1.

Spouses Cha vs CA
Lessons Applicable: Effect of Lack of Insurable Interest (Insurance)
Laws Applicable: Sec. 17, Sec. 18, Sec. 25 of the Insurance Code
FACTS:

Spouses Nilo Cha and Stella Uy-Cha and CKS Development Corporation entered a 1
year lease contract with a stipulation not 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. But it insured
against loss by fire their merchandise inside the leased premises for P500,000 with the
United Insurance Co., Inc. without the written consent of CKS
On the day the lease contract was to expire, fire broke out inside the leased premises
and CKS learning that the spouses procured an insurance wrote to United to have the
proceeds be paid directly to them. But United refused so CKS filed against Spouses Cha
and United.
RTC: United to pay CKS the amount of P335,063.11 and Spouses Cha to pay P50,000
as exemplary damages, P20,000 as attorneys fees and costs of suit
CA: deleted exemplary damages and attorneys fees

ISSUE: W/N the CKS has insurable interest because the spouses Cha violated the stipulation
HELD: NO. CA set aside. Awarding the proceeds to spouses Cha.

Sec. 18. No contract or policy of insurance on property shall be enforceable except for
the benefit of some person having an insurable interest in the property insured
A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses
over their merchandise is primarily a contract of indemnity. Insurable interest in the
property insured must exist a t the time the insurance takes effect and at the time the
loss occurs. The basis of such requirement of insurable interest in property insured is
based on sound public policy: to prevent a person from taking out an insurance policy on
property upon which he has no insurable interest and collecting the proceeds of said
policy in case of loss of the property. In such a case, the contract of insurance is a mere
wager which is void under Section 25 of the Insurance Code.
SECTION 25. Every stipulation in a policy of Insurance for the payment of loss, whether
the person insured has or has not any interest in the property insured, or that the policy
shall be received as proof of such interest, and every policy executed by way of gaming
or wagering, is void
Section 17. The measure of an insurable interest in property is the extent to which the
insured might be damnified by loss of injury thereof
The automatic assignment of the policy to CKS under the provision of the lease contract
previously quoted is void for being contrary to law and/or public policy. The proceeds of
the fire insurance policy thus rightfully belong to the spouses. 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.

2. Geogonia vs CA

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 Insurance Commissioner and
which the latter relied upon cannot prevail over a written admission made ante litem
motam. It was, indeed, incredible that he did not know about the prior policies since
these policies were not new or original.
2. Stated differently, provisions, conditions or exceptions in policies which tend to work a
forfeiture of insurance policies should be construed most strictly against those for whose
benefits they are inserted, and most favorably toward those against whom they are
intended to operate.

With these principles in mind, Condition 3 of the subject policy is not totally free from
ambiguity and must be meticulously analyzed. Such analysis leads us to conclude that
(a) the prohibition applies only to double insurance, and (b) the nullity of the policy shall
only be to the extent exceeding P200,000.00 of the total policies obtained.
Furthermore, by stating within Condition 3 itself that such condition shall not apply if the
total insurance in force at the time of loss does not exceed P200,000.00, the private
respondent was amenable to assume a co-insurer's liability up to a loss not exceeding
P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the
rationale behind the incorporation of "other insurance" clause in fire policies is to prevent
over-insurance and thus avert the perpetration of fraud. When a property owner obtains
insurance policies from two or more insurers in a total amount that exceeds the
property's value, the insured may have an inducement to destroy the property for the
purpose of collecting the insurance. The public as well as the insurer is interested in
preventing a situation in which a fire would be profitable to the insured.

3. RCBC vs CA
Lessons Applicable: Assignee (Insurance)
FACTS:

RCBC Binondo Branch initially granted a credit facility of P30M to Goyu & Sons,
Inc. GOYUs applied again and through Binondo Branch key officer's Uys and Laos
recommendation, RCBCs executive committee increased its credit facility to P50M to
P90M and finally to P117M.
o As security, GOYU executed 2 real estate mortgages and 2 chattel mortgages in
favor of RCBC.
o GOYU obtained in its name 10 insurance policy on the mortgaged properties
from Malayan Insurance Company, Inc. (MICO). In February 1992, he was
issued 8 insurance policies in favor of RCBC.
April 27, 1992: One of GOYUs factory buildings was burned so he claimed against
MICO for the loss who denied contending that the insurance policies were
either attached pursuant to writs of attachments/garnishments or that creditors are
claiming to have a better right
GOYU filed a complaint for specific performance and damages at the RTC
RCBC, one of GOYUs creditors, also filed with MICO its formal claim over the proceeds
of the insurance policies, but said claims were also denied for the same reasons that
MICO denied GOYUs claims
RTC: Confirmed GOYUs other creditors (Urban Bank, Alfredo Sebastian, and Philippine
Trust Company) obtained their writs of attachment covering an aggregate amount
of P14,938,080.23 and ordered that 10 insurance policies be deposited with the court
minus the said amount so MICO deposited P50,505,594.60.
Another Garnishment of P8,696,838.75 was handed down
RTC: favored GOYU against MICO for the claim, RCBC for damages and to pay RCBC
its loan
CA: Modified by increasing the damages in favor of GOYU
In G.R. No. 128834, RCBC seeks right to intervene in the action between Alfredo C.
Sebastian (the creditor) and GOYU (the debtor), where the subject insurance policies
were attached in favor of Sebastian

RTC and CA: endorsements do not bear the signature of any officer of GOYU concluded
that the endorsements favoring RCBC as defective.

ISSUE: W/N RCBC as mortgagee, has any right over the insurance policies taken by GOYU,
the mortgagor, in case of the occurrence of loss
HELD: YES.

mortgagor and a mortgagee have separate and distinct insurable interests in the same
mortgaged property, such that each one of them may insure the same property for his
own sole benefit
although it appears that GOYU obtained the subject insurance policies naming itself as
the sole payee, the intentions of the parties as shown by their contemporaneous acts,
must be given due consideration in order to better serve the interest of justice and equity
o 8 endorsement documents were prepared by Alchester in favor of RCBC
o MICO, a sister company of RCBC
o GOYU continued to enjoy the benefits of the credit facilities extended to it by
RCBC.
GOYU is at the very least estopped from assailing their operative effects.
The two courts below erred in failing to see that the promissory notes which they ruled
should be excluded for bearing dates which are after that of the fire, are mere renewals
of previous ones
RCBC has the right to claim the insurance proceeds, in substitution of the property lost
in the fire. Having assigned its rights, GOYU lost its standing as the beneficiary of the
said insurance policies
insurance company to be held liable for unreasonably delaying and withholding payment
of insurance proceeds, the delay must be wanton, oppressive, or malevolent - not shown
Sebastians right as attaching creditor must yield to the preferential rights of RCBC over
the Malayan insurance policies as first mortgagee.

4. Gaisano Cagayan vs. Insurance Company of North America

Lessons Applicable: Existing Interest (Insurance)
Laws Applicable: Article 1504,Article 1263, Article 2207 of the Civil Code, Section 13 of
Insurance Code
FACTS:

Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. while Levi
Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks owned
by Levi Strauss & Co
IMC and LSPI separately obtained from Insurance Company of North America fire
insurance policies for their book debt endorsements related to their ready-made clothing
materials which have been sold or delivered to various customers and dealers of the
Insured anywhere in the Philippines which are unpaid 45 days after the time of the loss
February 25, 1991: Gaisano Superstore Complex in Cagayan de Oro City, owned by
Gaisano Cagayan, Inc., containing the ready-made clothing materials sold and delivered
by IMC and LSPI was consumed by fire.

February 4, 1992: Insurance Company of North America filed a complaint for damages
against Gaisano Cagayan, Inc. alleges that IMC and LSPI filed their claims under their
respective fire insurance policies which it paid thus it was subrogated to their rights
o Gaisano Cagayan, Inc: not be held liable because it was destroyed due to
fortuities event or force majeure
RTC: IMC and LSPI retained ownership of the delivered goods until fully paid, it must
bear the loss (res perit domino)
CA: Reversed - sales invoices is an exception under Article 1504 (1) of the Civil Code to
res perit domino

ISSUE: W/N Insurance Company of North America can claim against Gaisano Cagayan for the
debt that was isnured
HELD: YES. petition is partly GRANTED. order to pay P535,613 is DELETED

insurance policy is clear that the subject of the insurance is the book debts and
NOT goods sold and delivered to the customers and dealers of the insured
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but when the ownership therein is
transferred to the buyer the goods are at the buyer's risk whether actual delivery has
been made or not, except that:

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

IMC and LSPI did not lose complete interest over the goods. They have an insurable
interest until full payment of the value of the delivered goods. Unlike the civil law concept
of res perit domino, where ownership is the basis for consideration of who bears the risk
of loss, in property insurance, one's interest is not determined by concept of title, but
whether insured has substantial economic interest in the property
Section 13 of our Insurance Code defines insurable interest as "every interest in
property, whether real or personal, or any relation thereto, or liability in respect thereof,
of such nature that a contemplated peril might directly damnify the insured."
Parenthetically, under Section 14 of the same Code, an insurable interest in property
may consist in: (a) an existing interest; (b) an inchoate interest founded on existing
interest; or (c) an expectancy, coupled with an existing interest in that out of which the
expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its existence or
would suffer loss from its destruction.
o 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
o an insurable interest in property does not necessarily imply a property interest in,
or a lien upon, or possession of, the subject
o matter of the insurance, and neither the title nor a beneficial interest is requisite
to the existence of such an interest

insurance in this case is not for loss of goods by fire but for petitioner's accounts with
IMC and LSPI that remained unpaid 45 days after the fire - obligation is pecuniary in
nature
o obligor should be held exempt from liability when the loss occurs thru a fortuitous
event only holds true when the obligation consists in the delivery of a determinate
thing and there is no stipulation holding him liable even in case of fortuitous event
Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or
destruction of anything of the same kind does not extinguish the obligation (Genus
nunquan perit)
The subrogation receipt, by itself, is sufficient to establish not only the relationship of
respondent as insurer and IMC as the insured, but also the amount paid to settle the
insurance claim
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or breach of
contract complained of, the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the contract.
As to LSPI, no subrogation receipt was offered in evidence.
o Failure to substantiate the claim of subrogation is fatal to petitioner's case for
recovery of the amount of P535,613