G.R. No.

166245

April 9, 2008

ETERNAL GARDENS MEMORIAL PARK CORPORATION, petitioner, vs. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondent. DECISION VELASCO, JR., J.: The Case Central to this Petition for Review on Certiorari under Rule 45 which seeks to reverse and set aside the November 26, 2004 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 57810 is the query: May the inaction of the insurer on the insurance application be considered as approval of the application? The Facts On December 10, 1980, respondent Philippine American Life Insurance Company (Philamlife) entered into an agreement denominated as Creditor Group Life Policy No. P-19202 with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. The amount of insurance coverage depended upon the existing balance of the purchased burial lots. The policy was to be effective for a period of one year, renewable on a yearly basis. The relevant provisions of the policy are: ELIGIBILITY. Any Lot Purchaser of the Assured who is at least 18 but not more than 65 years of age, is indebted to the Assured for the unpaid balance of his loan with the Assured, and is accepted for Life Insurance coverage by the Company on its effective date is eligible for insurance under the Policy. EVIDENCE OF INSURABILITY. No medical examination shall be required for amounts of insurance up to P50,000.00. However, a declaration of good health shall be required for all Lot Purchasers as part of the application. The Company reserves the right to require further evidence of insurability satisfactory to the Company in respect of the following: 1. Any amount of insurance in excess of P50,000.00. 2. Any lot purchaser who is more than 55 years of age. LIFE INSURANCE BENEFIT. The Life Insurance coverage of any Lot Purchaser at any time shall be the amount of the unpaid balance of his loan (including arrears up to but not exceeding 2 months) as reported by the Assured to the Company or the sum of P100,000.00, whichever is smaller. Such benefit shall be paid to the Assured if the Lot Purchaser dies while insured under the Policy. 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.3 Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers, together with a copy of the application of each purchaser, and the amounts of the respective unpaid balances of all insured lot purchasers. In relation to the instant petition, Eternal complied by submitting a letter dated December 29, 1982,4containing a list of insurable balances of its lot buyers for October 1982. One of those included in the list as "new business" was a certain John Chuang. His balance of payments was PhP 100,000. On August 2, 1984, Chuang died. Eternal sent a letter dated August 20, 19845 to Philamlife, which served as an insurance claim for Chuang’s death. Attached to the claim were the following documents: (1) Chuang’s Certificate of Death; (2) Identification Certificate stating that Chuang is a naturalized Filipino Citizen; (3) Certificate of Claimant; (4) Certificate of Attending Physician; and (5) Assured’s Certificate. In reply, Philamlife wrote Eternal a letter on November 12, 1984,6 requiring Eternal to submit the following documents relative to its insurance claim for Chuang’s death: (1) Certificate of Claimant (with form attached); (2) Assured’s Certificate (with form attached); (3) Application for Insurance accomplished and signed by the insured, Chuang, while still living; and (4) Statement of Account showing the unpaid balance of Chuang before his death.

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Eternal transmitted the required documents through a letter dated November 14, 1984,7 which was received by Philamlife on November 15, 1984. After more than a year, 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, 1986.8 In response to Eternal’s demand, Philamlife denied Eternal’s insurance claim in a letter dated May 20, 1986,9 a portion of which reads: The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal Gardens Memorial Park in October 1982 for the total maximum insurable amount of P100,000.00 each. No application for Group Insurance was submitted in our office prior to his death on August 2, 1984. In accordance with our Creditor’s Group Life Policy No. P-1920, under Evidence of Insurability provision, "a declaration of good health shall be required for all Lot Purchasers as party of the application." We cite further the provision on Effective Date of Coverage under the policy which states that "there shall be no insurance if the application is not approved by the Company." Since no application had been submitted by the Insured/Assured, prior to his death, for our approval but was submitted instead on November 15, 1984, after his death, Mr. John Uy Chuang was not covered under the Policy. We wish to point out that Eternal Gardens being the Assured was a party to the Contract and was therefore aware of these pertinent provisions. With regard to our acceptance of premiums, these do not connote our approval per se of the insurance coverage but are held by us in trust for the payor until the prerequisites for insurance coverage shall have been met. We will however, return all the premiums which have been paid in behalf of John Uy Chuang. Consequently, Eternal filed a case before the Makati City Regional Trial Court (RTC) for a sum of money against Philamlife, docketed as Civil Case No. 14736. The trial court decided in favor of Eternal, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered in favor of Plaintiff ETERNAL, against Defendant PHILAMLIFE, ordering the Defendant PHILAMLIFE, to pay the sum of P100,000.00, representing the proceeds of the Policy of John Uy Chuang, plus legal rate of interest, until fully paid; and, to pay the sum of P10,000.00 as attorney’s fees. SO ORDERED. The RTC found that Eternal submitted Chuang’s application for insurance which he accomplished before his death, as testified to by Eternal’s witness and evidenced by the letter dated December 29, 1982, stating, among others: "Encl: Phil-Am Life Insurance Application Forms & Cert."10 It further ruled that due to Philamlife’s inaction from the submission of the requirements of the group insurance on December 29, 1982 to Chuang’s death on August 2, 1984, as well as Philamlife’s acceptance of the premiums during the same period, Philamlife was deemed to have approved Chuang’s application. The RTC said that since the contract is a group life insurance, once proof of death is submitted, payment must follow. Philamlife appealed to the CA, which ruled, thus: WHEREFORE, the decision of the Regional Trial Court of Makati in Civil Case No. 57810 is REVERSED and SET ASIDE, and the complaint is DISMISSED. No costs. SO ORDERED.11 The CA based its Decision on the factual finding that Chuang’s application was not enclosed in Eternal’s letter dated December 29, 1982. It further 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 Philamlife’s insurance. Hence, we have this petition with the following grounds: The Honorable Court of Appeals has decided a question of substance, not therefore determined by this Honorable Court, or has decided it in a way not in accord with law or with the applicable jurisprudence, in holding that: I. The application for insurance was not duly submitted to respondent PhilamLife before the death of John Chuang; II. There was no valid insurance coverage; and III. Reversing and setting aside the Decision of the Regional Trial Court dated May 29, 1996. The Court’s Ruling

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As a general rule, this Court is not a trier of facts and will not re-examine factual issues raised before the CA and first level courts, considering their findings of facts are conclusive and binding on this Court. However, such rule is subject to exceptions, as enunciated in Sampayan v. Court of Appeals: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the [CA] went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings [of the CA] are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.12 (Emphasis supplied.) In the instant case, the factual findings of the RTC were reversed by the CA; thus, this Court may review them. Eternal claims that the evidence that it presented before the trial court supports its contention that it submitted a copy of the insurance application of Chuang before his death. In Eternal’s letter dated December 29, 1982, a list of insurable interests of buyers for October 1982 was attached, including Chuang in the list of new businesses. Eternal added it was noted at the bottom of said letter that the corresponding "Phil-Am Life Insurance Application Forms & Cert." were enclosed in the letter that was apparently received by Philamlife on January 15, 1983. Finally, Eternal alleged that it provided a copy of the insurance application which was signed by Chuang himself and executed before his death. On the other hand, Philamlife claims that the evidence presented by Eternal is insufficient, arguing that Eternal must present evidence showing that Philamlife received a copy of Chuang’s insurance application. The evidence on record supports Eternal’s position. The fact of the matter is, the letter dated December 29, 1982, which Philamlife stamped as received, states that the insurance forms for the attached list of burial lot buyers were attached to the letter. Such stamp of receipt has the effect of acknowledging receipt of the letter together with the attachments. Such receipt is an admission by Philamlife against its own interest.13 The burden of evidence has shifted to Philamlife, which must prove that the letter did not contain Chuang’s insurance application. However, Philamlife failed to do so; thus, Philamlife is deemed to have received Chuang’s insurance application. To reiterate, it was Philamlife’s bounden duty to make sure that before a transmittal letter is stamped as received, the contents of the letter are correct and accounted for. Philamlife’s allegation that Eternal’s witnesses ran out of credibility and reliability due to inconsistencies is groundless. The trial court is in the best position to determine the reliability and credibility of the witnesses, because it has the opportunity to observe firsthand the witnesses’ demeanor, conduct, and attitude. Findings of the trial court on such matters are binding and conclusive on the appellate court, unless some facts or circumstances of weight and substance have been overlooked, misapprehended, or misinterpreted,14 that, if considered, might affect the result of the case.15 An examination of the testimonies of the witnesses mentioned by Philamlife, however, reveals no overlooked facts of substance and value. Philamlife primarily claims that Eternal did not even know where the original insurance application of Chuang was, as shown by the testimony of Edilberto Mendoza: Atty. Arevalo: Q Where is the original of the application form which is required in case of new coverage? [Mendoza:] A It is [a] standard operating procedure for the new client to fill up two copies of this form and the original of this is submitted to Philamlife together with the monthly remittances and the second copy is remained or retained with the marketing department of Eternal Gardens. Atty. Miranda: We move to strike out the answer as it is not responsive as counsel is merely asking for the location and does not [ask] for the number of copy. Atty. Arevalo:

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Q Where is the original? [Mendoza:] A As far as I remember I do not know where the original but when I submitted with that payment together with the new clients all the originals I see to it before I sign the transmittal letter the originals are attached therein.16 In other words, the witness admitted not knowing where the original insurance application was, but believed that the application was transmitted to Philamlife as an attachment to a transmittal letter. As to the seeming inconsistencies between the testimony of Manuel Cortez on whether one or two insurance application forms were accomplished and the testimony of Mendoza on who actually filled out the application form, these are minor inconsistencies that do not affect the credibility of the witnesses. Thus, we ruled in People v. Paredes that minor inconsistencies are too trivial to affect the credibility of witnesses, and these may even serve to strengthen their credibility as these negate any suspicion that the testimonies have been rehearsed.17 We reiterated the above ruling in Merencillo v. People: Minor discrepancies or inconsistencies do not impair the essential integrity of the prosecution’s evidence as a whole or reflect on the witnesses’ honesty. The test is whether the testimonies agree on essential facts and whether the respective versions corroborate and substantially coincide with each other so as to make a consistent and coherent whole.18 In the present case, the number of copies of the insurance application that Chuang executed is not at issue, neither is whether the insurance application presented by Eternal has been falsified. Thus, the inconsistencies pointed out by Philamlife are minor and do not affect the credibility of Eternal’s witnesses. However, the question arises as to whether Philamlife assumed the risk of loss without approving the application. This question must be answered in the affirmative. 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. The first sentence appears to state that the insurance coverage of the clients of Eternal already became effective upon contracting a loan with Eternal while the second sentence appears to require Philamlife to approve the insurance contract before the same can become effective. It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latter’s interest. Thus, in Malayan Insurance Corporation v. Court of Appeals, this Court held that: Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared by the insurer. A contract of insurance, being a contract of adhesion, par excellence, any ambiguity therein should be resolved against the insurer; in other words, it should be construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations.19 (Emphasis supplied.) In the more recent case of Philamcare Health Systems, Inc. v. Court of Appeals, we reiterated the above ruling, stating that: When the terms of 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. Being a contract of adhesion, the terms of an insurance contract are to be construed strictly against the party which prepared the contract, the insurer. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract, ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured, especially to avoid forfeiture.20 Clearly, the vague contractual provision, in Creditor Group Life Policy No. P-1920 dated December 10, 1980, must be construed in favor of the insured and in favor of the effectivity of the insurance contract. On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon a party’s purchase of a memorial lot on installment from Eternal, an insurance contract covering the lot purchaser is created and the same is effective, valid, and binding until terminated by Philamlife by disapproving the insurance application. The second sentence of

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1 The application was approved for a period of one year from March 1. petitioner. respondent brought her husband home again.00 per disability. he answered no to the following question: Have you or any of your family members ever consulted or been treated for high blood pressure. to either deny or approve the same. He was also entitled to avail of "out-patient benefits" such as annual physical examinations. According to petitioner. 1996 until full payment of this award. The November 26. or otherwise be bound to honor the application as a valid.: Ernani Trinos. to characterize the insurer and the insured as contracting parties on equal footing is inaccurate at best. 57810 isREVERSED and SET ASIDE. respondent paid the hospitalization expenses herself. diabetic and asthmatic. Moreover. 1990. in order to protect the interest of insurance applicants. The amount of coverage was increased to a maximum sum of P75. 1989 to March 1. Later. cancer. 2002 PHILAMCARE HEALTH SYSTEMS. The May 29.00. In the 5 . 2 During the period of his coverage. P-1920 on the Effective Date of Benefit is in the nature of a resolutory condition which would lead to the cessation of the insurance contract. Upon the termination of the agreement. and effective insurance contract. 1988 to March 1. Hence. he was issued Health Care Agreement No. amounting to about P76. Insurance contracts are wholly prepared by the insurer with vast amounts of experience in the industry purposefully used to its advantage. As such. and (4) To pay Eternal attorney’s fees in the amount of PhP 10. 1996 RTC Decision on June 17.R. whether ordinary or emergency.Creditor Group Life Policy No. the mere inaction of the insurer on the insurance application must not work to prejudice the insured. applied for a health care coverage with petitioner Philamcare Health Systems. contrary to his answer in the application form. that are imposed on those who wish to avail of insurance. insurance contracts are imbued with public interest that must be considered whenever the rights and obligations of the insurer and the insured are to be delineated. vs. there was a concealment regarding Ernani’s medical history.000 from June 17. No. respondents. respondent tried to claim the benefits under the health care agreement. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. (3) To pay Eternal legal interest at the rate of twelve percent (12%) per annum of PhP 100. Due to financial difficulties. he was admitted at the Chinese General Hospital. Under the agreement.000. COURT OF APPEALS and JULITA TRINOS. then from March 1. While her husband was in the hospital. 125678 March 18. The termination of the insurance contract by the insurer must be explicit and unambiguous. G.000. petitioner denied her claim saying that the Health Care Agreement was void. 1990. YNARES-SANTIAGO.000 representing the proceeds of the Life Insurance Policy of Chuang. binding. INC.. deceased husband of respondent Julita Trinos. we GRANT the petition. diabetes.000. heart trouble. Accordingly. Inc. SO ORDERED. however.000 from the time of extrajudicial demand by Eternal until Philamlife’s receipt of the May 29. 1989.R. it cannot be interpreted as a termination of the insurance contract. insurance companies must be obligated to act with haste upon insurance applications. preventive health care and other out-patient services. CV No. 1996 Decision of the Makati City RTC. J. Branch 138 is MODIFIED. In the standard application form. insurance contracts are contracts of adhesion containing technical terms and conditions of the industry. respondent’s husband was entitled to avail of hospitalization benefits. More often than not. confusing if at all understandable to laypersons. he was attended by a physical therapist at home. the same was extended for another year from March 1. 1996. P010194. 1990. liver disease. As a final note. listed therein. Doctors at the MMC allegedly discovered at the time of Ernani’s confinement that he was hypertensive. No costs. However. (2) To pay Eternal legal interest at the rate of six percent (6%) per annum of PhP 100. Philamlife is hereby ORDERED: (1) To pay Eternal the amount of PhP 100. asthma or peptic ulcer? (If Yes. Thus. 2004 CA Decision in CA-G. give details).21 WHEREFORE. After her husband was discharged from the MMC. 1990 to June 1.

5 Hence. (2) of any person on whom he depends wholly or in part for education or support. petitioner brought the instant petition for review.morning of April 13. the insured pays a premium.00 as exemplary damages to plaintiff.000. which is governed by the Insurance Commission. the Court of Appeals affirmed the decision of the trial court but deleted all awards for damages and absolved petitioner Reverente. An insurance contract exists where the following elements concur: 1. of which death or illness might delay or prevent the performance. Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss. damage or liability arising from an unknown or contingent event.3 On appeal. 7 petitioner argues that the incontestability clause does not apply. Petitioner further argues that it is not an insurance company. medical or any other expense arising from sickness. since Health Care Agreements are only for a period of one year. unlike in an insurance contract where the insured is indemnified for his loss.00.4 Petitioner’s motion for reconsideration was denied. After trial.9 Once the member incurs hospital. and (4) of any person upon whose life any estate or interest vested in him depends.000. 1990. which is primarily a contract of indemnity. In the case at bar. ordering: 1. viz: WHEREFORE." such as medical check-ups and hospitalization which a member may immediately enjoy so long as he is alive upon effectivity of the agreement until its expiration one-year thereafter. as compared to insurance contracts which last longer. injury or other stipulated contingent. Section 10 provides: Every person has an insurable interest in the life and health: (1) of himself. raising the primary argument that a health care agreement is not an insurance contract. The health care agreement was in the nature of non-life insurance. 4. The insurer assumes the risk. 4. Branch 44. in view of the forgoing. hence the "incontestability clause" under the Insurance Code6 does not apply. the Court renders judgment in favor of the plaintiff Julita Trinos.1âwphi1. the health care provider must pay for the same to the extent agreed upon under the contract.000. or in whom he has a pecuniary interest. Defendants to pay and reimburse the medical and hospital coverage of the late Ernani Trinos in the amount of P76. as the same requires an effectivity period of at least two years. Ernani had fever and was feeling very weak. 2. Defendants to pay the reduced amount of P10.8 Section 3 of the Insurance Code states that any contingent or unknown event. The insured has an insurable interest. plus costs of suit. respecting property or service. which was docketed as Civil Case No. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk. Respondent was constrained to bring him back to the Chinese General Hospital where he died on the same day.00 plus interest. Dr. whether past or future. She asked for reimbursement of her expenses plus moral damages and attorney’s fees.00 to plaintiff. 6 . the lower court ruled against petitioners. 1990. Petitioner also points out that only medical and hospitalization benefits are given under the agreement without any indemnification. Every person has an insurable interest in the life and health of himself. 2.nêt Petitioner argues that the agreement grants "living benefits. which may damnify a person having an insurable interest against him. Defendants to pay attorney’s fees of P20. an action for damages against petitioner and its president. may be insured against. of his spouse and of his children. Defendants to pay the reduced amount of moral damages of P10. 90-53795. (3) of any person under a legal obligation to him for the payment of money. but a Health Maintenance Organization under the authority of the Department of Health. The insured is subject to a risk of loss by the happening of the designated peril. 3. until the amount is fully paid to plaintiff who paid the same. 3. In consideration of the insurer’s promise. and 5. SO ORDERED.000. the insurable interest of respondent’s husband in obtaining the health care agreement was his own health. respondent instituted with the Regional Trial Court of Manila. Benito Reverente. On July 24. Moreover.

20 By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. a representation of the expectation. if the statement is obviously of the foregoing character. Having assumed a responsibility under the agreement. (A)lthough false. organization. whether intentional or unintentional. that which he then knows. since in such case the insurer is not justified in relying upon such statement. Must be in writing. any and all information relative to any hospitalization. consultation. In any case. opinion. Under Section 27 of the Insurance Code.that any physician is. An undisclosed or misrepresented information is deemed material if its revelation would have resulted in the declination of the applicant by Philamcare or the assessment of a higher Membership Fee for the benefit or benefits applied for. petitioners required respondent’s husband to sign an express authorization for any person. In the end. with or without the authority to investigate. This largely depends on opinion rather than fact. especially to 7 .11 (Underscoring ours) In addition to the above condition. 17 In this case. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. Besides. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured. ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. belief.18 None of the above pre-conditions was fulfilled in this case. or its acceptance at a lower rate of premium. intention. 3. consultation. to be actually untrue. or the impossibility of which is shown by the facts within his knowledge." The right to rescind should be exercised previous to the commencement of an action on the contract. especially coming from respondent’s husband who was not a medical doctor.16 Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer.12 (Underscoring ours) Petitioner cannot rely on the stipulation regarding "Invalidation of agreement" which reads: Failure to disclose or misrepresentation of any material information by the member in the application or medical examination.14 Thus. answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid.19 Being a contract of adhesion. It appears that in the application for health coverage. the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: 1. 2.Petitioner argues that respondent’s husband concealed a material fact in his application. and this is likewise the rule although the statement is material to the risk. petitioner additionally required the applicant for authorization to inquire about the applicant’s medical history. petitioner is liable for claims made under the contract.15 (Underscoring ours) The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. complete and true and bind all parties in interest under the Agreement herein applied for. but is obligated to make further inquiry. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true. since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. that there shall be no contract of health care coverage unless and until an Agreement is issued on this application and the full Membership Fee according to the mode of payment applied for is actually paid during the lifetime and good health of proposed Members. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. 4. Inc. A photographic copy of this authorization shall be as valid as the original. the Health Care Agreement signed by respondent’s husband states: We hereby declare and agree that all statement and answers contained herein and in any addendum annexed to this application are full. that no information acquired by any Representative of PhilamCare shall be binding upon PhilamCare unless set out in writing in the application. to furnish facts on which cancellation is based. 10 Specifically. This authorization is in connection with the application for health care coverage only. courts should construe them in such a way as to preclude the insurer from non-compliance with his obligation. Prior notice of cancellation to insured. treatment or any other medical advice or examination. Where matters of opinion or judgment are called for. the terms of an insurance contract are to be construed strictly against the party which prepared the contract – the insurer. by these presents. as a matter of expectation or belief. treatment or any other medical advice or examination. no rescission was made. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned. expressly authorized to disclose or give testimony at anytime relative to any information acquired by him in his professional capacity upon any question affecting the eligibility for health care coverage of the Proposed Members and that the acceptance of any Agreement issued on this application shall be a ratification of any correction in or addition to this application as stated in the space for Home Office Endorsement. petitioner is bound to answer the same to the extent agreed upon. thus: I hereby authorize any person. or entity that has any record or knowledge of my health and/or that of __________ to give to the PhilamCare Health Systems. When the terms of insurance contract contain limitations on liability. "a concealment entitles the injured party to rescind a contract of insurance. 13 The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. mailed or delivered to the insured at the address shown in the policy.

we quote with approval the following findings of the trial court: (U)nder the title Claim procedures of expenses.940 metric tons not 600 tons at $395. seeking judgment against the third (sic) defendants in case Judgment is rendered against the third party plaintiff.24 WHEREFORE. Exhibit B. Razon's Bad Order Certificate No. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension.653. The periods having expired. payment should be made to the party who incurred the expenses. 1 The facts as found by the trial court and adopted by the Court of Appeals are as follows: This is an action brought by the consignee of the shipment of fishmeal loaded on board the vessel SS Bougainville and unloaded at the Port of Manila on or about December 11. The condition of the bad order was reflected in the turn over survey report of Bad Order cargoes Nos. but the defendant Filipino Merchants Insurance Company refused to pay the claim. 1976 at Manila unto the arrastre contractor E. 5 and 6. 1989 FILIPINO MERCHANTS INSURANCE CO. Based on said computation the plaintiff made a formal claim against the defendant Filipino Merchants Insurance Company for P51. petitioner. The health care agreement is in the nature of a contract of indemnity. and exclusionary clauses of doubtful import should be strictly construed against the provider. 2 8 .568. the plaintiff brought an action against said defendant as adverted to above and defendant presented a third party complaint against the vessel and the arrastre contractor. The records adequately prove the expenses incurred by respondent for the deceased’s hospitalization. and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted.avoid forfeiture. Inc. 23 Finally.80 with legal interest from the date of payment until the date of reimbursement. 85141 November 28. in view of the foregoing. must be liberally construed in favor of the subscriber. REGALADO. SO ORDERED. medication and the professional fees of the attending physicians. promulgated on July 19. Razon. Exhibit F-1.62 (Exhibit C) the computation of which claim is contained therein. and (2) the third-party complaint against third party defendant Compagnie Maritime Des Chargeurs Reunis is dismissed. Inc. The fishmeal in 666 new gunny bags were unloaded from the ship on December 11. A formal claim statement was also presented by the plaintiff against the vessel dated December 21. Inc.568. Razon.Razon. 14863 and 14869 covering a total of 227 bags in bad order condition. and is modified with respect to the third party complaint in that (1) third party defendant E. It is not controverted that respondent paid all the hospital and medical expenses. COURT OF APPEALS and CHOA TIEK SENG.148 kilos.471..62 representing damages to said shipment which has been insured by the defendant insurance company under Policy No. She is therefore entitled to reimbursement. Defendant's surveyor has conducted a final and detailed survey of the cargo in the warehouse for which he prepared a survey report Exhibit F with the findings on the extent of shortage or loss on the bad order bags totalling 227 bags amounting to 12. plaintiff insured said shipment with defendant insurance company under said cargo Policy No. petitioner alleges that respondent was not the legal wife of the deceased member considering that at the time of their marriage. such as the one at bar. Consequently.: This is a review of the decision of the Court of Appeals. the defense of concealment or misrepresentation no longer lie. the dispositive part of which reads: WHEREFORE. The phraseology used in medical or hospital service contracts. the deceased was previously married to another woman who was still alive.568. The defendant brought a third party complaint against third party defendants Compagnie Maritime Des Chargeurs Reunis and/or E. the petition is DENIED. No. is ordered to reimburse third party plaintiff the sum of P25. J. as Exhibit C-4 consisting of three (3) pages which are also Exhibits 4. the judgment appealed from is affirmed insofar as it orders defendant Filipino Merchants Insurance Company to pay the plaintiff the sum of P51. had twelve months from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma. 1976. 120320 to 120322. Hence. The cargo was also surveyed by the arrastre contractor before delivery of the cargo to the consignee and the condition of the cargo on such delivery was reflected in E.22 Anent the incontestability of the membership of respondent’s husband. Actually. M-2678. It appears from the evidence presented that in December 1976. the defendant Philamcare Health Systems Inc. respondents. G. what was imported was 59.. M-2678 for the sum of P267. and defendant's surveyor ascertained and certified that in such discharge 105 bags were in bad order condition as jointly surveyed by the ship's agent and the arrastre contractor. Razon. 1976 and seeks to recover from the defendant insurance company the amount of P51.21 This is equally applicable to Health Care Agreements. INC.42 a ton CNF Manila. The assailed decision of the Court of Appeals dated December 14.1988. 1995 is AFFIRMED. Thailand to Manila against all risks under warehouse to warehouse terms.62 with interest at legal rate from the date of filing of the complaint.59 for the goods described as 600 metric tons of fishmeal in new gunny bags of 90 kilos each from Bangkok. vs. 14859.R.

They are construed by the courts in their ordinary and common acceptance. the burden of proof is upon the insured to show that a loss arose from a covered peril. and (b) loss or damage or expense proximately caused by the inherent vice or nature of the subject matter insured. damage. " "casualty" or "accidental cause" to which the alleged loss is attributable and the failure of herein private respondent. Inc. to adduce evidence showing that the alleged loss to the cargo in question was due to a fortuitous event precludes his right to recover from the insurance policy. Claims recoverable hereunder shall be payable irrespective of percentage. to the effect that it extends to all damages/losses suffered by the insured cargo except (a) loss or damage or expense proximately caused by delay. have not acquired any technical meaning. but under an "all risks" policy the burden is not on the insured to prove the precise cause of loss or damage for which it seeks compensation. The Court of Appeals erred in not holding that the private respondent had no insurable interest in the subject cargo. Without pronouncement as to costs.The court below. upon whom lay the burden. on the main complaint. The insured under an "all risks insurance policy" has the initial burden of proving that the cargo was in good condition when the policy attached and that the cargo was damaged when unloaded from the vessel. and Pronove). Thus. which bars its recovery on the policy. The Court of Appeals erred in its interpretation and application of the "all risks" clause of the marine insurance policy when it held the petitioner liable to the private respondent for the partial loss of the cargo. unusual and unforeseen. ordering the defendants to pay the plaintiff the following amount: The sum of P51. attributable to external causes. A motion for reconsideration of the aforesaid decision was denied. 10 As we held in Paris-Manila Perfumery Co. Coverage under an "all risks" provision of a marine insurance policy creates a special type of insurance which extends coverage to risks not usually contemplated and avoids putting upon the insured the burden of establishing that the loss was due to the peril falling within the policy's coverage. 2. Ltd.62 with interest at legal rate from the date of the filing of the complaint. rendered judgment in favor of private respondent. The Court of Appeals erred in not holding that the private respondent was guilty of fraud in not disclosing the fact." in order to assure that no loss can happen through the incidence of a cause neither insured against nor creating liability in the ship. judgment is hereby rendered in favor of the plaintiff and against the defendant Filipino Merchant's (sic) Insurance Co. the respondent court affirmed the decision of the lower court insofar as the award on the complaint is concerned and modified the same with regard to the adjudication of the third-party complaint. We find said contention untenable. 6 The very nature of the term "all risks" must be given a broad and comprehensive meaning as covering any loss other than a willful and fraudulent act of the insured. the insurer can avoid coverage upon demonstrating that a specific provision expressly 9 . Razon. the language of the clause under the Institute Cargo Clauses being unequivocal and clear. that is.568.. the company is liable. not expected. or is an unusual effect of a known cause and. 3 On appeal. hence this petition with the following assignment of errors: 1. This insurance is against all risks of loss or damage to the subject-matter insured but shall in no case be deemed to extend to cover loss. therefore. An accident is an event that takes place without one's foresight or expectation. 8 An "all asks" policy has been evolved to grant greater protection than that afforded by the "perils clause. thereby contradicting the very precedents cited by it in its decision as well as a prior decision of the same Division of the said court (then composed of Justices Cacdac. 7 This is pursuant to the very purpose of an "all risks" insurance to give protection to the insured in those cases where difficulties of logical explanation or some mystery surround the loss or damage to property. hence. the terms have been taken to mean that which happens by chance or fortuitously. Castro-Bartolome. or expense proximately caused by delay or inherent vice or nature of the subject-matter insured. without intention and design.. that it had no insurable interest in the subject cargo. it being bound out of utmost good faith to do so. are ordered to pay to the third party plaintiff jointly and severally reimbursement of the amounts paid by the third party plaintiff with legal interest from the date of such payment until the date of such reimbursement. The terms "accident" and "accidental". and which is unexpected. the marine insurance policy taken out by private respondent is null and void. On the third party complaint. petitioner contends that an "all risks" marine policy has a technical meaning in insurance in that before a claim can be compensable it is essential that there must be "some fortuity. the third party defendant Compagnie Maritime Des Chargeurs Reunis and third party defendant E. 3. 5 An "all risks policy" should be read literally as meaning all risks whatsoever and covering all losses by an accidental cause of any kind. notwithstanding the clear absence of proof of some fortuitous event. vs. The "all risks clause" of the Institute Cargo Clauses read as follows: 5. as used in insurance contracts. Phoenix Assurance Co. casualty. the burden then shifts to the insurer to show the exception to the coverage. 9 The term "all risks" cannot be given a strained technical meaning. the decretal portion whereof reads: WHEREFORE. or accidental cause to which the loss is attributable. thereafter. an event that proceeds from an unknown cause. it is written against all losses. 4 On the first assignment of error. Generally. 11 the basic rule is that the insurance company has the burden of proving that the loss is caused by the risk excepted and for want of such proof. after trial on the merits.

the issue of lack of insurable interest was not among the defenses averred in petitioners answer. we uphold the ruling of the respondent court that private respondent." has insurable interest in said goods.I. it is believed that in the absence of any showing that the losses/damages were caused by an excepted peril. and there is no such showing. the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer. No. 12 A marine insurance policy providing that the insurance was to be "against all risks" must be construed as creating a special insurance and extending to other risks than are usually contemplated. whether under F. and the case is tried and decided upon that theory in the court below. coupled with an existing interest in that out of which the expectancy arises. G. 21 It simply means that the seller must pay the costs and freight necessary to bring the goods to the named destination but the risk of loss or damage to the goods is transferred from the seller to the buyer when the goods pass the ship's rail in the port of shipment. an existing interest over the goods sufficient to be the subject of insurance. anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction whether he has or has not any title in. upon due consideration of the authorities and jurisprudence it discussed — .excludes the loss from coverage. there being no showing that the loss was caused by any of the excepted perils. 13 The burden of the insured. Had there been such a showing that spillage would have been a certainty. There is no evidence presented to show that the condition of the gunny bags in which the fishmeal was packed was such that they could not hold their contents in the course of the necessary transit. would be unfair to the adverse party. In principle. As aptly stated by the respondent Court of Appeals. ordinary and popular sense. they must be taken and understood in their plain.B. the insurer is liable under the policy.O. it was sufficient to show that there was damage occasioned by some accidental cause of any kind. delay or the inherent vice or nature of the subject matter insured. there may have been good reason to plead that there was no risk covered by the policy (See Berk vs. Further. justice and due process. it was to put at rest all doubts on the matter under the facts in this case and also to dispose of petitioner's third assignment of error which consequently needs no further discussion. and covers all losses except such as arise from the fraud of the insured.R. from that time. 20 C & F contracts are shipment contracts. he will not be permitted to change his theory on appeal because. His interest over the goods is based on the perfected contract of sale. 18 The perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before be performed the conditions of the sale. WHEREFORE. the burden is shifted to the insurer to prove that the loss was due to excepted perils. Section 13 of the Insurance Code defines insurable interest in property as every interest in property. p. or lien upon or possession of the property y. In the present case. 15 Anent the issue of insurable interest. we nevertheless decided to indite a disquisition on the issue of insurable interest raised by petitioner. 1988 10 . destroyed or deteriorated. and there is no necessity to point to any particular cause. as consignee of the goods in transit under an invoice containing the terms under "C & F Manila. The term means that the price fixed includes in a lump sum the cost of the goods and freight to the named destination. much less any evidence that the bags of cargo had burst as the result of the weakness of the bags themselves. the exceptions to said rule not obtaining in the present case. Ibid. 16 Insurable interest in property may consist in (a) an existing interest. The Court has heretofore ruled that the delivery of the goods on board the carrying vessels partake of the nature of actual delivery since. C. to permit him to do so. Style [1956] cited in Marine Insurance Claims. 22 Moreover. is immaterial in the determination of whether the vendee has an insurable interest or not in the goods in transit.. Under an 'all risks' policy. & F. Article 1523 of the Civil Code provides that where. i. The terms of the policy constitute the measure of the insurer's liability. or C. If such terms are clear and unambiguous. therefore. for. the seller is authorized or required to send the goods to the buyer. of such nature that a contemplated peril might directly damnify the insured. as in this case. the lower court did not err in holding that the loss was covered by the policy.. It is a settled rule that an issue which has not been raised in the court a quo cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play. 14 Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. 17 Herein private respondent. 24 If despite the fundamental doctrines just stated. whether named by the buyer or not. 125). (b) an inchoate interest founded on an existing interest. delivery of the goods to a carrier. SO ORDERED.. The agreement has the force of law between the parties. in pursuance of a contract of sale. Thereafter. as vendee/consignee of the goods in transit has such existing interest therein as may be the subject of a valid contract of insurance. L-41014 November 28. the foreign buyers assumed the risks of loss of the goods and paid the insurance premium covering them. It was neither an issue agreed upon by the parties at the pre-trial conference nor was it raised during the trial in the court below. To impose on the insured the burden of proving the precise cause of the loss or damage would be inconsistent with the broad protective purpose of "all risks" insurance.. The perfected contract of sale even without delivery vests in the vendee an equitable title.e. 19 The contract of shipment. whether real or personal.F. 23 This is but a permuted restatement of the long settled rule that when a party deliberately adopts a certain theory. is to prove merely that the goods he transported have been lost. or (c) an expectancy. the instant petition is DENIED and the assailed decision of the respondent Court of Appeals is AFFIRMED in toto. or liability in respect thereof. or any relation thereto.

the undisputed facts of this case are as follows: On October 21. H.1967.. pp. while the aforesaid policy was in full force and effect. 37-38). Record on Appeal. entitled "Pacific Banking Corporation vs. (Record on Appeal.00 with Asian Surety. 13-14). No. It will be noted that the defense of fraud and/or violation of Condition No.000. both in violation of Policy Condition No. For failure of the insurance company to pay the loss as demanded.000. for brevity). respondents. caused by fire to its property consisting of stocks. second and third floors of the building situated at number 256 Jaboneros St. petitioner. San Nicolas. was issued to the Paramount Shirt Manufacturing Co.PACIFIC BANKING CORPORATION. not exceeding P61. 17-18). 1964. adjuster H. On January 4.H.H. 4). On March 25. either to the private respondent or its ad . an open policy. private respondent informed counsel for the petitioner that it was not yet ready to accede to the latter's demand as the former is awaiting the final report of the insurance adjuster. over the vehement opposition of the petitioner (Record on Appeal. revealing undeclared co-insurances with the following: P30. Fire Policy No. At any rate. nor submitted proof of loss which is a clear violation of Policy Condition No. On January 28.H.1963. the case was set for the continuation of the hearing for the reception merely of the testimony of Alejandro Tan Gatue.00 with Victory (Brief for the Defendant pp. 11 .: This is a petition for review on certiorari of the decision of respondent Court of Appeals * in CA-G. Said policy was duly endorsed to petitioner as mortgagee/ trustor of the properties insured. 1964. 1967.' " (Record on Appeal. 1965 of the insurance adjuster. J. Manager of the Adjustment Co. p. including furniture. the trial court denied private respondent's motion on the ground that the defense of lack of proof of loss or defects therein was raised for the first time after the commencement of the suit and that it must be deemed to have waived the requirement of proof of loss (Sections 83 and 84.00. 56889. 61). "in order to prove that 'insured has committed a violation of condition No. fixtures. pp. which set aside the decision of the Court of First Instance (CFI) of Manila. The insured was at the time of the issuance of the policy and is up to this time. petitioner presented in evidence Exhibit "H". 1 964.. materials and supplies usual to a shirt factory. pp.000. to Asian Surety Insurance Co. 00 with Empire Surety and P250. 1964.. 3 of the policy in relation to the other Insurance Clause. Bayne Adjustment Company (Brief for PlaintiffAppellee. for a period of one year commencing from that date to October 21. On May 25. p. Bayne Adjustment Co. pp.5) On January 24. COURT OF APPEALS and ORIENTAL ASSURANCE CORPORATION. and for which reason. the case was considered submitted for decision from which order private respondent filed a motion for reconsideration to set the case or further reception of private respondent's additional evidence. Manila. by which private respondent Oriental Assurance Corporation bound itself to indemnify the insured for any loss or damage. p..00 issued in favor of Paramount Shirt Manufacturing Co.000. 1964.000. F-3770 (Exhibit "A"). (hereinafter referred to as the insured.11 (Record on Appeal. P25. 129). On September 30. in the principal sum of P61. private respondent raised the following defenses in its answer to wit: (a) lack of formal claim by insured over the loss and (b) premature filing of the suit as neither plaintiff nor insured had submitted any proof of loss on the basis of which defendant would determine its liability and the amount thereof. 1964.000.000. 1964. pp. pp.00 with Malayan P50. H. the said insurance adjuster notified counsel for the petitioner that the insured under the policy had not filed any claim with it. determination of the liability of private respondent could not be had (Supra. petitioner (plaintiff therein) on April 28.00) and the goods described in the policy were held in trust by the insured for the petitioner under thrust receipts (Record on Appeal.00 with South Sea and P25. As gathered from the records.11. petitioner's counsel replied to aforesaid letter asking the insurance adjuster to verify from the records of the Bureau of Customs the entries of merchandise taken into the customs bonded warehouse razed by fire as a reliable proof of loss (Supra. p. 3 in the Policy. on June 30. 1967. in the form of non-declaration of coinsurances which was not pleaded in the answer was also not pleaded in the Motion to Dismiss. Inc. which is a communication dated December 22. machinery and equipment while contained in the ground. Oriental Assurance Corporation".. 16-17). On April 24. 21-22). Insurance Act. filed in the court a quo an action for a sum of money against the private respondent. with the knowledge and consent of private respondent to the effect that "loss if any under this policy is payable to the Pacific Banking Corporation".00 with Wellington Insurance. Bayne Adjustment Co. a debtor of petitioner in the amount of not less than Eight Hundred Thousand Pesos (P800.000. pp.R. counsel for the petitioner sent a letter of demand to private respondent for indemnity due to the loss of property by fire under the endorsement of said policy (Brief for Plaintiff-Appellee. 41735-R. 19-20). a fire broke out on the subject premises destroying the goods contained in its ground and second floors (Record on Appeal. 1-36). vs. ** which had in turn granted the complaint for a sum of money in Civil Case No. Oriental Assurance Corporation. 61-69). 1964. On September 9. PARAS. At the trial.000. undertaken by insured Paramount on the same property covered by its policy with private respondent whereas the only coinsurances declared in the subject policy are those of P30.

p.) A void or inexistent contract is one which has no force and effect from the very beginning. or which may subsequently be effected. it could have hesitated or plainly desisted from entering into such contract. the insured was guilty of clear fraud (Rollo. the dispositive portion of which reads: WHEREFORE. had the insurer known that there were many co-insurances. all benefit under this policy shall be forfeited. III. therefore. Hence. 1964. and 12% from April 29. (b) The record of the case is bereft of proof of such fraud. (a) The respondent Court did not consider the legal presumption against the existence of fraud. 54-67). which should be established with such quantum of proof as is required for any crime. 12 . Petitioner's contention that the allegation of fraud is but a mere inference or suspicion is untenable. SO ORDERED. as if it had never been entered into. pp.00. the trial court rendered a decision adjudging private respondent liable to the petitioner under the said contract of insurance. IV. or to terminate a contract which has once been made. Petitioner filed a motion for reconsideration of the said decision of the respondent Court of Appeals. judgment is hereby rendered ordering the defendant to pay the plaintiff P61. the superstructure does not arise. by reason of said unrevealed insurances.100. and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage. 145 SCRA [1986]). The Insured shall give notice to the Company of any insurance already effected. Policy Condition No. 25). THE FINDING OF THE TRIAL COURT THEREON SHOULD BE CONSIDERED AFFIRMED. (Brief for Petitioners. the risk does not attach and the policy never becomes a contract between the parties. the Court of Appeals reversed the decision of the trial court (Decision promulgated on April 23. Commercial Laws of the Philippines. C. 1964. it should have been considered waived. 8th Ed. NOTWITHSTANDING THE LETTER. pp. (Record on Appeal. V. Otherwise stated. Avila v. (c) The private respondent insurer did not even plead or in anywise raise fraud as a defense in its answer or motion to dismiss and. 1975. C.1975 for lack of merit (Rollo. 3 explicitly provides: 3. RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN DISMISSING THE CASE AND IN NOT AFFIRMING THE APPEALED DECISION OF THE TRIAL COURT. Falsehood in such representations is not shown to vary or add to the contract. 1-3) The crux of the controversy centers on two points: (a) unrevealed co-insurances which violated policy conditions No.00. 2133). as attorney's fees. but this was denied on July 3. Rollo. (d) The total amount of insurance procured by the insured from the different companies amounted to hardly onehalf (½) of the value of the goods insured. pp. p. Representations of facts are the foundation of the contract and if the foundation does not exist. "the whole foundation of the contract fails. that was deception. II. 123 SCRA 99 [1983]. to April 28. pp. but to show that no contract has ever existed (Tolentino. 3 and (b) failure of the insured to file the required proof of loss prior to court action.On April 18. a clear misrepresentation and a vital one because where the insured had been asked to reveal but did not. RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN NOT INTERPRETING THE PROVISIONS OF THE POLICY LIBERALLY IN FAVOR OF THE HEREIN PETITIONER-APPELLANT. with interest at the rate of 8% per annum from January 4. and the costs.A. Vol. 991. resulting in this petition with the following assigned errors. I. p. P6. JUSTICE CHANCO IS LEGALLY ERRONEOUS IN HOLDING THAT THE ACTION WAS PREMATURELY BROUGHT BECAUSE THE REQUIRED CLAIM UNDER THE INSURANCE LAW HAS NOT BEEN FILED. Consequently. 1 968..000. As found by the Court of Appeals. RESPONDENT COURT ERRED IN NOT HOLDING THAT CONSIDERING THE VOTING ON THE PARTICULAR QUESTION OF FRAUD. 140-141) On appeal. WHO IS NOT THE INSURED BUT ONLY THE ASSIGNEE/MORTGAGEE OF THE PROPERTY INSURED.A. until the amount is fully paid. THE CONCURRING OPINION OF MR. the insured had been guilty of a false declaration. 12) It is not disputed that the insured failed to reveal before the loss three other insurances. 1964. II. (Record on Appeal. concrete evidence of fraud or false declaration by the insured was furnished by the petitioner itself when the facts alleged in the policy under clauses "Co-Insurances Declared" and "Other Insurance Clause" are materially different from the actual number of coinsurances taken over the subject property. (EXHIBIT "C") OF PETITIONER-APPELLANT'S LAWYER WHICH IS A SUBSTANTIAL COMPLIANCE OF THE LEGAL REQUIREMENTS AND NOT HOLDING THAT PRIVATE RESPONDENT INSURER HAD ALREADY WAIVED THE SUPPOSED DEFECTS IN THE CLAIM FILED BY PETITIONER-APPELLANT FOR ITS FAILURE TO CALL THE ATTENTION OF THE LAYER TO SUCH ALLEGED DEFECTS AND FOR ENDORSING THE CLAIM TO ITS ADJUSTER FOR PROCESSING. In fact. and which cannot be validated either by time or by ratification Tongoy v. RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN CONCLUDING FRAUD FROM THE BARE FACT THAT THE INSURED PARAMOUNT PROCURED ADDITIONAL INSURANCES OTHER THAN THOSE STATED IN THE POLICY IN SPITE OF THE EXISTENCE OF CONTRARY PRESUMPTIONS AND ADMITTED FACT AND CIRCUMSTANCES WHICH NEGATE THE CORRECTNESS OF SAID CONCLUSION. covering any of the property hereby insured.

that is. thereafter. But when the policy provides that no action shall be brought unless the claim is first presented extrajudicially in the manner provided in the policy. 55 Phil 701 [1955]). Petitioner did not only object to the introduction of evidence but on the contrary. 333 [1930]. under this policy. shall be payable to the PACIFIC BANKING CORPORATION Manila mortgagee/trustor as its interest may appear. 701. cannot be invalidated. procure and give to the company all such further particulars. it being hereby understood and agreed that this insurance as to the interest of the mortgagee/trustor only herein. v. cannot certainly defeat the right of the petitioner to recover the insurance as mortgagee/assignee.. there is a need to make its own finding to support its conclusion. Commercial Union Assurance Co. that in case the mortgagor or owner/ trustee neglects or refuses to pay any premium.. documents. 56889 and dismissal thereof was warranted under the circumstances. proofs and information with respect to the claim". the cause of action will accrue from the time the insurer finally rejects the claim for payment (Eagle Star Insurance v.. 55 Phil. The evidence adduced shows that twenty-four (24) days after the fire.<äre||anº•1àw> Verily. it is established that the Supreme Court has ample authority to give beyond the pleadings where in the interest of justice and the promotion of public policy. there was no real necessity for bringing suit. It is obvious that petitioner has missed all together the import of subject mortgage clause which specifically provides: Mortgage Clause Loss. Petitioner further stressed that fraud which was not pleaded as a defense in private respondent's answer or motion to dismiss. or arson—of the mortgagor or owner/trustee of the property insured. the latter remained unheedful. Since the required claim by insured. insured was required "at his own expense to produce. 702. shall not be invalidated by any act or neglect—except fraud or misrepresentation.. Instead. p. books. forfeited said right. the Court can consider a fact which surfaced only after trial proper (Maharlika Publishing Corp. petitioner prematurely filed Civil Case No. misrepresentation (Rollo. Undoubtedly. as before such final rejection. the mortgagee/ trustor shall. it is but fair and just that where the insured who is primarily entitled to receive the proceeds of the policy has by its fraud and/or misrepresentation. et al. if any. papers. Ana v. provided. it follows that private respondent could not be deemed to have finally rejected petitioner's claim and therefore the latter's cause of action had not yet arisen. Petitioner should have endeavored to file the formal claim and procure all the documents. supra). Taurus Taxi Co. Chia Yu. It is noteworthy that private respondent and its adjuster notified petitioner that insured had not yet filed a written claim nor submitted the supporting documents in compliance with the requirements set forth in the policy. 33-35). 26) The paragraph clearly states the exceptions to the general rule that insurance as to the interest of the mortgagee. v.As the insurance policy against fire expressly required that notice should be given by the insured of other insurance upon the same property. 3 in the policy in relation to the "other insurance clause" supposedly to have been violated. presented the very evidence that proved its existence. the former did not furnish the latter whatever pertinent documents were necessary to prove and estimate its loss. vs. Be that as it may. Petitioner points out that Condition No. Yap.... duplicates or copies thereof.. Inc. petitioner argues that considering the purpose for which the endorsement or assignment was made. 27). Ltd. v. p. 11 specifically provides that the insured shall on the happening of any loss or damage give notice to the company and shall within fifteen (15) days after such loss or damage deliver to the private respondent (a) a claim in writing giving particular account as to the articles or goods destroyed and the amount of the loss or damage and (b) particulars of all other insurances. petitioner shifted upon private respondent the burden of fishing out the necessary information to ascertain the particular account of the articles destroyed by fire as well as the amount of loss. the total absence of such notice nullifies the policy (Sta. Particularly referring to the mortgage clause of the policy. with more reason petitioner which is merely claiming as indorsee of said insured. Indeed. or misrepresentation or arson. or in the very least. 142 SCRA 561 [1986]). on demand pay the same. to protect the mortgagee/assignee against any untoward act or omission of the insured.. Despite the notice. The argument that notice of co-insurances may be made orally is preposterous and negates policy condition No. 47 SCRA 276 [1972]. While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly as against the insurer company (Eagle Star Insurance Co. Union Manufacturing Co. should be deemed to have been waived. Brief for the petitioner. Chia Yu. the cause of action on the policy accrues when the loss occurs. Chia Yu. petitioner merely wrote letters to private respondent to serve as a notice of loss. if any. 20 which requires every notice and other communications to the insurer to be written or printed. vouchers. v. In the case at bar. et al. invoices. Tagle. pp. Compliance with condition No. This is so. 18-20). policy condition No. cannot be entitled to such proceeds. 11 is a requirement sine qua non to the right to maintain an action as prior thereto no violation of petitioner's right can be attributable to private respondent. Pioneer Ins. concealment of the aforecited co-insurances can easily be fraud. pp. (Record on Appeal. namely: fraud. the law does not encourage unnecessary litigation (Eagle Star Insurance Co. inventory needed by private respondent or its adjuster to ascertain the amount of loss and after compliance await the final rejection of its claim. 13 . together with the preliminary submittal of relevant documents had not been complied with.. supra. Philippine Guaranty Co. plans. As correctly found by the Court of Appeals. Likewise. p. It will be noted that the fact of fraud was tried by express or at least implied consent of the parties. Generally. Inc. Otherwise stated. Ltd. (Rollo. specifications. p. it would be absurd to hold that petitioner is barred from recovering the insurance on account of the alleged violation committed by the insured (Rollo. & Surety Corp. 61 SCRA 432 [1974]).

contracts of insurance. Co. Insular Life v.5028 years. Under Art. 739. Phil. 117 SCRA 480 [1982] Director of Lands v. 146 SCRA 385 [1986]).. Union Manufacturing Co. Dalida v. Inc. 3 and 11 of the contract.. SO ORDERED. referring to her as his wife.745. v. Manlapaz v. & Surety Co. a whole life plan for P5.Inc. 14 . the beneficiary will receive the proceeds or profits of said insurance. CA..Insurance Proceeds 80 SCRA 181 Facts: > Buenaventura Ebrado was issued by Insular Life Assurance Co. Sacay v. No costs. > Ebrado designated Carponia Ebrado as the revocable beneficiary in his policy. 147 SCRA 238-239 [1987]). 2 children = Jose Consuegra Jr. CA. for which no beneficiary was designated. (this was contracted in GF while the first marriage subsisted) > Being a GSIS member when he died. > Since he was in the gov’t service for 22. yet. CA. Issue: Between Carponia and Pascuala. Inc. CA. Rather.. GSIS v. It appearing that insured has violated or failed to perform the conditions under No. ordinary and popular sense (Young v. 24 SCRA 458 [1968]. Inc. 739 should equally operate in life insurance contracts. GSIS . Alonzo. Courts are not permitted to make contracts for the parties. Under Art. > When he was still alive. 739 cannot be named beneficiary of a life insurance policy by a person who cannot make any donation to him. Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. 117 SCRA 395 [1985].. Sandiganbayan. Montesa v. they are likewise barred from receiving proceeds of a life insurance contract. the proceeds of his life insurance were paid by the GSIS to Berdin and her children who were the beneficiaries named in the policy. v.. Gonzales v. 2012. although she admitted that she and the insured were merely living as husband and wife without the benefit of marriage. much less the herein petitioner. Guaranty Co. 124 SCRA 630 [1983]. a life insurance policy is no different from civil donations insofar as the beneficiary is concerned. the function and duty of the courts is simply to enforce and carry out the contracts actually made (Young v. the general rules of civil law should be applied to resolve this void in the insurance law. 145 SCRA 311 [1986]. are to be construed according to the sense and meaning of the terms which the parties themselves have used. PREMISES CONSIDERED. Said findings of the appellate court are final and cannot be disturbed by the Supreme Court except in certain cases Lereos v. and the decision appealed from is AFFIRMED. the petition is DISMISSED for lack of merit. Pichel v... CA. Guaranty Co. National Power Corp. Phil. 142 SCRA 609 [1986]. v. v. CA. Ebrado . As a consequence.73. Inc. since common-law spouses are barred from receiving donations. III SCRA 341 [1982]. they must be taken and understood in their plain. p. CA.. Guita v. The agreement has the force of law between the parties.. like other contracts. 276 supra). 30 Phil.. and in order to recover. It is quite unfortunate that the Insurance Act or our own Insurance Code does not contain a specific provision grossly resolutory of the prime question at hand. Petrophil Corp. who is entitled to the proceeds? Held: Pascuala. he contracted two marriages: o First – Rosario Diaz.Retirement Insurance Benefits 37 SCRA 315 Facts: > Jose Consuegra was employed as a shop foreman of the Office of the District Engineer in Surigao Del Norte. When not otherwise specifically provided for in the insurance law. CA. > Insurer by virtue of the contract was liable for 11. deserves reiteration. Finally. Inc. 617 [1919]. the established rule in this jurisdiction that findings of fact of the Court of Appeals when supported by substantial evidence. The parties have a right to impose such reasonable conditions at the time of the making of the contract as they may deem wise and necessary. according to said article. 30 Phil. The compliance of the insured with the terms of the policy is a condition precedent to the light of recovery (Stokes v. > Pascuala Ebrado also filed her claim as the widow of the deceased insured. In essence. 7 children. Herrera v. he was entitled to retirement insurance benefits. the contract of life insurance is governed by the general rules of civil law regulating contracts. Midland Textile Ins. and Pedro but both predeceased him o 2nd – Basilia Berdin. 2011 of the NCC states: The contract of insurance is governed by special laws. Malayan Insurance Co. 117 SCRA 770 [1982]. 145 SCRA 533 [1986]). CA. are not reviewable on appeal by certiorari. Co. The terms of the policy constitute the measure of the insurer's liability. the proscription in Art. 277 supra. donations between persons who were guilty of adultery or concubinage at the time of the donation shall be void. the insured must show himself within those terms. The Capital Ins. Art. Inc.882. 117 SCRA 346 [1982]. Midland Textile Ins. Matters not expressly provided for in such special laws shall be regulated by this Code. Vda. 617 [1915]. the insured cannot recover. Both are founded on the same consideration of liberality. p. Union Manufacturing Co. > Ebrado died when he was accidentally hit by a falling branch of tree. 139 SCRA 576 [1985]. A beneficiary is like a donee because from the premiums of the policy which the insured pays.00 with a rider for Accidental Death Benefits for the same amount. 127 SCRA 766 [1984]). > Insular life filed an interpleader case and the lower court found in favor of Pascuala. and Carponia filed her claim. NCC: Any person who is forbidden from receiving any donation under Art. If such terms are clear and unambiguous. and such violation or want of performance has not been waived by the insurer. Therefore. De Consuegra v.

503617) under a 20-year endowment plan. has been entitled to avail of under one of the provisions of said policy after the same has been in force for three (3) years. manifesting to the policy holder that the written consent for the minor son must not only be given by his father as legal guardian but it must also be authorized by the court in a competent guardianship proceeding. G. 1967 DELFIN NARIO. The beneficiary named in the life insurance does NOT automatically become the beneficiary in the retirement insurance. on pure question of law. each family will be entitled to one-half of the estate. and as the legal administrator of the minor's properties. L-22796 June 26. In case of failure to name a beneficiary in an insurance policy. Ernesto Nario. The lower court found and opined that since the parties expressly stipulated in the endorsement attached to the policy and which formed part thereof that — 15 . justified in refusing to grant and in disapproving the proposed transactions in question. and it (defendant Insurance Company) was. during the early part of 1943. Delfin Nario. without any court authority therefor. The Insurance Company also denied the surrender of the policy. Delfin Nario.L..00. When Consuegra. a life insurance policy (No. hence. Nario applied for a loan on the above stated policy with the Insurance Company. Mrs. and the other. vs. which ruled that the legal heirs were Diaz who is entitled to one-half or 8/16 of the retirement benefits and Berdin and her children were entitled to the remaining half. dismissing plaintiffs' complaint as well as from a later order of the same court. for the purpose of using the proceeds thereof for the school expenses of her minor son. The Insurance Company denied said application. And when there exists two marriages. as her irrevocable beneficiaries. under article 320 in relation to article 326 of the Civil Code. after which the case was considered submitted for decision. Alejandra Santos-Nario and her husband. About the middle of June. which loan she. No. from a decision of the Court of First Instance of Manila. with a face value of P5. but it set up the affirmative defense that inasmuch as the policy loan application and the surrender of the policy involved acts of disposition and alienation of the property rights of the minor.B.: Direct appeal. Sec. Nario signified her decision to surrender her policy to the Insurance Company. 1963. virtually admitting its material allegations. he could NOT have intended those beneficiaries of his life insurance as also the beneficiaries of his retirement insurance because the provisions on retirement insurance under the GSIS came about only when CA 186 was amended by RA 660 on June 18. on September 10. J. 1959. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY. There having been no substantial disagreement or dispute as to any material fact. in its Civil Case No. and ALEJANDRA SANTOS-NARIO. 11(b) clearly indicates that there is need for the employee to file an application for retirement insurance benefits when he becomes a GSIS member and to state his beneficiary. Mrs. on June 12. the proceeds will accrue to the estate of the insured. the parties. The life insurance and the retirement insurance are two separate and distinct systems of benefits paid out from 2 separate and distinct funds. Ernesto Nario. brought suit against the Philippine American Life Insurance Co. was not a sufficient compliance of the law. which she was also entitled to avail of under one of the provisions of the same policy.00. 1951. After the denial of said policy loan application. or before 1943. said acts are not within the powers of the legal administrator.> Both families filed their claims with the GSIS. pursuant to Article 320 of the Civil Code of the Philippines.000. upon joint motion which the lower court granted. designated his beneficiaries in his life insurance. Ernesto Nario. for and in behalf of the minor son. on the same ground as that given in disapproving the policy loan application.ñët Defendant Insurance Company answered the complaint. 54942. seeking to compel the latter (defendant) to grant their policy loan application and/or to accept the surrender of said policy in exchange for its cash value. mere written consent given by the father-guardian.1äwphï1. 1963. as policy-holder. CFI affirmed GSIS decision. each to receive an equal share of 1/16. dispensed with the presentation of evidence and submitted their respective memoranda. as one of the irrevocable beneficiaries of the policy.R. Mrs. Said application bore the written signature and consent of Delfin Nario in two capacities: first. denying a motion to set aside and/or reconsider said decision of dismissal. hence. defendant-appellee. Alejandra Santos-Mario was. upon application. J. and their unemancipated minor son. Issue: To whom should the retirement insurance benefits be paid? Held: Both families are entitled to half of the retirement benefits. in the above mentioned court of first instance. plaintiffs-appellants. issued. therefore. REYES. by the Philippine American Life Insurance Co.. She designated thereon her husband. The facts of this case may be stated briefly as follows: Mrs. as the father-guardian of said minor son and irrevocable beneficiary. > Berdin went to CFI on appeal. and demanded its cash value which then amounted to P520.

hence. including that of obtaining a policy loan to the extent stated in the schedule of values attached to the policy (Gercio vs. Suguitan. No. consists of one-half (½) of said amount or P2. As above noted. special powers are required to required to effect novations. appoint another suitable person. the father or mother shall give a bond subject to the approval of the Court of First Instance. It appearing that the minor beneficiary's vested interest or right on the policy exceeds two thousand pesos (P2. Parents as guardians. "acquired a vested right to all benefits accruing to the policy. that plaintiffs did not file any guardianship bond to be approved by the court. as one of the two (2) irrevocable beneficiaries. such consent was given by the father-guardian without any judicial authority. By analogy. 1964.. Rule 93 of the Revised Rules of Court. Section 2 of the Revised Rules of Court. L-8300. must be with the requisite court authority (U. release or surrender this Policy to the Company and exercise any and all other rights and privileges hereunder or agree with the Company to any change in or amendment to this Policy. The American cases cited by appellants are not applicable to the case at bar for lack of analogy. The above quoted provisions of the Civil Code have already been implemented and clarified in our Revised Rules of Court which provides — SEC. When the property of the child is worth more than two thousand pesos. For good reasons the court may. 7.It is hereby understood and agreed that. on January 28. to waive any obligation gratuitously or obligate the principal as a guarantor or surety (Do. The appeal is unmeritorious.500. In those cases. and the Code explicitly requires a special power or authority for the agent "to loan or borrow money. said beneficiaries are paid on the basis of its face value and in case the insured should discontinue paying premiums. While the father or mother would in such event be exempt from the duty of filing a bond. the full face value of the policy is P5. without the necessity of court appointment.00. Article 320 of the Civil Code of the Philippines provides — The father. which circumstances are wanting in this case. Unable to secure reconsideration of the trial Court's ruling. We agree with the lower court that the vested interest or right of the beneficiaries in the policy should be measured on its full face value and not on its cash surrender value. sustained defendant's affirmative defense. 2. Thus.00 and the minor's vested interest therein. under articles 320 and 326 of the Civil Code. an agency in general terms does not include power to encumber or dispose of the property of the principal. and shall file the petition required by Section 2 hereof. 4 and 11). the consent given by the fatherguardian. the minor son.00). with the duties and obligations of guardians under these rules. filed a formal application or petition for guardianship. 7). the Insured may not designate a new beneficiary or assign. (Rule 93). As there was no such petition and bond. shall be his legal guardian. that under Rule 96. under Article 1877 of the Civil Code of the Philippines.V.S. 1955. as distinguished from acts of management or administration. 48 Phil. subject to the duties and obligations of guardians under the Rules of Court.000. the father or the mother shall be considered guardian of the child's property. petitioner appealed directly to this Court.A.R. the father or the mother. without the consent of the beneficiaries originally designated. If the property is worth more than two thousand pesos. payment of the ward's debts is within the powers of the guardian. and rendered. contending that the minor's interest amounted to only one-half of the policy's cash surrender value of P520. as legal administrators of their child's property. 92 Phil. 99 Phil.000. agreeing with defendant's contention. 1878 no. — When the property of the child under parental authority is worth two thousand pesos or less. We likewise agree with the conclusion of the lower court that the proposed transactions in question (policy loan and surrender of policy) constitute acts of disposition or alienation of property rights and not merely of management or administration because they involve the incurring or termination of contractual obligations. however. that the proposed transactions in question (policy loan and surrender of policy) involved acts of disposition or alienation of the minor's properties for which the consent given by the father-guardian for and in behalf of the minor son.00. that under the above quoted provision. as one of the designated irrevocable beneficiaries. where no realty is involved. unless the latter act be urgent or indispensable for the preservation of the thing under administration" (Art. for in case of death of the insured. without prior court authorization. for and in behalf of the minor son. G. since the law 16 . November 18. 1004 [unrep] and in the case at bar. 53. its decision dismissing plaintiffs' complaint. was insufficient and ineffective. there were pending guardianship proceedings and the guardians therein were covered by bonds to protect the wards' interests. vs. 327. etc. but. inasmuch as the designation of the beneficiaries have been made by the Insured without reserving the right to change said beneficiaries. the father or mother shall be considered a guardian of the child's property. and securing judicial appointment.00. Similarly. there is no reason why the father may not validly agree to the proposed transaction on behalf of the minor without need of court authority. said court. nos. 58)". The distinction between one and the other kind of power is too basic in our law to be ignored. Visaya vs. is the legal administrator of the property pertaining to the child under parental authority. or in his absence the mother. and article 326 of the same Code reads — When the property of the child is worth more than two thousand pesos. The result would be the same even if we regarded the interest of the ward to be worth less than P2. Bustos. and that said vested right under the policy cannot be divisible at any given time. Sun Life Assurance of Canada. and defendant-appellee was justified in disapproving the proposed transactions in question.000. plaintiffs should have. had not. and as later implemented in the abovequoted Section 7. plaintiffs-parents cannot possibly exercise the powers vested on them. still the parent's authority over the estate of the ward as a legal-guardian would not extend to acts of encumbrance or disposition. the beneficiaries may continue paying it and are entitled to automatic extended term or paid-up insurance options. notwithstanding the provisions of this Policy to the contrary. to the policy loan application and the surrender of said policy.

> Lower Court granted the petition. Held: YES. as contended by the appellee and the court below. And. and this authority can be given only by a court. the decision appealed from is affirmed. 15 1963. the parent requires special authority for the acts above specified. > On Feb. > PHILAMLIFE also denied the surrender of the policy on the same ground as that given in disapproving the loan application. and designated Candelaria Davac. Philamlife Insurance Company . SC held that the disqualification mentioned in Art. significantly. which they claim to have been revived by the Civil Code of the Philippines (Rep. Nario then applied for a loan on the above policy with PHILAMLIFE w/c she is entitled to as policy holder. that prohibited the alienation by the parents of the real property owned by the child without court authority and led the commentators and interpreters of said Code to infer that the parents could by themselves alienate the child's movable property. Nario then signified her decision to surrender her policy and demand its cash value which then amounted to P 520. > Due to the conflicting claims. because she was not guilty of concubinage . Candelaria filed claims for the death benefits. Therefore. after the policy has been in force for 3 years. his alleged wife. Under the SSS Act. hence they should go to Candelaria. Costs against appellants Nario. Issue: Whether or not the court erred in granting Dimayuga’s petition. the Civil Code now in force did not reenact Article 164 of the Civil Code of 1889. based on the said provision of the contract. not to mention the law then applicable. 22. > Mrs. the SSS filed a petition praying that both of them be required to interplead and litigate the conflicting claims. The omission of any equivalent precept in the Civil Code now in force proves the absence of any authority in the parents to carry out now acts of disposition or alienation of the child's goods without court approval. Davac . So ordered. > The death benefits were awarded to Candelaria Davac.SSS Benefits 17 SCRA 863 Facts: > Davac was an SSS member. the revival has been only in part. 739 is NOT applicable to Candelaria. there is no bond to guarantee the ward against eventual losses. The contract between the parties is the law binding on them. Dimayuga filed a petition in court to amend the designation of the beneficiaries in his policy from irrevocable to revocable.) SSS v. Under the Insurance Act. 320 of the CC.Life Insurance 175 SCRA 416 Facts: > On Jan. Appellants seek to bolster their petition by invoking the parental power (patria potestas) under the Civil Code of 1889. there bieing NO proof that she had actual knowledge of the previous marriage of her husband. Lourdes contends that the designation made in the person of Candelaria who is party in a bigamous marriage is null and void for being against Art. > When he died. Issue: Who is entitled to the SSS benefits? Held: Candelaria. Nario applied for and was issued a life Insurance policy (no. both his first wife. This restricted interpretation of the parent's authority becomes all the more necessary where as in the case before us. Nario v. 739 of the CC.merely constitutes the parent as legal administrator of the child's property (which is a general power). Philamlife v. The purpose of such loan was for the school expenses of Ernesto. Pineda . For the new Civil Code has not effected a restitutio in integrum of the Spanish patria potestas. 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. 503617) by PHILAMLIFE under a 20-yr endowment plant. as his beneficiary. > The application bore the written signature and consent of Delfin in 2 capacities o As one of the irrevocable beneficiaries of the policy o As father-guardian of Ernesto and also the legal administrator of the minor’s properties pursuant to Art. it is only with the consent of all the beneficiaries that any change or amendment in the poicy may be legally and validly effected. Lourdes and his second wife. with a face value of 5T. the beneficiary as recorded by the employee’s employer is the one entitled to the death benefits. > Mrs. The appeal profits them nothing. Her husband Delfin and their unemancipated son Ernesto were her revocable beneficiaries. > PHILAMLIFE denied the loan application contending that written consent of the minor son must not only be given by his father as legal guardian but it must also be authorized by the court in a competent guardianship proceeding. Act 386). Wherefore.Loan Application and Surrender of Policy 20 SCRA 434 Facts: > Mrs. 17 . The policy contract states that the designation of the beneficiaries is irrevocable. 1980. (This case rule is no longer controlling under the Insurance Code. Dimayuga processed an ordinary life insurance policy from Philamlife and designated his wife and children as irrevocable beneficiaries.

even the Administrative Code describes a mutual benefit company as one which provides any method of life insurance among its members out of dues or assessments collected from its membership. and her children o Elsie Hicban. the effect would be the same. Del Val. public morals and public policy.Insurance Beneficiaries 96 PHIL 83 Facts: > SLEA is composed of laborers and employees of the LTBC and BTC (now BLTB Co.> Mrs.500 his ½ share as beneficiary). Held: YES. Golpeo . by her silence and actions had acquiesced in the illicit relations between her husband and Maloles. Besides. As a matter of fact. another common law wife of Roman. the father did not file any petition for guardianship nor post a guardianship bond. Nario sued PHILAMLIFE praying that the latter grant their loan application and/or accept the surrender of said policy in exchange for its cash value. the minor’s propty was worth 2. said acts are not within the power of administrator granted under Art. but merely ruled that the death benefit in question is analogous to insurance. SLEA was able to collect voluntary contribution from its members amounting to P2. and her children o Aquilina Maloles. if he chooses. Held: NO. and such person so named by the member will be the sole persons to be recognized by SLEA regarding claims for condolence contributions.205. for in case of death of the insured. > PHILAMLIFE contends that the loan application and the surrender of the policy involved acts of disposition and alienation of the property rights of the minor. The consent give for and in behalf of the son without prior court authorization to the loan application and the surrender was insufficient and ineffective and PHILAMLIFE was justified in disapproving the said applications. Posadas . She argues that: > The insurance code does not apply since the association is not an insurance company but a mutual benefit association. the father a must file a petition for guardianship and post a guardianship bond. Under the laws (CC and rules of Court) The father is constituted as the minor’s legal administrator of the propty. Secondly. > In 1949. 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. > The stipulation between SLEA and Roman was void for being contrary to law. After his death. the NCC recognizes certain successional rights of illegitimate children. > Roman listed as his beneficiaries Aquilina Maloles and their 4 children. > Three sets of claimants to the amount presented themselves to the association namely: o Juanita Golpeo.). and as such cannot possibly exercise the powers vested on him as legal administrator of the minor’s property. the common law wife. put down his common law wife and/or children he had with her as his beneficiaries. > Trial court rendered a decision declaring Maloles and her children the sole beneficiaries of the amount citing Del Val v. SC also agreed with TC that the said acts (loan app and surrender) constitute acts of disposition or alienation of property rights and not merely management or administration because they involve the incurring or termination of contractual obligations. Issue: Whether or not PHILAMLIFE was justified in refusing to grant the loan application and the surrender of the policy. and when the propty of the child is worth more than P2T (as in the case at bar. > Only Golpeo appealed. > Roman Concepcion was a member until his death in 1950. Southern Luzon Employee’s Association v. pursuant to Art. First of all. Assuming that the propty of the ward was less than 2T. hence court authority is required.Taxability of Insurance Proceeds 56 PHIL 147 (1931) Facts: 18 . SC agreed with the trial court that the vested interest or right of the beneficiaries in the policy should be measured on its full face value and not on its cash surrender value. the lower court did not consider the association as a regular insurance company. 320 in relation to art. SLEA adopted a resolution providing that: A member may. In the case at bar. legal wife. 739 of the CC ( donations between persons guilty of concubinage at the time of donation are void) Issue: Whether or not Golpeo. and her child. the legal wife is entitled to the amount. 326 CC. but their acts as legal administrators are only limited to acts of management or administration and not to acts of encumbrance or disposition. El Oriente v. > SLEA then filed an action for interpleader against the 3 conflicting claimants. and one of its purposes is mutual aid of its members and their dependents in case of death. Golpeo’s argument would certainly NOT apply to the children of Maloles likewise named beneficiaries by the deceased. said beneficiaries are paid on the basis of its face value and in case the insured should discontinue paying premiums. since the parents would only be exempted from filing a bond and judicial authorization. without considering the intimation in the brief for Maloles that Golpeo.

"There shall be levied. unusual and unforeseen. Issues & Resolutions: Filipino contends that an "all risks" marine policy has a technical meaning in insurance in that before a claim can be compensable it is essential that there must be "some fortuity. the El Oriente received all the proceeds of the said life insurance policy. . The terms "accident" and "accidental".a tax of three per centum upon such income .. Razon." "casualty" or "accidental cause" to which the alleged loss is attributable and the failure of herein private respondent. > Actually. A formal claim statement was also presented by the plaintiff against the vessel. what the plaintiff received was Filipino Merchants v. Inc. who had had more than thirty-five (35) years of experience in the manufacture of cigars in the Philippines. in Chapter II On Corporations. It is not so certain that the proceeds of life insurance policies paid to corporate beneficiaries upon the death of the insured are likewise exempt. > El Oriente paid for the premiums due thereon and charged as expenses of its business all the said premiums and deducted the same from its gross incomes as reported in its annual income tax returns. an event that proceeds from an unknown cause. the terms have been taken to mean that which happens by chance or fortuitously. provides the exemptions under the law. . 1976 and seeks to recover from Filipino the amount of P51. CA. In reality. Velhagen for the sum of $50. . of Toronto. assessed. an insurance policy on the life of the said A.568. as used in insurance contracts. In Chapter I of the Tax Code. took out the insurance on the life of its manager. Velhagen in 1929.957. Under the view we take of the case. what was imported was 59. Canada. .568. > Upon the death of A. Razon. have not acquired any technical meaning. Inc. not expected. but the Filipino refused to pay the claim. They are construed by the courts in their ordinary and common acceptance. in exempting individual beneficiaries. it may be said that the law is indefinite in phraseology and does not permit us unequivocally to hold that the proceeds of life insurance policies received by corporations constitute income which is taxable It will be recalled that El Oriente. An "all risks policy" should be read literally as meaning all risks whatsoever and covering all losses by an accidental cause of any kind. or is an unusual effect of a known cause and.62 representing damages to said shipment which has been insured by Filipino. the insurer can avoid coverage upon demonstrating that a specific provision expressly excludes the loss from coverage. aggregating P104. Issue: Whether or not the proceeds of insurance taken by a corporation on the life of an important official to indemnify it against loss in case of his death. and which is unexpected. "The following incomes shall be exempt from the provisions of this law: (a) The proceeds of life insurance policies paid to beneficiaries upon the death of the insured .88 from the insurance on the life of its manager. to adduce evidence showing that the alleged loss to the cargo in question was due to a fortuitous event precludes his right to recover from the insurance policy. E. together with the interests and the dividends accruing thereon. to protect itself against the loss it might suffer by reason of the death of its manager.940 metric tons not 600 tons at $395. Thailand to Manila against all risks under warehouse to warehouse terms. are taxable as income under the Philippine Income Tax Law Held: NOT TAXABLE. but neither here nor in any other section is reference made to the provisions of section 4 in Chapter I. speaks of the proceeds of life insurance policies as income.> El Oriente in order to protect itself against the loss that it might suffer by reason of the death of its manager.957. Thus. and Filipino’s surveyor ascertained and certified that in such discharge 105 bags were in bad order condition as jointly surveyed by the ship's agent and the arrastre contractor. which deductions were allowed upon a showing that such premiums were legitimate expenses of its business. > It appears from the evidence presented that Chao insured said shipment with Filipino for the sum of P267. We do not believe that this fact signifies that when the plaintiff received P104." Section 10. A marine insurance policy providing that the insurance was to be "against all risks" must be construed as creating a special insurance and extending to other risks than are usually contemplated. United States currency designating itself as the beneficiary. Coverage under an "all risks" provision of a marine insurance policy creates a special type of insurance which extends coverage to risks not usually contemplated and avoids putting upon the insured the burden of establishing that the loss was due to the peril falling within the policy's coverage. collected. procured from the Manufacturers Life Insurance Co.653.Insurable Interest 179 SCRA 638 Facts: > The Chao Tiek Seng a consignee of the shipment of fishmeal loaded on board the vessel SS Bougainville and unloaded at the Port of Manila on or about December 11. it thereby realized a net profit in this amount. Velhagen. It is true that the Income Tax Law. > Based on said computation the Chao made a formal claim against the Filipino for P51. SC did not uphold this contention. It is certain that the proceeds of life insurance policies paid to individual beneficiaries upon the death of the insured are exempt. it is sufficient for our purposes to direct attention to the anomalous and vague condition of the law. who had had more than thirty-five years' experience in the manufacture of cigars in the Philippines. is to be found section 4 which provides that. > The fishmeal in 666 gunny bags were unloaded from the ship on December 11.59 for the goods described as 600 metric tons of fishmeal in gunny bags of 90 kilos each from Bangkok. An accident is an event that takes place without one's foresight or expectation. . seeking judgment against the third party defendants in case judgment is rendered against it. A. as amended. but this is a very slight indication of legislative intention. 1976 at Manila unto the arrastre contractor E. thru its local agent E. > Filipino brought a third party complaint against Compagnie Maritime Des Chargeurs Reunis and/or E. But at least. without intention and design. provides that. therefore. Elser." Section 11 in the same chapter.000. upon whom lay the burden. . and covers all losses 19 .62.42 a ton.88 > CIR assessed El Oriente for deficiency taxes because El Oriente did not include as income the proceeds received from the insurance. and paid annually upon the total net income received in the preceding calendar year from all sources by every corporation .

Section 13 of the Insurance Code defines insurable interest in property as every interest in property. respondent filed a complaint for damages against petitioner. INC. or (c) an expectancy. there being no showing that the loss was caused by any of the excepted perils.205. or any relation thereto. owned by petitioner. The insurance policies provide for coverage on "book debts in connection with ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines. (b) an inchoate interest founded on an existing interest. The burden of the insured. that respondent made several demands for payment upon petitioner but these went unheeded. On February 25. respondent was subrogated to their rights against petitioner. that it never consented to paying the claim of the insured.5 In its Answer with Counter Claim dated July 4. SC upheld the ruling of the CA that Chao. and the CA Resolution dated April 11.6 20 . as consignee of the goods in transit under an invoice containing the terms under "C & F Manila.R. 1995. AUSTRIA-MARTINEZ.119. On February 4.O. CV No. It alleges that IMC and LSPI filed with respondent their claims under their respective fire insurance policies with book debt endorsements. His interest over the goods is based on the perfected contract of sale. coupled with an existing interest in that out of which the expectancy arises. Anent the issue of insurable interest. The contract of shipment. 1991."3 The policies also provide for the following conditions: 1. Warranted that the Insured shall submit to the Company within twelve (12) days after the close of every calendar month all amount shown in their books of accounts as unpaid and thus become receivable item from their customers and dealers. Warranted that the Company shall not be liable for any unpaid account in respect of the merchandise sold and delivered by the Insured which are outstanding at the date of loss for a period in excess of six (6) months from the date of the covering invoice or actual delivery of the merchandise whichever shall first occur. anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction whether he has or has not any title in. Branch 138."2 The policies defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this Policy." has insurable interest in said goods. x x x4 Petitioner is a customer and dealer of the products of IMC and LSPI. therefore. IMC and LSPI separately obtained from respondent fire insurance policies with book debt endorsements. the unpaid accounts of petitioner on the sale and delivery of ready-made clothing materials with IMC was P2.R. 1991. & F. The factual background of the case is as follows: Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans.00.I. or liability in respect thereof.. INSURANCE COMPANY OF NORTH AMERICA. was consumed by fire. No. (petitioner). is immaterial in the determination of whether the vendee has an insurable interest or not in the goods in transit. (LSPI) is the local distributor of products bearing trademarks owned by Levi Strauss & Co. 2000 of the Court of Appeals (CA) in CA-G. that IMC and LSPI never communicated to it that they insured their properties. is to prove merely that the goods he transported have been lost. as vendee/consignee of the goods in transit has such existing interest therein as may be the subject of a valid contract of insurance. Respondent. Inc. destroyed or deteriorated. or lien upon or possession of the property. the insurer is liable under the policy Filipino contends that Chao does not have insurable interest. Chao. 92-322 and upheld the causes of action for damages of Insurance Company of North America (respondent) against Gaisano Cagayan. 147839 June 8. as in this case.) Inc. by virtue thereof. 1998 of the Regional Trial Court. 2001 which denied petitioner's motion for reconsideration.00 while with LSPI it was P535. Makati (RTC) in Civil Case No. Thereafter. that respondent paid the claims of IMC and LSPI and. J. C. In principle. whether under F. that as of February 25.613. To impose on the insured the burden of proving the precise cause of the loss or damage would be inconsistent with the broad protective purpose of "all risks" insurance.F. vs. Included in the items lost or destroyed in the fire were stocks of ready-made clothing materials sold and delivered by IMC and LSPI. of such nature that a contemplated peril might directly damnify the insured. or C. petitioner contends that it could not be held liable because the property covered by the insurance policies were destroyed due to fortuities event or force majeure. the Gaisano Superstore Complex in Cagayan de Oro City. the burden is shifted to the insurer to prove that the loss was due to excepted perils. 1992. an existing interest over the goods sufficient to be the subject of insurance G. being only a consignee of the goods. Petitioner. Levi Strauss (Phils.except such as arise from the fraud of the insured. Insurable interest in property may consist in (a) an existing interest. 61848 which set aside the Decision dated August 31..: Before the Court is a petition for review on certiorari of the Decision 1 dated October 11. The perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before he performed the conditions of the sale. In the present case.. 2.B. whether real or personal. The perfected contract of sale even without delivery vests in the vendee an equitable title. that respondent's right of subrogation has no basis inasmuch as there was no breach of contract committed by it since the loss was due to fire which it could not prevent or foresee. 2006 GAISANO CAGAYAN.

that it has not been established that petitioner is the debtor of IMC and LSPI. even if the fire is considered a fortuitous event. the risk is borne by the owner of the thing at the time the loss under the principle of res perit domino. the present petition for review on certiorari anchored on the following Assignment of Errors: THE COURT OF APPEALS ERRED IN HOLDING THAT THE INSURANCE IN THE INSTANT CASE WAS ONE OVER CREDIT. petitioner appealed to the CA. plus legal interest from the time of demand until fully paid.613. that this lack of privity forecloses any real interest on the part of respondent in the obligation to pay. respondent counters that while ownership over the ready..9 On October 11. that petitioner's obligation to IMC and LSPI is not the delivery of the lost goods but the payment of its unpaid account and as such the obligation to pay is not extinguished.11 Petitioner filed a motion for reconsideration12 but it was denied by the CA in its Resolution dated April 11. Inc.10 The CA held that the sales invoices are proofs of sale. 2000. the jurisdiction of this Court in cases brought before it from the CA is limited to reviewing questions of law which involves no examination of the probative value of the evidence presented by the litigants or any of them. For its part. what was insured was the vendor's interest as a creditor. the RTC rendered its decision dismissing respondent's complaint. Dissatisfied.19 Accordingly.119.60 representing the amount paid by the plaintiff-appellant to the insured Inter Capitol Marketing Corporation.00 representing the amount paid by the plaintiff-appellant to the insured Levi Strauss Phil. that petitioner is guilty of gross and evident bad faith in refusing to pay respondent's valid claim and should be liable to respondent for contracted lawyer's fees. the above-described merchandise remains the property of the vendor until the purchase price is fully paid". that it was not credit that was insured since respondent paid on the occasion of the loss of the insured goods to fire and not because of the non-payment by petitioner of any obligation. SO ORDERED. trial on the merits ensued. 15 As to the second error. in view of the foregoing. Concerning the third ground.8 It held that the fire was purely accidental. to pay: 1. the CA rendered its decision setting aside the decision of the RTC. THE COURT OF APPEALS ERRED IN HOLDING THAT ALL RISK OVER THE SUBJECT GOODS IN THE INSTANT CASE HAD TRANSFERRED TO PETITIONER UPON DELIVERY THEREOF.20 21 . findings of fact of the appellate court are generally conclusive on the Supreme Court. that the fire was caused through petitioner's negligence in failing to provide stringent measures of caution. that. petitioner contends that the insurance in the present case cannot be deemed to be over credit since an insurance "on credit" belies not only the nature of fire insurance but the express terms of the policies. 1998. that the cause of the fire was not attributable to the negligence of the petitioner. IMC and LSPI have insurable interest over said goods as creditors who stand to suffer direct pecuniary loss from its destruction by fire. that by subrogation. On August 31. the amount of P2. that. that loss of the goods in the fire must be borne by petitioner since the proviso contained in the sales invoices is an exception under Article 1504 (1) of the Civil Code. petitioner avers that despite delivery of the goods. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS AUTOMATIC SUBROGATION UNDER ART.7 Thus. 2. quantity and cost of the thing sold.At the pre-trial conference the parties failed to arrive at an amicable settlement. petitioner submits that there is no subrogation in favor of respondent as no valid insurance could be maintained thereon by IMC and LSPI since all risk had transferred to petitioner upon delivery of the goods. being a fire insurance with book debt endorsements. the insurer has the right to go against petitioner.205. even if the insurance is deemed as one over credit. petitioner-buyer IMC and LSPI assumed the risk of loss when they secured fire insurance policies over the goods.18 The Supreme Court is not a trier of facts.14 Anent the first error. to the general rule that if the thing is lost by a fortuitous event.13 Hence. there was no loss as the accounts were not yet due since no prior demands were made by IMC and LSPI against petitioner for payment of the debt and such demands came from respondent only after it had already paid IMC and LSPI under the fire insurance policies. litigation expenses and cost of suit. limiting its interest to keeping the insured goods safe from fire. the appealed decision is REVERSED and SET ASIDE and a new one is entered ordering defendant-appellee Gaisano Cagayan. that petitioner was not privy to the insurance contract or the payment between respondent and its insured nor was its consent or approval ever secured.17 As a general rule. the amount of P535. care and maintenance on its property because electric wires do not usually short circuit unless there are defects in their installation or when there is lack of proper maintenance and supervision of the property.. 2207 OF THE CIVIL CODE IN FAVOR OF RESPONDENT. in petitions for review. With costs against the defendant-appellee.made clothing materials was transferred upon delivery to petitioner. The dispositive portion of the decision reads: WHEREFORE. plus legal interest from the time of demand until fully paid. that petitioner is liable for loss of the ready-made clothing materials since it failed to overcome the presumption of liability under Article 126516 of the Civil Code. it is not its function to analyze or weigh evidence all over again. 2001. IMC and LSPI retained ownership of the delivered goods and must bear the loss. Inc. that since the sales invoices state that "it is further agreed that merely for purpose of securing the payment of purchase price. being detailed statements of the nature.

absurd or impossible. it is sufficient that the insured is so situated with reference to the property that he would be liable to loss should it be injured or destroyed by the peril against which it is insured. As held earlier. The next question is: Is petitioner liable for the unpaid accounts? Petitioner's argument that it is not liable because the fire is a fortuitous event under Article 1174 32 of the Civil Code is misplaced. At issue is the proper interpretation of the questioned insurance policy. or its findings are contrary to the admissions of both the appellant and the appellee. in other words. petitioner bears the loss under Article 1504 (1) of the Civil Code. whether real or personal. Petitioner claims that the CA erred in construing a fire insurance policy on book debts as one covering the unpaid accounts of IMC and LSPI since such insurance applies to loss of the ready-made clothing materials sold and delivered to petitioner. a vendor or seller retains an insurable interest in the property sold so long as he has any interest therein. an insurable interest in property may consist in: (a) an existing interest. and not the loss or destruction of the goods delivered. (4) when the judgment is based on a misapprehension of facts. when the terms of the agreement are clear and explicit that they do not justify an attempt to read into it any alleged intention of the parties. the goods are at the buyer's risk from the time of such delivery. one's interest is not determined by concept of title. such as: (1) when the findings are grounded entirely on speculation. under Section 14 of the same Code. the questioned insurance policies provide coverage for "book debts in connection with ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines. the insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after the time of the loss covered by the policies. and (11) when the CA manifestly overlooked certain relevant facts not disputed by the parties. IMC and LSPI did not lose complete interest over the goods.29 Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction."24 Nowhere is it provided in the questioned insurance policies that the subject of the insurance is the goods sold and delivered to the customers and dealers of the insured. or a lien upon. but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not. (b) an inchoate interest founded on existing interest. 22 . where ownership is the basis for consideration of who bears the risk of loss.31 In this case. and defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this Policy. (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent. Unless otherwise agreed. (5) when the findings of facts are conflicting. (Emphasis supplied) Thus. if properly considered. there is no room for construction. The present case clearly falls under paragraph (1). jurisprudence has recognized several exceptions in which factual issues may be resolved by this Court. or liability in respect thereof.21 Exceptions (4). (3) when there is grave abuse of discretion. which. Therefore. (6) when in making its findings the CA went beyond the issues of the case.27 Accordingly. (2) when the inference made is manifestly mistaken. (7) when the findings are contrary to the trial court." Parenthetically. what were insured against were the accounts of IMC and LSPI with petitioner which remained unpaid 45 days after the loss through fire. the terms are to be understood literally just as they appear on the face of the contract. petitioner bears the risk of loss of the goods delivered. the subject matter of the insurance. 1504. the risk of loss is borne by the buyer. It is well-settled that when the words of a contract are plain and readily understood." 23 . in property insurance. so long as he would suffer by its destruction. or (c) an expectancy.28 Section 13 of our Insurance Code defines insurable interest as "every interest in property. The Court disagrees with petitioner's stand. Article 1504 of the Civil Code: ART. would justify a different conclusion. (5). and (11) apply to the present petition. as where he has a vendor's lien. (8) when the findings are conclusions without citation of specific evidence on which they are based. the goods remain at the seller's risk until the ownership therein is transferred to the buyer.25 Thus.Nevertheless. except that: (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer. of such nature that a contemplated peril might directly damnify the insured. surmises or conjectures. (7). (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record.30Indeed. but whether insured has substantial economic interest in the property. 22 In this case. They have an insurable interest until full payment of the value of the delivered goods. Unlike the civil law concept of res perit domino. coupled with an existing interest in that out of which the expectancy arises. and neither the title nor a beneficial interest is requisite to the existence of such an interest. Indeed. when the seller retains ownership only to insure that the buyer will pay its debt. in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract. or possession of."26 The Court is not persuaded. an insurable interest in property does not necessarily imply a property interest in. or any relation thereto. Petitioner argues that IMC bears the risk of loss because it expressly reserved ownership of the goods by stipulating in the sales invoices that "[i]t is further agreed that merely for purpose of securing the payment of the purchase price the above described merchandise remains the property of the vendor until the purchase price thereof is fully paid.

It does not apply when the obligation is pecuniary in nature. No pronouncement as to costs. SMB filed an action in court to recover on the policies.613. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty. 2001 of the Court of Appeals in CA-G. With respect to IMC.35 This rule is based on the principle that the genus of a thing can never perish. Issue: Whether or not the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies. 61848 are AFFIRMED with the MODIFICATIONthat the order to pay the amount of P535.Insurance Proceeds 40 PHIL 674 Facts: > On Jan. there is no proof of full settlement of the insurance claim of LSPI. no subrogation receipt was offered in evidence. Exhibit "E"39 is the check voucher evidencing payment to IMC. by itself.500 and procured another policy of equal amount from Filipinas Cia de Seguros. 2000 and Resolution dated April 11. petitioner's obligation is for the payment of money. Both policies required assignments to be approved and noted on the policy. In the application. the policies were renewed." If the obligation is generic in the sense that the object thereof is designated merely by its class or genus without any particular designation or physical segregation from all others of the same class.. > SMB eventually reached a settlement with the insurance companies and was paid the balance of it’s mortgage credit. "[i]n an obligation to deliver a generic thing. Genus nunquan perit. As correctly stated by the CA. Exhibits "C" to "C-22"38 show that petitioner has an outstanding account with IMC in the amount of P2. Harding was made a defendant because by virtue of the sale. Exhibit "F"40 is the subrogation receipt executed by IMC in favor of respondent upon receipt of the insurance proceeds.00 in the fire that razed petitioner's building on February 25. Harding was left to fend for himself. there is no evidence that respondent has been subrogated to any right which LSPI may have against petitioner. whether fire is a fortuitous event or petitioner was negligent are matters immaterial to this case. he became the owner of the property. Trial court ruled against Harding. it is not excused by fortuitous loss of any specific property of the debtor. If the plaintiff's property has been insured. authorizing SMB to choose the insurers and to receive the proceeds thereof and retain so much of the proceeds as would cover the mortgage debt. SO ORDERED. 33 The rationale for this is that the rule that an obligor should be held exempt from liability when the loss occurs thru a fortuitous event only holds true when the obligation consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case of fortuitous event. CV No.Moreover. > Dunn likewise authorized SMB to take out the insurance policy for him. 12. > In 1917. > Property was destroyed by fire. and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of. A year later. > Premiums were paid by SMB and charged to Dunn. the loss or destruction of anything of the same kind does not extinguish the obligation. As to LSPI. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T.R. Brias stated that SMB’s interest in the property was merely that of a mortgagee. > Brias.205.42 a letter dated April 23. What is relevant here is whether it has been established that petitioner has outstanding accounts with IMC and LSPI. Accordingly. It only confirms the loss of Levi's products in the amount of P535.613. The assailed Decision dated October 11. 1918.00. Gaisano. is sufficient to establish not only the relationship of respondent as insurer and IMC as the insured. although the policies were issued in SMB’s name. > Insurance Companies contended that they were not liable to Harding because their liability under the policies was limited to the insurable interests of SMB only. but no assignment of the policies was made to the latter. the loss or destruction of anything of the same kind even without the debtor's fault and before he has incurred in delay will not have the effect of extinguishing the obligation.37 Thus. Jr. Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of the amount of P535. > Law Union. 2207. respondent failed to present sufficient evidence to prove its cause of action. 1991. Dunn sold the property to Harding.34 Under Article 1263 of the Civil Code. the failure of the debtor to make the payment even by reason of a fortuitous event shall not relieve him of his liability.00 to respondent is DELETED for lack of factual basis. presented and marked as exhibits in court. > SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding. issued one for P7. No evidentiary weight can be given to Exhibit "F Levi Strauss". where the obligation consists in the payment of money. 1991 from petitioner's General Manager. x x x Petitioner failed to refute respondent's evidence. All these documents have been properly identified. but also the amount paid to settle the insurance claim. > Mortgage contract stated that Dunn was to have the property insured at his own expense. the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract.36 An obligation to pay money is generic. Moreover.00. therefore. Law Union Rock Insurance Company . approached Law Union for insurance to the extent of 15T upon the property. it must be stressed that the insurance in this case is not for loss of goods by fire but for petitioner's accounts with IMC and LSPI that remained unpaid 45 days after the fire. 23 . The subrogation receipt. Hence the appeal.119. San Miguel Brewery v.41 Respondent's action against petitioner is squarely sanctioned by Article 2207 of the Civil Code which provides: Art. WHEREFORE. not wanting to issue a policy for the entire amount. Stephen S. Thus. the petition is partly GRANTED. since it is not an admission of petitioner's unpaid account with LSPI. SMB’s general manager.613. the respondent has adequately established its claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.

Cosio required Palileo to sign a document known as ―conditional sale of residential building‖. Grepalife v. Cosio . NOT merely SMB’s and would have shown to whom the money. but Cosio refused to do so. Dr. > Dr. Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. If the wording had been: ―Payable to SMB. this was not what was stated in the policies.00) pesos. there is no clear and satisfactory proof that the policies failed to reflect the real agreement between the parties that would justify the reformation of these two contracts. > Trial Court found that the debt had an unpaid balance of P12T. had an insurable interest therein. Leuterio did not disclose that he had been suffering from hypertension.‖ The lower court erred in declaring that the proceeds of the insurance taken out by Cosio on the property insured to the benefit of Palileo and in ordering the former to deliver to the latter.107. may become owner of the interest insured”. > The insurance policy was issued in the name of Cosio. Allegedly. during the continuance of the risk. in case of loss. neither Dunn nor Harding could have recovered from the two policies. recover upon the two policies an amount in excess of its mortgage credit.Insurance Proceeds 97 PHIL 919 Facts: > On Dec. purporting to convey to Cosio. kidney or stomach disorder or any other physical impairment. Cosio was able to collect from the insurance company an indemnity of P13. and the policies had inadvertently been written in the form in which they were eventually issued. DBP submitted a death claim to Grepalife. > After execution of the document. Also it is provided in the IA that the insurance shall be applied exclusively to the proper interest of the person in whose name it is made. but is passed by subrogation to the insurer to the extent of the money paid. independently of the mortgagor. > In an application form. but it could NOT.107 (13. to the extent of his DBP mortgage indebtedness amounting to eighty-six thousand. but this was not done. mortgagee. The policies might have been worded differently so as to protect the owner. it would have proved an intention to insure the entire interest in the property. > Dr. the difference between the indebtedness and the amount of insurance received by Cosio. > Grepalife denied the claim alleging that Dr. but in such case. Unfortunately. Undoubtedly. he is entitled to the insurance proceeds in case of loss. Palileo obtained from Cosio a loan of P12T. and whether or not the trial court was correct in requiring Cosio to refund the excess of P1. Under the Insurance Act. > Palileo demanded from Cosio that she be credited with the necessary amount to pay her obligation out of the insurance proceeds. SMB as the mortgagee of the property. should be paid. diabetes. 18. By virtue of the Insurance Act. when he acquired the property. which caused his death. Palilieo v. Leuterio was not physically healthy when he applied for an insurance coverage and insisted that Dr. a two-story building of strong materials belonging to Palileo. a physician and a housing debtor of DBP applied for membership in the group life insurance plan. It declared the obligation of Palileo to Cosio fully compensated by virtue of the proceeds collected by Cosio and further held that the excess of P1.107 – 12." Consequently. cancer. he is not allowed to retain his claim against the mortgagor. The rule is that ―where a mortgagee. Leuterio.Held: NOPE.200. Wilfredo Leuterio. no change or assignment of the policies had been undertaken. Cosio insured the building against fire with Associated Insurance & Surety Co. > Grepalife issued the insurance coverage of Dr. lung. Leuterio died due to "massive cerebral hemorrhage.000) be refunded to Palileo Issue: Whether or not the trial court was justified in considering the obligation of Palileo fully compensated by the insurance amount that Cosio was able to collect from Associated.Real Party In Interest 316 SCRA 677 Facts: > A contract of group life insurance was executed between Grepalife and DBP. > To secure payment. the correct solution would be that the proceeds of the Insurance be delivered to Cosio. (Associated) for 15T. If during the negotiation for the policies. but her claim against Palileo should be considered assigned to the insurance company who is deemed subrogated to the rights of Cosio to the extent of the money paid as indemnity. as its interests may appear. insures the mortgaged property in his own name and for his own interest.107 to Palileo. 24 . In the light of this ruling. However. remainder to whomsoever. CA . the parties had agreed that even the owner’s interest would be covered by the policies. such non-disclosure constituted concealment that justified the denial of the claim. > The building was partly destroyed by fire and after proper demand. the lower court would have been able to order that the contract be reformed to give effect to them in the sense that the parties intended to be bound. Leuterio answered questions concerning his health stating that he is in good health and has never consulted a physician for or a heart condition. Held: NO and NO. With respect to Harding. 1951. with a right to repurchase (on the part of Palileo). the measure of insurable interest in the property is the extent to which the insured might be daminified by the loss or injury thereof. two hundred (P86. high blood pressure. an any event.

appraised the car and declared that its present value was P3T. we must consider the insurable interest in mortgaged properties and the parties to this type of contract. and is therefore liable to pay the proceeds of the insurance Harding v. Harding. Thereafter. He then gave the car to his wife Mrs. Commercial Union Assurance Company. the proceeds from such insurance will be applied to the payment of the mortgage debt. To resolve the issue. Where it appears that the proposal form. in the absence of willful misstatement. the insurance is on the mortgagor’s interest. Grepalife alleges that the complaint was instituted by the widow of Dr.8T and not 3T. there was no sufficient proof that the insured had suffered from hypertension. which in turn is Commercial Union’s agent). Leuterio. and the mortgagor continues to be a party to the contract. the policy stating that: "In the event of the debtor’s death before his indebtedness with the Creditor [DBP] shall have been fully paid. Harding to insure the care with Commercial. will or succession to any person. stated that Dr.Willful Misstatement 38 PHIL 464 Facts: > Henry Harding bought a car for 2T in 1915. The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. such loss-payable clause does not make the mortgagee a party to the contract. since it is DBP who insured the life of Dr. 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. hence. Under such circumstances. Leuterio were for hypertension. In the case at bar. not the real party in interest. Hernando Mejia. > RTC ruled in favor of widow and against Grepalife. Leuterio was not autopsied. Dr. the proposal is to be regarded as the act of the insurer. the latter denied payment thereof. whether he has an insurable interest or not. Commercial refused to pay because the car’s present value was only 2. As to the question of whether there was concealment. who issued the death certificate. It argues that when the Court of Appeals affirmed the trial court’s judgment. Grepalife. Held: Commercial is liable. > Mrs. 14 the widow of the decedent Dr. other causes were not ruled out. In a similar vein. where the mortgagor pays the insurance premium under the group insurance policy. the petitioner failed to clearly and satisfactorily establish its defense. Issue: Whether or not Commercial is liable. otherwise known as the "mortgage redemption insurance. Philamcare v.> The widow of the late Dr. and such person may recover it whatever the insured might have recovered. Grepalife was held liable to pay the proceeds of insurance contract in favor of DBP. > While Mrs. filed a complaint against Grepalife for "Specific Performance with Damages. Issue: Whether or not the widow is the real party in interest. even if incorrect." During the trial. and Smith Bell sent an agent to Luneta Garage. 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. 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. CA held as affirmed by the SC that contrary to Grepalife’s allegations. the appellant had not proven nor produced any witness who could attest to Dr. the indispensable party who was not joined in the suit. the mortgagee is simply an appointee of the insurance fund. Leuterio complained of headaches presumably due to high blood pressure. Leuterio’s medical history. will not be regarded as warranted by the insured. based partly from the information given by the widow." is a device for the protection of both the mortgagee and the mortgagor. The inference was not conclusive because Dr. the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness. thereby relieving the heirs of the mortgagor from paying the obligation. if there is any. The rationale of a group insurance policy of mortgagors. Leuterio. making the loss payable to the mortgagee. Harding signed. the latter induced Mrs. ample protection is given to the mortgagor under such a concept so that in the event of death. > Subsequently. Held: YES. This amt was written in the proposal form which Mrs. hence the trial court acquired no jurisdiction over the case. shall then be paid to the beneficiary/ies designated by the debtor. Harding was having the car repaired at the Luneta Garage (Luneta was an agent of Smith Bell and Co. Grepalife appealed contending that the wife was not the proper party in interest to file the suit. while signed by the insured was made out by the person authorized to solicit the insurance (Luneta and Smith Bell) the facts stated in the proposal. Leuterio. an amount to pay the outstanding indebtedness shall first be paid to the creditor and the balance of sum assured. Aside from the statement of the insured’s widow who was not even sure if the medicines taken by Dr. interposing the defense of concealment committed by the insured. On the part of the mortgagee. was called to testify. CA.. Dr. Mejia’s findings." When DBP submitted the insurance claim against petitioner. who together with the manager of LUneta. In this type of policy insurance. Leuterio may file the suit against the insurer. (not DBP) and has legal standing to file the suit. Harding agreed.Health Care Agreement 25 . The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance. the car was damaged by fire. Consequently.

In any case.00 per disability. he answered NO to the following question: ―Have you or any of your family members ever consulted or been treated for high blood pressure. Where matters of opinion or judgment are called for. amounting to about P76. to be actually untrue. > According to Philamcare. as a matter of expectation or belief.00 > After her husband was discharged from the MMC. 1990. 1990. but is obligated to make further inquiry. Sec. In the end.379 SCRA 356 (2002) Facts: > Ernani Trinos. answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. Prior notice of cancellation to insured. > Julita instituted. Having assumed a responsibility under the agreement. petitioner is bound to answer the same to the extent agreed upon. applied for a health care coverage with Philamcare. The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. heart trouble. It appears that in the application for health coverage. raising the primary argument that a health care agreement is not an insurance contract. However. Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive. the insurable interest of respondent's husband in obtaining the health care agreement was his own health. Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. Philamcare cannot rely on the stipulation regarding "Invalidation of agreement" which reads: Failure to disclose or misrepresentation of any material information by the member in the application or medical examination. > During the period of his coverage. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: 1. In the standard application form. or its acceptance at a lower rate of premium. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. The amount of coverage was increased to a maximum sum of P75. injury or other stipulated contingent. intention. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true." The right to rescind should be exercised previous to the commencement of an action on the contract. 1989 to March 1. He was also entitled to avail of "out-patient benefits" such as annual physical examinations. he was admitted at the Chinese General Hospital (CGH). belief. the same was extended for another year from March 1. He was a issued Health Care Agreement. The periods having expired. whether intentional or unintentional. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. preventive health care and other out-patient services. 3. cancer. Once the member incurs hospital. Under the title Claim procedures of expenses. In this case. 48 does not apply. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. She asked for reimbursement of her expenses plus moral damages and attorney's fees. 1988 to March 1. the health care provider must pay for the same to the extent agreed upon under the contract. listed therein. Julita brought her husband home again. had 12 mos from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma. This largely depends on opinion rather than fact. opinion. > While her husband was in the hospital. diabetic and asthmatic. 1989. an action for damages against Philamcare. Under Section 27 of the Insurance Code. if the statement is obviously of the foregoing character. and under such. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. 1990. consultation. treatment or any other medical advice or examination. since in such case the insurer is not justified in relying upon such statement. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. Due to financial difficulties. An undisclosed or misrepresented information is deemed material if its revelation would have resulted in the declination of the applicant by Philamcare or the assessment of a higher Membership Fee for the benefit or benefits applied for. Julita was constrained to bring him back to the CGH where he died on the same day. and this is likewise the rule although the statement is material to the risk. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned. the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid. Besides. a representation of the expectation. Petitioner argues that respondent's husband concealed a material fact in his application. mailed or delivered to the insured at the address shown in the policy. whether ordinary or emergency. Issues and Resolutions: Philamcare brought the instant petition for review. he was entitled to avail of hospitalization benefits. liver disease. which is primarily a contract of indemnity. medical or any other expense arising from sickness. 2. Philamcare. > Upon the termination of the agreement. with or without the authority to investigate. Philamcare denied her claim saying that the Health Care Agreement was void.000. (A)lthough false. Later. 1990 to June 1. 26 . give details)” > The application was approved for a period of one year from March 1. or the impossibility of which is shown by the facts within his knowledge. "a concealment entitles the injured party to rescind a contract of insurance. the defense of concealment or misrepresentation no longer lie. Thus. RTC decided in favor of Julita. > Julita had no choice but to pay the hospitalization expenses herself. asthma or peptic ulcer? (If Yes. Ernani had fever and was feeling very weak. CA affirmed. Julita tried to claim the benefits under the health care agreement. contrary to his answer in the application form. Must be in writing. hence the "incontestability clause" under the Insurance Code Title 6. diabetes. In the morning of April 13.000. The health care agreement was in the nature of non-life insurance. especially coming from respondent's husband who was not a medical doctor. no rescission was made. SC held that in the case at bar. there was concealment regarding Ernani's medical history. petitioners required respondent's husband to sign an express authorization for any person. since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. petitioner is liable for claims made under the contract. that which he then knows. he was attended by a physical therapist at home. then from March 1. 1990.

00 as exemplary damages. In the present petition. Manila. 2 III. IV. When the terms of insurance contract contain limitations on liability. merchandise. the terms of an insurance contract are to be construed strictly against the party which prepared the contract — the insurer. Branch 6. 1 3. on 5 October 1988. On appeal. A motion for reconsideration by United was denied on 29 March 1996..000. fire broke out inside the leased premises.00) with the United Insurance Co. courts should construe them in such a way as to preclude the insurer from non-compliance with his obligation. as lessees. . . 124520 August 18. When CKS learned of the insurance earlier procured by the Cha spouses (without its consent). rendered a decision * ordering therein defendant United to pay CKS the amount of P335. goods and effects placed at any stall or store or space in the leased premises without first obtaining the written consent and approval of the LESSOR. (hereinafter United) without the written consent of private respondent CKS. On 2 June 1992. Being a contract of adhesion. 7. INC. P20. respondent Court of Appeals in CA GR CV No. respondents. it wrote the insurer (United) a demand letter asking that the proceeds of the insurance contract (between the Cha spouses and United) be paid directly to CKS.000. 5. entered into a lease contract with private respondent CKS Development Corporation (hereinafter CKS). as lessor.: This petition for review on certiorari under Rule 45 of the Rules of Court seeks to set aside a decision of respondent Court of Appeals. affirming the trial court decision. Petitioner-spouses Nilo Cha and Stella Uy-Cha. G. 8.. and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted. especially to avoid forfeiture. to furnish facts on which cancellation is based. 6. COURT OF APPEALS and CKS DEVELOPMENT CORPORATION. . If the LESSEE obtain(s) the insurance thereof without the consent of the LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own benefit. The core issue to be resolved in this case is whether or not the aforequoted paragraph 18 of the lease contract entered into between CKS and the Cha spouses is valid insofar as it provides that any fire insurance policy obtained by the lessee (Cha 27 . Notwithstanding the above stipulation in the lease contract. . based on its lease contract with the Cha spouses. the latter filed a complaint against the Cha spouses and United.11 and defendant Cha spouses to pay P50. The phraseology used in medical or hospital service contracts. Hence. None of the above pre-conditions was fulfilled in this case. The LESSEE shall not insure against fire the chattels. 2. vs. textiles. ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. The undisputed facts of the case are as follows: 1. . deleting however the awards for exemplary damages and attorney's fees. On the day that the lease contract was to expire. Inc. the Cha spouses insured against loss by fire the merchandise inside the leased premises for Five Hundred Thousand (P500. One of the stipulations of the one (1) year lease contract states: 18.. No. petitioners. and UNITED INSURANCE CO.063. 39328 rendered a decision ** dated 11 January 1996. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured. PADILLA. MORALS AND PUBLIC POLICY THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO DECLARE THE CONTRACT OF LEASE ENTERED INTO AS A CONTRACT OF ADHESION AND THEREFORE THE QUESTIONABLE PROVISION THEREIN TRANSFERRING THE PROCEEDS OF THE INSURANCE TO RESPONDENT MUST BE RULED OUT IN FAVOR OF PETITIONER THE HONORABLE COURT OF APPEALS ERRED IN AWARDING PROCEEDS OF AN INSURANCE POLICY TO APPELLEE WHICH IS NOT PRIVY TO THE SAID POLICY IN CONTRAVENTION OF THE INSURANCE LAW THE HONORABLE COURT OF APPEALS ERRED IN AWARDING PROCEEDS OF AN INSURANCE POLICY ON THE BASIS OF A STIPULATION WHICH IS VOID FOR BEING WITHOUT CONSIDERATION AND FOR BEING TOTALLY DEPENDENT ON THE WILL OF THE RESPONDENT CORPORATION.000. and exclusionary clauses of doubtful import should be strictly construed against the provider. 4. the Regional Trial Court.00 as attorney's fees and costs of suit.4. United refused to pay CKS. .R. J. the following errors are assigned by petitioners to the Court of Appeals: I. 1997 Spouses NILO CHA and STELLA UY CHA. THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO DECLARE THAT THE STIPULATION IN THE CONTRACT OF LEASE TRANSFERRING THE PROCEEDS OF THE INSURANCE TO RESPONDENT IS NULL AND VOID FOR BEING CONTRARY TO LAW. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. II. This is equally applicable to Health Care Agreements. must be liberally construed in favor of the subscriber. such as the one at bar.

The proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella Uy-Cha (herein co-petitioners). Ebrado filed with the insurer a claim for the proceeds of the Policy as the designated beneficiary therein. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof. without the consent of CKS. The automatic assignment of the policy to CKS under the provision of the lease contract previously quoted is void for being contrary to law and/or public policy. Insurable interest in the property insured must exist at the time the insurance takes effect and at the time the loss occurs. Ebrado died as a result of an t when he was hit by a failing branch of a tree.00 plus the additional benefits for accidental death also in the amount of P5. vs.. the decision of the Court of Appeals in CA-G. basic in the law on contracts that the stipulations contained in a contract cannot be contrary to law.00 paid for the premium due November. whether the person insured has or has not any interest in the property insured. which provides: Sec. Ltd. She asserts that she is the one entitled to the insurance proceeds. 1969. rider for Accidental Death for the same amount Buenaventura C. 18 of the Insurance Code provides: Sec. the insurer. It is. public order or public policy. 009929 on a wholelife for P5. L-44059 October 28.. morals. On October 21. although she admits that she and the insured Buenaventura C. 1977 THE INSULAR LIFE ASSURANCE COMPANY. of course. MARTIN. In the present case. In such a case. G. The liability of the Cha spouses to CKS for violating their lease contract in that the Cha spouses obtained a fire insurance policy over their own merchandise. defendants-appellants. In doubt as to whom the insurance proceeds shall be paid.. good customs. 1969.27. 1969. The insurer (United) cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property insured. 18. minus the unpaid premiums and interest thereon due for January and February. Ebrado designated T. the contract of insurance is a mere wager which is void under Section 25 of the Insurance Code. 1970. plaintiff-appellee. not the common-law wife. awarding the proceeds of the fire insurance policy to petitioners Nilo Cha and Stella Uy-Cha. DE EBRADO.882. Pascuala Vda. respondent CKS cannot. Ebrado as the revocable beneficiary in his policy. The Insular Life Assurance Co. 25. is a separate and distinct issue which we do not resolve in this case. CV No. Policy No. it cannot be denied that CKS has no insurable interest in the goods and merchandise inside the leased premises under the provisions of Section 17 of the Insurance Code which provide: Sec. Therefore.882.spouses) over their merchandise inside the leased premises is deemed assigned or transferred to the lessor (CKS) if said policy is obtained without the prior written consent of the latter. No. is void. Every stipulation in a policy of Insurance for the payment of loss. This insurable interest over said merchandise remains with the insured. 1968. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured. Carponia T.73. Ltd. He to her as his wife.R. 39328 is SET ASIDE and a new decision is hereby entered. or that the policy shall be received as proof of such interest. As the policy was in force.: This is a novel question in insurance law: 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? On September 1. Buenaventura Cristor Ebrado was issued by The Life Assurance Co. the Cha spouses. Ebrado. CARPONIA T. J.R. 28 . in the sum of P36.00 and the refund of P18.745.. liable to pay the coverage in the total amount of P11. The Insular Life Assurance Co. 4 The basis of such requirement of insurable interest in property insured is based on sound public policy: to prevent a person from taking out an insurance policy on property upon which he has no insurable interest and collecting the proceeds of said policy in case of loss of the property.. Ltd. Ebrado were merely living as husband and wife without the benefit of marriage. LTD. SO ORDERED. EBRADO and PASCUALA VDA. 17. WHEREFORE. A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract of indemnity.00 with a. 3 Sec. under the Insurance Code — a special law — be validly a beneficiary of the fire insurance policy taken by the petitioner-spouses over their merchandise. representing the face value of the policy in the amount of P5. commenced an action for Interpleader before the Court of First Instance of Rizal on April 29. Buenaventura C. Carponia T. and every policy executed by way of gaming or wagering.882. de Ebrado also filed her claim as the widow of the deceased insured.

but on July 11.882. after which. he was insured with Insular Life Assurance Co. Felizardo and Helen. 2) that during the lifetime of the deceased. Ebrado were living together as husband and wife without being legally married and that the marriage of the insured with the other defendant Pascuala Vda. Carponia T. Article 739 of the new Civil Code provides: ñé+.00 with the rider for accidental death benefit as evidenced by Exhibits A for plaintiffs and Exhibit 1 for the defendant Pascuala and Exhibit 7 for Carponia Ebrado. 5) that complainant Carponia Ebrado filed claim with the Insular Life Assurance Co. 739 of the Civil Code that a criminal conviction for adultery or concubinage is not essential in order to establish the disqualification mentioned therein. as proceeds of the policy P11. the trial court rendered judgment declaring among others. Matters not expressly provided for in such special laws shall be regulated by this Code. It is. Hernando. From this judgment.73. essential that such adultery or concubinage exists at the time defendant Carponia T. 7) that there is now due from the Insular Life Assurance Co. Elsa. same was never changed up to the time of his death and the wife did not have any opportunity to write the company that there was reservation to change the designation of the parties agreed that a decision be rendered based on and stipulation of facts as to who among the two claimants is entitled to the policy. "any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a fife insurance policy by the person who cannot make a donation to him. 29 . 1972. a pre-trial order was entered reading as follows: ñé+. he was living with his common-wife.£ªwph!1 During the pre-trial conference. however. 8) that the beneficiary designated by the insured in the policy is Carponia Ebrado and the insured made reservation to change the beneficiary but although the insured made the option to change the beneficiary. Section 50 of the Insurance Act which provides that "(t)he insurance shag be applied exclusively to the proper interest of the person in whose name it is made" 1 cannot be validly seized upon to hold that the mm includes the beneficiary. the Court proceeded to have the parties submit their evidence for the purpose of the pretrial and make admissions for the purpose of pretrial. definitely. The trial court held: ñé+. the contract of life insurance is governed by the general rules of the civil law regulating contracts. Upon motion of the parties. Ebrado disqualified from becoming beneficiary of the insured Buenaventura Cristor Ebrado and directing the payment of the insurance proceeds to the estate of the deceased insured. since a contract of insurance is personal in character. Erlinda. a pre-trial conference was held on July 8. Ebrado appealed to the Court of Appeals. Those made between persons who were guilty of adultery or concubinage at the time of donation. 4 Common-law spouses are. 3 And under Article 2012 of the same Code. 4) that Buenaventura in accident on October 21." When not otherwise specifically provided for by the Insurance Law. During this conference. in consideration thereof. Rather. all surnamed Ebrado. the prohibitory laws against illicit relationships especially on property and descent will be rendered nugatory. the general rules of civil law should be applied to resolve this void in the Insurance Law.After the issues have been joined. 1969 as evidenced by the death Exhibit 3 and affidavit of the police report of his death Exhibit 5. Since it is agreed in their stipulation above-quoted that the deceased insured and defendant Carponia T. 1. Article 2011 of the New Civil Code states: "The contract of insurance is governed by special laws. The guilt of the donee (beneficiary) may be proved by preponderance of evidence in the same proceeding (the action brought to declare the nullity of the donation). 612. Ebrado was made beneficiary in the policy in question for the disqualification and incapacity to exist and that it is only necessary that such fact be established by preponderance of evidence in the trial. Neither is it also necessary that a finding of such guilt or commission of those acts be made in a separate independent action brought for the purpose.£ªwph!1 It is patent from the last paragraph of Art. On September 25. We affirm the judgment of the lower court. Carponia Ebrado. Carponia T. 2 Otherwise. parties Carponia T. SO ORDERED. It is quite unfortunate that the Insurance Act (RA 2327.745. as amended) does not contain any specific provision grossly resolutory of the prime question at hand. dated September 1. they are given ten (10) days to file their simultaneous memoranda from the receipt of this order. 3) that during the lifetime of Buenaventura Ebrado. Those made between persons found guilty of the same criminal offense. barred from receiving donations from each other. 1976. Ebrado and Pascuala Ebrado agreed and stipulated: 1) that the deceased Buenaventura Ebrado was married to Pascuala Ebrado with whom she has six — (legitimate) namely. as the same could easily be circumvented by modes of insurance. 1968 for the sum of P5. which was contested by Pascuala Ebrado who also filed claim for the proceeds of said policy 6) that in view ofthe adverse claims the insurance company filed this action against the two herein claimants Carponia and Pascuala Ebrado. Hence. 009929 whole life plan. 1972. Under Policy No. the Appellate Court certified the case to Us as involving only questions of law. Ebrado is disqualified from becoming the beneficiary of the policy in question and as such she is not entitled to the proceeds of the insurance upon the death of the insured.£ªwph!1 The following donations shall be void: 1. as amended) or even the new Insurance Code (PD No. Cresencio. that there is no possibility of amicable settlement. the parties manifested to the court. The word "interest" highly suggests that the provision refers only to the "insured" and not to the beneficiary. with whom she had 2 children although he was not legally separated from his legal wife. de Ebrado was valid and still existing at the time the insurance in question was purchased there is no question that defendant Carponia T.

We do not think that a conviction for adultery or concubinage is exacted before the disabilities mentioned in Article 739 may effectuate. Ebrado is hereby declared disqualified to be the beneficiary of the late Buenaventura C. SO ORDERED. it cannot even be from the aforequoted provision that a prosecution is needed. on the basis of these admissions. inter virum et uxorem). in that pretrial. LAW IV). Titl. It case agreed upon and stipulated therein that the deceased insured Buenaventura C. a prejudice deeply rooted in our ancient law. If there is every any occasion where the principle of statutory construction that what is within the spirit of the law is as much a part of it as what is written. the proceeds of the policy are hereby held payable to the estate of the deceased insured. For it is not to be doubted that assent to such irregular connection for thirty years bespeaks greater influence of one party over the other." Article 739 itself provides: ñé+. the law plainly states that the guilt of the party may be proved "in the same acting for declaration of nullity of donation.£ªwph!1 If the policy of the law is. Ebrado in his life insurance policy.3. 1. a policy of life insurance is considered as a testament and in construing it. Carponia T. Otherwise the basic purpose discernible in such codal provision would not be attained. Both are founded upon the same consideration: liberality. The quantum of proof in criminal cases is not demanded.L. 7 this Court. It would be to indict the frame of the Civil Code for a failure to apply a laudable rule to a situation which in its essentials cannot be distinguished. 24. These stipulations are nothing less thanjudicial admissions which. and the guilt of the donee may be proved by preponderance of evidence in the same action. The underscored clause neatly conveys that no criminal conviction for the offense is a condition precedent. if it is at all to be differentiated the policy of the law which embodies a deeply rooted notion of what is just and what is right would be nullified if such irregular relationship instead of being visited with disabilities would be attended with benefits. In essence. as a consequence. through Justice Fernando. the action for declaration of nullity may be brought by the spouse of the donor or donee. lest the condition 6f those who incurred guilt should turn out to be better. Thus. In fact. XI. then there is very reason to apply the same prohibitive policy to persons living together as husband and wife without the benefit of nuptials. More specifically. the appealed judgment of the lower court is hereby affirmed. Moreover. with more reason should an illicit relationship be restricted by these disabilities. fr. On the contrary. 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. 1. It is hardly necessary to add that even in the absence of the above pronouncement. it would be sufficient if evidence preponderates upon the guilt of the consort for the offense indicated. So long as manage remains the threshold of family laws. 8 A fortiori. Whatever omission may be apparent in an interpretation purely literal of the language used must be remedied by an adherence to its avowed objective. Ebrado. so that the danger that the law seeks to avoid is correspondingly increased. reason and morality dictate that the impediments imposed upon married couple should likewise be imposed upon extra-marital relationship. 'it would not be just that such donations should subsist. Certainly a legal norm should not be susceptible to such a reproach. a judgment may be validly rendered without going through the rigors of a trial for the sole purpose of proving the illicit liaison between the insured and the beneficiary. Both are recipients of pure beneficence. with record to the disability on "persons who were guilty of adultery or concubinage at the time of the donation. If legitimate relationship is circumscribed by these legal disabilities. A beneficiary is like a donee. and the guilty of the donee may be proved by preponderance of evidence in the same action. 6 3. said: ñé+. reason and morality alike demand that the disabilities attached to marriage should likewise attach to concubinage.£ªwph!1 In the case referred to in No.' So long as marriage remains the cornerstone of our family law. any other conclusion cannot stand the test of scrutiny. 1). In fact. 1. Policy considerations and dictates of morality rightly justify the institution of a barrier between common law spouses in record to Property relations since such hip ultimately encroaches upon the nuptial and filial rights of the legitimate family There is every reason to hold that the bar in donations between legitimate spouses and those between illegitimate ones should be enforced in life insurance policies since the same are based on similar consideration As above pointed out. because from the premiums of the policy which the insured pays out of liberality.5 Under American law. reiterating the rationale 'No Mutuato amore invicem spoliarentur' the Pandects (Bk. As a consequence. in the language of the opinion of the then Justice J." ACCORDINGLY. Reyes of that court (Court of Appeals)." por-que no se enganen desponjandose el uno al otro por amor que han de consuno' (According to) the Partidas (Part IV. the parties even agreed "that a decision be rendered based on this agreement and stipulation of facts as to who among the two claimants is entitled to the policy. Cervantes. 2. Costs against Carponia T. this is it. no longer require proof and cannot be contradicted. Moreover. And. that during his lifetime. a beneficiary in a fife insurance policy is no different from a donee. 32 ad Sabinum. 4. 30 . Those made to a public officer or his wife. the requisite proof of common-law relationship between the insured and the beneficiary has been conveniently supplied by the stipulations between the parties in the pre-trial conference of the case. descendants or ascendants by reason of his office. the action for declaration of nullity may be brought by the spouse of the donor or donee. Carponia Ebrado. a life insurance policy is no different from a civil donation insofar as the beneficiary is concerned. 'to prohibit donations in favor of the other consort and his descendants because of and undue and improper pressure and influence upon the donor. the deceased insured was living with his common-law wife. In the case referred to in No. so far as possible treat it as a will and determine the effect of a clause designating the beneficiary by rules under which wins are interpreted. the courts will. with whom he has two children. As a consequence. the beneficiary will receive the proceeds or profits of said insurance. as already pointed out by Ulpian (in his lib. In the caw before Us. Ebrado was married to Pascuala Ebrado with whom she has six legitimate children. Tit. De donat.B. in Matabuena v.

pp.G. Record on Appeal. 4).000. the undisputed facts of this case are as follows: On October 21. 1964. either to the private respondent or its ad . On March 25.' " (Record on Appeal. caused by fire to its property consisting of stocks. p. Insurance Act. adjuster H. Fire Policy No. L-41014 November 28. F-3770 (Exhibit "A"). petitioner's counsel replied to aforesaid letter asking the insurance adjuster to verify from the records of the Bureau of Customs the entries of merchandise taken into the customs bonded warehouse razed by fire as a reliable proof of loss (Supra. the trial court denied private respondent's motion on the ground that the defense of lack of proof of loss or defects therein was raised for the first time after the commencement of the suit and that it must be deemed to have waived the requirement of proof of loss (Sections 83 and 84. 61-69). Oriental Assurance Corporation". On January 28. including furniture. No. San Nicolas. 3 in the Policy. private respondent informed counsel for the petitioner that it was not yet ready to accede to the latter's demand as the former is awaiting the final report of the insurance adjuster. Said policy was duly endorsed to petitioner as mortgagee/ trustor of the properties insured. 1965 of the insurance adjuster. 37-38). filed in the court a quo an action for a sum of money against the private respondent. 16-17). Manila. vs. fixtures.. On May 25. the case was considered submitted for decision from which order private respondent filed a motion for reconsideration to set the case or further reception of private respondent's additional evidence.R. 56889. 41735-R. 00 with Empire Surety and P250. entitled "Pacific Banking Corporation vs. On April 24. 1988 PACIFIC BANKING CORPORATION..00 with Victory (Brief for the Defendant pp.000. 1964. Oriental Assurance Corporation.H. which set aside the decision of the Court of First Instance (CFI) of Manila. It will be noted that the defense of fraud and/or violation of Condition No. p. 17-18). pp.00 issued in favor of Paramount Shirt Manufacturing Co.000. not exceeding P61.11 (Record on Appeal. private respondent raised the following defenses in its answer to wit: (a) lack of formal claim by insured over the loss and (b) premature filing of the suit as neither plaintiff nor insured had submitted any proof of loss on the basis of which defendant would determine its liability and the amount thereof. H. materials and supplies usual to a shirt factory. On September 9. 1964. At any rate.. the said insurance adjuster notified counsel for the petitioner that the insured under the policy had not filed any claim with it. pp. pp. 1-36). 21-22).. 61). while the aforesaid policy was in full force and effect. revealing undeclared co-insurances with the following: P30. by which private respondent Oriental Assurance Corporation bound itself to indemnify the insured for any loss or damage. 3 of the policy in relation to the other Insurance Clause.000. a debtor of petitioner in the amount of not less than Eight Hundred Thousand Pesos (P800. a fire broke out on the subject premises destroying the goods contained in its ground and second floors (Record on Appeal. 1967. "in order to prove that 'insured has committed a violation of condition No. H. ** which had in turn granted the complaint for a sum of money in Civil Case No.000. nor submitted proof of loss which is a clear violation of Policy Condition No. and for which reason. (hereinafter referred to as the insured. 19-20). 1964.H. petitioner presented in evidence Exhibit "H". petitioner. which is a communication dated December 22.00) and the goods described in the policy were held in trust by the insured for the petitioner under thrust receipts (Record on Appeal. 13-14). undertaken by insured Paramount on the same property covered by its policy with private respondent whereas the only coinsurances declared in the subject policy are those of P30. respondents PARAS.00. Bayne Adjustment Company (Brief for PlaintiffAppellee.11. 1 964.1963. in the form of non-declaration of coinsurances which was not pleaded in the answer was also not pleaded in the Motion to Dismiss. petitioner (plaintiff therein) on April 28. 1964.R. For failure of the insurance company to pay the loss as demanded. was issued to the Paramount Shirt Manufacturing Co. second and third floors of the building situated at number 256 Jaboneros St.: This is a petition for review on certiorari of the decision of respondent Court of Appeals * in CA-G. The insured was at the time of the issuance of the policy and is up to this time. for a period of one year commencing from that date to October 21. for brevity). to Asian Surety Insurance Co. Bayne Adjustment Co. with the knowledge and consent of private respondent to the effect that "loss if any under this policy is payable to the Pacific Banking Corporation".000. COURT OF APPEALS and ORIENTAL ASSURANCE CORPORATION.000. 31 . As gathered from the records. J.00 with Wellington Insurance.H. No. counsel for the petitioner sent a letter of demand to private respondent for indemnity due to the loss of property by fire under the endorsement of said policy (Brief for Plaintiff-Appellee. pp. 1964.00 with South Sea and P25. machinery and equipment while contained in the ground. P25. At the trial.5) On January 24.000. On January 4. (Record on Appeal. an open policy.00 with Malayan P50. p.00 with Asian Surety. in the principal sum of P61. 1967. pp.000. Inc. determination of the liability of private respondent could not be had (Supra. both in violation of Policy Condition No. Bayne Adjustment Co. pp. on June 30. 1964.

p. (Record on Appeal. the insured had been guilty of a false declaration. pp. 1 968. Otherwise stated. P6. 1964. the Court of Appeals reversed the decision of the trial court (Decision promulgated on April 23. JUSTICE CHANCO IS LEGALLY ERRONEOUS IN HOLDING THAT THE ACTION WAS PREMATURELY BROUGHT BECAUSE THE REQUIRED CLAIM UNDER THE INSURANCE LAW HAS NOT BEEN FILED. RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN DISMISSING THE CASE AND IN NOT AFFIRMING THE APPEALED DECISION OF THE TRIAL COURT. 1-3) The crux of the controversy centers on two points: (a) unrevealed co-insurances which violated policy conditions No. Manager of the Adjustment Co. RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN CONCLUDING FRAUD FROM THE BARE FACT THAT THE INSURED PARAMOUNT PROCURED ADDITIONAL INSURANCES OTHER THAN THOSE STATED IN THE POLICY IN SPITE OF THE EXISTENCE OF CONTRARY PRESUMPTIONS AND ADMITTED FACT AND CIRCUMSTANCES WHICH NEGATE THE CORRECTNESS OF SAID CONCLUSION. On April 18. the insured was guilty of clear fraud (Rollo.1967. SO ORDERED.100. the dispositive portion of which reads: WHEREFORE. The Insured shall give notice to the Company of any insurance already effected. with interest at the rate of 8% per annum from January 4. concrete evidence of fraud or false declaration by the insured was furnished by the petitioner itself when the facts alleged in the policy under clauses "Co-Insurances Declared" and "Other Insurance Clause" are materially different from the actual number of coinsurances taken over the subject property. until the amount is fully paid. which should be established with such quantum of proof as is required for any crime. Consequently. (Record on Appeal. Policy Condition No. it should have been considered waived. all benefit under this policy shall be forfeited.1975 for lack of merit (Rollo. the risk does not attach and the policy never becomes a contract between the parties. covering any of the property hereby insured. pp. Hence. Rollo. p. Petitioner's contention that the allegation of fraud is but a mere inference or suspicion is untenable. Falsehood in such representations is not shown to vary or add to the contract. THE FINDING OF THE TRIAL COURT THEREON SHOULD BE CONSIDERED AFFIRMED. 140-141) On appeal. 3 and (b) failure of the insured to file the required proof of loss prior to court action. by reason of said unrevealed insurances. (Brief for Petitioners.On September 30. but this was denied on July 3. to April 28. Representations of facts are the foundation of the contract and if the foundation does not exist. 129). RESPONDENT COURT ERRED IN NOT HOLDING THAT CONSIDERING THE VOTING ON THE PARTICULAR QUESTION OF FRAUD. that was deception. III. 2133).000. it could have hesitated or plainly desisted from entering into such contract. "the whole foundation of the contract fails. pp. pp. 3 explicitly provides: 3. 1975. THE CONCURRING OPINION OF MR. 54-67). (b) The record of the case is bereft of proof of such fraud. NOTWITHSTANDING THE LETTER. a clear misrepresentation and a vital one because where the insured had been asked to reveal but did not. but to show that no contract has ever existed (Tolentino. WHO IS NOT THE INSURED BUT ONLY THE ASSIGNEE/MORTGAGEE OF THE PROPERTY INSURED. the case was set for the continuation of the hearing for the reception merely of the testimony of Alejandro Tan Gatue. judgment is hereby rendered ordering the defendant to pay the plaintiff P61. IV. II. as attorney's fees.00. V. 12) It is not disputed that the insured failed to reveal before the loss three other insurances. 32 . the superstructure does not arise. resulting in this petition with the following assigned errors. In fact. (c) The private respondent insurer did not even plead or in anywise raise fraud as a defense in its answer or motion to dismiss and. 1964. Petitioner filed a motion for reconsideration of the said decision of the respondent Court of Appeals. had the insurer known that there were many co-insurances. (a) The respondent Court did not consider the legal presumption against the existence of fraud. p. therefore. (EXHIBIT "C") OF PETITIONER-APPELLANT'S LAWYER WHICH IS A SUBSTANTIAL COMPLIANCE OF THE LEGAL REQUIREMENTS AND NOT HOLDING THAT PRIVATE RESPONDENT INSURER HAD ALREADY WAIVED THE SUPPOSED DEFECTS IN THE CLAIM FILED BY PETITIONER-APPELLANT FOR ITS FAILURE TO CALL THE ATTENTION OF THE LAYER TO SUCH ALLEGED DEFECTS AND FOR ENDORSING THE CLAIM TO ITS ADJUSTER FOR PROCESSING. and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage. and 12% from April 29. or which may subsequently be effected. As found by the Court of Appeals. or to terminate a contract which has once been made.00. (d) The total amount of insurance procured by the insured from the different companies amounted to hardly onehalf (½) of the value of the goods insured. and the costs. over the vehement opposition of the petitioner (Record on Appeal.. 1964. 25). RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN NOT INTERPRETING THE PROVISIONS OF THE POLICY LIBERALLY IN FAVOR OF THE HEREIN PETITIONER-APPELLANT. I. the trial court rendered a decision adjudging private respondent liable to the petitioner under the said contract of insurance.

misrepresentation (Rollo. 123 SCRA 99 [1983]. Instead.A. v. the former did not furnish the latter whatever pertinent documents were necessary to prove and estimate its loss. Petitioner did not only object to the introduction of evidence but on the contrary. plans. petitioner shifted upon private respondent the burden of fishing out the necessary information to ascertain the particular account of the articles destroyed by fire as well as the amount of loss. if any. petitioner argues that considering the purpose for which the endorsement or assignment was made. petitioner merely wrote letters to private respondent to serve as a notice of loss. the law does not encourage unnecessary litigation (Eagle Star Insurance Co. 8th Ed. 47 SCRA 276 [1972]. Inc. it follows that private respondent could not be deemed to have finally rejected petitioner's claim and therefore the latter's cause of action had not yet arisen. that is. as if it had never been entered into. 11 specifically provides that the insured shall on the happening of any loss or damage give notice to the company and shall within fifteen (15) days after such loss or damage deliver to the private respondent (a) a claim in writing giving particular account as to the articles or goods destroyed and the amount of the loss or damage and (b) particulars of all other insurances. (Rollo. C. with more reason petitioner which is merely claiming as indorsee of said insured. 33-35). thereafter. invoices. or in the very least. Ana v. Tagle. the Court can consider a fact which surfaced only after trial proper (Maharlika Publishing Corp. Compliance with condition No. the latter remained unheedful. C. together with the preliminary submittal of relevant documents had not been complied with. It is obvious that petitioner has missed all together the import of subject mortgage clause which specifically provides: Mortgage Clause Loss. the cause of action will accrue from the time the insurer finally rejects the claim for payment (Eagle Star Insurance v. the cause of action on the policy accrues when the loss occurs. Commercial Union Assurance Co. Ltd. (Record on Appeal. it being hereby understood and agreed that this insurance as to the interest of the mortgagee/trustor only herein. cannot certainly defeat the right of the petitioner to recover the insurance as mortgagee/assignee. should be deemed to have been waived. books.A. As the insurance policy against fire expressly required that notice should be given by the insured of other insurance upon the same property. shall not be invalidated by any act or neglect—except fraud or misrepresentation.) A void or inexistent contract is one which has no force and effect from the very beginning. shall be payable to the PACIFIC BANKING CORPORATION Manila mortgagee/trustor as its interest may appear. it is but fair and just that where the insured who is primarily entitled to receive the proceeds of the policy has by its fraud and/or misrepresentation.. inventory needed by private respondent or its adjuster to ascertain the amount of loss and after compliance await the final rejection of its claim. cannot be entitled to such proceeds. under this policy. 333 [1930]. papers. specifications. Pioneer Ins. 27). As correctly found by the Court of Appeals. on demand pay the same. 991. But when the policy provides that no action shall be brought unless the claim is first presented extrajudicially in the manner provided in the policy. Otherwise stated. 20 which requires every notice and other communications to the insurer to be written or printed. The evidence adduced shows that twenty-four (24) days after the fire. forfeited said right.. 55 Phil. 18-20). presented the very evidence that proved its existence. p. p. The argument that notice of co-insurances may be made orally is preposterous and negates policy condition No. proofs and information with respect to the claim". it would be absurd to hold that petitioner is barred from recovering the insurance on account of the alleged violation committed by the insured (Rollo. vs. 11 is a requirement sine qua non to the right to maintain an action as prior thereto no violation of petitioner's right can be attributable to private respondent. Indeed. if any. p. policy condition No. Chia Yu. pp. Avila v. 55 Phil 701 [1955]).. documents. Union Manufacturing Co. Yap.. cannot be invalidated. In the case at bar. to protect the mortgagee/assignee against any untoward act or omission of the insured. the mortgagee/ trustor shall.. 26) The paragraph clearly states the exceptions to the general rule that insurance as to the interest of the mortgagee. It is noteworthy that private respondent and its adjuster notified petitioner that insured had not yet filed a written claim nor submitted the supporting documents in compliance with the requirements set forth in the policy. 142 SCRA 561 [1986]). namely: fraud. or arson—of the mortgagor or owner/trustee of the property insured.Commercial Laws of the Philippines. or misrepresentation or arson. v. provided. Vol. Since the required claim by insured. Undoubtedly. 61 SCRA 432 [1974]). there is a need to make its own finding to support its conclusion. Be that as it may.. duplicates or copies thereof. insured was required "at his own expense to produce. Likewise. 701.. concealment of the aforecited co-insurances can easily be fraud. Despite the notice. Philippine Guaranty Co. Inc. II. Petitioner points out that Condition No. & Surety Corp. pp.. it is established that the Supreme Court has ample authority to give beyond the pleadings where in the interest of justice and the promotion of public policy. and which cannot be validated either by time or by ratification Tongoy v. This is so. et al. Petitioner should have endeavored to file the formal claim and procure all the documents. v. 145 SCRA [1986]). 3 in the policy in relation to the "other insurance clause" supposedly to have been violated. the total absence of such notice nullifies the policy (Sta. as before such final rejection. Petitioner further stressed that fraud which was not pleaded as a defense in private respondent's answer or motion to dismiss. Particularly referring to the mortgage clause of the policy. supra). p. Brief for the petitioner. procure and give to the company all such further particulars.<äre||anº•1àw> 33 . that in case the mortgagor or owner/ trustee neglects or refuses to pay any premium. It will be noted that the fact of fraud was tried by express or at least implied consent of the parties. Generally. vouchers. Chia Yu. there was no real necessity for bringing suit.

276 supra). Inc. The application was in two parts. On Apri 20 1966. While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly as against the insurer company (Eagle Star Insurance Co.. the insured cannot recover. 1965. Vicenta was taken to a hospital for what was first diagnosed as alcoholism and later changed to manic-depressive psychosis and then again changed to pscyhonuerosis. SO ORDERED. Said findings of the appellate court are final and cannot be disturbed by the Supreme Court except in certain cases Lereos v. 23. 117 SCRA 395 [1985]. Her answers having shown that she was health. Vicenta died of cerebral apoplexy. No costs. West Coast Life Insurance Co. p. Philamlife issued her a policy effective Oct.. Petrophil Corp. The terms of the policy constitute the measure of the insurer's liability. 145 SCRA 311 [1986]. Issue: Whether or not on the basis of the misrepresentations of Vicenta. Held: YES. Inc. Since it was only recent from the time she first applied. Argente v. 61 years old and illiterate who spoke only Chinese.. her replies were as follows: o ―How frequently do you use beer. CA. 2) > The policy was again approved. Midland Textile Ins. much less the herein petitioner. Montesa v. applied for life insurance for 60T with Philamlife. 117 SCRA 480 [1982] Director of Lands v. 1965 with her nephew Vicente Tang as beneficiary. > It is admitted that in the Medical Examiner’s report. Sandiganbayan. Inc. v. Finally. It appearing that insured has violated or failed to perform the conditions under No. during the effectivity of the policy. Courts are not permitted to make contracts for the parties. & Surety Co.. they must be taken and understood in their plain. 30 Phil.Insurance Fraud or Mistake 90 SCRA 236 Facts: > On Sept. Thereafter. and the decision appealed from is AFFIRMED. the established rule in this jurisdiction that findings of fact of the Court of Appeals when supported by substantial evidence. The compliance of the insured with the terms of the policy is a condition precedent to the light of recovery (Stokes v.. If the policy was procured by fraudulent misrepresentations. v. like other contracts. The Capital Ins. CA. v. 146 SCRA 385 [1986]). 117 SCRA 346 [1982]. Inc. Alonzo. are not reviewable on appeal by certiorari. v. widow.Verily.. both in English. National Power Corp. 147 SCRA 238-239 [1987]). Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. Guita v. Phil. Bernardo is barred from recovery. Sacay v. CA. spirits and other intoxicants?‖ she answered ―beer only in small quantities‖. p. Taurus Taxi Co. the contract of insurance apparently set forth therein was never legally existent. Herrera v.. Guaranty Co. 2965. The agreement has the force of law between the parties. It can be fairly assumed that had the true facts been disclosed by the insured. Co. in response to the question asked by the medical examiner. 127 SCRA 766 [1984]). 139 SCRA 576 [1985].. Bernardo claimed payment but was refused. and in order to recover. the insurance would never have been granted. III SCRA 341 [1982]. Ltd. ordinary and popular sense (Young v. wine.. 142 SCRA 609 [1986]. et al. CA. 15. by West Coast. 124 SCRA 630 [1983]. v. Chia Yu. 30 Phil. GSIS v. deserves reiteration. and such violation or want of performance has not been waived by the insurer. 24 SCRA 458 [1968]. Manlapaz v. 617 [1919]. Union Manufacturing Co. Pichel v. contracts of insurance. 702. Lee Su Guat died of Lung cancer. Co. 18. Phil. Vicenta. If such terms are clear and unambiguous. Inc. 34 .. CA. The court found that the representations made by Vicenta in his application for life insurance were false with respect to her state of health and that she knew and was aware that the representations so made by her were false.Misrepresentation 51 PHIL 725 Facts: > A joint life insurance policy was issued to Bernardo Argente and his wife Vicenta upon payment of premium. Malayan Insurance Co. CA. no further medical exam was made but she accomplished Part 1 (which certified the truthfulness of statements made in Part.. CA. 145 SCRA 533 [1986]). Gonzales v. the petition is DISMISSED for lack of merit. > On Nov. 25. > On Nov. Inc. Guaranty Co. 1925. In an action on a life insurance policy where the evidence conclusively shows that the answers to questions concerning diseases were untrue. Tang v. Lee Su Guat.. CA. petitioner prematurely filed Civil Case No. are to be construed according to the sense and meaning of the terms which the parties themselves have used. supra. not disputed that in 1924. Inc... p. PREMISES CONSIDERED. the function and duty of the courts is simply to enforce and carry out the contracts actually made (Young v. Midland Textile Ins. the insured must show himself within those terms. Union Manufacturing Co. 617 [1915]. yet. 3 and 11 of the contract. CA. 56889 and dismissal thereof was warranted under the circumstances.. 117 SCRA 770 [1982]. Dalida v. the truth or falsity of the answer becomes the determining factor. CA. The parties have a right to impose such reasonable conditions at the time of the making of the contract as they may deem wise and necessary. 277 supra. o ―What physician have you consulted or been treated by within the last 5 years and for what illness or ailment?‖ she answered ―none‖ > It is however. Lee again applied for additional insurance of her life for 40T. > The second part dealt with her state of health.

Certainly. and the insurer has not proven that the terms thereof had been fully explained to her as provided by Art. > Tang’s position. the contract can still be rescinded. > In Jan. and considering the findings of both the trial court and the CA as to the Concealment of Lee. > Both trial court and CA ruled that Lee was guilty of concealment. the insurance company is NOT seeking to enforce the contract. they submitted the health certificates and paid the premium due up to said month. 35 . each party must communicate to the other. The insurer is once again given two years from the date of reinstatement to investigate into the veracity of the facts represented by the insured in the application for reinstatement. the SC affirms their decisions. and mistake or fraud is alleged. Concurring: J. each of them being the beneficiary of the other.. 1332 applies. the petitioner cannot assume inconsistent positions by attempting to enforce the contract of insurance for the purpose of collecting the proceeds of the policy and at the same time nullify the contract by claiming that it was executed through fraud or mistake. > US life denied the claim and filed for the rescission of the contract on the ground that the certificates failed to disclose that Rosario had been suffering from bronchial asthma for 3 years prior to their submission. and thereafter. 1332 is inapplicable. however. even as fraud or mistake is NOT alleged. Philamlife was under no obligation to prove that the terms of the insurance contract were fully explained to the other party. Accordingly. the person enforcing the contract must show that the terms thereof have been fully explained to him. US Life. is that because Lee was illiterate and spoke only Chinese.‖ ―absence of any concealment or deception however slight. US Life . she could not be held guilty of concealment of her health history because the application for insurance was English. the spouses were informed that the premium for Jan 1949 was still unpaid notwithstanding that the 31-day grace period has already expired. in good faith. it has to be noted as above stated that there has been NO imputation of mistake of fraud by the illiterate insured whose personality is represented by her beneficiary. Held: Yes. When US life sought to rescind the contract on the ground of concealment/misrepresentation. it is seeking to avoid its performance. two years had not yet elapsed. 1332 of CC. the failure by the insured to disclose conditions affecting the risk of which he is aware makes the contract voidable at the option of the insurer. Antonio In a contract of insurance. As a general rule.‖ Here the CA found that the insured deliberately concealed material facts about her physical condition and history and/or concealed with whoever assisted her in relaying false information to the medical examiner. Soliman v. they submitted the certificates and paid the premiums. all facts within his knowledge which are material to the contract. Art.Rescind Contract of Insurance 104 PHIL 1046 Facts: > US Life issued a 20 yr endowment life policy on the joint lives of Patricio Soliman and his wife Rosario.> Tang claimed the amount o 100T but Philamlife refused to pay on the ground that the insured was guilty of concealment and misrepresentation. The reason for this rule is that insurance policies are traditionally contracts uberrimae fidei. 1332 is NOT applicable. Held: NO. the obligation to show that the terms of the contract had been fully explained to the party who is unable to read or understand the language of the contract. > In Mar. In sum. when fraud or mistake is alleged. > In March 1949. Patricio filed a claim for the proceeds of the insurance. ―absolute and perfect candor or openness and honesty. and which the other has no means of ascertaining.Endowment Life Policy 104 PHIL 1046 Facts: > US Life issued a 20yr endowment life policy on the joint lives of Patricio Soliman and his wife Rosario. 1949. the spouses were informed that the premium for Jan 1949 was still unpaid notwithstanding that the 31-day grace period had already expired. > In Aprl 1949. Issue: Whether or not the contract can still be rescinded. > In Apr 1949. and they were furnished at the same time long-form health certificates for the reinstatement of the policies. and they were furnished at the same time long-form health certificates for the reinstatement of the policies. NOTE: Art. Rosario died of acute dilation of the heart. devolves on the party seeking to enforce it. Art. It is petitioner who is seeking to enforce it. Even if we were to say that the insurer is the one seeking the performance of the cont contracts by avoiding paying the claim. which means ―most abundant good faith‖. 1332: When one of the parties is unable to read or if the contract is in a language not understood by him. Issue: Whether or not Art. each of them being the beneficiary of the other. 1950. Under said article. Soliman v. on the contrary. Hence. Here.

it is the one who drafted and accepted the policy and consummated the contract. Asian should have made an inquiry as to the illness and operation of Kwong when it appeared on the face of the application that a question appeared to be imperfectly answered. > It appears that during that time. > US Life denied the claim and it filed a case for rescission on the ground that the health certificates failed to disclose that Rosario had been suffering from bronchial asthma for three years prior to the submission. Agents who solicit contracts are paid large commissions on the policies secured by them. Issue: Whether or not the policy can be rescinded. Issue: Whether or not Insular Life was bound by their agent’s acts. > Patricio claims that the answers to the questions in the health certificates were made by US Life’s agent. Feliciano . and that during the operation what was removed from Kwong’s body was actually a portion of the stomach and not tumor. They act as general representatives of insurance companies. found in the right armpit. > After that. but the examiner and the company’s agent ignored it. Kwong died of cancer of the liver with metastasis. > Notwithstanding the fact of her operation. the one who employed and gave character to the third person as its agent should be the one to bear the loss. > In 1963. involving complete removal of the right breast. > She stated therein that she did not have. including the pectoral muscles and the glands. Held: YES. > It was found that prior to his application.> In Jan. Issue: Whether or not the contract may be rescinded on the ground of the imperfection in the application form.Concealment 73 PHIL 201 Facts: > Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of its agents. Ng Gan Zee v. nor had she ever had. cancer or other tumors. Saturnino was operated on for cancer. Kwong did not have sufficient knowledge as to distinguish between a tumor and a peptic ulcer.Imperfection in the Application Form 122 SCRA 61 Facts: > In 1962. Saturnino v. Asian’s failure to inquire constituted a waiver of the imperfection in the answer Insular Life v. The spouses in ing the agent to answer some of the blanks in the certificates and afterwards stamping their signature thereon are presumed to have at least acquiesced in and approved all that had bee stated therein in their behalf. the true state of health of the insured was concealed by the agents of the insurer. Nowadays. Held: Yes. Such fact appeared during the medical exam. > She also stated that she had never been treated for. uterus and menstrual disorders. undergone any operation or suffered any injury within the preceding 5 years. Rosario died of acute dilatation of the heart. Asian Crusader Life . Hence. In this case. Ng Gan Zee as the beneficiary. It seems reasonable that as between the two of them. Insular is liable to the beneficiaries. even people of modest means enter into insurance contracts. Kwon Nam applied for a 20yr endowment insurance on his life with his wife. IN the case at bar. nor did she ever have any illness or disease peculiar to her sex. Held: NO. Saturnino did not make a disclosure thereof in her application for insurance.False Representation 7 SCRA 316 Facts: > 2 months prior to the insurance of the policy. among others listed in the application. 1950. The insurance business has grown so vast and lucrative within the past century. The insurer’s medical examiner approved the application knowing fully well that the applicant was sick. Evaristo was already suffering from tuberculosis. Insular life refused to pay the proceeds because of concealment. Kwong was diagnosed to have peptic ulcers. > He stated in his application that he was operated on for tumor of the stomach associated with ulcer. that she had not consulted any physician. > The application also recited that the declarations of Saturnino constituted a further basis for the issuance of the policy. ovaries. (Evaristo could not read and understand English) > When Evaristo died. and thereafter Patricio filed a claim for the proceeds of the insurance. Asian refused to pay on the ground of alse information. Philamlife . particularly of the breast. His statement therefore was made in good faith. The situation is one in which of two innocent parties must bear a loss for his reliance upon a third person. Evaristo was made to sign an application form and thereafter the blank spaces were filled by the medical examiner and the agent making it appear that Evaristo was a fit subject of insurance. Issue: 36 .

6. > On Aprl 26. but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due. thus null and void. that she never had cancer or tumors or consulted any physician or undergone any operation within the preceding period of 5 years. Held: YES. So if for example the policy was issued/reinstated on Jan 1. in forming his estimate of the proposed contract.‖ The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk. 48 simply means that the policy is no longer in force after the insured has died. 1. 2. or making his inquiries. 2000. that the disease for which she had been operated on was cancer. CA . CA? The period to consider in a life insurance poiicy is ―two years‖ from the date of issue or of the last reinstatement. is misled into a belief that the circumstances withheld does not exist. Held: YES.Rescission of the contract of insurance 174 SCRA 403 Facts: > Tan Lee Siong was issued a policy by Philamlife on Nov. 1975 denying their claim and rescinding the contract on the ground of misrepresentation. relying upon the belief that the insured will disclose every material fact within his actual or presumed knowledge. Pacific Timber v. 37 . contending that said loss may not be considered as covered under the cover note because such became null and void by virtue of the issuance of the marine policies. for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. Tan v. 2003. concealment. Issue: Whether or not Philamlife can rescind the contract. the waiver of medical examination renders even more material the information required of the applicant concerning previous condition of health and diseases suffered. Tan died of hepatoma. CA 112 SCRA 199 Facts: > On March 13. 1973. The key phrase in the second paragraph is ―for a period of two years‖. The phrase ―during the lifetime‖ found in Sec. 1. namely. and he is thereby induced to estimate the risk upon a false basis that it does not exist. 2003 or two years from the date of issue/reinstatement. which does away with the usual requirement of medical examination before the policy is issued. or accepting it at a rate of premium agreed upon. Issue: Whether or not the cover not was without consideration. The contention of appellants is that the facts subject of the representation were not material in view of the non-medical nature of the insurance applied for. > Philamlife wrote the beneficiaries in Sep. Workmen issued on said date Cover Note 1010 insuring said cargo.Whether or not the insured made such false representation of material facts as to avoid the policy. The question to determine is: Are the facts then falsely represented material? The Insurance Law provides that ―materiality is to be determined not by the event. If anything. in order to avoid a policy. Pacific secured temporary insurance from the Workemen’s Insurance Co. concealment of the fact of the operation itself was fraudulent. whether intentional or unintentional entitled the insurer to rescind the contract of insurance. What is a simpler illustration of the ruling in Tan v. REGARDLESS of whether the insured died before or after Jan. 1975. par. since her doctor never told her. 48. concealment being defined as ―negligence to communicate that which a party knows and ought to communicate. > Pacific filed its claim with the company. Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured herself did not know. but the latter refused. Secondly. it is not necessary to show actual fraud on the part of the insured. as there could not have been any mistake about it. > The regular marine policies were issued by the company in favor of Pacific on Apr 2. In this jurisdiction. some of the logs intended to be exported were lost due to a typhoon. no matter what the ailment. The 2 marine policies bore the number 53H01032 and 53H01033. His beneficiaries then filed a claim with Philamlife for the proceeds of the insurance. the insurer can still exercise his right to rescind up to Jan. The insurer. In the first place. There can be no dispute that the information given by her in the application for insurance was false. The contention is without merit. for its exportation of logs to Japan. 1963. 1963. > After the issuance of the cover note but BEFORE the issuance of the 2 policies. The beneficiaries contend that Philamlife can no longer rescind the contract on the ground of misrepresentation as rescission must allegedly be done ―during the lifetime of the insured‖ within two years and prior to the commencement of the action following the wording of Sec.

Inc. Reyes. Enrique Mora. Enrique Mora. Inc. The liability of the Company shall not exceed the value of the parts whichever is the less.102. Inc. authorized the Bonifacio Bros. and the H. 1959 with the State Bonding & Insurance Co. appellants herein. to the proceeds of motor insurance policy A-0615. L-20853 May 29. as Mortgagee.H. The fact that no separate premium was paid on the cover note before the loss was insured against occurred does not militate against the validity of Pacific’s contention.. (b) A detailed estimate of the cost is forwarded to the Company without delay.S. but the trial court denied the motion. Inc. Inc. and that under a clause in said insurance policy. and the Ayala Auto Parts Co. as proceeds of the insurance policy. for disposition and delivery to the proper party. The Insured may authorize the repair of the Motor Vehicle necessitated by damage for which the Company may be liable under this Policy provided that: — (a) The estimated cost of such repair does not exceed the Authorized Repair Limit. Inc.. as all cover notes do not contain. the counsel for the Bonifacio Bros. Inc. No. it did not contain. If the note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued. drew a check in the amount of P2. Branch XV.S. bearing plate No. The insurance company then assigned the accident to the Bayne Adjustment Co. CASTRO. On October 19. its purpose would be meaningless for it is in a real sense a contract. as having a better right than the Bonifacio Bros. Reyes. with the condition that the former would insure the automobile with the latter as beneficiary. Reyes. During the effectivity of the insurance contract.002. Inc. The Insured's estimate of value stated in the schedule will be the maximum amount payable by the Company in respect of any claim for loss or damage. The insurance company after claiming a franchise in the amount of P100. and State Bonding & Insurance Co. affirming the decision of the Municipal Court of Manila.. for no such premium could have been paid. Inc. moved for reconsideration of the decision.S. vs. submitted a stipulation of facts. Inc. Enrique Mora was billed at P2. As a logical consequence. to interplead in order to determine who has better right to the insurance proceeds in question.H. Inc. Bayne Adjustment Co. Reyes. Inc. The authority for this assertion is to be found. since by the nature of the cover note. Inc. owner of Oldsmobile sedan model 1956. Reyes. J. Reyes.mortgaged the same to the H.73. Reyes. Inc. and the Ayala Auto Parts Company. However.. At its own option the Company may pay in cash the amount of the loss or damage or may repair. defendants-appellees. and the Ayala Auto Parts Co.002. Inc. Enrique Mora was declared in default for failure to appear at the hearing...S. particulars of the shipment that would serve as basis for the computation of the premiums. Hence. if any is payable to H.: This is an appeal from the decision of the Court of First Instance of Manila. the car was delivered to Enrique Mora without the consent of the H. without the knowledge and consent of the H. indemnify the Insured against loss of or damages to the Motor Vehicle and its accessories and spare parts whilst thereon. in civil case 48823. Inc. Reyes.S. the car met with an accident. Inc.. INC. The automobile was thereafter insured on June 23..73. Inc.ñët 4.. and the Ayala Auto Parts Co. G. In the meantime.S. and the Ayala Auto Parts Co. or replace the Motor Vehicle or any part thereof or its accessories or spare parts.. 2.. Inc. this appeal. filed on May 8. the Bonifacio Bros.Held: It was with consideration. Reyes.. Inc. in the sum of P2. The Bonifacio Bros. and motor car insurance policy A-0615 was issued to Enrique Mora. For the cost of labor and materials. Inc. Upon the theory that the insurance proceeds should be paid directly to them. ENRIQUE MORA. on the one hand and the insurance company on the other. The Company (referring to the State Bonding & Insurance Co..S. Reyes. ET AL." by virtue of the fact that said Oldsmobile sedan was mortgaged in favor of the said H.73..S. for the collection of the sum of P2. Inc. in paragraph 4 of the insurance contract which provides that "the insured may authorize the repair of the Motor Vehicle necessitated by damage for which the company may be liable under the policy provided that (a) the estimated cost of such 38 . declaring the H.R. subject to the Limits of Liability. not a mere application. ET AL. 1962 the latter court rendered a decision. any loss was made payable to the H.73 The insurance company filed its answer with a counterclaim for interpleader. the said sum of P2. (a) by accidental collision or overturning or collision or overturning consequent upon mechanical breakdown or consequent upon wear and tear. Reyes.002. reinstate. 1967 BONIFACIO BROS. The appellants argue that the insurance company and Enrique Mora are parties to the repair of the car as well as the towage thereof performed.002. and without payment to the Bonifacio Bros. as having a better right to the disputed amount and ordering State Bonding & Insurance Co. 1961 a complaint with the Municipal Court of Manila against Enrique Mora and the State Bonding & Insurance Co. Reyes. requiring the Bonifacio Bros. some of which were supplied by the Ayala Auto Parts Co.S. and evidence against him was received ex parte. to pay to the H. S. and directing payment of the said amount to the H. on the basis of which are Municipal Court rendered a decision declaring the H. The main issue raised is whether there is privity of contract between the Bonifacio Bros.S. of the cost of repairs and materials.) will. From this decision. Ayala Auto Parts Co. it is alleged. Bayne Adjustment Co.1äwphï1. affirming the decision of the Municipal Court. subject to the condition that "Loss. and entrusted the check to the H. the pertinent provisions of which read: 1. Inc. SC upheld Pacific’s contention that said cover not was with consideration. QC. issued by the State Bonding & Insurance Co. plaintiffs-appellants. to furnish the labor and materials. Inc..73 through the H.. for investigation and appraisal of the damage. no separate premiums are required to be paid on a cover note. the appellants elevated the case to the Court of First Instance of Manila which the stipulation of facts was reproduced. Inc. payable to the order of Enrique Mora or H. Inc..

and MAY. 101439 June 21. We. if any.R. a third person not a party to the contract has no action against the parties thereto. 120 of the Insurance Act.S." which unmistakably shows the intention of the parties. VOLTAIRE. — The injury or damage sustained by the insured in consequence of the happening of one or more of the accidents or misfortune against which the insurer. and Enrique Mora.S. all surnamed CALABIA. This conclusion is deducible not only from the principle governing the operation and effect of insurance contracts in general. in our view. The appellants seek to recover the insurance proceeds. in consideration of the premium. petitioner. is to rely upon the intention of the parties as disclosed by their contract. at appellants' cost. which we cannot do. unless there be some contract of trust.3 The question of whether a third person has an enforcible interest in a contract. Loss in insurance. GLENN. 608). J. a perusal thereof would show that instead of establishing privity between the appellants and the insurance company. expressed or implied between the insured and third person. Bayne Adjustment Co. and third persons have no right either in a court of equity. VICTORIA JAIME VDA. JOSEFINA KHO. No. 2 Consequently. which is a circumstance that supports the said conclusion. because the word "loss" in insurance law embraces injury or damage. has undertaken to indemnify the insured. No. WILLIE. according to sec. is payable to H. for herself and minor ROY ROLAND. to the insurance proceeds arises only if there was loss and not where there is mere damage as in the instant case.. Black's Law Dictionary. therefore. The final contention of the appellants is that the right of the H. Reyes. the "loss payable" clause of the insurance policy stipulates that "Loss. This paragraph therefore should not be construed as bringing into existence in favor of the appellants a right of action against the insurance company as such intention can never be inferred therefrom. 39 . The parties to the insurance contract omitted such stipulation. defined. The appellants are not mentioned in the contract as parties thereto nor is there any clause or provision thereof from which we can infer that there is an obligation on the part of the insurance company to pay the cost of repairs directly to them. In this connection. Reyes.S. Bayne Adjustment Company's recommendation of payment of the appellants' bill for materials and repairs for which the latter drew a check for P2. COURT OF APPEALS (former Tenth Division). 1999 GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS). is payable to H. The policy in question has been so framed that "Loss. Reyes. Inc. is merely equitable in nature and must be made effective through Enrique Mora who entered into a contract with the Bonifacio Bros. a third person is allowed to avail himself of a benefit granted to him by the terms of the contract. Cyclopedic Law Dictionary. vs. Inc.repair does not exceed the Authorized Repair Limit.H. Ins.002. a loss may be either total or partial. which they intended to benefit. Indeed. provided that the contracting parties have clearly and deliberately conferred a favor upon such person. agree with the trial court that no cause of action exists in favor of the appellants in so far as the proceeds of insurance are concerned. (1 Bouv. Under this doctrine. 1. such stipulation merely establishes the procedure that the insured has to follow in order to be entitled to indemnity for repair. it could have easily inserted in the contract a stipulation to that effect. DE KHO. Vol. EMERITA KHO APEGO. To hold now that the original parties to the insurance contract intended to confer upon the appellants the benefit claimed by them would require us to ignore the indespensable requisite that a stipulationpour autrui must be clearly expressed by the parties. Reyes. or in a court of law." It is stressed that the H. We likewise observe from the brief of the State Bonding & Insurance Company that it has vehemently opposed the assertion or pretension of the appellants that they are privy to the contract. must be settled by determining whether the contracting parties intended to tender him such an interest by deliberately inserting terms in their agreement with the avowed purpose of conferring a favor upon such third person. and for this purpose. respondents. Inc."5 In this case. Inc. they rely upon paragraph 4 of the insurance contract document executed by and between the State Bonding & Insurance Company. because from the undisputed facts and from the pleadings it will be seen that the appellants' alleged cause of action rests exclusively upon the terms of the insurance contract. G. this Court has laid down the rule that the fairest test to determine whether the interest of a third person in a contract is a stipulation pour autrui or merely an incidental interest. and (b) a detailed estimate of the cost is forwarded to the company without delay. If it were the intention of the insurance company to make itself liable to the repair shop or materialmen. Inc.1Such stipulation is known as stipulation pour autrui or a provision in favor of a third person not a pay to the contract. acted for and in representation of the insurance company. the judgment appealed from is hereby affirmed. if any. This argument is. no contract of trust. JR. Inc. ANTONIO KHO and TERESITA KHO. cited in Martin's Phil. It is fundamental that contracts take effect only between the parties thereto. Suffice it to say that any attempt to draw a distinction between "loss" and "damage" is uncalled for. GLORIA KHO VDA. DE CALABIA for herself and minors MARY GRACE.S. but is clearly covered by the express provisions of section 50 of the Insurance Act which read: The insurance shall be applied exclusively to the proper interests of the person in whose name it is made unless otherwise specified in the policy. and cannot generally demand the enforcement of the same. 1215.73 indicates that Mora and the H. DANIEL KHO. On the other hand. beside the point." indicating that it was only the H. except in some specific instances provided by law where the contract contains some stipulation in favor of a third person..4 In the instant case the insurance contract does not contain any words or clauses to disclose an intent to give any benefit to any repairmen or materialmen in case of repair of the car in question.H. expressed or implied exists. Accordingly. if at all. Commercial Laws. As regards paragraph 4 of the insurance contract. 1961 ed. The appellants' claim. to the proceeds of it. QUISUMBING. p. Another cogent reason for not recognizing a right of action by the appellants against the insurance company is that "a policy of insurance is a distinct and independent contract between the insured and insurer.

1991 Decision 1 of the Court of Appeals in CA-G..00 for the injuries she sustained. NFA and GSIS to pay jointly and severally the following sums of money: i. On August 27. Sr.000. de Calabia . judgment is hereby rendered.06 for doctor's fees. de Calabia and Victoria Kho for an award of moral damages in their favor is hereby denied. the sum of P8. Among the dead were Maxima Ugmad Vda. modifying its original decision. 1985. Civil Case No. was filed by an injured passenger. an award of moral damages is hereby made. the prayer of plaintiffs Gloria Kho Vda. to the heirs of Wellie [Willie] Calabia. and P53.000.000.00 to the heirs of Rolando Kho and P10. de Calabia.. However. 1985. stating in part: WHEREFORE.. That this decision is without prejudice as to the right Mabuhay Insurance & Guaranty Co. de Calabia. Victoria Jaime Vda.00 advanced by defendant Victor Uy. 2196 for quasi-delict.00 as attorney's fees and expenses of litigation. the prayer for moral damages for the death of the three (3) persons above-mentioned is proper. Roland Kho and Willie Calabia. to pay plaintiff Gloria Kho Vda. a Toyota Tamaraw..000. 2225 for damages. for injuries they sustained. 2256: a) Dismissing the complaint against defendant Victor Uy.In this petition for review on certiorari under Rule 45 of the Rules of Court. which affirmed in toto the judgment of the Regional Trial Court of Butuan City. P2. we deem as also assailed the disposition by the trial court in its Order issued on July 12. 19849. On May 9. to plaintiff Victoria Kho. as for the death of Wellie [Willie] Calabia. Guillermo Corbeta. 3 The relevant facts as found by the trial court are as follows: National Food Authority (NFA. Inc. iii. Three (3) cases were filed with the Court of First Instance of Agusan del Norte and Butuan City. Roland Kho and Maxima Uhmad [Ugmad] Vda. Rolando Kho and Maxima Ugmad Vda. medicines. IT IS SO ORDERED.R. is the moral damages the instant motion seeks to obtain. an award of P10. the said truck driven by Guillermo Corbeta collided with a public utility vehicle. b) Ordering defendants Mabuhay Insurance and Guaranty Company. de Kho.000. and e) To pay the costs. Five (5) passengers died 4 while ten (10) others sustained bodily injuries.00 loss of income for six months. P10. formerly National Grains Authority) was the owner of a Chevrolet truck which was insured against liabilities for death of and injuries to third persons with the GSIS. the sum P832. damages and attorney's fees. The first. the sum of P7. Sr. d) Dismissing defendants counterclaim. the second. Sr.. However. de Kho. heirs of Roland Kho and heirs of Maxima Ugmad Vda. de Kho. Inc. Butuan City.000. (citation omitted) In view of the foregoing. c) To pay plaintiff the sum of P10. 1979. de Kho and Gloria Kho Vda. Librado Taer.00 to the heirs of Maxima Ugmad Vda. iv. The Toyota Tamaraw was owned and operated by Victor Uy. P10. as follows: Considering that the dispositive portion of the decision in this case. No. through [sic] not clearly stated in the decision. . dated April 30. and cross-claim.00 each made to plaintiffs Gloria Kho Vda. Branch II. 1979.00 for the injuries she sustained. de Kho." The Tamaraw was a total wreck.935. 2 For purposes of this review.319.000.000. 1979 against NFA and Corbeta.00 for transportation expenses. against Uy. P30. hospitalizations and medical expenses. and NFA to recover from Guillermo Corbeta and GSIS the amounts they may have paid by virtue hereof. Guillermo Corbeta. the operator of 40 . was commenced by Uy on June 5. at about 7:00 in the evening at Tabon-Tabon. under the name and style of "Victory Line. .. as follows: In Civil Case No. this award. P12.00 as funeral expenses less P5. petitioner Government Service Insurance System (GSIS) assails the January 15. Civil Case No. and ordering and directing defendants Mabuhay Insurance and Guaranty Company Inc. Among those injured were private respondents.00 each as compensatory damages. to the heirs of Wellie [Willie] Calabia. P10.500.000. National Food Authority and Government Service Insurance System to pay jointly and severally the following sums to wit : P10. de Kho. by awarding moral damages to the heirs of the deceased victims.000. Sr. ii..00 for hospitalization and medicines.00 to the heirs of Wellie [Willie]Calabia. All the collision victims were passengers of the Toyota Tamaraw.30 for telegrams.

was the lane of the Toyota Tamaraw. petitioner asserts that the presumption is that its obligation arising from a contract of insurance is joint. 75:15 Compulsory Motor Vehicle Liability Insurance (third party liability. These cases were consolidated and partially tried by Judge Fortunate A. was instituted by herein private respondents on November 26. compensatory. under traffic rules. The Court of Appeals agreed with the conclusions of the trial court and ruled as follows: WHEREFORE. 2225 and 2256 are hereby AFFIRMED in toto.-G. Corbeta and NFA to pay plaintiff Taer. 5-78.00) pesos for damages. GSIS also elevated the decision in Civil Case No. the total amount of forty thousand five hundred fifty-nine pesos and ninety four centavos (P40. It claims that the only exceptions are: (1) when there is a stipulation for solidary obligation. or TPL) is primarily intended to provide compensation for the death or bodily injuries suffered by innocent third parties or passengers as a result of a negligent operation and use of motor vehicles. 1991. the decisions of the Court a quo in Civil Cases Nos. Vailoces. The victims and/or their defendants [dependents] are assured of immediate financial assistance. Uy filed a cross-claim against MIGC and a third-party complaint against Corbeta and NFA. 2225. said court dismissed the case against Uy and ordered MIGC. Mabuhay Insurance and Guaranty Co. 2196. SO ORDERED. Damages were likewise awarded to the herein private respondents in Civil Case No.the public utility vehicle. 41 . petitioner states that when there are two or more debtors or two or more creditors. 2196. as earlier mentioned. Petitioner's position insofar as joint liability is concerned is not tenable. precisely for the benefit of victims of vehicular accidents and to extend them immediate relief. 5-78. 1979 against the following: NFA and Corbeta for damages due to quasi-delict. regardless of the financial capacity of motor vehicle owners. The findings of the trial court stated that the truck which crossed over to the other lane was speeding because after the collision. 19848. 2196. 2256 to the same appellate court. We find pertinent the following issues: 1) Whether the respondent court erred in holding GSIS solidarily liable with the negligent insured/owner-operator of the Chevrolet truck for damages awarded to private respondents which are beyond the limitations of the insurance policy and the Insurance Memorandum Circular No. the incident would not have occurred. RTC of Olongapo City. 2. in view of the foregoing considerations. 6 Likewise. Trial ensued and on April 30. its left front wheel was detached and the truck traveled for about fifty (50) meters and fell into a ravine. 8 In Civil Case No. and (3) when the law declares the obligation to be solidary. 374 13 of the Insurance Code. 2) Whether the respondent court failed to consider that the private respondents have no cause of action against the petitioner. Note that common carriers are required to secure Compulsory Motor Vehicle Liability Insurance [CMVLI] coverage as provided under Sec. Petitioner denies solidary liability with the NFA or the negligent operator of the cargo truck because it claims that they are liable under different obligations. with costs against the appellants. 1985. allegedly for failure of the victims to file an insurance claim within six (6) months from the date of the accident. since neither the provision of the contract nor the insurance law provides for solidary liability.559.R. of the then Court of First Instance of Agusan del Norte and Butuan City.94) for actual. The respondent court erred in holding GSIS solidarily liable with NFA. However. and 19849. 2256. only GSIS filed this petition for review on certiorari based on the following assigned errors: 1. It is now established that the injured or the heirs of a deceased victim of a vehicular accident may sue directly the insurer of the vehicle. 14 As this Court held in Shafter vs. and MIGC as insurer of the Toyota Tamaraw. 1991. On October 4. and finding no reversible error. GSIS and NFA filed their motions for reconsideration respectively. Citing articles 1207 11 and 1208 12 of the Civil Code of the Philippines.100. Br. 1991. GSIS as insurer of the truck. which were denied by the respondent court in its Resolution 10 dated August 13. the court rendered its decision 5 holding that Corbeta's negligence was the proximate cause of the collision. (MIGC).A. In turn. the Chevy cargo truck had crossed over to the other lane which. 19847. and 2256 to the Court of Appeals. The respondent court erred in holding GSIS liable without proof that a notice of claim had been filed within six (6) months from the date of the accident. Civil Case No. jointly and severally. Nos. In Civil Case No. 9 On February 5 and 6. Uy for breach of contract of carriage. 2256. the court concluded that if both vehicles had traveled in their respective lanes. and moral damages plus attorney's fees. and insurer. 2225. the obligation as a general rule is joint. The appeals were docketed as C. The third. (2) when the nature of the obligation requires solidary liability. 3. The respondent court erred in holding GSIS liable beyond the terms and conditions of the contract of insurance and the limitations under Insurance Memorandum Circular (IMC) No. 7 However. the trial court awarded Uy the total amount of one hundred nine thousand one hundred (P109. It asserts that the NFA's liability is based on quasi-delict. while petitioner's liability is based on the contract of insurance. Judge. Corbeta and NFA appealed the decision of the trial court in Civil Case Nos. These cases were later on transferred to Branch II of the Regional Trial Court of Butuan City.

we need to emphasize that the alleged delay in reporting the loss by the insured and/or by the beneficiaries must be promptly raised by the insurer 25 in objecting to the claims. from any of the following: GSIS. are solidarily liable for damages as computed below: SCHEDULE A I. 1979. de Calabia. or (2) against NFA and Corbeta to pay them all their claims in full. the defense of laches or prescription is deemed waived because of petitioner's failure to raise it not only before but also during the hearing. in accordance with CMVLI law. The latter's liability is based separately on Article 2180 20 of the Civil Code.000. 26 To recapitulate. The general purpose of statutes enabling an injured person to proceed directly against the insurer is to protect injured persons against the insolvency of the insured who causes such injury. might affect the result of the case. the driver (Guillermo Corbeta).000. could claim their medical expenses for eight thousand nine hundred thirty-five pesos and six centavos (P8. It has even been held that such a provision creates a contractual relation which injures to the benefit of any and every person who may be negligently injured by the named insured as if such injured person were specifically named in the policy. the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held liable in solidum with the insured and/or the other parties found at fault. the private respondents sent a notice of loss to the petitioner informing the latter of the accident. that of the insured carrier or vehicle owner is based on tort. Thus. 23 Thus. As matters stand now.372. Included as "Exihibit J'' 24 in the records. 5-78.The injured for whom the contract of insurance is intended can sue directly the insurer. unless there are substantial facts and particular circumstances which have been overlooked but which. the insurer could be held liable only up to the extent of what was provided for by the contract of insurance. 2d. Jur. considering the evidence on record including the schedule of indemnities provided under IMC No. this notice constitutes evidence of the loss they suffered by reason of the vehicular collision. the petitioner contends that it cannot be held liable without proof nor allegation that the private respondents filed before its office a notice of claim within six (6) months from the date of the accident. the schedule of indemnities for death and/or bodily injuries. concerning the notice of claim. according to the petitioner.. (S 449 7 Am. This requirement. professional fees. 1) Gloria Kho Vda. Moreover. the third party liability is only up to the extent of the insurance policy and those required by law. we find no cogent reason to disturb the computation of medical charges and expenses that justify the award of damages by the trial court. 22 The schedules for medical expenses were also provided by said IMC. the insurer failed to object to said presentation. and MIGC. Although merely factual. when presented by the private respondents during the trial. 5-78 which was approved on November 10. if properly considered. and non-compliance therewith constitutes waiver. the petitioner merely waited for the victims or beneficiaries to file their complaint. Since the claim was not reported to the insurer. and to give such injured person a certain beneficial interest in the proceeds of the policy. to those injured or killed in the May 9. a) Medical expenses P8. The petitioner failed to object to the evidence thereon. However. Gloria Kho Vda. 1978. and statutes are to be liberally construed so that their intended purpose may be accomplished. pp. only NFA or Corbeta may be held liable therefor. and it would be too late now to state otherwise. For generally. and against NFA and Guillermo Corbeta for any other damages or expenses claimed. specifically in paragraphs (C) to (G).00) pesos per victim. or Corbeta.00) pesos. For the Injured Victims. 118-119) 16 However. They stressed further that the petitioner did not deny receipt of notice of claim during the trial. heirs of the victims who died in the May 9. although the victim may proceed directly against the insurer for indemnity. Computation of hospital charges and fees for the services rendered to the injured victims was conclusively established by the trial court. 21 Obviously.00 42 . As therein provided. NFA. the operator (NFA). de Calabia and Victoria Kho. gives the insurer the opportunity to investigate the veracity of the claim. 1979 vehicular collision. 1979 vehicular incident. findings of the judge who tried the case and heard the witnesses could not be disturbed on appeal. Consequently. 18 For the liability of the insurer is based on contract. petitioner seeks a definitive ruling only on the extent of its liability. or belated compliance.30 c) Other Compensatory/Moral Damages 10. the maximum indemnity for death was twelve thousand (P12. As found by the trial court.06) and eight hundred thirty-two (P832.000 for each dead victim. in this case the records reveal that on September 7. While it is true that where the insurance contract provides for indemnity against liability to third persons. It follows also that injured victims.935. the petitioner avers that the presumption is that the victim opted to pursue his claim against the motor vehicle owner or against the tortfeasor. The petitioner should have promptly interposed the defense of delay. When the insured presented proof of loss before the trial court. hospital and other charges payable under a CMVLI coverage was provided under the Insurance Memorandum Circular (IMC) No.06 b) Transportation and Telegraph Expenses 2. As to the other damages. At the time of the incident. 19 The liability of GSIS based on the insurance contract is direct.935. could proceed (1) against GSIS for the indemnity of P12. As to the second issue. as insurer of NFA. but not solidary with that of the NFA. these factual bases for the award of damages may no longer be attacked. and such third persons can directly 17 sue the insurer.

Heirs of Deceased Victims Death Indemnity ———————————— ———————— 1) Heirs of Willie Calabia.00 42.500.500. (b) eight hundred thirty-two (P832.000.000.00) NIL (5. and not dependent on the recovery of judgment from the insured.00 42.832.307. Sr. Roland Kho and Maxima Ugmad Vda.000.00 P30.000.36 2) Victoria Kho.00 3) Heirs of Maxima Ugmad Vda.00 10. de Calabia. GSIS is directly liable to the private respondents. Petitioner Government Service Insurance System is ordered to pay (a) twelve thousand pesos (P12.00 2) Heirs of Roland Kho 2.00 P127.000.00 2) Gloria Kho Vda.000. the parties found solidarily liable. nine hundred thirty-five pesos and six centavos (P8.00 P10.00 The balance of the private respondents' claims as shown on Schedule A above.00 P30.500.00 II.500. as follows: 1. P12.00 30.00 Note that.. Total Amount of Attorney's Fees P10.000. in the following amounts.000.500.00 10. MODIFIED.500.00 Less: Advances by Victor Uy (5.06) for medical expenses of Gloria Kho Vda.00 30. but the decision of the trial court as affirmed by the Court of Appeals is hereby.00 2) Heirs of Roland Kho P12.000.000. the petitioner could only be held liable under its contract of insurance. de Kho P12. 43 .00 Total P10. its liability is primary.00 Sub-Total P7.000. Hence.935.500. a) Medical expenses P832. de Kho. But under the CMVLI law. P2. 27 WHEREFORE.00 Total P33.00 III.00 P90. Willie Calabia Sr.000. or MIGC.935.000.500. and (c) eight thousand.00 P90.00 3) Heirs of Maxima Ugmad Vda.000.00 122.000. And pursuant to the CMVLI law. Injured Victims Medical Expenses ——————— ————————— 1) Victoria Jaime Vda.00 II.500.de Kho 2. For the Heirs of the Deceased Victims: Compensatory/ Funeral Death Moral Expenses Indemnity Damages Total 1) Heirs of Willie Calabia.00) pesos for medical expenses of Victoria Jaime Vda.000.d) Loss of Income 12.00 42. Sr.000.000. must be paid by Corbeta or NFA. de Kho.500.00) Balance P2. de Calabia P8. SCHEDULE B I. de Kho P832.00 P30.00 b) Other Compensatory/Moral Damages 10. the instant petition is hereby GRANTED. the petitioner (GSIS) was impleaded as insurer of NFA.000.00) as death indemnity to each group of heirs of the deceased.

prescribing that — SEC.307. 1968 G. Whereupon. and (3) that Ladines was a necessary and indispensable party but had not been joined as such. and is governed by the same principles of interpretation: Mechanics Savings Bank & Trust Co. plaintiff-appellant. upon reconsideration. is based. in the nature of a contract of insurance against loss from misconduct. National Foods Authority. SO ORDERED.. vs. as required by conditions 4 and 11 of the bond. vs. 2427). and presented the proof of loss within the period fixed in the bond. in effect. Ladines. for the sum of Five Thousand Pesos (P5. limiting the time for commencing an action thereunder to a period of less than one year from the time when the cause of action accrues is void. P-FID-1558. in order to guarantee the Asingan Farmers' Cooperative Marketing Association. defendant-appellee. some P11. providing as follows: . as amended by Act 4101 of the pre-Commonwealth Philippine Legislature. but. A fidelity bond is. ACCFA filed suit against appellee on 30 May 1960. We find the appeal meritorious. its bond. to his personal benefit. Nemorosa. against a decision of the Court of First Instance of Manila. in view of Section 61-A of the Insurance Act invalidating stipulations limiting the time for commencing an action thereon to less than one year from the time the cause of action accrues. with approval of the principal and the surety.2. the condition of the bond in question. Hence. the appellee. Inc. on points of law. Ricardo Ladines converted and misappropriated. suit or proceeding shall be had or maintained upon this Bond unless the same be commenced within one year from the time of making claim for the loss upon which such action. Guarantee Company. This decision is immediately executory. 57. LADINES. At first. amounting to larceny or estafa of its Secretary-Treasurer. Alpha Insurance & Surety Company had issued. 459. During the effectivity of the bond. but despite repeated demands the surety company refused and failed to pay. stipulation or agreement in any policy of insurance. contrary to the eighth condition of the bond.. is subject to the provisions of Section 61-A of the Insurance Act (No. this appeal TJxbrhkl3G. (now appellee) moved to dismiss the complaint for failure to state a cause of action. Appeal. are ordered to pay private respondents' claims 28 as adjudged by the Regional Trial Court of Butuan City.. Material to this decision are the following facts: According to the allegations of the complaint. and Mabuhay Insurance & Guaranty Co. Consequently. suit or proceeding. jointly and severally. ET AL. ALPHA INSURANCE & SURETY CO. limiting the period for bringing action thereon. Defendant Alpha Insurance & Surety Co..513.. is valid or void. (FACOMA) against loss on account of "personal dishonesty.. INC. of which P6. in its Case No. Agricultural Credit Cooperative and Financing Administration (ACCFA for short). on 14 February 1958. upholding a motion to dismiss. the Court of First Instance denied dismissal. pages 56-59). No pronouncement as to cost. third partydefendants-appellees. and dismissed the complaint on the ground that the action was filed beyond the contractual limitation period (Record on Appeal. the Asingan FACOMA assigned its rights to the appellant.. No. Pao Chan Wei vs.33 belonged to the ACCFA. (2) the complaint failed to show that plaintiff had filed civil or criminal action against Ladines.R. minus the amounts that GSIS must pay to the injured victims and the heirs of the deceased victims as above stated. On the same date. 61-A — A condition. 43372. 103 Phil. Guillermo Corbeta. Inc. At issue is the question whether or not the provision of a fidelity bond that no action shall be had or maintained thereon unless commenced within one year from the making of a claim for the loss upon which the action is based.00) with said Ricardo Ladines as principal and the appellee as solidary surety. No. 68 Fed.000. 44 . Inc. RICARDO A. Ricardo A. Upon discovery of the loss. EIGHT LIMITATION OF ACTION No action. July 29. in accordance with the fourth section hereof. the court reversed its original stand. giving as reason that (1) the same was filed more than one year after plaintiff made claim for loss. L-24566 AGRICULTURAL CREDIT & COOPERATIVE FINANCING ADMINISTRATION (ACCFA).22 of the FACOMA funds. ACCFA immediately notified in writing the survey company on 10 October 1958.

considering the unrelieved congestion in the courts. and the records are remanded to the Court of First Instance.R. New Civil Code). with instructions to require defendant to answer and thereafter proceed in conformity with the law and the Rules of Court. to comply with its duty (in this case. But the question then would be: When did the cause of action accrue? On that question we agree with the court below that plaintiff's cause of action did not accrue until his claim was finally rejected by the insurance company. from the time of appellee's refusal to comply with its bond. not only a legal right of the plaintiff and a correlative obligation of the defendant but also "an act or omission of the defendant in violation of said legal right" (Maao Sugar Central vs. The law does not encourage unnecessary litigation. 945 (31 July 1961). relied upon by the Court a quo. the cause of action does not accrue until the party obligated refuses. The year for instituting action in court must be reckoned. therefore. Barrios.A. with the carrier and then with the insurer. as condition eight of the bond requires action to be filed within one year from the filing of the claim for loss. and action may be brought within the statutory period of limitation for written contracts (New Civil Code. 45 . or some or all of them simultaneously (Article 1216. As the policy provides that the insured should file his claim. Fulton Fire Insurance Co. So ordered. vs.Since a "cause of action" requires. Article 1144).. As a consequence of the foregoing. clause 4. 2 S. he had a right to wait for his claim to be finally decided before going to court. is null and void. therefore. the appealed order granting the motion to dismiss is reversed and set aside. of the contract) having been deleted by express agreement and the surety having assumed solidary liability. 79 Phil. In Eagle Star Insurance Co. therefore. 696. before such final rejection. this Court ruled: . the other grounds of the motion to dismiss are equally untenable. first. as essential elements. to pay the amount of the bond). 701. 666). The discouraging of unnecessary litigation must be deemed a rule of public policy. WHEREFORE. A creditor may proceed against any one of the solidary debtors. Condition eight of the bond.C. condition eight of the Alpha bond is null and void. it can not be counted from the creditor's filing of the claim of loss. there was no real necessity for bringing suit. Costs against appellee. expressly or impliedly. since the effect of Section 61-A of the Insurance Law on the terms of the Policy or contract was not there considered. and the appellant is not bound to comply with its provisions. The condition of previous conviction (paragraph b. The case of Ang vs. for that does not import that the surety company will refuse to pay. It may perhaps be suggested that the policy clause relied on by the insurer for defeating plaintiff's action should be given the construction that would harmonize it with section 61-A of the Insurance Act by taking it to mean that the time given the insured for bringing his suit is twelve months after the cause of action accrues. such stipulation contradicts the public policy expressed in Section 61-A of the Philippine Insurance Act. Chia Yu. is no authority against the views herein expressed. In so far. 96 Phil. This is because.

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