TITLE OF THE CASE: current business practices.

In contrast to contracts entered into by parties bargaining

G.R. No. L-4611 December 17, 1955
Qua Chee Gan, plaintiff-appellee, VS.
Law Union and Rock Insurance Co., Ltd., represented by its agent,
Warner, Barnes and Co., Ltd., defendant-appellant.
FACTS:
In 1939, Qua Chee Gan (QCG) owned 4 warehouses, called “Bodegas 1 to 4” in
Albay used for the storage of copra and hemp, which were insured since 1937 with
Law Union and Rock Insurance Co, Ltd. (LURI) amounting to 370,000 Php, and the
loss of which was made payable to Philippine National Bank (PNB) as mortgage of
the hemp and copra to the extent of its interest. On July 1940, fire destroyed
Bodegas 1, 2 and 4. QCG informed Law Union by telegram about the incident and the
next day, Fire adjusters arrived and dealt with the investigation. After the report has
been made, LURI resisted in paying QCG claiming violations of warranties and
conditions, filing fraudulent claims and that the fire had been deliberately caused by
QCG or by other persons in connivance with him.
Thereafter, QCG, his brother, Qua Chee Pao and some employees were indicted
and tried for arson but were acquitted. A civil suit to collect from LURI was filed by
QCG and the trial court decided on the latter’s favor. There was a complaint filed by
PNB in intervention but was dismissed because QCG was able to pay his
indebtedness during the pendency of the case.
There were several issues involved and the CFI decided that Law Union was
liable.
on an equal footing, a contract of insurance calls for greater strictness and vigilance
on the part of courts of justice with a view to protect the weaker party from abuses
and imposition, and prevent their becoming traps for the unwary. The contract of
insurance is one of perfect good faith not for the insured alone, but equally so for
the insurer; in fact, it is more so for the latter, since its dominant bargaining position
carries with it stricter responsibility.
QCG admitted that there were 36 cans of gasoline in Bodega 2. Gasoline is not
specifically mentioned among the prohibited articles listed in the hemp warranty. In
ordinary parlance, “oils” means “lubricants” and not gasoline or kerosene. The
prohibition of keeping gasoline could have been expressed clearly and unmistakably.
Also, gasoline is not one of those items specifically prohibited from the premises
of the warehouses. What was mentioned was the word “oil” which could mean
anything (from palm oil to lubricant and not gasoline or kerosene). This ambiguity is
to be interpreted against LURI because a contract of insurance is a contract of
adhesion. Further, oil is incidental to QCG’s business, it being used for motor fuel.
On fire hydrants warranty
LURI is estopped from claiming that there was a violation of such warranty, since
it knew that from the start, the number of hydrants it demanded never existed, yet it
issued policies and received premiums.

ISSUE: DOCTRINES:
Whether or not the insurance contract at bar was void.  Bachrach vs. British American Assurance Co. (17 Phil. 555, 561)
 New Civil Code, Article 24; Sent. of Supreme Court of Spain, 13 Dec.
HELD: 1934, 27 February 1942
No. The contract was binding and enforceable. LURI cannot exempt itself from
 Wilson vs. Commercial Union Assurance Co., 96 Atl. 540, 543-544
paying QCG because it is estopped through a waiver (or estoppel) from doing so.
According to the Supreme Court, it is a well settled rule of law that an insurer which
with knowledge of facts entitling it to treat a policy as no longer in force, receives
and accepts a premium on the policy, estopped to take advantage of the forfeiture. Research Purposes only!

On false and fraudulent claims

The Court of First Instance found that the discrepancies were a result of QCG’s
erroneous interpretation of the provisions of the insurance policies and claim forms,
caused by his imperfect English, and that the misstatements were innocently made
and without intent to defraud. The rule is that to avoid a policy, the false swearing
must be willful and with intent to defraud which was not the cause.

On the storage of gasoline

Ambiguities or obscurities must be strictly interpreted against the party that
caused them. This rigid application of the rule has become necessary in view of