UNION MANUFACTURING CO., INC. VS. PHILIPPINE GUARANTY CO., INC.

47 SCRA 271 (G.R. NO. L-27932)

OCTOBER 30, 1972

Petitioner:

Republic Bank

Respondent:

Philippine Guaranty Co.. Inc.

FACTS:
On January 12, 1962, the Union Manufacturing Co., Inc. obtained certain loans from the Republic
Bank in the total sum of 415,000.00. To secure the payment thereof, UMC executed real and
chattel mortgage on certain properties.
The Republic Bank procured from the defendant Philippine Guaranty Co., Inc. an insurance
coverage on loss against fire for 500,000.00 over the properties of the UMC, as described in
defendants 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 defendants Fire Insurance Policy Form.
On September 6, 1964, a fire occurred in the premises of UMC and on October 6, 1964, UMC
filed its fire claim with the PGC Inc., thru its adjuster, H.H. Bayne Adjustment Co., which was
denied by said defendant in its letter dated November 26, 1964 on the following ground: Policy
Condition No. 3 and/or the Other Insurance Clause of the policy was violated because you did
not give notice to us of the other insurance which you had taken from New India for 80,000.00.
Sincere Insurance for 25,000.00 and Manila Insurance for 200,000.00 with the result that
these insurances of which we became aware of only after the fire, were not endorsed on our
policy.
ISSUE:
Whether Republic Bank can recover.
HELD:
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).
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.
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.
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. The materiality of non-disclosure of
other insurance policies is not open to doubt.
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.

ONG GUAN CAN and THE BANK OF THE PHILIPPINE ISLANDS, plaintiffs-appellees,
vs.
THE CENTURY INSURANCE CO., LTD., defendant-appellant.
G.R. No. L-22738

December 2, 1924

Facts:
A building of the plaintiff was insured against fire by the defendant in the sum of P30,000, as well
as the goods and merchandise therein contained in the sum of P15,000. The house and
merchandise insured were burnt early in the morning of February 28, 1923, while the policies
issued by the defendant in favor of the plaintiff were in force. The appellant contends that under
clause 14 of the conditions of the policies, it may rebuild the house burnt, and although the house
may be smaller, yet it would be sufficient indemnity to the insured for the actual loss suffered by
him. The clause states that: The Company may at its option reinstate or replace the property
damaged or destroyed, or any part thereof, instead of paying the amount of the loss of damages,
or may join with any other Company or insurers in so doing, but the Company shall not be bound
to reinstate exactly or completely, but only as circumstances permit and in reasonable sufficient
manner, and in no case shall the Company be bound to expend more in reinstatement that it
would have cost to reinstate such property as it was at the time of the occurrence of such loss or
damage, nor more than the sum insured by the Company thereon. If the clause is valid it may
either rebuild it or pay it. It must be taken in consideration that the insurance company must notify
the insured which between the 2: either rebuild it or pay it, will be fulfilled. In which case, the final
notice was not given and the rebuilding of the property would be the better option.
Issue:
Whether or not the Insurance Company should rebuild the house or not?
Ruling of the Court:
It was held that the trial judge very aptly says in his decision: "It would be an imposition
unequitable, as well as unjust, to compel the plaintiff to accept the rebuilding of a smaller house
than the one burnt, with a lower kind of materials than those of said house, without offering him
an additional indemnity for the difference in size between the two house, which circumstances
were taken into account when the insurance applied for by the plaintiff was accepted by the
defendant." And we may add: Without tendering either the insured value of the merchandise
contained in the house destroyed, which amounts to the sum of P15,000." The election alleged by
the appellant to rebuild the house burnt instead of paying the value of the insurance is improper.

G.R. No. L-26827

June 29, 1984

AGAPITO GUTIERREZ, plaintiff-appellee,

vs.
CAPITAL INSURANCE & SURETY CO., INC., defendant-appellant.
Facts:
Capital Insurance & Surety Co., Inc. insured on December 7, 1961 for one year the jeepney of
Agapito Gutierrez against passenger and third-party liability. The passenger liability would not
exceed P5,000 for any one person.The policy provides in item 13 that the authorized driver must
be the holder of a valid and subsisting professional driver's license. "A driver with an expired
Traffic Violation Receipt or expired Temporary Operator's Permit is not considered an authorized
driver." On May 29, 1962, the insured jeepney had an accident at Buendia Avenue, Makati, Rizal.
As a result of said accident, a passenger named Agatonico Ballega fell off the vehicle and died.
Teofilo Ventura, the jeepney driver, was duly licensed for the years 1962 and 1963. However, at
the time of the accident he did not have the license. Instead, he had a carbon copy of a traffic
violation report (summons) issued by a policeman on February 22, 1962, with the notation that he
had committed the violation: "Inattentive to driving (Inv. in accident) at 9:30 a.m., 2-22-62". The
same traffic violation report, which served as a receipt for his license, required him to report to
Branch 8 of the traffic court at the corner of Arroceros and Concepcion Streets, Manila at nine
o'clock in the morning of March 2, 1962. The TVR would "serve as a temporary operator's permit
for 15 days from receipt hereof". It is indisputable that at the time of the accident (May 29, 1962),
Ventura was holding an "expired Temporary Operator's Permit." Capital Insurance refused to
make any reimbursement with regard to Guttierez's payment to the widow, hence he filed on
October 14, 1963 in the city court of Manila an action for specific performance and damages.
Insurance Company contended that paragraph 13 of the policy, already cited, is decisive and
controlling in this case. It plainly provides, and we repeat, that "a driver with an expired Traffic
Violation Receipt or expired Temporary Operator's permit is not considered an authorized driver
within the meaning" of the policy. Obviously, Ventura was not an authorized driver. His temporary
operator's permit had expired. The expiration bars recovery under the policy. In liability insurance,
"the parties are bound by the terms of the policy and the right of insured to recover is governed
thereby" (44 C.J.S. 934)
Issue:
Whether an insurance covers a jeepney whose driver's traffic violation report or temporary
operator's permit had already expired?
Rulling of the Court:
It was held that the following ruling has persuasive authority with regards to Insurance:
Insurance; Automobile; When insurer exempt from liability; Case at bar. The automobile
insurance policy sued upon in the instant case exempts the insurer company from liability for any
accident loss, damage or liability caused, sustained or incurred while the vehicle is being driven
by any person other than an authorized driver.
The policy defines the term 'authorized driver' to be the insured himself or any person driving on
the insured's order or with his permission provided he is permitted to drive under the licensing
laws.
In the given case, plaintiff's brother, who was at the wheel at the time of the collision, did not have
a valid license because the one he had obtained had already expired and had not been renewed
as required by Section 31 of the Motor Vehicle Law. That since he had renewed his license one
week after the accident, it did not cure the delinquency or revalidate the license which had
already expired (Syllabus, Tanco, Jr. vs. Phil. Guaranty Co., 122 Phil. 709). Wherefore the case is

against Gutierrez.