Filipinas Compania de Seguros V

Filipinas Compania de Seguros v.
Christern Huenefeld
Facts:
Christern Huenefeld Corporation bought a fire insurance policy from Filipinas Compania de
Seguros to cover merchandise contained in a building. During the Japanese military occupation,
this same merchandise and the building were burned, so Huenefeld filed a claim under the policy.
Filipinas Compania refused to pay, alleging that the policy had ceased to be in force when the US
declared war against Germany. Filipinas Compania contended that Huenefeld, although
organized and created under Philippine laws, is a German subject, and hence, a public enemy,
since majority of its stockholders are Germans. On the other hand, Filipinas Compania is under
American jurisdiction.
However, the Director of Bureau of Financing, Philippine Executive Commission ordered Filipinas
Compania to pay, so Filipinas Compania did pay. The case at bar is about the recovery of that
sum paid.
Issue:
W/N Christern Huenefeld is a German subject because majority of its stockholders are under
German jurisdiction, despite the fact that it was organized and created under Philippine laws and
whether the fire insurance policy is enforceable against an enemy state
Ratio:
The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that "anyone except
a public enemy may be insured." It stands to reason that an insurance policy ceases to be allowable
as soon as an insured becomes a public enemy.
Effect of war, generally. — All intercourse between citizens of belligerent powers which is
inconsistent with a state of war is prohibited by the law of nations. Such prohibition includes
all negotiations, commerce, or trading with the enemy; all acts which will increase, or tend to
increase, its income or resources; all acts of voluntary submission to it; or receiving its
protection; also all acts concerning the transmission of money or goods; and all contracts
relating thereto are thereby nullified. It further prohibits insurance upon trade with or by the
enemy, upon the life or lives of aliens engaged in service with the enemy; this for the reason
that the subjects of one country cannot be permitted to lend their assistance to protect by
insurance the commerce or property of belligerent, alien subjects, or to do anything detrimental
too their country's interest. The purpose of war is to cripple the power and exhaust the
resources of the enemy, and it is inconsistent that one country should destroy its enemy's
property and repay in insurance the value of what has been so destroyed, or that it should in
such manner increase the resources of the enemy, or render it aid, and the commencement
of war determines, for like reasons, all trading intercourse with the enemy, which prior thereto
may have been lawful. All individuals therefore, who compose the belligerent powers, exist, as
to each other, in a state of utter exclusion, and are public enemies. (6 Couch, Cyc. of Ins. Law,
pp. 5352-5353.)
In the case of an ordinary fire policy, which grants insurance only from year, or for some other
specified term it is plain that when the parties become alien enemies, the contractual tie is
broken and the contractual rights of the parties, so far as not vested. lost. (Vance, the Law on
Insurance, Sec. 44, p. 112.)
The Court of Appeals ruled that a private corporation is a citizen of the country or state by and
under the laws of which it was created or organized. It rejected the theory that nationality of a
private corporation is determined by the character or citizenship of its controlling stockholders.
But the Supreme Court held that Christern Huenefeld is an enemy corporation since majority of
its stockholders are German subjects. The two American cases relied up by the Court of Appeals
have lost their force in view of a newer case where the control test was adopted.
The Philippine Insurance Law provides that anyone, except a public enemy, may be insured. It
stands to reason that an insurance policy ceases to be allowable as soon as the insured becomes
a public enemy.
Since Christern Huenefeld became a public enemy on Dec. 10, 1941, then the policy has ceased
to be enforcible and therefore Huenefeld is not entitled to indemnity. However, elementary rules
of justice require that the premium paid from Dec. 11, 1941 should be returned.
Thus, Filipinas Compania is allowed to recover the sum paid but only its equivalent in actual
Philippine currency, minus the premium that Huenefeld paid after Dec. 11.

Filipinas Compania de Seguros V

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