G.R. No.

23703
September 28, 1925
HILARIO GERCIO, plaintiff-appellee,
vs.
SUN LIFE ASSURANCE OF CANADA, ET AL., defendants.
SUN LIFE ASSURANCE OF CANADA, appellant.
The question of first impression in the law of life insurance to be here decided is whether the insured the husband has the power
to change the beneficiary the former wife and to name instead his actual wife, where the insured and the beneficiary have been
divorced and where the policy of insurance does not expressly reserve to the insured the right to change the beneficiary. Although the
authorities have been exhausted, no legal situation exactly like the one before us has been encountered.
ESSENTIAL FACTS:
Insured: Hilario Gercio
Insurer: SUN LIFE ASSURANCE OF CANADA
Beneficiary: Andrea Zialcita, former wife of Insured

1.

the Sun Life Assurance Co. of Canada issued insurance on the life of Hilario Gercio. The policy was what is known as a
twenty-year endowment policy. By its terms, the insurance company agreed to insure the life of Hilario Gercio for the sum of
P/2,000, to be paid him on February 1, 1930, or if the insured should die before said date, then to his wife, Mrs. Andrea
Zialcita, should she survive him

2.

The policy did not include any provision reserving to the insured the right to change the beneficiary.

3.

On the date the policy was issued, Andrea Zialcita was the lawful wife of Hilario Gercio. Towards the end of the year 1919, she
was convicted of the crime of adultery. On September 4, 1920, a decree of divorce was issued in civil case no. 17955, which
had the effect of completely dissolving the bonds of matrimony contracted by Hilario Gercio and Andrea Zialcita.

4.

On March 4, 1922, Hilario Gercio formally notified the Sun Life Assurance Co. of Canada that he had revoked his donation in
favor of Andrea Zialcita, and that he had designated in her stead his present wife, Adela Garcia de Gercio, as the beneficiary
of the policy. Gercio requested the insurance company to eliminate Andrea Zialcita as beneficiary. This, the insurance
company has refused and still refuses to do.

Issue:
1.
2.

Should the insurance contract, whereby the husband names the wife as the beneficiary, be denominated a donation inter
vivos, a donation causa mortis, a contract in favor of a third person, or an aleatory contract?
Won the insured the husband has the power to change the beneficiary the former wife and to name instead his
actual wife, where the insured and the beneficiary have been divorced and where the policy of insurance does not expressly
reserve to the insured the right to change the beneficiary.

Ruling:
1.

The subject is further complicated by the fact that if an insurance contract should be considered a donation, a husband may
then never insure his life in favor of his wife and vice versa, inasmuch as article 1334 prohibits all donations between spouses
during marriage. It would seem, therefore, that this court was right when in the case of Del Val vs. Del Val ([1915]), 29 Phil.,
534), it declined to consider the proceeds of the insurance policy as a donation or gift, saying "the contract of life insurance is
a special contract and the destination of the proceeds thereof is determined by special laws which deal exclusively with that
subject. The Civil Code has no provisions which relate directly and specifically to life-insurance contracts or to the destination
of life-insurance proceeds. . . ." Some satisfaction is gathered from the perplexities of the Louisiana Supreme Court, a civil law
jurisdiction, where the jurists have disagreed as to the classification of the insurance contract, but have agreed in their
conclusions as will hereafter see.

2.

On the admitted facts and the authorities supporting the nearly universally accepted principles of insurance, we are irresistibly
led to the conclusion that the question at issue must be answered in the negative.
The wife has an insurable interest in the life of her husband. The beneficiary has an absolute vested interest in the policy from
the date of its issuance and delivery. So when a policy of life insurance is taken out by the husband in which the wife is named
as beneficiary, she has a subsisting interest in the policy. And this applies to a policy to which there are attached the incidents
of a loan value, cash surrender value, an automatic extension by premiums paid, and to an endowment policy, as well as to an
ordinary life insurance policy. If the husband wishes to retain to himself the control and ownership of the policy he may so
provide in the policy. But if the policy contains no provision authorizing a change of beneficiary without the beneficiary's
consent, the insured cannot make such change. Accordingly, it is held that a life insurance policy of a husband made payable
to the wife as beneficiary, is the separate property of the beneficiary and beyond the control of the husband.
As to the effect produced by the divorce, the Philippine Divorce Law, Act No. 2710, merely provides in section 9 that the
decree of divorce shall dissolve the community property as soon as such decree becomes final. Unlike the statutes of a few
jurisdictions, there is no provision in the Philippine Law permitting the beneficiary in a policy for the benefit of the wife of the
husband to be changed after a divorce. It must follow, therefore, in the absence of a statute to the contrary, that if a policy is
taken out upon a husband's life the wife is named as beneficiary therein, a subsequent divorce does not destroy her rights
under the policy.

Somewhat the same question came before the Supreme Court of Kansas in the leading case of Filley vs. Illinois Life Insurance
Company ([1914]), 91 Kansas, 220; L.R.A. [1915 D], 130). It was held, following consideration extending to two motions for rehearing,
as follows:

The benefit accruing from a policy of life insurance upon the life of a married man, payable upon his death to his wife, naming
her, is payable to the surviving beneficiary named, although she may have years thereafter secured a divorce from her
husband, and he was thereafter again married to one who sustained the relation of wife to him at the time of his death.
The rights of a beneficiary in an ordinary life insurance policy become vested upon the issuance of the policy, and can
thereafter, during the life of the beneficiary, be defeated only as provided by the terms of the policy. -lmcsumioglaw

G.R. No. 94052 August 9, 1991

private respondent Panama Sawmill Co., Inc. (Panama) bought, in Palawan, 1,208 pieces of apitong logs, with a total volume
of 2,000 cubic meters. It hired Transpacific Towage, Inc., to transport the logs by sea to Manila and insured it against loss for
P1-M with petitioner Oriental Assurance Corporation (Oriental Assurance).
There is a claim by Panama, however, that the insurance coverage should have been for P3-M were it not for the fraudulent
act of one Benito Sy Yee Long to whom it had entrusted the amount of P6,000.00 for the payment of the premium for a P3-M
policy.
Oriental Assurance Warranted that this Insurance is against TOTAL LOSS ONLY.
The logs were loaded on two (2) barges. But, as fate would have it, during the voyage, rough seas and strong winds caused
damage to Barge resulting in the loss of 497 pieces of logs out of the 598 pieces loaded thereon.
Panama demanded payment for the loss but Oriental Assurance refuse on the ground that its contracted liability was for
"TOTAL LOSS ONLY."

Issue: whether or not Oriental Assurance can be held liable under its marine insurance policy based on the theory of a divisible contract
of insurance and, consequently, a constructive total loss.
Ruling:
Our considered opinion is that no liability attaches.
The terms of the contract constitute the measure of the insurer liability and compliance therewith is a condition precedent to the
insured's right to recovery from the insurer (Perla Compania de Seguros, Inc. v. Court of Appeals, G.R. No. 78860, May 28, 1990, 185
SCRA 741). Whether a contract is entire or severable is a question of intention to be determined by the language employed by the
parties. The policy in question shows that the subject matter insured was the entire shipment of 2,000 cubic meters of apitong logs. The
fact that the logs were loaded on two different barges did not make the contract several and divisible as to the items insured. The logs
on the two barges were not separately valued or separately insured. Only one premium was paid for the entire shipment, making for
only one cause or consideration. The insurance contract must, therefore, be considered indivisible.
More importantly, the insurer's liability was for "total loss only." A total loss may be either actual or constructive (Sec. 129, Insurance
Code). An actual total loss is caused by:
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking, or by being broken up;
(c) Any damage to the thing which renders it valueless to the owner for the purpose for which he held it; or
(d) Any other event which effectively deprives the owner of the possession, at the port of destination, of the thing
insured. (Section 130, Insurance Code).

A constructive total loss is one which gives to a person insured a right to abandon, under Section 139 of the Insurance Code. This
provision reads:
SECTION 139. A person insured by a contract of marine insurance may abandon the thing insured, or any particular
portion thereof separately valued by the policy, or otherwise separately insured, and recover for a total loss thereof,
when the cause of the loss is a peril injured against,
(a) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it from the
peril;
(b) If it is injured to such an extent as to reduce its value more than three-fourths;
xxx xxx xxx
(Emphasis supplied)
Respondent Appellate Court treated the loss as a constructive total loss, and for the purpose of computing the more than three-fourths
value of the logs actually lost, considered the cargo in one barge as separate from the logs in the other. Thus, it concluded that the loss
of 497 pieces of logs from barge TPAC-1000, mathematically speaking, is more than three-fourths () of the 598 pieces of logs loaded
in that barge and may, therefore, be considered as constructive total loss.

The basis thus used is, in our opinion, reversible error. The requirements for the application of Section 139 of the Insurance Code,
quoted above, have not been met. The logs involved, although placed in two barges, were not separately valued by the policy, nor
separately insured. Resultantly, the logs lost in barge TPAC-1000 in relation to the total number of logs loaded on the same barge can
not be made the basis for determining constructive total loss. The logs having been insured as one inseparable unit, the correct basis
for determining the existence of constructive total loss is the totality of the shipment of logs. Of the entirety of 1,208, pieces of logs, only
497 pieces thereof were lost or 41.45% of the entire shipment. Since the cost of those 497 pieces does not exceed 75% of the value of
all 1,208 pieces of logs, the shipment can not be said to have sustained a constructive total loss under Section 139(a) of the Insurance
Code.
In the absence of either actual or constructive total loss, there can be no recovery by the insured Panama against the insurer, Oriental
Assurance. . -lmcsumioglaw