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Makati Tuscany Condominium Corporation vs Court of Appeals, American Home Assurance Co.

Facts:
Sometime in 19!, respondent American Home Assurance Co. "AHAC# represented $y American %nternational
&nder'riters %nc. "()ils.# issued in favor of petitioner an insurance policy coverin* t)e latter+s $uildin* and premises
from ,1 Marc) 19!-,1 Marc) 19. 'it) a total premium of (/00,1,..,1. %t 'as paid on installments from Marc)
19!-2ovem$er 19! ')ic) AHAC accepted.
%t 'as rene'ed on Fe$ruary 19. for t)e period of Marc) 19.-Marc) 19/ and t)e premium of t)e same amount
'as paid in installments a*ain ')ic) AHAC accepted.
3n 4anuary 19/, it 'as a*ain rene'ed for t)e period of Marc) 19/-Marc) 191. Here, petitioner only made !
installment payments 5 6rst one for (1!,,,, and t)e second one for (1,,,,,,. After t)at, petitioner refused to pay
t)e $alance of t)e premium.
AHAC 6led an action to recover t)e unpaid $alance of (.1/,1,..,1.
(etitioner admitted t)at t)ere 'as an e7istin* insurance policy and reasoned out t)at )e discontinued t)e payment
of premiums $ecause t)e policy didn+t contain a credit clause in its favor. %t furt)er claimed t)at t)e policy 'as
never $indin* and valid and no risk attac)ed to t)e policy. %t furt)er sou*)t )e refund of all t)e premium payments
)e made from 19!-191.
T)e trial court dismissed t)e complaint and stated t)at Makati Tuscany Condo Corp.+s premium payments cannot $e
refunded $ecause t)ere 'as a risk attac)ed under t)e policies8 and in vie' of t)e reservation in t)e receipts $y
AHAC, AHAC )as no ri*)t to demand payment and Makati Tuscany Condo Corp is 9usti6ed in not payin* it.
:ot) appealed and Makati Tuscany Condo Corp 'as ordered to pay t)e $alance of t)e premiums due on t)e e7istin*
policy 'it) le*al interest .
(etitioner no' asserts t)at its payment $y installment of t)e premium invalidated insurance policies from 19!-
19/ $ecause of Sec. ;; of t)e %nsurance Code ')ic) provides:
Sec. ;;. An insurer is entitled to t)e payment of t)e premium as soon as t)e t)in* is e7posed to t)e peril
insured a*ainst. 2ot'it)standin* any a*reement to t)e contrary, no policy or contract of insurance issued
$y an insurance company is valid and $indin* unless and until t)e premium t)ereof )as $een paid, e7cept
in t)e case of a life or an industrial life policy ')enever t)e *race period provision applies.
%ssue:
<)et)er payment $y installment of t)e premiums due on an insurance policy invalidates t)e contract of insurance
in vie' of Sec. ;; of t)e %nsurance Code.
Held:
2o. T)e Court )eld t)at t)e su$9ect policies are valid even if t)e premiums 'ere paid on installments. %t 'as clearly
s)o'n t)at petitioner and private respondent intended t)e policies to $e $indin* and e=ective not'it)standin* t)e
payment on installment of t)e premiums. T)e contracts 'ere even rene'ed and t)e insurance company also
accepted t)at 'ay of payin* t)e premiums. %t 'ould defy t)e $asic principles of e>uity and fairness if t)e insurer
'ould $e allo'ed to accept payments and later on deny lia$ility $ecause t)e premiums 'ere not paid in full.
As correctly stated $y t)e Court of Appeals 5
<)ile t)e import of Section ;; is t)at prepayment of premiums is strictly re>uired as a condition to t)e
validity of t)e contract, <e are not prepared to rule t)at t)e re>uest to make installment payments duly
approved $y t)e insurer, 'ould prevent t)e entire contract of insurance from *oin* into e=ect despite
payment and acceptance of t)e initial premium or 6rst installment.
7 7 7
Section ;; merely precludes t)e parties from stipulatin* t)at t)e policy is valid even if t)e premiums are
not paid, $ut does not e7pressly pro)i$it an a*reement *rantin* credit e7tension, and suc) an a*reement
is not contrary to morals, *ood customs, pu$lic order, or pu$lic policy "?e @eon, t)e %nsurance Code, at p.
1;1#
7 7 7
At t)e very least, $ot) parties s)ould $e deemed in estoppel to >uestion t)e arran*ement t)ey )ave
voluntarily accepted.
%t appearin* from t)e circumstances t)at t)e parties actually intended to make t)e . insurance contracts valid and
$indin*, petitioner must pay t)e $alance. Also, ')ere t)e risk is entire and contract is indivisi$le, t)e insured is not
entitled to a refund of t)e premiums already paid if t)e insurer 'as e7posed to t)e risk insured for any period,
)o'ever $rief or momentary.

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