Tan Chav vs.

West Coast

Facts:

Tan Chay applied for a life insurance policy of for the sum of P10,000 where he was the
sole beneficiary. The company approved. The policy was issued upon the payment by
Tan Ceang of the first year's premium worth P936. The company agreed to pay the
beneficiay the amount of the policy upon the receipt of the proofs of the death of the
insured while the policy was in force. Without any premium due or unpaid, Ceang died.
Tan Chay plaintiff submitted the proofs of the death of Tan Ceang with a claim for the
payment. The company refused to pay. The company alleged that Tan Ceang obtained
the policy by means of deceit to the effect that the medical certificate had false
statements about his health. They also claimed that he didn’t pay the premium. The
court ruled for Tan Chay and commanded the company to pay 10,000 pesos.

Issue:

Whether West Coast’s action for rescission is therefore barred by the collection suit filed
by Tan Chay.

HELD:

NO. West Coast’s defense was general and specific denial. it specifically denied that it
ever issued the policy in question, or that it ever agreed with Tan Caeng in the event of
his death. It made factual allegations as to why it never entered into the contract
alleged.

In the instant case, West Coast did not seek to have the alleged insurance contract
rescinded. It denies that it ever made any contract of insurance on the life of Tan
Caeng, or that any such a contract ever existed. As there was no valid contract entered
into, there was nothing to rescind.

An action for rescission presupposes the existence of a valid contract. If the facts
alleged by West Coast were true, there was no valid contract of insurance, for the
simple reason that the minds of the parties never met and never agreed upon the terms
and conditions of the contract. Should the same be found true, the Court is of the
opinion that they would constitute a valid defense to Tan Chay Heng’s cause of action.
Thus, case remanded.