G.R. No. 20341. September 01, 1923

STATEMENT

After formal pleas, the plaintiffs allege that on the 19th of March, 1918, in
the City of Manila, the plaintiff, Domingo Garcia, then a merchant and owner of
a bazaar known as “Las Novedades” in the district of Legaspi, municipality and
Province of Albay, entered into a contract with the defendant whereby it insured
his merchandise in the sum of P15,000 at a premium of P300 per annum; that in
consideration of such premium, the defendant issued its fire insurance policy
No. 1951 in favor of the plaintiff, not on the merchandise in the building, but
on the building which contained the merchandise; that for such reason the policy
does not contain the true agreement and intent of the parties; that the
plaintiff was not the owner of, and did not have any interest in, the building;
and that the policy was so issued through error, carelessness and negligence of
the defendant.

That on August 30, 1919, Garcia executed a mortgage to the plaintiff Bank on
the merchandise insured by the defendant, and that with the consent of the
defendant, the plaintiff endorsed the policy to the Bank; that on February 6,
1920, and while the policy was in force and effect, a fire took place which
destroyed the merchandise in the building of the value of P20,000, together with
the building itself; that demand was made upon the defendant for the payment of
P15,000, as provided for in the policy, and that payment was refused. Wherefore,
plaintiifs pray judgment for that amount, with legal interest from the date of
the filing of the complaint, and costs.

For answer, the defendant admits the formal allegations of the complaint, and
denies generally and specifically all other allegations.

As a result of the trial, the lower court rendered judgment for the
plaintiff, as prayed for in the complaint, from which the defendant appeals and
contends that the lower court erred in denying its motion to make the complaint
more definite and certain; in permitting Garcia over its objection to testify to
the contents of certain documents; in refusing to strike them from the record;
in finding that the defendant, through its agent, knew that it was the
merchandise which was insured and not the building; in failing to find the
plaintiffs, and Garcia in particular, guilty of negligence; in finding that the
defendant committed error in making out the policy to cover the building rather
than the merchandise; in rendering the judgment; and in denying defendant’s
motion for a new trial.

JOHNS, J.:

It appears that the policy was in the English language, of which the
plaintiff Garcia is ignorant. When he received it he noticed that the amount
P15,000 was correct, and never personally made any further investigation. He was
the exclusive owner of the merchandise in the building which, at the time of the
fire, was of the probable value of P20,000. He did not own or claim any interest
in the building. Desiring to have his merchandise insured for P15,000, he wrote
a letter to “El Pilar,” requesting that firm to have it insured, as a result of
which, the policy in question was issued and delivered to him, and it was issued
on the building which Garcia did not own, and did not cover the merchandise
which he did own. Desiring to obtain a loan from the Philippine National Bank,
Garcia later delivered and assigned the policy to the plaintiff Bank as
collateral security for a loan. Upon receipt of the policy, and as one of the
conditions for the making of the loan, the Bank, through its manager, addressed
the following letter to the agents of the defendant on August 6, 1919:

“We beg to advise that the merchandise insured by you against fire in favor
of Mr. Domingo Garcia of Legaspi, Albay, P. I., for P15,000 for which you issued
policy No. 1951, has been mortgaged to this bank together with the policy to
secure a credit and loans not to exceed P6,000 in all.

“We would appreciate very much if you have our claims against the property
and policy covering it, on account of the mortgage, entered in your records and
advise us accordingly.

“Hoping to hear from you soon, we are,

       “Very truly yours,”

This was answered by the agents August 14, 1919, as follows:

“We beg to acknowledge receipt of your esteemed favor of the 6th inst.,
informing us that the Hongkong Fire Insurance Company, Ltd.’s Policy in the name
of Mr. Domingo Garcia, for the sum of P15,000 has been mortgaged to your
goodselves. In order that this transaction may be officially recorded, it will
be necessary to make an endorsement upon the original policy, and we shall be
glad, therefore, if you will return this document to us as soon as
convenient.

“We are, Dear Sirs,

       “Yours faithfully.”

August 18, 1919, the Bank wrote the following letter to the agents:

“Complying with your request of the 13th ultimo, we beg to inclose herewith
policy No. 1951 in favor of Mr. Domingo Garcia, Legaspi, Albay, for P15,000,
which has been mortgaged to this Bank to secure a credit and loan of not to
exceed P6,000 in all, for your proper indorsement.

“Trusting to have your prompt action in this matter, we are,

       “Very respectfully yours.”

September 1, 1919, the agents wrote the Bank as follows:

“We beg to acknowledge receipt of your favour of the 18th ultimo, enclosing
Hongkong Fire Insurance Co., Ltd.’s Policy No. 1951, in the name of Mr. Domingo
Garcia, and in accordance with your request have endorsed same in your favour,
and beg to return the document herewith. Please be good enough to acknowledge
safe receipt in due course and oblige.

       “Yours faithfully.”

It clearly appears that where the word “merchandise” was written in the
letter of August 6th above quoted, some other word had been previously written
and erased, and the word “merchandise” was then written, as it now appears.

It is contended that when the letter was written, the Bank, which then had
the possession of the policy, knew that it covered the building and did not
insure the merchandise. That, having such knowledge, it was the duty of the Bank
to notify the defendant, and having failed to do so, it cannot now contend that
the policy was issued through a mistake. The fact remains that the defendant,
through its agents, received this letter, and that it recites:

“We beg to advise that the merchandise insured by you against fire in favor
of Mr. Domingo Garcia, etc.”

That was a personal notice to the defendant of the fact that the policy was
on the merchandise. It is pointed out that the Bank and not the defendant then
had the policy, and, for such reason, the Bank did not have notice of the error.
Although the policy was in possession of the Bank, the defendant had among its
own records all of the data and information upon which the policy was issued,
and, as a matter of fact, its agents knew or should have known the kind of
property insured.

It is possible that when the Bank wrote the letter, it knew of the error in
the issuance of the policy. But that is a matter of inference or conjecture
only. Outside of the appearance of the letter itself, there is no evidence that
the Bank had any knowledge of the error.

Garcia had his dealings with the officials of the branch Bank at Legaspi
where he was doing business as a merchant, of which the officials of that Bank
had knowledge. Under such facts, the presumption of knowledge, if any, on the
part of the Bank would be that the policy was on the merchandise. Be that as it
may, when the defendant received the letter from the Bank, it knew from its own
records that the policy was issued on the building, and, as a matter of fair
dealing, it should have notified the Bank that the policy was on the building.
It will be noted that the letters in question were all written several months
before the fire.

In the final analysis, Garcia wanted insurance upon a stock of goods, which
he owned, and he received and paid for a policy on a building, which he did not
own, and while the policy was in force and effect, both the building, which he
did not own, and the stock of merchandise, which he did own, were completely
destroyed by fire. Garcia was a well-known merchant, and his merchandise was in
the building described in the policy.

For some unknown reason, the party who applied for the insurance at the
instance and request of Garcia was not called as a witness, and, as stated, the
answer of the defendant is confined to a general denial, and it did not offer
any evidence.

In a well-written opinion, the trial court analyzed the evidence and made
findings of fact upon which it rendered judgment for the plaintiff. It is
claimed that the letters and the copy of the telegram introduced in evidence
were hearsay and not competent. If for no other purpose, they were competent to
show that Garcia wanted insurance on his merchandise and the reasons why he
wanted it.

The defense is purely technical, and is founded upon the contention that
plaintiff cannot recover, because the policy covers loss on a building, and does
not cover loss of merchandise.

It is very apparent that a mistake was made in the issuance of the
policy.

In its opinion the trial court says:

“Under these circumstances it seems clear and manifest that the insured, as
well as the manager of the National Bank at Legaspi, who was interested in the
policy, because the same secured a loan of P6,000 made to Domingo Garcia, and
the corporation of Wise & Co., Ltd., which represented the insurance
company, have been in the belief that it was not the building but the
merchandise that was insured, for the reason that none of them paid attention to
the context of the policy.”

The opinion of the trial court further points out that, under the pleadings
and proof, there is ground for the contention that the plaintiff would be
entitled to recover on the policy for the loss of the building.

All things considered, the judgment of the lower court is affirmed, with
costs. So ordered.

Araullo, C.J., Johnson, Malcolm, Avanceña,
Villamor, and Romualdez, JJ., concur.
Street, J.,
dissents.