1
Gallardo vs. Morales
G.R. No. L-12189 April 29, 1960
Lessons Applicable: Definition and Coverage of Life
Insurance (Insurance)
Laws Applicable: Rule 39, section 12, subdivision (k) of the
Rules of Court (old law)
FACTS:
 CFI: Hermenegilda S. Morales to pay P7,000 to a creditor
Francisca Gallardo
 writ of execution was issued and delivered to the Sheriff
who garnished and levied execution on the sum of P7,000
out of the P30,000 due from the CapitalInsurance & Surety
Co. Inc., to Morales as beneficiary whose husband Luis
Morales died by assassination.
 Morales asked the sheriff to quash and lift said
garnishment or levy on execution invoking Rule 39, section
12, subdivision (k) of the Rules of Court but it was denied.
 All moneys, benefits, privileges, or annuities accruing or in
any manner growing out of any life insurance, if the annual
premiums paid do not exceedfive hundred pesos, and if
they exceed that sum a like exemption shall exist which
shall bear the same proportion to the moneys, benefits,
privileges, and annuities so accruing or growing out of
such insurance that said five hundredpesos bears to the
whole annual premiums paid.
 Morales appealed maintaining that it was a life
insurance for it insured her husband for injuries and/or
death as a result of murder or assault or attempt thereat
ISSUE: W/N the insurance is a life insurance and not an
accident insurance
HELD: NO. order appealed from is reversed, and the
garnishment in dispute hereby set aside and quashed
 the annual premium was for P15
 If it were an ordinary life insurance policy, taking into
account that the insured, Luis G. Morales, was 38 years of
age and the amount of the policy was for P50,000.00 the
annual premium would have been around P1,206
 the period for the policy was stipulated for one year, and
considerations as to age, health, occupation and other
personal circumstances were not taken into account in
an accident insurance policy
 Annex "1" of the opposition, shows that the
Capital Insurance and Surety Company Inc. is a non-life
insurance company and that the only authority granted to it
to transact business covers fire, marine, surety, fidelity,
accident, motor car, and miscellaneous insurance,
except life insurance
 Accident vs Life Insurance Policy
 accident policy - merely insures the person from injury and
or death resulting from murder, assault, or an attempt
thereat
 Accident insurance
 indemnity or casualty contract
2
 life insurance policy - what is insured is the life of the
subject for a definite number of years
 life insurance
 investment contract
 contract by which the insurer, for a stipulated sum,
engages to pay a certain amount of money if another dies
within the time limited by the policy
 contract for insurance for one year in consideration of an
advanced premium, with the right of assured to continue it
from year to year upon payment of a premium as
stipulated
 includes accident insurance, since life is insured under
either contract
 includes all policies of insurance in which payment
of insurance money is contingent upon loss of life
 "any life insurance"
 applies to ordinary life insurance contracts, as well as to
those which, although intended primarily to indemnify for
risks arising from accident, likewise, insure against loss of
life due, either to accidental causes, or to the willful and
criminal act of another, which, as such, is not strictly
accidental in nature
 statutes of this nature seek to enable the head of the
family to secure his widow and children from becoming a
burden upon the community and, accordingly,
should merit a liberal interpretation
ˈjetisən,-zən/
1. 1.
throw or drop (something) from an aircraft or ship.
"six aircraft jettisoned their loads in the sea"
o
noun
Calanoc vs. CA (98 PHIL 79)
Facts: Basilio was a watchman of the Manila Auto Supply
located at the corner of Avenida Rizal and Zurbaran. He
secured a life insurance policy from the Philippine American
Life Insurance Company in the amount of P2,000 to which was
attached a supplementary contract covering death by accident.
On January 25, 1951, he died of a gunshot wound on the
occasion of a robbery committed in the house of Atty. Ojeda
at the corner of Oroquieta and Zurbaran streets.
Calanoc, the widow, was paid the sum of P2,000, face value
of the policy, but when she demanded the payment of the
additional sum of P2,000 representing the value of the
supplemental policy, the company refused alleging, as main
defense, that the deceased died because he was murdered
by a person who took part in the commission of the robbery
and while making an arrest as an officer of the law which
contingencies were expressly excluded in the contract and
have the effect of exempting the company from liability.
It is contended in behalf of the company that Basilio was killed
which "making an arrest as an officer of the law" or as a result
of an "assault or murder" committed in the place and therefore
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his death was caused by one of the risks excluded by
the supplementary contract which exempts the company
from liability. This contention was upheld by the Court of
Appeals. Hence, this petition.
Issue: Whether or not the death of the victim comes within the
purview of the exception clause of the supplementary policy
and, hence, exempts the company from liability.
Held: NO. Basilio was a watchman of the Manila Auto
Supply which was a block away from the house of Atty. Ojeda
where something suspicious was happening which caused the
latter to ask for help. While at first he declined the invitation of
Atty. Ojeda to go with him to his residence to inquire into what
was going on because he was not a regular policeman, he later
agreed to come along when prompted by the traffic policeman,
and upon approaching the gate of the residence he was shot
and died.
The circumstance that he was a mere watchman and had no
duty to heed the call of Atty. Ojeda should not be taken as a
capricious desire on his part to expose his life to danger
considering the fact that the place he was in duty-bound to
guard was only a block away.
In volunteering to extend help under the situation, he might
have thought, rightly or wrongly, that to know the truth was
in the interest of his employer it being a matter that affects
the security of the neighborhood. No doubt there was some
risk coming to him in pursuing that errand, but that risk always
existed it being inherent in the position he was holding. He
cannot therefore be blamed solely for doing what he believed
was in keeping with his duty as a watchman and as a citizen.
And he cannot be considered as making an arrest as an
officer of the law, as contended, simply because he went
with the traffic policeman, for certainly he did not go there
for that purpose nor was he asked to do so by the
policeman.
Much less can it be pretended that Basilio died in the course of
an assault or murder considering the very nature of these
crimes. In the first place, there is no proof that the death of
Basilio is the result of either crime for the record is barren
of any circumstance showing how the fatal shot was fired.
Perhaps this may be clarified in the criminal case now pending
in court as regards the incident but before that is done anything
that might be said on the point would be a mere conjecture. Nor
can it be said that the killing was intentional for there is the
possibility that the malefactor had fired the shot merely to
scare away the people around for his own protection and
not necessarily to kill or hit the victim. In any event, while the
act may not exempt the triggerman from liability for the damage
done, the fact remains that the happening was a pure
accident on the part of the victim.
The victim could have been either the policeman or Atty. Ojeda
for it cannot be pretended that the malefactor aimed at the
deceased precisely because he wanted to take his life.
Biagtan vs. The Insular Life Assurance Company, LTD|
Makalintal, J. March 29, 1972|
FACTS
4
- Juan Biagtan was insured with Insular for P5k and a
supplementary contract “Accidental Death Benefit” clause for
another P5k if "the death of the Insured resulted directly from
bodily injury effected solely through external and violent means
sustained in an accident . . . and independently of all other
causes." The clause, however, expressly provided that it
would not apply where death resulted from an injury
"intentionally inflicted by a third party."
- One night, a band of robbers entered their house. Juan went
out of his room and he was met with 9 knife stabs. He died. The
robbers were convicted of robbery with homicide.
- The family was claiming the additional P5k from Insular under
the Accidental Death Benefit clause. Insular refused on the
ground that the death resulted from injuries intentionally inflicted
by 3rd parties and was therefore not covered.
- Biagtans filed against Insular. CFI ruled in favor of Biagtans.
ISSUES & ARGUMENTS
WON the injuries were intentionally inflicted by a third party?
Yes
RATIONALE
- Whether the robbers had the intent to kill or merely to scare
the victim or to ward off any defense he might offer, it cannot be
denied that the act itself of inflicting the injuries was intentional.
- The exception in the accidental benefit clause invoked by the
appellant does not speak of the purpose — whether homicidal
or not — of a third party in causing the injuries, but only of the
fact that such injuries have been "intentionally" inflicted — this
obviously to distinguish them from injuries which, although
received at the hands of a third party, are purely accidental.
- Examples of unintentional:
>> A gun which discharges while being cleaned and kills a
bystander;
>> a hunter who shoots at his prey and hits a person instead;
>> an athlete in a competitive game involving physical effort
who collides with an opponent and fatally injures him as a result.
- In Calanoc vs. CA: Where a shot was fired and it turned out
afterwards that the watchman was hit in the abdomen, the
wound causing his death, the Court held that it could not be said
that the killing was intentional for there was the possibility that
the malefactor had fired the shot to scare the people around for
his own protection and not necessarily to kill or hit the victim. A
similar possibility is clearly ruled out by the facts in this case.
For while a single shot fired from a distance, and by a person
who was not even seen aiming at the victim, could indeed have
been fired without intent to kill or injure, nine wounds inflicted
with bladed weapons at close range cannot conceivably be
considered as innocent insofar as such intent is
concerned.
- In Hucthcraft's Ex'r vs. Travelers' Ins. Co. (US case): where
the insured was waylaid and assassinated for the purpose of
robbery, the court rendered judgment for the insurance
5
company and held that while the assassination of the insured
was as to him an unforeseen event and therefore accidental,
"the clause of the proviso that excludes the (insurer's) liability,
in case death or injury is intentionally inflicted by any other
person, applies to this case."
G.R. No. L-21574 June 30, 1966
Dela Cruz vs. Capital
Lessons Applicable: Liability of Insurer for Suicide and
Accidental Death (Insurance)
Laws Applicable:
FACTS:
 Eduardo de la Cruz, employed as a mucker in the Itogon-
Suyoc Mines, Inc. in Baguio, was the holder of
an accident insurance policy "against death or
disability caused by accidental means"
 January 1, 1957: For the celebration of the New Year, the
Itogon-Suyoc Mines, Inc. sponsored a boxing contest for
general entertainment wherein Eduardo, a non-
professional boxer participated
 In the course of his bout with another non-professional
boxer of the same height, weight, and size, Eduardo
slipped and was hit by his opponent on the left part of the
back of the head, causing Eduardo to fall, with his head
hitting the rope of the ring
 He was brought to the Baguio General Hospital the
following day. He died due to hemorrhage, intracranial.
 Simon de la Cruz, the father of the insured and who was
named beneficiary under the policy, thereupon filed a
claim with the insurance company
 The Capital Insurance and Surety co., inc denied stating
that the death caused by his participation in a
boxing contest was not accidental
 RTC: favored Simon
ISSUE: W/N the cause of death was accident
HELD:YES.
 Eduardo slipped, which was unintentional
 The terms "accident" and "accidental"
 as used in insurance contracts, have not acquired any
technical meaning and are construed by the courts in
their ordinary and common acceptation
 happen by chance or fortuitously, without intention and
design, and which is unexpected, unusual, and unforeseen
 event that takes place without one's foresight or
expectation
 event that proceeds from an unknown cause, or is an
unusual effect of a known cause and, therefore, not
expected
 where the death or injury is not the natural or probable
result of the insured's voluntary act, or if something
unforeseen occurs in the doing of the act which produces
the injury, the resulting death is within the protection of
policiesinsuring against death or injury from accident
6
 while the participation of the insured in the
boxing contest is voluntary, the injury was sustained when
he slid, giving occasion to the infliction by his opponent of
the blow that threw him to the ropes of the ring is not
 The fact that boxing is attended with some risks of external
injuries does not make any injuries received in the course
of the game not accidental
 In boxing as in other equally physically rigorous
sports, such as basketball or baseball, death is not
ordinarily anticipated to result. If, therefore, it ever
does, the injury or death can only be accidental or
produced by some unforeseen happening or event as
what occurred in this case
 Furthermore, the policy involved herein specifically
excluded from its coverage —
(e) Death or disablement consequent upon the Insured
engaging in football, hunting, pigsticking, steeplechasing,
polo-playing, racing of any kind, mountaineering,
or motorcycling.
 Death or disablement resulting from engagement in boxing
contests was not declared outside of the protection of
the insurance contract
Sun Insurance Office Ltd. vs. Court of Appeals [GR 92383,
17 July 1992]
Facts: Sun Insurance Office Ltd. issued Personal Accident
Policy 05687 to Felix Lim, Jr. with a face value of
P200,000.00. Two months later, he was dead with a bullet
wound in his head. As beneficiary, his wife Nerissa
Lim sought payment on the policy but her claim was rejected.
Sun Insurance agreed that there was no suicide.
It argued, however, that there was no accident either. Pilar
Nalagon, Lim's secretary, was the only eyewitness
Commercial Law – Insurance Law, 2006 ( 47 )Narratives
(Berne Guerrero)
to his death. It happened on 6 October 1982, at about 10 p.m.,
after his mother's birthday party. According to Nalagon, Lim
was in a happy mood (but not drunk) and was playing with his
handgun, from which he had previously removed the
magazine. As she watched the television, he stood in front of
her and pointed the gun at her. She pushed it aside and said it
might be loaded. He assured her it was not and then pointed it
to his temple. The next moment there was an explosion and
Lim slumped to the floor. He was dead before he fell.
The widow sued Sun Insurance in the Regional Trial Court of
Zamboanga City and was sustained. Sun Insurance was
sentenced to pay her P200,000.00, representing the face
value of the policy, with interest at the legal rate; P10,000.00
as moral damages; P5,000.00 as exemplary damages;
P50,000.00 as actual and compensatory damages; and
P5,000.00 as attorney's fees, plus the cost of the suit.
This decision was affirmed on appeal, and the motion for
reconsideration was denied. Sun Insurance then came to the
Supreme Court.
Issue: Whether the insured willfully exposed himself to
needless peril and thus removed himself from the coverage of
the insurance policy.
7
Held: NO. An accident is an event which happens without any
human agency or, if happening through human agency, an
event which, under the circumstances, is unusual to and not
expected by the person to whom it
happens. It has also been defined as an injury which happens
by reason of some violence or casualty to the insured without
his design, consent, or voluntary co-operation. Herein, the
incident that resulted in Lim's
death was indeed an accident. On the other hand, the parties
agree that Lim did not commit suicide.
Nevertheless, Sun Insurance contends that the insured willfully
exposed himself to needless peril and thus removed himself
from the coverage of the insurance policy. It should be noted
at the outset that suicide and
willful exposure to needless peril are in pari materia because
they both signify a disregard for one's life.
The only difference is in degree, as suicide imports a positive
act of ending such life whereas the second act indicates a
reckless risking of it that is almost suicidal in intent. The
posture -- that by the mere act of pointing the gun to his
temple, Lim had willfully exposed himself to needless peril and
so came under the exception -- is arguable. But what is not is
that Lim had removed the magazine from the gun and believed
it was no longer dangerous. He expressed assured her that
the gun was not loaded. It is submitted that Lim did not willfully
expose himself to needless peril when he pointed the gun to
his temple because the fact is that he
thought it was not unsafe to do so.
The act was precisely intended to assure Nalagon that the gun
was indeed
harmless. Lim was unquestionably negligent and that
negligence cost him his own life. But it should not prevent his
widow from recovering from the insurance policy he obtained
precisely against accident. There is
nothing in the policy that relieves the insurer of the
responsibility to pay the indemnity agreed upon if the insured
is shown to have contributed to his own accident. Indeed, most
accidents are caused by negligence.
There are only four exceptions expressly made in the contract
to relieve the insurer from liability, and none of these
exceptions is applicable in the present case. It bears noting
that insurance contracts are as a rule supposed to be
interpreted liberally in favor of the assured. There is no reason
to deviate from this rule, especially in view of the
circumstances of the case.
Jarque v Smith G.R. No. L-32986 November 11, 1930
J. Ostrand
Facts:
The plaintiff was the owner of the motorboat Pandan and held
a marine insurance policy for the sum of P45,000 on the boat,
the policy being issued by the National Union Fire Insurance
Company and according to the provisions of a "rider" attached
8
to the policy, the insurance was against the "absolute total loss
of the vessel only."
The ship ran into very heavy sea off the Islands of Ticlin, and it
became necessary to jettison a portion of the cargo. As a
result of the jettison, the National Union Fire Insurance
Company was assessed in the sum of P2,610.86 as its
contribution to the general average. The insurance company,
insisting that its obligation did not extend beyond the insurance
of the "absolute total loss of the vessel only, and to pay
proportionate salvage of the declared value," refused to
contribute to the settlement of the general average.
The present action was thereupon instituted,and after trial the
court below rendered judgment in favor of the plaintiff and
ordered the company to pay the plaintiff the sum of P2,610.86
as its part of the indemnity The insurance company appealed
to this court.
Issues:
1. WON the lower court erred in disregarding the typewritten
clause endorsed upon the policy, Exhibit A, expressly limiting
insurer's liability thereunder of the total loss of the wooden
vessel Pandanand to proportionate salvage charges
2. WON the lower court erred in concluding that defendant and
appellant, National Union Fire Insurance Company is liable to
contribute to the general average resulting from the jettison of
a part of said vessel's cargo.
Held: No to both. Petition dismissed.
Ratio:
1. One of the clauses of the document originally read as
follows: Touching the Adventures and Perils which the said
National Union Fire Insurance Company is content to bear,
and to take upon them in this Voyage; they are of the Seas,
Men-of-War, Fire, Pirates, Rovers, Thieves, Jettison, Letters of
Mart and Countermart, Surprisals, and Takings at Sea. Arrest,
Restraint and Detainments, of all Kings Princes and People of
what Nation, Condition or Quality so ever; Barratry of the
Master and Marines, and of all other Perils, Losses and
Misfortunes, that have or shall come to the Hurt, Detriment, or
Damage of the said Vessel or any part thereof; and in case of
any Loss or Misfortunes, it shall be lawful for the Assured, his
or their Factors, Servants, or assigns, to sue, labor and travel
for, in and about the Defense. Safeguard, and recovery of the
said Vessel or any Charges whereof the said Company, will
contribute, according to the rate and quantity of the sum herein
assured shall be of as much force and Virtue as the surest
Writing or Policy of Insurance made in LONDON. Attached to
the policy over and above the said clause is a "rider"
containing typewritten provisions, among which appears in
capitalized type the following
clause:
AGAINST THE ABSOLUTE TOTAL LOSS OF THE VESSEL
ONLY, AND TO PAY PROPORTIONATE SALVAGE
CHARGES OF THE DECLARED VALUE.
At the bottom of the same rider following the type written
provisions therein set forth are the following words: "Attaching
to and forming part of the National Union Fire Insurance Co.,
Hull Policy No. 1055."
9
It is a well settled rule that in case repugnance exists between
written and printed portions of a policy, the written portion
prevails, and there can be no question that as far as any
inconsistency exists, the above-mentioned typed "rider"
prevails over the printed clause it covers. Section 291 of the
Code of Civil Procedure provides that "when an instrument
consists partly of written words and partly of a printed form and
the two are inconsistent, the former controls the latter.
2. In the absence of positive legislation to the contrary, the
liability of the defendant insurance company on its policy
would, perhaps, be limited to "absolute loss of the vessel only,
and to pay proportionate salvage of the declared value."
But the policy was executed in this jurisdiction and "warranted
to trade within the waters of the Philippine Archipelago only."
Here the liability for contribution in general average is not
based on the express terms of the policy, but rest upon the
theory that from the relation of the parties and for their benefit,
a quasi contract is implied by law. Article 859 of the Code of
Commerce is still in force and reads as follows:
ART. 859. The underwriters of the vessel, of the freight, and of
the cargo shall be obliged to pay for the indemnity of the gross
average in so far as is required of each one of these objects
respectively. The article is mandatory in its terms, and the
insurers, whether for the vessel or for the freight or for the
cargo, is bound to contribute to the indemnity of the general
average. It simply places the insurer on the same footing as
other persons who have an interest in the vessel, or the cargo
therein at the time of the occurrence of the general average
and who are compelled to contribute.
In the present case it is not disputed that the ship was in grave
peril and that the jettison of part of the cargo was necessary. If
the cargo was in peril to the extent of call for general average,
the ship must also have been in great danger, possibly
sufficient to cause its absolute loss. The jettison was therefore
as much to the benefit of the underwriter as to the owner of the
cargo. If no jettison had take place and if the ship by reason
thereof had foundered, the underwriter's loss would have been
many times as large as the contribution now demanded.
Fortune Insurance and Surety Co., Inc., vs. CA [G.R. No.
115278, May 23, 1995]
Facts: On June 29, 1987, Producer’s Bank of the
Philippines’armored vehicle was robbed, in transit, of seven
hundred twenty-five thousand pesos (Php 725,000.00) that it
was transferring from its branch in Pasay to its main branch in
Makati. To mitigate their loss, they claim the amount from their
insurer, namely Fortune Insurance and Surety Co..
Fortune Insurance, however, assails that the
general exemptionclause in the Casualty Insurance coverage
had a general exemptionclause, to wit:
GENERAL EXCEPTIONS
10
The company shall not be liable under this policy in respect of
xxx xxx xxx
(b) any loss caused by any dishonest, fraudulent or criminal act
of the insured or any officer, employee, partner, director, trustee
or authorized representative of the Insured whether acting alone
or in conjunction with others. . . .
And, since the driver (Magalong) and security guard (Atiga) of
the armored vehicle were charged with three others as liable for
the robbery, Fortune denies Producer’s Bank of its insurance
claim.
The trial court and the court appeals ruled in favor of recovery,
hence, the case at bar.
Issue: Whether recovery is precluded under the
general exemption clause.
Held: Yes, recovery is precluded under the general exemption
clause. Howsoever viewed, Producers entrusted the three with
the specific duty to safely transfer the money to its head office,
with Alampay to be responsible for its custody in transit;
Magalong to drive the armored vehicle which would carry the
money; and Atiga to provide the needed security for the money,
the vehicle, and his two other companions. In short, for these
particular tasks, the three acted as agents of Producers. A
"representative" is defined as one who represents or stands in
the place of another; one who represents others or another in a
special capacity, as an agent, and is interchangeable with
"agent." 23
In view of the foregoing, Fortune is exempt from liability under
the general exceptions clause of the insurance policy.
LIM V. SUN LIFE
41 PHIL 263
Facts:
> On July 6, 1917, Luis Lim Y Garcia of Zamboanga applied
for a policy of life insurance with Sunlife in the amount of 5T.
> He designated his wife Pilar Lim as the beneficiary. The
first premium of P433 was paid by Lim and company issued a
“provisional policy”
> Such policy contained the following provisions “xx the
abovementioned life is to be assured in accordance with the
terms and conditions contained or inserted by the Company in
the policy which may be granted by it in this particular case for
4 months only from the date of the application, PROVIDED
that the company shall confirm this agreement by issuing a
policy on said application xxx. Should the company NOT issue
such a policy, then this agreement shall be null and void ab
initio and the Company shall be held not to have been on the
risk at all, but in such case, the amount herein shall be
returned.
> Lim died on Aug. 23, 1917 after the issuance of the
provisional policy but before the approval of the application by
the home office of the insurance company.
> The instant action is brought by the beneficiary to recover
from Sun Life the sum of 5T.
Issue:
Whether or not the beneficiary can collect the 5T.
11
Held:
NO.
The contract of insurance was not consummated by the
parties. The above quoted agreement clearly stated that the
agreement should NOT go into effect until the home office of
the Company shall confirm it by issuing a policy. It was
nothing but an acknowledgment by the Company that it has
received a sum of money agreed upon as the first year’s
premium upon a policy to be issued upon the application if it is
accepted by the Company.
When an agreement is made between the applicant and the
agent whether by signing an application containing such
condition or otherwise, that no liability shall attach until the
principal approves the risk and a receipt is given by the agent,
such acceptance is merely conditional and is subordinated to
the company’s act in approving or rejecting; so in life
insurance a “binding slip or receipt” does not insure itself.
January 23, 1907
G.R. No. 3069
VIOLA BADGER, plaintiff-appellant,
vs.
THE NEW YORK LIFE INSURANCE COMPANY, defendant-
appellee.
Condert Brothers for appellant.
Hartigan, Rohde & Gutierrez for appellee.
WILLARD, J.:
On July 5, 1902, William H. Badger made out a written
application for a policy of insurance upon his life for $5,000 in
favor of his wife, Harriet Viola Badger. The first premium on
this policy amounted to $312.50. Badger sent the application
and $297.60 to R. E. Herdman, who received the application
and the money on the 9th of July, 1902.
Herdman sent the papers on July 24 to the office of the
defendant company in Shanghai, where they were received on
August 11. Badger executed a promissory note for $14.90, the
balance of the first premium, which was sent to Herdman on
July 17, 1902. On the 31st of July, Mrs. Badger, acting for her
husband, sent to Herdman $14.90, cash, in payment of said
note. Badger died on the 1st day of August, 1902, of cholera.
No policy was ever issued upon his application.
The plaintiff brought this action to recover the sum of $5,000,
alleging that a contract of insurance had been made by the
company with Badger. Judgment was rendered in the court
below in favor of the defendant to the effect that no such
contract was ever made, from which judgment the plaintiff
appealed.
The only person who acted in any way for the company in this
transaction was Herdman. The only evidence in the case to
show what his powers were is found in an admission in the
answer which states that he was "a special agent and cashier
of the defendant company in Manila," and in his evidence,
testifying as a witness, he said that at the time of the trial on
September 6, 1905, he was the agency director of the
defendant company in the city of Manila.
12

The action can not be maintained unless the plaintiff proves a Shall I be obliged to wait until you receive an answer
contract between the company and Badger, made by a person from the office in New York, or do you have authority to
authorized to act for the company. The authority of this person issue policies at the Manila office?
must, of course, be proven. There is no evidence in the case
to show that Herdman had any authority to make any contract, xxx xxx xxx
either parol or in writing, that would bind the company. There
is no evidence to show that he had any policies in his If my application is accepted does insurance begin July
possession. 5, 1902?

Nor is there any evidence that Herdman ever undertook to In reply to this letter, Herdman, on July 15, wrote, saying:
make any parol contract with Badger for this insurance. There
had been some correspondence between the parties prior to
The receipt I sent you is official, being signed by me as
the making of the application on July 5. On that day Herdman,
cashier and not personally, and of course there will not
writing to Badger in regard to the medical examination, said:
be another examination required.

I will send you an official receipt when your remittance

xxx xxx xxx
reaches the office, and then a new examination will not
be necessary when the policies are delivered;
We issue an interim policy from our Shanghai office,
otherwise this would be necessary.
which stands until the definite policy comes from New
York. We hope soon to have an advisory board here in
After Badger had received the receipt of Herdman for the
Manila, so that we will be entirely free from Shanghai,
money sent to him and on July 11, he wrote to Herdman,
all our other business being transacted directly with the
saying:
home officer at New York.

Yours of the 9th instant received. Is the receipt you

If your examination is acceptable, your policy will date
sent official or not? I do not wish to take another
from July 5, the date of your application.
examination, and so desire an official receipt.

This evidence shows conclusively that there was no parol

xxx xxx xxx
agreement between the parties that the insurance had
commenced on July 5, 1902. In fact, the claim of the appellant
reduced to its lowest terms is that the mere signing of an
13
application for life insurance and the payment of a first
premium, without any parol agreement as to when the
insurance shall commence, constitutes a contract between the
parties binding from that date. Such a contention as this can
not be sustained.
Moreover, there is evidence in the case in addition to that
already referred to, showing that the company expressly
refused to be bound until the application had been accepted
either by its office in Shanghai or its office in New York. In the
application which Badger signed on the 5th day of July it is
said:
I agree, on behalf of myself and of any person who
shall have or claim any interest in any policy issued
under this application, as follows: That inasmuch as
only the officers at the home office of the company in
the city of New York have authority to determine
whether or nor a policy shall issue on any application,
no statements, etc., shall be binding on the company.
In the report of the medical examiner there is found this printed
statement:
The examiner is requested to send direct to the
company in New York City any information which, for
any reason, he prefers not to embody in this report. He
can also mail this report direct to the company if he
prefers.
Herdman testifies that when he sent to Badger a receipt for the
money paid, it was on one of two printed blanks, which one he
could not say. The court below found that the receipt was sent
upon the blank which contained a reference to the Shanghai
office. Whether it was upon this form of receipt or upon the
other one is of no consequence. In one of them it is stated
"that the company shall incur no liability under the application
until it has been received, approved by the resident board of
the company at Shanghai, and a policy issued thereon by the
resident board, and the full premium has actually been paid to
and accepted by the company or its authorized agent during
the lifetime and good health of the person upon whose life the
insurance is applied for. The company reserves the absolute
right of disapproval of such application."
The other form contains the statement that "the company shall
incur no liability under the application until it has been
received, approved at the house office of the company, and a
policy issued thereon." This is then followed by the words of
the first form. Upon both of these forms are printed the words
"conditional receipt."
It seems very clear that no liability was incurred by the
company in this case. The judgment of the court below is
accordingly affirmed, with the costs of this instance against the
appellant.
After expiration of twenty days let judgment be entered in
accordance herewith and ten days thereafter the record
remanded to the court below for proper action. So ordered.
14
Arellano, C.J., Torres, Mapa, Carson and Tracey, JJ., concur.
ENRIQUEZ V. SUNLIFE- INSURANCE POLICY
41 PHIL 269
Facts:
> On Sept. 24 1917, Herrer made an application to SunLife
through its office in Manila for life annuity.
> 2 days later, he paid the sum of 6T to the company’s
manager in its Manila office and was given a receipt.
> On Nov. 26, 1917, the head office gave notice of
acceptance by cable to Manila. On the same date, the Manila
office prepared a letter notifying Herrer that his application has
been accepted and this was placed in the ordinary channels of
transmission, but as far as known was never actually mailed
and never received by Herrer.
> Herrer died on Dec. 20, 1917. The plaintiff as administrator
of Herrer’s estate brought this action to recover the 6T paid by
the deceased.
Issue:
Whether or not the insurance contract was perfected.
Held:
NO.
The contract for life annuity was NOT perfected because it had
NOT been proved satisfactorily that the acceptance of the
application ever came to the knowledge of the applicant. An
acceptance of an offer of insurance NOT actually or
constructively communicated to the proposer does NOT make
a contract of insurance, as the locus poenitentiae is ended
when an acceptance has passed beyond the control of the
party.
NOTE: Life annuity is the opposite of a life insurance. In life
annuity, a big amount is given to the insurance company, and
if after a certain period of time the insured is still living, he is
entitled to regular smaller amounts for the rest of his life.
Examples of Life annuity are pensions. Life Insurance on the
other hand, the insured during the period of the coverage
makes small regular payments and upon his death, the insurer
pays a big amount to his beneficiaries.
Vda de Sindayen v Insular September 4, 1935 G.R. No.
41702
J. Butte
Facts:
Sindayen, employed in the Bureau of Printing at Manila went
to Tarlac, to spend the Christmas vacation with his aunt. There
he applied for life insurance in the sum of P1,000 and paid to
the agent P15 cash as part of the first premium. It was agreed
with the agent that the policy, when and if issued, should be
delivered to his aunt with whom he left sum of P26.06 to
complete the payment of the first annual premium of P40.06.
Sindayen returned to Manila and resumed his work a linotype
operator. The company accepted the risk after examining
Sindayen and issued a policy and to the same agent for
delivery to the insured. Sindayen abruptly passed away.
15
The policy which the company issued was received by its
agent in Tarlac. The agent delivered the policy to Felicidad
Estrada upon her payment of the balance of the first
year’s annual premium. The agent asked Felicidad Estrada if
her nephew was in good health and she replied that she
believed so. He gave her the policy. The agent learned of the
death of Arturo Sindayen and the aunt to return the policy. He
did not return or offer to return the premium paid. The aunt
gave him the policy.
The company obtained from the beneficiary, the widow of
Arturo Sindayen, her signature to a legal document entitled
“ACCORD, SATISFACTION AND RELEASE” In consideration
of the sum of P40.06 paid to her by a check of the company,
she discharged the company for all claims . The said check for
P40.06 was never cashed but returned to the company. The
widow brought action to enforce payment of the policy. The
first premium was already paid by the insured covering the
period from December 1, 1932. It is to December 1, 1933.
Hence, this appeal.
Issue: WON the said policy never took effect because of
paragraph 3 of the application for at the time of its delivery by
the agent the insured was not in good health.
Held: No. Petition granted.
Ratio:
The application which the insured signed in Tarlac, contained
among others the following provisions:
3. That the said policy shall not take effect until the first
premium has been paid and the policy has been delivered to
and accepted by me, while I am in good health.
There is one line of cases which holds that the stipulation
contained in paragraph 3 is in the nature of a condition
precedent, that is to say, that there can be no valid delivery to
the insured unless he is in good health at the time. A number
of these cases, on the other hand, go to the of holding that the
delivery of the policy by the agent to the insured consummates
the contract even though the agent knew that the insured was
not in good health at the time, the theory being that his
knowledge is the company’s knowledge and his delivery of the
policy is the company’s delivery.
We are inclined to the view that it is more consonant with the
well known practice of life insurance companies and the
evidence in the present case to rest our decision on the
proposition that Mendoza was authorized by the company to
make the delivery of the policy when he received the payment
of the first premium and he was satisfied that the insured was
in good health.
In the case of MeLaurin vs. Mutual Life Insurance Co. -It is
plain, therefore, that upon the facts it is not necessarily a case
of waiver or of estoppel, but a case where the local agents, in
the exercise of the powers lodged in them, accepted the
premium and delivered the policy. That act binds their
principal, the defendant.
16
The evidence in the record shows that Mendoza had the
authority, given him by the company, to withhold the delivery
of the policy to the insured “until the first premium has been
paid and the policy has been delivered to and accepted by me
(the insured) while I am in good health. Mendoza’s decision
that the condition had been met by the insured and that it was
proper to make a delivery of the policy to him is just as binding
on the company as if the decision had been made by its board
of directors.
It is the interest not only the applicant but of all insurance
companies as well that there should be some act which gives
the applicant the definite assurance that the contract has been
consummated. A cloud will be thrown over the entire insurance
business if the condition of health of the insured at the time of
delivery of the policy may be required into years afterwards
with the view to avoiding the policy on the ground that it never
took effect because of an alleged lack of good health, at the
time of delivery.
When the policy is issued and delivered it is plainly not within
the intention of the parties that there should be any questions
held in abeyance or reserved for future determination. It would
be a most serious handicap to business if the very existence of
the contract remains in doubt even though the policy has been
issued and delivered with all the formalities required by the
law. The delivery of the policy to the insured by an agent is the
final act which binds the company and insured in the absence
of fraud or other legal ground for rescission. The fact that the
agent to whom it has entrusted this duty is derelict or negligent
or even dishonest in the performance of the duty which has
been entrusted to him would create a liability of the agent to
the company but does not resolve the company’s obligation
based upon the authorized acts of the agent toward a third
party who was not in collusion with the agent.
“4. That the agent taking this application has no authority to
make, modify or discharge contracts, or to waive any of the
Company’s right or requirements.”
Paragraph 4 of the application to the effect is not in point.
Mendoza neither waived nor pretended to waive any right or
requirement of the company. In fact, his inquiry as to the state
of health of the insured discloses that he was endeavoring to
assure himself that this requirement of the company had been
satisfied. In doing so, he acted within the authority conferred
on him by his agency and his acts within that authority bind the
company. The company therefore having decided that all the
conditions precedent to the taking effect of the policy had been
complied with, it is now estopped to assert that it never
intended that the policy should take effect.
G.R. No. 105562 September 27, 1993
Lessons Applicable: Who Exercises Rights of Minor Insured or
Beneficiaries (Insurance)
Laws Applicable: Art. 225 Family Code
FACTS:
 Prime Marine Services, Inc. (PMSI), a crewing/manning
outfit, procured Group PoIicy
17
from Insular Life Assurance Co., Ltd. to provide life
insurance coverage to its sea-based employees enrolled
under the plan.
 February 17 1986: 6 employees of the PMSI perished at
sea when M/V Nemos, a Greek cargo vessel, sunk
somewhere in El Jadida, Morocco
 The beneficiaries asked President and General Manager
of PMSI, Capt. Roberto Nuval and issued
him special powers of attorney authorizing him to "follow
up, ask, demand, collect and receive" for their benefit
indemnities. It only verbally pertained to the sinking of the
fatal vessel
 Unknown to them, however, the PMSI, in its capacity as
employer and policyholder of the life insurance of its
deceased workers, filed with formal claims with their
special power of attorney
 Capt. Nuval, upon receipt of these checks from the
treasurer, who happened to be his son-in-law, endorsed
and deposited them in his account with the Commercial
Bank of Manila, now Boston Bank
 Upon learning that they are entitled to the claim, they
sought to recover from Insular Life but it denied on the
ground that they already delivered to PMSI
 The fact that there was a verbal agreement between
complainants-appellees and Capt. Nuval limiting the
authority of the latter to claiming specified death benefits
cannot prejudice the insurance company which relied on
the terms of the powers of attorney which on their face do
not disclose such limitation
 Section 180 of the Insurance Code has been amended by
the Family Code 17 which grants the father and mother
joint legal guardianship over the property of their
unemancipated common child without the necessity of a
court appointment; however, when the market value of the
property or the annual income of the child exceeds
P50,000.00, the parent concerned shall be required to put
up a bond in such amount as the court may determine.
 Insurance Commission: favored petitioners
 The Insular Life Assurance Company appealed stating that
 (a) had no jurisdiction over the case considering that the
claims exceeded P100,000
 (b) erred in holding that the powers of attorney relied upon
by Insular Life were insufficient to convey absolute
authority to Capt. Nuval to demand, receive and take
delivery of the insurance proceeds pertaining to the
petitioners
 (c) erred in not giving credit to the version of Insular Life
that the power of attorney supposed to have been
executed in favor of the Alarcons was missing, and
 (d) erred in holding that Insular Life was liable for violating
Section 180 of the Insurance Code for having released to
the surviving mothers the insuranceproceeds pertaining to
the beneficiaries who were still minors despite the failure
of the former to obtain a court authorization or to post a
bond.
 CA: eliminated the award to minor beneficiaries Dina Ayo
and Lucia Lontok
ISSUE: W/N the minor beneficiaries award should be
eliminated
18
HELD: YES. petition is GRANTED. CA Reversed. Insurance
Commission Reinstated.
 Being special powers of attorney, they must be strictly
construed. Insular Life knew that apower of attorney in
favor of Capt. Nuval for the collection and receipt of such
proceeds was a deviation from its practice with respect to
group policies.
 Group Insurance
 coverage terms for group insurance are usually stated in a
master agreement or policy that is issued by the insurer to
a representative of the group or to an administrator of the
insurance program
 employer acts as a functionary in the collection and
payment of premiums and in performing related duties
 falling within the ambit of administration of a group policy is
the disbursement of insurance payments by the employer
to the employees
 employee is in the position of a real party to the master
policy
 employees is the true source of the benefits, which are a
form of additional compensation to them
 enables the employees to carry a larger amount of
insurance than they could otherwise, and helps to attract
and hold a permanent class of employees
 Even granting for the sake of argument that the
special powers of attorneywere in due form, Insular Life
was grossly negligent in delivering the checks, drawn in
favor of the petitioners, to a party who is not the agent
mentioned in the special power of attorney
 Nor can we agree with the opinion of the public respondent
that since the shares of the minors in the
insurance proceeds are less than P50,000.00, then under
Article 225 of the Family Code their mothers could receive
such shares without need of either court appointments as
guardian or the posting of a bond
 Art. 225. The father and the mother shall jointly exercise
legal guardianship over the property of their
unemancipated common child without the necessity of a
court appointment. In case of disagreement, the father's
decision shall prevail, unless there is judicial order to the
contrary.
Where the market value of the property or the annual income
of the child exceeds P50,000, the parent concerned shall be
required to furnish a bond in such amount as the court may
determine, but not less than ten per centum (10%) of the value
of the property or annual income, to guarantee the
performance of the obligations prescribed for general
guardians.
It is clear from the said Article that regardless of the value of
the unemancipated common child's property, the father and
mother ipso jure become the legal guardian of the child's
property. However, if the market value of the property or the
annual income of the child exceeds P50,000.00, a bond has to
be posted by the parents concerned to guarantee the
performance of the obligations of a general guardian.
19
 It must, however, be noted that the second paragraph of
Article 225 of the Family Code speaks of the "market value
of the property or the annual income of the child," which
means, therefore, the aggregate of the child's property or
annual income; if this exceeds P50,000.00, a bond is
required.
 There is no evidence that the share of each of the minors
in the proceeds of the group policy in question is the
minor's only property. Without such evidence, it would not
be safe to conclude that, indeed, that is his only property.
GREPALIFE V. CA
89 SCRA 543
Facts:
> On March 14, 1957, respondent Ngo Hing filed an
application with Grepalife for a 20-yr endowment policy for 50T
on the life of his one year old daughter Helen Go.
> All the essential data regarding Helen was supplied by Ngo
to Lapu-Lapu Mondragon, the branch manager of Grepalife-
Cebu. Mondragon then typed the data on the application form
which was later signed by Ngo.
> Ngo then paid the insurance premium and a binding deposit
receipt was issued to him. The binding receipt contained the
following provision: “If the applicant shall not have been
insurable xxx and the Company declines to approve the
application, the insurance applied for shall not have been in
force at any time and the sum paid shall be returned to the
applicant upon the surrender of this receipt.”
> Mondragon wrote on the bottom of the application form his
strong recommendation for the approval of the insurance
application.
> On Apr 30, 1957, Mondragon received a letter from
Grepalife Main office disapproving the insurance application of
Ngo for the simple reason that the 20yr endowment plan is not
available for minors below 7 yrs old.
> Mondragon wrote back the main office again strongly
recommending the approval of the endowment plan on the life
of Helen, adding that Grepalife was the only insurance
company NOT selling endowment plans to children.
> On may 1957, Helen died of influenza with complication of
broncho pneumonia. Ngo filed a claim with Gepalife, but the
latter denied liability on the ground that there was no contract
between the insurer and the insured and a binding receipt is
NOT evidence of such contract.
Issue:
Whether or not the binding deposit receipt, constituted a
temporary contract of life insurance.
Held:
NO.
The binding receipt in question was merely an
acknowledgement 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
20
either approve or reject the same on the basis of whether or
not the applicant is insurable on standard rates.
Since Grepalife disapproved the insurance application of Ngo,
the binding deposit receipt had never became on force at any
time, pursuant to par. E of the said receipt. A binding receipt
is manifestly merely conditional and does NOT insure
outright. Where an agreement is made between the applicant
and the agent, NO liability shall attach until the principal
approves the risk and a receipt is given by the agent.
The acceptance is merely conditional, and is subordinated to
the act of the company in approving or rejecting the
application. Thus in life insurance, a binding slip or binding
receipt does NOT insure by itself.
TANG V. CA- INSURANCE FRAUD OR MISTAKE
90 SCRA 236
Facts:
> On Sept. 25, 2965, Lee Su Guat, widow, 61 years old and
illiterate who spoke only Chinese, applied for life insurance for
60T with Philamlife. The application was in two parts, both in
English.
> The second part dealt with her state of health. Her answers
having shown that she was health, Philamlife issued her a
policy effective Oct. 23, 1965 with her nephew Vicente Tang
as beneficiary.
> On Nov. 15, 1965, Lee again applied for additional
insurance of her life for 40T. Since it was only recent from the
time she first applied, no further medical exam was made but
she accomplished Part 1 (which certified the truthfulness of
statements made in Part. 2)
> The policy was again approved. On Apri 20 1966, Lee Su
Guat died of Lung cancer.
> Tang claimed the amount o 100T but Philamlife refused to
pay on the ground that the insured was guilty of concealment
and misrepresentation.
> Both trial court and CA ruled that Lee was guilty of
concealment.
> Tang’s position, however, is that because Lee was illiterate
and spoke only Chinese, she could not be held guilty of
concealment of her health history because the application for
insurance was English, and the insurer has not proven that the
terms thereof had been fully explained to her as provided by
Art. 1332 of CC.
Issue:
Whether or not Art. 1332 applies.
Held:
NO.
Art. 1332 is NOT applicable. Under said article, the obligation
to show that the terms of the contract had been fully explained
to the party who is unable to read or understand the language
of the contract, when fraud or mistake is alleged, devolves on
the party seeking to enforce it. Here, the insurance company
is NOT seeking to enforce the contract; on the contrary, it is
seeking to avoid its performance.
21
It is petitioner who is seeking to enforce it, even as fraud or
mistake is NOT alleged. Accordingly, Philamlife was under no
obligation to prove that the terms of the insurance contract
were fully explained to the other party. Even if we were to say
that the insurer is the one seeking the performance of the cont
contracts by avoiding paying the claim, it has to be noted as
above stated that there has been NO imputation of mistake of
fraud by the illiterate insured whose personality is represented
by her beneficiary. In sum, Art. 1332 is inapplicable, and
considering the findings of both the trial court and the CA as to
the Concealment of Lee, the SC affirms their decisions.
Concurring: J., Antonio
In a contract of insurance, each party must communicate to
the other, in good faith, all facts within his knowledge which
are material to the contract, and which the other has no means
of ascertaining. As a general rule, the failure by the insured to
disclose conditions affecting the risk of which he is aware
makes the contract voidable at the option of the insurer.
The reason for this rule is that insurance policies are
traditionally contracts uberrimae fidei, which means “most
abundant good faith”, “absolute and perfect candor or
openness and honesty,” “absence of any concealment or
deception however slight.” Here the CA found that the insured
deliberately concealed material facts about her physical
condition and history and/or concealed with whoever assisted
her in relaying false information to the medical
examiner. Certainly, the petitioner cannot assume
inconsistent positions by attempting to enforce the contract of
insurance for the purpose of collecting the proceeds of the
policy and at the same time nullify the contract by claiming that
it was executed through fraud or mistake.
NOTE: Art. 1332: When one of the parties is unable to read or
if the contract is in a language not understood by him, and
mistake or fraud is alleged, the person enforcing the contract
must show that the terms thereof have been fully explained to
him.
G.R. No. L-18529
FRANCISCO G. ALEJA, FELICITACION GAMBOA-ALEJA
and DOMINADOR ALEJA, plaintiffs-appellants,
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-
appellee.
Restituto L. Joson for plaintiffs-appellants. Bartolome S. Palma
for defendant-appellee.
Barrera, J.:
This is an appeal by Francisco G. Aleja, et al., from the
decision of the Court of First Instance of Nueva Ecija (in Civil
Case No. 3335) dismissing their complaint against the
Government Service Insurance System (GSIS) and denying
their claim to the proceeds of the insurance policy No. 310973
issued to the late Rosauro G. Aleja, on the ground that the
deceased was not yet covered by insurance at the time of his
death.
As found by the lower court, the deceased Rosauro G. Aleja
was appointed as temporary classroom teacher in the Bureau
of Public Schools, Division of Nueva Ecija, on July 8, 1958.
Thereafter, a compulsory term insurance policy, No. 310973,
22
was issued in his name, said policy to take effect on February
1, 1959. The corresponding premium therefor was deducted
for the first time from his salary on January 31, 1959.
However, two days before that or on January 29, 1959, while
guarding the rice stack in front of their house, Rosauro Aleja
died of a gunshot wound inflicted by his own gun. Plaintiffs, as
beneficiaries named in the policy, filed a claim with the GSIS
to collect the proceeds of the said policy, but the same was
denied allegedly because at the time of Aleja's death, the
policy was not yet effective and the latter was, therefore, not
covered by insurance. Hence, the institution of this case and
the consequent promulgation of the decision by the lower court
which is the subject of the present appeal.
In denying plaintiffs-appellants' claim, the GSIS contends that
although Aleja became a permanent employee and entitled to
membership in the System 6 months after his original
appointment, or on January 8, 1959, yet as specified in the
policy issued to him, the same shall become effective only on
February 1, 1959. And this latter date was fixed in accordance
with the provisions of Commonwealth Act 186, as amended
byRepublic Act 660, which read:
SEC. 4. Scope of application of System.- (a) Membership to
the System shall be compulsory upon all regularly and
permanently appointed employees, including those whose
tenure of office is fixed or limited by law; upon all teachers
except only those who are substitutes; ... .
SEC. 8. (a) Compulsory membership insurance.- An employee
whose membership in the System is compulsory shall be
automatically insured on the first day of the seventh calendar
month following the month he was appointed or on the first day
of the sixth calendar month if the date of his appointment is the
first day of the month: Provided, That his medical examination,
if required, has been approved by the System.
It is not controverted that the deceased had rendered services
to the government for 6 months and 21 days before his death;
that he was insured and in fact a policy was already issued in
his favor at the time of his death; that the death fixed for the
effectivity of said policy was made pursuant to the aforequoted
provisions of the GSIS Charter. Appellants, however, maintain
that section 8 of Commonwealth Act 186, insofar as it fixes the
date of compulsory membership therein, is absurd and
discriminatory, in that, whereas those whose appointments are
dated on the first day of the month become covered by
insurance on the first day of the sixth month following their
appointment, those who were appointed on other dates
become insured only on the first day of the seventh calendar
month from their original appointment. In other words, if an
employee is appointed on January 1, he will be covered by
insurance on June 1, whereas one who gets appointed in
January 2 becomes insured only on July 1. This arrangement,
appellants claim, was made only to facilitate office transactions
or for office procedure, and should not be construed to defeat
the purpose for which the System was established, i.e., to
promote the welfare of the employees. It is, therefore, urged
that the coverage of compulsory insurance should commence
on the date when the employee becomes entitled to
membership in the System, or upon completion of six months'
service.
It may be admitted that as thus worded, the disputed provision
makes a distinction, in the matter of effectivity of their
23
insurance coverage, between those appointed to the service
on the first day of the month and those who receive their
appointments on any other date. But classification or class
legislation, assuming this to be one, does not ipso facto make
a statutory provision invalid. Classification will not constitute an
infringement of the individual's right to constitutional
guarantees of equality if it is not unreasonable, arbitrary or
capricious. To be reasonable, the classification must be based
on substantial distinctions which make real differences; must
be germane to the purposes of the law; must not be limited to
existing conditions only, and must apply equally to each
member of the class, under similar conditions. 1
In the instant case, it may be true that the disputed provision
must have been incorporated in the law to promote efficiency
and convenience in office procedure of the System. Taking
into account the volume of business that the System handles,
the providing of this measure which ultimately may redound to
the benefit of the members in the form of efficient and prompt
service, cannot be considered capricious or arbitrary.
Furthermore, it appears that the policy issued and accepted by
Aleja during his lifetime specifically provides that the effective
date of the insurance contract is February 1, 1959.
Additionally, it is not denied that the first premium on said
insurance contract was deducted from Aleja's salary only on
January 31, 1959 or after his death. Clearly, at the time of his
said death, there was no existing contract between him and
the appellee GSIS, there being no consideration for the risk
sought to be enforced against the insurance system. The offer
of the latter to refund the amount collected after Aleja's death,
is proper.
WHEREFORE, the decision of the lower court appealed from
is hereby modified in the sense that the defendant-appellee
shall return to the plaintiffs the amount deducted from the
deceased's salary in the form of premium. No costs. So
ordered.
Areola vs. CA
G.R. No. 95641 September 22, 1994
Lessons Applicable: Binding Effect of Payment (Insurance)
Laws Applicable: Art. 1910,Article 1191
FACTS:
 December 17, 1984: Prudential Guarantee And
Assurance, Inc. issued collector's provisional receipt
amounting to P1,609.65
 June 29, 1985: 7 months after the issuance of petitioner
Santos Areola's Personal Accident Insurance
Policy, Prudential Guarantee And Assurance,
Inc. unilaterally cancelled it for failing to pay his premiums
through its manager Teofilo M. Malapit
 Shocked by the cancellation of the policy, Santos
approached Carlito Ang, agent of Prudential and
demanded the issuance of an official receipt. Ang told
Santos that it was a mistake and assured its rectification.
 July 15, 1985: Santos demanded the same terms and
same rate increase as when he paid the provincial receipt
24
but Malapit insisted that the partialpayment he made was
exhausted and that he should pay the balance or his
policy will cease to operate
 July 25, 1985 : Assistant Vice-President Mariano M. Ampil
III apologized
 August 6, 1985 had filed a complaint for breach of
contract with damages before the lower court
 August 13, 1985: Santos received through Carlito Ang the
leeter of Assistant Vice-President Mariano M. Ampil III
finding error on their part since premiums were not
remitted Malapit, proposed to extend its lifetime to
December 17, 1985
 RTC: favored Santos - Prudential in Bad Faith
 CA: Reversed - not motivated by negligence, malice or
bad faith in cancelling subject policy
ISSUE: W/N the Areolas can file against damages despite the
effort to rectify the cancellation
HELD: YES. RTC reinstated
 Malapit's fraudulent act of misappropriating the premiums
paid is beyond doubt directly imputable to Prudential
 Art. 1910. The principal must comply with all the
obligations which the agent may have contracted within
the scope of his authority.
As for any obligation wherein the agent has exceeded his
power, the principal is not bound except when he ratifies it
expressly or tacitly.
 Subsequent reinstatement could not possibly absolve
Prudential there being an obvious breach of contract
 a contract of insurance creates reciprocal obligations for
both insurer and insured
 Article 1191
 choice between fulfillment or rescission of the obligation in
case one of the obligors fails to comply with what is
incumbent upon him
 entitles the injured party to payment of damages,
regardless of whether he demands fulfillment or rescission
of the obligation
 Nominal damages are "recoverable where a legal right is
technically violated and must be vindicated against an
invasion that has produced no actual present loss of any
kind, or where there has been a breach of contract and no
substantial injury or actual damages whatsoever have
been or can be shown.
CONSTANTINO V. ASIA LIFE- NON-PAYMENT OF
INSURANCE PREMIUMS
87 PHIL 248
Facts:
> Appeal consolidates two cases.
> Asia life insurance Company (ALIC) was incorporated in
Delaware.
> For the sum of 175.04 as annual premium duly paid to
ALIC, it issued Policy No. 93912 whereby it insured the life of
Arcadio Constantino for 20 years for P3T with Paz Constantino
as beneficiary.
 First premium covered the period up to Sept. 26,
1942. No further premiums were paid after the first
premium and Arcadio died on Sept. 22, 1944.
25
> Due to Jap occupation, ALIC closed its branch office in
Manila from Jan. 2 1942-1945.
> On Aug. 1, 1938, ALIC issued Policy no. 78145 covering the
lives of Spouses Tomas Ruiz and Agustina Peralta for the sum
of P3T for 20 years. The annual premium stipulated was
regularly paid from Aug. 1, 1938 up to and including Sept. 30,
1940.
 Effective Aug. 1, 1941, the mode of payment was
changed from annually to quarterly and such quarterly
premiums were paid until Nov. 18, 1941.
 Last payment covered the period until Jan. 31, 1942.
 Tomas Ruiz died on Feb. 16, 1945 with Agustina Peralta
as his beneficiary.
> Due to Jap occupation, it became impossible and illegal for
the insured to deal with ALIC. Aside from this the insured
borrowed from the policy P234.00 such that the cash
surrender value of the policy was sufficient to maintain the
policy in force only up to Sept. 7, 1942.
> Both policies contained this provision: All premiums are due
in advance and any unpunctuality in making such payment
shall cause this policy to lapse unless and except as kept in
force by the grace period condition.
> Paz Constantino and Agustina Peralta claim as
beneficiaries, that they are entitled to receive the proceeds of
the policies less all sums due for premiums in arrears. They
also allege that non-payment of the premiums were caused by
the closing of ALIC’s offices during the war and the impossible
circumstances by the war, therefore, they should be excused
and the policies should not be forfeited.
> Lower court ruled in favor of ALIC.
Issue:
May a beneficiary in a life insurance policy recover the amount
thereof although the insured died after repeatedly failing to pay
the stipulated premiums, such failure being caused by war?
Held:
NO.
Due to the express terms of the policy, non-payment of the
premium produces its avoidance. In Glaraga v. Sun Life, it
was held that a life policy was avoided because the premium
had not been paid within the time fixed; since by its express
terms, non-payment of any premium when due or within the
31 day grace period ipso fact caused the policy to lapse.
When the life insurance policy provides that non-payment of
premiums will cause its forfeiture, war does NOT excuse non-
payment and does not avoid forfeiture. Essentially, the reason
why punctual payments are important is that the insurer
calculates on the basis of the prompt payments. Otherwise,
malulugi sila.
It should be noted that the parties contracted not only as to
peace time conditions but also as to war-time conditions since
the policies contained provisions applicable expressly to
wartime days. The logical inference therefore is that the
parties contemplated the uninterrupted operation of the
contract even if armed conflict should ensue.
26
ADELAIDA OCAMPO VDA. DE GOMEZ, demandante-apelante,
vs.
THE GOVERNMENT INSURANCE BOARD, demandado-apelado.
Sres. Artemio C. Macalino y Rodrigo G. Pañgan en representacion
de la apelante.
Abogado Auxiliar de Corporaciones D. Federico C. Alikpala en
representacion del apelado.
BRIONES, J.:
Andres A. Gomez estuvo sirviendo en el gobierno provincial de la
Pampanga como tasador provincial delegado por un periodo
continuo de 25 años, desde el 8 de Agosto de 1914 en que fue
nombrado por primera vez, hasta el 28 de Febrero de 1938 en que
fallecio. Segun el convenio dehechos, no cabe duda de que su
nombramiento era de empleado temporero — temporary — al tenor
de la fraseologia legal. No era elegible en el servicio civil: esto
explica porque durante tan largo tiempo de servicio no se le habia
podido expedir un nombramiento regular y permanente. El sueldo
que percibia al morir era de P90 al mes.
Tampoco hay controversia entre las partes, bajo el convenio, acerca
de los siguientes hechos: (a) que el gobierno provincial de la
Pampanga, para aprovecharse delos beneficios de la ley del
Commonwealth No. 186, aprobo el 8 de Agosto, 1937, por medio de
su junta provincial, una resolucion en que significaba su intencion de
afiliarse al Sistema de Seguro de Vida del Gobierno nacional
llamado "Government Service Insurance System"; (b) que despues
de recibir dicha resolucion, la junta que regenta y administra dicho
Sistema de Seguro la aprobo debidamente, haciendo efectiva la
afiliacion desde el 28 de Febrero, 1938; (c) que Andres A. Gomez,
antes de sumuerte, juntamente con otros empleados del gobierno
provincial de la Pampanga habia llenado un formulario del referido
Sistema de Seguro llamado "Information for membership insurance,"
en el que nombraba a suesposa Adelaida Ocampo como
beneficiaria, enviando luego el formulario asi llenado al "Government
Service Insurance System" que lo recibio y guardo en su archivo; (d)
que el 28 de Febrero, 1938, el tesorero provincia lde la Pampanga,
como pagador oficial, dedujo del sueldode Gomez correspondiente a
la segunda mitad de dichomes la cantidad de P2.70 como su parte
en la primera prima, aportando la provincia una suma igual como su
contribucion; (e) que la prima fue enviada a la oficina del
"Government Service Insurance System" en Manila, y dicha oficina
la recibio el 10 de marzo, 1938, librando el correspondiente recibo al
gobierno provincial de la Pampanga; (f) que el 7 de Marzo, 1938, el
tesorero provincial de la Pampanga envio a la oficina del
"Government Service Insurance System," en nombre de la viuda de
Andres Gomez, Adelaida Ocampo, una reclamacion por el importe
dela poliza de seguro en la suma de P1,052, pero la juntadirectiva
del Sistema la rechazo por el fundamento de queAndres Gomez era
solo un empleado temporero — temporary — bajo las reglas del
Servicio Civil, y, por tanto, no era asegurable cuando murio el 28 de
Febrero, 1938; (g) finalmente, que la oficina del "Government
Service Insurance System" devolvio al gobierno provincial de la
Pampanga el importe de la prima pagada, o sea la cantidad de
P5.40, por medio de la libranza de la Tesoreria No. 58162.
La viuda interpuso la presente accion ante el Juzgado de Primera
Instancia de la Pampanga contra la Junta Directiva del "Government
Service Insurance System," pidiendoel cobro del importe de la
poliza. El Juzgado, estimandola defensa de que Andres Gomez era
solo un temporero, sinhaberse cualificado en el servicio civil
mediante el correspondiente examen para merecer un
nombramiento como empleado regular y permanente, y, por tanto,
sin derechoa ser asegurado automaticamente bajo la ley que rige el
Sistema, dicto sentencia contra la demandante, sobrese y endola
demanda. De ahi la presente apelacion.
27
Establecido y convenido que el nombramiento de Gomez era de
temporero, la cuestion que tenemos que resolver essi al tiempo de
su muerte tenia tales cualificaciones quepodia ser considerado como
empleado regular y permanente para los efectos del cobro del
importe de su poliza de seguro por la beneficiaria. Decidimos que si,
tenia tales cualificaciones.
Resulta establecido en autos, sin discusion, que Gomez,
acogiendose a las disposiciones del articulo 672 del Codigo
Administrativo tal como fue enmendado por la ley del
Commonwealth No. 177, se sometio a examen de 2.ogrado enel
servicio civil el 16 de Octubre, 1937, y fue aprobado enaquel
examen, si bien este favorable resultado no se anunciosino despues
ya de su muerte. Es obvio que los efectos de la aprobacion deben
retrotraerse a la fecha del examen. La prueba de la competencia, de
la idoneidad del examinando, se realizo antes de su muerte; por
tanto, hay que darle efectividad desde la fecha en que tuvo lugar
laprueba. Hasta parece superfluo que esto se discuta.
Sin embargo, se arguye que no cabe dar efecto retroactivo a la
aprobacion de Gomez en su examen, puesto que el articulo 663 (d)
del Codigo Administrativo Revisado, tal como ha sido enmendado,
dispone que "a period of trial service shall be required before
appointment or employmentis made permanent;" y es claro que
Gomez, habien domuerto despues del examen y antes de que su
resultado seanunciara, mal pudo ser sometido a dicho periodo de
pruebapor 6 meses.
Esta manera de interpretar la ley tiene el defecto deser demasiado
literal, y "la letra mata (a veces), mientrasque el espiritu vivifica."
Tengase en cuenta que Gomez habia servido como tasador
provincial delegado por 25 años consecutivos hasta el dia de su
muerte. Cuando portan largo tiempo pudo superar la prueba de su
competencia, en el ejercicio cotidiano de sus deberes, hay que
presumir que sus superiores estaban satisfechos de su idoneidad.
Por tanto, el periodo de prueba de 6 meses no rezabacon el. Para
los efectos, por lo menos, de la validez de su poliza de seguro, se
debe concluir que el exito desu examen le capacitaba y cualificaba
automaticamente para un nombramiento regular y permanente
desde la fechade dicho examen. Por tanto, el era asegurable y,
dehecho, estaba asegurado en el dia de su muerte, bajo losterminos
de la Ley No. 186. Esta conclusion es tanto masjusta cuanto que el
"Government Service Insurance System" acepto practicamente la
prima pagada, librando porella el correspondiente recibo.
Nos sentimos perfectamente autorizados para interpretarla ley lo
mas liberalmente posible, toda vez que, prescindiendo ya de que en
el presente caso se trata de la viuday familia de un pequeño
empleado, es evidente que el Sistema Nacional de Seguro de Vida
del Gobierno se hacreado para fines sociales y humanitarios, siendo
parte deese generoso movimiento universal que tiende a
mejorarcada dia la suerte de los hijos del trabajo mediante la
promulgacion en todos los paises cultos y civilizados de leyes
progresivas y liberales sobre seguridad social y economica. El
articulo 3 de la ley del Commonwealth No. 186 que crea y
reglamenta dicho Sistema, dice positivamente que el mismose
establece "en orden a promover la eficiencia y bien estarde los
empleados del Gobierno de Filipinas y reemplazar los sistemas de
pensiones actualmente establecidos . . .". Como se sabe, aquellos
sistemas de pensioneseran fundamentalmente de beneficencia,
tanto que si noha sido posible continuarlos era porque el gobierno
no disponia de tanto dinero para capitalizarlos y sostener lospor si
solo. Asi que se ha ideado el Sistema Nacional de Seguro sobre
bases mas cientificas y con adecuadas aportaciones de los
empleados mismos. Con todo, es innegableque el sucesor ha
heredado parte de los rasgos beneficos y humanitarios de sus
antecesores.
En meritos de lo expuesto, se revoca la sentencia del Juzgado y se
condena a la demandada y apelada a pagara la demandante y
28
apelante la suma de P1,052, importe de la poliza de seguro del
difunto Andres A. Gomez, maslos intereses legales desde la
interposicion de la demanda, y las costas del juicio. Asi se ordena.
Moran, Pres., Paras, Feria, Pablo, Hilado, Bengzon, Padilla, and
Tuason , MM., estan conformes.
[G.R. No. 42874. October 22, 1935.]
THE INSULAR LIFE ASSURANCE CO., LTD., Plaintiff-
Appellant, v. MARIA NARCISA SUVA, as administratrix of
the intestate estate of Benito Patrocinio Suva, defendant
and appellee. FELICIDAD CRUZ, intervenor and appellant,
MARIA NARCISA SUVA, Intervenor-Appellee.
Araneta, Zaragoza & Araneta for plaintiff.
Jose Gutierrez David for intervenors.
SYLLABUS
LIFE INSURANCE POLICY; ATTEMPTED CHANGE OF
BENEFICIARY. — The conclusion of the trial court is
sustained by the decision in the case of Gercio v. Sun Life
Assurance Co. of Canada (48 Phil., 53), and the American
authorities therein cited. The attempted change of beneficiary
made by the insured on August 16, 1933, no right to change
having been reserved, and endorsed by the company on the
back of the policy on August 24, 1933, was due to a mutual
mistake. The application in which the insured, over his
personal signature, renounced the right to change the
beneficiary, should prevail over the printed phrase "WITH
RIGHT OF REVOCATION" which occurs in the policy. It is to
be noted that the application itself is made a part of the
contract.
DECISION
BUTTE, J.:
This is an appeal from a judgment of the Court of First
Instance of Manila in an action brought by the Insular Life
Assurance Co., Ltd., for the cancellation of two policies of
P5,000 each issued and delivered by it upon the life of Benito
Patrocinio Suva, now deceased. The action was originally
brought only against the administratrix of the estate of the
insured, but by leave of court, Maria Narcisa Suva, in her own
right, and Felicidad Cruz filed their interventions claiming to be
the beneficiaries of the two policies involved in this action.
The first of the policies, numbered 47726, bears date of
December 1, 1932, and names as beneficiary Isabel
Simbulan, the wife of the insured. The second of the said
policies, numbered 48819, bears date of February 1, 1933,
and names as beneficiary the appellee, Maria Narcisa Suva,
sister of the insured. The company acknowledges having
received the premium due on said policies for the first year
and tenders the return of the same in its petition. The
intervenors, besides praying for judgment for the amount due
29
on said policies, also pray for P1,000 each as damages.
The ground alleged by the plaintiff for the cancellation of said
policies is that the insured made false statements as to the
past and present state of his health in his applications which,
by the terms of the policies themselves, are made a part of the
contract. The applicant was examined on October 17, 1932, by
Dr. G. Ocampo, one of the physicians of the company. He was
again examined on December 28, 1932, by Dr. M. Llora, a
physician of the company sent out from the home office for
that purpose. In connection with his first application for policy
No. 47726, among the numerous questions with relation to
specific diseases, the following questions and answers appear
in the report of Dr. Ocampo (Exhibit B):jgc:chanrobles.com.ph
" ¿Ha padecido V.2 alguna vez de las siguientes
enfermedades . . . del pulmon, pleuriesia, pulomia, asma? —
No.
" ¿Ha escupido V. sangre? ¿Por quecausa? — No." No doubt
is raised as to the correctness of any other statements of the
applicant.
The report of Dr. Ocampo is a detailed account of the
complete examination made by him. Item No. 30 of his report
is as follows:" ¿Encuentra V., despues de una cuidadosa
interrogacion y reconocimiento, algún sintoma de
padecimiento actual o anterior . . . de los pulmones? to which
the doctor answered "No." Item 33 of his report is as follows:"
¿Ha revisado V. cuidadosamente todas las contestaciones de
este reconocimiento y esta V. seguro de que son claras y
completas?" to which the doctor answered "Si." Item 34 is as
follows:" ¿Cree V. que los informes dados por le solicitante
son verdaderos y completos en todos los conceptos?" to
which the doctor answered "Si." Item 35 is as follows:"
¿Recomienda V., como representante fiel de la compañia, que
se acepte este riesgo como excelente, bueno, o que no se
acepte?" to which the doctor answered "Si, que se acepte
como excelente."cralaw virtua1aw library
On December 28, 1932, when the applicant was examined by
Dr. M. Llora, he was asked the same questions as were put to
him by Dr. Ocampo. In the questions relating to his clinical
history he was asked: "Have you ever suffered from any
ailment or disease of (c) the lungs, pleurisy, pneumonia or
asthma? The applicant answered "Yes, trancazo 1918" and (h)
"Have you ever spat blood? What was it due to?" to which the
applicant answered "No." No other answers made by him are
called in question in this litigation.
In Dr. Llora’s detailed report which appears on the back of said
application, Exhibit C, appear the
following:jgc:chanrobles.com.ph
"Item 30: Do you find after careful inquiry and physical
examination any evidence of past or present disease . . . (d) of
the lungs?
"Answer: No."cralaw virtua1aw library
"Item 34: Do you believe the party has given full and true
information in all respects?
"Answer: Si.
30
"Item 35: Would you classify applicant as first class, good,
average or poor risk?
"Answer: Creo que es aceptable." His report concludes with
the following certificate:jgc:chanrobles.com.ph
"I CERTIFY that I have carefully examined Benito Patrocinio
Suva of Arayat, Pampanga, in private, and not in the presence
of any third person, at Arayat, Pampanga, this 28th day of
December, 1932, at 5.15 o’clock P. M. for an insurance of
P5,000 for 20 C. P. years on the applicant’s life; that I have
asked each question exactly as set forth on the other side of
this sheet and that the applicant’s answers thereto are in my
handwriting, and are exactly as made by the applicant to me
and that the applicant signed them in my presence.
(Sgd.) "M. LLORA, Med. Ex."cralaw virtua1aw library
The insured died of pulmonary tuberculosis in the Chinese
General Hospital in Manila on September 23, 1933.
The substance of the plaintiff’s cause of action is that the
statements made by the insured in his applications as above
quoted, were false and that the applicant was not in good
health either at the time he presented his applications or on
the date when said policies were delivered.
Upon this issue of fact the learned trial judge made a complete
and careful analysis of the evidence. We accept his
conclusions as to the credibility of the witnesses. We have
carefully re-examined the entire record and see no reason to
disturb his findings of fact. It seems to us the company’s
physicians were entirely warranted in their conclusion that the
insured was an acceptable risk. The preponderance of the
evidence discloses that the applicant, a young man 27 years
of age and recently married, was devoted to vigorous athletic
sports and regularly carried on his business as a farmer and
contractor up to May, 1933.
In reply to the question in the printed application, "Are you in
good health? he replied "Yes." If two qualified physicians, not
selected by him, independently examine a man with critical
attention and in the interest of their employer, the insurance
company, and they pronounce him to be in good health, we
should find it difficult to declare that he knowingly made a false
statement when he said he believed the same thing himself.
"Good health" is a relative term. A person with sound body
may honestly believe himself to be in "good health" although at
the moment he may have a terrific headache, or a running
cold, or an attack of diarrhea, or indigestion, or any other of a
host of minor common ailments which may possibly develop
later into a serious illness. A hemorrhage may be due to any
one of a variety of causes, grave or slight, having no
necessary relation with pulmonary tuberculosis. Even if we
gave credence to the testimony that Benito Patrocinio Suva
spat blood on one occasion in May, 1932, and another in
August, 1932, there is no evidence whatever in the record as
to the cause of the alleged hemorrhage. We have no right to
jump at the conclusion that it was grave and could only be due
to pulmonary tuberculosis, especially as it left no trace, for Drs.
Ocampo and Llora found nothing wrong with the applicant in
October or December, 1932. No serious illness prior to May,
1933, is established by the evidence. We agree with the trial
31

court that the applicant was in good health when the policies of the policy on August 24, 1933, was due to a mutual mistake.
were delivered and that it is not proved that he made any The application in which the insured, over his personal
material false statement in his said applications for insurance. signature, renounced the right to change the beneficiary,
should prevail over the printed phrase "WITH RIGHT OF
The appellant company complains that the trial court failed to REVOCATION" which occurs in the policy. It is to be noted
consider the death certificate signed by Dr. Tablante. This that the application itself is made a part of the contract.
certificate (Exhibit J) states that Suva died in the Chinese
General Hospital of Manila on September 23, 1933; that the In view of the premises, the judgment is affirmed with costs
cause of the death was pulmonary tuberculosis; that the against the appellant insurance company as to the appellee
duration of the disease was one year and five months. The Maria Narcisa Suva and without special pronouncement as to
source information of the latter statement is not mentioned. costs in the appeal of Felicidad Cruz.
Suva entered the hospital in August 1933, and the certificate
itself recites that Dr. Tablante treated him only from August 18,
1933, to September 23, 1933. The plaintiff did not offer Dr.
Tablante as a witness and none of the hospital records were
put in evidence. The statement of Dr. Tablante as to the
duration of the disease is apparently hearsay and, under the
circumstances, we cannot give that recital in the certificate of
death the conclusiveness which the plaintiff claims for it. (U.S.
v. Que Ping, 40 Phil., 17.)

Felicidad Cruz appeals from that part of the judgment which

holds that the insured, Benito Patrocinio Suva, having
renounced in his application the right to change the beneficiary
in policy No. 47726, his wife, Isabel Simbulan, acquired a
vested interest in the policy which neither the insured nor the
company could take from her without her consent. The
conclusion of the trial court is sustained by our decision in the
case of Gercio v. Sun Life Assurance Co. of Canada (48 Phil.,
53), and the American authorities therein cited. (We think that
the attempted change of beneficiary made by the insured on
August 16, 1933, and endorsed by the company on the back