Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

L-68118 October 29, 1985 JOSE P. OBILLOS, JR., SARAH P. OBILLOS, ROMEO P. OBILLOS and REMEDIOS P. OBILLOS, brothers and sisters, petitioners vs. COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS, respondents. Demosthenes B. Gadioma for petitioners.

each of them. They treated the profit as a capital gain and paid an income tax on one-half thereof or of P16,792. In April, 1980, or one day before the expiration of the five-year prescriptive period, the Commissioner of Internal Revenue required the four petitioners to pay corporate income tax on the total profit of P134,336 in addition to individual income tax on their shares thereof He assessed P37,018 as corporate income tax, P18,509 as 50% fraud surcharge and P15,547.56 as 42% accumulated interest, or a total of P71,074.56. Not only that. He considered the share of the profits of each petitioner in the sum of P33,584 as a " taxable in full (not a mere capital gain of which is taxable) and required them to pay deficiency income taxes aggregating P56,707.20 including the 50% fraud surcharge and the accumulated interest. Thus, the petitioners are being held liable for deficiency income taxes and penalties totalling P127,781.76 on their profit of P134,336, in addition to the tax on capital gains already paid by them. The Commissioner acted on the theory that the four petitioners had formed an unregistered partnership or joint venture within the meaning of sections 24(a) and 84(b) of the Tax Code (Collector of Internal Revenue vs. Batangas Trans. Co., 102 Phil. 822). The petitioners contested the assessments. Two Judges of the Tax Court sustained the same. Judge Roaquin dissented. Hence, the instant appeal. We hold that it is error to consider the petitioners as having formed a partnership under article 1767 of the Civil Code simply because they allegedly contributed P178,708.12 to buy the two lots, resold the same and divided the profit among themselves. To regard the petitioners as having formed a taxable unregistered partnership would result in oppressive taxation and confirm the dictum that the power to tax involves the power to destroy. That eventuality should be obviated.

AQUINO, J.: This case is about the income tax liability of four brothers and sisters who sold two parcels of land which they had acquired from their father. On March 2, 1973 Jose Obillos, Sr. completed payment to Ortigas & Co., Ltd. on two lots with areas of 1,124 and 963 square meters located at Greenhills, San Juan, Rizal. The next day he transferred his rights to his four children, the petitioners, to enable them to build their residences. The company sold the two lots to petitioners for P178,708.12 on March 13 (Exh. A and B, p. 44, Rollo). Presumably, the Torrens titles issued to them would show that they were coowners of the two lots. In 1974, or after having held the two lots for more than a year, the petitioners resold them to the Walled City Securities Corporation and Olga Cruz Canda for the total sum of P313,050 (Exh. C and D). They derived from the sale a total profit of P134,341.88 or P33,584 for

As testified by Jose Obillos, Jr., they had no such intention. They were co-owners pure and simple. To consider them as partners would obliterate the distinction between a co-ownership and a partnership. The petitioners were not engaged in any joint venture by reason of that isolated transaction. Their original purpose was to divide the lots for residential purposes. If later on they found it not feasible to build their residences on the lots because of the high cost of construction, then they had no choice but to resell the same to dissolve the co-ownership. The division of the profit was merely incidental to the dissolution of the co-ownership which was in the nature of things a temporary state. It had to be terminated sooner or later. Castan Tobeas says: Como establecer el deslinde entre la comunidad ordinaria o copropiedad y la sociedad? El criterio diferencial-segun la doctrina mas generalizada-esta: por razon del origen, en que la sociedad presupone necesariamente la convencion, mentras que la comunidad puede existir y existe ordinariamente sin ela; y por razon del fin objecto, en que el objeto de la sociedad es obtener lucro, mientras que el de la indivision es solo mantener en su integridad la cosa comun y favorecer su conservacion. Reflejo de este criterio es la sentencia de 15 de Octubre de 1940, en la que se dice que si en nuestro Derecho positive se ofrecen a veces dificultades al tratar de fijar la linea divisoria entre comunidad de bienes y contrato de sociedad, la moderna orientacion de la doctrina cientifica seala como nota fundamental de diferenciacion aparte del origen de fuente de que surgen, no siempre uniforme, la finalidad perseguida por los interesados: lucro comun partible en la sociedad, y mera conservacion y aprovechamiento en la

comunidad. (Derecho Civil Espanol, Vol. 2, Part 1, 10 Ed., 1971, 328- 329). Article 1769(3) of the Civil Code provides that "the sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived". There must be an unmistakable intention to form a partnership or joint venture.* Such intent was present in Gatchalian vs. Collector of Internal Revenue, 67 Phil. 666, where 15 persons contributed small amounts to purchase a two-peso sweepstakes ticket with the agreement that they would divide the prize The ticket won the third prize of P50,000. The 15 persons were held liable for income tax as an unregistered partnership. The instant case is distinguishable from the cases where the parties engaged in joint ventures for profit. Thus, in Oa vs. ** This view is supported by the following rulings of respondent Commissioner: Co-owership distinguished from partnership.We find that the case at bar is fundamentally similar to the De Leon case. Thus, like the De Leon heirs, the Longa heirs inherited the 'hacienda' in questionproindiviso from their deceased parents; they did not contribute or invest additional ' capital to increase or expand the inherited properties; they merely continued dedicating the property to the use to which it had been put by their forebears; they individually reported in their tax returns their corresponding shares in the income and expenses of the 'hacienda', and they continued for many years the status of co-ownership in order, as conceded by respondent, 'to preserve its (the 'hacienda') value and to continue the existing contractual relations with the Central Azucarera de Bais for milling

purposes. Longa vs. Aranas, CTA Case No. 653, July 31, 1963). All co-ownerships are not deemed unregistered pratnership.Co-Ownership who own properties which produce income should not automatically be considered partners of an unregistered partnership, or a corporation, within the purview of the income tax law. To hold otherwise, would be to subject the income of all co-ownerships of inherited properties to the tax on corporations, inasmuch as if a property does not produce an income at all, it is not subject to any kind of income tax, whether the income tax on individuals or the income tax on corporation. (De Leon vs. CI R, CTA Case No. 738, September 11, 1961, cited in Araas, 1977 Tax Code Annotated, Vol. 1, 1979 Ed., pp. 77-78). Commissioner of Internal Revenue, L-19342, May 25, 1972, 45 SCRA 74, where after an extrajudicial settlement the co-heirs used the inheritance or the incomes derived therefrom as a common fund to produce profits for themselves, it was held that they were taxable as an unregistered partnership. It is likewise different from Reyes vs. Commissioner of Internal Revenue, 24 SCRA 198, where father and son purchased a lot and building, entrusted the administration of the building to an administrator and divided equally the net income, and from Evangelista vs. Collector of Internal Revenue, 102 Phil. 140, where the three Evangelista sisters bought four pieces of real property which they leased to various tenants and derived rentals therefrom. Clearly, the petitioners in these two cases had formed an unregistered partnership. In the instant case, what the Commissioner should have investigated was whether the father donated the two lots to the petitioners and whether he paid the donor's tax (See Art. 1448, Civil Code). We are not prejudging this matter. It might have already prescribed.

WHEREFORE, the judgment of the Tax Court is reversed and set aside. The assessments are cancelled. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-23276 November 29, 1968

and/or Inspector who is riding in the Motor Vehicle insured at 1 the time of accident or injury. While the policy was in force, or on February 10, 1962, a taxicab of the Insured, driven by Carlito Coquia, met a vehicular accident at Mangaldan, Pangasinan, in consequence of which Carlito died. The Insured filed therefor a claim for P5,000.00 to which the Company replied with an offer to pay P2,000.00, by way of compromise. The Insured rejected the same and made a counter-offer for P4,000.00, but the Company did not accept it. Hence, on September 18, 1962, the Insured and Carlito's parents, namely, Melecio Coquia and Maria Espanueva hereinafter referred to as the Coquias filed a complaint against the Company to collect the proceeds of the aforementioned policy. In its answer, the Company admitted the existence thereof, but pleaded lack of cause of action on the part of the plaintiffs. After appropriate proceedings, the trial court rendered a decision sentencing the Company to pay to the plaintiffs the sum of P4,000.00 and the costs. Hence, this appeal by the Company, which contends that plaintiffs have no cause of action because: 1) the Coquias have no contractual relation with the Company; and 2) the Insured has not complied with the provisions of the policy concerning arbitration. As regards the first defense, it should be noted that, although, in general, only parties to a contract may bring an action based thereon, this rule is subject to exceptions, one of which is found in the second paragraph of Article 1311 of the Civil Code of the Philippines, reading: If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly 2 and deliberately conferred a favor upon a third person. This is but the restatement of a well-known principle concerning contracts pour autrui, the enforcement of which may be demanded

MELECIO COQUIA, MARIA ESPANUEVA and MANILA YELLOW TAXICAB CO., INC., plaintiffs-appellees, vs. FIELDMEN'S INSURANCE CO., INC., defendant-appellant. Antonio de Venecia for plaintiffs-appellees. Rufino Javier for defendant-appellant. CONCEPCION, C.J.: This is an appeal from a decision of the Court of First Instance of Manila, certified to us by the Court of Appeals, only questions of law being involved therein. Indeed, the pertinent facts have been stipulated and/or, admitted by the parties at the hearing of the case in the trial court, to dispense with the presentation of evidence therein. It appears that on December 1, 1961, appellant Fieldmen's Insurance Company, Inc. hereinafter referred to as the Company issued, in favor of the Manila Yellow Taxicab Co., Inc. hereinafter referred to as the Insured a common carrier accident insurance policy, covering the period from December 1, 1961 to December 1, 1962. It was stipulated in said policy that: The Company will, subject to the Limits of Liability and under the Terms of this Policy, indemnify the Insured in the event of accident caused by or arising out of the use of Motor Vehicle against all sums which the Insured will become legally liable to pay in respect of: Death or bodily injury to any fare-paying passengerincluding the Driver, Conductor

by a third party for whose benefit it was made, although not a party to the contract, before the stipulation in his favor has been revoked by the contracting parties. Does the policy in question belong to such class of contracts pour autrui? In this connection, said policy provides, inter alia: Section I Liability to Passengers. 1. The Company will, subject to the Limits of Liability and under the Terms of this Policy, indemnify the Insured in the event of accident caused by or arising out of the use of Motor Vehicle against all sums which the Insured will become legally liable to pay in respect of: Death or bodily injury to any fare-paying passenger including the Driver ... who is riding in the Motor Vehicle insured at the time of accident or injury. Section II Liability to the Public xxx xxx xxx

securing the consent of or prior notification to the Insured, it being the true intention of this Policy to protect, to the extent herein specified and subject always to the Terms Of this Policy, the liabilities of the Insured towards the passengers of the Motor Vehicle and the Public. Pursuant to these stipulations, the Company "will indemnify any authorized Driver who is driving the Motor Vehicle" of the Insured and, in the event of death of said driver, the Company shall, likewise, "indemnify his personal representatives." In fact, the Company "may, at its option, make indemnity payable directly to the claimants or heirs of claimants ... it being the true intention of this Policy to protect ... the liabilities of the Insured towards the passengers of the Motor Vehicle and the Public" in other words, third parties. Thus, the policy under consideration is typical of contracts pour autrui, this character being made more manifest by the fact that the deceased driver paid fifty percent (50%) of the corresponding premiums, which were deducted from his weekly commissions. Under these conditions, it is clear that the Coquias who, admittedly, are the sole heirs of the deceased have a direct cause 3 of action against the Company, and, since they could have maintained this action by themselves, without the assistance of the Insured, it goes without saying that they could and did properly join 4 the latter in filing the complaint herein. The second defense set up by the Company is based upon Section 17 of the policy reading: If any difference or dispute shall arise with respect to the amount of the Company's liability under this Policy, the same shall be referred to the decision of a single arbitrator to be agreed upon by both parties or failing such agreement of a single arbitrator, to the decision of two arbitrators, one to be appointed in writing by each of the parties within one calendar month after having been required in writing so to do by either of the parties and in case of disagreement between the arbitrators, to the decision of an umpire who shall have been appointed in writing by the arbitrators before entering

3. In terms of and subject to the limitations of and for the purposes of this Section, the Company will indemnify any authorized Driver who is driving the Motor Vehicle.... Conditions xxx xxx xxx

7. In the event of death of any person entitled to indemnity under this Policy, the Company will, in respect of the liability incurred by such person, indemnify his personal representatives in terms of and subject to the limitations of this Policy, provided, that such representatives shall, as though they were the Insured, observe, fulfill and be subject to the Terms of this Policy insofar as they can apply. 8. The Company may, at its option, make indemnity payable directly to the claimants or heirs of claimants, with or without

on the reference and the costs of and incident to the reference shall be dealt with in the Award. And it is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this Policy that the award by such arbitrator, arbitrators or umpire of the amount of the Company's liability hereunder if disputed shall be first obtained. The record shows, however, that none of the parties to the contract invoked this section, or made any reference to arbitration, during the negotiations preceding the institution of the present case. In fact, counsel for both parties stipulated, in the trial court, that none of them had, at any time during said negotiations, even suggested the settlement of the issue between them by arbitration, as provided in said section. Their aforementioned acts or omissions had the effect of a waiver of their respective right to demand an arbitration. Thus, in 5 Kahnweiler vs. Phenix Ins. Co. of Brooklyn, it was held: Another well-settled rule for interpretation of all contracts is that the court will lean to that interpretation of a contract which will make it reasonable and just. Bish. Cont. Sec. 400. Applying these rules to the tenth clause of this policy, its proper interpretation seems quite clear. When there is a difference between the company and the insured as to the amount of the loss the policy declares: "The same shall then be submitted to competent and impartial arbitrators, one to be selected by each party ...". It will be observed that the obligation to procure or demand an arbitration is not, by this clause, in terms imposed on either party. It is not said that either the company or the insured shall take the initiative in setting the arbitration on foot. The company has no more right to say the insured must do it than the insured has to say the company must do it. The contract in this respect is neither unilateral nor self-executing. To procure a reference to arbitrators, the joint and concurrent action of both parties to the contract is indispensable. The right it gives and the obligation it creates to refer the differences between the parties to arbitrators are mutual. One party to the contract cannot bring about an arbitration. Each party is entitled to demand a reference, but neither can compel it, and neither

has the right to insist that the other shall first demand it, and shall forfeit any right by not doing so. If the company demands it, and the insured refuses to arbitrate, his right of action is suspended until he consents to an arbitration; and if the insured demands an arbitration, and the company refuses to accede to the demand, the insured may maintain a suit on the policy, notwithstanding the language of the twelfth section of the policy, and, where neither party 6 demands an arbitration, both parties thereby waive it. To the same effect was the decision of the Supreme Court of Minnesota in Independent School Dist. No. 35, St. Louis County vs. 7 A. Hedenberg & Co., Inc. from which we quote: This rule is not new in our state. In Meyer v. Berlandi, 53 Minn. 59, 54 N.W. 937, decided in 1893, this court held that the parties to a construction contract, having proceeded throughout the entire course of their dealings with each other in entire disregard of the provision of the contract regarding the mode of determining by arbitration the value of the extras, thereby waived such provision. xxx xxx xxx

The test for determining whether there has been a waiver in a particular case is stated by the author of an exhaustive annotation in 117 A.L.R. p. 304, as follows: "Any conduct of the parties inconsistent with the notion that they treated the arbitration provision as in effect, or any conduct which might be reasonably construed as showing that they did not intend to avail themselves of such provision, may amount to a waiver thereof and estop the party charged with such conduct from claiming its benefits". xxx xxx xxx

The decisive facts here are that both parties from the inception of their dispute proceeded in entire disregard of the provisions of the contract relating to arbitration and that

neither at any stage of such dispute, either before or after commencement of the action, demanded arbitration, either by oral or written demand, pleading, or otherwise. Their conduct was as effective a rejection of the right to arbitrate as if, in the best Coolidge tradition, they had said, "We do not choose to arbitrate". As arbitration under the express provisions of article 40 was "at the choice of either party," and was chosen by neither, a waiver by both of the right to arbitration followed as a matter of law. WHEREFORE, the decision appealed from should be as it is hereby affirmed in toto, with costs against the herein defendant-appellant, Fieldmen's Insurance Co., Inc. It is so ordered. Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando and Capistrano, JJ., concur. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-22684 August 31, 1967

plaintiff, Philippine Phoenix Surety & Insurance, Inc., the sum of P3,522.09 with interest thereon at the legal rate of 6% per annum from the date of the filing of the complaint until fully paid, and costs of the suit." Appellee Philippine Phoenix Surety & Insurance Co., Inc. commenced this action in the Municipal Court of Manila to recover from appellant Woodworks, Inc. the sum of P3,522.09, representing the unpaid balance of the premiums on a fire insurance policy issued by appellee in favor of appellant for a term of one year from April 1, 1960 to April 1, 1961. From an adverse decision of said court, Woodworks, Inc. appealed to the Court of First Instance of Manila (Civil Case No. 50710) where the parties submitted the following stipulation of facts, on the basis of which the appealed decision was rendered: That plaintiff and defendant are both corporations duly organized and existing under and by virtue of the laws of the Philippines; That on April 1, 1960, plaintiff issued to defendant Fire Policy No. 9652 for the amount of P300,000.00, under the terms and conditions therein set forth in said policy a copy of which is hereto attached and made a part hereof as Annex "A"; That the premiums of said policy as stated in Annex "A" amounted to P6,051.95; the margin fee pursuant to the adopted plan as an implementation of Republic Act 2609 amounted to P363.72, copy of said adopted plan is hereto attached as Annex "B" and made a part hereof, the documentary stamps attached to the policy was P96.42; That the defendant paid P3,000.00 on September 22, 1960 under official receipt No. 30245 of plaintiff; That plaintiff made several demands on defendant to pay the amount of P3,522.09.1wph1.t

PHILIPPINE PHOENIX SURETY & INSURANCE, INC., plaintiffappellee, vs. WOODWORKS, INC., defendant-appellant. Zosimo Rivas for defendant-appellant. Manuel O. Chan for plaintiff-appellee. DIZON, J.: Appeal upon a question of law taken by Woodworks, Inc. from the judgment of the Court of First Instance of Manila in Civil Case No. 50710 "ordering the defendant, Woodworks, Inc. to pay to the

In the present appeal, appellant claims that the court a quo committed the following errors: I. The lower court erred in stating that in fire insurance policies the risk attached upon the issuance and delivery of the policy to the insured. II. The lower court erred in deciding that in a perfected contract of insurance non-payment of premium does not cancel the policy. III. The lower court erred in deciding that the premium in the policy was still collectible when the complaint was filed. IV. The lower court erred in deciding that a partial payment of the premium made the policy effective during the whole period of the policy. It is clear from the foregoing that on April 1, 1960 Fire Insurance Policy No. 9652 was issued by appellee and delivered to appellant, and that on September 22 of the same year, the latter paid to the former the sum of P3,000.00 on account of the total premium of P6,051.95 due thereon. There is, consequently, no doubt at all that, as between the insurer and the insured, there was not only a perfected contract of insurance but a partially performed one as far as the payment of the agreed premium was concerned. Thereafter the obligation of the insurer to pay the insured the amount for which the policy was issued in case the conditions therefor had been complied with, arose and became binding upon it, while the obligation of the insured to pay the remainder of the total amount of the premium due became demandable. We can not agree with appellant's theory that non-payment by it of the premium due, produced the cancellation of the contract of insurance. Such theory would place exclusively in the hands of one of the contracting parties the right to decide whether the contract should stand or not. Rather the correct view would seem to be this: as the contract had become perfected, the parties could demand from each other the performance of whatever obligations they had

assumed. In the case of the insurer, it is obvious that it had the right to demand from the insured the completion of the payment of the premium due or sue for the rescission of the contract. As it chose to demand specific performance of the insured's obligation to pay the balance of the premium, the latter's duty to pay is indeed indubitable. Having thus resolved that the fourth and last assignment of error submitted in appellant's brief is without merit, the first three assignments of error must likewise be overruled as lacking in merit. Wherefore, the appealed decision being in accordance with law and the evidence, the same is hereby affirmed, with costs. Concepcion, C.J., Reyes, J.B.L., Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-34583 October 22, 1931

THE BANK OF THE PHILIPPINE ISLANDS, administrator of the estate of the late Adolphe Oscar Schuetze,plaintiff-appellant, vs. JUAN POSADAS, JR., Collector of Internal Revenue, defendantappellee. Araneta, De Joya, Zaragoza and Araneta for appellant. Attorney-General Jaranilla for appellee.

VILLA-REAL, J.:

The Bank of the Philippine Islands, as administrator of the estate of the deceased Adolphe Oscar Schuetze, has appealed to this court from the judgment of the Court of First Instance of Manila absolving the defendant Juan Posadas, Jr., Collector of Internal Revenue, from the complaint filed against him by said plaintiff bank, and dismissing the complaint with costs. The appellant has assigned the following alleged errors as committed by the trial court in its judgment, to wit: 1. The lower court erred in holding that the testimony of Mrs. Schuetze was inefficient to established the domicile of her husband. 2. The lower court erred in holding that under section 1536 of the Administrative Code the tax imposed by the defendant is lawful and valid. 3. The lower court erred in not holding that one-half () of the proceeds of the policy in question is community property and that therefore no inheritance tax can be levied, at least on one-half () of the said proceeds. 4. The lower court erred in not declaring that it would be unconstitutional to impose an inheritance tax upon the insurance policy here in question as it would be a taking of property without due process of law. The present complaint seeks to recover from the defendant Juan Posadas, Jr., Collector of Internal Revenue, the amount of P1,209 paid by the plaintiff under protest, in its capacity of administrator of the estate of the late Adolphe Oscar Schuetze, as inheritance tax upon the sum of P20,150, which is the amount of an insurance policy on the deceased's life, wherein his own estate was named the beneficiary. At the hearing, in addition to documentary and parol evidence, both parties submitted the following agreed statement of facts of the court for consideration:

It is hereby stipulated and agreed by and between the parties in the above-entitled action through their respective undersigned attorneys: 1. That the plaintiff, Rosario Gelano Vda. de Schuetze, window of the late Adolphe Oscar Schuetze, is of legal age, a native of Manila, Philippine Islands, and is and was at all times hereinafter mentioned a resident of Germany, and at the time of the death of her husband, the late Adolphe Oscar Schuetze, she was actually residing and living in Germany; 2. That the Bank of the Philippine Islands, is and was at all times hereinafter mentioned a banking institution duly organized and existing under and by virtue of the laws of the Philippine Islands; 3. That on or about August 23, 1928, the herein plaintiff before notary public Salvador Zaragoza, drew a general power appointing the above-mentioned Bank of the Philippine Islands as her attorney-in-fact, and among the powers conferred to said attorney-in-fact was the power to represent her in all legal actions instituted by or against her; 4. That the defendant, of legal age, is and at all times hereinafter mentioned the duly appointed Collector of Internal Revenue with offices at Manila, Philippine Islands; 5. That the deceased Adolphe Oscar Schuetze came to the Philippine Islands for the first time of March 31, 1890, and worked in the several German firms as a mere employee and that from the year 1903 until the year 1918 he was partner in the business of Alfredo Roensch; 6. That from 1903 to 1922 the said Adolphe Oscar Schuetze was in the habit of making various trips to Europe; 7. That on December 3, 1927, the late Adolphe Oscar Schuetze coming from Java, and with the intention of going

to Bremen, landed in the Philippine Islands where he met his death on February 2, 1928; 8. That on March 31, 1926, the said Adolphe Oscar Schuetze, while in Germany, executed a will, in accordance with its law, wherein plaintiff was named his universal heir; 9. That the Bank of the Philippine Islands by order of the Court of First Instance of Manila under date of May 24, 1928, was appointed administrator of the estate of the deceased Adolphe Oscar Schuetze; 10. That, according to the testamentary proceedings instituted in the Court of First Instance of Manila, civil case No. 33089, the deceased at the time of his death was possessed of not only real property situated in the Philippine Islands, but also personal property consisting of shares of stock in nineteen (19) domestic corporations; 11. That the fair market value of all the property in the Philippine Islands left by the deceased at the time of his death in accordance with the inventory submitted to the Court of First Instance of Manila, civil case No. 33089, was P217,560.38; 12. That the Bank of the Philippine Islands, as administrator of the estate of the deceased rendered its final account on June 19, 1929, and that said estate was closed on July 16, 1929; 13. That among the personal property of the deceased was found life-insurance policy No. 194538 issued at Manila, Philippine Islands, on January 14, 1913, for the sum of $10,000 by the Sun Life Assurance Company of Canada, Manila branch, a foreign corporation duly organized and existing under and by virtue of the laws of Canada, and duly authorized to transact business in the Philippine Islands;

14. That in the insurance policy the estate of the said Adolphe Oscar Schuetze was named the beneficiary without any qualification whatsoever; 15. That for five consecutive years, the deceased Adolphe Oscar Schuetze paid the premiums of said policy to the Sun Life Assurance Company of Canada, Manila branch; 16. That on or about the year 1918, the Sun Life Assurance Company of Canada, Manila branch, transferred said policy to the Sun Life Assurance Company of Canada, London branch; 17. That due to said transfer the said Adolphe Oscar Schuetze from 1918 to the time of his death paid the premiums of said policy to the Sun Life Assurance Company of Canada, London Branch; 18. That the sole and only heir of the deceased Adolphe Oscar Schuetze is his widow, the plaintiff herein; 19. That at the time of the death of the deceased and at all times thereafter including the date when the said insurance policy was paid, the insurance policy was not in the hands or possession of the Manila office of the Sun Life Assurance Company of Canada, nor in the possession of the herein plaintiff, nor in the possession of her attorney-in-fact the Bank of the Philippine Islands, but the same was in the hands of the Head Office of the Sun Life Assurance Company of Canada, at Montreal, Canada; 20. That on July 13, 1928, the Bank of the Philippine Islands as administrator of the decedent's estate received from the Sun Life Assurance Company of Canada, Manila branch, the sum of P20,150 representing the proceeds of the insurance policy, as shown in the statement of income and expenses of the estate of the deceased submitted on June 18, 1929, by the administrator to the Court of First Instance of Manila, civil case No. 33089;

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21. That the Bank of the Philippine Islands delivered to the plaintiff herein the said sum of P20,150; 22. That the herein defendant on or about July 5, 1929, imposed an inheritance tax upon the transmission of the proceeds of the policy in question in the sum of P20,150 from the estate of the late Adolphe Oscar Schuetze to the sole heir of the deceased, or the plaintiff herein, which inheritance tax amounted to the sum of P1,209; 23. That the Bank of the Philippine Islands as administrator of the decedent's estate and as attorney-in-fact of the herein plaintiff, having been demanded by the herein defendant to pay inheritance tax amounting to the sum of P1,209, paid to the defendant under protest the above-mentioned sum; 24. That notwithstanding the various demands made by plaintiff to the defendant, said defendant has refused and refuses to refund to plaintiff the above mentioned sum of P1,209; 25. That plaintiff reserves the right to adduce evidence as regards the domicile of the deceased, and so the defendant, the right to present rebuttal evidence; 26. That both plaintiff and defendant submit this stipulation of facts without prejudice to their right to introduce such evidence, on points not covered by the agreement, which they may deem proper and necessary to support their respective contentions. In as much as one of the question raised in the appeal is whether an insurance policy on said Adolphe Oscar Schuetze's life was, by reason of its ownership, subject to the inheritance tax, it would be well to decide first whether the amount thereof is paraphernal or community property. According to the foregoing agreed statement of facts, the estate of Adolphe Oscar Schuetze is the sole beneficiary named in

the life-insurance policy for $10,000, issued by the Sun Life Assurance Company of Canada on January 14, 1913. During the following five years the insured paid the premiums at the Manila branch of the company, and in 1918 the policy was transferred to the London branch. The record shows that the deceased Adolphe Oscar Schuetze married the plaintiff-appellant Rosario Gelano on January 16, 1914. With the exception of the premium for the first year covering the period from January 14, 1913 to January 14, 1914, all the money used for paying the premiums, i. e., from the second year, or January 16, 1914, or when the deceased Adolphe Oscar Schuetze married the plaintiff-appellant Rosario Gelano, until his death on February 2, 1929, is conjugal property inasmuch as it does not appear to have exclusively belonged to him or to his wife (art. 1407, Civil Code). As the sum of P20,150 here in controversy is a product of such premium it must also be deemed community property, because it was acquired for a valuable consideration, during said Adolphe Oscar Schuetze's marriage with Rosario Gelano at the expense of the common fund (art. 1401, No. 1, Civil Code), except for the small part corresponding to the first premium paid with the deceased's own money. In his Commentaries on the Civil Code, volume 9, page 589, second edition, Manresa treats of life insurance in the following terms, to wit: The amount of the policy represents the premiums to be paid, and the right to it arises the moment the contract is perfected, for at the moment the power of disposing of it may be exercised, and if death occurs payment may be demanded. It is therefore something acquired for a valuable consideration during the marriage, though the period of its fulfillment, depend upon the death of one of the spouses, which terminates the partnership. So considered, the question may be said to be decided by articles 1396 and 1401: if the premiums are paid with the exclusive property of husband or wife, the policy belongs to the owner; if with

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conjugal property, or if the money cannot be proved as coming from one or the other of the spouses, the policy is community property. The Supreme Court of Texas, United States, in the case of Martin vs. Moran (11 Tex. Civ. A., 509) laid down the following doctrine: COMMUNITY PROPERTY LIFE INSURANCE POLICY. A husband took out an endowment life insurance policy on his life, payable "as directed by will." He paid the premiums thereon out of community funds, and by his will made the proceeds of the policy payable to his own estate. Held, that the proceeds were community estate, onehalf of which belonged to the wife. In In re Stan's Estate, Myr. Prob. (Cal.), 5, the Supreme Court of California laid down the following doctrine: A testator, after marriage, took out an insurance policy, on which he paid the premiums from his salary. Held that the insurance money was community property, to onehalf of which, the wife was entitled as survivor. In In re Webb's Estate, Myr. Prob. (Cal.), 93, the same court laid down the following doctrine: A decedent paid the first third of the amount of the premiums on his life-insurance policy out of his earnings before marriage, and the remainder from his earnings received after marriage. Held, that one-third of the policy belonged to his separate estate, and the remainder to the community property. Thus both according to our Civil Code and to the ruling of those North American States where the Spanish Civil Code once governed, the proceeds of a life-insurance policy whereon the premiums were paid with conjugal money, belong to the conjugal partnership.

The appellee alleges that it is a fundamental principle that a life-insurance policy belongs exclusively to the beneficiary upon the death of the person insured, and that in the present case, as the late Adolphe Oscar Schuetze named his own estate as the sole beneficiary of the insurance on his life, upon his death the latter became the sole owner of the proceeds, which therefore became subject to the inheritance tax, citing Del Val vs. Del Val (29 Phil., 534), where the doctrine was laid down that an heir appointed beneficiary to a life-insurance policy taken out by the deceased, becomes the absolute owner of the proceeds of such policy upon the death of the insured. The estate of a deceased person cannot be placed on the same footing as an individual heir. The proceeds of a life-insurance policy payable to the estate of the insured passed to the executor or administrator of such estate, and forms part of its assets (37 Corpus Juris, 565, sec. 322); whereas the proceeds of a life-insurance policy payable to an heir of the insured as beneficiary belongs exclusively to said heir and does not form part of the deceased's estate subject to administrator. (Del Val vs. Del Val, supra; 37 Corpus Juris, 566, sec. 323, and articles 419 and 428 of the Code of Commerce.) Just as an individual beneficiary of a life-insurance policy taken out by a married person becomes the exclusive owner of the proceeds upon the death of the insured even if the premiums were paid by the conjugal partnership, so, it is argued, where the beneficiary named is the estate of the deceased whose life is insured, the proceeds of the policy become a part of said estate upon the death of the insured even if the premiums have been paid with conjugal funds. In a conjugal partnership the husband is the manager, empowered to alienate the partnership property without the wife's consent (art. 1413, Civil Code), a third person, therefore, named beneficiary in a life-insurance policy becomes the absolute owner of its proceeds upon the death of the insured even if the premiums should have been paid with money belonging to the community property. When a married man has his life insured and names his own estate after death, beneficiary, he makes no alienation of the proceeds of conjugal funds to a third person, but appropriates them

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himself, adding them to the assets of his estate, in contravention of the provisions of article 1401, paragraph 1, of the Civil Code cited above, which provides that "To the conjugal partnership belongs" (1) Property acquired for a valuable consideration during the marriage at the expense of the common fund, whether the acquisition is made for the partnership or for one of the spouses only." Furthermore, such appropriation is a fraud practised upon the wife, which cannot be allowed to prejudice her, according to article 1413, paragraph 2, of said Code. Although the husband is the manager of the conjugal partnership, he cannot of his own free will convert the partnership property into his own exclusive property. As all the premiums on the life-insurance policy taken out by the late Adolphe Oscar Schuetze, were paid out of the conjugal funds, with the exceptions of the first, the proceeds of the policy, excluding the proportional part corresponding to the first premium, constitute community property, notwithstanding the fact that the policy was made payable to the deceased's estate, so that one-half of said proceeds belongs to the estate, and the other half to the deceased's widow, the plaintiff-appellant Rosario Gelano Vda. de Schuetze. The second point to decide in this appeal is whether the Collector of Internal Revenue has authority, under the law, to collect the inheritance tax upon one-half of the life-insurance policy taken out by the late Adolphe Oscar Schuetze, which belongs to him and is made payable to his estate. According to the agreed statement of facts mentioned above, the plaintiff-appellant, the Bank of the Philippine Islands, was appointed administrator of the late Adolphe Oscar Schuetze's testamentary estate by an order dated March 24, 1928, entered by the Court of First Instance of Manila. On July 13, 1928, the Sun Life Assurance Company of Canada, whose main office is in Montreal, Canada, paid Rosario Gelano Vda. de Schuetze upon her arrival at Manila, the sum of P20,150, which was the amount of the insurance policy on the life of said deceased, payable to the latter's estate. On the same date Rosario Gelano Vda. de Schuetze delivered the money to said Bank of the Philippine Islands, as administrator of the

deceased's estate, which entered it in the inventory of the testamentary estate, and then returned the money to said widow. Section 1536 of the Administrative Code, as amended by section 10 of Act No. 2835 and section 1 of Act No. 3031, contains the following relevant provision: SEC. 1536. Conditions and rate of taxation. Every transmission by virtue of inheritance, devise, bequest, gift mortis causa or advance in anticipation of inheritance, devise, or bequest of real property located in the Philippine Islands and real rights in such property; of any franchise which must be exercised in the Philippine Islands; of any shares, obligations, or bonds issued by any corporation or sociedad anonimaorganized or constituted in the Philippine Islands in accordance with its laws; of any shares or rights in any partnership, business or industry established in the Philippine Islands or of any personal property located in the Philippine Islands shall be subject to the following tax: xxx xxx xxx

In as much as the proceeds of the insurance policy on the life of the late Adolphe Oscar Schuetze were paid to the Bank of the Philippine Islands, as administrator of the deceased's estate, for management and partition, and as such proceeds were turned over to the sole and universal testamentary heiress Rosario Gelano Vda. de Schuetze, the plaintiff-appellant, here in Manila, the situs of said proceeds is the Philippine Islands. In his work "The Law of Taxation," Cooley enunciates the general rule governing the levying of taxes upon tangible personal property, in the following words: GENERAL RULE. The suits of tangible personal property, for purposes of taxation may be where the owner is domiciled but is not necessarily so. Unlike intangible personal property, it may acquire a taxation situs in a state other than the one where the owner is domiciled, merely

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because it is located there. Its taxable situs is where it is more or less permanently located, regardless of the domicile of the owner. It is well settled that the state where it is more or less permanently located has the power to tax it although the owner resides out of the state, regardless of whether it has been taxed for the same period at the domicile of the owner, provided there is statutory authority for taxing such property. It is equally well settled that the state where the owner is domiciled has no power to tax it where the property has acquired an actual situs in another state by reason of its more or less permanent location in that state. ... (2 Cooley, The Law of Taxation, 4th ed., p. 975, par. 451.) With reference to the meaning of the words "permanent" and "in transit," he has the following to say: PERMANENCY OF LOCATION; PROPERTY IN TRANSIT. In order to acquire a situs in a state or taxing district so as to be taxable in the state or district regardless of the domicile of the owner and not taxable in another state or district at the domicile of the owner, tangible personal property must be more or less permanently located in the state or district. In other words, the situs of tangible personal property is where it is more or less permanently located rather than where it is merely in transit or temporarily and for no considerable length of time. If tangible personal property is more or less permanently located in a state other than the one where the owner is domiciled, it is not taxable in the latter state but is taxable in the state where it is located. If tangible personal property belonging to one domiciled in one state is in another state merely in transitu or for a short time, it is taxable in the former state, and is not taxable in the state where it is for the time being. . . . . Property merely in transit through a state ordinarily is not taxable there. Transit begins when an article is committed to a carrier for transportation to the state of its destination, or started on its ultimate passage. Transit ends when the goods arrive at their destination. But intermediate these points questions may arise as to when a temporary

stop in transit is such as to make the property taxable at the place of stoppage. Whether the property is taxable in such a case usually depends on the length of time and the purpose of the interruption of transit. . . . . . . . It has been held that property of a construction company, used in construction of a railroad, acquires a situs at the place where used for an indefinite period. So tangible personal property in the state for the purpose of undergoing a partial finishing process is not to be regarded as in the course of transit nor as in the state for a mere temporary purpose. (2 Cooley, The Law of Taxation, 4th ed., pp. 982, 983 and 988, par. 452.) If the proceeds of the life-insurance policy taken out by the late Adolphe Oscar Schuetze and made payable to his estate, were delivered to the Bank of the Philippine Islands for administration and distribution, they were not in transit but were more or less permanently located in the Philippine Islands, according to the foregoing rules. If this be so, half of the proceeds which is community property, belongs to the estate of the deceased and is subject to the inheritance tax, in accordance with the legal provision quoted above, irrespective of whether or not the late Adolphe Oscar Schuetze was domiciled in the Philippine Islands at the time of his death. By virtue of the foregoing, we are of opinion and so hold: (1) That the proceeds of a life-insurance policy payable to the insured's estate, on which the premiums were paid by the conjugal partnership, constitute community property, and belong one-half to the husband and the other half to the wife, exclusively; (2) that if the premiums were paid partly with paraphernal and partly conjugal funds, the proceeds are likewise in like proportion paraphernal in part and conjugal in part; and (3) that the proceeds of a life-insurance policy payable to the insured's estate as the beneficiary, if delivered to the testamentary administrator of the former as part of the assets of said estate under probate administration, are subject to the inheritance tax according to the law on the matter, if they belong to the assured exclusively, and it is immaterial that the insured was domiciled in these Islands or outside.1awphil.net

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Wherefore, the judgment appealed from is reversed, and the defendant is ordered to return to the plaintiff the one-half of the tax collected upon the amount of P20,150, being the proceeds of the insurance policy on the life of the late Adolphe Oscar Schuetze, after deducting the proportional part corresponding to the first premium, without special pronouncement of costs. So ordered. Avancea, C.J., Johnson, Street, Malcolm, Villamor, and Ostrand, JJ., concur. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

(Branch VI) in Civil Case No. 54508, which latter court declared plaintiff Oliva Yap, herein respondent, entitled to recover from defendant Pioneer Insurance & Surety Corporation, herein petitioner, the full amount of the damage inquired in Policy No. 4219, which is P25,000.00, plus 12% of said sum from the date of filing of the complaint until full payment, in addition to the sum of P6,000.00 for attorney's fees, and costs. Respondent Oliva Yap was the owner of a store in a two-storey building located at No. 856 Juan Luna Street, Manila, where in 1962 she sold shopping bags and footwear, such as shoes, sandals and step-ins. Chua Soon Poon Oliva Yap's son-in-law, was in charge of the store. On April 19, 1962, respondent Yap took out Fire Insurance Policy No. 4216 from petitioner Pioneer Insurance & Surety Corporation with a face value of P25,000.00 covering her stocks, office furniture, fixtures and fittings of every kind and description. Among the conditions in the policy executed by the parties are the following: The Insured shall give notice to the Company of any insurance or insurances 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 benefits under this Policy shall be forfeited. (emphasis supplied) It is understood that, except as may be stated on the face of this policy there is no other insurance on the property hereby covered and no other insurance is allowed except by the consent of the Company endorsed hereon. Any false declaration or breach or this condition will render this policy null and void. At the time of the insurance on April 19, 1962 of Policy No. 4219 in favor of respondent Yap, an insurance policy for P20,000.00 issued

G.R. No. L-36232 December 19, 1974 PIONEER INSURANCE AND SURETY CORPORATION, petitionerappellant, vs. OLIVA YAP, represented by her attorney-in-fact, CHUA SOON POON respondent-appellee. Eriberto D. Ignacio for petitioner-appellant. Paculdo, Miranda, Marquez, Sibal & Associates for respondentappellee.

FERNANDEZ, J.:p This is an appeal by certiorari from the decision of the Court of Appeals dated December 16, 1972, in CA-G.R. No. 36669-R, affirming the judgment of the Court of First Instance of Manila

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by the Great American Insurance Company covering the same properties was noted on said policy as co-insurance (Annex "1-E"). Later, on August 29, 1962, the parties executed Exhibit "1-K", as an endorsement on Policy No. 4219, stating: It is hereby declared and agreed that the coinsurance existing at present under this policy is as follows: P20,000.00 Northwest Ins., and not as originally stated. (emphasis supplied) Except as varied by this endorsement, all other terms and conditions remain unchanged. Still later, or on September 26, 1962, respondent Oliva Yap took out another fire insurance policy for P20,000.00 covering the same properties, this time from the Federal Insurance Company, Inc., which new policy was, however, procured without notice to and the written consent of petitioner Pioneer Insurance & Surety Corporation and, therefore, was not noted as a co-insurance in Policy No. 4219. At dawn on December 19, 1962, a fire broke out in the building housing respondent Yap's above-mentioned store, and the said store was burned. Respondent Yap filed an insurance claim, but the same was denied in petitioner's letter of May 17, 1963 (Exhibit "G"), on the ground of "breach and/or violation of any and/or all terms and conditions" of Policy No. 4219. On July 17, 1963, Oliva Yap filed with the Court of First Instance of Manila the present complaint, asking, among others, for payment of the face value of her fire insurance policy. In its answer, petitioner alleged that no property belonging to plaintiff Yap and covered by the insurance policy was destroyed by the fire; that Yap's claim was filed out of time; and that Yap took out an insurance policy from another insurance company without petitioner's knowledge and/or endorsement, in violation of the express stipulations in Policy No. 4219, hence, all benefits accruing from the policy were deemed forfeited.

As already stated at the beginning of this opinion, the trial court decided for plaintiff Oliva Yap; and its judgment was affirmed in full by the Court of Appeals. The vital issue in this appeal is whether or not petitioner should be absolved from liability on Fire Insurance Policy No. 4219 on account of any violation by respondent Yap of the co-insurance clause therein. In resolving this problem, the Court of Appeals stated in its decision: 5. The plaintiff-appellee has not violated the other insurance clause (Exhibit 1-F) of the insurance Policy No. 4219 that would justify the defendantappellant, as insurer, to avoid its liability thereunder. It appears on the face of said policy that a coinsurance in the amount of P20,000.00 was secured from the Great American Insurance and was declared by the plaintiff-appellee and recognized by the defendant-appellant. This was later on substituted for the same amount and secured by the Federal Insurance Company. Chua Soon Poon on being cross-examined by counsel for the defendantappellant, declared that the Great American Insurance policy was cancelled because of the difference in the premium and the same was changed for that of the Federal (t.s.n., hearing of December 1, 1964, pp. 35-36). Contrary to the assertion of the defendant-appellant, the Great American Insurance policy was not substituted by the Northwest Insurance policy. As admitted by the defendant-appellant in its brief (p. 48), the fire insurance policy issued by the Great American Insurance Company for P20,000.00 (Exhibit 1-E) was cancelled on August 29, 1962. On the other hand, the fire insurance policy issued by the Northwest Insurance & Surety Company for P20,000.00 (Exhibit 1-K) was taken out on July 23, 1962. How then can the Northwest Insurance policy issued on July 23, 1962, be considered as having substituted the Great American policy which was

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cancelled only on August 29, 1962? The defendantappellant can be considered to have waived the formal requirement of indorsing the policy of coinsurance since there was absolutely no showing that it was not aware of said substitution and preferred to continue the policy (Gonzales La O vs. Yek Tong Lin Fire and Marine Insurance Co., 55 Phil. 386). Even assuming that the defendantappellant did not indorse the Federal Insurance policy, there is no question that the same was only a substitution and did not in any way increase the amount of the declared co-insurance. In other words, there was no increase in the risk assumed by the defendant-appellant. We do not agree with the conclusion of the Court of Appeals. There was a violation by respondent Oliva Yap of the co-insurance clause contained in Policy No. 4219 that resulted in the avoidance of petitioner's liability. The insurance policy for P20,000.00 issued by the Great American Insurance Company covering the same properties of respondent Yap and duly noted on Policy No. 4219 as c-insurance, ceased, by agreement of the parties (Exhibit "1-L"), to be recognized by them as a co-insurance policy. The Court of Appeals says that the Great American Insurance policy was substituted by the Federal Insurance policy for the same amount, and because it was a mere case of substitution, there was no necessity for its endorsement on Policy No. 4219. This finding, as well as reasoning, suffers from several flaws. There is no evidence to establish and prove such a substitution. If anything was substituted for the Great American Insurance policy, it could only be the Northwest Insurance policy for the same amount of P20,000.00. The endorsement (Exhibit "1-K") quoted above shows the clear intention of the parties to recognize on the date the endorsement was made (August 29, 1962), the existence of only one co-insurance, and that is the Northwest Insurance policy, which according to the stipulation of the parties during the hearing, was issued on August 20, 1962 (t.s.n., January 12, 1965, pp. 3-4) and endorsed only on August 20, 1962. The finding of the Court of Appeals that the Great American Insurance policy was substituted by the Federal Insurance policy is

unsubstantiated by the evidence of record and indeed contrary to said stipulation and admission of respondent, and is grounded entirely on speculation, surmises or conjectures, hence, not binding 1 on the Supreme Court. The Court of Appeals would consider petitioner to have waived the formal requirement of endorsing the policy of co-insurance "since there was absolutely no showing that it was not aware of said substitution and preferred to continue the policy." The fallacy of this argument is that, contrary to Section 1, Rule 131 of the Revised Rules of Court, which requires each party to prove his own allegations, it would shift to petitioner, respondent's burden of proving her proposition that petitioner was aware of the alleged substitution, and with such knowledge preferred to continue the policy. Respondent Yap cites Gonzales La O vs. Yek Tong Lin Fire 2 and Marine Insurance Co., Ltd. to justify the assumption but in that case, unlike here, there was knowledge by the insurer of violations of the contract, to wit: "If, with the knowledge of the existence of other insurances which the defendant deemed violations of the contract, it has preferred to continue the policy, its action amounts to a waiver of the annulment of the contract ..." A waiver must be express. If it is to be implied from conduct mainly, said conduct must be clearly indicative of a clear intent to waive such right. Especially in the case at bar where petitioner is assumed to have waived a valuable right, nothing less than a clear, positive waiver, made with full knowledge of the circumstances, must be required. By the plain terms of the policy, other insurance without the consent of petitioner would ipso facto avoid the contract. It required no affirmative act of election on the part of the company to make operative the clause avoiding the contract, wherever the specified conditions should occur. Its obligations ceased, unless, being informed of the fact, it consented to the additional insurance. The validity of a clause in a fire insurance policy to the effect that the procurement of additional insurance without the consent of the insurer renders ipso facto the policy void is well-settled:

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In Milwaukee Mechanids' Lumber Co., vs. Gibson, 199 Ark. 542, 134 S. W. 2d 521, 522, a substantially identical clause was sustained and enforced, the court saying: "The rule in this state and practically all of the states is to the effect that a clause in a policy to the effect that the procurement of additional insurance without the consent of the insurer renders the policy void is a valid provision. The earlier cases of Planters Mutual Insurance Co., vs. Green, 72 Ark. 305, 80 S.W. 92, are to the same effect." And see Vance, Insurance, 2nd Ed., 725. (Reach vs. Arkansas Farmers Mut. Fire Ins. Co., [Ark. Nov. 14, 1949] 224 S. W. 2d 48, 49.) 2. Where a policy contains a clause providing that the policy shall be void if insured has or shall procure any other insurance on the property, the procurement of additional insurance without the consent of the insurer avoids the policy." (Planters' Mut. Ins. Ass'n vs. Green [Supreme Court of Arkansas, March 19, 1904] 80 S.W. 151.) 3. The policy provided that it should be void in case of other insurance "without notice and consent of this company. ..." It also authorized the company to terminate the contract at any time, at its option, by giving notice and refunding a ratable proportion of the premium. Held, that additional insurance, unless consented to, or unless a waiver was shown, ipso facto avoided the contract, and the fact that the company had not, after notice of such insurance, cancelled the policy, did not justify the legal conclusion that it had elected to allow it to continue in force." (Johnson vs. American Fire Ins., Co., [Supreme Court of Minnesota, Aug. 12, 1889] 43 N.W., 59) The aforecited principles have been applied in this jurisdiction 3 in General Insurance & Surety Corporation vs. Ng Hua . There, the policy issued by the General Insurance & Surety Corporation in favor

of respondent Ng Hua contained a provision identical with the 4 provisions in Policy No. 4219 quoted above. This Court, speaking thru Justice Cesar P. Bengson, in reversing the judgment of the Court of Appeals and absolving the insurer from liability under the policy, held: ... And considering the terms of the policy which required the insured to declare other insurances, the statement in question must be deemed to be a statement (warranty) binding on both insurer and insured, that there were no other insurance on the property. ... The annotation then, must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitled the insurer to rescind. (Sec. 69, Insurance Act.) Such misrepresentation is fatal in the light of our views in Santa Ana vs. Commercial Union Assurance Company, Ltd., 55 Phil. 329. The materiality of nondisclosure of other insurance policies is not open to doubt. Furthermore, even if the annotations were overlooked the defendant insurer would still be free from liability because there is no question that the policy issued by General Indemnity has not been stated in nor endorsed on Policy No. 471 of defendant. And as stipulated in the above-quoted provisions of such policy "all benefit under this policy shall be forfeited. (Emphasis supplied) The obvious purpose of the aforesaid requirement in the policy is to prevent over-insurance and thus avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing the situation in which a fire would be profitable to the insured. According to Justice Story: "The insured has no right to complain, for he assents to comply with all the stipulation on his side, in order to entitle himself to the benefit of the contract, which, upon reason or principle, he has

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no right to ask the court to dispense with the performance of his own part of the agreement, and yet to bind the other party to obligations, 5 which, but for those stipulation would not have been entered into." In view of the above conclusion, We deem it unnecessary to consider the other defenses interposed by petitioner. WHEREFORE, the appealed judgment of the Court of Appeals is reversed and set aside, and the petitioner absolved from all liability under the policy. Costs against private respondent. SO ORDERED. Fernando (Chairman), Barredo, Antonio and Aquino, JJ., concur.

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