Felipe vs.
MGM any document to prove said allegation while MGM Motors
Facts: Petitioner Frederick Felipe purchased on
installment basis a Nissan Terrano Wagon through MGM
Motors' authorized representative Sarmiento. Petitioner
allegedly gave a P200,000.00 downpayment and
P5,000.00 reservation fee to Sarmiento. He then insured
the vehicle with Ayala Insurance and paid a premium of
P40,220.67. On 15 November 1997, the subject vehicle
was reportedly lost. He tried to claim from Ayala
Insurance but the latter refused to pay its liability causing
damages to petitioner. On the other hand, MGM Motors
refused to produce, despite repeated demands, the
document of sale by installment covering the vehicle.
MGM Motors denied receiving the down payment of
P200,000.00 and P5,000.00 reservation fee paid through
Sarmiento. (Reason why MGM denied: MGM Motors
offered Petitioner a discount of P220,000.00 if the latter
would pay in cash. MGM Motors averred that the vehicle
was delivered to petitioner on 14 May 1997 but the latter
failed to pay in cash, thus MGM Motors did not give the
registration papers to petitioner.)
Ayala Insurance, for its part, contended that petitioner had
no valid cause of action against it. Ayala Insurance
asserted that petitioner had no insurable interest because
he is not the owner of the vehicle that he had insured with
it.
Aggrieved, Petitioner filed a Complaint for Specific
Performance and Damages against respondents MGM
Motors, Inc. (MGM Motors) and Ayala General Insurance
Corporation (Ayala Insurance).
RTC and CA dismissed the case – lack of evidence. (kay
“only two pieces of evidence were admitted by the trial
court: (1) the Official Receipt dated 7 May 1998 issued by
MGM Motors wherein it acknowledged receipt of
P200,000.00 from petitioner; and (2) the testimony of his
father Alberto that he was present when petitioner paid
P200,000.00 to MGM Motors.”)
Issue: WON Petitioner has a claim against Ayala
Insurance
Ruling: No. Petitioner failed to prove that a loss occurred
and that his motorcycle is covered by the insurance
policy.
Well-established is the rule that the burden of proof lies
on the party who makes the allegations.14 There is no
dispute that the only pieces of evidence admitted in court
are the testimony of Alberto and the receipt showing MGM
Motors receiving P200,000.00 from petitioner as partial
payment of the subject car. The allegation that the
purchase of the vehicle was on an installment basis was
not supported by any evidence. The receipt of a partial
payment does not suffice to prove that the purchase was
made on an installment basis. Petitioner did not present
produced a sales invoice wherein it was stated that the
mode of payment is "COD" or cash on delivery.
In the same vein, petitioner failed to substantiate his
allegation against Ayala Insurance. Petitioner has the
burden of proof to show that a loss occurred and said loss
was covered by his insurance policy. Considering that the
trial court only admitted two pieces of evidence in
petitioner's favor and none of those tend to prove loss of
the subject car and coverage thereof under the insurance
policy, petitioner is not entitled to the reliefs he had prayed
for.
RCBC v CA
1. COMMERCIAL LAW; INSURANCE; MORTGAGOR
AND MORTGAGEE, WITH SEPARATE AND DISTINCT
INSURABLE INTEREST. — It is settled that a mortgagor
and a mortgagee have separate and distinct insurable
interests in the same mortgaged property, such that each
one of them may insure the same property for his own
sole benefit. There is no question that GOYU could insure
the mortgaged property for its own exclusive benefit. In
the present case, although it appears that GOYU obtained
the subject insurance policies naming itself as the sole
payee, the intentions of the parties as shown by their
contemporaneous acts, must be given due consideration
in order to better serve the interest of justice and equity.
4. COMMERCIAL LAW; OBLIGATIONS AND
CONTRACTS; INTENTION OF PARTIES WILL
PREVAIL OVER INSURANCE PROVISION THAT
PROCEEDS SHALL EXCLUSIVELY APPLY TO
INTEREST OFPERSON IN WHOSE NAME OR
BENEFIT IT IS MADE; CASE AT BAR. — GOYU cannot
seek relief under Section 53 of the Insurance Code which
provides that the proceeds of insurance shall exclusively
apply to the interest of the person in whose name or for
whose benefit it is made. The peculiarity of the
circumstances obtaining in the instant case presents a
justification to take exception to the strict
application of said provision, it having been sufficiently
established that it was the intention of the parties to
designate RCBC as the party for whose benefit the
insurance policies were taken out. This Court can not
over stress the fact that upon receiving its copies of the
endorsement documents prepared by Alchester, GOYU,
despite the absence ofits written conformity thereto,
obviously considered said endorsement to be sufficient
compliance with its obligation under the mortgage
contracts since RCBC accordingly continued to extend
the benefits of its credit facilities and GOYU continued to
benefit therefrom. Just as plain too is the intention of the
parties to constitute RCBC as the beneficiary of the
various insurance policies obtained by GOYU. The
intention of the parties will have to be given full force and
effect in this particular case. The insurance proceeds
may, therefore, be exclusively applied to RCBC, which
under the factual circumstances of the case, is truly the
person or entity for whose benefit the policies were clearly
intended. Moreover, the law's evident intention to protect
the interests of the mortgagee upon the mortgaged
property is expressed in Article 2127 of the Civil Code.|||
10. COMMERCIAL LAW; INSURANCE; ASSIGNEE
ENTITLED TO CLAIM INSURANCE PROCEEDS. — By
virtue of the mortgage contracts as well as the
endorsements of the insurance policies, RCBC has the
right to claim the insurance proceeds, in
substitution of the property lost in the fire. Having
assigned its rights, GOYU lost its standing as the
beneficiary of the said insurance policies.
FACTS:
GOYU applied for credit facilities and accommodations
with RCBC. After due evaluation, a credit facility in the
amount of P30 million was initially granted. Upon GOYU's
application increased GOYU's credit facility to P50 million,
then to P90 million, and finally to P117 million
As security for its credit facilities with RCBC, GOYU
executed two REM and two CM in favor of RCBC, which
were registered with the Registry of Deeds at. Under each
of these four mortgage contracts, GOYU committed itself
to insure the mortgaged property with an insurance
company approved by RCBC, and subsequently, to
endorse and deliver the insurance policies to RCBC.
GOYU obtained in its name a total of 10 insurance
policies from MICO. In February 1992, Alchester
Insurance Agency, Inc., the insurance agent where
GOYU obtained the Malayan insurance policies, issued
nine endorsements in favor of RCBC seemingly upon
instructions of GOYU
On April 27, 1992, one of GOYU's factory buildings in
Valenzuela was gutted by fire. Consequently, GOYU
submitted its claim for indemnity.
MICO denied the claim on the ground that the insurance
policies were either attached pursuant to writs of
attachments/garnishments issued by various courts or
that the insurance proceeds were also claimed by other
creditors of GOYU alleging better rights to the proceeds
than the insured.
GOYU filed a complaint for specific performance and
damages. RCBC, one of GOYU's creditors, also filed with
MICO its formal claim over the proceeds of the insurance
policies, but said claims were also denied for the same
reasons that AGCO denied GOYU's claims.
However, because the endorsements do not bear the
signature of any officer of GOYU, the trial court, as well
as the Court of Appeals, concluded that the
endorsements are defective and held that RCBC has no
right over the insurance proceeds.
ISSUE: Whether or not RCBC has a right over the
insurance proceeds.
RULING:
RCBC has a right over the insurance proceeds.
It is settled that a mortgagor and a mortgagee have
separate and distinct insurable interests in the same
mortgaged property, such that each one of them may
insure the same property for his own sole benefit. There
is no question that GOYU could insure the mortgaged
property for its own exclusive benefit. In the present case,
although it appears that GOYU obtained the subject
insurance policies naming itself as the sole payee, the
intentions of the parties as shown by their
contemporaneous acts, must be given due consideration
in order to better serve the interest of justice and equity.
It is to be noted that 9 endorsement documents were
prepared by Alchester in favor of RCBC. The Court is in a
quandary how Alchester could arrive at the idea of
endorsing any specific insurance policy in favor of any
particular beneficiary or payee other than the insured had
not such named payee or beneficiary been specifically
disclosed by the insured itself. It is also significant that
GOYU voluntarily and purposely took the insurance
policies from MICO, a sister company of RCBC, and not
just from any other insurance company. Alchester would
not have found out that the subject pieces of property
were mortgaged to RCBC had not such information been
voluntarily disclosed by GOYU itself. Had it not been for
GOYU, Alchester would not have known of GOYU's
intention of obtaining insurance coverage in compliance
with its undertaking in the mortgage contracts with RCBC,
and verify, Alchester would not have endorsed the
policies to RCBC had it not been so directed by GOYU.
On equitable principles, particularly on the ground of
estoppel, the Court is constrained to rule in favor of
mortgagor RCBC. RCBC, in good faith, relied upon the
endorsement documents sent to it as this was only
pursuant to the stipulation in the mortgage contracts. We
find such reliance to be justified under the circumstances
of the case. GOYU failed to seasonably repudiate the
authority of the person or persons who prepared such
endorsements. Over and above this, GOYU continued, in
the meantime, to enjoy the benefits of the credit facilities
extended to it by RCBC. After the occurrence of the loss
insured against, it was too late for GOYU to disown the
endorsements for any imagined or contrived lack of
authority of Alchester to prepare and issue said
endorsements. If there had not been actually an implied
ratification of said endorsements by virtue of GOYU's
inaction in this case, GOYU is at the very least estopped
from assailing their operative effects.
To permit GOYU to capitalize on its non-confirmation of
these endorsements while it continued to enjoy the
benefits of the credit facilities of RCBC which believed in
good faith that there was due endorsement pursuant to
their mortgage contracts, is to countenance grave
contravention of public policy, fair dealing, good faith, and
justice. Such an unjust situation, the Court cannot
sanction. Under the peculiar circumstances obtaining in
this case, the Court is bound to recognize RCBC's right to
the proceeds of the insurance policies if not for the actual
endorsement of the policies, at least on the basis of the
equitable principle of estoppel.
GOYU cannot seek relief under Section 53 of the
Insurance Code which provides that the proceeds of
insurance shall exclusively apply to the interest of the
person in whose name or for whose benefit it is made.
The peculiarity of the circumstances obtaining in the
instant case presents a justification to take exception to
the strict application of said provision, it having been
sufficiently established that it was the intention of the
parties to designate RCBC as the party for whose benefit
the insurance policies were taken out. Consider thus the
following:
1. It is undisputed that the insured pieces of
property were the subject of mortgage contracts
entered into between RCBC and GOYU in
consideration of and for securing GOYU's credit
facilities from RCBC. The mortgage contracts
contained common provisions whereby GOYU, as
mortgagor, undertook to have the mortgaged
property properly covered against any loss by an
insurance company acceptable to RCBC.
2. GOYU voluntarily procured insurance policies to
cover the mortgaged property from MICO, no less
than a sister company of RCBC and definitely an
acceptable insurance company to RCBC.
3. Endorsement documents were prepared by
MICO's underwriter, Alchester Insurance Agency,
Inc., and copies thereof were sent to GOYU, MICO
and RCBC. GOYU did not assail, until of late, the
validity of said endorsements.
4. GOYU continued until the occurrence of the fire,
to enjoy the benefits of the credit facilities extended
by RCBC which was conditioned upon the
endorsement of the insurance policies to be taken
by GOYU to cover the mortgaged properties.
This Court can not over stress the fact that upon receiving
its copies of the endorsement documents prepared by
Alchester, GOYU, despite the absence written conformity
thereto, obviously considered said endorsement to be
sufficient compliance with its obligation under the
mortgage contracts since RCBC accordingly continued to
extend the benefits of its credit facilities and GOYU
continued to benefit therefrom. Just as plain too is the
intention of the parties to constitute RCBC as the
beneficiary of the various insurance policies obtained by
GOYU. The intention of the parties will have to be given
full force and effect in this particular case. The insurance
proceeds may, therefore, be exclusively applied to RCBC,
which under the factual circumstances of the case, is truly
the person or entity for whose benefit the policies were
clearly intended.
GAISANO VS. INSURANCE COMPANY OF NA
Facts: IMC is the maker of Wrangler Blue Jeans while
LSPI is the local distributor of products bearing
trademarks owned by Levi Strauss & Co.. IMC and LSPI
separately obtained from respondent fire insurance
policies with book debt endorsements. The insurance
policies provide for coverage on "book debts in
connection with ready-made clothing materials which
have been sold or delivered to various customers and
dealers of the Insured anywhere in the Philippines." By
definition, book debts are the "unpaid account still
appearing in the Book of Account of the Insured 45 days
after the time of the loss covered under this Policy."
Dom: ang gi insure diri kay ang unpaid accounts sa
goods (aka utang), dili ang goods themselves.
Petitioner Gaisano is a customer and dealer of the
products of IMC and LSPI. On February 25, 1991, the
Gaisano Superstore Complex in Cagayan de Oro City,
owned by petitioner, was consumed by fire. Included in
the items lost or destroyed in the fire were stocks of ready-
made clothing materials sold and delivered by IMC and
LSPI. Subrogated to the rights of IMC and LSPI,
respondent Insurance Company filed a complaint against
petitioner.
RTC Ruling – in favor of petitioner Gaisano
It held that the fire was purely accidental; and that since
the sales invoices state that "it is further agreed that
merely for purpose of securing the payment of purchase
price, the above-described merchandise remains the
property of the vendor until the purchase price is fully
paid", IMC and LSPI retained ownership of the delivered
goods and must bear the loss (res perit domino).
CA Ruling – set aside RTC decision.
CA ordered petitioner Gaisano to pay respondent
Insurance Company (being the subrogee of IMC and
LSPI).
The CA held that the sales invoices are proofs of sale,
being detailed statements of the nature, quantity and cost
of the thing sold; that loss of the goods in the fire must be
borne by petitioner since the proviso contained in the
sales invoices is an exception under Article 1504 (1) of
the Civil Code, to the general rule that if the thing is lost
by a fortuitous event, the risk is borne by the owner of the
thing at the time the loss under the principle of res perit
domino.
Issues:
WON the subject insured were the accounts of IMC and
LSPI with petitioner which remained unpaid 45 days after
the loss through fire, and not the loss or destruction of the
goods delivered.
WON petitioner bears the loss
WON IMC and LSPI have maintained insurable interest
over the subject matter
WON petitioner is liable for the unpaid accounts
WON there was a valid subrogation
Ruling:
1) The subject insured were the unpaid accounts of IMC
and LSPI.
The questioned insurance policies provide coverage for
"book debts in connection with ready-made clothing
materials which have been sold or delivered to various
customers and dealers of the Insured anywhere in the
Philippines."23 ; and defined book debts as the "unpaid
account still appearing in the Book of Account of the
Insured 45 days after the time of the loss covered under
this Policy."24 Nowhere is it provided in the questioned
insurance policies that the subject of the insurance is the
goods sold and delivered to the customers and dealers of
the insured.
Indeed, when the terms of the agreement are clear and
explicit that they do not justify an attempt to read into it
any alleged intention of the parties, the terms are to be
understood literally just as they appear on the face of the
contract.25 Thus, what were insured against were the
accounts of IMC and LSPI with petitioner which
remained unpaid 45 days after the loss through fire,
and not the loss or destruction of the goods delivered.
2) Yes, petitioner should bear the loss.
Paragraph (1), Article 1504 of the Civil Code:
ART. 1504. Unless otherwise agreed, the goods
remain at the seller's risk until the ownership therein is
transferred to the buyer, but when the ownership
therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or
not, except that:
(1) Where delivery of the goods has been made to the
buyer or to a bailee for the buyer, in pursuance of the
contract and the ownership in the goods has been
retained by the seller merely to secure performance by
the buyer of his obligations under the contract, the
goods are at the buyer's risk from the time of such
delivery; (Emphasis supplied)
Thus, when the seller retains ownership only to insure that
the buyer will pay its debt, the risk of loss is borne by
the buyer.27 Accordingly, petitioner bears the risk of loss
of the goods delivered.
3) IMC and LSPI did not lose complete interest over the
goods. They have an insurable interest until full payment
of the value of the delivered goods. Unlike the civil law
concept of res perit domino, where ownership is the basis
for consideration of who bears the risk of loss, in property
insurance, one's interest is not determined by concept of
title, but whether insured has substantial economic
interest in the property.28
Section 13 of our Insurance Code defines insurable
interest as "every interest in property, whether real or
personal, or any relation thereto, or liability in respect
thereof, of such nature that a contemplated peril might
directly damnify the insured." Parenthetically, under
Section 14 of the same Code, an insurable interest in
property may consist in: (a) an existing interest; (b) an
inchoate interest founded on existing interest; or (c) an
expectancy, coupled with an existing interest in that out of
which the expectancy arises.
Therefore, an insurable interest in property does not
necessarily imply a property interest in, or a lien upon, or
possession of, the subject matter of the insurance, and
neither the title nor a beneficial interest is requisite to the
existence of such an interest, it is sufficient that the
insured is so situated with reference to the property that
he would be liable to loss should it be injured or destroyed
by the peril against which it is insured.29 Anyone has an
insurable interest in property who derives a benefit from
its existence or would suffer loss from its
destruction.30Indeed, a vendor or seller retains an
insurable interest in the property sold so long as he has
any interest therein, in other words, so long as he would
suffer by its destruction, as where he has a vendor's
lien.31 In this case, the insurable interest of IMC and LSPI
pertain to the unpaid accounts appearing in their Books of
Account 45 days after the time of the loss covered by the
policies.
4) Yes.
It must be stressed that the insurance in this case is not
for loss of goods by fire but for petitioner's accounts with
IMC and LSPI that remained unpaid 45 days after the fire.
Accordingly, petitioner's obligation is for the payment of
money.
Whether fire is a fortuitous event or petitioner was
negligent are matters immaterial to this case. What is
relevant here is whether it has been established that
petitioner has outstanding accounts with IMC and LSPI.
As a rule, the obligor should be held exempt from liability
when the loss occurs thru a fortuitous event. However,
this is only limited if the obligation consists in the delivery
of a determinate thing and there is no stipulation holding
him liable even in case of fortuitous event. On the other
hand, Article 1263 of the Civil Code states that in an
obligation to deliver a generic thing, the loss or destruction
of anything of the same kind does not extinguish the
obligation (Genus nunquan perit).
5) The right of subrogation accrues simply upon payment
by the insurance company of the insurance claim.
 Art. 2207. If the plaintiff's property has been insured,
and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong
or breach of contract complained of, the insurance
company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has
violated the contract.
As to IMC, there was a valid subrogation because of the
subrogation receipt, which by itself, is sufficient to
establish not only the relationship of respondent as
insurer and IMC as the insured, but also the amount paid
to settle the insurance claim
As to LSPI, respondent failed to present sufficient
evidence to prove its cause of action. There is no proof of
full settlement of the insurance claim of LSPI; no
subrogation receipt was offered in evidence. Thus, there
is no evidence that respondent has been subrogated to
any right which LSPI may have against petitioner. Failure
to substantiate the claim of subrogation is fatal to
petitioner's case for recovery of the amount
of P535,613.00.
HEIRS OF LORETO C. MARAMAG v EVA VERNA DE
GUZMAN MARAMAG
FACTS: The case stems from a petition filed against
respondents with the RTC for revocation and/or reduction
of insurance proceeds for being void and/or inofficious.
The petition alleged that: (1) petitioners were the
legitimate wife and children of Loreto Maramag, while
respondents were Loreto’s illegitimate family; (2) Eva de
Guzman Maramag was a concubine of Loreto and a
suspect in the killing of the latter, thus, she is disqualified
to receive any proceeds from his insurance policies from
Insular Life and Great Pacific Life Assurance Corporation
(Grepalife); (3) the illegitimate children of Loreto—
Odessa, Karl Brian, and Trisha Angelie—were entitled
only to one-half of the legitime of the legitimate children,
thus, the proceeds released to Odessa and those to be
released to Karl Brian and Trisha Angelie were inofficious
and should be reduced; and (4) petitioners could not be
deprived of their legitimes, which should be satisfied first.
In answer, Insular admitted that Loreto misrepresented
Eva as his legitimate wife and Odessa, Karl Brian, and
Trisha Angelie as his legitimate children, and that they
filed their claims for the insurance proceeds of the
insurance policies; that when it ascertained that Eva was
not the legal wife of Loreto, it disqualified her as a
beneficiary and divided the proceeds among Odessa, Karl
Brian, and Trisha Angelie, as the remaining designated
beneficiaries. Insular further claimed that it was bound to
honor the insurance policies designating the children of
Loreto with Eva as beneficiaries pursuant to Section 53 of
the Insurance Code.
In its own answer with compulsory counterclaim,
Grepalife alleged that Eva was not designated as an
insurance policy beneficiary; that the claims filed by
Odessa, Karl Brian, and Trisha Angelie were denied
because Loreto was ineligible for insurance due to a
misrepresentation in his application form that he was born
on December 10, 1936 and, thus, not more than 65 years
old when he signed it in September 2001; that the case
was premature, there being no claim filed by the
legitimate family of Loreto; and that the law on succession
does not apply where the designation of insurance
beneficiaries is clear.
ISSUE: Whether the petitioners are entitled to the
insurance proceeds.
RULING: NO. In this case, it is clear from the petition filed
before the trial court that, although petitioners are the
legitimate heirs of Loreto, they were not named as
beneficiaries in the insurance policies issued by Insular
and Grepalife. The basis of petitioners’ claim is that Eva,
being a concubine of Loreto and a suspect in his murder,
is disqualified from being designated as beneficiary of the
insurance policies, and that Eva’s children with Loreto,
being illegitimate children, are entitled to a lesser share of
the proceeds of the policies. They also argued that
pursuant to Section 12 of the Insurance Code, Eva’s
share in the proceeds should be forfeited in their favor, the
former having brought about the death of Loreto. Thus,
they prayed that the share of Eva and portions of the
shares of Loreto’s illegitimate children should be awarded
to them, being the legitimate heirs of Loreto entitled to
their respective legitimes.
It is evident from the face of the complaint that petitioners
are not entitled to a favorable judgment in light of Article
2011 of the Civil Code which expressly provides that
insurance contracts shall be governed by special laws,
i.e., the Insurance Code. Section 53 of the Insurance
Code states— SECTION 53. The insurance proceeds
shall be applied exclusively to the proper interest of the
person in whose name or for whose benefit it is made
unless otherwise specified in the policy.
Pursuant thereto, it is obvious that the only persons
entitled to claim the insurance proceeds are either the
insured, if still alive; or the beneficiary, if the insured is
already deceased, upon the maturation of the policy. The
exception to this rule is a situation where the insurance
contract was intended to benefit third persons who are not
parties to the same in the form of favorable stipulations or
indemnity. In such a case, third parties may directly sue
and claim from the insurer.
Petitioners are third parties to the insurance contracts with
Insular and Grepalife and, thus, are not entitled to the
proceeds thereof. Accordingly, respondents Insular and
Grepalife have no legal obligation to turn over the
insurance proceeds to petitioners. The revocation of Eva
as a beneficiary in one policy and her disqualification as
such in another are of no moment considering that the
designation of the illegitimate children as beneficiaries in
Loreto’s insurance policies remains valid. Because no
legal proscription exists in naming as beneficiaries the
children of illicit relationships by the insured, the shares of
Eva in the insurance proceeds, whether forfeited by the
court in view of the prohibition on donations under Article
739 of the Civil Code or by the insurers themselves for
reasons based on the insurance contracts, must be
awarded to the said illegitimate children, the designated
beneficiaries, to the exclusion of petitioners. It is only in
cases where the insured has not designated any
beneficiary, or when the designated beneficiary is
disqualified by law to receive the proceeds, that the
insurance policy proceeds shall redound to the benefit of
the estate of the insured. (Only then will the laws on
succession apply)
VIOLETA VS INSULAR LIFE
FACTS: Violeta is the widow of the deceased Eulogio C.
Lalican (Eulogio). During his lifetime, Eulogio applied for
an insurance policy with Insular Life through its agent
Josephine Malaluan (Malaluan). The value of the policy
amounted to P1.5M. Violeta was named as the primary
beneficiary.
Under the terms of the policy, Eulogio was to pay the
premiums on a quarterly basis in the amount of P8K
payable every 24 of April, July, October and January until
the end of the 20-year period.
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 and 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. The policy therefore, lapsed and became void.
Eulogio applied for the reinstatement of the policy. A while
later, on the same day, Eulogio died of cardio-respiratory
arrest secondary to electrocution.
Without knowing of Eulogios death, Malaluan forwarded
to the Insular Life Regional Office Eulogio’s application for
reinstatement. However, Insular Life no longer acted
upon such application as it was informed that Eulogio had
already passed away.
Violeta filed with Insular Life a claim for payment of the full
proceeds of the insurance policy. Insular Life informed
Violeta that her claim could not be granted since, at the
time of Eulogios death, the policy had already lapsed, and
Eulogio failed to reinstate the same. According to the
Application for Reinstatement, the policy would only
be considered reinstated upon approval of the
application by Insular Life during the applicant’s
lifetime and good health.
Violeta filed with the RTC a Complaint for Death Claim
Benefit. RTC thereafter issued a decision in favor of
Insular Life. She then directly appealed to the SC.
ISSUE: WON Eulogio was able to reinstate the lapsed
insurance policy on his life before his death
RULING: NO. Eulogio was not able to reinstate the
lapsed insurance policy hence Violeta my dear is not
entitled to the insurance proceeds.
That Eulogio’s insurance policy had already lapsed is a
fact beyond dispute. Both the Policy Contract and the
Application for Reinstatement provide for specific
conditions for the reinstatement of a lapsed policy:
You may reinstate this policy at any time within
three years after it lapsed if the following
conditions are met: (1) the policy has not been
surrendered for its cash value or the period of
extension as a term insurance has not expired;
(2) evidence of insurability satisfactory to Insular
Life is furnished; (3) overdue premiums are paid
with compound interest at a rate not exceeding
that which would have been applicable to said
premium and indebtedness in the policy years
prior to reinstatement; and (4) indebtedness
which existed at the time of lapsation is paid or
renewed.
There was also an additional condition, to wit: I/We agree
that said Policy shall not be considered reinstated until
this application is approved by the Company during
my/our lifetime and good health and until all other
Company requirements for the reinstatement of said
Policy are fully satisfied.
In the instant case, Eulogios death rendered impossible
full compliance with the conditions for reinstatement.
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 Eulogios lifetime and good health.
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.
It does not matter that when he died, Eulogios Application
for Reinstatement and deposits for the overdue premiums
and interests were already with Malaluan as she did not
have the authority to approve Eulogios Application for
Reinstatement.
The Policy 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 but she is entitled to receive the full
refund of the payments made by Eulogio thereon.
ONG LIM SING, JR. v FEB LEASING AND FINANCE
CORPORATION
(G.R. No. 168115, June 8, 2007)
In property insurance against loss or other accidental
causes, the assured must have an insurable interest. It
has also been held that the test of insurable interest in
property is whether the assured has a right, title or interest
therein that he will be benefited by its preservation and
continued existence or suffer a direct pecuniary loss from
its destruction or injury by the peril insured against.
FACTS:
On March 9, 1995, FEB Leasing and Finance
Corporation entered into a lease of equipment and motor
vehicles with JVL Food Products. On the same date,
Vicente Ong Lim Sing, Jr. executed an Individual
Guaranty Agreement with FEB to guarantee the prompt
and faithful performance of the terms and conditions of
the aforesaid lease agreement.
Corresponding Lease Schedules with Delivery
and Acceptance Certificates over the equipment and
motor vehicles formed part of the agreement. Under the
contract, JVL was obliged to pay FEB an aggregate gross
monthly rental of One Hundred Seventy Thousand Four
Hundred Ninety-Four Pesos (P170,494.00).
JVL defaulted in the payment of the monthly
rentals. As of July 31, 2000, the amount in arrears,
including the penalty charges and insurance premiums,
amounted to Three Million Four Hundred Fourteen
Thousand Four Hundred Sixty-Eight and 75/100 Pesos
(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 Regional Trial Court of Manila for sum of money,
damages, and replevin against JVL, Lim, and John Doe.
In an Amended Answer, JVL and Lim admitted
the existence of the lease agreement but asserted that it
is in reality a sale of equipment on instalment basis, with
FEB acting as the financier. On November 22, 2002, the
trial court ruled in favor of JVL and Lim and stressed the
contradictory terms found in the lease agreement. 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.
On March 15, 2005, the Court of Appeals
reversed the RTC decision and issued its Decision
declaring the transaction between the parties as a
financial lease agreement.
Hence, Lim filed the present Petition for
Review on Certiorari.
ISSUE:
W/N petitioner has an insurable interest in the equipment
and motor vehicles leased? (even if they are mere
lessees, and not necessarily the owner of the equipment
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.They are not the owners but
surely, the preservation of the thing/property is in their
best interest. Thus, asking petitioner to insure the said
leased equipment does not change the fact that they are
mere lesses of the equipment and not owners thereof.
SC affirmed the CA’s ruling and held that the
contract is not a contract of sale but a financial lease.
AFP GENERAL INSURANCE CORPORATION vs
MOLINA
FACTS: The private respondents are the complainants in
a case for illegal dismissal, filed against Radon Security &
Allied Services Agency and/or Raquel Aquias and Ever
Emporium, Inc. The Labor Arbiter ruled that the private
respondents were illegally dismissed and ordered Radon
Security to pay them separation pay, backwages, and other
monetary claims.
Radon Security appealed the Labor Arbiters decision to
public respondent NLRC and posted a supersedeas bond,
issued by herein petitioner AFPGIC as surety. (basta ang
sa labor ni na to perfect an appeal, file ug bond)
The NLRC affirmed the decision of the Labor Arbiter and
ordered Radon Security to pay said awards, with Radon
Security and Ever Emporium, Inc. adjudged jointly and
severally liable.
After their MR being denied by NLRC and the SC
dismissed their petition for certiorari, the Decision of the
NLRC became final and executory. Subsequently, the
Labor Arbiter issued a Writ of Execution. By virtue of the
writ of execution, the NLRC Sheriff issued a Notice of
Garnishment against the supersedeas bond.
On April 14, 1999, AFPGIC (petitioner) entered the fray
by filing before the Labor Arbiter an Omnibus Motion to
Quash Notice/Writ of Garnishment and to Discharge
AFPGICs Appeal Bond (ang kadtong supersedeas bond)
on the ground that said bond has been cancelled and thus
non-existent in view of the failure of Radon Security to pay
the yearly premiums.
The petitioner contends that under Section 64 of the
Insurance Code, which is deemed written into every
insurance contract or contract of surety, an insurer may
cancel a policy upon non-payment of the premium. Said
cancellation is binding upon the beneficiary as the right of
a beneficiary is subordinate to that of the insured.
Petitioner points out that in South Sea Surety & Insurance
Co., Inc. v. CA, this Court held that payment of premium
is a condition precedent to and essential for the
efficaciousness of a contract of insurance.
The private respondents, on the other hand, argue that as
a supersedeas bond was posted for the benefit of a third
person to guarantee that the money judgment will be
satisfied in case it is affirmed on appeal, the third person who
stands to benefit from said bond is entitled to notice of its
cancellation for any reason. Likewise, the NLRC should
have been notified to enable it to take the proper action
under the circumstances. The respondents submit that from
its very nature, a supersedeas bond remains effective and
the surety liable thereon until formally discharged from said
liability. To hold otherwise would enable a losing party to
frustrate a money judgment by the simple expedient of
ceasing to pay premiums.
ISSUE: WoN the subject appeal bond was already
cancelled for non-payment of premium and thus it could
not be subject of execution or garnishment.
RULING: NO.
The controversy before the Court involves more than just
the mere application of the provisions of the Insurance
Code to the factual circumstances. This instant case, after
all, traces its roots to a labor controversy involving illegally
dismissed workers. It thus entails the application of labor
laws and regulations. Recall that the heart of the dispute
is not an ordinary contract of property or life insurance,
but an appeal bond required by both substantive and
adjective law in appeals in labor disputes, specifically
Article 223 of the Labor Code, as amended by Republic
Act No. 6715, and Rule VI, Section 6 of the Revised
NLRC Rules of Procedure. Said provisions mandate that
in labor cases where the judgment appealed from
involves a monetary award, the appeal may be perfected
only upon the posting of a cash or surety bond issued by
a reputable bonding company accredited by the
NLRC. The perfection of an appeal by an employer only
upon the posting of a cash or surety bond clearly and
categorically shows the intent of the lawmakers to make
the posting of a cash or surety bond by the employer to
be the exclusive means by which an employers appeal
may be perfected. Additionally, the filing of a cash or
surety bond is a jurisdictional requirement in an appeal
involving a money judgment to the NLRC. In addition,
Rule VI, Section 6 of the Revised NLRC Rules of
Procedure is a contemporaneous construction of Article
223 by the NLRC. As an interpretation of a law by the
implementing administrative agency, it is accorded great
respect by this Court. Note that Rule VI, Section 6
categorically states that the cash or surety bond posted in
appeals involving monetary awards in labor disputes shall
be in effect until final disposition of the case. This could
only be construed to mean that the surety bond shall
remain valid and in force until finality and execution of
judgment, with the resultant discharge of the surety
company only thereafter, if we are to give teeth to the
labor protection clause of the Constitution. To construe
the provision any other way would open the
floodgates to unscrupulous and heartless employers
who would simply forego paying premiums on their
surety bond in order to evade payment of the
monetary judgment.
Moreover, the Insurance Code supports the
private respondents arguments. The petitioners reliance
on Sections 64 and 77 of the Insurance Code is
misplaced. The said provisions refer to insurance
contracts in general. The instant case pertains to a surety
bond; thus, the applicable provision of the Insurance
Code is Section 177, which specifically governs
suretyship. It provides that a surety bond, once accepted
by the obligee becomes valid and enforceable,
irrespective of whether or not the premium has been paid
by the obligor. The private respondents, the obligees
here, accepted the bond posted by Radon Security and
issued by the petitioner. Hence, the bond is both valid and
enforceable. A verbis legis non est recedendum (from the
language of the law there must be no departure).
When petitioner surety company cancelled the
surety bond because Radon Security failed to pay the
premiums, it gave due notice to the latter but not to the
NLRC. By its failure to give notice to the NLRC, AFPGIC
failed to acknowledge that the NLRC had jurisdiction not
only over the appealed case, but also over the appeal
bond. This oversight amounts to disrespect and contempt
for a quasi-judicial agency tasked by law with resolving
labor disputes. Until the surety is formally discharged,
it remains subject to the jurisdiction of the NLRC.
Our ruling, anchored on concern for the
employee, however, does not in any way seek to derogate
the rights and interests of the petitioner as against Radon
Security. Under Section 176 of the Insurance Code, the
liability of petitioner and Radon Security is solidary in
nature. Since the law provides that the liability of the
surety company and the obligor or principal is joint and
several, then either or both of them may be proceeded
against for the money award.
Petitioner may then proceed to collect the amount
it paid on the bond, plus the premiums due and
demandable, plus any interest owing from Radon
Security. This is pursuant to the principle of subrogation
enunciated in Article 2067 of the Civil Code which we
apply to the suretyship agreement between AFPGIC and
Radon Security, in accordance with Section 178 of the
Insurance Code.
Makati Tuscany Condominium Corp. vs. CA
While the import of Section 77 is that prepayment of
premiums is strictly required as a condition to the validity
of the contract, we are not prepared to rule that the
request to make installment payments duly approved by
the insurer, would prevent the entire contract of insurance
from going into effect despite payment and acceptance of
the initial premium or first installment.
Section 78 of the Insurance Code in effect allows waiver
by the insurer of the condition of prepayment by
making an acknowledgment in the insurance policy
of receipt of premium as conclusive evidence of
payment so far as to make the policy binding despite
the fact that premium is actually unpaid. Section 77
merely precludes the parties from stipulating that the
policy is valid even if premiums are not paid, but does not
expressly prohibit an agreement granting credit
extension. So is an understanding to allow insured to pay
premiums in installments not so proscribed.”
Facts:
American International Underwriters issued a policy in
favor of Makati Tuscany Condominium Corporation with a
total premium of P466,103.05. The company issued a
replacement policy. Premium was again paid. In 1984, the
policy was again renewed and private respondent issued
to petitioner another policy. The petitioner paid 152,000
pesos then refused to furnish the balance. The company
filed an action to recover the unpaid balance of
P314,103.05.
Makati Tuscany explained that it discontinued the
payment of premiums because the policy did not contain
a credit clause in its favor and that the acceptance of
premiums didn’t waive any of the company rights to deny
liability on any claim under the policy arising before such
payments or after the expiration of the credit clause of the
policy and prior to premium payment, loss wasn’t covered.
It 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 sought the refund of P924,206.10
representing the premium payments for
1982-85.
Trial court: Dismissed the complaint and counterclaim
owing to the argument that payment of the premiums of
the policies were made during the lifetime or term of said
policies, so risk attached under the policies.
Court of Appeals: Ordered petitioner to pay the balance
of the premiums owing to the reason that it was part of an
indivisible obligation.
Petitioner now asserts that its payment by installment of
the premiums for the insurance policies invalidated them
because of the provisions of Sec. 77 of the Insurance
Code disclaiming liability for loss for occurring before
payment of premiums.
It argues that where the premiums is not actually paid in
full, the policy would only be effective if there is an
acknowledgment in the policy of the receipt of premium
pursuant to Sec. 78 of the Insurance Code. The absence
of an express acknowledgment in the policies of such
receipt of the corresponding premium payments, and
petitioner's failure to pay said premiums on or before the
effective dates of said policies rendered them invalid.
Petitioner thus concludes that there cannot be a perfected
contract of insurance upon mere partial payment of the
premiums because under Sec. 77 of the Insurance Code,
no contract of insurance is valid and binding unless the
premium thereof has been paid, notwithstanding any
agreement to the contrary. As a consequence, petitioner
seeks a refund of all premium payments made on the
alleged invalid insurance policies.
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
Ruling:
NO. The subject policies are valid even if the premiums
were paid on installments. The records clearly show that
petitioner and private respondent intended subject
insurance policies to be binding and effective
notwithstanding the staggered payment of the premiums.
The initial insurance contract entered into in 1982 was
renewed in 1983, then in 1984. In those three (3) years,
the insurer accepted all the installment payments. Such
acceptance of payments speaks loudly of the insurer's
intention to honor the policies it issued to petitioner.
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.
Quoting the CA decision: “While the import of Section
77 is that prepayment of premiums is strictly required as
a condition to the validity of the contract, we are not
prepared to rule that the request to make installment
payments duly approved by the insurer, would prevent the
entire contract of insurance from going into effect despite
payment and acceptance of the initial premium or first
installment. Section 78 of the Insurance Code in effect
allows waiver by the insurer of the condition of
prepayment by making an acknowledgment in the
insurance policy of receipt of premium as conclusive
evidence of payment so far as to make the policy
binding despite the fact that premium is actually
unpaid. Section 77 merely precludes the parties from
stipulating that the policy is valid even if premiums are not
paid, but does not expressly prohibit an agreement
granting credit extension. So is an understanding to allow
insured to pay premiums in installments not so
proscribed.”
It appearing from the peculiar circumstances that the
parties actually intended to make three (3) insurance
contracts valid, effective and binding, petitioner may not
be allowed to renege on its obligation to pay the balance
of the premium after the expiration of the whole term.
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.
UCPB GENERAL INSURANCE CO.,
INC. vs. MASAGANA TELAMART, INC.
FACTS:
Respondent obtained from Petitioner five (5) insurance
policies on its properties in Pasay City and Manila. The
policies were effective from May 22, 1991 to May 22,
1992. On June 13, 1992, Masagana’s properties were
razed by fire. On July 13, 1992, Masagana tendered five
checks for P225,753.45 as renewal premium payments.
A receipt was issued. On July 14, 1992, Masagana made
its formal demand for indemnification for the burned
insured properties. On thesame day, UCPB returned the
five (5) manager's checks stating in its letter) that itwas
rejecting Masagana's claim on the following grounds:
"a) Said policies expired last May 22, 1992 and were
not renewed for another term;
b ) UCPB had put Masagana and its alleged broker
on notice of non-renewal earlier;
c) The properties covered by the said policies were
burned in a fire that took place last June 13, 1992, or
before tender of premium payment."
CA disagreed with UCPB’s stand that Masagana’s tender
of payment of the premiums on 13 July 1992 did not result
in the renewal of the policies, having been made beyond
the effective date of renewal as provided under Policy
Condition No. 26:
Renewal Clause. — Unless the company
at least 45 days in advance of the end of
the policy period mails or delivers to the
assured at the address shown in the
policy notice of its intention not to renew
the policy or to condition its renewal upon
reduction of limits or elimination of
coverages, the assured shall be entitled
to renew the policy upon payment of the
premium due on the effective date of
renewal.
Both the Court of Appeals and the trial court found that
sufficient proof exists that Masagana, which had procured
insurance coverage from UCPB for a number of years,
had been granted a 60 to 90-day credit term for the
renewal of the policies. Such a practice had existed up to
the time the claims were filed. Most of the premiums have
been paid for more than 60 days after the issuance. Also,
no timely notice of non-renewal was made by UCPB.
The Supreme Court ruled against UCPB in the first case
on the issue of whether the fire insurance policies issued
by petitioner to the respondent covering the period from
May 22, 1991 to May 22, 1992 had been extended or
renewed by an implied credit arrangement though actual
payment of premium was tendered on a later date and
after the occurrence of the risk insured against.
UCPB filed a motion for reconsideration.
Upon a meticulous review of the records and reevaluation
of the issues raised in the motion for reconsideration and
the pleadings filed thereafter by the parties, SC resolved
to grant the motion for reconsideration. The following
facts, as found by the trial court and the Court of Appeals,
are indeed duly established:
1. For years, Petitioner had been issuing fire policies to
the Respondent, and these policies were annually
renewed.
2. Petitioner had been granting Respondent a 60- to 90-
day credit term within which to pay the premiums on the
renewed policies.
3. There was no valid notice of non-renewal of the policies
in question, as there is no proof at all that the notice sent
by ordinary mail was received by Respondent, and the
copy thereof allegedly sent to Zuellig was ever transmitted
to Respondent.
4. The premiums for the policies in question in the
aggregate amount of P225,753.95 were paid by
Respondent within the 60- to 90-day credit term and were
duly accepted and received by Petitioner's cashier.
The Supreme Court affirmed that there was no valid
notice of non-renewal of the policies in question, as there
is no proof at all that the notice sent by ordinary mail was
received by Masagana. Also, the premiums were paid
within the grace period.
ISSUE
Whether Section 77 of the Insurance Code of 1978 (P.D.
No. 1460) must be strictlyapplied to Petitioner's
advantage despite its practice of granting a 60 - to
90-day creditterm for the payment of premiums.
HELD: No.
1999 DECISION SET ASIDE; CA DECISION AFFIRMED
Section 77 of the Insurance Code of 1978 provides:
 SECTION 77. An insurer is entitled to payment
of the premium as soon as the thing insured
is exposed to the peril insured against.
Notwithstanding any agreement to the contrary, no
policy or contract of insurance issued by an
insurance company is valid and binding unless
and until the premium thereof has been paid,
except in the case of a life or an industrial life
policy whenever the grace period provision
applies.
However, There are exceptions to IC 77.
The 1st exception is provided by Section 77 itself, and that
is, in case of a life or industrial life policy whenever the
grace period provision applies.
The 2nd exception to this section is Section 78 which
provides: Any acknowledgment in a policy or contract
of insurance of the receipt of premium is conclusive
evidence of its payment, so far as to make the policy
binding, notwithstanding any stipulation therein that it
shall not be binding until premium is actually paid.
A third exception was laid down in Makati Tuscany
Condominium Corporation vs. Court of Appeals||| which
held that if the parties have agreed to the payment
ininstallments of the premium and partial payment has
been made at the time of loss.
The Tuscany case also provided a fourth exception to
Section 77, namely, that the insurer may grant credit
extension for the payment of the premium. This simply
means that if the insurer has granted the insured a credit
term for the payment of the premium and loss occurs
before the expiration of the term, recovery on the policy
should be allowed even though the premium is paid after
the loss but within the credit term.|
Moreover, there is nothing in Section 77 which
prohibits the parties in an insurance contract to
provide a credit term within which to pay the
premiums. That agreement is not against the law,
morals, good customs, public order or public policy.
Finally, it would be unjust and inequitable if recovery on
the policy would not be permitted against Petitioner, which
had consistently granted a 60- to 90-day credit term for
the payment of premiums despite its full awareness of
Section 77. Estoppel bars it from taking refuge under said
Section, since Respondent relied in good faith on such
practice. Estoppel then is the fifth exception to Section
77.||Estoppel. WHEREFORE the Decision in this case of
15 June 1999 is RECONSIDERED and SET ASIDE.
AMERICAN HOME ASSURANCE COMPANY vs.
ANTONIO CHUA
FACTS: Petitioner is a domestic corporation engaged in
the insurance business. Sometime in 1990, respondent
obtained from petitioner a fire insurance covering the
stock-in-trade of his business, Moonlight Enterprises.
When the insurance policy expired, the respondent issued
a check as payment for the renewal of the policy to an
agent of the petitioner on April 5, 1990. The check was
drawn and deposited in petitioner’s account. Petitioner
then issued a corresponding receipt for the renewal on
April 10. The new insurance policy covered any damage
or loss arising from fire up to P200,000 for the period
March 25, 1990 to March 25, 1991.
On April 6, 1990, Moonlight Enterprises was completely
razed by fire. Total loss was estimated between
P4,000,000 and P5,000,000. Respondent filed an
insurance claim with petitioner and four other co-insurers.
Petitioner refused to honor the claim notwithstanding
several demands by respondent, thus, the latter filed an
action against petitioner before the trial court.
In its defense, petitioner claimed there was no existing
insurance contract when the fire occurred since
respondent did not pay the premium. It also alleged that
even assuming there was a contract, respondent violated
several conditions of the policy.
RTC: In favor of respondent.
CA: Affirmed in toto.
ISSUE: W/N there was an existing insurance contract
between the parties when the fire happened.
RULING: The petitioner invokes Sec. 77 of the Insurance
Code which states:
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.
and cites the case of Arce v. Capital Insurance & Surety
Co., Inc., where we ruled that unless and until the
premium is paid there is no insurance.
Petitioner emphasizes that when the fire occurred on April
6, the insurance contract was not yet subsisting pursuant
to Article 1249 of the Civil Code, which recognizes that a
check can only effect payment once it has been cashed.
Although respondent testified that he gave the check on
April 5 to a certain James Uy (the agent), the check,
drawn against a Manila bank and deposited in a Cagayan
de Oro City bank, could not have been cleared by April 6,
the date of the fire. In fact, the official receipt issued for
respondents check payment was dated April 10, 1990,
four days after the fire occurred.
The Court ruled that, yes, the general rule in insurance
laws is that unless the premium is paid the insurance
policy is not valid and binding and that the only exceptions
are life and industrial life insurance. However, whether
payment was indeed made is a question of fact which is
best determined by the trial court. In this case, the trial
court found, as affirmed by the Court of Appeals, that
there was a valid check payment by respondent to
petitioner. Well-settled is the rule that the factual findings
and conclusions of the trial court and the Court of Appeals
are entitled to great weight and respect, and will not be
disturbed on appeal in the absence of any clear showing
that the trial court overlooked certain facts or
circumstances which would substantially affect the
disposition of the case.
According to the trial court, the renewal certificate issued
to respondent contained the acknowledgment that
premium had been paid. It is not disputed that the check
drawn by respondent in favor of petitioner and delivered
to its agent was honored when presented and petitioner
forthwith issued its official receipt to respondent on April
10. 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. In
the instant case, the 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
agents acknowledgment of receipt of payment.
Section 78 of the Insurance Code explicitly provides:
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.
Sps. Tibay vs CA and Fortune Life and General
Insurance
Facts:
Fortune Life and General Insurance (Fortune) issued a
fire insurance policy in favor of the Sps. Tibay on their 2-
storey residential unit together with the effects therein.
However, only 600 pesos of the total 2,983.50 pesos were
paid by the Sps. Tibay on January 1987. On March 8
1987, the insured building was destroyed by fire. 2 days
later, the Spouses paid the balance of the premium and
file a claim on the fire insurance policy. Fortune denied
the claim for violating of Condition No. 2 of the Policy and
of Sec. 77 of the Insurance Code. The Insurance
Commissioner was not able to settle the case, hence the
Spouses filed a case before the TC for damages. The TC
adjudged Fortune as liable which was reversed by the CA,
but ordering Fortune to return the premium. Hence this
petition.
The Spouses argues that Fortune is liable on the policy
despite partial payment of the premium due and the
express stipulation to the contrary relying on Philippine
Phoenix vs Woodworks where the Court held that partial
payment on the premium made the policy effective during
the whole period of the policy.
Issues:
Whether the CA erred in reversing the decision of the TC?
Held:
No. 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 and in the way and manner specified in the policy,
and if not so paid, the policy will lapse and be forfeited by
its own terms. The pertinent provision reads:
2. This policy including any renewal thereof
and/or any endorsement thereon is not in force
until the premium has been fully paid to and duly
receipted by the Company in the manner
provided herein
Clearly the Policy provides for payment of premium in full.
Accordingly, where the premium has only been partially
paid and the balance paid only after the peril insured
against has occurred, the insurance contract did not take
effect and the insured cannot collect at all on the policy.
This is fully supported by Sec. 77 of the Insurance Code.
These two (2) cases, Philippine Phoenix vs Woodworks
and Makati Tuscany vs. CA, adequately demonstrate the
waiver, either express or implied, of prepayment in full by
the insurer: impliedly, by suing for the balance of the
premium as in Phoenix, and expressly, by agreeing to
make premiums payable in installments as in Tuscany.
But contrary to the stance taken by petitioners, there is no
waiver express or implied in the case at bench.
Conformably with the aforesaid stipulations explicitly
worded and taken in conjunction with Sec. 77 of the
Insurance Code the payment of partial premium by the
assured in this particular instance should not be
considered the payment required by the law and the
stipulation of the parties. Rather, it must be taken in the
concept of a deposit to be held in trust by the insurer until
such time that the full amount has been tendered and duly
receipted for. In other words, as expressly agreed upon in
the contract, full payment must be made before the risk
occurs for the policy to be considered effective and in
force. But once payment of premium is left to the whim
and caprice of the insured, as when the courts tolerate the
payment of a mere P600.00 as partial undertaking out of
the stipulated total premium of P2,983.50 and the balance
to be paid even after the risk insured against has
occurred, as petitioners have done in this case, on the
principle that the strength of the vinculumjuris is not
measured by any specific amount of premium payment,
we will surely wreak havoc on the business and set to
naught what has taken actuarians centuries to devise to
arrive at a fair and equitable distribution of risks and
benefits between the insurer and the insured.
PHIL. PHOENIX SURETY & INS., CO. VS
WOODWORKS
One-liner: The premium must be paid at the time and in
the way and manner specified in the policy and, if not so
paid, the policy will lapse and be forfeited by its own
terms.|||
Facts:
Upon defendant’s application, petitioner insured the
former’s building, machinery and equipment for a term of
one (1) year against loss by fire. However, defendant did
not pay the premium stipulated in the policy when it was
issued nor at any time thereafter amounting to P10,
593.36. Few days prior to the lapse of the one-year term,
and through indorsement, petitioner notified defendant of
the cancellation of the policy. In such indorsement,
petitioner credited defendant the amount of P3,110.25,
and claimed the balance of P7,483.11 as “earned
premium.” To this, defendant refused. Thus, petitioner
filed a case for the recovery of said amount, where the
defendant argued that its failure to pay the premium after
the issuance of policy put an end to the insurance contract
and rendered the policy unenforceable.
Issue:
WON the policy was a binding contract even if the
premium was not paid, thus making the unpaid premium
a debt enforceable by action of the insurer.
Ruling:
NO. 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. The premium
must be paid at the time and in the way and manner
specified in the policy and, if not so paid, the policy will
lapse and be forfeited by its own terms. There was also
no extension of credit or waiver of premium, by express
agreement, that was extended to the defendant. And
assuming there was, there is absence of an acceptance
on defendant’s part. An acceptance of an offer to allow
credit, if one was made, is as essential to make a valid
agreement for credit, to change a conditional delivery of
an insurance policy to an unconditional delivery, as it is to
make any other contract. Such an acceptance could not
be merely a mental act or state of mind, but would require
a promise to pay made known in some manner to
defendant.||| Since the premium had not been paid, the
policy must be deemed to have lapsed. The non-payment
of premiums 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.
|||Further, explicit in the Policy itself is plaintiff's
agreement to indemnify defendant for loss by fire only
after payment of premium. Compliance by the insured
with the terms of the contract is a condition precedent to
the right of recovery.||| The burden is on an insured to
keep a policy in force by the payment of premiums, rather
than on the insurer to exert every effort to prevent the
insured from allowing a policy to elapse through a failure
to make premium payments. The continuance of the
insurer's obligation is conditional upon the payment of
premiums, so that no recovery can be had upon a lapsed
policy, the contractual relation between the parties having
ceased.||| Moreover, an insurer cannot treat a contract as
valid for the purpose of collecting premiums and invalid
for the purpose of indemnity.
PACIFIC TIMBER VS. CA
FACTS: On March 13, 1963, Pacific secured temporary
insurance from respondent Workemen’s Insurance Co.
for its exportation of logs to Japan. Workmen issued on
said date a Cover Note 1010 insuring said cargo as well
as two regular marine cargo policies.
After the issuance of the cover note but BEFORE the
issuance of the 2 policies, some of the logs intended to be
exported were lost during the loading operations at
Diapitan Bay due to a typhoon.
First Philippine Adjustment Corporation came to inspect
the loss, assess the damage, and report that the loss of
30 pieces of logs were not covered by the 2 policies but
were within the Cover Note.
Pacific filed its claim with the company, but the latter
refused, contending that said loss may not be considered
as covered under the cover note because such became
null and void by virtue of the issuance of the marine
policies.
Issue: W/N the cover note was null and void for lack of
valuable consideration (NO)
Held: The fact that no separate premium was paid on the
Cover Note before the loss occurred does not militate
against the validity of the contention even if no such
premium was paid. All Cover Notes do not contain
particulars of the shipment that would serve as basis for
the computation of the premiums. Also, no separate
premiums are required to be paid on a Cover Note.
The petitioner paid in full all the premiums, hence there
was no account unpaid on the insurance coverage and
the cover note. If the note is to be treated as a separate
policy instead of integrating it to the regular policies, the
purpose of the note would be meaningless. It is a contract,
not a mere application for insurance which is a mere offer.
It may be true that the marine insurance policies issued
were for logs no longer including those which had been
lost during loading operations. This had to be so because
the risk insured against is for loss during transit, because
the logs were safely placed aboard.
The non-payment of premium on the Cover Note is,
therefore, no cause for the petitioner to lose what is due it
as if there had been payment of premium, for non-
payment by it was not chargeable against its fault. Had all
the logs been lost during the loading operations, but after
the issuance of the Cover Note, liability on the note would
have already arisen even before payment of premium.
Otherwise, the note would serve no practical purpose in
the realm of commerce, and is supported by the doctrine
that where a policy is delivered without requiring payment
of the premium, the presumption is that a credit was
intended and policy is valid.
Great Pacific Insurance vs. CA
FACTS: Ngo Hing applied for a 20-year endowment
policy with the Great Pacific Life Assurance Company for
his one year old daughter. He sent his representations to
Mondragon, an authorized agent of the said insurance
company, which the latter also sent to the insurance
company for approval. The company, however, rejected
the application since their endowment plan does not apply
to minors below 7 years old. They however,
recommended another type of insurance plan – the
Juvenile Triple Action Plan (the contents of such counter
offer was not stated in the case). Mondragon did not relay
the rejection to Ngo Hing, hence Ngo paid the premiums
and Mondragon issued a corresponding “binding deposit
receipt”. Mondragon then delivered the money to the
company and withheld his portion of the money for his
commission.
A few months later, the daughter died due to
bronchopneumonia. It was later discovered that the
daughter was actually a mongoloid and such fact was not
stated or disclosed in Ngo’s representations. Ngo now is
suing the company for the proceeds of the life insurance.
ISSUE: May the claimant ask for the proceeds of the life
insurance? Was there actually a contract? And if there is
none, what is the remedy of the claimant?
RULING: There was no contract as there was no
acceptance by the private respondent of the counter offer
(Juvenile Triple Action). Ngo cannot also claim the
proceeds because of concealment but he may be
reimbursed for the premiums he paid. (Wa nalang nako
giinclude ang provisions sa receipt ky taas kayu)
It bears repeating that through the intra-company
communication of April 30, 1957 (Exhibit 3-M), Pacific Life
disapproved the insurance application in question on the
ground that it is not offering the twenty-year endowment
insurance policy to children less than seven years of age.
What it offered instead is another plan known as the
Juvenile Triple Action, which private respondent failed
to accept. In the absence of a meeting of the minds
between petitioner Pacific Life and private respondent
Ngo Hing over the 20-year endowment life insurance in
the amount of P50,000.00 in favor of the latter's one-year
old daughter, and with the non-compliance of the
abovequoted conditions stated in the disputed binding
deposit receipt, there could have been no insurance
contract duly perfected between them. Accordingly, the
deposit paid by private respondent shall have to be
refunded by Pacific Life.
As held in De Lim vs. Sun Life Assurance Company of
Canada, supra, "a contract of insurance, like other
contracts, must be assented to by both parties either in
person or by their agents ... The contract, to be binding
from the date of the application, must have been a
completed contract, one that leaves nothing to be dione,
nothing to be completed, nothing to be passed upon, or
determined, before it shall take effect. There can be no
contract of insurance unless the minds of the parties have
met in agreement." We are thus not impressed with
private respondent's contention that failure of petitioner
Mondragon to communicate to him the rejection of the
insurance application would not have any adverse effect
on the allegedly perfected temporary contract
(Respondent's Brief, pp. 13-14). In this first place, there
was no contract perfected between the parties who had
no meeting of their minds. Private respondet, being an
authorized insurance agent of Pacific Life at Cebu branch
office, is indubitably aware that said company does not
offer the life insurance applied for.
Relative to the second issue of alleged concealment. this
Court is of the firm belief that private respondent had
deliberately concealed the state of health and physical
condition of his daughter Helen Go. Where private
respondent supplied the required essential data for the
insurance application form, he was fully aware that his
one-year old daughter is typically a mongoloid child. Such
a congenital physical defect could never be ensconced
nor disguised. Nonetheless, private respondent, in
apparent bad faith, withheld the fact material to the risk to
be assumed by the insurance company. As an insurance
agent of Pacific Life, he ought to know, as he surely must
have known. his duty and responsibility to such a material
fact. Had he diamond (wa ko kybaw unsay meaning aning
diamond; “disclosed” cguro ni) said significant fact in the
insurance application from Pacific Life would have verified
the same and would have had no choice but to disapprove
the application outright.
The contract of insurance is one of perfect good faith
uberrima fides meaning good faith, absolute and perfect
candor or openness and honesty; the absence of any
concealment or demotion, however slight [Black's Law
Dictionary, 2nd Edition], not for the alone but equally so
for the insurer (Field man's Insurance Co., Inc. vs. Vda de
Songco, 25 SCRA 70). Concealment is a neglect to
communicate that which a party knows and Ought to
communicate (Section 25, Act No. 2427). Whether
intentional or unintentional the concealment entitles the
insurer to rescind the contract of insurance (Section 26,
Id.: Yu Pang Cheng vs. Court of Appeals, et al, 105 Phil
930; Satumino vs. Philippine American Life Insurance
Company, 7 SCRA 316). Private respondent appears
guilty thereof.
We are thus constrained to hold that no insurance
contract was perfected between the parties with the
noncompliance of the conditions provided in the binding
receipt, and concealment, as legally defined, having been
committed by herein private respondent.
Clearly implied from the aforesaid conditions is that the
binding deposit receipt in question is merely an
acknowledgment, on behalf of the company, that the
latter's branch office had received from the applicant the
insurance premium and had accepted the application
subject for processing by the insurance company; and
that the latter will either approve or reject the same on the
basis of whether or not the applicant is "insurable on
standard rates." Since petitioner Pacific Life disapproved
the insurance application of respondent Ngo Hing, the
binding deposit receipt in question had never become in
force at any time.
WHEREFORE, the decision appealed from is hereby set
aside, and in lieu thereof, one is hereby entered absolving
petitioners Lapulapu D. Mondragon and Great Pacific Life
Assurance Company from their civil liabilities as found by
respondent Court and ordering the aforesaid insurance
company to reimburse the amount of P1,077.75, without
interest, to private respondent, Ngo Hing. Costs against
private respondent.
PHILIPPINE AMERICAN LIFE AND GENERAL
INSURANCE COMPANY, petitioner, vs. JUDGE LORE
R. VALENCIA-BAGALACSA, Regional Trial Court of
Libmanan, Camarines Sur, Branch 56, and EDUARDO
Z. LUMANIOG, CELSO Z. LUMANIOG and RUBEN Z.
LUMANIOG, respondents.
FACTS:
Private respondents, as legitimate children and
heirs of Faustino Lumaniog, filed a complaint for recovery
of sum on money against PhilAm on June 20, 1995
alleging that: 1) their father was insured with a face value
of 50k; 2) their father died with coronary thrombosis, so
they demanded starting from June 22, 1981 and
continuosly demanded thereafter for the proceeds worth
P641k but all demands were refused. PhilAm, in a motion
to dismiss, argued that private respondents’ cause of
action had prescribed, they were guilty of laches and
through a letter dated March 12, 1982, on the ground of
concealment by Faustino of him being hypertensive when
he applied for the insurance coverage. Private
respondents sought reconsideration on PhilAm’s denial
through a letter dated May, 25, 1983, but it was denied
on July 11, 1983. More than 10 years later or on Dec. 1,
1994, PhilAm received a letter from Claro, a PB Member
of Camaries, to reconsider the denial but it was denied
with finality on Feb. 14, 1995, leading to the case filed
before the RTC.
(1st order dated June 7, 1996) RTC denied the
motion to dismiss by PhilAm, saying that evidentiary
matters need to be heard.
(2nd order dated Dec. 12, 1997) RTC denied the
reconsideration of PhilAm saying that the 10 year
prescriptive period was stopped on May 25, 1983,
when private respondents sent a letter for
reconsideration, and it was only on feb 14, 1995, when
PhilAm denied the claim with finality that the 10 year
period began to run.
On appeal, CA upheld the both decisions , saying
that the 10 year prescriptive period should be counted
from the date of rejection by the insurer in this case,
Feb 14, 1995, since this is the time when the cause of
action accrues. Hence, the petition.
ISSUE:
WON RTC and CA erred - YES
RULING:
(No problem as to the 1st order)
SC said that RTC committed grave abuse of
discretion when it dismissed the reconsideration by
deciding that the prescription should be reckoned from
Feb. 14, 1995. The reason is that PhilAm alleged in its
Answer that it had denied private respondents claim
for the proceeds through a letter dated July 11, 1983.
Hence, due process demands that it be given the
opportunity to prove that private respondents had
received said letter, dated July 11, 1983. Said letter is
crucial to petitioner's defense that the filing of the
complaint for recovery of sum of money in June, 1995 is
beyond the 10-year prescriptive period.
Likewise, CA, by upholding the 2nd decision,
committed a reversible error.
REMANDED for PhilAm to prove the letter dated
July 11, 1983.
(ako rani nga pagsabot ha)
 10 years ang prescription for claims of insurance
proceeds
 Prescription starts to run after denial of Insurer.
CIR V. Lincoln
Facts: Private respondent Lincoln Philippine Life
Insurance Co., Inc., (now Jardine-CMA Life Insurance
Company, Inc.) is a domestic corporation registered with
the Securities and Exchange Commission and engaged
in life insurance business. In the years prior to 1984,
private respondent issued a special kind of life insurance
policy known as the "Junior Estate Builder Policy," the
distinguishing feature of which is a clause providing for an
automatic increase in the amount of life insurance
coverage upon attainment of a certain age by the insured
without the need of issuing a new policy. The clause was
to take effect in the year 1984. Documentary stamp taxes
due on the policy were paid by petitioner only on the
initial sum assured.
Subsequently, petitioner issued deficiency documentary
stamps tax assessment for the year 1984 in the amounts
of (a) P464,898.75, corresponding to the amount of
automatic increase of the sum assured on the policy
issued by respondent. ||
Issue: WON the automatic increase clause should be
included in determining the amount of Documentary
stamp tax due?
Ruling: Yes.
Section 49, Title VI of the Insurance Code defines an
insurance policy as the written instrument in which a
contract of insurance is set forth. Section 50 of the same
Code provides that the policy, which is required to be in
printed form, may contain any word,
phrase, clause, mark, sign, symbol, signature, number,
or word necessary to complete the contract of
insurance. It is thus clear that any rider, clause, warranty
or endorsement pasted or attached to the policy is
considered part of such policy or contract of insurance.
Here, although the automatic increase in the amount of
life insurance coverage was to take effect later on, the
date of its effectivity, as well as the amount of the
increase, was already definite at the time of the issuance
of the policy. Thus, the amount insured by the policy at
the time of its issuance necessarily included the additional
sum covered by the automatic increase clause because it
was already determinable at the time the transaction was
entered into and formed part of the policy.
The "automatic increase clause" in the policy is in the
nature of a conditional obligation under Article 1181, by
which the increase of the insurance coverage shall
depend upon the happening of the event which
constitutes the obligation. In the instant case, the
additional insurance that took effect in 1984 was an
obligation subject to a suspensive obligation, but still a
part of the insurance sold to which private respondent was
liable for the payment of the documentary stamp tax.
The deficiency of documentary stamp tax imposed on
private respondent is definitely not on the amount of the
original insurance coverage, but on the increase of the
amount insured upon the effectivity of the "Junior Estate
Builder Policy."
Rizal Surety and Insurance Co. vs. CA and
Transworld Knitting Mills, Inc. G.R. No. 112360
Facts: Respondent availed of a Fire Insurance Policy
from petitioner initially for 1Million pesos which was
increased to 1.5Million pesos. The relevant provision on
the policy:
"On stocks of finished and/or unfinished products,
raw materials and supplies of every kind and
description, the properties of the Insureds and/or
held by them in trust, on commission or on joint
account with others and/or for which they (sic)
responsible in case of loss whilst contained
and/or stored during the currency of this Policy in
the premises occupied by them forming part of
the buildings situate (sic) within own Compound
at MAGDALO STREET, BARRIO UGONG,
PASIG, METRO MANILA, PHILIPPINES,
BLOCK NO. 601.
xxx...............xxx...............xxx
Said building of four-span lofty one storey in
height with mezzanine portions is constructed of
reinforced concrete and hollow blocks and/or
concrete under galvanized iron roof and occupied
as hosiery mills, garment and lingerie factory,
transistor-stereo assembly plant, offices,
warehouse and caretaker's quarters.
'Bounds in front partly by one-storey concrete
building under galvanized iron roof occupied as
canteen and guardhouse, partly by building of two
and partly one storey constructed of concrete
below, timber above undergalvanized iron roof
occupied as garage and quarters and partly by
open space and/or tracking/ packing, beyond
which is the aforementioned Magdalo Street; on
its right and left by driveway, thence open spaces,
and at the rear by open spaces.'"
The same property was also insured by respondent
to New India Assurance Company.
Fire broke out in the compound of Transworld, razing the
middle portion of its four-span building and partly gutting
the left and right sections thereof. A two-storey building
(behind said four-span building) where fun and
amusement machines and spare parts were stored, was
also destroyed by the fire.
Respondent claimed indemnity on the insurance
policy on the two insurers but to no avail. Petitioner
argued that the fire insurance policy litigated upon
protected only the contents of the main building
(four-span), and did not include those stored in the
two-storey annex building while New India argued
that respondent could not be compensated for the
loss of the fun and amusement machines and spare
parts stored at the two-storey building because it
(Transworld) had no insurable interest in said goods
or items.
Issue: WON respondent can claim indemnity from
the insurance policy.
Held: Yes, respondent Transworld is entitled to a
claim.
Resolution of the issues posited here hinges on the
proper interpretation of the stipulation in subject fire
insurance policy regarding its coverage, which reads:
"xxx contained and/or stored during the currency
of this Policy in the premises occupied by them
forming part of the buildings situate (sic) within
own Compound xxx"
Therefrom, it can be gleaned unerringly that the fire
insurance policy in question did not limit its coverage to
what were stored in the four-span building.
In the case under consideration, both the trial court and
the Court of Appeals found that the so called "annex " was
not an annex building but an integral and inseparable part
of the four-span building described in the policy and
consequently, the machines and spare parts stored
therein were covered by the fire insurance in dispute. The
letter-report of the Manila Adjusters and Surveyor's
Company, which petitioner itself cited and invoked,
describes the "annex" building as follows:
"Two-storey building constructed of
partly timber and partly concrete hollow
blocks under g.i. roof which is adjoining
and intercommunicating with the repair of
the first right span of the lofty storey
building and thence by property fence
wall."
Verily, the two-storey building involved, a permanent
structure which adjoins and intercommunicates with the
"first right span of the lofty storey building",[17] formed part
thereof, and meets the requisites for compensability
under the fire insurance policy sued upon.
So also, considering that the two-storey building
aforementioned was already existing when subject fire
insurance policy contract was entered into on January 12,
1981, having been constructed sometime in
1978,[18] petitioner should have specifically excluded the
said two-storey building from the coverage of the fire
insurance if minded to exclude the same but if did not, and
instead, went on to provide that such fire insurance policy
covers the products, raw materials and supplies stored
within the premises of respondent Transworld which was
an integral part of the four-span building occupied by
Transworld, knowing fully well the existence of such
building adjoining and intercommunicating with the right
section of the four-span building.
Indeed, the stipulation as to the coverage of the fire
insurance policy under controversy has created a
doubt regarding the portions of the building insured
thereby. Article 1377 of the New Civil Code provides:
"Art.1377. The interpretation of obscure
words or stipulations in a contract shall not favor the
party who caused the obscurity"
Conformably, it stands to reason that the doubt
should be resolved against the petitioner, Rizal
Surety Insurance Company, whose lawyer or
managers drafted the fire insurance policy contract
under scrutiny.
The issue of whether or not Transworld has an
insurable interest in the fun and amusement
machines and spare parts, which entitles it to be
indemnified for the loss thereof, had been settled in
G.R. No. L-111118, entitled New India Assurance
Company, Ltd., vs. Court of Appeals, where the
appeal of New India from the decision of the Court of
Appeals under review, was denied with finality by this
Court on February 2, 1994.
The rule on conclusiveness of judgment, which obtains
under the premises, precludes the relitigation of a
particular fact or issue in another action between the
same parties based on a different claim or cause of
action. "xxx the judgment in the prior action operates as
estoppel only as to those matters in issue or points
controverted, upon the determination of which the finding
or judgment was rendered. In fine, the previous judgment
is conclusive in the second case, only as those matters
actually and directly controverted and determined and not
as to matters merely involved therein."
Great Pacific Life Assurance Corp VS CA (316 SCRA
678)
Facts:
A contract of group life insurance was executed between
petitioner Great Pacific Life Assurance Corporation
(hereinafter Grepalife) and Development Bank of the
Philippines (hereinafter DBP). Grepalife agreed to insure
the lives of eligible housing loan mortgagors of DBP. On
November 11, 1983, Dr. Wilfredo Leuterio, a physician
and a housing debtor of DBP applied for membership in
the group life insurance plan. In the application form, Dr
Leuterio denied any previous sickness and claimed that
he was in good health. On November 15, 1983, Grepalife
issued Certificate No. B-18558, as insurance coverage of
Dr. Leuterio, to the extent of his DBP mortgage
indebtedness amounting to eighty-six thousand, two
hundred (P86,200.00) pesos.
On August 6, 1984, Dr. Leuterio died due to massive
cerebral hemorrhage. Consequently, DBP submitted a
death claim to Grepalife.Grepalife denied the claim
alleging that Dr. Leuterio was not physically healthy when
he applied for an insurance coverage on November 15,
1983. Grepalife insisted that Dr. Leuterio did not disclose
he had been suffering from hypertension, which caused
his death. Allegedly, such non-disclosure constituted
concealment that justified the denial of the claim.
On October 20, 1986, the widow of the late Dr. Leuterio, communicate it to the assured, but he designedly and
respondent Medarda V. Leuterio, filed a complaint with intentionally withholds the same.
the Regional Trial Court of Misamis Oriental. During the
trial, Dr. Hernando Mejia, who issued the death certificate, Petitioner merely relied on the testimony of the attending
was called to testify. Dr. Mejias findings, based partly from physician, Dr. Hernando Mejia, as supported by the
the information given by the respondent widow, stated information given by the widow of the decedent. On the
that Dr. Leuterio complained of headaches presumably contrary the medical findings were not conclusive
due to high blood pressure. The inference was not because Dr. Mejia did not conduct an autopsy on the body
conclusive because Dr. Leuterio was not autopsied, of the decedent. . Hence, the statement of the physician
hence, other causes were not ruled out. RTC rendered a was properly considered by the trial court as hearsay.
decision in favour of respondent widow. This was affirmed Further, contrary to appellants allegations, there was no
by CA. sufficient proof that the insured had suffered from
hypertension. Aside from the statement of the insureds
Issue: WON the widow has legal standing and WON widow who was not even sure if the medicines taken by
CA erred in not finding Dr. Leuterio liable for Dr. Leuterio were for hypertension, the appellant had not
material concealment. –Yes has standing, There was proven nor produced any witness who could attest to Dr.
no material concealment Leuterios medical history.
Held: Appellant insurance company had failed to establish that
there was concealment made by the insured, hence, it
To resolve the issue, we must consider the insurable cannot refuse payment of the claim.
interest in mortgaged properties and the parties to this
type of contract. The rationale of a group insurance policy Lastly, However, we noted that the Court of Appeals
of mortgagors, otherwise known as the mortgage decision was promulgated on May 17, 1993. In private
redemption insurance, is a device for the protection of respondents memorandum, she states that DBP
both the mortgagee and the mortgagor. On the part of the foreclosed in 1995 their residential lot, in satisfaction of
mortgagee, it has to enter into such form of contract so mortgagors outstanding loan. Considering this
that in the event of the unexpected demise of the supervening event, the insurance proceeds shall inure to
mortgagor during the subsistence of the mortgage the benefit of the heirs of the deceased person or his
contract, the proceeds from such insurance will be applied beneficiaries. Equity dictates that DBP should not unjustly
to the payment of the mortgage debt, thereby relieving the enrich itself at the expense of another (Nemo cum alterius
heirs of the mortgagor from paying the obligation. In a detrimenio protest). Hence, it cannot collect the insurance
similar vein, ample protection is given to the mortgagor proceeds, after it already foreclosed on the mortgage. The
under such a concept so that in the event of death; the proceeds now rightly belong to Dr. Leuterios heirs
mortgage obligation will be extinguished by the represented by his widow, herein private respondent
application of the insurance proceeds to the mortgage Medarda Leuterio.
indebtedness. Consequently, where the mortgagor pays
the insurance premium under the group insurance policy,
making the loss payable to the mortgagee, the insurance
is on the mortgagors interest, and the mortgagor
continues to be a party to the contract. In this type of
policy insurance, the mortgagee is simply an appointee of
the insurance fund, such loss-payable clause does not
make the mortgagee a party to the contract.
The insured private respondent did not cede to the
mortgagee all his rights or interests in the insurance, the
policy stating that: In the event of the debtors death before
his indebtedness with the Creditor [DBP] shall have been
fully paid, an amount to pay the outstanding indebtedness
shall first be paid to the creditor and the balance of sum
assured, if there is any, shall then be paid to the
beneficiary/ies designated by the debtor
And since a policy of insurance upon life or health may
pass by transfer, will or succession to any person,
whether he has an insurable interest or not, and such
person may recover it whatever the insured might have
recovered, the widow of the decedent Dr. Leuterio may
file the suit against the insurer, Grepalife.
Also, Concealment exists where the assured had
knowledge of a fact material to the risk, and honesty, good
faith, and fair dealing requires that he should