QUA CHEE GAN, PLAINTIFF AND APPELLEE, VS. LAW UNION AND ROCK INSURANCE CO., LTD., REPRESENTED BY ITS AGENT, WARNER, BARNES AND CO., LTD., DEFENDANT AND APPELLANT.

Qua Chee Gan, a merchant of Albay, instituted this action in 1940, in the
Court of First Instance of said province, seeking to recover the proceeds of
certain fire insurance policies totalling P370,000, issued by the Law Union
& Eock Insurance Co., Ltd., through its agent, Warner, Barnes & Co.,
Ltd., upon certain bodegas, and merchandise of the insured that were burned on
June 21, 1940. The records of the origmal case were destroyed duriiig the
liberation of the region, and were reconstituted in 1946. After a trial that
lasted several years, the Court of First Instance rendered a decision in favor
of the plaintiff, the dispositive part whereof reads as follows:

“Wherefore, judgment is rendered for the plaintiff and against the defendant
condemning’ the latter to pay the former—

(a) Under the first cause of action, the sum of
P146,894.48;
(b) Under the second cause of action, the sum of
P150,000;
(c) Under the third cause of action, the sum of
P5,000;
(d) Under the fourth cause of action, the sum of P15,000;
and
(e) Under the fifth cause of action, the sum of P40,000;

all of which shall bear interest at the rate of 8% per annum in accordance
with Section 91 (b) of the Insurance Act from September 26, 1940, until
each is paid, with costs against, the defendant.

The complaint in intervention of the Philippine National Bank is dismissed
without costs.” (Record on Appeal, 166-167.)

From the decision, the defendant Insurance Company appealed directly to this
Court.

The record shows that before the last war, plaintiff-appellee owned four
warehouses or bodegas (designated as Bodegas Nos. 1 to 4) in the municipality of
Tabaco, Albay, used for the storage of stocks of copra and of hemp, baled and
loose, in which the appellee dealt extensively. They had been, with their
contents, insured with the defendant Company since 1987, and the lose made
payable to the Philippine National Bank as mortgage of the. hemp and copra, to
the extent of its interest. On , June, 1940, the insurance stood as follows:

Policy No.	Property Insured	Amount
2637164 (Exhibit “LL”)……….	Bodega No. 1 (Building)….	P15.000.00
2637165 (Exhibit “JJ”)……….	Bodega No. 2 (Building)….	10,000.00
	Bodega No. 3 (Building)…..	25,000.00
	Bodega No. 4 (Building)….	10,000.00
	Hemp Press—moved by steam engine ……	5,000.00
2687346 (Exhibit “X”)…..	Merchandise contents (copra and empty sacks of Bodega No. 1)….	150,000.00
2637346 (Exhibit “Y”)….	Merchandise contents(hemp) of Bodega No. 3 ……	160,000.00
2637067′ (Exhibit “GG”)…	Merchandise contents(loose hemp) of Bodega No. 4 …..	5,000.00
Total	……………………………………………….	P370.,000.00

Fire ot undetermined origin that broke out in the early morning of July 21,
1940, and lasted almost one week, gutted and completely destroyed Bodegas Nos.
1, 3 and 4, with the merchandise stored therein. Plaintiff-appellee informed the
insurer by telegram on the same date; and on the next day, the lire adjusters
engaged by appellant insurance company arrived and proceeded to examine and
photograph the premises, pored over the books of the insured and conducted an
extensive investigation. The plaintiff having submitted the corresponding fire
claims, totalling P398.562.81 (but reduced to the full amount of the insurance,
P370,000), the Insurance Company resisted payment, claiming violation of
warranties and conditions, filing of fraudulent claims, and that the fire had
been deliberately caused by the insured or by other persons’ in connivance with
him.

With counsel for the insurance company acting as private prosecutor, Qua Chee
Gan, with his brother, Qua Chee Pao, and some employees of his, were indicted
and tried in 1940 for the crime of arson, it being claimed that they had set
fire to the destroyed warehouses to collect the insurance. They were, however,
acquitted by the trial court in a final decision dated July 9, 1941 (Exhibit
WW). Thereafter, the civil suit to collect the insurance money proceeded to its
trial and termination in the Court below, with the result noted at the start of
this opinion. The Philippine National Bank’s complaint in intervention was
dismissed because the appellee had managed to pay his indebtedness to the Bank
during the pendency of the suit, and despite the fire losses.

In its first assignment of error, the insurance company alleges that the
trial Court should have held that the policies were avoided for breach of
warranty, specifically the one appearing on a rider pasted (with other similar
riders) On the face of the policies (Exhibits X, Y, JJ and LL). These riders
were attached for the first time in 1939, and the pertinent portions read as
follows:

“Memo of Warranty.—The undernoted Appliances for the extinction of
fire being kept on the premises insured hereby, and it being declared and
understood that there is an ample and constant water supply with sufficient
pressure available at all seasons for the same, it is hereby warranted that the
said ‘appliances shall be maintained in efficient working order during the
currency of this policy, by reason whereof a discount of 2 1/2 per cent is
allowed on the premium chargeable under this policy.

Hydrants in the compound, not less in number than one for each 150
feet of external wall measurement of buildings, protected, with not less than
100 feet of hose piping and nozzles for every two hydrants kept under cover in
convenient places, the hydrants being supplied with water pressure by a pumping
engine, or from some other source, capable of discharging at the rate of not
less than 200 gallons of water per minute into the upper story of the highest
building protected, and a trained brigade of not less than 20 men to work the
same.'”

It is argued that since the bodegas insured had an external wall perimeter of
500 meters or 1,640 feet, the appellee should have eleven (11) fire hydrants in
the compound, and that he actually had only two (2), with a further, pair
nearby, belonging to the municipality of Tabaco.

We are in agreement with the trial Court that the appellant is barred by
waiver (or rather estoppel) to claim violation of the so-called fire hydrants
warranty, for the reason that knowing fully all that the number of hydrants
demanded therein never existed from the very beginning, the appellant
nevertheless issued the policies in question subject to such warranty, and
received the corresponding premiums. It would be perilously close to conniving
at fraud upon the insured to allow appellant to claims now as void ab
initio the policies that it had issued to the plaintiff without Warning of
their fatal defect, of which it was informed, and after it had misled the
defendant teto believing that the policies were effective.

The insurance company was, aware, even before the policies were issued, that
in the premises insured there were only two fire hydrants installed by Qua Chee
Gan and two others nearby, owned by the municipality of Tabaco, contrary to the
requirements, of the warranty in question. Such fact appears from positive
testimony for the insured that appellant’s agents inspected the premises; and
the simple denials of appellant’s representative (Jamiczon) can not overcome
that proof. That such inspection was made is moreover rendered probable by its
being a prerequisite for the fixing of the discount on the premium to which the
insured was entitled, since the discount depended on the number of hydrants, and
the fire fighting equipment available (See “Scale of Allowances” to which the
policies were expressly made subject). The law, supported by a long line of
cases, is expressed by American Jurisprudence (Vol. 29, pp. 611-612) to be as
follows:

“It is usually held that where the insurer, at the time of the issuance of a
policy of insurance, has knowledge of existing facts which, if insisted on,
would invalidate the contract from its very inception, such knowledge
constitutes a waiver of conditions in the contract inconsistent with the known
facts, and the insurer is stopped thereafter from asserting the breach of such
conditions. The law is charitable enough to assume, in the absence of any
showing to the contrary, that an insurance company intends to execute a, valid
contract in return for the premium received; and when the policy contains a
condition which renders it voidable at its inception, and this result is known
to the insurer, it will be presumed to have intended to waive the conditions and
to execute a binding contract, rather than to have deceived the insured into
thinking he is insured when in fact he is not, and to have taken his money
without consideration.” (29 Am. Jur,, Insurance, section 807, at pp. 611-612.)

The reason for the rule ia not difficult to find.

“The plain, human justice of this doctrine is perfectly apparent. To allow a
company to accept one’s money for a policy of insurance which it then knows to
be void and of no effect, though it knows as it must, that the assured believes
it to be valid and binding, is so contrary to the dictates of honesty and fair
dealing, and so closely related to positive fraud, as to be abhorrent to
fairminded men. It would be to allow the company to treat the policy as valid
long enough to get the premium on it, and leave it at liberty to repudiate it
the next moment. This cannot be deemed to be the real intention of the parties.
To hold that a literal construction of the policy expressed the true intention
of the company would be to indict it, for fraudulent purposes and designs which
we cannot believe it to be guilty of” (Wilson vs. Commercial Union
Assurance Co., 96 Atl. 540, 543-544).

The inequitableness of the conduct observed by the Insurance company in this
case is heightened by the fact that after the insured had incurred the expense
of installing the two hydrants, the company collected the premiums and issued
him a policy so worded that it gave the insured a discount much smaller than
that he was normally entitled to. According to the “Scale of Allowances,” a
policy subject to a warranty of the existence of one fire hydrant for every 150
feet of external wall entitled the insured to a discount of 7 1/2 per cent of
the premium; while the .existence of “hydrants, in compound” (regardless of
number) reduced the allowance on the premium to a mere 2 1/2 per cent. This
schedule was logical, since a greater number of hydrants and lire fighting
appliances reduced the risk of loss. But the appellant company, in the
particular case now before us, so worded the policies that while exacting the
greater number of fire hydrants and appliances, it kept the premium discount at
the minimum of 2 1/2 per cent, thereby giving the insurance company a double
benefit. No reason. is shown why appellant’s premises, that had been insured
with appellant for several years past, suddenly should be regarded in 1939 as so
hazardous as to be accorded a treatment beyond the limits of appellant’s own
scale of allowances. Such abnormal treatment of the insured strongly points at
an abuse of the insurance company’s selection of the words and terms of the
contract, over which it had absolute control.

These considerations lead us to regard the parol evidence rule, invoked by
the appellant as not applicable to the present case. It is not a question here
whether or not the parties may vary a written contract by, oral evidence; but
whether testimony is receivable so that a party may be, by reason of inequitable
conduct shown, estopped from enforcing forfeitures in its favor, in order to
forestall fraud or imposition on the insured.

“Receipt of Premiums or Assessments after Cause for Forfeiture. Other
than Nonpayment.—It is a well settled rule of law that an insurer which
with knowledge of facts entitling it to treat a policy as no longer in force,
receives and accepts a premium on the policy, estopped to take advantage of the
forfeiture. It cannot treat the policy as void for the purpose of defense to an
action to. recover for a loss thereafter occurring and at the same time treat it
as valid for the purpose of earning and collecting further premiums.” (29 Am.
Jur., 653, p. 657.)

“It would be unconscionable to permit a company to issue a policy under
circumstances which it knew rendered the policy void and then to accept and
retain premiums under such a void policy. Neither law nor good morals would
justify such conduct and the doctrine of equitable estoppel is peculiarly
applicable1 to the situation.” (McGuire vs. Home Life Ins. Co. 94 Pa.
Super. Ct. 457.)

Moreover, taking into account the well known rule that ambiguities or
obscurities must be’ strictly interpreted against the party thai; caused
them,^[1] the “memo of warranty” invoked
by appellant bars the latter from questioning the existence of “the appliances
called for in the” insured premises, since its initial expression, “the
under-noted appliances for the extinction of fire being kept on the premises
insured hereby, … it is hereby warranted . . .”, admits of interpretation
as an admission of the existence of such appliances which appellant cannot now
contradict, should the parol evidence rule apply.

The alleged violation of the warranty of 100 feet of fire hose for every two
hydrants, must be equally rejected, since the appellant’s argument thereon is
based on the assumption that the insured was bound to maintain no less than
eleven hydrants (one per 150 feet of wall), which requirement appellant is
estopped from enforcing. The supposed breach of the water pressure condition is
made to rest on the testimony of witness Serra, that the water supply could fill
a 5-gallon can in 3 seconds; appellant thereupon inferring that the maximum
quantity obtainable from the hydrants was 100 gallons a minute, when the
warranty called for 200 gallons a minute. The transcript shows, however, that
Serra repeatedly refused and professed inability to estimate the rate of
discharge of the water, and only gave the “5-gallon per 3-second” rate because
the insistence of appellant’s counsel forced the witness to hazard a guess.
Obviously, the testimony is worthless and insufficient to establish the
violation claimed, ‘specially since the burden of its proof lay on
appellant.

As to, maintenance of a trained fire brigade of 20 men, the record is
preponderant that the same waa organized, and,drilled, from time to give, altho
not maintained as a permanently separate unit, which the warranty did not
require. Anyway, it would be unreasonable to expect the insured to maintain for
his compound alone a fire fighting force that many municipalities in the Islands
do not even possess. There is no merit in appellant’s claim that subordinate
membership of the business manager (Co Cuan) in the fire brigade, while its
direction was entrusted to a minor employee, renders the testimony improbable. A
business manager is not necessarily adept at fire fighting, the qualities
required being different for both activities.

Under the second assignment of error, appellant insurance company avers, that
the insured violated the. “Hemp Warranty” provisions of Policy No. 2637165
(Exhibit JJ), against the storage of gaaoline, since appellee admitted that
there were 36 cans (latas) of gasoline in the building designed as “Bodega No.
2” that was a separate structure not affected by the fire. It is well to note
that gasoline is not specifically mentioned among the prohibited articles listed
in the so-called “hemp warranty.” The cause relied upon by the insurer speaks of
“oils (animal and/or vegetable and/or mineral and/or their liquid
products having a flash point below 300° Fahrenheit”, and is decidedly ambiguous
and uncertain; for in ordinary parlance, “Oils” mean “lubricants” and not
gasoline or kerosene. And how many insured, it may well be wondered, are in a
position to understand or determine “flash point below 003° Fahrenheit. Here,
again, by reason. of the exclusive control of the insurance company over the
terms and phraseology of the contract, the ambiguity must be held strictly
against the insurer and liberally in favor of the insured, specially to avoid a
forfeiture (44 C. J. S, pp. 1166-1175; 29 Am. Jur. 180). ,

“Insurance is, in its nature, complex and difficult for the layman to
understand. Policies are prepared by experts who know and can anticipate the
bearing and possible complications of every contingency. So long as insurance
companies insist upon the use of ambiguous, intricate and technical provisions,
which conceal rather than frankly disclose, their own intentions, the courts
must, in fairness to those “who purchase insurance, construe every ambiguity in
favor of the insured.” (Algoe vs. Pacific Mut. L. Ins. Co., 91 Wash.
324, LRA 1917A, 1237.)

“An insurer should not be allowed, by the use of obscure phrases and
exceptions, to defeat the very purpose for which the policy was procured” (Moore
vs. Aetna Life Insurance Co., LRA 1915D, 264).

We see no reason why the prohibition of keeping gasoline in the premises
could not be expressed clearly and unmistakably, in the language and terms that
the general public can readily understand, without resort to obscure esoteric
expression (now derisively termed “gobbledy-gook”). We reiterate the rule stated
in, Bachrach vs. British American Assurance Co. (17 Phil. 555,
561):

“If the company intended to rely upon a condition of that character, it ought
to have been plainly expressed in the policy.”

This rigid application of the rule on ambiguities has become necessary in
view of current business practices. The courts cannot ignore that nowadays
monopolies, cartels and concentrations of capital, endowed with overwhelming
economic power, manage to impose upon parties dealing with them cunningly
prepared “agreements” that the weaker party may not change one whit, his
participation in the “agreement” being reduced to the alternative to take it or
leave it” labelled since Raymond Baloilles “contracts by adherence” (con
tracts d’adhesion), in contrast to these entered into by parties bargaining
on an equal footing, such contracts (of which policies of insurance and
international bills of lading are prime examples) obviously call for greater
strictness and vigilance on the part of courts of justice with a view to
protecting the weaker party from abuses and imposition, and prevent their
becoming traps for the unwarry (New Civil Code, Article 24; Sent, of Supreme
Court of Spain, 13 Dec. 1934, 27 February 1942).

“Si pudiera estiroarse que la condiei6n 18 de la p61iza de seguro envolvia
alguna oseuridad, habra de ser tenido en cuenta que al segaro es, practicamente
Tin eontrato de los llamados de adhesion y por consiguiente en caso de duda
sobre la signification de las clausulas generates de una poliza—redactada por
las companias sin la intervencion alguna de sus clientes—se ha de adoptar de
acuerdo con el articulo 1268 del Codigo Civil, la interpretacion mas favorable
al asegurado, ya que la obscuridad es imputable a la empresa aseguradora, que
debia haberse explicado mas claramante.” (Dec. Trib. Sup. of Spain 13 Dec.
1934)

The contract of insurance is one of perfect good faith (uferrimal
fidei) not for the insured, alone, but equally so for the insurer; in fact,
it is mere so for the latter, since its dominant bargaining position carries
with it stricter responsibility.

Another point that is in favor of the insured is that the gasoline kept in
Bodega No. 2 was only incidental to his business, being no more than a customary
2 day’s supply for the five or six motor vehicles used for transporting of the
stored merchandise (t. s. n., pp. 1447-1448). “It is well settled that the
keeping of inflammable oils on the premises, though prohibited by the policy,
does not void it if such keeping is incidental to the business.” Bachrach
vs. British American Ass. Co., 17 Phil. 555, 560); and “according to
the weight of authority, even though there are printed prohibitions against
keeping certain articles on the insured premises the policy will not be avoided
by a violation of these prohibitions, if the prohibited articles are necessary
or in customary use in carrying on the trade or business conducted on the
premises.” (45 C. J. S., p. 311; also 4 Couch on Insurance, section 966b). It
should also be noted that the “Hemp Warranty” forbade storage only “in the
building to which this insurance applies and/or in any building communicating
therewith”, and it is undisputed that no gasoline was stored in the burned
bodegas, and that “Bodega No. 2” which was not burned and where the gasoline was
found, stood isolated from the other insured bodegas.

The charge, that the insured failed or refused to submit to the examiners of
the insurer the books, vouchers, etc. demanded by them was found unsubstantiated
by the trial Court, and no reason has been shown to alter this finding. The
insured gave the insurance examiner all the data he ‘ asked for (Exhibits AA,
BB, CCC and Z), and the examiner even kept and photographed some of the examined
books in his possession. What does appear to have been rejected by the insured
was the demand that he should submit “a list of all books,
vouchers, receipts and other records” (Page 4, Exhibit 9-c); but the
refusal of the insured in this instance was well justified, since the demand for
a list of all the vouchers (which were not in use by the insured) and
receipts was positively unreasonable, considering that such listing was
superfluous because the insurer was not denied access to the records, that the
volume of Qua Chee Gan’s business ran into millions, and that the demand was
made just after the fire when everything was in turmoil. That the
representatives of the insurance company were able to secure all the data they
needed is proved by the fact that the adjuster Alexander Stewart was able to
prepare his own balance sheet (Exhibit L of the criminal case) that did not
differ from that submitted by the insured (Exhibit J) except for the valuation
of the merchandise, as expressly found by the Court in the criminal case for
arson. (Decision, Exhibit WW).

How valuations may differ honestly, without fraud being involved, was
strikingly illustrated in the decision of the arson case (Exhibit WW) acquitting
Qua Choc Gan, appellee in the. present proceedings. The decision states (Exhibit
WW, p. 11) :

“Alexander D. Stewart declaro que ha examinado los libros de Qua Choc Gan en
Tabaco asi como su existencia de copra y abaca en las bodegas al tiempo del
incendio durante el periodo comprendido desde el 1.° de enero al 21 de junio de
1940 y ha eneontrado que Qua Choc Gan ha sufrido una perdida de P1,750.76 en su
negocio en Tabaco. Segun Stewart al llegar a este conclusion el ha tenido en
cuenta el balance de comprobacion Exhibit ‘J’ que le ha entregado el mismo
acusado Que Choc Gan en relacion con bus librps y lo ha eneontrado correeto a
excepcion do los precios de abaca y copra que alli aparecen que no estan de
acuerdo con los preeios en el mercado. Esta comprobacion apareee en el balance
mercado exhibit J que fue preparado por el mismo testigo.”

In view of the discrepancy in the valuations between the insured and the
adjuster Stewart for the insurer, the Court referred the controversy to a
government auditor, Apolonio Ramos; but the latter reached a different result
from the other two. Not only that, but Ramos reported two different valuations
that coul’d be reached according to the methods employed” (Exhibit WW, p.
35):

“La ciencia de la contabilidad es buena, pues ha tenido sus muchos usos
buenos para promover el comercio y la finanza, pero en el caso presente ha
resultado un tanto cumplicada y acomodaticia, como lo prueba el resultado del
examen hecho por los contadores Stewart y Ramos, pues el juzgado no alcanza a
ver como habiendo examinado las mismas partidas y loa mismos libros dichos
contadores hayan de llegara dos conclusiones que difieron sustancialmente entre
si. En otras palabras, no solamente la comprobacion hecha por Stewart difiere de
la comprobacion hecha por Ramos sino que, segun este ultimo, su comprobacion ha
dado lugar a dos resultados diferentes dependiendo del metodo que se
emplea.”

Clearly then, the charge of fraudulent overvaluation cannot be seriously
entertained. The insurer attempted to bolster its case with alleged photographs
of certain pages of the insurance book (destroyed by the war) of insured Qua
Chee Gan (Exhibits 26-A and 26-B) and allegedly showing abnormal purchases of
hemp and copra from June 11 to June 20, 1940. The Court below remained
unconvinced of the authenticity of those photographs, and rejected them, because
they were not mentioned nor introduced in the criminal case; and considering the
evident importance of said exhibits in establishing the motive of the insured in
committing the arson charged, and the absence of adequate explanation for their
omission in the criminal case, we cannot say that their rejection in the civil
case constituted reversible error.

The next two defenses pleaded by the insurer,—that the insured connived at
the loss and that he fraudulently inflated the quantity of the insured stock in
the burnt bodegas,— are closely related to each other. Both defenses are
predicted on the assumption that the insured was in financial difficulties and
set the fire to defraud the insurance company, presumably in order to pay off
the Philippine National Bank, to which most of the insured hemp and copra was
pledged. Both defenses are, fatally undermined by the established fact that,
notwithstanding the insurer’s refusal to pay the value of the policies the
extensive resources of the insured (Exhibit W) enabled him to pay off the
National Bank in a short time; and if he was able to do so, no motive appears
for attempt to defraud the insurer. While the acquittal of the insured in the
arson case is not res judicata on the present civil action, the
insurer’s evidence, to judge from the decision in the criminal case, is
practically identical in both cases and must lead to the same result, since the
proof to establish the defense of connivance at the fire in order to defraud the
insurer “cannot be materially less convincing than that required in order to
convict the insured of the crime of arson” (Bachrach vs. British
American Assurance Co., 17 Phil. 536).

As to the defense that the burned bodegas could not possibly, have contained
the quantities of copra and hemp stated in the fire claims, the insurer’s case
rests almost exclusively on the estimates, inferences and conclusions of its
adjuster investigator, Alexander D. Stewart, who examined the premises during
and after Jhe fire. Hia testimony, however, was based on inferences from the
photographs and traces found after the fire, and must yield to the contradictory
testimony of engineer Andres Bolinas, and specially of the then Chief of the
Loan Department of the National Bank’s Legaspi branch, Porfirio Barrios, and of
Bank Appraiser Loreto Samson, who actually saw the contents of the bodegas
shortly before the fire, while inspecting them for the mortgagee Bank. The lower
Court was satisfied of the veracity and accuracy of these witnesses, and the
appellant insurer has failed to substantiate its charges against their
character. In fact, the insurer’s repeated accusations that these witnesses were
later “suspended for fraudulent transactions” without giving any details, is a
plain attempt to create prejudice against them,, without the least support in
fact.

Stewart himself, in testifying that it is impossible to determine from the
remains the quantity of hemp burned (t. s. n., pp. 1468, 1470), rebutted
appellant’s attacks on the refusal of the Court below to accept its inferences
from the remains shown in the photographs of the burned premises. It appears,
likewise, that the adjuster’s calculations of the maximum contents of the
destroyed warehouses rested on the assumption that all the copra and hemp were
in sacks, and on the result of his experiments to determine the space occupied
by definite amounts, of sacked, copra. The error in the estimates thus arrived
at proceeds from the^fact that a large amount of the insured’s stocks were in
loose form, occupying less space than when kept in sacks; and from Stewart’s
obvious failure to give due allowance, for the compression of the material at
the bottom of the piles (t. s. n., pp. 1964, 1967) due to the weight of the
overlying stock, as shown by engineer Bolinas. It is probable that the errors
were due to inexperience, (Stewart himself admitted that this was the first
copra fire he had investigated); but it is clear that such errors render
valueless Stewart’s computations. These were in fact twice passed upon and twice
rejected by different judges (in the criminal and civil cases) and their
concordant opinion is practically conclusive.

The adjusters’ reports, Exhibits 9-A and 9-B, were correctly disregarded by
the Court below, since the opinions stated therein were based on ex
parte investigations made at the back of the insured; and the appellant did
not present at the trial the original testimony and documents from which the
conclusions in the report were drawn.

Appellant insurance company also contends that the claims filed by the
insured contained false and fraudulent statements that avoided the insurance
policy. But the trial Court found that the discrepancies were a result of the
insured’s erroneous interpretation of the provisions of the insurance policies
and claim forms, caused by his imperfect knowledge of English, and that the
misstatements were innocently made and without intent to defraud. Our review of
the lengthy record fails to disclose, reasons. for rejecting these conclusions
of the Court below. For example, the occurrence of previous fires in the
premises insured in 1939, altho omitted in the claims, Exhibits EE and FF, were
nevertheless revealed by the insured in his claims Exhibits Q (filed,
simultaneously with them), KK and WW. Considering that all these claims were
submitted to the same agent, and that this same agent had paid the loss caused
by the 1939 fire, we find no error in the tria Court’s acceptance of the
insured’s explanation that the omission in Exhibits EE and FF was due to
inadvertance, for the insured could hardly expect under such circumstances, that
the 1939 would pass unnoticed, by the insurance agents. Similarly, the 20 per
cent overclaim on 70 per cent of the hemp stock, was explained by the insured as
caused by his belief that he was entitled to include in the claim his expected
profit on the 70 per cent of the hemp, because the same was already contracted
for and sold to other parties before the fire occurred. Compared with other
cases of over-valuation recorded in our judicial’ annals, the 20 per cent excess
in the case bt..the insured is not by itself sufficient to establish fraudulent
intent. Thus, in Yu Cua vs. South British Ins. Co., 41 Phi!. 1S4, the
claim was fourteen (14) times (1,400 per cent) bigger than the actual loss; in
Go Lu vs. Yorkshire Insurance Co., 43 Phil., 638, eight (8) times (800
per cent); in Tuason vs. North China Ins. Co., 47 Phil. 14, six (6)
times (600 per cent); in Tan It vs. Sun Insurance, 51 Phil. 212, the
claim totalled (“31,860.85 while the goods insured were inventoried at P13,113.
Certainly, the insured’s overclaim of 20 per cent in the case at bar, duly
explained by him to the Court a quo, appears puny by comparison, and
can not be regarded as “more than misstatement, more than inadvertence of
mistake, more than a mere error in opinion, more than a slight exaggeration”
(Tan It vs. Sun Insurance Office, ante) that would entitle the
insurer to avoid the policy. It is well to note that the overcharge of 20 per
cent was claimed only on a part (70 per cent) of the hemp stock; had
the insured acted with fraudulent intent, nothing prevented him from increasing
the value of all of his copra, hemp and buildings in the same
proportion. This also applies to the alleged fraudulent claim for burned empty
sacks, that was likewise explained to our satisfaction and that of the trial
Court. The rule is that to avoid a policy, the false swearing must be wilful and
with intent to defraud (29 Am. Jur., pp. 849-851) which was not the cause. Of
course, the lack of fraudulent intent would not authorize the collection of the
expected profit under the terms of the policies, and the trial Court
correctly-deducted the same from its award.

We find no reversible error in the judgment appealed from, wherefore the same
is hereby . affirmed. Costs against the appellant. So ordered.

Paras, C. J., Padilla, Montemayor, Reyes, A., Jugo, Labrador, and
Concepcion, JJ., concur.

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^[1] Old Civil Code, Article 1288; New,
Civil Code, Article 1377; 44 G. J. S. 1169; 29 Am. Jur., p. 180, section
186.