Filipinas v Christern G.R. No. L-2294 May 25, 1951

J. Paras

Facts:

Christern obtained from Filipinas a fire insurance policy of P1000,000, covering merchandise contained in a building located at Binondo. During the Japanese military occupation, the building and insured merchandise were burned. The respondent its claim under the policy. The total loss suffered by the respondent was fixed at P92,650.

The petitioner refused to pay the claim on the ground that the policy in favor of the respondent had ceased to be in force on the date the U.S. declared war on Germany with the respondent Corporation being controlled by German subjects and the petitioner being a company under American jurisdiction (though organized by Philippine laws) when the policy was issued on October 1, 1941. The petitioner, however, paid to the respondent the sum of P92,650 on April 19, 1943 under orders from the military government.

The insurer filed for a suit to recover the sum. The contention was that the policy ceased to be effective because of the outbreak of the war and that the payment made by the petitioner to the respondent corporation during the Japanese military occupation was under pressure.

The tiral and the appellate courts dismissed the action. The Court of Appeals claimed that a corporation is a citizen of the country or state by and under the laws of which it was created or organized.

 Hence this appeal.

Issue: Whether the policy in question became null and void upon the declaration of war

Held: Yes. Petition granted.

Ratio:

The majority of the stockholders of the respondent corporation were German subjects. The respondent became an enemy corporation upon the outbreak of the war. The English and American cases relied upon by the Court of Appeals have lost their force in view of the latest decision of the Supreme Court of the United States in Clark vs. Uebersee Finanz Korporation where the controls test has been adopted.

Measures of blocking foreign funds, the so called freezing regulations, and other administrative practice in the treatment of foreign-owned property in the United States allowed to large degree the determination of enemy interest in domestic corporations and thus the application of the control test. In Clark vs. Uebersee, the court held that “The property of all foreign interest was placed within the reach of the vesting power (of the Alien Property Custodian) not to appropriate friendly or neutral assets but to reach enemy interest which masqueraded under those innocent fronts. . . . The power of seizure and vesting was extended to all property of any foreign country or national so that no innocent appearing device could become a Trojan horse.”

The Philippine Insurance Law states that “anyone except a public enemy may be insured.” It stands to reason that an insurance policy ceases to be allowable as soon as an insured becomes a public enemy.

“All individuals therefore, who compose the belligerent powers, exist, as to each other, in a state of utter exclusion, and are public enemies.”

Vance- “In the case of an ordinary fire policy, which grants insurance only from year, or for some other specified term it is plain that when the parties become alien enemies, the contractual tie is broken and the contractual rights of the parties, so far as not vested, are lost.”

The respondent having become an enemy corporation on December 10, 1941, the insurance policy issued in its favor on October 1, 1941, by the petitioner had ceased to be valid and enforceable, and since the insured goods were burned after December 10, 1941, and during the war, the respondent was not entitled to any indemnity under said policy from the petitioner. The premium must be returned for the sake of justice.

It results that the petitioner is entitled to recover the indemnity paid. However, the petitioner will be entitled to recover only the equivalent of P92,650 paid on April 19, 1943.