FILIPINAS COMPAÑIA DE SEGUROS vs. CHRISTERN, HUENEFELD and CO.

, INC
G.R. No. L-2294, May 25, 1951

FACTS
October 1, 1941: Respondent Corporation, Christern, obtained from petitioner Filipinas Compania, a fire
policy in the sum of P1M, covering merchandise contained in a building located at Binondo, Manila.

During the Japanese military occupation, the building and insured merchandise were burned. And so,
Christern claimed its policy. Filipinas, however, refused to pay the claim on the ground that the policy in
favor of Christern had ceased to be in force on the date the United States declared war against Germany,
Christern, being controlled by German subjects and the petitioner Filipinas, being a company under
American jurisdiction when said policy was issued on October 1, 1941. Despite this assertion, Filipinas
still paid Christern P92,650 on April 19, 1943 pursuant to the order of Dir. of Bureau of Financing as
ordered by Japanese Military.

Thus, on August 6, 1946, an action is thus filed by the Insurance company, Filipinas, to recover the sum it
paid to Christern.

Lower Court’s Rulings

CFI Manila: Dismissed the petition;
CA: Affirmed CFI’s ruling.

ISSUE: W/N CHRISTERN IS A PUBLIC ENEMY

HELD: YES.
A corporation is subject to enemy legislation when it is controlled by enemies, namely managed under the
influence of individuals or corporations, themselves considered as enemies. The majority of the
stockholders of the respondent corporation Christern were German subjects. This being so, the SC ruled
that said respondent became an enemy corporation upon the outbreak of the war between the United
States and Germany.

The Philippine Insurance Law (Act No. 2427, as amended,) in Section 8, provides that "anyone except a
public enemy may be insured."

Precisely, it stands to reason that an insurance policy ceases to be allowable as soon as an insured
becomes a public enemy.

This is for the reason that the subjects of one country cannot be permitted to lend their assistance to
protect by insurance the commerce or property of belligerent, alien subjects, or to do anything detrimental
too their country's interest. The purpose of war is to cripple the power and exhaust the resources of the
enemy, and it is inconsistent that one country should destroy its enemy's property and repay in insurance
the value of what has been so destroyed, or that it should in such manner increase the resources of the
enemy, or render it aid, and the commencement of war determines, for like reasons, all trading
intercourse with the enemy, which prior thereto may have been lawful. All individuals therefore, who
compose the belligerent powers, exist, as to each other, in a state of utter exclusion, and are public
enemies.

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, lost.

The respondent Christern Co., having become an enemy corporation on December 10, 1941, the
insurance policy issued in its favor on October 1, 1941, by the petitioner (a Philippine corporation) 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.
However, elementary rules of justice require that the premium paid by the respondent for the period
covered by its policy from December 11, 1941, should be returned by the petitioner.
IF INDEED CHRISTERN IS PUBLIC ENEMY, W/N INSURER FILIPINAS CAN RECOVER THE MONEY
IT PAID TO CHRISTERN
HELD: YES. The CA decision is reversed.

Factually, there can be no doubt that the Director of the Bureau of Financing, in ordering the petitioner
Filipinas to pay the claim of the respondent, merely obeyed the instruction of the Japanese Military
Administration. It results that the petitioner Filipinas is entitled to recover what paid to the respondent
Christern under the circumstances on this case. However, the petitioner will be entitled to recover only the
equivalent, in actual Philippines currency of P92,650 paid on April 19, 1943, in accordance with the rate
fixed in the Ballantyne scale.