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INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 1 of 26

G.R. No. 181132 June 5, 2009 Loreto revoked her designation as such in Policy No. A001544070 and it disqualified her in Policy
No. A001693029; and insofar as it sought to declare as inofficious the shares of Odessa, Karl Brian,
HEIRS OF LORETO C. MARAMAG, represented by surviving spouse VICENTA PANGILINAN and Trisha Angelie, considering that no settlement of Loretos estate had been filed nor had the
MARAMAG,Petitioners, vs. EVA VERNA DE GUZMAN MARAMAG, ODESSA DE GUZMAN respective shares of the heirs been determined. Insular further claimed that it was bound to honor the
MARAMAG, KARL BRIAN DE GUZMAN MARAMAG, TRISHA ANGELIE MARAMAG, THE insurance policies designating the children of Loreto with Eva as beneficiaries pursuant to Section 53
INSULAR LIFE ASSURANCE COMPANY, LTD., and GREAT PACIFIC LIFE ASSURANCE of the Insurance Code.
CORPORATION, Respondents.
In its own answer7 with compulsory counterclaim, Grepalife alleged that Eva was not designated as
NACHURA, J.: an insurance policy beneficiary; that the claims filed by Odessa, Karl Brian, and Trisha Angelie were
denied because Loreto was ineligible for insurance due to a misrepresentation in his application form
This is a petition1 for review on certiorari under Rule 45 of the Rules, seeking to reverse and set that he was born on December 10, 1936 and, thus, not more than 65 years old when he signed it in
aside the Resolution2 dated January 8, 2008 of the Court of Appeals (CA), in CA-G.R. CV No. 85948, September 2001; that the case was premature, there being no claim filed by the legitimate family of
dismissing petitioners appeal for lack of jurisdiction. Loreto; and that the law on succession does not apply where the designation of insurance
beneficiaries is clear.
The case stems from a petition 3 filed against respondents with the Regional Trial Court, Branch 29,
for revocation and/or reduction of insurance proceeds for being void and/or inofficious, with prayer for As the whereabouts of Eva, Odessa, Karl Brian, and Trisha Angelie were not known to petitioners,
a temporary restraining order (TRO) and a writ of preliminary injunction. summons by publication was resorted to. Still, the illegitimate family of Loreto failed to file their
answer. Hence, the trial court, upon motion of petitioners, declared them in default in its Order dated
The petition alleged that: (1) petitioners were the legitimate wife and children of Loreto Maramag May 7, 2004.
(Loreto), while respondents were Loretos illegitimate family; (2) Eva de Guzman Maramag (Eva) was
a concubine of Loreto and a suspect in the killing of the latter, thus, she is disqualified to receive any During the pre-trial on July 28, 2004, both Insular and Grepalife moved that the issues raised in their
proceeds from his insurance policies from Insular Life Assurance Company, Ltd. (Insular) 4 and Great respective answers be resolved first. The trial court ordered petitioners to comment within 15 days.
Pacific Life Assurance Corporation (Grepalife); 5(3) the illegitimate children of LoretoOdessa, Karl
Brian, and Trisha Angeliewere entitled only to one-half of the legitime of the legitimate children, In their comment, petitioners alleged that the issue raised by Insular and Grepalife was purely legal
thus, the proceeds released to Odessa and those to be released to Karl Brian and Trisha Angelie whether the complaint itself was proper or not and that the designation of a beneficiary is an act of
were inofficious and should be reduced; and (4) petitioners could not be deprived of their legitimes, liberality or a donation and, therefore, subject to the provisions of Articles 752 8 and 7729 of the Civil
which should be satisfied first. Code.

In support of the prayer for TRO and writ of preliminary injunction, petitioners alleged, among others, In reply, both Insular and Grepalife countered that the insurance proceeds belong exclusively to the
that part of the insurance proceeds had already been released in favor of Odessa, while the rest of designated beneficiaries in the policies, not to the estate or to the heirs of the insured. Grepalife also
the proceeds are to be released in favor of Karl Brian and Trisha Angelie, both minors, upon the reiterated that it had disqualified Eva as a beneficiary when it ascertained that Loreto was legally
appointment of their legal guardian. Petitioners also prayed for the total amount of P320,000.00 as married to Vicenta Pangilinan Maramag.
actual litigation expenses and attorneys fees.
On September 21, 2004, the trial court issued a Resolution, the dispositive portion of which reads
In answer,6 Insular admitted that Loreto misrepresented Eva as his legitimate wife and Odessa, Karl
Brian, and Trisha Angelie as his legitimate children, and that they filed their claims for the insurance WHEREFORE, the motion to dismiss incorporated in the answer of defendants Insular Life and
proceeds of the insurance policies; that when it ascertained that Eva was not the legal wife of Loreto, Grepalife is granted with respect to defendants Odessa, Karl Brian and Trisha Maramag. The action
it disqualified her as a beneficiary and divided the proceeds among Odessa, Karl Brian, and Trisha shall proceed with respect to the other defendants Eva Verna de Guzman, Insular Life and Grepalife.
Angelie, as the remaining designated beneficiaries; and that it released Odessas share as she was SO ORDERED.10
of age, but withheld the release of the shares of minors Karl Brian and Trisha Angelie pending
submission of letters of guardianship. Insular alleged that the complaint or petition failed to state a In so ruling, the trial court ratiocinated thus
cause of action insofar as it sought to declare as void the designation of Eva as beneficiary, because
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 2 of 26

Art. 2011 of the Civil Code provides that the contract of insurance is governed by the (sic) special to the concubine, for evidently, what is prohibited under Art. 2012 is the naming of the improper
laws. Matters not expressly provided for in such special laws shall be regulated by this Code. The beneficiary. In such case, the action for the declaration of nullity may be brought by the spouse of the
principal law on insurance is the Insurance Code, as amended. Only in case of deficiency in the donor or donee, and the guilt of the donor and donee may be proved by preponderance of evidence
Insurance Code that the Civil Code may be resorted to. (Enriquez v. Sun Life Assurance Co., 41 Phil. in the same action (Comment of Edgardo L. Paras, Civil Code of the Philippines, page 897). Since
269.) the designation of defendant Eva Verna de Guzman as one of the primary beneficiary (sic) in the
insurances (sic) taken by the late Loreto C. Maramag is void under Art. 739 of the Civil Code, the
The Insurance Code, as amended, contains a provision regarding to whom the insurance proceeds insurance indemnity that should be paid to her must go to the legal heirs of the deceased which this
shall be paid. It is very clear under Sec. 53 thereof that the insurance proceeds shall be applied court may properly take cognizance as the action for the declaration for the nullity of a void donation
exclusively to the proper interest of the person in whose name or for whose benefit it is made, unless falls within the general jurisdiction of this Court. 11
otherwise specified in the policy. Since the defendants are the ones named as the primary
beneficiary (sic) in the insurances (sic) taken by the deceased Loreto C. Maramag and there is no Insular12 and Grepalife13 filed their respective motions for reconsideration, arguing, in the main, that
showing that herein plaintiffs were also included as beneficiary (sic) therein the insurance proceeds the petition failed to state a cause of action. Insular further averred that the proceeds were divided
shall exclusively be paid to them. This is because the beneficiary has a vested right to the indemnity, among the three children as the remaining named beneficiaries. Grepalife, for its part, also alleged
unless the insured reserves the right to change the beneficiary. (Grecio v. Sunlife Assurance Co. of that the premiums paid had already been refunded.
Canada, 48 Phil. [sic] 63).
Petitioners, in their comment, reiterated their earlier arguments and posited that whether the
Neither could the plaintiffs invoked (sic) the law on donations or the rules on testamentary complaint may be dismissed for failure to state a cause of action must be determined solely on the
succession in order to defeat the right of herein defendants to collect the insurance indemnity. The basis of the allegations in the complaint, such that the defenses of Insular and Grepalife would be
beneficiary in a contract of insurance is not the donee spoken in the law of donation. The rules on better threshed out during trial.1avvphi1
testamentary succession cannot apply here, for the insurance indemnity does not partake of a
donation. As such, the insurance indemnity cannot be considered as an advance of the inheritance On June 16, 2005, the trial court issued a Resolution, disposing, as follows:
which can be subject to collation (Del Val v. Del Val, 29 Phil. 534). In the case of Southern Luzon
Employees Association v. Juanita Golpeo, et al., the Honorable Supreme Court made the following WHEREFORE, in view of the foregoing disquisitions, the Motions for Reconsideration filed by
pronouncements[:] defendants Grepalife and Insular Life are hereby GRANTED. Accordingly, the portion of the
Resolution of this Court dated 21 September 2004 which ordered the prosecution of the case against
"With the finding of the trial court that the proceeds to the Life Insurance Policy belongs exclusively to defendant Eva Verna De Guzman, Grepalife and Insular Life is hereby SET ASIDE, and the case
the defendant as his individual and separate property, we agree that the proceeds of an insurance against them is hereby ordered DISMISSED.
policy belong exclusively to the beneficiary and not to the estate of the person whose life was
insured, and that such proceeds are the separate and individual property of the beneficiary and not of SO ORDERED.14
the heirs of the person whose life was insured, is the doctrine in America. We believe that the same
doctrine obtains in these Islands by virtue of Section 428 of the Code of Commerce x x x." In granting the motions for reconsideration of Insular and Grepalife, the trial court considered the
allegations of Insular that Loreto revoked the designation of Eva in one policy and that Insular
In [the] light of the above pronouncements, it is very clear that the plaintiffs has (sic) no sufficient disqualified her as a beneficiary in the other policy such that the entire proceeds would be paid to the
cause of action against defendants Odessa, Karl Brian and Trisha Angelie Maramag for the reduction illegitimate children of Loreto with Eva pursuant to Section 53 of the Insurance Code. It ruled that it is
and/or declaration of inofficiousness of donation as primary beneficiary (sic) in the insurances (sic) of only in cases where there are no beneficiaries designated, or when the only designated beneficiary is
the late Loreto C. Maramag. disqualified, that the proceeds should be paid to the estate of the insured. As to the claim that the
proceeds to be paid to Loretos illegitimate children should be reduced based on the rules on
However, herein plaintiffs are not totally bereft of any cause of action. One of the named beneficiary legitime, the trial court held that the distribution of the insurance proceeds is governed primarily by
(sic) in the insurances (sic) taken by the late Loreto C. Maramag is his concubine Eva Verna De the Insurance Code, and the provisions of the Civil Code are irrelevant and inapplicable. With respect
Guzman. Any person who is forbidden from receiving any donation under Article 739 cannot be to the Grepalife policy, the trial court noted that Eva was never designated as a beneficiary, but only
named beneficiary of a life insurance policy of the person who cannot make any donation to him, Odessa, Karl Brian, and Trisha Angelie; thus, it upheld the dismissal of the case as to the illegitimate
according to said article (Art. 2012, Civil Code). If a concubine is made the beneficiary, it is believed children. It further held that the matter of Loretos misrepresentation was premature; the appropriate
that the insurance contract will still remain valid, but the indemnity must go to the legal heirs and not
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 3 of 26

action may be filed only upon denial of the claim of the named beneficiaries for the insurance xxxx
proceeds by Grepalife.
(g) That the pleading asserting the claim states no cause of action.
Petitioners appealed the June 16, 2005 Resolution to the CA, but it dismissed the appeal for lack of
jurisdiction, holding that the decision of the trial court dismissing the complaint for failure to state a A cause of action is the act or omission by which a party violates a right of another. 16 A complaint
cause of action involved a pure question of law. The appellate court also noted that petitioners did states a cause of action when it contains the three (3) elements of a cause of action(1) the legal
not file within the reglementary period a motion for reconsideration of the trial courts Resolution, right of the plaintiff; (2) the correlative obligation of the defendant; and (3) the act or omission of the
dated September 21, 2004, dismissing the complaint as against Odessa, Karl Brian, and Trisha defendant in violation of the legal right. If any of these elements is absent, the complaint becomes
Angelie; thus, the said Resolution had already attained finality. vulnerable to a motion to dismiss on the ground of failure to state a cause of action. 17

Hence, this petition raising the following issues: When a motion to dismiss is premised on this ground, the ruling thereon should be based only on the
facts alleged in the complaint. The court must resolve the issue on the strength of such allegations,
a. In determining the merits of a motion to dismiss for failure to state a cause of action, may assuming them to be true. The test of sufficiency of a cause of action rests on whether, hypothetically
the Court consider matters which were not alleged in the Complaint, particularly the admitting the facts alleged in the complaint to be true, the court can render a valid judgment upon the
defenses put up by the defendants in their Answer? same, in accordance with the prayer in the complaint. This is the general rule.

b. In granting a motion for reconsideration of a motion to dismiss for failure to state a cause However, this rule is subject to well-recognized exceptions, such that there is no hypothetical
of action, did not the Regional Trial Court engage in the examination and determination of admission of the veracity of the allegations if:
what were the facts and their probative value, or the truth thereof, when it premised the
dismissal on allegations of the defendants in their answer which had not been proven? 1. the falsity of the allegations is subject to judicial notice;

c. x x x (A)re the members of the legitimate family entitled to the proceeds of the insurance 2. such allegations are legally impossible;
for the concubine?15
3. the allegations refer to facts which are inadmissible in evidence;
In essence, petitioners posit that their petition before the trial court should not have been dismissed
for failure to state a cause of action because the finding that Eva was either disqualified as a 4. by the record or document in the pleading, the allegations appear unfounded; or
beneficiary by the insurance companies or that her designation was revoked by Loreto, hypothetically
admitted as true, was raised only in the answers and motions for reconsideration of both Insular and 5. there is evidence which has been presented to the court by stipulation of the parties or in
Grepalife. They argue that for a motion to dismiss to prosper on that ground, only the allegations in the course of the hearings related to the case.18
the complaint should be considered. They further contend that, even assuming Insular disqualified
Eva as a beneficiary, her share should not have been distributed to her children with Loreto but,
In this case, it is clear from the petition filed before the trial court that, although petitioners are the
instead, awarded to them, being the legitimate heirs of the insured deceased, in accordance with law
legitimate heirs of Loreto, they were not named as beneficiaries in the insurance policies issued by
and jurisprudence.
Insular and Grepalife. The basis of petitioners claim is that Eva, being a concubine of Loreto and a
suspect in his murder, is disqualified from being designated as beneficiary of the insurance policies,
The petition should be denied. and that Evas children with Loreto, being illegitimate children, are entitled to a lesser share of the
proceeds of the policies. They also argued that pursuant to Section 12 of the Insurance Code, 19 Evas
The grant of the motion to dismiss was based on the trial courts finding that the petition failed to share in the proceeds should be forfeited in their favor, the former having brought about the death of
state a cause of action, as provided in Rule 16, Section 1(g), of the Rules of Court, which reads Loreto. Thus, they prayed that the share of Eva and portions of the shares of Loretos illegitimate
children should be awarded to them, being the legitimate heirs of Loreto entitled to their respective
SECTION 1. Grounds. Within the time for but before filing the answer to the complaint or pleading legitimes.
asserting a claim, a motion to dismiss may be made on any of the following grounds:
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 4 of 26

It is evident from the face of the complaint that petitioners are not entitled to a favorable judgment in
light of Article 2011 of the Civil Code which expressly provides that insurance contracts shall be
governed by special laws, i.e., the Insurance Code. Section 53 of the Insurance Code states Heirs Of Loreto C. Maramag V Maramag (2009) G.R. No. 181132 June 5, 2009

Lessons Applicable: To whom insurance proceeds payable (Insurance)


SECTION 53. The insurance proceeds shall be applied exclusively to the proper interest of the FACTS: Loreto Maramag designated as beneficiary his concubine Eva de Guzman Maramag
person in whose name or for whose benefit it is made unless otherwise specified in the policy. Vicenta Maramag and Odessa, Karl Brian, and Trisha Angelie (heirs of Loreto Maramag) and
his concubine Eva de Guzman Maramag, also suspected in the killing of Loreto and his
Pursuant thereto, it is obvious that the only persons entitled to claim the insurance proceeds are illegitimate children are claiming for his insurance.
either the insured, if still alive; or the beneficiary, if the insured is already deceased, upon the Vicenta alleges that Eva is disqualified from claiming.
maturation of the policy.20 The exception to this rule is a situation where the insurance contract was RTC: Granted - civil code does NOT apply
intended to benefit third persons who are not parties to the same in the form of favorable stipulations CA: dismissed the case for lack of jurisdiction for filing beyond reglementary period
or indemnity. In such a case, third parties may directly sue and claim from the insurer.21
ISSUE: W/N Eva can claim even though prohibited under the civil code against donation
Petitioners are third parties to the insurance contracts with Insular and Grepalife and, thus, are not
HELD: YES. Petition is DENIED.
entitled to the proceeds thereof. Accordingly, respondents Insular and Grepalife have no legal
obligation to turn over the insurance proceeds to petitioners. The revocation of Eva as a beneficiary Any person who is forbidden from receiving any donation under Article 739 cannot be
in one policy and her disqualification as such in another are of no moment considering that the named beneficiary of a life insurance policy of the person who cannot make any donation to
designation of the illegitimate children as beneficiaries in Loretos insurance policies remains valid. him
Because no legal proscription exists in naming as beneficiaries the children of illicit relationships by
the insured,22 the shares of Eva in the insurance proceeds, whether forfeited by the court in view of If a concubine is made the beneficiary, it is believed that the insurance contract
the prohibition on donations under Article 739 of the Civil Code or by the insurers themselves for will still remain valid, but the indemnity must go to the legal heirs and not to the concubine,
reasons based on the insurance contracts, must be awarded to the said illegitimate children, the for evidently, what is prohibited under Art. 2012 is the naming of the improper beneficiary.
designated beneficiaries, to the exclusion of petitioners. It is only in cases where the insured has not
designated any beneficiary,23 or when the designated beneficiary is disqualified by law to receive the SECTION 53. The insurance proceeds shall be applied exclusively to the proper
proceeds,24 that the insurance policy proceeds shall redound to the benefit of the estate of the interest of the person in whose name or for whose benefit it is made unless otherwise
insured. specified in the policy.

GR: only persons entitled to claim the insurance proceeds are either the
In this regard, the assailed June 16, 2005 Resolution of the trial court should be upheld. In the same
insured, if still alive; or the beneficiary, if the insured is already deceased, upon the
light, the Decision of the CA dated January 8, 2008 should be sustained. Indeed, the appellate court
maturation of the policy.
had no jurisdiction to take cognizance of the appeal; the issue of failure to state a cause of action is a
question of law and not of fact, there being no findings of fact in the first place. 25 EX: situation where the insurance contract was intended to benefit third
persons who are not parties to the same in the form of favorable stipulations or indemnity. In
WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioners.SO ORDERED. such a case, third parties may directly sue and claim from the insurer

It is only in cases where the insured has not designated any beneficiary, or when the
designated beneficiary is disqualified by law to receive the proceeds, that the insurance
policy proceeds shall redound to the benefit of the estate of the insured

G.R. No. L-22375 July 18, 1975 THE CAPITAL INSURANCE & SURETY CO., INC., petitioner,
vs.PLASTIC ERA CO., INC., AND COURT OF APPEALS, respondents.
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 5 of 26

MARTIN, J.: On August 25, 1961, Plastic Era filed its complaint against Capital Insurance for the recovery of
the sum of P100,000.00 plus P25,000.00 for attorney's fees and P20,000.00 for additional
Petition for review of a decision of the Court of Appeals affirming the decision of the Court of First expenses. Capital Insurance filed a counterclaim of P25,000.00 as and for attorney's fees.
Instance of Manila in Civil Case No. 47934 entitled "Plastic Era Manufacturing Co., Inc. versus
The Capital Insurance and Surety Co., Inc." On November 15, 1961, the trial court rendered judgment, the dispositive portion of which reads
as follows:
On December 17, 1960, petitioner Capital Insurance & Surety Co., Inc. (hereinafter referred to as
Capital Insurance) delivered to the respondent Plastic Era Manufacturing Co., Inc., (hereinafter WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendant for the
referred to as Plastic Era) its open Fire Policy No. 22760 1 wherein the former undertook to sum of P88,325.63 with interest at the legal rate from the filing of the complaint and to pay the
insure the latter's building, equipments, raw materials, products and accessories located at costs.
Sheridan Street, Mandaluyong, Rizal. The policy expressly provides that if the property insured
would be destroyed or damaged by fire after the payment of the premiums, at anytime between From said decision, Capital Insurance appealed to the Court of Appeals.
the 15th day of December 1960 and one o'clock in the afternoon of the 15th day of December
1961, the insurance company shall make good all such loss or damage in an amount not On December 5, 1963, the Court of Appeals rendered its decision affirming that of the trial court.
exceeding P100,000.00. When the policy was delivered, Plastic Era failed to pay the Hence, this petition for review by certiorari to this Court.
corresponding insurance premium. However, through its duly authorized representative, it
executed the following acknowledgment receipt: Assailing the decision of the Court of Appeals petitioner assigns the following errors, to wit:

This acknowledged receipt of Fire Policy) NO. 22760 Premium 1. THE COURT OF APPEALS ERRED IN SENTENCING PETITIONER TO PAY PLASTIC ERA THE SUM OF
x x x x x) (I promise to pay) P88,325.63 PLUS INTEREST, AND COST OF SUIT, ALTHOUGH PLASTIC ERA NEVER PAID PETITIONER THE
(P2,220.00) (has been paid) INSURANCE PREMIUM OF P2,220.88.
THIRTY DAYS AFTER on effective date ---------------------
(Date) 2. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER SHOULD HAVE INSTITUTED AN
ACTION FOR RESCISSION OF THE INSURANCE CONTRACT ENTERED INTO BETWEEN IT AND PLASTIC
ERA BEFORE PETITIONER COULD BE RELIEVED OF RESPONSIBILITY UNDER ITS FIRE INSURANCE
On January 8, 1961, in partial payment of the insurance premium, Plastic Era delivered to POLICY.
Capital Insurance, a check 2 for the amount of P1,000.00 postdated January 16, 1961 payable to
the order of the latter and drawn against the Bank of America. However, Capital Insurance tried 3. WE HAVE SHOWN ABOVE THAT PLASTIC ERA'S ACTION WAS UNWARRANTED AND THAT THE
to deposit the check only on February 20, 1961 and the same was dishonored by the bank for PETITIONER SHOULD HAVE BEEN ABSOLVED FROM THE COMPLAINT, AND CONSEQUENTLY, THE LOWER
lack of funds. The records show that as of January 19, 1961 Plastic Era had a balance of COURT SHOULD HAVE AWARDED PETITIONER A REASONABLE SUM AND AS ATTORNEY'S FEES
P1,193.41 with the Bank of America. P25,000.00.

On January 18, 1961 or two days after the insurance premium became due, at about 4:00 to The pivotal issue in this petition is whether or not a contract of insurance has been duly
5:00 o'clock in the morning, the property insured by Plastic Era was destroyed by fire. In due perfected between the petitioner, Capital Insurance, and respondent Plastic Era. Necessarily, the
time, the latter notified Capital Insurance of the loss of the insured property by fire 3 and issue calls for a correct interpretation of the insurance policy which states:
accordingly filed its claim for indemnity thru the Manila Adjustment Company. 4 The loss and/or
damage suffered by Plastic Era was estimated by the Manila Adjustment Company to be This Policy of Insurance Witnesseth That in consideration of PLASTIC ERA MANUFACTURING
P283,875. However, according to the records the same property has been insured by Plastic Era COMPANY, INC. hereinafter called the Insured, paying to the Capital Insurance & Surety Co.,
with the Philamgen Insurance Company for P200,000.00. Inc., hereinafter called the Company, the sum of PESOS TWO THOUSAND ONE HUNDRED
EIGHTY EIGHT the premium for the first period hereinafter mentioned, for insuring against Loss
In less than a month Plastic Era demanded from Capital Insurance the payment of the sum of or Damage by only Fire or Lightning, as hereinafter appears, the Property hereinafter described
P100,000.00 as indemnity for the loss of the insured property under Policy No. 22760 but the and contained, or described herein and not elsewhere, in the several sums following namely:
latter refused for the reason that, among others, Plastic Era failed to pay the insurance premium. PESOS ONE HUNDRED THOUSAND ONLY, PHILIPPINE CURRENCY; ... THE COMPANY
HEREBY AGREES with the Insured but subject to the terms and conditions endorsed or
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 6 of 26

otherwise expressed hereon, which are to be taken as part of this Policy), that if the Property debtor's liability should be actually cashed. 6 If the delivery of the check of Plastic Era to Capital
described, or any part thereof, shall be destroyed or damaged by Fire or Lightning after payment Insurance were to be viewed in the light of the foregoing, no payment of the premium had been
of the Premiums, at anytime between the 15th day of December One Thousand Nine Hundred effected, for it is only when the check is cashed that it is said to effect payment.
and Sixty and 1 'clock in the afternoon of the 15th day of December One Thousand Nine
Hundred and Sixty-One of the last day of any subsequent period in respect of which the insured, Significantly, in the case before Us the Capital Insurance accepted the promise of Plastic Era to
or a successor in interest to whom the insurance is by an endorsement hereon declared to be or pay the insurance premium within thirty (30) days from the effective date of policy. By so doing, it
is otherwise continued, shall pay to the Company and the Company shall accept the sum has implicitly agreed to modify the tenor of the insurance policy and in effect, waived the
required for the renewal of this Policy, the Company will pay or make good all such loss or provision therein that it would only pay for the loss or damage in case the same occurs after the
Damage, to an amount not exceeding during any one period of the insurance in respect of the payment of the premium. Considering that the insurance policy is silent as to the mode of
several matters specified, the sum; set opposite thereto respectively, and not exceeding the payment, Capital Insurance is deemed to have accepted the promissory note in payment of the
whole sum of PESOS, ONE HUNDRED THOUSAND ONLY, PHIL. CUR.... premium. This rendered the policy immediately operative on the date it was delivered. The view
taken in most cases in the United States:
In clear and unequivocal terms the insurance policy provides that it is only upon payment of the
premiums by Plastic Era that Capital Insurance agrees to insure the properties of the former ... is that although one of conditions of an insurance policy is that "it shall not be valid or binding
against loss or damage in an amount not exceeding P100,000.00. until the first premium is paid", if it is silent as to the mode of payment, promissory notes
received by the company must be deemed to have been accepted in payment of the premium. In
The crux of the problem then is whether at the time the insurance policy was delivered to Plastic other words, a requirement for the payment of the first or initial premium in advance or actual
Era on December 17, 1960, the latter was able to pay the stipulated premium. It appears on cash may be waived by acceptance of a promissory note ... 7
record that on the day the insurance policy was delivered, Plastic Era did not pay the Capital
Insurance, but instead executed an acknowledgment receipt of Policy No. 22760. In said receipt Precisely, this was what actually happened when the Capital Insurance accepted the
Plastic Era promised to pay the premium within thirty (30) days from the effectivity date of the acknowledgment receipt of the Plastic Era promising to pay the insurance premium within thirty
policy on December 17, 1960 and Capital Insurance accepted it. What then is the effect of (30) days from December 17, 1960. Hence, when the damage or loss of the insured property
accepting such acknowledgment receipt from the Plastic Era? Did the Capital Insurance mean to occurred, the insurance policy was in full force and effect. The fact that the check issued by
agree to make good its undertaking under the policy if the premium could be paid on or before Plastic Era in partial payment of the promissory note was later on dishonored did not in any way
January 16, 1961? And what would be the effect of the delivery to Capital Insurance on January operate as a forfeiture of its rights under the policy, there being no express stipulation therein to
8, 1961 of a postdated check (January 16, 1961) in the amount of P1,000.00, payable to the that effect.
order of the latter? Could not this have been considered a valid payment of the insurance
premium? Pursuant to Article 1249 of the New Civil Code: In the absence of express agreement or stipulation to that effect in the policy, the non-payment
at maturity of a note given for and accepted as premium on a policy does not operate to forfeit
xxx xxx xxx the rights of the insured even though the note is given for an initial premium, nor does the fact
that the collection of the note had been enjoined by the insured in any way affect the policy. 8
The delivery of promissory notes payable to order, or bills of exchange or other mercantile
documents shall produce the effect of payment only when they have been cashed, or when ... If the check is accepted as payment of the premium even though it turns out to be worthless,
through the fault of the creditor they have been impaired. there is payment which will prevent forfeiture. 9

xxx xxx xxx By accepting its promise to pay the insurance premium within thirty (30) days from the effectivity
date of the policy December 17, 1960 Capital Insurance had in effect extended credit to
In the meantime, the action derived from the original obligation shall be held in abeyance. Plastic Era. The payment of the premium on the insurance policy therefore became an
independent obligation the non-fulfillment of which would entitle Capital Insurance to recover. It
Under this provision the mere delivery of a bill of exchange in payment of a debt does not could just deduct the premium due and unpaid upon the satisfaction of the loss under the
immediately effect payment. It simply suspends the action arising from the original obligation in policy. 10 It did not have the right to cancel the policy for nonpayment of the premium except by
satisfaction of which it was delivered, until payment is accomplished either actually or putting Plastic Era in default and giving it personal notice to that effect. This Capital Insurance
presumptively. 5 Tender of draft or check in order to effect payment that would extinguish the failed to do.
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 7 of 26

... Where credit is given by an insurance company for the payment of the premium it has no right CFI: favored Capital Insurance
to cancel the policy for nonpayment except by putting the insured in default and giving him CA: affirmed
personal notice.... 11
ISSUE: W/N there was a valid insurance contract because there was an extention of credit
On the contrary Capital Insurance had accepted a check for P1,000.00 from Plastic Era in partial despite failing to encash the check payment
payment of the premium on the insurance policy. Although the check was due for payment on
January 16, 1961 and Plastic Era had sufficient funds to cover it as of January 19, 1961, Capital
HELD: YES. Affirmed
Insurance decided to hold the same for thirty-five (35) days before presenting it for payment.
Article 1249 of the New Civil Code
Having held the check for such an unreasonable period of time, Capital Insurance was estopped
from claiming a forfeiture of its policy for non-payment even if the check had been dishonored
The delivery of promissory notes payable to order, or bills of exchange or other
later.1wph1.t
mercantile documents shall produce the effect of payment only when they have been
cashed, or when through the fault of the creditor they have been impaired
Where the check is held for an unreasonable time before presenting it for payment, the insurer
may be held estopped from claiming a forfeiture if the check is dishonored. 12 Capital Insurance accepted the promise of Plastic Era to pay the insurance premium
within 30 days from the effective date of policy. Considering that the insurance policy is
Finally, it is submitted by petitioner that: silent as to the mode of payment, Capital Insurance is deemed to have accepted the
promissory note in payment of the premium. This rendered the policy immediately operative
on the date it was delivered.
We are here concerned with a case of reciprocal obligations, and respondent having failed to
comply with its obligation to pay the insurance premium due on the policy within thirty days from
By accepting its promise to pay the insurance premium within thirty (30) days from the
December 17, 1960, petitioner was relieved of its obligation to pay anything under the policy,
effectivity date of the policy December 17, 1960 Capital Insurance had in effect extended
without the necessity of first instituting an action for rescission of the contract of insurance
credit to Plastic Era.
entered into by the parties.
Where credit is given by an insurance company for the payment of the premium it has
But precisely in this case, Plastic Era has complied with its obligation to pay the insurance no right to cancel the policy for nonpayment except by putting the insured in default and
premium and therefore Capital Insurance is obliged to make good its undertaking to Plastic Era. giving him personal notice

WHEREFORE, finding no reversible error in the decision appealed from, We hereby affirm the Having held the check for such an unreasonable period of time, Capital Insurance was
same in toto. Costs against the petitioner. estopped from claiming a forfeiture of its policy for non-payment even if the check had been
dishonored later.
Lessons Applicable: Estoppel and credit extension (Insurance) Article 1249 of the New Civil Code
G.R. No. 95546 November 6, 1992
December 17, 1960: Capital Insurance & Surety Co., Inc. delivered to the respondent Plastic
Era Manufacturing Co., Inc. its open Fire Policy insuring its building, equipments, raw materials, MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner,
products and accessories located at Sheridan Street, Mandaluyong, Rizal between December vs. THE COURT OF APPEALS, AMERICAN HOME ASSURANCE CO., represented by American
15, 1960 1 pm - December 15, 1961 1 pm up to P100,000 but Plastic Era did not pay the International Underwriters (Phils.), Inc., respondent.
premium
January 8, 1961: Plastic Era delivered to Capital Insurance its partial payment through
check P1,000 postdated January 16, 1961
February 20, 1961: Capital Insurance tried to deposit the check but it was dishonored BELLOSILLO, J.:
due to lack of funds. According to the records, on January 19, 1961 Plastic Era has had a
bank balance of P1,193.41
This case involves a purely legal question: whether payment by installment of the premiums due on an
January 18, 1961: Plastic Era's properties were destroyed by fire amounting to a loss
insurance policy invalidates the contract of insurance, in view of Sec. 77 of P.D. 612, otherwise known as
of P283,875. The property was also insured to Philamgen Insurance Company for P200K.
the Insurance Code, as amended, which provides:
Capital Insurance refused Plastic Era's claim for failing to pay the insurance premium
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 8 of 26

Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing is exposed to the peril On 8 October 1987, the trial court dismissed the complaint and the counterclaim upon the following
insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued findings:
by an insurance company is valid and binding unless and until the premium thereof has been paid, except
in the case of a life or an industrial life policy whenever the grace period provision applies. While it is true that the receipts issued to the defendant contained the aforementioned reservations, it is
equally true that payment of the premiums of the three aforementioned policies (being sought to be
Sometime in early 1982, private respondent American Home Assurance Co. (AHAC), represented by refunded) were made during the lifetime or term of said policies, hence, it could not be said, inspite of the
American International Underwriters (Phils.), Inc., issued in favor of petitioner Makati Tuscany reservations, that no risk attached under the policies. Consequently, defendant's counterclaim for refund is
Condominium Corporation (TUSCANY) Insurance Policy No. AH-CPP-9210452 on the latter's building and not justified.
premises, for a period beginning 1 March 1982 and ending 1 March 1983, with a total premium of
P466,103.05. The premium was paid on installments on 12 March 1982, 20 May 1982, 21 June 1982 and As regards the unpaid premiums on Insurance Policy No. AH-CPP-9210651, in view of the reservation in
16 November 1982, all of which were accepted by private respondent. the receipts ordinarily issued by the plaintiff on premium payments the only plausible conclusion is that
plaintiff has no right to demand their payment after the lapse of the term of said policy on March 1, 1985.
On 10 February 1983, private respondent issued to petitioner Insurance Policy No. AH-CPP-9210596, Therefore, the defendant was justified in refusing to pay the same. 1
which replaced and renewed the previous policy, for a term covering 1 March 1983 to 1 March 1984. The
premium in the amount of P466,103.05 was again paid on installments on 13 April 1983, 13 July 1983, 3 Both parties appealed from the judgment of the trial court. Thereafter, the Court of Appeals rendered a
August 1983, 9 September 1983, and 21 November 1983. All payments were likewise accepted by private decision 2modifying that of the trial court by ordering herein petitioner to pay the balance of the premiums
respondent. due on Policy No. AH-CPP-921-651, or P314,103.05 plus legal interest until fully paid, and affirming the
denial of the counterclaim. The appellate court thus explained
On 20 January 1984, the policy was again renewed and private respondent issued to petitioner Insurance
Policy No. AH-CPP-9210651 for the period 1 March 1984 to 1 March 1985. On this renewed policy, The obligation to pay premiums when due is ordinarily as indivisible obligation to pay the entire premium.
petitioner made two installment payments, both accepted by private respondent, the first on 6 February Here, the parties herein agreed to make the premiums payable in installments, and there is no pretense
1984 for P52,000.00 and the second, on 6 June 1984 for P100,000.00. Thereafter, petitioner refused to that the parties never envisioned to make the insurance contract binding between them. It was renewed for
pay the balance of the premium. two succeeding years, the second and third policies being a renewal/replacement for the previous one.
And the insured never informed the insurer that it was terminating the policy because the terms were
Consequently, private respondent filed an action to recover the unpaid balance of P314,103.05 for unacceptable.
Insurance Policy No. AH-CPP-9210651.
While it may be true that under Section 77 of the Insurance Code, the parties may not agree to make the
In its answer with counterclaim, petitioner admitted the issuance of Insurance Policy No. AH-CPP- insurance contract valid and binding without payment of premiums, there is nothing in said section which
9210651. It explained that it discontinued the payment of premiums because the policy did not contain a suggests that the parties may not agree to allow payment of the premiums in installment, or to consider the
credit clause in its favor and the receipts for the installment payments covering the policy for 1984-85, as contract as valid and binding upon payment of the first premium. Otherwise, we would allow the insurer to
well as the two (2) previous policies, stated the following reservations: renege on its liability under the contract, had a loss incurred (sic) before completion of payment of the
entire premium, despite its voluntary acceptance of partial payments, a result eschewed by a basic
2. Acceptance of this payment shall not waive any of the company rights to deny liability on any claim considerations of fairness and equity.
under the policy arising before such payments or after the expiration of the credit clause of the policy; and
To our mind, the insurance contract became valid and binding upon payment of the first premium, and the
3. Subject to no loss prior to premium payment. If there be any loss such is not covered. plaintiff could not have denied liability on the ground that payment was not made in full, for the reason that
it agreed to accept installment payment. . . . 3
Petitioner further claimed that the policy was never binding and valid, and no risk attached to the policy. It
then pleaded a counterclaim for P152,000.00 for the premiums already paid for 1984-85, and in its answer Petitioner now asserts that its payment by installment of the premiums for the insurance policies for 1982,
with amended counterclaim, sought the refund of P924,206.10 representing the premium payments for 1983 and 1984 invalidated said policies because of the provisions of Sec. 77 of the Insurance Code, as
1982-85. amended, and by the conditions stipulated by the insurer in its receipts, disclaiming liability for loss for
occurring before payment of premiums.
After some incidents, petitioner and private respondent moved for summary judgment.
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 9 of 26

It argues that where the premiums is not actually paid in full, the policy would only be effective if there is an balance of the premium after the expiration of the whole term of the third policy (No. AH-CPP-9210651) in
acknowledgment in the policy of the receipt of premium pursuant to Sec. 78 of the Insurance Code. The March 1985. Moreover, as correctly observed by the appellate court, where the risk is entire and the
absence of an express acknowledgment in the policies of such receipt of the corresponding premium contract is indivisible, the insured is not entitled to a refund of the premiums paid if the insurer was
payments, and petitioner's failure to pay said premiums on or before the effective dates of said policies exposed to the risk insured for any period, however brief or momentary. WHEREFORE, finding no
rendered them invalid. Petitioner thus concludes that there cannot be a perfected contract of insurance reversible error in the judgment appealed from, the same is AFFIRMED. Costs against petitioner.
upon mere partial payment of the premiums because under Sec. 77 of the Insurance Code, no contract of
insurance is valid and binding unless the premium thereof has been paid, notwithstanding any agreement Early 1982: American Home Assurance Co. (AHAC), represented by American International
to the contrary. As a consequence, petitioner seeks a refund of all premium payments made on the alleged Underwriters (Phils.), Inc., issued in favor of Makati Tuscany Condominium Corporation
invalid insurance policies. (Tuscany) on the latter's building and premises, for a period beginning 1 March 1982 and ending
1 March 1983, with a total premium of P466,103.05.
We hold that the subject policies are valid even if the premiums were paid on installments. The records Premium were paid on installments on:
March 12 1982 May 20 1982
clearly show that petitioner and private respondent intended subject insurance policies to be binding and June 21 1982 November 16 1982
effective notwithstanding the staggered payment of the premiums. The initial insurance contract entered February 10 1983: AHAC replaced and renewed the previous policy, for a term covering 1 March 1983 to 1 March 1984
into in 1982 was renewed in 1983, then in 1984. In those three (3) years, the insurer accepted all the premium of P466,103.05 was again paid on installments on:
April 13 1983 July 13 1983
installment payments. Such acceptance of payments speaks loudly of the insurer's intention to honor the August 3 1983 September 9 1983 November 21 1983
policies it issued to petitioner. Certainly, basic principles of equity and fairness would not allow the insurer January 20 1984: policy was again renewed for the period March 1 1984 to March 1 1985
to continue collecting and accepting the premiums, although paid on installments, and later deny liability Tuscany only paid two installment payments
on the lame excuse that the premiums were not prepared in full. February 6 1984 for P52kJune 6 1984 for P100k
AHAC filed an action to recover the unpaid balance of P314,103.05
We therefore sustain the Court of Appeals. We quote with approval the well-reasoned findings and RTC: dismissed the complaint
conclusion of the appellate court contained in its Resolution denying the motion to reconsider its Decision While it is true that the receipts issued to the defendant contained the
aforementioned reservations, it is equally true that payment of the premiums of the three
aforementioned policies (being sought to be refunded) were made during the lifetime or term of
While the import of Section 77 is that prepayment of premiums is strictly required as a condition to the said policies, hence, it could not be said, inspite of the reservations, that no risk attached under
the policies
validity of the contract, We are not prepared to rule that the request to make installment payments duly
counterclaim for refund is not justified
approved by the insurer, would prevent the entire contract of insurance from going into effect despite
CA: ordered Tuscany to pay premiums when due is ordinarily as indivisible obligation to pay
payment and acceptance of the initial premium or first installment. Section 78 of the Insurance Code in
the entire premium; insurance contract became valid and binding upon payment of the first
effect allows waiver by the insurer of the condition of prepayment by making an acknowledgment in the
premium
insurance policy of receipt of premium as conclusive evidence of payment so far as to make the policy
binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties from ISSUE:
stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an 1. W/N payment by installment of the premiums due on an insurance policy invalidates the contract
agreement granting credit extension, and such an agreement is not contrary to morals, good customs, of insurance on the basis of:
public order or public policy (De Leon, the Insurance Code, at p. 175). So is an understanding to allow Sec. 77 of the Insurance Code, no contract of insurance is valid and binding unless the premium
insured to pay premiums in installments not so proscribed. At the very least, both parties should be thereof has been paid, notwithstanding any agreement to the contrary. As a consequence, petitioner
deemed in estoppel to question the arrangement they have voluntarily accepted. 4 seeks a refund of all premium payments made on the alleged invalid insurance policies.
2. W/N there is risk attached to the insurance so it cannot be refunded
The reliance by petitioner on Arce vs. Capital Surety and Insurance
Co. 5 is unavailing because the facts therein are substantially different from those in the case at bar.
HELD:
In Arce, no payment was made by the insured at all despite the grace period given. In the case before Us,
petitioner paid the initial installment and thereafter made staggered payments resulting in full payment of 1. NO
the 1982 and 1983 insurance policies. For the 1984 policy, petitioner paid two (2) installments although it Section 77 merely precludes the parties from stipulating that the policy is valid even if
refused to pay the balance. premiums are not paid, but does not expressly prohibit an agreement granting credit extension,
and such an agreement is not contrary to morals, good customs, public order or public policy
It appearing from the peculiar circumstances that the parties actually intended to make three (3) insurance At the very least, both parties should be deemed in estoppel to question the
contracts valid, effective and binding, petitioner may not be allowed to renege on its obligation to pay the arrangement they have voluntarily accepted.
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 10 of 26

It paid the initial installment and thereafter made staggered payments resulting in full P363.72, copy of said adopted plan is hereto attached as Annex "B" and made a part
payment of the 1982 and 1983 insurance policies. For the 1984 policy, petitioner paid 2 hereof, the documentary stamps attached to the policy was P96.42;
installments although it refused to pay the balance. - appearing that they actually intended to
make 3 insurance contracts valid
2. NO. That the defendant paid P3,000.00 on September 22, 1960 under official receipt No. 30245
where the risk is entire and the contract is indivisible, the insured is not entitled to a refund of of plaintiff;
the premiums paid if the insurer was exposed to the risk insured for any period, however brief or
momentary That plaintiff made several demands on defendant to pay the amount of
P3,522.09.1wph1.t

In the present appeal, appellant claims that the court a quo committed the following errors:
G.R. No. L-22684 August 31, 1967
I. The lower court erred in stating that in fire insurance policies the risk attached upon the
PHILIPPINE PHOENIX SURETY & INSURANCE, INC., plaintiff-appellee,
issuance and delivery of the policy to the insured.
vs.WOODWORKS, INC., defendant-appellant.

II. The lower court erred in deciding that in a perfected contract of insurance non-payment of
DIZON, J.:
premium does not cancel the policy.
Appeal upon a question of law taken by Woodworks, Inc. from the judgment of the Court of First
III. The lower court erred in deciding that the premium in the policy was still collectible when
Instance of Manila in Civil Case No. 50710 "ordering the defendant, Woodworks, Inc. to pay
the complaint was filed.
to the plaintiff, Philippine Phoenix Surety & Insurance, Inc., the sum of P3,522.09 with
interest thereon at the legal rate of 6% per annum from the date of the filing of the complaint
until fully paid, and costs of the suit." IV. The lower court erred in deciding that a partial payment of the premium made the policy
effective during the whole period of the policy.
Appellee Philippine Phoenix Surety & Insurance Co., Inc. commenced this action in the
Municipal Court of Manila to recover from appellant Woodworks, Inc. the sum of P3,522.09, It is clear from the foregoing that on April 1, 1960 Fire Insurance Policy No. 9652 was
representing the unpaid balance of the premiums on a fire insurance policy issued by issued by appellee and delivered to appellant, and that on September 22 of the same year,
appellee in favor of appellant for a term of one year from April 1, 1960 to April 1, 1961. From the latter paid to the former the sum of P3,000.00 on account of the total premium of
an adverse decision of said court, Woodworks, Inc. appealed to the Court of First Instance P6,051.95 due thereon. There is, consequently, no doubt at all that, as between the insurer
of Manila (Civil Case No. 50710) where the parties submitted the following stipulation of and the insured, there was not only a perfected contract of insurance but a partially
facts, on the basis of which the appealed decision was rendered: performed one as far as the payment of the agreed premium was concerned. Thereafter the
obligation of the insurer to pay the insured the amount for which the policy was issued in
case the conditions therefor had been complied with, arose and became binding upon it,
That plaintiff and defendant are both corporations duly organized and existing under and by
while the obligation of the insured to pay the remainder of the total amount of the premium
virtue of the laws of the Philippines;
due became demandable.
That on April 1, 1960, plaintiff issued to defendant Fire Policy No. 9652 for the amount of
We can not agree with appellant's theory that non-payment by it of the premium due,
P300,000.00, under the terms and conditions therein set forth in said policy a copy of which
produced the cancellation of the contract of insurance. Such theory would place exclusively
is hereto attached and made a part hereof as Annex "A";
in the hands of one of the contracting parties the right to decide whether the contract should
stand or not. Rather the correct view would seem to be this: as the contract had become
That the premiums of said policy as stated in Annex "A" amounted to P6,051.95; the margin
perfected, the parties could demand from each other the performance of whatever
fee pursuant to the adopted plan as an implementation of Republic Act 2609 amounted to
obligations they had assumed. In the case of the insurer, it is obvious that it had the right to
demand from the insured the completion of the payment of the premium due or sue for the
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 11 of 26

rescission of the contract. As it chose to demand specific performance of the insured's It appears that on 16 January 1984, plaintiff [Valenzuela Hardwood and Industrial Supply,
obligation to pay the balance of the premium, the latter's duty to pay is indeed indubitable. Inc.] entered into an agreement with the defendant Seven Brothers whereby the latter
undertook to load on board its vessel M/V Seven Ambassador the former's lauan round
Having thus resolved that the fourth and last assignment of error submitted in appellant's logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila.
brief is without merit, the first three assignments of error must likewise be overruled as
lacking in merit. On 20 January 1984, plaintiff insured the logs, against loss and/or, damage with defendant
South Sea Surety and Insurance Co., Inc. for P2,000,000.00 end the latter issued its
Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00 on said date.
Wherefore, the appealed decision being in accordance with law and the evidence, the same
is hereby affirmed, with costs.
On 24 January 1984, the plaintiff gave the check in payment of the premium on the
insurance policy to Mr. Victorio Chua.
Concepcion, C.J., Reyes, J.B.L., Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro,
Angeles and Fernando, JJ., concur.
In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984
resulting in the loss of the plaintiffs insured logs.

On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment of the premium
and documentary stamps due on the policy was tendered to the insurer but was not
accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance
policy it issued as of the date of inception for non-payment of the premium due in
accordance with Section 77 of the Insurance Code.

On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance
G.R. No. 102253 June 2, 1995 Co., Inc. the payment of the proceeds of the policy but the latter denied liability under the
policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping
SOUTH SEA SURETY AND INSURANCE COMPANY, INC., petitioner, Corporation for the value of the lost logs but the latter denied the claim. 1
vs. HON. COURT OF APPEALS and VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY,
INC., respondents. In its decision, dated 11 May 1988, the trial court rendered judgment in favor of plaintiff Hardwood.

VITUG, J.: On appeal perfected by both the shipping firm and the insurance company, the Court of
Appeals affirmed the judgment of the court a quo only against the insurance corporation; in absolving
Two issues on the subject of insurance are raised in this petition, that assails the decision, that the shipping entity from liability, the appellate court ratiocinated:
assails the decision of the Court of Appeals. (in CA-G.R. NO. CV-20156), the first dealing on the
requirement of premium payment and the second relating to the agency relationship of parties under The primary issue to be resolved before us is whether defendants shipping corporation and the surety
that contract. company are liable to the plaintiff for the latter's lost logs.

The court litigation started when Valenzuela Hardwood and Industrial Supply, Inc. ("Hardwood"), filed It appears that there is a stipulation in the charter party that the ship owner would be exempted from
with the Regional, Trial Court of the National Capital Judicial Region, Branch l71 in Valenzuela, Metro liability in case of loss.
Manila, a complaint for the recovery of the value of lost logs and freight charges from Seven Brothers
Shipping Corporation or, to the extent of its alleged insurance cover, from South Sea Surety and The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the
insurance Company. liability of the shipping corporation. The provisions on common carriers should not be applied where the
carrier is not acting as such but as a private carrier.
The factual backdrop is described briefly by the appellate court thusly:
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 12 of 26

Under American jurisprudence, a common carrier undertaking to carry a special or chartered to a special In the instant case, the Marine Cargo Insurance Policy No. 84/24229 was issued by
person only, becomes a private carrier. defendant insurance company on 20 January 1984. At the time the vessel sank on 25
January 1984 resulting in the loss of the insured logs, the insured had already delivered to
As a private carrier, a stipulation exempting the owner from liability even for the negligence of its agent is Victorio Chua the check in payment of premium. But, as Victorio Chua testified, it was only in
valid (Home Insurance Company, Inc. vs. American Steamship Agencies, Inc., 23 SCRA 24). the morning of 30 January 1984 or 5 days after the vessel sank when his messenger
tendered the check to defendant South Sea Surety and Insurance Co., Inc. (TSN, pp. 3-27,
The shipping corporation should not therefore be held liable for the loss of the logs. 2 16-17, 22 October 1985).

In this petition for review on certiorari brought by South Sea Surety and Insurance Co., Inc., petitioner The pivotal issue to be resolved to determine the liability, of the surety corporation is whether
argues that it likewise should have been freed from any liability to Hardwood. It faults the appellate Mr. Chua acted as an agent of the surety company or of the insured when he received the
court (a) for having Supposedly disregarded Section 77 of the insurance Code and (b) for holding check for insurance premiums.
Victorio Chua to have been an authorized representative of the insurer.
Appellant surety company insists that Mr. Chua is an administrative assistant for the past ten
Section 77 of the Insurance Code provides: years and an agent for less than ten years of the Columbia Insurance Brokers, Ltd. He is paid
a salary as a administrative assistant and a commission as agent based on the premiums he
Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is turns over to the broker. Appellant therefore argues that Mr. Chua, having received the
exposed to the peril insured against. Notwithstanding any agreement to the contrary, no insurance premiums as an agent of the Columbia Insurance Broker, acted as an agent of the
policy or contract of insurance issued by an insurance company is valid and binding unless insured under Section 301 of the Insurance Code which provides as follows:
and until the premium thereof has been paid, except in the case of a life or an industrial life
policy whenever the grace period provision applies. Sec. 301. Any person who for any compensation, commission or other thing of value, acts, or aids in
soliciting, negotiating or procuring the making of any insurance contract or in placing risk or taking out
Undoubtedly, the payment of the premium is a condition precedent to, and essential for, the insurance, on behalf of an insured other than himself,shall be an insurance broker within the intent of
efficaciousness of the contract. The only two statutorily provided exceptions are (a) in case the this Code, and shall thereby become liable to all the duties requirements, liabilities and penalties to
which an insurance broker is subject.
insurance coverage relates to life or industrial life (health) insurance when a grace period applies and
(b) when the insurer makes a written acknowledgment of the receipt of premium, this
acknowledgment being declared by law to be then conclusive evidence of the premium payment The appellees, upon the other hand, claim that the second paragraph of Section 306 of the
Insurance Code provide as follows:
(Secs. 77-78, Insurance Code). The appellate court, contrary to what the petition suggests, did not
make any pronouncement to the contrary. Indeed, it has said:
Sec. 306. . . . Any insurance company which delivers to an insurance agent or insurance broker a policy or
contract of insurance shall be deemed to have authorized such agent or broker to receive on its behalf
Concerning the issue as to whether there is a valid contract of insurance between plaintiff-
payment of any premium which is due on such policy of contract of insurance at the time of its issuance or
appellee and defendant-appellant South Sea Surety and Insurance Co., Inc., Section 77 of
delivery or which becomes due thereon.
the Insurance Code explicitly provides that notwithstanding any agreement to the contrary,
no policy issued by an insurance company is valid and binding unless and until premium
On cross-examination in behalf of South Sea Surety and Insurance Co., Inc. Mr. Chua testified that the
thereof has been paid. It is therefore important to determine whether at the time of the loss,
marine cargo insurance policy for the plaintiff's logs was delivered to him on 21 January 1984 at his office
the premium was already paid. 3
to be delivered to the plaintiff.

No attempt becloud the issues can disguise the fact that the sole question raised in the instant When the appellant South Sea Surety and Insurance Co., Inc. delivered to Mr. Chua the marine cargo
petition is really evidentiary in nature, i.e., whether or not Victorio Chua, in receiving the check for the insurance policy for the plaintiffs logs, he is deemed to have been authorized by the South Sea Surety and
insurance premium prior to the occurrence of the risk insured against has so acted as an agent of Insurance Co., Inc. to receive the premium which is due on its behalf.
petitioner. The appellate court, like the trial court, has found in the affirmative. Said the appellate
court: When therefore the insured logs were lost, the insured had already paid the premium to an agent of the
South Sea Surety and Insurance Co., Inc., which is consequently liable to pay the insurance proceeds
under the policy it issued to the insured. 4
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 13 of 26

We see no valid reason to discard the factual conclusions of the appellate court. Just as so correctly MALAYAN INSURANCE CO., INC. (MICO), petitioner,
pointed out by private respondent, it is not the function of this Court to assess and evaluate all over again vs. GREGORIA CRUZ ARNALDO, in her capacity as the INSURANCE COMMISSIONER, and
the evidence, testimonial and documentary, adduced by the parties particularly where, such as here, the CORONACION PINCA, respondents.
findings of both the trial court and the appellate court on the matter coincide.
CRUZ, J.:
WHEREFORE, the resolution, dated 01 February 1993, granting due course to the petition is RECALLED,
and the petition is DENIED. Costs against petitioner. SO ORDERED.
When a person's house is razed, the fire usually burns down the efforts of a lifetime and forecloses
hope for the suddenly somber future. The vanished abode becomes a charred and painful memory.
Lessons Applicable: Authority to Receive Payment/Effect of Payment and Binding Effect of Payment Where once stood a home, there is now, in the sighing wisps of smoke, only a gray desolation. The
dying embers leave ashes in the heart.
Valenzuela Hardwood and Industrial Supply, Inc. shipped with Seven Brothers' vessel M/V
Seven Ambassador lauan round logs numbering 940 at the port of Maconacon, Isabela for
shipment to Manila For peace of mind and as a hedge against possible loss, many people now secure fire insurance.
Valenzuela insured the logs against loss and/or, damage with South Sea Surety and This is an aleatory contract. By such insurance, the insured in effect wagers that his house will be
Insurance Co., Inc. for P2,000,000 issuing a Marine Cargo Insurance Policy burned, with the insurer assuring him against the loss, for a fee. If the house does burn, the insured,
January 24 1984: Valenzuela gave the check in payment of the premium on the insurance while losing his house, wins the wagers. The prize is the recompense to be given by the insurer to
policy to Mr. Victorio Chua make good the loss the insured has sustained.
January 25 1984: M/V Seven Ambassador sank
January 30 1984: The check was tendered to South Sea but it refused. Instead it cancelled
It would be a pity then if, having lost his house, the insured were also to lose the payment he expects
the insurance policy for non-payment of the premium
RTC: favored Valenzuela against South Sea and Seven Brothers to recover for such loss. Sometimes it is his fault that he cannot collect, as where there is a defect
CA: Absolved Seven Brothers imputable to him in the insurance contract. Conversely, the reason may be an unjust refusal of the
stipulation in the charter party that the ship owner would be exempted from liability insurer to acknowledge a just obligation, as has happened many times.
in case of loss
South Sea contends that it is cancelled and that Mr. Chua is not authorized In the instant case the private respondent has been sustained by the Insurance Commission in her
claim for compensation for her burned property. The petitioner is now before us to dispute the
ISSUE: W/N Mr. Chua is an authorized representative to receive the payment decision, 1 on the ground that there was no valid insurance contract at the time of the loss.

HELD: YES. petition is DENIED


The chronology of the relevant antecedent facts is as follows:
payment of the premium is a condition precedent to, and essential for, the efficaciousness of
the contract.
The only two statutorily provided exceptions are On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private respondent,
(a) in case the insurance coverage relates to life or industrial life (health) Coronacion Pinca, Fire Insurance Policy No. F-001-17212 on her property for the amount of
insurance when a grace period applies and P14,000.00 effective July 22, 1981, until July 22, 1982. 2
(b) when the insurer makes a written acknowledgment of the receipt of
premium, this acknowledgment being declared by law to be then conclusive evidence of the On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent
premium payment
the corresponding notice to Pinca. 3
South Sea Surety and Insurance Co., Inc. delivered to him the policy on 21 January 1984 at
his office to be delivered to the Valenzuela - deemed to have been authorized by the South Sea
Surety and Insurance Co., Inc. to receive the premium On December 24, 1981, payment of the premium for Pinca was received by DomingoAdora, agent of
MICO. 4

5
G.R. No. L-67835 October 12, 1987 On January 15, 1982, Adora remitted this payment to MICO,together with other payments.

6
On January 18, 1982, Pinca's property was completely burned.
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 14 of 26

On February 5, 1982, Pinca's payment was returned by MICO to Adora on the ground that her policy Under Section 416 of the Insurance Code, the period for appeal is thirty days from notice of the
had been cancelled earlier. But Adora refused to accept it. 7 decision of the Insurance Commission. The petitioner filed its motion for reconsideration on April 25,
1981, or fifteen days such notice, and the reglementary period began to run again after June 13,
In due time, Pinca made the requisite demands for payment, which MICO rejected. She then went to 1981, date of its receipt of notice of the denial of the said motion for reconsideration. As the herein
the Insurance Commission. It is because she was ultimately sustained by the public respondent that petition was filed on July 2, 1981, or nineteen days later, there is no question that it is tardy by four
the petitioner has come to us for relief. days.

From the procedural viewpoint alone, the petition must be rejected. It is stillborn. Counted from June 13, the fifteen-day period prescribed under Rule 45, assuming it is applicable,
would end on June 28, 1982, or also four days from July 2, when the petition was filed.
The records show that notice of the decision of the public respondent dated April 5, 1982, was
received by MICO on April 10, 1982. 8 On April 25, 1982, it filed a motion for reconsideration, which If it was filed under B.P. 129, then, considering that the motion for reconsideration was filed on the
was denied on June 4, 1982. 9 Notice of this denial was received by MICO on June 13, 1982, as fifteenth day after MICO received notice of the decision, only one more day would have remained for
evidenced by Annex "1" duly authenticated by the Insurance Commission. 10 The instant petition it to appeal, to wit, June 14, 1982. That would make the petition eighteen days late by July 2.
was filed with this Court on July 2, 1982. 11
Indeed, even if the applicable law were still R.A. 5434, governing appeals from administrative bodies,
The position of the petition is that the petition is governed by Section 416 0f the Insurance Code the petition would still be tardy. The law provides for a fixed period of ten days from notice of the
giving it thirty days wthin which to appeal by certiorari to this Court. Alternatively, it also invokes Rule denial of a seasonable motion for reconsideration within which to appeal from the decision.
45 of the Rules of Court. For their part, the public and private respondents insist that the applicable Accordingly, that ten-day period, counted from June 13, 1982, would have ended on June 23, 1982,
law is B.P. 129, which they say governs not only courts of justice but also quasi-judicial bodies like making the petition filed on July 2, 1982, nine dayslate.
the Insurance Commission. The period for appeal under this law is also fifteen days, as under Rule
45. Whichever law is applicable, therefore, the petition can and should be dismissed for late filing.

The pivotal date is the date the notice of the denial of the motion for reconsideration was received by On the merits, it must also fail. MICO's arguments that there was no payment of premium and that
MICO. the policy had been cancelled before the occurence of the loss are not acceptable. Its contention that
the claim was allowed without proof of loss is also untenable.
MICO avers this was June 18, 1982, and offers in evidence its Annex "B," 12 which is a copy of the
Order of June 14, 1982, with a signed rubber-stamped notation on the upper left-hand corner that it The petitioner relies heavily on Section 77 of the Insurance Code providing that:
was received on June 18, 1982, by its legal department. It does not indicate from whom. At the
bottom, significantly, there is another signature under which are the ciphers "6-13-82," for which no SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is exposed to the peril
explanation has been given. insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance
issued by an insurance company is valid and binding unless and until the premium thereof has been
Against this document, the private respodent points in her Annex "1," 13 the authenticated copy of paid, except in the case of a life or an industrial life policy whenever the grace period provision
the same Order with a rubber-stamped notation at the bottom thereof indicating that it was received applies.
for the Malayan Insurance Co., Inc. by J. Gotladera on "6-13-82." The signature may or may not
habe been written by the same person who signed at the bottom of the petitioner's Annex "B." The above provision is not applicable because payment of the premium was in fact eventually made
in this case. Notably, the premium invoice issued to Pinca at the time of the delivery of the policy on
Between the two dates, the court chooses to believe June 13, 1982, not only because the numbers June 7, 1981 was stamped "Payment Received" of the amoung of P930.60 on "12-24-81" by
"6-13-82" appear on both annexes but also because it is the date authenticated by the administrative Domingo Adora. 14 This is important because it suggests an understanding between MICO and the
division of the Insurance Commission. Annex "B" is at worst self-serving; at best, it might only insured that such payment could be made later, as agent Adora had assured Pinca. In any event, it is
indicate that it was received on June 18, 1982, by the legal department of MICO, after it had been not denied that this payment was actually made by Pinca to Adora, who remitted the same to MICO.
received earlier by some other of its personnel on June 13, 1982. Whatever the reason for the delay
in transmitting it to the legal department need not detain us here.
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 15 of 26

The payment was made on December 24, 1981, and the fire occured on January 18, 1982. One We do not share MICO's view that there was no existing insurance at the time of the loss sustained
wonders: suppose the payment had been made and accepted in, say, August 1981, would the by Pinca because her policy never became effective for non-payment of premium. Payment was in
commencement date of the policy have been changed to the date of the payment, or would the fact made, rendering the policy operative as of June 22, 1981, and removing it from the provisions of
payment have retroacted to July 22, 1981? If MICO accepted the payment in December 1981 and Article 77, Thereafter, the policy could be cancelled on any of the supervening grounds enumerated
the insured property had not been burned, would that policy not have expired just the same on July in Article 64 (except "nonpayment of premium") provided the cancellation was made in accordance
22, 1982, pursuant to its original terms, and not on December 24, 1982? therewith and with Article 65.

It would seem from MICO's own theory, that the policy would have become effective only upon Section 64 reads as follows:
payment, if accepted and so would have been valid only from December 24, 1981m but only up to
July 22, 1981, according to the original terms. In others words, the policy would have run for only SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior
eight months although the premium paid was for one whole year. notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on the
occurrence, after the effective date of the policy, of one or more of the following:
It is not disputed that the preium was actually paid by Pinca to Adora on December 24, 1981, who
received it on behalf of MICO, to which it was remitted on January 15, 1982. What is questioned is (a) non-payment of premium;
the validity of Pinca's payment and of Adora's authority to receive it.
(b) conviction of a crime arising out of acts increasing the hazard insured against;
MICO's acknowledgment of Adora as its agent defeats its contention that he was not authorized to
receive the premium payment on its behalf. It is clearly provided in Section 306 of the Insurance (c) discovery of fraud or material misrepresentation;
Code that:
(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;
SEC. 306. xxx xxx xxx
(e) physical changes in the property insured which result in the property becoming uninsurable;or
Any insurance company which delivers to an insurance agant or insurance broker a policy or contract
of insurance shall be demmed to have authorized such agent or broker to receive on its behalf (f) a determination by the Commissioner that the continuation of the policy would violate or would
payment of any premium which is due on such policy or contract of insurance at the time of its place the insurer in violation of this Code.
issuance or delivery or which becomes due thereon.
As for the method of cancellation, Section 65 provides as follows:
And it is a well-known principle under the law of agency that:
SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or
Payment to an agent having authority to receive or collect payment is equivalent to payment to the delivered to the named insured at the address shown in the policy, and shall state (a) which of the
principal himself; such payment is complete when the money delivered is into the agent's hands and grounds set forth in section sixty-four is relied upon and (b) that, upon written request of the named
is a discharge of the indebtedness owing to the principal. 15 insured, the insurer will furnish the facts on which the cancellation is based.

There is the petitioner's argument, however, that Adora was not authorized to accept the premium A valid cancellation must, therefore, require concurrence of the following conditions:
payment because six months had elapsed since the issuance by the policy itself. It is argued that this
prohibition was binding upon Pinca, who made the payment to Adora at her own riskl as she was
(1) There must be prior notice of cancellation to the insured; 17
bound to first check his authority to receive it. 16

(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more
MICO is taking an inconsistent stand. While contending that acceptance of the premium payment
of the grounds mentioned;18
was prohibited by the policy, it at the same time insists that the policy never came into force because
the premium had not been paid. One surely, cannot have his cake and eat it too.
(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the address
shown in the policy; 19
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 16 of 26

(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon A: Misleading, Your Honor.
written request of the insured, the insurer will furnish the facts on which the cancellation is based. 20
Hearing Officer: The testimony of witness is that, she thought of that.
MICO's claims it cancelled the policy in question on October 15, 1981, for non-payment of premium.
To support this assertion, it presented one of its employees, who testified that "the original of the Q: I will revise the question. Now, Mrs. Witness, you stated that you thought the policy was cancelled.
endorsement and credit memo" presumably meaning the alleged cancellation "were sent the Now, when you made the payment of December 24, 1981, your intention was to revive the policy if it
assured by mail through our mailing section" 21 However, there is no proof that the notice, assuming it was already cancelled?
complied with the other requisites mentioned above, was actually mailed to and received by Pinca.
All MICO's offers to show that the cancellation was communicated to the insured is its employee's A: Yes, to renew it. 23
testimony that the said cancellation was sent "by mail through our mailing section." without more.
The petitioner then says that its "stand is enervated (sic) by the legal presumption of regularity and A close study of the above transcript will show that Pinca meant to renew the policy if it had really
due performance of duty." 22 (not realizing perhaps that "enervated" means "debilitated" not been already cancelled but not if it was stffl effective. It was all conditional. As it has not been shown
"strengthened"). that there was a valid cancellation of the policy, there was consequently no need to renew it but to
pay the premium thereon. Payment was thus legally made on the original transaction and it could be,
On the other hand, there is the flat denial of Pinca, who says she never received the claimed and was, validly received on behalf of the insurer by its agent Adora. Adora. incidentally, had not
cancellation and who, of course, did not have to prove such denial Considering the strict language of been informed of the cancellation either and saw no reason not to accept the said payment.
Section 64 that no insurance policy shall be cancelled except upon prior notice, it behooved MICO's
to make sure that the cancellation was actually sent to and received by the insured. The presumption The last point raised by the petitioner should not pose much difficulty. The valuation fixed in fire
cited is unavailing against the positive duty enjoined by Section 64 upon MICO and the flat denial insurance policy is conclusive in case of total loss in the absence of fraud, 24 which is not shown
made by the private respondent that she had received notice of the claimed cancellation. here. Loss and its amount may be determined on the basis of such proof as may be offered by the
insured, which need not be of such persuasiveness as is required in judicial proceedings. 25 If, as in
It stands to reason that if Pinca had really received the said notice, she would not have made this case, the insured files notice and preliminary proof of loss and the insurer fails to specify to the
payment on the original policy on December 24, 1981. Instead, she would have asked for a new former all the defects thereof and without unnecessary delay, all objections to notice and proof of loss
insurance, effective on that date and until one year later, and so taken advantage of the extended are deemed waived under Section 90 of the Insurance Code.
period. The Court finds that if she did pay on that date, it was because she honestly believed that the
policy issued on June 7, 1981, was still in effect and she was willing to make her payment retroact to The certification 26 issued by the Integrated National Police, Lao-ang, Samar, as to the extent of
July 22, 1981, its stipulated commencement date. After all, agent Adora was very accomodating and Pinca's loss should be considered sufficient. Notably,MICO submitted no evidence to the contrary nor
had earlier told her "to call him up any time" she was ready with her payment on the policy earlier did it even question the extent of the loss in its answer before the Insurance Commission. It is also
issued. She was obviously only reciprocating in kind when she paid her premium for the period worth observing that Pinca's property was not the only building bumed in the fire that razed the
beginning July 22, 1981, and not December 24, 1981. commercial district of Lao-ang, Samar, on January 18, 1982. 27

MICO's suggests that Pinca knew the policy had already been cancelled and that when she paid the There is nothing in the Insurance Code that makes the participation of an adjuster in the assessment
premium on December 24, 1981, her purpose was "to renew it." As this could not be done by the of the loss imperative or indespensable, as MICO suggests. Section 325, which it cites, simply
agent alone under the terms of the original policy, the renewal thereof did not legally bind MICO. speaks of the licensing and duties of adjusters.
which had not ratified it. To support this argument, MICO's cites the following exchange:
We see in this cases an obvious design to evade or at least delay the discharge of a just obligation
Q: Now, Madam Witness, on December 25th you made the alleged payment. Now, my question is through efforts bordering on bad faith if not plain duplicity, We note that the motion for
that, did it not come to your mind that after the lapse of six (6) months, your policy was cancelled? reconsideration was filed on the fifteenth day from notice of the decision of the Insurance
Commission and that there was a feeble attempt to show that the notice of denial of the said motion
A: I have thought of that but the agent told me to call him up at anytime. was not received on June 13, 1982, to further hinder the proceedings and justify the filing of the
petition with this Court fourteen days after June 18, 1982. We also look askance at the alleged
Q: So if you thought that your policy was already intended to revive cancelled policy? cancellation, of which the insured and MICO's agent himself had no knowledge, and the curious fact
that although Pinca's payment was remitted to MICO's by its agent on January 15, 1982, MICO
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 17 of 26

sought to return it to Adora only on February 5, 1982, after it presumably had learned of the Any insurance company which delivers to an insurance agant or insurance broker a policy or contract
occurrence of the loss insured against on January 18, 1982. These circumstances make the motives of insurance shall be demmed to have authorized such agent or broker to receive on its behalf
of the petitioner highly suspect, to say the least, and cast serious doubts upon its candor and bona payment of any premium which is due on such policy or contract of insurance at the time of its
issuance or delivery or which becomes due thereon.
fides.
Payment to an agent having authority to receive or collect payment is equivalent to payment
to the principal himself; such payment is complete when the money delivered is into the agent's
WHEREFORE, the petition is DENIED. The decision of the Insurance Commission dated April 10, hands and is a discharge of the indebtedness owing to the principal.
1981, and its Order of June 4, 1981, are AFFIRMED in full, with costs against the petitioner. This SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except
decision is immediately executory. SO ORDERED. upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless it
is based on the occurrence, after the effective date of the policy, of one or more of the following:

Lessons Applicable: Authority to Receive Payment/Effect of Payment (Insurance) (a) non-payment of premium;
Laws Applicable: Article 64, Article 65, Section 77, Section 306 of the Insurance Code (b) conviction of a crime arising out of acts increasing the hazard insured against;
(c) discovery of fraud or material misrepresentation;
FACTS: (d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;
June 7, 1981: Malayan insurance co., inc. (MICO) issued to Coronacion Pinca, Fire (e) physical changes in the property insured which result in the property becoming uninsurable;or
(f) a determination by the Commissioner that the continuation of the policy would violate or would
Insurance Policy for her property effective July 22, 1981, until July 22, 1982
place the insurer in violation of this Code.
October 15,1981: MICO allegedly cancelled the policy for non-payment, of the premium and As for the method of cancellation, Section 65 provides as follows:
sent the corresponding notice to Pinca
December 24, 1981: payment of the premium for Pinca was received by Domingo Adora, SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing,
agent of MICO mailed or delivered to the named insured at the address shown in the policy, and shall state (a)
January 15, 1982: Adora remitted this payment to MICO,together with other payments which of the grounds set forth in section sixty-four is relied upon and (b) that, upon written
January 18, 1982: Pinca's property was completely burned request of the named insured, the insurer will furnish the facts on which the cancellation is
February 5, 1982: Pinca's payment was returned by MICO to Adora on the ground that her based.
policy had been cancelled earlier but Adora refused to accept it and instead demanded for A valid cancellation must, therefore, require concurrence of the following conditions:
payment
Under Section 416 of the Insurance Code, the period for appeal is thirty days from notice of (1) There must be prior notice of cancellation to the insured;
the decision of the Insurance Commission. The petitioner filed its motion for reconsideration on (2) The notice must be based on the occurrence, after the effective date of the policy, of one or
April 25, 1981, or fifteen days such notice, and the reglementary period began to run again after more of the grounds mentioned;
June 13, 1981, date of its receipt of notice of the denial of the said motion for reconsideration. As (3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the
the herein petition was filed on July 2, 1981, or nineteen days later, there is no question that it is address shown in the policy;
tardy by four days. (4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon
Insurance Commission: favored Pinca written request of the insured, the insurer will furnish the facts on which the cancellation is based.
MICO appealed All MICO's offers to show that the cancellation was communicated to the insured is its
employee's testimony that the said cancellation was sent "by mail through our mailing section."
ISSUE: W/N MICO should be liable because its agent Adora was authorized to receive it without more
It stands to reason that if Pinca had really received the said notice, she would not have
HELD: YES. petition is DENIED made payment on the original policy on December 24, 1981. Instead, she would have asked for
a new insurance, effective on that date and until one year later, and so taken advantage of the
SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is exposed extended period.
Incidentally, Adora had not been informed of the cancellation either and saw no reason not
to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract
of insurance issued by an insurance company is valid and binding unless and until the premium to accept the said payment
thereof has been paid, except in the case of a life or an industrial life policy whenever the grace Although Pinca's payment was remitted to MICO's by its agent on January 15, 1982, MICO
period provision applies. sought to return it to Adora only on February 5, 1982, after it presumably had learned of the
SEC. 306. xxx xxx xxx occurrence of the loss insured against on January 18, 1982 make the motives of MICO highly
suspicious
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 18 of 26

stocks-in-trade were likewise covered by fire insurance policies No. GA-28146 and No. GA-28144,
for P100,000.00 each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc.
G.R. No. 114427 February 6, 1995 ARMANDO GEAGONIA, petitioner, (hereinafter PFIC). 3 These policies indicate that the insured was "Messrs. Discount Mart (Mr.
vs. COURT OF APPEALS and COUNTRY BANKERS INSURANCE CORPORATION, respondents. Armando Geagonia, Prop.)" with a mortgage clause reading:

DAVIDE, JR., J.: MORTGAGE: Loss, if any shall be payable to Messrs. Cebu Tesing Textiles, Cebu City as their
Four our review under Rule 45 of the Rules of Court is the decision 1 of the Court of Appeals in CA- interest may appear subject to the terms of this policy. CO-INSURANCE DECLARED: P100,000.
G.R. SP No. 31916, entitled "Country Bankers Insurance Corporation versus Armando Geagonia," Phils. First CEB/F 24758. 4
reversing the decision of the Insurance Commission in I.C. Case No. 3340 which awarded the claim
of petitioner Armando Geagonia against private respondent Country Bankers Insurance Corporation.
The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3 of
the policy.
The petitioner is the owner of Norman's Mart located in the public market of San Francisco, Agusan
del Sur. On 22 December 1989, he obtained from the private respondent fire insurance policy No. F-
The petitioner then filed a complaint 5 against the private respondent with the Insurance Commission
14622 2 for P100,000.00. The period of the policy was from 22 December 1989 to 22 December 1990
(Case No. 3340) for the recovery of P100,000.00 under fire insurance policy No. F-14622 and for
and covered the following: "Stock-in-trade consisting principally of dry goods such as RTW's for men
attorney's fees and costs of litigation. He attached as Annex "AM" 6thereof his letter of 18 January
and women wear and other usual to assured's business."
1991 which asked for the reconsideration of the denial. He admitted in the said letter that at the time
he obtained the private respondent's fire insurance policy he knew that the two policies issued by the
The petitioner declared in the policy under the subheading entitled CO-INSURANCE that Mercantile PFIC were already in existence; however, he had no knowledge of the provision in the private
Insurance Co., Inc. was the co-insurer for P50,000.00. From 1989 to 1990, the petitioner had in his respondent's policy requiring him to inform it of the prior policies; this requirement was not mentioned
inventory stocks amounting to P392,130.50, itemized as follows: to him by the private respondent's agent; and had it been mentioned, he would not have withheld
such information. He further asserted that the total of the amounts claimed under the three policies
Zenco Sales, Inc. P55,698.00 was below the actual value of his stocks at the time of loss, which was P1,000,000.00.

F. Legaspi Gen. Merchandise 86,432.50 In its answer, 7 the private respondent specifically denied the allegations in the complaint and set up
as its principal defense the violation of Condition 3 of the policy.

Cebu Tesing Textiles 250,000.00 (on credit)


In its decision of 21 June 1993, 8 the Insurance Commission found that the petitioner did not violate
Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained from
the PFIC; that it was Cebu Tesing Textiles which procured the PFIC policies without informing him or
securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the
stocks. These findings were based on the petitioner's testimony that he came to know of the PFIC
P392,130.50
policies only when he filed his claim with the private respondent and that Cebu Tesing Textile
obtained them and paid for their premiums without informing him thereof. The Insurance Commission
The policy contained the following condition: then decreed:

3. The insured shall give notice to the Company of any insurance or insurances already affected, or WHEREFORE, judgment is hereby rendered ordering the respondent company to pay complainant
which may subsequently be effected, covering any of the property or properties consisting of stocks the sum of P100,000.00 with legal interest from the time the complaint was filed until fully satisfied
in trade, goods in process and/or inventories only hereby insured, and unless such notice be given plus the amount of P10,000.00 as attorney's fees. With costs. The compulsory counterclaim of
and the particulars of such insurance or insurances be stated therein or endorsed in this policy respondent is hereby dismissed.
pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence
of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, Its motion for the reconsideration of the decision 9 having been denied by the Insurance Commission
that this condition shall not apply when the total insurance or insurances in force at the time of the in its resolution of 20 August 1993, 10 the private respondent appealed to the Court of Appeals by way
loss or damage is not more than P200,000.00. of a petition for review. The petition was docketed as CA-G.R. SP No. 31916.

On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m. at the public market of San In its decision of 29 December 1993, 11 the Court of Appeals reversed the decision of the Insurance
Francisco, Agusan del Sur. The petitioner's insured stock-in-trade were completely destroyed Commission because it found that the petitioner knew of the existence of the two other policies
prompting him to file with the private respondent a claim under the policy. On 28 December 1990, the issued by the PFIC. It said:
private respondent denied the claim because it found that at the time of the loss the petitioner's
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 19 of 26

It is apparent from the face of Fire Policy GA 28146/Fire Policy No. 28144 that the insurance was C . . . WHEN IT DISMISSED THE CLAIM OF THE PETITIONER HEREIN AGAINST THE
taken in the name of private respondent [petitioner herein]. The policy states that "DISCOUNT MART PRIVATE RESPONDENT.
(MR. ARMANDO GEAGONIA, PROP)" was the assured and that "TESING TEXTILES" [was] only the
mortgagee of the goods. The chief issues that crop up from the first and third grounds are (a) whether the petitioner had prior
knowledge of the two insurance policies issued by the PFIC when he obtained the fire insurance
In addition, the premiums on both policies were paid for by private respondent, not by the Tesing policy from the private respondent, thereby, for not disclosing such fact, violating Condition 3 of the
Textiles which is alleged to have taken out the other insurance without the knowledge of private policy, and (b) if he had, whether he is precluded from recovering therefrom.
respondent. This is shown by Premium Invoices nos. 46632 and 46630. (Annexes M and N). In both The second ground, which is based on the Court of Appeals' reliance on the petitioner's letter of
invoices, Tesing Textiles is indicated to be only the mortgagee of the goods insured but the party to reconsideration of 18 January 1991, is without merit. The petitioner claims that the said letter was not
which they were issued were the "DISCOUNT MART (MR. ARMANDO GEAGONIA)." offered in evidence and thus should not have been considered in deciding the case. However, as
correctly pointed out by the Court of Appeals, a copy of this letter was attached to the petitioner's
complaint in I.C. Case No. 3440 as Annex "M" thereof and made integral part of the complaint. 12 It
In is clear that it was the private respondent [petitioner herein] who took out the policies on the same
has attained the status of a judicial admission and since its due execution and authenticity was not
property subject of the insurance with petitioner. Hence, in failing to disclose the existence of these
denied by the other party, the petitioner is bound by it even if it were not introduced as an
insurances private respondent violated Condition No. 3 of Fire Policy No. 1462. . . .
independent evidence. 13

Indeed private respondent's allegation of lack of knowledge of the provisions insurances is belied by
As to the first issue, the Insurance Commission found that the petitioner had no knowledge of the
his letter to petitioner [of 18 January 1991. The body of the letter reads as follows;]
previous two policies. The Court of Appeals disagreed and found otherwise in view of the explicit
admission by the petitioner in his letter to the private respondent of 18 January 1991, which was
xxx xxx xxx quoted in the challenged decision of the Court of Appeals. These divergent findings of fact constitute
Please be informed that I have no knowledge of the provision requiring me to inform your office about an exception to the general rule that in petitions for review under Rule 45, only questions of law are
my involved and findings of fact by the Court of Appeals are conclusive and binding upon this Court. 14
prior insurance under FGA-28146 and F-CEB-24758. Your representative did not mention about said
requirement at the time he was convincing me to insure with you. If he only die or even inquired if I
We agree with the Court of Appeals that the petitioner knew of the prior policies issued by the PFIC.
had other existing policies covering my establishment, I would have told him so. You will note that at
His letter of 18 January 1991 to the private respondent conclusively proves this knowledge. His
the time he talked to me until I decided to insure with your company the two policies aforementioned
testimony to the contrary before the Insurance Commissioner and which the latter relied upon cannot
were already in effect. Therefore I would have no reason to withhold such information and I would
prevail over a written admission made ante litem motam. It was, indeed, incredible that he did not
have desisted to part with my hard earned peso to pay the insurance premiums [if] I know I could not
know about the prior policies since these policies were not new or original. Policy No. GA-28144 was
recover anything.
a renewal of Policy No. F-24758, while Policy No. GA-28146 had been renewed twice, the previous
Sir, I am only an ordinary businessman interested in protecting my investments. The actual value of
policy being F-24792.
my stocks damaged by the fire was estimated by the Police Department to be P1,000,000.00 (Please
see xerox copy of Police Report Annex "A"). My Income Statement as of December 31, 1989 or five
months before the fire, shows my merchandise inventory was already some P595,455.75. . . . These Condition 3 of the private respondent's Policy No. F-14622 is a condition which is not proscribed by
will support my claim that the amount claimed under the three policies are much below the value of law. Its incorporation in the policy is allowed by Section 75 of the Insurance Code 15 which provides
my stocks lost. that "[a] policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the
breach of an immaterial provision does not avoid the policy." Such a condition is a provision which
invariably appears in fire insurance policies and is intended to prevent an increase in the moral
xxx xxx xxx
hazard. It is commonly known as the additional or "other insurance" clause and has been upheld as
The letter contradicts private respondent's pretension that he did not know that there were other
valid and as a warranty that no other insurance exists. Its violation would thus avoid the
insurances taken on the stock-in-trade and seriously puts in question his credibility.
policy. 16 However, in order to constitute a violation, the other insurance must be upon same subject
His motion to reconsider the adverse decision having been denied, the petitioner filed the instant
matter, the same interest therein, and the same risk. 17
petition. He contends therein that the Court of Appeals acted with grave abuse of discretion
amounting to lack or excess of jurisdiction:
As to a mortgaged property, the mortgagor and the mortgagee have each an independent insurable
interest therein and both interests may be one policy, or each may take out a separate policy
A . . . WHEN IT REVERSED THE FINDINGS OF FACTS OF THE INSURANCE COMMISSION, A
covering his interest, either at the same or at separate times. 18 The mortgagor's insurable interest
QUASI-JUDICIAL BODY CHARGED WITH THE DUTY OF DETERMINING INSURANCE CLAIM
covers the full value of the mortgaged property, even though the mortgage debt is equivalent to the
AND WHOSE DECISION IS ACCORDED RESPECT AND EVEN FINALITY BY THE COURTS;
full value of the property. 19 The mortgagee's insurable interest is to the extent of the debt, since the
B . . . WHEN IT CONSIDERED AS EVIDENCE MATTERS WHICH WERE NOT PRESENTED AS
property is relied upon as security thereof, and in insuring he is not insuring the property but his
EVIDENCE DURING THE HEARING OR TRIAL; AND
interest or lien thereon. His insurable interest is prima facie the value mortgaged and extends only to
the amount of the debt, not exceeding the value of the mortgaged property. 20 Thus, separate
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 20 of 26

insurances covering different insurable interests may be obtained by the mortgagor and the or insert it in the policy, without which such policy shall be null and void, and the insured will not be
mortgagee. entitled to indemnity in case of loss,"Condition 3 in the private respondent's policy No. F-14622 does
not absolutely declare void any violation thereof. It expressly provides that the condition "shall not
A mortgagor may, however, take out insurance for the benefit of the mortgagee, which is the usual apply when the total insurance or insurances in force at the time of the loss or damage is not more
practice. The mortgagee may be made the beneficial payee in several ways. He may become the than P200,000.00."
assignee of the policy with the consent of the insurer; or the mere pledgee without such consent; or
the original policy may contain a mortgage clause; or a rider making the policy payable to the It is a cardinal rule on insurance that a policy or insurance contract is to be interpreted liberally in
mortgagee "as his interest may appear" may be attached; or a "standard mortgage clause," favor of the insured and strictly against the company, the reason being, undoubtedly, to afford the
containing a collateral independent contract between the mortgagee and insurer, may be attached; or greatest protection which the insured was endeavoring to secure when he applied for insurance. It is
the policy, though by its terms payable absolutely to the mortgagor, may have been procured by a also a cardinal principle of law that forfeitures are not favored and that any construction which would
mortgagor under a contract duty to insure for the mortgagee's benefit, in which case the mortgagee result in the forfeiture of the policy benefits for the person claiming thereunder, will be avoided, if it is
acquires an equitable lien upon the proceeds. 21 possible to construe the policy in a manner which would permit recovery, as, for example, by finding
a waiver for such forfeiture. 29 Stated differently, provisions, conditions or exceptions in policies which
In the policy obtained by the mortgagor with loss payable clause in favor of the mortgagee as his tend to work a forfeiture of insurance policies should be construed most strictly against those for
interest may appear, the mortgagee is only a beneficiary under the contract, and recognized as such whose benefits they are inserted, and most favorably toward those against whom they are intended
by the insurer but not made a party to the contract himself. Hence, any act of the mortgagor which to operate. 30 The reason for this is that, except for riders which may later be inserted, the insured
defeats his right will also defeat the right of the mortgagee. 22 This kind of policy covers only such sees the contract already in its final form and has had no voice in the selection or arrangement of the
interest as the mortgagee has at the issuing of the policy. 23 words employed therein. On the other hand, the language of the contract was carefully chosen and
deliberated upon by experts and legal advisers who had acted exclusively in the interest of the
insurers and the technical language employed therein is rarely understood by ordinary laymen. 31
On the other hand, a mortgagee may also procure a policy as a contracting party in accordance with
the terms of an agreement by which the mortgagor is to pay the premiums upon such insurance. 24 It
has been noted, however, that although the mortgagee is himself the insured, as where he applies With these principles in mind, we are of the opinion that Condition 3 of the subject policy is not totally
for a policy, fully informs the authorized agent of his interest, pays the premiums, and obtains on the free from ambiguity and must, perforce, be meticulously analyzed. Such analysis leads us to
assurance that it insures him, the policy is in fact in the form used to insure a mortgagor with loss conclude that (a) the prohibition applies only to double insurance, and (b) the nullity of the policy shall
payable clause. 25 only be to the extent exceeding P200,000.00 of the total policies obtained.

The fire insurance policies issued by the PFIC name the petitioner as the assured and contain a The first conclusion is supported by the portion of the condition referring to other insurance "covering
mortgage clause which reads: any of the property or properties consisting of stocks in trade, goods in process and/or inventories
only hereby insured," and the portion regarding the insured's declaration on the subheading CO-
INSURANCE that the co-insurer is Mercantile Insurance Co., Inc. in the sum of P50,000.00. A double
Loss, if any, shall be payable to MESSRS. TESING TEXTILES, Cebu City as their interest may
insurance exists where the same person is insured by several insurers separately in respect of the
appear subject to the terms of this policy.
same subject and interest. As earlier stated, the insurable interests of a mortgagor and a mortgagee
on the mortgaged property are distinct and separate. Since the two policies of the PFIC do not cover
This is clearly a simple loss payable clause, not a standard mortgage clause. the same interest as that covered by the policy of the private respondent, no double insurance exists.
The non-disclosure then of the former policies was not fatal to the petitioner's right to recover on the
It must, however, be underscored that unlike the "other insurance" clauses involved in General private respondent's policy.
Insurance and Surety Corp. vs. Ng Hua 26 or in Pioneer Insurance & Surety Corp. vs. Yap, 27 which
read: Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total
insurance in force at the time of loss does not exceed P200,000.00, the private respondent was
The insured shall give notice to the company of any insurance or insurances already effected, or amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in
which may subsequently be effected covering any of the property hereby insured, and unless such mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of "other
notice be given and the particulars of such insurance or insurances be stated in or endorsed on this insurance" clause in fire policies is to prevent over-insurance and thus avert the perpetration of fraud.
Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits When a property owner obtains insurance policies from two or more insurers in a total amount that
under this Policy shall be forfeited. exceeds the property's value, the insured may have an inducement to destroy the property for the
purpose of collecting the insurance. The public as well as the insurer is interested in preventing a
or in the 1930 case of Santa Ana vs. Commercial Union Assurance situation in which a fire would be profitable to the insured. 32
Co. 28 which provided "that any outstanding insurance upon the whole or a portion of the objects
thereby assured must be declared by the insured in writing and he must cause the company to add
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 21 of 26

WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals in CA- admittedly signed by Reputables representatives, the terms thereof faithfully observed by the parties
G.R. SP No. 31916 is SET ASIDE and the decision of the Insurance Commission in Case No. 3340 and, as previously stated, the same contract of carriage had been annually executed by the parties
is REINSTATED. Costs against private respondent Country Bankers Insurance Corporation. SO ORDERED. every year since 1989.5

Under the contract, Reputable undertook to answer for "all risks with respect to the goods and shall
be liable to the COMPANY (Wyeth), for the loss, destruction, or damage of the goods/products due to
any and all causes whatsoever, including theft, robbery, flood, storm, earthquakes, lightning, and
other force majeure while the goods/products are in transit and until actual delivery to the customers,
salesmen, and dealers of the COMPANY".6

The contract also required Reputable to secure an insurance policy on Wyeths goods. 7 Thus, on
February 11, 1994, Reputable signed a Special Risk Insurance Policy (SR Policy) with petitioner
Malayan for the amount of P1,000,000.00.

G.R. No. 184300 July 11, 2012 On October 6, 1994, during the effectivity of the Marine Policy and SR Policy, Reputable received
from Wyeth 1,000 boxes of Promil infant formula worth P2,357,582.70 to be delivered by Reputable
MALAYAN INSURANCE CO., INC., Petitioner, to Mercury Drug Corporation in Libis, Quezon City. Unfortunately, on the same date, the truck
vs. PHILIPPINES FIRST INSURANCE CO., INC. and REPUTABLE FORWARDER SERVICES, carrying Wyeths products was hijacked by about 10 armed men. They threatened to kill the truck
INC., Respondents. driver and two of his helpers should they refuse to turn over the truck and its contents to the said
highway robbers. The hijacked truck was recovered two weeks later without its cargo.
REYES, J.:
On March 8, 1995, Philippines First, after due investigation and adjustment, and pursuant to the
Before the Court is a petitiOn for review on certiorari filed by petitioner Malayan Insurance Co., lnc. Marine Policy, paid Wyeth P2,133,257.00 as indemnity. Philippines First then demanded
(Malayan) assailing the Decision1 dated February 29, 2008 and Resolution 2 dated August 28, 2008 of reimbursement from Reputable, having been subrogated to the rights of Wyeth by virtue of the
the Court of Appeals (CA) in CA-G.R. CV No. 71204 which affirmed with modification the decision of payment. The latter, however, ignored the demand.
the Regional Trial Court (RTC), Branch 38 of Manila.
Consequently, Philippines First instituted an action for sum of money against Reputable on August
Antecedent Facts 12, 1996.8 In its complaint, Philippines First stated that Reputable is a "private corporation engaged
in the business of a common carrier." In its answer,9 Reputable claimed that it is a private carrier. It
also claimed that it cannot be made liable under the contract of carriage with Wyeth since the
Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable Forwarder Services, Inc.
contract was not signed by Wyeths representative and that the cause of the loss was force majeure,
(Reputable) had been annually executing a contract of carriage, whereby the latter undertook to
i.e., the hijacking incident.
transport and deliver the formers products to its customers, dealers or salesmen. 3

Subsequently, Reputable impleaded Malayan as third-party defendant in an effort to collect the


On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797 (Marine Policy) from
amount covered in the SR Policy. According to Reputable, "it was validly insured with Malayan for
respondent Philippines First Insurance Co., Inc. (Philippines First) to secure its interest over its own
P1,000,000.00 with respect to the lost products under the latters Insurance Policy No. SR-0001-
products. Philippines First thereby insured Wyeths nutritional, pharmaceutical and other products
02577 effective February 1, 1994 to February 1, 1995" and that the SR Policy covered the risk of
usual or incidental to the insureds business while the same were being transported or shipped in the
robbery or hijacking.10
Philippines. The policy covers all risks of direct physical loss or damage from any external cause, if
by land, and provides a limit of P6,000,000.00 per any one land vehicle.
Disclaiming any liability, Malayan argued, among others, that under Section 5 of the SR Policy, the
insurance does not cover any loss or damage to property which at the time of the happening of such
On December 1, 1993, Wyeth executed its annual contract of carriage with Reputable. It turned out,
loss or damage is insured by any marine policy and that the SR Policy expressly excluded third-party
however, that the contract was not signed by Wyeths representative/s. 4 Nevertheless, it was
liability.
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 22 of 26

After trial, the RTC rendered its Decision11 finding Reputable liable to Philippines First for the amount Malayan argued that inasmuch as there was already a marine policy issued by Philippines First
of indemnity it paid to Wyeth, among others. In turn, Malayan was found by the RTC to be liable to securing the same subject matter against loss and that since the monetary coverage/value of the
Reputable to the extent of the policy coverage. The dispositive portion of the RTC decision provides: Marine Policy is more than enough to indemnify the hijacked cargo, Philippines First alone must bear
the loss.
WHEREFORE, on the main Complaint, judgment is hereby rendered finding [Reputable] liable for the
loss of the Wyeth products and orders it to pay Philippines First the following: Malayan sought the dismissal of the third-party complaint against it. In the alternative, it prayed that it
be held liable for no more than P468,766.70, its alleged pro-rata share of the loss based on the
1. the amount of P2,133,257.00 representing the amount paid by Philippines First to Wyeth amount covered by the policy, subject to the provision of Section 12 of the SR Policy, which states:
for the loss of the products in question;
12. OTHER INSURANCE CLAUSE. If at the time of any loss or damage happening to any property
2. the amount of P15,650.00 representing the adjustment fees paid by Philippines First to hereby insured, there be any other subsisting insurance or insurances, whether effected by the
hired adjusters/surveyors; insured or by any other person or persons, covering the same property, the company shall not be
liable to pay or contribute more than its ratable proportion of such loss or damage.
3. the amount of P50,000.00 as attorneys fees; and
On February 29, 2008, the CA rendered the assailed decision sustaining the ruling of the RTC, the
4. the costs of suit. decretal portion of which reads:

On the third-party Complaint, judgment is hereby rendered finding WHEREFORE, in view of the foregoing, the assailed Decision dated 29 September 2000, as
modified in the Order dated 21 July 2001, is AFFIRMED with MODIFICATION in that the award of
Malayan liable to indemnify [Reputable] the following: attorneys fees in favor of Reputable is DELETED.

1. the amount of P1,000,000.00 representing the proceeds of the insurance policy; SO ORDERED.13

2. the amount of P50,000.00 as attorneys fees; and The CA ruled, among others, that: (1) Reputable is estopped from assailing the validity of the
contract of carriage on the ground of lack of signature of Wyeths representative/s; (2) Reputable is
liable under the contract for the value of the goods even if the same was lost due to fortuitous event;
3. the costs of suit.
and (3) Section 12 of the SR Policy prevails over Section 5, it being the latter provision; however,
since the ratable proportion provision of Section 12 applies only in case of double insurance, which is
SO ORDERED.12
not present, then it should not be applied and Malayan should be held liable for the full amount of the
policy coverage, that is, P1,000,000.00.14
Dissatisfied, both Reputable and Malayan filed their respective appeals from the RTC decision.
On March 14, 2008, Malayan moved for reconsideration of the assailed decision but it was denied by
Reputable asserted that the RTC erred in holding that its contract of carriage with Wyeth was binding the CA in its Resolution dated August 28, 2008. 15
despite Wyeths failure to sign the same. Reputable further contended that the provisions of the
contract are unreasonable, unjust, and contrary to law and public policy.
Hence, this petition.

For its part, Malayan invoked Section 5 of its SR Policy, which provides:
Malayan insists that the CA failed to properly resolve the issue on the "statutory limitations on the
liability of common carriers" and the "difference between an other insurance clause and an over
Section 5. INSURANCE WITH OTHER COMPANIES. The insurance does not cover any loss or insurance clause."
damage to property which at the time of the happening of such loss or damage is insured by or would
but for the existence of this policy, be insured by any Fire or Marine policy or policies except in
Malayan also contends that the CA erred when it held that Reputable is a private carrier and should
respect of any excess beyond the amount which would have been payable under the Fire or Marine
be bound by the contractual stipulations in the contract of carriage. This argument is based on its
policy or policies had this insurance not been effected.
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 23 of 26

assertion that Philippines First judicially admitted in its complaint that Reputable is a common carrier 4) Whether Reputable should be held solidarily liable with Malayan for the amount of
and as such, Reputable should not be held liable pursuant to Article 1745(6) of the Civil P998,000.00 due to Philippines First.
Code.16 Necessarily, if Reputable is not liable for the loss, then there is no reason to hold Malayan
liable to Reputable. The Courts Ruling

Further, Malayan posits that there resulted in an impairment of contract when the CA failed to apply On the first issue Reputable is a private carrier.
the express provisions of Section 5 (referred to by Malayan as over insurance clause) and Section 12
(referred to by Malayan as other insurance clause) of its SR Policy as these provisions could have The Court agrees with the RTC and CA that Reputable is a private carrier. Well-entrenched in
been read together there being no actual conflict between them. jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the
appellate court, are accorded the highest degree of respect and considered conclusive between the
Reputable, meanwhile, contends that it is exempt from liability for acts committed by thieves/robbers parties, save for certain exceptional and meritorious circumstances, none of which are present in this
who act with grave or irresistible threat whether it is a common carrier or a private/special carrier. It, case.18
however, maintains the correctness of the CA ruling that Malayan is liable to Philippines First for the
full amount of its policy coverage and not merely a ratable portion thereof under Section 12 of the SR Malayan relies on the alleged judicial admission of Philippines First in its complaint that Reputable is
Policy. a common carrier.19 Invoking Section 4, Rule 129 of the Rules on Evidence that "an admission verbal
or written, made by a party in the course of the proceeding in the same case, does not require proof,"
Finally, Philippines First contends that the factual finding that Reputable is a private carrier should be it is Malayans position that the RTC and CA should have ruled that
accorded the highest degree of respect and must be considered conclusive between the parties, and
that a review of such finding by the Court is not warranted under the circumstances. As to its alleged Reputable is a common carrier. Consequently, pursuant to Article 1745(6) of the Civil Code, the
judicial admission that Reputable is a common carrier, Philippines First proffered the declaration liability of Reputable for the loss of Wyeths goods should be dispensed with, or at least diminished.
made by Reputable that it is a private carrier. Said declaration was allegedly reiterated by Reputable
in its third party complaint, which in turn was duly admitted by Malayan in its answer to the said third- It is true that judicial admissions, such as matters alleged in the pleadings do not require proof, and
party complaint. In addition, Reputable even presented evidence to prove that it is a private carrier. need not be offered to be considered by the court. "The court, for the proper decision of the case,
may and should consider, without the introduction of evidence, the facts admitted by the
As to the applicability of Sections 5 and 12 in the SR Policy, Philippines First reiterated the ruling of parties."20 The rule on judicial admission, however, also states that such allegation, statement, or
the CA. Philippines First, however, prayed for a slight modification of the assailed decision, praying admission is conclusive as against the pleader,21 and that the facts alleged in the complaint are
that Reputable and Malayan be rendered solidarily liable to it in the amount of P998,000.00, which deemed admissions of the plaintiff and binding upon him. 22 In this case, the pleader or the plaintiff
represents the balance from the P1,000.000.00 coverage of the SR Policy after deducting P2,000.00 who alleged that Reputable is a common carrier was Philippines First. It cannot, by any stretch of
under Section 10 of the said SR Policy.17 imagination, be made conclusive as against Reputable whose nature of business is in question.

Issues It should be stressed that Philippines First is not privy to the SR Policy between Wyeth and
Reputable; rather, it is a mere subrogee to the right of Wyeth to collect from Reputable under the
The liability of Malayan under the SR Policy hinges on the following issues for resolution: terms of the contract of carriage. Philippines First is not in any position to make any admission, much
more a definitive pronouncement, as to the nature of Reputables business and there appears no
1) Whether Reputable is a private carrier; other connection between Philippines First and Reputable which suggests mutual familiarity between
them.
2) Whether Reputable is strictly bound by the stipulations in its contract of carriage with
Wyeth, such that it should be liable for any risk of loss or damage, for any cause Moreover, records show that the alleged judicial admission of Philippines First was essentially
whatsoever, including that due to theft or robbery and other force majeure; disputed by Reputable when it stated in paragraphs 2, 4, and 11 of its answer that it is actually a
private or special carrier.23 In addition, Reputable stated in paragraph 2 of its third-party complaint
3) Whether the RTC and CA erred in rendering "nugatory" Sections 5 and Section 12 of the that it is "a private carrier engaged in the carriage of goods." 24 Such allegation was, in turn, admitted
SR Policy; and by Malayan in paragraph 2 of its answer to the third-party complaint. 25 There is also nothing in the
records which show that Philippines First persistently maintained its stance that Reputable is a
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 24 of 26

common carrier or that it even contested or proved otherwise Reputables position that it is a private Since Sec. 5 calls for Malayans complete absolution in case the other insurance would be sufficient
or special carrier. to cover the entire amount of the loss, it is in direct conflict with Sec. 12 which provides only for a pro-
rated contribution between the two insurers. Being the later provision, and pursuant to the rules on
Hence, in the face of Reputables contrary admission as to the nature of its own business, what was interpretation of contracts, Sec. 12 should therefore prevail.
stated by Philippines First in its complaint is reduced to nothing more than mere allegation, which
must be proved for it to be given any weight or value. The settled rule is that mere allegation is not xxxx
proof.26
x x x The intention of both Reputable and Malayan should be given effect as against the wordings of
More importantly, the finding of the RTC and CA that Reputable is a special or private carrier is Sec. 12 of their contract, as it was intended by the parties to operate only in case of double
warranted by the evidence on record, primarily, the unrebutted testimony of Reputables Vice insurance, or where the benefits of the policies of both plaintiff-appellee and Malayan should pertain
President and General Manager, Mr. William Ang Lian Suan, who expressly stated in open court that to Reputable alone. But since the court a quo correctly ruled that there is no double insurance in this
Reputable serves only one customer, Wyeth. 27 case inasmuch as Reputable was not privy thereto, and therefore did not stand to benefit from the
policy issued by plaintiff-appellee in favor of Wyeth, then Malayans stand should be rejected.
Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or
associations engaged in the business of carrying or transporting passenger or goods, or both by To rule that Sec. 12 operates even in the absence of double insurance would work injustice to
land, water or air for compensation, offering their services to the public. On the other hand, a private Reputable which, despite paying premiums for a P1,000,000.00 insurance coverage, would not be
carrier is one wherein the carriage is generally undertaken by special agreement and it does not hold entitled to recover said amount for the simple reason that the same property is covered by another
itself out to carry goods for the general public. 28 A common carrier becomes a private carrier when it insurance policy, a policy to which it was not a party to and much less, from which it did not stand to
undertakes to carry a special cargo or chartered to a special person only. 29 For all intents and benefit. Plainly, this unfair situation could not have been the intention of both Reputable and Malayan
purposes, therefore, Reputable operated as a private/special carrier with regard to its contract of in signing the insurance contract in question. 33
carriage with Wyeth.
In questioning said ruling, Malayan posits that Sections 5 and 12 are separate provisions applicable
On the second issue Reputable is bound by the terms of the contract of carriage. under distinct circumstances. Malayan argues that "it will not be completely absolved under Section 5
of its policy if it were the assured itself who obtained additional insurance coverage on the same
The extent of a private carriers obligation is dictated by the stipulations of a contract it entered into, property and the loss incurred by Wyeths cargo was more than that insured by Philippines Firsts
provided its stipulations, clauses, terms and conditions are not contrary to law, morals, good marine policy. On the other hand, Section 12 will not completely absolve Malayan if additional
customs, public order, or public policy. "The Civil Code provisions on common carriers should not be insurance coverage on the same cargo were obtained by someone besides Reputable, in which case
applied where the carrier is not acting as such but as a private carrier. Public policy governing Malayans SR policy will contribute or share ratable proportion of a covered cargo loss." 34
common carriers has no force where the public at large is not involved." 30
Malayans position cannot be countenanced.
Thus, being a private carrier, the extent of Reputables liability is fully governed by the stipulations of
the contract of carriage, one of which is that it shall be liable to Wyeth for the loss of the Section 5 is actually the other insurance clause (also called "additional insurance" and "double
goods/products due to any and all causes whatsoever, including theft, robbery and other force insurance"), one akin to Condition No. 3 in issue in Geagonia v. CA, 35 which validity was upheld by
majeure while the goods/products are in transit and until actual delivery to Wyeths customers, the Court as a warranty that no other insurance exists. The Court ruled that Condition No. 3 36 is a
salesmen and dealers.31 condition which is not proscribed by law as its incorporation in the policy is allowed by Section 75 of
the Insurance Code. It was also the Courts finding that unlike the other insurance clauses, Condition
On the third issue other insurance vis--vis over insurance. No. 3 does not absolutely declare void any violation thereof but expressly provides that the condition
"shall not apply when the total insurance or insurances in force at the time of the loss or damage is
Malayan refers to Section 5 of its SR Policy as an "over insurance clause" and to Section 12 as a not more than P200,000.00."
"modified other insurance clause". 32 In rendering inapplicable said provisions in the SR Policy, the
CA ruled in this wise: In this case, similar to Condition No. 3 in Geagonia, Section 5 does not provide for the nullity of the
SR Policy but simply limits the liability of Malayan only up to the excess of the amount that was not
covered by the other insurance policy. In interpreting the "other insurance clause" in Geagonia, the
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 25 of 26

Court ruled that the prohibition applies only in case of double insurance. The Court ruled that in order The interest of Wyeth over the property subject matter of both insurance contracts is also different
to constitute a violation of the clause, the other insurance must be upon same subject matter, the and distinct from that of Reputables. The policy issued by Philippines First was in consideration of
same interest therein, and the same risk. Thus, even though the multiple insurance policies involved the legal and/or equitable interest of Wyeth over its own goods. On the other hand, what was issued
were all issued in the name of the same assured, over the same subject matter and covering the by Malayan to Reputable was over the latters insurable interest over the safety of the goods, which
same risk, it was ruled that there was no violation of the "other insurance clause" since there was no may become the basis of the latters liability in case of loss or damage to the property and falls within
double insurance. the contemplation of Section 15 of the Insurance Code. 39

Section 12 of the SR Policy, on the other hand, is the over insurance clause. More particularly, it Therefore, even though the two concerned insurance policies were issued over the same goods and
covers the situation where there is over insurance due to double insurance. In such case, Section 15 cover the same risk, there arises no double insurance since they were issued to two different
provides that Malayan shall "not be liable to pay or contribute more than its ratable proportion of such persons/entities having distinct insurable interests. Necessarily, over insurance by double insurance
loss or damage." This is in accord with the principle of contribution provided under Section 94(e) of cannot likewise exist. Hence, as correctly ruled by the RTC and CA, neither Section 5 nor Section 12
the Insurance Code,37 which states that "where the insured is over insured by double insurance, each of the SR Policy can be applied.
insurer is bound, as between himself and the other insurers, to contribute ratably to the loss in
proportion to the amount for which he is liable under his contract." Apart from the foregoing, the Court is also wont to strictly construe the controversial provisions of the
SR Policy against Malayan.1wphi1 This is in keeping with the rule that:
Clearly, both Sections 5 and 12 presuppose the existence of a double insurance. The pivotal
question that now arises is whether there is double insurance in this case such that either Section 5 "Indemnity and liability insurance policies are construed in accordance with the general rule of
or Section 12 of the SR Policy may be applied. resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared by the
insurer. A contract of insurance, being a contract of adhesion, par excellence, any ambiguity therein
By the express provision of Section 93 of the Insurance Code, double insurance exists where the should be resolved against the insurer; in other words, it should be construed liberally in favor of the
same person is insured by several insurers separately in respect to the same subject and interest. insured and strictly against the insurer. Limitations of liability should be regarded with extreme
The requisites in order for double insurance to arise are as follows: 38 jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its
obligations."40
1. The person insured is the same;
Moreover, the CA correctly ruled that:
2. Two or more insurers insuring separately;
To rule that Sec. 12 operates even in the absence of double insurance would work injustice to
3. There is identity of subject matter; Reputable which, despite paying premiums for a P1,000,000.00 insurance coverage, would not be
entitled to recover said amount for the simple reason that the same property is covered by another
4. There is identity of interest insured; and insurance policy, a policy to which it was not a party to and much less, from which it did not stand to
benefit. x x x41
5. There is identity of the risk or peril insured against.
On the fourth issue Reputable is not solidarily liable with Malayan.
In the present case, while it is true that the Marine Policy and the SR Policy were both issued over
the same subject matter, i.e. goods belonging to Wyeth, and both covered the same peril insured There is solidary liability only when the obligation expressly so states, when the law so provides or
against, it is, however, beyond cavil that the said policies were issued to two different persons or when the nature of the obligation so requires.
entities. It is undisputed that Wyeth is the recognized insured of Philippines First under its Marine
Policy, while Reputable is the recognized insured of Malayan under the SR Policy. The fact that In Heirs of George Y. Poe v. Malayan lnsurance Company., lnc., 42 the Court ruled that:
Reputable procured Malayans SR Policy over the goods of Wyeth pursuant merely to the stipulated
requirement under its contract of carriage with the latter does not make Reputable a mere agent of Where the insurance contract provides for indemnity against liability to third persons, the liability of
Wyeth in obtaining the said SR Policy. the insurer is direct and such third persons can directly sue the insurer. The direct liability of the
insurer under indemnity contracts against third party[- ]liability does not mean, however, that the
INSURANCE Cessy Ciar Beneficiary, Premium, Double Insurance) -Page 26 of 26

insurer can be held solidarily liable with the insured and/or the other parties found at fault, since they FACTS:
are being held liable under different obligations. The liability of the insured carrier or vehicle owner is Aurelio Lacson ,owner of a Toyota NP Land Cruiser, Model 1972, bearing Plate No. NY-
based on tort, in accordance with the provisions of the Civil Code; while that of the insurer arises 362 and with engine Number F-374325 insured with Malayan Insurance Co
from contract, particularly, the insurance policy: 43 (Citation omitted and emphasis supplied) Dec. 1, 1975: Aurelio brought it to the shop of Carlos Jamelo for repair
Dec. 2, 1975: Rogelio Mahinay, together with Johnny Mahinay, Rogelio Macapagong
Suffice it to say that Malayan's and Reputable's respective liabilities arose from different obligations-
and Rogelio Francisco took and drove the Toyota Land Cruiser and it met an accident with
Malayan's is based on the SR Policy while Reputable's is based on the contract of carriage.
Bo
Carlos reported the incident to the police and instituted a criminal case for Qualified
All told, the Court finds no reversible error in the judgment sought to be reviewed.
Theft against his employees
Rogelio Mahinay pleaded guilty and was convicted of theft
WHEREFORE, premises considered, the petition is DENIED. The Decision dated February 29, 2008
and Resolution dated August 28, 2008 of the Court of Appeals in CA-G.R. CV No. 71204 are hereby
Aurelio was not allowed to claim on the ground that the claim is not covered by the
AFFIRMED. policy inasmuch as the driver of the insured vehicle at the time of the accident was not a
duly licensed driver
Cost against petitioner Malayan Insurance Co., Inc. Trial Court: favored Aurelio
CA: Affirmed
SO ORDERED.
ISSUE: W/N the taking of the vehicle by another person without permission or authority from the
owner or person-in-charge thereof is sufficient to place it within the ambit of the word theft in the
policy

HELD: YES.

The damages therefore were sustained in the course of the unlawful taking
Bacolod IFCs interest in the insured vehicle was in the amount of P2,000.00 only
compared to plaintiff's P26,000.00 it is well to presume that Bacolod IFC did not deem it
Lessons Applicable: Motor Vehicle Liability Insurance - Authorized Driver Cause (Insurance) wise to be impleaded as party-plaintiff in this case. This inaction on the part of BIFC will
Laws Applicable: only show that it was not really interested to intervene.