DBP v. CA and the Estate of the Late Juan B.

Dans, represented by Candida G Dans, and the DBP MRI

Pool, G.R. No. L-109937, March 21, 1994

Facts: In 1987 Juan Dans together with his wife, son and daughter-in-law, applied for a loan of Php500K
with DBP. Only Php300K was granted. Dans, 76 yrs old, was advised by DBP to obtain a mortgage
redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool). When
the loan was released, DBP deducted the amount of Php1,476 as payment for the MRI premium. Dans
accomplished and submitted the "MRI Application for Insurance" and the "Health Statement for DBP
MRI Pool". Days later, the MRI premium of Dans, less the DBP service fee of 10% was credited by DBP to
the account of the DBP MRI Pool, and it was advised of the credit. Days later, Dans died of cardiac
arrest. DBP was notified, and relayed this information to the DBP MRI Pool. The DBP MRI Pool notified
DBP that Dans was not eligible for MRI coverage since he was over 60 years old, which was the
acceptance age limit of application. DBP apprised Candida of the disapproval of her late husband´s
application, and offered to refund the premium. She refused, demanding payment of the face value of
the MRI or an amount equivalent to the loan, and she refused to accept Php30K that was being offered
to her by DBP. She filed a complaint with the RTC, she being the administratix of Dans´ estate, for
Collection of Sum of Money with Damages.

Dans´ estate alleged that Dans became insured by the DBP MRI Pool when DBP, with full knowledge of
Dans´ age, required him to apply for MRI and collected the premium. Respondent estate prayed that (1)
the sum of Php139,500 which it paid under protest for the loan, be reimbursed, (2) that the mortgage
debt of the deceased be declared fully paid, and that (3) damages be awarded.

At the pre-trial, DBP and the DBP MRI Pool admitted all the documents and exhibits submitted by
respondent Estate. The trial court narrowed down the issues and found the case ripe for summary
judgment.

RTC- decision favored respondent Estate; DBP MRI Pool was absolved from liability after the court found
no priviity of contract between it and the deceased. It declared DBP in estoppel for having led Dans to
apply for MRI and collecting the premium and the service fee despite knowledge of his age ineligibility. It
ordered DBP to reimburse the Php139.5K, to consider the mortgage settled, and to pay Php10K as
attorney´s fees.

CA- affirmed RTC

Issue: WON DBP MRI Pool and DBP are liable to Dans.

SC: No. Yes.

Re: DBP MRI Pool - When Dans applied for MRI, the health statement contained the proviso that "No
insurance coverage shall be effected unless and until this application is approved and the full premium is
paid during my continued good health". Under these provisions, the MRI coverage will take effect when
the application shall be approved, and that the premium is paid. These two conditions must concur. The
SC found that the pool did not approve the application of Dans, and there is no showing that it accepted
the premium paid. As a result, there was no perfected contract of insurance, and the DBP MRI Pool
cannot be held liable on a contract that does not exist.

Re: DBP - Instead of allowing Dans to look for his own insurance carrier or some other insurance policy,
DBP compelled him to apply with the DBP MRI Pool for MRI coverage. When the loan was released, DBP
deducted its premium. Later on it deducted its service fee. The SC found that DBP led Dans and his
family to believe that they fulfilled all the requirements for the MRI. Apparently, DBP had full knowledge
that Dans' application was never going to be approved, since the maximum age acceptance was clearly
and specifically provided for in Article 1 of the Group Mortgage Insurance Policy signed by all insurance
companies. DBP acted as an agent, whose actions exceeded the scope of authority conferred by the
principal. The liability depends on whether the third person was aware of the limits of the agent´s
powers. There is no showing that Dans knew of the limitations of DBP's authority to solicit applications
for MRI.

Inasmuch as the non-disclosure of the limits of the agency carries with it the implication that a
deception was perpetrated on the unsuspecting client, the provisions of Articles 19, 20 and 21 come into
play. However DBP cannot be liable for the whole amount of the insurance policy, since it is purely
speculative that Dans would be fully insured by the time he died. Considering his advanced age, there is
no absolute certainty that he could obtain an insurance coverage from another company.

The CA decision is modified; DBP is ordered to reimburse Dans the amount of the premium with legal
interest; to pay the Estate Php50K as moral damages and the amount of PhP10K as attorney´s fees.