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G.R. No. 198588 July 11, 2012

UNITED MERCHANTS CORPORATION, Petitioner,

vs.

COUNTRY BANKERS INSURANCE CORPORATION, Respondent.

D E C I S I O N

CARPIO, J.:

The Case

This Petition for Review on Certiorari

seeks to reverse the Court of Appeals’ Decision

dated 16 June

2011 and its Resolution

dated 8 September 2011 in CA-G.R. CV No. 85777. The Court of Appeals

reversed the Decision

of the Regional Trial Court (RTC) of Manila, Branch 3, and ruled that the claim on

the Insurance Policy is void.

The Facts

The facts, as culled from the records, are as follows:

Petitioner United Merchants Corporation (UMC) is engaged in the business of buying, selling, and

manufacturing Christmas lights. UMC leased a warehouse at 19-B Dagot Street, San Jose Subdivision,

Barrio Manresa, Quezon City, where UMC assembled and stored its products.

On 6 September 1995, UMC’s General Manager Alfredo Tan insured UMC’s stocks in trade of Christmas

lights against fire with defendant Country Bankers Insurance Corporation (CBIC) for P15,000,000.00. The

Fire Insurance Policy No. F-HO/95-576 (Insurance Policy) and Fire Invoice No. 12959A, valid until 6

September 1996, states:

AMOUNT OF INSURANCE:

FIFTEEN

MILLION PESOS

PHILIPPINE

CURRENCY

x x x

PROPERTY INSURED: On stocks in trade only, consisting of Christmas Lights, the properties of the

Assured or held by them in trust, on commissions, or on joint account with others and/or for which they

are responsible in the event of loss and/or damage during the currency of this policy, whilst contained in

the building of one lofty storey in height, constructed of concrete and/or hollow blocks with portion of

galvanized iron sheets, under galvanized iron rood, occupied as Christmas lights storage.

On 7 May 1996, UMC and CBIC executed Endorsement F/96-154 and Fire Invoice No. 16583A to form

part of the Insurance Policy. Endorsement F/96-154 provides that UMC’s stocks in trade were insured

against additional perils, to wit: "typhoon, flood, ext. cover, and full earthquake." The sum insured was

also increased to P50,000,000.00 effective 7 May 1996 to 10 January 1997. On 9 May 1996, CBIC issued

Endorsement F/96-157 where the name of the assured was changed from Alfredo Tan to UMC.

On 3 July 1996, a fire gutted the warehouse rented by UMC. CBIC designated CRM Adjustment

Corporation (CRM) to investigate and evaluate UMC’s loss by reason of the fire. CBIC’s reinsurer, Central

Surety, likewise requested the National Bureau of Investigation (NBI) to conduct a parallel investigation.

On 6 July 1996, UMC, through CRM, submitted to CBIC its Sworn Statement of Formal Claim, with proofs

of its loss.

On 20 November 1996, UMC demanded for at least fifty percent (50%) payment of its claim from CBIC.

On 25 February 1997, UMC received CBIC’s letter, dated 10 January 1997, rejecting UMC’s claim due to

breach of Condition No. 15 of the Insurance Policy. Condition No. 15 states:

If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof,

or if any fraudulent means or devices are used by the Insured or anyone acting in his behalf to obtain

any benefit under this Policy; or if the loss or damage be occasioned by the willful act, or with the

connivance of the Insured, all the benefits under this Policy shall be forfeited.

On 19 February 1998, UMC filed a Complaint

against CBIC with the RTC of Manila. UMC anchored its

insurance claim on the Insurance Policy, the Sworn Statement of Formal Claim earlier submitted, and

the Certification dated 24 July 1996 made by Deputy Fire Chief/Senior Superintendent Bonifacio J.

Garcia of the Bureau of Fire Protection. The Certification dated 24 July 1996 provides that:

This is to certify that according to available records of this office, on or about 6:10 P.M. of July 3, 1996, a

fire broke out at United Merchants Corporation located at 19-B Dag[o]t Street, Brgy. Manresa, Quezon

City incurring an estimated damage of Fifty-Five Million Pesos (P55,000,000.00) to the building and

contents, while the reported insurance coverage amounted to Fifty Million Pesos (P50,000,000.00) with

Country Bankers Insurance Corporation.

The Bureau further certifies that no evidence was gathered to prove that the establishment was

willfully, feloniously and intentionally set on fire.

That the investigation of the fire incident is already closed being ACCIDENTAL in nature.

In its Answer with Compulsory Counterclaim

dated 4 March 1998, CBIC admitted the issuance of the

Insurance Policy to UMC but raised the following defenses: (1) that the Complaint states no cause of

action; (2) that UMC’s claim has already prescribed; and (3) that UMC’s fire claim is tainted with fraud.

CBIC alleged that UMC’s claim was fraudulent because UMC’s Statement of Inventory showed that it had

no stocks in trade as of 31 December 1995, and that UMC’s suspicious purchases for the year 1996 did

not even amount to P25,000,000.00. UMC’s GIS and Financial Reports further revealed that it had

insufficient capital, which meant UMC could not afford the alleged P50,000,000.00 worth of stocks in

trade.

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G.R. No. 198588 July 11, 2012 UNITED MERCHANTS CORPORATION, Petitioner, vs. COUNTRY BANKERS INSURANCE CORPORATION, Respondent. D E C I S I O N CARPIO, J.: The Case This Petition for Review on Certiorari1 seeks to reverse the Court of Appeals’ Decision2 dated 16 June 2011 and its Resolution3 dated 8 September 2011 in CA-G.R. CV No. 85777. The Court of Appeals reversed the Decision4 of the Regional Trial Court (RTC) of Manila, Branch 3, and ruled that the claim on the Insurance Policy is void. The Facts The facts, as culled from the records, are as follows: Petitioner United Merchants Corporation (UMC) is engaged in the business of buying, selling, and manufacturing Christmas lights. UMC leased a warehouse at 19-B Dagot Street, San Jose Subdivision, Barrio Manresa, Quezon City, where UMC assembled and stored its products. On 6 September 1995, UMC’s General Manager Alfredo Tan insured UMC’s stocks in trade of Christmas lights against fire with defendant Country Bankers Insurance Corporation (CBIC) for P15,000,000.00. The Fire Insurance Policy No. F-HO/95-576 (Insurance Policy) and Fire Invoice No. 12959A, valid until 6 September 1996, states: AMOUNT OF INSURANCE: FIFTEEN MILLION PESOS PHILIPPINE CURRENCY x x x PROPERTY INSURED: On stocks in trade only, consisting of Christmas Lights, the properties of the Assured or held by them in trust, on commissions, or on joint account with others and/or for which they are responsible in the event of loss and/ ...
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