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EN BANC.
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relying thereon. A party may not go back on his own acts and
representations to the prejudice of the other party who relied
upon them.
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All five (5) policies reflect on their face the effectivity term:
from 4:00 P.M. of 22 May 1991 to 4:00 P.M. of 22 May 1992. On
June 13, 1992, plaintiffs properties located at 24102432 and
24422450 Taft Avenue, Pasay City were razed by fire. On July
13, 1992, plaintiff tendered, and defendant accepted, five (5)
Equitable Bank Managers Checks in the total amount of
P225,753.45 as renewal premium payments for which Official
Receipt Direct Premium No. 62926 (Exhibit Q, Record, p. 191)
was is
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Rollo, 38.
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under O.R. No. 46487 (Exhs. V and V1). And so were as other
policies: Fire Insurance Policy No. 34657 covering risks from May
22, 1990 to May 22, 1991 was issued on May 7, 1990 but premium
therefor was paid only on July 19, 1990 under O.R. No. 46583
(Exhs. W and W1). Fire Insurance Policy No. 34661 covering
risks from May 22, 1990 to May 22, 1991 was issued on May 3,
1990 but premium was paid only on July 19, 1990 under O.R. No.
46582 (Exhs. X and X1). Fire Insurance Policy No. 34688 for
insurance coverage from May 22, 1990 to May 22, 1991 was
issued on May 7, 1990 but premium was paid only on July 19,
1990 under O.R. No. 46585 (Exhs. Y and Y1). Fire Insurance
Policy No. 29126 to cover insurance risks from May 22, 1989 to
May 22, 1990 was issued on May 22, 1989 but premium therefor
was collected only on July 25, 1990[sic] under O.R. No. 40799
(Exhs. AA and AA1). Fire Insurance Policy No. HO/F26408
covering risks from January 12, 1989 to January 12, 1990 was
issued to Intratrade Phils. (Masaganas sister company) dated
December 10, 1988 but premium therefor was paid only on
February 15, 1989 under O.R. No. 38075 (Exhs. BB and BB1).
Fire Insurance Policy No. 29128 was issued on May 22, 1989 but
premium was paid only on July 25, 1989 under O.R. No. 40800 for
insurance coverage from May 22, 1989 to May 22, 1990 (Exhs.
CC and CC1). Fire Insurance Policy No. 29127 was issued on
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May 22, 1989 but premium was paid only on July 17, 1989 under
O.R. No. 40682 for insurance risk coverage from May 22, 1989 to
May 22, 1990 (Exhs. DD and DD1). Fire Insurance Policy No.
HO/F29362 was issued on June 15, 1989 but premium was paid
only on February 13, 1990 under O.R. No. 39233 for insurance
coverage from May 22, 1989 to May 22, 1990 (Exhs. EE and
EE1). Fire Insurance Policy No. 26303 was issued on November
22, 1988 but premium therefor was collected only on March 15,
1989 under O.R. No. 38573 for insurance risks coverage from
December 15, 1988 to December 15, 1989 (Exhs. FF and FF1).
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official receipt for, the premium payment on July 1[3], 1992 which
indicates defendants willingness to assume the risk despite only
a 67.5% reinsurance cover[age]; and (3) Defendant insurer
appointed Esteban Adjusters and Valuers to investigate plaintiffs
claim as shown by the letter dated July 17, 1992 (Exhibit 11,
Record, p. 254).
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257 SCRA 126 [1996] (erroneously stated in the decision as 275 SCRA
126).
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315
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316
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317
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Inc.
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SEPARATE OPINION
VITUG, J.:
An essential characteristic of an insurance is its being
synallagmatic, a highly reciprocal contract where the rights
and obligations of the parties correlate and mutually
correspond. The insurer assumes the risk of loss which an
insured might suffer in consideration of premium payments
under a riskdistributing device. Such assumption of risk is
a component of a general scheme to distribute actual losses
among a group of persons, bearing similar risks, who make
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Hartford Acci. & Indem. Co. vs. N.O. Leson Mfg. Co., 291 US 352, 78
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43 Am Jur 2d; Merchants Mut. Auto Liability Ins. Co. vs. Smart, 267
Secs. 7778, Insurance Code; Acme vs. Court of Appeals, 134 SCRA
155 (1985); South Sea Surety and Insurance Company, Inc. vs. Court of
Appeals, 244 SCRA 744 (1995).
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2d. 67). This rule was changed when the present provision
eliminated the portion concerning credit agreement, and added
the phrase notwithstanding any agreement to the contrary which
precludes the parties from stipulating that the policy is valid even
if premiums are not paid. Hence, under the present law, the policy
is not valid and binding unless and until the premium is paid
(Arce vs. Capital Insurance & Surety Co., Inc., 117 SCRA 63). If
the insurer wants to favor the insured by making the policy
binding notwithstanding the nonpayment of premium, a mere
credit agreement would not be sufficient. The remedy would be for
the insurer to acknowledge in the policy that premiums were paid
although they were not, in which case the policy becomes binding
because such acknowledgment is a conclusive evidence of
payment of premium (Section 78). Thus, the Supreme Court took
note that under the present law, Section 77 of the Insurance Code
of 1978 has deleted the clause unless there is a clear agreement
to grant the insured credit extension of the premium due (Velasco
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vs. Apostol, 173 SCRA 228).
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6
Ed.
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C.J.S. 674.
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C.E. Carnes & Co. vs. Employers Liability Assur. Corp., Limited of
14 (1998).
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463 (1992).
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DISSENTING OPINION
PARDO, J.:
The majority resolved to grant respondents motion for
reconsideration of the Courts decision promulgated on
June 15, 1999. By this somersault, petitioner must now pay
respondents claim for insurance proceeds amounting to
P18,645,000.00, exclusive of interests, plus 25% of the
amount due as attorneys fees, P25,000.00 as litigation
expenses, and costs of suit, covering its Pasay City property
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324
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325
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Yes, maam.
Q:
A:
Q:
A:
Yes.
Q:
A:
Yes.
Q:
________________
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326
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Ibid.
American Home Assurance Co. v. Chua, 309 SCRA 250, 259 [1999].
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327
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328
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329
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11
12
Ibid., p. 138.
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330
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full.
There is no dispute that like in any other contract, the
parties to a contract of insurance enjoy the freedom to
stipulate on the terms and conditions that will govern their
agreement so long as they are not contrary to law, morals,
good customs, public order or public policy. However, the
agreement containing such terms and conditions must be
clear and definite.
In the case at bar, there was no clear and definite
agreement between petitioner and respondent on the grant
of a credit extension; neither was there partial payment of
premiums for petitioner to invoke the exceptional doctrine
in Tuscany.
Hence, the circumstances in the above cited case are
totally different from the case at bar, and consequently, not
applicable herein.
Insurance is an aleatory contract whereby one
undertakes for a consideration to indemnity another
against loss, damage14or liability arising from an unknown
or contingent event. The consideration is the premium,
which must be paid at the time and in the manner specified
in the policy, and if not so paid,
the policy will lapse and be
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forfeited by its own terms.
With regard to the contention that the absence of notice
of nonrenewal of the policy resulted to the automatic
renewal of the insurance policy, we find the contention
untenable. As above discussed, the law provides that only
upon payment of the insurance premium will the insurance
policy bind the insurer to the peril insured against and
hold it liable under the policy in case of loss.
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made.
Verily, it is elemental law that the payment of premium
is a mandatory requisite to make the policy of insurance
effective. If the premium is not paid in the manner
prescribed in the policy as 16intended by the parties, the
policy is void and ineffective.
Basically a contract of indemnity, an insurance contract
is the law between the parties. Its terms and conditions
constitute the measure of the insurers liability and
compliance therewith is a condition precedent
to the
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insureds right to recovery from the insurer.
IN VIEW WHEREOF, I vote to DENY the respondents
motion for reconsideration, for lack of merit.
Judgment reconsidered and set aside, that of the Court of
Appeals affirmed in toto.
Notes.Under Sections 77 and 78 of the Insurance
Code, until the premium is paid, and the law has not
expressly excepted partial payments, there is no valid and
binding contract. (Tibay vs. Court of Appeals, 257 SCRA
126 [1996])
Section 78 of the Insurance Code establishes a legal
fiction of payment and should be interpreted as an
exception to Section 77. (American Home Assurance
Company vs. Chua, 309 SCRA 250 [1999])
o0o
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