G.R. No. 174719 - Heirs of Pacres vs. Heirs of Ygona

On October 21, 1963, Oriental Assurance Corporation issued Fire Policy No. F-3770 (Exh. A), an open policy for P61,000.00 covering stocks, materials, supplies, furniture, fixtures, machinery and equipment of Paramount Shirt Manufacturing Co., contained in its building at 256 Jaboneros St., Manila, for one year to October 21, 1964.
Paramount was indebted to Pacific Banking Corporation for at least P800,000.00; its goods were held under trust receipts. The policy was endorsed to Pacific Banking as mortgagee/trustor with Oriental Assurance’s consent that loss, if any, be paid to the bank.

On January 4, 1964, fire destroyed the insured goods on the ground and second floors.
On January 24, 1964, petitioner’s counsel demanded indemnity. On January 28 and March 25, 1964, Oriental Assurance (through H.H. Bayne Adjustment Co.) informed petitioner that no formal claim or proof of loss was filed, violating Policy Condition No. 11.
On April 24, 1964, petitioner’s counsel asked the adjuster to verify customs entries as proof of loss.

On April 28, 1964, Pacific Banking filed Civil Case No. 56889 against Oriental Assurance for P61,000.00.
In its May 25, 1964 answer, Oriental Assurance pleaded (a) lack of formal claim and (b) premature suit due to no proof of loss (Condition 11).
At trial, petitioner introduced Exh. H (Dec. 22, 1965 adjuster’s letter) disclosing undeclared co-insurances totaling P305,000.00 (Wellington P30,000; Empire P25,000; Asian Surety P250,000), in violation of Condition No. 3.

The trial court denied respondent’s motion to dismiss, deemed the proof-of-loss requirement waived, set the case for submission and additional hearing, and on April 18, 1968 rendered judgment ordering Oriental Assurance to pay P61,000.00 with 8% interest (Jan 4–Apr 28, 1964) and 12% thereafter, attorney’s fees of P6,100.00, and costs.
The Court of Appeals (April 23, 1975) reversed the trial court; its denial of petitioner’s motion for reconsideration (July 3, 1975) resulted in this petition for review on certiorari.

Whether the insured’s non-disclosure of co-insurances violated Policy Condition No. 3, constituting fraud or misrepresentation that voids the policy ab initio, including as to the mortgagee’s interest.
Whether the failure to file the required proof of loss under Policy Condition No. 11 rendered the suit premature, since no final rejection of a compliant claim occurred.