SAURA IMPORT AND EXPORT CO., INC. VS. PHILIPPINE INTERNATIONAL SURETY CO., INC.
,
AND PHILIPPINE NATIONAL BANK
G.R. No. L-15184, May 31, 1963
FACTS
On December 26, 1952, the Saura Import & Export Co Inc., (Saura) mortgaged to PNB a parcel of land in
Davao to secure the payment of promissory note. Erected on the land mortgaged, was a building of
strong materials owned by the mortgagor Saura. Saura then insured the building and its contents with the
respondent PIS Co., for P29,000.00, against fire for the period of one year from October 2, 1954.
Basically, in case of loss of the said building due to fire, it will be payable to PNB.
However, on October 15, 1954, the insurer cancelled the policy, and such cancellation notice was
likewise sent to PNB, but we later find out that neither defendants PIS nor PNB informed the plaintiff
Saura of the cancellation of the policy.
On April 6, 1955, the building and its contents were burned. Thus, Saura filed a claim with the Insurer PIS
and mortgagee Bank, PNB. Upon the presentation of notice of loss with the PNB, Saura learned for the
first time that the policy had previously been cancelled by the insurer. Upon refusal of the Insurer to pay
the amount of the insurance, Saura, filed a case against Insurer PIS and PNB.
Lower Courts’ Ruling: Dismissed the case to the detriment of Saura.
ISSUE: W/N THE INSURER FAILED TO GIVE NOTICE OF CANCELLATION OF POLICY
HELD: YES.
Fire insurance policies and other contracts of insurance upon property generally provide for cancellation
by the insurer by notice to the insured for a prescribed period, which is usually 5 days, and the return of
the unearned portion of the premium paid by the insured.
The form and sufficiency of a notice of cancellation is determined by policy provisions. In order to form the
basis for the cancellation of a policy, notice to the insured need not be in any particular form, in the
absence of a statute or policy provision prescribing such form, and it is sufficient, so long as it positively
and unequivocally indicates to the insured, that it is the intention of the company that the policy shall
cease to be binding.
In the case at bar, the policy in question does not provide for the notice, its form or period. Neither does
the Insurance Law provide for such notice. It thus devolves upon the Court to apply the generally
accepted principles of insurance, regarding cancellation of the insurance policy by the insurer.
Where the policy contains no provisions that a certain number of days notice shall be given, a reasonable
notice and opportunity to obtain other insurance must be given. Actual personal notice to the insured is
essential to a cancellation under a provision for cancellation by notice. The actual receipt by the insured
of a notice of cancellation is universally recognized as a condition precedent to a cancellation of the policy
by the insurer, and consequently a letter containing notice of cancellation which is mailed by the insurer
but not received by the insured, is ineffective as cancellation.
Here, the insurance company, must have realized the paramount importance of sending a notice of
cancellation, when it sent the notice of cancellation of the policy to PNB.
It was the primary duty of the insurance company to notify the insured, but it did not. It is thus evident that
both the insurance company and the appellee bank failed, wittingly or unwittingly, to notify the insured
appellant Saura of the cancellation made. There is no substantial compliance of the notice requirement
when Insurer sent notice to the bank, as far appellant herein is concerned, is not effective notice.
“If a mortgage or lien exists against the property insured, and the policy contains a clause stating that
loss, if any, shall be payable to such mortgagee or the holder of such lien as interest may appear, notice
of cancellation to the mortgagee or lienholder alone is ineffective as a cancellation of the policy to
the owner of the property.” (Connecticut Ins. Co. v. Caumisar, 218 Ky. 378, 391 SW 776, cited in 29
Am. Jur. p. 743).
Upon authority of the above case, therefore, the liability of the insurance company becomes a fact.
Disposition: Thus, the decision appealed from is reversed. The SC condemns PIS to pay Saura the sum
of P29k, the amount in the policy.
