16.

FILIPINO MERCHANTS v CA
J. REGALADO | November 28, 1989
Topic: Insurable Interest In Property
Nature: Petition

PARTIES:
FILIPINO MERCHANTS INSURANCE CO., INC., petitioner,
COURT OF APPEALS and CHOA TIEK SENG, respondents.

DISPUTED MATTER: Presence of insurable interest over property by a vendee/consignee

SUMMARY
Choa Tiek Seng insured a cargo of fishmeal from Bangkok to Manila, [he is a consignee of the
goods in transit under the terms “C&F Manila”] under a policy from Filipino Merchants against
all risks. The cargo arriving from the SS Bougainville was in bad condition; hence respondent
filed a claim against petitioner to recover the amount of PHP 51k, which petitioner refused so
Choa Tiek Seng filed a suit. The RTC and CA ruled in favor of respondent. SC ruled that CTS
has insurable interest by virtue of a perfected contract of sale

DOCTRINE
Section 13 of the Insurance Code defines insurable interest in property as every interest in
property, whether real or personal, or any relation thereto, or liability in respect thereof, of
such nature that a contemplated peril might directly damnify the insured. In principle, anyone
has an insurable interest in property who derives a benefit from its existence or would suffer
loss from its destruction whether he has or has not any title in, or lien upon or possession of
the property. Insurable interest in property may consist in (a) an existing interest; (b) an
inchoate interest founded on an existing interest; or (c) an expectancy, coupled with an
existing interest in that out of which the expectancy arises.

FACTS

1. In December 1976 - Choa Tiek Seng (consignee of a shipment of the subject fishmeal) and Filipino
Merchants Insurance Co. (Filipino Merchants) entered into an insurance contract: (Important: mej
malabo yung case pero from how I understood it Choa Tiek Seng purchased the goods/fishmeal from a
vendor in Banngkok. Then the goods were gonna be delivered from Bangkok to Choa Tiek Seng in
Manila. Then otw to manila, dun nasira yung goods, pero basically, may interest na si Choa Tiek Seng
sa goods cus nabili nya na e.)
o Policy No. M-2678 for insurance against all risks
o What was insured - insured the shipment of fishmeal loaded on board the vessel SS
Bougainville
 Description - 600 metric tons of fishmeal in new gunny bags of 90 kilos each from
Bangkok, Thailand to Manila against all risks under warehouse to warehouse terms
o Amount covered - 267,653.59 pesos
2. However, what was imported was only 59.940 metric tons of fishmeal and not 600 tons of fishmeal
3. On December 11, 1976 - 666 new grunny bags of fishmeal (the shipment) was unloaded at the port of
Manila and unto the arrastre contractor E. Razon, Inc.
o 227 new grunny bags were in bad order condition, amounting to 12,148 kilos
4. December 21, 1976 - Choa Tiek Seng sought to claim P51,568.62 from insurer Filipino Merchants,
representing the damage to the fishmeal which was insured by Filipino Merchants
5. Filipino Merchants refused to pay Choa Tiek Seng’s claim
 6. Choa Tiek Seng then brought an action against Filipino Merchants, seeking to recover the amount of
51,568.62
7. Filipino Merchants brought a third party complaint against Compagnie Maritime Des Chargeurs Reunis
and/or E. Razon (arrastre contractor)
8. Trial Court - in favor of Choa Tiek Seng (the insured)
o Filipino Merchants ordered to pay 51,568.62
o On third party complaint by Filipino Merchants - Compagnie Maritime Des Chargeurs Reunis
and E. Razon ordered to reimburse solidarily Filipino Merchants for the sums they will pay to
Choa Tiek Seng
9. Filipino Merchants appeal to the CA
10. CA
o Filipino merchants still ordered to pay the 51,568.62 to Choa Tiek Seng
o E. Razon to reimburse Filipino Merchants the amount of 25.471.80
o Complaint against Compagnie dismissed
11. Hence, petition

ISSUE-HELD
W/N CHOA TIEK SENG, AS CONSIGNEE OF THE INSURED GOODS, HAS INSURABLE INTEREST OVER
SUCH GOODS - YES. THEREFORE INSURANCE CONTRACT IS VALID (because it was choa tiek seng
who entered into an insurance contract with Filipino Merchant. If CTS has an insurable interest, the contract of
insurance is valid. If CTS does not have an insurable interest, the contract of insurance is void, because
insurable interest is an essential element for the validity of the insurance contract)

GENERAL RULE
- Definition of Insurable Interest in property (Sec. 13, Insurance Code) - property as every interest in
property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature
that a contemplated peril might directly damnify the insured.
o In other words - there is insurable interest in property when the person derives a benefit from its
existence or would suffer loss from its destruction whether he has or has not any title in, or
lien upon or possession of the property. 
- Insurable interest in property may consist in:
o an existing interest;
o an inchoate interest founded on an existing interest; or
o an expectancy, coupled with an existing interest in that out of which the expectancy arises. 

IN THIS CASE
- Choa Tiek Seng, who is the vendee/consignee of the goods in transit, has insurable interest on the
goods (fishmeal). Hence, it may be the proper subject of insurance
o Choa TIek Seng’s interest over the goods stems from a perfected contract of sale between
Choa TIek Seng and the shipper of the goods
o The perfected contract of sale operates to vest Choa TIek Seng an equitable title even before
the delivery or before the performance of the conditions of the sale
o Even though the contract of shipment was under C&F (C&F - an arrangement wherein the
vendor would be the one to pay the costs of shipping for it to be delivered to the vendee, but the
risk of loss is transferred to the buyer), Choa Tiek Seng still had insurable interest during the
transit/shipment of the goods by virtue of a perfected contract of sale
- Further Article 1523 of the Civil Code provides - that where the seller is authorized or required to send
the goods to the buyer, delivery of the goods to a carrier is deemed to be a delivery of the goods to the
buyer.
o Hence, the delivery of the goods on board the carrying vessels partake of the nature of actual
delivery since, from that time, the foreign buyers assumed the risks of loss of the goods and
paid the insurance premium covering them

OTHER ISSUES
- On all risks
 o Filipino Merchants - contends that an "all risks" marine policy has a technical meaning in
insurance in that before a claim can be compensable it is essential that there must be "some
fortuity, " "casualty" or "accidental cause" to which the alleged loss is attributable and the failure
of herein private respondent, upon whom lay the burden, to adduce evidence showing that the
alleged loss to the cargo in question was due to a fortuitous event precludes his right to recover
from the insurance policy.
o SC - The Court here ruled that “all risks” nature of the insurance contract at hand does not need
the claimant to show “some fortuity,” “casualty” or “accidental cause” in order to recover their
loss. The terms accident and accidental do not acquire any technical meaning hence are
interpreted as all damages/losses suffered by the insured except a) loss or damage caused by
delay and b) loss or damage caused by inherent defect of the thing insured. Generally, the
burden of proof belongs to the insured, but under an all risks policy the burden is not on the
insured to prove the precise cause of the damage. In these cases, the insured merely has the
initial burden of proving that the cargo was in good condition and then subsequently damaged;
thereafter burden of proof shifts to the insurer to show that the loss falls under the exceptions to
the coverage. In this case, Petitioner is liable to cover for the damage for it has failed to show
that the event falls under the exceptions.

DISPOSITIVE
WHEREFORE, the instant petition is DENIED and the assailed decision of the respondent Court of Appeals is
AFFIRMED in toto.
SO ORDERED.