FILIPINAS COMPAÑIA DE SEGUROS v. CHRISTERN, HUENEFELD and CO., INC.

FACTS:

 On October 1, 1941, respondent Christern obtained from petitioner Filipinas Compania a fire
policy amounting to P1,000,000 covering merchandise in a building located in Binondo, Manila.

 In 1942, during the Japanese military occupation, the building and insured merchandise were
burned.

 Christen then submitted its claim to the petitioner under the policy.

 The petitioner, however, refused to pay the claim:

Ground: that the policy 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.

Respondent = was controlled by the German

Petitioner = a company under American jurisdiction

 Nevertheless, in 1943, the claim was paid pursuant to the order issued by the Director of
Bureau of Financing, Philippine Executive Commission.

 In 1946, an action was filed by petitioner with the CFI of Manila for the purpose of recovering
from respondent the amount it has paid.

Theory of petitioner: The policy has ceased to be effective (because of the war) before
the insured merchandise were burned up.

October 1, 1941 = issuance of policy

December 10, 1941 = outbreak of war between US and Germany
February 27, 1942 = insured merchandise was burned

CFI – dismissed the case

CA – affirmed
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.

ISSUE:

Whether respondent corporation became an enemy?

RULING:
  Yes. The majority of the stockholders of the respondent corporation were German
subjects

The English and American cases relied upon by the CA have lost their force because
of the decision of the SC of US in Clark v. Uebersee Finanz Korporation (decided in
1947) in which the control test has been adopted.

- History of the control test. 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.

- 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."

 Sec 8 of the Philippine Insurance Law (Act. 2427) provides that "anyone except a public
enemy may be insured." An insurance policy ceases to be allowable as soon as an insured
becomes a public enemy.

- All intercourse between citizens of belligerent powers which is inconsistent with a

state of war is prohibited by the law of nations.

The prohibition includes: 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 to their country's interest.

Why? – 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.

In the case of an ordinary fire policy, when the parties become alien enemies, the
contractual tie is broken and the contractual rights of the parties, so far as not
vested. lost.

Application:
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.

The Court ordered the return of the amount paid by petitioner to respondent.

Note: The premium paid was returned in this case. (based on justice)
ETERNAL GARDENS MEMORIAL PARK CORPORATION v. THE PHILIPPINE AMERICAN LIFE
INSURANCE COMPANY

FACTS:

 December 10, 1980, respondent Philamlife entered into an agreement (Creditor Group Life
Policy) with petitioner Eternal Gardens.

Under the policy, the clients of Eternal who purchased burial lots from it on installment
basis would be insured by Philamlife. (the amount of coverage depends upon the existing
balance of the purchased burial lots) (effectivity of policy = 1 year, renewable on a yearly
basis)

Eternal Gardens was required under the policy to submit a list of all new lot purchaser
including:

a. Application of each purchaser

b. Amount of the unpaid balance

 On December 29, 1982, Eternal Gardens submitted a letter containing a list of insurable
balances of its lot buyers for October 1982. Included in the list was John Chuang:

Unpaid balance: Php 100,000

Date of death August 2, 1984

 Consequently, Eternal Gardens sent a letter to Philamlife which served as insurance claim.
 Philamlife required the submission of certain documents.
 Eternal Gardens complied with the requirements.

 After more than a year, Philamlife had not furnished Eternal with any reply to the latter’s
insurance claim prompting Eternal Gardens to demand the payment of Php 100,000.00 (Apr.
1986)

 Philamlife denied the insurance claim:

Grounds:

1. The deceased was 59 years old when he entered into Contract with Eternal Gardens.
2. No application for Group Insurance was submitted
3. That under the policy, "there shall be no insurance if the application is not approved
by the Company." Since no application had been submitted by the Insured/Assured, prior
to his death, for Philamlife’s approval, John Chuang was not covered under the policy.

Note: Acceptance of premium does not per se constitute approval. They will return the
premium paid on behalf of John Chuang.

 Eternal Gardens filed an action for a sum of money with the RTC.

RTC – in favor of petitioner

 The RTC ruled in favor of Eternal Gardens. The RTC held that there was a submitted
application for insurance. That due to Philamlife’s inaction from the submission of the
 requirements of the group insurance on December 29, 1982 to Chuang’s death on August 2,
1984, as well as Philamlife’s acceptance of the premiums during the same period, Philamlife
was deemed to have approved Chuang’s application.

CA – reversed
 The CA held that Chuang’s application was not enclosed in Eternal’s letter dated December
29, 1982. There being no application form, Chuang was not covered by Philamlife’s insurance.

ISSUE:

Whether Philamlife assumed the risk of loss without approving the application.

RULING:

 Yes. The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a
loan with the Assured. However, there shall be no insurance if the application of the Lot
Purchaser is not approved by the Company.

An examination of the above provision would show ambiguity between its two sentences. The
first sentence appears to state that the insurance coverage of the clients of Eternal already
became effective upon contracting a loan with Eternal while the second sentence appears to
require Philamlife to approve the insurance contract before the same can become effective.

That upon a party’s purchase of a memorial lot on installment from Eternal, an

insurance contract covering the lot purchaser is created and the same is effective, valid,
and binding until terminated by Philamlife by disapproving the insurance application.
The second sentence of Creditor Group Life Policy No. P-1920 on the Effective Date of Benefit
is in the nature of a resolutory condition which would lead to the cessation of the insurance
contract.

 the mere inaction of the insurer on the insurance application must not work to prejudice the
insured; it cannot be interpreted as a termination of the insurance contract. The termination of
the insurance contract by the insurer must be explicit and unambiguous.

 In order to protect the interest of insurance applicants, insurance companies must be obligated
to act with haste upon insurance applications, to either deny or approve the same, or otherwise
be bound to honor the application as a valid, binding, and effective insurance contract.
GREAT PACIFIC LIFE ASSURANCE CORP. v. CA

FACTS:

 Petitioner Grepalife entered into a contract of group life insurance with DBP whereby Grepalife
agreed to insure the lives of eligible housing loan mortgagors of DBP.

 On November 11, 1983, Dr. Wilfredo, a housing debtor of DBP applied for membership in the
group life insurance plan.

 On November 15, 1983, Grepalife issued Certificate No. B-18558, as insurance coverage of
Dr. Wilfredo Leuterio, to the extent of his DBP mortgage indebtedness amounting Php
86,200.00

 On August 6, 1984, Dr. Leuterio died due to "massive cerebral hemorrhage."

 Consequently, DBP submitted a death claim to Grepalife.

 Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy and that he did
not disclose that he has been suffering from hypertension which caused his death.

 In 1986, the widow of Dr. Leuterio, Medarda Leuterio, filed a complaint with the RTC
against Grepalife for specific performance with damages.

RTC – in favor of private respondent

CA – affirmed

 Petitioner alleges that the complaint was instituted by the widow of Dr. Leuterio, not the real
party in interest, hence the trial court acquired no jurisdiction over the case. It argues that
when the Court of Appeals affirmed the trial court's judgment, Grepalife was held liable to pay
the proceeds of insurance contract in favor of DBP, the indispensable party who was not joined
in the suit.

ISSUE:

Whether the Court of Appeals erred in holding petitioner liable to DBP as beneficiary in a group life
insurance contract from a complaint filed by the widow of the decedent/mortgagor.

RULING:

 No. Sec. 8 of the Insurance Code provides: Unless the policy provides, where a mortgagor
of property effects insurance in his own name providing that the loss shall be payable to the
mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be
upon the interest of the mortgagor, who does not cease to be a party to the original contract,
and any act of his, prior to the loss, which would otherwise avoid the insurance, will have the
same effect, although the property is in the hands of the mortgagee, but any act which, under
the contract of insurance, is to be performed by the mortgagor, may be performed by the
mortgagee therein named, with the same effect as if it had been performed by the mortgagor.

 Where the mortgagor pays the insurance premium under the group insurance policy, making
the loss payable to the mortgagee, the insurance is on the mortgagor's interest, and the
 mortgagor continues to be a party to the contract. In this type of policy insurance, the
mortgagee is simply an appointee of the insurance fund, such loss-payable clause does
not make the mortgagee a party to the contract.

 The insured private respondent did not cede to the mortgagee all his rights or interests in the
insurance, the policy stating that: "In the event of the debtor's death before his indebtedness
with the Creditor [DBP] shall have been fully paid, an amount to pay the outstanding
indebtedness shall first be paid to the creditor and the balance of sum assured, if there is any,
shall then be paid to the beneficiary/ies designated by the debtor." 10 When DBP submitted
the insurance claim against petitioner, the latter denied payment thereof, interposing the
defense of concealment committed by the insured. Thereafter, DBP collected the debt from the
mortgagor and took the necessary action of foreclosure on the residential lot of private
respondent.

 In Gonzales La O vs. Yek Tong Lin Fire & Marine Ins. Co., we held: Insured, being the
person with whom the contract was made, is primarily the proper person to bring suit
thereon. * * * Subject to some exceptions, insured may thus sue, although the policy is taken
wholly or in part for the benefit of another person named or unnamed, and although it is
expressly made payable to another as his interest may appear or otherwise. * * * Although a
policy issued to a mortgagor is taken out for the benefit of the mortgagee and is made payable
to him, yet the mortgagor may sue thereon in his own name, especially where the mortgagee's
interest is less than the full amount recoverable under the policy,

 And since a policy of insurance upon life or health may pass by transfer, will or succession to
any person, whether he has an insurable interest or not, and such person may recover it
whatever the insured might have recovered, 14 the widow of the decedent Dr. Leuterio may file
the suit against the insurer, Grepalife.

Note: that DBP foreclosed in 1995 their residential lot, in satisfaction of mortgagor's outstanding loan.
Considering this supervening event, the insurance proceeds shall inure to the benefit of the
heirs of the deceased person or his beneficiaries.
HEIRS OF LORETO C. MARAMAG v. MARAMAG

FACTS:

 A petition was filed against respondents with the RTC for revocation and/or reduction of
insurance proceeds for being void and/or inofficious.

The petitioner alleged that:

1. Petitioners were the legitimate wife and children of Loreto Maramag, while
respondents were Loreto’s illegitimate family.

2. Eva de Guzman Maramag was a concubine of Loreto and a suspect in the killing of
the latter, thus, she is disqualified to receive any proceeds from his insurance
policies from Insular Life and Grepalife.

3. The illegitimate children of Loreto—Odessa, Karl Brian, and Trisha Angelie—were

entitled only to one-half of the legitime of the legitimate children, thus, the proceeds
released to Odessa and those to be released to Karl Brian and Trisha Angelie were
inofficious and should be reduced

4. Petitioners could not be deprived of their legitimes, which should be satisfied first.

Insular life
 Insular life admitted that Loreto made a misrepresentation in his application. (that Eva was his
legitimate wife)

That when it ascertained that Eva was not the legal wife of Loreto, it disqualified her as a
beneficiary and divided the proceeds among Odessa, Karl Brian, and Trisha Angelie, as the
remaining designated beneficiaries.

Odessa’s share = released

Karl Brian = withheld (needs a guardianship)
Trisha Angelie = withheld (needs a guardianship)

Insular alleged that there is no cause of action since Loreto revoked the designation of Eva in
the policy and disqualified her in another policy.

Grapalife
 Grepalife alleged that Eva was not designated as an insurance policy beneficiary; that the
claims filed by Odessa, Karl Brian, and Trisha Angelie were denied because Loreto was
ineligible for insurance due to a misrepresentation in his application form.

RTC – granted the motion to dismiss with respect to the children

On motion for reconsideration – dismissed

The RTC dismissed the case – it ruled that it is only in cases where there are no beneficiaries
designated, or when the only designated beneficiary is disqualified, that the proceeds should
be paid to the estate of the insured.
  Petitioners posit that their petition before the trial court should not have been dismissed for
failure to state a cause of action because the finding that Eva was either disqualified as a
beneficiary by the insurance companies or that her designation was revoked by Loreto,
hypothetically admitted as true, was raised only in the answers and motions for reconsideration
of both Insular and Grepalife. They argue that for a motion to dismiss to prosper on that
ground, only the allegations in the complaint should be considered. They further contend that,
even assuming Insular disqualified Eva as a beneficiary, her share should not have been
distributed to her children with Loreto but, instead, awarded to them, being the legitimate heirs
of the insured deceased, in accordance with law and jurisprudence.

ISSUE:

Whether the petitioners have a cause of action.

RULING:

 No. The basis of petitioners’ claim is that Eva, being a concubine of Loreto and a suspect in his
murder, is disqualified from being designated as beneficiary of the insurance policies, and that
Eva’s children with Loreto, being illegitimate children, are entitled to a lesser share of the
proceeds of the policies.

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.

The 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. The
exception to this rule is a 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.

Petitioners are third parties to the insurance contracts with Insular and Grepalife and,
thus, are not entitled to the proceeds thereof.

The revocation of Eva as a beneficiary in one policy and her disqualification assuch in
another are of no moment considering that the designation of the illegitimate children
as beneficiaries in Loreto’s insurance policies remains valid.

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.
LALICAN V. THE INSULAR LIFE ASSURANCE COMPANY LIMITED

FACTS:

 Eulogio applied for an insurance policy with Insular Life. The policy contained a Year
Endowment Variable Income Package Flexi Plan worth ₱500,000.00, with two riders valued at
₱500,000.00 each. Thus, the value of the policy amounted to ₱1,500,000.00. Violeta was
named as the primary beneficiary.

 Under the policy, If any premium was not paid on or before the due date, the policy would be
in default, and if the premium remained unpaid until the end of the grace period, the policy
would automatically lapse and become void.

* Premium is payable every Apr 24, July 24, Oct. 24, Jan 24 of each year until the end of
the 20 year period of the policy

* There was a grace period of 31 days for the payment of each premium subsequent to
the first.

 The policy became void as he failed to pay premium on the 24 th of January 1998.

 Eulogio applied for reinstatement through Malaluan. He was advised to pay the interest and
the premiums that subsequently became due and to file another application for reinstatement.

 Eulogio went to Malaluan’s house and submitted a second application for reinstatement. It was
the husband of Malaluan who received the application and payment as Malaluan was not
there. A receipt was issued to Eulogio.

 On that same day, Eulogio died of cardio-respiratory arrest secondary to electrocution.

 Malaluan forwarded the application for reinstatement, without knowing that Eulogio already
died, to Insular life. However, Insular life did not act upon the second application as it was
informed of Eulogio’s death.

 Violeta filed with Insular Life a claim for payment of the full proceeds of Policy No.9011992.

 Insular life informed Violeta that the claim could not be granted since the policy, at the time of
Eulogio’s death, had already lapsed. And the latter failed to reinstate the same.

 Violeta filed with the RTC a Complaint for Death Claim Benefit

(RTC – in favor of Insular)

 The RTC ruled that Policy No. 9011992 had indeed lapsed and Eulogio needed to have the
same reinstated.

 Violeta invoked Sec. 19 of the Insurance Code “Interest in the life or health of a person insured
must exist when the insurance takes effect, but need not exist thereafter or when the loss
occurs.”

ISSUE:
Whether Eulogio was able to reinstate the policy.

RULING:

 An insurable interest is one of the most basic and essential requirements in an insurance
contract. In general, an insurable interest is that interest which a person is deemed to have in
the subject matter insured, where he has a relation or connection with or concern in it, such
that the person will derive pecuniary benefit or advantage from the preservation of the subject
matter insured and will suffer pecuniary loss or damage from its destruction, termination, or
injury by the happening of the event insured against. The existence of an insurable interest
gives a person the legal right to insure the subject matter of the policy of insurance.

 Section 10 of the Insurance Code indeed provides that every person has an insurable interest
in his own life. Section 19 of the same code also states that an interest in the life or health of a
person insured must exist when the insurance takes effect, but need not exist thereafter or
when the loss occurs.

 It is actually beyond question that while Eulogio was still alive, he had an insurable interest in
his own life, which he did insure under Policy No. 9011992.

 To reinstate a policy means to restore the same to premium-paying status after it has been
permitted to lapse. Both the Policy Contract and the Application for Reinstatement provide for
specific conditions for the reinstatement of a lapsed policy.

 The provision in the policy under Reinstatement clause provides:

I/We agree that said Policy shall not be considered reinstated until this application is approved
by the Company during my/our lifetime and good health and until all other Company
requirements for the reinstatement of said Policy are fully satisfied.

I/We further agree that any payment made or to be made in connection with this application
shall be considered as deposit only and shall not bind the Company until this application is
finally approved by the Company during my/our lifetime and good health.

“The stipulation in a life insurance policy giving the insured the privilege to reinstate it
upon written application does not give the insured absolute right to such reinstatement
by the mere filing of an application. The insurer has the right to deny the reinstatement
if it is not satisfied as to the insurability of the insured and if the latter does not pay all
overdue premium and all other indebtedness to the insurer. After the death of the
insured the insurance Company cannot be compelled to entertain an application for
reinstatement of the policy because the conditionsprecedent to reinstatement can no
longer be determined and satisfied.” (Andres v. The Crown Life Insurance Company, citing
McGuire v. The Manufacturer's Life Insurance Co)

Application:
 Eulogio’s death rendered impossible full compliance with the conditions for reinstatement of
Policy No. 9011992.

Eulogio, before his death, managed to file his Application for Reinstatement and deposit the
amount for payment of his overdue premiums and interests thereon with Malaluan; but Policy
 No. 9011992could only be considered reinstated after the Application for Reinstatement had
been processed and approved by Insular Life during Eulogio’s lifetime and good health.

 Policy No. 9011992 remained lapsed and void, not having been reinstated in accordance with
the Policy Contract and Application for Reinstatement before Eulogio’s death. Violeta,
therefore, cannot claim any death benefits from Insular Life on the basis of Policy No.
9011992; but she is entitled to receive the full refund of the payments made by Eulogio
thereon.
GAISANO CAGAYAN, INC v. INSURANCE COMPANY OF NORTH AMERICA

FACTS:

 Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans.

 Levi Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks owned
by Levi Strauss & Co.

 Intercapitol and Levi Strauss separately obtained from respondent insurance Company of
North America, fire insurance policies with book debt endorsements.

- The insurance policies provide for coverage on "book debts in connection with
ready-made clothing materials which have been sold or delivered to various
customers and dealers of the Insured anywhere in the Philippines.

- Book debts – "unpaid account still appearing in the Book of Account of the
Insured 45 days after the time of the loss covered under this Policy."

 Petitioner is a customer and dealer of the products of IMC and LSPI.

 In February 1991, the Gaisano Superstore Complex in Cagayan de Oro City, owned by
petitioner, was consumed by fire including the stocks of ready-made clothing materials sold
and delivered by IMC and LSPI.

 In February 1992, respondent Insurance company filed a complaint for damages against
petitioner (it was subrogated to the right of IMC and LSPI. The insurance company paid the
claim by IMC and LSPI)

 Petitioner contends that

1. It could not be held liable because the property covered by the insurance policies were
destroyed due to fortuities event or force majeure
2. That respondent's right of subrogation has no basis inasmuch as there was no breach of
contract committed by it since the loss was due to fire which it could not prevent or foresee
3. That IMC and LSPI never communicated to it that they insured their properties; that it never
consented to paying the claim of the insured.

(RTC – dismissed the case)

 The RTC held that:

1. the fire was purely accidental

2. the cause of the fire was not attributable to the negligence of the petitioner
3. it has not been established that petitioner is the debtor of IMC and LSPI
4. since the sales invoices state that "it is further agreed that merely for purpose of securing
the payment of purchase price, the above-described merchandise remains the property of
the vendor until the purchase price is fully paid", IMC and LSPI retained ownership of the
delivered goods and must bear the loss.

(CA – set aside)

 The CA ruled that if the thing is lost by a fortuitous event, the risk is borne by the owner of the
thing at the time the loss under the principle of res perit domino. That petitioner's obligation
 to IMC and LSPI is not the delivery of the lost goods but the payment of its unpaid account and
as such the obligation to pay is not extinguished.

 What was insured was the vendor's interest as a creditor.

(Petitioner)
 That it was not credit that was insured since respondent paid on the occasion of the loss of the
insured goods to fire and not because of the non-payment by petitioner of any obligation; that,
even if the insurance is deemed as one over credit, there was no loss as the accounts were
not yet due since no prior demands were made by IMC and LSPI against petitioner for
payment of the debt and such demands came from respondent only after it had already paid
IMC and LSPI under the fire insurance policies

 Petitioner submits that petitioner was not privy to the insurance contract or the payment
between respondent and its insured nor was its consent or approval ever secured; that this
lack of privity forecloses any real interest on the part of respondent in the obligation to pay,
limiting its interest to keeping the insured goods safe from fire.

(Respondent)
 Respondent counters that while ownership over the ready- made clothing materials was
transferred upon delivery to petitioner, IMC and LSPI have insurable interest over said
goods as creditors who stand to suffer direct pecuniary loss from its destruction by fire;

ISSUE:

RULING:

 The Court ruled that the words of the contract are plain and clear and need no interpretation.
Nowhere is it provided in the questioned insurance policies that the subject of the insurance is
the goods sold and delivered to the customers and dealers of the insured.

 What were insured against were the accounts of IMC and LSPI with petitioner which
remained unpaid 45 days after the loss through fire, and not the loss or destruction of
the goods delivered.

 When the seller retains ownership only to insure that the buyer will pay its debt, the risk
of loss is borne by the buyer. Accordingly, petitioner bears the risk of loss of the goods
delivered.

 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 interest in property may
consist in:

a. an existing interest
b. an inchoate interest founded on existing interest
c. an expectancy, coupled with an existing interest in that out of which the expectancy arises

Application: INSURANBLE INTEREST

 Therefore, 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, 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. Anyone has an insurable interest in
property who derives a benefit from its existence or would suffer loss from its destruction.
Indeed, a vendor or seller retains an insurable interest in the property sold so long as he has
any interest therein, in other words, so long as he would suffer by its destruction, as where he
has a vendor's lien. In this case, the insurable interest of IMC and LSPI pertain to the unpaid
accounts appearing in their Books of Account 45 days after the time of the loss covered by the
policies.

 It must be stressed that the 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.

 What is relevant here is whether it has been established that petitioner has outstanding
accounts with IMC and LSPI.

Note: with respect to LSPI, respondent is not subrogated to its rights. there is no proof of full
settlement of the insurance claim of LSPI; no subrogation receipt was offered in evidence.
Thus, there is no evidence that respondent has been subrogated to any right which LSPI may
have against petitioner.
THE INSULAR LIFE ASSURANCE COMPANY, LTD. v. EBRADO

FACTS:

 Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd., Policy No.009929
on a whole-life for P5,882.00. He designated Carponia Ebrado as the revocable beneficiary in
his policy.

 Buenaventura Ebrado died (he was hit by a falling branch of a tree)

 Carponia filed with Insular life a claim for the proceeds as the beneficiary although she admits
that she and the insured Buenaventura C. Ebrado were merely living as husband and wife
without the benefit of marriage.

 On the other hand, Pascuale Ebrado, also filed a claim as the widow of Buenaventura
asserting that she is the one entitled to the proceeds.

 Insular life filed an action for interpleader with the CFI of Rizal.

(CFI – against Carponia)

 The CFI rendered judgment declaring Carponia disqualified from being beneficiary and
directing the payment of the proceeds to the estate of the deceased.

ISSUE:

RULING:

 Article 2011 of the New Civil Code states: "The contract of insurance is governed by special
laws. Matters not expressly provided for in such special laws shall be regulated by this Code."
When not otherwise specifically provided for by the Insurance Law, the contract of life
insurance is governed by the general rules of the civil law regulating contracts. And under
Article 2012 of the same Code, "any person who is forbidden from receiving any donation
under Article 739 cannot be named beneficiary of a life insurance policy by the person who
cannot make a donation to him. Common-law spouses are, definitely, barred from
receiving donations from each other. Article 739 of the new Civil Code provides:

The following donations shall be void:

1. Those made between persons who were guilty of adultery or concubinage at the time of
donation;

2. Those made between persons found guilty of the same criminal offense, in consideration
thereof

3. Those made to a public officer or his wife, descendants or ascendants by reason of his
office.

In the case referred to in No. 1, the action for declaration of nullity may be brought by the
spouse of the donor or donee; and the guilt of the donee may be proved by preponderance of
 evidence in the same action. (NOTE: no criminal conviction for the offense is a condition
precedent)
There is already judicial admission in this case.
 A life insurance policy is no different from a civil donation insofar as the beneficiary is
concerned. Both are founded upon the same consideration: liberality. A beneficiary is like a
donee, because from the premiums of the policy which the insured pays out of
liberality, the beneficiary will receive the proceeds or profits of said insurance. As a
consequence, the proscription in Article 739 of the new Civil Code should equally operate in
life insurance contracts. The mandate of Article 2012 cannot be laid aside: any person who
cannot receive a donation cannot be named as beneficiary in the life insurance policy of the
person who cannot make the donation.
SING v. FEB LEASING & FINANCE CORPORATION

FACTS:

 FEB Leasing entered into a lease of equipment and motor vehicles with JVL Food Products.
On the same date, Vicente Ong Lim Sing, Jr. executed an Individual Guaranty Agreement
with FEB to guarantee the prompt and faithful performance of the terms and conditions of the
aforesaid lease agreement.

Under the contract, JVL was obliged to pay FEB an aggregate gross monthly rental
of(₱170,494.00).

 JVL defaulted in the payment of the monthly rentals.

 FEB sent a letter to JVL demanding payment of the said amount. However, JVL failed to pay.

 FEB filed an action for a sum of money, damages and replevin with the RTC of Manila against
JVL and Lim.

 JVL and Lim admitted the existence of the lease agreement but asserted that it is in reality a
sale of equipment on installment basis.

(RTC – in favor of JVL and Lim)

 RTC ruled in favor of JVL and Lim. The trial court stressed the contradictory terms it found in
the lease agreement.

Another instance is when the alleged lessee was required to insure the thing against
loss, damage or destruction.

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

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

(CA – reversed)
 The CA reversed the decision of the trial court holding that the transaction between the parties
as a financial lease agreement under Republic Act (R.A.) No. 8556.

ISSUE:

RULING:

The stipulation in Section 14 of the lease contract, that the equipment shall be insured at the cost and
expense of the lessee against loss, damage, or destruction from fire, theft, accident, or other
insurable risk for the full term of the lease, is a binding and valid stipulation. Petitioner, as a lessee,
has an insurable interest in the equipment and motor vehicles leased. Section 17 of the Insurance
Code provides that the measure of an insurable interest in property is the extent to which the insured
might be damnified by loss or injury thereof. It cannot be denied that JVL will be directly damnified in
case of loss, damage, or destruction of any of the properties leased.