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Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 138941 October 8, 2001
AMERICAN HOME ASSURANCE COMPANY, petitioner,
vs.
TANTUCO ENTERPRISES, INC., respondent.
PUNO, J.
efore us is a Petition for Revie! on "ertiorari assailin# the Decision of the "ourt of
$ppeals in "$%&.R. "V No. '((() pro*ul#ated on +anuar, )-, )..., !hich a/r*ed
in toto the Decision of the Re#ional Trial "ourt, ranch '0, 1ucena "it, in "ivil "ase
No. .(%') dated October )2, )..'.
Respondent Tantuco 3nterprises, Inc. is en#a#ed in the coconut oil *illin# and
re4nin# industr,. It o!ns t!o oil *ills. oth are located at factor, co*pound at I,a*,
1ucena "it,. It appears that respondent co**enced its business operations !ith
onl, one oil *ill. In ).55, it started operatin# its second oil *ill. The latter ca*e to
be co**onl, referred to as the ne! oil *ill.
The t!o oil *ills !ere separatel, covered b, 4re insurance policies issued b,
petitioner $*erican 6o*e $ssurance "o., Philippine ranch.
)
The 4rst oil *ill !as
insured for three *illion pesos 7P0,888,888.889 under Polic, No. 082%:-0(0(-%0 for
the period March ), )..) to )..(.
(
The ne! oil *ill !as insured for si; *illion pesos
7P2,888,888.889 under Polic, No. 082%:-0(0()%. for the sa*e ter*.
0
O/cial receipts
indicatin# pa,*ent for the full a*ount of the pre*iu* !ere issued b, the
petitioner<s a#ent.
-
$ 4re that bro=e out in the earl, *ornin# of Septe*ber 08,)..) #utted and
consu*ed the ne! oil *ill. Respondent i**ediatel, noti4ed the petitioner of the
incident. The latter then sent its appraisers !ho inspected the burned pre*ises and
the properties destro,ed. Thereafter, in a letter dated October )', )..), petitioner
re>ected respondent<s clai* for the insurance proceeds on the #round that no polic,
!as issued b, it coverin# the burned oil *ill. It stated that the description of the
insured establish*ent referred to another buildin# thus? @Our polic, nos. 082%
:-0(0()%. 7Ps 2M9 and 082%:-0(0(-%- 7Ps 0M9 e;tend insurance covera#e to ,our
oil *ill under uildin# No. ', !hilst the aAected oil *ill !as under uildin# No. )-. @
'
$ co*plaint for speci4c perfor*ance and da*a#es !as conseBuentl, instituted b,
the respondent !ith the RT", ranch '0 of 1ucena "it,. On October )2, )..', after
trial, the lo!er court rendered a Decision 4ndin# the petitioner liable on the
insurance polic, thus?
@C63R3FOR3, >ud#*ent is rendered in favor of the plaintiA orderin#
defendant to pa, plaintiA?
7a9 P-,-82,'02.-8 representin# da*a#es for loss b, 4re of its insured
propert, !ith interest at the le#al rateD
7b9 P58,888.88 for liti#ation e;pensesD
7c9 P088,888.88 for and as attorne,<s feesD and
7d9 Pa, the costs.
SO ORD3R3D.@
2
Petitioner assailed this >ud#*ent before the "ourt of $ppeals. The appellate court
upheld the sa*e in a Decision pro*ul#ated on +anuar, )-, )..., the pertinent
portion of !hich states?
@C63R3FOR3, the instant appeal is hereb, DISMISS3D for lac= of *erit and
the trial court<s Decision dated October )2, )..' is hereb, $FFIRM3D in
toto.
SO ORD3R3D.@
:
Petitioner *oved for reconsideration. The *otion, ho!ever, !as denied for lac= of
*erit in a Resolution pro*ul#ated on +une )8, )....
6ence, the present course of action, !here petitioner ascribes to the appellate court
the follo!in# errors?
@7)9 The "ourt of $ppeals erred in its conclusion that the issue of non%
pa,*ent of the pre*iu* !as be,ond its >urisdiction because it !as raised
for the 4rst ti*e on appeal.@
5
@7(9 The "ourt of $ppeals erred in its le#al interpretation of <Fire
3;tin#uishin# $ppliances Carrant,< of the polic,.@
.
@709 Cith due respect, the conclusion of the "ourt of $ppeals #ivin# no
re#ard to the parole evidence rule and the principle of estoppel is
erroneous.@
)8
The petition is devoid of *erit.
The pri*ar, reason advanced b, the petitioner in resistin# the clai* of the
respondent is that the burned oil *ill is not covered b, an, insurance polic,.
$ccordin# to it, the oil *ill insured is speci4call, described in the polic, b, its
boundaries in the follo!in# *anner?
@Front? b, a drive!a, thence at )5 *eters distance b, ld#. No. (.
Ri#ht? b, an open space thence b, ld#. No. -.
1eft? $d>oinin# thence an i*perfect !all b, ld#. No. -.
Rear? b, an open space thence at 5 *eters distance.@
6o!ever, it ar#ues that this speci4c boundar, description clearl, pertains, not to the
burned oil *ill, but to the other *ill. In other !ords, the oil *ill #utted b, 4re !as
not the one described b, the speci4c boundaries in the contested polic,.
Chat e;acerbates respondent<s predica*ent, petitioner posits, is that it did not have
the supposed !ron# description or *ista=e corrected. Despite the fact that the
polic, in Buestion !as issued !a, bac= in ).55, or about three ,ears before the 4re,
and despite the @I*portant Notice@ in the polic, that @Please read and examine the
policy and if incorrect, return it immediately for alteration,@ respondent apparentl,
did not call petitioner<s attention !ith respect to the *isdescription.
, !a, of conclusion, petitioner ar#ues that respondent is @barred b, the parole
evidence rule fro* presentin# evidence 7other than the polic, in Buestion9 of its self%
servin# intention 7sic9 that it intended reall, to insure the burned oil *ill,@ >ust as it is
@barred b, estoppel fro* clai*in# that the description of the insured oil *ill in the
polic, !as !ron#, because it retained the polic, !ithout havin# the sa*e corrected
before the 4re b, an endorse*ent in accordance !ith its "ondition No. (5.@
These contentions can not pass >udicial *uster.
In construin# the !ords used descriptive of a buildin# insured, the #reatest liberalit,
is sho!n b, the courts in #ivin# eAect to the insurance.
))
In vie! of the custo* of
insurance a#ents to e;a*ine buildin#s before !ritin# policies upon the*, and since
a *ista=e as to the identit, and character of the buildin# is e;tre*el, unli=el,, the
courts are inclined to consider that the polic, of insurance covers an, buildin# !hich
the parties *anifestl, intended to insure, ho!ever inaccurate the description *a,
be.
)(
Not!ithstandin#, therefore, the *isdescription in the polic,, it is be,ond dispute, to
our *ind, that !hat the parties *anifestl, intended to insure !as the ne! oil *ill.
This is obvious fro* the cate#orical state*ent e*bodied in the polic,, e;tendin# its
protection?
@On *achineries and eBuip*ent !ith co*plete accessories usual to a
coconut oil *ill includin# stoc=s of copra, copra ca=e and copra *ills !hilst
contained in the new oil mill buildin#, situate 7sic9 at ENNO. $1ON&
N$TION$1 6I&6 C$F, O. IF$M, 1E"3N$ "ITF EN1O"G3D.<<
)0
7emphasis
supplied.9
If the parties reall, intended to protect the 4rst oil *ill, then there is no need to
specify it as new.
Indeed, it !ould be absurd to assu*e that respondent !ould protect its 4rst oil *ill
for diAerent a*ounts and leave uncovered its second one. $s *entioned earlier, the
4rst oil *ill is alread, covered under Polic, No. 082%:-0(0(-%- issued b, the
petitioner. It is unthin=able for respondent to obtain the other polic, fro* the ver,
sa*e co*pan,. The latter ou#ht to =no! that a second a#ree*ent over that sa*e
realt, results in its over insurance.
The i*perfection in the description of the insured oil *ill<s boundaries can be
attributed to a *isunderstandin# bet!een the petitioner<s #eneral a#ent, Mr. $lfredo
or>a, and its polic, issuin# cler=, !ho *ade the error of cop,in# the boundaries of
the 4rst oil *ill !hen t,pin# the polic, to be issued for the ne! one. $s testi4ed to
b, Mr. or>a?
@$tt,. &. "a*ali#an?
H? Chat did ,ou do !hen ,ou received the reportI
$? I told the* as !ill be sho!n b, the *ap the intention reall, of Mr.
3dison Tantuco is to cover the ne! oil *ill that is !h, !hen I presented the
e;istin# polic, of the old polic,, the polic, issuin# cler= >ust *erel, 7sic9
copied the !ordin# fro* the old polic, and !hat she t,ped is that t!e
"e#cr$%t$o& o' t!e bo(&")r$e# 'ro* t!e o+" %o+$c, -)# co%$e" b(t
#!e $&#erte" co.er$&/ t!e &e- o$+ *$++ )&" to me at that time the
important thing is that it covered the new oil mill bec)(#e $t $# 0(#t
-$t!$& o&e co*%o(&" )&" t!ere )re o&+, t-o o$+ *$++1#2 and so >ust
enou#h, I had the polic, prepared. In fact, t!o policies !ere prepared
havin# the sa*e date one for the old one and the other for the ne! oil *ill
and e;actl, the sa*e polic, period, sir.@
)-
7emphasis supplied9
It is thus clear that the source of the discrepanc, happened durin# the preparation
of the !ritten contract.
These facts lead us to hold that the present case falls !ithin one of the reco#niJed
e;ceptions to the parole evidence rule. Ender the Rules of "ourt, a part, *a,
present evidence to *odif,, e;plain or add to the ter*s of the !ritten a#ree*ent if
he puts in issue in his pleadin#, a*on# others, its failure to e;press the true intent
and a#ree*ent of the parties thereto.
)'
6ere, the contractual intention of the parties
cannot be understood fro* a *ere readin# of the instru*ent. Thus, !hile the
contract e;plicitl, stipulated that it !as for the insurance of the ne! oil *ill, the
boundar, description !ritten on the polic, concededl, pertains to the 4rst oil *ill.
This irreconcilable diAerence can onl, be clari4ed b, ad*ittin# evidence aliunde,
!hich !ill e;plain the i*perfection and clarif, the intent of the parties.
$nent petitioner<s ar#u*ent that the respondent is barred b, estoppel fro* clai*in#
that the description of the insured oil *ill in the polic, !as !ron#, !e 4nd that the
sa*e proceeds fro* a !ron# assu*ption. 3vidence on record reveals that
respondent<s operatin# *ana#er, Mr. 3dison Tantuco, noti4ed Mr. or>a 7the
petitioner<s a#ent !ith !ho* respondent ne#otiated for the contract9 about the
inaccurate description in the polic,. 6o!ever, Mr. or>a assured Mr. Tantuco that the
use of the ad>ective new !ill distin#uish the insured propert,. The assurance
convinced respondent, despite the i*preciseness in the speci4cation of the
boundaries, the insurance !ill cover the ne! oil *ill. This can be seen fro* the
testi*on, on cross of Mr. Tantuco?
@$TTF. S$1ON&$?
H? Fou *entioned, sir, that at least in so far as 3;hibit $ is concern ,ou
have read !hat the polic, contents. 7sic9
Gindl, ta=e a loo= in the pa#e of 3;hibit $ !hich !as *ar=ed as 3;hibit $%(
particularl, the boundaries of the propert, insured b, the insurance polic,
3;hibit $, !ill ,ou tell us as the *ana#er of the co*pan, !hether the
boundaries stated in 3;hibit $%( are the boundaries of the old 7sic9 *ill that
!as burned or not.
$? It !as not, I called up Mr. Borja regarding this matter and he told
me that what is important is the word new oil mill. Mr. or>a said, as a
*atter of fact, ,ou can never insured 7sic9 one propert, !ith t!o 7(9
policies, ,ou !ill onl, do that if ,ou !ill *a=e to increase the a*ount and it
is b, indorse*ent not b, another polic,, sir.,
)2
Ce a#ain stress that the ob>ect of the court in construin# a contract is to ascertain
the intent of the parties to the contract and to enforce the a#ree*ent !hich the
parties have entered into. In deter*inin# !hat the parties intended, the courts !ill
read and construe the polic, as a !hole and if possible, #ive eAect to all the parts of
the contract, =eepin# in *ind al!a,s, ho!ever, the pri*e rule that in the event of
doubt, this doubt is to be resolved a#ainst the insurer. In deter*inin# the intent of
the parties to the contract, the courts !ill consider the purpose and ob>ect of the
contract.
):
In a further atte*pt to avoid liabilit,, petitioner clai*s that respondent forfeited the
rene!al polic, for its failure to pa, the full a*ount of the pre*iu* and breach of the
Fire 3;tin#uishin# $ppliances Carrant,.
The a*ount of the pre*iu* stated on the face of the polic, !as P5.,::8.(8. Fro*
the ad*ission of respondent<s o!n !itness, Mr. or>a, !hich the petitioner cited, the
for*er onl, paid it P:',)-:.88, leavin# a diAerence of P)-,2(0.(8. The de4cienc,,
petitioner ar#ues, su/ces to invalidate the polic,, in accordance !ith Section :: of
the Insurance "ode.
)5
The "ourt of $ppeals refused to consider this contention of the petitioner. It held
that this issue !as raised for the 4rst ti*e on appeal, hence, be,ond its >urisdiction
to resolve, pursuant to Rule -2, Section )5 of the Rules of "ourt.
).
Petitioner, ho!ever, contests this 4ndin# of the appellate court. It insists that the
issue !as raised in para#raph (- of its $ns!er, viJ.?
@(-. PlaintiA has not co*plied !ith the condition of the polic, and rene!al
certi4cate that the rene!al pre*iu* should be paid on or before rene!al
date.@
Petitioner adds that the issue !as the sub>ect of the cross%e;a*ination of Mr. or>a,
!ho ac=no!led#ed that the paid a*ount !as lac=in# b, P)-,2(0.(8 b, reason of a
discount or rebate, !hich rebate under Sec. 02) of the Insurance "ode is ille#al.
The ar#u*ent fails to i*press. It is true that the asseverations petitioner *ade in
para#raph (- of its $ns!er ostensibl, spo=e of the polic,<s condition for pa,*ent of
the rene!al pre*iu* on ti*e and respondent<s non%co*pliance !ith it. Fet, it did
not contain an, speci4c and de4nite alle#ation that respondent did not pa, the
pre*iu*, or that it did not pa, the full a*ount, or that it did not pa, the a*ount on
ti*e.
1i=e!ise, !hen the issues to be resolved in the trial court !ere for*ulated at the
pre%trial proceedin#s, the Buestion of the supposed inadeBuate pa,*ent !as never
raised. Most si#ni4cant to point, petitioner fatall, ne#lected to present, durin# the
!hole course of the trial, an, !itness to testif, that respondent indeed failed to pa,
the full a*ount of the pre*iu*. The thrust of the cross%e;a*ination of Mr. or>a, on
the other hand, !as not for the purpose of provin# this fact. Thou#h it brieK,
touched on the alle#ed de4cienc,, such !as *ade in the course of discussin# a
discount or rebate, !hich the a#ent apparentl, #ave the respondent. "ertainl,, the
!hole tenor of Mr. or>a<s testi*on,, both durin# direct and cross e;a*inations,
i*plicitl, assu*ed a valid and subsistin# insurance polic,. It *ust be re*e*bered
that he !as called to the stand basicall, to de*onstrate that an e;istin# polic,
issued b, the petitioner covers the burned buildin#.
Finall,, petitioner contends that respondent violated the e;press ter*s of the Fire
3;tin#uishin# $ppliances Carrant,. The said !arrant, provides?
@C$RR$NT3D that durin# the currenc, of this Polic,, Fire 3;tin#uishin# $ppliances as
*entioned belo! shall be *aintained in e/cient !or=in# order on the pre*ises to
!hich insurance applies?
% PORT$13 3LTIN&EIS63RS
% INT3RN$1 6FDR$NTS
% 3LT3RN$1 6FDR$NTS
% FIR3 PEMP
% (-%6OER S3"ERITF S3RVI"3S
R3$"6 of this !arrant, shall render this polic, null and void and the "o*pan, shall
no lon#er be liable for an, loss !hich *a, occur.@
(8
Petitioner ar#ues that the !arrant, clearl, obli#ates the insured to *aintain all the
appliances speci4ed therein. The breach occurred !hen the respondent failed to
install internal 4re h,drants inside the burned buildin# as !arranted. This fact !as
ad*itted b, the oil *ill<s e;peller operator, &erardo Marsuela.
$#ain, the ar#u*ent lac=s *erit. Ce a#ree !ith the appellate court<s conclusion that
the afore*entioned !arrant, did not reBuire respondent to provide for all the 4re
e;tin#uishin# appliances enu*erated therein. $dditionall,, !e 4nd that neither did it
reBuire that the appliances are restricted to those *entioned in the !arrant,. In
other !ords, !hat the !arrant, *andates is that respondent should *aintain in
e/cient !or=in# condition !ithin the pre*ises of the insured propert,, 4re 4#htin#
eBuip*ents such as, but not li*ited to, those identi4ed in the list, !hich !ill serve
as the oil *ill<s 4rst line of defense in case an, part of it bursts into Ka*e.
To be sure, respondent !as able to co*pl, !ith the !arrant,. Cithin the vicinit, of
the ne! oil *ill can be found the follo!in# devices? nu*erous portable 4re
e;tin#uishers, t!o 4re hoses,
()
4re h,drant,
((
and an e*er#enc, 4re en#ine.
(0
$ll of
these eBuip*ents !ere in e/cient !or=in# order !hen the 4re occurred.
It ou#ht to be re*e*bered that not onl, are !arranties strictl, construed a#ainst
the insurer, but the, should, li=e!ise, b, the*selves be reasonabl,
interpreted.
(-
That reasonableness is to be ascertained in li#ht of the factual
conditions prevailin# in each case. 6ere, !e 4nd that there is no *ore need for an
internal h,drant considerin# that inside the burned buildin# !ere? 7)9 nu*erous
portable 4re e;tin#uishers, 7(9 an e*er#enc, 4re en#ine, and 709 a 4re hose !hich
has a connection to one of the e;ternal h,drants.
IN VI3C C63R3OF, 4ndin# no reversible error in the i*pu#ned Decision, the instant
petition is hereb, DISMISS3D.
SO ORD3R3D.
AMERICAN HOME ASSURANCE COMPANY .#. TANTUCO ENTERPRISES, INC.
&.R. No. )05.-)
October 5, (88)
F$"TS? Respondent Tantuco 3nterprises, Inc. is en#a#ed in the coconut oil *illin#
and re4nin# industr,. It o!ns t!o oil *ills !hich !ere separatel, covered b, 4re
insurance policies issued b, petitioner $*erican 6o*e $ssurance "o., Philippine
ranch.

The 4rst oil *ill !as insured for P0,888,888.88 under Polic, No. 082%
:-0(0(-%0 for the period March ), )..) to )..(. The ne! oil *ill !as insured for
P2,888,888.88 under Polic, No. 082%:-0(0()%. for the sa*e ter*. O/cial receipts
indicatin# pa,*ent for the full a*ount of the pre*iu* !ere issued b, the
petitioner<s a#ent.
$ 4re that bro=e out in the earl, *ornin# of Septe*ber 08,)..) #utted and
consu*ed the ne! oil *ill. Respondent i**ediatel, noti4ed the petitioner of the
incident but petitioner re>ected respondent<s clai* for the insurance proceeds on the
#round that no polic, !as issued b, it coverin# the burned oil *ill. It stated that the
description of the insured establish*ent referred to another buildin# thus? @Our
polic, nos. 082%:-0(0()%. 7Ps 2M9 and 082%:-0(0(-%- 7Ps 0M9 e;tend insurance
covera#e to ,our oil *ill under uildin# No. ', !hilst the aAected oil *ill !as under
uildin# No. )-. @
ISSE3? Chether or not the "ourt of $ppeals erred in its le#al interpretation of <Fire
3;tin#uishin# $ppliances Carrant,< of the polic,.
631D? In construin# the !ords used descriptive of a buildin# insured, the #reatest
liberalit, is sho!n b, the courts in #ivin# eAect to the insurance. In vie! of the
custo* of insurance a#ents to e;a*ine buildin#s before !ritin# policies upon the*,
and since a *ista=e as to the identit, and character of the buildin# is e;tre*el,
unli=el,, the courts are inclined to consider that the polic, of insurance covers an,
buildin# !hich the parties *anifestl, intended to insure, ho!ever inaccurate the
description *a, be.
Not!ithstandin#, therefore, the *isdescription in the polic,, it is be,ond dispute, to
our *ind, that !hat the parties *anifestl, intended to insure !as the ne! oil *ill. If
the parties reall, intended to protect the 4rst oil *ill, then there is no need to
specify it as new.
In deter*inin# !hat the parties intended, the courts !ill read and construe the
polic, as a !hole and if possible, #ive eAect to all the parts of the contract, =eepin#
in *ind al!a,s, ho!ever, the pri*e rule that in the event of doubt, this doubt is to
be resolved a#ainst the insurer. In deter*inin# the intent of the parties to the
contract, the courts !ill consider the purpose and ob>ect of the contract.