CASE #1

UCPB GENERAL INSURANCE CO., INC. v. MASAGANA TELAMART, INC.

G.R. No. 137172; April 4, 2001
DAVIDE, JR., C.J.

DOCTRINE: Exceptions to Sec. 77.

FACTS: Respondent obtained from Petitioner five (5) insurance policies on its properties in Pasay
City and Manila. All five (5) policies reflect on their face the effectivity term. On 13 June 1992,
respondent’s properties located at Taft Avenue, Pasay City were razed by fire. On 13 July 1992,
Masagana tendered, and UCPB accepted, five (5) Equitable Bank Manager's Checks in the total
amount of P225,753.45 as renewal premium payments for which Official Receipt was issued by
UCPB. On 14 July 1992, Masagana made its formal demand for indemnification for the burned
insured properties. On the same day, UCPB returned the five (5) manager's checks stating in its
letter that it was rejecting Masagana's claim on the following grounds:
a) Said policies expired last 22 May 1992 and were not renewed for another term;
b) UCPB had put Masagana and its alleged broker on notice of non-renewal
earlier; and
c) The properties covered by the said policies were burned in a fire that took place
last 13 June 1992, or before tender of premium payment.

The following facts, as found by the trial court and the CA, are indeed duly established:
1. For years, Petitioner had been issuing fire policies to the Respondent, and these
policies were annually renewed.
2. Petitioner had been granting Respondent a 60- to 90-day credit term within which to
pay the premiums on the renewed policies.
3. There was no valid notice of non-renewal of the policies in question, as there is no proof
at all that the notice sent by ordinary mail was received by Respondent, and the copy
thereof allegedly sent to Zuellig was ever transmitted to Respondent.
4. The premiums for the policies in question in the aggregate amount of P225,753.95 were
paid by Respondent within the 60- to 90-day credit term and were duly accepted and
received by Petitioner's cashier.

ISSUE: Whether or not Sec. 77 of the Insurance Code must be strictly applied to Petitioner's
advantage despite its practice of granting a 60- to 90-day credit term for the payment of premiums.

HELD: No. There are exceptions to Sec. 77.

1. The first exception is provided by Sec. 77 itself, and that is, in case of a life or industrial
life policy whenever the grace period provision applies.
2. The second is that covered by Sec. 78 of the Insurance Code, which provides:
Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of
its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be
binding until premium is actually paid.
3. A third exception was laid down in Makati Tuscany Condominium Corporation vs. Court
of Appeals, wherein we ruled that Sec. 77 may not apply if the parties have agreed to the
payment in installments of the premium and partial payment has been made at the time
of loss.
4. Tuscany has provided a fourth exception to Sec. 77, that the insurer may grant credit
extension for the payment of the premium. This simply means that if the insurer has
granted the insured a credit term for the payment of the premium and loss occurs before
 the expiration of the term, recovery on the policy should be allowed even though the
premium is paid after the loss but within the credit term.

Moreover, there is nothing in Section 77 which prohibits the parties in an insurance

contract to provide a credit term within which to pay the premiums. That agreement is not
against the law, morals, good customs, public order or public policy. The agreement binds
the parties pursuant to Article 1306 of the Civil Code which provides for autonomy of
contracts.

5. Finally, in the instant case, it would be unjust and inequitable if recovery on the policy
would not be permitted against petitioner, which had consistently granted a 60- to 90-day
credit term for the payment of premiums despite its full awareness of Sec. 77. Estoppel
bars it from taking refuge under said Section, since Respondent relied in good faith on
such practice. Estoppel then is the fifth exception to Section 77. Instant petition is denied.
____________________________________________________________________________

CASE #2
SPS. ANTONIO TIBAY v. CA & FORTUNE LIFE AND GENERAL INSURANCE CO., INC.
G.R. No. 119655 May 24, 1996
BELLOSILLO, J.

DOCTRINE:
➢ The cardinal polestar in the construction of an insurance contract is the intention of the
parties as expressed in the policy. Verily, it is elemental law that the payment of premium
is requisite to keep the policy of insurance in force. If the premium is not paid in the manner
prescribed in the policy as intended by the parties, the policy is ineffective.
➢ Under Sec. 77, as well as Sec. 78, until the premium is paid, and the law has not expressly
excepted partial payments, there is no valid and binding contract. Hence, in the absence
of clear waiver of prepayment in full by the insurer, the insured cannot collect on the
proceeds of the policy.

FACTS: On 22 January 1987 private respondent FORTUNE issued a Fire Insurance Policy in
favor of Violeta Tibay and/or Nicolas Roraldo on their two-storey residential building in Makati
City, together with all their personal effects therein. The insurance was for P600,000.00 for the
period of 23 January 1987 to 23 January 1988. On 23 January 1987, of the total premium of
P2,983.50, petitioner Violeta Tibay only paid P600.00 thus leaving a considerable balance unpaid.

On 8 March 1987 the insured building was completely destroyed by fire. Two days later, Violeta
Tibay paid the balance of the premium. She filed with FORTUNE a claim on the fire insurance
policy which was referred to its adjuster, Goodwill Adjustment Services, Inc. (GASI). Then, Violeta
she signed a non-waiver agreement with GASI.

FORTUNE denied the claim of Violeta. Efforts to settle the case before the Insurance Commission
proved futile. On 3 March 1988 Violeta and the other petitioners sued FORTUNE for damages in
the amount of P600,000.00 representing the total coverage of the fire insurance policy plus 12%
interest per annum, moral damages, and attorney's fees.

RTC: ruled for petitioners and adjudged FORTUNE liable for the total value of the insured building
and personal properties in the amount of P600,000.00 plus 6% interest per annum
CA: reversed the RTC decision by declaring FORTUNE not to be liable to the plaintiffs but ordered
defendant to return to the former the premium of P2,983.50. Hence, this petition for review.

ISSUE: Whether or not FORTUNE remains liable under the subject fire insurance policy in spite
of the failure of petitioners to pay their premium in full.

HELD: No. Insurance is a contract whereby one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an unknown or contingent event. The
consideration is the premium, which must be paid at the time and in the way and manner specified
in the policy, and if not so paid, the policy will lapse and be forfeited by its own terms

Clearly, the Policy provides for payment of premium in full. Accordingly, where the
premium has only been partially paid and the balance paid only after the peril insured
against has occurred, the insurance contract did not take effect and the insured cannot
collect at all on the policy. This is fully supported by Sec. 77 of the Insurance Code.

Apparently the crux of the controversy lies in the phrase "unless and until the premium thereof
has been paid." This leads us to the manner of payment envisioned by the law to make the
insurance policy operative and binding. The principle that where the law does not distinguish the
court should neither distinguish assumes that the legislature made no qualification on the use of
a general word or expression.

By express agreement of the parties, no vinculum juris or bond of law was to be

established until full payment was effected prior to the occurrence of the risk insured
against.

In the case at bench, the insurer and the insured expressly stipulated that (t)his policy including
any renewal thereof and/or any indorsement thereon is not in force until the premium has been
fully paid to and duly receipted by the Company . . . and that this policy shall be deemed effective,
valid and binding upon the Company only when the premiums therefor have actually been paid
in full and duly acknowledged.

Conformably with the aforesaid stipulations explicitly worded and taken in conjunction with Sec.
77 of the Insurance Code the payment of partial premium by the assured in this particular instance
should not be considered the payment required by the law and the stipulation of the parties.
Rather, it must be taken in the concept of a deposit to be held in trust by the insurer until
such time that the full amount has been tendered and duly receipted for. In other words, as
expressly agreed upon in the contract, full payment must be made before the risk occurs for the
policy to be considered effective and in force.

Petition denied. CA Decision affirmed.

____________________________________________________________________________

CASE #3
PEDRO ARCE v. THE CAPITAL INSURANCE & SURETY CO., INC.
G.R. No. L-28501 September 30, 1982
ABAD SANTOS, J.

DOCTRINE: Stipulation of parties.

FACTS: Arce – the INSURED – was the owner of a residential house in Tondo, Manila, which
had been insured with the respondent COMPANY since 1961. In 1965, the COMPANY sent to
the INSURED a renewal certificate to cover the period from December 5, 1965 to December 5,
1966. The COMPANY requested payment of the corresponding premium (PhP38.10).

Anticipating that the premium could not be paid on time, the INSURED – thru his wife – promised
to pay it on 04 Jan.1966. The COMPANY accepted the promise but the premium was not paid on
04 Jan. 1966. On 8 Jan. 1966 the house of the INSURED was totally destroyed by fire.

INSURED's wife presented a claim for indemnity to the COMPANY. She was told that no
indemnity was due because the premium on the policy was not paid. Nonetheless the COMPANY
tendered a check for P300.00 as financial aid which was received by the INSURED's daughter,
Evelina Arce. The voucher for the check which Evelina signed stated that it was "in full settlement
(ex gratia) of the fire loss." Thereafter, the INSURED and his wife went to the office of the
COMPANY to have his signature on the check Identified preparatory to encashment. At that time,
the COMPANY reiterated that the check was given "not as an obligation, but as a concession"
because the renewal premium had not been paid. The INSURED cashed the check but then sued
the COMPANY on the policy.

CFI: held that since the COMPANY could have demanded payment of the premium, mutuality of
obligation requires that it should also be liable on its policy. It also held that the INSURED was
not bound by the signature of Evelina on the check voucher because he did not authorize her to
sign the waiver.

ISSUE: Whether or not the company is obligated to pay petitioner Arce.

HELD: No. It is obvious from both the Insurance Act, and the stipulation of the parties that time is
of the essence in respect of the payment of the insurance premium so that if it is not paid the
contract does not take effect unless there is still another stipulation to the contrary. In the instant
case, the INSURED was given a grace period to pay the premium but the period having expired
with no payment made, he cannot insist that the COMPANY is nonetheless obligated to him.

The INSURED had nothing to waive; his policy ceased to have effect when he failed to pay the
premium.

The Court held: “We commiserate with the INSURED. We are wen aware that many insurance
companies have fallen into the condemnable practice of collecting premiums promptly but resort
to all kinds of excuses to deny or delay payment of just claims. Unhappily the instant case is one
where the insurer has the law on its side.”
____________________________________________________________________________

CASE #4
MAKATI TUSCANY CONDOMINIUM CORP. v. CA, AMERICAN HOME ASSURANCE CO.
G.R. No. 95546; November 6, 1992
BELLOSILLO, J.

DOCTRINE: Sec. 77 merely precludes the parties from stipulating that the policy is valid even if
premiums are not paid, but does not expressly prohibit an agreement granting credit extension,
and such an agreement is not contrary to morals, good customs, public order or public. So is an
understanding to allow insured to pay premiums in installments not so proscribed. At the very
least, both parties should be deemed in estoppel to question the arrangement they have
voluntarily accepted.

FACTS:
➢ In 1982, private respondent American Home, represented by American International
Underwriters issued in favor of petitioner an Insurance Policy on the latter's building and
premises, for a period beginning 1 March 1982 and ending 1 March 1983, with a total
premium of P466,103.05. The premium was paid on installments on different dates, all of
which were accepted by private respondent.
➢ Private respondent issued to petitioner another Insurance Policy which replaced and
renewed the previous policy. The premium in the amount of P466,103.05 was again paid
on installments and again accepted by private respondent.
➢ On 20 January 1984, the policy was again renewed and private respondent issued to
petitioner, another Insurance Policy for the period 1 March 1984 to 1 March 1985. On this
renewed policy, petitioner made 2 installment payments, both accepted by private
respondent. Thereafter, petitioner refused to pay the balance of the premium.
➢ Consequently, private respondent filed an action to recover the unpaid balance of
P314,103.05 for the said Policy.
➢ After some incidents, petitioner and private respondent moved for summary judgment.

RTC: dismissed the complaint and the counterclaim.

CA: Both parties appealed from the judgment of RTC. The CA modified the order of the RTC by
ordering herein petitioner to pay the balance of the premiums due on the subject policy.

Petitioner’s assertion: its payment by installment of the premiums for the insurance policies for
1982, 1983 and 1984 invalidated said policies because of the provisions of Sec. 77, and by the
conditions stipulated by the insurer in its receipts, disclaiming liability for loss for occurring before
payment of premiums. It argues that where the premiums are not actually paid in full, the policy
would only be effective if there is an acknowledgment in the policy of the receipt of premium
pursuant to Sec. 78 of the Code. Petitioner thus concludes that there cannot be a perfected
contract of insurance upon mere partial payment of the premiums. As a consequence, petitioner
seeks a refund of all premium payments made on the alleged invalid insurance policies.

ISSUE: Whether payment by installment of the premiums due on an insurance policy invalidates
the contract of insurance, in view of Sec. 77 of the Insurance Code.

HELD: No. The SC held that the subject policies are valid even if the premiums were paid on
installments. The records clearly show that petitioner and private respondent intended subject
insurance policies to be binding and effective notwithstanding the staggered payment of the
premiums. The initial insurance contract entered into in 1982 was renewed in 1983, then in 1984.
In those three (3) years, the insurer accepted all the installment payments. Such acceptance of
payments speaks loudly of the insurer's intention to honor the policies it issued to petitioner.
Certainly, basic principles of equity and fairness would not allow the insurer to continue collecting
and accepting the premiums, although paid on installments, and later deny liability on the lame
excuse that the premiums were not prepared in full.

Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums
are not paid, but does not expressly prohibit an agreement granting credit extension, and such an
agreement is not contrary to morals, good customs, public order or public policy (De Leon). So is
an understanding to allow insured to pay premiums in installments not so proscribed. At the very
least, both parties should be deemed in estoppel to question the arrangement they have
voluntarily accepted.

It appearing from the peculiar circumstances that the parties actually intended to make three (3)
insurance contracts valid, effective and binding, petitioner may not be allowed to renege on its
obligation to pay the balance of the premium after the expiration of the whole term of the third
policy in March 1985. Moreover, as correctly observed by the appellate court, where the risk is
entire and the contract is indivisible, the insured is not entitled to a refund of the premiums paid if
the insurer was exposed to the risk insured for any period, however brief or momentary.
____________________________________________________________________________

CASE #5
ACME SHOE RUBBER & PLASTIC CORPORATION v. CA and DOMESTIC INSURANCE
COMPANY OF THE PHILIPPINES
G.R. No. L-56718; January 17, 1985
MELENCIO-HERRERA, J.

DOCTRINE: It is axiomatic that laws have no retroactive effect unless the contrary is provided.
What became automatically cancelled by R.A. No.3540 was the 1964-1965 policy for ACME's
failure to pay the premium within the 90-day extension granted, and in accordance with the
express terms of the Promissory Note that it had signed.

FACTS: Since 1946, petitioner ACME had been insuring yearly against fire its building, machines
and general merchandise, located at Caloocan City, with respondent INSURER. In May 1962,
ACME continued to insure its properties with the INSURER and was issued a Policy in the amount
of P200,000.00 for the period May 15, 1962 up to May 15, 1963. The INSURER issued Renewal
Receipt to cover the abovementioned period. Then, ACME paid P3,331.26 as premium. The
INSURER applied the payment as renewal premium for said period. Subsequently, the INSURER
issued a Renewal Receipt, and stamped on it was the note: Subject to "Receipt of Payment
Clause" and "Credit Agreement" attached hereto and forming part hereof.

ACME, through its President, signed a promissory note promising to pay within ninety days from
the effective date of this policy, 15th May 1964, the premium and documentary stamps in the sum
of P3,331.26. He agreed therein that should there be failure to pay, the policy will be automatically
cancelled, without further notice by the Company, and that he shall pay only the short period
premium corresponding to 90 days.

ACME's properties were completely destroyed by fire in October 1964. ACME filed its insurance
claim but the INSURER disclaimed liability on the ground that as of the date of loss, the properties
burned were not covered by insurance. Then, ACME sued on the policy before the CFI-Rizal for
the collection of the insurance proceeds and for damages in the form of lost profits by reason of
the delay in payment.

RTC: found the INSURER liable in the amount of P200,000.00, representing the insurance
coverage; stating that there was a clear intention on the INSURER's part to grant ACME a credit
extension for the payment of the premium due.
CA: reversed the RTC and dismissed the suit on the ground that, as of the moment of loss,
ACME's properties were not insured and the INSURER could not be held liable for any indemnity
as a result of the loss. Hence, the present Petition.
ISSUE: Whether or not the CA erred in ruling that there was no insurance contract since
respondent insurer accepted a one-year premium on 08 January 1964.

HELD: No. By the express terms of the Promissory Note signed by its President, ACME was fully
aware that the policy would be automatically cancelled on 13 August 1964 (90th day from 14
March 1964) if it did not pay the premium before the former date. There is also evidence to the
effect that various reminders by the INSURER for payment remained unheeded. Not having paid
the 1964-1965 premium within the extension granted, the policy was automatically cancelled and
there was no insurance coverage to speak of as of the date of the fire.

Sec. 72. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured
against, unless there is clear agreement to grant the insured credit extension of the premium due. No policy issued by
an insurance company is valid and binding unless and until the premium thereof has been paid .

Since Republic Act No. 3540 was approved only on June 20, 1963 and was put into effect only
beginning October 1, 1963, it could not retroactively affect the renewal of the insurance policy on
May 15, 1963, or prior to the Act's effective date. ACME's premium payment of January 8, 1964,
therefore, was properly applied to the 1963-1964 premium. The Trial Court's opinion that there
was a clear agreement to grant ACME credit extension for 1964-1965 is negated by ACME's
Promissory Note binding itself to pay "within ninety days from the effective date of the policy.
Indubitably, the credit extension granted ACME was only for 90 days.

If, in the past, ACME had been granted credit extensions, the Promissory Note it had signed did
away with such credit arrangement. Moreover, it was prior to the advent of Republic Act No. 3540
when renewal receipts that the INSURER had issued did not contain the "Receipt of Payment"
and "Credit Agreement" clauses. By 1964, however, the situation had changed by the passage of
said Act by the express provision of which no policy could be valid and binding unless and until
the premium thereof had been paid. CA’s judgment is affirmed.
____________________________________________________________________________

CASE #6
THE MANUFACTURERS LIFE INSURANCE CO. v. BIBIANO MEER, BIR Collector
G.R. No. L-2910; June 29, 1951
BENGZON, J.

DOCTRINE: The cash value or cash surrender value is therefore an amount which the insurance
company holds in trust for the insured to be delivered to him upon demand. It is therefore a liability
of the company to the insured. Now then, when the company's credit for advances is paid out of
the cash value or cash surrender value, that value and the company's liability is thereby dismissed
pro tanto.

FACTS: Manufacturer Life Insurance Company in a corporation duly organized in Canada with
head office at Toronto. It is duly registered and licensed to engage in life insurance business in
the Philippines, and maintains a branch office in Manila. It was engaged in such business in the
Philippines for more than 5 years before and including the year 1941. But due to the exigencies
of the war it closed the branch office at Manila during 1942 up to September 1945.

In the course of its operations before the war, petitioner issued a number of life insurance policies
in the Philippines containing stipulations referred to as non-forfeiture clauses.
From 01 January 1942 to 31 December 1946 for failure of the insured under the above policies
to pay the corresponding premiums for one or more years, the petitioner’s head office of Toronto,
applied the provision of the automatic premium loan clauses; and the net amount of premiums so
advanced or loaned totaled P1,069,254.98. On this sum the defendant Collector of Internal
Revenue assessed P17,917.12 — which petitioner paid supra protest. The assessment was
made pursuant to section 255 of the NIRC.

Petitioner’s contention: When it made premium loans or premium advances by virtue of the non-
forfeiture clauses, it did not collect premiums within the meaning of the above sections of the law,
and therefore it is not amendable to the tax therein provided.

ISSUE: Whether or not premium advances made by the petitioner under the automatic premium
loan clause of its policies are "premium collected" by the Company subject to tax.

HELD: Yes. The Manufacturers Life Insurance Co. loaned to "A" on the 11th year, the sum of P250
and the latter in turn paid with that sum the annual premium on his policy. The Company therefore
collected the premium for the 11th year.

In other words, "A" paid the premium for the eleventh; but in turn he became a debtor of the
company for the sum of P250. This debt he could repay either by later remitting the money to the
insurer OR by letting the cash value compensate for it. The debt may also be deducted from the
amount of the policy should "A" die thereafter during the continuance of the policy.

There was an increase. There was the new credit for the advances made. True, the petitioner
could not sue the insured to enforce that credit. But it has means of satisfaction out of the cash
surrender value (“as applied to life insurance policy, is the amount of money the company agrees
to pay to the holder of the policy if he surrenders it and releases his claims upon it.”) The more
premiums the insured has paid the greater will be the surrender value; but the surrender value is
always a lesser sum than the total amount of premiums paid."

The cash value or cash surrender value is therefore an amount which the insurance company
holds in trust for the insured to be delivered to him upon demand. It is therefore a liability of the
company to the insured. Now then, when the company's credit for advances is paid out of the
cash value or cash surrender value, that value and the company's liability is thereby dismissed
pro tanto. Consequently, the net assets of the insurance company increased corresponding; for
it is plain mathematics that the decrease of a person's liabilities means a corresponding increase
in his net assets.

The operation of the automatic loan provision contributed no additional cash to the funds of the
insurer. Yet it must be admitted that the insurer agreed to consider the premium paid on the
strength of the automatic loan. The premium was therefore paid by means of a "note" or "credit"
or "other substitute for money" and the taxes due because sec. 255 levies taxes according to the
total premiums collected by the insurer “whether such premiums are paid in money, notes, credits
or any substitutes for money”.

The premiums paid and on which taxes had already been collected, were those for the ten years.
The tax demanded is on the premium for the eleventh year.

AS TO APPLICATION OF LOCAL TAXES

The loans are made to policyholders in the Philippines, who in turn pay therewith the premium to
the insurer thru the Manila branch. The law does not contemplate premiums collected in the
Philippines. It is enough that the insurer is doing insurance business in the Philippines,
irrespective of the place of its organization or establishment. Furthermore, in objecting to the
payment of the tax, petitioner never insisted before the BIR that it was not engaged in business
in this country during those years.
____________________________________________________________________________

CASE #7
GSIS v. PRUDENTIAL GUARANTEE AND ASSURANCE, INC. (PGAI)
G.R. No. 165585; November 20, 2013
PERLAS-BERNABE, J.

DOCTRINE: Cite doctrine in the Makati Tuscany case.

FACTS: Assailed in these consolidated petitions for review on Certiorari are separate issuances
of the CA in relation to the complaint for sum of money filed by PGAI against the GSIS before the
Makati RTC.

Sometime in March 1999, the National Electrification Administration (NEA) entered into a MOA
with GSIS insuring all real and personal properties mortgaged to it by electrical cooperatives
under an Industrial All Risks Policy (IAR policy). The total sum insured under the IAR policy was
₱16,731,141,166.80, out of which, 95% (or ₱15,894,584,108.40) was reinsured by GSIS with
PGAI for a period of one year.

As reflected in Reinsurance Request Note and the Reinsurance Binder, GSIS agreed to pay
respondent PGAI reinsurance premiums in the amount of ₱32,885,894.52 per quarter (or
₱131,543,578.08) While GSIS remitted to PGAI the reinsurance premiums for the first three
quarters, it, however, failed to pay the fourth and last reinsurance premium due on 05 December
1999 despite demands. This prompted PGAI to file a Complaint for sum of money against GSIS
before the RTC.

PGAI filed a Motion for Judgment on the Pleadings averring that GSIS essentially admitted the
material allegations of the complaint, which are:
➢ the existence of the MOA between NEA and GSIS;
➢ the existence of the reinsurance binder between GSIS and PGAI;
➢ the remittance by GSIS to PGAI of the first three quarterly reinsurance premiums; and
➢ the failure/refusal of GSIS to remit the fourth and last reinsurance premium.

In its petition, GSIS argued that:

(a) none of the grounds proffered by PGAI justifies the issuance of a writ of execution
pending appeal; and
(b) all funds and assets of GSIS are exempt from execution and levy in accordance with
RA 8291 (An Act further amending the Revised Government Service Insurance Act of
1977)

RTC: granted PGAI’s Motion for Judgment on the Pleadings.

CA: issued a TRO enjoining the garnishment of GSIS’ funds with LBP and DBP. Nevertheless,
since the TRO’s effectivity lapsed, GSIS’ funds with the LBP were eventually garnished. Then, it
dismissed GSIS’ petition. GSIS’ MR was denied. Hence, these consolidated petitions.

ISSUE: Whether or not the PGAI has right to be paid by GSIS the amount of the fourth and last
reinsurance premium pursuant to the reinsurance contract between them.
HELD: Yes. Owing to the identical complexion of Makati Tuscany with the present case the Court
upholds PGAI’s right to be paid by GSIS the amount of the fourth and last reinsurance premium
pursuant to the reinsurance contract between them.

In this case, records disclose that in its Answer, GSIS admitted the material allegations of PGAI’s
complaint warranting the grant of the relief prayed for. In particular, GSIS admitted that: (a) it
made a request for reinsurance cover which PGAI accepted in a reinsurance binder effective for
one year; (b) it remitted only the first three reinsurance premium payments to PGAI; (c) it failed to
pay PGAI the fourth and final reinsurance premium installment; and (d) it received demand letters
from PGAI. It also did not refute the allegation of PGAI that it settled reinsurance claims during
the reinsured period. On the basis of these admissions, the Court finds that the CA did not err in
affirming the propriety of a judgment on the pleadings.

The declared policy of the State in Section 39 of the GSIS Charter granting GSIS an exemption
from tax, lien, attachment, levy, execution, and other legal processes should be read together
with the grant of power to the GSIS to invest its "excess funds" under Section 36 of the same Act.
Under Section 36, the GSIS is granted the ancillary power to invest in business and other ventures
for the benefit of the employees, by using its excess funds for investment purposes. In the
exercise of such function and power, the GSIS is allowed to assume a character similar to a
private corporation. Thus, it may sue and be sued, as also explicitly granted by its charter.

Needless to say, where proper, under Section 36, the GSIS may be held liable for the contracts
it has entered into in the course of its business investments. For GSIS cannot claim a special
immunity from liability in regard to its business ventures under said Section.
____________________________________________________________________________

CASE #8
SOUTH SEA SURETY AND INSURANCE COMPANY, INC. v. CA
G.R. No. 102253; June 2, 1995
VITUG, J.

DOCTRINE: When the appellant South Sea Surety and Insurance Co., Inc. delivered to Mr. Chua
the marine cargo insurance policy for Hardwood’s logs, he is deemed to have been authorized by
the South Sea Surety and Insurance Co., Inc. to receive the premium which is due on its behalf.

FACTS: On 16 January 1984, private respondent Valenzuela Hardwood and Industrial Supply,
Inc. entered into an agreement with the Seven Brothers whereby the latter undertook to load on
board its vessel M/V Seven Ambassador the former's lauan round logs numbering 940 at the port
of Maconacon, Isabela for shipment to Manila.

Hardwood insured the logs, against loss and/or, damage with petitioner for P2,000,000.00 and
the latter issued its Marine Cargo Insurance Policy for such amount. Hardwood gave the check in
payment of the premium on the insurance policy to Mr. Victorio Chua. In the meantime, the said
vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the plaintiffs
insured logs.

On 30 January, a check for P5,625.00 to cover payment of the premium and documentary stamps
due on the policy was tendered to the insurer but was not accepted. Instead, the petitioner
cancelled the insurance policy it issued as of the date of inception for non-payment of the premium
due in accordance with Sec. 77 of the Insurance Code.
Hardwood demanded from petitioner the payment of the proceeds of the policy but the latter
denied liability under the policy. Hardwood likewise filed a formal claim with Seven Brothers
Shipping Corporation for the value of the lost logs but the latter denied the claim.

RTC: rendered judgment in favor of Hardwood.

CA: affirmed RTC judgment only against the insurance corp. and absolved the shipping entity.

ISSUE: Whether or not Victorio Chua, in receiving the check for the insurance premium prior to
the occurrence of the risk insured against has so acted as an agent of petitioner.

HELD: Yes. In the instant case, the Marine Cargo Insurance Policy was issued by petitioner 20
January 1984. At the time the vessel sank on 25 January 1984 resulting in the loss of the insured
logs, the insured had already delivered to Victorio Chua the check in payment of premium.

When the appellant South Sea Surety and Insurance Co., Inc. delivered to Mr. Chua the marine
cargo insurance policy for Hardwood’s logs, he is deemed to have been authorized by the South
Sea Surety and Insurance Co., Inc. to receive the premium which is due on its behalf.

When therefore the insured logs were lost, the insured had already paid the premium to an agent
of the South Sea Surety and Insurance Co., Inc., which is consequently liable to pay the insurance
proceeds under the policy it issued to the insured.

AS TO LIABILITY OF SHIPPING CORPORATION

The RTC erred in applying the provisions of the Civil Code on common carriers to establish the
liability of the shipping corporation. The provisions on common carriers should not be applied
where the carrier is not acting as such but as a private carrier. Under American jurisprudence, a
common carrier undertaking to carry a special or chartered to a special person only, becomes a
private carrier. As a private carrier, a stipulation exempting the owner from liability even for the
negligence of its agent is valid. The shipping corporation should not therefore be held liable for
the loss of the logs. Petition denied.
____________________________________________________________________________

CASE #9 NOT FOUND

CASE #10
MALAYAN INSURANCE CO., INC. (MICO) v. GREGORIA CRUZ ARNALDO
G.R. No. L-67835; October 12, 1987
CRUZ, J.

DOCTRINE:
• Section 77 of the Insurance Code is not applicable herein because payment of the
premium was in fact eventually made in this case, specifically on 24 December 1981. Such
payment rendered the policy operative as of 22 June 1981.
• The policy could be cancelled on any of the supervening grounds enumerated in Article
64 (except "nonpayment of premium") provided the cancellation was made in accordance
therewith and with Article 65. As it has not been shown that there was a valid cancellation
of the policy, there was consequently no need to renew it but to pay the premium thereon.

FACTS: On 07 June 1981, petitioner MICO issued to the private respondent, Coronacion Pinca,
a Fire Insurance Policy on her property for the amount of P14,000.00 for the period of 22 July
1981 until 22 July 1982. On 15 October 1981, MICO allegedly cancelled the policy for
nonpayment, of the premium and sent the corresponding notice to Pinca.
On 24 December 1981, payment of the premium for Pinca was received by Domingo Adora, agent
of MICO. Adora remitted this payment to MICO, together with other payments. On 18 January
1982, Pinca's property was completely burned. The following month, Pinca's payment was
returned by MICO to Adora on the ground that her policy had been cancelled earlier. But Adora
refused to accept it.
In due time, Pinca made the requisite demands for payment, which MICO rejected. She then went
to the Insurance Commission. It is because she was ultimately sustained by the public respondent
that the petitioner has come to the SC for relief.

ISSUE: Whether or not there was no valid insurance contract at the time of the loss.

HELD: No. There was a valid insurance contract at the time of the loss. The petitioner relies
heavily on Section 77 of the Insurance Code. Such provision is not applicable because payment
of the premium was in fact eventually made in this case, specifically on 24 December 1981. The
fire occurred on 18 January 1982. The payment rendered the policy operative as of 22 June 1981,
and removing it from the provisions of Article 77. Thereafter, the policy could be cancelled on any
of the supervening grounds enumerated in Article 64 (except "nonpayment of premium") provided
the cancellation was made in accordance therewith and with Article 65.

MICO's acknowledgment of Adora as its agent defeats its contention that he was not authorized
to receive the premium payment on its behalf. It is a well-known principle under the law of agency
that payment to an agent having authority to receive or collect payment is equivalent to payment
to the principal himself; such payment is complete when the money delivered is into the agent's
hands and is a discharge of the indebtedness owing to the principal.

MICO claims it cancelled the policy in question on 15 October 1981, for non-payment of premium.
On the other hand, there is the flat denial of Pinca, who says she never received the claimed
cancellation and who, of course, did not have to prove such denial considering the strict language
of Sec. 64 that no insurance policy shall be cancelled except upon prior notice, it behooved MICO
to make sure that the cancellation was actually sent to and received by the insured.

It stands to reason that if Pinca had really received the said notice, she would not have made
payment on the original policy on 24 December 1981. Instead, she would have asked for a new
insurance, effective on that date and until one year later, and so taken advantage of the extended
period. The Court finds that if she did pay on that date, it was because she honestly believed that
the policy issued on 07 June 1981, was still in effect and she was willing to make her payment
retroact to 22 July 1981. After all, agent Adora was very accommodating and had earlier told her
"to call him up any time" she was ready with her payment on the policy earlier issued.

MICO's suggests that Pinca knew the policy had already been cancelled and that when she paid
the premium on 24 December 1981, her purpose was "to renew it." As this could not be done by
the agent alone under the terms of the original policy, the renewal thereof did not legally bind
MICO which had not ratified it. As it has not been shown that there was a valid cancellation of the
policy, there was consequently no need to renew it but to pay the premium thereon. Payment was
thus legally made on the original transaction and it could be, and was, validly received on behalf
of the insurer by its agent Adora.

As to procedure: The petition can and should be dismissed for late filing. Petition is DENIED. The
decision of the Insurance Commission is AFFIRMED.
____________________________________________________________________________
 CASE #11
AMERICAN HOME ASSURANCE COMPANY v. TANTUCO ENTERPRISES, INC.
G. R. No. 138941; October 8, 2001
PUNO, J.

DOCTRINE:
➢ 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.
➢ It ought to be remembered that not only are warranties strictly construed against the
insurer, but they should, likewise, by themselves be reasonably interpreted. That
reasonableness is to be ascertained in light of the factual conditions prevailing in each
case.

FACTS: Respondent Tantuco Enterprises, Inc. is engaged in the coconut oil milling and refining
industry. It owns two oil mills at Lucena City. The two oil mills were separately covered by fire
insurance policies issued by petitioner American Home. The first oil mill was insured for
P3,000,000.00. The 2nd (commonly known as the “new oil mill”) was insured for P6,000,000.00.
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 30 September 1991 gutted and consumed the new oil
mill. Respondent immediately notified the petitioner of the incident. The latter then sent its
appraisers who inspected the burned premises and the properties destroyed. Thereafter,
petitioner rejected respondent's claim for the insurance proceeds on the ground that no policy
was issued by it covering the burned oil mill; stating that: the policies extend insurance coverage
to oil mill under bldg. no. 5; whilst the affected oil mill was under bldg. no. 14

A complaint for specific performance and damages was consequently instituted by the respondent
with the RTC-Lucena City.

RTC: found petitioner liable. CA: upheld RTC’s decision. Petitioner moved for MR but such was
denied for lack of merit. Hence, the present course of action.

ISSUE: Whether or not the respondent’s burned oil mill is not covered by any insurance policy.

HELD: NO. Petitioner’s contention: the oil mill gutted by fire was not the one described by the
specific boundaries in the contested policy. What worsens respondent's predicament, is that it did
not have the supposed wrong description or mistake corrected. Respondent apparently did not
call petitioner's attention with respect to the misdescription.

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 that what the
parties manifestly intended to insure was the new oil mill. This is obvious from the categorical
statement embodied in the policy, extending its protection: On machineries and equipment with
complete accessories usual to a coconut oil mill including stocks of copra, copra cake, and copra
mills whilst contained in the new oil mill building.

If the parties really intended to protect the first oil mill, then there is no need to specify it
as new.

Indeed, it would be absurd to assume that respondent would protect its first oil mill for different
amounts and leave uncovered its second one. As mentioned earlier, the first oil mill is already
covered by a Policy issued by the petitioner. It is unthinkable for respondent to obtain the other
policy from the very same company. The latter ought to know that a second agreement over that
same realty results in its over insurance.

The imperfection in the description of the insured oil mill's boundaries can be attributed to a
misunderstanding between the petitioner's general agent, Mr. Alfredo Borja, and its policy issuing
clerk, who made the error of copying the boundaries of the first oil mill when typing the policy to
be issued for the new one.

These facts lead us to hold that the present case falls within one of the recognized exceptions to
the parole evidence rule. Thus, while the contract explicitly stipulated that it was for the insurance
of the new oil mill, the boundary description written on the policy concededly pertains to the first
oil mill. This irreconcilable difference can only be clarified by admitting evidence aliunde, which
will explain the imperfection and clarify the intent of the parties.

Likewise, petitioner fatally neglected to present, during the whole course of the trial, any witness
to testify that respondent indeed failed to pay the full amount of the premium.

As to the Fire Extinguishing Appliances Warranty

What the warranty mandates is that respondent should maintain in efficient working condition
within the premises of the insured property, firefighting equipment such as, but not limited to,
those identified in the list, which will serve as the oil mill's first line of defense in case any part of
it bursts into flame. To be sure, respondent was able to comply with the warranty. All the present
equipment were in efficient working order when the fire occurred.

It ought to be remembered that not only are warranties strictly construed against the insurer, but
they should, likewise, by themselves be reasonably interpreted. That reasonableness is to be
ascertained in light of the factual conditions prevailing in each case. Here, we find that there is no
more need for an internal hydrant considering that inside the burned building were: (1) numerous
portable fire extinguishers, (2) an emergency fire engine, and (3) a fire hose which has a
connection to one of the external hydrants.

Petition dismissed.