ESSENTIALS OF INSURANCE LAW

By: Atty. Timoteo B. Aquino

2014 Edition

Topic: The Parties

1. Insured – one who applied for and to whom an insurance policy is used to cover his life,
property or the life or property of other person/s in whose life or property he has insurable
interest or liability to other persons
1.1. Assured and Owner
Insured – person whose life is insured
Assured – person who took out insurance on the former’s life
1.2. Capacity (Apply the provisions)
 Spouses – Married women can enter into insurance contracts without the
consent of their husbands in the same manner that the latter can enter into an
insurance contract without the consent of his wife for a policy taken out of
his or her life or that his or her children.
Section 3 of the Insurance Code: “The consent of the spouse is not necessary for
the validity of an insurance policy taken out by a married person on his or her life
or that of his or her children.”
 Consistent with E.O. No. 209 and R.A. 7192
 “his or her children” – does not limit the provision to an insurance taken on
the common children of the spouses
 Implication of Section 3 – consent of the spouse is not necessary for the
validity of an insurance policy taken out by a married person on the life of
other persons other than life of the spouses themselves or his or her children

 Minors – cannot enter into insurance contracts

1.3. Effect of Death of Owner
Section 3 as amended by R.A. No. 10607 now provides:
“All rights, title and interest in the policy of insurance taken out by an original
owner on the life or health of the person insured shall automatically vest in the
latter upon the death of the original owner, unless otherwise provided for in the
policy.”
 Before R.A. No. 10607, the last paragraph of Section 3 applies only to
insurance taken on the life of minors. Section 3 previously provides that “all
rights, title and interest in the policy of insurance taken out by an original
owner on the life or health of a minor shall automatically vest in the minor
upon the death of the original owner, unless otherwise provided for in
policy.” With the last paragraph of Section 3 is no longer limited to insurance
taken on the life or health of minors.

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 1.4. Public Enemy – Section 7 of the Insurance Code provides that “Anyone except a
public enemy may be insured.”
a. Effect of War
 No war – Philippines vs Country of the Insured  deemed abrogated
 Application of the “United States Rule” – declares that the country is not
merely suspended, but is abrogated by reason of nonpayment of premiums,
since the time of the payments is peculiarly of the essence of the contract
 Application of a Case on the effect of Section 7 of the Insurance Code
2. Insurer – Section 6 of the Insurance Code provides that every person, partnership,
association, or corporation duly authorized to transact insurance business may be an
insurer.
2.1Definition – “Insurer” or “insurance company” shall include all partnerships,
associations, cooperatives or corporations, including government-owned or controlled
corporations or entities, engaged as principals in the insurance business, excepting
mutual benefit associations. The old governing provision of the Insurance Code
included individuals in the term “insurer” or “insurance company.” However,
individuals are no longer identified as persons who can be an insurer under the present
law.
a. Professional Reinsurer – The terms “insurer” or “insurance company” likewise
include professional reinsurers. Section 288 defines the term “professional
reinsurer” as any person, partnership, association or corporation that transacts
solely and exclusively reinsurance business in the Philippines.
b. Domestic and Foreign Company – An insurer may be a domestic company or a
foreign company. “Domestic company” shall include companies formed,
organized or existing under the laws of the Philippines. “Foreign company” when
used without limitation shall include companies formed, organized, or existing
under any laws other than those of the Philippines.
c. Mutual Benefit Association – Although excluded from the term “insurer” under
Section 184 of the Insurance Code, likewise within the regulatory powers of the
Insurance Commission are mutual benefit associations.” They must first secure a
license from the Insurance Commission before they can transact business.
 Mutual benefit associations include “any society, association or corporation,
without capital stock, formed or organized not for profit but mainly for the
purpose of paying sick benefits to members, or of furnishing financial
support to members while out of employment, or of paying to relatives of
deceased members of fixed or any sum of money, irrespective of whether
such aim or purpose is carried out by means of fixed dues or assessments
collected regularly from the members or of providing, by the issuance of
certificates of insurance, payment of its members of accident or life insurance
benefits out of such fixed and regular due assessments, but in no case shall
 include any society association, or corporation with such mutual benefit
features and which shall be carried out purely from voluntary contributions
collected not regularly and. Or no fixed amount from whomsoever may
contribute.
d. Mutual Insurance Companies – Mutual Insurance Companies are recognized under
the Insurance Code. Section 268 provides that any domestic stock life insurance
company doing business in the Philippines may convert itself into an
incorporated mutual life insurer. To that end, it may provide and carry out a
plan for the acquisition of the outstanding shares of its capital stock for the
benefit of its policyholders, or any class or classes of its policyholders, by
complying with the requirements of Chapter III, Title 17 of the Insurance
Code
 Procedure for Mutualization – the plan for mutualization shall include
appropriate proceedings for amending the insurer’s articles of incorporation
to give effect to the acquisition, by said insurer, for the benefit of its
policyholders or any class or classes thereof, of the outstanding shares of its
capital and the conversion of the insurer from a stock corporation into a non-
stock corporation for the benefit of its members. The members of such non-
stock corporation shall be the policyholders from time to time of the class or
classes for whose benefit the stock of the insurer was acquired, and the
policyholders of such other class or classes as may be specified in such
corporation’s articles of incorporation as they may be amended from time to
time
 The term “policyholder” or “policyholders” for purposes of mutualization
under Chapter III, Title 17 shall be deemed to mean the person or persons
insured under an individual policy of life insurance, or of health and accident
insurance, or of any combination of life, health and accident insurance. They
shall also include the person/or persons to whom any annuity or pure
endowment is presently or prospectively payable by the terms of an
individual annuity or pure endowment contract, except where the policy or
contract declares some other person to be the owner or holder thereof, in
which case such other person shall be deemed policyholder. The terms
“policyholder” and “policyholders” include the employer to whom, or a
president, secretary or other executive officer of any cooperation or
association to which a master group policy has been issued, but exclude the
holders of certificates or policies has been issued, but exclude the holders of
certificates or policies issued under or in connection with a master group
policy. Beneficiaries under unmatured contracts shall not as such be deemed
to be policyholders.
  Demutualization – More and more mutual insurance companies are
converting to stock corporations. One of the primary reasons for this
development is the need of companies for more funds. It is easier to raise
funds if the corporate vehicle is a stock corporation. It is easier to raise funds
if the corporate vehicle is a stock corporation. Another reason for
demutualization is to enable the insurance company to diversify its activities
and to facilitate payment of certain types of non-cash compensation to its
directors and officers. Demutualization is now expressly recognized under
section 280 of the Insurance Code which provides that “a domestic mutual
life insurance company doing business in the Philippines may convert itself
into an incorporated stock life insurance company by mutualization.” The
same provision states that “the conversion of a domestic mutual life
insurance company shall be carried out pursuant to a conversion plan duly
approved by the Commissioner.” The Corporation Code applies suppletory to
this demutualization process.”
e. Cooperatives – The new section 190 expressly includes cooperatives in the entities
included in the terms “insurer” or “insurance company.” In this connection,
Articles 105 to 108 of RA No. 9520 otherwise known as the Philippine
Cooperative Code of 2008 provides that:
Art. 105. Cooperative Insurance Societies – Existing cooperatives may organize
themselves into a cooperative insurance entity for the purpose of engaging in the
business of insuring life and property of cooperatives and their members.
Art. 106. Types of Insurance Provided – Under the cooperative insurance
program established and formed by the virtue of the provisions of this Code, the
cooperative insurance societies shall provide its constituting members different
types of insurance coverage consisting of, but not limited to, life insurance with
special group coverage, loan protection, retirement plans, endowment, motor
vehicle coverage, bonding, crop and livestock protection and equipment insurance.
Art. 107. Applicability of Insurance Laws – The provisions of the Insurance Code
and all other laws and regulations relative to the organization and operation of an
insurance company shal apply to cooperative insurance entities organized under
this Code. The requirements on capitalization, investments and reserves of
insurance firms may be liberally modified upon consultation with the Authority
and the cooperative sector, but in no case may be the requirement to be reduced to
less than half of those provided for under the Insurance Code and other related
laws.
Art. 108. Implementing Rules – The Insurance Commission and the Authority, in
consultation with the concerned cooperative sector, shall issue the appropriate
rules and regulations implementing the provisions of this Chapter.
 2.2 Certificate of Authority – Section 193 of the Insurance Code provides
that, “No insurance company shall transact any insurance business in the
Philippines until after it shall have obtained a certificate of authority for that
purpose from the (Insurance) Commissioner upon application therefor and
payment by the company concerned of the fees.” A certificate of authority is
required because contracts of insurance involve public interest and regulation
thereof by the State is necessary.”
a. Basic Qualifications – Section 192 provides that no person, partnership or
association of person shall transact any insurance business in the Philippines
except as agent of a person or corporation authorized to do the business of
insurance in the Philippines, unless: (1) possessed of the capital and assets
required of an insurance corporation doing the same kind of business in the
Philippines and invested in the same manner; (2) nor unless the Commissioner
shall have granted to him or them a certificate to the effect that he or they have
complied with all provisions of law which an insurance corporation doing
business in the Philippines is required to observe.
b. Term of the Certificate – Section 193 provides that “the certificate of authority
issued by the Commissioner shall expire on the last day of December, three (3)
years following its date of issuance, and shall be renewable every three (3)
years thereafter, subject to the company’s continuing compliance with the
provisions of this Code, circulars, instructions, rulings or decisions of the
Commission.”
2.3 Grounds for Disapproval of Application – Section 193 provides for some of the
grounds for rejection of the application for certificate of authority by the Insurance
Commissioner:
a. If such refusal will best promote the interest of the people of this country;
b. If there is evidence that the applicant is not qualified by the laws of the
Philippines to transact business therein;
c. If the grant of such authority appears to be unjustified in the light of : (1) economic
requirements, (2) the direction, administration, integrity and responsibility of
the organizers and administrators, (3) the financial organization and the
amount of capital, and (4) reasonable assurance of the safety of the interests of
the policyholders and the public; and
d. The name if the applicant belongs to any other known company transacting a
similar business in the Philippines or its name is so similar as to be calculated to
mislead the public.
2.4 Prohibited Acts – An insurer is prohibited from doing, among other acts, the
following:
a. To transact in the Philippines both the business of life and non-life insurance
company unless specifically authorized to do so;
 b. To have equity in an adjustment company (neither shall an adjustment company
have an equity in an insurance company);
c. To negotiate any contract of insurance other than is plainly expressed in the
policy or other written contract issued to or to be issued as evidence thereof;
d. To directly or indirectly, by giving or sharing a commission or in any
whatsoever, pay or allow or offer to pay or allow to the insured or to any
employee of such insurance or after such insurance has been effected, any
rebate from the premium which is specified in the policy, or any special favor
or advantage in the dividends or other benefits to accrue thereon;
e. To give or offer to give any valuable consideration or inducements of any kind,
directly or indirectly, which is not specified in such policy or contract of
insurance;
f. To make any discrimination against any Filipino in the sense that he is given
less advantageous rates, dividends or other policy conditions or privileges than
are accorded to those nationals because of his race;
g. To issue or circulate or cause or permit to be issued or circulated any
literature, illustration, circular or statement of any sort misrepresenting the
terms of any policy issued by an insurance company of the benefits or
advantages promised thereby, or any misleading estimate of the dividends or
share of surplus to be received thereon;
h. To use any name or title of any policy or class of policies misrepresenting the
true nature thereof; and,
i. To make any misleading representation or incomplete comparison of policies
to any person insured in such company for the purpose of inducing or tending
to induce such person to lapse, forfeit, or surrender his said insurance.
3. Beneficiary – The beneficiary may be a third person. Unless he is the insured himself, the
beneficiary is not one of the contracting parties. However, a third party beneficiary named in
the policy has the right to file an action against the insurer in case of loss. No other party can
recover the proceeds other than the beneficiary. Section 53 provides:
Sec. 53 – The insurance proceeds shall be applied exclusively to the proper interest of the
person in whose name or for whose benefit it made unless otherwise specified in the
policy.
a. When beneficiary is designated – In life insurance, if there is a named beneficiary
and the designation is not valid, it is the designated beneficiary who is entitled to
receive the proceeds and not the heirs of the insured. If another person is named the
beneficiary, the proceeds of an insurance policy belong exclusively to the
beneficiary and not to the estate of the person whose life was insured. In other
words, the proceeds are the separate and individual property of the beneficiary, and
not the heirs of the person whose life was insured. At any rate, the heir may be the
beneficiary and the proceeds of the life-insurance policy payable to said heir
belongs to him exclusively and does not form part of the deceased’s estate.
 b. Third parties – The insurer has no obligation to turn over the proceeds of the
insurance to third persons even if the third persons are immediate relatives if there
is a designated beneficiary.
Case Doctrine:
General Rule: Claim insurance proceeds – insured or the beneficiary; maturation
of the policy (death of insured)
Exception: A situation where the insurance contract was intended to benefit third
persons who are not parties to the same in the form of favorable situations or
indemnity.
c. When there is no beneficiary – proceeds shall form part of the estate of the
deceased insured
d. Effect of use of conjugal funds - If the funds of the conjugal partnership of gains
are used to pay for the premium, the proceeds of the policy constitute community
property if the policy was made payable to the deceased’s estate of the deceased
insured.
(1) In a case decided when the New Civil Code provisions on the property
regime of the spouses was still in force, the Supreme Court adopted the
following comments of Manresa in his Commentaries on the Civil Code.
“The amount of the policy represents the premium to be paid and the right to it
arises the moment the contract is perfected, for at that moment the power of
disposing of it may be exercised, and if death occurs payment may be
demanded. It is therefore something acquired for a valuable consideration
during the marriage, through the period of its fulfillment, depend upon the
death of one of the spouses, which terminates the partnership. So considered,
the question may be said to be decided by Articles 1396 and 1401: if the
premiums are paid with the exclusive property of husband or wife, the policy
belongs to the owner, if with conjugal property, or if the money cannot be
proved as coming from one or the other of the spouses, the policy is community
property.”
(2) However, if there is a designated beneficiary, the beneficiary is entitled to
the proceeds of the policy. The source of the premium is immaterial.
e. Vested interest of beneficiary – The vested interest or right of the beneficiaries in
a life insurance policy should be measured on its full face value, 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 it and are entitled to
automatic extended term or paid-up insurance options and that said vested right
under the policy cannot be divisible at any given time.

3.1 Generally Revocable – As a rule, the designation of the beneficiary is revocable.

If the insured wants the designation to be irrevocable, the irrevocable nature
should be expressly provided for in the policy:
 Sec. 11. The insured shall have the right to change the beneficiary he
designated in the policy, unless he has expressly waived this right in said
policy. Notwithstanding the foregoing, in the event the insured does not change
the beneficiary during his lifetime, the designation shall be deemed irrevocable.
a. Effect if Irrevocable – As the term implies, an irrevocable beneficiary cannot
be replaced. The irrevocable beneficiary has rights over the policy.
b. Exception – Article 64 of the Family Code provides that after the finality of
the decree of legal separation, the innocent spouse may revoke the designation
as a beneficiary in any insurance policy, even if such designation is stipulated
to be irrevocable.
c. Revocation during the Lifetime
Section 11 states that notwithstanding the revocable nature of the designation
of the beneficiary, “in the event the insured does not change the beneficiary
during his lifetime, the designation shall be deemed irrevocable. However, the
provision is a surplusage with respect to life insurance because the insured
who is the owner of the policy can no longer change the beneficiary beyond
his lifetime.
3.2 Forfeiture of Rights of the Beneficiary – Found in Section 12 of the Insurance
Code provides:
Sec. 12. The interest of a beneficiary in a life insurance policy shall be
forfeited when the beneficiary is the principal, accomplice, or accessory in
willfully bringing about the death of the insured. In such case, the share
forfeited shall pass on to the other beneficiaries, unless otherwise
disqualified. In the absence of other beneficiaries, the proceeds shall be paid
in accordance with the policy contract. If the policy is silent, the proceeds
shall be paid to the estate of the insured.
a. Section 12 of the Insurance Code talks about a disqualification that arises after
the perfection of the contract of insurance. The beneficiary does not suffer any
disqualification at the inception of the contract but he becomes disqualified
after the contract’s perfection. The underlying principle is that the beneficiary
should not profit from his misdeed. This is consistent with the maxim Un ne
dolt prise advantage de son tort desmene and Nemo ex suo delicto melloram
suam conditionem facere potest. Note that the disqualification under Section
12 of the Insurance Code arises due to a willfull act of the beneficiary.
b. R.A. No. 10607 changed the default rules on beneficiary under Section 12. In
Life Insurance, if a beneficiary is disqualified under Section 12, the proceeds
of the insurance shall be paid in accordance with the following rules:
(1) The forfeited share of the disqualified beneficiary shall pass on to the
other beneficiaries;
(2) If there are no other beneficiaries, the proceeds shall be paid in accordance
with the policy contract;
 (3) If there are no other beneficiaries and there is no provision in the policy
contract, the proceeds shall be paid to the estate of the insured.
3.3 Disqualification of Beneficiary – Found in Article 2012
Article 2012. Any person who is forbidden from receiving any donation
under Article 739 cannot be named beneficiary of a life insurance policy and
by the person who cannot make any donation to him, according to said
article
a. Rationale – The Supreme Court explained in The Insular Life Assurance Co.,
Ltd. V. Carponia T. Ebrado
“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 done, because form 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 prescription 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 be named as
beneficiary in 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.”
b. Grounds for disqualification
Sample cases
(1) Those made between persons who were guilty of adultery or concubinage
at the time of the donation;
(2) Those made between persons found guilty of the same criminal offense,
inconsideration thereof;
(3) Those made to a public officer or his wife, descendants and ascendants, by
reason of his office
c. Hence, in one case, the Supreme Court ruled that a husband cannot name as
beneficiary a woman with whom he had illicit relations. The common law
wife who is aware that the man with whom she has relations is already
married may not be validly designated as a beneficiary. However, this
argument would certainly not apply to the children borne out of wedlock. The
illegitimate children are not covered by the prohibition. As a matter of fact,
the New Civil Code (and now the Family Code) recognizes certain
successional rights of illegitimate children.
d. Conviction is not necessary in order for one to be disqualified due to adultery
or concubinage. This is the rule in donation which should equally apply to
insurance contracts.
 e. The spouse can designate the other as a beneficiary. While a spouse is
prohibited from making a donation to other spouse under the New Civil Code
and the Family Code, this prohibition does not apply to insurance contracts.
f. While a concubine is disqualified, the illegitimate children of the insured are
not disqualified. No legal proscription exists in naming as beneficiaries the
children of illicit relationships by the insured. If the concubine was
disqualified, her shares in the insurance proceeds must be awarded to the
illegitimate children who are also designated as beneficiaries.

QUICK SUMMARY OF CASES

1. Heirs of Loreto Maramag v. Maramag, G.R. No 181132, 05 June 2009
Facts: Loreto Maramag designated his concubine, Eva de Guzman Maramag, as his
beneficiary.The heirs of Loreto Maramag and his illegitimate children are claiming for the
insurance of Loreto. They suspected his concubine as the murder on the death of Loreto.
Vicenta alleged that Eva is disqualified from claiming. According to the Regional Trial
Court, the civil code does not apply. The court of appeals dismissed the case for lack of
jurisdiction for filing beyond reglementary period.
Issue: W/N Eva can claim even though prohibited under the civil code against donation.
Held: Yes. Petition is denied. Any person who is forbidden from receiving any donation
under Article 739 cannot be named beneficiary of a life insurance policy of the person who
cannot make any donation to him. If a concubine is made the beneficiary, it is believed that
the insurance contract will still remain valid, but the indemnity must go to the legal heirs
and not to the concubine, for evidently, what is prohibited under Art. 2012 is the naming of
the improper beneficiary. Section 53 of the Insurance code states that the insurance proceeds
shall be applied exclusively to the proper interest of the person in whose name or for whose
name or for whose benefit it is made unless otherwise specified in the policy.

2. The Insular Life Assurance Co. v. Ebrado, 80 SCRA 181, 28 October 1997
Facts: Buenaventura Ebrado was issued a life plan by insular company. He designated
Capriona as his beneficiary, referring to her as his wife. The insured then died and
Carpriona tried to claim the proceeds of the said plan. She admitted to being only the
common law wife of the insured. Pascula, the legal wife, also filed a claim asserting her
right as the legal wife. The company ten filed an action for interpleader.

Issue: W/N the common law wife named as beneficiary can collect the proceeds.

Held: “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 done, because form 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 prescription 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 be named as beneficiary in 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.”
3. Del Val v. Del Val, 29 Phil. 534
Facts: Petitioners and private respondents are brothers and sisters. They are the only heirs
and next of kin of Gregorio Del Val who died intestate. It was found out that the deceased
took out insurance on his life for the sum of 40 thousand and made it payable to private
respondents as sole beneficiary. After Gregorio’s death, Andres collected the proceeds of
the policy. Of the said policy, Andres paid 18 thousand to redeem some real property which
Gregorio had sold to third persons during his lifetime. Said redemption of the property was
made by Andres’ lawyer in the name of Andres and the petitioners. Petitioners now contend
that the amount of the insurance policy belonged to the estate of the deceased and not to
Andres personally. Pet filed a complaint for partition of property including the insurance
proceeds. Andres’s claims that he is the sole owner of the proceeds and prayed that he be
declared the sole owner of the real property, redeemed with the use of the insurance
proceeds and its remainder. Petitioners account for the use and occupation of the premises.

Issue: Whether or not the petitioners have a right to the insurance proceeds?
Held: No. The contract of life insurance is a special contract and the destination of the
proceeds thereof is determined by special laws which deal exclusively with the subject. Our
civil code has no provisions which relate directly and specifically to life-insurance contracts
of to the destination of life-insurance proceeds that subject is regulated exclusively by the
Code of Commerce. Thus, contention of petitioners that proceeds should be considered as a
donation or gift and should be included in the estate of the deceased is untenable.

Since the repurchase has been made the names of all the heirs instead of the defendant
alone, petitioners claim that the property belongs to the heirs in common and not to the
defendant alone, the SC held that if it is established by evidence that that was his intention
and that the real estate was delivered to the plaintiffs with that understanding, then it is
probable that their contention is correct and that they are entitled to share equally with the
defendant. HOWEVER, it appears from the evidence that the conveyances were taken in
the name of the plaintiffs without the knowledge and consent of Andres, or that it was not
his intention to make a gift to them of real estate, when it belongs to him.

4. BPI v. Posadas, 56 Phil. 215

Facts: BPI, as administrator of the estate of deceased Adolphe Schuetze, appealed to CFI
Manila absolving defendant, Collector of Internal Revenue, from the complaint filed against
him in recovering the inheritance tax amounting to P1209 paid by the plaintiff, Rosario
Gelano Vda de Schuetze, under protest, and sum of P20,150 representing the proceeds of
the insurance policy of the deceased.

Rosario and Adolphe were married in January 1914. The wife was actually residing and
living in Germany when Adolphe died in December 1927. The latter while in Germany,
executed a will in March 1926, pursuant with its law wherein plaintiff was named his
universal heir. The deceased possessed not only real property situated in the Philippines but
also personal property consisting of shares of stocks in 19 domestic corporations. Included
in the personal property is a life insurance policy issued at Manila on January 1913 for the
sum of $10,000 by the Sun Life Assurance Company of Canada, Manila Branch. In the
insurance policy, the estate of the deceased was named the beneficiary without any
qualification. Rosario is the sole and only heir of the deceased. BPI, as administrator of the
decedent’s estate and attorney in fact of the plaintiff, having been demanded by Posadas to
pay the inheritance tax, paid under protest. Notwithstanding various demands made by
plaintiff, Posadas refused to refund such amount.

Issue: Whether or not the plaintiff is entitled to the proceeds of the insurance.

Held: SC ruled that(1)the proceeds of a life-insurance policy payable to the insured's estate,
on which the premiums were paid by the conjugal partnership, constitute community
property, and belong one-half to the husband and the other half to the wife, exclusively;
(2)if the premiums were paid partly with paraphernal and partly conjugal funds, the
proceeds are likewise in like proportion paraphernal in part and conjugal in part; and (3)the
proceeds of a life-insurance policy payable to the insured's estate as the 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 the insured was
domiciled in these Islands or outside.

Hence, the defendant was ordered to return to the plaintiff one-half of the tax collected upon
the amount of P20,150, being the proceeds of the insurance policy on the life of the late
Adolphe Oscar Schuetze, after deducting the proportional part corresponding to the first
premium.