Case No.

48
RCBC V. COURT OF APPEALS
FACTS:
When GOYU & Sons, Inc. (GOYU) obtained a credit facility from Rizal Commercial
Banking Corporation (RCBC) it executed a mortgage contract in favor of the bank
wherein it was expressly stipulated that GOYU will insure all the subject properties with
an insurance company approved by the bank and to endorse and deliver the policies to
the bank. GOYU, through Alchester Insurance, Agency, Inc., took insurance policies
from Malayan Insurance Company, Inc. (MICO), sister company of RCBC, and endorsed
them in favor of RCBC. Copies of the endorsements were sent and received by GOYU,
RCBC and MICO. GOYU continued to enjoy the benefits of the credit facilities extended
to it by the bank. When GOYU’s factory buildings were gutted by fire, GOYU and RCBC
filed separate claims with MICO but were both denied because the policies were either
attached or claimed by other creditors. GOYU then filed a complaint for specific
performance and damages disowning the endorsements or lack of authority of Alchester
to prepare and issue said endorsements in favor of RCBC. The trial court rendered
judgment ordering, among others, MICO to pay fire loss claim of GOYU while ordering
MICO and RCBC to pay damages. GOYU was ordered to pay its loan obligations with
RCBC with interests. On appeal, the Court of Appeals sustained the findings of the trial
court with respect to MICO and RCBC’s liabilities. Hence, this recourse.

ISSUE:
Whether or not RCBC, as mortgagee, has any right over the insurance policies
taken by GOYU, the mortgagor, in case of the occurrence of loss.

HELD:
Yes. It is settled that a mortgagor and a mortgagee have separate and distinct
insurable interests in the same mortgaged property, such that each one of them may
insure the same property for his own sole benefit. There is no question that GOYU could
insure the mortgaged property for its own exclusive benefit. In the present case,
although it appears that GOYU obtained the subject insurance policies naming itself as
the sole payee, the intentions of the parties as shown by their contemporaneous acts,
must be given due consideration in order to better serve the interest of justice and
equity. CDcaSA
It is to be noted that nine endorsement documents were prepared by Alchester
in favor of RCBC. The Court is in a quandary how Alchester could arrive at the idea of
endorsing any specific insurance policy in favor of any particular beneficiary or payee
other than the insured had not such named payee or beneficiary been specifically
disclosed by the insured itself. It is also significant that GOYU voluntarily and purposely
took the insurance policies from MICO, a sister company of RCBC, and not just from
any other insurance company. Alchester would not have found out that the subject
pieces of property were mortgaged to RCBC had not such information been voluntarily
disclosed by GOYU itself. Had it not been for GOYU, Alchester would not have known of
GOYU’s intention of obtaining insurance coverage in compliance with its undertaking in
the mortgage contracts with RCBC, and verily, Alchester would not have endorsed the
policies to RCBC had it not been so directed by GOYU. On equitable principles,
particularly on the ground of estoppel, the Court is constrained to rule in favor of
mortgagor RCBC. RCBC, in good faith, relied upon the endorsement documents sent to
it as this was only pursuant to the stipulation in the mortgage contracts. We find such
reliance to be justified under the circumstances of the case. GOYU failed to seasonably
repudiate the authority of the person or persons who prepared such endorsements.
Over and above this, GOYU continued, in the meantime, to enjoy the benefits of the
credit facilities extended to it by RCBC. After the occurrence of the loss insured against,
it was too late for GOYU to disown the endorsements for any imagined or contrived lack
of authority of Alchester to prepare and issue said endorsements. If there had not been
actually an implied ratification of said endorsements by virtue of GOYU’s inaction in this
case, GOYU is at the very least estopped from assailing their operative effects. To
permit GOYU to capitalize on its non-confirmation of these endorsements while it
continued to enjoy the benefits of the credit facilities of RCBC which believed in good
faith that there was due endorsement pursuant to their mortgage contracts, is to
countenance grave contravention of public policy, fair dealing, good faith, and justice.
Such an unjust situation, the Court cannot sanction. Under the peculiar circumstances
obtaining in this case, the Court is bound to recognize RCBC’s right to the proceeds of
the insurance policies if not for the actual endorsement of the policies, at least on the
basis of the equitable principle of estoppel.
The basis and purpose of the doctrine was explained in Philippine National Bank
vs. Court of Appeals (94 SCRA 357 [1979]), to wit: The doctrine of estoppel is based
upon the grounds of public policy, fair dealing, good faith and justice, and its purpose is
to forbid one to speak against his own act, representations, or commitments to the
injury of one to whom they were directed and who reasonably relied thereon. The
doctrine of estoppel springs from equitable principles and the equities in the case. It is
designed to aid the law in the administration of justice where without its aid injustice
might result. It has been applied by this Court whereever and whenever special
circumstances of a case so demand. cADTSH
GOYU cannot seek relief under Section 53 of the Insurance Code which provides
that the proceeds of insurance shall exclusively apply to the interest of the person in
whose name or for whose benefit it is made. The peculiarity of the circumstances
obtaining in the instant case presents a justification to take exception to the strict
application of said provision, it having been sufficiently established that it was the
intention of the parties to designate RCBC as the party for whose benefit the insurance
policies were taken out. This Court can not over stress the fact that upon receiving its
copies of the endorsement documents prepared by Alchester, GOYU, despite the
absence of its written conformity thereto, obviously considered said endorsement to be
sufficient compliance with its obligation under the mortgage contracts since RCBC
accordingly continued to extend the benefits of its credit facilities and GOYU continued
to benefit therefrom. Just as plain too is the intention of the parties to constitute RCBC
as the beneficiary of the various insurance policies obtained by GOYU. The intention of
the parties will have to be given full force and effect in this particular case. The
insurance proceeds may, therefore, be exclusively applied to RCBC, which under the
factual circumstances of the case, is truly the person or entity for whose benefit the
policies were clearly intended. Moreover, the law’s evident intention to protect the
interests of the mortgagee upon the mortgaged property is expressed in Article 2127 of
the Civil Code.
The proceeds of the 8 insurance policies endorsed to RCBC aggregate to
P89,974,488.36. Being exclusively payable to RCBC by reason of the endorsement by
Alchester to RCBC, which we already ruled to have the force and effect of an
endorsement by GOYU itself, these 8 policies can not be attached by GOYU’s other
creditors up to the extent of the GOYU’s outstanding obligation in RCBC’s favor. Section
53 of the Insurance Code ordains that the insurance proceeds of the endorsed policies
shall be applied exclusively to the proper interest of the person for whose benefit it was
made. In this case, to the extent of GOYU’s obligation with RCBC, the interest of GOYU
in the subject policies had been transferred to RCBC effective as of the time of the
endorsement. These policies may no longer be attached by the other creditors of GOYU,
like Alfredo Sebastian in the present G.R. No. 128834, which may nonetheless forthwith
be dismissed for being moot and academic in view of the results reached herein. Only
the two other policies amounting to P19,646,224.92 may be validly attached, garnished,
and levied upon by GOYU’s other creditors. To the extent of GOYU’s outstanding
obligation with RCBC, all the rest of the other insurance policies above-listed which
were endorsed to RCBC, are, therefore, to be released from attachment, garnishment,
and levy by the other creditors of GOYU. Respondent Sebastian must, however, yield to
the preferential right of RCBC over the MICO insurance policies. It is basic and
fundamental that the first mortgagee has superior rights over junior mortgagees or
attaching creditors.