1. ARMANDO GEAGONIA, petitioner, vs.
COURT OF HELD: YES, petitioner violated the said condition but he is not
APPEALS and COUNTRY BANKERS INSURANCE
CORPORATION, respondents.
FACTS: Petitioner is the owner of Norman's Mart located in a
public market, of which he obtained from the private
respondent fire insurance policy for P100,000.00. The period of
the policy was from 22 December 1989 to 22 December 1990
and covered the following: "Stock-in-trade consisting principally
of dry goods such as RTW's for men and women wear and
other usual to assured's business."
The petitioner declared in the policy that the Mercantile
Insurance Co., Inc. was the co-insurer for P50,000.00. From
1989 to 1990, the petitioner had in his inventory stocks
amounting to P392,130.50.
The policy contained the following condition:
3. The insured shall give notice to the Company of
any insurance or insurances already affected, or
which may subsequently be effected, covering any of
the property or properties consisting of stocks in
trade, goods in process and/or inventories only
hereby insured, and unless such notice be given and
the particulars of such insurance or insurances be
stated therein or endorsed in this policy pursuant to
Section 50 of the Insurance Code, by or on behalf of
the Company before the occurrence of any loss or
damage, all benefits under this policy shall be
deemed forfeited, provided however, that this
condition shall not apply when the total insurance or
insurances in force at the time of the loss or damage
is not more than P200,000.00.
Later, a fire of accidental origin broke out at the public market.
The petitioner's insured stock-in-trade were completely
destroyed prompting him to file with the private respondent a
claim under the policy. The latter denied the claim because it
found that at the time of the loss the petitioner's stocks-in-trade
were likewise covered by two fire insurance policies for
P100,000.00 each, issued by the Cebu Branch of the
Philippines First Insurance Co., Inc. (hereinafter PFIC). These
policies indicate that the insured was "Messrs. Discount Mart
(Mr. Armando Geagonia, Prop.)" with a mortgage clause
reading:
MORTGAGE: Loss, if any shall be payable to Messrs. Cebu
Tesing Textiles, Cebu City as their interest may appear subject
to the terms of this policy. CO-INSURANCE DECLARED:
P100,000. — Phils. First CEB/F 24758.
The basis of the private respondent's denial was the
petitioner's alleged violation of Condition 3 of the policy.
The petitioner then filed a complaint against the private
respondent with the Insurance Commission for the recovery of
P100,000.00 under fire insurance policy. He admitted that at
the time he obtained the private respondent's fire insurance
policy he knew that the two policies issued by the PFIC were
already in existence; however, he had no knowledge of the
provision in the private respondent's policy requiring him to
inform it of the prior policies; this requirement was not
mentioned to him by the private respondent's agent; and had it
been mentioned, he would not have withheld such information.
The Insurance Commission favored petitioner, however, the
CA, reversed and found that the petitioner knew of the
existence of the two other policies issued by the PFIC. It said
that it is apparent from the face of the two fire policies that the
insurance was taken in the name of petitioner herein. The
policy states that "DISCOUNT MART (MR. ARMANDO
GEAGONIA, PROP)" was the assured and that "TESING
TEXTILES" was only the mortgagee of the goods. In addition,
the premiums on both policies were paid for by petitioner, not
by the Tesing Textiles.
ISSUE: Whether the petitioner violates the Condition 3 of the
policy, and now is precluded from recovering therefrom.
precluded from recovering therefrom.
The SC agreed with the CA that the petitioner knew of the prior
policies issued by the PFIC. His letter to the private respondent
conclusively proves this knowledge.
Condition 3 of the said Policy is a condition which is not
proscribed by law. Its incorporation in the policy is allowed by
Section 75 of the Insurance Code which provides that "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."
Such a condition is a provision which invariably appears in fire
insurance policies and is intended to prevent an increase in the
moral hazard. It is commonly known as the additional or "other
insurance" clause and has been upheld as valid and as a
warranty that no other insurance exists. Its violation would thus
avoid the policy. However, in order to constitute a violation, the
other insurance must be upon same subject matter, the same
interest therein, and the same risk.
It must, however, be underscored that unlike the "other
insurance" clauses involved in different cases that failure to
comply will immediately forfeit the policy. In this case,
Condition 3 in the private respondent's policy does not
absolutely declare void any violation thereof. It expressly
provides that the condition "shall not apply when the total
insurance or insurances in force at the time of the loss or
damage is not more than P200,000.00."
It is a cardinal rule on insurance that a policy or insurance
contract is to be interpreted liberally in favor of the insured and
strictly against the company, the reason being to afford the
greatest protection which the insured was endeavoring to
secure when he applied for insurance. It is also a cardinal
principle of law that forfeitures are not favored and that any
construction which would result in the forfeiture of the policy
benefits for the person claiming thereunder, will be avoided, if it
is possible to construe the policy in a manner which would
permit recovery, as, for example, by finding a waiver for such
forfeiture. The reason for this is that, except for riders which
may later be inserted, the insured sees the contract already in
its final form and has had no voice in the selection or
arrangement of the words employed therein. On the other
hand, the language of the contract was carefully chosen and
deliberated upon by experts and legal advisers who had acted
exclusively in the interest of the insurers and the technical
language employed therein is rarely understood by ordinary
laymen.
With these principles in mind, we are of the opinion that
Condition 3 of the subject policy is not totally free from
ambiguity and must, perforce, be meticulously analyzed. Such
analysis leads us to conclude that (a) the prohibition applies
only to double insurance, and (b) the nullity of the policy shall
only be to the extent exceeding P200,000.00 of the total
policies obtained.
The first conclusion is supported by the portion of the condition
referring to other insurance "covering any of the property or
properties consisting of stocks in trade, goods in process
and/or inventories only hereby insured," and the portion
regarding the insured's declaration that the co-insurer is
Mercantile Insurance Co., Inc. in the sum of P50,000.00. A
double insurance exists where the same person is insured by
several insurers separately in respect of the same subject and
interest. However, the insurable interests of a mortgagor and a
mortgagee on the mortgaged property are distinct and
separate. Since the two policies of the PFIC do not cover the
same interest as that covered by the policy of the private
respondent, no double insurance exists. The non-disclosure
then of the former policies was not fatal to the petitioner's right
to recover on the private respondent's policy.
Furthermore, by stating within Condition 3 itself that such
condition shall not apply if the total insurance in force at the
time of loss does not exceed P200,000.00, the private
respondent was amenable to assume a co-insurer's liability up
to a loss not exceeding P200,000.00. What it had in mind was
to discourage over-insurance.
Indeed, the rationale behind the incorporation of "other
insurance" clause in fire policies is to prevent over-insurance
and thus avert the perpetration of fraud. When a property
owner obtains insurance policies from two or more insurers in
a total amount that exceeds the property's value, the insured
may have an inducement to destroy the property for the
purpose of collecting the insurance. The public as well as the
insurer is interested in preventing a situation in which a fire
would be profitable to the insured.
(Explanation about mortgage related to insurance): As to a
mortgaged property, the mortgagor and the mortgagee have
each an independent insurable interest therein and both
interests may be one policy, or each may take out a separate
policy covering his interest, either at the same or at separate
times. The mortgagor's insurable interest covers the full value
of the mortgaged property, even though the mortgage debt is
equivalent to the full value of the property. The mortgagee's
insurable interest is to the extent of the debt, since the property
is relied upon as security thereof, and in insuring he is not
insuring the property but his interest or lien thereon. His
insurable interest is prima facie the value mortgaged and
extends only to the amount of the debt, not exceeding the
value of the mortgaged property. Thus, separate insurances
covering different insurable interests may be obtained by the
mortgagor and the mortgagee.
A mortgagor may, however, take out insurance for the benefit
of the mortgagee, which is the usual practice. The mortgagee
may be made the beneficial payee in several ways. He may
become the assignee of the policy with the consent of the
insurer; or the mere pledgee without such consent; or the
original policy may contain a mortgage clause; or a rider
making the policy payable to the mortgagee "as his interest
may appear" may be attached; or a "standard mortgage
clause," containing a collateral independent contract between
the mortgagee and insurer, may be attached; or the policy,
though by its terms payable absolutely to the mortgagor, may
have been procured by a mortgagor under a contract duty to
insure for the mortgagee's benefit, in which case the
mortgagee acquires an equitable lien upon the proceeds.
In the policy obtained by the mortgagor with loss payable
clause in favor of the mortgagee as his interest may appear,
the mortgagee is only a beneficiary under the contract, and
recognized as such by the insurer but not made a party to the
contract himself. Hence, any act of the mortgagor which
defeats his right will also defeat the right of the mortgagee.
This kind of policy covers only such interest as the mortgagee
has at the issuing of the policy.
On the other hand, a mortgagee may also procure a policy as
a contracting party in accordance with the terms of an
agreement by which the mortgagor is to pay the premiums
upon such insurance. It has been noted, however, that
although the mortgagee is himself the insured, as where he
applies for a policy, fully informs the authorized agent of his
interest, pays the premiums, and obtains on the assurance that
it insures him, the policy is in fact in the form used to insure a
mortgagor with loss payable clause
The fire insurance policies issued by the PFIC name the
petitioner as the assured and contain a mortgage clause which
reads: “Loss, if any, shall be payable to MESSRS. TESING
TEXTILES, Cebu City as their interest may appear subject to
the terms of this policy,” which is clearly a simple loss payable
clause, not a standard mortgage clause.
2. THE INSULAR LIFE ASSURANCE COMPANY, LTD.,
plaintiff-appellee,
vs.
CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO,
defendants-appellants.
FACTS: Buenaventura Cristor Ebrado was issued by The Life
Assurance Co., Ltd., Policy on a whole-life for P5,882.00 with
a, rider for Accidental Death for the same amount.
He designated Carponia T. Ebrado as the revocable
beneficiary in his policy.
Unfortunately, he died as a result of an accident when he was
hit by a falling branch of a tree.
Thus, Carponia filed with the insurer a claim for the proceeds of the
Policy as the designated beneficiary therein, although she admits that
she and the insured Buenaventura C. Ebrado were merely living as
husband and wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the
deceased insured. She asserts that she is the one entitled to the
insurance proceeds, not the common-law wife, Carponia T. Ebrado.
ISSUE: Can a common-law wife can be named as beneficiary in the
life insurance policy of a legally married man and claim the proceeds
thereof in case of death of the latter?
HELD: No. Since the Insurance Act (RA 2327, as amended) or
even the new Insurance Code (PD No. 612, as amended) does
not contain any specific provision grossly resolutory of the
prime question at hand, the provisions of the Civil Code shall
apply pursuant to Article 2011 of the New Civil Code which
states: "The contract of insurance is governed by special laws.
Matters not expressly provided for in such special laws shall be
regulated by this Code."
Moreover, under Article 2012 of the same Code, "any person who is
forbidden from receiving any donation under Article 739 cannot be
named beneficiary of a fife insurance policy by the person who
cannot make a donation to him. Common-law spouses are,
definitely, barred from receiving donations from each other.
In essence, a life insurance policy is no different from a civil
donation insofar as the beneficiary is concerned. Both are
founded upon the same consideration: liberality.
Lastly, a conviction for adultery or concubinage is not necessary
before the disabilities mentioned in Article 739 may effectuate. More
specifically, with record to the disability on "persons who were guilty
of adultery or concubinage at the time of the donation," Article 739
itself provides: In the case referred to in No. 1, the action for
declaration of nullity may be brought by the spouse of the donor or
donee; and the guilty of the donee may be proved by preponderance
of evidence in the same action.
Therefore, Carponia T. Ebrado is disqualified to be the beneficiary of
the late Buenaventura C. Ebrado in his life insurance policy. As a
consequence, the proceeds of the policy are held payable to the estate
of the deceased insured.
3. EL ORIENTE FABRICA DE TABACOS, INC., plaintiff-
appellant, vs. JUAN POSADAS, Collector of Internal
Revenue, defendant-appellee.
INSURED: A. Velhagen, the Manager
INSURANCE: Manufacturers Life Insurance Co
BENEFICIARY: El Oriente Fabrica Tabacos, plaintiff
FACTS: Plaintiff, a domestic corporation, in order to protect
itself against the loss that it might suffer by reason of the death
of its manager A. Velhagen and whose death would be a
serious loss to the plaintiff, procured from the Manufacturers
Life Insurance Co an insurance policy on the life of the said A.
Velhagen for the sum of $50,000.
During the time the life insurance policy referred to was in force
and effect, plaintiff paid from its funds all the insurance
premiums due thereon. Plaintiff charged as expenses of its
business all the said premiums and deducted the same from its
gross incomes as reported in its annual income tax returns.
Upon the death of A. Velhagen in the year 1929, the plaintiff
received all the proceeds of the said life insurance policy,
together with the interests and the dividends accruing thereon
Later, defendant CIR assessed and levied the sum of
P3,148.74 as income tax on the proceeds of the insurance
policy, however, plaintiff, claimed exemption under section 4 of
the Income Tax Law.
ISSUE: Whether the proceeds of insurance are taxable as
income law.
RULING: No, the proceeds of the life insurance policy in
question as representing an indemnity and not taxable income,
it is a capital.
In the case at bar, El Oriente, Fabrica de Tabacos, Inc., took
out the insurance on the life of its manager, to protect itself
against the loss it might suffer by reason of the death of its
manager. The Court do not believe that this fact signifies that
when the plaintiff received P104,957.88 from the insurance on
the life of its manager, it thereby realized a net profit in this
amount. It is true that the Income Tax Law, in exempting
individual beneficiaries, speaks of the proceeds of life
insurance policies as income, but this is a very slight indication
of legislative intention. In reality, what the plaintiff received was
in the nature of an indemnity for the loss which it actually
suffered because of the death of its manager.
To quote the exact words in the cited case of Chief Justice Taft
delivering the opinion of the court:
It is earnestly pressed upon us that proceeds of life
insurance paid on the death of the insured are in fact
capital, and cannot be taxed as income … that
proceeds of a life insurance policy paid on the death
of the insured are not usually classed as income.
Considering, therefore, the purport of the stipulated facts,
considering the uncertainty of Philippine law, and considering
the lack of express legislative intention to tax the proceeds of
life insurance policies paid to corporate beneficiaries,
particularly when in the exemption in favor of individual
beneficiaries in the chapter on this subject, the clause is
inserted "exempt from the provisions of this law," we deem it
reasonable to hold the proceeds of the life insurance policy in
question as representing an indemnity and not taxable income.
NOTE: Guys, wala guy gidiscuss sa case bahin sa Insurable
Interest. I checked the book, mao ni akong nakita ra didto nga
nakacite ni nga case:
It is generally held that a corporation has an insurable interest
in the life of an officer on whose services the corporation
depends for its prosperity, and whose death will be the cause
of a substantial pecuniary loss to it.
4. VIOLETA R. LALICAN, Petitioner, - versus - THE
INSULAR LIFE ASSURANCE COMPANY LIMITED, AS
REPRESENTED BY THE PRESIDENT VICENTE R. AVILON,
Respondent.
Facts: During his lifetime, Eulogio applied for an insurance
policy with Insular Life. On 24 April 1997, Insular Life, through
its agent, Malaluan, issued in favor of Eulogio an insurance
policy which contained a 20-Year Endowment Variable Income
Package Flexi Plan worth P500,000.00, with two riders valued
at P500,000.00 each. Thus, the value of the policy amounted
to P1,500,000.00. Violeta was named as the primary
beneficiary.
Under the terms of the said policy, Eulogio was to pay the
premiums on a quarterly basis in the amount of P8,062.00,
payable every 24 April, 24 July, 24 October and 24 January of
each year, until the end of the 20-year period of the policy.
According to the Policy Contract, there was a grace period of
31 days for the payment of each premium subsequent to the
first. If any premium was not paid on or before the due date,
the policy would be in default, and if the premium remained
unpaid until the end of the grace period, the policy would
automatically lapse and become void.
Eulogio paid the premiums due on 24 July 1997 and 24
October 1997. However, he failed to pay the premium due on
24 January 1998, even after the lapse of the grace period of 31
days. Policy No. 9011992, therefore, lapsed and became void.
Eulogio submitted to Insular Life an application for
reinstatement for the said policy, together with the payment for
the premium due on 24 January 1998. Insular Life notified
Eulogio that his application could not be fully processed
because he left unpaid the overdue interest thereon. Thus,
Insular Life instructed Eulogio to pay the amount of interest
and to file another application for reinstatement; and to pay the
premiums that subsequently became due on 24 April 1998 and
24 July 1998, plus interest.
On 17 September 1998, Eulogio went to Malaluan’s house and
submitted a second Application for Reinstatement of the said
Policy, including the amount of P17,500.00, representing
payments for the overdue interest on the premium for 24
January 1998, and the premiums which became due on 24
April 1998 and 24 July 1998. A while later, Eulogio died of
cardio-respiratory arrest secondary to electrocution.
Malaluan forwarded Eulogio’s second application on 18
September 1998. However, upon knowing of Eulogio’s death,
Insular life no longer acted upon the said application.
On 28 September 1998, Violeta, Eulogio’s widow, filed with
Insular Life a claim for payment of the full proceeds of the
Policy.
In a letter, Insular Life informed Violeta that her claim could not
be granted since, at the time of Eulogios death, the said Policy
had already lapsed, and Eulogio failed to reinstate the same.
According to the application, the policy would only be
considered reinstated upon approval of the application by
Insular Life during the applicants’ lifetime and good health, and
whatever amount the applicant paid in connection thereto was
considered to be a deposit only until approval of said
application. Enclosed with the said letter was a check, drawn in
Violeta’s favour, representing the full refund of the payments
made by Eulogio on the Policy. Subsequently, it agreed to re-
evaluate Violeta’s claim.
However, without waiting for the result of the re-evaluation by
Insular Life, Violeta filed with the RTC a Complaint for Death
Claim Benefit.
The RTC, taking into account the clear provisions of the Policy
Contract between Eulogio and Insular Life and the Application
for Reinstatement Eulogio subsequently signed and submitted
to Insular Life, held that Eulogio was not able to fully comply
with the requirements for the reinstatement.
Issue: whether Eulogio was able to reinstate the lapsed
insurance policy on his life before his death on 17 September
1998.
Ruling: No. Policy No. 9011992 had lapsed and become void
on 24 February 1998, upon the expiration of the 31-day grace
period for payment of the premium, which fell due on 24
January 1998, without any payment having been made.
Eulogio’s filing of his first Application for Reinstatement with
Insular Life constitutes an admission that Policy No. 9011992
had lapsed by then. Insular Life did not act on Eulogio’s first
Application for Reinstatement, since the amount Eulogio
simultaneously deposited was sufficient to cover only
the P8,062.00 overdue premium for 24 January 1998, but not
the P322.48 overdue interests thereon. On 17 September
1998, Eulogio submitted a second Application for
Reinstatement to Insular Life, again through Malaluan,
depositing at the same time P17,500.00, to cover payment for
the overdue interest on the premium for 24 January 1998, and
the premiums that had also become due on 24 April
1998 and 24 July 1998. On the very same day, Eulogio passed
away.
To reinstate a policy means to restore the same to premium-
paying status after it has been permitted to lapse. Both the
Policy Contract and the Application for Reinstatement provide
for specific conditions for the reinstatement of a lapsed policy.
In the instant case, Eulogios death rendered impossible full
compliance with the conditions for reinstatement of Policy
No. 9011992. True, Eulogio, before his death, managed to file
his Application for Reinstatement and deposit the amount for
payment of his overdue premiums and interests thereon with
Malaluan; but the Policy could only be considered
reinstated after the Application for Reinstatement had been
processed and approved by Insular Life during Eulogio’s
lifetime and good health.
The conditions for reinstatement under the Policy Contract and
Application for Reinstatement were written in clear and simple
language, which could not admit of any meaning or
interpretation other than those that they so obviously embody.
Violeta did not adduce any evidence that Eulogio might have
failed to fully understand the import and meaning of the
provisions of his Policy Contract and/or Application for
Reinstatement, both of which he voluntarily signed. While it is a
cardinal principle of insurance law that a policy or contract of
insurance is to be construed liberally in favor of the insured
and strictly as against the insurer company, yet, contracts of
insurance, like other contracts, are to be construed according
to the sense and meaning of the terms, which the parties
themselves have used.
Policy No. 9011992 remained lapsed and void, not having
been reinstated in accordance with the Policy Contract and
Application for Reinstatement before Eulogios death. Violeta,
therefore, cannot claim any death benefits from Insular Life on
the basis of Policy No. 9011992; but she is entitled to receive
the full refund of the payments made by Eulogio thereon.
5. HILARIO GERCIO, plaintiff-appellee, vs. SUN LIFE
ASSURANCE OF CANADA, ET AL., defendants.
SUN LIFE ASSURANCE OF CANADA, appellant.
The question of first impression in the law of life insurance to
be here decided is whether the insured — the husband — has
the power to change the beneficiary — the former wife — and
to name instead his actual wife, where the insured and the
beneficiary have been divorced and where the policy of
insurance does not expressly reserve to the insured the right to
change the beneficiary. Although the authorities have been
exhausted, no legal situation exactly like the one before us has
been encountered.
ESSENTIAL FACTS:
Insured: Hilario Gercio
Insurer: SUN LIFE ASSURANCE OF CANADA
Beneficiary: Andrea Zialcita, former wife of Insured
1. the Sun Life Assurance Co. of Canada issued
insurance on the life of Hilario Gercio. The policy was
what is known as a twenty-year endowment policy. By
its terms, the insurance company agreed to insure the
life of Hilario Gercio for the sum of P/2,000, to be paid
him on February 1, 1930, or if the insured should die
before said date, then to his wife, Mrs. Andrea
Zialcita, should she survive him
2. The policy did not include any provision reserving to
the insured the right to change the beneficiary.
3. On the date the policy was issued, Andrea Zialcita
was the lawful wife of Hilario Gercio. Towards the end
of the year 1919, she was convicted of the crime of
adultery. On September 4, 1920, a decree of divorce
was issued in civil case no. 17955, which had the
effect of completely dissolving the bonds of
matrimony contracted by Hilario Gercio and Andrea
Zialcita.
4. On March 4, 1922, Hilario Gercio formally notified the
Sun Life Assurance Co. of Canada that he had
revoked his donation in favor of Andrea Zialcita, and
that he had designated in her stead his present wife,
Adela Garcia de Gercio, as the beneficiary of the
policy. Gercio requested the insurance company to
eliminate Andrea Zialcita as beneficiary. This, the
insurance company has refused and still refuses to
do.
Issue:
1. Should the insurance contract, whereby the husband
names the wife as the beneficiary, be denominated a
donation inter vivos, a donation causa mortis, a
contract in favor of a third person, or an aleatory
contract?
2. Won the insured — the husband — has the power to
change the beneficiary — the former wife — and to
name instead his actual wife, where the insured and
the beneficiary have been divorced and where the
policy of insurance does not expressly reserve to the
insured the right to change the beneficiary.
Ruling:
1. The subject is further complicated by the fact that if an
insurance contract should be considered a donation,
a husband may then never insure his life in favor of
his wife and vice versa, inasmuch as article 1334
prohibits all donations between spouses during
marriage. It would seem, therefore, that this court was
right when in the case of Del Val vs. Del Val ([1915]),
29 Phil., 534), it declined to consider the proceeds of
the insurance policy as a donation or gift, saying "the
contract of life insurance is a special contract and the
destination of the proceeds thereof is determined by
special laws which deal exclusively with that subject.
The Civil Code has no provisions which relate directly
and specifically to life-insurance contracts or to the
destination of life-insurance proceeds. . . ." Some
satisfaction is gathered from the perplexities of the
Louisiana Supreme Court, a civil law jurisdiction,
where the jurists have disagreed as to the
classification of the insurance contract, but have
agreed in their conclusions as will hereafter see.
2. On the admitted facts and the authorities supporting
the nearly universally accepted principles of
insurance, we are irresistibly led to the conclusion that
the question at issue must be answered in the
negative.
The wife has an insurable interest in the life of her
husband. The beneficiary has an absolute vested
interest in the policy from the date of its issuance and
delivery. So when a policy of life insurance is taken
out by the husband in which the wife is named as
beneficiary, she has a subsisting interest in the policy.
And this applies to a policy to which there are
attached the incidents of a loan value, cash surrender
value, an automatic extension by premiums paid, and
to an endowment policy, as well as to an ordinary life
insurance policy. If the husband wishes to retain to
himself the control and ownership of the policy he
may so provide in the policy. But if the policy contains
no provision authorizing a change of beneficiary
without the beneficiary's consent, the insured cannot
make such change. Accordingly, it is held that a life
insurance policy of a husband made payable to the
wife as beneficiary, is the separate property of the
beneficiary and beyond the control of the husband.
As to the effect produced by the divorce, the
Philippine Divorce Law, Act No. 2710, merely
provides in section 9 that the decree of divorce shall
dissolve the community property as soon as such
decree becomes final. Unlike the statutes of a few
jurisdictions, there is no provision in the Philippine
Law permitting the beneficiary in a policy for the
benefit of the wife of the husband to be changed after
a divorce. It must follow, therefore, in the absence of
a statute to the contrary, that if a policy is taken out
upon a husband's life the wife is named as beneficiary
therein, a subsequent divorce does not destroy her
rights under the policy.
Somewhat the same question came before the Supreme Court
of Kansas in the leading case of Filley vs. Illinois Life Insurance
Company ([1914]), 91 Kansas, 220; L.R.A. [1915 D], 130). It
was held, following consideration extending to two motions for
rehearing, as follows:
 The benefit accruing from a policy of life insurance
upon the life of a married man, payable upon his
death to his wife, naming her, is payable to the
surviving beneficiary named, although she may have
years thereafter secured a divorce from her husband,
and he was thereafter again married to one who
sustained the relation of wife to him at the time of his
death.
The rights of a beneficiary in an ordinary life
insurance policy become vested upon the issuance of
the policy, and can thereafter, during the life of the
beneficiary, be defeated only as provided by the
terms of the policy. -lmcsumioglaw
6. DELFIN NARIO, and ALEJANDRA SANTOS-
NARIO, plaintiffs-appellants, vs. THE PHILIPPINE AMERICAN
LIFE INSURANCE COMPANY, defendant-appellee.
FACTS:
Mrs. Alejandra Santos-Mario was, upon application, issued by
the Philippine American Life Insurance Co. (defendant), a life
insurance policy, with a face value of P5,000.00. She
designated thereon her husband, Delfin Nario, and their
unemancipated minor son, Ernesto Nario, as her irrevocable
beneficiaries.
Mrs. Nario applied for a loan on the above stated policy with
the defendant, which she, as policy-holder, has been entitled to
avail of under one of the provisions of said policy, for the
purpose of using the proceeds thereof for the school expenses
of her son. Said application bore the written signature and
consent of Delfin Nario in two capacities: as one of the
irrevocable beneficiaries of the policy, and as the father-
guardian of said minor son and irrevocable beneficiary, and as
the legal administrator of the minor's properties, pursuant to
Article 320 of the Civil Code of the Philippines.
Defendant denied said application, manifesting that the written
consent for the minor son must not only be given by his father
as legal guardian but it must also be authorized by the court in
a competent guardianship proceeding.
After the denial, Mrs. Nario signified her decision to surrender
her policy to defendant, which she was also entitled to avail of
under one of the provisions of the same policy, and demanded
its cash value which then amounted to P520.00.
Defendant also denied the same, on the same ground as that
given in disapproving the policy loan application; hence,
Plaintiffs brought suit against the defendant seeking to compel
the latter to grant their policy loan application and/or to accept
the surrender of said policy in exchange for its cash value.
Defendant answered that inasmuch as the policy loan
application and the surrender of the policy involved acts of
disposition and alienation of the property rights of the minor,
said acts are not within the powers of the legal administrator,
without any court authority therefor.
The lower court dismissed plaintiffs' complaint.
ISSUE: W/N the defendant was justified in refusing to
grant the loan application and the surrender of the policy.
HELD: YES.
The SC agreed with the lower court that the vested interest or
right of the beneficiaries in the policy should be measured on
its full face value and not on its cash surrender value, for in
case of death of the insured, said beneficiaries are paid on the
basis of its face value and in case the insured should
discontinue paying premiums, the beneficiaries may continue
paying it and are entitled to automatic extended term or paid-
up insurance options, etc. and that said vested right under the
policy cannot be divisible at any given time.
Also the proposed transactions in question (policy loan and
surrender of policy) constitute acts of disposition or alienation
of property rights and not merely of management or
administration because they involve the incurring or
termination of contractual obligations.
As above noted, the full face value of the policy is P5,000.00
and the minor's vested interest therein, as one of the two (2)
irrevocable beneficiaries, consists of ½ of said amount or
P2,500.00.
Article 320 of the Civil Code of the Philippines provides —
The father, or in his absence the mother, is the legal
administrator of the property pertaining to the child under
parental authority. If the property is worth more than two
thousand pesos, the father or mother shall give a bond subject
to the approval of the Court of First Instance.
and article 326 of the same Code reads — When the
property of the child is worth more than two thousand pesos,
the father or mother shall be considered a guardian of the
child's property, subject to the duties and obligations of
guardians under the Rules of Court.
Under the Revised Rules of Court, which provides —
SEC. 7. Parents as guardians. — When the property of the
child under parental authority is worth two thousand pesos or
less, the father or the mother, without the necessity of court
appointment, shall be his legal guardian. When the property of
the child is worth more than two thousand pesos, the father or
the mother shall be considered guardian of the child's property,
with the duties and obligations of guardians under these rules,
and shall file the petition required by Section 2 hereof. For
good reasons the court may, however, appoint another suitable
person. (Rule 93).
It appearing that the minor beneficiary's vested interest or right
on the policy exceeds P2,000.00; that plaintiffs did not file any
guardianship bond to be approved by the court; and as
provided in the said laws, plaintiffs should have, but, had not,
filed a formal application or petition for guardianship, plaintiffs
cannot possibly exercise the powers vested on them, as legal
administrators of their child's property. As there was no such
petition and bond, the consent given by the father-guardian, for
and in behalf of the minor son, without prior court authorization,
to the policy loan application and the surrender of said policy,
was insufficient and ineffective, and defendant was justified in
disapproving the proposed transactions in question.
7. BASILIA BERDIN VDA. DE CONSUEGRA; JULIANA,
PACITA, MARIA LOURDES, JOSE, JR., RODRIGO, LINEDA
and LUIS, all surnamed CONSUEGRA, petitioners-appellants,
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM,
COMMISSIONER OF PUBLIC HIGHWAYS, HIGHWAY
DISTRICT ENGINEER OF SURIGAO DEL NORTE,
COMMISSIONER OF CIVIL SERVICE, and ROSARIO
DIAZ,respondents-appellees.
Facts: Consuegra contracted two marriages, the first with
herein respondent Rosario Diaz, and the second, which was
contracted in good faith while the first marriage was subsisting,
with herein petitioner Basilia Berdin.
Being a member of the GSIS as he was a foreman in the
District Engineer's Office in Surigao, when Consuegra died on
September 26, 1965, the proceeds of his life insurance were
paid by the GSIS to petitioner Basilia Berdin and her children
who were the beneficiaries named in the policy.
Consuegra did not designate any beneficiary in the retirement
insurance benefits due to him. Respondent Rosario Diaz, the
widow by the first marriage, filed a claim with the GSIS asking
that the retirement insurance benefits be paid to her as the
only legal heir of Consuegra, considering that the deceased did
not designate any beneficiary with respect to his retirement
insurance benefits.
Petitioner Basilia Berdin and her children, likewise, filed a
similar claim with the GSIS, asserting that being the
beneficiaries named in the life insurance policy of Consuegra,
they are the only ones entitled to receive the retirement
insurance benefits due the deceased Consuegra.
Issue: To whom should this retirement insurance benefits of Jose
Consuegra be paid, because he did not, or failed to, designate the
beneficiary of his retirement insurance?
Held: It should be divided equally between his first living wife
Rosario Diaz, on the one hand, and his second wife Basilia
Berdin and his children by her.
It should be noted that the law creating the Government Service
Insurance System is Commonwealth Act 186 which was enacted by
the National Assembly on November 14, 1936. As originally
approved, Commonwealth Act 186 provided for the compulsory
membership in the GSIS of all regularly and permanently appointed
officials and employees of the government and it provided for life
insurance only.
Commonwealth Act 186 was amended by Republic Act 660 on
June 16, 1951, and, among others, the amendatory Act
provided that aside from the system of life insurance under the
Government Service Insurance System there was also
established the system of retirement insurance.
When Consuegra designated his beneficiaries in his life
insurance he could not have intended those beneficiaries of his
life insurance as also the beneficiaries of his retirement
insurance because the provisions on retirement insurance
under the GSIS came about only when Com. Act 186 was
amended by Rep. Act 660 on June 16, 1951. Hence, it cannot
be said that because herein appellants were designated
beneficiaries in Consuegra's life insurance they automatically
became the beneficiaries also of his retirement insurance.
Also, Section 11 of Commonwealth Act 186, as amended by Rep.
Act 660, clearly indicate that there is a need for the employee to file
an application for retirement insurance benefits when he becomes a
member of the GSIS, and he should state in his application the
beneficiary of his retirement insurance. Hence, the beneficiary named
in the life insurance does not automatically become the beneficiary in
the retirement insurance unless the same beneficiary in the life
insurance is so designated in the application for retirement insurance.
In essence, GSIS offers two separate and distinct systems of benefits
to its members — one is the life insurance and the other is the
retirement insurance. These two distinct systems of benefits are paid
out from two distinct and separate funds that are maintained by the
GSIS.
In the case of the proceeds of a life insurance, the same are paid to
whoever is named the beneficiary in the life insurance policy. The
beneficiary in a life insurance under the GSIS may not necessarily be
a heir of the insured. The insured in a life insurance may designate
any person as beneficiary unless disqualified to be so under the
provisions of the Civil Code. And in the absence of any beneficiary
named in the life insurance policy, the proceeds of the insurance will
go to the estate of the insured.
Retirement insurance is primarily intended for the benefit of the
employee — to provide for his old age, or incapacity, after rendering
service in the government for a required number of years. If the
employee reaches the age of retirement, he gets the retirement
benefits even to the exclusion of the beneficiary or beneficiaries
named in his application for retirement insurance. The beneficiary of
the retirement insurance can only claim the proceeds of the retirement
insurance if the employee dies before retirement. If the employee
failed or overlooked to state the beneficiary of his retirement
insurance, the retirement benefits will accrue to his estate and will be
given to his legal heirs in accordance with law, as in the case of a life
insurance if no beneficiary is named in the insurance policy.
Therefore, the proceeds of the retirement insurance of the late
Jose Consuegra should be divided equally between his first
living wife Rosario Diaz, on the one hand, and his second wife
Basilia Berdin and his children by her, on the other; it being
accepted as a fact that the second marriage of Jose
Consuegra to Basilia Berdin was contracted in good faith.
8. Spouses NILO CHA and STELLA UY CHA, and UNITED
INSURANCE CO., INC., petitioners, vs. COURT OF
APPEALS and CKS DEVELOPMENT CORPORATION,
respondents.
INSURED: Merchandise and goods
INSURANCE: United Insurance Co
BENEFICIARY: CKS Development Corporation
FACTS: Petitioner-spouses Nilo Cha and Stella Uy-Cha, as
lessees, entered into a lease contract with private respondent
CKS Development Corporation (CKS), as lessor. One of the
stipulations of the one year lease contract states is that the
lessee shall not insure against fire the, merchandise and goods
placed in the leased premises without first obtaining the written
consent and approval of the LESSOR and if the LESSEE
obtain the insurance thereof without the consent of the
LESSOR then the policy is deemed assigned and transferred
to the LESSOR for its own benefit. Notwithstanding such
stipulation in the lease contract, the Cha spouses insured
against loss by fire the merchandise inside the leased
premises for Php 500,000.00 with the United Insurance Co.,
Inc. (United) without the written consent of private respondent
CKS. On the day that the lease contract was to expire, fire
broke out inside the leased premises.
When CKS learned of the insurance earlier procured by the
Cha spouses, it wrote the insurer (United) a demand letter
asking that the proceeds of the insurance contract be paid
directly to CKS, based on its lease contract with the Cha
spouses. However, United refused to pay CKS. The latter filed
a complaint against the Cha spouses and United to which the
RTC rendered a decision in favor of CKS.
ISSUE: Whether or not CKS, the lessor, has insurable interest
in the goods and merchandise inside the leased premises.
RULING: No, the lessor has no insurable interest over the
goods and merchandise inside the leased premises.
A non-life insurance policy such as the fire insurance policy
taken by petitioner-spouses over their merchandise is primarily
a contract of indemnity. Insurable interest in the property
insured must exist at the time the insurance takes effect and at
the time the loss occurs. The basis of such requirement of
insurable interest in property insured is based on sound public
policy: to prevent a person from taking out an insurance policy
on property upon which he has no insurable interest and
collecting the proceeds of said policy in case of loss of the
property.
Section 17 of the Insurance Code provides:
Sec. 17. The measure of an insurable interest in
property is the extent to which the insured might be
damnified by loss of injury thereof.
Therefore, respondent CKS cannot, under the Insurance Code
— a special law — be validly a beneficiary of the fire insurance
policy taken by the petitioner-spouses over their merchandise.
This insurable interest over said merchandise remains with the
insured, the Cha spouses. The automatic assignment of the
policy to CKS under the provision of the lease contract
previously quoted is void for being contrary to law and/or public
policy. The proceeds of the fire insurance policy thus rightfully
belong to the spouses Nilo Cha and Stella Uy-Cha (herein co-
petitioners). The insurer (United) cannot be compelled to pay
the proceeds of the fire insurance policy to a person (CKS)
who has no insurable interest in the property insured.
9. VICENTE ONG LIM SING, JR., petitioner, vs. FEB
LEASING & FINANCE CORPORATION, respondent.
Facts: On March 9, 1995, FEB entered into a lease of
equipment and motor vehicles with JVL Food Products (JVL).
On the same date, Vicente executed an Individual Guaranty
Agreement with FEB to guarantee the prompt and faithful
performance of the terms and conditions of the aforesaid lease
agreement. Under the contract, JVL was obliged to pay FEB
an aggregate gross monthly rental of P170,494.00.
JVL defaulted in the payment of the monthly rentals. As of July
31, 2000, the amount in arrears, including penalty charges and
insurance premiums, amounted to P3,414,468.75. On August
23, 2000, FEB sent a letter to JVL demanding payment of the
said amount. However, JVL failed to pay.
On December 6, 2000, FEB filed a Complaint with the RTC of
Manila for sum of money, damages, and replevin against JVL,
Lim, and John Doe.
JVL and Lim admitted the existence of the lease agreement
but asserted that it is in reality a sale of equipment on
installment basis, with FEB acting as the financier. JVL and
Lim claimed that this intention was apparent from the fact that
they were made to believe that when full payment was
effected, a Deed of Sale will be executed by FEB as vendor in
favor of JVL and Lim as vendees. FEB purportedly assured
them that documenting the transaction as a lease agreement is
just an industry practice and that the proper documentation
would be effected as soon as full payment for every item was
made.
The trial court stated, among others, that if JVL and Lim (then
defendants) were to be regarded as only a lessee, logically the
lessor who asserts ownership will be the one directly benefited
or injured and therefore the lessee is not supposed to be the
assured as he has no insurable interest.
FEB subsequently appealed the case to the CA, wherein it
declared the transaction between the parties as a financial
lease agreement. The said decision reversed and set aside the
trial court’s decision. Hence, Lim filed the present Petition for
Review on Certiorari.
ISSUE: Whether or not petitioner has an insurable interest in
the equipment and motor vehicles leased.
RULING: Yes.
The stipulation in Section 14 of the leased contract, that the
equipment shall be insured at the cost and expense of the
lessee against loss, damage, or destruction from fire, theft,
accident, or other insurable risk for the full term of the lease, is
a binding and valid stipulation. Petitioner, as a lessee, has an
insurable interest in the equipment and motor vehicles leased.
Section 17 of the Insurance Code provides that the measure of
an insurable interest in property is the extent to which the
insured might be damnified by loss or injury thereof. It cannot
be denied that JVL will be directly damnified in case of loss,
damage, or destruction of any of the properties leased.
10. ORIENTAL ASSURANCE CORPORATION, petitioner,
vs. COURT OF APPEALS AND PANAMA SAW MILL CO.,
INC., respondents.
ESSENTIAL FACTS:
Insured: Panama Sawmill Co., Inc
Insurer: Oriental Assurance Corporation
Carrier: Transpacific Towage, Inc
Amount insured: P1-M
1. private respondent Panama Sawmill Co., Inc.
(Panama) bought, in Palawan, 1,208 pieces of
apitong logs, with a total volume of 2,000 cubic
meters. It hired Transpacific Towage, Inc., to transport
the logs by sea to Manila and insured it against loss
for P1-M with petitioner Oriental Assurance
Corporation (Oriental Assurance).
2. There is a claim by Panama, however, that the
insurance coverage should have been for P3-M were
it not for the fraudulent act of one Benito Sy Yee Long
to whom it had entrusted the amount of P6,000.00 for
the payment of the premium for a P3-M policy.
3. Oriental Assurance Warranted that this Insurance is
against TOTAL LOSS ONLY.
4. The logs were loaded on two (2) barges. But, as fate
would have it, during the voyage, rough seas and
strong winds caused damage to Barge resulting in the
loss of 497 pieces of logs out of the 598 pieces
loaded thereon.
5. Panama demanded payment for the loss but Oriental
Assurance refuse on the ground that its contracted
liability was for "TOTAL LOSS ONLY."
Issue: whether or not Oriental Assurance can be held liable
under its marine insurance policy based on the theory of a
divisible contract of insurance and, consequently, a
constructive total loss.
Ruling:
Our considered opinion is that no liability attaches.
The terms of the contract constitute the measure of the insurer
liability and compliance therewith is a condition precedent to
the insured's right to recovery from the insurer (Perla
Compania de Seguros, Inc. v. Court of Appeals, G.R. No.
78860, May 28, 1990, 185 SCRA 741). Whether a contract is
entire or severable is a question of intention to be determined
by the language employed by the parties. The policy in
question shows that the subject matter insured was the entire
shipment of 2,000 cubic meters of apitong logs. The fact that
the logs were loaded on two different barges did not make the
contract several and divisible as to the items insured. The logs
on the two barges were not separately valued or separately
insured. Only one premium was paid for the entire shipment,
making for only one cause or consideration. The insurance
contract must, therefore, be considered indivisible.
More importantly, the insurer's liability was for "total loss only."
A total loss may be either actual or constructive (Sec. 129,
Insurance Code). An actual total loss is caused by:
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by
sinking, or by being broken up;
(c) Any damage to the thing which renders it
valueless to the owner for the purpose for
which he held it; or
(d) Any other event which effectively
deprives the owner of the possession, at the
port of destination, of the thing insured.
(Section 130, Insurance Code).
A constructive total loss is one which gives to a person insured
a right to abandon, under Section 139 of the Insurance Code.
This provision reads:
SECTION 139. A person insured by a
contract of marine insurance may abandon
the thing insured, or any particular portion
thereof separately valued by the policy, or
otherwise separately insured, and recover
for a total loss thereof, when the cause of the
loss is a peril injured against,
(a) If more than three-fourths thereof in value
is actually lost, or would have to be
expended to recover it from the peril;
(b) If it is injured to such an extent as to
reduce its value more than three-fourths;
xxx xxx xxx
(Emphasis supplied)
Respondent Appellate Court treated the loss as a constructive
total loss, and for the purpose of computing the more than
three-fourths value of the logs actually lost, considered the
cargo in one barge as separate from the logs in the other.
Thus, it concluded that the loss of 497 pieces of logs from
barge TPAC-1000, mathematically speaking, is more than
three-fourths (¾) of the 598 pieces of logs loaded in that barge
and may, therefore, be considered as constructive total loss.
The basis thus used is, in our opinion, reversible error. The
requirements for the application of Section 139 of the
Insurance Code, quoted above, have not been met. The logs
involved, although placed in two barges, were not separately
valued by the policy, nor separately insured. Resultantly, the
logs lost in barge TPAC-1000 in relation to the total number of
logs loaded on the same barge can not be made the basis for
determining constructive total loss. The logs having been
insured as one inseparable unit, the correct basis for
determining the existence of constructive total loss is the
totality of the shipment of logs. Of the entirety of 1,208, pieces
of logs, only 497 pieces thereof were lost or 41.45% of the
entire shipment. Since the cost of those 497 pieces does not
exceed 75% of the value of all 1,208 pieces of logs, the
shipment can not be said to have sustained a constructive total
loss under Section 139(a) of the Insurance Code.
In the absence of either actual or constructive total loss, there
can be no recovery by the insured Panama against the insurer,
Oriental Assurance. . -lmcsumioglaw