ONG LIM SING, JR. vs. FEB LEASING AND FINANCE Thelma Vda. De Canilang v.

Court of Appeals
CORPORATION G.R. No. 92492, 17 June 1993, 223 SCRA 443
ONG LIM SING, JR. vs. FEB LEASING AND FINANCE
CORPORATION FACTS:
G.R. No. 168115 - June 8, 2007

FACTS: Canilang was found to have suffered from sinus tachycardia and
On March 9, 1995, FEB Leasing and Finance Corporation bronchitis after a check-up from his doctor. The next day, he
entered into a lease of equipment and motor vehicles with JVL applied for a “non-medical” insurance policy with respondent
Food Products. On the same date, Vicente Ong Lim Sing, Jr. Grepalife naming his wife, Thelma Canilang, as his beneficiary
executed an Individual Guaranty Agreement with FEB to with the face value of Php19,700.
guarantee the prompt and faithful performance of the terms and He died of “congestive heart failure,” “anemia,” and “chronic
conditions of the aforesaid lease agreement. Corresponding anemia.” When Thelma filed a claim with Great Pacific, it was
Lease Schedules with Delivery and Acceptance Certificates denied on the ground that Jaime concealed material information.
over the equipment and motor vehicles formed part of the Thelma filed a complaint against Great Pacific with the
agreement. Under the contract, JVL was obliged to pay FEB an Insurance Commission for recovery of the insurance proceeds.
aggregate gross monthly rental of One Hundred Seventy She testified that she was not aware of any serious illness
Thousand Four Hundred Ninety-Four Pesos (P170,494.00). suffered by Jaime, and that what she knew was that he died
because of a kidney disorder. Great Pacific presented a
JVL defaulted in the payment of the monthly rentals. As of July physician who explained that Jaime’s application had been
31, 2000, the amount in arrears, including the penalty charges approved based on his medical declaration, and that medical
and insurance premiums, amounted to Three Million Four examinations are required only in cases where applicant
Hundred Fourteen Thousand Four Hundred Sixty-Eight and indicated that he has undergone medical consultation and
75/100 Pesos (P3,414,468.75). On August 23, 2000, FEB sent hospitalization.
a letter to JVL demanding payment of the said amount. The Insurance Commissioner ordered Great Pacific to pay
However, JVL failed to pay. P19,700 plus legal interest and P2,000.00 as attorney’s fees. On
appeal by Great Pacific, the Court of Appeals reversed. It found
On December 6, 2000, FEB filed a Complaint with the Regional that the failure of Jaime Canilang to disclose previous medical
Trial Court of Manila for sum of money, damages, and replevin consultation and treatment constituted material information
against JVL, Lim, and John Doe. which should have been communicated to Great Pacific to
enable the latter to make proper inquiries.
In an Amended Answer, JVL and Lim admitted the existence of
the lease agreement but asserted that it is in reality a sale of ISSUE:
equipment on instalment basis, with FEB acting as the financier.
On November 22, 2002, the trial court ruled in favor of JVL and
Lim and stressed the contradictory terms found in the lease Whether or not Canilang was guilty of misrepresentation
agreement. The trial court stated, among others, that if JVL and
Lim (then defendants) were to be regarded as only a lessee, HELD:
logically the lessor who asserts ownership will be the one
directly benefited or injured and therefore the lessee is not
supposed to be the assured as he has no insurable interest. Yes. Petition denied.
There was a right of the insurance company to rescind the
On December 27, 2002, FEB filed its Notice of Appeal. contract if it was proven that the insured committed fraud in not
Accordingly, on January 17, 2003, the court issued an Order affirming that he was treated for heart condition and other
elevating the entire records of the case to the Court of Appeals. ailments stipulated.
On March 15, 2005, the Court of Appeals issued its Decision Apart from certifying that he didn’t suffer from such a condition,
declaring the transaction between the parties as a financial Canilang also failed to disclose that he had twice consulted a
lease agreement. The said decision reversed and set aside the doctor who had found him to be suffering from “sinus
trial court’s decision dated November 22, 2002. Hence, Lim filed tachycardia” and “acute bronchitis.”
the present Petition for Review on Certiorari. Under the Insurance Code:
Sec. 26. A neglect to communicate that which a party knows and
ISSUE: ought to communicate, is called a concealment.
Whether or not petitioner has an insurable interest in the Sec. 28. Each party to a contract of insurance must
equipment and motor vehicles leased. communicate to the other, in good faith, all factors within his
knowledge which are material to the contract and as to which he
RULING: makes no warranty, and which the other has not the means of
Yes. ascertaining.
The information concealed must be information which the
The stipulation in Section 14 of the leased contract, that the concealing party knew and should have communicated. The test
equipment shall be insured at the cost and expense of the lessee of materiality of such information is contained in Section 31
against loss, damage, or destruction from fire, theft, accident, or which provides that “materiality is to be determined not by the
other insurable risk for the full term of the lease, is a binding and event, but solely by the probable and reasonable influence of
valid stipulation. Petitioner, as a lessee, has an insurable the facts upon the party to whom the communication is due, in
interest in the equipment and motor vehicles leased. Section 17 forming his estimate of the disadvantages of the proposed
of the Insurance Code provides that the measure of an insurable contract, or in making his inquiries.”
interest in property is the extent to which the insured might be The information which Jaime Canilang failed to disclose was
damnified by loss or injury thereof. It cannot be denied that JVL material to the ability of Great Pacific to estimate the probable
will be directly damnified in case of loss, damage, or destruction risk he presented as a subject of life insurance. Had he disclosed
of any of the properties leased. his visits to his doctor, the diagnosis made and medicines
prescribed by such doctor, in the insurance application, it may CA reversed decision. Concealment of other co-insurances is a
be reasonably assumed that Great Pacific would have made misrepresentation and can easily be fraud.
further inquiries and would have probably refused to issue a
non-medical insurance policy.
Materiality relates rather to the “probable and reasonable Issues: (1) Whether or not unrevealed con-insurances is a
influence of the facts” upon the party to whom the violation of Policy Condition No.3
communication should have been made, in assessing the risk
involved in making or omitting to make further inquiries and in
(2) Whether or not there was premature filing of action
accepting the application for insurance; that “probable and
reasonable influence of the facts” concealed must, of course, be
determined objectively, by the judge ultimately. Held: (1) Yes. Policy Condition 3 provides that the insured must
The Insurance Commissioner had also ruled that the failure of give notice of any insurance already in effect or subsequently be
Great Pacific to convey certain information to the insurer was not in effect covering same property being insured. Failure to do so,
“intentional” in nature, for the reason that Canilang believed that the policy shall be forfeited.
he was suffering from minor ailment like a common cold. Section
27 stated that “concealment whether intentional or unintentional
entitles the injured party to rescind a contract of insurance.” Failure to reveal before the loss of the 3 other insurances is a
The failure to communicate must have been intentional rather clear misrepresentation or a false declaration. The material fact
than inadvertent. Canilang could not have been unaware that his was asked for but was not revealed. Representations of facts
heart beat would at times rise to high and alarming levels and are the foundations of the contract. Pacific itself provided for the
that he had consulted a doctor twice in the two (2) months before evidences in trial court that proved existence of
applying for non-medical insurance. Indeed, the last medical misrepresentation.
consultation took place just the day before the insurance
application was filed. In all probability, Jaime Canilang went to
visit his doctor precisely because of the ailment. (2) Yes. Policy Condition 11 is a sine qua non requirement for
Canilang’s failure to set out answers to some of the questions in maintaining action. It requires that documents necessary to
the insurance application constituted concealment. prove and estimate the loss should be included with notice of
loss. Pacific failed to submit formal claim of loss with supporting
documents but shifted the burden to the insurance company.
Failing to submit claim is failure for insurance company to reject
Pacific Banking Corporation vs. CA & Oriental Assurance claim. Thus, a lack of cause of action to file suit.
Posted on September 9, 2015
Pacific Banking Corporation vs. CA & Oriental Assurance Furthermore, the mortgage clause in the policy specifically
[GR. No. L-41014 28 November 1988] provides that the policy is invalidated by reasons of FRAUD,
MISREPRESENTATION and FRAUD. Concealment can easily
Facts: An open Fire Policy issued to Paramount Shirt be fraud or misrepresentation.
Manufacturing for Php61,000 on the following: stocks, materils,
supplies, furniture, fixture, machinery, equipment contained on The insured – PARAMOUNT is not entitled to proceeds. Moreso,
the 1st to 3rd floors. Insurance is for a year starting 21 Pacific as indorsee of policy is not entitled.
OCTOBER 1964.

Paramount Shirt is debtor of Pacific Banking amounting to

Pacific sent letter of demand to Oriental. Insurance Adjuster of

Pacific filed for sum of money against Oriental. Oriental alleged

Trial court decided in favor of Pacific. Decision based on