Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-1669 August 31, 1950
PAZ LOPEZ DE CONSTANTINO, plaintif-appellant,
vs.
ASIA LIE INSURANCE COMPAN!, defendant-appellee.
x---------------------------------------------------------x
G.R. No. L-16"0 August 31, 1950
AGUSTINA PERALTA, plaintif-appellant,
vs.
ASIA LIE INSURANCE COMPAN!, defendant-appellee.
Mariano Lozada for appellant Constantino.
Cachero and Madarang for appellant Peralta.
Dewitt, Perkins and Ponce Enrile for appellee.
Ramirez and Ortigas and Padilla, Carlos and Fernando as amici criae.
#ENGZON, J.$
These to cases, appealed f!o" the Cou!t of #i!st $nstance of Manila, call fo!
decision of the %uestion hethe! the bene&cia!' in a life insu!ance polic' "a'
!ecove! the a"ount the!eof althou(h the insu!ed died afte! !epeatedl' failin( to pa'
the stipulated p!e"iu"s, such failu!e havin( been caused b' the last a! in the
Paci&c.
The facts a!e these)
First case. $n conside!ation of the su" of P*+,.-. as annual p!e"iu" dul' paid to it,
the Asia /ife $nsu!ance Co"pan' 0a fo!ei(n co!po!ation inco!po!ated unde! the las
of 1elaa!e, 2.3.A.4, issued on 3epte"be! 5+, *6.*, its Polic' No. 676*5 fo! P7,---,
he!eb' it insu!ed the life of A!cadio Constantino fo! a te!" of tent' 'ea!s. The
&!st p!e"iu" cove!ed the pe!iod up to 3epte"be! 5,, *6.5. The plaintif Pa8 /ope8
de Constantino as !e(ula!l' appointed bene&cia!'. The polic' contained these
stipulations, a"on( othe!s)
This P9/$C: 9# $N32RANCE is issued in conside!ation of the !itten and
p!inted application he!e fo! a cop' of hich is attached he!eto and is
he!eb' "ade a pa!t he!eof "ade a pa!t he!eof, and of the pa'"ent in
advance du!in( the lifeti"e and (ood health of the $nsu!ed of the annual
p!e"iu" of 9ne ;und!ed &ft'-ei(ht and .<*-- pesos Philippine
cu!!enc'
*
and of the pa!ment of a like amont pon each twent!"se#enth
da! of $eptem%er hereafter du!in( the te!" of Tent' 'ea!s o! until the
p!io! death of the $nsu!ed. 0E"phasis supplied.4
x x x x x x x x x
All p!e"iu" pa'"ents a!e due in advance and an' unpunctualit' in "a=in(
an' such pa'"ent shall cause this polic' to lapse unless and except as =ept
in fo!ce b' the >!ace Pe!iod condition o! unde! 9ption . belo. 0>!ace of 7*
da's.4
Afte! that &!st pa'"ent, no fu!the! p!e"iu"s e!e paid. The insu!ed died on
3epte"be! 55, *6...
$t is ad"itted that the defendant, bein( an A"e!ican co!po!ation , had to close its
b!anch o?ce in Manila b' !eason of the @apanese occupation, i.e. f!o" @anua!' 5,
*6.5, until the 'ea! *6.A.
$econd case. 9n Au(ust *, *67B, the defendant Asia /ife $nsu!ance Co"pan' issued
its Polic' No. +B*.A 0@oint /ife 5--:ea! Endo"ent Pa!ticipatin( ith Accident
$nde"nit'4, cove!in( the lives of the spouses To"as Rui8 and A(ustina Pe!alta, fo!
the su" of P7,---. The annual p!e"iu" stipulated in the polic' as !e(ula!l' paid
f!o" Au(ust *, *67B, up to and includin( 3epte"be! 7-, *6.*. Efective Au(ust *,
*6.*, the "ode of pa'"ent of p!e"iu"s as chan(ed f!o" annual to %ua!te!l', so
that %ua!te!l' p!e"iu"s e!e paid, the last havin( been delive!ed on Nove"be! *B,
*6.*, said pa'"ent cove!in( the pe!iod up to @anua!' 7*, *6.5. No fu!the!
pa'"ents e!e handed to the insu!e!. 2pon the @apanese occupation, the insu!ed
and the insu!e! beca"e sepa!ated b' the lines of a!, and it as i"possible and
ille(al fo! the" to deal ith each othe!. Because the insu!ed had bo!!oed on the
polic' an "ount of P57..-- in @anua!', *6.*, the cash su!!ende! value of the polic'
as su?cient to "aintain the polic' in fo!ce onl' up to 3epte"be! +, *6.5. To"as
Rui8 died on #eb!ua!' *,, *6.A. The plaintif A(ustina Pe!alta is his bene&cia!'. ;e!
de"and fo! pa'"ent "et ith defendantCs !efusal, (!ounded on non-pa'"ent of the
p!e"iu"s.
The polic' p!ovides in pa!t)
This P9/$C: 9# $N32RANCE is issued in conside!ation of the !itten and
p!inted application he!efo!, a cop' of hich is attached he!eto and is
he!eb' "ade apa!t he!eof, and of the pa'"ent in advance du!in( the life
ti"e and (ood health of the $nsu!ed of the annual p!e"iu" of To hund!ed
and .7<*-- pesos Philippine cu!!enc' and of the pa!ment of a like amont
pon each &rst da! of 'gst hereafter dring the te!" of Tent' 'ea!s o!
until the p!io! death of eithe! of the $nsu!ed. 0E"phasis supplied.4
x x x x x x x x x
All p!e"iu" pa'"ents a!e due in advance and an' unpunctualit' in "a=in(
an' such pa'"ent shall cause this polic' to lapse unless and except as =ept
in fo!ce b' the >!ace Pe!iod condition o! unde! 9ption . belo. 0>!ace of
da's.4 . . .
Plaintifs "aintain that, as bene&cia!ies, the' a!e entitled to !eceive the p!oceeds of
the policies "inus all su"s due fo! p!e"iu"s in a!!ea!s. The' alle(e that non-
pa'"ent of the p!e"iu"s as caused b' the closin( of defendantCs o?ces in Manila
du!in( the @apanese occupation and the i"possible ci!cu"stances c!eated b' a!.
1efendant on the othe! hand asse!ts that the policies had lapsed fo! non-pa'"ent of
p!e"iu"s, in acco!dance ith the cont!act of the pa!ties and the la applicable to
the situation.
The loe! cou!t absolved the defendant. ;ence this appeal.
The cont!ove!sial point has neve! been decided in this Du!isdiction. #o!tunatel', this
cou!t has had the bene&t of extensive and exhaustive "e"o!anda includin( those
of amici criae. The "atte! has !eceived ca!eful conside!ation, inas"uch as it afects
the inte!est of thousands of polic'-holde!s and the obli(ations of "an' insu!ance
co"panies ope!atin( in this count!'.
3ince the 'ea! *6*+, the Philippine la on $nsu!ance as found in Act No. 5.5+, as
a"ended, and the Civil Code.
5
Act No. 5.5+ as la!(el' copied f!o" the Civil Code of
Califo!nia.
7
And this cou!t has he!etofo!e announced its intention to supple"ent the
statuto!' las ith (ene!al p!inciples p!evailin( on the subDect in the 2nited 3tate.
.
$n :oun( #s. Midland Textile $nsu!ance Co. 07- Phil., ,*+4, e said that Econt!acts of
insu!ance a!e cont!acts of inde"nit' upon the te!"s and conditions speci&ed in the
polic'. The pa!ties have a !i(ht to i"pose such !easonable conditions at the ti"e of
the "a=in( of the cont!act as the' "a' dee" ise and necessa!'. The !ate of
p!e"iu" is "easu!ed b' the cha!acte! of the !is= assu"ed. The insu!ance co"pan',
fo! a co"pa!ativel' s"all conside!ation, unde!ta=es to (ua!antee the insu!ed
a(ainst loss o! da"a(e, upon the te!"s and conditions a(!eed upon, and upon no
othe!, and hen called upon to pa', in case of loss, the insu!e!, the!efo!e, "a' Dustl'
insists upon a ful&ll"ent of these te!"s. $f the insu!ed cannot b!in( hi"self ithin
the conditions of the polic', he is not entitled fo! the loss. The te!"s of the polic'
constitute the "easu!e of the insu!e!Cs liabilit', and in o!de! to !ecove! the insu!ed
"ust sho hi"self ithin those te!"sF and if it appea!s that the cont!act has been
te!"inated b' a violation, on the pa!t of the insu!ed, of its conditions, then the!e can
be no !i(ht of !ecove!'. The co"pliance of the insu!ed ith the te!"s of the cont!act
is a condition p!ecedent to the !i(ht of !ecove!'.E
Recall of the above p!onounce"ents is app!op!iate because the policies in %uestion
stipulate that Eall p!e"iu" pa'"ents a!e due in advance and an' unpunctualit' in
"a=in( an' such pa'"ent shall cause this polic' to lapse.E Ghe!efo!e, it ould
see" that pu!suant to the exp!ess te!"s of the polic', non-pa'"ent of p!e"iu"
p!oduces its avoidance.
The conditions of cont!acts of $nsu!ance, hen plainl' exp!essed in a polic',
a!e bindin( upon the pa!ties and should be enfo!ced b' the cou!ts, if the
evidence b!in(s the case clea!l' ithin thei! "eanin( and intent. $t tends to
b!in( the la itself into dis!epute hen, b' astute and subtle distinctions, a
plain case is atte"pted to be ta=en ithout the ope!ation of a clea!,
!easonable and "ate!ial obli(ation of the cont!act. Mac= #s. Rocheste!
>e!"an $ns. Co., *-, N.:., A,-, A,.. 0:oun( #s. Midland Textile $ns. Co., 7-
Phil., ,*+, ,55.4
$n >la!a(a #s. 3un /ife Ass. Co. 0.6 Phil., +7+4, this cou!t held that a life polic' as
avoided because the p!e"iu" had not been paid ithin the ti"e &xed, since b' its
exp!ess te!"s, non-pa'"ent of an' p!e"iu" hen due o! ithin the thi!t'-da'
pe!iod of (!ace, ipso facto caused the polic' to lapse. This (oes to sho that
althou(h e ta=e the vie that insu!ance policies should be conse!ved
A
and should
not li(htl' be th!on out, still e do not hesitate to enfo!ce the a(!ee"ent of the
pa!ties.
#o!feitu!es of insu!ance policies a!e not favo!ed, but cou!ts cannot fo! that
!eason alone !efuse to enfo!ce an insu!ance cont!act acco!din( to its
"eanin(. 0.A C.@.3., p. *A-.4
Neve!theless, it is contended fo! plaintif that inas"uch as the non-pa'"ent of
p!e"iu" as the conse%uence of a!, it should be excused and should not cause
the fo!feitu!e of the polic'.
P!ofesso! Hance of :ale, in his standa!d t!eatise on $nsu!ance, sa's that in
dete!"inin( the efect of non-pa'"ent of p!e"iu"s occasioned b' a!, the
A"e!ican cases "a' be divided into th!ee (!oups, acco!din( as the' suppo!t the so-
called Connecticut Rule, the Ne :o!= Rule, o! the 2nited 3tates Rule.
The &!st holds the vie that Ethe!e a!e to ele"ents in the conside!ation fo! hich
the annual p!e"iu" is paid I #i!st, the "e!e p!otection fo! the 'ea!, and second,
the p!ivile(e of !enein( the cont!act fo! each succeedin( 'ea! b' pa'in( the
p!e"iu" fo! that 'ea! at the ti"e a(!eed upon. Acco!din( to this vie of the
cont!act, the pa'"ent of p!e"iu"s is a condition p!ecedent, the non-pe!fo!"ance
ould be ille(al necessa!il' defeats the !i(ht to !ene the cont!act.E
The second !ule, appa!entl' folloed b' the (!eate! nu"be! of decisions, hold that
Ea! beteen states in hich the pa!ties !eside "e!el' suspends the cont!acts of
the life insu!ance, and that, upon tende! of all p!e"iu"s due b' the insu!ed o! his
!ep!esentatives afte! the a! has te!"inated, the cont!act !evives and beco"es full'
ope!ative.E
The 2nited 3tates !ule decla!es that the cont!act is not "e!el' suspended, but is
ab!o(ated b' !eason of non-pa'"ents is peculia!l' of the essence of the cont!act. $t
additionall' holds that it ould be unDust to allo the insu!e! to !etain the !ese!ve
value of the polic', hich is the excess of the p!e"iu"s paid ove! the actual !is=
ca!!ied du!in( the 'ea!s hen the polic' had been in fo!ce. This !ule as announced
in the ell-=non 3tatha"
,
case hich, in the opinion of P!ofesso! Hance, is the
correct rle.
+
The appellants and so"e amici criae contend that the Ne :o!= !ule should be
applied he!e. The appellee and othe! amici criae contend that the 2nited 3tates
doct!ine is the o!thodox vie.
Ge have !ead and !e-!ead the p!incipal cases upholdin( the dife!ent theo!ies.
Besides the !espect and hi(h !e(a!d e have ala's ente!tained fo! decisions of the
3up!e"e Cou!t of the 2nited 3tates, e cannot !esist the conviction that the !easons
expounded in its decision of the 3tatha" case a!e lo(icall' and Dudiciall' sound. /i=e
the instant case, the polic' involved in the 3tatha" decision speci&es that non-
pa'"ent on ti"e shall cause the polic' to cease and dete!"ine. Reasonin( out that
punctual pa'"ents e!e essential, the cou!t said)
. . . it "ust be conceded that p!o"ptness of pa'"ent is essential in the
business of life insu!ance. All the calculations of the insu!ance co"pan' a!e
based on the h'pothesis of p!o"pt pa'"ents. The' not onl' calculate on
the !eceipt of the p!e"iu"s hen due, but on co"poundin( inte!est upon
the". $t is on this basis that the' a!e enabled to ofe! assu!ance at the
favo!able !ates the' do. #o!feitu!e fo! non-pa'"ent is an necessa!' "eans
of p!otectin( the"selves f!o" e"ba!!ass"ent. 2nless it e!e enfo!ceable,
the business ould be th!on into confusion. $t is li=e the fo!feitu!e of
sha!es in "inin( ente!p!ises, and all othe! ha8a!dous unde!ta=in(s. The!e
"ust be poe! to cut-of unp!o&table "e"be!s, o! the success of the hole
sche"e is endan(e!ed. The insu!ed pa!ties a!e associates in a (!eat
sche"e. This associated !elation exists hethe! the co"pan' be a "utual
one o! not. Each is inte!ested in the en(a(e"ents of allF fo! out of the co-
existence of "an' !is=s a!ises the la of ave!a(e, hich unde!lies the
hole business. An essential featu!e of this sche"e is the "athe"atical
calculations !efe!!ed to, on hich the p!e"iu"s and a"ounts assu!ed a!e
based. And these calculations, a(ain, a!e based on the assu"ption of
ave!a(e "o!talit', and of p!o"pt pa'"ents and co"pound inte!est
the!eon. 1elin%uenc' cannot be tole!ated no! !edee"ed, except at the
option of the co"pan'. This has ala's been the unde!standin( and the
p!actice in this depa!t"ent of business. 3o"e co"panies, it is t!ue, acco!d
a (!ace of thi!t' da's, o! othe! &xed pe!iod, ithin hich the p!e"iu" in
a!!ea! "a' be paid, on ce!tain conditions of continued (ood health, etc. But
this is a "atte! of stipulation, o! of disc!etion, on the pa!t of the pa!ticula!
co"pan'. Ghen no stipulation exists, it is the (ene!al unde!standin( that
ti"e is "ate!ial, and that the fo!feitu!e is absolute if the p!e"iu" be not
paid. The ext!ao!dina!' and even despe!ate efo!ts so"eti"es "ade, hen
an insu!ed pe!son is in ext!e"es to "eet a p!e"iu" co"in( due,
de"onst!ates the co""on vie of this "atte!.
The case, the!efo!e, is one in hich ti"e is "ate!ial and of the essence and
of the essence of the cont!act. Non-pa'"ent at the da' involves absolute
fo!feitu!e if such be the te!"s of the cont!act, as is the case he!e. Cou!ts
cannot ith safet' va!' the stipulation of the pa!ties b' int!oducin( e%uities
fo! the !elief of the insu!ed a(ainst thei! on ne(li(ence.
$n anothe! pa!t of the decision, the 2nited 3tates 3up!e"e Cou!t conside!s and
!eDects hat is, in efect, the Ne :o!= theo!' in the folloin( o!ds and ph!ases)
The t!uth is, that the doct!ine of the !evival of cont!acts suspended du!in(
the a! is one based on conside!ations of e%uit' and Dustice, and cannot be
invo=ed to !evive a cont!act hich it ould be unDust o! ine%uitable to
!evive.
$n the case of /ife insu!ance, besides the "ate!ialit' of ti"e in the
pe!fo!"ance of the cont!act, anothe! st!on( !eason exists h' the polic'
should not be !evived. The pa!ties do not stand on e%ual (!ound in
!efe!ence to such a !evival. $t ould ope!ate "ost unDustl' a(ainst the
co"pan'. The business of insu!ance is founded on the la of ave!a(eF that
of life insu!ance e"inentl' so. The ave!a(e !ate of "o!talit' is the basis on
hich it !ests. B' sp!eadin( thei! !is=s ove! a la!(e nu"be! of cases, the
co"panies calculate on this ave!a(e ith !easonable ce!taint' and safet'.
An'thin( that inte!fe!es ith it de!an(es the secu!it' of the business. $f
eve!' polic' lapsed b' !eason of the a! should be !evived, and all the bac=
p!e"iu"s should be paid, the co"panies ould have the bene&t of this
ave!a(e a"ount of !is=. But the (ood !is=s a!e neve! hea!d f!o"F onl' the
ba! a!e sou(ht to be !evived, he!e the pe!son insu!ed is eithe! dead o!
d'in(. Those in health can (et the ne policies cheape! than to pa'
a!!ea!a(es on the old. To enfo!ce a !evival of the bad cases, hilst the
co"pan' necessa!il' lose the cases hich a!e desi!able, ould be
"anifestl' unDust. An insu!ed pe!son, as befo!e stated, does not stand
isolated and alone. ;is case is connected ith and co-!elated to the cases
of all othe!s insu!ed b' the sa"e co"pan'. The natu!e of the business, as a
hole, "ust be loo=ed at to unde!stand the (ene!al e%uities of the pa!ties.
The above conside!ation ce!tainl' lend the"selves to the app!oval of fai!-"inded
"en. Mo!eove!, if, as alle(ed, the conse%uences of a! should not p!eDudice the
insu!ed, neithe! should the' bea! don on the insu!e!.
2!(in( adoption of the Ne :o!= theo!', counsel fo! plaintif point out that the
obli(ation of the insu!ed to pa' p!e"iu"s as excused du!in( the a! oin( to
i"possibilit' of pe!fo!"ance, and that conse%uentl' no unfavo!able conse%uences
should follo f!o" such failu!e.
The appellee anse!s, %uite plausibl', that the pe!iodic pa'"ent of p!e"iu"s, at
least those afte! the &!st, is not an o%ligation of the insu!ed, so "uch so that it is not
a debt enfo!ceable b' action of the insu!e!.
2nde! an 9=laho"a decision, the annual p!e"iu" due is not a debt. $t is
not an obli(ation upon hich the insu!e! can "aintain an action a(ainst
insu!edF no! is its settle"ent (ove!ned b' the st!ict !ule cont!ollin(
pa'"ents of debts. 3o, the cou!t in a Jentuc=' case decla!es, in the
opinion, that it is not a debt. . . . The fact that it is pa'able annuall' o!
se"i-annuall', o! at an' othe! stipulated ti"e, does not of itself constitute
a p!o"ise to pa', eithe! exp!ess o! i"plied. $n case of non-pa'"ent the
polic' is fo!feited, except so fa! as the fo!feitu!e "a' be saved b'
a(!ee"ent, b' aive!, estoppel, o! b' statute. The pa'"ent of the
p!e"iu" is enti!el' optional, hile a debt "a' be enfo!ced at la, and the
fact that the p!e"iu" is a(!eed to be paid is ithout fo!ce, in the absence
of an un%uali&ed and absolute a(!ee"ent to pa' a speci&ed su" at so"e
ce!tain ti"e. $n the o!dina!' polic' the!e is no p!o"ise to pa', but it is
optional ith the insu!ed hethe! he ill continue the polic' o! fo!feit it. 07
Couch, C'c. on $nsu!ance, 3ec. ,57, p. *66,.4
$t is ell settled that a cont!act of insu!ance is si generis. Ghile the
insu!ed b' an obse!vance of the conditions "a' hold the insu!e! to his
cont!act, the latte! has not the poe! o! !i(ht to co"pel the insu!ed to
"aintain the cont!act !elation ith it lon(e! than he chooses. (hether the
insred will contine it or not is optional with him. )here %eing no
o%ligation to pa! for the premim, the! did not constitte a
de%t. 0Noble#s. 3outhe!n 3tates M.1. $ns. Co., *A+ J'., .,F *,5 3.G., A5B.4
0E"phasis ou!s.4
$t should be noted that the pa!ties cont!acted not onl' fo! peaceti"e conditions but
also fo! ti"es of a!, because the policies contained p!ovisions applicable exp!essl'
to a!ti"e da's. The lo(ical infe!ence, the!efo!e, is that the pa!ties conte"plated
uninte!!upted ope!ation of the cont!act even if a!"ed conKict should ensue.
#o! the plaintifs, it is a(ain a!(ued that in vie of the eno!"ous (!oth of insu!ance
business since the 3tatha" decision, it could no be !elaxed and even dis!e(a!ded.
$t is stated Ethat the !elaxation of !ules !elatin( to insu!ance is in di!ect p!opo!tion to
the (!oth of the business. $f the!e e!e onl' *-- "en, fo! exa"ple, insu!ed b' a
Co"pan' o! a "utual Association, the death of one ill dist!ibute the insu!ance
p!oceeds a"on( the !e"ainin( 66 polic'-holde!s. Because the loss hich each
su!vivo! ill bea! ill be !elativel' (!eat, death f!o" ce!tain a(!eed o! speci&ed
causes "a' be dee"ed not a co"pensable loss. But if the polic'-holde!s of the
Co"pan' o! Association should be *,---,--- individuals, it is clea! that the death of
one of the" ill not se!iousl' p!eDudice each one of the 666,666 su!vivin( insu!ed.
The loss to be bo!ne b' each individual ill be !elativel' s"all.E
The anse! to this is that as the!e a!e 0in the exa"ple4 one "illion polic'-holde!s,
the ElossesE to be conside!ed ill not be the death of one but the death of ten
thousand, since the p!opo!tion of * to *-- should be "aintained. And ce!tainl' such
losses fo! *-,--- deaths ill not be E!elativel' s"all.E
Afte! pe!usin( the $nsu!ance Act, e a!e &!"l' pe!suaded that the non-pa'"ent of
p!e"iu"s is such a vital defense of insu!ance co"panies that since the ve!'
be(innin(, said Act no. 5.5+ exp!essl' p!ese!ved it, b' p!ovidin( that afte! the
polic' shall have been in fo!ce fo! to 'ea!s, it shall beco"e incontestable 0i.e. the
insu!e! shall have no defense4 except fo! f!aud, non"pa!ment of premims, and
"ilita!' o! naval se!vice in ti"e of a! 0sec. *B. LbM, $nsu!ance Act4. And hen
Con(!ess !ecentl' a"ended this section 0Rep. Act No. *+*4, the defense of f!aud as
eli"inated, hile the defense of nonpa!ment of premims was preser#ed. Thus the
funda"ental cha!acte! of the unde!ta=in( to pa' p!e"iu"s and the hi(h i"po!tance
of the defense of non-pa'"ent the!eof, as speci&call' !eco(ni8ed.
$n =eepin( ith such le(islative polic', e feel no hesitation to adopt the 2nited
3tates Rule, hich is in efect a va!iation of the Connecticut !ule fo! the sa=e of
e%uit'. $n this connection, it appea!s that the &!st polic' had no !ese!ve value, and
that the e%uitable values of the second had been p!acticall' !etu!ned to the insu!ed
in the fo!" of loan and advance fo! p!e"iu".
#o! all the fo!e(oin(, the loe! cou!tCs decision absolvin( the defendant f!o" all
liabilit' on the policies in %uestion, is he!eb' a?!"ed, ithout costs.
Constantino vs Asia /ife $nsu!ance 0Case B!ief4
%&ts$
0Appeal consolidates to cases. Asia life insu!ance Co"pan' 0A/$C4 as
inco!po!ated in 1elaa!e. #o! the su" of *+A.-. as annual p!e"iu" dul' paid to
A/$C, it issued Polic' No. 676*5 he!eb' it insu!ed the life of A!cadio Constantino fo!
5- 'ea!s fo! P7T ith Pa8 Constantino as bene&cia!'.4
#i!st p!e"iu" cove!ed the pe!iod up to 3ept. 5,, *6.5. No fu!the! p!e"iu"s
e!e paid afte! the &!st p!e"iu" and A!cadio died on 3ept. 55, *6...
1ue to @ap occupation, A/$C closed its b!anch o?ce in Manila f!o" @an. 5 *6.5-*6.A.
9n Au(. *, *67B, A/$C issued Polic' no. +B*.A cove!in( the lives of 3pouses To"as
Rui8 and A(ustina Pe!alta fo! the su" of P7T fo! 5- 'ea!s. The annual p!e"iu"
stipulated as !e(ula!l' paid f!o" Au(. *, *67B up to and includin( 3ept. 7-, *6.-.
Efective Au(. *, *6.*, the "ode of pa'"ent as chan(ed f!o"
annuall' to %ua!te!l' and such %ua!te!l' p!e"iu"s e!e paid until Nov.
*B, *6.*.
/ast pa'"ent cove!ed the pe!iod until @an. 7*, *6.5.
To"as Rui8 died on #eb. *,, *6.A ith A(ustina Pe!alta as his
bene&cia!'.
1ue to @ap occupation, it beca"e i"possible and ille(al fo! the insu!ed to deal ith
A/$C. Aside f!o" this the insu!ed bo!!oed f!o" the polic' P57..-- such that the
cash su!!ende! value of the polic' as su?cient to "aintain the polic' in fo!ce onl'
up to 3ept. +, *6.5.
Both policies contained this p!ovision) 'll premims are de in ad#ance and an!
npnctalit! in making sch pa!ment shall case this polic! to lapse nless and
e*cept as kept in force %! the grace period condition.
Pa8 Constantino and A(ustina Pe!alta clai" as bene&cia!ies, that the' a!e entitled to
!eceive the p!oceeds of the policies less all su"s due fo! p!e"iu"s in a!!ea!s. The'
also alle(e that non-pa'"ent of the p!e"iu"s e!e caused b' the closin( of A/$CNs
o?ces du!in( the a! and the i"possible ci!cu"stances b' the a!, the!efo!e, the'
should be excused and the policies should not be fo!feited.
/oe! cou!t !uled in favo! of A/$C.
Issu'$ Ma' a bene&cia!' in a life insu!ance polic' !ecove! the a"ount the!eof
althou(h the insu!ed died afte! !epeatedl' failin( to pa' the stipulated p!e"iu"s,
such failu!e bein( caused b' a!O
(')*$ NO.
1ue to the exp!ess te!"s of the polic', non-pa'"ent of the p!e"iu" p!oduces its
avoidance. $n >la!a(a v. 3un /ife, it as held that a life polic' as avoided because
the p!e"iu" had not been paid ithin the ti"e &xedF since b' its exp!ess te!"s,
non-pa'"ent of an' p!e"iu" hen due o! ithin the 7*

da' (!ace pe!iod ipso fact
caused the polic' to lapse.
Ghen the life insu!ance polic' p!ovides that non-pa'"ent of p!e"iu"s ill cause its
fo!feitu!e, a! does N9T excuse non-pa'"ent and does not avoid fo!feitu!e.
Essentiall', the !eason h' punctual pa'"ents a!e i"po!tant is that the insu!e!
calculates on the basis of the p!o"pt pa'"ents. 9the!ise, "alulu(i sila. $t should
be noted that the pa!ties cont!acted not onl' as to peace ti"e conditions but also as
to a!-ti"e conditions since the policies contained p!ovisions applicable exp!essl' to
a!ti"e da's. The lo(ical infe!ence the!efo!e is that the pa!ties conte"plated the
uninte!!upted ope!ation of the cont!act even if a!"ed conKict should ensue.