Cha vs CA

Facts: Petitioner spouses Nilo Cha and Stella Uy-Cha, as lessees entered into a
lease contract with private respondent CKS Development Corporation as lessor. A
stipulation of the lease contract provides that the Lessee is not allowed to ins
ure against fire the chattels, merchandise, textiles, goods and effects placed a
t any stall or store or space in the leased premises without first obtaining the
written consent and approval of the Lessor. If the Lessee violates this the pol
icy is deemed assigned and transferred to the Lessor for his own benefit.

Petitioner took out a policy of fire insurance over the merchandise inside the l
eased premises with United Insurance without consent of CKS.

On the day the lease contract was to expire a fire broke out inside the leased p
remises. CKS, wrote a letter to United asking that the proceeds of the fire insu
rance be paid directly to CKS. United refused. Hence, the latter filed a complai
nt against the Cha spouses and United.

RTC ruled in favor of CKS. CA affirmed, hence the petition.

Issue: Whether or not CKS can recover from the insurance policy.

Held: No. Section 18 of the Insurance Code provides that: No contract or policy o
f insurance on property shall be enforceable except for the benefit of some pers
on having an insurable interest in the property insured.

In the present case, it cannot be denied that CKS has no insurable interest in t
he goods and merchandise inside the leased premises under the provisions of Sect
ion 17 of the Insurance Code: The measure of an insurable interest in property is
the extent to which the insured might be damnified by loss or injury thereof. Th
erefore, CKS cannot be validly a beneficiary of the fire insurance policy taken
by petitioner-spouses. The insurable interest remains with the Cha spouses.

The stipulation in the lease contract is void for being contrary to law and publ
ic policy. This is in keeping with the provision under Sec. 25 of the Insurance
Code that: Every stipulation in a policy of Insurance for the payment of loss, w
hether 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 ex
ecuted by way of gaming or wagering is void.