Page 1 of 7

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 114427 February 6, 1995
ARMANDO GEAGONA, petitioner,
s!
COURT OF APPEA!S a"# COUNTR$ %AN&ERS NSURANCE
CORPORATON, respon"ents.

DA'DE, (R., J.:
Four our reie# un"er Rule $% of the Rules of &ourt is the "ecision
1
of the &ourt
of 'ppeals in &'()!R! SP No! *1+1,, entitle" -&ountr. /an0ers Insurance
&orporation ersus 'r1an"o )eagonia,- reersing the "ecision of the Insurance
&o11ission in I!&! &ase No! **$2 #hich a#ar"e" the clai1 of petitioner
'r1an"o )eagonia against priate respon"ent &ountr. /an0ers Insurance
&orporation!
The petitioner is the o#ner of Nor1an3s Mart locate" in the public 1ar0et of San
Francisco, 'gusan "el Sur! On 44 Dece1ber 1+5+, he obtaine" fro1 the priate
respon"ent fire insurance polic. No! F(1$,44
2
for P122,222!22! The perio" of the
polic. #as fro1 44 Dece1ber 1+5+ to 44 Dece1ber 1++2 an" coere" the
follo#ing6 -Stoc0(in(tra"e consisting principall. of "r. goo"s such as RT73s for
1en an" #o1en #ear an" other usual to assure"3s business!-
The petitioner "eclare" in the polic. un"er the subhea"ing entitle" &O(
INS8R'N&9 that Mercantile Insurance &o!, Inc! #as the co(insurer for
P%2,222!22! Fro1 1+5+ to 1++2, the petitioner ha" in his inentor. stoc0s
a1ounting to P*+4,1*2!%2, ite1i:e" as follo#s6
;enco Sales, Inc! P%%,,+5!22
F! <egaspi )en! Merchan"ise 5,,$*4!%2
&ebu Tesing Te=tiles 4%2,222!22 >on cre"it?
@@@@@
P*+4,1*2!%2
The polic. containe" the follo#ing con"ition6
*! The insure" shall gie notice to the &o1pan. of an. insurance or insurances
alrea". affecte", or #hich 1a. subseAuentl. be effecte", coering an. of the
propert. or properties consisting of stoc0s in tra"e, goo"s in process an"Bor
inentories onl. hereb. insure", an" unless such notice be gien an" the
particulars of such insurance or insurances be state" therein or en"orse" in this
polic. pursuant to Section %2 of the Insurance &o"e, b. or on behalf of the
&o1pan. before the occurrence of an. loss or "a1age, all benefits un"er this
Page 4 of 7
polic. shall be "ee1e" forfeite", provided however, that this con"ition shall not
appl. #hen the total insurance or insurances in force at the ti1e of the loss or
"a1age is not 1ore than P422,222!22!
On 47 Ma. 1++2, fire of acci"ental origin bro0e out at aroun" 76*2 p!1! at the
public 1ar0et of San Francisco, 'gusan "el Sur! The petitioner3s insure" stoc0(in(
tra"e #ere co1pletel. "estro.e" pro1pting hi1 to file #ith the priate
respon"ent a clai1 un"er the polic.! On 45 Dece1ber 1++2, the priate
respon"ent "enie" the clai1 because it foun" that at the ti1e of the loss the
petitioner3s stoc0s(in(tra"e #ere li0e#ise coere" b. fire insurance policies No!
)'(451$, an" No! )'(451$$, for P122,222!22 each, issue" b. the &ebu /ranch
of the Philippines First Insurance &o!, Inc! >hereinafter PFIC)!
)
These policies
in"icate that the insure" #as -Messrs! Discount Mart >Mr! 'r1an"o )eagonia,
Prop!?- #ith a 1ortgage clause rea"ing6
MORT)')96 <oss, if an. shall be pa.able to Messrs! &ebu Tesing Te=tiles,
&ebu &it. as their interest 1a. appear subCect to the ter1s of this polic.! &O(
INS8R'N&9 D9&<'R9D6 P122,222! @ Phils! First &9/BF 4$7%5!
4
The basis of the priate respon"ent3s "enial #as the petitioner3s allege" iolation
of &on"ition * of the polic.!
The petitioner then file" a co1plaint
5
against the priate respon"ent #ith the
Insurance &o11ission >&ase No! **$2? for the recoer. of P122,222!22 un"er
fire insurance polic. No! F(1$,44 an" for attorne.3s fees an" costs of litigation!
De attache" as 'nne= -'M-
6
thereof his letter of 15 Eanuar. 1++1 #hich as0e"
for the reconsi"eration of the "enial! De a"1itte" in the sai" letter that at the ti1e
he obtaine" the priate respon"ent3s fire insurance polic. he 0ne# that the t#o
policies issue" b. the PFI& #ere alrea". in e=istenceF ho#eer, he ha" no
0no#le"ge of the proision in the priate respon"ent3s polic. reAuiring hi1 to
infor1 it of the prior policiesF this reAuire1ent #as not 1entione" to hi1 b. the
priate respon"ent3s agentF an" ha" it been 1entione", he #oul" not hae
#ithhel" such infor1ation! De further asserte" that the total of the a1ounts
clai1e" un"er the three policies #as belo# the actual alue of his stoc0s at the
ti1e of loss, #hich #as P1,222,222!22!
In its ans#er,
7
the priate respon"ent specificall. "enie" the allegations in the
co1plaint an" set up as its principal "efense the iolation of &on"ition * of the
polic.!
In its "ecision of 41 Eune 1++*,
*
the Insurance &o11ission foun" that the
petitioner "i" not iolate &on"ition * as he ha" no 0no#le"ge of the e=istence of
the t#o fire insurance policies obtaine" fro1 the PFI&F that it #as &ebu Tesing
Te=tiles #hich procure" the PFI& policies #ithout infor1ing hi1 or securing his
consentF an" that &ebu Tesing Te=tile, as his cre"itor, ha" insurable interest on the
stoc0s! These fin"ings #ere base" on the petitioner3s testi1on. that he ca1e to
0no# of the PFI& policies onl. #hen he file" his clai1 #ith the priate
respon"ent an" that &ebu Tesing Te=tile obtaine" the1 an" pai" for their
pre1iu1s #ithout infor1ing hi1 thereof! The Insurance &o11ission then
"ecree"6
7D9R9FOR9, Cu"g1ent is hereb. ren"ere" or"ering the respon"ent co1pan. to
pa. co1plainant the su1 of P122,222!22 #ith legal interest fro1 the ti1e the
co1plaint #as file" until full. satisfie" plus the a1ount of P12,222!22 as
attorne.3s fees! 7ith costs! The co1pulsor. counterclai1 of respon"ent is hereb.
"is1isse"!
Its 1otion for the reconsi"eration of the "ecision
9
haing been "enie" b. the
Insurance &o11ission in its resolution of 42 'ugust 1++*,
1+
the priate
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respon"ent appeale" to the &ourt of 'ppeals b. #a. of a petition for reie#! The
petition #as "oc0ete" as &'()!R! SP No! *1+1,!
In its "ecision of 4+ Dece1ber 1++*,
11
the &ourt of 'ppeals reerse" the "ecision
of the Insurance &o11ission because it foun" that the petitioner 0ne# of the
e=istence of the t#o other policies issue" b. the PFI&! It sai"6
It is apparent fro1 the face of Fire Polic. )' 451$,BFire Polic. No! 451$$ that
the insurance #as ta0en in the na1e of priate respon"ent Gpetitioner hereinH! The
polic. states that -DIS&O8NT M'RT >MR! 'RM'NDO )9')ONI', PROP?-
#as the assure" an" that -T9SIN) T9ITI<9S- G#asH onl. the 1ortgagee of the
goo"s!
In a""ition, the pre1iu1s on both policies #ere pai" for b. priate respon"ent,
not b. the Tesing Te=tiles #hich is allege" to hae ta0en out the other insurance
#ithout the 0no#le"ge of priate respon"ent! This is sho#n b. Pre1iu1 Inoices
nos! $,,*4 an" $,,*2! >'nne=es M an" N?! In both inoices, Tesing Te=tiles is
in"icate" to be onl. the 1ortgagee of the goo"s insure" but the part. to #hich
the. #ere issue" #ere the -DIS&O8NT M'RT >MR! 'RM'NDO
)9')ONI'?!-
In is clear that it #as the priate respon"ent Gpetitioner hereinH #ho too0 out the
policies on the sa1e propert. subCect of the insurance #ith petitioner! Dence, in
failing to "isclose the e=istence of these insurances priate respon"ent iolate"
&on"ition No! * of Fire Polic. No! 1$,4! ! ! !
In"ee" priate respon"ent3s allegation of lac0 of 0no#le"ge of the proisions
insurances is belie" b. his letter to petitioner Gof 15 Eanuar. 1++1! The bo". of
the letter rea"s as follo#sFH
=== === ===
Please be infor1e" that I hae no 0no#le"ge of the proision reAuiring 1e to
infor1 .our office about 1.
prior insurance un"er F)'(451$, an" F(&9/(4$7%5! Jour representatie "i" not
1ention about sai" reAuire1ent at the ti1e he #as conincing 1e to insure #ith
.ou! If he onl. "ie or een inAuire" if I ha" other e=isting policies coering 1.
establish1ent, I #oul" hae tol" hi1 so! Jou #ill note that at the ti1e he tal0e" to
1e until I "eci"e" to insure #ith .our co1pan. the t#o policies afore1entione"
#ere alrea". in effect! Therefore I #oul" hae no reason to #ithhol" such
infor1ation an" I #oul" hae "esiste" to part #ith 1. har" earne" peso to pa. the
insurance pre1iu1s GifH I 0no# I coul" not recoer an.thing!
Sir, I a1 onl. an or"inar. business1an intereste" in protecting 1. inest1ents!
The actual alue of 1. stoc0s "a1age" b. the fire #as esti1ate" b. the Police
Depart1ent to be P1,222,222!22 >Please see =ero= cop. of Police Report 'nne=
-'-?! M. Inco1e State1ent as of Dece1ber *1, 1+5+ or fie 1onths before the
fire, sho#s 1. 1erchan"ise inentor. #as alrea". so1e P%+%,$%%!7%! ! ! ! These
#ill support 1. clai1 that the a1ount clai1e" un"er the three policies are 1uch
belo# the alue of 1. stoc0s lost!
=== === ===
The letter contra"icts priate respon"ent3s pretension that he "i" not 0no# that
there #ere other insurances ta0en on the stoc0(in(tra"e an" seriousl. puts in
Auestion his cre"ibilit.!
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Dis 1otion to reconsi"er the a"erse "ecision haing been "enie", the petitioner
file" the instant petition! De conten"s therein that the &ourt of 'ppeals acte" #ith
grae abuse of "iscretion a1ounting to lac0 or e=cess of Curis"iction6
' @ ! ! ! 7D9N IT R9V9RS9D TD9 FINDIN)S OF F'&TS OF TD9
INS8R'N&9 &OMMISSION, ' K8'SI(E8DI&I'< /ODJ &D'R)9D 7ITD
TD9 D8TJ OF D9T9RMININ) INS8R'N&9 &<'IM 'ND 7DOS9
D9&ISION IS '&&ORD9D R9SP9&T 'ND 9V9N FIN'<ITJ /J TD9
&O8RTSF
/ @ ! ! ! 7D9N IT &ONSID9R9D 'S 9VID9N&9 M'TT9RS 7DI&D 79R9
NOT PR9S9NT9D 'S 9VID9N&9 D8RIN) TD9 D9'RIN) OR TRI'<F
'ND
& @ ! ! ! 7D9N IT DISMISS9D TD9 &<'IM OF TD9 P9TITION9R D9R9IN
')'INST TD9 PRIV'T9 R9SPOND9NT!
The chief issues that crop up fro1 the first an" thir" groun"s are >a? #hether the
petitioner ha" prior 0no#le"ge of the t#o insurance policies issue" b. the PFI&
#hen he obtaine" the fire insurance polic. fro1 the priate respon"ent, thereb.,
for not "isclosing such fact, iolating &on"ition * of the polic., an" >b? if he ha",
#hether he is preclu"e" fro1 recoering therefro1!
The secon" groun", #hich is base" on the &ourt of 'ppeals3 reliance on the
petitioner3s letter of reconsi"eration of 15 Eanuar. 1++1, is #ithout 1erit! The
petitioner clai1s that the sai" letter #as not offere" in ei"ence an" thus shoul"
not hae been consi"ere" in "eci"ing the case! Do#eer, as correctl. pointe" out
b. the &ourt of 'ppeals, a cop. of this letter #as attache" to the petitioner3s
co1plaint in I!&! &ase No! *$$2 as 'nne= -M- thereof an" 1a"eintegral part of
the co1plaint!
12
It has attaine" the status of a Cu"icial a"1ission an" since its "ue
e=ecution an" authenticit. #as not "enie" b. the other part., the petitioner is
boun" b. it een if it #ere not intro"uce" as an in"epen"ent ei"ence!
1)
's to the first issue, the Insurance &o11ission foun" that the petitioner ha" no
0no#le"ge of the preious t#o policies! The &ourt of 'ppeals "isagree" an"
foun" other#ise in ie# of the e=plicit a"1ission b. the petitioner in his letter to
the priate respon"ent of 15 Eanuar. 1++1, #hich #as Auote" in the challenge"
"ecision of the &ourt of 'ppeals! These "iergent fin"ings of fact constitute an
e=ception to the general rule that in petitions for reie# un"er Rule $%, onl.
Auestions of la# are inole" an" fin"ings of fact b. the &ourt of 'ppeals are
conclusie an" bin"ing upon this &ourt!
14
7e agree #ith the &ourt of 'ppeals that the petitioner 0ne# of the prior policies
issue" b. the PFI&! Dis letter of 15 Eanuar. 1++1 to the priate respon"ent
conclusiel. proes this 0no#le"ge! Dis testi1on. to the contrar. before the
Insurance &o11issioner an" #hich the latter relie" upon cannot preail oer a
#ritten a"1ission 1a"e ante litem motam! It #as, in"ee", incre"ible that he "i"
not 0no# about the prior policies since these policies #ere not ne# or original!
Polic. No! )'(451$$ #as a rene#al of Polic. No! F(4$7%5, #hile Polic. No!
)'(451$, ha" been rene#e" t#ice, the preious polic. being F(4$7+4!
&on"ition * of the priate respon"ent3s Polic. No! F(1$,44 is a con"ition #hich is
not proscribe" b. la#! Its incorporation in the polic. is allo#e" b. Section 7% of
the Insurance &o"e
15
#hich proi"es that -GaH polic. 1a. "eclare that a iolation
of specifie" proisions thereof shall aoi" it, other#ise the breach of an
i11aterial proision "oes not aoi" the polic.!- Such a con"ition is a proision
#hich inariabl. appears in fire insurance policies an" is inten"e" to preent an
increase in the 1oral ha:ar"! It is co11onl. 0no#n as the a""itional or -other
insurance- clause an" has been uphel" as ali" an" as a #arrant. that no other
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insurance e=ists! Its iolation #oul" thus aoi" the
polic.!
16
Do#eer, in or"er to constitute a iolation, the other insurance 1ust be
upon sa1e subCect 1atter, the sa1e interest therein, an" the sa1e ris0!
17
's to a 1ortgage" propert., the 1ortgagor an" the 1ortgagee hae each an
in"epen"ent insurable interest therein an" both interests 1a. be one polic., or
each 1a. ta0e out a separate polic. coering his interest, either at the sa1e or at
separate ti1es!
1*
The 1ortgagor3s insurable interest coers the full alue of the
1ortgage" propert., een though the 1ortgage "ebt is eAuialent to the full alue
of the propert.!
19
The 1ortgagee3s insurable interest is to the e=tent of the "ebt,
since the propert. is relie" upon as securit. thereof, an" in insuring he is not
insuring the propert. but his interest or lien thereon! Dis insurable interest
is prima facie the alue 1ortgage" an" e=ten"s onl. to the a1ount of the "ebt,
not e=cee"ing the alue of the 1ortgage" propert.!
2+
Thus, separate insurances
coering "ifferent insurable interests 1a. be obtaine" b. the 1ortgagor an" the
1ortgagee!
' 1ortgagor 1a., ho#eer, ta0e out insurance for the benefit of the 1ortgagee,
#hich is the usual practice! The 1ortgagee 1a. be 1a"e the beneficial pa.ee in
seeral #a.s! De 1a. beco1e the assignee of the polic. #ith the consent of the
insurerF or the 1ere ple"gee #ithout such consentF or the original polic. 1a.
contain a 1ortgage clauseF or a ri"er 1a0ing the polic. pa.able to the 1ortgagee
-as his interest 1a. appear- 1a. be attache"F or a -stan"ar" 1ortgage clause,-
containing a collateral in"epen"ent contract bet#een the 1ortgagee an" insurer,
1a. be attache"F or the polic., though b. its ter1s pa.able absolutel. to the
1ortgagor, 1a. hae been procure" b. a 1ortgagor un"er a contract "ut. to
insure for the 1ortgagee3s benefit, in #hich case the 1ortgagee acAuires an
eAuitable lien upon the procee"s!
21
In the polic. obtaine" b. the 1ortgagor #ith loss pa.able clause in faor of the
1ortgagee as his interest 1a. appear, the 1ortgagee is onl. a beneficiar. un"er
the contract, an" recogni:e" as such b. the insurer but not 1a"e a part. to the
contract hi1self! Dence, an. act of the 1ortgagor #hich "efeats his right #ill also
"efeat the right of the 1ortgagee!
22
This 0in" of polic. coers onl. such interest
as the 1ortgagee has at the issuing of the polic.!
2)
On the other han", a 1ortgagee 1a. also procure a polic. as a contracting part.
in accor"ance #ith the ter1s of an agree1ent b. #hich the 1ortgagor is to pa.
the pre1iu1s upon such insurance!
24
It has been note", ho#eer, that although
the 1ortgagee is hi1self the insure", as #here he applies for a polic., full.
infor1s the authori:e" agent of his interest, pa.s the pre1iu1s, an" obtains on
the assurance that it insures hi1, the polic. is in fact in the for1 use" to insure a
1ortgagor #ith loss pa.able clause!
25
The fire insurance policies issue" b. the PFI& na1e the petitioner as the assure"
an" contain a 1ortgage clause #hich rea"s6
<oss, if an., shall be pa.able to M9SSRS! T9SIN) T9ITI<9S, &ebu &it. as
their interest 1a. appear subCect to the ter1s of this polic.!
This is clearl. a si1ple loss pa.able clause, not a stan"ar" 1ortgage clause!
It 1ust, ho#eer, be un"erscore" that unli0e the -other insurance- clauses
inole" in General Insurance and Surety Corp! vs! Ng Hua
26
or in Pioneer
Insurance & Surety Corp! vs! ap,
27
#hich rea"6
The insure" shall gie notice to the co1pan. of an. insurance or insurances
alrea". effecte", or #hich 1a. subseAuentl. be effecte" coering an. of the
propert. hereb. insure", an" unless such notice be gien an" the particulars of
Page , of 7
such insurance or insurances be state" in or en"orse" on this Polic. b. or on
behalf of the &o1pan. before the occurrence of an. loss or "a1age, all benefits
un"er this Polic. shall be forfeite"!
or in the 1+*2 case of Santa !na vs! Commercial "nion !ssurance
Co!
2*
#hich proi"e" -that an. outstan"ing insurance upon the #hole or a portion
of the obCects thereb. assure" 1ust be "eclare" b. the insure" in #riting an" he
1ust cause the co1pan. to a"" or insert it in the polic., #ithout #hich such
polic. shall be null an" oi", an" the insure" #ill not be entitle" to in"e1nit. in
case of loss,- Condition #in the priate respon"ent3s polic. No! F(1$,44 "oes not
absolutel. "eclare oi" an. iolation thereof! It e=pressl. proi"es that the
con"ition -shall not appl. #hen the total insurance or insurances in force at the
ti1e of the loss or "a1age is not 1ore than P422,222!22!-
It is a car"inal rule on insurance that a polic. or insurance contract is to be
interprete" liberall. in faor of the insure" an" strictl. against the co1pan., the
reason being, un"oubte"l., to affor" the greatest protection #hich the insure" #as
en"eaoring to secure #hen he applie" for insurance! It is also a car"inal principle
of la# that forfeitures are not faore" an" that an. construction #hich #oul"
result in the forfeiture of the polic. benefits for the person clai1ing thereun"er,
#ill be aoi"e", if it is possible to construe the polic. in a 1anner #hich #oul"
per1it recoer., as, for e=a1ple, b. fin"ing a #aier for such forfeiture!
29
State"
"ifferentl., proisions, con"itions or e=ceptions in policies #hich ten" to #or0 a
forfeiture of insurance policies shoul" be construe" 1ost strictl. against those for
#hose benefits the. are inserte", an" 1ost faorabl. to#ar" those against #ho1
the. are inten"e" to operate!
)+
The reason for this is that, e=cept for ri"ers #hich
1a. later be inserte", the insure" sees the contract alrea". in its final for1 an"
has ha" no oice in the selection or arrange1ent of the #or"s e1plo.e" therein!
On the other han", the language of the contract #as carefull. chosen an"
"eliberate" upon b. e=perts an" legal a"isers #ho ha" acte" e=clusiel. in the
interest of the insurers an" the technical language e1plo.e" therein is rarel.
un"erstoo" b. or"inar. la.1en!
)1
7ith these principles in 1in", #e are of the opinion that &on"ition * of the
subCect polic. is not totall. free fro1 a1biguit. an" 1ust, perforce, be
1eticulousl. anal.:e"! Such anal.sis lea"s us to conclu"e that >a? the prohibition
applies onl. to "ouble insurance, an" >b? the nullit. of the polic. shall onl. be to
the e=tent e=cee"ing P422,222!22 of the total policies obtaine"!
The first conclusion is supporte" b. the portion of the con"ition referring to other
insurance -coering an. of the propert. or properties consisting of stoc0s in tra"e,
goo"s in process an"Bor inentories onl. hereb. insure",- an" the portion
regar"ing the insure"3s "eclaration on the subhea"ing &O(INS8R'N&9 that the
co(insurer is Mercantile Insurance &o!, Inc! in the su1 of P%2,222!22! ' "ouble
insurance e=ists #here the sa1e person is insure" b. seeral insurers separatel. in
respect of the sa1e subCect an" interest! 's earlier state", the insurable interests of
a 1ortgagor an" a 1ortgagee on the 1ortgage" propert. are "istinct an" separate!
Since the t#o policies of the PFI& "o not coer the sa1e interest as that coere"
b. the polic. of the priate respon"ent, no "ouble insurance e=ists! The non(
"isclosure then of the for1er policies #as not fatal to the petitioner3s right to
recoer on the priate respon"ent3s polic.!
Further1ore, b. stating #ithin &on"ition * itself that such con"ition shall not
appl. if the total insurance in force at the ti1e of loss "oes not e=cee"
P422,222!22, the priate respon"ent #as a1enable to assu1e a co(insurer3s
liabilit. up to a loss not e=cee"ing P422,222!22! 7hat it ha" in 1in" #as to
"iscourage oer(insurance! In"ee", the rationale behin" the incorporation of
-other insurance- clause in fire policies is to preent oer(insurance an" thus aert
the perpetration of frau"! 7hen a propert. o#ner obtains insurance policies fro1
Page 7 of 7
t#o or 1ore insurers in a total a1ount that e=cee"s the propert.3s alue, the
insure" 1a. hae an in"uce1ent to "estro. the propert. for the purpose of
collecting the insurance! The public as #ell as the insurer is intereste" in
preenting a situation in #hich a fire #oul" be profitable to the insure"!
)2
7D9R9FOR9, the instant petition is hereb. )R'NT9D! The "ecision of the
&ourt of 'ppeals in &'()!R! SP No! *1+1, is S9T 'SID9 an" the "ecision of the
Insurance &o11ission in &ase No! **$2 is R9INST'T9D!
&osts against priate respon"ent &ountr. /an0ers Insurance &orporation!
SO ORD9R9D!
Padilla$ %ellosillo$ &uiason and 'apunan$ (()$ concur)