TEAL MOTOR COMPANY, INC., PLAINTIFF AND APPELLEE, VS. THE CONTINENTAL INSURANCE CO., DEFENDANT AND APPELLANT. MANILA BUILDING AND LOAN ASSOCIATION, DEFENDANT AND APPELLEE.

The plaintiff in these cases is a domestic
corporation engaged in the automobile business in the City of Manila.
Its principal office and store-rooms, located in the Port Area of the
City of Manila were, late Sunday afternoon, January 6, 1929, visited by
a severe fire of unknown origin. The Teal Motor Company, Inc., was
heavily insured with the various defendant insurance companies, and in
June it filed complaints against the insurance companies for the damage
to the building and in August filed complaints against the insurance
companies on the policies covering the contents thereof.

The defendant Manila Building and Loan Association is a domestic
corporation with its head office in the City of Manila. It held a
mortgage on the building and, as part security therefor, had a partial
assignment of the insurance policies covering the building.

By mutual consent the cases were tried jointly, and after an
unnecessarily long and tedious trial, judgment was given against the
defendant insurance companies on the policies for damage to the
building, in the sum of P125,000, distributed as per the assignments on
the policies between the plaintiff and the Building and Loan
Association.

Relief was denied on the policies covering the merchandise, on the
ground that they were filed out of time. The court also dismissed the
cross-complaint of the defendant Building and Loan Association, holding
the request for foreclosure premature.

From these decisions of the trial court the insurance companies who
were held liable for the damage to the building, appealed. Plaintiff
appealed from the decision holding that it could not recover in its
actions for damage to the contents, and the Building and Loan
Association subsequently perfected an appeal in the cases relating to
the building based on the action of the court in holding that its
prayer for foreclosure of the mortgage was premature. The latter appeal
of the Building and Loan Association will be disposed of in a separate
opinion.

While the cases were heard jointly, argued jointly, and while, to a
great degree, the same basic facts are present in all cases, for ease
of understanding, this court will follow the same practice as the trial
court in disposing of the cases relating to the building in one
opinion, and the cases relating to the contents of the building in
another.

The building, mainly of concrete, was only partially destroyed.
There is virtually no dispute as to the original cost or approximate
value at the time of the fire. There are wide discrepancies in the
estimates of various architects, contractors, and builders as to the
cost of restoration of the building to a condition equivalent to that
existing before the fire. A great divergence is caused by the estimates
made at various times as to how much of the walls and flooring could be
repaired and how much would have to be removed and totally rebuilt.

The trial court, after a careful examination and study of the
evidence presented, held that the damage to the building amounted to
the sum of P125,000.

Defendants vigorously assert that the building could be restored
for slightly over one-half of this sum and that, in fact, the damage to
the building was so overestimated that the claim presented should be
held false and result in the total rejection of the claim, pursuant to
one of the clauses of the insurance contracts.

This contention of defendants is not well taken. In the first place
enough of the building remains for inspection to demonstrate to experts
the amount and character of the repairs necessary. This makes an
entirely different condition than where an exaggerated claim is
presented on articles totally destroyed. In the second place, the
court, after hearing the witnesses, gave judgment for the amount set
forth in the complaint.

We have reviewed the evidence and, in view of its conflicting
nature, have determined to be guided by the judgment of the trial court
on this point and therefore hold that the damage to the building
amounts to P125,000.

After the fire and before judgment was rendered by the trial court,
Act No. 3802 was passed and approved December 4, 1930. That Act
provides, among other things, that in certain cases of insurance the
rate of interest on the proceeds of the policy should be 8 per cent per
annum instead of the customary legal rate of 6 per cent. The last
clause of the Act reads:

“* * * If the court shall find that there was no
justification for the insurer to contest payment, the assured shall be
entitled to collect, besides the proceeds of the policy, the interest
provided for in this section.”

There is no express finding of the court that there was no
justification for the assured to contest payment. The mere fact that
both the trial court and this court hold that the predominance of the
proof justify the payment as claimed, does not necessarily mean that
the insurance companies in contesting payment, did so without
justification. At the time of refusal to pay they had in their
possession information that would tend to prove that the claim was
excessive. They had a right to their day in court, and as the evidence
does not present sufficient grounds to hold that the defense was
captious or dilatory or, in the language of the statute, without
justification, we are convinced that the statute does not apply and
that the judgment should bear the rate of 6 per cent per annum instead
of 8 per cent per annum.

Virtually nothing is known as to how the fire started, and
therefore the defense of arson was rejected by the trial court, and the
assignment of error based on that finding is not worthy of comment by
this court.

Counsel for appellant urges that there was overinsurance on the
building’s contents but does not allege that there was overinsurance on
the building, the subject we are here discussing. The intimation of
counsel for appellants that the principal owners of the Teal Motor
Company, Inc., were not good risks, does not redound to the benefit of
the insurance companies. The insurance companies knew or had an easy
method of acquiring exact information of the value of the goods that
were insured. They knew the character and reputation of the principal
owners of plaintiff company, as they have been business men of
prominence in the City of Manila for many years. If it were a fact that
insurance companies are willing to overinsure hazardous cases, such
companies become, instead of an asset to the community, an actual
menace to the law-abiding and honest inhabitants of the community.

There are also assignments of error based on the exclusion of certain exhibits which were properly rejected by the trial court.

With the modification of the rate of interest above-mentioned, the
judgment of the Court of First Instance of the City of Manila, so far
as it relates to the insurance companies, defendants, is affirmed. No
pronouncement as to costs. So ordered.

Street, Malcolm, Villa-Real, Abad Santos, Imperial, Bntte, and Goddard, JJ., concur.

Justice Vickers voted to affirm the decisions of the lower
court with modifications indicated in the opinion in cases Nos. 36657,
36659, and 36660, but was absent when the opinion was promulgated and
his name does not appear signed thereto.—STREET, Acting C. J.