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010 Constantino v.

Asia Life Insurance Company


G.R. No. 1669, August 31, 1950
Topic: What may be insured
Ponente: Bengzon

Author: Mila Marciana Asiddao
Link:
http://www.lawphil.net/judjuris/juri1950/aug1950/gr_l-
1669_1950.html
FACTS:
1. In the first case (G.R. No. L-1669, August 31, 1950), respondent Corporation was paid P176.04 as annual
premium by Arcadio Constantino in exchange for policy no. 93212 in 1941 for P 3,000 which lasted for 20
years.
2. Petitioner Paz Constantino was made beneficiary.
3. However after the first payment, no further premiums were made. Thereafter the insured died on 1944.
4. Later, due to the war (Japanese occupation) Respondent Corporation had to close down its branch in the
country.
5. In the second case (G.R. No. L-1670,August 31, 1950), in the same way, respondent Corporation issued in 1938
another insurance policy no. 78145 for Spouses Ruiz and Peralta also for P 3,000, lasting for 20 years.
6. Regular payments were made however due also to the war, it became impossible to transact further payments.
The insured nevertheless was able to borrow P 234 from the policy.
7. Ruiz died on 1945. Peralta was the beneficiary.
8. In both cases the plaintiffs demanded payment but was refused due to Respondent Corporations refusal on the
ground of non-payment of the premiums.
9. The lower court favored Respondent.
ISSUES:
1. Whether or not the beneficiaries are entitled to recover the amount insured despite non-payment caused by the
Japanese occupation.
2. Whether or not the periodic payments of the premiums, those after the first, is not an obligation of the insured so
that it is not a debt enforceable by the action of the insurer.
HELD:
1. No, the beneficiaries are not entitled to recover for non-payment despite the presence of war.
2. No, the annual premium is not a debt, nor is it an obligation which the insurer can maintain an action against the
insured; nor its settlement governed by the rules on payment of debts.
RATIO:
1. Contracts of insurance are contracts of indemnity within the terms and condition found therein.
An insurance company for certain considerations guarantee the insured against loss or damage as may be
stipulated, and when called to pay, the insurer may insist on the fulfillment of said stipulations. Failure of the
insured to do so disqualifies recovery for the loss. Thus the terms of the policy determines the insurers liability.
Compliance to the terms of the policy is a must as it is a condition precedent to the right of recovery. Therefore,
from the terms of the policy it is clear that non-payment of premium produces avoidance (forfeiture of the
policy).
Moreover, since act 2427, Philippine law on insurance and the Civil Code) are mostly based from the Civil Code
of California, An intention to supplement our laws with the prevailing principles of the US arises. Thus, Prof.
Vance of Yaled declares that the United States Rule must be followed, where the contract is not merely
suspended but is abrogated by reason of non-payment of premiumssince the time of payments is peculiar to the
essence of the contract. Further it would be unjust to permit the insurer to retain the reserve value of the policy
or the excess of premiums paid over the actual risk when the policy was still effective as held in the Statham
Case which was more logical and juridically sound. In said case it was hold that promptness of payment is
essential in the business oflife insurance since all calculations of the company is based on the hypothesis of
prompt payments. Forfeiture for non-payment is necessary to protect said business from embarrassment
otherwise confusion would abound. And that delinquency cannot be tolerated nor redeemed except at the option
of the company. Lastly parties contracted both for peace and war times since the policies contained also wartime
days. It follows that the parties contemplated uninterrupted operation of the contract even if armed conflict
ensues.
2. A contract of insurance is sui generis. This means though the insured may hold the insurer to the contract by the
fulfillment of the condition, the latter has no power or right to compel the insured to maintain the contract
relation longer than the insured may desire. It is optional upon the insured.
DOCTRINES
The terms of the policy determines the insurers liability. Compliance to the terms of the policy is a must as it is a
condition precedent to the right of recovery.
Though the insured may hold the insurer to the contract by the fulfillment of the condition, the latter has no power or
right to compel the insured to maintain the contract relation longer than the insured may desire. It is optional upon the
insured.