[G.R. No. 112329. January 28, 2000] VIRGINIA A. PEREZ, petitioner, vs. COURT O APPEA!" an# $ !

I E%AN IN"URANCE CORPORATION, respondents. &ECI"ION 'NARE"("ANTIAGO, J.) A contract of insurance, like all other contracts, must be assented to by both parties, either in person or through their agents and so long as an application for insurance has not been either accepted or rejected, it is merely a proposal or an offer to make a contract. Petitioner Virginia A. Perez assails the decision of respondent Court of Appeals dated July 9, 99! in CA"#.$. CV !%%&9 entitled, 'BF Lifeman Insurance Corporations, PlaintiffAppellant versus Virginia A. Perez, Defendant-Appellee,' (hich declared )nsurance Policy *%+!** for P%*,***.** issued by pri,ate respondent corporation in fa,or of the deceased Primiti,o -. Perez, null and ,oid and rescinded, thereby re,ersing the decision rendered by the $egional .rial Court of /anila, -ranch 0V). .he facts of the case as summarized by respondent Court of Appeals are not in dispute. Primiti,o -. Perez had been insured (ith the -1 2ifeman )nsurance Corporation since 93* for P&*,***.**. 4ometime in 5ctober 936, an agent of the insurance corporation, $odolfo 2alog, ,isited Perez in #uinayangan, 7uezon and con,inced him to apply for additional insurance co,erage of P%*,***.**, to a,ail of the ongoing promotional discount of P8**.** if the premium (ere paid annually. 5n 5ctober &*, 936, Primiti,o -. Perez accomplished an application form for the additional insurance co,erage of P%*,***.**. 5n the same day, petitioner Virginia A. Perez, Primiti,o9s (ife, paid P&,*6%.** to 2alog. .he receipt issued by 2alog indicated the amount recei,ed (as a 'deposit.': ; <nfortunately, 2alog lost the application form accomplished by Perez and so on 5ctober &3, 936, he asked the latter to fill up another application form. :&; 5n =o,ember , 936, Perez (as made to undergo the re>uired medical e?amination, (hich he passed.:!; Pursuant to the established procedure of the company, 2alog for(arded the application for additional insurance of Perez, together (ith all its supporting papers, to the office of -1 2ifeman )nsurance Corporation at #umaca, 7uezon (hich office (as supposed to for(ard the papers to the /anila office. 5n =o,ember &%, 936, Perez died in an accident. @e (as riding in a banca (hich capsized during a storm. At the time of his death, his application papers for the additional insurance of P%*,***.** (ere still (ith the #umaca office. 2alog testified that (hen he (ent to follo( up the papers, he found them still in the #umaca office and so he personally brought the papers to the /anila office of -1 2ifeman )nsurance Corporation. )t (as only on =o,ember &6, 936 that said papers (ere recei,ed in /anila. Aithout kno(ing that Perez died on =o,ember &%, 936, -1 2ifeman )nsurance Corporation appro,ed the application and issued the corresponding policy for the P%*,***.** on Becember &, 936.:8; =cmC Petitioner Virginia Perez (ent to /anila to claim the benefits under the insurance policies of the deceased. 4he (as paid P8*,***.** under the first insurance policy for P&*,***.** Ddouble indemnity in case of accidentE but the insurance company refused to pay the claim under the additional policy co,erage of P%*,***.**, the proceeds of (hich amount to P %*,***.** *n +*,- o. a /r*01, *n#,2n*/y r*#,r on /3, *n4uran5, 0o1*5y. )n its letter of January &9, 933 to Virginia A. Perez, the insurance company maintained that the insurance for P%*,***.** had not been perfected at the time of

the death of Primiti,o Perez. Conse>uently, the insurance company refunded the amount of P&,*6%.** (hich Virginia Perez had paid. 5n 4eptember & , 99*, pri,ate respondent -1 2ifeman )nsurance Corporation filed a complaint against Virginia A. Perez seeking the rescission and declaration of nullity of the insurance contract in >uestion. Petitioner Virginia A. Perez, on the other hand, a,erred that the deceased had fulfilled all his prestations under the contract and all the elements of a ,alid contract are present. 4he then filed a counterclaim against pri,ate respondent for the collection of P %*,***.** as actual damages, P **,***.** as e?emplary damages, P!*,***.** as attorney9s fees and P *,***.** as e?penses for litigation. 5n 5ctober &%, 99 , the trial court rendered a decision in fa,or of petitioner, the dispositi,e portion of (hich reads as follo(sF !"#"F$#" P#"%I&"& C$'&ID"#"D, (udgment is )ere*+ rendered in favor of defendant Virginia A. Perez, ordering t)e plaintiff BF Lifeman Insurance Corporation to pa+ to )er t)e face value of BF Lifeman Insurance Polic+ 'o. ,-./,,, plus dou*le indemnit+ under t)e &A#DI or in t)e total amount of P0-,,,,,.,, 1an+ refund made and2or premium deficienc+ to *e deducted t)erefrom3. &$ $#D"#"D.:%; .he trial court, in ruling for petitioner, held that the premium for the additional insurance of P%*,***.** had been fully paid and e,en if the sum of P&,*6%.** (ere to be considered merely as partial payment, the same does not affect the ,alidity of the policy. .he trial court further stated that the deceased had fully complied (ith the re>uirements of the insurance company. @e paid, signed the application form and passed the medical e?amination. @e should not be made to suffer the subse>uent delay in the transmittal of his application form to pri,ate respondent9s head office since these (ere no longer (ithin his control. .he Court of Appeals, ho(e,er, re,ersed the decision of the trial court saying that the insurance contract for P%*,***.** could not ha,e been perfected since at the time that the policy (as issued, Primiti,o (as already dead.:+; Citing the pro,ision in the application form signed by Primiti,o (hich states thatF =cmmisG 45 5 5 t)ere s)all *e no contract of insurance unless and until a polic+ is issued on t)is application and t)at t)e polic+ s)all not ta6e effect until t)e first premium )as *een paid and t)e polic+ )as *een delivered to and accepted *+ me2us in person 7)ile I27e, am2are in good )ealt)4 the Court of Appeals held that the contract of insurance had to be assented to by both parties and so long as the application for insurance has not been either accepted or rejected, it is merely an offer or proposal to make a contract. Petitioner9s motion for reconsideration ha,ing been denied by respondent court, the instant petition for certiorari (as filed on the ground that there (as a consummated contract of insurance bet(een the deceased and -1 2ifeman )nsurance Corporation and that the condition that the policy issued by the corporation be deli,ered and recei,ed by the applicant in good health, is potestati,e, being dependent upon the (ill of the insurance company, and is therefore null and ,oid. .he petition is bereft of merit. )nsurance is a contract (hereby, for a stipulated consideration, one party undertakes to compensate the other for loss on a

specified subject by specified perils.:6; A contract, on the other hand, is a meeting of the minds bet(een t(o persons (hereby one binds himself, (ith respect to the other to gi,e something or to render some ser,ice.:3; <nder Article ! 3 of the Ci,il Code, there is no contract unless the follo(ing re>uisites concurF D E.......Consent of the contracting partiesH D&E.......5bject certain (hich is the subject matter of the contractH D!E.......Cause of the obligation (hich is established. Consent must be manifested by the meeting of the offer and the acceptance upon the thing and the cause (hich are to constitute the contract. .he offer must be certain and the acceptance absolute. Ahen Primiti,o filed an application for insurance, paid P&,*6%.** and submitted the results of his medical e?amination, his application (as subject to the acceptance of pri,ate respondent -1 2ifeman )nsurance Corporation. .he perfection of the contract of insurance bet(een the deceased and respondent corporation (as further conditioned upon compliance (ith the follo(ing re>uisites stated in the application formF 't)ere s)all *e no contract of insurance unless and until a polic+ is issued on t)is application and t)at t)e said polic+ s)all not ta6e effect until t)e premium )as *een paid and t)e polic+ delivered to and accepted *+ me2us in person 7)ile I2 e, am2are in good )ealt).4:9; 4cncI m .he assent of pri,ate respondent -1 2ifeman )nsurance Corporation therefore (as not gi,en (hen it merely recei,ed the application form and all the re>uisite supporting papers of the applicant. )ts assent (as gi,en (hen it issues a corresponding policy to the applicant. <nder the abo,ementioned pro,ision, it is only (hen the applicant pays the premium and recei,es and accepts the policy (hile he is in good health that the contract of insurance is deemed to ha,e been perfected. )t is not disputed, ho(e,er, that (hen Primiti,o died on =o,ember &%, 936, his application papers for additional insurance co,erage (ere still (ith the branch office of respondent corporation in #umaca and it (as only t(o days later, or on =o,ember &6, 936, (hen 2alog personally deli,ered the application papers to the head office in /anila. Conse>uently, there (as absolutely no (ay the acceptance of the application could ha,e been communicated to the applicant for the latter to accept inasmuch as the applicant at the time (as already dead. )n the case of "nri8uez vs. &un Life Assurance Co. of Canada,: *; reco,ery on the life insurance of the deceased (as disallo(ed on the ground that the contract for annuity (as not perfected since it had not been pro,ed satisfactorily that the acceptance of the application e,er reached the kno(ledge of the applicant. Petitioner insists that the condition imposed by respondent corporation that a policy must ha,e been deli,ered to and accepted by the proposed insured in good health is potestati,e being dependent upon the (ill of the corporation and is therefore null and ,oid. Ae do not agree. A potestati,e condition depends upon the e?clusi,e (ill of one of the parties. 1or this reason, it is considered ,oid. Article 3& of the =e( Ci,il Code statesF )en t)e fulfillment of t)e condition depends upon t)e sole 7ill of t)e de*tor, t)e conditional o*ligation s)all *e void.

)n the case at bar, the follo(ing conditions (ere imposed by the respondent company for the perfection of the contract of insuranceF DaE.......a policy must ha,e been issuedH DbE.......the premiums paidH and DcE.......the policy must ha,e been deli,ered to and accepted by the applicant (hile he is in good health. .he condition imposed by the corporation that the policy must ha,e been deli,ered to and accepted by the applicant (hile he is in good health can hardly be considered as a potestati,e or facultati,e condition. 5n the contrary, the health of the applicant at the time of the deli,ery of the policy is beyond the control or (ill of the insurance company. $ather, the condition is a suspensi,e one (hereby the ac>uisition of rights depends upon the happening of an e,ent (hich constitutes the condition. )n this case, the suspensi,e condition (as the policy must ha,e been deli,ered and accepted by the applicant (hile he is in good health. .here (as non"fulfillment of the condition, ho(e,er, inasmuch as the applicant (as already dead at the time the policy (as issued. @ence, the non"fulfillment of the condition resulted in the non"perfection of the contract. 4daaG miso As stated abo,e, a contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents. 4o long as an application for insurance has not been either accepted or rejected, it is merely an offer or proposal to make a contract. .he contract, to be binding from the date of application, must ha,e been a completed contract, one that lea,es nothing to be done, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect. .here can be no contract of insurance unless the minds of the parties ha,e met in agreement.: ; Prescinding from the foregoing, respondent corporation cannot be held liable for gross negligence. )t should be noted that an application is a mere offer (hich re>uires the o,ert act of the insurer for it to ripen into a contract. Belay in acting on the application does not constitute acceptance e,en though the insured has for(arded his first premium (ith his application. .he corporation may not be penalized for the delay in the processing of the application papers. /oreo,er, (hile it may ha,e taken some time for the application papers to reach the main office, in the case at bar, the same (as acted upon less than a (eek after it (as recei,ed. .he processing of applications by respondent corporation normally takes t(o to three (eeks, the longest being a month.: &; )n this case, ho(e,er, the re>uisite medical e?amination (as undergone by the deceased on =o,ember , 936H the application papers (ere for(arded to the head office on =o,ember &6, 936H and the policy (as issued on Becember &, 936. <nder these circumstances, (e hold that the delay could not be deemed unreasonable so as to constitute gross negligence. A final note. )t has not escaped our notice that the Court of Appeals declared )nsurance Policy *%+!** for P%*,***.** null and ,oid and rescinded. .he Court of Appeals corrected this in its $esolution of the motion for reconsideration filed by petitioner, thusF 4Anent t)e appearance of t)e 7ord 9rescinded: in t)e dispositive portion of t)e decision, to 7)ic) defendant-appellee attac)es undue significance and ma6es capital of, it is clear t)at t)e use of t)e 7ords 9and rescinded: is, as it is )ere*+ declared, a superfluit+. It is apparent from t)e conte5t of t)e decision t)at t)e insurance polic+ in 8uestion 7as found null and void, and did not )ave to *e 9rescinded:.': !; .rue, rescission presupposes the e?istence of a ,alid contract. A contract (hich is null and ,oid is no contract at all and hence could not be the subject of rescission.

67ERE ORE, the decision rendered by the Court of Appeals in CA"#.$. CV =o. !%%&9 is A11)$/JB insofar as it declared )nsurance Policy =o. *%+!** for P%*,***.** issued by -1 2ifeman )nsurance Corporation of no force and effect and hence null and ,oid. =o costs. "O OR&ERE&. Davide, ;r., C.;., 1C)airman3, Puno, <apunan, and Pardo, ;;., concur.=20>2,, 00?=> A%

!*2 Guan "y +. Nor/3,rn A44uran5, Co 88 P3*1 298

4.$JJ., J.F

N+*,*** and under(ritten by other companies, (ere taken out, making all together FP6*,*** of insurance on the same stock of te?tiles. All of these policies (ere (ritten in the name of the plaintiff 2im Cuan 4y, as the insured. At the hour of about .8% a. m. on the morning of Becember &3, 9&+, a destructi,e fire occurred in the Poizat -odega, (hich burned (ith fury for perhaps a couple of hours and destroyed most of the contents of the building, lea,ing only the e?terior (alls standing. .his fire appears to ha,e originated in the northeastern corner of the bodega, at a point some(hat remo,ed from the compartment (here the plaintiffLs goods (ere stored. A breeze happened, at the time, to be blo(ing from the northeast, (ith the result that the flames (ere carried in a south(est(ardly direction, gi,ing the fire the full s(eep of the bodega. .he plaintiffLs compartment (as directly in the course of the progress of the fireH and although some remnants of the te?tiles (ere found in the debris, the destruction (as so complete that e,en the places occupied by the ro(s of bo?es are not discernible in the photographs taken of the ruins. After the fire occurred the plaintiff, in due time, put in a claim of loss against the ,arious insurance companies concerned for %% bo?es of te?tiles, (ith an alleged ,alue of P9 ,8&%,8+. .he claim (as disallo(ed by the insurer, upon the ad,ice of its adjuster and its attorneys, and as a conse>uence this action (as instituted. )t is not >uestioned that at the time the insurance policies (ere (ritten the plaintiff had goods stored in his compartment in the Poizat -odega of the ,alue claimedH and no serious attempt has been made to fasten upon the plaintiff the charge of ha,ing set fire to the bodega. .he defenses urged in this instance by the appellant re,ol,e mainly around t(o propositions, namely, first, that there (as a misrepresentation by the insured as to the nature and e?tent of his interest in the insured goods, and, secondly, that immediately prior to the fire, the plaintiff caused a large part of the goods to be remo,ed surreptitiously from &%&

.his action (as instituted in the Court of 1irst )nstance of the City of /anila, on /ay %, 9&6, by 2im Cuan 4y, for the purpose of reco,ering f rom the =orthern Assurance Company, 2imited, the sum of 1 *,***, upon a policy of insurance issued through its /anila agency upon a stock of te?tiles stored in a bodega located at =o. +&, Calle <rbiztondo, 4an =icolas, /anila, (hich goods, it (as alleged in the complaint, had been destroyed by fire on Becember &3, 9&+. )n its ans(er the defendant company set up a general denial and se,eral special defenses directed to the follo(ing pointsF false representation by the insured (ith respect to the o(nership of the insured property, incendiarism on the part of the insured, and the submission of false and fraudulent proof (ith respect to the amount and ,alue of the destroyed merchandise. <pon hearing the cause the trial court ga,e judgment for the plaintiff to reco,er of the defendant the sum of P *,***, the f ull amount of the policy, (ith la(ful interest from the date of the filing of the complaint, and (ith costs. 1rom this j udgment the defendant appealed. &%*

&%* P@)2)PP)=J $JP5$.4 A==5.A.JB 2im Cuan 4y ,s. =orthern Assurance Co. At the time of the fire (hich ga,e rise to this la(suit there (as a Chinese firm engaged in the business of selling te?tiles at 68 $osario 4treet, in the City of /anila. .his business (as conducted indifferently, in Chinese fashion, under the names of '@ong 2iong,' '2im Cuan 4y,' and '2im Cuan 4y K Co.,' though it (as organized and registered as a mercantile partnership under the designation last abo,e gi,en. .he name '2im Cuan 4y,' one of the designations of the business, is the name of one of the partners in the business, (ho actually o(ned, at the time this action arose, about one"third of the business. At the time of the incident (ith (hich (e are concerned, the partner 2im Cuan 4y (as in China, and his son, one 2im .ec 4uan, (as acting as his agent and as manager of the business at 68 $osario 4treet. 5(ing to the cramped >uarters of the place (here the concern did business, it (as necessary f or. the firm to store a large part of its stock, such as (as not necessary for actual e?hibition to purchasers, in places apart from its store. 5ne of these places of storage (as an interior compartment in the Poizat -odega located on <rbiztondo and -arraca 4treets in the Bistrict of 4an =icolas, /anila. .his bodega (as of considerable size (ith e?terior parts of cement. )n the center there (as originally an open patio, but in response apparently to demands for space, this interior area had been con,erted into compartments for the storage of goods. )n the autumn of 9&+ the plaintiff ac>uired possession of the interior compartment of the Lbodega designated as A" , =o. +&, <rbiztondo 4treet. .his compartment (as * or & meters long, (ith a breadth of % meters and height of %M meters. @ere the plaintiff stored a large >uantity of te?tiles prior to =o,ember &!, 9&+, upon (hich date he procured the policy of insurance, (hich is the basis of this action, to be issued by the local agent of the defendant insurance company in the amount of P *,***, insuring the effects stored in said bodega, from loss by fire. At or about the same time additional policies of insurance, aggregating &%

&%& P@)2)PP)=J $JP5$.4 A==5.A.JB 2im Cuan 4y ,s. =orthern Assurance Co. the bodega and that the goods so remo,ed (ere included in the claim of loss, thereby rendering the claim fraudulent. .hese defenses (ill be dealt (ith in turn. )n connection (ith the first of these defenses the appellant calls attention to the fact that the true o(ner of the insured goods (as the mercantile entity 2im Cuan 4y K Co., (hereas the policies (ere (ritten in the name of 2im Cuan 4y only, (ithout any re,elation ha,ing been made to the insurer of the fact that 2im Cuan 4y (as only one of se,eral partners in the business and that he (as not the sole o(ner. .he proof, ho(e,er, sho(s that the agent (ho (rote the policy made no in>uiry as to the interest of 2im Cuan 4y in the insured goods, and he merely asked in (hat name the insurance should be (ritten. .he proof further sho(s that, in accordance (ith the Chinese genius for mi?ing names, the name 2im Cuan 4y (as commonly used to indicate the business pertaining to the mercantile entity 2im Cuan 4y K Co. .hus, the store at 68 $osario 4treet (as rented in the name of 2im Cuan 4yH the goods in the same store are insured in the name of 2im Cuan 4yH and the obligations contracted by the concern (ith the Philippine =ational -ank for goods bought on credit (ere contracted in the name of 2im Cuan 4y. .here is no >uestion but that (hen this policy of insurance (as (ritten, the agent of the company kne( that he (as insuring a stock of goods the identity of (hich (as not in doubt, and (hich pertained to a business commonly kno(n as the business of 2im Cuan 4yH and inasmuch as the def endant (as content to take the premium corresponding to the insurance on goods of the ,alue of those then contained in the bodega, the company should not no( be permitted to escape responsibility merely upon the lack of conformity bet(een the name used in

V52. %%, =5VJ/-J$ !, 9!* &% 2im Cuan 4y ,s. =orthern Assurance Co.

the policy and the true name of the legal entity e?isting under our la(. )f >uestions had been put to the agent of the insured at the time the policies (ere (ritten and misrepresentation had been deliberately made (ith respect to the o(nership, a different problem (ould ha,e been presented. &%!

<pon the (hole the trial judge (as so unfa,orably impressed by the story told by these t(o that he refused to gi,e credence to it. .he defense insists, ho(e,er, that the testimony of these t(o (itnesses is corroborated by the circumstance that (hen the attorneys for the respecti,e parties, in company (ith the clerk of court, ,isited =o. 6+ $osario 4treet, for purposes of inspection on /arch 9, 9&3, they found in that compartment an empty bo? bearing the same number as one of the cases included in the claim of loss, that is to say, the number '!69*.' .his certainly looks suspicious. -ut the defendant produced and e?hibited in court shipping documents sho(ing that in the early part of the year 9&3, that is to say, more than a year after the fire occurred, t(o bo?es of goods, purchased in Jngland, arri,ed at the port of /anila, consigned to 2im &%%

V52. %%, =5VJ/-J$ !, 9!* &%! 2im Cuan 4y ,s. =orthern Assurance Co. A point some(hat similar to that here presented (as raised by the defendant in the case of Acriche ,s. 2a( <nion K $ock )nsurance Co. D83 Phil., %9&E, and although the point (as not necessary to the decision in the case, it (as suggested that 'if the claim had been in all other respects fair and honest, the objection (ith respect to the o(nership of the insured goods (ould probably not ha,e been a fatal obstacle to a reco,ery.' .he ,ery strict doctrine built up on this point in the courts of America has resulted from the effort of the courts to protect insurance companies by (ithdra(ing the cases so far as possible from the jury, it being notorious that juries are ,ery prone to see matters of this kind in the light of the insured. As the jury system is not in ,ogue in this country, this idea should not here control. .he defendant, (e think, should be considered estopped from defeating its policy on the ground stated. )n arri,ing at this ,ie( (e are not unmindful of the practices of the mercantile community, including both bankers and merchants, in dealing (ith Chinese firms. Ae are of the opinion, therefore, that the contract of insurance cannot be a,oided upon the ground suggested. )t is e,ident that the misrepresentation complained of (as not f fraudulently made, and it could only ha,e resulted from ignorance on the part of the insured. )f considered material, the error (ould no doubt ha,e gi,en rise to an e>uity on the part of the insured to ha,e the contract reformed in conformity (ith the intention of both insurer and insured, but (e consider such a course unnecessary. .he difficult >uestion in the case, and the one upon (hich the defense has mainly concentrated its force, is, (hether the plaintiff, after ha,ing surreptitiously remo,ed a great part of the insured goods from the bodega already mentioned, falsified its claim and proof of loss by including the goods so remo,ed, (ith intent to defraud the insurer. <pon this >uestion the defendant introduced t(o (itnesses, #abriel Okal and 1ernando -ayan, (ho testified that, as &%8

V52. %%, =5VJ/-J$ !, 9!* &%% 2im Cuan 4y ,s. =orthern Assurance Co. Cuan 4y, and (ere entered through.the -ureau of Customs soon after their arri,al. )n connection (ith this entry, the defendant e?hibited the customhouse documents by means of (hich the admission of the goods (as effected. Ae belie,e that these documents are authentic. And the numbers of the t(o bo?es so entered (ere '!69*' and '!39*.' After the bo?es (ere recei,ed at the plaintif1s store and the contents remo,ed, the t(o empty cases (ere stored, so the Chinese (itnesses say, in =o. 6+. .his must ha,e occurred just before the place (as inspected by the clerk of the court and the attorneys for the t(o litigants on /arch 9, for the reason that (hen the inspecting party e?amined this place on said date, they found !& bo?es, one of (hich (as the bo? bearing the number '!69*,' already mentioned. .(o other bo?es found on the same occasion bore an identical number, namely, '!39*.' .his sho(s that a consignment of t(o bo?es (as recei,ed by the plaintiff in 9&3, in (hich the numbers on the bo?es duplicated the numbers of t(o bo?es pre,iously recei,edH and one of these numbers happened to correspond (ith the number on one of the bo?es consumed in the fire. .he reason for this coincidence is not apparent. )t may ha,e resulted from a mere duplication of orders upon an identical e?porter. .hat the duplication occurred is established beyond a reasonable doubt. )n reflecting upon this circumstance (e ha,e not o,erlooked the fact that the Chinese (itnesses testified that the t(o bo?es imported in /arch, 9&3, (ere, after the remo,al of their contents, stored in =o. 6+ Calle $osario on /arch &*, 9&3, or one day later than the inspection abo,e"mentioned. -ut this must ha,e been a mere mistake due possibly to the difference bet(een #regorian and Chinese calendars. )t could not reasonably ha,e been due to a deliberate intent to gi,e a false date, because the truth (ould ha,e been more in the interest of the side by (hich the (itnesses (ere called. <pon the (hole it must be apparent that the proof relati,e to the finding of bo? =o. &%+

&%8 P@)2)PP)=J $JP5$.4 A==5.A.JB 2im Cuan 4y ,s. =orthern Assurance Co. laborers, they assisted in remo,ing some +% cases of goods from the bodega on Becember &!, &8, &+, and &6, 9&+, immediately preceding the fire. .hese (itnesses state that a truck (as used to effect the remo,al of the bo?es mentioned, and they further state that a carretela (as used to transport some goods (hich (ere taken from bo?es in the bodega, the bo?es being left in the place. .he bo?es and goods thus remo,ed from the bodega (ere taken, so the (itnesses say, to the store at 68 $osario 4treet, (here they (ere unladen and carried in through the front door. .hey (ere then taken, so these (itnesses say, through the back yard of =o. 68 and stored in =o. 6+. A certain ,erisimilitude (as imparted to this narrati,e by the circumstance that the defendant first obtained from the (itness Okal information concerning the use of =o. 6+ as a place of storage for the occupant of =o. 68. -ut of course his ability to re,eal this circumstance might ha,e originated from a single ,isit to the place upon some other occasion. .he antecedents of the (itness Okal appear to be bad, if repeated enforced ,isits to -ilibid Prison may be taken as suggesti,eH and the other (itness (as procured by him.

&%+ P@)2)PP)=J $JP5$.4 A==5.A.JB 2im Cuan 4y ,s. =orthern Assurance Co. !69* in this place of storage is far from adding any (eight to the defendantLs contention. -ut the defense further relies upon the results of an e?amination of the debris left by the fire, and the deductions dra(n therefrom. )n this connection (e note that there (ere found in the compartment (here the plaintiff had its goods stored in the Poizat -odega certain remnants of te?tiles that had not been entirely consumed, as (ell as some iron bands,

or (ires, from around bo?es that had been consumed in the fire. 5f these bands enough pieces (ere found to ha,e ser,ed, as is supposed, for about 6! bo?esH and as the plaintiff claims that %% bo?es (ere destroyed, it is therefore insisted by the appellant that there (ere not in the place at the time of the fire as many bo?es as the plaintiff claims. Aith respect to the remnants of te?tiles found in the debris, it appears that no ,estige remained of 8 kinds of goods comprising the 3* items included in the claim of loss, and it is therefore insisted by the appellant that there could not reasonably ha, been in the place anything like the >uantity of goods claimed by the plaintiff. Ae are of the opinion, ho(e,er, that the inference (hich the appellant dra(s from the data supplied by the debris are not sufficiently con,incing to justify this court in re,ersing the judgmentH for although some remnants of unconsumed te?tiles (ere found in the ruins, the fire (as undoubtedly of great intensity, as more than one member of the fire department stated. )n the light of this testimony it cannot be considered (holly incredible that half of the iron bands might ha,e been entirely destroyed. .he suspicions engendered by the aspects of the proof abo,e discussed, and by other circumstances upon (hich counsel for the defense places stress, do not, in the opinion of a majority of the court, amount to a clear preponderance of the e,idence, such as ought to be demonstrated before the findings of a trial court can be re,ersed. &%6

is true that the court might ha,e suspended the order of proof at the hearing of the same case in the afternoon of the day (hen the deposition (as taken, but the plaintiff (as then submitting its case. .he attorneys for the defendant had no means of kno(ing that the court (ould suspend the order of the taking of the proof (ith a ,ie( to the e?amination of this particular (itness, for the party (ho (as then out of turnH and it might (ell ha,e been considered un(ise to take this chance. At any rate the deposition (as taken according to la( and should not ha,e been suppressed. .he circumstance that none of the la(yers of the firm representing the plaintiff (ere present at the taking of the deposition, (hether f or good reason or f or none, did not make the deposition inadmissible, and notice ha,ing been properly gi,en, it (as the duty of the attorneys for the plaintiff either to ha,e some one present to represent the firm at the taking of the deposition or to let it be read (ithout cross"e?amination by them. @is @onor, therefore, erred in e?cluding the deposition, and (e ha,e accordingly treated it upon this hearing as competent proof for the defendant. 1or the reasons stated, the appealed judgment, in so far as relates to the fundamental issues of the case, is affirmed, and it is so ordered, (ith costs against the appellant. A,ancePa, C. J., /alcolm, Villamor, and Villa"$eal, JJ., concur. J5@=4, J., (ith (hom concurs 54.$A=B, J., dissentingF

V52. %%, =5VJ/-J$ !, 9!* &%6 2im Cuan 4y ,s. =orthern Assurance Co. Jrror =o. calls in >uestion the propriety of the action of the trial court in e?cluding the deposition of A. @. Aells. )n this connection it appears that the taking of the proof in this case e?tended o,er a considerable period of time, in the course of (hich the defendantLs attorneys became informed that one of its (itnesses, Br. Albert @. Aells, (as planning to lea,e the Philippine )slands f or the <nited 4tates. )mmediately upon learning of this fact, the attorneys for the defendant, on Becember &, 9&6, ga,e notice to the plaintiff and his attorneys that they (ould take the deposition of Boctor Aells at *F!* a. m., /onday, Becember %, before a notary public. 4aid notice (as accompanied by the usual affida,it setting forth that Boctor Aells (as to lea,e the city on Becember +, 9&6, as he in fact did, and that he (ould be absent (hen his testimony (ould be re>uired in court. .he notification of the taking of this deposition (as in due form and the time fi?ed (as in accordance (ith la(, since full t(o daysL notice (as gi,en e?clusi,e of the inter,ening 4unday. =o member of the firm of attorneys representing the plaintiff appeared at the taking of said deposition, as the particular member of the firm (ho (as acting in this case apparently had other professional matters re>uiring his attention at that time. Ahen, ho(e,er, the deposition (as produced in court, said attorney objected to its use and mo,ed for its suppression. .his motion (as acceded to by the trial judge, on the ground that the attorneys for the defendant had not ad,ised the court that one of its (itnesses (as about to lea,e the )slandsH and that, if immediate application had been made to the court, it (ould ha,e allo(ed the (itness to be e?amined in court on the afternoon of the same day (hen the deposition (as in fact taken. )t is clear that the deposition (as taken upon proper notice, and (e are of the opinion that the deposition ought to ha,e been admitted as proof for the defendant. )t &%3

Ae agree that the fire (as not incendiary. Ae also agree that the lo(er court committed an error in refusing to recei,e in e,idence the deposition of Br. A. @. Aells, and that it 'ought to ha,e been admitted as proof for the defendant.' Ae also agree (ith the majority opinion (hen it saysF '.he destruction (as so complete that e,en the places occupied by the ro(s of bo?es are not discernible in the photographs taken of the ruins.' -ut (e are clearly &%9

V52. %%, =5VJ/-J$ !, 9!* &%9 2im Cuan 4y ,s. =orthern Assurance Co. of the opinion that the proof of plaintiffLs claim (as both false and fraudulent. As to the deposition of Boctor Aells, the majority opinion saysF 'Ae ha,e accordingly treated it upon this hearing as competent proof for the defendant.' PlaintiffLs claim of loss is founded upon the destruction by the fire of cases and bolts of te?tile goods, and the real and decisi,e >uestion in this case is (hether or not, (ith some fe( marked e?ceptions, they could be or (ere totally lost and consumed in and by the fire. .hat is to say, (hether a fire of this nature (ould consume, (ipe out, and destroy e,ery ,estige of the cases, iron bolts, bands, and (rappings in (hich, it is admitted, the te?tiles (ere bound. <pon that >uestion the only competent e,idence offered by either party (as the deposition of Boctor Aells. @e testified that he (as 8& years of age. .hat his occupation (as chief, di,ision of organic chemistry, -ureau of 4cience, and then as follo(sF '7. Ahat course of study did you take (hich >ualified you for the position as chief of the di,ision of organic chemistry, -ureau of 4cienceNQA. 4e,en years, 4tanford <ni,ersity, studying organic chemistry. 5rganic chemistry co,ers (ork (ith te?tiles. '7. @o( long ha,e you been chief, di,ision of organic chemistry, -ureau of 4cienceNQA. About ten years.

&%3 P@)2)PP)=J $JP5$.4 A==5.A.JB 2im Cuan 4y ,s. =orthern Assurance Co.

'7. 4tate (hether or not you e?amined the damaged merchandise no( stored at =o. 8&6 Calle Pinpin, /anila, and said to be the remains of the merchandise of 2im Cuan 4y K Company damaged in the fire of the Poizat bodegaNQA. ) did.

'7. 4tate (hether or not all the bo?es or cases containing damaged merchandise (ere opened up for your inspection NQ A. All of the cases (ere opened up and the merchandise taken out. '7. )n (hat form (as the merchandise (hich (as taken from the bo?esNQA. .ightly (rapped bolts, some of (hich (ere co,ered (ith hea,y paper (rappings tied (ith string &+*

the merchandise (hich you inspected and (hich, according to your information, (ent through the same fireNQA. .he ans(er to the last >uestion applies e>ually to this. '7. ) call your attention like(ise to items =os. &, 8, 9, &&, &!, &8, &%, &+, &9 and !*, after each of (hich numbers appears the (ord L=oneS meaning that no ,estige of the material designated by those items (ere found in the debris after the fire, and ask you to state (hether or not in your opinion the >uantities of merchandise designated in these items could ha,e been totally consumed, lea,ing no ,estige thereof, by the same fire through (hich the damaged merchandise inspected by you at =o. 8&6 Calle Pinpin (entNQ A. .he same holds true in these cases as in the pre,ious ans(er. '7. Please state (hether or not merchandise rolled tightly in bolts and bo?ed in cases burns rapidly of slo(ly and (hy NQA. )t burns slo(ly, not only for the reason that the bolts are tightly (rapped and bo?ed, but also because of the small >uantity of o?ygen contained in the bolts to allo( of combustionQ combustion being o?idation. '7. Boctor, do you remember if among Lthe bolts of merchandise (hich you inspected at =o. 8&6 Calle Pinpin, there (as some coco PajaritoNQA. Oes, sir. &+&

&+* P@)2)PP)=J $JP5$.4 A==5.A.JB 2im Cuan 4y ,s. =orthern Assurance Co. '7. .hat is to say that they (ere in their original packages of paper and the paper had not been burnedNQA. Oes in some cases. '7. Ahat can you say as to (hether or not the paper labels of some of the bolts (ere still on the boltsNQA. .hey (ere still intact, in their original form. '7. 4peaking generally of all the bolts of goods (hich you inspected there, state to (hat e?tent the ,arious bolts had been consumed by fireNQA. 4ome of the bolts (ere consumed o,er %* per centH others about % to * per cent and others (ere not consumed at all, still ha,ing their original (rappings. '7. Bid you make a rough estimate at the time you e?amined the bolts of merchandise as to (hat percentage of the entire damaged goods that (ere inspected by you (ere consumed by fireNQA. After inspecting all the bolts, including those that (ere not damaged by fire, ) estimated appro?imately &% per cent of the total to be consumed by fire. '7. Ahat percentage of the bolts (ould you say had been consumed to an e?tent of more than %* per centNQA. ) (ould say possibly %, not o,er * per cent. '7. ) call your attention to a book of samples of merchandise, one column of the samples of (hich consists of ne( samples of goods claimed by the insured to ha,e been in the bodega, at the time of the fire and the other outside column of the samples are samples of the goods actually found in the debris after the fire, and (hich book of samples has heretofore been referred to in the trial as J?hibit 3. =o(, referring to item =o. + of this book of samples described as 8 cases containing *,3&6R yards of colored striped madras, 99 pieces DboltsE, ) (ill ask you to state (hether, in your opinion, there could ha,e been 8 cases of 99 bolts, containing *,3&6R yards of that kind of clotch totally consumed in that bodega by the fire, taking into consideration the condition of the bolts of goods (hich (ere e?amined by you at =o. 8&6 Calle &+

&+& P@)2)PP)=J $JP5$.4 A==5.A.JB 2im Cuan 4y ,s, =orthern Assurance Co. '7. Please state (hether or not, in your opinion, judging from the condition in (hich the bolts you e?amined (ere found, there could ha,e been %* more bolts of the same class of goods totally consumed by the fire through (hich the pieces inspected by you (entNQA. )t is my opinion that it (ould ha,e been impossible for the same fire to ha,e entirely consumed %* bolts more of the same kind of goods. '7. $eferring to item =o. 6 in the book of samples, consisting of * cases of &,*** blankets, (hich, (hen ne(, (ould fill a space of &38.%+ cubic feet, please state (hether or not, judging from the damage to the blankets that you e?amined at =o. 8&6 Calle Pinpin, the blankets could ha,e been reduced by the fire to such an e?tent that the remains thereof (ould fill a space of but %.!%9 cubic feetNQA. -lankets of this nature are not easily combustible, particularly (hen compressed in packing cases, and it is my opinion, judging from the appearance of those found in the bodega, that such a reduction (ould be impossible, or highly improbable. '7. Boctor, ho( do you account for the fact that some of the bolts of goods (hich you inspected at =o. 8&6 Calle Pinpin (ere consumed to a larger e?tent than others by the fire NQA. -ecause there (as naturally some ,ariation in the intensity of the heat in the different parts of the bodega. '7. .aking into consideration the fact that this bodega (as but ! meters in length by % meters in (idth, (hat (ould you say as to (hether or not the difference in the intensity of heat (hich may ha,e pre,ailed at the time of the fire in the bodega (ould ha,e been sufficient to totally destroy certain classes of goods to (hich your attention has heretofore been called, and at the same time consume or damage the goods (hich you inspected only to the e?tent found by youNQA. )n my opinion, the difference in the intensity of heat (hich might ha,e pre,ailed in the fire in the different parts of the bodega, (ould be insufficient to totally consume such large >uantities of one class of &+!

V52. %%, =5VJ/-J$ !, 9!* &+ 2im Cuan 4y ,s. =orthern Assurance Co. Pinpin and (hich (ent through the same fire NQA. )t (ould be impossible, taking into consideration the intensity of heat and duration of the fire indicated by the specimens (e inspected at the bodegaH there (ould ha,e been some of the original material left if there had been such a >uantity in the bodega at the time of the fire. '7. ) call your attention to item =o. 9 in the same book of samplesQJ?hibit 3Qconsisting of % cases, 9,+ 9f yards of @alburnic #inghams, contained in &8* bolts, and (ill ask you to state (hether or not, in your opinion, there could ha,e been as large a >uantity of that class of merchandise in the bodega, at the time of the fire (ithout there ha,ing been left any ,estige thereof in the debris, taking into consideration the condition of

V52. %%, =5VJ/-J$ !, 9!* &+!

2im Cuan 4y ,s. =orthern Assurance Co. merchandise and lea,e the merchandise inspected by me in the condition in (hich it (as found.' )t (ill be noted that this e,idence is clear, positi,e, definite, and certain, and that no(here in the record is it impeached or >uestioned. )n fact upon those points no other (itness testified or (as called by either party. .he >uestion as to (hether or not a fire of this nature (ould totally (ipe out and destroy e,ery ,estige of the te?tiles is one of science, and in the absence of any other testimony upon that point ho( can this court find as a scientific fact that the e,idence of Boctor Aells is not trueN )t appears from his deposition that he has made a life study of organic chemistry (hich co,ers the burning of te?tiles, and he testified as a fact that taking in consideration the intensi,e heat and duration of the fire 'there (ould ha,e been some of the original material left if there had been such a >uantity in the bodega at the time of the fire.' .hat some of the bolts (ere consumed o,er %* per centH others about % to * per centH and others still ha,e their original (rappings, and that the percentage of the entire damaged goods (as 'possibly %, not o,er * per cent,' and that it (ould ha,e been impossible 'for the same fire to ha,e entirely consumed %* bolts more of the same kind of goods.' .hat is a scientific fact upon (hich the only competent e,idence in the record is that of Boctor Aells. Oet, in the final analysis, the majority opinion of this court has set up its o(n judgment as to the force and effect of the fire against his, and found as a fact, based on its o(n judgment, that there (as almost a total destruction and loss of te?tiles (hich plaintiff claims (as in the bodega at the time of the fire. )n other (ords, the majority opinion holds that the deposition of Boctor Aells (as competent, and that it should ha,e been recei,ed in e,idence, but (ithout any e,idence to o,ercome or contradict it findN that it is not true. Oet it (as gi,en by a man (ho has de,oted his (hole life to the study of his profession, (ith &+8

)t (ill be noted that the majority opinion saysF ')n the light of this testimony,' but it does not point out or specify any of the testimony upon (hich it relies. )n truth and in fact the only competent e,idence upon that point is the testimony of Boctor Aells (ho has made a lifelong study of the decisi,e >uestion in,ol,ed in this case. &+%

V52. %%, =5VJ/-J$ !, 9!* &+% 2im Cuan 4y ,s. =orthern Assurance Co. Again it appears that in testifying, Boctor Aells (as sho(n samples of the te?tiles (hich (ere supposed to be in the bodega at the time of the fire, together (ith the samples of the te?tiles (hich (ere 'actually found in the debris after the fire,' kno(n as J?hibit 3, and his e,idence is based on his personal inspection of those samples (hich this court has ne,er seen. As stated, the decisi,e >uestion in this case is (hether the kind and >uality of the te?tiles (hich plaintiff claims (ere in the bodega at the time of the fire, as e,idenced by the samples submitted to Boctor Aells, (ould be consumed and all e,idence (iped out and destroyed by the fire, and again (e repeat that the only e,idence in the record on that point is that of Boctor Aells, and if his testimony is true, it must follo( that plaintiffLs claim (as false and fraudulent. @o( can this court ignore and entirely o,erlook the testimony of Boctor AellsN )n the face of his testimony, ho( can this court find as a fact that the te?tile goods (ere (holly consumed, (iped out, and destroyed by the fireN <pon (hat legal principle can this court set up its o(n judgment against a man (ho has made organic chemistry his chosen profession and in (hich he has had a lifelong e?perience, in particular, (hen on that ,ital point his e,idence is not refuted by any other (itnessN As the majority opinion finds 'the destruction (as so complete that e,en the places occupied by the ro(s of bo?es are not discernible in the photographs taken of the ruins.' )f Boctor AellLs testimony is true, 'the ro(s of bo?es' (ere not discernible after the fire, for the simple reason that the 'ro(s of bo?es' (ere not in the bodega at the time of the fire. Ae are clearly of the opinion that plaintiffLs claim (as false and fraudulent, and for such reasons the judgment of the lo(er court should be re,ersed. :2im Cuan 4y ,s. =orthern Assurance Co., %% Phil. &83D 9!*E;

&+8 P@)2)PP)=J $JP5$.4 A==5.A.JB 2im Cuan 4y ,s. =orthern Assurance Co. a lifelong e?perience, (ho is fair and impartial, and has no personal interest in the result. Ae ha,e been taught that >uestions of fact should be tried and decided upon the e,idence in the record, and that the testimony of one credible (itness is sufficient to establish any fact, in particular, (hen it is not contro,erted and there is no e,idence to dispute it. .he testimony of Boctor Aells (as gi,en after a personal inspection by him of e,erything (hich remained of all of the te?tiles after the fire, (hich (ere later sold for P6,***, and his testimony is founded on that personal inspection. @o( then can this court, after an inspection of a small portion of the remaining te?tiles, set up its o(n judgment against a person (ho has made a lifelong study of his profession, and (ho personally e?amined all of the remaining e,idence of the te?tiles after the fireN .he majority opinion saysF '.hat the inference (hich the appellant dra(s from the data supplied by the debris are not sufficiently con,incing to justify this court in re,ersing the judgmentH for although some remnants of unconsumed te?tiles (ere found in the ruins, the fire (as undoubtedly of great intensity, as more than one member of the fire department stated. )n the light of this testimony it cannot be considered (holly incredible that half of the iron bands might ha,e been entirely destroyed. .he suspicions engendered by the aspects of the proof abo,e discussed, and by other circumstances upon (hich counsel for the defense places stress, do not, in the opinion of a majority of the court, amount to a clear preponderance of the e,idence, such as ought to be demonstrated before the findings of a trial court can be re,ersed.'

Enr*:u,; +. "un !*., A44uran5, /A2C52/, J.F

receipt. $afael Jnri>uez, the administrator of the estate, testified that he had gone through the effects of the deceased and had found no letter of notification from the insurance company to /r. @errer. 5ur deduction from the e,idence on this issue must be that the letter of =o,ember &+, 9 6, notifying /r. @errer that his application had been accepted, (as prepared and signed in the local office of the insurance company, (as placed in the ordinary channels for transmission, but as far as (e kno(, (as ne,er actually mailed and thus (as ne,er recei,ed by the applicant. =ot forgetting our conclusion of fact, it ne?t becomes necessary to determine the la( (hich should be applied to the facts. )n order to reach our legal goal, the ob,ious signposts along the (ay must be noticed. <ntil >uite recently, all of the pro,isions concerning life insurance in the Philippines (ere found in the Code of Commerce and the Ci,il Code. )n the Code of Commerce, there formerly e?isted .itle V))) of -ook )) and 4ection ))) of .itle ))) of -ook ))), (hich dealt (ith insurance contracts. )n the Ci,il Code there formerly e?isted and presumably still e?ist, Chapters )) and )V, entitled insurance contracts and life annuities, respecti,ely, of .itle 0)) of -ook )V. 5n and after July , 9 %, there (as, ho(e,er, in force the )nsurance Act, =o. &8&6. Chapter )V of this Act concerns life and health insurance. .he Act e?pressly repealed .itle V))) of -ook )) and 4ection ))) of .itle ))) of -ook ))) of the Code of Commerce. .he la( of insurance is conse>uently no( found in the )nsurance Act and the Ci,il Code. Ahile, as just noticed, the )nsurance Act deals (ith life insurance, it is silent as to the methods to be follo(ed in order that there may be a contract of insurance 5n the other hand, the Ci,il Code, in article 3*&, not only describes a contract of life annuity markedly similar to the one (e are considering, but in t(o other articles gi,es strong clues as to the proper disposition of the case 1or instance, article + of the Ci,il Code pro,ides that ')n &6!

.his is an action brought by the plaintiff as administrator of the estate of the late Joa>uin /a. @errer to reco,er from the defendant life insurance company the sum of P+,*** paid by the deceased for a life annuity. .he trial court ga,e judgment for the defendant. Plaintiff appeals. .he undisputed facts are theseF 5n 4eptember &8, 9 6, Joa>uin @errer made application to the 4un 2ife Assurance Company of Canada through its office in /anila for a life annuity. .(o days later he paid the sum of P+,*** to the manager of the companyLs /anila office and (as gi,en a receipt reading as follo(sF '/A=)2A, ). 1., &+ de septiembre, 9 6. 'P$5V)4)5=A2 $JCJ)P. 'P+,***

'$ecibT la suma de seis mil pesos de Bon Joa>uTn @errer de /anila como prima de la $enta Vitalicia solicitada por dicho Bon Joa>uin @errer hoy, sujeta al e?amen mUdico y aprobaciVn de la 5ficina Central de la CompaPTa.' .he application (as immediately for(arded to the head office of the company at /ontreal, Canada. 5n =o,ember &+, 9 6, the head office ga,e notice of acceptance by cable to /anila. DAhether on the same day the cable (as recei,ed notice (as sent by the /anila office to @errer thatthe application had been accepted, is a disputed point, (hich (ill be discussed later.E 5n Becember 8, 9 6, the policy (as issued at /ontreal. 5n Becember 3, 9 6, attorney Aurelio A. .orres (rote to the /anila office of the company stating that @errer desired to (ithdra( his application. .he follo(ing day the local office replied to /r. .orres, stating that the policy had been issued, and called attention to the notification of =o,ember &+, 9 6. .his letter (as recei,ed by /r. .orres on the morning of Becember & , 9 6. /r. @errer died on Becember &*, 9 6. As abo,e suggested, the issue of fact raised by the e,idence is (hether @errer recei,ed notice of acceptance of his application. .o resol,e this >uestion, (e propose to go directly to the e,idence of record. .he chief clerk of the /anila office of the 4un 2ife Assurance Company of Canada at the time of the trial testified that he prepared the letter introduced in e,idence as J?hibit !, of date =o,ember &+, 9 6, and handed it to the local manager, /r. J. J. Ahite, for signature. .he (itness admitted on cross" e?amination that after preparing the letter and gi,ing it to the manager, he kne( nothing of (hat became of it. .he local manager, /r. Ahite, testified to ha,ing recei,ed the cablegram accepting the application of /r. @errer from the home office on =o,ember &+, 9 6. @e said that on the same day he signed a letter notifying /r. @errer of this acceptance. .he (itness further said that letters, after being signed, (ere sent to the chief clerk and placed on the mailing desk f or transmission. .he (itness could not tell if the letter had e,er actually been placed in the mails. /r. .uason, (ho (as the chief clerk, on =o,ember &+, 9 6, (as not called as a (itness. 1or the defense, attorney /anuel .orres testified to ha,ing prepared the (ill of Joa>uin /a. @errer, that on this occasion /r. @errer mentioned his application for a life annuity, and that he said that the only document relating to the transaction in his possession (as the pro,isional &6&

V52. 8 , =5VJ/-J$ &9, 9&*. &6! Jnri>uez ,s. 4un 2ife Assurance Co. of Canada. matters (hich are go,erned by special la(s, any deficiency of the latter shall be supplied by the pro,isions of this Code.' 5n the supposition, therefore, (hich. is incontestable, that the special la( on the subject of insurance is deficient in enunciating the principles go,erning acceptance, the subject" matter of the Ci,il Code, if there be any, (ould be controlling. )n the Ci,il Code is found article &+& pro,iding that 'Consent is sho(n by the concurrence of offer and acceptance (ith respect to the thing and the consideration (hich are to constitute the contract. An acceptance made by letter shall not bind the person making the offer e?cept from the time it came to his kno(ledge. .he contract, in such case, is presumed to ha,e been entered into at the place (here the offer (as made.' .his latter article is in opposition to the pro,isions of article %8 of the Code of Commerce. )f no mistake has been made in announcing the successi,e steps by (hich (e reach a conclusion, then the only duty remaining is for the court to apply the la( as it is found. .he legislature in its (isdom ha,ing enacted a ne( la( on insurance, and e?pressly repealed the pro,isions in the Code of Commerce on the same subject, and ha,ing thus left a ,oid in the commercial la(, ,it (ould seem logical to make use of the only pertinent pro,ision of la( found in the Ci,il Code, closely related to the chapter concerning life annuities. .he Ci,il Code rule, that an acceptance made by letter shall bind the person making the offer only from the date it came to his kno(ledge, may not be the best e?pression of modern commercial usage. 4till it must be admitted that its enforcement a,oids uncertainty and tends to security =ot only

&6& P@)2)PP)=J $JP5$.4 A==5.A.JB Jnri>uez ,s. 4un 2ife Assurance Co. of Canada.

this, but in order that the principle may not be taken too lightly, let it be noticed that it is identical (ith the principles announced by a considerable number of respectable.courts in the <nited 4tates. .he courts (ho take this ,ie( ha,e e?pressly held that an acceptance of an offer of insurance not actually or constructi,ely communicated to the proposer does not make a contract. 5nly &68

&68 P@)2)PP)=J $JP5$.4 A==5.A.JB Jnri>uez ,s. 4un 2ife Assurance Co. of Canada,. the mailing of acceptance, it has been said, completes the contract of insurance, as the locus pWnitentiX is ended (hen the acceptance has passed beyond the control of the party. D) Joyce, .he 2a( of )nsurance, pp. &!%, &88.E )n rUsumU, therefore, the la( applicable to the case is found to be the second paragraph of article &+& of the Ci,il Code pro,iding that an acceptance made by letter shall not bind the person making the offer e?cept from the time it came to his kno(ledge. .he pertinent fact is, that according to the pro,isional receipt, three things had to be accomplished by the insurance company before there (as a contractF D E .here had to be a medical e?amination of the applicantH D&E there had to be appro,al of the application by the head office of the companyH and D!E this appro,al had in some (ay to be communicated by the company to the applicant. .he further admitted facts are that the head office in /ontreal did accept the application, did cable the /anila office to that effect, did actually issue the policy and did, through its agent in /anila, actually (rite the letter of notification and place it in the usual channels for transmission to the addressee. .he fact as to the letter of notification thus fails to concur (ith the essential elements of the general rule pertaining to the mailing and deli,ery of mail matter as announced by the American courts, namely, (hen a letter or other mail matter is addressed and mailed (ith postage prepaid there is a rebuttable presumption of fact that it (as recei,ed by the addressee as soon as it could ha,e been transmitted to him in the ordinary course of the mails. -ut if any one of these elemental facts fails to appear, it is fatal to the presumption. 1or instance, a letter (ill not be presumed to ha,e been recei,ed by the addressee unless it is sho(n that it (as deposited in the post"office, properly addressed and stamped. D4ee && C. J., 9+, and 89 2. $. A. :=. 4.;, pp. 8%3, et se>., notes.E Ae hold that the contract for a life annuity in the case at bar (as not perfected because it has not been pro,ed satisfactorily that the acceptance of the application e,er came to the kno(ledge of the applicant. &6%

V52. 8 , BJCJ/-J$ 6, 9&*. &6% )n re -asa. Judgment is re,ersed, and the plaintiff shall ha,e and reco,er from the defendant the sum of P+,*** (ith legal interest from =o,ember &*, 9 3, until paid, (ithout special finding as to costs in either instance. 4o ordered. /apa, C. J. Araullo, A,ancePa, and Villamor, JJ., concur. Johnson, J., dissents. Judgment re,ersed. :Jnri>uez ,s. 4un 2ife Assurance Co. of Canada, 8 Phil. &+9D 9&*E;

ANG GIO< C7IP, #o*n= >u4*n,44 un#,r /3, na2, an# 4/y1, o. 7ua $,, <on= "*, plaintiff"appellee, ,s. "PRING IE!& IRE ? %ARINE IN"URANCE CO%PAN', defendant"appellant. C.A. &o*ral for appellant. Paredes and Buencamino for appellee. @i**s and %cDonoug) and #amon $zaeta as amici curiae.

A)is polic+ is su*(ect to t)e )ereon attac)ed 4$rdinar+ &)ort Period #ate &cale4Aarranties A K 1, Co"insurances Clause 'and .hree 1ourths 2oss Clause,' 7)ic) are forming part of same. Co" insurance declaredF 'P&*,***. Q 4un )nsurance 5ffice 2td. DY K 4E.' DJmphasis inserted.E 4ecurely pasted on the left hand margin of the face of the policy are fi,e (arranties and special clauses. 5ne of them is (arranty 1, specially referred to on the face of the policy, reading in part as follo(sF AA$$A=.O 1 )t is hereby declared and agreed that during the currency of this policy no hazardous goods be stored in the -uilding to (hich this insurance applies or in any building communicating there(ith, pro,ided, al(ays, ho(e,er, that the )nsured be permitted to stored a small >uantity of the hazardous goods specified belo(, but not e?ceeding in all ! per cent of the total ,alue of the (hole of the goods or merchandise contained in said (arehouse, ,izH . . . . .he applicable la( is found in the )nstance Act, Act =o. &8&6, as amended, section +% readingF 'J,ery e?press (arranty, made at or before the e?ecution of a policy, must be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy, as making a part of it.' As the Philippine la( (as taken ,erbatim from the la( of California, in accordance (ith (ell settled canons of statutory construction, the court should follo( in fundamental points, at least, the construction placed by California courts on a California la(. <nfortunately the researches of counsel re,eal no authority coming from the courts of California (hich is e?actly on all fours (ith the case before us. @o(e,er, there are certain consideration lying at the basis of California la( and certain indications in the California decisions (hich point the (ay for the decision in this case 4ection +% of the Philippine )nsurance Act corresponds to section &+*% of the Ci,il Cod of California. .he comments of the Code J?aminers of California disclose that the language of section &+*% (as >uite different from that under the Code as adopted in 36&. .hat language (as found too harsh as to insurance companies. .he Code J?aminersL notes stateF '.he amendment restores the la( as it e?isted pre,ious to the CodeF &ee Parsons on /aritime 2a(, *+, and Phillips on )nsurance, sec. 6%+.' .he passage referred to in Philips on )nsurance, (as (orded by the author as follo(sF 'Any e?press (arranty or condition is al(ays a part of the policy, but, like any other part of an e?press contract, may be (ritten in the margin, or contained in proposals or documents e?pressly referred to in the policy, and so made a part of it.' .he annotator of the Ci,il Code of California, after setting forth these facts, addsF . . . .he section as it no( reads is in harmony (ith the rule that a (arranty may be contained in another instrument than the policy (hen e?pressly referred to in the policy as forming a part thereofF . . . . Ahat (e ha,e abo,e stated has been paraphrased from the decision of the California Court of Appeals in the case of )saac <pham Co. vs. <nited 4tates 1idelity K #uaranty Co. D : 9&&;, & Pac., 3*9E, and thus discloses the attitude of the California courts. 2ike(ise in the 1ederal courts, in the case of Conner vs. /anchester Assur. Co. D: 9*8;, !* 1ed., 68!E, section &+*% of the Ci,il Code of California came under obser,ation, and it (as said that it 'is in effect an affirmance of the generally accepted doctrine applicable to such contracts.' Ae, therefore, think it (rong to hold that the California la( represents a radical departure from the basic principles

%A!CO!%, J.: An important >uestion in the la( of insurance, not heretofore considered in this jurisdiction and, according to our information, not directly resol,ed in California from (hich 4tate the Philippine )nsurance Act (as taken, must be decided on this appeal for the future guidance of trial courts and of insurance companies doing business in the Philippine )slands. .his >uestion, flatly stated, is (hether a (arranty referred to in the policy as forming part of the contract of insurance and in the form of a rider to the insurance policy, is null and ,oid because not complying (ith the Philippine )nsurance Act. .he court has had the benefit of instructi,e briefs and memoranda from the parties and has also been assisted by a (ell prepared brief submitted on behalf of amici curiae. .he admitted facts are theseF Ang #iok Chip doing business under the name and style of @ua -ee Yong 4i (as formerly the o(ner of a (arehouse situated at =o. +8! Calle $eina $egente, City of /anila. .he contents of the (arehouse (ere insured (ith the three insurance companies for the total sum of P+*,***. 5ne insurance policy, in the amount of P *,***, (as taken out (ith the 4pringfield 1ire K /arine )nsurance Company. .he (arehouse (as destroyed by fire on January , 9&3, (hile the policy issued by the latter company (as in force. Predicated on this policy the plaintiff instituted action in the Court of 1irst )nstance of /anila against the defendant to reco,er a proportional part of the loss coming to P3, 6*.%9. 1our special defenses (ere interposed on behalf of the insurance company, one being planted on a ,iolation of (arranty 1 fi?ing the amount of hazardous goods (hich might be stored in the insured building. .he trial judge in his decision found against the insurance company on all points, and ga,e judgment in fa,or of the plaintiff for the sum of P3, 33.68. 1rom this judgment the insurance company has appealed, and it is to the first and fourth errors assigned that (e (ould address particular attention. Considering the result at (hich (e arri,e, it is unnecessary for us to discuss three of the four special defenses (hich (ere made by the insurance company. Ae think, ho(e,er, that it (ould be a reasonable deduction to conclude that more than ! per cent of the total ,alue of the merchandise contained in the (arehouse constituted hazardous goods, and that this per cent reached as high as !9. Ae place reliance on the consular in,oices and on the testimony of the adjuster, @erridge. @a,ing thus s(ept to one side all inter,ening obstacle, the legal >uestion recurs, as stated in the beginning of this decision, of (hether or not (arranty 1 (as null and ,oid. .o place this >uestion in its proper light, (e turn to the policy issued by the 4pringfield 1ire K /arine )nsurance Company in fa,or of the plaintiff. .he description of the risk in this policy is as follo(sFla7p)il.net Aen t)ousand pesos P)ilippine Currenc+. Q 5n general non-)azardous merc)andise, chiefly consisting of chucherias, also produce, Cacao, 1lour, all the property of the )nsured, or held by them in trust, on commission or on joint account (ith others, or for (hich he is responsible, (hile contained during the currency of this policy in the godo(n, situate =o. +8! Calle $eina $egent. . . .

go,erning the la( of insurance. Ae are more inclined to belie,e that the codification of the la( of California had e?actly the opposite purpose, and that in the language of the 1ederal court it (as but an affirmance of the generally accepted doctrine applicable to such contracts. .his being true, (e turn to t(o of such (ell recognized doctrines. )n the first place, it is (ell settled that a rider attached to a policy is a part of the contract, to the same e?tent and (ith like effect as it actually embodied therein. D) Couch, Cyclopedia of )nsurance 2a(, sec. %9.E )n the second place, it is e>ually (ell settled that an e?press (arranty must appear upon the face of the policy, or be clearly incorporated therein and made a part thereof by e?plicit reference, or by (ords clearly e,idencing such intention. D8 Couch, Cyclopedia of )nsurance 2a(, sec. 3+&.E 4ection +% of the )nsurance Act and its counterpart, section &+% of the Ci,il Code of California, (ill bear analysis as tested by reason and authority. .he la( says that e,ery e?press (arranty must be 'contained in the policy itself.' .he (ord 'contained,' according to the dictionaries, means 'included,' inclosed,' 'embraced,' 'comprehended,' etc. Ahen, therefore, the courts speak of a rider attached to the policy, and thus 'embodied' therein, or of a (arranty 'incorporated' in the policy, it is belie,ed that the phrase 'contained in the policy itself' must necessarily include such rider and (arranty. As to the alternati,e relating to 'another instrument,' 'instrument' as here used could not mean a mere slip of paper like a rider, but something akin to the policy itself, (hich in section 83 of the )nsurance Act is defined as '.he (ritten instrument, in (hich a contract of insurance is set forth.' )n California, e,ery paper (riting is not necessarily an 'instrument' (ithin the statutory meaning of the term. .he (ord 'instrument has a (ell defined definition in California, and as used in the Codes in,ariably means some (ritten paper or instrument signed and deli,ered by one person to another, transferring the title to, or gi,ing a lien, on property, or gi,ing a right to debt or duty. D@oag vs. @o(ard : 33*;, %% Cal., %+8H People vs. 1raser: 9 !;, !6 Pac., &6+.E )n other (ords, the rider, (arranty 1, is contained in the policy itself, because by the contract of insurance agreed to by the parties it is made to form a part of the same, but is not another instrument signed by the insured and referred to in the policy as forming a part of it. Again, referring to the jurisprudence of California, another rule of insurance adopted in that 4tate is in point. )t is admitted that the policy before us (as accepted by the plaintiff. .he receipt of this policy by the insured (ithout objection binds both the acceptor and the insured to the terms thereof. .he insured may not thereafter be heard to say that he did not read the policy or kno( its terms, since it is his duty to read his policy and it (ill be assumed that he did so. )n California Jurisprudence, ,ol. 8, p. 8&6, from (hich these statements are taken (ith citations to California decisions, it is added that it has been held that (here the holder of a policy disco,ers a mistake made by himself and the local agent in attaching the (rong rider to his application, elects to retain the policy issued to him, and neither re>uests the issuance of a different one nor offers to pay the premium re>uisite to insure against the risk (hich he belie,e the rider to co,er, he thereby accepts the policy. Ae are gi,en to understand, and there is no indication to the contrary, that (e ha,e here a standard insurance policy. Ae are further gi,en to understand, and there is no indication to the contrary, that the issuance of the policy in this case (ith its attached rider conforms to (ell established practice in the Philippines and else(here. Ae are further gi,en to understand, and there is no indication to the contrary, that there are no less than si?ty"nine insurance companies doing business in the Philippine )slands (ith outstanding policies more or less similar to the one in,ol,ed in this case, and that to nullify such policies (ould place an unnecessary hindrance in the transaction of insurance business in the Philippines. .hese are matters of public policy. Ae cannot belie,e that it (as e,er the legislati,e intention to insert in the Philippine 2a( on )nsurance an oddity, an incongruity, entirely out of harmony (ith the la( as found in other jurisdiction, and destructi,e of good business practice. Ae ha,e studied this case carefully and ha,ing done so ha,e reached the definite conclusion that (arranty 1, a rider attached to the face of the insurance policy, and referred to in contract of insurance, is ,alid and sufficient under section +% of the )nsurance Act. Accordingly, sustaining the first and fourth

errors assigned, and it being unnecessary to discuss the remaining errors, the result (ill be to re,erse the judgment appealed from and to order the dismissal of the complaint, (ithout special pronouncement as to costs in either instance. &treet, Villamor, $strand, and #omualdez, ;;., concur.

G.R. No. !(18@@9

No+,2>,r 29, 1920 !I%, plaintiff"appellant, CO%PAN' O

PI!AR C. &E ,s. "UN !I E A""URANCE CANA&A, defendant"appellee. &anz and Luzuriaga Co)n and Fis)er for appellee.

confirm this agreement by issuing a policy on said application (hen the same shall be submitted to the head office in /ontreal.' .o reenforce the same there follo(s the negati,e condition Q 4hould the company not issue such a policy, then this agreement shall be null and ,oid a* initio, and the company shall be held not to ha,e been on the risk.' Certainly, language could hardly be used (hich (ould more clearly stipulate that the agreement should not go into effect until the home office of the company should confirm it by issuing a policy. As (e read and understand the so"called pro,isional policy it amounts to nothing but an ackno(ledgment on behalf of the company, that it has recei,ed from the person named therein the sum of money agreed upon as the first yearLs premium upon a policy to be issued upon the application, if the application is accepted by the company. )t is of course a primary rule that a contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents. 4o long as an application for insurance has not been either accepted or rejected, it is merely an offer or proposal to make a contract. .he contract, to be binding from the date of the application, must ha,e been a completed contract, one that lea,es nothing to be done, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect. .here can be no contract of insurance unless the minds of the parties ha,e met in agreement. 5ur ,ie( is, that a contract of insurance (as not here consummated by the parties.la7p)Bl.net Appellant relies on Joyce on )nsurance. -eginning at page &%!, of Volume ), Joyce states the general rule concerning the agentLs receipt pending appro,al or issuance of policy. .he first rule (hich Joyce lays do(n is thisF )f the act of acceptance of the risk by the agent and the gi,ing by him of a receipt, is (ithin the scope of the agentLs authority, and nothing remains but to issue a policy, then the receipt (ill bind the company. .his rule does not apply, for (hile here nothing remained but to issue the policy, this (as made an e?press condition to the contract. .he second rule laid do(n by Joyce is thisF Ahere an agreement is made bet(een the applicant and the agent (hether by signing an application containing such condition, or other(ise, that no liability shall attach until the principal appro,es the risk and a receipt is gi,en buy the agent, such acceptance is merely conditional, and it subordinated to the act of the company in appro,ing or rejectingH so in life insurance a 'binding slip' or 'binding receipt' does not insure of itself. .his is the rule (hich (e belie,e applies to the instant case. .he third rule announced by Joyce is thisF Ahere the acceptance by the agent is (ithin the scope of his authority a receipt containing a contract for insurance for a specific time (hich is not absolute but conditional, upon acceptance or rejection by the principal, co,ers the specified period unless the risk is declined (ithin that period. .he case cited by Joyce to substantiate the last principle is that a #oodfello( vs. .imes K -eacon Assurance Com. D 6 <. C. 7. -., 8 E, not a,ailable. .he t(o cases most nearly in point come from the federal courts and the 4upreme Court of Arkansas. )n the case of 4teinle vs. =e( Oork 2ife )nsurance Co. D: 396;, 3 1ed., 839[ the facts (ere that the amount of the first premium had been paid to an insurance agent and a receipt gi,en therefor. .he receipt, ho(e,er, e?pressly declared that if the application (as accepted by the company, the insurance shall take effect from the date of the application but that if the application (as not accepted, the money shall be returned. .he trite decision of the circuit court of appeal (as, '5n the conceded facts of this case, there (as no contract to life insurance perfected and the judgment of the circuit court must be affirmed.' )n the case of Cooksey vs. /utual 2ife )nsurance Co. D: 9*8;, 6! Ark., 6E the person applying for the life insurance paid and amount e>ual to the first premium, but the application and the receipt for the money paid, stipulated that the insurance (as to become effecti,e only (hen the application (as appro,ed and the policy issued. .he court held that the transaction did not amount to an agreement for preliminary or temporary insurance. )t (as saidF

for

appellant.

%A!CO!%, J.: .his is an appeal by plaintiff from an order of the Court of 1irst )nstance of Zamboanga sustaining a demurrer to plaintiffLs complaint upon the ground that it fails to state a cause of action. As the demurrer had the effect of admitting the material facts set forth in the complaint, the facts are those alleged by the plaintiff. 5n July +, 9 6, 2uis 2im y #arcia of Zamboanga made application to the 4un 2ife Assurance Company of Canada for a policy of insurance on his life in the sum of P%,***. )n his application 2im designated his (ife, Pilar C. de 2im, the plaintiff herein, as the beneficiary. .he first premium of P8!! (as paid by 2im, and upon such payment the company issued (hat (as called a 'pro,isional policy.' 2uis 2im y #arcia died on August &!, 9 6, after the issuance of the pro,isional policy but before appro,al of the application by the home office of the insurance company. .he instant action is brought by the beneficiary, Pilar C. de 2im, to reco,er from the 4un 2ife Assurance Company of Canada the sum of P%,***, the amount named in the pro,isional policy. .he 'pro,isional policy' upon (hich this action rests reads as follo(sF #eceived Dsubject to the follo(ing stipulations and agreementsE the sum of four hundred and thirty"three pesos, being the amount of the first yearLs premium for a 2ife Assurance Policy on the life of /r. 2uis B. 2im y #arcia of Zamboanga for P%,***, for (hich an application dated the +th day of July, 9 6, has been made to the 4un 2ife Assurance Company of Canada. .he abo,e"mentioned life is to be assured in accordance (ith the terms and conditions contained or inserted by the Company in the policy (hich may be granted by it in this particular case for four mont)s onl+ from the date of the application, pro,ided that the Company shall confirm this agreement by issuing a policy on said application (hen the same shall be submitted to the @ead 5ffice in /ontreal. 4hould the Company not issue such a policy, then this agreement shall be null and ,oid a* initio, and the Company shall be held not to ha,e been on the risk at all, but in such case the amount herein ackno(ledged shall be returned. :4JA2.; D4gd.E .. -. /ACA<2AO, President. D4gd.E A. 1. Peters, Agent. 5ur duty in this case is to ascertain the correct meaning of the document abo,e >uoted. A perusal of the same many times by the (riter and by other members of the court lea,es a decided impression of ,agueness in the mind. Apparently it is to be a pro,isional policy 'for four months only from the date of this application.' Ae use the term 'apparently' ad,isedly, because immediately follo(ing the (ords fi?ing the four months period comes the (ord 'pro,ided' (hich has the meaning of 'if.' 5ther(ise stated, the policy for four months is e?pressly made subjected to the affirmati,e condition that 'the company shall

)t is not an unfamiliar custom among life insurance companies in the operation of the business, upon receipt of an application for insurance, to enter into a contract (ith the applicant in the shape of a so"called 'binding receipt' for temporary insurance pending the consideration of the application, to last until the policy be issued or the application rejected, and such contracts are upheld and enforced (hen the applicant dies before the issuance of a policy or final rejection of the application. )t is held, too, that such contracts may rest in parol. Counsel for appellant insists that such a preliminary contract for temporary insurance (as entered into in this instance, but (e do not think so. 5n the contrary, the clause in the application and the receipt gi,en by the solicitor, (hich are to be read together, stipulate e?pressly that the insurance shall become effecti,e only (hen the 'application shall be appro,ed and the policy duly signed by the secretary at the head office of the company and issued.' )t constituted no agreement at all for preliminary or temporary insuranceH /ohrstadt ,s. /utual 2ife )ns. Co., % 1ed., 3 , %& C. C. A., +6%H 4teinle ,s. =e( Oork 2ife )ns. Co., 3 1ed., 839, &+ C. C. A., 89 .' D4ee further Aeinfeld ,s. /utual $eser,e 1und 2ife AssLn. : 39&;, %! 1ed, &*3L /ohrstadt ,s. /utual 2ife )nsurance Co. : 9*&;, % 1ed., 3 H )nsurance co. ,s. OoungLs Administrator : 36%;, 9* <. 4., 3%H Chamberlain ,s. Prudential )nsurance Company of America : 9* ;, *9 Ais., 8H 4ha(nee /ut. 1ire )ns. Co. ,s. /cClure : 9 !;, !9 5kla., %*9H Borman ,s. Connecticut 1ire )ns. Co. : 9 8;, % contra, 4tarr ,s. /utual 2ife )ns. Co. : 9*%;, 8 Aash., &&3.E Ae are of the opinion that the trial court committed no error in sustaining the demurrer and dismissing the case. )t is to be noted, ho(e,er, that counsel for appellee admits the liability of the company for the return of the first premium to the estate of the deceased. )t is not to be doubted but that the 4un 2ife Assurance Company of Canada (ill immediately, on the promulgation of this decision, pay to the estate of the late 2uis 2im y #arcia the of P8!!. .he order appealed from, in the nature of a final judgment is affirmed, (ithout special finding as to costs in this instance. 4o ordered. %apa, C.;., ;o)nson, Araullo, AvanceCa and Villamor, ;;., concur.

#.$. =o. *99!6. /arch & , 998.\ BJVJ25P/J=. -A=Y 51 .@J P@)2)PP)=J4, petitioner, ,s. C5<$. 51 APPJA24 and the J4.A.J 51 .@J 2A.J J<A= -. BA=4, represented by CA=B)BA #. BA=4, and the B-P /5$.#A#J $JBJ/P.)5= )=4<$A=CJ P552, respondents. Ci,il 2a(H ContractsH )nsuranceH Ahere there (as no perfected contract of insurance, B-P /$) Pool cannot be held liable on the contract that does not e?ist.Q<ndisputably, the po(er to appro,e /$) applications is lodged (ith the B-P /$) Pool. .he pool, ho(e,er, did not appro,e the application of Bans. .here is also no sho(ing that it accepted the sum of P ,86+.**, (hich B-P credited to its account (ith full kno(ledge that it (as payment for Bans9s premium. .here (as, as a result, no perfected contract of insuranceH hence, the B-P /$) Pool cannot be held liable on a contract that does not e?ist. 4ameH AgencyH 5bligation of the AgentH Agent acting as such is not personally liable unless he e?pressly binds himself or e?ceeds his authority.Q<nder Article 396 of the Ci,il Code of the Philippines, ]the agent (ho acts as such is not personally liable to the party (ith (hom he contracts, unless he e?pressly binds himself or e?ceeds the limits of ^^^^^^^^^^^^^^^

D$efractories Corporation ,. )ntermediate Appellate Court, 6+ 4C$A %!9 : 939;H Choa .ek @ee ,. Philippine Publishing Co., !8 Phil. 886 : 9 +;E. 4peculati,e damages are too remote to be included in an accurate estimate of damages D4un 2ife Assurance ,. $ueda @ermanos, !6 Phil. 388 : 9 3;E. 4ameH 4ameH =o proof of pecuniary loss is re>uired in the assessment of moral damages.QAhile Bans is not entitled to compensatory damages, he is entitled to moral damages. =o proof of pecuniary loss is !6&

!6& 4<P$J/J C5<$. $JP5$.4 A==5.A.JB Be,elopment -ank of the Philippines ,s. Court of Appeals re>uired in the assessment of said kind of damages DCi,il Code of the Philippines, Art. && +E. .he same may be reco,ered in acts referred to in Article && 9 of the Ci,il Code. PJ.).)5= for re,ie( on certiorari of a decision of the Court of Appeals.

.he facts are stated in the opinion of the Court. \ 1)$4. B)V)4)5=. !6 5ffice of the 2egal Counsel for petitioner. $eyes, 4antayana, /olo K Alegre for B-P /ortgage $edemption )nsurance Pool. 7<)A45=, J.F

V52. &! , /A$C@ & , 998 !6 Be,elopment -ank of the Philippines ,s. Court of Appeals his authority (ithout gi,ing such party sufficient notice of his po(ers._ 4ameH 4ameH 4ameH 2iability of the agent (ho e?ceeds the scope of his authority depends upon (hether the !rd person is a(are of the limits of agent9s po(ers.Q.he liability of an agent (ho e?ceeds the scope of his authority depends upon (hether the third person is a(are of the limits of the agent9s po(ers. .here is no sho(ing that Bans kne( of the limitation on B-P9s authority to solicit applications for /$). 4ameH 4ameH 4ameH )f the third person dealing (ith an agent is una(are of the limits of the authority conferred by the principal on the agent and the third person has been decei,ed by the non"disclosure by the agent, then the latter is liable for damages to him.Q)f the third person dealing (ith an agent is una(are of the limits of the authority conferred by the principal on the agent and he Dthird personE has been decei,ed by the non"disclosure thereof by the agent, then the latter is liable for damages to him DV .olentino, Commentaries and Jurisprudence on the Ci,il Code of the Philippines, p. 8&& : 99&;, citing 4entencia :Cuba; of 4eptember &%, 9*6E. .he rule that the agent is liable (hen he acts (ithout authority is founded upon the supposition that there has been some (rong or omission on his part either in misrepresenting, or in affirming, or concealing the authority under (hich he assumes to act D1rancisco, V., Agency !*6 : 9%&;, citing @all ,. 2auderdale, 8+ =.O. 6*, 6%E. )nasmuch as the non"disclosure of the limits of the agency carries (ith it the implication that a deception (as perpetrated on the unsuspecting client, the pro,isions of Articles 9, &* and & of the Ci,il Code of the Philippines come into play. 4ameH BamagesH 5ne is entitled to an ade>uate compensation only for such pecuniary loss suffered by him as he has duly pro,ed.Q5ne is entitled to an ade>uate compensation only for such pecuniary loss suffered by him as he has duly pro,ed DCi,il Code of the Philippines, Art. & 99E. Bamages, to be reco,erable, must not only be capable of proof, but must be actually pro,ed (ith a reasonable degree of certainty

.his is a petition for re,ie( on certiorari under $ule 8% of the $e,ised $ules of Court to re,erse and set aside the decision of the Court of Appeals in CA"#.$. CV =o. &+8!8 and its resolution denying reconsideration thereof. Ae affirm the decision of the Court of Appeals (ith modification. ) )n /ay 936, Juan -. Bans, together (ith his (ife Candida, his son and daughter"in"la(, applied for a loan of P%**,***.** (ith the Be,elopment -ank of the Philippines DB-PE, -asilan -ranch. As the principal mortgagor, Bans, then 6+ years of age, (as ad,ised by B-P to obtain a mortgage redemption insurance D/$)E (ith the B-P /ortgage $edemption )nsurance Pool DB-P /$) PoolE. A loan, in the reduced amount of P!**,***.**, (as appro,ed by B-P on August 8, 936 and released on August , 936. 1rom the proceeds of the loan, B-P deducted the amount of P ,86+.** as payment for the /$) premium. 5n August %, 936, Bans accomplished and submitted the ]/$) Application for )nsurance_ and the ]@ealth 4tatement for B-P /$) Pool._ 5n August &*, 936, the /$) premium of Bans, less the B-P ser,ice fee of * percent, (as credited by B-P to the sa,ings account of the B-P /$) Pool. Accordingly, the B-P /$) Pool (as ad,ised of the credit. !6!

V52. &! , /A$C@ & , 998 !6! Be,elopment -ank of the Philippines ,s. Court of Appeals 5n 4eptember !, 936, Bans died of cardiac arrest. .he B-P, upon notice, relayed this information to the B-P /$) Pool. 5n 4eptember &!, 936, the B-P /$) Pool notified B-P that

Bans (as not eligible for /$) co,erage, being o,er the acceptance age limit of +* years at the time of application. 5n 5ctober & , 936, B-P apprised Candida Bans of the disappro,al of her late husband9s /$) application. .he B-P offered to refund the premium of P ,86+.** (hich the deceased had paid, but Candida Bans refused to accept the same, demanding payment of the face ,alue of the /$) or an amount e>ui,alent to the loan. 4he, like(ise, refused to accept an e? gratia settlement of P!*,***.**, (hich the B-P later offered. 5n 1ebruary *, 939, respondent Jstate, through Candida Bans as amdinistratri?, filed a complaint (ith the $egional .rial Court, -ranch ), -asilan, against B-P and the insurance pool for ]Collection of 4um of /oney (ith Bamages._ $espondent Jstate alleged that Bans became insured by the B-P /$) Pool (hen B-P, (ith full kno(ledge of Bans9 age at the time of application, re>uired him to apply for /$), and later collected the insurance premium thereon. $espondent Jstate therefore prayedF D E that the sum P !9,%**.**, (hich it paid under protest for the loan, be reimbursedH D&E that the mortgage debt of the deceased be declared fully paidH and D!E that damages be a(arded. .he B-P and the B-P /$) Pool separately filed their ans(ers, (ith the former asserting a cross"claim against the latter. At the pre"trial, B-P and the B-P /$) Pool admitted all the documents and e?hibits submitted by respondent Jstate. As a result of these admissions, the trial court narro(ed do(n the issues and, (ithout opposition from the parties, found the case ripe for summary judgment. Conse>uently, the trial court ordered the parties to submit their respecti,e position papers and documentary e,idence, (hich may ser,e as basis for the judgment. 5n /arch *, 99*, the trial court rendered a decision in fa,or of respondent Jstate and against B-P. .he B-P /$) Pool, ho(e,er, (as absol,ed from liability, after the trial court found no pri,ity of contract bet(een it and the deceased. .he trial court declared B-P in estoppel for ha,ing led Bans into applying for /$) and actually collecting the premium and the ser,ice fee, despite kno(ledge of his age ineligibility. .he dispositi,e portion !68

reconsideration (as denied in a resolution dated April &*, 99!. @ence, this recourse. )) Ahen Bans applied for /$), he filled up and personally signed a ]@ealth 4tatement for B-P /$) Pool_ DJ?h. ]%"-ank_E (ith the follo(ing declarationF ]) hereby declare and agree that all the statements and ans(ers contained herein are true, complete and correct to the best of my kno(ledge and belief and form part of my application for insurance. )t is understood and agreed that no insurance co,erage shall be effected unless and until this application is appro,ed and the full premium is paid during my continued good health_ D$ecords, p. 8*E. <nder the aforementioned pro,isions, the /$) co,erage shall take effectF D E (hen the application shall be appro,ed by the !6%

V52. &! , /A$C@ & , 998 !6% Be,elopment -ank of the Philippines ,s. Court of Appeals insurance poolH and D&E (hen the full premium is paid during the continued good health of the applicant. .hese t(o conditions, being joined conjuncti,ely, must concur. <ndisputably, the po(er to appro,e /$) applications is lodged (ith the B-P /$) Pool. .he pool, ho(e,er, did not appro,e the application of Bans. .here is also no sho(ing that it accepted the sum of P ,86+.**, (hich B-P credited to its account (ith full kno(ledge that it (as payment for Bans9s premium. .here (as, as a result, no perfected contract of insuranceH hence, the B-P /$) Pool cannot be held liable on a contract that does not e?ist. .he liability of B-P is another matter. )t (as B-P, as a matter of policy and practice, that re>uired Bans, the borro(er, to secure /$) co,erage. )nstead of allo(ing Bans to look for his o(n insurance carrier or some other form of insurance policy, B-P compelled him to apply (ith the B-P /$) Pool for /$) co,erage. Ahen Bans9s loan (as released on August , 936, B-P already deducted from the proceeds thereof the /$) premium. 1our days later, B-P made Bans fill up and sign his application for /$), as (ell as his health statement. .he B-P later submitted both the application form and health statement to the B-P /$) Pool at the B-P /ain -uilding, /akati, /etro /anila. As ser,ice fee, B-P deducted * percent of the premium collected by it from Bans. )n dealing (ith Bans, B-P (as (earing t(o legal hatsF the first as a lender, and the second as an insurance agent. As an insurance agent, B-P made Bans go through the motion of applying for said insurance, thereby leading him and his family to belie,e that they had already fulfilled all the re>uirements for the /$) and that the issuance of their policy (as forthcoming. Apparently, B-P had full kno(ledge that Bans9s application (as ne,er going to be appro,ed. .he ma?imum age for /$) acceptance is +* years as clearly and specifically pro,ided in Article of the #roup /ortgage $edemption )nsurance Policy signed in 938 by all the insurance companies concerned DJ?h. ] "Pool_E. <nder Article 396 of the Ci,il Code of the Philippines, ]the agent (ho acts as such is not personally liable to the party (ith (hom he contracts, unless he e?pressly binds himself or e?ceeds the limits of his authority (ithout gi,ing such party sufficient notice of his po(ers._ !6+

!68 4<P$J/J C5<$. $JP5$.4 A==5.A.JB Be,elopment -ank of the Philippines ,s. Court of Appeals of the decision reads as follo(sF ]A@J$J15$J, in ,ie( of the foregoing consideration and in the furtherance of justice and e>uity, the Court finds judgment for the plaintiff and against Befendant B-P, ordering the latterF . .o return and reimburse plaintiff the amount of P !9,%**.** plus legal rate of interest as amortization payment paid under protestH &. .o consider the mortgage loan of P!**,***.** including all interest accumulated or other(ise to ha,e been settled, satisfied or set"off by ,irtue of the insurance co,erage of the late Juan -. BansH !. .o pay plaintiff the amount of P *,***.** as attorney9s feesH 8. .o pay plaintiff in the amount of P *,***.** as costs of litigation and other e?penses, and other relief just and e>uitable. .he Counterclaims of Befendants B-P and B-P"/$) P552 are hereby dismissed. .he Cross"claim of Befendant B-P is like(ise dismissed_ D$ollo, p. 69E. .he B-P appealed to the Court of Appeals. )n a decision dated 4eptember 6, 99&, the appellate court affirmed in toto the decision of the trial court. .he B-P9s motion for

!6+ 4<P$J/J C5<$. $JP5$.4 A==5.A.JB Be,elopment -ank of the Philippines ,s. Court of Appeals .he B-P is not authorized to accept applications for /$) (hen its clients are more than +* years of age DJ?h. ] "Pool_E. Yno(ing all the (hile that Bans (as ineligible for /$) co,erage because of his ad,anced age, B-P e?ceeded the scope of its authority (hen it accepted Bans9s application for /$) by collecting the insurance premium, and deducting its agent9s commission and ser,ice fee. .he liability of an agent (ho e?ceeds the scope of his authority depends upon (hether the third person is a(are of the limits of the agent9s po(ers. .here is no sho(ing that Bans kne( of the limitation on B-P9s authority to solicit applications for /$). )f the third person dealing (ith an agent is una(are of the limits of the authority conferred by the principal on the agent and he Dthird personE has been decei,ed by the non"disclosure thereof by the agent, then the latter is liable for damages to him DV .olentino, Commentaries and Jurisprudence on the Ci,il Code of the Philippines, p. 8&& : 99&;, citing 4entencia :Cuba; of 4eptember &%, 9*6E. .he rule that the agent is liable (hen he acts (ithout authority is founded upon the supposition that there has been some (rong or omission on his part either in misrepresenting, or in affirming, or concealing the authority under (hich he assumes to act D1rancisco, V., Agency !*6 : 9%&;, citing @all ,. 2auderdale, 8+ =.O. 6*, 6%E. )nasmuch as the non"disclosure of the limits of the agency carries (ith it the implication that a deception (as perpetrated on the unsuspecting client, the pro,isions of Articles 9, &* and & of the Ci,il Code of the Philippines come into play. Article 9 pro,idesF ]J,ery person must, in the e?ercise of his rights and in the performance of his duties, act (ith justice gi,e e,eryone his due and obser,e honesty and good faith._ Article &* pro,idesF ]J,ery person (ho, contrary to la(, (illfully or negligently causes damage to another, shall indemnify the latter for the same._ !66

be included in an accurate estimate of damages D4un 2ife Assurance ,. $ueda @ermanos, !6 Phil. 388 : 9 3;E. Ahile Bans is not entitled to compensatory damages, he is entitled to moral damages. =o proof of pecuniary loss is re>uired in the assessment of said kind of damages DCi,il Code of the Philippines, Art. && +E. .he same may be reco,ered in acts referred to in Article && 9 of the Ci,il Code. .he assessment of moral damages is left to the discretion of the court according to the circumstances of each case DCi,il Code of the Philippines, Art. && +E. Considering that B-P had offered to pay P!*,***.** to respondent Jstate in e? gratia settlement of its claim and that B-P9s non"disclosure of the limits of its authority amounted to a deception to its client, an a(ard of moral damages in the amount of P%*,***.** (ould be reasonable. !63

!63 4<P$J/J C5<$. $JP5$.4 A==5.A.JB Be,elopment -ank of the Philippines ,s. Court of Appeals .he a(ard of attorney9s fees is also just and e>uitable under the circumstances DCi,il Code of the Philippines, Article &&*3 : ;E. A@J$J15$J, the decision of the Court of Appeals in CA #.$."CV =o. &+8!8 is /5B)1)JB and petitioner B-P is 5$BJ$JBF D E to $J)/-<$4J respondent Jstate of Juan -. Bans the amount of P ,86+.** (ith legal interest from the date of the filing of the complaint until fully paidH and D&E to PAO said Jstate the amount of 1ifty .housand Pesos DP%*,***.**E as moral damages and the amount of .en .housand Pesos DP *,***.**E as attorney9s fees. Aith costs against petitioner. 45 5$BJ$JB. :Be,elopment -ank of the Philippines ,s. Court of Appeals, &! 4C$A !6*D 998E;

V52. &! , /A$C@ & , 998 !66 Be,elopment -ank of the Philippines ,s. Court of Appeals Article & pro,idesF ]Any person, (ho (illfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage._ .he B-P9s liability, ho(e,er, cannot be for the entire ,alue of the insurance policy. .o assume that (ere it not for B-P9s concealment of the limits of its authority, Bans (ould ha,e secured an /$) from another insurance company, and therefore (ould ha,e been fully insured by the time he died, is highly speculati,e. Considering his ad,anced age, there is no absolute certainty that Bans could obtain an insurance co,erage from another company. )t must also be noted that Bans died almost immediately, i.e., on the nineteenth day after applying for the /$), and on the t(enty"third day from the date of release of his loan. 5ne is entitled to an ade>uate compensation only for such pecuniary loss suffered by him as he has duly pro,ed DCi,il Code of the Philippines, Art. & 99E. Bamages, to be reco,erable, must not only be capable of proof, but must be actually pro,ed (ith a reasonable degree of certainty D$efractories Corporation ,. )ntermediate Appellate Court, 6+ 4C$A %!9 : 939;H Choa .ek @ee ,. Philippine Publishing Co., !8 Phil. 886 : 9 +;E. 4peculati,e damages are too remote to

-<..J, J.F

.his is an appeal from a judgment of the Court of 1irst )nstance of /anila in an action brought by the plaintiff"appellant as beneficiary to reco,er P ,*** upon a life insurance policy issued by the defendant on the life of her deceased husband, Arturo 4indayen. &

& P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. .he essential facts upon (hich this case turns are not )n dispute and may be stated as follo(sF Arturo 4indayen, up to the time of his death on January 9, 9!!, (as employed as a linotype operator in the -ureau of Printing at /anila and had been such for ele,en years prior thereto. @e and his (ife (ent to Camiling, .arlac, to spend the Christmas ,acation (ith his aunt, 1elicidad Jstrada. Ahile there he made a (ritten application on Becember &+, 9!&, to the defendant )nsular 2ife Assurance Co., 2td., through its agent, Cristobal /endoza, for a policy of insurance on his life in the sum of P ,*** and he paid to the agent P % cash as part of the first premium. )t (as agreed (ith the agent that the policy, (hen and if )ssued, should be deli,ered to his aunt, 1elicidad Jstrada, (ith (hom 4indayen left the sum of P&%.*+ to complete the payment of the first annual premium of P8*.*+* 5n January , 9!!, 4indayen, (ho (as then t(enty" nine years of age, (as e?amined by the companyLs doctor (ho made a fa,orable report to the company. 5n January &, 9!!, 4indayen returned to /anila and resumed his (ork as linotype operator )n the -ureau of Printing. 5n January , 9!!, the company accepted the risk and issued policy =o. 866 * dated back to Becember , 9!&, and mailed the same to its agent, Cristobal /endoza, in Camiling, .arlac, for deli,ery to the insured. 5n January , 9!!, 4indayen (as at (ork in the -ureau of Printing. 5n January &, he complained of a se,ere headache and remained at home,, 5n January %, he called a physician (ho found that he (as suffering from acute nephritis and uremia. @is illness did not yield to treatment and on January 9, 9!!, he died. .he policy (hich the company issued and mailed in /anila on January , 9!!, (as recei,ed by its agent in Camiling, .arlac, on January +, 9!!. 5n January 3, 9!!, the agent, in accordance (ith his agreement (ith the insured, deli,ered the policy to 1elicidad Jstrada upon !

legal document entitled 'ACC5$B, 4A.)41AC.)5= A=B $J2JA4J' (hereby in consideration of the sum of P8*.*+ paid to her by a check of the company, she 'assigns, releases andL f ore,er discharges said )nsular 2ife Assurance Co., 2td., its successors and assigns, of all claims, obligation or indebtedness (hich she, as such beneficiary e,er had or no( has, hereafter can, shall, or may ha,e, for, upon, or by reason of said policy of life insurance numbered 866 * upon the life of said Arturo 4indayen, the latter no( deceased, or arising therefrom or connected there(ith in any manner', (hich appears in the recordL as J?hibit A,, attached to the deposition of the notary (ho e?ecuted the fraudulent ackno(ledgment to J?hibit A. .he said check for P8*.*+ (as ne,er cashed but returned to the company and appears in the record of this case as J?hibit B. .hereupon this action (as brought to enforce payment of the policy. -y the terms of the policy, an annual premium of P8*.*+ is due on the first day of Becember of each year, the first premium already paid by the insured co,ering the period from Becember , 9!&, to Becember , 9!!. )t is to be 8

8 P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. noted that the policy (as not issued and the company assumed no actual risk prior to January , 9!!. .he policy contains the follo(ing paragraphF '.@J C5=.$AC.. .his Policy and the application herefor constitute the entire contract bet(een the parties hereto. All statements made by the )nsured shall, in the absence of fraud, be deemed representations and not (arranties, and no such statement shall ,oid the Policy unless it is contained in the (ritten application, a copy of (hich is attached to this Policy. 5nly the President, or the /anager, acting jointly (ith the 4ecretary or Assistant 4ecretary Dand then only in (riting signed by themE ha,e po(er in behalf of the Company to issue permits, or to modify this or any contract, or to e?tend the time for making any premium payment, and the Company shall not be bound by any promise or representation heretofore or hereafter gi,en by any person other than the abo,e"named officials, and by them only in (riting and signed conjointly as stated.' .he application (hich the insured signed in Camiling, .arlac, on Becember &+, 9!&, contained among others the follo(ing pro,isionsF '&. .hat if this application is accepted and a policy issued in my f a,or, ) bind myself to accept the same and` to pay at least the first yearLs premium thereon in the City of /anila. '!. .hat the said policy shall not take effect until the first premium has been paid and the policy has been deli,ered to and accepted by me, (hile ) am in good health. '8. .hat the agent taking this application has no authority to make, modify or discharge contracts, or to (ai,e any of the CompanyLs right or re>uirements.' .he insurance company does not set up any defense of fraudL, misconduct or omission of duty of the insured or his agent, 1elicidad Jstrada or of the beneficiary. )n its ans(er it pleads the 'ACC5$B, 4A.)41AC.)5= A=B $J2JA4J' DJ?hibit AE signed by the (ido( of Arturo 4indayen, the plaintiff"appellant. Aith respect to J?hibit A, it suffices to say that this release is so ine>uitable, not to say %

V52. +&, 4JP.J/-J$ 8, 9!% ! 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. her payment of the balance of the first yearLs annual premium. .he agent asked 1elicidad Jstrada if her nephe( (as in good health and she replied that she belie,ed so because she had no information that he (as sick and he thereupon deli,ered to her the policy. 5n January &*, 9!!, the agent learned of the death of Arturo 4indayen and called on 1elicidad Jstrada and asked her to return the policy. @e testifiedF 'pedTa a ella >ue me de,ol,iera la pVliza para traerla a /anila para esperar la decision de la compaPia' Dt. s. n. p. 9E. -ut he did not return or offer to return the premium paid. 1elicidad Jstrada on his aforesaid statement ga,e him the policy. 5n 1ebruary 8, 9!!, under circumstances (hich it is not necessary to relate here, the company obtained from the beneficiary, the (ido( of Arturo 4indayen, her signature to a

V52. +&, 4JP.J/-J$ 8, 9!% %

2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. fraudulent, that (e are pleased to note that counsel for the defendant company, on page % of their brief, stateF 'si resultara >ue la pVliza a>uT en cuestiVn es ,alida la apelada serTa la primera en no dar ,alidez alguno al documento J?hibit A aun>ue la apelante hubiera afirmado >ue lo otorgV con conocimiento de causa.' )t is suggested in appelleeLs brief that there (as no deli,ery of the policy in this case because the policy (as not deli,ered to and accepted by the insured in person. Beli,ery to the insured in person is not necessary. Beli,ery may be made by mail or to a duly constituted agent. Appellee cites no authorities to support its proposition and none need be cited to refute it. Ae come no( to the main defense of the company in this case, namely, that the said policy ne,er took effect because of paragraph ! of the application abo,e >uoted, for at the time of its deli,ery by the agent as aforesaid the insured (as not in good health. Ae ha,e not heretofore been called upon to interpret and apply this clause in a life insurance application, but identical or substantially identical clauses ha,e been construed andL applied in a number of cases in the <nited 4tates and the decisions thereon are far from uniform or harmonious. Ae do not find it practicable to attempt to determine (here the (eight of authority lies and propose to resol,e this case on its o(n facts. .here is one line of cases (hich holds that the stipulation contained in paragraph ! is in the nature of a condition precedent, that is to say, that there can be no ,alid deli,ery to the insured unless he is in good health at the timeH that this condition precedent goes to the ,ery essence of the contract and cannot be (ai,ed by the agent making deli,ery of the policy. D$athbun ,s. =e( Oork 2ife )nsurance Co., !* )daho, !8H +% Pac., 996H American -ankers )nsurance Co. ,s. .homas, %! 5kla., H %8 Pac., 88H #ordon ,s. Prudential )nsurance Co., &! Pa., 8*8H $eliance 2ife )nsurance Co. ,s. @ighto(er, 83 #a., 38!H 93 4. J., 8+9.E +

health.. As (as (ell said in the case of /c2aurin ,s. /utual 2ife )nsurance Co. D % 4. C., %9H *8 4. J.. !&6EF '4o much comes from the necessity of the caseH the president the ,ice"president, and the secretary cannot solicit, 6

V52. +&, 4JP.J/-J$ 8, 9!% 6 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. or collect, or deli,erH they must commit that to others, and along (ith it the discretions (e ha,e ad,erted to. \ \ \ .he po(er in the local agent to (ithhold the policy in,ol,es the po(er to deli,er itH there is no escape from that conclusion. '-ut the appellant says, e,en though the local agent should ha,e concluded that the applicant (as in good health, yet, if the fact be the contrary, then the policy ne,er operated. .he parties intended to make a contract, and that in,ol,ed the doing of e,erything necessary to carry it into operation, to (it, the acceptance of the applicant as a person in good health. .hey ne,er intended to lea,e open that one essential element of the contract, (hen the parties dealth fairly one (ith the other. )t is plain, therefore, that upon the facts it is not necessarily a case of (ai,er or of estoppel, but a case (here the local agents, in the e?ercise of the po(ers lodged in them, accepted the premium and deli,ered the policy. .hat act binds their principal, the defendant.' /endoza (as duly licensed by the )nsurance Commissioner to act as the agent of the def endant insurance company. .he (ell kno(n custom of the insurance business and the e,idence in this case pro,e that /endoza (as not regarded by the company as a mere conduit or automaton for the performance of the physical act of placing the policy in the hands of the insured. )f /endoza (ere only an automaton then the legally effecti,e deli,ery of the policy and the consummation" of the contract occurred (hen the company e?pressed its (ill to release fee policy by mailing it to its agent, namely, on January , 9!!. )n such a case the agent (ould perform a purely ministerial act andL ha,e no discretion. @e could do nothing but make unconditional deli,ery. .he legal result (ould be the same as if the company had mailed the policy on January , 9!!, to the insured directly using the post"office as )ts conduit for deli,ery. 5n January , 9!!, the insured (as in good 3

+ P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. 5n the other hand, a number of American decisions hold that an agent to (hom a lif e insurance policy similar to the one here in,ol,ed (as sent (ith instructions to deli,er it to the insured has authority to bind the company by making such deli,ery, although the insuredL (as not in good health at the time of deli,ery, on the theory that the deli,ery of the policy being the final act to the consummation of the contract, the condition as to the insuredLs good health (as (ai,ed by the company. DYansas City 2ife )nsurance Co. ,s. $idout, 86 Ark., %+!H &&3 4. A., %%H /etropolitan 2ife )nsurance Co. ,s. Aillis, !6 )nd. App., 83H 6+ =. J., %+*H #rier ,s. /utual 2ife )nsurance Co. of =e( Oork, !& =. C., %8!H 88 4. J., !3H -ell ,s. /issouri 4tate 2ife )nsurance Co., ++ /o. App., !9*H 89 4. A., !!.E A number of these cases go to the e?tent of holding that the deli,ery of the policy by the agent to the insured consummates the contract e,en though the agent kne( that the insured (as not in good health at the time, the theory being that his kno(ledge is the companyLs kno(ledge and his deli,ery of the policy is the companyLs deli,eryH that (hen the deli,ery is made not(ithstanding this kno(ledge of the defect, the company is deemed to ha,e (ai,ed the defect. Although that appears to be the pre,ailing ,ie( in the American decisions D 8 $. C. 2., 9**E and leads to the same conclusion, namely, that the act of deli,ery of the policy in the absence of fraud or other ground for rescission consummates the insurance, (e are inclined to the ,ie( that it is more consonant (ith the (ell kno(n practice of life insurance companies and the e,idence in the present case to rest our decision on the proposition that /endoza (as authorized by. the company to make the deli,ery of the policy (hen he recei,ed the payment of the first premium and he (as satisfied that the insured (as in good

3 P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. health performing his regular duties in the -ureau of Printing. -ut (e are not inclined to take such a restricti,e ,ie( of the agentLs authority because the e,idence in the record sho(s that /endoza had the authority, gi,en him by the company, to (ithholdL the deli,ery of the policy to the insured 'until the first premium has been paid and the policy has been deli,ered to and accepted by me Dthe insuredE (hile ) am in good health'. Ahether that condition had been met or not plainly calls for the e?ercise of discretion. /endozaLs decision that the condition had been met by the insured and that it (as proper to make deli,ery of the policy to him is just as binding on the company as if the decision had been made by its board of directors. #ranted that /endoza made a mistake of judgment because he acted on insufficient e,idence as to the state of health of the insured. -ut it is not charged that the mistake (as induced by any misconduct or omission of duty of the insured. )t is in the interest not only of the applicant but of all insurance companies as (ell that there should be some act (hich gi,es the applicant the definite assurance that the contract has been consummatedL. .his sense of security and of peace of mind

that oneLs dependents are pro,ided for (ithout risk either of loss or of litigation is the bedrock of life insurance. A cloud (ill be thro(n o,er the entire insurance business if the condition of health of the insured at the time of deli,ery of the policy may be in>uired into years after(ardLs (ith the ,ie( to a,oiding the policy on the ground that it ne,er took effect because of an alleged lack of good health, at the time of deli,ery. 4uppose in the present instance that 4indayen had reco,ered his health, but (as killed in an automobile accident si? months after the deli,ery of the policyH and that (hen called on to pay the loss, the company learns of 4indayenLs gra,e illness on January 3, 9!!, and alleges that the policy had ne,er taken effect. )t is difficult to imagine that the 9

his acts (ithin that authority bind the company. .he company therefore ha,ing decided that all the conditions precedent to the taking effect of the policy had been complied (ith and ha,ing accepted the premium andL deli,ered` the policy thereafter to the insured, the company is no( estopped to assert that it ne,er intended that the policy should take effect. DCf. =orth(estern 2ife Association ,s. 1indley, &9 .e?. Ci,. App., 898H +3 4. A., +9%H /c2aurin ,s, /utual 2ife )nsurance Co., % 4. C., %9H *8 4. J., !&6H 8 Cal. Jur., par. &, pages 8&%"8&6.E )n ,ie( of the premises, (e hold that the defendant company assumed the risk co,ered by policy =o. 866 * on the life of Arturo 4indayen on January 3, 9!!, the date (hen the policy (as deli,ered to the insured. .he judgment appealed from is therefore re,ersed (ith directions to enter judgment against the appellee in the sum of P ,*** together (ith interest at the legal rate from and after /ay 8, 9!!, (ith costs in both instances against the appellee. /alcolm, Villa"$eal, Abad 4antos, @ull, Vickers, #oddard, and $ecto, JJ., concur. AVA=CJbA, C. J., concurringF

V52. +&, 4JP.J/-J$ 8, 9!% 9 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. insurance company (ould take such a position in the face of the common belief of the insuring public that (hen the policy is deli,ered, in the absence of fraud or other grounds for rescission, the contract of insurance is consummated. .he insured rests and acts on that faith. 4o does the insurance company, for that matter, for from the date of deli,ery of the policy it appropriates to its o(n use the premium paid by the insured. Ahen the policy is issued and deli,ered, in the absence of fraud or other grounds for rescission, it is plainly not (ithin the intention of the parties that there should be any >uestions held in abeyance or reser,ed for future determination that lea,e the ,ery e?istence of the contract in suspense and doubt. )f this (ere not so, the entire business (orld (hich deals so ,Vluminously in insurance (ould be affected by this uncertainty. Policies that ha,e been deli,ered to the insured are constantly being assigned for credit and other purposes. Although such policies are not negotiable instruments and are subject to defenses for fraud, it (ould be a most serious handicap to business if the ,ery e?istence of the contract remains in doubt e,en though the policy has been issued and deli,ered (ith all the formalities re>uired by the la(. )t is therefore in the public interest, for the public is profoundly and generally interested in life insurance, as (ell as in the interest of the insurance companies themsel,es by gi,ing certainty andL security to their policies, that (e are constrained to hold, as (e do, that the deli,ery of the policy to the insuredL by an agent of the company (ho is authorized to make deli,ery or (ithhold deli,ery is the final act (hich binds the company Dand the insured as (ellE in the absence of fraud or other legal ground for rescission. .he fact that the agent to (hom it has entrusted this duty Dand corporations can only act through agentsE is derelict or negligent or e,en dishonest in the performance of the duty (hich has been entrusted to him (ould create a liability of the agent to the company but does not resol,e the companyLs obligation based upon the authorized acts of the &*

) concur in the result of this decision. ) agree (ith the conclusion arri,ed in the majority opinion in the sense &

V52. +&, 4JP.J/-J$ 8, 9!% & 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. that the contract in >uestion (as consummated. ) am of the opinion, ho(e,er, that this contract (as consummated by the defendant due to an error regarding an essential condition, to (itF the good health of the insured. .here is no doubt but that the defendant (ould not ha,e consummatedL the contract had it kno(n that the insured (as hopelessly ill, inasmuch as this consideration is essential in this kind of contracts. )t is not true that the defendant or its agent had (ai,ed this condition inasmuch as it consummated the contract in the belief that this condition had been complied (ith, in ,ie( of the information gi,en to it in good faith by the agent of the insured to the effect that the latter might continue to be in good health for the reason that she had not recei,ed any information from him to the contrary. .his being so, the defendantLs consent is ,itiated by error, and, inasmuch as it affects an essential condition of the contract, it may gi,e rise to the nullity thereof. @o(e,er, inasmuch as the nullity of the contract has not been set up as a defense in this case, ) concur (ith the majority in the result. )/PJ$)A2, J., dissentingF

&* P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. agent to(ard a third party (ho (as not in collusion (ith the agent Paragraph 8 of the application to the effect 'that the agent taking this application has no authority to make, modify or discharge contracts or to (ai,e any of the companyLs rights or re>uirements' is not in point. /endoza neither (ai,ed nor pretended to (ai,e any right or re>uirement of the company. )n fact, his in>uiry as to the state of health of the insured discloses that he (as endea,oring to assure himself that this re>uirement of the company had been satisfied. )n doing so, he acted (ithin the authority conferred on him by his agency and

.he plaintiff, as beneficiary, brought this action to reco,er from the defendant, an insurance company, the sum of P ,***, the ,alue of a life insurance policy issued in the name of Arturo 4indayen, the plaintiffLs husband .he plaintiff appealed from the judgment dismissing the complaint, (ithout special pronouncement as to costs, 5n Becember &+, 9!&, Arturo 4indayen signed J?hibit + (herein he applied for life insurance in the sum of P ,*** under certain conditions, among others, the follo( '!. .hat the said policy shall not take effect until the first premium has been paidL and the policy has been deli,ered to and accepted by me, (hile ) am in good health. &&

&& P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. '8. .hat the agent taking this application has no authority to make, modify or discharge contracts, or to (ai,e any of the companyLs right or re>uirements.' 5n the back of the policy said conditions (ere endorsed as follo(sF '.@J C5=.$AC.. .his Policy and the application herefor constitute the entire contract bet(een the parties hereto. All statements made by the )nsuredL shall, in the absence of fraud, be deemed representations and not (arranties, and no such statement shall ,oid the Policy unless it is contained in the (ritten application, a copy of (hich is attached to this Policy. 5nly the President, or the /anager, acting jointly (ith the 4ecretary or Assistant 4ecretary Dand then only in (riting signed by themE ha,e po(er in behalf of the Company to issue permits, or to modify this or any contract, or to e?tend` the time for making any premium payment, and the Company shall not be bound by any promise or representation heretofore or hereafter gi,en by any person other than the abo,e"named officials, and by them only in (riting and signed conjointly as stated.' .he insurance (as secured by the defendantLs agent Cristobal /endoza in Camiling, .arlac. .he first premium to be paid by the insuredL amounted to P8*.*+ and on account of this sum he paid the agent P % after he signed the application, (ith the understanding bet(een them that the balance of P&%.*+ (ould be paid in the same to(n on the date the policy (ould be deli,ered. .he insured designated his aunt 1elicidad Jstrada to act as his representati,e and to recei,e in his name the policy and to pay the balance of the premium. 5n January , 9!!, the defendant issued insurance policy =o. 866 *, dated Becember , 9!& and sent it by registered mail to its agent in Camiling, .arlac. 5n January +th the agent got the policy from the post office and on the 3th he looked for the insured, but 1elicidad Jstrada informed him that the insured had returned to /anila. .he agent asked &!

in the insurance policy issued in the name of her deceased husband. Aith respect to the sickness of the deceased, it appears that on January , 9!! he (as e?amined by the physician of the defendant company. 5n the &th of the same month he felt ill and consulted Br. Alfredo 2. #uerrero (ho, after an e?amination, found him suffering from ne" &8

&8 P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. phritis. 5n the %th he (as treated for the second time by the physician, (ho found him seriously and (ith fe,er. )n the afternoon of January 9, 9!!, he died from nephritis and uremia in his home in /anila. )n its ans(er the defendant set up t(o special defensesF D E .hat the plaintiff has lost any and all right to collect the ,alue of the policy because at the time the first premium (as paid and the policy (as deli,ered to the insured, the latter (as not in good health, thus ,iolating clause ! of the application (hich he signed and (as made an integral part of the policy as one of the conditions thereofH and D&E that the plaintiff by means of the document kno(n as 'Accord, 4atisfaction and $elease' has (ai,ed (hate,er right she might deri,e from the insurance policy. A stipulation or contract bet(een the company and the applicant in the sense that the insurance policy (ill produce no effect or (ill not be binding on the company unless the first premium shall ha,e been paid (hile the applicant is ali,e and in good health, is ,alid and (ill be enforcedL in accordance (ith the terms thereofH it is a condition precedent to the liability of the company, and compliance there(ith or its (ai,er are necessary for the enforcement and fulfillment of the insurance contract, unless the case should come under the pro,isions of an uncontestable clause. D:Perry ,s. 4ecurity 2., etc., Co., %* =. C., 8!H +! 4. J., +69H $athbun ,s. =e( Oork 2. )ns. Co., !* )da., !8H +% P., 996H @a(ley ,s. /ichigan /ut. 2. )ns. Co., 9& lo(a, %9!H + =. A., &* H Ahiting ,s. /assachusetts /ut 2. )ns, Co., &9 /ass., &8*H !6 Am. $ep., ! 6H /issouri 4tate 2. )ns. Co, ,s. 4alisbury, &69 /o., 8*H & ! 4. A., 63+H 5rmond ,s. 1idelity 2ife Assoc., 9+ =. C., %3H 4. J., 69+H -o(en ,s. =e( Oork /ut. 2. )ns. Co., &* 4. B., *!H *8 =. A., *8*H $ositer ,s, Aetna 2. )ns. Co., 9 Ais., & H +8 =. A., 36+,' Anders ,s. 2ife )ns. Clearing Co., +& =eb., %3+H 36 =. A., !! H $eliance 2. )ns. Co. ,s. @ighto(er, . 83 #a., 383H 93 4. J., 8+9H Clark ,s. /utual 2. )ns. Co., &9 #a., %6 H %9 3. J., &3!H $eese ,s. 1idelity /ut. 2ife Assoc., &%

V52. +&, 4JP.J/-J$ 8, 9!% &! 2ucero Vda. de 4indayen ,s. lnsular 2ife Assurance Co. her (hether the insured continuedL to be sound and in good health, to (hich she replied that she belie,ed that he (as in good health inasmuch as she recei,ed no information that he (as sick, (hereupon the agent deli,ered the policy to 1elicidad Jstrada (ith instruction to hand it to the insured and, after recei,ing the sum of P&%.*+, he issued the receipt for the payment of the premium of P8*.*+, signing it as defendantLs agent. 5n January 9th 1elicidad Jstrada came to /anila, to the home of the insured at =o. 8 .eresa 4treet, to deli,er the policy, but she found that he died a fe( hours before her arri,al and there she sa( his lifeless body. 1elicidad Jstrada deli,ered the policy to the plaintiff as beneficiary. 5n January &*th of the same year the agent had kno(ledge of the death of the insured and (ent to see 1elicidad Jstrada (hom he re>uested to return the policy so that the defendant (ould decide (hat (as to be done. 5n that occasion the agent con,eyed to 1elicidad Jstrada his belief that the insured (as not in good health (hen he deli,ered the policy to her. 1elicidad Jstrada returned the policy to the agent on the afternoon of said date. .he agent ga,e notice to the defendant of the death of the insured and of the circumstances under (hich he had deli,ered the policy, and the defendant on 1ebruary 8th of the same year returned to the plaintiff by check all the premium theretofore recei,ed, and furthermore secured from her J?hibit A DAccord, 4atisfaction and $eleaseE, by ,irtue of (hich said plaintiff ackno(ledged ha,ing recei,ed the aforesaid premium and that in further consideration thereof she formally (ai,ed (hate,er right she might ha,e, as beneficiary,

V52. +&, 4JP.J/-J$ 8, 9!% &% 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. #a., 83&H !+ 4. J., +!6 :foll. Ailliams ,s. Jmpire 2. )ns. Co., 8+ #a., &8+H 9 4. J., 88EH 5li,er ,s. =e( Oork /ut. 2. )ns. Co., 96 Va., !8H !! 4. J., %&+H $eese ,s. 1idelity /ut. 2ife Assoc., #a., 83&H !+ 4. J., +!6H Anders ,s. 2ife )ns. Clearing Co., +& =eb., %3%H 36 =. A., !! H Perry ,s. 4ecurity 2. etc., Co., %* =. C., 8!H +! 4. J.H +69H 4trigham ,s. /utual )ns. Co., 88 5re., 886H 6% Pac., 3&&H Bibble ,s. $eliance 2. )ns. Co., 6* Cal., 99H 89 Pac., 6 .; Ann. Cas. 9 6J, !8.E )n the case of $eliance 2ife )ns. Co. ,s. @ighto(er, supra, the 4upreme Court of #eorgia, in a similar case, said the follo(ingF '\ \ \ An application for life insurance, signed by the applicant, contained a pro,ision as follo(sF

' ) hereby declare and agree that all statements and ans(ers (ritten in this application \ \ \ are true, full, and complete, and are offered to the company as a consideration for the contract of insurance, (hich ) hereby agree to accept, and (hich shall not take effect until the first premium shall ha,e been actually paid (hile ) am in good health and the policy shall ha,e been signed by the duly authorized officers of the company and issued.L '.he policy itself contained, among others, the follo(ing pro,isionsF ' L Agents are not authorized to modify this policy or to e?tend the time for paying a premium \ \ \. All insurance pro,ided by this policy is based upon the application therefore, a copy of (hich is hereto attached and made a part of this policyS \ \ \ \ \ \

)n the case of $athbun ,s. =e( Oork 2ife )ns. Co., supra, the 4upreme Court of )daho saidF ')n its ans(er and on the trial of the case, the main contention of the insurance company (ereF 1irst, that under the terms of the contract the first premium (as to be paid in cashH and, second, the policy (as not to take effect unless the insured (as in good health at the time it (as deli,ered to him. 4aid contentions are partly based upon the stipulations abo,e >uoted from the application for said insurance. '.he court in its findings of fact, among other things, found as follo(sF ' .he court further finds that Jrnest C. $athbun, the plaintiffsL son, applied in (riting for insurance on his life, agreeing therein that the insurance thereby applied for should not take effect unless the first premium (as paid and the policy (as deli,ered to and recei,ed by him during his lifetime and good health. After applying for the policy and before its deli,ery, the applicant (as taken (ith appendicitis, from (hich he died. Ahile he (as in the hospital, the soliciting agent at 4pokane, in total ignorance of the changed condition of the applicantLs health, mailed him the policy. .he applicantLs friends thereafter paid the first premium, (hich the company promptly returned (hen it disco,ered the facts.L '.he e,idence is clearly sufficient to sustain this finding of fact. '.hen if the parties understood and agreed that the policy should not become effecti,e unless the first premium (as paid and the policy (as deli,ered to and recei,ed by the applicant during his lifetime and (hile he (as in good health, and both of those conditions failed, the contract of insurance (as ne,er completed, and the policy (as of no force and effect. )t is a (ell"recognized rule that life insurance results from contract, and that the true rule is that no other or different rule is to be applied to a contract of insurance than is applied to other contracts. D7uinlan &3

'Applying to the facts abo,e stated the principles recognized in $eese ,s. 1idelity /utual 2ife Association D #a., 83&H !+ 4. J., +!6E, it must be ruledF D E )t (as (ithin the po(er of the insurance company, as bet(een itself and its agent, to define and limit the po(ers of the latter. 2imitations upon the po(er of the agent affect all third persons dealing (ith him, (ho ha,e kno(ledge or notice &+

&+ P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. thereofH and any notice of limitations upon the agentLs po(er (hich a prudent man is bound to regard, is the e>ui,alent of kno(ledge to the insuredH D&E the stipulation in the signed application, that the insurance Lshall not take effect until the first premium shall ha,e been actually paid (hile ) am in good healthS coupled (ith the (ords in the policy, LAgents are not authorized to modify this policy or to e?tend the time for paying a premiumS (ere sufficient to charge the applicant (ith notice that he (as dealing (ith a special agent (ith limited po(ersH D!E the actual payment of the first premium during the good health of the applicant (as a condition precedent to liability under the policy, and the agent of the company could not (ai,e such condition.' )n the case of /issouri 4tate 2ife )ns. Co. ,s. 4alisbury, supra, the 4upreme Court of /issouri, in another similar case, saidF '.he application has this clauseF ' L+. .hat the insurance hereby applied for shall not take effect unless the first premium is paid and the policy deli,ered to and accepted by me during my lifetime and good health.L 'Another reason (hy the contract (as ne,er completed (as because the first premium (as not paid nor tendered during the good health of /rs. 4alisbury, as re>uired by the stipulation in the application >uoted abo,e. 'A stipulation of that character, re>uiring the payment of a first premium in ad,ance as a condition upon (hich the policy (as to take effect, is al(ays recognized and enforced by the courts. .he policy, in such case, is not effecti,e until that condition is complied (ith. DYilcullen ,s. 2ife )ns. Co., *3 /o. App., + H 3& 4. A., 9++H Aallingford ,s. @ome /ut. 1ire K /arine )ns. Co., !* /o., 8+H 5rmond ,s. )nsurance Co., 9+ =. C., %3H 4. J., 69+H -o(en ,s. /utual 2ife )ns. Co., &* 4. B., *!H *8 =. A., *8*.E' &6

&3 P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. ,s. Pro,idence"Aashington )ns. Co., !! =. O., !%+H &3 Am. 4t. $ep., +8%H ! =. J., ! .E )n life insurance contracts, the assent of both parties is re>uired as in any other contract. D4tephens ,s. Capital )ns. Co., 36 lo(a, &3!H %8 =. A., !+H Aeidenaar ,s. =. O. 2ife )ns. Co., !+ /ont., %9&H && Am. 4t., !!*H 98 Pac., .E ')n the determination of this case, the application and the policy itself must be e?amined and considered in order to ascertain the true situation of the parties under the negotiations and agreements bet(een them. Dlo(a 2ife )ns. Co. ,s. 2e(is, 36 <. 4., !!%H &! 4up. Ct., &+H 86 2a(. ed., &*8H -ehling ,s. =. A. =at, 2ife )ns. Co., 6 Ais., &8H 9! =. A., 3**.E ')f (e concede in this case that the first premium (as paid by the payment of the c% andL the deli,ery of the insuredLs promissory note to the agent of the company for the balance, the plaintiffs (ould not be entitled to reco,er, for the reason that the policy (as not deli,ered to and recei,ed by the applicant (hile he (as in good health, but (hen he (as fatally ill. @e became ill (ith appendicitis on the &3th of April, 9 !, (as operated on that day and thereafter died on the *th day of /ay, 9 !, fi,e days after recei,ing the policy.' )n the case of #ordon ,s. Prudential )nsurance Company D&! Pa., 8*8E, the 4upreme Court of Pennsyl,ania saidF '\ \ \ )n the case at bar, the policy (as issued and handed to the agent, (ho deli,ered it to the insured before payment of the premium, and upon the insured gi,ing a receipt, in (hich it (as stated that the policy (as Lrecei,ed for the purpose of inspection only and upon the understanding that it is not to be in force until the first premium payable thereunder has been

V52. +&, 4JP.J/-J$ 8, 9!% &6 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co.

paid by me and the official receipt of the company deli,eredL to me during my lifetime and in good health, as pro,ided in my application upon (hich the abo,e numbered policy (as issued.L .his, therefore, (as a conditional deli,ery of the policy and the contract could not be consummated e?cept upon perform" &9

insurance company upon receipt of the ordinary premium for insurance upon the life of an ordinary risk. 'Aith the >uestion of good faith on the part of the insured at the time of paying the premium, (e ha,e nothing to do. .he fact is that his physical condition (as not disclosed to the company or its agent at the time of the payment of the premiumH and that his condition (as not at that time such as, in his application for insurance, he stated it to be. .his being true, it is no legal hardship upon the beneficiary in the policy to say that the premium paid under such conditions does not entitle her to reco,er the amount of the insurance from the defendant company.' )n the case of Po(ell ,s. Prudential )nsurance Co. of America D %! Ala., + E, the 4upreme Court of Alabama, in a similar cause, saidF '5n June &&, 9*8, Claude B. Po(ell applied to the defendant company for insurance on his life for c ,***. )n his application for insurance, he statedF L) am in good health, \ \ \ and all the statements and ans(ers to the abo,e >uestions are complete and true, and that the !

V52. +&, 4JP.J/-J$ 8, 9!% &9 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. ance of that condition, namely, payment of the premium, thereafter, (hile the insured (as ali,e and in good health, as pro,ided in both the application and receipt for the policy. \ \ \ \ \ \ \

')t is therefore undisputed that on the day of the payment of the premium, /r. #ordon (as ill of the disease (hich caused his death (ithin si?ty"four hours after such payment. .here (as no dispute, nor contradictory testimony as to the condition of /r. #ordonLs health on the day of payment, and, therefore, nothing for the jury to pass upon in this respect. \ \ \ \ \ \ \

V52. +&, 4JP.J/-J$ 8, 9!% ! 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. foregoing, together (ith this declaration, shall constitute the application, and become a part of the contract for insurance hereby applied for. And it is agreed that the policy herein applied for shall be accepted subject to the pri,ileges and pro,isions therein contained, and said policy shall not take effect until the same shall be issued and deli,ered by the saidL company, and the first premium paid thereon in full, (hile my health is in the same condition as described in this application.L \ \ \ \ \ \ \

')n the case at bar, there (as no >uestion of the condition of the health of the insured on the day of the payment of the premium, and no conflicting testimony as to the serious nature of his illness on that day, nor as to any other material fact in the cause. =o person testified that /r. #ordon (as in Lgood healthL on 4aturday, /ay +, the day the premium (as paid, but on the contrary, e,ery (itness (ho had kno(ledge of his condition and (ho (as asked the >uestion, including the plaintiff herself, said that he (as not in Lgood healthL on that day. @o(, then, can a jury be permitted to find that he (as in Lgood healthL at the time of the payment of the premium in the absence of any e,idence to (arrant or support such findingN \ \ \ \ \ \ \ \ \

')n this case it is impossible to find from the e,idence that on 4aturday, /ay +, the day of the payment of the premium, andL at the time of such payment, the applicant had no gra,e, important or serious disease, or that he (as free from any ailment that seriously affected the general soundness and healthfulness of his system, or that he suffered a mere temporary indisposition (hich did not tend to (eaken or undermine his constitution at the time of paying the premium. =or is it possible to findL that he enjoyed such health and strength as to justify a reason" !*

'@ere (e find that t(o absolute conditions precedent of the contract of insurance, (ere set aside or annulled, in (hat the friends of the deceased attempted to do, in that, the first premium (as ne,er paid by the assured nor any one for him, and if, by any possible construction, it could be held that it (as paid, it is not pretended that the assured (as not fatally sick at the time, of (hich fact the company (as ignorantH and further, it is not denied that the policy (as ne,er deli,eredQif (hat (as done could possibly amount to a deli,eryQuntil after the death of the assured. .o hold that the policy (as good under such circumstances, (ouldL be to abrogate and set aside the contract of insurance, and hold the company liable for a payment of the policy against the ,ery terms of its contract.' .he same principle controls and applies (hen, as in the instant case, it is stipulated that the policy shall be of no effect if at the time of its deli,ery to the insured he is not in good health. .he condition is ,alid` and binding (hen it refers only to the payment of the first premium as (ell as to the deli,ery of the policy, or to both. )n the case of =yman ,s. /anufacturersL K /erchantsL 2ife AssLn. D *8 =. J., +%!E, the 4upreme Court of )llinois saidF '\ \ \ .he proof is direct and positi,e that on the last"named date she (as not in good health, and that t(o months and three days later she died from the disease the proof sho(ed she (as suffering f rom on that day. )f there !&

!* P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. able belief that he (as free from derangement of organic functions, or free from symptoms calculated to cause a reasonable apprehension of such derangement, and that to ordinary obser,ation and out(ard appearance his health (as reasonably such that he might, (ith ordinary safety, be insured and upon ordinary terms (hich only (ould satisfy the re>uirement of Lgood healthL. -ut on the contrary, the testimony conclusi,ely sho(s that on 4aturday, /ay +, 9*3, at the time of the payment of the premium, the condition of /r. #ordonLs health (as both a serious and a dangerous one, and such as (ould preclude the possibility of any life insurance company, (ith kno(ledge of his condition, issuing its policy upon his life for anything like the ordinary premiumH in other (ords, his condition at that time (as such as to render him a hazardous and dangerous risk, (hich (ould not be assumedL by any

!& P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co,

had been no proof of the condition of /rs. =ymanLs health on the day the certificate (as deli,ered, then there (ould be some force in plaintiffLs contention that the inference might be indulged that, if she (as in good health on April th, she so continued until the 9th. -ut no such inference can be indulged, (hen the uncontradicted proof sho(s she (as in bad health the day the certificate (as deli,ered, and so continued until her death. Befendant pro,ed its third special plea, and, in our opinion, plaintiff offered no e,idence that legitimately tended to rebut defendantLs e,idence. .he trial court therefore erred in refusing to direct a ,erdict in fa,or of defendant under the issue made by the third special plea. D2ibby, /c=eill K 2ibby ,s. Cook, &&& ., &*+H 63 =. J., %99.E' )n the case of American -ankersL )ns. Co. ,s. .homas, D%! 5kla. $ep., E, the 4upreme Court of 5klahoma saidF '.hat part of the policy (hich pro,ides that the same shall not take effect until it is deli,ered by the company (hile the insured is in good health prescribes a condition precedent to the attachment of the risk under the policy. D CooleyLs -riefs on the 2a( of )nsurance, p. 8% .E $ecognizing it to be such, plaintiff properly pleaded a (ai,er thereof by setting up the facts as stated. DAestern, etc., )ns. Co. ,s. Coon, !3 5kla., 8%!H !8 Pac., &&H Anders ,s. 2ife )ns. Clearing Co., +& =eb., %3%H 36 =. A., !! .E' )n the case of 4teinsultz ,s. )llinois -ankers 2ife Association D&&9 . App. $ep., 99E, the third district of the Appellate Courts, in a similar cause, saidF L.he policy of insurance contains the follo(ing clauseF 'L) agree to accept the Policy issued hereon and that the same shall not take effect until the first payment shall ha,e been made and the Policy issued and actually deli,ered to me during my continuance in good health. '.he main >uestion in this case, in the opinion of this court, is the >uestion as to (hether a ,alid and legal policy e,er (as issued and actually deli,ered to the insured, /yr" !!

.o re,erse said judgment the appellant prosecuted appeal. )n this case the application, signed by Jllis, contained, among other things, the follo(ing pro,isionF .hat the contract or policy ap" !8

!8 P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. plied for shall not take effect until the first premium thereon shall ha,e been actually paid and the policy deli,ered to me during my lifetime and the present condition of health. '.he policy issued thereon contained this pro,isionF .his policy shall not take effect until actually deli,ered and the first premium paid thereon during the lifetime of the insured.L '4aid policy contained the further pro,isionsF L.his policy and the application therefor shall constitute the entire contract bet(een the parties hereto.L ')n this case, like(ise, the appellant at the close of appelleeLs e,idence and then again at the close of all the e,idence, mo,ed the court to direct a ,erdict in its fa,or. Appellant objected to the admission of the policy, sued upon, in e,idence. )n this case on Becember 8, 9 8, the insured (as injured and (as carried to his home and died bet(een 8.!* and % p. m. on that day, and it appears that the policy of insurance had been returned to the office of the agent of the insurance company the e,ening before but had not been deli,ered personally to the insured at the time of his death. )n this case the contention (as made by the holders of the policy that the deli,ery to the agent (as a deli,ery to the insured. '.he court goes into the >uestion in the Jllis case ,ery e?hausti,ely, >uoting from a great many cases and >uoting from Be,ine ,s. 1ederal 2ife )ns. Co. D&%* ., &*!E, in (hich the 4upreme Court in discussing the >uestion of the deli,ery of an insurance policy, at page &*+, saysF ' .he application may or may not pro,ide that the insurance shall take effect only upon the deli,ery of the policy to the insured. <nless e?pressly made so by the contract itself, an actual deli,ery of a policy of insurance to the insured is not essential to the ,alidity of the contract, and the rule under such circumstances is that a policy becomes binding upon the insurer (hen signed and for(arded to the !%

V52. +&, 4JP.J/-J$ 8, 9!% !! 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. tle /ay 4teinsultz. )t is argued that the clause in >uestion is a condition precedent and re>uires that the insured shall be in good health at the time of the payment of the first premium and the actual deli,ery of the policy to her, other(ise that the policy ne,er became operati,e and for the purposes of this suit is ,oid. )t (ill be noticed that plaintiff in representing his main case made no effort to submit or sho( anything as to the health of the insured prior to the claimed deli,ery of the policy. )f the clause in >uestion is a condition precedent to reco,ery, (hich (e shall discuss later, the general issue filed by the defendant denied the e?istence of a ,alid policy and raised this >ues tion and re>uired proof on the part of the plaintiff to sho( that the insured (as in good health at the time of the claimed deli,ery of the policy. =o such proof (as sho(n and the defendant, appellant, at the close of plaintiffLs case, mo,ed the court to instruct the jury, under the pleadings and e,idence in the case, to find a ,erdict for the defendant and a form of ,erdict (as submitted (ith the motion. .his motion the court o,erruled, to (hich ruling appellant duly e?cepted and this issue is therefore s>uarely raised by the proceedings as to the e?istence of a legal and binding policy in the case under the terms of said contract. ')n Jllis ,s. 4tate /ut. 2ife Assur. Co. of Aorcester D&*+ ))). App., &&+E, the appellant insurance company filed a plea of the general issue (ith notice of special matter of defense, the special matter being that the policy (as not to be in effect until actually deli,ered and the first premium paid during the lifetime of the assured, and (hile he (as in the same condition of health as (hen his application (as signed, and that the policy (as not so deli,ered. .here (as a trial, ,erdict and judgment in fa,or of appellee, being the amount of the policy and interest.

V52. +&, 4JP.J/-J$ 8, 9!% !% 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. insurance broker to (hom the application for insurance (as made, to be deli,ered to the insured.L 'And >uoting &% Cyc., 6 3, 6 9, it is stated (ith reference to the deli,ery of insurance policies thatF L.he placing of the completed policy in the hands of the agent for deli,ery, (ithout condition, to the insured completes the contract, though the actual deli,ery by the agent to the insured is not made before the death of the insured. -ut if the deli,ery to the agent of the company is (ith the understanding that it is to be deli,ered by the agent to the insured only after the performance of some condition, then, until the condition is performed and it becomes the duty of the agent to deli,er the policy to the insured, the contract is not complete. \ \ \ )t is a usual condition of a life insurance policy that the deli,ery shall not be effectual to create a binding contract unless the insured is ali,e and in good health (hen the policy is deli,ered and the first premium paid, and under such conditions the death of the insured before the deli,ery of the policy (ill pre,ent its becoming effectual.

')t (as held in the Jllis case that in ,ie( of the foregoing authorities, numerous of (hich (e ha,e not cited here, that the policy sued on (as ne,er deli,ered and that the court erred in not directing a ,erdict in fa,or of appellant and re,ersed the judgment (ith a finding of fact. '.he language in the policy in >uestion, L) agree to accept the Policy issued hereon and that the same shall not take effect until the first payment shall ha,e been made and the Policy issued and actually deli,ered to me during my continuance in good health,L is a condition precedent to the e?istence of any binding legal contract of insurance upon the appellant. )t means just (hat it says and it (as entered into and signed by the insured. .he statement (as a (arranty that the insured (as in good health at the time she signed said application and further (as a binding obligation that she should continue in good health and should be in good health at the time the policy (as !+

Anderson, 69 4. A., ++H 4ecurity /ut. 2. )ns. Co. ,s. Cal,ert, !9 .e?. Ci,. App., !3&H 36 4. A., 339H 4eaback ,s. /etropolitan 2. )ns. Co., &68 ., % +H ! =. J., 3+&H /utual 2. )nsurance Co. ,s. Ailley, !! /d., ++%H *+ Atl., +!.E )t is also held that it is immaterial that the condition of the insuredLs health has changed' since his application (as made, or that he (as ignorant of his condition. DCarmichael ,s. @ancock /ut. )ns. Co., + App. Bi,., &9 H * =. O. 4upp., +*&H /etropolitan 2. )ns. Co. ,s. @o(le, +& 5hio, &*8H %+ =. J., 9*3H )d., +3 5hio, + 8H +3 =. J., 8H 5li,er ,s. /utual 2. )ns. Co., 96 Va., !8H !! 4. J., %!+H Packard ,s. /etropolitan 2. )ns. Co., 6& =. @,, H %8 Atl, &36.E '.his defense, as (e no( ,ie( it, is separate and distinct from the defense that misrepresentations (ere made in the application for the policy, and our conclusion is that the failure of the appellant to gi,e notice to the insured or beneficiary, (ithin a reasonable time after disco,ering that the insured had tuberculosis of the lungs, that it (ould not be bound by the contract of insurance did not render una,ailing the pro,ision that unless the policy (as deli,ered (hile the insured (as in good health the contract should not take effect. <nder article 8983 of the statute, it (as necessary for the appellant, in order to a,ail itself of the defense based upon misrepresentations made in the application to secure the policy, to sho( that it ga,e the insured or beneficiary notice (ithin a reasonable time after disco,ering the falsity of such representations that Lit (ould not be bound by the contract of insuranceH but in order to sustain the first"mentioned defense, the same ha,ing been asserted (ithin the contestable period, it (as necessary only to !3

!+ P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda, de 4indayen ,s. )nsular 2ife Assurance Co, deli,ered to her, other(ise the policy ne,er should become binding and obligatory. )t is condition that goes to the ,ery e?istence of the policy and )ts ,alidity, and under the facts in this case it is insisted strenuously that no binding policy (as e,er issued andL deli,ered by the appellant.' And in the case of 1ederal 2ife )ns. Co. ,s. Aright D&!* 4. A., 69%E, the Ci,il Appellate Court of .e?as saidF '\ \ \ .he application and the policy contain, the entire contract bet(een the parties, and it is not only agreed in the application that all of the statements therein Lare full, true, andL complete,L but it is stipulated therein, as abo,e sho(n, that the policy of insurance applied for shall not take effect until the policy shall ha,e been actually deli,ered to the insured and the first premium paid during his life and (hile he (as in good health. .he purpose and meaning of this pro,ision, standing alone or taken in connection (ith any or all other pro,isions of the contract, is clear, (ithout ambiguity, and not open to construction. )t un>uestionably means that the policy should not take effect as a contract of insurance unless actually deli,ered to the applicant therefor (hile he (as in good health. .his being the meaning of the pro,ision, and the appellee ha,ing admitted in her pleadings and in open court at the trial that the applicant or insured (as afflicted (ith tuberculosis of the lungs at the time the policy (as deli,eredL to him, and that such disease caused his deaths the policy by its terms ne,er became an obligation of the appellant. 'Applications for policies of life insurance .fre>uently pro,ide, as )n the present instance, that the policy shall not take effect unless it is deli,ered to the insured and the first premium paid` (hile he is in good health, and the great (eight of authority is to the effect that such pro,ision is ,alid, and that if the insured (as not in fact in good health on the date the policy (as deli,ered the company is not liable. D#allant ,s. /etropolitan 2. )ns. Co., +6 /ass., 69H 88 =. J., *6!H /urphy ,s. /etropolitan 2ife )ns. Co., !6

!3 P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. sho( that the insured (as not in good health (hen the policy (as deli,ered. Ae do not agree (ith the contention to the effect that by pleading and pro,ing that the first premium (as paid andL recei,ed (hen the application for the policy (as made, (hich (as a fe( days prior to the deli,ery of the policy, the appellee sho(ed an e?press (ai,er of the pro,ision in the application making the assumption of any liability on the part of appellant dependent upon the good health of the insured at the time the policy (as deli,ered. '.he pro,ision, as before stated, is clear and unambiguous and susceptible of but one construction. -y its plain and unmistakable terms the insured agrees that all the statements and ans(ers contained in the application are full, true, and complete in e,ery respect, and are offered to the insurance company as a consideration for a contract of insurance, (hich shall not take effect unless the policy shall ha,e been actually deli,ered to him (hile he (as in good health. =or shall it take effect unless the first premium shall ha,e been actually paid during his life and paid (hile he (as in good health. )n other (ords, if the insured (as not in good health at the time the policy (as deli,ered to him, or if he (as dead or in bad health (hen the first premium (as paid, then, in either e,ent, no obligation on the part of the insurance company (as assumed, and, of course, there (as no contract of insurance. )t (as as much a condition precedent to the taking effect of the contract that the first premium be paid during the life of the insured and (hile he (as in good health as that the policy be deli,ered (hile he (as in good health, and the fact that the premium (as paid (hen the application (as made, and a fe( days in ad,ance of the deli,ery of the policy, can furnish no basis for the holding that thereby the other condition (as abrogated or (ai,ed. Ae can see no good reason for saying that the pro,ision relati,e to good health at the time of the payment of the first premium of the policy (as inserted !9

V52. +&, 4JP.J/-J$ 8, 9!% !6 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. *+ /inn., &H 3 =. A., !%%H 2ogan ,s, =e( Oork 2. )nsurance Co., *6 Aash., &%!H 3 Pac., 9*+H /etropolitan 2. )nsurance Co. ,s. Aillis, !6 )nd. App., 83H 6+ =. J,, %+*H #allop ,s. $oyal =eighbors of America, +6 /o. App., 3%H %* 4. A., 3H /etropolitan 2. )nsurance Co. ,s. -etz, 88 .e?. Ci,. App., %%6H 99 4. A., 8*H American =at. )nsurance Co. ,s.

V52. +&, 4JP.J/-J$ 8, 9!%

!9 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. to co,er cases L(hen the first premium (as collected at a time subse>uent to the issuance of the policy, either at or prior to the deli,ery thereof.L .he pro,ision under consideration is not one (hich the insurance company may a,ail itself of to a,oid an e?ecuted contract, or one (hich in the ordinary sense constitutes a (arranty of the good health of the insured, but its effect (as to pre,ent the taking effect of the contemplated contract, unless there (as a compliance (ith the conditions precedent named therein. Bifferently stated, (ith such a pro,ision in the application for the policy the contract is not a completed one, is not absolute but conditional, and in this case it is the fact of soundL health, etc., in the insured on the date of the deli,ery of the policy that determines the liability of the appellant. ')n her motion for a rehearing the appellee asserts that our holding on the appellantLs motion for rehearing, to the effect that since the application f or the policy sued on, (hich (as a part of the contract of insurance, stipulated that the policy should not take effect until the same (as actually deli,ered to the insured and the first premium paid during his life and (hile he (as in good health, and since it (as admitted by the appellee and conclusi,ely sho(n that the insured had tuberculosis of the lungs at the time the policy (as deli,ered to him and the first premium paid, the policy by its terms ne,er became an obligation of the appellant, is different from or in conflict (ith the decision in the cases of American =ational 2ife )nsurance Co. ,s. $o(ell D 6% 4. A., 6*EH American =ational )nsurance Co. ,s. -urnside D 6% 4. A., +9E H American =ational 2ife )nsurance Co. ,s. 1a(cett D +& 4. A., *EH =ational 1ire )ns. Co. ,s. Carter D 99 4. A., %*6E H and /ecca 1ire )nsurance Co. ,s. 4tricker D !+ 4. A., %99E. '.he first three of the cases mentioned (ere decided by this court, the fourth by the Court of Ci,il Appeals for the 1irst Bistrict, and the fifth by the Court of Ci,il Appeals for the L.hird Bistrict. 5ur conclusion is that neither of 8*

the deli,ery of the policy be made (hen the insured is in good health, is not in conflict (ith any pro,ision of the )nsurance 2a( no( in force, nor (ith any other la( of a general characterH neither is said stipulation contrary to 8

V52. +&, 4JP.J/-J$ 8, 9!% 8 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. morals or public order, and therefore the same is ,alid and binding upon the parties. DArticles &%%, &%6 and &%3, Ci,il Code.E .he majority opinion states that the deli,ery of the policy by the agent after he has made use of the discretion conferred upon him by the defendant to deli,er or to (ithhold said policy, is binding upon the defendant and the latter cannot e,ade the conse>uences thereof. .his same legal >uestion has been raised before ,arious appellate courts of se,eral states of the <nion, (hich made a distinction bet(een agents (hose only po(er consisted in soliciting insurance and in deli,ering policies and those (ho, in addition to such po(er, (ere authorized to issue policies and accept risks on behalf of insurance companies. )n the first case the doctrine is uniform that the acts of agents (ith limited po(ers are not binding upon the insurance companies, (hereas in the second case the acts of the agents bind andL prejudice the insurance companies represented by them. .his legal >uestion has been e?tensi,ely considered and s>uarely decided in the case of American -ankersL )ns. Co. ,s. .homas, supra, as follo(sF '1a,oring liability, she contends that the kno(ledge of /artin of the ill health of the insured at the time the policies (ere deli,ered (as the kno(ledge of the company and a (ai,er of the condition. =ot so. Assuming that /artin (as the agent of the company at that time, (ith authority to deli,er the policies, it f ailing to appear that he had anything to do (ith the e?ecution thereof or the acceptance of the risk, his kno(ledge (as not that of the company. )n /erchantsL K PlantersL )ns. Co. ,s. /arsh D!8 5kla., 8%!H &% Pac., **E, (e held that the kno(ledge of the agent (as the kno(ledge of the company only (here the authority of such agent, deri,edL from the company, (as to solicit applications and e?ecute and deli,er contracts of insurance as an alter ego of the company, and that it (as only in such case that he had po(er to (ai,e the conditions of the policy. 8&

8* P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. these cases is in conflict (ith the decision in the first case referred to and the present case, but it seems manifest, from a careful e?amination and analysis of the opinion in that case, that the court did not ha,e in mind the precise >uestion here in,ol,ed, and did not there e?pressly pass on it. .here it (as urged that the trial court erred in o,erruling the insurance companyLs demurrers to $o(ellLs petition, because it (as not alleged that the insured (as in sound health at the time the policy sued on (as issued, and this court held that there (as no error in o,erruling the demurrers, since, if the insured (as not, in fact, in sound health at that time, such fact (as a matter of defense to be pleaded by the company. )t (as further there held that (hile the defendant a,erred that the insured (as not in sound health (hen the policy (as issued, such defense (as not sufficiently pleaded to justify the admission of testimony to establish it. .he opinion also indicates that the insurance company in its pleadings and assignments of error treated the pro,ision in the policy, that no obligation (as assumed by it unless on the date of issuance the insured (as in good health, as a representation or (arranty, and that this court, discussing the matter as presented, after stating in substance the pro,isions of article 8983 of the statute said that the failure to gi,e the notice prescribed in that statute absolutely barred the insurance company from defending an action on the policy because of alleged misrepresentations. Ae also declared that said statute applied to co,enants of (arranty as (ell Las to statements in the application not made (arranties by the contract, citing /ecca 1ire )ns. Co. ,s. 4tricker, supra.' /oreo,er, the stipulation that the insurance contract shall produce no effect unless the payment of the first premium and

8& P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. )n that case the agent (as, as here, a local or soliciting agent, and there the policy sued on (as, as here, a Lhome office policyL, or one issued direct by the president and secretary of the company as distinguished from one issued by the local agent. .here, in the syllabus, (e saidF ' LA local agent of an insurance company, (hose only po(er is to solicit applications for insurance, and for(ard them to the company for appro,al, (hen, if appro,ed, the company issues the policy and causes it to be deli,ered to the insured, has no po(er to (ai,e any of the pro,isions of the policy so deli,eredS \\\ 'Also in keeping (ith this rule is Bes /oines )ns. Co,s. /oon D!! 5kla., 8!6H &+ Pac., 6%!E. .here (e saidF 'L\ \ \ Ahere the local agent has the po(er to accept a risk and deli,er a policy of insurance, and is ad,ised and has full kno(ledge, at the time of the deli,ery of the policy, that certain conditions of the policy, (hich may be (ai,ed, are ,iolated, such policy is binding upon the company, not(ithstanding the fact that it contains a pro,ision that none of the companyLs officers or

agents can (ai,e any of its pro,isions, e?cept in (riting, indorsed upon the policy. .his case Dreferring to Aestern =ational )ns. Co. ,s. /arsh, !8 5kla., 8 8H &% Pac., *98E, unanimously concurred in by the members of the courts, settles the rule in this jurisdiction as to contracts of insurance (ritten after the admission of the stateF \ \ \L '5f course, if the local agent had not po(er, as here, to accept the risk, he had no po(er to (ai,e the condition precedent in the policy. Cases relied on by plaintiff (hich hold the contrary practically under the same state of facts fail to dra( this distinction, and seem to hold that the kno(ledge of a mere soliciting agent of the company of the ill health of the insured at the time of the deli,ery of the policy is the kno(ledge of the company, and hence a deli,ery (ith such kno(ledge constitutes a (ai,er of the condition under consideration. .hey are $oe ,s. =ational 2ife, etc. Co. D !6 lo(a, +9+H % =. A., %**H 6 2. $. A. :=. 4.;, 88E H 8!

premium is paid and its deli,ery, (hile the insured is in good health, is for the benefit of the insurer, and ob,iously may be (ai,ed by it or by its agent possessing authority (ith respect to that matter. D4ee $hodus ,s. Yansas City, etc., )ns. Co., %+ /o. App., &3 H !6 4. A., 9*6.E \ \ \ -ut it is insisted that a mere soliciting agent, such as Cummings, is (ithout authority to (ai,e the condition in the policy here relied upon, andL, for the purpose of the case, the proposition may be conceded as true. 'Ahereupon the court proceeded to consider (hether the company, under the facts in that case, had (ai,ed the condition in the policy relied upon. Ae are therefore of opinion that /artin (as (ithout authority to (ai,e the condition relied on, and that plaintiff cannot reco,er unless defendant is estopped to deny that liability attached by reason of recei,ing and retaining the premiums as alleged in the petition. Joining issue on these allegations, defendant by ans(er in effect admitted accepting the premiums as stated, but pleaded in a,oidance that it tendered them back to a representati,e of the assured and demanded a return of the policies, (hich (as refused, and for that reason, it is urged, defendant is not estopped to assert that no liability attached under the policies.' )t is clear, therefore, that the deli,ery of the policy by /endoza does not bind the defendant, nor is the defendant estopped from alleging its defense, for the simple reason that /endoza (as not an agent (ith authority to issue policies or to accept risks in the name of his principal. 8%

V52. +&, 4JP.J/-J$ 8, 9!% 8! 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. Connecticut, etc. )ns. Co. ,s. #rogan D:Yy.; %& 4. A., 9%9EH =. A. 2ife )ns. Co. ,s. 1indley D&9 .e?. Ci,. App., 898H +3 4. A., +9%EH =ational 2ife )ns. Co. ,s. .(iddel D:Yy.;, %3 4. A., +99E H @ome 1orum -en. 5rder ,s. Varnado D:.e?. Ci,. App.;, %% 4. A., !+8E, and others. -ut the distinction is referred to in -ell ,s. )ns. Co. D ++ /o. App., !9*H 89 4. A., !!E. )n that case the insured, (ho (as plaintiffLs brother, died at =ogales, Ariz., as a result of injuries recei,ed (hile (orking as a telegraph lineman. 5n July 6, 9*9, he made application to defendant for a policy of life insurance, payable in e,ent of his death to plaintiff. @e made it to defendantsL soliciting agents at that place, and paid the first annual premium cash in hand. .he application (as for(arded to defendant by mail, and duly recei,ed in 4t. 2ouis, /o., on July &!, 9*9. .he policy (as conditioned the same as here. 5n July &6, the application (as duly accepted, and the policy issued and (as mailed August 8, 9*9, to the soliciting agents for deli,ery to the insured. <pon its arri,al on August 3, 9*9, pursuant to instructions, the policy (as deposited for him in the safe of the soliciting agents, along (ith other pri,ate papers of the insured kept there by him" .(o days before that time the insured recei,ed a fatal injury, from (hich he died on the night of August th. 5n August +th, one of the soliciting agents ,isited the insured and kne( of his injury. .he court saidF 'L.here can be no doubt that it is competent for the parties to stipulate in the application for insurance, as here, that the policy shall not be effecti,e or binding until deli,ered to, and accepted by, the insured (hile in good health and the payment of the first permium is made. )t is said that a contract of life insurance is not complete until the last act necessary to be done by the insured, under the conditions of the contract, after acceptance of the application by the company, has been done by him, and the courts, therefore, in proper cases, sustain such agreements (hich operate to postpone the taking effect of the policy until the 88

V52. +&, 4JP.J/-J$ 8, 9!% 8% 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. .here is another ground upon (hich the majority opinion is based, namely, that the defendant (ai,ed the defense it no( in,okes, by reason of the deli,ery of the policy by its agent. )t is admitted that if the deli,ery of the policy (as due to fraud, legally there could ha,e been no (ai,er. )n ,ie( of the facts established and admitted, there is no doubt as to the e?istence of the fraud. A restatement of the facts (ill sho( such e?istence. )t (ill be remembered that before the deli,ery of the policy /endoza asked Jstrada (hether the insured continued enjoying good health, to (hich she ans(ered that she thought he (as in good health because she had had no information that he (as sick. )t (ill like(ise be noted that the information, far from being correct or truthful, (as incorrect and misleading because, in reality, on that occasion the insured (as seriously ill from nephritis and uremia, almost in a moribund state. Jstrada, as a representati,e of the insured (as not only bound to gi,e a truthful information on the state of health of the insured, but it (as her duty to find out his true state of health in order to gi,e a true and correct information. Ahen she ga,e /endoza an incorrect information tending to create the impression that the insured (as (ell (hen in fact he (as seriously ill, there is no doubt that she committed fraud and imparted a deceitful information to the defendantLs agent. )t matters not that the fraud (as in,oluntary and not chargeable to JstradaH the truth is that it e?isted and that by reason of such fraud the policy (as deli,ered, and both the agent and the defendant (ere misled into belie,ing that the insured (as enjoying good health. )n the case of Cable ,s. <nited 4tates 2ife )ns. Co. D 1ed. $ep., 9E, the se,enth circuit of the <nited 4tates Circuit Courts of Appeals, in deciding the same >uestion of (ai,er, saidF ')t is, ho(e,er, urged that sufficient information (as disclosed by 2ord to /cCabe to put the company upon in>uiry, and that, (ith such notice, /cCabe deli,ered the 8+

88 P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. deli,ery and premium payment (hile the insured is in good health. D4ee -acon, 2ife )ns. :!d ed.;, sec. &6&H Yilcullen ,s. /et. 2ife )ns. Co., *3 /o. App., + H 3& 4. A., 9++H /isselhorn ,s. /utual $eser,e, etc", 2ife )ns. Co., !* /o. App., %39H /c#regor ,s. /et. 2ife )ns. Co. : 8! Yy., 833;, !+ 4. A., 339.E -ut though such be true, the pro,ision for thus suspending the policy, as an effecti,e contract, until the first

8+ P@)2)PP)=J $JP5$.4 A==5.A.JB

2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. policy and recei,ed the premiumH, that /cCabe (as the agent of the company, and notice to him (as notice to the company, and the deli,ery of the policy constituted a (ai,er of the condition and (arranty. <pon the assumption that /cCabe (as such agent of the company, and that his action must be treated as the action of the company, >uestions (hich (e do not determine,Qit becomes us to in>uire of the sufficiency of the notice gi,en, andL (hether the act of deli,ery of the policy in,ol,ed a (ai,er of the (arranty. '\ \ \ .he holder of the policy cannot be permitted to conceal from the company an important fact, like that of the assured being in e?tremis, and then to claim a (ai,er of the forfeiture created by the act (hich brought the insured to that condition. .o permit such concealment, and yet to gi,e to the action of the company the same effect as though no concealment (ere made, (ould tend to sanction fraud on the part of the policy holder, instead of protecting him against the commission of one by the company. D)nsurance Co. ,s. Aolff, 9% <. 4., !&+, !!!H &8 2a(. ed., !36, !9*.E ')t cannot here be doubted that if the insurance company, or /cCabe as its agent, had been informed of the fact, (ithin the personal kno(ledge of 2ord, that Cable (as seriously ill (ith acute pneumonia, the policy (ould not ha,e been deli,ered. )t is difficult for us to belie,e that 2ord, (ith that kno(ledge, could think he had a right to accept this policyH but, (hether so or not, the concealment of the fact (as a fraud upon the company. .he statement made (as decepti,e and misleading, (hate,er (ere the intentions of 2ord, and a court of e>uity ought not to permit the completion of the (rong. Courts of e>uity cannot sustain an insurance upon the life of a dying man, (hen the nature of his malady and the seriousness of his illness are concealedL from the insurer.' .he same doctrine has been applied (hen there is an attempt to sho( that the (ai,er or estoppel arises from 86

'Ahereas, the undersigned, 1ortunata 2ucero 4indayen, (ido( of the said Arturo 4indayen, is named as beneficiary in the said policy of life insuranceH and 'Ahereas, it is the desire of the )nsular 2ife Assce. Co., 2td., and of the beneficiary, 1ortunata 2ucero 4indayen 83

83 P@)2)PP)=J $JP5$.4 A==5.A.JB 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. that all differences, contro,ersies and disputes that may gro( out of the issuance of the said policy of life insurance and out of the claims that the said beneficiary may make under the said policy of life insurance be settled and compromisedH and 'Ahereas, the said )nsular 2ife Assce. Co., 2td. has at the date hereof paid 1ortunata 2ucero 4indayen, the beneficiary named in said policy of life insurance, the sum of 1orty Pesos and 4i? Centa,os DP8*.*+E, la(ful money of the Philippine )slands, the receipt (hereof is hereby ackno(ledgedH '=o(, therefore, in consideration of the promises and of the sum of 1orty Pesos and 4i? Centa,os DP8*.*+E, said 1ortunata 2ucero 4indayen, for herself, her heirs, e?ecutors, administrators and assigns, release and fore,er discharge said )nsular 2ife Assurance Co., 2td., its successors, and assigns, of all claims, obligation or indebtedness (hich she, as such beneficiary e,er had or no( has, hereafter can, shall, or may ha,e, for, upon, or by reason of said policy of life insurance numbered 866 * upon the life of said Arturo 4indayen, the latter no( deceased, or arising therefrom or connected there(ith in any manner.' .here is no dispute that the aforesaid document (as signed by the plaintiff. .here (as irregularity in its e?ecution because it (as authenticated by the notary public in the absence of the plaintiff. )t is admitted that due to this irregularity the document is not a public instrument, but there is no doubt that it is an authentic pri,ate instrument (hose e,identiary ,alue cannot be disregardedL. )ts terms are binding upon the plaintiff, (ho understood the same not(ithstanding her denial. @o(e,er, it is said that the defendant like(ise (ai,ed the defense (hich has hereinbefore been e?tensi,ely considered, because it failed to return the first premium collected, and this alleged failure is predicated upon the statement contained in the penultimate paragraph of the instrument stating that the check for P8*.*+ (as returned to 89

V52. +&, 4JP.J/-J$ 8, 9!% 86 2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co. the payment of the premium. )n the case of =yman ,s. /anufacturersL K /erchantsL 2ife Assn., supra, the court saidF ')t is further insisted by plaintiff that defendant, by accepting and retaining premiums or assessments from the insured, is estopped from denying the ,alidity of the certificate. .he first premium (as paid on the day the policy (as deli,ered, and the last one t(o days before the insuredLs death. .here is no proof (hate,er that defendant or its agent kne(, before the death of /rs. =yman, that, at the time the policy (as deli,ered and the first premium paid, she (as not in good health. $ecei,ing premiums subse>uently, (ith kno(ledge that she (as then ill, could ha,e no significance, if defendant (as ignorant of the fact that the insured (as in bad health (hen the policy (as deli,ered and the first premium paid. )f /rs. =yman had been in good health (hen she recei,ed the policy and paid the first premium, defendant (ould not ha,e been justified in refusing to accept premiums if she after(ards became ill. .he kno(ledge that (ould estop defendant from denying liability in this case must be kno(ledge that the insured (as not in good health (hen the policy (as deli,ered.' .he case presents another aspect, namely, the (ai,er made by the plaintiff of any and all benefits accruing from the policy, (hich (ai,er e?pressly appears in document J?hibit A, kno(n as 'Accord, 4atisfaction and $elease'. .he pertinent clauses of the document read as follo(sF 'Ahereas, the )nsular 2ife Assce. Co., 2td., claims that the deli,ery of the said policy =o. 866 * (as not ,alid because said deli,ery (as made (hile the said Arturo 4indayen (as not in good healthH

V52. +&, 4JP.J/-J$ 8, 9!% 89 Central Azucarera de .arlac ,s. Be 2eon and 1ernandez the plaintiff in consideration of her (ai,er of any claim (hatsoe,er. A careful reading of the instrument (ill con,ince the mind that (hat (as really meant is that the deli,ery of the check (as another consideration of the plaintiffLs (ai,er, it being self"e,ident that said check constituted, in effect, a refund of the first premium paid by the insured and recei,ed by the insurer. )t is ridiculous to think that such a negligible amount has been the only consideration of the plaintiffLs (ai,er of any right or benefit accruing to her from the policy. A careful perusal of the instrument (ill sho( that the real consideration of the plaintiffLs (ai,er (as the unenforceability of the policy due to her husbandLs illness and the mutual desire of the plaintiff and the insurer to settle amicably the case instead of resorting to courts. )n conclusion it is my opinionF D E .hat the policy has not produced any effect from (hich the plaintiff may deri,e any right, and D&E that she has e?pressly (ai,ed any and all rights

accruing from the policyH and for these reasons ) dissent from the majority opinion. Judgment re,ersed and case remanded (ith directions. :2ucero Vda. de 4indayen ,s. )nsular 2ife Assurance Co., +& Phil. 9D 9!%E;

BJ CA4.$5,\\ J.F

4<P$J/J C5<$. $JP5$.4 A==5.A.JB Pacific .imber J?port Corp. ,s. Court of Appeals

.his petition seeks the re,ie( of the decision of the Court of Appeals re,ersing the decision of the Court of 1irst )nstance ^^^^^^^^^^^^^^^^

At about *F** o9clock a. m. on /arch &9, 9+!, (hile the logs (ere alongside the ,essel, bad (eather de,eloped resulting in 6% pieces of logs (hich (ere rafted together to break loose from each other. 8% pieces of logs (ere sal,aged, but !* pieces (ere ,erified to ha,e been lost or (ashed a(ay as a result of the accident. ])n a letter dated April 8, 9+!, the plaintiff informed the defendant about the loss of eappro?imately !& pieces of logs9 during loading of the e44 Aoodlock9. .he said letter DJ?hibit 1E reads as follo(sF eApril 8, 9+!

\\ /r. Justice de Castro (as designated to sit (ith the 1irst Bi,ision under 4pecial 5rder =o. &&%. &*

V52. &*

&, 1J-$<A$O &%, 93&

Aorkmen9s )nsurance Company, )nc. /anila, Philippines #entlemenF

Pacific .imber J?port Corp. ,s. Court of Appeals of /anila in fa,or of petitioner and against pri,ate respondent (hich ordered the latter to pay the sum of P ,*8&.*8 (ith interest at the rate of &d interest from receipt of notice of loss on April %, 9+! up to the complete payment, the sum of P!,***.** as attorney9s fees and the costs thereby dismissing petitioner9s complaint (ith costs.& .he findings of fact of the Court of Appeals, (hich are generally binding upon this Court, e?cept as shall be indicated in the discussion of the opinion of this Court the substantial correctness of such particular finding ha,ing been disputed, thereby raising a >uestion of la( re,ie(able by this Court! are as follo(sF ]5n /arch 9, 9+!, the plaintiff secured temporary insurance from the defendant for its e?portation of ,&%*,*** board feet of Philippine 2auan and Apitong logs to be shipped from the Biapitan -ay, 7uezon Pro,ince to 5kina(a and .okyo, Japan. .he defendant issued on said date Co,er =ote =o. * *, insuring the said cargo of the plaintiff ]4ubject to the .erms and Conditions of the A5$Y/J=94 )=4<$A=CJ C5/PA=O, )=C. printed /arine Policy form as filed (ith and appro,ed by the 5ffice of the )nsurance Commissioner_ DJ?hibit AE. ].he regular marine cargo policies (ere issued by the defendant in fa,or of the plaintiff on April &, 9+!. .he t(o marine policies bore the numbers %! @5 *!& and %! @5 *!! DJ?hibits - and C, respecti,elyE. Policy =o. %! @5 *!& DJ?hibit -E (as for %8& pieces of logs e>ui,alent to 899,9%* board feet. Policy =o. %! @5 *!! (as for 3%! pieces of logs e>ui,alent to +9%,%83 board feet DJ?hibit CE. .he total cargo insured under the t(o marine policies accordingly consisted of ,!9% logs, or the e>ui,alent of , 9%,893 bd. ft. ]After the issuance of Co,er =ote =o. * * DJ?hibit AE, but before the issuance of the t(o marine policies =os. %! @5 *!& and %! @5 *!!, some of the logs intended to be e?ported (ere lost during loading operations in the Biapitan -ay. .he logs (ere to be loaded on the e44 Aoodlock9 (hich docked about %** meters from the shoreline of the Biapitan -ay. .he logs (ere taken from the log pond of the plaintiff and from (hich they (ere to(ed in rafts to the ,essel. ^^^^^^^^^^^^^^^^

.his has reference to )nsurance Co,er =ote =o. * * for shipment of ,&%*,*** bd. ft., Philippine 2auan and Apitong 2ogs. Ae (ould like to inform you that (e ha,e recei,ed ad,ance preliminary report from our 5ffice in Biapitan, 7uezon that (e ha,e lost appro?imately !& pieces of logs during loading of the 4.4. Aoodlock. Ae (ill send you an accurate report all the details including ,alues as soon as same (ill be reported to us. .hank you for your attention, (e (ish to remain. Very respectfully yours, PAC)1)C .)/-J$ J0P5$. C5$P5$A.)5= D4gd.E J//A=<J2 4. A.)2A=5 Asst. #eneral /anager.9 Although dated April 8, 9+!, the letter (as recei,ed in the office of the defendant only on April %, 9+!, as sho(n by the stamp impression appearing on the left bottom corner of said letter. .he plaintiff subse>uently submitted a eClaim 4tatement demanding payment of the loss under Policies =os. %! @5 *!& and %! @5 *!!, in the total amount of P 9,&3+.69 DJ?hibit #E. &*!

V52. &*!

&, 1J-$<A$O &%, 93&

Pacific .imber J?port Corp. ,s. Court of Appeals ]5n July 6, 9+!, the defendant re>uested the 1irst Philippine Adjustment Corporation to inspect the loss and assess the damage. .he adjustment company submitted its e$eport9 on August &!, 9+! DJ?hibit @E. in said report, the adjuster found that ethe loss of !* pieces of logs is not co,ered by Policies =os. %! @5 *!& and *!! inasmuch as said policies co,ered the actual number of logs loaded on board the e44 Aoodlock9. @o(e,er, the loss of !* pieces of logs is (ithin the ,&%*,*** bd. ft. co,ered by Co,er =ote =o. * * insured for c6*,***.**. ]5n 4eptember 8, 9+!, the adjustment company submitted a computation of the defendant9s probable liability on the loss sustained by the shipment, in the total amount of P ,*8&.*8 DJ?hibit 8E. ]5n January !, 9+8, the defendant (rote the plaintiff denying the latter9s claim, on the ground that defendant9s in,estigation re,ealed that the entire shipment of logs co,ered by the t(o

$ecord on Appeal, pp. 8&"8!, p. 6&, $ollo. & Appendi? ]A_ to Petitioner9s -rief, p. &8, $ollo. ! Alejandra Cunanan ,s. 1idela =u>ui de 2azatin, et al., 68 Phil. 6 9H =g Ooung ,s. Ana Villa, et al., 9! Phil. & . &*&

&*&

marines policies =o. %! @5 *!& and %! @5 *!! (ere recei,ed in good order at their point of destination. )t (as further stated that the said loss may not be considered as co,ered under Co,er =ote =o. * * because the said =ote had become enull and ,oid by ,irtue of the issuance of /arine Policy =os. %! @5 *!& and *!!9 DJ?hibit J" E. .he denial of the claim by the defendant (as brought by the plaintiff to the attention of the )nsurance Commissioner by means of a letter dated /arch & , 9+8 DJ?hibit YE. )n a reply letter dated /arch !*, 9+8, )nsurance Commissioner 1rancisco O. /andanas obser,ed that eit is only fair and e>uitable to indemnify the insured under Co,er =ote =o. * *9, and ad,ised early settlement of the said marine loss and sal,age claim DJ?hibit 2E. ]5n June &+, 9+8, the defendant informed the )nsurance Commissioner that, on ad,ice of their attorneys, the claim of the plaintiff is being denied on the ground that the co,er note is null and ,oid for lack of ,aluable consideration DJ?hibit /E._8 Petitioner assigned as errors of the Court of Appeals, the follo(ingF )

or re>uired to be paid on a Co,er =ote. .his is a fact admitted by an official of respondent company, Juan Jose Camacho, in charge of issuing co,er notes of the respondent company Dp. !!, tsn, 4eptember &8, 9+%E. ^^^^^^^^^^^^^^^^

% p 6, )B., p. &8, $ollo. &*%

V52. &*%

&, 1J-$<A$O &%, 93&

Pacific .imber J?port Corp. ,s. Court of Appeals At any rate, it is not disputed that petitioner paid in full all the premiums as called for by the statement issued by pri,ate respondent after the issuance of the t(o regular marine insurance policies, thereby lea,ing no account unpaid by petitioner due on the insurance co,erage, (hich must be deemed to include the Co,er =ote. )f the =ote is to be treated as a separate policy instead of integrating it to the regular policies subse>uently issued, the purpose and function of the Co,er =ote (ould be set at naught or rendered meaningless, for it is in a real sense a contract, not a mere application for insurance (hich is a mere offer.+ )t may be true that the marine insurance policies issued (ere for logs no longer including those (hich had been lost during loading operations. .his had to be so because the risk insured against is not for loss during operations anymore, but for loss during transit, the logs ha,ing already been safely placed aboard. .his (ould make no difference, ho(e,er, insofar as the liability on the co,er note is concerned, for the number or ,olume of logs lost can be determined independently, as in fact it had been so ascertained at the instance of pri,ate respondent itself (hen it sent its o(n adjuster to in,estigate and assess the loss, after the issuance of the marine insurance policies. .he adjuster (ent as far as submitting his report to respondent, as (ell as its computation of respondent9s liability on the insurance co,erage. .his co,erage could not ha,e been no other than (hat (as stipulated in the Co,er =ote, for no loss or damage had to be assessed on the co,erage arising from the marine insurance policies. 1or ob,ious reasons, it (as not necessary to ask petitioner to pay premium on the Co,er =ote, for the loss insured against ha,ing already occurred, the more practical procedure is simply to deduct the premium from the amount due the petitioner on the Co,er =ote. .he non" payment of premium on the Co,er =ote is, therefore, no cause for the petitioner to lose (hat is due it as if there had been payment of premium, for non"payment by it (as not chargeable against its fault. @ad all the logs been lost during the loading ^^^^^^^^^^^^^^^^

].@J C5<$. 51 APPJA24 J$$JB )= @52B)=# .@A. .@J C5VJ$ =5.J AA4 =<22 A=B V5)B 15$ 2ACY 51 ^^^^^^^^^^^^^^^^

8 pp. 6" &*8

, -rief for the Petitioner, p. &8, $ollo.

&*8 4<P$J/J C5<$. $JP5$.4 A==5.A.JB Pacific .imber J?port Corp. ,s. Court of Appeals VA2<A-2J C5=4)BJ$A.)5= -JCA<4J .@J C5<$. B)4$J#A$BJB .@J P$5VJ= 1AC.4 .@A. P$J/)</4 15$ .@J C5/P$J@J=4)VJ )=4<$A=CJ C5VJ$A#J .@A. )=C2<BJB .@J C5VJ$ =5.J AA4 PA)B -O PJ.).)5=J$ A=B .@A. =5 4JPA$A.J P$J/)</4 A$J C522JC.JB -O P$)VA.J $J4P5=BJ=. 5= A22 ).4 C5VJ$ =5.J4. ))

].@J C5<$. 51 APPJA24 J$$JB )= @52B)=# .@A. P$)VA.J $J4P5=BJ=. AA4 $J2JA4JB 1$5/ 2)A-)2).O <=BJ$ .@J C5VJ$ =5.J B<J .5 <=$JA45=A-2J BJ2AO )= #)V)=# =5.)CJ 51 2544 -JCA<4J .@J C5<$. B)4$J#A$BJB .@J P$5VJ= 1AC. .@A. P$)VA.J $J4P5=BJ=. B)B =5. P$5/P.2O A=B 4PJC)1)CA22O 5-JJC. .5 .@J C2A)/ 5= .@J #$5<=B 51 BJ2AO )= #)V)=# =5.)CJ 51 2544 A=B, C5=4J7<J=.2O, 5-JJC.)5=4 5= .@A. #$5<=B A$J AA)VJB <=BJ$ 4JC.)5= 38 51 .@J )=4<$A=CJ AC.._% . Petitioner contends that the Co,er =ote (as issued (ith a consideration (hen, by e?press stipulation, the co,er note is made subject to the terms and conditions of the marine policies, and the payment of premiums is one of the terms of the policies. 1rom this undisputed fact, Ae uphold petitioner9s submission that the Co,er =ote (as not (ithout consideration for (hich the respondent court held the Co,er =ote as null and ,oid, and denied reco,ery therefrom. .he fact that no separate premium (as paid on the Co,er =ote before the loss insured against occurred, does not militate against the ,alidity of petitioner9s contention, for no such premium could ha,e been paid, since by the nature of the Co,er =ote, it did not contain, as all Co,er =otes do not contain particulars of the shipment that (ould ser,e as basis for the computation of the premiums. As a logical conse>uence, no separate premiums are intended

+ &9 A/ J<$. p. %9+. &*+

&*+ 4<P$J/J C5<$. $JP5$.4 A==5.A.JB Pacific .imber J?port Corp. ,s. Court of Appeals operations, but after the issuance of the Co,er =ote, liability on the note (ould ha,e already arisen e,en before payment of premium. .his is ho( the co,er note as a ]binder_ should legally operateH other(ise, it (ould ser,e no practical purpose in the realm of commerce, and is supported by the doctrine that (here a policy is deli,ered (ithout re>uiring payment of

the premium, the presumption is that a credit (as intended and policy is ,alid.6 &. .he defense of delay as raised by pri,ate respondent in resisting the claim cannot be sustained. .he la( re>uires this ground of delay to be promptly and specifically asserted (hen a claim on the insurance agreement is made. .he undisputed facts sho( that instead of in,oking the ground of delay in objecting to petitioner9s claim of reco,ery on the co,er note, it took steps clearly indicati,e that this particular ground for objection to the claim (as ne,er in its mind. .he nature of this specific ground for resisting a claim places the insurer on duty to in>uire (hen the loss took place, so that it could determine (hether delay (ould be a ,alid ground upon (hich to object to a claim against it. As already stated earlier, pri,ate respondent9s reaction upon receipt of the notice of loss, (hich (as on April %, 9+!, (as to set in motion from July 9+! (hat (ould be necessary to determine the cause and e?tent of the loss, (ith a ,ie( to the payment thereof on the insurance agreement. .hus it sent its adjuster to in,estigate and assess the loss in July, 9+!. .he adjuster submitted his report on August &!, 9+! and his computation of respondent9s liability on 4eptember 8, 9+!. 1rom April 9+! to July, 9+!, enough time (as a,ailable for pri,ate respondent to determine if petitioner (as guilty of delay in communicating the loss to respondent company. )n the proceedings that took place later in the 5ffice of the )nsurance Commissioner, pri,ate respondent should then ha,e raised this ground of delay to a,oid liability. )t did not do so. )t must be because it did not find any delay, as this Court fails ^^^^^^^^^^^^^^^^

6 /iller ,s. -rooklyn 2. )nc., Co. D<. 4.E & Aall, &3%, &* 2 ed. !9 Am. Jur. =e( e)nsurance9 4ec. 38%, p. 9*6, note &H 4ec. *69, p. &8+, note &*. &*6

V52. &*6

&, 1J-$<A$O &%, 93&

Pacific .imber J?port Corp. ,s. Court of Appeals to find a real and substantial sign thereof. -ut e,en on the assumption that there (as delay, this Court is satisfied and con,inced that as e?pressly pro,ided by la(, (ai,er can successfully be raised against pri,ate respondent. .hus 4ection 38 of the )nsurance Act pro,idesF ]4ection 38.QBelay in the presentation to an insurer of notice or proof of loss is (ai,ed if caused by any act of his or if he omits to take objection promptly and specifically upon that ground._ 1rom (hat has been said, Ae find duly substantiated petitioner9s assignments of error. ACC5$B)=#2O, the appealed decision is set aside and the decision of the Court of 1irst )nstance is reinstated in toto (ith the affirmance of this Court. =o special pronouncement as to costs. 45 5$BJ$JB. :Pacific .imber J?port Corp. ,s. Court of Appeals, & 4C$A 99D 93&E;

G!ORIA V. P7I!A%!I E IN"URANCE CO. @3 OG 8AA0 a5/4) f )n 9++, $oberto =arito applied for a **. life insurance policy (ith Philamlife )nsurance Company. =arito (as e?amined by Bra. Vergel de dios, the insurer9s medical e?aminer. f 4he opined that =arito (as insurable. @er opinion (as confirmed by Br. 5robia, the Associate /edical Birector of the insurer. f 5n 5c. ! , 9++, an agent of the insured prepared an application for the life insurance (hose annual premium (as P , 63. 5n the same date, the application (as signed by =arito. f =arito paid the first annual premium on the policy applied for. .he insurer9s application form contained a so"called ]-inding $eceipt_ (hich (as detachable. f )t is not sure (hether or not =arito (as gi,en the -inding $eceipt upon his payment of the first premium, but (hat is certain that he (as handed a Cashier9s $eceipt. f 1rom the time the insured recei,ed the application form its agent on =o,. %, 9++, up to Bec. +, 9++, it did not take any action (ith regard to the contro,erted insurance co,erage. f 5n Bec. +, 9++, =arito (as shot and killed. .he beneficiaries submitted a claim to the insurer. After an under(riting analysis conducted by the insurer, it found out that =arito (as unacceptable as an insurance risk. .he claim (as denied. I44u,) Ahether or not the beneficiaries can claim. 7,1#) 'E". .he application for insurance signed by the deceased contained the follo(ing stipulationFDA)e *inding receipt must '$A *e issued unless a *inding deposit is paid 7)ic) must *e at least e8ual to t)e first full premium.E .he preponderance of e,idence is to the effect that the binding receipt (as not issued to the deceased (hen he paid the company9s agent, the first annual premium of P , 63. @ence the rights of the beneficiaries and the obligation of the company ha,e to be determined solely in the application for insurance an in the Cashier9s receipt. .he application for insurance contained the follo(ing clauseF DA)ere s)all *e no contract of insurance unless a polic+ is issued on t)is application and t)e full first premium t)ereon actuall+ paid._ )t should be conceded that there shall be a contract of insurance once the first premium is paid and a policy is issued. .here is no >uestion that the first premium (as paid. .he problem is to resol,e (hether or not it can be said that the policy has been issued. )= this connection, (hat may be noted is that, in contrast to the re>uirement of actual payment of the premium, it (as =5. re>uired that the policy be actually issued. An assuming that no policy had indeed been issued, it should still be held that the application for insurance (as appro,ed by the company, (ith the actual issuance of the policy being a mere technicality. Ahen an insurer accepts and retains the first premium for an unreasonable length of time, it should be presumed that the insurer had assumed the risk. )t should therefore be liable for loss before the application is subse>uently rejected. )n the case at bar, the company did =5. act on the application for insurance, one (ay or the other, from =o,. & to Bec. %, 9++, and no justification for the delay had been pro,en. @ence, it should be held that the application for insurance of the deceased had been appro,ed prior to his death, although the policy had not actually been issued, for (hich reason, the company should be liable to the beneficiaries.

J= -A=C G.R. No. !(93@9 ,>ruary 1A, 1918

any relief can be a(arded under the complaint, e?cept by agreement of all the parties.' .his alleged defect of the complaint (as made one of the t(o bases for the dismissal of the action. Ae do not regard this as sufficient reason for dismissing the action. )t is the doctrine of this court, set do(n in se,eral decisions, 2izarraga @ermanos ,s. Oap .ico, &8 Phil. $ep., %*8, that, e,en though the complaint is defecti,e to the e?tent of failing in allegations necessary to constitute a cause of action, if, on the trial of the cause, e,idence is offered (hich establishes the cause of action (hich the complaint intended to allege, and such e,idence is recei,ed (ithout objection, the defect is thereby cured and cannot be made the ground of a subse>uent objection. )f, therefore, e,idence (as introduced on the trial in this case definitely and clearly describing the real estate sought to be partitioned, the defect in the complaint (as cured in that regard and should not ha,e been used to dismiss the action. Ae do not stop to in>uire (hether such e,idence (as or (as not introduced on the trial, inasmuch as this case must be turned for a ne( trial (ith opportunity to both parties to present such e,idence as is necessary to establish their respecti,e claims. .he court in its decision further saysF ')t (ill be noticed that the pro,ision abo,e >uoted refers e?clusi,ely to real estate. . . . )t is, in other (ords, an e?clusi,e real property action, and the institution thereof gi,es the court no jurisdiction o,er chattels. . . . -ut no relief could possibly be granted in this action as to any property e?cept the last Dreal estateE, for the la( contemplated that all the personal property of an estate be distributed before the administration is closed. )ndeed, it is only in e?ceptional cases that the partition of the real estate is pro,ided for, and this too is e,idently intended to be effected as a part of the administration, but here the complaint alleges that the estate (as finally closed on Becember 9, 9 , and (e find upon referring to the record in that case that subse>uent motion to reopen the same (ere deniedH so that the matter of the personal property at least must be considered res (udicata Dfor the final judgment in the administration proceedings must be treated as concluding not merely (hat (as adjudicated, but (hat might ha,e beenE. 4o far, therefore, as the personal property at least is concerned, plaintiffsL only remedy (as an appeal from said order.' Ae do not belie,e that the la( is correctly laid do(n in this >uotation. .he courts of the )slands ha,e jurisdiction to di,ide personal property bet(een the common o(ners thereof and that po(er is as full and complete as is the po(er to partition real property. )f an actual partition of personal property cannot be made it (ill be sold under the direction of the court and the proceeds di,ided among the o(ners after the necessary e?penses ha,e been deducted. .he administration of the estate of the decedent consisted simply, so far as the record sho(s, in the payment of the debts. =o di,ision of the property, either real or personal, seems to ha,e been made. 5n the contrary, the property appears, from the record, to ha,e been turned o,er to the heirs in bulk. .he failure to partition the real property may ha,e been due either to the lack of re>uest to the court by one or more of the heirs to do so, as the court has no authority to make a partition of the real estate (ithout such re>uestH or it may ha,e been due to the fact that all the real property of decedent had been sold under pacto de retro and that, therefore, he (as not the o(ner of any real estate at the time of his death. As to the personal property, it does not appear that it (as disposed of in the manner pro,ided by la(. D4ec. 6%!, Code of Ci,il Procedure.E 4o far as this action is concerned, ho(e,er, it is sufficient for us to kno( that none of the property (as actually di,ided among the heirs in the administration proceeding and that they remain coo(ners and tenants"in" common thereof at the present time. .o maintain an action to partition real or personal property it is necessary to sho( only that it is o(ned in common. .he order finally closing the administration and discharging the administrator, referred to in the opinion of the trial court, has nothing to do (ith the di,ision of either the real or the personal property. .he heirs ha,e the right to ask the probate court to

RANCI"CO &E! VA!, ET A!., plaintiffs"appellants, ,s. AN&RE" &E! VA!, defendant"appellee. Ledesma, Lim and Irureta $FBrien and De itt for appellee. %ORE!AN&, J.) .his is an appeal from a judgment of the Court of 1irst )nstance of the city of /anila dismissing the complaint (ith costs. .he pleadings set forth that the plaintiffs and defendant are brother and sistersH that they are the only heirs at la( and ne?t of kin of #regorio =acianceno del Val, (ho died in /anila on August 8, 9 *, intestateH that an administrator (as appointed for the estate of the deceased, and, after a partial administration, it (as closed and the administrator discharged by order of the Court of 1irst )nstance dated Becember 9, 9 H that during the lifetime of the deceased he took out insurance on his life for the sum of P8*,*** and made it payable to the defendant as sole beneficiaryH that after his death the defendant collected the face of the policyH that of said policy he paid the sum of P 3,!+%.&* to redeem certain real estate (hich the decedent had sold to third persons (ith a right to repurchaseH that the redemption of said premises (as made by the attorney of the defendant in the name of the plaintiff and the defendant as heirs of the deceased ,endorH that the redemption of said premises they ha,e had the use and benefit thereofH that during that time the plaintiffs paid no ta?es and made no repairs. )t further appears from the pleadings that the defendant, on the death of the deceased, took possession of most of his personal property, (hich he still has in his possession, and that he has also the balance on said insurance policy amounting to P& ,+!8.3*. Plaintiffs contend that the amount of the insurance policy belonged to the estate of the deceased and not to the defendant personallyH that, therefore, they are entitled to a partition not only of the real and personal property, but also of the P8*,*** life insurance. .he complaint prays a partition of all the property, both real and personal, left by the deceasedH that the defendant account for P& ,+!8.3*, and that that sum be di,ided e>ually among the plaintiffs and defendant along (ith the other property of deceased. .he defendant denies the material allegations of the complaint and sets up as special defense and counterclaim that the redemption of the real estate sold by his father (as made in the name of the plaintiffs and himself instead of in his name alone (ithout his kno(ledge or consentH and that it (as not his intention to use the proceeds of the insurance policy for the benefit of any person but himself, he alleging that he (as and is the sole o(ner thereof and that it is his indi,idual property. @e, therefore, asks that he be declared the o(ner of the real estate redeemed by the payment of the P 3,!+%.&*, the o(ner of the remaining P& ,+!8.3*, the balance of the insurance policy, and that the plaintiffLs account for the use and occupation of the premises so redeemed since the date of the redemption. .he learned trial court refused to gi,e relief to either party and dismissed the action. )t says in its opinionF '.his purports to be an action for partition, brought against an heir by his coheirs. .he complaint, ho(e,er, fails to comply (ith Code Ci,., Pro. sec. 3!, in that it does not Lcontain an ade>uate description of the real property of (hich partition is demanded.L -ecause of this defect D(hich has not been called to our attention and (as disco,ered only after the cause (as submittedE it is more than doubtful (hether @o+ena for appellants.

turn o,er to them both the real and personal property (ithout di,isionH and (here that re>uest is unanimous it is the duty of the court to comply (ith it, and there is nothing in section 6%! of the Code of Ci,il Procedure (hich prohibits it. )n such case an order finally settling the estate and discharging the administrator (ould not bar a subse>uent action to re>uire a di,ision of either the real or personal property. )f, on the other hand, an order had been made in the administration proceedings di,iding the personal or the real property, or both, among the heirs, then it is >uite possible that, to a subse>uent action brought by one of the heirs for a partition of the real or personal property, or both, there could ha,e been interposed a plea of res (udicata based on such order. As the matter no( stands, ho(e,er, there is no ground on (hich to base such a plea. /oreo,er, no such plea has been made and no e,idence offered to support it. Aith the finding of the trial court that the proceeds of the life" insurance policy belong e?clusi,ely to the defendant as his indi,idual and separate property, (e agree. .hat the proceeds of an insurance policy belong e?clusi,ely to the beneficiary and not to the estate of the person (hose life (as insured, and that such proceeds are the separate and indi,idual property of the beneficiary, and not of the heirs of the person (hose life (as insured, is the doctrine in America. Ae belie,e that the same doctrine obtains in these )slands by ,irtue of section 8&3 of the Code of Commerce, (hich readsF .he amount (hich the under(riter must deli,er to the person insured, in fulfillment of the contract, shall be the property of the latter, e,en against the claims of the legitimate heirs or creditors of any kind (hatsoe,er of the person (ho effected the insurance in fa,or of the former. )t is claimed by the attorney for the plaintiffs that the section just >uoted is subordinate to the pro,isions of the Ci,il Code as found in article *!%. .his article readsF An heir by force of la( sur,i,ing (ith others of the same character to a succession must bring into the hereditary estate the property or securities he may ha,e recei,ed from the deceased during the life of the same, by (ay of do(ry, gift, or for any good consideration, in order to compute it in fi?ing the legal portions and in the account of the di,ision. Counsel also claim that the proceeds of the insurance policy (ere a donation or gift made by the father during his lifetime to the defendant and that, as such, its ultimate destination is determined by those pro,isions of the Ci,il Code (hich relate to donations, especially article 3 9. .his article pro,ides that 'gifts made to children (hich are not betterments shall be considered as part of their legal portion.' Ae cannot agree (ith these contentions. .he contract of life insurance is a special contract and the destination of the proceeds thereof is determined by special la(s (hich deal e?clusi,ely (ith that subject. .he Ci,il Code has no pro,isions (hich relate directly and specifically to life" insurance contracts or to the destination of life insurance proceeds. .hat subject is regulated e?clusi,ely by the Code of Commerce (hich pro,ides for the terms of the contract, the relations of the parties and the destination of the proceeds of the policy. .he proceeds of the life"insurance policy being the e?clusi,e property of the defendant and he ha,ing used a portion thereof in the repurchase of the real estate sold by the decedent prior to his death (ith right to repurchase, and such repurchase ha,ing been made and the con,eyance taken in the names of all of the heirs instead of the defendant alone, plaintiffs claim that the property belongs to the heirs in common and not to the defendant alone. Ae are not inclined to agree (ith this contention unless the fact appear or be sho(n that the defendant acted as he did (ith the intention that the other heirs should enjoy (ith him the o(nership of the estate Q in other (ords, that he proposed, in effect, to make a gift of the real estate to the other heirs. )f it is established by the e,idence that that (as his intention and that

the real estate (as deli,ered to the plaintiffs (ith that understanding, then it is probable that their contention is correct and that they are entitled to share e>ually (ith the defendant therein. )f, ho(e,er, it appears from the e,idence in the case that the con,eyances (ere taken in the name of the plaintiffs (ithout his kno(ledge or consent, or that it (as not his intention to make a gift to them of the real estate, then it belongs to him. )f that facts are as stated, he has t(o remedies. .he one is to compel the plaintiffs to recon,ey to him and the other is to let the title stand (ith them and to reco,er from them the sum he paid on their behalf. 1or the complete and proper determination of the >uestions at issue in this case, (e are of the opinion that the cause should be returned to the trial court (ith instructions to permit the parties to frame such issues as (ill permit the settlement of all the >uestions in,ol,ed and to introduce such e,idence as may be necessary for the full determination of the issues framed. <pon such issues and e,idence taken thereunder the court (ill decide the >uestions in,ol,ed according to the e,idence, subordinating his conclusions of la( to the rules laid do(n in this opinion. Ae do not (ish to be understood as ha,ing decided in this opinion any >uestion of fact (hich (ill arise on the trial and be there in contro,ersy. .he trial court is left free to find the facts as the e,idence re>uires. .o the facts as so found he (ill apply the la( as herein laid do(n. .he judgment appealed from is set aside and the cause returned to the Court of 1irst )nstance (hence it came for the purpose hereinabo,e stated. 4o ordered. Arellano, C.;., and Aorres, ;., concurs in the result. Carson, ;., concur.

CA4.$5, J.F

.his is an appeal from the decision of the Court of 1irst )nstance of /anila, -ranch 0V, in ci,il case 833&!, &+!

V52. &*, /AO &9, 9+6 &+! -onifacio -ros., )nc. ,s. /ora affirming the decision of the /unicipal Court of /anila, declaring the @.4. $eyes, )nc. as ha,ing a better right than the -onifacio -ros., )nc. and the Ayala Auto Parts Company, appellants herein, to the proceeds of motor insurance policy A" *+ %, in the sum of P&,**&.6!, issued by the 4tate -onding K )nsurance Co. )nc., and directing payment of the said amount to the @.4. $eyes, )nc. Jnri>ue /ora, o(ner of an 5ldsmobile sedan model 9%+, bearing plate =o. 7C"3*33, mortgaged the same to the @.4. $eyes, )nc., (ith the condition that the former (ould insure the automobile (ith the latter as beneficiary. .he automobile (as thereafter insured on June &!, 9%9 (ith the 4tate -onding K )nsurance Co,, )nc., and motor car insurance policy A"*+ % (as issued to Jnri>ue /ora, the pertinent pro,isions of (hich readF ' . .he Company Dreferring to the 4tate -onding K )nsurance Co., )nc.E (ill, subject to the 2imits of 2iability, indemnify the )nsured against loss of or damages to the /otor Vehicle and its accessories and spare parts (hilst thereonH DaE by accidental collision or o,erturning or collision or o,erturning conse>uent upon mechanical breakdo(n or conse>uent upon (ear and tear, ??? ??? ???

-onifacio -ros. )nc. to furnish the labor and materials, some of (hich (ere supplied by the Ayala Auto Parts Co. 1or the cost of labor and materials, Jnri>ue /ora (as billed at P&, *&.6! through the @.@. -ayne Adjustment Co. .he insurance company, after claiming a franchise in the amount of N **, dre( a check in the amount of P&,**&.6!, as proceeds of the insurance policy, payable to the order of Jnri>ue /ora or @.4. $eyes, )nc., and entrusted the check to the @.@. -ayne Adjustment Co. for disposition and deli,ery to the proper party. )n the meantime, the car (as deli,ered to Jnri>ue /ora (ithout the consent of the @.4, $eyes, )nc., and (ithout payment to the -onifacio -ros. )nc. and the Ayala Auto Parts Co. of the cost of repairs and materials, <pon the theory that the insurance proceeds should be paid directly to them, the -onifacio -ros. )nc. and the Ayala Auto Parts Co. filed on /ay 3, 9+ a complaint (ith the /unicipal Court of /anila against Jnri>ue /ora and the 4tate -onding K )nsurance Co., )nc. for the collection of the sum of P&,**&.6!. .he insurance company filed its ans(er (ith a counterclaim for interpleader, re>uiring the -onifacio -ros. )nc. and the @.4. $eyes, )nc. to interplead in order to determine (ho has better right to the insurance proceeds in >uestion. Jnri>ue /ora (as declared in default for failure to appear at the hearing, and e,idence against him (as recei,ed e? parte. @o(e,er, the counsel for the -onifacio -ros. )nc., Ayala Auto Parts Co. and 4tate -onding K )nsurance Co. )nc. submitted a stipulation of facts, on the basis of (hich the /unicipal Court rendered a decision declaring the @.4. $eyes, )nc. as ha,ing a better right to the disputed amount, and ordering the 4tate -onding K )nsurance Co. )nc. to pay to the @.4. $eyes, )nc. the said sum of P&,**&.6!. 1rom this decision, the herein appellants ele,ated the case to the Court of 1irst )nstance of /anila before (hich the stipulation of facts (as reproduced. 5n 5ctober 9, 9+& the latter &+%

V52. &*, /AO &9, 9+6 &+% -onifacio -ros., )nc. ,s. /ora court rendered a decision, affirming the decision of the /unicipal Court. .he -onifacio -ros. )nc. and the Ayala Auto Parts Co. mo,ed for reconsideration of the decision, but the trial court denied the motion. @ence, this appeal. .he main issue raised is (hether there is pri,ity of contract bet(een the -onifacio -ros. )nc. and the Ayala Auto Parts Co. on the one hand and the insurance company on the other. .he appellants argue that the insurance company and Jnri>ue /ora are parties to the repair of the car as (ell as the to(age thereof performed. .he authority for this assertion is to be found, it is alleged, in paragraph 8 of the insurance contract (hich pro,ides that 'the insured may authorize the repair of the /otor Vehicle necessitated by damage for (hich the company may be liable under the policy pro,ided that DaE the estimated cost of such repair does not e?ceed the Authorized $epair 2imit, and DbE a detailed estimate of the cost is for(arded to the company (ithout delay.' )t is stressed that the @.@. -ayne Adjustment CompanyLs recommendation of payment of the appellantsL bill for materials and repairs for (hich the latter dre( a check for P&,**&.6! indicates that /ora and the @.@. -ayne Adjustment Co. acted for and in representation of the insurance company. .his argument is, in our ,ie(, beside the point, because from the undisputed facts and from the pleadings it (ill be seen that the appellantsL alleged cause of action rests e?clusi,ely upon the terms of the insurance contract. .he appellants seek to reco,er the insurance proceeds, and for this purpose, they rely upon paragraph 8 of the insurance contract document e?ecuted by and bet(een the 4tate -onding K )nsurance Company, )nc. and Jnri>ue /ora. .he appellants are not mentioned in the contract as parties theretoH nor is there any clause or pro,ision thereof from (hich (e can infer that there is an obligation on the part of the insurance company to pay the cost of repairs directly to them. )t is fundamentalL that contracts take effect only bet(een the parties thereto, e?cept

&. At its o(n option the Company may pay in cash the amount of the loss or damage or may repair, reinstate, or replace the /otor Vehicle or any part thereof or its accessories or spare parts. .he liability of the Company shall not e?ceed the ,alue of the parts (hiche,er is the less. .he )nsuredLs estimate of ,alue stated in the schedule (ill be the ma?imum amount payable by the Company in respect of any claim for loss or damage. ??? ??? ???

8. .he )nsured may authorize the repair of the /otor Vehicle necessitated by damage for (hich the Company may be liable under this Policy pro,ided thatFQDaE .he estimated cost of such repair does not e?ceed the Authorized $epair 2imit, DbE A detailed estimate of the cost is for(arded to the Company (ithout delay, subject to the condition that L2oss, if any, is payable to @.4. $eyes, )nc..L, by ,irtue of the fact that said 5ldsmobile sedan (as mortgaged in fa,or of the said @.4. $eyes, )nc. and that under a clause in said insurance policy, any loss (as made payable to the @.4, $eyes, )nc. as /ortgageeH ??? &+8 ??? ???

&+8 4<$P$J/J C5<$. $JP5$.4 A==5.A.JB -onifacio -ros., )nc. ,s. /ora Buring the effecti,ity of the insurance contract, the car met (ith an accident. .he insurance company then assigned the accident to the @.@. -ayne Adjustment Co. for in,estigation and appraisal of the damage. Jnri>ue /ora, (ithout the kno(ledge and consent of the @.4. $eyes, )nc., authorized the

in some specific instances pro,ided by la( (here the contract contains some stipulation in fa,or of a third person. 4uch stipula" ^^^^^^^^^^^^^^^

merely establishes the procedure that the insured has to follo( in order to be entitled to indemnity for repair. .his paragraph therefore should not be construed as bringing into e?istence in fa,or of the appellants a right of action against the insurance company as such intention can ne,er be inferred therefrom. Another cogent reason for not recognizing a right of action by the appellants against the insurance company is that 'a policy of insurance is a distinct and independent contract bet(een the insured and insurer, and third persons ha,e no right either in a court of e>uity, or in a court of la(, to the proceeds of it, unless there be some contract or trust, e?pressed or implied bet(een the insured and third person.'% )n this case, no contract of trust, e?pressed or implied e?ists. Ae, therefore, agree (ith the trial court that no cause of action e?ists in fa,or of the appellants in so far as the proceeds of insurance are concerned. .he appellantsL claim, if at all, is merely e>uitable in nature and must be made effecti,e through Jnri>ue /ora (ho entered into a contract (ith the -onifacio -ros. )nc. .his conclusion is deducible not only from the principle go,erning the operation and effect of insurance contracts in general, but is clearly co,ered by the e?press pro,isions of section %* of the )nsurance Act (hich readF '.he insurance shall be applied e?clusi,ely to the proper interests of the person in (hose name it is made unless other(ise specified in the policy.' .he policy in >uestion has been so framed that '2oss, if any, is payable to @.4. $eyes, )nc.,' (hich unmistakably sho(s the intention of the parties. .he final contention of the appellants is that the right of the @.4. $eyes, )nc. to the insurance proceeds arises ^^^^^^^^^^^^^^^

Art. ! &++

, Ci,il Code of the Philippines.

&++ 4<P$J/J C5<$. $JP5$.4 A==5.A.JB -onifacio -ros., )nc. ,s. /ora tion is kno(n as stipulation pour autrui or a pro,ision in fa,or of a third person not a party to the contract. <nder this doctrine, a third person is allo(ed to a,ail himself of a benefit granted to him by the terms of the contract, pro,ided that the contracting parties ha,e clearly and deliberately conferred a fa,or upon such person.& Conse>uently, a third person not a party to the contract has no action against the parties thereto, and cannot generally demand the enforcement of the same.! .he >uestion of (hether a third person has an enforcible interest in a contract. must be settled by determining (hether the contracting parties intended to tender him. such an interest by deliberately inserting terms in their agreement (ith the a,o(ed purpose of conferring a fa,or upon such third person. )n this connection, this Court has laid do(n the rule that the fairest test to determine (hether the interest of a third person in a contract is a stipulation pour autrui or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract.8 )n the instant case the insurance contract does not contain any (ords or clauses to disclose an intent to gi,e any benefit to any repairmen or materialmen in case of repair of the car in >uestion. .he parties to the insurance contract omitted such stipulation, (hich is a circumstance that supports the said conclusion. 5n the other hand, the 'loss payable' clause of the insurance policy stipulates that '2oss, if any, is payable to @.4. $eyes, )nc.' indicating that it (as only the @.4. $eyes, )nc. (hich they intended to benefit. Ae like(ise obser,e from the brief of the 4tate -onding K )nsurance Company that it has ,ehemently opposed the assertion or pretension of the appellants that they are pri,y to the contract. )f it (ere the intention of the insurance company to make itself liable to the repair shop or materialmen, it could ha,e easily inserted in the contract a stipulation to that effect. .o hold no( that the original parties to the insurance contract intended to confer upon the ap" ^^^^^^^^^^^^^^^

% 2ampano ,s. Jose, !* Phil. %!6, &+3

&+3 4<P$J/J C5<$. $JP5$.4 A==5.A.JB 4yson ,s. $epublic only if there (as loss and not (here there is mere damage as in the instant case. 4uffice it to say that any attempt to dra( a distinction bet(een 'loss' and 'damage' is uncalled for, because the (ord 'loss' in insurance la( embraces injury or damage. '2oss in insurance, defined.Q.he injury or damage sustained by the insured in conse>uence of the happening of one or more of the accidents or misfortune against (hich the insurer, in consideration of the premium, has undertaken to indemnify the insured.' D -ou,. )ns. =o. & %H -lackLs 2a( BictionaryH Cyclopedic 2a( Bictionary, cited in /artinLs Phil. Commercial 2a(s, Vol. , 9+ ed. p. +*3E. )ndeed, accordingH to sec. &* of the )nsurance Act, a loss may be either total or partial. Accordingly, the judgment appealed from is hereby affirmed, at appellantsL cost,

& Art. !

, )d.H see <y .am, et al. ,s. 2eonard, !* Phil 86 .

! 4ee /anila $ailroad Co. ,s. CompaPia .ransatlantica, !3 Phil. 36%. 8 <y .amH et al. ,s. 2eonard, supra. &+6

V52. &*, /AO &9, 9+6 &+6 -onifacio -ros., )nc. ,s. /ora pellants the benefit claimed by them (ould re>uire us to ignore the indispensable re>uisite that a stipulation pour autrui must be clearly e?pressed by the parties, (hich (e cannot do. As regards paragraph 8 of the insurance contract, a perusal thereof (ould sho( that instead of establishing pri,ity bet(een the appellants and the insurance company, such stipulation

Concepcion, C.J., $eyes, J.-.2., Bizon, $egala, /akalintal, -engzon, J.P., Zaldi,ar 4anchez and Castro, JJ., concur. Judgment affirmed. :-onifacio -ros., )nc. ,s. /ora, &* 4C$A &+ D 9+6E;

G.R. No. !(232@A

No+,2>,r 29, 19A8

stipulation in his fa,or has been re,oked by the contracting parties. Boes the policy in >uestion belong to such class of contracts pour autruiN )n this connection, said policy pro,ides, inter aliaF &ection I G Lia*ilit+ to Passengers . . .he Company (ill, subject to the 2imits of 2iability and under the .erms of this Policy, indemnify the )nsured in the e,ent of accident caused by or arising out of the use of /otor Vehicle against all sums (hich the )nsured (ill become legally liable to pay in respect ofF Beath or bodily injury to any fare"paying passenger including the Bri,er ... (ho is riding in the /otor Vehicle insured at the time of accident or injury. &ection II G Lia*ilit+ to t)e Pu*lic ??? ??? ???

%E!ECIO COBUIA, %ARIA E"PANUEVA an# %ANI!A 'E!!O6 TACICA$ CO., INC., plaintiffs"appellees, ,s. IE!&%END" IN"URANCE CO., INC., defendant"appellant. Antonio de Venecia for #ufino ;avier for defendant-appellant. CONCEPCION, C.J.: .his is an appeal from a decision of the Court of 1irst )nstance of /anila, certified to us by the Court of Appeals, only >uestions of la( being in,ol,ed therein. )ndeed, the pertinent facts ha,e been stipulated andSor, admitted by the parties at the hearing of the case in the trial court, to dispense (ith the presentation of e,idence therein. )t appears that on Becember , 9+ , appellant 1ieldmenLs )nsurance Company, )nc. Q hereinafter referred to as the Company Q issued, in fa,or of the /anila Oello( .a?icab Co., )nc. Q hereinafter referred to as the )nsured Q a common carrier accident insurance policy, co,ering the period from Becember , 9+ to Becember , 9+&. )t (as stipulated in said policy thatF .he Company (ill, subject to the 2imits of 2iability and under the .erms of this Policy, indemnify the )nsured in the e,ent of accident caused by or arising out of the use of /otor Vehicle against all sums (hich the )nsured (ill become legally liable to pay in respect ofF Beath or bodily injury to any fare"paying passengerincluding t)e Driver, Conductor andSor )nspector (ho is riding in the /otor Vehicle insured at the time of accident or injury. Ahile the policy (as in force, or on 1ebruary *, 9+&, a ta?icab of the )nsured, dri,en by Carlito Co>uia, met a ,ehicular accident at /angaldan, Pangasinan, in conse>uence of (hich Carlito died. .he )nsured filed therefor a claim for P%,***.** to (hich the Company replied (ith an offer to pay P&,***.**, by (ay of compromise. .he )nsured rejected the same and made a counter"offer for P8,***.**, but the Company did not accept it. @ence, on 4eptember 3, 9+&, the )nsured and CarlitoLs parents, namely, /elecio Co>uia and /aria Jspanue,a Q hereinafter referred to as the Co>uias Q filed a complaint against the Company to collect the proceeds of the aforementioned policy. )n its ans(er, the Company admitted the e?istence thereof, but pleaded lack of cause of action on the part of the plaintiffs. After appropriate proceedings, the trial court rendered a decision sentencing the Company to pay to the plaintiffs the sum of P8,***.** and the costs. @ence, this appeal by the Company, (hich contends that plaintiffs ha,e no cause of action becauseF E the Co>uias ha,e no contractual relation (ith the CompanyH and &E the )nsured has not complied (ith the pro,isions of the policy concerning arbitration. As regards the first defense, it should be noted that, although, in general, only parties to a contract may bring an action based thereon, this rule is subject to e?ceptions, one of (hich is found in the second paragraph of Article ! of the Ci,il Code of the Philippines, readingF If a contract s)ould contain some stipulation in favor of a t)ird person, )e ma+ demand its fulfillment provided )e communicated )is acceptance to t)e o*ligor *efore its revocation. A mere incidental benefit or interest of a person is not sufficient. .he contracting parties must ha,e clearly and deliberately conferred a fa,or upon a third person.& .his is but the restatement of a (ell"kno(n principle concerning contracts pour autrui, the enforcement of (hich may be demanded by a third party for (hose benefit it (as made, although not a party to the contract, before the plaintiffs-appellees.

!. )n terms of and subject to the limitations of and for the purposes of this 4ection, the Company (ill indemnify any authorized Bri,er (ho is dri,ing the /otor Vehicle.... Conditions ??? ??? ???

6. )n the e,ent of death of any person entitled to indemnity under this Policy, the Company (ill, in respect of the liability incurred by such person, indemnify his personal representati,es in terms of and subject to the limitations of this Policy, pro,ided, that such representati,es shall, as though they (ere the )nsured, obser,e, fulfill and be subject to the .erms of this Policy insofar as they can apply. 3. .he Company may, at its option, make indemnity payable directly to the claimants or heirs of claimants, (ith or (ithout securing the consent of or prior notification to the )nsured, it being the true intention of this Policy to protect, to the e?tent herein specified and subject al(ays to the .erms 5f this Policy, the liabilities of the )nsured to(ards the passengers of the /otor Vehicle and the Public. Pursuant to these stipulations, the Company '(ill indemnify an+ aut)orized Driver (ho is dri,ing the /otor Vehicle' of the )nsured and, in the e,ent of death of said dri,er, the Company shall, like(ise, 'indemnify his personal representati,es.' )n fact, the Company 'may, at its option, make indemnity payable directl+ to the claimants or )eirs of claimants ... it *eing t)e true intention of t)is Polic+ to protect ... t)e lia*ilities of t)e Insured to(ards the passengers of the /otor Vehicle and the Public' Q in other (ords, third parties. .hus, the policy under consideration is typical of contracts pour autrui, this character being made more manifest by the fact that the deceased dri,er paid fifty percent D%*dE of the corresponding premiums, (hich (ere deducted from his (eekly commissions. <nder these conditions, it is clear that the Co>uias Q (ho, admittedly, are the sole heirs of the deceased Q ha,e a direct cause of action against the Company,! and, since they could ha,e maintained this action by themsel,es, (ithout the assistance of the )nsured, it goes (ithout saying that they could and did properly join the latter in filing the complaint herein.8 .he second defense set up by the Company is based upon 4ection 6 of the policy readingF )f any difference or dispute shall arise (ith respect to the amount of the CompanyLs liability under this Policy, the same shall be referred to the decision of a single arbitrator to be agreed upon by both parties or failing such agreement of a single arbitrator, to the

decision of t(o arbitrators, one to be appointed in (riting by each of the parties (ithin one calendar month after ha,ing been re>uired in (riting so to do by either of the parties and in case of disagreement bet(een the arbitrators, to the decision of an umpire (ho shall ha,e been appointed in (riting by the arbitrators before entering on the reference and the costs of and incident to the reference shall be dealt (ith in the A(ard. And it is hereby e?pressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this Policy that the a(ard by such arbitrator, arbitrators or umpire of the amount of the CompanyLs liability hereunder if disputed shall be first obtained. .he record sho(s, ho(e,er, that none of the parties to the contract in,oked this section, or made any reference to arbitration, during the negotiations preceding the institution of the present case. )n fact, counsel for both parties stipulated, in the trial court, that none of them had, at any time during said negotiations, e,en suggested the settlement of the issue bet(een them by arbitration, as pro,ided in said section. .heir aforementioned acts or omissions had the effect of a (ai,er of their respecti,e right to demand an arbitration. .hus, in Yahn(eiler ,s. Pheni? )ns. Co. of -rooklyn,% it (as heldF Another (ell"settled rule for interpretation of all contracts is that the court (ill lean to that interpretation of a contract (hich (ill make it reasonable and just. -ish. Cont. 4ec. 8**. Applying these rules to the tenth clause of this policy, its proper interpretation seems >uite clear. Ahen there is a difference bet(een the company and the insured as to the amount of the loss the policy declaresF '.he same shall then be submitted to competent and impartial arbitrators, one to be selected by each party ...'. )t (ill be obser,ed that the obligation to procure or demand an arbitration is not, by this clause, in terms imposed on either party. )t is not said that either the company or the insured shall take the initiati,e in setting the arbitration on foot. .he company has no more right to say the insured must do it than the insured has to say the company must do it. .he contract in this respect is neither unilateral nor self"e?ecuting. .o procure a reference to arbitrators, the joint and concurrent action of both parties to the contract is indispensable. .he right it gi,es and the obligation it creates to refer the differences bet(een the parties to arbitrators are mutual. 5ne party to the contract cannot bring about an arbitration. Jach party is entitled to demand a reference, but neither can compel it, and neither has the right to insist that the other shall first demand it, and shall forfeit any right by not doing so. )f the company demands it, and the insured refuses to arbitrate, his right of action is suspended until he consents to an arbitrationH and if the insured demands an arbitration, and the company refuses to accede to the demand, the insured may maintain a suit on the policy, not(ithstanding the language of the t(elfth section of the policy, and, 7)ere neit)er part+ demands an ar*itration, *ot) parties t)ere*+ 7aive it.+ .o the same effect (as the decision of the 4upreme Court of /innesota in )ndependent 4chool Bist. =o. !%, 4t. 2ouis County ,s. A. @edenberg K Co., )nc.6 from (hich (e >uoteF .his rule is not ne( in our state. )n /eyer ,. -erlandi, %! /inn. %9, %8 =.A. 9!6, decided in 39!, this court held that the parties to a construction contract, ha,ing proceeded throughout the entire course of their dealings (ith each other in entire disregard of the pro,ision of the contract regarding the mode of determining by arbitration the ,alue of the e?tras, thereby (ai,ed such pro,ision. ??? ??? ???

follo(sF 'Any conduct of the parties inconsistent (ith the notion that they treated the arbitration pro,ision as in effect, or any conduct (hich might be reasonably construed as sho(ing that they did not intend to a,ail themsel,es of such pro,ision, may amount to a (ai,er thereof and estop the party charged (ith such conduct from claiming its benefits'. ??? ??? ???

.he decisi,e facts here are that both parties from the inception of their dispute proceeded in entire disregard of the pro,isions of the contract relating to arbitration and that neither at any stage of such dispute, either before or after commencement of the action, demanded arbitration, either by oral or (ritten demand, pleading, or other(ise. .heir conduct (as as effecti,e a rejection of the right to arbitrate as if, in the best Coolidge tradition, they had said, 'Ae do not choose to arbitrate'. As arbitration under the e?press pro,isions of article 8* (as 'at the choice of either party,' and (as chosen by neither, a (ai,er by both of the right to arbitration follo(ed as a matter of la(. A@J$J15$J, the decision appealed from should be as it is hereby affirmed in toto, (ith costs against the herein defendant"appellant, 1ieldmenLs )nsurance Co., )nc. )t is so ordered. #e+es, ;.B.L., Dizon, %a6alintal, Haldivar, &anc)ez, Castro, Fernando and Capistrano, ;;., concur.

.he test for determining (hether there has been a (ai,er in a particular case is stated by the author of an e?hausti,e annotation in 6 A.2.$. p. !*8, as

G.R. No. !(22092

Au=u4/ 1@, 19A@

5n August &6, 9+&, the Court of 1irst )nstance of /anila rendered its judgment (ith the follo(ing dispositi,e portionF A@J$J15$J, judgment is rendered sentencing )luminado del /onte and Julio Aguilar jointly and se,erally to pay plaintiffs the sum of P3,%6&.9% as damages for the death of their father, plus P ,***.** for attorneyLs fees plus costs. .he defendant Capital )nsurance and 4urety Co., )nc. is hereby sentenced to pay the plaintiffs the sum of 1i,e .housand DP%,***.**E Pesos plus 1i,e @undred DP%**.**E Pesos as attorneyLs fees and costs. .hese sums of P%,***.** and P%**.** adjudged against Capital )nsurance and 4urety Co., )nc. shall be applied in partial satisfaction of the judgment rendered against )luminado del /onte and Julio Aguilar in this case. 45 5$BJ$JB. .he case (as appealed to the Court of Appeals (hich appellate court on 4eptember !*, 9+! certified the case to <s because the appeal raises purely >uestions of la(. .he issues raised before <s in this appeal are D E As the company agreed to indemnify the insured Julio Aguilar, is it only the insured to (hom it is liableN D&E /ust Julio Aguilar first sho( himself to be entitled to indemnity before the insurance company may be held liable for the sameN D!E Plaintiffs not being parties to the insurance contract, do they ha,e a cause of action against the companyH and D8E Boes the fact that the insured is liable to the plaintiffs necessarily mean that the insurer is liable to the insuredN )n the discussion of the points thus raised, (hat is paramount is the interpretation of the insurance contract (ith the aim in ,ie( of attaining the objecti,es for (hich the insurance (as taken. .he $ules of Court pro,ide that parties may be joined either as plaintiffs or defendants, as the right to relief in respect to or arising out of the same transactions is alleged to e?ist D4ec. +, $ule !E. .he policy, on the other hand, contains a clause statingF J. Action Against Compan+ =o action shall lie against the Company unless, as a condition precedent thereto, the )nsured shall ha,e fully complied (ith all of the terms of this Policy, nor until the amount of the )nsuredLs obligation to pay shall ha,e been finally determined either by judgment against the )nsured after actual trial or by (ritten agreement of the )nsured, the claimant, and the Company. Any person or organization or the legal representati,e thereof (ho has secured such judgment or (ritten agreement shall thereafter be entitled to reco,er under this policy to the e?tent of the insurance afforded by the Policy. =othing contained in this policy shall gi,e any person or organization any right to join the Company as a co"defendant in any action against the )nsured to determine the )nsuredLs liability. -ankruptcy or insol,ency of the )nsured or of the )nsuredLs estate shall not relie,e the Company of any of its obligations hereunder. Appellant contends that the 'no action' clause in the policy closes the a,enue to any third party (hich may be injured in an accident (herein the jeepney of the insured might ha,e been the cause of the injury of third persons, alleging the freedom of contracts. Aill the mere fact that such clause (as agreed upon by the parties in an insurance policy pre,ail o,er the $ules of Court (hich authorizes the joining of parties plaintiffs or defendantsN

&IONI"IA, EU!OGIO, %ARINA, GUI!!ER%O an# NOR$ERTO a11 4urna2,# GUINGON, plaintiffs"appellees, ,s. I!U%INA&O &E! %ONTE, JU!IO AGUI!AR an# CAPITA! IN"URANCE an# "URET' CO., INC., defendants. CAPITA! IN"URANCE an# "URET' CO., INC., defendant" appellant. @eneroso Almario and Associates for plaintiffs-appellees. Ac)acoso and Associates for defendant-appellant. $ENGZON, J.P., J.: Julio Aguilar o(ned and operated se,eral jeepneys in the City of /anila among (hich (as one (ith plate number P<J"&*+" /anila, 9+ . @e entered into a contract (ith the Capital )nsurance K 4urety Co., )nc. insuring the operation of his jeepneys against accidents (ith third"party liability. As a conse>uence thereof an insurance policy (as e?ecuted by the Capital )nsurance K 4urety Co., )nc., the pertinent pro,isions of (hich in so far as this case is concerned contains the follo(ingF &ection II GLIABILIAI A$ A!" PJBLIC . .he Company, (ill, subject to the limits of liability, indemnify the )nsured in the e,ent of accident caused by or arising out of the use of the /otor VehicleSs or in connection (ith the loading or unloading of the /otor VehicleSs, against all sums including claimantLs costs and e?penses (hich the )nsured shall become legally liable to pay in respect ofF a. death of or bodily injury to any person b. damage to property Buring the effecti,ity of such insurance policy on 1ebruary &*, 9+ )luminado del /onte, one of the dri,ers of the jeepneys operated by Aguilar, (hile dri,ing along the intersection of Juan 2una and /oro streets, City of /anila, bumped (ith the jeepney abo,ementioned one #er,acio #uingon (ho had just alighted from another jeepney and as a conse>uence the latter died some days thereafter. A corresponding information for homicide thru reckless imprudence (as filed against )luminado del /onte, (ho pleaded guilty. A penalty of four months imprisonment (as imposed on him. As a corollary to such action, the heirs of #er,acio #uingon filed an action for damages praying that the sum of P3&,66 .3* be paid to them jointly and se,erally by the defendants, dri,er )luminado del /onte, o(ner and operator Julio Aguilar, and the Capital )nsurance K 4urety Co., )nc. 1or failure to ans(er the complaint, Bel /onte and Aguilar (ere declared in default. Capital )nsurance K 4urety Co., )nc. ans(ered, alleging that the plaintiff has no cause of action against it. Buring the trial the follo(ing facts (ere stipulatedF C5<$.F .he Court (ants to find if there is a stipulation in the policy (hereby the insured is insured against liability to third persons (ho are not passengers of jeeps. A2/A$)5F As far as ) kno(, in my honest belief, there is no particularization as to the passengers, (hether the passengers of the jeep insured or a passenger of another jeep or (hether it is a pedestrian. Aith those, (e can submit the stipulation. 4)/-<2A=F ) admit that. D..s.n., p. & , Jan. &!, 9+&H p. +% $ec. on AppealE

.he foregoing issues raise t(o principalF >uestionsF D E Can plaintiffs sue the insurer at allN D&E )f so, can plaintiffs sue the insurer (ointl+ (ith the insuredN .he policy in the present case, as afore>uoted, is one (hereby the insurer agreed to indemnify the insured 'against all sums . . . (hich the )nsured shall become legally lia*le to pay in respect ofF a. death of or bodily injury to any person . . . .' Clearly, therefore, it is one for indemnity against liabilityH from the fact then that the insured is liable to the third person, such third person is entitled to sue the insurer.0K7p)L0.CMt .he right of the person injured to sue the insurer of the party at fault DinsuredE, depends on (hether the contract of insurance is intended to benefit third persons also or only the insured. And the test applied has been thisF Ahere the contract pro,ides for indemnity against lia*ilit+ to third persons, then third persons to (hom the insured is liable, can sue the insurer. Ahere the contract is for indemnity against actual loss or payment, then third persons cannot proceed against the insurer, the contract being solely to reimburse the insured for liability actually discharged by him thru payment to third persons, said third personsL recourse being thus limited to the insured alone.& .he ne?t >uestion is on the right of the third person to sue the insurer jointly (ith the insured. .he policy re>uires, as afore" stated, that suit and final judgment be first obtained against the insuredH that only 'thereafter' can the person injured reco,er on the policyH it e?pressly disallo(s suing the insurer as a co" defendant of the insured in a suit to determine the latterLs liability. As ad,erted to before, the >uery is (hich procedure to follo( Q that of the insurance policy or the $ules of Court. .he 'no action' clause in the policy of insurance cannot pre,ail o,er the $ules of Court pro,ision aimed at a,oiding multiplicity of suits. )n a case s>uarely on the point, American Automo*ile Ins. Co. vs. &tru7e, & 3 4A %!8 D.e?as CCAE, it (as held that a 'no action' clause in a policy of insurance cannot o,erride procedural rules aimed at a,oidance of multiplicity of suits. Ae >uoteF Appellants filed a plea in abatement on the grounds that the suit had been prematurely brought against the insurance company, and that it had been improperly joined (ith Zunker, as said insurance company, under the terms of the policy, (as only liable after judgment had been a(arded against Zunker. . . . \ \ \ .hat plea (as properly o,erruled, because under the la(s of .e?as a dual suit (ill al(ays be a,oided (hene,er all parties can ha,e a fair trial (hen joined in one suit. Appellee, had he so desired, could ha,e prosecuted his claim to judgment as against Zunker and then ha,e sued on that judgment against the insurance company, but the la( does not make it imperati,e that he should do so, but (ould permit him to dispose of the (hole matter in one suit. .he rule has often been announced in .e?as that (hen t(o causes of action are connected (ith each other, or gro( out of the same transaction, they may be properly joined, and in such suit all parties against (hom the plaintiff asserts a common or an alternati,e liability may be joined as defendants. . . . J,en if appellants had presented any plea in abatement as to joinder of damages arising from a tort (ith those arising from a contract, it could not, under the facts of this case, be sustained, for the rule is that a suit may include an action for breach of contract and one for tort, pro,ided they are connected (ith each other or gre( out of the same transaction. 4imilarly, in the instant suit, 4ec. % of $ule & on 'Joinder of causes of action' and 4ec. + of $ule ! on 'Permissi,e joinder of parties' cannot be superseded, at least 7it) respect to t)ird persons not a part+ to t)e contract , as herein, by a 'no action' clause in the contract of insurance.

Aherefore, the judgment appealed from is affirmed in toto. Costs against appellant. 4o ordered. #e+es, ;.B.L., %a6alintal, Haldivar, &anc)ez, Castro, Angeles and Fernando, ;;., concur. Concepcion, C.;. and Dizon, ;., are on leave.

/alayan insurance policies, issued nine endorsements in fa,or of $C-C seemingly upon instructions of #5O< DJ?hibits ] " /alayan_ to ]9"/alayan_E. [G.R. No4. 128833. A0r*1 20, 1998] 5n April &6, 99&, one of #5O<9s factory buildings in Valenzuela (as gutted by fire. Conse>uently, #5O< submitted its claim for indemnity on account of the loss insured against. /)C5 denied the claim on the ground that the insurance policies (ere either attached pursuant to (rits of attachmentsSgarnishments issued by ,arious courts or that the insurance proceeds (ere also claimed by other creditors of #5O< alleging better rights to the proceeds than the insured. #5O< filed a complaint for specific performance and damages (hich (as docketed at the $egional .rial Court of the =ational Capital Judicial $egion D/anila, -ranch !E as Ci,il Case =o. 9!"+%88&, no( subject of the present #.$. =o. &33!! and &33++. $C-C, one of #5O<9s creditors, also filed (ith /)C5 its formal claim o,er the proceeds of the insurance policies, but said claims (ere also denied for the same reasons that /)C5 denied #5O<9s claims. )n an interlocutory order dated 5ctober &, 99! D$ecord, pp. ! "! &E, the $egional .rial Court of /anila D-ranch !E, confirmed that #5O<9s other creditors, namely, <rban -ank, Alfredo 4ebastian, and Philippine .rust Company obtained their respecti,e (rits of attachments from ,arious courts, co,ering an aggregate amount of P 8,9!3,*3*.&!, and ordered that the proceeds of the ten insurance policies be deposited (ith the said court minus the aforementioned P 8,9!3,*3*.&!. Accordingly, on January 6, 998, /)C5 deposited the amount of P%*,%*%,%98.+* (ith -ranch ! of the /anila $.C. )n the meantime, another notice of garnishment (as handed do(n by another /anila $.C sala D-ranch &3E for the amount of P3,+9+,3!3.6% DJ?hibit ]&&"/alayan_E. After trial, -ranch ! of the /anila $.C rendered judgment in fa,or of #5O<, disposingF A@J$J15$J, judgment is hereby rendered in fa,or of the plaintiff and against the defendant, /alayan )nsurance Company, )nc. and $izal Commercial -anking Corporation, ordering the latter as follo(sF . 1or defendant /alayan )nsurance Co., )nc.F a. .o pay the plaintiff its fire loss claims in the total amount of P68,*8*,% 3.%3 less the amount of P%*,***,***.** (hich is deposited (ith this CourtH .o pay the plaintiff damages by (ay of interest for the duration of the delay since July &6, 99& Dninety days after defendant insurer9s receipt of the re>uired proof of loss and notice of lossE at the rate of t(ice the ceiling prescribed by the /onetary -oard, on the follo(ing amountsF E P%*,***,***.** Q from July &6, 99& up to the time said amount (as deposited (ith this Court on January 6, 998H P&8,*8*,% 3.%3 Q from July &6, 99& up to the time (hen the (rits of attachments (ere recei,ed by defendant /alayanH

RIZA! CO%%ERCIA! $AN<ING CORPORATION, U' C7UN $ING AN& E!I &. !AO, petitioners, vs. COURT O APPEA!" an# GO'U ? "ON", INC.,respondents.

[G.R. No. 128839. A0r*1 20, 1998]

RIZA!

CO%%ERCIA! $AN<ING CORPORATION, petitioners, vs. COURT O APPEA!", A! RE&O C. "E$A"TIAN, GO'U ? "ON", INC., GO "ONG 7IAP, "POU"E" GO TENG <O< an# $ETT' C7IU "U< 'ING a1*a4 $ETT' GO, respondents.

[G.R. No. 1288AA. A0r*1 20, 1998]

%A!A'AN IN"URANCE INC., petitioner, "ON", INC. respondent. & EC I " I O N %E!O, J.)

vs. GO'U

.he issues rele,ant to the herein three consolidated petitions re,ol,e around the fire loss claims of respondent #oyu K 4ons, )nc. D#5O<E (ith petitioner /alayan )nsurance Company, )nc. D/)C5E in connection (ith the mortgage contracts entered into by and bet(een $izal Commercial -anking Corporation D$C-CE and #5O<. .he Court of Appeals ordered /)C5 to pay #5O< its claims in the total amount of P68,*8*,% 3.%3, plus !6d interest per annum commencing July &6, 99&. $C-C (as ordered to pay actual and compensatory damages in the amount of P%,***,***.**. /)C5 and $C-C (ere held solidarily liable to pay #5O< P ,%**,***.** as e?emplary damages and P ,%**,***.** for attorney9s fees. #5O<9s obligation to $C-C (as fi?ed at P+3,63%,*+9.*8 as of April 99&, (ithout any interest, surcharges, and penalties. $C-C and /)C5 appealed separately but, in ,ie( of the common facts and issues in,ol,ed, their indi,idual petitions (ere consolidated. .he undisputed facts may be summarized as follo(sF #5O< applied for credit facilities and accommodations (ith $C-C at its -inondo -ranch. After due e,aluation, $C-C -inondo -ranch, through its key officers, petitioners <y Chun -ing and Jli B. 2ao, recommended #5O<9s application for appro,al by $C-C9s e?ecuti,e committee. A credit facility in the amount of P!* million (as initially granted. <pon #5O<9s application and <y9s and 2ao9s recommendation, $C-C9s e?ecuti,e committee increased #5O<9s credit facility to P%* million, then to P9* million, and finally to P 6 million. As security for its credit facilities (ith $C-C, #5O< e?ecuted t(o real estate mortgages and t(o chattel mortgages in fa,or of $C-C, (hich (ere registered (ith the $egistry of Beeds at Valenzuela, /etro /anila. <nder each of these four mortgage contracts, #5O< committed itself to insure the mortgaged property (ith an insurance company appro,ed by $C-C, and subse>uently, to endorse and deli,er the insurance policies to $C-C. #5O< obtained in its name a total of ten insurance policies from /)C5. )n 1ebruary 99&, Alchester )nsurance Agency, )nc., the insurance agent (here #5O< obtained the

b.

&E

&.

1or defendant $izal Commercial -anking CorporationF a. .o pay the plaintiff actual and compensatory damages in the amount of P&,***,***.**H

!.

1or both defendants /alayan and $C-CF

a. .o pay the plaintiff, jointly and se,erally, the follo(ing amountsF

E &E !E

P ,***,***.** as e?emplary damagesH P ,***,***.** as, and for, attorney9s feesH Costs of suit. and on the Counterclaim of defendant $C-C, ordering the plaintiff to pay its loan obligations (ith defendant $C-C in the amount of P+3,63%,*+9.*8, as of April &6, 99&, (ith interest thereon at the rate stipulated in the respecti,e promissory notes D(ithout surcharges and penaltiesE per computation, pp. 8"A, 8"- K 8"C.

)n #.$. =o. &33!8, $C-C like(ise appeals from the decision in C.A. #.$. =o. CV"83!6+, (hich case, by ,irtue of the Court of Appeals9 resolution dated August 6, 99+, (as consolidated (ith C.A. #.$. =o. CV"8+ +& Dsubject of herein #.$. =o. &33!!E. At issue in said petition is $C-C9s right to inter,ene in the action bet(een Alfredo C. 4ebastian Dthe creditorE and #5O< Dthe debtorE, (here the subject insurance policies (ere attached in fa,or of 4ebastian. After a careful re,ie( of the material facts as found by the t(o courts belo( in relation to the pertinent and applicable la(s, (e find merit in the submissions of $C-C and /)C5. .he se,eral causes of action pursued belo( by #5O< ga,e rise to se,eral related issues (hich are no( submitted in the petitions before us. .his Court, ho(e,er, discerns one primary and central issue, and this is, (hether or not $C-C, as mortgagee, has any right o,er the insurance policies taken by #5O<, the mortgagor, in case of the occurrence of loss. As earlier mentioned, accordant (ith the credit facilities e?tended by $C-C to #5O<, the latter e?ecuted se,eral mortgage contracts in fa,or of $C-C. )t (as e?pressly stipulated in these mortgage contracts that #5O< shall insure the mortgaged property (ith any of the insurance companies acceptable to $C-C. #5O< indeed insured the mortgaged property (ith /)C5, an insurance company acceptable to $C-C. -ased on their stipulations in the mortgage contracts, #5O< (as supposed to endorse these insurance policies in fa,or of, and deli,er them, to $C-C. Alchester )nsurance Agency, )nc., /)C59s under(riter from (hom #5O< obtained the subject insurance policies, prepared the nine endorsements Dsee J?h. ] "/alayan_ to ]9"/alayan_H also J?h. ]% "$C-C_ to ]%9"$C-C_E, copies of (hich (ere deli,ered to #5O<, $C-C, and /)C5. @o(e,er, because these endorsements do not bear the signature of any officer of #5O<, the trial court, as (ell as the Court of Appeals, concluded that the endorsements are defecti,e. Ae do not >uite agree. )t is settled that a mortgagor and a mortgagee ha,e separate and distinct insurable interests in the same mortgaged property, such that each one of them may insure the same property for his o(n sole benefit. .here is no >uestion that #5O< could insure the mortgaged property for its o(n e?clusi,e benefit. )n the present case, although it appears that #5O< obtained the subject insurance policies naming itself as the sole payee, the intentions of the parties as sho(n by their contemporaneous acts, must be gi,en due consideration in order to better ser,e the interest of justice and e>uity. )t is to be noted that nine endorsement documents (ere prepared by Alchester in fa,or of $C-C. .he Court is in a >uandary ho( Alchester could arri,e at the idea of endorsing any specific insurance policy in fa,or of any particular beneficiary or payee other than the insured had not such named payee or beneficiary been specifically disclosed by the insured itself. )t is also significant that #5O< ,oluntarily and purposely took the insurance policies from /)C5, a sister company of $C-C, and not just from any other insurance company. Alchester (ould not ha,e found out that the subject pieces of property (ere mortgaged to $C-C had not such information been ,oluntarily disclosed by #5O< itself. @ad it not been for #5O<, Alchester (ould not ha,e kno(n of #5O<9s intention of obtaining insurance co,erage in compliance (ith its undertaking in the mortgage contracts (ith $C-C, and ,erily, Alchester (ould not ha,e endorsed the policies to $C-C had it not been so directed by #5O<. 5n e>uitable principles, particularly on the ground of estoppel, the Court is constrained to rule in fa,or of mortgagor $C-C. .he basis and purpose of the doctrine (as e?plained in P)ilippine 'ational Ban6 vs. Court of Appeals D98 4C$A !%6 : 969;E, to (itF .he doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak against his o(n act, representations, or commitments to the injury of one to (hom they (ere directed and (ho reasonably relied thereon. .he doctrine of estoppel springs from e>uitable principles and the e>uities in the case. )t is designed to aid the la( in the administration of justice (here (ithout its aid injustice might result. )t has been

1<$.@J$, the Clerk of Court of the $egional .rial Court of /anila is hereby ordered to release immediately to the plaintiff the amount of P%*,***,***.** deposited (ith the Court by defendant /alayan, together (ith all the interests earned thereon. D $ecord, pp. 863"869.E 1rom this judgment, all parties interposed their respecti,e appeals. #5O< (as unsatisfied (ith the amounts a(arded in its fa,or. /)C5 and $C-C disputed the trial court9s findings of liability on their part. .he Court of Appeals partly granted #5O<9s appeal, but sustained the findings of the trial court (ith respect to /)C5 and $C-C9s liabilities, thuslyF A@J$J15$J, the decision of the lo(er court dated June &9, 998 is hereby modified as follo(sF . 15$ BJ1J=BA=. /A2AOA= )=4<$A=CJ C5., )=CF aE .o pay the plaintiff its fire loss claim in the total amount of P68,*8*,% 3.%3 less the amount of P%*,%*%,%98.+* Dper 5.$. =o. !+89&3%E plus deposited in court and damages by (ay of interest commencing July &6, 99& until the time #oyu recei,es the said amount at the rate of thirty"se,en D!6dE percent per annum (hich is t(ice the ceiling prescribed by the /onetary -oard. &. 15$ BJ1J=BA=. C5$P5$A.)5=F $)ZA2 C5//J$C)A2 -A=Y)=#

aE .o pay the plaintiff actual and compensatory damages in the amount of P%,***,***.**. !. 15$ BJ1J=BA=.4 /A2AOA= )=4<$A=CJ C5., )=C., $)ZA2 C5//J$C)A2 -A=Y)=# C5$P5$A.)5=, <O C@<= -)=# A=B J2) B. 2A5F aE .o pay the plaintiff jointly and se,erally the follo(ing amountsF . &. P ,%**,***.** as e?emplary damagesH P ,%**,***.** as and for attorney9s fees.

8. And on $C-C9s Counterclaim, ordering the plaintiff #oyu K 4ons, )nc. to pay its loan obligation (ith $C-C in the amount of P+3,63%,*+9.*8 as of April &6, 99& (ithout any interest, surcharges and penalties. .he Clerk of the Court of the $egional .rial Court of /anila is hereby ordered to immediately release to #oyu K 4ons, )nc. the amount of P%*,%*%,%98.+* Dper 5.$. =o. !+89&3%E deposited (ith it by /alayan )nsurance Co., )nc., together (ith all the interests thereon. D #ollo, p. &**.E $C-C and /)C5 are no( before us in #.$. =o. &33!! and &33++, respecti,ely, seeking re,ie( and conse>uent re,ersal of the abo,e dispositions of the Court of Appeals.

applied by this Court (here,er and (hene,er special circumstances of a case so demand. D p. !+3.E J,elyn 2ozada of Alchester testified that upon instructions of /r. #o, through a certain /r. Oam, she prepared in >uadruplicate on 1ebruary , 99& the nine endorsement documents for #5O<9s nine insurance policies in fa,or of $C-C. .he original copies of each of these nine endorsement documents (ere sent to #5O<, and the others (ere sent to $C-C and /)C5, (hile the fourth copies (ere retained for Alchester9s file Dtsn, 1ebruary &!, pp. 6"3E. #5O< has not denied ha,ing recei,ed from Alchester the originals of these endorsements. $C-C, in good faith, relied upon the endorsement documents sent to it as this (as only pursuant to the stipulation in the mortgage contracts. Ae find such reliance to be justified under the circumstances of the case. #5O< failed to seasonably repudiate the authority of the person or persons (ho prepared such endorsements. 5,er and abo,e this, #5O< continued, in the meantime, to enjoy the benefits of the credit facilities e?tended to it by $C-C. After the occurrence of the loss insured against, it (as too late for #5O< to diso(n the endorsements for any imagined or contri,ed lack of authority of Alchester to prepare and issue said endorsements. )f there had not been actually an implied ratification of said endorsements by ,irtue of #5O<9s inaction in this case, #5O< is at the ,ery least estopped from assailing their operati,e effects. .o permit #5O< to capitalize on its non"confirmation of these endorsements (hile it continued to enjoy the benefits of the credit facilities of $C-C (hich belie,ed in good faith that there (as due endorsement pursuant to their mortgage contracts, is to countenance gra,e contra,ention of public policy, fair dealing, good faith, and justice. 4uch an unjust situation, the Court cannot sanction. <nder the peculiar circumstances obtaining in this case, the Court is bound to recognize $C-C9s right to the proceeds of the insurance policies if not for the actual endorsement of the policies, at least on the basis of the e>uitable principle of estoppel. #5O< cannot seek relief under 4ection %! of the )nsurance Code (hich pro,ides that the proceeds of insurance shall e?clusi,ely apply to the interest of the person in (hose name or for (hose benefit it is made. .he peculiarity of the circumstances obtaining in the instant case presents a justification to take e?ception to the strict application of said pro,ision, it ha,ing been sufficiently established that it (as the intention of the parties to designate $C-C as the party for (hose benefit the insurance policies (ere taken out. Consider thus the follo(ingF . )t is undisputed that the insured pieces of property (ere the subject of mortgage contracts entered into bet(een $C-C and #5O< in consideration of and for securing #5O<9s credit facilities from $C-C. .he mortgage contracts contained common pro,isions (hereby #5O<, as mortgagor, undertook to ha,e the mortgaged property properly co,ered against any loss by an insurance company acceptable to $C-C. &. #5O< ,oluntarily procured insurance policies to co,er the mortgaged property from /)C5, no less than a sister company of $C-C and definitely an acceptable insurance company to $C-C. !. Jndorsement documents (ere prepared by /)C59s under(riter, Alchester )nsurance Agency, )nc., and copies thereof (ere sent to #5O<, /)C5, and $C-C. #5O< did not assail, until of late, the ,alidity of said endorsements. 8. #5O< continued until the occurrence of the fire, to enjoy the benefits of the credit facilities e?tended by $C-C (hich (as conditioned upon the endorsement of the insurance policies to be taken by #5O< to co,er the mortgaged properties. .his Court can not o,er stress the fact that upon recei,ing its copies of the endorsement documents prepared

by Alchester, #5O<, despite the absence of its (ritten conformity thereto, ob,iously considered said endorsement to be sufficient compliance (ith its obligation under the mortgage contracts since $C-C accordingly continued to e?tend the benefits of its credit facilities and #5O< continued to benefit therefrom. Just as plain too is the intention of the parties to constitute $C-C as the beneficiary of the ,arious insurance policies obtained by #5O<. .he intention of the parties (ill ha,e to be gi,en full force and effect in this particular case. .he insurance proceeds may, therefore, be e?clusi,ely applied to $C-C, (hich under the factual circumstances of the case, is truly the person or entity for (hose benefit the policies (ere clearly intended. /oreo,er, the la(9s e,ident intention to protect the interests of the mortgagee upon the mortgaged property is e?pressed in Article & &6 of the Ci,il Code (hich statesF A$.. & &6. .he mortgage e?tends to the natural accessions, to the impro,ements, gro(ing fruits, and the rents or income not yet recei,ed (hen the obligation becomes due, and to the amount of the indemnity granted or o(ing to the proprietor from the insurers of the property mortgaged, or in ,irtue of e?propriation for public use, (ith the declarations, amplifications and limitations established by la(, (hether the estate remains in the possession of the mortgagor, or it passes into the hands of a third person. 4ignificantly, the Court notes that out of the * insurance policies subject of this case, only 3 of them appear to ha,e been subject of the endorsements prepared and deli,ered by Alchester for and upon instructions of #5O< as sho(n belo(F Policy =umber 1" 8"*669% :DaE abo,e; has not been endorsed. .his fact (as admitted by /)C59s (itness, Atty. 1arolan Dtsn, 1ebruary +, 998, p. &%E. 2ike(ise, the record sho(s no endorsement for Policy =umber C)S1" &3"*!!8 :DhE abo,e;. Also, one of the endorsement documents, J?hibit D-%ala+anE, refers to a certain insurance policy number AC)A"1" *6*++, (hich is not among the insurance policies in,ol,ed in the complaint. .he proceeds of the 3 insurance policies endorsed to $C-C aggregate to P39,968,833.!+. -eing e?clusi,ely payable to $C-C by reason of the endorsement by Alchester to $C-C, (hich (e already ruled to ha,e the force and effect of an endorsement by #5O< itself, these 3 policies can not be attached by #5O<9s other creditors up to the e?tent of the #5O<9s outstanding obligation in $C-C9s fa,or. 4ection %! of the )nsurance Code ordains that the insurance proceeds of the endorsed policies shall be applied e?clusi,ely to the proper interest of the person for (hose benefit it (as made. )n this case, to the e?tent of #5O<9s obligation (ith $C-C, the interest of #5O< in the subject policies had been transferred to $C-C effecti,e as of the time of the endorsement. .hese policies may no longer be attached by the other creditors of #5O<, like Alfredo 4ebastian in the present #.$. =o. &33!8, (hich may nonetheless forth(ith be dismissed for being moot and academic in ,ie( of the results reached herein. 5nly the t(o other policies amounting to P 9,+8+,&&8.9& may be ,alidly attached, garnished, and le,ied upon by #5O<9s other creditors. .o the e?tent of #5O<9s outstanding obligation (ith $C-C, all the rest of the other insurance policies abo,e"listed (hich (ere endorsed to $C-C, are, therefore, to be released from attachment, garnishment, and le,y by the other creditors of #5O<. .his brings us to the ne?t rele,ant issue to be resol,ed, (hich is, the e?tent of #5O<9s outstanding obligation (ith $C-C (hich the proceeds of the 3 insurance policies (ill discharge and li>uidate, or put differently, the actual amount of #5O<9s liability to $C-C. .he Court of Appeals simply echoed the declaration of the trial court finding that #5O<94 total obligation to $C-C (as only P+3,63%,*+*.*8 as of April &6, 99&, thus sanctioning the trial court9s e?clusion of Promissory =ote =o. 8& "9& Drene(al of Promissory =ote =o. 9*3"9 E and Promissory =ote =o. 8&*"9& Drene(al of Promissory =ote =o. 9%&"9 E on the ground that their e?ecution is highly >uestionable for not only are these dated after the fire, but also because the signatures of either #5O< or any its representati,e are conspicuously absent. Accordingly, the Court of Appeals speculated thuslyF

g@ence, this Court is inclined to conclude that said promissory notes (ere pre"signed by plaintiff in blank terms, as a,erred by plaintiff, in contemplation of the speedy grant of future loans, for the same practice of procedure has al(ays been adopted in its pre,ious dealings (ith the bank.

D#ollo, pp. 3 " 3&.E .he fact that the promissory notes bear dates posterior to the fire does not necessarily mean that the documents are spurious, for it is presumed that the ordinary course of business had been follo(ed D%etropolitan Ban6 and Arust Compan+ vs. Nuilts and All, Inc., &&& 4C$A 83+ : 99!;E. .he obligor and not the holder of the negotiable instrument has the burden of proof of sho(ing that he no longer o(es the obligee any amount DAravel-$n, Inc. vs. Court of Appeals , & * 4C$A !% : 99&;E. J,en casting aside the presumption of regularity pri,ate transactions, receipt of the loan amounting P & ,9++,*%3.+6 DJ?hibits "&9, $C-CE (as admitted #5O< as indicated in the testimony of #o 4ong @iap (hen ans(ered the >ueries of the trial courtF A..O. =A.)V)BAB 7F AF -ut insofar as the amount stated in J?hibits to &9" $C-C, you recei,ed all the amounts stated thereinN Oes, sir, ) recei,ed the amount. of to by he

.he t(o courts belo( erred in failing to see that the promissory notes (hich they ruled should be e?cluded for bearing dates (hich are after that of the fire, are mere rene7als of pre,ious ones. .he proceeds of the loan represented by these promissory notes (ere admittedly recei,ed by #5O<. .here is ample factual and legal basis for gi,ing #5O<9s judicial admission of liability in the amount of P +,!* ,99&.+* full force and effect )t should, ho(e,er, be >uickly added that (hate,er amount $C-C may ha,e reco,ered from the other insurers of the mortgaged property (ill, nonetheless, ha,e to be applied as payment against #5O<9s obligation. -ut, contrary to the lo(er courts9 findings, payments effected by #5O< prior to January & , 99! should no longer be deducted. 4uch payments had ob,iously been duly considered by #5O<, in its afore>uoted letter dated /arch 9, 99!, (herein it admitted that its past due account totaled P +,!* ,99&.+* as of January & , 99!. .he net obligation of #5O<, after deductions, is thus reduced to P *6,&8+,336.9* as of January & , 99!, to (itF .otal 5bligation as admitted by #5O< as of January & , 99!F P +,!* ,99&.+* -roken do(n as follo(s Principal: $egular 1B<
;

)nterest

C5<$. @e is asking if he recei,ed all the amounts stated in J?hibits to &9"$C-CN A).=J44F Oes, Oour @onor, ) recei,ed all the amounts. C5<$. )ndicated in the Promissory =otesN A).=J44 A. .he promissory =otes they did not gi,e to me but the amount ) asked (hich is correct, Oour @onor.

3*,%!%,98+.!& 6,%83,*&%. 6 ^^^^^^^^^^^^ ^^^^^^^^^^^^^ 3,& 3,*& .

:&;

.otalF 2J44F E

*3,*3!,96 .89

Proceeds from 4eaboard Jastern )nsurance CompanyF +,*9%, 8%.3

C5<$. 7F AF Oou mean to say the amounts indicated in J?hibits to &9"$C-C is correctN Oes, Oour @onor. &E

Proceeds from J>uitable )nsurance CompanyF &,6%+,!6!.**

Dtsn, Jan. 8, 998, p. &+.E 1urthermore, aside from its judicial admission of ha,ing recei,ed all the proceeds of the &9 promissory notes as hereinabo,e >uoted, #5O< also offered and admitted to $C-C that its obligation be fi?ed at P +,!* ,99&.+* as sho(n in its letter dated /arch 9, 99!, (hich pertinently readsF Ae (ish to inform you, therefore that (e are ready and (illing to pay the current past due account of this company in the amount of P +,!* ,99&.+* as of & January 99!, specified in pars. %, p. *, and 3, p. ! of your affida,its of .hird Party Claims in the <rban case at /akati, /etro /anila and in the Zamboanga case at Zamboanga city, respecti,ely, less the total of P3,3% ,% 9.6 paid from the 4eaboard and J>uitable insurance companies and other legitimate deductions. Ae accept and confirm this amount of P +,!* ,99&.+* as stated as true and correct. D J?hibit --.E .he Court of Appeals erred in placing much significance on the fact that the e?cluded promissory notes are dated after the fire. )t failed to consider that said notes had for their origin transactions consummated prior to the fire. .hus, careful attention must be paid to the fact that Promissory =otes =o. 8&*"9& and 8& "9& are mere rene7als of Promissory =otes =o. 9*3"9 and 9%&"9 , loans already a,ailed of by #5O<.

!E

Payment from foreign department negotiationF &*!,%38.39

9,*%%, *8.6*:!; =J. 99!F A/5<=. as of January P 10@,29A,88@.90 & ,

.he need for the payment of interest due upon the principal amount of the obligation, (hich is the cost of money to $C-C, the primary end and the ultimate reason for $C-C9s e?istence and being, (as duly recognized by the trial court (hen it ruled fa,orably on $C-C9s counterclaim, ordering #5O< ]to pay its loan obligation (ith $C-C in the amount of P+3,63%,*+9.*8, as of April &6, 99&, (ith interest thereon at the rate stipulated in the respecti,e promissory notes D(ithout surcharges and penaltiesE per computation, pp. 8"A, 8"-, 8" C_ D$ecord, p. 869E. )ne?plicably, the Court of Appeals, (ithout e,en laying do(n the factual or legal justification for its ruling, modified the trial court9s ruling and ordered #5O< ]to

pay the principal amount of P+3,63%,*+9.*8(ithout any interest, surcharges and penalties_ D$ollo, p. &**E. )t is to be noted in this regard that e,en the trial court hedgingly and (ith much uncertainty deleted the payment of additional interest, penalties, and charges, in this mannerF $egarding defendant $C-C9s commitment not to charge additional interest, penalties and surcharges, the same does not re>uire that it be embodied in a document or some form of (riting to be binding and enforceable. .he principle is (ell kno(n that generally a ,erbal agreement or contract is no less binding and effecti,e than a (ritten one. And the e?istence of such a ,erbal agreement has been amply established by the e,idence in this case. )n any e,ent, regardless of the e?istence of such ,erbal agreement, it (ould still be unjust and ine>uitable for defendant $C-C to charge the plaintiff (ith surcharges and penalties considering the latter9s pitiful situation. DJmphasis supplied.E

abo,e, shall be &d per annum from such finality until its satisfaction, this interim period being deemed to be by then an e>ui,alent to a forbearance of credit. D pp. 9%"96.E .here being (ritten stipulations as to the rate of interest o(ing on each specific promissory note as summarized and tabulated by the trial court in its decision Dpp.86* and 86 , $ecordE such agreed interest rates must be follo(ed. .his is ,ery clear from paragraph )), sub"paragraph >uoted abo,e.

5n the issue of payment of surcharges and penalties, (e partly agree that #5O<9s pitiful situation must be taken into account. Ae do not agree, ho(e,er, that payment of any amount as surcharges and penalties should altogether be deleted. J,en assuming that $C-C, through its responsible officers, herein petitioners Jli 2ao and <y Chun -ing, may ha,e relayed its assurance for assistance to #5O< D$ecord, p. immediately 86+E after the occurrence of the fire, (e cannot accept the lo(er courts9 finding that $C-C had thereby ipso facto effecti,ely (ai,ed collection of any additional interests, .he essence or rationale for the payment of interest or surcharges, and penalties from #5O<. Assurances of cost of money is separate and distinct from that of surcharges assistance are one thing, but (ai,er of additional interests, and penalties. Ahat may justify a court in not allo(ing the surcharges, and penalties is another. creditor to charge surcharges and penalties despite e?press stipulation therefor in a ,alid agreement, may not e>ually justify non"payment of interest. .he charging of interest for loans forms a ,ery essential and fundamental element of the banking business, (hich may truly be considered to be at the ,ery core of its e?istence or being. )t is inconcei,able for a bank to grant loans for (hich it (ill not charge any interest at all. Ae fail to find justification for the Court of Appeals9 outright deletion of the payment of interest as agreed upon in the respecti,e promissory notes. .his constitutes gross error. 1or the computation of the interest due to be paid to $C-C, the follo(ing rules of thumb laid do(n by this Court in "astern &)ipping Lines, Inc. vs. Court of Appeals D&!8 4C$A 63 : 998;E, shall apply, to (itF ). Ahen an obligation, regardless of its source, i.e., la(, contracts, >uasi"contracts, delicts or >uasi"delicts is breached, the contra,enor can be held liable for damages. .he pro,isions under .itle 0V))) on ]Bamages_ of the Ci,il Code go,ern in determining the measure of reco,erable damages. )). Aith regard particularly to an a(ard of interest in the concept of actual and compensatory damages, the rate of interest, as (ell as the accrual thereof, is imposed, as follo(sF . Ahen the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that (hich may ha,e been stipulated in (riting. 1urthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. )n the absence of stipulation, the rate of interest shall be &d per annum to be computed from default, i.e., from judicial or e?trajudicial demand under and subject to the pro,isions of Article +9 of the Ci,il Code. &. Ahen an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages a(arded may be imposed at the discretion of the court at the rate of +d per annum. =o interest, ho(e,er, shall be adjudged on unli>uidated claims or damages e?cept (hen or until the demand can be established (ith reasonable certainty. Accordingly, (here the demand is established (ith reasonable certainty, the interest shall begin to run from the time the claim is made judicially or e?trajudicially DArt. +9, Ci,il CodeE but (hen such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date of the judgment of the court is made Dat (hich time the >uantification of damages may be deemed to ha,e been reasonably ascertainedE. .he actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. !. Ahen the judgment of the court a(arding a sum of money becomes final and e?ecutory, the rate of legal interest, (hether the case falls under paragraph or paragraph &, 4urcharges and penalties agreed to be paid by the debtor in case of default partake of the nature of li>uidated damages, co,ered by 4ection 8, Chapter !, .itle 0V))) of the Ci,il Code. Article &&&6 thereof pro,idesF A$.. &&&6. 2i>uidated damages, (hether intended as a indemnity or penalty, shall be e>uitably reduced if they are ini>uitous and unconscionable. )n e?ercising this ,ested po(er to determine (hat is ini>uitous and unconscionable, the Court must consider the circumstances of each case. )t should be stressed that the Court (ill not make any s(eeping ruling that surcharges and penalties imposed by banks for non"payment of the loans e?tended by them are generally ini>uitous and unconscionable. Ahat may be ini>uitous and unconscionable in one case, may be totally just and e>uitable in another. .his pro,ision of la( (ill ha,e to be applied to the established facts of any gi,en case. #i,en the circumstances under (hich #5O< found itself after the occurrence of the fire, the Court rules the surcharges rates ranging any(here from 9d to &6d, plus the penalty charges of !+d, to be definitely ini>uitous and unconscionable. .he Court tempers these rates to &d and !d, respecti,ely. 1urthermore, in the light of #5O<9s offer to pay the amount of P +,!* ,99&.+* to $C-C as /arch 99! D4eeF J?hibit ]--_E, (hich $C-C refused, (e find it more in keeping (ith justice and e>uity for $C-C not to charge additional interest, surcharges, and penalties from that time on(ard. #i,en the factual milieu spread hereo,er, (e rule that it (as error to hold /)C5 liable in damages for denying or (ithholding the proceeds of the insurance claim to #5O<. 1irstly, by ,irtue of the mortgage contracts as (ell as the endorsements of the insurance policies, $C-C has the right to claim the insurance proceeds, in substitution of the property lost in the fire. @a,ing assigned its rights, #5O< lost its standing as the beneficiary of the said insurance policies. 4econdly, for an insurance company to be held liable for unreasonably delaying and (ithholding payment of insurance proceeds, the delay must be (anton, oppressi,e, or male,olent DHenit) Insurance Corporation vs. CA, 3% 4C$A 8*! : 99*;E. )t is generally agreed, ho(e,er, that an insurer may in good faith and honesty entertain a difference of opinion as to its liability. Accordingly, the statutory penalty for ,e?atious refusal of an insurer to pay a claim should not be inflicted unless the e,idence and circumstances sho( that such refusal (as (illful and (ithout reasonable cause as the facts appear to a reasonable and prudent man DBuffalo Ins. Co. vs. Bommarito :CCA 3th; 8& 1 :&d; %!, 6* A2$ & H P)oeni5 Ins. Co. vs. Cla+, * #a. !! , &3 4J 3%!, +% Am 4t $ep !*6H <usnets6+ vs. &ecurit+ Ins. Co., ! ! /o. 8!, &3 4A 86, 8% A2$ 39E. .he case at bar does not sho( that /)C5 (antonly and in bad faith delayed the release of the

proceeds. .he problem in the determination of (ho is the actual beneficiary of the insurance policies, aggra,ated by the claim of ,arious creditors (ho (anted to partake of the insurance proceeds, not to mention the importance of the endorsement to $C-C, to our mind, and as no( borne out by the outcome herein, justified /)C5 in (ithholding payment to #5O<. )n adjudging $C-C liable in damages to #5O<, the Court of Appeals said that $C-C cannot a,ail itself of t(o simultaneous remedies in enforcing the claim of an unpaid creditor, one for specific performance and the other for foreclosure. )n doing so, said the appellate court, the second action is deemed barred, $C-C ha,ing split a single cause of action D$ollo, pp. 9%" 99E. .he Court of Appeals (as too accommodating in gi,ing due consideration to this argument of #5O<, for the foreclosure suit is still pending appeal before the same Court of Appeals in CA #.$ CV =o. 8+&86, the case ha,ing been ele,ated by $C-C. )n finding that the foreclosure suit cannot prosper, the 1ifteenth Bi,ision of the Court of Appeals pre"empted the resolution of said foreclosure case (hich is not before it. .his is plain re,ersible error if not gra,e abuse of discretion. As held in PeCa vs. Court of Appeals D&8% 4C$A +9 : 99%;EF )t should ha,e been enough, nonetheless, for the appellate court to merely set aside the >uestioned orders of the trial court for ha,ing been issued by the latter (ith gra,e abuse of discretion. )n like(ise enjoining permanently herein petitioner ]from entering in and interfering (ith the use or occupation and enjoyment of petitioner9s Dno( pri,ate respondentE residential house and compound,_ the appellate court in effect, precipitately resol,ed (ith finality the case for injunction that (as yet to be heard on the merits by the lo(er court. Jle,ated to the appellate court, it might be stressed, (ere mere incidents of the principal case still pending (ith the trial court. )n %unicipalit+ of BiCan, Laguna vs. Court of Appeals, & 9 4C$A +9, (e ruled that the Court of Appeals (ould ha,e ]no jurisdiction in a certiorari proceeding in,ol,ing an incident in a case to rule on the merits of the main case itself (hich (as not on appeal before it._ D pp. 6* "6*&.E Anent the right of $C-C to inter,ene in Ci,il Case =o. *6!, before the Zamboanga $egional .rial Court, since it has been determined that $C-C has the right to the insurance proceeds, the subject matter of inter,ention is rendered moot and academic. $espondent 4ebastian must, ho(e,er, yield to the preferential right of $C-C o,er the /)C5 insurance policies. )t is basic and fundamental that the first mortgagee has superior rights o,er junior mortgagees or attaching creditors DAlp)a Insurance O &uret+ Co. vs. #e+es, *+ 4C$A &68 : 93 ;H &un Life Assurance Co. of Canada vs. @onzales Diaz, %& Phil. &6 : 9&3;E. A@J$J15$J, the petitions are hereby #$A=.JB and the decision and resolution of Becember +, 99+ and April !, 996 in CA"#.$. CV =o. 8+ +& are hereby $JVJ$4JB and 4J. A4)BJ, and a ne( one enteredF . Bismissing the Complaint of pri,ate respondent #5O< in Ci,il Case =o. 9!"+%88& before -ranch ! of the /anila $egional .rial Court for lack of meritH &. 5rdering /alayan )nsurance Company, )nc. to deli,er to $izal Commercial -anking Corporation the proceeds of the insurance policies in the amount of P% ,3+&,!9*.98 Dper report of adjuster .oplis K @arding D1ar JastE, )nc., J?hibits ]&_ and ]&" _E, less the amount of P%*,%*%,%98.+* Dper 5.$. =o. !+89&3%EH !. 5rdering the Clerk of Court to release the amount of P%*,%*%,%98.+* including the interests earned to $izal Commercial -anking CorporationH 8. 5rdering #oyu K 4ons, )nc. to pay its loan obligation (ith $izal Commercial -anking Corporation in the principal amount

of P *6,&8+,336.9*, (ith interest at the respecti,e rates stipulated in each promissory note from January & , 99! until finality of this judgment, and surcharges at &d and penalties at !d from January & , 99! to /arch 9, 99!, minus payments made by /alayan )nsurance Company, )nc. and the proceeds of the amount deposited (ith the trial court and its earned interest. .he total amount due $C-C at the time of the finality of this judgment shall earn interest at the legal rate of &d in lieu of all other stipulated interests and charges until fully paid. .he petition of $izal Commercial -anking Corporation against the respondent Court in CA"#$ CV 83!6+ is B)4/)44JB for being moot and academic in ,ie( of the results herein arri,ed at. $espondent 4ebastian9s right as attaching creditor must yield to the preferential rights of $izal Commercial -anking Corporation o,er the /alayan insurance policies as first mortgagee. "O OR&ERE&.

G.R. No. !(188A2

Ju1y 31, 19A1

PAU!O ANG an# "A!!' C. ANG, plaintiffs"appellees, ,s. U!TON IRE IN"URANCE CO., ET A!., defendants. U!TON IRE IN"URANCE CO., defendant"appellant. &antiago #anada for plaintiffs-appellees. Ben(amin &. Valte for defendant-appellant. !A$RA&OR, J.) .he present action (as instituted by the spouses Paulo Ang and 4ally C. Ang against the 1ulton 1ire )nsurance Company and the Paramount 4urety and )nsurance Company, )nc. to reco,er from them the face ,alue of a fire insurance policy issued in plaintiffsL fa,or co,ering a store o(ned and operated by them in 2aoag, )locos =orte. 1rom a judgment of the court ordering the defendant 1ulton 1ire )nsurance Co. to pay the plaintiffs the sum of P *,***.**, (ith interest, and an additional sum of P&,***.** as attorneyLs fees, and costs, the defendants ha,e appealed directly to this Court. 5n 4eptember 9, 9%!, defendant 1ulton 1ire )nsurance Company issued a policy =o. 1"86!*!8*, in fa,or of P. K 4 Bepartment 4tore D4ally C. AngE o,er stocks of general merchandise, consisting principally of dry goods, contained in a building occupied by the plaintiffs at 2aoag, )locos =orte. .he premium is P%**.** annually. .he insurance (as issued for one year, but the same (as rene(ed for another year on 4eptember ! , 9%8. 5n Becember 6, 9%8, the store containing the goods insured (as destroyed by fire. 5n Becember !*, follo(ing, plaintiffs e?ecuted the first claim form. .he claim together (ith all the necessary papers relating thereto, (ere for(arded to he /anila Adjustment Company, the defendantsL adjusters and recei,ed by the latter on Jane 3, 9%%. 5n January &, 9%%, the /anila Adjustment Company accepted receipt of the claim and re>uested the submission of the books of accounts of the insured for the year 9%!" 9%8 and a clearance from the Philippine Constabulary and the police. 5n April +, 9%+, the 1ulton 1ire )nsurance Company (rote the plaintiffs that their claim (as denied. .his denial of the claim (as recei,ed by the plaintiffs on April 9, 9%+. 5n January !, 9%%, plaintiff Paulo Ang and ten others (ere charged for arson in Criminal Case =o. 8&9 in the Justice of the Peace Court of 2aoag, )locos =orte. .he case (as remanded for trial to the Court of 1irst )nstance of )locos =orte and there docketed as Criminal Case =o. &* 6. .he said court in a decision dated Becember 9, 9%6, ac>uitted plaintiff Paulo Ang of the crime of arson. .he present action (as instituted on /ay %, 9%3. .he action (as originally instituted against both the 1ulton 1ire )nsurance Company and the Paramount 4urety and )nsurance Company, )nc., but on June +, 9%3, upon motion of the Paramount 4urety, the latter (as dropped from the complaint. 5n /ay &+, 9%3, the defendant 1ulton 1ire )nsurance Company filed an ans(er to the complaint, admitting the e?istence of the contract of insurance, its rene(al and the loss by fire of the department store and the merchandise contained therein, but denying that the loss by the fire (as accidental, alleging that it (as occasioned by the (illful act of the plaintiff Paulo Ang himself. )t claims that under paragraph ! of the policy, if the loss or damage is occasioned by the (illful act of the insured, or if t)e claim is made and re(ected *ut no action is commenced 7it)in 0= mont)s after suc) re(ection, all benefits under the policy (ould be forfeited, and that since the claim of the plaintiffs (as denied and plaintiffs recei,ed notice of denial on April 3, 9%+, and they brought the action only on /ay %, 9%3, all the benefits under the policy ha,e been forfeited. 5n 1ebruary &, 9%9, plaintiffs filed a reply to the abo,e ans(er of the 1ulton 1ire )nsurance, alleging that on /ay , 9%+, plaintiffs had instituted Ci,il Case =o. &989 in the Court of 1irst )nstance of /anila, to assert the claimH that this case (as dismissed (ithout prejudice on 4eptember !, 9%6 and that deducting the period (ithin (hich said action (as pending,

the present action (as still (ithin the & month period from April &, 9%+. .he court belo( held that the bringing of the action in the Court of 1irst )nstance of /anila on /ay , 9%+, tolled the running of the & month period (ithin (hich the action must be filed. 4aid the court on this pointF .rue, indeed, plaintiffs committed a procedural mistake in first suing the agent instead of its principal, the herein defendant, as correctly pointed out by counsel for the defendant, for L<n agente residente de una compania de seguros e?tranjera >ue comercia en las )slas 1ilipinos no es responsable como mandante ni como mandatario, en ,irtud de contratas de seguro e?pendidos a nombre de la companiaL, D/acias K Co. ,s. Aarner, -arnes K Co., 8! Phil. + E. -ut the mistake being merely procedural, and the defendant not ha,ing been misled by the error, L.here is nothing sacred about process or pleadings, their forms or contents. .heir sole purpose is to facilitate the application of justice to the ri,al claims of contending parties. .hey (ere created not to hinder and delay, but to facilitate and promote the administration of justice DAlonso ,s. Villamor, + Phil %63.E .he complaint, J?h. LCL, (as dismissed by the Court (ithout prejudice DJ?h. L@" LE on 4eptember !, 9%6, and motion for reconsideration dated 4eptember & , 9%6. .he instant complaint (as filed on /ay 3, 9%3. .he $ules of Court D4ee !& thereofE is applicable in the computation of time. =o(, as correctly pointed out by the plaintiffsL counsel, by simple mathematical computation, the present action (as filed leas thin nine D9E months after the notice of rejection recei,ed by plaintiffs on April 9, 9%+, because the filing of the original complaint stopped the running of the period.' DBecision, pp. 8&"8!, $.5.A.E )n ,ie( of the reasons thus abo,e >uoted, the court rendered decision in fa,or of the plaintiffs. 5n the appeal before this Court, defendant"appellant argues that the court belo( erred in holding that the filing of the pre,ious suit tolled or suspended the running of the prescripti,e period. .he clause subject of the issue is paragraph ! of the policy, (hich reads as follo(sF !. )f the claim be in any respect fraudulent, or if any false declaration is made or used in support thereof, or if any fraudulent means or de,ices are used by the )nsured or any one acting on his behalf to obtain any benefit under this Policy, or, if the loss or damage be occasioned by the (illful act or (ith conni,ance of the )nsured, or, if the claim be made and rejected and an action or suit be not commenced (ithin t(el,e months after such rejection or Din case of arbitration place in pursuance of the 3th condition of this PolicyE (ithin t(el,e months after the arbitrator or arbitrators or umpire shall ha,e made their a(ard, all benefits under this Policy shall be forfeited. DJmphasis suppliedE. DBecision. p. *, $.5.A.E. .he appellant cites in support of its contention the cases of ". %acias O Co. vs. arner, Barnes O Co., Ltd ., 8! Phil %%H ". %acias O Co. vs. C)ina Fire Insurance Co ., 8+ Phil. !8% and Castillo etc. vs. %etropolitan Insurance Co ., 86 5.#. D4eptember, 9% E. )n ans(er to appellantLs contention, counsel for appellees contend that the action of the plaintiffs against the defendant had not yet prescribed at the time of the bringing of the action, because the period of prescription (as interrupted by the filing of the first action against the Paramount 4urety K )nsurance Co., in accordance (ith Article %% of the Ci,il Code. Counsel further argues that the basis of prescription of an action is the abandonment by a person of his right of action or claim, so that any act of said person tending to sho( his intention not to abandon his right of action or claim, as the filing of the pre,ious action in the case at bar, interrupts the period of prescription.

1urthermore, counsel argues, the dismissal of the pre,ious action is (ithout prejudice, (hich means that plaintiffs ha,e the right to file another complaint against the principal. .he basic error committed by the trial court is its ,ie( that the filing of the action against the agent of the defendant company (as 'merely a procedural mistake of no significance or conse>uence, (hich may be o,erlooked.' .he condition contained in the insurance policy that claims must be presented (ithin one year after rejection is not merely a procedural re>uirement. .he condition is an important matter, essential to a prompt settlement of claims against insurance companies, as it demands that insurance suits be brought by the insured (hile the e,idence as to the origin and cause of destruction ha,e not yet disappeared. )t is in the nature of a condition precedent to the liability of the insurer, or in other terms, a resolutory cause, the purpose of (hich is to terminate all liabilities in case the action is not filed by the insured (ithin the period stipulated. .he bringing of the action against the Paramount 4urety K )nsurance Company, the agent of the defendant Company cannot ha,e any legal effect e?cept that of notifying the agent of the claim. -eyond such notification, the filing of the action can ser,e no other purpose. .here is no la( gi,ing any effect to such action upon the principal. -esides, there is no condition in the policy that the action must be filed against the agent, and this Court can not by interpretation, e?tend the clear scope of the agreement beyond (hat is agreed upon by the parties. .he case of ". %acias O Co. vs. C)ina Fire Insurance Co . has settled the issue presented by the appellees in the case at bar definitely against their claim. )n that case, Ae declared that the contractual station in an insurance policy pre,ails o,er the statutory limitation, as (ell as o,er the e?ceptions to the statutory limitations that the contract necessarily supersedes the statute Dof limitationsE and the limitation is in all phases go,erned by the former. DJ. /acias K Co. ,s. China 1ire )nsurance K Co., 8+ Phil. pp. !8%"!%!E. As stated in said case and in accordance (ith the decision of the 4upreme Court of the <nited 4tates in $iddlesbarger ,s. @artford 1ire )nsurance Co. D6 Aall., !3+E, the rights of the parties flo( from the contract of insurance, hence they are not bound by the statute of limitations nor by e?emptions thereto. )n the (ords of our o(n la(, their contract is the la( bet(een the parties, and their agreement that an action on a claim denied by the insurer must be brought (ithin one year from the denial, go,erns, not the rules on the prescription of actions. .he judgment appealed from is hereby set aside and the case dismissed, (ith costs against the plaintiffs"appellees. Bengzon, C.;., Padilla, Concepcion, #e+es, ;.B.L., Barrera, Paredes, Dizon, De Leon and 'atividad, ;;., concur.

G.R. No. !(8918

%ar53 31, 1988

the right of action accrues. D4ec. 8!, Act 9*H Art. 88, =e( Ci,il Code.E -ut counsel for the insurer claim that this statutory in the policyF =o suit action on this Policy, for the reco,ery of any claim, shall be sustainable in any Court of la( or e>uity unless the insured shall ha,e fully complied (ith all the terms and conditions of this Policy nor unless commenced (ith t(el,e D &E months ne?t after the happening of the loss . . . .o this (e cannot agree. )n the case of ". %acias O Co. vs. C)ina Fire Insurance O Co., Ltd., et al., 8+ Phil. !8%, relied upon by the insurer, this Court held that a clause in an insurance policy pro,iding that an action upon the policy by the insured must be brought (ithin a certain time is, if reasonable, ,alid and (ill pre,ail o,er statutory limitations of the action. .hat decision, ho(e,er, (as rendered before the passage of Act 8 * , (hich amended the )nsurance Act by inserting the follo(ing section in chapter one thereofF 4JC. + "A. Q Any condition, stipulation or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one year from the time (hen the cause of action accrues, is ,oid. As 'matters respecting a remedy, such as the bringing of suit, admissibility of e,idence, and statute of limitations, depend upon the la( of the place (here the suit is brought' D)nsular #o,ernment vs. 1rank, ! Phil. &!+E, any policy clause repugnant to this amendment to the )nsurance Act cannot be gi,en effect in an action in our courts. J?amining the policy sued upon in the present case, (e find that its prescripti,e clause, if gi,en effect in accordance (ith the terms of the policy, (ould reduce the period allo(ed the insured for bringing his action to less than one year. .his is so because the said clause makes the prescripti,e period begin from the happening of the loss and at the same time pro,ides that the no suit on the policy shall be sustainable in any court unless the insured shall ha,e first fully complied (ith all the terms and conditions of the policy, among them that (hich re>uires that, as so as the loss is determined, (ritten claim therefor be filed (ith the carrier and that the letter to the carrier and the latterLs reply should be attached to the claim papers to be sent to the insurer. )t is ob,ious that compliance (ith this condition precedent (ill necessarily consume time and thus shorten the period for bringing suit to less than one year if the period is to begin, as stated in the policy, from ' t)e )appening of t)e loss.' -eing contrary to the la( of the forum, such stipulation cannot be gi,en effect. )t may perhaps be suggested that the policy clause relied on by the insurer for defeating plaintiffLs action should be gi,en the construction that (ould harmonize it (ith section + "A of the )nsurance Act by taking it to mean that the time gi,en the insured for bringing his suit is t(el,e months after the cause of action accrues. -ut the >uestion then (ould beF Ahen did the cause of action accrueN 5n that >uestion (e agree (ith the court belo( that plaintiffLs cause of action did not accrue until his claim (as finally rejected by the insurance company. .his is because, before such final rejection, there (as no real necessity for bringing suit. As the policy pro,ides that the insured should file his claim, first, (ith the carrier and then (ith the insurer, he had a right to (ait for his claim to be finally decided before going to court. .he la( does not encourages unnecessary litigation. At this junction it should be e?plained that (hile the decision of the Court of Appeals states that the claim against the insurance company '(as finally rejected o April &&, 986, as correctly concluded by the court belo(,' it is ob,ious from the conte?t and (e find it to be a fact that the date meant (as April ==, 0PQ>, for this (as the date (hen, according to the finding of the trial court, the insurance company in 2ondon rejected the claim. .he trial courtLs decision saysF

EAG!E "TAR IN"URANCE CO., !T&., <URR "TEA%"7IP CO., INC., ROO"EVE!T "TEA%"7IP AGENC', INC., an# !EI 7OEG7 ? CO%PAN', AE"., petitioners, ,s. C7IA 'U, respondent. #oss, &elp), Carrascoso and ;anda and Delfin L. @onzales for petitioner. 'a*ong and &ese for respondent. RE'E", A., J.) 5n January %, 98+, Atkin, Yroll K Co., loaded on the 4. 4. $oeph 4il,erlight o(ned and operated by 2eigh @oegh K Co., AS4, of 4an 1rancisco California, 8 bales of assorted under(ear ,alued at P3,*3%.&! consigned to Chia Ou in the City of /anila. .he shipment (as insured against all risks by Jagle 4tar )ns. Co. of 4an 1rancisco, California, under a policy issued to the shipper and by the latter assigned to the consignee. .he ,essel arri,ed in /anila on 1ebruary *, 98+, and on /arch 8 started discharging its cargo into the custody of the /anila .erminal Co., )nc., (hich (as then operating the arrastre ser,ice for the -ureau of Customs. -ut the 8 bales consigned to Chia Ou only * (ere deli,ered to him as the remaining ! could not be found. .hree of those deli,ered (ere also found damaged to the e?tent of %* per cent. Chia Ou claimed indemnity for the missing and damaged bales. -ut the claim (as declined, first, by the carrier and after(ard by the insurer, (hereupon Chia Ou brought the present action against both, including their respecti,e agents in the Philippines. Commenced in the Court of 1irst )nstance of /anila on =o,ember +, 983, or more than t(o years after deli,ery of the damaged bales and the date (hen the missing bales should ha,e been deli,ered, the action (as resisted by the defendants principally on the ground of prescription. -ut the trial court found for plaintiff and rendered judgment in his fa,or for the sum claimed plus legal interest and costs. .he judgment (as affirmed by the Court of Appeals, and the case is no( before us on appeal by certiorari. J?cept for the contro,ersy as to the amount for (hich the carrier could be held liable under the terms of the bill of lading, the only >uestion presented for determination is (hether plaintiffLs action has prescribed. 5n the part of the carrier the defense of prescription is made to rest on the follo(ing stipulation of the bill of ladingF )n any e,ent the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought (ithin one year after the deli,ery of the goods or the date (hen the goods should ha,e been deli,ered. .he stipulation is but a repetition of a pro,ision contained in section ! D+E of the <nited 4tates Carriage of #oods by 4ea, Act of 9!+, (hich (as adopted and made applicable to the Philippines by Common(ealth Act +% and by e?press agreement incorporated by reference in the bill of lading. 1ollo(ing our decision in Chua Yuy vs. J,erett 4teamship Corporation, #. $. =o 2"%%%8 D/ay &6, 9%!E and in J. $. Jlser, )nc., et al., vs. Court of Appeals,. et al., & #. $. =o. 2" +% 6 D=o,ember &9, 9%8E gi,ing force and effect to this kind of stipulation in bills of lading co,ering shipments from the <nited 4tates to the Philippines, (e ha,e to hold that plaintiffLs failure to bring his action '(ithin one year after the deli,ery of the goods or the date (hen the goods should ha,e been deli,ered' discharged the carrier from all liability. .his dispenses (ith the necessity of deciding ho( much could be reco,ered from the carrier under the terms of the bill of lading. .he case for the insurer stands on a different footing, for its claim of prescription is founded upon the terms of the policy and not upon the bill of lading. <nder our la( the time limit for bringing a ci,il action upon a (ritten contract is ten years after

5n 4eptember & , 98+, after $oose,elt 4teamship Agency )nc., and /anila .erminal Co., )nc., denied plaintiffLs claim, a formal insurance claim (as filed (ith Yerr K Co., 2td., local agents of Jagle 4tar )nsurance Co., 2td., DJ?h. 2.EYerr K Co., 2td., referred the insurance claim to Jagle 4tar )nsurance Co., 2td. in 2ondon but the latter, after insistent re>uest of plaintiffs for action, rejected the claim on April &&, 983, gi,ing as its reasons the lapse of the e?piry day of the risks co,ered by the policy and returned the claim documents only in August of 983. Dpp. 36"33, $ecord on Appeal.E 1urthermore, there is nothing in the record to sho( that the claim (as rejected in the year 986, either by the insurance company in 2ondon or its settling agents in the Philippines, (hile on the other hand defendantLs o(n J?hibit 2" is indisputable proof that it (as on &&nd April 983' that the settling agents informed the claimant 'that after due and careful consideration, our Principals confirm our declination of this claim.' )t not appearing that the settling agentsL decision on claims against their principals (ere not subject to re,ersal or modification by the latter, (hile on the contrary the insurance policy e?pressly stipulates, under the heading 'Important 'otice,' that the said agents 'ha,e authority to certify only as to the nature, cause and e?tent of the damage,' and it furthermore appearing that a reiteration of plaintiffs claim (as made to the principals and the latter ga,e it due course since only 'after due and careful consideration' did they confirm the action taken by the agents, (e conclude that, for the purpose of the present action, (e should consider plaintiffLs claim to ha,e been finally rejected by the insurer on April &&, 983. @a,ing been filed (ithin t(el,e months form that date, the action cannot be deemed to ha,e prescribed e,en on the supposition that the period gi,en the insured for bringing suit under the prescripti,e clause of the policy is t(el,e months after the accrual of the cause of action. )n concluding, (e may state that contractual limitations contained in insurance policies are regarded (ith e?treme jealousy by courts and (ill be strictly construed against the insurer and should not be permitted to pre,ent a reco,ery (hen their just and honest application (ould not produce that result. D8+ C. J. 4. &6!.E Aherefore, the judgment appealed from is re,ersed (ith respect to the carrier and its agents but affirmed (ith respect to the insurance company and its agents, (ith costs against the latter. Pa*lo, Bengzon, Padilla, ;ugo, Bautista Angelo, Concepcion, and #e+es, ;.B.L., concur.

G.R. No. 89@91 %ar53 13, 1991 "UN IN"URANCE O ICE, !T&., petitioner, ,s. COURT O APPEA!" an# E%I!IO TAN, respondents. Alfonso Feli5, ;r., for petitioner. illiam B. Devilles for private respondent.

A@J.@J$ 5$ =5. .@J $JJJC.)5= 51 .@J C2A)/ 4@A22 -J BJJ/JB 1)=A2 5=2O )1 ). C5=.A)=4 A5$B4 .5 .@J J11JC. .@A. .@J BJ=)A2 )4 1)=A2. .he ans(er to the first issue is in the negati,e. Ahile it is a cardinal principle of insurance la( that a policy or contract of insurance is to be construed liberally in fa,or of the insured and strictly against the insurer company, yet, contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms (hich the parties themsel,es ha,e used. )f such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense DPacific -anking Corp. ,. Court of Appeals, +3 4C$A : 933;E. Condition &6 of the )nsurance Policy, (hich is the subject of the conflicting contentions of the parties, readsF &6. Action or suit clause G If a claim be made and rejected and an action or suit be not commenced either in the )nsurance Commission or in any court of competent jurisdiction (ithin t(el,e D &E months from receipt of notice of such rejection, or in case of arbitration taking place as pro,ided herein, (ithin t(el,e D &E months after due notice of the a(ard made by the arbitrator or arbitrators or umpire, then the claim shall for all purposes be deemed to ha,e been abandoned and shall not thereafter be reco,erable hereunder. As the terms are ,ery clear and free from any doubt or ambiguity (hatsoe,er, it must be taken and understood in its plain, ordinary and popular sense pursuant to the abo,e"cited principle laid do(n by this Court. $espondent .an, in his letter addressed to the petitioner insurance company dated April !, 938 D#ollo, pp. %*"%&E, admitted that he recei,ed a copy of the letter of rejection on April &, 938. .hus, the &"month prescripti,e period started to run from the said date of April &, 938, for such is the plain meaning and intention of 4ection &6 of the insurance policy. Ahile the >uestion of (hether or not the insured (as definitely ad,ised of the rejection of his claim through the letter D #ollo, pp. 83"89E of petitioner dated 1ebruary &9, 938, may arise, the certainty of the denial of .anLs claim (as clearly manifested in said letter, the pertinent portion of (hich readsF Ae refer to your claim for fire loss of &*th August, 93! at @uer,ana 4t., 2a Paz, )loilo City. Ae no( ha,e the report of our adjusters and after a thorough and careful re,ie( of the same and the accompanying documents at hand, (e are rejecting, much to our regrets, liability for the claim under our policies for one or more of the follo(ing reasonsF . ??? ??? ??? &. ??? ??? ??? 1or your information, (e ha,e referred all these matters to our la(yers for their opinion as to the compensability of your claim, particularly referring to the abo,e ,iolations. )t is their opinion and in fact their strong recomendation to us to deny your claim. -y this letter, (e do not intend to (ai,e or relin>uish any of our rights or defenses under our policies of insurance.

PARA", J.:p .his is a petition for re,ie( on certiorari of the June &*, 939 decision 1 of the Court of Appeals in CA"#.$. 4P. Case =o. !383 affirming the =o,ember !, 936 and January 8, 933 orders of the $egional .rial Court 2 of )loilo, -ranch &6, in Ci,il Case =o. +3 6, denying the motion to dismiss and the subse>uent motion for reconsiderationH and the August &&, 939 resolution of the same court denying the motion for reconsideration. 5n August %, 93!, herein pri,ate respondent Jmilio .an took from herein petitioner a P!**,***.** property insurance policy to co,er his interest in the electrical supply store of his brother housed in a building in )loilo City. 1our D8E days after the issuance of the policy, the building (as burned including the insured store. 5n August &*, 93!, .an filed his claim for fire loss (ith petitioner, but on 1ebruary &9, 938, petitioner (rote .an denying the latterLs claim. 5n April !, 938, .an (rote petitioner, seeking reconsideration of the denial of his claim. 5n 4eptember !, 93%, .anLs counsel (rote the )nsurer in>uiring about the status of his April !, 938 re>uest for reconsideration. Petitioner ans(ered the letter on 5ctober , 93%, ad,ising .anLs counsel that the )nsurerLs denial of .anLs claim remained unchanged, enclosing copies of petitionersL letters of 1ebruary &9, 938 and /ay 6, 93% Dresponse to petition for reconsiderationE. 5n =o,ember &*, 93%, .an filed Ci,il Case =o. +3 6 (ith the $egional .rial Court of )loilo, -ranch &6 but petitioner filed a motion to dismiss on the alleged ground that the action had already prescribed. 4aid motion (as denied in an order dated =o,ember !, 936H and petitionerLs motion for reconsideration (as also denied in an order dated January 8, 933. Petitioner (ent to the Court of Appeals and sought the nullification of the said =o,. !, 936 and January 8, 933 orders, but the Court of Appeals, in its June &*, 939 decision denied the petition and held that the court a 8uomay continue until its final termination. A motion for reconsideration (as filed, but the same (as denied by the Court of Appeals in its resolution of August &&, 939 D#ollo, pp. 8&"8!E. @ence, the instant petition. .he 4econd Bi,ision of this Court, in its resolution of Becember 3, 939 resol,ed to gi,e due course to the petition and to re>uire the parties to submit simultaneous memoranda DI*id., p. %+E. Petitioner raised t(o D&E issues (hich may be stated in substance, as follo(sF ) A@J.@J$ 5$ =5. .@J 1)2)=# 51 A /5.)5= 15$ $JC5=4)BJ$A.)5= )=.J$$<P.4 .@J .AJ2VJ D &E /5=.@4 P$J4C$)P.)VJ PJ$)5B .5 C5=.J4. .@J BJ=)A2 51 .@J )=4<$A=CJ C2A)/H and ))

)t is also important to note the principle laid do(n by this Court in the case of Ang v. Fulton Fire Insurance Co., D& 4C$A 98% : 9+ ;E, to (itF .he condition contained in an insurance policy that claims must be presented (ithin one year after rejection is not merely a procedural re>uirement but an important matter essential to a prompt settlement of claims against insurance companies as it demands that insurance suits be brought by the insured (hile the e,idence as to the origin and cause of destruction ha,e not yet disappeared. )n enunciating the abo,e"cited principle, this Court had definitely settled the rationale for the necessity of bringing suits against the )nsurer (ithin one year from the rejection of the claim. .he contention of the respondents that the one"year prescripti,e period does not start to run until the petition for reconsideration had been resol,ed by the insurer, runs counter to the declared purpose for re>uiting that an action or suit be filed in the )nsurance Commission or in a court of competent jurisdiction from the denial of the claim. .o uphold respondentsL contention (ould contradict and defeat the ,ery principle (hich this Court had laid do(n. /oreo,er, it can easily be used by insured persons as a scheme or de,ice to (aste time until any e,idence (hich may be considered against them is destroyed. )t is apparent that 4ection &6 of the insurance policy (as stipulated pursuant to 4ection +! of the )nsurance Code, (hich states thatF 4ec. +!. A condition, stipulation or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one year from the time (hen the cause of action accrues, is ,oid. .he crucial issue in this case isF Ahen does the cause of action accrueN )n support of pri,ate respondentLs ,ie(, t(o rulings of this Court ha,e been cited, namely, the case of "agle &tar Insurance Co. vs. C)ia Iu D9+ Phil. +9+ D 9%%;E, (here the Court heldF .he right of the insured to the payment of his loss accrues from the happening of the loss. @o(e,er, the cause of action in an insurance contract does not accrue until the insuredLs claim is finally rejected by the insurer. .his is because before such final rejection there is no real necessity for bringing suit. and the case of ACCFA vs. Alp)a Insurance O &uret+ Co., Inc. D&8 4C$A % : 9+3;, holding thatF 4ince 'cause of action' re>uires as essential elements not only a legal right of the plaintiff and a correlated obligation of the defendant in ,iolation of the said legal right, the cause of action does not accrue until the party obligated DsuretyE refuses, e?pressly or impliedly, to comply (ith its duty Din this case to pay the amount of the bondE. )ndisputably, the abo,e"cited pronouncements of this Court may be taken to mean that the insuredLs cause of action or his right to file a claim either in the )nsurance Commission or in a court of competent jurisdiction commences from the time of the denial of his claim by the )nsurer, either e?pressly or impliedly. -ut as pointed out by the petitioner insurance company, the rejection referred to should be construed as the rejection, in the first instance, for if (hat is being referred to is a reiterated rejection con,eyed in a resolution of a petition for reconsideration, such should ha,e been e?pressly stipulated.

.hus, to allo( the filing of a motion for reconsideration to suspend the running of the prescripti,e period of t(el,e months, a (hole ne( body of rules on the matter should be promulgated so as to a,oid any conflict that may be brought by it, such asF aE (hether the mere filing of a plea for reconsideration of a denial is sufficient or must it be supported by argumentsSaffida,itsSmaterial e,idenceH bE ho( many petitions for reconsideration should be permittedN Ahile in the "agle &tar case D9+ Phil. 6* E, this Court uses the phrase 'final rejection', the same cannot be taken to mean the rejection of a petition for reconsideration as insisted by respondents. 4uch (as clearly not the meaning contemplated by this Court. .he )nsurance policy in said case pro,ides that the insured should file his claim, first, (ith the carrier and then (ith the insurer. .he 'final rejection' being referred to in said case is the rejection by the insurance company. P$J/)4J4 C5=4)BJ$JB, the >uestioned decision of the Court of Appeals is $JVJ$4JB and 4J. A4)BJ, and Ci,il Case =o. +3 6 filed (ith the $egional .rial Court is hereby B)4/)44JB. 45 5$BJ$JB. %elencio-!errera, Padilla, &armiento and #egalado, ;;., concur.

G.R. No. 88191 No+,2>,r 28, 1989 I!IPINO %ERC7ANT" IN"URANCE CO., INC., petitioner, ,s. COURT O APPEA!" an# C7OA TIE< "ENG, respondents. Balgos O Perez La7 $ffices for petitioner. Lapuz La7 office for private respondent.

REGA!A&O, J.: .his is a re,ie( of the decision of the Court of Appeals, promulgated on July 9, 933, the dispositi,e part of (hich readsF A@J$J15$J, the judgment appealed from is affirmed insofar as it orders defendant 1ilipino /erchants )nsurance Company to pay the plaintiff the sum of P% ,%+3.+& (ith interest at legal rate from the date of filing of the complaint, and is modified (ith respect to the third party complaint in that D E third party defendant J. $azon, )nc. is ordered to reimburse third party plaintiff the sum of P&%,86 .3* (ith legal interest from the date of payment until the date of reimbursement, and D&E the third"party complaint against third party defendant Compagnie /aritime Bes Chargeurs $eunis is dismissed. 1 .he facts as found by the trial court and adopted by the Court of Appeals are as follo(sF .his is an action brought by the consignee of the shipment of fishmeal loaded on board the ,essel 44 -ougain,ille and unloaded at the Port of /anila on or about Becember , 96+ and seeks to reco,er from the defendant insurance company the amount of P% ,%+3.+& representing damages to said shipment (hich has been insured by the defendant insurance company under Policy =o. /"&+63. .he defendant brought a third party complaint against third party defendants Compagnie /aritime Bes Chargeurs $eunis andSor J. $azon, )nc. seeking judgment against the third DsicE defendants in case Judgment is rendered against the third party plaintiff. )t appears from the e,idence presented that in Becember 96+, plaintiff insured said shipment (ith defendant insurance company under said cargo Policy =o. /"&+63 for the sum of P&+6,+%!.%9 for the goods described as +** metric tons of fishmeal in ne( gunny bags of 9* kilos each from -angkok, .hailand to /anila against all risks under (arehouse to (arehouse terms. Actually, (hat (as imported (as %9.98* metric tons not +** tons at c!9%.8& a ton C=1 /anila. .he fishmeal in +++ ne( gunny bags (ere unloaded from the ship on Becember , 96+ at /anila unto the arrastre contractor J. $azon, )nc. and defendantLs sur,eyor ascertained and certified that in such discharge *% bags (ere in bad order condition as jointly sur,eyed by the shipLs agent and the arrastre contractor. .he condition of the bad order (as reflected in the turn o,er sur,ey report of -ad 5rder cargoes =os. &*!&* to &*!&&, as J?hibit C"8 consisting of three D!E pages (hich are also J?hibits 8, % and +" $azon. .he cargo (as also sur,eyed by the arrastre contractor before deli,ery of the cargo to the consignee

and the condition of the cargo on such deli,ery (as reflected in J. $azonLs -ad 5rder Certificate =o. 83%9, 83+! and 83+9 co,ering a total of &&6 bags in bad order condition. BefendantLs sur,eyor has conducted a final and detailed sur,ey of the cargo in the (arehouse for (hich he prepared a sur,ey report J?hibit 1 (ith the findings on the e?tent of shortage or loss on the bad order bags totalling &&6 bags amounting to &, 83 kilos, J?hibit 1" . -ased on said computation the plaintiff made a formal claim against the defendant 1ilipino /erchants )nsurance Company for P% ,%+3.+& DJ?hibit CE the computation of (hich claim is contained therein. A formal claim statement (as also presented by the plaintiff against the ,essel dated Becember & , 96+, J?hibit -, but the defendant 1ilipino /erchants )nsurance Company refused to pay the claim. Conse>uently, the plaintiff brought an action against said defendant as ad,erted to abo,e and defendant presented a third party complaint against the ,essel and the arrastre contractor. 2 .he court belo(, after trial on the merits, rendered judgment in fa,or of pri,ate respondent, the decretal portion (hereof readsF A@J$J15$J, on the main complaint, judgment is hereby rendered in fa,or of the plaintiff and against the defendant 1ilipino /erchantLs DsicE )nsurance Co., ordering the defendants to pay the plaintiff the follo(ing amountF .he sum of P% ,%+3.+& (ith interest at legal rate from the date of the filing of the complaintH 5n the third party complaint, the third party defendant Compagnie /aritime Bes Chargeurs $eunis and third party defendant J. $azon, )nc. are ordered to pay to the third party plaintiff jointly and se,erally reimbursement of the amounts paid by the third party plaintiff (ith legal interest from the date of such payment until the date of such reimbursement. Aithout pronouncement as to costs. 3 5n appeal, the respondent court affirmed the decision of the lo(er court insofar as the a(ard on the complaint is concerned and modified the same (ith regard to the adjudication of the third"party complaint. A motion for reconsideration of the aforesaid decision (as denied, hence this petition (ith the follo(ing assignment of errorsF . .he Court of Appeals erred in its interpretation and application of the 'all risks' clause of the marine insurance policy (hen it held the petitioner liable to the pri,ate respondent for the partial loss of the cargo, not(ithstanding the clear absence of proof of some fortuitous e,ent, casualty, or accidental cause to (hich the loss is attributable, thereby contradicting the ,ery precedents cited by it in its decision as (ell as a prior decision of the same Bi,ision of the said court Dthen composed of Justices Cacdac, Castro"-artolome, and Prono,eEH &. .he Court of Appeals erred in not holding that the pri,ate respondent had no insurable interest in the subject cargo, hence, the marine insurance policy taken out by pri,ate respondent is null and ,oidH

!. .he Court of Appeals erred in not holding that the pri,ate respondent (as guilty of fraud in not disclosing the fact, it being bound out of utmost good faith to do so, that it had no insurable interest in the subject cargo, (hich bars its reco,ery on the policy. 9 5n the first assignment of error, petitioner contends that an 'all risks' marine policy has a technical meaning in insurance in that before a claim can be compensable it is essential that there must be 'some fortuity, ' 'casualty' or 'accidental cause' to (hich the alleged loss is attributable and the failure of herein pri,ate respondent, upon (hom lay the burden, to adduce e,idence sho(ing that the alleged loss to the cargo in >uestion (as due to a fortuitous e,ent precludes his right to reco,er from the insurance policy. Ae find said contention untenable. .he 'all risks clause' of the )nstitute Cargo Clauses read as follo(sF %. .his insurance is against all risks of loss or damage to the subject"matter insured but shall in no case be deemed to e?tend to co,er loss, damage, or e?pense pro?imately caused by delay or inherent ,ice or nature of the subject"matter insured. Claims reco,erable hereunder shall be payable irrespecti,e of percentage. 8 An 'all risks policy' should be read literally as meaning all risks (hatsoe,er and co,ering all losses by an accidental cause of any kind. .he terms 'accident' and 'accidental', as used in insurance contracts, ha,e not ac>uired any technical meaning. .hey are construed by the courts in their ordinary and common acceptance. .hus, the terms ha,e been taken to mean that (hich happens by chance or fortuitously, (ithout intention and design, and (hich is une?pected, unusual and unforeseen. An accident is an e,ent that takes place (ithout oneLs foresight or e?pectationH an e,ent that proceeds from an unkno(n cause, or is an unusual effect of a kno(n cause and, therefore, not e?pected. A .he ,ery nature of the term 'all risks' must be gi,en a broad and comprehensi,e meaning as co,ering any loss other than a (illful and fraudulent act of the insured. @ .his is pursuant to the ,ery purpose of an 'all risks' insurance to gi,e protection to the insured in those cases (here difficulties of logical e?planation or some mystery surround the loss or damage to property. 8 An 'all asks' policy has been e,ol,ed to grant greater protection than that afforded by the 'perils clause,' in order to assure that no loss can happen through the incidence of a cause neither insured against nor creating liability in the shipH it is (ritten against all losses, that is, attributable to e?ternal causes. 9 .he term 'all risks' cannot be gi,en a strained technical meaning, the language of the clause under the )nstitute Cargo Clauses being une>ui,ocal and clear, to the effect that it e?tends to all damagesSlosses suffered by the insured cargo e?cept DaE loss or damage or e?pense pro?imately caused by delay, and DbE loss or damage or e?pense pro?imately caused by the inherent ,ice or nature of the subject matter insured. #enerally, the burden of proof is upon the insured to sho( that a loss arose from a co,ered peril, but under an 'all risks' policy the burden is not on the insured to pro,e the precise cause of loss or damage for (hich it seeks compensation. .he insured under an 'all risks insurance policy' has the initial burden of pro,ing that the cargo (as in good condition (hen the policy attached and that the cargo (as damaged (hen unloaded from the ,esselH thereafter, the burden then shifts to the insurer to sho( the e?ception to the co,erage. 10 As (e held in Paris%anila Perfumer+ Co. vs. P)oeni5 Assurance Co., Ltd. 11 the basic rule is that the insurance company has the burden of pro,ing that the loss is caused by the risk e?cepted and for (ant of such proof, the company is liable. Co,erage under an 'all risks' pro,ision of a marine insurance policy creates a special type of insurance (hich e?tends

co,erage to risks not usually contemplated and a,oids putting upon the insured the burden of establishing that the loss (as due to the peril falling (ithin the policyLs co,erageH the insurer can a,oid co,erage upon demonstrating that a specific pro,ision e?pressly e?cludes the loss from co,erage. 12 A marine insurance policy pro,iding that the insurance (as to be 'against all risks' must be construed as creating a special insurance and e?tending to other risks than are usually contemplated, and co,ers all losses e?cept such as arise from the fraud of the insured. 13 .he burden of the insured, therefore, is to pro,e merely that the goods he transported ha,e been lost, destroyed or deteriorated. .hereafter, the burden is shifted to the insurer to pro,e that the loss (as due to e?cepted perils. .o impose on the insured the burden of pro,ing the precise cause of the loss or damage (ould be inconsistent (ith the broad protecti,e purpose of 'all risks' insurance. )n the present case, there being no sho(ing that the loss (as caused by any of the e?cepted perils, the insurer is liable under the policy. As aptly stated by the respondent Court of Appeals, upon due consideration of the authorities and jurisprudence it discussed Q ... it is belie,ed that in the absence of any sho(ing that the lossesSdamages (ere caused by an e?cepted peril, i.e. delay or the inherent ,ice or nature of the subject matter insured, and there is no such sho(ing, the lo(er court did not err in holding that the loss (as co,ered by the policy. .here is no e,idence presented to sho( that the condition of the gunny bags in (hich the fishmeal (as packed (as such that they could not hold their contents in the course of the necessary transit, much less any e,idence that the bags of cargo had burst as the result of the (eakness of the bags themsel,es. @ad there been such a sho(ing that spillage (ould ha,e been a certainty, there may ha,e been good reason to plead that there (as no risk co,ered by the policy D4ee -erk ,s. 4tyle : 9%+; cited in /arine )nsurance Claims, I*id, p. &%E. <nder an Lall risksL policy, it (as sufficient to sho( that there (as damage occasioned by some accidental cause of any kind, and there is no necessity to point to any particular cause. 19 Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. .he agreement has the force of la( bet(een the parties. .he terms of the policy constitute the measure of the insurerLs liability. )f such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense. 18 Anent the issue of insurable interest, (e uphold the ruling of the respondent court that pri,ate respondent, as consignee of the goods in transit under an in,oice containing the terms under 'C K 1 /anila,' has insurable interest in said goods. 4ection ! of the )nsurance Code defines insurable interest in property as e,ery interest in property, (hether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured. )n principle, anyone has an insurable interest in property (ho deri,es a benefit from its e?istence or (ould suffer loss from its destruction (hether he has or has not any title in, or lien upon or possession of the property y. 1A )nsurable interest in property may consist in DaE an e?isting interestH DbE an inchoate interest founded on an e?isting interestH or DcE an e?pectancy, coupled (ith an e?isting interest in that out of (hich the e?pectancy arises. 1@ @erein pri,ate respondent, as ,endeeSconsignee of the goods in transit has such e?isting interest therein as may be the subject of a ,alid contract of insurance. @is interest o,er the goods is based on the perfected contract of sale. 18 .he perfected contract of sale bet(een him and the shipper of the goods operates to ,est in him an e>uitable title e,en before

deli,ery or before be performed the conditions of the sale. 19 .he contract of shipment, (hether under 1.5.-., C.).1., or C. K 1. as in this case, is immaterial in the determination of (hether the ,endee has an insurable interest or not in the goods in transit. .he perfected contract of sale e,en (ithout deli,ery ,ests in the ,endee an e>uitable title, an e?isting interest o,er the goods sufficient to be the subject of insurance. 1urther, Article %&! of the Ci,il Code pro,ides that (here, in pursuance of a contract of sale, the seller is authorized or re>uired to send the goods to the buyer, deli,ery of the goods to a carrier, (hether named by the buyer or not, for, the purpose of transmission to the buyer is deemed to be a deli,ery of the goods to the buyer, the e?ceptions to said rule not obtaining in the present case. .he Court has heretofore ruled that the deli,ery of the goods on board the carrying ,essels partake of the nature of actual deli,ery since, from that time, the foreign buyers assumed the risks of loss of the goods and paid the insurance premium co,ering them. 20 C K 1 contracts are shipment contracts. .he term means that the price fi?ed includes in a lump sum the cost of the goods and freight to the named destination. 21 )t simply means that the seller must pay the costs and freight necessary to bring the goods to the named destination but the risk of loss or damage to the goods is transferred from the seller to the buyer (hen the goods pass the shipLs rail in the port of shipment. 22 /oreo,er, the issue of lack of insurable interest (as not among the defenses a,erred in petitioners ans(er. )t (as neither an issue agreed upon by the parties at the pre"trial conference nor (as it raised during the trial in the court belo(. )t is a settled rule that an issue (hich has not been raised in the court a 8uo cannot be raised for the first time on appeal as it (ould be offensi,e to the basic rules of fair play, justice and due process. 23 .his is but a permuted restatement of the long settled rule that (hen a party deliberately adopts a certain theory, and the case is tried and decided upon that theory in the court belo(, he (ill not be permitted to change his theory on appeal because, to permit him to do so, (ould be unfair to the ad,erse party. 29 )f despite the fundamental doctrines just stated, (e ne,ertheless decided to indite a dis>uisition on the issue of insurable interest raised by petitioner, it (as to put at rest all doubts on the matter under the facts in this case and also to dispose of petitionerLs third assignment of error (hich conse>uently needs no further discussion. A@J$J15$J, the instant petition is BJ=)JB and the assailed decision of the respondent Court of Appeals is A11)$/JB in toto. 45 5$BJ$JB.

G.R. No. 129080 Jun, 19, 199@ %A'ER "TEE! PIPE CORPORATION an# 7ONG<ONG GOVERN%ENT "UPP!IE" &EPART%ENT, petitioners, ,s. COURT O APPEA!", "OUT7 "EA "URET' AN& IN"URANCE CO., INC. an# /3, C7ARTER IN"URANCE CORPORATION, respondents.

. the sum e>ui,alent in Philippine currency of @Yc&99,!8%.!*, (ith legal rate of interest as of the filing of the complaintH &. P **,***.** as and for attorneyLs feesH and !. costs of suit. 45 5$BJ$JB. 8 Pri,ate respondents ele,ated the case to respondent Court of Appeals. $espondent court affirmed the finding of the trial court that the damage is not due to factory defect and that it (as co,ered by the 'all risks' insurance policies issued by pri,ate respondents to petitioner /ayer. @o(e,er, it set aside the decision of the trial court and dismissed the complaint on the ground of prescription. )t held that the action is barred under 4ection !D+E of the Carriage of #oods by 4ea Act since it (as filed only on April 6, 93+, more than t(o years from the time the goods (ere unloaded from the ,essel. 4ection !D+E of the Carriage of #oods by 4ea Act pro,ides that 'the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought (ithin one year after deli,ery of the goods or the date (hen the goods should ha,e been deli,ered.' $espondent court ruled that this pro,ision applies not only to the carrier but also to the insurer, citing Filipino %erc)ants Insurance Co., Inc. v. Ale(andro. A @ence this petition (ith the follo(ing assignments of errorF . .he respondent Court of Appeals erred in holding that petitionersL cause of action had already prescribed on the mistaken application of the Carriage of #oods by 4ea Act and the doctrine of 1ilipino /erchants Co., )nc. ,. Alejandro D 8% 4C$A 8&EH and &. .he respondent Court of Appeals committed an error in dismissing the complaint. @ .he petition is impressed (ith merit. $espondent court erred in applying 4ection !D+E of the Carriage of #oods by 4ea Act. 4ection !D+E of the Carriage of #oods by 4ea Act states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed (ithin one year after deli,ery of the goods or the date (hen they should ha,e been deli,ered. <nder this pro,ision, only the carrierLs liability is e?tinguished if no suit is brought (ithin one year. -ut the liability of the insurer is not e?tinguished because the insurerLs liability is based not on the contract of carriage but on the contract of insurance. A close reading of the la( re,eals that the Carriage of #oods by 4ea Act go,erns the relationship bet(een the carrier on the one hand and the shipper, the consignee andSor the insurer on the other hand. )t defines the obligations of the carrier under the contract of carriage. )t does not, ho(e,er, affect the relationship bet(een the shipper and the insurer. .he latter case is go,erned by the )nsurance Code. 5ur ruling in Filipino %erc)ants Insurance Co., Inc. v. Ale(andro 8 and the other cases 9 cited therein does not support respondent courtLs ,ie( that the insurerLs liability prescribes after one year if no action for indemnity is filed against the carrier or the insurer. )n that case, the shipper filed a complaint against the insurer for reco,ery of a sum of money as indemnity for the loss and damage sustained by the insured goods. .he insurer, in turn, filed a third"party complaint against the carrier for reimbursement of the amount it paid to the shipper. .he insurer filed the third"party complaint on January 9, 963, more than one year after deli,ery of the goods on Becember 6, 966. .he court held that the insurer (as already barred from filing a claim against the carrier because under the Carriage of #oods by 4ea Act, the suit against the carrier must be filed (ithin one year after deli,ery of the goods or the date (hen the goods should ha,e been deli,ered. .he

PUNO, J.: .his is a petition for re,ie( on certiorari to annul and set aside the Becision of respondent Court of Appeals dated Becember 8, 99% 1 and its $esolution dated 1ebruary &&, 99+ 2 in CA" #.$. CV =o. 8%3*% entitled %a+er &teel Pipe Corporation and !ong6ong @overnment &upplies Department v. &out) &ea &uret+ Insurance Co., Inc. and .he Charter )nsurance Corporation. 3 )n 93!, petitioner @ongkong #o,ernment 4upplies Bepartment D@ongkongE contracted petitioner /ayer 4teel Pipe Corporation D/ayerE to manufacture and supply ,arious steel pipes and fittings. 1rom August to 5ctober, 93!, /ayer shipped the pipes and fittings to @ongkong as e,idenced by )n,oice =os. /4PC" * 8, /4PC" * %, /4PC" *&%, /4PC" *&*, /4PC" * 6 and /4PC" *&&. 9 Prior to the shipping, petitioner /ayer insured the pipes and fittings against all risks (ith pri,ate respondents 4outh 4ea 4urety and )nsurance Co., )nc. D4outh 4eaE and Charter )nsurance Corp. DCharterE. .he pipes and fittings co,ered by )n,oice =os. /4PC" * 8, * % and *&% (ith a total amount of <4c& &,66&.*9 (ere insured (ith respondent 4outh 4ea, (hile those co,ered by )n,oice =os. *&*, * 6 and *&& (ith a total amount of <4c 89,86*.** (ere insured (ith respondent Charter. Petitioners /ayer and @ongkong jointly appointed )ndustrial )nspection D)nternationalE )nc. as third"party inspector to e?amine (hether the pipes and fittings are manufactured in accordance (ith the specifications in the contract. )ndustrial )nspection certified all the pipes and fittings to be in good order condition before they (ere loaded in the ,essel. =onetheless, (hen the goods reached @ongkong, it (as disco,ered that a substantial portion thereof (as damaged. Petitioners filed a claim against pri,ate respondents for indemnity under the insurance contract. $espondent Charter paid petitioner @ongkong the amount of @Yc+8,9*8.6%. Petitioners demanded payment of the balance of @Yc&99,!8%.!* representing the cost of repair of the damaged pipes. Pri,ate respondents refused to pay because the insurance sur,eyorLs report allegedly sho(ed that the damage is a factory defect. 5n April 6, 93+, petitioners filed an action against pri,ate respondents to reco,er the sum of @Yc&99,!8%.!*. 1or their defense, pri,ate respondents a,erred that they ha,e no obligation to pay the amount claimed by petitioners because the damage to the goods is due to factory defects (hich are not co,ered by the insurance policies. .he trial court ruled in fa,or of petitioners. )t found that the damage to the goods is not due to manufacturing defects. )t also noted that the insurance contracts e?ecuted by petitioner /ayer and pri,ate respondents are 'all risks' policies (hich insure against all causes of concei,able loss or damage. .he only e?ceptions are those e?cluded in the policy, or those sustained due to fraud or intentional misconduct on the part of the insured. .he dispositi,e portion of the decision statesF A@J$J15$J, judgment is hereby rendered ordering the defendants jointly and se,erally, to pay the plaintiffs the follo(ingF

court said that 'the co,erage of the Act includes the insurer of the goods.' 10 .he 1ilipino /erchants case is different from the case at bar. )n 1ilipino /erchants, it (as the insurer (hich filed a claim against the carrier for reimbursement of the amount it paid to the shipper. )n the case at bar, it (as the shipper (hich filed a claim against the insurer. .he basis of the shipperLs claim is the 'all risks' insurance policies issued by pri,ate respondents to petitioner /ayer. .he ruling in 1ilipino /erchants should apply only to suits against the carrier filed either by the shipper, the consignee or the insurer. Ahen the court said in 1ilipino /erchants that 4ection !D+E of the Carriage of #oods by 4ea Act applies to the insurer, it meant that the insurer, like the shipper, may no longer file a claim against the carrier beyond the one"year period pro,ided in the la(. -ut it does not mean that the shipper may no longer file a claim against the insurer because the basis of the insurerLs liability is the insurance contract. An insurance contract is a contract (hereby one party, for a consideration kno(n as the premium, agrees to indemnify another for loss or damage (hich he may suffer from a specified peril. 11 An 'all risks' insurance policy co,ers all kinds of loss other than those due to (illful and fraudulent act of the insured. 12 .hus, (hen pri,ate respondents issued the 'all risks' policies to petitioner /ayer, they bound themsel,es to indemnify the latter in case of loss or damage to the goods insured. 4uch obligation prescribes in ten years, in accordance (ith Article 88 of the =e( Ci,il Code. 13 )= V)JA A@J$J51, the petition is #$A=.JB. .he Becision of respondent Court of Appeals dated Becember 8, 99% and its $esolution dated 1ebruary &&, 99+ are hereby 4J. A4)BJ and the Becision of the $egional .rial Court is hereby $J)=4.A.JB. =o costs. 45 5$BJ$JB.

G.R. No. !(A@838 O5/o>,r 12, 198@ %A!A'AN IN"URANCE CO., INC. F%ICOG, petitioner, ,s. GREGORIA CRUZ ARNA!&O, *n 3,r 5a0a5*/y a4 /3, IN"URANCE CO%%I""IONER, an# CORONACION PINCA, respondents.

.he records sho( that notice of the decision of the public respondent dated April %, 93&, (as recei,ed by /)C5 on April *, 93&. 8 5n April &%, 93&, it filed a motion for reconsideration, (hich (as denied on June 8, 93&. 9 =otice of this denial (as recei,ed by /)C5 on June !, 93&, as e,idenced by Anne? ' ' duly authenticated by the )nsurance Commission. 10 .he instant petition (as filed (ith this Court on July &, 93&. 11 .he position of the petition is that the petition is go,erned by 4ection 8 + *f the )nsurance Code gi,ing it thirty days (thin (hich to appeal by certiorari to this Court. Alternati,ely, it also in,okes $ule 8% of the $ules of Court. 1or their part, the public and pri,ate respondents insist that the applicable la( is -.P. &9, (hich they say go,erns not only courts of justice but also >uasi"judicial bodies like the )nsurance Commission. .he period for appeal under this la( is also fifteen days, as under $ule 8%. .he pi,otal date is the date the notice of the denial of the motion for reconsideration (as recei,ed by /)C5. /)C5 a,ers this (as June 3, 93&, and offers in e,idence its Anne? '-,' 12 (hich is a copy of the 5rder of June 8, 93&, (ith a signed rubber"stamped notation on the upper left"hand corner that it (as recei,ed on June 3, 93&, by its legal department. )t does not indicate from (hom. At the bottom, significantly, there is another signature under (hich are the ciphers '+" !"3&,' for (hich no e?planation has been gi,en. Against this document, the pri,ate respodent points in her Anne? ' ,' 13 the authenticated copy of the same 5rder (ith a rubber"stamped notation at the bottom thereof indicating that it (as recei,ed for the /alayan )nsurance Co., )nc. by J. #otladera on '+" !"3&.' .he signature may or may not habe been (ritten by the same person (ho signed at the bottom of the petitionerLs Anne? '-.' -et(een the t(o dates, the court chooses to belie,e June !, 93&, not only because the numbers '+" !"3&' appear on both anne?es but also because it is the date authenticated by the administrati,e di,ision of the )nsurance Commission. Anne? '-' is at (orst self"ser,ingH at best, it might only indicate that it (as recei,ed on June 3, 93&, by the legal department of /)C5, after it had been recei,ed earlier by some other of its personnel on June !, 93&. Ahate,er the reason for the delay in transmitting it to the legal department need not detain us here. <nder 4ection 8 + of the )nsurance Code, the period for appeal is thirty days from notice of the decision of the )nsurance Commission. .he petitioner filed its motion for reconsideration on April &%, 93 , or fifteen days such notice, and the reglementary period began to run again after June !, 93 , date of its receipt of notice of the denial of the said motion for reconsideration. As the herein petition (as filed on July &, 93 , or nineteen days later, there is no >uestion that it is tard+ *+ four da+s. Counted from June !, the fifteen"day period prescribed under $ule 8%, assuming it is applicable, (ould end on June &3, 93&, or also four da+s from July &, (hen the petition (as filed. )f it (as filed under -.P. &9, then, considering that the motion for reconsideration (as filed on the fifteenth day after /)C5 recei,ed notice of the decision, only one more day (ould ha,e remained for it to appeal, to (it, June 8, 93&. .hat (ould make the petition eig)teen da+s late by July &. )ndeed, e,en if the applicable la( (ere still $.A. %8!8, go,erning appeals from administrati,e bodies, the petition (ould still be tardy. .he la( pro,ides for a fi?ed period of ten days from notice of the denial of a seasonable motion for reconsideration (ithin (hich to appeal from the decision. Accordingly, that ten"day period, counted from June !, 93&, (ould ha,e ended on June &!, 93&, making the petition filed on July &, 93&, nine da+s late.

CRUZ, J.: Ahen a personLs house is razed, the fire usually burns do(n the efforts of a lifetime and forecloses hope for the suddenly somber future. .he ,anished abode becomes a charred and painful memory. Ahere once stood a home, there is no(, in the sighing (isps of smoke, only a gray desolation. .he dying embers lea,e ashes in the heart. 1or peace of mind and as a hedge against possible loss, many people no( secure fire insurance. .his is an aleatory contract. -y such insurance, the insured in effect (agers that his house (ill be burned, (ith the insurer assuring him against the loss, for a fee. )f the house does burn, the insured, (hile losing his house, (ins the (agers. .he prize is the recompense to be gi,en by the insurer to make good the loss the insured has sustained. )t (ould be a pity then if, ha,ing lost his house, the insured (ere also to lose the payment he e?pects to reco,er for such loss. 4ometimes it is his fault that he cannot collect, as (here there is a defect imputable to him in the insurance contract. Con,ersely, the reason may be an unjust refusal of the insurer to ackno(ledge a just obligation, as has happened many times. )n the instant case the pri,ate respondent has been sustained by the )nsurance Commission in her claim for compensation for her burned property. .he petitioner is no( before us to dispute the decision, 1 on the ground that there (as no ,alid insurance contract at the time of the loss. .he chronology of the rele,ant antecedent facts is as follo(sF 5n June 6, 93 , the petitioner Dhereinafter called D/)C5E issued to the pri,ate respondent, Coronacion Pinca, 1ire )nsurance Policy =o. 1"** " 6& & on her property for the amount of P 8,***.** effecti,e July &&, 93 , until July &&, 93&. 2 5n 5ctober %, 93 , /)C5 allegedly cancelled the policy for non"payment, of the premium and sent the corresponding notice to Pinca. 3 5n Becember &8, 93 , payment of the premium for Pinca (as recei,ed by BomingoAdora, agent of /)C5. 9 5n January %, 93&, Adora remitted this payment to /)C5,together (ith other payments. 8 5n January burned. A 3, 93&, PincaLs property (as completely

5n 1ebruary %, 93&, PincaLs payment (as returned by /)C5 to Adora on the ground that her policy had been cancelled earlier. -ut Adora refused to accept it. @ )n due time, Pinca made the re>uisite demands for payment, (hich /)C5 rejected. 4he then (ent to the )nsurance Commission. )t is because she (as ultimately sustained by the public respondent that the petitioner has come to us for relief. 1rom the procedural ,ie(point alone, the petition must be rejected. )t is stillborn.

Ahiche,er la( is applicable, therefore, the petition can and should be dismissed for late filing. 5n the merits, it must also fail. /)C5Ls arguments that there (as no payment of premium and that the policy had been cancelled before the occurence of the loss are not acceptable. )ts contention that the claim (as allo(ed (ithout proof of loss is also untenable. .he petitioner relies hea,ily on 4ection 66 of the )nsurance Code pro,iding thatF 4JC. 66. An insurer is entitled to payment of the premium as soon as the thing is e?posed to the peril insured against. =ot(ithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is ,alid and binding unless and until the premium thereof has been paid, e?cept in the case of a life or an industrial life policy (hene,er the grace period pro,ision applies. .he abo,e pro,ision is not applicable because payment of the premium (as in fact e,entually made in this case. =otably, the premium in,oice issued to Pinca at the time of the deli,ery of the policy on June 6, 93 (as stamped 'Payment $ecei,ed' of the amoung of P9!*.+* on ' &"&8"3 ' by Bomingo Adora. 19 .his is important because it suggests an understanding bet(een /)C5 and the insured that such payment could be made later, as agent Adora had assured Pinca. )n any e,ent, it is not denied that this payment (as actually made by Pinca to Adora, (ho remitted the same to /)C5. .he payment (as made on Becember &8, 93 , and the fire occured on January 3, 93&. 5ne (ondersF suppose the payment had been made and accepted in, say, August 93 , (ould the commencement date of the policy ha,e been changed to the date of the payment, or (ould the payment ha,e retroacted to July &&, 93 N )f /)C5 accepted the payment in Becember 93 and the insured property had not been burned, (ould that policy not ha,e e?pired just the same on July &&, 93&, pursuant to its original terms, and not on Becember &8, 93&N )t (ould seem from /)C5Ls o(n theory, that the policy (ould ha,e become effecti,e only upon payment, if accepted and so (ould ha,e been ,alid only from Becember &8, 93 m but only up to July &&, 93 , according to the original terms. )n others (ords, the policy (ould ha,e run for only eight months although the premium paid (as for one (hole year. )t is not disputed that the preium (as actually paid by Pinca to Adora on Becember &8, 93 , (ho recei,ed it on behalf of /)C5, to (hich it (as remitted on January %, 93&. Ahat is >uestioned is the ,alidity of PincaLs payment and of AdoraLs authority to recei,e it. /)C5Ls ackno(ledgment of Adora as its agent defeats its contention that he (as not authorized to recei,e the premium payment on its behalf. )t is clearly pro,ided in 4ection !*+ of the )nsurance Code thatF 4JC. !*+. ??? ??? ??? Any insurance company (hich deli,ers to an insurance agant or insurance broker a policy or contract of insurance shall be demmed to ha,e authorized such agent or broker to recei,e on its behalf payment of any premium (hich is due on such policy or contract of insurance at the time of its issuance or deli,ery or (hich becomes due thereon. And it is a (ell"kno(n principle under the la( of agency thatF

Payment to an agent ha,ing authority to recei,e or collect payment is e>ui,alent to payment to the principal himselfH such payment is complete (hen the money deli,ered is into the agentLs hands and is a discharge of the indebtedness o(ing to the principal. 18 .here is the petitionerLs argument, ho(e,er, that Adora (as not authorized to accept the premium payment because si? months had elapsed since the issuance by the policy itself. )t is argued that this prohibition (as binding upon Pinca, (ho made the payment to Adora at her o(n riskl as she (as bound to first check his authority to recei,e it. 1A /)C5 is taking an inconsistent stand. Ahile contending that acceptance of the premium payment (as prohibited by the policy, it at the same time insists that the policy ne,er came into force because the premium had not been paid. 5ne surely, cannot ha,e his cake and eat it too. Ae do not share /)C5Ls ,ie( that there (as no e?isting insurance at the time of the loss sustained by Pinca because her policy ne,er became effecti,e for non"payment of premium. Payment (as in fact made, rendering the policy operati,e as of June &&, 93 , and remo,ing it from the pro,isions of Article 66, .hereafter, the policy could be cancelled on any of the super,ening grounds enumerated in Article +8 De?cept 'nonpayment of premium'E pro,ided the cancellation (as made in accordance there(ith and (ith Article +%. 4ection +8 reads as follo(sF 4JC. +8. =o policy of insurance other than life shall be cancelled by the insurer e?cept upon prior notice thereof to the insured, and no notice of cancellation shall be effecti,e unless it is based on the occurrence, after the effecti,e date of the policy, of one or more of the follo(ingF DaE non"payment of premiumH DbE con,iction of a crime arising out of acts increasing the hazard insured againstH DcE disco,ery of misrepresentationH fraud or material

DdE disco,ery of (illful, or reckless acts or commissions increasing the hazard insured againstH DeE physical changes in the property insured (hich result in the property becoming uninsurableHor DfE a determination by the Commissioner that the continuation of the policy (ould ,iolate or (ould place the insurer in ,iolation of this Code. As for the method of cancellation, 4ection +% pro,ides as follo(sF 4JC. +%. All notices of cancellation mentioned in the preceding section shall be in (riting, mailed or deli,ered to the named insured at the address sho(n in the policy, and shall state DaE (hich of the grounds set forth in section si?ty"four is relied upon and DbE that, upon (ritten re>uest of the named insured, the insurer (ill furnish the facts on (hich the cancellation is based. A ,alid cancellation must, therefore, re>uire concurrence of the follo(ing conditionsF

D E .here must be prior notice of cancellation to the insuredH 1@ D&E .he notice must be based on the occurrence, after the effecti,e date of the policy, of one or more of the grounds mentionedH18 D!E .he notice must be DaE in (riting, DbE mailed, or deli,ered to the named insured, DcE at the address sho(n in the policyH 19 D8E )t must state DaE (hich of the grounds mentioned in 4ection +8 is relied upon and DbE that upon (ritten re>uest of the insured, the insurer (ill furnish the facts on (hich the cancellation is based. 20 /)C5Ls claims it cancelled the policy in >uestion on 5ctober %, 93 , for non"payment of premium. .o support this assertion, it presented one of its employees, (ho testified that 'the original of the endorsement and credit memo' Q presumably meaning the alleged cancellation Q '(ere sent the assured by mail through our mailing section' 21 @o(e,er, there is no proof that the notice, assuming it complied (ith the other re>uisites mentioned abo,e, (as actually mailed to and recei,ed by Pinca. All /)C5Ls offers to sho( that the cancellation (as communicated to the insured is its employeeLs testimony that the said cancellation (as sent 'by mail through our mailing section.' (ithout more. .he petitioner then says that its 'stand is ener,ated DsicE by the legal presumption of regularity and due performance of duty.' 22Dnot realizing perhaps that 'ener,ated' means 'debilitated' not 'strengthened'E. 5n the other hand, there is the flat denial of Pinca, (ho says she ne,er recei,ed the claimed cancellation and (ho, of course, did not ha,e to pro,e such denial Considering the strict language of 4ection +8 that no insurance policy shall be cancelled e?cept upon prior notice, it behoo,ed /)C5Ls to make sure that the cancellation (as actually sent to and recei,ed by the insured. .he presumption cited is una,ailing against the positi,e duty enjoined by 4ection +8 upon /)C5 and the flat denial made by the pri,ate respondent that she had recei,ed notice of the claimed cancellation. )t stands to reason that if Pinca had really recei,ed the said notice, she (ould not ha,e made payment on the original policy on Becember &8, 93 . )nstead, she (ould ha,e asked for a ne( insurance, effecti,e on that date and until one year later, and so taken ad,antage of the e?tended period. .he Court finds that if she did pay on that date, it (as because she honestly belie,ed that the policy issued on June 6, 93 , (as still in effect and she (as (illing to make her payment retroact to July &&, 93 , its stipulated commencement date. After all, agent Adora (as ,ery accomodating and had earlier told her 'to call him up any time' she (as ready (ith her payment on the policy earlier issued. 4he (as ob,iously only reciprocating in kind (hen she paid her premium for the period beginning July &&, 93 , and not Becember &8, 93 . /)C5Ls suggests that Pinca kne( the policy had already been cancelled and that (hen she paid the premium on Becember &8, 93 , her purpose (as 'to rene( it.' As this could not be done by the agent alone under the terms of the original policy, the rene(al thereof did not legally bind /)C5. (hich had not ratified it. .o support this argument, /)C5Ls cites the follo(ing e?changeF 7F =o(, /adam Aitness, on Becember &%th you made the alleged payment. =o(, my >uestion is that, did it not come to your mind that after the lapse of si? D+E months, your policy (as cancelledN AF ) ha,e thought of that but the agent told me to call him up at anytime.

7F 4o if you thought that your policy (as already intended to re,i,e cancelled policyN AF /isleading, Oour @onor. @earing 5fficerF .he testimony of (itness is that, she thought of that. 7F ) (ill re,ise the >uestion. =o(, /rs. Aitness, you stated that you thought the policy (as cancelled. =o(, (hen you made the payment of Becember &8, 93 , your intention (as to re,i,e the policy if it (as already cancelledN AF Oes, to rene( it. 23 A close study of the abo,e transcript (ill sho( that Pinca meant to rene( the policy if it had really been already cancelled but not if it (as stffl effecti,e. )t (as all conditional. As it has not been sho(n that there (as a ,alid cancellation of the policy, there (as conse>uently no need to rene( it but to pay the premium thereon. Payment (as thus legally made on the original transaction and it could be, and (as, ,alidly recei,ed on behalf of the insurer by its agent Adora. Adora. incidentally, had not been informed of the cancellation either and sa( no reason not to accept the said payment. .he last point raised by the petitioner should not pose much difficulty. .he ,aluation fi?ed in fire insurance policy is conclusi,e in case of total loss in the absence of fraud, 29 (hich is not sho(n here. 2oss and its amount may be determined on the basis of such proof as may be offered by the insured, (hich need not be of such persuasi,eness as is re>uired in judicial proceedings. 28 )f, as in this case, the insured files notice and preliminary proof of loss and the insurer fails to specify to the former all the defects thereof and (ithout unnecessary delay, all objections to notice and proof of loss are deemed (ai,ed under 4ection 9* of the )nsurance Code. .he certification 2A issued by the )ntegrated =ational Police, 2ao"ang, 4amar, as to the e?tent of PincaLs loss should be considered sufficient. =otably,/)C5 submitted no e,idence to the contrary nor did it e,en >uestion the e?tent of the loss in its ans(er before the )nsurance Commission. )t is also (orth obser,ing that PincaLs property (as not the only building bumed in the fire that razed the commercial district of 2ao"ang, 4amar, on January 3, 93&. 2@ .here is nothing in the )nsurance Code that makes the participation of an adjuster in the assessment of the loss imperati,e or indespensable, as /)C5 suggests. 4ection !&%, (hich it cites, simply speaks of the licensing and duties of adjusters. Ae see in this cases an ob,ious design to e,ade or at least delay the discharge of a just obligation through efforts bordering on bad faith if not plain duplicity, Ae note that the motion for reconsideration (as filed on the fifteenth day from notice of the decision of the )nsurance Commission and that there (as a feeble attempt to sho( that the notice of denial of the said motion (as not recei,ed on June !, 93&, to further hinder the proceedings and justify the filing of the petition (ith this Court fourteen days after June 3, 93&. Ae also look askance at the alleged cancellation, of (hich the insured and /)C5Ls agent himself had no kno(ledge, and the curious fact that although PincaLs payment (as remitted to /)C5Ls by its agent on January %, 93&, /)C5 sought to return it to Adora only on 1ebruary %, 93&, after it presumably had learned of the occurrence of the loss insured against on January 3, 93&. .hese circumstances make the moti,es of the petitioner highly suspect, to say the least, and cast serious doubts upon its candor and bona fides.

A@J$J15$J, the petition is BJ=)JB. .he decision of the )nsurance Commission dated April *, 93 , and its 5rder of June 8, 93 , are A11)$/JB in full, (ith costs against the petitioner. .his decision is immediately e?ecutory. 45 5$BJ$JB.