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vs. CA [G.R. No. 83122. October 19, 1990] ISSUE: W/N Valenzuela is liable to Philamgen for the unpaid and uncollected
Petitioner: Arturo P. Valenzuela and Hospitalita N. Valenzuela premiums? NO
Respondent: Bienvenido M. Aragon, Robert E. Parnell, Carlos K. Catolico and the
Philippine American General Insurance Company , Inc. HELD:
SC held there was no factual and legal basis for the CA issue such order regarding
Doctrine: Non-payment of premiums does not merely suspend but puts an end to the unpaid and uncollected premimus. Under Sec 77 of the Insurance Code, the
an insurance contract since the time of the payment is peculiarly of the essence of remedy for the non-payment premiums is to put an end to and render the
the contract. insurance policy not binding

Facts: Sec. 77 x x x [N]otwithstanding any agreement to the contrary, no policy or
1. Arturo Valenzuela is a General Agent of private respondent Phil. American contract of insurance is valid and binding unless and until the premiums thereof
General Insurance Company Inc. (Philamgen) since 1965 have been paid except in the case of a life or industrial life policy whenever the
grace period provision applies (P.D.612, as amended otherwise known as the
2. He would solicit & sell in behalf of Philamgen all kinds of non-life insurance
Insurance Code of 1974)
and he would receive full agents commission of 32.5%

3. Valenzuela then solicited marine insurance to Delta Motors Inc. amounting
In Philippine Phoenix Surety and Insurance, Inc. v. Woodworks, Inc. the court held
to P4.4m wherein he would be entitled to 32% commission.
that, non-payment of premium does not merely suspend but puts an end to an
4. The premium payments amounting to P1.946,886 were paid directly to
insurance contract since the time of the payment is peculiarly of the essence of the
Philamgen and Valuenzas commission to which he is entitled amounting to
contract. An insurer cannot treat a contract as valid for the purpose of collecting
premiums and invalid for the purpose of indemnity.
5. Philamgen started to become interested & wanted a share in the

commission that would be due to Valenzuela but the latter refused.
In Arce v. The Capital Insurance and Surety Co., Inc. the SC held that, unless
6. There were certain proposals made by Philamgen and its President but
premium is paid, an insurance contract does not take effect.
Valenzuela firmly reiterated his objection.

7. Because of that, Philamgen and its officers reversed his commission due
In the case of Capital Insurance & Surety Co., Inc. v. Delgado was decided in the light
him, placed agency transactions on a cash & carry basis thus removing the
of the Insurance Act before Sec. 72 was amended by the underscored portion. Prior
60-day credit for premiums due, threatened to cancel policies issued by
to the Amendment, an insurance contract was effective even if the premium had
Valenzuelaas agency and even leaked news that he has substantial
not been paid so that an insurer was obligated to pay indemnity in case of loss and
accounts w/ Philamgen. All of which resulted in the decline of his business
correlatively he had also the right to sue for payment of the premium. But the
as insurance agent.
amendment to Sec. 72 has radically changed the legal regime in that unless the
8. Subsequently, Philamgen terminated the General Agency Agreement of
premium is paid there is no insurance.
Valenzuela. Hence, Valenzuela sought relief before the court.

9. RTC: In favor of Valenzuela. The termination was improper since the
In this case, since the premiums have not been paid, the policies issued
principal cause of the termination as General Agent was due to
have lapsed. And the insurance coverage didnt go into effect or didnt
Valenzuelas refusal to share his Delta commission.
continue and the obligation of Philamgen as insurer ceased.
10. CA: In favor of Philamgen. It held that the power of the principal to revoke
Hence, Philamgen had no more liability under the lapsed and inexistent
the agency is so pervasive that the termination may be effected even if the
policies. Philamgen could neither demand nor sue Valenzuela for the
principal acts in bad faith and is subjected only to the principals liability for
unpaid premiums since there were no more insurance contracts to speak
damages. It ordered Valenzuela to pay Philamgen P1,932,532.17
of due to the lapsing of the policies thru the non-payment of premiums by
representing the unpaid and uncollected premiums.
the insured.

Note: This case was more on Agency. Yan lang tlga ung Insurance part.