[G.R. No.

 14300. January 19, 1920.]

SAN MIGUEL BREWERY, ETC., plaintiff-appellee, vs. LAW UNION AND ROCK INSURANCE
CO. (LTD.) ET AL., defendants-appellees. HENRY HARDING, defendant-appellant.

A brewery company, as mortgagee of real property, procured a policy of insurance to be written

thereon payable to itself, in case of loss. The insurer was notified that the brewery was merely a
mortgagee, but no information was asked or given as to the personality of the owner. Held: That the
brewery company had an insurable interest but could recover on the policy only to the extent of the
credit secured by the mortgage.

FACTS:

In the contract of mortgage, the owner P.D. Dunn had agreed, at his own expense, to insure the mortgaged
property for its full value and to indorse the policies in such manner as to authorize the Brewery
Company to receive the proceeds in case of loss and to retain such part thereof as might be necessary to
satisfy the remainder then due upon the mortgage debt. Instead, however, of effecting the insurance
himself Dunn authorized and requested the Brewery Company to procure insurance on the property in the
amount of P15,000 at Dunn's expense.

San Miguel insured the property only as mortgagee. Dunn sold the property to Henry Harding. The
insurance was not assigned by Dunn to Harding.

When it was destroyed by fire, the two companies settled with San Miguelto the extent of the mortgage
credit.

The RTC Absolved the 2 companies from the difference. Henry Harding is not entitled to the difference
between the mortgage credit and the face value of the policies.

Henry Harding appealed.

ISSUE:

Whether or not San Miguel has insurable interests as mortgagee only to the extent of the mortgage credit.

RULING:

Yes.

Section 19 of the Insurance Act provides that, a change of interest in any part of a thing insured
unaccompanied by a corresponding change of interest in the insurance, suspends the insurance to an
equivalent extent, until the interest in the thing and the interest in the insurance are vested in the same
person

Section 55 also provides that, the mere transfer of a thing insured does not transfer the policy, but
suspends it until the same person becomes the owner of both the policy and the thing insured.

Undoubtedly these policies of insurance might have been so framed as to have been "payable to the San
Miguel Brewery, mortgagee, as its interest may appear, remainder to whomsoever, during the continuance
of the risk, may become the owner of the interest insured." (Sec 54, Act No. 2427.) Such a clause would
have proved an intention to insure the entire interest in the property, not merely the insurable interest of
the San Miguel Brewery, and would have shown exactly to whom the money, in case of loss, should be
paid. But the policies are not so written.

The blame for the situation thus created rests, however, with the Brewery rather than with the insurance
companies, and there is nothing in the record to indicate that the insurance companies were requested to
write insurance upon the insurable interest of the owner or intended to make themselves liable to that
extent
If by inadvertence, accident, or mistake the terms of the contract were not fully set forth in the policy, the
parties are entitled to have it reformed. But to justify the reformation of a contract, the proof must be of
the most satisfactory character, and it must clearly appear that the contract failed to express the real
agreement between the parties

In the case now before us the proof is entirely insufficient to authorize reformation.