Pacific Banking v CA (Geronimo) In this case, it appears that insured has violated or failed to perform the
November 28,1988| Paras, J | G.R. No. L-41014 conditions under No. 3 and 11 of the contract, and such violation or want
Construction, Interpretation; insuranve as contract of ashesion;proof
PETITIONERS: PACIFIC BANKING CORPORATION
RESPONDENTS: COURT OF APPEALS and ORIENTAL ASSURANCE
CORPORATION
SUMMARY: On October 1963, a Fire policy, was issued to the Paramount
Shirt Manufacturing Co. (Insured), by which Oriental Assurance
Corporation(Respondent) bound itself to indemnify the insured for any loss
or damage, not exceeding P61,000.00
Said policy was duly endorsed to Pacific Bank(petitioner) as
mortgagee/trustor of the properties insured, with the effect that "loss if any
under this policy is payable to the Pacific Banking Corporation".
On January 1964, a fire broke out on the subject premises destroying the
goods contained in its ground and second floors. Pacific Bank sent a letter
and demanded Oriental Assurance for indemnity due to the loss of
property by fire.
However, Oriental Assurance denied the demand and stated that the
insured under the policy had not filed any claim with it, the insurance
adjuster, nor submitted proof of loss which is a clear violation of Policy
Condition No. 11, and for which reason, determination of the Oriental
Assurance will not pay Pacific Banking. In addition, the insured failed to
disclose of the existence of other co-insurance covering the destroyed
property. This lead to the petitioner in filing a case
ISSUE:
Did the Pacific Bank prematurely file a Civil case against Oriental
Assurance since? (Yes)
HELD:
Yes, petitioner prematurely filed Civil Case and dismissal thereof was
warranted under the circumstances.
While it is a cardinal principle of insurance law that a policy or contract of
insurance is to be construed liberally in favor of the insured and strictly as
against the insurer company.Yet, contracts of insurance, like other
contracts, are to be construed according to the sense and meaning of the
terms which the parties themselves have used. If such terms are clear and
unambiguous, they must be taken and understood in their plain, ordinary
and popular sense.
of performance has not been waived by the insurer, the insured cannot
recover, much less the herein petitioner. Courts are not permitted to make
contracts for the parties; the function and duty of the courts is simply to
enforce and carry out the contracts actually made.
DOCTRINE:
While it is a cardinal principle of insurance law that a policy or contract of
insurance is to be construed liberally in favor of the insured and strictly as
against the insurer company.Yet, contracts of insurance, like other
contracts, are to be construed according to the sense and meaning of the
terms which the parties themselves have used. If such terms are clear and
unambiguous, they must be taken and understood in their plain, ordinary
and popular sense.
FACTS:
1. On October 1963, a Fire policy, was issued to the Paramount Shirt
Manufacturing Co. (Insured), by which Oriental Assurance
Corporation(Respondent) bound itself to indemnify the insured for
any loss or damage, not exceeding P61,000.00, caused by fire to its
property.
2. The insured was at the time of the issuance of the policy and is up to
this time, a debtor of Pacific Bank(petitioner) in the amount of
P800,000.00 and the goods described in the policy were held in trust
by the insured for the petitioner under thrust receipts
3. Said policy was duly endorsed to Pacific Bank(petitioner) as
mortgagee/trustor of the properties insured, with the knowledge and
consent of Oriental Insurance(respondent) to the effect that "loss if
any under this policy is payable to the Pacific Banking Corporation".
4. On January 1964, a fire broke out on the subject premises destroying
the goods contained in its ground and second floors.
5. Pacific Bank(Petitioner) sent a letter and demanded Oriental
Assurance(respondent) for indemnity due to the loss of property by
fire.
6. However, private respondent informed counsel for the petitioner that
it was not yet ready to accede to the latter's demand as the former is
awaiting the final report of the insurance adjuster, H.H. Bayne
Adjustment Company
7. The said insurance adjuster notified that the insured under the policy
had not filed any claim with it, nor submitted proof of loss which is a
clear violation of Policy Condition No. 11, and for which reason,
determination of the Oriental Assurance will not pay Pacific Banking.
a. Policy No 11. provides that the insured shall on the
happening of any loss or damage give notice to the company
and shall within fifteen (15) days after such loss or damage
 deliver to the private respondent (a) a claim in writing giving
particular account as to the articles or goods destroyed and
the amount of the loss or damage and (b) particulars of all
other insurances, if any….
8. This lead the Pacific Banking(petitioner) in filing a case against
Oriental Assurance(respondent) to claim the P61,000
9. Pacific presented evidence of a communication dated December
1965 of the insurance adjuster, H.H. Bayne Adjustment Co. to Asian
Surety Insurance Co., Inc., revealing undeclared co-insurances with
the following: P30,000.00 with Wellington Insurance; P25,000.00 with
Empire Surety and P260,000.00 with Asian Surety ; undertaken by
insured Paramount on the same property covered by its policy with
private respondent whereas the only co-insurances declared in the
subject policy are those of P30,000.00 with Malayan, P50,000.00
with South Sea and P25,000.00 with Victory.
10. And as provided in Policy No 3.
a. Policy No 3. The Insured shall give notice to the Company
of any insurance already effected, or which may
subsequently be effected, covering any of the property
hereby insured, and unless such notice be given and the
particulars of such insurance or insurances be stated in or
endorsed on this Policy by or on behalf of the Company
before the occurrence of any loss or damage, all benefit
under this policy shall be forfeited.
11. Oriental Assurance(respondents) raise a defense that:
a. There was a lack of formal claim by insured over the loss
b. Premature filing of the suit as neither plaintiff nor insured had
submitted any proof of loss on the basis of which defendant
would determine its liability and the amount thereof, either to
the private respondent or its adjuster H.H. Bayne Adjustment
Co., both in violation of Policy Condition No. 11
12. It will be noted that the defense of fraud and/or violation of Condition
No. 3 in the Policy, in the form of non-declaration of co-insurances
which was not pleaded in the answer was also not pleaded in the
Motion to Dismiss.
TRIAL COURT:
1. The trial court denied private respondent's motion on the ground that
the defense of lack of proof of loss or defects therein was raised for
the first time after the commencement of the suit and that it must be
deemed to have waived the requirement of proof of loss
CA:
1. On appeal, the Court of Appeals reversed the decision of the trial
court
ISSUES:
1. Did the Pacific Bank prematurely filed a Civil case against Oriental
Assurance since? (Yes)
RULING: PREMISES CONSIDERED, the petition is DISMISSED for lack of
merit, and the decision appealed from is AFFIRMED.
RATIO:
First Issue
1. Yes, petitioner prematurely filed Civil Case and dismissal
thereof was warranted under the circumstances.
2. While it is a cardinal principle of insurance law that a policy or
contract of insurance is to be construed liberally in favor of the
insured and strictly as against the insurer company
3. Yet, contracts of insurance, like other contracts, are to be construed
according to the sense and meaning of the terms which the parties
themselves have used. If such terms are clear and unambiguous,
they must be taken and understood in their plain, ordinary and
popular sense
4. Contracts of insurance are contracts of indemnity upon the terms and
conditions specified in the policy. The parties have a right to impose
such reasonable conditions at the time of the making of the contract
as they may deem wise and necessary. The agreement has the force
of law between the parties. The terms of the policy constitute the
measure of the insurer's liability, and in order to recover, the insured
must show himself within those terms. The compliance of the insured
with the terms of the policy is a condition precedent to the right of
recovery
5. In this case, it appears that insured has violated or failed to perform
the conditions under No. 3 and 11 of the contract, and such violation
or want of performance has not been waived by the insurer, the
insured cannot recover, much less the herein petitioner. Courts are
not permitted to make contracts for the parties; the function and duty
of the courts is simply to enforce and carry out the contracts actually
made