G.R. No. 154514. July 28, 2005.

WHITE GOLD MARINE SERVICES, INC., petitioner, vs. PIONEER INSURANCE AND SURETY CORPORATION
AND THE STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD., respondents.

Insurance Law; Section 2(2) of the Insurance Code enumerates what constitutes “doing an insurance
business” or “transacting an insurance business”; The fact that no profit is derived from the making of
insurance contracts, agreements or transactions or that no separate or direct consideration is received
therefor, shall not preclude the existence of an insurance business.—Section 2(2) of the Insurance Code
enumerates what constitutes “doing an insurance business” or “transacting an insurance business.”
These are: (a) making or proposing to make, as insurer, any insurance contract; (b) making, or proposing
to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other
legitimate business or activity of the surety; (c) doing any kind of business, including a reinsurance
business, specifically recognized as constituting the doing of an insurance business within the meaning
of this Code; (d) doing or proposing to do any business in substance equivalent to any of the foregoing in
a manner designed to evade the provisions of this Code. . . . The same provision also provides, the fact
that no profit is derived from the making of insurance contracts, agreements or transactions, or that no
separate or direct consideration is received therefor, shall not preclude the existence of an insurance
business.

Same; Test to determine if a contract is an insurance contract or not.—The test to determine if a

contract is an insurance contract or not, depends on the nature of the promise, the act required to be
performed, and the exact nature of the agreement in the light of the occurrence, contingency, or
circumstances under which the performance becomes requisite. It is not by what it is called.

Same; An insurance contract is a contract of indemnity basically.—Basically, an insurance contract is a

contract of indemnity. In it, one undertakes for a consideration to indemnify another against loss,
damage or liability arising from an unknown or contingent event.

Same; A marine insurance undertakes to indemnify the assured against marine losses, such as the
losses incident to a marine adventure.—In particular, a marine insurance undertakes to indemnify the
assured against marine losses, such as the losses incident to a marine adventure. Section 99 of the
Insurance Code enumerates the coverage of marine insurance.

Same; Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine
insurance business.—A P & I Club is “a form of insurance against third party liability, where the third
party is anyone other than the P & I Club and the members.” By definition then, Steamship Mutual as a P
& I Club is a mutual insurance association engaged in the marine insurance business.
Same; To continue doing business here, Steamship Mutual or through its agent Pioneer, must secure a
license from the Insurance Commission.—The records reveal Steamship Mutual is doing business in the
country albeit without the requisite certificate of authority mandated by Section 187 of the Insurance
Code. It maintains a resident agent in the Philippines to solicit insurance and to collect payments in its
behalf. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled due to
non-payment of the calls. Thus, to continue doing business here, Steamship Mutual or through its
agent Pioneer, must secure a license from the Insurance Commission. Since a contract of insurance
involves public interest, regulation by the State is necessary. Thus, no insurer or insurance company is
allowed to engage in the insurance business without a license or a certificate of authority from the
Insurance Commission.

Same; Although Pioneer is already licensed as an insurance company, it needs a separate license to act
as insurance agent for Steamship Mutual.—Pioneer is the resident agent of Steamship Mutual as
evidenced by the certificate of registration issued by the Insurance Commission. It has been licensed to
do or transact insurance business by virtue of the certificate of authority issued by the same agency.
However, a Certification from the Commission states that Pioneer does not have a separate license to be
an agent/broker of Steamship Mutual. Although Pioneer is already licensed as an insurance company, it
needs a separate license to act as insurance agent for Steamship Mutual. White Gold Marine Services,
Inc. vs. Pioneer Insurance and Surety Corporation, 464 SCRA 448, G.R. No. 154514 July 28, 2005

No. L-25803. May 29, 1970.

Luz PICAR, NANCY PICAR, JESSE PICAR, assisted by their mother, CONSOLACION PICAR, plaintiffs-
appellants, vs. GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-appellee, REPUBLIC OF THE
PHILIPPINES, as represented by the PROVINCIAL TREASURER OF CAMARINES SUR, intervenor-
appellee.

Insurance law; Life insurance; Beneficiary; When beneficiary is not entitled to proceeds of insurance.—
It is true that under general principles in the law of insurance, if a policy provides that the proceeds shall
be payable to the assured, if he lives to a certain date, and, in case of his death before that date, then
they shall be payable to the beneficiary designated, the benefit of the policy will inure to such
beneficiary in case the assured dies before the need of the period designated in the policy, and,
generally, that the proceeds of a life insurance in which a third person is named beneficiary belong
exclusively to such beneficiary as an individual, they are not the property of the heirs of the insured, are
not subject to administration and cannot properly be claimed or received by the administrator of other
legal representative of the insured as assets of his estate. However, such general principles are not
applicable to the life insurance of government employees which is governed by specific law, namely
Section 26 of Commonwealth Act 186, which specifically provides that in life insurance policies issued
by the GSIS in favor of government employees, the proceeds shall be liable to attachment,
garnishment and other legal processes, when obligations or indebtedness to the GSIS and the
employer are concerned.
Government Service Insurance System; Insurance proceeds; GSIS may require beneficiaries of insurance
policies to present necessary clearance from money and property accountabilities of deceased
government employee; Reason.—The Government Service Insurance System has the right to require the
benef iciaries to submit the necessary clearance from money and property accountabilities of the
deceased government employee whose insurance policy is involved, before paying them the proceeds
of the policy concerned.

Same; Same; Subject to attachment in favor of Government.—Under Section 26 of Commonwealth Act

186, insurance proceeds of insurance policies issued to government employees are exempt from
attachment or liens except when obligations or indebtedness to the GSIS and the employer are
concerned. Picar vs. Government Service Insurance System, 33 SCRA 324, No. L-25803 May 29, 1970
No. L-22169. December 29, 1967.

SERGIO ALABAT,PETRONILO ALABAT,NICOLAS ALABAT and FORTTJNATO ALABAT, plaintiffs-

appellants, vs. TORIBIA TANDOG VDA. DE ALABAT,LEONCIO ALABAT, JARMILO ALABAT,and PREMIA
ALABAT, defendants-appellees. WENIFREDA ALMEDA, intervenor.

Civil law; Rights of natural child, source and nature of.—It is an elementary and basic principle in our
law of succession that the rights of a natural child spring not from the filiation itself, but from the
child’s acknowledgment by the natural parent, made voluntarily or by court decree. Possession or
enjoyment of the status of natural child is per se not a sufficient operative acknowledgment but only a
ground to compel the parent to acknowledge the child.

Same; Death benefit payment, nature of.—The money paid to the father and the mother of a soldier,
by way of indemnity and insurance for his death, forms part of the community property. Hence, the
father is entitled to 1/2 thereof and so of the property acquired thereby. Upon his death, that half
descends to his surviving children, with the surviving widow being also entitled to a share equal to that
of each of the children. Alabat vs. Vda. de Alabat, 21 SCRA 1479, No. L-22169 December 29, 1967

[No. 34583. October 22, 1931]

THE BANK OF THE PHILIPPINE ISLANDS, administrator of the estate of the late Adolphe Oscar
Schuetze, plaintiff and appellant, vs. JUAN POSADAS, jr., Collector of Internal Revenue, defendant and
appellee.

1.LIFE INSURANCE; AMOUNT OF POLICY; KIND OF PROPERTY.—The proceeds of a life-insurance policy

payable to the insured person's estate, on which the premiums were paid by the conjugal partnership,
constitute community property, and belong onehalf to the husband exclusively, and the other half to
the wife.

2.ID.; ID.; ID.—If the premiums were paid partly with paraphernal and partly conjugal funds, the
proceeds are in like proportion paraphernal in part and conjugal in part.

3.ID.; ID.; INHERITANCE TAX.—The proceeds of a life-insurance policy payable to the insured person's
estate as beneficiary, if delivered to the testamentary administrator of the former as part of the assets
of said estate under probate administration, are subject to the inheritance tax according to the law on
the matter, if they belong to the assured exclusively, and it is immaterial that he was domiciled in these
Islands or outside. Bank of the Philippine Islands vs. Posadas, 56 Phil. 215, No. 34583 October 22, 1931
[No. 9401. March 30, 1915.]

ANTONINA LAMPANO, plaintiff and appellee, vs. PLACIDA A. JOSE ET AL., defendants and appellants.

1.INSURANCE; INTEREST OF BUILDING CONTRACTOR.—A building contractor has an insurable interest

in the completed building pending the payment of the construction price. Lampano vs. Jose., 30 Phil.
537, No. 9401 March 30, 1915

G.R. No. 181132. June 5, 2009.*

HEIRS OF LORETO C. MARAMAG, represented by surviving spouse VICENTA PANGILINAN MARAMAG,

petitioners, vs. EVA VERNA DE GUZMAN MARAMAG, ODESSA DE GUZMAN MARAMAG, KARL BRIAN
DE GUZMAN MARAMAG, TRISHA ANGELIE MARAMAG, THE INSULAR LIFE ASSURANCE COMPANY,
LTD., and GREAT PACIFIC LIFE ASSURANCE CORPORATION, respondents.

Remedial Law; Actions; Cause of Action; A cause of action is the act or omission by which a party violates
a right of another; Elements of a Cause of Action.—A cause of action is the act or omission by which a
party violates a right of another. A complaint states a cause of action when it contains the three (3)
elements of a cause of action—(1) the legal right of the plaintiff; (2) the correlative obligation of the
defendant; and (3) the act or omission of the defendant in violation of the legal right. If any of these
elements is absent, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to
state a cause of action.

Same; Same; Same; Test of Sufficiency of a Cause of Action; Well-Recognized Exceptions to the General
Rule.—When a motion to dismiss is premised on this ground, the ruling thereon should be based only on
the facts alleged in the complaint. The court must resolve the issue on the strength of such allegations,
assuming them to be true. The test of sufficiency of a cause of action rests on whether, hypothetically
admitting the facts alleged in the complaint to be true, the court can render a valid judgment upon the
same, in accordance with the prayer in the complaint. This is the general rule. However, this rule is
subject to well-recognized exceptions, such that there is no hypothetical admission of the veracity of the
allegations if: 1. the falsity of the allegations is subject to judicial notice; 2. such allegations are legally
impossible; 3. the allegations refer to facts which are inadmissible in evidence; 4. by the record or
document in the pleading, the allegations appear unfounded; or 5. there is evidence which has been
presented to the court by stipulation of the parties or in the course of the hearings related to the case.

Civil Law; Insurance Law; Article 2011 of the Civil Code expressly provides that insurance contracts shall
be governed by special laws; i.e., the Insurance Code; The only persons entitled to claim the insurance
proceeds are either the insured, if still alive or the beneficiary if the insured is already deceased upon
the maturation of the policy; Exception is where the insurance contract was intended to benefit third
persons who are not parties to the same in the form of favorable stipulations or indemnity.—It is
evident from the face of the complaint that petitioners are not entitled to a favorable judgment in
light of Article 2011 of the Civil Code which expressly provides that insurance contracts shall be
governed by special laws, i.e., the Insurance Code. Section 53 of the Insurance Code states—SECTION
53. The insurance proceeds shall be applied exclusively to the proper interest of the person in whose
name or for whose benefit it is made unless otherwise specified in the policy. Pursuant thereto, it is
obvious that the only persons entitled to claim the insurance proceeds are either the insured, if still
alive; or the beneficiary, if the insured is already deceased, upon the maturation of the policy. The
exception to this rule is a situation where the insurance contract was intended to benefit third persons
who are not parties to the same in the form of favorable stipulations or indemnity. In such a case, third
parties may directly sue and claim from the insurer.

Same; Same; Same; No legal proscription exists in naming as beneficiaries the children of illicit
relationships by the insured.—The revocation of Eva as a beneficiary in one policy and her
disqualification as such in another are of no moment considering that the designation of the illegitimate
children as beneficiaries in Loreto’s insurance policies remains valid. Because no legal proscription exists
in naming as beneficiaries the children of illicit relationships by the insured, the shares of Eva in the
insurance proceeds, whether forfeited by the court in view of the prohibition on donations under Article
739 of the Civil Code or by the insurers themselves for reasons based on the insurance contracts, must
be awarded to the said illegitimate children, the designated beneficiaries, to the exclusion of petitioners.
It is only in cases where the insured has not designated any beneficiary, or when the designated
beneficiary is disqualified by law to receive the proceeds, that the insurance policy proceeds shall
redound to the benefit of the estate of the insured. Heirs of Loreto C. Maramag vs. Maramag, 588 SCRA
774, G.R. No. 181132 June 5, 2009

No. L-22796. June 26, 1967.

DELFIN NARIO, and ALEJANDRA SANTOS-NARIO. plaintiffsappellants, vs. THE PHILIPPINE AMERICAN
LIFE INSURANCE COMPANY, defendant-appellee.

Insurance; Vested interest of beneficiaries in life insurance policy.—The vested interest or right of the
beneficiaries in a life insurance policy should be measured on its full face value and not on its cash
surrender value, for, in case of death of the insured, said beneficiaries are paid on the basis of its face
value and, in case the insured should discontinue paying premiums, the beneficiaries may continue
paying the same and they are entitled to automatic extended term or paidup insurance options, etc.
Said vested right under the policy cannot be divisible at any given time.

Same; Parental authority; Alienation of minor child's property.—Where a person secured a life insurance
policy with a face value of P5,000, and she designated her husband and minor child as irrevocable
beneficiaries, her act of securing a loan on said policy and the act of surrendering the policy because
the loan was not granted are acts of disposition or alienation of her minor child's property rights and
are not merely acts of management or administration. Said acts involve the incurring or termination of
contractual obligations.

Same; Judicial authorization is required for alienation or incumbrance of minor child's property
rights.—Judicial authorization is necessary for the consent to be given by the father to a policy loan or
to the surrender of a life insurance policy wherein a minor has a vested interest worth P2,500. To obtain
such judicial authorization, the father should be appointed guardian of 'the child's property. If the
minor's property is valued at less than P2,000, the father or mother, as legal administrator, needs
judicial authorization to alienate or encumber the same. As legal administrator, the father or mother
can perform only acts of administration or management, as distinguished f rom incumbrance or
disposition.

Same; Provisions of New and Old Civil Codes compared.— The New Civil Code has not effected a
restitutio in integrum of the Spanish patria potestas. The revival has been in part only. The fact that the
New Civil Code did not reenact article 104 of the old Civil Code, which prohibited the parents from
alienating the real property owned by the child without court authority, proves that the parents have no
authority to carry out acts of disposition or alienation of the child's real or personal property without
judicial authorization. Nario vs. Philippine American Life Ins. Co., 20 SCRA 434, No. L-22796 June 26,
1967

No. L-44059. October 28, 1977.*

THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-appellee, vs. CARPONIA T. EBRADO and
PASCUALA VDA. DE EBRADO, defendants-appellants.

Commercial Law; Insurance; Insurance Code; Word “Interest” in Sec. 50 of Insurance Act which provides
that insurance shall be applied exclusively to the proper interest of the person in whose name it is
made refers only to the insured and not to the beneficiary; contract of insurance personal in
character.—

Section 50 of the Insurance Act which provides that “(t)he insurance shall be applied exclusively to the
proper interest of the person in whose name it is made” cannot be validly seized upon to hold that the
same includes the beneficiary. The word “interest” highly suggests that the provision refers only to the
“insured” and not the beneficiary, since a contract of insurance is personal in character. Otherwise, the
prohibitory laws against illicit relationships especially on property and descent will be rendered
nugatory, as the same could easily be circumvented by modes of insurance.

Same; Same; On matters not otherwise specifically provided for by the Insurance Law, the contract of
life insurance is governed by general rules of civil law.—Rather the general rules of civil law should be
applied to resolve this void in the Insurance Law. Article 2011 of the New Civil Code states: “The contract
of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be
regulated by this Code.” When not otherwise specifically provided for by the Insurance Law, the
contract of life insurance is governed by the general rules of the civil law regulating contracts. And under
Article 2012 of the same Code, “any person who is forbiden from receiving any donation under Article
739 cannot be named beneficiary of a life insurance policy by the person who cannot make a donation
to him.” Common-law spouses are, definitely, barred from receiving donations from each other.

Same; Same; Life Insurance policy no different from civil donation as far as beneficiary is concerned;
Both are founded on liberality; Common-law spouses designated as beneficiary barred from receiving
life insurance proceeds from a legally married person; Reasons therefor.—In essence, a life insurance
policy is no different from a civil donation insofar as the beneficiary is concerned. Both are founded
upon the same consideration: liberality. A beneficiary is like a donee, because from the premiums of
the policy which the insured pays out of liberality, the beneficiary will receive the proceeds or profits of
said insurance. As a consequence, the proscription in Article 739 of the new Civil Code should equally
operate in life insurance contracts. The mandate of Article 2012 cannot be laid aside: any person who
cannot receive a donation cannot be named as beneficiary in the life insurance policy of the person who
cannot make the donation. Under American law, a policy of life insurance is considered as a testament
and in construing it, the courts will, so far as possible treat it as a will and determine the effect of a
clause designating the beneficiary by rules under which wills are interpreted.

Same; Same; Conviction for adultery or concubinage for those barred from receiving donations or life
insurance not required as only preponderance of evidence is necessary.—We do not think that a
conviction for adultery or concubinage is exacted before the disabilities mentioned in Article 739 may
effectuate. More specifically, with regard to the disability on “persons who were guilty of adultery or
concubinage at the time of the donation,” x x x The underscored clause neatly conveys that no criminal
conviction for the disqualifying offense is a condition precedent. In fact, it cannot even be gleaned from
the aforequoted provision that a criminal prosecution is needed. On the contrary, the law plainly states
that the guilt of the party may be proved “in the same action” for declaration of nullity of donation. And,
it would be sufficient if evidence preponderates upon the guilt of the consort for the offense indicated.
The quantum of proof in criminal cases is not demanded.

Same; Same; Remedial Law; Evidence; Requisite proof of common-law relationship between insured
and beneficiary supplied by stipulations of parties at pre-trial conference; Considered judicial
admissions, of which judgment may be validly rendered without rigors of trial to prove illicit
relationship.—In the case before Us, the requisite proof of common-law relationship between the
insured and the beneficiary has been conveniently supplied by the stipulations between the parties in
the pre-trial conference of the case. It was agreed upon and stipulated therein that the deceased
insured Buenaventura C. Ebrado was married to Pascuala Ebrado with whom she has six legitimate
children; that during his lifetime, the deceased insured was living with his common-law wife, Carponia
Ebrado, with whom he has two children. These stipulations are nothing less than judicial admission
which, as a consequence, no longer require proof and cannot be contradicted. A fortiori, on the basis of
these admissions, a judgment may be validly rendered without going through the rigors of a trial for the
sole purpose of proving the illicit liason between the insured and the beneficiary. In fact, in that pre-
trial, the parties even agreed “that a decision be rendered based on this agreement and stipulation of
facts as to who among the two claimants is entitled to the policy.” The Insular Life Assurance Company,
Ltd. vs. Ebrado, 80 SCRA 181, No. L-44059 October 28, 1977

[No. L-6114. October 30, 1954.]

SOUTHERN LUZON EMPLOYEES' ASSOCIATION, plaintiff, vs. JUANITA GOLPEO, ET AL., defendants and
appellants; AQUILINA MALOLES, ET AL., defendants and appellees; ELSIE HICBAN, ET AL., defendants;
MARCELINO CONCEPCION, ET AL., intervenors and appellants.

ASSOCIATIONS; MUTUAL BENEFIT ASSOCIATIONS; DEATH BENEFIT ANALOGOUS TO INSURANCE.—The

plaintiff association is composed of laborers and employees and one of its purposes is mutual aid of its
members and their dependents in case of death. The association adopted a resolution allowing a
member to name as his beneficiaries his common law wife and/ or children had with her. In this case,
the deceased member listed as his beneficiaries his common law wife and the latter's children. Held,
that said beneficiaries are exclusively entitled to the death benefit, the agreement between the
deceased member and the association being analogous to an insurance.

[No. 9374. February 16, 1915.]

FRANCISCO DEL VAL ET AL., plaintiffs and appellants, vs. ANDRES DEL, VAL, defendant and appellee.

1.PLEADING; DEFECTS IN COMPLAINT; CURE.—Even though a complaint is defective to the extent of

failing to allege facts sufficient to constitute a cause of action, if, on the trial of the cause, evidence is
offered which establishes the cause of action which it was intended the complaint should allege, and
such evidence is received without objection, the defect is thereby cured and cannot be made the
ground of a subsequent objection.

2.ID.; ID.; ID.—An objection, made after trial, that the complaint in an action in partition was defective in
that it failed to describe the lands sought to be partitioned, is unavailing, where it appears that evidence
was introduced on the trial, without objection, clearly describing the real estate sought to be
partitioned.

3.PARTITION OF PERSONAL PROPERTY; JURISDICTION OF COURT OF FIRST INSTANCE.—The Courts of

First Instance of the Philippine Islands have jurisdiction to divide personal property between the
common owners thereof. If actual partition thereof cannot be made, it may be sold under the direction
of the court and the proceeds divided among the owners after the necessary expenses have been
deducted.
4.PARTITION OF REAL PROPERTY; JURISDICTION OF COURT OF FIRST INSTANCE.—The court has no
authority to partition real property among the common owners thereof without a proceeding in proper
form begun by one or more of such owners.

5.PARTITION; ORDER DISCHARGING ADMINISTRATOR NO BAR TO SUBSEQUENT ACTION.—The heirs of

real and personal property have the right to ask the probate court to turn such property over to them
without division; and where such request is unanimous, it is the duty of the court to comply with it and

535

VOL. 29, FEBRUARY 16, 1915.

535

Del Val vs. Del Val.

there is nothing in section 753 of the Code of Civil Procedure which prohibits it. In case the property is
turned over to the heirs by the probate court in bulk and without division, an order finally settling the
estate and discharging the administrator is not a bar to a subsequent action for a division of either the
real or personal property among the heirs as owners thereof.

6.JUDGMENT; PLEA OF "RES JUDICATA."—The defense of res judicata, to be available, must be pleaded"
or the facts demonstrating its existence must be proved on the trial without objection.

7.LIFE INSURANCE; PROCEEDS; HEIR AS BENEFICIARY.—Where a life-insurance policy is made payable to

one of the heirs of the person whose life is insured, the proceeds of the policy on the death of the
insured belong exclusively to the beneficiary and not to the estate of the person whose life was insured;
and such proceeds are his individual property and not the property of the heirs of the person whose life
was insured.

8.ID.; ID.; ID.; ARTICLE 1035, CIVIL CODE.—Article 1035 of the Civil Code, providing that "an heir by force
of law surviving with others of the same character to a succession must bring into the hereditary estate
the property or securities he may have received from the deceased during the life of the same, by way
of dowry, gift, or for any good consideration, in order to compute it in fixing the legal portions and in the
account of the division," is not applicable to the proceeds of an insurance policy made payable to one of
the heirs of the insured by name, nor can the proceeds of such a policy be considered a gift under article
819 of the Civil Code.

9.ID.; ID.; ID.; CODE OF COMMERCE.—The contract of life insurance is ?. special contract and the
destination of the proceeds thereof is determined by special laws which deal exclusively with that
subject. The Civil Code has no provisions which relate directly and specifically to life-insurance contracts
or to the destination of life-insurance proceeds. That subject is regulated exclusively by the Code of
Commerce, which provides for the terms of the contract, the relations of the parties and the destination
of the proceeds of the policy. Del Val vs. Del Val., 29 Phil. 534, No. 9374 February 16, 1915

[No. 23703. September 28, 1925]

HILARIO GERCIO, plaintiff and appellee, vs. SUN LIFE AsSURANCE Co. OF CANADA ET AL., defendants.
SUN LIFE ASSURANCE Co. OF CANADA, appellant.

1.INSURANCE; LAW APPLICABLE IN THE PHILIPPINES.—The Philippine Law of Insurance should be

supplemented by the general principles prevailing on the subject. The purpose should be to have the
Philippine Law of Insurance conform as nearly as possible to the modern Law of Insurance as found in
the United States proper.

2.ID.; ID.; INSURABLE INTEREST OF WIFE.—The wife has an insurable interest in the life of her husband.

3.ID.; ID.; ID.; BENEFICIARIES.—The beneficiary has an absolute vested interest in the policy f rom the
date of its issuance and delivery.

4.ID. ; ID. ; ID. ; ID.—When a policy of life insurance is taken out by the husband in which the wife is
named as beneficiary, she has a subsisting interest in the policy. And this applies to a policy to which
there attached the incidents of a loan value, cash surrender value, and automatic extension by
premiums paid, and to an endowment policy, as well as to an ordinary life insurance policy.

5.ID.; ID.; ID.; ID.; RIGHT TO CHANGE BENEFICIARY.—If the policy contains no provision authorizing a
change of beneficiary without the beneficiary's consent, the insured cannot make such change.

6.ID.; ID.; ID.; ID.; ID.—A life insurance policy of a husband made payable to the wife as beneficiary, is
the separate property of the beneficiary and beyond the control of the husband.

7.ID.; ID.; ID.; ID.; ID.; EFFECT OF DIVORCE.—In the absence of a statute to the contrary, if a policy is
taken out upon a husband's life and the wife is named as beneficiary therein, a subsequent divorce does
not destroy her rights under the policy.

8.ID.; ID.; ID.; ID.; ID.; ID.—The insured—the husband—has no power to change the beneficiary—the
former wife—and to name instead his actual wife, where the insured and the beneficiary have been
divorced, and where the policy of insurance does not expressly reserve to the insured the right to
change the beneficiary. Gercio vs. Sun Life Assurance Co. of Canada, 48 Phil. 53, No. 23703 September
28, 1925

G.R. No. 166245. April 9, 2008.*

ETERNAL GARDENS MEMORIAL PARK CORPORATION, petitioner, vs. THE PHILIPPINE AMERICAN LIFE
INSURANCE COMPANY, respondent.

Evidence; Witnesses; We ruled in People v. Paredes, 368 SCRA 102 (2001), that minor inconsistencies
are too trivial to affect the credibility of witnesses, and these may even serve to strengthen their
credibility as these negate any suspicion that the testimonies have been rehearsed.—As to the seeming
inconsistencies between the testimony of Manuel Cortez on whether one or two insurance application
forms were accomplished and the testimony of Mendoza on who actually filled out the application form,
these are minor inconsistencies that do not affect the credibility of the witnesses. Thus, we ruled in
People v. Paredes, 368 SCRA 102 (2001), that minor inconsistencies are too trivial to affect the credibility
of witnesses, and

_______________

* SECOND DIVISION.

SUPREME COURT REPORTS ANNOTATED

Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company

these may even serve to strengthen their credibility as these negate any suspicion that the testimonies
have been rehearsed.

Contracts; Insurance Law; It must be remembered that an insurance contract is a contract of adhesion
which must be construed liberally in favor of the insured and strictly against the insurer in order to
safeguard the latter’s interest.—It must be remembered that an insurance contract is a contract of
adhesion which must be construed liberally in favor of the insured and strictly against the insurer in
order to safeguard the latter’s interest. Thus, in Malayan Insurance Corporation v. Court of Appeals, 270
SCRA 242 (1997), this Court held that: Indemnity and liability insurance policies are construed in
accordance with the general rule of resolving any ambiguity therein in favor of the insured, where the
contract or policy is prepared by the insurer. A contract of insurance, being a contract of adhesion, par
excellence, any ambiguity therein should be resolved against the insurer; in other words, it should be
construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should
be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from
noncompliance with its obligations. (Emphasis supplied.)

Same; Same; The mere inaction of the insurer on the insurance application must not work to prejudice
the insured; it cannot be interpreted as a termination of the insurance contract.—The seemingly
conflicting provisions must be harmonized to mean that upon a party’s purchase of a memorial lot on
installment from Eternal, an insurance contract covering the lot purchaser is created and the same is
effective, valid, and binding until terminated by Philamlife by disapproving the insurance application.
The second sentence of Creditor Group Life Policy No. P-1920 on the Effective Date of Benefit is in the
nature of a resolutory condition which would lead to the cessation of the insurance contract. Moreover,
the mere inaction of the insurer on the insurance application must not work to prejudice the insured; it
cannot be interpreted as a termination of the insurance contract. The termination of the insurance
contract by the insurer must be explicit and unambiguous.

Same; Same; Insurance contracts are imbued with public interest that must be considered whenever the
rights and obligations of the

VOL. 551, APRIL 9, 2008

Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company

insurer and the insured are to be delineated.—To characterize the insurer and the insured as contracting
parties on equal footing is inaccurate at best. Insurance contracts are wholly prepared by the insurer
with vast amounts of experience in the industry purposefully used to its advantage. More often than
not, insurance contracts are contracts of adhesion containing technical terms and conditions of the
industry, confusing if at all understandable to laypersons, that are imposed on those who wish to avail of
insurance. As such, insurance contracts are imbued with public interest that must be considered
whenever the rights and obligations of the insurer and the insured are to be delineated. Hence, in order
to protect the interest of insurance applicants, insurance companies must be obligated to act with haste
upon insurance applications, to either deny or approve the same, or otherwise be bound to honor the
application as a valid, binding, and effective insurance contract. Eternal Gardens Memorial Park
Corporation vs. Philippine American Life Insurance Company, 551 SCRA 1, G.R. No. 166245 April 9, 2008

G.R. No. 105562. September 27, 1993.*

LUZ PINEDA, MARILOU MONTENEGRO, VIRGINIA ALARCON, DINA LORENA AYO, CELIA CALUMBAG and
LUCIA LONTOK, petitioners, vs. HON. COURT OF APPEALS and THE INSULAR LIFE ASSURANCE COMPANY,
LIMITED, respondents.

Insurance Law; Group Insurance Policies; In group insurance policies, the employer is the agent of the
insurer.—In Elfstrom vs. New York Life Insurance Company, the California Supreme Court explicitlyruled
that in group insurance policies, the employer is the agent of the insurer. Thus: “We are convinced that
the employer is the agent of the insurer in performing the duties of administering group insurance
policies. It cannot be said that the employer acts entirely for its own benefit or for the benefit of its
employees in undertaking administrative functions. While a reduced premium may result if the
employer relieves the insurer of these tasks, and this, of course, is advantageous to both the employer
and the employees, the insurer also enjoys significant advantages from the arrangement. The reduction
in the premium which results from employer-administration permits the insurer to realize a larger
volume of sales, and at the same time the insurer’s own administrative costs are markedly reduced. x x x
The most persuasive rationale for adopting the view that the employer acts as the agent of the insurer,
however, is that the employee has no knowledge of or control over the employer’s actions in handling
the policy or its administration. An agency relationship is based upon consent by one person that
another shall act in his behalf and be subject to his control. It is clear from the evidence regarding
procedural techniques here that the insurer-employer relationship meets this agency test with regard to
the administration of the policy, whereas that between the employer and its employees fails to reflect
true agency. The insurer directs the performance of the employer’s administrative acts, and if these
duties are not undertaken properly the insurer is in a position to exercise more constricted control over
the employer’s conduct.”

Same; Same; Civil Law; Family Law; Guardianship; The father and mother are the legal guardian of the
child’s property if the market value of the property or the annual income of the child does not exceed

_______________

* FIRST DIVISION.
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VOL. 226, SEPTEMBER 27, 1993

755

Pineda vs. Court of Appeals

P50,000.00, otherwise a bond is required.—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
appointment as guardian or the posting of a bond. It is of the view that said Article had repealed the
third paragraph of Section 180 of the Insurance Code. The pertinent portion of Article 225 of the Family
Code reads as follows: “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. 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. Pineda vs. Court of
Appeals, 226 SCRA 754, G.R. No. 105562 September 27, 1993