Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-20552
May 20, 1966
FILIPINAS LIFE ASSURANCE CO., ET AL., petitioners, vs. GONZALO P. NAVA, respondent. Araneta, Mendoza and Papa for petitioners. Bengzon, Villegas and Zarraga and G. Advincula for respondent. BAUTISTA ANGELO,
J.:
This is a petition for review of a decision of the Court of Appeals which affirms that of the court a quo !" rescindin# the insurance contracts entered into between plaintiff and defenda defendants$ nts$ %" orderin orderin# # defenda defendant nt &ilipina &ilipinas s 'ife 'ife Assura Assurance nce Co. to pa( plaintif plaintifff the amoun amountt of P)%, P)%,*+% *+%. .* * as the the total total amoun amountt paid paid b( said said plain plaintif tifff on his his insura insurance nce policies$ and )" orderin# defendant -nsular 'ife Assurance Co., 'td. to pa( plaintiff the amount of P%,+/.** as the total amount paid b( plaintiff on account of his insurance polic(. 0n 1anuar( !, !2), plaintiff and defendant -nsular 'ife Assurance Co., 'td. entered into a contract of life insurance with a face value of P,***.** for which the insurer issued Polic( No. 3222. 0n &ebruar( %3, !2)2, plaintiff and defendant &ilipinas 'ife Assurance Co. entered into !+ separate contracts of life insurance for which the insurer issued !+ life insurance policies, one of said policies havin# a face value of P!*,***.** while the rest a face value of P,***.** each, or a total of P2*,***.**. Each and ever(one of the !3 policies issued b( defendants to plaintiff contains a loan clause of the followin# tenor4 Polic( loans. After three full (ears5 premiums have been paid upon this Polic(, if no premium pa(ment is in default, the Compan(, sub6ect to its then e7istin# rules, will advance on proper assi#nment and deliver( of this Polic( and on the sole securit( thereof a sum e8ual to, or at the option of the owner less than, the cash value specified in the 9chedule of Polic( :alues, less an( e7istin# indebtedness on or secured b( this Polic( and an( unpaid balance of the premium for the current polic(;(ear$ provided interest at si7 per centum per annum on the whole amount of the loan is paid in advance to the end of the current polic(;(ear. At the end of the current polic(;(ear interest at the same rate for one (ear in advance will be due and pa(able, and annuall( thereafter, thereafter, and if not so paid will be added to the principal and bear the same rate of interest. &ailure to repa( an( such loan or interest shall not avoid this Polic( unless the total indebtedness indebtedness shall e8ual or e7ceed the full amount of the loan value available hereunder. An( indebtedness indebtedness on this Polic( shall first be deducted from an( mone( pa(able or in an( settlement under this Polic(.
0n ACC0 as soon as debtor;creditor relationship is established> and because of such process of >withholdin#> plaintiff was not entitled to borrow an( amount until such ad6ustment has been made. 0n 9eptember )*, !2/3, plaintiff called the attention of the insurance companies to the decision of our 9upreme Court in the case of Haw Pia v. Cina Ban!ing Corporation! establishin# and reco#ni?in# the relationship of debtor and creditor with respect to pa(ments in fiat currenc( made durin# the 1apanese occupation on pre;war obli#ations, but in spite of that fact the insurance companies refused to #ive to plaintiff the loan he solicited #ivin# as reason the e7cuse that said decision of our 9upreme Court was not applicable to transactions underta@en durin# 1apanese occupation when the( relate to life insurance policies. 0n &ebruar( /, !2/2, plaintiff reiterated his re8uest for his much;needed loan of P,***.**, and as said re8uest was a#ain refused b( the insurance companies notwithstandin# the fact that the total amount of the cash surrender values of the !3 policies issued in his favor reached the sum of P2,/3.%2, plaintiff commenced the present action on &ebruar( !*, !2/2 before the Court of &irst -nstance of Manila pra(in# for the rescission of the abovementioned !3 policies and for the refund to him of all the premiums so far paid b( him to defendants in the amount of P)!,)).3*, plus interest thereon as dama#es, and the costs of action. 0n November %3, !2!, defendants passed a resolution which was approved b( the -nsurance Commissioner, #ivin# full credit to all premium pa(ments made b( their polic(holders in fiat currenc( durin# the 1apanese occupation on ACC0
petitioners should refund to defendant all the premiums paid on his insurance policies as a conse8uence of their rescission$ and )" in not rulin# that, even if respondent is entitled to the rescission of said insurance policies, he can onl( recover their cash surrender value at the time the complaint was filed on &ebruar( !*, !2/2. The issues raised will be the sub6ect of separate consideration. !. -t is contended that the failure of petitioners to #ive to respondent the loan of P,***.** APP'-E= for b( him on April %3, !2/3 was 6ustified in view of certain re#ulations issued b( the -nsurance Commissioner on Ma( %*, !2/ which, amon# other thin#s, provide that the amount correspondin# to occupation premiums paid on pre;war policies as well as those paid on pre;war loans should be withheld sub6ect to ad6ustment >as soon as debtor;creditor relationship is established>, for which reason petitioners were not in a position to #rant the loan considerin# the amount of the fiat currenc( emplo(ed b( respondent to pa( the premiums durin# the 1apanese occupation, and since this eventualit( has not (et occurred it stands to reason that petitioners cannot be made responsible to respondent for their alle#ed non;compliance with the loan clause contained in the insurance policies issued to respondent. But, as correctl( stated b( the Court of Appeals, even assumin# the validit( of the re#ulations issued b( the -nsurance Commissioner which re8uired the withholdin# of the pa(ments made in fiat currenc( of the premiums on insurance policies issued before the war sub6ect to whatever ad6ustment that ma( be made after the relationship between debtor and creditor shall have been established, the fact however is that such re8uirement has alread( lost its le#al effect and value when on April 2, !2/3 our 9upreme Court rendered its decision in the aw Pia case wherein it was declared, amon# others, that all pa(ments made in fiat currenc( durin# the 1apanese occupation in relation with an( contractual obli#ation e7ecuted before the war were valid to all intents and purposes, and (et petitioners apparentl( did not #ive an( importance to such decision for in their opinion it does not have an( application to transactions which have an( relation to pa(ment of premiums on life insurance policies. -n other words, petitioners maintain that the aw Pia case did not settle the 8uestion of valuation or premium pa(ments in 1apanese militar( notes durin# the war on life insurance policies because what said case merel( settled was the validit( of pa(ments in fiat currenc( b( a debtor to a creditor. 9tated in another wa(, petitioners are of the opinion that the aw Pia case did not settle the 8uestion of the valuation or premium pa(ments in 1apanese militar( notes durin# the war on life insurance policies because the insured is b( no means a de"tor of the insurer, nor is the insurer his creditor, considerin# that there is absolutel( no obli#ation on his part to pa( the premiums. There is no merit in this contention. -n the aw Pia case it was ruled in a clear manner that pa(ments made in 1apanese militar( notes on account of contractual obli#ations entered into before the war are valid pa(ments for all le#al intents and purposes, and this rulin# was reiterated in other similar cases. % And it cannot be denied that a life insurance polic( involves a contractual obli#ation wherein the insured becomes dut( bound to pa( the premiums a#reed upon, lest he runs the ris@ of havin# his insurance polic( lapse if he fails to pa( such premiums. The fact that if the insured had paid in full the premiums correspondin# to the first three (ears of the life of his polic( he cannot be considered delin8uent that would cause the lapse of his polic( if the same contains an automatic premium pa(ment clause cannot divest such polic( of its contractual nature,
for the result of such failure would onl( be for him to pa( later the premium plus the correspondin# interest dependin# upon the condition of the polic(. But certainl( it does not cease to be a contractual liabilit( insofar as the pa(ment of that premium is concerned for whether he li@es it or not that premium has to be paid lest he allows the lapse of his polic(. Conse8uentl(, the pa(ment of premiums on the life insurance policies made b( herein respondent before and durin# the war up to the time he applied for the loan in 8uestion with petitioners should be considered li@ewise as valid pa(ments upon the theor( that such insurance policies are in the nature of a contractual obli#ation within the meanin# of the civil law. -n effect, therefore, those pa(ments were made b( a debtor to a creditor within the meanin# of the re8uirement of the re#ulations of the -nsurance Commissioner and as such the( can offer no e7cuse to petitioners for refusin# to #rant the loan as contemplated in the loan clause embodied in the policies in 8uestion. #$wp%#.&'t The fact, however, is that the oft;repeated re#ulations of the -nsurance Commissioner are of doubtful validit( if their effect is to suspend the effectivit( of a provision or clause embodied in a valid insurance polic( for that would parta@e of the nature of a re#ulation the effect of which would be to infrin#e or impair a contractual obli#ation in violation of 9ection !!*", Article ---, of our Constitution. -n the case of 'im, et al. vs. Re#ister of =eeds of Ri?al, ) this Court has held that an administrative official has no power to issue a circular or a re#ulation the effect for that would be violative of our Constitution. -t is, therefore, clear from the fore#oin# that the petitioners violated the loan clause embodied in each of the !3 life insurance policies issued to respondent to rescind all said policies under 9ection 2 of the -nsurance Act, which provides4 >The violation of a material warrant(, or other material provision of a polic(, on the part of either part( thereto, entitles the other to rescind.> The citation that petitioners ma@e from :ance on -nsurance to the effect that >The #eneral rule is that a breach of the a#reement to ma@e the loan does not entitle the insured to rescind the contract,> is not controllin# in this 6urisdiction. &irstl(, it was not shown that the insurance laws in the states where said rulin# prevails contain a provision identical to 9ection 2 of our -nsurance 'aw we 8uoted above, and secondl(, the rule cited b( :ance is not a rule uniforml( followed b( all states in the
!%% of the old Civil Code, as postulated in Article ! of the same Code, which provides that on matters which are not #overned b( special laws the provisions of said Code shall supplement its deficienc(. And said Article !%2 provides4 ART. !%2. Rescission ma@es necessar( the return of the thin#s which were the sub6ect;matter of the contract, with their fruits, and of the price paid, with interest thereon. ...777 De find, therefore, correct the rulin# of the Court of Appeals which orders petitioners to refund to respondent all premiums paid b( him up to the filin# of the action amountin# to P)/,//.*. Petitioners, however, insist that the correct rulin# is not what the Court of Appeals has stated but what is hereinafter 8uoted because such is the wei#ht of authorit( on that matter. 9aid the petitioners4 >Recover( of the full amount of the premium after the insurer has sustained for sometime the ris@ of the insurance and the insured has en6o(ed the benefit of protection is obviousl( un6ust and is so reco#ni?ed b( the better authorities.> A#ain we find this statement incorrect, for accordin# to American 'aw Reports Annotated, the rulin# above 8uoted merel( represents the minorit( rule in the value of the benefit of protection> which he mi#ht have received under the !3 life insurance policies in 8uestion he is not entitled to rescind them under the provision of Article !%2 of the old Civil Code, because it should be here stated that said article onl( contemplates a transaction whether material thin#s are involved, and do not refer to intan#ible ones which cannot be the sub6ect of restoration, for to interpret it otherwise would be to defeat the law itself with the result that rescission can never be had under 9ection 2 of our -nsurance 'aw. And it cannot be denied that petitioners had in turn alread( derived material benefits from the use of premiums paid to them b( respondent before, durin# and after the last war from which the( must have reali?ed hu#e PR0&-T9 , and in this li#ht alone petitioners cannot claim pre6udice or unfairness if the( are ordered to refund the premiums paid b( respondents. ). Anent this issue, petitioners point out that the Court of Appeals erred in not rulin# that even if respondent is entitled to the rescission of his !3 life insurance policies he can onl( recover le#all( and e8uitabl( their cash surrender value at the time the complaint was filed on &ebruar( !*, !2/2. -nasmuch as this contention is but a corollar( to the conclusion we have reached in the discussion of the precedin# assi#nment of error, we believe that further refutation thereof is unnecessar(. Dherefore, the decision appealed from is affirmed. Cost a#ainst petitioners.
