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Hence this petition for review with petitioners contending mainly that contrary to the

G.R. No. 119655 May 24, 1996


conclusion of the appellate court, FORTUNE remains liable under the subject fire insurance
policy in spite of the failure of petitioners to pay their premium in full.
SPS. ANTONIO A. TIBAY and VIOLETA R. TIBAY and OFELIA M. RORALDO,
VICTORINA M. RORALDO, VIRGILIO M. RORALDO, MYRNA M. RORALDO and
We find no merit in the petition; hence, we affirm the Court of Appeals.
ROSABELLA M. RORALDO, petitioners,
vs.
COURT OF APPEALS and FORTUNE LIFE AND GENERAL INSURANCE CO., INC., Insurance is a contract whereby one undertakes for a consideration to indemnify another
respondents. BELLOSILLO, J.:p against loss, damage or liability arising from an unknown or contingent event. 4 The
consideration is the premium, which must be paid at 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
May a fire insurance policy be valid, binding and enforceable upon mere partial payment of terms. 5
premium?
The pertinent provisions in the Policy on premium read —
On 22 January 1987 private respondent Fortune Life and General Insurance Co., Inc.
(FORTUNE) issued Fire Insurance Policy No. 136171 in favor of Violeta R. Tibay and/or
THIS POLICY OF INSURANCE WITNISSETH THAT only after payment
Nicolas Roraldo on their two-storey residential building located at 5855 Zobel Street, Makati
to the Company in accordance with Policy Condition No. 2 of the total
City, together with all their personal effects therein. The insurance was for P600,000.00
premiums by the insured as stipulated above for the period
covering the period from 23 January 1987 to 23 January 1988. On 23 January 1987, of the
aforementioned for insuring against Loss or Damage by Fire or Lightning
total premium of P2,983.50, petitioner Violeta Tibay only paid P600.00 thus leaving a
as herein appears, the Property herein described . . .
considerable balance unpaid.

2. This policy including any renewal thereof and/or any endorsement


On 8 March 1987 the insured building was completely destroyed by fire. Two days later or
thereon is not in force until the premium has been fully paid to and duly
on 10 March 1987 Violeta Tibay paid the balance of the premium. On the same day, she
receipted by the Company in the manner provided herein.
filed with FORTUNE a claim on the fire insurance policy. Her claim was accordingly referred
to its adjuster, Goodwill Adjustment Services, Inc. (GASI), which immediately wrote Violeta
requesting her to furnish it with the necessary documents for the investigation and Any supplementary agreement seeking to amend this condition prepared
processing of her claim. Petitioner forthwith complied. On 28 March 1987 she signed a non- by agent, broker or Company official, shall be deemed invalid and of no
waiver agreement with GASI to the effect that any action taken by the companies or their effect.
representatives in investigating the claim made by the claimant for his loss which occurred
at 5855 Zobel Roxas, Makati on March 8, 1987, or in the investigating or ascertainment of xxx xxx xxx
the amount of actual cash value and loss, shall not waive or invalidate any condition of the
policies of such companies held by said claimant, nor the rights of either or any of the
parties to this agreement, and such action shall not be, or be claimed to be, an admission of Except only in those specific cases where corresponding rules and
liability on the part of said companies or any of them. 1 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 declared, agreed and warranted that this policy
In a letter dated 11 June 1987 FORTUNE denied the claim of Violeta for violation of Policy shall be deemed effective, valid and binding upon the Company only
Condition No. 2 and of Sec. 77 of the Insurance Code. Efforts to settle the case before the when the premiums therefor have actually been paid in full and duly
Insurance Commission proved futile. On 3 March 1988 Violets and the other petitioners sued acknowledged in a receipt signed by any authorized official or
FORTUNE for damages in the amount of P600,000.00 representing the total coverage of the representative/agent of the Company in such manner as provided herein.
fire insurance policy plus 12% interest per annum, P100,000.00 moral damages, and (emphasis supplied). 6
attorney's fees equivalent to 20% of the total claim.

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

Sec. 77. An insurer is entitled to payment of the premium as


On 24 March 1995 the Court of Appeals reversed the court a quo by declaring FORTUNE soon as the thing insured is exposed to the peril insured
not to be liable to plaintiff-appellees therein but ordering defendant-appellant to return to the against. Notwithstanding any agreement to the contrary, no
former the premium of P2,983.50 plus 12% interest from 10 March 1987 until full payment. 3 policy or contract of insurance issued by an 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 the balance of the premium, i.e., it recognized and admitted the existence of an insurance
supplied). contract with the insured. In the case before us, there is, quite unlike in Phoenix, a specific
stipulation that (t)his policy . . . is not in force until the premium has been fully paid and duly
Apparently the crux of the controversy lies in the phrase "unless and until the premium receipted by the Company . . . Resultantly, it is correct to say that in Phoenix a contract was
thereof has been paid." This leads us to the manner of payment envisioned by the law to perfected upon partial payment of the premium since the parties had not otherwise
make the insurance policy operative and binding. For whatever judicial construction may be stipulated that prepayment of the premium in full was a condition precedent to the existence
accorded the disputed phrase must ultimately yield to the clear mandate of the law. The of a contract.
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 In Phoenix, by accepting the initial payment of P3,000.00 and then later demanding the
expression. In Escosura v. San Miguel Brewery, Inc., 7 the Court through Mr. Justice Jesus remainder of the premium without any other precondition to its enforceability as in the instant
G. Barrera, interpreting the phrase "with pay" used in connection with leaves of absence with case, the insurer in effect had shown its intention to continue with the existing contract of
pay granted to employees, ruled — insurance, as in fact it was enforcing its right to collect premium, or exact specific
performance from the insured. This is not so here. By express agreement of the parties, no
. . . the legislative practice seems to be that when the intention vinculum juris or bond of law was to be established until full payment was effected prior to
is to distinguish between full and partial payment, the modifying the occurrence of the risk insured against.
term is used . . .
In Makati Tuscany Condominium Corp. v. Court of Appeals 9 the parties mutually agreed that
Citing C.A. No. 647 governing maternity leaves of married women in the premiums could be paid in installments, which in fact they did for three (3) years, hence,
government, R. A. No. 679 regulating employment of women and this Court refused to invalidate the insurance policy. In giving effect to the policy, the Court
children, R.A. No. 843 granting vacation and sick leaves to judges of quoted with approval the Court of Appeals —
municipal courts and justices of the peace, and finally, Art. 1695 of the
New Civil Code providing that every househelp shall be allowed four (4) The obligation to pay premiums when due is ordinarily an indivisible
days vacation each month, which laws simply stated "with pay," the Court obligation to pay the entire premium. Here, the parties . . . agreed to make
concluded that it was undisputed that in all these laws the phrase "with the premiums payable in installments, and there is no pretense that the
pay" used without any qualifying adjective meant that the employee was parties never envisioned to make the insurance contract binding between
entitled to full compensation during his leave of absence. them. It was renewed for two succeeding years, the second and third
policies being a renewal/replacement for the previous one. And the insured
Petitioners maintain otherwise. Insisting that FORTUNE is liable on the policy despite partial never informed the insurer that it was terminating the policy because the
payment of the premium due and the express stipulation thereof to the contrary, petitioners terms were unacceptable.
rely heavily on the 1967 case 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 While it may be true that under Section 77 of the Insurance Code, the
court that partial payment of the premium made the policy effective during the whole period parties may not agree to make the insurance contract valid and binding
of the policy. In that case, the insurance company commenced action against the insured for without payment of premiums, there is nothing in said section which
the unpaid balance on a fire insurance policy. In its defense the insured claimed that suggests that the parties may not agree to allow payment of the premiums
nonpayment of premium produced the cancellation of the insurance contract. Ruling in installment, or to consider the contract as valid and binding upon
otherwise the Court held — payment of the first premium. Otherwise we would allow the insurer to
renege on its liability under the contract, had a loss incurred (sic) before
It is clear . . . that on April 1, 1960, Fire Insurance Policy No. completion of payment of the entire premium, despite its voluntary
9652 was issued by appellee and delivered to appellant, and acceptance of partial payments, a result eschewed by basic considerations
that on September 22 of the same year, the latter paid to the of fairness and equity . . .
former the sum of P3,000.00 on account of the total premium of
P6,051.95 due thereon. There is, consequently, no doubt at all These two (2) cases, Phoenix and Tuscany, adequately demonstrate the waiver, either
that, as between the insurer and the insured, there was not only express or implied, of prepayment in full by the insurer: impliedly, by suing for the balance of
a perfected contract of insurance but a partially performed one the premium as in Phoenix, and expressly, by agreeing to make premiums payable in
as far as the payment of the agreed premium was concerned. installments as in Tuscany. But contrary to the stance taken by petitioners, there is no
Thereafter the obligation of the insurer to pay the insured the waiver express or implied in the case at bench. Precisely, the insurer and the insured
amount, for which the policy was issued in case the conditions expressly stipulated that (t)his policy including any renewal thereof and/or any indorsement
therefor had been complied with, arose and became binding thereon is not in force until the premium has been fully paid to and duly receipted by the
upon it, while the obligation of the insured to pay the remainder Company . . . and that this policy shall be deemed effective, valid and binding upon the
of the total amount of the premium due became demandable. Company only when the premiums therefor have actually been 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 is different. In Phoenix it was the insurance company that sued for
Conformably with the aforesaid stipulations explicitly worded and taken in conjunction with maintained if by judicial fiat partial offerings of premiums were to be construed as a legal
Sec. 77 of the Insurance Code the payment of partial premium by the assured in this nexus between the applicant and the insurer despite an express agreement to the contrary.
particular instance should not be considered the payment required by the law and the For what could prevent the insurance applicant from deliberately or wilfully holding back full
stipulation of the parties. Rather, it must be taken in the concept of a deposit to be held in premium payment and wait for the risk insured against to transpire and then conveniently
trust by the insurer until such time that the full amount has been tendered and duly receipted pass on the balance of the premium to be deducted from the proceeds of the insurance?
for. In other words, as expressly agreed upon in the contract, full payment must be made Worse, what if the insured makes an initial payment of only 10%, or even 1%, of the required
before the risk occurs for the policy to be considered effective and in force. premium, 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
Thus, no vinculum juris whereby the insurer bound itself to indemnify the assured according even 10%, of the premium stipulated in the policy on the basis that, after all, the insurer can
to law ever resulted from the fractional payment of premium. The insurance contract itself deduct from the proceeds of the insurance should the risk insured against occur?
expressly provided that the policy would be effective only when the premium was paid in full.
It would have been altogether different were it not so stipulated. Ergo, petitioners had Interpreting the contract of insurance stringently against the insurer but liberally in favor of
absolute freedom of choice whether or not to be insured by FORTUNE under the terms of its the insured despite clearly defined obligations of the parties to the policy can be carried out
policy and they freely opted to adhere thereto. to extremes that there is the danger that 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
Indeed, and far more importantly, the cardinal polestar in the construction of an insurance collecting premiums promptly yet resorting to all kinds of excuses to deny or delay payment
contract is the intention of the parties as expressed in the of just insurance claims. But, in this case, the law is manifestly on the side of the insurer. For
policy. 10 Courts have no other function but to enforce the same. The rule that contracts of as long as the current Insurance Code remains unchanged and partial payment of premiums
insurance will be construed in favor of the insured and most strongly against the insurer is not mentioned at all as among the exceptions provided in Sees. 77 and 78, no policy of
should not be permitted to have the effect of making a plain agreement ambiguous and then insurance can ever pretend to be efficacious or effective until premium has been fully paid.
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 manner And so it must be. For it cannot be disputed that premium is the elixir vitae of the insurance
prescribed in the policy as intended by the parties the policy is ineffective. Partial payment business because by law the insurer must maintain a legal reserve fund to meet its
even when accepted as a partial payment will not keep the policy alive even for such contingent obligations to the public, hence, the imperative need for its prompt payment and
fractional part of the year as the part payment bears to the whole full satisfaction. 16 It must be emphasized here that all actuarial calculations and various
payment. 12 tabulations of probabilities of losses under the risks insured against are based on the sound
hypothesis of prompt payment of premiums. Upon this bedrock insurance firms are enabled
Applying further the rules of statutory construction, the position maintained by petitioners to offer the assurance of security to the public at favorable rates. But once payment of
becomes even more untenable. The case of South Sea Surety and Insurance Company, Inc. premium is left to the whim and caprice of the insured, as when the courts tolerate the
v. Court Of Appeals, 13 speaks only of two (2) statutory exceptions to the requirement of payment of a mere P600.00 as partial undertaking out of the stipulated total premium of
payment of the entire premium as a prerequisite to the validity of the insurance contract. P2,983.50 and the balance to be paid even after the risk insured against has occurred, as
These exceptions are: (a) in case the insurance coverage relates to life or industrial life petitioners have done in this case, on the principle that the strength of the vinculum juris is
(health) insurance when a grace period applies, and (b) when the insurer makes a written not measured by any specific amount of premium payment, we will surely wreak havoc on
acknowledgment of the receipt of premium, this acknowledgment being declared by law to the business and set to naught what has taken actuarians centuries to devise to arrive at a
be then conclusive evidence of the premium payment. 14 fair and equitable distribution of risks and benefits between the insurer and the insured.

A maxim of recognized practicality is the rule that the expressed exception or exemption The terms of the insurance policy constitute the measure of the insurer's liability. In the
excludes others. Exceptio firmat regulim in casibus non exceptis. The express mention of absence of statutory prohibition to the contrary, insurance companies have the same rights
exceptions operates to exclude other exceptions; conversely, those which are not within the as individuals to limit their liability and to impose whatever conditions they deem best upon
enumerated exceptions are deemed included in the general rule. Thus, under Sec. 77, as their obligations not inconsistent with public policy. 17 The validity of these limitations is by
well as Sec. 78, until the premium is paid, and the law has not expressly excepted partial law passed upon by the Insurance Commissioner who is empowered to approve all forms of
payments, there is no valid and binding contract. Hence, in the absence of clear waiver of policies, certificates or contracts of insurance which insurers intend to issue or deliver. That
prepayment in full by the insurer, the insured cannot collect on the proceeds of the policy. the policy contract in the case at bench was approved and allowed issuance simply reaffirms
the validity of such policy, particularly the provision in question.

In the desire to safeguard the interest of the assured, it must not be ignored that the contract
of insurance is primarily a risk distributing device, a mechanism by which all members of a WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals
group exposed to a particular risk contribute premiums to an insurer. From these dated 24 March 1995 is AFFIRMED.
contributory funds are paid whatever losses occur due to exposure to the peril insured
against. Each party therefore takes a risk: the insurer, that of being compelled upon the SO ORDERED.
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 payment for these losses, the law mandates all
insurance companies to maintain a legal reserve fund in favor of those claiming under their
policies. 15 It should be understood that the integrity of this fund cannot be secured and
On February 5, 1982, Pinca's payment was returned by MICO to Adora on the ground that
her policy had been cancelled earlier. But Adora refused to accept it. 7
G.R. No. L-67835 October 12, 1987
In due time, Pinca made the requisite demands for payment, which MICO rejected. She then
MALAYAN INSURANCE CO., INC. (MICO), petitioner, went to the Insurance Commission. It is because she was ultimately sustained by the public
vs. respondent that the petitioner has come to us for relief.
GREGORIA CRUZ ARNALDO, in her capacity as the INSURANCE COMMISSIONER,
and CORONACION PINCA, respondents.
From the procedural viewpoint alone, the petition must be rejected. It is stillborn.

CRUZ, J.:
The records show that notice of the decision of the public respondent dated April 5, 1982,
was received by MICO on April 10, 1982. 8 On April 25, 1982, it filed a motion for
When a person's house is razed, the fire usually burns down the efforts of a lifetime and reconsideration, which was denied on June 4, 1982. 9 Notice of this denial was received by
forecloses hope for the suddenly somber future. The vanished abode becomes a charred MICO on June 13, 1982, as evidenced by Annex "1" duly authenticated by the Insurance
and painful memory. Where once stood a home, there is now, in the sighing wisps of smoke, Commission. 10 The instant petition was filed with this Court on July 2, 1982. 11
only a gray desolation. The dying embers leave ashes in the heart.
The position of the petition is that the petition is governed by Section 416 0f the Insurance
For peace of mind and as a hedge against possible loss, many people now secure fire Code giving it thirty days wthin which to appeal by certiorari to this Court. Alternatively, it
insurance. This is an aleatory contract. By such insurance, the insured in effect wagers that also invokes Rule 45 of the Rules of Court. For their part, the public and private respondents
his house will be burned, with the insurer assuring him against the loss, for a fee. If the insist that the applicable law is B.P. 129, which they say governs not only courts of justice
house does burn, the insured, while losing his house, wins the wagers. The prize is the but also quasi-judicial bodies like the Insurance Commission. The period for appeal under
recompense to be given by the insurer to make good the loss the insured has sustained. this law is also fifteen days, as under Rule 45.

It would be a pity then if, having lost his house, the insured were also to lose the payment he The pivotal date is the date the notice of the denial of the motion for reconsideration was
expects to recover for such loss. Sometimes it is his fault that he cannot collect, as where received by MICO.
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, as has happened many MICO avers this was June 18, 1982, and offers in evidence its Annex "B," 12 which is a copy
times. of the Order of June 14, 1982, with a signed rubber-stamped notation on the upper left-hand
corner that it was received on June 18, 1982, by its legal department. It does not indicate
In the instant case the private respondent has been sustained by the Insurance Commission from whom. At the bottom, significantly, there is another signature under which are the
in her claim for compensation for her burned property. The petitioner is now before us to ciphers "6-13-82," for which no explanation has been given.
dispute the decision, 1 on the ground that there was no valid insurance contract at the time
of the loss. 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
The chronology of the relevant antecedent facts is as follows: it was received for the Malayan Insurance Co., Inc. by J. Gotladera on "6-13-82." The
signature may or may not habe been written by the same person who signed at the bottom
of the petitioner's Annex "B."
On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private respondent,
Coronacion Pinca, Fire Insurance Policy No. F-001-17212 on her property for the amount of
P14,000.00 effective July 22, 1981, 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 both annexes but also because it is the date authenticated by
the administrative division of the Insurance Commission. Annex "B" is at worst self-serving;
On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium at best, it might only indicate that it was received on June 18, 1982, by the legal department
and sent the corresponding notice to Pinca. 3 of MICO, after it had been received earlier by some other of its personnel on June 13, 1982.
Whatever the reason for the delay in transmitting it to the legal department need not detain
On December 24, 1981, payment of the premium for Pinca was received by DomingoAdora, us here.
agent of MICO. 4
Under Section 416 of the Insurance Code, the period for appeal is thirty days from notice of
On January 15, 1982, Adora remitted this payment to MICO,together with other payments. 5 the decision of the Insurance Commission. The petitioner filed its motion for reconsideration
on April 25, 1981, or fifteen days such 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
On January 18, 1982, Pinca's property was completely burned. 6 reconsideration. As the herein petition was filed on July 2, 1981, or nineteen days later,
there is no question that it is tardy by four days.
Counted from June 13, the fifteen-day period prescribed under Rule 45, assuming it is but only up to July 22, 1981, according to the original terms. In others words, the policy
applicable, would end on June 28, 1982, or also four days from July 2, when the petition was would have run for only eight months although the premium paid was for one whole year.
filed.
It is not disputed that the preium was actually paid by Pinca to Adora on December 24,
If it was filed under B.P. 129, then, considering that the motion for reconsideration was filed 1981, who received it on behalf of MICO, to which it was remitted on January 15, 1982.
on the fifteenth day after MICO received notice of the decision, only one more day would What is questioned is the validity of Pinca's payment and of Adora's authority to receive it.
have remained for it to appeal, to wit, June 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 premium payment on its behalf. It is clearly provided in Section 306
Indeed, even if the applicable law were still R.A. 5434, governing appeals from of the Insurance Code that:
administrative bodies, the petition 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 SEC. 306. xxx xxx xxx
appeal from the decision. Accordingly, that ten-day period, counted 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 shall be
demmed to have authorized such agent or broker to receive on
Whichever law is applicable, therefore, the petition can and should be dismissed for late its behalf payment of any premium which is due on such policy
filing. 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. And it is a well-known principle under the law of agency that:
Its contention that the claim was allowed without proof of loss is also untenable.

Payment to an agent having authority to receive or collect


The petitioner relies heavily on Section 77 of the Insurance Code providing that: payment is equivalent to payment to the principal himself; such
payment is complete when the money delivered is into the
SEC. 77. An insurer is entitled to payment of the premium as agent's hands and is a discharge of the indebtedness owing to
soon as the thing is exposed to the peril insured against. the principal. 15
Notwithstanding any agreement to the contrary, no policy or
contract of insurance issued by an insurance company is valid There is the petitioner's argument, however, that Adora was not authorized to accept the
and binding unless and until the premium thereof has been premium payment because six months had elapsed since the issuance by the policy itself. It
paid, except in the case of a life or an industrial life policy is argued that this prohibition was binding upon Pinca, who made the payment to Adora at
whenever the grace period provision applies. 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 MICO is taking an inconsistent stand. While contending that acceptance of the premium
eventually made in this case. Notably, the premium invoice issued to Pinca at the time of the payment was prohibited by the policy, it at the same time insists that the policy never came
delivery of the policy on June 7, 1981 was stamped "Payment Received" of the amoung of into force because the premium had not been paid. One surely, cannot have his cake and
P930.60 on "12-24-81" by Domingo Adora. 14 This is important because it suggests an eat it too.
understanding between MICO and the insured that such payment could be made later, as
agent 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
The payment was made on December 24, 1981, and the fire occured on January 18, 1982. removing it from the provisions of Article 77, Thereafter, the policy could be cancelled on any
One wonders: suppose the payment had been made and accepted in, say, August 1981, of the supervening grounds enumerated in Article 64 (except "nonpayment of premium")
would the commencement date of the policy have been changed to the date of the payment, provided the cancellation was made in accordance therewith and with Article 65.
or would the payment have retroacted to July 22, 1981? If MICO accepted the payment in
December 1981 and the insured property had not been burned, would that policy not have
expired just the same on July 22, 1982, pursuant to its original terms, and not on December Section 64 reads as follows:
24, 1982?
SEC. 64. No policy of insurance other than life shall be
It would seem from MICO's own theory, that the policy would have become effective only cancelled by the insurer except upon prior notice thereof to the
upon payment, if accepted and so would have been valid only from December 24, 1981m insured, and no notice of cancellation shall be effective unless it
is based on the occurrence, after the effective date of the cancellation was sent "by mail through our mailing section." without more. The petitioner
policy, of one or more of the following: then says that its "stand is enervated (sic) by the legal presumption of regularity and due
performance of duty." 22 (not realizing perhaps that "enervated" means "debilitated" not
(a) non-payment of premium; "strengthened").

(b) conviction of a crime arising out of acts increasing the On the other hand, there is the flat denial of Pinca, who says she never received the claimed
hazard insured against; cancellation and who, 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
(c) discovery of fraud or material misrepresentation; the insured. The presumption cited is unavailing against the positive duty enjoined by
Section 64 upon MICO and the flat denial made by the private respondent that she had
(d) discovery of willful, or reckless acts or commissions received notice of the claimed cancellation.
increasing the hazard insured against;
It stands to reason that if Pinca had really received the said notice, she would not have
(e) physical changes in the property insured which result in the made payment on the original policy on December 24, 1981. Instead, she would have asked
property becoming uninsurable;or 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 date, it was because she
honestly believed that the policy issued on June 7, 1981, was still in effect and she was
(f) a determination by the Commissioner that the continuation of willing to make her payment retroact to July 22, 1981, its stipulated commencement date.
the policy would violate or would place the insurer in violation of After all, agent Adora was very accomodating and had earlier told her "to call him up any
this Code. time" she was ready with her payment on the policy earlier issued. She was obviously only
reciprocating in kind when she paid her premium for the period beginning July 22, 1981, and
As for the method of cancellation, Section 65 provides as follows: not December 24, 1981.

SEC. 65. All notices of cancellation mentioned in the preceding MICO's suggests that Pinca knew the policy had already been cancelled and that when she
section shall be in writing, mailed or delivered to the named paid the premium on December 24, 1981, her purpose was "to renew it." As this could not
insured at the address shown in the policy, and shall state (a) be done by the agent alone under the terms of the original policy, the renewal thereof did not
which of the grounds set forth in section sixty-four is relied upon legally bind MICO. which had not ratified it. To support this argument, MICO's cites the
and (b) that, upon written request of the named insured, the following exchange:
insurer will furnish the facts on which the cancellation is based.
Q: Now, Madam Witness, on December
A valid cancellation must, therefore, require concurrence of the following conditions: 25th you made the alleged payment. Now,
my question is that, did it not come to your
mind that after the lapse of six (6) months,
(1) There must be prior notice of cancellation to the insured; 17 your policy was cancelled?

(2) The notice must be based on the occurrence, after the effective date of the policy, of one A: I have thought of that but the agent told
or more of the grounds mentioned;18 me to call him up at anytime.

(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the Q: So if you thought that your policy was
address shown in the policy; 19 already intended to revive cancelled policy?

(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that A: Misleading, Your Honor.
upon written request of the insured, the insurer will furnish the facts on which the
cancellation is based. 20
Hearing Officer: The testimony of witness is
that, she thought of that.
MICO's claims it cancelled the policy in question on October 15, 1981, for non-payment of
premium. To support this assertion, it presented one of its employees, who testified that "the
original of the endorsement and credit memo" — presumably meaning the alleged Q: I will revise the question. Now, Mrs.
cancellation — "were sent the assured by mail through our mailing section" 21 However, Witness, you stated that you thought the
there is no proof that the notice, assuming it complied with the other requisites mentioned policy was cancelled. Now, when you made
above, was actually mailed to and received by Pinca. All MICO's offers to show that the the payment of December 24, 1981, your
cancellation was communicated to the insured is its employee's testimony that the said
intention was to revive the policy if it was
already cancelled?

A: Yes, to renew it. 23

A close study of the above transcript will show that Pinca meant to renew the policy if it had
really been already 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 was thus legally made on the
original transaction and it could be, and was, validly received on behalf of the insurer by its
agent Adora. Adora. incidentally, had not been informed of the cancellation either and saw
no reason not to accept the said payment.

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 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.

The certification 26 issued by the Integrated National Police, Lao-ang, Samar, as to the
extent of Pinca's loss should be considered sufficient. Notably,MICO submitted no evidence
to the contrary nor did it even question the extent of the loss in its answer before the
Insurance Commission. It is also worth observing that Pinca's property was not the only
building bumed in the fire that razed the commercial district of Lao-ang, Samar, on January
18, 1982. 27

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 duties of adjusters.

We see in this cases an obvious design to evade or at least delay the discharge of a just
obligation through efforts bordering on bad faith if not plain duplicity, We note that the motion
for reconsideration was filed on the fifteenth day from notice of the decision of the Insurance
Commission and that there was a feeble attempt to show that the notice of denial of the said
motion was not received on June 13, 1982, to further hinder the proceedings and justify the
filing of the petition with this Court fourteen days after June 18, 1982. We also look askance
at the alleged cancellation, of which the insured and MICO's agent himself had no
knowledge, and the curious fact that although Pinca's payment was remitted to MICO's by its
agent on January 15, 1982, MICO sought to return it to Adora only on February 5, 1982,
after it presumably had learned of the occurrence of the loss insured against on January 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.

WHEREFORE, the petition is DENIED. The decision of the Insurance Commission dated
April 10, 1981, and its Order of June 4, 1981, are AFFIRMED in full, with costs against the
petitioner. This decision is immediately executory.

SO ORDERED.
of inception for non-payment of the premium due in accordance with
Section 77 of the Insurance Code.
G.R. No. 102253 June 2, 1995
On 2 February 1984, plaintiff demanded from defendant South Sea Surety
SOUTH SEA SURETY AND INSURANCE COMPANY, INC., petitioner, and Insurance Co., Inc. the payment of the proceeds of the policy but the
vs. latter denied liability under the policy. Plaintiff likewise filed a formal claim
HON. COURT OF APPEALS and VALENZUELA HARDWOOD AND INDUSTRIAL with defendant Seven Brothers Shipping Corporation for the value of the
SUPPLY, INC., respondents. lost logs but the latter denied the claim. 1

RESOLUTION In its decision, dated 11 May 1988, the trial court rendered judgment in favor of plaintiff
Hardwood.

On appeal perfected by both the shipping firm and the insurance company, the Court of
Appeals affirmed the judgment of the court a quo only against the insurance corporation; in
VITUG, J.: absolving the shipping entity from liability, the appellate court ratiocinated:

Two issues on the subject of insurance are raised in this petition, that assails the decision, The primary issue to be resolved before us is whether defendants shipping
that assails the decision of the Court of Appeals. (in CA-G.R. NO. CV-20156), the first corporation and the surety company are liable to the plaintiff for the latter's
dealing on the requirement of premium payment and the second relating to the agency lost logs.
relationship of parties under that contract.
It appears that there is a stipulation in the charter party that the ship owner
The court litigation started when Valenzuela Hardwood and Industrial Supply, Inc. would be exempted from liability in case of loss.
("Hardwood"), filed with the Regional, Trial Court of the National Capital Judicial Region,
Branch l71 in Valenzuela, Metro Manila, a complaint for the recovery of the value of lost logs
and freight charges from Seven Brothers Shipping Corporation or, to the extent of its alleged The court a quo erred in applying the provisions of the Civil Code on
insurance cover, from South Sea Surety and insurance Company. common carriers to establish the liability of the shipping corporation. The
provisions on common carriers should not be applied where the carrier is
not acting as such but as a private carrier.
The factual backdrop is described briefly by the appellate court thusly:
Under American jurisprudence, a common carrier undertaking to carry a
It appears that on 16 January 1984, plaintiff [Valenzuela Hardwood and special or chartered to a special person only, becomes a private carrier.
Industrial Supply, Inc.] entered into an agreement with the defendant
Seven Brothers whereby the latter undertook to load on board its vessel
M/V Seven Ambassador the former's lauan round logs numbering 940 at As a private carrier, a stipulation exempting the owner from liability even for
the port of Maconacon, Isabela for shipment to Manila. the negligence of its agent is valid (Home Insurance Company, Inc. vs.
American Steamship Agencies, Inc., 23 SCRA 24).

On 20 January 1984, plaintiff insured the logs, against loss and/or,


damage with defendant South Sea Surety and Insurance Co., Inc. for The shipping corporation should not therefore be held liable for
P2,000,000.00 end the latter issued its Marine Cargo Insurance Policy the loss of the logs. 2
No. 84/24229 for P2,000,000.00 on said date.
In this petition for review on certiorari brought by South Sea Surety and Insurance Co., Inc.,
On 24 January 1984, the plaintiff gave the check in payment of the petitioner argues that it likewise should have been freed from any liability to Hardwood. It
premium on the insurance policy to Mr. Victorio Chua. faults the appellate court (a) for having Supposedly disregarded Section 77 of the insurance
Code and (b) for holding Victorio Chua to have been an authorized representative of the
insurer.
In the meantime, the said vessel M/V Seven Ambassador sank on 25
January 1984 resulting in the loss of the plaintiffs insured logs.
Section 77 of the Insurance Code provides:

On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment


of the premium and documentary stamps due on the policy was tendered Sec. 77. An insurer is entitled to payment of the premium as soon as the thing
to the insurer but was not accepted. Instead, the South Sea Surety and insured is exposed to the peril insured against. Notwithstanding any
Insurance Co., Inc. cancelled the insurance policy it issued as of the date agreement to the contrary, no policy or contract of insurance issued by an
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 Sec. 301. Any person who for any
the grace period provision applies. compensation, commission or other thing of
value, acts, or aids in soliciting, negotiating
Undoubtedly, the payment of the premium is a condition precedent to, and essential for, the or procuring the making of any insurance
efficaciousness of the contract. The only two statutorily provided exceptions are (a) in case contract or in placing risk or taking out
the insurance coverage relates to life or industrial life (health) insurance when a grace period insurance, on behalf of an insured other
applies and (b) when the insurer makes a written acknowledgment of the receipt of premium, than himself, shall be an insurance broker
this acknowledgment being declared by law to be then conclusive evidence of the premium within the intent of this Code, and shall
payment (Secs. 77-78, Insurance Code). The appellate court, contrary to what the petition thereby become liable to all the duties
suggests, did not make any pronouncement to the contrary. Indeed, it has said: requirements, liabilities and penalties to
which an insurance broker is subject.

Concerning the issue as to whether there is a valid contract of


insurance between plaintiff-appellee and defendant-appellant The appellees, upon the other hand, claim that the second
South Sea Surety and Insurance Co., Inc., Section 77 of the paragraph of Section 306 of the Insurance Code provide as
Insurance Code explicitly provides that notwithstanding any follows:
agreement to the contrary, no policy issued by an insurance
company is valid and binding unless and until premium thereof Sec. 306. . . . Any insurance company which
has been paid. It is therefore important to determine whether at delivers to an insurance agent or insurance
the time of the loss, the premium was already paid. 3 broker a policy or contract of insurance shall
be deemed to have authorized such agent
No attempt becloud the issues can disguise the fact that the sole question raised in the or broker to receive on its behalf payment of
instant petition is really evidentiary in nature, i.e., whether or not Victorio Chua, in receiving any premium which is due on such policy of
the check for the insurance premium prior to the occurrence of the risk insured against has contract of insurance at the time of its
so acted as an agent of petitioner. The appellate court, like the trial court, has found in the issuance or delivery or which becomes due
affirmative. Said the appellate court: thereon.

In the instant case, the Marine Cargo Insurance Policy No. On cross-examination in behalf of South Sea Surety and
84/24229 was issued by defendant insurance company on 20 Insurance Co., Inc. Mr. Chua testified that the marine cargo
January 1984. At the time the vessel sank on 25 January 1984 insurance policy for the plaintiff's logs was delivered to him on
resulting in the loss of the insured logs, the insured had already 21 January 1984 at his office to be delivered to the plaintiff.
delivered to Victorio Chua the check in payment of premium.
But, as Victorio Chua testified, it was only in the morning of 30 When the appellant South Sea Surety and Insurance Co., Inc.
January 1984 or 5 days after the vessel sank when his delivered to Mr. Chua the marine cargo insurance policy for the
messenger tendered the check to defendant South Sea Surety plaintiffs logs, he is deemed to have been authorized by the
and Insurance Co., Inc. (TSN, pp. 3-27, 16-17, 22 October South Sea Surety and Insurance Co., Inc. to receive the
1985). premium which is due on its behalf.

The pivotal issue to be resolved to determine the liability, of the When therefore the insured logs were lost, the insured had
surety corporation is whether Mr. Chua acted as an agent of the already paid the premium to an agent of the South Sea Surety
surety company or of the insured when he received the check and Insurance Co., Inc., which is consequently liable to pay the
for insurance premiums. insurance proceeds under the policy it issued to the insured. 4

Appellant surety company insists that Mr. Chua is an We see no valid reason to discard the factual conclusions of the appellate court. Just as so
administrative assistant for the past ten years and an agent for correctly pointed out by private respondent, it is not the function of this Court to assess and
less than ten years of the Columbia Insurance Brokers, Ltd. He evaluate all over again the evidence, testimonial and documentary, adduced by the parties
is paid a salary as a administrative assistant and a commission particularly where, such as here, the findings of both the trial court and the appellate court
as agent based on the premiums he turns over to the broker. on the matter coincide.
Appellant therefore argues that Mr. Chua, having received the
insurance premiums as an agent of the Columbia Insurance WHEREFORE, the resolution, dated 01 February 1993, granting due course to the petition is
Broker, acted as an agent of the insured under Section 301 of RECALLED, and the petition is DENIED. Costs against petitioner.
the Insurance Code which provides as follows:

SO ORDERED.