EN BANC G.R. No. L-5715 December 20, 1910 E. M. BACHRACH, plaintiff-appellee, vs.

BRITISH AMERICAN ASSURANCE COMPANY, a corporation, defendant-appellant. Haussermann, Ortigas, Cohn and Fisher, for appellant Kincaid & Hurd and Thomas L. Hartigan, for appellee.

JOHNSON, J.: On the 13th of July, 1908, the plaintiff commenced an action against the defendant to recover the sum of P9,841.50, the amount due, deducting the salvage, upon the following fire insurance policy issued by the defendant to the plaintiff: [Fire policy No. 3007499.] This policy of insurance witnesseth, that E. M. Bachrach, esq., Manila (hereinafter called the insured), having paid to the undersigned, as authorized agent of the British American Assurance Company (hereinafter called the company), the sum of two thousand pesos Philippine currency, for insuring against loss or damage by fire, as hereinafter mentioned, the property hereinafter described, in the sum of several sums following, viz: Ten thousand pesos Philippine currency, on 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 (in accordance with warranty "D" of the tariff attached hereto) the property of the assured, in trust, on commission or for which he is responsible, whilst stored in the ground floor and first story of house and dwelling No. 16 Calle Martinez, district 3, block 70, Manila, built, ground floor of stone and or brick, first story of hard wood and roofed with galvanized iron bounded in the front by the said calle, on one side by Calle David and on the other two sides by buildings of similar construction and occupation. Co-insurance allowed, particulars of which to be declared in the event of loss or claim. The company hereby agrees with the insured (but subject to the conditions on the back hereof, which are to be taken as a part of this policy) that if the property above described, or any part thereof, shall be destroyed or damaged by fire, at any time between the 21st day of February, 1908, and 4 o'clock in the afternoon of the 21st day of February, 1909, or (in case of the renewal of this policy) at any time afterwards, so long as, and during the period in respect of which the insured shall have paid to the company, and they shall have accepted, the sum required for the renewal of this policy, the company will, out of their capital stock, and funds, pay or make good to the insured the value of the property so destroyed, or the amount of such damage thereto, to any amount not exceeding, in respect of each or any of the several matters

above specified, the sum set opposite thereto, respectively, and not exceeding in the whole the sum of ten thousand pesos, and also not exceeding, in any case, the amount of the insurable interest therein of the insured at the time of the happening of such fire. In witness whereof, the British American Assurance Company has accused these presents to be signed this 21st day of February, in the year of our Lord 1908. For the company. W. F. STEVENSON & Co. LTD., "By..............................................., "Manager Agents." And indorsed on the back the following: The within policy and includes a "Calalac" automobile to the extent of (P1,250) twelve hundred and fifty pesos Philippine currency. Memo: Permission is hereby granted for the use of gasoline not to exceed 10 gallons for the above automobile, but only whilst contained in the reservoir of the car. It is further warranted that the car be neither filled nor emptied in the within-described building or this policy be null and void. Manila, 27th February, 1908. "W. F. STEVENSON & Co. LTD., "By......................................................., "Manager Agents." The defendant answered the complaint, admitting some of the facts alleged by the plaintiff and denying others. The defendant also alleged certain facts under which it claimed that it was released from all obligations whatever under said policy. These special facts are as follows: First. That the plaintiff maintained a paint and varnish shop in the said building where the goods which were insured were stored. Second. That the plaintiff transferred his interest in and to the property covered by the policy to H. W. Peabody & Co. to secure certain indebtedness due and owing to said company, and also that the plaintiff had transferred his interest in certain of the goods covered by the said policy to one Macke, to secure certain obligations assumed by the said Macke for and on behalf of the insured. That the sanction of the said defendant had not been obtained by the plaintiff, as required by the said policy. Third. That the plaintiff, on the 18th of April, 1908, and immediately preceding the outbreak of the alleged fire, willfully placed a gasoline can containing 10 gallons of gasoline in the upper story of said building in close proximity to a portion of said goods, wares, and merchandise, which can was so placed by the plaintiff as to permit the gasoline to run on the floor of said second story, and after so placing said gasoline, he, the plaintiff, placed in close proximity to said escaping gasoline a lighted lamp containing alcohol, thereby greatly increasing the risk of fire.

Fourth. That the plaintiff made no proof of the loss within the time required by condition five of said policy, nor did the insured file a statement with he municipal or any other judge or court of the goods alleged to have been in said building at the time of the alleged fire, nor of the goods saved, nor the loss suffered. The plaintiff, after denying nearly all of the facts set out in the special answer of the defendant, alleged: First. That he had been acquitted in a criminal action against him, after a trial duly and regularly had, upon a charge of arson, based upon the same alleged facts set out in the answer of the defendant. Second. That her had made no proof of the loss set up in his complaint for the reason that immediately after he had, on the 20th of April, 1908, given the defendant due notice in writing of said loss, the defendant, on the 21st of April, 1908, and thereafter on other occasions, had waived all right to require proof of said loss by denying all liability under the policy and by declaring said policy to be null and void. After hearing the evidence adduced during the trial of the cause, the lower court found that the defendant was liable to the plaintiff and rendered a judgment against the defendant for the sum of P9,841.50, with interest for a period of one year at 6 per cent, making a total of P10,431.99, with costs. From that decision the defendant appealed and made the following assignments of error: 1. The court erred in failing to hold that the use of the building, No. 16 Calle Martinez, as a paint and varnish shop annulled the policy of insurance. 2. The court erred in failing to hold the execution of the chattel mortgages without the knowledge and consent of the insurance company annulled the policy of insurance. 3. The court erred in holding that the keeping of gasoline and alcohol not in bottles in the building No. 16 Calle Martinez was not such a violation of the conditions of the policy as to render the same null and void. 4. The court erred in failing to find as a fact that E. M. Bachrach, the insured, willfully placed a gasoline can containing about 10 gallons of gasoline in the upper story of said building, No. 16 Calle Martinez, in close proximity to a portion of the goods, wares, and merchandise stored therein, and that said can was so placed by said Bachrach as to permit the gasoline to run on the floor of said second story. 5. The court erred in failing to find as a fact that E. M. Bachrach, after placing said gasoline can in close proximity to the goods, wares, and merchandise covered by the policy of insurance, the he (Bachrach) placed in close proximity to said escaping gasoline a lighted lamp containing alcohol, thereby greatly increasing the risk of fire. 6. The court erred in holding that the policy of insurance was in force at the time of said fire, and that the acts or omissions on the part of the insured which cause, or tended to cause, the forfeiture of the policy, were waived by the defendant. 7. The court erred in holding the defendant liable for the loss under the policy.
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8. The court erred in refusing to deduct from the loss sustained by Bachrach the value of the automobile, which was saved without damage.

9. The court erred in refusing to grant the motion for a new trial. 10. The court erred in refusing to enter judgment in favor of the defendant and against the plaintiff. With reference to the first above assignment of error, the lower court in its decision said: It is claimed that either gasoline or alcohol was kept in violation of the policy in the bodega containing the insured property. The testimony on this point is somewhat conflicting, but conceding all of the defendant's claims, the construction given to this claim by American courts would not justify the forfeiture of the policy on that ground. The property insured consisted mainly of household furniture kept for the purpose of sale. The preservation of the furniture in a salable condition by retouching or otherwise was incidental to the business. The evidence offered by the plaintiff is to the effect that alcohol was used in preparing varnish for the purpose of retouching, though he also says that the alcohol was kept in store and not in the bodega where the furniture was. It is well settled that the keeping of inflammable oils on the premises, though prohibited by the policy, does not void it if such keeping is incidental to the business. Thus, where a furniture factory keeps benzine for the purposes of operation (Davis vs. Pioneer Furniture Company, 78 N. W. Rep., 596; Faust vs. American Fire Insurance Company, 91 Wis., 158), or where it is used for the cleaning machinery (Mears vs. Humboldt Insurance Company, 92 Pa. St., 15; 37 Am. Rep., 647), the insurer can not on that ground avoid payment of loss, though the keeping of the benzine on the premises is expressly prohibited. These authorities also appear sufficient to answer the objection that the insured automobile contained gasoline and that the plaintiff on one occasion was seen in the bodega with a lighted lamp. The first was incidental to the use of the insured article and the second being a single instance falls within the doctrine of the case last cited. 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. With reference to the second above assignment of error, the defendant and appellant contends that the lower court erred in failing to hold that the execution of the said chattel mortgage, without the knowledge and consent of the insurance company and without receiving the sanction of said company, annulled the said policy of insurance. With reference to this assignment of error, upon reading the policy of insurance issued by the defendant to the plaintiff, it will be noted that there is no provision in said policy prohibiting the plaintiff from placing a mortgage upon the property insured, but, admitting that such a provision was intended, we think the lower court has completely answered this contention of the defendant. He said, in passing upon this question as it was presented: It is claimed that the execution of a chattel mortgage on the insured property violated what is known as the "alienation clause," which is now found in most policies, and which is expressed in the policies involved in cases 6496 and 6497 by a purchase imposing forfeiture if the interest in the property pass from the insured. (Cases 6496 and 6497, in which are involved other action against other insurance companies for the same loss as in the present action.) This clause has been the subject of a vast number of judicial decisions (13 Am. & Eng. Encyc. of Law, 2d ed., pp. 239 et seq.), and it is held by the great weight of authority that the interest in property insured does not pass by the mere execution of a chattel mortgage and that while a chattel mortgage is a conditional sale, 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. With reference to the third assignment of error above noted, upon a reading of the decision of the lower court it will be found that there is nothing in the decision of the lower court relating to the facts stated in this assignment of error, neither is there any provision in the policy relating to the facts alleged in said assignment of error. Assignment of error numbers 4 and 5 above noted may be considered together. The record discloses that some time prior to the commencement of this present action, a criminal action was commenced against the plaintiff herein in the Court of First Instance of the city of Manila, in which he was charged with willfully and maliciously burning the property covered by the policy in the present case. At the conclusion of the criminal action and after hearing the evidence adduced during the trial, the lower court, with the assistance of two assessors, found that the evidence was insufficient to show beyond peradventure of doubt that the defendant was guilty of the crime. The evidence adduced during the trial of the criminal cause was introduced as evidence in the present cause. While the evidence shows some very peculiar and suspicious circumstances concerning the burning of the goods covered by the said policy, yet, nevertheless, in view of the findings of the lower court and in view of the apparent conflict in the testimony, 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. The lower court, in discussing this question, said: As to the claim that the loss occurred through the voluntary act of the insured, we consider it unnecessary to review the evidence in detail. That was done by another branch of this court in disposing of the criminal prosecution brought against the insured, on the same ground, based mainly on the same evidence. And regardless of whether or not the judgment in that proceeding is res adjudicata as to anything here, we are at least of the opinion that the evidence to establish this defense should not be materially less convincing than that required in order to convict the insured of the crime of arson. (Turtell vs. Beamount, 25 Rev. Rep., 644.) In order to find that the defense of incendiarism was established here, we would be obliged, therefore, in effect to set aside the findings of the judge and assessors in the criminal cause, and this we would be loath to do even though the evidence now produced were much stronger than it is. With reference to the sixth assignment of error above noted, to wit: That the court erred in holding that the policy of insurance was in force at the time of said fire and that the acts or omissions on the part of the insured which caused or tended to cause a forfeiture of the policy were waived by the defendant, the lower court, in discussing this question, said:
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Regardless of the question whether the plaintiff's letter of April 20 (Exhibit B) was a sufficient compliance with the requirement that he furnish notice of loss, the fact remains that on the following day the insurers replied by a letter (Exhibit C) declaring that the "policies were null and void," and in effect denying liability. It is well settled by a preponderance of authorities that such a denial is a waiver of notice of loss, because if the "policies are null and void," the furnishing of such notice would be vain and useless. (13 Am. & Eng. Encyc. of Law, 347, 348, 349.) Besides, "immediate notice" is construed to mean only within a reasonable time. Much the same may be said as to the objection that the insured failed to furnish to the insurers his books and papers or to present a detailed statement to the "juez municipal," in accordance with article 404 of the Code of Commerce. The last-named provision is similar to one appearing in many American policies requiring a certificate from a magistrate nearest the loss

regarding the circumstance thereof. A denial of liability on other grounds waives this requirement (O'Niel vs. Buffalo Fire Insurance Company, 3 N. Y., 122; Peoria Marine Ins. Co. vs. Whitehill, 25 Ill., 382), as well as that relating to the production of books and papers (Ga. Home Ins. Co. vs. Goode & Co., 95 Va., 751; 66 Jur. Civ., 16). Besides, the insured might have had difficulty in attempting to comply with this clause, for there is no longer an official here with the title of "juez municipal." Besides the foregoing reasons, it may be added that there was no requirement in the policy in question that such notice be given. With reference to the assignments of error numbers 7, 9, and 10, they are too general in their character to merit consideration. With reference to the eight assignment of error above noted, the defendant and appellant contends that he was entitled to have the amount of his responsibility reduced by the full value (P1,250) of the said automobile. 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. No reason is given why the objection was not made at the time of the distribution of the salvage, including the automobile, among all of the insurers. The lower court had no opportunity to pass upon the question now presented for the first time. The defendant stood by and allowed the other insurers to share in the salvage, which he claims now wholly belonged to him. We think it is now too late to raise the question. For all the foregoing reasons, we are of the opinion that the judgment of the lower court should be affirmed, and it is hereby ordered that judgment be entered against the defendant and in favor of the plaintiff for the sum of P9,841.50, with interest at the rate of 6 per cent from the 13th of July, 1908, with costs. So ordered. Arellano, C. J., and Torres, J., concur. Trent, J., concurs in the result. Moreland, J., dissents.

EN BANC G.R. No. L-9370 March 31, 1915

K. S. YOUNG, plaintiff-appellee, vs. THE MIDLAND TEXTILE INSURANCE COMPANY, defendant-appellant. Bruce, Lawrence, Ross and Block for appellant. Thos D. Aitken for appellee. JOHNSON, J.: The purpose of the present action is to recover the sum of P3,000 upon an insurance policy. The lower court rendered a judgment in favor of the plaintiff and against the defendant for the sum of P2,708.78, and costs. From that judgment the defendant appealed to this court. The undisputed facts upon which said action is based are as follows: 1. The plaintiff conducted a candy and fruit store on the Escolta, in the city of Manila, and occupied a building at 321 Calle Claveria, as a residence and bodega (storehouse). 2. On the 29th of May, 1912, the defendant, in consideration of the payment of a premium of P60, entered into a contract of insurance with the plaintiff (policy No. 509105) by the terms of which the defendant company, upon certain conditions, promised to pay to the plaintiff the sum of P3,000, in case said residence and bodega and contends should be destroyed by fire. 3. On the conditions of said contract of insurance is found in "warranty B" and is as follows: "Waranty B. It is hereby declared and agreed that during the pendency of this policy no hazardous goods stored or kept for sale, and no hazardous trade or process be carried on, in the building to which this insurance applies, or in any building connected therewith." 4. On the 4th or 5th of February, 1913, the plaintiff placed in said residence and bodega three boxes, 18 by 18 by 20 inches measurement, which belonged to him and which were filed with fireworks. 5. On the 18th day of March, q913, said residence and bodega and the contents thereof were partially destroyed by fire. 6. Said fireworks had been given to the plaintiff by the former owner of the Luneta Candy Store; that the plaintiff intended to use the same in the celebration of the Chinese new year; that the authorities of the city of Manila had prohibited the use of fireworks on said occasion, and that the plaintiff then placed the same in said bodega, where they remained from the 4th or 5th of February, 1913, until after the fire of the 18th of March, 1913. 7. Both of the parties agree that said fireworks come within the phrase "hazardous goods," mentioned in said "warranty B" of the policy. 8. That said fireworks were found in a part of the building not destroyed by the fire; that they in no way contributed to the fire, or to the loss occasioned thereby. The only question presented by the parties is whether or not the placing of said fireworks in the building insured, under the conditions above enumerated, they being "hazardous goods," is a violation of the terms of the contract of insurance and especially of "warranty B." "Warranty B" provides that "no hazardous goods be stored" in the building insured. It is admitted by both parties that the fireworks are

"hazardous goods." The defendant alleged that they were "stored." The plaintiff contends that under all the facts and circumstances of the case, they were not "stored" in said building, and that the placing of them in the building was not a violation of the terms of the contract. Both the plaintiff and defendant agree that if they were "hazardous goods," and if they were "stored," then the act of the plaintiff was a violation of the terms of the contract of insurance and the defendant was justified in repudiating its liability thereunder. This leads us to a consideration of the meaning of the accord "stored" as used in said "warranty B." While the word "stored" has been variously defined by authors, as well as by courts, we have found no case exactly analogous to the present. The plaintiff says that he placed said fireworks in the bodega after he had been notified that he could not use them on the Chinese new year, in order that he might later send them to a friend in the provinces. Whether a particular article is "stored" or not must, in some degree, depend upon the intention of the parties. The interpretation of the word "stored" is quite difficult, in view of the many decisions upon the various conditions presented. Nearly all of the cases cited by the lower court are cases where the article was being put to some reasonable and actual use, which might easily have been permitted by the terms of the policy, and within the intention of the parties, and excepted from the operation of the warranty, like the present. Said decision are upon cases like: 1. Where merchants have had or kept the "hazardous" articles in small quantities, and for actual daily use, for safe, such as gasoline, gunpowder, etc.; 2. Where such articles have been brought on the premises for actual use thereon, and in small quantities, such as oil, paints, etc; and 3. Where such articles or goods were used for lighting purpose, and in small quantities. The author of the Century Dictionary defines the world "store" to be a deposit in a store or warehouse for preservation or safe keeping; o place in a warehouse or other place of deposit for safe keeping. See also the definitions given by the Standard Dictionary, to the same effect. Said definitions, of course, do not include a deposit in a store, in small quantities, for daily use. "Daily use" precludes the idea of a deposit for preservation or safe keeping, as well as a deposit for future consumption, or safe keeping. In the present case no claim is made that the "hazardous goods" were placed in the bodega for present or daily use. It is admitted that they were placed in the bodega "for future use," or for future consumption, or for safe keeping. The plaintiff makes no claim that he deposited them there with any other idea than "for future use" for future consumption. It seems clear to us that the "hazardous goods" in question were "stored" in the bodega, as that word is generally defined. That being true, suppose the defendant had made an examination of the premises, even in the absence of a fire, and had found he "hazardous goods" there, under the conditions above described, would it not have been justified, then and there, in declaring the policy null and of no effect by reason of a violation of its terms on he par of the plaintiff? If it might, then may it no repudiate is liability, even after the fire? If the "warranty" is a term of the contract, will not its violation cause a breach and justify noncompliance or a repudiation? Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. The parties have a right to impose such reasonable conditions at the time of the making of the contract as they may deem wise and necessary. The rate of premium is measured by the character of the risk assumed. The insurance company, for a comparatively small consideration, undertakes to guarantee the insured against loss or damage, upon the terms and conditions agreed upon, and upon no other,

and when called upon to pay, in case of loss, the insurer, therefore, may justly insist upon a fulfillment of these terms. If the insured cannot bring himself within the conditions of the policy, he is not entitled to recover for the loss. The terms of the policy constitute the measure of the insurer's liability, and in order to recover the insured must show himself within those terms; and if it appears that the contract has been terminated by a violation, on the part of the insured, of its conditions, then there can be no right of recovery. The compliance of the insured with the terms of the contract is a condition precedent to the right of recovery. If the insured has violated or failed to perform the conditions of the contract, and such a violation or want of performance has not been waived by the insurer, then the insured cannot recover. Courts are not permitted to make contracts for the parties. The function and duty of the courts consist simply in enforcing and carrying out he contracts actually made. While it is true, as a general rule, that contracts of insurance are construed most favorably to the insured, 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. (Imperial Fire Ins. Co. vs. County of Coos, 151 U. S., 542; Kyte vs. Commercial Union Assurance Co., 149 Mass., 116, 122.) The conditions of contracts of insurance, when plainly expressed in a policy, are binding upon the parties and should be enforced by the courts, if the evidence brings the case clearly within their meaning and intent. It tends to bring the law itself into disrepute when, by astute and subtle distinctions, a plain case is attempted to be taken without the operation of a clear, reasonable, and material obligation of the contract. (Mack vs. Rochester German Ins. Co., 106 N. Y., 560, 564.) The appellant argues, however, that in view of the fact that the "storing" of the fireworks on the premises of the insured did not contribute in any way to the damage occasioned by the fire, he should be permitted to recover that the "storing" of the "hazardous goods" in no way caused injury to the defendant company. That argument, however, is beside the question, if the "storing" was a violation of the terms of the contract. The violation of the terms of the contract, by virtue of the provisions of the policy itself, terminated, at the election of either party, he contractual relations. (Kyte vs. Commercial Union Assurance Co., 149 Mass., 116, 122.) The plaintiff paid a premium based upon the risk at the time the policy was issued. Certainly it cannot be denied that the placing of the firecrackers in the building insured increased the risk. The plaintiff had not paid a premium based upon the increased risk, neither had the defendant issued a policy upon the theory of a different risk. The plaintiff was enjoying, if his contention may be allowed may be allowed, the benefits of an insurance policy upon one risk, whereas, as a matter of fact, it was issued upon an entirely different risk. The defendant had neither been paid nor had issues a policy to cover the increased risk. An increase of risk which is substantial and which is continued for a considerable period of time, is a direct and certain injury to the insurer, and changes the basis upon which the contract of insurance rests. (Kyte vs. Commercial Union Assurance Co. (supra); Frost's Detroit Lumber Works vs.Millers' Mutual Ins. Co., 37 Minn., 300, 302; Moore vs. Phoenix Ins. Co., 62 N. H., 240; Ferree vs. Oxford Fire & Life Ins. Co., 67 Pa. State, 373.) Therefore and for the foregoing reasons, the judgment of the lower court is hereby revoked and the defendant is hereby relieved from any responsibility under said complaint, and, without any finding as to costs, it is so ordered. Arellano, C.J., Torres, Carson, Trent and Araullo, JJ., concur. Moreland, J., concurs in the result. EN BANC

G.R. No. L-27932 October 30, 1972

UNION MANUFACTURING CO., INC. and the REPUBLIC BANK, plaintiffs, REPUBLIC BANK, plaintiff-appellant, vs. PHILIPPINE GUARANTY CO., INC., defendant-appellee. Armando L. Abad, Sr. for plaintiff-appellant. Gamelo, Francisco and Aquino for defendant-appellee.

FERNANDO, J.:p In a suit arising from a fire insurance policy, the insurer, Philippine Guaranty Co., Inc., defendant in the lower court and now appellee, was able to avoid liability upon proof that there was a violation of a warranty. There was no denial thereof from the insured, Union Manufacturing Co., Inc. With such a legally crippling blow, the effort of the Republic Bank, the main plaintiff and now the sole appellant, to recover on such policy as mortgagee, by virtue of the cover note in the insurance policy providing that it is entitled to the payment of loss or damages as its interest may appear, was in vain. The defect being legally incurable, its appeal is likewise futile. We affirm. As noted in the decision, the following facts are not disputed: "(1) That on January 12, 1962, the Union Manufacturing Co., Inc. obtained certain loans, overdrafts and other credit accommodations from the Republic Bank in the total sum of P415,000.00 with interest at 9% per annum from said date and to secure the payment thereof, said Union Manufacturing Co., Inc. executed a real and chattel mortgages on certain properties, which are more particularly described and listed at the back of the mortgage contract ...; (2) That as additional condition of the mortgage contract, the Union Manufacturing Co., Inc. undertook to secure insurance coverage over the mortgaged properties for the same amount of P415,000.00 distributed as follows: (a) Buildings, P30,000.00; (b) Machineries, P300,000.00; and (c) Merchandise Inventory, P85,000.00, giving a total of P415,000.00; (3) That as Union Manufacturing Co., Inc. failed to secure insurance coverage on the mortgaged properties since January 12, 1962, despite the fact that Cua Tok, its general manager, was reminded of said requirement, the Republic Bank procured from the defendant, Philippine Guaranty Co., Inc. an insurance coverage on loss against fire for P500,000.00 over the properties of the Union Manufacturing Co., Inc., as described in defendant's 'Cover Note' dated September 25, 1962, with the annotation that loss or damage, if any, under said Cover Note is payable to Republic Bank as its interest may appear, subject however to the printed conditions of said defendant's Fire Insurance Policy Form; (4) That on September 27, 1962, Fire Insurance Policy No. 43170 ... was issued for the sum of P500,000.00 in favor of the assured, Union Manufacturing Co., Inc., for which the corresponding premium in the sum of P8,328.12, which was reduced to P6,688.12, was paid by the Republic Bank to the defendant, Philippine Guaranty Co., Inc. ...; (5) That upon the expiration of said fire policy on September 25, 1963, the same was renewed by the Republic Bank upon payment of the corresponding premium in the same amount of P6,663.52 on September 26, 1963; (6) That in the corresponding voucher ..., it appears that although said renewal premium was paid by the Republic Bank, such payment was for the account of Union Manufacturing Co., Inc. and that the cash voucher for the payment of the first premium was paid also by the Republic Bank but for the account Union Manufacturing Co., Inc.; (7) That sometime on September 6, 1964, a fire occurred in the premises of the Union Manufacturing Co., Inc.; (8) That on October 6, 1964, the Union Manufacturing Co., Inc. filed its fire claim with the defendant Philippine Guaranty Co., Inc., thru its adjuster, H. H. Bayne Adjustment Co., which was denied by said defendant in its letter dated November 27, 1964 ..., on the following grounds: 'a. Policy Condition No. 3 and/or the 'Other Insurance Clause' of the policy violated because you did not give notice to us the other insurance which you had taken from New India for P80,000.00, Sincere Insurance for P25,000.00 and

Manila Insurance for P200,000.00 with the result that these insurances, of which we became aware of only after the fire, were not endorsed on our policy; and (b) Policy Condition No. 11 was not complied with because you have failed to give to our representatives the required documents and other proofs with respect to your claim and matters touching on our liability, if any, and the amount of such liability'; (9) That as of September, 1962, when the defendant Philippine Guaranty Co., issued Fire Insurance Policy No. 43170 ... in the sum of P500,000.00 to cover the properties of the Union Manufacturing Co., Inc., the same properties were already covered by Fire Policy No. 1533 of the Sincere Insurance Company for P25,000.00 for the period from October 7, 1961 to October 7, 1962 ...; and by insurance policies Nos. F-2314 ... and F-2590 ... of the Oceanic Insurance Agency for the total sum of P300,000.00 and for periods respectively, from January 27, 1962 to January 27, 1963, and from June 1, 1962 to June 1, 1963; and (10) That when said defendant's Fire Insurance Policy No. 43170 was already in full force and effect, the Union Manufacturing Co., Inc. without the consent of the defendant, Philippine Guaranty Co., Inc., obtained other insurance policies totalling P305,000.00 over the same properties prior to the fire, to wit: (1) Fire Policy No. 250 of New India Assurance Co., Ltd., for P80,000.00 for the period from May 27, 1964 to May 27, 1965 ...; (2) Fire Policy No. 3702 of the Sincere Insurance Company for P25,000.00 for the period from October 7, 1963 to October 7, 1964 ...; and (3) Fire Policy No. 6161 of Manila Insurance Co. for P200,000.00 for the period from May 15, 1964 to May 15, 1965 ... ." 1 There is in the cover note 2 and in the fire insurance policy 3 the following warranty: "[Co- Insurance Declared]: Nil." 4 Why the appellant Republic Bank could not recover, as payee, in case of loss as its "interest may appear subject to the terms and conditions, clauses and warranties" of the policy was expressed in the appealed decision thus: "However, inasmuch as the Union Manufacturing Co., Inc. has violated the condition of the policy to the effect that it did not reveal the existence of other insurance policies over the same properties, as required by the warranty appearing on the face of the policy issued by the defendant and that on the other hand said Union Manufacturing Co., Inc. represented that there were no other insurance policies at the time of the issuance of said defendant's policy, and it appearing furthermore that while the policy of the defendant was in full force and effect the Union Manufacturing Co., Inc. secured other fire insurance policies without the written consent of the defendant endorsed on the policy, the conclusion is inevitable that both the Republic Bank and Union Manufacturing Co., Inc. cannot recover from the same policy of the defendant because the same is null and void." 5 The tone of confidence apparent in the above excerpts from the lower court decision is understandable. The conclusion reached by the lower court finds support in authoritative precedents. It is far from easy, therefore, for appellant Republic Bank to impute to such a decision a failure to abide by the law. Hence, as noted at the outset, the appeal cannot prosper. An affirmance is indicated. It is to Santa Ana v. Commercial Union Assurance Co., 6 a 1930 decision, that one turns to for the first explicit formulation as to the controlling principle. As was made clear in the opinion of this Court, penned by Justice Villa-Real: "Without deciding whether notice of other insurance upon the same property must be given in writing, or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral or written, we hold that in the absolute absence of such notice when it is one of the conditions specified in the fire insurance policy, the policy is null and void." 7 The next year, in Ang Giok Chip v. Springfield Fire & Marine Ins. Co., 8 the conformity of the insured to the terms of the policy, implied from the failure to express any disagreement with what is provided for, was stressed in these words of the ponente, Justice Malcolm: "It is admitted that the policy before us was accepted by the plaintiff. The receipt of this policy by the insured without objection binds both the acceptor and the insured to the terms thereof. The insured may not thereafter be heard to say that he did not read the policy or know its terms, since it is his duty to read his policy and it will be assumed that he did so." 9 As far back as 1915, in Young v. Midland Textile Insurance Company, 10 it was categorically set forth that as a condition precedent to the right of recovery, there must be compliance on the part of the insured with the terms of the policy. As stated in the opinion of the Court through Justice Johnson: "If the insured has violated or failed to perform the conditions of the contract, and such a violation or want of performance has not been waived by the insurer, then the insured cannot

recover. 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. While it is true, as a general rule, that contracts of insurance are construed most favorably to the insured, 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." 11 More specifically, there was a reiteration of this Santa Ana ruling in a decision by the then Justice, later Chief Justice, Bengzon, in General Insurance & Surety Corp. v. Ng Hua. 12 Thus: "The annotation then, must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitles the insurer to rescind. (Sec. 69, Insurance Act) Such misrepresentation is fatal in the light of our views in Santa Ana v. Commercial Union Assurance Company, Ltd. ... . The materiality of non-disclosure of other insurance policies is not open to doubt." 13 As a matter of fact, in a 1966 decision, Misamis Lumber Corp. v. Capital Ins. & Surety Co., Inc., 14 Justice J.B.L. Reyes, for this Court, made manifest anew its adherence to such a principle in the face of an assertion that thereby a highly unfavorable provision for the insured would be accorded recognition. This is the language used: "The insurance contract may be rather onerous ('one sided', as the lower court put it), but that in itself does not justify the abrogation of its express terms, terms which the insured accepted or adhered to and which is the law between the contracting parties." 15 There is no escaping the conclusion then that the lower court could not have disposed of this case in a way other than it did. Had it acted otherwise, it clearly would have disregarded pronouncements of this Court, the compelling force of which cannot be denied. There is, to repeat, no justification for a reversal. WHEREFORE, the decision of the lower court of March 31, 1967 is affirmed. No costs. Concepcion, C.J., Zaldivar, Barredo, Makasiar, Antonio and Esguerra, JJ., concur. Castro and Teehankee, JJ., reserve their votes. Makalintal, J., is on leave.

Footnotes 1 Decision of the lower court, Record on Appeal, pp. 116-120. 2 Exhibit A. 3 Exhibit C. 4 Decision of the lower court, Record on Appeal, p. 120. 5 Ibid, 128-129. 6 55 Phil. 329. 7 Ibid, 335. 8 56 Phil. 375.

9 Ibid, 381. 10 30 Phil. 617. 11 Ibid, 622. 12 106 Phil. 117 (1960). 13 Ibid, 1119. 14 L-21380, May 20, 1966, 17 SCRA 228. 15 Ibid, 231.