SYLLABI/SYNOPSIS

FIRST DIVISION

[G.R. No. 137172. June 15, 1999]

UCPB GENERAL INSURANCE CO., INC., petitioner, vs. MASAGANA

TELAMART, INC., respondent.
DECISION
PARDO, J.:

The case is an appeal via certiorari seeking to set aside the decision of the Court of
Appeals,[1] affirming with modification that of the Regional Trial Court, Branch 58, Makati,
ordering petitioner to pay respondent the sum of P18,645,000.00, as the proceeds of the
insurance coverage of respondent's property razed by fire; 25% of the total amount due as
attorney's fees and P25,000.00 as litigation expenses, and costs.
The facts are undisputed and may be related as follows:
On April 15, 1991, petitioner issued five (5) insurance policies covering respondent's
various property described therein against fire, for the period from May 22, 1991 to May 22,
1992.
In March 1992, petitioner evaluated the policies and decided not to renew them upon
expiration of their terms on May 22, 1992. Petitioner advised respondent's broker, Zuellig
Insurance Brokers, Inc. of its intention not to renew the policies.
On April 6, 1992, petitioner gave written notice to respondent of the non-renewal of the
policies at the address stated in the policies.
On June 13, 1992, fire razed respondent's property covered by three of the insurance
policies petitioner issued.
On July 13, 1992, respondent presented to petitioner's cashier at its head office five (5)
manager's checks in the total amount of P225,753.95, representing premium for the renewal
of the policies from May 22, 1992 to May 22, 1993. No notice of loss was filed by
respondent under the policies prior to July 14, 1992.
On July 14, 1992, respondent filed with petitioner its formal claim for indemnification of
the insured property razed by fire.
On the same day, July 14, 1992, petitioner returned to respondent the five (5) manager's
checks that it tendered, and at the same time rejected respondent's claim for the reasons (a)
that the policies had expired and were not renewed, and (b) that the fire occurred on June 13,
1992, before respondent's tender of premium payment.
On July 21, 1992, respondent filed with the Regional Trial Court, Branch 58, Makati
City, a civil complaint against petitioner for recovery of P18,645,000.00, representing the
face value of the policies covering respondent's insured property razed by fire, and for
attorney's fees.[2]

On October 23, 1992, after its motion to dismiss had been denied, petitioner filed an
answer to the complaint. It alleged that the complaint "fails to state a cause of action"; that
petitioner was not liable to respondent for insurance proceeds under the policies because at
the time of the loss of respondent's property due to fire, the policies had long expired and
were not renewed.[3]
After due trial, on March 10, 1993, the Regional Trial Court, Branch 58, Makati,
rendered decision, the dispositive portion of which reads:

"WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiff and against the defendant, as follows:
"(1) Authorizing and allowing the plaintiff to consign/deposit with this Court the
sum of P225,753.95 (refused by the defendant) as full payment of the
corresponding premiums for the replacement-renewal policies for Exhibits A, B, C,
D and E;
"(2) Declaring plaintiff to have fully complied with its obligation to pay the
premium thereby rendering the replacement-renewal policy of Exhibits A, B, C, D
and E effective and binding for the duration May 22, 1992 until May 22, 1993;
and, ordering defendant to deliver forthwith to plaintiff the said replacementrenewal policies;
"(3) Declaring Exhibits A & B, in force from August 22, 1991 up to August 23,
1992 and August 9, 1991 to August 9, 1992, respectively; and
"(4) Ordering the defendant to pay plaintiff the sums of: (a) P18,645,000.00
representing the latter's claim for indemnity under Exhibits A, B & C and/or its
replacement-renewal policies; (b) 25% of the total amount due as and for attorney's
fees; (c) P25,000.00 as necessary litigation expenses; and, (d) the costs of suit.
"All other claims and counterclaims asserted by the parties are denied and/or
dismissed, including plaintiff's claim for interests.
"SO ORDERED.
"Makati, Metro-Manila, March 10, 1993.
"ZOSIMO Z.
ANGELES
Judge.[4]
In due time, petitioner appealed to the Court of Appeals.[5]
On September 7, 1998, the Court of Appeals promulgated its decision [6] affirming that of
the Regional Trial Court with the modification that item No. 3 of the dispositive portion was
deleted, and the award of attorney's fees was reduced to 10% of the total amount due.[7]

The Court of Appeals held that following previous practise, respondent was allowed a
sixty (60) to ninety (90) day credit term for the renewal of its policies, and that the acceptance
of the late premium payment suggested an understanding that payment could be made later.
Hence, this appeal.
By resolution adopted on March 24, 1999, we required respondent to comment on the
petition, not to file a motion to dismiss within ten (10) days from notice. [8] On April 22, 1999,
respondent filed itscomment.[9]
Respondent submits that the Court of Appeals correctly ruled that no timely notice of
non-renewal was sent. The notice of non-renewal sent to broker Zuellig which claimed that it
verbally notified the insurance agency but not respondent itself did not suffice. Respondent
submits further that the Court of Appeals did not err in finding that there existed a sixty (60)
to ninety (90) days credit agreement between UCPB and Masagana, and that, finally, the
Supreme Court could not review factual findings of the lower court affirmed by the Court of
Appeals.[10]
We give due course to the appeal.
The basic issue raised is whether the fire insurance policies issued by petitioner to the
respondent covering the period May 22, 1991 to May 22, 1992, had expired on the latter date
or had been extended or renewed by an implied credit arrangement though actual payment of
premium was tendered on a later date after the occurrence of the risk (fire) insured against.
The answer is easily found in the Insurance Code. No, an insurance policy, other than
life, issued originally or on renewal, is not valid and binding until actual payment of the
premium. Any agreement to the contrary is void.[11] The parties may not agree expressly or
impliedly on the extension of credit or time to pay the premium and consider the policy
binding before actual payment.
The case of Malayan Insurance Co., Inc. vs. Cruz-Arnaldo,[12] cited by the Court of
Appeals, is not applicable. In that case, payment of the premium was in fact actually made on
December 24, 1981, and the fire occurred on January 18, 1982. Here, the payment of the
premium for renewal of the policies was tendered on July 13, 1992, a month after the fire
occurred on June 13, 1992. The assured did not even give the insurer a notice of loss within
a reasonable time after occurrence of the fire.
WHEREFORE, the Court hereby REVERSES and SETS ASIDE the decision of the
Court of Appeals in CA-G.R. CV No. 42321. In lieu thereof, the Court renders judgment
dismissing respondent's complaint and petitioner's counterclaims thereto filed with the
Regional Trial Court, Branch 58, Makati City, in Civil Case No. 92-2023. Without costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Melo, Kapunan, and Ynares-Santiago, JJ., concur.

[1]

In CA-G.R. CV No. 42321, promulgated on September 7, 1998. Alio-Hormachuelos, J., ponente, Guerrero
and Villarama, Jr., JJ., concurring.
[2]

RTC Original Record, pp. 1-10.

[3]

RTC Original Record, pp. 103-117.

[4]

RTC Original record, pp. 454-466.

[5]

Docketed as CA-G.R. CV No. 42321.

[6]

Alio-Hormachuelos, J., ponente, Guerrero and Villarama, Jr. JJ., concurring.

[7]

Petition, Annex A, Rollo, pp. 38-54.

[8]

Rollo, p. 72.

[9]

Rollo, pp. 73-106.

[10]

Comment, Rollo, on p. 84.

[11]

Section 77, Insurance Code of the Philippines; Valenzuela vs. Court of Appeals, 191 SCRA 1; South Sea
Surety and Insurance Co., Inc. vs. Court of Appeals, 244 SCRA 744; Tibay vs. Court of Appeals, 275 SCRA
126.
[12]

154 SCRA 672.

EN BANC

[G.R. No. 137172. April 4, 2001]

UCPB GENERAL INSURANCE CO. INC., petitioner, vs. MASAGANA

TELAMART, INC., respondent.
RESOLUTION
DAVIDE, JR., 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 affirmed with modification the judgment of the trial
court (a) allowing Respondent to consign the sum of P225,753.95 as full payment of the
premiums for the renewal of the five insurance policies on Respondents properties; (b)
declaring the replacement-renewal policies effective and binding from 22 May 1992 until 22
May 1993; and (c) ordering Petitioner to pay Respondent P18,645,000.00 as indemnity for
the burned properties covered by the renewal-replacement policies.The modification
consisted in the (1) deletion of the trial courts declaration that three of the policies were in
force from August 1991 to August 1992; and (2) reduction of the award of the attorneys fees
from 25% to 10% of the total amount due the Respondent.
The material operative facts upon which the appealed judgment was based are
summarized by the Court of Appeals in its assailed decision as follows:

Plaintiff [herein Respondent] obtained from defendant [herein Petitioner] five (5)
insurance policies (Exhibits "A" to "E", Record, pp. 158-175) on its properties [in
Pasay City and Manila].
All five (5) policies reflect on their face the effectivity term: "from 4:00 P.M. of 22
May 1991 to 4:00 P.M. of 22 May 1992." On June 13, 1992, plaintiff's properties
located at 2410-2432 and 2442-2450 Taft Avenue, Pasay City were razed by
fire. On July 13, 1992, plaintiff tendered, and defendant accepted, five (5)
Equitable Bank Manager's Checks in the total amount of P225,753.45 as renewal

premium payments for which Official Receipt Direct Premium No. 62926 (Exhibit
"Q", Record, p. 191) was issued by defendant. On July 14, 1992, Masagana made
its formal demand for indemnification for the burned insured properties. On the
same day, defendant returned the five (5) manager's checks stating in its letter
(Exhibit "R"/"8", Record, p. 192) that it was rejecting Masagana's claim on the
following grounds:
"a) Said policies expired last May 22, 1992 and were not renewed for another term;
b) Defendant had put plaintiff and its alleged broker on notice of non-renewal earlier; and
c) The properties covered by the said policies were burned in a fire that took place last June
13, 1992, or before tender of premium payment."
(Record, p. 5)

Hence Masagana filed this case.

The Court of Appeals disagreed with Petitioners stand that Respondents tender of
payment of the premiums on 13 July 1992 did not result in the renewal of the policies, having
been made beyond the effective date of renewal as provided under Policy Condition No. 26,
which states:

26. Renewal Clause. -- Unless the company at least forty five days in advance of
the end of the policy period mails or delivers to the assured at the address shown in
the policy notice of its intention not to renew the policy or to condition its renewal
upon reduction of limits or elimination of coverages, the assured shall be entitled
to renew the policy upon payment of the premium due on the effective date of
renewal.
Both the Court of Appeals and the trial court found that sufficient proof exists that
Respondent, which had procured insurance coverage from Petitioner for a number of years,
had been granted a 60 to 90-day credit term for the renewal of the policies. Such a practice
had existed up to the time the claims were filed. Thus:

Fire Insurance Policy No. 34658 covering May 22, 1990 to May 22, 1991 was
issued on May 7, 1990 but premium was paid more than 90 days later on August
31, 1990 under O.R. No. 4771 (Exhs. "T" and "T-1"). Fire Insurance Policy No.
34660 for Insurance Risk Coverage from May 22, 1990 to May 22, 1991 was
issued by UCPB on May 4, 1990 but premium was collected by UCPB only on
July 13, 1990 or more than 60 days later under O.R. No. 46487 (Exhs. "V" and "V1"). And so were as other policies: Fire Insurance Policy No. 34657 covering risks
from May 22, 1990 to May 22, 1991 was issued on May 7, 1990 but premium
therefor was paid only on July 19, 1990 under O.R. No. 46583 (Exhs. "W" and
"W-1"). Fire Insurance Policy No. 34661 covering risks from May 22, 1990 to May
22, 1991 was issued on May 3, 1990 but premium was paid only on July 19, 1990
under O.R. No. 46582 (Exhs. "X' and "X-1"). Fire Insurance Policy No. 34688 for
insurance coverage from May 22, 1990 to May 22, 1991 was issued on May 7,
1990 but premium was paid only on July 19, 1990 under O.R. No. 46585 (Exhs.

"Y" and "Y-1"). Fire Insurance Policy No. 29126 to cover insurance risks from
May 22, 1989 to May 22, 1990 was issued on May 22, 1989 but premium therefor
was collected only on July 25, 1990[sic] under O.R. No. 40799 (Exhs. "AA" and
"AA-1"). Fire Insurance Policy No. HO/F-26408 covering risks from January 12,
1989 to January 12, 1990 was issued to Intratrade Phils. (Masagana's sister
company) dated December 10, 1988 but premium therefor was paid only on
February 15, 1989 under O.R. No. 38075 (Exhs. "BB" and "BB-1"). Fire Insurance
Policy No. 29128 was issued on May 22, 1989 but premium was paid only on July
25, 1989 under O.R. No. 40800 for insurance coverage from May 22, 1989 to May
22, 1990 (Exhs. "CC" and "CC-1"). Fire Insurance Policy No. 29127 was issued on
May 22, 1989 but premium was paid only on July 17, 1989 under O.R. No. 40682
for insurance risk coverage from May 22, 1989 to May 22, 1990 (Exhs. "DD" and
"DD-1"). Fire Insurance Policy No. HO/F-29362 was issued on June 15, 1989 but
premium was paid only on February 13, 1990 under O.R. No. 39233 for insurance
coverage from May 22, 1989 to May 22, 1990 (Exhs. "EE" and "EE-1"). Fire
Insurance Policy No. 26303 was issued on November 22, 1988 but premium
therefor was collected only on March 15, 1989 under O.R. NO. 38573 for
insurance risks coverage from December 15, 1988 to December 15, 1989 (Exhs.
"FF" and "FF-1").
Moreover, according to the Court of Appeals the following circumstances constitute
preponderant proof that no timely notice of non-renewal was made by Petitioner:

(1) Defendant-appellant received the confirmation (Exhibit 11, Record, p. 350)

from Ultramar Reinsurance Brokers that plaintiffs reinsurance facility had
been confirmed up to 67.5% only on April 15, 1992 as indicated on Exhibit
11. Apparently, the notice of non-renewal (Exhibit 7, Record, p. 320) was sent
not earlier than said date, or within 45 days from the expiry dates of the
policies as provided under Policy Condition No. 26; (2) Defendant insurer
unconditionally accepted, and issued an official receipt for, the premium
payment on July 1[3], 1992 which indicates defendant's willingness to assume
the risk despite only a 67.5% reinsurance cover[age]; and (3) Defendant
insurer appointed Esteban Adjusters and Valuers to investigate plaintiffs claim
as shown by the letter dated July 17, 1992 (Exhibit 11, Record, p. 254).
In our decision of 15 June 1999, we defined the main issue to be whether the fire
insurance policies issued by petitioner to the respondent covering the period from May 22,
1991 to May 22, 1992 had been extended or renewed by an implied credit arrangement
though actual payment of premium was tendered on a later date and after the occurrence of
the (fire) risk insured against. We resolved this issue in the negative in view of Section 77 of
the Insurance Code and our decisions in Valenzuela v. Court of Appeals[2]; South Sea Surety
and Insurance Co., Inc. v. Court of Appeals[3]; and Tibay v. Court of Appeals.[4] Accordingly,
we reversed and set aside the decision of the Court of Appeals.
Respondent seasonably filed a motion for the reconsideration of the adverse verdict. It
alleges in the motion that we had made in the decision our own findings of facts, which are
not in accord with those of the trial court and the Court of Appeals. The courts below

correctly found that no notice of non-renewal was made within 45 days before 22 May 1992,
or before the expiration date of the fire insurance policies. Thus, the policies in question were
renewed by operation of law and were effective and valid on 30 June 1992 when the fire
occurred, since the premiums were paid within the 60- to 90-day credit term.
Respondent likewise disagrees with our ruling that parties may neither agree expressly or
impliedly on the extension of credit or time to pay the premium nor consider a policy binding
before actual payment. It urges the Court to take judicial notice of the fact that despite the
express provision of Section 77 of the Insurance Code, extension of credit terms in premium
payment has been the prevalent practice in the insurance industry. Most insurance companies,
including Petitioner, extend credit terms because Section 77 of the Insurance Code is not a
prohibitive injunction but is merely designed for the protection of the parties to an insurance
contract. The Code itself, in Section 78, authorizes the validity of a policy notwithstanding
non-payment of premiums.
Respondent also asserts that the principle of estoppel applies to Petitioner. Despite its
awareness of Section 77 Petitioner persuaded and induced Respondent to believe that
payment of premium on the 60- to 90-day credit term was perfectly alright; in fact it accepted
payments within 60 to 90 days after the due dates. By extending credit and habitually
accepting payments 60 to 90 days from the effective dates of the policies, it has implicitly
agreed to modify the tenor of the insurance policy and in effect waived the provision therein
that it would pay only for the loss or damage in case the same occurred after payment of the
premium.
Petitioner filed an opposition to the Respondents motion for reconsideration. It argues
that both the trial court and the Court of Appeals overlooked the fact that on 6 April 1992
Petitioner sent by ordinary mail to Respondent a notice of non-renewal and sent by personal
delivery a copy thereof to Respondents broker, Zuellig. Both courts likewise ignored the fact
that Respondent was fully aware of the notice of non-renewal. A reading of Section 66 of the
Insurance Code readily shows that in order for an insured to be entitled to a renewal of a nonlife policy, payment of the premium due on the effective date of renewal should first be
made. Respondents argument that Section 77 is not a prohibitive provision finds no
authoritative support.
Upon a meticulous review of the records and reevaluation of the issues raised in the
motion for reconsideration and the pleadings filed thereafter by the parties, we resolved to
grant the motion for reconsideration. The following facts, as found by the trial court and the
Court of Appeals, are indeed duly established:
1. For years, Petitioner had been issuing fire policies to the Respondent, and these policies
were annually renewed.
2. Petitioner had been granting Respondent a 60- to 90-day credit term within which to pay
the premiums on the renewed policies.
3. There was no valid notice of non-renewal of the policies in question, as there is no proof
at all that the notice sent by ordinary mail was received by Respondent, and the copy
thereof allegedly sent to Zuellig was ever transmitted to Respondent.
4. The premiums for the policies in question in the aggregate amount of P225,753.95 were
paid by Respondent within the 60- to 90-day credit term and were duly accepted and
received by Petitioners cashier.

The instant case has to rise or fall on the core issue of whether Section 77 of the
Insurance Code of 1978 (P.D. No. 1460) must be strictly applied to Petitioners advantage
despite its practice of granting a 60- to 90-day credit term for the payment of premiums.
Section 77 of the Insurance Code of 1978 provides:

SEC. 77. An insurer is entitled to payment of the premium as soon as the thing
insured is exposed to the peril insured against. Notwithstanding any agreement to
the contrary, no policy or contract of insurance issued by an insurance company is
valid and binding unless and until the premium thereof has been paid, except in the
case of a life or an industrial life policy whenever the grace period provision
applies.
This Section is a reproduction of Section 77 of P.D. No. 612 (The Insurance Code)
promulgated on 18 December 1974. In turn, this Section has its source in Section 72 of Act
No. 2427 otherwise known as the Insurance Act as amended by R.A. No. 3540, approved on
21 June 1963, which read:

SEC. 72. An insurer is entitled to payment of premium as soon as the thing insured
is exposed to the peril insured against, unless there is clear agreement to grant the
insured credit extension of the premium due. No policy issued by an insurance
company is valid and binding unless and until the premium thereof has been paid.
(Underscoring supplied)
It can be seen at once that Section 77 does not restate the portion of Section 72 expressly
permitting an agreement to extend the period to pay the premium. But are there exceptions to
Section 77?
The answer is in the affirmative.
The first exception is provided by Section 77 itself, and that is, in case of a life or
industrial life policy whenever the grace period provision applies.
The second is that covered by Section 78 of the Insurance Code, which provides:

SEC. 78. Any acknowledgment in a policy or contract of insurance of the receipt

of premium is conclusive evidence of its payment, so far as to make the policy
binding, notwithstanding any stipulation therein that it shall not be binding until
premium is actually paid.
A third exception was laid down in Makati Tuscany Condominium Corporation vs. Court
of Appeals,[5] wherein we ruled that Section 77 may not apply if the parties have agreed to the
payment in installments of the premium and partial payment has been made at the time of
loss. We said therein, thus:

We hold that the subject policies are valid even if the premiums were paid on
installments. The records clearly show that the petitioners and private respondent
intended subject insurance policies to be binding and effective notwithstanding the
staggered payment of the premiums. The initial insurance contract entered into in

1982 was renewed in 1983, then in 1984. In those three years, the insurer accepted
all the installment payments. Such acceptance of payments speaks loudly of the
insurers intention to honor the policies it issued to petitioner. Certainly, basic
principles of equity and fairness would not allow the insurer to continue collecting
and accepting the premiums, although paid on installments, and later deny liability
on the lame excuse that the premiums were not prepaid in full.
Not only that. In Tuscany, we also quoted with approval the following pronouncement of
the Court of Appeals in its Resolution denying the motion for reconsideration of its decision:

While the import of Section 77 is that prepayment of premiums is strictly required

as a condition to the validity of the contract, We are not prepared to rule that the
request to make installment payments duly approved by the insurer would prevent
the entire contract of insurance from going into effect despite payment and
acceptance of the initial premium or first installment. Section 78 of the Insurance
Code in effect allows waiver by the insurer of the condition of prepayment by
making an acknowledgment in the insurance policy of receipt of premium as
conclusive evidence of payment so far as to make the policy binding despite the
fact that premium is actually unpaid. Section 77 merely precludes the parties from
stipulating that the policy is valid even if premiums are not paid, but does not
expressly prohibit an agreement granting credit extension, and such an agreement
is not contrary to morals, good customs, public order or public policy (De Leon,
The Insurance Code, p. 175). So is an understanding to allow insured to pay
premiums in installments not so prescribed. At the very least, both parties should
be deemed in estoppel to question the arrangement they have voluntarily accepted.
By the approval of the aforequoted findings and conclusion of the Court of
Appeals, Tuscany has provided a fourth exception to Section 77, namely, that the insurer may
grant credit extension for the payment of the premium. This simply means that if the insurer
has granted the insured a credit term for the payment of the premium and loss occurs before
the expiration of the term, recovery on the policy should be allowed even though the
premium is paid after the loss but within the credit term.
Moreover, there is nothing in Section 77 which prohibits the parties in an insurance
contract to provide a credit term within which to pay the premiums. That agreement is not
against the law, morals, good customs, public order or public policy. The agreement binds the
parties. Article 1306 of the Civil Code provides:

ART. 1306. The contracting parties may establish such stipulations clauses, terms
and conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public policy.
Finally in the instant case, it would be unjust and inequitable if recovery on the policy
would not be permitted against Petitioner, which had consistently granted a 60- to 90-day
credit term for the payment of premiums despite its full awareness of Section 77. Estoppel
bars it from taking refuge under said Section, since Respondent relied in good faith on such
practice. Estoppel then is the fifth exception to Section 77.

WHEREFORE,
the
Decision
in
this
case
of
15
June
1999
is RECONSIDERED and SET ASIDE, and a new one is hereby entered DENYING the
instant petition for failure of Petitioner to sufficiently show that a reversible error was
committed by the Court of Appeals in its challenged decision, which is
hereby AFFIRMED in toto.
No pronouncement as to cost.
SO ORDERED.
Bellosillo, Kapunan, Mendoza, Panganiban, Buena, Gonzaga-Reyes, Ynares-Santiago,
De Leon, Jr., and Sandoval-Gutierrez, JJ., concur.
Vitug, J., Please see separate opinion.
Melo, J., I join the dissents of Justices Vitug and Pardo.
Pardo, J., I dissent. See attached.
Puno and Quisumbing, JJ., I join the dissent of J. Pardo.

[1]

Rollo, 38.

[2]

191 SCRA 1 [1990].

[3]

244 SCRA 744 [1995].

[4]

257 SCRA 126 [1996] (erroneously stated in the decision as 275 SCRA, 126).

[5]

215 SCRA 463 [1992].

G.R. No. 95546 November 6, 1992

MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner,
vs.
THE COURT OF APPEALS, AMERICAN HOME ASSURANCE CO., represented by American
International Underwriters (Phils.), Inc., respondent.

BELLOSILLO, J.:
This case involves a purely legal question: whether payment by installment of the premiums due
on an insurance policy invalidates the contract of insurance, in view of Sec. 77 of P.D. 612,
otherwise known as the Insurance Code, as amended, which provides:
Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing
is exposed to the peril insured against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an insurance company is
valid and binding unless and until the premium thereof has been paid, except in
the case of a life or an industrial life policy whenever the grace period provision
applies.
Sometime in early 1982, private respondent American Home Assurance Co. (AHAC),
represented by American International Underwriters (Phils.), Inc., issued in favor of petitioner
Makati Tuscany Condominium Corporation (TUSCANY) Insurance Policy No. AH-CPP-9210452
on the latter's building and premises, for a period beginning 1 March 1982 and ending 1 March

1983, with a total premium of P466,103.05. The premium was paid on installments on 12 March
1982, 20 May 1982, 21 June 1982 and 16 November 1982, all of which were accepted by private
respondent.
On 10 February 1983, private respondent issued to petitioner Insurance Policy No. AH-CPP9210596, which replaced and renewed the previous policy, for a term covering 1 March 1983 to 1
March 1984. The premium in the amount of P466,103.05 was again paid on installments on 13
April 1983, 13 July 1983, 3 August 1983, 9 September 1983, and 21 November 1983. All
payments were likewise accepted by private respondent.
On 20 January 1984, the policy was again renewed and private respondent issued to petitioner
Insurance Policy No. AH-CPP-9210651 for the period 1 March 1984 to 1 March 1985. On this
renewed policy, petitioner made two installment payments, both accepted by private respondent,
the first on 6 February 1984 for P52,000.00 and the second, on 6 June 1984 for P100,000.00.
Thereafter, petitioner refused to pay the balance of the premium.
Consequently, private respondent filed an action to recover the unpaid balance of P314,103.05
for Insurance Policy No. AH-CPP-9210651.
In its answer with counterclaim, petitioner admitted the issuance of Insurance Policy No. AHCPP-9210651. It explained that it discontinued the payment of premiums because the policy did
not contain a credit clause in its favor and the receipts for the installment payments covering the
policy for 1984-85, as well as the two (2) previous policies, stated the following reservations:
2. Acceptance of this payment shall not waive any of the company rights to deny
liability on any claim under the policy arising before such payments or after the
expiration of the credit clause of the policy; and
3. Subject to no loss prior to premium payment. If there be any loss such is not
covered.
Petitioner further claimed that the policy was never binding and valid, and no risk attached to the
policy. It then pleaded a counterclaim for P152,000.00 for the premiums already paid for 198485, and in its answer with amended counterclaim, sought the refund of P924,206.10 representing
the premium payments for 1982-85.
After some incidents, petitioner and private respondent moved for summary judgment.
On 8 October 1987, the trial court dismissed the complaint and the counterclaim upon the
following findings:
While it is true that the receipts issued to the defendant contained the
aforementioned reservations, it is equally true that payment of the premiums of
the three aforementioned policies (being sought to be refunded) were made
during the lifetime or term of said policies, hence, it could not be said, inspite of
the reservations, that no risk attached under the policies. Consequently,
defendant's counterclaim for refund is not justified.
As regards the unpaid premiums on Insurance Policy No. AH-CPP-9210651, in
view of the reservation in the receipts ordinarily issued by the plaintiff on premium
payments the only plausible conclusion is that plaintiff has no right to demand

their payment after the lapse of the term of said policy on March 1, 1985.
Therefore, the defendant was justified in refusing to pay the same. 1
Both parties appealed from the judgment of the trial court. Thereafter, the Court of Appeals
rendered a decision 2modifying that of the trial court by ordering herein petitioner to pay the balance
of the premiums due on Policy No. AH-CPP-921-651, or P314,103.05 plus legal interest until fully
paid, and affirming the denial of the counterclaim. The appellate court thus explained
The obligation to pay premiums when due is ordinarily as indivisible obligation to
pay the entire premium. Here, the parties herein agreed to make the premiums
payable in installments, and there is no pretense that the parties never
envisioned to make the insurance contract binding between them. It was renewed
for two succeeding years, the second and third policies being a
renewal/replacement for the previous one. And the insured never informed the
insurer that it was terminating the policy because the terms were unacceptable.
While it may be true that under Section 77 of the Insurance Code, the parties
may not agree to make the insurance contract valid and binding without payment
of premiums, there is nothing in said section which suggests that the parties may
not agree to allow payment of the premiums in installment, or to consider the
contract as valid and binding upon payment of the first premium. Otherwise, we
would allow the insurer to renege on its liability under the contract, had a loss
incurred (sic) before completion of payment of the entire premium, despite its
voluntary acceptance of partial payments, a result eschewed by a basic
considerations of fairness and equity.
To our mind, the insurance contract became valid and binding upon payment of
the first premium, and the plaintiff could not have denied liability on the ground
that payment was not made in full, for the reason that it agreed to accept
installment payment. . . . 3
Petitioner now asserts that its payment by installment of the premiums for the insurance policies
for 1982, 1983 and 1984 invalidated said policies because of the provisions of Sec. 77 of the
Insurance Code, as amended, and by the conditions stipulated by the insurer in its receipts,
disclaiming liability for loss for occurring before payment of premiums.
It argues that where the premiums is not actually paid in full, the policy would only be effective if
there is an acknowledgment in the policy of the receipt of premium pursuant to Sec. 78 of the
Insurance Code. The absence of an express acknowledgment in the policies of such receipt of
the corresponding premium payments, and petitioner's failure to pay said premiums on or before
the effective dates of said policies rendered them invalid. Petitioner thus concludes that there
cannot be a perfected contract of insurance upon mere partial payment of the premiums because
under Sec. 77 of the Insurance Code, no contract of insurance is valid and binding unless the
premium thereof has been paid, notwithstanding any agreement to the contrary. As a
consequence, petitioner seeks a refund of all premium payments made on the alleged invalid
insurance policies.
We hold that the subject policies are valid even if the premiums were paid on installments. The
records clearly show that petitioner and private respondent intended subject insurance policies to
be binding and effective notwithstanding the staggered payment of the premiums. The initial
insurance contract entered into in 1982 was renewed in 1983, then in 1984. In those three (3)
years, the insurer accepted all the installment payments. Such acceptance of payments speaks
loudly of the insurer's intention to honor the policies it issued to petitioner. Certainly, basic

principles of equity and fairness would not allow the insurer to continue collecting and accepting
the premiums, although paid on installments, and later deny liability on the lame excuse that the
premiums were not prepared in full.
We therefore sustain the Court of Appeals. We quote with approval the well-reasoned findings
and conclusion of the appellate court contained in its Resolution denying the motion to
reconsider its Decision
While the import of Section 77 is that prepayment of premiums is strictly required
as a condition to the validity of the contract, We are not prepared to rule that the
request to make installment payments duly approved by the insurer, would
prevent the entire contract of insurance from going into effect despite payment
and acceptance of the initial premium or first installment. Section 78 of the
Insurance Code in effect allows waiver by the insurer of the condition of
prepayment by making an acknowledgment in the insurance policy of receipt of
premium as conclusive evidence of payment so far as to make the policy binding
despite the fact that premium is actually unpaid. Section 77 merely precludes the
parties from stipulating that the policy is valid even if premiums are not paid, but
does not expressly prohibit an agreement granting credit extension, and such an
agreement is not contrary to morals, good customs, public order or public policy
(De Leon, the Insurance Code, at p. 175). So is an understanding to allow
insured to pay premiums in installments not so proscribed. At the very least, both
parties should be deemed in estoppel to question the arrangement they have
voluntarily accepted. 4
The reliance by petitioner on Arce vs. Capital Surety and Insurance
Co. 5 is unavailing because the facts therein are substantially different from those in the case at bar.
In Arce, no payment was made by the insured at all despite the grace period given. In the case before
Us, petitioner paid the initial installment and thereafter made staggered payments resulting in full
payment of the 1982 and 1983 insurance policies. For the 1984 policy, petitioner paid two (2)
installments although it refused to pay the balance.
It appearing from the peculiar circumstances that the parties actually intended to make three (3)
insurance contracts valid, effective and binding, petitioner may not be allowed to renege on its
obligation to pay the balance of the premium after the expiration of the whole term of the third
policy (No. AH-CPP-9210651) in March 1985. Moreover, as correctly observed by the appellate
court, where the risk is entire and the contract is indivisible, the insured is not entitled to a refund
of the premiums paid if the insurer was exposed to the risk insured for any period, however brief
or momentary.
WHEREFORE, finding no reversible error in the judgment appealed from, the same is
AFFIRMED. Costs against petitioner.
SO ORDERED.
Cruz, Padilla and Grio-Aquino, JJ., concur.
Medialdea, J., is on leave.

Footnotes

1 Rollo, p. 85.
2 Penned by Mme. Justice Minerva P. Gonzaga-Reyes, concurred by Mr. Justice
Ricardo J. Francisco and Mme. Justice Salome A. Montoya.
3 Decision, pp. 6-7; Rollo, pp. 36-37.
4 Rollo, pp. 41-42.
5 No. L-28501, September 30, 1982, 117 SCRA 63.

Makati Tuscany Condominium Corporation v CA (Insurance)

G.R. No. 95546 November 6, 1992
MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner, vs. THE COURT OF
APPEALS, AMERICAN HOME ASSURANCE CO., represented by American
International Underwriters (Phils.), Inc., respondent.
FACTS:
Sometime in early 1982, private respondent American Home Assurance Co. (AHAC),
represented by American International Underwriters (Phils.), Inc., issued in favor of
petitioner Makati Tuscany Condominium Corporation (TUSCANY) Insurance Policy No. AHCPP-9210452 on the latter's building and premises, for a period beginning 1 March 1982
and ending 1 March 1983, with a total premium of P466,103.05. The premium was paid
on installments on 12 March 1982, 20 May 1982, 21 June 1982 and 16 November 1982,
all of which were accepted by private respondent.
Successive renewals of the policies were made in the same manner. On 1984, the policy
was again renewed and petitioner made two installment payments, both accepted by
private respondent, the first on 6 February 1984 for P52,000.00 and the second, on 6
June 1984 for P100,000.00. Thereafter, petitioner refused to pay the balance of the
premium.

Private respondent filed an action to recover the unpaid balance of P314,103.05 for
Insurance Policy. Petitioner explained that it discontinued the payment of premiums
because the policy did not contain a credit clause in its favor. Petitioner further claimed
that the policy was never binding and valid, and no risk attached to the policy. It then
pleaded a counterclaim for P152,000.00 for the premiums already paid for 1984-85, and
in its answer with amended counterclaim, sought the refund of P924,206.10 representing
the premium payments for 1982-85.
DECISION OF LOWER COURTS:
(1) Trial Court: dismissed the complaint and counterclaim
(2) CA: ordering herein petitioner to pay the balance of the premiums due
ISSUE:
Whether payment by installment of the premiums due on an insurance policy invalidates
the contract of insurance, in view of Sec. 77 of P.D. 612, otherwise known as the
Insurance Code, as amended, which provides:
Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing is
exposed to the peril insured against. Notwithstanding any agreement to the contrary, no
policy or contract of insurance issued by an insurance company is valid and binding
unless and until the premium thereof has been paid, except in the case of a life or an

industrial life policy whenever the grace period provision applies.

RULING:
No, the contract remains valid even if the premiums were paid on installments. Certainly,
basic principles of equity and fairness would not allow the insurer to continue collecting
and accepting the premiums, although paid on installments, and later deny liability on
the lame excuse that the premiums were not prepared in full.
At the very least, both parties should be deemed in estoppel to question the
arrangement they have voluntarily accepted.
Moreover, as correctly observed by the appellate court, where the risk is entire and the
contract is indivisible, the insured is not entitled to a refund of the premiums paid if the
insurer was exposed to the risk insured for any period, however brief or momentary. The
obligation to pay premiums when due is ordinarily as indivisible obligation to pay the
entire premium.

[G.R. No. 138941. October 8, 2001]

AMERICAN HOME ASSURANCE COMPANY, petitioner, vs. TANTUCO

ENTERPRISES, INC., respondent.
DECISION
PUNO, J.:

Before us is a Petition for Review on Certiorari assailing the Decision of the Court of
Appeals in CA-G.R. CV No. 52221 promulgated on January 14, 1999, which affirmed in
toto the Decision of the Regional Trial Court, Branch 53, Lucena City in Civil Case No. 9251 dated October 16, 1995.
Respondent Tantuco Enterprises, Inc. is engaged in the coconut oil milling and refining
industry. It owns two oil mills. Both are located at its factory compound at Iyam, Lucena
City. It appears that respondent commenced its business operations with only one oil mill. In
1988, it started operating its second oil mill. The latter came to be commonly referred to as
the new oil mill.
The two oil mills were separately covered by fire insurance policies issued by petitioner
American Home Assurance Co., Philippine Branch. [1] The first oil mill was insured for three
million pesos (P3,000,000.00) under Policy No. 306-7432324-3 for the period March 1, 1991
to 1992.[2] The new oil mill was insured for six million pesos (P6,000,000.00) under Policy
No. 306-7432321-9 for the same term. [3] Official receipts indicating payment for the full
amount of the premium were issued by the petitioner's agent.[4]
A fire that broke out in the early morning of September 30,1991 gutted and consumed
the new oil mill. Respondent immediately notified the petitioner of the incident. The latter
then sent its appraisers who inspected the burned premises and the properties
destroyed. Thereafter, in a letter dated October 15, 1991, petitioner rejected respondents
claim for the insurance proceeds on the ground that no policy was issued by it covering the
burned oil mill. It stated that the description of the insured establishment referred to another
building thus: Our policy nos. 306-7432321-9 (Ps 6M) and 306-7432324-4 (Ps 3M) extend

insurance coverage to your oil mill under Building No. 5, whilst the affected oil mill was
under Building No. 14.[5]
A complaint for specific performance and damages was consequently instituted by the
respondent with the RTC, Branch 53 of Lucena City. On October 16, 1995, after trial, the
lower court rendered a Decision finding the petitioner liable on the insurance policy thus:

WHEREFORE, judgment is rendered in favor of the plaintiff ordering defendant to

pay plaintiff:
(a) P4,406,536.40 representing damages for loss by fire of its insured property with
interest at the legal rate;
(b) P80,000.00 for litigation expenses;
(c) P300,000.00 for and as attorneys fees; and
(d) Pay the costs.
SO ORDERED.[6]
Petitioner assailed this judgment before the Court of Appeals. The appellate court upheld
the same in a Decision promulgated on January 14, 1999, the pertinent portion of which
states:

WHEREFORE, the instant appeal is hereby DISMISSED for lack of merit and the
trial courts Decision dated October 16, 1995 is hereby AFFIRMED in toto.
SO ORDERED.[7]
Petitioner moved for reconsideration. The motion, however, was denied for lack of merit in a
Resolution promulgated on June 10, 1999.
Hence, the present course of action, where petitioner ascribes to the appellate court the
following errors:

(1) The Court of Appeals erred in its conclusion that the issue of non-payment
of the premium was beyond its jurisdiction because it was raised for the first
time on appeal.[8]
(2) The Court of Appeals erred in its legal interpretation of 'Fire Extinguishing
Appliances Warranty' of the policy.[9]
(3) With due respect, the conclusion of the Court of Appeals giving no regard
to the parole evidence rule and the principle of estoppel is erroneous. [10]
The petition is devoid of merit.

The primary reason advanced by the petitioner in resisting the claim of the respondent is
that the burned oil mill is not covered by any insurance policy. According to it, the oil mill
insured is specifically described in the policy by its boundaries in the following manner:

Front: by a driveway thence at 18 meters distance by Bldg. No. 2.

Right: by an open space thence by Bldg. No. 4.
Left: Adjoining thence an imperfect wall by Bldg. No. 4.
Rear: by an open space thence at 8 meters distance.
However, it argues that this specific boundary description clearly pertains, not to the burned
oil mill, but to the other mill. In other words, the oil mill gutted by fire was not the one
described by the specific boundaries in the contested policy.
What exacerbates respondents predicament, petitioner posits, is that it did not have the
supposed wrong description or mistake corrected. Despite the fact that the policy in question
was issued way back in 1988, or about three years before the fire, and despite the Important
Notice in the policy that Please read and examine the policy and if incorrect, return it
immediately for alteration, respondent apparently did not call petitioners attention with
respect to the misdescription.
By way of conclusion, petitioner argues that respondent is barred by the parole evidence
rule from presenting evidence (other than the policy in question) of its self-serving intention
(sic) that it intended really to insure the burned oil mill, just as it is barred by estoppel from
claiming that the description of the insured oil mill in the policy was wrong, because it
retained the policy without having the same corrected before the fire by an endorsement in
accordance with its Condition No. 28.
These contentions can not pass judicial muster.
In construing the words used descriptive of a building insured, the greatest liberality is
shown by the courts in giving effect to the insurance. [11] In view of the custom of insurance
agents to examine buildings before writing policies upon them, and since a mistake as to the
identity and character of the building is extremely unlikely, the courts are inclined to consider
that the policy of insurance covers any building which the parties manifestly intended to
insure, however inaccurate the description may be.[12]
Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our
mind, that what the parties manifestly intended to insure was the new oil mill. This is obvious
from the categorical statement embodied in the policy, extending its protection:

On machineries and equipment with complete accessories usual to a coconut oil

mill including stocks of copra, copra cake and copra mills whilst contained in
the new oil mill building, situate (sic) at UNNO. ALONG NATIONAL HIGH
WAY, BO. IYAM, LUCENA CITY UNBLOCKED.[13] (emphasis supplied.)
If the parties really intended to protect the first oil mill, then there is no need to specify it as
new.

Indeed, it would be absurd to assume that respondent would protect its first oil mill for
different amounts and leave uncovered its second one. As mentioned earlier, the first oil mill
is already covered under Policy No. 306-7432324-4 issued by the petitioner. It is unthinkable
for respondent to obtain the other policy from the very same company. The latter ought to
know that a second agreement over that same realty results in its overinsurance.
The imperfection in the description of the insured oil mills boundaries can be attributed
to a misunderstanding between the petitioners general agent, Mr. Alfredo Borja, and its policy
issuing clerk, who made the error of copying the boundaries of the first oil mill when typing
the policy to be issued for the new one. As testified to by Mr.Borja:
Atty. G. Camaligan:
Q: What did you do when you received the report?
A: I told them as will be shown by the map the intention really of Mr. Edison Tantuco is to cover
the new oil mill that is why when I presented the existing policy of the old policy, the policy
issuing clerk just merely (sic) copied the wording from the old policy and what she typed is
that the description of the boundaries from the old policy was copied but she inserted
covering the new oil mill and to me at that time the important thing is that it covered the
new oil mill because it is just within one compound and there are only two oil mill[s] and
so just enough, I had the policy prepared. In fact, two policies were prepared having the same
date one for the old one and the other for the new oil mill and exactly the same policy period,
sir.[14] (emphasis supplied)

It is thus clear that the source of the discrepancy happened during the preparation of the
written contract.
These facts lead us to hold that the present case falls within one of the recognized
exceptions to the parole evidence rule. Under the Rules of Court, a party may present
evidence to modify, explain or add to the terms of the written agreement if he puts in issue in
his pleading, among others, its failure to express the true intent and agreement of the parties
thereto.[15] Here, the contractual intention of the parties cannot be understood from a mere
reading of the instrument. Thus, while the contract explicitly stipulated that it was for the
insurance of the new oil mill, the boundary description written on the policy concededly
pertains to the first oil mill. This irreconcilable difference can only be clarified by admitting
evidence aliunde, which will explain the imperfection and clarify the intent of the parties.
Anent petitioners argument that the respondent is barred by estoppel from claiming that
the description of the insured oil mill in the policy was wrong, we find that the same proceeds
from a wrong assumption. Evidence on record reveals that respondents operating manager,
Mr. Edison Tantuco, notified Mr. Borja (the petitioners agent with whom respondent
negotiated for the contract) about the inaccurate description in the policy. However, Mr. Borja
assured Mr. Tantuco that the use of the adjective new will distinguish the insured
property. The assurance convinced respondent that, despite the impreciseness in the
specification of the boundaries, the insurance will cover the new oil mill. This can be seen
from the testimony on cross of Mr. Tantuco:
"ATTY. SALONGA:
Q: You mentioned, sir, that at least in so far as Exhibit A is concern you have read what the policy
contents.(sic)
Kindly take a look in the page of Exhibit A which was marked as Exhibit A-2 particularly the
boundaries of the property insured by the insurance policy Exhibit A, will you tell us as the

manager of the company whether the boundaries stated in Exhibit A-2 are the boundaries of
the old (sic) mill that was burned or not.
A: It was not, I called up Mr. Borja regarding this matter and he told me that what is
important is the word new oil mill. Mr. Borja said, as a matter of fact, you can never insured
(sic) one property with two (2) policies, you will only do that if you will make to increase the
amount and it is by indorsement not by another policy, sir."[16]

We again stress that the object of the court in construing a contract is to ascertain the
intent of the parties to the contract and to enforce the agreement which the parties have
entered into. In determining what the parties intended, the courts will read and construe the
policy as a whole and if possible, give effect to all the parts of the contract, keeping in mind
always, however, the prime rule that in the event of doubt, this doubt is to be resolved against
the insurer. In determining the intent of the parties to the contract, the courts will consider the
purpose and object of the contract.[17]
In a further attempt to avoid liability, petitioner claims that respondent forfeited the
renewal policy for its failure to pay the full amount of the premium and breach of the Fire
Extinguishing Appliances Warranty.
The amount of the premium stated on the face of the policy was P89,770.20. From the
admission of respondents own witness, Mr. Borja, which the petitioner cited, the former only
paid it P75,147.00, leaving a difference of P14,623.20. The deficiency, petitioner argues,
suffices to invalidate the policy, in accordance with Section 77 of the Insurance Code.[18]
The Court of Appeals refused to consider this contention of the petitioner. It held that this
issue was raised for the first time on appeal, hence, beyond its jurisdiction to resolve,
pursuant to Rule 46, Section 18 of the Rules of Court.[19]
Petitioner, however, contests this finding of the appellate court. It insists that the issue
was raised in paragraph 24 of its Answer, viz.:

24. Plaintiff has not complied with the condition of the policy and renewal
certificate that the renewal premium should be paid on or before renewal date.
Petitioner adds that the issue was the subject of the cross-examination of Mr. Borja, who
acknowledged that the paid amount was lacking by P14,623.20 by reason of a discount or
rebate, which rebate under Sec. 361 of the Insurance Code is illegal.
The argument fails to impress. It is true that the asseverations petitioner made in
paragraph 24 of its Answer ostensibly spoke of the policys condition for payment of the
renewal premium on time and respondents non-compliance with it. Yet, it did not contain any
specific and definite allegation that respondent did not pay the premium, or that it did not pay
the full amount, or that it did not pay the amount on time.
Likewise, when the issues to be resolved in the trial court were formulated at the pre-trial
proceedings, the question of the supposed inadequate payment was never raised. Most
significant to point, petitioner fatally neglected to present, during the whole course of the
trial, any witness to testify that respondent indeed failed to pay the full amount of the
premium. The thrust of the cross-examination of Mr. Borja, on the other hand, was not for the
purpose of proving this fact. Though it briefly touched on the alleged deficiency, such was
made in the course of discussing a discount or rebate, which the agent apparently gave the
respondent. Certainly, the whole tenor of Mr. Borjas testimony, both during direct and cross
examinations, implicitly assumed a valid and subsisting insurance policy. It must be

remembered that he was called to the stand basically to demonstrate that an existing policy
issued by the petitioner covers the burned building.
Finally, petitioner contends that respondent violated the express terms of the Fire
Extinguishing Appliances Warranty. The said warranty provides:

WARRANTED that during the currency of this Policy, Fire Extinguishing

Appliances as mentioned below shall be maintained in efficient working order
on the premises to which insurance applies:
- PORTABLE EXTINGUISHERS
- INTERNAL HYDRANTS
- EXTERNAL HYDRANTS
- FIRE PUMP
- 24-HOUR SECURITY SERVICES
BREACH of this warranty shall render this policy null and void and the
Company shall no longer be liable for any loss which may occur.[20]
Petitioner argues that the warranty clearly obligates the insured to maintain all the
appliances specified therein. The breach occurred when the respondent failed to install
internal fire hydrants inside the burned building as warranted. This fact was admitted by the
oil mills expeller operator, Gerardo Zarsuela.
Again, the argument lacks merit. We agree with the appellate courts conclusion that the
aforementioned warranty did not require respondent to provide for all the fire extinguishing
appliances enumerated therein. Additionally, we find that neither did it require that the
appliances are restricted to those mentioned in the warranty. In other words, what the
warranty mandates is that respondent should maintain in efficient working condition within
the premises of the insured property, fire fighting equipments such as, but not limited to,
those identified in the list, which will serve as the oil mills first line of defense in case any
part of it bursts into flame.
To be sure, respondent was able to comply with the warranty. Within the vicinity of the
new oil mill can be found the following devices: numerous portable fire extinguishers, two
fire hoses,[21] fire hydrant,[22] and an emergency fire engine.[23] All of these equipments were in
efficient working order when the fire occurred.
It ought to be remembered that not only are warranties strictly construed against the
insurer, but they should, likewise, by themselves be reasonably interpreted. [24] That
reasonableness is to be ascertained in light of the factual conditions prevailing in each
case. Here, we find that there is no more need for an internal hydrant considering that inside
the burned building were: (1) numerous portable fire extinguishers, (2) an emergency fire
engine, and (3) a fire hose which has a connection to one of the external hydrants.
IN VIEW WHEREOF, finding no reversible error in the impugned Decision, the instant
petition is hereby DISMISSED.

SO ORDERED.
Davide, Jr., C.J., (Chairman), Pardo, and Ynares-Santiago, JJ., concur.
Kapunan, J., on official leave.

[1]

Decision, CA-G.R. CV No. 52221, p. 1; Rollo, p. 27.

[2]

Exhibit K, Folder of Exhibits, p. 54.

[3]

Exhibit C, Folder of Exhibits, p. 22.

[4]

O.R. No. 1043, Exhibit E, Folder of Exhibits, p. 32; O.R. No. 1044, Exhibit Q, Folder of Exhibits, p. 70.

[5]

Exhibit H, Folder of Exhibit, p. 35.

[6]

Decision, Civil Case No. 92-15, RTC, Branch 53, Lucena City, p.14; Original Record, p. 168.

[7]

Decision, CA-G.R. CV No. 52221, p. 6; Rollo, p. 32.

[8]

Verified Petition for Review, p. 99; Rollo, p. 17.

[9]

Petition, p.11; Rollo, p.19.

[10]

Petition, p.14; Rollo, p. 23.

[11]

See Martinez, Philippine Insurance Code Annotated, p. 324, citing Richard vs. Ins. Co., 27 N.W. 586 (1886),
which gives the following illustration: A policy upon a school house was held sufficient to identify the building
insured in which a school was kept, although it was not an ordinary school house; the term store was held to be
a sufficient description of a building used as a restaurant and bakery.
[12]

Vance on Insurance, p. 816-817.

[13]

Exhibit C-2, Folder of Exhibits, p. 24.

[14]

TSN, March 31, 1993, pp. 31-32.

[15]

Rule 130, Section 9, Rules of Court.

[16]

TSN, April 20, 1993, pp. 25-26.

[17]

Vance on Insurance 809 (3rd ed., 1951).

[18]

The provision states:

Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril
insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an
insurance company is valid and binding unless and until the premium thereof has been paid, except in the case
of a life or an industrial life policy whenever the grace period provision applies.
[19]

Now Rule 44, Section 15 of the 1997 Rules of Civil Procedure:

Sec. 15. Questions that may be raised on appeal. - Whether or not the appellant has filed a motion for new trial
in the court below, he may include in his assignment of errors any question of law or fact that has been raised in
the court below and which is within the issues framed by the parties.
[20]

Exhibit C-4-C, Folder of Exhibits, p. 29.

[21]

Exhibits T, T-1 and T-13, Folder of Exhibits, pp. 73 and 77.

[22]

Exhibit T-12, Folder of Exhibits, p. 77.

[23]

Exhibit T-14, Folder of Exhibits, p. 77.

[24]

See Qua Chee Gan v. Law Union and Rock Insurance Co., Ltd., 98 Phil. 85 (1955).