1. Enriquez vs. sunlife assurance co.

of
Canada

FACTS:

On September 24, 1917, Joaquin Herrer made application to the Sun Life
Assurance Company of Canada through its office in Manila for a life annuity.
Two days later he paid the sum of P6,000 to the manager of the company's
Manila office and was given a receipt.

The application was immediately forwarded to the head office of the company
at Montreal, Canada. On November 26, 1917, the head office gave notice of
acceptance by cable to Manila. The policy was then issued at Montreal.
Subsequently Atty. Aurelio Torres wrote to the Manila office of the company
stating that Herrer desired to withdraw his application. The following day the
local office replied to Mr. Torres, stating that the policy had been issued, and
called attention to the notification of November 26, 1917. This letter was
received by Mr. Torres on the morning of December 21, 1917. Mr. Herrer died
on December 20, 1917.

Rafael Enriquez (plaintiff), as administrator of the estate of the late Joaquin

Ma. Herrer filed to recover from Sun Life Assurance Company of Canada
through its office in Manila for a life annuity

An action brought by the plaintiff as administrator of the estate of the late

Joaquin Ma. Herrer to recover from the defendant life insurance company the
sum of pesos 6,000 paid by the deceased for a life annuity. The trial court
gave judgment for the defendant Sunlife assurance. Plaintiff appeals.

ISSUE: Whether or not Mr. Herrera received notice of acceptance of his

application thereby perfecting his life annuity (insurance contract)

HELD: NO.

The contract for life annuity was not perfected because it had not been proved
satisfactorily that the acceptance of the application ever came to the
knowledge of the applicant. An acceptance of an offer of insurance not actually
or constructively communicated to the proposer does NOT make a contract of
insurance, as the locus poenitentiae is ended when an acceptance has passed
beyond the control of the party.
In resume, therefore, the law applicable to the case is found to be the second
paragraph of article 1262 of the Civil Code providing that an acceptance made
by letter shall not bind the person making the offer except from the time it
came to his knowledge. The pertinent fact is, that according to the provisional
receipt, three things had to be accomplished by the insurance company before
there was a contract: (1) There had to be a medical examination of the
applicant; (2) there had to be approval of the application by the head office of
the company; and (3) this approval had in some way to be communicated by
the company to the applicant.

(The further admitted facts are that the head office in Montreal did accept the
application, did cable the Manila office to that effect, did actually issue the
policy and did, through its agent in Manila, actually write the letter of
notification and place it in the usual channels for transmission to the
addressee. The fact as to the letter of notification thus fails to concur with the
essential elements of the general rule pertaining to the mailing and delivery of
mail.)

Dispositive portion: Judgment is reversed, and the plaintiff shall have and
recover from the defendant the sum of P6,000 with legal interest from
November 20, 1918, until paid, without special finding as to costs in either
instance. So ordered.

Insular Life vs Ebrado Case Digest

Facts:
Buenaventura was married to Pascuala with whom he had six. Later on however,
he started living with Carponia although he was still legally married to
Pascuala and had not legally separated from her.

While living with Carponia, Buenaventura obtained an insurance policy from

Insular Life Assurance Co. with a rider for accidental death benefit and
designated Carponia as the revocable beneficiary, referring her therein as his
wife. Barely more than a year after obtaining the policy, Buenaventura died
when he was hit by a falling branch of a tree.

Carponia filed a claim for the proceeds of the Policy as the

designated beneficiary therein, although she admits that she and the insured
Buenaventura were merely living as husband and wife without the benefit of
marriage. Pascuala also filed her claim as the widow of the deceased insured.
She asserts that she is the one entitled to the insurance proceeds, not the
common-law wife, Carponia. In view of the conflicting claims, Insular Life
brought the matter to court interpleading both parties in the case. The trial court
ruled in favor of Pascuala.

Issue:

Can a common-law wife named as beneficiary in the life insurance policy of a

legally married man claim the proceeds thereof in case of death of the latter?

Held:

Yes. In essence, a life insurance policy is no different from a civil

donation insofar as the beneficiary is concerned. Both are founded upon the
same consideration: liberality. A beneficiary is like a donee, because from the
premiums of the policy which the insured pays out of liberality,
the beneficiary will receive the proceeds or profits of said insurance. As
a consequence, the proscription in Article 739 of the new Civil Code should
equally operate in life insurance contracts. The mandate of Article 2012 cannot
be laid aside: any person who cannot receive a donation cannot be named
as beneficiary in the life insurance policy of the person who cannot make the
donation.

Policy considerations and dictates of morality rightly justify the institution of a

barrier between common law spouses in regard to property relations since such
relationship ultimately encroaches upon the nuptial and filial rights of the
legitimate family. 

A conviction for adultery or concubinage is not necessary. Article 739 itself

provides that the guilt of the donee may be proved by preponderance of
evidence in the same action. In this case, the common law relationship is already
admitted by Carponia herself in the stipulation of facts they submitted to the
court. (Insular Life vs Ebrado,  G.R. No. L-44059, October 28, 1977)
CASE #1 CONSTANTINO VS ASIA LIFE INSURANCE CO.
GR# L-1669 August 31, 1950 PERALTA VS ASIA LIFE INSURANCE CO.
GR# L-1670 August 31, 1950

FACTS:

FIRST CASE: Respondent Corporation was paid P 176.04 as annual premium by

Arcadio Constantino in exchange for policy no. 93212 on 1941 for P 3,000 which
lasted for 20 years. Petitioner Paz Constantino was made beneficiary. However
after the first payment, no further premiums were made. Thereafter the insured
died on 1944. Later, due to the war (Japanese occupation) Respondent
Corporation had to close down its branch in the country.

SECOND CASE: Similarly, Respondent Corporation issued on 1938 another

insurance policy no. 78145 for Spouses Ruiz and Peralta also for P 3,000, lasting
for 20 years. Regular payments were made however due also to the war, it
became impossible to transact further payments. The insured nevertheless was
able to borrow P 234 from the policy. Ruiz died on 1945. Peralta was the
beneficiary.

In both cases the plaintiffs demanded payment but was refused due to
Respondent Corporations refusal on the ground of non-payment of the
premiums. The lower court favored Respondent.

ISSUES:

1) Whether or not the beneficiaries are entitled to recover the amount insured
despite non-payment caused by the Japanese occupation.

2) Whether or not the periodic payments of the premiums, those after the first,
is not an obligation of the insured so that it is not a debt enforceable by the
action of the insurer.

HELD: 1) The beneficiaries are not entitled to recover for non-payment despite
the presence of war. Contracts of insurance are contracts of indemnity within the
terms and condition found therein. An insurance company for certain
considerations guarantee the insured against loss or damage as may be
stipulated, and when called to pay, the insurer may insist on the fulfillment of
said stipulations. Failure of the insured to do so disqualifies recovery for the loss.
Thus the terms of the policy determines the insurers liability. Compliance to the
terms of the policy is a must as it is a condition precedent to the right of
recovery. Therefore, from the terms of the policy it is clear that non-payment of
premium produces avoidance (forfeiture of the policy). Moreover, since act 2427,
Philippine law on insurance and the Civil Code) are mostly based from the Civil
Code of California, An intention to supplement our laws with the prevailing
principles of the US arises. Thus, Prof. Vance of Yaled declares that the United
States Rule must be followed, where the contract is not merely suspended but is
abrogated by reason of non-payment of premiums since the time of payments is
peculiar to the essence of the contract. Further it would be unjust to permit the
insurer to retain the reserve value of the policy or the excess of premiums paid
over the actual risk when the policy was still effective as held in the Statham
Case which was more logical and juridically sound. In said case it was hold that
promptness of payment is essential in the business of life insurance since all
calculations of the company is based on the hypothesis of prompt payments.
Forfeiture for non-payment is necessary to protect said business from
embarrassment otherwise confusion would abound. And that delinquency cannot
be tolerated nor redeemed except at the option of the company. Lastly parties
contracted both for peace and war times since the policies contained also
wartime days. It follows that the parties contemplated uninterrupted operation of
the contract even if armed conflict ensues.

2) The annual premium is not a debt, nor is it an obligation which the insurer can
maintain an action against the insured; nor its settlement governed by the rules
on payment of debts. A contract of insurance is sui generis. This means though
the insured may hold the insurer to the contract by the fulfillment of the
condition, the latter has no power or right to compel the insured to maintain the
contract relation longer than the insured may desire. It is optional upon the
insured.

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Perez v. CA- Perfection of the Contract of Insurance

323 SCRA 613 (2000)

Facts:

>  Primitivo Perez had been insured with the BF Lifeman Insurance Corporation
since 1980 for P20,000.00.
>  In October 1987, an agent of Lifeman, Rodolfo Lalog, visited Perez in Quezon
and convinced him to apply for additional insurance coverage of P50,000.00, to
avail of the ongoing promotional discount of P400.00 if the premium were paid
annually.
>  Primitivo B. Perez accomplished an application form for the additional
insurance coverage.  Virginia A. Perez, his wife, paid P2,075.00 to Lalog. The
receipt issued by Lalog indicated the amount received was a "deposit."
>  Unfortunately, Lalog lost the application form accomplished by Perez and so
on October 28, 1987, he asked the latter to fill up another application form. On
November 1, 1987, Perez was made to undergo the required medical
examination, which he passed.
>  Lalog forwarded the application for additional insurance of Perez, together
with all its supporting papers, to the office of BF Lifeman Insurance Corporationn
in Quezon which office was supposed to forward the papers to the Manila office.
>  On November 25, 1987, Perez died while he was riding a banca which
capsized during a storm.
>  At the time of his death, his application papers for the additional insurance
were still with the Quezon office. Lalog testified that when he went to follow up
the papers, he found them still in the Quezon office and so he personally brought
the papers to the Manila office of BF Lifeman Insurance Corporation. It was only
on November 27, 1987 that said papers were received in Manila.
>  Without knowing that Perez died on November 25, 1987, BF Lifeman
Insurance Corporation approved the application and issued the corresponding
policy for the P50,000.00 on December 2, 1987
>  Virginia went to Manila to claim the benefits under the insurance policies of
the deceased. She was paid P40,000.00 under the first insurance policy for
P20,000.00 (double indemnity in case of accident) but the insurance company
refused to pay the claim under the additional policy coverage of P50,000.00, the
proceeds of which amount to P150,000.00 in view of a triple indemnity rider on
the insurance policy.
>  In its letter of January 29, 1988 to Virginia A. Perez, the insurance company
maintained that the insurance for P50,000.00 had not been perfected at the time
of the death of Primitivo Perez. Consequently, the insurance company refunded
the amount of P2,075.00 which Virginia Perez had paid
>  Lifeman filed for the rescission and the declaration of nullity.  Perez, on the
other hand, averred that the deceased had fulfilled all his prestations under the
contract and all the elements of a valid contract are present.
>  RTC ruled in favor of Perez.  CA reversed.

Issue:

Whether or not there was a perfected additional insurance contract.

Held: 

The contract was not perfected.

Insurance is a contract whereby, for a stipulated consideration, one party
undertakes to compensate the other for loss on a specified subject by specified
perils.  A contract, on the other hand, is a meeting of the minds between two
persons whereby one binds himself, with respect to the other to give something
or to render some service.

Consent must be manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract. The offer
must be certain and the acceptance absolute. When Primitivo filed an application
for insurance, paid P2,075.00 and submitted the results of his medical
examination, his application was subject to the acceptance of private respondent
BF Lifeman Insurance Corporation. The perfection of the contract of insurance
between the deceased and respondent corporation was further conditioned upon
compliance with the following requisites stated in the application form:
"there shall be no contract of insurance unless and until a policy is issued on this
application and that the said policy shall not take effect until the premium has
been paid and the policy delivered to and accepted by me/us in person while
I/We, am/are in good health."
The assent of private respondent BF Lifeman Insurance Corporation therefore
was not given when it merely received the application form and all the requisite
supporting papers of the applicant. Its assent was given when it issues a
corresponding policy to the applicant. Under the abovementioned provision, it is
only when the applicant pays the premium and receives and accepts the policy
while he is in good health that the contract of insurance is deemed to have been
perfected.

It is not disputed, however, that when Primitivo died on November 25, 1987, his
application papers for additional insurance coverage were still with the branch
office of respondent corporation in Gumaca and it was only two days later, or on
November 27, 1987, when Lalog personally delivered the application papers to
the head office in Manila. Consequently, there was absolutely no way the
acceptance of the application could have been communicated to the applicant for
the latter to accept inasmuch as the applicant at the time was already dead.

Case Digest: Alpha Insurance vs Castor

G.R. No. 198174, September 2, 2013     

FACTS:

            On February 21, 2007, respondent entered into a contract of insurance

with petitioner, involving her motor vehicle, a Toyota Revo. The contract of
insurance obligates the petitioner to pay the respondent the amount of Six
Hundred Thirty Thousand Pesos (₱630,000.00) in case of loss or damage to said
vehicle during the period covered, which is from February 26, 2007 to February
26, 2008.

On April 16, 2007, respondent instructed her driver, Lanuza, to bring the above-
described vehicle to a nearby auto-shop for a tune-up. However, Lanuza no
longer returned the motor vehicle to respondent and despite diligent efforts to
locate the same, said efforts proved futile. Resultantly, respondent promptly
reported the incident to the police and concomitantly notified petitioner of the
said loss and demanded payment of the insurance proceeds in the total sum of
₱630,000.00.

Petitioner, however, denied the insurance claim of respondent, stating among

others, that that among the provisions of the Policy states that:

1.) The Company shall not be liable for:

xxxx

(4) Any malicious damage caused by the Insured, any member of his family or
by “A PERSON IN THE INSURED’S SERVICE.”

The respondent reiterated her claim and argued that the exception refers to
damage of the motor vehicle and not to its loss. However, petitioner’s denial of
respondent’s insured claim remains firm.

ISSUE:

Whether or not the loss of respondent’s vehicle is excluded under the insurance
policy

RULING:

The court ruled in the negative. The loss of respondent’s vehicle is not excluded
under the insurance policy.

In denying respondent’s claim, petitioner takes exception by arguing that the

word “damage,” under paragraph 4 of “Exceptions to Section III,” means loss
due to injury or harm to person, property or reputation, and should be construed
to cover malicious “loss” as in “theft.” Thus, it asserts that the loss of
respondent’s vehicle as a result of it being stolen by the latter’s driver is excluded
from the policy. We do not agree.

If the intention of the defendant-appellant was to include the term “loss” within
the term “damage” then logic dictates that it should have used the term
“damage” alone in the entire policy or otherwise included a clear definition of the
said term as part of the provisions of the said insurance contract. Which is why
the Court finds it puzzling that in the said policy’s provision detailing the
exceptions to the policy’s coverage in Section III thereof, which is one of the
crucial parts in the insurance contract, the insurer, after liberally using the words
“loss” and “damage” in the entire policy, suddenly went specific by using the
word “damage” only in the policy’s exception regarding “malicious damage.”

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Now, the defendant-appellant would like this Court to believe that it really
intended the word “damage” in the term “malicious damage” to include the theft
of the insured vehicle. The Court does not find the particular contention to be
well taken.

True, it is a basic rule in the interpretation of contracts that the terms of a

contract are to be construed according to the sense and meaning of the terms
which the parties thereto have used. In the case of property insurance policies,
the evident intention of the contracting parties, i.e., the insurer and the assured,
determine the import of the various terms and provisions embodied in the policy.
However, when the terms of the insurance policy are ambiguous, equivocal or
uncertain, such that the parties themselves disagree about the meaning of
particular provisions, the policy will be construed by the courts liberally in favor
of the assured and strictly against the insurer.

Lastly, a contract of insurance is a contract of adhesion. So, when the terms of

the insurance contract contain limitations on liability, courts should construe
them in such a way as to preclude the insurer from non-compliance with his
obligation.

Insurance Case Digest: De La Cruz V. Capital Ins. & Surety Co, Inc. (1966)
G.R. No. L-21574           June 30, 1966
Lessons Applicable: Liability of Insurer for Suicide and Accidental Death
(Insurance)
Laws Applicable: 

FACTS:

 Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc

Mines, Inc. in Baguio, was the holder of an accident insurance
policy "against death or disability caused by accidental means"
 January 1, 1957: For the celebration of the New Year, the Itogon-
Suyoc Mines, Inc. sponsored a boxing contest for general
entertainment wherein Eduardo, a non-professional boxer
participated
 In the course of his bout with another non-professional boxer of
the same height, weight, and size, Eduardo slipped and was hit by
his opponent on the left part of the back of the head, causing
Eduardo to fall, with his head hitting the rope of the ring
 He was brought to the Baguio General Hospital the following day.
He died due to hemorrhage, intracranial.
 Simon de la Cruz, the father of the insured and who was named
beneficiary under the policy, thereupon filed a claim with the
insurance company
 The Capital Insurance and Surety co., inc denied stating that the
death caused by his participation in a boxing contest was not
accidental
 RTC: favored Simon
ISSUE: W/N the cause of death was accident

HELD:YES.

 Eduardo slipped, which was unintentional

 The terms "accident" and "accidental"
 as used in insurance contracts, have not acquired any
technical meaning and are construed by the courts in their
ordinary and common acceptation
 happen by chance or fortuitously, without intention and
design, and which is unexpected, unusual, and unforeseen
 event that takes place without one's foresight or
expectation
 event that proceeds from an unknown cause, or is an
unusual effect of a known cause and, therefore, not
expected
 where the death or injury is not the natural or probable result of
the insured's voluntary act, or if something unforeseen occurs in
the doing of the act which produces the injury, the resulting death
is within the protection of policies insuring against death or injury
from accident
 while the participation of the insured in the boxing contest is
voluntary, the injury was sustained when he slid, giving occasion to
the infliction by his opponent of the blow that threw him to the
ropes of the ring is not
 The fact that boxing is attended with some risks of external injuries
does not make any injuries received in the course of the game not
accidental
 In boxing as in other equally physically rigorous sports, such as
basketball or baseball, death is not ordinarily anticipated to result.
If, therefore, it ever does, the injury or death can only be
accidental or produced by some unforeseen happening or event as
what occurred in this case
 Furthermore, the policy involved herein specifically excluded from
its coverage —
(e) Death or disablement consequent upon the Insured engaging in
football, hunting, pigsticking, steeplechasing, polo-playing, racing
 of any kind, mountaineering, or motorcycling.
 Death or disablement resulting from engagement in
boxing contests was not declared outside of the protection
of the insurance contract 

Insurance Law case digests SY 2010-2011

Interpretation of insurance contracts

DIOSDADO C. TY vs. FIRST NATIONAL SURETY & ASSURANCE CO. INC.

G.R. NO. L-16138, April 29, 961 1 SCRA 1324

Facts:

Petitioner obtained personal accident policies which stipulated, among others,

that for partial disability resulting to the loss of either hand, the insurer shall be
liable for P650.00. It was further stated in the policies that, “That loss of a hand
shall mean the loss by amputation through the bones of the wrist.” A fire broke
out which totally destroyed Broadway Cotton Factory, Ty’s employer. Fighting his
way out of the factory, Ty was injured on the left hand by a heavy object. As a
result, Ty suffered a temporary total disability of his left hand which prevented hi
from performing his work or labor necessary in the pursuance of his occupation.

Issue: Whether or not the insurer is liable

Held: The insurer was not liable.

We can not go beyond the clear and express conditions of the insurance policies,
all of which defined partial disability as loss of either hand by amputation
through the bones of the wrist. There was no such amputation. All that was
found was that the physical injuries caused temporary total disability of Ty’s left
hand. We might add that the agreement contained in the insurance policies are
clear, express and specific that only amputation of the left hand should be
considered as a loss thereof, an interpretation that would include the mere
fracture or other temporary disability not covered by the policies would certainly
be unwarranted. WHEREFORE, the decision appealed from is hereby affirmed,
with costs against the plaintiff-appellant.

Panaton v. Malayan Insurance Co., Inc.:o(Source: Perez book)

Facts:o
A personal accident policy was issued covering “loss of legs”which was defined in
the policy as the amputation of thelegs.
oThe insured met an accident resulting in total paralysis of both legs.
oThe insurer refused to pay because there was no “loss oflegs” since the legs of
the insured were not amputated.

Issues: Was the insurer liable? Should permanent and total paralysis of both legs
be considered as equivalent of “loss of legs”?
Ruling:
oThe insurer was liable because “loss of legs” should beinterpreted so as to
include the permanent and total paralysisof both legs.oThe interpretation of the
term “loss of legs” as limited toamputation of both legs to the exclusion of
permanent totalparalysis of both legs would be contrary to public good,sound
morality and public policy. It would force a desperateman to cause an
amputation to be performed since his legsare of no use for life, in order to avail
of the benefits of thepolicy.

oThe permanent, total paralysis of both legs suffered by theinsured was

equivalent to loss of both legs, since it willobviously be bedridden for the rest of
his natural life.
 Insurance Case Digest: Qua Chee Gan V. Law Union And Rock Insurance Co.,
Ltd. (1955)

G.R. No.L-4611        December 17, 1955

Lessons Applicable: Ambiguous Provisions Interpreted Against Insurer
(Insurance)

FACTS:
 Qua Chee Gan, a merchant of Albay, owned four bodegas which he
insured with Law Union & Rock Insurance Co., Ltd (Law Union)
since 1937 and the lose made payable to the Philippine National
Bank (PNB) as mortgage of the hemp and crops, to the extent of
its interest
 July 21, 1940 morning: fire broke out in bodegas 1,2 and 4 which
lasted for almost a week. 
 Qua Chee Gan informed Law Union by telegram
 Law Union rejected alleging that it was a fraudulent claim that the
fire had been deliberately caused by the insured or by other
persons in connivance with him
 Que Chee Gan, with his brother, Qua Chee Pao, and some
employees of his, were indicted and tried in 1940 for the crime of
arson but was  subsequently acquitted
 During the pendency of the suit, Que Chee Gan paid PNB
 Law Union states that ff. assignment of errors:
 1. memo of warranty requires 11 hydrants instead of 2 
 2. violation of hemp warranty against storage of gasoline
since it prohibits oils
 3. fire was due to fraud
 4. burned bodegas could not possibly have contained the
quantities of copra and hemp stated in the fire claims
ISSUE: W/N Qua Chee Gan should be allowed to claim.

HELD: YES. Affirmed.

 1. It is a well settled rule of law that an insurer which with
knowledge of facts entitling it to treat a policy as no longer in
force, receives and accepts a preium on the policy, estopped to
take advantage of the forfeiture
 2. oils (animal and/or vegetable and/or mineral and/or their liquid
products having a flash point below 300o Fahrenheit", and is
decidedly ambiguous and uncertain; for in ordinary parlance, "Oils"
mean "lubricants" and not gasoline or kerosene
 by reason of the exclusive control of the insurance
company over the terms and phraseology of the contract,
the ambiguity must be held strictly against the insurer and
liberraly in favor of the insured, specially to avoid a
forfeiture
 3. trial Court found that the discrepancies were a result of the
insured's erroneous interpretation of the provisions of the
insurance policies and claim forms, caused by his imperfect
knowledge of English, and that the misstatements were innocently
made and without intent to defraud.
 4. Similarly, the 20 per cent overclaim on 70 per cent of the hemo
stock, was explained by the insured as caused by his belief that he
was entitled to include in the claim his expected profit on the 70
per cent of the hemp, because the same was already contracted
for and sold to other parties before the fire occurred

Case Digest: Eternal Gardens Memorial Park vs. Philam Life

ETERNAL GARDENS MEMORIAL PARK CORPORATION vs. THE
PHILIPPINE AMERICAN LIFE INSURANCE COMPANY
G.R. No. 166245 09 April 2008

Facts:
Respondent Philamlife entered into an agreement denominated as Creditor
Group Life Policy with petitioner. Under the policy, the clients of Eternal who
purchased burial lots from it on installment basis would be insured by Philamlife.
Among those insured was John Chuang who died with a balance of payments pf
PhP100,000.00. More than a year after complying with the required
documents, Philamlife had not furnished Eternal with any reply to the latter’s
insurance claim. This prompted Eternal to demand from Philamlife the payment
of the claim for PhP 100,000 on April 25, 1986. Only then did Philamlife respond
that the deceased was not covered by the Policy.

The RTC said that since the contract is a group life insurance, once proof of
death is submitted, payment must follow. The CA ruled that the non-
accomplishment of the submitted application form violated Section 26 of the
Insurance Code. Thus, the CA concluded, there being no application form,
Chuang was not covered by Philamlifes insurance.

Issue: May the inaction of the insurer on the insurance application be considered

approval of the application?

Ruling:

Yes. As earlier stated, Philamlife and Eternal entered into an agreement

denominated as Creditor Group Life Policy No. P-1920 dated December 10, 1980.
In the policy, it is provided that:
 
EFFECTIVE DATE OF BENEFIT.
 
The insurance of any eligible Lot Purchaser shall be effective on the date he
contracts a loan with the Assured. However, there shall be no insurance if the
application of the Lot Purchaser is not approved by the Company.
 
An examination of the above provision would show ambiguity between its two
sentences.   A contract of insurance, being a contract of adhesion, par
excellence, any ambiguity therein should be resolved against the
insurer. Moreover, the mere inaction of the insurer on the insurance application
must not work to prejudice the insured; it cannot be interpreted as a termination
of the insurance contract. The termination of the insurance contract by the
insurer must be explicit and unambiguous.

FORTUNE INSURANCE AND SURETY CO., INC., petitioner,

vs.
COURT OF APPEALS and PRODUCERS BANK OF THE
PHILIPPINES, respondents.
G.R. No. 115278. May 23, 1995.
DAVIDE, JR., J.

Rule Synopsis

Manpower supplied by agencies may be considered employees or authorized

representatives of the employer for purposes of construing exceptions to a
robbery and theft policy exempting the insurer from liability for any loss caused
by any dishonest, fraudulent or criminal act of its employees or authorized
representatives, among others.

Case Summary

Producers Bank had a Money, Security, and Payroll Robbery policy with Fortune
Insurance and Surety Co., Inc. The policy states that the insurer shall not be
liable for: “any loss caused by any dishonest, fraudulent or criminal act of the
insured or any officer, employee, partner, director, trustee or authorized
representative of the Insured whether acting alone or in conjunction with
others.” Producers then allegedly lost a sum of P725k during a robbery of its
armored vehicle while it was in transit to transfer the money from Pasay to
Makati. The vehicle was driven by one Magalong (assigned by PRC Management
Systems). The security guard, Atiga, was assigned by Unicorn Security Services,
Inc. The driver and the security guard, along with others, were charged with
highway robbery. The criminal case was still pending as of writing of this
decision. Producers filed a claim Fortune. Fortune denied on the ground that the
robbery was due to the acts of Producers’ own employees, thus an excluded loss
under the general exceptions in the policy.

Producers filed a case against Fortune for the recovery of the insurance
proceeds.

The trial court ruled in favor of Producers Bank. The CA affirmed. The lower
courts found that both Magalong and Atiga were not employees of the Bank. The
SC reversed.

Issues resolved —

Was Fortune Insurance liable under the Money,

Security, and Payroll Robbery policy it issued to
Producers Bank or was the recovery thereunder is
precluded under the general exceptions clause thereof?

HELD – RECOVERY PRECLUDED. FORTUNE NOT LIABLE.

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On the applicable law. The Court said that theft or robbery insurance policy,
as with the case at bar, is a form of casualty insurance governed by Sec. 174 of
the Insurance Code. The Court also noted that the Code contains no provisions
specifically applicable to casualty insurance. Thus, this shall be governed by the
general provisions applicable to all types of insurance.

On the usual exceptions in robbery and theft policies. The numerous

restrictions in the robbery and theft policies were intended to reduce the moral
hazard. It was noted that in these types of insurance, the opportunity to defraud
the insurer is so great (e.g. through conspiracy, etc.). Usually, losses occasioned
on the acts of the persons under the insured’s service and employment, are
excepted risks. The purpose of the exception is to guard against liability should
the theft be committed by one having unrestricted access to the property.
“Service” and “employment” in this case are to be understood in their ordinary
sense.

On whether Magalong and Atiga were Producers’ employees, given that

they were merely supplied by agencies. The Court held that Magalong and
Atiga may be considered employees of Producers. This is under the assumption
that the contract of Producers with the providers of concerned manpower were
“labor-only.” And under the Labor Code, employees under labor-only contract are
considered employees of the party employing them and not of the party who
supplied them to the employer, the former merely acting as an agent for the
latter.

However, the Court noted that there was still lack of evidence as to the real
nature of the contract between producers and its suppliers of manpower, since
the parties merely entered into stipulation without submitting additional evidence
other than the insurance policy. Nevertheless, the Court held that even if
Magalong and Atiga were not to be considered employees of Producers, then
may still be deemed its authorized representatives for purposes of transferring
the money in question. For the said particular task, the subject employees acted
as agents of Producers.

[CASE DIGEST] WHITE GOLD MARINE SERVICES, INC. vs. PIONEER

INSURANCE AND SURETY CORPORATION AND THE STEAMSHIP
MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD. [G.R. No.
154514, July 28, 2005]

Facts:
            White Gold Marine Services, Inc. (White Gold) procured a protection and
indemnity coverage for its vessels from The Steamship Mutual Underwriting
Association (Bermuda) Limited (Steamship Mutual) through Pioneer Insurance
and Surety Corporation (Pioneer). Subsequently, White Gold was issued a
Certificate of Entry and Acceptance.  Pioneer also issued receipts evidencing
payments for the coverage. When White Gold failed to fully pay its accounts,
Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum
of money to recover the latter’s unpaid balance. White Gold on the other hand,
filed a complaint before the Insurance Commission claiming that Steamship
Mutual violated Sections 186  and 187  of the Insurance Code, while Pioneer
violated Sections 299,  300  and 301  in relation to Sections 302 and 303, thereof.
The Insurance Commission dismissed the complaint. It said that there was no
need for Steamship Mutual to secure a license because it was not engaged in the
insurance business.

Steamship Mutual contend that although Steamship Mutual is a P & I Club, it is

not engaged in the insurance business in the Philippines. It is merely an
association of vessel owners who have come together to provide mutual
protection against liabilities incidental to shipowning.
Issue:
            Whether or not Steamship Mutual, a P & I Club, engaged in the
insurance business in the Philippines

Ruling:
            Yes. A P & I Club is “a form of insurance against third party liability,
where the third party is anyone other than the P & I Club and the members.”   By
definition then, Steamship Mutual as a P & I Club is a mutual insurance
association engaged in the marine insurance business.
The test to determine if a contract is an insurance contract or not, depends on
the nature of the promise, the act required to be performed, and the exact
nature of the agreement in the light of the occurrence, contingency, or
circumstances under which the performance becomes requisite. It is not by what
it is called.

Basically, an insurance contract is a contract of indemnity. In it, one undertakes

for a consideration to indemnify another against loss, damage or liability arising
from an unknown or contingent event.
In particular, a marine insurance undertakes to indemnify the assured against
marine losses, such as the losses incident to a marine adventure.   Section 99  of
the Insurance Code enumerates the coverage of marine insurance.
Relatedly, a mutual insurance company is a cooperative enterprise where the
members are both the insurer and insured. In it, the members all contribute, by
a system of premiums or assessments, to the creation of a fund from which all
losses and liabilities are paid, and where the profits are divided among
themselves, in proportion to their interest.  Additionally, mutual insurance
associations, or clubs, provide three types of coverage, namely, protection and
indemnity, war risks, and defense costs.

G.R. No.
205206, March 16, 2016
BANK OF THE PHILIPPINE ISLANDS AND FGU INSURANCE
CORPORATION (PRESENTLY KNOWN AS BPI/MS INSURANCE
CORPORATION), Petitioners, v. YOLANDA LAINGO, Respondent.

This is a petition for review on certiorari assailing the Decision dated 29 June
2012 and Resolutiondated 11 December 2012 of the Court of Appeals in CA-G.R.
CV No. 01575.

FACTS:

On 20 July 1999, Rheozel, the son of respondent Laingo, opened a "Platinum 2-

in-1 Savings and Insurance" account with petitioner Bank of the Philippine
Islands (BPI) in its Claveria, DavaoCity branch. The Platinum 2-in-1 Savings and
Insurance account is a savings account wheredepositors are automatically
covered by an insurance policy against disability or death issued bypetitioner
FGU Insurance Corporation (FGU Insurance). Laingo was named as Beneficiary
On 25 September 2000, Rheozel died due to a vehicular accident. On 27
September 2000,Laingo instructed the family's personal secretary, Alice to
inquire about the savings account ofRheozel. Alice went to BPI and talked to
Jaime Ibe Rodriguez, BPI's Branch Manager regardingLaingo's request. Laingo
was allowed to withdraw P995,000 from the account of Rheozel. On 21 January
2003, Rheozel's sister, Rhealyn Laingo-Concepcion found the PersonalAccident
Insurance Coverage Certificate No. 043549 issued by FGU Insurance. Rhealyn
immediatelyconveyed the information to Laingo. Laingo sent two letters dated 11
September 2003 and 7 November 2003 to BPI and FGUInsurance requesting
them to process her claim as beneficiary of Rheozel's insurance policy. On
19February 2004, FGU Insurance sent a reply-letter to Laingo denying her claim.
FGU Insurancestated that Laingo should have filed the claim within three
calendar months from the death ofRheozel as required under Paragraph 15 of
the Personal Accident Certificate of Insurance which states:

15. Written notice of claim shall be given to and filed at FGU Insurance
Corporation within three calendar months of death or disability.

On 20 February 2004, Laingo filed a Complaint for Specific Performance with

Damages andAttorney's Fees with the Regional Trial Court of Davao City against
BPI and FGU Insurance.

On 21 April 2008, RTC decided the case in favor of respondents. The trial court
ruled that the prescriptive period of 90 days shall commence from the time of
death of the insured andnot from the knowledge of the beneficiary. The Court of
Appeals reversed the ruling of the trial court.

The Court of Appeals ruled thatLaingo could not be expected to do an obligation

which she did not know existed. The appellate court added that Laingo was not a
party to the insurance contract entered into between Rheozeland petitioners.
Thus, she could not be bound by the 90-day stipulation. Appellee Bank of the
Philippine Islands and FGU Insurance Corporation are DIRECTED to PAYjointly
and severally appellant Yolanda Laingo Actual Damages in the amount of
P44,438.75 andAttorney's Fees in the amount of P200,000.00. Appellee FGU
Insurance Corporation is also DIRECTED to PAY appellant the insurance proceeds
ofthe Personal Accident Insurance Coverage of Rheozel Laingo with legal interest
of six percent (6%) perannum reckoned from February 20, 2004 until this
Decision becomes final. Thereafter, an interest oftwelve percent (12%) per
annum shall be imposed until fully paid.

ISSUE:

Whether or not Laingo, as named beneficiary who had no knowledge of the

existence of theinsurance contract, is bound by the three calendar month
deadline for filing a written notice ofclaim upon the death of the insured?

HELD: NO
As the main proponent of the 2-in-1 deposit account, BPI tied up with its
affiliate, FGUInsurance, as its partner. Any customer interested to open a deposit
account under this 2-in-1product, after submitting all the required documents to
BPI and obtaining BPI's approval, willautomatically be given insurance coverage.
Thus, BPI acted as agent of FGU Insurance with respectto the insurance feature
of its own marketed product. BPI not only facilitated the processing of the
deposit account and the collection of necessarydocuments but also the necessary
endorsement for the prompt approval of the insurance coveragewithout any
other action on Rheozel's part. Rheozel did not interact with FGU Insurance
directly andevery transaction was coursed through BPI. BPI, as agent of FGU
Insurance, had the primary responsibility to ensure that the 2-in-1account be
reasonably carried out with full disclosure to the parties concerned, particularly
thebeneficiaries. Thus, it was incumbent upon BPI to give proper notice of the
existence of the insurance coverage and the stipulation in the insurance contract
for filing a claim to Laingo, asRheozel's beneficiary, upon the latter's death. Since
BPI, as agent of FGU Insurance, fell short in notifying Laingo of the existence of
theinsurance policy, Laingo had no means to ascertain that she was entitled to
the insurance claim. Itwould be unfair for Laingo to shoulder the burden of loss
when BPI was remiss in its duty toproperly notify her that she was a beneficiary.

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 29 June

2012 and Resolutiondated 11 December 2012 of the Court of Appeals in CA-G.R.
CV No. 01575.

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FILIPINAS COMPANIA DE SEGUROS vs. CHRISTERN HUENEFELD and

CO. DIGEST
DECEMBER 21, 2016  ~ VBDIAZ
FILIPINAS COMPANIA DE SEGUROS vs. CHRISTERN HUENEFELD and
CO., INC. 89 Phil 54

FACTS:

On October 1, 1941, the respondent corporation, Christern Huenefeld and Co.,

Inc., after payment of corresponding premium, obtained from the petitioner,
Filipinas Cia de Seguros fire policy covering merchandise contained in a building
located at Binondo, Manila. On February 27, 1942 or during the Japanese military
occupation, the building and insured merchandise were burned. In due time, the
respondent submitted to the petitioner its claim under the policy. The petitioner
refused to pay the claim on the ground that the policy in favor of the respondent
that ceased to be a force on the date the United States declared war against
Germany, the respondent corporation (through organized under and by virtue of
the laws of Philippines) being controlled by German subjects and the petitioner
being a company under American jurisdiction when said policy was issued on
October 1, 1941. The theory of the petitioner is that the insured merchandise
was burned after the policy issued in 1941 had ceased to be effective because
the outbreak of the war between United States and Germany on December 10,
1941, and that the payment made by the petitioner to the respondent
corporation during the Japanese military occupation was under pressure.
ISSUE:

Whether or not the respondent corporation is a corporation of public enemy.

RULING:

Since the majority of stockholders of the respondent corporation were German

subjects, the respondent became an enemy of the state upon the outbreak of
the war between US and Germany. The English and American cases relied upon
by the Court of Appeals lost in force upon the latest decision of the Supreme
Court of US in which the control test has adopted.
Since World War I, the determination of enemy nationality of corporations has
been discussed in many countries, belligerent and neutral. A corporation was
subject to enemy legislation when it was controlled by enemies, namely
managed under the influence of individuals or corporations themselves
considered as enemies…
The Philippine Insurance Law (Act No 2427, as amended), in Section 8, provides
that “anyone except a public enemy may be insured”. It stands to reason that an
insurance policy ceases to be allowable as soon as an insured becomes a public
enemy.
The respondent having an enemy corporation on December 10, 1941, the
insurance policy issued in its favor on October 1, 1941, by the petitioner had
ceased to be valid and enforceable, and since the insured good were burned
during the war, the respondent was not entitled to any indemnity under said
policy from the petitioner. However, elementary rule of justice (in the absence of
specific provisions in the Insurance Law) require that the premium paid by the
respondent for the period covered by its policy from December 11, 1941, should
be returned by the petitioner.

GREPALIFE vs. CA
OCTOBER 30, 2011  ~ VBDIAZ
GREAT PACIFIC LIFE vs. CA AND LEUTERIO
G.R. No. 113899
October 13, 1999
FACTS: A contract of group life insurance was executed between petitioner
Grepalife and DBP. Grepalife agreed to insure the lives of eligible housing loan
mortgagors of DBP.
Leuterio, a physician and a housing debtor of DBP applied for membership in the
group life insurance plan. In an application form,. Leuterio answered questions
concerning his health condition as follows:

7. Have you ever had, or consulted, a physician for a heart condition, high blood
pressure, cancer, diabetes, lung; kidney or stomach disorder or any other
physical impairment?

Answer: No. If so give details _____________.

8. Are you now, to the best of your knowledge, in good health?

Answer: [x] Yes [ ] NO.

Grepalife then issued a Certificate, as insurance coverage of  Leuterio, to the

extent of his DBP mortgage indebtedness amounting to P86,200.00

Later, Leuterio died due to “massive cerebral hemorrhage.” Consequently, DBP

submitted a death claim to Grepalife. Grepalife denied the claim alleging that.
Leuterio was not physically healthy when he applied for an insurance coverage.
Grepalife insisted that Leuterio did not disclose he had been suffering from
hypertension, which caused his death. Allegedly, such non-disclosure constituted
concealment that justified the denial of the claim.

Tthe widow of the. Leuterio, respondent Medarda, filed a complaint with the
RTC, against Grepalife for “Specific Performance with Damages.” During the trial,
Dr. Mejia, who issued the death certificate, was called to testify. Dr. Mejia’s
findings, based partly from the information given by the respondent widow,
stated that Leuterio complained of headaches presumably due to high blood
pressure. The inference was not conclusive because Leuterio was not autopsied,
hence, other causes were not ruled out.
The trial court rendered a decision in favor of respondent widow and against
Grepalife. The CA sustained the trial court’s decision. Hence, the present petition.

ISSUE:
 
1. who is the proper party to bring the suit, the widow or the mortgagee (DBP)?
 
2. WON there was concealment as to justify Grepalife’s non-payment of the
insurance proceeds
 
HELD: petition denied
 
1. 1.        WIDOW
 

To resolve the issue, we must consider the insurable interest in mortgaged

properties and the parties to this type of contract.

The rationale of a group insurance policy of mortgagors, otherwise known as the

“mortgage redemption insurance,” is a device for the protection of both the
mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into
such form of contract so that in the event of the unexpected demise of the
mortgagor during the subsistence of the mortgage contract, the proceeds from
such insurance will be applied to the payment of the mortgage debt, thereby
relieving the heirs of the mortgagor from paying the obligation.  In a similar vein,
ample protection is given to the mortgagor under such a concept so that in the
event of death; the mortgage obligation will be extinguished by the application of
the insurance proceeds to the mortgage indebtedness. Consequently, where the
mortgagor pays the insurance premium under the group insurance policy,
making the loss payable to the mortgagee, the insurance is on the mortgagor’s
interest, and the mortgagor continues to be a party to the contract. In this type
of policy insurance, the mortgagee is simply an appointee of the insurance fund,
such loss-payable clause does not make the mortgagee a party to the contract.

Sec. 8 of the Insurance Code provides:

Unless the policy provides, where a mortgagor of property effects insurance in

his own name providing that the loss shall be payable to the mortgagee, or
assigns a policy of insurance to a mortgagee, the insurance is deemed to be
upon the interest of the mortgagor, who does not cease to be a party to the
original contract, and any act of his, prior to the loss, which would otherwise
avoid the insurance, will have the same effect, although the property is in the
hands of the mortgagee, but any act which, under the contract of insurance, is
to be performed by the mortgagor, may be performed by the mortgagee therein
named, with the same effect as if it had been performed by the mortgagor.

the mortgagee is simply an appointee of the insurance fund, such loss-payable

clause does not make the mortgagee a party to the contract.

Sec. 8 of the Insurance Code provides:

Unless the policy provides, where a mortgagor of property effects insurance in

his own name providing that the loss shall be payable to the mortgagee, or
assigns a policy of insurance to a mortgagee, the insurance is deemed to be
upon the interest of the mortgagor, who does not cease to be a party to the
original contract, and any act of his, prior to the loss, which would otherwise
avoid the insurance, will have the same effect, although the property is in the
hands of the mortgagee, but any act which, under the contract of insurance, is
to be performed by the mortgagor, may be performed by the mortgagee therein
named, with the same effect as if it had been performed by the mortgagor.

The insured private respondent did not cede to the mortgagee all his rights or
interests in the insurance, the policy stating that: “In the event of the debtor’s
death before his indebtedness with the Creditor [DBP] shall have been fully paid,
an amount to pay the outstanding indebtedness shall first be paid to the creditor
and the balance of sum assured, if there is any, shall then be paid to the
beneficiary/ies designated by the debtor.” When DBP submitted the insurance
claim against petitioner, the latter denied payment thereof, interposing the
defense of concealment committed by the insured. Thereafter, DBP collected the
debt from the mortgagor and took the necessary action of foreclosure on the
residential lot of private respondent.

And since a policy of insurance upon life or health may pass by transfer, will or
succession to any person, whether he has an insurable interest or not, and such
person may recover it whatever the insured might have recovered, 14 the widow
of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife.
2. The second assigned error refers to an alleged concealment that the petitioner
interposed as its defense to annul the insurance contract. Petitioner contends
that Dr. Leuterio failed to disclose that he had hypertension, which might have
caused his death. Concealment exists where the assured had knowledge of a fact
material to the risk, and honesty, good faith, and fair dealing requires that he
should communicate it to the assured, but he designedly and intentionally
withholds the same.

Petitioner merely relied on the testimony of the attending physician, Dr.

Hernando Mejia, as supported by the information given by the widow of the
decedent

On the contrary the medical findings were not conclusive because Dr. Mejia did
not conduct an autopsy on the body of the decedent. Hence, the statement of
the physician was properly considered by the trial court as hearsay.

The CA’s stand is that contrary to appellant’s allegations, there was no sufficient
proof that the insured had suffered from hypertension.

Appellant insurance company had failed to establish that there was concealment
made by the insured, hence, it cannot refuse payment of the claim

The fraudulent intent on the part of the insured must be established to entitle
the insurer to rescind the contract. Misrepresentation as a defense of the insurer
to avoid liability is an affirmative defense and the duty to establish such defense
by satisfactory and convincing evidence rests upon the insurer. In the case at
bar, the petitioner failed to clearly and satisfactorily establish its defense, and is
therefore liable to pay the proceeds of the insurance.
 
And that brings us to the last point in the review of the case at bar. Petitioner
claims that there was no evidence as to the amount of Dr. Leuterio’s outstanding
indebtedness to DBP at the time of the mortgagor’s death. Hence, for private
respondent’s failure to establish the same, the action for specific performance
should be dismissed. Petitioner’s claim is without merit. A life insurance policy is
a valued policy.  Unless the interest of a person insured is susceptible of exact
pecuniary measurement, the measure of indemnity under a policy of insurance
upon life or health is the sum fixed in the policy.  The mortgagor paid the
premium according to the coverage of his insurance which states that:

The policy states that upon receipt of due proof of the Debtor’s death during the
terms of this insurance, a death benefit in the amount of P86,200.00 shall be
paid.

In the event of the debtor’s death before his indebtedness with the creditor shall
have been fully paid, an amount to pay the outstanding indebtedness shall first
be paid to the Creditor and the balance of the Sum Assured, if there is any shall
then be paid to the beneficiary/ies designated by the debtor.”

However, we noted that the CA  decision was promulgated in 1993. In private

respondent’s memorandum, she states that DBP foreclosed in 1995 their
residential lot, in satisfaction of mortgagor’s outstanding loan. Considering this
supervening event, the insurance proceeds shall inure to the benefit of the heirs
of the deceased person or his beneficiaries. Equity dictates that DBP should not
unjustly enrich itself at the expense of another (Nemo cum alterius detrimenio
protest). Hence, it cannot collect the insurance proceeds, after it already
foreclosed on the mortgage. The proceeds now rightly belong to Leuterio’s heirs
represented by his widow.

THE PHILIPPINE AMERICAN INSURANCE COMPANY vs.

HONORABLEGREGORIO G. PINEDA in his capacity as Judge of the Court
of First Instance ofRizal, and RODOLFO C. DIMAYUGAG.R. No. L-
54216July 19, 1989

FACTS:

On January 15, 1968, Rodolfo Dimayuga, procured a life insurance policy

fromthe petitioner insurance company and designated his wife and children as
irrevocablebeneficiaries of said policy. In 1980 Dimayuga filed a petition to
amend the designationof the beneficiaries in his life policy from irrevocable to
revocable. Respondent judgeissued an order allowing the amendments.

Issues:
1. WON the designation of the irrevocable beneficiaries could be changed or
amended without the consent of all the irrevocable beneficiaries.
2. WON the irrevocable minor beneficiaries could give consent to the change in
designation

Held: No to both. Petition dismissed.

Ratio:
Under the Insurance Act, the beneficiary designated in a life insurance contract
cannot be changed without the consent of the beneficiary because he has a
vested interest in the policy.
There was an express stipulation to this effect: “It is hereby understood and
agreed that, notwithstanding the provisions of this policy to the contrary,
inasmuch as the designation of the
primary/contingent beneficiary/beneficiaries in this Policy has been made without
reserving the right to change said beneficiary/ beneficiaries, such designation
may not be surrendered to the Company, released or assigned; and no right or
privilege under the Policy may be exercised, or agreement made with the
Company to any change in or amendment to the Policy, without the consent of
the said beneficiary/beneficiaries.”
The alleged acquiescence of the six (6) children beneficiaries of the policy cannot
be considered an effective ratification due to the fact that they were minors.
Neither could they act through their father insured since their interests are
quite divergent from one another.
Therefore, the parent-insured cannot exercise rights and/or privileges pertaining
to the insurance contract, for otherwise, the vested rights of the
irrevocable beneficiaries would be rendered inconsequential.  
Of equal importance is the well-settled rule that the contract between the parties
is the law binding on both of them and for so many times, this court has
consistently issued pronouncements upholding the validity and effectivity of
contracts. Likewise, contracts which are the private laws of the contracting
parties should be fulfilled according to the literal sense of their stipulations, for
contracts are obligatory, no matter in what form they may be, whenever the
essential requisites for their validity are present
The change in the designation of was not within the contemplation of the
parties. The lower court instead made a new contract for them. It acted
in excess of its authority when it did so.