GR 17598; (June, 1922) (Digest)

G.R. No. 17598; June 17, 1922
Henry Harding, plaintiff-appellee, vs. San Miguel Brewery Co., defendant-appellant.

FACTS

D. P. Dunn mortgaged his property to San Miguel Brewery Co. (defendant) for P9,000. The mortgage required Dunn to insure the property for its full value (P15,000) and endorse the policies to the defendant. At the defendant’s request and approval, Dunn authorized it to insure the property for P15,000, with loss payable to the defendant for its interest and the remainder to Dunn. However, the defendant obtained policies solely in its own name, with loss payable only to it “as its interest may appear,” without any provision for Dunn’s remaining interest. Dunn, and later the plaintiff Henry Harding who bought the property subject to the mortgage, paid premiums for P15,000 coverage based on the defendant’s representations that the policies protected their interests. After a fire totally destroyed the property, the mortgage debt was reduced to P3,600. The insurance companies, based on the policy terms, only paid the defendant P3,600. The defendant sued the insurers for P15,000 but lost. Harding then sued the defendant for P11,400 (the difference), claiming damages due to the defendant’s misrepresentation about the insurance coverage.

ISSUE

Whether the defendant is liable to the plaintiff for damages arising from its misrepresentation regarding the terms of the insurance policies it obtained on the mortgaged property.

RULING

Yes. The defendant is liable. The plaintiff and his predecessor paid premiums for P15,000 coverage in reliance on the defendant’s representations, both in a letter and otherwise, that the policies protected their interests and that any fire loss proceeds above the mortgage debt would be paid to them. The defendant, which possessed the policies, had a duty not to mislead the plaintiff. Its false statements and negligence in obtaining inadequate insurance caused the plaintiff’s loss. The defense of estoppel is untenable as the prior suit was against the insurers on the policies, while the present action is against the defendant for its own misrepresentations. The lower court’s judgment for the plaintiff is affirmed.