Pacific Banking Corporation v.

Court of Appeals and Oriental Assurance Corporatino

G.R. No. L-41014. November 28, 1988.

Facts:
A Fire Policy was issued by Oriental Assurance Corp. to Paramount Shirt Manufacturing Co. for
P61,000.00 caused by fire to the latters materials, supplies, etc. Paramount was indebted to Pacific
Banking Corp. (PBC). The policy was duly endorsed to PBC as mortgagee/trustor of the properties
insured, with knowledge and consent of Oriental, such that any loss shall be payable to PBC. A fire broke
out destroying some goods. PBC sent a letter of demand to Oriental, but PBC was told that it had not yet
filed any claim with Oriental, or submitted proof of loss, which is a clear violation of the policy. PBC
filed an action for sum of money against Oriental. On appeal to the SC, Oriental raised the issue that
Paramount procured additional insurances other than those stated in the policy, and that PBC failed to
file the required proof of loss prior to court action.

Held: Paramount is guilty of fraud. The insured failed to reveal before the loss three other insurances.
The insured had been guilty of a false declaration; a clear misrepresentation and a vital one because
where the insured had been asked to reveal but did not, that was deception. As the insurance policy
against fire expressly required that notice should be given by the insured of other insurance upon the same
property, the total absence of such notice nullifies the policy.

PBC is precluded from claiming the amount stated in the policy. Where the insured who is primarily
entitled to receive the proceeds of the policy has by its fraud and/or misrepresentation, forfeited said right,
with more reason PBC which is merely claiming as indorsee of said insured, cannot be entitled to such
proceeds.

The case was prematurely filed. Generally, the cause of action on the policy accrues when the loss occurs,
but, as in this case, when the policy provides that no action shall be brought unless the claim is first
presented extrajudicially in the manner provided in the policy, the cause of action will accrue from the
time the insurer finally rejects the claim for payment. Since the required claim by the insured had not
been complied with, it follows that Oriental could not be deemed to have finally rejected PBCs claim and
therefore the latter's cause of action had not yet arisen.