Young v Midland March 31, 1915 G.R. No. L-9370

J. Johnson

Facts:

Young owned a candy and fruit store in Manila. Midland issued a policy for the payment of a premium of P60. The indemnity was 3,000 if the place was destroyed by fire. One clause claimed:

 “Waranty B. – It is hereby declared and agreed that during the pendency of this policy no hazardous goods stored or kept for sale, and no hazardous trade or process be carried on, in the building to which this insurance applies, or in any building connected therewith.”

Young then placed three boxes of fireworks. The plaintiff intended to use them for Chinese New Year, but the authorities prohibited the use. The bodega was destroyed by fire.

Both of the parties agree that said fireworks come within the phrase “hazardous goods,” mentioned in said “warranty B” of the policy. But it was found out that the fireworks were found in a part of the building not destroyed by the fire, and that they in no way contributed to the fire.

Issue: Whether or not the placing of said fireworks in the building insured is a violation of the terms of the contract of insurance and especially of “warranty B”

Held: Yes. Petition dismissed.

Ratio:

Both the plaintiff and defendant agree that if they were “hazardous goods,” and if they were “stored,” then the act of the plaintiff was a violation of the terms of the contract of insurance and the defendant was justified in repudiating its liability.

This leads us to a consideration of the meaning of the accord “stored” as used in said “warranty B.” Whether a particular article is “stored” or not must, in some degree, depend upon the intention of the parties. Nearly all of the cases cited by the lower court are cases where the article was being put to some reasonable and actual use, which might easily have been permitted by the terms of the policy, and within the intention of the parties, and excepted from the operation of the warranty, like the present.

The author of the Century Dictionary defines the world “store” to be a deposit in a store or warehouse for preservation or safe keeping; o place in a warehouse or other place of deposit for safe keeping.

Said definitions, of course, do not include a deposit in a store, in small quantities, for daily use. “Daily use” precludes the idea of a deposit for preservation or safe keeping, as well as a deposit for future consumption, or safe keeping.

The plaintiff makes no claim that he deposited them there with any other idea than “for future use” – for future consumption. It seems clear to us that the “hazardous goods” in question were “stored” in the bodega, as that word is generally defined. That being true, suppose the defendant had made an examination of the premises, even in the absence of a fire, and had found the “hazardous goods” there, under the conditions above described, would it not have been justified, then and there, in declaring the policy null and of no effect by reason of a violation of its terms?

The appellant argues, however, that in view of the fact that the “storing” of the fireworks on the premises of the insured did not contribute in any way to the damage occasioned by the fire, he should be permitted to recover – that the “storing” of the “hazardous goods” in no way caused injury to the defendant company. The “storing” was a violation of the terms of the contract by virtue of the provisions of the policy itself, terminated the contractual relations.

The plaintiff paid a premium based upon the risk at the time the policy was issued. Certainly it cannot be denied that the placing of the firecrackers in the building insured increased the risk. The plaintiff had not paid a premium based upon the increased risk, neither had the defendant issued a policy upon the theory of a different risk. The plaintiff was enjoying, if his contention may be allowed may be allowed, the benefits of an insurance policy upon one risk, whereas, as a matter of fact, it was issued upon an entirely different risk. The defendant had neither been paid nor had issues a policy to cover the increased risk. An increase of risk which is substantial and which is continued for a considerable period of time, is a direct and certain injury to the insurer, and changes the basis upon which the contract of insurance rests.