Saura Import and Export v Philippine International Surety Co GR L – 15184 May 31, 1963 Mortgagor/Insured: Saura Import and Export Co., Inc. (Saura) Mortgagee: Philippine National Bank (PNB) Insurer: Philippine International Surety Co. (PISC) EMERGENCY RECIT: Saura mortgaged its property to PNB. Saura insured its mortgaged property to Philippine International Surety Co. from October 2, 1954 to October 2, 1955. However, on October 15, 1954 Philippine International Surety Co. cancelled the insurance policy without informing the insured Saura. SC: 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 his interest may appear, notice of cancellation to the mortgagee or lienholder alone is ineffective as a cancellation of the policy as to the owner of the property. FACTS: On Dec. 26, 1952, Saura mortgaged to PNB its registered parcel of land in Davao to secure the payment of a promissory note amounting to Php 27,000. A building of strong materials which was also owned by Saura, was erected on the parcel of land and the building had always been covered by insurance even before the execution of the mortgage contract. Pursuant to the mortgage agreement which required Saura to insure the building and its contents, it obtained a fire insurance for Php 29,000 from PISC for a period of 1 year starting Oct. 2, 1954 to Oct. 2, 1955. The mortgage also required Saura to endorse the insurance policy to PNB. The memo stated: Loss if any, payable to PNG as their interest may appear, subject to the terms, conditions and warranties of this policy. The policy was delivered to PNB by Saura. However on Oct. 15, 1954, barely 13 days after the issuance of the fire insurance, PISC canceled the same, effective as of the date of issue. Notice of the cancellation was sent to PNB (but not to Saura) in writing and was received by the bank on Nov. 8, 1954. On April 6, 1955, the building and its contents worth Php 4,685 were burned. On April 11, 1985, Saura filed a claim with PISC and mortgagee bank. Upon presentation of notice of loss with PNB, Saura learned for the first time that the policy had been previously canceled by PISC, when Saura’s folder in the bank’s file was opened and the notice of the cancellation by PISC was found. ISSUE: W/N cancellation by PISC was proper. HELD: No. SC ordered PISC to pay Saura in the amount of Php 29,000. RATIO: The policy in question does NOT provide for the notice of cancellation, its form or period. The Insurance Law does not likewise provide for such notice. This being the case, it
devolves upon the Court to apply the generally accepted principles of insurance, regarding cancellation of the insurance policy by the insurer. Actual notice of cancellation in a clear and unequivocal manner, preferably in writing should be given by the insurer to the insured so that the latter might be given an opportunity to obtain other insurance for his own protection. The notice should be personal to the insurer and not to and/or through any unauthorized person by the policy. Both the PSIC and the PNB failed, wittingly or unwittingly to notify Saura of the cancellation made. The insurer contends that it gave notice to PNB as mortgagee of the property and that was already substantial compliance with its duty to notify the insured of the cancellation of the policy. But notice to the bank, as far as Saura herein is concerned, is not effective notice. PISC is then ordered to pay Saura Php 29,000, the amount involved in the policy subject matter of this case.
