1 | Case Digests for Insurance Law Topics: 7: Insurable Interest; 27: Premium

Case 7 & 27:

G.R. No. 171379 January 10, 2011

JOSE MARQUES and MAXILITE TECHNOLOGIES, INC., Petitioners, vs. FAR EAST BANK AND TRUST
COMPANY, FAR EAST BANK INSURANCE BROKERS, INC., and MAKATI INSURANCE
COMPANY, Respondents.

Facts:

Maxilite and Marques entered into a $80, 765.00 trust receipt transaction with FEBTC for the shipment of
various high technology equipment from the US, with the merchandise serving as the collateral. Said
importation was covered by a trust receipt document signed by Marques as Maxilite’s President, which
states that Marques agrees to keep merchandise insured against fire to its full value payable to FEBTC
who agrees to pay all charges for storage on said merchandise or any or other expenses incurred thereon.
FEBIBI, sister company of FEBTC and local insurance brokerage company, facilitated the procurement and
processing from Makati Insurance Company four separate & independent fire insurance policies over
trust receipted merchandise. Maxilite paid the premiums for these policies through debit arrangement,
with FEBTC debiting Maxilite’s account for the payments, as reflected in the statements of accounts sent
by FEBTC to Maxilite.

On August 19, 1994, an insurance policy covering the period of June 24,1994-1995 was released to cover
the trust receipted merchandise. The said policy provided that it and any renewal or endorsement thereon
is not in force until the premium has been fully paid to and duly receipted by the Company in the manner
provided therein.

FEBIBI found that Maxilite failed to pay the insurance premium in the sum of Php 8, 265.60 for the above-
mentioned insurance policy, and sent written reminders to FEBTC to debit Maxilite’s account(dated
oct.19, 1994, jan. 24 1995 and march 6 1995), after which Maxilite fully settled its trust receipt account in
October 24&26 1994.

On 9 March 1995, a fire gutted the Aboitiz Sea Transport Building where Maxilite’s office and warehouse
were located. Maxilite suffered losses amounting to at least 2.1 million, which Maxilite claimed against
the fire insurance policy with Makati insurance Company. The insurance company denied the fire loss
claim on the ground of non-payment of premium. FEBTC and FEBIBI disclaimed responsibility for such
denial.

Marques and Maxilite sued FEBTC, FEBIBI and Makati Insurance Company, praying for actual, moral and
exemplary damages. Marques sought payment of actual, moral, and exemplary damages, attorney’s fees
and litigation expenses. Both also sought the issuance of a preliminary injunction or a temporary
restraining to enjoin FEBTC to impose penalties on their obligations, foreclosing the real estate mortgage
securing their straight loan accounts and initiating actions to collect their obligations.

The trial court ruled in favor of Maxilite and Marques on the ground that the non-payment of the premium
of the insurance policy was due to the fault/ negligence of the defendant FEBTC. Despite the written
reminders from FEBIBI, FEBTC did not heed the same when Maxilite had sufficient fund in its trust receipt
2 | Case Digests for Insurance Law Topics: 7: Insurable Interest; 27: Premium

account, as it did not care to pay the premium after Maxilite fully and finally settled the trust receipt
account with FEBTC. Despite the non-payment of the insurance premium, Makati Insurance did not cancel
the policy in question nor informed Maxilite &Marques of its cancellation if the insurance premium had
not been paid. Defendants were ordered to pay jointly and severally Maxilite 2 million representing the
full insurance policy as actual damages plus 12 % per annum from filing of complaint on july 11, 1996 until
fully paid and to Marques 400k as moral damages, to both 500k as exemplary damages and 50k as
attorney’s fees 23k a filing fees. The writ of preliminary injunction was also made permanent.

On appeal, the CA affirmed the trial court’s decision but reduced the interest rate from 12% per annum
to 6% per annum to run from the time of demand on April 11, 1995 in accordance with Art 1589 of the
Civil Code until the finality of the decision, reduced the moral damages to 50k, exemplary damages to 50k
and the writ of preliminary injunction was lifted.

Petitioners assail the CA’s reduction of the interest rate and the award of moral and exemplary damages.
FEBTC and Makati insurance challenge the CA’s finding that the premium for the subject insurance policy
has been paid and that FEBIBI, FEBTC and Makati insurance are jointly and severally liable to pay the full
coverage of the insurance policy despite their (1) separate juridical personalities,(2) the absence of fault
or negligence on their part and Maxilite and Marques’ failure to prove the alleged loss.

Issues:

(1) WON FEBTC is estopped from claiming that the insurance premium has been unpaid.
(2) WON FEBTC had insurable interest over the merchandise
(3) WON FEBIBI, FEBTC and Makati Insurance Company are jointly and severally liable to indemnify
petitioners

Ruling:

(1) YES. Both trial and appellate courts agreed that FEBTC is estopped from claiming that the insurance
premium has been unpaid. FEBTC induced Maxilite and Marques to believe that the insurance
premium has in fact been debited from Maxilite's account

This is grounded on the following facts:

(1) FEBTC represented and committed to handle Maxilite's financing and capital requirements,
including the related transactions such as the insurance of the trust receipted merchandise;

(2) prior to the subject Insurance Policy No. 1024439, the premiums for the three separate fire
insurance policies had been paid through automatic debit arrangement;

(3) FEBIBI sent FEBTC, not Maxilite nor Marques, written reminders dated 19 October 1994, 24
January 1995, and 6 March 1995 to debit Maxilite's account, establishing FEBTC's obligation to
automatically debit Maxilite's account for the premium amount;

(4) there was no written demand from FEBTC or Makati Insurance Company for Maxilite or
Marques to pay the insurance premium;

(5) the subject insurance policy was released to Maxilite on 19 August 1994; and
3 | Case Digests for Insurance Law Topics: 7: Insurable Interest; 27: Premium

(6) the subject insurance policy remained uncancelled despite the alleged non-payment of the
premium, making it appear that the insurance policy remained in force and binding.

(2) Yes. Prior to the full settlement of the trust receipt account on October 24 and 26 1994, FEBTC had
insurable interest over such merchandise and had a greater reason to debit Maxilite’s Account. It remains
undisputed by FEBIBI, FEBTC and Makati insurance company that Maxilite had sufficient funds at the time
the first reminder, was sent by FEBIBI to FEBTC to debit Maxilite's account for the payment of the
insurance premium. Since (1) FEBTC committed to debit Maxilite's account corresponding to the insurance
premium; (2) FEBTC had insurable interest over the property prior to the settlement of the trust receipt
account; and (3) Maxilite's bank account had sufficient funds to pay the insurance premium prior to the
settlement of the trust receipt account, FEBTC should have debited Maxilite's account as what it had
repeatedly done, as an established practice, with respect to the previous insurance policies. FEBTC’s
failure to debit and disregard of the written reminder from FEBIBI to debit Maxilite's account constitutes
negligence in handling Maxilite's and Marques' accounts.

(3) FEBTC is solely liable for the payment of the face value of the insurance policy and the monetary awards
in the CA’s decision. FEBTC, FEBIBI and Makati insurance company are independent and separate juridical
entities even if even if FEBIBI and Makati Insurance Company are subsidiaries of FEBTC. Absent any
showing of its illegitimate or illegal functions, a subsidiary's separate existence shall be respected, and the
liability of the parent corporation as well as the subsidiary shall be confined to those arising in their
respective business. There is no evidence showing FEBIBI's and Makati Insurance Company's negligence
as regards the non-payment of the insurance premium.

NOTES:

Estoppel:

 Art. 1431. Through estoppel an admission or representation is rendered conclusive upon

the person making it, and cannot be denied or disproved as against the person relying
thereon.
 Section 2(a), Rule 131 of the Rules of Court provides:
 SEC. 2. Conclusive presumptions. - The following are instances of conclusive
presumptions:
o Whenever a party has, by his own declaration, act, or omission, intentionally and
deliberately led another to believe a particular thing is true, and to act upon such
belief, he cannot, in any litigation arising out of such declaration, act or omission,
be permitted to falsify it.
 In estoppel, a party creating an appearance of fact, which is false, is bound by that
appearance as against another person who acted in good faith on it.
 purpose : forbid one to speak against his own act, representations, or commitments to
the injury of one who reasonably relied thereon. It springs from equity, and is designed
to aid the law in the administration of justice where without its aid injustice might result.

Insurable Interest:
Section 13 defines insurable interest in property. The interest may be in the property itself (e.g., ownership), or any
relation thereto (e.g., interest of a trustee or a commission agent), or liability in respect thereof (e.g., interest of a
4 | Case Digests for Insurance Law Topics: 7: Insurable Interest; 27: Premium

carrier or depository of goods). The principle may be stated generally that anyone has an insurable interest in
property who derives a benefit from its existence or would suffer loss from its destruction. (Harrison vs. Fortlege,
161 U.S. 57.)

SEC. 13. 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, is
an insurable interest.

SEC. 14. An 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