TITLE OF THE CASE: G.R. No. L-4611 December 17, 1955 Qua Chee Gan, plaintiff-appellee, VS.

Law Un on an! Roc" #n$urance Co., L%!., represented by its agent, &arner, 'arne$ an! Co., L%!., defendant-appellant. FACTS: In 1939, Qua Chee Gan (QCG) owned 4 warehouses, called !odegas 1 to 4" in #lbay used $or the storage o$ copra and he%p, which were insured since 193& with 'aw (nion and )oc* Insurance Co, 'td. ('()I) a%ounting to 3&+,+++ ,hp, and the loss o$ which was %ade payable to ,hilippine -ational !an* (,-!) as %ortgage o$ the he%p and copra to the e.tent o$ its interest. /n 0uly 194+, $ire destroyed !odegas 1, 1 and 4. QCG in$or%ed 'aw (nion by telegra% about the incident and the ne.t day, 2ire ad3usters arri4ed and dealt with the in4estigation. #$ter the report has been %ade, '()I resisted in paying QCG clai%ing 4iolations o$ warranties and conditions, $iling $raudulent clai%s and that the $ire had been deliberately caused by QCG or by other persons in conni4ance with hi%. 5herea$ter, QCG, his brother, Qua Chee ,ao and so%e e%ployees were indicted and tried $or arson but were ac6uitted. # ci4il suit to collect $ro% '()I was $iled by QCG and the trial court decided on the latter7s $a4or. 5here was a co%plaint $iled by ,-! in inter4ention but was dis%issed because QCG was able to pay his indebtedness during the pendency o$ the case. 5here were se4eral issues in4ol4ed and the C2I decided that 'aw (nion was liable. ISSUE: 8hether or not the insurance contract at bar was 4oid. HELD: -o. 5he contract was binding and en$orceable. '()I cannot e.e%pt itsel$ $ro% paying QCG because it is estopped through a wai4er (or estoppel) $ro% doing so. #ccording to the 9upre%e Court, it is a well settled rule o$ law that an insurer which with *nowledge o$ $acts entitling it to treat a policy as no longer in $orce, recei4es and accepts a pre%iu% on the policy, estopped to ta*e ad4antage o$ the $or$eiture. On false and fraudulent claims 5he Court o$ 2irst Instance $ound that the discrepancies were a result o$ QCG7s erroneous interpretation o$ the pro4isions o$ the insurance policies and clai% $or%s, caused by his i%per$ect :nglish, and that the %isstate%ents were innocently %ade and without intent to de$raud. 5he rule is that to a4oid a policy, the $alse swearing %ust be will$ul and with intent to de$raud which was not the cause. On the storage of gasoline #%biguities or obscurities %ust be strictly interpreted against the party that caused the%. 5his rigid application o$ the rule has beco%e necessary in

4iew o$ current business practices. In contrast to contracts entered into by parties bargaining on an e6ual $ooting, a contract o$ insurance calls $or greater strictness and 4igilance on the part o$ courts o$ 3ustice with a 4iew to protect the wea*er party $ro% abuses and i%position, and pre4ent their beco%ing traps $or the unwary. 5he contract o$ insurance is one o$ per$ect good $aith not $or the insured alone, but e6ually so $or the insurer; in $act, it is %ore so $or the latter, since its do%inant bargaining position carries with it stricter responsibility. QCG ad%itted that there were 3< cans o$ gasoline in !odega 1. Gasoline is not speci$ically %entioned a%ong the prohibited articles listed in the he%p warranty. In ordinary parlance, oils" %eans lubricants" and not gasoline or *erosene. 5he prohibition o$ *eeping gasoline could ha4e been e.pressed clearly and un%ista*ably. #lso, gasoline is not one o$ those ite%s speci$ically prohibited $ro% the pre%ises o$ the warehouses. 8hat was %entioned was the word oil" which could %ean anything ($ro% pal% oil to lubricant and not gasoline or *erosene). 5his a%biguity is to be interpreted against '()I because a contract o$ insurance is a contract o$ adhesion. 2urther, oil is incidental to QCG7s business, it being used $or %otor $uel. On fire hydrants arranty '()I is estopped $ro% clai%ing that there was a 4iolation o$ such warranty, since it *new that $ro% the start, the nu%ber o$ hydrants it de%anded ne4er e.isted, yet it issued policies and recei4ed pre%iu%s. DOCT!I"ES:

!achrach 4s. !ritish #%erican #ssurance Co. (1& ,hil. ===, =<1) -ew Ci4il Code, #rticle 14; 9ent. o$ 9upre%e Court o$ 9pain, 13 >ec. 1934, 1& 2ebruary 1941 8ilson 4s. Co%%ercial (nion #ssurance Co., 9< #tl. =4+, =43?=44

!esearch #ur$oses only%