G.R. No.
L-67835 October 12, 1987 On February 5, 1982, Pinca's payment was returned by MICO to Adora on
MALAYAN INSURANCE CO., INC. (MICO), petitioner,
vs.
GREGORIA CRUZ ARNALDO, in her capacity as the INSURANCE
COMMISSIONER, and CORONACION PINCA, respondents.
CRUZ, J.:
When a person's house is razed, the fire usually burns down the efforts of a
lifetime and forecloses hope for the suddenly somber future. The vanished
abode becomes a charred and painful memory. Where once stood a home,
there is now, in the sighing wisps of smoke, only a gray desolation. The dying
embers leave ashes in the heart.
For peace of mind and as a hedge against possible loss, many people now
secure fire insurance. This is an aleatory contract. By such insurance, the
insured in effect wagers that his house will be burned, with the insurer
assuring him against the loss, for a fee. If the house does burn, the insured,
while losing his house, wins the wagers. The prize is the recompense to be
given by the insurer to make good the loss the insured has sustained.
It would be a pity then if, having lost his house, the insured were also to lose
the payment he expects to recover for such loss. Sometimes it is his fault
that he cannot collect, as where there is a defect imputable to him in the
insurance contract. Conversely, the reason may be an unjust refusal of the
insurer to acknowledge a just obligation, as has happened many times.
In the instant case the private respondent has been sustained by the
Insurance Commission in her claim for compensation for her burned
property. The petitioner is now before us to dispute the decision, 1 on the
ground that there was no valid insurance contract at the time of the loss.
The chronology of the relevant antecedent facts is as follows:
On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the
private respondent, Coronacion Pinca, Fire Insurance Policy No. F-001-
17212 on her property for the amount of P14,000.00 effective July 22, 1981,
until July 22, 1982. 2
On October 15,1981, MICO allegedly cancelled the policy for non-payment,
of the premium and sent the corresponding notice to Pinca. 3
On December 24, 1981, payment of the premium for Pinca was received by
DomingoAdora, agent of MICO. 4
On January 15, 1982, Adora remitted this payment to MICO,together with
other payments. 5
6
On January 18, 1982, Pinca's property was completely burned.
the ground that her policy had been cancelled earlier. But Adora refused to
accept it. 7
In due time, Pinca made the requisite demands for payment, which MICO
rejected. She then went to the Insurance Commission. It is because she was
ultimately sustained by the public respondent that the petitioner has come to
us for relief.
From the procedural viewpoint alone, the petition must be rejected. It is
stillborn.
The records show that notice of the decision of the public respondent dated
April 5, 1982, was received by MICO on April 10, 1982. 8 On April 25, 1982, it
filed a motion for reconsideration, which was denied on June 4,
1982. 9 Notice of this denial was received by MICO on June 13, 1982, as
evidenced by Annex "1" duly authenticated by the Insurance
Commission. 10 The instant petition was filed with this Court on July 2,
1982. 11
The position of the petition is that the petition is governed by Section 416 0f
the Insurance Code giving it thirty days wthin which to appeal by certiorari to
this Court. Alternatively, it also invokes Rule 45 of the Rules of Court. For
their part, the public and private respondents insist that the applicable law is
B.P. 129, which they say governs not only courts of justice but also quasi-
judicial bodies like the Insurance Commission. The period for appeal under
this law is also fifteen days, as under Rule 45.
The pivotal date is the date the notice of the denial of the motion for
reconsideration was received by MICO.
MICO avers this was June 18, 1982, and offers in evidence its Annex
"B," 12 which is a copy of the Order of June 14, 1982, with a signed rubber-
stamped notation on the upper left-hand corner that it was received on June
18, 1982, by its legal department. It does not indicate from whom. At the
bottom, significantly, there is another signature under which are the ciphers
"6-13-82," for which no explanation has been given.
Against this document, the private respodent points in her Annex "1," 13 the
authenticated copy of the same Order with a rubber-stamped notation at the
bottom thereof indicating that it was received for the Malayan Insurance Co.,
Inc. by J. Gotladera on "6-13-82." The signature may or may not habe been
written by the same person who signed at the bottom of the petitioner's
Annex "B."
Between the two dates, the court chooses to believe June 13, 1982, not only
because the numbers "6-13-82" appear on both annexes but also because it
is the date authenticated by the administrative division of the Insurance
Commission. Annex "B" is at worst self-serving; at best, it might only indicate
that it was received on June 18, 1982, by the legal department of MICO, after
it had been received earlier by some other of its personnel on June 13, 1982.
Whatever the reason for the delay in transmitting it to the legal department
need not detain us here.
Under Section 416 of the Insurance Code, the period for appeal is thirty days
from notice of the decision of the Insurance Commission. The petitioner filed
its motion for reconsideration on April 25, 1981, or fifteen days such notice,
and the reglementary period began to run again after June 13, 1981, date of
its receipt of notice of the denial of the said motion for reconsideration. As the
herein petition was filed on July 2, 1981, or nineteen days later, there is no
question that it is tardy by four days.
Counted from June 13, the fifteen-day period prescribed under Rule 45,
assuming it is applicable, would end on June 28, 1982, or also four days from
July 2, when the petition was filed.
If it was filed under B.P. 129, then, considering that the motion for
reconsideration was filed on the fifteenth day after MICO received notice of
the decision, only one more day would have remained for it to appeal, to wit,
June 14, 1982. That would make the petition eighteen days late by July 2.
Indeed, even if the applicable law were still R.A. 5434, governing appeals
from administrative bodies, the petition would still be tardy. The law provides
for a fixed period of ten days from notice of the denial of a seasonable motion
for reconsideration within which to appeal from the decision. Accordingly, that
ten-day period, counted from June 13, 1982, would have ended on June 23,
1982, making the petition filed on July 2, 1982, nine days late.
Whichever law is applicable, therefore, the petition can and should be
dismissed for late filing.
On the merits, it must also fail. MICO's arguments that there was no payment
of premium and that the policy had been cancelled before the occurence of
the loss are not acceptable. Its contention that the claim was allowed without
proof of loss is also untenable.
The petitioner relies heavily on Section 77 of the Insurance Code providing
that:
SEC. 77. An insurer is entitled to payment of the premium as soon as the
thing is exposed to the peril insured against. Notwithstanding any agreement
to the contrary, no policy or contract of insurance issued by an insurance
company is valid and binding unless and until the premium thereof has been
paid, except in the case of a life or an industrial life policy whenever the
grace period provision applies.
The above provision is not applicable because payment of the premium was
in fact eventually made in this case. Notably, the premium invoice issued to
Pinca at the time of the delivery of the policy on June 7, 1981 was stamped
"Payment Received" of the amoung of P930.60 on "12-24-81" by Domingo
Adora. 14 This is important because it suggests an understanding between
MICO and the insured that such payment could be made later, as agent
Adora had assured Pinca. In any event, it is not denied that this payment was
actually made by Pinca to Adora, who remitted the same to MICO.
The payment was made on December 24, 1981, and the fire occured on
January 18, 1982. One wonders: suppose the payment had been made and
accepted in, say, August 1981, would the commencement date of the policy
have been changed to the date of the payment, or would the payment have
retroacted to July 22, 1981? If MICO accepted the payment in December
1981 and the insured property had not been burned, would that policy not
have expired just the same on July 22, 1982, pursuant to its original terms,
and not on December 24, 1982?
It would seem from MICO's own theory, that the policy would have become
effective only upon payment, if accepted and so would have been valid only
from December 24, 1981m but only up to July 22, 1981, according to the
original terms. In others words, the policy would have run for only eight
months although the premium paid was for one whole year.
It is not disputed that the preium was actually paid by Pinca to Adora on
December 24, 1981, who received it on behalf of MICO, to which it was
remitted on January 15, 1982. What is questioned is the validity of Pinca's
payment and of Adora's authority to receive it.
MICO's acknowledgment of Adora as its agent defeats its contention that he
was not authorized to receive the premium payment on its behalf. It is clearly
provided in Section 306 of the Insurance Code that:
SEC. 306. xxx xxx xxx
Any insurance company which delivers to an insurance agant or insurance
broker a policy or contract of insurance shall be demmed to have authorized
such agent or broker to receive on its behalf payment of any premium which
is due on such policy or contract of insurance at the time of its issuance or
delivery or which becomes due thereon.
And it is a well-known principle under the law of agency that:
Payment to an agent having authority to receive or collect payment is
equivalent to payment to the principal himself; such payment is complete
when the money delivered is into the agent's hands and is a discharge of the
indebtedness owing to the principal. 15
There is the petitioner's argument, however, that Adora was not authorized to
accept the premium payment because six months had elapsed since the
issuance by the policy itself. It is argued that this prohibition was binding
upon Pinca, who made the payment to Adora at her own riskl as she was
bound to first check his authority to receive it. 16
MICO is taking an inconsistent stand. While contending that acceptance of
the premium payment was prohibited by the policy, it at the same time insists
that the policy never came into force because the premium had not been
paid. One surely, cannot have his cake and eat it too.
We do not share MICO's view that there was no existing insurance at the
time of the loss sustained by Pinca because her policy never became
effective for non-payment of premium. Payment was in fact made, rendering
the policy operative as of June 22, 1981, and removing it from the provisions
of Article 77, Thereafter, the policy could be cancelled on any of the
supervening grounds enumerated in Article 64 (except "nonpayment of
premium") provided the cancellation was made in accordance therewith and
with Article 65.
Section 64 reads as follows:
SEC. 64. No policy of insurance other than life shall be cancelled by the
insurer except upon prior notice thereof to the insured, and no notice of
cancellation shall be effective unless it is based on the occurrence, after the
effective date of the policy, of one or more of the following:
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the hazard insured
against;
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful, or reckless acts or commissions increasing the hazard
insured against;
(e) physical changes in the property insured which result in the property
becoming uninsurable;or
(f) a determination by the Commissioner that the continuation of the policy
would violate or would place the insurer in violation of this Code.
As for the method of cancellation, Section 65 provides as follows:
SEC. 65. All notices of cancellation mentioned in the preceding section shall
be in writing, mailed or delivered to the named insured at the address shown
in the policy, and shall state (a) which of the grounds set forth in section
sixty-four is relied upon and (b) that, upon written request of the named
insured, the insurer will furnish the facts on which the cancellation is based.
A valid cancellation must, therefore, require concurrence of the following
conditions:
(1) There must be prior notice of cancellation to the insured; 17
(2) The notice must be based on the occurrence, after the effective date of
the policy, of one or more of the grounds mentioned;18
(3) The notice must be (a) in writing, (b) mailed, or delivered to the named
insured, (c) at the address shown in the policy; 19
(4) It must state (a) which of the grounds mentioned in Section 64 is relied
upon and (b) that upon written request of the insured, the insurer will furnish
the facts on which the cancellation is based. 20
MICO's claims it cancelled the policy in question on October 15, 1981, for
non-payment of premium. To support this assertion, it presented one of its
employees, who testified that "the original of the endorsement and credit
memo" — presumably meaning the alleged cancellation — "were sent the
assured by mail through our mailing section" 21However, there is no proof
that the notice, assuming it complied with the other requisites mentioned
above, was actually mailed to and received by Pinca. All MICO's offers to
show that the cancellation was communicated to the insured is its
employee's testimony that the said cancellation was sent "by mail through
our mailing section." without more. The petitioner then says that its "stand is
enervated (sic) by the legal presumption of regularity and due performance of
duty." 22 (not realizing perhaps that "enervated" means "debilitated" not
"strengthened").
On the other hand, there is the flat denial of Pinca, who says she never
received the claimed cancellation and who, of course, did not have to prove
such denial Considering the strict language of Section 64 that no insurance
policy shall be cancelled except upon prior notice, it behooved MICO's to
make sure that the cancellation was actually sent to and received by the
insured. The presumption cited is unavailing against the positive duty
enjoined by Section 64 upon MICO and the flat denial made by the private
respondent that she had received notice of the claimed cancellation.
It stands to reason that if Pinca had really received the said notice, she would
not have made payment on the original policy on December 24, 1981.
Instead, she would have asked for a new insurance, effective on that date
and until one year later, and so taken advantage of the extended period. The
Court finds that if she did pay on that date, it was because she honestly
believed that the policy issued on June 7, 1981, was still in effect and she
was willing to make her payment retroact to July 22, 1981, its stipulated
commencement date. After all, agent Adora was very accomodating and had
earlier told her "to call him up any time" she was ready with her payment on
the policy earlier issued. She was obviously only reciprocating in kind when
she paid her premium for the period beginning July 22, 1981, and not
December 24, 1981.
MICO's suggests that Pinca knew the policy had already been cancelled and
that when she paid the premium on December 24, 1981, her purpose was "to
renew it." As this could not be done by the agent alone under the terms of
the original policy, the renewal thereof did not legally bind MICO. which had
not ratified it. To support this argument, MICO's cites the following exchange:
Q: Now, Madam Witness, on December 25th you made the alleged payment.
Now, my question is that, did it not come to your mind that after the lapse of
six (6) months, your policy was cancelled?
A: I have thought of that but the agent told me to call him up at anytime. that there was a feeble attempt to show that the notice of denial of the said
motion was not received on June 13, 1982, to further hinder the proceedings
Q: So if you thought that your policy was already intended to revive cancelled
and justify the filing of the petition with this Court fourteen days after June 18,
policy?
1982. We also look askance at the alleged cancellation, of which the insured
A: Misleading, Your Honor. and MICO's agent himself had no knowledge, and the curious fact that
although Pinca's payment was remitted to MICO's by its agent on January
Hearing Officer: The testimony of witness is that, she thought of that.
15, 1982, MICO sought to return it to Adora only on February 5, 1982, after it
Q: I will revise the question. Now, Mrs. Witness, you stated that you thought presumably had learned of the occurrence of the loss insured against on
the policy was cancelled. Now, when you made the payment of December January 18, 1982. These circumstances make the motives of the petitioner
24, 1981, your intention was to revive the policy if it was already cancelled? highly suspect, to say the least, and cast serious doubts upon its candor and
bona fides.
A: Yes, to renew it. 23
WHEREFORE, the petition is DENIED. The decision of the Insurance
A close study of the above transcript will show that Pinca meant to renew the Commission dated April 10, 1981, and its Order of June 4, 1981, are
policy if it had really been already cancelled but not if it was stffl effective. It AFFIRMED in full, with costs against the petitioner. This decision is
was all conditional. As it has not been shown that there was a valid immediately executory.
cancellation of the policy, there was consequently no need to renew it but to
pay the premium thereon. Payment was thus legally made on SO ORDERED.
the original transaction and it could be, and was, validly received on behalf of
the insurer by its agent Adora. Adora. incidentally, had not been informed of
the cancellation either and saw no reason not to accept the said payment. [G.R. No. 119655. May 24, 1996]
The last point raised by the petitioner should not pose much difficulty. The
valuation fixed in fire insurance policy is conclusive in case of total loss in the
SPS. ANTONIO A. TIBAY and VIOLETA R. TIBAY and OFELIA M.
absence of fraud, 24 which is not shown here. Loss and its amount may be
RORALDO, VICTORINA M. RORALDO, VIRGILIO M. RORALDO, MYRNA
determined on the basis of such proof as may be offered by the insured,
M. RORALDO and ROSABELLA M. RORALDO, petitioners, vs. COURT OF
which need not be of such persuasiveness as is required in judicial
APPEALS and FORTUNE LIFE AND GENERAL INSURANCE CO., INC.,
proceedings. 25 If, as in this case, the insured files notice and preliminary
respondents.
proof of loss and the insurer fails to specify to the former all the defects
thereof and without unnecessary delay, all objections to notice and proof of
loss are deemed waived under Section 90 of the Insurance Code.
D E C I S I O N*
The certification 26 issued by the Integrated National Police, Lao-ang, Samar,
as to the extent of Pinca's loss should be considered sufficient.
Notably,MICO submitted no evidence to the contrary nor did it even question BELLOSILLO, J.:
the extent of the loss in its answer before the Insurance Commission. It is
also worth observing that Pinca's property was not the only building bumed in
the fire that razed the commercial district of Lao-ang, Samar, on January 18, May a fire insurance policy be valid, binding and enforceable upon mere
1982. 27 partial payment of premium?
There is nothing in the Insurance Code that makes the participation of an
adjuster in the assessment of the loss imperative or indespensable, as MICO
suggests. Section 325, which it cites, simply speaks of the licensing and On 22 January 1987 private respondent Fortune Life and General Insurance
duties of adjusters. Co., Inc. (FORTUNE) issued Fire Insurance Policy No. 136171 in favor of
Violeta R. Tibay and/or Nicolas Roraldo on their two-storey residential
We see in this cases an obvious design to evade or at least delay the building located at 5855 Zobel Street, Makati City, together with all their
discharge of a just obligation through efforts bordering on bad faith if not personal effects therein. The insurance was for P600,000.00 covering the
plain duplicity, We note that the motion for reconsideration was filed on the period from 23 January 1987 to 23 January 1988. On 23 January 1987, of
fifteenth day from notice of the decision of the Insurance Commission and
the total premium of P2,983.50, petitioner Violeta Tibay only paid P600.00
thus leaving a considerable balance unpaid.
On 8 March 1987 the insured building was completely destroyed by fire. Two
days later or on 10 March 1987 Violeta Tibay paid the balance of the
premium. On the same day, she filed with FORTUNE a claim on the fire
insurance policy. Her claim was accordingly referred to its adjuster, Goodwill
Adjustment Services, Inc. (GASI), which immediately wrote Violeta
requesting her to furnish it with the necessary documents for the
investigation and processing of her claim. Petitioner forthwith complied. On
28 March 1987 she signed a non-waiver agreement with GASI to the effect
that any action taken by the companies or their representatives in
investigating the claim made by the claimant for his loss which occurred at
5855 Zobel Roxas, Makati on March 8, 1987, or in the investigating or
ascertainment of the amount of actual cash value and loss, shall not waive or
invalidate any condition of the policies of such companies held by said
claimant, nor the rights of either or any of the parties to this agreement, and
such action shall not be, or be claimed to be, an admission of liability on the
part of said companies or any of them.[1]
In a letter dated 11 June 1987 FORTUNE denied the claim of Violeta for
violation of Policy Condition No. 2 and of Sec. 77 of the Insurance Code.
Efforts to settle the case before the Insurance Commission proved futile. On
3 March 1988 Violeta and the other petitioners sued FORTUNE for damages
in the amount of P600,000.00 representing the total coverage of the fire
insurance policy plus 12% interest per annum, P 100,000.00 moral damages,
and attorneys fees equivalent to 20% of the total claim.
On 19 July 1990 the trial court ruled for petitioners and adjudged FORTUNE
liable for the total value of the insured building and personal properties in the
amount of P600,000.00 plus interest at the legal rate of 6% per annum from
the filing of the complaint until full payment, and attorneys fees equivalent to
20% of the total amount claimed plus costs of suit.[2]
On 24 March 1995 the Court of Appeals reversed the court a quo by
declaring FORTUNE not to be liable to plaintiff-appellees therein but ordering
defendant-appellant to return to the former the premium of P2,983.50 plus
12% interest from 10 March 1987 until full payment.[3]
Hence this petition for review with petitioners contending mainly that contrary
to the conclusion of the appellate court, FORTUNE remains liable under the
subject fire insurance policy inspite of the failure of petitioners to pay their
premium in full.
We find no merit in the petition; hence, we affirm the Court of Appeals.
Insurance is a contract whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown
or contingent event.[4] The consideration is the premium, which must be paid
at the time and in the way and manner specified in the policy, and if not so
paid, the policy will lapse and be forfeited by its own terms.[5]
The pertinent provisions in the Policy on premium read
THIS POLICY OF INSURANCE WITNESSETH, THAT only after payment to
the Company in accordance with Policy Condition No. 2 of the total
premiums by the insured as stipulated above for the period aforementioned
for insuring against Loss or Damage by Fire or Lightning as herein appears,
the Property herein described x x x
2. This policy including any renewal thereof and/or any endorsement thereon
is not in force until the premium has been fully paid to and duly receipted by
the Company in the manner provided herein.
Any supplementary agreement seeking to amend this condition prepared by
agent, broker or Company official, shall be deemed invalid and of no effect.
xxx xxx xxx
Except only in those specific cases where corresponding rules and
regulations which are or may hereafter be in force provide for the payment of
the stipulated premiums in periodic installments at fixed percentage, it is
hereby declared, agreed and warranted that this policy shall be deemed
effective, valid and binding upon the Company only when the premiums
therefor have actually been paid in full and duly acknowledged in a receipt
signed by any authorized official or representative/agent of the Company in
such manner as provided herein, (Italics supplied).[6]
Clearly the Policy provides for payment of premium in full. Accordingly,
where the premium has only been partially paid and the balance paid only
after the peril insured against has occurred, the insurance contract did not
take effect and the insured cannot collect at all on the policy. This is fully
supported by Sec. 77 of the Insurance Code which provides
SEC. 77. An insurer is entitled to payment of the premium as soon as the
thing insured is exposed to the peril insured against. Notwithstanding any
agreement to the contrary, no policy or contract of insurance issued by an
insurance company is valid and binding unless and until the premium thereof
has been paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies (Italics supplied).
Apparently the crux of the controversy lies in the phrase unless and until the
premium thereof has been paid. This leads us to the manner of payment
envisioned by the law to make the insurance policy operative and binding.
For whatever judicial construction may be accorded the disputed phrase
must ultimately yield to the clear mandate of the law. The principle that where
the law does not distinguish the court should neither distinguish assumes
that the legislature made no qualification on the use of a general word or
expression. In Escosura v. San Miguel Brewery, inc.,[7] the Court through
Mr. Justice Jesus G. Barrera, interpreting the phrase with pay used in
connection with leaves of absence with pay granted to employees, ruled -
x x x the legislative practice seems to be that when the intention is to
distinguish between full and partial payment, the modifying term is used x x x
Citing C. A. No. 647 governing maternity leaves of married women in
government, R. A. No. 679 regulating employment of women and children,
R.A. No. 843 granting vacation and sick leaves to judges of municipal courts
and justices of the peace, and finally, Art. 1695 of the New Civil Code
providing that every househelp shall be allowed four (4) days vacation each
month, which laws simply stated with pay, the Court concluded that it was
undisputed that in all these laws the phrase with pay used without any
qualifying adjective meant that the employee was entitled to full
compensation during his leave of absence.
Petitioners maintain otherwise. Insisting that FORTUNE is liable on the policy
despite partial payment of the premium due and the express stipulation
thereof to the contrary, petitioners rely heavily on the 1967 case of Philippine
Phoenix and Insurance Co., Inc. v. Woodworks, Inc.[8] where the Court
through Mr. Justice Arsenio P. Dizon sustained the ruling of the trial court
that partial payment of the premium made the policy effective during the
whole period of the policy. In that case, the insurance company commenced
action against the insured for the unpaid balance on a fire insurance policy.
In its defense the insured claimed that nonpayment of premium produced the
cancellation of the insurance contract. Ruling otherwise the Court held
It is clear x x x that on April 1, 1960, Fire Insurance Policy No. 9652 was
issued by appellee and delivered to appellant, and that on September 22 of
the same year, the latter paid to the former the sum of P3,000.00 on account
of the total premium of P6,051.95 due thereon. There is, consequently, no
doubt at all that, as between the insurer and the insured, there was not only a
perfected contract of insurance but a partially performed one as far as the
payment of the agreed premium was concerned. Thereafter the obligation of
the insurer to pay the insured the amount, for which the policy was issued in
case the conditions therefor had been complied with, arose and became
binding upon it, while the obligation of the insured to pay the remainder of the
total amount of the premium due became demandable.
The 1967 Phoenix case is not persuasive; neither is it decisive of the instant
dispute. For one, the factual scenario is different. In Phoenix it was the
insurance company that sued for the balance of the premium, i.e., it
recognized and admitted the existence of an insurance contract with the
insured. In the case before us, there is, quite unlike in Phoenix, a specific
stipulation that (t)his policy xxx is not in force until the premium has been fully
paid and duly receipted by the Company x x x. Resultantly, it is correct to say
that in Phoenix a contract was perfected upon partial payment of the
premium since the parties had not otherwise stipulated that prepayment of
the premium in full was a condition precedent to the existence of a contract.
In Phoenix, by accepting the initial payment of P3,000.00 and then later
demanding the remainder of the premium without any other precondition to
its enforceability as in the instant case, the insurer in effect had shown its
intention to continue with the existing contract of insurance, as in fact it was
enforcing its right to collect premium, or exact specific performance from the
insured. This is not so here. By express agreement of the parties, no
vinculum juris or bond of law was to be established until full payment was
effected prior to the occurrence of the risk insured against.
In Makati Tuscany Condominium Corp. v. Court of Appeals[9] the parties
mutually agreed that the premiums could be paid in installments, which in
fact they did for three (3) years, hence, this Court refused to invalidate the
insurance policy. In giving effect to the policy, the Court quoted with approval
the Court of Appeals
The obligation to pay premiums when due is ordinarily an indivisible
obligation to pay the entire premium. Here, the parties x x x agreed to make
the premiums payable in installments, and there is no pretense that the
parties never envisioned to make the insurance contract binding between
them. It was renewed for two succeeding years, the second and third policies
being a renewal/replacement for the previous one. And the insured never
informed the insurer that it was terminating the policy because the terms
were unacceptable.
While it maybe true that under Section 77 of the Insurance Code, the parties
may not agree to make the insurance contract valid and binding without
payment of premiums, there is nothing in said section which suggests that
the parties may not agree to allow payment of the premiums in installment, or
to consider the contract as valid and binding upon payment of the first
premium. Otherwise we would allow the insurer to renege on its liability
under the contract, had a loss incurred (sic) before completion of payment of
the entire premium, despite its voluntary acceptance of partial payments, a
result eschewed by basic considerations of fairness and equity x x x.
These two (2) cases, Phoenix and Tuscany, adequately demonstrate the
waiver, either express or implied, of prepayment in full by the insurer:
impliedly, by suing for the balance of the premium as inPhoenix, and
expressly, by agreeing to make premiums payable in installments as in
Tuscany. But contrary to the stance taken by petitioners, there is no waiver
express or implied in the case at bench. Precisely, the insurer and the
insured expressly stipulated that (t)his policy including any renewal thereof
and/or any indorsement thereon is not in force until the premium has been
fully paid to and duly receipted by the Company x x x and that this policy
shall be deemed effective, valid and binding upon the Company only when
the premiums therefor have actually been paid in full and duly acknowledged.
Conformably with the aforesaid stipulations explicitly worded and taken in
conjunction with Sec. 77 of the Insurance Code the payment of partial
premium by the assured in this particular instance should not be considered
the payment required by the law and the stipulation of the parties. Rather, it
must be taken in the concept of a deposit to be held in trust by the insurer
until such time that the full amount has been tendered and duly receipted for.
In other words, as expressly agreed upon in the contract, full payment must
be made before the risk occurs for the policy to be considered effective and
in force.
Thus, no vinculum juris whereby the insurer bound itself to indemnify the
assured according to law ever resulted from the fractional payment of
premium. The insurance contract itself expressly provided that the policy
would be effective only when the premium was paid in full. It would have
been altogether different were it not so stipulated. Ergo, petitioners had
absolute freedom of choice whether or not to be insured by FORTUNE under
the terms of its policy and they freely opted to adhere thereto.
Indeed, and far more importantly, the cardinal polestar in the construction of
an insurance contract is the intention of the parties as expressed in the
policy.[10] Courts have no other function but to enforce the same. The rule
that contracts of insurance will be construed in favor of the insured and most
strongly against the insurer should not be permitted to have the effect of
making a plain agreement ambiguous and then construe it in favor of the
insured.[11] Verily, it is elemental law that the payment of premium is
requisite to keep the policy of insurance in force. If the premium is not paid in
the manner prescribed in the policy as intended by the parties the policy is
ineffective. Partial payment even when accepted as a partial payment will not
keep the policy alive even for such fractional part of the year as the part
payment bears to the whole payment.[12]
Applying further the rules of statutory construction, the position maintained by
petitioners becomes even more untenable. The case of South Sea Surety
and Insurance Company, Inc. v. Court of Appeals,[13] speaks only of two (2)
statutory exceptions to the requirement of payment of the entire premium as
a prerequisite to the validity of the insurance contract. These exceptions are:
(a) in case the insurance coverage relates to life or industrial life (health)
insurance when a grace period applies, and (b) when the insurer makes a
written acknowledgment of the receipt of premium, this acknowledgment
being declared by law to, be then conclusive evidence of the premium
payment.[14]
A maxim of recognized practicality is the rule that the expressed exception or
exemption excludes others. Exceptio firm at regulim in casibus non exceptis.
The express mention of exceptions operates to exclude other exceptions;
conversely, those which are not within the enumerated exceptions are
deemed included in the general rule. Thus, under Sec. 77, as well as Sec.
78, until the premium is paid, and the law has not expressly excepted partial
payments, there is no valid and binding contract. Hence, in the absence of
clear waiver of prepayment in full by the insurer, the insured cannot collect
on the proceeds of the policy.
In the desire to safeguard the interest of the assured, itmust not be ignored
that the contract of insurance is primarily a risk-distributing device, a
mechanism by which all members of a group exposed to a particular risk
contribute premiums to an insurer. From these contributory funds are paid
whatever losses occur due to exposure to the peril insured against. Each
party therefore takes a risk: the insurer, that of being compelled upon the
happening of the contingency to pay the entire sum agreed upon, and the
insured, that of parting with the amount required as premium, without
receiving anything therefor in case the contingency does not happen. To
ensure payment for these losses, the law mandates all insurance companies
to maintain a legal reserve fund in favor of those claiming under their
policies.[15] It should be understood that the integrity of this fund cannot be
secured and maintained if by judicial fiat partial offerings of premiums were to
be construed as a legal nexus between the applicant and the insurer despite
an express agreement to the contrary. For what could prevent the insurance
applicant from deliberately or wilfully holding back full premium payment and
wait for the risk insured against to transpire and then conveniently pass on
the balance of the premium to be deducted from the proceeds of the
insurance? Worse, what if the insured makes an initial payment of only 10%,
or even 1%, of the required premium, and when the risk occurs simply points
to the proceeds from where to source the balance? Can an insurance
company then exist and survive upon the payment of 1%, or even 10%, of
the premium stipulated in the policy on the basis that, after all, the insurer
can deduct from the proceeds of the insurance should the risk insured
against occur?
Interpreting the contract of insurance stringently against the insurer but
liberally in favor of the insured despite clearly defined obligations of the
parties to the policy can be carried out to extremes that there is the danger
that we may, so to speak, kill the goose that lays the golden egg. We are well
aware of insurance companies falling into the despicable habit of collecting
premiums promptly yet resorting to all kinds of excuses to deny or delay
payment of just insurance claims. But, in this case, the law is manifestly on
the side of the insurer. For as long as the current Insurance Code remains
unchanged and partial payment of premiums is not mentioned at all as
among the exceptions provided in Secs. 77 and 78, no policy of insurance
can ever pretend to be efficacious or effective until premium has been fully
paid.
And so it must be. For it cannot be disputed that premium is the elixir vitae of
the insurance business because by law the insurer must maintain a legal
reserve fund to meet its contingent obligations to the public, hence, the
imperative need for its prompt payment and full satisfaction.[16] It must be
emphasized here that all actuarial calculations and various tabulations of
probabilities of losses under the risks insured against are based on the
sound hypothesis of prompt payment of premiums. Upon this bedrock
insurance firms are enabled to offer the assurance of security to the public at
favorable rates. But once payment of premium is left to the whim and caprice
of the insured, as when the courts tolerate the payment of a mere P600.00
as partial undertaking out of the stipulated total premium of P2,983.50 and
the balance to be paid even after the risk insured against has occurred, as
petitioners have done in this case, on the principle that the strength of the
vinculumjuris is not measured by any specific amount of premium payment,
we will surely wreak havoc on the business and set to naught what has taken
actuarians centuries to devise to arrive at a fair and equitable distribution of
risks and benefits between the insurer and the insured.
The terms of the insurance policy constitute the measure of the insurers
liability. In the absence of statutory prohibition to the contrary, insurance
companies have the same rights as individuals to limit their liability and to
impose whatever conditions they deem best upon their obligations not
inconsistent with public policy.[17] The validity of these limitations is by law
passed upon by the Insurance Commissioner who is empowered to approve
all forms of policies, certificates or contracts of insurance which insurers
intend to issue or deliver. That the policy contract in the case at bench was
approved and allowed issuance simply reaffirms the validity of such policy,
particularly the provision in question.
WHEREFORE, the petition is DENIED and the assailed Decision of the Court
of Appeals dated 24 March 1995 is AFFIRMED.
SO ORDERED.
[G.R. No. 119655. May 24, 1996]
SPS. ANTONIO A. TIBAY and VIOLETA R. TIBAY and OFELIA M.
RORALDO, VICTORINA M. RORALDO, VIRGILIO M. RORALDO,
 MYRNA M. RORALDO and ROSABELLA M.
RORALDO, petitioners, vs. COURT OF APPEALS and FORTUNE
LIFE AND GENERAL INSURANCE CO., INC., respondents.
D E C I S I O N*
BELLOSILLO, J.:
May a fire insurance policy be valid, binding and enforceable upon mere
partial payment of premium?
On 22 January 1987 private respondent Fortune Life and General
Insurance Co., Inc. (FORTUNE) issued Fire Insurance Policy No. 136171 in
favor of Violeta R. Tibay and/or Nicolas Roraldo on their two-storey
residential building located at 5855 Zobel Street, Makati City, together with all
their personal effects therein. The insurance was for P600,000.00 covering
the period from 23 January 1987 to 23 January 1988. On 23 January 1987,
of the total premium of P2,983.50, petitioner Violeta Tibay only paid P600.00
thus leaving a considerable balance unpaid.
On 8 March 1987 the insured building was completely destroyed by fire.
Two days later or on 10 March 1987 Violeta Tibay paid the balance of the
premium. On the same day, she filed with FORTUNE a claim on the fire
insurance policy. Her claim was accordingly referred to its adjuster, Goodwill
Adjustment Services, Inc. (GASI), which immediately wrote Violeta
requesting her to furnish it with the necessary documents for the
investigation and processing of her claim. Petitioner forthwith complied. On
28 March 1987 she signed a non-waiver agreement with GASI to the effect
that any action taken by the companies or their representatives in
investigating the claim made by the claimant for his loss which occurred at
5855 Zobel Roxas, Makati on March 8, 1987, or in the investigating or
ascertainment of the amount of actual cash value and loss, shall not waive or
invalidate any condition of the policies of such companies held by said
claimant, nor the rights of either or any of the parties to this agreement, and
such action shall not be, or be claimed to be, an admission of liability on the
part of said companies or any of them.[1]
In a letter dated 11 June 1987 FORTUNE denied the claim of Violeta for
violation of Policy Condition No. 2 and of Sec. 77 of the Insurance Code.
Efforts to settle the case before the Insurance Commission proved futile. On
3 March 1988 Violeta and the other petitioners sued FORTUNE for damages
in the amount of P600,000.00 representing the total coverage of the fire
insurance policy plus 12% interest per annum, P 100,000.00 moral damages,
and attorneys fees equivalent to 20% of the total claim.
On 19 July 1990 the trial court ruled for petitioners and adjudged
FORTUNE liable for the total value of the insured building and personal
properties in the amount of P600,000.00 plus interest at the legal rate of 6%
per annum from the filing of the complaint until full payment, and attorneys
fees equivalent to 20% of the total amount claimed plus costs of suit.[2]
On 24 March 1995 the Court of Appeals reversed the court a quo by
declaring FORTUNE not to be liable to plaintiff-appellees therein but ordering
defendant-appellant to return to the former the premium of P2,983.50 plus
12% interest from 10 March 1987 until full payment.[3]
Hence this petition for review with petitioners contending mainly that
contrary to the conclusion of the appellate court, FORTUNE remains liable
under the subject fire insurance policy inspite of the failure of petitioners to
pay their premium in full.
We find no merit in the petition; hence, we affirm the Court of Appeals.
Insurance is a contract whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown
or contingent event.[4] The consideration is the premium, which must be paid
at the time and in the way and manner specified in the policy, and if not so
paid, the policy will lapse and be forfeited by its own terms.[5]
The pertinent provisions in the Policy on premium read
THIS POLICY OF INSURANCE WITNESSETH, THAT only after payment to
the Company in accordance with Policy Condition No. 2 of the total
premiums by the insured as stipulated above for the period aforementioned
for insuring against Loss or Damage by Fire or Lightning as herein appears,
the Property herein described x x x
2. This policy including any renewal thereof and/or any endorsement thereon
is not in force until the premium has been fully paid to and duly receipted by
the Company in the manner provided herein.
Any supplementary agreement seeking to amend this condition prepared by
agent, broker or Company official, shall be deemed invalid and of no effect.
xxx xxx xxx
Except only in those specific cases where corresponding rules and
regulations which are or may hereafter be in force provide for the payment of
the stipulated premiums in periodic installments at fixed percentage, it is
hereby declared, agreed and warranted that this policy shall be deemed
effective, valid and binding upon the Company only when the premiums
therefor have actually been paid in full and duly acknowledged in a receipt
signed by any authorized official or representative/agent of the Company in
such manner as provided herein, (Italics supplied).[6]
 Clearly the Policy provides for payment of premium in full. Accordingly,
where the premium has only been partially paid and the balance paid only
after the peril insured against has occurred, the insurance contract did not
take effect and the insured cannot collect at all on the policy. This is fully
supported by Sec. 77 of the Insurance Code which provides
SEC. 77. An insurer is entitled to payment of the premium as soon as the
thing insured is exposed to the peril insured against. Notwithstanding any
agreement to the contrary, no policy or contract of insurance issued by an
insurance company is valid and binding unless and until the premium thereof
has been paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies (Italics supplied).
Apparently the crux of the controversy lies in the phrase unless and until
the premium thereof has been paid. This leads us to the manner of payment
envisioned by the law to make the insurance policy operative and binding.
For whatever judicial construction may be accorded the disputed phrase
must ultimately yield to the clear mandate of the law. The principle that where
the law does not distinguish the court should neither distinguish assumes
that the legislature made no qualification on the use of a general word or
expression. In Escosura v. San Miguel Brewery, inc.,[7] the Court through Mr.
Justice Jesus G. Barrera, interpreting the phrase with pay used in connection
with leaves of absence with pay granted to employees, ruled -
x x x the legislative practice seems to be that when the intention is to
distinguish between full and partial payment, the modifying term is used x x x
Citing C. A. No. 647 governing maternity leaves of married women in
government, R. A. No. 679 regulating employment of women and children,
R.A. No. 843 granting vacation and sick leaves to judges of municipal courts
and justices of the peace, and finally, Art. 1695 of the New Civil Code
providing that every househelp shall be allowed four (4) days vacation each
month, which laws simply stated with pay, the Court concluded that it was
undisputed that in all these laws the phrase with pay used without any
qualifying adjective meant that the employee was entitled to full
compensation during his leave of absence.
Petitioners maintain otherwise. Insisting that FORTUNE is liable on the
policy despite partial payment of the premium due and the express
stipulation thereof to the contrary, petitioners rely heavily on the 1967 case
of Philippine Phoenix and Insurance Co., Inc. v. Woodworks, Inc. [8] where the
Court through Mr. Justice Arsenio P. Dizon sustained the ruling of the trial
court that partial payment of the premium made the policy effective during
the whole period of the policy. In that case, the insurance company
commenced action against the insured for the unpaid balance on a fire
insurance policy. In its defense the insured claimed that nonpayment of
premium produced the cancellation of the insurance contract. Ruling
otherwise the Court held
It is clear x x x that on April 1, 1960, Fire Insurance Policy No. 9652 was
issued by appellee and delivered to appellant, and that on September 22 of
the same year, the latter paid to the former the sum of P3,000.00 on account
of the total premium of P6,051.95 due thereon. There is, consequently, no
doubt at all that, as between the insurer and the insured, there was not only a
perfected contract of insurance but a partially performed one as far as the
payment of the agreed premium was concerned. Thereafter the obligation of
the insurer to pay the insured the amount, for which the policy was issued in
case the conditions therefor had been complied with, arose and became
binding upon it, while the obligation of the insured to pay the remainder of the
total amount of the premium due became demandable.
The 1967 Phoenix case is not persuasive; neither is it decisive of the instant
dispute. For one, the factual scenario is different. In Phoenix it was the
insurance company that sued for the balance of the premium, i.e., it
recognized and admitted the existence of an insurance contract with the
insured. In the case before us, there is, quite unlike in Phoenix, a specific
stipulation that (t)his policy xxx is not in force until the premium has been fully
paid and duly receipted by the Company x x x. Resultantly, it is correct to say
that in Phoenix a contract was perfected upon partial payment of the
premium since the parties had not otherwise stipulated that prepayment of
the premium in full was a condition precedent to the existence of a contract.
In Phoenix, by accepting the initial payment of P3,000.00 and then later
demanding the remainder of the premium without any other precondition to
its enforceability as in the instant case, the insurer in effect had shown its
intention to continue with the existing contract of insurance, as in fact it was
enforcing its right to collect premium, or exact specific performance from the
insured. This is not so here. By express agreement of the parties,
no vinculum juris or bond of law was to be established until full payment was
effected prior to the occurrence of the risk insured against.
In Makati Tuscany Condominium Corp. v. Court of Appeals [9] the parties
mutually agreed that the premiums could be paid in installments, which in
fact they did for three (3) years, hence, this Court refused to invalidate the
insurance policy. In giving effect to the policy, the Court quoted with approval
the Court of Appeals
The obligation to pay premiums when due is ordinarily an indivisible
obligation to pay the entire premium. Here, the parties x x x agreed to make
the premiums payable in installments, and there is no pretense that the
parties never envisioned to make the insurance contract binding between
them. It was renewed for two succeeding years, the second and third policies
being a renewal/replacement for the previous one. And the insured never
informed the insurer that it was terminating the policy because the terms
were unacceptable.
While it maybe true that under Section 77 of the Insurance Code, the parties
may not agree to make the insurance contract valid and binding without
payment of premiums, there is nothing in said section which suggests that
the parties may not agree to allow payment of the premiums in installment, or
to consider the contract as valid and binding upon payment of the first
premium. Otherwise we would allow the insurer to renege on its liability
under the contract, had a loss incurred (sic) before completion of payment of
the entire premium, despite its voluntary acceptance of partial payments, a
result eschewed by basic considerations of fairness and equity x x x.
These two (2) cases, Phoenix and Tuscany, adequately demonstrate
the waiver, either express or implied, of prepayment in full by the insurer:
impliedly, by suing for the balance of the premium as inPhoenix, and
expressly, by agreeing to make premiums payable in installments as
in Tuscany. But contrary to the stance taken by petitioners, there is no waiver
express or implied in the case at bench. Precisely, the insurer and the
insured expressly stipulated that (t)his policy including any renewal thereof
and/or any indorsement thereon is not in force until the premium has been
fully paid to and duly receipted by the Company x x x and that this policy
shall be deemed effective, valid and binding upon the Company only when
the premiums therefor have actually been paid in full and duly acknowledged.
Conformably with the aforesaid stipulations explicitly worded and taken
in conjunction with Sec. 77 of the Insurance Code the payment of partial
premium by the assured in this particular instance should not be considered
the payment required by the law and the stipulation of the parties. Rather, it
must be taken in the concept of a deposit to be held in trust by the insurer
until such time that the full amount has been tendered and duly receipted
for. In other words, as expressly agreed upon in the contract, full payment
must be made before the risk occurs for the policy to be considered effective
and in force.
Thus, no vinculum juris whereby the insurer bound itself to indemnify the
assured according to law ever resulted from the fractional payment of
premium. The insurance contract itself expressly provided that the policy
would be effective only when the premium was paid in full. It would have
been altogether different were it not so stipulated. Ergo, petitioners had
absolute freedom of choice whether or not to be insured by FORTUNE under
the terms of its policy and they freely opted to adhere thereto.
Indeed, and far more importantly, the cardinal polestar in the
construction of an insurance contract is the intention of the parties as
expressed in the policy.[10] Courts have no other function but to enforce the
same. The rule that contracts of insurance will be construed in favor of the
insured and most strongly against the insurer should not be permitted to
have the effect of making a plain agreement ambiguous and then construe it
in favor of the insured.[11] Verily, it is elemental law that the payment of
premium is requisite to keep the policy of insurance in force. If the premium
is not paid in the manner prescribed in the policy as intended by the parties
the policy is ineffective. Partial payment even when accepted as a partial
payment will not keep the policy alive even for such fractional part of the year
as the part payment bears to the whole payment.[12]
Applying further the rules of statutory construction, the position
maintained by petitioners becomes even more untenable. The case of South
Sea Surety and Insurance Company, Inc. v. Court of Appeals,[13] speaks only
of two (2) statutory exceptions to the requirement of payment of the entire
premium as a prerequisite to the validity of the insurance contract. These
exceptions are: (a) in case the insurance coverage relates to life or industrial
life (health) insurance when a grace period applies, and (b) when the insurer
makes a written acknowledgment of the receipt of premium, this
acknowledgment being declared by law to, be then conclusive evidence of
the premium payment.[14]
A maxim of recognized practicality is the rule that the expressed
exception or exemption excludes others. Exceptio firm at regulim in casibus
non exceptis. The express mention of exceptions operates to exclude other
exceptions; conversely, those which are not within the enumerated
exceptions are deemed included in the general rule. Thus, under Sec. 77, as
well as Sec. 78, until the premium is paid, and the law has not expressly
excepted partial payments, there is no valid and binding contract. Hence, in
the absence of clear waiver of prepayment in full by the insurer, the insured
cannot collect on the proceeds of the policy.
In the desire to safeguard the interest of the assured, itmust not be
ignored that the contract of insurance is primarily a risk-distributing device, a
mechanism by which all members of a group exposed to a particular risk
contribute premiums to an insurer. From these contributory funds are paid
whatever losses occur due to exposure to the peril insured against. Each
party therefore takes a risk: the insurer, that of being compelled upon the
happening of the contingency to pay the entire sum agreed upon, and the
insured, that of parting with the amount required as premium, without
receiving anything therefor in case the contingency does not happen. To
ensure payment for these losses, the law mandates all insurance companies
to maintain a legal reserve fund in favor of those claiming under their
policies.[15] It should be understood that the integrity of this fund cannot be
secured and maintained if by judicial fiat partial offerings of premiums were to
be construed as a legal nexus between the applicant and the insurer despite
an express agreement to the contrary. For what could prevent the insurance
applicant from deliberately or wilfully holding back full premium payment and
wait for the risk insured against to transpire and then conveniently pass on
the balance of the premium to be deducted from the proceeds of the
insurance? Worse, what if the insured makes an initial payment of only 10%,
or even 1%, of the required premium, and when the risk occurs simply points
to the proceeds from where to source the balance? Can an insurance
company then exist and survive upon the payment of 1%, or even 10%, of
the premium stipulated in the policy on the basis that, after all, the insurer
can deduct from the proceeds of the insurance should the risk insured
against occur?
Interpreting the contract of insurance stringently against the insurer but
liberally in favor of the insured despite clearly defined obligations of the
parties to the policy can be carried out to extremes that there is the danger
that we may, so to speak, kill the goose that lays the golden egg. We are well
aware of insurance companies falling into the despicable habit of collecting
premiums promptly yet resorting to all kinds of excuses to deny or delay
payment of just insurance claims. But, in this case, the law is manifestly on
the side of the insurer. For as long as the current Insurance Code remains
unchanged and partial payment of premiums is not mentioned at all as
among the exceptions provided in Secs. 77 and 78, no policy of insurance
can ever pretend to be efficacious or effective until premium has been fully
paid.
And so it must be. For it cannot be disputed that premium is the elixir
vitae of the insurance business because by law the insurer must maintain a
legal reserve fund to meet its contingent obligations to the public, hence, the
imperative need for its prompt payment and full satisfaction. [16] It must be
emphasized here that all actuarial calculations and various tabulations of
probabilities of losses under the risks insured against are based on the
sound hypothesis of prompt payment of premiums. Upon this bedrock
insurance firms are enabled to offer the assurance of security to the public at
favorable rates. But once payment of premium is left to the whim and caprice
of the insured, as when the courts tolerate the payment of a mere P600.00
as partial undertaking out of the stipulated total premium of P2,983.50 and
the balance to be paid even after the risk insured against has occurred, as
petitioners have done in this case, on the principle that the strength of
the vinculumjuris is not measured by any specific amount of premium
payment, we will surely wreak havoc on the business and set to naught what
has taken actuarians centuries to devise to arrive at a fair and equitable
distribution of risks and benefits between the insurer and the insured.
The terms of the insurance policy constitute the measure of the insurers
liability. In the absence of statutory prohibition to the contrary, insurance
companies have the same rights as individuals to limit their liability and to
impose whatever conditions they deem best upon their obligations not
inconsistent with public policy.[17] The validity of these limitations is by law
passed upon by the Insurance Commissioner who is empowered to approve
all forms of policies, certificates or contracts of insurance which insurers
intend to issue or deliver. That the policy contract in the case at bench was
approved and allowed issuance simply reaffirms the validity of such policy,
particularly the provision in question.
WHEREFORE, the petition is DENIED and the assailed Decision of the
Court of Appeals dated 24 March 1995 is AFFIRMED.
SO ORDERED.
G.R. No. L-24833 September 23, 1968
FIELDMEN'S INSURANCE CO., INC., petitioner,
vs.
MERCEDES VARGAS VDA. DE SONGCO, ET AL. and COURT OF
APPEALS, respondents.
Jose S. Suarez for petitioner.
Eligio G. Lagman for respondents.
FERNANDO, J.:
An insurance firm, petitioner Fieldmen's Insurance Co., Inc., was not allowed
to escape liability under a common carrier insurance policy on the pretext
that what was insured, not once but twice, was a private vehicle and not a
common carrier, the policy being issued upon the insistence of its agent who
discounted fears of the insured that his privately owned vehicle might not fall
within its terms, the insured moreover being "a man of scant education,"
finishing only the first grade. So it was held in a decision of the lower court
thereafter affirmed by respondent Court of Appeals. Petitioner in seeking the
review of the above decision of respondent Court of Appeals cannot be so
sanguine as to entertain the belief that a different outcome could be
expected. To be more explicit, we sustain the Court of Appeals.
The facts as found by respondent Court of Appeals, binding upon us, follow:
"This is a peculiar case. Federico Songco of Floridablanca, Pampanga, a
man of scant education being only a first grader ..., owned a private jeepney
with Plate No. 41-289 for the year 1960. On September 15, 1960, as such
private vehicle owner, he was induced by Fieldmen's Insurance Company
Pampanga agent Benjamin Sambat to apply for a Common Carrier's Liability
Insurance Policy covering his motor vehicle ... Upon paying an annual
premium of P16.50, defendant Fieldmen's Insurance Company, Inc. issued
on September 19, 1960, Common Carriers Accident Insurance Policy No. 45-
HO- 4254 ... the duration of which will be for one (1) year, effective
September 15, 1960 to September 15, 1961. On September 22, 1961, the
defendant company, upon payment of the corresponding premium, renewed
the policy by extending the coverage from October 15, 1961 to October 15,
1962. This time Federico Songco's private jeepney carried Plate No. J-
68136-Pampanga-1961. ... On October 29, 1961, during the effectivity of the
renewed policy, the insured vehicle while being driven by Rodolfo Songco, a
duly licensed driver and son of Federico (the vehicle owner) collided with a
car in the municipality of Calumpit, province of Bulacan, as a result of which
mishap Federico Songco (father) and Rodolfo Songco (son) died, Carlos
Songco (another son), the latter's wife, Angelita Songco, and a family friend
by the name of Jose Manuel sustained physical injuries of varying degree." 1
It was further shown according to the decision of respondent Court of
Appeals: "Amor Songco, 42-year-old son of deceased Federico Songco,
testifying as witness, declared that when insurance agent Benjamin Sambat
was inducing his father to insure his vehicle, he butted in saying: 'That
cannot be, Mr. Sambat, because our vehicle is an "owner" private vehicle
and not for passengers,' to which agent Sambat replied: 'whether our vehicle
was an "owner" type or for passengers it could be insured because their
company is not owned by the Government and the Government has nothing
to do with their company. So they could do what they please whenever they
believe a vehicle is insurable' ... In spite of the fact that the present case was
filed and tried in the CFI of Pampanga, the defendant company did not even
care to rebut Amor Songco's testimony by calling on the witness-stand agent
Benjamin Sambat, its Pampanga Field Representative." 2
The plaintiffs in the lower court, likewise respondents here, were the
surviving widow and children of the deceased Federico Songco as well as
the injured passenger Jose Manuel. On the above facts they prevailed, as
had been mentioned, in the lower court and in the respondent Court of
Appeals.1awphîl.nèt
The basis for the favorable judgment is the doctrine announced in Qua Chee
Gan v. Law Union and Rock Insurance Co., Ltd., 3 with Justice J. B. L. Reyes
speaking for the Court. It is now beyond question that where inequitable
conduct is shown by an insurance firm, it is "estopped from enforcing
forfeitures in its favor, in order to forestall fraud or imposition on the
insured." 4
As much, if not much more so than the Qua Chee Gan decision, this is a
case where the doctrine of estoppel undeniably calls for application. After
petitioner Fieldmen's Insurance Co., Inc. had led the insured Federico
Songco to believe that he could qualify under the common carrier liability
insurance policy, and to enter into contract of insurance paying the premiums
due, it could not, thereafter, in any litigation arising out of such
representation, be permitted to change its stand to the detriment of the heirs
of the insured. As estoppel is primarily based on the doctrine of good faith
and the avoidance of harm that will befall the innocent party due to its
injurious reliance, the failure to apply it in this case would result in a gross
travesty of justice.
That is all that needs be said insofar as the first alleged error of respondent
Court of Appeals is concerned, petitioner being adamant in its far-from-
reasonable plea that estoppel could not be invoked by the heirs of the
insured as a bar to the alleged breach of warranty and condition in the policy.
lt would now rely on the fact that the insured owned a private vehicle, not a
common carrier, something which it knew all along when not once but twice
its agent, no doubt without any objection in its part, exerted the utmost
pressure on the insured, a man of scant education, to enter into such a
contract.
Nor is there any merit to the second alleged error of respondent Court that no
legal liability was incurred under the policy by petitioner. Why liability under
the terms of the policy 5 was inescapable was set forth in the decision of
respondent Court of Appeals. Thus: "Since some of the conditions contained
in the policy issued by the defendant-appellant were impossible to comply
with under the existing conditions at the time and 'inconsistent with the
known facts,' the insurer 'is estopped from asserting breach of such
conditions.' From this jurisprudence, we find no valid reason to deviate and
consequently hold that the decision appealed from should be affirmed. The
injured parties, to wit, Carlos Songco, Angelito Songco and Jose Manuel, for
whose hospital and medical expenses the defendant company was being
made liable, were passengers of the jeepney at the time of the occurrence,
and Rodolfo Songco, for whose burial expenses the defendant company was
also being made liable was the driver of the vehicle in question. Except for
the fact, that they were not fare paying passengers, their status as
beneficiaries under the policy is recognized therein." 6
Even if it be assumed that there was an ambiguity, an excerpt from the Qua
Chee Gan decision would reveal anew the weakness of petitioner's
contention. Thus: "Moreover, taking into account the well known rule that
ambiguities or obscurities must be strictly interpreted against the party that
caused them, the 'memo of warranty' invoked by appellant bars the latter
from questioning the existence of the appliances called for in the insured
premises, since its initial expression, 'the undernoted appliances for the
extinction of fire being kept on the premises insured hereby, ... it is hereby
warranted ...,' admits of interpretation as an admission of the existence of
such appliances which appellant cannot now contradict, should the parol
evidence rule apply." 7
To the same effect is the following citation from the same leading case: "This
rigid application of the rule on ambiguities has become necessary in view of
current business practices. The courts cannot ignore that nowadays
monopolies, cartels and concentration of capital, endowed with
overwhelming economic power, manage to impose upon parties dealing with
them cunningly prepared 'agreements' that the weaker party may not change
one whit, his participation in the 'agreement' being reduced to the alternative
to 'take it or leave it' labelled since Raymond Saleilles 'contracts by
adherence' (contrats d'adhesion), in contrast to those entered into by parties
bargaining on an equal footing, such contracts (of which policies of insurance
and international bills of lading are prime examples) obviously call for greater
strictness and vigilance on the part of courts of justice with a view to
protecting the weaker party from abuses and imposition, and prevent their
becoming traps for the unwary (New Civil Code. Article 24; Sent. of Supreme
Court of Spain, 13 Dec. 1934, 27 February 1942)." 8
The last error assigned which would find fault with the decision of respondent
Court of Appeals insofar as it affirmed the lower court award for exemplary
damages as well as attorney's fees is, on its face, of no persuasive force at
all.
The conclusion that inescapably emerges from the above is the correctness
of the decision of respondent Court of Appeals sought to be reviewed. For, to
borrow once again from the language of the Qua Chee Gan opinion: "The
contract of insurance is one of perfect good faith (uberima fides) not for the
insured alone,but equally so for the insurer; in fact, it is more so for the latter,
since its dominant bargaining position carries with it stricter responsibility." 9
This is merely to stress that while the morality of the business world is not the
morality of institutions of rectitude like the pulpit and the academe, it cannot
descend so low as to be another name for guile or deception. Moreover,
should it happen thus, no court of justice should allow itself to lend its
approval and support.1awphîl.nèt
We have no choice but to recognize the monetary responsibility of petitioner
Fieldmen's Insurance Co., Inc. It did not succeed in its persistent effort to
avoid complying with its obligation in the lower court and the Court of
Appeals. Much less should it find any receptivity from us for its unwarranted
and unjustified plea to escape from its liability.
WHEREFORE, the decision of respondent Court of Appeals of July 20, 1965,
is affirmed in its entirety. Costs against petitioner Fieldmen's Insurance Co.,
Inc.
[G.R. No. 154514. July 28, 2005]
WHITE GOLD MARINE SERVICES, INC., petitioner, vs. PIONEER
INSURANCE AND SURETY CORPORATION AND THE
STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION
(BERMUDA) LTD., respondents.
DECISION
QUISUMBING, J.:
This petition for review assails the Decision[1] dated July 30, 2002 of the
Court of Appeals in CA-G.R. SP No. 60144, affirming the Decision[2] dated
May 3, 2000 of the Insurance Commission in I.C. Adm. Case No. RD-277.
Both decisions held that there was no violation of the Insurance Code and
the respondents do not need license as insurer and insurance agent/broker.
The facts are undisputed.
White Gold Marine Services, Inc. (White Gold) procured a protection
and indemnity coverage for its vessels from The Steamship Mutual
Underwriting Association (Bermuda) Limited (Steamship Mutual) through
Pioneer Insurance and Surety Corporation (Pioneer). Subsequently, White
Gold was issued a Certificate of Entry and Acceptance. [3] Pioneer also issued
receipts evidencing payments for the coverage. When White Gold failed to
fully pay its accounts, Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for
collection of sum of money to recover the latters unpaid balance. White Gold
on the other hand, filed a complaint before the Insurance Commission
claiming that Steamship Mutual violated Sections 186[4] and 187[5] of the
Insurance Code, while Pioneer violated Sections 299,[6] 300[7] and 301[8] in
relation to Sections 302 and 303, thereof.
The Insurance Commission dismissed the complaint. It said that there
was no need for Steamship Mutual to secure a license because it was not
engaged in the insurance business. It explained that Steamship Mutual was
a Protection and Indemnity Club (P & I Club). Likewise, Pioneer need not
obtain another license as insurance agent and/or a broker for Steamship
Mutual because Steamship Mutual was not engaged in the insurance
business. Moreover, Pioneer was already licensed, hence, a separate
license solely as agent/broker of Steamship Mutual was already superfluous.
The Court of Appeals affirmed the decision of the Insurance
Commissioner. In its decision, the appellate court distinguished between P &
I Clubs vis--vis conventional insurance. The appellate court also held that
Pioneer merely acted as a collection agent of Steamship Mutual.
In this petition, petitioner assigns the following errors allegedly
committed by the appellate court,
FIRST ASSIGNMENT OF ERROR
THE COURT A QUO ERRED WHEN IT RULED THAT RESPONDENT
STEAMSHIP IS NOT DOING BUSINESS IN THE PHILIPPINES ON THE
GROUND THAT IT COURSED . . . ITS TRANSACTIONS THROUGH ITS
AGENT AND/OR BROKER HENCE AS AN INSURER IT NEED NOT
SECURE A LICENSE TO ENGAGE IN INSURANCE BUSINESS IN THE
PHILIPPINES.
SECOND ASSIGNMENT OF ERROR
THE COURT A QUO ERRED WHEN IT RULED THAT THE RECORD IS
BEREFT OF ANY EVIDENCE THAT RESPONDENT STEAMSHIP IS
ENGAGED IN INSURANCE BUSINESS.
THIRD ASSIGNMENT OF ERROR
THE COURT A QUO ERRED WHEN IT RULED, THAT RESPONDENT
PIONEER NEED NOT SECURE A LICENSE WHEN CONDUCTING ITS
AFFAIR AS AN AGENT/BROKER OF RESPONDENT STEAMSHIP.
FOURTH ASSIGNMENT OF ERROR
THE COURT A QUO ERRED IN NOT REVOKING THE LICENSE OF
RESPONDENT PIONEER AND [IN NOT REMOVING] THE OFFICERS AND
DIRECTORS OF RESPONDENT PIONEER.[9]
Simply, the basic issues before us are (1) Is Steamship Mutual, a P & I
Club, engaged in the insurance business in the Philippines? (2) Does
Pioneer need a license as an insurance agent/broker for Steamship Mutual?
The parties admit that Steamship Mutual is a P & I Club. Steamship
Mutual admits it does not have a license to do business in the Philippines
although Pioneer is its resident agent. This relationship is reflected in the
certifications issued by the Insurance Commission.
Petitioner insists that Steamship Mutual as a P & I Club is engaged in
the insurance business. To buttress its assertion, it cites the definition of a P
& I Club in Hyopsung Maritime Co., Ltd. v. Court of Appeals[10] as an
association composed of shipowners in general who band together for the
specific purpose of providing insurance cover on a mutual basis against
liabilities incidental to shipowning that the members incur in favor of third
parties. It stresses that as a P & I Club, Steamship Mutuals primary purpose
is to solicit and provide protection and indemnity coverage and for this
purpose, it has engaged the services of Pioneer to act as its agent.
Respondents contend that although Steamship Mutual is a P & I Club, it
is not engaged in the insurance business in the Philippines. It is merely an
association of vessel owners who have come together to provide mutual
protection against liabilities incidental to shipowning. [11] Respondents
aver Hyopsung is inapplicable in this case because the issue
in Hyopsung was the jurisdiction of the court over Hyopsung.
Is Steamship Mutual engaged in the insurance business?
Section 2(2) of the Insurance Code enumerates what constitutes doing
an insurance business or transacting an insurance business. These are:
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship
as a vocation and not as merely incidental to any other legitimate
business or activity of the surety;
(c) doing any kind of business, including a reinsurance business,
specifically recognized as constituting the doing of an insurance
business within the meaning of this Code;
(d) doing or proposing to do any business in substance equivalent to
any of the foregoing in a manner designed to evade the provisions
of this Code.
...
The same provision also provides, the fact that no profit is derived from
the making of insurance contracts, agreements or transactions, or that no
separate or direct consideration is received therefor, shall not preclude the
existence of an insurance business.[12]
The test to determine if a contract is an insurance contract or not,
depends on the nature of the promise, the act required to be performed, and
the exact nature of the agreement in the light of the occurrence, contingency,
or circumstances under which the performance becomes requisite. It is not
by what it is called.[13]
Basically, an insurance contract is a contract of indemnity. In it, one
undertakes for a consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event.[14]
In particular, a marine insurance undertakes to indemnify the assured
against marine losses, such as the losses incident to a marine
adventure.[15] Section 99[16] of the Insurance Code enumerates the coverage
of marine insurance.
Relatedly, a mutual insurance company is a cooperative enterprise
where the members are both the insurer and insured. In it, the members all
contribute, by a system of premiums or assessments, to the creation of a
fund from which all losses and liabilities are paid, and where the profits are
divided among themselves, in proportion to their interest.[17] Additionally,
mutual insurance associations, or clubs, provide three types of coverage,
namely, protection and indemnity, war risks, and defense costs. [18]
A P & I Club is a form of insurance against third party liability, where
the third party is anyone other than the P & I Club and the members. [19] By
definition then, Steamship Mutual as a P & I Club is a mutual insurance
association engaged in the marine insurance business.
The records reveal Steamship Mutual is doing business in the country
albeit without the requisite certificate of authority mandated by Section
187[20] of the Insurance Code. It maintains a resident agent in the Philippines
to solicit insurance and to collect payments in its behalf. We note that
Steamship Mutual even renewed its P & I Club cover until it was cancelled
due to non-payment of the calls. Thus, to continue doing business here,
Steamship Mutual or through its agent Pioneer, must secure a license from
the Insurance Commission.
Since a contract of insurance involves public interest, regulation by the
State is necessary. Thus, no insurer or insurance company is allowed to
engage in the insurance business without a license or a certificate of
authority from the Insurance Commission.[21]
Does Pioneer, as agent/broker of Steamship Mutual, need a special
license?
Pioneer is the resident agent of Steamship Mutual as evidenced by the
certificate of registration[22] issued by the Insurance Commission. It has been
licensed to do or transact insurance business by virtue of the certificate of
authority[23] issued by the same agency. However, a Certification from the
Commission states that Pioneer does not have a separate license to be an
agent/broker of Steamship Mutual.[24]
Although Pioneer is already licensed as an insurance company, it needs
a separate license to act as insurance agent for Steamship Mutual. Section
299 of the Insurance Code clearly states:
SEC. 299 . . .
No person shall act as an insurance agent or as an insurance broker in the
solicitation or procurement of applications for insurance, or receive for
services in obtaining insurance, any commission or other compensation from
any insurance company doing business in the Philippines or any agent
thereof, without first procuring a license so to act from the Commissioner,
which must be renewed annually on the first day of January, or within six
months thereafter. . .
Finally, White Gold seeks revocation of Pioneers certificate of authority
and removal of its directors and officers. Regrettably, we are not the forum
for these issues.
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision
dated July 30, 2002 of the Court of Appeals affirming the Decision dated May
3, 2000 of the Insurance Commission is hereby REVERSED AND SET
ASIDE. The Steamship Mutual Underwriting Association (Bermuda) Ltd., and
Pioneer Insurance and Surety Corporation are ORDERED to obtain licenses
and to secure proper authorizations to do business as insurer and insurance
agent, respectively. The petitioners prayer for the revocation of Pioneers
Certificate of Authority and removal of its directors and officers, is DENIED.
Costs against respondents.
SO ORDERED.
G.R. No. L-44059 October 28, 1977
THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-appellee,
vs.
CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO, defendants-
appellants.
MARTIN, J.:
This is a novel question in insurance law: Can a common-law wife named as
beneficiary in the life insurance policy of a legally married man claim the
proceeds thereof in case of death of the latter?
On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life
Assurance Co., Ltd., Policy No. 009929 on a whole-life for P5,882.00 with a,
rider for Accidental Death for the same amount Buenaventura C. Ebrado
designated T. Ebrado as the revocable beneficiary in his policy. He to her as
his wife.
On October 21, 1969, Buenaventura C. Ebrado died as a result of an t when
he was hit by a failing branch of a tree. As the policy was in force, The
Insular Life Assurance Co., Ltd. liable to pay the coverage in the total amount
of P11,745.73, representing the face value of the policy in the amount of
P5,882.00 plus the additional benefits for accidental death also in the amount
of P5,882.00 and the refund of P18.00 paid for the premium due November,
1969, minus the unpaid premiums and interest thereon due for January and
February, 1969, in the sum of P36.27.
Carponia T. Ebrado filed with the insurer a claim for the proceeds of the
Policy as the designated beneficiary therein, although she admits that she
and the insured Buenaventura C. Ebrado were merely living as husband and
wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased
insured. She asserts that she is the one entitled to the insurance proceeds,
not the common-law wife, Carponia T. Ebrado.
In doubt as to whom the insurance proceeds shall be paid, the insurer, The
Insular Life Assurance Co., Ltd. commenced an action for Interpleader before
the Court of First Instance of Rizal on April 29, 1970.
After the issues have been joined, a pre-trial conference was held on July 8,
1972, after which, a pre-trial order was entered reading as
follows: ñé+.£ªwph!1
During the pre-trial conference, the parties manifested to the court. that there
is no possibility of amicable settlement. Hence, the Court proceeded to have
the parties submit their evidence for the purpose of the pre-trial and make
admissions for the purpose of pretrial. During this conference, parties
Carponia T. Ebrado and Pascuala Ebrado agreed and stipulated: 1) that the
deceased Buenaventura Ebrado was married to Pascuala Ebrado with whom
she has six — (legitimate) namely; Hernando, Cresencio, Elsa, Erlinda,
Felizardo and Helen, all surnamed Ebrado; 2) that during the lifetime of the
deceased, he was insured with Insular Life Assurance Co. Under Policy No.
009929 whole life plan, dated September 1, 1968 for the sum of P5,882.00
with the rider for accidental death benefit as evidenced by Exhibits A for
plaintiffs and Exhibit 1 for the defendant Pascuala and Exhibit 7 for Carponia
Ebrado; 3) that during the lifetime of Buenaventura Ebrado, he was living
with his common-wife, Carponia Ebrado, with whom she had 2 children
although he was not legally separated from his legal wife; 4) that
Buenaventura in accident on October 21, 1969 as evidenced by the death
Exhibit 3 and affidavit of the police report of his death Exhibit 5; 5) that
complainant Carponia Ebrado filed claim with the Insular Life Assurance Co.
which was contested by Pascuala Ebrado who also filed claim for the
proceeds of said policy 6) that in view ofthe adverse claims the insurance
company filed this action against the two herein claimants Carponia and
Pascuala Ebrado; 7) that there is now due from the Insular Life Assurance
Co. as proceeds of the policy P11,745.73; 8) that the beneficiary designated
by the insured in the policy is Carponia Ebrado and the insured made
reservation to change the beneficiary but although the insured made the
option to change the beneficiary, same was never changed up to the time of
his death and the wife did not have any opportunity to write the company that
there was reservation to change the designation of the parties agreed that a
decision be rendered based on and stipulation of facts as to who among the
two claimants is entitled to the policy.
Upon motion of the parties, they are given ten (10) days to file their
simultaneous memoranda from the receipt of this order.
SO ORDERED.
On September 25, 1972, the trial court rendered judgment declaring among
others, Carponia T. Ebrado disqualified from becoming beneficiary of the
insured Buenaventura Cristor Ebrado and directing the payment of the
insurance proceeds to the estate of the deceased insured. The trial court
held: ñé+.£ªwph!1
It is patent from the last paragraph of Art. 739 of the Civil Code that a
criminal conviction for adultery or concubinage is not essential in order to
establish the disqualification mentioned therein. Neither is it also necessary
that a finding of such guilt or commission of those acts be made in a
separate independent action brought for the purpose. The guilt of the donee
(beneficiary) may be proved by preponderance of evidence in the same
proceeding (the action brought to declare the nullity of the donation).
It is, however, essential that such adultery or concubinage exists at the time
defendant Carponia T. Ebrado was made beneficiary in the policy in question
for the disqualification and incapacity to exist and that it is only necessary
that such fact be established by preponderance of evidence in the trial. Since
it is agreed in their stipulation above-quoted that the deceased insured and
defendant Carponia T. Ebrado were living together as husband and wife
without being legally married and that the marriage of the insured with the
other defendant Pascuala Vda. de Ebrado was valid and still existing at the
time the insurance in question was purchased there is no question that
defendant Carponia T. Ebrado is disqualified from becoming the beneficiary
of the policy in question and as such she is not entitled to the proceeds of the
insurance upon the death of the insured.
From this judgment, Carponia T. Ebrado appealed to the Court of Appeals,
but on July 11, 1976, the Appellate Court certified the case to Us as involving
only questions of law.
We affirm the judgment of the lower court.
1. It is quite unfortunate that the Insurance Act (RA 2327, as amended) or
even the new Insurance Code (PD No. 612, as amended) does not contain
any specific provision grossly resolutory of the prime question at hand.
Section 50 of the Insurance Act which provides that "(t)he insurance shag be
applied exclusively to the proper interest of the person in whose name it is
made" 1 cannot be validly seized upon to hold that the mm includes the
beneficiary. The word "interest" highly suggests that the provision refers only
to the "insured" and not to the beneficiary, since a contract of insurance is
personal in character. 2 Otherwise, the prohibitory laws against illicit
relationships especially on property and descent will be rendered nugatory,
as the same could easily be circumvented by modes of insurance. Rather,
the general rules of civil law should be applied to resolve this void in the
Insurance Law. Article 2011 of the New Civil Code states: "The contract of
insurance is governed by special laws. Matters not expressly provided for in
such special laws shall be regulated by this Code." When not otherwise
specifically provided for by the Insurance Law, the contract of life insurance
is governed by the general rules of the civil law regulating contracts. 3 And
under Article 2012 of the same Code, "any person who is forbidden from
receiving any donation under Article 739 cannot be named beneficiary of a
fife insurance policy by the person who cannot make a donation to
him. 4 Common-law spouses are, definitely, barred from receiving donations
from each other. Article 739 of the new Civil Code provides: ñé+.£ªwph!1
The following donations shall be void:
1. Those made between persons who were guilty of adultery or concubinage
at the time of donation;
Those made between persons found guilty of the same criminal offense, in
consideration thereof;
3. Those made to a public officer or his wife, descendants or ascendants by
reason of his office.
In the case referred to in No. 1, the action for declaration of nullity may be
brought by the spouse of the donor or donee; and the guilt of the donee may
be proved by preponderance of evidence in the same action.
2. In essence, a life insurance policy is no different from a civil donation
insofar as the beneficiary is concerned. Both are founded upon the same
consideration: liberality. A beneficiary is like a donee, because from the
premiums of the policy which the insured pays out of liberality, the
beneficiary will receive the proceeds or profits of said insurance. As a
consequence, the proscription in Article 739 of the new Civil Code should
equally operate in life insurance contracts. The mandate of Article 2012
cannot be laid aside: any person who cannot receive a donation cannot be
named as beneficiary in the life insurance policy of the person who cannot
make the donation. 5 Under American law, a policy of life insurance is
considered as a testament and in construing it, the courts will, so far as
possible treat it as a will and determine the effect of a clause designating the
beneficiary by rules under which wins are interpreted. 6
3. Policy considerations and dictates of morality rightly justify the institution of
a barrier between common law spouses in record to Property relations since
such hip ultimately encroaches upon the nuptial and filial rights of the
legitimate family There is every reason to hold that the bar in donations
between legitimate spouses and those between illegitimate ones should be
enforced in life insurance policies since the same are based on similar
consideration As above pointed out, a beneficiary in a fife insurance policy is
no different from a donee. Both are recipients of pure beneficence. So long
as manage remains the threshold of family laws, reason and morality dictate
that the impediments imposed upon married couple should likewise be
imposed upon extra-marital relationship. If legitimate relationship is
circumscribed by these legal disabilities, with more reason should an illicit
relationship be restricted by these disabilities. Thus, in Matabuena v.
Cervantes, 7 this Court, through Justice Fernando, said: ñé+.£ªwph!1
If the policy of the law is, in the language of the opinion of the then Justice
J.B.L. Reyes of that court (Court of Appeals), 'to prohibit donations in favor of
the other consort and his descendants because of and undue and improper
pressure and influence upon the donor, a prejudice deeply rooted in our
ancient law;" por-que no se enganen desponjandose el uno al otro por amor
que han de consuno' (According to) the Partidas (Part IV, Tit. XI, LAW IV),
reiterating the rationale 'No Mutuato amore invicem spoliarentur' the
Pandects (Bk, 24, Titl. 1, De donat, inter virum et uxorem); then there is very
reason to apply the same prohibitive policy to persons living together as
husband and wife without the benefit of nuptials. For it is not to be doubted
that assent to such irregular connection for thirty years bespeaks greater
influence of one party over the other, so that the danger that the law seeks to
avoid is correspondingly increased. Moreover, as already pointed out by
Ulpian (in his lib. 32 ad Sabinum, fr. 1), 'it would not be just that such
donations should subsist, lest the condition 6f those who incurred guilt should
turn out to be better.' So long as marriage remains the cornerstone of our
family law, reason and morality alike demand that the disabilities attached to
marriage should likewise attach to concubinage.
It is hardly necessary to add that even in the absence of the above
pronouncement, any other conclusion cannot stand the test of scrutiny. It
would be to indict the frame of the Civil Code for a failure to apply a laudable
rule to a situation which in its essentials cannot be distinguished. Moreover, if
it is at all to be differentiated the policy of the law which embodies a deeply
rooted notion of what is just and what is right would be nullified if such
irregular relationship instead of being visited with disabilities would be
attended with benefits. Certainly a legal norm should not be susceptible to
such a reproach. If there is every any occasion where the principle of
statutory construction that what is within the spirit of the law is as much a part
of it as what is written, this is it. Otherwise the basic purpose discernible in
such codal provision would not be attained. Whatever omission may be
apparent in an interpretation purely literal of the language used must be
remedied by an adherence to its avowed objective.
4. We do not think that a conviction for adultery or concubinage is exacted
before the disabilities mentioned in Article 739 may effectuate. More
specifically, with record to the disability on "persons who were guilty of
adultery or concubinage at the time of the donation," Article 739 itself
provides: ñé+.£ªwph!1
In the case referred to in No. 1, the action for declaration of nullity may be
brought by the spouse of the donor or donee; and the guilty of the donee
may be proved by preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the
offense is a condition precedent. In fact, it cannot even be from the
aforequoted provision that a prosecution is needed. On the contrary, the law
plainly states that the guilt of the party may be proved "in the same acting for
declaration of nullity of donation. And, it would be sufficient if evidence
preponderates upon the guilt of the consort for the offense indicated. The
quantum of proof in criminal cases is not demanded.
In the caw before Us, the requisite proof of common-law relationship
between the insured and the beneficiary has been conveniently supplied by
the stipulations between the parties in the pre-trial conference of the case. It
case agreed upon and stipulated therein that the deceased insured
Buenaventura C. Ebrado was married to Pascuala Ebrado with whom she
has six legitimate children; that during his lifetime, the deceased insured was
living with his common-law wife, Carponia Ebrado, with whom he has two
children. These stipulations are nothing less than judicial admissions which,
as a consequence, no longer require proof and cannot be
contradicted. 8 A fortiori, on the basis of these admissions, a judgment may
be validly rendered without going through the rigors of a trial for the sole
purpose of proving the illicit liaison between the insured and the beneficiary.
In fact, in that pretrial, the parties even agreed "that a decision be rendered
based on this agreement and stipulation of facts as to who among the two
claimants is entitled to the policy."
ACCORDINGLY, the appealed judgment of the lower court is hereby
affirmed. Carponia T. Ebrado is hereby declared disqualified to be the
beneficiary of the late Buenaventura C. Ebrado in his life insurance policy. As
a consequence, the proceeds of the policy are hereby held payable to the
estate of the deceased insured. Costs against Carponia T. Ebrado.
SO ORDERED.