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Characteristics of Insurance Contract On December 24, 1981, payment of the premium for Pinca was received by DomingoAdora, agent of MICO.

Aleatory Contract On January 15, 1982, Adora remitted this payment to MICO,together with other payments. 5

G.R. No. L-67835 October 12, 1987 On January 18, 1982, Pinca's property was completely burned. 6

MALAYAN INSURANCE CO., INC. (MICO), petitioner, On February 5, 1982, Pinca's payment was returned by MICO to Adora on the ground that her policy had been
vs. cancelled earlier. But Adora refused to accept it. 7
GREGORIA CRUZ ARNALDO, in her capacity as the INSURANCE COMMISSIONER, and
CORONACION PINCA, respondents. In due time, Pinca made the requisite demands for payment, which MICO rejected. She then went to the Insurance
Commission. It is because she was ultimately sustained by the public respondent that the petitioner has come to
us for relief.

CRUZ, J.: From the procedural viewpoint alone, the petition must be rejected. It is stillborn.

When a person's house is razed, the fire usually burns down the efforts of a lifetime and forecloses hope for the The records show that notice of the decision of the public respondent dated April 5, 1982, was received by MICO
suddenly somber future. The vanished abode becomes a charred and painful memory. Where once stood a home, on April 10, 1982. 8 On April 25, 1982, it filed a motion for reconsideration, which was denied on June 4,
there is now, in the sighing wisps of smoke, only a gray desolation. The dying embers leave ashes in the heart. 1982. 9 Notice of this denial was received by MICO on June 13, 1982, as evidenced by Annex "1" duly
authenticated by the Insurance Commission. 10 The instant petition was filed with this Court on July 2, 1982. 11
For peace of mind and as a hedge against possible loss, many people now secure fire insurance. This is an aleatory
contract. By such insurance, the insured in effect wagers that his house will be burned, with the insurer assuring The position of the petition is that the petition is governed by Section 416 0f the Insurance Code giving it thirty
him against the loss, for a fee. If the house does burn, the insured, while losing his house, wins the wagers. The days wthin which to appeal by certiorari to this Court. Alternatively, it also invokes Rule 45 of the Rules of Court.
prize is the recompense to be given by the insurer to make good the loss the insured has sustained. For their part, the public and private respondents insist that the applicable law is B.P. 129, which they say governs
not only courts of justice but also quasi-judicial bodies like the Insurance Commission. The period for appeal
It would be a pity then if, having lost his house, the insured were also to lose the payment he expects to recover under this law is also fifteen days, as under Rule 45.
for such loss. Sometimes it is his fault that he cannot collect, as where there is a defect imputable to him in the
insurance contract. Conversely, the reason may be an unjust refusal of the insurer to acknowledge a just obligation, The pivotal date is the date the notice of the denial of the motion for reconsideration was received by MICO.
as has happened many times.
MICO avers this was June 18, 1982, and offers in evidence its Annex "B," 12 which is a copy of the Order of
In the instant case the private respondent has been sustained by the Insurance Commission in her claim for June 14, 1982, with a signed rubber-stamped notation on the upper left-hand corner that it was received on June
compensation for her burned property. The petitioner is now before us to dispute the decision, 1 on the ground 18, 1982, by its legal department. It does not indicate from whom. At the bottom, significantly, there is another
that there was no valid insurance contract at the time of the loss. signature under which are the ciphers "6-13-82," for which no explanation has been given.

The chronology of the relevant antecedent facts is as follows: Against this document, the private respodent points in her Annex "1," 13 the authenticated copy of the same Order
with a rubber-stamped notation at the bottom thereof indicating that it was received for the Malayan Insurance
On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private respondent, Coronacion Pinca, Co., Inc. by J. Gotladera on "6-13-82." The signature may or may not habe been written by the same person who
Fire Insurance Policy No. F-001-17212 on her property for the amount of P14,000.00 effective July 22, 1981, signed at the bottom of the petitioner's Annex "B."
until July 22, 1982. 2
Between the two dates, the court chooses to believe June 13, 1982, not only because the numbers "6-13-82" appear
On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent the on both annexes but also because it is the date authenticated by the administrative division of the Insurance
corresponding notice to Pinca. 3 Commission. Annex "B" is at worst self-serving; at best, it might only indicate that it was received on June 18,
1982, by the legal department of MICO, after it had been received earlier by some other of its personnel on June The payment was made on December 24, 1981, and the fire occured on January 18, 1982. One wonders: suppose
13, 1982. Whatever the reason for the delay in transmitting it to the legal department need not detain us here. the payment had been made and accepted in, say, August 1981, would the commencement date of the policy have
been changed to the date of the payment, or would the payment have retroacted to July 22, 1981? If MICO
Under Section 416 of the Insurance Code, the period for appeal is thirty days from notice of the decision of the accepted the payment in December 1981 and the insured property had not been burned, would that policy not
Insurance Commission. The petitioner filed its motion for reconsideration on April 25, 1981, or fifteen days such have expired just the same on July 22, 1982, pursuant to its original terms, and not on December 24, 1982?
notice, and the reglementary period began to run again after June 13, 1981, date of its receipt of notice of the
denial of the said motion for reconsideration. As the herein petition was filed on July 2, 1981, or nineteen days It would seem from MICO's own theory, that the policy would have become effective only upon payment, if
later, there is no question that it is tardy by four days. accepted and so would have been valid only from December 24, 1981m but only up to July 22, 1981, according
to the original terms. In others words, the policy would have run for only eight months although the premium
Counted from June 13, the fifteen-day period prescribed under Rule 45, assuming it is applicable, would end on paid was for one whole year.
June 28, 1982, or also four days from July 2, when the petition was filed.
It is not disputed that the preium was actually paid by Pinca to Adora on December 24, 1981, who received it on
If it was filed under B.P. 129, then, considering that the motion for reconsideration was filed on the fifteenth day behalf of MICO, to which it was remitted on January 15, 1982. What is questioned is the validity of Pinca's
after MICO received notice of the decision, only one more day would have remained for it to appeal, to wit, June payment and of Adora's authority to receive it.
14, 1982. That would make the petition eighteen days late by July 2.
MICO's acknowledgment of Adora as its agent defeats its contention that he was not authorized to receive the
Indeed, even if the applicable law were still R.A. 5434, governing appeals from administrative bodies, the petition premium payment on its behalf. It is clearly provided in Section 306 of the Insurance Code that:
would still be tardy. The law provides for a fixed period of ten days from notice of the denial of a seasonable
motion for reconsideration within which to appeal from the decision. Accordingly, that ten-day period, counted SEC. 306. xxx xxx xxx
from June 13, 1982, would have ended on June 23, 1982, making the petition filed on July 2, 1982, nine days late.
Any insurance company which delivers to an insurance agant or insurance broker a policy or contract of insurance
Whichever law is applicable, therefore, the petition can and should be dismissed for late filing. shall be demmed to have authorized such agent or broker to receive on its behalf payment of any premium which
is due on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon.
On the merits, it must also fail. MICO's arguments that there was no payment of premium and that the policy had
been cancelled before the occurence of the loss are not acceptable. Its contention that the claim was allowed And it is a well-known principle under the law of agency that:
without proof of loss is also untenable.
Payment to an agent having authority to receive or collect payment is equivalent to payment to the principal
The petitioner relies heavily on Section 77 of the Insurance Code providing that: himself; such payment is complete when the money delivered is into the agent's hands and is a discharge of the
indebtedness owing to the principal. 15
SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is exposed to the peril insured
against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance There is the petitioner's argument, however, that Adora was not authorized to accept the premium payment
company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or because six months had elapsed since the issuance by the policy itself. It is argued that this prohibition was binding
an industrial life policy whenever the grace period provision applies. upon Pinca, who made the payment to Adora at her own riskl as she was bound to first check his authority to
receive it. 16
The above provision is not applicable because payment of the premium was in fact eventually made in this case.
Notably, the premium invoice issued to Pinca at the time of the delivery of the policy on June 7, 1981 was stamped MICO is taking an inconsistent stand. While contending that acceptance of the premium payment was prohibited
"Payment Received" of the amoung of P930.60 on "12-24-81" by Domingo Adora. 14 This is important because by the policy, it at the same time insists that the policy never came into force because the premium had not been
it suggests an understanding between MICO and the insured that such payment could be made later, as agent paid. One surely, cannot have his cake and eat it too.
Adora had assured Pinca. In any event, it is not denied that this payment was actually made by Pinca to Adora,
who remitted the same to MICO. We do not share MICO's view that there was no existing insurance at the time of the loss sustained by Pinca
because her policy never became effective for non-payment of premium. Payment was in fact made, rendering
the policy operative as of June 22, 1981, and removing it from the provisions of Article 77, Thereafter, the policy
could be cancelled on any of the supervening grounds enumerated in Article 64 (except "nonpayment of MICO's claims it cancelled the policy in question on October 15, 1981, for non-payment of premium. To support
premium") provided the cancellation was made in accordance therewith and with Article 65. this assertion, it presented one of its employees, who testified that "the original of the endorsement and credit
memo" presumably meaning the alleged cancellation "were sent the assured by mail through our mailing
Section 64 reads as follows: section" 21However, there is no proof that the notice, assuming it complied with the other requisites mentioned
above, was actually mailed to and received by Pinca. All MICO's offers to show that the cancellation was
SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof communicated to the insured is its employee's testimony that the said cancellation was sent "by mail through our
to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the mailing section." without more. The petitioner then says that its "stand is enervated (sic) by the legal presumption
effective date of the policy, of one or more of the following: of regularity and due performance of duty." 22 (not realizing perhaps that "enervated" means "debilitated" not
"strengthened").
(a) non-payment of premium;
On the other hand, there is the flat denial of Pinca, who says she never received the claimed cancellation and who,
(b) conviction of a crime arising out of acts increasing the hazard insured against; of course, did not have to prove such denial Considering the strict language of Section 64 that no insurance policy
shall be cancelled except upon prior notice, it behooved MICO's to make sure that the cancellation was actually
sent to and received by the insured. The presumption cited is unavailing against the positive duty enjoined by
(c) discovery of fraud or material misrepresentation;
Section 64 upon MICO and the flat denial made by the private respondent that she had received notice of the
claimed cancellation.
(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;
It stands to reason that if Pinca had really received the said notice, she would not have made payment on the
(e) physical changes in the property insured which result in the property becoming uninsurable;or original policy on December 24, 1981. Instead, she would have asked for a new insurance, effective on that date
and until one year later, and so taken advantage of the extended period. The Court finds that if she did pay on that
(f) a determination by the Commissioner that the continuation of the policy would violate or would place the date, it was because she honestly believed that the policy issued on June 7, 1981, was still in effect and she was
insurer in violation of this Code. willing to make her payment retroact to July 22, 1981, its stipulated commencement date. After all, agent Adora
was very accomodating and had earlier told her "to call him up any time" she was ready with her payment on the
As for the method of cancellation, Section 65 provides as follows: policy earlier issued. She was obviously only reciprocating in kind when she paid her premium for the period
beginning July 22, 1981, and not December 24, 1981.
SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered
to the named insured at the address shown in the policy, and shall state (a) which of the grounds set forth in MICO's suggests that Pinca knew the policy had already been cancelled and that when she paid the premium on
section sixty-four is relied upon and (b) that, upon written request of the named insured, the insurer will furnish December 24, 1981, her purpose was "to renew it." As this could not be done by the agent alone under the terms
the facts on which the cancellation is based. of the original policy, the renewal thereof did not legally bind MICO. which had not ratified it. To support this
argument, MICO's cites the following exchange:
A valid cancellation must, therefore, require concurrence of the following conditions:
Q: Now, Madam Witness, on December 25th you made the alleged payment. Now, my question is that, did it not
(1) There must be prior notice of cancellation to the insured; 17 come to your mind that after the lapse of six (6) months, your policy was cancelled?

(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the grounds A: I have thought of that but the agent told me to call him up at anytime.
mentioned;18
Q: So if you thought that your policy was already intended to revive cancelled policy?
(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the address shown in
the policy; 19 A: Misleading, Your Honor.

(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon written request Hearing Officer: The testimony of witness is that, she thought of that.
of the insured, the insurer will furnish the facts on which the cancellation is based. 20
Q: I will revise the question. Now, Mrs. Witness, you stated that you thought the policy was cancelled. Now, WHEREFORE, the petition is DENIED. The decision of the Insurance Commission dated April 10, 1981, and its
when you made the payment of December 24, 1981, your intention was to revive the policy if it was already Order of June 4, 1981, are AFFIRMED in full, with costs against the petitioner. This decision is immediately
cancelled? executory.

A: Yes, to renew it. 23 SO ORDERED.

A close study of the above transcript will show that Pinca meant to renew the policy if it had really been already G.R. No. 119655 May 24, 1996
cancelled but not if it was stffl effective. It was all conditional. As it has not been shown that there was a valid
cancellation of the policy, there was consequently no need to renew it but to pay the premium thereon. Payment SPS. ANTONIO A. TIBAY and VIOLETA R. TIBAY and OFELIA M. RORALDO, VICTORINA M.
was thus legally made on the original transaction and it could be, and was, validly received on behalf of the RORALDO, VIRGILIO M. RORALDO, MYRNA M. RORALDO and ROSABELLA M.
insurer by its agent Adora. Adora. incidentally, had not been informed of the cancellation either and saw no reason RORALDO, petitioners,
not to accept the said payment. vs.
COURT OF APPEALS and FORTUNE LIFE AND GENERAL INSURANCE CO., INC., respondents.
The last point raised by the petitioner should not pose much difficulty. The valuation fixed in fire insurance policy
is conclusive in case of total loss in the absence of fraud, 24 which is not shown here. Loss and its amount may be
determined on the basis of such proof as may be offered by the insured, which need not be of such persuasiveness
as is required in judicial proceedings. 25 If, as in this case, the insured files notice and preliminary proof of loss BELLOSILLO, J.:p
and the insurer fails to specify to the former all the defects thereof and without unnecessary delay, all objections
to notice and proof of loss are deemed waived under Section 90 of the Insurance Code. May a fire insurance policy be valid, binding and enforceable upon mere partial payment of premium?

The certification 26 issued by the Integrated National Police, Lao-ang, Samar, as to the extent of Pinca's loss On 22 January 1987 private respondent Fortune Life and General Insurance Co., Inc. (FORTUNE) issued Fire
should be considered sufficient. Notably,MICO submitted no evidence to the contrary nor did it even question Insurance Policy No. 136171 in favor of Violeta R. Tibay and/or Nicolas Roraldo on their two-storey residential
the extent of the loss in its answer before the Insurance Commission. It is also worth observing that Pinca's building located at 5855 Zobel Street, Makati City, together with all their personal effects therein. The insurance
property was not the only building bumed in the fire that razed the commercial district of Lao-ang, Samar, on was for P600,000.00 covering the period from 23 January 1987 to 23 January 1988. On 23 January 1987, of the
January 18, 1982. 27 total premium of P2,983.50, petitioner Violeta Tibay only paid P600.00 thus leaving a considerable balance
unpaid.
There is nothing in the Insurance Code that makes the participation of an adjuster in the assessment of the loss
imperative or indespensable, as MICO suggests. Section 325, which it cites, simply speaks of the licensing and On 8 March 1987 the insured building was completely destroyed by fire. Two days later or on 10 March 1987
duties of adjusters. 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),
We see in this cases an obvious design to evade or at least delay the discharge of a just obligation through efforts which immediately wrote Violeta requesting her to furnish it with the necessary documents for the investigation
bordering on bad faith if not plain duplicity, We note that the motion for reconsideration was filed on the fifteenth and processing of her claim. Petitioner forthwith complied. On 28 March 1987 she signed a non-waiver agreement
day from notice of the decision of the Insurance Commission and that there was a feeble attempt to show that the with GASI to the effect that any action taken by the companies or their representatives in investigating the claim
notice of denial of the said motion was not received on June 13, 1982, to further hinder the proceedings and justify made by the claimant for his loss which occurred at 5855 Zobel Roxas, Makati on March 8, 1987, or in the
the filing of the petition with this Court fourteen days after June 18, 1982. We also look askance at the alleged investigating or ascertainment of the amount of actual cash value and loss, shall not waive or invalidate any
cancellation, of which the insured and MICO's agent himself had no knowledge, and the curious fact that although condition of the policies of such companies held by said claimant, nor the rights of either or any of the parties to
Pinca's payment was remitted to MICO's by its agent on January 15, 1982, MICO sought to return it to Adora this agreement, and such action shall not be, or be claimed to be, an admission of liability on the part of said
only on February 5, 1982, after it presumably had learned of the occurrence of the loss insured against on January companies or any of them. 1
18, 1982. These circumstances make the motives of the petitioner highly suspect, to say the least, and cast serious
doubts upon its candor and bona fides. In a letter dated 11 June 1987 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 Violets and the other petitioners sued FORTUNE for damages in the amount of P600,000.00
representing the total coverage of the fire insurance policy plus 12% interest per annum, P100,000.00 moral any authorized official or representative/agent of the Company in such manner as provided herein. (emphasis
damages, and attorney's fees equivalent to 20% of the total claim. supplied). 6

On 19 July 1990 the trial court ruled for petitioners and adjudged FORTUNE liable for the total value of the Clearly the Policy provides for payment of premium in full. Accordingly, where the premium has only been
insured building and personal properties in the amount of P600,000.00 plus interest at the legal rate of 6% per partially paid and the balance paid only after the peril insured against has occurred, the insurance contract did not
annum from the filing of the complaint until full payment, and attorney's fees equivalent to 20% of the total take effect and the insured cannot collect at all on the policy. This is fully supported by Sec. 77 of the Insurance
amount claimed plus costs of suit. 2 Code which provides

On 24 March 1995 the Court of Appeals reversed the court a quo by declaring FORTUNE not to be liable to Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril
plaintiff-appellees therein but ordering defendant-appellant to return to the former the premium of P2,983.50 plus insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an
12% interest from 10 March 1987 until full payment. 3 insurance company is valid and binding unless and until the premium thereof has been paid, except in the case
of a life or an industrial life policy whenever the grace period provision applies (emphasis supplied).
Hence this petition for review with petitioners contending mainly that contrary to the conclusion of the appellate
court, FORTUNE remains liable under the subject fire insurance policy in spite of the failure of petitioners to pay Apparently the crux of the controversy lies in the phrase "unless and until the premium thereof has been paid."
their premium in full. This leads us to the manner of payment envisioned by the law to make the insurance policy operative and binding.
For whatever judicial construction may be accorded the disputed phrase must ultimately yield to the clear mandate
We find no merit in the petition; hence, we affirm the Court of Appeals. of the law. The principle that where the law does not distinguish the court should neither distinguish assumes that
the legislature made no qualification on the use of a general word or expression. In Escosura v. San Miguel
Insurance is a contract whereby one undertakes for a consideration to indemnify another against loss, damage or Brewery, Inc., 7 the Court through Mr. Justice Jesus G. Barrera, interpreting the phrase "with pay" used in
liability arising from an unknown or contingent event. 4 The consideration is the premium, which must be paid at connection with leaves of absence with pay granted to employees, ruled
the time and in the way and manner specified in the policy, and if not so paid, the policy will lapse and be forfeited
by its own terms. 5 . . . the legislative practice seems to be that when the intention is to distinguish between full and partial payment,
the modifying term is used . . .
The pertinent provisions in the Policy on premium read
Citing C.A. No. 647 governing maternity leaves of married women in government, R. A. No. 679 regulating
THIS POLICY OF INSURANCE WITNISSETH THAT only after payment to the Company in accordance with employment of women and children, R.A. No. 843 granting vacation and sick leaves to judges of municipal courts
Policy Condition No. 2 of the total premiums by the insured as stipulated above for the period aforementioned for and justices of the peace, and finally, Art. 1695 of the New Civil Code providing that every househelp shall be
insuring against Loss or Damage by Fire or Lightning as herein appears, the Property herein described . . . allowed four (4) days vacation each month, which laws simply stated "with pay," the Court concluded that it was
undisputed that in all these laws the phrase "with pay" used without any qualifying adjective meant that the
2. This policy including any renewal thereof and/or any endorsement thereon is not in force until the premium employee was entitled to full compensation during his leave of absence.
has been fully paid to and duly receipted by the Company in the manner provided herein.
Petitioners maintain otherwise. Insisting that FORTUNE is liable on the policy despite partial payment of the
Any supplementary agreement seeking to amend this condition prepared by agent, broker or Company official, premium due and the express stipulation thereof to the contrary, petitioners rely heavily on the 1967 case
shall be deemed invalid and of no effect. of Philippine Phoenix and Insurance Co., Inc. v. Woodworks, Inc. 8 where the Court through Mr. Justice Arsenio
P. Dizon sustained the ruling of the trial court that partial payment of the premium made the policy effective
during the whole period of the policy. In that case, the insurance company commenced action against the insured
xxx xxx xxx
for the unpaid balance on a fire insurance policy. In its defense the insured claimed that nonpayment of premium
produced the cancellation of the insurance contract. Ruling otherwise the Court held
Except only in those specific cases where corresponding rules and regulations which are or may hereafter be in
force provide for the payment of the stipulated premiums in periodic installments at fixed percentage, it is hereby
It is clear . . . that on April 1, 1960, Fire Insurance Policy No. 9652 was issued by appellee and delivered to
declared, agreed and warranted that this policy shall be deemed effective, valid and binding upon the Company
appellant, and that on September 22 of the same year, the latter paid to the former the sum of P3,000.00 on account
only when the premiums therefor have actually been paid in full and duly acknowledged in a receipt signed by
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 petitioners, there is no waiver express or implied in the case at bench. Precisely, the insurer and the insured
payment of the agreed premium was concerned. Thereafter the obligation of the insurer to pay the insured the expressly stipulated that (t)his policy including any renewal thereof and/or any indorsement thereon is not in
amount, for which the policy was issued in case the conditions therefor had been complied with, arose and became force until the premium has been fully paid to and duly receipted by the Company . . . and that this policy shall
binding upon it, while the obligation of the insured to pay the remainder of the total amount of the premium due be deemed effective, valid and binding upon the Company only when the premiums therefor have actually been
became demandable. paid in full and duly acknowledged.

The 1967 Phoenix case is not persuasive; neither is it decisive of the instant dispute. For one, the factual scenario Conformably with the aforesaid stipulations explicitly worded and taken in conjunction with Sec. 77 of the
is different. In Phoenix it was the insurance company that sued for the balance of the premium, i.e., it recognized Insurance Code the payment of partial premium by the assured in this particular instance should not be considered
and admitted the existence of an insurance contract with the insured. In the case before us, there is, quite unlike the payment required by the law and the stipulation of the parties. Rather, it must be taken in the concept of a
in Phoenix, a specific stipulation that (t)his policy . . . is not in force until the premium has been fully paid and deposit to be held in trust by the insurer until such time that the full amount has been tendered and duly receipted
duly receipted by the Company . . . Resultantly, it is correct to say that in Phoenix a contract was perfected upon for. In other words, as expressly agreed upon in the contract, full payment must be made before the risk occurs
partial payment of the premium since the parties had not otherwise stipulated that prepayment of the premium in for the policy to be considered effective and in force.
full was a condition precedent to the existence of a contract.
Thus, no vinculum juris whereby the insurer bound itself to indemnify the assured according to law ever resulted
In Phoenix, by accepting the initial payment of P3,000.00 and then later demanding the remainder of the premium from the fractional payment of premium. The insurance contract itself expressly provided that the policy would
without any other precondition to its enforceability as in the instant case, the insurer in effect had shown its be effective only when the premium was paid in full. It would have been altogether different were it not so
intention to continue with the existing contract of insurance, as in fact it was enforcing its right to collect premium, stipulated. Ergo, petitioners had absolute freedom of choice whether or not to be insured by FORTUNE under the
or exact specific performance from the insured. This is not so here. By express agreement of the parties, terms of its policy and they freely opted to adhere thereto.
no vinculum juris or bond of law was to be established until full payment was effected prior to the occurrence of
the risk insured against. 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
In Makati Tuscany Condominium Corp. v. Court of Appeals 9 the parties mutually agreed that the premiums could policy. 10 Courts have no other function but to enforce the same. The rule that contracts of insurance will be
be paid in installments, which in fact they did for three (3) years, hence, this Court refused to invalidate the construed in favor of the insured and most strongly against the insurer should not be permitted to have the effect
insurance policy. In giving effect to the policy, the Court quoted with approval the Court of Appeals of making a plain agreement ambiguous and then construe it in favor of the insured. 11 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 obligation to pay premiums when due is ordinarily an indivisible obligation to pay the entire premium. Here, the manner prescribed in the policy as intended by the parties the policy is ineffective. Partial payment even when
the parties . . . agreed to make the premiums payable in installments, and there is no pretense that the parties never accepted as a partial payment will not keep the policy alive even for such fractional part of the year as the part
envisioned to make the insurance contract binding between them. It was renewed for two succeeding years, the payment bears to the whole
second and third policies being a renewal/replacement for the previous one. And the insured never informed the payment. 12
insurer that it was terminating the policy because the terms were unacceptable.
Applying further the rules of statutory construction, the position maintained by petitioners becomes even more
While it may be true that under Section 77 of the Insurance Code, the parties may not agree to make the insurance untenable. The case of South Sea Surety and Insurance Company, Inc. v. Court Of Appeals, 13 speaks only of two
contract valid and binding without payment of premiums, there is nothing in said section which suggests that the (2) statutory exceptions to the requirement of payment of the entire premium as a prerequisite to the validity of
parties may not agree to allow payment of the premiums in installment, or to consider the contract as valid and the insurance contract. These exceptions are: (a) in case the insurance coverage relates to life or industrial life
binding upon (health) insurance when a grace period applies, and (b) when the insurer makes a written acknowledgment of the
payment of the first premium. Otherwise we would allow the insurer to renege on its liability under the contract, receipt of premium, this acknowledgment being declared by law to be then conclusive evidence of the premium
had a loss incurred (sic) before completion of payment of the entire premium, despite its voluntary acceptance of payment. 14
partial payments, a result eschewed by basic considerations of fairness and equity . . .
A maxim of recognized practicality is the rule that the expressed exception or exemption excludes
These two (2) cases, Phoenix and Tuscany, adequately demonstrate the waiver, either express or implied, of others. Exceptio firmat regulim in casibus non exceptis. The express mention of exceptions operates to exclude
prepayment in full by the insurer: impliedly, by suing for the balance of the premium as in Phoenix, and expressly, other exceptions; conversely, those which are not within the enumerated exceptions are deemed included in the
by agreeing to make premiums payable in installments as in Tuscany. But contrary to the stance taken by general rule. Thus, under Sec. 77, as well as Sec. 78, until the premium is paid, and the law has not expressly
excepted partial payments, there is no valid and binding contract. Hence, in the absence of clear waiver of The terms of the insurance policy constitute the measure of the insurer's liability. In the absence of statutory
prepayment in full by the insurer, the insured cannot collect on the proceeds of the policy. prohibition to the contrary, insurance companies have the same rights as individuals to limit their liability and to
impose whatever conditions they deem best upon their obligations not inconsistent with public policy. 17 The
In the desire to safeguard the interest of the assured, it must not be ignored that the contract of insurance is validity of these limitations is by law passed upon by the Insurance Commissioner who is empowered to approve
primarily a risk distributing device, a mechanism by which all members of a group exposed to a particular risk all forms of policies, certificates or contracts of insurance which insurers intend to issue or deliver. That the policy
contribute premiums to an insurer. From these contributory funds are paid whatever losses occur due to exposure contract in the case at bench was approved and allowed issuance simply reaffirms the validity of such policy,
to the peril insured against. Each party therefore takes a risk: the insurer, that of being compelled upon the particularly the provision in question.
happening of the contingency to pay the entire sum agreed upon, and the insured, that of parting with the amount
required as premium, without receiving anything therefor in case the contingency does not happen. To ensure WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals dated 24 March 1995
payment for these losses, the law mandates all insurance companies to maintain a legal reserve fund in favor of is AFFIRMED.
those claiming under their policies. 15 It should be understood that the integrity of this fund cannot be secured and
maintained if by judicial fiat partial offerings of premiums were to be construed as a legal nexus between the SO ORDERED.
applicant and the insurer despite an express agreement to the contrary. For what could prevent the insurance
applicant from deliberately or wilfully holding back full premium payment and wait for the risk insured against
to transpire and then conveniently pass on the balance of the premium to be deducted from the proceeds of the
insurance? Worse, what if the insured makes an initial payment of only 10%, or even 1%, of the required premium,
G.R. No. L-24833 September 23, 1968
and when the risk occurs simply points to the proceeds from where to source the balance? Can an insurance
company then exist and survive upon the payment of 1%, or even 10%, of the premium stipulated in the policy
FIELDMEN'S INSURANCE CO., INC., petitioner,
on the basis that, after all, the insurer can deduct from the proceeds of the insurance should the risk insured against
vs.
occur?
MERCEDES VARGAS VDA. DE SONGCO, ET AL. and COURT OF APPEALS, respondents.

Interpreting the contract of insurance stringently against the insurer but liberally in favor of the insured despite
Jose S. Suarez for petitioner.
clearly defined obligations of the parties to the policy can be carried out to extremes that there is the danger that
Eligio G. Lagman for respondents.
we may, so to speak, "kill the goose that lays the golden egg." We are well aware of insurance companies falling
into the despicable habit of collecting premiums promptly yet resorting to all kinds of excuses to deny or delay
payment of just insurance claims. But, in this case, the law is manifestly on the side of the insurer. For as long as
the current Insurance Code remains unchanged and partial payment of premiums is not mentioned at all as among
the exceptions provided in Sees. 77 and 78, no policy of insurance can ever pretend to be efficacious or effective FERNANDO, J.:
until premium has been fully paid.
An insurance firm, petitioner Fieldmen's Insurance Co., Inc., was not allowed to escape liability under a common
And so it must be. For it cannot be disputed that premium is the elixir vitae of the insurance business because by carrier insurance policy on the pretext that what was insured, not once but twice, was a private vehicle and not a
law the insurer must maintain a legal reserve fund to meet its contingent obligations to the public, hence, the common carrier, the policy being issued upon the insistence of its agent who discounted fears of the insured that
imperative need for its prompt payment and full satisfaction. 16 It must be emphasized here that all actuarial his privately owned vehicle might not fall within its terms, the insured moreover being "a man of scant education,"
calculations and various tabulations of probabilities of losses under the risks insured against are based on the finishing only the first grade. So it was held in a decision of the lower court thereafter affirmed by respondent
sound hypothesis of prompt payment of premiums. Upon this bedrock insurance firms are enabled to offer the Court of Appeals. Petitioner in seeking the review of the above decision of respondent Court of Appeals cannot
assurance of security to the public at favorable rates. But once payment of premium is left to the whim and caprice be so sanguine as to entertain the belief that a different outcome could be expected. To be more explicit, we
of the insured, as when the courts tolerate the payment of a mere P600.00 as partial undertaking out of the sustain the Court of Appeals.
stipulated total premium of P2,983.50 and the balance to be paid even after the risk insured against has occurred,
as petitioners have done in this case, on the principle that the strength of the vinculum juris is not measured by The facts as found by respondent Court of Appeals, binding upon us, follow: "This is a peculiar case. Federico
any specific amount of premium payment, we will surely wreak havoc on the business and set to naught what has Songco of Floridablanca, Pampanga, a man of scant education being only a first grader ..., owned a private jeepney
taken actuarians centuries to devise to arrive at a fair and equitable distribution of risks and benefits between the with Plate No. 41-289 for the year 1960. On September 15, 1960, as such private vehicle owner, he was induced
insurer and the insured. by Fieldmen's Insurance Company Pampanga agent Benjamin Sambat to apply for a Common Carrier's Liability
Insurance Policy covering his motor vehicle ... Upon paying an annual premium of P16.50, defendant Fieldmen's
Insurance Company, Inc. issued on September 19, 1960, Common Carriers Accident Insurance Policy No. 45- twice its agent, no doubt without any objection in its part, exerted the utmost pressure on the insured, a man of
HO- 4254 ... the duration of which will be for one (1) year, effective September 15, 1960 to September 15, 1961. scant education, to enter into such a contract.
On September 22, 1961, the defendant company, upon payment of the corresponding premium, renewed the
policy by extending the coverage from October 15, 1961 to October 15, 1962. This time Federico Songco's private Nor is there any merit to the second alleged error of respondent Court that no legal liability was incurred under
jeepney carried Plate No. J-68136-Pampanga-1961. ... On October 29, 1961, during the effectivity of the renewed the policy by petitioner. Why liability under the terms of the policy 5 was inescapable was set forth in the decision
policy, the insured vehicle while being driven by Rodolfo Songco, a duly licensed driver and son of Federico (the of respondent Court of Appeals. Thus: "Since some of the conditions contained in the policy issued by the
vehicle owner) collided with a car in the municipality of Calumpit, province of Bulacan, as a result of which defendant-appellant were impossible to comply with under the existing conditions at the time and 'inconsistent
mishap Federico Songco (father) and Rodolfo Songco (son) died, Carlos Songco (another son), the latter's wife, with the known facts,' the insurer 'is estopped from asserting breach of such conditions.' From this jurisprudence,
Angelita Songco, and a family friend by the name of Jose Manuel sustained physical injuries of varying degree." 1 we find no valid reason to deviate and consequently hold that the decision appealed from should be affirmed. The
injured parties, to wit, Carlos Songco, Angelito Songco and Jose Manuel, for whose hospital and medical expenses
It was further shown according to the decision of respondent Court of Appeals: "Amor Songco, 42-year-old son the defendant company was being made liable, were passengers of the jeepney at the time of the occurrence, and
of deceased Federico Songco, testifying as witness, declared that when insurance agent Benjamin Sambat was Rodolfo Songco, for whose burial expenses the defendant company was also being made liable was the driver of
inducing his father to insure his vehicle, he butted in saying: 'That cannot be, Mr. Sambat, because our vehicle is the vehicle in question. Except for the fact, that they were not fare paying passengers, their status as beneficiaries
an "owner" private vehicle and not for passengers,' to which agent Sambat replied: 'whether our vehicle was an under the policy is recognized therein." 6
"owner" type or for passengers it could be insured because their company is not owned by the Government and
the Government has nothing to do with their company. So they could do what they please whenever they believe Even if it be assumed that there was an ambiguity, an excerpt from the Qua Chee Gan decision would reveal
a vehicle is insurable' ... In spite of the fact that the present case was filed and tried in the CFI of Pampanga, the anew the weakness of petitioner's contention. Thus: "Moreover, taking into account the well known rule that
defendant company did not even care to rebut Amor Songco's testimony by calling on the witness-stand agent ambiguities or obscurities must be strictly interpreted against the party that caused them, the 'memo of warranty'
Benjamin Sambat, its Pampanga Field Representative." 2 invoked by appellant bars the latter from questioning the existence of the appliances called for in the insured
premises, since its initial expression, 'the undernoted appliances for the extinction of fire being kept on the
The plaintiffs in the lower court, likewise respondents here, were the surviving widow and children of the premises insured hereby, ... it is hereby warranted ...,' admits of interpretation as an admission of the existence of
deceased Federico Songco as well as the injured passenger Jose Manuel. On the above facts they prevailed, as such appliances which appellant cannot now contradict, should the parol evidence rule apply." 7
had been mentioned, in the lower court and in the respondent Court of Appeals.1awphl.nt
To the same effect is the following citation from the same leading case: "This rigid application of the rule on
The basis for the favorable judgment is the doctrine announced in Qua Chee Gan v. Law Union and Rock ambiguities has become necessary in view of current business practices. The courts cannot ignore that nowadays
Insurance Co., Ltd., 3 with Justice J. B. L. Reyes speaking for the Court. It is now beyond question that where monopolies, cartels and concentration of capital, endowed with overwhelming economic power, manage to
inequitable conduct is shown by an insurance firm, it is "estopped from enforcing forfeitures in its favor, in order impose upon parties dealing with them cunningly prepared 'agreements' that the weaker party may not change
to forestall fraud or imposition on the insured." 4 one whit, his participation in the 'agreement' being reduced to the alternative to 'take it or leave it' labelled since
Raymond Saleilles 'contracts by adherence' (contrats d'adhesion), in contrast to those entered into by parties
As much, if not much more so than the Qua Chee Gan decision, this is a case where the doctrine of estoppel bargaining on an equal footing, such contracts (of which policies of insurance and international bills of lading are
undeniably calls for application. After petitioner Fieldmen's Insurance Co., Inc. had led the insured Federico prime examples) obviously call for greater strictness and vigilance on the part of courts of justice with a view to
Songco to believe that he could qualify under the common carrier liability insurance policy, and to enter into protecting the weaker party from abuses and imposition, and prevent their becoming traps for the unwary (New
contract of insurance paying the premiums due, it could not, thereafter, in any litigation arising out of such Civil Code. Article 24; Sent. of Supreme Court of Spain, 13 Dec. 1934, 27 February 1942)." 8
representation, be permitted to change its stand to the detriment of the heirs of the insured. As estoppel is primarily
based on the doctrine of good faith and the avoidance of harm that will befall the innocent party due to its injurious The last error assigned which would find fault with the decision of respondent Court of Appeals insofar as it
reliance, the failure to apply it in this case would result in a gross travesty of justice. affirmed the lower court award for exemplary damages as well as attorney's fees is, on its face, of no persuasive
force at all.
That is all that needs be said insofar as the first alleged error of respondent Court of Appeals is concerned,
petitioner being adamant in its far-from-reasonable plea that estoppel could not be invoked by the heirs of the The conclusion that inescapably emerges from the above is the correctness of the decision of respondent Court of
insured as a bar to the alleged breach of warranty and condition in the policy. lt would now rely on the fact that Appeals sought to be reviewed. For, to borrow once again from the language of the Qua Chee Gan opinion: "The
the insured owned a private vehicle, not a common carrier, something which it knew all along when not once but contract of insurance is one of perfect good faith (uberima fides) not for the insured alone,but equally so for the
insurer; in fact, it is more so for the latter, since its dominant bargaining position carries with it stricter Steamship Mutual violated Sections 1864 and 1875 of the Insurance Code, while Pioneer violated Sections
responsibility."9 299,63007 and 3018 in relation to Sections 302 and 303, thereof.

This is merely to stress that while the morality of the business world is not the morality of institutions of rectitude The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure
like the pulpit and the academe, it cannot descend so low as to be another name for guile or deception. Moreover, a license because it was not engaged in the insurance business. It explained that Steamship Mutual was a
should it happen thus, no court of justice should allow itself to lend its approval and support.1awphl.nt Protection and Indemnity Club (P & I Club). Likewise, Pioneer need not obtain another license as insurance agent
and/or a broker for Steamship Mutual because Steamship Mutual was not engaged in the insurance business.
We have no choice but to recognize the monetary responsibility of petitioner Fieldmen's Insurance Co., Inc. It did Moreover, Pioneer was already licensed, hence, a separate license solely as agent/broker of Steamship Mutual
not succeed in its persistent effort to avoid complying with its obligation in the lower court and the Court of was already superfluous.
Appeals. Much less should it find any receptivity from us for its unwarranted and unjustified plea to escape from
its liability. The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the appellate court
distinguished between P & I Clubs vis--vis conventional insurance. The appellate court also held that Pioneer
WHEREFORE, the decision of respondent Court of Appeals of July 20, 1965, is affirmed in its entirety. Costs merely acted as a collection agent of Steamship Mutual.
against petitioner Fieldmen's Insurance Co., Inc.
In this petition, petitioner assigns the following errors allegedly committed by the appellate court,
G.R. No. 154514. July 28, 2005
FIRST ASSIGNMENT OF ERROR
WHITE GOLD MARINE SERVICES, INC., Petitioners,
vs. THE COURT A QUO ERRED WHEN IT RULED THAT RESPONDENT STEAMSHIP IS NOT DOING
PIONEER INSURANCE AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL BUSINESS IN THE PHILIPPINES ON THE GROUND THAT IT COURSED . . . ITS TRANSACTIONS
UNDERWRITING ASSOCIATION (BERMUDA) LTD., Respondents. THROUGH ITS AGENT AND/OR BROKER HENCE AS AN INSURER IT NEED NOT SECURE A LICENSE
TO ENGAGE IN INSURANCE BUSINESS IN THE PHILIPPINES.
DECISION
SECOND ASSIGNMENT OF ERROR
QUISUMBING, J.:
THE COURT A QUO ERRED WHEN IT RULED THAT THE RECORD IS BEREFT OF ANY EVIDENCE
1
This petition for review assails the Decision dated July 30, 2002 of the Court of Appeals in CA-G.R. SP No. THAT RESPONDENT STEAMSHIP IS ENGAGED IN INSURANCE BUSINESS.
60144, affirming the Decision2 dated May 3, 2000 of the Insurance Commission in I.C. Adm. Case No. RD-277.
Both decisions held that there was no violation of the Insurance Code and the respondents do not need license as THIRD ASSIGNMENT OF ERROR
insurer and insurance agent/broker.
THE COURT A QUO ERRED WHEN IT RULED, THAT RESPONDENT PIONEER NEED NOT SECURE A
The facts are undisputed. LICENSE WHEN CONDUCTING ITS AFFAIR AS AN AGENT/BROKER OF RESPONDENT STEAMSHIP.

White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity coverage for its vessels from FOURTH ASSIGNMENT OF ERROR
The Steamship Mutual Underwriting Association (Bermuda) Limited (Steamship Mutual) through Pioneer
Insurance and Surety Corporation (Pioneer). Subsequently, White Gold was issued a Certificate of Entry and THE COURT A QUO ERRED IN NOT REVOKING THE LICENSE OF RESPONDENT PIONEER AND [IN
Acceptance.3Pioneer also issued receipts evidencing payments for the coverage. When White Gold failed to fully NOT REMOVING] THE OFFICERS AND DIRECTORS OF RESPONDENT PIONEER. 9
pay its accounts, Steamship Mutual refused to renew the coverage.
Simply, the basic issues before us are (1) Is Steamship Mutual, a P & I Club, engaged in the insurance business
Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latters in the Philippines? (2) Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?
unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that
The parties admit that Steamship Mutual is a P & I Club. Steamship Mutual admits it does not have a license to Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a consideration to indemnify
do business in the Philippines although Pioneer is its resident agent. This relationship is reflected in the another against loss, damage or liability arising from an unknown or contingent event. 14
certifications issued by the Insurance Commission.
In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as the losses
Petitioner insists that Steamship Mutual as a P & I Club is engaged in the insurance business. To buttress its incident to a marine adventure.15 Section 9916 of the Insurance Code enumerates the coverage of marine insurance.
assertion, it cites the definition of a P & I Club in Hyopsung Maritime Co., Ltd. v. Court of Appeals10 as "an
association composed of shipowners in general who band together for the specific purpose of providing insurance Relatedly, a mutual insurance company is a cooperative enterprise where the members are both the insurer and
cover on a mutual basis against liabilities incidental to shipowning that the members incur in favor of third insured. In it, the members all contribute, by a system of premiums or assessments, to the creation of a fund from
parties." It stresses that as a P & I Club, Steamship Mutuals primary purpose is to solicit and provide protection which all losses and liabilities are paid, and where the profits are divided among themselves, in proportion to their
and indemnity coverage and for this purpose, it has engaged the services of Pioneer to act as its agent. interest.17 Additionally, mutual insurance associations, or clubs, provide three types of coverage, namely,
protection and indemnity, war risks, and defense costs. 18
Respondents contend that although Steamship Mutual is a P & I Club, it is not engaged in the insurance business
in the Philippines. It is merely an association of vessel owners who have come together to provide mutual A P & I Club is "a form of insurance against third party liability, where the third party is anyone other than the
protection against liabilities incidental to shipowning.11 Respondents aver Hyopsung is inapplicable in this case P & I Club and the members." 19 By definition then, Steamship Mutual as a P & I Club is a mutual insurance
because the issue in Hyopsung was the jurisdiction of the court over Hyopsung. association engaged in the marine insurance business.

Is Steamship Mutual engaged in the insurance business? The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of
authority mandated by Section 18720 of the Insurance Code. It maintains a resident agent in the Philippines to
Section 2(2) of the Insurance Code enumerates what constitutes "doing an insurance business" or "transacting an solicit insurance and to collect payments in its behalf. We note that Steamship Mutual even renewed its P & I
insurance business". These are: Club cover until it was cancelled due to non-payment of the calls. Thus, to continue doing business here,
Steamship Mutual or through its agent Pioneer, must secure a license from the Insurance Commission.
(a) making or proposing to make, as insurer, any insurance contract;
Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer or
(b) making, or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental insurance company is allowed to engage in the insurance business without a license or a certificate of authority
to any other legitimate business or activity of the surety; from the Insurance Commission.21

(c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing Does Pioneer, as agent/broker of Steamship Mutual, need a special license?
of an insurance business within the meaning of this Code;
Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration22 issued by the
(d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed Insurance Commission. It has been licensed to do or transact insurance business by virtue of the certificate of
to evade the provisions of this Code. authority23 issued by the same agency. However, a Certification from the Commission states that Pioneer does
not have a separate license to be an agent/broker of Steamship Mutual.24
...
Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance
The same provision also provides, the fact that no profit is derived from the making of insurance contracts, agent for Steamship Mutual. Section 299 of the Insurance Code clearly states:
agreements or transactions, or that no separate or direct consideration is received therefor, shall not preclude the
existence of an insurance business.12 SEC. 299 . . .

The test to determine if a contract is an insurance contract or not, depends on the nature of the promise, the act No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of
required to be performed, and the exact nature of the agreement in the light of the occurrence, contingency, or applications for insurance, or receive for services in obtaining insurance, any commission or other compensation
circumstances under which the performance becomes requisite. It is not by what it is called. 13 from any insurance company doing business in the Philippines or any agent thereof, without first procuring a
license so to act from the Commissioner, which must be renewed annually on the first day of January, or within Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is the one
six months thereafter. . . entitled to the insurance proceeds, not the common-law wife, Carponia T. Ebrado.

Finally, White Gold seeks revocation of Pioneers certificate of authority and removal of its directors and officers. In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life Assurance Co., Ltd.
Regrettably, we are not the forum for these issues. commenced an action for Interpleader before the Court of First Instance of Rizal on April 29, 1970.

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated July 30, 2002 of the Court of After the issues have been joined, a pre-trial conference was held on July 8, 1972, after which, a pre-trial order
Appeals affirming the Decision dated May 3, 2000 of the Insurance Commission is hereby REVERSED AND was entered reading as follows: +.wph!1
SET ASIDE. The Steamship Mutual Underwriting Association (Bermuda) Ltd., and Pioneer Insurance and Surety
Corporation are ORDERED to obtain licenses and to secure proper authorizations to do business as insurer and During the pre-trial conference, the parties manifested to the court. that there is no possibility of amicable
insurance agent, respectively. The petitioners prayer for the revocation of Pioneers Certificate of Authority and settlement. Hence, the Court proceeded to have the parties submit their evidence for the purpose of the pre-trial
removal of its directors and officers, is DENIED. Costs against respondents. 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
SO ORDERED. 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
.R. No. L-44059 October 28, 1977 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
THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-appellee, Carponia Ebrado; 3) that during the lifetime of Buenaventura Ebrado, he was living with his common-wife,
vs. Carponia Ebrado, with whom she had 2 children although he was not legally separated from his legal wife; 4)
CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO, defendants-appellants. 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
MARTIN, J.:
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,
This is a novel question in insurance law: Can a common-law wife named as beneficiary in the life insurance same was never changed up to the time of his death and the wife did not have any opportunity to write the company
policy of a legally married man claim the proceeds thereof in case of death of the latter? 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.
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. Upon motion of the parties, they are given ten (10) days to file their simultaneous memoranda from the receipt of
Ebrado designated T. Ebrado as the revocable beneficiary in his policy. He to her as his wife. this order.

On October 21, 1969, Buenaventura C. Ebrado died as a result of an t when he was hit by a failing branch of a SO ORDERED.
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
On September 25, 1972, the trial court rendered judgment declaring among others, Carponia T. Ebrado
for accidental death also in the amount of P5,882.00 and the refund of P18.00 paid for the premium due November,
disqualified from becoming beneficiary of the insured Buenaventura Cristor Ebrado and directing the payment of
1969, minus the unpaid premiums and interest thereon due for January and February, 1969, in the sum of P36.27.
the insurance proceeds to the estate of the deceased insured. The trial court held: +.wph!1

Carponia T. Ebrado filed with the insurer a claim for the proceeds of the Policy as the designated beneficiary
It is patent from the last paragraph of Art. 739 of the Civil Code that a criminal conviction for adultery or
therein, although she admits that she and the insured Buenaventura C. Ebrado were merely living as husband and
concubinage is not essential in order to establish the disqualification mentioned therein. Neither is it also
wife without the benefit of marriage.
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 In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or
same proceeding (the action brought to declare the nullity of the donation). donee; and the guilt of the donee may be proved by preponderance of evidence in the same action.

It is, however, essential that such adultery or concubinage exists at the time defendant Carponia T. Ebrado was 2. In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is concerned.
made beneficiary in the policy in question for the disqualification and incapacity to exist and that it is only Both are founded upon the same consideration: liberality. A beneficiary is like a donee, because from the
necessary that such fact be established by preponderance of evidence in the trial. Since it is agreed in their premiums of the policy which the insured pays out of liberality, the beneficiary will receive the proceeds or profits
stipulation above-quoted that the deceased insured and defendant Carponia T. Ebrado were living together as of said insurance. As a consequence, the proscription in Article 739 of the new Civil Code should equally operate
husband and wife without being legally married and that the marriage of the insured with the other defendant in life insurance contracts. The mandate of Article 2012 cannot be laid aside: any person who cannot receive a
Pascuala Vda. de Ebrado was valid and still existing at the time the insurance in question was purchased there is donation cannot be named as beneficiary in the life insurance policy of the person who cannot make the
no question that defendant Carponia T. Ebrado is disqualified from becoming the beneficiary of the policy in donation. 5 Under American law, a policy of life insurance is considered as a testament and in construing it, the
question and as such she is not entitled to the proceeds of the insurance upon the death of the insured. 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
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. 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
We affirm the judgment of the lower court. 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
1. It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new Insurance Code (PD No. consideration As above pointed out, a beneficiary in a fife insurance policy is no different from a donee. Both are
612, as amended) does not contain any specific provision grossly resolutory of the prime question at hand. Section recipients of pure beneficence. So long as manage remains the threshold of family laws, reason and morality
50 of the Insurance Act which provides that "(t)he insurance shag be applied exclusively to the proper interest of dictate that the impediments imposed upon married couple should likewise be imposed upon extra-marital
the person in whose name it is made" 1 cannot be validly seized upon to hold that the mm includes the beneficiary. relationship. If legitimate relationship is circumscribed by these legal disabilities, with more reason should an
The word "interest" highly suggests that the provision refers only to the "insured" and not to the beneficiary, since illicit relationship be restricted by these disabilities. Thus, in Matabuena v. Cervantes, 7 this Court, through
a contract of insurance is personal in character. 2 Otherwise, the prohibitory laws against illicit relationships Justice Fernando, said: +.wph!1
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. 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
Article 2011 of the New Civil Code states: "The contract of insurance is governed by special laws. Matters not Appeals), 'to prohibit donations in favor of the other consort and his descendants because of and undue and
expressly provided for in such special laws shall be regulated by this Code." When not otherwise specifically improper pressure and influence upon the donor, a prejudice deeply rooted in our ancient law;" por-que no se
provided for by the Insurance Law, the contract of life insurance is governed by the general rules of the civil law enganen desponjandose el uno al otro por amor que han de consuno' (According to) the Partidas (Part IV, Tit. XI,
regulating contracts. 3 And under Article 2012 of the same Code, "any person who is forbidden from receiving LAW IV), reiterating the rationale 'No Mutuato amore invicem spoliarentur' the Pandects (Bk, 24, Titl. 1, De
any donation under Article 739 cannot be named beneficiary of a fife insurance policy by the person who cannot donat, inter virum et uxorem); then there is very reason to apply the same prohibitive policy to persons living
make a donation to him. 4 Common-law spouses are, definitely, barred from receiving donations from each other. together as husband and wife without the benefit of nuptials. For it is not to be doubted that assent to such irregular
Article 739 of the new Civil Code provides: +.wph!1 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
The following donations shall be void: 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
1. Those made between persons who were guilty of adultery or concubinage at the time of donation; morality alike demand that the disabilities attached to marriage should likewise attach to concubinage.

Those made between persons found guilty of the same criminal offense, in consideration thereof; 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
3. Those made to a public officer or his wife, descendants or ascendants by reason of his office.
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.