CASE TITLE

Eternal Gardens Memorial vs. Philamlife

G.R. No. 166245 Date: April 9,2008 Ponente: Velasco, JR

TOPIC CHARACTERISTICS
(per syllabus/book)
TICKLER A contract of insurance, being a contract of
(as in the case) adhesion, par excellence, any ambiguity therein
should be resolved against the insurer; in other
words, it should be construed liberally in favor of
the insured and strictly against the insurer.
Limitations of liability should be regarded with
extreme jealousy and must be construed in such
a way as to preclude the insurer from
noncompliance with its obligations.

RECIT READY – SUMMARY (OPTIONAL)

FACTS:
• December 10, 1980- PhilamLife entered into an agreement as Creditor
Group Life Policy with Eternal Gardens Memorial Park Corp. Under the
policy, the clients of Eternal who purchased burial lots from it on installment
basis would be insured by Philamlife
o Amount to depend on the existing balance of the purchased burial
lot
o Effective for one year, renewable on a yearly basis
• Eternal was required under the policy to submit to Philamlife a list of all new
lot purchasers and with a copy of the application of each purchaser and
the amounts of the respective unpaid balances of all insured lot purchasers
• Eternal complied and one of those included in the list was a certain John
Chuang
o His balance of payments was 100,000 and died on Aug. 2, 1984
• Eternal sent a letter dated Aug. 20, 1984 to Philamlife which served an
insurance claim for Chuang’s death
• After more than a year, Philamlife had not furshied Eternal with any reply to
the insurance claim which prompted Philamlfie for the payment of the
claim of Php 100,000 on April 25, 1986 which was subsequently denied
contesting that no application for Group Insurance was submitted prior to
his death.
 • Eternal filed a case before the MTC Makati for sum of money against
Philamlife
o Ordered Philamlife to pay the sum of 100,000
RTC Affirmed MTC’s decision. The RTC said that since the contract is
a group life insurance, once proof of death is submitted,
payment must follow.

CA Decision is reversed and set aside.

Petitioner [ALLEGATIONS] Respondent [ALLEGATIONS]

Claims that the evidence that it Claims that the evidence presented
presented before the trial court by Eternal is insufficient, arguing that
supports its contention that it Eternal must present evidence
submitted a copy of the insurance showing that Philamlife received a
application of Chuang before his copy of Chuang’s insurance
death and alleged that it provided a application.
copy of the insurance application
which was signed by Chuang himself
and executed before his death.

ISSUE 1: WON Philamlife assumed the risk of loss without approving the application

RULING 1: YES.

SC DOCTRINE
As earlier stated, Philamlife and Eternal It must be remembered that an
entered into an agreement insurance contract is a contract of
denominated as Creditor Group Life adhesion which must be construed
Policy No. P-1920 dated December 10, liberally in favor of the insured and
1980. In the policy, it is provided that: strictly against the insurer in order to
The insurance of any eligible Lot safeguard the latter’s interest.
Purchaser shall be effective on the
date he contracts a loan with the
Assured. However, there shall be no
insurance if the application of the Lot
Purchaser is not approved by the
Company.
- An examination of the above
provision would show ambiguity
between its two sentences. The
 first sentence appears to state
that the insurance coverage of
the clients of Eternal already
became effective upon
contracting a loan with Eternal
while the second sentence
appears to require Philamlife to
approve the insurance contract
before the same can become
effective.

FINAL DISPOSITION: The CA Decision in CA-G.R. CV No. 57810 is REVERSED and

SET ASIDE. Decision of the Makati City RTC, Branch 138 is MODIFIED. Philamlife is
hereby ORDERED:

(1) To pay Eternal the amount of PhP 100,000 representing the proceeds of the Life
Insurance Policy of Chuang;

(2) To pay Eternal legal interest at the rate of six percent (6%) per annum of PhP
100,000 from the time of extra-judicial demand by Eternal until Philamlife’s receipt
of the May 29, 1996 RTC Decision on June 17, 1996;

(3) To pay Eternal legal interest at the rate of twelve percent (12%) per annum of
PhP 100,000 from June 17, 1996 until full payment of this award; and

(4) To pay Eternal attorney’s fees in the amount of PhP 10,000.