Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-36232 December 19, 1974

PIONEER INSURANCE AND SURETY
CORPORATION, petitioner-appellant,
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.
Insurance; Co-insurance; Violation by insured of co-insurance
clause; Procurement of additional insurance without the consent of
the insurer renders policy voidBy 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.
Same; Same; Clause providing that policy shall be void if the
insured procures additional insurance without the consent of the
insurer; Purpose of.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.
Same; Waiver of right; Waiver must be made expressly.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 these cases where a person 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.
Courts; Court of Appeals; Findings by appellate court based on
speculation, surmises or conjectures not binding on Supreme
Court; Case at bar.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 on the Supreme Court.
Evidence; Burden of proof; Each party must prove his own
allegations; Case at bar.The Court of Appeals would consider the
insurer 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 the insurer the
insureds burden of proving her proposition that the said insurer
was aware of the alleged substitution, and with such knowledge
preferred to continue the policy.

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 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 "1K", 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.

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
(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.

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
defendant-appellant, as insurer, to avoid its
liability thereunder. It appears on the face of
said policy that a co-insurance 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
defendant-appellant, 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. 3536). Contrary to the assertion of the defendantappellant, 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
cancelled only on August 29, 1962? The
defendant-appellant can be considered to have
waived the formal requirement of indorsing 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
(Gonzales La O vs. Yek Tong Lin Fire and Marine
Insurance Co., 55 Phil. 386). Even assuming that
the defendant-appellant 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 on the Supreme
Court. 1
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
and Marine Insurance Co., Ltd. 2 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:
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
in General Insurance & Surety Corporation vs. Ng Hua 3. There,
the policy issued by the General Insurance & Surety Corporation in
favor of respondent Ng Hua contained a provision identical with
the provisions in Policy No. 4219 quoted above. 4 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 non-disclosure 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 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, which, but for those stipulation
would not have been entered into." 5
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.
FACTS:
Respondent Oliva Yap was the owner of a store in a two-storey
building located in Manila.
On April 19, 1962, respondent Yap took out a fire policy from
Pioneer Insurane for 25,000.00 covering her stocks,
officer furniture, fixtures and fittings of every kind and description
Among the conditions in the policy was The
insured shall give notice to the company of any insurance or
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 be stated in or indorsed 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.
At the time of the insurance, an insurance for 20,000.00 issued
by the Great American Insurance Company covering
the same properties was noted on said policy as co-insurance. On
September 26, 1962, Yap took out another Fire
Policy for 20,000.00 covering the same properties, from the
Federal Insurance Company, Inc. which new policy was
however procured without notice to and without the written
consent of Pioneer Ins. and therefore, was not noted as a
co-insurance in Policy No. 4219.
On December 19, 1962, a fire broke out in the building housing
Yaps above-mentioned store, and the said store was
burned. Yap filed an insurance claim, but the same was denied on
the ground of breach and/or violative of any/or all
terms and conditions of Policy No. 4219.
ISSUE: Whether or not petitioner should be absolved from liability
on the policy.
HELD: 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 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.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-27932 October 30, 1972

UNION MANUFACTURING CO., INC. and the REPUBLIC
BANK, plaintiffs, REPUBLIC BANK, plaintiff-appellant,
vs.
PHILIPPINE GUARANTY CO., INC., defendant-appellee.
Armando L. Abad, Sr. for plaintiff-appellant.
Gamelo, Francisco and Aquino for defendant-appellee.
Insurance Law; Property insurance against fire; Failure to give
notice of existence of other policies thereon, effect of.Without
deciding- whether notice of other insurance upon the same
property must be given in writing, or whether a verbal notice is
sufficient to render an insurance valid which requires such notice,
whether oral or written, we hold that in the absolute absence of
such notice when it is one of the conditions specified in the fire
insurance policy, the policy is null and void. (Santa Ana vs.
Commercial Union Ass. Co., 55 Phil. 128).
Same; Same; Same.If the insured has violated or failed to
perform the conditions of the contract, and such a violation or
want of performance has not been waived by the insurer, then the
insured cannot recover. Courts are not permitted to make
contracts for the parties. The functions and duty of the courts
consist simply in enforcing and carrying out the contracts actually
made.
Same; Same; Same; Interpretation of insurance contracts.While
it is true, as a general rule, that contracts of insurance are
construed most favorably to the insured, 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.
Same; Same; Same; Nature of annotation on existence of other
insurance on insured property.The annotation then, must be
deemed to be a warranty that the property was not insured by any
other policy. Violation thereof entitles the insurer to rescind. xxx

The materiality of non-disclosure of other insurance policies is not

open to doubt.
Same; Insurance contract law between the parties even if terms
onerous.The insurance contract may be rather onerous, but that
in itself does not justify the abrogation of its express terms, terms
which the insured accepted or adhered to and which is the law
between the contracting parties.
FERNANDO, J.:p
In a suit arising from a fire insurance policy, the insurer, Philippine
Guaranty Co., Inc., defendant in the lower court and now appellee,
was able to avoid liability upon proof that there was a violation of
a warranty. There was no denial thereof from the insured, Union
Manufacturing Co., Inc. With such a legally crippling blow, the
effort of the Republic Bank, the main plaintiff and now the sole
appellant, to recover on such policy as mortgagee, by virtue of the
cover note in the insurance policy providing that it is entitled to
the payment of loss or damages as its interest may appear, was in
vain. The defect being legally incurable, its appeal is likewise
futile. We affirm.
As noted in the decision, the following facts are not disputed: "(1)
That on January 12, 1962, the Union Manufacturing Co., Inc.
obtained certain loans, overdrafts and other credit
accommodations from the Republic Bank in the total sum of
P415,000.00 with interest at 9% per annum from said date and to
secure the payment thereof, said Union Manufacturing Co., Inc.
executed a real and chattel mortgages on certain properties, which
are more particularly described and listed at the back of the
mortgage contract ...; (2) That as additional condition of the
mortgage contract, the Union Manufacturing Co., Inc. undertook to
secure insurance coverage over the mortgaged properties for the
same amount of P415,000.00 distributed as follows: (a) Buildings,
P30,000.00; (b) Machineries, P300,000.00; and (c) Merchandise
Inventory, P85,000.00, giving a total of P415,000.00; (3) That as
Union Manufacturing Co., Inc. failed to secure insurance coverage
on the mortgaged properties since January 12, 1962, despite the
fact that Cua Tok, its general manager, was reminded of said
requirement, the Republic Bank procured from the defendant,
Philippine Guaranty Co., Inc. an insurance coverage on loss
against fire for P500,000.00 over the properties of the Union
Manufacturing Co., Inc., as described in defendant's 'Cover Note'
dated September 25, 1962, with the annotation that loss or
damage, if any, under said Cover Note is payable to Republic Bank
as its interest may appear, subject however to the printed
conditions of said defendant's Fire Insurance Policy Form; (4) That
on September 27, 1962, Fire Insurance Policy No. 43170 ... was
issued for the sum of P500,000.00 in favor of the assured, Union
Manufacturing Co., Inc., for which the corresponding premium in
the sum of P8,328.12, which was reduced to P6,688.12, was paid
by the Republic Bank to the defendant, Philippine Guaranty Co.,
Inc. ...; (5) That upon the expiration of said fire policy on
September 25, 1963, the same was renewed by the Republic Bank
upon payment of the corresponding premium in the same amount
of P6,663.52 on September 26, 1963; (6) That in the
corresponding voucher ..., it appears that although said renewal
premium was paid by the Republic Bank, such payment was for
the account of Union Manufacturing Co., Inc. and that the cash
voucher for the payment of the first premium was paid also by the
Republic Bank but for the account Union Manufacturing Co., Inc.;
(7) That sometime on September 6, 1964, a fire occurred in the
premises of the Union Manufacturing Co., Inc.; (8) That on
October 6, 1964, the Union Manufacturing Co., Inc. filed its fire
claim with the defendant Philippine Guaranty Co., Inc., thru its
adjuster, H. H. Bayne Adjustment Co., which was denied by said
defendant in its letter dated November 27, 1964 ..., on the
following grounds: 'a. Policy Condition No. 3 and/or the 'Other
Insurance Clause' of the policy violated because you did not give
notice to us the other insurance which you had taken from New
India for P80,000.00, Sincere Insurance for P25,000.00 and Manila
Insurance for P200,000.00 with the result that these insurances,
of which we became aware of only after the fire, were not
endorsed on our policy; and (b) Policy Condition No. 11 was not
complied with because you have failed to give to our
representatives the required documents and other proofs with
respect to your claim and matters touching on our liability, if any,
and the amount of such liability'; (9) That as of September, 1962,
when the defendant Philippine Guaranty Co., issued Fire Insurance
Policy No. 43170 ... in the sum of P500,000.00 to cover the
properties of the Union Manufacturing Co., Inc., the same
properties were already covered by Fire Policy No. 1533 of the
Sincere Insurance Company for P25,000.00 for the period from
October 7, 1961 to October 7, 1962 ...; and by insurance policies
Nos. F-2314 ... and F-2590 ... of the Oceanic Insurance Agency for
the total sum of P300,000.00 and for periods respectively, from
January 27, 1962 to January 27, 1963, and from June 1, 1962 to
June 1, 1963; and (10) That when said defendant's Fire Insurance

Policy No. 43170 was already in full force and effect, the Union
Manufacturing Co., Inc. without the consent of the defendant,
Philippine Guaranty Co., Inc., obtained other insurance policies
totalling P305,000.00 over the same properties prior to the fire, to
wit: (1) Fire Policy No. 250 of New India Assurance Co., Ltd., for
P80,000.00 for the period from May 27, 1964 to May 27, 1965 ...;
(2) Fire Policy No. 3702 of the Sincere Insurance Company for
P25,000.00 for the period from October 7, 1963 to October 7,
1964 ...; and (3) Fire Policy No. 6161 of Manila Insurance Co. for
P200,000.00 for the period from May 15, 1964 to May 15, 1965 ...
." 1 There is in the cover note 2 and in the fire insurance policy 3
the following warranty: "[Co- Insurance Declared]: Nil." 4
Why the appellant Republic Bank could not recover, as payee, in
case of loss as its "interest may appear subject to the terms and
conditions, clauses and warranties" of the policy was expressed in
the appealed decision thus: "However, inasmuch as the Union
Manufacturing Co., Inc. has violated the condition of the policy to
the effect that it did not reveal the existence of other insurance
policies over the same properties, as required by the warranty
appearing on the face of the policy issued by the defendant and
that on the other hand said Union Manufacturing Co., Inc.
represented that there were no other insurance policies at the
time of the issuance of said defendant's policy, and it appearing
furthermore that while the policy of the defendant was in full force
and effect the Union Manufacturing Co., Inc. secured other fire
insurance policies without the written consent of the defendant
endorsed on the policy, the conclusion is inevitable that both the
Republic Bank and Union Manufacturing Co., Inc. cannot recover
from the same policy of the defendant because the same is null
and void." 5 The tone of confidence apparent in the above
excerpts from the lower court decision is understandable. The
conclusion reached by the lower court finds support in
authoritative precedents. It is far from easy, therefore, for
appellant Republic Bank to impute to such a decision a failure to
abide by the law. Hence, as noted at the outset, the appeal cannot
prosper. An affirmance is indicated.
It is to Santa Ana v. Commercial Union Assurance Co., 6 a 1930
decision, that one turns to for the first explicit formulation as to
the controlling principle. As was made clear in the opinion of this
Court, penned by Justice Villa-Real: "Without deciding whether
notice of other insurance upon the same property must be given in
writing, or whether a verbal notice is sufficient to render an
insurance valid which requires such notice, whether oral or
written, we hold that in the absolute absence of such notice when
it is one of the conditions specified in the fire insurance policy, the
policy is null and void." 7 The next year, in Ang Giok Chip v.
Springfield Fire & Marine Ins. Co., 8 the conformity of the insured
to the terms of the policy, implied from the failure to express any
disagreement with what is provided for, was stressed in these
words of the ponente, Justice Malcolm: "It is admitted that the
policy before us was accepted by the plaintiff. The receipt of this
policy by the insured without objection binds both the acceptor
and the insured to the terms thereof. The insured may not
thereafter be heard to say that he did not read the policy or know
its terms, since it is his duty to read his policy and it will be
assumed that he did so." 9 As far back as 1915, in Young v.
Midland Textile Insurance Company, 10 it was categorically set
forth that as a condition precedent to the right of recovery, there
must be compliance on the part of the insured with the terms of
the policy. As stated in the opinion of the Court through Justice
Johnson: "If the insured has violated or failed to perform the
conditions of the contract, and such a violation or want of
performance has not been waived by the insurer, then the insured
cannot recover. Courts are not permitted to make contracts for the
parties. The function and duty of the courts consist simply in
enforcing and carrying out the contracts actually made. While it is
true, as a general rule, that contracts of insurance are construed
most favorably to the insured, 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." 11 More
specifically, there was a reiteration of this Santa Ana ruling in a
decision by the then Justice, later Chief Justice, Bengzon, in
General Insurance & Surety Corp. v. Ng Hua. 12 Thus: "The
annotation then, must be deemed to be a warranty that the
property was not insured by any other policy. Violation thereof
entitles the insurer to rescind. (Sec. 69, Insurance Act) Such
misrepresentation is fatal in the light of our views in Santa Ana v.
Commercial Union Assurance Company, Ltd. ... . The materiality of
non-disclosure of other insurance policies is not open to doubt." 13
As a matter of fact, in a 1966 decision, Misamis Lumber Corp. v.
Capital Ins. & Surety Co., Inc.,14 Justice J.B.L. Reyes, for this
Court, made manifest anew its adherence to such a principle in
the face of an assertion that thereby a highly unfavorable
provision for the insured would be accorded recognition. This is
the language used: "The insurance contract may be rather
onerous ('one sided', as the lower court put it), but that in itself

does not justify the abrogation of its express terms, terms which
the insured accepted or adhered to and which is the law between
the contracting parties." 15
There is no escaping the conclusion then that the lower court
could not have disposed of this case in a way other than it did.
Had it acted otherwise, it clearly would have disregarded
pronouncements of this Court, the compelling force of which
cannot be denied. There is, to repeat, no justification for a
reversal.
WHEREFORE, the decision of the lower court of March 31, 1967 is
affirmed. No costs.

Republic of the Philippines

SUPREME COURT
Manila

Same; Marine Insurance; Obligations and Contracts; Delivery;

Delivery of goods on board the carrying vessels partake of the
nature of actual delivery.Further, Article 1523 of the Civil Code
provides that where, in pursuance of a contract of sale, the seller
is authorized or required to send the goods to the buyer, delivery
of the goods to a carrier, whether named by the buyer or not, for,
the purpose of transmission to the buyer is deemed to be a
delivery of the goods to the buyer, the exceptions to said rule not
obtaining in the present case. The Court has heretofore ruled that
the delivery of the goods on board the carrying vessels partake of
the nature of actual delivery since, from that time, the foreign
buyers assumed the risks of loss of the goods and paid the
insurance premium covering them.
REGALADO, J.:
This is a review of the decision of the Court of Appeals,
promulgated on July 19,1988, the dispositive part of which reads:

SECOND DIVISION
G.R. No. 85141 November 28, 1989
FILIPINO MERCHANTS INSURANCE CO., INC., petitioner,
vs.
COURT OF APPEALS and CHOA TIEK SENG, respondents.
Balgos & Perez Law Offices for petitioner.
Lapuz Law office for private respondent.
Insurance; An all risks policy covers all losses other than those
caused by the wilful and fraudulent act of insured.The very
nature of the term all risks must be given a broad and
comprehensive meaning as covering any loss other than a wilful
and fraudulent act of the insured. This is pursuant to the very
purpose of an all risks insurance to give protection to the insured
in those cases where difficulties of logical explanation or some
mystery surround the loss or damage to property. An all risks
policy has been evolved to grant greater protection than that
afforded by the perils clause, in order to assure that no loss can
happen through the incidence of a cause neither insured against
nor creating liability in the ship; it is written against all losses, that
is, attributable to external causes.
Same; Same; Insurer has burden of proof to show that loss is
caused by an excepted risk.Generally, the burden of proof is
upon the insured to show that a loss arose from a covered peril,
but under an all risks, policy the burden is not on the insured to
prove the precise cause of loss or damage for which it seeks
compensation. The insured under an all risks insurance policy
has the initial burden of proving that the cargo was in good
condition when the policy attached and that the cargo was
damaged when unloaded from the vessel; thereafter, the burden
then shifts to the insurer to show the exception to the coverage.
As we held in Paris-Manila Perfumery Co. vs. Phoenix Assurance
Co., Ltd. the basic rule is that the insurance company has the
burden of proving that the loss is caused by the risks excepted
and for want of such proof, the company is liable.
Same; Insurable Interest; Perfected contract of sale even without
delivery vests in the vendee, an equitable title, an existing interest
over the goods sufficient to be subject of insurance.Herein
private respondent, as vendee/consignee of the goods in transit
has such existing interest therein as may be the subject of a valid
contract of insurance. His interest over the goods is based on the
perfected contract of sale. The perfected contract of sale between
him and the shipper of the goods operates to vest in him an
equitable title even before delivery or before he performed the
conditions of the sale. The contract of shipment, whether under
F.O.B., C.I.F., or C. & F. as in this case, is immaterial in the
determination of whether the vendee has an insurable interest or
not in the goods in transit. The perfected contract of sale even
without delivery vests in the vendee an equitable title, an existing
interest over the goods sufficient to be the subject of insurance.

WHEREFORE, the judgment appealed from is

affirmed insofar as it orders defendant Filipino
Merchants Insurance Company to pay the
plaintiff the sum of P51,568.62 with interest at
legal rate from the date of filing of the
complaint, and is modified with respect to the
third party complaint in that (1) third party
defendant E. Razon, Inc. is ordered to reimburse
third party plaintiff the sum of P25,471.80 with
legal interest from the date of payment until the
date of reimbursement, and (2) the third-party
complaint against third party defendant
Compagnie Maritime Des Chargeurs Reunis is
dismissed. 1
The facts as found by the trial court and adopted by the Court of
Appeals are as follows:
This is an action brought by the consignee of the
shipment of fishmeal loaded on board the vessel
SS Bougainville and unloaded at the Port of
Manila on or about December 11, 1976 and
seeks to recover from the defendant insurance
company the amount of P51,568.62 representing
damages to said shipment which has been
insured by the defendant insurance company
under Policy No. M-2678. The defendant brought
a third party complaint against third party
defendants Compagnie Maritime Des Chargeurs
Reunis and/or E. Razon, Inc. seeking judgment
against the third (sic) defendants in case
Judgment is rendered against the third party
plaintiff. It appears from the evidence presented
that in December 1976, plaintiff insured said
shipment with defendant insurance company
under said cargo Policy No. M-2678 for the sum
of P267,653.59 for the goods described as 600
metric tons of fishmeal in new gunny bags of 90
kilos each from Bangkok, Thailand to Manila
against all risks under warehouse to warehouse
terms. Actually, what was imported was 59.940
metric tons not 600 tons at $395.42 a ton CNF
Manila. The fishmeal in 666 new gunny bags
were unloaded from the ship on December 11,
1976 at Manila unto the arrastre contractor E.
Razon, Inc. and defendant's surveyor
ascertained and certified that in such discharge
105 bags were in bad order condition as jointly
surveyed by the ship's agent and the arrastre
contractor. The condition of the bad order was
reflected in the turn over survey report of Bad
Order cargoes Nos. 120320 to 120322, as
Exhibit C-4 consisting of three (3) pages which
are also Exhibits 4, 5 and 6- Razon. The cargo
was also surveyed by the arrastre contractor
before delivery of the cargo to the consignee and
the condition of the cargo on such delivery was
reflected in E. Razon's Bad Order Certificate No.

14859, 14863 and 14869 covering a total of 227

bags in bad order condition. Defendant's
surveyor has conducted a final and detailed
survey of the cargo in the warehouse for which
he prepared a survey report Exhibit F with the
findings on the extent of shortage or loss on the
bad order bags totalling 227 bags amounting to
12,148 kilos, Exhibit F-1. Based on said
computation the plaintiff made a formal claim
against the defendant Filipino Merchants
Insurance Company for P51,568.62 (Exhibit C)
the computation of which claim is contained
therein. A formal claim statement was also
presented by the plaintiff against the vessel
dated December 21, 1976, Exhibit B, but the
defendant Filipino Merchants Insurance Company
refused to pay the claim. Consequently, the
plaintiff brought an action against said defendant
as adverted to above and defendant presented a
third party complaint against the vessel and the
arrastre contractor. 2
The court below, after trial on the merits, rendered judgment in
favor of private respondent, the decretal portion whereof reads:
WHEREFORE, on the main complaint, judgment
is hereby rendered in favor of the plaintiff and
against the defendant Filipino Merchant's (sic)
Insurance Co., ordering the defendants to pay
the plaintiff the following amount:
The sum of P51,568.62 with interest at legal rate
from the date of the filing of the complaint;
On the third party complaint, the third party
defendant Compagnie Maritime Des Chargeurs
Reunis and third party defendant E. Razon, Inc.
are ordered to pay to the third party plaintiff
jointly and severally reimbursement of the
amounts paid by the third party plaintiff with
legal interest from the date of such payment
until the date of such reimbursement.
Without pronouncement as to costs. 3
On appeal, the respondent court affirmed the decision of the lower
court insofar as the award on the complaint is concerned and
modified the same with regard to the adjudication of the thirdparty complaint. A motion for reconsideration of the aforesaid
decision was denied, hence this petition with the following
assignment of errors:
1. The Court of Appeals erred in its
interpretation and application of the "all risks"
clause of the marine insurance policy when it
held the petitioner liable to the private
respondent for the partial loss of the cargo,
notwithstanding the clear absence of proof of
some fortuitous event, casualty, or accidental
cause to which the loss is attributable, thereby
contradicting the very precedents cited by it in
its decision as well as a prior decision of the
same Division of the said court (then composed
of Justices Cacdac, Castro-Bartolome, and
Pronove);
2. The Court of Appeals erred in not holding that
the private respondent had no insurable interest
in the subject cargo, hence, the marine
insurance policy taken out by private respondent
is null and void;
3. The Court of Appeals erred in not holding that
the private respondent was guilty of fraud in not
disclosing the fact, it being bound out of utmost
good faith to do so, that it had no insurable

interest in the subject cargo, which bars its

recovery on the policy. 4
On the first assignment of error, petitioner contends that an "all
risks" marine policy has a technical meaning in insurance in that
before a claim can be compensable it is essential that there must
be "some fortuity, " "casualty" or "accidental cause" to which the
alleged loss is attributable and the failure of herein private
respondent, upon whom lay the burden, to adduce evidence
showing that the alleged loss to the cargo in question was due to a
fortuitous event precludes his right to recover from the insurance
policy. We find said contention untenable.
The "all risks clause" of the Institute Cargo Clauses read as
follows:
5. This insurance is against all risks of loss or
damage to the subject-matter insured but shall
in no case be deemed to extend to cover loss,
damage, or expense proximately caused by
delay or inherent vice or nature of the subjectmatter insured. Claims recoverable hereunder
shall be payable irrespective of percentage. 5
An "all risks policy" should be read literally as meaning all risks
whatsoever and covering all losses by an accidental cause of any
kind. The terms "accident" and "accidental", as used in insurance
contracts, have not acquired any technical meaning. They are
construed by the courts in their ordinary and common acceptance.
Thus, the terms have been taken to mean that which happens by
chance or fortuitously, without intention and design, and which is
unexpected, unusual and unforeseen. An accident is an event that
takes place without one's foresight or expectation; an event that
proceeds from an unknown cause, or is an unusual effect of a
known cause and, therefore, not expected. 6
The very nature of the term "all risks" must be given a broad and
comprehensive meaning as covering any loss other than a willful
and fraudulent act of the insured. 7 This is pursuant to the very
purpose of an "all risks" insurance to give protection to the insured
in those cases where difficulties of logical explanation or some
mystery surround the loss or damage to property. 8 An "all asks"
policy has been evolved to grant greater protection than that
afforded by the "perils clause," in order to assure that no loss can
happen through the incidence of a cause neither insured against
nor creating liability in the ship; it is written against all losses, that
is, attributable to external causes. 9
The term "all risks" cannot be given a strained technical meaning,
the language of the clause under the Institute Cargo Clauses being
unequivocal and clear, to the effect that it extends to all
damages/losses suffered by the insured cargo except (a) loss or
damage or expense proximately caused by delay, and (b) loss or
damage or expense proximately caused by the inherent vice or
nature of the subject matter insured.
Generally, the burden of proof is upon the insured to show that a
loss arose from a covered peril, but under an "all risks" policy the
burden is not on the insured to prove the precise cause of loss or
damage for which it seeks compensation. The insured under an
"all risks insurance policy" has the initial burden of proving that
the cargo was in good condition when the policy attached and that
the cargo was damaged when unloaded from the vessel;
thereafter, the burden then shifts to the insurer to show the
exception to the coverage. 10 As we held in Paris-Manila Perfumery
Co. vs. Phoenix Assurance Co., Ltd. 11 the basic rule is that the
insurance company has the burden of proving that the loss is
caused by the risk excepted and for want of such proof, the
company is liable.
Coverage under an "all risks" provision of a marine insurance
policy creates a special type of insurance which extends coverage
to risks not usually contemplated and avoids putting upon the
insured the burden of establishing that the loss was due to the
peril falling within the policy's coverage; the insurer can avoid
coverage upon demonstrating that a specific provision expressly

excludes the loss from coverage. 12 A marine insurance policy

providing that the insurance was to be "against all risks" must be
construed as creating a special insurance and extending to other
risks than are usually contemplated, and covers all losses except
such as arise from the fraud of the insured. 13 The burden of the
insured, therefore, is to prove merely that the goods he
transported have been lost, destroyed or deteriorated. Thereafter,
the burden is shifted to the insurer to prove that the loss was due
to excepted perils. To impose on the insured the burden of proving
the precise cause of the loss or damage would be inconsistent with
the broad protective purpose of "all risks" insurance.
In the present case, there being no showing that the loss was
caused by any of the excepted perils, the insurer is liable under
the policy. As aptly stated by the respondent Court of Appeals,
upon due consideration of the authorities and jurisprudence it
discussed
... it is believed that in the absence of any
showing that the losses/damages were caused
by an excepted peril, i.e. delay or the inherent
vice or nature of the subject matter insured, and
there is no such showing, the lower court did not
err in holding that the loss was covered by the
policy.
There is no evidence presented to show that the
condition of the gunny bags in which the
fishmeal was packed was such that they could
not hold their contents in the course of the
necessary transit, much less any evidence that
the bags of cargo had burst as the result of the
weakness of the bags themselves. Had there
been such a showing that spillage would have
been a certainty, there may have been good
reason to plead that there was no risk covered
by the policy (See Berk vs. Style [1956] cited in
Marine Insurance Claims, Ibid, p. 125). Under an
'all risks' policy, it was sufficient to show that
there was damage occasioned by some
accidental cause of any kind, and there is no
necessity to point to any particular cause. 14
Contracts of insurance are contracts of indemnity upon the terms
and conditions specified in the policy. The agreement has the force
of law between the parties. The terms of the policy constitute the
measure of the insurer's liability. If such terms are clear and
unambiguous, they must be taken and understood in their plain,
ordinary and popular sense. 15

not in the goods in transit. The perfected contract of sale even

without delivery vests in the vendee an equitable title, an existing
interest over the goods sufficient to be the subject of insurance.
Further, Article 1523 of the Civil Code provides that where, in
pursuance of a contract of sale, the seller is authorized or required
to send the goods to the buyer, delivery of the goods to a carrier,
whether named by the buyer or not, for, the purpose of
transmission to the buyer is deemed to be a delivery of the goods
to the buyer, the exceptions to said rule not obtaining in the
present case. The Court has heretofore ruled that the delivery of
the goods on board the carrying vessels partake of the nature of
actual delivery since, from that time, the foreign buyers assumed
the risks of loss of the goods and paid the insurance premium
covering them. 20
C & F contracts are shipment contracts. The term means that the
price fixed includes in a lump sum the cost of the goods and
freight to the named destination. 21 It simply means that the seller
must pay the costs and freight necessary to bring the goods to the
named destination but the risk of loss or damage to the goods is
transferred from the seller to the buyer when the goods pass the
ship's rail in the port of shipment. 22
Moreover, the issue of lack of insurable interest was not among
the defenses averred in petitioners answer. It was neither an issue
agreed upon by the parties at the pre-trial conference nor was it
raised during the trial in the court below. It is a settled rule that
an issue which has not been raised in the court a quo cannot be
raised for the first time on appeal as it would be offensive to the
basic rules of fair play, justice and due process. 23This is but a
permuted restatement of the long settled rule that when a party
deliberately adopts a certain theory, and the case is tried and
decided upon that theory in the court below, he will not be
permitted to change his theory on appeal because, to permit him
to do so, would be unfair to the adverse party. 24
If despite the fundamental doctrines just stated, we nevertheless
decided to indite a disquisition on the issue of insurable interest
raised by petitioner, it was to put at rest all doubts on the matter
under the facts in this case and also to dispose of petitioner's third
assignment of error which consequently needs no further
discussion.
WHEREFORE, the instant petition is DENIED and the assailed
decision of the respondent Court of Appeals is AFFIRMED in toto.

Republic of the Philippines

SUPREME COURT
Manila

Anent the issue of insurable interest, we uphold the ruling of the

respondent court that private respondent, as consignee of the
goods in transit under an invoice containing the terms under "C &
F Manila," has insurable interest in said goods.
Section 13 of the Insurance Code defines insurable interest in
property as every interest in property, whether real or personal, or
any relation thereto, or liability in respect thereof, of such nature
that a contemplated peril might directly damnify the insured. In
principle, anyone has an insurable interest in property who derives
a benefit from its existence or would suffer loss from its
destruction whether he has or has not any title in, or lien upon or
possession of the property y. 16 Insurable interest in property may
consist in (a) an existing interest; (b) an inchoate interest founded
on an existing interest; or (c) an expectancy, coupled with an
existing interest in that out of which the expectancy arises. 17
Herein private respondent, as vendee/consignee of the goods in
transit has such existing interest therein as may be the subject of
a valid contract of insurance. His interest over the goods is based
on the perfected contract of sale. 18 The perfected contract of sale
between him and the shipper of the goods operates to vest in him
an equitable title even before delivery or before be performed the
conditions of the sale. 19 The contract of shipment, whether under
F.O.B., C.I.F., or C. & F. as in this case, is immaterial in the
determination of whether the vendee has an insurable interest or

FIRST DIVISION
G.R. No. 71360 July 16, 1986
DEVELOPMENT INSURANCE CORPORATION, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, and PHILIPPINE UNION
REALTY DEVELOPMENT CORPORATION,respondents.
Balgos & Perez Law Offices for petitioner.
Agustin M. Sundiam for private respondent.

CRUZ, J.:
A fire occurred in the building of the private respondent and it
sued for recovery of damages from the petitioner on the basis of
an insurance contract between them. The petitioner allegedly
failed to answer on time and was declared in default by the trial

court. A judgment of default was subsequently rendered on the

strength of the evidence submitted ex parte by the private
respondent, which was allowed full recovery of its claimed
damages. On learning of this decision, the petitioner moved to lift
the order of default, invoking excusable neglect, and to vacate the
judgment by default. Its motion was denied. It then went to the
respondent court, which affirmed the decision of the trial court in
toto. The petitioner is now before us, hoping presumably that it
will fare better here than before the trial court and the
Intermediate Appellate Court. We shall see.
On the question of default, the record argues mightily against it. It
is indisputable that summons was served on it, through its senior
vice-president, on June 19,1980. On July 14, 1980, ten days after
the expiration of the original 15-day period to answer (excluding
July 4), its counsel filed an ex parte motion for an extension of five
days within which to file its answer. On July 18, 1980, the last day
of the requested extension-which at the time had not yet been
granted-the same counsel filed a second motion for another 5-day
extension, fourteen days after the expiry of the original period to
file its answer. The trial court nevertheless gave it five days from
July 14, 1980, or until July 19, 1980, within which to file its
answer. But it did not. It did so only on July 26, 1980, after the
expiry of the original and extended periods, or twenty-one days
after the July 5, deadline. As a consequence, the trial court, on
motion of the private respondent filed on July 28, 1980, declared
the petitioner in default. This was done almost one month later, on
August 25, 1980. Even so, the petitioner made no move at all for
two months thereafter. It was only on October 27, 1980, more
than one month after the judgment of default was rendered by the
trial court on September 26, 1980, that it filed a motion to lift the
order of default and vacate the judgment by default. 1
The pattern of inexcusable neglect, if not deliberate delay, is all
too clear. The petitioner has slumbered on its right and awakened
too late. While it is true that in Trajano v. Cruz, 2 which it cites,
this Court declared "that judgments by default are generally
looked upon with disfavor," the default judgment in that case was
set aside precisely because there was excusable neglect,
Summons in that case was served through "an employee in
petitioners' office and not the person in-charge," whereas in the
present case summons was served on the vice-president of the
petitioner who however refused to accept it. Furthermore, as
Justice Guerrero noted, there was no evidence showing that the
petitioners in Trajano intended to unduly delay the case.
Besides, the petitioners in Trajano had a valid defense against the
complaint filed against them, and this justified a relaxation of the
procedural rules to allow full hearing on the substantive issues
raised. In the instant case, by contrast, the petitioner must just
the same fail on the merits even if the default orders were to be
lifted. As the respondent Court observed, "Nothing would be
gained by having the order of default set aside considering the
appellant has no valid defense in its favor." 3
The petitioner's claim that the insurance covered only the building
and not the elevators is absurd, to say the least. This Court has
little patience with puerile arguments that affront common sense,
let alone basic legal principles with which even law students are
familiar. The circumstance that the building insured is seven
stories high and so had to be provided with elevators-a legal
requirement known to the petitioner as an insurance companymakes its contention all the more ridiculous.
No less preposterous is the petitioner's claim that the elevators
were insured after the occurrence of the fire, a case of shutting
the barn door after the horse had escaped, so to speak. 4 This
pretense merits scant attention. Equally undeserving of serious
consideration is its submission that the elevators were not
damaged by the fire, against the report of The arson investigators
of the INP 5and, indeed, its own expressed admission in its
answer 6 where it affirmed that the fire "damaged or destroyed a
portion of the 7th floor of the insured building and more
particularly a Hitachi elevator control panel." 7
There is no reason to disturb the factual findings of the lower
court, as affirmed by the Intermediate Appellate Court, that the

heat and moisture caused by the fire damaged although they did
not actually burn the elevators. Neither is this Court justified in
reversing their determination, also factual, of the value of the loss
sustained by the private respondent in the amount of
P508,867.00.
The only remaining question to be settled is the amount of the
indemnity due to the private respondent under its insurance
contract with the petitioner. This will require an examination of this
contract, Policy No. RY/F-082, as renewed, by virtue of which the
petitioner insured the private respondent's building against fire for
P2,500,000.00. 8
The petitioner argues that since at the time of the fire the building
insured was worth P5,800,000.00, the private respondent should
be considered its own insurer for the difference between that
amount and the face value of the policy and should share pro
rata in the loss sustained. Accordingly, the private respondent is
entitled to an indemnity of only P67,629.31, the rest of the loss to
be shouldered by it alone. In support of this contention, the
petitioner cites Condition 17 of the policy, which provides:
If the property hereby insured shall, at the
breaking out of any fire, be collectively of
greater value than the sum insured thereon then
the insured shall be considered as being his own
insurer for the difference, and shall bear a
ratable proportion of the loss accordingly. Every
item, if more than one, of the policy shall be
separately subject to this condition.
However, there is no evidence on record that the building was
worth P5,800,000.00 at the time of the loss; only the petitioner
says so and it does not back up its self-serving estimate with any
independent corroboration. On the contrary, the building was
insured at P2,500,000.00, and this must be considered, by
agreement of the insurer and the insured, the actual value of the
property insured on the day the fire occurred. This valuation
becomes even more believable if it is remembered that at the time
the building was burned it was still under construction and not yet
completed.
The Court notes that Policy RY/F-082 is an open policy and is
subject to the express condition that:
Open Policy
This is an open policy as defined in Section 57 of
the Insurance Act. In the event of loss, whether
total or partial, it is understood that the amount
of the loss shall be subject to appraisal and the
liability of the company, if established, shall be
limited to the actual loss, subject to the
applicable terms, conditions, warranties and
clauses of this Policy, and in no case shall exceed
the amount of the policy.
As defined in the aforestated provision, which is now Section 60 of
the Insurance Code, "an open policy is one in which the value of
the thing insured is not agreed upon but is left to be ascertained in
case of loss. " This means that the actual loss, as determined, will
represent the total indemnity due the insured from the insurer
except only that the total indemnity shall not exceed the face
value of the policy.
The actual loss has been ascertained in this case and, to repeat,
this Court will respect such factual determination in the absence of
proof that it was arrived at arbitrarily. There is no such showing.
Hence, applying the open policy clause as expressly agreed upon
by the parties in their contract, we hold that the private
respondent is entitled to the payment of indemnity under the said
contract in the total amount of P508,867.00.
The refusal of its vice-president to receive the private respondent's
complaint, as reported in the sheriff's return, was the first
indication of the petitioner's intention to prolong this case and

postpone the discharge of its obligation to the private respondent

under this agreement. That intention was revealed further in its
subsequent acts-or inaction-which indeed enabled it to avoid
payment for more than five years from the filing of the claim
against it in 1980. The petitioner has temporized long enough to
avoid its legitimate responsibility; the delay must and does end
now.

WHEREFORE, the appealed decision is affirmed in full, with costs

against the petitioner.