Vicente Ong Lim Sing, Jr. vs.

Feb Leasing & Finance Corporation

G.R. No. 168115, June 8, 2007
Nachura, J.:

FACTS:

FEB Leasing and Finance Corporation (FEB) entered into a lease of equipment and motor
vehicles with JVL Food Products (JVL). On the same date, Vicente Ong Lim Sing, Jr. (Lim)
executed an Individual Guaranty Agreement with FEB to guarantee the prompt and faithful
performance of the terms and conditions of the aforesaid lease agreement. Corresponding Lease
Schedules with Delivery and Acceptance Certificates over the equipment and motor vehicles
formed part of the agreement. Under the contract, JVL was obliged to pay FEB an aggregate
gross monthly rental of ₱170,494.00.

JVL defaulted in the payment of the monthly rentals so FEB sent a letter to JVL demanding
payment of ₱3,414,468.75 which includes penalty charges and insurance premiums. However,
JVL failed to pay.

On December 6, 2000, FEB filed a Complaint with the RTC of Manilafor sum of money,
damages, and replevin against JVL, Lim, and John Doe.

JVL and Lim: Admitted the existence of the lease agreement but asserted that it is in reality a
sale of equipment on installment basis, with FEB acting as the financier. They claimed that this
intention was apparent from the fact that they were made to believe that when full payment was
effected, a Deed of Sale will be executed by FEB as vendor in favor of JVL and Lim as vendees.

RTC: In upholding JVL and Lim’s stance, the trial court stressed the following:

1. The contradictory terms it found in the lease agreement;

2. That the alleged lessee was required to insure the thing against loss, damage or
destruction.

In property insurance against loss or other accidental causes, the assured must have an
insurable interest, 32 Corpus Juris 1059.

It has been held that the test of insurable interest in property is whether the assured
has a right, title or interest therein that he will be benefited by its preservation and
continued existence or suffer a direct pecuniary loss from its destruction or injury by
the peril insured against. If the defendants were to be regarded as only a lessee,
logically the lessor who asserts ownership will be the one directly benefited or injured
and therefore the lessee is not supposed to be the assured as he has no insurable
interest.

CA: Declared the transaction between the parties as a financial lease agreement under Republic
Act (R.A.) No. 8556.
Thus, this petition.

ISSUE:

Is the stipulation in Section 14 of the lease contract that the equipment shall be insured at the cost
and expense of the lessee against loss, damage, or destruction from fire, theft, accident, or other
insurable risk for the full term of the lease, a binding and valid stipulation?

HELD:

YES, the stipulation in Section 14 of the lease contract, that the equipment shall be insured at the
cost and expense of the lessee against loss, damage, or destruction from fire, theft, accident, or
other insurable risk for the full term of the lease, is a binding and valid stipulation.

Section 17 of the Insurance Code provides that the measure of an insurable interest in property is
the extent to which the insured might be damnified by loss or injury thereof.

In this case, it cannot be denied that JVL will be directly damnified in case of loss, damage, or
destruction of any of the properties leased.

Hence, petitioner, as a lessee, has an insurable interest in the equipment and motor vehicles
leased.