G.R. No. L-55397 February 29, 1988
TAI TONG CHUACHE & CO., petitioner, vs. THE INSURANCE COMMISSION and TRAVELLERS MULTI-INDEMNITY CORPORATION, respondents.

FACTS

Spouses Pedro and Azucena Palomo owned a building in Davao City. They obtained a loan from Tai Tong Chuache & Co., secured by a mortgage on the property. To protect its interest as mortgagee, Tai Tong Chuache, through its representative Arsenio Chua, procured a fire insurance policy from Travellers Multi-Indemnity Corporation for P100,000. The Palomos also separately obtained three other fire insurance policies on the same property from different companies. The building was subsequently destroyed by fire. The adjustment of the loss led to a pro-rata settlement among the three other insurers, but Travellers refused to pay its share, arguing the policy was for the mortgagee’s sole interest.
The Palomos filed a complaint with the Insurance Commission to recover the unpaid balances from all insurers, including Travellers. Tai Tong Chuache intervened, claiming the proceeds of the Travellers policy. The Insurance Commission dismissed both the complaint and the complaint-in-intervention. It ruled the Palomos had no right of action against Travellers as the policy was for the mortgagee’s benefit. It also dismissed the intervenor’s claim, finding that Tai Tong Chuache failed to sufficiently prove the existence of the mortgage debt at the time of loss, suggesting it may have already been paid.

ISSUE

Whether the Insurance Commission erred in dismissing Tai Tong Chuache & Co.’s complaint-in-intervention for the proceeds of the fire insurance policy issued by Travellers Multi-Indemnity Corporation.

RULING

Yes, the Supreme Court reversed the Insurance Commission’s decision. The legal logic centered on insurable interest and the capacity to sue. The Court found that Tai Tong Chuache, as the mortgagee of the burned property, had a clear insurable interest at the time the insurance policy was issued, which interest is presumed to continue unless proven otherwise. Travellers failed to substantiate its allegation that this insurable interest had ceased before the loss. The fact that a related civil case for collection of the loan was filed in the name of Arsenio Chua did not negate the debt’s existence. Chua, as the managing partner and an agent of the petitioner partnership, was legally authorized to act for and in behalf of the firm. His actions, including procuring the insurance and filing suits, were deemed acts of the partnership itself. Since the insurance policy was valid and in force at the time of the fire, and the insurer did not successfully prove the lack of an insurable interest, Travellers became liable under the contract’s terms. The Court thus ordered Travellers to pay petitioner the face value of the policy.