ONG GUAN CAN AND THE BANK OF THE PHILIPPINE ISLANDS, PLAINTIFFS AND APPELLEES, VS. THE CENTURY INSURANCE CO., LTD., DEFENDANT AND APPELLANT.

VILLAMOR, J.:

On April 19, 1924, the Court of First Instance of Iloilo rendered a judgment
in favor of the plaintiff, sentencing the defendant company to pay him the sum
of P45,000, the value of certain policies of fire insurance, with legal interest
thereon from February 28, 1923, until payment, with the costs. The defendant
company appealed from this judgment, and now insists that the same must be
modified and that it must be permitted to rebuild the house burnt, subject to
the alignment, of the street where the building was erected, and that the
appellant be relieved from the payment of the sum in which said building was
insured.

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 cited by the appellant is as follows:

“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 or
damage, 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 than 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 this clause of the policies is valid, its effect is to make the obligation
of the insurance company an alternative one, that is to say, that it may either
pay the insured value of the house, or rebuild it. It must be noted that in
alternative obligations, the debtor, the insurance company in this case, must
notify the creditor of his election, stating which of the two prestations he is
disposed to fulfill, in accordance with article 1133 of the Civil Code. The
object of this notice is to give the creditor, that is, the plaintiff in the
instant case, opportunity to express his consent, or to impugn the election made
by the debtor, and only after said notice shall the election take legal effect
when consented by the creditor, or if impugned by the latter, when declared
proper by a competent court. In the instant cape, the record shows that the
appellant company did not give a formal notice of its election to rebuild, and
while the witnesses, Cedrun and Cacho, speak of the proposed reconstruction of
the house destroyed, yet the plaintiff did not give his assent to the
proposition, for the reason that the new house would be smaller and of materials
of lower kind than those employed in the construction of the house destroyed.
Upon this point 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 houses, 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.

We find in the record nothing to justify the reversal of the finding of the
trial judge, holding that the election alleged by the appellant to rebuild the
house burnt instead of paying the value of the insurance is improper. To our
mind, the judgment appealed from is in accordance with the merits of the case
and the law, and must be, as is hereby, affirmed with the costs against the
appellant. So ordered.

Johnson, Street, Malcolm, Avancena, Ostrand, Johns, and
Romualdez, JJ., concur.