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G.R. No.

L-15895 November 29, 1920 The chief clerk of the Manila office of the Sun Life Assurance Company of Canada at the
time of the trial testified that he prepared the letter introduced in evidence as Exhibit 3,
RAFAEL ENRIQUEZ, as administrator of the estate of the late Joaquin Ma. of date November 26, 1917, and handed it to the local manager, Mr. E. E. White, for
Herrer, plaintiff-appellant, vs. SUN LIFE ASSURANCE COMPANY OF CANADA, defendant- signature. The witness admitted on cross-examination that after preparing the letter and
appellee. giving it to he manager, he new nothing of what became of it. The local manager, Mr.
White, testified to having received the cablegram accepting the application of Mr. Herrer
MALCOLM, J.:
from the home office on November 26, 1917. He said that on the same day he signed a
This is an action brought by the plaintiff ad administrator of the estate of the late Joaquin letter notifying Mr. Herrer of this acceptance. The witness further said that letters, after
Ma. Herrer to recover from the defendant life insurance company the sum of pesos 6,000 being signed, were sent to the chief clerk and placed on the mailing desk for transmission.
paid by the deceased for a life annuity. The trial court gave judgment for the defendant. The witness could not tell if the letter had every actually been placed in the mails. Mr.
Plaintiff appeals. Tuason, who was the chief clerk, on November 26, 1917, was not called as a witness. For
the defense, attorney Manuel Torres testified to having prepared the will of Joaquin Ma.
The undisputed facts are these: On September 24, 1917, Joaquin Herrer made application Herrer, that on this occasion, Mr. Herrer mentioned his application for a life annuity, and
to the Sun Life Assurance Company of Canada through its office in Manila for a life that he said that the only document relating to the transaction in his possession was the
annuity. Two days later he paid the sum of P6,000 to the manager of the company's provisional receipt. Rafael Enriquez, the administrator of the estate, testified that he had
Manila office and was given a receipt reading as follows: gone through the effects of the deceased and had found no letter of notification from the
insurance company to Mr. Herrer.
MANILA, I. F., 26 de septiembre, 1917.
Our deduction from the evidence on this issue must be that the letter of November 26,
PROVISIONAL RECEIPT Pesos 6,000
1917, notifying Mr. Herrer that his application had been accepted, was prepared and
Recibi la suma de seis mil pesos de Don Joaquin Herrer de Manila como prima dela Renta signed in the local office of the insurance company, was placed in the ordinary channels
Vitalicia solicitada por dicho Don Joaquin Herrer hoy, sujeta al examen medico y for transmission, but as far as we know, was never actually mailed and thus was never
aprobacion de la Oficina Central de la Compaia. received by the applicant.

The application was immediately forwarded to the head office of the company at Not forgetting our conclusion of fact, it next becomes necessary to determine the law
Montreal, Canada. On November 26, 1917, the head office gave notice of acceptance by which should be applied to the facts. In order to reach our legal goal, the obvious
cable to Manila. (Whether on the same day the cable was received notice was sent by the signposts along the way must be noticed.
Manila office of Herrer that the application had been accepted, is a disputed point, which
Until quite recently, all of the provisions concerning life insurance in the Philippines were
will be discussed later.) On December 4, 1917, the policy was issued at Montreal. On
found in the Code of Commerce and the Civil Code. In the Code of the Commerce, there
December 18, 1917, attorney Aurelio A. Torres wrote to the Manila office of the company
formerly existed Title VIII of Book III and Section III of Title III of Book III, which dealt with
stating that Herrer desired to withdraw his application. The following day the local office
insurance contracts. In the Civil Code there formerly existed and presumably still exist,
replied to Mr. Torres, stating that the policy had been issued, and called attention to the
Chapters II and IV, entitled insurance contracts and life annuities, respectively, of Title XII
notification of November 26, 1917. This letter was received by Mr. Torres on the morning
of Book IV. On the after July 1, 1915, there was, however, in force the Insurance Act. No.
of December 21, 1917. Mr. Herrer died on December 20, 1917.
2427. Chapter IV of this Act concerns life and health insurance. The Act expressly repealed
As above suggested, the issue of fact raised by the evidence is whether Herrer received Title VIII of Book II and Section III of Title III of Book III of the code of Commerce. The law
notice of acceptance of his application. To resolve this question, we propose to go directly of insurance is consequently now found in the Insurance Act and the Civil Code.
to the evidence of record.
While, as just noticed, the Insurance Act deals with life insurance, it is silent as to the In resume, therefore, the law applicable to the case is found to be the second paragraph
methods to be followed in order that there may be a contract of insurance. On the other of article 1262 of the Civil Code providing that an acceptance made by letter shall not bind
hand, the Civil Code, in article 1802, not only describes a contact of life annuity markedly the person making the offer except from the time it came to his knowledge. The pertinent
similar to the one we are considering, but in two other articles, gives strong clues as to fact is, that according to the provisional receipt, three things had to be accomplished by
the proper disposition of the case. For instance, article 16 of the Civil Code provides that the insurance company before there was a contract: (1) There had to be a medical
"In matters which are governed by special laws, any deficiency of the latter shall be examination of the applicant; (2) there had to be approval of the application by the head
supplied by the provisions of this Code." On the supposition, therefore, which is office of the company; and (3) this approval had in some way to be communicated by the
incontestable, that the special law on the subject of insurance is deficient in enunciating company to the applicant. The further admitted facts are that the head office in Montreal
the principles governing acceptance, the subject-matter of the Civil code, if there be any, did accept the application, did cable the Manila office to that effect, did actually issue the
would be controlling. In the Civil Code is found article 1262 providing that "Consent is policy and did, through its agent in Manila, actually write the letter of notification and
shown by the concurrence of offer and acceptance with respect to the thing and the place it in the usual channels for transmission to the addressee. The fact as to the letter of
consideration which are to constitute the contract. An acceptance made by letter shall notification thus fails to concur with the essential elements of the general rule pertaining
not bind the person making the offer except from the time it came to his knowledge. The to the mailing and delivery of mail matter as announced by the American courts, namely,
contract, in such case, is presumed to have been entered into at the place where the offer when a letter or other mail matter is addressed and mailed with postage prepaid there is
was made." This latter article is in opposition to the provisions of article 54 of the Code of a rebuttable presumption of fact that it was received by the addressee as soon as it could
Commerce. have been transmitted to him in the ordinary course of the mails. But if any one of these
elemental facts fails to appear, it is fatal to the presumption. For instance, a letter will not
If no mistake has been made in announcing the successive steps by which we reach a be presumed to have been received by the addressee unless it is shown that it was
conclusion, then the only duty remaining is for the court to apply the law as it is found. deposited in the post-office, properly addressed and stamped. (See 22 C.J., 96, and 49 L.
The legislature in its wisdom having enacted a new law on insurance, and expressly R. A. [N. S.], pp. 458, et seq., notes.)
repealed the provisions in the Code of Commerce on the same subject, and having thus
left a void in the commercial law, it would seem logical to make use of the only pertinent We hold that the contract for a life annuity in the case at bar was not perfected because it
provision of law found in the Civil code, closely related to the chapter concerning life has not been proved satisfactorily that the acceptance of the application ever came to the
annuities. knowledge of the applicant.lawph!l.net

The Civil Code rule, that an acceptance made by letter shall bind the person making the Judgment is reversed, and the plaintiff shall have and recover from the defendant the
offer only from the date it came to his knowledge, may not be the best expression of sum of P6,000 with legal interest from November 20, 1918, until paid, without special
modern commercial usage. Still it must be admitted that its enforcement avoids finding as to costs in either instance. So ordered.
uncertainty and tends to security. Not only this, but in order that the principle may not be
taken too lightly, let it be noticed that it is identical with the principles announced by a
considerable number of respectable courts in the United States. The courts who take this
view have expressly held that an acceptance of an offer of insurance not actually or
constructively communicated to the proposer does not make a contract. Only the mailing
of acceptance, it has been said, completes the contract of insurance, as the locus
poenitentiae is ended when the acceptance has passed beyond the control of the party. (I
Joyce, The Law of Insurance, pp. 235, 244.)
G.R. No. 23703 September 28, 1925 however, that the complaint prays for affirmative relief against the insurance company. It
will be noticed further that it is stipulated that the insurance company has persistently
HILARIO GERCIO, plaintiff-appellee, vs. SUN LIFE ASSURANCE OF CANADA, ET refused to change the beneficiary as desired by the plaintiff. As the rights of Andrea
AL., defendants. Zialcita in the policy are rights which are enforceable by her only against the insurance
SUN LIFE ASSURANCE OF CANADA, appellant. company, the defendant insurance company will only be fully protected if the question at
issue is conclusively determined. Accordingly, we have decided not to accede to the
MALCOLM, J.:
motion of the appellee and not to order the dismissal of the appeal of the appellant.
The question of first impression in the law of life insurance to be here decided is whether
This brings us to the main issue. Before, however, discussing its legal aspects, it is
the insured the husband has the power to change the beneficiary the former wife
advisable to have before us the essential facts. As they are stipulated, this part of the
and to name instead his actual wife, where the insured and the beneficiary have been
decision can easily be accomplished.
divorced and where the policy of insurance does not expressly reserve to the insured the
right to change the beneficiary. Although the authorities have been exhausted, no legal On January 29, 1910, the Sun Life Assurance Co. of Canada issued insurance policy No.
situation exactly like the one before us has been encountered. 161481 on the life of Hilario Gercio. The policy was what is known as a twenty-year
endowment policy. By its terms, the insurance company agreed to insure the life of Hilario
Hilario Gercio, the insured, is the plaintiff. The Sun Life Assurance Co. of Canada, the
Gercio for the sum of P/2,000, to be paid him on February 1, 1930, or if the insured
insurer, and Andrea Zialcita, the beneficiary, are the defendants. The complaint is in the
should die before said date, then to his wife, Mrs. Andrea Zialcita, should she survive him;
nature of mandamus. Its purpose is to compel the defendant Sun Life Assurance Co. of
otherwise to the executors, administrators, or assigns of the insured. The policy also
Canada to change the beneficiary in the policy issued by the defendant company on the
contained a schedule of reserves, amounts in cash, paid-up policies, and renewed
life of the plaintiff Hilario Gercio, with one Andrea Zialcita as beneficiary.
insurance, guaranteed. The policy did not include any provision reserving to the insured
A default judgment was taken in the lower court against the defendant Andrea Zialcita. the right to change the beneficiary.
The other defendant, the Sun Life Assurance Co. of Canada, first demurred to the
On the date the policy was issued, Andrea Zialcita was the lawful wife of Hilario Gercio.
complaint and when the demurrer was overruled, filed an answer in the nature of a
Towards the end of the year 1919, she was convicted of the crime of adultery. On
general denial. The case was then submitted for decision on an agreed statement of facts.
September 4, 1920, a decree of divorce was issued in civil case no. 17955, which had the
The judgment of the trial court was in favor of the plaintiff without costs, and ordered the
effect of completely dissolving the bonds of matrimony contracted by Hilario Gercio and
defendant company to eliminate from the insurance policy the name of Andrea Zialcita as
Andrea Zialcita.
beneficiary and to substitute therefor such name as the plaintiff might furnish to the
defendant for that purpose. On March 4, 1922, Hilario Gercio formally notified the Sun Life Assurance Co. of Canada
that he had revoked his donation in favor of Andrea Zialcita, and that he had designated
The Sun Life Assurance Co. of Canada has appealed and has assigned three errors alleged
in her stead his present wife, Adela Garcia de Gercio, as the beneficiary of the policy.
to have been committed by the lower court. The appellee has countered with a motion
Gercio requested the insurance company to eliminate Andrea Zialcita as beneficiary. This,
which asks the court to dismiss the appeal of the defendant Sun Life Assurance Co. of
the insurance company has refused and still refuses to do.
Canada, with costs.
With all of these introductory matters disposed of and with the legal question to the
As the motion presented by the appellee and the first two errors assigned by the
forefront, it becomes our first duty to determine what law should be applied to the facts.
appellant are preliminary in nature, we will pass upon the first. Appellee argues that the
In this connection, it should be remembered that the insurance policy was taken out in
"substantial defendant" was Andrea Zialcita, and that since she was adjudged in default,
1910, that the Insurance Act. No. 2427, became effective in 1914, and that the effort to
the Sun Life Assurance Co. of Canada has no interest in the appeal. It will be noticed,
change the beneficiary was made in 1922. Should the provisions of the Code of The wife has an insurable interest in the life of her husband. The beneficiary has an
Commerce and the Civil Code in force in 1910, or the provisions of the Insurance Act now absolute vested interest in the policy from the date of its issuance and delivery. So when a
in force, or the general principles of law, guide the court in its decision? policy of life insurance is taken out by the husband in which the wife is named as
beneficiary, she has a subsisting interest in the policy. And this applies to a policy to which
On the supposition, first, that the Code of Commerce is applicable, yet there can be found there are attached the incidents of a loan value, cash surrender value, an automatic
in it no provision either permitting or prohibiting the insured to change the beneficiary. extension by premiums paid, and to an endowment policy, as well as to an ordinary life
insurance policy. If the husband wishes to retain to himself the control and ownership of
On the supposition, next, that the Civil Code regulates insurance contracts, it would be
the policy he may so provide in the policy. But if the policy contains no provision
most difficult, if indeed it is practicable, to test a life insurance policy by its provisions.
authorizing a change of beneficiary without the beneficiary's consent, the insured cannot
Should the insurance contract, whereby the husband names the wife as the beneficiary,
make such change. Accordingly, it is held that a life insurance policy of a husband made
be denominated a donation inter vivos, a donation causa mortis, a contract in favor of a
payable to the wife as beneficiary, is the separate property of the beneficiary and beyond
third person, or an aleatory contract? The subject is further complicated by the fact that if
the control of the husband.
an insurance contract should be considered a donation, a husband may then never insure
his life in favor of his wife and vice versa, inasmuch as article 1334 prohibits all donations As to the effect produced by the divorce, the Philippine Divorce Law, Act No. 2710, merely
between spouses during marriage. It would seem, therefore, that this court was right provides in section 9 that the decree of divorce shall dissolve the community property as
when in the case of Del Val vs. Del Val ([1915]), 29 Phil., 534), it declined to consider the soon as such decree becomes final. Unlike the statutes of a few jurisdictions, there is no
proceeds of the insurance policy as a donation or gift, saying "the contract of life provision in the Philippine Law permitting the beneficiary in a policy for the benefit of the
insurance is a special contract and the destination of the proceeds thereof is determined wife of the husband to be changed after a divorce. It must follow, therefore, in the
by special laws which deal exclusively with that subject. The Civil Code has no provisions absence of a statute to the contrary, that if a policy is taken out upon a husband's life the
which relate directly and specifically to life-insurance contracts or to the destination of wife is named as beneficiary therein, a subsequent divorce does not destroy her rights
life-insurance proceeds. . . ." Some satisfaction is gathered from the perplexities of the under the policy.
Louisiana Supreme Court, a civil law jurisdiction, where the jurists have disagreed as to
the classification of the insurance contract, but have agreed in their conclusions as will These are some of the pertinent principles of the Law of Insurance. To reinforce them, we
hereafter see. (Re Succession of Leone Desforges [1914], 52 L.R.A. [N.S.], 689; Lambert vs would, even at the expense of clogging the decision with unnecessary citation of
Penn Mutual Life Insurance Company of Philadelphia and L'Hote & Co. [1898], 50 La. Ann., authority, bring to notice certain decisions which seem to us to have controlling influence.
1027.)
To begin with, it is said that our Insurance Act is mostly taken from the statute of
On the further supposition that the Insurance Act applies, it will be found that in this Law, California. It should prove of interest, therefore, to know the stand taken by the Supreme
there is likewise no provision either permitting or prohibiting the insured to change the Court of that State. A California decision oft cited in the Cyclopedias is Yore vs.
beneficiary. Booth ([1895]), 110 Cal., 238; 52 Am. St. Rep., 81), in which we find the following:

We must perforce conclude that whether the case be considered as of 1910, or 1914, or . . . It seems to be the settled doctrine, with but slight dissent in the courts of this country,
1922, and whether the case be considered in the light of the Code of Commerce, the Civil that a person who procures a policy upon his own life, payable to a designated
Code, or the Insurance Act, the deficiencies in the law will have to be supplemented by beneficiary, although he pays the premiums himself, and keeps the policy in his exclusive
the general principles prevailing on the subject. To that end, we have gathered the rules possession, has no power to change the beneficiary, unless the policy itself, or the charter
which follow from the best considered American authorities. In adopting these rules, we of the insurance company, so provides. In policy, although he has parted with nothing,
do so with the purpose of having the Philippine Law of Insurance conform as nearly as and is simply the object of another's bounty, has acquired a vested and irrevocable
possible to the modern Law of Insurance as found in the United States proper. interest in the policy, which he may keep alive for his own benefit by paying the
premiums or assessments if the person who effected the insurance fails or refuses to do survivor or survivors. The old tontines were based substantially on this principle, and their
so. validity has never been called in question.

As carrying great weight, there should also be taken into account two decisions coming xxx xxx xxx
from the Supreme Court of the United States. The first of these decisions, in point of time,
is Connecticut Mutual Life Insurance Company vs Schaefer ([1877]), 94 U.S., 457). There, The policy in question might, in our opinion, be sustained as a joint insurance, without
Mr. Justice Bradley, delivering the opinion of the court, in part said: reference to any other interest, or to the question whether the cessation of interest
avoids a policy good at its inception. We do not hesitate to say, however, that a policy
This was an action on a policy of the court, in part said: July 25, 1868, on the joint lives of taken out in good faith and valid at its inception, is not avoided by the cessation of the
George F. and Francisca Schaefer, then husband and wife, payable to the survivor on the insurable interest, unless such be the necessary effect of the provisions of the policy itself.
death of either. In January, 1870, they were divorced, and alimony was decreed and paid ...
to the wife, and there was never any issue of the marriage. They both subsequently
married again, after which, in February, 1871, George F. Schaefer died. This action was . . . .In our judgment of life policy, originally valid, does not cease to be so by the cessation
brought by Francisca, the survivor. of the assured party's interest in the life insured.

xxx xxx xxx Another controlling decision of the United States Supreme Court is that of the Central
National Bank of Washington City vs. Hume ([1888], 128 U.S., 134). Therein, Mr. Chief
The other point, relating to the alleged cessation of insurable interest by reason of the Justice Fuller, as the organ of the court, announced the following doctrines:
divorce of the parties, is entitled to more serious consideration, although we have very
little difficulty in disposing of it. We think it cannot be doubted that in the instance of contracts of insurance with a wife or
children, or both, upon their insurable interest in the life of the husband or father, the
It will be proper, in the first place, to ascertain what is an insurable interest. It is generally latter, while they are living, can exercise no power of disposition over the same without
agreed that mere wager policies, that is, policies in which the insured party has no their consent, nor has he any interest therein of which he can avail himself; nor upon his
interest in its loss or destruction, are void, as against public policy. . . . But precisely what death have his personal representatives or his creditors any interest in the proceeds of
interest is necessary, in order to take a policy out of the category of mere wager, has been such contracts, which belong to the beneficiaries to whom they are payable.
the subject of much discussion. In marine and fire insurance the difficulty is not so great,
because there insurance is considered as strictly an indemnity. But in life insurance the It is indeed the general rule that a policy, and the money to become due under it, belong,
loss can seldom be measured by pecuniary values. Still, an interest of some sort in the the moment it is issued, to the person or persons named in it as the beneficiary or
insured life must exist. A man cannot take out insurance on the life of a total stranger, nor beneficiaries, and that there is no power in the person procuring the insurance, by any act
on that of one who is not so connected with him as to make the continuance of the life a of his, by deed or by will, to transfer to any other person the interest of the person
matter of some real interest to him. named.

It is well settled that a man has an insurable interest in his own life and in that of his wife A jurisdiction which found itself in somewhat the same situation as the Philippines,
and children; a woman in the life of her husband; and the creditor in the life of his debtor. because of having to reconcile the civil law with the more modern principles of insurance,
Indeed it may be said generally that any reasonable expectation of pecuniary benefit or is Louisiana. In a case coming before the Federal Courts, In re Dreuil & Co. ([1915]), 221
advantage from the continued life of another creates an insurable interest in such life. Fed., 796), the facts were that an endowment insurance policy provided for payment of
And there is no doubt that a man may effect an insurance on his own life for the benefit the amount thereof at the expiration of twenty years to the insured, or his executors,
of a relative or fried; or two or more persons, on their joint lives, for the benefit of the administrators, or assigns, with the proviso that, if the insured die within such period,
payment was to be made to his wife if she survive him. It was held that the wife has a
vested interest in the policy, of which she cannot be deprived without her consent. The case most nearly on all fours with the one at bar is that of Wallace vs Mutual Benefit
Foster, District Judge, announced: Life Insurance Co. ([1906], 97 Minn., 27; 3 L.R.A. [N.S.], 478). The opinion there delivered
also invokes added interest when it is noted that it was written by Mr. Justice Elliott, the
In so far as the law of Louisiana is concerned, it may also be considered settled that where author of a text on insurance, later a member of this court. In the Minnesota case cited,
a policy is of the semitontine variety, as in this case, the beneficiary has a vested right in one Wallace effected a "twenty-year endowment" policy of insurance on his life, payable
the policy, of which she cannot be deprived without her consent. (Lambert vs Penn in the event of his death within twenty years to Emma G. Wallace, his wife, but, if he
Mutual Life Ins. Co., 50 La. Ann., 1027; 24 South., 16.) (See in same connection a leading lived, to himself at the end of twenty years. If Wallace died before the death of his wife,
decision of the Louisiana Supreme Court, Re Succession of Leonce Desforges, [1914], 52 within the twenty years, the policy was payable to the personal representatives of the
L.R.A. [N.S.], 689.) insured. During the pendency of divorce proceedings, the parties signed a contract by
which Wallace agreed that, if a divorce was granted to Mrs. Wallace, the court might
Some question has arisen as to the power of the insured to destroy the vested interest of
award her certain specified property as alimony, and Mrs. Wallace agreed to relinquish all
the beneficiary in the policy. That point is well covered in the case of Entwistle vs.
claim to any property arising out of the relation of husband and wife. The divorce was
Travelers Insurance Company ([1902], 202 Pa. St., 141). To quote:
granted. An action was brought by Wallace to compel Mrs. Wallace to relinquish her
. . . The interest of the wife was wholly contingent upon her surviving her husband, and interest in the insurance policy. Mr. Justice Elliott said:
she could convey no greater interest in the policy than she herself had. The interest of the
As soon as the policy was issued Mrs. Wallace acquired a vested interest therein, of which
children of the insured, which was created for them by the contract when the policy was
she could not be deprived without her consent, except under the terms of the contract
issued; vested in them at the same time that the interest of the wife became vested in
with the insurance company. No right to change the beneficiary was reserved. Her
her. Both interests were contingent. If the wife die before the insured, she will take
interest in the policy was her individual property, subject to be divested only by her
nothing under the policy. If the insured should die before the wife, then the children take
death, the lapse of time, or by the failure of the insured to pay the premiums. She could
nothing under the policy. We see no reason to discriminate between the wife and the
keep the policy alive by paying the premiums, if the insured did not do so. It was
children. They are all payees, under the policy, and together constitute the assured.
contingent upon these events, but it was free from the control of her husband. He had no
The contingency which will determine whether the wife, or the children as a class will take interest in her property in this policy, contingent or otherwise. Her interest was free from
the proceeds, has not as yet happened; all the beneficiaries are living, and nothing has any claim on the part of the insured or his creditors. He could deprive her of her interest
occurred by which the rights of the parties are in any way changed. The provision that the absolutely in but one way, by living more than twenty years. We are unable to see how
policy may be converted into cash at the option of the holder does not change the relative the plaintiff's interest in the policy was primary or superior to that of the husband. Both
rights of the parties. We agree entirely with the suggestion that "holder" or "holders", as interests were contingent, but they were entirely separate and distinct, the one from the
used in this connection, means those who in law are the owners of the policy, and are other. The wife's interest was not affected by the decree of court which dissolved the
entitled to the rights and benefits which may accrue under it; in other words, all the marriage contract between the parties. It remains her separate property, after the divorce
beneficiaries; in the present case, not only the wife, by the children of the insured. If for as before. . .
any reason, prudence required the conversion of the policy into cash, a guardian would
. . . . The fact that she was his wife at the time the policy was issued may have been, and
have no special difficulty in reasonable protecting the interest of his wards. But however
undoubtedly was, the reason why she was named as beneficiary in the event of his death.
that may be, it is manifest that the option can only be exercised by those having the full
But her property interest in the policy after it was issued did not in any reasonable sense
legal interest in the policy, or by their assignee. Neither the husband, nor the wife, nor
arise out of the marriage relation.
both together had power to destroy the vested interest of the children in the policy.
Somewhat the same question came before the Supreme Court of Kansas in the leading
case of Filley vs. Illinois Life Insurance Company ([1914]), 91 Kansas, 220; L.R.A. [1915 D],
130). It was held, following consideration extending to two motions for rehearing, as
follows:

The benefit accruing from a policy of life insurance upon the life of a married man,
payable upon his death to his wife, naming her, is payable to the surviving beneficiary
named, although she may have years thereafter secured a divorce from her husband, and
he was thereafter again married to one who sustained the relation of wife to him at the
time of his death.

The rights of a beneficiary in an ordinary life insurance policy become vested upon the
issuance of the policy, and can thereafter, during the life of the beneficiary, be defeated
only as provided by the terms of the policy.

If space permitted, the following corroborative authority could also be taken into account:
Joyce, The Law of Insurance, second edition, vol. 2, pp. 1649 et seq.; 37 Corpus Juris, pp.
394 et seq.; 14 R.C.L., pp. 1376 et seq.; Green vs. Green ([1912], 147 Ky., 608; 39 L.R.A.
[N.S.], 370); Washington Life Insurance Co. vs. Berwald ([1903], 97 Tex., 111); Begley vs.
Miller ([1907]), 137 Ill., App., 278); Blum vs. New York L. Ins. Co. ([1906], 197 Mo., 513; 8
L.R.A. [N.S.], 923; Union Central Life Ins. Co. vs. Buxer ([1900], 62 Ohio St., 385; 49 L.R.A.,
737); Griffith vs. New York Life Ins. Co. ([1894], 101 Cal., 627; 40 Am. St. Rep., 96); Preston
vs. Conn. Mut. L. Ins. Co. of Hartford([1902]); 95 Md., 101); Snyder vs. Supreme Ruler of
Fraternal Mystic Circle ([1909], 122 Tenn. 248; 45 L.R.A. [N.S.], 209); Lloyd vs. Royal Union
Mut. L. Ins. Co. ([1917], 245 Fed., 162); Phoenix Mut. L. Ins. Co. vs. Dunham ([1878], 46
Conn., 79; 33 Am. Rep., 14); McKee vs. Phoenix Ins. Co. ([1859], 28 Mo., 383; 75 Am. Rep.,
129); Supreme Council American Legion of Honor vs. Smith and Smith ([1889], 45 N.J. Eq.,
466); Overhiser vs. Overhiser ([1900], 63 Ohio St., 77; 81 Am. St. Rep., 612; 50 L.R.A.,
552); Condon vs. New York Life Insurance Co. ([1918], 183 Iowa, 658); with which
compare Foster vs. Gile ([1880], 50 Wis., 603) and Hatch vs. Hatch ([1904], 35 Tex. Civ.
App., 373).

On the admitted facts and the authorities supporting the nearly universally accepted
principles of insurance, we are irresistibly led to the conclusion that the question at issue
must be answered in the negative.

The judgment appealed from will be reversed and the complaint ordered dismissed as to
the appellant, without special pronouncement as to the costs in either instance. So
ordered.
G.R. No. L-33637 December 31, 1931 and on the testimony of the adjuster, Herridge. Having thus swept to one side all
intervening obstacle, the legal question recurs, as stated in the beginning of this decision,
ANG GIOK CHIP, doing business under the name and style of Hua Bee Kong Si, plaintiff- of whether or not warranty F was null and void.
appellee, vs. SPRINGFIELD FIRE & MARINE INSURANCE COMPANY, defendant-appellant.
To place this question in its proper light, we turn to the policy issued by the Springfield
MALCOLM, J.: Fire & Marine Insurance Company in favor of the plaintiff. The description of the risk in
this policy is as follows:lawphil.net
An important question in the law of insurance, not heretofore considered in this
jurisdiction and, according to our information, not directly resolved in California from
Ten thousand pesos Philippine Currency. On general non-hazardous
which State the Philippine Insurance Act was taken, must be decided on this appeal for
merchandise, chiefly consisting of chucherias, also produce, Cacao,
the future guidance of trial courts and of insurance companies doing business in the
Flour, all the property of the Insured, or held by them in trust, on
Philippine Islands. This question, flatly stated, is whether a warranty referred to in the
commission or on joint account with others, or for which he is
policy as forming part of the contract of insurance and in the form of a rider to the
responsible, while contained during the currency of this policy in the
insurance policy, is null and void because not complying with the Philippine Insurance Act.
godown, situate No. 643 Calle Reina Regent. . . .
The court has had the benefit of instructive briefs and memoranda from the parties and
has also been assisted by a well prepared brief submitted on behalf of amici curiae. This policy is subject to the hereon attached "Ordinary Short Period Rate
Scale" Warranties A & F, Co-insurances Clause "and Three Fourths Loss
The admitted facts are these: Ang Giok Chip doing business under the name and style of
Clause," which are forming part of same. Co-insurance declared:
Hua Bee Kong Si was formerly the owner of a warehouse situated at No. 643 Calle Reina
Regente, City of Manila. The contents of the warehouse were insured with the three "P20,000. Sun Insurance Office Ltd. (K & S)." (Emphasis inserted.)
insurance companies for the total sum of P60,000. One insurance policy, in the amount of Securely pasted on the left hand margin of the face of the policy are
P10,000, was taken out with the Springfield Fire & Marine Insurance Company. The five warranties and special clauses. One of them is warranty F, specially
warehouse was destroyed by fire on January 11, 1928, while the policy issued by the referred to on the face of the policy, reading in part as follows:
latter company was in force.
WARRANTY F
Predicated on this policy the plaintiff instituted action in the Court of First Instance of
Manila against the defendant to recover a proportional part of the loss coming to It is hereby declared and agreed that during the currency of this policy
P8,170.59. Four special defenses were interposed on behalf of the insurance company, no hazardous goods be stored in the Building to which this insurance
one being planted on a violation of warranty F fixing the amount of hazardous goods applies or in any building communicating therewith, provided, always,
which might be stored in the insured building. The trial judge in his decision found against however, that the Insured be permitted to stored a small quantity of
the insurance company on all points, and gave judgment in favor of the plaintiff for the the hazardous goods specified below, but not exceeding in all 3 per
sum of P8,188.74. From this judgment the insurance company has appealed, and it is to cent of the total value of the whole of the goods or merchandise
the first and fourth errors assigned that we would address particular attention. contained in said warehouse, viz; . . . .

Considering the result at which we arrive, it is unnecessary for us to discuss three of the The applicable law is found in the Instance Act, Act No. 2427, as
four special defenses which were made by the insurance company. We think, however, amended, section 65 reading:
that it would be a reasonable deduction to conclude that more than 3 per cent of the
total value of the merchandise contained in the warehouse constituted hazardous goods, "Every express warranty, made at or before the execution of a policy, must be contained
and that this per cent reached as high as 39. We place reliance on the consular invoices in the policy itself, or in another instrument signed by the insured and referred to in the
policy, as making a part of it." As the Philippine law was taken verbatim from the law of well recognized doctrines. In the first place, it is well settled that a rider attached to a
California, in accordance with well settled canons of statutory construction, the court policy is a part of the contract, to the same extent and with like effect as it actually
should follow in fundamental points, at least, the construction placed by California courts embodied therein. (I Couch, Cyclopedia of Insurance Law, sec. 159.) In the second place, it
on a California law. Unfortunately the researches of counsel reveal no authority coming is equally well settled that an express warranty must appear upon the face of the policy,
from the courts of California which is exactly on all fours with the case before us. or be clearly incorporated therein and made a part thereof by explicit reference, or by
However, there are certain consideration lying at the basis of California law and certain words clearly evidencing such intention. (4 Couch, Cyclopedia of Insurance Law, sec. 862.)
indications in the California decisions which point the way for the decision in this case
Section 65 of the Insurance Act and its counterpart, section 265 of the Civil Code of
Section 65 of the Philippine Insurance Act corresponds to section 2605 of the Civil Cod of California, will bear analysis as tested by reason and authority. The law says that every
California. The comments of the Code Examiners of California disclose that the language express warranty must be "contained in the policy itself." The word "contained,"
of section 2605 was quite different from that under the Code as adopted in 1872. That according to the dictionaries, means "included," inclosed," "embraced," "comprehended,"
language was found too harsh as to insurance companies. The Code Examiners' notes etc. When, therefore, the courts speak of a rider attached to the policy, and thus
state: "The amendment restores the law as it existed previous to the Code: See Parsons "embodied" therein, or of a warranty "incorporated" in the policy, it is believed that the
on Maritime Law, 106, and Phillips on Insurance, sec. 756." The passage referred to in phrase "contained in the policy itself" must necessarily include such rider and warranty.
Philips on Insurance, was worded by the author as follows: As to the alternative relating to "another instrument," "instrument" as here used could
not mean a mere slip of paper like a rider, but something akin to the policy itself, which in
"Any express warranty or condition is always a part of the policy, but, like any other part section 48 of the Insurance Act is defined as "The written instrument, in which a contract
of an express contract, may be written in the margin, or contained in proposals or of insurance is set forth." In California, every paper writing is not necessarily an
documents expressly referred to in the policy, and so made a part of it." The annotator of "instrument" within the statutory meaning of the term. The word "instrument has a well
the Civil Code of California, after setting forth these facts, adds: defined definition in California, and as used in the Codes invariably means some written
paper or instrument signed and delivered by one person to another, transferring the title
. . . The section as it now reads is in harmony with the rule that a warranty may be
to, or giving a lien, on property, or giving a right to debt or duty. (Hoag vs. Howard [1880],
contained in another instrument than the policy when expressly referred to in the policy
55 Cal., 564; People vs. Fraser[1913], 137 Pac., 276.) In other words, the rider, warranty F,
as forming a part thereof: . . . .
is contained in the policy itself, because by the contract of insurance agreed to by the
What we have above stated has been paraphrased from the decision of the California parties it is made to form a part of the same, but is not another instrument signed by the
Court of Appeals in the case of Isaac Upham Co. vs. United States Fidelity & Guaranty Co. ( insured and referred to in the policy as forming a part of it.
[1922], 211 Pac., 809), and thus discloses the attitude of the California courts. Likewise in
Again, referring to the jurisprudence of California, another rule of insurance adopted in
the Federal courts, in the case of Conner vs. Manchester Assur. Co. ([1904], 130 Fed.,
that State is in point. It is admitted that the policy before us was accepted by the plaintiff.
743), section 2605 of the Civil Code of California came under observation, and it was said
The receipt of this policy by the insured without objection binds both the acceptor and
that it "is in effect an affirmance of the generally accepted doctrine applicable to such
the insured to the terms thereof. The insured may not thereafter be heard to say that he
contracts."
did not read the policy or know its terms, since it is his duty to read his policy and it will be
We, therefore, think it wrong to hold that the California law represents a radical assumed that he did so. In California Jurisprudence, vol. 14, p. 427, from which these
departure from the basic principles governing the law of insurance. We are more inclined statements are taken with citations to California decisions, it is added that it has been
to believe that the codification of the law of California had exactly the opposite purpose, held that where the holder of a policy discovers a mistake made by himself and the local
and that in the language of the Federal court it was but an affirmance of the generally agent in attaching the wrong rider to his application, elects to retain the policy issued to
accepted doctrine applicable to such contracts. This being true, we turn to two of such him, and neither requests the issuance of a different one nor offers to pay the premium
requisite to insure against the risk which he believe the rider to cover, he thereby accepts
the policy.

We are given to understand, and there is no indication to the contrary, that we have here
a standard insurance policy. We are further given to understand, and there is no
indication to the contrary, that the issuance of the policy in this case with its attached
rider conforms to well established practice in the Philippines and elsewhere. We are
further given to understand, and there is no indication to the contrary, that there are no
less than sixty-nine insurance companies doing business in the Philippine Islands with
outstanding policies more or less similar to the one involved in this case, and that to
nullify such policies would place an unnecessary hindrance in the transaction of insurance
business in the Philippines. These are matters of public policy. We cannot believe that it
was ever the legislative intention to insert in the Philippine Law on Insurance an oddity,
an incongruity, entirely out of harmony with the law as found in other jurisdiction, and
destructive of good business practice.

We have studied this case carefully and having done so have reached the definite
conclusion that warranty F, a rider attached to the face of the insurance policy, and
referred to in contract of insurance, is valid and sufficient under section 65 of the
Insurance Act. Accordingly, sustaining the first and fourth errors assigned, and it being
unnecessary to discuss the remaining errors, the result will be to reverse the judgment
appealed from and to order the dismissal of the complaint, without special
pronouncement as to costs in either instance.
G.R. No. L-41794 August 30, 1935 answered "None", and in the second, "No". These answers of the insured as well as his
other statements contained in his applications were one of the causes or considerations
SEGUNDINA MUSGI, ET AL., plaintiffs-appellees, vs. WEST COAST LIFE INSURANCE for the issuance of the policies, and they so positively appear therein. After the death of
CO., defendant-appellant. the insured and as a result of the demand made by the beneficiaries upon the defendant
to pay the value of the policies, the latter discovered that the aforementioned answers
IMPERIAL, J.:
were false and fraudulent, because the truth was that the insured, before answering and
The plaintiffs, as beneficiaries, brought suit against the defendant to recover the value of signing the applications and before the issuance of the policies, had been treated in the
two life insurance policies. The defendant appealed from a judgment sentencing it to pay General Hospital by a lady physician for different ailments. It indisputably appears that
the plaintiffs the amount of said policies, and the costs. between May 13 and 19, 1929, the insured had entered the General Hospital in Manila,
and was treated by Doctor Pilar V. Cruz for peptic ulcer and chronic catarrhal
The principal facts of the case are embodied in the following written stipulation entered nasopharyngitis; on August 5, 1930, he entered the same hospital and was treated by the
into by the parties: same physician for chronic pyelocystitis and for incipient pulmonary tuberculosis; on the
13th of the same month he returned to the hospital and was treated by the same
1. That Arsenio T. Garcia was insured by the defendant company in the sum of P5,000 as
physician for chronic suppurative pyelocystitis and for chronic bronchitis; on the 20th of
evidenced by Policy No. 129454 effective as of July 25, 1931, hereby attached and marked
the same month he again entered the hospital and was treated by the same doctor for
as Exhibit A;
acute tracheo-bronchitis and chronic suppurative pyelocystitis; on the 27th of the same
2. That the said Arsenio T. Garcia was again insured by the defendant company in the sum month he again entered the same hospital and was treated for the same ailments; on
of P10,000 effective as of October 20, 1931, as evidenced by Policy No. 130381 hereby December 11, 1930, he again entered the hospital and was treated for the same ailments;
attached and marked as Exhibit B; on the 18th of the same month, he again entered the hospital and was treated for the
same ailments; on the 28th of the same month he again entered the hospital and was
3. That the two policies aforementioned were valid and subsisting at the time of the death treated for the same ailments, and, finally, on January 11, 1931, he again entered the
of the insured on December 30, 1932; the fact of said death is evidenced by the hospital and was treated by the same doctor for the same ailments.
accompanying death certificate issued by the Civil Register of Pasay, Rizal, which is
marked as Exhibit C; The defendant contended at the outset that the two policies did not create any valid
obligation because they were fraudulently obtained by the insured. The appealed decision
4. That the plaintiffs herein are the beneficiaries in said policies, Segundina Musgi of holds that the health of the insured before the acceptance of his applications and the
Policy No. 129454, and Buenaventura Garcia of Policy No. 130381; issuance of the policies could neither be discussed nor questioned by the defendant,
because the insured was examined by three physicians of the company and all of them
5. That demand was made upon the defendant company for the payment of the two unanimously certified that he was in good health and that he could be properly insured.
policies above referred to, but the defendant company refused to pay on the grounds The question here is not whether the physicians' reports or the answers which the insured
stated in the answer. gave to them relative to his health were correct or not. It is admitted that such
information was substantially correct, in the sense that the physicians of the defendant
The two policies were issued upon applications filed by the insured on July 20, 1931 and
who examined the insured, for failure to make a detailed examination, did not discover
October 15, of the same year, respectively. In both applications, the insured had to
the ailments suffered by the insured. However, the question raised for our determination
answer inquiries as to his state of health and that of his family, which he did voluntarily. In
is whether the two answers given by the insured in his applications are false, and if they
each of the said applications the following question was asked: "1. What physician or
were the cause, or one of the causes, which induced the defendant to issue the policies.
practitioner or any other person not named above have you consulted or been treated by,
On the first point, the facts above set out leave no room for doubt. The insured knew that
and for what illness, or ailment? (If none, so state.)" In the first application, the insured
he had suffered from a number of ailments, including incipient pulmonary tuberculosis, "Another rule is that if the assured undertakes to state all the circumstances affecting the
before subscribing the applications, yet he concealed them and omitted the hospital risk, a full and fair statement of all is required.
where he was confined as well as the name of the lady physician who treated him. That
this concealment and the false statements constituted fraud, is likewise clear, because "It is also held that the concealment must, in the absence of inquiries, be not only
the defendant by reason thereof accepted the risk which it would otherwise have flatly material, but fraudulent, or the fact must have been intentionally withheld; so it is held
refused. When not otherwise specially provided for by the Insurance Law, the contract of under English law that if no inquiries are made and no fraud or design to conceal enters
life insurance is governed by the general rules of the civil law regarding contracts. Article into the concealment the contract is not avoided. And it is determined that even though
1261 of the Civil Code provides that there is no contract unless there should be, in silence may constitute misrepresentation or concealment it is not of itself necessarily so
addition to consent and a definite object, a consideration for the obligation established. as it is a question of fact. Nor is there a concealment justifying a forfeiture where the fact
And article 1276 provides that the statement of a false consideration shall render the of insanity is not disclosed no questions being asked concerning the same. . . .
contract void. The two answers being one of the considerations of the policies, and it
"But it would seem that if a material fact is actually known to the assured, its concealment
appearing that they are false and fraudulent, it is evident that the insurance contracts
must of itself necessarily be a fraud, and if the fact is one which the assured ought to
were null and void and did not give rise to any right to recover their value or amount. A
know, or is presumed to know, the presumption of knowledge ought to place the assured
similar case was already decided by this court in Argente vs. West Coast Life Insurance Co.
in the same position as in the former case with relation to material facts; and if the jury in
(51 Phil., 725). In that case the insured concealed from the physician who examined her
such cases find the fact material, and one tending to increase the risk, it is difficult to see
that she had consulted and had been treated by another physician for cerebral congestion
how the inference of a fraudulent intent or intentional concealment can be avoided. And
and Bell's Palsy, and that she was addicted to alcohol, so much so that on one occasion
it is declared that if a material fact is concealed by assured it is equivalent to a false
she was confined in the San Lazaro Hospital suffering from "alcoholism"; this court held
representation that it does not exist and that the essentials are the truth of the
that such concealments and false and fraudulent statements rendered the policy null and
representations whether they were intended to mislead and did insurer accept them as
void. In discussing the legal phase of the case, this court said:
true and act upon them to his prejudice. So it is decided that under a stipulation voiding
One ground for the rescission of a contract of insurance under the Insurance Act is a the policy for concealment or misrepresentation of any material fact or if his interest is
"concealment", which in section 25 is defined as "A neglect to communicate that which a not truly stated or is other than the sole and unconditional ownership the facts are
party knows and ought to communicate". Appellant argues that the alleged concealment unimportant that insured did not intend to deceive or withhold information as to
was immaterial and insufficient to avoid the policy. We cannot agree. In an action on a life encumbrances even though no questions were asked. And if insured while being
insurance policy where the evidence conclusively shows that the answers to questions examined for life insurance, and knowing that she had heart disease, falsely stated that
concerning diseases were untrue, the truth or falsity of the answers become the she was in good health, and though she could not read the application, it was explained to
determining factor. If the policy was procured by fraudulent representations, the contract her and the questions asked through an interpreter, and the application like the policy
of insurance apparently set forth therein was never legally existent. It can fairly be contained a provision that no liability should be incurred unless the policy was delivered
assumed that had the true facts been disclosed by the assured, the insurance would never while the insured was in good health, the court properly directed a verdict for the insurer,
have been granted. though a witness who was present at the examination testified that the insured was not
asked whether she had heart disease.
In Joyce, The Law of Insurance, second edition, volume 3, Chapter LV, is found the
following: xxx xxx xxx

"Concealment exists where the assured has knowledge of a fact material to the risk, and "The basis of the rule vitiating the contract in cases of concealment is that it misleads or
honesty, good faith and fair dealing requires that he should communicate it to the deceives the insurer into accepting the risk, or accepting it at the rate of premium agreed
assured, but he designedly and intentionally withholds the same. upon. The insurer, relying upon the belief that the assured will disclose every material fact
within his actual or presumed knowledge, is misled into a belief that the circumstance ". . . The question should be left to the jury whether the assured truly represented the
withheld does not exist, and he is thereby induced to estimate the risk upon a false basis state of his health so as not to mislead or deceive the insurer; and if he did not deal in
that it does not exist. The principal question, therefore, must be, Was the assurer misled good faith with the insurer in that matter, then the inquiry should be made, Did he know
or deceived into entering a contract obligation or in fixing the premium of insurance by a the state of his health so as to be able to furnish a proper answer to such questions as are
withholding of material information or facts within the assured's knowledge or presumed propounded. A Massachusetts case, if construed as it is frequently cited, would be
knowledge? opposed to the above conclusion; but, on the contrary, it sustains it, for the reason that
symptoms of consumption had so far developed themselves within a few months prior to
"It therefore follows that the assurer in assuming a risk is entitled to know every material effecting the insurance as to induce a reasonable belief that the applicant had that fatal
fact of which the assured has exclusive or peculiar knowledge, as well as all material facts disease, and we should further construe this case as establishing the rule that such a
which directly tend to increase the hazard or risk which are known by the assured, or matter cannot rest alone upon the assured's belief irrespective of what is a reasonable
which ought to be or are presumed to be known by him. And a concealment of such facts belief, but that it ought to be judged by the criterion whether the belief is one fairly
vitiates the policy. "It does not seem to be necessary ... that the ... suppression of the warranted by the circumstances. A case in Indiana, however, holds that if the assured has
truth should have been willful." If it were but an inadvertent omission, yet if it were some affection or ailment of one or more of the organs inquired about so well-defined
material to the risk and such as the plaintiff should have known to be so, it would render and marked as to materially derange for a time the functions of such organ, as in the case
the policy void. But it is held that if untrue or false answers are given in response to of Bright's disease, the policy will be avoided by a nondisclosure, irrespective of the fact
inquiries and they relate to material facts the policy is avoided without regard to the whether the assured knew of such ailment or not. . . ."
knowledge or fraud of assured, although under the statute statements are
representations which must be fraudulent to avoid the policy. So under certain codes the In view of the foregoing, we are of the opinion that the appellant's first two assignments
important inquiries are whether the concealment was willful and related to a matter of error are well founded, wherefore, the appealed judgment is reversed and the
material to the risk. defendant absolved from the complaint, with the costs of both instances to the plaintiffs.
So ordered.
xxx xxx xxx

"If the assured has exclusive knowledge of material facts, he should fully and fairly
disclose the same, whether he believes them material or not. But notwithstanding this
general rule it will not infrequently happen, especially in life risks, that the assured may
have a knowledge actual or presumed of material facts, and yet entertain an honest belief
that they are not material. ... The determination of the point whether there has or has not
been a material concealment must rest largely in all cases upon the form of the questions
propounded and the exact terms of the contract. Thus, where in addition to specifically
named diseases the insured was asked whether he had had any sickness within ten years,
to which he answered "No", and it was proven that within that period he had had a slight
attack of pharyngitis, it was held a question properly for the jury whether such an
inflammation of the throat was a "sickness" within the intent of the inquiry, and the court
remarked on the appealed decision that if it could be held as a matter of law that the
policy was thereby avoided, then it was a mere devise on the part of insurance companies
to obtain money without rendering themselves liable under the policy. . . .
G.R. No. L-8151 December 16, 1955 policeman on duty at the corner of Rizal Avenue and Zurbaran; that Atty. Ojeda went to
the traffic policeman at said corner and reported the matter, asking the policeman to
VIRGINIA CALANOC, petitioner, vs. COURT OF APPEALS and THE PHILIPPINE AMERICAN come along with him, to which the policeman agreed; that on the way to the Ojeda
LIFE INSURANCE CO., respondents. residence, the policeman and Atty. Ojeda passed by Basilio and somehow or other invited
the latter to come along; that as the tree approached the Ojeda residence and stood in
BAUTISTA ANGELO, J.:
front of the main gate which was covered with galvanized iron, the fence itself being
This suit involves the collection of P2,000 representing the value of a supplemental policy partly concrete and partly adobe stone, a shot was fired; that immediately after the shot,
covering accidental death which was secured by one Melencio Basilio from the Philippine Atty. Ojeda and the policeman sought cover; that the policeman, at the request of Atty.
American Life Insurance Company. The case originated in the Municipal Court of Manila Ojeda, left the premises to look for reinforcement; that it turned out afterwards that the
and judgment being favorable to the plaintiff it was appealed to the court of first special watchman Melencio Basilio was hit in the abdomen, the wound causing his
instance. The latter court affirmed the judgment but on appeal to the Court of Appeals instantaneous death; that the shot must have come from inside the yard of Atty. Ojeda,
the judgment was reversed and the case is now before us on a petition for review. the bullet passing through a hole waist-high in the galvanized iron gate; that upon inquiry
Atty. Ojeda found out that the savings of his children in the amount of P30 in coins kept in
Melencio Basilio was a watchman of the Manila Auto Supply located at the corner of his aparador contained in stockings were taken away, the aparador having been
Avenida Rizal and Zurbaran. He secured a life insurance policy from the Philippine ransacked; that a month thereafter the corresponding investigation conducted by the
American Life Insurance Company in the amount of P2,000 to which was attached a police authorities led to the arrest and prosecution of four persons in Criminal Case No.
supplementary contract covering death by accident. On January 25, 1951, he died of a 15104 of the Court of First Instance of Manila for 'Robbery in an Inhabited House and in
gunshot wound on the occasion of a robbery committed in the house of Atty. Ojeda at the Band with Murder'.
corner of Oroquieta and Zurbaan streets. Virginia Calanoc, the widow, was paid the sum
of P2,000, face value of the policy, but when she demanded the payment of the additional It is contended in behalf of the company that Basilio was killed which "making an arrest as
sum of P2,000 representing the value of the supplemental policy, the company refused an officer of the law" or as a result of an "assault or murder" committed in the place and
alleging, as main defense, that the deceased died because he was murdered by a person therefore his death was caused by one of the risks excluded by the supplementary
who took part in the commission of the robbery and while making an arrest as an officer contract which exempts the company from liability. This contention was upheld by the
of the law which contingencies were expressly excluded in the contract and have the Court of Appeals and, in reaching this conclusion, made the following comment: From the
effect of exempting the company from liability. foregoing testimonies, we find that the deceased was a watchman of the Manila Auto
Supply, and, as such, he was not boud to leave his place and go with Atty. Ojeda and
The pertinent facts which need to be considered for the determination of the questions Policeman Magsanoc to see the trouble, or robbery, that occurred in the house of Atty.
raised are those reproduced in the decision of the Court of Appeals as follows: The Ojeda. In fact, according to the finding of the lower court, Atty. Ojeda finding Basilio in
circumstances surrounding the death of Melencio Basilio show that when he was killed at uniform asked him to accompany him to his house, but the latter refused on the ground
about seven o'clock in the night of January 25, 1951, he was on duty as watchman of the that he was not a policeman and suggested to Atty. Ojeda to ask help from the traffic
Manila Auto Supply at the corner of Avenida Rizal and Zurbaran; that it turned out that policeman on duty at the corner of Rizal Avenue and Zurbaran, but after Atty. Ojeda
Atty. Antonio Ojeda who had his residence at the corner of Zurbaran and Oroquieta, a secured the help of the traffic policeman, the deceased went with Ojeda and said traffic
block away from Basilio's station, had come home that night and found that his house was policeman to the residence of Ojeda, and while the deceased was standing in front of the
well-lighted, but with the windows closed; that getting suspicious that there were culprits main gate of said residence, he was shot and thus died. The death, therefore, of Basilio,
in his house, Atty. Ojeda retreated to look for a policeman and finding Basilio in khaki although unexpected, was not caused by an accident, being a voluntary and intentional
uniform, asked him to accompany him to the house with the latter refusing on the ground act on the part of the one wh robbed, or one of those who robbed, the house of Atty.
that he was not a policeman, but suggesting that Atty. Ojeda should ask the traffic Ojeda. Hence, it is out considered opinion that the death of Basilio, though unexpected,
cannot be considered accidental, for his death occurred because he left his post and We take note that these defenses are included among the risks exluded in the
joined policeman Magsanoc and Atty. Ojeda to repair to the latter's residence to see what supplementary contract which enumerates the cases which may exempt the company
happened thereat. Certainly, when Basilio joined Patrolman Magsanoc and Atty. Ojeda, from liability. While as a general rule "the parties may limit the coverage of the policy to
he should have realized the danger to which he was exposing himself, yet, instead of certain particular accidents and risks or causes of loss, and may expressly except other
remaining in his place, he went with Atty. Ojeda and Patrolman Magsanoc to see what risks or causes of loss therefrom" (45 C. J. S. 781-782), however, it is to be desired that the
was the trouble in Atty. Ojeda's house and thus he was fatally shot. We dissent from the terms and phraseology of the exception clause be clearly expressed so as to be within the
above findings of the Court of Appeals. For one thing, Basilio was a watchman of the easy grasp and understanding of the insured, for if the terms are doubtful or obscure the
Manila Auto Supply which was a block away from the house of Atty. Ojeda where same must of necessity be interpreted or resolved aganst the one who has caused the
something suspicious was happening which caused the latter to ask for help. While at first obscurity. (Article 1377, new Civil Code) And so it has bene generally held that the "terms
he declied the invitation of Atty. Ojeda to go with him to his residence to inquire into in an insurance policy, which are ambiguous, equivacal, or uncertain . . . are to be
what was going on because he was not a regular policeman, he later agreed to come construed strictly and most strongly against the insurer, and liberally in favor of the
along when prompted by the traffic policeman, and upon approaching the gate of the insured so as to effect the dominant purpose of indemnity or payment to the insured,
residence he was shot and died. The circumstance that he was a mere watchman and had especially where a forfeiture is involved" (29 Am. Jur., 181), and the reason for this rule is
no duty to heed the call of Atty. Ojeda should not be taken as a capricious desire on his that he "insured usually has no voice in the selection or arrangement of the words
part to expose his life to danger considering the fact that the place he was in duty-bound employed and that the language of the contract is selected with great care and
to guard was only a block away. In volunteering to extend help under the situation, he deliberation by experts and legal advisers employed by, and acting exclusively in the
might have thought, rightly or wrongly, that to know the truth was in the interest of his interest of, the insurance company." (44 C. J. S., p. 1174.) Insurance is, in its nature,
employer it being a matter that affects the security of the neighborhood. No doubt there complex and difficult for the layman to understand. Policies are prepared by experts who
was some risk coming to him in pursuing that errand, but that risk always existed it being know and can anticipate the bearings and possible complications of every contingency. So
inherent in the position he was holding. He cannot therefore be blamed solely for doing long as insurance companies insist upon the use of ambiguous, intricate and technical
what he believed was in keeping with his duty as a watchman and as a citizen. And he provisions, which conceal rather than frankly disclose, their own intentions, the courts
cannot be considered as making an arrest as an officer of the law, as contended, simply must, in fairness to those who purchase insurance, construe every ambiguity in favor of
because he went with the traffic policeman, for certainly he did not go there for that the insured. (Algoe vs. Pacific Mut. L. Ins. Co., 91 Wash. 324, LRA 1917A, 1237.) An insurer
purpose nor was he asked to do so by the policeman. Much less can it be pretended that should not be allowed, by the use of obscure phrases and exceptions, to defeat the very
Basilio died in the course of an assault or murder considering the very nature of these purpose for which the policy was procured. (Moore vs. Aetna Life Insurance Co., LRA
crimes. In the first place, there is no proof that the death of Basilio is the result of either 1915D, 264.) We are therefore persuaded to conclude that the circumstances unfolded in
crime for the record is barren of any circumstance showing how the fatal shot was fired. the present case do not warrant the finding that the death of the unfortunate victim
Perhaps this may be clarified in the criminal case now pending in court as regards the comes within the purview of the exception clause of the supplementary policy and,
incident but before that is done anything that might be said on the point would be a mere hence, do not exempt the company from liability.
conjecture. Nor can it be said that the killing was intentional for there is the possibility
that the malefactor had fired the shot merely to scare away the people around for his Wherefore, reversing the decision appealed from, we hereby order the company to pay
own protection and not necessarily to kill or hit the victim. In any event, while the act may petitioner-appellant the amount of P2,000, with legal interest from January 26, 1951 until
not excempt the triggerman from liability for the damage done, the fact remains that the fully paid, with costs.
happening was a pure accident on the part of the victim. The victim could have been
either the policeman or Atty. Ojeda for it cannot be pretended that the malefactor aimed
at the deceased precisely because he wanted to take his life.
G.R. No. L-4611 December 17, 1955 since 1937, and the lose made payable to the Philippine National Bank as mortgage of the
hemp and crops, to the extent of its interest. On June, 1940, the insurance stood as
QUA CHEE GAN, plaintiff-appellee, vs. LAW UNION AND ROCK INSURANCE CO., LTD., follows:
represented by its agent, WARNER, BARNES AND CO., LTD., defendant-appellant.

REYES, J. B. L., J.: Policy No. Property Insured

Qua Chee Gan, a merchant of Albay, instituted this action in 1940, in the Court of First 2637164 (Exhibit "LL") Bodega No. 1 (Building)
Instance of said province, seeking to recover the proceeds of certain fire insurance
policies totalling P370,000, issued by the Law Union & Rock Insurance Co., Ltd., upon
certain bodegas and merchandise of the insured that were burned on June 21, 1940. The Bodega No. 2 (Building)
records of the original case were destroyed during the liberation of the region, and were
reconstituted in 1946. After a trial that lasted several years, the Court of First Instance Bodega No. 3 (Building)
rendered a decision in favor of the plaintiff, the dispositive part whereof reads as follows: 2637165 (Exhibit "JJ")

Wherefore, judgment is rendered for the plaintiff and against the defendant condemning Bodega No. 4 (Building)
the latter to pay the former
Hemp Press moved by steam engine
(a) Under the first cause of action, the sum of P146,394.48;

(b) Under the second cause of action, the sum of P150,000; 2637345 (Exhibit "X") Merchandise contents (copra and empty sacks of Bodega No. 1)

(c) Under the third cause of action, the sum of P5,000;


2637346 (Exhibit "Y") Merchandise contents (hemp) of Bodega No. 3
(d) Under the fourth cause of action, the sum of P15,000; and
2637067 (Exhibit "GG") Merchandise contents (loose hemp) of Bodega No. 4
(e) Under the fifth cause of action, the sum of P40,000;

all of which shall bear interest at the rate of 8% per annum in accordance with Section 91
(b) of the Insurance Act from September 26, 1940, until each is paid, with costs against
the defendant. Total

The complaint in intervention of the Philippine National Bank is dismissed without costs. Fire of undetermined origin that broke out in the early morning of July 21, 1940, and
(Record on Appeal, 166-167.) lasted almost one week, gutted and completely destroyed Bodegas Nos. 1, 2 and 4, with
the merchandise stored theren. Plaintiff-appellee informed the insurer by telegram on the
From the decision, the defendant Insurance Company appealed directly to this Court.
same date; and on the next day, the fire adjusters engaged by appellant insurance
The record shows that before the last war, plaintiff-appellee owned four warehouses or company arrived and proceeded to examine and photograph the premises, pored over
bodegas (designated as Bodegas Nos. 1 to 4) in the municipality of Tabaco, Albay, used for the books of the insured and conducted an extensive investigation. The plaintiff having
the storage of stocks of copra and of hemp, baled and loose, in which the appellee dealth submitted the corresponding fire claims, totalling P398,562.81 (but reduced to the full
extensively. They had been, with their contents, insured with the defendant Company amount of the insurance, P370,000), the Insurance Company resisted payment, claiming
violation of warranties and conditions, filing of fraudulent claims, and that the fire had We are in agreement with the trial Court that the appellant is barred by waiver (or rather
been deliberately caused by the insured or by other persons in connivance with him. estoppel) to claim violation of the so-called fire hydrants warranty, for the reason that
knowing fully all that the number of hydrants demanded therein never existed from the
With counsel for the insurance company acting as private prosecutor, Que Chee Gan, with very beginning, the appellant neverthless issued the policies in question subject to such
his brother, Qua Chee Pao, and some employees of his, were indicted and tried in 1940 warranty, and received the corresponding premiums. It would be perilously close to
for the crime of arson, it being claimed that they had set fire to the destroyed warehouses conniving at fraud upon the insured to allow appellant to claims now as void ab initio the
to collect the insurance. They were, however, acquitted by the trial court in a final policies that it had issued to the plaintiff without warning of their fatal defect, of which it
decision dated July 9, 1941 (Exhibit WW). Thereafter, the civil suit to collect the insurance was informed, and after it had misled the defendant into believing that the policies were
money proceeded to its trial and termination in the Court below, with the result noted at effective.
the start of this opinion. The Philippine National Bank's complaint in intervention was
dismissed because the appellee had managed to pay his indebtedness to the Bank during The insurance company was aware, even before the policies were issued, that in the
the pendecy of the suit, and despite the fire losses. premises insured there were only two fire hydrants installed by Qua Chee Gan and two
others nearby, owned by the municipality of TAbaco, contrary to the requirements of the
In its first assignment of error, the insurance company alleges that the trial Court should warranty in question. Such fact appears from positive testimony for the insured that
have held that the policies were avoided for breach of warranty, specifically the one appellant's agents inspected the premises; and the simple denials of appellant's
appearing on a rider pasted (with other similar riders) on the face of the policies (Exhibits representative (Jamiczon) can not overcome that proof. That such inspection was made is
X, Y, JJ and LL). These riders were attached for the first time in 1939, and the pertinent moreover rendered probable by its being a prerequisite for the fixing of the discount on
portions read as follows: the premium to which the insured was entitled, since the discount depended on the
number of hydrants, and the fire fighting equipment available (See "Scale of Allowances"
Memo. of Warranty. The undernoted Appliances for the extinction of fire being kept on
to which the policies were expressly made subject). The law, supported by a long line of
the premises insured hereby, and it being declared and understood that there is an ample
cases, is expressed by American Jurisprudence (Vol. 29, pp. 611-612) to be as follows:
and constant water supply with sufficient pressure available at all seasons for the same, it
is hereby warranted that the said appliances shall be maintained in efficient working It is usually held that where the insurer, at the time of the issuance of a policy of
order during the currency of this policy, by reason whereof a discount of 2 1/2 per cent is insurance, has knowledge of existing facts which, if insisted on, would invalidate the
allowed on the premium chargeable under this policy. contract from its very inception, such knowledge constitutes a waiver of conditions in the
contract inconsistent with the facts, and the insurer is stopped thereafter from asserting
Hydrants in the compound, not less in number than one for each 150 feet of external wall
the breach of such conditions. The law is charitable enough to assume, in the absence of
measurement of building, protected, with not less than 100 feet of hose piping and
any showing to the contrary, that an insurance company intends to executed a valid
nozzles for every two hydrants kept under cover in convenient places, the hydrants being
contract in return for the premium received; and when the policy contains a condition
supplied with water pressure by a pumping engine, or from some other source, capable of
which renders it voidable at its inception, and this result is known to the insurer, it will be
discharging at the rate of not less than 200 gallons of water per minute into the upper
presumed to have intended to waive the conditions and to execute a binding contract,
story of the highest building protected, and a trained brigade of not less than 20 men to
rather than to have deceived the insured into thinking he is insured when in fact he is not,
work the same.'
and to have taken his money without consideration. (29 Am. Jur., Insurance, section 807,
It is argued that since the bodegas insured had an external wall perimeter of 500 meters at pp. 611-612.)
or 1,640 feet, the appellee should have eleven (11) fire hydrants in the compound, and
The reason for the rule is not difficult to find.
that he actually had only two (2), with a further pair nearby, belonging to the municipality
of Tabaco.
The plain, human justice of this doctrine is perfectly apparent. To allow a company to treat a policy as no longer in force, receives and accepts a preium on the policy, estopped
accept one's money for a policy of insurance which it then knows to be void and of no to take advantage of the forfeiture. It cannot treat the policy as void for the purpose of
effect, though it knows as it must, that the assured believes it to be valid and binding, is defense to an action to recover for a loss thereafter occurring and at the same time treat
so contrary to the dictates of honesty and fair dealing, and so closely related to positive it as valid for the purpose of earning and collecting further premiums." (29 Am. Jur., 653,
fraud, as to the abhorent to fairminded men. It would be to allow the company to treat p. 657.)
the policy as valid long enough to get the preium on it, and leave it at liberty to repudiate
it the next moment. This cannot be deemed to be the real intention of the parties. To It would be unconscionable to permit a company to issue a policy under circumstances
hold that a literal construction of the policy expressed the true intention of the company which it knew rendered the policy void and then to accept and retain premiums under
would be to indict it, for fraudulent purposes and designs which we cannot believe it to such a void policy. Neither law nor good morals would justify such conduct and the
be guilty of (Wilson vs. Commercial Union Assurance Co., 96 Atl. 540, 543-544). doctrine of equitable estoppel is peculiarly applicable to the situation. (McGuire vs. Home
Life Ins. Co. 94 Pa. Super Ct. 457.)
The inequitableness of the conduct observed by the insurance company in this case is
heightened by the fact that after the insured had incurred the expense of installing the Moreover, taking into account the well known rule that ambiguities or obscurities must
two hydrants, the company collected the premiums and issued him a policy so worded be strictly interpreted aganst the prty that caused them, 1the "memo of warranty"
that it gave the insured a discount much smaller than that he was normaly entitledto. invoked by appellant bars the latter from questioning the existence of the appliances
According to the "Scale of Allowances," a policy subject to a warranty of the existence of called for in the insured premises, since its initial expression, "the undernoted appliances
one fire hydrant for every 150 feet of external wall entitled the insured to a discount of 7 for the extinction of fire being kept on the premises insured hereby, . . . it is hereby
1/2 per cent of the premium; while the existence of "hydrants, in compund" (regardless of warranted . . .", admists of interpretation as an admission of the existence of such
number) reduced the allowance on the premium to a mere 2 1/2 per cent. This schedule appliances which appellant cannot now contradict, should the parol evidence rule apply.
was logical, since a greater number of hydrants and fire fighting appliances reduced the
The alleged violation of the warranty of 100 feet of fire hose for every two hydrants, must
risk of loss. But the appellant company, in the particular case now before us, so worded
be equally rejected, since the appellant's argument thereon is based on the assumption
the policies that while exacting the greater number of fire hydrants and appliances, it kept
that the insured was bound to maintain no less than eleven hydrants (one per 150 feet of
the premium discount at the minimum of 2 1/2 per cent, thereby giving the insurance
wall), which requirement appellant is estopped from enforcing. The supposed breach of
company a double benefit. No reason is shown why appellant's premises, that had been
the wter pressure condition is made to rest on the testimony of witness Serra, that the
insured with appellant for several years past, suddenly should be regarded in 1939 as so
water supply could fill a 5-gallon can in 3 seconds; appellant thereupon inferring that the
hazardous as to be accorded a treatment beyond the limits of appellant's own scale of
maximum quantity obtainable from the hydrants was 100 gallons a minute, when the
allowances. Such abnormal treatment of the insured strongly points at an abuse of the
warranty called for 200 gallons a minute. The transcript shows, however, that Serra
insurance company's selection of the words and terms of the contract, over which it had
repeatedly refused and professed inability to estimate the rate of discharge of the water,
absolute control.
and only gave the "5-gallon per 3-second" rate because the insistence of appellant's
These considerations lead us to regard the parol evidence rule, invoked by the appellant counsel forced the witness to hazard a guess. Obviously, the testimony is worthless and
as not applicable to the present case. It is not a question here whether or not the parties insufficient to establish the violation claimed, specially since the burden of its proof lay on
may vary a written contract by oral evidence; but whether testimony is receivable so that appellant.
a party may be, by reason of inequitable conduct shown, estopped from enforcing
As to maintenance of a trained fire brigade of 20 men, the record is preponderant that
forfeitures in its favor, in order to forestall fraud or imposition on the insured.
the same was organized, and drilled, from time to give, altho not maintained as a
Receipt of Premiums or Assessments afte Cause for Forfeiture Other than Nonpayment. permanently separate unit, which the warranty did not require. Anyway, it would be
It is a well settled rule of law that an insurer which with knowledge of facts entitling it to unreasonable to expect the insured to maintain for his compound alone a fire fighting
force that many municipalities in the Islands do not even possess. There is no merit in If the company intended to rely upon a condition of that character, it ought to have been
appellant's claim that subordinate membership of the business manager (Co Cuan) in the plainly expressed in the policy.
fire brigade, while its direction was entrusted to a minor employee unders the testimony
improbable. A business manager is not necessarily adept at fire fighting, the qualities This rigid application of the rule on ambiguities has become necessary in view of current
required being different for both activities. business practices. The courts cannot ignore that nowadays monopolies, cartels and
concentrations of capital, endowed with overwhelming economic power, manage to
Under the second assignment of error, appellant insurance company avers, that the impose upon parties dealing with them cunningly prepared "agreements" that the weaker
insured violated the "Hemp Warranty" provisions of Policy No. 2637165 (Exhibit JJ), party may not change one whit, his participation in the "agreement" being reduced to the
against the storage of gasoline, since appellee admitted that there were 36 cans (latas) of alternative to take it or leave it" labelled since Raymond Baloilles" contracts by
gasoline in the building designed as "Bodega No. 2" that was a separate structure not adherence" (con tracts d'adhesion), in contrast to these entered into by parties bargaining
affected by the fire. It is well to note that gasoline is not specifically mentioned among the on an equal footing, such contracts (of which policies of insurance and international bills
prohibited articles listed in the so-called "hemp warranty." The cause relied upon by the of lading are prime examples) obviously call for greater strictness and vigilance on the
insurer speaks of "oils (animal and/or vegetable and/or mineral and/or their liquid part of courts of justice with a view to protecting the weaker party from abuses and
products having a flash point below 300o Fahrenheit", and is decidedly ambiguous and imposition, and prevent their becoming traps for the unwarry (New Civil Coee, Article 24;
uncertain; for in ordinary parlance, "Oils" mean "lubricants" and not gasoline or kerosene. Sent. of Supreme Court of Spain, 13 Dec. 1934, 27 February 1942).
And how many insured, it may well be wondered, are in a position to understand or
determine "flash point below 003o Fahrenheit. Here, again, by reason of the exclusive Si pudiera estimarse que la condicion 18 de la poliza de seguro envolvia alguna oscuridad,
control of the insurance company over the terms and phraseology of the contract, the habra de ser tenido en cuenta que al seguro es, practicamente un contrato de los
ambiguity must be held strictly against the insurer and liberraly in favor of the insured, llamados de adhesion y por consiguiente en caso de duda sobre la significacion de las
specially to avoid a forfeiture (44 C. J. S., pp. 1166-1175; 29 Am. Jur. 180). clausulas generales de una poliza redactada por las compafijas sin la intervencion
alguna de sus clientes se ha de adoptar de acuerdo con el articulo 1268 del Codigo
Insurance is, in its nature, complex and difficult for the layman to understand. Policies are Civil, la interpretacion mas favorable al asegurado, ya que la obscuridad es imputable a la
prepared by experts who know and can anticipate the hearing and possible complications empresa aseguradora, que debia haberse explicado mas claramante. (Dec. Trib. Sup. of
of every contingency. So long as insurance companies insist upon the use of ambiguous, Spain 13 Dec. 1934)
intricate and technical provisions, which conceal rather than frankly disclose, their own
intentions, the courts must, in fairness to those who purchase insurance, construe every The contract of insurance is one of perfect good faith (uferrimal fidei) not for the insured
ambiguity in favor of the insured. (Algoe vs. Pacific Mut. L. Ins. Co., 91 Wash. 324, LRA alone, but equally so for the insurer; in fact, it is mere so for the latter, since its dominant
1917A, 1237.) bargaining position carries with it stricter responsibility.

An insurer should not be allowed, by the use of obscure phrases and exceptions, to defeat Another point that is in favor of the insured is that the gasoline kept in Bodega No. 2 was
the very purpose for which the policy was procured (Moore vs. Aetna Life Insurance Co., only incidental to his business, being no more than a customary 2 day's supply for the five
LRA 1915D, 264). or six motor vehicles used for transporting of the stored merchandise (t. s. n., pp. 1447-
1448). "It is well settled that the keeping of inflammable oils on the premises though
We see no reason why the prohibition of keeping gasoline in the premises could not be prohibited by the policy does not void it if such keeping is incidental to the business."
expressed clearly and unmistakably, in the language and terms that the general public can Bachrach vs. British American Ass. Co., 17 Phil. 555, 560); and "according to the weight of
readily understand, without resort to obscure esoteric expression (now derisively termed authority, even though there are printed prohibitions against keeping certain articles on
"gobbledygook"). We reiterate the rule stated in Bachrach vs. British American Assurance the insured premises the policy will not be avoided by a violation of these prohibitions, if
Co. (17 Phil. 555, 561): the prohibited articles are necessary or in customary use in carrying on the trade or
business conducted on the premises." (45 C. J. S., p. 311; also 4 Couch on Insurance, In view of the discrepancy in the valuations between the insured and the adjuster Stewart
section 966b). It should also be noted that the "Hemp Warranty" forbade storage only "in for the insurer, the Court referred the controversy to a government auditor, Apolonio
the building to which this insurance applies and/or in any building communicating Ramos; but the latter reached a different result from the other two. Not only that, but
therewith", and it is undisputed that no gasoline was stored in the burned bodegas, and Ramos reported two different valuations that could be reached according to the methods
that "Bodega No. 2" which was not burned and where the gasoline was found, stood employed (Exhibit WW, p. 35):
isolated from the other insured bodegas.
La ciencia de la contabilidad es buena, pues ha tenido sus muchos usos buenos para
The charge that the insured failed or refused to submit to the examiners of the insurer the promovar el comercio y la finanza, pero en el caso presente ha resultado un tanto
books, vouchers, etc. demanded by them was found unsubstantiated by the trial Court, cumplicada y acomodaticia, como lo prueba el resultado del examen hecho por los
and no reason has been shown to alter this finding. The insured gave the insurance contadores Stewart y Ramos, pues el juzgado no alcanza a ver como habiendo examinado
examiner all the date he asked for (Exhibits AA, BB, CCC and Z), and the examiner even las mismas partidas y los mismos libros dichos contadores hayan de llegara dos
kept and photographed some of the examined books in his possession. What does appear conclusiones que difieron sustancialmente entre si. En otras palabras, no solamente la
to have been rejected by the insured was the demand that he should submit comprobacion hecha por Stewart difiere de la comprobacion hecha por Ramos sino que,
"a list of all books, vouchers, receipts and other records" (Age 4, Exhibit 9-c); but the segun este ultimo, su comprobacion ha dado lugar a dos resultados diferentes
refusal of the insured in this instance was well justified, since the demand for a list of all dependiendo del metodo que se emplea.
the vouchers (which were not in use by the insured) and receipts was positively
unreasonable, considering that such listing was superfluous because the insurer was not Clearly then, the charge of fraudulent overvaluation cannot be seriously entertained. The
denied access to the records, that the volume of Qua Chee Gan's business ran into insurer attempted to bolster its case with alleged photographs of certain pages of the
millions, and that the demand was made just after the fire when everything was in insurance book (destroyed by the war) of insured Qua Chee Gan (Exhibits 26-A and 26-B)
turmoil. That the representatives of the insurance company were able to secure all the and allegedly showing abnormal purchases of hemp and copra from June 11 to June 20,
date they needed is proved by the fact that the adjuster Alexander Stewart was able to 1940. The Court below remained unconvinced of the authenticity of those photographs,
prepare his own balance sheet (Exhibit L of the criminal case) that did not differ from that and rejected them, because they were not mentioned not introduced in the criminal case;
submitted by the insured (Exhibit J) except for the valuation of the merchandise, as and considering the evident importance of said exhibits in establishing the motive of the
expressly found by the Court in the criminal case for arson. (Decision, Exhibit WW). insured in committing the arson charged, and the absence of adequate explanation for
their omission in the criminal case, we cannot say that their rejection in the civil case
How valuations may differ honestly, without fraud being involved, was strikingly constituted reversible error.
illustrated in the decision of the arson case (Exhibit WW) acquiting Qua Choc Gan,
appellee in the present proceedings. The decision states (Exhibit WW, p. 11): The next two defenses pleaded by the insurer, that the insured connived at the loss
and that the fraudulently inflated the quantity of the insured stock in the burnt bodegas,
Alexander D. Stewart declaro que ha examinado los libros de Qua Choc Gan en Tabaco asi are closely related to each other. Both defenses are predicted on the assumption that
como su existencia de copra y abaca en las bodega al tiempo del incendio durante el the insured was in financial difficulties and set the fire to defraud the insurance company,
periodo comprendido desde el 1.o de enero al 21 de junio de 1940 y ha encontrado que presumably in order to pay off the Philippine National Bank, to which most of the insured
Qua Choc Gan ha sufrico una perdida de P1,750.76 en su negocio en Tabaco. Segun hemp and copra was pledged. Both defenses are fatally undermined by the established
Steward al llegar a este conclusion el ha tenidoen cuenta el balance de comprobacion fact that, notwithstanding the insurer's refusal to pay the value of the policies the
Exhibit 'J' que le ha entregado el mismo acusado Que Choc Gan en relacion con sus libros extensive resources of the insured (Exhibit WW) enabled him to pay off the National Bank
y lo ha encontrado correcto a excepcion de los precios de abaca y copra que alli aparecen in a short time; and if he was able to do so, no motive appears for attempt to defraud the
que no estan de acuerdo con los precios en el mercado. Esta comprobacion aparece en el insurer. While the acquittal of the insured in the arson case is not res judicata on the
balance mercado exhibit J que fue preparado por el mismo testigo. present civil action, the insurer's evidence, to judge from the decision in the criminal case,
is practically identical in both cases and must lead to the same result, since the proof to different judges (in the criminal and civil cases) and their concordant opinion is practically
establish the defense of connivance at the fire in order to defraud the insurer "cannot be conclusive.
materially less convincing than that required in order to convict the insured of the crime
of arson"(Bachrach vs. British American Assurance Co., 17 Phil. 536). The adjusters' reports, Exhibits 9-A and 9-B, were correctly disregarded by the Court
below, since the opinions stated therein were based on ex parte investigations made at
As to the defense that the burned bodegas could not possibly have contained the the back of the insured; and the appellant did not present at the trial the original
quantities of copra and hemp stated in the fire claims, the insurer's case rests almost testimony and documents from which the conclusions in the report were
exclusively on the estimates, inferences and conclusionsAs to the defense that the burned drawn.lawphi1.net
bodegas could not possibly have contained the quantities of copra and hemp stated in the
fire claims, the insurer's case rests almost exclusively on the estimates, inferences and Appellant insurance company also contends that the claims filed by the insured contained
conclusions of its adjuster investigator, Alexander D. Stewart, who examined the premises false and fraudulent statements that avoided the insurance policy. But the trial Court
during and after the fire. His testimony, however, was based on inferences from the found that the discrepancies were a result of the insured's erroneous interpretation of the
photographs and traces found after the fire, and must yield to the contradictory provisions of the insurance policies and claim forms, caused by his imperfect knowledge
testimony of engineer Andres Bolinas, and specially of the then Chief of the Loan of English, and that the misstatements were innocently made and without intent to
Department of the National Bank's Legaspi branch, Porfirio Barrios, and of Bank Appraiser defraud. Our review of the lengthy record fails to disclose reasons for rejecting these
Loreto Samson, who actually saw the contents of the bodegas shortly before the fire, conclusions of the Court below. For example, the occurrence of previous fires in the
while inspecting them for the mortgagee Bank. The lower Court was satisfied of the premises insured in 1939, altho omitted in the claims, Exhibits EE and FF, were
veracity and accuracy of these witnesses, and the appellant insurer has failed to nevertheless revealed by the insured in his claims Exhibits Q (filed simultaneously with
substantiate its charges aganst their character. In fact, the insurer's repeated accusations them), KK and WW. Considering that all these claims were submitted to the smae agent,
that these witnesses were later "suspended for fraudulent transactions" without giving and that this same agent had paid the loss caused by the 1939 fire, we find no error in the
any details, is a plain attempt to create prejudice against them, without the least support trial Court's acceptance of the insured's explanation that the omission in Exhibits EE and
in fact. FF was due to inadvertance, for the insured could hardly expect under such
circumstances, that the 1939 would pass unnoticed by the insurance agents. Similarly, the
Stewart himself, in testifying that it is impossible to determine from the remains the 20 per cent overclaim on 70 per cent of the hemo stock, was explained by the insured as
quantity of hemp burned (t. s. n., pp. 1468, 1470), rebutted appellant's attacks on the caused by his belief that he was entitled to include in the claim his expected profit on the
refusal of the Court below to accept its inferences from the remains shown in the 70 per cent of the hemp, because the same was already contracted for and sold to other
photographs of the burned premises. It appears, likewise, that the adjuster's calculations parties before the fire occurred. Compared with other cases of over-valuation recorded in
of the maximum contents of the destroyed warehouses rested on the assumption that all our judicial annals, the 20 per cent excess in the case of the insured is not by itself
the copra and hemp were in sacks, and on the result of his experiments to determine the sufficient to establish fraudulent intent. Thus, in Yu Cua vs. South British Ins. Co., 41 Phil.
space occupied by definite amounts of sacked copra. The error in the estimates thus 134, the claim was fourteen (14) times (1,400 per cent) bigger than the actual loss; in Go
arrived at proceeds from the fact that a large amount of the insured's stock were in loose Lu vs. Yorkshire Insurance Co., 43 Phil., 633, eight (8) times (800 per cent); in Tuason vs.
form, occupying less space than when kept in sacks; and from Stewart's obvious failure to North China Ins. Co., 47 Phil. 14, six (6) times (600 per cent); in Tan It vs. Sun Insurance, 51
give due allowance for the compression of the material at the bottom of the piles (t. s. n., Phil. 212, the claim totalled P31,860.85 while the goods insured were inventoried at
pp. 1964, 1967) due to the weight of the overlying stock, as shown by engineer Bolinas. It O13,113. Certainly, the insured's overclaim of 20 per cent in the case at bar, duly
is probable that the errors were due to inexperience (Stewart himself admitted that this explained by him to the Court a quo, appears puny by comparison, and can not be
was the first copra fire he had investigated); but it is clear that such errors render valueles regarded as "more than misstatement, more than inadvertence of mistake, more than a
Stewart's computations. These were in fact twice passed upon and twice rejected by mere error in opinion, more than a slight exaggeration" (Tan It vs. Sun Insurance
Office, ante) that would entitle the insurer to avoid the policy. It is well to note that the
overchange of 20 per cent was claimed only on a part (70 per cent) of the hemp stock;
had the insured acted with fraudulent intent, nothing prevented him from increasing the
value of all of his copra, hemp and buildings in the same proportion. This also applies to
the alleged fraudulent claim for burned empty sacks, that was likewise explained to our
satisfaction and that of the trial Court. The rule is that to avoid a policy, the false swearing
must be wilful and with intent to defraud (29 Am. Jur., pp. 849-851) which was not the
cause. Of course, the lack of fraudulent intent would not authorize the collection of the
expected profit under the terms of the polices, and the trial Court correctly deducte the
same from its award.

We find no reversible error in the judgment appealed from, wherefore the smae is hereby
affirmed. Costs against the appellant. So ordered.
G.R. No. L-16215 June 29, 1963 .....
SIMEON DEL ROSARIO, plaintiff-appellee, vs. THE EQUITABLE INSURANCE AND
CASUALTY CO., INC., defendant-appellant. xxx xxx xxx

PAREDES, J.: Part VI. Exceptions

On February 7, 1957, the defendant Equitable Insurance and Casualty Co., Inc., issued This policy shall not cover disappearance of the Insured nor shall it cover Death, Disability,
Personal Accident Policy No. 7136 on the life of Francisco del Rosario, alias Paquito Hospital fees, or Loss of Time, caused to the insured:
Bolero, son of herein plaintiff-appellee, binding itself to pay the sum of P1,000.00 to
. . . (h) By drowning except as a consequence of the wrecking or disablement in the
P3,000.00, as indemnity for the death of the insured. The pertinent provisions of the
Philippine waters of a passenger steam or motor vessel in which the Insured is travelling
Policy, recite:
as a farepaying passenger; . . . .
Part I. Indemnity For Death
A rider to the Policy contained the following:
If the insured sustains any bodily injury which is effected solely through violent, external,
IV. DROWNING
visible and accidental means, and which shall result, independently of all other causes and
within sixty (60) days from the occurrence thereof, in the Death of the Insured, the It is hereby declared and agreed that exemption clause Letter (h) embodied in PART VI of
Company shall pay the amount set opposite such injury: the policy is hereby waived by the company, and to form a part of the provision covered
by the policy.
Section 1. Injury sustained other than those specified below unless
excepted hereinafter. . . . . . . . P1,000.00 On February 24, 1957, the insured Francisco del Rosario, alias Paquito Bolero, while on
board the motor launch "ISLAMA" together with 33 others, including his beneficiary in the
Policy, Remedios Jayme, were forced to jump off said launch on account of fire which
Section 2. Injury sustained by the wrecking or disablement of a
broke out on said vessel, resulting in the death of drowning, of the insured and
railroad passenger car or street railway car in or on which the
beneficiary in the waters of Jolo. 1wph1.t
Insured is travelling as a farepaying passenger. . . . . . . . P1,500.00
On April 13, 1957, Simeon del Rosario, father of the insured, and as the sole heir, filed a
Section 3. Injury sustained by the burning of a church, theatre, claim for payment with defendant company, and on September 13, 1957, defendant
public library or municipal administration building while the Insured company paid to him (plaintiff) the sum of P1,000.00, pursuant to Section 1 of Part I of
is therein at the commencement of the fire. . . . . . . . P2,000.00 the policy. The receipt signed by plaintiff reads

RECEIVED of the EQUITABLE INSURANCE & CASUALTY CO., INC., the sum of PESOS ONE
Section 4. Injury sustained by the wrecking or disablement of a THOUSAND (P1,000.00) Philippine Currency, being settlement in full for all claims and
regular passenger elevator car in which the Insured is being demands against said Company as a result of an accident which occurred on February 26,
conveyed as a passenger (Elevator in mines excluded) P2,500.00 1957, insured under out ACCIDENT Policy No. 7136, causing the death of the Assured.

In view of the foregoing, this policy is hereby surrendered and CANCELLED.


Section 5. Injury sustained by a stroke of lightning or by a cyclone. . . P3,000.00
LOSS COMPUTATION
Amount of Insurance P1,000.00 Since the contemporaneous and subsequent acts of the parties show that it was not their
__________ intention that the payment of P1,000.00 to the plaintiff and the signing of the loss receipt
vvvvv exhibit "1" would be considered as releasing the defendant completely from its liability on
the policy in question, said intention of the parties should prevail over the contents of the
On the same date (September 13, 1957), Atty. Vicente J. Francisco, wrote defendant loss receipt "1" (Articles 1370 and 1371, New Civil Code).
company acknowledging receipt by his client (plaintiff herein), of the P1,000.00, but
informing said company that said amount was not the correct one. Atty. Francisco ". . . . Under the terms of this policy, defendant company agreed to pay P1,000.00 to
claimed P3,000.00 as indemnity for the death of the insured. The insured died of drowning. Death
by drowning is covered by the policy the pertinent provisions of which reads as follows:
The amount payable under the policy, I believe should be P1,500.00 under the provision
of Section 2, part 1 of the policy, based on the rule of pari materia as the death of the xxx xxx xxx
insured occurred under the circumstances similar to that provided under the aforecited
section. "Part I of the policy fixes specific amounts as indemnities in case of death resulting from
"bodily injury which is effected solely thru violence, external, visible and accidental
Defendant company, upon receipt of the letter, referred the matter to the Insurance means" but, Part I of the Policy is not applicable in case of death by drowning because
Commissioner, who rendered an opinion that the liability of the company was only death by drowning is not one resulting from "bodily injury which is affected solely thru
P1,000.00, pursuant to Section 1, Part I of the Provisions of the policy (Exh. F, or 3). violent, external, visible and accidental means" as "Bodily Injury" means a cut, a bruise, or
Because of the above opinion, defendant insurance company refused to pay more than a wound and drowning is death due to suffocation and not to any cut, bruise or wound."
P1,000.00. In the meantime, Atty. Vicente Francisco, in a subsequent letter to the
insurance company, asked for P3,000.00 which the Company refused, to pay. Hence, a xxx xxx xxx
complaint for the recovery of the balance of P2,000.00 more was instituted with the Court
Besides, on the face of the policy Exhibit "A" itself, death by drowning is a ground for
of First Instance of Rizal (Pasay City, Branch VII), praying for it further sum of P10,000.00
recovery apart from the bodily injury because death by bodily injury is covered by Part I of
as attorney's fees, expenses of litigation and costs.
the policy while death by drowning is covered by Part VI thereof. But while the policy
Defendant Insurance Company presented a Motion to Dismiss, alleging that the demand mentions specific amounts that may be recovered for death for bodily injury, yet, there is
or claim is set forth in the complaint had already been released, plaintiff having received not specific amount mentioned in the policy for death thru drowning although the latter
the full amount due as appearing in policy and as per opinion of the Insurance is, under Part VI of the policy, a ground for recovery thereunder. Since the defendant has
Commissioner. An opposition to the motion to dismiss, was presented by plaintiff, and bound itself to pay P1000.00 to P3,000.00 as indemnity for the death of the insured but
other pleadings were subsequently file by the parties. On December 28, 1957, the trial the policy does not positively state any definite amount that may be recovered in case of
court deferred action on the motion to dismiss until termination of the trial of the case, it death by drowning, there is an ambiguity in this respect in the policy, which ambiguity
appearing that the ground thereof was not indubitable. In the Answer to the complaint, must be interpreted in favor of the insured and strictly against the insurer so as to allow
defendant company practically admitted all the allegations therein, denying only those greater indemnity.
which stated that under the policy its liability was P3,000.00.
xxx xxx xxx
On September 1, 1958, the trial court promulgated an Amended Decision, the pertinent
. . . plaintiff is therefore entitled to recover P3,000.00. The defendant had already paid the
portions of which read
amount of P1,000.00 to the plaintiff so that there still remains a balance of P2,000.00 of
xxx xxx xxx the amount to which plaintiff is entitled to recover under the policy Exhibit "A".
The plaintiff asks for an award of P10,000.00 as attorney's fees and expenses of litigation. At any event, the policy under consideration, covers death or disability by accidental
However, since it is evident that the defendant had not acted in bad faith in refusing to means, and the appellant insurance company agreed to pay P1,000.00 to P3,000.00. is
pay plaintiff's claim, the Court cannot award plaintiff's claim for attorney's fees and indemnity for death of the insured.
expenses of litigation.
In view of the conclusions reached, it would seem unnecessary to discuss the other issues
IN VIEW OF THE FOREGOING, the Court hereby reconsiders and sets aside its decision raised in the appeal.
dated July 21, 1958 and hereby renders judgment, ordering the defendant to pay plaintiff
the sum of Two Thousand (P2,000.00) Pesos and to pay the costs. The judgment appealed from is hereby affirmed. Without costs.

The above judgment was appealed to the Court of Appeals on three (3) counts. Said
Court, in a Resolution dated September 29, 1959, elevated the case to this Court, stating
that the genuine issue is purely legal in nature.

All the parties agree that indemnity has to be paid. The conflict centers on how much
should the indemnity be. We believe that under the proven facts and circumstances, the
findings and conclusions of the trial court, are well taken, for they are supported by the
generally accepted principles or rulings on insurance, which enunciate that where there is
an ambiguity with respect to the terms and conditions of the policy, the same will be
resolved against the one responsible thereof. It should be recalled in this connection, that
generally, the insured, has little, if any, participation in the preparation of the policy,
together with the drafting of its terms and Conditions. The interpretation of obscure
stipulations in a contract should not favor the party who cause the obscurity (Art. 1377,
N.C.C.), which, in the case at bar, is the insurance company.

. . . . And so it has been generally held that the "terms in an insurance policy, which are
ambiguous, equivocal or uncertain . . . are to be construed strictly against, the insurer,
and liberally in favor of the insured so as to effect the dominant purpose of indemnity or
payment to the insured, especially where a forfeiture is involved," (29 Am. Jur. 181) and
the reason for this rule is that the "insured usually has no voice in the selection or
arrangement of the words employed and that the language of the contract is selected
with great care and deliberation by expert and legal advisers employed by, and acting
exclusively in the interest of, the insurance company" (44 C.J.S. 1174). Calanoc v. Court of
Appeals, et al., G.R. No. L-8151, Dec. 16, 1955.

. . . . Where two interpretations, equally fair, of languages used in an insurance policy may
be made, that which allows the greater indemnity will prevail. (L'Engel v. Scotish Union &
Nat. F. Ins. Co., 48 Fla. 82, 37 So. 462, 67 LRA 581 111 Am. St. Rep. 70, 5 Ann. Cas. 749).
G.R. No. L-21380 May 20, 1966 Boulevard in front of the Pepsi-Cola plant in Quezon City, passed over a water hole which
the driver did not see because an oncoming car did not dim its light. The crankcase and
MISAMIS LUMBER CORPORATION, plaintiff and appellee, vs. CAPITAL INSURANCE and flywheel housing of the car broke when it hit a hollow block lying alongside the water
SURETY CO., INC., defendant and appellant. hole. At the instance of the plaintiff-appellee, the car was towed and repaired by Morosi
Motors at its shop at 1906 Taft Avenue Extension at a total cost of P302.27.
REYES, J.B.L., J.:
On 29 November 1961, when the repairs on the car had already been made, the plaintiff-
Plaintiff-appellee Misamis Lumber Corporation, under its former name, Lanao Timber
appellee made a report of the accident to the defendant-appellant Capital Insurance &
Mills, Inc., insured its Ford Falcon motor car for the amount of P14,000 with the
Surety Company.
defendant-appellant, Capital Insurance & Surety Company, Inc. The pertinent provisions
of the policy provided, as follows: Since the defendant-appellant refused to pay for the total cost of to wage and repairs,
suit was filed in the municipal court originally.
1. The Company will subject to the Limits of Liability indemnify the Insured against loss or
damage to the Motor Vehicle and its accessories and spare parts whilst thereon. The case before Us is now a direct appeal on a point of law from the judgment of the
Court of First Instance of Manila finding for the plaintiff and against the defendant-insurer
2. (a) by accidental collision or overturning or collision or overturning consequent when
in its Civil Case No. 51757. Per our resolution on 13 February 1964, it was resolved to
mechanical breakdown or consequent upon wear and tear.
proceed with the case without the appellee's brief, which was filed late.
xxx xxx xxx
The defendant-appellant admits liability in the amount of P150, but not for any excess
3. At its option, the Company may pay in cash the amount of the loss or damage or may thereof.
repair, reinstate or replace the Motor Vehicle or any part thereof or its accessories or
The lower court did not exonerate the said appellant for the excess because, according to
spare parts. The liability of the Company shall not exceed the value of the parts lost or
it, the company's absolution would render the insurance contract one-sided and that the
damaged and the reasonable cost of fitting such parts or the value of the Motor Vehicle at
said insurer had not shown that the cost of repairs in the sum of P302.27 is unreasonable,
the time of the loss or damage whichever is the loss. The Insured's estimate of value
excessive or padded, nor had it shown that it could have undertaken the repairs itself at
stated in the schedule shall be the maximum amount payable by the Company in respect
less expense.
of any claim for loss or damage.1wph1.t
The above reasoning is beside the point, because the insurance policy stipulated in
xxx xxx xxx
paragraph 4 that if the insured authorizes the repair the liability of the insurer, per its sub-
4. The Insured may authorize the repair of the Motor Vehicle necessitated by damage for paragraph (a), is limited to P150.00. The literal meaning of this stipulation must control, it
which the Company may be liable under this policy provided that: being the actual contract, expressly and plainly provided for in the policy (Art. 1370, Civil
Code; Young vs. Midland Textile Ins. Co., 30 Phil. 617; Ty vs. First Nat. Surety & Assur. Co.,
(a) the estimated cost of such repair does not exceed the authorized Repair Limit. Inc., L-16138-45, 29 April 1961).

(b) a detailed estimate of the cost is forwarded to the Company without delay. The lower court's recourse to legal hermeneutics is not called for because paragraph 4 of
the policy is clear and specific and leaves no room for interpretation. The interpretation
and providing also that the authorized repair limit is P150.00.
given is even unjustified because it opposes what was specifically stipulated. Thus, it will
At around eleven o'clock in the evening of 25 November 1961, and while the above- be observed that the policy drew out not only the limits of the insurer's liability but also
mentioned insurance policy was in force, the insured car, while traveling along in Aurora the mechanics that the insured had to follow to be entitled to full indemnity of repairs.
The option to undertake the repairs is accorded to the insurance company per paragraph
2. The said company was deprived of the option because the insured took it upon itself to
have the repairs made, and only notified the insurer when the repairs were done. As a
consequence, paragraph 4, which limits the company's liability to P150.00, applies.

The insurance contract may be rather onerous ("one-sided", as the lower court put it), but
that in itself does not justify the abrogation of its express terms, terms which the insured
accepted or adhered to and which is the law between the contracting parties.

Finally, to require the insurer to prove that the cost of the repairs ordered by the insured
is unreasonable, as the appealed decision does, when the insurer was not given an
opportunity to inspect and assess the damage before the repairs were made, strikes Us as
contrary to elementary justice and equity.

For the foregoing reasons, the appealed decision is hereby modified by ordering the
defendant-appellant Capital Insurance & Surety Company, Inc. to pay not more than
P150.00 to the plaintiff-appellee Misamis Lumber Corporation. Each party shall bear its
own costs and attorney's fees.
G.R. No. L-16138 April 29, 1961 G.R. No. L-16144 April 29, 1961

DIOSDADO C. TY, plaintiff-appellant, vs. FIRST NATIONAL SURETY & ASSURANCE CO., DIOSDADO C. TY, plaintiff-appellant, vs. CAPITAL INSURANCE & SURETY CO.,
INC., defendant-appellee. INC., defendant-appellee.

x---------------------------------------------------------x x---------------------------------------------------------x

G.R. No. L-16139 April 29, 1961. G.R. No. L-16145 April 29, 1961

DIOSDADO C. TY, plaintiff-appellant, vs. ASSOCIATED INSURANCE & SURETY CO., DIOSDADO C. TY, plaintiff-appellant, vs. CAPITAL INSURANCE & SURETY CO.,
INC., defendant-appellee. INC., defendant-appellee.

x---------------------------------------------------------x LABRADOR, J.:

G.R. No. L-16140 April 29, 1961 Appeal from a judgment of the Court of First Instance of Manila, Hon. Gregorio S.
Narvasa, presiding, dismissing the actions filed in the above-entitled cases.
DIOSDADO C. TY, plaintiff-appellant, vs. UNITED INSURANCE CO., INC., defendant-
appellee. The facts found by the trial court, which are not disputed in this appeal, are as follows:

x---------------------------------------------------------x At different times within a period of two months prior to December 24, 1953, the plaintiff
herein Diosdado C. Ty, employed as operator mechanic foreman in the Broadway Cotton
G.R. No. L-16141 April 29, 1961. Factory, in Grace Park, Caloocan, Rizal, at a monthly salary of P185.00, insured himself in
18 local insurance companies, among which being the eight above named defendants,
DIOSDADO C. TY. plaintiff-appellant, vs. PHILIPPINE SURETY & INSURANCE CO.,
which issued to him personal accident policies, upon payment of the premium of P8.12
INC., defendant-appellee.
for each policy. Plaintiff's beneficiary was his employer, Broadway Cotton Factory, which
x---------------------------------------------------------x paid the insurance premiums.

G.R. No. L-16142 April 29, 1961. On December 24, 1953, a fire broke out which totally destroyed the Broadway Cotton
Factory. Fighting his way out of the factory, plaintiff was injured on the left hand by a
DIOSDADO C. TY, plaintiff-appellant, vs. RELIANCE SURETY & INSURANCE CO., heavy object. He was brought to the Manila Central University hospital, and after
INC., defendant-appellee. receiving first aid there, he went to the National Orthopedic Hospital for treatment of his
injuries which were as follows:
x---------------------------------------------------------x
1. Fracture, simple, proximal phalanx index finger, left;
G.R. No. L-16143 April 29, 1961
2. Fracture, compound, comminuted, proximal phalanx, middle finger, left and 2nd
DIOSDADO C. TY, plaintiff-appellant, vs. FAR EASTERN SURETY & INSURANCE CO.,
phalanx, simple;
INC., defendant-appellee.
3. Fracture, compound, comminute phalanx, 4th finger, left;
x---------------------------------------------------------x
4. Fracture, simple, middle phalanx, middle finger, left;
5. Lacerated wound, sutured, volar aspect, small finger, left; should be an amputation thereof, but that it is sufficient if the injuries prevent him from
performing his work or labor necessary in the pursuance of his occupation or business.
6. Fracture, simple, chip, head, 1st phalanx, 5th digit, left. He underwent medical Authorities are cited to the effect that "total disability" in relation to one's occupation
treatment in the Orthopedic Hospital from December 26, 1953 to February 8, 1954. The means that the condition of the insurance is such that common prudence requires him to
above-described physical injuries have caused temporary total disability of plaintiff's left desist from transacting his business or renders him incapable of working. (46 C.J.S., 970).
hand. Plaintiff filed the corresponding notice of accident and notice of claim with all of the It is also argued that obscure words or stipulations should be interpreted against the
abovenamed defendants to recover indemnity under Part II of the policy, which is person who caused the obscurity, and the ones which caused the obscurity in the cases at
similarly worded in all of the policies, and which reads pertinently as follows: bar are the defendant insurance companies.

INDEMNITY FOR TOTAL OR PARTIAL DISABILITY While we sympathize with the plaintiff or his employer, for whose benefit the policies
were issued, we can not go beyond the clear and express conditions of the insurance
If the Insured sustains any Bodily Injury which is effected solely through violent, external,
policies, all of which define partial disability as loss of either hand by amputation through
visible and accidental means, and which shall not prove fatal but shall result,
the bones of the wrist." There was no such amputation in the case at bar. All that was
independently of all other causes and within sixty (60) days from the occurrence thereof,
found by the trial court, which is not disputed on appeal, was that the physical injuries
in Total or Partial Disability of the Insured, the Company shall pay, subject to the
"caused temporary total disability of plaintiff's left hand." Note that the disability of
exceptions as provided for hereinafter, the amount set opposite such injury:
plaintiff's hand was merely temporary, having been caused by fracture of the index, the
PARTIAL DISABILITY middle and the fourth fingers of the left hand.

LOSS OF: We might add that the agreement contained in the insurance policies is the law between
the parties. As the terms of the policies are clear, express and specific that only
xxx xxx xxx amputation of the left hand should be considered as a loss thereof, an interpretation that
would include the mere fracture or other temporary disability not covered by the policies
Either hand ............................................................................ P650.00
would certainly be unwarranted.
xxx xxx xxx
WHEREFORE, the decision appealed from is hereby affirmed, with costs against the
... The loss of a hand shall mean the loss by amputation through the bones of the wrist.... plaintiff-appellant.

Defendants rejected plaintiff's claim for indemnity for the reason that there being no
severance of amputation of the left hand, the disability suffered by him was not covered
by his policy. Hence, plaintiff sued the defendants in the Municipal Court of this City, and
from the decision of said Court dismissing his complaints, plaintiff appealed to this Court.
(Decision of the Court of First Instance of Manila, pp. 223-226, Records).

In view of its finding, the court absolved the defendants from the complaints. Hence this
appeal.

The main contention of appellant in these cases is that in order that he may recover on
the insurance policies issued him for the loss of his left hand, it is not necessary that there
G.R. No. L-21821-22 and L-21824-27 May 31, 1966 which injuries, the attending surgeon certified, would cause temporary total disability of
appellant's left hand.
DIOSDADO C. TY, plaintiff-appellant, vs. FILIPINAS COMPAIA DE SEGUROS, et
al., defendants-appellees. As the insurance companies refused to pay his claim for compensation under the policies
by reason of the said disability of his left hand, Ty filed motions in the Municipal Court of
BARRERA, J.: Manila, which rendered favorable decision. On appeal to the Court of First Instance by the
insurance companies, the cases were dismissed on the ground that under the uniform
These are appeals instituted by Diosdado C. Ty from a single decision of the Court of First
terms of the insurance policies, partial disability of the insured caused by loss of either
Instance of Manila (in Civ. Cases Nos. 26343, 26344, 26404, 26405, 26406, 26442, which
hand to be compensable, the loss must result in the amputation of that hand. Hence,
were tried together), dismissing the six separate complaints he filed against six insurance
these appeals by the insured.1wph1.t
companies (Filipinas Compaia de Seguros, People's Surety & Insurance Co., Inc., South
Sea Surety & Insurance Co., Inc., The Philippine Guaranty Company, Inc., Universal Plaintiff-appellant is basing his claim for indemnity under the provision of the insurance
Insurance & Indemnity Co., and Plaridel Surety & Insurance Co., Inc.) for collection from contract, uniform in all the cases, which reads:
each of them, of the sum of P650.00, as compensation for the disability of his left hand.
"INDEMNITY FOR TOTAL OR PARTIAL DISABILITY
The facts of these cases are not controverted:
If the Insured sustains any Bodily Injury which is effected solely through violent, external,
Plaintiff-appellant was an employee of Broadway Cotton Factory at Grace Park, Caloocan visible and accidental means, and which shall not prove fatal but shall result,
City, working as mechanic operator, with monthly salary of P185.00. In the latter part of independently of all other causes and within sixty (60) days from the occurrence, thereof,
1953, he took Personal Accident Policies from several insurance companies, among which in Total or Partial Disability of the Insured, the Company shall pay, subject to the
are herein defendants-appellees, on different dates, 1 effective for 12 months. During the exceptions as provided for hereinafter, the amount set opposite such injury.
effectivity of these policies, or on December 24, 1953, a fire broke out in the factory
where plaintiff was working. As he was trying to put out said fire with the help of a fire xxx xxx xxx
extinguisher, a heavy object fell upon his left hand. Plaintiff received treatment at the
National Orthopedic Hospital from December 26, 1953 to February 8, 1954, for the PARTIAL DISABILITY
following injuries, to wit:
LOSS OF:
(1) Fracture, simple, oraximal phalanx, index finger, left;
xxx xxx xxx
(2) Fracture, compound, communite proximal phalanx, middle finger, left and 2nd phalanx
Either Hand P650.00
simple;
xxx xxx xxx
(3) Fracture, compound, communite phalanx, 4th finger, left;
The loss of a hand shall mean the loss, by amputation through the bones of the wrist.
(4) Fracture, simple, middle phalanx, middle finger, left;
Appellant contends that to be entitled to indemnification under the foregoing provision, it
(5) Lacerated wound, sutured, volar aspect, small finger, left;
is enough that the insured is disabled to such an extent that he cannot substantially
(6) Fracture, simple, chip, head, 1st phalanx 5th digit, left. perform all acts or duties of the kind necessary in the prosecution of his business. It is
argued that what is compensable is the disability and not the amputation of the hand. The
definition of what constitutes loss of hand, placed in the contract, according to appellant,
consequently, makes the provision ambiguous and calls for the interpretation thereof by
this Court.

This is not the first time that the proper construction of this provision, which is uniformly
carried in personal accident policies, has been questioned. Herein appellant himself has
already brought this matter to the attention of this Court in connection with the other
accident policies which he took and under which he had tried to collect indemnity, for the
identical injury that is the basis of the claims in these cases. And, we had already ruled:

While we sympathize with the plaintiff or his employer, for whose benefit the policies
were issued, we can not go beyond the clear and express conditions of the insurance
policies, all of which definite partial disability as loss of either hand
by amputation through the bones of the wrist. There was no such amputation in the case
at bar. All that was found by the trial court, which is not disputed on appeal, was that the
physical injuries "caused temporary total disability of plaintiff's left hand." Note that the
disability of plaintiff's hand was merely temporary, having been caused by fractures of the
index, the middle and the fourth fingers of the left hand.

We might add that the agreement contained in the insurance policies is the law between
the parties. As the terms of the policies are clear, express and specific that only
amputation of the left hand should be considered as a loss thereof, an interpretation that
would include the mere fracture or other temporary disability not covered by the policies
would certainly be unwarranted.2

We find no reason to depart from the foregoing ruling on the matter.


Plaintiff-appellant cannot come to the courts and claim that he was misled by the terms of
the contract. The provision is clear enough to inform the party entering into that contract
that the loss to be considered a disability entitled to indemnity, must be severance or
amputation of that affected member from the body of the insured.

Wherefore, finding no error in the decision appealed from, the same is hereby affirmed,
without costs. So ordered.
G.R. No. L-25579 March 29, 1972 The only issue here is whether under the facts are stipulated and found by the trial court
the wounds received by the insured at the hands of the robbers nine in all, five of them
EMILIA T. BIAGTAN, JUAN T. BIAGTAN, JR., MIGUEL T. BIAGTAN, GIL T. BIAGTAN and mortal and four non-mortal were inflicted intentionally. The court, in ruling negatively
GRACIA T. BIAGTAN, plaintiffs-appellees, vs. THE INSULAR LIFE ASSURANCE COMPANY, on the issue, stated that since the parties presented no evidence and submitted the case
LTD., defendant-appellant. upon stipulation, there was no "proof that the act of receiving thrust (sic) from the sharp-
pointed instrument of the robbers was intended to inflict injuries upon the person of the
MAKALINTAL, J.:p
insured or any other person or merely to scare away any person so as to ward off any
This is an appeal from the decision of the Court of First Instance of Pangasinan in its Civil resistance or obstacle that might be offered in the pursuit of their main objective which
Case No. D-1700. was robbery."

The facts are stipulated. Juan S. Biagtan was insured with defendant InsularLife Assurance The trial court committed a plain error in drawing the conclusion it did from the admitted
Company under Policy No. 398075 for the sum of P5,000.00 and, under a supplementary facts. Nine wounds were inflicted upon the deceased, all by means of thrusts with sharp-
contract denominated "Accidental Death Benefit Clause, for an additional sum of pointed instruments wielded by the robbers. This is a physical fact as to which there is no
P5,000.00 if "the death of the Insured resulted directly from bodily injury effected solely dispute. So is the fact that five of those wounds caused the death of the insured. Whether
through external and violent means sustained in an accident ... and independently of all the robbers had the intent to kill or merely to scare the victim or to ward off any defense
other causes." The clause, however,expressly provided that it would not apply where he might offer, it cannot be denied that the act itself of inflicting the injuries was
death resulted from an injury"intentionally inflicted by another party." intentional. It should be noted that the exception in the accidental benefit clause invoked
by the appellant does not speak of the purpose whether homicidal or not of a third
On the night of May 20, 1964, or during the first hours of the following day a band of party in causing the injuries, but only of the fact that such injuries have been
robbers entered the house of the insured Juan S. Biagtan. What happened then is related "intentionally" inflicted this obviously to distinguish them from injuries which, although
in the decision of the trial court as follows: received at the hands of a third party, are purely accidental. This construction is the basic
idea expressed in the coverage of the clause itself, namely, that "the death of the insured
...; that on the night of May 20, 1964 or the first hours of May 21, 1964, while the said life
resulted directly from bodily injury effected solely through external and violent means
policy and supplementary contract were in full force and effect, the house of insured Juan
sustained in an accident ... and independently of all other causes." A gun which discharges
S. Biagtan was robbed by a band of robbers who were charged in and convicted by the
while being cleaned and kills a bystander; a hunter who shoots at his prey and hits a
Court of First Instance of Pangasinan for robbery with homicide; that in committing the
person instead; an athlete in a competitive game involving physical effort who collides
robbery, the robbers, on reaching the staircase landing on the second floor, rushed
with an opponent and fatally injures him as a result: these are instances where the
towards the door of the second floor room, where they suddenly met a person near the
infliction of the injury is unintentional and therefore would be within the coverage of an
door of oneof the rooms who turned out to be the insured Juan S. Biagtan who received
accidental death benefit clause such as thatin question in this case. But where a gang of
thrusts from their sharp-pointed instruments, causing wounds on the body of said Juan S.
robbers enter a house and coming face to face with the owner, even if unexpectedly, stab
Biagtan resulting in his death at about 7 a.m. on the same day, May 21, 1964;
him repeatedly, it is contrary to all reason and logic to say that his injuries are not
Plaintiffs, as beneficiaries of the insured, filed a claim under the policy. The insurance intentionally inflicted, regardless of whether they prove fatal or not. As it was, in the
company paid the basic amount of P5,000.00 but refused to pay the additional sum of present case they did prove fatal, and the robbers have been accused and convicted of
P5,000.00 under the accidental death benefit clause, on the ground that the insured's the crime of robbery with homicide.
death resulted from injuries intentionally inflicted by third parties and therefore was not
The case of Calanoc vs. Court of Appeals, 98 Phil. 79, is relied upon by the trial court in
covered. Plaintiffs filed suit to recover, and after due hearing the court a quo rendered
support of its decision. The facts in that case, however, are different from those obtaining
judgment in their favor. Hence the present appeal by the insurer.
here. The insured there was a watchman in a certain company, who happened to be from "intentional injuries inflicted by the insured or any other person." The inquiry was as
invited by a policeman to come along as the latter was on his way to investigate a to the question whether the shooting that caused the insured's death was accidental or
reported robbery going on in a private house. As the two of them, together with the intentional; and the Court found that under the facts, showing that the murderer knew
owner of the house, approached and stood in front of the main gate, a shot was fired and his victim and that he fired with intent to kill, there could be no recovery under the policy
it turned out afterwards that the watchman was hit in the abdomen, the wound causing which excepted death from intentional injuries inflicted by any person.
his death. Under those circumstances this Court held that it could not be said that the
killing was intentional for there was the possibility that the malefactor had fired the shot WHEREFORE, the decision appealed from is reversed and the complaint dismissed,
to scare people around for his own protection and not necessarrily to kill or hit the victim. without pronouncement as to costs.
A similar possibility is clearly ruled out by the facts in the case now before Us. For while a
single shot fired from a distance, and by a person who was not even seen aiming at the
victim, could indeed have been fired without intent to kill or injure, nine wounds inflicted
with bladed weapons at close range cannot conceivably be considered as innocent insofar
as such intent is concerned. The manner of execution of the crime permits no other
conclusion.

Court decisions in the American jurisdiction, where similar provisions in accidental death
benefit clauses in insurance policies have been construed, may shed light on the issue
before Us. Thus, it has been held that "intentional" as used in an accident policy excepting
intentional injuries inflicted by the insured or any other person, etc., implies the exercise
of the reasoning faculties, consciousness and volition.1 Where a provision of the policy
excludes intentional injury, it is the intention of the person inflicting the injury that is
controlling.2 If the injuries suffered by the insured clearly resulted from the intentional act
of a third person the insurer is relieved from liability as stipulated. 3

In the case of Hutchcraft's Ex'r v. Travelers' Ins. Co., 87 Ky. 300, 8 S.W. 570, 12 Am. St. Rep.
484, the insured was waylaid and assassinated for the purpose of robbery. Two (2)
defenses were interposed to the action to recover indemnity, namely: (1) that the insured
having been killed by intentional means, his death was not accidental, and (2) that the
proviso in the policy expressly exempted the insurer from liability in case the insured died
from injuries intentionally inflicted by another person. In rendering judgment for the
insurance company the Court held that while the assassination of the insured was as to
him an unforeseen event and therefore accidental, "the clause of the proviso that
excludes the (insurer's) liability, in case death or injury is intentionally inflicted by another
person, applies to this case."

In Butero v. Travelers' Acc. Ins. Co., 96 Wis. 536, 65 Am. St. Rep. 61, 71 S.W. 811, the
insured was shot three times by a person unknown late on a dark and stormy night, while
working in the coal shed of a railroad company. The policy did not cover death resulting
G.R. No. L-44059 October 28, 1977 During the pre-trial conference, the parties manifested to the court. that there is no
possibility of amicable settlement. Hence, the Court proceeded to have the parties submit
THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-appellee, vs. CARPONIA T. their evidence for the purpose of the pre-trial and make admissions for the purpose of
EBRADO and PASCUALA VDA. DE EBRADO, defendants-appellants. pretrial. During this conference, parties Carponia T. Ebrado and Pascuala Ebrado agreed
and stipulated: 1) that the deceased Buenaventura Ebrado was married to Pascuala
MARTIN, J.:
Ebrado with whom she has six (legitimate) namely; Hernando, Cresencio, Elsa, Erlinda,
This is a novel question in insurance law: Can a common-law wife named as beneficiary in Felizardo and Helen, all surnamed Ebrado; 2) that during the lifetime of the deceased, he
the life insurance policy of a legally married man claim the proceeds thereof in case of was insured with Insular Life Assurance Co. Under Policy No. 009929 whole life plan,
death of the latter? dated September 1, 1968 for the sum of P5,882.00 with the rider for accidental death
benefit as evidenced by Exhibits A for plaintiffs and Exhibit 1 for the defendant Pascuala
On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance and Exhibit 7 for Carponia Ebrado; 3) that during the lifetime of Buenaventura Ebrado, he
Co., Ltd., Policy No. 009929 on a whole-life for P5,882.00 with a, rider for Accidental was living with his common-wife, Carponia Ebrado, with whom she had 2 children
Death for the same amount Buenaventura C. Ebrado designated T. Ebrado as the although he was not legally separated from his legal wife; 4) that Buenaventura in
revocable beneficiary in his policy. He to her as his wife. accident on October 21, 1969 as evidenced by the death Exhibit 3 and affidavit of the
police report of his death Exhibit 5; 5) that complainant Carponia Ebrado filed claim with
On October 21, 1969, Buenaventura C. Ebrado died as a result of an t when he was hit by
the Insular Life Assurance Co. which was contested by Pascuala Ebrado who also filed
a failing branch of a tree. As the policy was in force, The Insular Life Assurance Co., Ltd.
claim for the proceeds of said policy 6) that in view ofthe adverse claims the insurance
liable to pay the coverage in the total amount of P11,745.73, representing the face value
company filed this action against the two herein claimants Carponia and Pascuala Ebrado;
of the policy in the amount of P5,882.00 plus the additional benefits for accidental death
7) that there is now due from the Insular Life Assurance Co. as proceeds of the policy
also in the amount of P5,882.00 and the refund of P18.00 paid for the premium due
P11,745.73; 8) that the beneficiary designated by the insured in the policy is Carponia
November, 1969, minus the unpaid premiums and interest thereon due for January and
Ebrado and the insured made reservation to change the beneficiary but although the
February, 1969, in the sum of P36.27.
insured made the option to change the beneficiary, same was never changed up to the
Carponia T. Ebrado filed with the insurer a claim for the proceeds of the Policy as the time of his death and the wife did not have any opportunity to write the company that
designated beneficiary therein, although she admits that she and the insured there was reservation to change the designation of the parties agreed that a decision be
Buenaventura C. Ebrado were merely living as husband and wife without the benefit of rendered based on and stipulation of facts as to who among the two claimants is entitled
marriage. to the policy.

Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She Upon motion of the parties, they are given ten (10) days to file their simultaneous
asserts that she is the one entitled to the insurance proceeds, not the common-law wife, memoranda from the receipt of this order.
Carponia T. Ebrado.
SO ORDERED.
In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life
On September 25, 1972, the trial court rendered judgment declaring among others,
Assurance Co., Ltd. commenced an action for Interpleader before the Court of First
Carponia T. Ebrado disqualified from becoming beneficiary of the insured Buenaventura
Instance of Rizal on April 29, 1970.
Cristor Ebrado and directing the payment of the insurance proceeds to the estate of the
After the issues have been joined, a pre-trial conference was held on July 8, 1972, after deceased insured. The trial court held: +.wph!1
which, a pre-trial order was entered reading as follows: +.wph!1
It is patent from the last paragraph of Art. 739 of the Civil Code that a criminal conviction same Code, "any person who is forbidden from receiving any donation under Article 739
for adultery or concubinage is not essential in order to establish the disqualification cannot be named beneficiary of a fife insurance policy by the person who cannot make a
mentioned therein. Neither is it also necessary that a finding of such guilt or commission donation to him. 4 Common-law spouses are, definitely, barred from receiving donations
of those acts be made in a separate independent action brought for the purpose. The guilt from each other. Article 739 of the new Civil Code provides: +.wph!1
of the donee (beneficiary) may be proved by preponderance of evidence in the same
proceeding (the action brought to declare the nullity of the donation). The following donations shall be void:

It is, however, essential that such adultery or concubinage exists at the time defendant 1. Those made between persons who were guilty of adultery or concubinage at the time of
Carponia T. Ebrado was made beneficiary in the policy in question for the disqualification donation;
and incapacity to exist and that it is only necessary that such fact be established by
Those made between persons found guilty of the same criminal offense, in consideration
preponderance of evidence in the trial. Since it is agreed in their stipulation above-quoted
thereof;
that the deceased insured and defendant Carponia T. Ebrado were living together as
husband and wife without being legally married and that the marriage of the insured with 3. Those made to a public officer or his wife, descendants or ascendants by reason of his
the other defendant Pascuala Vda. de Ebrado was valid and still existing at the time the office.
insurance in question was purchased there is no question that defendant Carponia T.
Ebrado is disqualified from becoming the beneficiary of the policy in question and as such In the case referred to in No. 1, the action for declaration of nullity may be brought by the
she is not entitled to the proceeds of the insurance upon the death of the insured. spouse of the donor or donee; and the guilt of the donee may be proved by
preponderance of evidence in the same action.
From this judgment, Carponia T. Ebrado appealed to the Court of Appeals, but on July 11,
1976, the Appellate Court certified the case to Us as involving only questions of law. 2. In essence, a life insurance policy is no different from a civil donation insofar as the
beneficiary is concerned. Both are founded upon the same consideration: liberality. A
We affirm the judgment of the lower court. beneficiary is like a donee, because from the premiums of the policy which the insured
pays out of liberality, the beneficiary will receive the proceeds or profits of said insurance.
1. It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new
As a consequence, the proscription in Article 739 of the new Civil Code should equally
Insurance Code (PD No. 612, as amended) does not contain any specific provision grossly
operate in life insurance contracts. The mandate of Article 2012 cannot be laid aside: any
resolutory of the prime question at hand. Section 50 of the Insurance Act which provides
person who cannot receive a donation cannot be named as beneficiary in the life
that "(t)he insurance shag be applied exclusively to the proper interest of the person in
insurance policy of the person who cannot make the donation. 5 Under American law, a
whose name it is made" 1 cannot be validly seized upon to hold that the mm includes the
policy of life insurance is considered as a testament and in construing it, the courts will, so
beneficiary. The word "interest" highly suggests that the provision refers only to the
far as possible treat it as a will and determine the effect of a clause designating the
"insured" and not to the beneficiary, since a contract of insurance is personal in
beneficiary by rules under which wins are interpreted. 6
character. 2 Otherwise, the prohibitory laws against illicit relationships especially on
property and descent will be rendered nugatory, as the same could easily be 3. Policy considerations and dictates of morality rightly justify the institution of a barrier
circumvented by modes of insurance. Rather, the general rules of civil law should be between common law spouses in record to Property relations since such hip ultimately
applied to resolve this void in the Insurance Law. Article 2011 of the New Civil Code encroaches upon the nuptial and filial rights of the legitimate family There is every reason
states: "The contract of insurance is governed by special laws. Matters not expressly to hold that the bar in donations between legitimate spouses and those between
provided for in such special laws shall be regulated by this Code." When not otherwise illegitimate ones should be enforced in life insurance policies since the same are based on
specifically provided for by the Insurance Law, the contract of life insurance is governed similar consideration As above pointed out, a beneficiary in a fife insurance policy is no
by the general rules of the civil law regulating contracts. 3 And under Article 2012 of the different from a donee. Both are recipients of pure beneficence. So long as manage
remains the threshold of family laws, reason and morality dictate that the impediments disability on "persons who were guilty of adultery or concubinage at the time of the
imposed upon married couple should likewise be imposed upon extra-marital donation," Article 739 itself provides: +.wph!1
relationship. If legitimate relationship is circumscribed by these legal disabilities, with
more reason should an illicit relationship be restricted by these disabilities. Thus, In the case referred to in No. 1, the action for declaration of nullity may be brought by the
in Matabuena v. Cervantes, 7 this Court, through Justice Fernando, said: +.wph!1 spouse of the donor or donee; and the guilty of the donee may be proved by
preponderance of evidence in the same action.
If the policy of the law is, in the language of the opinion of the then Justice J.B.L. Reyes of
that court (Court of Appeals), 'to prohibit donations in favor of the other consort and his The underscored clause neatly conveys that no criminal conviction for the offense is a
descendants because of and undue and improper pressure and influence upon the donor, condition precedent. In fact, it cannot even be from the aforequoted provision that a
a prejudice deeply rooted in our ancient law;" por-que no se enganen desponjandose el prosecution is needed. On the contrary, the law plainly states that the guilt of the party
uno al otro por amor que han de consuno' (According to) the Partidas (Part IV, Tit. XI, LAW may be proved "in the same acting for declaration of nullity of donation. And, it would be
IV), reiterating the rationale 'No Mutuato amore invicem spoliarentur' the Pandects (Bk, sufficient if evidence preponderates upon the guilt of the consort for the offense
24, Titl. 1, De donat, inter virum et uxorem); then there is very reason to apply the same indicated. The quantum of proof in criminal cases is not demanded.
prohibitive policy to persons living together as husband and wife without the benefit of
In the caw before Us, the requisite proof of common-law relationship between the
nuptials. For it is not to be doubted that assent to such irregular connection for thirty
insured and the beneficiary has been conveniently supplied by the stipulations between
years bespeaks greater influence of one party over the other, so that the danger that the
the parties in the pre-trial conference of the case. It case agreed upon and stipulated
law seeks to avoid is correspondingly increased. Moreover, as already pointed out by
therein that the deceased insured Buenaventura C. Ebrado was married to Pascuala
Ulpian (in his lib. 32 ad Sabinum, fr. 1), 'it would not be just that such donations should
Ebrado with whom she has six legitimate children; that during his lifetime, the deceased
subsist, lest the condition 6f those who incurred guilt should turn out to be better.' So
insured was living with his common-law wife, Carponia Ebrado, with whom he has two
long as marriage remains the cornerstone of our family law, reason and morality alike
children. These stipulations are nothing less than judicial admissions which, as a
demand that the disabilities attached to marriage should likewise attach to concubinage.
consequence, no longer require proof and cannot be contradicted. 8 A fortiori, on the
It is hardly necessary to add that even in the absence of the above pronouncement, any basis of these admissions, a judgment may be validly rendered without going through the
other conclusion cannot stand the test of scrutiny. It would be to indict the frame of the rigors of a trial for the sole purpose of proving the illicit liaison between the insured and
Civil Code for a failure to apply a laudable rule to a situation which in its essentials cannot the beneficiary. In fact, in that pretrial, the parties even agreed "that a decision be
be distinguished. Moreover, if it is at all to be differentiated the policy of the law which rendered based on this agreement and stipulation of facts as to who among the two
embodies a deeply rooted notion of what is just and what is right would be nullified if claimants is entitled to the policy."
such irregular relationship instead of being visited with disabilities would be attended
ACCORDINGLY, the appealed judgment of the lower court is hereby affirmed. Carponia T.
with benefits. Certainly a legal norm should not be susceptible to such a reproach. If there
Ebrado is hereby declared disqualified to be the beneficiary of the late Buenaventura C.
is every any occasion where the principle of statutory construction that what is within the
Ebrado in his life insurance policy. As a consequence, the proceeds of the policy are
spirit of the law is as much a part of it as what is written, this is it. Otherwise the basic
hereby held payable to the estate of the deceased insured. Costs against Carponia T.
purpose discernible in such codal provision would not be attained. Whatever omission
Ebrado. SO ORDERED.
may be apparent in an interpretation purely literal of the language used must be
remedied by an adherence to its avowed objective.

4. We do not think that a conviction for adultery or concubinage is exacted before the
disabilities mentioned in Article 739 may effectuate. More specifically, with record to the

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