San Miguel Brewery v Law Union (Geronimo) could recover on the policy only to the extent of the credit
o the extent of the credit secured by the
January 19, 1920 | Street, J | G.R. No. 14300
Insurable Interest of the Mortgagor and Mortgagee
PETITIONERS: SAN MIGUEL BREWERY, ETC.,
RESPONDENTS: LAW UNION AND ROCK INSURANCE CO. (LTD.) ET
AL.; HENRY HARDING
SUMMARY:
In 1916, D. P. Dunn, the first owner of the property, mortgaged the it to the
San Miguel Brewery to secure a debt of P10.000.
In the contract of mortgage Dunn agreed to keep the property insured at
his expense to the full amount of its value in companies to be selected by
the Brewery Company and authorized the latter in case of loss to receive
the proceeds of the insurance and to retain such part as might be
necessary to cover the mortgage debt.
Dunn authorized and requested the Brewery Company to find and enter
the said insurance itself. No information was asked as to who was the
owner of the property, but the property was insured Law Union and
Filipinas Compania de Sugros for the sum of P7,500 each, against fire.
However in March 1917 Dunn sold the insured property Henry
Harding(Respondent), but no assignment of the insurance, or of the
insurance policies, was at any time made to him.
Harding is now claiming for the difference between the San Miguel’s credit
and the amount for which the property was insured.
ISSUE
Can Harding claim the difference from the insurance coverage? (No)
HELD:
No, Harding cannot claim the difference from the insurance coverage.He is
not a party to the contracts of insurance and cannot directly maintain an
action thereon.
His claim is merely of an equitable and subsidiary nature and must be
made effective, if at all, through the San Miguel Brewery in whose name
the contracts are written. Now the Brewery, as mortgagee of the insured
property, undoubtedly had an insurable interest therein; but it could not, in
any event, recover upon these policies an amount in excess of its
mortgage credit.
DOCTRINE:
The brewery company had an insurable interest over the property but
mortgage.
FACTS:
1. On January 12, 1916, D. P. Dunn, the first owner of the property to
which the insurance relates, mortgaged the same to the San Miguel
Brewery to secure a debt of P10.000.
2. In the contract of mortgage Dunn agreed to keep the property
insured at his expense to the full amount of its value in companies to
be selected by the Brewery Company and authorized the latter in
case of loss to receive the proceeds of the insurance and to retain
such part as might be necessary to cover the mortgage debt. At the
same time, in order more conveniently to accomplish the end in view,
Dunn authorized and requested the Brewery Company to effect said
insurance itself.
3. Accordingly on the same date Antonio Brias, general manager of the
Brewery, made a verbal application to the Law Union and Rock
Insurance Company for insurance to the extent of P15,000 upon said
property. In reply to a question of the company's agent as to whether
the Brewery was the owner of the property, he stated that the
company was interested only as a mortgagee.
4. No information was asked as to who was the owner of the property,
and no information upon this point was given.
5. It seems that the insurance company to whom this application was
directed did not want to carry more than one-half the risk. It therefore
issued its own policy for P7,500 and procured a policy in a like
amount to be issued by the "Filipinas" Compa ia de Seguros.
6. Both policies were issued in the name of the San Miguel Brewery as
the assured, and contained no reference to any other interest in the
property. Both policies contain the usual clause requiring
assignments to be approved and noted on the policy.
7. The premiums were paid by the Brewery and charged to Dunn.A
year later the policies were renewed, without change, the renewal
premiums being paid by the Brewery, supposedly for the account of
the owner.
8. However in March 1917 Dunn sold the insured property Henry
Harding(Respondent), but no assignment of the insurance, or of the
insurance policies, was at any time made to him.
ISSUES:
1. Can Harding claim the difference from the insurance coverage? (No)
**** Main issue
2. Was there an intention shown that the owner of the property be a
beneficiary to insurance policy? (No)
RULING: The judgment is therefore affirmed, with costs against the
appellant. So ordered.
RATIO:
First Issue
1. No, Harding cannot claim any benefits from the insurance coverage
despit being the owner of the property.
2. The SC agree with the trial court that no cause of action in Henry
Harding against the insurance companies is shown. He is not a party
to the contracts of insurance and cannot directly maintain an action
thereon.
3. His claim is merely of an equitable and subsidiary nature and must
be made effective, if at all, through the San Miguel Brewery in whose
name the contracts are written. Now the Brewery, as mortgagee of
the insured property, undoubtedly had an insurable interest therein;
but it could not, in any event, recover upon these policies an amount
in excess of its mortgage credit.
4. In this connection it will be remembered that Antonio Brias, upon
making application for the insurance, informed the company with
which the insurance was placed that the Brewery was interested only
as a mortgagee. It would, therefore, be impossible for the Brewery to
recover anything beyond the amount secured by its mortgage on the
insured property.
5. This conclusion is not only deducible from the principles governing
the operation and effect of insurance contracts in general but the
point is clearly covered by the express provisions of sections 16 and
50 of the Insurance Act (Act No. 2427).
a. Sec 16 "the measure of an insurable interest in property is
the extent to which the insured might be damnified by loss or
injury thereof" ;
b. Sec 50."the insurance shall be applied exclusively to the
proper interest of the person in whose name it is made
unless otherwise specified in the policy".
6. These provisions would have been fatal to any attempt at recovery
even by D. P. Dunn, if the ownership of the property had continued in
him up to the time of the loss; and as regards Hardings an additional
insuperable obstacle is found in the fact that the ownership of the
property had been changed, prior to the loss, without any
corresponding change having been effected in the policy of
insurance.
7. In section 19 of the Insurance Act we find it stated that "a change of
interest in any part of a thing insured unaccompanied by a
corresponding change of interest in the insurance, suspends the
insurance to an equivalent extent, until the interest in the thing and
the interest in the insurance are vested in the same person."
8. Again in section 55 it is declared that "the mere transfer of a thing
insured does not transfer the policy, but suspends it until the same
person becomes the owner of both the policy and the thing insured."
9. Therefore, Harding cannot claim any benefits from the insurance
coverage despite being the owner of the property.
Second Issue
1. No, there is a lack of evidence to show that there was intention that
the owner of the property be a beneficiary to insurance policy.
2. If during the negotiations which resulted in the writing of this
insurance, it had been agreed between the contracting parties that
the insurance should be so written as to protect not only the interest
of the mortgagee but also the residuary interest of the owner, and the
policies had been, by inadvertence, ignorance, or mistake written in
the form in which they were issued, a court would have the power to
reform the contracts and give effect to them in the sense in which the
parties intended to be bound. But in order to justify this, it must be
made clearly to appear that the minds of the contracting parties did
actually meet in agreement and that they labored under some mutual
error or mistake in respect to the expression of their purpose.
3. To justify the reformation of a contract, the proof must be of the most
satisfactory character, and it must clearly appear that the contract
failed to express the real agreement between the parties.
4. In the case now before us the proof is entirely insufficient to
authorize the application of the doctrine stated in the foregoing
cases, for it is by no means clear from the testimony of Brias — and
none other was offered — that the parties intended for the policy to
cover the risk of the owner in addition to that of the mortgagee. It
results that the defendant Harding is not entitled to relief in any
aspect of the case.