FACTS:

December 10, 1980: Philippine American Life Insurance Company

(Philamlife) entered into an agreement denominated as Creditor Group
Life Policy No. P-19202 with Eternal Gardens Memorial Park
Corporation (Eternal)
o Under the policy (renewable annually), the clients of Eternal who
purchased burial lots from it on installment basis would be
insured by Philamlife

amount of insurance coverage depended upon the existing

balance

Eternal complied by submitting a letter dated December 29, 1982, a

list of insurable balances of its lot buyers for October 1982 which
includes John Chuang which was stamped as received by Philam Life

August 2, 1984, Chuang died with a balance of 100,000 php

April 25, 1986: Philamlife had not furnished Eternal with any reply on
its insurance claim so its demanded its claim

According to Philam Life, since the application was submitted only on

November 15, 1984, after his death, Mr. John Uy Chuang was not
covered under the Policy since his application was not approved.
Moreover, the acceptance of the premiums are only in trust for and
not a sign of approval.

RTC: favored Eternal

CA: Reversed RTC

ISSUE: W/N Philam's inaction or non-approval meant the perfection of the

insurance contract.
HELD: YES. CA reversed

construed in favor of the insured and in favor of the effectivity of the

insurance contract

Upon a partys purchase of a memorial lot on installment from Eternal,

an insurance contract covering the lot purchaser is created and the

same is effective, valid, and binding until terminated by Philamlife by

disapproving the insurance application

Moreover, the mere inaction of the insurer on the insurance application

must not work to prejudice the insured

The termination of the insurance contract by the insurer must be

explicit and unambiguous

ETERNAL GARDENS VS. PHILAMLIFE

FACTS:
On December 10, 1980, respondent Philippine American Life Insurance Company
(Philamlife) entered into an agreement denominated as Creditor Group Life Policy
No. P-1920 with petitioner Eternal Gardens Memorial Park Corporation (Eternal).
Under the policy, the clients of Eternal who purchased burial lots from it on
installment basis would be insured by Philamlife. The amount of insurance coverage
depended upon the existing balance of the purchased burial lots. The policy was to
be effective for a period of one year, renewable on a yearly basis.
Eternal was required under the policy to submit to Philamlife a list of all new lot
purchasers, together with a copy of the application of each purchaser, and the
amounts of the respective unpaid balances of all insured lot purchasers. In relation
to the instant petition, Eternal complied by submitting a letter dated December 29,
1982, containing a list of insurable balances of its lot buyers for October 1982. One
of those included in the list as "new business" was a certain John Chuang. His
balance of payments was PhP 100,000. On August 2, 1984, Chuang died.
Eternal sent a letter dated August 20, 1984 to Philamlife, which served as an
insurance claim for Chuang's death. Attached to the claim were the following
documents: (1) Chuang's Certificate of Death; (2) Identification Certificate stating
that Chuang is a naturalized Filipino Citizen; (3) Certificate of Claimant; (4)
Certificate of Attending Physician; and (5) Assured's Certificate.
In reply, Philamlife wrote Eternal a letter on November 12, 1984, requiring Eternal to
submit the following documents relative to its insurance claim for Chuang's death:
(1) Certificate of Claimant (with form attached); (2) Assured's Certificate (with form
attached); (3) Application for Insurance accomplished and signed by the insured,
Chuang, while still living; and (4) Statement of Account showing the unpaid balance
of Chuang before his death.
Eternal transmitted the required documents through a letter dated November 14,
1984, which was received by Philamlife on November 15, 1984.

After more than a year, Philamlife had not furnished Eternal with any reply to the
latter's insurance claim. This prompted Eternal to demand from Philamlife the
payment of the claim for PhP 100,000 on April 25, 1986.
In response, Philamlife denied having received Chuangs application, more so
having approved the same.
RTC ruled in favor of Eternal; CA reversed.
ISSUE: Whether or not Philamlife is liable.
HELD: YES

-The fact of the matter is, the letter dated December 29, 1982, which Philamlife
stamped as received, states that the insurance forms for the attached list of burial
lot buyers were attached to the letter. Such stamp of receipt has the effect of
acknowledging receipt of the letter together with the attachments. Such receipt is
an admission by Philamlife against its own interest. The burden of evidence has
shifted to Philamlife, which must prove that the letter did not contain Chuang's
insurance application. However, Philamlife failed to do so; thus, Philamlife is
deemed to have received Chuang's insurance application.

-Is Philamlife liable without having approved the application? In the policy, it is
provided that: EFFECTIVE DATE OF BENEFIT. The insurance of any eligible Lot
Purchaser shall be effective on the date he contracts a loan with the Assured.
However, there shall be no insurance if the application of the Lot Purchaser is not
approved by the Company. An examination of the above provision would show
ambiguity between its two sentences. The first sentence appears to state that the
insurance coverage of the clients of Eternal already became effective upon
contracting a loan with Eternal while the second sentence appears to require
Philamlife to approve the insurance contract before the same can become effective.
It must be remembered that an insurance contract is a contract of adhesion which
must be construed liberally in favor of the insured and strictly against the insurer in
order to safeguard the latter's interest.

REPUBLIC VS SUNLIFE

FACTS:

On October 20, 1997, Sun Life filed with the Commissioner of Internal
Revenue (CIR) its insurance premium tax return for the third quarter of 1997
and paid the premium tax in the amount of P31,485,834.51. For the period
covering August 21 to December 18, 1997, petitioner filed with the CIR its
documentary stamp tax (DST) declaration returns and paid the total amount
of P30,000,000.00.

On December 29, 1997, the CTA rendered its decision in Insular Life
Assurance Co. Ltd. v. [CIR], which held that mutual life insurance companies
are purely cooperative companies and are exempt from the payment of
premium tax and DST. This pronouncement was later affirmed by this court in
[CIR] v. Insular Life Assurance Company, Ltd. Sun Life surmised that being a
mutual life insurance company, it was likewise exempt from the payment of
premium tax and DST. Hence, on August 20, 1999, Sun Life filed with the CIR
an administrative claim for tax credit of its alleged erroneously paid premium
tax and DST for the aforestated tax periods.

For failure of the CIR to act upon the administrative claim for tax credit and
with the 2-year period to file a claim for tax credit or refund dwindling away

and about to expire, Sun Life filed with the CTA a petition for review on August
23, 1999. In its petition, it prayed for the issuance of a tax credit certificate in
the amount of P61,485,834.51 representing P31,485,834.51 of erroneously
paid premium tax for the third quarter of 1997 and P30,000[,000].00 of DST
on policies of insurance from August 21 to December 18, 1997.

CIR opposed, claiming that Sunlife does not fall within the exemption. CTA ruled in
favour of Sunlife. CA affirmed.

ISSUE: Whether Sunlife is a mutual life insurance company and thus exempt from
payment of premium tax and DST.

HELD: YES

First, it is managed by its members. Both the CA and the CTA found that the
management and affairs of respondent were conducted by its memberpolicyholders.
Second, it is operated with money collected from its members. Since respondent is
composed entirely of members who are also its policyholders, all premiums
collected obviously come only from them.

Third, it is licensed for the mutual protection of its members, not for the profit of
anyone.

A mutual life insurance corporation is a cooperative that promotes the welfare of its
own members. It does not operate for profit, but for the mutual benefit of its
member-policyholders. They receive their insurance at cost, while reasonably and
properly guarding and maintaining the stability and solvency of the company. The
economic benefits filter to the cooperative members. Either equally or
proportionally, they are distributed among members in correlation with the
resources of the association utilized.

Therefore, it is entitled to exemption from both premium taxes and documentary

stamp taxes (DST).
The Tax Code is clear. On the one hand, Section 121 of the Code exempts
cooperative companies from the 5 percent percentage tax on insurance premiums.

On the other hand, Section 199 also exempts from the DST, policies of insurance or
annuities made or granted by cooperative companies. Being a cooperative,
respondent is thus exempt from both types of taxes.

MINOR ISSUE:

Whether CDA registration is necessary. NO. Under the Tax Code although
respondent is a cooperative, registration with the Cooperative Development
Authority (CDA) is not necessary in order for it to be exempt from the payment of
both percentage taxes on insurance premiums, under Section 121; and
documentary stamp taxes on policies of insurance or annuities it grants, under
Section 199.

ETERNAL VS. PHILAMLIFE

October 30, 2011 ~ vbdiaz
ETERNAL VS. PHILAMLIFE
G.R. No. 166245

April 09, 2008

FACTS: Respondent Philamlife entered into an agreement denominated as Creditor Group Life
Policy with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under the policy,
the clients of Eternal who purchased burial lots from it on installment basis would be insured by
Philamlife. The amount of insurance coverage depended upon the existing balance of the
purchased burial lots.
The relevant provisions of the policy are:
ELIGIBILITY.
xx
EVIDENCE OF INSURABILITY.
xx
LIFE INSURANCE BENEFIT.
xx

EFFECTIVE DATE OF BENEFIT.

The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a
loan with the Assured. However, there shall be no insurance if the application of the Lot
Purchaser is not approved by the Company.

xx

Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers,
together with a copy of the application of each purchaser, and the amounts of the respective
unpaid balances of all insured lot purchasers. Eternal complied by submitting a letter dated
December 29, 1982, containing a list of insurable balances of its lot buyers for October 1982.
One of those included in the list as new business was a certain John Chuang. His balance of
payments was 100K. on August 2, 1984, Chuang died.

Eternal sent a letter dated to Philamlife, which served as an insurance claim for Chuangs death.
Attached to the claim were certain documents. In reply, Philamlife wrote Eternal a letter
requiring Eternal to submit the additional documents relative to its insurance claim for Chuangs

death. Eternal transmitted the required documents through a letter which was received by
Philamlife.
After more than a year, Philamlife had not furnished Eternal with any reply to the latters
insurance claim. This prompted Eternal to demand from Philamlife the payment of the claim for
PhP 100,000.
In response to Eternals demand, Philamlife denied Eternals insurance claim in a letter a portion
of which reads:

The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal
Gardens Memorial Park in October 1982 for the total maximum insurable amount of
P100,000.00 each. No application for Group Insurance was submitted in our office prior to
his death on August 2, 1984

Eternal filed a case with the RTC for a sum of money against Philamlife, which decided in favor
of Eternal, ordering Philamlife to pay the former 100K representing the proceeds of the policy.

CA reversed. Hence this petition.

ISSUE: WON Philamlife should pay the 100K insurance proceeds

HELD: petition granted.

YES

An examination of the provision of the POLICY under effective date of benefit, would show
ambiguity between its two sentences. The first sentence appears to state that the insurance
coverage of the clients of Eternal already became effective upon contracting a loan with Eternal
while the second sentence appears to require Philamlife to approve the insurance contract before
the same can become effective.

It must be remembered that an insurance contract is a contract of adhesion which must be

construed liberally in favor of the insured and strictly against the insurer in order to safeguard the
latters interest

On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon a
partys purchase of a memorial lot on installment from Eternal, an insurance contract covering
the lot purchaser is created and the same is effective, valid, and binding until terminated by
Philamlife by disapproving the insurance application. The second sentence of the Creditor Group
Life Policy on the Effective Date of Benefit is in the nature of a resolutory condition which
would lead to the cessation of the insurance contract. Moreover, the mere inaction of the insurer
on the insurance application must not work to prejudice the insured; it cannot be interpreted as a
termination of the insurance contract. The termination of the insurance contract by the insurer
must be explicit and unambiguous.

Eternal Gardens Memorial Park Corporation v Philamlife (Insurance)

G.R. No. 166245

April 9, 2008

ETERNAL GARDENS MEMORIAL PARK CORPORATION, petitioner, vs. THE PHILIPPINE

AMERICAN LIFE INSURANCE COMPANY, respondent.

FACTS:

Philamlife) entered into an agreement denominated as Creditor Group Life Policy No.
P-19202 with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under
the policy, the clients of Eternal who purchased burial lots from it on installment
basis would be insured by Philamlife. The amount of insurance coverage depended
upon the existing balance of the purchased burial lots.

Eternal was required under the policy to submit to Philamlife a list of all new lot
purchasers, together with a copy of the application of each purchaser, and the
amounts of the respective unpaid balances of all insured lot purchasers. In relation
to the instant petition, Eternal complied by submitting a letter dated December 29,
1982,4 containing a list of insurable balances of its lot buyers for October 1982. One
of those included in the list as "new business" was a certain John Chuang. His
balance of payments was PhP 100,000. On August 2, 1984, Chuang died.

Eternal sent a letter dated August 20, 19845 to Philamlife, which served as an
insurance claim for Chuang's death.
After more than a year, Philamlife had not furnished Eternal with any reply to the
latter's insurance claim. This prompted Eternal to demand from Philamlife the
payment of the claim for PhP 100,000 on April 25, 1986.8

In response to Eternal's demand, Philamlife denied Eternal's insurance claim in a

letter dated May 20, 1986. Consequently, Eternal filed a case before the Makati City
Regional Trial Court (RTC).

DECISION OF LOWER COURTS:

(1) RTC : in favor of Eternal. due to Philamlife's inaction from the submission of the
requirements of the group insurance on December 29, 1982 to Chuang's death on
August 2, 1984, as well as Philamlife's acceptance of the premiums during the same
period, Philamlife was deemed to have approved Chuang's application. The RTC said
that since the contract is a group life insurance, once proof of death is submitted,
payment must follow.
(2) CA : in favor of Philamlife. there being no application form, Chuang was not
covered by Philamlife's insurance.

ISSUE:
May the inaction of the insurer on the insurance application be considered as
approval of the application?

RULING:

YES

As earlier stated, Philamlife and Eternal entered into an agreement denominated as

Creditor Group Life Policy No. P-1920 dated December 10, 1980. In the policy, it is
provided that:

EFFECTIVE DATE OF BENEFIT.

The insurance of any eligible Lot Purchaser shall be effective on the date he
contracts a loan with the Assured. However, there shall be no insurance if the
application of the Lot Purchaser is not approved by the Company.

An examination of the above provision would show ambiguity between its two
sentences. The first sentence appears to state that the insurance coverage of the
clients of Eternal already became effective upon contracting a loan with Eternal
while the second sentence appears to require Philamlife to approve the insurance
contract before the same can become effective.

It must be remembered that an insurance contract is a contract of adhesion which

must be construed liberally in favor of the insured and strictly against the insurer in
order to safeguard the latter's interest.

The fact of the matter is, the letter dated December 29, 1982, which Philamlife
stamped as received, states that the insurance forms for the attached list of burial
lot buyers were attached to the letter. Such stamp of receipt has the effect of
acknowledging receipt of the letter together with the attachments. Such receipt is
an admission by Philamlife against its own interest.13 The burden of evidence has
shifted to Philamlife, which must prove that the letter did not contain Chuang's

insurance application. However, Philamlife failed to do so; thus, Philamlife is

deemed to have received Chuang's insurance application.

the seemingly conflicting provisions must be harmonized to mean that upon a

party's purchase of a memorial lot on installment from Eternal, an insurance
contract covering the lot purchaser is created and the same is effective, valid, and
binding until terminated by Philamlife by disapproving the insurance application.
The second sentence of Creditor Group Life Policy No. P-1920 on the Effective Date
of Benefit is in the nature of a resolutory condition which would lead to the
cessation of the insurance contract. Moreover, the mere inaction of the insurer on
the insurance application must not work to prejudice the insured; it cannot be
interpreted as a termination of the insurance contract. The termination of the
insurance contract by the insurer must be explicit and unambiguous.