G.R. No.

L-4611        December 17, 1955

QUA CHEE GAN, plaintiff-appellee, 

Delgado, Flores & Macapagal for appellant.

REYES, J. B. L., J.:

Qua Chee Gan, a merchant of Albay, instituted this action in 1940, in the Court of First Instance of said
province, seeking to recover the proceeds of certain fire insurance policies totalling P370,000, issued by
the Law Union & Rock Insurance Co., Ltd., upon certain bodegas and merchandise of the insured that
were burned on June 21, 1940. The records of the original case were destroyed during the liberation of
the region, and were reconstituted in 1946. After a trial that lasted several years, the Court of First
Instance rendered a decision in favor of the plaintiff, the dispositive part whereof reads as follows: 

Wherefore, judgment is rendered for the plaintiff and against the defendant condemning the latter
to pay the former — 

(a) Under the first cause of action, the sum of P146,394.48;

(b) Under the second cause of action, the sum of P150,000;

(c) Under the third cause of action, the sum of P5,000;

(d) Under the fourth cause of action, the sum of P15,000; and 

(e) Under the fifth cause of action, the sum of P40,000; 

all of which shall bear interest at the rate of 8% per annum in accordance with Section 91 (b) of the
Insurance Act from September 26, 1940, until each is paid, with costs against the defendant.

The complaint in intervention of the Philippine National Bank is dismissed without costs. (Record on
Appeal, 166-167.)

From the decision, the defendant Insurance Company appealed directly to this Court.

The record shows that before the last war, plaintiff-appellee owned four warehouses or bodegas
(designated as Bodegas Nos. 1 to 4) in the municipality of Tabaco, Albay, used for the storage of stocks
of copra and of hemp, baled and loose, in which the appellee dealth extensively. They had been, with
their contents, insured with the defendant Company since 1937, and the lose made payable to the
Philippine National Bank as mortgage of the hemp and crops, to the extent of its interest. On June, 1940,
the insurance stood as follows:

1
 Policy No. Property Insured

2637164 (Exhibit "LL") Bodega No. 1 (Building)

Bodega No. 2 (Building)

Bodega No. 3 (Building)

Hemp Press — moved by steam engine

2637345 (Exhibit "X") Merchandise contents (copra and empty sacks of Bodega No. 1)

2637346 (Exhibit "Y") Merchandise contents (hemp) of Bodega No. 3

2637067 (Exhibit "GG") Merchandise contents (loose hemp) of Bodega No. 4

Total

Fire of undetermined origin that broke out in the early morning of July 21, 1940, and lasted almost one
week, gutted and completely destroyed Bodegas Nos. 1, 2 and 4, with the merchandise stored theren.
Plaintiff-appellee informed the insurer by telegram on the same date; and on the next day, the fire
adjusters engaged by appellant insurance company arrived and proceeded to examine and photograph
the premises, pored over the books of the insured and conducted an extensive investigation. The plaintiff
having submitted the corresponding fire claims, totalling P398,562.81 (but reduced to the full amount of
the insurance, P370,000), the Insurance Company resisted payment, claiming violation of warranties and
conditions, filing of fraudulent claims, and that the fire had been deliberately caused by the insured or by
other persons in connivance with him.

With counsel for the insurance company acting as private prosecutor, Que Chee Gan, with his brother,
Qua Chee Pao, and some employees of his, were indicted and tried in 1940 for the crime of arson, it
being claimed that they had set fire to the destroyed warehouses to collect the insurance. They were,
however, acquitted by the trial court in a final decision dated July 9, 1941 (Exhibit WW). Thereafter, the
civil suit to collect the insurance money proceeded to its trial and termination in the Court below, with the
result noted at the start of this opinion. The Philippine National Bank's complaint in intervention was
dismissed because the appellee had managed to pay his indebtedness to the Bank during the pendecy of
the suit, and despite the fire losses.

In its first assignment of error, the insurance company alleges that the trial Court should have held that
the policies were avoided for breach of warranty, specifically the one appearing on a rider pasted (with
other similar riders) on the face of the policies (Exhibits X, Y, JJ and LL). These riders were attached for
the first time in 1939, and the pertinent portions read as follows:

Memo. of Warranty. — The undernoted Appliances for the extinction of fire being kept on the
premises insured hereby, and it being declared and understood that there is an ample and
constant water supply with sufficient pressure available at all seasons for the same, it is hereby
warranted that the said appliances shall be maintained in efficient working order during the
currency of this policy, by reason whereof a discount of 2 1/2 per cent is allowed on the premium
chargeable under this policy.

Hydrants in the compound, not less in number than one for each 150 feet of external wall
measurement of building, protected, with not less than 100 feet of hose piping and nozzles for
every two hydrants kept under cover in convenient places, the hydrants being supplied with water

2
 pressure by a pumping engine, or from some other source, capable of discharging at the rate of
not less than 200 gallons of water per minute into the upper story of the highest building
protected, and a trained brigade of not less than 20 men to work the same.'

It is argued that since the bodegas insured had an external wall perimeter of 500 meters or 1,640 feet, the
appellee should have eleven (11) fire hydrants in the compound, and that he actually had only two (2),
with a further pair nearby, belonging to the municipality of Tabaco.

We are in agreement with the trial Court that the appellant is barred by waiver (or rather estoppel) to claim
violation of the so-called fire hydrants warranty, for the reason that knowing fully all that the number of
hydrants demanded therein never existed from the very beginning, the appellant neverthless issued the
policies in question subject to such warranty, and received the corresponding premiums. It would be
perilously close to conniving at fraud upon the insured to allow appellant to claims now as void ab initio
the policies that it had issued to the plaintiff without warning of their fatal defect, of which it was informed,
and after it had misled the defendant into believing that the policies were effective.

The insurance company was aware, even before the policies were issued, that in the premises insured
there were only two fire hydrants installed by Qua Chee Gan and two others nearby, owned by the
municipality of TAbaco, contrary to the requirements of the warranty in question. Such fact appears from
positive testimony for the insured that appellant's agents inspected the premises; and the simple denials
of appellant's representative (Jamiczon) can not overcome that proof. That such inspection was made is
moreover rendered probable by its being a prerequisite for the fixing of the discount on the premium to
which the insured was entitled, since the discount depended on the number of hydrants, and the fire
fighting equipment available (See "Scale of Allowances" to which the policies were expressly made
subject). The law, supported by a long line of cases, is expressed by American Jurisprudence (Vol. 29,
pp. 611-612) to be as follows:

It is usually held that where the insurer, at the time of the issuance of a policy of insurance, has
knowledge of existing facts which, if insisted on, would invalidate the contract from its very
inception, such knowledge constitutes a waiver of conditions in the contract inconsistent with the
facts, and the insurer is stopped thereafter from asserting the breach of such conditions. The law
is charitable enough to assume, in the absence of any showing to the contrary, that an insurance
company intends to executed a valid contract in return for the premium received; and when the
policy contains a condition which renders it voidable at its inception, and this result is known to
the insurer, it will be presumed to have intended to waive the conditions and to execute a binding
contract, rather than to have deceived the insured into thinking he is insured when in fact he is
not, and to have taken his money without consideration. (29 Am. Jur., Insurance, section 807, at
pp. 611-612.) 

The reason for the rule is not difficult to find.

The plain, human justice of this doctrine is perfectly apparent. To allow a company to accept
one's money for a policy of insurance which it then knows to be void and of no effect, though it
knows as it must, that the assured believes it to be valid and binding, is so contrary to the dictates
of honesty and fair dealing, and so closely related to positive fraud, as to the abhorent to
fairminded men. It would be to allow the company to treat the policy as valid long enough to get
the preium on it, and leave it at liberty to repudiate it the next moment. This cannot be deemed to
be the real intention of the parties. To hold that a literal construction of the policy expressed the
true intention of the company would be to indict it, for fraudulent purposes and designs which we
cannot believe it to be guilty of (Wilson vs. Commercial Union Assurance Co., 96 Atl. 540, 543-
544).

The inequitableness of the conduct observed by the insurance company in this case is heightened by the
fact that after the insured had incurred the expense of installing the two hydrants, the company collected

3
the premiums and issued him a policy so worded that it gave the insured a discount much smaller than
that he was normaly entitledto. According to the "Scale of Allowances," a policy subject to a warranty of
the existence of one fire hydrant for every 150 feet of external wall entitled the insured to a discount of 7
1/2 per cent of the premium; while the existence of "hydrants, in compund" (regardless of number)
reduced the allowance on the premium to a mere 2 1/2 per cent. This schedule was logical, since a
greater number of hydrants and fire fighting appliances reduced the risk of loss. But the appellant
company, in the particular case now before us, so worded the policies that while exacting the greater
number of fire hydrants and appliances, it kept the premium discount at the minimum of 2 1/2 per cent,
thereby giving the insurance company a double benefit. No reason is shown why appellant's premises,
that had been insured with appellant for several years past, suddenly should be regarded in 1939 as so
hazardous as to be accorded a treatment beyond the limits of appellant's own scale of allowances. Such
abnormal treatment of the insured strongly points at an abuse of the insurance company's selection of the
words and terms of the contract, over which it had absolute control.

These considerations lead us to regard the parol evidence rule, invoked by the appellant as not applicable
to the present case. It is not a question here whether or not the parties may vary a written contract by oral
evidence; but whether testimony is receivable so that a party may be, by reason of inequitable conduct
shown, estopped from enforcing forfeitures in its favor, in order to forestall fraud or imposition on the
insured.

Receipt of Premiums or Assessments afte Cause for Forfeiture Other than Nonpayment. — It is a
well settled rule of law that an insurer which with knowledge of facts entitling it to treat a policy as
no longer in force, receives and accepts a preium on the policy, estopped to take advantage of
the forfeiture. It cannot treat the policy as void for the purpose of defense to an action to recover
for a loss thereafter occurring and at the same time treat it as valid for the purpose of earning and
collecting further premiums." (29 Am. Jur., 653, p. 657.)

It would be unconscionable to permit a company to issue a policy under circumstances which it

Moreover, taking into account the well known rule that ambiguities or obscurities must be strictly
interpreted aganst the prty that caused them, 1the "memo of warranty" invoked by appellant bars the latter
from questioning the existence of the appliances called for in the insured premises, since its initial
expression, "the undernoted appliances for the extinction of fire being kept on the premises insured
hereby, . . . it is hereby warranted . . .", admists of interpretation as an admission of the existence of such
appliances which appellant cannot now contradict, should the parol evidence rule apply.

The alleged violation of the warranty of 100 feet of fire hose for every two hydrants, must be equally
rejected, since the appellant's argument thereon is based on the assumption that the insured was bound
to maintain no less than eleven hydrants (one per 150 feet of wall), which requirement appellant is
estopped from enforcing. The supposed breach of the wter pressure condition is made to rest on the
testimony of witness Serra, that the water supply could fill a 5-gallon can in 3 seconds; appellant
thereupon inferring that the maximum quantity obtainable from the hydrants was 100 gallons a minute,
when the warranty called for 200 gallons a minute. The transcript shows, however, that Serra repeatedly
refused and professed inability to estimate the rate of discharge of the water, and only gave the "5-gallon
per 3-second" rate because the insistence of appellant's counsel forced the witness to hazard a guess.
Obviously, the testimony is worthless and insufficient to establish the violation claimed, specially since the
burden of its proof lay on appellant.

As to maintenance of a trained fire brigade of 20 men, the record is preponderant that the same was
organized, and drilled, from time to give, altho not maintained as a permanently separate unit, which the
warranty did not require. Anyway, it would be unreasonable to expect the insured to maintain for his
compound alone a fire fighting force that many municipalities in the Islands do not even possess. There is

4
no merit in appellant's claim that subordinate membership of the business manager (Co Cuan) in the fire
brigade, while its direction was entrusted to a minor employee unders the testimony improbable. A
business manager is not necessarily adept at fire fighting, the qualities required being different for both
activities.

Under the second assignment of error, appellant insurance company avers, that the insured violated the
"Hemp Warranty" provisions of Policy No. 2637165 (Exhibit JJ), against the storage of gasoline, since
appellee admitted that there were 36 cans (latas) of gasoline in the building designed as "Bodega No. 2"
that was a separate structure not affected by the fire. It is well to note that gasoline is not specifically
mentioned among the prohibited articles listed in the so-called "hemp warranty." The cause relied upon by
the insurer speaks of "oils (animal and/or vegetable and/or mineral and/or their liquid products having a
flash point below 300o Fahrenheit", and is decidedly ambiguous and uncertain; for in ordinary parlance,
"Oils" mean "lubricants" and not gasoline or kerosene. And how many insured, it may well be wondered,
are in a position to understand or determine "flash point below 003o Fahrenheit. Here, again, by reason of
the exclusive control of the insurance company over the terms and phraseology of the contract, the
ambiguity must be held strictly against the insurer and liberraly in favor of the insured, specially to avoid a
forfeiture (44 C. J. S., pp. 1166-1175; 29 Am. Jur. 180).

Insurance is, in its nature, complex and difficult for the layman to understand. Policies are
prepared by experts who know and can anticipate the hearing and possible complications of
every contingency. So long as insurance companies insist upon the use of ambiguous, intricate
and technical provisions, which conceal rather than frankly disclose, their own intentions, the
courts must, in fairness to those who purchase insurance, construe every ambiguity in favor of
the insured. (Algoe vs. Pacific Mut. L. Ins. Co., 91 Wash. 324, LRA 1917A, 1237.)

An insurer should not be allowed, by the use of obscure phrases and exceptions, to defeat the
very purpose for which the policy was procured (Moore vs. Aetna Life Insurance Co., LRA 1915D,
264).

We see no reason why the prohibition of keeping gasoline in the premises could not be expressed clearly
and unmistakably, in the language and terms that the general public can readily understand, without
resort to obscure esoteric expression (now derisively termed "gobbledygook"). We reiterate the rule
stated in Bachrach vs. British American Assurance Co. (17 Phil. 555, 561):

If the company intended to rely upon a condition of that character, it ought to have been plainly
expressed in the policy.

This rigid application of the rule on ambiguities has become necessary in view of current business
practices. The courts cannot ignore that nowadays monopolies, cartels and concentrations of capital,
endowed with overwhelming economic power, manage to impose upon parties dealing with them
cunningly prepared "agreements" that the weaker party may not change one whit, his participation in the
"agreement" being reduced to the alternative to take it or leave it" labelled since Raymond Baloilles"
contracts by adherence" (con tracts d'adhesion), in contrast to these entered into by parties bargaining on
an equal footing, such contracts (of which policies of insurance and international bills of lading are prime
examples) obviously call for greater strictness and vigilance on the part of courts of justice with a view to
protecting the weaker party from abuses and imposition, and prevent their becoming traps for the unwarry
(New Civil Coee, Article 24; Sent. of Supreme Court of Spain, 13 Dec. 1934, 27 February 1942).

Si pudiera estimarse que la condicion 18 de la poliza de seguro envolvia alguna oscuridad, habra
de ser tenido en cuenta que al seguro es, practicamente un contrato de los llamados de adhesion
y por consiguiente en caso de duda sobre la significacion de las clausulas generales de una
poliza — redactada por las compafijas sin la intervencion alguna de sus clientes — se ha de
adoptar de acuerdo con el articulo 1268 del Codigo Civil, la interpretacion mas favorable al

5
 asegurado, ya que la obscuridad es imputable a la empresa aseguradora, que debia haberse
explicado mas claramante. (Dec. Trib. Sup. of Spain 13 Dec. 1934)

The contract of insurance is one of perfect good faith (uferrimal fidei) not for the insured alone, but equally
so for the insurer; in fact, it is mere so for the latter, since its dominant bargaining position carries with it
stricter responsibility.

Another point that is in favor of the insured is that the gasoline kept in Bodega No. 2 was only incidental to
his business, being no more than a customary 2 day's supply for the five or six motor vehicles used for
transporting of the stored merchandise (t. s. n., pp. 1447-1448). "It is well settled that the keeping of
inflammable oils on the premises though prohibited by the policy does not void it if such keeping is
incidental to the business." Bachrach vs. British American Ass. Co., 17 Phil. 555, 560); and "according to
the weight of authority, even though there are printed prohibitions against keeping certain articles on the
insured premises the policy will not be avoided by a violation of these prohibitions, if the prohibited articles
are necessary or in customary use in carrying on the trade or business conducted on the premises." (45
C. J. S., p. 311; also 4 Couch on Insurance, section 966b). It should also be noted that the "Hemp
Warranty" forbade storage only "in the building to which this insurance applies and/or in any building
communicating therewith", and it is undisputed that no gasoline was stored in the burned bodegas, and
that "Bodega No. 2" which was not burned and where the gasoline was found, stood isolated from the
other insured bodegas.

The charge that the insured failed or refused to submit to the examiners of the insurer the books,
vouchers, etc. demanded by them was found unsubstantiated by the trial Court, and no reason has been
shown to alter this finding. The insured gave the insurance examiner all the date he asked for (Exhibits
AA, BB, CCC and Z), and the examiner even kept and photographed some of the examined books in his
possession. What does appear to have been rejected by the insured was the demand that he should
submit "a list of all books, vouchers, receipts and other records" (Age 4, Exhibit 9-c); but the refusal of the
insured in this instance was well justified, since the demand for a list of all the vouchers (which were not
in use by the insured) and receipts was positively unreasonable, considering that such listing was
superfluous because the insurer was not denied access to the records, that the volume of Qua Chee
Gan's business ran into millions, and that the demand was made just after the fire when everything was in
turmoil. That the representatives of the insurance company were able to secure all the date they needed
is proved by the fact that the adjuster Alexander Stewart was able to prepare his own balance sheet
(Exhibit L of the criminal case) that did not differ from that submitted by the insured (Exhibit J) except for
the valuation of the merchandise, as expressly found by the Court in the criminal case for arson.
(Decision, Exhibit WW).

How valuations may differ honestly, without fraud being involved, was strikingly illustrated in the decision
of the arson case (Exhibit WW) acquiting Qua Choc Gan, appellee in the present proceedings. The
decision states (Exhibit WW, p. 11):

Alexander D. Stewart declaro que ha examinado los libros de Qua Choc Gan en Tabaco asi
como su existencia de copra y abaca en las bodega al tiempo del incendio durante el periodo
comprendido desde el 1.o de enero al 21 de junio de 1940 y ha encontrado que Qua Choc Gan
ha sufrico una perdida de P1,750.76 en su negocio en Tabaco. Segun Steward al llegar a este
conclusion el ha tenidoen cuenta el balance de comprobacion Exhibit 'J' que le ha entregado el
mismo acusado Que Choc Gan en relacion con sus libros y lo ha encontrado correcto a
excepcion de los precios de abaca y copra que alli aparecen que no estan de acuerdo con los
precios en el mercado. Esta comprobacion aparece en el balance mercado exhibit J que fue
preparado por el mismo testigo.

In view of the discrepancy in the valuations between the insured and the adjuster Stewart for the insurer,
the Court referred the controversy to a government auditor, Apolonio Ramos; but the latter reached a
different result from the other two. Not only that, but Ramos reported two different valuations that could be
reached according to the methods employed (Exhibit WW, p. 35):

6
 La ciencia de la contabilidad es buena, pues ha tenido sus muchos usos buenos para promovar
el comercio y la finanza, pero en el caso presente ha resultado un tanto cumplicada y
acomodaticia, como lo prueba el resultado del examen hecho por los contadores Stewart y
Ramos, pues el juzgado no alcanza a ver como habiendo examinado las mismas partidas y los
mismos libros dichos contadores hayan de llegara dos conclusiones que difieron sustancialmente
entre si. En otras palabras, no solamente la comprobacion hecha por Stewart difiere de la
comprobacion hecha por Ramos sino que, segun este ultimo, su comprobacion ha dado lugar a
dos resultados diferentes dependiendo del metodo que se emplea.

Clearly then, the charge of fraudulent overvaluation cannot be seriously entertained. The insurer
attempted to bolster its case with alleged photographs of certain pages of the insurance book (destroyed
by the war) of insured Qua Chee Gan (Exhibits 26-A and 26-B) and allegedly showing abnormal
purchases of hemp and copra from June 11 to June 20, 1940. The Court below remained unconvinced of
the authenticity of those photographs, and rejected them, because they were not mentioned not
introduced in the criminal case; and considering the evident importance of said exhibits in establishing the
motive of the insured in committing the arson charged, and the absence of adequate explanation for their
omission in the criminal case, we cannot say that their rejection in the civil case constituted reversible
error.

The next two defenses pleaded by the insurer, — that the insured connived at the loss and that the
fraudulently inflated the quantity of the insured stock in the burnt bodegas, — are closely related to each
other. Both defenses are predicted on the assumption that the insured was in financial difficulties and set
the fire to defraud the insurance company, presumably in order to pay off the Philippine National Bank, to
which most of the insured hemp and copra was pledged. Both defenses are fatally undermined by the
established fact that, notwithstanding the insurer's refusal to pay the value of the policies the extensive
resources of the insured (Exhibit WW) enabled him to pay off the National Bank in a short time; and if he
was able to do so, no motive appears for attempt to defraud the insurer. While the acquittal of the insured
in the arson case is not res judicata on the present civil action, the insurer's evidence, to judge from the
decision in the criminal case, is practically identical in both cases and must lead to the same result, since
the proof to establish the defense of connivance at the fire in order to defraud the insurer "cannot be
materially less convincing than that required in order to convict the insured of the crime of
arson"(Bachrach vs. British American Assurance Co., 17 Phil. 536).

As to the defense that the burned bodegas could not possibly have contained the quantities of copra and
hemp stated in the fire claims, the insurer's case rests almost exclusively on the estimates, inferences
and conclusionsAs to the defense that the burned bodegas could not possibly have contained the
quantities of copra and hemp stated in the fire claims, the insurer's case rests almost exclusively on the
estimates, inferences and conclusions of its adjuster investigator, Alexander D. Stewart, who examined
the premises during and after the fire. His testimony, however, was based on inferences from the
photographs and traces found after the fire, and must yield to the contradictory testimony of engineer
Andres Bolinas, and specially of the then Chief of the Loan Department of the National Bank's Legaspi
branch, Porfirio Barrios, and of Bank Appraiser Loreto Samson, who actually saw the contents of the
bodegas shortly before the fire, while inspecting them for the mortgagee Bank. The lower Court was
satisfied of the veracity and accuracy of these witnesses, and the appellant insurer has failed to
substantiate its charges aganst their character. In fact, the insurer's repeated accusations that these
witnesses were later "suspended for fraudulent transactions" without giving any details, is a plain attempt
to create prejudice against them, without the least support in fact.

Stewart himself, in testifying that it is impossible to determine from the remains the quantity of hemp
burned (t. s. n., pp. 1468, 1470), rebutted appellant's attacks on the refusal of the Court below to accept
its inferences from the remains shown in the photographs of the burned premises. It appears, likewise,
that the adjuster's calculations of the maximum contents of the destroyed warehouses rested on the
assumption that all the copra and hemp were in sacks, and on the result of his experiments to determine
the space occupied by definite amounts of sacked copra. The error in the estimates thus arrived at
proceeds from the fact that a large amount of the insured's stock were in loose form, occupying less

7
space than when kept in sacks; and from Stewart's obvious failure to give due allowance for the
compression of the material at the bottom of the piles (t. s. n., pp. 1964, 1967) due to the weight of the
overlying stock, as shown by engineer Bolinas. It is probable that the errors were due to inexperience
(Stewart himself admitted that this was the first copra fire he had investigated); but it is clear that such
errors render valueles Stewart's computations. These were in fact twice passed upon and twice rejected
by different judges (in the criminal and civil cases) and their concordant opinion is practically conclusive.

The adjusters' reports, Exhibits 9-A and 9-B, were correctly disregarded by the Court below, since the
opinions stated therein were based on ex parte investigations made at the back of the insured; and the
appellant did not present at the trial the original testimony and documents from which the conclusions in
the report were drawn.lawphi1.net

Appellant insurance company also contends that the claims filed by the insured contained false and
fraudulent statements that avoided the insurance policy. But the trial Court found that the discrepancies
were a result of the insured's erroneous interpretation of the provisions of the insurance policies and claim
forms, caused by his imperfect knowledge of English, and that the misstatements were innocently made
and without intent to defraud. Our review of the lengthy record fails to disclose reasons for rejecting these
conclusions of the Court below. For example, the occurrence of previous fires in the premises insured in
1939, altho omitted in the claims, Exhibits EE and FF, were nevertheless revealed by the insured in his
claims Exhibits Q (filed simultaneously with them), KK and WW. Considering that all these claims were
submitted to the smae agent, and that this same agent had paid the loss caused by the 1939 fire, we find
no error in the trial Court's acceptance of the insured's explanation that the omission in Exhibits EE and
FF was due to inadvertance, for the insured could hardly expect under such circumstances, that the 1939
would pass unnoticed by the insurance agents. Similarly, the 20 per cent overclaim on 70 per cent of the
hemo stock, was explained by the insured as caused by his belief that he was entitled to include in the
claim his expected profit on the 70 per cent of the hemp, because the same was already contracted for
and sold to other parties before the fire occurred. Compared with other cases of over-valuation recorded
in our judicial annals, the 20 per cent excess in the case of the insured is not by itself sufficient to
establish fraudulent intent. Thus, in Yu Cua vs. South British Ins. Co., 41 Phil. 134, the claim was fourteen
(14) times (1,400 per cent) bigger than the actual loss; in Go Lu vs. Yorkshire Insurance Co., 43 Phil.,
633, eight (8) times (800 per cent); in Tuason vs. North China Ins. Co., 47 Phil. 14, six (6) times (600 per
cent); in Tan It vs. Sun Insurance, 51 Phil. 212, the claim totalled P31,860.85 while the goods insured
were inventoried at O13,113. Certainly, the insured's overclaim of 20 per cent in the case at bar, duly
explained by him to the Court a quo, appears puny by comparison, and can not be regarded as "more
than misstatement, more than inadvertence of mistake, more than a mere error in opinion, more than a
slight exaggeration" (Tan It vs. Sun Insurance Office, ante) that would entitle the insurer to avoid the
policy. It is well to note that the overchange of 20 per cent was claimed only on a part (70 per cent) of the
hemp stock; had the insured acted with fraudulent intent, nothing prevented him from increasing the value
of all of his copra, hemp and buildings in the same proportion. This also applies to the alleged fraudulent
claim for burned empty sacks, that was likewise explained to our satisfaction and that of the trial Court.
The rule is that to avoid a policy, the false swearing must be wilful and with intent to defraud (29 Am. Jur.,
pp. 849-851) which was not the cause. Of course, the lack of fraudulent intent would not authorize the
collection of the expected profit under the terms of the polices, and the trial Court correctly deducte the
same from its award.

We find no reversible error in the judgment appealed from, wherefore the smae is hereby affirmed. Costs
against the appellant. So ordered.

Paras, C. J., Padilla, Montemayor, Reyes, A., Jugo, Labrador, and Concepcion, JJ., concur.