G.R. No.
L-15895 November 29, 1920 The chief clerk of the Manila office of the Sun Life Assurance Company of
RAFAEL ENRIQUEZ, as administrator of the estate of the late Joaquin Ma.
Herrer, plaintiff-appellant, vs. SUN LIFE ASSURANCE COMPANY OF
CANADA, defendant-appellee.
This is an action brought by the plaintiff ad administrator of the estate of
the late Joaquin Ma. Herrer to recover from the defendant life insurance
company the sum of pesos 6,000 paid by the deceased for a life annuity. The
trial court gave judgment for the defendant. Plaintiff appeals.
The undisputed facts are these: On September 24, 1917, Joaquin Herrer
made application to the Sun Life Assurance Company of Canada through its
office in Manila for a life annuity. Two days later he paid the sum of P6,000
to the manager of the company's Manila office and was given a receipt
reading as follows:
MANILA, I. F., 26 de septiembre, 1917.
PROVISIONAL RECEIPT Pesos 6,000
Recibi la suma de seis mil pesos de Don Joaquin Herrer de Manila como
prima dela Renta Vitalicia solicitada por dicho Don Joaquin Herrer hoy,
sujeta al examen medico y aprobacion de la Oficina Central de la Compañia.
The application was immediately forwarded to the head office of the
company at Montreal, Canada. On November 26, 1917, the head office gave
notice of acceptance by cable to Manila. (Whether on the same day the
cable was received notice was sent by the Manila office of Herrer that the
application had been accepted, is a disputed point, which will be discussed
later.) On December 4, 1917, the policy was issued at Montreal. On
December 18, 1917, attorney Aurelio A. Torres wrote to the Manila office of
the company stating that Herrer desired to withdraw his application. The
following day the local office replied to Mr. Torres, stating that the policy
had been issued, and called attention to the notification of November 26,
1917. This letter was received by Mr. Torres on the morning of December
21, 1917. Mr. Herrer died on December 20, 1917.
As above suggested, the issue of fact raised by the evidence is whether
Herrer received notice of acceptance of his application. To resolve this
question, we propose to go directly to the evidence of record.
Canada at the time of the trial testified that he prepared the letter
introduced in evidence as Exhibit 3, of date November 26, 1917, and handed
it to the local manager, Mr. E. E. White, for signature. The witness admitted
on cross-examination that after preparing the letter and giving it to he
manager, he new nothing of what became of it. The local manager, Mr.
White, testified to having received the cablegram accepting the application
of Mr. Herrer from the home office on November 26, 1917. He said that on
the same day he signed a letter notifying Mr. Herrer of this acceptance. The
witness further said that letters, after being signed, were sent to the chief
clerk and placed on the mailing desk for transmission. The witness could not
tell if the letter had every actually been placed in the mails. Mr. Tuason,
who was the chief clerk, on November 26, 1917, was not called as a witness.
For the defense, attorney Manuel Torres testified to having prepared the
will of Joaquin Ma. Herrer, that on this occasion, Mr. Herrer mentioned his
application for a life annuity, and that he said that the only document
relating to the transaction in his possession was the provisional receipt.
Rafael Enriquez, the administrator of the estate, testified that he had gone
through the effects of the deceased and had found no letter of notification
from the insurance company to Mr. Herrer.
Our deduction from the evidence on this issue must be that the letter of
November 26, 1917, notifying Mr. Herrer that his application had been
accepted, was prepared and signed in the local office of the insurance
company, was placed in the ordinary channels for transmission, but as far as
we know, was never actually mailed and thus was never received by the
applicant.
Not forgetting our conclusion of fact, it next becomes necessary to
determine the law which should be applied to the facts. In order to reach
our legal goal, the obvious signposts along the way must be noticed.
Until quite recently, all of the provisions concerning life insurance in the
Philippines were found in the Code of Commerce and the Civil Code. In the
Code of the Commerce, there formerly existed Title VIII of Book III and
Section III of Title III of Book III, which dealt with insurance contracts. In the
Civil Code there formerly existed and presumably still exist, Chapters II and
IV, entitled insurance contracts and life annuities, respectively, of Title XII of
Book IV. On the after July 1, 1915, there was, however, in force the
Insurance Act. No. 2427. Chapter IV of this Act concerns life and health
insurance. The Act expressly repealed Title VIII of Book II and Section III of
Title III of Book III of the code of Commerce. The law of insurance is
consequently now found in the Insurance Act and the Civil Code.
While, as just noticed, the Insurance Act deals with life insurance, it is silent
as to the methods to be followed in order that there may be a contract of
insurance. On the other hand, the Civil Code, in article 1802, not only
describes a contact of life annuity markedly similar to the one we are
considering, but in two other articles, gives strong clues as to the proper
disposition of the case. For instance, article 16 of the Civil Code provides
that "In matters which are governed by special laws, any deficiency of the
latter shall be supplied by the provisions of this Code." On the supposition,
therefore, which is incontestable, that the special law on the subject of
insurance is deficient in enunciating the principles governing acceptance,
the subject-matter of the Civil code, if there be any, would be controlling. In
the Civil Code is found article 1262 providing that "Consent is shown by the
concurrence of offer and acceptance with respect to the thing and the
consideration which are to constitute the contract. An acceptance made by
letter shall not bind the person making the offer except from the time it
came to his knowledge. The contract, in such case, is presumed to have
been entered into at the place where the offer was made." This latter article
is in opposition to the provisions of article 54 of the Code of Commerce.
If no mistake has been made in announcing the successive steps by which
we reach a conclusion, then the only duty remaining is for the court to apply
the law as it is found. The legislature in its wisdom having enacted a new
law on insurance, and expressly repealed the provisions in the Code of
Commerce on the same subject, and having thus left a void in the
commercial law, it would seem logical to make use of the only pertinent
provision of law found in the Civil code, closely related to the chapter
concerning life annuities.
The Civil Code rule, that an acceptance made by letter shall bind the person
making the offer only from the date it came to his knowledge, may not be
the best expression of modern commercial usage. Still it must be admitted
that its enforcement avoids uncertainty and tends to security. Not only this,
but in order that the principle may not be taken too lightly, let it be noticed
that it is identical with the principles announced by a considerable number
of respectable courts in the United States. The courts who take this view
have expressly held that an acceptance of an offer of insurance not actually
or constructively communicated to the proposer does not make a contract.
Only the mailing of acceptance, it has been said, completes the contract of
insurance, as the locus poenitentiae is ended when the acceptance has
passed beyond the control of the party. (I Joyce, The Law of Insurance, pp.
235, 244.)
In resume, therefore, the law applicable to the case is found to be the
second paragraph of article 1262 of the Civil Code providing that an
acceptance made by letter shall not bind the person making the offer except
from the time it came to his knowledge. The pertinent fact is, that according
to the provisional receipt, three things had to be accomplished by the
insurance company before there was a contract: (1) There had to be a
medical examination of the applicant; (2) there had to be approval of the
application by the head office of the company; and (3) this approval had in
some way to be communicated by the company to the applicant. The
further admitted facts are that the head office in Montreal did accept the
application, did cable the Manila office to that effect, did actually issue the
policy and did, through its agent in Manila, actually write the letter of
notification and place it in the usual channels for transmission to the
addressee. The fact as to the letter of notification thus fails to concur with
the essential elements of the general rule pertaining to the mailing and
delivery of mail matter as announced by the American courts, namely, when
a letter or other mail matter is addressed and mailed with postage prepaid
there is a rebuttable presumption of fact that it was received by the
addressee as soon as it could have been transmitted to him in the ordinary
course of the mails. But if any one of these elemental facts fails to appear, it
is fatal to the presumption. For instance, a letter will not be presumed to
have been received by the addressee unless it is shown that it was
deposited in the post-office, properly addressed and stamped. (See 22 C.J.,
96, and 49 L. R. A. [N. S.], pp. 458, et seq., notes.)
We hold that the contract for a life annuity in the case at bar was not
perfected because it has not been proved satisfactorily that the acceptance
of the application ever came to the knowledge of the applicant.lawph!l.net
Judgment is reversed, and the plaintiff shall have and recover from the
defendant the sum of P6,000 with legal interest from November 20, 1918,
until paid, without special finding as to costs in either instance. So ordered.
 G.R. No. L-109937 March 21, 1994
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF
APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented by
CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION INSURANCE
POOL, respondents.
This is a petition for review on certiorari under Rule 45 of the Revised Rules
of Court to reverse and set aside the decision of the Court of Appeals in CA-
G.R CV No. 26434 and its resolution denying reconsideration thereof.
We affirm the decision of the Court of Appeals with modification.
I. In May 1987, Juan B. Dans, together with his wife Candida, his son and
daughter-in-law, applied for a loan of P500,000.00 with the
Development Bank of the Philippines (DBP), Basilan Branch. As the
principal mortgagor, Dans, then 76 years of age, was advised by DBP to
obtain a mortgage redemption insurance (MRI) with the DBP Mortgage
Redemption Insurance Pool (DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by DBP on
August 4, 1987 and released on August 11, 1987. From the proceeds of the
loan, DBP deducted the amount of P1,476.00 as payment for the MRI
premium. On August 15, 1987, Dans accomplished and submitted the "MRI
Application for Insurance" and the "Health Statement for DBP MRI Pool."
On August 20, 1987, the MRI premium of Dans, less the DBP service fee of
10 percent, was credited by DBP to the savings account of the DBP MRI
Pool. Accordingly, the DBP MRI Pool was advised of the credit.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice,
relayed this information to the DBP MRI Pool. On September 23, 1987, the
DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage,
being over the acceptance age limit of 60 years at the time of application.
On October 21, 1987, DBP apprised Candida Dans of the disapproval of her
late husband's MRI application. The DBP offered to refund the premium of
P1,476.00 which the deceased had paid, but Candida Dans refused to accept
the same, demanding payment of the face value of the MRI or an amount
equivalent to the loan. She, likewise, refused to accept an ex
gratia settlement of P30,000.00, which the DBP later offered.
On February 10, 1989, respondent Estate, through Candida Dans as
administratrix, filed a complaint with the Regional Trial Court, Branch I,
Basilan, against DBP and the insurance pool for "Collection of Sum of Money
with Damages." Respondent Estate alleged that Dans became insured by the
DBP MRI Pool when DBP, with full knowledge of Dans' age at the time of
application, required him to apply for MRI, and later collected the insurance
premium thereon. Respondent Estate therefore prayed: (1) that the sum of
P139,500.00, which it paid under protest for the loan, be reimbursed; (2)
that the mortgage debt of the deceased be declared fully paid; and (3) that
damages be awarded.
The DBP and the DBP MRI Pool separately filed their answers, with the
former asserting a cross-claim against the latter.
At the pre-trial, DBP and the DBP MRI Pool admitted all the documents and
exhibits submitted by respondent Estate. As a result of these admissions,
the trial court narrowed down the issues and, without opposition from the
parties, found the case ripe for summary judgment. Consequently, the trial
court ordered the parties to submit their respective position papers and
documentary evidence, which may serve as basis for the judgment.
On March 10, 1990, the trial court rendered a decision in favor of
respondent Estate and against DBP. The DBP MRI Pool, however, was
absolved from liability, after the trial court found no privity of contract
between it and the deceased. The trial court declared DBP in estoppel for
having led Dans into applying for MRI and actually collecting the premium
and the service fee, despite knowledge of his age ineligibility. The
dispositive portion of the decision read as follows:
WHEREFORE, in view of the foregoing consideration and in
the furtherance of justice and equity, the Court finds
judgment for the plaintiff and against Defendant DBP,
ordering the latter:
1. To return and reimburse plaintiff the amount of P139,500.00 plus
legal rate of interest as amortization payment paid under protest;
 2. To consider the mortgage loan of P300,000.00 including all interest
accumulated or otherwise to have been settled, satisfied or set-off by
virtue of the insurance coverage of the late Juan B. Dans;
3. To pay plaintiff the amount of P10,000.00 as attorney's fees;
4. To pay plaintiff in the amount of P10,000.00 as costs of litigation and
other expenses, and other relief just and equitable.
The Counterclaims of Defendants DBP and DBP MRI POOL are hereby
dismissed. The Cross-claim of Defendant DBP is likewise dismissed
(Rollo, p. 79)
The DBP appealed to the Court of Appeals. In a decision dated September 7,
1992, the appellate court affirmed in toto the decision of the trial court. The
DBP's motion for reconsideration was denied in a resolution dated April 20,
1993.
Hence, this recourse.
II. When Dans applied for MRI, he filled up and personally signed a "Health
Statement for DBP MRI Pool" (Exh. "5-Bank") with the following
declaration:
I hereby declare and agree that all the statements and answers
contained herein are true, complete and correct to the best of my
knowledge and belief and form part of my application for insurance. It is
understood and agreed that no insurance coverage shall be effected
unless and until this application is approved and the full premium is paid
during my continued good health (Records, p. 40).
Under the aforementioned provisions, the MRI coverage shall take effect:
(1) when the application shall be approved by the insurance pool; and (2)
when the full premium is paid during the continued good health of the
applicant. These two conditions, being joined conjunctively, must concur.
Undisputably, the power to approve MRI applications is lodged with the DBP
MRI Pool. The pool, however, did not approve the application of Dans.
There is also no showing that it accepted the sum of P1,476.00, which DBP
credited to its account with full knowledge that it was payment for Dan's
premium. There was, as a result, no perfected contract of insurance; hence,
the DBP MRI Pool cannot be held liable on a contract that does not exist.
The liability of DBP is another matter.
It was DBP, as a matter of policy and practice, that required Dans, the
borrower, to secure MRI coverage. Instead of allowing Dans to look for his
own insurance carrier or some other form of insurance policy, DBP
compelled him to apply with the DBP MRI Pool for MRI coverage. When
Dan's loan was released on August 11, 1987, DBP already deducted from the
proceeds thereof the MRI premium. Four days latter, DBP made Dans fill up
and sign his application for MRI, as well as his health statement. The DBP
later submitted both the application form and health statement to the DBP
MRI Pool at the DBP Main Building, Makati Metro Manila. As service fee,
DBP deducted 10 percent of the premium collected by it from Dans.
In dealing with Dans, DBP was wearing two legal hats: the first as a lender,
and the second as an insurance agent.
As an insurance agent, DBP made Dans go through the motion of applying
for said insurance, thereby leading him and his family to believe that they
had already fulfilled all the requirements for the MRI and that the issuance
of their policy was forthcoming. Apparently, DBP had full knowledge that
Dan's application was never going to be approved. The maximum age for
MRI acceptance is 60 years as clearly and specifically provided in Article 1 of
the Group Mortgage Redemption Insurance Policy signed in 1984 by all the
insurance companies concerned (Exh. "1-Pool").
Under Article 1987 of the Civil Code of the Philippines, "the agent who acts
as such is not personally liable to the party with whom he contracts, unless
he expressly binds himself or exceeds the limits of his authority without
giving such party sufficient notice of his powers."
The DBP is not authorized to accept applications for MRI when its clients are
more than 60 years of age (Exh. "1-Pool"). Knowing all the while that Dans
was ineligible for MRI coverage because of his advanced age, DBP exceeded
the scope of its authority when it accepted Dan's application for MRI by
collecting the insurance premium, and deducting its agent's commission and
service fee.
The liability of an agent who exceeds the scope of his authority depends
upon whether the third person is aware of the limits of the agent's powers.
There is no showing that Dans knew of the limitation on DBP's authority to
solicit applications for MRI.
If the third person dealing with an agent is unaware of the limits of the
authority conferred by the principal on the agent and he (third person) has
been deceived by the non-disclosure thereof by the agent, then the latter is
liable for damages to him (V Tolentino, Commentaries and Jurisprudence on
the Civil Code of the Philippines, p. 422 [1992], citing Sentencia [Cuba] of
September 25, 1907). The rule that the agent is liable when he acts without
authority is founded upon the supposition that there has been some wrong
or omission on his part either in misrepresenting, or in affirming, or
concealing the authority under which he assumes to act (Francisco, V.,
Agency 307 [1952], citing Hall v. Lauderdale, 46 N.Y. 70, 75). Inasmuch as
the non-disclosure of the limits of the agency carries with it the implication
that a deception was perpetrated on the unsuspecting client, the provisions
of Articles 19, 20 and 21 of the Civil Code of the Philippines come into play.
Article 19 provides:
Every person must, in the exercise of his rights and in the performance
of his duties, act with justice give everyone his due and observe honesty
and good faith.
Article 20 provides:
Every person who, contrary to law, willfully or negligently causes
damage to another, shall indemnify the latter for the same.
Article 21 provides:
Any person, who willfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
The DBP's liability, however, cannot be for the entire value of the insurance
policy. To assume that were it not for DBP's concealment of the limits of its
authority, Dans would have secured an MRI from another insurance
company, and therefore would have been fully insured by the time he died,
is highly speculative. Considering his advanced age, there is no absolute
certainty that Dans could obtain an insurance coverage from another
company. It must also be noted that Dans died almost immediately, i.e., on
the nineteenth day after applying for the MRI, and on the twenty-third day
from the date of release of his loan.
One is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved (Civil Code of the Philippines, Art.
2199). Damages, to be recoverable, must not only be capable of proof, but
must be actually proved with a reasonable degree of certainty (Refractories
Corporation v. Intermediate Appellate Court, 176 SCRA 539 [1989]; Choa
Tek Hee v. Philippine Publishing Co., 34 Phil. 447 [1916]). Speculative
damages are too remote to be included in an accurate estimate of damages
(Sun Life Assurance v. Rueda Hermanos, 37 Phil. 844 [1918]).
While Dans is not entitled to compensatory damages, he is entitled to moral
damages. No proof of pecuniary loss is required in the assessment of said
kind of damages (Civil Code of Philippines, Art. 2216). The same may be
recovered in acts referred to in Article 2219 of the Civil Code.
The assessment of moral damages is left to the discretion of the court
according to the circumstances of each case (Civil Code of the Philippines,
Art. 2216). Considering that DBP had offered to pay P30,000.00 to
respondent Estate in ex gratia settlement of its claim and that DBP's non-
disclosure of the limits of its authority amounted to a deception to its client,
an award of moral damages in the amount of P50,000.00 would be
reasonable.
The award of attorney's fees is also just and equitable under the
circumstances (Civil Code of the Philippines, Article 2208 [11]).
WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV
No. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to REIMBURSE
respondent Estate of Juan B. Dans the amount of P1,476.00 with legal
interest from the date of the filing of the complaint until fully paid; and (2)
to PAY said Estate the amount of Fifty Thousand Pesos (P50,000.00) as
moral damages and the amount of Ten Thousand Pesos (P10,000.00) as
attorney's fees. With costs against petitioner.
SO ORDERED.
 G.R. No. L-31845 April 30, 1979
GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner, vs. HONORABLE
COURT OF APPEALS, respondents.
G.R. No. L-31878 April 30, 1979
LAPULAPU D. MONDRAGON, petitioner, vs. HON. COURT OF APPEALS and
NGO HING, respondents.
The two above-entitled cases were ordered consolidated by the Resolution
of this Court dated April 29, 1970, (Rollo, No. L-31878, p. 58), because the
petitioners in both cases seek similar relief, through these petitions for
certiorari by way of appeal, from the amended decision of respondent Court
of Appeals which affirmed in toto the decision of the Court of First Instance
of Cebu, ordering "the defendants (herein petitioners Great Pacific Ligfe
Assurance Company and Mondragon) jointly and severally to pay plaintiff
(herein private respondent Ngo Hing) the amount of P50,000.00 with
interest at 6% from the date of the filing of the complaint, and the sum of
P1,077.75, without interest.
It appears that on March 14, 1957, private respondent Ngo Hing filed an
application with the Great Pacific Life Assurance Company (hereinafter
referred to as Pacific Life) for a twenty-year endownment policy in the
amount of P50,000.00 on the life of his one-year old daughter Helen Go.
Said respondent supplied the essential data which petitioner Lapulapu D.
Mondragon, Branch Manager of the Pacific Life in Cebu City wrote on the
corresponding form in his own handwriting (Exhibit I-M). Mondragon finally
type-wrote the data on the application form which was signed by private
respondent Ngo Hing. The latter paid the annual premuim the sum of
P1,077.75 going over to the Company, but he reatined the amount of
P1,317.00 as his commission for being a duly authorized agebt of Pacific Life.
Upon the payment of the insurance premuim, the binding deposit receipt
(Exhibit E) was issued to private respondent Ngo Hing. Likewise, petitioner
Mondragon handwrote at the bottom of the back page of the application
form his strong recommendation for the approval of the insurance
application. Then on April 30, 1957, Mondragon received a letter from
Pacific Life disapproving the insurance application (Exhibit 3-M). The letter
stated that the said life insurance application for 20-year endowment plan is
not available for minors below seven years old, but Pacific Life can consider
the same under the Juvenile Triple Action Plan, and advised that if the offer
is acceptable, the Juvenile Non-Medical Declaration be sent to the company.
The non-acceptance of the insurance plan by Pacific Life was allegedly not
communicated by petitioner Mondragon to private respondent Ngo Hing.
Instead, on May 6, 1957, Mondragon wrote back Pacific Life again strongly
recommending the approval of the 20-year endowment insurance plan to
children, pointing out that since 1954 the customers, especially the Chinese,
were asking for such coverage (Exhibit 4-M).
It was when things were in such state that on May 28, 1957 Helen Go died
of influenza with complication of bronchopneumonia. Thereupon, private
respondent sought the payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for the recovery of the same
before the Court of First Instance of Cebu, which rendered the adverse
decision as earlier refered to against both petitioners.
The decisive issues in these cases are: (1) whether the binding deposit
receipt (Exhibit E) constituted a temporary contract of the life insurance in
question; and (2) whether private respondent Ngo Hing concealed the state
of health and physical condition of Helen Go, which rendered void the
aforesaid Exhibit E.
1. At the back of Exhibit E are condition precedents required before a
deposit is considered a BINDING RECEIPT. These conditions state that:
A. If the Company or its agent, shan have received the premium deposit
... and the insurance application, ON or PRIOR to the date of medical
examination ... said insurance shan be in force and in effect from the
date of such medical examination, for such period as is covered by the
deposit ..., PROVIDED the company shall be satisfied that on said date
the applicant was insurable on standard rates under its rule for the
amount of insurance and the kind of policy requested in the application.
D. If the Company does not accept the application on standard rate for
the amount of insurance and/or the kind of policy requested in the
application but issue, or offers to issue a policy for a different plan
and/or amount ..., the insurance shall not be in force and in effect until
the applicant shall have accepted the policy as issued or offered by the
Company and shall have paid the full premium thereof. If the applicant
does not accept the policy, the deposit shall be refunded.
 E. If the applicant shall not have been insurable under Condition A
above, and the Company declines to approve the application the
insurance applied for shall not have been in force at any time and the
sum paid be returned to the applicant upon the surrender of this
receipt. (Emphasis Ours).
The aforequoted provisions printed on Exhibit E show that the binding
deposit receipt is intended to be merely a provisional or temporary
insurance contract and only upon compliance of the following conditions:
(1) that the company shall be satisfied that the applicant was insurable on
standard rates; (2) that if the company does not accept the application and
offers to issue a policy for a different plan, the insurance contract shall not
be binding until the applicant accepts the policy offered; otherwise, the
deposit shall be reftmded; and (3) that if the applicant is not ble according
to the standard rates, and the company disapproves the application, the
insurance applied for shall not be in force at any time, and the premium
paid shall be returned to the applicant.
Clearly implied from the aforesaid conditions is that the binding deposit
receipt in question is merely an acknowledgment, on behalf of the
company, that the latter's branch office had received from the applicant the
insurance premium and had accepted the application subject for processing
by the insurance company; and that the latter will either approve or reject
the same on the basis of whether or not the applicant is "insurable on
standard rates." Since petitioner Pacific Life disapproved the insurance
application of respondent Ngo Hing, the binding deposit receipt in question
had never become in force at any time.
Upon this premise, the binding deposit receipt (Exhibit E) is, manifestly,
merely conditional and does not insure outright. As held by this Court,
where an agreement is made between the applicant and the agent, no
liability shall attach until the principal approves the risk and a receipt is
given by the agent. The acceptance is merely conditional and is
subordinated to the act of the company in approving or rejecting the
application. Thus, in life insurance, a "binding slip" or "binding receipt" does
not insure by itself (De Lim vs. Sun Life Assurance Company of Canada, 41
Phil. 264).
It bears repeating that through the intra-company communication of April
30, 1957 (Exhibit 3-M), Pacific Life disapproved the insurance application in
question on the ground that it is not offering the twenty-year endowment
insurance policy to children less than seven years of age. What it offered
instead is another plan known as the Juvenile Triple Action, which private
respondent failed to accept. In the absence of a meeting of the minds
between petitioner Pacific Life and private respondent Ngo Hing over the
20-year endowment life insurance in the amount of P50,000.00 in favor of
the latter's one-year old daughter, and with the non-compliance of the
abovequoted conditions stated in the disputed binding deposit receipt,
there could have been no insurance contract duly perfected between thenl
Accordingly, the deposit paid by private respondent shall have to be
refunded by Pacific Life.
As held in De Lim vs. Sun Life Assurance Company of Canada, supra, "a
contract of insurance, like other contracts, must be assented to by both
parties either in person or by their agents ... The contract, to be binding
from the date of the application, must have been a completed contract, one
that leaves nothing to be dione, nothing to be completed, nothing to be
passed upon, or determined, before it shall take effect. There can be no
contract of insurance unless the minds of the parties have met in
agreement."
We are not impressed with private respondent's contention that failure of
petitioner Mondragon to communicate to him the rejection of the insurance
application would not have any adverse effect on the allegedly perfected
temporary contract (Respondent's Brief, pp. 13-14). In this first place, there
was no contract perfected between the parties who had no meeting of their
minds. Private respondet, being an authorized insurance agent of Pacific Life
at Cebu branch office, is indubitably aware that said company does not offer
the life insurance applied for. When he filed the insurance application in
dispute, private respondent was, therefore, only taking the chance that
Pacific Life will approve the recommendation of Mondragon for the
acceptance and approval of the application in question along with his
proposal that the insurance company starts to offer the 20-year endowment
insurance plan for children less than seven years. Nonetheless, the record
discloses that Pacific Life had rejected the proposal and recommendation.
Secondly, having an insurable interest on the life of his one-year old
daughter, aside from being an insurance agent and an offense associate of
petitioner Mondragon, private respondent Ngo Hing must have known and
followed the progress on the processing of such application and could not
pretend ignorance of the Company's rejection of the 20-year endowment
life insurance application.
At this juncture, We find it fit to quote with approval, the very apt
observation of then Appellate Associate Justice Ruperto G. Martin who later
came up to this Court, from his dissenting opinion to the amended decision
of the respondent court which completely reversed the original decision,
the following:
Of course, there is the insinuation that neither the memorandum of
rejection (Exhibit 3-M) nor the reply thereto of appellant Mondragon
reiterating the desire for applicant's father to have the application
considered as one for a 20-year endowment plan was ever duly
communicated to Ngo; Hing, father of the minor applicant. I am not
quite convinced that this was so. Ngo Hing, as father of the applicant
herself, was precisely the "underwriter who wrote this case" (Exhibit H-
1). The unchallenged statement of appellant Mondragon in his letter of
May 6, 1957) (Exhibit 4-M), specifically admits that said Ngo Hing was
"our associate" and that it was the latter who "insisted that the plan be
placed on the 20-year endowment plan." Under these circumstances, it
is inconceivable that the progress in the processing of the application
was not brought home to his knowledge. He must have been duly
apprised of the rejection of the application for a 20-year endowment
plan otherwise Mondragon would not have asserted that it was Ngo
Hing himself who insisted on the application as originally filed, thereby
implictly declining the offer to consider the application under the
Juvenile Triple Action Plan. Besides, the associate of Mondragon that he
was, Ngo Hing should only be presumed to know what kind of policies
are available in the company for minors below 7 years old. What he and
Mondragon were apparently trying to do in the premises was merely to
prod the company into going into the business of issuing endowment
policies for minors just as other insurance companies allegedly do. Until
such a definite policy is however, adopted by the company, it can hardly
be said that it could have been bound at all under the binding slip for a
plan of insurance that it could not have, by then issued at all. (Amended
Decision, Rollo, pp- 52-53).
2. Relative to the second issue of alleged concealment. this Court is of the
firm belief that private respondent had deliberately concealed the state of
health and piysical condition of his daughter Helen Go. Where private
respondent supplied the required essential data for the insurance
application form, he was fully aware that his one-year old daughter is
typically a mongoloid child. Such a congenital physical defect could never be
ensconced nor distinguished. Nonetheless, private respondent, in apparent
bad faith, withheld the fact materal to the risk to be assumed by the
insurance company. As an insurance agent of Pacific Life, he ought to know,
as he surely must have known. His duty and responsibility to such a material
fact. Had he diamond said significant fact in the insurance application from
Pacific Life would have verified the same and would have had no choice but
to disapprove the application outright.
The contract of insurance is one of perfect good faith uberrima fides
meaning good faith, absolute and perfect candor or openness and honesty;
the absence of any concealment or demotion, however slight [Black's Law
Dictionary, 2nd Edition], not for the alone but equally so for the insurer
(Field man's Insurance Co., Inc. vs. Vda de Songco, 25 SCRA 70).
Concealment is a neglect to communicate that which a partY knows aDd
Ought to communicate (Section 25, Act No. 2427). Whether intentional or
unintentional the concealment entitles the insurer to rescind the contract of
insurance (Section 26, Id.: Yu Pang Cheng vs. Court of Appeals, et al, 105 Phil
930; Satumino vs. Philippine American Life Insurance Company, 7 SCRA
316). Private respondent appears guilty thereof.
We are thus constrained to hold that no insurance contract was perfected
between the parties with the noncompliance of the conditions provided in
the binding receipt, and concealment, as legally defined, having been
committed by herein private respondent.
WHEREFORE, the decision appealed from is hereby set aside, and in lieu
thereof, one is hereby entered absolving petitioners Lapulapu D.
Mondragon and Great Pacific Life Assurance Company from their civil
liabilities as found by respondent Court and ordering the aforesaid
insurance company to reimburse the amount of P1,077.75, without interest,
to private respondent, Ngo Hing. Costs against private respondent.
SO ORDERED.