ANG GIOK CHIP, doing business under the name and style of Hua Bee Kong Si, plaintiff-appellee,

vs. SPRING I!"# IR! $ %ARIN! INS&RANC! CO%PAN', defendant-appellant. C.A. Sobral for appellant. Paredes and Buencamino for appellee. Gibbs and McDonough and Ramon Ozaeta as amici curiae. %A"CO"%, J.: An important question in the law of insurance, not heretofore considered in this jurisdiction and, according to our information, not directly resolved in California from which State the Philippine Insurance Act was ta en, must !e decided on this appeal for the future guidance of trial courts and of insurance companies doing !usiness in the Philippine Islands. "his question, flatly stated, is whether a warranty referred to in the policy as forming part of the contract of insurance and in the form of a rider to the insurance policy, is null and void !ecause not complying with the Philippine Insurance Act. "he court has had the !enefit of instructive !riefs and memoranda from the parties and has also !een assisted !y a well prepared !rief su!mitted on !ehalf of amici curiae. "he admitted facts are these# Ang $io Chip doing !usiness under the name and style of %ua &ee 'ong Si was formerly the owner of a warehouse situated at (o. )*+ Calle ,eina ,egente, City of -anila. "he contents of the warehouse were insured with the three insurance companies for the total sum of P).,.... /ne insurance policy, in the amount of P0.,..., was ta en out with the Springfield 1ire 2 -arine Insurance Company. "he warehouse was destroyed !y fire on 3anuary 00, 0456, while the policy issued !y the latter company was in force. Predicated on this policy the plaintiff instituted action in the Court of 1irst Instance of -anila against the defendant to recover a proportional part of the loss coming to P6,07..84. 1our special defenses were interposed on !ehalf of the insurance company, one !eing planted on a violation of warranty 1 fi9ing the amount of ha:ardous goods which might !e stored in the insured !uilding. "he trial judge in his decision found against the insurance company on all points, and gave judgment in favor of the plaintiff for the sum of P6,066.7*. 1rom this judgment the insurance company has appealed, and it is to the first and fourth errors assigned that we would address particular attention. Considering the result at which we arrive, it is unnecessary for us to discuss three of the four special defenses which were made !y the insurance company. ;e thin , however, that it would !e a reasona!le deduction to conclude that more than + per cent of the total value of the merchandise contained in the warehouse constituted ha:ardous goods, and that this per cent reached as high as +4. ;e place reliance on the consular invoices and on the testimony of the adjuster, %erridge. %aving thus swept to one side all intervening o!stacle, the legal question recurs, as stated in the !eginning of this decision, of whether or not warranty 1 was null and void. "o place this question in its proper light, we turn to the policy issued !y the Springfield 1ire 2 -arine Insurance Company in favor of the plaintiff. "he description of the ris in this policy is as follows# la phil.net !en thousand pesos Philippine Currenc". < /n general non#hazardous merchandise, chiefly consisting of chucherias, also produce, Cacao, 1lour, all the property of the Insured, or held !y them in trust, on commission or on joint account with others, or for which he is responsi!le, while contained during the currency of this policy in the godown, situate (o. )*+ Calle ,eina ,egent. . . . !his polic" is sub$ect to the hereon attached %Ordinar" Short Period Rate Scale% ;arranties A 2 1, Co-insurances Clause =and "hree 1ourths >oss Clause,= hich are forming part of same. Coinsurance declared# =P5.,.... < Sun Insurance /ffice >td. ?' 2 S@.= ?Amphasis inserted.@ Securely pasted on the left hand margin of the face of the policy are five warranties and special clauses. /ne of them is warranty 1, specially referred to on the face of the policy, reading in part as follows# ;A,,A("B 1 It is here!y declared and agreed that during the currency of this policy no ha:ardous goods !e stored in the &uilding to which this insurance applies or in any !uilding communicating therewith, provided, always, however, that the Insured !e permitted to stored a small quantity of the ha:ardous goods specified !elow, !ut not e9ceeding in all + per cent of the total value of the whole of the goods or merchandise contained in said warehouse, vi:C . . . . "he applica!le law is found in the Instance Act, Act (o. 5*57, as amended, section )8 reading#

=Avery e9press warranty, made at or !efore the e9ecution of a policy, must !e contained in the policy itself, or in another instrument signed !y the insured and referred to in the policy, as ma ing a part of it.= As the Philippine law was ta en ver!atim from the law of California, in accordance with well settled canons of statutory construction, the court should follow in fundamental points, at least, the construction placed !y California courts on a California law. Dnfortunately the researches of counsel reveal no authority coming from the courts of California which is e9actly on all fours with the case !efore us. %owever, there are certain consideration lying at the !asis of California law and certain indications in the California decisions which point the way for the decision in this case Section )8 of the Philippine Insurance Act corresponds to section 5).8 of the Civil Cod of California. "he comments of the Code A9aminers of California disclose that the language of section 5).8 was quite different from that under the Code as adopted in 0675. "hat language was found too harsh as to insurance companies. "he Code A9aminersE notes state# ="he amendment restores the law as it e9isted previous to the Code# See Parsons on -aritime >aw, 0.), and Phillips on Insurance, sec. 78).= "he passage referred to in Philips on Insurance, was worded !y the author as follows# =Any e9press warranty or condition is always a part of the policy, !ut, li e any other part of an e9press contract, may !e written in the margin, or contained in proposals or documents e9pressly referred to in the policy, and so made a part of it.= "he annotator of the Civil Code of California, after setting forth these facts, adds# . . . "he section as it now reads is in harmony with the rule that a warranty may !e contained in another instrument than the policy when e9pressly referred to in the policy as forming a part thereof# . . . . ;hat we have a!ove stated has !een paraphrased from the decision of the California Court of Appeals in the case of Isaac Dpham Co. &s. Dnited States 1idelity 2 $uaranty Co. ? F0455G, 500 Pac., 6.4@, and thus discloses the attitude of the California courts. >i ewise in the 1ederal courts, in the case of Conner &s. -anchester Assur. Co. ?F04.*G, 0+. 1ed., 7*+@, section 5).8 of the Civil Code of California came under o!servation, and it was said that it =is in effect an affirmance of the generally accepted doctrine applica!le to such contracts.= ;e, therefore, thin it wrong to hold that the California law represents a radical departure from the !asic principles governing the law of insurance. ;e are more inclined to !elieve that the codification of the law of California had e9actly the opposite purpose, and that in the language of the 1ederal court it was !ut an affirmance of the generally accepted doctrine applica!le to such contracts. "his !eing true, we turn to two of such well recogni:ed doctrines. In the first place, it is well settled that a rider attached to a policy is a part of the contract, to the same e9tent and with li e effect as it actually em!odied therein. ?I Couch, Cyclopedia of Insurance >aw, sec. 084.@ In the second place, it is equally well settled that an e9press warranty must appear upon the face of the policy, or !e clearly incorporated therein and made a part thereof !y e9plicit reference, or !y words clearly evidencing such intention. ?* Couch, Cyclopedia of Insurance >aw, sec. 6)5.@ Section )8 of the Insurance Act and its counterpart, section 5)8 of the Civil Code of California, will !ear analysis as tested !y reason and authority. "he law says that every e9press warranty must !e =contained in the policy itself.= "he word =contained,= according to the dictionaries, means =included,= inclosed,= =em!raced,= =comprehended,= etc. ;hen, therefore, the courts spea of a rider attached to the policy, and thus =em!odied= therein, or of a warranty =incorporated= in the policy, it is !elieved that the phrase =contained in the policy itself= must necessarily include such rider and warranty. As to the alternative relating to =another instrument,= =instrument= as here used could not mean a mere slip of paper li e a rider, !ut something a in to the policy itself, which in section *6 of the Insurance Act is defined as ="he written instrument, in which a contract of insurance is set forth.= In California, every paper writing is not necessarily an =instrument= within the statutory meaning of the term. "he word =instrument has a well defined definition in California, and as used in the Codes invaria!ly means some written paper or instrument signed and delivered !y one person to another, transferring the title to, or giving a lien, on property, or giving a right to de!t or duty. ?%oag &s. %oward F066.G, 88 Cal., 8)*C People &s. 1raserF040+G, 0+7 Pac., 57).@ In other words, the rider, warranty 1, is contained in the policy itself, !ecause !y the contract of insurance agreed to !y the parties it is made to form a part of the same, !ut is not another instrument signed !y the insured and referred to in the policy as forming a part of it. Again, referring to the jurisprudence of California, another rule of insurance adopted in that State is in point. It is admitted that the policy !efore us was accepted !y the plaintiff. "he receipt of this policy !y the insured without o!jection !inds !oth the acceptor and the insured to the terms thereof. "he insured may not thereafter !e heard to say that he did not read the policy or now its terms, since it is his duty to read his policy and it will !e assumed that he did so. In California 3urisprudence, vol. 0*, p. *57, from which these statements are ta en with citations to California decisions, it is added that it has !een held that where the holder of a policy discovers a mista e made !y himself and the local agent in attaching the wrong rider to his application, elects to retain the policy issued to him, and neither requests the issuance of a different one nor offers to pay the premium requisite to insure against the ris which he !elieve the rider to cover, he there!y accepts the policy. ;e are given to understand, and there is no indication to the contrary, that we have here a standard insurance policy. ;e are further given to understand, and there is no indication to the contrary, that the issuance of the policy in this

case with its attached rider conforms to well esta!lished practice in the Philippines and elsewhere. ;e are further given to understand, and there is no indication to the contrary, that there are no less than si9ty-nine insurance companies doing !usiness in the Philippine Islands with outstanding policies more or less similar to the one involved in this case, and that to nullify such policies would place an unnecessary hindrance in the transaction of insurance !usiness in the Philippines. "hese are matters of pu!lic policy. ;e cannot !elieve that it was ever the legislative intention to insert in the Philippine >aw on Insurance an oddity, an incongruity, entirely out of harmony with the law as found in other jurisdiction, and destructive of good !usiness practice. ;e have studied this case carefully and having done so have reached the definite conclusion that (arranty , a rider atta)hed to the fa)e of the insuran)e *oli)y, and referred to in )ontra)t of insuran)e, is +alid and suffi)ient under se)tion ,- of the Insuran)e A)t. Accordingly, sustaining the first and fourth errors assigned, and it !eing unnecessary to discuss the remaining errors, the result will !e to reverse the judgment appealed from and to order the dismissal of the complaint, without special pronouncement as to costs in either instance. Street' (illamor' Ostrand' and Romualdez' )).' concur. Se*arate O*inions /I""A0R!A", J., dissenting# I fully concur in the dissenting opinion penned !y 3ustice Imperial, and further say that a rider or slip attached to an insurance policy, though referred to therein as ma ing a part of it, is not one of the forms prescri!ed !y section )8 of the Insurance >aw in which an e9press warranty may !e made to appear validly so as to !e !inding !etween the insurer and the insured. "here are two, and only two forms provided in said section !y which an e9press warranty may !e made to appear validly, to wit# !y em!odiment either in the insurance policy itself or in another instrument signed !y the insured and referred to in the policy as ma ing a part of it. (ow the question arises as to whether the rider or slip containing said warranty 1 attached to the policy in question and referred to therein as ma ing a part thereof is one of the two forms provided in said section )8 of the Insurance >aw. It is admitted that it is not the second form, !ecause not !eing signed !y the insured it does not constitute an instrument. ?%oag &s. %oward F066.G, 88 Cal., 8)*C People &s. 1raser F040+G, 0+7 Pac., 57).@ Is it the first form required !y law, that is, is it contained in the policy itselfH It is so contended in the majority opinion and authorities are cited in support of such contention. In 0 Couch, Cyclopedia of Insurance >aw, par. 084, it is said that =as a general rule, a rider or slip attached to a policy or certificate of insurance is, prima facie at least, a part of the contract to the same e9tent, and with li e effect, as if actually em!odied therein, provided, of course, that it does not violate any statutory inhi!ition, and has !een lawfully, and sufficiently attached, ...= ?See also +5 Corpus 3uris, 0084, par. 57.@. Ioes the attachment of a rider or slip containing an e9press warranty contravene the provisions of section )8 of the Insurance >awH ;hen the law, in order to protect the insured, requires that an e9press warranty !e contained in the policy or in another instrument referred to therein as ma ing a part thereof, it could not have !een its intention to permit that such e9press warranty !e contained in a piece of paper not signed !y the insured although it is attached to the policy and referred to therein as ma ing a part thereof, !ecause it would !e contrary to the requirement that such e9press warranty !e contained in an instrument signed !y the insured. It is a general rule of statutory construction that a law should not !e so construed as to produced an a!surd result. It would certainly !e an a!surdity if section )8 of the Insurance >aw were construed as requiring that an e9press warranty !e contained only in the policy or in another instrument signed !y the insured and referred to therein as ma ing a part thereof for the protection of such insured, and at the same time pertaining that such, e9press warranty !e contained in a piece of paper not signed !y the insured !ut simply attached to the policy and referred to therein as ma ing a part thereof, thus opening the door to fraud, < it !eing easy to detach such rider or slip and change it with another, < which is precisely what the law is trying to prevent. It will thus !e seen that the attachment of a rider or slip containing an e9press warranty to a policy, although referred to therein as ma ing a part thereof, is contrary to the evident intent and purpose of section )8 of the Insurance >aw. In the case of Isaac Dpham Co. &s. Dnited States 1idelity 2 $uaranty Co. ?500 Pac., 6.4@, cited in the majority opinion, the question was whether a warranty contained in an application for insurance, which was not referred to in the policy as ma ing a part thereof, incorporated said warranty in the said policy and was valid. "he Supreme Court of California held that it was not, for lac of such reference. /f course an application for insurance is a document signed !y the insured, and an e9press warranty contained therein if referred to in the policy as ma ing a part thereof, will !e considered as contained therein in accordance with law.

In the case of Conner &s. -anchester Assur. Co. ?0+. 1e!., 7*+@, also cited in the majority opinion, the question was whether an open policy was a warranty and the Circuit Court of Appeals for the (orthern Iistrict of California held that it was not, and further said that =section 5).8 of the Civil Code of California ?from which section )8 of the Insurance >aw was ta en@ was evidently intended to e9press in statutory form the rule that no e9press warranty made !y the insured shall affect the contract of insurance, unless it !e contained in the policy or in the application, or some other instrument signed !y the insured and made a part of the contract, and is in effect an affirmance of the generally accepted doctrine applica!le to such contracts.= It will !e seen from this statement that the court in enumerating the forms in which an e9press warranty may !e e9press or made to appear does not mention any paper which is not signed !y the insured. "he fact that for many years it has !een the practice of the insurance companies to use riders or slips of paper containing e9press warranties without the signature of the insured in violation of the law is no reason why such practice should !e permitted to continue when its legality is questioned. In view of the foregoing consideration, I am constrained to dissent from the opinion of the majority. I%P!RIA", J., dissenting# "he decision of this case depended principally, !ut wholly, on the validity of the warranty 1, A9hi!it A-5. "his instrument consist of a slip of paper pasted on the margin of a page of the fire insurance policy. It contains the stipulation that the insured is permitted to store in the !uilding concerned the ha:ardous goods specified, to an amount not e9ceeding three per cent of the total value of the merchandise stored. "he policy ma es reference to this rider as follows# ="his policy is su!ject to the hereon attached J/rdinary Short Period ,ate Scale,E ;arranties A and 1, Co-insurance clause and J"hree 1ourths >oss ClauseE which are forming part of the same=C !ut the rider is not signed !y the insured. Section )8 of Act (o. 5*57 ?Insurance >aw@ reads as follows# Avery e9press warranty, made at or !efore the e9ecution of a policy, must !e contained in the policy itself, or in another instrument signed !y the insured and referred to in the policy, as ma ing a part of it. An e9press warranty, then, made at or !efore the e9ecution of the policy, li e warranty 1, is valid only if it is contained in the policy itself, or in another instrument signed !y the insured and referred to in the policy as forming a part thereof. A9amining warranty 1, it may !e seen that it does not form an integral part of the policy !ut appeals on another slip of paper pasted on the policyC it is therefore an instrument other than the policy and comes under the second paragraph provided for in section )8. And, according to this provision, warranty 1 cannot !e valid or !inding, for the simple reason that it is not signed !y the insured, and has no weight, notwithstanding the fact that reference is made to it in a general way in the !ody of the policy. "his reference is not equivalent to including it in the policy, for the simple reason, as we have said, that it was made in a general way. It is mentioned simply as warranty 1, without giving any idea of its contents. "he term of the rider might !e changed and the heading =;arranty 1= retained, and, following the appellantEs line of reasoning, it might, with equal plausi!ility, !e defended as the e9press warranty agreed upon, !ecause it was headed =;arranty 1.= It is just such alterations as this that the law see s to prevent in requiring that all warranties of the ind are to !e signed !y the insured and referred to in the policy. Setting aside for the moment the legal question of the validity of the warranty, and assuming warranty 1 to !e valid, we have to consider another circumstance which indicates that the insured did not violate it. "he trial court found that at the time of the fire, the inflamma!le goods in the warehouse or !uilding of the insured did not e9ceed the amount permitted !y the insurance company, that is, three per cent of the total value of the merchandise stored. "his finding is !orne out !y the evidence, and there is no reason for changing it and ma ing another. 1or these reasons, I !elieve the judgment appealed from should !e affirmed in its entirely. A&ance*a' C.).' concurs.