PERLA COMPANIA v.

CA, LIM (Nocon, 1992, GR 96452) Vehicle insurance may be constituted as an additional security for a chattel mortgage over a vehicle. A stipulation in the chattel mortgage contract that the insurer will be liable to the principal obligation of the chattel mortgage in case of loss of the vehicle is valid and binding if the insurer consents thereto. The insurer cannot relieve himself of liability by invoking a clause in the policy that does not have a causal connection with the peril that actually caused the loss of the insured person's property. FACTS Spouses Lim issued promissory note in favor of Supercars, Inc for around 78K. This promissory note was secured by a chattel mortgage over the Lim's brand new Ford Laser Hatchback. The car was insured by Perla Compania de Seguros (comprehensive coverage). On the same date as the issuance of the promissory note, Supercars, Inc assigned the credit in the promissory note and chattel mortgage to FCP Credit Corp. The vehicle was carnapped. As required by the policy, she reported the carnapping to the LTO and police. Spouses Lim then filed a claim for loss with insurer Perla. Perla refused saying that at the time of the carnapping, the wife was driving under an expired license, in violation of the AUTHORIZED DRIVER clause of the policy. Spouses Lim requests from FCP for suspension of payment on the promissory notes, and that because of the insurance, FCP should instead collect from Perla. FCP sued the Spouses Lim. The spouses in turn sued Perla. Perla argument: violation of the AUTHORIZED DRIVER clause. FCP argument: doesn't matter if spouses lost car, still liable under promissory note. Spouses argument: Perla must pay installments in promissory note as stipulated in mortgage ISSUES/HELD WON Perla can escape liability under the UNAUTHORIZED DRIVER clause /NO. WON FCP can claim performance from Perla/Spouses, /YES/YES RATIO Since the car was unlawfully taken, it should be the THEFT clause of the policy that should apply, not the AUTHORIZED DRIVER clause. There is no causal connection between the possession of a valid driver's license and the loss of the vehicle. To rule otherwise would be a sham since an insurance company can escape liability by citing restrictions which are not applicable or germane to the claim. The loss of the object of the chattel mortgage did not relive the spouses from their obligations to pay the installments of the principal contract, the promissory note. However, the insurance was actually intended to serve as additional security for the promissory note, and based on the chattel mortgage contract consented to by Perla, Perla will be liable for unpaid installments on the promissory in case of loss of the car. So the spouses were justified in compelling Perla to pay the installments on the promissory note. DISPOSITIVE Perla will pay indemnity to Spouses, Spouses will pay FCP the unpaid balance. Digest by Ronald.