San Miguel Brewery V. Law Union And Rock Insurance Co.

(1920)
FACTS:
In the contract of mortgage, the owner P.D. Dunn had agreed, at his own expense, to
insure the mortgaged property for its full value and to indorse the policies in such manner
as to authorize the Brewery Company to receive the proceeds in case of loss and to retain
such part thereof as might be necessary to satisfy the remainder then due upon
the mortgage debt. Instead, however, of effecting the insurance himself Dunn authorized
and requested the Brewery Company to procure insurance on the property in the amount
of P15,000 at Dunn's expense.
San Miguel insured the property only as mortgagee. Dunn sold the property to Henry
Harding. The insurance was not assigned by Dunn to Harding. When it was destroyed by
fire, the two companies settled with San Miguel to the extent of the mortgage credit.
RTC: Absolved the 2 companies from the difference. Henry Harding is not entitled to the
difference between the mortgage credit and the face value of the policies. Henry Harding
appealed.
ISSUE:
1. W/N San Miguel has insurable interest as mortgagor only to the extent of
the mortgage credit
YES
2. W/N Harding has insurable interest as owner - NO
RULING: affirmed
section 19 of the Insurance Act:
a change of interest in any part of a thing insured unaccompanied by a corresponding
change of interest in the insurance, suspends the insurance to an equivalent extent, until
the interest in the thing and the interest in the insurance are vested in the same person
section 55:
the mere transfer of a thing insured does not transfer the policy, but suspends it until the
same person becomes the owner of both the policy and the thing insured.
Undoubtedly these policies of insurance might have been so framed as to have been
"payable to the San Miguel Brewery, mortgagee, as its interest may appear, remainder to
whomsoever, during the continuance of the risk, may become the owner of the interest
insured." (Sec 54, Act No. 2427.) Such a clause would have proved an intention to insure
the entire interest in the property, not merely the insurable interest of the San Miguel
Brewery, and would have shown exactly to whom the money, in case of loss, should be
paid. But the policies are not so written.
The blame for the situation thus created rests, however, with the Brewery rather than
with the insurance companies, and there is nothing in the record to indicate that the
insurance companies were requested to write insurance upon the insurable interest of the
owner or intended to make themselves liable to that extent

If by inadvertence, accident, or mistake the terms of the contract were not fully set
forth in the policy, the parties are entitled to have it reformed. But to justify the
reformation of a contract, the proof must be of the most satisfactory character, and it must
clearly appear that the contract failed to express the real agreement between the parties.
In the case now before us the proof is entirely insufficient to authorize reformation.