G.R. No. 119655 May 24, 1996 SPS. ANTONIO A. TIBAY and VIOLETA R. TIBAY and OFELIA M. RORALDO, VICTORINA M.

RORALDO, VIRGILIO M. RORALDO, MYRNA M. RORALDO and ROSABELLA M. RORALDO, petitioners, vs. COURT OF APPEALS and FORTUNE LIFE AND GENERAL INSURANCE CO., INC., respondents. BELLOSILLO, J.:p May a fire insurance policy be valid, binding and enforceable upon mere partial payment of premium? On 22 January 1987 private respondent Fortune Life and General Insurance Co., Inc. (FORTUNE) issued Fire Insurance Policy No. 136171 in favor of Violeta R. Tibay and/or Nicolas Roraldo on their two-storey residential building located at 5855 Zobel Street, Makati City, together with all their personal effects therein. The insurance was for P600,000.00 covering the period from 23 January 1987 to 23 January 1988. On 23 January 1987, of the total premium of P2,983.50, petitioner Violeta Tibay only paid P600.00 thus leaving a considerable balance unpaid. On 8 March 1987 the insured building was completely destroyed by fire. Two days later or on 10 March 1987 Violeta Tibay paid the balance of the premium. On the same day, she filed with FORTUNE a claim on the fire insurance policy. Her claim was accordingly referred to its adjuster, Goodwill Adjustment Services, Inc. (GASI), which immediately wrote Violeta requesting her to furnish it with the necessary documents for the investigation and processing of her claim. Petitioner forthwith complied. On 28 March 1987 she signed a nonwaiver agreement with GASI to the effect that any action taken by the companies or their representatives in investigating the claim made by the claimant for his loss which occurred at 5855 Zobel Roxas, Makati on March 8, 1987, or in the investigating or ascertainment of the amount of actual cash value and loss, shall not waive or invalidate any condition of the policies of such companies held by said claimant, nor the rights of either or any of the parties to this agreement, and such action shall not be, or be claimed to be, an admission of liability on the part of said companies or any of them. 1 In a letter dated 11 June 1987 FORTUNE denied the claim of Violeta for violation of Policy Condition No. 2 and of Sec. 77 of the Insurance Code. Efforts to settle the case before the Insurance Commission proved futile. On 3 March 1988 Violets and the other petitioners sued FORTUNE for damages in the amount of P600,000.00 representing the total coverage of the fire insurance policy plus 12% interest per annum, P100,000.00 moral damages, and attorney's fees equivalent to 20% of the total claim. On 19 July 1990 the trial court ruled for petitioners and adjudged FORTUNE liable for the total value of the insured building and personal properties in the amount of P600,000.00 plus interest at the legal rate of 6% per annum from the filing of the complaint until full payment, and attorney's fees equivalent to 20% of the total amount claimed plus costs of suit. 2 On 24 March 1995 the Court of Appeals reversed the court a quo by declaring FORTUNE not to be liable to plaintiff-appellees therein but ordering defendant-appellant to return to the former the premium of P2,983.50 plus 12% interest from 10 March 1987 until full payment. 3

Hence this petition for review with petitioners contending mainly that contrary to the conclusion of the appellate court, FORTUNE remains liable under the subject fire insurance policy in spite of the failure of petitioners to pay their premium in full. We find no merit in the petition; hence, we affirm the Court of Appeals. Insurance is a contract whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. 4 The consideration is the premium, which must be paid at the time and in the way and manner specified in the policy, and if not so paid, the policy will lapse and be forfeited by its own terms. 5 The pertinent provisions in the Policy on premium read — THIS POLICY OF INSURANCE WITNISSETH THAT only after payment to the Company in accordance with Policy Condition No. 2 of the total premiums by the insured as stipulated above for the period aforementioned for insuring against Loss or Damage by Fire or Lightning as herein appears, the Property herein described . . . 2. This policy including any renewal thereof and/or any endorsement thereon is not in force until the premium has been fully paid to and duly receipted by the Company in the manner provided herein. Any supplementary agreement seeking to amend this condition prepared by agent, broker or Company official, shall be deemed invalid and of no effect. xxx xxx xxx Except only in those specific cases where corresponding rules and regulations which are or may hereafter be in force provide for the payment of the stipulated premiums in periodic installments at fixed percentage, it is hereby declared, agreed and warranted that this policy shall be deemed effective, valid and binding upon the Company only when the premiums therefor have actually been paid in full and duly acknowledged in a receipt signed by any authorized official or representative/agent of the Company in such manner as provided herein. (emphasis supplied). 6 Clearly the Policy provides for payment of premium in full. Accordingly, where the premium has only been partially paid and the balance paid only after the peril insured against has occurred, the insurance contract did not take effect and the insured cannot collect at all on the policy. This is fully supported by Sec. 77 of the Insurance Code which provides — Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy

Dizon sustained the ruling of the trial court that partial payment of the premium made the policy effective during the whole period of the policy. for which the policy was issued in case the conditions therefor had been complied with. Apparently the crux of the controversy lies in the phrase "unless and until the premium thereof has been paid. this Court refused to invalidate the insurance policy.e. 1695 of the New Civil Code providing that every househelp shall be allowed four (4) days vacation each month. a result eschewed by basic considerations of fairness and equity . which laws simply stated "with pay. 843 granting vacation and sick leaves to judges of municipal courts and justices of the peace. . Inc. the second and third policies being a renewal/replacement for the previous one. In Phoenix it was the insurance company that sued for the balance of the premium. by agreeing to make premiums payable in installments as in Tuscany. R. Woodworks.00 on account of the total premium of P6. In Phoenix. For one. neither is it decisive of the instant dispute. The principle that where the law does not distinguish the court should neither distinguish assumes that the legislature made no qualification on the use of a general word or expression. the insurer in effect had shown its intention to continue with the existing contract of insurance. hence. Inc. While it may be true that under Section 77 of the Insurance Code.00 and then later demanding the remainder of the premium without any other precondition to its enforceability as in the instant case. that on April 1. there is no waiver express or implied in the case at bench. . there is. had a loss incurred (sic) before completion of payment of the entire premium.. 8 where the Court through Mr. v. is not in force until the premium has been fully paid and duly receipted by the Company . by accepting the initial payment of P3. it is correct to say that in Phoenix a contract was perfected upon partial payment of the premium since the parties had not otherwise stipulated that prepayment of the premium in full was a condition precedent to the existence of a contract. . . as between the insurer and the insured. despite its voluntary acceptance of partial payments. Resultantly. . San Miguel Brewery. Thereafter the obligation of the insurer to pay the insured the amount. or to consider the contract as valid and binding upon payment of the first premium.whenever the grace period provision applies (emphasis supplied). Justice Jesus G. as in fact it was enforcing its right to collect premium.95 due thereon. interpreting the phrase "with pay" used in connection with leaves of absence with pay granted to employees. . 7 the Court through Mr.." This leads us to the manner of payment envisioned by the law to make the insurance policy operative and binding. 1960. For whatever judicial construction may be accorded the disputed phrase must ultimately yield to the clear mandate of the law. Fire Insurance Policy No. no doubt at all that. or exact specific performance from the insured. In that case. But contrary to the stance taken by petitioners. 679 regulating employment of women and children.. . . Petitioners maintain otherwise. No. . 9652 was issued by appellee and delivered to appellant. In its defense the insured claimed that nonpayment of premium produced the cancellation of the insurance contract. it recognized and admitted the existence of an insurance contract with the insured. . Precisely. of prepayment in full by the insurer: impliedly. there was not only a perfected contract of insurance but a partially performed one as far as the payment of the agreed premium was concerned. agreed to make the premiums payable in installments. Ruling otherwise the Court held — It is clear . valid and binding upon the Company only when the premiums therefor have actually been paid in full and duly acknowledged. adequately demonstrate the waiver.A. by suing for the balance of the premium as in Phoenix. Court of Appeals 9 the parties mutually agreed that the premiums could be paid in installments. No. . It was renewed for two succeeding years. ruled — . This is not so here. Here. no vinculum juris or bond of law was to be established until full payment was effected prior to the occurrence of the risk insured against. consequently. Inc. and that this policy shall be deemed effective. There is. the parties may not agree to make the insurance contract valid and binding without payment of premiums.000. In Escosura v. R. while the obligation of the insured to pay the remainder of the total amount of the premium due became demandable. And the insured never informed the insurer that it was terminating the policy because the terms were unacceptable. Citing C. . which in fact they did for three (3) years." the Court concluded that it was undisputed that in all these laws the phrase "with pay" used without any qualifying adjective meant that the employee was entitled to full compensation during his leave of absence. A. the insurer and the insured expressly stipulated that (t)his policy including any renewal thereof and/or any indorsement thereon is not in force until the premium has been fully paid to and duly receipted by the Company . and there is no pretense that the parties never envisioned to make the insurance contract binding between them. The 1967 Phoenix case is not persuasive. . there is nothing in said section which suggests that the parties may not agree to allow payment of the premiums in installment. . Otherwise we would allow the insurer to renege on its liability under the contract. . No. the legislative practice seems to be that when the intention is to distinguish between full and partial payment. 647 governing maternity leaves of married women in government. a specific stipulation that (t)his policy . Insisting that FORTUNE is liable on the policy despite partial payment of the premium due and the express stipulation thereof to the contrary. In Makati Tuscany Condominium Corp. Justice Arsenio P. and expressly. either express or implied. the parties . the latter paid to the former the sum of P3. Phoenix and Tuscany. quite unlike in Phoenix. the modifying term is used . By express agreement of the parties. and finally. In the case before us.051. . . arose and became binding upon it.000. i. In giving effect to the policy. the Court quoted with approval the Court of Appeals — The obligation to pay premiums when due is ordinarily an indivisible obligation to pay the entire premium. Art. Barrera. These two (2) cases. the insurance company commenced action against the insured for the unpaid balance on a fire insurance policy. petitioners rely heavily on the 1967 case of Philippine Phoenix and Insurance Co. and that on September 22 of the same year. v. the factual scenario is different.A.

Hence. without receiving anything therefor in case the contingency does not happen. the petition is DENIED and the assailed Decision of the Court of Appeals dated 24 March 1995 is AFFIRMED. Each party therefore takes a risk: the insurer. the cardinal polestar in the construction of an insurance contract is the intention of the parties as expressed in the policy. what if the insured makes an initial payment of only 10%. That the policy contract in the case at bench was approved and allowed issuance simply reaffirms the validity of such policy. 17 The validity of these limitations is by law passed upon by the Insurance Commissioner who is empowered to approve all forms of policies. 12 Applying further the rules of statutory construction. 77. From these contributory funds are paid whatever losses occur due to exposure to the peril insured against. of the premium stipulated in the policy on the basis that. Inc. insurance companies have the same rights as individuals to limit their liability and to impose whatever conditions they deem best upon their obligations not inconsistent with public policy. after all. For what could prevent the insurance applicant from deliberately or wilfully holding back full premium payment and wait for the risk insured against to transpire and then conveniently pass on the balance of the premium to be deducted from the proceeds of the insurance? Worse. Thus. Rather. 15 It should be understood that the integrity of this fund cannot be secured and maintained if by judicial fiat partial offerings of premiums were to be construed as a legal nexus between the applicant and the insurer despite an express agreement to the contrary. Upon this bedrock insurance firms are enabled to offer the assurance of security to the public at favorable rates.983. full payment must be made before the risk occurs for the policy to be considered effective and in force. It would have been altogether different were it not so stipulated. no vinculum juris whereby the insurer bound itself to indemnify the assured according to law ever resulted from the fractional payment of premium. and (b) when the insurer makes a written acknowledgment of the receipt of premium. These exceptions are: (a) in case the insurance coverage relates to life or industrial life (health) insurance when a grace period applies. and far more importantly.50 and the balance to be paid even after the risk insured against has occurred. of the required premium. Court Of Appeals. The express mention of exceptions operates to exclude other exceptions. WHEREFORE. 10 Courts have no other function but to enforce the same. in the absence of clear waiver of prepayment in full by the insurer. conversely. on the principle that the strength of the vinculum juris is not measured by any specific amount of premium payment. as well as Sec. In the desire to safeguard the interest of the assured. Partial payment even when accepted as a partial payment will not keep the policy alive even for such fractional part of the year as the part payment bears to the whole payment. The insurance contract itself expressly provided that the policy would be effective only when the premium was paid in full. and when the risk occurs simply points to the proceeds from where to source the balance? Can an insurance company then exist and survive upon the payment of 1%. For as long as the current Insurance Code remains unchanged and partial payment of premiums is not mentioned at all as among the exceptions provided in Sees. particularly the provision in question. it must not be ignored that the contract of insurance is primarily a risk distributing device. or even 10%. the law mandates all insurance companies to maintain a legal reserve fund in favor of those claiming under their policies. petitioners had absolute freedom of choice whether or not to be insured by FORTUNE under the terms of its policy and they freely opted to adhere thereto. so to speak. this acknowledgment being declared by law to be then conclusive evidence of the premium payment. as expressly agreed upon in the contract. 77 and 78. the insured cannot collect on the proceeds of the policy. In the absence of statutory prohibition to the contrary. 77 of the Insurance Code the payment of partial premium by the assured in this particular instance should not be considered the payment required by the law and the stipulation of the parties." We are well aware of insurance companies falling into the despicable habit of collecting premiums promptly yet resorting to all kinds of excuses to deny or delay payment of just insurance claims. there is no valid and binding contract. until the premium is paid. the law is manifestly on the side of the insurer. 13 speaks only of two (2) statutory exceptions to the requirement of payment of the entire premium as a prerequisite to the validity of the insurance contract. 14 A maxim of recognized practicality is the rule that the expressed exception or exemption excludes others. "kill the goose that lays the golden egg. Indeed. and the law has not expressly excepted partial payments. and the insured. the insurer can deduct from the proceeds of the insurance should the risk insured against occur? Interpreting the contract of insurance stringently against the insurer but liberally in favor of the insured despite clearly defined obligations of the parties to the policy can be carried out to extremes that there is the danger that we may.00 as partial undertaking out of the stipulated total premium of P2. The rule that contracts of insurance will be construed in favor of the insured and most strongly against the insurer should not be permitted to have the effect of making a plain agreement ambiguous and then construe it in favor of the insured. that of being compelled upon the happening of the contingency to pay the entire sum agreed upon. In other words. under Sec. The terms of the insurance policy constitute the measure of the insurer's liability. the imperative need for its prompt payment and full satisfaction. v. Thus. it must be taken in the concept of a deposit to be held in trust by the insurer until such time that the full amount has been tendered and duly receipted for. For it cannot be disputed that premium is the elixir vitae of the insurance business because by law the insurer must maintain a legal reserve fund to meet its contingent obligations to the public. The case of South Sea Surety and Insurance Company. no policy of insurance can ever pretend to be efficacious or effective until premium has been fully paid. in this case. To ensure payment for these losses. 16 It must be emphasized here that all actuarial calculations and various tabulations of probabilities of losses under the risks insured against are based on the sound hypothesis of prompt payment of premiums. But. hence. But once payment of premium is left to the whim and caprice of the insured. it is elemental law that the payment of premium is requisite to keep the policy of insurance in force. Exceptio firmat regulim in casibus non exceptis. as petitioners have done in this case. Ergo. a mechanism by which all members of a group exposed to a particular risk contribute premiums to an insurer. 78. or even 1%. the position maintained by petitioners becomes even more untenable. that of parting with the amount required as premium. those which are not within the enumerated exceptions are deemed included in the general rule. certificates or contracts of insurance which insurers intend to issue or deliver. .Conformably with the aforesaid stipulations explicitly worded and taken in conjunction with Sec. If the premium is not paid in the manner prescribed in the policy as intended by the parties the policy is ineffective. we will surely wreak havoc on the business and set to naught what has taken actuarians centuries to devise to arrive at a fair and equitable distribution of risks and benefits between the insurer and the insured. 11 Verily. as when the courts tolerate the payment of a mere P600. And so it must be. SO ORDERED.

the private respodent points in her Annex "1. Whatever the reason for the delay in transmitting it to the legal department need not detain us here. It is because she was ultimately sustained by the public respondent that the petitioner has come to us for relief. Alternatively. In the instant case the private respondent has been sustained by the Insurance Commission in her claim for compensation for her burned property. 1982. GREGORIA CRUZ ARNALDO. many people now secure fire insurance. 1982. significantly. which was denied on June 4. the insured in effect wagers that his house will be burned. having lost his house. The records show that notice of the decision of the public respondent dated April 5. From the procedural viewpoint alone.: When a person's house is razed. 1982. while losing his house. was received by MICO on April 10.000. for a fee. INC. 1982.P. 6 On February 5. 10 The instant petition was filed with this Court on July 2." 13 the authenticated copy of the same Order with a rubber-stamped notation at the bottom thereof indicating that it was received for the Malayan Insurance Co. as under Rule 45. The pivotal date is the date the notice of the denial of the motion for reconsideration was received by MICO. CRUZ. 3 On December 24. The petitioner is now before us to dispute the decision. with the insurer assuring him against the loss. For peace of mind and as a hedge against possible loss.together with other payments. it might only indicate that it was received on June 18. 129. or nineteen days later.. Where once stood a home. it also invokes Rule 45 of the Rules of Court. J. The prize is the recompense to be given by the insurer to make good the loss the insured has sustained. Conversely. The chronology of the relevant antecedent facts is as follows: On June 7. and the reglementary period began to run again after June 13. in her capacity as the INSURANCE COMMISSIONER. with a signed rubber-stamped notation on the upper left-hand corner that it was received on June 18. or fifteen days such notice. as evidenced by Annex "1" duly authenticated by the Insurance Commission. which MICO rejected. . 1982. 1982. 1982. and CORONACION PINCA. At the bottom. 1982." The signature may or may not habe been written by the same person who signed at the bottom of the petitioner's Annex "B. 11 The position of the petition is that the petition is governed by Section 416 0f the Insurance Code giving it thirty days wthin which to appeal by certiorari to this Court. the petition must be rejected. This is an aleatory contract. It would be a pity then if. (MICO).. payment of the premium for Pinca was received by DomingoAdora. until July 22. But Adora refused to accept it. For their part. agent of MICO." 12 which is a copy of the Order of June 14. 2 On October 15. Annex "B" is at worst self-serving. 1987 MALAYAN INSURANCE CO. by its legal department. 1981. Against this document. F-001-17212 on her property for the amount of P14. there is now. 1981. by the legal department of MICO. the fire usually burns down the efforts of a lifetime and forecloses hope for the suddenly somber future. By such insurance. 7 In due time. 1982. Pinca's property was completely burned. Inc.R. It does not indicate from whom. 1981. which they say governs not only courts of justice but also quasi-judicial bodies like the Insurance Commission. 1982. the public and private respondents insist that the applicable law is B. 9 Notice of this denial was received by MICO on June 13. and offers in evidence its Annex "B. the reason may be an unjust refusal of the insurer to acknowledge a just obligation. The period for appeal under this law is also fifteen days. MICO allegedly cancelled the policy for non-payment.G. Fire Insurance Policy No. respondents. 4 On January 15." Between the two dates. the court chooses to believe June 13. there is another signature under which are the ciphers "6-13-82. 5 On January 18. Under Section 416 of the Insurance Code. She then went to the Insurance Commission. only a gray desolation. at best. the insured. Coronacion Pinca. Gotladera on "6-13-82. 1981. wins the wagers. As the herein petition was filed on July 2. The vanished abode becomes a charred and painful memory. date of its receipt of notice of the denial of the said motion for reconsideration.00 effective July 22. in the sighing wisps of smoke. If the house does burn. 1982. the petitioner (hereinafter called (MICO) issued to the private respondent. Sometimes it is his fault that he cannot collect. No. by J. 1982.1981. 1981. as where there is a defect imputable to him in the insurance contract. it filed a motion for reconsideration. L-67835 October 12. It is stillborn. 1981. of the premium and sent the corresponding notice to Pinca. 1982. The petitioner filed its motion for reconsideration on April 25. Pinca's payment was returned by MICO to Adora on the ground that her policy had been cancelled earlier. Pinca made the requisite demands for payment. the insured were also to lose the payment he expects to recover for such loss. 8 On April 25. vs. 1982. petitioner. The dying embers leave ashes in the heart. as has happened many times. 1982. 1 on the ground that there was no valid insurance contract at the time of the loss." for which no explanation has been given. MICO avers this was June 18. not only because the numbers "6-13-82" appear on both annexes but also because it is the date authenticated by the administrative division of the Insurance Commission. the period for appeal is thirty days from notice of the decision of the Insurance Commission. 1982. Adora remitted this payment to MICO. there is no question that it is tardy by four days. after it had been received earlier by some other of its personnel on June 13.

it must also fail. making the petition filed on July 2. 15 There is the petitioner's argument. 1982. What is questioned is the validity of Pinca's payment and of Adora's authority to receive it. who remitted the same to MICO. except in the case of a life or an industrial life policy whenever the grace period provision applies. An insurer is entitled to payment of the premium as soon as the thing is exposed to the peril insured against.P. In any event. 1982. Section 64 reads as follows: SEC. 1981. the petition can and should be dismissed for late filing. and the fire occured on January 18. 64. only one more day would have remained for it to appeal.60 on "12-24-81" by Domingo Adora. pursuant to its original terms. 1982? It would seem from MICO's own theory. the policy could be cancelled on any of the supervening grounds enumerated in Article 64 (except "nonpayment of premium") provided the cancellation was made in accordance therewith and with Article 65. to wit. 5434. The above provision is not applicable because payment of the premium was in fact eventually made in this case. assuming it is applicable. considering that the motion for reconsideration was filed on the fifteenth day after MICO received notice of the decision. 1981. Its contention that the claim was allowed without proof of loss is also untenable. 16 MICO is taking an inconsistent stand. would end on June 28. that ten-day period. who received it on behalf of MICO. or also four days from July 2. On the merits. 1982. 129. While contending that acceptance of the premium payment was prohibited by the policy. or would the payment have retroacted to July 22. And it is a well-known principle under the law of agency that: Payment to an agent having authority to receive or collect payment is equivalent to payment to the principal himself. even if the applicable law were still R. 14 This is important because it suggests an understanding between MICO and the insured that such payment could be made later. That would make the petition eighteen days late by July 2.A. who made the payment to Adora at her own riskl as she was bound to first check his authority to receive it. 77. 1982. such payment is complete when the money delivered is into the agent's hands and is a discharge of the indebtedness owing to the principal. the fifteen-day period prescribed under Rule 45. no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid. to which it was remitted on January 15. 1981m but only up to July 22. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured. when the petition was filed. Whichever law is applicable. We do not share MICO's view that there was no existing insurance at the time of the loss sustained by Pinca because her policy never became effective for non-payment of premium. that Adora was not authorized to accept the premium payment because six months had elapsed since the issuance by the policy itself. It is not disputed that the preium was actually paid by Pinca to Adora on December 24. therefore. Payment was in fact made. Indeed. nine days late. as agent Adora had assured Pinca. governing appeals from administrative bodies. the policy would have run for only eight months although the premium paid was for one whole year. The payment was made on December 24. The law provides for a fixed period of ten days from notice of the denial of a seasonable motion for reconsideration within which to appeal from the decision. Thereafter. the premium invoice issued to Pinca at the time of the delivery of the policy on June 7. 306. and no notice of cancellation shall be effective unless it . Accordingly. 1982. however. rendering the policy operative as of June 22. 1981? If MICO accepted the payment in December 1981 and the insured property had not been burned. xxx xxx xxx Any insurance company which delivers to an insurance agant or insurance broker a policy or contract of insurance shall be demmed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon. cannot have his cake and eat it too. August 1981. Notwithstanding any agreement to the contrary. would have ended on June 23. say. and removing it from the provisions of Article 77. One wonders: suppose the payment had been made and accepted in. counted from June 13. 1982. 1981. It is clearly provided in Section 306 of the Insurance Code that: SEC.Counted from June 13. the petition would still be tardy. it is not denied that this payment was actually made by Pinca to Adora. that the policy would have become effective only upon payment. 1982. Notably. If it was filed under B. 1982. would that policy not have expired just the same on July 22. 1981 was stamped "Payment Received" of the amoung of P930. June 14. In others words. One surely. then. MICO's acknowledgment of Adora as its agent defeats its contention that he was not authorized to receive the premium payment on its behalf. The petitioner relies heavily on Section 77 of the Insurance Code providing that: SEC. MICO's arguments that there was no payment of premium and that the policy had been cancelled before the occurence of the loss are not acceptable. and not on December 24. it at the same time insists that the policy never came into force because the premium had not been paid. would the commencement date of the policy have been changed to the date of the payment. It is argued that this prohibition was binding upon Pinca. 1981. if accepted and so would have been valid only from December 24. according to the original terms.

The presumption cited is unavailing against the positive duty enjoined by Section 64 upon MICO and the flat denial made by the private respondent that she had received notice of the claimed cancellation. effective on that date and until one year later. mailed or delivered to the named insured at the address shown in the policy. on December 25th you made the alleged payment. she thought of that. 1981. the insurer will furnish the facts on which the cancellation is based. and shall state (a) which of the grounds set forth in section sixty-four is relied upon and (b) that. upon written request of the named insured. its stipulated commencement date. she would not have made payment on the original policy on December 24.18 (3) The notice must be (a) in writing. which had not ratified it. after the effective date of the policy. (c) discovery of fraud or material misrepresentation.is based on the occurrence. It stands to reason that if Pinca had really received the said notice. require concurrence of the following conditions: (1) There must be prior notice of cancellation to the insured. 17 (2) The notice must be based on the occurrence. there is the flat denial of Pinca. Instead. your . Witness. who testified that "the original of the endorsement and credit memo" — presumably meaning the alleged cancellation — "were sent the assured by mail through our mailing section" 21 However. As for the method of cancellation. Q: So if you thought that your policy was already intended to revive cancelled policy? A: Misleading.or (f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code. of course. To support this argument. Now. (b) mailed. or delivered to the named insured. MICO's suggests that Pinca knew the policy had already been cancelled and that when she paid the premium on December 24. 1981. did not have to prove such denial Considering the strict language of Section 64 that no insurance policy shall be cancelled except upon prior notice. 1981. The Court finds that if she did pay on that date. Q: I will revise the question. you stated that you thought the policy was cancelled. Section 65 provides as follows: SEC. was actually mailed to and received by Pinca. MICO's cites the following exchange: Q: Now. She was obviously only reciprocating in kind when she paid her premium for the period beginning July 22. A valid cancellation must. of one or more of the following: (a) non-payment of premium. after the effective date of the policy. when you made the payment of December 24." without more. of one or more of the grounds mentioned. there is no proof that the notice. (d) discovery of willful. and so taken advantage of the extended period. After all. Now. All notices of cancellation mentioned in the preceding section shall be in writing. it presented one of its employees. 20 MICO's claims it cancelled the policy in question on October 15. your policy was cancelled? A: I have thought of that but the agent told me to call him up at anytime. 1981. it behooved MICO's to make sure that the cancellation was actually sent to and received by the insured. 1981. Madam Witness. was still in effect and she was willing to make her payment retroact to July 22. who says she never received the claimed cancellation and who. it was because she honestly believed that the policy issued on June 7." 22 (not realizing perhaps that "enervated" means "debilitated" not "strengthened"). Now. the insurer will furnish the facts on which the cancellation is based. Mrs. Hearing Officer: The testimony of witness is that. therefore. 19 (4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon written request of the insured. for non-payment of premium. (b) conviction of a crime arising out of acts increasing the hazard insured against. (e) physical changes in the property insured which result in the property becoming uninsurable. the renewal thereof did not legally bind MICO. her purpose was "to renew it. or reckless acts or commissions increasing the hazard insured against. The petitioner then says that its "stand is enervated (sic) by the legal presumption of regularity and due performance of duty. All MICO's offers to show that the cancellation was communicated to the insured is its employee's testimony that the said cancellation was sent "by mail through our mailing section. 1981. my question is that. and not December 24. 65. 1981. agent Adora was very accomodating and had earlier told her "to call him up any time" she was ready with her payment on the policy earlier issued. On the other hand. To support this assertion. assuming it complied with the other requisites mentioned above. 1981. did it not come to your mind that after the lapse of six (6) months. (c) at the address shown in the policy. Your Honor. she would have asked for a new insurance." As this could not be done by the agent alone under the terms of the original policy.

The valuation fixed in fire insurance policy is conclusive in case of total loss in the absence of fraud. It was all conditional. as MICO suggests. as to the extent of Pinca's loss should be considered sufficient. 1981. all objections to notice and proof of loss are deemed waived under Section 90 of the Insurance Code. 1982. The certification 26 issued by the Integrated National Police. and cast serious doubts upon its candor and bona fides. with costs against the petitioner. WHEREFORE. These circumstances make the motives of the petitioner highly suspect. validly received on behalf of the insurer by its agent Adora. Samar. had not been informed of the cancellation either and saw no reason not to accept the said payment. As it has not been shown that there was a valid cancellation of the policy. which need not be of such persuasiveness as is required in judicial proceedings. The decision of the Insurance Commission dated April 10. incidentally. We see in this cases an obvious design to evade or at least delay the discharge of a just obligation through efforts bordering on bad faith if not plain duplicity. 1982. 27 There is nothing in the Insurance Code that makes the participation of an adjuster in the assessment of the loss imperative or indespensable. are AFFIRMED in full. Lao-ang.intention was to revive the policy if it was already cancelled? A: Yes. 23 A close study of the above transcript will show that Pinca meant to renew the policy if it had really been already cancelled but not if it was stffl effective. simply speaks of the licensing and duties of adjusters. to say the least. Section 325. This decision is immediately executory. which it cites. It is also worth observing that Pinca's property was not the only building bumed in the fire that razed the commercial district of Lao-ang. Notably. to further hinder the proceedings and justify the filing of the petition with this Court fourteen days after June 18. 1981. 24 which is not shown here. The last point raised by the petitioner should not pose much difficulty. and was. 1982. to renew it. 25 If. 1982. after it presumably had learned of the occurrence of the loss insured against on January 18. We also look askance at the alleged cancellation. the insured files notice and preliminary proof of loss and the insurer fails to specify to the former all the defects thereof and without unnecessary delay. of which the insured and MICO's agent himself had no knowledge. as in this case. Adora. and the curious fact that although Pinca's payment was remitted to MICO's by its agent on January 15. . and its Order of June 4. We note that the motion for reconsideration was filed on the fifteenth day from notice of the decision of the Insurance Commission and that there was a feeble attempt to show that the notice of denial of the said motion was not received on June 13. MICO sought to return it to Adora only on February 5. Samar. the petition is DENIED. 1982. 1982. there was consequently no need to renew it but to pay the premium thereon.MICO submitted no evidence to the contrary nor did it even question the extent of the loss in its answer before the Insurance Commission. SO ORDERED. Loss and its amount may be determined on the basis of such proof as may be offered by the insured. Payment was thus legally made on the original transaction and it could be. on January 18.

a complaint for the recovery of the value of lost logs and freight charges from Seven Brothers Shipping Corporation or. Inc.: Two issues on the subject of insurance are raised in this petition. the trial court rendered judgment in favor of plaintiff Hardwood. On 24 January 1984. 1995 SOUTH SEA SURETY AND INSURANCE COMPANY. vs. The factual backdrop is described briefly by the appellate court thusly: It appears that on 16 January 1984. petitioner argues that it likewise should have been freed from any liability to Hardwood. Inc. plaintiff demanded from defendant South Sea Surety and Insurance Co. from South Sea Surety and insurance Company. plaintiff [Valenzuela Hardwood and Industrial Supply. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim.00 on said date.625.. (in CA-G.000. On appeal perfected by both the shipping firm and the insurance company. It faults the appellate court (a) for having Supposedly disregarded Section 77 of the insurance Code and (b) for holding Victorio Chua to have been an authorized representative of the insurer. The court litigation started when Valenzuela Hardwood and Industrial Supply. 84/24229 for P2. the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the plaintiffs insured logs. cancelled the insurance policy it issued as of the date . the Court of Appeals affirmed the judgment of the court a quo only against the insurance corporation. dated 11 May 1988. the payment of the proceeds of the policy but the latter denied liability under the policy.R.00 (Exh. 102253 June 2. HON. the first dealing on the requirement of premium payment and the second relating to the agency relationship of parties under that contract. Inc. NO. Victorio Chua. 2 In this petition for review on certiorari brought by South Sea Surety and Insurance Co. becomes a private carrier.. a check for P5. The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the liability of the shipping corporation. plaintiff insured the logs. petitioner. In the meantime. filed with the Regional. Branch l71 in Valenzuela. a stipulation exempting the owner from liability even for the negligence of its agent is valid (Home Insurance Company. It appears that there is a stipulation in the charter party that the ship owner would be exempted from liability in case of loss. "E") to cover payment of the premium and documentary stamps due on the policy was tendered to the insurer but was not accepted. Trial Court of the National Capital Judicial Region.. As a private carrier. On 2 February 1984. American Steamship Agencies. Isabela for shipment to Manila. that assails the decision. no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof VITUG. 1 In its decision. Inc. 77. that assails the decision of the Court of Appeals. Instead. RESOLUTION of inception for non-payment of the premium due in accordance with Section 77 of the Insurance Code. Inc. a common carrier undertaking to carry a special or chartered to a special person only. On 30 January 1984.] entered into an agreement with the defendant Seven Brothers whereby the latter undertook to load on board its vessel M/V Seven Ambassador the former's lauan round logs numbering 940 at the port of Maconacon. the plaintiff gave the check in payment of the premium on the insurance policy to Mr. Section 77 of the Insurance Code provides: Sec.. No. the appellate court ratiocinated: The primary issue to be resolved before us is whether defendants shipping corporation and the surety company are liable to the plaintiff for the latter's lost logs. Under American jurisprudence... Metro Manila. The shipping corporation should not therefore be held liable for the loss of the logs.. Notwithstanding any agreement to the contrary. against loss and/or.. vs. CV-20156). COURT OF APPEALS and VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY. ("Hardwood").000. Inc. for P2.000.R. damage with defendant South Sea Surety and Insurance Co. J. On 20 January 1984. The provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. respondents. to the extent of its alleged insurance cover. Inc. 23 SCRA 24). INC. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against.000. in absolving the shipping entity from liability. Inc.G. INC.00 end the latter issued its Marine Cargo Insurance Policy No. the South Sea Surety and Insurance Co.

Chua. Inc. Inc. It is therefore important to determine whether at the time of the loss. the Marine Cargo Insurance Policy No. liabilities and penalties to which an insurance broker is subject. Chua testified that the marine cargo insurance policy for the plaintiff's logs was delivered to him on 21 January 1984 at his office to be delivered to the plaintiff. Chua acted as an agent of the surety company or of the insured when he received the check for insurance premiums. (TSN. has found in the affirmative.has been paid. Appellant therefore argues that Mr.. acts. When the appellant South Sea Surety and Insurance Co. SO ORDERED. Mr. . Any insurance company which delivers to an insurance agent or insurance broker a policy or contract of insurance shall be deemed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy of contract of insurance at the time of its issuance or delivery or which becomes due thereon.. the insured had already paid the premium to an agent of the South Sea Surety and Insurance Co.e. 306. The appellate court.. did not make any pronouncement to the contrary. testimonial and documentary. it is not the function of this Court to assess and evaluate all over again the evidence. 301. which is consequently liable to pay the insurance proceeds under the policy it issued to the insured. 22 October 1985). to receive the premium which is due on its behalf. Inc. he is deemed to have been authorized by the South Sea Surety and Insurance Co. and the petition is DENIED. 3 No attempt becloud the issues can disguise the fact that the sole question raised in the instant petition is really evidentiary in nature. Ltd. But. Inc. Costs against petitioner. Undoubtedly. At the time the vessel sank on 25 January 1984 resulting in the loss of the insured logs. Indeed. 16-17. 3-27. this acknowledgment being declared by law to be then conclusive evidence of the premium payment (Secs. or aids in soliciting. acted as an agent of the insured under Section 301 of the Insurance Code which provides as follows: Sec. the payment of the premium is a condition precedent to. WHEREFORE. 77-78. i. Section 77 of the Insurance Code explicitly provides that notwithstanding any agreement to the contrary. Any person who for any compensation. upon the other hand. Just as so correctly pointed out by private respondent. in receiving the check for the insurance premium prior to the occurrence of the risk insured against has so acted as an agent of petitioner. having received the insurance premiums as an agent of the Columbia Insurance Broker... such as here. claim that the second paragraph of Section 306 of the Insurance Code provide as follows: Sec. .. it has said: Concerning the issue as to whether there is a valid contract of insurance between plaintiff-appellee and defendant-appellant South Sea Surety and Insurance Co. adduced by the parties particularly where. Appellant surety company insists that Mr. on behalf of an insured other than himself. pp. the resolution. On cross-examination in behalf of South Sea Surety and Insurance Co. The only two statutorily provided exceptions are (a) in case the insurance coverage relates to life or industrial life (health) insurance when a grace period applies and (b) when the insurer makes a written acknowledgment of the receipt of premium. of the surety corporation is whether Mr.. the premium was already paid. Said the appellate court: In the instant case. the efficaciousness of the contract. . the findings of both the trial court and the appellate court on the matter coincide. granting due course to the petition is RECALLED. dated 01 February 1993. the insured had already delivered to Victorio Chua the check in payment of premium. and essential for. Insurance Code). shall be an insurance broker within the intent of this Code. Inc. The appellate court. The pivotal issue to be resolved to determine the liability. 4 We see no valid reason to discard the factual conclusions of the appellate court. no policy issued by an insurance company is valid and binding unless and until premium thereof has been paid. He is paid a salary as a administrative assistant and a commission as agent based on the premiums he turns over to the broker. negotiating or procuring the making of any insurance contract or in placing risk or taking out insurance. whether or not Victorio Chua.. like the trial court. Chua is an administrative assistant for the past ten years and an agent for less than ten years of the Columbia Insurance Brokers. 84/24229 was issued by defendant insurance company on 20 January 1984. and shall thereby become liable to all the duties requirements. Chua the marine cargo insurance policy for the plaintiffs logs. Inc. When therefore the insured logs were lost. contrary to what the petition suggests. commission or other thing of value.. The appellees. except in the case of a life or an industrial life policy whenever the grace period provision applies. . delivered to Mr. as Victorio Chua testified. it was only in the morning of 30 January 1984 or 5 days after the vessel sank when his messenger tendered the check to defendant South Sea Surety and Insurance Co.