42. G.R. No. 95546 November 6, 1992 MAKATI TUSCANY CONDOMINIUM CORPORATION vs. T ! COURT O" APP!A#S, AM!

RICAN OM! ASSURANC! CO., re$rese%&e' b( Amer)*+% I%&er%+&)o%+, U%'er-r)&ers .P/),s.0, I%*. "ACTS1 Private respondent American Home Assurance Co. (AHAC), represented by American International Underwriters (Phils.), Inc., issued in favor of petitioner a!ati "uscany Condominium Corporation ("U#CA$%) insurance policy on the latter&s buildin' and premises for a period be'innin' ( arch ()*+ and endin' ( arch ()*,. "he premium was paid on installments all of which were accepted by private respondent. "he policy was renewed in several occasions from -ebruary ()*, to .anuary ()*/ all of which were accepted by private respondent. "hereafter, petitioner refused to pay the balance of the premium. Conse0uently, private respondent filed an action to recover the unpaid. Petitioner e1plained that it discontinued the payment of premiums because the policy did not contain a credit clause in its favor and the receipts for the installment payments coverin' the policy for ()*/2*3, as well as the two (+) previous policies, stated the followin' reservations4 +. Acceptance of this payment shall not waive any of the company ri'hts to deny liability on any claim under the policy arisin' before such payments or after the e1piration of the credit clause of the policy5 and ,. #ub6ect to no loss prior to premium payment. If there be any loss such is not covered. Petitioner further claimed that the policy was never bindin' and valid, and no ris! attached to the policy. "he &r)+, *o2r& dismissed the complaint and the counterclaim findin' that the payments of the premiums of the three aforementioned policies (bein' sou'ht to be refunded) were made durin' the lifetime or term of said policies, hence, it could not be said, inspite of the reservations, that no ris! attached under the policies. Conse0uently, defendant&s counterclaim for refund is not 6ustified and , in view of the reservation in the receipts ordinarily issued by the plaintiff on premium payments the only plausible conclusion is that plaintiff has no ri'ht to demand their payment after the lapse of the term of said policy. "herefore, the defendant was 6ustified in refusin' to pay the same. "he Co2r& o3 A$$e+,s rendered a decision +modifyin' that of the trial court by orderin' herein petitioner to pay the balance of the premiums due. 7hile it may be true that under #ection 88 of the Insurance Code, the parties may not a'ree to ma!e the insurance contract valid and bindin' without payment of premiums, there is nothin' in said section which su''ests that the parties may not a'ree to allow payment of the premiums in installment, or to consider the contract as valid and bindin' upon payment of the first premium. Petitioner thus concludes that there cannot be a perfected contract of insurance upon mere partial payment of the premiums because under #ec. 88 of the Insurance Code, no

contract of insurance is valid and bindin' unless the premium thereof has been paid, notwithstandin' any a'reement to the contrary. As a conse0uence, petitioner see!s a refund of all premium payments made on the alle'ed invalid insurance policies. ISSU!1 7hether $+(me%& b( )%s&+,,me%& of the premiums due on an insurance policy )%v+,)'+&es the contract of insurance, in view of #ec. 88 of P.9. :(+. !#D1 NO. 7e hold that the sub6ect policies are valid even if the premiums were paid on installments. "he records clearly show that petitioner and private respondent intended sub6ect insurance policies to be bindin' and effective notwithstandin' the sta''ered payment of the premiums. "he initial insurance contract entered into in ()*+ was renewed in ()*,, then in ()*/. In those three (,) years, the insurer accepted all the installment payments. #uch acceptance of payments spea!s loudly of the insurer&s intention to honor the policies it issued to petitioner. Certainly, basic principles of e0uity and fairness would not allow the insurer to continue collectin' and acceptin' the premiums, althou'h paid on installments, and later deny liability on the lame e1cuse that the premiums were not prepared in full. 7e therefore sustain the Court of Appeals. #ection 8* of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment by ma!in' an ac!nowled'ment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to ma!e the policy bindin' despite the fact that premium is actually unpaid. #ection 88 merely precludes the parties from stipulatin' that the policy is valid even if premiums are not paid, but does not e1pressly prohibit an a'reement 'rantin' credit e1tension, and such an a'reement is not contrary to morals, 'ood customs, public order or public policy (9e ;eon, the Insurance Code, at p. (83). #o is an understandin' to allow insured to pay premiums in installments not so proscribed. At the very least, both parties should be deemed in estoppel to 0uestion the arran'ement they have voluntarily accepted. Petitioner may not be allowed to rene'e on its obli'ation to pay the balance of the premium after the e1piration of the whole term of the third policy. oreover, as correctly observed by the appellate court, where the ris! is entire and the contract is indivisible, the insured is not entitled to a refund of the premiums paid if the insurer was e1posed to the ris! insured for any period, however brief or momentary.