FIRST DIVISION
"2. That the lower court erred in sustaining that the premium in Insurance
[G.R. No. L-25317. August 6, 1979.]
PHILIPPINE PHOENIX SURETY & INSURANCE COMPANY, Plaintiff-
Appellee, v. WOODWORKS, INC., Defendant-Appellant.
Zosimo Rivas for Appellant.
Manuel O. Chan for Appellee.
DECISION
MELENCIO-HERRERA, J.:
This case was certified to this Tribunal by the Court of Appeals in its
Resolution of October 4, 1965 on a pure question of law and "because
the issues raised are practically the same as those in CA-G.R. No.
32017-R" between the same parties, which case had been forwarded to
us on April 1, 1964. The latter case, "Philippine Phoenix Surety &
Insurance Inc. v. Woodworks, Inc.," docketed in this Court as L-22684,
was decided on August 31, 1967 and has been reported in 20 SCRA
1270.chanrobles.com:cralaw:red
Specifically, this action is for recovery of unpaid premium on a fire
insurance policy issued by plaintiff, Philippine Phoenix Surety &
Insurance Company, in favor of defendant Woodworks, Inc.
The following are the established facts:chanrob1es virtual 1aw library
On July 21, 1960, upon defendant’s application, plaintiff issued in its
favor Fire Insurance Policy No. 9749 for P500,000.00 whereby plaintiff
insured defendant’s building, machinery and equipment for a term of one
year from July 21, 1960 to July 21, 1961 against loss by fire. The
premium and other charges including the margin fee surcharge of
P590.76 and the documentary stamps in the amount of P156.60 affixed
on the Policy, amounted to P10,593.36.
It is undisputed that defendant did not pay the premium stipulated in the
Policy when it was issued nor at any time thereafter.
On April 19, 1961, or before the expiration of the one-year term, plaintiff
notified defendant, through its Indorsement No. F-6963/61, of the
cancellation of the Policy allegedly upon request of defendant. 1 The
latter has denied having made such a request. In said Indorsement,
plaintiff credited defendant with the amount of P3,110.25 for the
unexpired period of 94 days, and claimed the balance of P7,483.11
representing "earned premium from July 21, 1960 to 18th April 1961 or,
say 271 days." On July 6, 1961, plaintiff demanded in writing for the
payment of said amount. 2 Defendant, through counsel, disclaimed any
liability in its reply-letter of August 15, 1961, contending, in essence, that
it need not pay premium "because the Insurer did not stand liable for any
indemnity during the period the premiums were not paid." 3 
On January 30, 1962, plaintiff commenced action in the Court of First
Instance of Manila, Branch IV (Civil Case No. 49468), to recover the
amount of P7,483.11 as "earned premium." Defendant controverted
basically on the theory that its failure "to pay the premium after the
issuance of the policy put an end to the insurance contract and rendered
the policy unenforceable." 4 
On September 13, 1962, judgment was rendered in plaintiff’s favor
"ordering defendant to pay plaintiff the sum of P7,483.11, with interest
thereon at the rate of 6% per annum from January 30, 1962, until the
principal shall have been fully paid, plus the sum of P700.00 as
attorney’s fees of the plaintiff, and the costs of the suit." From this
adverse Decision, defendant appealed to the Court of Appeals which, as
heretofore stated, certified the case to us on a question of law.
The errors assigned read:jgc:chanrobles.com.ph
"1. The lower court erred in sustaining that Fire Insurance Policy, Exhibit
A, was a binding contract even if the premium stated in the policy has
not been paid.
Policy, Exhibit B, became an obligation which was demandable even
after the period in the Policy has expired.
"3. The lower court erred in not deciding that a premium not paid is not a
debt enforceable by action of the insurer."cralaw virtua1aw library
We find the appeal meritorious.
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." 5 The consideration is the "premium."
"The premium 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." 6 
The provisions on premium in the subject Policy
read:jgc:chanrobles.com.ph
"THIS POLICY OF INSURANCE WITNESSETH, THAT in consideration
of — MESSRS. WOODWORKS, INC. — hereinafter called the Insured,
paying to the PHILIPPINE PHOENIX SURETY AND INSURANCE, INC.,
hereinafter called the Company, the sum of — PESOS NINE
THOUSAND EIGHT HUNDRED FORTY SIX ONLY — the Premium for
the first period hereinafter mentioned, . . ."cralaw virtua1aw library
x       x       x
"THE COMPANY HEREBY AGREES with the Insured . . . that if the
Property above described, or any part thereof, shall be destroyed or
damaged by Fire or Lightning after payment of Premium, at any time
between 4:00 o’clock in the afternoon of the TWENTY FIRST day of
JULY One Thousand Nine Hundred and SIXTY and 4:00 o’clock in the
afternoon of the TWENTY FIRST day of JULY One Thousand Nine
Hundred and SIXTY ONE, . . ." (Emphasis supplied)
Paragraph "2" of the Policy further contained the following
condition:jgc:chanrobles.com.ph
"2. No payment in respect of any premium shall be deemed to be
payment to the Company unless a printed form of receipt for the same
signed by an Official or duly-appointed Agent of the Company shall have
been given to the Insured."cralaw virtua1aw library
Paragraph "10" of the Policy also provided:jgc:chanrobles.com.ph
"10. "This insurance may be terminated at any time at the request of the
Insured, in which case the Company will retain the customary short
period rate for the time the policy has been in force. This insurance may
also at any time be terminated at the option of the Company, on notice to
that effect being given to the Insured, in which case the Company shall
be liable to repay on demand a ratable proportion of the premium for the
unexpired term from the date of the cancelment."cralaw virtua1aw library
Clearly, the Policy provides for pre-payment of premium. Accordingly;
"when the policy is tendered the insured must pay the premium unless
credit is given or there is a waiver, or some agreement obviating the
necessity for prepayment." 7 To constitute an extension of credit there
must be a clear and express agreement therefor." 8 
From the Policy provisions, we fail to find any clear agreement that a
credit extension was accorded defendant. And even if it were to be
presumed that plaintiff had extended credit from the circumstances of
the unconditional delivery of the Policy without prepayment of the
premium, yet it is obvious that defendant had not accepted the insurer’s
offer to extend credit, which is essential for the validity of such
agreement.chanroblesvirtualawlibrary
"An acceptance of an offer to allow credit, if one was made, is as
essential to make a valid agreement for credit, to change a conditional
delivery of an insurance policy to an unconditional delivery, as it is to
make any other contract. Such an acceptance could not be merely a
mental act or state of mind, but would require a promise to pay made
known in some manner to defendant. 9 

In this respect, the instant case differs from that involving the same
parties entitled Philippine Phoenix Surety & Insurance Inc. v.
Woodworks, Inc., 10 where recovery of the balance of the unpaid
premium was allowed inasmuch as in that case "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." This is not the
situation obtaining here where no partial payment of premiums has been
made whatsoever.

Since the premium had not been paid, the policy must be deemed to
have lapsed.

"The non-payment of premiums does not merely suspend but puts an

end to an insurance contract, since the time of the payment is peculiarly
of the essence of the contract." 11 

". . . the rule is that under policy provisions that upon the failure to make
a payment of a premium or assessment at the time provided for, the
policy shall become void or forfeited, or the obligation of the insurer shall
cease, or words to like effect, because the contract so prescribes and
because such a stipulation is a material and essential part of the
contract. This is true, for instance, in the case of life, health and
accident, fire and hail insurance policies." 12 

In fact, if the peril insured against had occurred, plaintiff, as insurer,

would have had a valid defense against recovery under the Policy it had
issued. Explicit in the Policy itself is plaintiff’s agreement to indemnify
defendant for loss by fire only "after payment of premium," supra.
Compliance by the insured with the terms of the contract is a condition
precedent to the right of recovery.

"The burden is on an insured to keep a policy in force by the payment of

premiums, rather than on the insurer to exert every effort to prevent the
insured from allowing a policy to elapse through a failure to make
premium payments. The continuance of the insurer’s obligation is
conditional upon the payment of premiums, so that no recovery can be
had upon a lapsed policy, the contractual relation between the parties
having ceased." 13 

Moreover, "an insurer cannot treat a contract as valid for the purpose of
collecting premiums and invalid for the purpose of indemnity." 14 

The foregoing findings are buttressed by section 77 of the Insurance

Code (Presidential Decree No. 612, promulgated on December 18,
1974), which now provides that no contract of insurance issued by an
insurance company is valid and binding unless and until the premium
thereof has been paid, notwithstanding any agreement to the
contrary.chanrobles law library : red

WHEREFORE, the judgment appealed from is reversed, and plaintiff’s

complaint hereby dismissed.
G.R. No. L-22684             August 31, 1967
PHILIPPINE PHOENIX SURETY & INSURANCE, INC., plaintiff-
appellee, 
vs.
WOODWORKS, INC., defendant-appellant.
DIZON, J.:
Appeal upon a question of law taken by Woodworks, Inc. from the
judgment of the Court of First Instance of Manila in Civil Case No. 50710
"ordering the defendant, Woodworks, Inc. to pay to the plaintiff,
Philippine Phoenix Surety & Insurance, Inc., the sum of P3,522.09 with
interest thereon at the legal rate of 6% per annum from the date of the
filing of the complaint until fully paid, and costs of the suit."
Appellee Philippine Phoenix Surety & Insurance Co., Inc. commenced
this action in the Municipal Court of Manila to recover from appellant
Woodworks, Inc. the sum of P3,522.09, representing the unpaid balance
of the premiums on a fire insurance policy issued by appellee in favor of
appellant for a term of one year from April 1, 1960 to April 1, 1961. From
an adverse decision of said court, Woodworks, Inc. appealed to the
Court of First Instance of Manila (Civil Case No. 50710) where the
parties submitted the following stipulation of facts, on the basis of which
the appealed decision was rendered:
was concerned. Thereafter the obligation of the insurer to pay the
insured the amount for which the policy was issued in case the
conditions therefor had been complied with, arose and became binding
upon it, while the obligation of the insured to pay the remainder of the
total amount of the premium due became demandable.
We can not agree with appellant's theory that non-payment by it of the
premium due, produced the cancellation of the contract of insurance.
Such theory would place exclusively in the hands of one of the
contracting parties the right to decide whether the contract should stand
or not. Rather the correct view would seem to be this: as the contract
had become perfected, the parties could demand from each other the
performance of whatever obligations they had assumed. In the case of
the insurer, it is obvious that it had the right to demand from the insured
the completion of the payment of the premium due or sue for the
rescission of the contract. As it chose to demand specific performance of
the insured's obligation to pay the balance of the premium, the latter's
duty to pay is indeed indubitable.
Having thus resolved that the fourth and last assignment of error
submitted in appellant's brief is without merit, the first three assignments
of error must likewise be overruled as lacking in merit.
Wherefore, the appealed decision being in accordance with law and the
evidence, the same is hereby affirmed, with costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Bengzon, J.P., Zaldivar,

That plaintiff and defendant are both corporations duly organized and
Sanchez, Castro, Angeles and Fernando, JJ., concur.
existing under and by virtue of the laws of the Philippines;

That on April 1, 1960, plaintiff issued to defendant Fire Policy No. 9652
for the amount of P300,000.00, under the terms and conditions therein
set forth in said policy a copy of which is hereto attached and made a
part hereof as Annex "A";

That the premiums of said policy as stated in Annex "A" amounted to

P6,051.95; the margin fee pursuant to the adopted plan as an
implementation of Republic Act 2609 amounted to P363.72, copy of said
adopted plan is hereto attached as Annex "B" and made a part hereof,
the documentary stamps attached to the policy was P96.42;

That the defendant paid P3,000.00 on September 22, 1960 under official
receipt No. 30245 of plaintiff;

That plaintiff made several demands on defendant to pay the amount of  

P3,522.09.1äwphï1.ñët

In the present appeal, appellant claims that the court a quo committed

the following errors:

I. The lower court erred in stating that in fire insurance policies the risk
attached upon the issuance and delivery of the policy to the insured.

II. The lower court erred in deciding that in a perfected contract of

insurance non-payment of premium does not cancel the policy.

III. The lower court erred in deciding that the premium in the policy was
still collectible when the complaint was filed.

IV. The lower court erred in deciding that a partial payment of the
premium made the policy effective during the whole period of the policy.

It is clear from the foregoing that on April 1, 1960 Fire Insurance Policy
No. 9652 was issued by appellee and delivered to appellant, and that on
September 22 of the same year, the latter paid to the former the sum of
P3,000.00 on account of the total premium of P6,051.95 due thereon.
There is, consequently, no doubt at all that, as between the insurer and
the insured, there was not only a perfected contract of insurance but a
partially performed one as far as the payment of the agreed premium
G.R. No. 95546 November 6, 1992 After some incidents, petitioner and private respondent moved for
summary judgment.
MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner, 
vs. On 8 October 1987, the trial court dismissed the complaint and the
THE COURT OF APPEALS, AMERICAN HOME ASSURANCE CO., counterclaim upon the following findings:
represented by American International Underwriters (Phils.),
Inc., respondent.
While it is true that the receipts issued to the defendant contained the
aforementioned reservations, it is equally true that payment of the
BELLOSILLO, J.: premiums of the three aforementioned policies (being sought to be
refunded) were made during the lifetime or term of said policies, hence,
it could not be said, inspite of the reservations, that no risk attached
This case involves a purely legal question: whether payment by
under the policies. Consequently, defendant's counterclaim for refund is
installment of the premiums due on an insurance policy invalidates the
not justified.
contract of insurance, in view of Sec. 77 of P.D. 612, otherwise known
as the Insurance Code, as amended, which provides:
As regards the unpaid premiums on Insurance Policy No. AH-CPP-
9210651, in view of the reservation in the receipts ordinarily issued by
Sec. 77. An insurer is entitled to the payment of the premium as soon as
the plaintiff on premium payments the only plausible conclusion is that
the thing is exposed to the peril insured against. Notwithstanding any
plaintiff has no right to demand their payment after the lapse of the term
agreement to the contrary, no policy or contract of insurance issued by
of said policy on March 1, 1985. Therefore, the defendant was justified in
an insurance company is valid and binding unless and until the premium
refusing to pay the same. 1
thereof has been paid, except in the case of a life or an industrial life
policy whenever the grace period provision applies.
Both parties appealed from the judgment of the trial court. Thereafter,
the Court of Appeals rendered a decision 2modifying that of the trial court
Sometime in early 1982, private respondent American Home Assurance
by ordering herein petitioner to pay the balance of the premiums due on
Co. (AHAC), represented by American International Underwriters
Policy No. AH-CPP-921-651, or P314,103.05 plus legal interest until fully
(Phils.), Inc., issued in favor of petitioner Makati Tuscany Condominium
paid, and affirming the denial of the counterclaim. The appellate court
Corporation (TUSCANY) Insurance Policy No. AH-CPP-9210452 on the
thus explained —
latter's building and premises, for a period beginning 1 March 1982 and
ending 1 March 1983, with a total premium of P466,103.05. The
premium was paid on installments on 12 March 1982, 20 May 1982, 21 The obligation to pay premiums when due is ordinarily as indivisible
June 1982 and 16 November 1982, all of which were accepted by obligation to pay the entire premium. Here, the parties herein agreed to
private respondent. make the premiums payable in installments, and there is no pretense
that the parties never envisioned to make the insurance contract binding
between them. It was renewed for two succeeding years, the second
On 10 February 1983, private respondent issued to petitioner Insurance
and third policies being a renewal/replacement for the previous one. And
Policy No. AH-CPP-9210596, which replaced and renewed the previous
the insured never informed the insurer that it was terminating the policy
policy, for a term covering 1 March 1983 to 1 March 1984. The premium
because the terms were unacceptable.
in the amount of P466,103.05 was again paid on installments on 13 April
1983, 13 July 1983, 3 August 1983, 9 September 1983, and 21
November 1983. All payments were likewise accepted by private While it may be true that under Section 77 of the Insurance Code, the
respondent. parties may not agree to make the insurance contract valid and binding
without payment of premiums, there is nothing in said section which
suggests that the parties may not agree to allow payment of the
On 20 January 1984, the policy was again renewed and private
premiums in installment, or to consider the contract as valid and binding
respondent issued to petitioner Insurance Policy No. AH-CPP-9210651
upon payment of the first premium. Otherwise, we would allow the
for the period 1 March 1984 to 1 March 1985. On this renewed policy,
insurer to renege on its liability under the contract, had a loss incurred
petitioner made two installment payments, both accepted by private
(sic) before completion of payment of the entire premium, despite its
respondent, the first on 6 February 1984 for P52,000.00 and the second,
voluntary acceptance of partial payments, a result eschewed by a basic
on 6 June 1984 for P100,000.00. Thereafter, petitioner refused to pay
considerations of fairness and equity.
the balance of the premium.

To our mind, the insurance contract became valid and binding upon
Consequently, private respondent filed an action to recover the unpaid
payment of the first premium, and the plaintiff could not have denied
balance of P314,103.05 for Insurance Policy No. AH-CPP-9210651.
liability on the ground that payment was not made in full, for the reason
that it agreed to accept installment payment. . . . 3
In its answer with counterclaim, petitioner admitted the issuance of
Insurance Policy No. AH-CPP-9210651. It explained that it discontinued
Petitioner now asserts that its payment by installment of the premiums
the payment of premiums because the policy did not contain a credit
for the insurance policies for 1982, 1983 and 1984 invalidated said
clause in its favor and the receipts for the installment payments covering
policies because of the provisions of Sec. 77 of the Insurance Code, as
the policy for 1984-85, as well as the two (2) previous policies, stated the
amended, and by the conditions stipulated by the insurer in its receipts,
following reservations:
disclaiming liability for loss for occurring before payment of premiums.

2. Acceptance of this payment shall not waive any of the company rights
to deny liability on any claim under the policy arising before such
payments or after the expiration of the credit clause of the policy; and
3. Subject to no loss prior to premium payment. If there be any loss such
is not covered.
Petitioner further claimed that the policy was never binding and valid,
and no risk attached to the policy. It then pleaded a counterclaim for
P152,000.00 for the premiums already paid for 1984-85, and in its
answer with amended counterclaim, sought the refund of P924,206.10
representing the premium payments for 1982-85.
It argues that where the premiums is not actually paid in full, the policy
would only be effective if there is an acknowledgment in the policy of the
receipt of premium pursuant to Sec. 78 of the Insurance Code. The
absence of an express acknowledgment in the policies of such receipt of
the corresponding premium payments, and petitioner's failure to pay said
premiums on or before the effective dates of said policies rendered them
invalid. Petitioner thus concludes that there cannot be a perfected
contract of insurance upon mere partial payment of the premiums
because under Sec. 77 of the Insurance Code, no contract of insurance
is valid and binding unless the premium thereof has been paid,
notwithstanding any agreement to the contrary. As a consequence,
petitioner seeks a refund of all premium payments made on the alleged
invalid insurance policies.

We hold that the subject policies are valid even if the premiums were
paid on installments. The records clearly show that petitioner and private
respondent intended subject insurance policies to be binding and
effective notwithstanding the staggered payment of the premiums. The
initial insurance contract entered into in 1982 was renewed in 1983, then
in 1984. In those three (3) years, the insurer accepted all the installment
payments. Such acceptance of payments speaks loudly of the insurer's
intention to honor the policies it issued to petitioner. Certainly, basic
principles of equity and fairness would not allow the insurer to continue
collecting and accepting the premiums, although paid on installments,
and later deny liability on the lame excuse that the premiums were not
prepared in full.

We therefore sustain the Court of Appeals. We quote with approval the

well-reasoned findings and conclusion of the appellate court contained in
its Resolution denying the motion to reconsider its Decision —

While the import of Section 77 is that prepayment of premiums is strictly

required as a condition to the validity of the contract, We are not
prepared to rule that the request to make installment payments duly  
approved by the insurer, would prevent the entire contract of insurance
from going into effect despite payment and acceptance of the initial
premium or first installment. Section 78 of the Insurance Code in effect
allows waiver by the insurer of the condition of prepayment by making an
acknowledgment in the insurance policy of receipt of premium as
conclusive evidence of payment so far as to make the policy binding
despite the fact that premium is actually unpaid. Section 77 merely
precludes the parties from stipulating that the policy is valid even if
premiums are not paid, but does not expressly prohibit an agreement
granting credit extension, and such an agreement is not contrary to
morals, good customs, public order or public policy (De Leon, the
Insurance Code, at p. 175). So is an understanding to allow insured to
pay premiums in installments not so proscribed. At the very least, both
parties should be deemed in estoppel to question the arrangement they
have voluntarily accepted. 4

The reliance by petitioner on Arce vs. Capital Surety and Insurance

Co. 5 is unavailing because the facts therein are substantially different
from those in the case at bar. In Arce, no payment was made by the
insured at all despite the grace period given. In the case before Us,
petitioner paid the initial installment and thereafter made staggered
payments resulting in full payment of the 1982 and 1983 insurance
policies. For the 1984 policy, petitioner paid two (2) installments although
it refused to pay the balance.

It appearing from the peculiar circumstances that the parties actually

intended to make three (3) insurance contracts valid, effective and
binding, petitioner may not be allowed to renege on its obligation to pay
the balance of the premium after the expiration of the whole term of the
third policy (No. AH-CPP-9210651) in March 1985. Moreover, as
correctly observed by the appellate court, where the risk is entire and the
contract is indivisible, the insured is not entitled to a refund of the
premiums paid if the insurer was exposed to the risk insured for any
period, however brief or momentary.

WHEREFORE, finding no reversible error in the judgment appealed

from, the same is AFFIRMED. Costs against petitioner.

SO ORDERED.
G.R. No. 137172 June 15, 1999
UCPB GENERAL INSURANCE CO., INC., petitioner,  (2) Declaring plaintiff to have fully complied with its obligation to pay the
vs.
MASAGANA TELAMART, INC., respondent.
 PARDO, J.:
The case is an appeal via certiorari seeking to set aside the decision of
the Court of Appeals, 1 affirming with modification that of the Regional
Trial Court, Branch 58, Makati, ordering petitioner to pay respondent the
sum of P18,645,000.00, as the proceeds of the insurance coverage of
respondent's property razed by fire; 25% of the total amount due as
attorney's fees and P25,000.00 as litigation expenses, and costs.
The facts are undisputed and may be related as follows:
On April 15, 1991, petitioner issued five (5) insurance policies covering
respondent's various property described therein against fire, for the
period from May 22, 1991 to May 22, 1992.
In March 1992, petitioner evaluated the policies and decided not to
renew them upon expiration of their terms on May 22, 1992. Petitioner
advised respondent's broker, Zuellig Insurance Brokers, Inc. of its
intention not to renew the policies.
On April 6, 1992, petitioner gave written notice to respondent of the non-
renewal of the policies at the address stated in the policies.
On June 13, 1992, fire razed respondent's property covered by three of
the insurance policies petitioner issued.
On July 13, 1992, respondent presented to petitioner's cashier at its
head office five (5) manager's checks in the total amount of
P225,753.95, representing premium for the renewal of the policies from
May 22, 1992 to May 22, 1993. No notice of loss was filed by respondent
under the policies prior to July 14, 1992.
On July 14, 1992, respondent filed with petitioner its formal claim for
indemnification of the insured property razed by fire.
On the same day, July 14, 1992, petitioner returned to respondent the
five (5) manager's checks that it tendered, and at the same time rejected
respondent's claim for the reasons (a) that the policies had expired and
were not renewed, and (b) that the fire occurred on June 13, 1992,
before respondent's tender of premium payment.
On July 21, 1992, respondent filed with the Regional Trial Court, Branch
58, Makati City, a civil complaint against petitioner for recovery of
P18,645,000.00, representing the face value of the policies covering
respondent's insured property razed by fire, and for attorney's fees. 2
On October 23, 1992, after its motion to dismiss had been denied,
petitioner filed an answer to the complaint. It alleged that the complaint
"fails to state a cause of action"; that petitioner was not liable to
respondent for insurance proceeds under the policies because at the
time of the loss of respondent's property due to fire, the policies had long
expired and were not renewed. 3
After due trial, on March 10, 1993, the Regional Trial Court, Branch 58,
Makati, rendered decision, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff and against the defendant, as follows:
(1) Authorizing and allowing the plaintiff to consign/deposit with this
Court the sum of P225,753.95 (refused by the defendant) as full
payment of the corresponding premiums for the replacement-renewal
policies for Exhibits A, B, C, D and E;
premium thereby rendering the replacement-renewal policy of Exhibits A,
B, C, D and E effective and binding for the duration May 22, 1992 until
May 22, 1993; and, ordering defendant to deliver forthwith to plaintiff the
said replacement-renewal policies;
(3) Declaring Exhibits A & B, in force from August 22, 1991 up to August
23, 1992 and August 9, 1991 to August 9, 1992, respectively; and
(4) Ordering the defendant to pay plaintiff the sums of: (a)
P18,645,000.00 representing the latter's claim for indemnity under
Exhibits A, B & C and/or its replacement-renewal policies; (b) 25% of the
total amount due as and for attorney's fees; (c) P25,000.00 as necessary
litigation expenses; and, (d) the costs of suit.
All other claims and counterclaims asserted by the parties are denied
and/or dismissed, including plaintiff's claim for interests.
SO ORDERED.
Makati, Metro-Manila, March 10, 1993.
ZOSIMO Z. ANGELES.
Judge.4
In due time, petitioner appealed to the Court of Appeals. 5
On September 7, 1998, the Court of Appeals promulgated its decision 6 affirming that of
the Regional Trial Court with the modification that item No. 3 of the dispositive portion
was deleted, and the award of attorney's fees was reduced to 10% of the total amount
due. 7
The Court of Appeals held that following previous practise, respondent was allowed a
sixty (60) to ninety (90) day credit term for the renewal of its policies, and that the
acceptance of the late premium payment suggested an understanding that payment could
be made later.
Hence, this appeal.
By resolution adopted on March 24, 1999, we required respondent to comment on the
petition, not to file a motion to dismiss within ten (10) days from notice. 8 On April 22,
1999, respondent filed its comment. 9
Respondent submits that the Court of Appeals correctly ruled that no timely notice of non-
renewal was sent. The notice of non-renewal sent to broker Zuellig which claimed that it
verbally notified the insurance agency but not respondent itself did not suffice.
Respondent submits further that the Court of Appeals did not err in finding that there
existed a sixty (60) to ninety (90) days credit agreement between UCPB and Masagana,
and that, finally, the Supreme Court could not review factual findings of the lower court
affirmed by the Court of Appeals. 10
We give due course to the appeal.
The basic issue raised is whether the fire insurance policies issued by petitioner to the
respondent covering the period May 22, 1991 to May 22, 1992, had expired on the latter
date or had been extended or renewed by an implied credit arrangement though actual
payment of premium was tendered on a later date after the occurrence of the risk (fire)
insured against.
The answer is easily found in the Insurance Code. No, an insurance policy, other than
life, issued originally or on renewal, is not valid and binding until actual payment of the
premium. Any agreement to the contrary is void. 11 The parties may not agree expressly
or impliedly on the extension of creditor time to pay the premium and consider the policy
binding before actual payment.
The case of Malayan Insurance Co., Inc. vs. Cruz-Arnaldo, 12 cited by the Court of
Appeals, is not applicable. In that case, payment of the premium was in fact actually
made on December 24, 1981, and the fire occurred on January 18, 1982. Here, the
payment of the premium for renewal of the policies was tendered on July 13, 1992, a
month after the fire occurred on June 13, 1992. The assured did not even give the insurer
a notice of loss within a reasonable time after occurrence of the fire.
WHEREFORE, the Court hereby REVERSES and SETS ASIDE the decision of the Court
of Appeals in CA-G.R. CV No. 42321. In lieu thereof the Court renders judgment
dismissing respondent's complaint and petitioner's counterclaims thereto filed with the
Regional Trial Court, Branch 58, Makati City, in Civil Case No. 92-2023. Without costs.SO
ORDERED.