Sps Cha vs CA

Spouses NILO CHA and STELLA UY CHA, and UNITED INSURANCE CO., INC.,  petitioners, vs. COURT OF APPEALS and CKS DEVELOPMENT CORPORATION, respondents. [G.R. No. 124520. August 18, 1997 PADILLA, J .:] .:] TOPIC: Insurable Interest - Effect when no insurable interest exists – Sec. 18, IC FACTS: 1. Sps Cha are are the lessees lessees in the lease lease agreement agreement with with CKS Developm Development ent Corp., Corp., lessor. lessor. a. 1 year year cont contrac ractt state states s that that “18. “18. LESSEE shall not insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in the leased premises without first obtaining the written consent and approval of the LESSOR. LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent of the LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own benefit” benefit ” 2. Sps Cha insured insured against against loss by fire their their merchandi merchandise se inside the leased leased premises premises with with the United Insurance Co. (united) without the consent of CKS. 3. The same day day the lease lease contract contract was to to expire a fire fire broke out out inside inside the leased leased premises premises 4. CKS CKS kne knew w of the the insu insura ranc nce e a. CKS wrote wrote a letter letter to to United United asking asking for the proceeds proceeds of the the insurance insurance.. b. Unit United ed ref refus used ed to to pay pay CKS CKS ISSUE: ISSUE: W/N paragraph 18 is valid giving CKS the right to the insurance proceeds. HELD: NO 1. law on cont contrac racts ts prov provide ided d that that the the stipulations contained in a contract cannot be contrary to law, morals, good customs, public order or public policy “Sec. 18. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured.” 2. non-life non-life insurance insurance policy such such as the fire insurance insurance policy policy taken taken by petitioner-sp petitioner-spouses ouses over over their  merchandise is primarily a contract of indemnity a. Insurable Insurable interest interest in the the property property insured insured must exist exist at the time the the insurance insurance takes effect effect and at the time the loss occurs i. Based on sound public policy: to prevent a person from taking out an insurance policy on property upon which he has no insurable interest and collecting the proceeds of said policy in case of loss of the property. b. a contract contract of insurance insurance that that is a mere mere wager wager which which is void under Sectio Section n 25 “SECTION 25. Every stipulation in a policy of Insurance for the payment of loss, whether the person insured has or has not any interest in the property insured, or that the policy shall be received as proof of  such interest, and every policy executed by way of gaming or wagering, is void.” 3. CKS has no insurab insurable le interest interest in the goods goods and merchan merchandise dise inside inside the leased leased premises premises under under the provisions of Section 17 of the Insurance Code. “Section 17. The measure of an insurable interest interest in property is the extent to which the insured might be damnified by loss of injury thereof." a. CKS cannot cannot be a benefici beneficiary ary of the fire fire insurance insurance policy, policy, insurab insurable le interest interest over said said merchandise remains with the insured, the Cha spouses