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138941 October 8, 2001

FACTS: Respondent Tantuco Enterprises, Inc. is engaged in the coconut oil milling and refining industry. It owns two oil mills which were separately covered by fire insurance policies issued by petitioner American Home Assurance Co., Philippine Branch. The first oil mill was insured for P3,000,000.00 under Policy No. 306-7432324-3 for the period March 1, 1991 to 1992. The new oil mill was insured for P6,000,000.00 under Policy No. 306-7432321-9 for the same term. Official receipts indicating payment for the full amount of the premium were issued by the petitioner's agent. A fire that broke out in the early morning of September 30,1991 gutted and consumed the new oil mill. Respondent immediately notified the petitioner of the incident but petitioner rejected respondent's claim for the insurance proceeds on the ground that no policy was issued by it covering the burned oil mill. It stated that the description of the insured establishment referred to another building thus: "Our policy nos. 306-7432321-9 (Ps 6M) and 306-7432324-4 (Ps 3M) extend insurance coverage to your oil mill under Building No. 5, whilst the affected oil mill was under Building No. 14. " ISSUE: Whether or not the Court of Appeals erred in its legal interpretation of 'Fire Extinguishing Appliances Warranty' of the policy. HELD: In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in giving effect to the insurance. In view of the custom of insurance agents to examine buildings before writing policies upon them, and since a mistake as to the identity and character of the building is extremely unlikely, the courts are inclined to consider that the policy of insurance covers any building which the parties manifestly intended to insure, however inaccurate the description may be. Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind, that what the parties manifestly intended to insure was the new oil mill. If the parties really intended to protect the first oil mill, then there is no need to specify it as new. In determining what the parties intended, the courts will read and construe the policy as a whole and if possible, give effect to all the parts of the contract, keeping in mind always, however, the prime rule that in the event of doubt, this doubt is to be resolved against the insurer. In determining the intent of the parties to the contract, the courts will consider the purpose and object of the contract.


FACTS: 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. 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. 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. ISSUE: Whether or not Herrer received notice of acceptance of his application. HELD: 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. 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.


FACTS: Private respondent Ngo Hing filed an application with the Great Pacific Life Assurance Company on the life of his one-year old daughter Helen Go. Upon the payment of the insurance premium to Lapulapu D. Mondragon, Branch Manager of the Pacific Life, the binding deposit receipt was issued to private respondent Ngo Hing. Mondragon received a letter from Pacific Life disapproving the insurance application. The non-acceptance of the insurance plan by Pacific Life was not communicated by petitioner Mondragon to private respondent Ngo Hing. 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. ISSUES: (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. HELD: 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. In life insurance, a "binding slip" or "binding receipt" does not insure by itself. Private respondent had deliberately concealed the state of health and physical condition of his daughter Helen Go. When 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 disguised. Nonetheless, private respondent, in apparent bad faith, withheld the fact material 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 form Pacific Life would have verified the same and would have had no choice but to disapprove the application outright. 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 private respondent.


FACTS: In May 1987, Juan B. Dans, 76 years of age, together with his wife Candida, his son and daughter-in-law, applied for a loan with the Development Bank of the Philippines (DBP), and was advised by DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool). The loan was approved and released on August 11, 1987. On August 15, 1987, Dans accomplished and submitted the "MRI Application for Insurance" and the "Health Statement for DBP MRI Pool." On September 3, 1987, Dans died of cardiac arrest. 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. ISSUE: Whether or not DBP is liable as an insurance agent. HELD: 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. 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.

VIRGINIA A. PEREZ vs. COURT OF APPEALS G.R. No. 112329 January 28, 2000

FACTS: Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation. An agent of the insurance corporation, Rodolfo Lalog, visited Perez and convinced him to apply for additional insurance coverage to avail of the ongoing promotional discount. Perez accomplished an application form for the additional insurance coverage. Lalog forwarded the application for additional insurance of Perez, together with all its supporting papers, to the office of BF Lifeman Insurance Corporation which office was supposed to forward the papers to the Manila office. Perez died in an accident. At the time of his death, his application papers for the additional insurance were still with the Gumaca office. Without knowing that Perez died, BF Lifeman Insurance Corporation approved the application and issued the corresponding policy. Petitioner Virginia Perez went to Manila to claim the benefits under the insurance policies of the deceased but the insurance company refused to pay the claim under the additional policy and maintained that the insurance had not been perfected at the time of the death of Primitivo Perez. ISSUE: Whether or not there was a consummated contract of insurance between the deceased and BF Lifeman Insurance Corporation and that the condition that the policy issued by the corporation be delivered and received by the applicant in good health, is potestative, being dependent upon the will of the insurance company, and is therefore null and void. HELD: A potestative condition depends upon the exclusive will of one of the parties. For this reason, it is considered void. Article 1182 of the New Civil Code states: When the fulfillment of the condition depends upon the sole will the debtor, the conditional obligation shall be void. The condition imposed by the corporation that the policy must have been delivered to and accepted by the applicant while he is in good health can hardly be considered as a potestative or facultative condition. On the contrary, the health of the applicant at the time of the delivery of the policy is beyond the control or will of the insurance company. Rather, the condition is a suspensive one whereby the acquisition of rights depends upon the happening of an event which constitutes the condition. In this case, the suspensive condition was the policy must have been delivered and accepted by the applicant while he is in good health. There was non-fulfillment of the condition, however, inasmuch as the applicant was already dead at the time the policy was issued. Hence, the non-fulfillment of the condition resulted in the non-perfection of the contract.

MALAYAN INSURANCE CO., INC. vs. COURT OF APPEALS G.R. No. L-36413 September 26, 1988

FACTS: On 29 March 1967, petitioner Malayan Insurance Co., Inc., issued in favor of private respondent Sio Choy Private Car Comprehensive Policy No. MRO/PV-15753 covering a Willys jeep. The insurance coverage was for "own damage" not to exceed P600.00 and "third-party liability" in the amount of P20,000.00. During the effectivity of said insurance policy, the insured jeep, while being driven by one Juan P. Campollo an employee of the respondent San Leon Rice Mill, Inc., collided with a passenger bus belonging to the respondent PANTRANCO, causing damage to the insured vehicle and injuries to the driver and the respondent Martin C. Vallejos, who was riding in the ill-fated jeep. As a result, Martin C. Vallejos filed an action for damages against Sio Choy, Malayan Insurance Co., Inc. and the PANTRANCO. ISSUES: (1) Whether or not the trial court, as upheld by the Court of Appeals, was correct in holding petitioner and respondents Sio Choy and San Leon Rice Mill, Inc. "solidarily liable" to respondent Vallejos; and (2) whether or not petitioner is entitled to be reimbursed by respondent San Leon Rice Mill, Inc. for whatever amount petitioner has been adjudged to pay respondent Vallejos on its insurance policy. HELD: It appears that respondents Sio Choy and San Leon Rice Mill, Inc. are the principal tortfeasors who are primarily liable to respondent Vallejos. The law states that the responsibility of two or more persons who are liable for a quasi-delict is solidarily. On the other hand, the basis of petitioner's liability is its insurance contract with respondent Sio Choy. While it is true that where the insurance contract provides for indemnity against liability to third persons, such third persons can directly sue the insurer, however, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties found at fault. The liability of the insurer is based on contract; that of the insured is based on tort. It follows that petitioner, upon paying respondent Vallejos the amount of riot exceeding P20,000.00, shall become the subrogee of the insured, the respondent Sio Choy; as such, it is subrogated to whatever rights the latter has against respondent San Leon Rice Mill, Inc. Article 1217 of the Civil Code gives to a solidary debtor who has paid the entire obligation the right to be reimbursed by his codebtors for the share which corresponds to each.