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1. Saturnino v. Philamlife
Facts:
The policy sued upon is one for 20-year endowment non-
medical insurance. In this kind of policy, the medical
examination conducted in ordinary life policies is dispensed
with. However, detailed information is required concerning
applicants health and medical history. In this case, the
application was submitted by Saturnino in 1957. The policy
was issued on the same day, upon payment of the first years
premium. A year later, Saturnino died of pneumonia.
Petitioners in this case are Saturninos surviving husband and
child. They demanded payment of the face value of the policy.
However, this was rejected. By reason of such, this suit was
filed.
Apparently, prior to the issuance of the policy, Saturnino was
operated on for cancer. She was eventually discharged and,
although the doctor said she was could not be definitely cured,
her ailment became malignant. This whole circumstance was
not disclosed by Saturnino in her application. In fact, she
stated that she never had cancer.
Issue:
W/N the insured made a false representation of material facts
to avoid the policy?
Held:
Yes, there was false representation.
According to Insurance Law, materiality is to be determined
not by the event, but by the probable and reasonable influence
of the facts upon the party to whom the communication is due,
in forming his estimate of the propose contract, or in making
his inquiries.
Given the circumstances of the case, the contention of
petitioners that the non-medical nature of the insurance
applied for renders the fact of her operation immaterial.
However, that is not true. The fact there was a waiver of a
medical examination makes it even more material because
such information is an important factor for the insurer to
consider in issuing the policy or not.
Further, petitioner alleges that respondent was negligent
because Saturnino initially agreed to submit herself to a
medical examination but respondent decided not to do conduct
one. The SC said that no negligence can be attributed to
petitioner because they relied on petitioners false application
that she was healthy. Hence, they did not think it was
necessary.
Lastly, petitioner argues that there was no fraudulent
concealment because Saturninos doctor never told her that
the disease she was operated on was cancer. However, this
has no merit either. First of all, the mere fact she concealed
the operation, regardless of the disease, is already fraudulent.
Secondly, it is not necessary to show actual fraud on the part
of the insured to avoid a policy. In our jurisdiction,
concealment is defined as the negligence to communicate that
which a party knows and ought to communication. Regardless
of intention, entitles insurer to rescind the contract.
2. Soliman v US Life
US Life issued a 20 yr endowment life policy on the joint lives
of Patricio Soliman and his wife Rosario, each of them being
the beneficiary of the other.
Mar. 1949 - the spouses were informed that the premium for
Jan 1949 was still unpaid notwithstanding that the 31-day
grace period has already expired, and they were furnished at
the same time long-form health certificates for the
reinstatement of the policies.
Apr 1949 - they submitted the certificates and paid the
premiums.
Jan. 1950 - Rosario died of acute dilation of the heart, and
thereafter, Patricio filed a claim for the proceeds of the
insurance.
US life denied the claim and filed for the rescission of the
contract on the ground that the certificates failed to
disclose that Rosario had been suffering from bronchial
asthma for 3 years prior to their submission.
Patricio claims that the answers to the questions in the health
certificates were made by US Lifes agent.
W/N contract can be rescinded.
YES
The insurer is once again given two years from the date of
reinstatement to investigate into the veracity of the facts
represented by the insured in the application for
reinstatement. When US life sought to rescind the contract on
the ground of concealment/misrepresentation, two years had
not yet elapsed. Hence, the contract can still be rescinded.
The spouses in allowing the agent to answer some of the
blanks in the certificates and afterwards stamping their
signature thereon are presumed to have at least acquiesced in
and approved all that had bee stated therein in their behalf.
3. Fieldman's Insurance v Songco
Facts: Federico Songco, a man of scant education being only a
first grader, owned a private jeepney. The same was insured
with Fieldmens Insurance Company which issued a Common
Carriers Accident Insurance Policy covering the motor vehicle.
It was for a durstion of one year (Sept 15, 1960- Sept 15,
1961). On on Sept. 22, 1961, the defendant company, upon
payment of premium renewed the policy for another year, in
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October 29 of the same year, the jeep collided with a car,
causing the death of Federico and his son.
A case was filed for collection of the proceeds of the policy
against the defendant company. It refused to do so, arguing
that the insured vehicle was a private one, not a common
carrier which was what the policy is supposed to cover. Amor
Songco, 42-year-old son of deceased Federico Songco,
testifying as witness, declared that when insurance agent
Benjamin Sambat was inducing his father to insure his vehicle,
he butted in saying: 'That cannot be, Mr. Sambat, because our
vehicle is an "owner" private vehicle and not for passengers,'
to which agent Sambat replied: 'whether our vehicle was an
"owner" type or for passengers it could be insured because
their company is not owned by the Government and the
Government has nothing to do with their company. So they
could do what they please whenever they believe a vehicle is
insurable'
Issue: Whether or not Fieldman is liable for the policy?
Held: Yes. After petitioner Fieldmen's Insurance Co., Inc. had
led the insured Federico Songco to believe that he could
qualify under the common carrier liability insurance policy, and
to enter into contract of insurance paying the premiums due, it
could not, thereafter, in any litigation arising out of such
representation, be permitted to change its stand to the
detriment of the heirs of the insured. As estoppel is primarily
based on the doctrine of good faith and the avoidance of harm
that will befall the innocent party due to its injurious reliance,
the failure to apply it in this case would result in a gross
travesty of justice.
4. Sun Life v CA
On April 15, 1986, Bacani procured a life insurance contract for
himself from Sun Life. He was issued a life insurance policy
with double indemnity in case of accidental death. The
designated beneficiary was his mother, Bernarda.
The insured died in a plane crash. Bernarda Bacani filed a
claim with Sun Life, seeking the benefits of the insurance. Sun
Life conducted an investigation and its findings prompted it to
reject the claim.
Sun Life discovered that 2 weeks prior to his application,
Bacani was examined and confined at the Lung Center of the
Philippines, where he was diagnosed for renal failure. During
his confinement, the deceased was subjected to urinalysis,
ultra-sonography and hematology tests. He did not reveal such
fact in his application.
Sun Life informed Bernarda, that the insured did not disclosed
material facts relevant to the issuance of the policy, thus
rendering the contract of insurance voidable. A check
representing the total premiums paid in the amount of
P10,172.00 was attached to said letter.
Bernarda and her husband, filed an action for specific
performance against Sun Life. RTC ruled for Bernarda holding
that the facts concealed by the insured were made in good
faith and under the belief that they need not be disclosed.
Moreover, it held that the health history of the insured was
immaterial since the insurance policy was "non-medical." CA
affirmed.
Issue: WON the beneficiary can claim despite the
concealment. Held: NO.
Section 26 of the Insurance Code is explicit in requiring a party
to a contract of insurance to communicate to the other, in
good faith, all facts within his knowledge which are material to
the contract and as to which he makes no warranty, and which
the other has no means of ascertaining.
Materiality is to be determined not by the event, but solely by
the probable and reasonable influence of the facts upon the
party to whom communication is due, in forming his estimate
of the disadvantages of the proposed contract or in making his
inquiries (The Insurance Code, Sec 31)
The terms of the contract are clear. The insured is specifically
required to disclose to the insurer matters relating to his health.
The information which the insured failed to disclose were
material and relevant to the approval and the issuance of the
insurance policy. The matters concealed would have definitely
affected petitioner's action on his application, either by
approving it with the corresponding adjustment for a higher
premium or rejecting the same. Moreover, a disclosure may
have warranted a medical examination of the insured by
petitioner in order for it to reasonably assess the risk involved
in accepting the application.
Thus, "good faith" is no defense in concealment. The insured's
failure to disclose the fact that he was hospitalized for two
weeks prior to filing his application for insurance, raises grave
doubts about his bonafides. It appears that such concealment
was deliberate on his part.
5. Ng Gan Zee v Asian Crusader Life
Kwong Nam applied with Asian Crusader for a 20year
endowment insurance on his life for 20,000 php, with his wife
Ng Gan Zee as beneficiary. The policy was issued, he paid
premiums religiously. Later on, he died of cancer of the liver
with metastasis.
Ng Gan Zee filed a claim with Asian but it was denied on the
ground of misrepresentation. Ng Gan Zee brought the matter
to the Insurance Commissioner, who ordered Asian Crusader
to pay, but it still refused.
First, Asian Crusader claims that he misrepresented the fact
that he was actually denied application by Insular Life when he
was renewing his application with them. Another claim is that
when the insured was examined, he gave Asians medical
examiner false and misleading information as to his ailment
and previous operation. He said: operated on for a tumor of
the stomach. Claims that tumor is associated with ulcer of the
stomach. Tumor taken out was hard and of a hens egg size.
Operation was 2 years ago in Chinese General Hospital. Now
claims he is completely recovered. Asian points to the
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misrepresentation in that it interviewed one of the doctors who
treated Kwong Nam and said his ailment was peptic ulcer and
that the specimen removed from the deceaseds body was a
part of his stomach.
Ng Gan sued and CFI ordered Asian Crusader to pay.
Issue: WON Kwong Nam is guilty of misrepresentation
to allow Asian to rescind. No fraudulent
misrepresentation.
According to the Insurance Law (not the present code) the
concealment must be material and fraudulent the fact must
have been intentionally withheld. The fraudulent intent must
be established by the insurer to be able to rescind the contract.
This fraudulent intent was not present. Kwong informed the
medical examiner that his tumor was associated with ulcer of
the stomach. This should be construed as an expression made
in good faith of his belief as to the nature of his ailment. It was
presumed to be made by him without knowledge of its
incorrectness and without intention to mislead Asian. Also, the
SC held that Asian Crusader was not able to prove that Insular
Life denied his insurance renewal.
ISSUE: WON Asian Crusader waived its right to
information of material facts. Yes.
The Insurance Law states that the right to information of
material facts may be waived by the terms of the insurance or
by neglect to make inquiries as to such facts. Where upon the
face of the application, a question appears to be not answered
at all or to be imperfectly answered, and the insurer still issues
a policy without any further inquiry, they waive the
imperfection of the answer and render the omission to answer
fully immaterial.
If the ailment of Kwong had such an important bearing on
whether or not Asian would issue the policy or not, the court
cannot understand why Asian or its medical examiners did not
make further inquiries with Chinese Gen Hospital. Truth was,
Asian was too eager to accept the application to receive the
premiums. It would now be inequitable to allow Asian to avoid
liability.
6. Harding v Commercial Union
FACTS:
Plaintiffs are the spouses Harding who filed an action
for recovery of a sum of money under the terms of a
policy insurance against defendant Commercial Union
Assurance Company (Commercial).
Mrs. Harding insured her car (which she received by
donation from her husband) for P3000 with
Commercial, through its agent Smith Bell and
Company (Smith).
The car was totally destroyed by fire, which led Mrs.
Harding to retrieve the proceeds of the insurance
from Commercial.
Commercial refused to pay the insurance proceeds
based on the following grounds:
o That Mrs. Harding had no insurable interest
over the car, given that the same came into
her possession by means of donation from
her husband. Commercial argues that this
donation is void, as provided by article 1334
of the civil code which prohibits all gifts
between the spouses during the marriage
except moderate gifts on festive days of the
family.
o That the statements made by Mrs. Harding
in the insurance policy were made with
fraud. Commercial argues that Mrs. Harding
represented that the cars present value was
P3000 when in truth the car was worth less
than that amount.
Trial Court ruled in favor the Harding spouses.
ISSUE:
WON Commercial is liable to pay the insurance proceeds to the
Harding spouses? YES.
HELD:
With regard to Mrs. Hardings lack of insurable interest as
argued by Commercial:
Supreme Court denied such contention.
Commercial is in no position to challenge the validity
of the transfer/donation between the spouses.
Although certain transfers between spouses are
prohibited under the Civil Code, such prohibition can
only be taken advantage of by persons who bear a
relation to the parties making the transfer or is
prejudiced with regard to their rights or interests over
the property. Commercial had no relations to the
Harding spouses or to the property, thus they cannot
invoke the Civil Code provision as their defense.
Assuming arguendo that Commercial rightfully
invoked the Civil Code provision as a defense, they
did not provide evidence showing that the car
donated did not fall under the exception to the rule
(moderate gifts on festive days of the family). The
court is in no position to assume that the car was not
a moderate gift which would justify Commercials
invocation the provision; such is circumstantial which
must be proven through evidence.
With regard to fraud in the representations made by Mrs.
Harding for the insurance policy:
Supreme Court denied such contention.
The evidence shows that at the time the car was
given to Mrs. Harding, its value was P2800. Several
repairs were performed on the car which further
increased the cars value by P900. Given this, the
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value of the car was even greater than the amount
for which the car was insured.
Furthermore, one of Commercials employees also
performed an inspection over the car and valued the
same for P3000. Commercial is bound by this
valuation made by its own employee in the absence
of fraud on the part of Mrs. Harding.
Harding spouses are entitled to the insurance proceeds under
the insurance policy with Commercial.
7. Edillon v Manila Bankers Life
FACTS:
Sometime in April 1969, Carmen O, Lapuz applied
with respondent insurance corporation for insurance
coverage against accident and injuries
Upon the filing of said application and the payment of
the premium on the policy applied for, the respondent
insurance corporation issued to Carmen O. Lapuz its
Certificate of Insurance No. 128866. (Rollo, p. 28.)
The policy was to be effective for a period of 90 days.
On May 31, 1969 or during the effectivity of
Certificate of Insurance No. 12886, Carmen O. Lapuz
died in a vehicular acciden
On June 7, 1969, petitioner Regina L. Edillon, a sister
of the insured and who was the named beneficiary in
the policy, filed her claim for the proceeds of the
insurance, submitting all the necessary papers and
other requisites with the private respondent.
Her claim having been denied, Regina L. Edillon
instituted this action in the Court of First Instance of
Rizal on August 27, 1969.
In resisting the claim of the petitioner, the respondent
insurance corporation relies on a provision contained
in the Certificate of Insurance, excluding its liability to
pay claims under the policy in behalf of "persons who
are under the age of sixteen (16) years of age or over
the age of sixty (60) years ..."
Regina was over 60 years of age when she applied for
insurance coverage.
ISSUE: Was the respondent correct in denying the claim
of Regina?
HELD: NO
The age of the insured Carmen 0. Lapuz was not
concealed to the insurance company. Her application
for insurance coverage which was on a printed form
furnished by private respondent and which contained
very few items of information clearly indicated her
age of the time of filing the same to be almost 65
years of age
Despite such information which could hardly be
overlooked in the application form, considering its
prominence thereon and its materiality to the
coverage applied for, the respondent insurance
corporation received her payment of premium and
issued the corresponding certificate of insurance
without question.
The accident which resulted in the death of the
insured, a risk covered by the policy, occurred on May
31, 1969 or FORTY-FIVE (45) DAYS after the
insurance coverage was applied for. There was
sufficient time for the private respondent to process
the application and to notice that the applicant was
over 60 years of age and thereby cancel the policy on
that ground if it was minded to do so.
If the private respondent failed to act, it is either
because it was willing to waive such disqualification;
or, through the negligence or incompetence of its
employees for which it has only itself to blame, it
simply overlooked such fact.
Under the circumstances, the insurance
corporation is already deemed in estoppel. It
inaction to revoke the policy despite a
departure from the exclusionary condition
contained in the said policy constituted a
waiver of such condition.
8. Tan Chay Heng v West Coast Life
FACTS
West Coast Life Insurance Company is a foreign insurance
corporation duly organized by the laws of the Philippines to
engage in the insurance business. Upon Tan Caengs
application the insurance company accepted and approved a
life insurance policy of for the sum of P10,000 in which Tan
Chay Heng was the sole beneficiary. The policy was
thereafter issued upon the payment by Tan Ceang (who is the
uncle of Tan Chay Heng) of the first year's premium
amounting to P936. By its terms, the defendant agreed to pay
the plaintiff as beneficiary the amount of the policy upon the
receipt of the proofs of the death of the insured while the
policy was in force.
Without any premium being due or unpaid, Tan Ceang died.
Plaintiff then submitted the proofs of the death of Tan Ceang
with a claim for the payment of the policy, which the
defendant refused to pay, for which he prays for a
corresponding judgment, with legal interest from the date of
the policy, and costs.
West Coast filed an Answer stating as special defense that the
insurance policy was obtained by petitioner in confabulation
with Go Chulian, Francisco Sanghez, and Dr. V.S. Locsin
through fraud and deceit perpetrated against the defendant
insurance company. It alleged that they misrepresented that
Tan Ceang was single and was a merchant, and that the
beneficiary Tan Chay Heng was his nephew, whereas in truth
and in fact Tan Caeng was actually legally married, and was
not a merchant but was a mere employee of another
Chinaman from whom he received only a meager salary, and
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that the petitioner was not a nephew of Tan Ceang. Moreover,
Tan Ceang was seriously ill, suffering from pulmonary
tuberculosis of about three years' duration, which illness was
incurable and was well known to the plaintiff and his said
coconspirators. Also, Dr. Locsin prepared and falsified the
necessary medical certificate, in which it was made to appear
that Tan Ceang had never used morphine, cocaine or any
other drug; that he was then in good health and had never
consulted any physician; that he had never spit blood; and that
there was no sign of either present or past disease of his
lungs; whereas in truth and in fact, as the plaintiff and his said
coconspirators well knew, the said Tan Ceang was addicted to
morphine, cocaine, and opium and had been convicted and
imprisoned therefor, and was then, and for about three year
prior thereto had been suffering from pulmonary tuberculosis.
Dr. Locsin further stated falsely in a certificate of death that
the said Tan Ceang had died of cerebral hemorrhage. Thus,
based on all these, the present action to recover from the
insurance policy is null and void.
Lower court renedered judgment for Tan Chay Heng. Hence,
this petition. Defendant contends that section 47 of the
Insurance Act should be applied, and that when so applied,
defendant is barred and estopped to plead and set forth the
matters alleged in its special defense. That section is as
follows:
Whenever a right to rescind a contract of
insurance is given to the insurer by any
provision of this chapter, such right must be
exercised previous to the commencement of
an action on the contract.
The defendant contended in the lower court and now contends
in this court, that section 47 does not apply to the new matters
alleged in the special defense. If in legal effect defendant's
special defense is in the nature of an act to rescind "a contract
of insurance," then such right must be exercised prior to an
action enforce the contract. That is the real question involved
in this appeal.
Defendant's original answer was a general and specific denial.
In other words, it specifically denied that if ever issued the
policy in question, or that it ever agreed with Tan Ceang in the
even of his death to pay P10,000 to the plaintiff or any one
else. In its amended answer the defendant again makes a
general and specific denial, and alleges the reasons, the
specific facts, and the reasons why it never made or entered
into the contract alleged in the complaint, and based upon
those alleged facts, defendant contends that it never did enter
into any contract of insurance on the life of Tan Caeng.
ISSUE
W/N West Coasts action for rescission is therefore barrd by
the collection suit filed by Tan Chay NO.
HELD
NO. Precisely, the defense of West Cast was that through
fraud in its execution, the policy is void ab initio, and therefore,
no valid contract was ever made. Its action then cannot be
fore rescission because an action to rescind is founded upon
and presupposes the existence of the contract. Hence, West
Coasts defense is not barred by Sec. 47.
In the instant case, it will be noted that even in its prayer, the
defendant does not seek to have the alleged insurance
contract rescinded. It denies that it ever made any contract of
insurance on the life of Tan Caeng, or that any such a contract
ever existed, and that is the question which it seeks to have
litigated by its special defense. In the very nature of things, if
the defendant never made or entered into the contract in
question, there is no contract to rescind, and, hence, section
47 upon which the lower court based its decision in sustaining
the demurrer does not apply.
As stated, an action to rescind a contract is founded upon and
presupposes the existence of the contract which is sought to
be rescinded. If all of the material matters set forth and
alleged in the defendant's special plea are true, there was no
valid contract of insurance, for the simple reason that the
minds of the parties never met and never agreed upon the
terms and conditions of the contract. We are clearly of the
opinion that, if such matters are known to exist by a
preponderance of the evidence, they would constitute a valid
defense to plaintiff's cause of action. Upon the question as to
whether or not they are or are not true, we do not at this time
have or express any opinion, but we are clear that section 47
does not apply to the allegations made in the answer, and that
the trial court erred in sustaining the demurrer.
9. Tan v CA
FACTS:
Tan Lee Siong, father of petitioners, applied for life insurance
worth 80K with Philam Life. The application was approved with
the petitioners as beneficiaries.
Tan Lee Siong died of hepatoma. Petitioners then filed with
Philam Life their claim for proceeds of the life insurance policy.
However, the company denied their claim and rescinded the
policy by reason of the alleged misrepresentation and
concealment of material facts made by deceased Tan Lee
Siong in his application for insurance. The premiums paid on
the policy were thereupon refunded.
Alleging that the company's refusal to pay them the proceeds
of the policy was unjustified and unreasonable, petitioners filed
a complaint against the former with the Office of the Insurance
Commissioner. The Commissioner rendered judgment
dismissing the complaint. CA dismissed petitioners' appeal for
lack of merit.
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Hence, this petition.
Petitioners contend that the incontestability clause in the
second paragraph of Sec. 48 precludes the insurer from raising
the defenses of false representations/concealment of material
facts insofar as health and previous diseases are concerned if
the insurance has been in force for at least 2 years during the
insured's lifetime.
ISSUE: W/N Philam Life can rescind the contract
HELD: YES.
The SC agreed with the CA which ruled:
Petitioners argue that no evidence was presented by Philam
Life to show that the questions appearing in Part II of the
application for insurance were asked, explained to and
understood by the deceased so as to prove concealment on his
part. The same is not well taken. The deceased, by affixing his
signature on the application form, affirmed the correctness of
all the entries and answers appearing therein.
Because of the concealment made by the deceased of his
consultations and treatments for hypertension, diabetes and
liver disorders, respondent company was thus misled into
accepting the risk and approving his application as medically
standard and dispensing with further medical investigation and
examination. For as long as no adverse medical history is
revealed in the application form, an applicant for insurance is
presumed to be healthy and physically fit and no further
medical investigation/examination is conducted by respondent
company.
There is no strong showing that we should apply the "fine
print" or "contract of adhesion" rule in this case.
There is no showing that the questions in the application form
for insurance regarding the insured's medical history are in
smaller print than the rest of the printed form or that they are
designed in such a way as to conceal from the applicant their
importance.
10. Perez v CA
Facts:
Primitivo Perez has been insured with Lifeman Insurance Corp.
An agent of the insurance corp, Lalog, convinced Primitivo to
get an additional coverage, which he did. Upon
accomplishment of the application form and payment of the
additional insurance coverage (2,000 out of the 50,000), the
receipt given by Lalog indicated that the amount received was
a deposit. Lalog lost the first application form so he asked
Primitivo to make another one. He forwarded the application to
the QC office which will forward it again to the Manila office.
November 25 - Primitivo died in the banca which capsized
during a storm. During his death, the papers were still with the
QC office.
November 27 - Papers were received in Manila
December 5 - Without knowing about the death of Primitivo,
the Manila office approved the additional insurance coverage.
Virginia Perez then claimed the insurance payments from the
company. However, the company refused to pay the additional
coverage since the second contract was not perfected
(Primitivo died before the application was approved).
Issue: W/N there was a consummated contract of
insurance between Primitivo and Lifeman Insurance
Held: NO.
Insurance is a contract whereby, for a stipulated
consideration, one party undertakes to compensate the
other for loss on a specified subject by specified perils.
In this case, the perfection of the contract was conditioned
by this clause:
"there shall be no contract of insurance unless and until a
policy is issued on this application and that the said
policy shall not take effect until the premium has been
paid and the policy delivered to and accepted by me/us in
person while I/We, am/are in good health.
Petitioner insists that the condition imposed by respondent
corporation that a policy must have been delivered to and
accepted by the proposed insured in good health is
potestative being dependent upon the will of the
corporation and is therefore null and void.
SC SAYS NOPE!
The conditions imposed by the respondent company were
the following:
Policy was issued
Premiums were paid
The policy must have been delivered to and accepted by
the applicant while he is in good health
This can hardly be considered a potestative 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.
11. Comm. of Int. revenue v Lincoln Phil. Life
Facts:
Private respondent is a domestic corporation registered with
the SEC and engaged in the life insurance business. In 1984, it
issued a special life insurance policy called the Junior Estate
Builder Policy, the most notable feature of which was the
automatic increase in the amount of life insurance coverage
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upon attainment of a certain age without the need for the
issuance of a new policy. DST was paid only on the initial
amount.
Subsequently, petitioner issued a deficiency assessment
against the respondent for the amount of the automatic
increase of the sum assured on the policy issued by the
respondent.
The CTA revoked the assessment, which was affirmed by the
CA.
Issue: W/N the deficiency assessment was proper
Held: YES
It is clear from Section 173 [of the Tax Code] that the
payment of documentary stamp taxes is done at the time the
act is done or transaction had and the tax base for the
computation of documentary stamp taxes on life insurance
policies under Section 183 [of the Tax Code] is the amount
fixed in policy, unless the interest of a person insured is
susceptible of exact pecuniary measurement. What then is the
amount fixed in the policy? Logically, we believe that the
amount fixed in the policy is the figure written on its face and
whatever increases will take effect in the future by reason of
the automatic increase clause embodied in the policy without
the need of another contract.
Here, although the automatic increase in the amount of life
insurance coverage was to take effect later on, the date of its
effectivity, as well as the amount of the increase, was already
definite at the time of the issuance of the policy. Thus, the
amount insured by the policy at the time of its issuance
necessarily included the additional sum covered by the
automatic increase clause because it was already determinable
at the time the transaction was entered into and formed part
of the policy.
12. Grepalife v CA
FACTS
On March 14, 1957, private respondent Ngo Hing filed an
application with the Great Pacific Life Assurance Company
(GREPALIFE) for a 20-year endownment policy in the amount
of P50,000.00 on the life of his one-year old daughter Helen
Go. 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. 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 retained the
amount of P1,317.00 as his commission for being a duly
authorized agent of Pacific Life. Upon the payment of the
insurance premuim, the binding deposit receipt 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. However, on April 30, 1957, Mondragon
received a letter from Pacific Life disapproving the insurance
application. 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.
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.
ISSUE/HELD
1. Whether the binding deposit receipt
constituted a temporary contract of the life
insurance in question?
At the back of said receipt are condition precedents required
before a deposit is considered a BINDING RECEIPT. Said
provisions 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
refunded; and (3) that if the applicant is not able 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 is, manifestly,
merely conditional and does not insure outright. As held by this
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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.
It bears repeating that through the intra-company
communication of April 30, 1957, 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.
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.
In this first place, there was no contract perfected between the
parties who had no meeting of their minds.
2. Whether private respondent Ngo Hing
concealed the state of health and physical
condition of Helen Go, which render said
binding deposit void?
There was deliberately concealment. 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 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.
13. Pacific Timber v CA
Facts:
In 1963, Pacific Timber Export Corporation (PTEC) applied for
a temporary marine insurance from Workmens Insurance
Company (WIC) in order for the latter to insure 1,250,000
board feet of logs to be exported to Japan. In March 1963,
WIC issued a cover note to PTEC for the said logs. On April 2,
1963, WIC issued two policies for the logs. However, the total
board feet covered this time is only 1,195,498. On April 4,
1963, while the logs were in transit to Japan, bad weather
prevailed and this caused the loss of 32 pieces of logs.
WIC then asked an adjuster to investigate the loss. The
adjuster submitted that the logs lost were not covered by the
two policies issued on April 2, 1963 but said logs were included
in the cover note earlier issued.
WIC however denied the insurance claim of PTEC as it averred
that the cover note became null and void when the two
policies were subsequently issued. The Court of Appeals ruled
that the cover note is void for lack of valuable consideration as
it appeared that no premium payment therefor was made by
PTEC.
ISSUE:
Whether or not a separate premium is needed for cover notes.
HELD:
No. The Cover Note was not without consideration for which
the Court of Appeals held the Cover Note as null and void, and
denied recovery therefrom. The fact that no separate premium
was paid on the Cover Note before the loss insured against
occurred, does not militate against the validity of PTECs
contention, for no such premium could have been paid, since
by the nature of the Cover Note, it did not contain, as all Cover
Notes do not contain particulars of the shipment that would
serve as basis for the computation of the premiums. As a
logical consequence, no separate premiums are intended or
required to be paid on a Cover Note.
At any rate, it is not disputed that PTEC paid in full all the
premiums as called for by the statement issued by WIC after
the issuance of the two regular marine insurance policies,
thereby leaving no account unpaid by PTEC due on the
insurance coverage, which must be deemed to include the
Cover Note. If the Note is to be treated as a separate policy
instead of integrating it to the regular policies subsequently
issued, the purpose and function of the Cover Note would be
set at naught or rendered meaningless, for it is in a real sense
a contract, not a mere application for insurance which is a
mere offer.
14. Bonifacio Bros v Mora
FACTS: Enrique Mora mortgaged his sedan car to HS Reyes
Inc., with the condition that Mora would insure the car with HS
Reyes as beneficiary. The car was then insured with State
Insurance Company and the policy delivered to Mora. During
the effectivity of the insurance contract, the car figured in an
accident. The company then assigned the accident to an
insurance appraiser for investigation and appraisal of the
damage. Mora without the knowledge and consent of HS
Reyes, authorized Bonifacio Bros to fix the car, using
materials supplied by the Ayala Auto Parts Company.
For the cost of Labor and materials, Mora was billed
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P2,102.73. The bill was sent to the insurers appraiser. The
insurance company drew a check in the amount of the
insurance proceeds and entrusted the check to its appraiser for
delivery to the proper party. The car was delivered to Mora
without the consent of HS Reyes, and without payment
to Bonifacio Bros and Ayala.
Upon the theory that the insurance proceeds should be directly
paid to them, Bonifacio and Ayala filed a complaint against
Mora and the insurer with the municipal court for the collection
of P2,102.73.
The insurance company filed its answer with a counterclaim for
interpleader, requiring Bonifacio and HS Reyes to interplead in
order to determine who has a better right to the proceeds.
W/N there is privity of contract between Bonifacio and
Ayala on one hand and State Insurance on the other.
NONE.
It is fundamental that contracts take effect only between the
parties thereto, except in some specific instance provided by
law where the contract contains some stipulation in favor of a
third person. Such stipulation is known as a stipulation pour
autrui; or a provision in favor of a third person not a party to
the contract.
Under this doctrine, a third person is allowed to avail himself of
a benefit granted to him by the terms of the contract, provided
that the contracting parties have clearly and deliberately
conferred a favor upon such person. Consequently, a third
person NOT a party to the contract has NO action against the
parties thereto, and cannot generally demand the enforcement
of the same.
The question of whether a third person has an enforceable
interest in a contract must be settled by determining whether
the contracting parties intended to tender him such an interest
by deliberately inserting terms in their agreement with the
avowed purpose of conferring favor upon such third person. In
this connection, this court has laid down the rule that the
fairest test is to rely upon the intention of the parties as
disclosed by their contract.
In the instant case the insurance contract does not contain
any words or clauses to disclose an intent to give any
benefit to any repairmen or material men in case of
repair of the car in question. The parties to the insurance
contract omitted such stipulation, which is a circumstance that
supports the said conclusion. On the other hand, the "loss
payable" clause of the insurance policy stipulates that "Loss, if
any, is payable to H.S. Reyes, Inc." indicating that it was only
the H.S. Reyes, Inc. which they intended to benefit.
A policy of insurance is a distinct and independent contract
between the insured and insurer, and third persons have no
right either in a court of equity, or in a court of law, to the
proceeds of it, unless there be some contract of trust,
expressed or implied, by the insured and third person. In this
case, no contract of trust, expressed or implied exists. We,
therefore, agree with the trial court that no cause of action
exists in favor of the appellants in so far as the proceeds of
insurance are concerned. The policy in question has been so
framed that "Loss, if any, is payable to H. S. Reyes, Inc."
which unmistakably shows the intention of the parties
15. Guingon v Del Monte
Facts: Julio Aguilar owned and operated several jeepneys in
the City of Manila. He entered into a contract with the Capital
Insurance & Surety Co., Inc. insuring the operation of his
jeepneys against accidents with third-party liability. The
provision of the policy contains the following:
The Company, will, subject to the limits of liability, indemnify
the Insured in the event of accident caused by or arising out of
the use of the Motor Vehicle/s or in connection with the
loading or unloading of the Motor Vehicle/s, against all sums
including claimant's costs and expenses which the Insured
shall become legally liable to pay in respect of:
a. death of or bodily injury to any person
b. damage to property
During the effectivity of such insurance policy on February 20,
1961 Iluminado del Monte, one of the drivers of the jeepneys
operated by Aguilar, while driving along the intersection of
Juan Luna and Moro streets, City of Manila, bumped with the
jeepney abovementioned one Gervacio Guingon who had just
alighted from another jeepney and as a consequence the latter
died some days thereafter. The heirs of Gervacio Guingon filed
an action for damages praying that the sum of P82,771.80 be
paid to them jointly and severally by the defendants, driver
Iluminado del Monte, owner and operator Julio Aguilar, and
the Capital Insurance & Surety Co., Inc. For failure to answer
the complaint, Del Monte and Aguilar were declared in default.
Capital Insurance & Surety Co., Inc. answered, alleging that
the plaintiff has no cause of action against it.
Issue: can the plaintiffs sue the Insurer? The insurer
jointly with the insured?
Held: Yes to both. The policy in the present case, as
aforequoted, is one whereby the insurer agreed to indemnify
the insured "against all sums . . . which the Insured shall
become legally liable to pay in respect of: a. death of or bodily
injury to any person . . . ." Clearly, therefore, it is one for
indemnity against liability; from the fact then that the insured
is liable to the third person, such third person is entitled to sue
the insurer.
The right of the person injured to sue the insurer of the party
at fault (insured), depends on whether the contract of
insurance is intended to benefit third persons also or only the
insured. And the test applied has been this: Where the
contract provides for indemnity against liability to third persons,
then third persons to whom the insured is liable, can sue the
insurer. Where the contract is for indemnity against actual loss
or payment, then third persons cannot proceed against the
insurer, the contract being solely to reimburse the insured for
liability actually discharged by him thru payment to third
persons, said third persons' recourse being thus limited to the
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insured alone. In the case at bar, the contract expressly
provides for liability to any person injured, therefore the
plaintiffs (third-party to the contract) may sue the insurer.
Despite the policy expressly disallowing any suit against the
insurer as co-defendant of the insured in determining the
latters liability, the Rules of Courts provision on joinder of
cause of actions and permissive joinder of the parties shall
prevail, which are aimed at avoiding multiplicity of suits.
16. Del Val v Del Val
Facts:
Petitioners and private respondents are brothers and Sisters
and are the only heirs and next of kin of Gregorio del Val who
died intestate. It was found out that the deceased took out
insurance on his life for the sum of 40T and made it payable to
private respondents as sole beneficiary. After Gregorios death,
Andres collected the proceeds of the policy. Of the said policy,
Andres paid 18,000 to redeem some real property which
Gregorio had sold to third persons during his lifetime. Said
redemption of the property was made by Andres laywer in the
name of Andres and the petitioners. (According to Andres, said
redemption in the name of Petitioners and himself was without
his knowledge and that since the redemption, petitioners have
been in possession of the property) Petitioners now contend
that the amount of the insurance policy belonged to the estate
of the deceased and not to Andres personally. Petitioner filed
a complaint for partition of property including the insurance
proceeds. Andres claims that he is the sole owner of the
proceeds and prayed that he be declared:
1. Sole owner of the real property, redeemed with the
use of the insurance proceeds and its remainder;
2. Petitioners to account for the use and occupation
of the premises.
Issue: WON the petitioners have a right to the insurance
proceeds?
Held: NO. The contract of life insurance is a special contract
and the destination of the proceeds thereof is determined by
special laws which deal exclusively with the subject. Our civil
code has no provisions which relate directly and specifically to
life-insurance contracts of to the destination of life-insurance
proceeds that subject is regulated exclusively by the Code of
Commerce. Thus, contention of petitioners that proceeds
should be considered as a dontation or gift and should be
included in the estate of the deceased is UNTENABLE. Since
the repurchase has been made n the names of all the heirs
instead of the defendant alone, petitioners claim that the
property belongs to the heirs in common and not to the
defendant alone. The SC held that if it is established by
evidence that that was his intention and that the real estate
was delivered to the plaintiffs with that understanding, then it
is probable that their contention is correct and that they are
entitled to share equally with the defendant. HOWEVER, it
appears from the evidence that the conveyances were taken in
the name of the plaintiffs without the knowledge and consent
of Andres, or that it was not his intention to make a gift to
them of real estate, when it belongs to him.
17. RCBC v CA
FACTS:
This is a consolidated case. RCBC Binondo initially granted a
credit facility of P30M to Goyu & Sons, Inc. Goyu applied again
and through the key officers of Binondo branchs
recommendation, RCBCs executive committee increased its
credit facility to P50M, to P90M, and finally, to P117M. As
security, Goyu executed 2 real estate mortgages and 2 chattel
mortgages in favor of RCBC. Under each of these four
mortgage contracts, GOYU committed itself to insure the
mortgaged property with an insurance company approved by
RCBC, and subsequently, to endorse and deliver the insurance
policies to RCBC. GOYU obtained in its name 10 insurance
policies on the mortgaged properties from Malayan Insurance.
Alchester Insurance Agency, the insurance agent where Goyu
obtained the Malayan insurance policies, issued 9
endorsements in favor of RCBC seemingly upon instructions of
Goyu. In February 1992, he was issued 8 insurance policies in
favor of RCBC.
Sometime later, one of Goyus factory buildings was burned so
he claimed against Malayan for the loss, but Malayan denied
contending that the insurance policies were either attached
pursuant to writs of attachments/garnishments or that
creditors are claiming to have a better right.
Goyu filed a complaint for specific performance and damages.
RCBC, one of Goyus creditors, also filed with Malayan
Insurance its formal claim over the proceeds of the insurance
policies, but said claims were also denied for the same reasons
that Malayan denied GOYUs claims.
Issue: WON RCBC as mortgagee, has any right over the
insurance policies taken by GOYU, the mortgagor, in case of
the occurrence of loss. Yes.
Although it appears that the mortgagor obtains the policy
naming itself as the sole payee, the intentions of the parties as
shown by their contemporaneous acts must be considered.
The endorsement of the policy shows the intent to assign the
rights to the proceeds to the mortgagee. The debtor cannot
seek relief under Secton 53 which provides that the proceeds
of insurance shall exclusively apply to the interest of the
person in whose name or for whose benefit it is made. This
case in an exception to the strict application of Section 53. It
can be shown through the intent of the parties to designate
the creditor as the party for whose benefit the insurance
policies were taken out.
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18. Heirs of Maramag v Maramag
FACTS:
Petitioners are the legitimate wife and children of
Loreto Maramag. Respondents are the illegitimate
family.
Loreto was insured by Insular Life Assurance
Company (Insular) and by Great Pacific Life
Assurance Corporation (Grepalife). In the insurance
policies, Loreto designated the respondents as his
beneficiaries.
It appears however that respondent Eva, the
concubine of Loreto, is suspected of killing the latter.
Thus petitioners claim that Eva is disqualified to
receive any proceeds from the life insurance policies.
They further claim that the other respondents were
illegitimate children of Loreto, thus they could not
receive the whole proceeds of the insurance policies
as such would deprive petitioners of their legitime.
Insular and Grepalife filed a motion to dismiss for
failure to state a cause of action. Trial Court granted
and the Court of Appeals affirmed.
ISSUE:
WON respondents are entitled to the life insurance proceeds as
the beneficiaries designated in the insurance policies? YES,
but only for the illegitimate children.
HELD:
It is clear that although petitioners are the legitimate
heirs of Loreto, they were not named as beneficiaries
in the insurance policies issued by Insular and
Grepalife.
Section 53 of the Insurance Code states:
SECTION 53. The insurance proceeds shall be applied
exclusively to the proper interest of the person in whose name
or for whose benefit it is made unless otherwise specified in
the policy.
Pursuant tot his, it is obvious that the only persons
entitled to claim the insurance proceeds are either the
insured, if still alive; or the beneficiaries, if the
insured is already deceased, upon maturation of the
policy.
There is no legal proscription in naming as
beneficiaries the children of illicit relationships by the
insured.
There is also no deprivation of legitime of petitioners
as legitimate heirs. The rules on testamentary
succession cannot apply in this case, for insurance
indemnity does not partake of a donation. As such,
the insurance indemnity cannot be considered as an
advance of the inheritance which would deprive
legitimate heirs of the legitime.
o Proceeds of an insurance policy belong
exclusively to the beneficiary and not to the
estate of the insured. Such proceeds are the
separate and the individual property of the
beneficiary and not of the heirs of the
insured.
o EXCEPTION: In cases where the insured has
not designated any beneficiary, or when the
designated beneficiary is disqualified by law
to receive the proceeds, then the insurance
policy proceeds shall redound to the benefit
of the estate of the insured. This does not
apply in this case.
With regard to Eva the concubine, she is not entitled
to a share in the proceeds as it appears that the
insurance companies had disqualified her from
receiving any amount because Loreto had
misrepresented her to be her legal wife.
19. San Miguel v Law Union Rock
FACTS:
On January 12, 1916, D. P. Dunn, then the owner of
the property which is insured under this case,
mortgaged the same to the San Miguel Brewery to
secure a debt of P10,000.
In the contract of mortgage Dunn agreed to keep the
property insured at his expense to the full amount of
its value in companies to be selected by the Brewery
Company and authorized the latter in case of loss to
receive the proceeds of the insurance and to retain
such part as might be necessary to cover the
mortgage debt.
At the same time, in order more conveniently to
accomplish the end in view, Dunn authorized and
requested the Brewery Company to effect said
insurance itself.
It seems that the insurance company to whom this
application was directed did not want to carry more
than one-half the risk. It therefore issued its own
policy for P7,500 and procured a policy in a like
amount to be issued by the "Filipinas" Compania de
Seguros. Both policies were issued in the name of the
San Miguel Brewery as the assured, and contained no
reference to any other interest in the property. Both
policies contain the usual clause requiring
assignments to be approved and noted on the policy.
The premiums were paid by the Brewery and charged
to Dunn.
San Miguel Brewery, brought this action ,for the
purpose of recovering upon two policies of insurance
underwritten respectively by Law Union and Rock
Insurance Company (Ltd.), and the
"Filipinas" Compania de Seguros, for the sum of
P7,500 each, insuring certain property which has
been destroyed by fire.
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The plaintiff, the San Miguel Brewery, is named as the in order to justify this, it must be made clearly to
party assured in the two insurance policies, but it is appear that the minds of the contracting parties did
alleged in the complaint that said company was in actually meet in agreement and that they labored
reality interested in the property which was the under some mutual error or mistake in respect to the
subject of insurance in the character of a mortgage expression of their purpose.
creditor only, and that the owner of said
property upon the date the policies were issued
was one D. P. Dunn who was later succeeded
as owner by one Henry Harding.
Accordingly said Harding was made a defendant, as a
person interested in the subject of the litigation.
The two insurance companies who are named as
defendants do not dispute their liability to the San
Miguel Brewery, to the extent already stated.

ISSUE: Are the insurance companies liable to Harding, the

successor in ownership of the property?

HELD: NO

Harding is not a party to the contracts of insurance

and cannot directly maintain an action thereon.
His claim is merely of an equitable and subsidiary
nature and must be made effective, if at all, through
the San Miguel Brewery in whose name the contracts
are written.
The Brewery, as mortgagee of the insured property,
undoubtedly had an insurable interest therein; but it
could not, in any event, recover upon these policies
an amount in excess of its mortgage credit. In this
connection it will be remembered that Antonio Brias,
upon making application for the insurance, informed
the company with which the insurance was placed
that the Brewery was interested only as a mortgagee.
It would, therefore, be impossible for the Brewery
mortgage on the insured property.
This conclusion is not only deducible from the
principles governing the operation and effect of
insurance contracts in general but the point is clearly
covered by the express provisions of sections 16 and
50 of the Insurance Act (Act No. 2427). In the first of
the sections cited, it is declared that "the measure of
an insurable interest in property is the extent to which
the insured might be damnified by loss or injury
thereof" (sec. 16); while in the other it is stated that
"the insurance shall be applied exclusively to the
proper interest of the person in whose name it is
made unless otherwise specified in the policy" (sec.
50).
If during the negotiations which resulted in the
writing of this insurance, it had been agreed between
the contracting parties that the insurance should be
so written as to protect not only the interest of the
mortgagee but also the residuary interest of the
owner, and the policies had been, by inadvertence,
ignorance, or mistake written in the form in which
they were issued, a court would have the power to
reform the contracts and give effect to them in the
sense in which the parties intended to be bound. But