G.R. No. 36657 , 36658, 36659, 36660; March 28, 1934
TEAL MOTOR COMPANY, INC., plaintiff-appellee, vs. THE CONTINENTAL INSURANCE CO., et al., defendants-appellants; MANILA BUILDING AND LOAN ASSOCIATION, defendant-appellee.

FACTS

Teal Motor Company, Inc., insured its building and merchandise with several insurance companies. A fire of unknown origin partially destroyed the building on January 6, 1929. The company filed claims. The trial court held the insurance companies liable for building damage amounting to P125,000 but denied the claim for merchandise damage as filed out of time. The Manila Building and Loan Association, a mortgagee with a partial assignment of the building insurance policies, was a party. The insurance companies appealed the liability for the building damage, contesting the amount as excessive and arguing the claim was false.

ISSUE

1. Whether the trial court correctly determined the amount of damage to the building.
2. Whether the insurance companies were justified in contesting payment, affecting the applicable interest rate under Act No. 3802 .

RULING

1. Yes. The Supreme Court affirmed the trial court’s finding that the building damage amounted to P125,000. The Court deferred to the trial court’s assessment of conflicting expert testimony, noting the building remained partially intact for inspection, distinguishing it from a claim on totally destroyed property. The defense of arson was properly rejected for lack of evidence.
2. The insurance companies were justified in contesting payment. Although the claim was ultimately upheld, the companies possessed information suggesting the claim was excessive at the time of refusal, giving them a right to litigate. Therefore, the defense was not without justification under Act No. 3802 . The legal interest rate on the proceeds is 6% per annum, not 8%. The judgment was affirmed with this modification.

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