Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 137172 April 4, 2001
UCPB GENERAL INSURANCE CO., INC., petitioner,
vs.
MASAGANA TELAMART, INC., respondent.
R E S O L U T I O N
DAVIDE, R., C.J.!
In our decision of 15 June 1999 in this case, we reversed and set aside the assailed decision
1
of the Court of
Appeals, which affired with odification the !ud"ent of the trial court #a$ allowin" Respondent to consi"n the
su of P%%5,&5'.95 as full pa(ent of the preius for the renewal of the five insurance policies on
Respondent)s properties* #b$ declarin" the replaceent+renewal policies effective and bindin" fro %% Ma( 199%
until %% Ma( 199'* and #c$ orderin" Petitioner to pa( Respondent P1,,-.5,///.// as indenit( for the burned
properties covered b( the renewal+replaceent policies. 0he odification consisted in the #1$ deletion of the trial
court)s declaration that three of the policies were in force fro Au"ust 1991 to Au"ust 199%* and #%$ reduction of
the award of the attorne()s fees fro %51 to 1/1 of the total aount due the Respondent.
0he aterial operative facts upon which the appealed !ud"ent was based are suari2ed b( the Court of
Appeals in its assailed decision as follows3
Plaintiff 4herein Respondent5 obtained fro defendant 4herein Petitioner5 five #5$ insurance policies
#67hibits 8A8 to 868, Record, pp. 15,+1&5$ on its properties 4in Pasa( Cit( and Manila5 . . . .
All five #5$ policies reflect on their face the effectivit( ter3 8fro .3// P.M. of %% Ma( 1991 to .3// P.M.
of %% Ma( 199%.8 9n June 1', 199%, plaintiffs properties located at %.1/+%.'% and %..%+%.5/ 0aft
Avenue, Pasa( Cit( were ra2ed b( fire. 9n Jul( 1', 199%, plaintiff tendered, and defendant accepted,
five #5$ 6:uitable ;an< Mana"er)s Chec<s in the total aount of P%%5,&5'..5 as renewal preiu
pa(ents for which 9fficial Receipt =irect Preiu >o. -%9%- #67hibit 8?8, Record, p. 191$ was issued
b( defendant. 9n Jul( 1., 199%, Masa"ana ade its foral deand for indenification for the burned
insured properties. 9n the sae da(, defendant returned the five #5$ ana"er)s chec<s statin" in its
letter #67hibit 8R8 @ 8,8, Record, p. 19%$ that it was re!ectin" Masa"ana)s clai on the followin" "rounds3
8a$ Aaid policies e7pired last Ma( %%, 199% and were not renewed for another ter*
b$ =efendant had put plaintiff and its alle"ed bro<er on notice of non+renewal earlier* and
c$ 0he properties covered b( the said policies were burned in a fire that too< place last June 1',
199%, or before tender of preiu pa(ent.8
#Record, p. 5$
Bence Masa"ana filed this case.
0he Court of Appeals disa"reed with Petitioner)s stand that Respondent)s tender of pa(ent of the preius on
1' Jul( 199% did not result in the renewal of the policies, havin" been ade be(ond the effective date of renewal
as provided under Polic( Condition >o. %-, which states3
%-. Renewal Clause. C Dnless the copan( at least fort( five da(s in advance of the end of the polic(
period ails or delivers to the assured at the address shown in the polic( notice of its intention not to
renew the polic( or to condition its renewal upon reduction of liits or eliination of covera"es, the
assured shall be entitled to renew the polic( upon pa(ent of the preiu due on the effective date of
renewal.
;oth the Court of Appeals and the trial court found that sufficient proof e7ists that Respondent, which had
procured insurance covera"e fro Petitioner for a nuber of (ears, had been "ranted a -/ to 9/+da( credit ter
for the renewal of the policies. Auch a practice had e7isted up to the tie the clais were filed. 0hus3
Eire Insurance Polic( >o. '.-5, coverin" Ma( %%, 199/ to Ma( %%, 1991 was issued on Ma( &, 199/ but
preiu was paid ore than 9/ da(s later on Au"ust '1, 199/ under 9.R. >o. .&&1 #67hs. 808 and 80+
18$. Eire Insurance Polic( >o. '.--/ for Insurance Ris< Covera"e fro Ma( %%, 199/ to Ma( %%, 1991
was issued b( DCP; on Ma( ., 199/ but preiu was collected b( DCP; onl( on Jul( 1', 199/ or
ore than -/ da(s later under 9.R. >o. .-.,& #67hs. 8F8 and 8F+18$. And so were as other policies3 Eire
Insurance Polic( >o. '.-5& coverin" ris<s fro Ma( %%, 199/ to Ma( %%, 1991 was issued on Ma( &,
199/ but preiu therefor was paid onl( on Jul( 19, 199/ under 9.R. >o. .-5,' #67hs. 8G8 and 8G+18$.
Eire Insurance Polic( >o. '.--1 coverin" ris<s fro Ma( %%, 199/ to Ma( %%, 1991 was issued on Ma(
', 199/ but preiu was paid onl( on Jul( 19, 199/ under 9.R. >o. .-5,% #67hs. 8H8 and 8H+18$. Eire
Insurance Polic( >o. '.-,, for insurance covera"e fro Ma( %%, 199/ to Ma( %%, 1991 was issued on
Ma( &, 199/ but preiu was paid onl( on Jul( 19, 199/ under 9.R. >o. .-5,5 #67hs. 8I8 and 8I+18$.
Eire Insurance Polic( >o. %91%- to cover insurance ris<s fro Ma( %%, 19,9 to Ma( %%, 199/ was issued
on Ma( %%, 19,9 but preiu therefor was collected onl( on Jul( %5, 199/4sic5 under 9.R. >o. ./&99
#67hs. 8AA8 and 8AA+18$. Eire Insurance Polic( >o. B9@E+%-./, coverin" ris<s fro Januar( 1%, 19,9 to
Januar( 1%, 199/ was issued to Intratrade Phils. #Masa"ana)s sister copan($ dated =eceber 1/,
19,, but preiu therefor was paid onl( on Eebruar( 15, 19,9 under 9.R. >o. ',/&5 #67hs. 8;;8 and
8;;+18$. Eire Insurance Polic( >o. %91%, was issued on Ma( %%, 19,9 but preiu was paid onl( on
Jul( %5, 19,9 under 9.R. >o. ./,// for insurance covera"e fro Ma( %%, 19,9 to Ma( %%, 199/ #67hs.
8CC8 and 8CC+18$. Eire Insurance Polic( >o. %91%& was issued on Ma( %%, 19,9 but preiu was paid
onl( on Jul( 1&, 19,9 under 9.R. >o. ./-,% for insurance ris< covera"e fro Ma( %%, 19,9 to Ma( %%,
199/ #67hs. 8==8 and 8==+18$. Eire Insurance Polic( >o. B9@E+%9'-% was issued on June 15, 19,9 but
preiu was paid onl( on Eebruar( 1', 199/ under 9.R. >o. '9%'' for insurance covera"e fro Ma(
%%, 19,9 to Ma( %%, 199/ #67hs. 8668 and 866+18$. Eire Insurance Polic( >o. %-'/' was issued on
>oveber %%, 19,, but preiu therefor was collected onl( on March 15, 19,9 under 9.R. >9. ',5&'
for insurance ris<s covera"e fro =eceber 15, 19,, to =eceber 15, 19,9 #67hs. 8EE8 and 8EE+18$.
Moreover, accordin" to the Court of Appeals the followin" circustances constitute preponderant proof that no
tiel( notice of non+renewal was ade b( Petitioner3
#1$ =efendant+appellant received the confiration #67hibit 8118, Record, p. '5/$ fro Dltraar
Reinsurance ;ro<ers that plaintiff)s reinsurance facilit( had been confired up to -&.51 onl( on April 15,
199% as indicated on 67hibit 8118. Apparentl(, the notice of non+renewal #67hibit 8&,8 Record, p. '%/$ was
sent not earlier than said date, or within .5 da(s fro the e7pir( dates of the policies as provided under
Polic( Condition >o. %-* #%$ =efendant insurer unconditionall( accepted, and issued an official receipt
for, the preiu pa(ent on Jul( 14'5, 199% which indicates defendant)s willin"ness to assue the ris<
despite onl( a -&.51 reinsurance cover4a"e5* and #'$ =efendant insurer appointed 6steban Ad!usters
and Faluers to investi"ate plaintiff)s clai as shown b( the letter dated Jul( 1&, 199% #67hibit 8118,
Record, p. %5.$.
In our decision of 15 June 1999, we defined the ain issue to be 8whether the fire insurance policies issued b(
petitioner to the respondent coverin" the period fro Ma( %%, 1991 to Ma( %%, 199% . . . had been e7tended or
renewed b( an iplied credit arran"eent thou"h actual pa(ent of preiu was tendered on a later date and
after the occurrence of the #fire$ ris< insured a"ainst.8 Ge resolved this issue in the ne"ative in view of Aection
&& of the Insurance Code and our decisions in Valenzuela v. Court of Appeals;
%
South Sea Surety and
Insurance Co., Inc. v. Court of Appeals*
'
and Tibay v. Court of Appeals.
.
Accordin"l(, we reversed and set
aside the decision of the Court of Appeals.
Respondent seasonabl( filed a otion for the reconsideration of the adverse verdict. It alle"es in the otion that
we had ade in the decision our own findin"s of facts, which are not in accord with those of the trial court and
the Court of Appeals. 0he courts below correctl( found that no notice of non+renewal was ade within .5 da(s
before %% Ma( 199%, or before the e7piration date of the fire insurance policies. 0hus, the policies in :uestion
were renewed b( operation of law and were effective and valid on '/ June 199% when the fire occurred, since
the preius were paid within the -/+ to 9/+da( credit ter.
Respondent li<ewise disa"rees with our rulin" that parties a( neither a"ree e7pressl( or ipliedl( on the
e7tension of credit or tie to pa( the preiu nor consider a polic( bindin" before actual pa(ent. It ur"es the
Court to ta<e !udicial notice of the fact that despite the e7press provision of Aection && of the Insurance Code,
e7tension of credit ters in preiu pa(ent has been the prevalent practice in the insurance industr(. Most
insurance copanies, includin" Petitioner, e7tend credit ters because Aection && of the Insurance Code is not
a prohibitive in!unction but is erel( desi"ned for the protection of the parties to an insurance contract. 0he
Code itself, in Aection &,, authori2es the validit( of a polic( notwithstandin" non+pa(ent of preius.
Respondent also asserts that the principle of estoppel applies to Petitioner. =espite its awareness of Aection &&
Petitioner persuaded and induced Respondent to believe that pa(ent of preiu on the -/+ to 9/+da( credit
ter was perfectl( alri"ht* in fact it accepted pa(ents within -/ to 9/ da(s after the due dates. ;( e7tendin"
credit and habituall( acceptin" pa(ents -/ to 9/ da(s fro the effective dates of the policies, it has iplicitl(
a"reed to odif( the tenor of the insurance polic( and in effect waived the provision therein that it would pa(
onl( for the loss or daa"e in case the sae occurred after pa(ent of the preiu.
Petitioner filed an opposition to the Respondent)s otion for reconsideration. It ar"ues that both the trial court
and the Court of Appeals overloo<ed the fact that on - April 199% Petitioner sent b( ordinar( ail to Respondent
a notice of non+renewal and sent b( personal deliver( a cop( thereof to Respondent)s bro<er, Juelli". ;oth
courts li<ewise i"nored the fact that Respondent was full( aware of the notice of non+renewal. A readin" of
Aection -- of the Insurance Code readil( shows that in order for an insured to be entitled to a renewal of a non+
life polic(, pa(ent of the preiu due on the effective date of renewal should first be ade. Respondent)s
ar"uent that Aection && is not a prohibitive provision finds no authoritative support.
Dpon a eticulous review of the records and reevaluation of the issues raised in the otion for reconsideration
and the pleadin"s filed thereafter b( the parties, we resolved to "rant the otion for reconsideration. 0he
followin" facts, as found b( the trial court and the Court of Appeals, are indeed dul( established3
1. Eor (ears, Petitioner had been issuin" fire policies to the Respondent, and these policies were
annuall( renewed.
%. Petitioner had been "rantin" Respondent a -/+ to 9/+da( credit ter within which to pa( the
preius on the renewed policies.
'. 0here was no valid notice of non+renewal of the policies in :uestion, as there is no proof at all that the
notice sent b( ordinar( ail was received b( Respondent, and the cop( thereof alle"edl( sent to Juelli"
was ever transitted to Respondent.
.. 0he preius for the policies in :uestion in the a""re"ate aount of P%%5,&5'.95 were paid b(
Respondent within the -/+ to 9/+da( credit ter and were dul( accepted and received b( Petitioner)s
cashier.
0he instant case has to rise or fall on the core issue of whether Aection && of the Insurance Code of 19&, #P.=.
>o. 1.-/$ ust be strictl( applied to Petitioner)s advanta"e despite its practice of "rantin" a -/+ to 9/+da( credit
ter for the pa(ent of preius.
Aection && of the Insurance Code of 19&, provides3
A6C0I9> &&. An insurer is entitled to pa(ent of the preiu as soon as the thin" insured is e7posed
to the peril insured a"ainst. >otwithstandin" an( a"reeent to the contrar(, no polic( or contract of
insurance issued b( an insurance copan( is valid and bindin" unless and until the preiu thereof has
been paid, e7cept in the case of a life or an industrial life polic( whenever the "race period provision
applies.
0his Aection is a reproduction of Aection && of P.=. >o. -1% #0he Insurance Code$ proul"ated on 1, =eceber
19&.. In turn, this Aection has its source in Aection &% of Act >o. %.%& otherwise <nown as the Insurance Act as
aended b( R.A. >o. '5./, approved on %1 June 19-', which read3
A6C0I9> &%. An insurer is entitled to pa(ent of preiu as soon as the thin" insured is e7posed to
the peril insured a"ainst, unless there is clear aree!ent to rant the insured credit e"tension of the
pre!iu! due. >o polic( issued b( an insurance copan( is valid and bindin" unless and until the
preiu thereof has been paid. #Italic supplied$
It can be seen at once that Aection && does not restate the portion of Aection &% e7pressl( perittin" an
a"reeent to e7tend the period to pa( the preiu. ;ut are there e7ceptions to Aection &&K
0he answer is in the affirative.
0he first e7ception is provided b( Aection && itself, and that is, in case of a life or industrial life polic( whenever
the "race period provision applies.
0he second is that covered b( Aection &, of the Insurance Code, which provides3
A6C0I9> &,. An( ac<nowled"ent in a polic( or contract of insurance of the receipt of preiu is
conclusive evidence of its pa(ent, so far as to a<e the polic( bindin", notwithstandin" an( stipulation
therein that it shall not be bindin" until preiu is actuall( paid.
A third e7ception was laid down in #a$ati Tuscany Condo!iniu! Corporation vs. Court of Appeals,
5
wherein we
ruled that Aection && a( not appl( if the parties have a"reed to the pa(ent in installents of the preiu and
partial pa(ent has been ade at the tie of loss. Ge said therein, thus3
Ge hold that the sub!ect policies are valid even if the preius were paid on installents. 0he records
clearl( show that the petitioners and private respondent intended sub!ect insurance policies to be bindin"
and effective notwithstandin" the sta""ered pa(ent of the preius. 0he initial insurance contract
entered into in 19,% was renewed in 19,', then in 19,.. In those three (ears, the insurer accepted all
the installent pa(ents. Auch acceptance of pa(ents spea<s loudl( of the insurer)s intention to honor
the policies it issued to petitioner. Certainl(, basic principles of e:uit( and fairness would not allow the
insurer to continue collectin" and acceptin" the preius, althou"h paid on installents, and later den(
liabilit( on the lae e7cuse that the preius were not prepaid in full.
>ot onl( that. In Tuscany, we also :uoted with approval the followin" pronounceent of the Court of Appeals in
its Resolution den(in" the otion for reconsideration of its decision3
Ghile the iport of Aection && is that prepa(ent of preius is strictl( re:uired as a condition to the
validit( of the contract, Ge are not prepared to rule that the re:uest to a<e installent pa(ents dul(
approved b( the insurer would prevent the entire contract of insurance fro "oin" into effect despite
pa(ent and acceptance of the initial preiu or first installent. Aection &, of the Insurance Code in
effect allows waiver b( the insurer of the condition of prepa(ent b( a<in" an ac<nowled"ent in the
insurance polic( of receipt of preiu as conclusive evidence of pa(ent so far as to a<e the polic(
bindin" despite the fact that preiu is actuall( unpaid. Aection && erel( precludes the parties fro
stipulatin" that the polic( is valid even if preius are not paid, but does not e7pressl( prohibit an
a"reeent "rantin" credit e7tension, and such an a"reeent is not contrar( to orals, "ood custos,
public order or public polic( #=e Leon, 0he Insurance Code, p. 1&5$. Ao is an understandin" to allow
insured to pa( preius in installents not so prescribed. At the ver( least, both parties should be
deeed in estoppel to :uestion the arran"eent the( have voluntaril( accepted.
;( the approval of the afore:uoted findin"s and conclusion of the Court of Appeals, Tuscany has provided a
fourth e7ception to Aection &&, nael(, that the insurer a( "rant credit e7tension for the pa(ent of the
preiu. 0his sipl( eans that if the insurer has "ranted the insured a credit ter for the pa(ent of the
preiu and loss occurs before the e7piration of the ter, recover( on the polic( should be allowed even
thou"h the preiu is paid after the loss but within the credit ter.
Moreover, there is nothin" in Aection && which prohibits the parties in an insurance contract to provide a credit
ter within which to pa( the preius. 0hat a"reeent is not a"ainst the law, orals, "ood custos, public
order or public polic(. 0he a"reeent binds the parties. Article 1'/- of the Civil Code provides3
AR0ICL6 1'/-. 0he contractin" parties a( establish such stipulations clauses, ters and conditions as
the( a( dee convenient, provided the( are not contrar( to law, orals, "ood custos, public order, or
public polic(.
Einall( in the instant case, it would be un!ust and ine:uitable if recover( on the polic( would not be peritted
a"ainst Petitioner, which had consistentl( "ranted a -/+ to 9/+da( credit ter for the pa(ent of preius
despite its full awareness of Aection &&. 6stoppel bars it fro ta<in" refu"e under said Aection, since
Respondent relied in "ood faith on such practice. 6stoppel then is the fifth e7ception to Aection &&.
GB6R6E9R6, the =ecision in this case of 15 June 1999 is R6C9>AI=6R6= and A60 AAI=6, and a
new one is hereb( entered =6>II>M the instant petition for failure of Petitioner to sufficientl( show that
a reversible error was coitted b( the Court of Appeals in its challen"ed decision, which is hereb(
AEEIRM6= in toto.
>o pronounceent as to cost.
A9 9R=6R6=.
%ellosillo, &apunan, #endoza, 'ananiban, %uena, (onzaa)Reyes, *nares)Santiao, +e ,eon, -r. and
Sandoval)(utierrez, -- ., concur.
#elo, -., I !oin the dissents of Justice Fitu" and Pardo.
Vitu, -., Please see separate opinion.
'ardo, -., I dissent. Aee attached.
S"p#r#$" Opi%io%&
VITUG, J .!
An essential characteristic of an insurance is its bein" s(nalla"atic, a hi"hl( reciprocal contract where the
ri"hts and obli"ations of the parties correlate and utuall( correspond. 0he insurer assues the ris< of loss
which an insured i"ht suffer in consideration of preiu pa(ents under a ris<+distributin" device. Auch
assuption of ris< is a coponent of a "eneral schee to distribute actual losses aon" a "roup of persons,
bearin" siilar ris<s, who a<e ratable contributions to a fund fro which the losses incurred due to e7posures
to the peril insured a"ainst are assured and copensated.
It is "enerall( reco"ni2ed that the business of insurance is one ibued with public interest.
1
Eor the "eneral
"ood and utual protection of all the parties, it is aptl( sub!ected to re"ulation and control b( the Atate b( virtue
of an e7ercise of its police power.
%
0he Atate a( re"ulate in various respects the relations between the insurer
and the insured, includin" the internal affairs of an insurance copan(, without bein" violative of due process.
'

A re:uireent iposed b( wa( of Atate re"ulation upon insurers is the aintenance of an ade:uate le"al
reserve in favor of those claiin" under their policies.
.
0he law "enerall( andates that insurance copanies
should retain an aount sufficient to "uarantee the securit( of its polic(holders in the reote future, as well as
the present, and to cover an( contin"encies that a( arise or a( be fairl( anticipated. 0he inte"rit( of this le"al
reserve is threatened and underined if a credit arran"eent on the pa(ent of preiu were to be
sanctioned. Calculations and estiations of liabilities under the ris< insured a"ainst are predicated on the basis
of the pa(ent of preius, the vital eleent that establishes the !uridical relation between the insured and the
insurer. ;( le"islative fiat, an( a"reeent to the contrar( notwithstandin", the pa(ent of preiu is a condition
precedent to, and essential for, the efficaciousness of the insurance contract, e7cept #a$ in case of life or
industrial life insurance where a "race period applies, or #b$ in case of a written ac<nowled"ent b( the insurer
of the receipt of preiu, such as b( a deposit receipt, the written ac<nowled"ent bein" conclusive evidence
of the preiu pa(ent so far as to a<e the polic( bindin".
5

Aection && of the Insurance Code provides3
8A6C0I9> &&. An insurer is entitled to pa(ent of the preiu as soon as the thin" insured is e7posed
to the peril insured a"ainst. >otwithstandin" an( a"reeent to the contrar(, no polic( or contract of
insurance issued b( an insurance copan( is valid and bindin" unless and until the preiu thereof has
been paid, e7cept in the case of a life or an industrial life polic( whenever the "race period provision
applies.8
0his provision aended Aection &% of the then Insurance Act b( deletin" the phrase, 8unless there is a clear
a"reeent to "rant the insured credit e7tension of the preiu due,8 and addin" at the be"innin" of the second
sentence the phrase, 84n5otwithstandin" an( a"reeent to the contrar(.8 Coentin" on the new provision,
=ean Bernando ;. Pere2 states3
8Dnder the forer rule, whenever the insured was "ranted credit e7tension of the preiu due or "iven
a period of tie to pa( the preiu on the polic( issued, such polic( was bindin" althou"h preius
had not been paid #Aection &%, Insurance Act* - Couch %d. -&$. 0his rule was chan"ed when the present
provision eliinated the portion concernin" credit a"reeent, and added the phrase )notwithstandin"
an( a"reeent to the contrar() which precludes the parties fro stipulatin" that the polic( is valid even if
preius are not paid. Bence, under the present law, the polic( is not valid and bindin" unless and until
the preiu is paid #Arce vs. Capital Insurance N Auret( Co., Inc., 11& ACRA -'$. If the insurer wants to
favor the insured b( a<in" the polic( bindin" notwithstandin" the non+pa(ent of preiu, a ere
credit a"reeent would not be sufficient. 0he reed( would be for the insurer to ac<nowled"e in the
polic( that preius were paid althou"h the( were not, in which case the polic( becoes bindin"
because such ac<nowled"ent is a conclusive evidence of pa(ent of preiu #Aection &,$. 0hus, the
Aupree Court too< note that under the present law, Aection && of the Insurance Code of 19&, has
deleted the clause )unless there is a clear a"reeent to "rant the insured credit e7tension of the
preiu due) #Felasco vs. Apostol, 1&' ACRA %%,$.8
-

;( wei"ht of authorit(, estoppel cannot create a contract of insurance,
&
neither can it be successfull( invo<ed to
create a priar( liabilit(,
,
nor can it "ive validit( to what the law so proscribes as a atter of public polic(.
9
Ao
essential is the preiu pa(ent to the creation of the vinculu! .uris between the insured and the insurer that it
would be doubtful to have that pa(ent validl( e7cused even for a fortuitous event.
1/

0he law, however, neither re:uires for the establishent of the !uridical tie, nor easures the stren"th of such tie
b(, an( specific aount of preiu pa(ent. A part pa(ent of the preiu, if accepted b( the insurer, can
thus perfect the contract and brin" the parties into an obli"ator( relation.
11
Auch a pa(ent puts the contract
into full bindin" force, not erel( pro tanto, thereb( entitlin" and obli"atin" the parties b( their a"reeent.
Bence, in case of loss, full recover( less the unpaid portion of the preiu #b( the operative act of le"al
copensation$, can be had b( the insured and, correlativel(, if no loss occurs the insurer can deand the
pa(ent of the unpaid balance of the preiu.
1%

In the instant case, no !uridical tie appears to have been established under an( of the situations hereinabove
discussed.
GB6R6E9R6, I vote to den( the otion for reconsideration.
#elo, - ., concurs.
PARDO, J ., dissentin"3
0he a!orit( resolved to "rant respondent)s otion for reconsideration of the Court)s decision proul"ated on
June 15, 1999. ;( this soersault, petitioner ust now pa( respondent)s clai for insurance proceeds
aountin" to P1,,-.5,///.//, e7clusive of interests, plus %51 of the aount due as attorne()s fees, P%5,///.//
as liti"ation e7penses, and costs of suit, coverin" its Pasa( Cit( propert( ra2ed b( fire. Ghat an undeserved
lar"essO Indeed, an un!ust enrichent at the e7pense of petitioner* even the award of attorne()s fees is bloated
to %51 of the aount due.
Ge cannot "ive our concurrence. Ge be" to dissent. Ge find respondent)s clai to be fraudulent3
/irst3 Respondent Masa"ana surreptitiousl( tried to pa( the overdue preius before ivin written notice to
petitioner of the occurrence of the fire that ra2ed the sub!ect propert(. 0his failure to "ive notice of the fire
iediatel( upon its occurrence blatantl( showed the fraudulent character of its clai. 0he fire totall( destro(ed
the propert( on -une 01, 0223* the written notice of loss was "iven onl( ore than a onth later, on -uly 04,
0223, the da( after respondent surreptitiously paid the overdue pre!iu!s. Respondent ver( well <new that the
polic( was not renewed on tie. Bence, the surreptitious attept to pa( overdue preius. Auch act revealed a
reprehensible disre"ard of the principle that insurance is a contract uberri!a fides, the ost abundant "ood
faith.
1
Respondent is re:uired b( law and b( e7press ters of the polic( to "ive iediate written notice of
loss. 0his ust be coplied with in the utost "ood faith.
Another bad"e of fraud is that respondent deviated fro its previous practice of coursin" its preiu pa(ents
throu"h its bro<ers. 0his tie, respondent Masa"ana went directl( to petitioner and paid throu"h its cashier with
!anaer5s chec$s. >aturall(, the cashier routinel( accepted the preiu pa(ent because he had no written
notice of the occurrence of the fire. Auch fact was concealed b( the insured and not revealed to petitioner at the
tie of pa(ent.
Indeed, if as contended b( respondent, there was a clear a"reeent re"ardin" the "rant of a credit e7tension,
respondent would have "iven iediate written notice of the fire that ra2ed the propert(. 0his clearl( showed
respondent)s attept to deceive petitioner into believin" that the sub!ect propert( still e7isted and the ris< insured
a"ainst had not happened.
Second3 0he clai for insurance benefits ust fall as well because the failure to "ive tiel( written notice of the
fire was a aterial isrepresentation affectin" the ris< insured a"ainst.
Aection 1 of the polic( provides3
8All benefits under the polic( shall be forfeited if the clai be in an( respect fraudulent, or if an( false
declaration be ade or used in support thereof, or if an( false declaration be ade or used in support
thereof, or if an( fraudulent eans or devices are used b( the insured or an( one actin" on his behalf to
obtain an( benefit under the polic(.8
%

In the factual ilieu, the purported practice of "ivin" -/ to 9/+da( credit e7tension for pa(ent of preius was
a disputed fact. ;ut it is a "iven fact that the written notice of loss was not i!!ediately iven. It was iven only
the day after the atte!pt to pay the delayed pre!iu!s.
At an( rate, the purported credit was a ere verbal understandin" of the respondent Masa"ana of an a"reeent
between the insurance copan( #petitioner$ and the insurance bro<ers of respondent Masa"ana. 0he president
of respondent Masa"ana ad!itted that the insurance policy did not contain an( proviso pertainin" to the rant of
credit within which to pa( the preius. Respondent Masa"ana erel( deduced that a credit a"reeent e7isted
based on previous (ears) practice that the( had of dela(ed pa(ents accepted b( the insurer as reflected on the
face of the receipts issued b( DCP; evidencin" the pa(ent of preius.
8?3 Iou also clai that (ou have -/ to 9/ da(s credit arran"eent with DCP;* is that correctK,
A3 Ies, a)a.
?3 I) showin" to (ou the polic( which had previousl( been ar<ed in evidence as 67hibit 8A8, 8;8,
8C8, 8=8, N 868) for the plaintiff and li<ewise, ar<ed as e7hibits 818, 8%8, 8'8, 8.8, N 858 for the defendant.
Could (ou show us, Mr. witness where in these policies does it show that (ou are actuall( "iven -/ to 9/
da(s credit arran"eent with DCP;K
A3 Gell, it)s verbal with (our copan(, and Ansons Insurance ;ro<era"e. It is not written.
?3 It is not written in the polic(K
A3 Ies.
?3 Iou erel( have verbal a"reeent with Ansons Insurance ;ro<era"eK
A3 Ies* as shown in our ode of pa(ent* in our vouchers and the receipts issued b( the insurance
copan(.8
'

It ust be stressed that a verbal understandin" of respondent Masa"ana cannot aend an insurance polic(. In
insurance practice, aendents or even corrections to a polic( are done b( written endorseents or tic<ets
appended to the polic(.
Bowever, the date on the face of the receipts does not refer to the date of actual reittance b( respondent
Masa"ana to DCP; of the preiu pa(ents, but erel( to the date of reittance to DCP; of the preiu
pa(ents b( the insurance bro<ers of respondent Masa"ana.
8?3 Iou also identified several receipts* here* official receipts issued b( DCP; Meneral Insurance
Copan(, Inc., which has been previousl( ar<ed as 67hibits 8E8, 8M8, 8B8, 8I8, and 8J8 for the plaintiff* is
that correctK
A3 Ies.
?3 And, (ou would a"ree with e that the dates indicated in these particular 9fficial Receipts #9.
R.$, erel( indicated the dates when DCP; Meneral Insurance Copan( issued these receiptsK =o (ou
adit that, Mr. GitnessK
A3 0hat was written in the receipts.
?3 ;ut, (ou would also a"ree that this did not necessaril( show the dates when (ou actuall(
forwarded the chec<s to (our bro<er, Anson Insurance A"enc(, for pa(ent to DCP; Meneral Insurance
Co. Inc., isn)t itK
A3 0he actual support of this would be the cash voucher of the copan(, Masa"ana 0elaart Inc.,
the date when the( pic<ed up the chec< fro the copan(.
?3 And are these cash voucher with (ouK
A3 I don)t <now if it is in the folder or in our folder, now.
?3 Ao, (ou are not certain, whether or not (ou actuall( delivered the chec<s covered b( these
9fficial Receipts to DCP; Meneral Insurance, on the dates indicatedK
A3 I would suppose it is few da(s earlier, when the( pic<ed up the pa(ent in our office.8
.

Bence, what has been established was the rant of credit to the insurance bro$ers, not to the assured. 0he
insurance copan( reconized the pay!ent to the insurance bro<ers as pay!ent to itself, thou"h the actual
reittance of the preiu pa(ents to the principal i"ht be ade later. 9nce pa(ent of preius is ade to
the insurance bro<er, the assured would be covered b( a valid and bindin" insurance polic(, provided the loss
occurred after pay!ent to the bro$er has been !ade.
Assuin" ar"uendo that the -/ to 9/ da(+credit+ter has been a"reed between the parties, respondent could
not still invo<e estoppel to bac< up its clai. 86stoppel is unavailin" in this case,8
5
thus spo<e the Aupree
Court throu"h the pen of Justice Bilario M. =avide, Jr., now Chief Justice. #utatis !utandi, he a( well be
spea<in" of this case. Be added that 8465stoppel can not "ive validit( to an act that is prohibited b( law or a"ainst
public polic(.8
-
0he actual pa(ent of preius is a condition precedent to the validit( of an insurance contract
other than life insurance polic(.
&
An( a"reeent to the contrar( is void as a"ainst the law and public polic(.
Aection && of the Insurance Code provides3
8An insurer is entitled to pa(ent of the preiu as soon as the thin" insured is e7posed to the peril
insured a"ainst. 6otwithstandin any aree!ent to the contrary, no policy or contract of insurance
issued by an insurance co!pany is valid and bindin unless and until the pre!iu! thereof has been
paid, e7cept in the case of a life or an industrial life polic( whenever the "race period provision applies.8
46phasis supplied5
An incisive readin" of the afore+cited provision would show that the ephasis was on the conclusiveness of the
ac<nowled"ent in the polic( of the receipt of preiu, notwithstandin" the absence of actual pa(ent of
preiu, because of estoppel. Dnder the doctrine of estoppel, an adission or representation is rendered
conclusive upon the person a<in" it, and cannot be denied or disproved as a"ainst the person rel(in" thereon.
8A part( a( not "o bac< on his own acts and representations to the pre!udice of the other part( who relied upon
the.8
,

0his is the onl( case of estoppel which the law considers a valid e7ception to the andator( re:uireent of pre+
pa(ent of preiu. 0he law reco"ni2ed that the contractin" parties, in enterin" a contract of insurance, are
free to enter into stipulations and a<e personal underta<in"s so lon" as the( are not contrar( to law or public
polic(. Bowever, the law is clear in providin" that the ac<nowled"ent ust be contained in the polic( or
contract of insurance. An(thin" short of it would not fall under the e7ception so provided in Aection &,.
Bence, because of respondent)s failure to pa( the preius prior to the occurrence of the fire insured a"ainst,
no valid and bindin" insurance polic( was created to cover the loss and destruction of the propert(. 0he fire too<
place on June 1', 199%, twent(+two #%%$ da(s after the e7piration of the polic( of fire insurance. 0he tender of
pa(ent of preius was ade onl( thirt( #'/$ da(s after the occurrence of the fire, or on Jul( 1', 199%.
Respondent Masa"ana did not "ive iediate notice to petitioner of the fire as it occurred as re:uired in the
insurance polic(. Respondent Masa"ana tried to tender pa(ent of the preius overdue surreptitiousl( before
"ivin" notice of the occurrence of the fire. More iportantl(, the parties theselves e7pressl( stipulated that the
insurance polic( would not be bindin" on the insurer unless the preius thereon had been paid in full. Aection
% of the polic( provides3
8%. This policy includin any renewal and7or endorse!ent thereon is not in force until the pre!iu! has
been fully paid and duly receipted by the Co!pany in the !anner provided therein.
8An( suppleentar( a"reeent see<in" to aend this condition prepared b( a"ent, bro<er or copan(
official, shall be deeed invalid and of no effect.
8>o pa(ent in respect of an( preiu shall be deeed to be pa(ent to the Copan( unless a
printed for of receipt for the sae si"ned b( an 9fficial or dul( appointed A"ent of the Copan( shall
have been "iven to the Insured, e7cept when such printed receipt is not available at the tie of pa(ent
and the copan( or its representative accepts the preiu in which case a teporar( receipt other than
the printed for a( be issued in lieu thereof. 867cept onl( on those specific cases where correspondin"
rules and re"ulations which now we are or a( hereafter be in force provide for the pa(ent of the
stipulated preius in periodic installents at fi7ed percenta"es, it is hereb( declared, areed and
warranted that this policy shall be dee!ed effective valid and bindin upon the Co!pany when the
pre!iu!s thereof have actually been paid in full and duly ac$nowleded in a receipt sined by any
authorized official or representative7aent of the Co!pany in such !anner as provided herein.8
9
4ephasis supplied5
0hus, the insurance polic(, includin" an( renewal thereof or an( endorseents thereon shall not coe in force
until the preius have been full( paid and dul( received b( the insurance Copan(. >o pa(ent in respect of
an( preius shall be deeed to be pa(ent to the Insurance Copan( unless a printed for of receipt for the
sae si"ned b( an 9fficial or dul( appointed A"ent of the Copan( shall be "iven to the insured.
0he case of Tibay v. Court of Appeals
1/
is in point. 0he issue raised therein was3 8Ma( a fire insurance polic(
be valid, bindin" and enforceable upon ere partial pa(ent of preiuK8 In the said case, Eortune Life and
Meneral Insurance Co., Inc. issued Eire Insurance Polic( >o. 1'-1&1 in favor of Fioleta R. 0iba( and@or >icolas
Roraldo, on a two+store( residential buildin" located at 5,55 Jobel Atreet, Ma<ati Cit(, to"ether with all the
personal effects therein, 0he insurance was for P-//,///.//, coverin" the period fro %' Januar( 19,& to %'
Januar( 19,,. 9n %' Januar( 19,&, of the total preiu of P%,9,'.5/, Fioleta 0iba( onl( paid P-//.//, thus
leavin" a substantial balance unpaid. 9n March ,, 19,&, the insured buildin" was copletel( destro(ed b( fire.
0wo da(s later, or on 1/ March 19,&, Fioleta 0iba( paid the balance of the preiu. 9n the sae da(, she filed
with Eortune a clai for the proceeds of the fire insurance polic(.
In den(in" the clai of insurance, the Court ruled that 8b( e7press a"reeent of the parties, no vinculu! .uris or
bond of law was to be established until full pa(ent was effected prior to the occurrence of the ris< insured
a"ainst.
11
As e7pressl( stipulated in the contract, full pa(ent ust be ade before the ris< occurs for the
polic( to be considered effective and in force. 8>o vinculu! .uris whereb( the insurer bound itself to indenif(
the assured accordin" to law ever resulted fro the fractional pa(ent of preiu.8
1%

0he a!orit( cited the case of #a$ati Tuscany Condo!iniu! Corp. vs. Court of Appeals
1'
to support the
contention that the insurance policies sub!ect of the instant case were valid and effective. Bowever, the factual
situation in that case was different fro the case at bar.
In Tuscany, the Court held that the insurance policies were valid and bindin" because there was partial pa(ent
of the preius and a clear understandin" between the parties that the( had intended the insurance policies to
be bindin" and effective notwithstandin" the sta""ered pa(ent of the preius. 9n the basis of e:uit( and
fairness, the Court ruled that there was a perfected contract of insurance upon the partial pa(ent of the
preius, notwithstandin" the provisions of Aection && to the contrar(. 0he Court would not allow the insurer to
continue collectin" and acceptin" the preius, althou"h paid on installents, and later den( liabilit( on the
lae e7cuse that the preius were not prepaid in full.
0here is no dispute that li<e in an( other contract, the parties to a contract of insurance en!o( the freedo to
stipulate on the ters and conditions that will "overn their a"reeent so lon" as the( are not contrar( to law,
orals, "ood custos, public order or public polic(. Bowever, the a"reeent containin" such ters and
conditions ust be clear and definite.
In the case at bar, there was no clear and definite a"reeent between petitioner and respondent on the "rant of
a credit e7tension* neither was there partial pa(ent of preius for petitioner to invo<e the e7ceptional
doctrine in Tuscany.
Bence, the circustances in the above cited case are totall( different fro the case at bar, and conse:uentl(, not
applicable herein.
Insurance is an aleator( contract whereb( one underta<es for a consideration to indenif( another a"ainst loss,
daa"e or liabilit( arisin" fro an un<nown or contin"ent event.
1.
0he consideration is the preiu, which
ust be paid at the tie and in the anner specified in the polic(, and if not so paid, the polic( will lapse and be
forfeited b( its own ters.
15

Gith re"ard to the contention that the absence of notice of non+renewal of the polic( resulted to the autoatic
renewal of the insurance polic(, we find the contention untenable. As above discussed, the law provides that onl(
upon pa(ent of the insurance preiu will the insurance polic( bind the insurer to the peril insured a"ainst and
hold it liable under the polic( in case of loss.
6ven in the absence of notice of non+renewal, the assured would be bound b( the law that a non life insurance
polic( ta<es effect onl( on the date pa(ent of the preiu was ade.
Feril(, it is eleental law that the pa(ent of preiu is a andator( re:uisite to a<e the polic( of insurance
effective. If the preiu is not paid in the anner prescribed in the polic( as intended b( the parties, the polic(
is void and ineffective.
1-

;asicall( a contract of indenit(, an insurance contract is the law between the parties. Its ters and conditions
constitute the easure of the insurer)s liabilit( and copliance therewith is a condition precedent to the insured)s
ri"ht to recover( fro the insurer.
1&

I> FI6G GB6R69E, I vote to =6>I the respondent)s otion for reconsideration, for lac< of erit.
#elo, 'uno and 8uisu!bin, -- ., concur.
'oo$%o$"&
1
Rollo, ',.
%
191 ACRA 1 4199/5.
'
%.. ACRA &.. 419955.
.
%5& ACRA 1%- 4199-5 #erroneousl( stated in the decision as %&5 ACRA 1%-$.
5
%15 ACRA .-' 4199%5.
VITUG, J.!
1
Bartford Acci. N Inde. Co. vs. >.9. Leson Mf". Co., %91 DA '5%, &, L 6d, ,./, 5. A Ct. '9%.
%
Dnited Atates vs. Aouth+6astern Dnderwriters Asso., '%% DA 5'', ,, L 6d 1../, -. A Ct 11-%, reh den
'%' DA ,11, ,9 L 6d -.-, -5 A Ct, %-* Binc<le( vs. ;echtel Corp. #1st =ist.$, .1 Cal App 'd %/-, 11- Cal
Rptr ''.
'
.' A Jur %d* Merchants Mut. Auto Liabilit( Ins. Co. vs. Aart, %-& DA 1%-, -9 L 6d 5',, .5 A Ct '%/*
California Atate Auto Asso. Inter+Ins. ;ureau vs. Malone( '.1 DA 1/5, 95 L 6d &,,, &1 A Ct -/1* Atate
Ear Mut. Auto. Ins. Co. vs. =uel, '%. DA 15., ,9 L 6d ,1% -5 A Ct 5&' reh den '%. DA ,,&.
.
0iba( vs. Court of Appeals, %5& ACRA 1%-.
5
Aecs. &&+&,, Insurance Code* Ace vs. Court of Appeals, 1'. ACRA 155* Aouth Aea Auret( and
Insurance Copan(, Inc. vs. Court of Appeals, %.. ACRA &...
-
Insurance Code and Insolvenc( Law b( Bernando ;. Pere2, 1999 Rev. 6d.
&
Aes. vs. Auto 9wners) Ins. Co.* 195 >.G. -,-, %%5 Mich. ..* .5 C.J.A. -&..
,
C.6. Carnes N Co. vs. 6plo(ers) Liabilit( Assur. Corp., Liited of London, 6n"land, C.C.A. La, 1/1
E%d &'9* .5 CJA -&..
9
=evelopent ;an< of the Philippines vs. Court of Appeals, %,. ACRA 1..
1/
Aee Constantino vs. Asia Life Insurance Co., ,& Phil. %.,.
11
Aee Philippine Phoeni7 Auret( and Insurance, Inc. vs. Goodwor<s, Inc., %/ ACRA 1%&1.
1%
Aee Ma<ati 0uscan( Condoiniu vs. Court of Appeals, %15 ACRA .-'.
PARDO, J., dissentin"3
1
Felasco v. Apostol, 1&' ACRA %%,, %'- 419,95.
%
Aection 15, Polic( Conditions, R0C Record, p. %5.
'
0A>, =eceber ,, 199%, pp. %.+%5.
.
0A>, =eceber ,, 199%, pp. 1.+1&.
5
=evelopent ;an< of the Philippines v. Court of Appeals, '., Phil. 15, '% 4199,5.
-
Ibid.
&
Aerican Boe Assurance Co. v. Chua, '/9 ACRA %5/, %59 419995.
,
A(ala Corporation v. Ra( ;urton =evelopent Corp., '55 Phil. .&5, .9- 4199,5.
9
Aection %, Polic( Conditions, R0C Record, p. 1-.
1/
'%- Phil. 9'1 4199-5.
11
0iba( v. Court of Appeals, supra, >ote 1/, p. 1'-.
1%
Ibid., p. 1',.
1'
%15 ACRA .-% 4199%5.
1.
Article %/1/, Civil Code.
15
0iba( v. Court of Appeals, supra, >ote 1/, p. 1''.
1-
0iba( v. Court of Appeals, supra, >ote 1/, pp. 1',+1'9.
1&
Ferendia v. Court of Appeals, %1& ACRA .1&, .%%+%.' 4199'5.