47 SCRA 271 (G.R. NO. L-27932)

OCTOBER 30, 1972


Republic Bank


Philippine Guaranty Co.. Inc.

On January 12, 1962, the Union Manufacturing Co., Inc. obtained certain loans from the Republic
Bank in the total sum of ₱ 415,000.00. To secure the payment thereof, UMC executed real and
chattel mortgage on certain properties.
The Republic Bank procured from the defendant Philippine Guaranty Co., Inc. an insurance
coverage on loss against fire for ₱ 500,000.00 over the properties of the UMC, 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.
On September 6, 1964, a fire occurred in the premises of UMC and on October 6, 1964, UMC
filed its fire claim with the PGC Inc., thru its adjuster, H.H. Bayne Adjustment Co., which was
denied by said defendant in its letter dated November 26, 1964 on the following ground: “Policy
Condition No. 3 and/or the ‘Other Insurance Clause’ of the policy was violated because you did
not give notice to us of the other insurance which you had taken from New India for ₱ 80,000.00.
Sincere Insurance for ₱ 25,000.00 and Manila Insurance for ₱ 200,000.00 with the result that
these insurances of which we became aware of only after the fire, were not endorsed on our
Whether Republic Bank can recover.
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. (Santa Ana vs.
Commercial Union Ass. Co., 55 Phil. 128).
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 functions 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

must be deemed to be a warranty that the property was not insured by any other policy. or may join with any other Company or insurers in so doing. like other contracts. No. but only as circumstances permit and in reasonable sufficient manner. vs.000.. while the policies issued by the defendant in favor of the plaintiff were in force. 1924 Facts: A building of the plaintiff was insured against fire by the defendant in the sum of P30. The appellant contends that under clause 14 of the conditions of the policies.R. The clause states that: The Company may at its option reinstate or replace the property damaged or destroyed. are to be construed according to the sense and meaning of the terms which the parties themselves have used. The materiality of non-disclosure of other insurance policies is not open to doubt. The house and merchandise insured were burnt early in the morning of February 28. Violation thereof entitles the insurer to rescind. Issue: Whether or not the Insurance Company should rebuild the house or not? Ruling of the Court: It was held that the trial judge very aptly says in his decision: "It would be an imposition unequitable. but the Company shall not be bound to reinstate exactly or completely. will be fulfilled. to compel the plaintiff to accept the rebuilding of a smaller house than the one burnt. with a lower kind of materials than those of said house. yet it would be sufficient indemnity to the insured for the actual loss suffered by him. instead of paying the amount of the loss of damages. as well as the goods and merchandise therein contained in the sum of P15. THE CENTURY INSURANCE CO.000." And we may add: Without tendering either the insured value of the merchandise contained in the house destroyed. which circumstances were taken into account when the insurance applied for by the plaintiff was accepted by the defendant. but that in itself does not justify the abrogation of its express terms. L-22738 December 2. G. nor more than the sum insured by the Company thereon. If such terms are clear and unambiguous they must be taken and understood in their plain. The insurance contract may be rather onerous. which amounts to the sum of P15. .insured.000. yet contracts of insurance. LTD. terms which the insured accepted or adhered to and which is the law between the contracting parties. plaintiffs-appellees. 1923.. The annotation then. it may rebuild the house burnt. and although the house may be smaller. without offering him an additional indemnity for the difference in size between the two house. If the clause is valid it may either rebuild it or pay it. as well as unjust. the final notice was not given and the rebuilding of the property would be the better option. or any part thereof. In which case. ONG GUAN CAN and THE BANK OF THE PHILIPPINE ISLANDS. ordinary and popular sense. defendant-appellant." The election alleged by the appellant to rebuild the house burnt instead of paying the value of the insurance is improper. and in no case shall the Company be bound to expend more in reinstatement that it would have cost to reinstate such property as it was at the time of the occurrence of such loss or damage. It must be taken in consideration that the insurance company must notify the insured which between the 2: either rebuild it or pay it.

1962.000 for any one person. in accident) at 9:30 a. plaintiff-appellee. — The automobile insurance policy sued upon in the instant case exempts the insurer company from liability for any accident loss. vs. His temporary operator's permit had expired. Facts: Capital Insurance & Surety Co. Insurance Company contended that paragraph 13 of the policy. The same traffic violation report.The policy provides in item 13 that the authorized driver must be the holder of a valid and subsisting professional driver's license.m. INC. that "a driver with an expired Traffic Violation Receipt or expired Temporary Operator's permit is not considered an authorized driver within the meaning" of the policy. 1984 AGAPITO GUTIERREZ. Rizal. 1962.. The policy defines the term 'authorized driver' to be the insured himself or any person driving on the insured's order or with his permission provided he is permitted to drive under the licensing laws. did not have a valid license because the one he had obtained had already expired and had not been renewed as required by Section 31 of the Motor Vehicle Law. 1962. who was at the wheel at the time of the collision. In the given case. That since he had renewed his license one week after the accident. 2-22-62". with the notation that he had committed the violation: "Inattentive to driving — (Inv. the insured jeepney had an accident at Buendia Avenue. insured on December 7.S. it did not cure the delinquency or revalidate the license which had already expired (Syllabus.G. Ventura was holding an "expired Temporary Operator's Permit.. It is indisputable that at the time of the accident (May 29. was duly licensed for the years 1962 and 1963. 1962). which served as a receipt for his license. Phil. Obviously.. Ventura was not an authorized driver. 1963 in the city court of Manila an action for specific performance and damages. No. hence he filed on October 14. However. It plainly provides. The passenger liability would not exceed P5. already cited. required him to report to Branch 8 of the traffic court at the corner of Arroceros and Concepcion Streets. Jr. a passenger named Agatonico Ballega fell off the vehicle and died. CAPITAL INSURANCE & SURETY CO. "A driver with an expired Traffic Violation Receipt or expired Temporary Operator's Permit is not considered an authorized driver. Inc. 1961 for one year the jeepney of Agapito Gutierrez against passenger and third-party liability. damage or liability caused." Capital Insurance refused to make any reimbursement with regard to Guttierez's payment to the widow. The expiration bars recovery under the policy. is decisive and controlling in this case." On May 29. Teofilo Ventura. the jeepney driver. The TVR would "serve as a temporary operator's permit for 15 days from receipt hereof". Wherefore the case is . plaintiff's brother. Instead. "the parties are bound by the terms of the policy and the right of insured to recover is governed thereby" (44 C. In liability insurance.J. 709).. 934) Issue: Whether an insurance covers a jeepney whose driver's traffic violation report or temporary operator's permit had already expired? Rulling of the Court: It was held that the following ruling has persuasive authority with regards to Insurance: Insurance. Case at bar. and we repeat. sustained or incurred while the vehicle is being driven by any person other than an authorized driver.. Guaranty Co. Automobile. As a result of said accident. 122 Phil. vs.R. at the time of the accident he did not have the license. he had a carbon copy of a traffic violation report (summons) issued by a policeman on February 22. When insurer exempt from liability. L-26827 June 29. defendant-appellant. Manila at nine o'clock in the morning of March 2. Tanco. Makati.

.against Gutierrez.