1

Gallardo vs. Morales

G.R. No. L-12189 April 29, 1960
Lessons Applicable: Definition and Coverage of Life
Insurance (Insurance)
Laws Applicable: Rule 39, section 12, subdivision (k) of the Rules of
Court (old law)

FACTS:
CFI: Hermenegilda S. Morales to pay P7,000 to a creditor
Francisca Gallardo
writ of execution was issued and delivered to the Sheriff
who garnished and levied execution on the sum of P7,000 out
of the P30,000 due from the CapitalInsurance & Surety Co. Inc.,
to Morales as beneficiary whose husband Luis Morales died
by assassination.
Morales asked the sheriff to quash and lift said garnishment or
levy on execution invoking Rule 39, section 12, subdivision (k)
of the Rules of Court but it was denied.
All moneys, benefits, privileges, or annuities accruing or in any
manner growing out of any life insurance, if the annual
premiums paid do not exceedfive hundred pesos, and if they
exceed that sum a like exemption shall exist which shall bear
the same proportion to the moneys, benefits, privileges, and
annuities so accruing or growing out of such insurance that
said five hundredpesos bears to the whole annual premiums
paid.
Morales appealed maintaining that it was a life insurance for it
insured her husband for injuries and/or death as a result of
murder or assault or attempt thereat
ISSUE: W/N the insurance is a life insurance and not an
accident insurance

HELD: NO. order appealed from is reversed, and the garnishment in
dispute hereby set aside and quashed
the annual premium was for P15
If it were an ordinary life insurance policy, taking into account
that the insured, Luis G. Morales, was 38 years of age and the
amount of the policy was for P50,000.00 the annual premium
would have been around P1,206
the period for the policy was stipulated for one year, and
considerations as to age, health, occupation and other personal
circumstances were not taken into account in an accident
insurance policy
Annex "1" of the opposition, shows that the
Capital Insurance and Surety Company Inc. is a non-life
insurance company and that the only authority granted to it to
transact business covers fire, marine, surety, fidelity, accident,
motor car, and miscellaneous insurance, except life insurance
Accident vs Life Insurance Policy
accident policy - merely insures the person from injury and or
death resulting from murder, assault, or an attempt thereat
Accident insurance
indemnity or casualty contract
life insurance policy - what is insured is the life of the subject for
a definite number of years
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life insurance
investment contract
contract by which the insurer, for a stipulated sum, engages to
pay a certain amount of money if another dies within the time
limited by the policy
contract for insurance for one year in consideration of an
advanced premium, with the right of assured to continue it
from year to year upon payment of a premium as stipulated
includes accident insurance, since life is insured under either
contract
includes all policies of insurance in which payment
of insurance money is contingent upon loss of life
"any life insurance"
applies to ordinary life insurance contracts, as well as to those
which, although intended primarily to indemnify for risks arising
from accident, likewise, insure against loss of life due, either to
accidental causes, or to the willful and criminal act of another,
which, as such, is not strictly accidental in nature
1. statutes of this nature seek to enable the head of the family to
secure his widow and children from becoming a burden upon the
community and, accordingly, should merit a liberal interpretation
1.
throw or drop (something) from an aircraft or ship.
"six aircraft jettisoned their loads in the sea"
o
noun



Calanoc vs. CA (98 PHIL 79)

Facts: Basilio was a watchman of the Manila Auto Supply located at
the corner of Avenida Rizal and Zurbaran. He secured a life
insurance policy from the Philippine American Life Insurance
Company in the amount of P2,000 to which was attached a
supplementary contract covering death by accident.
On January 25, 1951, he died of a gunshot wound on the occasion
of a robbery committed in the house of Atty. Ojeda at the corner of
Oroquieta and Zurbaran streets.

Calanoc, the widow, was paid the sum of P2,000, face value of the
policy, but when she demanded the payment of the additional sum
of P2,000 representing the value of the supplemental policy, the
company refused alleging, as main defense, that the deceased died
because he was murdered by a person who took part in the
commission of the robbery and while making an arrest as an officer
of the law which contingencies were expressly excluded in the
contract and have the effect of exempting the company from
liability.

It is contended in behalf of the company that Basilio was killed
which "making an arrest as an officer of the law" or as a result of an
"assault or murder" committed in the place and therefore his death
was caused by one of the risks excluded by the supplementary
contract which exempts the company from liability. This contention
was upheld by the Court of Appeals. Hence, this petition.

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Issue: Whether or not the death of the victim comes within the
purview of the exception clause of the supplementary policy and,
hence, exempts the company from liability.

Held: NO. Basilio was a watchman of the Manila Auto Supply
which was a block away from the house of Atty. Ojeda where
something suspicious was happening which caused the latter to ask
for help. While at first he declined the invitation of Atty. Ojeda to go
with him to his residence to inquire into what was going on because
he was not a regular policeman, he later agreed to come along
when prompted by the traffic policeman, and upon approaching the
gate of the residence he was shot and died.

The circumstance that he was a mere watchman and had no duty to
heed the call of Atty. Ojeda should not be taken as a capricious
desire on his part to expose his life to danger considering the fact
that the place he was in duty-bound to guard was only a block away.

In volunteering to extend help under the situation, he might have
thought, rightly or wrongly, that to know the truth was in the
interest of his employer it being a matter that affects the security
of the neighborhood. No doubt there was some risk coming to him
in pursuing that errand, but that risk always existed it being
inherent in the position he was holding. He cannot therefore be
blamed solely for doing what he believed was in keeping with his
duty as a watchman and as a citizen. And he cannot be considered
as making an arrest as an officer of the law, as contended, simply
because he went with the traffic policeman, for certainly he did
not go there for that purpose nor was he asked to do so by the
policeman.

Much less can it be pretended that Basilio died in the course of an
assault or murder considering the very nature of these crimes. In
the first place, there is no proof that the death of Basilio is the
result of either crime for the record is barren of any circumstance
showing how the fatal shot was fired. Perhaps this may be clarified
in the criminal case now pending in court as regards the incident
but before that is done anything that might be said on the point
would be a mere conjecture. Nor can it be said that the killing was
intentional for there is the possibility that the malefactor had fired
the shot merely to scare away the people around for his own
protection and not necessarily to kill or hit the victim. In any event,
while the act may not exempt the triggerman from liability for the
damage done, the fact remains that the happening was a pure
accident on the part of the victim.

The victim could have been either the policeman or Atty. Ojeda for
it cannot be pretended that the malefactor aimed at the deceased
precisely because he wanted to take his life.

Biagtan vs. The Insular Life Assurance Company,
LTD|
Makalintal, J. March 29, 1972|
FACTS
- Juan Biagtan was insured with Insular for P5k and a
supplementary contract Accidental Death Benefit clause for
another P5k if "the death of the Insured resulted directly from
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bodily injury effected solely through external and violent means
sustained in an accident . . . and independently of all other causes."
The clause, however, expressly provided that it would not apply
where death resulted from an injury "intentionally inflicted by a
third party."
- One night, a band of robbers entered their house. Juan went out
of his room and he was met with 9 knife stabs. He died. The robbers
were convicted of robbery with homicide.
- The family was claiming the additional P5k from Insular under the
Accidental Death Benefit clause. Insular refused on the ground that
the death resulted from injuries intentionally inflicted by 3
rd
parties
and was therefore not covered.
- Biagtans filed against Insular. CFI ruled in favor of Biagtans.

ISSUES & ARGUMENTS
WON the injuries were intentionally inflicted by a third party?
Yes
RATIONALE
- Whether the robbers had the intent to kill or merely to scare the
victim or to ward off any defense he might offer, it cannot be
denied that the act itself of inflicting the injuries was intentional.
- The exception in the accidental benefit clause invoked by the
appellant does not speak of the purpose whether homicidal or
not of a third party in causing the injuries, but only of the fact
that such injuries have been "intentionally" inflicted this
obviously to distinguish them from injuries which, although received
at the hands of a third party, are purely accidental.
- Examples of unintentional:
>> A gun which discharges while being cleaned and kills a
bystander;
>> a hunter who shoots at his prey and hits a person instead;
>> an athlete in a competitive game involving physical effort who
collides with an opponent and fatally injures him as a result.
- In Calanoc vs. CA: Where a shot was fired and it turned out
afterwards that the watchman was hit in the abdomen, the wound
causing his death, the Court held that it could not be said that the
killing was intentional for there was the possibility that the
malefactor had fired the shot to scare the people around for his
own protection and not necessarily to kill or hit the victim. A similar
possibility is clearly ruled out by the facts in this case. For while a
single shot fired from a distance, and by a person who was not even
seen aiming at the victim, could indeed have been fired without
intent to kill or injure, nine wounds inflicted with bladed weapons
at close range cannot conceivably be considered as innocent
insofar as such intent is concerned.
- In Hucthcraft's Ex'r vs. Travelers' Ins. Co. (US case): where the
insured was waylaid and assassinated for the purpose of robbery,
the court rendered judgment for the insurance company and held
that while the assassination of the insured was as to him an
unforeseen event and therefore accidental, "the clause of the
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proviso that excludes the (insurer's) liability, in case death or injury
is intentionally inflicted by any other person, applies to this case."

G.R. No. L-21574 June 30, 1966

Dela Cruz vs. Capital
Lessons Applicable: Liability of Insurer for Suicide and Accidental
Death (Insurance)
Laws Applicable:

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

ISSUE: W/N the cause of death was accident

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


Sun Insurance Office Ltd. vs. Court of Appeals [GR
92383, 17 July 1992]

Facts: Sun Insurance Office Ltd. issued Personal Accident Policy
05687 to Felix Lim, Jr. with a face value of P200,000.00. Two months
later, he was dead with a bullet wound in his head. As beneficiary,
his wife Nerissa
Lim sought payment on the policy but her claim was rejected. Sun
Insurance agreed that there was no suicide.
It argued, however, that there was no accident either. Pilar Nalagon,
Lim's secretary, was the only eyewitness

Commercial Law Insurance Law, 2006 ( 47 )Narratives (Berne
Guerrero)
to his death. It happened on 6 October 1982, at about 10 p.m., after
his mother's birthday party. According to Nalagon, Lim was in a
happy mood (but not drunk) and was playing with his handgun,
from which he had previously removed the magazine. As she
watched the television, he stood in front of her and pointed the gun
at her. She pushed it aside and said it might be loaded. He assured
her it was not and then pointed it to his temple. The next moment
there was an explosion and Lim slumped to the floor. He was dead
before he fell.

The widow sued Sun Insurance in the Regional Trial Court of
Zamboanga City and was sustained. Sun Insurance was sentenced to
pay her P200,000.00, representing the face value of the policy, with
interest at the legal rate; P10,000.00 as moral damages; P5,000.00
as exemplary damages; P50,000.00 as actual and compensatory
damages; and P5,000.00 as attorney's fees, plus the cost of the suit.

This decision was affirmed on appeal, and the motion for
reconsideration was denied. Sun Insurance then came to the
Supreme Court.
Issue: Whether the insured willfully exposed himself to needless
peril and thus removed himself from the coverage of the insurance
policy.
Held: NO. An accident is an event which happens without any
human agency or, if happening through human agency, an event
which, under the circumstances, is unusual to and not expected by
the person to whom it
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happens. It has also been defined as an injury which happens by
reason of some violence or casualty to the insured without his
design, consent, or voluntary co-operation. Herein, the incident that
resulted in Lim's
death was indeed an accident. On the other hand, the parties agree
that Lim did not commit suicide.

Nevertheless, Sun Insurance contends that the insured willfully
exposed himself to needless peril and thus removed himself from
the coverage of the insurance policy. It should be noted at the
outset that suicide and
willful exposure to needless peril are in pari materia because they
both signify a disregard for one's life.

The only difference is in degree, as suicide imports a positive act of
ending such life whereas the second act indicates a reckless risking
of it that is almost suicidal in intent. The posture -- that by the mere
act of pointing the gun to his temple, Lim had willfully exposed
himself to needless peril and so came under the exception -- is
arguable. But what is not is that Lim had removed the magazine
from the gun and believed it was no longer dangerous. He
expressed assured her that the gun was not loaded. It is submitted
that Lim did not willfully expose himself to needless peril when he
pointed the gun to his temple because the fact is that he
thought it was not unsafe to do so.

The act was precisely intended to assure Nalagon that the gun was
indeed
harmless. Lim was unquestionably negligent and that negligence
cost him his own life. But it should not prevent his widow from
recovering from the insurance policy he obtained precisely against
accident. There is
nothing in the policy that relieves the insurer of the responsibility to
pay the indemnity agreed upon if the insured is shown to have
contributed to his own accident. Indeed, most accidents are caused
by negligence.

There are only four exceptions expressly made in the contract to
relieve the insurer from liability, and none of these exceptions is
applicable in the present case. It bears noting that insurance
contracts are as a rule supposed to be interpreted liberally in favor
of the assured. There is no reason to deviate from this rule,
especially in view of the circumstances of the case.


Jarque v Smith G.R. No. L-32986 November 11, 1930
J. Ostrand

Facts:
The plaintiff was the owner of the motorboat Pandan and held a
marine insurance policy for the sum of P45,000 on the boat, the
policy being issued by the National Union Fire Insurance Company
and according to the provisions of a "rider" attached to the policy,
the insurance was against the "absolute total loss of the vessel
only."

The ship ran into very heavy sea off the Islands of Ticlin, and it
became necessary to jettison a portion of the cargo. As a result of
the jettison, the National Union Fire Insurance Company was
8


assessed in the sum of P2,610.86 as its contribution to the general
average. The insurance company, insisting that its obligation did not
extend beyond the insurance of the "absolute total loss of the
vessel only, and to pay proportionate salvage of the declared
value," refused to contribute to the settlement of the general
average.

The present action was thereupon instituted,and after trial the
court below rendered judgment in favor of the plaintiff and ordered
the company to pay the plaintiff the sum of P2,610.86 as its part of
the indemnity The insurance company appealed to this court.

Issues:
1. WON the lower court erred in disregarding the typewritten clause
endorsed upon the policy, Exhibit A, expressly limiting insurer's
liability thereunder of the total loss of the wooden vessel
Pandanand to proportionate salvage charges

2. WON the lower court erred in concluding that defendant and
appellant, National Union Fire Insurance Company is liable to
contribute to the general average resulting from the jettison of a
part of said vessel's cargo.

Held: No to both. Petition dismissed.

Ratio:
1. One of the clauses of the document originally read as follows:
Touching the Adventures and Perils which the said National Union
Fire Insurance Company is content to bear, and to take upon them
in this Voyage; they are of the Seas, Men-of-War, Fire, Pirates,
Rovers, Thieves, Jettison, Letters of Mart and Countermart,
Surprisals, and Takings at Sea. Arrest, Restraint and Detainments, of
all Kings Princes and People of what Nation, Condition or Quality so
ever; Barratry of the Master and Marines, and of all other Perils,
Losses and Misfortunes, that have or shall come to the Hurt,
Detriment, or Damage of the said Vessel or any part thereof; and in
case of any Loss or Misfortunes, it shall be lawful for the Assured,
his or their Factors, Servants, or assigns, to sue, labor and travel for,
in and about the Defense. Safeguard, and recovery of the said
Vessel or any Charges whereof the said Company, will contribute,
according to the rate and quantity of the sum herein assured shall
be of as much force and Virtue as the surest Writing or Policy of
Insurance made in LONDON. Attached to the policy over and above
the said clause is a "rider" containing typewritten provisions, among
which appears in capitalized type the following
clause:

AGAINST THE ABSOLUTE TOTAL LOSS OF THE VESSEL ONLY, AND TO
PAY PROPORTIONATE SALVAGE CHARGES OF THE DECLARED VALUE.

At the bottom of the same rider following the type written
provisions therein set forth are the following words: "Attaching to
and forming part of the National Union Fire Insurance Co., Hull
Policy No. 1055."

It is a well settled rule that in case repugnance exists between
written and printed portions of a policy, the written portion
prevails, and there can be no question that as far as any
inconsistency exists, the above-mentioned typed "rider" prevails
over the printed clause it covers. Section 291 of the Code of Civil
9


Procedure provides that "when an instrument consists partly of
written words and partly of a printed form and the two are
inconsistent, the former controls the latter.

2. In the absence of positive legislation to the contrary, the liability
of the defendant insurance company on its policy would, perhaps,
be limited to "absolute loss of the vessel only, and to pay
proportionate salvage of the declared value."
But the policy was executed in this jurisdiction and "warranted to
trade within the waters of the Philippine Archipelago only." Here
the liability for contribution in general average is not based on the
express terms of the policy, but rest upon the theory that from the
relation of the parties and for their benefit, a quasi contract is
implied by law. Article 859 of the Code of Commerce is still in force
and reads as follows:

ART. 859. The underwriters of the vessel, of the freight, and of the
cargo shall be obliged to pay for the indemnity of the gross average
in so far as is required of each one of these objects respectively. The
article is mandatory in its terms, and the insurers, whether for the
vessel or for the freight or for the cargo, is bound to contribute to
the indemnity of the general average. It simply places the insurer on
the same footing as other persons who have an interest in the
vessel, or the cargo therein at the time of the occurrence of the
general average and who are compelled to contribute.

In the present case it is not disputed that the ship was in grave peril
and that the jettison of part of the cargo was necessary. If the cargo
was in peril to the extent of call for general average, the ship must
also have been in great danger, possibly sufficient to cause its
absolute loss. The jettison was therefore as much to the benefit of
the underwriter as to the owner of the cargo. If no jettison had take
place and if the ship by reason thereof had foundered, the
underwriter's loss would have been many times as large as the
contribution now demanded.


Fortune Insurance and Surety Co., Inc., vs. CA [G.R. No.
115278, May 23, 1995]

Facts: On June 29, 1987, Producers Bank of the Philippinesarmored
vehicle was robbed, in transit, of seven hundred twenty-five
thousand pesos (Php 725,000.00) that it was transferring from its
branch in Pasay to its main branch in Makati. To mitigate their loss,
they claim the amount from their insurer, namely Fortune Insurance
and Surety Co..
Fortune Insurance, however, assails that the
general exemptionclause in the Casualty Insurance coverage had a
general exemptionclause, to wit:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in respect of
xxx xxx xxx
(b) any loss caused by any dishonest, fraudulent or criminal act of
the insured or any officer, employee, partner, director, trustee or
authorized representative of the Insured whether acting alone or in
conjunction with others. . . .
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And, since the driver (Magalong) and security guard (Atiga) of the
armored vehicle were charged with three others as liable for the
robbery, Fortune denies Producers Bank of its insurance claim.
The trial court and the court appeals ruled in favor of recovery,
hence, the case at bar.
Issue: Whether recovery is precluded under the general exemption
clause.
Held: Yes, recovery is precluded under the general exemption
clause. Howsoever viewed, Producers entrusted the three with the
specific duty to safely transfer the money to its head office, with
Alampay to be responsible for its custody in transit; Magalong to
drive the armored vehicle which would carry the money; and Atiga
to provide the needed security for the money, the vehicle, and his
two other companions. In short, for these particular tasks, the three
acted as agents of Producers. A "representative" is defined as one
who represents or stands in the place of another; one who
represents others or another in a special capacity, as an agent, and
is interchangeable with "agent." 23
In view of the foregoing, Fortune is exempt from liability under the
general exceptions clause of the insurance policy.




LIM V. SUN LIFE
41 PHIL 263

Facts:
> On July 6, 1917, Luis Lim Y Garcia of Zamboanga applied for a
policy of life insurance with Sunlife in the amount of 5T.
> He designated his wife Pilar Lim as the beneficiary. The first
premium of P433 was paid by Lim and company issued a
provisional policy
> Such policy contained the following provisions xx the
abovementioned life is to be assured in accordance with the terms
and conditions contained or inserted by the Company in the policy
which may be granted by it in this particular case for 4 months only
from the date of the application, PROVIDED that the company shall
confirm this agreement by issuing a policy on said application xxx.
Should the company NOT issue such a policy, then this agreement
shall be null and void ab initio and the Company shall be held not to
have been on the risk at all, but in such case, the amount herein
shall be returned.
> Lim died on Aug. 23, 1917 after the issuance of the provisional
policy but before the approval of the application by the home office
of the insurance company.
> The instant action is brought by the beneficiary to recover from
Sun Life the sum of 5T.

Issue:
Whether or not the beneficiary can collect the 5T.

Held:
NO.
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The contract of insurance was not consummated by the parties.
The above quoted agreement clearly stated that the agreement
should NOT go into effect until the home office of the Company
shall confirm it by issuing a policy. It was nothing but an
acknowledgment by the Company that it has received a sum of
money agreed upon as the first years premium upon a policy to be
issued upon the application if it is accepted by the Company.

When an agreement is made between the applicant and the agent
whether by signing an application containing such condition or
otherwise, that no liability shall attach until the principal approves
the risk and a receipt is given by the agent, such acceptance is
merely conditional and is subordinated to the companys act in
approving or rejecting; so in life insurance a binding slip or receipt
does not insure itself.

January 23, 1907
G.R. No. 3069
VIOLA BADGER, plaintiff-appellant,
vs.
THE NEW YORK LIFE INSURANCE COMPANY, defendant-appellee.
Condert Brothers for appellant.
Hartigan, Rohde & Gutierrez for appellee.
WILLARD, J.:
On July 5, 1902, William H. Badger made out a written application
for a policy of insurance upon his life for $5,000 in favor of his wife,
Harriet Viola Badger. The first premium on this policy amounted to
$312.50. Badger sent the application and $297.60 to R. E. Herdman,
who received the application and the money on the 9th of July,
1902.
Herdman sent the papers on July 24 to the office of the defendant
company in Shanghai, where they were received on August 11.
Badger executed a promissory note for $14.90, the balance of the
first premium, which was sent to Herdman on July 17, 1902. On the
31st of July, Mrs. Badger, acting for her husband, sent to Herdman
$14.90, cash, in payment of said note. Badger died on the 1st day of
August, 1902, of cholera. No policy was ever issued upon his
application.
The plaintiff brought this action to recover the sum of $5,000,
alleging that a contract of insurance had been made by the
company with Badger. Judgment was rendered in the court below in
favor of the defendant to the effect that no such contract was ever
made, from which judgment the plaintiff appealed.
The only person who acted in any way for the company in this
transaction was Herdman. The only evidence in the case to show
what his powers were is found in an admission in the answer which
states that he was "a special agent and cashier of the defendant
company in Manila," and in his evidence, testifying as a witness, he
said that at the time of the trial on September 6, 1905, he was the
agency director of the defendant company in the city of Manila.
The action can not be maintained unless the plaintiff proves a
contract between the company and Badger, made by a person
authorized to act for the company. The authority of this person
must, of course, be proven. There is no evidence in the case to show
12


that Herdman had any authority to make any contract, either parol
or in writing, that would bind the company. There is no evidence to
show that he had any policies in his possession.
Nor is there any evidence that Herdman ever undertook to make
any parol contract with Badger for this insurance. There had been
some correspondence between the parties prior to the making of
the application on July 5. On that day Herdman, writing to Badger in
regard to the medical examination, said:
I will send you an official receipt when your remittance
reaches the office, and then a new examination will not be
necessary when the policies are delivered; otherwise this
would be necessary.
After Badger had received the receipt of Herdman for the money
sent to him and on July 11, he wrote to Herdman, saying:
Yours of the 9th instant received. Is the receipt you sent
official or not? I do not wish to take another examination,
and so desire an official receipt.
xxx xxx xxx
Shall I be obliged to wait until you receive an answer from
the office in New York, or do you have authority to issue
policies at the Manila office?
xxx xxx xxx
If my application is accepted does insurance begin July 5,
1902?
In reply to this letter, Herdman, on July 15, wrote, saying:
The receipt I sent you is official, being signed by me as
cashier and not personally, and of course there will not be
another examination required.
xxx xxx xxx
We issue an interim policy from our Shanghai office, which
stands until the definite policy comes from New York. We
hope soon to have an advisory board here in Manila, so that
we will be entirely free from Shanghai, all our other
business being transacted directly with the home officer at
New York.
If your examination is acceptable, your policy will date from
July 5, the date of your application.
This evidence shows conclusively that there was no parol
agreement between the parties that the insurance had commenced
on July 5, 1902. In fact, the claim of the appellant reduced to its
lowest terms is that the mere signing of an application for life
insurance and the payment of a first premium, without any parol
agreement as to when the insurance shall commence, constitutes a
contract between the parties binding from that date. Such a
contention as this can not be sustained.
13


Moreover, there is evidence in the case in addition to that already
referred to, showing that the company expressly refused to be
bound until the application had been accepted either by its office in
Shanghai or its office in New York. In the application which Badger
signed on the 5th day of July it is said:
I agree, on behalf of myself and of any person who shall
have or claim any interest in any policy issued under this
application, as follows: That inasmuch as only the officers at
the home office of the company in the city of New York
have authority to determine whether or nor a policy shall
issue on any application, no statements, etc., shall be
binding on the company.
In the report of the medical examiner there is found this printed
statement:
The examiner is requested to send direct to the company in
New York City any information which, for any reason, he
prefers not to embody in this report. He can also mail this
report direct to the company if he prefers.
Herdman testifies that when he sent to Badger a receipt for the
money paid, it was on one of two printed blanks, which one he
could not say. The court below found that the receipt was sent upon
the blank which contained a reference to the Shanghai office.
Whether it was upon this form of receipt or upon the other one is of
no consequence. In one of them it is stated "that the company shall
incur no liability under the application until it has been received,
approved by the resident board of the company at Shanghai, and a
policy issued thereon by the resident board, and the full premium
has actually been paid to and accepted by the company or its
authorized agent during the lifetime and good health of the person
upon whose life the insurance is applied for. The company reserves
the absolute right of disapproval of such application."
The other form contains the statement that "the company shall
incur no liability under the application until it has been received,
approved at the house office of the company, and a policy issued
thereon." This is then followed by the words of the first form. Upon
both of these forms are printed the words "conditional receipt."
It seems very clear that no liability was incurred by the company in
this case. The judgment of the court below is accordingly affirmed,
with the costs of this instance against the appellant.
After expiration of twenty days let judgment be entered in
accordance herewith and ten days thereafter the record remanded
to the court below for proper action. So ordered.
Arellano, C.J., Torres, Mapa, Carson and Tracey, JJ., concur.





14



ENRIQUEZ V. SUNLIFE- INSURANCE POLICY
41 PHIL 269

Facts:
> On Sept. 24 1917, Herrer made an application to SunLife through
its office in Manila for life annuity.
> 2 days later, he paid the sum of 6T to the companys anager in its
Manila office and was given a receipt.
> On Nov. 26, 1917, the head office gave notice of acceptance by
cable to Manila. On the same date, the Manila office prepared a
letter notifying Herrer that his application has been accepted and
this was placed in the ordinary channels of transmission, but as far
as known was never actually mailed and never received by Herrer.
> Herrer died on Dec. 20, 1917. The plaintiff as administrator of
Herrers estate brought this action to recover the 6T paid by the
deceased.

Issue:

Whether or not the insurance contract was perfected.

Held:
NO.
The contract for life annuity was NOT perfected because it had NOT
been proved satisfactorily that the acceptance of the application
ever came to the knowledge of the applicant. An acceptance of an
offer of insurance NOT actually or constructively communicated to
the proposer does NOT make a contract of insurane, as the locus
poenitentiae is ended when an acceptance has passed beyond the
control of the party.

NOTE: Life annuity is the opposite of a life insurance. In life annuity,
a big amount is given to the insurance company, and if after a
certain period of time the insured is stil living, he is entitled to
regular smaller amounts for the rest of his life. Examples of Life
annuity are pensions. Life Insurance on the other hand, the insured
during the period of the coverage makes small regular payments
and upon his death, the insurer pays a big amount to his
beneficiaries.


Vda de Sindayen v Insular September 4, 1935
G.R. No. 41702
J. Butte
Facts:
Sindayen, employed in the Bureau of Printing at Manila went to
Tarlac, to spend the Christmas vacation with his aunt. There he
applied for for life insurance in the sum of P1,000 and paid to the
agent P15 cash as part of the first premium. It was agreed with the
agent that the policy, when and if issued, should be delivered to his
aunt with whom he left sum of P26.06 to complete the payment of
the first annual premium of P40.06. Sindayen returned to Manila
and resumed his work a linotype operator. The company accepted
the risk after examining Sindayen and issued a policy and to the
same agent for delivery to the insured. Sindayen abruptly passed
away.
15


The policy which the company issued was received by its agent in
Tarlac. The agent delivered the policy to Felicidad Estrada upon her
payment of the balance of the first years annual premium. The
agent asked Felicidad Estrada if her nephew was in good health and
she replied that she believed so. He gave her the policy. The agent
learned of the death of Arturo Sindayen and the aunt to return the
policy. He did not return or offer to return the premium paid. The
aunt gave him the policy.
The company obtained from the beneficiary, the widow of Arturo
Sindayen, her signature to alegal document entitled ACCORD,
SATISFACTION AND RELEASE In consideration of the sum of P40.06
paid to her by a check of the company, she discharged the company
for all claims . The said check for P40.06 was never cashed but
returned to the company. The widow brought action to enforce
payment of the policy. The first premium was already paid by the
insured covering the period from December 1, 1932. It is to
December 1, 1933. Hence, this appeal.

Issue: WON the said policy never took effect because of paragraph 3
of the application for at the time of its delivery by the agent the
insured was not in good health.
Held: No. Petition granted.
Ratio:
The application which the insured signed in Tarlac, contained
among others the following provisions:
3. That the said policy shall not take effect until the first premium
has been paid and the policy has been delivered to and accepted by
me, while I am in good health.
There is one line of cases which holds that the stipulation contained
in paragraph 3 is in the nature of a condition precedent, that is to
say, that there can be no valid delivery to the insured unless he is in
good health at the time. A number of these cases, on the other
hand, go to the of holding that the delivery of the policy by the
agent to the insured consummates the contract even though the
agent knew that the insured was not in good health at the time, the
theory being that his knowledge is the companys knowledge and
his delivery of the policy is the companys delivery.
We are inclined to the view that it is more consonant with the well
known practice of life insurancecompanies and the evidence in the
present case to rest our decision on the proposition that Mendoza
was authorized by the company to make the delivery of the policy
when he received the payment of the first premium and he was
satisfied that the insured was in good health.
In the case of MeLaurin vs. Mutual Life Insurance Co. -It is plain,
therefore, that upon the facts it is not necessarily a case of waiver
or of estoppel, but a case where the local agents, in the exercise of
the powers lodged in them, accepted the premium and delivered
the policy. That act binds their principal, the defendant.
The evidence in the record shows that Mendoza had the authority,
given him by the company, to withhold the delivery of the policy to
the insured until the first premium has been paid and the policy
has been delivered to and accepted by me (the insured) while
16


I am in good health. Mendozas decision that the condition had
been met by the insured and that it was proper to make a delivery
of the policy to him is just as binding on the company as if the
decision had been made by its board of directors.
It is the interest not only the applicant but of all insurance
companies as well that there should be some act which gives the
applicant the definite assurance that the contract has been
consummated. A cloud will be thrown over the entire insurance
business if the condition of health of the insured at the time of
delivery of the policy may be required into years afterwards with
the view to avoiding the policy on the ground that it never took
effect because of an alleged lack of good health, at the time of
delivery.
When the policy is issued and delivered it is plainly not within the
intention of the parties that there should be any questions held in
abeyance or reserved for future determination. It would be a most
serious handicap to business if the very existence of the contract
remains in doubt even though the policy has been issued and
delivered with all the formalities required by the law. The delivery
of the policy to the insured by an agent is the final act which binds
the company and insured in the absence of fraud or other legal
ground for rescission. The fact that the agent to whom it has
entrusted this duty is derelict or negligent or even dishonest in
the performance of the duty which has been entrusted to him
would create a liability of the agent to the company but does not
resolve the companys obligation based upon the authorized acts of
the agent toward a third party who was not in collusion with the
agent.
4. That the agent taking this application has no authority to make,
modify or discharge contracts, or to waive any of the Companys
right or requirements.
Paragraph 4 of the application to the effect is not in point. Mendoza
neither waived nor pretended to waive any right or requirement of
the company. In fact, his inquiry as to the state of health of the
insured discloses that he was endeavoring to assure himself that
this requirement of the company had been satisfied. In doing so, he
acted within the authority conferred on him by his agency and his
acts within that authority bind the company. The company
therefore having decided that all the conditions precedent to the
taking effect of the policy had been complied with, it is now
estopped to assert that it never intended that the policy should take
effect.
G.R. No. 105562 September 27, 1993

Lessons Applicable: Who Exercises Rights of Minor Insured or
Beneficiaries (Insurance)
Laws Applicable: Art. 225 Family Code

FACTS:
Prime Marine Services, Inc. (PMSI), a crewing/manning outfit,
procured Group PoIicy
from Insular Life Assurance Co., Ltd. to provide life insurance
coverage to its sea-based employees enrolled under the plan.
17


February 17 1986: 6 employees of the PMSI perished at sea
when M/V Nemos, a Greek cargo vessel, sunk somewhere in El
Jadida, Morocco
The beneficiaries asked President and General Manager of
PMSI, Capt. Roberto Nuval and issued him special powers of
attorney authorizing him to "follow up, ask, demand, collect
and receive" for their benefit indemnities. It only
verbally pertained to the sinking of the fatal vessel
Unknown to them, however, the PMSI, in its capacity as
employer and policyholder of the life insurance of its deceased
workers, filed with formal claims with their special power of
attorney
Capt. Nuval, upon receipt of these checks from the treasurer,
who happened to be his son-in-law, endorsed and deposited
them in his account with the Commercial Bank of Manila,
now Boston Bank
Upon learning that they are entitled to the claim, they sought to
recover from Insular Life but it denied on the ground that they
already delivered to PMSI
The fact that there was a verbal agreement between
complainants-appellees and Capt. Nuval limiting the authority
of the latter to claiming specified death benefits cannot
prejudice the insurance company which relied on the terms of
the powers of attorney which on their face do not disclose such
limitation
Section 180 of the Insurance Code has been amended by the
Family Code 17 which grants the father and mother joint legal
guardianship over the property of their unemancipated
common child without the necessity of a court appointment;
however, when the market value of the property or the annual
income of the child exceeds P50,000.00, the parent concerned
shall be required to put up a bond in such amount as the court
may determine.
Insurance Commission: favored petitioners
The Insular Life Assurance Company appealed stating that
(a) had no jurisdiction over the case considering that the claims
exceeded P100,000
(b) erred in holding that the powers of attorney relied upon by
Insular Life were insufficient to convey absolute authority to
Capt. Nuval to demand, receive and take delivery of the
insurance proceeds pertaining to the petitioners
(c) erred in not giving credit to the version of Insular Life that
the power of attorney supposed to have been executed in favor
of the Alarcons was missing, and
(d) erred in holding that Insular Life was liable for violating
Section 180 of the Insurance Code for having released to the
surviving mothers the insurance proceeds pertaining to the
beneficiaries who were still minors despite the failure of the
former to obtain a court authorization or to post a bond.
CA: eliminated the award to minor beneficiaries Dina Ayo and
Lucia Lontok

ISSUE: W/N the minor beneficiaries award should be eliminated

HELD: YES. petition is GRANTED. CA Reversed. Insurance
Commission Reinstated.
Being special powers of attorney, they must be strictly
construed. Insular Life knew that a power of attorney in favor
18


of Capt. Nuval for the collection and receipt of such proceeds
was a deviation from its practice with respect to group policies.
Group Insurance
coverage terms for group insurance are usually stated in a
master agreement or policy that is issued by the insurer to a
representative of the group or to an administrator of the
insurance program
employer acts as a functionary in the collection and payment of
premiums and in performing related duties
falling within the ambit of administration of a group policy is the
disbursement of insurance payments by the employer to the
employees
employee is in the position of a real party to the master policy
employees is the true source of the benefits, which are a form
of additional compensation to them
enables the employees to carry a larger amount of insurance
than they could otherwise, and helps to attract and hold a
permanent class of employees
Even granting for the sake of argument that the special powers
of attorney were in due form, Insular Life was grossly negligent
in delivering the checks, drawn in favor of the petitioners, to a
party who is not the agent mentioned in the special power of
attorney
Nor can we agree with the opinion of the public respondent
that since the shares of the minors in the insurance proceeds
are less than P50,000.00, then under Article 225 of the Family
Code their mothers could receive such shares without need of
either court appointments as guardian or the posting of a bond
Art. 225. The father and the mother shall jointly exercise legal
guardianship over the property of their unemancipated
common child without the necessity of a court appointment. In
case of disagreement, the father's decision shall prevail, unless
there is judicial order to the contrary.

Where the market value of the property or the annual income of
the child exceeds P50,000, the parent concerned shall be required
to furnish a bond in such amount as the court may determine, but
not less than ten per centum (10%) of the value of the property or
annual income, to guarantee the performance of the obligations
prescribed for general guardians.
It is clear from the said Article that regardless of the value of the
unemancipated common child's property, the father and mother
ipso jure become the legal guardian of the child's property.
However, if the market value of the property or the annual income
of the child exceeds P50,000.00, a bond has to be posted by the
parents concerned to guarantee the performance of the obligations
of a general guardian.
It must, however, be noted that the second paragraph of Article
225 of the Family Code speaks of the "market value of the
property or the annual income of the child," which means,
therefore, the aggregate of the child's property or annual
income; if this exceeds P50,000.00, a bond is required.
There is no evidence that the share of each of the minors in the
proceeds of the group policy in question is the minor's only
property. Without such evidence, it would not be safe to
conclude that, indeed, that is his only property.


19


GREPALIFE V. CA
89 SCRA 543

Facts:
> On March 14, 1957, respondent Ngo Hing filed an application
with Grepalife for a 20-yr endowment policy for 50T on the life of
his one year old daughter Helen Go.

> All the essential data regarding Helen was supplied by Ngo to
Lapu-Lapu Mondragon, the branch manager of Grepalife-Cebu.
Mondragon then typed the data on the application form which was
later signed by Ngo.

> Ngo then paid the insurance premium and a binding deposit
receipt was issued to him. The binding receipt contained the
following provision: If the applicant shall not have been insurable
xxx and the Company declines to approve the application, the
insurance applied for shall not have been in force at any time and
the sum paid shall be returned to the applicant upon the surrender
of this receipt.
> Mondragon wrote on the bottom of the application form his
strong recommendation for the approval of the insurance
application.
> On Apr 30, 1957, Mondragon received a letter from Grepalife
Main office disapproving the insurance application of Ngo for the
simple reason that the 20yr endowment plan is not available for
minors below 7 yrs old.
> Mondragon wrote back the main office again strongly
recommending the approval of the endowment plan on the life of
Helen, adding that Grepalife was the only insurance company NOT
selling endowment plans to children.
> On may 1957, Helen died of influenza with complication of
broncho pneumonia. Ngo filed a claim with Gepalife, but the latter
denied liability on the ground that there was no contract between
the insurer and the insured and a binding receipt is NOT evidence of
such contract.

Issue:
Whether or not the binding deposit receipt, constituted a
temporary contract of life insurance.

Held:

NO.
The binding receipt in question was merely an acknowledgement on
behalf of the company, that the latters branch office had received
from the applicant, the insurance premium and had accepted the
application subject for processing by the insurance company, and
that the latter will either approve or reject the same on the basis of
whether or not the applicant is insurable on standard rates.

Since Grepalife disapproved the insurance application of Ngo, the
binding deposit receipt had never became on force at any time,
pursuant to par. E of the said receipt. A binding receipt is manifestly
merely conditional and does NOT insure outright. Where an
agreement is made between the applicant and the agent, NO
liability shall attach until the principal approves the risk and a
receipt is given by the agent.

20


The acceptance is merely conditional, and is subordinated to the act
of the company in approving or rejecting the application. Thus in
life insurance, a binding slip or binding receipt does NOT insure by
itself.


TANG V. CA- INSURANCE FRAUD OR MISTAKE
90 SCRA 236

Facts:
> On Sept. 25, 2965, Lee Su Guat, widow, 61 years old and illiterate
who spoke only Chinese, applied for life insurance for 60T with
Philamlife. The application was in two parts, both in English.
> The second part dealt with her state of health. Her answers
having shown that she was health, Philamlife issued her a policy
effective Oct. 23, 1965 with her nephew Vicente Tang as
beneficiary.
> On Nov. 15, 1965, Lee again applied for additional insurance of
her life for 40T. Since it was only recent from the time she first
applied, no further medical exam was made but she accomplished
Part 1 (which certified the truthfulness of statements made in Part.
2)
> The policy was again approved. On Apri 20 1966, Lee Su Guat
died of Lung cancer.
> Tang claimed the amount o 100T but Philamlife refused to pay on
the ground that the insured was guilty of concealment and
misrepresentation.
> Both trial court and CA ruled that Lee was guilty of concealment.
> Tangs position, however, is that because Lee was illiterate and
spoke only Chinese, she could not be held guilty of concealment of
her health history because the application for insurance was
English, and the insurer has not proven that the terms thereof had
been fully explained to her as provided by Art. 1332 of CC.

Issue:

Whether or not Art. 1332 applies.

Held:
NO.
Art. 1332 is NOT applicable. Under said article, 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, when fraud or mistake is alleged, devolves on the party
seeking to enforce it. Here, the insurance company is NOT seeking
to enforce the contract; on the contrary, it is seeking to avoid its
performance.

It is petitioner who is seeking to enforce it, even as fraud or mistake
is NOT alleged. Accordingly, Philamlife was under no obligation to
prove that the terms of the insurance contract were fully explained
to the other party. Even if we were to say that the insurer is the
one seeking the performance of the cont contracts by avoiding
paying the claim, 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. In sum, Art.
1332 is inapplicable, and considering the findings of both the trial
court and the CA as to the Concealment of Lee, the SC affirms their
decisions.

21


Concurring: J., Antonio
In a contract of insurance, each party must communicate to the
other, in good faith, all facts within his knowledge which are
material to the contract, and which the other has no means of
ascertaining. As a general rule, 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.

The reason for this rule is that insurance policies are traditionally
contracts uberrimae fidei, which means most abundant good
faith, absolute and perfect candor or openness and honesty,
absence of any concealment or deception however slight. 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. Certainly, 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.

NOTE: Art. 1332: When one of the parties is unable to read or if the
contract is in a language not understood by him, and mistake or
fraud is alleged, the person enforcing the contract must show that
the terms thereof have been fully explained to him.






G.R. No. L-18529
FRANCISCO G. ALEJA, FELICITACION GAMBOA-ALEJA and
DOMINADOR ALEJA, plaintiffs-appellants,
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-
appellee.
Restituto L. Joson for plaintiffs-appellants. Bartolome S. Palma for
defendant-appellee.
Barrera, J.:
This is an appeal by Francisco G. Aleja, et al., from the decision of
the Court of First Instance of Nueva Ecija (in Civil Case No. 3335)
dismissing their complaint against the Government Service
Insurance System (GSIS) and denying their claim to the proceeds of
the insurance policy No. 310973 issued to the late Rosauro G. Aleja,
on the ground that the deceased was not yet covered by insurance
at the time of his death.
As found by the lower court, the deceased Rosauro G. Aleja was
appointed as temporary classroom teacher in the Bureau of Public
Schools, Division of Nueva Ecija, on July 8, 1958. Thereafter, a
compulsory term insurance policy, No. 310973, was issued in his
name, said policy to take effect on February 1, 1959. The
corresponding premium therefor was deducted for the first time
from his salary on January 31, 1959. However, two days before that
or on January 29, 1959, while guarding the rice stack in front of their
house, Rosauro Aleja died of a gunshot wound inflicted by his own
gun. Plaintiffs, as beneficiaries named in the policy, filed a claim
with the GSIS to collect the proceeds of the said policy, but the
22


same was denied allegedly because at the time of Aleja's death, the
policy was not yet effective and the latter was, therefore, not
covered by insurance. Hence, the institution of this case and the
consequent promulgation of the decision by the lower court which
is the subject of the present appeal.
In denying plaintiffs-appellants' claim, the GSIS contends that
although Aleja became a permanent employee and entitled to
membership in the System 6 months after his original appointment,
or on January 8, 1959, yet as specified in the policy issued to him,
the same shall become effective only on February 1, 1959. And this
latter date was fixed in accordance with the provisions
of Commonwealth Act 186, as amended byRepublic Act 660, which
read:
SEC. 4. Scope of application of System.- (a) Membership to the
System shall be compulsory upon all regularly and permanently
appointed employees, including those whose tenure of office is
fixed or limited by law; upon all teachers except only those who are
substitutes; ... .
SEC. 8. (a) Compulsory membership insurance.- An employee whose
membership in the System is compulsory shall be automatically
insured on the first day of the seventh calendar month following the
month he was appointed or on the first day of the sixth calendar
month if the date of his appointment is the first day of the month:
Provided, That his medical examination, if required, has been
approved by the System.
It is not controverted that the deceased had rendered services to
the government for 6 months and 21 days before his death; that he
was insured and in fact a policy was already issued in his favor at
the time of his death; that the death fixed for the effectivity of said
policy was made pursuant to the aforequoted provisions of the GSIS
Charter. Appellants, however, maintain that section 8
of Commonwealth Act 186, insofar as it fixes the date of compulsory
membership therein, is absurd and discriminatory, in that, whereas
those whose appointments are dated on the first day of the month
become covered by insurance on the first day of the sixth month
following their appointment, those who were appointed on other
dates become insured only on the first day of the seventh calendar
month from their original appointment. In other words, if an
employee is appointed on January 1, he will be covered by
insurance on June 1, whereas one who gets appointed in January 2
becomes insured only on July 1. This arrangement, appellants claim,
was made only to facilitate office transactions or for office
procedure, and should not be construed to defeat the purpose for
which the System was established, i.e., to promote the welfare of
the employees. It is, therefore, urged that the coverage of
compulsory insurance should commence on the date when the
employee becomes entitled to membership in the System, or upon
completion of six months' service.
It may be admitted that as thus worded, the disputed provision
makes a distinction, in the matter of effectivity of their insurance
coverage, between those appointed to the service on the first day
of the month and those who receive their appointments on any
other date. But classification or class legislation, assuming this to be
one, does not ipso facto make a statutory provision invalid.
Classification will not constitute an infringement of the individual's
23


right to constitutional guarantees of equality if it is not
unreasonable, arbitrary or capricious. To be reasonable, the
classification must be based on substantial distinctions which make
real differences; must be germane to the purposes of the law; must
not be limited to existing conditions only, and must apply equally to
each member of the class, under similar conditions. 1
In the instant case, it may be true that the disputed provision must
have been incorporated in the law to promote efficiency and
convenience in office procedure of the System. Taking into account
the volume of business that the System handles, the providing of
this measure which ultimately may redound to the benefit of the
members in the form of efficient and prompt service, cannot be
considered capricious or arbitrary.
Furthermore, it appears that the policy issued and accepted by Aleja
during his lifetime specifically provides that the effective date of the
insurance contract is February 1, 1959. Additionally, it is not denied
that the first premium on said insurance contract was deducted
from Aleja's salary only on January 31, 1959 or after his death.
Clearly, at the time of his said death, there was no existing contract
between him and the appellee GSIS, there being no consideration
for the risk sought to be enforced against the insurance system. The
offer of the latter to refund the amount collected after Aleja's
death, is proper.
WHEREFORE, the decision of the lower court appealed from is
hereby modified in the sense that the defendant-appellee shall
return to the plaintiffs the amount deducted from the deceased's
salary in the form of premium. No costs. So ordered.
Areola vs. CA
G.R. No. 95641 September 22, 1994

Lessons Applicable: Binding Effect of Payment (Insurance)
Laws Applicable: Art. 1910,Article 1191

FACTS:
December 17, 1984: Prudential Guarantee And Assurance,
Inc. issued collector's provisional receipt amounting
to P1,609.65
June 29, 1985: 7 months after the issuance of petitioner Santos
Areola's Personal Accident Insurance Policy, Prudential
Guarantee And Assurance, Inc. unilaterally cancelled it for
failing to pay his premiums through its manager Teofilo M.
Malapit
Shocked by the cancellation of the policy, Santos
approached Carlito Ang, agent of Prudential and demanded the
issuance of an official receipt. Ang told Santos that it was a
mistake and assured its rectification.
July 15, 1985: Santos demanded the same terms and same rate
increase as when he paid the provincial receipt but Malapit
insisted that the partialpayment he made was exhausted and
that he should pay the balance or his policy will cease to
operate
July 25, 1985 : Assistant Vice-President Mariano M. Ampil III
apologized
24


August 6, 1985 had filed a complaint for breach of
contract with damages before the lower court
August 13, 1985: Santos received through Carlito Ang the leeter
of Assistant Vice-President Mariano M. Ampil III finding error
on their part since premiums were not
remitted Malapit, proposed to extend its lifetime to December
17, 1985
RTC: favored Santos - Prudential in Bad Faith
CA: Reversed - not motivated by negligence, malice or bad faith
in cancelling subject policy
ISSUE: W/N the Areolas can file against damages despite the effort
to rectify the cancellation

HELD: YES. RTC reinstated
Malapit's fraudulent act of misappropriating the premiums paid
is beyond doubt directly imputable to Prudential
Art. 1910. The principal must comply with all the obligations
which the agent may have contracted within the scope of his
authority.
As for any obligation wherein the agent has exceeded his power,
the principal is not bound except when he ratifies it expressly or
tacitly.
Subsequent reinstatement could not possibly absolve
Prudential there being an obvious breach of contract
a contract of insurance creates reciprocal obligations for both
insurer and insured
Article 1191
choice between fulfillment or rescission of the obligation in
case one of the obligors fails to comply with what is incumbent
upon him
entitles the injured party to payment of damages, regardless of
whether he demands fulfillment or rescission of the obligation
Nominal damages are "recoverable where a legal right is
technically violated and must be vindicated against an invasion
that has produced no actual present loss of any kind, or where
there has been a breach of contract and no substantial injury or
actual damages whatsoever have been or can be shown.

CONSTANTINO V. ASIA LIFE- NON-PAYMENT OF
INSURANCE PREMIUMS
87 PHIL 248

Facts:
> Appeal consolidates two cases.
> Asia life insurance Company (ALIC) was incorporated in Delaware.
> For the sum of 175.04 as annual premium duly paid to ALIC, it
issued Policy No. 93912 whereby it insured the life of Arcadio
Constantino for 20 years for P3T with Paz Constantino as
beneficiary.
First premium covered the period up to Sept. 26, 1942. No
further premiums were paid after the first premium and
Arcadio died on Sept. 22, 1944.
> Due to Jap occupation, ALIC closed its branch office in Manila
from Jan. 2 1942-1945.
> On Aug. 1, 1938, ALIC issued Policy no. 78145 covering the lives of
Spouses Tomas Ruiz and Agustina Peralta for the sum of P3T for 20
25


years. The annual premium stipulated was regularly paid from Aug.
1, 1938 up to and including Sept. 30, 1940.
Effective Aug. 1, 1941, the mode of payment was changed
from annually to quarterly and such quarterly premiums were
paid until Nov. 18, 1941.
Last payment covered the period until Jan. 31, 1942.
Tomas Ruiz died on Feb. 16, 1945 with Agustina Peralta as his
beneficiary.
> Due to Jap occupation, it became impossible and illegal for the
insured to deal with ALIC. Aside from this the insured borrowed
from the policy P234.00 such that the cash surrender value of the
policy was sufficient to maintain the policy in force only up to Sept.
7, 1942.
> Both policies contained this provision: All premiums are due in
advance and any unpunctuality in making such payment shall cause
this policy to lapse unless and except as kept in force by the grace
period condition.
> Paz Constantino and Agustina Peralta claim as beneficiaries, that
they are entitled to receive the proceeds of the policies less all sums
due for premiums in arrears. They also allege that non-payment of
the premiums were caused by the closing of ALICs offices during
the war and the impossible circumstances by the war, therefore,
they should be excused and the policies should not be forfeited.
> Lower court ruled in favor of ALIC.

Issue:

May a beneficiary in a life insurance policy recover the amount
thereof although the insured died after repeatedly failing to pay the
stipulated premiums, such failure being caused by war?
Held:

NO.
Due to the express terms of the policy, non-payment of the
premium produces its avoidance. In Glaraga v. Sun Life, it was held
that a life policy was avoided because the premium had not been
paid within the time fixed; since by its express terms, non-payment
of any premium when due or within the 31

day grace period ipso
fact caused the policy to lapse.

When the life insurance policy provides that non-payment of
premiums will cause its forfeiture, war does NOT excuse non-
payment and does not avoid forfeiture. Essentially, the reason why
punctual payments are important is that the insurer calculates on
the basis of the prompt payments. Otherwise, malulugi sila.

It should be noted that the parties contracted not only as to peace
time conditions but also as to war-time conditions since the policies
contained provisions applicable expressly to wartime days. The
logical inference therefore is that the parties contemplated the
uninterrupted operation of the contract even if armed conflict
should ensue.






26


ADELAIDA OCAMPO VDA. DE GOMEZ, demandante-
apelante,
vs.
THE GOVERNMENT INSURANCE BOARD, demandado-apelado.
Sres. Artemio C. Macalino y Rodrigo G. Pagan en representacion de la
apelante.
Abogado Auxiliar de Corporaciones D. Federico C. Alikpala en
representacion del apelado.
BRIONES, J.:
Andres A. Gomez estuvo sirviendo en el gobierno provincial de la
Pampanga como tasador provincial delegado por un periodo continuo de
25 aos, desde el 8 de Agosto de 1914 en que fue nombrado por primera
vez, hasta el 28 de Febrero de 1938 en que fallecio. Segun el convenio
dehechos, no cabe duda de que su nombramiento era de empleado
temporero temporary al tenor de la fraseologia legal. No era elegible
en el servicio civil: esto explica porque durante tan largo tiempo de servicio
no se le habia podido expedir un nombramiento regular y permanente. El
sueldo que percibia al morir era de P90 al mes.
Tampoco hay controversia entre las partes, bajo el convenio, acerca de los
siguientes hechos: (a) que el gobierno provincial de la Pampanga, para
aprovecharse delos beneficios de la ley del Commonwealth No. 186,
aprobo el 8 de Agosto, 1937, por medio de su junta provincial, una
resolucion en que significaba su intencion de afiliarse al Sistema de Seguro
de Vida del Gobierno nacional llamado "Government Service Insurance
System"; (b) que despues de recibir dicha resolucion, la junta que regenta y
administra dicho Sistema de Seguro la aprobo debidamente, haciendo
efectiva la afiliacion desde el 28 de Febrero, 1938; (c) que Andres A.
Gomez, antes de sumuerte, juntamente con otros empleados del gobierno
provincial de la Pampanga habia llenado un formulario del referido Sistema
de Seguro llamado "Information for membership insurance," en el que
nombraba a suesposa Adelaida Ocampo como beneficiaria, enviando luego
el formulario asi llenado al "Government Service Insurance System" que lo
recibio y guardo en su archivo; (d) que el 28 de Febrero, 1938, el tesorero
provincia lde la Pampanga, como pagador oficial, dedujo del sueldode
Gomez correspondiente a la segunda mitad de dichomes la cantidad de
P2.70 como su parte en la primera prima, aportando la provincia una suma
igual como su contribucion; (e) que la prima fue enviada a la oficina del
"Government Service Insurance System" en Manila, y dicha oficina la
recibio el 10 de marzo, 1938, librando el correspondiente recibo al
gobierno provincial de la Pampanga; (f) que el 7 de Marzo, 1938, el
tesorero provincial de la Pampanga envio a la oficina del "Government
Service Insurance System," en nombre de la viuda de Andres Gomez,
Adelaida Ocampo, una reclamacion por el importe dela poliza de seguro en
la suma de P1,052, pero la juntadirectiva del Sistema la rechazo por el
fundamento de queAndres Gomez era solo un empleado temporero
temporary bajo las reglas del Servicio Civil, y, por tanto, no era
asegurable cuando murio el 28 de Febrero, 1938; (g) finalmente, que la
oficina del "Government Service Insurance System" devolvio al gobierno
provincial de la Pampanga el importe de la prima pagada, o sea la cantidad
de P5.40, por medio de la libranza de la Tesoreria No. 58162.
La viuda interpuso la presente accion ante el Juzgado de Primera Instancia
de la Pampanga contra la Junta Directiva del "Government Service
Insurance System," pidiendoel cobro del importe de la poliza. El Juzgado,
estimandola defensa de que Andres Gomez era solo un temporero,
sinhaberse cualificado en el servicio civil mediante el correspondiente
examen para merecer un nombramiento como empleado regular y
permanente, y, por tanto, sin derechoa ser asegurado automaticamente
bajo la ley que rige el Sistema, dicto sentencia contra la demandante,
sobrese y endola demanda. De ahi la presente apelacion.
27


Establecido y convenido que el nombramiento de Gomez era de
temporero, la cuestion que tenemos que resolver essi al tiempo de su
muerte tenia tales cualificaciones quepodia ser considerado como
empleado regular y permanente para los efectos del cobro del importe de
su poliza de seguro por la beneficiaria. Decidimos que si, tenia tales
cualificaciones.
Resulta establecido en autos, sin discusion, que Gomez, acogiendose a las
disposiciones del articulo 672 del Codigo Administrativo tal como fue
enmendado por la ley del Commonwealth No. 177, se sometio a examen
de 2.ogrado enel servicio civil el 16 de Octubre, 1937, y fue aprobado
enaquel examen, si bien este favorable resultado no se anunciosino
despues ya de su muerte. Es obvio que los efectos de la aprobacion deben
retrotraerse a la fecha del examen. La prueba de la competencia, de la
idoneidad del examinando, se realizo antes de su muerte; por tanto, hay
que darle efectividad desde la fecha en que tuvo lugar laprueba. Hasta
parece superfluo que esto se discuta.
Sin embargo, se arguye que no cabe dar efecto retroactivo a la aprobacion
de Gomez en su examen, puesto que el articulo 663 (d) del Codigo
Administrativo Revisado, tal como ha sido enmendado, dispone que "a
period of trial service shall be required before appointment or
employmentis made permanent;" y es claro que Gomez, habien domuerto
despues del examen y antes de que su resultado seanunciara, mal pudo ser
sometido a dicho periodo de pruebapor 6 meses.
Esta manera de interpretar la ley tiene el defecto deser demasiado literal,
y "la letra mata (a veces), mientrasque el espiritu vivifica." Tengase en
cuenta que Gomez habia servido como tasador provincial delegado por 25
aos consecutivos hasta el dia de su muerte. Cuando portan largo tiempo
pudo superar la prueba de su competencia, en el ejercicio cotidiano de sus
deberes, hay que presumir que sus superiores estaban satisfechos de su
idoneidad. Por tanto, el periodo de prueba de 6 meses no rezabacon el.
Para los efectos, por lo menos, de la validez de su poliza de seguro, se debe
concluir que el exito desu examen le capacitaba y cualificaba
automaticamente para un nombramiento regular y permanente desde la
fechade dicho examen. Por tanto, el era asegurable y, dehecho, estaba
asegurado en el dia de su muerte, bajo losterminos de la Ley No. 186. Esta
conclusion es tanto masjusta cuanto que el "Government Service Insurance
System" acepto practicamente la prima pagada, librando porella el
correspondiente recibo.
Nos sentimos perfectamente autorizados para interpretarla ley lo mas
liberalmente posible, toda vez que, prescindiendo ya de que en el presente
caso se trata de la viuday familia de un pequeo empleado, es evidente
que el Sistema Nacional de Seguro de Vida del Gobierno se hacreado para
fines sociales y humanitarios, siendo parte deese generoso movimiento
universal que tiende a mejorarcada dia la suerte de los hijos del trabajo
mediante la promulgacion en todos los paises cultos y civilizados de leyes
progresivas y liberales sobre seguridad social y economica. El articulo 3 de
la ley del Commonwealth No. 186 que crea y reglamenta dicho Sistema,
dice positivamente que el mismose establece "en orden a promover la
eficiencia y bien estarde los empleados del Gobierno de Filipinas y
reemplazar los sistemas de pensiones actualmente establecidos . . .".
Como se sabe, aquellos sistemas de pensioneseran fundamentalmente de
beneficencia, tanto que si noha sido posible continuarlos era porque el
gobierno no disponia de tanto dinero para capitalizarlos y sostener lospor
si solo. Asi que se ha ideado el Sistema Nacional de Seguro sobre bases
mas cientificas y con adecuadas aportaciones de los empleados mismos.
Con todo, es innegableque el sucesor ha heredado parte de los rasgos
beneficos y humanitarios de sus antecesores.
En meritos de lo expuesto, se revoca la sentencia del Juzgado y se condena
a la demandada y apelada a pagara la demandante y apelante la suma de
P1,052, importe de la poliza de seguro del difunto Andres A. Gomez,
28


maslos intereses legales desde la interposicion de la demanda, y las costas
del juicio. Asi se ordena.
Moran, Pres., Paras, Feria, Pablo, Hilado, Bengzon, Padilla, and Tuason ,
MM., estan conformes.

[G.R. No. 42874. October 22, 1935.]

THE INSULAR LIFE ASSURANCE CO., LTD., Plaintiff-Appellant, v.
MARIA NARCISA SUVA, as administratrix of the intestate estate of
Benito Patrocinio Suva, defendant and appellee. FELICIDAD CRUZ,
intervenor and appellant, MARIA NARCISA SUVA, Intervenor-
Appellee.

Araneta, Zaragoza & Araneta for plaintiff.

Jose Gutierrez David for intervenors.

SYLLABUS
LIFE INSURANCE POLICY; ATTEMPTED CHANGE OF BENEFICIARY.
The conclusion of the trial court is sustained by the decision in the
case of Gercio v. Sun Life Assurance Co. of Canada (48 Phil., 53), and
the American authorities therein cited. The attempted change of
beneficiary made by the insured on August 16, 1933, no right to
change having been reserved, and endorsed by the company on the
back of the policy on August 24, 1933, was due to a mutual mistake.
The application in which the insured, over his personal signature,
renounced the right to change the beneficiary, should prevail over
the printed phrase "WITH RIGHT OF REVOCATION" which occurs in
the policy. It is to be noted that the application itself is made a part
of the contract.

D E C I S I O N

BUTTE, J.:

This is an appeal from a judgment of the Court of First Instance of
Manila in an action brought by the Insular Life Assurance Co., Ltd.,
for the cancellation of two policies of P5,000 each issued and
delivered by it upon the life of Benito Patrocinio Suva, now
deceased. The action was originally brought only against the
administratrix of the estate of the insured, but by leave of court,
Maria Narcisa Suva, in her own right, and Felicidad Cruz filed their
interventions claiming to be the beneficiaries of the two policies
involved in this action.

The first of the policies, numbered 47726, bears date of December
1, 1932, and names as beneficiary Isabel Simbulan, the wife of the
insured. The second of the said policies, numbered 48819, bears
date of February 1, 1933, and names as beneficiary the appellee,
Maria Narcisa Suva, sister of the insured. The company
acknowledges having received the premium due on said policies for
the first year and tenders the return of the same in its petition. The
intervenors, besides praying for judgment for the amount due on
said policies, also pray for P1,000 each as damages.

The ground alleged by the plaintiff for the cancellation of said
policies is that the insured made false statements as to the past and
present state of his health in his applications which, by the terms of
29


the policies themselves, are made a part of the contract. The
applicant was examined on October 17, 1932, by Dr. G. Ocampo,
one of the physicians of the company. He was again examined on
December 28, 1932, by Dr. M. Llora, a physician of the company
sent out from the home office for that purpose. In connection with
his first application for policy No. 47726, among the numerous
questions with relation to specific diseases, the following questions
and answers appear in the report of Dr. Ocampo (Exhibit
B):jgc:chanrobles.com.ph

" Ha padecido V.2 alguna vez de las siguientes enfermedades . . .
del pulmon, pleuriesia, pulomia, asma? No.

" Ha escupido V. sangre? Por quecausa? No." No doubt is
raised as to the correctness of any other statements of the
applicant.

The report of Dr. Ocampo is a detailed account of the complete
examination made by him. Item No. 30 of his report is as follows:"
Encuentra V., despues de una cuidadosa interrogacion y
reconocimiento, algn sintoma de padecimiento actual o anterior . .
. de los pulmones? to which the doctor answered "No." Item 33 of
his report is as follows:" Ha revisado V. cuidadosamente todas las
contestaciones de este reconocimiento y esta V. seguro de que son
claras y completas?" to which the doctor answered "Si." Item 34 is
as follows:" Cree V. que los informes dados por le solicitante son
verdaderos y completos en todos los conceptos?" to which the
doctor answered "Si." Item 35 is as follows:" Recomienda V., como
representante fiel de la compaia, que se acepte este riesgo como
excelente, bueno, o que no se acepte?" to which the doctor
answered "Si, que se acepte como excelente."cralaw virtua1aw
library

On December 28, 1932, when the applicant was examined by Dr. M.
Llora, he was asked the same questions as were put to him by Dr.
Ocampo. In the questions relating to his clinical history he was
asked: "Have you ever suffered from any ailment or disease of (c)
the lungs, pleurisy, pneumonia or asthma? The applicant answered
"Yes, trancazo 1918" and (h) "Have you ever spat blood? What was
it due to?" to which the applicant answered "No." No other answers
made by him are called in question in this litigation.

In Dr. Lloras detailed report which appears on the back of said
application, Exhibit C, appear the following:jgc:chanrobles.com.ph

"Item 30: Do you find after careful inquiry and physical examination
any evidence of past or present disease . . . (d) of the lungs?

"Answer: No."cralaw virtua1aw library

"Item 34: Do you believe the party has given full and true
information in all respects?

"Answer: Si.

"Item 35: Would you classify applicant as first class, good, average
or poor risk?

"Answer: Creo que es aceptable." His report concludes with the
following certificate:jgc:chanrobles.com.ph
30



"I CERTIFY that I have carefully examined Benito Patrocinio Suva of
Arayat, Pampanga, in private, and not in the presence of any third
person, at Arayat, Pampanga, this 28th day of December, 1932, at
5.15 oclock P. M. for an insurance of P5,000 for 20 C. P. years on
the applicants life; that I have asked each question exactly as set
forth on the other side of this sheet and that the applicants
answers thereto are in my handwriting, and are exactly as made by
the applicant to me and that the applicant signed them in my
presence.

(Sgd.) "M. LLORA, Med. Ex."cralaw virtua1aw library

The insured died of pulmonary tuberculosis in the Chinese General
Hospital in Manila on September 23, 1933.

The substance of the plaintiffs cause of action is that the
statements made by the insured in his applications as above
quoted, were false and that the applicant was not in good health
either at the time he presented his applications or on the date when
said policies were delivered.

Upon this issue of fact the learned trial judge made a complete and
careful analysis of the evidence. We accept his conclusions as to the
credibility of the witnesses. We have carefully re-examined the
entire record and see no reason to disturb his findings of fact. It
seems to us the companys physicians were entirely warranted in
their conclusion that the insured was an acceptable risk. The
preponderance of the evidence discloses that the applicant, a young
man 27 years of age and recently married, was devoted to vigorous
athletic sports and regularly carried on his business as a farmer and
contractor up to May, 1933.

In reply to the question in the printed application, "Are you in good
health? he replied "Yes." If two qualified physicians, not selected by
him, independently examine a man with critical attention and in the
interest of their employer, the insurance company, and they
pronounce him to be in good health, we should find it difficult to
declare that he knowingly made a false statement when he said he
believed the same thing himself. "Good health" is a relative term. A
person with sound body may honestly believe himself to be in
"good health" although at the moment he may have a terrific
headache, or a running cold, or an attack of diarrhea, or indigestion,
or any other of a host of minor common ailments which may
possibly develop later into a serious illness. A hemorrhage may be
due to any one of a variety of causes, grave or slight, having no
necessary relation with pulmonary tuberculosis. Even if we gave
credence to the testimony that Benito Patrocinio Suva spat blood
on one occasion in May, 1932, and another in August, 1932, there is
no evidence whatever in the record as to the cause of the alleged
hemorrhage. We have no right to jump at the conclusion that it was
grave and could only be due to pulmonary tuberculosis, especially
as it left no trace, for Drs. Ocampo and Llora found nothing wrong
with the applicant in October or December, 1932. No serious illness
prior to May, 1933, is established by the evidence. We agree with
the trial court that the applicant was in good health when the
policies were delivered and that it is not proved that he made any
material false statement in his said applications for insurance.

The appellant company complains that the trial court failed to
31


consider the death certificate signed by Dr. Tablante. This certificate
(Exhibit J) states that Suva died in the Chinese General Hospital of
Manila on September 23, 1933; that the cause of the death was
pulmonary tuberculosis; that the duration of the disease was one
year and five months. The source information of the latter
statement is not mentioned. Suva entered the hospital in August
1933, and the certificate itself recites that Dr. Tablante treated him
only from August 18, 1933, to September 23, 1933. The plaintiff did
not offer Dr. Tablante as a witness and none of the hospital records
were put in evidence. The statement of Dr. Tablante as to the
duration of the disease is apparently hearsay and, under the
circumstances, we cannot give that recital in the certificate of death
the conclusiveness which the plaintiff claims for it. (U.S. v. Que Ping,
40 Phil., 17.)

Felicidad Cruz appeals from that part of the judgment which holds
that the insured, Benito Patrocinio Suva, having renounced in his
application the right to change the beneficiary in policy No. 47726,
his wife, Isabel Simbulan, acquired a vested interest in the policy
which neither the insured nor the company could take from her
without her consent. The conclusion of the trial court is sustained
by our decision in the case of Gercio v. Sun Life Assurance Co. of
Canada (48 Phil., 53), and the American authorities therein cited.
(We think that the attempted change of beneficiary made by the
insured on August 16, 1933, and endorsed by the company on the
back of the policy on August 24, 1933, was due to a mutual mistake.
The application in which the insured, over his personal signature,
renounced the right to change the beneficiary, should prevail over
the printed phrase "WITH RIGHT OF REVOCATION" which occurs in
the policy. It is to be noted that the application itself is made a part
of the contract.

In view of the premises, the judgment is affirmed with costs against
the appellant insurance company as to the appellee Maria Narcisa
Suva and without special pronouncement as to costs in the appeal
of Felicidad Cruz.