G.R. No.

L-2294 May 25, 1951

FILIPINAS COMPAÑIA DE SEGUROS, petitioner,
vs.
CHRISTERN, HUENEFELD and CO., INC., respondent.
Ramirez and Ortigas for petitioner.
Ewald Huenefeld for respondent.

PARAS, C.J.:

On October 1, 1941, the respondent corporation, Christern Huenefeld, & Co., Inc., after payment of
corresponding premium, obtained from the petitioner ,Filipinas Cia. de Seguros, fire policy No. 29333
in the sum of P1000,000, covering merchandise contained in a building located at No. 711 Roman
Street, Binondo Manila. On February 27, 1942, or during the Japanese military occupation, the
building and insured merchandise were burned. In due time the respondent submitted to the petitioner
its claim under the policy. The salvage goods were sold at public auction and, after deducting their value,
the total loss suffered by the respondent was fixed at P92,650. The petitioner refused to pay the claim on
the ground that the policy in favor of the respondent had ceased to be in force on the date the United
States declared war against Germany, the respondent Corporation (though organized under and by virtue
of the laws of the Philippines) being controlled by the German subjects and the petitioner being a
company under American jurisdiction when said policy was issued on October 1, 1941. The petitioner,
however, in pursuance of the order of the Director of Bureau of Financing, Philippine Executive
Commission, dated April 9, 1943, paid to the respondent the sum of P92,650 on April 19, 1943.

The present action was filed on August 6, 1946, in the Court of First Instance of Manila for the purpose of
recovering from the respondent the sum of P92,650 above mentioned. The theory of the petitioner is that
the insured merchandise were burned up after the policy issued in 1941 in favor of the respondent
corporation has ceased to be effective because of the outbreak of the war between the United States and
Germany on December 10, 1941, and that the payment made by the petitioner to the respondent
corporation during the Japanese military occupation was under pressure. After trial, the Court of First
Instance of Manila dismissed the action without pronouncement as to costs. Upon appeal to the Court of
Appeals, the judgment of the Court of First Instance of Manila was affirmed, with costs. The case is now
before us on appeal by certiorari from the decision of the Court of Appeals.

The Court of Appeals overruled the contention of the petitioner that the respondent corporation became
an enemy when the United States declared war against Germany, relying on English and American cases
which held that a corporation is a citizen of the country or state by and under the laws of which it was
created or organized. It rejected the theory that nationality of private corporation is determine by the
character or citizenship of its controlling stockholders.

There is no question that majority of the stockholders of the respondent corporation were German
subjects. This being so, we have to rule that said respondent became an enemy corporation upon the
outbreak of the war between the United States and Germany. The English and American cases relied
upon by the Court of Appeals have lost their force in view of the latest decision of the Supreme Court of
the United States in Clark vs. Uebersee Finanz Korporation, decided on December 8, 1947, 92 Law. Ed.
Advance Opinions, No. 4, pp. 148-153, in which the controls test has been adopted. In "Enemy
Corporation" by Martin Domke, a paper presented to the Second International Conference of the Legal
Profession held at the Hague (Netherlands) in August. 1948 the following enlightening passages appear:

1
Since World War I, the determination of enemy nationality of corporations has been discussion in many
countries, belligerent and neutral. A corporation was subject to enemy legislation when it was controlled
by enemies, namely managed under the influence of individuals or corporations, themselves considered
as enemies. It was the English courts which first the Daimler case applied this new concept of "piercing
the corporate veil," which was adopted by the peace of Treaties of 1919 and the Mixed Arbitral
established after the First World War.

The United States of America did not adopt the control test during the First World War. Courts refused to
recognized the concept whereby American-registered corporations could be considered as enemies and
thus subject to domestic legislation and administrative measures regarding enemy property.

World War II revived the problem again. It was known that German and other enemy interests were
cloaked by domestic corporation structure. It was not only by legal ownership of shares that a material
influence could be exercised on the management of the corporation but also by long term loans and other
factual situations. For that reason, legislation on enemy property enacted in various countries during
World War II adopted by statutory provisions to the control test and determined, to various degrees, the
incidents of control. Court decisions were rendered on the basis of such newly enacted statutory
provisions in determining enemy character of domestic corporation.

The United States did not, in the amendments of the Trading with the Enemy Act during the last war,
include as did other legislations the applications of the control test and again, as in World War I, courts
refused to apply this concept whereby the enemy character of an American or neutral-registered
corporation is determined by the enemy nationality of the controlling stockholders.

Measures of blocking foreign funds, the so called freezing regulations, and other administrative practice in
the treatment of foreign-owned property in the United States allowed to large degree the determination of
enemy interest in domestic corporations and thus the application of the control test. Court decisions
sanctioned such administrative practice enacted under the First War Powers Act of 1941, and more
recently, on December 8, 1947, the Supreme Court of the United States definitely approved of the control
theory. In Clark vs. Uebersee Finanz Korporation, A. G., dealing with a Swiss corporation allegedly
controlled by German interest, the Court: "The property of all foreign interest was placed within the reach
of the vesting power (of the Alien Property Custodian) not to appropriate friendly or neutral assets but to
reach enemy interest which masqueraded under those innocent fronts. . . . The power of seizure and
vesting was extended to all property of any foreign country or national so that no innocent appearing
device could become a Trojan horse."

It becomes unnecessary, therefore, to dwell at length on the authorities cited in support of the appealed
decision. However, we may add that, in Haw Pia vs. China Banking Corporation,* 45 Off Gaz., (Supp. 9)
299, we already held that China Banking Corporation came within the meaning of the word "enemy" as
used in the Trading with the Enemy Acts of civilized countries not only because it was incorporated under
the laws of an enemy country but because it was controlled by enemies.

The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that "anyone except a
public enemy may be insured." It stands to reason that an insurance policy ceases to be allowable as
soon as an insured becomes a public enemy.

Effect of war, generally. — All intercourse between citizens of belligerent powers which is inconsistent
with a state of war is prohibited by the law of nations. Such prohibition includes all negotiations,
commerce, or trading with the enemy; all acts which will increase, or tend to increase, its income or

2
resources; all acts of voluntary submission to it; or receiving its protection; also all acts concerning the
transmission of money or goods; and all contracts relating thereto are thereby nullified. It further prohibits
insurance upon trade with or by the enemy, upon the life or lives of aliens engaged in service with the
enemy; this for the reason that the subjects of one country cannot be permitted to lend their assistance to
protect by insurance the commerce or property of belligerent, alien subjects, or to do anything detrimental
too their country's interest. The purpose of war is to cripple the power and exhaust the resources of the
enemy, and it is inconsistent that one country should destroy its enemy's property and repay in insurance
the value of what has been so destroyed, or that it should in such manner increase the resources of the
enemy, or render it aid, and the commencement of war determines, for like reasons, all trading
intercourse with the enemy, which prior thereto may have been lawful. All individuals therefore, who
compose the belligerent powers, exist, as to each other, in a state of utter exclusion, and are public
enemies. (6 Couch, Cyc. of Ins. Law, pp. 5352-5353.)

In the case of an ordinary fire policy, which grants insurance only from year, or for some other specified
term it is plain that when the parties become alien enemies, the contractual tie is broken and the
contractual rights of the parties, so far as not vested. lost. (Vance, the Law on Insurance, Sec. 44, p. 112.)

The respondent having become an enemy corporation on December 10, 1941, the insurance policy
issued in its favor on October 1, 1941, by the petitioner (a Philippine corporation) had ceased to be valid
and enforcible, and since the insured goods were burned after December 10, 1941, and during the war,
the respondent was not entitled to any indemnity under said policy from the petitioner. However,
elementary rules of justice (in the absence of specific provision in the Insurance Law) require that the
premium paid by the respondent for the period covered by its policy from December 11, 1941, should be
returned by the petitioner.

The Court of Appeals, in deciding the case, stated that the main issue hinges on the question of whether
the policy in question became null and void upon the declaration of war between the United States and
Germany on December 10, 1941, and its judgment in favor of the respondent corporation was predicated
on its conclusion that the policy did not cease to be in force. The Court of Appeals necessarily assumed
that, even if the payment by the petitioner to the respondent was involuntary, its action is not tenable in
view of the ruling on the validity of the policy. As a matter of fact, the Court of Appeals held that "any
intimidation resorted to by the appellee was not unjust but the exercise of its lawful right to claim for and
received the payment of the insurance policy," and that the ruling of the Bureau of Financing to the effect
that "the appellee was entitled to payment from the appellant was, well founded." Factually, there can be
no doubt that the Director of the Bureau of Financing, in ordering the petitioner to pay the claim of the
respondent, merely obeyed the instruction of the Japanese Military Administration, as may be seen from
the following: "In view of the findings and conclusion of this office contained in its decision on
Administrative Case dated February 9, 1943 copy of which was sent to your office and the concurrence
therein of the Financial Department of the Japanese Military Administration, and following the instruction
of said authority, you are hereby ordered to pay the claim of Messrs. Christern, Huenefeld & Co., Inc. The
payment of said claim, however, should be made by means of crossed check." (Emphasis supplied.)

It results that the petitioner is entitled to recover what paid to the respondent under the circumstances on
this case. However, the petitioner will be entitled to recover only the equivalent, in actual Philippines
currency of P92,650 paid on April 19, 1943, in accordance with the rate fixed in the Ballantyne scale.

Wherefore, the appealed decision is hereby reversed and the respondent corporation is ordered to pay to
the petitioner the sum of P77,208.33, Philippine currency, less the amount of the premium, in Philippine

3
currency, that should be returned by the petitioner for the unexpired term of the policy in question,
beginning December 11, 1941. Without costs. So ordered.

Geagonia v CA G.R. No. 114427 February 6, 1995

Facts:

Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00. The 1
year policy and covered thestock trading of dry goods. The policy noted the requirement that "3. The
insured shall give notice to the Company of any insurance or insurances already effected, or which may
subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods
in process and/or inventories only hereby insured, and unless notice be given and the particulars of such
insurance or insurances be stated therein or endorsed in this policy pursuant to Section 50 of the
Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all
benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply
when the total insurance or insurances in force at the time of the loss or damage is not more than
P200,000.00." The petitioners’ stocks were destroyed by fire. He then filed a claim which was
subsequently denied because the petitioner’s stocks were covered by two other fire insurance policies for
Php 200,000 issued by PFIC. The basis of the private respondent's denial was the petitioner's alleged
violation of Condition 3 of the policy. Geagonia then filed a complaint against the private respondent in the
Insurance Commission for the recovery of P100,000.00 under fire insurance policy and damages. He
claimed that he knew the existence of the other two policies. But, he said that he had no knowledge of the
provision in the private respondent's policy requiring him to inform it of the prior policies and this
requirement was not mentioned to him by the private respondent's agent. The Insurance Commission
found that the petitioner did not violate Condition 3 as he had no knowledge of the existence of the two
fire insurance policies obtained from the PFIC; that it was Cebu Tesing Textiles w/c procured the PFIC
policies w/o informing him or securing his consent; and that Cebu Tesing Textile, as his creditor, had
insurable interest on the stocks. The Insurance Commission then ordered the respondent company to pay
complainant the sum of P100,000.00 with interest and attorney’s fees. CA reversed the decision of the
Insurance Commission because it found that the petitioner knew of the existence of the two other policies
issued by the PFIC.

Issues:
1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire insurance
and thereby violated Condition 3 of the policy.
2. WON he is prohibited from recovering

Held: Yes. No. Petition Granted

Ratio:

1. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC. His letter
of 18 January 1991 to the private respondent conclusively proves this knowledge. His testimony to the
contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over a written
admission made ante litem motam. It was, indeed, incredible that he did not know about the prior policies
since these policies were not new or original.

4
2. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of
insurance policies should be construed most strictly against those for whose benefits they are inserted,
and most favorably toward those against whom they are intended to operate. With these principles in
mind, Condition 3 of the subject policy is not totally free from ambiguity and must be meticulously
analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to double insurance,
and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies
obtained. Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total
insurance in force at the time of loss does not exceed P200,000.00, the private respondent was amenable
to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to
discourage over-insurance. Indeed, the rationale behind the incorporation of "other insurance" clause in
fire policies is to prevent over-insurance and thus avert the perpetration of fraud. When a property owner
obtains insurance policies from two or more insurers in a total amount that exceeds the property's value,
the insured may have an inducement to destroy the property for the purpose of collecting the insurance.
The public as well as the insurer is interested in preventing a situation in which a fire would be profitable
to the insured.

Insurance Case Digest: Gercio V. Sun Life Assurance Co. Of Canada (1925)
G.R. No. 23703 September 28, 1925
Lessons Applicable:
Blood relationship (Insurance)
Revocable Designation (Insurance)

FACTS:

January 29, 1910: Sun Life Assurance Co. of Canada issued a 20-year endowment insurance policy on
the life of Hilario Gercio, insurance company agreed to insure the life of Gercio for the sum of P2,000, to
be paid him on February 1, 1930, or if the insured should die before said date, then to his wife, Mrs.
Andrea Zialcita, should she survive him; otherwise to the executors, administrators, or assigns of the
insured policy did not include any provision reserving to the insured the right to change the beneficiary
End of 1919: she was convicted of the crime of adultery, September 4, 1920: a decree of divorce was
issued.
March 4, 1922: Gercio formally notified the Sun Life that he had revoked his donation in favor of Andrea
Zialcita, and that he had designated in her stead his present wife, Adela Garcia de Gercio, as the
beneficiary of the policy, Sun Life refused.
Gercio filed a petition for mandamus to compel Sun Life
Trial Court: favored Gercio

ISSUE: W/N Gercio has the right to change the beneficiary of the policy

HELD: NO. Dismissed.

The wife has an insurable interest in the life of her husband.
The beneficiary has an absolute vested interest in the policy from the date of its issuance and delivery. So
when a policy of life insurance is taken out by the husband in which the wife is named as beneficiary, she
has a subsisting interest in the policy applies to a policy to which there are attached the incidents of a
loan value, cash surrender value, an automatic extension by premiums paid, and to an endowment policy,
as well as to an ordinary life insurance policy. If the husband wishes to retain to himself the control and
ownership of the policy he may so provide in the policy. But if the policy contains no provision authorizing
a change of beneficiary without the beneficiary's consent, the insured cannot make such change.

5
Accordingly, it is held that a life insurance policy of a husband made payable to the wife as beneficiary, is
the separate property of the beneficiary and beyond the control of the husband.
Effect produced by the divorce, the Philippine Divorce Law, Act No. 2710, merely provides in section 9
that the decree of divorce shall dissolve the community property as soon as such decree becomes final,
absence of a statute to the contrary, that if a policy is taken out upon a husband's life the wife is named
as beneficiary therein, a subsequent divorce does not destroy her rights under the policy
Neither the husband, nor the wife, nor both together had power to destroy the vested interest of the
children in the policy.

Philam v Pineda G.R. No. L-54216 July 19, 1989

J. Paras

Facts:

Pineda procured an ordinary life insurance policy from the petitioner company and designated his wife
and children as irrevocable beneficiaries.
He then filed a petition to amend the designation of the beneficiaries in his life policy from irrevocable to
revocable.
The judge granted the request.
Petitioner promptly filed a motion but was denied. Hence, this petition.

Issues:
1. WON the designation of the irrevocable beneficiaries could be changed or amended without the
consent of all the irrevocable beneficiaries.
2. WON the irrevocable minor beneficiaries could give consent to the change in designation

Held: No to both. Petition dismissed.

Ratio:
Under the Insurance Act, the beneficiary designated in a life insurance contract cannot be changed
without the consent of the beneficiary because he has a vested interest in the policy.
There was an express stipulation to this effect: “It is hereby understood and agreed that, notwithstanding
the provisions of this policy to the contrary, inasmuch as the designation of the primary/contingent
beneficiary/beneficiaries in this Policy has been made without reserving the right to change said
beneficiary/ beneficiaries, such designation may not be surrendered to the Company, released or
assigned; and no right or privilege under the Policy may be exercised, or agreement made with the
Company to any change in or amendment to the Policy, without the consent of the said
beneficiary/beneficiaries.”
The alleged acquiescence of the six (6) children beneficiaries of the policy cannot be considered an
effective ratification due to the fact that they were minors. Neither could they act through their father
insured since their interests are quite divergent from one another.
Therefore, the parent-insured cannot exercise rights and/or privileges pertaining to the insurance contract,
for otherwise, the vested rights of the irrevocable beneficiaries would be rendered inconsequential.
Of equal importance is the well-settled rule that the contract between the parties is the law binding on
both of them and for so many times, this court has consistently issued pronouncements upholding the
validity and effectivity of contracts. Likewise, contracts which are the private laws of the contracting
parties should be fulfilled according to the literal sense of their stipulations, for contracts are obligatory, no
matter in what form they may be, whenever the essential requisites for their validity are present

6
The change in the designation of was not within the contemplation of the parties. The lower court instead
made a new contract for them. It acted in excess of its authority when it did so.

Insurance Case Digest: Heirs Of Loreto C. Maramag V Maramag (2009)

G.R. No. 181132 June 5, 2009
Lessons Applicable: To whom insurance proceeds payable (Insurance)

FACTS:
Loreto Maramag designated as beneficiary his concubine Eva de Guzman MaramagVicenta Maramag
and Odessa, Karl Brian, and Trisha Angelie (heirs of Loreto Maramag) and his concubine Eva de
Guzman Maramag, also suspected in the killing of Loreto and his illegitimate children are claiming for his
insurance.
Vicenta alleges that Eva is disqualified from claiming
RTC: Granted - civil code does NOT apply
CA: dismissed the case for lack of jurisdiction for filing beyond reglementary period

ISSUE: W/N Eva can claim even though prohibited under the civil code against donation

HELD: YES. Petition is DENIED.

Any person who is forbidden from receiving any donation under Article 739 cannot be named
beneficiary of a life insurance policy of the person who cannot make any donation to him
If a concubine is made the beneficiary, it is believed that the insurance contract will still remain valid, but
the indemnity must go to the legal heirs and not to the concubine, for evidently, what is prohibited under
Art. 2012 is the naming of the improper beneficiary.
SECTION 53. The insurance proceeds shall be applied exclusively to the proper interest of the person in
whose name or for whose benefit it is made unless otherwise specified in the policy.
GR: only persons entitled to claim the insurance proceeds are either the insured, if still alive; or the
beneficiary, if the insured is already deceased, upon the maturation of the policy.
EX: situation where the insurance contract was intended to benefit third persons who are not parties to
the same in the form of favorable stipulations or indemnity. In such a case, third parties may directly sue
and claim from the insurer.
It is only in cases where the insured has not designated any beneficiary, or when the designated
beneficiary is disqualified by law to receive the proceeds, that the insurance policy proceeds shall
redound to the benefit of the estate of the insured.

Insurance Case Digest: Gaisano Cagayan, Inc. V. Insurance Company Of North America (2006)
G.R. No. 147839 June 8, 2006

7
Lessons Applicable: Existing Interest (Insurance)
Laws Applicable: Article 1504,Article 1263, Article 2207 of the Civil Code, Section 13 of Insurance
Code

FACTS:

Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. while Levi Strauss
(Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks owned by Levi Strauss &
Co
IMC and LSPI separately obtained from Insurance Company of North America fire insurance
policies for their book debt endorsements related to their ready-made clothing materials which have
been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines which
are unpaid 45 days after the time of the loss.
February 25, 1991: Gaisano Superstore Complex in Cagayan de Oro City, owned by Gaisano Cagayan,
Inc., containing the ready-made clothing materials sold and delivered by IMC and LSPI was consumed by
fire.
February 4, 1992: Insurance Company of North America filed a complaint for damages against Gaisano
Cagayan, Inc. alleges that IMC and LSPI filed their claims under their respective fire insurance policies
which it paid thus it was subrogated to their rights
Gaisano Cagayan, Inc: not be held liable because it was destroyed due to fortuities event or force
majeure.
RTC: IMC and LSPI retained ownership of the delivered goods until fully paid, it must bear the loss
(res perit domino)
CA: Reversed - sales invoices is an exception under Article 1504 (1) of the Civil Code to res perit
domino

ISSUE: W/N Insurance Company of North America can claim against Gaisano Cagayan for the debt
that was isnured

HELD: YES. petition is partly GRANTED. order to pay P535,613 is DELETED

insurance policy is clear that the subject of the insurance is the book debts and NOT goods sold and
delivered to the customers and dealers of the insured
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is
transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or not, except that:

(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of
the contract and the ownership in the goods has been retained by the seller merely to secure
performance by the buyer of his obligations under the contract, the goods are at the buyer's risk from
the time of such delivery;
IMC and LSPI did not lose complete interest over the goods. They have an insurable interest until full
payment of the value of the delivered goods. Unlike the civil law concept of res perit domino, where
ownership is the basis for consideration of who bears the risk of loss, in property insurance, one's interest
is not determined by concept of title, but whether insured has substantial economic interest in the property
Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether real or
personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril
might directly damnify the insured." Parenthetically, under Section 14 of the same Code, an insurable

8
interest in property may consist in: (a) an existing interest; (b) an inchoate interest founded on existing
interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss
from its destruction.
it is sufficient that the insured is so situated with reference to the property that he would be liable to loss
should it be injured or destroyed by the peril against which it is insured
an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or
possession of, the subject
matter of the insurance, and neither the title nor a beneficial interest is requisite to the existence of such
an interest
insurance in this case is not for loss of goods by fire but for petitioner's accounts with IMC and LSPI that
remained unpaid 45 days after the fire - obligation is pecuniary in nature
obligor should be held exempt from liability when the loss occurs thru a fortuitous event only holds true
when the obligation consists in the delivery of a determinate thing and there is no stipulation holding him
liable even in case of fortuitous event
Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or destruction of anything
of the same kind does not extinguish the obligation (Genus nunquan perit)
The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as
insurer and IMC as the insured, but also the amount paid to settle the insurance claim
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance
company shall be subrogated to the rights of the insured against the wrongdoer or the person who has
violated the contract.
As to LSPI, no subrogation receipt was offered in evidence.
Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of the amount of
P535,613

nsurance Case Digest: Cha V. CA (1997)

G.R. No. 124520 August 18, 1997

Lessons Applicable: Effect of Lack of Insurable Interest (Insurance)

Laws Applicable: Sec. 17, Sec. 18, Sec. 25 of the Insurance Code

FACTS:

Spouses Nilo Cha and Stella Uy-Cha and CKS Development Corporation entered a 1 year lease contract
with a stipulation not to insure against fire the chattels, merchandise, textiles, goods and effects placed at
any stall or store or space in the leased premises without first obtaining the written consent and approval
of the lessor. But it insured against loss by fire their merchandise inside the leased premises for
P500,000 with the United Insurance Co., Inc. without the written consent of CKS
On the day the lease contract was to expire, fire broke out inside the leased premises and CKS learning
that the spouses procured an insurance wrote to United to have the proceeds be paid directly to them.
But United refused so CKS filed against Spouses Cha and United.
RTC: United to pay CKS the amount of P335,063.11 and Spouses Cha to pay P50,000 as exemplary
damages, P20,000 as attorney’s fees and costs of suit

9
CA: deleted exemplary damages and attorney’s fees
ISSUE: W/N the CKS has insurable interest because the spouses Cha violated the stipulation

HELD: NO. CA set aside. Awarding the proceeds to spouses Cha.

Sec. 18. No contract or policy of insurance on property shall be enforceable except for the benefit of
some person having an insurable interest in the property insured
A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their
merchandise is primarily a contract of indemnity. Insurable interest in the property insured must exist a t
the time the insurance takes effect and at the time the loss occurs. The basis of such requirement of
insurable interest in property insured is based on sound public policy: to prevent a person from taking out
an insurance policy on property upon which he has no insurable interest and collecting the proceeds of
said policy in case of loss of the property. In such a case, the contract of insurance is a mere wager
which is void under Section 25 of the Insurance Code.
SECTION 25. Every stipulation in a policy of Insurance for the payment of loss, whether the person
insured has or has not any interest in the property insured, or that the policy shall be received as proof of
such interest, and every policy executed by way of gaming or wagering, is void
Section 17. The measure of an insurable interest in property is the extent to which the insured might be
damnified by loss of injury thereof
The automatic assignment of the policy to CKS under the provision of the lease contract previously
quoted is void for being contrary to law and/or public policy. The proceeds of the fire insurance policy
thus rightfully belong to the spouses. The liability of the Cha spouses to CKS for violating their lease
contract in that Cha spouses obtained a fire insurance policy over their own merchandise, without the
consent of CKS, is a separate and distinct issue which we do not resolve in this case.
Labels: 1997, August 18, Case Digest, Cha v CA, Effect of Lack of Insurable Interest, G.R. No. 124520,
insurance, insurance case digest, insurance code, Sec 17, Sec 18

Insurance Case Digest: San Miguel Brewery V. Law Union And Rock Insurance Co. (1920)

G.R. No. L-14300 January 19, 1920

Lessons Applicable:
Mortgagor (Insurance)
Measure of Insurable Interest (Insurance)
Effect of Change of Interest in Thing Insured (Insurance)
Effect of transfer of thing insured (Insurance)
Laws Applicable: sec. 16,sec. 19 (now sec. 20),sec. 50,sec.55 (now sec. 58) of the Insurance Code (all
old law)

FACTS:

In the contract of mortgage, the owner P.D. Dunn had agreed, at his own expense, to insure the
mortgaged property for its full value and to indorse the policies in such manner as to authorize the
Brewery Company to receive the proceeds in case of loss and to retain such part thereof as might be
necessary to satisfy the remainder then due upon the mortgage debt. Instead, however, of effecting the
insurance himself Dunn authorized and requested the Brewery Company to procure insurance on the
property in the amount of P15,000 at Dunn's expense.
San Miguel insured the property only as mortgagee.

10
Dunn sold the propert to Henry Harding. The insurance was not assigned by Dunn to Harding.
When it was destroyed by fire, the two companies settled with San Miguelto the extent of the mortgage
credit.
RTC: Absolved the 2 companies from the difference. Henry Harding is not entitled to the difference
between the mortgage credit and the face value of the policies.
Henry Harding appealed.
ISSUE:
1. W/N San Miguel has insurable interest as mortgagor only to the extent of the mortgage credit - YES
2. W/N Harding has insurable interest as owner - NO

HELD: affirmed
section 19 of the Insurance Act:
a change of interest in any part of a thing insured unaccompanied by a corresponding change of interest
in the insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the
interest in the insurance are vested in the same person
section 55:
the mere transfer of a thing insured does not transfer the policy, but suspends it until the same person
becomes the owner of both the policy and the thing insured
Undoubtedly these policies of insurance might have been so framed as to have been "payable to the San
Miguel Brewery, mortgagee, as its interest may appear, remainder to whomsoever, during the
continuance of the risk, may become the owner of the interest insured." (Sec 54, Act No. 2427.) Such a
clause would have proved an intention to insure the entire interest in the property, not merely the
insurable interest of the San Miguel Brewery, and would have shown exactly to whom the money, in case
of loss, should be paid. But the policies are not so written.
The blame for the situation thus created rests, however, with the Brewery rather than with the insurance
companies, and there is nothing in the record to indicate that the insurance companies were requested to
write insurance upon the insurable interest of the owner or intended to make themselves liable to that
extent
If by inadvertence, accident, or mistake the terms of the contract were not fully set forth in the policy, the
parties are entitled to have it reformed. But to justify the reformation of a contract, the proof must be of
the most satisfactory character, and it must clearly appear that the contract failed to express the real
agreement between the parties
In the case now before us the proof is entirely insufficient to authorize reformation.

CONCEALEMENT

Ng GAN ZEE v Asian Crusader G.R. No. L-30685 May 30, 1983
J. Escolin:

Facts:
Kwong Nam applied for a 20-year endowment insurance on his life for the sum of P20,000.00, with his
wife, appellee Ng Gan Zee as beneficiary. On the same date, Asian Crusader, upon receipt of the
required premium from the insured, approved the application and issued the corresponding policy. Kwong
Nam died of cancer of the liver with metastasis. All premiums had been paid at the time of his death.
Ng Gan Zee presented a claim for payment of the face value of the policy. On the same date, she
submitted the required proof of death of the insured. Appellant denied the claim on the ground that the
answers given by the insured to the questions in his application for life insurance were untrue.
Appellee brought the matter to the attention of the Insurance Commissioner. The latter, after conducting
an investigation, wrote the appellant that he had found no material concealment on the part of the insured

11
and that, therefore, appellee should be paid the full face value of the policy. The company refused to
settle its obligation.
Appellant alleged that the insured was guilty of misrepresentation when he answered "No" to the following
question appearing in the application for life insurance-
Has any life insurance company ever refused your application for insurance or for reinstatement of a
lapsed policy or offered you a policy different from that applied for? If, so, name company and date.
The lower court ruled against the company on lack of evidence.
Appellant further maintains that when the insured was examined in connection with his application for life
insurance, he gave the appellant's medical examiner false and misleading information as to his ailment
and previous operation. The company contended that he was operated on for peptic ulcer 2 years before
the policy was applied for and that he never disclosed such an operation.

Issue: WON Asian Crusader was deceived into entering the contract or in accepting the risk at the rate of
premium agreed upon because of insured's representation?

Held: No. Petition dismissed.

Ratio:
Section 27 of the Insurance Law:
Sec. 27. Such party a contract of insurance must communicate to the other, in good faith, all facts within
his knowledge which are material to the contract, and which the other has not the means of ascertaining,
and as to which he makes no warranty.
"Concealment exists where the assured had knowledge of a fact material to the risk, and honesty, good
faith, and fair dealing requires that he should communicate it to the assurer, but he designedly and
intentionally withholds the same."
It has also been held "that the concealment must, in the absence of inquiries, be not only material, but
fraudulent, or the fact must have been intentionally withheld."
Fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the
contract. And as correctly observed by the lower court, "misrepresentation as a defense of the insurer to
avoid liability is an 'affirmative' defense. The duty to establish such a defense by satisfactory and
convincing evidence rests upon the defendant. The evidence before the Court does not clearly and
satisfactorily establish that defense."
It bears emphasis that Kwong Nam had informed the appellant's medical examiner of the tumor. His
statement that said tumor was "associated with ulcer of the stomach" should be construed as an
expression made in good faith of his belief as to the nature of his ailment and operation.
While the information communicated was imperfect, the same was sufficient to have induced appellant to
make further inquiries about the ailment and operation of the insured.
Section 32 of Insurance Law:
Section 32. The right to information of material facts maybe waived either by the terms of insurance or by
neglect to make inquiries as to such facts where they are distinctly implied in other facts of which
information is communicated.
Where a question appears to be not answered at all or to be imperfectly answered, and the insurers issue
a policy without any further inquiry, they waive the imperfection of the answer and render the omission to
answer more fully immaterial.
The company or its medical examiner did not make any further inquiries on such matters from the hospital
before acting on the application for insurance. The fact of the matter is that the defendant was too eager
to accept the application and receive the insured's premium. It would be inequitable now to allow the
defendant to avoid liability under the circumstances."

12
13