American Home v.
Tantuco (Short title) - In construing words used to describe a building insured, the
GR # 138941 | October 8, 2001
Petitioner: American Home Assurance Company
Respondent: Tantuco Enterprises Inc.
(Rule 130, Section 9)
DOCTRINE
A party may present evidence to modify, explain or add to the terms of the
written agreement if he puts in issue in his pleading, among others, its failure
to express the true intent and agreement of the parties
FACTS
- Tantuco Enterprises, Inc. owns two oil mills (an older and newer
one) which were separately covered by fire insurance policies
issued by American Home Assurance Co.
- Subsequently, a fire broke out and gutted and consumed one of the
oil mills
- Tantuco immediately notified American Home which the latter then
sent its appraisers to inspect damages.
- In a letter, American Home rejected the claim on the ground that no
policy was issued covering the burned oil mill.
- It stated that the description of the insured establishment in the
policy referred to another building.
- A complaint for specific performance and damages was then
instituted by Tantuco with the RTC which rendered a decision
finding American Home liable.
- American Home assailed the judgment before the CA who upheld
the same and denied the MR.
- American Home argues that the specific boundary description in
the policy pertains to the other mill and that Tantuco did not even
tried to correct such mistake.
- American Home argues that Tantuco is barred by the parole
evidence rule from presenting evidence (other than the policy in
question) to show that it intended really to insure the burned oil mill,
just as it is barred by estoppel from claiming that the description of
the insured oil mill in the policy was wrong, because it retained the
policy without having the same corrected.
ISSUE/S
1. W/N the CA erred in giving no regard to the parole evidence rule and
the principle of estoppel
RULING & RATIO
1. No
greatest liberality is shown by the courts.
- Given this, it is beyond dispute that what the parties manifestly
intended to insure was the new oil mill which is obvious from the
categorical statement embodied in the policy stating "in the new oil
mill building."
- It would be absurd to assume that Tantuco would protect the one
oil mill for different amounts and leave uncovered the other.
- As testified by the general agent the policy issuing clerk made an
error of copying the boundaries of the first oil mill when typing the
policy for the new one.
- These facts falls within one of the recognized exceptions to the
parole evidence rule.
o Under the Rules, a party may present evidence to modify,
explain or add to the terms of the written agreement if he
puts in issue in his pleading, among others, its failure to
express the true intent and agreement of the parties.
o Here, the contractual intention of the parties cannot be
understood from a mere reading of the instrument for
while the contract shows that it was for the new oil mill, the
description concededly pertains to the first oil mill.
o This irreconcilable difference can only be clarified by
admitting evidence aliunde, which will explain the
imperfection and clarify the intent of the parties.
- The argument that Tantuco was barred by estoppel proceeds from
a wrong assumption. Evidence on record reveals that Tantuco's
operating manager notified Mthe general agent agent about the
inaccurate description in the policy. However, the agent assured
that the use of the adjective new will distinguish the property.
- The assurance convinced Tantuco that the insurance will cover the
new oil mill.
- The object of the court in construing a contract is to ascertain the
intent of the parties to the contract and enforce the agreement
which the parties have entered into.
- In determining what the parties intended, the courts will read and
construe the policy as a whole and if possible, give effect to all the
parts of the contract, keeping in mind always the prime rule that in
the event of doubt, it is to be resolved against the insurer.
DISPOSITION
IN VIEW WHEREOF, finding no reversible error in the impugned Decision,
the instant petition is hereby DISMISSED. SO ORDERED.
NOTES