G.R. No.

106999 June 20, 1996

PHILIPPINE HOME ASSURANCE CORPORATION, petitioner,

vs.

COURT OF APPEALS and EASTERN SHIPPING LINES, INC., respondents.

KAPUNAN, J.:p

Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan, the following shipment for
carriage to Manila and Cebu, freight pre-paid and in good order and condition, viz: (a) two (2) boxes internal combustion
engine parts, consigned to William Lines, Inc. under Bill of Lading No. 042283; (b) ten (l0) metric ton. (334 bags)
ammonium chloride, consigned to Orca's Company under Bill of Lading No. KCE-I2; (c) two hundred (200) bags Glue 300,
consigned to Pan Oriental Match Company under Bill of Lading No. KCE-8; and (d) garments, consigned to Ding Velayo
under Bills of Lading Nos. KMA-73 and KMA-74.

While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene cylinder located in the
accommodation area near the engine room on the main deck level. As the crew was trying to extinguish the fire, the
acetylene cylinder suddenly exploded sending a flash of flame throughout the accommodation area, thus causing death
and severe injuries to the crew and instantly setting fire to the whole superstructure of the vessel. The incident forced
the master and the crew to abandon the ship.

Thereafter, SS Eastern Explorer was found to be a constructive total loss and its voyage was declared abandoned.

Several hours later, a tugboat under the control of Fukuda Salvage Co. arrived near the vessel and commenced to tow
the vessel for the port of Naha, Japan.

Fire fighting operations were again conducted at the said port. After the fire was extinguished, the cargoes which were
saved were loaded to another vessel for delivery to their original ports of destination. ESLI charged the consignees
several amounts corresponding to additional freight and salvage charges, as follows: (a) for the goods covered by Bill of
Lading No. 042283, ESLI charged the consignee the sum of P1,927.65, representing salvage charges assessed against the
goods; (b) for the goods covered by Bill of Lading No. KCE-12, ESLI charged the consignee the sum of P2,980.64 for
additional freight and P826.14 for salvage charges against the goods; (c) for the goods covered by Bill of Lading No. KCE-
8, ESLI charged the consignee the sum of P3,292.26 for additional freight and P4,130.68 for salvage charges against the
goods; and

(d) for the goods under Bills of Lading Nos. KMA-73 and KMA-74, ESLI charged the consignee the sum of P8,337.06 for
salvage charges against the goods.

The charges were all paid by Philippine Home Assurance Corporation (PHAC) under protest for and in behalf of the
consignees.

PHAC, as subrogee of the consignees, thereafter filed a complaint before the Regional Trial Court of Manila, Branch 39,
against ESLI to recover the sum paid under protest on the ground that the same were actually damages directly brought
about by the fault, negligence, illegal act and/or breach of contract of ESLI.

In its answer, ESLI contended that it exercised the diligence required by law in the handling, custody and carriage of the
shipment; that the fire was caused by an unforeseen event; that the additional freight charges are due and demandable
pursuant to the Bill of Lading; 1 and that salvage charges are properly collectible under Act No. 2616, known as the
Salvage Law.
The trial court dismissed PHAC's complaint and ruled in favor of ESLI ratiocinating thus:

The question to be resolved is whether or not the fire on the vessel which was caused by the explosion of an acetylene
cylinder loaded on the same was the fault or negligence of the defendant.

Evidence has been presented that the SS "Eastern Explorer" was a seaworthy vessel (Deposition of Jumpei Maeda,
October 23, 1980, p. 3) and before the ship loaded the Acetylene Cylinder No. NCW 875, the same has been tested,
checked and examined and was certified to have complied with the required safety measures and standards (Deposition
of Senjei Hayashi, October 23, 1980, pp. 2-3). When the fire was detected by the crew, fire fighting operations was
immediately conducted but due to the explosion of the acetylene cylinder, the crew were unable to contain the fire and
had to abandon the ship to save their lives and were saved from drowning by passing vessels in the vicinity. The burning
of the vessel rendering it a constructive total loss and incapable of pursuing its voyage to the Philippines was, therefore,
not the fault or negligence of defendant but a natural disaster or calamity which nobody would like to happen. The
salvage operations conducted by Fukuda Salvage Company (Exhibits "4-A" and "6-A") was perfectly a legal operation and
charges made on the goods recovered were legitimate charges.

Act No. 2616, otherwise known as the Salvage Law, is thus applicable to the case at bar. Section 1 of Act No. 2616 states:

Sec 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or shall have been
abandoned by them, and picked up and conveyed to a safe place by other persons, the latter shall be entitled to a
reward for the salvage.

Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck, shall be
entitled to like reward.

In relation to the above provision, the Supreme Court has ruled in Erlanger & Galinger v. Swedish East Asiatic Co., Ltd.,
34 Phil. 178, that three elements are necessary to a valid salvage claim, namely (a)a marine peril (b) service voluntarily
rendered when not required as an existing duty or from a special contract and (c) success in whole or in part, or that the
service rendered contributed to such success.

The above elements are all present in the instant case. Salvage charges may thus be assessed on the cargoes saved from
the vessel. As provided for in Section 13 of the Salvage Law, "The expenses of salvage, as well as the reward for salvage
or assistance, shall be a charge on the things salvaged or their value." In Manila Railroad Co. v. Macondray Co., 37 Phil.
583, it was also held that "when a ship and its cargo are saved together, the salvage allowance should be charged
against the ship and cargo in the proportion of their respective values, the same as in a case of general average . . ."
Thus, the "compensation to be paid by the owner of the cargo is in proportion to the value of the vessel and the value of
the cargo saved." (Atlantic Gulf and Pacific Co. v. Uchida Kisen Kaisha, 42 Phil. 321). (Memorandum for Defendant,
Records, pp. 212-213).

With respect to the additional freight charged by defendant from the consignees of the goods, the same are also validly
demandable.

As provided by the Civil Code:

Art. 1174. Except in cases expressly specified by law, or when it is otherwise declared by stipulation, or when the nature
of the obligation require the assumption of risk, no person shall be responsible for those events which could not be
foreseen, or which though foreseen, were inevitable.
Art 1266. The debtor in obligations to do shall also be released when the prestation becomes legally or physically
impossible without the fault of the obligor."

The burning of "EASTERN EXPLORER" while off Okinawa rendered it physically impossible for defendant to comply with
its obligation of delivering the goods to their port of destination pursuant to the contract of carriage. Under Article 1266
of the Civil Code, the physical impossibility of the prestation extinguished defendant's obligation..

It is but legal and equitable for the defendant therefore, to demand additional freight from the consignees for
forwarding the goods from Naha, Japan to Manila and Cebu City on board another vessel, the "EASTERN MARS." This
finds support under Article 844 of the Code of Commerce which provides as follows:

Art. 844. A captain who may have taken on board the goods saved from the wreck shall continue his course to the port
of destination; and on arrival should deposit the same, with judicial intervention at the disposal of their legitimate
owners. . . .

The owners of the cargo shall defray all the expenses of this arrival as well as the payment of the freight which, after
taking into consideration the circumstances of the case, may be fixed by agreement or by a judicial decision.

Furthermore, the terms and conditions of the Bill of Lading authorize the imposition of additional freight charges in case
of forced interruption or abandonment of the voyage. At the dorsal portion of the Bills of Lading issued to the
consignees is this stipulation:

12. All storage, transshipment, forwarding or other disposition of cargo at or from a port of distress or other place where
there has been a forced interruption or abandonment of the voyage shall be at the expense of the owner, shipper,
consignee of the goods or the holder of this bill of lading who shall be jointly and severally liable for all freight charges
and expenses of every kind whatsoever, whether payable in advance or not that may be incurred by the cargo in
addition to the ordinary freight, whether the service be performed by the named carrying vessel or by carrier's other
vessels or by strangers. All such expenses and charges shall be due and payable day by day immediately when they are
incurred.

The bill of lading is a contract and the parties are bound by its terms (Gov't of the Philippine Islands vs. Ynchausti and
Co., 40 Phil. 219). The provision quoted is binding upon the consignee.

Defendant therefore, can validly require payment of additional freight from the consignee. Plaintiff can not thus recover
the additional freight paid by the consignee to defendant. (Memorandum for Defendant, Record, pp. 215-216).2

On appeal to the Court of Appeals, respondent court affirmed the trial court's findings and conclusions, 3 hence, the
present petition for review before this Court on the following errors:

I. THE RESPONDENT COURT ERRONEOUSLY ADOPTED WITH APPROVAL THE TRIAL COURT'S FINDINGS THAT THE
BURNING OF THE SS "EASTERN EXPLORER", RENDERING ET A CONSTRUCTIVE TOTAL LOSS, IS A NATURAL DISASTER OR
CALAMITY WHICH NOBODY WOULD LIKE TO HAPPEN, DESPITE EXISTING JURISPRUDENCE TO THE CONTRARY.

II. THE RESPONDENT COURT ARBITRARILY RULED THAT THE BURNING OF THE SS "EASTERN EXPLORER" WAS NOT THE
FAULT AND NEGLIGENCE OF RESPONDENT EASTERN SHIPPING LINES.
III. THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION IN RULING THAT DEFENDANT HAD EXERCISED
THE EXTRAORDINARY DILIGENCE IN THE VIGILANCE OVER THE GOODS AS REQUIRED BY LAW.

IV. THE RESPONDENT COURT ARBITRARILY RULED THAT THE MARINE NOTE OF PROTEST AND STATEMENT OF FACTS
ISSUED BY THE VESSEL'S MASTER ARE NOT HEARSAY DESPITE THE FACT THAT THE VESSEL'S MASTER, CAPT. LICAYLICAY
WAS NOT PRESENTED COURT, WITHOUT EXPLANATION WHATSOEVER FOR HIS NON-PRESENTATION, THUS, PETITIONER
WAS DEPRIVED OF ITS RIGHT TO CROSS- EXAMINE THE AUTHOR THEREOF.

V. THE RESPONDENT COURT ERRONEOUSLY ADOPTED WITH APPROVAL THE TRIAL COURT'S CONCLUSION THAT THE
EXPENSES OR AVERAGES INCURRED IN SAVING THE CARGO CONSTITUTE GENERAL AVERAGE.

VI. THE RESPONDENT COURT ERRONEOUSLY ADOPTED THE TRIAL COURT'S RULING THAT PETITIONER WAS LIABLE TO
RESPONDENT CARRIER FOR ADDITIONAL FREIGHT AND SALVAGE CHARGES. 4

It is quite evident that the foregoing assignment of errors challenges the findings of fact and the appreciation of
evidence made by the trial court and later affirmed by respondent court. While it is a well-settled rule that only
questions of law may be raised in a petition for review under Rule 45 of the Rules of Court, it is equally well-settled that
the same admits of the following exceptions, namely: (a) when the conclusion is a finding grounded entirely on
speculation, surmises or conjectures; (b) when the inference made is manifestly mistaken, absurd or impossible; (c)
where there is a grave abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the
findings of fact are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case
and the same is contrary to the admissions of both appellant and appellee; (g) when the findings of the Court of Appeals
are contrary to those of the trial court; (h) when the findings of fact are conclusions without citation of specific evidence
on which they are based;

(i) when the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed by the
respondents; and (j) when the finding of fact of the Court of Appeals is premised on the supposed absence of evidence
and is contradicted by the evidence on record. 5 Thus, if there is a showing, as in the instant case, that the findings
complained of are totally devoid of support in the records, or that they are so glaringly erroneous as to constitute grave
abuse of discretion, the same may be properly reviewed and evaluated by this Court.

It is worthy to note at the outset that the goods subject of the present controversy were neither lost nor damaged in
transit by the fire that razed the carrier. In fact, the said goods were all delivered to the consignees, even if the
transshipment took longer than necessary. What is at issue therefore is not whether or not the carrier is liable for the
loss, damage, or deterioration of the goods transported by them but who, among the carrier, consignee or insurer of the
goods, is liable for the additional charges or expenses incurred by the owner of the ship in the salvage operations and in
the transshipment of the goods via a different carrier.

In absolving respondent carrier of any liability, respondent Court of Appeals sustained the trial court's finding that the
fire that gutted the ship was a natural disaster or calamity. Petitioner takes exception to this conclusion and we agree.

In our jurisprudence, fire may not be considered a natural disaster or calamity since it almost always arises from some
act of man or by human means.

It cannot be an act of God unless caused by lightning or a natural disaster or casualty not attributable to human agency.

In the case at bar, it is not disputed that a small flame was detected on the acetylene cylinder and that by reason
thereof, the same exploded despite efforts to extinguish the fire. Neither is there any doubt that the acetylene cylinder,
obviously fully loaded, was stored in the accommodation area near the engine room and not in a storage area
considerably far, and in a safe distance, from the engine room. Moreover, there was no showing, and none was alleged
by the parties, that the fire was caused by a natural disaster or calamity not attributable to human agency. On the
contrary, there is strong evidence indicating that the acetylene cylinder caught fire because of the fault and negligence
of respondent ESLI, its captain and its crew.

First, the acetylene cylinder which was fully loaded should not have been stored in the accommodation area near the
engine room where the heat generated therefrom could cause the acetylene cylinder to explode by reason of
spontaneous combustion. Respondent ESLI should have easily foreseen that the acetylene cylinder, containing highly
inflammable material was in real danger of exploding because it was stored in close proximity to the engine room.

Second, respondent ESLI should have known that by storing the acetylene cylinder in the accommodation area supposed
to be reserved for passengers, it unnecessarily exposed its passengers to grave danger and injury. Curious passengers,
ignorant of the danger the tank might have on humans and property, could have handled the same or could have lighted
and smoked cigarettes while repairing in the accommodation area.

Third, the fact that the acetylene cylinder was checked, tested and examined and subsequently certified as having
complied with the safety measures and standards by qualified experts 7 before it was loaded in the vessel only shows to
a great extent that negligence was present in the handling of the acetylene cylinder after it was loaded and while it was
on board the ship. Indeed, had the respondent and its agents not been negligent in storing the acetylene cylinder near
the engine room, then the same would not have leaked and exploded during the voyage.

Verily, there is no merit in the finding of the trial court to which respondent court erroneously agreed that the fire was
not the fault or negligence of respondent but a natural disaster or calamity. The records are simply wanting in this
regard.

Anent petitioner's objection to the admissibility of Exhibits "4'' and ''5", the Statement of Facts and the Marine Note of
Protest issued by Captain Tiburcio A. Licaylicay, we find the same impressed with merit because said documents are
hearsay evidence. Capt. Licaylicay, Master of S.S. Eastern Explorer who issued the said documents, was not presented in
court to testify to the truth of the facts he stated therein; instead, respondent ESLI presented Junpei Maeda, its Branch
Manager in Tokyo and Yokohama, Japan, who evidently had no personal knowledge of the facts stated in the documents
at issue. It is clear from Section 36, Rule 130 of the Rules of Court that any evidence, whether oral or documentary, is
hearsay if its probative value is not based on the personal knowledge of the witness but on the knowledge of some
other person not on the witness stand. Consequently, hearsay evidence, whether objected to or not, has no probative
value unless the proponent can show that the evidence falls within the exceptions to the hearsay evidence rule. 8 It is
excluded because the party against whom it is presented is deprived of his right and opportunity to cross-examine the
persons to whom the statements or writings are attributed.

On the issue of whether or not respondent court committed an error in concluding that the expenses incurred in saving
the cargo are considered general average, we rule in the affirmative. As a rule, general or gross averages include all
damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time,
from a real and known risk 9 While the instant case may technically fall within the purview of the said provision, the
formalities prescribed under Articles 813 10 and 814 11 of the Code of Commerce in order to incur the expenses and
cause the damage corresponding to gross average were not complied with. Consequently, respondent ESLI's claim for
contribution from the consignees of the cargo at the time of the occurrence of the average turns to naught.

Prescinding from the foregoing premises, it indubitably follows that the cargo consignees cannot be made liable to
respondent carrier for additional freight and salvage charges. Consequently, respondent carrier must refund to herein
petitioner the amount it paid under protest for additional freight and salvage charges in behalf of the consignees.
WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE. Respondent Eastern Shipping Lines, Inc.
is ORDERED to return to petitioner Philippine Home Assurance Corporation the amount it paid under protest in behalf of
the consignees herein.

SO ORDERED.

G.R. No. L-5715 December 20, 1910

E. M. BACHRACH, plaintiff-appellee,
vs.
BRITISH AMERICAN ASSURANCE COMPANY, a corporation, defendant-appellant.

Haussermann, Ortigas, Cohn and Fisher, for appellant

Kincaid & Hurd and Thomas L. Hartigan, for appellee.

JOHNSON, J.:

On the 13th of July, 1908, the plaintiff commenced an action against the defendant to recover the sum of P9,841.50,
the amount due, deducting the salvage, upon the following fire insurance policy issued by the defendant to the
plaintiff:

[Fire policy No. 3007499.]

This policy of insurance witnesseth, that E. M. Bachrach, esq., Manila (hereinafter called the insured),
having paid to the undersigned, as authorized agent of the British American Assurance Company
(hereinafter called the company), the sum of two thousand pesos Philippine currency, for insuring against
loss or damage by fire, as hereinafter mentioned, the property hereinafter described, in the sum of several
sums following, viz:

Ten thousand pesos Philippine currency, on goods, belonging to a general furniture store, such as iron and
brass bedsteads, toilet tables, chairs, ice boxes, bureaus, washstands, mirrors, and sea-grass furniture (in
accordance with warranty "D" of the tariff attached hereto) the property of the assured, in trust, on
commission or for which he is responsible, whilst stored in the ground floor and first story of house and
dwelling No. 16 Calle Martinez, district 3, block 70, Manila, built, ground floor of stone and or brick, first story
of hard wood and roofed with galvanized iron — bounded in the front by the said calle, on one side by Calle
David and on the other two sides by buildings of similar construction and occupation.

Co-insurance allowed, particulars of which to be declared in the event of loss or claim.

The company hereby agrees with the insured (but subject to the conditions on the back hereof, which are to
be taken as a part of this policy) that if the property above described, or any part thereof, shall be destroyed
or damaged by fire, at any time between the 21st day of February, 1908, and 4 o'clock in the afternoon of
the 21st day of February, 1909, or (in case of the renewal of this policy) at any time afterwards, so long as,
and during the period in respect of which the insured shall have paid to the company, and they shall have
accepted, the sum required for the renewal of this policy, the company will, out of their capital stock, and
funds, pay or make good to the insured the value of the property so destroyed, or the amount of such
damage thereto, to any amount not exceeding, in respect of each or any of the several matters above
specified, the sum set opposite thereto, respectively, and not exceeding in the whole the sum of ten
thousand pesos, and also not exceeding, in any case, the amount of the insurable interest therein of the
insured at the time of the happening of such fire.

In witness whereof, the British American Assurance Company has accused these presents to be signed this
21st day of February, in the year of our Lord 1908.

For the company.

W. F. STEVENSON & Co. LTD.,

"By...............................................,
"Manager Agents."
 And indorsed on the back the following:

The within policy and includes a "Calalac" automobile to the extent of (P1,250) twelve hundred and
fifty pesos Philippine currency.

Memo: Permission is hereby granted for the use of gasoline not to exceed 10 gallons for the above
automobile, but only whilst contained in the reservoir of the car. It is further warranted that the car be
neither filled nor emptied in the within-described building or this policy be null and void.

Manila, 27th February, 1908.

"W. F. STEVENSON & Co. LTD.,

"By.......................................................,
"Manager Agents."

The defendant answered the complaint, admitting some of the facts alleged by the plaintiff and denying others. The
defendant also alleged certain facts under which it claimed that it was released from all obligations whatever under
said policy. These special facts are as follows:

First. That the plaintiff maintained a paint and varnish shop in the said building where the goods which were insured
were stored.

Second. That the plaintiff transferred his interest in and to the property covered by the policy to H. W. Peabody &
Co. to secure certain indebtedness due and owing to said company, and also that the plaintiff had transferred his
interest in certain of the goods covered by the said policy to one Macke, to secure certain obligations assumed by
the said Macke for and on behalf of the insured. That the sanction of the said defendant had not been obtained by
the plaintiff, as required by the said policy.

Third. That the plaintiff, on the 18th of April, 1908, and immediately preceding the outbreak of the alleged fire,
willfully placed a gasoline can containing 10 gallons of gasoline in the upper story of said building in close proximity
to a portion of said goods, wares, and merchandise, which can was so placed by the plaintiff as to permit the
gasoline to run on the floor of said second story, and after so placing said gasoline, he, the plaintiff, placed in close
proximity to said escaping gasoline a lighted lamp containing alcohol, thereby greatly increasing the risk of fire.

Fourth. That the plaintiff made no proof of the loss within the time required by condition five of said policy, nor did
the insured file a statement with he municipal or any other judge or court of the goods alleged to have been in said
building at the time of the alleged fire, nor of the goods saved, nor the loss suffered.

The plaintiff, after denying nearly all of the facts set out in the special answer of the defendant, alleged:

First. That he had been acquitted in a criminal action against him, after a trial duly and regularly had, upon a charge
of arson, based upon the same alleged facts set out in the answer of the defendant.

Second. That her had made no proof of the loss set up in his complaint for the reason that immediately after he had,
on the 20th of April, 1908, given the defendant due notice in writing of said loss, the defendant, on the 21st of April,
1908, and thereafter on other occasions, had waived all right to require proof of said loss by denying all liability
under the policy and by declaring said policy to be null and void.

After hearing the evidence adduced during the trial of the cause, the lower court found that the defendant was liable
to the plaintiff and rendered a judgment against the defendant for the sum of P9,841.50, with interest for a period of
one year at 6 per cent, making a total of P10,431.99, with costs.

From that decision the defendant appealed and made the following assignments of error:

1. The court erred in failing to hold that the use of the building, No. 16 Calle Martinez, as a paint and varnish shop
annulled the policy of insurance.

2. The court erred in failing to hold the execution of the chattel mortgages without the knowledge and consent of the
insurance company annulled the policy of insurance.

3. The court erred in holding that the keeping of gasoline and alcohol not in bottles in the building No. 16 Calle
Martinez was not such a violation of the conditions of the policy as to render the same null and void.

4. The court erred in failing to find as a fact that E. M. Bachrach, the insured, willfully placed a gasoline can
containing about 10 gallons of gasoline in the upper story of said building, No. 16 Calle Martinez, in close proximity
to a portion of the goods, wares, and merchandise stored therein, and that said can was so placed by said Bachrach
as to permit the gasoline to run on the floor of said second story.
5. The court erred in failing to find as a fact that E. M. Bachrach, after placing said gasoline can in close proximity to
the goods, wares, and merchandise covered by the policy of insurance, the he (Bachrach) placed in close proximity
to said escaping gasoline a lighted lamp containing alcohol, thereby greatly increasing the risk of fire.

6. The court erred in holding that the policy of insurance was in force at the time of said fire, and that the acts or
omissions on the part of the insured which cause, or tended to cause, the forfeiture of the policy, were waived by the
defendant.

7. The court erred in holding the defendant liable for the loss under the policy. lawphil.net

8. The court erred in refusing to deduct from the loss sustained by Bachrach the value of the automobile, which was
saved without damage.

9. The court erred in refusing to grant the motion for a new trial.

10. The court erred in refusing to enter judgment in favor of the defendant and against the plaintiff.

With reference to the first above assignment of error, the lower court in its decision said:

It is claimed that either gasoline or alcohol was kept in violation of the policy in the bodega containing the
insured property. The testimony on this point is somewhat conflicting, but conceding all of the defendant's
claims, the construction given to this claim by American courts would not justify the forfeiture of the policy on
that ground. The property insured consisted mainly of household furniture kept for the purpose of sale. The
preservation of the furniture in a salable condition by retouching or otherwise was incidental to the business.
The evidence offered by the plaintiff is to the effect that alcohol was used in preparing varnish for the
purpose of retouching, though he also says that the alcohol was kept in store and not in the bodega where
the furniture was. It is well settled that the keeping of inflammable oils on the premises, though prohibited by
the policy, does not void it if such keeping is incidental to the business. Thus, where a furniture factory
keeps benzine for the purposes of operation (Davis vs. Pioneer Furniture Company, 78 N. W. Rep., 596;
Faust vs. American Fire Insurance Company, 91 Wis., 158), or where it is used for the cleaning machinery
(Mears vs. Humboldt Insurance Company, 92 Pa. St., 15; 37 Am. Rep., 647), the insurer can not on that
ground avoid payment of loss, though the keeping of the benzine on the premises is expressly prohibited.
These authorities also appear sufficient to answer the objection that the insured automobile contained
gasoline and that the plaintiff on one occasion was seen in the bodega with a lighted lamp. The first was
incidental to the use of the insured article and the second being a single instance falls within the doctrine of
the case last cited.

It may be added that there was no provision in the policy prohibiting the keeping of paints and varnishes upon the
premises where the insured property was stored. If the company intended to rely upon a condition of that character,
it ought to have been plainly expressed in the policy.

With reference to the second above assignment of error, the defendant and appellant contends that the lower court
erred in failing to hold that the execution of the said chattel mortgage, without the knowledge and consent of the
insurance company and without receiving the sanction of said company, annulled the said policy of insurance.

With reference to this assignment of error, upon reading the policy of insurance issued by the defendant to the
plaintiff, it will be noted that there is no provision in said policy prohibiting the plaintiff from placing a mortgage upon
the property insured, but, admitting that such a provision was intended, we think the lower court has completely
answered this contention of the defendant. He said, in passing upon this question as it was presented:

It is claimed that the execution of a chattel mortgage on the insured property violated what is known as the
"alienation clause," which is now found in most policies, and which is expressed in the policies involved in
cases 6496 and 6497 by a purchase imposing forfeiture if the interest in the property pass from the insured.
(Cases 6496 and 6497, in which are involved other action against other insurance companies for the same
loss as in the present action.)

This clause has been the subject of a vast number of judicial decisions (13 Am. & Eng. Encyc. of Law, 2d
ed., pp. 239 et seq.), and it is held by the great weight of authority that the interest in property insured does
not pass by the mere execution of a chattel mortgage and that while a chattel mortgage is a conditional sale,
there is no alienation within the meaning of the insurance law until the mortgage acquires a right to take
possession by default under the terms of the mortgage. No such right is claimed to have accrued in the case
at bar, and the alienation clause is therefore inapplicable.

With reference to the third assignment of error above noted, upon a reading of the decision of the lower court it will
be found that there is nothing in the decision of the lower court relating to the facts stated in this assignment of error,
neither is there any provision in the policy relating to the facts alleged in said assignment of error.

Assignment of error numbers 4 and 5 above noted may be considered together.

The record discloses that some time prior to the commencement of this present action, a criminal action was
commenced against the plaintiff herein in the Court of First Instance of the city of Manila, in which he was charged
with willfully and maliciously burning the property covered by the policy in the present case. At the conclusion of the
criminal action and after hearing the evidence adduced during the trial, the lower court, with the assistance of two
assessors, found that the evidence was insufficient to show beyond peradventure of doubt that the defendant was
guilty of the crime. The evidence adduced during the trial of the criminal cause was introduced as evidence in the
present cause. While the evidence shows some very peculiar and suspicious circumstances concerning the burning
of the goods covered by the said policy, yet, nevertheless, in view of the findings of the lower court and in view of
the apparent conflict in the testimony, we can not find that there is a preponderance of evidence showing that the
plaintiff did actually set fire or cause fire to be set to the goods in question. The lower court, in discussing this
question, said:

As to the claim that the loss occurred through the voluntary act of the insured, we consider it unnecessary to
review the evidence in detail. That was done by another branch of this court in disposing of the criminal
prosecution brought against the insured, on the same ground, based mainly on the same evidence. And
regardless of whether or not the judgment in that proceeding is res adjudicata as to anything here, we are at
least of the opinion that the evidence to establish this defense should not be materially less convincing than
that required in order to convict the insured of the crime of arson. (Turtell vs. Beamount, 25 Rev. Rep., 644.)
In order to find that the defense of incendiarism was established here, we would be obliged, therefore, in
effect to set aside the findings of the judge and assessors in the criminal cause, and this we would be loath
to do even though the evidence now produced were much stronger than it is.

With reference to the sixth assignment of error above noted, to wit:  That the court erred in holding that the policy of
itc@alf

insurance was in force at the time of said fire and that the acts or omissions on the part of the insured which caused
or tended to cause a forfeiture of the policy were waived by the defendant, the lower court, in discussing this
question, said:

Regardless of the question whether the plaintiff's letter of April 20 (Exhibit B) was a sufficient compliance
with the requirement that he furnish notice of loss, the fact remains that on the following day the insurers
replied by a letter (Exhibit C) declaring that the "policies were null and void," and in effect denying liability. It
is well settled by a preponderance of authorities that such a denial is a waiver of notice of loss, because if
the "policies are null and void," the furnishing of such notice would be vain and useless. (13 Am. & Eng.
Encyc. of Law, 347, 348, 349.) Besides, "immediate notice" is construed to mean only within a reasonable
time.

Much the same may be said as to the objection that the insured failed to furnish to the insurers his books
and papers or to present a detailed statement to the "juez municipal," in accordance with article 404 of the
Code of Commerce. The last-named provision is similar to one appearing in many American policies
requiring a certificate from a magistrate nearest the loss regarding the circumstance thereof. A denial of
liability on other grounds waives this requirement (O'Niel vs. Buffalo Fire Insurance Company, 3 N. Y., 122;
Peoria Marine Ins. Co. vs. Whitehill, 25 Ill., 382), as well as that relating to the production of books and
papers (Ga. Home Ins. Co. vs. Goode & Co., 95 Va., 751; 66 Jur. Civ., 16). Besides, the insured might have
had difficulty in attempting to comply with this clause, for there is no longer an official here with the title of
"juez municipal."

Besides the foregoing reasons, it may be added that there was no requirement in the policy in question that such
notice be given.

With reference to the assignments of error numbers 7, 9, and 10, they are too general in their character to merit
consideration.

With reference to the eight assignment of error above noted, the defendant and appellant contends that he was
entitled to have the amount of his responsibility reduced by the full value (P1,250) of the said automobile.

It does not positively appear of record that the automobile in question was not included in the other policies. It does
appear that the automobile was saved and was considered as a part of the salvaged. It is alleged that the salvage
amounted to P4,000, including the automobile. This amount (P4,000) was distributed among the different insurers
and the amount of their responsibility was proportionately reduced. The defendant and appellant in the present case
made no objection at any time in the lower court to that distribution of the salvage. The claim is now made for the
first time. No reason is given why the objection was not made at the time of the distribution of the salvage, including
the automobile, among all of the insurers. The lower court had no opportunity to pass upon the question now
presented for the first time. The defendant stood by and allowed the other insurers to share in the salvage, which he
claims now wholly belonged to him. We think it is now too late to raise the question.

For all the foregoing reasons, we are of the opinion that the judgment of the lower court should be affirmed, and it is
hereby ordered that judgment be entered against the defendant and in favor of the plaintiff for the sum of P9,841.50,
with interest at the rate of 6 per cent from the 13th of July, 1908, with costs. So ordered.
[G.R. No. 5069. October 25, 1909. 1 ]

TAN CHUCO, plaintiff, appellant-appellee, v. YORKSHIRE FIRE AND LIFE INSURANCE COMPANY, defendant, appellant-
appellee.

Chicote & Miranda for plaintiff.

Lionel D. Hargis for defendant.

SYLLABUS

1. ACTION ON FIRE INSURANCE POLICY; BURDEN OF PROOF. — In the absence of an express valuation in a fire insurance
policy, recovery thereunder, in the event of fire, is limited to the amount of the actual loss incurred, and the burden is
upon the claimant to establish the amount of such loss.

DECISION

CARSON, J. :

Judgment in this action was rendered in the Court of First Instance of Manila against the plaintiff upon his claim under
an "open" fire insurance policy for compensation to the full extent of the policy, for the alleged loss by fire of a certain
stock of goods insured by the defendant company; and against the defendant company on its counterclaim for losses
resulting from the plaintiff’s alleged intentional and fraudulent setting on fire of the building wherein the insured goods
were kept, thereby as it is alleged causing the destruction by fire of several stocks of goods belonging to third parties,
and insured by the defendant company.

The trial court found that the evidence did not sustain defendant’s allegation that plaintiff or his agents had intentionally
and fraudulently set the building on fire, but was of opinion that not only had the plaintiff failed to establish the value of
the goods which he alleges were destroyed by fire but that he had failed in several particulars to live up to the terms of
his contract as set out in the policy, thereby voiding the policy and defeating his claim to indemnification thereunder.

Plaintiff and defendant each appealed from so much of the judgment as is against their respective claims.

It is not denied that all of plaintiff’s property which was within the building wherein, under the terms of policy, the
insured goods were to be kept, was destroyed by fire as alleged in the complaint; and there is no question as to the
defendant company’s liability to indemnify the plaintiff, under his policy, for the amount of these losses, when duly
established, unless it appears that plaintiff’s right of recovery was defeated by some failure on his part to live up to the
terms of his contract, as set out in the recover from the plaintiff upon its counterclaim, if it appears from the evidence
that the plaintiff, as alleged by the defendant, intentionally and fraudulently set on fire, or caused to be set on fire the
building wherein it is alleged the insured goods were kept.
The evidence of record strongly tends to sustain defendant’s allegations that the plaintiff, although himself absent in
China, caused the building in question to be set on fire, but the trial judge, in whose presence the witnesses testified,
appears to have had some doubt as to the credibility of some of the witnesses called by the defendant, and was of
opinion that these allegations were not satisfactorily established by the weight of the evidence. Upon a careful review of
the whole record, and keeping in mind the fact that the trial judge saw and heard the witnesses testify, we are unable to
say that there is such a preponderance of the evidence in support of these allegations as would sustain an affirmative
finding in favor of the defendant, and justify us in reversing the finding by the trial court upon this issue. The judgment
against the defendant company upon its counterclaim should therefore be affirmed.

The trial court was of opinion, however, that the building wherein the insured goods were stored having been destroyed
by fire the origin of which is unknown, the plaintiff failed to prove the value of the insured goods and that for the
fraudulent purpose of recovering the full amount of the policy, he submitted fabricated written evidence and false
testimony in support of his claim that the insured goods actually destroyed by fire were worth more than the total
amount of the insurance thereon. Plaintiff introduced an inventory of the insured goods alleged to have been taken a
short time before the fire, which would leave little room for doubt as to the truth of his allegation as to the amount of
his loss if it could be accepted as genuine. But the trial judge was of opinion that this inventory was not genuine and that
it had been fraudulently prepared with a view to its use as evidence in support of plaintiff’s claim. He was led to reject
this alleged inventory as unworthy of belief, partly because of the inherent improbability of the story told by the
witnesses for the plaintiff who testified as to the conditions under which it was made and as to the manner in which it
had been preserved from destruction, notwithstanding the fact that all other useful documentary evidence, books, and
papers were lost in the fire; partly because of the unconvincing and unsatisfactory manner in which these witnesses
testified; partly because the evidence of record tends to prove, though not conclusively, that the stock of insured goods
at the time of the fire was considerably lass than the total amount of the insurance thereon; and partly because the
evidence conclusively establishes that defendant’s manager and representative, who claims to have made this
inventory, was in the building together with his employees when the fire took place, and not only made no effort to
extinguish the fire or to save the insured goods from destruction, although such efforts might have been availing, but
that he failed to save from destruction any of the books or papers connected with the business of which he was in
charge which would have served in any wise to corroborate the data contained in the alleged inventory, or to give any
accurate information upon which a finding could be based as to the true value of the insured goods destroyed by the
fire.

The inventory was dated as of the 1st of January, although it appears that it was not custom of the plaintiff or his
manager, who are Chinese persons, to make an inventory on the first day of the New Year under the Gregorian calendar,
and no reason was given or suggested which would satisfactorily explain the making of the inventory upon that date on
this particular occasion; while the fact that the plaintiff and owner of the store left for China in the month of November
immediately prior thereto, and that the Chines New Year occurs in the months of February, and that in the ordinary
course of business, inventories, if taken at all, would naturally be taken upon those occasions, renders it, to say the least,
highly improbable that a third inventory would, in the ordinary course of business, be taken within less than two months
after the former, and two months before the latter date.

Plaintiff’s manager testified that after the taking of the inventory it was turned over to a friend who was about to leave
for China to be taken to plaintiff, and he thus attempted to account for the fact that it was not destroyed together with
the other books and documents relating to the business; but it appears that the friend to whom it had been intrusted
had not yet departed for China in the month of February when the fire took place, so that the manager immediately
after the fire was able to secure the return of the inventory for the purpose of making his report to the insurance
company. No explanation was offered which would account for the remarkable conduct of plaintiff’s manager in
preparing an inventory less than two months after his employer had left for China and then instead of forwarding it at
once by mail to his principal, intrusting it for transmission to a friend who had not left for China when the fire took place
several weeks later.

Evidence was introduced at the trial which showed that as a result of adverse conditions in the sugar market the
business of the plaintiff for some time prior to the fire was at a low ebb, and this evidence strongly tended to prove that
because of these adverse business conditions the stocks of goods of the plaintiff, as well as those of all the Chinese
merchants in the town wherein the fire took place, were far below the average at the time the fire occurred; and it was
proven that not long before the fire the plaintiff had sought and secured a reduction in his rent, because of the
admittedly adverse business conditions then existing. Plaintiff at the trial sought to corroborate the contents of the
inventory by introducing copies of various alleged invoices of goods made to him during the course of several months
preceding the fire, but these invoices, as the trial judge points out, not only failed to establish the fact that the goods
were actually delivered to the building wherein the insured goods were kept, but amounting as they do to but a small
fraction of the loss claimed by the plaintiff, tended rather to raise a doubt as to the probability of the existence in the
store of such a stock of goods as is set out in the inventory, than to corroborate the truth of plaintiff’s claims, since the
plaintiff, who well knew the persons with whom he dealt, should not have found any serious difficulty in proving the
purchase and delivery of any goods which may have been received by him prior to the fire and during the existence of
the insurance contract.

We think that the action of the trial court in rejecting the proof offered by plaintiff as to the amount of the loss must be
sustained, and the contract of fire insurance being a contract of indemnity, and the plaintiff only entitled therefore to
recover the amount of the actual loss sustained by him, there being no express valuation in the policy, judgment was
properly entered against him for lack of satisfactory proof of the amount of his loss. (Franklin F. Ins. Co. v. Hamill, 6 Gill
(Md.) , 87; Marchesseau v. Merchants Ins., Co. 1 Rob. (La.) , 438; Eagle Ins. Co. v. Lafayetted Ins. Co., 9 Ind., 443.)

It is not necessary for us to examined the assignments of error by counsel for plaintiff appellant which are directed to
the findings and conclusions of the trial court as to the failure of the plaintiff to live up to various provisions of the
contract set out in the policy (which in the opinion of the trial court defeated plaintiff’s right of recovery even had he
established the amount of his loss with satisfactory evidence), because even if all these assignments of error were
sustained, it would be our duty nevertheless to affirm the decision of the court below upon the grounds already set out.

The judgment appealed from should be, and is, therefore, affirmed, without costs to either party.

G.R. No. L-67835 October 12, 1987

MALAYAN INSURANCE CO., INC. (MICO), petitioner,

vs.
GREGORIA CRUZ ARNALDO, in her capacity as the INSURANCE COMMISSIONER, and CORONACION
PINCA, respondents.

CRUZ, J.:

When a person's house is razed, the fire usually burns down the efforts of a lifetime and forecloses hope for the
suddenly somber future. The vanished abode becomes a charred and painful memory. Where once stood a home,
there is now, in the sighing wisps of smoke, only a gray desolation. The dying embers leave ashes in the heart.

For peace of mind and as a hedge against possible loss, many people now secure fire insurance. This is an aleatory
contract. By such insurance, the insured in effect wagers that his house will be burned, with the insurer assuring him
against the loss, for a fee. If the house does burn, the insured, while losing his house, wins the wagers. The prize is
the recompense to be given by the insurer to make good the loss the insured has sustained.

It would be a pity then if, having lost his house, the insured were also to lose the payment he expects to recover for
such loss. Sometimes it is his fault that he cannot collect, as where there is a defect imputable to him in the
insurance contract. Conversely, the reason may be an unjust refusal of the insurer to acknowledge a just obligation,
as has happened many times.

In the instant case the private respondent has been sustained by the Insurance Commission in her claim for
compensation for her burned property. The petitioner is now before us to dispute the decision, 1 on the ground that there
was no valid insurance contract at the time of the loss.
The chronology of the relevant antecedent facts is as follows:

On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private respondent, Coronacion Pinca, Fire
Insurance Policy No. F-001-17212 on her property for the amount of P14,000.00 effective July 22, 1981, until July
22, 1982.  2

On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent the
corresponding notice to Pinca.  3

On December 24, 1981, payment of the premium for Pinca was received by DomingoAdora, agent of MICO.  4

On January 15, 1982, Adora remitted this payment to MICO,together with other payments.  5

On January 18, 1982, Pinca's property was completely burned.  6

On February 5, 1982, Pinca's payment was returned by MICO to Adora on the ground that her policy had been
cancelled earlier. But Adora refused to accept it.  7

In due time, Pinca made the requisite demands for payment, which MICO rejected. She then went to the Insurance
Commission. It is because she was ultimately sustained by the public respondent that the petitioner has come to us
for relief.

From the procedural viewpoint alone, the petition must be rejected. It is stillborn.

The records show that notice of the decision of the public respondent dated April 5, 1982, was received by MICO on
April 10, 1982.   On April 25, 1982, it filed a motion for reconsideration, which was denied on June 4, 1982.   Notice
8 9

of this denial was received by MICO on June 13, 1982, as evidenced by Annex "1" duly authenticated by the
Insurance Commission. 10 The instant petition was filed with this Court on July 2, 1982. 11

The position of the petition is that the petition is governed by Section 416 0f the Insurance Code giving it thirty days
wthin which to appeal by certiorari to this Court. Alternatively, it also invokes Rule 45 of the Rules of Court. For their
part, the public and private respondents insist that the applicable law is B.P. 129, which they say governs not only
courts of justice but also quasi-judicial bodies like the Insurance Commission. The period for appeal under this law is
also fifteen days, as under Rule 45.

The pivotal date is the date the notice of the denial of the motion for reconsideration was received by MICO.

MICO avers this was June 18, 1982, and offers in evidence its Annex "B," 12 which is a copy of the Order of June 14, 1982, with a
signed rubber-stamped notation on the upper left-hand corner that it was received on June 18, 1982, by its legal department. It does not indicate from whom. At
the bottom, significantly, there is another signature under which are the ciphers "6-13-82," for which no explanation has been given.

Against this document, the private respodent points in her Annex "1," 13 the authenticated copy of the same Order with a rubber-
stamped notation at the bottom thereof indicating that it was received for the Malayan Insurance Co., Inc. by J. Gotladera on "6-13-82." The signature may or may
not habe been written by the same person who signed at the bottom of the petitioner's Annex "B."

Between the two dates, the court chooses to believe June 13, 1982, not only because the numbers "6-13-82"
appear on both annexes but also because it is the date authenticated by the administrative division of the Insurance
Commission. Annex "B" is at worst self-serving; at best, it might only indicate that it was received on June 18, 1982,
by the legal department of MICO, after it had been received earlier by some other of its personnel on June 13, 1982.
Whatever the reason for the delay in transmitting it to the legal department need not detain us here.

Under Section 416 of the Insurance Code, the period for appeal is thirty days from notice of the decision of the
Insurance Commission. The petitioner filed its motion for reconsideration on April 25, 1981, or fifteen days such
notice, and the reglementary period began to run again after June 13, 1981, date of its receipt of notice of the denial
of the said motion for reconsideration. As the herein petition was filed on July 2, 1981, or nineteen days later, there
is no question that it is tardy by four days.

Counted from June 13, the fifteen-day period prescribed under Rule 45, assuming it is applicable, would end on
June 28, 1982, or also four days from July 2, when the petition was filed.

If it was filed under B.P. 129, then, considering that the motion for reconsideration was filed on the fifteenth day after
MICO received notice of the decision, only one more day would have remained for it to appeal, to wit, June 14,
1982. That would make the petition eighteen days late by July 2.

Indeed, even if the applicable law were still R.A. 5434, governing appeals from administrative bodies, the petition
would still be tardy. The law provides for a fixed period of ten days from notice of the denial of a seasonable motion
for reconsideration within which to appeal from the decision. Accordingly, that ten-day period, counted from June 13,
1982, would have ended on June 23, 1982, making the petition filed on July 2, 1982, nine days late.
Whichever law is applicable, therefore, the petition can and should be dismissed for late filing.

On the merits, it must also fail. MICO's arguments that there was no payment of premium and that the policy had
been cancelled before the occurence of the loss are not acceptable. Its contention that the claim was allowed
without proof of loss is also untenable.

The petitioner relies heavily on Section 77 of the Insurance Code providing that:

SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is exposed to the
peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of
insurance issued by an insurance company is valid and binding unless and until the premium thereof
has been paid, except in the case of a life or an industrial life policy whenever the grace period
provision applies.

The above provision is not applicable because payment of the premium was in fact eventually made in this case.
Notably, the premium invoice issued to Pinca at the time of the delivery of the policy on June 7, 1981 was stamped
"Payment Received" of the amoung of P930.60 on "12-24-81" by Domingo Adora. 14 This is important because it suggests an
understanding between MICO and the insured that such payment could be made later, as agent Adora had assured Pinca. In any event, it is not denied that this
payment was actually made by Pinca to Adora, who remitted the same to MICO.

The payment was made on December 24, 1981, and the fire occured on January 18, 1982. One wonders: suppose
the payment had been made and accepted in, say, August 1981, would the commencement date of the policy have
been changed to the date of the payment, or would the payment have retroacted to July 22, 1981? If MICO
accepted the payment in December 1981 and the insured property had not been burned, would that policy not have
expired just the same on July 22, 1982, pursuant to its original terms, and not on December 24, 1982?

It would seem from MICO's own theory, that the policy would have become effective only upon payment, if accepted
and so would have been valid only from December 24, 1981m but only up to July 22, 1981, according to the original
terms. In others words, the policy would have run for only eight months although the premium paid was for one
whole year.

It is not disputed that the preium was actually paid by Pinca to Adora on December 24, 1981, who received it on
behalf of MICO, to which it was remitted on January 15, 1982. What is questioned is the validity of Pinca's payment
and of Adora's authority to receive it.

MICO's acknowledgment of Adora as its agent defeats its contention that he was not authorized to receive the
premium payment on its behalf. It is clearly provided in Section 306 of the Insurance Code that:

SEC. 306. xxx xxx xxx

Any insurance company which delivers to an insurance agant or insurance broker a policy or
contract of insurance shall be demmed to have authorized such agent or broker to receive on its
behalf payment of any premium which is due on such policy or contract of insurance at the time of its
issuance or delivery or which becomes due thereon.

And it is a well-known principle under the law of agency that:

Payment to an agent having authority to receive or collect payment is equivalent to payment to the
principal himself; such payment is complete when the money delivered is into the agent's hands and
is a discharge of the indebtedness owing to the principal. 15

There is the petitioner's argument, however, that Adora was not authorized to accept the premium payment because six months had elapsed since the issuance
by the policy itself. It is argued that this prohibition was binding upon Pinca, who made the payment to Adora at her own riskl as she was bound to first check his
authority to receive it. 16

MICO is taking an inconsistent stand. While contending that acceptance of the premium payment was prohibited by the policy, it at the same time insists that the
policy never came into force because the premium had not been paid. One surely, cannot have his cake and eat it too.

We do not share MICO's view that there was no existing insurance at the time of the loss sustained by Pinca
because her policy never became effective for non-payment of premium. Payment was in fact made, rendering the
policy operative as of June 22, 1981, and removing it from the provisions of Article 77, Thereafter, the policy could
be cancelled on any of the supervening grounds enumerated in Article 64 (except "nonpayment of premium")
provided the cancellation was made in accordance therewith and with Article 65.

Section 64 reads as follows:

SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior
notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on the
occurrence, after the effective date of the policy, of one or more of the following:
 (a) non-payment of premium;

(b) conviction of a crime arising out of acts increasing the hazard insured against;

(c) discovery of fraud or material misrepresentation;

(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;

(e) physical changes in the property insured which result in the property becoming uninsurable;or

(f) a determination by the Commissioner that the continuation of the policy would violate or would
place the insurer in violation of this Code.

As for the method of cancellation, Section 65 provides as follows:

SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or
delivered to the named insured at the address shown in the policy, and shall state (a) which of the
grounds set forth in section sixty-four is relied upon and (b) that, upon written request of the named
insured, the insurer will furnish the facts on which the cancellation is based.

A valid cancellation must, therefore, require concurrence of the following conditions:

(1) There must be prior notice of cancellation to the insured; 17

(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the grounds mentioned;18

(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the address shown in the
policy; 19

(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon written request of the insured, the insurer will furnish the facts on
which the cancellation is based. 20

MICO's claims it cancelled the policy in question on October 15, 1981, for non-payment of premium. To support this
assertion, it presented one of its employees, who testified that "the original of the endorsement and credit memo" —
presumably meaning the alleged cancellation — "were sent the assured by mail through our mailing
section"   However, there is no proof that the notice, assuming it complied with the other requisites mentioned
21

above, was actually mailed to and received by Pinca. All MICO's offers to show that the cancellation was
communicated to the insured is its employee's testimony that the said cancellation was sent "by mail through our
mailing section." without more. The petitioner then says that its "stand is enervated (sic) by the legal presumption of
regularity and due performance of duty."   (not realizing perhaps that "enervated" means "debilitated" not
22

"strengthened").

On the other hand, there is the flat denial of Pinca, who says she never received the claimed cancellation and who,
of course, did not have to prove such denial Considering the strict language of Section 64 that no insurance policy
shall be cancelled except upon prior notice, it behooved MICO's to make sure that the cancellation was actually sent
to and received by the insured. The presumption cited is unavailing against the positive duty enjoined by Section 64
upon MICO and the flat denial made by the private respondent that she had received notice of the claimed
cancellation.

It stands to reason that if Pinca had really received the said notice, she would not have made payment on the
original policy on December 24, 1981. Instead, she would have asked for a new insurance, effective on that date
and until one year later, and so taken advantage of the extended period. The Court finds that if she did pay on that
date, it was because she honestly believed that the policy issued on June 7, 1981, was still in effect and she was
willing to make her payment retroact to July 22, 1981, its stipulated commencement date. After all, agent Adora was
very accomodating and had earlier told her "to call him up any time" she was ready with her payment on the policy
earlier issued. She was obviously only reciprocating in kind when she paid her premium for the period beginning
July 22, 1981, and not December 24, 1981.

MICO's suggests that Pinca knew the policy had already been cancelled and that when she paid the premium on
December 24, 1981, her purpose was "to renew it." As this could not be done by the agent alone under the terms of
the original policy, the renewal thereof did not legally bind MICO. which had not ratified it. To support this argument,
MICO's cites the following exchange:

Q: Now, Madam Witness, on December 25th you made the alleged payment. Now,
my question is that, did it not come to your mind that after the lapse of six (6) months,
your policy was cancelled?

A: I have thought of that but the agent told me to call him up at anytime.
 Q: So if you thought that your policy was already intended to revive cancelled policy?

A: Misleading, Your Honor.

Hearing Officer: The testimony of witness is that, she thought of that.

Q: I will revise the question. Now, Mrs. Witness, you stated that you thought the
policy was cancelled. Now, when you made the payment of December 24, 1981,
your intention was to revive the policy if it was already cancelled?

A: Yes, to renew it. 23

A close study of the above transcript will show that Pinca meant to renew the policy if it had really been already
cancelled but not if it was stffl effective. It was all conditional. As it has not been shown that there was a valid
cancellation of the policy, there was consequently no need to renew it but to pay the premium thereon. Payment
was thus legally made on the original transaction and it could be, and was, validly received on behalf of the insurer
by its agent Adora. Adora. incidentally, had not been informed of the cancellation either and saw no reason not to
accept the said payment.

The last point raised by the petitioner should not pose much difficulty. The valuation fixed in fire insurance policy is
conclusive in case of total loss in the absence of fraud,   which is not shown here. Loss and its amount may be
24

determined on the basis of such proof as may be offered by the insured, which need not be of such persuasiveness
as is required in judicial proceedings.   If, as in this case, the insured files notice and preliminary proof of loss and
25

the insurer fails to specify to the former all the defects thereof and without unnecessary delay, all objections to
notice and proof of loss are deemed waived under Section 90 of the Insurance Code.

The certification   issued by the Integrated National Police, Lao-ang, Samar, as to the extent of Pinca's loss should
26

be considered sufficient. Notably,MICO submitted no evidence to the contrary nor did it even question the extent of
the loss in its answer before the Insurance Commission. It is also worth observing that Pinca's property was not the
only building bumed in the fire that razed the commercial district of Lao-ang, Samar, on January 18, 1982.  27

There is nothing in the Insurance Code that makes the participation of an adjuster in the assessment of the loss
imperative or indespensable, as MICO suggests. Section 325, which it cites, simply speaks of the licensing and
duties of adjusters.

We see in this cases an obvious design to evade or at least delay the discharge of a just obligation through efforts
bordering on bad faith if not plain duplicity, We note that the motion for reconsideration was filed on the fifteenth day
from notice of the decision of the Insurance Commission and that there was a feeble attempt to show that the notice
of denial of the said motion was not received on June 13, 1982, to further hinder the proceedings and justify the
filing of the petition with this Court fourteen days after June 18, 1982. We also look askance at the alleged
cancellation, of which the insured and MICO's agent himself had no knowledge, and the curious fact that although
Pinca's payment was remitted to MICO's by its agent on January 15, 1982, MICO sought to return it to Adora only
on February 5, 1982, after it presumably had learned of the occurrence of the loss insured against on January 18,
1982. These circumstances make the motives of the petitioner highly suspect, to say the least, and cast serious
doubts upon its candor and bona fides.

WHEREFORE, the petition is DENIED. The decision of the Insurance Commission dated April 10, 1981, and its
Order of June 4, 1981, are AFFIRMED in full, with costs against the petitioner. This decision is immediately
executory.

SO ORDERED.