ONG LIM SING, JR. vs. FEB LEASING AND FINANCE CORPORATION

ONG LIM SING, JR. vs. FEB LEASING AND FINANCE CORPORATION

G.R. No. 168115 - June 8, 2007

FACTS:

On March 9, 1995, FEB Leasing and Finance Corporation entered into a lease of equipment and motor vehicles with JVL Food Products. On the same date, Vicente Ong Lim Sing, Jr. executed an Individual Guaranty Agreement with FEB to guarantee the prompt and faithful performance of the terms and conditions of the aforesaid lease agreement. Corresponding Lease Schedules with Delivery and Acceptance Certificates over the equipment and motor vehicles formed part of the agreement. Under the contract, JVL was obliged to pay FEB an aggregate gross monthly rental of One Hundred Seventy Thousand Four Hundred Ninety-Four Pesos (P170,494.00).

JVL defaulted in the payment of the monthly rentals. As of July 31, 2000, the amount in arrears, including the penalty charges and insurance premiums, amounted to Three Million Four Hundred Fourteen Thousand Four Hundred Sixty-Eight and 75/100 Pesos (P3,414,468.75). On August 23, 2000, FEB sent a letter to JVL demanding payment of the said amount. However, JVL failed to pay.

On December 6, 2000, FEB filed a Complaint with the Regional Trial Court of Manila for sum of money, damages, and replevin against JVL, Lim, and John Doe.

In an Amended Answer, JVL and Lim admitted the existence of the lease agreement but asserted that it is in reality a sale of equipment on instalment basis, with FEB acting as the financier. On November 22, 2002, the trial court ruled in favor of JVL and Lim and stressed the contradictory terms found in the lease agreement. The trial court stated, among others, that if JVL and Lim (then defendants) were to be regarded as only a lessee, logically the lessor who asserts ownership will be the one directly benefited or injured and therefore the lessee is not supposed to be the assured as he has no insurable interest.

On December 27, 2002, FEB filed its Notice of Appeal. Accordingly, on January 17, 2003, the court issued an Order elevating the entire records of the case to the Court of Appeals. On March 15, 2005, the Court of Appeals issued its Decision declaring the transaction between the parties as a financial lease agreement. The said decision reversed and set aside the trial court’s decision dated November 22, 2002. Hence, Lim filed the present Petition for Review on Certiorari.

ISSUE:

Whether or not petitioner has an insurable interest in the equipment and motor vehicles leased.

RULING:

Yes.

The stipulation in Section 14 of the leased contract, that the equipment shall be insured at the cost and expense of the lessee against loss, damage, or destruction from fire, theft, accident, or other insurable risk for the full term of the lease, is a binding and valid stipulation. Petitioner, as a lessee, has an insurable interest in the equipment and motor vehicles leased. Section 17 of the Insurance Code provides that the measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury thereof. It cannot be denied that JVL will be directly damnified in case of loss, damage, or destruction of any of the properties leased.