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RIZAL COMMERCIAL BANKING CORPORATION v. CA

FACTS:

This case involves three consolidated petitions concerning fire loss claims made by Goyu & Sons, Inc. (GOYU) against Malayan Insurance Company, Inc. (MICO) in relation to mortgage contracts entered into by GOYU and Rizal Commercial Banking Corporation (RCBC). The Court of Appeals ordered MICO to pay GOYU its claims in the total amount of P74,040,518.58, plus 37% interest per annum starting from July 27, 1992. RCBC was ordered to pay actual and compensatory damages in the amount of P5,000,000.00. Undisputed facts show that GOYU obtained credit facilities from RCBC and executed mortgage contracts requiring GOYU to insure the mortgaged property and endorse the insurance policies to RCBC. GOYU obtained insurance policies from MICO, and one of its factory buildings was destroyed by fire. GOYU filed a complaint against MICO and RCBC after their insurance claims were denied. The Regional Trial Court rendered judgment in favor of GOYU, ordering MICO and RCBC to pay damages. All parties appealed the judgment.

The case involves the appeals of various parties from the decision of the trial court. Goyu, MICO, RCBC, Uy Chun Bing, and Eli D. Lao were ordered to pay Goyu exemplary damages and attorney's fees. On RCBC's counterclaim, Goyu was ordered to pay its loan obligation. Goyu, MICO, and RCBC separately filed petitions seeking review of the Court of Appeals' decision. The primary issue is whether RCBC has any right over the insurance policies taken by Goyu in case of loss. The court found the endorsements on the policies to be defective but considered the intentions of the parties and found in favor of RCBC on equitable grounds.

Evelyn Lozada of Alchester Insurance Agency testified that she prepared endorsement documents for Goyu's insurance policies in favor of RCBC based on instructions from Mr. Go. RCBC relied on these endorsement documents, and Goyu did not deny receiving them. After the loss insured against occurred, Goyu attempted to disown the endorsements, but the court recognized RCBC's right to the insurance proceeds based on the equitable principle of estoppel.

The case involves respondent Philippine Charter Insurance Corporation (PCIC) and petitioner Malayan Insurance Co., Inc. (Malayan). PCIC issued two insurance policies to Goyu, and Malayan collected the premium payments from Goyu but did not remit the full amount to PCIC. This led to the cancellation of the policies, and Goyu filed a complaint against PCIC and Malayan for breach of contract and damages.

ISSUES:

  1. Whether RCBC, as mortgagee, has any right over the insurance policies taken by GOYU, the mortgagor, in case of the occurrence of loss.

  2. The extent of GOYU's outstanding obligation with RCBC which the proceeds of the 8 insurance policies will discharge and liquidate.

RULING:

  1. RCBC's Right Over Insurance Policies

    The Supreme Court ruled that RCBC has a right over the insurance policies taken by GOYU. The endorsement documents prepared by Alchester Insurance Agency, Inc. in favor of RCBC were upheld. Even if unsigned by GOYU, their inaction and continued benefit from the credit facilities implied ratification or at least estopped them from denying the endorsements. Hence, RCBC was considered the beneficiary of the insurance policies pursuant to the equitable principle of estoppel.

  2. Extent of GOYU's Outstanding Obligation

    The Court determined that GOYU's total obligation to RCBC was P107,246,887.90 as of January 21, 1993, after taking into account certain payments and deductions. The Court found that the lower courts erred in excluding certain promissory notes because they were mere renewals of previous loans already availed by GOYU. Furthermore, the Supreme Court ordered RCBC to collect this amount along with interest, surcharges, and penalties as temperate.

PRINCIPLES:

  • Stipulation in Mortgage Contracts Mortgage contracts can include agreements that oblige the mortgagor to insure the property for the mortgagee's benefit.

  • Equitable Principle of Estoppel Changes or acts based on estoppel can be binding if one party in a transaction reasonably relies on the actions or commitments of another, even without formal endorsement.

  • Mortgagee's Separate Insurable Interest Both mortgagor and mortgagee can insure mortgaged property for their respective benefit.

  • Article 2127 of the Civil Code A mortgage extends to indemnities concerning the mortgaged estate from insurers.

  • Doctrine of Estoppel in Insurance Claims Public policy, fair dealing, and justice prohibit one from denying acts or representations made to another's detriment who relied on them.

  • Section 53 of the Insurance Code Insurance proceeds apply to the interest of the person for whose benefit the insurance is made, but equitable considerations can make exceptions.

  • Payment of Interest, Surcharges, and Penalties Even in cases where surcharges and penalties may be deemed iniquitous, interest on loans may still be valid and collectable by the bank.