Pacific v CA G.R. No.
L-41014 November 28, result, determination of the liability of private
1988
J. Paras
Facts:
An open fire insurance policy, was issued to
Paramount Shirt Manufacturing by Oriental
Assurance Corporation to indemnify
P61,000.00, caused by fire to the factory’s
stocks, materials and supplies.
The insured was a debtor of Pacific Banking
in the amount of (P800,000.00) and the
goods described in the policy were held in
trust by the insured for Pacific Banking under
trust receipts.
The policy was endorsed to Pacific Banking
as mortgagee/ trustor of the properties
insured, with the knowledge and consent of
private respondent to the effect that "loss if
any under this policy is payable to the
Pacific Banking Corporation".
A fire broke out on the premises destroying
the goods contained in the building.
The bank sent a letter of demand to Oriental
for indemnity.
The company wasn’t ready to give since it
was awaiting the adjuster’s report. The
company then made an excuse that the
insured had not filed any claim with it, nor
submitted proof of loss which is a clear
violation of Policy Condition No.11, as a
respondent could not be made.
Pacific Banking filed in the trial court an
action for a sum of money for P61,000.00
against Oriental Assurance.
At the trial, petitioner presented
communications of the insurance adjuster to
Asian Surety revealing undeclared co-
insurances with the following: P30,000 with
Wellington Insurance; P25,000 with Empire
Surety and P250,000 with Asian Surety
undertaken by insured Paramount on the
same property covered by its policy with
Oriental 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.
The defense of fraud, 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.
The trial court denied the respondent’s
motion. Oriental filed another motion to
include additional evidence of the co-
insurance which could amount to fraud.
The trial court still made Oriental liable for P
61,000. The CA reversed the trial court
decision. Pacific Banking filed a motion for
reconsideration of the said decision of the
respondent Court of Appeals, but this was
denied for lack of merit.
Issues:
1. WON unrevealed co-insurances Violated
policy conditions No. 3
2. WON the insured failed to file the required
proof of loss prior to court action.
Held: Yes. Petition dismissed.
Ratio:
Policy Condition No. 3 explicitly provides:
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.
The insured failed to reveal before the loss
three other insurances. Had the insurer
known that there were many co-insurances,
it could have hesitated or plainly desisted
from entering into such contract. Hence, the
insured was guilty of clear fraud.
Concrete evidence of fraud or false
declaration by the insured was furnished by
the petitioner itself when the facts alleged in
the policy under clauses "Co-Insurances
Declared" and "Other Insurance Clause" are
materially different from the actual number
of co-insurances taken over the subject
property.
As the insurance policy against fire expressly
required that notice should be given by the
insured of other insurance upon the same
property, the total absence of such notice
nullifies the policy.
Petitioner points out that Condition No. 3 in
the policy in relation to the "other insurance
clause" supposedly to have been violated,
cannot certainly defeat the right of the
petitioner to recover the insurance as
mortgagee/assignee. Hence, they claimed
that the purpose for which the endorsement
or assignment was made was to protect the
mortgagee/assignee against any untoward
act or omission of the insured. It would be
absurd to hold that petitioner is barred from
recovering the insurance on account of the
alleged violation committed by the insured.
It is obvious that petitioner has missed all
together the import of subject mortgage
clause which specifically provides:
“Loss, if any, under this policy, shall be
payable to the PACIFIC BANKING
CORPORATION Manila mortgagee/trustor as
its interest may appear, it being hereby
understood and agreed that this insurance
as to the interest of the mortgagee/trustor
only herein, shall not be invalidated by any
act or neglect—except fraud or
misrepresentation, or arson—of the
mortgagor or owner/trustee of the property
insured; provided, that in case the
mortgagor or owner/ trustee neglects or
refuses to pay any premium, the
mortgagee/ trustor shall, on demand pay
the same.”
The paragraph clearly states the exceptions
to the general rule that insurance as to the
interest of the mortgagee, cannot be
invalidated; namely: fraud, or
misrepresentation or arson. Concealment of
the aforecited co-insurances can easily be
fraud, or in the very least, misrepresentation.
Undoubtedly, it is but fair and just that where
the insured who is primarily entitled to
receive the proceeds of the policy has by its
fraud and/or misrepresentation, forfeited
said right.
Petitioner further stressed that fraud which
was not pleaded as a defense in private
respondent's answer or motion to dismiss,
should be deemed to have been waived. It
will be noted that the fact of fraud was tried
by express or at least implied consent of the
parties. Petitioner did not only object to the
introduction of evidence but on the
contrary, presented the very evidence that
proved its existence.
2. Generally, the cause of action on the
policy accrues when the loss occurs, But
when the policy provides that no action
shall be brought unless the claim is first
presented extrajudicially in the manner
provided in the policy, the cause of action
will accrue from the time the insurer finally
rejects the claim for payment.
In the case at bar, policy condition No. 11
specifically 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.
Twenty-four days after the fire did petitioner
merely wrote letters to private respondent to
serve as a notice of loss. It didn’t even
furnish other documents. Instead, petitioner
shifted upon private respondent the burden
of fishing out the necessary information to
ascertain the particular account of the
articles destroyed by fire as well as the
amount of loss. Since the required claim by
insured, together with the preliminary
submittal of relevant documents had not
been complied with, it follows that private
respondent could not be deemed to have
finally rejected petitioner's claim and
therefore there was no cause of action.
It appearing that insured has violated or
failed to perform the conditions under No. 3
and 11 of the contracts, and such violation
or want of performance has not been HELD: In the contract executed by petitioner
waived by the insurer, the insured cannot in SOLIDBANK’s favor, albeit denominated as
recover, much less the herein petitioner. a “Continuing Guaranty”, is in fact a
contract of surety. The contract’s terms
CASE NO.11 obligates petitioner as “surety” to induce
SM: Surety vs. Guaranty; A.2080, NCC does SOLIDBANK to extend credit to the Claverias.
not apply where the liability is as a surety, The contract clearly disclose that petitioner
not as a guarantor. assumed liability to SOLIDBANK, as a regular
E.ZOBEL, INC. vs. CA party the undertaking and obligated itself as
GR# 113931, May 6, 1998 an original promissory. It bound itself jointly
and severally to the obligation with the
FACTS: Respondent Spouses Claveria, doing Claverias. In fact, SOLIDBANK need not
business under the name “ Agro Brokers”, resort to all other legal remedies or exhaust
applied for a loan with respondent the Claverias’ properties before it can hold
Consolidated Bank & Trust Corp. (now SOLID petitioner liable for the obligation. Since the
BANK) amounting to P2.875M. The loan was petitioner is a surety, A.2080, NCC is
granted subject to the condition that inapplicable. Said article applies where the
respondent spouses execute a chattel liability is as a guaranty not as a surety.
mortgage over the 3 vessels to be acquired
and that a continuing guarantee be
executed by Ayala International Phils., Inc.,
now herein petitioner E.Zobel, Inc. in SOLID
BANK’s favor. The Claverias defaulted in the
payment of the entire obligation upon
maturity. Petitioner moved to dismiss the
complaint asserting that its liability as
guarantor of the loan was extinguished
pursuant to A.2080, NCC. It argued that it
has lost its right to be subrogated to the first
chattel mortgage in view of SOLIDBANK’s
failure to register the chattel mortgage with
the appropriate government
agency. SOLIDBANK meantime claimed
that A.2080 is not applicable because
petitioner is not a guarantor but a surety.