FILIPINAS COMPAÑÍA A DE SEGUROS vs .

TAN CHAUCO

G.R. No. L-1559. 31 January 1950

Doctrine:

Recit-Ready Summary: The petitioner is a domestic insurance corporation licensed to engage in the insurance
business in the Philippines. The respondent is the owner of a building located in the municipality of Lucena,
province of Tayabas, insured for P20,000 and P10,000 in two policies issued by the petitioner.
On 5 January 1942, during the term of the policies just referred to, the building insured was burned and
completely destroyed. Notice and proof of loss had been duly made, but as the petitioner refused to pay, an action
was brought to recover on the policies. After trial, judgment was rendered against the petitioner for the amount of
the two policies with legal interest from the date of the filing of the complaint. The Court of Appeals affirmed the
judgment.
Now, the petitioner raises the question under article 13 of the insurance policies which provides:
All benefits under this policy shall be forfeited:
(a)If the claim be in any respect fraudulent;
(b)If any false declaration be made or used in support thereof;
(c)If any fraudulent means or devices are used by the Insured or anyone acting on his behalf to obtain any benefit
under this policy;
(d)If the loss or damage be occasioned by the wilful act, or with the connivance of the Insured;
(e)If the insured or anyone acting on his behalf shall hinder or obstruct the Company in doing any of the acts
referred to in Article 1;
(f)If the claim be made and rejected and an action or suit be not commenced within twelve months after such
rejection, or (in case of an Arbitration taking place in pursuance of Article 18 of this Policy) within twelve months
after the Arbitrator or Arbitors or Umpire shall have made their award,
the respondent cannot recover, because he had made fraudulent declaration in his claim submitted to the
petitioner denying that there had been a previous fire in the premises in which the insured was interested,
whereas at the trial he admitted that there had been a previous fire in which he was an interested party.
The issue in this case is whether or Tan breached the warranty on the issurance policy. The
Supreme Court held that it is strenuously contended that the sealing of, and the placing of posters on, tne
building insured increased the risk, because the latter "concerns itself with probabilities and possibilities from the
prospective point of view," and "cannot be retrospective, for insurance contracts are never consummated after the
known happening of the event." The contention as to the increase in the risk due to a change in the condition of
the building insured was overruled by the Court of Appeals, and in so doing it took into consideration the fact that
the building insured was sealed and that posters were placed thereon by the Japanese forces.
The Court of Appeals set out at length the evidence submitted by the parties and from such evidence it concluded
that the loss was occasioned by a cause independent of, and "unrelated to war, invasion, civil commotion, or to the
abnormal conditions arising therefrom," or the existence of abnormal conditions prevailing in Lucena. We come
now to the merits of the case; our attention being first directed to the questions arising under that clause of the
policy pro'viding that it shall not cover "loss or damage by fire happening during the existence of any invasion,
foreign enemy, rebellion, insurrection, riot, civil commotion, military or usurped power, or martial law within the
country or locality in which the property insured is situated.

As the words of the policy are those of the company, they should be taken most strongly against it, and the
interpretation should be adopted which is most favorable to the insured, if such interpretation be not inconsistent
with the words used. In this view the above words should be held to mean that the policy covered loss by fire
occurring during the existence of (if not occasioned by nor connected with) any invasion, foreign enemy, rebellion,
insurrection, riot, civil commotion, military or usurped power, or martial law, in the general locality where the
property insured was situated.

Facts: The petitioner is a domestic insurance corporation licensed to engage in the insurance business in the
Philippines. The respondent is the owner of a building located in the municipality of Lucena, province of Tayabas,
insured for P20,000 and P10,000 in two policies issued by the petitioner.
On 5 January 1942, during the term of the policies just referred to, the building insured was burned and
completely destroyed. Notice and proof of loss had been duly made, but as the petitioner refused to pay, an action
was brought to recover on the policies. After trial, judgment was rendered against the petitioner for the amount of
the two policies with legal interest from the date of the filing of the complaint. The Court of Appeals affirmed the
judgment.
Now, the petitioner raises in these proceedings three questions (1) that, under article 8 which provides:
Under any of the following circumstances the insurance ceases to attach as regards the property affected
unless the insured, before the occurrence of any loss or damage, obtains the sanction of the company signified by
endorsement upon the policy, by or on behalf of the Company.
 (a)If the trade or manufacture carried on be altered, or if the nature of the occupation of or other
circumstances affecting the building insured or containing the insured property be changed in such a way as to
increase the "the sealing of respondent's property by Japanese forces on December 28,1941 changed the nature of
the occupation thereof in a manner which increased the risk of loss, and that in accordance with the provisions of
article 8 of the policies above quoted, the insurance ceased to attach as of the aforesaid date of December
28,1941;"
(2) that under article 6 of the insurance policies issued "the inferential finding that the fire of January 5,
1942 was of accidental origin, without more, could not make respondent's loss compensable, considering that the
contract of the parties specifically required respondent to prove that loss happened independently of the abnormal
conditions before he could recover. In other words, that a consuming fire was accidental is not proof of the fact
that such fire was not the remote or indirect result of, or contributed to, by the abnormal conditions;" and
(3) that, under article 13 of the insurance policies which provides:
All benefits under this policy shall be forfeited:
(a)If the claim be in any respect fraudulent;
(b)If any false declaration be made or used in support thereof;
(c)If any fraudulent means or devices are used by the Insured or anyone acting on his behalf to obtain any benefit
under this policy;
(d)If the loss or damage be occasioned by the wilful act, or with the connivance of the Insured;
(e)If the insured or anyone acting on his behalf shall hinder or obstruct the Company in doing any of the acts
referred to in Article 1;
(f)If the claim be made and rejected and an action or suit be not commenced within twelve months after such
rejection, or (in case of an Arbitration taking place in pursuance of Article 18 of this Policy) within twelve months
after the Arbitrator or Arbitors or Umpire shall have made their award,
the respondent cannot recover, because he had made fraudulent declaration in his claim submitted to the
petitioner denying that there had been a previous fire in the premises in which the insured was interested,
whereas at the trial he admitted that there had been a previous fire in which he was an interested party.

Issue: Whether or not Tan breached the warranty on the issurance policy.

Held: No. The record discloses that the plaintiff-appellee had a previous building on the land on which the
insured building was built, which had also been destroyed by fire from neighboring buildings. On the basis of this
fact, it is claimed on defendant-appellant's behalf that the plaintiff-appellee should be considered as having
forfeited all benefits under the policies, in. accordance with Article 13 thereof. Three objections are raised against
this claim, namely, that it had not been raised in defendant-appellant's answer; that it has been waived and
appellant is estopped from asserting it now, especially for the first time on this appeal; and that the misstatement
is immaterial and.not fraudulent.

The findings of the Court of Appeals (1) that the sealing of, and the placing of posters on, the building by the
Japanese Forces did not increase the hazard or risk to which the building was exposed and, therefore, the
insurance did not cease to attach under article 8 of the policies; and (2) that the fire which destroyed the building
"was purely an ordinary and accidental one, unrelated to war, invasion, civil commotion, or to the abnormal
conditions arising therefrom," are binding and conclusive upon this Court. It has not been shown that the findings
of fact made by the Court of Appeals are arbitrary, whimsical, manifestly mistaken, illogical, or absurd, so as to
warrant this Court to step in in the exercise of its supervisory power. And as to the defense based on article 13,
the same is not set up in the special defenses, unlike the one under article 3 which is set up in the 4th and 5th
special defenses and the other under article 6 set up in the 2nd special defense. This Court cannot determine
whether the defense under article 13 is included in that of article 11 pleaded in the 6th special defense because
the policies are not before it.

It is strenuously contended that the sealing of, and the placing of posters on, tne building insured increased the
risk, because the latter "concerns itself with probabilities and possibilities from the prospective point of view," and
"cannot be retrospective, for insurance contracts are never consummated after the known happening of the
event." The contention as to the increase in the risk due to a change in the condition of the building insured was
overruled by the Court of Appeals, and in so doing it took into consideration the fact that the building insured was
sealed and that posters were placed thereon by the Japanese forces. As already stated, that conclusion cannot be
reviewed.

The Court of Appeals set out at length the evidence submitted by the parties and from such evidence it concluded
that the loss was occasioned by a cause independent of, and "unrelated to war, invasion, civil commotion, or to the
abnormal conditions arising therefrom," or the existence of abnormal conditions prevailing in Lucena. Counsel for
the petitioner contend that such conclusion is inferred from the fact that the fire "was purely an ordinary and
accidental one." The contention is not well taken, because the Court of Appeals found that the fire was "unrelated
to war, invasion, civil commotion, or to the abnormal conditions arising therefrom." We come now to the merits of
the case; our attention being first directed to the questions arising under that clause of the policy pro'viding that
it shall not cover "loss or damage by fire happening during the existence of any invasion, foreign enemy, rebellion,
insurrection, riot, civil commotion, military or usurped power, or martial law within the country or locality in
which the property insured is situated,
As the words of the policy are those of the company, they should be taken most strongly against it, and the
interpretation should be adopted which is most favorable to the insured, if such interpretation be not inconsistent
with the words used. In this view the above words should be held to mean that the policy covered loss by fire
occurring during the existence of (if not occasioned by nor connected with) any invasion, foreign enemy, rebellion,
insurrection, riot, civil commotion, military or usurped power, or martial law, in the general locality where the
property insured was situated.