Insular Life vs.
Ebrado > Qua Chee Gan, a merchant, owned 4
80 SCRA 181
Facts:
> Buenaventura Ebrado was issued al life plan by
Insular Company. He designated Capriona as his
beneficiary, referring to her as his wife.
> The insured then died and Carponia tried to
claim the proceeds of the said plan.
> She admitted to being only the common law
wife of the insured.
> Pascuala, the legal wife, also filed a claim
asserting her right as the legal wife. The company
then filed an action for interpleader.
Issue:
Whether or not the common law wife named as
beneficiary can collect the proceeds.
Held:
NO.
The civil code prohibitions on donations made
between persons guilty of adulterous concubinage
applies to insurance contracts. On matters not
specifically provided for by the Insurance Law, the
general rules on Civil law shall apply. A life
insurance policy is no different from a civil
donation as far as the beneficiary is concerned,
since both are founded on liberality.
Why was the common law wife not ed to collect
the proceeds despite the fact that she was the
beneficiary? Isn’t this against Sec. 53?
It is true that SC went against Sec. 53. However,
Sec. 53 is NOT the only provision that the SC had to
consider. Art. 739 and 2012 of CC prohibit persons
who are guilty of adultery or concubinage from
being beneficiaries of the life insurance policies of
the persons with whom they committed adultery
or concubinage. If the SC used only Sec. 53, it
would have gone against Art. 739 and 2012.
Qua Chee Gan v. Law Union Rock - Breach of
Warranty
98 PHIL 85
Facts:
warehouses in Albay which were used for the
storage or copra and hemp in which the appelle
deals with exclusively.
> The warehouses together with the contents
were insured with Law Union since 1937 and the
loss made payable to PNB as mortgagee of the
hemp and copra.
> A fire of undetermined cause broke out in July
21, 1940 and lasted for almost 1 whole week.
> Bodegas 1, 3, and 4 including the merchandise
stored were destroyed completely.
> Insured then informed insurer of the
unfortunate event and submitted the
corresponding fire claims, which were later
reduced to P370T.
> Insurer refused to pay claiming violations of the
warranties and conditions, filing of fraudulent
claims and that the fire had been deliberately
caused by the insured.
> Insured filed an action before CFI which
rendered a decision in favor of the insured.
Issues and Resolutions:
(1) Whether or not the policies should be avoided
for the reason that there was a breach of warranty.
Under the Memorandum of Warranty, there
should be no less than 1 hydrant for each 150 feet
of external wall measurements of the compound,
and since bodegas insured had an external wall per
meter of 1640 feet, the insured should have 11
hydrants in the compound. But he only had 2.
Even so, the insurer is barred by estoppel to claim
violation of the fire hydrants warranty, because
knowing that the number of hydrants it demanded
never existed from the very beginning, appellant
nevertheless issued the policies subject to such
warranty and received the corresponding
premiums. The insurance company was aware,
even before the policies were issued, that in the
premises there were only 2 hydrants and 2 others
were owned by the Municipality, contrary to the
requirements of the warranties in question.
It should be close to conniving at fraud upon the
insured to allow the insurer to claim now as void
the policies it issued to the insured, without
warning him of the fatal defect, of which the
insurer was informed, and after it had misled the
insured into believing that the policies were
effective.
Accdg to American Jurisprudence: It is a well-
settled rule that the insurer at the time of the
issuance of a policy has the knowledge of existing
facts, which if insisted on, would invalidate the
contract from its very inception, such knowledge
constitutes a waiver of conditions in the contract
inconsistent with known facts, and the insurer is
stopped thereafter from asserting the breach of
such conditions. The reason for the rule is: To
allow a company to accept one’s money for a
policy of insurance which it knows to be void and
of no effect, though it knows as it must that the
insured believes it to be valid and binding is so
contrary to the dictates of honesty and fair dealing,
as so closely related to positive fraud, as to be
abhorrent to fair-minded men. It would be to
allow the company to treat the policy as valid long
enough to get the premium on it, and leave it at
liberty to repudiate it the next moment.
Moreover, taking into account the well-known rule
that ambiguities or obscurities must strictly be
interpreted against the party that cause them, the
memorandum of warranty invoked by the insurer
bars the latter from questioning the existence of
the appliances called for, since its initial expression
“the undernoted appliances for the extinction of
fire being kept on the premises insured hereby..”
admits of the interpretation as an admission of the
existence of such appliances which insurer cannot
now contradict, should the parole evidence apply.
(2) Whether or not the insured violated the hemp
warranty provision against the storage of gasoline
since insured admitted there were 36 cans of
gasoline in Bodega 2 which was a separate
structure and not affected by the fire.
It is well to note that gasoline is not specifically
mentioned among the prohibited articles listed in
the so-called hemp warranty. The clause relied
upon by the insurer speaks of “oils”. Ordinarily,
oils mean lubricants and not gasoline or kerosene.
Here again, by reason of the exclusive control of
the insurance company over the terms of the
contract, the ambiguity must be held strictly
against the insurer and liberally in favor of the
insured, specially to avoid a forfeiture.
Furthermore, the gasoline kept was only incidental
to the insured’s business. It is a well settled rule
that keeping of inflammable oils in the premises
though prohibited by the policy does NOT void it if
such keeping is incidental to the business. Also,
the hemp warranty forbade the storage only in the
building to which the insurance applies, and/or in
any building communicating therewith; and it is
undisputed that no gasoline was stored in the
burnt bodegas and that Bodega No. 2 which was
where the gasoline was found stood isolated from
the other bodegas.
G.R. No. L-21821-22 and L-21824-27 May
31, 1966
DIOSDADO C. TY, plaintiff-appellant,
vs.FILIPINAS COMPAÑIA DE SEGUROS, et al.,
defendants-appellees.
BARRERA, J.:
These are appeals instituted by Diosdado C. Ty
from a single decision of the Court of First Instance
of Manila (in Civ. Cases Nos. 26343, 26344, 26404,
26405, 26406, 26442, which were tried together),
dismissing the six separate complaints he filed
against six insurance companies (Filipinas
Compañia de Seguros, People's Surety & Insurance
Co., Inc., South Sea Surety & Insurance Co., Inc.,
The Philippine Guaranty Company, Inc., Universal
Insurance & Indemnity Co., and Plaridel Surety &
Insurance Co., Inc.) for collection from each of
them, of the sum of P650.00, as compensation for
the disability of his left hand.
The facts of these cases are not controverted:
Plaintiff-appellant was an employee of Broadway
Cotton Factory at Grace Park, Caloocan City,
working as mechanic operator, with monthly salary
of P185.00. In the latter part of 1953, he took
Personal Accident Policies from several insurance
companies, among which are herein defendants-
appellees, on different dates,1 effective for 12
months. During the effectivity of these policies, or
on December 24, 1953, a fire broke out in the
factory where plaintiff was working. As he was
trying to put out said fire with the help of a fire
extinguisher, a heavy object fell upon his left hand.
Plaintiff received treatment at the National
Orthopedic Hospital from December 26, 1953 to
February 8, 1954, for the following injuries, to wit:
(1) Fracture, simple, oraximal phalanx, index finger,
left;
(2) Fracture, compound, communite proximal
phalanx, middle finger, left and 2nd phalanx
simple;
(3) Fracture, compound, communite phalanx, 4th
finger, left;
(4) Fracture, simple, middle phalanx, middle finger,
left;
(5) Lacerated wound, sutured, volar aspect, small
finger, left;
(6) Fracture, simple, chip, head, 1st phalanx 5th
digit, left.
which injuries, the attending surgeon certified,
would cause temporary total disability of
appellant's left hand.
As the insurance companies refused to pay his
claim for compensation under the policies by
reason of the said disability of his left hand, Ty filed
motions in the Municipal Court of Manila, which
rendered favorable decision. On appeal to the
Court of First Instance by the insurance companies,
the cases were dismissed on the ground that under
the uniform terms of the insurance policies, partial
disability of the insured caused by loss of either
hand to be compensable, the loss must result in
the amputation of that hand. Hence, these appeals
by the insured.1äwphï1.ñët
Plaintiff-appellant is basing his claim for indemnity
under the provision of the insurance contract,
uniform in all the cases, which reads:
"INDEMNITY FOR TOTAL OR PARTIAL DISABILITY
If the Insured sustains any Bodily Injury which is
effected solely through violent, external, visible
and accidental means, and which shall not prove
fatal but shall result, independently of all other
causes and within sixty (60) days from the
occurrence, thereof, in Total or Partial Disability of
the Insured, the Company shall pay, subject to the
exceptions as provided for hereinafter, the amount
set opposite such injury.
xxx xxx xxx
PARTIAL DISABILITY
LOSS OF:
xxx xxx xxx
Either Hand P650.00
xxx xxx xxx
The loss of a hand shall mean the loss, by
amputation through the bones of the wrist.
Appellant contends that to be entitled to
indemnification under the foregoing provision, it is
enough that the insured is disabled to such an
extent that he cannot substantially perform all acts
or duties of the kind necessary in the prosecution
of his business. It is argued that what is
compensable is the disability and not the
amputation of the hand. The definition of what
constitutes loss of hand, placed in the contract,
according to appellant, consequently, makes the
provision ambiguous and calls for the
interpretation thereof by this Court.
This is not the first time that the proper
construction of this provision, which is uniformly
carried in personal accident policies, has been
questioned. Herein appellant himself has already
brought this matter to the attention of this Court in
connection with the other accident policies which
he took and under which he had tried to collect
indemnity, for the identical injury that is the basis
of the claims in these cases. And, we had already
ruled:
While we sympathize with the plaintiff or his
employer, for whose benefit the policies were
issued, we can not go beyond the clear and express
conditions of the insurance policies, all of which
definite partial disability as loss of either hand by
amputation through the bones of the wrist. There
was no such amputation in the case at bar. All that
was found by the trial court, which is not disputed
on appeal, was that the physical injuries "caused
temporary total disability of plaintiff's left hand."
Note that the disability of plaintiff's hand was
merely temporary, having been caused by
fractures of the index, the middle and the fourth
fingers of the left hand.
We might add that the agreement contained in the
insurance policies is the law between the parties.
As the terms of the policies are clear, express and
specific that only amputation of the left hand
should be considered as a loss thereof, an
interpretation that would include the mere
fracture or other temporary disability not covered
by the policies would certainly be unwarranted.2
We find no reason to depart from the foregoing
ruling on the matter.
Plaintiff-appellant cannot come to the courts and
claim that he was misled by the terms of the
contract. The provision is clear enough to inform
the party entering into that contract that the loss
to be considered a disability entitled to indemnity,
must be severance or amputation of that affected
member from the body of the insured.
Wherefore, finding no error in the decision
appealed from, the same is hereby affirmed,
without costs. So ordered.
Del Rosario v. Equitable Insurance - Life Insurance
Policy
118 PHIL 349
Facts:
> Equitable Insurance issued a life Insurance policy
to del Rosario binding itself to pay P1,000 to
P3,000 as indemnity.
> Del Rosario died in a boating accident. The heirs
filed a claim and Equitable paid them P1,000.
> The heir filed a complaint for recovery of the
balance of P2,000, claiming that the insurere
should pay him P3,000 as stated in the policy.
Issue:
Whether or not the heir is entitled to recover
P3,000.
Held: YES.
Generally accepted principles or ruling on
insurance, enunciate that where there is an
ambiguity with respect to the terms and conditions
of the policy, the same shall be resolved against
the one responsible thereof. The insured has little,
if any, participation in the preparation of the
policy. The interpretation of obscure stipulations
in a contract should not favor the party who cause
the obscurity.
Misamis Lumber v. Capital Insurance - Insurance
Policy
123 Phil 1077
Facts:
> Misamis lumber insured it’s motor car for P14T
with Capital Insurance. The policy stipulated that
the insured may authorize the repair of the vehicle
necessitated by damage and the liability of the
insured is limited to 150.
> Car met an accident and was repaired by Morosi
Motors at a total cost of P302.27. Misamis made a
report of the accident to Capital who refused to
pay the cost of the repairs.
Issue:
Whether or not the insurer is liable for the total
amount of the repair.
Held: NO.
The insurance policy stipulated that if it is the
insured who authorized the repair, the liability of
the insurer is limited to 150. The literal meaning of
the stipulation must control, it being the actual
contract, expressly and plainly provided for in the
policy.
Verendia v. CA - Insurance Policy
217 SCRA 1993
Facts:
> Fidelity and Surety Insurance Company (Fidelity)
issued Fire Insurance Policy No. F-18876 effective
between June 23, 1980 and June 23, 1981 covering
Rafael (Rex) Verendia's residential in the amount of
P385,000.00. Designated as beneficiary was the
Monte de Piedad & Savings Bank.
> Verendia also insured the same building with
two other companies, namely, The Country
Bankers Insurance for P56,000.00 and The
Development Insurance for P400,000.00.
> While the three fire insurance policies were in
force, the insured property was completely
destroyed by fire.
> Fidelity appraised the damage amounting to
385,000 when it was accordingly informed of the
loss. Despite demands, Fidelity refused payment
under its policy, thus prompting Verendia to file a
complaint for the recovery of 385,000
> Fidelity, averred that the policy was avoided by
reason of over-insurance, that Verendia maliciously
represented that the building at the time of the fire
was leased under a contract executed on June 25,
1980 to a certain Roberto Garcia, when actually it
was a Marcelo Garcia who was the lessee.
Issue: Whether or not Verendia can claim on the
insurance despite the misrepresentation as to the
lessee and the overinsurance.
Held: NOPE.
The contract of lease upon which Verendia relies to
support his claim for insurance benefits, was
entered into between him and one Robert Garcia,
a couple of days after the effectivity of the
insurance policy. When the rented residential
building was razed to the ground, it appears that
Robert Garcia was still within the premises.
However, according to the investigation by the
police, the building appeared to have "no
occupants" and that Mr. Roberto Garcia was
"renting on the otherside of said compound" These
pieces of evidence belie Verendia's uncorroborated
testimony that Marcelo Garcia whom he
considered as the real lessee, was occupying the
building when it was burned.
Ironically, during the trial, Verendia admitted that
it was not Robert Garcia who signed the lease
contract but it was Marcelo Garcia cousin of
Robert, who had also been paying the rentals all
the while. Verendia, however, failed to explain why
Marcelo had to sign his cousin's name when he in
fact he was paying for the rent and why he
(Verendia) himself, the lessor, allowed such a ruse.
Fidelity's conclusions on these proven facts appear,
therefore, to have sufficient bases: Verendia
concocted the lease contract to deflect
responsibility for the fire towards an alleged
"lessee", inflated the value of the property by the
alleged monthly rental of P6,500) when in fact, the
Provincial Assessor of Rizal had assessed the
property's fair market value to be only P40,300.00,
insured the same property with two other
insurance companies for a total coverage of
around P900,000, and created a dead-end for the
adjuster by the disappearance of Robert Garcia.
Basically a contract of indemnity, an insurance
contract is the law between the parties. Its terms
and conditions constitute the measure of the
insurer's liability and compliance therewith is a
condition precedent to the insured's right to
recovery from the. As it is also a contract of
adhesion, an insurance contract should be liberally
construed in favor of the insured and strictly
against the insurer company which usually
prepares it
.Considering, however, the foregoing discussion
pointing to the fact that Verendia used a false lease
contract to support his claim under Fire Insurance
Policy, the terms of the policy should be strictly
construed against the insured. Verendia failed to
live by the terms of the policy, specifically Section
13 thereof which is expressed in terms that are
clear and unambiguous, that all benefits under the
policy shall be forfeited "if the claim be in any
respect fraudulent, or if any false declaration be
made or used in support thereof, or if any
fraudulent means or devises are used by the
Insured or anyone acting in his behalf to obtain any
benefit under the policy". Verendia, having
presented a false declaration to support his claim
for benefits in the form of a fraudulent lease
contract, he forfeited all benefits therein by virtue
of Section 13 of the policy in the absence of proof
that Fidelity waived such provision
There is also no reason to conclude that by
submitting the subrogation receipt as evidence in
court, Fidelity bound itself to a "mutual
agreement" to settle Verendia's claims in
consideration of the amount of P142,685.77. While
the said receipt appears to have been a filled-up
form of Fidelity, no representative of Fidelity had
signed it. It is even incomplete as the blank spaces
for a witness and his address are not filled up.
More significantly, the same receipt states that
Verendia had received the aforesaid amount.
However, that Verendia had not received the
amount stated therein, is proven by the fact that
Verendia himself filed the complaint for the full
amount of P385,000.00 stated in the policy. It
might be that there had been efforts to settle
Verendia's claims, but surely, the subrogation
receipt by itself does not prove that a settlement
had been arrived at and enforced. Thus, to
interpret Fidelity's presentation of the subrogation
receipt in evidence as indicative of its accession to
its "terms" is not only wanting in rational basis but
would be substituting the will of the Court for that
of the parties
 Philamlife v. Ansaldo - Jurisdiction of the
Insurance Commissioner
234 SCRA 509
Facts:
> Ramon M. Paterno sent a letter-complaint to the
Insurance Commissioner alleging certain problems
encountered by agents, supervisors, managers and
public consumers of the Philamlife as a result of
certain practices by said company.
> Commissioner requested petitioner Rodrigo de
los Reyes, in his capacity as Philamlife's president,
to comment on respondent Paterno's letter.
> The complaint prays that provisions on charges
and fees stated in the Contract of Agency executed
between Philamlife and its agents, as well as the
implementing provisions as published in the
agents' handbook, agency bulletins and circulars,
be declared as null and void. He also asked that the
amounts of such charges and fees already
deducted and collected by Philamlife in connection
therewith be reimbursed to the agents, with
interest at the prevailing rate reckoned from the
date when they were deducted
> Manuel Ortega, Philamlife's Senior Assistant
Vice-President and Executive Assistant to the
President, asked that the Commissioner first rule
on the questions of the jurisdiction of the
Insurance Commissioner over the subject matter of
the letters-complaint and the legal standing of
Paterno.
> Insurance Commissioner set the case for hearing
and sent subpoena to the officers of Philamlife.
Ortega filed a motion to quash the subpoena
alleging that the Insurance company has no
jurisdiction over the subject matter of the case and
that there is no complaint sufficient in form and
contents has been filed.
> The motion to quash was denied.
Issue:
Whether or not the insurance commissioner had
jurisdiction over the legality of the Contract of
Agency between Philamlife and its agents.
Held:
No, it does not have jurisdiction.
The general regulatory authority of the Insurance
Commissioner is described in Section 414 of the
Insurance Code, to wit:
"The Insurance Commissioner shall have the duty
to see that all laws relating to insurance, insurance
companies and other insurance matters, mutual
benefit associations and trusts for charitable uses
are faithfully executed and to perform the duties
imposed upon him by this Code, . . . ."
On the other hand, Section 415 provides:
"In addition to the administrative sanctions
provided elsewhere in this Code, the Insurance
Commissioner is hereby authorized, at his
discretion, to impose upon insurance companies,
their directors and/or officers and/or agents, for
any willful failure or refusal to comply with, or
violation of any provision of this Code, or any
order, instruction, regulation or ruling of the
Insurance Commissioner, or any commission of
irregularities, and/or conducting business in an
unsafe or unsound manner as may be determined
by the Insurance Commissioner, the following:
a) fines not in excess of five hundred pesos a day;
and
b) suspension, or after due hearing, removal of
directors and/or officers and/or agents."
A plain reading of the above-quoted provisions
show that the Insurance Commissioner has the
authority to regulate the business of insurance,
which is defined as follows:
"(2) The term 'doing an insurance business' or
'transacting an insurance business,' within the
meaning of this Code, shall include (a) making or
proposing to make, as insurer, any insurance
contract; (b) making, or proposing to make, as
surety, any contract of suretyship as a vocation and
not as merely incidental of the surety; (c) doing any
kind of business, including a reinsurance business,
specifically recognized as constituting the doing of
an insurance business within the meaning of this
Code; (d) doing or proposing to do any business in
substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this
Code. (Insurance Code, Sec. 2 [2])
Since the contract of agency entered into between
Philamlife and its agents is not included within the
meaning of an insurance business, Section 2 of the
Insurance Code cannot be invoked to give
jurisdiction over the same to the Insurance
Commissioner. Expressio unius est exclusio
alterius.
Filipinas Cia de Seguros v. Christern Huenfeld & Co. -
Enemy Corporation
80 PHIL 54
Facts:
> Oct. 1, 1941, Domestic Corp Christern, after payment
of the premium, obtained from Filipinas, fire policy no.
29333 for P100T covering merchandise contained in a
building located in Binondo.
> On Feb. 27, 1942, during the Jap occupation, the
building and the insured merchandise were
burned. Christern submitted to Filipinas its claim.
> Salvaged goods were sold and the total loss of
Christern was P92T.
> Filipinas denied liability on the ground that Christern
was an enemy corporation and cannot be insured.
Issue: Whether or not Filipinas is liable to Christern,
Huenfeld & Co.
Held:NO.
Majority of the stockholders of Christern were German
subjects. This being so, SC ruled that said corporation
became an enemy corporation upon the war between the
US and Germany. The Phil Insurance Law in Sec. 8
provides that anyone except a public enemy may be
insured. It stands to reason that an insurance policy
ceases to be allowable as soon as an insured becomes a
public enemy.
The purpose of the war is to cripple the power ad exhaust
the resources of the enemy, and it is inconsistent that one
country should destroy its enemy property and repay in
insurance the value of what has been so destroyed, or
that it should in such manner increase the resources of
the enemy or render it aid.
All individuals who compose the belligerent powers, exist
as to each other, in a state of utter exclusion and are
public enemies. Christern having become an enemy
corporation on Dec. 10. 1941, the insurance policy issued
in his favor on Oct. 1, 1941 by Filipinas had ceased to be
valid and enforceable, and since the insured goods were
burned after Dec. 10, 1941, and during the war, Christern
was NOT entitled to any indemnity under said policy from
Filipinas.
Elementary rules of justice require that the premium paid
by Christern for the period covered by the policy from
Dec. 10, 1941 should be returned by Filipinas.
San Miguel Brewery v. Law Union Rock
Insurance Company - Insurance Proceeds
40 PHIL 674
Facts:
> On Jan. 12, 1918, Dunn mortgaged a parcel of land to
SMB to secure a debt of 10T.
> Mortgage contract stated that Dunn was to have the
property insured at his own expense, authorizing SMB to
choose the insurers and to receive the proceeds thereof
and retain so much of the proceeds as would cover the
mortgage debt.
> Dunn likewise authorized SMB to take out the
insurance policy for him.
> Brias, SMB’s general manager, approached Law Union
for insurance to the extent of 15T upon the property. In
the application, Brias stated that SMB’s interest in the
property was merely that of a mortgagee.
> Law Union, not wanting to issue a policy for the entire
amount, issued one for P7,500 and procured another
policy of equal amount from Filipinas Cia de
Seguros. Both policies were issued in the name of SMB
only and contained no reference to any other interests in
the propty. Both policies required assignments to be policies might have been worded differently so as to

approved and noted on the policy. protect the owner, but this was not done.

> Premiums were paid by SMB and charged to Dunn. A If the wording had been: “Payable to SMB, mortgagee, as

year later, the policies were renewed. its interests may appear, remainder to whomsoever,

during the continuance of the risk, may become owner of

> In 1917, Dunn sold the property to Harding, but no
the interest insured”, it would have proved an intention to
assignment of the policies was made to the latter.
insure the entire interest in the property, NOT merely
> Property was destroyed by fire. SMB filed an action in
SMB’s and would have shown to whom the money, in
court to recover on the policies. Harding was made a
case of loss, should be paid. Unfortunately, this was not
defendant because by virtue of the sale, he became the
what was stated in the policies.
owner of the property, although the policies were issued
If during the negotiation for the policies, the parties had
in SMB’s name.
agreed that even the owner’s interest would be covered
> SMB sought to recover the proceeds to the extent of its by the policies, and the policies had inadvertently been
mortgage credit with the balance to go to Harding. written in the form in which they were eventually issued,

> Insurance Companies contended that they were not the lower court would have been able to order that the

liable to Harding because their liability under the policies contract be reformed to give effect to them in the sense

was limited to the insurable interests of SMB only. that the parties intended to be bound. However, there is

no clear and satisfactory proof that the policies failed to

> SMB eventually reached a settlement with the
reflect the real agreement between the parties that would
insurance companies and was paid the balance of it’s
justify the reformation of these two contracts.
mortgage credit. Harding was left to fend for

himself. Trial court ruled against Harding. Hence the Saura Import Export Co. v. Philippine
appeal.
International Surety - Cancellation of Policy
Issue:
118 PHIL 150
Whether or not the insurance companies are liable to
Facts:
Harding for the balance of the proceeds of the 2 policies.
> On Dec. 26, 1952, Saura mortgaged to PNB its
Held:
registered parcel of land in Davao to secure the payment
NOPE.Under the Insurance Act, the measure of insurable of a promissory note of P27T.
interest in the property is the extent to which the insured
might be daminified by the loss or injury thereof. Also it is > A building of strong materials which was also owned
provided in the IA that the insurance shall be applied by Saura, was erected on the parcel of land and the
exclusively to the proper interest of the person in whose building had always been covered by insurance even
name it is made. Undoubtedly, SMB as the mortgagee of
before the execution of the mortgage contract.
the property, had an insurable interest therein; but it could
NOT, an any event, recover upon the two policies an > Pursuant to the mortgage agreement which required
amount in excess of its mortgage credit.
Saura to insure the building and its contents, it obtained a

By virtue of the Insurance Act, neither Dunn nor Harding fire insurance for P29T from PISC for a period of 1 year

could have recovered from the two policies. With respect starting Oct. 2, 1954.

to Harding, when he acquired the property, no change or > The mortgage also required Saura to endorse the
assignment of the policies had been undertaken. The insurance policy to PNB. The memo stated: Loss if any,
payable to PNG as their interest may appear, subject to of the cancellation of the policy. But notice to the bank,
the terms, conditions and warranties of this policy. as far as Saura herein is concerned, is not effective

notice. PISC is then ordered to pay Saura P29T, the

> The policy was delivered to PNB by Saura.
amount involved in the policy subject matter of this case.
> On Oct. 15, 1954, barely 13 days after the issuance of

the fire insurance, PISC canceled the same, effective as Palilieo v. Cosio - Insurance Proceeds
of the date of issue. Notice of the cancellation was sent
97 PHIL 919
to PNB in writing and was received by the bank on Nov.

8, 1954.
Facts:

> On Apr. 6, 1955, the building and its contents worth > On Dec. 18, 1951, Palileo obtained from Cosio a

P4,685 were burned. On April 11, 1985, Saura filed a loan of P12T.

claim with PISC and mortgagee bank.

> To secure payment, Cosio required Palileo to

> Upon presentation of notice of loss with PNB, Saura sign a document known as “conditional sale of

learned for the first time that the policy had been residential building”, purporting to convey to Cosio,

previously canceled by PISC, when Saura’s folder in the with a right to repurchase (on the part of Palileo), a

bank’s file was opened and the notice of the cancellation two-story building of strong materials belonging to

by PISC was found. Palileo.

Issue: > After execution of the document, Cosio insured

the building against fire with Associated Insurance
Whether or not there was proper cancellation of the
& Surety Co. (Associated) for 15T.
policy?
> The insurance policy was issued in the name of
Held:
Cosio.
NO.The policy in question does NOT provide for the
> The building was partly destroyed by fire and
notice of cancellation, its form or period. The Insurance
after proper demand, Cosio was able to collect from
Law does not likewise provide for such notice. This being
the insurance company an indemnity of P13,107.
the case, it devolves upon the Court to apply the
> Palileo demanded from Cosio that she be
generally accepted principles of insurance, regarding
credited with the necessary amount to pay her
cancellation of the insurance policy by the insurer.
obligation out of the insurance proceeds, but Cosio
Actual notice of cancellation in a clear and unequivocal
refused to do so.
manner, preferably in writing should be given by the
insurer to the insured so that the latter might be given an
> Trial Court found that the debt had an unpaid
balance of P12T. It declared the obligation of
opportunity to obtain other insurance for his own
Palileo to Cosio fully compensated by virtue of the
protection. The notice should be personal to the insurer
proceeds collected by Cosio and further held that
and not to and/or through any unauthorized person by the
the excess of P1,107 (13,107 – 12,000) be
policy. Both the PSIC and the PNB failed, wittingly or
refunded to Palileo
unwittingly to notify Saura of the cancellation made.

The insurer contends that it gave notice to PNB as

Issue:
mortgagee of the property and that was already Whether or not the trial court was justified in
substantial compliance with its duty to notify the insured considering the obligation of Palileo fully
compensated by the insurance amount that Cosio
was able to collect from Associated, and whether or
not the trial court was correct in requiring Cosio to
refund the excess of P1,107 to Palileo.
Held:
NO and NO.
The rule is that “where a mortgagee, independently
of the mortgagor, insures the mortgaged property in
his own name and for his own interest, he is entitled
to the insurance proceeds in case of loss, but in
such case, he is not allowed to retain his claim
against the mortgagor, but is passed by subrogation
to the insurer to the extent of the money paid.”
The lower court erred in declaring that the
proceeds of the insurance taken out by Cosio on
the property insured to the benefit of Palileo and in
ordering the former to deliver to the latter, the
difference between the indebtedness and the
amount of insurance received by Cosio. In the light
of this ruling, the correct solution would be that the
proceeds of the Insurance be delivered to Cosio,
but her claim against Palileo should be considered
assigned to the insurance company who is deemed
subrogated to the rights of Cosio to the extent of the
money paid as indemnity.
 wife was not the proper party in interest to file the
Grepalife v. CA - Real Party In Interest
316 SCRA 677
Facts:
> A contract of group life insurance was executed
between Grepalife and DBP. Grepalife agreed to
insure the lives of eligible housing loan mortgagors
of DBP.
> Dr. Wilfredo Leuterio, a physician and a housing
debtor of DBP applied for membership in the group
life insurance plan.
> In an application form, Dr. Leuterio answered
questions concerning his health stating that he is in
good health and has never consulted a physician
for or a heart condition, high blood pressure,
cancer, diabetes, lung, kidney or stomach disorder
or any other physical impairment.
> Grepalife issued the insurance coverage of Dr.
Leuterio, to the extent of his DBP mortgage
indebtedness amounting to eighty-six thousand,
two hundred (P86,200.00) pesos.
> 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 and insisted that
Dr. Leuterio did not disclose that he had been
suffering from hypertension, which caused his
death. Allegedly, such non-disclosure constituted
concealment that justified the denial of the claim.
> The widow of the late Dr. Leuterio, filed a
complaint against Grepalife for "Specific
Performance with Damages." During the trial, Dr.
Hernando Mejia, who issued the death certificate,
was called to testify. Dr. Mejia’s findings, based
partly from the information given by the widow,
stated that Dr. Leuterio complained of headaches
presumably due to high blood pressure. The
inference was not conclusive because Dr. Leuterio
was not autopsied, hence, other causes were not
ruled out.
> RTC ruled in favor of widow and against
Grepalife. Grepalife appealed contending that the
suit, since it is DBP who insured the life of Dr.
Leuterio.
Issue: Whether or not the widow is the real party
in interest, (not DBP) and has legal standing to file
the suit.
Held: YES.
Grepalife alleges that the complaint was instituted
by the widow of Dr. Leuterio, not the real party in
interest, hence the trial court acquired no
jurisdiction over the case. It argues that when the
Court of Appeals affirmed the trial court’s
judgment, Grepalife was held liable to pay the
proceeds of insurance contract in favor of DBP, the
indispensable party who was not joined in the suit.
To resolve the issue, we must consider the
insurable interest in mortgaged properties and the
parties to this type of contract. The rationale of a
group insurance policy of mortgagors, otherwise
known as the "mortgage redemption insurance," is
a device for the protection of both the mortgagee
and the mortgagor. On the part of the mortgagee,
it has to enter into such form of contract so that in
the event of the unexpected demise of the
mortgagor during the subsistence of the mortgage
contract, the proceeds from such insurance will be
applied to the payment of the mortgage debt,
thereby relieving the heirs of the mortgagor from
paying the obligation.
In a similar vein, ample protection is given to the
mortgagor under such a concept so that in the
event of death; the mortgage obligation will be
extinguished by the application of the insurance
proceeds to the mortgage 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 mortgagor’s 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 debtor’s 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." When
DBP submitted the insurance claim against
petitioner, the latter denied payment thereof,
interposing the defense of concealment committed
by the insured. Thereafter, DBP collected the debt
from the mortgagor and took the necessary action
of foreclosure on the residential lot of private
respondent
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, 14 the widow of the
decedent Dr. Leuterio may file the suit against the
insurer, Grepalife.
As to the question of whether there was
concealment, CA held as affirmed by the SC that
contrary to Grepalife’s allegations, there was no
sufficient proof that the insured had suffered from
hypertension. Aside from the statement of the
insured’s widow who was not even sure if the
medicines taken by Dr. Leuterio were for
hypertension, the appellant had not proven nor
produced any witness who could attest to Dr.
Leuterio’s medical history.
The fraudulent intent on the part of the insured
must be established to entitle the insurer to
rescind the contract. Misrepresentation as a
defense of the insurer to avoid liability is an
affirmative defense and the duty to establish such
defense by satisfactory and convincing evidence
rests upon the insurer. In the case at bar, the
petitioner failed to clearly and satisfactorily
establish its defense, and is therefore liable to pay
the proceeds of the insurance
Filipinas Compania de Seguros v. Christern
Huenefeld
G.R. No. L-2294, May 25, 1951
A corporation borrows its citizenship from the
citizenship of majority of its stockholders,
regardless of the country under whose laws it was
organized and created.
FACTS:
Christern Huenefeld Corporation bought a fire
insurance policy from Filipinas Compania de
Seguros to cover merchandise contained in a
building. During the Japanese military occupation,
this same merchandise and the building were
burned, so Huenefeld filed a claim under the
policy.
Filipinas Compania refused to pay, alleging that the
policy had ceased to be in force when the US
declared war against Germany. Filipinas Compania
contended that Huenefeld, although organized and
created under Philippine laws, is a German subject,
and hence, a public enemy, since majority of its
stockholders are Germans. On the other hand,
Filipinas Compania is under American jurisdiction.
However, the Director of Bureau of Financing,
Philippine Executive Commission ordered Filipinas
Compania to pay, so Filipinas Compania did pay.
The case at bar is about the recovery of that sum
paid.
ISSUES:
W/N Christern Huenefeld is a German subject
because majority of its stockholders are under
German jurisdiction, despite the fact that it was
organized and created under Philippine laws
If so, W/N the fire insurance policy is enforceable
against an enemy state
HELD:
The Court of Appeals ruled that a private
corporation is a citizen of the country or state by
and under the laws of which it was created or
organized. It rejected the theory that nationality of
a private corporation is determined by the
character or citizenship of its controlling
stockholders.
But the Supreme Court held that Christern
Huenefeld is an enemy corporation since majority
of its stockholders are German subjects. The two
American cases relied up by the Court of Appeals
have lost their force in view of a newer case where
the control test was adopted.
The Philippine Insurance Law provides that anyone,
except a public enemy, may be insured. It stands to
reason that an insurance policy ceases to be
allowable as soon as the insured becomes a public
enemy.
Since Christern Huenefeld became a public enemy
on Dec. 10, 1941, then the policy has ceased to be
enforcible and therefore Huenefeld is not entitled
to indemnity. However, elementary rules of justice
require that the premium paid from Dec. 11, 1941
should be returned.
Thus, Filipinas Compania is allowed to recover the
sum paid but only its equivalent in actual Philippine
currency, minus the premium that Huenefeld paid
after Dec. 11.
G.R. No. L-22796 June 26, 1967
DELFIN NARIO, and ALEJANDRA SANTOS-NARIO,
plaintiffs-appellants,
vs.THE PHILIPPINE AMERICAN LIFE INSURANCE
COMPANY, defendant-appellee.
Ricardo T. Bancod and Severino C. Zarasate for
plaintiffs-appellants.
M. Lim, M. Y. Macias and Associates for
defendant-appellee.
REYES, J.B.L., J.:
Direct appeal, on pure question of law, from a
decision of the Court of First Instance of Manila, in
its Civil Case No. 54942, dismissing plaintiffs'
complaint as well as from a later order of the same
court, denying a motion to set aside and/or
reconsider said decision of dismissal.
The facts of this case may be stated briefly as
follows:
Mrs. Alejandra Santos-Mario was, upon
application, issued, on June 12, 1959, by the
Philippine American Life Insurance Co., a life
insurance policy (No. 503617) under a 20-year
endowment plan, with a face value of P5,000.00.
She designated thereon her husband, Delfin Nario,
and their unemancipated minor son, Ernesto Nario,
as her irrevocable beneficiaries.
About the middle of June, 1963, Mrs. Nario applied
for a loan on the above stated policy with the
Insurance Company, which loan she, as policy-
holder, has been entitled to avail of under one of
the provisions of said policy after the same has
been in force for three (3) years, for the purpose of
using the proceeds thereof for the school expenses
of her minor son, Ernesto Nario. Said application
bore the written signature and consent of Delfin
Nario in two capacities: first, as one of the
irrevocable beneficiaries of the policy; and the
other, as the father-guardian of said minor son and
irrevocable beneficiary, Ernesto Nario, and as the
legal administrator of the minor's properties,
pursuant to Article 320 of the Civil Code of the
Philippines.
The Insurance Company denied said application,
manifesting to the policy holder that the written
consent for the minor son must not only be given
by his father as legal guardian but it must also be
authorized by the court in a competent
guardianship proceeding.
After the denial of said policy loan application, Mrs.
Nario signified her decision to surrender her policy
to the Insurance Company, which she was also
entitled to avail of under one of the provisions of
the same policy, and demanded its cash value
which then amounted to P520.00.
The Insurance Company also denied the surrender
of the policy, on the same ground as that given in
disapproving the policy loan application; hence, on
September 10, 1963, Mrs. Alejandra Santos-Nario
and her husband, Delfin Nario, brought suit against
the Philippine American Life Insurance Co. in the
above mentioned court of first instance, seeking to
compel the latter (defendant) to grant their policy
loan application and/or to accept the surrender of
said policy in exchange for its cash
value.1äwphï1.ñët
Defendant Insurance Company answered the
complaint, virtually admitting its material
allegations, but it set up the affirmative defense
that inasmuch as the policy loan application and
the surrender of the policy involved acts of
disposition and alienation of the property rights of
the minor, said acts are not within the powers of
the legal administrator, under article 320 in
relation to article 326 of the Civil Code; hence,
mere written consent given by the father-guardian,
for and in behalf of the minor son, without any
court authority therefor, was not a sufficient
compliance of the law, and it (defendant Insurance
Company) was, therefore, justified in refusing to
grant and in disapproving the proposed
transactions in question.
There having been no substantial disagreement or
dispute as to any material fact, the parties, upon
joint motion which the lower court granted,
dispensed with the presentation of evidence and
submitted their respective memoranda, after
which the case was considered submitted for
decision.
The lower court found and opined that since the
parties expressly stipulated in the endorsement
attached to the policy and which formed part
thereof that —
It is hereby understood and agreed that,
notwithstanding the provisions of this Policy to the
contrary, inasmuch as the designation of the
beneficiaries have been made by the Insured
without reserving the right to change said
beneficiaries, the Insured may not designate a new
beneficiary or assign, release or surrender this
Policy to the Company and exercise any and all
other rights and privileges hereunder or agree with
the Company to any change in or amendment to
this Policy, without the consent of the beneficiaries
originally designated;
that under the above quoted provision, the minor
son, as one of the designated irrevocable
beneficiaries, "acquired a vested right to all
benefits accruing to the policy, including that of
obtaining a policy loan to the extent stated in the
schedule of values attached to the policy (Gercio
vs. Sun Life Assurance of Canada, 48 Phil. 53, 58)";
that the proposed transactions in question (policy
loan and surrender of policy) involved acts of
disposition or alienation of the minor's properties
for which the consent given by the father-guardian
for and in behalf of the minor son, must be with
the requisite court authority (U.S.V.A. vs. Bustos,
92 Phil. 327; Visaya vs. Suguitan, G.R. No. L-8300,
November 18, 1955; 99 Phil. 1004 [unrep] and in
the case at bar, such consent was given by the
father-guardian without any judicial authority; said
court, agreeing with defendant's contention,
sustained defendant's affirmative defense, and
rendered, on January 28, 1964, its decision
dismissing plaintiffs' complaint.
Unable to secure reconsideration of the trial
Court's ruling, petitioner appealed directly to this
Court, contending that the minor's interest
amounted to only one-half of the policy's cash
surrender value of P520.00; that under Rule 96,
Section 2 of the Revised Rules of Court, payment of
the ward's debts is within the powers of the
guardian, where no realty is involved; hence, there
is no reason why the father may not validly agree
to the proposed transaction on behalf of the minor
without need of court authority.
The appeal is unmeritorious. We agree with the
lower court that the vested interest or right of the
beneficiaries in the policy should be measured on
its full face value and not on its cash surrender
value, for in case of death of the insured, said
beneficiaries are paid on the basis of its face value
and in case the insured should discontinue paying
premiums, the beneficiaries may continue paying it
and are entitled to automatic extended term or
paid-up insurance options, etc. and that said
vested right under the policy cannot be divisible at
any given time. We likewise agree with the
conclusion of the lower court that the proposed
transactions in question (policy loan and surrender
of policy) constitute acts of disposition or
alienation of property rights and not merely of
management or administration because they
involve the incurring or termination of contractual
obligations.
As above noted, the full face value of the policy is
P5,000.00 and the minor's vested interest therein,
as one of the two (2) irrevocable beneficiaries,
consists of one-half (½) of said amount or
P2,500.00.
Article 320 of the Civil Code of the Philippines
provides —The father, or in his absence the
mother, is the legal administrator of the property
pertaining to the child under parental authority. If
the property is worth more than two thousand
pesos, the father or mother shall give a bond
subject to the approval of the Court of First
Instance.
and article 326 of the same Code reads —
When the property of the child is worth more than
two thousand pesos, the father or mother shall be
considered a guardian of the child's property,
subject to the duties and obligations of guardians
under the Rules of Court.
The above quoted provisions of the Civil Code have
already been implemented and clarified in our
Revised Rules of Court which provides —
SEC. 7. Parents as guardians. — When the property
of the child under parental authority is worth two
thousand pesos or less, the father or the mother,
without the necessity of court appointment, shall
be his legal guardian. When the property of the
child is worth more than two thousand pesos, the
father or the mother shall be considered guardian
of the child's property, with the duties and
obligations of guardians under these rules, and
shall file the petition required by Section 2 hereof.
For good reasons the court may, however, appoint
another suitable person. (Rule 93).
It appearing that the minor beneficiary's vested
interest or right on the policy exceeds two
thousand pesos (P2,000.00); that plaintiffs did not
file any guardianship bond to be approved by the
court; and as later implemented in the
abovequoted Section 7, Rule 93 of the Revised
Rules of Court, plaintiffs should have, but, had not,
filed a formal application or petition for
guardianship, plaintiffs-parents cannot possibly
exercise the powers vested on them, as legal
administrators of their child's property, under
articles 320 and 326 of the Civil Code. As there was
no such petition and bond, the consent given by
the father-guardian, for and in behalf of the minor
son, without prior court authorization, to the policy
loan application and the surrender of said policy,
was insufficient and ineffective, and defendant-
appellee was justified in disapproving the proposed
transactions in question.
The American cases cited by appellants are not
applicable to the case at bar for lack of analogy. In
those cases, there were pending guardianship
proceedings and the guardians therein were
covered by bonds to protect the wards' interests,
which circumstances are wanting in this case.
The result would be the same even if we regarded
the interest of the ward to be worth less than
P2,000.00. While the father or mother would in
such event be exempt from the duty of filing a
bond, and securing judicial appointment, still the
parent's authority over the estate of the ward as a
legal-guardian would not extend to acts of
encumbrance or disposition, as distinguished from
acts of management or administration. The
distinction between one and the other kind of
power is too basic in our law to be ignored. Thus,
under Article 1877 of the Civil Code of the
Philippines, an agency in general terms does not
include power to encumber or dispose of the
property of the principal; and the Code explicitly
requires a special power or authority for the agent
"to loan or borrow money, unless the latter act be
urgent or indispensable for the preservation of the
thing under administration" (Art. 1878 no. 7).
Similarly, special powers are required to required
to effect novations, to waive any obligation
gratuitously or obligate the principal as a guarantor
or surety (Do., nos. 2, 4 and 11). By analogy, since
the law merely constitutes the parent as legal
administrator of the child's property (which is a
general power), the parent requires special
authority for the acts above specified, and this
authority can be given only by a court. This
restricted interpretation of the parent's authority
becomes all the more necessary where as in the
case before us, there is no bond to guarantee the
ward against eventual losses.
Appellants seek to bolster their petition by
invoking the parental power (patria potestas)
under the Civil Code of 1889, which they claim to
have been revived by the Civil Code of the
Philippines (Rep. Act 386). The appeal profits them
nothing. For the new Civil Code has not effected a
restitutio in integrum of the Spanish patria
potestas; the revival has been only in part. And,
significantly, the Civil Code now in force did not
reenact Article 164 of the Civil Code of 1889, that
prohibited the alienation by the parents of the real
property owned by the child without court
authority and led the commentators and
interpreters of said Code to infer that the parents
could by themselves alienate the child's movable
property. The omission of any equivalent precept
in the Civil Code now in force proves the absence
of any authority in the parents to carry out now
acts of disposition or alienation of the child's goods
without court approval, as contended by the
appellee and the court below.
G.R. No. L-2227 August 31, 1948
Intestate estate of the late Esperanza J.
Villanueva. MARIANO J. VILLANUEVA, claimant-
appellant,
vs.
PABLO ORO, administrator.
Nicolas P. Nonato for claimant and appellant.
Rodrigo J. Harder for administrator and appellee.
PARAS, J.:
The West Coast Life Insurance Company issued two
policies of insurance on the life of Esperanza J.
Villanueva, one for two thousand pesos and
maturing on April 1, 1943, and the other for three
thousand pesos and maturing on March 31, 1943.
In both policies (with corresponding variation in
amount and date of maturity) the insurer agreed
"to pay two thousand pesos, at the home office of
the Company, in San Francisco, California, to the
insured hereunder, if living, on the 1st day of April
1943, or to the beneficiary Bartolome Villanueva,
father of the insured, immediately upon receipt of
due proof of the prior death of the insured,
Esperanza J. Villanueva, of La Paz, Philippine
Islands, during the continuance of this policy, with
right on the part of the insured to change the
beneficiary.
After the death of Bartolome Villanueva in 1940,
the latter was duly substituted as beneficiary under
the policies by Mariano J. Villanueva, a brother of
the insured. Esperanza J. Villanueva survived the
insurance period, for she died only on October 15,
1944, without, however, collecting the insurance
proceeds. Adverse claims for said proceeds were
presented by the estate of Esperanza J. Villanueva
on the one hand and by Mariano J. Villanueva on
the other, which conflict was squarely submitted in
the intestate proceedings of Esperanza J.
Villanueva pending in the Court of First Instance of
Iloilo. From an order, dated February 26, 1947,
holding the estate of the insured is entitled to the
insurance proceeds, to the exclusion of the
beneficiary, Mariano J. Villanueva, the latter has
interposed the present appeal.
The lower court committed no error. Under the
policies, the insurer obligated itself to pay the
insurance proceeds (1) to the insured if the latter
lived on the dates of maturity or (2) to the
beneficiary if the insured died during the
continuance of the policies. The first contingency
of course excludes the second, and vice versa. In
other words, as the insured Esperanza J. Villanueva
was living on April 1, and March 31, 1943, the
proceeds are payable exclusively to her estate
unless she had before her death otherwise
assigned the matured policies. (It is not here
pretended and much less proven, that there was
such assignment.) The beneficiary, Mariano J.
Villanueva, could be entitled to said proceeds only
in default of the first contingency. To sustain the
beneficiary's claim would be altogether eliminate
from the policies the condition that the insurer
"agrees to pay . . . to the insured hereunder, if
living".
There is nothing there in the Insurance Law (Act
No. 2427) that militates against the construction
placed by the lower court on the disputed
condition appearing in the two policies now under
advisement. On the contrary, said law provides
that "an insurance upon life may be made payable
on the death of the death of the person, or on his
surviving a specified period, or otherwise,
contingently on the continuance or cessation of
life" (section 165), and that "a policy of insurance
upon life or health mat pass by transfer, will, or
succession, to any person, whether he has an
insurable interest or not, and such person may
recover upon it whatever the insured might have
recovered" (section 166).
Counsel for the beneficiary invokes the decision in
Del Val vs. Del Val, 29 Phil., 534, 540, in which it
was held that "the proceeds of an insurance policy
belong exclusively to the beneficiary and not to the
estate of the person whose life was insured, and
that such proceeds are the separate and individual
property of the beneficiary, and not of the heirs of
the person whose life was insured." This citation is
clearly not controlling, first, because it does not
appear therein that the insurance contract
contained the stipulation appearing in the policies
issued on the life of Esperanza J. Villanueva and on
which the appealed order in the case at bar is
based; and, secondly, because the Del Val doctrine
was made upon the authority of the provisions of
the Code of Commerce relating to insurance
(particularly section 428) which had been expressly
repealed by the present Insurance Act No. 2427.
Our pronouncement is not novel, since it tallies
with the following typical American authorities: "If
a policy of insurance provides that the proceeds
shall be payable to the assured, if he lives to a
certain date, and, in case of his death before that
date, then they shall be payable to the beneficiary
designated, the interest of the beneficiary is a
contingent one, and the benefit of the policy will
only inure to such beneficiary in case the assured
dies before the end of the period designated in the
policy." (Couch, Cyclopedia of Insurance Law, Vol.
2, sec. 343. p. 1023.) "Under endowment of
tontine policies payable to the insured at the
expiration of a certain period, if alive, but providing
for the payment of a stated sum to a designated
beneficiary in case of the insured death during the
period mentioned, the insured and the beneficiary
take contingent interests. The interest of the
insured in the proceeds of the insurance depends
upon his survival of the expiration of endowment
period. Upon the insured's death, within the
period, the beneficiary will take, as against the
personal representative or the assignee of the
insured. Upon the other hand, if the insured
survives the endowment period, the benefits are
payable to him or to his assignee, notwithstanding
a beneficiary is designated in the policy." (29 Am.
Jur., section 1277, pp. 952, 953.).
The appealed order is, therefore, hereby affirmed,
and it is so ordered with costs against the
appellant.
Philamlife v. Pineda - Life Insurance
175 SCRA 416
Facts:
> On Jan. 15 1963, Dimayuga processed an
ordinary life insurance policy from Philamlife and
designated his wife and children as irrevocable
beneficiaries.
> On Feb. 22, 1980, Dimayuga filed a petition in
court to amend the designation of the beneficiaries
in his policy from irrevocable to revocable.
> Lower Court granted the petition.
Issue: Whether or not the court erred in granting
Dimayuga’s petition.
Held: YES.
Under the Insurance Act, the beneficiary
designated in a life insurance contract cannot be
changed without the consent of the beneficiary
because he has a vested interest in the policy. The
policy contract states that the designation of the
beneficiaries is irrevocable. Therefore, based on
the said provision of the contract, not to mention
the law then applicable, it is only with the consent
of all the beneficiaries that any change or
amendment in the poicy may be legally and validly
effected. The contract between the parties is the
law binding on them. (This case rule is no longer
controlling under the Insurance Code.)
 G.R. No. L-44059 October 28, 1977
THE INSULAR LIFE ASSURANCE COMPANY, LTD.,
plaintiff-appellee,
vs.CARPONIA T. EBRADO and PASCUALA VDA. DE
EBRADO, defendants-appellants.
MARTIN, J.:
This is a novel question in insurance law: Can a
common-law wife named as beneficiary in the life
insurance policy of a legally married man claim the
proceeds thereof in case of death of the latter?
On September 1, 1968, Buenaventura Cristor
Ebrado was issued by The Life Assurance Co., Ltd.,
Policy No. 009929 on a whole-life for P5,882.00
with a, rider for Accidental Death for the same
amount Buenaventura C. Ebrado designated T.
Ebrado as the revocable beneficiary in his policy.
He to her as his wife.
On October 21, 1969, Buenaventura C. Ebrado died
as a result of an t when he was hit by a failing
branch of a tree. As the policy was in force, The
Insular Life Assurance Co., Ltd. liable to pay the
coverage in the total amount of P11,745.73,
representing the face value of the policy in the
amount of P5,882.00 plus the additional benefits
for accidental death also in the amount of
P5,882.00 and the refund of P18.00 paid for the
premium due November, 1969, minus the unpaid
premiums and interest thereon due for January
and February, 1969, in the sum of P36.27.
Carponia T. Ebrado filed with the insurer a claim
for the proceeds of the Policy as the designated
beneficiary therein, although she admits that she
and the insured Buenaventura C. Ebrado were
merely living as husband and wife without the
benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the
widow of the deceased insured. She asserts that
she is the one entitled to the insurance proceeds,
not the common-law wife, Carponia T. Ebrado.
In doubt as to whom the insurance proceeds shall
be paid, the insurer, The Insular Life Assurance Co.,
Ltd. commenced an action for Interpleader before
the Court of First Instance of Rizal on April 29,
1970.
After the issues have been joined, a pre-trial
conference was held on July 8, 1972, after which, a
pre-trial order was entered reading as follows:
ñé+.£ªwph!1
During the pre-trial conference, the parties
manifested to the court. that there is no possibility
of amicable settlement. Hence, the Court
proceeded to have the parties submit their
evidence for the purpose of the pre-trial and make
admissions for the purpose of pretrial. During this
conference, parties Carponia T. Ebrado and
Pascuala Ebrado agreed and stipulated: 1) that the
deceased Buenaventura Ebrado was married to
Pascuala Ebrado with whom she has six —
(legitimate) namely; Hernando, Cresencio, Elsa,
Erlinda, Felizardo and Helen, all surnamed Ebrado;
2) that during the lifetime of the deceased, he was
insured with Insular Life Assurance Co. Under
Policy No. 009929 whole life plan, dated
September 1, 1968 for the sum of P5,882.00 with
the rider for accidental death benefit as evidenced
by Exhibits A for plaintiffs and Exhibit 1 for the
defendant Pascuala and Exhibit 7 for Carponia
Ebrado; 3) that during the lifetime of Buenaventura
Ebrado, he was living with his common-wife,
Carponia Ebrado, with whom she had 2 children
although he was not legally separated from his
legal wife; 4) that Buenaventura in accident on
October 21, 1969 as evidenced by the death Exhibit
3 and affidavit of the police report of his death
Exhibit 5; 5) that complainant Carponia Ebrado
filed claim with the Insular Life Assurance Co.
which was contested by Pascuala Ebrado who also
filed claim for the proceeds of said policy 6) that in
view ofthe adverse claims the insurance company
filed this action against the two herein claimants
Carponia and Pascuala Ebrado; 7) that there is now
due from the Insular Life Assurance Co. as
proceeds of the policy P11,745.73; 8) that the
beneficiary designated by the insured in the policy
is Carponia Ebrado and the insured made
reservation to change the beneficiary but although
the insured made the option to change the
beneficiary, same was never changed up to the
time of his death and the wife did not have any
opportunity to write the company that there was
reservation to change the designation of the
parties agreed that a decision be rendered based
on and stipulation of facts as to who among the
two claimants is entitled to the policy.
Upon motion of the parties, they are given ten (10)
days to file their simultaneous memoranda from
the receipt of this order.SO ORDERED.
On September 25, 1972, the trial court rendered
judgment declaring among others, Carponia T.
Ebrado disqualified from becoming beneficiary of
the insured Buenaventura Cristor Ebrado and
directing the payment of the insurance proceeds to
the estate of the deceased insured. The trial court
held: ñé+.£ªwph!1
It is patent from the last paragraph of Art. 739 of
the Civil Code that a criminal conviction for
adultery or concubinage is not essential in order to
establish the disqualification mentioned therein.
Neither is it also necessary that a finding of such
guilt or commission of those acts be made in a
separate independent action brought for the
purpose. The guilt of the donee (beneficiary) may
be proved by preponderance of evidence in the
same proceeding (the action brought to declare
the nullity of the donation).
It is, however, essential that such adultery or
concubinage exists at the time defendant Carponia
T. Ebrado was made beneficiary in the policy in
question for the disqualification and incapacity to
exist and that it is only necessary that such fact be
established by preponderance of evidence in the
trial. Since it is agreed in their stipulation above-
quoted that the deceased insured and defendant
Carponia T. Ebrado were living together as
husband and wife without being legally married
and that the marriage of the insured with the other
defendant Pascuala Vda. de Ebrado was valid and
still existing at the time the insurance in question
was purchased there is no question that defendant
Carponia T. Ebrado is disqualified from becoming
the beneficiary of the policy in question and as
such she is not entitled to the proceeds of the
insurance upon the death of the insured.
From this judgment, Carponia T. Ebrado appealed
to the Court of Appeals, but on July 11, 1976, the
Appellate Court certified the case to Us as involving
only questions of law.
We affirm the judgment of the lower court.
1. It is quite unfortunate that the Insurance
Act (RA 2327, as amended) or even the new
Insurance Code (PD No. 612, as amended) does not
contain any specific provision grossly resolutory of
the prime question at hand. Section 50 of the
Insurance Act which provides that "(t)he insurance
shag be applied exclusively to the proper interest
of the person in whose name it is made" 1 cannot
be validly seized upon to hold that the mm
includes the beneficiary. The word "interest" highly
suggests that the provision refers only to the
"insured" and not to the beneficiary, since a
contract of insurance is personal in character. 2
Otherwise, the prohibitory laws against illicit
relationships especially on property and descent
will be rendered nugatory, as the same could easily
be circumvented by modes of insurance. Rather,
the general rules of civil law should be applied to
resolve this void in the Insurance Law. Article 2011
of the New Civil Code states: "The contract of
insurance is governed by special laws. Matters not
expressly provided for in such special laws shall be
regulated by this Code." When not otherwise
specifically provided for by the Insurance Law, the
contract of life insurance is governed by the
general rules of the civil law regulating contracts. 3
And under Article 2012 of the same Code, "any
person who is forbidden from receiving any
donation under Article 739 cannot be named
beneficiary of a fife insurance policy by the person
who cannot make a donation to him. 4 Common-
law spouses are, definitely, barred from receiving
donations from each other. Article 739 of the new
Civil Code provides: ñé+.£ªwph!1
The following donations shall be void:
1. Those made between persons who were
guilty of adultery or concubinage at the time of
donation;
Those made between persons found guilty of the
same criminal offense, in consideration thereof;
3. Those made to a public officer or his wife,
descendants or ascendants by reason of his office.
In the case referred to in No. 1, the action for
declaration of nullity may be brought by the
spouse of the donor or donee; and the guilt of the
donee may be proved by preponderance of
evidence in the same action.
2. In essence, a life insurance policy is no
different from a civil donation insofar as the
beneficiary is concerned. Both are founded upon
the same consideration: liberality. A beneficiary is
like a donee, because from the premiums of the
policy which the insured pays out of liberality, the
beneficiary will receive the proceeds or profits of
said insurance. As a consequence, the proscription
in Article 739 of the new Civil Code should equally
operate in life insurance contracts. The mandate of
Article 2012 cannot be laid aside: any person who
cannot receive a donation cannot be named as
beneficiary in the life insurance policy of the
person who cannot make the donation. 5 Under
American law, a policy of life insurance is
considered as a testament and in construing it, the
courts will, so far as possible treat it as a will and
determine the effect of a clause designating the
beneficiary by rules under which wins are
interpreted. 6
3. Policy considerations and dictates of
morality rightly justify the institution of a barrier
between common law spouses in record to
Property relations since such hip ultimately
encroaches upon the nuptial and filial rights of the
legitimate family There is every reason to hold that
the bar in donations between legitimate spouses
and those between illegitimate ones should be
enforced in life insurance policies since the same
are based on similar consideration As above
pointed out, a beneficiary in a fife insurance policy
is no different from a donee. Both are recipients of
pure beneficence. So long as manage remains the
threshold of family laws, reason and morality
dictate that the impediments imposed upon
married couple should likewise be imposed upon
extra-marital relationship. If legitimate relationship
is circumscribed by these legal disabilities, with
more reason should an illicit relationship be
restricted by these disabilities. Thus, in Matabuena
v. Cervantes, 7 this Court, through Justice
Fernando, said: ñé+.£ªwph!1
If the policy of the law is, in the language of the
opinion of the then Justice J.B.L. Reyes of that
court (Court of Appeals), 'to prohibit donations in
favor of the other consort and his descendants
because of and undue and improper pressure and
influence upon the donor, a prejudice deeply
rooted in our ancient law;" por-que no se enganen
desponjandose el uno al otro por amor que han de
consuno' (According to) the Partidas (Part IV, Tit.
XI, LAW IV), reiterating the rationale 'No Mutuato
amore invicem spoliarentur' the Pandects (Bk, 24,
Titl. 1, De donat, inter virum et uxorem); then
there is very reason to apply the same prohibitive
policy to persons living together as husband and
wife without the benefit of nuptials. For it is not to
be doubted that assent to such irregular
connection for thirty years bespeaks greater
influence of one party over the other, so that the
danger that the law seeks to avoid is
correspondingly increased. Moreover, as already
pointed out by Ulpian (in his lib. 32 ad Sabinum, fr.
1), 'it would not be just that such donations should
subsist, lest the condition 6f those who incurred
guilt should turn out to be better.' So long as
marriage remains the cornerstone of our family
law, reason and morality alike demand that the
disabilities attached to marriage should likewise
attach to concubinage.
It is hardly necessary to add that even in the
absence of the above pronouncement, any other
conclusion cannot stand the test of scrutiny. It
would be to indict the frame of the Civil Code for a
failure to apply a laudable rule to a situation which
in its essentials cannot be distinguished. Moreover,
if it is at all to be differentiated the policy of the
law which embodies a deeply rooted notion of
what is just and what is right would be nullified if
such irregular relationship instead of being visited
with disabilities would be attended with benefits.
Certainly a legal norm should not be susceptible to
such a reproach. If there is every any occasion
where the principle of statutory construction that
what is within the spirit of the law is as much a part
of it as what is written, this is it. Otherwise the
basic purpose discernible in such codal provision
would not be attained. Whatever omission may be
apparent in an interpretation purely literal of the
language used must be remedied by an adherence
to its avowed objective.
4. We do not think that a conviction for
adultery or concubinage is exacted before the
disabilities mentioned in Article 739 may
effectuate. More specifically, with record to the
disability on "persons who were guilty of adultery
or concubinage at the time of the donation,"
Article 739 itself provides: ñé+.£ªwph!1
In the case referred to in No. 1, the action for
declaration of nullity may be brought by the
spouse of the donor or donee; and the guilty of the
donee may be proved by preponderance of
evidence in the same action.
The underscored clause neatly conveys that no
criminal conviction for the offense is a condition
precedent. In fact, it cannot even be from the
aforequoted provision that a prosecution is
needed. On the contrary, the law plainly states that
the guilt of the party may be proved "in the same
acting for declaration of nullity of donation. And, it
would be sufficient if evidence preponderates
upon the guilt of the consort for the offense
indicated. The quantum of proof in criminal cases
is not demanded.
In the caw before Us, the requisite proof of
common-law relationship between the insured and
the beneficiary has been conveniently supplied by
the stipulations between the parties in the pre-trial
conference of the case. It case agreed upon and
stipulated therein that the deceased insured
Buenaventura C. Ebrado was married to Pascuala
Ebrado with whom she has six legitimate children;
that during his lifetime, the deceased insured was
living with his common-law wife, Carponia Ebrado,
with whom he has two children. These stipulations
are nothing less than judicial admissions which, as
a consequence, no longer require proof and cannot
be contradicted. 8 A fortiori, on the basis of these
admissions, a judgment may be validly rendered
without going through the rigors of a trial for the
sole purpose of proving the illicit liaison between
the insured and the beneficiary. In fact, in that
pretrial, the parties even agreed "that a decision be
rendered based on this agreement and stipulation
of facts as to who among the two claimants is
entitled to the policy."
ACCORDINGLY, the appealed judgment of the
lower court is hereby affirmed. Carponia T. Ebrado
is hereby declared disqualified to be the
beneficiary of the late Buenaventura C. Ebrado in
his life insurance policy. As a consequence, the
proceeds of the policy are hereby held payable to
the estate of the deceased insured. Costs against
Carponia T. Ebrado.
SO ORDERED.
Souther Luzon Employee’s Association v. Golpeo -
Insurance Beneficiaries
96 PHIL 83
Facts:
> SLEA is composed of laborers and employees of
the LTBC and BTC (now BLTB Co.), and one of its
purposes is mutual aid of its members and their
dependents in case of death.
> Roman Concepcion was a member until his
death in 1950.
> In 1949, SLEA adopted a resolution providing
that: A member may, if he chooses, put down his
common law wife and/or children he had with her
as his beneficiaries; and such person so named by
the member will be the sole persons to be
recognized by SLEA regarding claims for
condolence contributions.
> Roman listed as his beneficiaries Aquilina
Maloles and their 4 children. After his death, SLEA
was able to collect voluntary contribution from its
members amounting to P2,205.
> Three sets of claimants to the amount presented
themselves to the association namely:
o Juanita Golpeo, legal wife, and her children
o Aquilina Maloles, the common law wife, and
her children
o Elsie Hicban, another common law wife of
Roman, and her child.
> SLEA then filed an action for interpleader against
the 3 conflicting claimants.
> Trial court rendered a decision declaring Maloles
and her children the sole beneficiaries of the
amount citing Del Val v. Del Val.
> Only Golpeo appealed. She argues that:
> The insurance code does not apply since the
association is not an insurance company but a
mutual benefit association.
> The stipulation between SLEA and Roman was
void for being contrary to law, public morals and
public policy, pursuant to Art. 739 of the CC (
donations between persons guilty of concubinage
at the time of donation are void)
Issue:
Whether or not Golpeo, the legal wife is entitled to
the amount.
Held:
NO.
First of all, the lower court did not consider the
association as a regular insurance company, but
merely ruled that the death benefit in question is
analogous to insurance. Besides, even the
Administrative Code describes a mutual benefit
company as one which provides any method of life
insurance among its members out of dues or
assessments collected from its membership.
Secondly, without considering the intimation in the
brief for Maloles that Golpeo, by her silence and
actions had acquiesced in the illicit relations
between her husband and Maloles, Golpeo’s
argument would certainly NOT apply to the
children of Maloles likewise named beneficiaries by
the deceased. As a matter of fact, the NCC
recognizes certain successional rights of
illegitimate children.
SSS v. Davac - SSS Benefits
17 SCRA 863
Facts:
> Davac was an SSS member, and designated
Candelaria Davac, his alleged wife, as his
beneficiary.
> When he died, both his first wife, Lourdes and
his second wife, Candelaria filed claims for the
death benefits.
> Due to the conflicting claims, the SSS filed a
petition praying that both of them be required to
interplead and litigate the conflicting claims.
> The death benefits were awarded to Candelaria
Davac.
Issue:
Who is entitled to the SSS benefits?
Held:
Candelaria.
Under the SSS Act, the beneficiary as recorded by
the employee’s employer is the one entitled to the
death benefits, hence they should go to
Candelaria. Lourdes contends that the designation
made in the person of Candelaria who is party in a
bigamous marriage is null and void for being
against Art. 739 of the CC. SC held that the
disqualification mentioned in Art. 739 is NOT
applicable to Candelaria, because she was not
guilty of concubinage , there bieing NO proof that
she had actual knowledge of the previous marriage
of her husband.
Vda. De Consuegra v. GSIS - Retirement Insurance
Benefits
37 SCRA 315
Facts:
> Jose Consuegra was employed as a shop
foreman of the Office of the District Engineer in
Surigao Del Norte.
> When he was still alive, he contracted two
marriages:
o First – Rosario Diaz; 2 children = Jose Consuegra
Jr. and Pedro but both predeceased him
o 2nd – Basilia Berdin; 7 children. (this was
contracted in GF while the first marriage subsisted)
> Being a GSIS member when he died, the
proceeds of his life insurance were paid by the GSIS
to Berdin and her children who were the
beneficiaries named in the policy.
> Since he was in the gov’t service for 22.5028
years, he was entitled to retirement insurance
benefits, for which no beneficiary was designated.
> Both families filed their claims with the GSIS,
which ruled that the legal heirs were Diaz who is
entitled to one-half or 8/16 of the retirement
benefits and Berdin and her children were entitled
to the remaining half, each to receive an equal
share of 1/16.
> Berdin went to CFI on appeal. CFI affirmed GSIS
decision.
Issue: To whom should the retirement insurance
benefits be paid?
Held:
Both families are entitled to half of the retirement
benefits.
The beneficiary named in the life insurance does
NOT automatically become the beneficiary in the
retirement insurance. When Consuegra, during the
early part of 1943, or before 1943, designated his
beneficiaries in his life insurance, he could NOT
have intended those beneficiaries of his life
insurance as also the beneficiaries of his
retirement insurance because the provisions on
retirement insurance under the GSIS came about
only when CA 186 was amended by RA 660 on June
18, 1951.
Sec. 11(b) clearly indicates that there is need for
the employee to file an application for retirement
insurance benefits when he becomes a GSIS
member and to state his beneficiary. The life
insurance andthe retirement insurance are two
separate and distinct systems of benefits paid out
from 2 separate and distinct funds.
In case of failure to name a beneficiary in an
insurance policy, the proceeds will accrue to the
estate of the insured. And when there exists two
marriages, each family will be entitled to one-half
of the estate.
In Re: Chanliongco
AM No. 190. 18 October 1977
FACTS:
The matter refers to the claims for retirement
benefits by the heirs of the late Atty. Chanliongco
of the SC, who was more than 63 years of age, with
more than 38 years of service in the government.
He left as heirs the following: his widow, one
legitimate child and 2 illegitimate children. He died
intestate and stated in his application for
membership with the GSIS the beneficiary, of his
retirement benefits, should he die before
retirement.
ISSUE:
How should the retirement benefits and the
monetary value of terminal leave of the decedent
be settled?
RULING:
As to the retirement benefits:
Widow 4/16
Legitimate Son 8/16
Illegitimate Daughter 2/16
Illegitimate Son 2/16
As to the monetary value of the terminal leave pay
and unused vacation and sick leave, the SC treated
the same as conjugal property and as such, ½ goes
to the widow as her share in the conjugal
partnership and the other half to be distributed to
the legal heirs in the same way as in the retirement
benefits. This is so because ‘vacation with pay is
not a gratuity but is compensation for services
rendered’.
Col. C. Castro v. Insurance Commissioner -
Insurable Interest
GR. 55836, Feb. 16, 1981
Facts:
> Castro applied for insurance on the life of his
driver. On the basis of such application, Insular Life
issued policy No. 934943 effective July 18, 1979.
> The policy applied for and issued was on a 20-yr
endowment plan for the sum of P25T with double
indemnity in case of accidental death.
> Castro paid the first quarterly premium of
P309.95. About 3 months later, on Oct. 16, 1959,
the insured driver was allegedly shot to death by
unknown persons. (hmmm… sounds fishy…)
> Castro then filed a claim for the total benefits of
50T under the policy.
> Insular life denied the claim on the ground that
the policy was VOID. Insular instead refunded to
Castro the premiums he had paid.
Issue: Whether or not Castro has an insurable
interest in his driver.
Held:
NO.
The requirement of insurable interest to support a
contract of insurance is based upon consideration
of public policy which renders wager policies
INVALID. To sustain a contract of this character it
must appear that there is a real concern in the life
of the party whose death would be the cause of
substantial loss to those who are named as a
beneficiary.
Mere relationship of uncle and nephew, employer
and employee is NOT sufficient to provide an
insurable interest on the life of the insured. It
must be shown that the destruction of the life of
the insured would cause pecuniary loss to the
complainant. This, Castro failed to prove.
Lincoln National Life v. San Juan - Life Insurance
CA GR 34588-88, Nov. 27, 1971
Facts:
> An employer insured the life of the employee
with two insurance companies.
> The insurance totaled 200T and the only
beneficiaries were the employer and his wife.
> A severed head was later found, purportedly
that of the insured employee.
> The insurance companies refused to pay on the
ground that the employer had no insurable interest
in the life of the employee.
Issue: Whether or not the employer can recover
the proceeds of a life insurance policy of his
employee.
Held:
NO.The insured was a tenant in a coconut land
owned by the employer and his earning were
barely that of a farm laborer. It was established
that the insured could not have afforded the
insurance policies drawn on his life. Many more
policies were found to have been issued with the
employee/tenant as insured and the employer and
his wife as beneficiaries.
The policies were also found to have been acquired
in quick succession. It was found that the various
postal money orders issued in payment of the
premiums were made by the employer. It appears
that, based on the circumstances and evidence, the
insurance was really taken out by the employer.
Gercio v. Sun Life - Insurance Beneficiary
48 PHIL 53
Facts:
> Sunlife issued a life insurance policy to Gercio,
the former agreeing to insure the life of Gercio for
2T to be paid to him on Feb. 1, 1930 or if he should
die before said date, then to his wife Andrea,
should she survive him; otherwise to the executor,
administrator of Gercio.
> The policy did not include any provision
reserving to Gercio the right to change the
beneficiary.
> The wife was convicted of adultery and a decree
of divorce was issued.
> Gercio notified Sunlife that he had revoked his
donation in favor of Andrea and that he had
designated his present wife Adela as his
beneficiary.
> Sunlife refused to change the beneficiary.
Issue: Whether or not Gercio may change the
beneficiary in the policy.
Held: NO.
If the policy contains no provision authorizing a
change of beneficiary without the beneficiary’s
consent, the insured cannot make such change. It
is held that a life insurance policy of a husband
made payable to his wife as a beneficiary is the
separate property of the beneficiary and beyond
the control of the husband. (NOTE: this case is
based on the old rule under the Insurance Act)
Court also held that the designation of a
beneficiary that is originally valid does NOT render
it invalid dut to a subsequent cessation of the
interests between the beneficiary and insured.
El Oriente v. Posadas - Taxability of Insurance
Proceeds
56 PHIL 147 (1931)
Facts:
> El Oriente in order to protect itself against the
loss that it might suffer by reason of the death of
its manager, A. Velhagen, who had had more than
thirty-five (35) years of experience in the
manufacture of cigars in the Philippines, procured
from the Manufacturers Life Insurance Co., of
Toronto, Canada, thru its local agent E. E. Elser, an
insurance policy on the life of the said A. Velhagen
for the sum of $50,000, United States currency
designating itself as the beneficiary.
> El Oriente paid for the premiums due thereon
and charged as expenses of its business all the said
premiums and deducted the same from its gross
incomes as reported in its annual income tax
returns, which deductions were allowed upon a
showing that such premiums were legitimate
expenses of its business.
> Upon the death of A. Velhagen in 1929, the El
Oriente received all the proceeds of the said life
insurance policy, together with the interests and
the dividends accruing thereon, aggregating
P104,957.88
> CIR assessed El Oriente for deficiency taxes
because El Oriente did not include as income the
proceeds received from the insurance.
Issue: Whether or not the proceeds of insurance
taken by a corporation on the life of an important
official to indemnify it against loss in case of his
death, are taxable as income under the Philippine
Income Tax Law
Held:
NOT TAXABLE.
In Chapter I of the Tax Code, is to be found section
4 which provides that, "The following incomes shall
be exempt from the provisions of this law: (a) The
proceeds of life insurance policies paid to
beneficiaries upon the death of the insured . . ."
Section 10, as amended, in Chapter II On
Corporations, provides that, "There shall be levied,
assessed, collected, and paid annually upon the
total net income received in the preceding
calendar year from all sources by every corporation
. . .a tax of three per centum upon such income . .
." Section 11 in the same chapter, provides the
exemptions under the law, but neither here nor in
any other section is reference made to the
provisions of section 4 in Chapter I.
Under the view we take of the case, it is sufficient
for our purposes to direct attention to the
anomalous and vague condition of the law. It is
certain that the proceeds of life insurance policies
paid to individual beneficiaries upon the death of
the insured are exempt. It is not so certain that the
proceeds of life insurance policies paid to
corporate beneficiaries upon the death of the
insured are likewise exempt. But at least, it may be
said that the law is indefinite in phraseology and
does not permit us unequivocally to hold that the
proceeds of life insurance policies received by
corporations constitute income which is taxable
It will be recalled that El Oriente, took out the
insurance on the life of its manager, who had had
more than thirty-five years' experience in the
manufacture of cigars in the Philippines, to protect
itself against the loss it might suffer by reason of
the death of its manager. We do not believe that
this fact signifies that when the plaintiff received
P104,957.88 from the insurance on the life of its
manager, it thereby realized a net profit in this
amount. It is true that the Income Tax Law, in
exempting individual beneficiaries, speaks of the
proceeds of life insurance policies as income, but
this is a very slight indication of legislative
intention. In reality, what the plaintiff received was
in the nature of an indemnity for the loss which it
actually suffered because of the death of its
manager.
Philamcare v. CA- Health Care Agreement
379 SCRA 356 (2002)
Facts:
> Ernani Trinos, applied for a health care coverage
with Philamcare. In the standard application form,
he answered NO to the following question: “Have
you or any of your family members ever consulted
or been treated for high blood pressure, heart
trouble, diabetes, cancer, liver disease, asthma or
peptic ulcer? (If Yes, give details)”
> The application was approved for a period of
one year from March 1, 1988 to March 1, 1989. He
was a issued Health Care Agreement, and under
such, he was entitled to avail of hospitalization
benefits, whether ordinary or emergency, listed
therein. He was also entitled to avail of "out-
patient benefits" such as annual physical
examinations, preventive health care and other
out-patient services.
> Upon the termination of the agreement, the
same was extended for another year from March
1, 1989 to March 1, 1990, then from March 1, 1990
to June 1, 1990. The amount of coverage was
increased to a maximum sum of P75,000.00 per
disability.
> During the period of his coverage, Ernani
suffered a heart attack and was confined at the
Manila Medical Center (MMC) for one month
beginning March 9, 1990.
> While her husband was in the hospital, Julita
tried to claim the benefits under the health care
agreement. However, Philamcare denied her claim
saying that the Health Care Agreement was void.
> According to Philamcare, there was concealment
regarding Ernani's medical history.
Doctors at the MMC allegedly discovered at the
time of Ernani's confinement that he was
hypertensive, diabetic and asthmatic, contrary to
his answer in the application form.
> Julita had no choice but to pay the
hospitalization expenses herself, amounting to
about P76,000.00
> After her husband was discharged from the
MMC, he was attended by a physical therapist at
home. Later, he was admitted at the Chinese
General Hospital (CGH). Due to financial
difficulties, Julita brought her husband home again.
In the morning of April 13, 1990, Ernani had fever
and was feeling very weak. Julita was constrained
to bring him back to the CGH where he died on the
same day
.> Julita instituted, an action for damages against
Philamcare. She asked for reimbursement of her
expenses plus moral damages and attorney's fees.
RTC decided in favor of Julita. CA affirmed.
Issues and Resolutions:
Philamcare brought the instant petition for review,
raising the primary argument that a health care
agreement is not an insurance contract; hence the
"incontestability clause" under the Insurance Code
Title 6, Sec. 48 does not apply.
SC held that in the case at bar, the insurable
interest of respondent's husband in obtaining the
health care agreement was his own health. The
health care agreement was in the nature of non-
life insurance, which is primarily a contract of
indemnity. Once the member incurs hospital,
medical or any other expense arising from sickness,
injury or other stipulated contingent, the health
care provider must pay for the same to the extent
agreed upon under the contract.
Under the title Claim procedures of expenses,
Philamcare. had 12 mos from the date of issuance
of the Agreement within which to contest the
membership of the patient if he had previous
ailment of asthma, and six months from the
issuance of the agreement if the patient was sick of
diabetes or hypertension. The periods having
expired, the defense of concealment or
misrepresentation no longer lie.
Petitioner argues that respondent's husband
concealed a material fact in his application. It
appears that in the application for health coverage,
petitioners required respondent's husband to sign
an express authorization for any person,
organization or entity that has any record or
knowledge of his health to furnish any and all
information relative to any hospitalization,
consultation, treatment or any other medical
advice or examination.
Philamcare cannot rely on the stipulation regarding
"Invalidation of agreement" which reads:
Failure to disclose or misrepresentation of any
material information by the member in the
application or medical examination, whether
intentional or unintentional, shall automatically
invalidate the Agreement from the very beginning
and liability of Philamcare shall be limited to return
of all Membership Fees paid. An undisclosed or
misrepresented information is deemed material if
its revelation would have resulted in the
declination of the applicant by Philamcare or the
assessment of a higher Membership Fee for the
benefit or benefits applied for.
The answer assailed by petitioner was in response
to the question relating to the medical history of
the applicant. This largely depends on opinion
rather than fact, especially coming from
respondent's husband who was not a medical
doctor. Where matters of opinion or judgment are
called for, answers made in good faith and without
intent to deceive will not avoid a policy even
though they are untrue. Thus,
(A)lthough false, a representation of the
expectation, intention, belief, opinion, or judgment
of the insured will not avoid the policy if there is no
actual fraud in inducing the acceptance of the risk,
or its acceptance at a lower rate of premium, and
this is likewise the rule although the statement is
material to the risk, if the statement is obviously of
the foregoing character, since in such case the
insurer is not justified in relying upon such
statement, but is obligated to make further inquiry.
There is a clear distinction between such a case
and one in which the insured is fraudulently and
intentionally states to be true, as a matter of
expectation or belief, that which he then knows, to
be actually untrue, or the impossibility of which is
shown by the facts within his knowledge, since in
such case the intent to deceive the insurer is
obvious and amounts to actual fraud.
The fraudulent intent on the part of the insured
must be established to warrant rescission of the
insurance contract. Concealment as a defense for
the health care provider or insurer to avoid liability
is an affirmative defense and the duty to establish
such defense by satisfactory and convincing
evidence rests upon the provider or insurer. In any
case, with or without the authority to investigate,
petitioner is liable for claims made under the
contract. Having assumed a responsibility under
the agreement, petitioner is bound to answer the
same to the extent agreed upon. In the end, the
liability of the health care provider attaches once
the member is hospitalized for the disease or injury
covered by the agreement or whenever he avails of
the covered benefits which he has prepaid.
Under Section 27 of the Insurance Code, "a
concealment entitles the injured party to rescind a
contract of insurance." The right to rescind should
be exercised previous to the commencement of an
action on the contract. In this case, no rescission
was made. Besides, the cancellation of health care
agreements as in insurance policies require the
concurrence of the following conditions:
Prior notice of cancellation to insured;
Notice must be based on the occurrence after
effective date of the policy of one or more of the
grounds mentioned;
Must be in writing, mailed or delivered to the
insured at the address shown in the policy;
Must state the grounds relied upon provided in
Section 64 of the Insurance Code and upon request
of insured, to furnish facts on which cancellation is
based.
None of the above pre-conditions was fulfilled in
this case. When the terms of insurance contract
contain limitations on liability, courts should
construe them in such a way as to preclude the
insurer from non-compliance with his obligation.
Being a contract of adhesion, the terms of an
insurance contract are to be construed strictly
against the party which prepared the contract —
the insurer. By reason of the exclusive control of
the insurance company over the terms and
phraseology of the insurance contract, ambiguity
must be strictly interpreted against the insurer and
liberally in favor of the insured, especially to avoid
forfeiture. This is equally applicable to Health Care
Agreements. The phraseology used in medical or
hospital service contracts, such as the one at bar,
must be liberally construed in favor of the
subscriber, and if doubtful or reasonably
susceptible of two interpretations the construction
conferring coverage is to be adopted, and
exclusionary clauses of doubtful import should be
strictly construed against the provider.
Harvardian Colleges v. Country Bankers Insurance
Corp.
1 SCRA 2
Facts:
> Harvardian is a family corporation, the
stockholders of which are Ildefonso Yap, Virginia
King Yap and their children.
> Prior to Aug. 9, 1979, an agent of Country
Bankers proposed to Harvardian to insure its
school building. Although at first reluctant,
Harvardian agreed.
> Country Banks sent an inspector to inspect the
school building and agreed to insure the same for
P500,000 for which Harvardian paid an annual
premium of P2,500.
> On Aug. 9, 1979, Country Bankers issued to
Harvardian a fire insurance policy. On March 12,
1980, (39 days before I was born… hehehehe
)during the effectivity of said insurance policy, the
insured property was totally burned rendering it a
total loss.
> A claim was made by plaintiff upon defendant
but defendant denied it contending that plaintiff
had no insurable interest over the building
constructed on the piece of land in the name of the
late Ildefonso Yap as owner.
> It was contended that both the lot and the
building were owned by Ildefonso Yap and NOT by
the Harvardian Colleges.
Issue: Whether or not Harvardian colleges has a
right to the proceeds.
Held:
Harvardian has a right to the proceeds.
Regardless of the nature of the title of the insured
or even if he did not have title to the property
insured, the contract of fire insurance should still
be upheld if his interest in or his relation to the
property is such that he will be benefited in its
continued existence or suffer a direct pecuniary
loss from its destruction or injury. The test in
determining insurable interest in property is
whether one will derive pecuniary benefit or
advantage from its preservation, or will suffer
pecuniary loss or damage from its destruction,
termination or injury by the happening of the
event insured against.
Here Harvardian was not only in possession of the
building but was in fact using the same for several
years with the knowledge and consent of Ildefonso
Yap. It is reasonably fair to assume that had the
building not been burned, Harvardian would have
been allowed the continued use of the same as the
site of its operation as an educational institution.
Harvardian therefore would have been directly
benefited by the preservation of the property, and
certainly suffered a pecuniary loss by its being
burned.
Traders Insurance and Surety Co. v. Golangco-
Insurance Proceeds
95 PHIL 826
Facts:
> A decision was rendred in Civil Case No. 6306
granting Golangco the right to collect rentals from
a building in Sta. Cruz, Manila.
> Golangco then sought fire insurance from
Traders. Before the policy was issued, Golangco
made a full and clear exposal of his interests in the
premises, i.e. that he was not the owner.
> The fire policy that defendant issued covered
only all of Golangco’s interest in the premises and
his right to collect the rentals.
> The building burned down in a fire and Golangco
sought to collect from Traders. Traders denied any
liability on the ground that since Golangco was not
the owner of the premises then he had no
insurable interest in the same and consequently,
he could not collect the insurance proceeds.
Issue: Whether or not plaintiff can claim the
insurance proceeds.
Held. YES.
Both at the time of the issuance of the policy and
at the time of the fire, plaintiff Golangco was in
legal possession of the premises, collecting rentals
from its occupant. It seems plain that if the
premises were destroyed as they were, by fire,
Golangco would be, as he was, directly damnified
thereby; and hence he had an insurable interest
therein.
Filipino Merchants v. CA- Insurable Interest
179 SCRA 638
Facts:
> The Chao Tiek Seng a consignee of the shipment
of fishmeal loaded on board the vessel SS
Bougainville and unloaded at the Port of Manila on
or about December 11, 1976 and seeks to recover
from Filipino the amount of P51,568.62
representing damages to said shipment which has
been insured by Filipino.> Filipino brought a third
party complaint against Compagnie Maritime Des
Chargeurs Reunis and/or E. Razon, Inc. seeking
judgment against the third party defendants in
case judgment is rendered against it.
> It appears from the evidence presented that
Chao insured said shipment with Filipino for the
sum of P267,653.59 for the goods described as 600
metric tons of fishmeal in gunny bags of 90 kilos
each from Bangkok, Thailand to Manila against all
risks under warehouse to warehouse terms.
> Actually, what was imported was 59.940 metric
tons not 600 tons at $395.42 a ton.
> The fishmeal in 666 gunny bags were unloaded
from the ship on December 11, 1976 at Manila
unto the arrastre contractor E. Razon, Inc. and
Filipino’s surveyor ascertained and certified that in
such discharge 105 bags were in bad order
condition as jointly surveyed by the ship's agent
and the arrastre contractor.
> Based on said computation the Chao made a
formal claim against the Filipino for P51,568.62. A
formal claim statement was also presented by the
plaintiff against the vessel, but the Filipino refused
to pay the claim.
risks" must be construed as creating a special
insurance and extending to other risks than are
usually contemplated, and covers all losses except
such as arise from the fraud of the insured. The
burden of the insured, therefore, is to prove
merely that the goods he transported have been
lost, destroyed or deteriorated. Thereafter, the
burden is shifted to the insurer to prove that the
loss was due to excepted perils. To impose on the
insured the burden of proving the precise cause of
the loss or damage would be inconsistent with the
broad protective purpose of "all risks" insurance.

Issues & Resolutions:

In the present case, there being no showing that
Filipino contends that an "all risks" marine policy
the loss was caused by any of the excepted perils,
has a technical meaning in insurance in that before
the insurer is liable under the policy
a claim can be compensable it is essential that
there must be "some fortuity," "casualty" or Filipino contends that Chao does not have
"accidental cause" to which the alleged loss is insurable interest, being only a consignee of the
attributable and the failure of herein private goods.
respondent, upon whom lay the burden, to adduce
Anent the issue of insurable interest, SC upheld the
evidence showing that the alleged loss to the cargo
ruling of the CA that Chao, as consignee of the
in question was due to a fortuitous event precludes
goods in transit under an invoice containing the
his right to recover from the insurance policy.
terms under "C & F Manila," has insurable interest
SC did not uphold this contention. An "all risks in said goods.
policy" should be read literally as meaning all risks
Section 13 of the Insurance Code defines insurable
whatsoever and covering all losses by an accidental
interest in property as every interest in property,
cause of any kind. The terms "accident" and
whether real or personal, or any relation thereto,
"accidental", as used in insurance contracts, have
or liability in respect thereof, of such nature that a
not acquired any technical meaning. They are
contemplated peril might directly damnify the
construed by the courts in their ordinary and
insured. In principle, anyone has an insurable
common acceptance. Thus, the terms have been
interest in property who derives a benefit from its
taken to mean that which happens by chance or
existence or would suffer loss from its destruction
fortuitously, without intention and design, and
whether he has or has not any title in, or lien upon
which is unexpected, unusual and unforeseen. An
or possession of the property. Insurable interest
accident is an event that takes place without one's
in property may consist in (a) an existing interest;
foresight or expectation; an event that proceeds
(b) an inchoate interest founded on an existing
from an unknown cause, or is an unusual effect of
interest; or (c) an expectancy, coupled with an
a known cause and, therefore, not expected.
existing interest in that out of which the
Coverage under an "all risks" provision of a marine expectancy arises.
insurance policy creates a special type of insurance
Chao, as vendee/consignee of the goods in transit
which extends coverage to risks not usually
has such existing interest therein as may be the
contemplated and avoids putting upon the insured
subject of a valid contract of insurance. His interest
the burden of establishing that the loss was due to
over the goods is based on the perfected contract
the peril falling within the policy's coverage; the
of sale. The perfected contract of sale between
insurer can avoid coverage upon demonstrating
him and the shipper of the goods operates to vest
that a specific provision expressly excludes the loss
in him an equitable title even before delivery or
from coverage. A marine insurance policy
before he performed the conditions of the sale.
providing that the insurance was to be "against all
The contract of shipment, whether under F.O.B.,
C.I.F., or C. & F. as in this case, is immaterial in the
determination of whether the vendee has an
insurable interest or not in the goods in transit. The
perfected contract of sale even without delivery
vests in the vendee an equitable title, an existing
interest over the goods sufficient to be the subject
of insurance
Cha v. Cha - Insurable Interest
277 SCRA 690 (1997)
Facts:
> Spouses Nilo Cha and Stella Uy-Cha, as lessees,
entered into a lease contract with CKS
Development Corporation (CKS), as lessor.
> One of the stipulations of the one (1) year lease
contract states: "18. . . . The LESSEE shall not
insure against fire the chattels, merchandise,
textiles, goods and effects placed at any stall or
store or space in the leased premises without first
obtaining the written consent and approval of the
LESSOR. If the LESSEE obtain(s) the insurance
thereof without the consent of the LESSOR then
the policy is deemed assigned and transferred to
the LESSOR for its own benefit; . . ."
> Notwithstanding the above stipulation, the Cha
spouses insured against loss by fire their
merchandise inside the leased premises for Five
Hundred Thousand (P500,000.00) with the United
Insurance without the written consent CKS.
> On the day that the lease contract was to expire,
fire broke out inside the leased premises. When
CKS learned of the insurance earlier procured by
the Cha spouses (without its consent), it wrote the
United a demand letter asking that the proceeds of
the insurance contract (between the Cha spouses
and United) be paid directly to CKS, based on its
lease contract with the Cha spouses.
> United refused to pay CKS, alleging that the
latter had no insurable interest. Hence, the latter
filed a complaint against the Cha spouses and
United.
Issue:
Whether or not CKS can claim the proceeds of the
fire insurance.
Held:
NO. CKS has no insurable interest.
Sec. 18 of the Insurance Code provides:
"Sec. 18. No contract or policy of insurance on
property shall be enforceable except for the
benefit of some person having an insurable
interest in the property insured."
A non-life insurance policy such as the fire
insurance policy taken by petitioner-spouses over
their merchandise is primarily a contract of
indemnity. Insurable interest in the property
insured must exist at the time the insurance takes
effect and at the time the loss occurs. The basis of
such requirement of insurable interest in property
insured is based on sound public policy: to prevent
a person from taking out an insurance policy on
property upon which he has no insurable interest
and collecting the proceeds of said policy in case of
loss of the property.
In the present case, it cannot be denied that CKS
has no insurable interest in the goods and
merchandise inside the leased premises under the
provisions of Section 17 of the Insurance Code
which provide:
"Section 17. The measure of an insurable
interest in property is the extent to which the
insured might be damnified by loss of injury
thereof."
Therefore, CKS cannot, under the Insurance Code
— a special law — be validly a beneficiary of the
fire insurance policy taken by the petitioner-
spouses over their merchandise. This insurable
interest over said merchandise remains with the
insured, the Cha spouses. The automatic
assignment of the policy to CKS under the
provision of the lease contract previously quoted is
void for being contrary to law and/or public policy.
The proceeds of the fire insurance policy thus
rightfully belong to the spouses Nilo Cha and Stella
Uy-Cha (herein co-petitioners). The insurer
(United) cannot be compelled to pay the proceeds
of the fire insurance policy to a person (CKS) who
has no insurable interest in the property insured.
Sharuff and Co. v. Baloise Fire Insurance Co.-
Proceeds of the Policy
64 SCRA 258
Facts:
> Sharuff and Eskenazi were doing business under
the firm name Sharuff and Co.
> They insured their merchandise with Baloise.
Later on, Sharuff and Eskenazi entered into a
contract of partnership and thereby changed the
firm name to Sharuff and Eskenazi.> The
merchandise insured was subsequently destroyed
by fire. Sharuff and Eskenazi filed their claim
against the insurance company.
> Baloise refused to pay on the ground that the
policy was issued in the name of Sharuff and Co.
and not Sharuff and Eskenazi.
Issue:
Whether or not the partnership can claim the
proceeds of the policy.
Held: Yes.
The subsequent partnership did not alter the
composition of the firm. The people involved are
actually the same. Furthermore, such change of
firm name was not made to defraud the insurance
company or some other person.
> The building which housed the merchandise was
later razed by fire. The insurance company refused
to pay due to the fact that the policy indicates
insurance on the building and not on the
merchandise.
Issue:
Whether or not Garcia can collect.
Held: YES.
The defense of the insurer is purely technical. The
mistake was obviously on the part of the insurer
when it issued a wrong policy. It cannot deny such
allegation due to the fact that it even confirmed
with PNB the nature of said policy when it was
endorsed. Garcia could not have noticed the
mistake due to his ignorance of the English
language.
Insurance Case Digest: Tai Tong Chuache & Co. V.
Insurance Commission (1988)
G.R. No. L-55397 February 29, 1988
Lessons Applicable: When Insurable Interest Must
Exist (Insurance)

Laws Applicable:
Garcia v. HongKong Fire and Marine Insurance Co.
FACTS:
- Wrong Policy
Azucena Palomo bought a parcel of land and
45 PHIL 122
building from Rolando Gonzales and assumed a
Facts: mortgage of the building in favor of S.S.S. which
was insured with S.S.S. Accredited Group of
> Garcia had his merchandise insured by
Insurers
Hongkong Fire and Marine Insurance Co.
April 19, 1975: Azucena Palomo obtained a loan
> The insurance company however made a
from Tai Tong Chuache Inc. in the amount of
mistake and issued a policy covering the building
P100,000 and to secure it, the land and building
where the merchandise was stored. (The building
was mortgaged
was not owned by Garcia)
June 11, 1975: Pedro Palomo secured a Fire
> The policy was written in English, of which Garcia
Insurance Policy covering the building for P50,000
was ignorant, so he could not have noticed the
with Zenith Insurance Corporation
error of the insurance company.
July 16, 1975: another Fire Insurance policy was
> Said policy was later on assigned by Garcia to
procured from Philippine British Assurance
PNB to secure a loan. PNB acknowledged receipt
Company, covering the same building for P50,000
of said policy, referring to it as a policy covering the
and the contents thereof for P70,000
merchandise.
Before the occurrence of the peril insured against
> The insurance company made the necessary
the Palomos had already paid their credit due the
endorsements to PNB.
July 31, 1975: building and the contents were
totally razed by fire
Palomo was able to claim P41,546.79 from
Philippine British Assurance Co., P11,877.14 from
Zenith Insurance Corporation and P5,936.57 from
S.S.S. Group of Accredited Insurers but Travellers
Multi-Indemnity refused so it demanded the
balance from the other three but they refused so
they filed against them
Insurance Commission, CFI: absolved Travellers on
the basis that Arsenio Cua was claiming and NOT
Tai Tong Chuache
Palomo Appealed
Travellers reasoned that the policy is endorsed to
Arsenio Chua, mortgage creditor Tai Tong Chuache
& Co. filed a complaint in intervention claiming the
proceeds of the fire Insurance Policy issued by
travelers affirmative defense of lack of insurable
interest that before the occurrence of the peril
insured against the Palomos had already paid their
credit due the petitioner
ISSUE: W/N Tai Tong Chuache & Co. has insurable
interest
HELD: YES. Travellers Multi-Indemnity Corporation
to pay Tai Tong Chuache & Co.
when the creditor is in possession of the document
of credit, he need not prove non-payment for it is
presumed
The validity of the insurance policy taken b
petitioner was not assailed by private respondent.
Moreover, petitioner's claim that the loan
extended to the Palomos has not yet been paid
was corroborated by Azucena Palomo who
testified that they are still indebted to herein
petitioner
Chua being a partner of petitioner Tai Tong
Chuache & Company is an agent of the
partnership. Being an agent, it is understood that
he acted for and in behalf of the firm
Upon its failure to prove the allegation of lack of
insurable interest on the part of the petitioner,
Travellers must be held liable
G.R. No. L-31845 April 30, 1979
GREAT PACIFIC LIFE ASSURANCE COMPANY,
petitioner,
vs.
HONORABLE COURT OF APPEALS, respondents.
G.R. No. L-31878 April 30, 1979
LAPULAPU D. MONDRAGON, petitioner,
vs.HON. COURT OF APPEALS and NGO HING,
respondents.
Siguion Reyna, Montecillo & Ongsiako and Sycip,
Salazar, Luna & Manalo for petitioner Company.
Voltaire Garcia for petitioner Mondragon.
Pelaez, Pelaez & Pelaez for respondent Ngo Hing.
DE CASTRO, J.:
The two above-entitled cases were ordered
consolidated by the Resolution of this Court dated
April 29, 1970, (Rollo, No. L-31878, p. 58), because
the petitioners in both cases seek similar relief,
through these petitions for certiorari by way of
appeal, from the amended decision of respondent
Court of Appeals which affirmed in toto the
decision of the Court of First Instance of Cebu,
ordering "the defendants (herein petitioners Great
Pacific Ligfe Assurance Company and Mondragon)
jointly and severally to pay plaintiff (herein private
respondent Ngo Hing) the amount of P50,000.00
with interest at 6% from the date of the filing of
the complaint, and the sum of P1,077.75, without
interest.
It appears that on March 14, 1957, private
respondent Ngo Hing filed an application with the
Great Pacific Life Assurance Company (hereinafter
referred to as Pacific Life) for a twenty-year
endownment policy in the amount of P50,000.00
on the life of his one-year old daughter Helen Go.
Said respondent supplied the essential data which
petitioner Lapulapu D. Mondragon, Branch
Manager of the Pacific Life in Cebu City wrote on
the corresponding form in his own handwriting
(Exhibit I-M). Mondragon finally type-wrote the
data on the application form which was signed by
private respondent Ngo Hing. The latter paid the
annual premuim the sum of P1,077.75 going over
to the Company, but he reatined the amount of
P1,317.00 as his commission for being a duly
authorized agebt of Pacific Life. Upon the payment
of the insurance premuim, the binding deposit
receipt (Exhibit E) was issued to private respondent
Ngo Hing. Likewise, petitioner Mondragon
handwrote at the bottom of the back page of the
application form his strong recommendation for
the approval of the insurance application. Then on
April 30, 1957, Mondragon received a letter from
Pacific Life disapproving the insurance application
(Exhibit 3-M). The letter stated that the said life
insurance application for 20-year endowment plan
is not available for minors below seven years old,
but Pacific Life can consider the same under the
Juvenile Triple Action Plan, and advised that if the
offer is acceptable, the Juvenile Non-Medical
Declaration be sent to the company.
The non-acceptance of the insurance plan by
Pacific Life was allegedly not communicated by
petitioner Mondragon to private respondent Ngo
Hing. Instead, on May 6, 1957, Mondragon wrote
back Pacific Life again strongly recommending the
approval of the 20-year endowment insurance plan
to children, pointing out that since 1954 the
customers, especially the Chinese, were asking for
such coverage (Exhibit 4-M).
It was when things were in such state that on May
28, 1957 Helen Go died of influenza with
complication of bronchopneumonia. Thereupon,
private respondent sought the payment of the
proceeds of the insurance, but having failed in his
effort, he filed the action for the recovery of the
same before the Court of First Instance of Cebu,
which rendered the adverse decision as earlier
refered to against both petitioners.
The decisive issues in these cases are: (1) whether
the binding deposit receipt (Exhibit E) constituted a
temporary contract of the life insurance in
question; and (2) whether private respondent Ngo
Hing concealed the state of health and physical
condition of Helen Go, which rendered void the
aforesaid Exhibit E.
1. At the back of Exhibit E are condition
precedents required before a deposit is considered
a BINDING RECEIPT. These conditions state that:
A. If the Company or its agent, shan have
received the premium deposit ... and the insurance
application, ON or PRIOR to the date of medical
examination ... said insurance shan be in force and
in effect from the date of such medical
examination, for such period as is covered by the
deposit ..., PROVIDED the company shall be
satisfied that on said date the applicant was
insurable on standard rates under its rule for the
amount of insurance and the kind of policy
requested in the application.
D. If the Company does not accept the
application on standard rate for the amount of
insurance and/or the kind of policy requested in
the application but issue, or offers to issue a policy
for a different plan and/or amount ..., the
insurance shall not be in force and in effect until
the applicant shall have accepted the policy as
issued or offered by the Company and shall have
paid the full premium thereof. If the applicant does
not accept the policy, the deposit shall be
refunded.
E. If the applicant shall not have been
insurable under Condition A above, and the
Company declines to approve the application the
insurance applied for shall not have been in force
at any time and the sum paid be returned to the
applicant upon the surrender of this receipt.
(Emphasis Ours).
The aforequoted provisions printed on Exhibit E
show that the binding deposit receipt is intended
to be merely a provisional or temporary insurance
contract and only upon compliance of the
following conditions: (1) that the company shall be
satisfied that the applicant was insurable on
standard rates; (2) that if the company does not
accept the application and offers to issue a policy
for a different plan, the insurance contract shall
not be binding until the applicant accepts the
policy offered; otherwise, the deposit shall be
reftmded; and (3) that if the applicant is not ble
according to the standard rates, and the company
disapproves the application, the insurance applied
for shall not be in force at any time, and the
premium paid shall be returned to the applicant.
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.
Upon this premise, the binding deposit receipt
(Exhibit E) is, manifestly, merely conditional and
does not insure outright. As held by this Court,
where an agreement is made between the
applicant and the agent, no liability shall attach
until the principal approves the risk and a receipt is
given by the agent. The acceptance is merely
conditional and is subordinated to the act of the
company in approving or rejecting the application.
Thus, in life insurance, a "binding slip" or "binding
receipt" does not insure by itself (De Lim vs. Sun
Life Assurance Company of Canada, 41 Phil. 264).
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 thenl 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 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. When he filed the insurance
application in dispute, private respondent was,
therefore, only taking the chance that Pacific Life
will approve the recommendation of Mondragon
for the acceptance and approval of the application
in question along with his proposal that the
insurance company starts to offer the 20-year
endowment insurance plan for children less than
seven years. Nonetheless, the record discloses that
Pacific Life had rejected the proposal and
recommendation. Secondly, having an insurable
interest on the life of his one-year old daughter,
aside from being an insurance agent and an
offense associate of petitioner Mondragon, private
respondent Ngo Hing must have known and
followed the progress on the processing of such
application and could not pretend ignorance of the
Company's rejection of the 20-year endowment life
insurance application.
At this juncture, We find it fit to quote with
approval, the very apt observation of then
Appellate Associate Justice Ruperto G. Martin who
later came up to this Court, from his dissenting
opinion to the amended decision of the
respondent court which completely reversed the
original decision, the following:
Of course, there is the insinuation that neither the
memorandum of rejection (Exhibit 3-M) nor the
reply thereto of appellant Mondragon reiterating
the desire for applicant's father to have the
application considered as one for a 20-year
endowment plan was ever duly communicated to
Ngo; Hing, father of the minor applicant. I am not
quite conninced that this was so. Ngo Hing, as
father of the applicant herself, was precisely the
"underwriter who wrote this case" (Exhibit H-1).
The unchallenged statement of appellant
Mondragon in his letter of May 6, 1957) (Exhibit 4-
M), specifically admits that said Ngo Hing was "our
associate" and that it was the latter who "insisted
that the plan be placed on the 20-year endowment
plan." Under these circumstances, it is
inconceivable that the progress in the processing
of the application was not brought home to his
knowledge. He must have been duly apprised of
the rejection of the application for a 20-year
endowment plan otherwise Mondragon would not
have asserted that it was Ngo Hing himself who
insisted on the application as originally filed,
thereby implictly declining the offer to consider the
application under the Juvenile Triple Action Plan.
Besides, the associate of Mondragon that he was,
Ngo Hing should only be presumed to know what
kind of policies are available in the company for
minors below 7 years old. What he and Mondragon
were apparently trying to do in the premises was
merely to prod the company into going into the
business of issuing endowment policies for minors
just as other insurance companies allegedly do.
Until such a definite policy is however, adopted by
the company, it can hardly be said that it could
have been bound at all under the binding slip for a
plan of insurance that it could not have, by then
issued at all. (Amended Decision, Rollo, pp- 52-53).
2. 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 piysical condition of his
daughter Helen Go. Wher private regpondeit
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 disguished. Nonetheless, private
respondent, in apparent bad faith, withheld the
fact materal to the risk to be assumed by the
insurance compary. 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 said significant fact
in the insurance application fom 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 aDd 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 comraitted by herein private
respondent.
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. SO ORDERED.
Saturnino v. Philamlife - False Representation
7 SCRA 316
Facts:
> 2 months prior to the insurance of the policy,
Saturnino was operated on for cancer, involving
complete removal of the right breast, including the
pectoral muscles and the glands, found in the right
armpit.
> Notwithstanding the fact of her operation,
Saturnino did not make a disclosure thereof in her
application for insurance.
> She stated therein that she did not have, nor had
she ever had, among others listed in the
application, cancer or other tumors; that she had
not consulted any physician, undergone any
operation or suffered any injury within the
preceding 5 years.
> She also stated that she had never been treated
for, nor did she ever have any illness or disease
peculiar to her sex, particularly of the breast,
ovaries, uterus and menstrual disorders.
> The application also recited that the declarations
of Saturnino constituted a further basis for the
issuance of the policy.
Issue:
Whether or not the insured made such false
representation of material facts as to avoid the
policy.
Held: YES.
There can be no dispute that the information given
by her in the application for insurance was false,
namely, that she never had cancer or tumors or
consulted any physician or undergone any
operation within the preceding period of 5 years.
The question to determine is: Are the facts then
falsely represented material? The Insurance Law
provides that “materiality is to be determined not
by the event, but solely by the probable and
reasonable influence of the facts upon the party to
whom the communication is due, in forming his
estimate of the proposed contract, or making his
inquiries.
The contention of appellants is that the facts
subject of the representation were not material in
view of the non-medical nature of the insurance
applied for, which does away with the usual
requirement of medical examination before the
policy is issued. The contention is without merit. If
anything, the waiver of medical examination
renders even more material the information
required of the applicant concerning previous
condition of health and diseases suffered, for such
information necessarily constitutes an important
factor which the insurer takes into consideration in
deciding whether to issue the policy or not.
Appellants also contend that there was no
fraudulent concealment of the truth inasmuch as
the insured herself did not know, since her doctor
never told her, that the disease for which she had
been operated on was cancer. In the first place,
concealment of the fact of the operation itself was
fraudulent, as there could not have been any
mistake about it, no matter what the ailment.
Secondly, in order to avoid a policy, it is not
necessary to show actual fraud on the part of the
insured. In this jurisdiction, concealment, whether
intentional or unintentional entitled the insurer to
rescind the contract of insurance, concealment
being defined as “negligence to communicate that
which a party knows and ought to communicate.”
The basis of the rule vitiating the contract in cases
of concealment is that it misleads or deceives the
insurer into accepting the risk, or accepting it at a
rate of premium agreed upon. The insurer, relying
upon the belief that the insured will disclose every
material fact within his actual or presumed
knowledge, is misled into a belief that the
circumstances withheld does not exist, and he is
thereby induced to estimate the risk upon a false
basis that it does not exist.
G.R. No. L-31878 April 30, 1979
LAPULAPU D. MONDRAGON, petitioner,
vs.HON. COURT OF APPEALS and NGO HING,
respondents.
Siguion Reyna, Montecillo & Ongsiako and Sycip,
Salazar, Luna & Manalo for petitioner Company.
Voltaire Garcia for petitioner Mondragon.
Pelaez, Pelaez & Pelaez for respondent Ngo Hing.
DE CASTRO, J.:
The two above-entitled cases were ordered
consolidated by the Resolution of this Court dated
April 29, 1970, (Rollo, No. L-31878, p. 58), because
the petitioners in both cases seek similar relief,
through these petitions for certiorari by way of
appeal, from the amended decision of respondent
Court of Appeals which affirmed in toto the
decision of the Court of First Instance of Cebu,
ordering "the defendants (herein petitioners Great
Pacific Ligfe Assurance Company and Mondragon)
jointly and severally to pay plaintiff (herein private
respondent Ngo Hing) the amount of P50,000.00
with interest at 6% from the date of the filing of
the complaint, and the sum of P1,077.75, without
interest.
It appears that on March 14, 1957, private
respondent Ngo Hing filed an application with the
Great Pacific Life Assurance Company (hereinafter
referred to as Pacific Life) for a twenty-year
endownment policy in the amount of P50,000.00
on the life of his one-year old daughter Helen Go.
Said respondent supplied the essential data which
petitioner Lapulapu D. Mondragon, Branch
Manager of the Pacific Life in Cebu City wrote on
the corresponding form in his own handwriting
(Exhibit I-M). Mondragon finally type-wrote the
data on the application form which was signed by
private respondent Ngo Hing. The latter paid the
annual premuim the sum of P1,077.75 going over
to the Company, but he reatined the amount of
P1,317.00 as his commission for being a duly
authorized agebt of Pacific Life. Upon the payment
of the insurance premuim, the binding deposit
receipt (Exhibit E) was issued to private respondent
Ngo Hing. Likewise, petitioner Mondragon
handwrote at the bottom of the back page of the
application form his strong recommendation for
the approval of the insurance application. Then on
April 30, 1957, Mondragon received a letter from
Pacific Life disapproving the insurance application
(Exhibit 3-M). The letter stated that the said life
insurance application for 20-year endowment plan
is not available for minors below seven years old,
but Pacific Life can consider the same under the
Juvenile Triple Action Plan, and advised that if the
offer is acceptable, the Juvenile Non-Medical
Declaration be sent to the company.
The non-acceptance of the insurance plan by
Pacific Life was allegedly not communicated by
petitioner Mondragon to private respondent Ngo
Hing. Instead, on May 6, 1957, Mondragon wrote
back Pacific Life again strongly recommending the
approval of the 20-year endowment insurance plan
to children, pointing out that since 1954 the
customers, especially the Chinese, were asking for
such coverage (Exhibit 4-M).
It was when things were in such state that on May
28, 1957 Helen Go died of influenza with
complication of bronchopneumonia. Thereupon,
private respondent sought the payment of the
proceeds of the insurance, but having failed in his
effort, he filed the action for the recovery of the
same before the Court of First Instance of Cebu,
which rendered the adverse decision as earlier
refered to against both petitioners.
The decisive issues in these cases are: (1) whether
the binding deposit receipt (Exhibit E) constituted a
temporary contract of the life insurance in
question; and (2) whether private respondent Ngo
Hing concealed the state of health and physical
condition of Helen Go, which rendered void the
aforesaid Exhibit E.
1. At the back of Exhibit E are condition
precedents required before a deposit is considered
a BINDING RECEIPT. These conditions state that:
A. If the Company or its agent, shan have
received the premium deposit ... and the insurance
application, ON or PRIOR to the date of medical
examination ... said insurance shan be in force and
in effect from the date of such medical
examination, for such period as is covered by the
deposit ..., PROVIDED the company shall be
satisfied that on said date the applicant was
insurable on standard rates under its rule for the
amount of insurance and the kind of policy
requested in the application.
D. If the Company does not accept the
application on standard rate for the amount of
insurance and/or the kind of policy requested in
the application but issue, or offers to issue a policy
for a different plan and/or amount ..., the
insurance shall not be in force and in effect until
the applicant shall have accepted the policy as
issued or offered by the Company and shall have
paid the full premium thereof. If the applicant does
not accept the policy, the deposit shall be
refunded.
E. If the applicant shall not have been
insurable under Condition A above, and the
Company declines to approve the application the
insurance applied for shall not have been in force
at any time and the sum paid be returned to the
applicant upon the surrender of this receipt.
(Emphasis Ours).
The aforequoted provisions printed on Exhibit E
show that the binding deposit receipt is intended
to be merely a provisional or temporary insurance
contract and only upon compliance of the
following conditions: (1) that the company shall be
satisfied that the applicant was insurable on
standard rates; (2) that if the company does not
accept the application and offers to issue a policy
for a different plan, the insurance contract shall
not be binding until the applicant accepts the
policy offered; otherwise, the deposit shall be
reftmded; and (3) that if the applicant is not ble
according to the standard rates, and the company
disapproves the application, the insurance applied
for shall not be in force at any time, and the
premium paid shall be returned to the applicant.
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.
Upon this premise, the binding deposit receipt
(Exhibit E) is, manifestly, merely conditional and
does not insure outright. As held by this Court,
where an agreement is made between the
applicant and the agent, no liability shall attach
until the principal approves the risk and a receipt is
given by the agent. The acceptance is merely
conditional and is subordinated to the act of the
company in approving or rejecting the application.
Thus, in life insurance, a "binding slip" or "binding
receipt" does not insure by itself (De Lim vs. Sun
Life Assurance Company of Canada, 41 Phil. 264).
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 thenl 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 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. When he filed the insurance
application in dispute, private respondent was,
therefore, only taking the chance that Pacific Life
will approve the recommendation of Mondragon
for the acceptance and approval of the application
in question along with his proposal that the
insurance company starts to offer the 20-year
endowment insurance plan for children less than
seven years. Nonetheless, the record discloses that
Pacific Life had rejected the proposal and
recommendation. Secondly, having an insurable
interest on the life of his one-year old daughter,
aside from being an insurance agent and an
offense associate of petitioner Mondragon, private
respondent Ngo Hing must have known and
followed the progress on the processing of such
application and could not pretend ignorance of the
Company's rejection of the 20-year endowment life
insurance application.
At this juncture, We find it fit to quote with
approval, the very apt observation of then
Appellate Associate Justice Ruperto G. Martin who
later came up to this Court, from his dissenting
opinion to the amended decision of the
respondent court which completely reversed the
original decision, the following:
Of course, there is the insinuation that neither the
memorandum of rejection (Exhibit 3-M) nor the
reply thereto of appellant Mondragon reiterating
the desire for applicant's father to have the
application considered as one for a 20-year
endowment plan was ever duly communicated to
Ngo; Hing, father of the minor applicant. I am not
quite conninced that this was so. Ngo Hing, as
father of the applicant herself, was precisely the
"underwriter who wrote this case" (Exhibit H-1).
The unchallenged statement of appellant
Mondragon in his letter of May 6, 1957) (Exhibit 4-
M), specifically admits that said Ngo Hing was "our
associate" and that it was the latter who "insisted
that the plan be placed on the 20-year endowment
plan." Under these circumstances, it is
inconceivable that the progress in the processing
of the application was not brought home to his
knowledge. He must have been duly apprised of
the rejection of the application for a 20-year
endowment plan otherwise Mondragon would not
have asserted that it was Ngo Hing himself who
insisted on the application as originally filed,
thereby implictly declining the offer to consider the
application under the Juvenile Triple Action Plan.
Besides, the associate of Mondragon that he was,
Ngo Hing should only be presumed to know what
kind of policies are available in the company for
minors below 7 years old. What he and Mondragon
were apparently trying to do in the premises was
merely to prod the company into going into the
business of issuing endowment policies for minors
just as other insurance companies allegedly do.
Until such a definite policy is however, adopted by
the company, it can hardly be said that it could
have been bound at all under the binding slip for a
plan of insurance that it could not have, by then
issued at all. (Amended Decision, Rollo, pp- 52-53).
2. 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 piysical condition of his
daughter Helen Go. Wher private regpondeit
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 disguished. Nonetheless, private
respondent, in apparent bad faith, withheld the
fact materal to the risk to be assumed by the
insurance compary. 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 said significant fact
in the insurance application fom 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 aDd 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 comraitted by herein private
respondent.
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. SO ORDERED.
Musngi v. West Coast Life Assurance Co.- False
Representation
61 PHIL 864
Facts:
> Arsenio Garcia was insured by West Coast twice
in 1931. In both policies, he was asked to answer
the question: “what physician or practitioners have
you consulted or been treated by, and for what
illness or ailment?
> In both policies, he answered in the negative. It
turned out that from 1929 to 1939, he went to see
several physicians for a number of ailments. So
when he died in 1942, the company refused to pay
the proceeds of the insurance.
Issue:
Whether or not the answer given by Arsenio in the
policies justifies the company’s refusal to pay?
Held: YES.
Aresenio knew that he was suffering from a
number of ailments, yet, he concealed this. Such
concealment and his false statements constituted
fraud, because the insurance company by reasons
of such statement accepted the risk which it would
otherwise have rejected.
Sun Life v. CA - Concealment in Insurance
245 SCRA 268 (1995)
Facts:
> On April 15, 1986, Bacani procured a life
insurance contract for himself from Sun Life. He
was issued a life insurance policy with double
indemnity in case of accidental death. The
designated beneficiary was his mother, Bernarda.
> On June 26, 1987, the insured died in a plane
crash. Bernarda Bacani filed a claim with Sun Life,
seeking the benefits of the insurance. Sun Life
conducted an investigation and its findings
prompted it to reject the claim.
> Sun Life discovered that 2 weeks prior to his
application, Bacani was examined and confined at
the Lung Center of the Philippines, where he was
diagnosed for renal failure. During his
confinement, the deceased was subjected to
urinalysis, ultra-sonography and hematology tests.
He did not reveal such fact in his application.
> In its letter, Sun Life informed Berarda, that the
insured did not disclosed material facts relevant to
the issuance of the policy, thus rendering the
contract of insurance voidable. A check
representing the total premiums paid in the
amount of P10,172.00 was attached to said letter.
> Bernarda and her husband, filed an action for
specific performance against Sun Life. RTC ruled
for Bernarda holding that the facts concealed by
the insured were made in good faith and under the
belief that they need not be disclosed. Moreover, it
held that the health history of the insured was
immaterial since the insurance policy was "non-
medical." CA affirmed.
Issue:
Whether or not the beneficiary can claim despite
the concealment.
Held: NOPE.
Section 26 of the Insurance Code is explicit in
requiring a party to a contract of insurance to
communicate to the other, in good faith, all facts
within his knowledge which are material to the
contract and as to which he makes no warranty,
and which the other has no means of ascertaining.
Materiality is to be determined not by the event,
but solely by the probable and reasonable
influence of the facts upon the party to whom
communication is due, in forming his estimate of
the disadvantages of the proposed contract or in
making his inquiries (The Insurance Code, Sec 31)
The terms of the contract are clear. The insured is
specifically required to disclose to the insurer
matters relating to his health. The information
which the insured failed to disclose were material
and relevant to the approval and the issuance of
the insurance policy. The matters concealed would
have definitely affected petitioner's action on his
application, either by approving it with the
corresponding adjustment for a higher premium or
rejecting the same. Moreover, a disclosure may
have warranted a medical examination of the
insured by petitioner in order for it to reasonably
assess the risk involved in accepting the
application.
Thus, "good faith" is no defense in concealment.
The insured's failure to disclose the fact that he
was hospitalized for two weeks prior to filing his
application for insurance, raises grave doubts
about his bonafides. It appears that such
concealment was deliberate on his part.
G.R. No. L-30685 May 30, 1983
NG GAN ZEE, plaintiff-appellee,
 vs.ASIAN CRUSADER LIFE ASSURANCE
CORPORATION, defendant-appellant.
Alberto Q. Ubay for plaintiff-appellee.
Santiago F. A lidio for defendant-appellant.
ESCOLIN, J.:
This is an appeal from the judgment of the Court of
First Instance of Manila, ordering the appellant
Asian-Crusader Life Assurance Corporation to pay
the face value of an insurance policy issued on the
life of Kwong Nam the deceased husband of
appellee Ng Gan Zee. Misrepresentation and
concealment of material facts in obtaining the
policy were pleaded to avoid the policy. The lower
court rejected the appellant's theory and ordered
the latter to pay appellee "the amount of P
20,000.00, with interest at the legal rate from July
24, 1964, the date of the filing of the complaint,
until paid, and the costs. "
The Court of Appeals certified this appeal to Us, as
the same involves solely a question of law.
On May 12, 1962, Kwong Nam applied for a 20-
year endowment insurance on his life for the sum
of P20,000.00, with his wife, appellee Ng Gan Zee
as beneficiary. On the same date, appellant, upon
receipt of the required premium from the insured,
approved the application and issued the
corresponding policy. On December 6, 1963,
Kwong Nam died of cancer of the liver with
metastasis. All premiums had been religiously paid
at the time of his death.
On January 10, 1964, his widow Ng Gan Zee
presented a claim in due form to appellant for
payment of the face value of the policy. On the
same date, she submitted the required proof of
death of the insured. Appellant denied the claim
on the ground that the answers given by the
insured to the questions appealing in his
application for life insurance were untrue.
Appellee brought the matter to the attention of
the Insurance Commissioner, the Hon. Francisco Y.
Mandamus, and the latter, after conducting an
investigation, wrote the appellant that he had
found no material concealment on the part of the
insured and that, therefore, appellee should be
paid the full face value of the policy. This opinion
of the Insurance Commissioner notwithstanding,
appellant refused to settle its obligation.
Appellant alleged that the insured was guilty of
misrepresentation when he answered "No" to the
following question appearing in the application for
life insurance-
Has any life insurance company ever refused your
application for insurance or for reinstatement of a
lapsed policy or offered you a policy different from
that applied for? If, so, name company and date.
In its brief, appellant rationalized its thesis thus:
... As pointed out in the foregoing summary of the
essential facts in this case, the insured had in
January, 1962, applied for reinstatement of his
lapsed life insurance policy with the Insular Life
Insurance Co., Ltd, but this was declined by the
insurance company, although later on approved for
reinstatement with a very high premium as a result
of his medical examination. Thus notwithstanding
the said insured answered 'No' to the [above]
question propounded to him. ... 1
The lower court found the argument bereft of
factual basis; and We quote with approval its
disquisition on the matter-
On the first question there is no evidence that the
Insular Life Assurance Co., Ltd. ever refused any
application of Kwong Nam for insurance. Neither is
there any evidence that any other insurance
company has refused any application of Kwong
Nam for insurance.
... The evidence shows that the Insular Life
Assurance Co., Ltd. approved Kwong Nam's request
for reinstatement and amendment of his lapsed
insurance policy on April 24, 1962 [Exh. L-2
Stipulation of Facts, Sept. 22, 1965). The Court
notes from said application for reinstatement and
amendment, Exh. 'L', that the amount applied for
was P20,000.00 only and not for P50,000.00 as it
was in the lapsed policy. The amount of the
reinstated and amended policy was also for
P20,000.00. It results, therefore, that when on May
12, 1962 Kwong Nam answered 'No' to the
question whether any life insurance company ever
refused his application for reinstatement of a
lapsed policy he did not misrepresent any fact.
... the evidence shows that the application of
Kwong Nam with the Insular Life Assurance Co.,
Ltd. was for the reinstatement and amendment of
his lapsed insurance policy-Policy No. 369531 -not
an application for a 'new insurance policy. The
Insular Life Assurance Co., Ltd. approved the said
application on April 24, 1962. Policy No. 369531
was reinstated for the amount of P20,000.00 as
applied for by Kwong Nam [Exhs. 'L', 'L-l' and 'L-2'].
No new policy was issued by the Insular Life
Assurance Co., Ltd. to Kwong Nam in connection
with said application for reinstatement and
amendment. Such being the case, the Court finds
that there is no misrepresentation on this matter. 2
Appellant further maintains that when the insured
was examined in connection with his application
for life insurance, he gave the appellant's medical
examiner false and misleading information as to his
ailment and previous operation. The alleged false
statements given by Kwong Nam are as follows:
Operated on for a Tumor [mayoma] of the
stomach. Claims that Tumor has been associated
with ulcer of stomach. Tumor taken out was hard
and of a hen's egg size. Operation was two [2]
years ago in Chinese General Hospital by Dr. Yap.
Now, claims he is completely recovered.
To demonstrate the insured's misrepresentation,
appellant directs Our attention to:
[1] The report of Dr. Fu Sun Yuan the physician
who treated Kwong Nam at the Chinese General
Hospital on May 22, 1960, i.e., about 2 years
before he applied for an insurance policy on May
12, 1962. According to said report, Dr. Fu Sun Yuan
had diagnosed the patient's ailment as 'peptic
ulcer' for which, an operation, known as a 'sub-
total gastric resection was performed on the
patient by Dr. Pacifico Yap; and
[2] The Surgical Pathology Report of Dr. Elias
Pantangco showing that the specimen removed
from the patient's body was 'a portion of the
stomach measuring 12 cm. and 19 cm. along the
lesser curvature with a diameter of 15 cm. along
the greatest dimension.
On the bases of the above undisputed medical data
showing that the insured was operated on for
peptic ulcer", involving the excision of a portion of
the stomach, appellant argues that the insured's
statement in his application that a tumor, "hard
and of a hen's egg size," was removed during said
operation, constituted material concealment.
The question to be resolved may be propounded
thus: Was appellant, because of insured's aforesaid
representation, misled or deceived into entering
the contract or in accepting the risk at the rate of
premium agreed upon?
The lower court answered this question in the
negative, and We agree.
Section 27 of the Insurance Law [Act 2427]
provides:
Sec. 27. Such party a contract of insurance must
communicate to the other, in good faith, all facts
within his knowledge which are material to the
contract, and which the other has not the means of
ascertaining, and as to which he makes no
warranty. 3
Thus, "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 communicate it to the assurer, but he
designedly and intentionally withholds the same."
4
It has also been held "that the concealment must,
in the absence of inquiries, be not only material,
but fraudulent, or the fact must have been
intentionally withheld." 5
Assuming that the aforesaid answer given by the
insured is false, as claimed by the appellant. Sec.
27 of the Insurance Law, above-quoted,
nevertheless requires that fraudulent intent on the
part of the insured be established to entitle the
insurer to rescind the contract. And as correctly
observed by the lower court, "misrepresentation
as a defense of the insurer to avoid liability is an
'affirmative' defense. The duty to establish such a
defense by satisfactory and convincing evidence
rests upon the defendant. The evidence before the
Court does not clearly and satisfactorily establish
that defense."
It bears emphasis that Kwong Nam had informed
the appellant's medical examiner that the tumor
for which he was operated on was "associated with
ulcer of the stomach." In the absence of evidence
that the insured had sufficient medical knowledge
as to enable him to distinguish between "peptic
ulcer" and "a tumor", his statement that said
tumor was "associated with ulcer of the stomach, "
should be construed as an expression made in
good faith of his belief as to the nature of his
ailment and operation. Indeed, such statement
must be presumed to have been made by him
without knowledge of its incorrectness and
without any deliberate intent on his part to
mislead the appellant.
While it may be conceded that, from the viewpoint
of a medical expert, the information
communicated was imperfect, the same was
nevertheless sufficient to have induced appellant
to make further inquiries about the ailment and
operation of the insured.
Section 32 of Insurance Law [Act No. 24271
provides as follows:
Section 32. The right to information of material
facts maybe waived either by the terms of
insurance or by neglect to make inquiries as to
such facts where they are distinctly implied in
other facts of which information is communicated.
It has been held that where, upon the face of the
application, a question appears to be not answered
at all or to be imperfectly answered, and the
insurers issue a policy without any further inquiry,
they waive the imperfection of the answer and
render the omission to answer more fully
immaterial. 6
As aptly noted by the lower court, "if the ailment
and operation of Kwong Nam had such an
important bearing on the question of whether the
defendant would undertake the insurance or not,
the court cannot understand why the defendant or
its medical examiner did not make any further
inquiries on such matters from the Chinese General
Hospital or require copies of the hospital records
from the appellant before acting on the application
for insurance. The fact of the matter is that the
defendant was too eager to accept the application
and receive the insured's premium. It would be
inequitable now to allow the defendant to avoid
liability under the circumstances."
Finding no reversible error committed by the trial
court, the judgment appealed from is hereby
affirmed, with costs against appellant Asian-
Crusader life Assurance Corporation.
G.R. No. L-10436 January 24, 1916
FRANCISCA EGUARAS, plaintiff-appellee,
vs.
THE GREAT EASTERN LIFE ASSURANCE COMPANY,
LTD., and WEST G. SMITH, defendants.
THE GREAT EASTERN LIFE ASSURANCE COMPANY,
LTD., appellant.
TORRES, J.:
This is an appeal filed through bill of exceptions by
the counsel for the defendant, the Great Eastern
Life Assurance Company, Ltd., from the judgment
of September 14, 1914, whereby the Court of First
Instance of Laguna sentenced it to pay to the
plaintiff the sum of P5,000, the value of the
insurance policy in question, with legal interest
from April 15, 1913, the date when the complaint
was filed, and the costs. W.G. Smith was absolved
from the complaint, and the claim fro damages
dismissed, as they were not proven.
On April 14, 1913, counsel for Francisca Eguaras
filed a written complaint in the said Laguna court,
alleging as a cause of action that about October 14,
1912, her son-in-law Dominador Albay had applied
in writing to the defendant insurance company to
insure his life for the sum of P5,000, naming as the
beneficiary in case of his death the plaintiff
Francisca Eguaras; that after compliance with the
requisites and the investigation carried on by the
defendant company, and it had been satisfied
concerning the physical condition of the applicant,
it accepted the application for insurance and on
November 6, 1912, issued policy No. 5592, Exhibit
A, which has been made a part of the complaint,
whereby the said insurance company insured the
life of the said Dominador Albay in the sum of
P5,000, payable in the event of his death to
Francisca Eguaras; that on December 6, 1912, said
policy No. 5592 being in force, the insured
Dominador Albay, died in the municipality of Santa
Cruz, Laguna, and despite the fact that the
beneficiary submitted satisfactory proofs of his
death and that the defendant company
investigated the event, still it refused and
continues to refuse to pay to the plaintiff the value
of the policy, Exhibit A, thereby causing damages
estimated at P1,000. The court was therefore
asked to render judgment against the Great
Eastern Life Assurance Company, Ltd., and its
general agent, West G. Smith, by sentencing them
to pay to the plaintiff the sum of P5,000, the value
of policy No. 5592, plus the sum of P1,000 for
damages inflicted upon them, in addition to the
costs of the suit.
The demurrer filed to the foregoing complaint
having been overruled, counsel for the insurance
company and for West G. Smith replied thereto,
admitting the allegations of the complaint with
respect to the legal status of the parties by denying
all the rest, and setting forth in special defense
that the insurance policy issued in the name of
Dominador [Albay] had been obtained through
fraud and deceit known and consented to by the
interested parties and is therefore completely
illegal, void, and ineffective; wherefore he prayed
that the defendants be absolved from the
complaint, with the costs against the plaintiff.
In answer to the reply of the defendants the
plaintiff alleged that the grounds set forth in the
special defense had been made the basis of a
criminal complaint against the plaintiff, Francisca
Eguaras, and Ponciano Remegio for the crime of
frustrated estafa in the Court of First Instance of
Laguna, but that they had been acquitted on said
complaint, as is demonstrated by the copy of the
judgment, marked Exhibit b, which was made an
integral part of the answer, and therefore the
plaintiff prayed that the relief sought in her
complaint be granted.
After trial and examination of the evidence
submitted by both parties, the court rendered the
judgment that has been set forth, whereto the
defendant, The Great Eastern Life Assurance
Company, Ltd., saved its exception, and in writing
moved for a reopening of the case and a new trial.
This motion was denied, with exception on
appellant's part, so the corresponding bill of
exceptions was filed, approved and forwarded to
the clerk of this court.
The question to be determined in this suit consists
in whether the life insurance obtained by
Dominador Albay, with the assistance of the
insurance agent, Ponciano Remegio, is legal and
valid or whether on the contrary it was issued
through fraud and deceit, and in such case,
whether the defendant, The Great Eastern Life
Assurance Company, Ltd., is still under obligation
to pay the value thereof to the plaintiff.
It is demonstrated in the case by evidence
submitted by the plaintiff that on October 14,
1912, through the efforts of the defendant
company's agent, Ponciano Remigio, Dominador
Albay got the insurance company to insure his life
for the sum of P5,000 and that through the
representations and statements made by said
Dominador Albay in his application and the
favorable medical examination made by Dr. Jose A.
Vidal (record, p. 126), the company agreed to the
life insurance sought, and on November 6,. 1912,
issued the policy No. 5592, the value whereof was
payable to the insured's mother-in-law, Francisca
Eguaras. One month after said insurance policy had
been issued, that is, on December 6, 1912, the
insured Dominador Albay died in the municipality
of Santa Cruz, Laguna, of intestinal occlusion,
according to the certificate of Dr. R. Kamatoy, after
an illness of three days, wit medical attendance.
(Exhibit B, p. 154; Exhibit B, criminal case No.
2616.) The defendant company, according to the
declaration of its own agent in these Islands,
despite having received satisfactory proofs of the
death of the insured, refused to pay the amount of
the insurance, alleging that it had been secured
through fraud and deceit and was therefore illegal
and void.
The contract of life insurance executed between
The Great Eastern Life Assurance Company, Ltd.,
and Dominador Albay is set forth in the policy itself
and in the original and supplementary applications
signed apparently by Dominador Albay, it
appearing to have been stipulated that "This
insurance is granted in consideration of the
foregoing statements and agreement in the
application presented to obtain this policy, which
application forms a part of the present contract."
This condition is repeated in Clause VIII of the
conditions and the privileges granted to the
insured, that "This policy and the application
presented to secure it, taken together, constitute
the whole contract, which cannot be altered
except in writing by the general manager or some
person expressly appointed therefor by the board
of directors."
Now then, in the supplementary application
presented by the insured on October 14, 1912, to
the question: "Do you think that you are free from
disease and that you have a good constitution?" he
answered: "Yes;" and to another question: "Have
you suffered from any affection of ... (c) Chest —
Cough, asthma, spitting blood, pleurisy?" the
applicant answered: "No." (p. 126.)
The physician of the insurance company in charge
of the physical examination of the person applying
for insurance in Laguna, Dr. Jose A. Vidal, made the
physical examination of the person who presented
himself to him as Dominador Albay and in his
report to the said company (pp. 126-127), dated
October 14, 1912, he recorded that the
development, expansion, percussion, and
auscultation of the applicant's chest were "normal"
and recommended to the company that it could
"take the risk" of insuring the applicant Dominador
Albay and on said professional report a certain
Lunn, who must be the medical officer of the
company, placed his O.K. On the basis of these
medical reports and of the exact and faithful
performance of its obligations on the part of the
insurance agent, Ponciano Remigio, The Great
Eastern Life Assurance Company issued the
corresponding policy in favor of Dominador Albay,
insuring his life for P5,000. The first premium,
amounting to P82.25, was paid on November 6,
1912, and while said policy was in full force and
effect the death of the death of the insured Albay
occurred the next month.
It appears from the record that the insured had
knowledge of the false replied contained in the
two applications for insurance and knowing
permitted fraud to be practised upon the insurance
company, for in his acknowledgment and consent
his mother-in-law was designated as the
beneficiary of the insurance, despite the fact that
he had children and his mother was still living. In
the present case the fraud consisted in the fact
that a healthy and robust person was substituted
in place of insured invalid when Dr. Vidal made the
physical examination of the one who seeking to be
insured, for the real person who desired to be
insured and who ought to have been examined
was in bad health on and before the date of
executing the insurance contract of which facts the
insured Dominador Albay and the insurance agent
Ponciano Remigio had full knowledge.
The insurance company endeavored to prove by
means of cross-examination of Ponciano Remigio,
while he was testifying as a witness for the
plaintiff, and by means of the declaration of
another insurance agent, Jose D. Arce, that said
Ponciano Remigio had always been in the habit of
securing the insurance of sick persons, who died
shortly after it was issued, in fraud and to the
serious injury of the defendant company; but at
the request of the opposition party the court
overruled this attempt of the defendant and did
not permit proof of specific fraudulent acts
performed by its agent Remegio. It is to be
observed that the said Remegio has already been
convicted of the crime of estafa and sentenced to
two months and one day of arresto and to the
restitution of P20 to The Insular Life Insurance
Company, as stated in the copy of the sentence.
(Record, p. 158.)
It is unquestionable that the person who on
October 14, 1912, presented himself to Dr. Vidal to
be examined under the name of Dominador Albay,
and who signed the supplementary application
before said physician, was not the real Dominador
Albay, who died on December 6, 1912. In case No.
2616, prosecuted against Ponciano Remegio,
Castor Garcia, and Francisca Eguaras for frustrated
estafa, part of which was exhibited at the hearing
in this suit, Dr. Vidal testified that on October 14,
1912, while he was in the employ of the defendant
company as a physician, he proceeded to examine,
in San Pablo, Laguna, a person presented to him by
the insurance agent, Ponciano Remegio, who said
that such person was named Dominador Albay and
desired to insured; that after he had conducted the
examination for the space of about an hour the
person examined by him signed the supplementary
application (Exhibit F) with the name of Dominador
Albay; that the person whom he examined and
who signed the application with the name of
Dominador Albay, if he were not mistaken, was the
individual he saw before him, the accused Castor
Garcia. When he saw urged to state positively
whether he had any doubt that the person he had
examined was the accused Castor Garcia, he first
asked permission to examine the latter's body, and
finally reaffirmed that, judging from the general
appearance of the accused, Castor Garcia, the
latter was the very person he had examined in San
Pablo and that he had assured Major Grove of the
Constabulary and the attorney of the defendant
company that said Garcia was the person who had
presented himself to him, saying that his name was
Dominador Albay. He further stated that about
March 24, 1913, Ponciano Remegio had visited his
house in Manila to request that he should testify in
favor of said Remegio, who at the same time had
offered him P600 not to identify the person of
Castor Garcia at the trial. Major Grove of the
Constabulary affirmed under oath at the trial of the
same case that on April 4, 1913, when Dr. Vidal and
the accused Castor Garcia were in his house, Dr.
Vidal had told him that he had not the least doubt
that Castor Garcia was the person whom he had
examined in San Pablo.
Attorney O'Brien, among other things, stated in a
sworn declaration, that Ponciano Remegio
interviewed him in his office about March 15,
1914, telling him that the signatures affixed to the
original application for insurance and the
supplementary application signed before Dr. Vidal
at the time of the physical examination were false,
and then indicated where he could get documents
with authentic signatures of the said Albay.
Remegio further told him that he (Remegio) was
disgusted with his accomplices because they could
not reach an agreement regarding the distribution
among them of the amount of the policy when it
should be collected. All the statements of said
Remegio were made before him under oath as a
notary public in the presence of Jose D. Arce, which
statements were annotated in the memorandum,
Exhibit 3, he being unable to draw up a formal
document for signature as the day of the interview
was Sunday and he had no stenographer in his
office. Jose D. Arce corroborated the statements of
the foregoing witness, and added that as the said
Ponciano Remegio lodged in his house, the latter
had told him the details of the substitution of
another person in place of Dominador Albay at the
examination made by the physician of the
company, and that the cedulas of said Albay and
two letters (pp. 171, 173), in which authentic
signatures of Albay appeared, were delivered to
Attorney O'Brien by Albay's mother, named
Manuela Flores. Captain Barrows of the
Constabulary testified how Ponciano Remegio had
promised O'Brien in a conference held by the three
in his house in Santa Cruz some ten days before
the trial, that on the day of the trial he would
testify that the person who had signed the
applications with the name of Dominador Albay
was Castor Garcia, who was then outside of the
Philippine Islands (p. 35). It is true that said
Remegio denied all this in his testimony given at
the trial in favor of the plaintiff, but it is to be
observed that the said Remegio in March, 1914,
told Attorney O'Brien in his office in Manila that
the person who had signed the insurance
applications had left the Philippines, but
afterwards he stated to said O'Brien and Barrows
that the person mentioned was Castor Garcia, and
it the said Remegio did not so testify at the trial it
was through fear of being prosecuted for perjury.
Dr. Getrudo Reyes stated at the trial that in March,
1912, he had been consulted by Dominador Albay
regarding the cough he had and after a medical
examination witness had reached the conclusion
that the person concerned was suffering from
tuberculosis in the first stage, although it does not
appear that said physician made a microscopic
analysis of the patient's sputum; but there is
circumstantial evidence in the case that the said
Dominador Albay died of tuberculosis, for his own
mother, Manuela Flores, so affirmed in the
affidavit (p. 199) drawn up before a notary on April
17, 1914, although said affidavit was not admitted
as evidence because she repudiated its contents in
the courts. The motive for this change of front on
the part of the said Manuela Flores seems to have
been due to the fact that the insurance company
was unwilling to give her and her husband money
for the statements they would make in the court,
for in the letter (Exhibit 9) of Leodegario v.
Lambonga, Manuela Flores' husband, addressed to
Jose D. Arce on August 26, 1914, Lambonga
informed Arce that they would not appear the next
day, not saying where, because they first wanted
to agree upon the sum that they would receive in
the event Smith, defendant's agent, should win the
case, and accordingly it execute "an instrument we
can hold to" (literal). Jose Valencia testified that on
November 27, 1912, he went to the municipal
building to sign a declaration in the name
Dominador Albay because the latter was then ill
and could not leave his house — a fact admitted by
plaintiff. Attorney O'Brien also testified that
Ponciano Remegio had assured him that
Dominador Albay was suffering from tuberculosis,
and also that Remegio had told him that there was
a physician in Santa Cruz, who must have been Dr.
Reyes, that could attest that said Albay was really
affected with tuberculosis.
It is immaterial that Albay may have died of
intestinal occlusion, as Dr. Kamatoy affirms in the
death certificate (p. 154), because said aliment
does not demonstrate that Albay was not suffering
from some other chronic disease; or that in the
month of October, 1912, when he applied for
insurance on his life, he was not affected by
malady that would have been sufficient cause for
his rejection by the physician of the insurance
company.
To secure the insurance on the life of Dominador
Albay, the parties interested used a person who
signed the name of Dominador Albay as the
insured in all the documents connected with his
application, for the signatures to the letter and the
document relating to the insurance, exhibited at
the trial, and signed by "Dominador Albay" (pp. 50,
54), are different from the authentic signatures of
the real Dominador Albay which appear in the
official documents and the instruments of
conveyance of reality. (Exhibits 12,13, 15, pp. 207-
211 of the record.) The signatures on these three
documents of an official nature, as well as those on
the letters (Exhibits 7 and 8; pp. 171, 173)
addressed by the said Albay to his sister Odang and
his relative Lambonga, although not admitted as
evidence because they were not duly identified are
the genuine signatures of the real Dominador
Albay, who was accustomed to fashion his letters
in the Spanish style of handwriting. The documents
exhibited under the letters D, E, F, and G by the
plaintiff, which bear the signatures of "Dominador
Albay," appear to have been signed by the same
hand, and therefore it is not strange that the
signatures on these documents are similar, for it is
to be observed that the characters in these
signatures are firm and strong, demonstrating that
the person who made them had learned to write in
American schools where the style of handwriting
taught is very different from the Spanish.
Plaintiff's claim is based especially on the
genuineness of the signatures of "Dominador
Albay" in the elector's oath (Exhibit G, p. 124),
which was signed before the board of election
inspectors on May 4, 1912, and duly identified by
the chairman of said board, Proceso Maximo, on
the contention that if the signature on said
elector's oath is genuine, those which appear on
the insurance applications, Exhibits E and F (pp.
125-127), and that affixed to the letter, Exhibit D
(p. 50), addressed by said Albay in November,
1912, to the insurance also be true and genuine.
But if the real Dominador Albay wrote in the
Spanish style in the months of January, February,
and March of the year 1912, as demonstrated by
the signatures affixed to the documents Exhibits 7,
8, and 15, it is impossible to believe that he should
have radically changed his form of writing, two
months later by adopting a different handwriting,
as can be seen in the alleged signature, said to be
authentic, in the elector's oath, Exhibit G, written
on May 4, 1912, and subsequently imitated in the
months of October and November of the same
year in the Exhibits E, F, and D. The signatures that
appear on the papers referring to the insurance are
so different from those which appear on the other
documents which unquestionably bear the
signature of the real Dominador Albay that, in
consideration of the short time which elapsed
between the last genuine signature in March,
1912, when he sold a tract of land, and his oath as
elector in May of the same year 1912, and the
great difference that exist between the two
signatures, we can do no less than reach the
conclusion already stated that there was a person
who passed himself off as Dominador Albay and
said person was the one who went to signing the
documents relating to the alleged insurance of
Dominador Albay who died on December 6, 1912.
Moreover, Dominador Albay's age, according to
the alleged insurance application and the insurance
policy, was 40 years in 1912, while according to his
personal cedulas he was only 32 years of age in
1911, so that when he was insured he must have
been only 33.
It is therefore proven that the signatures on the
insurance applications reading "Dominador Albay"
are false and forged; that the person who
presented himself to Dr. Vidal to be examined was
not the real Dominador Albay, but another
different person; that at the time of the application
for insurance and the issuance of the policy which
is the subject matter of this suit the real
Dominador Albay was informed of all those
machinations, wherefore it is plain that the
insurance contract between the defendant and
Dominador Albay is null and void because it is
false, fraudulent and illegal.
Article 1269 of the Civil Code states:
There is deceit when by words or insidious
machinations on the part of one of the contracting
parties the other is induced to execute a contract
which without them he would not have made.
It is essential to the nature of the deceit, to which
the foregoing article refers, that said deceit be
prior to or contemporaneous with the consent that
is a necessary requisite for perfecting the contract,
but not that it may have occurred or happened
thereafter. A contract is therefore deceitful, for the
execution whereof the consent of one of the
parties has been secured by means of fraud,
because he was persuaded by words or insidious
machinations, statements or false promises, and a
defective consent wrung from him, even though
such do not constitute estafa or any other criminal
subject to the penal law.
The defendant company accepted the application
for insurance made by Dominador Albay and
executed the contract comprised under articles
416 of the Code of Commerce, although for the
perfecting thereof the insured, Albay, as he was
not in good health, by connivance with the
insurance company's agent, presented Castor
Garcia to the physician Vidal, who was
commissioned by the company to examine
applicants for life insurance and in view of the
favorable report of the said physician, who
reported and certified that the person examined by
him under the name of Dominador Albay was in
good health and possessed the qualifications
required by said insurance company for perfecting
the contract, so the company freely and willingly
consented to the execution thereof, effectively
induced thereto by the result of the medical
examination and of the favorable professional
report issued in view of the appearance of an
individual who was in good health, but different
from the individual who was seeking to be insured
and who died one month and twenty-three days
after the insurance had been granted.
The fraud which gave rise to the mistaken consent,
given by the defendant company to the application
for insurance made by Albay and to the execution
of the contract through deceit, is plain and
unquestionable. This fraud consisted in the
substitution at the examination of Castor Garcia in
place of the insured Dominador Albay, and as the
deceit practiced in the said contract is of a serious
nature, the same is ipso facto void and ineffective,
in accordance with the provisions of article 1270 of
the Civil Code.
If there had been no substitution, if the insured
Dominador Albay had been the person who
appeared and was examined by the physician
Vidal, said Albay being manifestly different from
Castor Garcia, the said physician would not have
affirmed at the trial that it was Garcia who
presented himself for the physical examination,
accompanied by the insurance company's agent, at
his residence in San Pablo, and he would have
failed to recognize him when he saw him in the
court, nor is any mistake on the physician's part
possible as the inspection and physical
examination of the individual lasted for something
like the space of an hour.
The supposition that Dominador Albay was not ill
in October, 1912, would not explain why he did not
present himself in person to be examined by the
physician Vidal; and when he failed to do so and by
agreement with the agent Remegio was willing to
be substituted by Castor Garcia to the end that in
any event no defect or personal quality should be
discovered to hinder the perfecting of the
insurance contract, such a change in the person
constitutes one of the means of fraud which,
although it may not partake of the nature of a
crime, essentially nullifies the insurance contract
executed.
With this array of circumstantial evidence derived
from facts duly proven as a result of the present
suit, we get, if not a moral certainly, at least a full
conviction that when Castor Garcia presented
himself to be examined by the physician Vidal in
place of Dominador Albay, serious deceit occurred
in perfecting the insurance contract, for had the
agent of the company not been deceived it would
not have granted the insurance applied for by
Albay, nor would it have executed the contract by
virtue of whereof payment is claimed of the value
of policy obtained through fraud; and consequently
on such assumptions it is improper, nor is it
permitted by the law, to order collection of the
amount claimed.
With reference to the effect produced by the final
judgment rendered in the cae for estafa in
connection with this suit, it is unquestionable that
said judgment does not give rise to the
presumption of res adjudicata, applicable to the
present case (art. 1252, Civil Code), nor does it
constitute an estoppel to the matters litigated in
the said criminal case for estafa and consequently
there cannot be applied in the present suit the
principle laid down in the decision of Peñalosa vs.
Tuason (22 Phil. Rep., 303), for the reason that said
case was instituted by virtue of an information on
the charge that the deceitful acts executed by the
company's agent and others interested in the
result of the fraud constitute the crime of estafa to
the injury of the said insurance company, even
though the court acquitted the accused on account
of the lack of satisfactory proof of the acts ascribed
to them and of their guilt, while the exception
taken by the defendant company is based on the
nullity of the insurance contract because deceit
occurred in the perfecting and execution thereof.
In view of that acquittal the beneficiary of the
insurance, Francisca Eguaras, instituted the present
suit against The Great Eastern Life Assurance
Company, Ltd., claiming payment of the sum of
P5,000, the value of policy No. 5592, Exhibit A,
which claim the defendant opposed with the
contention that said policy was void and illegal
because it had been obtained by means of deceit
and fraud.
The judgment of acquittal rendered in the criminal
case for estafa against the said Francisca Eguaras
does not produce the effect of res adjudicata in the
present suit to the extent that because she was
acquitted of the crime of estafa she has necessarily
acquired as a plaintiff the right to collect the value
of the insurance, or that the insurance company
cannot contend that the insurance contract is null
and void because it was executed by means of
deceit, which upon being proven, as it has been in
this case, invalidates the contract that gave rise to
the obligation to pay the value of said policy.
In the said criminal case the question raised was
whether the acts performed by Eguaras and her co-
accused partook of the nature of the crime of
estafa, and when it was decided in the negative,
the said Eguaras was not therefore unquestionably
entitled to collect the value of the insurance, for
after deceit had once been proven in the contract,
no obligation rested upon the insurance company
to pay the sum stipulated.
In the present civil suit it is not a question whether
the acts performed by Eguaras and others
interested in the proceeds of the insurance were
criminal, but whether in taking out the insurance
on the life of Dominador Albay there occurred in
the operation deceit and fraud of a civil nature, in
the form and under the conditions defined by the
Civil Code.
In a contract executed with the requisites fixed in
article 1261, one of the contracting parties may
have given his consent through error, violence,
intimidation, or deceit, and in any of such cases the
contract is void, even though, despite this nullity,
no crime was committed. (Article 1265, Civil Code.)
There may not have been estafa in the case at bar,
but it was conclusively demonstrated by the trial
that deceit entered into the insurance contract,
fulfillment whereof is claimed, and therefore the
conclusions reached by the court in the judgment it
rendered in the criminal proceedings for estafa do
not affect this suit, nor do they influence the
decision proper herein, nor can they produce in the
present suit, over the exception of the defendant,
the force of res adjudicata.
For all the foregoing reasons the first part of the
judgment appealed from, with reference to the
payment of P5,000 to the plaintiff, must be
reversed and the defendant, The Great Eastern Life
Assurance Company, Ltd., absolved from the
complaint, as we do absolve it; and we affirm the
second part of said judgment in so far it absolves
W. G. Smith and dismissed the petition for
damages; without special finding as to the costs in
both instances. So ordered
Argente v. West Coast Life Insurance Co.-
Misrepresentation
51 PHIL 725
Facts:
> A joint life insurance policy was issued to
Bernardo Argente and his wife Vicenta upon
payment of premium, by West Coast.
> On Nov. 18, 1925, during the effectivity of the
policy, Vicenta died of cerebral apoplexy.
Thereafter, Bernardo claimed payment but was
refused.
> It is admitted that in the Medical Examiner’s
report, Vicenta, in response to the question asked
by the medical examiner, her replies were as
follows:
o “How frequently do you use beer, wine, spirits
and other intoxicants?” she answered “beer only in
small quantities”.
o “What physician have you consulted or been
treated by within the last 5 years and for what
illness or ailment?” she answered “none”
> It is however, not disputed that in 1924, Vicenta
was taken to a hospital for what was first
diagnosed as alcoholism and later changed to
manic-depressive psychosis and then again
changed to pscyhonuerosis.
Issue:
Whether or not on the basis of the
misrepresentations of Vicenta, Bernardo is barred
from recovery.
Held:YES.
The court found that the representations made by
Vicenta in his application for life insurance were
false with respect to her state of health and that
she knew and was aware that the representations
so made by her were false. In an action on a life
insurance policy where the evidence conclusively
shows that the answers to questions concerning
diseases were untrue, the truth or falsity of the
answer becomes the determining factor.
If the policy was procured by fraudulent
misrepresentations, the contract of insurance
apparently set forth therein was never legally
existent. It can be fairly assumed that had the true
facts been disclosed by the insured, the insurance
would never have been granted.
G.R. No. L-47593 December 29, 1943
THE INSULAR LIFE ASSURANCE CO., LTD.,
petitioner,
vs.SERAFIN D. FELICIANO ET AL., respondents.
Manuel Roxas and Araneta, Zaragoza, Araneta
and Bautista for petitioner.
Deflfin Joven and Pablo Lorenzo for respondents.
Ramirez and Ortigas as amici curiae.
OZAETA, J.:
In a four-to-three decision promulgated on
September 13, 1941, 1 this Court affirmed the
judgment of the Court of Appeals in favor of the
respondents and against the petitioner for the sum
of P25,000, representing the value of two
insurance policies issued by the petitioner on the
life of Evaristo Feliciano. A motion to reconsider
and set aside said decision has been filed by the
petitioner, and both parties have submitted
exhaustive and luminous written arguments in
support of their respective contentions.
The facts of the case are set forth in the majority
and dissenting opinions heretofore handed down
by this Court, the salient points of which may be
briefly restated as follows:
Evaristo Feliciano, who died on September 29,
1935, was suffering with advanced pulmonary
tuberculosis when he signed his applications for
insurance with the petitioner on October 12, 1934.
On that same date Doctor Trepp, who had taken X-
ray pictures of his lungs, informed the respondent
Dr. Serafin D. Feliciano, brother of Evaristo, that
the latter "was already in a very serious ad
practically hopeless condition." Nevertheless the
question contained in the application — "Have you
ever suffered from any ailment or disease of the
lungs, pleurisy, pneumonia or asthma?" — appears
to have been answered , "No" And above the
signature of the applicant, following the answers to
the various questions propounded to him, is the
following printed statement:1awphil.net
I declare on behalf of myself and of any person
who shall have or claim any interest in any policy
issued hereunder, that each of the above answers
is full, complete and true, and that to the best of
my knowledge and belief I am a proper subject for
life insurance. (Exhibit K.)
The false answer above referred to, as well as the
others, was written by the Company's soliciting
agent Romulo M. David, in collusion with the
medical examiner Dr. Gregorio Valdez, for the
purpose of securing the Company's approval of the
application so that the policy to be issued thereon
might be credited to said agent in connection with
the inter-provincial contest which the Company
was then holding among its soliciting agents to
boost the sales of its policies. Agent David bribed
Medical Examiner Valdez with money which the
former borrowed from the applicant's mother by
way of advanced payment on the premium,
according to the finding of the Court of Appeals.
Said court also found that before the insured
signed the application he, as well as the members
of his family, told the agent and the medical
examiner that he had been sick and coughing for
some time and that he had gone three times to the
Santol Sanatorium and had X-ray pictures of his
lungs taken; but that in spite of such information
the agent and the medical examiner told them that
the applicant was a fit subject for insurance.
Each of the policies sued upon contains the
following stipulations:
This policy and the application herefor constitute
the entire contract between the parties hereto. . . .
Only the President, or the Manager, acting jointly
with the Secretary or Assistant Secretary (and then
only in writing signed by them) have power in
behalf of the Company to issue permits, or to
modify this or any contract, or to extend the same
time for making any premium payment, and the
Company shall not be bound by any promise or
representation heretofore or hereafter given by
any person other than the above-named officials,
and by them only in writing and signed conjointly
as stated.
The application contains, among others, the
following statements:
18. — I [the applicant] hereby declare that all the
above statements and answers as well as all those
that I may make to the Company's Medical
Examiner in continuation of this application, to be
complete, true and correct to the best of my
knowledge and belief, and I hereby agree as
follows:
1. That his declaration, with the answers to
be given by me to the Medical Examiner, shall be
the basis of the policy and form part of same.
3. That the said policy shall not take effect
until the first premium has been paid and the
policy has been delivered to and accepted by me,
while I am in good health.
4. That the agent taking this application has
no authority to make, modify or discharge
contracts, or to waive any of the Company's rights
or requirements.
5. My acceptance of any policy issued on this
application will constitute a ratification by me of
any corrections in or additions to this application
made by the Company in the space provided "For
Home Office Corrections or Additions Only." I
agree that photographic copy of this applications
as corrected or added to shall constitute sufficient
notice to me of the changes made. (Emphasis
added.)
The petitioner insists that upon the facts of the
case the policies in question are null and void ab
initio and that all that the respondents are entitled
to is the refund of the premiums paid thereon.
After a careful re-examination of the facts and the
law, we are persuaded that petitioner's contention
is correct. To the reasons adduced in the dissenting
opinion heretofore published, we only desire to
add the following considerations:
When Evaristo Feliciano, the applicant for
insurance, signed the application in blank and
authorized the soliciting agent and/or medical
examiner of the Company to write the answers for
him, he made them his own agents for that
purpose, and he was responsible for their acts in
that connection. If they falsified the answers for
him, he could not evade the responsibility for he
falsification. He was not supposed to sign the
application in blank. He knew that the answers to
the questions therein contained would be "the
basis of the policy," and for that every reason he
was required with his signature to vouch for truth
thereof.
Moreover, from the facts of the case we cannot
escape the conclusion that the insured acted in
connivance with the soliciting agent and the
medical examiner of the Company in accepting the
policies in question. Above the signature of the
applicant is the printed statement or
representation: " . . . I am a proper subject for life
insurance." In another sheet of the same and was still suffering with advanced pulmonary
application and above another signature of the tuberculosis.
applicant was also printed this statement: "That
From all the facts and circumstances of this case,
the said policy shall not take effect until he first
we are constrained to conclude that the insured
premium has been paid and the policy as been
was a co-participant, and co-responsible with
delivered to and accepted by me, while I am in
Agent David and Medical Examiner Valdez, in the
good health." When the applicant signed the
fraudulent procurement of the policies in question
application he was "having difficulty in breathing, .
and that by reason thereof said policies are void ab
. . with a very high fever." He had gone three times
initio.
to the Santol Sanatorium and had X-ray pictures
taken of his lungs. He therefore knew that he was Wheretofore, the motion for reconsideration is
not "a proper subject for life insurance." When he sustained and the judgment of the Court of
accepted the policy,he knew that he was not in Appeals is hereby reversed. Let another judgment
good health. Nevertheless, he not only accepted be entered in favor of the respondents and against
the first policy of P20,000 but then and there the petitioner for the refund of the premiums
applied for and later accepted another policy of amounting to P1,389, with legal interest thereon
P5,000. from the date of the complaint, and without any
finding as to costs.
We cannot bring ourselves to believe that the
insured did not take the trouble to read the
answers contained in the photostatic copy of the
application attached to and made a part of the
policy before he accepted it and paid the premium
thereon. He must have notice that the answers to
the questions therein asked concerning his clinical
history were false, and yet he accepted the first
policy and applied for another. In any event, he
obligated himself to read the policy when he
subscribed to this statement: "My acceptance of
any policy issued on this application will constitute
a ratification by me of any corrections in or
additions to this application made by the Company
. . ." By accepting the policy he became charged
with knowledge of its contents, whether he
actually read it or not. He could not ostrich-like
hide his head from it in order to avoid his part of
the bargain and at the same time claim the benefit
thereof. He knew, or was chargeable with
knowledge, from the very terms of the two policies
sued upon (one of which is printed in English and
the other in Spanish) that the soliciting agent and
the medical examiner had no power to bind the
Company by any verbal promise or oral
representation. The insured, therefore, had no
right to rely — and we cannot believe he relied in
good faith — upon the oral representation. The
insured, therefore, had no right to rely — and we
cannot believe he relied in good faith — upon the
oral representation of said agent and medical
examiner that he (the applicant) was a fit subject
for insurance notwithstanding that he had been