434 SUPREME COURT REPORTS ANNOTATED

Nario vs. Philippine American Life Ins. Co.

No. L-22796. June 26, 1967.

DELFIN NARIO, and ALEJANDRA SANTOS-NARIO.

plaintiffsappellants, vs. THE PHILIPPINE AMERICAN
LIFE INSURANCE COMPANY, defendant-appellee.

Insurance; Vested interest of beneficiaries in life insurance

policy.The vested interest or right of the beneficiaries in a life
insurance policy should be measured on its full face value and not
on its cash surrender value, for, in case of death of the insured, said
beneficiaries are paid on the basis of its face value and, in case the
insured should discontinue paying premiums, the beneficiaries may
continue paying the same and they are entitled to automatic
extended term or paidup insurance options, etc. Said vested right
under the policy cannot be divisible at any given time.
Same; Parental authority; Alienation of minor child's property.
Where a person secured a life insurance policy with a face value
of P5,000, and she designated her husband and minor child as
irrevocable beneficiaries, her act of securing a loan on said policy
and the act of surrendering the policy because the loan was not
granted are acts of disposition or alienation of her minor child's
property rights and are not merely

435

VOL. 20, JUNE 26, 1967 435

Nario vs, Philippine American Life Ins. Co.

acts of management or administration. Said acts involve the

incurring or termination of contractual obligations.
Same; Judicial authorization is required for alienation or
incumbrance of minor child's property rights.Judicial
authorization is necessary for the consent to be given by the father
to a policy loan or to the surrender of a life insurance policy wherein
a minor has a vested interest worth P2,500. To obtain such judicial
authorization, the father should be appointed guardian of 'the
child's property. If the minor's property is valued at less than
P2,000, the father or mother, as legal administrator, needs judicial
authorization to alienate or encumber the same. As legal
administrator, the father or mother can perform only acts of
administration or management, as distinguished f rom
incumbrance or disposition.
Same; Provisions of New and Old Civil Codes compared. The
New Civil Code has not effected a restitutio in integrum of the
Spanish patria potestas. The revival has been in part only. The fact
that the New Civil Code did not reenact article 104 of the old Civil
Code, which prohibited the parents from alienating the real
property owned by the child without court authority, proves that the
parents have no authority to carry out acts of disposition or
alienation of the child's real or personal property without judicial
authorization.

APPEAL from a decision of the Court of First Instance of

Manila.

The facts are stated in the opinion of the court.

Ricardo T. Bancod and Severino C. Zarasate for
plaintiffs-appellants.
M. Lim, M. Y. Macias & Associates for defendant-
appellee.

REYES, J.B.L., J.:

Direct appeal, on pure question of law, from a decision of

the Court of First Instance of Manila, in its Civil Case No.
54942, dismissing plaintiffs' complaint as well as from a
later order of the same court, denying a motion to set aside
and/or reconsider said decision of dismissal.
The facts of this case may be stated briefly as follows:
Mrs. Alejandra Santos-Mario was, upon application,
issued, on June 12, 1959, by the Philippine American Life
Insurance Co., a life insurance policy (No. 503617) under a
20-year endowment plan, with a face value of P5,000.00.
She designated thereon her husband, Delfin Nario, and
their unemancipated minor son, Ernesto Nario, as her
irrevocable beneficiaries.
 436

436 SUPREME COURT REPORTS ANNOTATED

Nario vs. Philippine American Life Ins. Co.

About the middle of June, 1963, Mrs. Nario applied for a

loan on the above stated policy with the Insurance
Company, which loan she, as policy-holder, has been
entitled to avail of under one of the provisions of said policy
after the same has been in force for three (3) years, for the
purpose of using the proceeds thereof for the school
expenses of her minor son, Ernesto Nario. Said application
bore the written signature and consent of Delfin Nario in
two capacities: first, as one of the irrevocable beneficiaries
of the policy; and the other, as the father-guardian of said
minor son and irrevocable beneficiary, Ernesto Nario, and
as the legal administrator of the minor's properties,
pursuant to Article 320 of the Civil Code of the Philippines.
The Insurance Company denied said application, manif
esting to the policy holder that the written consent for the
minor son must not only be given by his father as legal
guardian but it must also be authorized by the court in a
competent guardianship proceeding.
After the denial of said policy loan application, Mrs.
Nario signified her decision to surrender her policy to the
Insurance Company, which she was also entitled to avail of
under one of the provisions of the same policy, and
demanded its cash value which then amounted to P520.00.
The Insurance Company also denied the surrender of
the policy, on the same ground as that given in
disapproving the policy loan application; hence. on
September 10, 1963, Mrs. Alejandra Santos-Nario and her
husband, Delfin Nario, brought suit against the Philippine
American Life Insurance Co. in the above mentioned court
of first instance, seeking to compel the latter (defendant) to
grant their policy loan application and/or to accept the
surrender of said policy in exchange f or its cash value.
Defendant Insurance Company answered the complaint,
virtually admitting its material allegations, but it set up
the affirmative defense that inasmuch as the policy loan
application and the surrender of the policy involved acts of
disposition and alienation of the property rights of the
minor, said acts are not within the powers of the legal
administrator, under article 320 in relation to article 326
 437

VOL. 20, JUNE 26, 1967 437

Nario vs. Philippine American Life Ins. Co.

of the Civil Code; hence, mere written consent given by the

father-guardian, for and in behalf of the minor son, without
any court authority therefor, was not a sufficient
compliance of the law, and it (defendant Insurance
Company) was, therefore, justified in refusing to grant and
in disapproving the proposed transactions in question.
There having been no substantial disagreement or
dispute as to any material fact, the parties, upon joint
motion which the lower court granted, dispensed with the
presentation of evidence and submitted their respective
memoranda, after which the case was considered submitted
for decision.
The lower court found and opined that since the parties
expressly stipulated in the endorsement attached to the
policy and which formed part thereof that

"It is hereby understood and agreed that, notwithstanding the

provisions of this Policy to the contrary, inasmuch as the
designation of the beneficiaries have been made by the Insured
without reserving the right to change said beneficiaries, the Insured
may not designate a new beneficiary or assign, release or surrender
this Policy to the Company and exercise any and all other rights
and privileges hereunder or agree with the Company to any change
in or amendment to this Policy, without the consent of the
beneficiaries originally designated";

that under the above quoted provision, the minor son, as

one of the designated irrevocable beneficiaries, "acquired a
vested right to all benefits accruing to the policy, including
that of obtaining a policy loan to the extent stated in the
schedule of values attached to the policy (Gercio vs. Sun
Life Assurance of Canada, 48 Phil. 53, 58)"; that the
proposed transactions in question (policy loan and
surrender of policy) involved acts of disposition or
alienation of the minor's properties for which the consent
given by the father-guardian, for and in behalf of the minor
son, must be with the requisite court authority (U.S.V.A.
vs. Bustos, 92 Phil. 327; Visaya vs. Suguitan, G.R. No. L-
8300, November 18, 1955; 99 Phil. 1004 [unrep.]; and in the
case at bar, such consent was given by the father-guardian
without any judicial authority; said court, agreeing with
defendant's contention, sustained defendant's affirmative
defense,

438

438 SUPREME COURT REPORTS ANNOTATED

Nario vs. Philippine American Life Ins. Co.

and rendered, on January 28, 1964, its decision

dismissingplaintiffs' complaint.
Unable to secure reconsideration of the trial Court's ruling,
petitioner appealed directly to this Court, contending that
the minor's interest amounted to only' one-half of the
policy's cash surrender value of P520.00; that under Rule
96, Section 2 of the Revised Rules of Court, payment of the
ward's debts is within the powers of the guardian, where no
realty is involved; hence, there is no reason why the father
may not validly agree to the proposed transaction on
.behalf of the minor without need of court authority.
The appeal is unmeritorious. We agree with the lower
court that the vested interest or right of the beneficiaries in
the policy should be measured on its full face value and not
on its cash surrender value, for in case of death of the
insured, said beneficiaries are paid on the basis of its face
value and in case the insured should discontinue paying
premiums, the beneficiaries may continue paying it and are
entitled to automatic extended term or paid-up insurance
options, etc. and that said vested right under the policy
cannot be divisible at any given time. We likewise agree
with the conclusion of the lower court that the proposed
transactions in question (policy loan and surrender of
policy) constitute acts of disposition or alienation of
property rights and not merely of management or
administration because they involve the incurring or
termination of contractual obligations.
As above noted, the full face value of the policy is
P5,000.00 and the minor's vested interest therein, as one of
the two (2) irrevocable beneficiaries, consists of onehalf
(1/2) of said amount or P2,500.00.
Article 320 of the Civil Code of the Philippines provides

"The father, or in his absence the mother, is the legal administrator

of the property pertaining to the child under parental authority. If
the property is worth more than two thousand pesos, the father or
mother shall give a bond subject to the approval of the Court of
First Instance."

and article 326 of the same Code reads

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VOL. 20, JUNE 26, 1967 439

Nario vs. Philippine American Life Ins. Co.

"When the property of the child is worth more than two thousand
pesos, the father or mother shall be considered a guardian of the
child's property, subject to the duties and obligations of guardians
under the Rules of Court."

The above quoted provisions of the Civil Code have already

been implemented and clarified in our Revised Rules of
Court which provides

"SEC. 7. Parents as guardians.When the property of the child

under parental authority is worth two thousand pesos or less, the
father or the mother, without the necessity of court appointment,
shall be his legal guardian. When the property of the child is worth
more than two thousand pesos, the father or the mother shall be
considered guardian of the child's property, with the duties and
obligations of guardians under these rules, and shall file the
petition required by Section 2 hereof. For good reasons the court
may, however, appoint another suitable person." (Rule 93).

It appearing that the minor beneficiary's vested interest or

right on the policy exceeds two thousand pesos
(P2,000.-00); that plaintiffs did not file any guardianship
bond to be approved by the court; and as later implemented
in the abovequoted Section 7, Rule 93 of the Revised Rules
of Court, plaintiffs should have, but, had not, filed a formal
application or petition for guardianship, plaintiffs-parents
cannot possibly exercise the powers vested on them, as
legal administrators of their child's property, under articles
820 and 326 of the Civil Code. As there was no such
petition and bond, the consent given by the father-
guardian, for and in behalf of the minor son, without prior
court authorization, to the policy loan application and the
surrender of said policy, was insufficient and ineffective,
and defendant-appellee was justified in disapproving the
proposed transactions in question.
 The American cases cited by appellants are not
applicable to the case at bar f or lack of analogy. In those
cases, there were pending guardianship proceedings and
the guardians therein were covered by bonds to protect the
wards' interests, which circumstances are wanting in this
case.
The result would be the same even if we regarded the
interest of the ward to be worth less than P2,000.00. While
the father or mother would in such event be exempt from
the duty of filing a bond, and securing judicial
appointment, still the parent's authority over the estate of
the

440

440 SUPREME COURT REPORTS ANNOTATED

Nario vs. Philippine American Life Ins. Co.

ward as a legal-guardian would not extend to acts of

encumbrance or disposition, as distinguished from acts of
management or administration. The distinction between
one and the other kind of power is too basic in our law to be
ignored. Thus, under Article 1877 of the Civil Code of the
Philippines, an agency in general terms does not include
power to encumber or dispose of the property of the
principal; and the Code explicitly requires a special power
or authority for the agent "to loan or borrow money, unless
the latter act be urgent or indispensable for the
preservation of the thing under administration" (Art. 1878,
no. 7). Similarly, special powers are required to effect
novations, to waive any obligation gratuitously or obligate
the principal as a guarantor or surety (Do., nos. 2, 4 and
11). By analogy, since the law merely constitutes the parent
as legal administrator of the child's property (which is a
general power), the parent requires special authority for
the acts above specified, and this authority can be given
only by a court. This restricted interpretation of the
parent's authority becomes all the more necessary where as
in the case before us, there is no bond to guarantee the
ward against eventual losses.
Appellants seek to bolster their petition by invoking the
parental power (patria potestas) under the Civil Code of
1889, which they claim to have been revived by the Civil
Code of the Philippines (Rep. Act 386). The appeal profits
them nothing, For the new Civil Code has not effected a
 restitutio in integrum of the Spanish patria potestas; the
revival has been only in part. And, significantly, the Civil
Code now in force did not reenact Article 164 of the Civil
Code of 1889, that prohibited the alienation by the parents
of the real property owned by the child without court
authority and led the commentators and interpreters of
said Code to infer that the parents could by themselves
alienate the child's movable property. The omission of any
equivalent precept in the Civil Code now in force proves the
absence of any authority in the parents to carry out now
acts of disposition or alienation of the child's goods without
court approval, as contended by the appellee and the court
below.

441

VOL. 20, JUNE 26, 1967 441

Rheem of the Philippines vs. Ferrer

Wherefore, the decision appealed from is affirmed. Costs

against appellants Nario. So ordered.

Concepcion, C.J., Dizon, Makalintal, Bengzon, J.P.,

Zaldivar, Sanchez and Castro, JJ., concur,
Regala, J., did not take part.

Decision affirmed.

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