Geagonia v CA G.R. No.

114427 February 6, 1995

Facts:
Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00. The 1
year policy and covered thestock trading of dry goods.
The policy noted the requirement that
"3. The insured shall give notice to the Company of any insurance or insurances already effected, or
which may subsequently be effected, covering any of the property or properties consisting of stocks in
trade, goods in process and/or inventories only hereby insured, and unless notice be given and the
particulars of such insurance or insurances be stated therein or endorsed in this policy pursuant to
Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or
damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition
shall not apply when the total insurance or insurances in force at the time of the loss or damage is not
more than P200,000.00."
The petitioners stocks were destroyed by fire. He then filed a claim which was subsequently denied
because the petitioners stocks were covered by two other fire insurance policies for Php 200,000 issued
by PFIC. The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3
of the policy.
Geagonia then filed a complaint against the private respondent in the Insurance Commission for the
recovery of P100,000.00 under fire insurance policy and damages. He claimed that he knew the existence
of the other two policies. But, he said that he had no knowledge of the provision in the private
respondent's policy requiring him to inform it of the prior policies and this requirement was not
mentioned to him by the private respondent's agent.
The Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge
of the existence of the two fire insurance policies obtained from the PFIC; that it was Cebu Tesing Textiles
w/c procured the PFIC policies w/o informing him or securing his consent; and that Cebu Tesing Textile,
as his creditor, had insurable interest on the stocks.
The Insurance Commission then ordered the respondent company to pay complainant the sum of
P100,000.00 with interest and attorneys fees.
CA reversed the decision of the Insurance Commission because it found that the petitioner knew of the
existence of the two other policies issued by the PFIC.
Issues:
1. WON the petitioner had not disclosed the two insurance policies when he obtained the
fire insurance and thereby violated Condition 3 of the policy.
2. WON he is prohibited from recovering
Held: Yes. No. Petition Granted
Ratio:
1. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC. His letter
of 18 January 1991 to the private respondent conclusively proves this knowledge. His testimony to the
contrary before the InsuranceCommissioner and which the latter relied upon cannot prevail over a
written admission made ante litem motam. It was, indeed, incredible that he did not know about the prior
policies since these policies were not new or original.
2. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture
of insurance policies should be construed most strictly against those for whose benefits they are inserted,
and most favorably toward those against whom they are intended to operate.
With these principles in mind, Condition 3 of the subject policy is not totally free from ambiguity and
must be meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to
double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of
the total policies obtained.
Furthermore, by stating within Condition 3 itself that such condition shall not apply if the
total insurance in force at the time of loss does not exceed P200,000.00, the private respondent was
amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind
was to discourage over-insurance. Indeed, the rationale behind theincorporation of "other insurance"
clause in fire policies is to prevent over-insurance and thus avert the perpetration offraud. When a
property owner obtains insurance policies from two or more insurers in a total amount that exceeds the
property's value, the insured may have an inducement to destroy the property for the purpose of collecting
the insurance. The public as well as the insurer is interested in preventing a situation in which a fire would
be profitable to the insured.

RCBC v. CA - Insurance Proceeds

289 SCRA 292 (1998)
Facts:
> GOYU applied for credit facilities and accommodations with RCBC. After due evaluation, a credit
facility in the amount of P30 million was initially granted. Upon GOYU's application increased GOYU's
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 REM and two CM in favor of RCBC,
which were registered with the Registry of Deeds at. 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 10 insurance policies from MICO. In February 1992, Alchester
Insurance Agency, Inc., the insurance agent where GOYU obtained the Malayan insurance policies, issued
nine endorsements in favor of RCBC seemingly upon instructions of GOYU
> On April 27, 1992, one of GOYU's factory buildings in Valenzuela was gutted by fire. Consequently,
GOYU submitted its claim for indemnity.
> 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. RCBC, one of GOYU's 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 AGCO denied GOYU's claims.
> However, because the 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 and held that RCBC has no
right over the insurance proceeds.

Issue:
Whether or not RCBC has a right over the insurance proceeds.
Held:
RCBC has a right over the insurance proceeds.

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.

It is to be noted that 9 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 GOYU's intention of obtaining insurance coverage in compliance with its
undertaking in the mortgage contracts with RCBC, and verify, Alchester would not have endorsed the
policies to RCBC had it not been so directed by GOYU.

On equitable principles, particularly on the ground of estoppel, the Court is constrained to rule in favor of
mortgagor RCBC. 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. Over and above this, GOYU continued, in the meantime, to enjoy the
benefits of the credit facilities extended to it by RCBC. After the occurrence of the loss insured against, it
was too late for GOYU to disown the endorsements for any imagined or contrived lack of authority of
Alchester to prepare and issue said endorsements. If there had not been actually an implied ratification of
said endorsements by virtue of GOYU's inaction in this case, GOYU is at the very least estopped from
assailing their operative effects.

To permit GOYU to capitalize on its non-confirmation of these endorsements while it continued to enjoy
the benefits of the credit facilities of RCBC which believed in good faith that there was due endorsement
pursuant to their mortgage contracts, is to countenance grave contravention of public policy, fair dealing,
good faith, and justice. Such an unjust situation, the Court cannot sanction. Under the peculiar
circumstances obtaining in this case, the Court is bound to recognize RCBC's 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.

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 GOYU's 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 MICO's 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.

This Court can not over stress the fact that upon receiving its copies of the endorsement documents
prepared by Alchester, GOYU, despite the absence written conformity thereto, obviously considered said
endorsement to be sufficient compliance with its obligation under the mortgage contracts since RCBC
accordingly continued to extend the benefits of its credit facilities and GOYU continued to benefit
therefrom. Just as plain too is the intention of the parties to constitute RCBC as the beneficiary of the
various insurance policies obtained by GOYU. The intention of the parties will have to be given full force
and effect in this particular case. The insurance proceeds may, therefore, be exclusively applied to RCBC,
which under the factual circumstances of the case, is truly the person or entity for whose benefit the
policies were clearly intended.

Gaisano v Insurance G.R. No. 147839 June 8, 2006

J. Martinez
Facts:
IMC and Levi Strauss (Phils.) Inc. (LSPI) separately obtained from respondent fire insurance policies with
book debt endorsements. The insurance policies provide for coverage on "book debts in connection with
ready-made clothing materials which have been sold or delivered to various customers and dealers of the
Insured anywhere in the Philippines."
The policies defined book debts as the "unpaid account still appearing in the Book of Account of the
Insured 45 days after the time of the loss covered under this Policy." The policies also provide for the
following conditions:
1. Warranted that the Company shall not be liable for any unpaid account in respect of the merchandise
sold and delivered by the Insured which are outstanding at the date of loss for a period in excess of six (6)
months from the date of the covering invoice or actual delivery of the merchandise whichever shall first
occur.
2. Warranted that the Insured shall submit to the Company within twelve (12) days after the close of
every calendar monthall amount shown in their books of accounts as unpaid and thus become receivable
item from their customers and dealers.
Gaisano is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the Gaisano
Superstore Complex in Cagayan de Oro City, owned by petitioner, was consumed by fire. Included in the
items lost or destroyed in the fire were stocks of ready-made clothing materials sold and delivered by IMC
and LSPI.
Insurance of America filed a complaint for damages against Gaisano. It alleges that IMC and LSPI were
paid for their claims and that the unpaid accounts of petitioner on the sale and delivery of ready-made
clothing materials with IMC was P2,119,205.00 while with LSPI it was P535,613.00.
The RTC rendered its decision dismissing Insurance's complaint. It held that the fire was purely
accidental; that the cause of the fire was not attributable to the negligence of the petitioner. Also, it said
that IMC and LSPI retained ownership of the delivered goods and must bear the loss.
The CA rendered its decision and set aside the decision of the RTC. It ordered Gaisano to pay Insurance
the P 2 million and the P 500,000 the latter paid to IMC and Levi Strauss.
Hence this petition.
Issues:
1. WON the CA erred in construing a fire insurance policy on book debts as one covering the unpaid
accounts of IMC and LSPI since such insurance applies to loss of the ready-made clothing materials sold
and delivered to petitioner
2. WON IMC bears the risk of loss because it expressly reserved ownership of the goods by stipulating in
the sales invoices that "[i]t is further agreed that merely for purpose of securing the payment of the
purchase price the above described merchandise remains the property of the vendor until the purchase
price thereof is fully paid."
3. WON petitioner is liable for the unpaid accounts
4. WON it has been established that petitioner has outstanding accounts with IMC and LSPI.
Held: No. Yes. Yes. Yes but account with LSPI unsubstantiated. Petition partly granted.
Ratio:
1. Nowhere is it provided in the questioned insurance policies that the subject of the insurance is the
goods sold and delivered to the customers and dealers of the insured.
Thus, what were insured against were the accounts of IMC and LSPI with petitioner which remained
unpaid 45 days after the loss through fire, and not the loss or destruction of the goods delivered.
2. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is
transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of
the contract and the ownership in the goods has been retained by the seller merely to secure performance
by the buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such
delivery
Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss is
borne by the buyer. Petitioner bears the risk of loss of the goods delivered.
IMC and LSPI had an insurable interest until full payment of the value of the delivered goods. Unlike the
civil law concept of res perit domino, where ownership is the basis for consideration of who bears the risk
of loss, in property insurance, one's interest is not determined by concept of title, but whether insured has
substantial economic interest in the property.
Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether real or
personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril
might directly damnify the insured." Parenthetically, under Section 14 of the same Code, an insurable

interest in property may consist in: (a) an existing interest; (b) an inchoate interest founded on existing
interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss
from its destruction. Indeed, a vendor or seller retains an insurable interest in the property sold so long
as he has any interest therein, in other words, so long as he would suffer by its destruction, as where he
has a vendor's lien. In this case, the insurable interest of IMC and LSPI pertain to the unpaid accounts
appearing in their Books of Account 45 days after the time of the loss covered by the policies.
3. Petitioner's argument that it is not liable because the fire is a fortuitous event under Article 117432 of
the Civil Code is misplaced. As held earlier, petitioner bears the loss under Article 1504 (1) of the Civil
Code.
Moreover, it must be stressed that the insurance in this case is not for loss of goods by fire but for
petitioner's accounts with IMC and LSPI that remained unpaid 45 days after the fire. Accordingly,
petitioner's obligation is for the payment of money. As correctly stated by the CA, where the obligation
consists in the payment of money, the failure of the debtor to make the payment even by reason of a
fortuitous event shall not relieve him of his liability. The rationale for this is that the rule that an obligor
should be held exempt from liability when the loss occurs thru a fortuitous event only holds true when the
obligation consists in the delivery of a determinate thing and there is no stipulation holding him liable
even in case of fortuitous event. It does not apply when the obligation is pecuniary in nature.
Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the loss or destruction
of anything of the same kind does not extinguish the obligation." This rule is based on the principle that
the genus of a thing can never perish. An obligation to pay money is generic; therefore, it is not excused by
fortuitous loss of any specific property of thedebtor.
4. With respect to IMC, the respondent has adequately established its claim. The P 3 m claim has been
proven. The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent
as insurer and IMC as the insured, but also the amount paid to settle the insurance claim. The right of
subrogation accrues simply upon payment by the insurance company of the insurance claim Respondent's
action against petitioner is squarely sanctioned by Article 2207 of the Civil Code which provides:
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance
company shall be subrogated to the rights of the insured against the wrongdoer or the person who has
violated the contract.
As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. There was no
evidence that respondent has been subrogated to any right which LSPI may have against petitioner.
Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of P535,613.00.

Malayan Insurance Co. Inc. v Arnaldo (Insurance)

G.R. No. L-67835 October 12, 1987

MALAYAN INSURANCE CO., INC. (MICO), petitioner, vs. GREGORIA CRUZ ARNALDO, in
her capacity as
the INSURANCE COMMISSIONER, and CORONACION PINCA, respondents.
FACTS:
On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private respondent, Coronacion
Pinca, Fire Insurance Policy No. F-001-17212 on her property for the amount of P14,000.00 effective July
22, 1981, until July 22, 1982.
On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent the
corresponding notice to Pinca.
On December 24, 1981, payment of the premium for Pinca was received by Domingo Adora, agent of
MICO. On January 15, 1982, Adora remitted this payment to MICO, together with other payments. On
January 18, 1982, Pinca's property was completely burned.
DECISION OF LOWER COURTS:
(1) Insurance Commission: granted claim for compensation for burned property.

ISSUE:
Whether there was a valid insurance contract at the time of the loss.
RULING:
Yes.
A valid cancellation must, therefore, require concurrence of the following conditions:
(1) There must be prior notice of cancellation to the insured;
(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the
grounds mentioned;
(3) The notice must be
(a) in writing,
(b) mailed, or delivered to the named insured,
(c) at the address shown in the policy;
(4) It must state
(a) which of the grounds mentioned in Section 64 is relied upon and
(b) that upon written request of the insured, the insurer will furnish the facts on which the cancellation is
based.
MICO's claims it cancelled the policy in question on October 15, 1981, for non-payment of premium. To
support this assertion, it presented one of its employees, who testified that "the original of the
endorsement and credit memo" presumably meaning the alleged cancellation "were sent the assured
by mail through our mailing section" However, there is no proof that the notice, assuming it complied
with the other requisites mentioned above, was actually mailed to and received by Pinca.
We also look askance at the alleged cancellation, of which the insured and MICO's agent himself had no
knowledge, and the curious fact that although Pinca's payment was remitted to MICO's by its agent on
January 15, 1982, MICO sought to return it to Adora only on February 5, 1982, after it presumably had
learned of the occurrence of the loss insured against on January 18, 1982. These circumstances make the
motives of the petitioner highly suspect, to say the least, and cast serious doubts upon its candor and bona
fides.