DEVELOPMENT BANK OF THE PHILIPPINES vs CA

G.R. No. L-109937

FACTS:
Juan B. Dans applied for a loan with the Development Bank of the Philippines
(DBP). He was already 70 years old at that time; however, having knowledge of this
fact and an existing policy that the maximum age for Mortgage Redemption
Insurance (MRI) acceptance is 60 years old, DBP still advised him to obtain a
Mortgage Redemption Insurance (MRI) with DBP MRI Pool as a surety before they
could approve his loan. His loan was eventually granted and from the proceeds, DPB
deducted an amount as payment for the MRI premium, credited to the saving
account of DBP MRI Pool. He also accomplished and submitted the MRI application
for insurance and health statement.
When Mr. Dans died, DBP notified DPB MRI Pool on this matter; however
they were informed that Dans was not eligible for MRI coverage, being over the
acceptance age limit of 60 years at the time of application. Candida (wife of Mr. Dans)
was informed by DBP on the disapproval the MRI application. They offered to refund
the premium and an ex gratia settlement but was declined. She then filed a
complaint alleging that Mr. Dans became insured by the DBP MRI Pool when DBP
required him to apply for MRI and later collected the insurance premium despite
having knowledge of his age.

ISSUE:
Whether or not there exists a perfected contract of insurance?

HELD:
It was held that there was no perfected contract of insurance. In order that Mr.
Dans be covered to the MRI: The application shall be approved by the insurance
pool; and full premium is paid during the continued good health of the applicant. In
this case, DBP MRI Pool has the power to approve the MRI; but, there was no
showing that it actually approved the application of Mr. Dans. There is also no
showing that it accepted the premium, which DBP credited to it account with full
knowledge that it was payment for Mr. Dans’ premium; hence, DBP MRI Pool cannot
be held liable on a contract that does not exist.
Contrarily, DPB was held liable for damages but not for the entire value of the
insurance policy: 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
believed that the family already fulfilled the requirements of the said insurance
although DBP had a full knowledge that the application would never be approved.
DBP acted beyond the scope of its authority for accepting applications for the MRI. If
the third person who contracted is unaware of the authority conferred by the principal
on the agent and he has been deceived, the latter is liable for damages. 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.