G.R. No. 138941 Case Digest

G.R. No. 138941 October 8, 2001

American Home Insurance Company

vs Tantuco Enterprises, Inc.

Ponente: Puno

Facts:

Tantuco Enterprises is engaged in the coconut oil milling and refining industry. It owns two oil mills both located in Lucena City. The two oil mills were separately covered by fire insurance policies issued by American Home, 3M and 6M respectively to the two mills.

A fire broke out on September 30, 1991 gutted and consumed the new oil mill (6M policy). Tantuco immediately notified the insurance company of the incident. American Home then sent appraisers who inspected the burned premises and the properties destroyed. Thereafter, American Home rejected the insurance claim on ground that no policy was issued covering the burned oil mill, saying that the 6M policy insures the property located in building no. 5, while the affected oil mill was under building no. 14.

A complaint for specific performance and damages was consequently instituted by the respondent with the RTC. RTC rendered the insurance company liable on the insurance policy. American Home appealed at the CA, but the CA upheld the same decision.

Issues:

(1) The Court of Appeals erred in its conclusion that the issue of non-payment of the premium was beyond its jurisdiction because it was raised for the first time on appeal.

(2) The Court of Appeals erred in its legal interpretation of 'Fire Extinguishing Appliances Warranty' of the policy.

(3) With due respect, the conclusion of the Court of Appeals giving no regard to the parole evidence rule and the principle of estoppel is erroneous.

Ruling:

Petition is devoid of merit.

(1) In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in giving effect to the insurance. In view of the custom of insurance agents to examine buildings before writing policies upon them, and since a mistake as to the identity and character of the building is extremely unlikely, the courts are inclined to consider that the policy of insurance covers any building which the parties manifestly intended to insure, however inaccurate the description may be.

Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind, that what the parties manifestly intended to insure was the new oil mill. This is obvious from the categorical statement embodied in the policy, extending its protection:

On machineries and equipment with complete accessories usual to a coconut oil mill including stocks of copra, copra cake and copra mills whilst contained in the new oil mill building, situate (sic) at UNNO. ALONG NATIONAL HIGH WAY, BO. IYAM, LUCENA CITY UNBLOCKED.

If the parties really intended to protect the first oil mill, then there is no need to specify it as new.

(2) Anent petitioner's argument that the respondent is barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong, we find that the same proceeds from a wrong assumption. Evidence on record reveals that respondent's operating manager, Mr. Edison Tantuco, notified Mr. Borja (the petitioner's agent with whom respondent negotiated for the contract) about the inaccurate description in the policy. However, Mr. Borja assured Mr. Tantuco that the use of the adjective new will distinguish the insured property. The assurance convinced respondent, despite the impreciseness in the specification of the boundaries, the insurance will cover the new oil mill.

(3) When the issues to be resolved in the trial court were formulated at the pre-trial proceedings, the question of the supposed inadequate payment was never raised. Most significant to point, petitioner fatally neglected to present, during the whole course of the trial, any witness to testify that respondent indeed failed to pay the full amount of the premium.

(4) Petitioner argues that the warranty clearly obligates the insured to maintain all the appliances specified therein. The breach occurred when the respondent failed to install internal fire hydrants inside the burned building as warranted. This fact was admitted by the oil mill's expeller operator, Gerardo Zarsuela.

Again, the argument lacks merit. We agree with the appellate court's conclusion that the aforementioned warranty did not require respondent to provide for all the fire extinguishing appliances enumerated therein. Additionally, we find that neither did it require that the appliances are restricted to those mentioned in the warranty. In other words, what the warranty mandates is that respondent should maintain in efficient working condition within the premises of the insured property, fire fighting equipments such as, but not limited to, those identified in the list, which will serve as the oil mill's first line of defense in case any part of it bursts into flame.

To be sure, respondent was able to comply with the warranty. Within the vicinity of the new oil mill can be found the following devices: numerous portable fire extinguishers, two fire hoses, fire hydrant, and an emergency fire engine. All of these equipments were in efficient working order when the fire occurred.