Title (Title, GR No.

, Date, Ponente)

QUA CHEE GAN VS. LAW UNION

GR No. L-4611 17 December 1955 REYES, J. B. L., J.
Statutory Construction Made by
Scale of Allowances, Hemp Warranty Mika Cuacoyes
Plaintiff-Appellee Defendant-Appellant
QUA CHEE GAN LAW UNION AND ROCK INSURANCE
CO., LTD., represented by its agent,
WARNER BARNES AND CO., LTD.
Key Words
Scale of Allowances, Breach of Warranty, Hemp Warranty, Insurance Policy
Recit Ready Summary
Qua Chee Gan is an owner of four warehouses where three of which was burned down. He
immediately informed his insurer. On the next day, fire adjusters arrived and proceeded to
examine and photograph the warehouses. They also pored over the books of the plaintiff and
conducted extensive investigation. The plaintiff seeks to recover the amount of Php 370,000
from the defendant. The Court of First Instance ruled in favor of the plaintiffs ordering the
defendants to pay the amount of Php 370,000. The defendant appealed to this Court.
Facts of the Case
 Qua Chee Gan a merchant owns four warehouses or bodegas (designated as Bodegas
nos. 1 to 4) in the municipality of Tabaco, Albay, used for the storage of stocks of copra
and of hemp, baled and loose, in which the appellee dealt extensively.
 A fire broke out that lasted for a week which has affected the warehouses of the plaintiff.
 He immediately informed the insurer through telegram.
 And on the next day, the fire adjusters engaged by appellant insurance company arrived
and proceeded to examine and photograph the premises, pored over the books of the
insured and conducted an extensive investigation.
 He instituted this action seeking to recover the proceeds of certain fire insurance policies
totaling P370,000, issued by the Law Union & Rock Insurance Co., Ltd., through its
agent, Warner, Barnes & Co., Ltd., upon certain bodegas and merchandise of the insured
that were burned.
 The Court of First Instance ruled in favor of the plaintiffs. The decisions are as follows:
"Wherefore, judgment is rendered for the plaintiff and against the defendant
condemning the latter to pay the former –
(a) Under the first cause of action, the sum of P146,394.48;
(b) Under the second cause of action, the sum of P150,000;
(c ) Under the third cause of action, the sum of P5,000;
(d) Under the fourth cause of action, the sum of P15,000; and
(e) Under the fifth cause of action, the sum of P40,000;
 all of which shall bear interest at the rate of 80% per annum in accordance with
Section 91 (b) of the Insurance Act from September 26, 1940, until each is paid,
with costs against the defendant.

The complaint in intervention of the Philippine National Bank is dismissed

without costs."
 The defendant appealed to this Court.
Issues
I. Whether or not the trial Court should have held that the policies were avoided for
breach of warranty.
II. Whether or not the appellant insurance company avers that the insured violated the
"Hemp Warranty" provisions of Policy No. 2637165, against the storage of gasoline.
III. Whether or not the insured connived at the loss and that he fraudulently inflated the
quantity of the insured stock in the burnt bodegas.
Rationale/Analysis/Legal Basis
I. YES. Applying parol evidence rule in this case, it is argued that the plaintiff must
have 11 fire hydrants since it has an external wall perimeter of 500 meters. Although
it is known by the defendant through its policy that the plaintiff only has 2 fire
hydrants and 2 nearby fire hydrants belonging to the municipality of Tabaco, it does
not inform the plaintiff of such violation. Without doing so, the policy is invalid from
its inception. Also, the defendant gave the plaintiff a discount much smaller than
what he is entitled to. The Scale of Allowances indicate that if the plaintiff has 11
hydrants then it is entitled to 7.5% discount, if not, it is entitled to 2.5% only. The
defendant has double benefit. Therefore, the policies were avoided for the breach of
the warranty.
II. NO. In the case Moore vs. Aetna Life Insurance Co., an insurer shall not be allowed,
by the use of obscure phrases and exceptions, to defeat the very purpose for which
the policy was procured. In the present case, the defendant alleged that the plaintiff
violated the “Hemp Warranty” in the insurance policy when he had 36 cans of
gasoline in Bodega No. 2. The cause relied upon by the defendant speaks of “oil
(animal and/or vegetable and/or mineral and/or their liquid products having a flash
point below 300Ã, º Fahrenheit.” The word “300Ã, º Fahrenheit” is unfamiliar to
several insured individuals. There is no reason why the use of “gasoline” cannot be
used as it is understood by the general public. Also, the gasoline in the plaintiff’s
bodega was incidental as it is needed for the transportation used by the plaintiff. The
bodega containing gasoline is not part of the building that needs to be insured since
it is not burned and is found and stood isolated from the other bodegas. Therefore,
plaintiff did not violate the “Hemp Warranty” under the policy.
 III. NO. Although the defendant refuses to pay the plaintiff, the Plaintiff was able to pay
his debt with the Philippine National Bank without the amount he will receive from
the defendant. Therefore, there is no motive for the plaintiff to do such act alone.

NO. The estimated amount was based on the estimates, inferences and conclusion of
the adjuster investigator, Alexander D. Stewart during and after the fire. His
testimony is based on the photographs and traces found after the fire. The error in
the estimate relies on the inexperience of Mr. Stewart since he admitted that this is
his first copra fire experience. Therefore, the plaintiff did not inflate the quantity of
the insured stock.
Disposition
We find no reversible error in the judgment appealed from, wherefore the same is hereby
affirmed. Costs against the appellant. So ordered