Insurance Nov 5 2018

INSURANCE NOVEMBER 5, 2018
Perez v. CA- Perfection of the Contract of Insurance
323 SCRA 613 (2000)
Facts:
> Primitivo Perez had been insured with the BF Lifeman Insurance Corporation since
1980 for P20,000.00.
> In October 1987, an agent of Lifeman, Rodolfo Lalog, visited Perez in Quezon and
convinced him to apply for additional insurance coverage of P50,000.00, to avail of the
ongoing promotional discount of P400.00 if the premium were paid annually.
> Primitivo B. Perez accomplished an application form for the additional insurance
coverage. Virginia A. Perez, his wife, paid P2,075.00 to Lalog. The receipt issued by
Lalog indicated the amount received was a "deposit."
> Unfortunately, Lalog lost the application form accomplished by Perez and so on
October 28, 1987, he asked the latter to fill up another application form. On November
1, 1987, Perez was made to undergo the required medical examination, which he
passed.
> Lalog forwarded the application for additional insurance of Perez, together with all
its supporting papers, to the office of BF Lifeman Insurance Corporationn in Quezon
which office was supposed to forward the papers to the Manila office.
> On November 25, 1987, Perez died while he was riding a banca which capsized
during a storm.
> At the time of his death, his application papers for the additional insurance were
still with the Quezon office. Lalog testified that when he went to follow up the papers,
he found them still in the Quezon office and so he personally brought the papers to
the Manila office of BF Lifeman Insurance Corporation. It was only on November 27,
1987 that said papers were received in Manila.
> Without knowing that Perez died on November 25, 1987, BF Lifeman Insurance
Corporation approved the application and issued the corresponding policy for the
P50,000.00 on December 2, 1987
> Virginia went to Manila to claim the benefits under the insurance policies of the
deceased. She was paid P40,000.00 under the first insurance policy for P20,000.00
(double indemnity in case of accident) but the insurance company refused to pay the
claim under the additional policy coverage of P50,000.00, the proceeds of which
amount to P150,000.00 in view of a triple indemnity rider on the insurance policy.
> In its letter of January 29, 1988 to Virginia A. Perez, the insurance company
maintained that the insurance for P50,000.00 had not been perfected at the time of
the death of Primitivo Perez. Consequently, the insurance company refunded the
amount of P2,075.00 which Virginia Perez had paid
> Lifeman filed for the rescission and the declaration of nullity. Perez, on the other
hand, averred that the deceased had fulfilled all his prestations under the contract
and all the elements of a valid contract are present.
1
> RTC ruled in favor of Perez. CA reversed.
Issue:
Whether or not there was a perfected additional insurance contract.
Held:
The contract was not perfected.

Insurance is a contract whereby, for a stipulated consideration, one party undertakes
to compensate the other for loss on a specified subject by specified perils. A contract,
on the other hand, is a meeting of the minds between two persons whereby one binds
himself, with respect to the other to give something or to render some service.
Consent must be manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain
and the acceptance absolute. When Primitivo filed an application for insurance, paid
P2,075.00 and submitted the results of his medical examination, his application was
subject to the acceptance of private respondent BF Lifeman Insurance Corporation.
The perfection of the contract of insurance between the deceased and respondent
corporation was further conditioned upon compliance with the following requisites
stated in the application form:
"there shall be no contract of insurance unless and until a policy is issued on this
application and that the said policy shall not take effect until the premium has been paid
and the policy delivered to and accepted by me/us in person while I/We, am/are in
good health."
The assent of private respondent BF Lifeman Insurance Corporation therefore was not
given when it merely received the application form and all the requisite supporting
papers of the applicant. Its assent was given when it issues a corresponding policy to
the applicant. Under the abovementioned provision, it is only when the applicant pays
the premium and receives and accepts the policy while he is in good health that the
contract of insurance is deemed to have been perfected.
It is not disputed, however, that when Primitivo died on November 25, 1987, his
application papers for additional insurance coverage were still with the branch office of
respondent corporation in Gumaca and it was only two days later, or on November 27,
1987, when Lalog personally delivered the application papers to the head office in
Manila. Consequently, there was absolutely no way the acceptance of the application
could have been communicated to the applicant for the latter to accept inasmuch as
the applicant at the time was already dead.
2
Sindayen v. Insular Life- Policy of Insurance

62 PHIL 9
Facts:
> Arturo Sindayen was a linotype operator in the Bureau of Printing. He and his wife
Fortunat went to Camiling to spend Christmas with his aunt Felicidad Estrada.
> On Dec. 26, 1932, while still in Camiling, he made a written application to Insular
Life, through its agent, Cristobal Hendoza, for a policy of insurance on his life in the
sum of 1,000.
> He paid the agent P15 as part of the first premium. It was agreed that the policy,
when and if issued, should be delivered to Felicidad with whom Sindayen left the sum
P25.06 to complete the payment of the first annual premium of P40.06.
> On Jan 1, 1933, Sindayen was examined by Insular’s doctor who made a favorable
report to Insular.
> The next day, Sindayen returned to Manila and resumed his work. On Jan. 11,
1933, Insular accepted the risk and issued a policy, and mailed the same to its agent
for delivery to the insured.
> On Jan. 12, 1933, Sindayen complained of a severe headache. ON Jan. 15, 1933,
he called a physician who found that Sindayen was suffering from acute nephritis and
uremia. His illness did not yield to treatment and on Jan. 19, 1933, he died.
> The policy which the company issued and mailed in manila on Jan. 11 1933 was
received by its agent in Camilin on Jan. 16, 1933. On Jan 18, 1933, the agent, in
accordance with his agreement with the insured delivered the policy to Felicided upon
her payment of the balance of the 1st year’s premium.
> The agent asked Felicidad if her nephew was in good health and she replied that
she believed so because she had no information that he was sick, and thereupon , the
policy was handed to her by the agent.
> On Jan. 20, 1933, the agent learned of the death of Sindayen, afterwhich he called
upon Felicidad and asked her to return the policy. Felicidad did so.
> On Feb. 4, 1933, the company obtained from Sindayen’s widow Fortunata (also the
beneficiary), her signature on a legal document whereby in consideration of the sum
40.06 representing the amount of premium paid, Fortunata thereby releases forever
and discharges Insular from any and all claims and obligations she may have against
the latter.
> A check for the above-mentioned amount was drawn in the name of Fortunata, but
the same was never encashed.
> Instead, it was returned to Insular and this complaint to enforce payment under
the policy was instituted.
> The application which Sindayen signed in Camiling contained the following
provisions:
“xxx
3
(3) That the said policy shall not take effect until the first premium has been paid and
the policy has been delivered to and accepted by me, while I am in good health.”
> The main defense of the company is the policy never took effect because of par. 3 of
the application, since at the time of the delivery of the agent, the insured was not in
good health.
Issue:
Whether or not the policy took effect.
Held:
YES.
There is one line of American cases which holds that the stipulation contained par. 3
is in the nature of a condition precedent, that is to say, that there can be no valid
delivery to the insured unless he is in good health at that time; that this condition
precedent goes to the very essence of the contract and cannot be waived by the agent
making delivery of the policy; HOWEVER, there is also a number of American decision
which state the contrary.
These decisions say that an agent to whom a life insurance policy (similar to the one at
bar) was sent with instruction to deliver it to the insured, has authority to bind the
company by making such delivery, ALTHOUGH the insured was NOT in good health at
the time of delivery, on the theory that the delivery of the policy being the final act to
the consummation of the contract, the condition as to the insured’s good health was
WAIVED by the company.
These same cases further hold that the delivery of the policy by the agent to the
insured consummates the contract even though the agent knew that the insured was
NOT in good health at the time, the theory being, that his knowledge is the company’s
knowledge; and his delivery is the company’s delivery; that when the delivery is made
notwithstanding this knowledge of the defect, the company is deemed to have WAIVED
such defect.
The agent, Mendoza was duly licensed by the Insurance Commission to act for Insular
Life. He had the authority given by him by the company to withhold the delivery of the
policy to the insured until the first premium has been paid and the policy has been
delivered to and accepted by the insured while he is in good health. Whether that
condition had been met or not plainly calls for the exercise of discretion. Mendoza’s
decision that the condition had been met by the insured and that it was proper to
make delivery of the policy to him is just as binding on the company as if the decision
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had been made by its Board of Directors. Admittedly, Mendoza made a mistake of
judgment because he acted on insufficient evidence as to the state of health of the
insured, and this mistake cannot be said to be induced by any misconduct on the part
of the insured.
It is in the interest of not only of the applicant but of all insurance companies as well
that there should be some act which gives the applicant the definite assurance that
the contract has been consummated. This sense of security and of piece of mind that
one’s dependents are provided for without risk of either loss or of litigation is the
bedrock of life insurance.
A cloud will be thrown over the entire insurance business if the condition of health of
the insured at the time of the delivery of the policy may be inquired into years
afterwards with the view of avoiding the policy on the ground that it never took effect
because of an alleged lack of good health at the time of delivery.
It is therefore in the public interest that we are constrained to hold, as we do, that the
delivery of the policy to the insured by an agent of the company who is authorized to
make delivery or withhold delivery is the final act which binds the company and the
insured, in the absence of fraud or other legal grounds for rescission. The fact that
the agent to whom it has entrusted this duty is derelict or negligent or even dishonest
in the performance of the duty which has been entrusted to him would create an
obligation based upon the authorized acts of the agent toward a third party who was
not in collusion with the agent.
Enriquez v. SunLife- Insurance Policy

41 PHIL 269
Facts:
> On Sept. 24 1917, Herrer made an application to SunLife through its office in
Manila for life annuity.
> 2 days later, he paid the sum of 6T to the company’s anager in its Manila office and
was given a receipt.
> On Nov. 26, 1917, the head office gave notice of acceptance by cable to Manila. On
the same date, the Manila office prepared a letter notifying Herrer that his application
has been accepted and this was placed in the ordinary channels of transmission, but
as far as known was never actually mailed and never received by Herrer.
> Herrer died on Dec. 20, 1917. The plaintiff as administrator of Herrer’s estate
brought this action to recover the 6T paid by the deceased.
Issue:
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Whether or not the insurance contract was perfected.
Held:
NO.
The contract for life annuity was NOT perfected because it had NOT been proved
satisfactorily that the acceptance of the application ever came to the knowledge of the
applicant. An acceptance of an offer of insurance NOT actually or constructively
communicated to the proposer does NOT make a contract of insurane, as the locus
poenitentiae is ended when an acceptance has passed beyond the control of the party.
NOTE: Life annuity is the opposite of a life insurance. In life annuity, a big amount is
given to the insurance company, and if after a certain period of time the insured is stil
living, he is entitled to regular smaller amounts for the rest of his life. Examples of Life
annuity are pensions. Life Insurance on the other hand, the insured during the period
of the coverage makes small regular payments and upon his death, the insurer pays a
big amount to his beneficiaries.
G.R. No. L-602 March 31, 1947

ADELAIDA OCAMPO VDA. DE GOMEZ, demandante-apelante,
vs.
THE GOVERNMENT INSURANCE BOARD, demandado-apelado.
Sres. Artemio C. Macalino y Rodrigo G. Pañgan en representacion de la apelante.
Abogado Auxiliar de Corporaciones D. Federico C. Alikpala en representacion del
apelado.
BRIONES, J.:
Andres A. Gomez estuvo sirviendo en el gobierno provincial de la Pampanga como
tasador provincial delegado por un periodo continuo de 25 años, desde el 8 de Agosto
de 1914 en que fue nombrado por primera vez, hasta el 28 de Febrero de 1938 en que
fallecio. Segun el convenio dehechos, no cabe duda de que su nombramiento era de
empleado temporero — temporary — al tenor de la fraseologia legal. No era elegible en
el servicio civil: esto explica porque durante tan largo tiempo de servicio no se le habia
podido expedir un nombramiento regular y permanente. El sueldo que percibia al
morir era de P90 al mes.
Tampoco hay controversia entre las partes, bajo el convenio, acerca de los siguientes
hechos: (a) que el gobierno provincial de la Pampanga, para aprovecharse delos
beneficios de la ley del Commonwealth No. 186, aprobo el 8 de Agosto, 1937, por
medio de su junta provincial, una resolucion en que significaba su intencion de
afiliarse al Sistema de Seguro de Vida del Gobierno nacional llamado "Government
Service Insurance System"; (b) que despues de recibir dicha resolucion, la junta que
regenta y administra dicho Sistema de Seguro la aprobo debidamente, haciendo
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efectiva la afiliacion desde el 28 de Febrero, 1938; (c) que Andres A. Gomez, antes de
sumuerte, juntamente con otros empleados del gobierno provincial de la Pampanga
habia llenado un formulario del referido Sistema de Seguro llamado "Information for
membership insurance," en el que nombraba a suesposa Adelaida Ocampo como
beneficiaria, enviando luego el formulario asi llenado al "Government Service
Insurance System" que lo recibio y guardo en su archivo; (d) que el 28 de Febrero,
1938, el tesorero provincia lde la Pampanga, como pagador oficial, dedujo del sueldode
Gomez correspondiente a la segunda mitad de dichomes la cantidad de P2.70 como su
parte en la primera prima, aportando la provincia una suma igual como su
contribucion; (e) que la prima fue enviada a la oficina del "Government Service
Insurance System" en Manila, y dicha oficina la recibio el 10 de marzo, 1938, librando
el correspondiente recibo al gobierno provincial de la Pampanga; (f) que el 7 de Marzo,
1938, el tesorero provincial de la Pampanga envio a la oficina del "Government Service
Insurance System," en nombre de la viuda de Andres Gomez, Adelaida Ocampo, una
reclamacion por el importe dela poliza de seguro en la suma de P1,052, pero la
juntadirectiva del Sistema la rechazo por el fundamento de queAndres Gomez era solo
un empleado temporero — temporary — bajo las reglas del Servicio Civil, y, por tanto,
no era asegurable cuando murio el 28 de Febrero, 1938; (g) finalmente, que la oficina
del "Government Service Insurance System" devolvio al gobierno provincial de la
Pampanga el importe de la prima pagada, o sea la cantidad de P5.40, por medio de la
libranza de la Tesoreria No. 58162.
La viuda interpuso la presente accion ante el Juzgado de Primera Instancia de la
Pampanga contra la Junta Directiva del "Government Service Insurance System,"
pidiendoel cobro del importe de la poliza. El Juzgado, estimandola defensa de que
Andres Gomez era solo un temporero, sinhaberse cualificado en el servicio civil
mediante el correspondiente examen para merecer un nombramiento como empleado
regular y permanente, y, por tanto, sin derechoa ser asegurado automaticamente bajo
la ley que rige el Sistema, dicto sentencia contra la demandante, sobrese y endola
demanda. De ahi la presente apelacion.
Establecido y convenido que el nombramiento de Gomez era de temporero, la cuestion
que tenemos que resolver essi al tiempo de su muerte tenia tales cualificaciones
quepodia ser considerado como empleado regular y permanente para los efectos del
cobro del importe de su poliza de seguro por la beneficiaria. Decidimos que si, tenia
tales cualificaciones.
Resulta establecido en autos, sin discusion, que Gomez, acogiendose a las
disposiciones del articulo 672 del Codigo Administrativo tal como fue enmendado por
la ley del Commonwealth No. 177, se sometio a examen de 2.o grado enel servicio civil
el 16 de Octubre, 1937, y fue aprobado enaquel examen, si bien este favorable
resultado no se anunciosino despues ya de su muerte. Es obvio que los efectos de la
aprobacion deben retrotraerse a la fecha del examen. La prueba de la competencia, de
la idoneidad del examinando, se realizo antes de su muerte; por tanto, hay que darle
efectividad desde la fecha en que tuvo lugar laprueba. Hasta parece superfluo que esto
se discuta.
Sin embargo, se arguye que no cabe dar efecto retroactivo a la aprobacion de Gomez
en su examen, puesto que el articulo 663 (d) del Codigo Administrativo Revisado, tal
como ha sido enmendado, dispone que "a period of trial service shall be required
before appointment or employmentis made permanent;" y es claro que Gomez, habien
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domuerto despues del examen y antes de que su resultado seanunciara, mal pudo ser
sometido a dicho periodo de pruebapor 6 meses.
Esta manera de interpretar la ley tiene el defecto deser demasiado literal, y "la letra
mata (a veces), mientrasque el espiritu vivifica." Tengase en cuenta que Gomez habia
servido como tasador provincial delegado por 25 años consecutivos hasta el dia de su
muerte. Cuando portan largo tiempo pudo superar la prueba de su competencia, en el
ejercicio cotidiano de sus deberes, hay que presumir que sus superiores estaban
satisfechos de su idoneidad. Por tanto, el periodo de prueba de 6 meses no rezabacon
el. Para los efectos, por lo menos, de la validez de su poliza de seguro, se debe concluir
que el exito desu examen le capacitaba y cualificaba automaticamente para un
nombramiento regular y permanente desde la fechade dicho examen. Por tanto, el era
asegurable y, dehecho, estaba asegurado en el dia de su muerte, bajo losterminos de
la Ley No. 186. Esta conclusion es tanto masjusta cuanto que el "Government Service
Insurance System" acepto practicamente la prima pagada, librando porella el
correspondiente recibo.
Nos sentimos perfectamente autorizados para interpretarla ley lo mas liberalmente
posible, toda vez que, prescindiendo ya de que en el presente caso se trata de la
viuday familia de un pequeño empleado, es evidente que el Sistema Nacional de
Seguro de Vida del Gobierno se hacreado para fines sociales y humanitarios, siendo
parte deese generoso movimiento universal que tiende a mejorarcada dia la suerte de
los hijos del trabajo mediante la promulgacion en todos los paises cultos y civilizados
de leyes progresivas y liberales sobre seguridad social y economica. El articulo 3 de la
ley del Commonwealth No. 186 que crea y reglamenta dicho Sistema, dice
positivamente que el mismose establece "en orden a promover la eficiencia y bien
estarde los empleados del Gobierno de Filipinas y reemplazar los sistemas de
pensiones actualmente establecidos . . .". Como se sabe, aquellos sistemas de
pensioneseran fundamentalmente de beneficencia, tanto que si noha sido posible
continuarlos era porque el gobierno no disponia de tanto dinero para capitalizarlos y
sostener lospor si solo. Asi que se ha ideado el Sistema Nacional de Seguro sobre
bases mas cientificas y con adecuadas aportaciones de los empleados mismos. Con
todo, es innegableque el sucesor ha heredado parte de los rasgos beneficos y
humanitarios de sus antecesores.
En meritos de lo expuesto, se revoca la sentencia del Juzgado y se condena a la
demandada y apelada a pagara la demandante y apelante la suma de P1,052, importe
de la poliza de seguro del difunto Andres A. Gomez, maslos intereses legales desde la
interposicion de la demanda, y las costas del juicio. Asi se ordena.
Moran, Pres., Paras, Feria, Pablo, Hilado, Bengzon, Padilla, and Tuason , MM., estan
conformes.
Separate Opinions
PERFECTO, J., concurring:
We agree with the decision penned by Mr. Justice Briones, reversing the judgment of
the lower court and ordering defendant to pay plaintiff the insurance of her deceased
husband Andres Gomez in the sum of P1,052, including legal interest and costs.
Under the provisions of Commonwealth Act No. 177, amending the Civil Service Law,
8
Andres Gomez was a regular and permanent employee of the government, because he
had been occupying for twenty-five years a classified position and had passed the
examination as provided for by the above mentioned act, the pertinent, provisions of
which are as follows:
No person shall be appointed to or employed in any position in the classified service
until he passes the examination provided therefor. Provided, however, that persons
now regularly and permanently employed in any branch or subdivision of the
Government, whose positions are or may hereafter be classified by operation of the
Constitution and of this Act may, unless separated by proper authority, continue in
the service for the term of three years from January first, nineteen hundred and thirty-
seven; Provided, that they shall be given three chances to qualify; and Provided,
finally, That all employees who, upon the approval of this act, have rendered ten or
more years of continuous and satisfactory service in a classified position or in any
position which may be subject to classification, shall be given practical examination in
which their length of service shall be accorded preferred consideration.
The deceased, having rendered ten or more years of continuous and satisfactory
service in a classified position and passed the corresponding examination, became a
permanent and regular employee and his membership in the insurance system
became compulsory under section 4 (g), of Commonwealth Act No. 186, known as the
Government Service Insurance Act.
Having had the privilege of initiating the amendment to the Civil Service Law which
was later embodied in Commonwealth Act No. 117, as above quoted, we are in a
position to state, as member of the National Assembly which approved the act and as
author of the provisions, that the same covered perfectly the case of Andres Gomez to
make him a permanent and regular employee.
We are also in a position to state that the main purpose of the Government Service
Insurance Act was to replace the several pension laws then effective, in order to
eliminate the discrimination resulting from the fact that, while a small number of
government employees were enjoying the benefits of special pension laws, those
benefits were denied to a great majority of government employees. To uphold the
position taken by the lower court is to deprive the widow of Andres Gomez of the
benefits clearly intended for her by Commonwealth Act No. 186.
Even if Andres Gomez had been only a temporary employee he was still insurable. The
fact that membership in the Government Insurance System is compulsory upon
permanent and regular employees, is no reason to deprive other employees of the
benefits of the system as, otherwise, it will defeat the very social purpose for which it
was established by the National Assembly.
The system was established "in order to promote the efficiency and welfare of the
employees of the Government of the Philippines and to replace the present pension
systems established," as stated in section 3 of Commonwealth Act No. 186. There is
absolutely no principle of justice which can justify circumscribing the benefits of the
system only to permanent and regular employees, when it was expressly intended for
all employees, and to continue the hateful discrimination which compelled the
National Assembly to abolish the then existing special pension systems. If there
should be any doubt on this question, the doubt should be resolved in favor of the
general intent of the law.
9
Courts are justified to do violence to the words of the statute to carry out "the judge-
discovered intent" (Judge Baldwin, The American Judiciary, p. 84); that construction
of statutes must be done to avoid absurdity, and that general terms must not lead to
"injustice, oppression, or an absurd consequence," because "the reason of the law in
such cases should prevail over its letter" (The Church of the Holy Trinity vs. U.S., 36
Law. ed. [U.S.], 232); that our judges can go further to diagnose the intent of the law
and give it fulgour and effect and that the judge-made law is recognized in the
Philippines (In re Shoop, 41 Phil., 213); that lawyers who deny the power of courts to
legislate in the Philippines are sadly mistaken (Bocobo, The Cult of Legalism); that
courts are "the great laboratories of the law" (Justice Cardozo, The Nature of Judicial
Process); while Holland said in The Elements of Jurisprudence:
The State in general has two, and only two, articulate organs for law-making purposes
— the Legislature and the Tribunals. The first organ makes new law, the second
attests and confirms old law, though under cover of so doing it introduces many new
principles.
. . . For statutes and judicial decisions alike come into being and grow out of the same
common roots, the supreme good of society. It is a consecrated legal axiom that the
reason of the law is the life of the law. The reason lies in the soil of the common
welfare." (Bocobo, Cult of Legalism.)
. . . Consequently, if the judge limits himself to the printed page of the statute, and
does not go out into the open spaces o factuality and dig down deep into this common
soil, he fails in his noble calling, and becomes subservient to formalism. (Bocobo, Cult
of Legalism.)
In Samuels, Special C.J., in Wortham vs. Walker Tex. ([1939], 127 S.W. [2nd], 1138,
1150), we have the following liberal construction of the law:
A liberal interpretation of a statute which denies to it the historical circumstances
under which it has drawn is to make mummery of its provisions.
A statute should not be construed in a spirit of detachment as if it were a protoplasm
floating around a space . . .. "Generally it may be said that in determining the
meaning, intent, and purpose of a law or constitutional provisions, the history of the
times out of which it grew and to which it may be rationally supposed to bear some
direct relationship, the evils intended to be remedied, and the good to be accomplished
are proper subjects of inquiry" . . ..
Law is not a water-tight compartment sealed or shut off from the contract with the
drama of life which unfolds before our eyes. It is in no sense a cloistered realm but a
busy state in which events are held up to our vision and touch at our elbows.
If the above principles of interpretation are not enough in support of the theory that all
employees of the government are entitled to the benefits of the Government Insurance
System, there is the principle of social justice embodied in the Constitution which
supports the position, and with more emphasis if we take into consideration the fact
that Commonwealth Act No. 186 was enacted after the Constitution came into effect.
Is the mandate addressed only to the legislative department? No: it is meant for the
three departments; legislative, executive, and judicial, because the latter two are no
less the agencies of the State than the first. For what use would it be for the National
10
Assembly to pass laws calculated to enhance social justice if the executive officials
should enforce them in such a way, and the courts should give them such an
interpretation, as to defeat social justice?
Certainly, this principle of social justice in our Constitution as generously conceived
and so tersely phrased, was not included in the fundamental law as a mere popular
gesture. It was meant to a vital, articulate, compelling principle of public policy. It
should be observed in the interpretation not only of future legislation, but also of all
laws already existing on November 15, 1935. It was intended to change the spirit of
our laws, present and future. Thus, all the laws which on the great historic event
when the Commonwealth of the Philippines was born, were susceptible of two
interpretations — strict or liberal, against or in favor of social justice, now have to be
construed broadly in order to promote and achieve social justice. This may seem novel
to our friends, the advocates of legalism, but it is the only way to give life and
significance to the above-quoted principle of the Constitution. If it was not designed to
apply to these existing laws, then it would be necessary to wait for generations until
all our codes and all our statutes shall have been completely changed by removing
every provision inimical to social justice, before the policy of social justice can become
really effective. That would be an absurd conclusion. It is more reasonable to hold that
this constitutional principle applies to all legislation in force on November 15, 1935,
and all laws thereafter passed. (Bocobo, Cult of Legalism.)
Law, being a manifestation of social culture and progress, must be interpreted taking
into consideration the stage of said culture and progress including all the concomitant
circumstances. It must be interpreted by drawing inspiration, not only from the
teachings of history, from precedents and traditions, but from inventions of science,
discoveries of art, ideals of thinkers, dreams of poets, that is, all the sources from
which may spring guidance and help to form a truthful idea of the human relations
regulated by the law to be interpreted and applied. Broadmindedness and vision are
essential for men presiding tribunals to reach correct and just conclusions.
January 23, 1907

G.R. No. 3069
VIOLA BADGER, plaintiff-appellant,
vs.
THE NEW YORK LIFE INSURANCE COMPANY, defendant-appellee.
Condert Brothers for appellant.
Hartigan, Rohde & Gutierrez for appellee.
WILLARD, J.:
On July 5, 1902, William H. Badger made out a written application for a policy of
insurance upon his life for $5,000 in favor of his wife, Harriet Viola Badger. The first
premium on this policy amounted to $312.50. Badger sent the application and
$297.60 to R. E. Herdman, who received the application and the money on the 9th of
July, 1902.
Herdman sent the papers on July 24 to the office of the defendant company in
Shanghai, where they were received on August 11. Badger executed a promissory note
11
for $14.90, the balance of the first premium, which was sent to Herdman on July 17,
1902. On the 31st of July, Mrs. Badger, acting for her husband, sent to Herdman
$14.90, cash, in payment of said note. Badger died on the 1st day of August, 1902, of
cholera. No policy was ever issued upon his application.
The plaintiff brought this action to recover the sum of $5,000, alleging that a contract
of insurance had been made by the company with Badger. Judgment was rendered in
the court below in favor of the defendant to the effect that no such contract was ever
made, from which judgment the plaintiff appealed.
The only person who acted in any way for the company in this transaction was
Herdman. The only evidence in the case to show what his powers were is found in an
admission in the answer which states that he was "a special agent and cashier of the
defendant company in Manila," and in his evidence, testifying as a witness, he said
that at the time of the trial on September 6, 1905, he was the agency director of the
defendant company in the city of Manila.
The action can not be maintained unless the plaintiff proves a contract between the
company and Badger, made by a person authorized to act for the company. The
authority of this person must, of course, be proven. There is no evidence in the case to
show that Herdman had any authority to make any contract, either parol or in writing,
that would bind the company. There is no evidence to show that he had any policies in
his possession.
Nor is there any evidence that Herdman ever undertook to make any parol contract
with Badger for this insurance. There had been some correspondence between the
parties prior to the making of the application on July 5. On that day Herdman, writing
to Badger in regard to the medical examination, said:
I will send you an official receipt when your remittance reaches the office, and then a
new examination will not be necessary when the policies are delivered; otherwise this
would be necessary.
After Badger had received the receipt of Herdman for the money sent to him and on
July 11, he wrote to Herdman, saying:
Yours of the 9th instant received. Is the receipt you sent official or not? I do not wish
to take another examination, and so desire an official receipt.
xxx xxx xxx
Shall I be obliged to wait until you receive an answer from the office in New York, or do
you have authority to issue policies at the Manila office?
xxx xxx xxx
If my application is accepted does insurance begin July 5, 1902?
In reply to this letter, Herdman, on July 15, wrote, saying:
The receipt I sent you is official, being signed by me as cashier and not personally, and
of course there will not be another examination required.
xxx xxx xxx
12
We issue an interim policy from our Shanghai office, which stands until the definite
policy comes from New York. We hope soon to have an advisory board here in Manila,
so that we will be entirely free from Shanghai, all our other business being transacted
directly with the home officer at New York.
If your examination is acceptable, your policy will date from July 5, the date of your
application.
This evidence shows conclusively that there was no parol agreement between the
parties that the insurance had commenced on July 5, 1902. In fact, the claim of the
appellant reduced to its lowest terms is that the mere signing of an application for life
insurance and the payment of a first premium, without any parol agreement as to
when the insurance shall commence, constitutes a contract between the parties
binding from that date. Such a contention as this can not be sustained.
Moreover, there is evidence in the case in addition to that already referred to, showing
that the company expressly refused to be bound until the application had been
accepted either by its office in Shanghai or its office in New York. In the application
which Badger signed on the 5th day of July it is said:
I agree, on behalf of myself and of any person who shall have or claim any interest in
any policy issued under this application, as follows: That inasmuch as only the officers
at the home office of the company in the city of New York have authority to determine
whether or nor a policy shall issue on any application, no statements, etc., shall be
binding on the company.
In the report of the medical examiner there is found this printed statement:
The examiner is requested to send direct to the company in New York City any
information which, for any reason, he prefers not to embody in this report. He can also
mail this report direct to the company if he prefers.
Herdman testifies that when he sent to Badger a receipt for the money paid, it was on
one of two printed blanks, which one he could not say. The court below found that the
receipt was sent upon the blank which contained a reference to the Shanghai office.
Whether it was upon this form of receipt or upon the other one is of no consequence.
In one of them it is stated "that the company shall incur no liability under the
application until it has been received, approved by the resident board of the company
at Shanghai, and a policy issued thereon by the resident board, and the full premium
has actually been paid to and accepted by the company or its authorized agent during
the lifetime and good health of the person upon whose life the insurance is applied for.
The company reserves the absolute right of disapproval of such application."
The other form contains the statement that "the company shall incur no liability under
the application until it has been received, approved at the house office of the company,
and a policy issued thereon." This is then followed by the words of the first form. Upon
both of these forms are printed the words "conditional receipt."
It seems very clear that no liability was incurred by the company in this case. The
judgment of the court below is accordingly affirmed, with the costs of this instance
against the appellant.
13
After expiration of twenty days let judgment be entered in accordance herewith and
ten days thereafter the record remanded to the court below for proper action. So
ordered.
Velasco v Apostol G.R. No. L-44588 May 9, 1989

J. Regalado
Facts:
Plaintiffs Velasco and Acosta were riding in their Mercury car near Speaker Perez
Street, Quezon City, toward the directionof Manila. An N/S taxicab driven
by defendant Santos, crossed the center island towards their direction, and finally
collided with their car. The taxicab tried to return to its original lane, but was unable
to climb the island, and instead, backtracked, hitting again plaintiffs' car in the left
near portion, causing the latter's back portion to turn toward the center hitting a
jeepney on its right.
Maharlika Insurance Co., Inc. was impleaded as a defendant with an allegation that
the N/S taxicab involved was insured against third party liability for P20,000.00 with
private respondent at the time of the accident.
The company claimed that there was no cause of action against it because at the time
of the accident, the alleged insurance policy was not in force due to non-payment of
the premium. They alleged that even if the taxicab had been insured, the complaint
would still be premature since the policy provides that the insurer would be liable only
when the insured becomes legally liable.
The trial court rendered judgment in favor of the plaintiff affirming Santos’ negligence
as the proximate cuase. Defendantswere made to pay P17,061.95 for the repair of
their car and 37,000 for other damages. Maharlika Insurance Co. was exonerated on
the ground that the policy was not in force for failure of the defendants to pay the
initial premium.
Petitioners appealed the case to the Supreme Court with the averment that only
questions of law are involved.
Issue:
1. Whether defendant Maharlika Insurance Co. Inc. is liable under the insurance
policy on account of the negligence of defendant Dominador Santos.
Held: No. Petition dismissed
14
Ratio:
1. Petitioners averred that the respondent had agreed to grant the then prospective
insured a credit extension for the premium due.
The accident arose when the old insurance law, Act No. 2427 was in effect. The
accident occurred on November 27, 1973 while the complaint was filed on July 20,
1974, both before effectivity of Presidential Decree No. 612.
The former insurance law, which applies to the case under consideration, provided
that:
An insurer is entitled to the payment of premium as soon as the thing insured is
exposed to the peril insured against, unless there is clear agreement to grant the
insured credit extension of the premium due. No policy issued by an insurance
company is valid and binding unless and until the premium thereof has been paid.
The insurance policy in question would be valid and binding even without the non-
payment of the premium if there was a clear agreement to grant to the insured credit
extension.
Petitioners claim that “a condition requiring pre-payment of the premium is waived by
a parol agreement to that effect, acceptance of the premium after delivery of the policy,
the unconditional delivery of the policy, the giving of credit for the premiums, ... or any
other circumstances showing that pre-payment was not intended to be insisted upon.”
The accident for which respondent insurance company is sought to be held liable
occurred on November 27, 1973 while the initial premium was paid only on December
11, 1973.
Petitioners still maintained that the policy is nevertheless binding because there was
an implied agreement to grant a credit extension so as to make the policy effective.
This was not tenable, because the delivery of the policy was made on March 28, 1974.
Also, the premium was had been paid, in fact, more than three months before such
delivery.
The payment was accepted by the insurer without any knowledge that the risk insured
had occurred since such fact was concealed by the insured and was not revealed to
the insurer. The delivery of the policy was far from being unconditional. Had there
really been a credit extension, the insured would not have had any apprehension or
hesitation to inform the respondent insurance company at the time of or before the
payment of the premium that an accident for which the insurer may be held liable had
already happened.
Petitioners failed to point out "any other circumstances showing that prepayment of
premium was not intended to be insisted upon." They have thus failed to discharge the
burden of proving their allegation of the existence of the purported credit extension
agreement.
Section 77 of the Insurance Code of 1978 has deleted the clause "unless there is clear
agreement to grant the insured credit extension of the premium due" which was then
involved in this controversy.
15
There is bad faith on the part of defendants due to a reprehensible disregard of the
principle that insurance contracts are “uberrimae fidae and demand the most
abundant good faith.”
Valenzuela v CA G.R. No. 83122 October 19, 1990

J. Gutierrez Jr.
Facts:
Petitioner Valenzuela, a General Agent respondent Philamgen, was authorized to
solicit and sell all kinds of non-life insurance. He had a 32.5% commission rate. From
1973 to 1975, Valenzuela solicited marine insurance from Delta Motors, Inc. in the
amount of P4.4 Million from which he was entitled to a commission of 32%. However,
Valenzuela did not receive his full commission which amounted to P1.6 Million from
the P4.4 Million. Premium payments amounting to P1,946,886.00 were paid directly to
Philamgen. Valenzuela’s commission amounted to P632,737.00.
Philamgen wanted to cut Valenzuela’s commission to 50% of the amount. He declined.
When Philamgen offered again, Valenzuela firmly reiterated his objection.
Philamgen took drastic action against Valenzuela. They: reversed the commission due
him, threatened the cancellation of policies issued by his agency, and started to leak
out news that Valenzuela has a substantial debt with Philamgen. His agency contract
was terminated.
The petitioners sought relief by filing the complaint against the private respondents.
The trial court found that the principal cause of the termination as agent was his
refusal to share his Delta commission.
The court considered these acts as harassment and ordered the company to pay for
the resulting damage in the value of the commission. They also ordered the company
to pay 350,000 in moral damages.
The company appealed. The CA ordered Valenzuela to pay the entire amount of the
commission. Hence, this appeal by Valenzuela.
Issue:
1. WON the agency contract is coupled with interest on the part of agent Valenzuela.
2. Whether or not Philamgen can be held liable for damages due to the termination of
the General Agency Agreement it entered into with the petitioners.
3. WON Valenzuela should pay the premiums he collected.
16
Held: Yes. Yes. Petition granted
Ratio:
1. In any event the principal's power to revoke an agency at will is so pervasive, that
the Supreme Court has consistently held that termination may be effected even if the
principal acts in bad faith, subject only to the principal's liability for damages.
The Supreme Court accorded great weight on the trial court’s factual findings and
found the cause of the conflict to be Valenzuela’s refusal to share the commission.
Philamgen told the petitioners of its desire to share the Delta Commission with them.
It stated that should Delta back out from the agreement, the petitioners would be
charged interests through a reduced commission after full payment by Delta.
Philamgen proposed reducing the petitioners' commissions by 50% thus giving them
an agent's commission of 16.25%. The company insisted on the reduction scheme. The
company pressured the agents to share the income with the threat to terminate the
agency. The petitioners were also told that the Delta commissions would not be
credited to their account. This continued until the agency was terminated.
Records also show that the agency is one "coupled with an interest," and, therefore,
should not be freely revocable at the unilateral will of the company.
The records sustain the finding that the private respondent started to covet a share of
the insurance business that Valenzuela had built up, developed and nurtured. The
company appropriated the entire insurance business of Valenzuela. Worse, despite the
termination of the agency, Philamgen continued to hold Valenzuela jointly and
severally liable with the insured for unpaid premiums.
Under these circumstances, it is clear that Valenzuela had an interest in
the continuation of the agency when it was unceremoniously terminated not only
because of the commissions he procured, but also Philamgen’s stipulation liability
against him for unpaid premiums. The respondents cannot state that the agency
relationship between Valenzuela and Philamgen is not coupled with interest.
There is an exception to the principle that an agency is revocable at will and that is
when the agency has been given not only for the interest of the principal but also for
the mutual interest of the principal and the agent. The principal may not defeat the
agent's right to indemnification by a termination of the contract of agency. Also, if a
principal violates a contractual or quasi-contractual duty which he owes his agent, the
agent may as a rule bring an appropriate action for the breach of that duty.
2. Hence, if a principal acts in bad faith and with abuse of right in terminating the
agency, then he is liable in damages. The Civil Code says that "every person must in
the exercise of his rights and in the performance of his duties act with justice, give
every one his due, and observe honesty and good faith: (Art. 19, Civil Code), and every
person who, contrary to law, wilfully or negligently causes damages to another, shall
indemnify the latter for the same (Art. 20, Civil Code).
3. As to the issue of whether or not the petitioners are liable to Philamgen for the
unpaid and uncollected premiums which the appellate court ordered Valenzuela to
pay, the respondent court erred in holding Valenzuela liable.
17
Under Section 77 of the Insurance Code, the remedy for the non-payment of premiums
is to put an end to and render the insurance policy not binding.
Philippine Phoenix- non-payment of premium does not merely suspend but puts an
end to an insurance contract since the time of the payment is peculiarly of the essence
of the contract.
Section 776 of the insurance Code says that no contract of insurance by an insurance
company is valid and binding unless and until the premium has been paid,
notwithstanding any agreement to the contrary
Since the premiums have not been paid, the policies issued have lapsed. The
insurance coverage did not go into effect or did not continue and the obligation of
Philamgen as insurer ceased. Philam can’t demand from or sue Valenzuela for the
unpaid premiums.
The court held that the CA’s giving credence to an audit that showed Valenzuela owing
Philamgen P1,528,698.40 was unwarranted. Valenzuela had no unpaid account with
Philamgen. But, facts show that the beginning balance of Valenzuela's account with
Philamgen amounted to P744,159.80. 4 statements of account were sent to the agent.
It was only after the filing of the complaint that a radically different statement of
accounts surfaced in court. Certainly, Philamgen's own statements made by its own
accountants over a long period of time and covering examinations made on four
different occasions must prevail over unconfirmed and unaudited statements made to
support a position made in the course of defending against a lawsuit.
The records of Philamgen itself are the best refutation against figures made as an
afterthought in the course of litigation. Moreover, Valenzuela asked for a meeting
where the figures would be reconciled. Philamgen refused to meet with him and,
instead, terminated the agency agreement.
After off-setting the amount, Valenzuela had overpaid Philamgen the amount of
P530,040.37 as of November 30, 1978. Philamgen cannot later be heard
to complain that it committed a mistake in its computation. The alleged error may be
given credence if committed only once. But as earlier stated, the reconciliation of
accounts was arrived at four (4) times on different occasions where Philamgen was
duly represented by its account executives. On the basis of these admissions and
representations, Philamgen cannot later on assume a different posture and claim that
it was mistaken in its representation with respect to the correct beginning balance as
of July 1977 amounting to P744,159.80. The audit report commissioned by Philamgen
is unreliable since its results are admittedly based on an unconfirmed and unaudited
beginning balance of P1,758,185.43.
Philamgen has been appropriating for itself all these years the gross billings and
income that it took away from the petitioners. A principal can be held liable for
damages in cases of unjust termination of agency. This Court ruled that where no time
for the continuance of the contract is fixed by its terms, either party is at liberty to
terminate it at will, subject only to the ordinary requirements of good faith. The right
of the principal to terminate his authority is absolute and unrestricted, except only
that he may not do so in bad faith.
18
The circumstances of the case, however, require that the contractual relationship
between the parties shall be terminated upon the satisfaction of the judgment. No
more claims arising from or as a result of the agency shall be entertained by the
courts after that date.
Tibay v. CA Digest
Tibay, et. al v Court of Appeals

GR No. 119655, 24 May 1996
Bellosillo, [J.]
Facts:
1. In January 22 1987, the Petitioner Violeta Tibay (and Nicolas Roralso) obtained
a fire insurance policy for their 2-storey from the Private Respondent Fortune Life
Insurance Co. The said policy covers the period from January 23, 1987 until January
23, 1988 or one year for P600, 000 and at the agreed premium of P2, 983.50. On
January 23 or the next day, petitioner made a partial payment of the premium with
P600.
2. Unfortunately, on March 8 1987, the said building was burned to the ground. It
was only two days after the fire that Petitioner Violeta advanced the full payment of
the policy premium which was accepted by the insurer. On this same day, petitioner
likewise filed the claim that was then referred to the insurer's adjuster. Investigation of
the cause of fire commenced and the petitioner submitted the required proof of loss.
3. Despite that, the private respondent Fortune refused to pay the insurance claim
saying it as not liable due to the non-payment by petitioner of the full amount of the
premium as stated in the policy.
4. The petitioner then brought the matter to the Insurance Commission but
nothing good came out. Hence this case filed.
5. The trial court rule in favor of the petitioner. Upon appeal, the Court of Appeals
reversed the lower court's decision and held that Fortune is not liable but ordered it to
return the premium paid with interest to the petitioner. Hence, this petition for review.
19
Issue: W/N the partial payment of the premium rendered the insurance policy
ineffective?
YES.
1. Insurance is a contract whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or
contingent event. The consideration is the premium, which must be paid at the time,
way and manner as stated in the policy, and if not so paid as in this case, the policy is
therefore forfeited by its own terms. In this case, the policy taken out by the petitioner
provides for payment of premium in full. Since the petitioner only made partial
payment with the remaining balance paid only after the fire or peril insured against
has occurred, the insurance contract therefore did not take effect barring the insured
from claiming or collecting from the loss of her building.
2. Under Section 77 of the Insurance Code (Philippine), it provides therein that "An
insurer is entitled to payment of the premium as soon as the thing insured is exposed
to the peril insured against. Notwithstanding any agreement to the contrary, no policy
or contract of insurance issued by an insurance company is valid and binding unless
and until the premium thereof has been paid, except in the case of a life or an
industrial life policy whenever the grace period provision applies." Herein case, the
controversy is on the payment of the premium. It cannot be disputed that premium is
the elixir vitae of the insurance business because the insurer is required by law to
maintain a reserve fund to meet its contingent obligations to the public. Due to this, it
is imperative that the premium is paid fully and promptly. To allow the possibility of
paying the premium even after the peril has ensued will surely undermine the
foundation of the insurance business.
G.R. No. 95546 November 6, 1992

MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner, vs. THE COURT OF
APPEALS, AMERICAN HOME ASSURANCE CO., represented by American
International Underwriters (Phils.), Inc., respondent.
FACTS:
Sometime in early 1982, private respondent American Home Assurance Co. (AHAC),
represented by American International Underwriters (Phils.), Inc., issued in favor of
petitioner Makati Tuscany Condominium Corporation (TUSCANY) Insurance Policy No.
AH-CPP-9210452 on the latter's building and premises, for a period beginning 1
March 1982 and ending 1 March 1983, with a total premium of P466,103.05. The
premium was paid on installments on 12 March 1982, 20 May 1982, 21 June 1982
and 16 November 1982, all of which were accepted by private respondent.
Successive renewals of the policies were made in the same manner. On 1984, the
policy was again renewed and petitioner made two installment payments, both
accepted by private respondent, the first on 6 February 1984 for P52,000.00 and the
second, on 6 June 1984 for P100,000.00. Thereafter, petitioner refused to pay the
20
balance of the premium.
Private respondent filed an action to recover the unpaid balance of P314,103.05 for
Insurance Policy. Petitioner explained that it discontinued the payment of premiums
because the policy did not contain a credit clause in its favor. Petitioner further
claimed that the policy was never binding and valid, and no risk attached to the
policy. It then pleaded a counterclaim for P152,000.00 for the premiums already paid
for 1984-85, and in its answer with amended counterclaim, sought the refund of
P924,206.10 representing the premium payments for 1982-85.
DECISION OF LOWER COURTS:

(1) Trial Court: dismissed the complaint and counterclaim
(2) CA: ordering herein petitioner to pay the balance of the premiums due
ISSUE:
Whether payment by installment of the premiums due on an insurance policy
invalidates the contract of insurance, in view of Sec. 77 of P.D. 612, otherwise known
as the Insurance Code, as amended, which provides:
Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing is
exposed to the peril insured against. Notwithstanding any agreement to the contrary, no
policy or contract of insurance issued by an insurance company is valid and binding
unless and until the premium thereof has been paid, except in the case of a life or an
industrial life policy whenever the grace period provision applies.
RULING:
No, the contract remains valid even if the premiums were paid on installments.
Certainly, basic principles of equity and fairness would not allow the insurer to
continue collecting and accepting the premiums, although paid on installments, and
later deny liability on the lame excuse that the premiums were not prepared in full.
At the very least, both parties should be deemed in estoppel to question the
arrangement they have voluntarily accepted.
Moreover, as correctly observed by the appellate court, where the risk is entire and the
contract is indivisible, the insured is not entitled to a refund of the premiums paid if
the insurer was exposed to the risk insured for any period, however brief or
momentary. The obligation to pay premiums when due is ordinarily as indivisible
obligation to pay the entire premium.
South Sea v CA G.R. No. 102253 June 2, 1995

J. Vitug
Facts:
21
Valenzuela Hardwood entered into an agreement with the defendant Seven Brothers
whereby the latter undertook to load the former's 940 lauan logs for shipment to
Manila.
South Sea insured the logs for P2,000,000.00 in its marine policy. Valenzuela then
gave the check in payment of the premium on the insurance policy to Mr. Victorio
Chua.
Seven Brothers’ ship sank resulting in the loss of the logs.
A check for P5,625.00 to cover payment of the premium tendered to the insurer but
was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the
insurance policy it issued as of the date of inception for non-payment of the premium
due in accordance with Section 77 of the Insurance Code.
Valenzuela demanded from South Sea the payment of the proceeds of the policy but
the latter denied liability under the policy. Plaintiff likewise filed a formal claim
with defendant Seven Brothers Shipping Corporation for the value of the lost logs but
the latter denied the claim.
Valenzuela filed a complaint a complaint for the recovery of the value of lost logs and
freight charges from Seven Brothers Shipping Corporation or from South Sea Surety
and Insurance Company, the insurer.
The trial court rendered judgment in favor of plaintiff Valenzuela. The Court of
Appeals affirmed the judgment only against the insurance corporation and absolved
the shipping entity from liability. The court held that there was a stipulation in the
charter party exempted the ship owner from liability in case of loss.
In the SC petition, petitioner argues that it should have been freed from any liability to
Hardwood. It faults the appellatecourt (a) for having disregarded Section 77 of the
insurance Code and (b) for holding Victorio Chua to have been an authorized
representative of the insurer.
Issue:
WON Mr. Chua acted as an agent of the surety company or of the insured when he
received the check for insurance premiums.
Held: Agent of the surety. Petition denied.
Ratio:
To determine if there was a valid contract of insurance, it must be determine if the
premium was validly paid to the company or its agents at the time of the loss.
The appellate and trial courts have found that Chua acted as an agent.
South Sea insisted that Chua has been an agent for less than ten years of
the Columbia Insurance Brokers, a different company. Appellant argued that Mr.
22
Chua, having received the premiums, acted as an agent under Section 301 of the
Insurance Code which provides:
Sec. 301. Any person who for any compensation, commission or other thing of value,
acts, or aids in soliciting, negotiating or procuring the making of any insurance
contract or in placing risk or taking out insurance, on behalf of an insured other than
himself, shall be an insurance broker within the intent of this Code, and shall thereby
become liable to all the dutiesrequirements, liabilities and penalties to which an
insurance broker is subject.
Valenzuela claimed that the second paragraph of Section 306 of the Insurance Code
provided:
Sec. 306 Any insurance company which delivers to an insurance agent or insurance
broker a policy or contract of insurance shall be deemed to have authorized such
agent or broker to receive on its behalf payment of any premium which is due on such
policy of contract of insurance at the time of its issuance or delivery or which becomes
due thereon.
Mr. Chua testified that the marine cargo insurance policy logs was by South Sea to be
given to the wood company.
When South Sea delivered to Mr. Chua the marine cargo insurance policy for
Valenzuela’s logs, he is deemed to have been authorized by former to receive the
premium which is due on its behalf.
When the logs were lost, the insured had already paid the premium to an agent of the
South Sea Surety and Insurance Co., Inc., which is consequently liable to pay the
insurance proceeds under the policy it issued to the insured.
The court followed the factual evidence of the lower courts and held that they didn’t
try questions of fact.
UCPB DISSENT
DISSENTING OPINION
PARDO, J.:
The majority resolved to grant respondents motion for reconsideration of the Courts
decision promulgated on June 15, 1999. By this somersault, petitioner must now pay
respondents claim for insurance proceeds amounting to P18,645,000.00, exclusive of
interests, plus 25% of the amount due as attorneys fees, P25,000.00 as litigation
expenses, and costs of suit, covering its Pasay City property razed by fire. What an
undeserved largess! Indeed, an unjust enrichment at the expense of petitioner; even
the award of attorneys fees is bloated to 25% of the amount due.
We cannot give our concurrence. We beg to dissent. We find respondents claim to be
fraudulent:
First: Respondent Masagana surreptitiously tried to pay the overdue premiums before
giving written notice to petitioner of the occurrence of the fire that razed the
subject property. This failure to given notice of the fire immediately upon its
23
occurrence blatantly showed the fraudulent character of its claim. The fire totally
destroyed the property on June 13, 1992; the written notice of loss was given only
more than a month later, on July 14, 1992, the day after respondent surreptitiously
paid the overdue premiums. Respondent very well knew that the policy was not
renewed on time. Hence, the surreptitious attempt to pay overdue premiums. Such act
revealed a reprehensible disregard of the principle that insurance is a
contract uberrima fides, the most abundant good faith.[1] Respondent is required by
law and by express terms of the policy to give immediate written notice of loss. This
must be complied with in the utmost good faith.
Another badge of fraud is that respondent deviated from its previous practice of
coursing its premium payments through its brokers. This time, respondent Masagana
went directly to petitioner and paid through its cashier with managers
checks. Naturally, the cashier routinely accepted the premium payment because he
had no written notice of the occurrence of the fire. Such fact was concealed by the
insured and not revealed to petitioner at the time of payment.
Indeed, if as contended by respondent, there was a clear agreement regarding the
grant of a credit extension, respondent would have given immediate written notice of
the fire that razed the property. This clearly showed respondents attempt
to deceive petitioner into believing that the subject property still existed and the risk
insured against had not happened.
Second: The claim for insurance benefits must fall as well because the failure to give
timely written notice of the fire was a material misrepresentation affecting the risk
insured against.
Section 1 of the policy provides:
All benefits under the policy shall be forfeited if the claim be in any respect fraudulent,
or if any false declaration be made or used in support thereof, or if any false
declaration be made or used in support thereof, or if any fraudulent means or devices
are used by the insured or any one acting on his behalf to obtain any benefit under
the policy.[2]
In the factual milieu, the purported practice of giving 60 to 90-day credit extension for
payment of premiums was a disputed fact. But it is a given that the written notice of
loss was not immediately given. It was given only the day after the attempt to
pay the delayed premiums.
At any rate, the purported credit was a mere verbal understanding of the respondent
Masagana of an agreement between the insurance company (petitioner) and the
insurance brokers of respondent Masagana. The president fo respondent
Masagana admitted that the insurance policy did not contain any proviso pertaining
to the grant of credit within which to pay the premiums. Respondent Masagana
merely deduced that a credit agreement existed based on previous years practice that
they had of delayed payments accepted by the insurer as reflected on the face of the
receipts issued by UCPB evidencing the payment of premiums.
Q: You also claim that you have 60 to 90 days credit arrangement with UCPB; is that
correct?
A: Yes, maam.
24
Q: Im showing to you the policy which had previously been marked in evidence as
Exhibit A, B, C, D, & E for the plaintiff and likewise, marked as exhibits 1, 2, 3, 4, & 5
for the defendant. Could you show us, Mr. Witness where in these policies does it
show that you are actually given 60 to 90 days credit arrangement with UCPB?
A: Well, its verbal with your company, and Ansons Insurance Brokerage. It is not
written.
Q: It is not written in the policy?
A: Yes.
Q: You merely have verbal agreement with Ansons Insurance Brokerage?
A: Yes; as shown in our mode of payment; in our vouchers and the receipts issued by
the insurance company.[3]
It must be stressed that a verbal understanding of respondent Masagana cannot
amend an insurance policy. In insurance practice, amendments or even corrections to
a policy are done by written endorsements or tickets appended to the policy.
However, the date on the face of the receipts does not refer to the date of actual
remittance by respondent Masagana to UCPB of the premium payments, but merely to
the date of remittance to UCPB of the premium payments by the insurance brokers of
respondent Masagana.
Q: You also identified several receipts; here; official receipts issued by UCPB General
Insurance Company, Inc., which has been previously marked as Exhibits F, G, H, I,
and J for the plaintiff; is that correct?
A: Yes.
Q: And, you would agree with me that the dates indicated in these particular Official
Receipts (O.R.), merely indicated the dates when UCPB General Insurance Company
issued these receipts? Do you admit that, Mr Witness?
A: That was written in the receipts.
Q: But, you would also agree that this did not necessarily show the dates when you
actually forwarded the checks to your broker, Anson Insurance Agency, for payment to
UCPB General Insurance Co. Inc., isnt it?
A: The actual support of this would be the cash voucher of the company, Masagana
Telamart Inc., the date when they picked up the check from the company.
Q: And are these cash voucher with you?
A: I dont know if it is in the folder or in our folder, now.
Q: So, you are not certain, whether or not you actually delivered the checks covered by
these Official Receipts to UCPB General Insurance, on the dates indicated?
A: I would suppose it is few days earlier, when they picked up the payment in our
office.[4]
Hence, what has been established was the grant of credit to the insurance
brokers, not to the assured. The insurance company recognized the payment to the
25
insurance brokers as payment to itself, though the actual remittance of the premium
payments to the principal might be made later. Once payment of premiums is made to
the insurance broker, the assured would be covered by a valid and binding insurance
policy, provided the loss occurred after payment to the broker has been made.
Assuming arguendo that the 60 to 90 day-credit-term has been agreed between the
parties, respondent could not still invoke estoppel to back up its claim. Estoppel is
unavailing in this case,[5] thus spoke the Supreme Court through the pen of Justice
Hilario G. Davide, Jr., Now Chief Justice. Mutatis mutandi, he may well be speaking of
this case. He added that [E]stoppel can not give validity to an act that is prohibited by
law or against public policy.[6] The actual payment of premiums is a condition
precedent to the validity of an insurance contract other than life insurance
policy.[7] Any agreement to the contrary is void as against the law and public
policy. Section 77 of the Insurance Code provides:
An insurer is entitled to payment of the premium as soon as the thing insured is
exposed to the peril insured against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an insurance company is
valid and binding unless and until the premium thereof has been paid, except in
the case of a life or an industrial life policy whenever the grace period provision
applies. [Emphasis supplied]
An incisive reading of the afore-cited provision would show that the emphasis was on
the conclusiveness of the acknowledgment in the policy of the receipt of premium,
notwithstanding the absence of actual payment of premium, because of
estoppel. Under the doctrine of estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as against
the person relying thereon. A party may not go back on his own acts and
representations to the prejudice of the other party who relied upon them.[8]
This is the only case of estoppel which the law considers a valid exception to the
mandatory requirement of pre-payment of premium. The law recognized that the
contracting parties, in entering a contract of insurance, are free to enter into
stipulations and make personal undertakings so long as they are not contrary to law
or public policy. However, the law is clear in providing that the acknowledgment must
be contained in the policy or contract of insurance. Anything short of it would not fall
under the exception so provided in Section 78.
Hence, because of respondents failure to pay the premiums prior to the occurrence of
the fire insured against, no valid and binding insurance policy was created to cover
the loss and destruction of the property. The fire took place on June 13, 1992, twenty-
two (22) days after the expiration of the policy of fire insurance. The tender of payment
of premiums was made only thirty (30) days after the occurrence of the fire, or on July
13, 1992. Respondent Masagana did not give immediate notice to petitioner of the fire
as it occurred as required in the insurance policy. Respondent Masagana tried to
tender payment of the premiums overdue surreptitiously before giving notice of the
occurrence of the fire. More importantly, the parties themselves expressly stipulated
that the insurance policy would not be binding on the insurer unless the premiums
thereon had been paid in full. Section 2 of the policy provides:
26
2. This policy including any renewal and/or endorsement thereon is not in force
until the premium has been fully paid and duly receipted by the Company in the
manner provided therein.
Any supplementary agreement seeking to amend this condition prepared by agent,
broker or company official, shall be deemed invalid and of no effect.
No payment in respect of any premium shall be deemed to be payment to the
Company unless a printed form of receipt for the same signed by an Official or duly
appointed Agent of the Company shall have been given to the Insured, except when
such printed receipt is not available at the time of payment and the company or its
representative accepts the premium in which case a temporary receipt other than the
printed form may be issued in lieu thereof. Except only on those specific cases where
corresponding rules and regulations which now we are or may hereafter be in force
provide for the payment of the stipulated premiums in periodic installments at fixed
percentages, it is hereby declared, agreed and warranted that this policy shall be
deemed effective valid and binding upon the Company when the premiums
thereof have actually been paid in full and duly acknowledged in a receipt signed
by any authorized official or representative/agent of the Company in such
manner as provided herein.[9] [emphasis supplied]
Thus, the insurance policy, including any renewal thereof or any endorsements
thereon shall not come in force until the premiums have been fully paid and duly
received by the insurance Company. No payment in respect of any premiums shall be
deemed to be payment to the Insurance Company unless a printed form of receipt for
the same signed by an Official or duly appointed Agent of the Company shall be given
to the insured.
The case of Tibay v. Court of Appeals[10] is in point. The issue raised therein was: May a
fire insurance policy be valid, binding and enforceable upon mere partial payment of
premium? In the said case, Fortune Life and General Insurance Co., Inc. issued Fire
Insurance Policy No. 136171 in favor of Violeta R. Tibay and/or Nicolas Roraldo, on a
two-storey residential building located at 5855 Zobel Street, Makati City, together with
all the personal effects therein, The insurance was for P600,000.00, covering the
period from 23 January 1987 to 23 January 1988. On 23 January 1987, of the total
premium of P2,983.50, Violeta Tibay only paid P600.00, thus leaving a substantial
balance unpaid. On March 8, 1987, the insured building was completely destroyed by
fire. Two days later, or on 10 March 1987, Violeta Tibay paid the balance of the
premium. On the same day, she filed with Fortune a claim for the proceeds of the fire
insurance policy.
In denying the claim of insurance, the Court ruled that by express agreement of the
parties, no vinculum juris or bond of law was to be established until full payment was
effected prior to the occurrence of the risk insured against.[11] As expressly stipulated
in the contract, full payment must be made before the risk occurs for the policy to be
considered effective and in force. No vinculum juris whereby the insurer bound itself to
indemnify the assured according to law ever resulted from the fractional payment of
premium.[12]
The majority cited the case of Makati Tuscany Condominium Corp. vs. Court of
Appeals[13] to support the contention that the insurance policies subject of the instant
27
case were valid and effective. However, the factual situation in that case was different
from the case at bar.
In Tuscany, the Court held that the insurance policies were valid and binding because
there was partial payment of the premiums and a clear understanding between the
parties that they had intended the insurance policies to be binding and effective
notwithstanding the staggered payment of the premiums. On the basis of equity and
fairness, the Court ruled that there was a perfected contract of insurance upon the
partial payment of the premiums, notwithstanding the provisions of Section 77 to the
contrary. The Court would not allow the insurer to continue collecting and accepting
the premiums, although paid on installments, and later deny liability on the lame
excuse that the premiums were not prepaid in full.
There is no dispute that like in any other contract, the parties to a contract of
insurance enjoy the freedom to stipulate on the terms and conditions that will govern
their agreement so long as they are not contrary to law, morals, good customs, public
order or public policy. However, the agreement containing such terms and conditions
must be clear and definite.
In the case at bar, there was no clear and definite agreement between petitioner and
respondent on the grant of a credit extension; neither was there partial payment of
premiums for petitioner to invoke the exceptional doctrine in Tuscany.
Hence, the circumstances in the above cited case are totally different from the case at
bar, and consequently, not applicable herein.
Insurance is an aleatory contract whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or
contingent event.[14] The consideration is the premium, which must be paid at the time
and in the manner specified in the policy, and if not so paid, the policy will lapse and
be forfeited by its own terms.[15]
With regard to the contention that the absence of notice of non-renewal of the policy
resulted to the automatic renewal of the insurance policy, we find the contention
untenable. As above discussed, the law provides that only upon payment of the
insurance premium will the insurance policy bind the insurer to the peril insured
against and hold it liable under the policy in case of loss.
Even in the absence of notice of non-renewal, the assured would be bound by the law
that a non life insurance policy takes effect only on the date payment of the premium
was made.
Verily, it is elemental law that the payment of premium is a mandatory requisite to
make the policy of insurance effective. If the premium is not paid in the manner
prescribed in the policy as intended by the parties, the policy is void and ineffective.[16]
Basically a contract of indemnity, an insurance contract is the law between the
parties. Its terms and conditions constitute the measure of the insurers liability and
compliance therewith is a condition precedent to the insureds right to recovery from
the insurer.[17]
IN VIEW WHEREOF, I vote to DENY the respondents motion for reconsideration, for
lack of merit.
28
Insurance Case Digest: American Home Assurance Co. V. Chua (1999)
G.R. No. 130421 June 28, 1999
Lessons Applicable: Acknowledgement receipt (Insurance)

Laws Applicable: Section 29, Section 66,Section 75, Section 77,Section 78, Section
306 of the Insurance Code
FACTS:
 April 5, 1990: Antonio Chua renewed the fire insurance for its stock-in-trade of
his business, Moonlight Enterprises with American Home Assurance
Companyby issuing a check of P2,983.50 to its agent James Uy who delivered
the Renewal Certificate to him.
 April 6, 1990: Moonlight Enterprises was completely razed by fire with an est.
loss of P4,000,000 to P5,000,000
 April 10, 1990: An official receipt was issued and subsequently, a policy was
issued covering March 25 1990 to March 25 1991
 Antonio Chua filed an insurance claim with American Home and 4 other co-
insurers (Pioneer Insurance and Surety Corporation, Prudential Guarantee and
Assurance, Inc. and Filipino Merchants Insurance Co)
 American Home refused alleging the no premium was paid
 RTC: favored Antonio Chua for paying by way of check a day before the fire
occurred
 CA: Affirmed
ISSUE:
1. W/N there was a valid payment of premium considering that the check was cashed
after the occurrence of the fire since the renewal certificate issued containing the
acknowledgement receipt
2. W/N Chua violated the policy by his submission of fraudulent documents and non-
disclosure of the other existing insurance contracts or “other insurance clause"
HELD:petition is partly GRANTED modified by deleting the awards of P200,000 for

loss of profit, P200,000 as moral damages and P100,000 as exemplary damages, and
reducing the award of attorney’s fees from P50,000 to P10,000
1. YES.
 Section 77 of the Insurance Code
29
 An insurer is entitled to payment of the premium as soon as the thing

insured is exposed to the peril insured against. Notwithstanding any
agreement to the contrary, no policy or contract of insurance issued by
an insurance company is valid and binding unless and until the
premium thereof has been paid, except in the case of life or an industrial
life policy whenever the grace period provision applies
 Section 66 of the Insurance Code - not applicable since not termination but
renewal
 renewal certificate issued contained the acknowledgment that premium had
been paid
 Section 306 of the Insurance Code provides that any insurance company which
delivers a policy or contract of insurance to an insurance agent or insurance
broker shall be deemed to have authorized such agent or broker to receive on
its behalf payment of any premium which is due on such policy or contract of
insurance at the time of its issuance or delivery or which becomes due thereon
 best evidence of such authority is the fact that petitioner accepted the check
and issued the official receipt for the payment. It is, as well, bound by its
agent’s acknowledgment of receipt of payment
 Section 78 of the Insurance Code
 An acknowledgment in a policy or contract of insurance of the receipt of
premium is conclusive evidence of its payment, so far as to make the
policy binding, notwithstanding any stipulation therein that it shall not
be binding until the premium is actually paid.
 This Section establishes a legal fiction of payment and should be interpreted as
an exception to Section 77
2. NO.
 purpose for the “other insurance clause” is to prevent an increase in the moral
hazard
 failure to disclose was not intentional and fraudulent
 Section 75
 A policy may declare that a violation of specified provisions thereof shall
avoid it, otherwise the breach of an immaterial provision does not avoid
the policy.
 American Home is estopped because its loss adjusters had previous knowledge
of the co-insurers
 The loss adjuster, being an employee of petitioner, is deemed a
representative of the latter whose awareness of the other insurance
contracts binds petitioner
 no legal and factual basis for the award of P200,000 for loss of profit
 no such fraud or bad faith = no moral damages
30
 grant of attorney’s fees as part of damages is the exception rather than the rule
 award attorney’s fees where it deems just and equitable that it be so
granted
 reduced to P10,000
MANUFACTURERS LIFE INSURANCE CO. v. MEER

[89 PHIL 351, June 29, 1951]
NATURE:
APPEAL from a judgment of the Court of First Instance of Manila
FACTS:
(this is a tax case. What‟s really important here is the definition of CASH
SURRENDER VALUE).
– Manufacturers Life Insurance Company is a duly organized corporation which has
its head office at Toronto. It is duly registered and licensed to engage in
life insurance business in the Philippines, and, maintains a branch office in Manila. It
was engaged in such business in the Philippines for more than five years before and
including the year 1941. But due to the exigencies of the war It closed the
branch office at Manila during 1942 up to September 1945.- Plaintiff issued a number
31
of life insurance policies in the Philippines containing stipulations referred to as NON

FORFEITURE CLAUSES
– From January 1, 1942 to December 31, 1946, Plaintiff head office at Toronto applied
the provisions of the automatic premium loan clauses upon the nonpayment of the
corresponding premiums by the people who subscribed to the insurance. The net
amount of premiums advanced (by the company) or loaned (to the insured) as
payment for the premium due totalled P1,069,254.98.
– Meer, the Collector of the National Internal Revenue assessed the net amount of
premium at P17,917.12 pursuant to SEC.255, National Internal Revenue Code
– Company protested the assessment, but paid the taxes anyway. Then they filed a
complaint to recover money paid under protest for taxes
– CFI: Dismiss complaint-
PLAINTIFF‟s MAIN CONTENTION: when it made premium loans or premium advances
by virtue of the non-forfeiture clauses, it did not collect premiums within the meaning
of the above sections of the law, and therefore it is not amenable to the tax therein
provided.
1″‘8. Automatic Premium Loan. – This Policy shall not lapse for non-payment of any
premium after it has been three full years in force, it, at the due date of such
premium, the Cash Value of this Policy and of any bonus additions and dividends left
on accumulation (after deducting any indebtedness to the company and the interest
accrued thereon) shall exceed the amount of said premium. In which event the
company will, without further request, treat the premium then due as paid, and the
amount of such premium, with interest from its actual due date at six per cent per
annum, compounded yearly, and one percent, compounded yearly, for expenses, shall
be a first lien on this Policy in the Company’s favour in priority to the claim of any
assignee or any other person. The accumulated lien may at any time, while the Policy
is in force,be paid in whole or in part.’When the premium falls due and is not paid in
cash within the month’s grace, if the Cash Value of this policy and of any bonus
additions and dividends left on accumulation (after deducting any accumulated
indebtedness) be less than the premium then due, the Company will, without further
requests, continue this insurance in force for a period* * *.
’10. Cash and Paid-Up Insurance Values. – At the end of the third policy year
or thereafter, upon the legal surrender of this Policy to the Company while there is no
default in premium payments or within two months after the due date of the premium
in default, the Company will (1) grant a cash value as specified in Column(A) increased
by the cash value of any bonus additions and dividends left on accumulation, which
have been alloted to this Policy,less all indebtedness to the Company on this Polley an
the date of vouch surrender, or (2) endorse this Policy as a Non-Participating Paid-up
Polley for the amount as specified In Column(B) of the Table of Guaranteed Values * *
*.’11. Extended Insurance – After the premiums for three or more full years have been
paid here under in cash, if any subsequent premium is not paid when due, and there
is no indebtedness to the Company on the written request of the insured* **.
“2”SEC. 255. Taxes on insurance premiums. – There shall be collected from every
person, company, or corporation(except purely cooperative companies or associations)
doing insurance business of any sort in the Philippines a tax of one per centum of the
32
total premiums collected* * * whether such premiums are paid in money,

notes, credits, or any substitute for money but premiums refunded within six
months after payment on account of rejection of risk or returned for other reason to
person insured shall not be included in the taxable receipts ***.”
ISSUE(S):
1. WON premium advances made by plaintiff-appellant under the automatic
premium loan clause of its policies are premiums collected’ by the Company
subject to tax
2. WON, in the application of the automatic premium loan clause of plaintiff-
appellant’s policies, there is ‘payment in money, notes, credits, or any
substitutes for money
3. WON the collection of the alleged deficiency premium taxes constitutes double
taxation
4. WON the making of premium advances, granting for the sake of argument that
it amounted to collection of premiums, were done in Toronto, Canada
5. WON the fact that plaintiff-appellant was not doing business in the Philippines
during the period from January 1, 1942 to September 30, 1945, inclusive,
exempts it from payment of premium taxes corresponding to said period
HELD:
(example given by the plaintiff):
“Suppose that ‘A’, 30 years of age,secures a 20-year endowment policy for P5,000 from
plaintiff-appellant Company and pays an annual premium of P250. ‘A’ pays the first
ten yearly premiums amounting to P2,500 and on this amount plaintiff-appellant pays
the corresponding taxes under section 255 of the National Internal Revenue Code.
Suppose also that the cash value of said policy after the payment of the 10th annual
premium amounts to P1,000.” When on the eleventh year the annual premium fell due
and the insured remitted no money within the mouth grace, the insurer treated the
premium then over due as
paid from the cash value, the amount being a loan to the policy holder 1 who could
discharge it at any time with interest at 6 per cent. The insurance contract, therefore,
continued in force for the eleventh year.
1. YES
– Based on the example given by the plaintiff, the insurer collected the amount ofP250
as the annual premium for the eleventh year on the said policy when it loaned to “A”
the sum of P250. The insurer “became a creditor” of the loan, but not
of the premium that had already been paid (advanced by the insurer). The insurer is
entitled to collect interest on the loan, not on the premium. “A” paid the premium for
the eleventh year; but in turn he became a debtor of the company for the sum of P250.
This debt he could repay either by later remitting the money to the insurer or by
letting the cash value compensate for it. The debt may also be deducted from the
amount of the policy should “A” die thereafter during the continuance of the policy.
33
– ON ARGUMENT THAT THE ASSETS OF THE INSURER REMAINED THE SAME

AFTER THE APPLICATION OF THE AUTOMATIC PREMIUM LOAN CLAUSE: there was
an increase in assets in the form of CREDIT for the advances made (in the example,
the P250 for the 11th year).
– ON ARGUMENT THAT IF THE CREDIT IS PAID OUT OF THE CASH SURRENDER
VALUE, THERE WERE NO NEW FUNDS ADDED TO THE COMPANY’S ASSETS”:
Cash surrender value
“as applied to a life insurance policy, is the amount of money the company agrees to
pay to the holder of the policy if he surrenders it and releases his claims upon it. The
more premiums the insured has paid the greater will be the surrender value; but the
surrender value is always a lesser sum than the total amount of premiums
paid.”(Cyclopedia Law Dictionary 3d. ed. 1077.) The cash value or cash surrender
value is therefore an amount which the insurance company holds In trust for the
insured to be delivered to him upon demand. It is therefore a liability of the company
to the insured. Now then, when the company’s credit for advances is paid out of the
cash value or cash surrender value, that value and the company’s liability is thereby
diminished pro tanto.
2. YES
– the insurer agreed to consider the premium paid on the strength of the automatic
loan. The premium was therefore paid by means of a “note” or “credit” or “other
substitute for money” and the tax is due because section 255 above quoted levies
taxes according to the total premiums collected by the insurer “whether such
premiums are paid in money, notes, credits or any substitute for money.
3. NO
–No constitutional prohibition against double taxation.
4. NO
– The loans are made to policyholders in the Philippines, who in turn pay there with
the premium to the insurer thru the Manila branch. Approval of appellant’s
position will enable foreign insurers to evade the tax by contriving to
require that premium payments shall be made at their head offices. What is
important, the law does not contemplate premiums collected in the Philippines. It is
enough that the insurer is doing insurance business in the Philippines, irrespective of
the place of its organization or establishment.
5. NO
– Although during those years the appellant was not open for new business because
its branch office was closed, still it was practically and legally, operating in this
country by collecting premiums on its outstanding policies, incurring the risks and/or
enjoying the benefits consequent thereto, without having previously taken any steps
indicating withdrawal in good faith from this field of economic activity.
Disposition
finding no prejudicial error in the appealed decision, we hereby affirm it with costs.
34
Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-l0874 January 28, 1958
RUFINO D. ANDRES, plaintiff-appellant,
vs.
THE CROWN LIFE INSURANCE COMPANY, defendant-appellee.
Esteban Aguinaldo and Santiago D. Andres for appellant.
Nicodemus L. Dasig for appellee.
REYES, J.B.L., J.:
On April 20, 1952, Rufino D. Andres filed a complaint in the Court of First Instance of
Ilocos Norte against the Crown Life Insurance Company for the recovery of the amount
of P5,000, as the face value of a joint 20-year endowment insurance policy issued in
favor of the plaintiff Rufino D. Andres and his wife Severa G. Andres on the 13th of
February, 1950, by said insurance company. On Jun 7, 1951, Rufino Andres
presented his death claim as survivor-beneficiary of the deceased Severa G. Andres,
who died May 3, 1951. Payment having been denied by the insurance company on
April 20, 1952, this case was instituted.
Defendant Company filed its answer in due time disclaiming liability and setting forth
the special defense that the aforementioned policy had already lapsed. Later, on March
25, 1954, the parties submitted the case for decision by the lower court upon a
stipulation of facts, fully quoted hereunder:
1. That on October 20, 1949, plaintiff and Severa G. Andres filed an application for
insurance No. 536,423, which are marked as common Exhibits "1" and "l-A",
respectively;
2. That on February 13, 1950, defendant isssued Crown Life Policy No. 536,423 for
the sum of P5,000, in the name of Rufino D. Andres, plaintiff, and Severa G. Andres,
which is hereto marked as common Exhibit "2";
3. That the premiums are to be paid as called for in the policy Exhibit '2", semi-
annually, and the amount of P165.15 for the first semester beginning November 25,
1949 to May 25, 1950 was paid on November 25, 1949, which is hereby marked as
common Exhibit "3", and the premium likewise in the sum of P165.15 for the second
semester beginning May 25, 1950 to November 25, 1950, was paid on June 24, 1950,
as evidenced by common Exhibit "3-A"; and the premium for the third semester
beginning November 25, 1950 to May 25, 1951 was not paid;
4. That on January 6, 1951,the defendant, thru Mr. I.B. Melendres, wrote to Mr. and
Mrs. Rufino D. Andres advising them that the said Policy No. 536,423 lapsed on
December 25, 1950 and the amount overdue was P165.15, giving them a period of
sixty (60) days from the date of lapse to file an application for reinstatement, which
letter is made as common Exhibit "4";
35
5. That on February 12, 1951, the said Mr. I.B. Melendres, branch secretary of the
defendant, wrote Mr. and Mrs. Rufino D. Andres, telling the latter that Policy No.
536,423 was no longer in force and it lapsed on December 25, 1950, which letter is
herewith made as common Exhibit "5";
6. That in the month of February, 1951, plaintiff executed a Statement of Health
which is at the same time an Application for Reinstatement of the aforesaid policy,
which application is herewith made as common Exhibit "6" (Note: Exhibit "6" is the
reverse side of Exhibit "4"). and Severa G. Andres also executed in the month of
February, 1951, an Application for Reinstatement, which Application for
Reinstatement is made as common Exhibit "7";
7. That on February 20, 1951, plaintiff wrote a letter to the defendant and enclosed
therewith a money order for P100, which letter was received by the defendant on
February 26, 1951, wherein it is stated that the balance unpaid is the sum of P65.15,
which letter is hereby made as common Exhibit "8";
8. That on April 14, 1951, the said Mr. I.B. Melendres, as branch secretary for the
defendant; wrote plaintiff advising him that the Home Office has approved the
reinstatement of the lapsed policy, subject to the payment of P65.15 due on November,
1950 premium, a duplicate original copy of the said letter is hereby made as common
Exhibit "9";
9. That on April 27, 1951, said Mr. I.B. Melendres, branch secretary, again wrote the
plaintiff requesting the remittance of the balance of P65.15 due on the semi-annual
premium for November, 195O, and upon receipt of the said amount, there will be sent
to him the Certificate of Reinstatement of the policy, a duplicate original copy of the
said letter is hereto made as common Exhibit "10";
10. That on May 5, 1951, plaintiff sent a letter to the defendant and enclosed
therewith a Money Order in the amount of P65.00 for the balance due on the Crown
Life Policy No. 536,423, which letter has been received in the office of the defendant on
May 11, 1951, which letter is herewith made as common Exhibit "11";
11. That on May 15, 1951, said Mr. I.B. Melendres wrote a letter to Mr. and Mrs.
Rufino D. Andres, enclosing an Official Receipt for the receipt of P165.15, which
Official Receipt is hereby made as common Exhibit "12", and also enclosed therewith a
Certificate of Reinstatement dated April 2, 1951, which is herewith made as common
Exhibit "13" and the duplicate original copy of the aforesaid letter dated May 15, 1951
is herewith made as common Exhibit "14", and premium notice addressed to Mr. and
Mrs. Rufino D. Andres, wherein it is shown that the semi-annual premium in the sum
of P165.15 on the said policy would be due on May 15, 1951, which premium notice is
herwith made as common Exhibit "14-A";
12. That on June 7, 1951, plaintiff presented his Death Claim as survivor-beneficiary
of the deceased Severa G. Andres which has been received in the office of the
defendant on June 11, 1951, which letter is herewith made as common Exhibit "15",
and there were therein enclosed in the said letter an affidavit dated June 6, 1951 of
the plaintiff, which is herewith made as common Exhibit "15-A", and a Certificate of
Death dated May 29, 1951, issued by the Local Civil Registrar of the municipality of
Sarrat, wherein it is shown that Mrs. Severa G. Andres died on May 3, 1951 of
dystocia, second degree, contracted pelvis, which Certificate of Death is herewith made
36
as common Exhibit "15-B", and a medical certificate of Dr. R. de la Cuesta, senior

resident physician of the Ilocos Norte Provincial Hospital, dated May 20, 1951,
showing the cause of death of the said deceased, Mrs. Severa G. Andres, which
medical certificate is herewith made as common Exhibit "15-C";
13. That on June 30, 1951, Mr. I.B. Melendres wrote to plaintiff stating defendant's
reasons for its refusal to pay the death claim of the plaintiff which letter is herewith
made as common Exhibit "16", in which there was therein enclosed a Death Claim
Discharge to be signed by the plaintiff but the plaintiff refused to sign, which Death
Claim Discharge is herewith made as common Exhibit "16-A";
14. That on November 23, 1951, the said Mr. I.B. Melendres wrote plaintiff enclosing
therewith a National City Bank of New York Check No. D-115356 for P165.00 payable
to plaintiff, dated June 21, 1951, an original duplicate copy of which is herewith made
as common Exhibit "17";
15. That on December 1, 1951, the plaintiff wrote defendant company and enclosed
therewith the aforesaid National City Bank of New York Check No. D-115356 dated
June 21, 1951, which letter is herewith made as Common Exhibit "18", and the check
returned to the defendant company as Exhibit "18-A";
16. That with the approval of this stipulation of facts, the parties hereby submit the
same and do hereby request the Honorable Court to give them twenty (20) days within
which to file simultaneously their corresponding memoranda and another fifteen (15)
days for a reply memorandum." (Rec. App., pp. 17-22).
On August 5, 1954, Judge Julio Villamor rendered decision absolving the defendant
from any liability on the ground that the policy having lapsed, it was not reinstated at
the time the plaintiff's wife died. Not satisfied with the decision, plaintiff appealed to
the Court of Appeals, but the appeal was later certified to this Court, for there is no
question of fact involved therein.
As has been correctly stated by the lower court, the resolution of the issues in this
case centers on whether or not policy No. 536423 (Exhibit "2") which has been in a
state of lapse before May 3, 1951, has been validly and completely reinstated after said
date. In other words, was there a perfected contract of reinstatement after the policy
lapsed due to non-payment of premiums?
The stipulation of facts and accompanying exhibits render it undisputable that the
original policy No. 536423 lapsed for non-payment of premiums on December 26,
1950, upon expiration of the customary 31-day period of grace. The subsequent
reinstatement of the policy was provided for in the contract itself in the following
terms:
If this policy lapses, it may be reinstated upon application made within three years
from the date of lapse, and upon production of evidence of the good health of the
injured (and also of the Beneficiary, if the rate of premium depends upon the age of
the Beneficiary), and such other evidence of insurability at the date of application for
reinstatement as would then satisfy the Company to issue a new Policy on the same
terms as this Policy, and upon payment of all overdue premiums and other
indebtedness in respect of this Policy, together with interest at six per cent,
compounded annually, and provided also that no change has taken place in such good
37
health and insurability subsequent to the date of such application and before this
Policy is reinstated.
As stated by the lower court, the conditions set forth in the policy for reinstatement
are the following: (a) application shall be made within three years from the date of
lapse; (b) there should be a production of evidence of the good health of the insured:
(c) if the rate of premium depends upon the age of the Beneficiary, there should
likewise be a production of evidence of his or her good health; (d) there should be
presented such other evidence of insurability at the date of application for
reinstatement; (e) there should be no change which has taken place in such good
health and insurability subsequent to the date of such application and before the
policy is reinstated; and (f) all overdue premiums and other indebtedness in respect of
the policy, together with interest at six per cent, compounded annually, should first be
paid.
The plaintiff-appellant did not comply with the last condition; for he only paid P100
(on account of the over due semi-annual premium of P165.15) on February 20, 1951,
before his wife's death (Stipulation, par. 7) ; and, despite the Company's reminders on
April 14 and 27, he remitted the balance of P65 on May 5, 1951 (received by the
Company's agency on May 11), two days after his wife died. On the face of such facts,
the Company had the right to treat the contract as lapsed and refuse payment of the
policy.
Appellant, however, contends that the condition regarding payment of the premium
was waived by the insurance Company by its letters (signed by I. B. Melendres,
cashier) Exhibits 4 and 5 wherein the Company manifested to appellant:
If you can not pay the full amount immediately, send as large an amount as possible
and advise us how soon you expect to be able to pay the balance. Every consideration
will be given to your request consistent with the company's regulations (Exhibit 4).
If you are unable to cover this amount in full, send us as big an amount as you are
able and we will work out an adjustment most beneficial to you. (Exhibit 5)
We see nothing in these expressions that would indicate an intention on the insurer's
part to waive the full payment of the overdue premium as prerequisite to the
reinstatement of the lapsed policy, considering the well settled rule that a waiver must
be clear and positive, and intent to waive shown clearly and convincingly (Fernandez
vs. Sebido, 70 Phil. 151, 159; Lang vs. Sheriff* 49 Off. Gaz. 3323, 3329; Jocson vs.
Capitol Subdivision, Inc. G.R. L-6573, February 28, 1955). The promise to give
plaintiff's case every consideration does not import any decision to renounce the
insurer's rights; and as to the "working out of an adjustment most beneficial" to the
insured, the proposal is obviously so vague and indefinite as to require further
negotiations between the parties, for their criteria might differ as to what would be the
most beneficial arrangement.
Upon the other hand, the subsequent letters of the insurance Company (Exhibits 9
and 10) patently indicated that the Company insisted on the full payment of the
premium before the policy was reinstated.
We take this opportunity of advising you that our Home Office has approved the
reinstatement of your lapsel policy subject to the payment of the balance of P65.15 due
38
on your November 1950 premium. Kindly remitthis amount in order that you may once
more enjoy the benefits of insurance protection" (Exibit 9, April 14, 1951).
We may now reinstate your policy if you will kindly remit to us the balance of P65.15
due on your semi-annual premium for November, 1950. Please send us this amount
by return mail and upon its receipt we will in turn send the Certificate of
Reinstatement of your policy, thus rendering it once again in full force and effect,
(Exhibit 10, April 21, 1951) (Emphasis supplied).
Clearly the Company did not consider the partial payment as sufficient consideration
for the reinstatement. Appellant's failure to remit the balance before the death of his
wife operated to deprive him of any right to waive the policy and recover the face value
thereof.
This Court, in the case of James McGuire vs. The Manufacturer's Life Insurance Co.
(87 Phil,. 370, 48 Off. Gaz. [1], 114), said.
The stipulation in a life insurance policy giving the insured the privilege to reinstate it
upon written application does not give the insured absolute right to such
reinstatement by the mere filing of an application. The Company has the right to deny
the reinstatement if it is not satisfied as to the insurability of the insured and if the
latter does no pay all overdue premium and all other indebtedness to the Company.
After the death of the insured the insurance Company cannot be compelled to
entertain an application for reinstatement of the policy because the conditions
precedent to reinstatement can no longer be determined and satisfied.
Wherefore, finding no error in the judgment appealed from, we hereby affirm the same,
with costs against appellant. So ordered.
Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion,
Endencia, and Felix, JJ.,concur.
39

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INSURANCE NOVEMBER 5, 2018

Perez v. CA- Perfection of the Contract of Insurance

323 SCRA 613 (2000)

> RTC ruled in favor of Perez. CA reversed.

Whether or not there was a perfected additional insurance contract.

The contract was not perfected.

Sindayen v. Insular Life- Policy of Insurance

Enriquez v. SunLife- Insurance Policy

Whether or not the insurance contract was perfected.

G.R. No. L-602 March 31, 1947

January 23, 1907

Velasco v Apostol G.R. No. L-44588 May 9, 1989

Held: No. Petition dismissed

Valenzuela v CA G.R. No. 83122 October 19, 1990

Held: Yes. Yes. Petition granted

Tibay, et. al v Court of Appeals

G.R. No. 95546 November 6, 1992

balance of the premium.

DECISION OF LOWER COURTS:

South Sea v CA G.R. No. 102253 June 2, 1995

Held: Agent of the surety. Petition denied.

Insurance Case Digest: American Home Assurance Co. V. Chua (1999)

G.R. No. 130421 June 28, 1999

Lessons Applicable: Acknowledgement receipt (Insurance)

HELD:petition is partly GRANTED modified by deleting the awards of P200,000 for

 An insurer is entitled to payment of the premium as soon as the thing

MANUFACTURERS LIFE INSURANCE CO. v. MEER

of life insurance policies in the Philippines containing stipulations referred to as NON

total premiums collected* * * whether such premiums are paid in money,

– ON ARGUMENT THAT THE ASSETS OF THE INSURER REMAINED THE SAME

Republic of the Philippines

as common Exhibit "15-B", and a medical certificate of Dr. R. de la Cuesta, senior

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