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G.R. No.

L-1669

August 31, 1950

PAZ LOPEZ DE CONSTANTINO, plaintiff-appellant, vs.ASIA LIFE INSURANCE COMPANY,


defendant-appellee
G.R. No. L-1670

August 31, 1950

AGUSTINA PERALTA, plaintiff-appellant, vs.ASIA LIFE INSURANCE COMPANY, defendantappellee..


These two cases, appealed from the Court of First Instance of Manila, call for decision of the question
whether the beneficiary in a life insurance policy may recover the amount thereof although the insured
died after repeatedly failing to pay the stipulated premiums, such failure having been caused by the last
war in the Pacific.
The facts are these:
First case. In consideration of the sum of P176.04 as annual premium duly paid to it, the Asia Life
Insurance Company (a foreign corporation incorporated under the laws of Delaware, U.S.A.), issued on
September 27, 1941, its Policy No. 93912 for P3,000, whereby it insured the life of Arcadio Constantino for
a term of twenty years. The first premium covered the period up to September 26, 1942. The plaintiff Paz
Lopez de Constantino was regularly appointed beneficiary. The policy contained these stipulations, among
others:
This POLICY OF INSURANCE is issued in consideration of the written and printed application here for a
copy of which is attached hereto and is hereby made a part hereof made a part hereof, and of the payment
in advance during the lifetime and good health of the Insured of the annual premium of One Hundred
fifty-eight and 4/100 pesos Philippine currency1 and of the payment of a like amount upon each twentyseventh day of September hereafter during the term of Twenty years or until the prior death of the
Insured. (Emphasis supplied.)
xxx

xxx

xxx

All premium payments are due in advance and any unpunctuality in making any such payment shall cause
this policy to lapse unless and except as kept in force by the Grace Period condition or under Option 4
below. (Grace of 31 days.)
After that first payment, no further premiums were paid. The insured died on September 22, 1944.
It is admitted that the defendant, being an American corporation , had to close its branch office in Manila
by reason of the Japanese occupation, i.e. from January 2, 1942, until the year 1945.
Second case. On August 1, 1938, the defendant Asia Life Insurance Company issued its Policy No. 78145
(Joint Life 20-Year Endowment Participating with Accident Indemnity), covering the lives of the spouses
Tomas Ruiz and Agustina Peralta, for the sum of P3,000. The annual premium stipulated in the policy was
regularly paid from August 1, 1938, up to and including September 30, 1941. Effective August 1, 1941, the
mode of payment of premiums was changed from annual to quarterly, so that quarterly premiums were
paid, the last having been delivered on November 18, 1941, said payment covering the period up to January
31, 1942. No further payments were handed to the insurer. Upon the Japanese occupation, the insured and
the insurer became separated by the lines of war, and it was impossible and illegal for them to deal with
each other. Because the insured had borrowed on the policy an mount of P234.00 in January, 1941, the
cash surrender value of the policy was sufficient to maintain the policy in force only up to September 7,
1942. Tomas Ruiz died on February 16, 1945. The plaintiff Agustina Peralta is his beneficiary. Her demand
for payment met with defendant's refusal, grounded on non-payment of the premiums.
The policy provides in part:
This POLICY OF INSURANCE is issued in consideration of the written and printed application herefor, a
copy of which is attached hereto and is hereby made apart hereof, and of the payment in advance during
the life time and good health of the Insured of the annual premium of Two hundred and 43/100 pesos
Philippine currency and of the payment of a like amount upon each first day of August hereafter during

the term of Twenty years or until the prior death of either of the Insured. (Emphasis supplied.)
xxx

xxx

xxx

All premium payments are due in advance and any unpunctuality in making any such payment shall cause
this policy to lapse unless and except as kept in force by the Grace Period condition or under Option 4
below. (Grace of days.) . . .
Plaintiffs maintain that, as beneficiaries, they are entitled to receive the proceeds of the policies minus all
sums due for premiums in arrears. They allege that non-payment of the premiums was caused by the
closing of defendant's offices in Manila during the Japanese occupation and the impossible circumstances
created by war.
Defendant on the other hand asserts that the policies had lapsed for non-payment of premiums, in
accordance with the contract of the parties and the law applicable to the situation.
The lower court absolved the defendant. Hence this appeal.
The controversial point has never been decided in this jurisdiction. Fortunately, this court has had the
benefit of extensive and exhaustive memoranda including those of amici curiae. The matter has received
careful consideration, inasmuch as it affects the interest of thousands of policy-holders and the obligations
of many insurance companies operating in this country.
Since the year 1917, the Philippine law on Insurance was found in Act No. 2427, as amended, and the Civil
Code.2 Act No. 2427 was largely copied from the Civil Code of California. 3 And this court has heretofore
announced its intention to supplement the statutory laws with general principles prevailing on the subject
in the United State.4
In Young vs. Midland Textile Insurance Co. (30 Phil., 617), we said that "contracts of insurance are
contracts of indemnity upon the terms and conditions specified in the policy. The parties have a right to
impose such reasonable conditions at the time of the making of the contract as they may deem wise and
necessary. The rate of premium is measured by the character of the risk assumed. The insurance company,
for a comparatively small consideration, undertakes to guarantee the insured against loss or damage, upon
the terms and conditions agreed upon, and upon no other, and when called upon to pay, in case of loss, the
insurer, therefore, may justly insists upon a fulfillment of these terms. If the insured cannot bring himself
within the conditions of the policy, he is not entitled for the loss. The terms of the policy constitute the
measure of the insurer's liability, and in order to recover the insured must show himself within those
terms; and if it appears that the contract has been terminated by a violation, on the part of the insured, of
its conditions, then there can be no right of recovery. The compliance of the insured with the terms of the
contract is a condition precedent to the right of recovery."
Recall of the above pronouncements is appropriate because the policies in question stipulate that "all
premium payments are due in advance and any unpunctuality in making any such payment shall cause this
policy to lapse." Wherefore, it would seem that pursuant to the express terms of the policy, non-payment of
premium produces its avoidance.
The conditions of contracts of Insurance, when plainly expressed in a policy, are binding upon the parties
and should be enforced by the courts, if the evidence brings the case clearly within their meaning and
intent. It tends to bring the law itself into disrepute when, by astute and subtle distinctions, a plain case is
attempted to be taken without the operation of a clear, reasonable and material obligation of the contract.
Mack vs. Rochester German Ins. Co., 106 N.Y., 560, 564. (Young vs. Midland Textile Ins. Co., 30 Phil., 617,
622.)
In Glaraga vs. Sun Life Ass. Co. (49 Phil., 737), this court held that a life policy was avoided because the
premium had not been paid within the time fixed, since by its express terms, non-payment of any premium
when due or within the thirty-day period of grace, ipso facto caused the policy to lapse. This goes to show
that although we take the view that insurance policies should be conserved 5 and should not lightly be
thrown out, still we do not hesitate to enforce the agreement of the parties.
Forfeitures of insurance policies are not favored, but courts cannot for that reason alone refuse to enforce
an insurance contract according to its meaning. (45 C.J.S., p. 150.)

Nevertheless, it is contended for plaintiff that inasmuch as the non-payment of premium was the
consequence of war, it should be excused and should not cause the forfeiture of the policy.
Professor Vance of Yale, in his standard treatise on Insurance, says that in determining the effect of nonpayment of premiums occasioned by war, the American cases may be divided into three groups, according
as they support the so-called Connecticut Rule, the New York Rule, or the United States Rule.
The first holds the view that "there are two elements in the consideration for which the annual premium is
paid First, the mere protection for the year, and second, the privilege of renewing the contract for each
succeeding year by paying the premium for that year at the time agreed upon. According to this view of the
contract, the payment of premiums is a condition precedent, the non-performance would be illegal
necessarily defeats the right to renew the contract."
The second rule, apparently followed by the greater number of decisions, hold that "war between states in
which the parties reside merely suspends the contracts of the life insurance, and that, upon tender of all
premiums due by the insured or his representatives after the war has terminated, the contract revives and
becomes fully operative."
The United States rule declares that the contract is not merely suspended, but is abrogated by reason of
non-payments is peculiarly of the essence of the contract. It additionally holds that it would be unjust to
allow the insurer to retain the reserve value of the policy, which is the excess of the premiums paid over the
actual risk carried during the years when the policy had been in force. This rule was announced in the wellknown Statham6 case which, in the opinion of Professor Vance, is the correct rule.7
The appellants and some amici curiae contend that the New York rule should be applied here. The
appellee and other amici curiae contend that the United States doctrine is the orthodox view.
We have read and re-read the principal cases upholding the different theories. Besides the respect and high
regard we have always entertained for decisions of the Supreme Court of the United States, we cannot
resist the conviction that the reasons expounded in its decision of the Statham case are logically and
judicially sound. Like the instant case, the policy involved in the Statham decision specifies that nonpayment on time shall cause the policy to cease and determine. Reasoning out that punctual payments
were essential, the court said:
. . . it must be conceded that promptness of payment is essential in the business of life insurance. All the
calculations of the insurance company are based on the hypothesis of prompt payments. They not only
calculate on the receipt of the premiums when due, but on compounding interest upon them. It is on this
basis that they are enabled to offer assurance at the favorable rates they do. Forfeiture for non-payment is
an necessary means of protecting themselves from embarrassment. Unless it were enforceable, the
business would be thrown into confusion. It is like the forfeiture of shares in mining enterprises, and all
other hazardous undertakings. There must be power to cut-off unprofitable members, or the success of the
whole scheme is endangered. The insured parties are associates in a great scheme. This associated relation
exists whether the company be a mutual one or not. Each is interested in the engagements of all; for out of
the co-existence of many risks arises the law of average, which underlies the whole business. An essential
feature of this scheme is the mathematical calculations referred to, on which the premiums and amounts
assured are based. And these calculations, again, are based on the assumption of average mortality, and of
prompt payments and compound interest thereon. Delinquency cannot be tolerated nor redeemed, except
at the option of the company. This has always been the understanding and the practice in this department
of business. Some companies, it is true, accord a grace of thirty days, or other fixed period, within which
the premium in arrear may be paid, on certain conditions of continued good health, etc. But this is a
matter of stipulation, or of discretion, on the part of the particular company. When no stipulation exists, it
is the general understanding that time is material, and that the forfeiture is absolute if the premium be not
paid. The extraordinary and even desperate efforts sometimes made, when an insured person is in
extremes to meet a premium coming due, demonstrates the common view of this matter.
The case, therefore, is one in which time is material and of the essence and of the essence of the contract.
Non-payment at the day involves absolute forfeiture if such be the terms of the contract, as is the case here.
Courts cannot with safety vary the stipulation of the parties by introducing equities for the relief of the
insured against their own negligence.
In another part of the decision, the United States Supreme Court considers and rejects what is, in effect,
the New York theory in the following words and phrases:

The truth is, that the doctrine of the revival of contracts suspended during the war is one based on
considerations of equity and justice, and cannot be invoked to revive a contract which it would be unjust or
inequitable to revive.
In the case of Life insurance, besides the materiality of time in the performance of the contract, another
strong reason exists why the policy should not be revived. The parties do not stand on equal ground in
reference to such a revival. It would operate most unjustly against the company. The business of insurance
is founded on the law of average; that of life insurance eminently so. The average rate of mortality is the
basis on which it rests. By spreading their risks over a large number of cases, the companies calculate on
this average with reasonable certainty and safety. Anything that interferes with it deranges the security of
the business. If every policy lapsed by reason of the war should be revived, and all the back premiums
should be paid, the companies would have the benefit of this average amount of risk. But the good risks are
never heard from; only the bar are sought to be revived, where the person insured is either dead or dying.
Those in health can get the new policies cheaper than to pay arrearages on the old. To enforce a revival of
the bad cases, whilst the company necessarily lose the cases which are desirable, would be manifestly
unjust. An insured person, as before stated, does not stand isolated and alone. His case is connected with
and co-related to the cases of all others insured by the same company. The nature of the business, as a
whole, must be looked at to understand the general equities of the parties.
The above consideration certainly lend themselves to the approval of fair-minded men. Moreover, if, as
alleged, the consequences of war should not prejudice the insured, neither should they bear down on the
insurer.
Urging adoption of the New York theory, counsel for plaintiff point out that the obligation of the insured to
pay premiums was excused during the war owing to impossibility of performance, and that consequently
no unfavorable consequences should follow from such failure.
The appellee answers, quite plausibly, that the periodic payment of premiums, at least those after the first,
is not an obligation of the insured, so much so that it is not a debt enforceable by action of the insurer.
Under an Oklahoma decision, the annual premium due is not a debt. It is not an obligation upon which the
insurer can maintain an action against insured; nor is its settlement governed by the strict rule controlling
payments of debts. So, the court in a Kentucky case declares, in the opinion, that it is not a debt. . . . The
fact that it is payable annually or semi-annually, or at any other stipulated time, does not of itself
constitute a promise to pay, either express or implied. In case of non-payment the policy is forfeited,
except so far as the forfeiture may be saved by agreement, by waiver, estoppel, or by statute. The payment
of the premium is entirely optional, while a debt may be enforced at law, and the fact that the premium is
agreed to be paid is without force, in the absence of an unqualified and absolute agreement to pay a
specified sum at some certain time. In the ordinary policy there is no promise to pay, but it is optional with
the insured whether he will continue the policy or forfeit it. (3 Couch, Cyc. on Insurance, Sec. 623, p.
1996.)
It is well settled that a contract of insurance is sui generis. While the insured by an observance of the
conditions may hold the insurer to his contract, the latter has not the power or right to compel the insured
to maintain the contract relation with it longer than he chooses. Whether the insured will continue it or
not is optional with him. There being no obligation to pay for the premium, they did not constitute a
debt. (Noble vs. Southern States M.D. Ins. Co., 157 Ky., 46; 162 S.W., 528.) (Emphasis ours.)
It should be noted that the parties contracted not only for peacetime conditions but also for times of war,
because the policies contained provisions applicable expressly to wartime days. The logical inference,
therefore, is that the parties contemplated uninterrupted operation of the contract even if armed conflict
should ensue.
For the plaintiffs, it is again argued that in view of the enormous growth of insurance business since the
Statham decision, it could now be relaxed and even disregarded. It is stated "that the relaxation of rules
relating to insurance is in direct proportion to the growth of the business. If there were only 100 men, for
example, insured by a Company or a mutual Association, the death of one will distribute the insurance
proceeds among the remaining 99 policy-holders. Because the loss which each survivor will bear will be
relatively great, death from certain agreed or specified causes may be deemed not a compensable loss. But
if the policy-holders of the Company or Association should be 1,000,000 individuals, it is clear that the
death of one of them will not seriously prejudice each one of the 999,999 surviving insured. The loss to be
borne by each individual will be relatively small."

The answer to this is that as there are (in the example) one million policy-holders, the "losses" to be
considered will not be the death of one but the death of ten thousand, since the proportion of 1 to 100
should be maintained. And certainly such losses for 10,000 deaths will not be "relatively small."
After perusing the Insurance Act, we are firmly persuaded that the non-payment of premiums is such a
vital defense of insurance companies that since the very beginning, said Act no. 2427 expressly preserved
it, by providing that after the policy shall have been in force for two years, it shall become incontestable
(i.e. the insurer shall have no defense) except for fraud, non-payment of premiums, and military or naval
service in time of war (sec. 184 [b], Insurance Act). And when Congress recently amended this section
(Rep. Act No. 171), the defense of fraud was eliminated, while the defense of nonpayment of premiums
was preserved. Thus the fundamental character of the undertaking to pay premiums and the high
importance of the defense of non-payment thereof, was specifically recognized.
In keeping with such legislative policy, we feel no hesitation to adopt the United States Rule, which is in
effect a variation of the Connecticut rule for the sake of equity. In this connection, it appears that the first
policy had no reserve value, and that the equitable values of the second had been practically returned to
the insured in the form of loan and advance for premium.
For all the foregoing, the lower court's decision absolving the defendant from all liability on the policies in
question, is hereby affirmed, without costs.

G.R. No. L-44059 October 28, 1977


THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-appellee, vs.CARPONIA T.
EBRADO and PASCUALA VDA. DE EBRADO, defendants-appellant
This is a novel question in insurance law: Can a common-law wife named as beneficiary in the life
insurance policy of a legally married man claim the proceeds thereof in case of death of the latter?
On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd., Policy No.
009929 on a whole-life for P5,882.00 with a, rider for Accidental Death for the same amount
Buenaventura C. Ebrado designated T. Ebrado as the revocable beneficiary in his policy. He to her as his
wife.
On October 21, 1969, Buenaventura C. Ebrado died as a result of an t when he was hit by a failing branch of
a tree. As the policy was in force, The Insular Life Assurance Co., Ltd. liable to pay the coverage in the total
amount of P11,745.73, representing the face value of the policy in the amount of P5,882.00 plus the
additional benefits for accidental death also in the amount of P5,882.00 and the refund of P18.00 paid for
the premium due November, 1969, minus the unpaid premiums and interest thereon due for January and
February, 1969, in the sum of P36.27.
Carponia T. Ebrado filed with the insurer a claim for the proceeds of the Policy as the designated
beneficiary therein, although she admits that she and the insured Buenaventura C. Ebrado were merely
living as husband and wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is
the one entitled to the insurance proceeds, not the common-law wife, Carponia T. Ebrado.
In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life Assurance Co., Ltd.
commenced an action for Interpleader before the Court of First Instance of Rizal on April 29, 1970.
After the issues have been joined, a pre-trial conference was held on July 8, 1972, after which, a pre-trial
order was entered reading as follows: +.wph!1
During the pre-trial conference, the parties manifested to the court. that there is no possibility of amicable
settlement. Hence, the Court proceeded to have the parties submit their evidence for the purpose of the
pre-trial and make admissions for the purpose of pretrial. During this conference, parties Carponia T.
Ebrado and Pascuala Ebrado agreed and stipulated: 1) that the deceased Buenaventura Ebrado was

married to Pascuala Ebrado with whom she has six (legitimate) namely; Hernando, Cresencio, Elsa,
Erlinda, Felizardo and Helen, all surnamed Ebrado; 2) that during the lifetime of the deceased, he was
insured with Insular Life Assurance Co. Under Policy No. 009929 whole life plan, dated September 1, 1968
for the sum of P5,882.00 with the rider for accidental death benefit as evidenced by Exhibits A for
plaintiffs and Exhibit 1 for the defendant Pascuala and Exhibit 7 for Carponia Ebrado; 3) that during the
lifetime of Buenaventura Ebrado, he was living with his common-wife, Carponia Ebrado, with whom
she had 2 children although he was not legally separated from his legal wife ; 4) that Buenaventura in
accident on October 21, 1969 as evidenced by the death Exhibit 3 and affidavit of the police report of his
death Exhibit 5; 5) that complainant Carponia Ebrado filed claim with the Insular Life Assurance Co.
which was contested by Pascuala Ebrado who also filed claim for the proceeds of said policy 6) that in view
ofthe adverse claims the insurance company filed this action against the two herein claimants Carponia
and Pascuala Ebrado; 7) that there is now due from the Insular Life Assurance Co. as proceeds of the policy
P11,745.73; 8) that the beneficiary designated by the insured in the policy is Carponia Ebrado and the
insured made reservation to change the beneficiary but although the insured made the option to change
the beneficiary, same was never changed up to the time of his death and the wife did not have any
opportunity to write the company that there was reservation to change the designation of the parties
agreed that a decision be rendered based on and stipulation of facts as to who among the two claimants is
entitled to the policy.
Upon motion of the parties, they are given ten (10) days to file their simultaneous memoranda from the
receipt of this order.
SO ORDERED.
On September 25, 1972, the trial court rendered judgment declaring among others, Carponia T. Ebrado
disqualified from becoming beneficiary of the insured Buenaventura Cristor Ebrado and directing the
payment of the insurance proceeds to the estate of the deceased insured. The trial court held: +.wph!1
It is patent from the last paragraph of Art. 739 of the Civil Code that a criminal conviction for adultery or
concubinage is not essential in order to establish the disqualification mentioned therein. Neither is it also
necessary that a finding of such guilt or commission of those acts be made in a separate independent
action brought for the purpose. The guilt of the donee (beneficiary) may be proved by preponderance of
evidence in the same proceeding (the action brought to declare the nullity of the donation).
It is, however, essential that such adultery or concubinage exists at the time defendant Carponia T. Ebrado
was made beneficiary in the policy in question for the disqualification and incapacity to exist and that it is
only necessary that such fact be established by preponderance of evidence in the trial. Since it is agreed in
their stipulation above-quoted that the deceased insured and defendant Carponia T. Ebrado were living
together as husband and wife without being legally married and that the marriage of the insured with the
other defendant Pascuala Vda. de Ebrado was valid and still existing at the time the insurance in question
was purchased there is no question that defendant Carponia T. Ebrado is disqualified from becoming the
beneficiary of the policy in question and as such she is not entitled to the proceeds of the insurance upon
the death of the insured.
From this judgment, Carponia T. Ebrado appealed to the Court of Appeals, but on July 11, 1976, the
Appellate Court certified the case to Us as involving only questions of law.
We affirm the judgment of the lower court.
1. It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new Insurance Code
(PD No. 612, as amended) does not contain any specific provision grossly resolutory of the prime question
at hand. Section 50 of the Insurance Act which provides that "(t)he insurance shag be applied exclusively
to the proper interest of the person in whose name it is made" 1 cannot be validly seized upon to hold that
the mm includes the beneficiary. The word "interest" highly suggests that the provision refers only to the
"insured" and not to the beneficiary, since a contract of insurance is personal in character. 2 Otherwise, the
prohibitory laws against illicit relationships especially on property and descent will be rendered nugatory,
as the same could easily be circumvented by modes of insurance. Rather, the general rules of civil law
should be applied to resolve this void in the Insurance Law. Article 2011 of the New Civil Code states: "The
contract of insurance is governed by special laws. Matters not expressly provided for in such special laws
shall be regulated by this Code." When not otherwise specifically provided for by the Insurance Law, the
contract of life insurance is governed by the general rules of the civil law regulating contracts. 3 And under
Article 2012 of the same Code, "any person who is forbidden from receiving any donation under Article

739 cannot be named beneficiary of a fife insurance policy by the person who cannot make a donation to
him. 4 Common-law spouses are, definitely, barred from receiving donations from each other. Article 739
of the new Civil Code provides: +.wph!1
The following donations shall be void:
1. Those made between persons who were guilty of adultery or concubinage at the time of donation;
Those made between persons found guilty of the same criminal offense, in consideration thereof;
3. Those made to a public officer or his wife, descendants or ascendants by reason of his office.
In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the
donor or donee; and the guilt of the donee may be proved by preponderance of evidence in the same
action.
2. In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is
concerned. Both are founded upon the same consideration: liberality. A beneficiary is like a donee, because
from the premiums of the policy which the insured pays out of liberality, the beneficiary will receive the
proceeds or profits of said insurance. As a consequence, the proscription in Article 739 of the new Civil
Code should equally operate in life insurance contracts. The mandate of Article 2012 cannot be laid aside:
any person who cannot receive a donation cannot be named as beneficiary in the life insurance policy of
the person who cannot make the donation. 5 Under American law, a policy of life insurance is considered
as a testament and in construing it, the courts will, so far as possible treat it as a will and determine the
effect of a clause designating the beneficiary by rules under which wins are interpreted. 6
3. Policy considerations and dictates of morality rightly justify the institution of a barrier between common
law spouses in record to Property relations since such hip ultimately encroaches upon the nuptial and filial
rights of the legitimate family There is every reason to hold that the bar in donations between legitimate
spouses and those between illegitimate ones should be enforced in life insurance policies since the same
are based on similar consideration As above pointed out, a beneficiary in a fife insurance policy is no
different from a donee. Both are recipients of pure beneficence. So long as manage remains the threshold
of family laws, reason and morality dictate that the impediments imposed upon married couple should
likewise be imposed upon extra-marital relationship. If legitimate relationship is circumscribed by these
legal disabilities, with more reason should an illicit relationship be restricted by these disabilities. Thus, in
Matabuena v. Cervantes, 7 this Court, through Justice Fernando, said: +.wph!1
If the policy of the law is, in the language of the opinion of the then Justice J.B.L. Reyes of that court
(Court of Appeals), 'to prohibit donations in favor of the other consort and his descendants because of and
undue and improper pressure and influence upon the donor, a prejudice deeply rooted in our ancient law;"
por-que no se enganen desponjandose el uno al otro por amor que han de consuno' (According to) the
Partidas (Part IV, Tit. XI, LAW IV), reiterating the rationale 'No Mutuato amore invicem spoliarentur' the
Pandects (Bk, 24, Titl. 1, De donat, inter virum et uxorem); then there is very reason to apply the same
prohibitive policy to persons living together as husband and wife without the benefit of nuptials. For it is
not to be doubted that assent to such irregular connection for thirty years bespeaks greater influence of
one party over the other, so that the danger that the law seeks to avoid is correspondingly increased.
Moreover, as already pointed out by Ulpian (in his lib. 32 ad Sabinum, fr. 1), 'it would not be just that such
donations should subsist, lest the condition 6f those who incurred guilt should turn out to be better.' So
long as marriage remains the cornerstone of our family law, reason and morality alike demand that the
disabilities attached to marriage should likewise attach to concubinage.
It is hardly necessary to add that even in the absence of the above pronouncement, any other conclusion
cannot stand the test of scrutiny. It would be to indict the frame of the Civil Code for a failure to apply a
laudable rule to a situation which in its essentials cannot be distinguished. Moreover, if it is at all to be
differentiated the policy of the law which embodies a deeply rooted notion of what is just and what is right
would be nullified if such irregular relationship instead of being visited with disabilities would be attended
with benefits. Certainly a legal norm should not be susceptible to such a reproach. If there is every any
occasion where the principle of statutory construction that what is within the spirit of the law is as much a
part of it as what is written, this is it. Otherwise the basic purpose discernible in such codal provision
would not be attained. Whatever omission may be apparent in an interpretation purely literal of the
language used must be remedied by an adherence to its avowed objective.

4. We do not think that a conviction for adultery or concubinage is exacted before the disabilities
mentioned in Article 739 may effectuate. More specifically, with record to the disability on "persons who
were guilty of adultery or concubinage at the time of the donation," Article 739 itself provides: +.wph!
1
In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the
donor or donee; and the guilty of the donee may be proved by preponderance of evidence in the same
action.
The underscored clause neatly conveys that no criminal conviction for the offense is a condition precedent.
In fact, it cannot even be from the aforequoted provision that a prosecution is needed. On the contrary, the
law plainly states that the guilt of the party may be proved "in the same acting for declaration of nullity of
donation. And, it would be sufficient if evidence preponderates upon the guilt of the consort for the offense
indicated. The quantum of proof in criminal cases is not demanded.
In the caw before Us, the requisite proof of common-law relationship between the insured and the
beneficiary has been conveniently supplied by the stipulations between the parties in the pre-trial
conference of the case. It case agreed upon and stipulated therein that the deceased insured Buenaventura
C. Ebrado was married to Pascuala Ebrado with whom she has six legitimate children; that during his
lifetime, the deceased insured was living with his common-law wife, Carponia Ebrado, with whom he has
two children. These stipulations are nothing less than judicial admissions which, as a consequence, no
longer require proof and cannot be contradicted. 8 A fortiori, on the basis of these admissions, a judgment
may be validly rendered without going through the rigors of a trial for the sole purpose of proving the illicit
liaison between the insured and the beneficiary. In fact, in that pretrial, the parties even agreed "that a
decision be rendered based on this agreement and stipulation of facts as to who among the two claimants
is entitled to the policy."
ACCORDINGLY, the appealed judgment of the lower court is hereby affirmed. Carponia T. Ebrado is
hereby declared disqualified to be the beneficiary of the late Buenaventura C. Ebrado in his life insurance
policy. As a consequence, the proceeds of the policy are hereby held payable to the estate of the deceased
insured. Costs against Carponia T. Ebrado.
SO ORDERED.

G.R. No. L-21821-22 and L-21824-27

May 31, 1966

DIOSDADO C. TY, plaintiff-appellant, vs.FILIPINAS COMPAIA DE SEGUROS, et al.,


defendants-appellees.
These are appeals instituted by Diosdado C. Ty from a single decision of the Court of First Instance of
Manila (in Civ. Cases Nos. 26343, 26344, 26404, 26405, 26406, 26442, which were tried together),
dismissing the six separate complaints he filed against six insurance companies (Filipinas Compaia de
Seguros, People's Surety & Insurance Co., Inc., South Sea Surety & Insurance Co., Inc., The Philippine
Guaranty Company, Inc., Universal Insurance & Indemnity Co., and Plaridel Surety & Insurance Co., Inc.)
for collection from each of them, of the sum of P650.00, as compensation for the disability of his left hand.
The facts of these cases are not controverted:
Plaintiff-appellant was an employee of Broadway Cotton Factory at Grace Park, Caloocan City, working as
mechanic operator, with monthly salary of P185.00. In the latter part of 1953, he took Personal Accident
Policies from several insurance companies, among which are herein defendants-appellees, on different
dates,1 effective for 12 months. During the effectivity of these policies, or on December 24, 1953, a fire
broke out in the factory where plaintiff was working. As he was trying to put out said fire with the help of a
fire extinguisher, a heavy object fell upon his left hand. Plaintiff received treatment at the National
Orthopedic Hospital from December 26, 1953 to February 8, 1954, for the following injuries, to wit:
(1) Fracture, simple, oraximal phalanx, index finger, left;
(2) Fracture, compound, communite proximal phalanx, middle finger, left and 2nd phalanx simple;

(3) Fracture, compound, communite phalanx, 4th finger, left;


(4) Fracture, simple, middle phalanx, middle finger, left;
(5) Lacerated wound, sutured, volar aspect, small finger, left;
(6) Fracture, simple, chip, head, 1st phalanx 5th digit, left.
which injuries, the attending surgeon certified, would cause temporary total disability of appellant's left
hand.
As the insurance companies refused to pay his claim for compensation under the policies by reason of the
said disability of his left hand, Ty filed motions in the Municipal Court of Manila, which rendered favorable
decision. On appeal to the Court of First Instance by the insurance companies, the cases were dismissed on
the ground that under the uniform terms of the insurance policies, partial disability of the insured caused
by loss of either hand to be compensable, the loss must result in the amputation of that hand. Hence, these
appeals by the insured.1wph1.t
Plaintiff-appellant is basing his claim for indemnity under the provision of the insurance contract, uniform
in all the cases, which reads:
"INDEMNITY FOR TOTAL OR PARTIAL DISABILITY
If the Insured sustains any Bodily Injury which is effected solely through violent, external, visible and
accidental means, and which shall not prove fatal but shall result, independently of all other causes and
within sixty (60) days from the occurrence, thereof, in Total or Partial Disability of the Insured, the
Company shall pay, subject to the exceptions as provided for hereinafter, the amount set opposite such
injury.
xxx

xxx

xxx

PARTIAL DISABILITY
LOSS OF:
xxx

xxx

xxx

Either Hand P650.00


xxx

xxx

xxx

The loss of a hand shall mean the loss, by amputation through the bones of the wrist.
Appellant contends that to be entitled to indemnification under the foregoing provision, it is enough that
the insured is disabled to such an extent that he cannot substantially perform all acts or duties of the kind
necessary in the prosecution of his business. It is argued that what is compensable is the disability and not
the amputation of the hand. The definition of what constitutes loss of hand, placed in the contract,
according to appellant, consequently, makes the provision ambiguous and calls for the interpretation
thereof by this Court.
This is not the first time that the proper construction of this provision, which is uniformly carried in
personal accident policies, has been questioned. Herein appellant himself has already brought this matter
to the attention of this Court in connection with the other accident policies which he took and under which
he had tried to collect indemnity, for the identical injury that is the basis of the claims in these cases. And,
we had already ruled:
While we sympathize with the plaintiff or his employer, for whose benefit the policies were issued, we can
not go beyond the clear and express conditions of the insurance policies, all of which definite partial
disability as loss of either hand by amputation through the bones of the wrist. There was no such
amputation in the case at bar. All that was found by the trial court, which is not disputed on appeal, was
that the physical injuries "caused temporary total disability of plaintiff's left hand." Note that the disability

of plaintiff's hand was merely temporary, having been caused by fractures of the index, the middle and the
fourth fingers of the left hand.
We might add that the agreement contained in the insurance policies is the law between the parties. As the
terms of the policies are clear, express and specific that only amputation of the left hand should be
considered as a loss thereof, an interpretation that would include the mere fracture or other temporary
disability not covered by the policies would certainly be unwarranted. 2
We find no reason to depart from the foregoing ruling on the matter. Plaintiff-appellant cannot come to
the courts and claim that he was misled by the terms of the contract. The provision is clear enough to
inform the party entering into that contract that the loss to be considered a disability entitled to indemnity,
must be severance or amputation of that affected member from the body of the insured.
Wherefore, finding no error in the decision appealed from, the same is hereby affirmed, without costs. So
ordered.

G.R. No. 75605 January 22, 1993


RAFAEL (REX) VERENDIA, petitioner, vs.COURT OF APPEALS and FIDELITY & SURETY CO.
OF THE PHILIPPINES, respondents.
G.R. No. 76399 January 22, 1993
FIDELITY & SURETY CO. OF THE PHILIPPINES, INC., petitioner, vs.RAFAEL VERENDIA
and THE COURT OF APPEALS, respondents.
The two consolidated cases involved herein stemmed from the issuance by Fidelity and Surety Insurance
Company of the Philippines (Fidelity for short) of its Fire Insurance Policy No. F-18876 effective between
June 23, 1980 and June 23, 1981 covering Rafael (Rex) Verendia's residential building located at Tulip
Drive, Beverly Hills, Antipolo, Rizal in the amount of P385,000.00. Designated as beneficiary was the
Monte de Piedad & Savings Bank. Verendia also insured the same building with two other companies,
namely, The Country Bankers Insurance for P56,000.00 under Policy No. PDB-80-1913 expiring on May
12, 1981, and The Development Insurance for P400,000.00 under Policy No. F-48867 expiring on June
30, 198l.
While the three fire insurance policies were in force, the insured property was completely destroyed by fire
on the early morning of December 28, 1980. Fidelity was accordingly informed of the loss and despite
demands, refused payment under its policy, thus prompting Verendia to file a complaint with the then
Court of First Instance of Quezon City, praying for payment of P385,000.00, legal interest thereon, plus
attorney's fees and litigation expenses. The complaint was later amended to include Monte de Piedad as an
"unwilling defendant" (P. 16, Record).
Answering the complaint, Fidelity, among other things, averred that the policy was avoided by reason of
over-insurance; that Verendia maliciously represented that the building at the time of the fire was leased
under a contract executed on June 25, 1980 to a certain Roberto Garcia, when actually it was a Marcelo
Garcia who was the lessee.
On May 24, 1983, the trial court rendered a decision, per Judge Rodolfo A. Ortiz, ruling in favor of Fidelity.
In sustaining the defenses set up by Fidelity, the trial court ruled that Paragraph 3 of the policy was also
violated by Verendia in that the insured failed to inform Fidelity of his other insurance coverages with
Country Bankers Insurance and Development Insurance.
Verendia appealed to the then Intermediate Appellate Court and in a decision promulgated on March 31,
1986, (CA-G.R. No. CV No. 02895, Coquia, Zosa, Bartolome, and Ejercito (P), JJ.), the appellate court
reversed for the following reasons: (a) there was no misrepresentation concerning the lease for the
contract was signed by Marcelo Garcia in the name of Roberto Garcia; and (b) Paragraph 3 of the policy
contract requiring Verendia to give notice to Fidelity of other contracts of insurance was waived by Fidelity
as shown by its conduct in attempting to settle the claim of Verendia (pp. 32-33, Rollo of G.R. No. 76399).

Fidelity received a copy of the appellate court's decision on April 4, 1986, but instead of directly filing a
motion for reconsideration within 15 days therefrom, Fidelity filed on April 21, 1986, a motion for
extension of 3 days within which to file a motion for reconsideration. The motion for extension was not
filed on April 19, 1986 which was the 15th day after receipt of the decision because said 15th day was a
Saturday and of course, the following day was a Sunday (p. 14., Rollo of G.R. No. 75605). The motion for
extension was granted by the appellate court on April 30, 1986 (p. 15. ibid.), but Fidelity had in the
meantime filed its motion for reconsideration on April 24, 1986 (p. 16, ibid.).
Verendia filed a motion to expunge from the record Fidelity's motion for reconsideration on the ground
that the motion for extension was filed out of time because the 15th day from receipt of the decision which
fell on a Saturday was ignored by Fidelity, for indeed, so Verendia contended, the Intermediate Appellate
Court has personnel receiving pleadings even on Saturdays.
The motion to expunge was denied on June 17, 1986 (p. 27, ibid.) and after a motion for reconsideration
was similarly brushed aside on July 22, 1986 (p. 30, ibid .), the petition herein docketed as G.R. No. 75605
was initiated. Subsequently, or more specifically on October 21, 1986, the appellate court denied Fidelity's
motion for reconsideration and account thereof. Fidelity filed on March 31, 1986, the petition for review on
certiorari now docketed as G.R. No. 76399. The two petitions, inter-related as they are, were consolidated
(p. 54, Rollo of G.R. No. 76399) and thereafter given due course.
Before we can even begin to look into the merits of the main case which is the petition for review on
certiorari, we must first determine whether the decision of the appellate court may still be reviewed, or
whether the same is beyond further judicial scrutiny. Stated otherwise, before anything else, inquiry must
be made into the issue of whether Fidelity could have legally asked for an extension of the 15-day
reglementary period for appealing or for moving for reconsideration.
As early as 1944, this Court through Justice Ozaeta already pronounced the doctrine that the pendency of a
motion for extension of time to perfect an appeal does not suspend the running of the period sought to be
extended (Garcia vs. Buenaventura 74 Phil. 611 [1944]). To the same effect were the rulings in Gibbs vs.
CFI of Manila (80 Phil. 160 [1948]) Bello vs. Fernando (4 SCRA 138 [1962]), and Joe vs. King (20 SCRA
1120 [1967]).
The above cases notwithstanding and because the Rules of Court do not expressly prohibit the filing of a
motion for extension of time to file a motion for reconsideration in regard to a final order or judgment,
magistrates, including those in the Court of Appeals, held sharply divided opinions on whether the period
for appealing which also includes the period for moving to reconsider may be extended. The matter was
not definitely settled until this Court issued its Resolution in Habaluyas Enterprises, Inc. vs. Japson (142
SCRA [1986]), declaring that beginning one month from the promulgation of the resolution on May 30,
1986
. . . the rule shall be strictly enforced that no motion for extension of time to file a motion for new trial or
reconsideration shall be filed . . . (at p. 212.)
In the instant case, the motion for extension was filed and granted before June 30, 1986, although, of
course, Verendia's motion to expunge the motion for reconsideration was not finally disposed until July
22, 1986, or after the dictum in Habaluyas had taken effect. Seemingly, therefore, the filing of the motion
for extension came before its formal proscription under Habaluyas, for which reason we now turn our
attention to G.R. No. 76399.
Reduced to bare essentials, the issues Fidelity raises therein are: (a) whether or not the contract of lease
submitted by Verendia to support his claim on the fire insurance policy constitutes a false declaration
which would forfeit his benefits under Section 13 of the policy and (b) whether or not, in submitting the
subrogation receipt in evidence, Fidelity had in effect agreed to settle Verendia's claim in the amount
stated in said receipt. 1
Verging on the factual, the issue of the veracity or falsity of the lease contract could have been better
resolved by the appellate court for, in a petition for review on certiorari under Rule 45, the jurisdiction of
this Court is limited to the review of errors of law. The appellate court's findings of fact are, therefore,
conclusive upon this Court except in the following cases: (1) when the conclusion is a finding grounded
entirely on speculation, surmises, or conjectures; (2) when the inference made is manifestly absurd,
mistaken, or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when
the judgment is premised on a misapprehension of facts; (5) when the findings of fact are conflicting; and

(6) when the Court of Appeals in making its findings went beyond the issues of the case and the same are
contrary to the admissions of both appellant and appellee (Ronquillo v. Court of Appeals, 195 SCRA 433
[1991]). In view of the conflicting findings of the trial court and the appellate court on important issues in
these consolidated cases and it appearing that the appellate court judgment is based on a misapprehension
of facts, this Court shall review the evidence on record.
The contract of lease upon which Verendia relies to support his claim for insurance benefits, was entered
into between him and one Robert Garcia, married to Helen Cawinian, on June 25, 1980 (Exh. "1"), a couple
of days after the effectivity of the insurance policy. When the rented residential building was razed to the
ground on December 28, 1980, it appears that Robert Garcia (or Roberto Garcia) was still within the
premises. However, according to the investigation report prepared by Pat. Eleuterio M. Buenviaje of the
Antipolo police, the building appeared to have "no occupant" and that Mr. Roberto Garcia was "renting on
the otherside (sic) portion of said compound"(Exh. "E"). These pieces of evidence belie Verendia's
uncorroborated testimony that Marcelo Garcia, whom he considered as the real lessee, was occupying the
building when it was burned (TSN, July 27, 1982, p.10).
Robert Garcia disappeared after the fire. It was only on October 9, 1981 that an adjuster was able to locate
him. Robert Garcia then executed an affidavit before the National Intelligence and Security Authority
(NISA) to the effect that he was not the lessee of Verendia's house and that his signature on the contract of
lease was a complete forgery. Thus, on the strength of these facts, the adjuster submitted a report dated
December 4, 1981 recommending the denial of Verendia's claim (Exh. "2").
Ironically, during the trial, Verendia admitted that it was not Robert Garcia who signed the lease contract.
According to Verendia, it was signed by Marcelo Garcia, cousin of Robert, who had been paying the rentals
all the while. Verendia, however, failed to explain why Marcelo had to sign his cousin's name when he in
fact was paying for the rent and why he (Verendia) himself, the lessor, allowed such a ruse. Fidelity's
conclusions on these proven facts appear, therefore, to have sufficient bases; Verendia concocted the lease
contract to deflect responsibility for the fire towards an alleged "lessee", inflated the value of the property
by the alleged monthly rental of P6,500 when in fact, the Provincial Assessor of Rizal had assessed the
property's fair market value to be only P40,300.00, insured the same property with two other insurance
companies for a total coverage of around P900,000, and created a dead-end for the adjuster by the
disappearance of Robert Garcia.
Basically a contract of indemnity, an insurance contract is the law between the parties (Pacific Banking
Corporation vs. Court of Appeals 168 SCRA 1 [1988]). Its terms and conditions constitute the measure of
the insurer's liability and compliance therewith is a condition precedent to the insured's right to recovery
from the insurer (Oriental Assurance Corporation vs. Court of Appeals, 200 SCRA 459 [1991], citing Perla
Compania de Seguros, Inc. vs. Court of Appeals, 185 SCRA 741 [1991]). As it is also a contract of adhesion,
an insurance contract should be liberally construed in favor of the insured and strictly against the insurer
company which usually prepares it (Western Guaranty Corporation vs. Court of Appeals, 187 SCRA 652
[1980]).
Considering, however, the foregoing discussion pointing to the fact that Verendia used a false lease
contract to support his claim under Fire Insurance Policy No. F-18876, the terms of the policy should be
strictly construed against the insured. Verendia failed to live by the terms of the policy, specifically Section
13 thereof which is expressed in terms that are clear and unambiguous, that all benefits under the policy
shall be forfeited "If the claim be in any respect fraudulent, or if any false declaration be made or used in
support thereof, or if any fraudulent means or devises are used by the Insured or anyone acting in his
behalf to obtain any benefit under the policy". Verendia, having presented a false declaration to support his
claim for benefits in the form of a fraudulent lease contract, he forfeited all benefits therein by virtue of
Section 13 of the policy in the absence of proof that Fidelity waived such provision (Pacific Banking
Corporation vs. Court of Appeals, supra). Worse yet, by presenting a false lease contract, Verendia,
reprehensibly disregarded the principle that insurance contracts are uberrimae fidae and demand the
most abundant good faith (Velasco vs. Apostol, 173 SCRA 228 [1989]).
There is also no reason to conclude that by submitting the subrogation receipt as evidence in court,
Fidelity bound itself to a "mutual agreement" to settle Verendia's claims in consideration of the amount of
P142,685.77. While the said receipt appears to have been a filled-up form of Fidelity, no representative of
Fidelity had signed it. It is even incomplete as the blank spaces for a witness and his address are not filled
up. More significantly, the same receipt states that Verendia had received the aforesaid amount. However,
that Verendia had not received the amount stated therein, is proven by the fact that Verendia himself filed
the complaint for the full amount of P385,000.00 stated in the policy. It might be that there had been

efforts to settle Verendia's claims, but surely, the subrogation receipt by itself does not prove that a
settlement had been arrived at and enforced. Thus, to interpret Fidelity's presentation of the subrogation
receipt in evidence as indicative of its accession to its "terms" is not only wanting in rational basis but
would be substituting the will of the Court for that of the parties.
WHEREFORE, the petition in G.R. No. 75605 is DISMISSED. The petition in G.R. No. 76399 is
GRANTED and the decision of the then Intermediate Appellate Court under review is REVERSED and SET
ASIDE and that of the trial court is hereby REINSTATED and UPHELD.
SO ORDERED.