Lampano vs. Jose

An insurance policy is a personal contract between the insured and the insurer. Where a person with an insurable interest procures and pays for insurance in his own name, he is not required to account for the proceeds to another party who has an interest in the property, in the absence of an express or implied agreement that the insurance was taken for the benefit of that other party.

• Mariano R. Barretto built a house for Placida A. Jose.
• Jose later sold the house to Antonina Lampano.
• Barretto had insured the house in his own name, with Jose's consent, to protect his financial interest (as Jose still owed him for construction).
• The house was destroyed by fire after the sale.

• Filed in the Court of First Instance of Manila (now RTC).
• The lower court entered a complex judgment, effectively giving Lampano a portion of the insurance proceeds via an offset against her debt to Jose, and holding Barretto liable to Jose for the remainder.
• Barretto appealed directly to the SC (as the case was decided during the period when the SC had original appellate jurisdiction over such cases).

• Barretto constructed a house for Jose for P6,000.
• Jose sold the house to Lampano for P6,000. Lampano still owed Jose P2,000.
• Jose still owed Barretto P2,000 for construction.
• Barretto insured the completed house for P4,000 in his own name, paying all premiums.
• The house was destroyed by fire. Barretto collected P3,600 from the insurer.
• Lampano alleged a verbal agreement with Jose that Jose would transfer the insurance policy to her. Both Jose and Barretto denied this.

• The insurance was taken out and paid for by Barretto solely to protect his own financial interest (the debt owed by Jose for construction).
• The policy was a personal contract between Barretto and the insurance company.
• Lampano had no contractual relationship with Barretto and no right to the proceeds of his personal insurance policy.

• There was a verbal agreement at the time of sale that Jose would transfer the insurance policy to Lampano.
• Therefore, the insurance proceeds should follow the property and belong to Lampano as the new owner.

• Procedural Issues: N/A
• Substantive Issues:
  • Whether Lampano had a right to recover the insurance proceeds from Barretto.
  • Whether the insurance policy taken out by Barretto inured to the benefit of the property owner (Jose, and subsequently Lampano).

• Procedural: N/A
• Substantive: The SC reversed the lower court's judgment against Barretto.
• Lampano failed to prove the alleged verbal agreement with Jose to transfer the policy.
• More fundamentally, the insurance policy was a personal contract between Barretto and the insurer. It was not a contract that "ran with the property."
• Barretto had an insurable interest (as the builder/creditor) and insured that interest for his own protection. Absent an agreement to insure for another's benefit, he is entitled to the proceeds for his sole indemnity.

• Insurable Interest — A person has an insurable interest in property if he has a legal or equitable interest therein, such that its destruction would cause him a pecuniary loss. The SC affirmed Barretto had an insurable interest as the builder to whom the purchase price was still partly owed.
• Personal Nature of Insurance Contract — An insurance policy is a personal contract of indemnity between the insured and the insurer. It does not attach to or run with the title to the insured property. The proceeds are payable to the named insured based on the contract, not to subsequent owners, unless there is an assignment or a specific agreement (express or implied) that the insurance was procured for a third party's benefit.

• "A contract of insurance made for the insurer's [insured's] indemnity only, as where there is no agreement, express or implied, that it shall be for the benefit of a third person, does not attach to or run with the title to the insured property on a transfer thereof."
• "The contract of insurance was wholly between the defendant and the insurance company, and was personal, in the sense that the money agreed to be paid in case of loss was not to stand in the place of the [property] itself, but was a mere indemnity against the loss of defendant's interest therein."

• Shadgett v. Phillips and Crew Co. (56 L.R.A. 461) — Cited for the principle that a donee of property who insures it in her own name is not liable to a prior vendor (mortgagee) for the proceeds, absent an assumption of the donor's obligation to insure for the vendor's benefit.
• Vandergraf v. Medlock (29 Am. Dec. 256) — Cited for the rule that a mortgagee is not entitled to insurance proceeds procured by the mortgagor for his own interest, absent an agreement.
• Burlingame v. Goodspeed (10 L.R.A. 495) — Cited for the proposition that a mortgagee who insures his own interest at his own expense need not account to the mortgagor for the proceeds.

• Articles 1923, Civil Code of Spain (then in force) — Referenced to support the existence of Barretto's insurable interest as a builder/creditor.