Insurance Felipe Vs MGM Great Pacific V CA
Insurance Felipe Vs MGM Great Pacific V CA
Insurance Felipe Vs MGM Great Pacific V CA
ART. 1504. Unless otherwise agreed, the goods It must be stressed that the insurance in this case is not
remain at the seller's risk until the ownership therein is for loss of goods by fire but for petitioner's accounts with
transferred to the buyer, but when the ownership IMC and LSPI that remained unpaid 45 days after the fire.
therein is transferred to the buyer the goods are at the Accordingly, petitioner's obligation is for the payment of
buyer's risk whether actual delivery has been made or money.
not, except that:
Whether fire is a fortuitous event or petitioner was
(1) Where delivery of the goods has been made to the negligent are matters immaterial to this case. What is
buyer or to a bailee for the buyer, in pursuance of the relevant here is whether it has been established that
contract and the ownership in the goods has been petitioner has outstanding accounts with IMC and LSPI.
retained by the seller merely to secure performance by
the buyer of his obligations under the contract, the As a rule, the obligor should be held exempt from liability
goods are at the buyer's risk from the time of such when the loss occurs thru a fortuitous event. However,
delivery; (Emphasis supplied) this is only limited if the obligation consists in the delivery
of a determinate thing and there is no stipulation holding
Thus, when the seller retains ownership only to insure that him liable even in case of fortuitous event. On the other
the buyer will pay its debt, the risk of loss is borne by hand, Article 1263 of the Civil Code states that in an
the buyer.27 Accordingly, petitioner bears the risk of loss obligation to deliver a generic thing, the loss or destruction
of the goods delivered. of anything of the same kind does not extinguish the
obligation (Genus nunquan perit).
3) IMC and LSPI did not lose complete interest over the
goods. They have an insurable interest until full payment 5) The right of subrogation accrues simply upon payment
of the value of the delivered goods. Unlike the civil law by the insurance company of the insurance claim.
concept of res perit domino, where ownership is the basis
for consideration of who bears the risk of loss, in property
insurance, one's interest is not determined by concept of
Art. 2207. If the plaintiff's property has been insured, Odessa, Karl Brian, and Trisha Angelie were denied
and he has received indemnity from the insurance because Loreto was ineligible for insurance due to a
company for the injury or loss arising out of the wrong misrepresentation in his application form that he was born
or breach of contract complained of, the insurance on December 10, 1936 and, thus, not more than 65 years
company shall be subrogated to the rights of the old when he signed it in September 2001; that the case
insured against the wrongdoer or the person who has was premature, there being no claim filed by the
violated the contract. legitimate family of Loreto; and that the law on succession
does not apply where the designation of insurance
As to IMC, there was a valid subrogation because of the beneficiaries is clear.
subrogation receipt, which by itself, is sufficient to ISSUE: Whether the petitioners are entitled to the
establish not only the relationship of respondent as insurance proceeds.
insurer and IMC as the insured, but also the amount paid
to settle the insurance claim RULING: NO. In this case, it is clear from the petition filed
before the trial court that, although petitioners are the
As to LSPI, respondent failed to present sufficient legitimate heirs of Loreto, they were not named as
evidence to prove its cause of action. There is no proof of beneficiaries in the insurance policies issued by Insular
full settlement of the insurance claim of LSPI; no and Grepalife. The basis of petitioners’ claim is that Eva,
subrogation receipt was offered in evidence. Thus, there being a concubine of Loreto and a suspect in his murder,
is no evidence that respondent has been subrogated to is disqualified from being designated as beneficiary of the
any right which LSPI may have against petitioner. Failure insurance policies, and that Eva’s children with Loreto,
to substantiate the claim of subrogation is fatal to being illegitimate children, are entitled to a lesser share of
petitioner's case for recovery of the amount the proceeds of the policies. They also argued that
of P535,613.00. pursuant to Section 12 of the Insurance Code, Eva’s
share in the proceeds should be forfeited in their favor, the
former having brought about the death of Loreto. Thus,
they prayed that the share of Eva and portions of the
HEIRS OF LORETO C. MARAMAG v EVA VERNA DE shares of Loreto’s illegitimate children should be awarded
GUZMAN MARAMAG to them, being the legitimate heirs of Loreto entitled to
their respective legitimes.
FACTS: The case stems from a petition filed against
respondents with the RTC for revocation and/or reduction It is evident from the face of the complaint that petitioners
of insurance proceeds for being void and/or inofficious. are not entitled to a favorable judgment in light of Article
2011 of the Civil Code which expressly provides that
The petition alleged that: (1) petitioners were the insurance contracts shall be governed by special laws,
legitimate wife and children of Loreto Maramag, while i.e., the Insurance Code. Section 53 of the Insurance
respondents were Loreto’s illegitimate family; (2) Eva de Code states— SECTION 53. The insurance proceeds
Guzman Maramag was a concubine of Loreto and a shall be applied exclusively to the proper interest of the
suspect in the killing of the latter, thus, she is disqualified person in whose name or for whose benefit it is made
to receive any proceeds from his insurance policies from unless otherwise specified in the policy.
Insular Life and Great Pacific Life Assurance Corporation
(Grepalife); (3) the illegitimate children of Loreto— Pursuant thereto, it is obvious that the only persons
Odessa, Karl Brian, and Trisha Angelie—were entitled entitled to claim the insurance proceeds are either the
only to one-half of the legitime of the legitimate children, insured, if still alive; or the beneficiary, if the insured is
thus, the proceeds released to Odessa and those to be already deceased, upon the maturation of the policy. The
released to Karl Brian and Trisha Angelie were inofficious exception to this rule is a situation where the insurance
and should be reduced; and (4) petitioners could not be contract was intended to benefit third persons who are not
deprived of their legitimes, which should be satisfied first. parties to the same in the form of favorable stipulations or
indemnity. In such a case, third parties may directly sue
In answer, Insular admitted that Loreto misrepresented and claim from the insurer.
Eva as his legitimate wife and Odessa, Karl Brian, and
Trisha Angelie as his legitimate children, and that they Petitioners are third parties to the insurance contracts with
filed their claims for the insurance proceeds of the Insular and Grepalife and, thus, are not entitled to the
insurance policies; that when it ascertained that Eva was proceeds thereof. Accordingly, respondents Insular and
not the legal wife of Loreto, it disqualified her as a Grepalife have no legal obligation to turn over the
beneficiary and divided the proceeds among Odessa, Karl insurance proceeds to petitioners. The revocation of Eva
Brian, and Trisha Angelie, as the remaining designated as a beneficiary in one policy and her disqualification as
beneficiaries. Insular further claimed that it was bound to such in another are of no moment considering that the
honor the insurance policies designating the children of designation of the illegitimate children as beneficiaries in
Loreto with Eva as beneficiaries pursuant to Section 53 of Loreto’s insurance policies remains valid. Because no
the Insurance Code. legal proscription exists in naming as beneficiaries the
children of illicit relationships by the insured, the shares of
In its own answer with compulsory counterclaim, Eva in the insurance proceeds, whether forfeited by the
Grepalife alleged that Eva was not designated as an court in view of the prohibition on donations under Article
insurance policy beneficiary; that the claims filed by 739 of the Civil Code or by the insurers themselves for
reasons based on the insurance contracts, must be RULING: NO. Eulogio was not able to reinstate the
awarded to the said illegitimate children, the designated lapsed insurance policy hence Violeta my dear is not
beneficiaries, to the exclusion of petitioners. It is only in entitled to the insurance proceeds.
cases where the insured has not designated any
beneficiary, or when the designated beneficiary is That Eulogio’s insurance policy had already lapsed is a
disqualified by law to receive the proceeds, that the fact beyond dispute. Both the Policy Contract and the
insurance policy proceeds shall redound to the benefit of Application for Reinstatement provide for specific
the estate of the insured. (Only then will the laws on conditions for the reinstatement of a lapsed policy:
succession apply) You may reinstate this policy at any time within
three years after it lapsed if the following
conditions are met: (1) the policy has not been
VIOLETA VS INSULAR LIFE surrendered for its cash value or the period of
FACTS: Violeta is the widow of the deceased Eulogio C. extension as a term insurance has not expired;
Lalican (Eulogio). During his lifetime, Eulogio applied for (2) evidence of insurability satisfactory to Insular
an insurance policy with Insular Life through its agent Life is furnished; (3) overdue premiums are paid
Josephine Malaluan (Malaluan). The value of the policy with compound interest at a rate not exceeding
amounted to P1.5M. Violeta was named as the primary that which would have been applicable to said
beneficiary. premium and indebtedness in the policy years
prior to reinstatement; and (4) indebtedness
Under the terms of the policy, Eulogio was to pay the which existed at the time of lapsation is paid or
premiums on a quarterly basis in the amount of P8K renewed.
payable every 24 of April, July, October and January until
the end of the 20-year period. There was also an additional condition, to wit: I/We agree
that said Policy shall not be considered reinstated until
According to the Policy Contract, there was a grace period this application is approved by the Company during
of 31 days for the payment of each premium subsequent my/our lifetime and good health and until all other
to the first. If any premium was not paid on or before the Company requirements for the reinstatement of said
due date, the policy would be in default, and if the Policy are fully satisfied.
premium remained unpaid until the end of the grace
period, the policy would automatically lapse and become In the instant case, Eulogios death rendered impossible
void. full compliance with the conditions for reinstatement.
True, Eulogio, before his death, managed to file his
Eulogio paid the premiums due on 24 July and October Application for Reinstatement and deposit the amount for
1997. However, he failed to pay the premium due on 24 payment of his overdue premiums and interests thereon
January 1998, even after the lapse of the grace period of with Malaluan; but the policy could only be considered
31 days. The policy therefore, lapsed and became void. reinstated after the Application for Reinstatement had
been processed and approved by Insular
Eulogio applied for the reinstatement of the policy. A while Life during Eulogios lifetime and good health.
later, on the same day, Eulogio died of cardio-respiratory
arrest secondary to electrocution. The stipulation in a life insurance policy giving the insured
the privilege to reinstate it upon written application does
Without knowing of Eulogios death, Malaluan forwarded not give the insured absolute right to such
to the Insular Life Regional Office Eulogio’s application for reinstatement by the mere filing of an application.
reinstatement. However, Insular Life no longer acted
upon such application as it was informed that Eulogio had It does not matter that when he died, Eulogios Application
already passed away. for Reinstatement and deposits for the overdue premiums
and interests were already with Malaluan as she did not
Violeta filed with Insular Life a claim for payment of the full have the authority to approve Eulogios Application for
proceeds of the insurance policy. Insular Life informed Reinstatement.
Violeta that her claim could not be granted since, at the
time of Eulogios death, the policy had already lapsed, and The Policy remained lapsed and void, not having been
Eulogio failed to reinstate the same. According to the reinstated in accordance with the Policy Contract and
Application for Reinstatement, the policy would only Application for Reinstatement before Eulogios
be considered reinstated upon approval of the death. Violeta, therefore, cannot claim any death benefits
application by Insular Life during the applicant’s from Insular Life but she is entitled to receive the full
lifetime and good health. refund of the payments made by Eulogio thereon.
Violeta filed with the RTC a Complaint for Death Claim ONG LIM SING, JR. v FEB LEASING AND FINANCE
Benefit. RTC thereafter issued a decision in favor of CORPORATION
Insular Life. She then directly appealed to the SC. (G.R. No. 168115, June 8, 2007)
ISSUE: WON Eulogio was able to reinstate the lapsed In property insurance against loss or other accidental
insurance policy on his life before his death causes, the assured must have an insurable interest. It
has also been held that the test of insurable interest in
property is whether the assured has a right, title or interest and expense of the lessee against loss, damage, or
therein that he will be benefited by its preservation and destruction from fire, theft, accident, or other insurable
continued existence or suffer a direct pecuniary loss from risk for the full term of the lease, is a binding and valid
its destruction or injury by the peril insured against. stipulation.
Petitioner, as a lessee, has an insurable
FACTS: interest in the equipment and motor vehicles leased.
Section 17 of the Insurance Code provides that the
On March 9, 1995, FEB Leasing and Finance measure of an insurable interest in property is the extent
Corporation entered into a lease of equipment and motor to which the insured might be damnified by loss or injury
vehicles with JVL Food Products. On the same date, thereof.
Vicente Ong Lim Sing, Jr. executed an Individual It cannot be denied that JVL will be directly
Guaranty Agreement with FEB to guarantee the prompt damnified in case of loss, damage, or destruction of any
and faithful performance of the terms and conditions of of the properties leased.They are not the owners but
the aforesaid lease agreement. surely, the preservation of the thing/property is in their
Corresponding Lease Schedules with Delivery best interest. Thus, asking petitioner to insure the said
and Acceptance Certificates over the equipment and leased equipment does not change the fact that they are
motor vehicles formed part of the agreement. Under the mere lesses of the equipment and not owners thereof.
contract, JVL was obliged to pay FEB an aggregate gross SC affirmed the CA’s ruling and held that the
monthly rental of One Hundred Seventy Thousand Four contract is not a contract of sale but a financial lease.
Hundred Ninety-Four Pesos (P170,494.00).
JVL defaulted in the payment of the monthly
rentals. As of July 31, 2000, the amount in arrears, AFP GENERAL INSURANCE CORPORATION vs
including the penalty charges and insurance premiums, MOLINA
amounted to Three Million Four Hundred Fourteen FACTS: The private respondents are the complainants in
Thousand Four Hundred Sixty-Eight and 75/100 Pesos a case for illegal dismissal, filed against Radon Security &
(P3,414,468.75). On August 23, 2000, FEB sent a letter Allied Services Agency and/or Raquel Aquias and Ever
to JVL demanding payment of the said amount. However, Emporium, Inc. The Labor Arbiter ruled that the private
JVL failed to pay. respondents were illegally dismissed and ordered Radon
On December 6, 2000, FEB filed a Complaint with Security to pay them separation pay, backwages, and other
the Regional Trial Court of Manila for sum of money, monetary claims.
damages, and replevin against JVL, Lim, and John Doe.
In an Amended Answer, JVL and Lim admitted Radon Security appealed the Labor Arbiters decision to
the existence of the lease agreement but asserted that it public respondent NLRC and posted a supersedeas bond,
is in reality a sale of equipment on instalment basis, with issued by herein petitioner AFPGIC as surety. (basta ang
FEB acting as the financier. On November 22, 2002, the sa labor ni na to perfect an appeal, file ug bond)
trial court ruled in favor of JVL and Lim and stressed the
contradictory terms found in the lease agreement. The
trial court stated, among others, that if JVL and Lim The NLRC affirmed the decision of the Labor Arbiter and
(then defendants) were to be regarded as only a ordered Radon Security to pay said awards, with Radon
lessee, logically the lessor who asserts ownership Security and Ever Emporium, Inc. adjudged jointly and
will be the one directly benefited or injured and severally liable.
therefore the lessee is not supposed to be the
assured as he has no insurable After their MR being denied by NLRC and the SC
interest. dismissed their petition for certiorari, the Decision of the
On March 15, 2005, the Court of Appeals NLRC became final and executory. Subsequently, the
reversed the RTC decision and issued its Decision Labor Arbiter issued a Writ of Execution. By virtue of the
declaring the transaction between the parties as a writ of execution, the NLRC Sheriff issued a Notice of
financial lease agreement. Garnishment against the supersedeas bond.
Hence, Lim filed the present Petition for
Review on Certiorari.
On April 14, 1999, AFPGIC (petitioner) entered the fray
by filing before the Labor Arbiter an Omnibus Motion to
ISSUE: Quash Notice/Writ of Garnishment and to Discharge
W/N petitioner has an insurable interest in the equipment AFPGICs Appeal Bond (ang kadtong supersedeas bond)
and motor vehicles leased? (even if they are mere on the ground that said bond has been cancelled and thus
lessees, and not necessarily the owner of the equipment non-existent in view of the failure of Radon Security to pay
leased) the yearly premiums.
RULING:
The petitioner contends that under Section 64 of the
YES.
Insurance Code, which is deemed written into every
The stipulation in Section 14 of the leased
insurance contract or contract of surety, an insurer may
contract, that the equipment shall be insured at the cost
cancel a policy upon non-payment of the premium. Said
cancellation is binding upon the beneficiary as the right of remain valid and in force until finality and execution of
a beneficiary is subordinate to that of the insured. judgment, with the resultant discharge of the surety
Petitioner points out that in South Sea Surety & Insurance company only thereafter, if we are to give teeth to the
Co., Inc. v. CA, this Court held that payment of premium labor protection clause of the Constitution. To construe
is a condition precedent to and essential for the the provision any other way would open the
efficaciousness of a contract of insurance. floodgates to unscrupulous and heartless employers
who would simply forego paying premiums on their
surety bond in order to evade payment of the
The private respondents, on the other hand, argue that as monetary judgment.
a supersedeas bond was posted for the benefit of a third
person to guarantee that the money judgment will be
satisfied in case it is affirmed on appeal, the third person who Moreover, the Insurance Code supports the
stands to benefit from said bond is entitled to notice of its private respondents arguments. The petitioners reliance
cancellation for any reason. Likewise, the NLRC should on Sections 64 and 77 of the Insurance Code is
have been notified to enable it to take the proper action misplaced. The said provisions refer to insurance
under the circumstances. The respondents submit that from contracts in general. The instant case pertains to a surety
its very nature, a supersedeas bond remains effective and bond; thus, the applicable provision of the Insurance
the surety liable thereon until formally discharged from said Code is Section 177, which specifically governs
liability. To hold otherwise would enable a losing party to suretyship. It provides that a surety bond, once accepted
frustrate a money judgment by the simple expedient of by the obligee becomes valid and enforceable,
ceasing to pay premiums. irrespective of whether or not the premium has been paid
by the obligor. The private respondents, the obligees
here, accepted the bond posted by Radon Security and
ISSUE: WoN the subject appeal bond was already
issued by the petitioner. Hence, the bond is both valid and
cancelled for non-payment of premium and thus it could enforceable. A verbis legis non est recedendum (from the
not be subject of execution or garnishment. language of the law there must be no departure).
RULING: NO.
When petitioner surety company cancelled the
surety bond because Radon Security failed to pay the
The controversy before the Court involves more than just premiums, it gave due notice to the latter but not to the
the mere application of the provisions of the Insurance NLRC. By its failure to give notice to the NLRC, AFPGIC
Code to the factual circumstances. This instant case, after failed to acknowledge that the NLRC had jurisdiction not
all, traces its roots to a labor controversy involving illegally only over the appealed case, but also over the appeal
dismissed workers. It thus entails the application of labor bond. This oversight amounts to disrespect and contempt
laws and regulations. Recall that the heart of the dispute for a quasi-judicial agency tasked by law with resolving
is not an ordinary contract of property or life insurance, labor disputes. Until the surety is formally discharged,
but an appeal bond required by both substantive and it remains subject to the jurisdiction of the NLRC.
adjective law in appeals in labor disputes, specifically
Article 223 of the Labor Code, as amended by Republic
Our ruling, anchored on concern for the
Act No. 6715, and Rule VI, Section 6 of the Revised
employee, however, does not in any way seek to derogate
NLRC Rules of Procedure. Said provisions mandate that
the rights and interests of the petitioner as against Radon
in labor cases where the judgment appealed from
Security. Under Section 176 of the Insurance Code, the
involves a monetary award, the appeal may be perfected liability of petitioner and Radon Security is solidary in
only upon the posting of a cash or surety bond issued by nature. Since the law provides that the liability of the
a reputable bonding company accredited by the
surety company and the obligor or principal is joint and
NLRC. The perfection of an appeal by an employer only
several, then either or both of them may be proceeded
upon the posting of a cash or surety bond clearly and
against for the money award.
categorically shows the intent of the lawmakers to make
the posting of a cash or surety bond by the employer to
be the exclusive means by which an employers appeal Petitioner may then proceed to collect the amount
may be perfected. Additionally, the filing of a cash or it paid on the bond, plus the premiums due and
surety bond is a jurisdictional requirement in an appeal demandable, plus any interest owing from Radon
involving a money judgment to the NLRC. In addition, Security. This is pursuant to the principle of subrogation
Rule VI, Section 6 of the Revised NLRC Rules of enunciated in Article 2067 of the Civil Code which we
Procedure is a contemporaneous construction of Article apply to the suretyship agreement between AFPGIC and
223 by the NLRC. As an interpretation of a law by the Radon Security, in accordance with Section 178 of the
implementing administrative agency, it is accorded great Insurance Code.
respect by this Court. Note that Rule VI, Section 6
categorically states that the cash or surety bond posted in
appeals involving monetary awards in labor disputes shall Makati Tuscany Condominium Corp. vs. CA
be in effect until final disposition of the case. This could
only be construed to mean that the surety bond shall
While the import of Section 77 is that prepayment of It argues that where the premiums is not actually paid in
premiums is strictly required as a condition to the validity full, the policy would only be effective if there is an
of the contract, we are not prepared to rule that the acknowledgment in the policy of the receipt of premium
request to make installment payments duly approved by pursuant to Sec. 78 of the Insurance Code. The absence
the insurer, would prevent the entire contract of insurance of an express acknowledgment in the policies of such
from going into effect despite payment and acceptance of receipt of the corresponding premium payments, and
the initial premium or first installment. petitioner's failure to pay said premiums on or before the
effective dates of said policies rendered them invalid.
Section 78 of the Insurance Code in effect allows waiver Petitioner thus concludes that there cannot be a perfected
by the insurer of the condition of prepayment by contract of insurance upon mere partial payment of the
making an acknowledgment in the insurance policy premiums because under Sec. 77 of the Insurance Code,
of receipt of premium as conclusive evidence of no contract of insurance is valid and binding unless the
payment so far as to make the policy binding despite premium thereof has been paid, notwithstanding any
the fact that premium is actually unpaid. Section 77 agreement to the contrary. As a consequence, petitioner
merely precludes the parties from stipulating that the seeks a refund of all premium payments made on the
policy is valid even if premiums are not paid, but does not alleged invalid insurance policies.
expressly prohibit an agreement granting credit
extension. So is an understanding to allow insured to pay Issue:
premiums in installments not so proscribed.” Whether payment by installment of the premiums due on
an insurance policy invalidates the contract of insurance,
Facts: in view of Sec. 77 of P.D. 612
American International Underwriters issued a policy in
favor of Makati Tuscany Condominium Corporation with a
total premium of P466,103.05. The company issued a Ruling:
replacement policy. Premium was again paid. In 1984, the NO. The subject policies are valid even if the premiums
policy was again renewed and private respondent issued were paid on installments. The records clearly show that
to petitioner another policy. The petitioner paid 152,000 petitioner and private respondent intended subject
pesos then refused to furnish the balance. The company insurance policies to be binding and effective
filed an action to recover the unpaid balance of notwithstanding the staggered payment of the premiums.
P314,103.05. The initial insurance contract entered into in 1982 was
renewed in 1983, then in 1984. In those three (3) years,
Makati Tuscany explained that it discontinued the the insurer accepted all the installment payments. Such
payment of premiums because the policy did not contain acceptance of payments speaks loudly of the insurer's
a credit clause in its favor and that the acceptance of intention to honor the policies it issued to petitioner.
premiums didn’t waive any of the company rights to deny
liability on any claim under the policy arising before such Sec. 77. An insurer is entitled to the payment of the
payments or after the expiration of the credit clause of the premium as soon as the thing is exposed to the peril
policy and prior to premium payment, loss wasn’t covered. insured against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an
It further claimed that the policy was never binding and insurance company is valid and binding unless and until
valid, and no risk attached to the policy. It then pleaded a the premium thereof has been paid, except in the case of
counterclaim for P152,000.00 for the premiums already a life or an industrial life policy whenever the grace period
paid for 1984-85, and sought the refund of P924,206.10 provision applies.
representing the premium payments for
1982-85. Quoting the CA decision: “While the import of Section
77 is that prepayment of premiums is strictly required as
Trial court: Dismissed the complaint and counterclaim a condition to the validity of the contract, we are not
owing to the argument that payment of the premiums of prepared to rule that the request to make installment
the policies were made during the lifetime or term of said payments duly approved by the insurer, would prevent the
policies, so risk attached under the policies. entire contract of insurance from going into effect despite
payment and acceptance of the initial premium or first
Court of Appeals: Ordered petitioner to pay the balance installment. Section 78 of the Insurance Code in effect
of the premiums owing to the reason that it was part of an allows waiver by the insurer of the condition of
indivisible obligation. prepayment by making an acknowledgment in the
insurance policy of receipt of premium as conclusive
Petitioner now asserts that its payment by installment of evidence of payment so far as to make the policy
the premiums for the insurance policies invalidated them binding despite the fact that premium is actually
because of the provisions of Sec. 77 of the Insurance unpaid. Section 77 merely precludes the parties from
Code disclaiming liability for loss for occurring before stipulating that the policy is valid even if premiums are not
payment of premiums. paid, but does not expressly prohibit an agreement
granting credit extension. So is an understanding to allow
insured to pay premiums in installments not so the time the claims were filed. Most of the premiums have
proscribed.” been paid for more than 60 days after the issuance. Also,
no timely notice of non-renewal was made by UCPB.
It appearing from the peculiar circumstances that the
parties actually intended to make three (3) insurance
contracts valid, effective and binding, petitioner may not The Supreme Court ruled against UCPB in the first case
be allowed to renege on its obligation to pay the balance on the issue of whether the fire insurance policies issued
of the premium after the expiration of the whole term. by petitioner to the respondent covering the period from
Moreover, as correctly observed by the appellate court, May 22, 1991 to May 22, 1992 had been extended or
where the risk is entire and the contract is indivisible, the renewed by an implied credit arrangement though actual
insured is not entitled to a refund of the premiums paid if payment of premium was tendered on a later date and
the insurer was exposed to the risk insured for any period, after the occurrence of the risk insured against.
however brief or momentary.
UCPB filed a motion for reconsideration.
UCPB GENERAL INSURANCE CO., Upon a meticulous review of the records and reevaluation
INC. vs. MASAGANA TELAMART, INC. of the issues raised in the motion for reconsideration and
the pleadings filed thereafter by the parties, SC resolved
FACTS: to grant the motion for reconsideration. The following
Respondent obtained from Petitioner five (5) insurance facts, as found by the trial court and the Court of Appeals,
policies on its properties in Pasay City and Manila. The are indeed duly established:
policies were effective from May 22, 1991 to May 22, 1. For years, Petitioner had been issuing fire policies to
1992. On June 13, 1992, Masagana’s properties were the Respondent, and these policies were annually
razed by fire. On July 13, 1992, Masagana tendered five renewed.
checks for P225,753.45 as renewal premium payments.
A receipt was issued. On July 14, 1992, Masagana made 2. Petitioner had been granting Respondent a 60- to 90-
its formal demand for indemnification for the burned day credit term within which to pay the premiums on the
insured properties. On thesame day, UCPB returned the renewed policies.
five (5) manager's checks stating in its letter) that itwas
rejecting Masagana's claim on the following grounds: 3. There was no valid notice of non-renewal of the policies
in question, as there is no proof at all that the notice sent
"a) Said policies expired last May 22, 1992 and were by ordinary mail was received by Respondent, and the
not renewed for another term; copy thereof allegedly sent to Zuellig was ever transmitted
to Respondent.
b ) UCPB had put Masagana and its alleged broker
on notice of non-renewal earlier; 4. The premiums for the policies in question in the
aggregate amount of P225,753.95 were paid by
c) The properties covered by the said policies were Respondent within the 60- to 90-day credit term and were
burned in a fire that took place last June 13, 1992, or duly accepted and received by Petitioner's cashier.
before tender of premium payment."
CA disagreed with UCPB’s stand that Masagana’s tender
of payment of the premiums on 13 July 1992 did not result The Supreme Court affirmed that there was no valid
in the renewal of the policies, having been made beyond notice of non-renewal of the policies in question, as there
the effective date of renewal as provided under Policy is no proof at all that the notice sent by ordinary mail was
Condition No. 26: received by Masagana. Also, the premiums were paid
Renewal Clause. — Unless the company within the grace period.
at least 45 days in advance of the end of
the policy period mails or delivers to the
assured at the address shown in the
ISSUE
policy notice of its intention not to renew
Whether Section 77 of the Insurance Code of 1978 (P.D.
the policy or to condition its renewal upon
No. 1460) must be strictlyapplied to Petitioner's
reduction of limits or elimination of
advantage despite its practice of granting a 60 - to
coverages, the assured shall be entitled
90-day creditterm for the payment of premiums.
to renew the policy upon payment of the
premium due on the effective date of
renewal. HELD: No.
1999 DECISION SET ASIDE; CA DECISION AFFIRMED
Both the Court of Appeals and the trial court found that
sufficient proof exists that Masagana, which had procured
insurance coverage from UCPB for a number of years,
Section 77 of the Insurance Code of 1978 provides:
had been granted a 60 to 90-day credit term for the
renewal of the policies. Such a practice had existed up to
SECTION 77. An insurer is entitled to payment stock-in-trade of his business, Moonlight Enterprises.
of the premium as soon as the thing insured When the insurance policy expired, the respondent issued
is exposed to the peril insured against. a check as payment for the renewal of the policy to an
Notwithstanding any agreement to the contrary, no agent of the petitioner on April 5, 1990. The check was
policy or contract of insurance issued by an drawn and deposited in petitioner’s account. Petitioner
insurance company is valid and binding unless then issued a corresponding receipt for the renewal on
and until the premium thereof has been paid, April 10. The new insurance policy covered any damage
except in the case of a life or an industrial life or loss arising from fire up to P200,000 for the period
policy whenever the grace period provision March 25, 1990 to March 25, 1991.
applies.
However, There are exceptions to IC 77.
On April 6, 1990, Moonlight Enterprises was completely
The 1st exception is provided by Section 77 itself, and that razed by fire. Total loss was estimated between
is, in case of a life or industrial life policy whenever the P4,000,000 and P5,000,000. Respondent filed an
grace period provision applies. insurance claim with petitioner and four other co-insurers.
Petitioner refused to honor the claim notwithstanding
The 2nd exception to this section is Section 78 which several demands by respondent, thus, the latter filed an
provides: Any acknowledgment in a policy or contract action against petitioner before the trial court.
of insurance of the receipt of premium is conclusive
evidence of its payment, so far as to make the policy
binding, notwithstanding any stipulation therein that it
shall not be binding until premium is actually paid. In its defense, petitioner claimed there was no existing
insurance contract when the fire occurred since
A third exception was laid down in Makati Tuscany respondent did not pay the premium. It also alleged that
Condominium Corporation vs. Court of Appeals||| which even assuming there was a contract, respondent violated
held that if the parties have agreed to the payment several conditions of the policy.
ininstallments of the premium and partial payment has
been made at the time of loss.
The Tuscany case also provided a fourth exception to RTC: In favor of respondent.
Section 77, namely, that the insurer may grant credit CA: Affirmed in toto.
extension for the payment of the premium. This simply
means that if the insurer has granted the insured a credit
term for the payment of the premium and loss occurs
before the expiration of the term, recovery on the policy ISSUE: W/N there was an existing insurance contract
should be allowed even though the premium is paid after between the parties when the fire happened.
the loss but within the credit term.|
Issues:
Whether the CA erred in reversing the decision of the TC?
According to the trial court, the renewal certificate issued
to respondent contained the acknowledgment that Held:
premium had been paid. It is not disputed that the check No. Insurance is a contract whereby one undertakes for a
drawn by respondent in favor of petitioner and delivered consideration to indemnify another against loss, damage
to its agent was honored when presented and petitioner or liability arising from an unknown or contingent event.
forthwith issued its official receipt to respondent on April The consideration is the premium, which must be paid at
10. Section 306 of the Insurance Code provides that any the time and in the way and manner specified in the policy,
insurance company which delivers a policy or contract of and if not so paid, the policy will lapse and be forfeited by
insurance to an insurance agent or insurance broker shall its own terms. The pertinent provision reads:
be deemed to have authorized such agent or broker to 2. This policy including any renewal thereof
receive on its behalf payment of any premium which is and/or any endorsement thereon is not in force
due on such policy or contract of insurance at the time of until the premium has been fully paid to and duly
its issuance or delivery or which becomes due thereon. In receipted by the Company in the manner
the instant case, the best evidence of such authority is the provided herein
fact that petitioner accepted the check and issued the Clearly the Policy provides for payment of premium in full.
official receipt for the payment. It is, as well, bound by its Accordingly, where the premium has only been partially
agents acknowledgment of receipt of payment. 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.
Section 78 of the Insurance Code explicitly provides: This is fully supported by Sec. 77 of the Insurance Code.
These two (2) cases, Philippine Phoenix vs Woodworks
and Makati Tuscany vs. CA, adequately demonstrate the
waiver, either express or implied, of prepayment in full by
An acknowledgment in a policy or contract of insurance of
the insurer: impliedly, by suing for the balance of the
the receipt of premium is conclusive evidence of its premium as in Phoenix, and expressly, by agreeing to
payment, so far as to make the policy binding, make premiums payable in installments as in Tuscany.
notwithstanding any stipulation therein that it shall not be
But contrary to the stance taken by petitioners, there is no
binding until the premium is actually paid.
waiver express or implied in the case at bench.
Conformably with the aforesaid stipulations explicitly
worded and taken in conjunction with Sec. 77 of the
This Section establishes a legal fiction of payment and Insurance Code the payment of partial premium by the
should be interpreted as an exception to Section 77. assured in this particular instance should not be
considered the payment required by the law and the
Sps. Tibay vs CA and Fortune Life and General stipulation of the parties. Rather, it must be taken in the
Insurance concept of a deposit to be held in trust by the insurer until
Facts: 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 assuming there was, there is absence of an acceptance
occurs for the policy to be considered effective and in on defendant’s part. An acceptance of an offer to allow
force. But once payment of premium is left to the whim credit, if one was made, is as essential to make a valid
and caprice of the insured, as when the courts tolerate the agreement for credit, to change a conditional delivery of
payment of a mere P600.00 as partial undertaking out of an insurance policy to an unconditional delivery, as it is to
the stipulated total premium of P2,983.50 and the balance make any other contract. Such an acceptance could not
to be paid even after the risk insured against has be merely a mental act or state of mind, but would require
occurred, as petitioners have done in this case, on the a promise to pay made known in some manner to
principle that the strength of the vinculumjuris is not defendant.||| Since the premium had not been paid, the
measured by any specific amount of premium payment, policy must be deemed to have lapsed. The non-payment
we will surely wreak havoc on the business and set to of premiums does not merely suspend but puts an end to
naught what has taken actuarians centuries to devise to an insurance contract, since the time of the payment is
arrive at a fair and equitable distribution of risks and peculiarly of the essence of the contract.
benefits between the insurer and the insured.
|||Further, explicit in the Policy itself is plaintiff's
agreement to indemnify defendant for loss by fire only
PHIL. PHOENIX SURETY & INS., CO. VS after payment of premium. Compliance by the insured
WOODWORKS with the terms of the contract is a condition precedent to
the right of recovery.||| The burden is on an insured to
One-liner: The premium must be paid at the time and in keep a policy in force by the payment of premiums, rather
the way and manner specified in the policy and, if not so than on the insurer to exert every effort to prevent the
paid, the policy will lapse and be forfeited by its own insured from allowing a policy to elapse through a failure
terms.||| to make premium payments. The continuance of the
insurer's obligation is conditional upon the payment of
premiums, so that no recovery can be had upon a lapsed
Facts: policy, the contractual relation between the parties having
ceased.||| Moreover, an insurer cannot treat a contract as
Upon defendant’s application, petitioner insured the valid for the purpose of collecting premiums and invalid
former’s building, machinery and equipment for a term of for the purpose of indemnity.
one (1) year against loss by fire. However, defendant did
PACIFIC TIMBER VS. CA
not pay the premium stipulated in the policy when it was
issued nor at any time thereafter amounting to P10, FACTS: On March 13, 1963, Pacific secured temporary
593.36. Few days prior to the lapse of the one-year term, insurance from respondent Workemen’s Insurance Co.
and through indorsement, petitioner notified defendant of for its exportation of logs to Japan. Workmen issued on
the cancellation of the policy. In such indorsement, said date a Cover Note 1010 insuring said cargo as well
petitioner credited defendant the amount of P3,110.25, as two regular marine cargo policies.
and claimed the balance of P7,483.11 as “earned
premium.” To this, defendant refused. Thus, petitioner After the issuance of the cover note but BEFORE the
filed a case for the recovery of said amount, where the issuance of the 2 policies, some of the logs intended to be
defendant argued that its failure to pay the premium after exported were lost during the loading operations at
the issuance of policy put an end to the insurance contract Diapitan Bay due to a typhoon.
and rendered the policy unenforceable.
First Philippine Adjustment Corporation came to inspect
the loss, assess the damage, and report that the loss of
30 pieces of logs were not covered by the 2 policies but
Issue: were within the Cover Note.
WON the policy was a binding contract even if the Pacific filed its claim with the company, but the latter
premium was not paid, thus making the unpaid premium refused, contending that said loss may not be considered
a debt enforceable by action of the insurer. as covered under the cover note because such became
null and void by virtue of the issuance of the marine
policies.
Ruling:
Issue: W/N the cover note was null and void for lack of
NO. Insurance is a contract whereby one undertakes for valuable consideration (NO)
a consideration to indemnify another against loss,
Held: The fact that no separate premium was paid on the
damage or liability arising from an unknown or contingent
Cover Note before the loss occurred does not militate
event. The consideration is the premium. The premium
against the validity of the contention even if no such
must be paid at the time and in the way and manner
premium was paid. All Cover Notes do not contain
specified in the policy and, if not so paid, the policy will
particulars of the shipment that would serve as basis for
lapse and be forfeited by its own terms. There was also
no extension of credit or waiver of premium, by express the computation of the premiums. Also, no separate
agreement, that was extended to the defendant. And premiums are required to be paid on a Cover Note.
The petitioner paid in full all the premiums, hence there disapproved the insurance application in question on the
was no account unpaid on the insurance coverage and ground that it is not offering the twenty-year endowment
the cover note. If the note is to be treated as a separate insurance policy to children less than seven years of age.
policy instead of integrating it to the regular policies, the What it offered instead is another plan known as the
purpose of the note would be meaningless. It is a contract, Juvenile Triple Action, which private respondent failed
not a mere application for insurance which is a mere offer. to accept. In the absence of a meeting of the minds
between petitioner Pacific Life and private respondent
It may be true that the marine insurance policies issued Ngo Hing over the 20-year endowment life insurance in
were for logs no longer including those which had been the amount of P50,000.00 in favor of the latter's one-year
lost during loading operations. This had to be so because old daughter, and with the non-compliance of the
the risk insured against is for loss during transit, because abovequoted conditions stated in the disputed binding
the logs were safely placed aboard. deposit receipt, there could have been no insurance
The non-payment of premium on the Cover Note is, contract duly perfected between them. Accordingly, the
therefore, no cause for the petitioner to lose what is due it deposit paid by private respondent shall have to be
as if there had been payment of premium, for non- refunded by Pacific Life.
payment by it was not chargeable against its fault. Had all
the logs been lost during the loading operations, but after As held in De Lim vs. Sun Life Assurance Company of
the issuance of the Cover Note, liability on the note would Canada, supra, "a contract of insurance, like other
have already arisen even before payment of premium. contracts, must be assented to by both parties either in
Otherwise, the note would serve no practical purpose in person or by their agents ... The contract, to be binding
the realm of commerce, and is supported by the doctrine from the date of the application, must have been a
that where a policy is delivered without requiring payment completed contract, one that leaves nothing to be dione,
of the premium, the presumption is that a credit was nothing to be completed, nothing to be passed upon, or
intended and policy is valid. determined, before it shall take effect. There can be no
contract of insurance unless the minds of the parties have
Great Pacific Insurance vs. CA met in agreement." We are thus not impressed with
private respondent's contention that failure of petitioner
FACTS: Ngo Hing applied for a 20-year endowment
Mondragon to communicate to him the rejection of the
policy with the Great Pacific Life Assurance Company for
insurance application would not have any adverse effect
his one year old daughter. He sent his representations to
on the allegedly perfected temporary contract
Mondragon, an authorized agent of the said insurance
(Respondent's Brief, pp. 13-14). In this first place, there
company, which the latter also sent to the insurance was no contract perfected between the parties who had
company for approval. The company, however, rejected no meeting of their minds. Private respondet, being an
the application since their endowment plan does not apply
authorized insurance agent of Pacific Life at Cebu branch
to minors below 7 years old. They however,
office, is indubitably aware that said company does not
recommended another type of insurance plan – the
offer the life insurance applied for.
Juvenile Triple Action Plan (the contents of such counter
offer was not stated in the case). Mondragon did not relay
the rejection to Ngo Hing, hence Ngo paid the premiums Relative to the second issue of alleged concealment. this
and Mondragon issued a corresponding “binding deposit Court is of the firm belief that private respondent had
receipt”. Mondragon then delivered the money to the deliberately concealed the state of health and physical
company and withheld his portion of the money for his condition of his daughter Helen Go. Where private
commission. respondent supplied the required essential data for the
insurance application form, he was fully aware that his
A few months later, the daughter died due to one-year old daughter is typically a mongoloid child. Such
bronchopneumonia. It was later discovered that the a congenital physical defect could never be ensconced
daughter was actually a mongoloid and such fact was not nor disguised. Nonetheless, private respondent, in
stated or disclosed in Ngo’s representations. Ngo now is apparent bad faith, withheld the fact material to the risk to
suing the company for the proceeds of the life insurance. be assumed by the insurance company. As an insurance
agent of Pacific Life, he ought to know, as he surely must
ISSUE: May the claimant ask for the proceeds of the life have known. his duty and responsibility to such a material
insurance? Was there actually a contract? And if there is fact. Had he diamond (wa ko kybaw unsay meaning aning
none, what is the remedy of the claimant? diamond; “disclosed” cguro ni) said significant fact in the
RULING: There was no contract as there was no insurance application from Pacific Life would have verified
the same and would have had no choice but to disapprove
acceptance by the private respondent of the counter offer
the application outright.
(Juvenile Triple Action). Ngo cannot also claim the
proceeds because of concealment but he may be
reimbursed for the premiums he paid. (Wa nalang nako The contract of insurance is one of perfect good faith
giinclude ang provisions sa receipt ky taas kayu) uberrima fides meaning good faith, absolute and perfect
candor or openness and honesty; the absence of any
concealment or demotion, however slight [Black's Law
It bears repeating that through the intra-company
Dictionary, 2nd Edition], not for the alone but equally so
communication of April 30, 1957 (Exhibit 3-M), Pacific Life
for the insurer (Field man's Insurance Co., Inc. vs. Vda de on July 11, 1983. More than 10 years later or on Dec. 1,
Songco, 25 SCRA 70). Concealment is a neglect to 1994, PhilAm received a letter from Claro, a PB Member
communicate that which a party knows and Ought to of Camaries, to reconsider the denial but it was denied
communicate (Section 25, Act No. 2427). Whether with finality on Feb. 14, 1995, leading to the case filed
intentional or unintentional the concealment entitles the before the RTC.
insurer to rescind the contract of insurance (Section 26,
Id.: Yu Pang Cheng vs. Court of Appeals, et al, 105 Phil (1st order dated June 7, 1996) RTC denied the
930; Satumino vs. Philippine American Life Insurance motion to dismiss by PhilAm, saying that evidentiary
Company, 7 SCRA 316). Private respondent appears matters need to be heard.
guilty thereof.
(2nd order dated Dec. 12, 1997) RTC denied the
We are thus constrained to hold that no insurance reconsideration of PhilAm saying that the 10 year
contract was perfected between the parties with the prescriptive period was stopped on May 25, 1983,
noncompliance of the conditions provided in the binding when private respondents sent a letter for
receipt, and concealment, as legally defined, having been reconsideration, and it was only on feb 14, 1995, when
committed by herein private respondent. PhilAm denied the claim with finality that the 10 year
period began to run.
Clearly implied from the aforesaid conditions is that the
On appeal, CA upheld the both decisions , saying
binding deposit receipt in question is merely an
that the 10 year prescriptive period should be counted
acknowledgment, on behalf of the company, that the
from the date of rejection by the insurer in this case,
latter's branch office had received from the applicant the
Feb 14, 1995, since this is the time when the cause of
insurance premium and had accepted the application
action accrues. Hence, the petition.
subject for processing by the insurance company; and
that the latter will either approve or reject the same on the
ISSUE:
basis of whether or not the applicant is "insurable on
standard rates." Since petitioner Pacific Life disapproved WON RTC and CA erred - YES
the insurance application of respondent Ngo Hing, the
RULING:
binding deposit receipt in question had never become in
(No problem as to the 1st order)
force at any time.
WHEREFORE, the decision appealed from is hereby set SC said that RTC committed grave abuse of
aside, and in lieu thereof, one is hereby entered absolving discretion when it dismissed the reconsideration by
petitioners Lapulapu D. Mondragon and Great Pacific Life deciding that the prescription should be reckoned from
Assurance Company from their civil liabilities as found by Feb. 14, 1995. The reason is that PhilAm alleged in its
respondent Court and ordering the aforesaid insurance Answer that it had denied private respondents claim
company to reimburse the amount of P1,077.75, without for the proceeds through a letter dated July 11, 1983.
interest, to private respondent, Ngo Hing. Costs against Hence, due process demands that it be given the
private respondent. opportunity to prove that private respondents had
received said letter, dated July 11, 1983. Said letter is
PHILIPPINE AMERICAN LIFE AND GENERAL crucial to petitioner's defense that the filing of the
INSURANCE COMPANY, petitioner, vs. JUDGE LORE complaint for recovery of sum of money in June, 1995 is
R. VALENCIA-BAGALACSA, Regional Trial Court of beyond the 10-year prescriptive period.
Libmanan, Camarines Sur, Branch 56, and EDUARDO
Z. LUMANIOG, CELSO Z. LUMANIOG and RUBEN Z. Likewise, CA, by upholding the 2nd decision,
LUMANIOG, respondents. committed a reversible error.
"xxx contained and/or stored during the currency The issue of whether or not Transworld has an
of this Policy in the premises occupied by them insurable interest in the fun and amusement
forming part of the buildings situate (sic) within machines and spare parts, which entitles it to be
own Compound xxx" indemnified for the loss thereof, had been settled in
G.R. No. L-111118, entitled New India Assurance
Therefrom, it can be gleaned unerringly that the fire Company, Ltd., vs. Court of Appeals, where the
insurance policy in question did not limit its coverage to appeal of New India from the decision of the Court of
what were stored in the four-span building. Appeals under review, was denied with finality by this
Court on February 2, 1994.
In the case under consideration, both the trial court and
the Court of Appeals found that the so called "annex " was The rule on conclusiveness of judgment, which obtains
not an annex building but an integral and inseparable part under the premises, precludes the relitigation of a
of the four-span building described in the policy and particular fact or issue in another action between the
consequently, the machines and spare parts stored same parties based on a different claim or cause of
therein were covered by the fire insurance in dispute. The action. "xxx the judgment in the prior action operates as
letter-report of the Manila Adjusters and Surveyor's estoppel only as to those matters in issue or points
Company, which petitioner itself cited and invoked, controverted, upon the determination of which the finding
describes the "annex" building as follows: or judgment was rendered. In fine, the previous judgment
"Two-storey building constructed of is conclusive in the second case, only as those matters
partly timber and partly concrete hollow actually and directly controverted and determined and not
blocks under g.i. roof which is adjoining as to matters merely involved therein."
and intercommunicating with the repair of
the first right span of the lofty storey Great Pacific Life Assurance Corp VS CA (316 SCRA
building and thence by property fence 678)
wall."
Facts:
Verily, the two-storey building involved, a permanent A contract of group life insurance was executed between
structure which adjoins and intercommunicates with the petitioner Great Pacific Life Assurance Corporation
"first right span of the lofty storey building",[17] formed part (hereinafter Grepalife) and Development Bank of the
thereof, and meets the requisites for compensability Philippines (hereinafter DBP). Grepalife agreed to insure
under the fire insurance policy sued upon. the lives of eligible housing loan mortgagors of DBP. On
November 11, 1983, Dr. Wilfredo Leuterio, a physician
So also, considering that the two-storey building and a housing debtor of DBP applied for membership in
aforementioned was already existing when subject fire the group life insurance plan. In the application form, Dr
insurance policy contract was entered into on January 12, Leuterio denied any previous sickness and claimed that
1981, having been constructed sometime in he was in good health. On November 15, 1983, Grepalife
1978,[18] petitioner should have specifically excluded the issued Certificate No. B-18558, as insurance coverage of
said two-storey building from the coverage of the fire Dr. Leuterio, to the extent of his DBP mortgage
insurance if minded to exclude the same but if did not, and indebtedness amounting to eighty-six thousand, two
instead, went on to provide that such fire insurance policy hundred (P86,200.00) pesos.
covers the products, raw materials and supplies stored
within the premises of respondent Transworld which was On August 6, 1984, Dr. Leuterio died due to massive
an integral part of the four-span building occupied by cerebral hemorrhage. Consequently, DBP submitted a
Transworld, knowing fully well the existence of such death claim to Grepalife.Grepalife denied the claim
building adjoining and intercommunicating with the right alleging that Dr. Leuterio was not physically healthy when
section of the four-span building. he applied for an insurance coverage on November 15,
1983. Grepalife insisted that Dr. Leuterio did not disclose
Indeed, the stipulation as to the coverage of the fire he had been suffering from hypertension, which caused
insurance policy under controversy has created a his death. Allegedly, such non-disclosure constituted
doubt regarding the portions of the building insured concealment that justified the denial of the claim.
thereby. Article 1377 of the New Civil Code provides:
On October 20, 1986, the widow of the late Dr. Leuterio, communicate it to the assured, but he designedly and
respondent Medarda V. Leuterio, filed a complaint with intentionally withholds the same.
the Regional Trial Court of Misamis Oriental. During the
trial, Dr. Hernando Mejia, who issued the death certificate, Petitioner merely relied on the testimony of the attending
was called to testify. Dr. Mejias findings, based partly from physician, Dr. Hernando Mejia, as supported by the
the information given by the respondent widow, stated information given by the widow of the decedent. On the
that Dr. Leuterio complained of headaches presumably contrary the medical findings were not conclusive
due to high blood pressure. The inference was not because Dr. Mejia did not conduct an autopsy on the body
conclusive because Dr. Leuterio was not autopsied, of the decedent. . Hence, the statement of the physician
hence, other causes were not ruled out. RTC rendered a was properly considered by the trial court as hearsay.
decision in favour of respondent widow. This was affirmed Further, contrary to appellants allegations, there was no
by CA. sufficient proof that the insured had suffered from
hypertension. Aside from the statement of the insureds
Issue: WON the widow has legal standing and WON widow who was not even sure if the medicines taken by
CA erred in not finding Dr. Leuterio liable for Dr. Leuterio were for hypertension, the appellant had not
material concealment. –Yes has standing, There was proven nor produced any witness who could attest to Dr.
no material concealment Leuterios medical history.
Held: Appellant insurance company had failed to establish that
there was concealment made by the insured, hence, it
To resolve the issue, we must consider the insurable cannot refuse payment of the claim.
interest in mortgaged properties and the parties to this
type of contract. The rationale of a group insurance policy Lastly, However, we noted that the Court of Appeals
of mortgagors, otherwise known as the mortgage decision was promulgated on May 17, 1993. In private
redemption insurance, is a device for the protection of respondents memorandum, she states that DBP
both the mortgagee and the mortgagor. On the part of the foreclosed in 1995 their residential lot, in satisfaction of
mortgagee, it has to enter into such form of contract so mortgagors outstanding loan. Considering this
that in the event of the unexpected demise of the supervening event, the insurance proceeds shall inure to
mortgagor during the subsistence of the mortgage the benefit of the heirs of the deceased person or his
contract, the proceeds from such insurance will be applied beneficiaries. Equity dictates that DBP should not unjustly
to the payment of the mortgage debt, thereby relieving the enrich itself at the expense of another (Nemo cum alterius
heirs of the mortgagor from paying the obligation. In a detrimenio protest). Hence, it cannot collect the insurance
similar vein, ample protection is given to the mortgagor proceeds, after it already foreclosed on the mortgage. The
under such a concept so that in the event of death; the proceeds now rightly belong to Dr. Leuterios heirs
mortgage obligation will be extinguished by the represented by his widow, herein private respondent
application of the insurance proceeds to the mortgage Medarda Leuterio.
indebtedness. Consequently, where the mortgagor pays
the insurance premium under the group insurance policy,
making the loss payable to the mortgagee, the insurance
is on the mortgagors interest, and the mortgagor
continues to be a party to the contract. In this type of
policy insurance, the mortgagee is simply an appointee of
the insurance fund, such loss-payable clause does not
make the mortgagee a party to the contract.
The insured private respondent did not cede to the
mortgagee all his rights or interests in the insurance, the
policy stating that: In the event of the debtors death before
his indebtedness with the Creditor [DBP] shall have been
fully paid, an amount to pay the outstanding indebtedness
shall first be paid to the creditor and the balance of sum
assured, if there is any, shall then be paid to the
beneficiary/ies designated by the debtor
And since a policy of insurance upon life or health may
pass by transfer, will or succession to any person,
whether he has an insurable interest or not, and such
person may recover it whatever the insured might have
recovered, the widow of the decedent Dr. Leuterio may
file the suit against the insurer, Grepalife.
Also, Concealment exists where the assured had
knowledge of a fact material to the risk, and honesty, good
faith, and fair dealing requires that he should