MANUFACTURERS LIFE INSURANCE CO. v. MEER 89 PHIL 351 BENGZON, June 29, 1951
NATURE APPEAL from a judgment of the Court Court of First Instance of Manila Manila
FACTS (this is a tax case. What‟s really important here is the definition of CASH SURRENDER VALUE). - Manufacturers Life Insurance Company is a duly organized corporation which has its head office at Toronto. It is duly registered a nd licensed to engage in life insurance business in the Philippines, a nd, maintains a branch office in Manila. It was engaged in such business in the Philippines for more than five 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. - Plaintiff issued a number of life insurance policies in the Philippines containing stipulations referred to as NONFORFEITURE CLAUSES 1 - From January 1, 1942 to December 31, 1946, Plaintiff head office at Toronto applied the provisions of the automatic premium loan clauses upon the nonpayment of the corresponding premiums by the people who subscribed to the insurance. The net amount of premiums advanced (by the company) or loaned (to the insured) as payment for the premium due totaled P1,069,254.98. - Meer, the Collector of the National Internal Revenue assessed the net amount of premium at P17,917.12 pursuant to SEC.255, National Internal Revenue Code 2 - Company protested the assessment, but paid the taxes anyway. Then they filed a complaint to recover money paid under protest for tax es - CFI: Dissmiss complaint - PLAINTIFF‟s MAIN 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 amenable to the tax therein provided. 1"'8. Automatic PremiumLoan.-This Policy shallnot lapsefor non-payment ofany premium after it has beenthree fullyears inf orce, it, atthe duedate ofsuch premium,the CashValue of thisPolicy andof anybonus additions anddividends left onaccumulation (after deductingany indebtedness tothe company andt heinterest accruedthereon) shallexceed theamount of saidpremium. Inwhich event thecompany will, without furtherrequest, treat thepremium thendue as paid,andthe amount of suchpremium, with interest from its actualdue dateat six per cent perannum, compoundedyearly, andone percent, compoundedyearly, for expenses, shallbe a first lienonthis Policy int heCompany's favourin priority tothe claim of any assignee or any otherpers on. The accumulatedlienmay atany time, whilethePolicy isinforce,bepaid inwholeor inpart. 'Whenthe premium falls dueand is not paidin cashwit hinthe month's grace,if theCashValue of this policy andof anybonus additions anddividends left onaccumulation (after deductingany accumulatedindebtedness) beless thanthe premium thendue, the Company will, without furtherrequests, continuethis insurancein forcefor aperiod * **. '10. CashandPaid-UpInsuranceValues.-At A t the endof thethirdpolicy yearor thereafter, uponthelegalsurrender of this Policy to theCompany whilethereis nodefault inpremium payments or withintwomonths after theduedateof thepremium indefault, the Company will (1) grant acashvalueas specifiedin e din Column(A) increasedby thecashvalueof any bonus additions anddividends left onaccumulation, o n, whichhavebeenallotedtothis Policy,less allindebtedness totheCompany onthis Polley anthedateof ouchsurrender, or (2)endorsethis Policy as aNon-Part icipatingPaid-up Polley for theamount as specifiedI nColumn (B) oftheTable ofGuaranteed Values ** *. '11.ExtendedInsurance-After A fterthepremiumsforthreeor morefullyearshavebeenpaidhereunderincash,if anysubsequentpremiumisnot paidwhendue,andthereisno indebtednes e dnessto theCompanyon thewrittenrequestof theinsured** *." 2"SEC. 255. Taxes oninsurance premiums.-There shallbe collectedf rom every person, company, or corporation(except purely cooperativecompanies or associations) doinginsurance business of any sort intheP hilippines atax of oneper centum of thetotal premiums collected* * * whethersuch permiums arepaid inm oney, notes, credits, or any substitute for money but premiums refunded within six months after payment onaccount of rejectionof risk or returnedfor other reasonto personinsured shall not be includedinthe taxablereceipts** *."
ISSUES 1. WON premium advances made by plaintiff-appellant under the automatic premium loan clause of its policies are premiums collected' by the Company subject to tax 2. WON, in the application of the automatic premium loan clause of plaintiffappellant's policies, there is 'payment in money, notes, credits, or any substitutes for money 3. WON the collection of the alleged deficiency premium taxes constitutes double taxation 4. WON the making of premium advances, granting for the sake of argument that it amounted to collection of premiums, were done in Toronto, Canada 5. WON the fact that plaintiff-appellant was not doing business in the Philippines during the period from January 1, 1942 to September 30, 1945, inclusive, exempts it from payment of premium taxes corresponding to said period
HELD
NOTE (example given by the plaintiff): "Suppose that 'A', 30 years of age, secures a 20-year endowment policy for P5,000 from plaintiff-appellant Company and pays an annual premium of P250. 'A' pays the first ten yearly premiums amounting to P2,500 and on this amount plaintiff-appellant pays the corresponding taxes under section 255 of the National Internal Revenue Code. Suppose also that the cash value of said policy after the payment of the 10th annual premium amounts to P1,000." When on the eleventh year the annual premium fell due and the insured remitted no money within the mouth grace, the insurer treated the premium then over due as paid from the cash value value,, the amount being a loan to the policyholder1 who could discharge it at any time with interest at 6 per cent. The insurance contract, therefore, continued in force for the eleve nth year. 1. YES - Based on the example given by the plaintiff, the insurer collected the amount of P250 as the annual premium for the eleventh year on the said policy when it loaned to “A” the sum of P250. The insurer “became a creditor” of the loan, but not of the premium that had already been paid (advanced by the insurer). The insurer is entitled to collect interest on the loan, not on the premium. "A" paid the premium for the eleventh year; 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. RGUMENT THAT THE ASSETS OF THE INSURER REMAINED THE SAME AFTER THE - ON A RGUMENT APPLICATION OF THE AUTOMATIC PREMIUM LOAN CLAUSE: there was an increase in assets
in the form of CREDIT for the advances made (in the example, the P250 for the 11 th year). - ON ARGUMENT THAT IF THE CREDIT IS PAID OUT OF THE CASH SURRENDER VALUE , THERE WERE NO NEW FUNDS ADDED TO THE COMPANY 'S ASSETS”: Cash surrender value "as applied to a 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." (Cyclopedia Law Dictionary 3d. ed. 1077.) 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 diminished pro tanto. 2. YES - 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 tax is due because section 255 above quoted levies taxes according to the total premiums collected by the insurer "whether such premiums are paid in money, notes, credits or any substitute for money. 3. NO - No constitutional prohibition against double taxation. 4. NO - The loans are made to policyholders in the Philippines, who in turn pay therewith the premium to the insurer thru the Manila branch. Approval of appellant's position will enable foreign insurers to evade the tax by contriving to require that premium payments shall be made at their head offices. What is important, 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. 5. NO - Although during those years the appellant was not open for new business because its branch office was closed, still it was practically and legally, operating in this country by collecting premiums on its outstanding policies, incurring the risks and/or enjoying the benefits consequent thereto, without having previously taken any steps indicating withdrawal in good faith from this field of economic activity. Disposition finding no prejudicial error in the appealed decision, we hereby affirm it with costs.
ANDRES v. CROWN CROWN LIFE INSURANCE INSURANCE
102 Phil. 919 REYES, J.B.L., Jan.28, 1958
NATURE Appeal from judgment of CFI
FACTS - Feb. 13, 1950: For the sum of P5,000, defendant-appellee Crown Life issued an insurance policy in the name of plaintiff-appellant Rufino and his wife, with the stipulation that the premiums are to be paid semi-annually. - The premiums for the 1 st and 2 nd semester of the 1 st year, in the amount of P165.15 were paid by Rufino but the premium for the third semester, in the same amount, was not paid. - Jan. 6, 1951, Crown Life, through its branch secretary, wrote to Mr. and Mrs. Andres advising them that their insurance policy lapsed on Dec. 26, 1950 and the amount of P165.15 was overdue, giving them 60 days from the date of lapse to file an application for reinstatement. Crown Life later sent another letter telling the spouses Andres that their insurance policy policy was no longer in force. - Feb. 1951: Plaintiff and his wife executed a Statement of Health and application for reinstatement of the aforesaid policy. - Feb. 20, 1951: Plaintiff wrote a letter to the defendant, enclosed with a money order for P100. Upon acceptance, defendant advised Rufino that its main office had approved the application and that the reinstatement of the lapsed policy was subject to the payment of the remaining premium balance of P65.15. - May 3, 1951: Severa Andres died of dystocia, contracted pelvis. - May 5, 1951: Plaintiff sent a letter enclosed with a money order in the amount of P65, for the remaining balance due. - May 15, 1951: Defendant sent a letter with official receipt of the P165.15 paid by Rufino as well as a Certificate of Reinstatement. - June 7, 1951: Rufino presented a death claim as survivor-beneficiary of his deceased wife. Payment was denied by the the defendant. - April 1952: Rufino filed a complaint in CFI against Crown Life for the recover y of the amount of P5,000 as the face value of a joint 20-year endowment insurance policy issued by defendant in favor of plaintiff and his wife, on Feb. 13, 1950. In its answer, Crown Life disclaimed liability and set forth the special defense that the aforementioned policy had already lapsed. - Aug. 5, 1954: CFI rendered a decision absolving the defendant company from any liability on the ground that the policy had lapsed and it was not reinstated at the time of the plaintiff‟s wife‟s death. Plaintiff later appealed to the CA but the same was certified by the CA to the SC for having no question of fact.
ISSUE WON the insurance policy, which has bee n in a state of lapse before May 3, 1951, has been validly and completely reinstated after said date (Was there a perfected contract of reinstatement after the policy lapsed du e to non-payment of premiums?)
HELD NO Ratio The stipulation in a life insurance policy giving the insured the privilege to reinstate it upon written application does not give the insured absolute right to such reinstatement by the mere filing of an application. The Company has the right to deny the reinstatement if it is not satisfied as to the insurability of the insured and if the latter does not pay all overdue premiums and all other indebtedness to the Company. After the death of the insured the insurance Company cannot be compelled to entertain an application for reinstatement of the policy because the conditions precedent to reinstatement can no longer be determined and satisfied. Reasoning - The stipulations of facts render it undisputable that the original policy lapsed for non-payment of premiums on Dec. 26, 1950, upon expiration of the 31-day grace period. - As found by the lower court, the conditions set forth in the policy for reinstatement as provided in the contract itself are the following: (A) application shall be made within 3 years from the date of lapse; (B) there should be a production of evidence of the good health of the insured; (C) if the rate of premium depends upon the age of the Beneficiary, there should likewise be a production of evidence of his or her good health; (D) there should be presented such other evidence of insurability at the date of application for reinstatement; (E) there should be no change which has taken place in such good health and insurability subsequent to the date of such application and before the policy is reinstated; and (F) all overdue premiums and other indebtedness in respect of the policy, together with interest at 6%, compounded annually, should first be paid. - The plaintiff did not comply with the last condition; for he only paid P100 before his wife‟s death; and despite the Company‟s reminders, he only remitted the balance of P65.15 two days after his wife died. On the face of such facts, the Company had the right to treat the contract as lapsed and refuse payment of the policy. - Rufino contends that the condition regarding payment of the premium was waived by the insurance Company through its letters, wherein it made statements such as: “If you are unable to pay the full amount immediately, send as large a mount as possible and advise us how soon you expect to be able to pay the balance; we will work out an adjustment most beneficial to you.” The Court found the statements to be too vague and indefinite to indicate an intention on the ins urer‟s part to waive the full payment as prerequisite to the reinstatement of the lapsed policy. The Court reiterated the rule
that a waiver must be clear and positive, the intent to waive shown clearly and convincingly. On the other hand, It found subsequent letters sent by defendant indicating that they insisted on full payment of the premium before the policy was reinstated and that defendant did not consider partial payment as sufficient consideration for the reinstatement. Plaintiff- Appellant‟s failure to remit the balance before the death of his wife operated to de prive him of any right to waive the policy and recover the face value thereof. Disposition Judgment appealed from is affirmed.
PEREZ v. CA (BF LIFEMAN INSURANCE CORP.) 323 SCRA 613 YNARES-SANTIAGO; January 28, 2000
NATURE Petition for review on certiorari
FACTS - Primitivo Perez has been insured with the BF Lifeman Insurance Corporation (BF hereafter) since 1980 for Php20,000. Sometime in 1987, Rodolfo Lalog (agent of BF) convinced him to apply for additional insurance coverage of Php50,000. Perez accomplished the application form and passed the required medical examination. He also paid Php2,075 premium) to Lalog. - On November 25, 1987, Perez died while riding a banca which capsized during a storm. During this time his application papers for the additional insurance coverage was still with the Gumaca, Quezon office of BF. - Without knowing that Perez died on November 25, 1987, BF approved Perez's application and issued the corresponding policy for the Php50,000 on December 2, 1987. - Virginia Perez (wife of the deceased) claimed the benefits under the insurance policies of the deceased, but she was only able to receive Php40,000 under the first insurance policy. BF refused to pay the proceeds amounting to Php150,000 under the additional policy coverage of Php50,000 because they maintain that such policy had not been perfected. - On September 21, 1990, BF filed a complaint against Mrs. Perez seeking recission and declaration of nullity of the insurance contract in question. Mrs. Perez filed a conterclaim for the collection of Php150,000 plus damages.
ISSUE WON there was a consummated contract of insurance between Perez and BF
HELD NO - An essential requisite of a valid contract is consent. Consent must be manifested by the meeting of the offer and the acceptance upon the t hing and the cause which are to constitute the contract. - The offer must be certain and the acceptance absolute. When Perez filed the application, it was subject to the acceptance of BF. The perfection was also further conditioned upon (1) the issuance of the policy, (2) the payment of the premium, and (3) the delivery to and acceptance by the applicant in good health. - The delivery and acceptance by the applicant was a suspensive condition which was not fulfilled inasmuch as the applicant was already dead at the time the policy was issued. The non-fulfillment of the condition resulted in the non-perfection of the contract. - An application for insurance is merely an offer which requires the overt act of the insurer for it to ripen to a contract. Delay in acting on the application does not constitute acceptance even though the insured has forwarded his first premium with his application. Delay, in this case, does not constitute gross negligence because the application was granted within the normal processing time. Disposition Decision of CA affirmed in so far as it declared the insurance policy for Php50,000 issued by BF null and void (no recission because it presupposes a valid contract)
VDA. DE SINDAYEN v. INSULAR 62 Phil 51 BUTTE; September 4, 1935
FACTS - Arturo Sindayen, up to the time of his death on January 19, 1933, was employed as a linotype operator in the Bureau of Printing at Manila and had been such for eleven years prior thereto. While there he made a written application on December 26, 1932, to the defendant Insular Life Assurance Co., Ltd., through its agent, Cristobal Mendoza, for a policy of insurance on his life in the sum of P1,000 and he paid to the agent P15 cash as part of the first premium. It was agreed with the agent that the policy, when and if issued, should be delivered to his aunt. Felicidad Estrada, with whom Sindayen left the sum of P26.06 to complete the payment of the first annual premium of P40.06.
- On January 1, 1933, Sindayen, who was then twenty-nine years of age, was examined by the company's doctor who made a favorable report, to the company. On January 11, 1933, The company accepted the risk and issued policy No. 47710 dated back to December 1, 1932, and mailed the same to its agent, Cristobal Mendoza, in Camiling, Tarlac, for delivery to the insured. -On January 11, 1933, Sindayen was at work in the Bureau of P rinting. On January 12, he complained of a severe headache and remained at home. On January 15, he called a physician who found that he was suffering from acute nephritis and uremia and on January 19, 1933, he died. - On January 18, 1933, the agent, in accordance with his agreement with the insured, delivered the policy to Felicidad Estrada upon her payment of the balance of the first year's annual premium. The agent asked Felicidad Estrada if her nephew was in good health and she replied that she believed so because she had no information that he was sick and he thereupon delivered to her the policy. - On January 20, 1933, the agent learned of the death of Arturo Sindayen and called on Felicidad Estrada and asked her to return the policy. But he did not return or offer to return the premium paid. Felicidad Estrada on his aforesaid statement gave him the policy. - On February 4, 1933 Insular Life obtained from the beneficiary, Sindayen‟s wife, her signature to a legal document entitled "ACCORD, SATISFACTION AND RELEASE" whereby in consideration of the sum of P40.06 paid to her by a check of the company, she "assigns, releases and forever discharges said Isular Life Assurance Co., Ltd., its successors and assigns, of all claims, obligation in or indebtedness. The said check for P40.06 was never cashed but returned to the company and appears in the record of this case as Exhibit D. Thereupon this action was brought to enforce payment of the policy. By the terms of the policy, an annual premium of P40.06 is due on the first day of December of each year, the first premium already paid by the insured covering the period from December 1, 1932. It is to December 1, 1933. It is to be noted that the policy was not issued and the company assumed no actual risk prior to January 11, 1933.The application which the insured signed in Camiling, Tarlac, on December 26, 1932, contained among others the following provisions: “3 That the said policy shall not take effect until the first premium has been paid and the policy has been delivered to and accepted by me, while I am in good health.” -Main defense of the company in this case, namely, that the said policy never took effect because of paragraph 3 of the application above quoted, for at the time of its delivery by the agent as aforesaid the insured was not in good health
ISSUE WON the insurance policy is valid
HELD
YES - There is one line of cases which holds that the stipulation contained in paragraph 3 is in the nature of a condition precedent, that is to say, that there can be no valid delivery to the insured unless he is in good health at the time; that this condition precedent goes to the very essence of the contract and cannot be waived by the agent making delivery of the policy - On the other hand, a number of American decisions hold that an agent to whom a life insurance policy similar to the one here involved was sent with instructions to deliver it to the insured has authority to bind the company by making such delivery, although the insured was not in good health at the time of delivery, on the theory that the delivery of the policy being the final act to the consummation of the contract, the condition as to the insurer's good health was waived by the company. - we are inclined to the view that it is more consonant with the well known practice of life insurance companies and the evidence in the present case to rest our decision on the proposition that Mendoza was authorized by the company to make the delivery of the policy when he received the payment of the first premium and he was satisfied that the insured was in good health. As was well said in the case of MeLaurin vs. Mutual Life Insurance Co. “It is plain, therefore, that upon the facts it is not necessarily a case of waiver or of estoppel, but a case where the local agents, in the exercise of the powers lodged in them, accepted the premium and delivered the policy. That act binds their principal, the defendant.” - Mendoza was duly licensed by the Insurance Commissioner to act as the agent of the defendant insurance company. The well known custom of the insurance business and the evidence in this case prove that Mendoza was not regarded by the company as a mere conduit or automaton for the performance of the physical ac t of placing the policy in the hands of the insured - Granted that Mendoza's decision that the condition had been met by the insured and that it was proper to make a delivery of the policy to him is just as binding on the company as if the decision had been made by its board of directors. Granted that Mendoza made a mistake of judgement because he acted on insufficient evidence as to the state of health of the insured. But it is not charged that the mistake was induced by any misconduct or omission of duty of the insured. - It is the interest not only the applicant but of all insurance companies as well that there should be some act which gives the applicant the definite assurance that the contract has been consummated. This sense of security and of peace of mind that one's defendants are provided for without risk either of loss or of litigation is the bedrock of life insurance. When the policy is issued and delivered, in the absence of fraud or other grounds for rescission, it is plainly not within the intention of the parties that there should be any questions held in abeyance or reserved for future determination that leave the very existence of the contract in suspense and doubt.
- It is therefore in the public interest, for the public is profoundly and generally interested in life insurance, as well as in the interest of the insurance companies themselves by giving certainly and security to their policies, that we are constrained to hold, as we, do, that the delivery of the policy to the insured by an agent of the company who is authorized to make delivery or without delivery is the final act which binds the company (and the insured as well) in the absence of fraud or other legal ground for rescission - The company therefore having decided that all the conditions precedent to the taking effect of the policy had been complied with and having accepted the premium and delivered the policy thereafter to the insured, the company is now estopped to assert that it never intended that the policy should take effect.
SEPARATE OPINION IMPERIAL [dissent] - "A local agent of an insurance company, whose only power is to solicit applications for insurance, and forward them to the company for approval, when, if approved to the insured, has no power to waive any of the provision of the policy so delivered." - It is clear, therefore, that the delivery of the policy by Mendoza does not bind the defendant, nor is the defendant estopped from alleging its defense, for the simple reason that Mendoza was not an agent with authority to issue policies or to accept risks in the name of his principle. -There is another ground upon which the majority opinion is based, namely, that the defendant waived the defense it now invokes, by reason of the delivery of the policy by its invokes, by reason of the delivery of the policy by its agent. It is admitted that if the delivery of the policy was due to fraud, legally there could have been no waiver. In view of the facts established and admitted, there is no doubt, as to the existence of the fraud. -Estrada, as a representative of the insured was not only bound to give a truthful information on the state of health of the insured, but it was her duty to find out it his true state of health in order to give true and correct information. When she gave Mendoza an incorrect information tending to create the impression that the insured was well when in fact he was seriously ill, there is no doubt that she committed fraud and imparted a deceitful information to the defendant agent
ENRIQUEZ v. SUN LIFE OF CANADA 41 PHIL 269 MALCOLM; November 29, 1920
NATURE
Appeal from judgment of trial court denying plaintiff‟s (administrator of the estate of the late Joaquin Ma. Herrer) action to recover from the defendant life insurance company the sum of pesos 6,000 paid by the deceased for a life annuity.
FACTS - On September 24, 1917, Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its office in Manila for a life annuity. Two days later he paid the sum of P6,000 to the manager of the company's Manila office and was given a receipt. - The application was immediately forwarded to the head office of the company at Montreal, Canada. On November 26, 1917, the head office gave notice of acceptance by cable to Manila. (Whether on the same day the cable was received, notice was sent by the Manila office of Herrera that the application had been accepted, is a disputed point, which will be discussed later.) On December 4, 1917, the policy was issued at Montreal. On December 18, 1917, attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrer desired to withdraw his application. The following day the local office replied to Mr. Torres, stating that the policy had been issued, and called attention to the notification of November 26, 1917. This letter was received by Mr. Torres on the morning of December 21, 1917. Mr. Herrer died on December 20, 1917. - The chief clerk of the Manila office of Sun Life testified that he prepared the letter and handed it to the local manager, Mr. E. E. White, for signature. The local manager, Mr. White, testified to having received the cablegram accepting the application of Mr. Herrer from the home office on November 26, 1917. He said that on the same day he signed a letter notifying Mr. Herrer of this acceptance. The witness further sa id that letters, after being signed, were sent to the chief clerk and placed on the mailing desk for transmission. Mr. Tuason, who was the chief clerk on November 26, 1917, was not called as a witness. - For the defense, attorney Manuel Torres testified to having prepared the will of Joaquin Ma. Herrer. That on this occasion, Mr. Herrer mentioned his application for a life annuity, and that he said that the only document relating to the transaction in his possession was the provisional receipt. Rafael Enriquez, the administrator of the estate, testified that he had gone through the effects of the deceased and had found no letter of notification from the insurance company to Mr. Herrer.
ISSUE WON there exists a contract for life annuity between Herrer and defendant
HELD NO Ratio The law applicable to the case is found to be the second paragraph of article 1262 of the Civil Code providing that an acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge. Reasoning - Until quite recently, all of the provisions concerning life insurance in the Philippines were found in the Code of Commerce and the Civil Code. After July 1, 1915, there was, however, in force the Insurance Act. No. 2427. Chapter IV of this Act concerns life and health insurance. The Act expressly repealed Title VIII of Book II and Section III of Title III of Book III of the code of Commerce. The law of insurance is consequently now found in the Insurance Act and the Civil Code. - While, as just noticed, the Insurance Act deals with life insurance, it is silent as to the methods to be followed in order that there may be a contract of insurance. On the other hand, the Civil Code, in article 1802, not only describes a contact of life annuity markedly similar to the one we are considering, but in two other articles, gives strong clues as to the proper disposition of the case. For instance, article 16 of the Civil Code provides that "In matters which are governed by special laws, any deficiency of the latter shall be supplied by the provisions of this Code." On the supposition, therefore, which is incontestable, that the special law on the subject of insurance is deficient in enunciating the principles governing acceptance, the subject-matter of the Civil code, if there be any, would be controlling. In the Civil Code is found article 1262 providing that "Consent is shown by the concurrence of offer and acceptance with res pect to the thing and the consideration which are to constitute the contract. An acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge. - According to the provisional receipt, three things had to be accomplished by the insurance company before there was a contract: (1) There had to be a medical examination of the applicant; (2) there had to be approval of the application by the head office of the company; and (3) this approval had in some way to be communicated by the company to the applicant. The further admitted facts are that the head office in Montreal did accept the application, did cable the Manila office to that effect, did actually issue the policy and did, through its agent in Manila, actually write the letter of notification and place it in the usual channels for transmission to the addressee. - The contract for a life annuity in the case at bar was not perfected because it has not been proved satisfactorily that the acceptance of the application ever came to the knowledge of the applicant.
Disposition Judgment is reversed, and the plaintiff shall have and recover from the defendant the sum of P6,000 with legal interest from November 20, 1918, until paid, without special finding as to costs in either instance.
MAKATI TUSCANY v. CA ( AMERICAN HOME ASSURANCE CO.) 215 SCRA 462 BELLOSILLO; November 6, 1992
NATURE Appeal from decision of the CA
FACTS - American Home Assurance Co. (AHAC), represented by American International Underwriters (Phils.), Inc., issued in favor of petitioner Makati Tuscany Condominium Corporation an insurance policy on the latter's building and premises, for the period 1 March 1982 to1 March 1983. The premium was paid on installments all of which were accepted by AHAC. - A second policy was issued to renew the first one, this time covering the period 1 March 1983 to 1 March 1984. This was also pain in installment basis. - A third policy was again issued for the period 1 March 1984 to 1 March 1985. For this, petitioner made two installment payments, both accepted by AHAC. Thereafter, petitioner refused to pay the balance of the premium. AHAC filed an action to recover the unpaid balance of P314,103.05. - Petitioner explained that it discontinued the payment of premiums because the policy did not contain a credit clause in its favor and the receipts for the installment payments covering the policy for 1984-85, as well as the two (2) previous policies, stated the following reservations: 2. Acceptance of this payment shall not waive any of the company rights to deny liability on any claim under the policy arising before such payments or after the expiration of the credit clause of the policy; and 3. Subject to no loss prior to premium payment. If there be any loss such is not covered. - Petitioner further claimed that the policy was never binding and valid, and no risk attached to the policy. It then pleaded a counterclaim for P152k for the premiums already paid for 1984-85, and in its answer with amended counterclaim, sought the refund of P924,206.10 representing the premium payments for 1982-85. - Trial court dismissed the complaint and the counterclaim upon the following findings: (1) payment of the premiums of the three policies were made during the term of said policies, hence, it could not be said, inspite of the reservations, that no risk attached under the policies; (2) as regards the unpaid premiums, in view of the
reservation in the receipts ordinarily issued by AHAC on premium payments the only plausible conclusion is that AHAC has no right to demand their payment after the lapse of the term of said policy on March 1, 1985. Therefore, Tuscany was justified in refusing to pay the same. - CA modified the decision by ordering Tuscany to pay the balance of the premiums due on the third policy plus legal interest until fully paid, and affirming the denial of the counterclaim. Petitioner’s Claims
Petitioner argues that where the premiums is 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 Insurance Code. The absence of an express acknowledgment in the policies of such receipt of the corresponding premium payments, and petitioner's failure to pay said premiums on or before the effective dates of said policies rendered them invalid. Petitioner thus concludes that there cannot be a perfected contract of insurance upon mere partial payment of the premiums because under Sec. 77 of the Insurance Code, no contract of insurance is valid and binding unless the premium thereof has been paid, notwithstanding a ny agreement to the contrary.
ISSUE WON payment by installment of the premiums due on an insurance policy invalidates the contract of insurance
HELD Ratio 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. Reasoning - The obligation to pay premiums when due is ordinarily as indivisible obligation to pay the entire premium. Here, the parties herein agreed to make the premiums payable in installments, and there is no pretense that the parties never envisioned to make the insurance contract binding between them. And the insured never informed the insurer that it was terminating the policy because the terms were unacceptable. - There is nothing in Section 77 which suggests that the parties may not agree to allow payment of the premiums in installment, or to consider the contract as valid and binding upon payment of the first premium. - 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. Acceptance of payments speaks loudly of the insurer's intention to honor the policies it issued to petitioner.
- Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to make the policy binding despite the fact that premium is actually unpaid. 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. - At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted. Disposition Judgment affirmed. Costs against petitioner.
Appeal upon a question of law taken by Woodworks, Inc. from the judgment of the Court of First Instance of Manila in Civil Case No. 50710 "ordering the defendant, Woodworks, Inc. to pay to the plaintiff, Philippine Phoenix Surety & Insurance, Inc., the sum of P3,522.09 with interest thereon at the legal rate of 6% per annum from the date of the filing of the complaint until fully paid, and costs of the suit."cralaw virtua1aw library
[G.R. No. L-22684. August 31, 1967.] PHILIPPINE PHOENIX SURETY & INSURANCE, INC.,, v. WOODWORKS, INC.,
Appellee Philippine Phoenix Surety & Insurance Co., Inc., commenced this action in the Municipal Court of Manila to recover from appellant Woodworks, Inc. the sum of P3,522.09, representing the unpaid balance of the premiums on a fire insurance policy issued by appellee in favor of appellant for a term of one year from April 1, 1960 to April 1, 1961. From an adverse decision of said court, Woodworks, Inc. appealed to the Court of First Instance of Manila (Civil Case No. 50710) where the parties submitted the following stipulation of facts, on the basis of which the appealed decision was rendered:jgc:chanrobles.com.ph
SYLLABUS
"That plaintiff and defendant are both corporations duly organized and existing under and by virtue of the laws of the Philippines;
1. INSURANCE; CONTRACT, PERFECTION OF PREMIUM, PARTIAL PAYMENT OF; EFFECT; RIGHT OF PARTIES. — When an insurance policy is delivered to the insured upon partial payment of the premium there was not only a perfected contract of insurance but a partially performed one as far as the payment of the agreed premium was concerned. Thereafter, the obligation of the insurer to pay the insured the amount for which the policy was issued in case the conditions therefor had been complied with, arose and became binding upon it, while the obligation of the insured to pay the remainder of the total amount of the premium due became demandable. Thereafter, the parties could demand from each other the obligations each one assumed: the insurer, to demand payment of the unpaid premium or sue for rescission. As in the case at bar it chose to demand specific performance, the duty of the insured to pay is inubitable.
DECISION DIZON, J.:
"That on April 1, 1960, plaintiff issued to defendant Fire Policy No. 9652 for the amount of P300,000.00, under the terms and conditions therein set forth in said policy a copy of which is hereto attached and made a part hereof as Annex „A;‟ "That the premiums of said policy as stated in Annex „A‟ amounted to P6,051.95; the margin fee pursuant to the adopted plan as an implementation of Republic Act 2609 amounted to P363.22, copy of said adopted plan is hereto attached as Annex „B‟ and made a part hereof, the documentary stamps attached to the policy was P96.42; "That the defendant paid P3,000.00 on September 22, 1960 under official receipt No. 30245 of plaintiff;" That plaintiff made several demands on defendant to pay the amount of P3,522.09."cralaw virtua1aw library In the present appeal, appellant claims that the court a quo committed the following errors:jgc:chanrobles.com.ph "I. The lower court erred in stating that in fire insurance policies the risk attached upon the issuance and delivery of the policy to the insured. "II. The lower court erred in deciding that in a perfected contract of insurance nonpayment of premium does not cancel the policy.
"III. The lower court erred in deciding that the premium in the policy was still collectible when the complaint was filed. "IV. The lower court erred in deciding that a partial payment of the premium made the policy effective during the whole period of the policy."cralaw virtua1aw library It is clear from the foregoing that on April 1, 1960 Fire Insurance Policy No. 9652 was issued by appellee and delivered to appellant, and that on September 22 of the same year, the latter paid to the former the sum of P3,000.00 on account of the total premium of P6,051.95 due thereon. There is, consequently, no doubt at all that, as between the insurer and the insured, there was not only a perfected contract of insurance but a partially performed one as far as the payment of the agreed premium was concerned. Thereafter the obligation of the insurer to pay the insured the amount for which the policy was issued in case the conditions therefor had been complied with, arose and became binding upon it, while the obligation of the insured to pay the remainder of the total amount of the premium due became demandable. We can not agree with appellant‟s theory that non -payment by it of the premium due, produced the cancellation of the contract of insurance. Such theory would place exclusively in the hands of one of the contracting parties the right to decide whether the contract should stand or not. Rather the correct view would seem to be this: as the contract had become perfected, the parties could demand from each other the performance of whatever obligations they had assumed. In the case of the insurer, it is obvious that it had the right to demand from the insured the completion of the payment of the premium due or sue for the rescission of the contract. As it chose to demand specific performance of the insured‟s obligation to pay the balance of the premium, the latter‟s duty to pay is indeed indubitable. Having thus resolved that the fourth and last assignment of error submitted in appellant‟s brief is without merit, the first three a ssignments of error must likewise be overruled as lacking in merit. Wherefore, the appealed decision being in accordance with law and the evidence, the same is hereby affirmed, with costs.
TIBAY v. CA (FORTUNE LIFE & GENERAL INSURANCE) 257 SCRA 126 BELLOSILLO; May 24, 1996
FACTS
- On 22 January 1987 Fortune Life and General Insurance Co., Inc. (FORTUNE) issued Fire Insurance Policy No. 136171 in favor of Violeta R. Tibay and/or Nicolas Roraldo on their two-storey residential building located at 5855 Zobel Street, Makati City, together with all their personal effects therein. The insurance was for P600,000 covering the period from 23 January 1987 to 23 January 1988. On 23 January 1987, of the total premium of P2,983.50, Violeta Tibay only paid P600 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. On the same day, she filed with FORTUNE a claim on the fire insurance policy. Her claim was accordingly referred to its adjuster, Goodwill Adjustment Services, Inc. (GASI), which immediately wrote Violeta requesting her to furnish it with the necessary documents for the investigation and processing of her claim. Petitioner forthwith complied. On 28 March 1987 she signed a nonwaiver agreement with GASI to the effect that any action taken by the companies shall not be, or be claimed to be, an admission of liability. - FORTUNE denied the claim of Violeta for violation of Policy Condition No. 2 ♪ and of Sec. 77 of the Insurance Code. 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 representing the total coverage of the fire insurance policy plus 12% interest per annum, P100,000 moral damages, and attorney's fees equivalent to 20% of the total claim. The trial court ruled for petitioners. CA reversed.
ISSUE WON a fire insurance policy is valid, binding and enforceable upon mere partial payment of premium
HELD NO Ratio Where the insurer and the insured ex pressly stipulated that the policy is not in force until the premium has been fully paid 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. Reasoning - 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. Thus, no vinculum juris This policy including any renewal thereof and/or any endorsement thereon is not in force until the premium has been fully paid to and duly receipted by the Company in the manner provided herein. ♪
whereby the insurer bound itself to indemnify the assured according to law ever resulted from the fractional payment of premium. The insurance contract itself expressly provided that the policy would be effective only when the premium was paid in full. It would have been altogether different were it not so stipulated. Ergo, petitioners had absolute freedom of choice whether or not to be insured by FORTUNE under the terms of its policy and they freely opted to adhere thereto. - Indeed, and far more importantly, the cardinal polestar in the construction of an insurance contract is the intention of the parties as expressed in the policy. Courts have no other function but to enforce the same. The rule that contracts of insurance will be construed in favor of the insured and most strongly against the insurer should not be permitted to have the effect of making a plain agreement ambiguous and then construe it in favor of the insured. 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. Partial payment even when accepted as a partial payment will not keep the policy alive even for such fractional part of the year as the part payment bears to the whole payment. Disposition Petition is DENIED. Decision of the CA is AFFIRMED.
SEPARATE OPINION VITUG [dissent] - The law neither requires, nor measures the strength of the vinculum juris by, any specific amount of premium payment. It should thus be enough that payment on the premium, partly or in full, is made by the insured which the insurer accepts. In fine, it is either that a juridical tie exists (by such payment) or that it is not extant at all (by an absence thereof). Once the juridical relation comes into being, the full efficacy, not merely pro tanto, of the insurance contract naturally follows. Verily, not only is there an insurance perfected but also a partially performed contract. In case of loss, recovery on the basis of the full contract value, less the unpaid premium can accordingly be had; conversely, if no loss occurs, the insurer can demand the payment of the unpaid balance of the premium. The insured, on the one hand, cannot avoid the obligation of paying the bala nce of the premium while the insurer, upon the other hand, cannot treat the contract as valid only for the purpose of collecting premiums and as invalid for the purpose of indemnity.
UCPB GENERAL INSURANCE CO., INC. v. MASAGANA TELAMART, INC. 308 SCRA 259 PARDO; June 15, 1999
NATURE Petition for review on certiorari of a decision of the Court of Appeals.
FACTS - On April 15, 1991, petitioner issued five (5) insurance policies covering respondent's various property described therein against fire, for the period from May 22, 1991 to May 22, 1992. - In March 1992, petitioner evaluated the policies and decided not to renew them upon expiration of their terms on May 22, 1992. Petitioner advised respondent's broker, Zuellig Insurance Brokers, Inc. of its intention not to renew the policies. - On April 6, 1992, petitioner gave written notice to respondent of the non-renewal of the policies at the address stated in the policies. - On June 13, 1992, fire razed respondent's property covered by three of the insurance policies petitioner issued. - On July 13, 1992, respondent presented to petitioner's cashier at its head office five (5) manager's checks in the total amount of P225,753.95, representing premium for the renewal of the policies from May 22, 1992 to May 22, 1993. No notice of loss was filed by respondent under the policies prior to July 14, 1992. - On July 14, 1992, respondent filed with petitioner its formal claim for indemnification of the insured property razed by fire. On the same day, petitioner returned to respondent the five manager's checks that it tendered, and at the same time rejected respondent's claim for the reasons (a) that the policies had expired and were not renewed, and (b) that the fire occurred on June 13, 1992, before respondent's tender of premium payment. - On July, 21, 1992, respondent filed with the Regional Trial Court, Branch 58, Makati City, a civil complaint against petitioner for recovery, of P18.645,000.00, representing the face value of the policies covering respondent's insured property razed by fire, and for attorney's fees. - On October 23, 1992, after its motion to dismiss had been de nied, petitioner filed an answer to the complaint. It alleged that the complaint "fails to state a cause of action"; that petitioner was not liable to -respondent for insurance proceeds under the policies because at the time of the loss of respondent's property due to fire, the policies had long expired and were not renewed. After due trial, on March 10, 1993, the Regional Trial Court, Branch 58, Makati, rendered decision, the dispositive portion of which reads: "WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendant, as follows. "(1) Authorizing and allowing the plaintiff to consign/deposit with this Court the sum of P225,753.95 (refused by the defendant) as full payment of the corresponding premiums for the replacement-renewal policies for Exhibits A, B, C, D and E; "(2)
Declaring plaintiff to have fully complied with its obligation to pay the premium thereby rendering the replacement-renewal policy of Exhibits A, B, C, D and E effective and binding for the duration May 22, 1992 until May 22, 1993; and, ordering defendant to deliver forthwith to plaintiff the said replacement-renewal policies; "(3) Declaring Exhibits A & B, in force from August 22, 1991 up to August 23, 1992 and August 9 , 1991 to August 9, 1992, respectively; and "(4) Ordering the defendant to pay plaintiff the sums of. (a) P18,645,000.00 representing the latter's claim for indemnity under Exhibits A, B & C and/or its replacement-renewal policies; (b) 25% of the total amount due as and for attorney's fees; (c) P25,000.00 as necessary litigation expenses; and, (d) the costs of suit. “xxx ” - In due time, petitioner appealed to the Court of Appeals (CA). The CA promulgated its decision affirming that of the Regional Trial Court with the modification that item No. 3 of the dispositive portion was deleted, and the award of attorney's fees was reduced to 10% of the total amount due. It held that following previous practice, respondent was allowed a 60- to 90-day credit term for the renewal of its policies, and that the acceptance of the late premium payment suggested an understanding that payment could be made later. Hence, this appeal.
ISSUE WON the fire insurance policies issued by petitioner t o the respondent covering the period May 22, 1991 to May 22, 1992, had expired on the latter date or had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date after the occurrence of the risk (fire) insured against
HELD NO - An insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual payment of the premium. Any agreement to the contrary is void. The parties may not agree expressly or impliedly on the extension of credit or time to pay the premium and consider the policy b inding before actual payment. Disposition Judgment reversed and set aside
CAPITAL INC. v. PLASTIC ERA CO. 65 SCRA 134 MARTIN; July 18, 1975
NATURE Petition for review of a decision of the CA affirming the decision of the CFI of Manila
FACTS - On December 17, 1960, petitioner Capital Insurance & Surety Co., Inc. delivered to the respondent Plastic Era Manufacturing Co., Inc., its open Fire Policy No. 22760 wherein the former undertook to insure the latter's building, equipments, raw materials, products and accessories located at Sheridan Street, Mandaluyong, Rizal. The policy expressly provides that if the property insured would be destroyed or damaged by fire after the payment of the premiums, at anytime between the 15th day of December 1960 and one o'clock in the afternoon of the 15th day of December 1961, the insurance company shall make good all such loss or damage in an amount not exceeding P100,000.00. When the policy was delivered, Plastic Era failed to pay the corresponding insurance premium. On January 8, 1961, in partial payment of the insurance premium, Plastic Era delivered to Capital Insurance, a check for the amount of P1,000.00 postdated January 16, 1961. However, Capital Insurance tried to deposit the check only on February 20, 1961 and the same was dishonored by the bank for lack of funds. - Two days after the insurance premium became due, at about 4:00 to 5:00 o'clock in the morning, the property insured by Plastic Era was destroyed by fire. In less than a month Plastic Era demanded from Capital Insurance the payment of the sum of P100,000.00 as indemnity for the loss of the insured property under Policy No. 22760 but the latter refused for the reason that, among others, Plastic Era failed to pay the insurance premium.
ISSUES 1. WON a contract of insurance has been duly perfected between petitioner and respondent 2. WON the dishonored check constituted payment
HELD 1. YES - Tender of draft or check in order to effect payment that would extinguish the debtor's liability should be actually cashed. If the delivery of the check of Plastic Era to Capital Insurance were to be viewed in the light of the foregoing, no payment of the premium had been effected. Significantly, Capital Insurance accepted the promise of Plastic Era to pay the insurance premium within 30 days from the effective date of policy. By so doing, it has implicitly agreed to modify the tenor of the insurance policy and in effect, waived the provision therein that it would only pay for the loss or damage in case the same occurs after the payment of the premium. Considering that the insurance policy is silent as to the mode of payment, Capital Insurance is deemed to have accepted the promissory note in payment of the premium. This rendered the policy immediately operative on the date it was delivered.
2. YES - Although the check was due for payment on January 16, 1961 and Plastic Era had sufficient funds to cover it as of January 19, 1961, Capital Insurance decided to hold the same for thirty-five (35) days before presenting it for payment. Having held the check for such an unreasonable period of time, Capital Insurance was estopped from claiming a forfeiture of its policy for non-payment even if the check had been dishonored later. Where the check is held for an unreasonable time before presenting it for payment, the insurer may be held estopped from claiming a forfeiture if the check is dishonored. Disposition The decision of the CA is AFFIRMED in toto.
MALAYAN INSURANCE CO., INC. v. ARNALDO and PINCA 154 SCRA 672 CRUZ; October 12, 1987
FACTS - On June 7, 1981, Malayan Insurance Co. (MICO), issued fire insurance for the amount of P14,000 on the property of private respondent, Pinca, effective July 19811982. MICO later allegedly cancelled the policy for non-payment of the premium and sent a notice to Pinca. On Dec. 24 Adora, an agent of MICO, received Pinca‟s payment, which was remitted to MICO. On Jan. 18, 1982, Pinca‟s property was completely burned. On Feb. 5, MICO returned Pinca‟s payment to Adora on the ground that her policy had been cancelled; the latter refused to accept it. Her demand for payment having been rejected by MICO, Pinca went to the Insurance Commission. Public respondent Arnaldo, the Insurance Commissioner, sustained Pinca, hence this petition from MICO. Records show MICO rec eived Arnaldo‟s decision on April 10; MICO filed a MFR on April 25 which was denied on June 4; MICO received notice of this denial on June 14; instant petition was filed on July 2.
ISSUES Procedural 1. WON the petition should be dismissed for late filing Substantive 2. WON there was a valid insurance contract at the time of the loss 3. WON Adora was authorized to receive such payment 4. WON an adjuster is indispensable in the valuation of the loss
HELD Procedural 1. YES
- Petitioner invokes Sec 416 of the Insurance Code which grants it 30 days from notice of the Insurance Commission within which to appeal by certiorari with the Court. MICO filed its MFR on April 25, 15 days after the notice; the reglementary period began to run again after June 13. Since the petition was filed only on July 2, it was tardy by 4 days. Alternatively it invokes Rule 45 of the Rules of Court for certiorari but the petition still exceeds the 15 day limit from the June 13 notice. -Respondents, on the other hand, invoke Sec. 39 of B.P. 129 which pegs the period for appeal from decisions of any court in all cases at 15 days from the notice of the decision appealed from. Since the MFR was filed only 15 days after receiving notice of the decision, it was already 18 days late by July 2. So whichever is applied, the petition is still late. Substantive 2. YES - A valid cancellation requires the following conditions based on Sections 64-65 of the Code: prior notice which must be based on the occurrence of one or more of the grounds mentioned in Sec 64 (in this case, non-payment of premium), after the effective date of the policy; the notice must be written and mailed to the address on the policy; it must state the ground(s) for cancellation and the insurer must furnish details upon the request of the insured. - It is undisputed that payment of premium was made. Petitioner relies heavily on Sec 77 of the Insurance Code to contest this, the said provision requiring payment of premium as soon as the thing is exposed to the peril insured against and that the policy is invalid without it. However, this is not applicable in the instant case as payment was eventually made. It is to be noted that the premium invoice was stamped “Payment Received”, indicating an understanding between the parties that payment could be made later. This is furthered by the fact that Adora had earlier told her to call him anytime she was ready with her payment. The Court also finds it strange that MICO only sought to return Pinca‟s Jan. 15 payment only on Feb . 5, long after her house had burned down—this makes petitioner‟s motives highly suspect. - MICO claims to have sent a notice to Pinca, who flatly denied receiving one. Pinca did not have to prove this since the strict language of Sec 64 requires that MICO ensure the cancellation was actually sent to and received by the insured. - MICO also suggests that Pinca knew the policy had been cancelled and was paying the premium in order to renew the policy. A close study of the transcripts show, however, that Pinca only meant to renew the policy had it been cancelled but not if it was still in effect—it was conditional. Payment was thus legally made on the original transaction and validly received by Adora, who was not informed of the alleged cancellation and thus saw no reason to reject the payment. 3. YES - Sec. 306 of the Insurance Code provides that any insurance company that delivers a policy to its agent is deemed to have authorized such agent to receive payment of
premium on its behalf. It is a well-known principle under the law of agency that payment to an authorized agent is equivalent to payment to the principal himself. MICO‟s acknowledgement of Adora as its agent thus defeats its contention that he was not authorized to receive payments on its behalf. 4. NO - In absence of fraud, the amount of the loss may be determined on the basis of such proof offered by the insured. Here. The certification of the Integrated National Police as the extent of the loss should suffice. Disposition petition is DENIED
SOUTH SEA SURETY HARDWOOD)
AND
INSURANCE
v.
CA
(VALENZUELA
244 SCRA 744 VITUG; June 2, 1995
NATURE Petition for review on certiorari
FACTS - Hardwood entered into agreement with Seven Bros Shipping, where latter undertook to load the former‟s logs on vessel. Hardwood insured the logs with South Sea Surety which issued Marine Cargo Insurance Policy. The vessel sank Jan 25, 1984. - Hardwood filed claim with South Sea and Seven Bros. Trial Court favored Hardwood. CA decided against South Sea, but absolved Seven Bros. South Sea filed this instant petition.
ISSUES WON the insurance contract was already in effect when the vessel sank
HELD
VASQUEZ; September 30, 1982
NATURE Appeal from a decision of the CFI
FACTS - Sometime in April 1969, Carmen O, Lapuz applied with respondent insurance corporation for insurance coverage against accident and injuries. In the application form which was dated April 15, 1969, she gave the date of her birth as July 11, 1904. On the same date, she paid the sum of P20.00 representing the premium for which she was issued the corresponding receipt signed by an authorized agent of the respondent insurance corporation. 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. The policy was to be effective for a period of 90 days. - On May 31, 1969 or during the effectivity of the Insurance, Carmen O. Lapuz died in a vehicular accident. - 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. - 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 ..." It is pointed out that the insured being over sixty (60) years of age when she applied for the insurance coverage, the policy was null and void, and no risk on the part of the respondent insurance corporation had arisen therefrom. - RTC dismissed the complaint.
ISSUE
YES - It is already in effect because Hardwood has already paid the insurance premium. It delivered the check to Victorio Chua before the vessel sank, but Victorio Chua was only to deliver the check to South Sea five days after the vessel sank. Appellant argues that Chua was not its broker, but it was found that Chua was authorized by South Sea to receive the premium on its behalf.
WON the acceptance by the private respondent insurance corporation of the premium and the issuance of the corresponding certificate of insurance should be deemed a waiver of the exclusionary condition of overage stated in the said certificate of insurance
EDILLON v. MANILA BANKERS LIFE
YES - 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
117 SCRA 187
HELD
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. Its inaction to revoke the policy despite a departure from the exclusionary condition contained in the said policy constituted a waiver of such condition. Disposition Judgment appealed from is REVERSED and SET ASIDE and respondent insurance corporation is ordered to pay to the petitioner the proceeds of Insurance
examination, was accepted and approved by the company and in due course, Endowment Policy No. 221944 was issued in his name. It was released for delivery on January 24, 1973, and was actually delivered to him by the underwriter, Mrs. Siega on January 25, 1973. The effective date indicated on the face of the policy in question was December 25, 1972. The annual premium was P1,4 16.60. Mrs. Siega assured him that the first premium may be paid within the grace period of thirty (30) days from date of delivery of the policy. The first premium of P1,416.60 was paid by him in three (3) installments, to wit:
G.R. No. L-57308 April 23, 1990
In a letter dated June 1, 1973 (Exh. E), defendant advised plaintiff that Policy No. 221944 (Exh. A) was not in force. To make it enforceable and operative, plaintiff was asked to remit the balance of P1,015.60 to complete his initial annual premium due December 15, 1972, and to see Dr. Felipe V. Remollo for another full medical examination at his own expense.
GREAT
PACIFIC
LIFE
INSURANCE
CORPORATION, petitioner,
vs.
THE HON. COURT OF APPEALS and TEODORO CORTEZ, respondents.
(1) P400 evidenced by Temporary Receipt No. 19422, dated February 5, 1973 issued by Mrs. Si ega (Exh. B) and confirmed by Official Receipt No. 43543 dated March 6, 1973, issued by the Home Office of the defendant in Makati, Rizal (Exh. B-1); (2) P350 evidenced by Temporary Receipt No. 19448 dated February 17, 1973 issued by Mrs. Siega (Exh. C) and confirmed by Official Recei pt No. 43559 dated March 28, 1973 issued by defendant's Home Office (Exh. C-1); and (3) P666.60 evidenced by Temporary Receipt No. 19702 dated February 21, 1973, issued by the underwriter Mrs. Siega (Exh. D), and confirmed by Official Receipt No. 43563 dated March 28, 1973 issued by defendant's Home Office (Exh. D-1).
Cortez' reaction to the company's act was to immediately inform it that he was cancelling the policy and he demanded the return of his premium plus damages.
GRIÑO-AQUINO, J.: This case involves an insured's claim for refund of the first premium on the endowment policy on his life, upon being notified by the insurer that the policy never took effect despite the premium payment. Private respondent Teodoro Cortez, upon the solicitation of Margarita Siega an underwriter for the petitioner Great Pacific Insurance Corporation, applied for a 20 year endowment policy for P30,000. His application, with the requisite medical
When the company ignored his demand, Cortez filed on August 14, 1973, a complaint for damages in the Court of First Instance of Negros Oriental, docketed as Civil Case No. 5709, entitled "Teodoro Cortez vs. Pacific Life Assurance Corporation." He prayed for the refund of the insurance premium of P1,416.60 which he paid, plus P45,000 as moral damages, and P2,000 as attorney's fees. After trial, the court a quo rendered judgment on September 9, 1977, the dispositive portion of which reads:
FOR ALL THE FOREGOING CONSIDERATIONS, judgment is hereby rendered, in favor of the plaintiff and against the defendant, ordering the latter to pay to plaintiff the sum of: (1) ONE THOUSAND FOUR HUNDRED SIXTEEN PESOS AND SIXTY CENTAVOS (P1,416.60), without interest, representing the first annual premium paid by plaintiff on policy Exh. "A"; (2) THIRTY THOUSAND PESOS (P30,000.00) as moral damages; (3) FIVE HUNDRED PESOS (P500.00) as litigation expenses; (4) TWO THOUSAND PESOS (P2,000.00) as attorney's fees; and (5) Costs of suit." (p. 22, Rollo.) The insurer appealed to the Court of Appeals and on March 10, 1981, the latter court rendered a decision the dispositive portion of which reads: "WHEREFORE, modified in the sense that the amount of moral damages is hereby reduced to P10,000.00, the judgment appealed from is hereby affirmed in all other respects. With costs against the appellant." (p. 25, Rollo.) It filed a motion for reconsideration, but the same was denied by the Appellate Court on June 11, 1981. Hence, this petition for review. The only issue in this case is whether Cortez is entitled to a refund of his premium. In affirming the lower court's decision, the Appellate Court made the following observations: In the instant case, the policy was issued on December 25, 1972 and was delivered on January 25 , 1973 and the a ppellee was given by the appellant thru its underwriter Mrs. Margarita Siega a grace period of 30 days from said date within which the premium was to be paid. Record shows that the premium was paid fully on February 21, 1973 or within the grace period. This being so, the policy was already enforceable. The company had sufficient time to examine the result
of their medical examination on the person of the appellee. They would not have delivered the policy on January 24, 1973 if the appellee was unacceptable. Moreover, if premiums were to be paid within 90 days then the reckoning period should be the date the policy was delivered and not the date the appellee was physically examined. The 90-day period from the date of physical examination as provided for in the receipts of payment is of' no moment, since said receipts are an integral part of the insurance policy (contract). The official receipts issued by the company's agent can only mean that the company ratified the act of Mrs. Margarita Siega in giving the appellee a grace period of 30 days from January 25, 1973 within which to pay the annual premium. Indeed, record shows that the three (3) installment payments were paid for within 30-days period and all 3 partial payments were officially acknowledged by the company, on March 6, 1973, and the 2 other installments on March 28, 1973, Exhs. D-1, C-1, E-1. To the mind of this Court, this acknowledgments are the most eloquent proofs that at such time the policy was already in full force and effect. We ha ve no doubt at all that when the appellant wrote the letter in question in June 1973, understandably, the appellee must have been shocked to know that after all the matter about his coverage or the security that he provided for his family was after all empty or, to say the least, made debatable by the very company the appellant has sought security from. (p. 24, Rollo.) When the petitioner advised private respondent on June 1, 1973, four months after he had paid the first premium, that his policy had never been in force, and that he must pay another premium and undergo another medical examination to make the policy effective, the petitioner committed a serious breach of the contract of insurance. Petitioner should have informed Cortez of the deadline for paying the first premium before or at least upon delivery of the policy to him, so he could have complied with what was needful and would not have been misled into believing that his life and his family were protected by the policy, when actually they were not. And, if the premium paid by Cortez was unacceptable for being late, it was the company's duty to return it. By accepting his premiums without giving him the corresponding protection, the company acted in bad faith.
Sections 79, 81 and 82 of P.D. 612 of the Insurance Code of 1978 provide when the insured is entitled to the return of premium paid. SECTION 79. A person insured is entitled to a return of premium, as follows: (a) To the whole premium, if no part of his interest in the thing insured be exposed to any of the perils insured against. (b) Where the insure is made for a definite period of time and the insured surrenders his policy, to such portion of the premium as corresponds with the unexpired time, at a pro ratarate, unless a short period rate has been agreed upon and appears on the face of the policy, after deducting from the whole premium any claim for loss or damage under the policy which has previously accrued: Provided, That no holder of a life insurance policy may avail himself of the privileges of this paragraph without sufficient causes as otherwise provided by law.
for it never took effect, hence, he and his family never received the protection that he paid for. WHEREFORE, the petition for review is denied for lack of merit. In the interest of justice, i n view of the serious delay the private respondent's claim has suffered on account of the petitioner's intransigence in refusing to pay its just debt, the petitioner is ordered to pay legal rate of interest of 6% per annum on the premium of P1,416.60 refundable to the private respondent from the filing of the complaint until the judgment is fully paid. As thus modified, the decision of the Court of Appeals is affirmed. Costs against the petitioner. This decision is immediately executory.
Lumibao v IAC, et al., G.R. No. 64677, September 13, 1990 Issues: 1) Whether petitioner induced the insured to take out the policy through a rebate 2) Whether the petitioner should be compelled to fulfill her promise of giving back half of the premium paid by the insured
Ruling: 1) Petitioner violated Sec. 361 of the Insurance Code when she promised the insured a rebate of 50% of the first premium paid. 2) The appellate court should not have ordered petitioner to pay the promised amount to the insured as it is against the law and public policy.
SECTION 81. A person insured is entitled to a return of the premium when the contract is voidable on account of the fraud or misrepresentation of the insurer or of his agent or on account of facts the existence of which the insured was ignorant without his fault; or when, by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy.
Basis: 1) A preponderance of evidence on record supports the findings of the trial
SECTION 82. In case of an over-insurance by several insurers, the insured is entitled to a ratable return of the premium, proportioned to the amount by which the aggregate sum insured in all the policies exceeds the insurable value of the thing at risk.
Section 361 of Pres. Decree No. 612 states:
Since his policy was in fact inoperative or ineffectual from the beginning, the company was never at risk, hence, it is not entitled to keep the premium. The award of moral damages to Cortez was proper for there can hardly be any doubt that he must have suffered moral shock, serious anxiety and wounded feelings upon being informed by the petitioner six (6) months after it issued the policy to him and four (4) months after receiving the full premium, that his policy was in fact worthless
and appellate courts that petitioner had induced private respondent to take out a life insurance policy from Manila Bankers Life Insurance Corporation by promising him a rebate equivalent to 50% of the first annual premium payment. These factual findings are, therefore, final and binding upon the Court.
No insurance company doing business in the Philippines or any agent thereof, no insurance broker, and no employee or other representative of any such insurance company, agent, or broker, shall make, procure or negotiate any contract of insurance or agreement as to policy contract, other than is plainly expressed in the policy or other written contract issued or to be issued as evidence thereof, or shall directly or shall indirectly, by giving or sharing a commission or in any manner whatsoever, pay or allow or offer to pay or allow to the insured or to any employee of such insured, either as an inducement to the making of such insurance or after such insurance
has been effected, any rebate from the premium which is specified in the policy, or any special favor or advantage in the dividends or other benefits to accrue thereon, or shall give or offer to give any valuable consideration or inducement of any kind, directly or indirectly, which is not specified in such policy or contract of insurance; nor shall any such company, or any agent thereof, as to any policy or contract of insurance issued, make any discrimination against any Filipino in the sense that he is given less advantageous rates, dividends or other policy conditions or privileges than are accorded to other nationals because of his race [Emphasis supplied.] Furthermore, Section 363 of Pres. Decree No. 612 provides that violation of the a bove section constitutes a ground for the immediate revocation of the license issued to the erring insurance company, agent or broker and the imposition of a fine not exceeding five hundred pesos.
No. 961, in terms, are addressed to the insurance companies, agents and brokers, and is enacted for the protection of policyholders, but this is for the general body of policyholders who would suffer by the enforcement of the prohibited agreements, and not for those who have entered into such agreements and are seeking to profit by its terms.
American Home v Chua G.R. No. 130421. June 28, 1999 C.J. Davide Facts: Chua obtained from American Home a fire insurance covering the stock-in-trade of his business.The insurance was due to expire on March 25, 1990. On April 5, 1990, Chua issued a check for P2,983.50 to American Home‟s agent, James Uy, as payment for the renewal of the policy. The official receipt was issued on
It is evident that petitioner's promise to pay private respondent an amount equivalent to 50% of the first premium payment, which would be taken out of her commission on the insurance policy, is covered squarely by the express provisions of Section 361. 2) By virtue of Article 1409 (7) of the New Civil Code, the rebate agreement between the petitioner and private respondent is deemed a contract void ab initio, and, consequently, does not give rise to enforceable rights and obligations as between the parties thereto. Public policy considerations serve to underscore further the Court's foregoing ruling that petitioner's promise of rebate, which is expressly prohibited by law, may not be enforced for compliance by the courts. Section 361 of Pres. Decree No. 612 is similar to the so-called "anti-discrimination" statutes found in other jurisdictions which regulate the activities in the insurance industry. The purpose of these statutes is the prevention of unfair discriminatory practices by insurance companies, agents and brokers in order to ensure that equal terms are fixed for policyholders of the same insurable class and equal expectation of life. In aid and furtherance of this desirable policy, the statutes prohibit such practices involving rebates or preferential treatment with respect to the cost of the policy or the benefits allowed for the premium. It follows that to enforce contracts or agreements directly forbidden under these statutes, thereby allowing recovery thereunder, would be subversive of the very public policy which the law was designed and intended to uphold. True, the statutes, like Sections 361 and 363 of Pres. Decree
April 10. In turn, the latter a renewal certificate. A new insurance policy was issued where petitioner undertook to indemnify respondent for any damage or loss arising from fire up to P200,000 March 20, 1990 to March 25, 1991. On April 6, 1990, the business was completely razed by fire. Total loss was estimated between P4,000,000 and P5,000,000. Respondent filed an insurance claim with petitioner and four other co-insurers, namely, Pioneer Insurance, Prudential Guarantee, Filipino Merchants and DomesticInsurance.
Petitioner refused to
honor the claim hence, the respondent filed an action in the trial court. American Home claimed there was no existing contract because respondent did not pay the premium. Even with a contract, they contended that he was ineligible bacue of his fraudulent tax returns, his failure to establish the actual loss and his failure to notify to petitioner of anyinsurance already effected. The trial court ruled in favor of respondent because the respondentpaid by way of check a day before the fire occurred and that the other insurance companies promptly paid the claims. American homes was made to pay 750,000 in damages. The Court of Appeals found that respondent‟s claim was substantially proved and petitioner‟s unjustified refusal to pay the claim entitled respondent to the award of damages.
American Home filed the petition reiterating its stand that there was no existing insurance contract between the parties. It invoked Section 77 of the
he had paid the proper taxes for the said years. Since this is a question of fact, the finding is conclusive.
Insurance Code, which provides that no policy or contract of insurance issued by an
Ordinarily, where the insurance policy specifies as a condition the disclosure of
insurance company is valid and binding unless and until the premium thereof has
existing co-insurers, non-disclosure is a violation that entitles the insurer to a void the
been paid and t he case of Arce v. Capital Insurance that until the premium is paid
policy. The purpose for the inclusion of this clause is to prevent an increase in the
there is no insurance.
moral hazard. The relevant provision is Section 75, which provides that:
Issues:
A policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy.
1. Whether there was a valid payment of premium, respondent‟s check was cashed after the occurrence of the fire
considering
that
Respondent acquired several co-insurers and he failed to disclose this information to petitioner. Nonetheless, petitioner is estopped from invoking this argument due to
2. Whether respondent violated the policy by his submission of fraudulent documents
the loss adjuster‟s admission of previous knowledge of the co -insurers.
and non-disclosure of the other existing insurance contracts
It cannot be said that petitioner was deceived by respondent by the latter‟s non-
3. Whether respondent is entitled to the award of damages.
disclosure of the other insurance contracts when petitioner actually had prior knowledge thereof. The loss adjuster, being an employee of petitioner, is deemed a
Held: Yes. No. Yes, but not all damages valid. Petition granted. Damages modified.
representative of the latter whose awareness of the other insurance contracts binds petitioner.
Ratio:
3. Petitioner is liable to pay the loss. But there is merit in petitioner‟s grievance
1. The trial court found, as affirmed by t he Court of Appeals, that there was a
against the damages and attorney‟s fees awarded. There was no basis for an award for
valid check payment by respondent to petitioner. The court respected this.
loss of profit. This cannot be shouldered by petitioner whose obligation is limited to
The renewal certificate issued to respondent contained the acknowledgment that
the object of insurance.
premium had been paid. In the instant case, the best evidence of such authority is the fact that petitioner
There was no fraud to justify moral damages. Exemplary dama ges can‟t be awarded because thedefendant never acted in a reckless manner to claim insurance. Attorney‟s
accepted thecheck and issued the official receipt for the payment. It is, as well, bound
fees can‟t be recovered as part of damages because no premium should be placed on
by its agent‟s acknowledgment of receipt of payment.
the right to litigate.
Section 78 of the Insurance Code explicitly provides: An 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 the premium
AREOLA v. CA (PRUDENTIAL GUARANTEE AND ASSURANCE, INC.) 236 SCRA 643 ROMERO; September 22, 1994
is actually paid.
NATURE CERTIORARI
2. Submission of the alleged fraudulent documents pertained to respondent‟s income
FACTS
tax returns for 1987 to 1989. Respondent, however, presented a BIR certification that
- June 29, 1985- 7 months after the issuance of Santos Areola's Personal Accident Insurance Policy No. PA-20015 (covering a period of one year), Prudential unilaterally cancelled the same since company records revealed that Areola failed to pay his premiums. o Under the terms of the statement of account issued by Prudential, Areola was supposed to pay the total amount of P1,609.65 which included the premium of P1,470.00, documentary stamp of P110.25 and 2% premium tax of P29.40. o The statement of account stated that it must not be considered a receipt as an official receipt will be issued upon payment of the account. And if payment was made to a representative, the client must demand for a Provisional Receipt and if Official Receipts aren‟t received within 7 days, Prudential should be notified. If payment is made to their office, clients should demand for an OR. - August 3, 1985- Prudential offered to reinstate same policy it had previously cancelled and even proposed to extend its lifetime to December 17, 1985, upon a finding that the cancellation was erroneous and that the premiums were paid in full by Areola but were not remitted by Teofilo M. Malapit, Prudential's branch manager. Petitioners’ Claims - The fraudulent act of in misappropriating Areola‟s premium payments is the proximate cause of the cancellation of the insurance policy. - Areola theorized that Malapit's act of signing and even sending the notice of cancellation himself, notwithstanding his personal knowledge of petitioner-insured's full payment of premiums, further reinforces the allegation of bad faith. - Such fraudulent act committed by Malapit is attributable to Prudential. - Malapit's actuations are therefore not separate and distinct from that of Prudential‟s. It must, therefore, bear the consequences of the erroneous cancellation of subject insurance policy caused by the non-remittance by its own employee of the premiums paid. - Subsequent reinstatement could not possibly absolve respondent insurance company from liability, there being an obvious breach of contract. After all damage had already been inflicted on him and no amount of rectification could remedy the same. Respondent’s Argument - Prudential argues that where reinstatement, the equitable relief sought by Areola was granted at an opportune moment, i.e. prior to the filing of the complaint, Areola is left without a cause of action on which to predicate his claim for damages. - Reinstatement effectively restored Areola to all his rights under the policy.
ISSUES 1. WON the erroneous act of canceling subject insurance policy entitle petitionerinsured to payment of damages
2. WON the subsequent act of reinstating the wrongfully cancelled insurance policy obliterate whatever liability for damages Prudential has
HELD 1. YES 2. NO Reasoning - Malapit's fraudulent act of misappropriating the premiums paid by petitionerinsured is beyond doubt directly imputable to Prudential. - A corporation, such as respondent insurance company, acts solely thru its employees. The latter‟s acts are considered as its own for which it can be held to account. - The facts are clear as to the relationship between private respondent insurance company and Malapit. His act of receiving the premiums collected is well within the province of his authority as manager. Thus, his receipt of said premiums is receipt by private respondent insurance company who, by provision of law, particularly under Article 1910 of the Civil Code, is bound by the acts of its agent. - Article 1910 thus reads: Art. 1910. The principal must comply with all the o bligations which the agent may have contracted within the scope of his authority. As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly. - Malapit's failure to remit the premiums he received cannot constitute a defense for private respondent insurance company; no exoneration from liability could result therefrom. - Prudential‟s earlier act of reinstating the insurance policy can not obliterate the injury inflicted on petitioner-insured. - Respondent company should be reminded that a contract of insurance creates reciprocal obligations for both insurer and insured. - Reciprocal obligations are those which arise from the same cause and in which each party is both a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. - Under the circumstances of instant case, the relationship as creditor and debtor between the parties arose from a common cause: i.e., by reason of their agreement to enter into a contract of insurance under whose terms, Prudential promised to extend protection to Areola against the risk insured for a consideration in the form of premiums to be paid by the latter. - Under the law governing reciprocal obligations, particularly the second paragraph of Article 1191, the injured party, Areola in this case, is given a choice between fulfillment or rescission of the obligation in case one of the obligors, such as respondent insurance company, fails to comply with what is incumbent upon him.
- However, said article entitles the injured party to payment of damages, regardless of whether he demands fulfillment or rescission of the obligation. - Untenable then is reinstatement insurance company's argument, namely, that reinstatement being equivalent to fulfillment of its obligation, divests petitionerinsured of a rightful claim for payment of damages. Such a claim finds no support in our laws on obligations and contracts. DAMAGES: - The nature of damages to be awarded, however, would be in the form of nominal damages - Although the erroneous cancellation of the insurance policy constituted a breach of contract, Prudential within a reasonable time took steps to rectify the wrong committed by reinstating the insurance policy of petitioner. - Moreover, no actual or substantial damage or injury was inflicted on petitioner Areola at the time the insurance policy was cancelled. - Nominal damages are "recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind, or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown. Disposition Petition for review on certiorari is hereby GRANTED. RTC‟ s DECISION is REINSTATED.
