Gaisano Cagayan, Inc. vs. Insurance Co.
of North America • IMC and LSPI filed with respondent their claims under their respective
G.R. No. 147839, June 8, 2006 J. AUSTRIA-MARTINEZ, J
DOCTRINE
Anyone has an insurable interest in property that derives a benefit from its existence
or would suffer loss from its destruction. It is sufficient that the insured is so situated
with reference to the property that he would be liable to loss should it be injured or
destroyed by the peril against which it is insured an insurable interest in property
does not necessarily imply a property interest in, or a lien upon, or possession of, the
subject matter of the insurance, and neither the title nor a beneficial interest is
requisite to the existence of such an interest insurance.
FALLO
WHEREFORE, the petition is partly GRANTED. The assailed Decision dated October
11, 2000 and Resolution dated April 11, 2001 of the Court of Appeals in CA-G.R. CV
No. 61848 are AFFIRMED with the MODIFICATION that the order to pay the amount
of P535,613.00 to respondent is DELETED for lack of factual basis. No
pronouncement as to costs. SO ORDERED.
FACTS:
[Nature of the Case: Petition for review (Rule 45) assailing CA decision which
reversed RTC Manila (Br. 21) decision]
Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi
Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks
owned by Levi Strauss & Co.
IMC and LSPI separately obtained from respondent fire insurance policies with
book debt endorsements. The insurance policies provide for coverage on "book
debts in connection with ready-made clothing materials which have been sold or
delivered to various customers and dealers of the Insured anywhere in the
Philippines. The policies defined book debts as the "unpaid account still appearing
in the Book of Account of the Insured 45 days after the time of the loss covered
under this Policy.
On February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City,
owned by petitioner, was consumed by fire. Included in the items lost or destroyed
in the fire were stocks of ready-made clothing materials sold and delivered by IMC
and LSPI.
On February 4, 1992, Respondent filed a complaint for damages against petitioner.
Alleging that:
fire insurance policies with book debt endorsements;
• As of February 25, 1991, the unpaid accounts of petitioner on the sale
and delivery of ready-made clothing materials with IMC
was P2,119,205.00 while with LSPI it was P535,613.00;
• Respondent paid the claims of IMC and LSPI and, by virtue thereof,
respondent was subrogated to their rights against petitioner;
• Respondent made several demands for payment upon petitioner but
these went unheeded.
Petitioner’s contention:
• It could not be held liable because the property covered by the
insurance policies were destroyed due to fortuities event or force
majeure;
• Respondent's right of subrogation has no basis inasmuch as there was
no breach of contract committed by it since the loss was due to fire
which it could not prevent or foresee;
• IMC and LSPI never communicated to it that they insured their
properties; that it never consented to paying the claim of the insured
RTC: the fire was purely accidental; that the cause of the fire was not attributable
to the negligence of the petitioner; IMC and LSPI retained ownership of the
delivered goods and must bear the loss. (res perit domino)
CA: reversed the decision of RTC. Sales invoices is an exception under Article 1504
(1) of the Civil Code to res perit domino
ISSUE: Whether or not Insurance Company of North America can claim against
Gaisano Cagayan for the debt that was insured –Yes.
RATIO:
The insurance in this case is not for loss of goods by fire but for petitioner's
accounts with IMC and LSPI that remained unpaid 45 days after the fire.
Accordingly, petitioner's obligation is for the payment of money. As correctly
stated by the CA, where the obligation consists in the payment of money, the
failure of the debtor to make the payment even by reason of a fortuitous event
shall not relieve him of his liability. The rationale for this is that the rule that an
obligor should be held exempt from liability when the loss occurs thru a fortuitous
event only holds true when the obligation consists in the delivery of a determinate
thing and there is no stipulation holding him liable even in case of fortuitous event.
It does not apply when the obligation is pecuniary in nature.
Thus, whether fire is a fortuitous event or petitioner was negligent are matters
immaterial to this case. What is relevant here is whether it has been established
that petitioner has outstanding accounts with IMC and LSPI.
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but when the ownership therein is
transferred to the buyer the goods are at the buyer's risk whether actual delivery
has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the ownership in the goods has been
retained by the seller merely to secure performance by the buyer of his obligations
under the contract, the goods are at the buyer's risk from the time of such
delivery;
IMC and LSPI did not lose complete interest over the goods. They have an
insurable interest until full payment of the value of the delivered goods. Unlike
the civil law concept of res perit domino, where ownership is the basis for
consideration of who bears the risk of loss, in property insurance, one's interest is
not determined by concept of title, but whether insured has substantial economic
interest in the property.
and LSPI that remained unpaid 45 days after the fire - obligation is pecuniary in
nature obligor should be held exempt from liability when the loss occurs thru a
fortuitous event only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable even in case of
fortuitous event.
Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or
destruction of anything of the same kind does not extinguish the obligation (Genus
nunquan perit)
The subrogation receipt, by itself, is sufficient to establish not only the relationship
of respondent as insurer and IMC as the insured, but also the amount paid to settle
the insurance claim
Art. 2207. If the plaintiff's property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who
has violated the contract.
As to LSPI, no subrogation receipt was offered in evidence. Failure to substantiate
the claim of subrogation is fatal to petitioner's case for recovery of the amount of
P535,613

Section 13 of our Insurance Code defines insurable interest as "every interest in

property, whether real or personal, or any relation thereto, or liability in respect
thereof, of such nature that a contemplated peril might directly damnify the
insured." Parenthetically, under Section 14 of the same Code, an insurable interest
in property may consist in: (a) an existing interest; (b) an inchoate interest founded
on existing interest; or (c) an expectancy, coupled with an existing interest in that
out of which the expectancy arises.

Anyone has an insurable interest in property that derives a benefit from its
existence or would suffer loss from its destruction. It is sufficient that the insured
is so situated with reference to the property that he would be liable to loss should
it be injured or destroyed by the peril against which it is insured an insurable
interest in property does not necessarily imply a property interest in, or a lien
upon, or possession of, the subject matter of the insurance, and neither the title
nor a beneficial interest is requisite to the existence of such an interest insurance
in this case is not for loss of goods by fire but for petitioner's accounts with IMC
Malayan Insurance Corp. vs. CA
FALLO: WHEREFORE, the petition for review is DENIED and the decision of the Court
of Appeals is AFFIRMED.
DOCTRINE:
An insurance contract should be so interpreted as to carry out the purpose for which
the parties entered into the contract which is, to insure against risks of loss or
damage to the goods. Such interpretation should result from the natural and
reasonable meaning of language in the policy. Where restrictive provisions are open
to two interpretations, that which is most favorable to the insured is adopted.
A contract of insurance, being a contract of adhesion, par excellence, any ambiguity
therein should be resolved against the insurer; in other words, it should be construed
liberally in favor of the insured and strictly against the insurer.
FACTS:
Private respondent TKC Marketing Corp. was the owner/consignee of some
3,189.171 metric tons of soya bean meal which was loaded on board the ship MV Al
Kaziemah on or about September 8, 1989 for carriage from the port of Rio del
Grande, Brazil, to the port of Manila. Said cargo was insured against the risk of loss
by petitioner Malayan Insurance Corporation for which it issued two (2) Marine
Cargo Policy Nos. M/LP 97800305 amounting to P18,986,902.45 and M/LP 97800306
amounting to P1,195,005.45, both dated September 1989.
While the vessel was docked in Durban, South Africa on September 11, 1989 enroute
to Manila, the civil authorities arrested and detained it because of a lawsuit on a
question of ownership and possession. As a result, private respondent notified
petitioner on October 4, 1989 of the arrest of the vessel and made a formal claim for
the amount of US$916,886.66.
Petitioner maintained its position that the arrest of the vessel by civil authorities on
a question of ownership was an excepted risk under the marine insurance policies.
This prompted private respondent to file a complaint for damages praying that aside
from its claim, it be reimbursed the amount of P128,770.88 as legal expenses and
the interest it paid for the loan it obtained to finance the shipment totaling
P942,269.30. In addition, private respondent asked for moral damages amounting to
P200,000.00, exemplary damages amounting to P200,000.00 and attorney's fees
equivalent to 30% of what will be awarded by the court.
The lower court decided in favor of the private respondent. It was affirmed by the
Court of Appeals, stating that arrests by civil authorities, such as what happened in
the instant case, is an excepted risk under Clause 12 of the Institute Cargo Clause or
the F.C. & S. Clause (the Policy). However, with the deletion of Clause 12 of the
Institute Cargo Clause and the consequent adoption or institution of the Institute
War Clauses (Cargo), the arrest and seizure by judicial processes which were
excluded under the former policy became one of the covered risks. The CA made
such interpretation on the policy applying the doctrine that insurance policies are
strictly construed against the insurer.
ISSUE: W/N the CA erred in giving undue reliance to the doctrine that insurance
policies are strictly construed against the insurer.
HELD:
No. A contract of insurance, being a contract of adhesion, par excellence, any
ambiguity therein should be resolved against the insurer; in other words, it should
be construed liberally in favor of the insured and strictly against the insurer.
If a marine insurance company desires to limit or restrict the operation of the general
provisions of its contract by special proviso, exception, or exemption, it should
express such limitation in clear and unmistakable language. Obviously, the deletion
of the F.C. & S. Clause and the consequent incorporation of subsection 1.1 of Section
1 of the Institute War Clauses (Cargo) gave rise to ambiguity. If the risk of arrest
occasioned by ordinary judicial process was expressly indicated as an exception in
the subject policies, there would have been no controversy with respect to the
interpretation of the subject clauses.
Likewise, it must be borne in mind that such contracts are invariably prepared by the
companies and must be accepted by the insured in the form in which they are
written. Any construction of a marine policy rendering it void should be avoided.
Such policies will, therefore, be construed strictly against the, company in order to
avoid a forfeiture, unless no other result is possible from the language used.
With the incorporation of subsection 1.1 of Section 1 of the Institute War Clauses,
however, this Court agrees with the Court of Appeals and the private respondent
that "arrest" caused by ordinary judicial process is deemed included among the
covered risks. Petitioner cannot adopt the argument that the "arrest" caused by
ordinary Judicial process is not included in the covered risk simply because the F. C.
& S. Clause under the Institute War Clauses can only be operative in case of hostilities
or warlike operations on account of its heading "Institute War Clauses." This Court
agrees with the Court of Appeals when it held that ". . . Although the F.C. & S. Clause
may have originally been inserted in marine policies to protect against risks of war,
its interpretation in recent years to include seizure or detention by civil authorities
seems consistent with the general purposes of the clause, . . ." In fact, petitioner
itself averred that subsection 1.1 of Section 1 of the Institute War Clauses included Diosdado Ty v Filipnas Compania de Seguuros, et. al.
"arrest" even if it were not a result of hostilities or warlike operations. In this regard, G.R. No. L-21821-22 and L-21824-27; 1966
since what was also excluded in the deleted F. C. & S. Clause was "arrest" occasioned Topic: Interpretation
by ordinary judicial process, logically, such "arrest" would now become a covered Ponente: Barrera
risk under subsection 1.1 of Section 1 of the Institute War Clauses, regardless of
whether or not said "arrest" by civil authorities occurred in a state of war. DOCTRINE
The insurance policy is the law between the parties.

FALLO
Wherefore, finding no error in the decision appealed from, the same is hereby
affirmed, without costs.

NATURE OF THE CASE

This is an appeal from the CFI dismissing 6 separate complaints filed by Ty against 6
insurance companies1 for the collection of his compensation for the disability of his
left hand.

FACTS
1. Ty was employed as a mechanic operator in Broadway Cotton Factory in
Caloocan.
2. 1953 (didn’t say which month) – he took Personal Accident Policies from
several insurance companies effective for 12 months.
3. 24 Dec 1953 – a fire broke out in the factory. A heavy object fell on his left
hand while he was trying to put out the fire with a fire extinguisher.
4. Dec 1953 – Feb 1954 – He received treatment from the National
Orthopedic Hospital for injuries he suffered.
5. According to the medical report, he suffered simple and compound
fractures in different fingers which would cause temporary disability of his
left hand.
6. The insurance companies refused to pay his claim.
7. Municipal Court: ordered the insurance companies to pay his claim.
8. CFI: dismissed the claim on the ground that the partial disability because
of loss of either hand must result in its amputation to be compensable.
9. PETITIONER: He avers that it is enough that the insured is disabled, not
amputated, to such extent that he cannot perform necessary acts in the
ordinary conduct of his business2 and that the definition of what
constitutes loss of hand is ambiguous and calls for interpretation.

1 Filipinas Compañia de Seguros, People's Surety & Insurance Co., Inc., South Sea Surety If the Insured sustains any Bodily Injury which is effected solely through violent,
& Insurance Co., Inc., The Philippine Guaranty Company, Inc., Universal Insurance & external, visible and accidental means, and which shall not prove fatal but shall result,
Indemnity Co., and Plaridel Surety & Insurance Co., Inc. independently of all other causes and within sixty (60) days from the occurrence,
2 The insurance contract reads: INDEMNITY FOR TOTAL OR PARTIAL DISABILITY: thereof, in Total or Partial Disability of the Insured, the Company shall pay, subject to
ISSUE: WON he is entitled to claim.
HELD
No.
RATIO
1. In the case at bar, the provision of the policy is clear enough to inform him 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.
2. The SC held that it cannot go beyond the clear and express conditions of the
insurance policies, all of which define partial disability as loss of either hand
by amputation through the bones of the wrist. He suffered injuries which
caused temporary total disability having been caused by fractures of the index,
the middle and the fourth fingers of the left hand. There was no such
amputation.
3. As the terms of the policies are clear, express, and specific that only amputation
would be considered as a loss, to rule that mere fracture would be covered is
unwarranted.
the exceptions as provided for hereinafter, the amount set opposite such injury. The loss
of a hand shall mean the loss, by amputation through the bones of the wrist.
Gulf Resorts, Inc. vs. Philippine Charter Insurance Corp.
G.R. No. 156167 | May 16, 2005
Doctrine: All provisions of the insurance policy should be examined and interpreted
in consonance with each other. All its parts are reflective of the true intent of the
parties. The policy cannot be construed piecemeal. Certain stipulations cannot be
segregated and then made to control; neither do particular words or phrases
necessarily determine its character.
Fallo: IN VIEW WHEREOF, the judgment of the Court of Appeals is affirmed. The
petition for certiorari is dismissed. No costs.
Facts:
• Petitioner Gulf Resorts, Inc. owns Plaza Hotel in Agoo, La Union and had its
properties in said resort insured originally with the American Home Assurance
Company (AHAC-AIU) which includes loss or damage to shock to any of the
property insured by this Policy occasioned by or through or in consequence of
earthquake.
• On July 16, 1990, an earthquake struck Central and Northern Luzon resulting to
the damage of the properties and two swimming pools in Agoo Playa Resort.
• After the earthquake, petitioner advised respondent Philippine Charter
Insurance Corp. that the former would make a claim under its Insurance Policy
No. 31944 for damages on its properties.
• On August 11, 1990, petitioner filed its formal demand for settlement of the
damage to all its properties.
• Respondent denied petitioners claim on the ground that its insurance policy
only afforded earthquake shock coverage to the two swimming pools of the
resort.
• Petitioner contends that the policy’s earthquake shock endorsement clearly
covers all of the properties insured and not only the swimming pools. It used
the words any property insured by this policy, and it should be interpreted as
all inclusive.
• It also claims that the unqualified and unrestricted nature of the earthquake
shock endorsement is confirmed in the body of the insurance policy itself, which
states that it is subject to: Other Insurance Clause, Typhoon Endorsement,
Earthquake Shock Endt., Extended Coverage Endt., FEA Warranty & Annual
Payment Agreement on Long Term Policies.
Issue: Whether the insurance policy earthquake shock coverage extends to other
properties aside from the two swimming pools
Ruling:
No. Petitioner cannot focus on the earthquake shock endorsement to the exclusion
of the other provisions. All the provisions and riders, taken and interpreted together,
indubitably show the intention of the parties to extend earthquake shock coverage
to the two swimming pools only.
A careful examination of the premium recapitulation will show that it is the clear
intent of the parties to extend earthquake shock coverage only to the two swimming
pools.
In the subject policy, no premium payments were made with regard to earthquake
shock coverage, except on the two swimming pools. There is no mention of any
premium payable for the other resort properties with regard to earthquake shock.
This is consistent with the history of petitioner’s previous insurance policies from
AHAC-AIU.
There is no ambiguity in the terms of the contract and its riders. Petitioner cannot
rely on the general rule that insurance contracts are contracts of adhesion which
should be liberally construed in favor of the insured and strictly against the insurer
company which usually prepares it.
We cannot apply the general rule on contracts of adhesion to the case at bar.
Petitioner cannot claim it did not know the provisions of the policy. From the
inception of the policy, petitioner had required the respondent to copy verbatim the
provisions and terms of its latest insurance policy from AHAC-AIU.
Simon De La Cruz vs. The Capital Ins. and Surety Inc.,
Doctrine:
"Accident" and "Accidental", as used in insurance contracts is an event that takes
place without one's foresight or expectation — an event that proceeds from an
unknown cause, or is an unusual effect of a known cause and, therefore, not
expected.
When the death or injury is not the natural or probable result of the insured's
voluntary act, the resulting death is within the protection.
Fallo: SC held for Capital Insurance to indemnify Simon for son’s death.
Facts:
1. Eduardo de la Cruz (Eduardo) is employed as a mucker in Itogon-Suyoc
Mines, Inc. and holds an accident insurance policy with respondent Capital
Insurance & Surety Co., Inc. (Capital) from November 13, 1956 to
November 12, 1957.
2. Under his insurance contract, he is insured "against death or disability
caused by accidental means.”
3. On January 1, 1957, Itogen sponsored a boxing contest to celebrate New
Years Day.
4. Eduardo, as a non-pro boxer, participated in the match.
5. During the match, he slipped and was hit by his opponent causing him to
fall with his head hitting the rope of the ring.
6. He died with the cause of death being hemorrhage.
7. Petitioner Simon de la Cruz was the father and beneficiary of Eduardo and
filed a claim with the insurance company which they refused.
Grounds for refusal
• The death was caused by the voluntary participation of the victim in the
boxing match. Participation in the boxing contest was the "means” which
caused the injury. Hence, given the means used to cause the injury was
voluntary then the resulting injury is not accidental.
Issue: WON Eduardo’s injury is covered under his insurance plan notwithstanding his
voluntary participation in the boxing match. (YES)
Ratio:
1. General rule is if the death or injury is a natural result of the insured's
voluntary act, unaccompanied by anything unforeseen then the resulting
death or injury is from an accident or accidental means within the terms of
the accident-insurance policy.
2. Here, the injury resulted when he slid during the boxing match and hit his
head along the ropes. Although boxing risks external injuries, it does not
make all injuries received not accidental. In addition, death is not ordinarily
anticipated in sports such as boxing.
3. Lastly, the contract expressed what was excluded from coverage
protection:
"(e) Death or disablement consequent upon the Insured
engaging in football, hunting, pigsticking, steeplechasing, polo-
playing, racing of any kind, mountaineering, or motorcycling."
Failure to stipulate that death or injuries from boxing along those outside
the coverage protection leads to the conclusion that such death falls within
the insurance policy protection.
The Insular Life Ass. Co., Ltd. v. Paz Y. Khu
Case Doctrine: an insurance contract is a contract of adhesion which must be
construed liberally in favor of the insured and strictly against the insurer in order to
safeguard the latter’s interest. Limitations of liability should be regarded with
extreme jealousy and must be construed in such a way as to preclude the insurer
from noncompliance with its obligations.
Fallo: WHEREFORE, the Petition is DENIED
Facts:
March 1997 – Felipe Khu, Sr. (Felipe) applied for a life insurance policy with Insular
Life under the latter’s Diamond Jubilee Insurance Plan. Felipe accomplished the
required medical questionnaire wherein he did not declare any illness or adverse
medical condition. This took effect on June 22, 1997.
June 1999 - Felipe’s policy lapsed due to non-payment of the premium covering the
period from June 22, 1999 to June 23, 2000.
September 1999 - Felipe applied for the reinstatement of his policy and paid
P25,020.00 as premium. Except for the change in his occupation of being self-
employed to being the Municipal Mayor of Binuangan, Misamis Oriental, all the
other information submitted by Felipe in his application for reinstatement was
virtually identical to those mentioned in his original policy.
Oct 1999 – Insular Life advised Felipe that his application for reinstatement may only
be considered if he agreed to certain conditions such as payment of additional
premium and the cancellation of the riders pertaining to premium waiver and
accidental death benefits. Felipe agreed to these conditions and paid the agreed
additional premium.
Jan 2000 – Insular Life reinstated Felipe’s policy and issued an Endorsement stating:
This certifies that as agreed by the Insured, the reinstatement of this policy has been
approved by the Company on the understanding that the following changes are
made on the policy effective June 22, 1999…
Sept 2001 – Felipe died.
Paz Y. Khu, Felipe Y. Khu, Jr. and Frederick Y. Khu (Felipe’s beneficiaries or
respondents) filed with Insular Life a claim for benefit under the reinstated policy.
Insular Life denied the claim. It rescinded the reinstated policy on the grounds of
concealment and misrepresentation by Felipe since he did not disclose the ailments
(Type 2 Diabetes Mellitus, Diabetes Nephropathy and Alcoholic Liver Cirrhosis with
Ascites) that he already had prior to his application for reinstatement of his insurance
policy; and that it would not have reinstated the insurance policy had Felipe
disclosed the material information on his adverse health condition. It contended that
when Felipe died, the policy was still contestable.
Respondents instituted a complaint for specific performance with damages.
RTC and CA: ruled in favor of respondents
the amount of P3,054.50 on December 27, 1999 in addition to the P25,020.00 he had
earlier paid on September 7, 1999, Khu had paid for the insurance coverage starting
June 22, 1999. At the very least, this circumstance has engendered a true lacuna.
In the Endorsement, the obscurity is patent. In the first sentence of the
Endorsement, it is not entirely clear whether the phrase "effective June 22, 1999"
refers to the subject of the sentence, namely "the reinstatement of this policy," or
to the subsequent phrase "changes are made on the policy."
Given the obscurity of the language, the construction favorable to the insured will
be adopted by the courts.

Issue: Whether Felipe’s reinstated life insurance policy is already incontestable at Accordingly, the subject policy is deemed reinstated as of June 22, 1999. Thus, the
the time of his death – YES. period of contestability has lapsed.

Ratio: Sec 48 of the Insurance Code provides:

…After a policy of life insurance made payable on the death of the insured shall have
been in force during the lifetime of the insured for a period of two years from the
date of its issue or of its last reinstatement, the insurer cannot prove that the policy
is void ab initio or is rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent.

The insurer is deemed to have the necessary facilities to discover such fraudulent
concealment or misrepresentation within a period of two (2) years. It is not fair for
the insurer to collect the premiums as long as the insured is still alive, only to raise
the issue of fraudulent concealment or misrepresentation when the insured dies in
order to defeat the right of the beneficiary to recover under the policy.

At least two (2) years from the issuance of the policy or its last reinstatement, the
beneficiary is given the stability to recover under the policy when the insured dies.
The provision also makes clear when the two-year period should commence in case
the policy should lapse and is reinstated, that is, from the date of the last
reinstatement’.

In the Letter of Acceptance, Khu declared that he was accepting "the imposition of
an extra/additional premium of P5.00 a year per thousand of insurance; effective
June 22, 1999". It is true that the phrase as used in this particular paragraph does
not refer explicitly to the effectivity of the reinstatement. But the Court notes that
the reinstatement was conditioned upon the payment of additional premium not
only prospectively, that is, to cover the remainder of the annual period of coverage,
but also retroactively, that is for the period starting June 22, 1999. Hence, by paying
Maramag vs De Guzman G.R. No. 181132 June 5, 2009
Petitioners: HEIRS OF LORETO C. MARAMAG, represented by surviving spouse
VICENTA PANGILINAN MARAMAG
Respondents: EVA VERNA DE GUZMAN MARAMAG, ODESSA DE GUZMAN
MARAMAG, KARL BRIAN DE GUZMAN MARAMAG, TRISHA ANGELIE MARAMAG, THE
INSULAR LIFE ASSURANCE COMPANY, LTD., and GREAT PACIFIC LIFE ASSURANCE
CORPORATION
Ponente: NACHURA
FALLO: WHEREFORE, the petition is DENIED for lack of merit. Costs against
petitioners.
FACTS:
The case stems from a petition filed against respondents for revocation and/or
reduction of insurance proceeds for being void and/or inofficious, with prayer for
a TRO and a writ of preliminary injunction.
The petition alleged that:
1. petitioners were the legitimate wife and children of Loreto Maramag
(Loreto), while respondents were Loretos illegitimate family;
2. Eva de Guzman Maramag (Eva) was a concubine of Loreto and a suspect in
the killing of the latter, thus, she is disqualified to receive any proceeds
from his insurance policies from Insular Life Assurance Company, Ltd.
(Insular) and Great Pacific Life Assurance Corporation (Grepalife);
3. the illegitimate children of Loreto Odessa, Karl Brian, and Trisha
Angeliewere entitled only to one-half of the legitime of the legitimate
children, thus, the proceeds released to Odessa and those to be released
to Karl Brian and Trisha Angelie were inofficious and should be reduced;
and
4. petitioners could not be deprived of their legitimes, which should be
satisfied first
5. that part of the insurance proceeds had already been released in favor
of Odessa, while the rest of the proceeds are to be released in favor of
Karl Brian and Trisha Angelie, both minors, upon the appointment of
their legal guardian.
Insular’s Answer:
• admitted that Loreto misrepresented Eva as his legitimate wife and
Odessa, Karl Brian, and Trisha Angelie as his legitimate children, and
• that they filed their claims for the insurance proceeds of the insurance
policies;
• that when it ascertained that Eva was not the legal wife of Loreto, it
disqualified her as a beneficiary and divided the proceeds among Odessa,
Karl Brian, and Trisha Angelie, as the remaining designated beneficiaries;
and
• that it released Odessas share as she was of age, but withheld the release
of the shares of minors Karl Brian and Trisha Angelie pending submission
of letters of guardianship.
• that the complaint or petition failed to state a cause of action insofar as it
sought to declare as void the designation of Eva as beneficiary, because
Loreto revoked her designation as such in Policy No. A001544070 and it
disqualified her in Policy No. A001693029; and
• insofar as it sought to declare as inofficious the shares of Odessa, Karl
Brian, and Trisha Angelie, considering that no settlement of Loretos estate
had been filed nor had the respective shares of the heirs been determined.
• that it was bound to honor the insurance policies designating the children
of Loreto with Eva as beneficiaries pursuant to Section 53 of the
Insurance Code.
Grepalife’s Answer:
• alleged that Eva was not designated as an insurance policy beneficiary;
• that the claims filed by Odessa, Karl Brian, and Trisha Angelie were denied
because Loreto was ineligible for insurance due to a misrepresentation in
his application form that he was born on December 10, 1936 and, thus, not
more than 65 years old when he signed it in September 2001;
• that the case was premature, there being no claim filed by the legitimate
family of Loreto; and
• that the law on succession does not apply where the designation of
insurance beneficiaries is clear.
Insular and Grepalife’s Reply:
• the insurance proceeds belong exclusively to the designated beneficiaries
in the policies, not to the estate or to the heirs of the insured.
• that it had disqualified Eva as a beneficiary when it ascertained that Loreto
was legally married to Vicenta Pangilinan Maramag.
RTC Resolution:
• MTD of Insular Life and Grepalife is granted with respect to
defendants Odessa, Karl Brian and Trisha Maramag. The action shall
proceed with respect to the other defendants Eva Verna de Guzman,
Insular Life and Grepalife.
 • The Insurance Code, as amended, contains a provision regarding to whom
the insurance proceeds shall be paid. It is very clear under Sec. 53 thereof
that the insurance proceeds shall be applied exclusively to the proper
interest of the person in whose name or for whose benefit it is made,
unless otherwise specified in the policy.
• The rules on testamentary succession cannot apply here, for the
insurance indemnity does not partake of a donation.
• As such, the insurance indemnity cannot be considered as an advance of
the inheritance which can be subject to collation
• With the finding of the trial court that the proceeds to the Life Insurance
Policy belongs exclusively to the defendant as his individual and separate
property, we agree 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
• One of the named beneficiary in the insurances taken by the late Loreto C.
Maramag is his concubine Eva Verna De Guzman.
• Any person who is forbidden from receiving any donation under Article 739
cannot be named beneficiary of a life insurance policy of the person who
cannot make any donation to him, according to said article (Art. 2012, Civil
Code).
• If a concubine is made the beneficiary, it is believed that the insurance
contract will still remain valid, but the indemnity must go to the legal
heirs and not to the concubine, for evidently, what is prohibited under
Art. 2012 is the naming of the improper beneficiary.
• Since the designation of defendant Eva Verna de Guzman as one of the
primary beneficiary in the insurances taken by the late Loreto C.
Maramag is void under Art. 739 of the Civil Code, the insurance indemnity
that should be paid to her must go to the legal heirs of the deceased
which this court may properly take cognizance as the action for the
declaration for the nullity of a void donation falls within the general
jurisdiction of this Court.
Insular and Grepalife argued
• that the proceeds were divided among the three children as the remaining
named beneficiaries.
• that the premiums paid had already been refunded.
RTC’s Resolution: Granted MR of Insular and Grepalife
• Loreto revoked the designation of Eva in one policy and that Insular
disqualified her as a beneficiary in the other policy such that the entire
proceeds would be paid to the illegitimate children of Loreto with Eva
pursuant to Section 53 of the Insurance Code.
• It ruled that it is only in cases where there are no beneficiaries
designated, or when the only designated beneficiary is disqualified, that
the proceeds should be paid to the estate of the insured.
• As to the claim that the proceeds to be paid to Loretos illegitimate children
should be reduced based on the rules on legitime, the trial court held that
the distribution of the insurance proceeds is governed primarily by the
Insurance Code, and the provisions of the Civil Code are irrelevant and
inapplicable.
ISSUE: Whether or not the members of the legitimate family entitled to
the proceeds of the insurance for the concubine
RULING: NO. Petition denied.
RATIO:
In this case, it is clear from the petition filed before the trial court that, although
petitioners are the legitimate heirs of Loreto, they were not named as beneficiaries
in the insurance policies issued by Insular and Grepalife.
The basis of petitioners’ claim is that Eva, being a concubine of Loreto and a suspect
in his murder, is disqualified from being designated as beneficiary of the insurance
policies, and that Evas children with Loreto, being illegitimate children, are entitled
to a lesser share of the proceeds of the policies.
They also argued that pursuant to Section 12 of the Insurance Code, Evas share in
the proceeds should be forfeited in their favor, the former having brought about the
death of Loreto.
Thus, they prayed that the share of Eva and portions of the shares of Loretos
illegitimate children should be awarded to them, being the legitimate heirs of Loreto
entitled to their respective legitimes.
It is evident from the face of the complaint that petitioners are not entitled to a
favorable judgment in light of Article 2011 of the Civil Code which expressly provides
that insurance contracts shall be governed by special laws, i.e., the Insurance
Code. Section 53 of the Insurance Code states
SECTION 53. The insurance proceeds shall be applied exclusively to the
proper interest of the person in whose name or for whose benefit it is
made unless otherwise specified in the policy.
Pursuant thereto, it is obvious that the only persons entitled to claim the insurance
proceeds are either the insured, if still alive; or the beneficiary, if the insured is
already deceased, upon the maturation of the policy.
The exception to this rule is a situation where the insurance contract was intended
to benefit third persons who are not parties to the same in the form of favorable
stipulations or indemnity. In such a case, third parties may directly sue and claim
from the insurer.
Petitioners are third parties to the insurance contracts with Insular and Grepalife
and, thus, are not entitled to the proceeds thereof. Accordingly, respondents Insular
and Grepalife have no legal obligation to turn over the insurance proceeds to
petitioners.
The revocation of Eva as a beneficiary in one policy and her disqualification as such
in another are of no moment considering that the designation of the illegitimate
children as beneficiaries in Loretos insurance policies remains valid. Because no
legal proscription exists in naming as beneficiaries the children of illicit relationships
by the insured, the shares of Eva in the insurance proceeds, whether forfeited by the
court in view of the prohibition on donations under Article 739 of the Civil Code or
by the insurers themselves for reasons based on the insurance contracts, must be
awarded to the said illegitimate children, the designated beneficiaries, to the
exclusion of petitioners.
It is only in cases where the insured has not designated any beneficiary, or when
the designated beneficiary is disqualified by law to receive the proceeds, that the
insurance policy proceeds shall redound to the benefit of the estate of the insured.
Southern Luzon Employees’ Ass. V. Golpeo, et al.
DOCTRINE: 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, is the doctrine in America.
FALLO: Wherefore, the appealed decision is affirmed, and it is so ordered without
costs.
FACTS:
• Plaintiff, Southern Luzon Employees' Association, is composed of laborers and
employees with respect to transportation companies. One of its purposes is
mutual aid of its members and their dependents in case of death.
• The association adopted the following resolution:
xxx. “…that a member may, if he chooses, put down
his common-law wife as his beneficiary and/or children had with her as the case may
be.” xxx
xxx. That such person so named by the member will be the sole persons to be
recognized by the Association regarding claims for condolence contributions." xxx
• Roman A. Concepcion was a member until his death on December 13, 1950.
Roman M. Concepcion, Jr., Estela M. Concepcion, Rolando M. Concepcion and
Robin M. Concepcion. After the death of Roman A. Concepcion, the association
was able to collect voluntary contributions from its members amounting to
P2,505. Three sets of claimants presented themselves, namely, (1) Juanita
Golpeo, legal wife of Roman A. Concepcion, and her children; (2) Aquilina
Maloles, common law wife of Roman A. Concepcion, and her children, named
beneficiaries by the deceased; and (3) Elsie Hicban, another common law wife
of Roman A. Concepcion, and her child.
• The plaintiff association was accordingly constrained to institute in the Court of
First Instance for interpleading against the three conflicting claimants as
defendants.
• Afterhearing, the court rendered a decision, declaring the defendants Aquilina
Maloles and her children the sole beneficiaries of the sum of P2,505.00. Juanita
Golpeo later on appealed to the Supreme Court.
ISSUE: Whether or not the contract between the association and its member, Roman
Conception, was in the nature of an insurance, and therefore the amount in question
belonged exclusively to the beneficiaries?
RATIO:
• The trial court has not considered the plaintiff as a regular insurance company
but merely ruled that the death benefit in question is analogous to an insurance.
Moreover, section 1628 of the Revised Administrative Code defines a mutual
benefit association as one, among others, "providing for any method of accident
or life insurance among its members out of dues or assessments collected from
the membership."
• The contract of life insurance is a special contract and the destination of the
proceeds thereof is determined by special laws which deal exclusively with that
subject. That subject is regulated exclusively by the Code of Commerce which
provides for the terms of the contract, the relations of the parties and the
destination of the proceeds of the policy.
• Appellants also argue that Aquillana Maloles and her children cannot avail of
the benefits due to the fact that they are the illegitimate children of Roman
Conception. However, the fact that new Civil Code recognizes certain
successional rights of illegitimate children. (Article 287) diminishes that
argument.
VDA. DE CONSUEGRA V. GSIS, G.R. No. L-28093, January 30, 1971
Petitioners-appellants: BASILIA BERDIN VDA. DE CONSUEGRA; JULIANA,
PACITA, MARIA LOURDES, JOSE, JR., RODRIGO, LINEDA and LUIS, all
surnamed CONSUEGRA
Respondent-appellee: GOVERNMENT SERVICE INSURANCE SYSTEM,
COMMISSIONER OF PUBLIC HIGHWAYS, HIGHWAY DISTRICT ENGINEER OF
SURIGAO DEL NORTE, COMMISSIONER OF CIVIL SERVICE, and ROSARIO
DIAZ
Ponente: MAKALINTAL
DOCTRINE: GSIS offers two separate and distinct systems of benefits to its
members: (1) life insurance; and (2) retirement insurance (refer to ruling portion
for the detailed difference). These two distinct systems of benefits are paid out
from two distinct and separate funds that are maintained by the GSIS.
The beneficiary named in the life insurance does not automatically become the
beneficiary in the retirement insurance unless the same beneficiary in the life
insurance is so designated in the application for retirement insurance. There is
need for the employee to file an application for retirement insurance benefits
when he becomes a member of the GSIS, and he should state in his application
the beneficiary of his retirement insurance.
FALLO: “WHEREFORE, the decision appealed from is affirmed, with costs against
petitioners-appellants. It is so ordered.”
FACTS
The late Jose Consuegra, at the time of his death, was employed as a shop foreman
of the office of the District Engineer, Surigao del Norte.
In his lifetime, Consuegra contracted two marriages:
1. respondent Rosario Diaz, solemnized in the parish church in Surigao, on
July 15, 1937, with 2 children: Jose Consuegra, Jr. and Pedro Consuegra,
but both predeceased their father;
2. petitioner Basilia Berdin: contracted in good faith while the first marriage
was subsisting on May 1, 1957 in the same parish and municipality with 7
children: Juliana, Pacita, Maria Lourdes, Jose, Rodrigo, Lenida and Luz, all
surnamed Consuegra.
Being a member of the GSIS when Consuegra died on September 26, 1965, the
proceeds of his life insurance were paid to Berdin and her children, the beneficiaries
named in the policy.
Having been in the service of the government for 22.5028 years, Consuegra was
entitled to retirement insurance benefits in the sum of P6,304.47 pursuant to Sec.
12(c) of Commonwealth Act 186 as amended by RA 1616 and 3836. Consuegra did
not designate any beneficiary who would receive the retirement insurance benefits
due to him.
Diaz, the widow by the first marriage, filed a claim with the GSIS asking that the
retirement insurance benefits be paid to her as the only legal heir of Consuegra,
considering that the deceased did not designate any beneficiary with respect to his
retirement insurance benefits.
Berdin and her children, likewise, filed a similar claim with the GSIS, asserting that
being the beneficiaries named in the life insurance policy of Consuegra, they are the
only ones entitled to receive the retirement insurance benefits due the deceased
Consuegra.
GSIS DECISION: The legal heirs of the late Consuegra were Diaz (1st marriage) who
is entitled to one-half, or 8/16; and Berdin (2nd marriage) and their 7 children for the
remaining one-half, or 8/16, each of them to receive an equal share of 1/16.
Berdin and her children filed a petition for mandamus with preliminary injunction in
the CFI against GSIS, the Commissioner of Public Highways, the Highway District
Engineer of Surigao del Norte, the Commissioner of Civil Service, and Rosario Diaz,
praying that they be declared the legal heirs and exclusive beneficiaries of the
retirement insurance of the late Consuegra, and that a writ of preliminary injunction
be issued restraining the implementation of the adjudication made by the GSIS.
TRIAL COURT DECISION: Basilia Berdin and children are entitled to one-half (1/2) and
Rosario Diaz to the other half of the retirement benefit of the late Consuegra from
GSIS.
BERDIN’s CONTENTIONS: The system of life insurance and the system of retirement
insurance are complementary to each other, or that one is a part or an extension of
the other. Whoever is named the beneficiary in the life insurance is also the
beneficiary in the retirement insurance when no such beneficiary is named in the
retirement insurance.
ISSUE: WON the named beneficiary in the life insurance is automatically the
beneficiary in the retirement insurance, when none is named
RULING: NO. The contention of appellants is untenable.
As originally approved, Commonwealth Act 186 which created the GSIS provided for
life insurance only to all regularly and permanently appointed officials and
employees of the government.
It was amended by Republic Act 660 (June 16, 1951), which provided that aside from
the system of life insurance under the GSIS, there was also established the system of
retirement insurance.
Subsection (c) of Section 12 of Commonwealth Act 186, as thus amended and
reamended, read as follows:
(c) Retirement is likewise allowed to a member, regardless of age, who has
rendered at least twenty years of service. The benefit shall, in addition to
the return of his personal contributions plus interest and the payment of
the corresponding employer's premiums described in subsection (a) of
Section 5 hereof, without interest, be only a gratuity equivalent to one
month's salary for every year of service, based on the highest rate
received, but not to exceed twenty-four months; Provided, That the
retiring officer or employee has been in the service of the said employer
or office for at least four years, immediately preceding his retirement.
xxx xxx xxx
The gratuity is payable by the employer or office concerned which is hereby
authorized to provide the necessary appropriation to pay the same from any
unexpended items of appropriations.
Elective or appointive officials and employees paid gratuity under this subsection
shall be entitled to the commutation of the unused vacation and sick leave, based on
the highest rate received, which they may have to their credit at the time of
retirement.
Jose Consuegra, at the time of his death he had acquired rights under subsection
(c) of Section 12 of Com. Act 186, as amended by RA 3836.
When Consuegra died on September 26, 1965, he had to his credit 22.5028 years of
service in the government, and pursuant to the above-quoted provisions of
subsection (c) of Section 12 of Com. Act 186, as amended, on the basis of the highest
rate of salary received by him which was P282.83 per month, he was entitled to
receive retirement insurance benefits in the amount of P6,304.47.
If Consuegra had 22.5028 years of service in the government when he died on
September 26, 1965, it follows that he started in the government service sometime
during the early part of 1943, or before 1943 when the only benefits then provided
for were those that proceed from a life insurance.
It cannot be said that because the appellants were designated beneficiaries in
Consuegra's life insurance, they automatically became the beneficiaries also of his
retirement insurance.
Upon entering the government service, Consuegra became a compulsory member of
the GSIS, being automatically insured on his life. When Consuegra designated his
beneficiaries in his life insurance he could not have intended those beneficiaries of
his life insurance as also the beneficiaries of his retirement insurance because the
provisions on retirement insurance under the GSIS came about only when Com. Act
186 was amended by RA 660.
Subsection (b) of Section 11 of Com. Act 186, as amended by Rep. Act 660:
(b) Survivors benefit. — Upon death before he becomes eligible for
retirement, his beneficiaries as recorded in the application for retirement
annuity filed with the System shall be paid his own premiums with interest
of three per centum per annum, compounded monthly. If on his death he
is eligible for retirement, then the automatic retirement annuity or the
annuity chosen by him previously shall be paid accordingly.
The beneficiary named in the life insurance does not automatically become the
beneficiary in the retirement insurance unless the same beneficiary in the life
insurance is so designated in the application for retirement insurance. There is
need for the employee to file an application for retirement insurance benefits when
he becomes a member of the GSIS, and he should state in his application the
beneficiary of his retirement insurance.
Section 24 of Commonwealth Act 186, as amended by Rep. Act 660, provides for a
life insurance fund and for a retirement insurance fund.
Subsections (a) and (b) of Section 24 of CA 186, as amended by RA 660:
(a) Life insurance fund. — This shall consist of all premiums for life
insurance benefit and/or earnings and savings therefrom. It shall meet
death claims as they may arise or such equities as any member may be
entitled to, under the conditions of his policy, and shall maintain the
required reserves to the end of guaranteeing the fulfillment of the life
insurance contracts issued by the System ...
(b) Retirement insurance fund. — This shall consist of all
contributions for retirement insurance benefit and of earnings and savings
therefrom. It shall meet annuity payments and establish the required
reserves to the end of guaranteeing the fulfillment of the contracts issued
by the System. ...
GSIS offers two separate and distinct systems of benefits to its members:
1. life insurance
2. retirement insurance
3.
These two distinct systems of benefits are paid out from two distinct and separate
funds that are maintained by the GSIS.
Proceeds of a life insurance are paid to whoever is named the beneficiary in the life
insurance policy. As in the case of a life insurance provided for in the Insurance Act
(Act 2427, as amended), the beneficiary in a life insurance under the GSIS may not
necessarily be an heir of the insured. The insured in a life insurance may designate
any person as beneficiary unless disqualified to be so under the provisions of the
Civil Code. And in the absence of any beneficiary named in the life insurance policy,
the proceeds of the insurance will go to the estate of the insured.
Retirement insurance is primarily intended for the benefit of the employee — to
provide for his old age, or incapacity, after rendering service in the government for
a required number of years. If the employee reaches the age of retirement, he gets
the retirement benefits even to the exclusion of the beneficiary or beneficiaries
named in his application for retirement insurance. The beneficiary of the retirement
insurance can only claim the proceeds of the retirement insurance if the employee
dies before retirement. If the employee failed or overlooked to state the beneficiary
of his retirement insurance, the retirement benefits will accrue to his estate and will
be given to his legal heirs in accordance with law, as in the case of a life insurance if
no beneficiary is named in the insurance policy.
CONCLUSION:
GSIS had correctly acted when it ruled that the proceeds of the retirement insurance
of the late Consuegra should be divided equally between his first living wife and his
second wife and his children by her.
Lower court did not commit error when it confirmed the action of the GSIS, it being
accepted as a fact that the second marriage was contracted in good faith.
Since the defendant's first marriage has not been dissolved or declared void, the
conjugal partnership established by that marriage has not ceased nor has the first
wife lost or relinquished her status as putative heir of her husband. Accordingly, she
has an interest in the husband's share in the property here in dispute. Although the
second marriage can be presumed to be void ab initio as it was celebrated while the
first marriage was still subsisting, still there is need for judicial declaration of such
nullity. And inasmuch as the conjugal partnership formed by the second marriage
was dissolved before judicial declaration of its nullity, "[t]he only lust and equitable
solution in this case would be to recognize the right of the second wife to her share
of one-half in the property acquired by her and her husband and consider the other
half as pertaining to the conjugal partnership of the first marriage.
The Insular Life Assurance Company, Ltd. vs. Carpiona T. Ebrado and Pascuala Vda.
De Ebrado, G.R. No. L-44059 October 28, 1977
DOCTRINE: Any person who is forbidden from receiving any donation under Article
739 cannot be named beneficiary of a life insurance policy by the person who cannot
donate to him. Common-law spouses are barred from receiving donations from each
other.
FALLO: 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.
FACTS:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with
a rider for Accidental Death. He designated Carponia T. Ebrado as the
revocable beneficiary in his policy. He referred to her as his wife.
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made
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.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as
the designated beneficiary therein, although she admited that she and the insured
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.
Insular commenced an action for Interpleader before the trial court as to who should
be given the proceeds. The court declared Carponia as disqualified.
ISSUE: Whether or not a common-law wife named as beneficiary in the life insurance
policy of a legally married man can claim the proceeds in case of death of the latter?
– No.
RATIO: Section 50 of the Insurance Act which provides that "the insurance shall be
applied exclusively to the proper interest of the person in whose name it is made".
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.
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.
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.
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 life
insurance policy by the person who cannot make a donation to him. Common-law
spouses are barred from receiving donations from each other.
Article 739 provides that void donations are those made between persons who were
guilty of adultery or concubinage at the time of donation.
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. So long as marriage 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.
A conviction for adultery or concubinage isn’t required exacted before
the disabilities mentioned in Article 739 may effectuate. The article says that 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. 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.
The insured was married to Pascuala Ebrado with whom she has six legitimate
children. He was also living in with his common-law wife with whom he has two
children.
Spouses Cha vs. Court of Appeals
GR 124520, 18 August 1997
DOCTRINE
[1] 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
[2] The lessor cannot be validly a beneficiary of a fire insurance policy taken by a
lessee over his merchandise, and the provision in the lease contract providing for
such automatic assignment is void for being contrary to law and/or public policy—
the insurer cannot be compelled to pay the proceeds of the policy to a person who
has no insurable interest in the property insured.
FALLO
WHEREFORE, the decision of the Court of Appeals in CAG.R. CV No. 39328 is SET
ASIDE and a new decision is hereby entered, awarding the proceeds of the fire
insurance policy to petitioners Nilo Cha and Stella Uy-Cha.
FACTS
Spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease
contract with CKS Development Corporation, as lessor, on 5 October 1988. One of
the stipulations of the 1year lease contract states that "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 in the lease contract, the Cha
spouses insured against loss by fire their merchandise inside the leased premises for
P500,000.00 with the United Insurance Co., Inc. without the written consent of 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 insurer (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. Hence, the latter filed a complaint against the Cha spouses and United.
ISSUE/S
Whether or not the subject provision of the lease contract entered into between CKS
and the Cha spouses is valid insofar as it provides that any fire insurance policy
obtained by the lessee (Cha spouses) over their merchandise inside the leased
premises is deemed assigned or transferred to the lessor (CKS) if said policy is
obtained without the prior written consent of the latter.
RATIO
NO. It is basic in the law on contracts that the stipulations contained in a
contract cannot be contrary to law, morals, good customs, public order or public
policy. Section 18 of the Insurance Code provides that "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 the 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 such a case, the contract of insurance is a mere wager which is void
under Section 25 of the Insurance Code, which provides that "Every stipulation in a
policy of Insurance for the payment of loss whether the person insured has or has
not any interest in the property insured, or that the policy shall be received as proof
of such interest, and every policy executed by way of gaming or wagering, is void."
Herein, 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 provides that "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 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. 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.
Gaisano Cagayan, Inc. vs. Insurance Co. of North America
G.R. No. 147839, June 8, 2006 J. AUSTRIA-MARTINEZ, J
DOCTRINE
Anyone has an insurable interest in property that derives a benefit from its existence
or would suffer loss from its destruction. It is sufficient that the insured is so situated
with reference to the property that he would be liable to loss should it be injured or
destroyed by the peril against which it is insured an insurable interest in property
does not necessarily imply a property interest in, or a lien upon, or possession of, the
subject matter of the insurance, and neither the title nor a beneficial interest is
requisite to the existence of such an interest insurance.
FALLO
WHEREFORE, the petition is partly GRANTED. The assailed Decision dated October
11, 2000 and Resolution dated April 11, 2001 of the Court of Appeals in CA-G.R. CV
No. 61848 are AFFIRMED with the MODIFICATION that the order to pay the amount
of P535,613.00 to respondent is DELETED for lack of factual basis. No
pronouncement as to costs. SO ORDERED.
FACTS:
[Nature of the Case: Petition for review (Rule 45) assailing CA decision which
reversed RTC Manila (Br. 21) decision]
Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi
Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks
owned by Levi Strauss & Co.
IMC and LSPI separately obtained from respondent fire insurance policies with
book debt endorsements. The insurance policies provide for coverage on "book
debts in connection with ready-made clothing materials which have been sold or
delivered to various customers and dealers of the Insured anywhere in the
Philippines. The policies defined book debts as the "unpaid account still appearing
in the Book of Account of the Insured 45 days after the time of the loss covered
under this Policy.
On February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City,
owned by petitioner, was consumed by fire. Included in the items lost or destroyed
in the fire were stocks of ready-made clothing materials sold and delivered by IMC
and LSPI.
On February 4, 1992, Respondent filed a complaint for damages against petitioner.
Alleging that:
 • IMC and LSPI filed with respondent their claims under their respective
fire insurance policies with book debt endorsements;
• As of February 25, 1991, the unpaid accounts of petitioner on the sale
and delivery of ready-made clothing materials with IMC
was P2,119,205.00 while with LSPI it was P535,613.00;
• Respondent paid the claims of IMC and LSPI and, by virtue thereof,
respondent was subrogated to their rights against petitioner;
• Respondent made several demands for payment upon petitioner but
these went unheeded.
Petitioner’s contention:
• It could not be held liable because the property covered by the
insurance policies were destroyed due to fortuities event or force
majeure;
• Respondent's right of subrogation has no basis inasmuch as there was
no breach of contract committed by it since the loss was due to fire
which it could not prevent or foresee;
• IMC and LSPI never communicated to it that they insured their
properties; that it never consented to paying the claim of the insured
RTC: the fire was purely accidental; that the cause of the fire was not attributable
to the negligence of the petitioner; IMC and LSPI retained ownership of the
delivered goods and must bear the loss. (res perit domino)
CA: reversed the decision of RTC. Sales invoices is an exception under Article 1504
(1) of the Civil Code to res perit domino
ISSUE: Whether or not Insurance Company of North America can claim against
Gaisano Cagayan for the debt that was insured –Yes.
RATIO:
The insurance in this case is not for loss of goods by fire but for petitioner's
accounts with IMC and LSPI that remained unpaid 45 days after the fire.
Accordingly, petitioner's obligation is for the payment of money. As correctly
stated by the CA, where the obligation consists in the payment of money, the
failure of the debtor to make the payment even by reason of a fortuitous event
shall not relieve him of his liability. The rationale for this is that the rule that an
obligor should be held exempt from liability when the loss occurs thru a fortuitous
event only holds true when the obligation consists in the delivery of a determinate
thing and there is no stipulation holding him liable even in case of fortuitous event.
It does not apply when the obligation is pecuniary in nature.
Thus, whether fire is a fortuitous event or petitioner was negligent are matters
immaterial to this case. What is relevant here is whether it has been established
that petitioner has outstanding accounts with IMC and LSPI.
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but when the ownership therein is
transferred to the buyer the goods are at the buyer's risk whether actual delivery
has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the ownership in the goods has been
retained by the seller merely to secure performance by the buyer of his obligations
under the contract, the goods are at the buyer's risk from the time of such
delivery;
IMC and LSPI did not lose complete interest over the goods. They have an
insurable interest until full payment of the value of the delivered goods. Unlike
the civil law concept of res perit domino, where ownership is the basis for
consideration of who bears the risk of loss, in property insurance, one's interest is
not determined by concept of title, but whether insured has substantial economic
interest in the property.
Section 13 of our Insurance Code defines insurable interest as "every interest in
property, whether real or personal, or any relation thereto, or liability in respect
thereof, of such nature that a contemplated peril might directly damnify the
insured." Parenthetically, under Section 14 of the same Code, an insurable interest
in property may consist in: (a) an existing interest; (b) an inchoate interest founded
on existing interest; or (c) an expectancy, coupled with an existing interest in that
out of which the expectancy arises.
Anyone has an insurable interest in property that derives a benefit from its
existence or would suffer loss from its destruction. It is sufficient that the insured
is so situated with reference to the property that he would be liable to loss should
it be injured or destroyed by the peril against which it is insured an insurable
interest in property does not necessarily imply a property interest in, or a lien
upon, or possession of, the subject matter of the insurance, and neither the title
nor a beneficial interest is requisite to the existence of such an interest insurance
in this case is not for loss of goods by fire but for petitioner's accounts with IMC
and LSPI that remained unpaid 45 days after the fire - obligation is pecuniary in
nature obligor should be held exempt from liability when the loss occurs thru a
fortuitous event only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable even in case of
fortuitous event.
Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or
destruction of anything of the same kind does not extinguish the obligation (Genus
nunquan perit)
The subrogation receipt, by itself, is sufficient to establish not only the relationship
of respondent as insurer and IMC as the insured, but also the amount paid to settle
the insurance claim
Art. 2207. If the plaintiff's property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who
has violated the contract.
As to LSPI, no subrogation receipt was offered in evidence. Failure to substantiate
the claim of subrogation is fatal to petitioner's case for recovery of the amount of
P535,613
Ong Lim Sing Jr. vs. FEB Leasing & Finance Corporation
DOCTRINE: A lessee has an insurable interest in the equipment and motor vehicle
leased, and the measure of its insurable interest is the extent to which it may be
damnified by loss or injury thereof.
FALLO: WHEREFORE, in the light of all the foregoing, the petition is DENIED.
FACTS: FEB entered into a lease of equipment and motor vehicles with JVL with Lim
as the guaranty. Under the contract, JVL was obliged to pay FEB monthly rental of
P170,494.00. JVL defaulted in the payment. DEB send a letter to JVL demanding
payment and upon failure to pay, FEB filed a complaint for sum of money against JVL,
Lim and John Doe.
JVL and Lim admitted the existence of the lease agreement but asserted that it is in
reality a sale of equipment on installment basis, with FEB acting as the financier. JVL
and Lim claimed that this intention was apparent from the fact that they were made
to believe that when full payment was effected, a Dead of Sale will be executed by
FEB as vendor in favor of JVL and Lim as vendees. They also contended that the lease
agreement is a contract of adhesion and should, therefore, be construed against the
party who prepared it.
RTC upheld JVL and Lim’s stance stressing the contradictory terms it found on the
lease agreement. The said contract disclaimed warranty of product and that the
lessor does not guarantee any feature or aspect of the object of the contract as to
its merchantability. Merchantability is a term applied in a contract of sale of goods
where conditions and warranties are made to apply. Also, the alleged lessee was
required to insure the thing against loss, damage or destruction which would not be
possible if there is no right, title, or interest that he will be benefited by its
preservation and continued existence or suffer a direct pecuniary loss from its
destruction or injury by peril insured against. If the defendants were to be regarded
as only a lessee, logically the lessor who asserts ownership will be the one directly
benefited or injured and therefore the lessee is not supposed to be the assured as
he has no insurable interest.
On appeal, CA issued a decision declaring the transaction between the parties as a
financial lease agreement under RA 8556.
ISSUE: W/N the petitioner is a lessee with insurable interest over the subject
personal properties. – YES.
RATIO: The stipulation that the equipment shall be insured at the cost and expense
of the lessee against loss, damage, or destruction from fire, theft, accident or other
insurable risk for the full term of the lease, is a binding and valid stipulation.
Petitioner, as a lessee, has an insurable interest in the equipment and motor vehicles
leased. Section 17 of the Insurance Code provides that the measure of an insurable
interest in property is the extent to which the insured might be damnified by loss or
injury thereof. It cannot be denied that HVL will be directly damnified in case of loss,
damage, or destruction of any of the properties leased.
Likewise, the stipulation is Sec. 9.1 of the ease contract that the lessor does not
warrant the merchantability of the equipment is a valid stipulation. In the financial
lease agreement, FEB did not assume responsibility as to the quality,
merchantability, or capacity of the equipment. This stipulation provides that in case
of defect, recourse should be made to the manufacturer. “The financial lessor, being
a financing company, i.e., an extender of credit rather than an ordinary equipment
for any particular use. Thus, the financial lessee was precisely in a position to enforce
such warranty directly against the supplier of the equipment and not against the
financial lessor.
Great Pacific Life Ass. Corp. vs. CA and Leuterio, G.R. No. 113899. Oct. 13, 1999
INSURABLE INTEREST
FACTS
• A contract of group life insurance was executed between petitioner Great
Pacific Life Assurance Corporation and Development Bank of the
Philippines. Grepalife agreed to insure the lives of eligible housing loan
mortgagors of DBP.
• On November 11, 1983, Dr. Wilfredo Leuterio, a physician and a housing
debtor of DBP applied for membership in the group life insurance plan. In
an application form, Dr. Leuterio answered that he had no high blood and
to the best of his knowledge was in good health.
• On November 15, 1983, Grepalife issued Certificate No. B-18558, as
insurance coverage of Dr. Leuterio.
• On August 6, 1984, Dr. Leuterio died due to massive cerebral hemorrhage.
• Consequently, DBP submitted a death claim to Grepalife.
• Grepalife denied the claim alleging that Dr. Leuterio was not physically
healthy when he applied for an insurance coverage on November 15, 1983.
• Grepalife insisted that Dr. Leuterio did not disclose he had been suffering
from hypertension, which caused his death. Allegedly, such non-disclosure
constituted concealment that justified the denial of the claim.
• On October 20, 1986, the widow of the late Dr. Leuterio, respondent
Medarda V. Leuterio, filed a complaint with the RTC against Grepalife for
Specific Performance with Damages.
• Dr. Hernando Mejia, who issued the death certificate, was called to testify.
He 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.
GREPALife Contention:
• That MEDARDA V. LEUTERIO was not the real party in interest therefore
the case should be dismissed for the court had no juirsidiction over the
case.
• GREPALife claims that it falls to the DBP to file the case.
ISSUE:
 • Whether or not MEDARDA V. LEUTERIO has an insurable interest that
qualifies her to be a real party in interest?
HELD: The Insured may be regarded as the real party in interest, although he has
assigned the policy for the purpose of collection, or has assigned as collateral
security any judgment he may obtain.
The Group insurance policy (how the policy worked)
• 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.
RATIONALE: The Insurable Interest of the Spouse
Section 8 of the Insurance Code provides:
Unless the policy provides, where a mortgagor of property
effects insurance in his own name providing that the loss
shall be payable to the mortgagee, or assigns a policy of
insurance to a mortgagee, the insurance is deemed to be
upon the interest of the mortgagor, who does not cease to
be a party to the original contract, and any act of his, prior to
the loss, which would otherwise avoid the insurance, will
have the same effect, although the property is in the hands
of the mortgagee, but any act which, under the contract of
insurance, is to be performed by the mortgagor, may be
performed by the mortgagee therein named, with the same
effect as if it had been performed by the mortgagor.
The insured private respondent did not cede to the mortgagee all his rights or
interests in the insurance, the policy stating that: In the event of the debtors death
before his indebtedness with the [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 GREPALife, 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.
DBP has no longer an interest in the insurance, but the insurance policy remained
active, leaving the “insured” a right over the insurance.
Insured, being the person with whom the contract was made, is primarily
the proper person to bring suit thereon. * * * Subject to some exceptions,
insured may thus sue, although the policy is taken wholly or in part for the
benefit of another person named or unnamed, and although it is expressly
made payable to another as his interest may appear or otherwise. * * *
Although a policy issued to a mortgagor is taken out for the benefit of the
mortgagee and is made payable to him, yet the mortgagor may sue
thereon in his own name, especially where the mortgagees interest is less
than the full amount recoverable under the policy, (Gonzales La O vs. Yek
Tong Lin Fire & Marine Ins. Co)
Insured may be regarded as the real party in interest, although he has assigned the
policy for the purpose of collection, or has assigned as collateral security any
judgment he may obtain.
And since a policy of insurance upon life or health may pass by transfer, will or
succession to any person, whether he has an insurable interest or not, and such
person may recover it whatever the insured might have recovered, the widow of the
decedent Dr. Leuterio may file the suit against the insurer, Grepalife.
New Life Enterprises v. Hon. Court of Appeals G.R. No. L-16163. February 28, 1963
Petitioners: NEW LIFE ENTERPRISES and JULIAN SY
Respondents: HON. COURT OF APPEALS, EQUITABLE INSURANCE
CORPORATION, RELIANCE SURETY AND INCURANCE CO., INC. and
WESTERN GUARANTY CORPORATION
Ponente: REGALADO
DOCTRINE: It is a cardinal principle of insurance law that a policy or contract of
insurance is to be construed liberally and heavily in favor of the insured, and
strictly against the insurer, however, like all contracts, such is to be construed
according to the sense and meaning of the terms. If such terms are clear, they
must be taken and understood according to plain, ordinary, and popular sense.
FALLO: “WHEREFORE, finding no cogent reason to disturb the judgement of
respondent Court of Appeals, the same is hereby AFFIRMED.”
FACTS: Julian Sy and Jose Sy Bang formed a business named New Life Enterprises,
wherein the former engaged the Insurance services of Western Guaranty
Corporation, Reliance Surety and Insurance Co., Inc., and Equitable Insurance
Corporation. Subsequently, Respondents issued the following:
• On May 15th 1981, Western Guaranty Corporation issued Fire Insurance
Policy No. 27201 in the amount of php350,000.00 which was renewed on
May 13, 1982
• On July 30th, Reliance Surety and Insurance Co., Inc. issued Fire Insurance
Policy No. 69135 in the amount of php300,000.00, with an additional
insurance of php700,000.00 under Fire Insurance Policy No. 71547.
• On February 8th 1982, Equitable Insurance Corporation issued Fire Insurance
Policy No. 39328 in the amount of php200,000.00.
Subsequently thereafter; the building being occupied by New Life Enterprises was
unfortunately gutted by fire, where the stocks in the trade inside the said building
were insured against the total amount of php1,550,000.00. The cause of the fire
was said to be electrical in nature. Thereafter, Petitoner Julian Sy immediately
went to Respondent Reliance Insurance and attempted to claim, and in
conjunction, he was following up his claim with Respondent Equitable Insurance.
The latter said that if the former would pay, they would also agree. (It is important
to note that in a testimony, Julian Sy admitted that the three respondent
companies are sister companies). All three ultimately denied.
The grounds of denial of all three insurance companies were founded on the
grounds that they had violated the “Policy Condition No. 3” which requires the
insured to give notice of any insurances already effected which petitioner in fact,
did not. In their response, Petitioner alleged that they are not to be blamed for
the omissions, considering that Insurance Agents of Respondents knew about the
existence of the additional insurance and that he was not informed of such, as he
did not even read the policies.
ISSUE: Whether or not the Insurance Policy should be construed in favor of the
Insured No.
RATIO: The court did not excuse the petitioners, as the terms of the contract are
clear and unambiguous. The Insured is required to disclose. The court related
herein that the insured must conform to the terms of the policy, and such lapse is
cannot excuse his negligence, being a business man for quite some time. The
Supreme Court, pronounced in Pioneer Insurance and Surety Corporation v. Yap
that the terms of the Policy herein required the declaration of other insurances is
a statement binding on both parties ensuring that there was no other insurance
in effect, and that it upheld the validity of such provision to prevent “over-
insurance” and to avoid the perpetuation of fraud. Subsequently, the court
reiterated in Pacific Banking Corporation v. Court of Appeals et. al.: the failure of
the insured therein to declare the existence of other insurances, where the same
was guilty of false declaration since it was required to declare but elected not to.
Additionally, Policy No. 15 states that “ xxx if any false declaration be made or used
in support thereof, xxx all benefits under this Policy shall be forfeited xxx “, and in
so far as the liability of Respondent Reliance¸ the complaint for recovery was filed
in court by petitioners only on January 31, 1984, after more than one year after
Petitioners received the letter of denial on November 29, 1982 where Policy
Condition No. 27 requires that: “If a claim be made and rejected and an action or
suit not be commenced either in the insurance commission or any court of
competent jurisdiction of notice of such rejection, or in case of arbitration taking
place as provided herein, within twelve months after due notice of the award
made by the arbitrator xxx then such claim shall for all purposes be deemed to
have been abandoned and shall not thereafter be recoverable hereunder.”
Florendo v. Philam Plans
Doctrine: By signing the application, Manuel adopted as his own the written
representations and declarations embodied in it.
Fallo: Wherefore, the Court AFFIRMS in its entirely the decision of the Court of
Appeals in CA-G.R. CV 87085 dated December 18, 2007.
Facts: This case is about an insureds alleged concealment in his pension plan
application of his true state of health and its effect on the life insurance portion of
that plan in case of death.
Oct 1997, Manuel Florendo, deceased husband of petitioner, filed an application for
comprehensive pension plan respondent Philam Plans after convincing by
respondent Perla Abcede. That had a pre-need price of Php997,060, payable in 10
years and had a maturity value of Php 2.8 million after 20 years. Manuel signed the
application and left to Perla the task of supplying the information needed in the
application.
Under its master policy, Philam was to provide life insurance coverage, including
accidental death. So, if the plan holder died before the maturity of the plan, his
beneficiary was to instead receive the proceeds of the insurance, equivalent to the
pre-need price.
11 months after the issuance of the pension plan, on Sept 15, 1998, Petitioner died
of blood poisoning. Petitioner subsequently filed her claim, but it was declined
because they found that Manuel was on maintenance medicine for his heart and had
an implanted pacemaker.
Lourdes filed an action to recover the claim. RTC ordered respondents, to pay all the
benefits from the plan. However the CA reversed the decision, holding that insurance
policies are traditionally contracts uberrimae fidae or contracts of utmost good faith.
As such, Manuel was required to disclose his sickness,
Issue: Whether or not petitioner is entitled to the benefits of the plan despite the
concealment of the true state of health of the plan holder. – NO.
Ratio: Is Manuel Guilty of Concealment?
Lourdes argues that unfilled spaces relating to his medical history should have been
returned rather than choosing to approve it. She says that since Philam never
queried Manuel regarding his health, he could not be blamed for not filling it up.
However, when Manuel signed the pension plan, he adopted as his own the written
representations and declarations embodied in it. It is clear from these
representations that he concealed his chronic heart ailment and diabetes. He
represented that he has never been treated for a heart condition, diabetes, etc. also
that he is in good health and physical condition.
Since he signed the application without filling the details regarding his continuing
treatments, the assumption is that he has never been treated for the said illness in
the last 5 years preceding his application. Moreover, Manuel had the responsibility
for preparing the application, not Perla, the soliciting agent. If he furnished Perla the
needed information and delegated the filling up, then she acted on his instruction.
As Manuel was still taking medicine for his continuing illness, this should have been
made known in the application as required. Also, that he had been using a
pacemaker since the 70’s that falls within the use of medical attention 5 years
preceding the application in 1997.
Is Manuel bound to the failure of his agents to declare the health condition:
Lourdes argues that Manuel signed the application in blank and that the fault of the
agent must be considered solely her own and cannot prejudice Manuel.
Manuel, however, in signing the pension plan certified that he wrote all the
information stated in it or had someone do it under his direction. The plan included
a provision that it was signed by Manuel and it was filled up either by him or someone
else under his direction.
Lastly, Lourdes points out that any defect or insufficiency in the application should
be deemed waived after the same has been approved and the premiums have been
collected.
The Court disagrees. The plan contains a one year incontestability period which
states that:
After this Agreement has remained in force for one (1) year, we can no longer contest
for health reasons any claim for insurance under this Agreement, except for the
reason that installment has not been paid (lapsed), or that you are not insurable at
the time you bought this pension program by reason of age. If this Agreement lapses
but is reinstated afterwards, the one (1) year contestability period shall start again
on the date of approval of your request for reinstatement.
The clause precludes the insurer from disowning liability under the policy it used on
the ground of concealment or misrepresentation regarding the health of the insured
after a year of its issuance. Since Manuel died on the 11th month, the incontestability Great Pacific Life Ass. Corp. vs CA; Mondragon vs CA and Ngo Hing
period has not yet set in.
Doctrine: 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.

Concealment is a neglect to communicate that which a party knows he ought to

communicate. Whether intentional or unintentional, the concealment entitles the
insurer to rescind the contract of insurance.

Fallo: 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.

Facts:

• Ngo Hing filed an application with Great Pacific Life Assurance for a twenty-
year endowment policy in the amount of P50,000 on the life of his one-
year old daughter Helen Go.
• Ngo Hing supplied the essential data to Lapulapu Mondragon, Branch
Manager of Pacific Life. Ngo Hing paid the annual premium of P1,077 to
the company. Upon payment, a binding deposit receipt was issued to Ngo
Hing.
• Mondragon received a letter from Pacific Life disapproving the insurance
application because the said life insurance 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 can be sent to the
company.
• The non-acceptance was allegedly not communicated by Mondragon to
Ngo Hing.
• Helen Go died of influenza with complication of bronchopneumonia.
• Ngo Hing failed in his effort in seeking payment of the proceeds of the
insurance, hence, he filed an action for recovery before CFI which granted
his claim.

Issue #1: WON The binding deposit receipt constituted a temporary contract of the
life insurance in question
Held: No.
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”.
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
application, must have been a completed contract, one that leaves nothing to be
done, 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.
Issue #2: WON Ngo Hing concealed the state of health and physical condition of
Helen Go
Held: Yes.
When Ngo Hing supplied the required essential data for the insurance application
form, he was fully aware that his one year old daughter is typically a mongoloid child.
Such a congenital physical defect could never be ensconced nor disguised.
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.
Concealment is a neglect to communicate that which a party knows he ought to
communicate. Whether intentional or unintentional, the concealment entitles the
insurer to rescind the contract of insurance.
Saturnino vs Phil Am Life G.R. No. L-16163. February 28, 1963
Plaintiffs-appellants: IGNACIO SATURNINO, in his own behalf and as the
JUDICIAL GUARDIAN OF CARLOS SATURNINO, minor
Defendant-appellee: THE PHILIPPINE AMERICAN LIFE INSURANCE
COMPANY (PALIC)
Ponente: MAKALINTAL
DOCTRINE: In this jurisdiction, a concealment, whether intentional or
unintentional, entitles the insurer to rescind the contract of insurance,
concealment being defined as "negligence to communicate that which a party
knows and ought to communicate" (Sections 25 & 26, Act No. 2427)
FALLO: “The judgment appealed from, dismissing the complaint and awarding the
return to appellants of the premium already paid, with interest at 6% up to January
29, 1959, is affirmed, with costs against appellants.”
FACTS
Saturnino filed this action to recover the sum of P5,000.00, corresponding to the
face value of an insurance policy issued by defendant on the life of Estefania A.
Saturnino, and the sum of P1,500.00 as attorney's fees.
Saturnino was declared entitled to the return of the premium already paid, plus
interest at 62 up to January 8, 1959, when a check for the corresponding amount
— P359.65 — was sent to them by PALIC.
The policy sued upon is one for 20-year endowment non-medical insurance. This
kind of policy dispenses with the medical examination of the applicant usually
required in ordinary life policies.
However, detailed information is called for in the application concerning the
applicant's health and medical history.
• The written application in this case was submitted by Saturnino to PALIC on
November 16, 1957, witnessed by PALIC's agent Edward A. Santos.
• The policy was issued on the same day, upon payment of the first year's
premium of P339.25.
September 19, 1958: Saturnino died of pneumonia, secondly to influenza.
• Appellants here, who are her surviving husband and minor child, respectively,
demanded payment of the face value of the policy.
• The claim was rejected and this suit was subsequently instituted.
September 9, 1957: It appears that the months prior to the issuance 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.
• She stayed in the hospital for a period of eight days, after which she was
discharged
• although according to the surgeon who operated on her she could not be
considered definitely cured, her ailment being of the malignant type.
Notwithstanding the fact of her operation Estefania A. Saturnino did not make a
disclosure thereof in her application for insurance.
• On the contrary, she stated therein that she did not have, nor had she ever
had, among other ailments 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 five years; and
• 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 recites that the foregoing declarations constituted "a
further basis for the issuance of the policy."
ISSUE: Whether or not the insured made such false representations of material
facts as to avoid the policy. (YES)
RATIO
There can be no dispute that the information given by her in her application for
insurance was false, namely, that she had never had cancer or tumors, or
consulted any physician or undergone any operation within the preceding period
of five years.
Are the facts thus falsely represented material? The Insurance Law (Section 30)
provides that "materiality is to be determined not by the event, but solely by the
probable and reasonable influence of the in forming his estimate of the proposed
contract, or in facts upon the party to whom the communication is due, making
his inquiries."
FIRST CONTENTION
That the facts subject of the representations 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.
Supreme Court: 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.
• WHY? Such information necessarily constitutes an important factor which
the insurer takes into consideration in deciding whether to issue the policy or
not.
It is logical to assume that if appellee had been properly apprised of the insured's
medical history she would at least have been made to undergo medical
examination in order to determine her insurability.
SECOND CONTENTION
• that due information concerning the insured's previous illness and operation
had been given to appellee's agent Edward A. Santos, who filed the
application form after it was signed in blank by Estefania A. Saturnino.
• This was denied by Santos in his testimony
Supreme Court: It is not necessary to consider appellee's additional argument,
which was upheld by the trial court, that in signing the application form in blank
and leaving it to Edward A. Santos to fill (assuming that to be the truth) the insured
in effect made Santos her agent for that purpose and consequently was
responsible for the errors in the entries made by him in that capacity.
THIRD CONTENTION
In the application for insurance signed by the insured in this case, Estefania agreed
to submit to a medical examination by a duly appointed examiner of appellee if in
the latter's opinion such examination was necessary as further evidence of
insurability. In not asking her to submit to a medical examination, appellants
maintain, appellee was guilty of negligence, which precluded it from finding about
her actual state of health.
Supreme Court: No such negligence can be imputed to appellee. It was precisely
because the insured had given herself a clean bill of health that appellee no longer
considered an actual medical checkup necessary.
FOURTH CONTENTION
Appellants also contend there was no fraudulent concealment of the truth as
much 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.
Supreme Court: 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.
In order to avoid a policy it is not necessary to show actual fraud on the part of the
insured.
MANILA BANKERS LIFE INSURANCE CORPORATION v. ABAN
DOCTRINE: The insurer has two years from the date of issuance of the insurance
contract or of its last reinstatement within which to contest the policy, whether, the
insured still lives within such period. After two years, the defenses of concealment
or misrepresentation, no matter how patent or well founded, no longer lie.
FALLO: WHEREFORE, the Petition is DENIED. The assailed September 28, 2005
Decision and the November 9, 2006 Resolution of the Court of Appeals in CA-G.R. CV
No. 62286 are AFFIRMED.
FACTS:
• Delia Sotero took out a life insurance policy from Manila Bankers Life Insurance
Corporation, designating respondent Cresencia P. Aban, her niece, as her
beneficiary.
• Manila Bankers issued Insurance Policy with a face value of P 100,000.00, in
Sotero’s favor after the requisite medical examination and payment of the
insurance premium.
• On April 10, 1996, when the insurance policy had been in force for more than
two years and seven months, Sotero died. Aban filed a claim for the insurance
proceeds on July 9, 1996.
• Manila Bankers conducted an investigation into the claim, and came out with
the following findings:
o Sotero did not personally apply for insurance coverage, as she was illiterate
and Sotero was sickly since 1990;
o Sotero did not have the financial capability to pay the insurance premiums
on Insurance Policy No. 747411;
o Sotero did not sign the July 3, 1993 application for insurance; and
o Aban was the one who filed the insurance application and designated
herself as the beneficiary.
• Manila Bankers denied respondent’s claim on April 16, 1997 and refunded the
premiums paid on the policy. Manila Bankers filed a civil case for Rescission/
Annulment of the Policy alleging that the policy was obtained through Fraud,
Concealment and/or Misrepresentation under the Insurance Code, which
renders it voidable under Art. 1390 of the NCC.
• Aban filed a Motion to Dismiss claiming that the cause of action was barred by
prescription pursuant to Sec. 48 of the Insurance Code.
• During the proceedings on the Motion to Dismiss, Manila Banker’s investigator
testified in court that the insurance underwriter who solicited the insurance is
 a cousin of respondent's husband, Dind Aban, and that it was the respondent discrimination ultimately work to the detriment of bona fide takers of insurance
who paid the annual premiums on the policy. and the public in general.
• RTC granted the Motion to Dismiss concluding that Sotero, and not Aban, was
the one who procured the insurance; thus, Sotero could legally take out
insurance on her own life and validly designate — as she did — Aban as the
beneficiary. It held further that under Section 48, petitioner had only two years
from the effectivity of the policy to question the same; since the policy had been
in force for more than two years, petitioner is now barred from contesting the
same or seeking a rescission or annulment thereof.

ISSUE: Whether or not Manila Bankers is barred from denying the insurance claims
based on fraud or concealment? - YES.

RATIO:

• Yes. While Manila Bankers insists that its independent investigation on the
claim reveals that it was Aban, posing as Sotero, who obtained the insurance,
this claim is no longer feasible in the wake of the courts' finding that it was
Sotero who obtained the insurance for herself. The finding of fact binds the
court. The purpose of the law is to give protection to the insured or his
beneficiary by limiting the rescinding of the contract of insurance on the ground
of fraudulent concealment or misrepresentation to a period of only two (2)
years from the issuance of the policy or its last reinstatement.
• The insurer is deemed to have the necessary facilities to discover such
fraudulent concealment or misrepresentation within a period of two (2) years.
It is not fair for the insurer to collect the premiums as long as the insured is still
alive, only to raise the issue of fraudulent concealment or misrepresentation
when the insured dies in order to defeat the right of the beneficiary to recover
under the policy.
• Section 48 serves a noble purpose, as it regulates the actions of both the insurer
and the insured. Under the provision, an insurer is given two years – from the
effectivity of a life insurance contract and while the insured is alive – to discover
or prove that the policy is void ab initio or is rescindible by reason of the
fraudulent concealment or misrepresentation of the insured or his agent. After
the two-year period lapses, or when the insured dies within the period, the
insurer must make good on the policy, even though the policy was obtained by
fraud, concealment, or misrepresentation. This is not to say that insurance
fraud must be rewarded, but that insurers who recklessly and indiscriminately
solicit and obtain business must be penalized, for such recklessness and lack of
Sun Life of Canada (Phils), Inc. vs. Ma. Daisy's. Sibya, et. al.
G.R. No. 211212, June 08, 2016 J. Reyes
DOCTRINE: The intent to defraud on the part of the insured must be ascertained to
merit rescission of the insurance contract. Concealment as a defense for the 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.
FALLO:
WHEREFORE, the petition for review is DENIED. The Decision dated November 18,
2013 and Resolution dated February 13, 2014 of the Court of Appeals in CA-G.R. CV.
No. 93269 are hereby AFFIRMED.
FACTS:
• On January 10, 2001, Atty. Jesus Sibya, Jr. (Atty. Jesus Jr.) applied for life
insurance with Sun Life Canada (Philippines), Inc. In his Application for
Insurance, he indicated that he had sought advice for kidney problems.
• On February 5, 2001, Sun Life approved Atty. Jesus Jr.'s application and
issued Insurance Policy. The Policy indicated the respondents as
beneficiaries and entitles them to a death benefit of Pl,000,000.00 should
Atty. Jesus Jr. dies on or before February 5, 2021, or a sum of money if Atty.
Jesus Jr. is still living on the endowment date.
• On May 11, 2001, Atty. Jesus Jr. died as a result of a gunshot wound in San
Joaquin, Iloilo. Thus, Ma. Daisy filed a Claimant's Statement with Sun Life
to seek the death benefits indicated in his insurance policy.
• Sun Life denied the claim on the ground that the details on Atty. Jesus Jr.
's medical history were not disclosed in his application. Simultaneously,
Sun Life tendered a check representing the refund of the premiums paid
by Atty. Jesus Jr.
• Despite demands of Ma. Daisy, Sun Life refused to heed the requests and
instead filed a Complaint for Rescission of Atty. Jesus Jr. 's insurance policy
Sun Life alleges in the complaint that:
• Atty. Jesus Jr. did not disclose in his insurance application his previous
medical treatment at the National Kidney Transplant Institute in May and
August of 1994.
• The undisclosed fact suggested that the insured was in "renal failure" and
at a high-risk medical condition. Consequently, had it known such fact, it
would not have issued the insurance policy in favor of Atty. Jesus Jr.
Respondent’s defense:
• Atty. Jesus Jr. did not commit misrepresentation in his application for
insurance. They averred that Atty. Jesus Jr. was in good faith when he
signed the insurance application and even authorized Sun Life to inquire
further into his medical history for verification purposes. According to
them, the complaint is just a ploy to avoid the payment of insurance claims.
RTC:
• Sun Life violated Sections 241, paragraph l (b), (d), and (e) and 242 of the
Insurance Code when it refused to pay the rightful claim of the
respondents.
• Ordered Sun Life to pay death benefits and damages.
• Atty. Jesus Jr. did not commit material concealment and misrepresentation
when he applied for life insurance with Sun Life. Given the disclosures and
the waiver and authorization to investigate executed by Atty. Jesus Jr. to
Sun Life, the latter had all the means of ascertaining the facts allegedly
concealed by the applicant.
CA:
• Ordered Sun Life to pay death benefits and damages.
• Modified the RTC decision by absolving Sun Life from the charges of
violation of Sections 241 and 242 of the Insurance Code.
• Evidence on records show that there was no fraudulent intent on the part
of Atty. Jesus Jr. in submitting his insurance application. Instead, Atty. Jesus
Jr. admitted in his application that he had sought medical treatment for
kidney ailment.
ISSUE: Whether or not there was concealment or misrepresentation when Atty.
Jesus Jr. submitted his insurance application with Sun Life –No.
RATIO:
As correctly observed by the CA, Atty. Jesus Jr. admitted in his application his medical
treatment for kidney ailment. Moreover, he executed an authorization in favor of
Sun Life to conduct investigation in reference with his medical history.
It also appears that Atty. Jesus Jr. also signed the Authorization, which gave Sun Life
the opportunity to obtain information on the facts disclosed by Atty. Jesus Jr. in his
insurance application. Given the express language of the Authorization, it cannot be
said that Atty. Jesus Jr. concealed his medical history since Sun Life had the means of
ascertaining Atty. Jesus Jr.'s medical record.
As to allegations of misrepresentation
Atty. Jesus Jr. was not a medical doctor, and his answer "no recurrence" may be
construed as an honest opinion. 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.
Indeed, the intent to defraud on the part of the insured must be ascertained to merit
rescission of the insurance contract. Concealment as a defense for the 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 the
present case, Sun Life failed to clearly and satisfactorily establish its allegations, and
is therefore liable to pay the proceeds of the insurance.