Pacific Timber v CA G.R. No.

L-38613 February 25, 1982

112 SCRA 199 Mercantile Law Insurance Law The Policy Separate Premiums Not Required for
Cover Notes
In 1963, Pacific Timber Export Corporation (PTEC) applied for a temporary marine insurance from
Workmens Insurance Company (WIC) in order for the latter to insure 1,250,000 board feet of logs to be
exported to Japan. In March 1963, WIC issued a cover note to PTEC for the said logs. On April 2, 1963,
WIC issued two policies for the logs. However, the total board feet covered this time is only 1,195,498. On
April 4, 1963, while the logs were in transit to Japan, bad weather prevailed and this caused the loss of 32
pieces of logs.
WIC then asked an adjuster to investigate the loss. The adjuster submitted that the logs lost were not
covered by the two policies issued on April 2, 1963 but said logs were included in the cover note earlier
issued.
WIC however denied the insurance claim of PTEC as it averred that the cover note became null and void
when the two policies were subsequently issued. The Court of Appeals ruled that the cover note is void for
lack of valuable consideration as it appeared that no premium payment therefor was made by PTEC.
ISSUE: Whether or not a separate premium is needed for cover notes.
HELD: No. The Cover Note was not without consideration for which the Court of Appeals held the Cover
Note as null and void, and denied recovery therefrom. The fact that no separate premium was paid on the
Cover Note before the loss insured against occurred, does not militate against the validity of PTECs
contention, for no such premium could have been paid, since by the nature of the Cover Note, it did not
contain, as all Cover Notes do not contain particulars of the shipment that would serve as basis for the
computation of the premiums. As a logical consequence, no separate premiums are intended or required
to be paid on a Cover Note.
At any rate, it is not disputed that PTEC paid in full all the premiums as called for by the statement issued
by WIC after the issuance of the two regular marine insurance policies, thereby leaving no account unpaid
by PTEC due on the insurance coverage, which must be deemed to include the Cover Note. If the Note is
to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, the
purpose and function of the Cover Note would be set at naught or rendered meaningless, for it is in a real
sense a contract, not a mere application for insurance which is a mere offer.

Great Pacific v CA G.R. No. L-31845 April 30, 1979

J. De Castro
Facts:
Ngo Hing filed an application with the Great Pacific for a twenty-year endowment policy in the amount of
P50,000.00 on the life of his one-year old daughter Helen. He supplied the essential data which petitioner
Mondragon, the Branch Manager, wrote on the form. The latter paid the annual premium the sum of
P1,077.75 going over to the Company, but he retained the amount of P1,317.00 as his commission for
being a duly authorized agent of Pacific Life.
Upon the payment of the insurance premium, the binding deposit receipt was issued Ngo Hing. Likewise,
petitioner Mondragon handwrote at the bottom of the back page of the application form his strong
recommendation for the approval of the insurance application. Then Mondragon received a letter from
Pacific Life disapproving the insurance application. The letter stated that the said life
insurance application for 20-year endowment plan is not available for minors below seven years old, but
Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the offer is
acceptable, the Juvenile Non-Medical Declaration be sent to the company.
The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner
Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote back Pacific Life
again strongly recommending the approval of the 20-year endowment insurance plan to children,
pointing out that since the customers were asking for such coverage.
Helen Go died of influenza. Ngo Hing sought the payment of the proceeds of the insurance, but having
failed in his effort, he filed the action for the recovery before the Court of First Instance of Cebu, which
ruled against him.
Issues:
1. Whether the binding deposit receipt constituted a temporary contract of the life insurance in question
2. Whether Ngo Hing concealed the state of health and physical condition of Helen Go, which rendered
void the policy
Held: No. Yes. Petition dismissed.
Ratio:
The receipt was intended to be merely a provisional insurance contract. Its perfection was subject to
compliance of the following conditions: (1) that the company shall be satisfied that the applicant was
insurable on standard rates; (2) that if the company does not accept the application and offers to issue a
policy for a different plan, the insurance contract shall not be binding until the applicant accepts the
policy offered; otherwise, the deposit shall be refunded; and (3) that if the company disapproves the
application, the insurance applied for shall not be in force at any time, and the premium paid shall be
returned to the applicant.
The receipt is merely an acknowledgment that the latter's branch office had received from
the applicant the insurance premium and had accepted the application subject for processing by the
insurance company. There was still approval or rejection the same on the basis of whether or not
the applicant is "insurable on standard rates." Since Pacific Life disapproved the insurance application of
respondent Ngo Hing, the binding deposit receipt in question had never become in force at any time. The
binding deposit receipt is conditional and does not insure outright. This was held in Lim v Sun.
The deposit paid by private respondent shall have to be refunded by Pacific Life.
2. Ngo Hing had deliberately concealed the state of health of his daughter Helen Go. When he supplied
data, he was fully aware that his one-year old daughter is typically a mongoloid child. He withheld the fact
material to the risk insured.
The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute and
perfect candor or openness and honesty; the absence of any concealment or demotion, however slight.
The concealment entitles the insurer to rescind the contract of insurance.

[G.R. No. 139776. August 1, 2002]

PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY, petitioner,

vs. JUDGE LORE R. VALENCIA-BAGALACSA,
The facts of the case:
On June 20, 1995, private respondents, as legitimate children and forced heirs of their late father,
Faustino Lumaniog, filed with the aforesaid RTC, a complaint for recovery of sum of money against
petitioner alleging that: their father was insured by petitioner under Life Insurance Policy No. 1305486
with a face value of P50,000.00; their father died of coronary thrombosis on November 25, 1980; on June
22, 1981, they claimed and continuously claimed for all the proceeds and interests under the life insurance
policy in the amount of P641,000.00, despite repeated demands for payment and/or settlement of the
claim due from petitioner, the last of which is on December 1, 1994, petitioner finally refused or
disallowed said claim on February 14, 1995;[1] and so, they filed their complaint on June 20, 1995.
Petitioners motion for reconsideration was denied by the RTC in its Order dated December 12, 1997
upholding however in the same Order the claim of private respondents counsel that the running of the 10year period was stopped on May 25, 1983 when private respondents requested for a reconsideration of the
denial and it was only on February 14, 1995 when petitioner finally decided to deny their claim that the
10-year period began to run.[7] issues:
A. Whether or not the complaint filed by private respondents for payment of life insurance proceeds is
already barred by prescription of action.
B. Whether or not an extrajudicial demand made after an action has prescribed shall cause the revival of
the action.[9]
Private respondents filed their Comment and petitioners, their Reply.
Before we determine whether the Court of Appeals had committed any reversible error, we must
necessarily first ascertain whether or not the RTC committed grave abuse of discretion in issuing the
Orders dated June 7, 1996 and December 12, 1997.
Notably, the RTC was initially correct in issuing the Order dated June 7, 1996 when it set the case
below for hearing as there are matters in the respective pleadings of the parties that are evidentiary in
nature, hence the necessity of a trial on the merits[10], in effect, denying the motion to dismiss, pursuant to
the then prevailing Section 3, Rule 16, of the Rules of Court, to wit:
Sec. 3. Hearing and order. - After hearing the court may deny or grant the motion or allow amendment of
pleading, or may defer the hearing and determination of the motion until the trial if the ground alleged
therein does not appear to be indubitable.
before it was amended by the 1997 Rules of Civil Procedure, effective July 1, 1997. [11]
It must be emphasized that petitioner had specifically alleged in the Answer that it had denied
private respondents claim per its letter dated July 11, 1983. [12] Hence, due process demands that it be
given the opportunity to prove that private respondents had received said letter, dated July 11, 1983. Said
letter is crucial to petitioners defense that the filing of the complaint for recovery of sum of money in
June, 1995 is beyond the 10-year prescriptive period[13].
It is for the above reason that the RTC committed a grave abuse of discretion when, in resolving the
motion for reconsideration of petitioner, it arbitrarily ruled in its Order dated December 12, 1997, that the
period of ten (10) years had not yet lapsed. It based its finding on a mere explanation of the private
respondents counsel and not on evidence presented by the parties as to the date when to reckon the
prescriptive period. Portions of the Order dated December 12, 1997 read:
A perusal of the record will likewise reveal that plaintiffs counsel explained that the running of the ten
(10) year period was stopped on May 25, 1983, upon demand of Celso Lomaniog for the compliance of the
contract and reconsideration of the decision. Counsel also wrote the President of the Company on
December 1, 1994, asking for reconsideration. The letter was answered by the Assistant Vice President of
the Claims Department of Philamlife, with the advise that the company is reviewing the claim. On
February 14, 1995, Atty. Abis sent a letter to counsel, finally deciding the plaintiffs claim. Thus, the period
of prescription should commence to run only from February 14, 1995, when Atty. Abis finally decided
plaintiffs claim.
It is evident from the foregoing that the ten (10) year period for plaintiffs to claim the insurance proceeds
has not yet prescribed. The final determination denying the claim was made only on February 14,

1995. Hence, when the instant case was filed on June 20, 1995, the ten year period has not yet
lapsed.Moreover, defendants counsel failed to comply with the requirements of the Rules in filing his
motion for reconsideration.[14] (emphasis supplied)
The ruling of the RTC that the cause of action of private respondents had not prescribed, is arbitrary
and patently erroneous for not being founded on evidence on record, and therefore, the same is void.[15]
Consequently, while the Court of Appeals did not err in upholding the June 7, 1986 Order of the RTC,
it committed a reversible error when it declared that the RTC did not commit any grave abuse of
discretion in issuing the Order dated December 12, 1997.
The appellate court should have granted the petition for certiorari assailing said Order of December
12, 1997. Certiorari is an appropriate remedy to assail an interlocutory order (1) when the tribunal issued
such order without or in excess of jurisdiction or with grave abuse of discretion and (2) when the assailed
interlocutory order is patently erroneous and the remedy of appeal would not afford adequate and
expeditious relief.[16] Said Order was issued with grave abuse of discretion for being patently erroneous
and arbitrary, thus, depriving petitioner of due process, as discussed earlier.
WHEREFORE, the petition is partly GRANTED. The assailed decision of the Court of Appeals
dated April 30, 1999 insofar only as it upheld the Order dated December 12, 1997 is REVERSED and SET
ASIDE. A new judgment is entered reversing and setting aside the Order dated December 12, 1997 of the
Regional Trial Court of Libmanan, Camarines Sur (Branch 56) and affirming its Order dated June 20,
1995. Said RTC is directed to proceed with dispatch with Civil Case No. L-787.