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SAN MIGUEL BREWERY v.

LAW UNION ROCK INSURANCE COMPANY SMB sought to recover the proceeds to the extent of its mortgage credit with the
balance to go to Harding. Insurance Companies contended that they were not liable
G.R. No. L-14300 to Harding because their liability under the policies was limited to the insurable
interests of SMB only.
January 19, 1920
SMB eventually reached a settlement with the insurance companies and was paid
FACTS: In the contract of mortgage, the owner P.D. Dunn had agreed, at his own
the balance of its mortgage credit. Harding was left to fend for himself. Trial court
expense, to insure the mortgaged property for its full value and to indorse the
ruled against Harding. Hence the appeal.
policies in such manner as to authorize the Brewery Company to receive the
proceeds in case of loss and to retain such part thereof as might be necessary to ISSUE: Are the insurance companies liable to Harding for the balance of the 2
satisfy the remainder then due upon the mortgage debt. Instead, however, of policies?
effecting the insurance himself Dunn authorized and requested the Brewery
Company to procure insurance on the property in the amount of P15,000 at Dunn's HELD: NO. Under the Insurance Act, the measure of insurable interest in the
expense. property is the extent to which the insured might be indemnified by the loss or
injury thereof. Also it is provided in the IA that the insurance shall be applied
Brias, SMB’s general manager, approached Law Union for insurance to the extent of exclusively to the proper interest of the person in whose name it is
15T upon the property. In the application, Brias stated that SMB’s interest in the made. Undoubtedly, SMB as the mortgagee of the property, had an insurable
property was merely that of a mortgagee. interest therein; but it could NOT, at any event, recover upon the two policies an
amount in excess of its mortgage credit.
Law Union, not wanting to issue a policy for the entire amount, issued one for
By virtue of the Insurance Act, neither Dunn nor Harding could have recovered from
P7,500 and procured another policy of equal amount from Filipinas Cia de
the two policies. With respect to Harding, when he acquired the property, no
Seguros. Both policies were issued in the name of SMB only and contained no
change or assignment of the policies had been undertaken. The policies might have
reference to any other interests in the propty. Both policies required assignments to
been worded differently so as to protect the owner, but this was not done.
be approved and noted on the policy.
If the wording had been: “Payable to SMB, mortgagee, as its interests may appear,
Premiums were paid by SMB and charged to Dunn. A year later, the policies were
remainder to whomsoever, during the continuance of the risk, may become owner
renewed.
of the interest insured”, it would have proved an intention to insure the entire
San Miguel insured the property only as mortgagee. Dunn sold the property to interest in the property, NOT merely SMB’s and would have shown to whom the
Henry Harding. The insurance was not assigned by Dunn to Harding. Brias, SMB’s money, in case of loss, should be paid. Unfortunately, this was not what was stated
general manager, approached Law Union for insurance to the extent of 15T upon in the policies.
the property. In the application, Brias stated that SMB’s interest in the property
If during the negotiation for the policies, the parties had agreed that even the
was merely that of a mortgagee.
owner’s interest would be covered by the policies, and the policies had
inadvertently been written in the form in which they were eventually issued, the
Law Union, not wanting to issue a policy for the entire amount, issued one for
lower court would have been able to order that the contract be reformed to give
P7,500 and procured another policy of equal amount from Filipinas Cia de
effect to them in the sense that the parties intended to be bound. However, there
Seguros. Both policies were issued in the name of SMB only and contained no
is no clear and satisfactory proof that the policies failed to reflect the real
reference to any other interests in the property. Both policies required assignments
agreement between the parties that would justify the reformation of these two
to be approved and noted on the policy.
contracts.
Premiums were paid by SMB and charged to Dunn. A year later, the policies were
renewed.
The property was destroyed by fire. SMB filed an action in court to recover on the
policies. Harding was made a defendant because by virtue of the sale, he became
the owner of the property, although the policies were issued in SMB’s name.