Professional Documents
Culture Documents
356,APRIL4,2001 307
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
*
G.R.No.137172.April4,2001.
______________
*ENBANC.
308
308 SUPREMECOURTREPORTSANNOTATED
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
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
coveredbySection78oftheInsuranceCode,whichprovides:SEC.78.Any
acknowledgment in a policy or contract of insurance of the receipt of
premiumisconclusiveevidenceofitspayment,sofarastomakethepolicy
binding, notwithstanding any stipulation therein that it shall not be binding
until premium is actually paid. A third exception was laid down in Makati
TuscanyCondominiumCorporationvs.CourtofAppeals,whereinweruled
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, x x x Not only that. In Tuscany, we also quoted with approval the
followingpronouncementoftheCourtofAppealsinitsResolutiondenying
the motion for reconsideration of its decision: x x x By the approval of the
aforequoted findings and conclusion of the Court of Appeals, Tuscanyhas
providedafourthexceptiontoSection77,namely,thattheinsurermaygrant
creditextensionforthepaymentofthepremium.Thissimplymeansthatif
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
policyshouldbeallowedeventhoughthepremiumispaidafterthelossbut
withinthecreditterm.
SameSameThereisnothinginSection77whichprohibitstheparties
in an insurance contract to provide a credit term within which to pay the
premiums.Moreover, there is nothing in Section 77 which prohibits the
partiesinaninsurancecontracttoprovideacredittermwithinwhichtopay
thepremiums.Thatagreementisnotagainstthelaw,morals,goodcustoms,
publicorderorpublicpolicy.Theagreementbindstheparties.
Same Same Estoppel Where an insurer had consistently granted a
60 to 90day credit term for the payment of premiums despite its full
awareness of Section 77, and the assured had relied in good faith on such
practice,estoppelbarsitfromtakingrefugeundersaidSection.Finallyin
theinstantcase,itwouldbeunjustandinequitableifrecoveryonthepolicy
would not be permitted against Petitioner, which had consistently panted a
60 to 90day 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
thenisthefifthexceptiontoSection77.
309
VOL.356,APRIL4,2001 309
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
VITUG,J.,SeparateOpinion:
PARDO,J.,DissentingOpinion:
310
310 SUPREMECOURTREPORTSANNOTATED
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
MOTIONFORRECONSIDERATIONofadecisionoftheSupreme
Court.
311
VOL.356,APRIL4,2001 311
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
ThefactsarestatedintheresolutionoftheCourt.
Abello,Concepcion,Regala&Cruzforpetitioner.
ArturoS.Santosforprivaterespondent.
RESOLUTION
DAVIDE,JR.,C.J.:
_______________
1Rollo,38.
312
312 SUPREMECOURTREPORTSANNOTATED
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
suedbydefendant.OnJuly14,1992,Masaganamadeitsformaldemandfor
indemnification for the burned insured properties. On the same day,
defendantreturnedthefive(5)managerschecksstatinginitsletter(Exhibit
R/8, Record, p. 192) that it was rejecting Masaganas claim on the
followinggrounds:
a) Said policies expired last May 22, 1992 and were not renewed for
anotherterm
b) Defendanthadputplaintiffanditsallegedbrokeronnoticeofnon
renewalearlierand
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)
HenceMasaganafiledthiscase.
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
ConditionNo.26,whichstates:
313
VOL.356,APRIL4,2001 313
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
under O.R. No. 46487 (Exhs. V and V1). And so were as other
policies:FireInsurancePolicyNo.34657coveringrisksfromMay22,1990
toMay22,1991wasissuedonMay7,1990butpremiumthereforwaspaid
onlyonJuly19,1990underO.R.No.46583(Exhs.WandW1).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 X1). Fire Insurance Policy
No.34688forinsurancecoveragefromMay22,1990toMay22,1991was
issued on May 7, 1990 but premium was paid only on July 19, 1990 under
O.R.No.46585(Exhs.YandY1).FireInsurancePolicyNo.29126to
cover insurance risks from May 22, 1989 to May 22, 1990 was issued on
May22,1989butpremiumthereforwascollectedonlyonJuly25,1990[sic]
underO.R.No.40799(Exhs.AAandAA1).FireInsurancePolicyNo.
HO/F26408coveringrisksfromJanuary12,1989toJanuary12,1990was
issuedtoIntratradePhils.(Masaganassistercompany)datedDecember10,
1988butpremiumthereforwaspaidonlyonFebruary15,1989underO.R.
No.38075(Exhs.BBandBB1).FireInsurancePolicyNo.29128was
issuedonMay22,1989butpremiumwaspaidonlyonJuly25,1989under
O.R.No.40800forinsurancecoveragefromMay22,1989toMay22,1990
(Exhs. CC and CC1). Fire Insurance Policy No. 29127 was issued on
May22,1989butpremiumwaspaidonlyonJuly17,1989underO.R.No.
40682 for insurance risk coverage from May 22, 1989 to May 22, 1990
(Exhs. DD and DD1). Fire Insurance Policy No. HO/F29362 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 EE1). 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
December15,1988toDecember15,1989(Exhs.FFandFF1).
314
314 SUPREMECOURTREPORTSANNOTATED
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
officialreceiptfor,thepremiumpaymentonJuly1[3],1992whichindicates
defendantswillingnesstoassumetheriskdespiteonlya67.5%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(Exhibit11,Record,p.254).
_______________
2191SCRA1[1990].
3244SCRA744[1995].
4257SCRA126[1996](erroneouslystatedinthedecisionas275SCRA126).
315
VOL.356,APRIL4,2001 315
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
panies,includingPetitioner,extendcredittermsbecauseSection77
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
notwithstandingnonpaymentofpremiums.
Respondent also asserts that the principle of estoppel applies to
Petitioner.DespiteitsawarenessofSection77Petitionerpersuaded
andinducedRespondenttobelievethatpaymentofpremiumonthe
60 to 90day 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
effectivedatesofthepolicies,ithasimplicitlyagreedtomodifythe
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
sameoccurredafterpaymentofthepremium.
Petitioner filed an opposition to the Respondents motion for
reconsideration. It argues that both the trial court and the Court of
Appealsoverlookedthefactthaton6April1992Petitionersentby
ordinary mail to Respondent a notice of nonrenewal and sent by
personal delivery a copy thereof to Respondents broker, Zuellig.
Both courts likewise ignored the fact that Respondent was fully
awareofthenoticeofnonrenewal.AreadingofSection66ofthe
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.
RespondentsargumentthatSection77isnotaprohibitiveprovision
findsnoauthoritativesupport.
Uponameticulousreviewoftherecordsandreevaluationofthe
issues raised in the motion for reconsideration and the pleadings
filed thereafter by the parties, we resolved to grant the motion for
reconsideration.Thefollowingfacts,asfoundbytrialcourtandthe
CourtofAppeals,areindeeddulyestablished:
316
316 SUPREMECOURTREPORTSANNOTATED
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
3. Therewasnovalidnoticeofnonrenewalofthepoliciesin
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. Thepremiumsforthepoliciesinquestionintheaggregate
amountofP225,753.95werepaidbyRespondentwithinthe
60 to 90day credit term and were duly accepted and
receivedbyPetitionerscashier.
The instant case has to rise or fall on the core issue of whether
Section77oftheInsuranceCodeof1978(P.D.No.1460)mustbe
strictly applied to Petitioners advantage despite its practice of
grantinga60to90daycredittermforthepaymentofpremiums.
Section77oftheInsuranceCodeof1978provides:
SEC.72.Aninsurerisentitledtopaymentofpremiumassoonasthething
insured is exposed to the peril insured against, unless there is clear
agreement to grant the insured credit extension of the premium due. No
policyissuedbyaninsurancecompanyisvalidandbindingunlessanduntil
thepremiumthereofhasbeenpaid.(Italicssupplied)
ItcanbeseenatoncethatSection77doesnotrestatetheportionof
Section72expresslypermittinganagreementtoextendtheperiodto
paythepremium.ButarethereexceptionstoSection77?
Theanswerisintheaffirmative.
317
VOL.356,APRIL4,2001 317
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
Weholdthatthesubjectpoliciesarevalidevenifthepremiumswerepaidon
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.
Inthosethreeyears,theinsureracceptedalltheinstallmentpayments.Such
acceptanceofpaymentsspeaksloudlyoftheinsurersintentiontohonorthe
policies it issued to petitioner. Certainly, basic principles of equity and
fairnesswouldnotallowtheinsurertocontinuecollectingandacceptingthe
premiums,althoughpaidoninstallments,andlaterdenyliabilityonthelame
excusethatthepremiumswerenotprepaidinfull.
Not only that. In Tuscany, we also quoted with approval the
followingpronouncementoftheCourtofAppealsinitsResolution
denyingthemotionforreconsiderationofitsdecision:
_______________
5215SCRA463[1992].
318
318 SUPREMECOURTREPORTSANNOTATED
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
miumorfirstinstallment.Section78oftheInsuranceCodeineffectallows
waiver by the insurer of the condition of prepayment by making an
acknowledgmentintheinsurancepolicyofreceiptofpremiumasconclusive
evidenceofpaymentsofarastomakethepolicybindingdespitethefactthat
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
allowinsuredtopaypremiumsininstallmentsnotsoprescribed.Atthevery
least,bothpartiesshouldbedeemedinestoppeltoquestionthearrangement
theyhavevoluntarilyaccepted.
ART.1306.Thecontractingpartiesmayestablishsuchstipulations,clauses,
terms and conditions as they may deem convenient, provided they are not
contrarytolaw,morals,goodcustoms,publicorder,orpublicpolicy.
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 90day 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
thefifthexceptiontoSection77.
319
VOL.356,APRIL4,2001 319
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
SEPARATEOPINION
VITUG,J.:
Anessentialcharacteristicofaninsuranceisitsbeingsynallagmatic,
a highlyreciprocal contract where the rights and obligations of the
parties correlate and mutually correspond. The insurer assumes the
risk of loss which an insured might suffer in consideration of
premium payments under a riskdistributing device. Such
assumptionofriskisacomponentofageneralschemetodistribute
actual losses among a group of persons, bearing similar risks, who
makeratablecontributionstoafundfromwhichthelossesincurred
due to exposures to the peril insured against are assured and
compensated.
It is generally recognized
1
that the business of insurance is one
imbuedwithpublicinterest. Forthegeneralgoodandmutual
______________
1HartfordAcci.&Indem.Co.vs.N.O.LesonMfg.Co.,291US352,78LEd,840,
54SCt.392.
320
320 SUPREMECOURTREPORTSANNOTATED
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
_______________
2UnitedStatesvs.SouthEasternUnderwritersAsso.,322US533,88LEd1440,64
SCt1162,rehden323US811,89LEd646,65SCt,26Hinckleyvs.BechtelCorp.
(1stDist.),41CalApp3d206,116CalRptr33.
343AmJur2dMerchantsMut.AutoLiabilityIns.Co.vs.Smart,267US126,69L
Ed538,45SCt320CaliforniaStateAutoAsso.InterIns.Bureauvs.Maloney,341US
105,95LEd788,71SCt601StateFarmMut.AutoIns.Co.vs.Duel,324US154,89
LEd81265SCt573rehden324US887.
4Tibayvs.CourtofAppeals,257SCRA126(1996).
5Secs.7778,InsuranceCodeAcmevs.CourtofAppeals,134SCRA155(1985)
321
VOL.356,APRIL4,2001 321
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
Section77oftheInsuranceCodeprovides:
Section77.Aninsurerisentitledtopaymentofthepremiumassoonasthe
thing insured is exposed to the peril insured against. Notwithstanding any
agreement to the contrary, no policy or contract of insurance issued by an
insurancecompanyisvalidandbindingunlessanduntilthepremiumthereof
has been paid, except in the case of a life or an industrial life policy
wheneverthegraceperiodprovisionapplies.
Undertheformerrule,whenevertheinsuredwasgrantedcreditextensionof
thepremiumdueorgivenaperiodoftimetopaythepremiumonthepolicy
issued, such policy was binding although premiums had not been paid
(Section 72, Insurance Act 6 Couch 2d. 67). This rule was changed when
thepresentprovisioneliminatedtheportionconcerningcreditagreement,and
added the phrase notwithstanding any agreement to the contrary which
precludes the parties from stipulating that the policy is valid even if
premiumsarenotpaid.Hence,underthepresentlaw,thepolicyisnotvalid
andbindingunlessanduntilthepremiumispaid(Arcevs.CapitalInsurance
&SuretyCo.,Inc.,117SCRA63).Iftheinsurerwantstofavortheinsured
bymakingthepolicybindingnotwithstandingthenonpaymentofpremium,
a mere credit agreement would not be sufficient. The remedy would be for
the insurer to acknowledge in the policy that premiums were paid although
they were not, in which case the policy becomes binding because such
acknowledgment is a conclusive evidence of payment of premium (Section
78).Thus,theSupremeCourttooknotethatunderthepresentlaw,Section
77 of the Insurance Code of 1978 has deleted the clause unless there is a
clear agreement to grant the insured credit
6
extension of the premium due
(Velascovs.Apostol,173SCRA228).
________________
6InsuranceCodeandInsolvencyLawbyHernandoB.Perez,1999Rev.Ed.
322
322 SUPREMECOURTREPORTSANNOTATED
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
By weight 7
of authority, estoppel cannot create a contract of
insurance,8
neithercanitbesuccessfullyinvokedtocreateaprimary
liability, norcanitgivevaliditytowhatthelawsoproscribesasa
9
matterofpublicpolicy. Soessentialisthepremiumpaymenttothe
creation of the vinculum juris between the insured and the insurer
thatitwouldbedoubtfultohavethatpaymentvalidlyexcusedeven
10
forafortuitousevent.
The law, however, neither requires for the establishment of the
juridical tie, nor measures the strength of such tie by, any specific
amount of premium payment. A part payment of the premium, if
acceptedbytheinsurer,canthusperfectthecontractandbringthe
11
partiesintoanobligatoryrelation. Suchapaymentputsthecontract
into full binding force, not merely pro tanto, thereby entitling and
obligatingthepartiesbytheiragreement.Hence,incaseofloss,full
recovery less the unpaid portion of the premium (by the operative
act of legal compensation), can be had by the insured and,
correlatively,ifnolossoccurstheinsurercandemandthepayment
12
oftheunpaidbalanceofthepremium.
In the instant case, no juridical tie appears to have been
establishedunderanyofthesituationshereinabovediscussed.
WHEREFORE,Ivotetodenythemotionforreconsideration.
_______________
7Ames.vs.AutoOwnersIns.Co.195N.W.686,225Mich.4445C.J.S.674.
8 C.E. Carnes & Co. vs. Employers Liability Assur. Corp., Limited of London,
England,C.C.A.La,101F2d73945CJS674.
9DevelopmentBankofthePhilippinesvs.CourtofAppeals,284SCRA14(1998).
10SeeConstantinovs.AsiaLifeInsuranceCo.,87Phil.248.
11SeePhilippinePhoenixSuretyandInsurance,Inc.vs.Woodworks,Inc.,20SCRA
1271(1967).
12SeeMakatiTuscanyCondominiumvs.CourtofAppeals,215SCRA463(1992).
323
VOL.356,APRIL4,2001 323
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
DISSENTINGOPINION
PARDO,J.:
The majority resolved to grant respondents motion for
reconsideration of the Courts decision promulgated on June 15,
1999. By this somersault, petitioner must now pay respondents
claim for insurance proceeds amounting to P18,645,000.00,
exclusiveofinterests,plus25%oftheamountdueasattorneysfees,
P25,000.00 as litigation expenses, and costs of suit, covering its
Pasay City property razed by fire. What an undeserved largess!
Indeed,anunjustenrichment at the expense of petitioner even the
awardofattorneysfeesisbloatedto25%oftheamountdue.
We cannot give our concurrence. We beg to dissent. We find
respondentsclaimtobefraudulent:
First: Respondent Masagana surreptitiously tried to pay the
overdue premiums before giving written notice to petitioner of the
occurrenceofthefirethatrazedthesubjectproperty.Thisfailureto
give notice of the fire immediately upon its occurrence blatantly
showed the fraudulent character of its claim. The fire totally
destroyedthepropertyonJune13,1992the writtennoticeof loss
wasgivenonlymorethanamonthlater,onJuly14,1992,theday
after respondent surreptitiously paid the overdue premiums.
Respondentverywellknewthatthepolicywasnotrenewedontime.
Hence,thesurreptitiousattempttopayoverduepremiums.Suchact
revealedareprehensibledisregardoftheprinciplethatinsuranceisa
1
contractuberrimafides,themostabundantgoodfaith. Respondent
is required by law and by express terms of the policy to give
immediatewrittennoticeofloss.Thismustbecompliedwithinthe
utmostgoodfaith.
Another badge of fraud is that respondent deviated from its
previous practice of coursing its premium payments through its
brokers.Thistime,respondentMasaganawentdirectlytopetitioner
and paid through its cashier with managers checks. Naturally, the
cashierroutinelyacceptedthepremiumpaymentbecausehehad
_______________
1Velascov.Apostol,173SCRA228,236[1989].
324
324 SUPREMECOURTREPORTSANNOTATED
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
Allbenefitsunderthepolicyshallbeforfeitediftheclaimbeinanyrespect
fraudulent,orifanyfalsedeclarationbemadeorusedinsupportthereof,or
ifanyfraudulentmeansordevicesareusedbytheinsuredoranyoneacting
2
onhisbehalftoobtainanybenefitunderthepolicy.
Inthefactualmilieu,thepurportedpracticeofgiving60to90day
creditextensionforpaymentofpremiumswasadisputedfact.Butit
is a given fact that the written notice of loss was not immediately
given.Itwasgivenonlythedayaftertheattempttopaythedelayed
premiums.
Atanyrate,thepurportedcreditwasamereverbalunderstanding
oftherespondentMasaganaofanagreementbetweentheinsurance
company (petitioner) and the insurance brokers of respondent
Masagana.ThepresidentofrespondentMasaganaadmittedthatthe
insurancepolicydidnotcontainanyprovisopertainingtothegrant
ofcreditwithinwhichtopaythepremiums.RespondentMasagana
merely deduced that a credit agreement existed based on previous
years practice that they had of delayed payments accepted by the
insurer as reflected on the face of the receipts issued by UCPB
evidencingthepaymentofpremiums.
________________
2Section15,PolicyConditions,RTCRecord,p.25.
325
VOL.356,APRIL4,2001 325
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
Q: Youalsoclaimthatyouhave60to90dayscreditarrangement
withUCPBisthatcorrect?
A: Yes,maam.
Q: Imshowingtoyouthepolicywhichhadpreviouslybeen
markedinevidenceasExhibitA,B,C,D,&Efor
theplaintiffandlikewise,markedasexhibits1,2,3,4,
&5forthedefendant.Couldyoushowus,Mr.witnesswhere
inthesepoliciesdoesitshowthatyouareactuallygiven60to
90dayscreditarrangementwithUCPB?
A: Well,itsverbalwithyourcompany,andAnsonsInsurance
Brokerage.Itisnotwritten.
Q: Itisnotwritteninthepolicy?
A: Yes.
Q: YoumerelyhaveverbalagreementwithAnsonsInsurance
Brokerage?
A: Yesasshowninourmodeofpaymentinourvouchersandthe
3
receiptsissuedbytheinsurancecompany.
Q: Youalsoidentifiedseveralreceiptshereofficialreceiptsissued
byUCPBGeneralInsuranceCompany,Inc.,whichhasbeen
previouslymarkedasExhibitsF,G,H,I,andJfor
theplaintiffisthatcorrect?
A: Yes.
Q: And,youwouldagreewithmethatthedatesindicatedinthese
particularOfficialReceipts(O.R.),merelyindicatedthedates
whenUCPBGeneralInsuranceCompanyissuedthesereceipts?
Doyouadmitthat,Mr.Witness?
________________
3TSN,December8,1992,pp.2425.
326
326 SUPREMECOURTREPORTSANNOTATED
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
A: Thatwaswritteninthereceipts.
Q: But,youwouldalsoagreethatthisdidnotnecessarilyshowthe
dateswhenyouactuallyforwardedthecheckstoyourbroker,
AnsonInsuranceAgency,forpaymenttoUCPBGeneral
InsuranceCo.Inc.,isntit?
A: Theactualsupportofthiswouldbethecashvoucherofthe
company,MasaganaTelamartInc.,thedatewhentheypickedup
thecheckfromthecompany.
Q: Andarethesecashvoucherwithyou?
A: Idontknowifitisinthefolderorinourfolder,now.
Q: So,youarenotcertain,whetherornotyouactuallydeliveredthe
checkscoveredbytheseOfficialReceiptstoUCPBGeneral
Insurance,onthedatesindicated?
A: Iwouldsupposeitisfewdaysearlier,whentheypickedupthe
4
paymentinouroffice.
Hence, what has been established was the grant of credit to the
insurance brokers, not to the assured. The insurance company
recognizedthepaymenttotheinsurancebrokersaspaymenttoitself,
though the actual remittance of the premium payments to the
principalmightbemadelater.Oncepaymentofpremiumsismade
totheinsurancebroker,theassuredwouldbecoveredbyavalidand
binding insurance policy, provided the loss occurred after payment
tothebrokerhasbeenmade.
Assuming arguendo that the 60 to 90 daycreditterm has been
agreed between the parties, respondent could not still invoke5
estoppeltobackupitsclaim.Estoppelisunavailinginthiscase,
thusspoketheSupremeCourtthroughthepenofJusticeHiJarioG.
Davide, Jr., now Chief Justice. Mutatis mutandi, he may well be
speaking of this case. He added that [E]stoppel can not give6
validitytoanactthatisprohibitedbylaworagainstpublicpolicy.
The actual payment of premiums is a condition precedent to the7
validity of an insurance contract other than life insurance policy.
Any
_______________
4TSN,December8,1992,pp.1417.
5DevelopmentBankofthePhilippinesv.CourtofAppeals,348Phil.15, 32 284
SCRA14[1998].
6Ibid.
7AmericanHomeAssuranceCo.v.Chua,309SCRA250,259[1999].
327
VOL.356,APRIL4,2001 327
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
Anincisivereadingoftheaforecitedprovisionwouldshowthatthe
emphasis was on the conclusiveness of the acknowledgment in the
policy of the receipt of premium, notwithstanding the absence of
actualpaymentofpremium,becauseofestoppel.Underthedoctrine
of estoppel, an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved as
againstthepersonrelyingthereon.Apartymaynotgobackonhis
ownactsandrepresentationstotheprejudiceoftheotherpartywho
8
relieduponthem.
Thisistheonlycaseofestoppelwhichthelawconsidersavalid
exceptiontothemandatoryrequirementofprepaymentofpremium.
The law recognized that the contracting parties, in entering a
contract of insurance, are free to enter into stipulations and make
personal undertakings so long as they are not contrary to law or
public policy. However, the law is clear in providing that the
acknowledgment must be contained in the policy or contract of
insurance.Anythingshortofitwouldnotfallundertheexceptionso
providedinSection78.
Hence,becauseofrespondentsfailuretopaythepremiumsprior
to the occurrence of the fire insured against, no valid and binding
insurancepolicywascreatedtocoverthelossanddestructionofthe
property.ThefiretookplaceonJune13,1992,twentytwo(22)days
after the expiration of the policy of fire insurance. The tender of
payment of premiums was made only thirty (30) days after the
occurrence of the fire, or on July 13, 1992. Respondent Masagana
didnotgiveimmediatenoticetopetitionerofthefireas
________________
8 Ayala Corporation v. Ray Burton Development Corp., 355 Phil. 475, 496 294
SCRA48[1998].
328
328 SUPREMECOURTREPORTSANNOTATED
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
_______________
9Section2,PolicyConditions,RTCRecord,p.16.
329
VOL.356,APRIL4,2001 329
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
10
ThecaseofTibayv.CourtofAppeals isinpoint.Theissueraised
therein was: May a fire insurance policy be valid, binding and
enforceable upon mere partial payment of premium? In the said
case, Fortune Life and General Insurance Co., Inc. issued Fire
Insurance Policy No. 136171 in favor of Violeta R. Tibay and/or
NicolasRoraldo,onatwostoreyresidentialbuildinglocatedat5855
Zobel Street, Makati City, together with all the personal effects
therein. The insurance was for P600,000.00, covering the period
from23January1987to23January1988.On23January1987,of
the total premium of P2,983.50, Violeta Tibay only paid P600.00,
thus leaving a substantial balance unpaid. On March 8, 1987, the
insured building was completely destroyed by fire. Two days later,
or on 10 March 1987, Violeta Tibay paid the balance of the
premium. On the same day, she filed with Fortune a claim for the
proceedsofthefireinsurancepolicy.
In denying the claim of insurance, the Court ruled that by
expressagreementoftheparties,novinculumjuris or bond of law
was to be established until full payment
11
was effected prior to the
occurrence of the risk insured against. As expressly stipulated in
the contract, full payment must be made before the risk occurs for
the policy to be considered effective and in force. No vinculum
juris whereby the insurer bound itself to indemnify the assured
according 12to law ever resulted from the fractional payment of
premium.
The majority cited the case
13
of Makati Tuscany Condominium
Corp. vs. Court of Appeals to support the contention that the
insurance policies subject of the instant case were valid and
effective. However, the factual situation in that case was different
fromthecaseatbar.
InTuscany,theCourtheldthattheinsurancepolicieswerevalid
andbindingbecausetherewaspartialpaymentofthepremiumsand
aclearunderstandingbetweenthepartiesthattheyhadintendedthe
insurancepoliciestobebindingandeffectivenotwith
_______________
10326Phil.931257SCRA126[1996].
11Tibayv.CourtofAppeals,supra,Note10,p.136.
12Ibid.,p.138.
13215SCRA462[1992].
330
330 SUPREMECOURTREPORTSANNOTATED
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
_______________
14Article2010,CivilCode.
15Tibayv.CourtofAppeals,supra,Note10,p.133.
331
VOL.356,APRIL4,2001 331
UCPBGeneralInsuranceCo.,Inc.vs.MasaganaTelamart,Inc.
Evenintheabsenceofnoticeofnonrenewal,theassuredwouldbe
boundbythelawthatanonlifeinsurancepolicytakeseffectonlyon
thedatepaymentofthepremiumwasmade.
Verily, it is elemental law that the payment of premium is a
mandatoryrequisitetomakethepolicyofinsuranceeffective.Ifthe
premium is not paid in the manner prescribed in the16 policy as
intendedbytheparties,thepolicyisvoidandineffective.
Basicallyacontractofindemnity,aninsurancecontractisthelaw
betweentheparties.Itstermsandconditionsconstitutethemeasure
of the insurers liability and compliance therewith is a condition
17
precedenttotheinsuredsrighttorecoveryfromtheinsurer.
INVIEWWHEREOF,IvotetoDENYtherespondentsmotion
forreconsideration,forlackofmerit.
Judgment reconsidered and set aside, that of the Court of
Appealsaffirmedintoto.
Notes.Under Sections 77 and 78 of the Insurance Code, until
thepremiumispaid,andthelawhasnotexpresslyexceptedpartial
payments,thereisnovalidandbindingcontract.(Tibayvs.Courtof
Appeals,257SCRA126[1996])
Section 78 of the Insurance Code establishes a legal fiction of
payment and should be interpreted as an exception to Section 77.
(American Home Assurance Company vs. Chua, 309 SCRA 250
[1999])
o0o
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16Tibayv.CourtofAppeals,supra,Note10,pp.138139.
17Verendiav.CourtofAppeals,217SCRA417,422423[1993].
332
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