsurance is governed by the

general rules of the civil law regulatingcontracts. And under

Article 2012 of the same Code, "any person who isforbidden
from receiving any donation under Article 739 cannot be
namedbeneficiary of a life insurance policy by the person who
cannot make a donationto him. Common-law spouses are,
definitely, barred from receiving donationsfrom each other.
Article 739 of the new Civil Code provides:
The following donations shall be void:
1. Those made between persons who were guilty of adultery
orconcubinage at the time of donation;
2. Those made between persons found guilty of the same
criminal offense,inconsiderationthereof;
3. Those made to a public officer or his wife, descendants or
ascendantsby reason of his office.
In the case referred to in No. 1, theaction for declaration of
nullity may be brought by the spouse of the donor
ordonee; andthe guilt of the donee may beproved by
preponderance of evidence in the same action.

the policy which the insured pays out of liberality,

thebeneficiary will receive the proceeds or profits of said
insurance. As a consequence,the proscription in Article
739 of the new Civil Code should equally operate inlife
insurance contracts. The mandate of Article 2012 cannot be
laid aside: any person who cannotreceive a donation cannot
be named as beneficiary in the life insurance policyof the
person who cannot make the donation. Under American law, a
policy of lifeinsurance is considered as a testament and in
construing it, the courts will,so far as possible treat it as a will
and determine the effect of a clausedesignating the beneficiary
by rules under which wins are interpreted
SOUTHERN LUZON EMPLOYEES' ASSOCIATION,
plaintiff, vs.
JUANITA GOLPEO, ET AL., defendants-appellants;
AQUILINO MALOLES , ET AL., defendantsappellees;
ELSIE HICBAN, ET AL., defendants;
MARCELINO CONCEPCION, ET AL., intervenorsappellants.
G.R. No. L-6114

October 30, 1954

Facts:
In essence, a life insurance policy is no different from a
civildonation insofar as the beneficiary is concerned. Both
are founded upon thesame consideration: liberality. A
beneficiary is like a donee, because from thepremiums of

Southern Luzon Employees' Association is

composed of laborers and employees of Laguna
tayabas Bus Co., and Batangas Transportation
Company, and one of its purposes is mutual aid of its
members and their defendants in case of death.

Roman A. Concepcion was a member until his death on

1950. It must be noted that the association adopted on
1949 which provides that persons named as
beneficiaries are entitled to the insurance policy.
Roman Concecpion listed as his beneficiaries
Aquilina Maloles, Roman M. Concepcion, Jr., Estela M.
Concepcion, Rolando M. Concepcion and Robin M.
Concepcion. After the death of Roman A. Concepcion,
the association was able to collect voluntary
contributions from its members amounting to P2,5055.
Three sets of claimants presented themselves,
namely, (1) Juanita Golpeo, legal wife of Roman A.
Concepcion, and her children, named beneficiaries by
the deceased; and (3) Elsie Hicban, another common
law wife of Roman A. Concepcion, and her child. (The
case did not mention the second claimant but Im
guessing its AQUILINA MOLES-kabit)
The plaintiff association was accordingly
constrained to institute in the Court of First Instance of
Laguna the present action for interpleading against the
three conflicting claimants as defendants. After
hearing, the court rendered a decision, declaring the
defendants Aquilina Maloles and her children the sole
beneficiaries of the sum of P2,505.00, and ordering the
plaintiff to deliver said amount to them. From this
decision only the defendants Juanita Golpeo and her
minor children and the intervenors Marcelino and
Josefina Concepcion have appealed to this court.
Plaintiffs contention: The counsel for plaintiff argues
that the heirs are entitled to the proceeds of insurance
and that the proceeds of the insurance policy were

donation or gift made by the father during his lifetime

to the defendant and that, as such, its ultimate
destination is determined by those provisions of the
Civil Code which relate to donations, especially article
819 which provides "gifts made to children which are
not betterments shall be considered as part of their
legal portion."
Appellants contention: 1.The Insurance Law is not
applicable because the plaintiff is a mutual benefit
association as defined in section 1628 of the Revised
Administrative Code; 2. The stipulation between the
plaintiff and the deceased Roman A. Concepcion
regarding the specification of the latter's beneficiaries,
and the resolution adopted by plaintiff are void for the
being contrary to law, moral or public policy. (Any
person who is forbidden from receiving any donation
under article 739 cannot be named beneficiary of a life
insurance policy. Inasmuch as, according to article 739
of the new Civil Code, a donation is not valid when
made "between persons who are guilty or adultery or
concubinage at the time of the donation.)
Issue: WON the amount in question belonged
exclusively to the beneficiaries
Held:
Yes. The proceeds of the life-insurance policy
belongs exclusively to the beneficiaries. That the
proceeds of an insurance policy belong exclusively to
the beneficiary and not to the estate of the person
whose life was insured, and that such proceeds are the
separate and individual property of the beneficiary,
and not of the heirs of the person whose life was

insured, is the doctrine in America. We believe that the

same doctrine obtains in these Islands.
With regard to the contention of the plaintiff, the
contract of life insurance is a special contract and the
destination of the proceeds thereof is determined by
special laws which deal exclusively with that subject.
The Civil Code has no provisions which relate directly
and specifically to life-insurance contract or to the
destination of life-insurance proceeds. That subject is
regulate exclusively by the Code of Commerce which
provides for the terms of the contract, the relations of
the parties and the destination of the proceeds of the
policy.
For appellants first contention, the trial court
has no considered the plaintiff as a regular insurance
company but merely ruled that the death benefit in
question is analogous to an insurance. Moreover,
section 1628 of the Revised Administrative Code
defines a mutual benefit association as one, among
others, "providing for any method of accident or life
insurance among its members out of dues or
assessments collected from the membership." The
comparison made in the appealed decision is,
therefore, well taken.
With regard to the appellants second
contention, it is alleged that the defendant-appellee
Aquilina Maloles, cannot be named a beneficiary, even
assuming that the insurance law is applicable.
Appellant Juanita Golpeo, by her silence and actions,
had acquiesced in the illicit relations between her
husband and appellee Aquilina Maloles. However this
would certainly not apply to the children of Aquilina

likewise named beneficiaries by the deceased Roman

A. Concepcion. As a matter of a fact the new Civil Code
recognized certain successional rights of illegitimate
children.
In this connection it is noteworthy that the
estate of the deceased Roman A. Concepcion was not
entirely left without anything legally due it since it is
an admitted fact that the sum of P2,500 was paid by
Laguna Tayabas Bus Co., employer of the deceased to
the appellants under the Workmen's Compensation
Act.
HILARIO GERCIO VS. SUN LIFE ASSURANCE OF
CANADA, ET AL.
FACTS:
On January 29, 1910, Sun Life Assurance Co. of Canada
issued a twenty-year endowment insurance policy on
the life of Hilario Gercio. By its terms, the insurance
company agreed to insure the life of Gercio for the
sum of P/2,000, 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;
otherwise to the executors, administrators, or assigns
of the insured. The policy did not include any provision
reserving to the insured the right to change the
beneficiary.
Towards the end of the year 1919, Zialcita was
convicted of the crime of adultery. On September 4,
1920, a decree of divorce was issued, which had the
effect of completely dissolving the bonds of matrimony
contracted by Gercio and Zialcita.

On March 4, 1922, Gercio formally notified the Sun Life

Assurance Co. of Canada that he had revoked his
donation in favor of Zialcita, and that he had
designated in her stead his present wife, Adela Garcia
de Gercio, as the beneficiary of the policy. Gercio
requested the insurance company to eliminate Zialcita
as beneficiary. The insurance company has refused
and still refuses to do.
The judgment of the trial court was in favor of Gercio
without costs, and ordered the defendant company to
eliminate from the insurance policy the name of
Zialcita as beneficiary and to substitute therefor such
name as the plaintiff might furnish to the defendant for
that purpose.
ISSUE: Whether or not Gercio has the right to change
the beneficiary of the policy
RULING:
NOTE: In the case, it was first determined which law
should be applied to the facts: the insurance policy
was taken out in 1910 and that the effort to change
the beneficiary was made in 1922. Code of Commerce
and the Civil Code were in force in 1910 while
Insurance Act. No. 2427 became effective in 1914. In
the Code of Commerce, there is no provision either
permitting or prohibiting the insured to change the
beneficiary. The Court declined to consider the
proceeds of the insurance policy as a donation or gift,
saying "the contract of life insurance is a special
contract and the destination of the proceeds thereof is
determined by special laws which deal exclusively with
that subject. The Civil Code has no provisions which

relate directly and specifically to life-insurance

contracts or to the destination of life-insurance
proceeds. The Insurance Act likewise has no provision
either permitting or prohibiting the insured to change
the beneficiary. Because of the deficiency of the laws,
the Court gathered rules from the American
authorities.
No. 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.
And this applies to a policy to which there are attached
the incidents of a loan value, cash surrender value, an
automatic extension by premiums paid, and to an
endowment policy, as well as to an ordinary life
insurance 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 beneficiary's consent, the insured cannot make
such change. Accordingly, it is held that 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.
As to the effect produced by the divorce, the Philippine
Divorce Law, Act No. 2710, merely provides in section
9 that the decree of divorce shall dissolve the
community property as soon as such decree becomes
final. Unlike the statutes of a few jurisdictions, 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. It must follow,
therefore, in the absence of a statute to the contrary,
that if a policy is taken out upon a husband's life the
wife is named as beneficiary therein, a subsequent
divorce does not destroy her rights under the policy.
Yore vs. Booth (California decision): 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. In policy,
although he has parted with nothing, and is simply the
object of another's bounty, has acquired a vested and
irrevocable interest in the policy, which he may keep
alive for his own benefit by paying the premiums or
assessments if the person who effected the insurance
fails or refuses to do so.
Connecticut Mutual Life Insurance Company vs
Schaefer: A policy taken out in good faith and valid at
its inception, is not avoided by the cessation of the
insurable interest, unless such be the necessary effect
of the provisions of the policy itself. . . .life policy,
originally valid, does not cease to be so by the
cessation of the assured party's interest in the life
insured.
Central National Bank of Washington City vs. Hume:
The money to become due under it, belong, the
moment it is issued, to the person or persons named in
it as the beneficiary or beneficiaries, and that there is
no power in the person procuring the insurance, by

any act of his, by deed or by will, to transfer to any

other person the interest of the person named.
G.R. No. L-28093 January 30, 1971
BASILIA BERDIN VDA. DE CONSUEGRA; JULIANA,
PACITA, MARIA LOURDES, JOSE, JR., RODRIGO,
LINEDA and LUIS, all surnamed CONSUEGRA,
petitioners-appellants,
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM,
COMMISSIONER OF PUBLIC HIGHWAYS, HIGHWAY
DISTRICT ENGINEER OF SURIGAO DEL NORTE,
COMMISSIONER OF CIVIL SERVICE, and ROSARIO
DIAZ, respondents-appellees.
ZALDIVAR, J.:
FACTS:
The late Jose Consuegra, at the time of his death, was
employed as a shop foreman of the office of the
District Engineer in the province of Surigao del Norte.
In his lifetime, Consuegra contracted two marriages,
the first with herein respondent Rosario Diaz, out of
which marriage were born two children, namely, Jose
Consuegra, Jr. and Pedro Consuegra, but both
predeceased their father; and the second, which was
contracted in good faith while the first marriage was
subsisting, with herein petitioner Basilia Berdin, on
May 1, out of which marriage were born seven
children.
Being a member of the Government Service Insurance
System (GSIS, for short) when Consuegra died on

September 26, 1965, the proceeds of his life insurance

were paid by the GSIS to petitioner Basilia Berdin (2 nd
wife) and her children who were the beneficiaries
named in the policy.
Having been in the service of the government for
22.5028 years, Consuegra was entitled to retirement
insurance benefits in the sum of P6,304.47. Consuegra
did not designate any beneficiary who would receive
the retirement insurance benefits due to him.
Respondent Rosario Diaz, the widow by the first
marriage, 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.
Petitioner Basilia Berdin and her children, likewise,
filed a similar claim with the GSIS, asserting that being
the beneficiaries named in the life insurance policy of
Consuegra, they are the only ones entitled to receive
the retirement insurance benefits due the deceased
Consuegra.
Resolving the conflicting claims, the GSIS ruled that
the legal heirs of the late Jose Consuegra were Rosario
Diaz, his widow by his first marriage who is entitled to
one-half, or 8/16, of the retirement insurance benefits,
on the one hand; and Basilia Berdin, his widow by the
second marriage and their seven children, on the other
hand, who are entitled to the remaining one-half, or
8/16, each of them to receive an equal share of 1/16.
Dissatisfied with the foregoing ruling and
apportionment made by the GSIS, Basilia Berdin and

her children1 filed on October 10, 1966 a petition for

mandamus with preliminary injunction in the Court of
First Instance of Surigao,
RTC: "When two women innocently and in good faith
are legally united in holy matrimony to the same man,
they and their children, born of said wedlock, will be
regarded as legitimate children and each family be
entitled to one half of the estate.
Hence the present appeal by herein petitionersappellants, Basilia Berdin and her children.
ISSUE:
To whom should this retirement insurance benefits of
Jose Consuegra be paid, because he did not designate
the beneficiary of his retirement insurance?
Ruling:

Berdin averred that 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.
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 a 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.
GSIS had correctly acted when it ruled that the
proceeds should be divided equally between his first
living wife and his second. The lower court has
correctly applied the ruling of this Court in the case of
Lao v Dee.

OTHER NOTES:
Gomez vs. Lipana- in construing the rights of two
women who were married to the same man, held "that
since the defendant's first marriage has not been
dissolved or declared void the conjugal partnership
established by that marriage has not ceased. Nor has
the first wife lost or relinquished her status as putative
heir of her husband under the new Civil Code, entitled
to share in his estate upon his death should she
survive him. Consequently, whether as conjugal
partner in a still subsisting marriage or as such
putative heir she has an interest in the husband's
share in the property here in dispute....

With respect to the right of the second wife, although

the second marriage can be presumed to be void ab
initio as it was celebrated while the first marriage was
still subsisting, still there is need for judicial
declaration of such nullity. And inasmuch as the
conjugal partnership formed by the second marriage
was dissolved before judicial declaration of its nullity,
"the only lust and equitable solution in this case would
be to recognize the right of the second wife to her
share of one-half in the property acquired by her and
her husband and consider the other half as pertaining
to the conjugal partnership of the first marriage."
DELFIN NARIO, and ALEJANDRA SANTOS-NARIO, plaintiffsappellants,
vs.
THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY,

defendant-appellee.

demanded its cash value which then amounted to P520.00.

REYES, J.B.L., J.:

The Insurance Company also denied the surrender of the

policy, on the same ground as that given in disapproving the
policy loan application; hence, on September 10, 1963, Mrs.
Alejandra Santos- Nario and her husband, Delfin Nario,
brought suit against the Philippine American Life Insurance
Co. in the above mentioned court of first instance, seeking
to compel Philam to grant their policy loan application
and/or to accept the surrender of said policy in exchange for
its cash value.

FACTS:
Mrs. Alejandra Santos-Nario was, upon application, issued,
on June 12, 1959, by the Philippine American Life Insurance
Co., a life insurance policy (No. 503617) under a 20-year
endowment plan, with a face value of P5,000.00. She
designated thereon her husband, Delfin Nario, and their
unemancipated minor son, Ernesto Nario, as her irrevocable
beneficiaries.
About the middle of June, 1963, Mrs. Nario applied for a loan
on the above stated policy with the Insurance Company,
which loan she, as policy-holder, has been entitled to avail
of under one of the provisions of said policy after the same
has been in force for three (3) years, for the purpose of
using the proceeds thereof for the school expenses of her
minor son, Ernesto Nario. Said application bore the written
signature and consent of Delfin Nario in two capacities: first,
as one of the irrevocable beneficiaries of the policy; and the
other, as the father- guardian of said minor son and
irrevocable beneficiary, Ernesto Nario, and as the legal
administrator of the minor's properties, pursuant to Article
320 of the Civil Code of the Philippines.
The Insurance Company denied said application,
manifesting to the policy holder that 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.

Philam answered the complaint, virtually admitting its

material allegations, but it set up the affirmative defense
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, under
article 320 in relation to article 326 of the Civil Code; 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
Philam was, therefore, justified in refusing to grant and in
disapproving the proposed transactions in question.
The lower court found and opined that since the parties
expressly stipulated in the endorsement attached to the
policy and which formed part thereof that
It is hereby understood and agreed that, notwithstanding
the provisions of this Policy to the contrary, inasmuch as the
designation of the beneficiaries have been made by the
Insured without reserving the right to change said
beneficiaries, the Insured may not designate a new
beneficiary or assign, release or surrender this Policy to the

After the denial of said policy loan application, Mrs. Nario

signified her decision to surrender her policy to the
Insurance Company, which she was also entitled to avail of
under one of the provisions of the same policy, and

Company and exercise any and all other rights and

privileges hereunder or agree with the Company to any

change in or amendment to this Policy, without the consent

of the beneficiaries originally designated; that under the
above quoted provision, 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 minor's
properties for which the consent given by the fatherguardian 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 father- guardian without any
judicial authority; said court, agreeing with defendant's
contention, sustained defendant's affirmative defense, and
rendered, on January 28, 1964, its decision dismissing
plaintiffs' complaint.
Unable to secure reconsideration of the trial Court's ruling,
petitioner appealed directly to this Court.
ISSUE: Whether PhilAm Life is justified in denying the
proposed transaction.
HELD:
The appeal is unmeritorious. We agree with the lower court
that the vested 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 proposed 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 minor's vested interest therein, as one of the two
(2) irrevocable beneficiaries, consists of one-half (12) of said
amount or P2,500.00.
Article 320 of the Civil Code of the Philippines provides
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.
and article 326 of the same Code reads
When the property of the child is worth more than two
thousand pesos, the father or mother shall be considered a
guardian of the child's property, subject to the duties and
obligations of guardians under the Rules of Court.
It appearing that the minor beneficiary's 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; and as later implemented in Section
7, Rule 93 of the Revised Rules of 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
child's property, under articles 320 and 326 of the Civil
Code. As there was no such petition and bond, the consent
given by the father-guardian, 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.

Wherefore, the decision appealed from is affirmed. Costs

against appellants Nario. So ordered.

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 parent's 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. The distinction between one and the other
kind of power is too basic in our law to be ignored. Thus,
under Article 1877 of the Civil Code of the Philippines, an
agency in general terms does not include power to
encumber or dispose of the property of the principal; and
the Code explicitly requires a special power or authority for
the agent "to loan or borrow money, unless the latter act be
urgent or indispensable for the preservation of the thing
under administration"
Similarly, special powers are required to required to effect
novations, to waive any obligation gratuitously or obligate
the principal as a guarantor or surety. By analogy, since the
law merely constitutes the parent as legal administrator of
the child's 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 parent's authority becomes all the more
necessary where as in the case before us, there is no bond
to guarantee the ward against eventual losses.

THE PHILIPPINE AMERICAN INSURANCE COMPANY vs.

HONORABLE GREGORIO G. PINEDA in his capacity as
Judge of the CFI of Rizal, and RODOLFO C. DIMAYUGA
157 SCRA 416
Facts:
On January 15, 1968, private respondent Rodolfo
Dimayuga procured an ordinary life insurance policy
from Philam and designated his wife and 6 minor
children as irrevocable beneficiaries.

Appellants seek to bolster their petition by invoking the

parental power (patria potestas) under the Civil Code of
1889.The appeal profits them nothing. For the new Civil
Code has not effected a restitutio in integrum of the Spanish
patria potestas; the revival has been only in part.

On February 22, 1980, Rodolfo filed a petition with

the CFI of Rizal to amend the designation of the
beneficiaries in his life policy from irrevocable to
revocable.

On March 10, 1980, Philam filed an Urgent Motion to

Reset Hearing. It also filed its Comment and/or
Opposition to Rodolfos Petition.

However, respondent Judge Gregorio G. Pineda, then

presiding Judge CFI of Rizal, denied petitioner's
Urgent Motion, allowing Rodolfo to adduce evidence.
Consequently, respondent judge granted Rodolfos
petition. Hence this petition.
Issues:
1. WON the designation of the irrevocable beneficiaries
could be amended without the consent of all the
irrevocable beneficiaries?
2. WON the irrevocable beneficiaries herein, one of
whom is already deceased while the others are all
minors, could validly give consent to the amendment
of the designation of the irrevocable beneficiaries?

Respondents Contention:
The designation can be amended if the Court finds a
just, reasonable ground to do so.
The subsequent consent of the beneficiaries ratified
the change of beneficiaries from irrevocable to
revocable.
Held:
1. NO. The designation of the irrevocable beneficiaries
could not be amended without the consent of all the
irrevocable beneficiaries
Under the Insurance Act (the law applicable in
THIS case, the policy having been procured in
1968), 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. Additionally, it
was undisputed that a provision in the policy
expressly provides that the designation of
beneficiaries is irrevocable. Both the law and
the policy do not provide for any other
exception, thus, abrogating the contention of
the private respondent that said designation
can be amended if the Court finds a just,
reasonable ground to do so.
2. NO. The irrevocable beneficiaries herein, the 6 minor
children, could not validly give consent to the
amendment of the designation of the irrevocable
beneficiaries.
The alleged acquiescence of the six (6)
children beneficiaries of the policy (the
beneficiary-wife predeceased the insured)
cannot be considered an effective ratification

to the change of the beneficiaries from

irrevocable to revocable.
Since that all the six children named as
beneficiaries were minors at the time, they
could not validly give their consent. Neither
could they act through their father insured
since their interests are quite divergent from
one another.

The contract between the parties is the law binding on

both of them. The contract in the case at bar, contains
the indispensable elements for its validity and does
not in any way violate the law, morals, customs,
orders, etc. leaving no reason to deny sanction
thereto.

Finally, the fact that the contract of insurance does

not contain a contingency when the change in the
designation of beneficiaries could be validly effected
means that it was never within the contemplation of
the parties. Hence, the lower court acted in excess of
its authority when it granted the petition amending
the designation of the beneficiaries from "irrevocable"
to "revocable" over the disapprobation of the
petitioner insurance company.

Sps. Cha vs Court of Appeals

[G.R. No. 124520. August 18, 1997]
PADILLA, J.:
Facts:

Petitioner spouses Nilo Cha and Stella Uy-Cha, as lessees entered

into a lease contract with private respondent CKS Development
Corporation as lessor. A stipulation of the lease contract provides
that the Lessee is not allowed to insure against fire the chattels,
merchandise, textiles, goods and effects placed at any stall or
store or space in the leased premises without first obtaining the
written consent and approval of the Lessor. If the Lessee violates
this the policy is deemed assigned and transferred to the Lessor for
his own benefit.
Petitioner took out a policy of fire insurance over the merchandise
inside the leased premises with United Insurance without consent
of CKS.

benefit of some person having an insurable interest in the property

insured.
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: The
measure of an insurable interest in property is the extent to which
the insured might be damnified by loss or injury thereof.
Therefore, CKS cannot be validly a beneficiary of the fire insurance
policy taken by petitioner-spouses. The insurable interest remains
with the Cha spouses.

On the day the lease contract was to expire a fire broke out inside
the leased premises. CKS, wrote a letter to United asking that the
proceeds of the fire insurance be paid directly to CKS. United
refused. Hence, the latter filed a complaint against the Cha
spouses and United.

The stipulation in the lease contract is void for being contrary to

law and public policy. This is in keeping with the provision under
Sec. 25 of the Insurance Code that: 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.

Contention of CKS Development Corp:

VICENTE ONG LIM SING, JR. vs. FEB LEASING & FINANCE CORPORATION

Stipulation that the lease contract provides that the Lessee is not
allowed to insure against fire the chattels, merchandise, textiles,
goods and effects placed at any stall or store or space in the leased
premises without first obtaining the written consent and approval
of the Lessor.

G.R. No. 168115

RTC ruled in favor of CKS. CA affirmed, hence the petition

June 8, 2007

NACHURA

Issue:
- WON the stipulation is valid insofar as it provides that any fire
insurance policy obtained by the lessee (Cha spouses) over their
merchandise inside the leased premises is deemed assigned or
transferred to the lessor (CKS) if said policy is obtained without the
prior written of the latter.
- WON CKS can recover from the insurance policy

FACTS: FEB Leasing and Finance Corporation (FEB) entered into a lease of equipment and
motor vehicles with JVL Food Products (JVL). On the same day, 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. Corresponding
Lease Schedules with Delivery and Acceptance Certificates over the equipment and motor
vehicles formed part of the agreement. JVL was obliged to pay FEB an aggregate gross
monthly rental of P107,494.

Held:
No. Section 18 of the Insurance Code provides that: No contract or
policy of insurance on property shall be enforceable except for the

JVL defaulted in the payment of the monthly rentals. FEB sent a letter to JVL demanding
payment of P3, 414,468.75, the amount of rentals in arrear. However, JVL failed to pay.

FEB filed a Complaint with RTC of Manila for sum of money, damages, and replevin against
JVL, Lim and John Doe.

Defense of JVL and Lim (amended answer): They 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. They were made to believe that when full payment was effected, a
Deed of Sale would be executed by FEB as vendor in favor of JVL and Lim as vendees. They
also contended that the lease agreement is a contract of adhesion and should, therefore, be
construed against the party who prepared it, i.e. FEB.

still in possession of LIM and JVL, they are ordered by the court to jointly and severally to pay
the price thereof.

CAs Ruling: Transaction between the parties is a financial lease agreement under RA No.
8556. Ruling of RTC is set aside and Lim and JVL are ordered to pay FEB P3, 414,468.75.

Lim filed a Petition for Review on Certiorari in the Supreme Court.

ISSUE:
Trial Courts Ruling: It upheld JVL and Lims stance ruling
(1) that in an adhesion contract which is drafted and printed in advance and parties are not
given a real arms length opportunity to transact, the Courts treat this kind of contract strictly
against their architects for the reason that the party entering into this kind of contract has o
choice but to accept the terms and conditions found therein even if he/she is not in accord
therewith and for that matter may not have understood all the terms and stipulations
prescribed thereat.
(2) Also, lessee was required to insure the thing against loss, damage or destruction. In
property insurance against loos or other accidental causes, the assured must have an
insurable interest. The test of insurable interest in property is whether the assured has a right,
title or interest therein that he will be benefited by its preservation and continued existence or
suffer a direct pecuniary loss from its destruction or injury by the peril insured against. If the
defendants were to be regarded a sonly a lessee, logically the lessor who asserts ownership
will be the one directly benefited or injured and therefore the lessee is not supposed to be the
assured as he has no insurable interest.
(3) Another observation is the existence of a Deed of Absolute Sale by and between the same
parties where FEB sold to Lim and JVL one unit 1995 Mitsubishi L-200 Strada DC Pick Up
and in said Deed, the same terms as in the alleged lease were used in respect to warranty,
as well as liability in case of loss and other conditions. Therefore, the trial court ruled that the
transaction is a sale on installment, as such, there is no chattel mortgage on the thing sold,
but it appears amongst the Complainants prayer, that FEB elected to exact fulfillment of the
obligation. For the vehicles returned, FEB can only recover the unpaid balance of the price
because of the previous payments made by the defendants for the reasonable use of the
units, especially so, as it appears, there returned vehicles were sold at auction and that FEB
can apply the proceeds to the balance. With respect to the unreturned units and machineries

1) Whether or not the transaction is a lease agreement

2) Whether or not the lessees have insurable interest

HELD: 1) Yes. Petitioners claim that the real intention of the parties was a contract of sale of
personal property on installment basis is more likely a mere afterthought in order to defeat the
rights of FEB.

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

A financing company is not a buyer or seller of goods. But a financial lease must be preceded
by a purchase and sale contract covering the equipment which becomes the subject matter of
the financial lease. The sale of the equipment by the supplier to the financial lessor and the
latters legal ownership thereof are intended to secure the repayment over time of the
purchase price of the equipment, plus financing charges, through the payment of lease
rentals, that legal title is the upfront security held by the financial lessor.

2) Yes. The stipulation in Section 14 of the lease 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.

The petition is denied and the decision of CA is affirmed.

It was ruled that if the assignment is allowed, it would amount to

wagering since CKS has no insurable interest in the goods and
merchandise inside the leased premises.
Liability of Sps. Cha:
- The liability of the Cha spouses to CKS for violating their lease
contract in that Cha spouses obtained a fire insurance policy over
their own merchandise, without the consent of CKS, is a separate
and distinct issue which we do not resolve in this case.

Bachrach
G.R.

V.
No.

British

American

L-5715

Assurance

December

Co.
20,

(1910)
1910

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
-British American Assurance Company denied alleging that:
-property covered by the policy to H. W. Peabody & Co. to
secure certain indebtedness due and owing to said company
-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
Bachrach
-willfully placed a gasoline can containing 10 gallons of
gasoline
close
to
the
insured
goods

-made no proof of the loss with the time required by the

condition
-RTC: British American Assurance Company liable to
bACHRACH
ISSUE:

W/N

Bachrach

HELD:

YES.

lower

can
court

claim
affirmed

-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.
-alienation clause - forfeiture if the interest in the property
pass
from
the
insured
-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.
-we can not 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
-It does not positively appear of record that the automobile
in question was not included in the other policies. It does
appear that the automobile was saved and was considered
as a part of the salvaged. It is alleged that the salvage
amounted to P4,000, including the automobile. This amount
(P4,000) was distributed among the different insurers and
the amount of their responsibility was proportionately
reduced. The defendant and appellant in the present case

made no objection at any time in the lower court to that

distribution of the salvage. The claim is now made for the
first time.

(G.R. No. L-14300 January 19, 1920)

SAN MIGUEL BREWERY, ETC., plaintiff-appellee

LAW UNION AND ROCK INSURANCE CO., (LTD.) ET
AL., defendants-appellees
HENRY HARDING, defendant-appellant

Ponente: STREET, J.:

FACTS:

D. P. Dunn, then the owner of the property to which the

insurance relates, mortgaged the same to the San Miguel
Brewery to secure a debt (P10,000). In the contract of mortgage
Dunn agreed to keep the property insured at his expense to the
full amount of its value in companies to be selected by the
Brewery Company and authorized the latter in case of loss to
receive the proceeds of the insurance and to retain such part as
might be necessary to cover the mortgage debt. Then Dunn
authorized and requested the Brewery Company to effect said
insurance itself. Accordingly Antonio Brias, general manager of

the Brewery, made a verbal application to the Law Union and

Rock Insurance Company for insurance to the extent of P15,000
upon said property. He stated, when asked, that the company
was interested in the property only as a mortgagee. No
information was asked as to who was the owner of the property,
and no information upon this point was given.

The Insurance Company then issued its own policy for

P7,500 and procured a policy in a like amount to be issued by the
"Filipinas" Compania de Seguros. Both policies were issued in
the name of the San Miguel Brewery as the assured, and
contained no reference to any other interest in the property. Both
policies contain the usual clause requiring assignments to be
approved and noted on the policy. Premiums were paid by the
Brewery and charged to Dunn.

A year later the policies were renewed, without change,

the renewal premiums being paid by the Brewery. In March of
1917 Dunn sold the insured property to Henry Harding, but not
assignment of the insurance.

San Miguel Brewery, for the purpose of recovering upon two

policies of insurance underwritten respectively by Law Union
and
Rock
Insurance
Company
(Ltd.),
and
the
"Filipinas" Compania de Seguros, for the sum of P7,500
each, insuring certain property which has been destroyed by
fire. San Miguel Brewery, is named as the party assured in
the two policies referred to, but it is alleged in the complaint
that it was in reality interested in the property which was the

subject of insurance in the character of a mortgage creditor

only, and that the owner of said property upon the date the
policies were issued was D. P. Dunn who was later
succeeded by Henry Harding.

The prayer of the complaint is that judgment be entered in

favor of the plaintiff against the two companies named for the
sum of P15,000, with interest and costs, and further that upon
satisfaction of the balance of P4,505.30 due to the plaintiff
upon the mortgage debt, and upon the cancellation of the
mortgage, the plaintiff be absolved from liability to the
defendants or any of them. The peculiar form of the latter part
of the prayer is evidently due to the design of the plaintiff to
lay a foundation for Harding to recover the difference between
the plaintiff's credit and the amount for which the property was
insured.

the liability of the insurance companies was limited to the

insurable interest of the plaintiff therein.

Soon after the action was begun the insurance companies

effected a settlement with the San Miguel Brewery by paying
the full amount of the credit claimed by it (litigation as
between the original plaintiff and the two insurance
companies came to an end), leaving the action to be
prosecuted to final judgement by Harding with respect to the
balance claimed to be due to him upon the policies.

TRIAL COURT DECISION:

Harding had no right of action whatever against the
companies and absolved them from liability.

HARDINGS CONTENTION:
Admitting the material allegations of the complaint and
claiming for himself the right to recover the difference
between the plaintiff's mortgage credit and the face value of
the policies.

INSURANCE COMPANIES CONTENTION:

Admitting in effect their liability to the San Miguel Brewery to
the extent of its mortgage credit, but denying liability to
Harding on the ground that under the contracts of insurance

Henry Harding has appealed.

ISSUE:
Whether Harding has an insurable interest as owner and thus
entitled to the balance of the proceeds of the two policies

RULING:

No cause of action of Henry Harding against the insurance

companies is shown. He is not a party to the contracts of
insurance and cannot directly maintain an action thereon. His
claim is merely of an equitable and subsidiary nature and
must be made effective, if at all, through the San Miguel
Brewery in whose name the contracts are written.

Brewery, as mortgagee of the insured property, undoubtedly

had an insurable interest therein; but it could not, in any
event, recover upon these policies an amount in excess of its
mortgage credit.

Clearly covered by the express provisions of sections 16 and

50 of the Insurance Act (Act No. 2427). In the first of the
sections cited, it is declared that "the measure of an insurable
interest in property is the extent to which the insured might be
damnified by loss or injury thereof" (sec. 16); while in the
other it is stated that "the insurance shall be applied
exclusively to the proper interest of the person in whose
name it is made unless otherwise specified in the policy" (sec.
50).

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."

If the wording had 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, said 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.

If during the negotiations which resulted in the writing of this

insurance, it had been agreed between the contracting parties
that the insurance should be so written as to protect not only
the interest of the mortgagee but also the residuary interest of
the owner, and the policies had been, by inadvertence,
ignorance, or mistake written in the form in which they were
issued, a court would have the power to reform the contracts
and give effect to them in the sense in which the parties
intended to be bound. But in order to justify this, it must be
made clearly to appear that the minds of the contracting
parties did actually meet in agreement and that they labored
under some mutual error or mistake in respect to the
expression of their purpose.

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 but in the case the proof is entirely
insufficient to authorize the application of this, for it is by
means clear from the testimony of Brias and none other
was offered that the parties intended for the policy to cover
the risk of the owner in addition to that of the mortgagee. It
results that Harding is not entitled to relief in any aspect of the
case.

HEIRS OF MARAMAG VS MARAMAG, THE

INSULAR LIFE ASSURANCE COMPANY, LTD.,
and GREAT PACIFIC LIFE ASSURANCE
CORPORATION
Facts : The petitioner filed a petition against
respondents with the RTC for revocation and/or
reduction of insurance proceeds for being void
and/or inofficious, with prayer for a TRO and a writ
of preliminary injunction. The petition alleged that:
(1) petitioners were the legitimate wife and children
of Loreto, while respondents were Loretos
illegitimate family; (2) Eva de Guzman Maramag
was a concubine of Loreto and a suspect in the
killing of the latter, thus, she is disqualified to
receive any proceeds from his insurance policies
from Insular and Grepalife (3) the illegitimate
children of LoretoOdessa, Karl Brian, and Trisha
Angeliewere entitled only to one-half of the
legitime of the legitimate children, thus, the
proceeds released to Odessa and those to be
released to Karl Brian and Trisha Angelie were
inofficious and should be reduced; and (4)
petitioners could not be deprived of their legitimes,
which should be satisfied first.

INSULAR DEFENSE: 1. Loreto misrepresented Eva

as his legitimate wife and Odessa, Karl Brian, and
Trisha Angelie as his legitimate children, and that
they filed their claims for the insurance proceeds of
the insurance policies; that when it ascertained that
Eva was not the legal wife of Loreto, it disqualified
her as a beneficiary and divided the proceeds
among Odessa, Karl Brian, and Trisha Angelie, as
the remaining designated beneficiaries; and that it
released Odessas share as she was of age, but
withheld the release of the shares of minors Karl
Brian and Trisha Angelie pending submission of
letters of guardianship.
2. petition failed to state a cause of action insofar
as it sought to declare as void the designation of
Eva as beneficiary, because Loreto revoked her
designation as such in Policy No. A001544070 and
it disqualified her in Policy No. A001693029; and
insofar as it sought to declare as inofficious the
shares of Odessa, Karl Brian, and Trisha Angelie,
considering that no settlement of Loretos estate
had been filed nor had the respective shares of the
heirs been determined.
3. it was bound to honor the insurance policies
designating the children of Loreto with Eva as
beneficiaries pursuant to Section 53 of the
Insurance Code
GREPALIFE DEFENSE : Eva was not designated as
an insurance policy beneficiary; that the claims
filed by Odessa, Karl Brian, and Trisha Angelie were
denied because Loreto was ineligible for insurance
due to a misrepresentation in his application form

that he was born on December 10, 1936 and, thus,

not more than 65 years old when he signed it in
September 2001; that the case was premature,
there being no claim filed by the legitimate family
of Loreto; and that the law on succession does not
apply where the designation of insurance
beneficiaries is clear.
RTC :
Re: illegitimate children of Loreto - the case was
dismissed for lack of cause of action. The Insurance
Code, as amended, contains a provision regarding
to whom the insurance proceeds shall be paid. It is
very clear under Sec. 53 thereof that the insurance
proceeds shall be applied exclusively to the proper
interest of the person in whose name or for whose
benefit it is made, unless otherwise specified in the
policy. Since the defendants are the ones named as
the primary beneficiary (sic) in the insurances (sic)
taken by the deceased Loreto C. Maramag and
there is no showing that herein plaintiffs were also
included as beneficiary (sic) therein the insurance
proceeds shall exclusively be paid to them. This is
because the beneficiary has a vested right to the
indemnity, unless the insured reserves the right to
change the beneficiary.
Neither could the plaintiffs invoked (sic) the law on
donations or the rules on testamentary succession
in order to defeat the right of herein defendants to
collect the insurance indemnity. The beneficiary in
a contract of insurance is not the donee spoken in
the law of donation. The rules on testamentary
succession cannot apply here, for the insurance

indemnity does not partake of a donation. As such,

the insurance indemnity cannot be considered as
an advance of the inheritance which can be subject
to collation
Re: the concubine of Loreto Maramag. Any person
who is forbidden from receiving any donation under
Article 739 cannot be named beneficiary of a life
insurance policy of the person who cannot make
any donation to him, according to said article (Art.
2012, Civil Code). If a concubine is made the
beneficiary, it is believed that the insurance
contract will still remain valid, but the indemnity
must go to the legal heirs and not to the concubine,
for evidently, what is prohibited under Art. 2012 is
the naming of the improper beneficiary. Since the
designation of defendant Eva Verna de Guzman as
one of the primary beneficiary (sic) in the
insurances (sic) taken by the late Loreto C.
Maramag is void under Art. 739 of the Civil Code,
the insurance indemnity that should be paid to her
must go to the legal heirs of the deceased which
this court may properly take cognizance as the
action for the declaration for the nullity of a void
donation falls within the general jurisdiction of this
Court
MOTION FOR RECONSIDERATION : It ruled that it
is only in cases where there are no beneficiaries
designated, or when the only designated
beneficiary is disqualified, that the proceeds should
be paid to the estate of the insured. As to the claim
that the proceeds to be paid to Loretos illegitimate
children should be reduced based on the rules on

legitime, the trial court held that the distribution of

the insurance proceeds is governed primarily by
the Insurance Code, and the provisions of the Civil
Code are irrelevant and inapplicable.

With respect to the Grepalife policy, the trial court

noted that Eva was never designated as a
beneficiary, but only Odessa, Karl Brian, and Trisha
Angelie; thus, it upheld the dismissal of the case as
to the illegitimate children. It further held that the
matter
of
Loretos
misrepresentation
was
premature; the appropriate action may be filed only
upon denial of the claim of the named beneficiaries
for the insurance proceeds by Grepalife
ISSUE : WON the petitioners have a cause of
caution
HELD: NO. In the case at bar, there is a failure to
state a cause of action because the finding that Eva
was either disqualified as a beneficiary by the
insurance companies or that her designation was
revoked by Loreto, hypothetically admitted as true,
was raised only in the answers and motions for
reconsideration of both Insular and Grepalife.
When a motion to dismiss is premised on this
ground, the ruling thereon should be based only on
the facts alleged in the complaint.
ISSUE : WON the members of the legitimate
family entitled to the proceeds of the
insurance for the concubine
-

HELD : NO. SECTION 53. The insurance

proceeds shall be applied exclusively to the

proper interest of the person in whose name or

for whose benefit it is made unless otherwise
specified in the policy.
it is obvious that the only persons entitled to
claim the insurance proceeds are either the
insured, if still alive; or the beneficiary, if the
insured is already deceased, upon the
maturation of the policy. The exception to this
rule is a situation where the insurance contract
was intended to benefit third persons who are
not parties to the same in the form of favorable
stipulations or indemnity. In such a case, third
parties may directly sue and claim from the
insurer.
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.

the grace period, the policy would automatically lapse and

become void. Eulogio failed to pay the premium, even after
the lapse of the grace period of 31 days. Policy therefore,
lapsed and became void. Eulogio submitted an Application
for Reinstatement1 of Policy, together with the amount and
interest. Eulogio was likewise advised to pay the other
premiums that subsequently became due plus interest.
Eulogio submitted a second Application for Reinstatement
including the amount representing payments for the overdue
interest on the premiums to its agent Malaluan which was a
receipt was issued. On the same day, Eulogio died. Insular
Life no longer acted upon Eulogios second Application for
Reinstatement, as the former was informed that Eulogio had
already passed away. Violeta filed with Insular Life a claim
for payment of the full proceeds. Insular Life informed
Violeta that her claim could not be granted since, at the time
of Eulogios death, Policy had already lapsed, and Eulogio
failed to reinstate the same.

VIOLETA LALICAN vs. THE INSULAR LIFE

ASSURANCE COMPANYLIMITED
G.R. No. 183526, August 25, 2009, 597 SCRA 159
-

It is a cardinal principle of insurance law that a policy or

contract of insurance is to be construed liberally in favor of
the insured and strictly as against the insurer company, yet,
contracts of insurance, like other contracts, are to be
construed according to the sense and meaning of the terms,
which the parties themselves have used. If such terms are
clear and unambiguous, they must be taken and understood
in their plain, ordinary and popular sense.

Issue:
Whether or not Eulogy was able to reinstate the lapse insurance
policy before his death.
Defenses:

Facts:
Eulogio applied for an insurance policy with Insular Life
through an Agent Malaluan. Violeta was named as the
primary beneficiary. According to the Policy Contract, there
was a grace period of 31 days for the payment of each
premium subsequent to the first. If any premium was not
paid on or before the due date, the policy would be in
default, and if the premium remained unpaid until the end of

Violeta alleged that Insular Life engaged in unfair claim

settlement practice and deliberately failed to act with reasonable
promptness on her insurance claim. Violeta prayed that Insular
Life be ordered to pay her death claim benefits on Policy No.
9011992, in the amount of P1,500,000.00, plus interests,
attorneys fees, and cost of suit.
1

Insular Life filed with the RTC an Answer with

Counterclaim, asserting that Violetas Complaint had no
legal or factual bases. Insular Life maintained that Policy
No. 9011992, on which Violeta sought to recover, was
rendered void by the non-payment of the 24 January 1998
premium and non-compliance with the requirements for the
reinstatement of the same.

Ruling:
In the instant case, Eulogios death rendered impossible full
compliance with the conditions for reinstatement of Policy.
True, Eulogio, before his death, managed to file his Application
for Reinstatement and deposit the amount for payment of his
overdue premiums and interests thereon with Malaluan(Agent);
but Policy could only be considered reinstated after the
Application for Reinstatement had been processed and approved
by Insular Life during Eulogios lifetime and good health.
Malaluan did not have the authority to approve Eulogios
Application for Reinstatement.
The Court agrees with the RTC that the conditions for
reinstatement under the Policy Contract and Application for
Reinstatement were written in clear and simple language, which
could not admit of any meaning or interpretation other than those
that they so obviously embody. A construction in favor of the
insured is not called for, as there is no ambiguity in the said
provisions in the first place. The words thereof are clear,
unequivocal, and simple enough so as to preclude any mistake in
the appreciation of the same.
Violeta did not adduce any evidence that Eulogio might have
failed to fully understand the import and meaning of the

provisions of his Policy Contract and/or Application for

Reinstatement, both of which he voluntarily signed. While it is a
cardinal principle of insurance law that a policy or contract of
insurance is to be construed liberally in favor of the insured and
strictly as against the insurer company, yet, contracts of
insurance, like other contracts, are to be construed according to
the sense and meaning of the terms, which the parties themselves
have used. If such terms are clear and unambiguous, they must
be taken and understood in their plain, ordinary and popular
sense.
Eulogios death, just hours after filing his Application for
Reinstatement and depositing his payment for overdue premiums
and interests with Malaluan, does not constitute a special
circumstance that can persuade this Court to already consider
Policy reinstated. Said circumstance cannot override the clear
and express provisions of the Policy Contract and Application
for Reinstatement, and operate to remove the prerogative of
Insular Life thereunder to approve or disapprove the Application
for Reinstatement. Even though the Court commiserates with
Violeta, as the tragic and fateful turn of events leaves her
practically empty-handed, the Court cannot arbitrarily burden
Insular Life with the payment of proceeds on a lapsed insurance
policy. Justice and fairness must equally apply to all parties to a
case. Courts are not permitted to make contracts for the parties.
The function and duty of the courts consist simply in enforcing
and carrying out the contracts actually made.
Policy remained lapsed and void, not having been reinstated in
accordance with the Policy Contract and Application for
Reinstatement before Eulogios death. Violeta, therefore, cannot
claim any death benefits from Insular Life on the basis of Policy
No. 9011992; but she is entitled to receive the full refund of the
payments made by Eulogio thereon.

G.R. No. 147839

June 8, 2006

GAISANO
CAGAYAN,
vs.
INSURANCE
COMPANY
AMERICA, Respondent.

INC. Petitioner,
OF

NORTH

FACTS:
Intercapitol Marketing Corporation (IMC) is the maker
of Wrangler Blue Jeans.

Levi Strauss (Phils.) Inc. (LSPI) is the local distributor of

products bearing trademarks owned by Levi Strauss & Co.

IMC and 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.
Petitioner 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.
February 4, 1992: Insurance Company of North America filed a
complaint for damages against Gaisano.
Insurance Company of North Americas Claim:
Nagfile ang IMC and LSPI saamin ng claims under their
respective fire insurance policies with book debt endorsements.
As of February 25, 1991, 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.
Binayaran naming yung claims ng IMC and LSPI kaya
subrogated kami to their rights against petitioner.

Antagal na naming naniningil pero nagbibingi bingihan sila!

Pagbabayaran nila ito!
The Contention of Gaisano Cagayan, Inc:
Pucha! Wala kaming kasalanan! We should not be held liable
because the goods were destroyed by a fortuitous event / force
majeure. Nasunugan kaya kami, helerrrrr.
Also, ang respondent's right of subrogation ay walang basehan
dahil walang breach of contract mula sa aming kampo since the
loss ay dahil sa sunog which we could not prevent or foresee.
Hindi kami manghuhula!
Furthermore, IMC and LSPI never communicated to us that they
insured their properties; we never consented to paying the claim
of the insured.

RTC: IMC and LSPI retained ownership of the delivered

goods until fully paid, so 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

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

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

ISSUE: W/N Insurance Company of North America can claim

against Gaisano Cagayan for the insured debts.

HELD:

YES. petition

is

partly

GRANTED

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."

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

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.

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

Anyone has an insurable interest in property who derives a

benefit from its existence or would suffer loss from its
destruction.

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)

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

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

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

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.

Partly granted lang yung petition kasi 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. Hence, the order to pay the amount
of P535,613.00 to respondent is DELETED for lack of factual
basis.
. G.R. No. 20341
September 1, 1923
DOMINGO
GARCIA
and
THE
PHILIPPINE
NATIONAL
BANK, plaintiffs-appellees,
vs.
THE HONGKONG FIRE & MARINE INSURANCE CO.,
LTD., defendant-appellant.
JOHNS, J.:
FACTS:
1) Domingo Garcia is a merchant and owner of a
bazaar known as "Las Novedades" in Legaspi, Albay.
Desiring to have his merchandise insured for P15,000,
he wrote a letter to "El Pilar," requesting that firm to
have it insured. He then entered into a contract with
the HK Fire and Marine Insurance whereby it insured
his merchandise (and not the building) for a fire
insurance policy for P15,000 at a premium of P300 per
annum.
2) The policy was in the English language, of which
Garcia is ignorant. When he received it he noticed that
the amount P15,000 was correct, and never personally
made a further investigation.
3) To obtain a loan, Garcia later delivered and assigned
the policy to the PNB as collateral security for a loan
(He mortgaged the insured merchandise). PNB,
thorugh its manager, addressed a letter to the agents
of HK Fire and Marine Insurance. It is contended that
when the letter was written, 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.
4) A fire took place which destroyed the merchandise
in the building of the value of P20,000, together with
the building itself. Garcia demanded from HK Fire and
Marine Insurance P15,000, as provided for in the
policy, and but the latter refused.
5) As a result of the trial, the lower court rendered
judgment for the plaintiff, as prayed for in the
complaint, from which the defendant appeals and
contends that the lower court erred in denying its
motion to make the complaint more definite and
certain; in permitting Garcia over its objection to
testify to the contents of certain documents; in
refusing to strike them from the record; in finding that
the defendant, through its agent, knew that it was the
merchandise which was insured and not the building;
in failing to find the plaintiffs, and Garcia in particular,
guilty of negligence; in finding that the defendant
committed error in making out the policy to cover the
building rather than the merchandise; in rendering the
judgment; and in denying defendant's motion for a
new trial.
ISSUE: Whether or not Garcia is entitled to recover on
the policy from HK Fire and Marine Insurance Co. Ltd.?
HELD: YES, Garcia is entitled to recover on the policy
from HK Fire and Marine Insurance Co. Ltd.
- Garcia wanted insurance upon a stock of goods,
which he owned, and he received and paid for a
policy on a building, which he did not own, and
while the policy was in force and effect, both the
building, which he did not own, and the stock of

merchandise, which he did own, were

completely destroyed by fire. Garcia was a well
known merchant, and his merchandise was in
the building described in the policy.
The defense is purely technical, and is founded
upon the contention that Garcia cannot recover,
because the policy covers loss on a building,
and does not cover loss of merchandise. It is
very apparent that a mistake was made in the
issuance of the policy.
In its opinion the trial court says:
Under these circumstances it seems clear and
manifest that the insured, as well as the
manager of the PNB at Legaspi, who was
interested in the policy, because the same
secured a loan of P6,000 made to Domingo
Garcia, and the corporation of Wise & Co., Ltd.,
which represented the insurance company, have
been in the belief that it was not the building
but the merchandise that was insured, for the
reason that none of them paid attention to the
context of the policy.

RIZAL COMMERCIAL BANKING CORPORATION, UY CHUN

BING AND ELI D. LAO, petitioners, vs. COURT OF
APPEALS and GOYU & SONS, INC., respondents.
[G.R. Nos. 128833. April 20, 1998]
RIZAL COMMERCIAL BANKING CORPORATION,
petitioners, vs. COURT OF APPEALS, ALFREDO C.
SEBASTIAN, GOYU & SONS, INC., GO SONG HIAP,
SPOUSES GO TENG KOK and BETTY CHIU SUK YING
alias BETTY GO, respondents.

[G.R. No. 128834. April 20, 1998]

MALAYAN INSURANCE INC., petitioner, vs. GOYU &
SONS, INC. respondent
[G.R. No. 128866. April 20, 1998]
*The issues relevant to the herein three consolidated
petitions revolve around the fire loss claims of
respondent Goyu & Sons, Inc. (GOYU) with petitioner
Malayan Insurance Company, Inc. (MICO) in connection
with the mortgage contracts entered into by and
between Rizal Commercial Banking Corporation
(RCBC) and GOYU.

Facts:
GOYU applied for credit facilities and
accommodations with RCBC at its Binondo Branch.
After due evaluation, RCBC Binondo Branch, through
its key officers, petitioners Uy Chun Bing and Eli D.
Lao, recommended GOYUs application for approval by
RCBCs executive committee. A credit facility in the
amount of P30 million was initially granted. Upon
GOYUs application and Uys and Laos
recommendation, RCBCs executive committee
increased GOYUs credit facility to P50 million, then to
P90 million, and finally to P117 million.
As security for its credit facilities with RCBC,
GOYU executed two real estate mortgages and two
chattel mortgages in favor of RCBC, which were
registered with the Registry of Deeds at Valenzuela,
Metro Manila. Under each of these four mortgage

contracts, GOYU committed itself to insure the

mortgaged property with an insurance company
approved by RCBC, and subsequently, to endorse and
deliver the insurance policies to RCBC.
GOYU obtained in its name a total of ten
insurance policies from MICO. On April 27, 1992, one of
GOYUs factory buildings in Valenzuela was gutted by
fire. Consequently, GOYU submitted its claim for
indemnity on account of the loss insured against.
MICO denied the claim on the ground that the
insurance policies were either attached pursuant to
writs of attachments/garnishments issued by various
courts or that the insurance proceeds were also
claimed by other creditors of GOYU alleging better
rights to the proceeds than the insured. GOYU filed a
complaint for specific performance and damages with
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.
In an interlocutory order the Regional Trial Court
confirmed that GOYUs other creditors, namely, Urban
Bank, Alfredo Sebastian, and Philippine Trust Company
obtained their respective writs of attachments from
various courts and ordered that the proceeds of the
ten insurance policies be deposited with the said court.
After trial, the RTC rendered judgment in favor of
GOYU ordering MICO and RCBC to pay the fire loss
claims plus damages and damages respectively. Based
on their stipulations in the mortgage contracts, GOYU

was supposed to endorse these insurance policies in

favor of, and deliver them, to RCBC. Alchester
Insurance Agency, Inc., MICOs underwriter from whom
GOYU obtained the subject insurance policies,
prepared the nine endorsements in favor of RCBC,
copies of which were delivered to GOYU, RCBC, and
MICO. However, because these endorsements do not
bear the signature of any officer of GOYU, the trial
court, as well as the Court of Appeals, concluded that
the endorsements are defective.
From this judgment, all parties interposed their
respective appeals. The Court of Appeals partly
granted GOYUs appeal, but sustained the findings of
the trial court with respect to MICO and RCBCs
liabilities. The CA ordered Goyu to pay its loan
obligation to RCBC.

Issue: WON RCBC, as mortgagee, has any right over

the insurance policies taken by GOYU, the mortgagor,
in case of the occurrence of loss.
Held:
It is settled that a 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.
There is no question that GOYU could insure the
mortgaged property for its own exclusive benefit. In
the present case, 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.

having received from Alchester the originals of these

endorsements.

It is to be noted that nine endorsement

documents were prepared by Alchester in favor of
RCBC. The Court is in a quandary how Alchester could
arrive at the idea of endorsing any specific insurance
policy in favor of any particular beneficiary or payee
other than the insured had not such named payee or
beneficiary been specifically disclosed by the insured
itself. It is also significant that GOYU voluntarily and
purposely took the insurance policies from MICO, a
sister company of RCBC, and not just from any other
insurance company. Alchester would not have found
out that the subject pieces of property were
mortgaged to RCBC had not such information been
voluntarily disclosed by GOYU itself. Had it not been
for GOYU, Alchester would not have known of GOYUs
intention of obtaining insurance coverage in
compliance with its undertaking in the mortgage
contracts with RCBC, and verily, Alchester would not
have endorsed the policies to RCBC had it not been so
directed by GOYU.

RCBC, in good faith, relied upon the

endorsement documents sent to it as this was only
pursuant to the stipulation in the mortgage contracts.
We find such reliance to be justified under the
circumstances of the case. GOYU failed to seasonably
repudiate the authority of the person or persons who
prepared such endorsements.

On equitable principles, particularly on the

ground of estoppel, the Court is constrained to rule in
favor of mortgagor RCBC. Evelyn Lozada of Alchester
testified that upon instructions of Mr. Go she prepared
in quadruplicate the nine endorsement documents for
GOYUs nine insurance policies in favor of RCBC. The
original copies of each of these nine endorsement
documents were sent to GOYU, and the others were
sent to RCBC and MICO, while the fourth copies were
retained for Alchesters file. GOYU has not denied

GOYU cannot seek relief under Section 53 of the

Insurance Code which provides that the proceeds of
insurance shall exclusively apply to the interest of the
person in whose name or for whose benefit it is made.
The peculiarity of the circumstances obtaining in the
instant case presents a justification to take exception
to the strict application of said provision, it having
been sufficiently established that it was the intention
of the parties to designate RCBC as the party for
whose benefit the insurance policies were taken out.
Consider thus the following:
1. It is undisputed that the insured pieces of property
were the subject of mortgage contracts entered into
between RCBC and GOYU in consideration of and for
securing GOYUs credit facilities from RCBC. The
mortgage contracts contained common provisions
whereby GOYU, as mortgagor, undertook to have the
mortgaged property properly covered against any loss
by an insurance company acceptable to RCBC; 2.
GOYU voluntarily procured insurance policies to cover
the mortgaged property from MICO, no less than a
sister company of RCBC and definitely an acceptable
insurance company to RCBC; 3.
Endorsement

documents were prepared by MICOs underwriter,

Alchester Insurance Agency, Inc., and copies thereof
were sent to GOYU, MICO, and RCBC. GOYU did not
assail, until of late, the validity of said endorsements;
4. GOYU continued until the occurrence of the fire, to
enjoy the benefits of the credit facilities extended by
RCBC which was conditioned upon the endorsement of
the insurance policies to be taken by GOYU to cover
the mortgaged properties.
Under the peculiar circumstances obtaining in
this case, the Court is bound to recognize RCBCs right
to the proceeds of the insurance policies if not for the
actual endorsement of the policies, at least on the
basis of the equitable principle of estoppel.
Being exclusively payable to RCBC by reason of
the endorsement by Alchester to RCBC, which we
already ruled to have the force and effect of an
endorsement by GOYU itself, these 8 policies cannot
be attached by GOYUs other creditors up to the extent
of the GOYUs outstanding obligation in RCBCs favor.
Section 53 of the Insurance Code ordains that the
insurance proceeds of the endorsed policies shall be
applied exclusively to the proper interest of the person
for whose benefit it was made. In this case, to the
extent of GOYUs obligation with RCBC, the interest of
GOYU in the subject policies had been transferred to
RCBC effective as of the time of the endorsement.
Only the two other policies may be validly attached,
garnished, and levied upon by GOYUs other creditors.
To the extent of GOYUs outstanding obligation with
RCBC, all the rest of the other insurance policies
above-listed which were endorsed to RCBC, are,

therefore, to be released from attachment,

garnishment, and levy by the other creditors of GOYU.
FILIPINO MERCHANTS INSURANCE CO., INC. VS. COURT
OF APPEALS and CHOA TIEK SENG
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 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, Inc.
RTC: Ordered Filipino Merchants to pay Choa the sum
of P51, 568.62 with interest at legal rate from the date
of the filing of the complaint and Compagnie Maritime
Des Chargeurs Reunis and third party defendant E.
Razon, Inc. are ordered to pay to the third party
plaintiff jointly and severally reimbursement of the
amounts paid by the third party plaintiff with legal
interest from the date of such payment until the date
of such reimbursement.

CA: Affirmed but modified the adjudication of the third

party complaint
Filipino Merchants contended that Choa has no
insurable interest and therefore the policy should be
void and that it was fraud that it did not disclose of
such fact.
ISSUES:
1. Whether or not the "all risks" clause of the marine
insurance policy will hold the petitioner liable to the
private respondent for the partial loss of the cargo,
notwithstanding the clear absence of proof of some
fortuitous event, casualty, or accidental cause to which
the loss is attributable;
2. Whether or not the private respondent has an
insurable interest in the subject cargo; and
RULING:
Petition denied.
1. The "all risks clause" of the Institute Cargo Clauses
read as follows:
5. This insurance is against all risks of loss or damage
to the subject-matter insured but shall in no case be
deemed to extend to cover loss, damage, or expense
proximately caused by delay or inherent vice or nature
of the subject-matter insured. Claims recoverable
hereunder
shall
be
payable
irrespective
of
percentage.
An "all risks policy" should be read literally as meaning
all risks whatsoever and covering all losses by an

accidental cause of any kind. Accident is construed

by the courts in their ordinary and common
acceptance.
The very nature of the term "all risks" must be given a
broad and comprehensive meaning as covering any
loss other than a willful and fraudulent act of the
insured. This is pursuant to the very purpose of an "all
risks" insurance to give protection to the insured in
those cases where difficulties of logical explanation or
some mystery surround the loss or damage to
property.
Institute Cargo Clauses extends to all damages/losses
suffered by the insured cargo except (a) loss or
damage or expense proximately caused by delay, and
(b) loss or damage or expense proximately caused by
the inherent vice or nature of the subject matter
insured.
Generally, 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. The burden then shifts to
the insurer to show the exception to the coverage. This
creates a special type of insurance which extends
coverage to risks not usually contemplated and avoids
putting upon the insured the burden of establishing
that the loss was due to the peril falling within the

policy's coverage; the insurer can avoid coverage upon

demonstrating that a specific provision expressly
excludes the loss from coverage.
Under an 'all risks' policy, it was sufficient to show that
there was damage occasioned by some accidental
cause of any kind, and there is no necessity to point to
any particular cause.
2. Section 13 of the Insurance Code- anyone has an
insurable interest in property who derives a benefit
from its existence or would suffer loss from its
destruction
Insurable interest in property may consist in (a) an
existing interest; (b) an inchoate interest founded on
an existing interest; or (c) an expectancy, coupled with
an existing interest in that out of which the expectancy
arises.
Choa, as vendee/consignee of the goods in transit, has
such existing interest as may be the subject of a valid
contract of insurance. 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
performed.

or

before

conditions

have

been

Further, 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, for the purpose of
transmission to the buyer is deemed to be a delivery
of the goods to the buyer. 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.