Great Pacific v CA G.R. No. 113899. October 13, 1999 J.

Quisimbing Facts: A contract of group life insurance was executed between petitioner Great Pacific and Development Bank Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. Wilfredo Leuterio, a physician and a housing debtor of DBP, applied for membership in the grouplife insurance plan. In an application form, Dr. Leuterio answered questions concerning his health condition as follows: 7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure, cancer, diabetes, lung, kidney or stomach disorder or any other physical impairment? 8. Are you now, to the best of your knowledge, in good health? Grepalife issued a coverage to the value of P86,200.00 pesos. Dr. Leuterio died due to massive cerebral hemorrhage. DBP submitted a death claim to Grepalife. Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when he applied for an insurance coverage. Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure constituted concealment that justified the denial of the claim. The widow, respondent Medarda V. Leuterio, filed against Grepalife. The trial court rendered a decision in favor of respondent widow and against Grepalife. The Court of Appeals sustained the trial courts decision. Issues: 1. Whether the Court of Appeals erred in holding petitioner liable to DBP as beneficiary in a group life insurance contract from a complaint filed by the widow of the decedent/mortgagor? 2. Whether the Court of Appeals erred in not finding that Dr. Leuterio concealed that he had hypertension, which would vitiate the insurance contract? 3. Whether the Court of Appeals erred in holding Grepalife liable in the amount of eighty six thousand, two hundred (P86,200.00) pesos without proof of the actual outstanding mortgagepayable by the mortgagor to DBP. Held: No to all three. Petition dismissed. Ratio: 1. Petitioner alleges that the complaint was instituted by the widow of Dr. Leuterio, not the real party in interest, hence the trial court acquired no jurisdiction over the case. It argues that when the Court of Appeals affirmed the trial courts judgment, Grepalife was held liable to pay the proceeds of insurance contract in favor of DBP, the indispensable party who was not joined in the suit. The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance, the policy stating that: In the event of the debtors death before his indebtedness with the Creditor [DBP] shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the creditor and the balance of sum assured, if there is any, shall then be paid to the beneficiary/ies designated by the debtor. When DBPs claim was denied, it collected the debt from the mortgagor and took the necessary action of foreclosure on the residential lot of private respondent. Gonzales vs. Yek Tong Lin- Insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon. Insured may thus sue, although the policy is taken wholly or in part for the benefit of another person named or unnamed, and although it is expressly made payable to another as his interest may appear or otherwise. Although a policy issued to a mortgagor is taken out for the benefit of the

mortgagee and is made payable to him, yet the mortgagor may sue thereon in his own name, especially where the mortgagees interest is less than the full amount recoverable under the policy. Insured may be regarded as the real party in interest, although he has assigned the policy for the purpose of collection, or has assigned as collateral security any judgment he may obtain. And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the insured might have recovered,[14] the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife. 2. The medical findings were not conclusive because Dr. Mejia did not conduct an autopsy on the body of the decedent. The medical certificate stated that hypertension was the possible cause of death. Hence, the statement of the physician was properly considered by the trial court as hearsay. Contrary to appellants allegations, there was no sufficient proof that the insured had suffered from hypertension. Aside from the statement of the insureds widow who was not even sure if the medicines taken by Dr. Leuterio were for hypertension, the appellant had not proven nor produced any witness who could attest to Dr. Leuterios medical history. Appellant insurance company had failed to establish that there was concealment made by the insured, hence, it cannot refuse payment of the claim. The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. 3. A life insurance policy is a valued policy. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy. The mortgagor paid the premium according to the coverage of his insurance. In the event of the debtors death before his indebtedness with the creditor shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the creditor. DBP foreclosed one of the deceased persons lots to satisfy the mortgage. Hence, the in surance proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries. ---------------------------Petitioner alleges that the complaint was instituted by the widow of Dr. Leuterio, not the real party in interest, hence the trial court acquired no jurisdiction over the case. It argues that when the Court of Appeals affirmed the trial courts judgment, Grepalife was held liable to pay the proceeds of insurance contract in favor of DBP, the indispensable party who was not joined in the suit.
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To resolve the issue, we must consider the insurable interest in mortgaged properties and the parties

to this type of contract. The rationale of a group insurance policy of mortgagors, otherwise known as the "mortgage redemption insurance," is a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. 7 In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of death; the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness. 8 Consequently, where the mortgagor pays the insurance premium under the group insurance policy, making the loss payable to the mortgagee, the insurance is on the mortgagors interest, and the mortgagor continues to be a party to the contract. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not make the mortgagee a party to the contract.

Geagonia vs. Court of Appeals [GR 114427, 6 February 1995] First Division, Davide Jr. (J): 4 concur
Facts: Armando Geagonia is the owner of Norman's Mart located in the public market of San Francisco, Agusan del Sur. On 22 December 1989, he obtained from Country Bankers Insurance Corporation fire insurance policy No. F-14622 2 for P100,000.00. The period of the policy was from 22 December 1989 to 22 December 1990 and covered the following: "Stock-in-trade consisting principally of dry goods such as RTW's for men and women wear and other usual to assured's business." Geagonia declared in the policy under the subheading entitled COINSURANCE that Mercantile Insurance Co., Inc. was the co-insurer for P50,000.00. From 1989 to 1990, Geagonia had in his inventory stocks amounting to P392,130.50, itemized as follows: Zenco Sales, Inc., P55,698.00; F. Legaspi Gen. Merchandise, 86,432.50; and Cebu Tesing Textiles, 250,000.00 (on credit); totalling P392,130.50. The policy contained the following condition, that "the insured shall give notice to the Company of any insurance or insurances already effected, or which may subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless notice be given and the particulars of such insurance or insurances be stated therein or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00." On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m. at the public market of San Francisco, Agusan del Sur. Geagonia's insured stocks- in-trade were completely destroyed prompting him to file with Country Bankers a claim under the policy. On 28 December 1990, Country Bankers denied the claim because it found that at the time of the loss

Geagonia's stocks-in-trade were likewise covered by fire insurance policies GA-28146 and GA-28144, for P100,000.00 each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (PFIC) . These policies indicate that the insured was "Messrs. Discount Mart (Mr. Armando Geagonia, Prop.)" with a mortgage clause reading ""MORTGAGEE: Loss, if any, shall be payable to Messrs. Cebu Tesing Textiles, Cebu City as their interest may appear subject to the terms of this policy. CO-INSURANCE DECLARED: P100,000. Phils. First CEB/F-24758" The basis of Country Bankers' denial was Geagonia's alleged violation of Condition 3 of the policy. Geagonia then filed a complaint against Country Bankers with the Insurance Commission (Case 3340) for the recovery of P100,000.00 under fire insurance policy F-14622 and for attorney's fees and costs of litigation. He attached his letter of 18 January 1991 which asked for the reconsideration of the denial. He admitted in the said letter that at the time he obtained Country Bankers's fire insurance policy he knew that the two policies issued by the PFIC were already in existence; however, he had no knowledge of the provision in Country Bankers' policy requiring him to inform it of the prior policies; this requirement was not mentioned to him by Country Bankers' agent; and had it been so mentioned, he would not have withheld such information. He further asserted that the total of the amounts claimed under the three policies was below the actual value of his stocks at the time of loss, which was P1,000,000.00. In its decision of 21 June 1993, the Insurance Commission found that Geagonia did not violate Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained from the PFIC; that it was Cebu Tesing Textiles which procured the PFIC policies without informing him or securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks. These findings were based on Geagonia's testimony that he came to know of the PFIC policies only when he filed his claim with Country Bankers and that Cebu Tesing Textile obtained them and paid for their premiums without informing him thereof. The Insurance Commission ordered Country Bankers to pay Geagibua the sum of P100,000.00 with legal interest from the time the complaint was filed until fully satisfied plus the amount of P10,000.00 as attorney's fees. With costs. Its motion for the reconsideration of the decision having been denied by the Insurance Commission in its resolution of 20 August 1993, Country Bankers appealed to the Court of Appeals by way of a petition for review (CA-GR SP 31916). In its decision of 29 December 1993, the Court of Appeals reversed the decision of the Insurance Commission because it found that Geagonia knew of the existence of the two other policies issued by the PFIC. His motion to reconsider the adverse decision having been denied, Geagonia filed the petition for review on certiorari.

Issue [1]: Whether the non-disclosure of other insurance policies violate condition 3 of the policy, so as to deny Geagonia from recovering on the policy.
Held [1]: Condition 3 of Country Bankers's Policy F-14622 is a condition which is not proscribed by law. Its incorporation in the policy is allowed by Section 75 of the Insurance Code, Such a condition is a provision which invariably appears in fire insurance policies and is intended to prevent an increase in the moral hazard. It is commonly known as the additional or "other insurance" clause and has been upheld as valid and as a warranty that no other insurance exists. Its violation would thus avoid the policy. However, in order to constitute a violation, the other insurance must be upon the same subject matter, the same interest therein, and the same risk. The fire insurance policies issued by the PFIC name Geagonia as the assured and contain a mortgage clause which reads: "Loss, if any, shall be payable to MESSRS. TESING TEXTILES, Cebu City as their interest may appear subject to the terms of the policy." This is clearly a simple loss payable clause, not a standard mortgage clause. The Court concludes that (a) the prohibition in Condition 3 of the subject policy applies only to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained. The first conclusion is supported by the portion of the condition referring to other insurance "covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured," and the portion regarding the insured's declaration on the subheading CO-INSURANCE that the co-insurer is Mercantile Insurance Co., Inc. in the sum of P50,000.00. A double insurance exists where the same person is insured by several insurers separately in respect of the same subject and interest. Since the insurable interests of a mortgagor and a mortgagee on the mortgaged property are distinct and separate; the two policies of the PFIC do not cover the same interest as that covered

by the policy of Country Bankers, no double insurance exists. The non-disclosure then of the former policies was not fatal to Geagonia's right to recover on Country Bankers' policy. Issue [2]: Whether the violation of Condition 3 of the policy renders the policy void.
Held [2]: Unlike the "other insurance" clauses involved in General Insurance and Surety Corp. vs. Ng Hua, 106 Phil. 1117 [1960], or in Pioneer Insurance & Surety Corp. vs. Yap, 61 SCRA 426 [1974] which reads "The insured shall give notice to the company of any insurance or insurances already effected, or which may subsequently be effected covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this Policy shall be forfeited"; or in the 1930 case of Santa Ana vs. Commercial Union Assurance Co., 55 Phil. 329, 334 [1930], which provided "that any outstanding insurance upon the whole or a portion of the objects thereby assured must be declared by the insured in writing and he must cause the company to add or insert it in the policy, without which such policy shall be null and void, and the insured will not be entitled to indemnity in case of loss," Condition 3 in Country Bankers' policy F-14622 does not absolutely declare void any violation thereof. It expressly provides that the condition "shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00." By stating within Condition 3 itself that such condition shall not apply if the total insurance in force at the time of loss does not exceed P200,000.00, Country Bankers was amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of "other insurance" clause in fire policies is to prevent over-insurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property's value, the insured may have an inducement to destroy the property for the purpose of collecting the insurance. The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured.

Spouses Cha vs. Court of Appeals [GR 124520, 18 August 1997] First Division, Padilla (J): 4 concur

Facts: Spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract with CKS Development Corporation, as lessor, on 5 October 1988. One of the stipulations of the 1 year lease contract states that "The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in the leased premises without first obtaining the written consent and approval of the LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent of the LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own benefit" Notwithstanding the above stipulation in the lease contract, the Cha spouses insured against loss by fire their merchandise inside the leased premises for P500,000.00 with the United Insurance Co., Inc. without the written consent of CKS. On the day that the lease contract was to expire, fire broke out inside the leased premises. When CKS learned of the insurance earlier procured by the Cha spouses (without its consent), it wrote the insurer (United) a demand letter asking that the proceeds of the insurance contract (between the Cha spouses and United) be paid directly to CKS, based on its lease contract with the Cha spouses. United refused to pay CKS. Hence, the latter filed a complaint against the Cha spouses and United. On 2 June 1992, the Regional Trial Court, Branch 6, Manila, rendered a decision ordering United to pay CKS the amount of P335,063.11 and the Cha spouses to pay P50,000.00 as exemplary damages, P20,000.00 as attorney's fees and costs of suit. On appeal, the Court of Appeals in CA GR CV 39328 rendered a decision dated 11 January 1996, affirming the trial court decision, deleting however the awards for exemplary damages and attorney's fees. A motion for reconsideration by United was denied on 29 March 1996. The spouses Cha and United filed the petition for review on certiorari.

Issue: Whether paragraph 18 of the lease contract entered into between CKS and the Cha spouses is valid insofar as it provides that any fire insurance policy obtained by the lessee (Cha spouses) over their merchandise inside the leased premises is deemed assigned or transferred to the lessor (CKS) if said policy is obtained without the prior written consent of the latter.
Held: NO. It is basic in the law on contracts that the stipulations contained in a contract cannot be contrary to law, morals, good customs, public order or public policy. Section 18 of the Insurance Code provides that "No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured." A non-life insurance policy such as the fire insurance policy taken by the spouses over their merchandise is primarily a contract of indemnity. Insurable interest in the property insured must exist at the time the insurance takes effect and at the time the loss occurs. The basis of such requirement of insurable interest in property insured is based on sound public policy: to prevent a person from taking out an insurance policy on property upon which he has no insurable interest and collecting the proceeds of said policy in case of loss of the property. In such a case, the contract of insurance is a mere wager which is void under Section 25 of the Insurance Code, which provides that "Every stipulation in a policy of Insurance for the payment of loss whether the person insured has or has not any interest in the property insured, or that the policy shall be received as proof of such interest, and every policy executed by way of gaming or wagering, is void." Herein, it cannot be denied that CKS has no insurable interest in the goods and merchandise inside the leased premises under the provisions of Section 17 of the Insurance Code which provides that "The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof ." Therefore, CKS cannot, under the Insurance Code a special law be validly a beneficiary of the fire insurance policy taken by the spouses over their merchandise. This insurable interest over said merchandise remains with the insured, the Cha spouses. The automatic assignment of the policy to CKS under the provision of the lease contract previously quoted is void for being contrary to law and/or public policy. The proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella Uy-Cha. The insurer (United) cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property insured.

Rizal Commercial Banking Corporation (RCBC) vs. Court of Appeals [GR 128833, 20 April 1998]; also RCBC vs. Court of Appeals [GR 128834] Second Division, Melo (J): 4 concur
Facts: Goyu & Sons, Inc. (Goyu) applied for credit facilities and accommodations with Rizal Commercial Banking Corporation (RCBC) at its Binondo Branch. After due evaluation, RCBC Binondo Branch, through its key officers, petitioners Uy Chun Bing and Eli D. Lao, recommended Goyu's application for approval by RCBC's executive committee. A credit facility in the amount of P30 million was initially granted. Upon Goyu's application and Uy's and Lao's recommendation, RCBC's executive committee increased Goyu's credit facility to P50 million, then to P90 million, and finally to P117 million. As security for its credit facilities with RCBC, Goyu executed two real estate mortgages and two chattel mortgages in favor of RCBC, which were registered with the Registry of Deeds at Valenzuela, Metro Manila. Under each of these four mortgage contracts, Goyu committed itself to insure the mortgaged property with an insurance company approved by RCBC, and subsequently, to endorse and deliver the insurance policies to RCBC. Goyu obtained in its name a total of 10 insurance policies from MICO. In February 1992, Alchester Insurance Agency, Inc., the insurance agent where Goyu obtained the Malayan insurance policies, issued 9 endorsements in favor of RCBC seemingly upon instructions of Goyu. On 27 April 1992, one of Goyu's factory buildings in Valenzuela was gutted by fire. Consequently, Goyu submitted its claim for indemnity on account of the loss insured against. MICO denied the claim on the ground that the insurance policies were either attached pursuant to writs of attachments/garnishments issued by various courts or that the insurance proceeds were also claimed by other creditors of Goyu alleging better rights to the proceeds than the insured. Goyu filed a complaint for specific performance and damages which was docketed at the Regional Trial Court of the National Capital Judicial Region (Manila, Branch 3) as Civil Case 93-65442. RCBC, one of Goyu's creditors, also filed with MICO its formal claim over the proceeds of the insurance policies, but said claims were also denied for the same reasons that AGCO denied Goyu's claims. In an interlocutory order dated 12 October 1993, the Regional Trial

Court of Manila (Branch 3), confirmed that Goyu's other creditors, namely, Urban Bank, Alfredo Sebastian, and Philippine Trust Company obtained their respective writs of attachments from various courts, covering an aggregate amount of P14,938,080.23, and ordered that the proceeds of the 10 insurance policies be deposited with the said court minus the aforementioned P14,938,080.23. Accordingly, on 7 January 1994, MICO deposited the amount of P50,505,594.60 with Branch 3 of the Manila RTC. In the meantime, another notice of garnishment was handed down by another Manila RTC sala (Branch 28) for the amount of P8,696,838.75. After trial, Branch 3 of the Manila RTC rendered judgment in a favor of Goyu, ordering Malayan to pay Goyu its fire loss claims in the total amount of P74,040,518.58 less the amount of P50,000,000.00 which is deposited with the Court; damages by way of interest for the duration of the delay since 27 July 1992 (90 days after Malayan's receipt of the required proof of loss and notice of loss) at the rate of twice the ceiling prescribed by the Monetary Board, on the amounts of (1) P50,000,000.00 from 27 July 1992 up to the time said amount was deposited with the Court on 7 January 1994; and (2) P24,040,518.58 from 17 July 1992 up to the time when the writs of attachments were received by Malayan. The court also ordered RCBC to pay Goyu actual and compensatory damages in the amount of P2,000,000.00, and both Malayan and RCBC to solidarily pay Goyu (1) P1,000,000.00 as exemplary damages; (2) P1,000,000.00 as, and for, attorneys fees; and (3) Costs of suit. The Court, on the Counterclaim of RCBC, ordered Goyu to pay its loan obligations with RCBC in the amount of P68,785,069.04, as of 27 April 1992, with interest thereon at the rate stipulated in the respective promissory notes (without surcharges and penalties). From this judgment, all parties interposed their respective appeals. Goyu was unsatisfied with the amounts awarded in its favor. MICO and RCBC disputed the trial court's findings of liability on their part. The Court of Appeals partly granted Goyu's appeal, but sustained the findings of the trial court with respect to MICO and RCBC's liabilities. The appellate court modified the decision by ordering Malayan to pay Goyu its fire loss claim in the total amount of P74,040,518.58 less than the amount of P50,505,549.60 (per O.R. No. 3649285) plus deposited in court and damages by way of interest commencing 27 July 1992 until the time Goyu receives the said amount at the rate of 37% per annum which is twice the ceiling prescribed by the Monetary Board; ordering RCBC to pay Goyu actual and compensatory damages in the amount of P5,000,000.00; and Malayan and RCBC, Uy Chun Bing and Eli Lao to pay Goyu solidarily in the amounts of (1) P1,500,000.00 as exemplary damages; and (2) P1,500,000.00 as and for attorney's fees. The Court, on RCBC's Counterclaim, ordered Goyuto pay its loan obligation with RCBC in the amount of P68,785.069.04 as of 27 April 1992 without any interest, surcharges and penalties. RCBC and Malayan appealed separately but, in view of the common facts and issues involved, their individual petitions were consolidated.

Issue [1]: Whether RCBC, as mortgagee, has any right over the insurance policies taken by Goyu, the mortgagor, in case of the occurrence of loss.
Held [1]: YES. It is settled that a mortgagor and a mortgagee have separate and distinct insurable interests in the same mortgaged property, such that each one of them may insure the same property for his own sole benefit. There is no question that Goyu could insure the mortgaged property for its own exclusive benefit. Herein, although it appears that Goyu obtained the subject insurance policies naming itself as the sole payee, the intentions of the parties as shown by their contemporaneous acts, must be given due consideration in order to better serve the interest of justice and equity. It is to be noted that nine endorsement documents were prepared by Alchester in favor of RCBC. The Court is in a quandary how Alchester could arrive at the idea of endorsing any specific insurance policy in favor of any particular beneficiary or payee other than the insured had not such named payee or beneficiary been specifically disclosed by the insured itself. It is also significant that Goyu voluntarily and purposely took the insurance policies from MICO, a sister company of RCBC, and not just from any other insurance company. Alchester would not have found out that the subject pieces of property were mortgaged to RCBC had not such information been voluntarily disclosed by Goyu itself. Had it not been for Goyu, Alchester would not have known of Goyu's intention of obtaining insurance coverage in compliance with its undertaking in the mortgage contracts with RCBC, and verify, Alchester would not have endorsed the policies to RCBC had it not been so directed by Goyu. On equitable principles, particularly on the ground of estoppel, the Court is constrained to rule in favor of mortgagor RCBC. RCBC, in good faith,

relied upon the endorsement documents sent to it as this was only pursuant to the stipulation in the mortgage contracts. Such reliance is justified under the circumstances of the case. Goyu failed to seasonably repudiate the authority of the person or persons who prepared such endorsements. Over and above this, Goyu continued, in the meantime, to enjoy the benefits of the credit facilities extended to it by RCBC. After the occurrence of the loss insured against, it was too late for Goyu to disown the endorsements for any imagined or contrived lack of authority of Alchester to prepare and issue said endorsements. If there had not been actually an implied ratification of said endorsements by virtue of Goyu's inaction in this case, Goyu is at the very least estopped from assailing their operative effects. To permit Goyu to capitalize on its non-confirmation of these endorsements while it continued to enjoy the benefits of the credit facilities of RCBC which believed in good faith that there was due endorsement pursuant to their mortgage contracts, is to countenance grave contravention of public policy, fair dealing, good faith, and justice. Such an unjust situation, the Court cannot sanction. Under the peculiar circumstances, the Court is bound to recognize RCBC's right to the proceeds of the insurance policies if not for the actual endorsement of the policies, at least on the basis of the equitable principle of estoppel.

Issue [2]: Whether Goyu can insist that the proceeds of insurance shall exclusively apply to the interest of the person in whose name or for whose benefit it is made.
Held [2]: NO. Goyu cannot seek relief under Section 53 of the Insurance Code which provides that the proceeds of insurance shall exclusively apply to the interest of the person in whose name or for whose benefit it is made. The peculiarity of the circumstances obtaining in the instant case presents a justification to take exception to the strict application of said provision, it having been sufficiently established that it was the intention of the parties to designate RCBC as the party for whose benefit the insurance policies were taken out. Consider thus the following: (1) It is undisputed that the insured pieces of property were the subject of mortgage contracts entered into between RCBC and Goyu in consideration of and for securing Goyu's credit facilities from RCBC. The mortgage contracts contained common provisions whereby Goyu, as mortgagor, undertook to have the mortgaged property properly covered against any loss by an insurance company acceptable to RCBC. (2) Goyu voluntarily procured insurance policies to cover the mortgaged property from MICO, no less than a sister company of RCBC and definitely an acceptable insurance company to RCBC. (3) Endorsement documents were prepared by MICO's underwriter, Alchester Insurance Agency, Inc., and copies thereof were sent to Goyu, MICO and RCBC. Goyu did not assail, until of late, the validity of said endorsements. (4) Goyu continued until the occurrence of the fire, to enjoy the benefits of the credit facilities extended by RCBC which was conditioned upon the endorsement of the insurance policies to be taken by Goyu to cover the mortgaged properties. The fact that upon receiving its copies of the endorsement documents prepared by Alchester, Goyu, despite the absence written conformity thereto, obviously considered said endorsement to be sufficient compliance with its obligation under the mortgage contracts since RCBC accordingly continued to extend the benefits of its credit facilities and Goyu continued to benefit therefrom. Just as plain too is the intention of the parties to constitute RCBC as the beneficiary of the various insurance policies obtained by Goyu. The intention of the parties will have to be given full force and effect in this particular case. The insurance proceeds may, therefore, be exclusively applied to RCBC, which under the factual circumstances of the case, is truly the person or entity for whose benefit the policies were clearly intended. Moreover, the law's evident intention to protect the interests of the mortgagee upon the mortgaged property is expressed in Article 2127 of the Civil Code. The proceeds of the 8 insurance policies endorsed to RCBC aggregate to P89,974,488.36. Being exclusively payable to RCBC by reason of the endorsement by Alchester to RCBC, which we already ruled to have the force and effect of an endorsement by Goyu itself, these 8 policies can not be attached by Goyu's other creditors up to the extent of the Goyu's outstanding obligation in RCBC's favor. Section 53 of the Insurance Code ordains that the insurance proceeds of the endorsed policies shall be applied exclusively to the proper interest of the person for whose benefit it was made. In this case, to the extent of Goyu's obligation with RCBC, the interest of Goyu in the subject policies had been transferred to RCBC effective as of the time of the endorsement. These policies may no longer be attached by the other creditors of Goyu, like Alfredo Sebastian in GR 128834, which may nonetheless

forthwith be dismissed for being moot and academic in view of the results reached herein. Only the two other policies amounting to P19,646,224.92 may be validly attached, garnished, and levied upon by Goyu's other creditors. To the extent of Goyu's outstanding obligation with RCBC, all the rest of the other insurance policies which were endorsed to RCBC, are, therefore, to be released from attachment, garnishment, and levy by the other creditors of Goyu.