Marquez and Maxilite v. Far East Bank and Trust Company;  GR No. 171379, January 10, 2011

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FACTS

Maxilite and Marques entered into a trust receipt transaction with FEBTC, in the sum of US$80,765.00, for the shipment of various high-technology equipment from the United States, with the merchandise serving as collateral. Maxilite paid the premiums for these policies through debit arrangement. Far East Bank Insurance Brokers, Inc. (FEBIBI), subsidiary of FEBTC, upon the advice of FEBTC facilitated the procurement and processing from Makati Insurance Company of four separate and independent fire insurance policies over the trust receipted merchandise.

Finding that Maxilite failed to pay the insurance premium in the sum of P8,265.60 for one of the insurance policy, covering the period 24 June 1994 to 24 June 1995, FEBIBI sent written reminders to FEBTC, to debit Maxilite’s account.  FEBTC failed to transmit the premium payments on subject insurance coverage.

In March 1995, a fire gutted Maxilite’s office and warehouse. As a result, Maxilite suffered losses amounting to at least P2.1 million, which Maxilite claimed against the fire insurance policy with Makati Insurance Company. Makati Insurance Company denied the fire loss claim on the ground of non-payment of premium. FEBTC and FEBIBI disclaimed any responsibility for the denial of the claim.

Maxilite and Marques sued FEBTC, FEBIBI, and Makati Insurance Company. Maxilite and Marques invoke estoppel in claiming against FEBTC, FEBIBI, and Makati Insurance Company the face value of the insurance policy. They alleged they were led to believe and they in fact believed that the settlement of Maxilite’s trust receipt account included the payment of the insurance premium.

Both trial and appellate courts basically agree that FEBTC is estopped from claiming that the insurance premium has been unpaid. That FEBTC induced Maxilite and Marques to believe that the insurance premium has in fact been debited from Maxilite’s account is grounded on the the following facts: (1) FEBTC represented and committed to handle Maxilite’s financing and capital requirements, including the related transactions such as the insurance of the trust receipted merchandise; (2) prior to the subject Insurance Policy No. 1024439, the premiums for the three separate fire insurance policies had been paid through automatic debit arrangement;

ISSUE

WON the premium for the subject insurance policy has in fact been paid;

HELD

YES. Since (1) FEBTC committed to debit Maxilite’s account corresponding to the insurance premium; (2) FEBTC had insurable interest over the property prior to the settlement of the trust receipt account; and (3) Maxilite’s bank account had sufficient funds to pay the insurance premium prior to the settlement of the trust receipt account, FEBTC should have debited Maxilite’s account as what it had repeatedly done, as an established practice, with respect to the previous insurance policies. However, FEBTC failed to debit and instead disregarded the written reminder from FEBIBI to debit Maxilite’s account. FEBTC’s conduct clearly constitutes negligence in handling Maxilite’s and Marques’ accounts. Negligence is defined as “the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent man and reasonable man could not do. 

As a consequence of its negligence, FEBTC must be held liable for damages pursuant to Article 2176 of the Civil Code which states “whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done.” Indisputably, had the insurance premium been paid, through the automatic debit arrangement with FEBTC, Maxilite’s fire loss claim would have been approved. Hence, Maxilite suffered damage to the extent of the face value of the insurance policy or the sum of P2.1 million.

In estoppel, a party creating an appearance of fact, which is false, is bound by that appearance as against another person who acted in good faith on it.  Estoppel is based on public policy, fair dealing, good faith and justice.  Its purpose is to forbid one to speak against his own act, representations, or commitments to the injury of one who reasonably relied thereon.  It springs from equity, and is designed to aid the law in the administration of justice where without its aid injustice might result.

The Court stated that “estoppel may arise from silence as well as from words.” ‘Estoppel by silence’ arises where a person, who by force of circumstances is obliged to another to speak, refrains from doing so and thereby induces the other to believe in the existence of a state of facts in reliance on which he acts to his prejudice.  Silence may support an estoppel whether the failure to speak is intentional or negligent.

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