G.R. No. 14300 - San Miguel Brewery vs. Law Union and Rock Insurance Co., Ltd.

The San Miguel Brewery initiated an action on October 8, 1917, in the Court of First Instance of Manila to recover sums due under two insurance policies.
The policies were issued respectively by the Law Union and Rock Insurance Company (Ltd.) and the "Filipinas" Compania de Seguros for P7,500 each, insuring property that was later destroyed by fire.
The complaint sought a total judgment of P15,000 with interest and costs, and included a provision that upon cancellation of the mortgage and satisfaction of a balance debt of P4,505.30, the plaintiff would be absolved from further liability toward the defendants.

Though the San Miguel Brewery was named as the assured in the policies, it was alleged that its true interest in the insured property was as a mortgage creditor only.
Originally, D. P. Dunn owned the property and had mortgaged it to the San Miguel Brewery to secure a debt of P10,000, with an agreement that Dunn would have the property insured at his expense.
Antonio Brias, the Brewery’s general manager, applied for insurance on the property, clearly stating that the Brewery was interested merely as a mortgagee.
The insurance companies, limiting their risk, issued two separate policies each for P7,500 in the name of the Brewery, with no further indication of any other interest in the property.

In March 1917, D. P. Dunn sold the insured property to Henry Harding. No assignment of the insurance policies to Harding took place thereafter.
Harding, though later acquiring the property, was not a party to the insurance contracts and his interest was not reflected in the policy documentation.
The insurance companies settled with the San Miguel Brewery by paying it the full amount of its mortgage credit, thereby terminating the Brewery’s claim against them.
Harding then pursued recovery for the difference between the insurance face value and the mortgage credit, arguing a larger insurable interest in the property.
The trial court concluded that Harding, not being a party to the insurance contracts, had no right of action against the insurance companies and absolved them from further liability.

Whether Henry Harding, having acquired the property after the insurance policies were issued, has a right to claim any amount in excess of the mortgage debt.

Specifically, whether the change in property ownership, without a corresponding assignment or change in the insurance policy, creates an insurable interest for Harding.
Whether the liability of the insurance companies extends to cover the owner's interest beyond that of the mortgagee as originally stated.

Whether the express provisions of the insurance policies and the Insurance Act (specifically sections 16, 50, 19, and 55) limit the recovery strictly to the insurable interest of the San Miguel Brewery as mortgagee.

The issue arises on the interpretation of the policies that were issued solely in the name of the Brewery and whether any broader coverage was intended.
Determining if a court has the power to reform the contracts to reflect an intent to insure the owner’s residual interest in addition to the mortgagee’s interest.