G.R. No.

L-67835 October 12, 1987

MALAYAN INSURANCE CO., INC. (MICO), petitioner,
vs.
GREGORIA CRUZ ARNALDO, in her capacity as the INSURANCE COMMISSIONER, and CORONACION
PINCA, respondents.

Whether that was a valid insurance contract at the time of the loss.
Malayan insurance co. (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
On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent the corresponding notice to
Pinca. 3
On December 24, 1981, payment of the premium for Pinca was received by DomingoAdora, agent of MICO.
On January 15, 1982, Adora remitted this payment to MICO,together with other payments.
On January 18, 1982, Pinca's property was completely burned.

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
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.
From the procedural viewpoint alone, the petition must be rejected. It is stillborn.
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 reconsideration, which was denied on June 4, 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
The position of the petition is that the petition is governed by Section 416 0f the Insurance Code giving it thirty days wthin which to
appeal by certiorari to this Court. Alternatively, it also invokes Rule 45 of the Rules of Court. 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 under this law is also fifteen days, as under Rule 45.
The pivotal date is the date the notice of the denial of the motion for reconsideration was received by MICO.
MICO avers this was June 18, 1982, and offers in evidence its Annex "B," 12 which is a copy 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 from whom. At the bottom, significantly, there is another signature under which are the ciphers "6-13-82," for which no
explanation has been given.
Against this document, the private respodent points in her Annex "1," 13 the authenticated copy of the same Order with a rubberstamped notation at the bottom thereof indicating that it was received for the Malayan Insurance Co., Inc. by J. Gotladera on "6-1382." The signature may or may not habe been written by the same person who signed at the bottom of the petitioner's Annex "B."
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 selfserving; 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 13, 1982. Whatever the reason for the delay in transmitting it to the legal
department need not detain us here.

Under Section 416 of the Insurance Code, the period for appeal is thirty days from notice of 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 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 applicable, would end on June 28, 1982, or
also four days from July 2, when the petition was filed.
If it was filed under B.P. 129, then, considering that the motion for reconsideration was filed on the fifteenth day after MICO received
notice of the decision, only one more day would have remained for it to appeal, to wit, June 14, 1982. That would make the
petition eighteen days late by July 2.
Indeed, even if the applicable law were still R.A. 5434, governing appeals from 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
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 dayslate.
Whichever law is applicable, therefore, the petition can and should be dismissed for late filing.
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 without proof of loss is also untenable.
The petitioner relies heavily on Section 77 of the Insurance Code providing that:
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
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.
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 "Payment Received" of the amoung of
P930.60 on "12-24-81" by Domingo Adora. 14 This is important because it suggests an 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.
The payment was made on December 24, 1981, and the fire occured on January 18, 1982. One wonders: suppose 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 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 24, 1982?
It would seem from MICO's own theory, that the policy would have become effective only upon payment, if 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 paid was for one whole year.
It is not disputed that the preium was actually paid by Pinca to Adora on December 24, 1981, who received it on behalf of MICO, to
which it was remitted on January 15, 1982. What is questioned is the validity of Pinca's payment and of Adora's authority to receive it.
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 of the Insurance Code that:
SEC. 306. xxx xxx xxx
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 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.
And it is a well-known principle under the law of agency that:

Payment to an agent having authority to receive or collect payment is equivalent to payment to the principal 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
There is the petitioner's argument, however, that Adora was not authorized to accept the premium payment because six months had
elapsed since the issuance by the policy itself. It is argued that this prohibition was binding 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
MICO is taking an inconsistent stand. While contending that acceptance of the premium payment was prohibited by the policy, it at
the same time insists that the policy never came into force because the premium had not been paid. One surely, cannot have his cake
and eat it too.
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 premium") provided the cancellation was made in accordance therewith and with Article 65.
Section 64 reads as follows:
SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to
the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective
date of the policy, of one or more of the following:
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the hazard insured against;
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;
(e) physical changes in the property insured which result in the property becoming uninsurable;or
(f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer
in violation of this Code.
As for the method of cancellation, Section 65 provides as follows:
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 section
sixty-four is relied upon and (b) that, upon written request of the named insured, the insurer will furnish the facts on
which the cancellation is based.
A valid cancellation must, therefore, require concurrence of the following conditions:
(1) There must be prior notice of cancellation to the insured; 17
(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the grounds mentioned;18
(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
(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon written request of the insured, the
insurer will furnish the facts on which the cancellation is based. 20
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 cancellation "were sent the assured by mail through our mailing section" 21 However, 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 communicated to the insured is its employee's testimony that the said cancellation was sent "by mail
through our mailing section." without more. The petitioner 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 "strengthened").
On the other hand, there is the flat denial of Pinca, who says she never received the claimed 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 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 received notice of the claimed cancellation.
It stands to reason that if Pinca had really received the said notice, she would not have made payment on the 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 date, it was because she honestly believed that the policy
issued on June 7, 1981, was still in effect and she was 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 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.
MICO's suggests that Pinca knew the policy had already been cancelled and that when she paid the premium on December 24, 1981,
her purpose was "to renew it." As this could not be done by the agent alone under the terms 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:
Q: Now, Madam Witness, on December 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, your policy was cancelled?
A: I have thought of that but the agent told me to call him up at anytime.
Q: So if you thought that your policy was already intended to revive cancelled policy?
A: Misleading, Your Honor.
Hearing Officer: The testimony of witness is that, she thought of that.
Q: I will revise the question. Now, Mrs. Witness, you stated that you thought the policy was
cancelled. Now, when you made the payment of December 24, 1981, your 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.

G.R. No. 95546 November 6, 1992

MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner,
vs.
THE COURT OF APPEALS, AMERICAN HOME ASSURANCE CO., represented by American International
Underwriters (Phils.), Inc., respondent.

BELLOSILLO, J.:
This case involves a purely legal question: whether payment by installment of the premiums due on an insurance policy
invalidates the contract of insurance, in view of Sec. 77 of P.D. 612, otherwise known as the Insurance Code, as amended,
which provides:
Sec. 77. An insurer is entitled to the 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 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.
private respondent American Home Assurance Co. (AHAC) issued in favor of petitioner Makati Tuscany Condominium
Corporation (TUSCANY) an Insurance Policy on the latter's building and premises. The premium was paid on
instalments, all of which were accepted by private respondent.
On 10 February 1983, private respondent issued to petitioner anong Insurance Policy which replaced and renewed the
previous policy. The premium was again paid on installments. All payments were likewise accepted by private
respondent.
the policy was again renewed and private respondent issued to petitioner another Insurance Policy. On this renewed
policy, petitioner made two installment payments. Thereafter, petitioner refused to pay the balance of the premium.
Consequently, private respondent filed an action to recover the unpaid balance.
In its answer with counterclaim, petitioner admitted the issuance of Insurance Policy No. AH-CPP-9210651. It explained
that it discontinued the payment of premiums because the policy did not contain a credit clause in its favor and the
receipts for the installment payments covering the policy for 1984-85, as well as the two (2) previous policies, stated the
following reservations:
2. Acceptance of this payment shall not waive any of the company rights to deny liability on any claim
under the policy arising before such payments or after the expiration of the credit clause of the policy; and
3. Subject to no loss prior to premium payment. If there be any loss such is not covered.
Petitioner further claimed that the policy was never binding and valid, and no risk attached to the policy. It then pleaded a
counterclaim for P152,000.00 for the premiums already paid for 1984-85, and in its answer with amended counterclaim,
sought the refund of P924,206.10 representing the premium payments for 1982-85.
After some incidents, petitioner and private respondent moved for summary judgment.
On 8 October 1987, the trial court dismissed the complaint and the counterclaim upon the following findings:
While it is true that the receipts issued to the defendant contained the aforementioned reservations, it is
equally true that payment of the premiums of the three aforementioned policies (being sought to be
refunded) were made during the lifetime or term of said policies, hence, it could not be said, inspite of the
reservations, that no risk attached under the policies. Consequently, defendant's counterclaim for refund is
not justified.

As regards the unpaid premiums on Insurance Policy No. AH-CPP-9210651, in view of the reservation in
the receipts ordinarily issued by the plaintiff on premium payments the only plausible conclusion is that
plaintiff has no right to demand their payment after the lapse of the term of said policy on March 1, 1985.
Therefore, the defendant was justified in refusing to pay the same. 1
Both parties appealed from the judgment of the trial court. Thereafter, the Court of Appeals rendered a
decision 2modifying that of the trial court by ordering herein petitioner to pay the balance of the premiums due on Policy
No. AH-CPP-921-651, or P314,103.05 plus legal interest until fully paid, and affirming the denial of the counterclaim.
The appellate court thus explained
The obligation to pay premiums when due is ordinarily as indivisible obligation to pay the entire
premium. Here, the parties herein agreed to make the premiums payable in installments, and there is no
pretense that the parties never envisioned to make the insurance contract binding between them. It was
renewed for two succeeding years, the second and third policies being a renewal/replacement for the
previous one. And the insured never informed the insurer that it was terminating the policy because the
terms were unacceptable.
While it may be true that under Section 77 of the Insurance Code, the parties may not agree to make the
insurance contract valid and binding without payment of premiums, there is nothing in said section which
suggests that the parties may not agree to allow payment of the premiums in installment, or to consider
the contract as valid and binding upon 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 completion of payment
of the entire premium, despite its voluntary acceptance of partial payments, a result eschewed by a basic
considerations of fairness and equity.
To our mind, the insurance contract became valid and binding upon payment of the first premium, and the
plaintiff could not have denied liability on the ground that payment was not made in full, for the reason
that it agreed to accept installment payment. . . . 3
Petitioner now asserts that its payment by installment of the premiums for the insurance policies for 1982, 1983 and 1984
invalidated said policies because of the provisions of Sec. 77 of the Insurance Code, as amended, and by the conditions
stipulated by the insurer in its receipts, disclaiming liability for loss for occurring before payment of premiums.
It argues that where the premiums is not actually paid in full, the policy would only be effective if there is an
acknowledgment in the policy of the receipt of premium pursuant to Sec. 78 of the Insurance Code. The absence of an
express acknowledgment in the policies of such receipt of the corresponding premium payments, and petitioner's failure to
pay said premiums on or before the effective dates of said policies rendered them invalid. Petitioner thus concludes that
there cannot be a perfected contract of insurance upon mere partial payment of the premiums because under Sec. 77 of the
Insurance Code, no contract of insurance is valid and binding unless the premium thereof has been paid, notwithstanding
any agreement to the contrary. As a consequence, petitioner seeks a refund of all premium payments made on the alleged
invalid insurance policies.
We hold that the subject policies are valid even if the premiums were paid on installments. The records clearly show that
petitioner and private respondent intended subject insurance policies to be binding and effective notwithstanding the
staggered payment of the premiums. The initial insurance contract entered into in 1982 was renewed in 1983, then in
1984. In those three (3) years, the insurer accepted all the installment payments. Such acceptance of payments speaks
loudly of the insurer's intention to honor the policies it issued to petitioner. Certainly, basic principles of equity and
fairness would not allow the insurer to continue collecting and accepting the premiums, although paid on installments, and
later deny liability on the lame excuse that the premiums were not prepared in full.
We therefore sustain the Court of Appeals. We quote with approval the well-reasoned findings and conclusion of the
appellate court contained in its Resolution denying the motion to reconsider its Decision
While the import of Section 77 is that prepayment of premiums is strictly required as a condition to the
validity of the contract, We are not prepared to rule that the request to make installment payments duly

approved by the insurer, would prevent the entire contract of insurance from going into effect despite
payment and acceptance of the initial premium or first installment. Section 78 of the Insurance Code in
effect allows waiver by the insurer of the condition of prepayment by making an acknowledgment in the
insurance policy of receipt of premium as conclusive evidence of payment so far as to make the policy
binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties from
stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an
agreement granting credit extension, and such an agreement is not contrary to morals, good customs,
public order or public policy (De Leon, the Insurance Code, at p. 175). So is an understanding to allow
insured to pay premiums in installments not so proscribed. At the very least, both parties should be
deemed in estoppel to question the arrangement they have voluntarily accepted. 4
The reliance by petitioner on Arce vs. Capital Surety and Insurance
Co. 5 is unavailing because the facts therein are substantially different from those in the case at bar. In Arce, no payment
was made by the insured at all despite the grace period given. In the case before Us, petitioner paid the initial installment
and thereafter made staggered payments resulting in full payment of the 1982 and 1983 insurance policies. For the 1984
policy, petitioner paid two (2) installments although it refused to pay the balance.
It appearing from the peculiar circumstances that the parties actually intended to make three (3) insurance contracts valid,
effective and binding, petitioner may not be allowed to renege on its obligation to pay the balance of the premium after
the expiration of the whole term of the third policy (No. AH-CPP-9210651) in March 1985. Moreover, as correctly
observed by the appellate court, where the risk is entire and the contract is indivisible, the insured is not entitled to a
refund of the premiums paid if the insurer was exposed to the risk insured for any period, however brief or momentary.
WHEREFORE, finding no reversible error in the judgment appealed from, the same is AFFIRMED. Costs against
petitioner.

UCPB GENERAL INSURANCE CO. INC., petitioner, vs. MASAGANA TELAMART, INC., respondent.
RESOLUTION
DAVIDE, JR., C.J.:
In our decision of 15 June 1999 in this case, we reversed and set aside the assailed decision[1] of the Court of Appeals, which
affirmed with modification the judgment of the trial court (a) allowing Respondent to consign the sum ofP225,753.95 as full payment
of the premiums for the renewal of the five insurance policies on Respondents properties; (b) declaring the replacement-renewal
policies effective and binding from 22 May 1992 until 22 May 1993; and (c) ordering Petitioner to pay Respondent P18,645,000.00 as
indemnity for the burned properties covered by the renewal-replacement policies. The modification consisted in the (1) deletion of the
trial courts declaration that three of the policies were in force from August 1991 to August 1992; and (2) reduction of the award of the
attorneys fees from 25% to 10% of the total amount due the Respondent.
The material operative facts upon which the appealed judgment was based are summarized by the Court of Appeals in its
assailed decision as follows:
Plaintiff [herein Respondent] obtained from defendant [herein Petitioner] five (5) insurance policies (Exhibits "A" to "E", Record, pp.
158-175) on its properties [in Pasay City and Manila].
All five (5) policies reflect on their face the effectivity term: "from 4:00 P.M. of 22 May 1991 to 4:00 P.M. of 22 May 1992." On June
13, 1992, plaintiff's properties located at 2410-2432 and 2442-2450 Taft Avenue, Pasay City were razed by fire. On July 13, 1992,
plaintiff tendered, and defendant accepted, five (5) Equitable Bank Manager's Checks in the total amount of P225,753.45 as renewal
premium payments for which Official Receipt Direct Premium No. 62926 (Exhibit "Q", Record, p. 191) was issued by defendant. On
July 14, 1992, Masagana made its formal demand for indemnification for the burned insured properties. On the same day, defendant
returned the five (5) manager's checks stating in its letter (Exhibit "R"/"8", Record, p. 192) that it was rejecting Masagana's claim on
the following grounds:
"a) Said policies expired last May 22, 1992 and were not renewed for another term;
b) Defendant had put plaintiff and its alleged broker on notice of non-renewal earlier; and
c) The properties covered by the said policies were burned in a fire that took place last June 13, 1992, or before tender of
premium payment."
(Record, p. 5)
Hence Masagana filed this case.
The Court of Appeals disagreed with Petitioners stand that Respondents tender of payment of the premiums on 13 July 1992
did not result in the renewal of the policies, having been made beyond the effective date of renewal as provided under Policy
Condition No. 26, which states:
26. Renewal Clause. -- Unless the company at least forty five days in advance of the end of the policy period mails or delivers to the
assured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon reduction of
limits or elimination of coverages, the assured shall be entitled to renew the policy upon payment of the premium due on the effective
date of renewal.
Both the Court of Appeals and the trial court found that sufficient proof exists that Respondent, which had procured insurance
coverage from Petitioner for a number of years, had been granted a 60 to 90-day credit term for the renewal of the policies. Such a
practice had existed up to the time the claims were filed. Thus:
Fire Insurance Policy No. 34658 covering May 22, 1990 to May 22, 1991 was issued on May 7, 1990 but premium was paid more
than 90 days later on August 31, 1990 under O.R. No. 4771 (Exhs. "T" and "T-1"). Fire Insurance Policy No. 34660 for Insurance
Risk Coverage from May 22, 1990 to May 22, 1991 was issued by UCPB on May 4, 1990 but premium was collected by UCPB only
on July 13, 1990 or more than 60 days later under O.R. No. 46487 (Exhs. "V" and "V-1"). And so were as other policies: Fire
Insurance Policy No. 34657 covering risks from May 22, 1990 to May 22, 1991 was issued on May 7, 1990 but premium therefor was
paid only on July 19, 1990 under O.R. No. 46583 (Exhs. "W" and "W-1"). Fire Insurance Policy No. 34661 covering risks from May
22, 1990 to May 22, 1991 was issued on May 3, 1990 but premium was paid only on July 19, 1990 under O.R. No. 46582 (Exhs. "X'
and "X-1"). Fire Insurance Policy No. 34688 for insurance coverage from May 22, 1990 to May 22, 1991 was issued on May 7, 1990
but premium was paid only on July 19, 1990 under O.R. No. 46585 (Exhs. "Y" and "Y-1"). Fire Insurance Policy No. 29126 to cover

insurance risks from May 22, 1989 to May 22, 1990 was issued on May 22, 1989 but premium therefor was collected only on July 25,
1990[sic] under O.R. No. 40799 (Exhs. "AA" and "AA-1"). Fire Insurance Policy No. HO/F-26408 covering risks from January 12,
1989 to January 12, 1990 was issued to Intratrade Phils. (Masagana's sister company) dated December 10, 1988 but premium therefor
was paid only on February 15, 1989 under O.R. No. 38075 (Exhs. "BB" and "BB-1"). Fire Insurance Policy No. 29128 was issued on
May 22, 1989 but premium was paid only on July 25, 1989 under O.R. No. 40800 for insurance coverage from May 22, 1989 to May
22, 1990 (Exhs. "CC" and "CC-1"). Fire Insurance Policy No. 29127 was issued on May 22, 1989 but premium was paid only on July
17, 1989 under O.R. No. 40682 for insurance risk coverage from May 22, 1989 to May 22, 1990 (Exhs. "DD" and "DD-1"). Fire
Insurance Policy No. HO/F-29362 was issued on June 15, 1989 but premium was paid only on February 13, 1990 under O.R. No.
39233 for insurance coverage from May 22, 1989 to May 22, 1990 (Exhs. "EE" and "EE-1"). Fire Insurance Policy No. 26303 was
issued on November 22, 1988 but premium therefor was collected only on March 15, 1989 under O.R. NO. 38573 for insurance risks
coverage from December 15, 1988 to December 15, 1989 (Exhs. "FF" and "FF-1").
Moreover, according to the Court of Appeals the following circumstances constitute preponderant proof that no timely notice of
non-renewal was made by Petitioner:
(1) Defendant-appellant received the confirmation (Exhibit 11, Record, p. 350) from Ultramar Reinsurance Brokers that
plaintiffs reinsurance facility had been confirmed up to 67.5% only on April 15, 1992 as indicated on Exhibit 11. Apparently,
the notice of non-renewal (Exhibit 7, Record, p. 320) was sent not earlier than said date, or within 45 days from the expiry
dates of the policies as provided under Policy Condition No. 26; (2) Defendant insurer unconditionally accepted, and issued an
official receipt for, the premium payment on July 1[3], 1992 which indicates defendant's willingness to assume the risk despite
only a 67.5% reinsurance cover[age]; and (3) Defendant insurer appointed Esteban Adjusters and Valuers to investigate
plaintiffs claim as shown by the letter dated July 17, 1992 (Exhibit 11, Record, p. 254).
In our decision of 15 June 1999, we defined the main issue to be whether the fire insurance policies issued by petitioner to the
respondent covering the period from May 22, 1991 to May 22, 1992 had been extended or renewed by an implied credit
arrangement though actual payment of premium was tendered on a later date and after the occurrence of the (fire) risk insured
against. We resolved this issue in the negative in view of Section 77 of the Insurance Code and our decisions in Valenzuela v. Court
of Appeals[2]; South Sea Surety and Insurance Co., Inc. v. Court of Appeals[3]; and Tibay v. Court of Appeals.[4] Accordingly, we
reversed and set aside the decision of the Court of Appeals.
Respondent seasonably filed a motion for the reconsideration of the adverse verdict. It alleges in the motion that we had made in
the decision our own findings of facts, which are not in accord with those of the trial court and the Court of Appeals. The courts
below correctly found that no notice of non-renewal was made within 45 days before 22 May 1992, or before the expiration date of the
fire insurance policies. Thus, the policies in question were renewed by operation of law and were effective and valid on 30 June 1992
when the fire occurred, since the premiums were paid within the 60- to 90-day credit term.
Respondent likewise disagrees with our ruling that parties may neither agree expressly or impliedly on the extension of credit or
time to pay the premium nor consider a policy binding before actual payment. It urges the Court to take judicial notice of the fact that
despite the express provision of Section 77 of the Insurance Code, extension of credit terms in premium payment has been the
prevalent practice in the insurance industry. Most insurance companies, including Petitioner, extend credit terms because Section 77
of the Insurance Code is not a prohibitive injunction but is merely designed for the protection of the parties to an insurance
contract. The Code itself, in Section 78, authorizes the validity of a policy notwithstanding non-payment of premiums.
Respondent also asserts that the principle of estoppel applies to Petitioner. Despite its awareness of Section 77 Petitioner
persuaded and induced Respondent to believe that payment of premium on the 60- to 90-day credit term was perfectly alright; in fact it
accepted payments within 60 to 90 days after the due dates. By extending credit and habitually accepting payments 60 to 90 days
from the effective dates of the policies, it has implicitly agreed to modify the tenor of the insurance policy and in effect waived the
provision therein that it would pay only for the loss or damage in case the same occurred after payment of the premium.
Petitioner filed an opposition to the Respondents motion for reconsideration. It argues that both the trial court and the Court of
Appeals overlooked the fact that on 6 April 1992 Petitioner sent by ordinary mail to Respondent a notice of non-renewal and sent by
personal delivery a copy thereof to Respondents broker, Zuellig. Both courts likewise ignored the fact that Respondent was fully
aware of the notice of non-renewal. A reading of Section 66 of the Insurance Code readily shows that in order for an insured to be
entitled to a renewal of a non-life policy, payment of the premium due on the effective date of renewal should first be
made. Respondents argument that Section 77 is not a prohibitive provision finds no authoritative support.
Upon a meticulous review of the records and reevaluation of the issues raised in the motion for reconsideration and the pleadings
filed thereafter by the parties, we resolved to grant the motion for reconsideration. The following facts, as found by the trial court and
the Court of Appeals, are indeed duly established:
1. For years, Petitioner had been issuing fire policies to the Respondent, and these policies were annually renewed.
2. Petitioner had been granting Respondent a 60- to 90-day credit term within which to pay the premiums on the renewed
policies.

3. There was no valid notice of non-renewal of the policies in question, as there is no proof at all that the notice sent by
ordinary mail was received by Respondent, and the copy thereof allegedly sent to Zuellig was ever transmitted to
Respondent.
4. The premiums for the policies in question in the aggregate amount of P225,753.95 were paid by Respondent within the
60- to 90-day credit term and were duly accepted and received by Petitioners cashier.
The instant case has to rise or fall on the core issue of whether Section 77 of the Insurance Code of 1978 (P.D. No. 1460) must
be strictly applied to Petitioners advantage despite its practice of granting a 60- to 90-day credit term for the payment of premiums.
Section 77 of the Insurance Code of 1978 provides:
SEC. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured
against. Notwithstanding any 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 the
grace period provision applies.
This Section is a reproduction of Section 77 of P.D. No. 612 (The Insurance Code) promulgated on 18 December 1974. In turn,
this Section has its source in Section 72 of Act No. 2427 otherwise known as the Insurance Act as amended by R.A. No. 3540,
approved on 21 June 1963, which read:
SEC. 72. An insurer is entitled to payment of premium as soon as the thing insured is exposed to the peril insured against, unless there
is clear agreement to grant the insured credit extension of the premium due. No policy issued by an insurance company is valid and
binding unless and until the premium thereof has been paid. (Underscoring supplied)
It can be seen at once that Section 77 does not restate the portion of Section 72 expressly permitting an agreement to extend the
period to pay the premium. But are there exceptions to Section 77?
The answer is in the affirmative.
The first exception is provided by Section 77 itself, and that is, in case of a life or industrial life policy whenever the grace period
provision applies.
The second is that covered by Section 78 of the Insurance Code, which provides:
SEC. 78. Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment,
so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until premium is actually paid.
A third exception was laid down in Makati Tuscany Condominium Corporation vs. Court of Appeals,[5] wherein we ruled that
Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial payment has been made
at the time of loss. We said therein, thus:
We hold that the subject policies are valid even if the premiums were paid on installments. The records clearly show that the
petitioners and private respondent intended subject insurance policies to be binding and effective notwithstanding the staggered
payment of the premiums. The initial insurance contract entered into in 1982 was renewed in 1983, then in 1984. In those three years,
the insurer accepted all the installment payments. Such acceptance of payments speaks loudly of the insurers intention to honor the
policies it issued to petitioner. Certainly, basic principles of equity and fairness would not allow the insurer to continue collecting and
accepting the premiums, although paid on installments, and later deny liability on the lame excuse that the premiums were not prepaid
in full.
Not only that. In Tuscany, we also quoted with approval the following pronouncement of the Court of Appeals in its Resolution
denying the motion for reconsideration of its decision:
While the import of Section 77 is that prepayment of premiums is strictly required as a condition to the validity of the contract, We are
not prepared to rule that the request to make installment payments duly approved by the insurer would prevent the entire contract of
insurance from going into effect despite payment and acceptance of the initial premium or first installment. Section 78 of the
Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an acknowledgment in the insurance
policy of receipt of premium as conclusive evidence of payment so far as to make the policy binding despite the fact that premium is
actually unpaid. Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but
does not expressly prohibit an agreement granting credit extension, and such an agreement is not contrary to morals, good customs,
public order or public policy (De Leon, The Insurance Code, p. 175). So is an understanding to allow insured to pay premiums in

installments not so prescribed. At the very least, both parties should be deemed in estoppel to question the arrangement they have
voluntarily accepted.
By the approval of the aforequoted findings and conclusion of the Court of Appeals, Tuscany has provided a fourth exception to
Section 77, namely, that the insurer may grant credit extension for the payment of the premium. This simply means that if the insurer
has granted the insured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the
policy should be allowed even though the premium is paid after the loss but within the credit term.
Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit term within
which to pay the premiums. That agreement is not against the law, morals, good customs, public order or public policy. The
agreement binds the parties. Article 1306 of the Civil Code provides:
ART. 1306. The contracting parties may establish such stipulations clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order, or public policy.
Finally in the instant case, it would be unjust and inequitable if recovery on the policy would not be permitted against Petitioner,
which had consistently granted a 60- to 90-day credit term for the payment of premiums despite its full awareness of Section
77. Estoppel bars it from taking refuge under said Section, since Respondent relied in good faith on such practice. Estoppel then is
the fifth exception to Section 77.
WHEREFORE, the Decision in this case of 15 June 1999 is RECONSIDERED and SET ASIDE, and a new one is hereby
entered DENYING the instant petition for failure of Petitioner to sufficiently show that a reversible error was committed by the Court
of Appeals in its challenged decision, which is hereby AFFIRMED in toto.
No pronouncement as to cost.
SO ORDERED.

UCPB v Masagana G.R. No. 137172. April 4, 2001

C.J. Davide
Facts:
In our decision of 15 June 1999 in this case, we reversed and set aside the assailed decision[1] of the Court of
Appeals, which affirmed with modification the judgment of the trial court (a) allowing Respondent to consign
the sum of P225,753.95 as full payment of the premiums for the renewal of the five insurance policies on
Respondents properties; (b) declaring the replacement-renewal policies effective and binding from 22 May
1992 until 22 May 1993; and (c) ordering Petitioner to pay Respondent P18,645,000.00 as indemnity for the
burned properties covered by the renewal-replacement policies. The modification consisted in the (1) deletion
of the trial courts declaration that three of the policies were in force from August 1991 to August 1992; and (2)
reduction of the award of the attorneys fees from 25% to 10% of the total amount due the Respondent.
Masagana obtained from UCPB five (5) insurance policies on its Manila properties.
The policies were effective from May 22, 1991 to May 22, 1992. On June 13, 1992, Masaganas properties
were razed by fire. On July 13, 1992, plaintiff tendered five checks for P225,753.45 as renewal premium
payments. A receipt was issued. On July 14, 1992, Masagana made its formal demand for indemnification for
the burned insured properties. UCPB then rejected Masaganas claims under the argument that the fire took
place before the tender of payment. Hence Masagana filed this case.
The Court of Appeals disagreed with UCPBs argument that Masaganas tender of payment of the premiums
on 13 July 1992 did not result in the renewal of the policies, having been made beyond the effective date
of renewal as provided under Policy Condition No. 26, which states:
26. Renewal Clause. -- Unless the company at least forty five days in advance of the end of the policy period
mails or delivers to the assured at the address shown in the policy notice of its intention not to renew the policy
or to condition its renewal upon reduction of limits or elimination of coverages, the assured shall be entitled to
renew the policy upon payment of the premium due on the effective date of renewal.
Both the Court of Appeals and the trial court found that sufficient proof exists that Masagana, which had
procured insurance coverage from UCPB for a number of years, had been granted a 60 to 90-day credit term for
the renewal of the policies. Such a practice had existed up to the time the claims were filed. Most of the
premiums have been paid for more than 60 days after the issuance. Also, no timely notice of non-renewal was
made by UCPB.
The Supreme Court ruled against UCPB in the first case on the issue of whether the fire insurance policies
issued by petitioner to the respondent covering the period from May 22, 1991 to May 22, 1992 had been
extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a
later date and after the occurrence of the risk insured against.
UCPB filed a motion for reconsideration.
The Supreme Court, upon observing the facts, affirmed that there was no valid notice of non-renewal of the
policies in question, as there is no proof at all that the notice sent by ordinary mailwas received by Masagana.
Also, the premiums were paid within the grace period.
Issue: Whether Section 77 of the Insurance Code of 1978 must be strictly applied to Petitioners advantage
despite its practice of granting a 60- to 90-day credit term for the payment of premiums.
Held: No. Petition denied.

Ratio:
Section 77 of the Insurance Code provides: No policy or contract of insurance issued by an insurance company
is valid and binding unless and until the premium thereof has been paid
An exception to this section is Section 78 which provides: Any acknowledgment in a policy or contract of
insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policy
binding, notwithstanding any stipulation therein that it shall not be binding until premium is actually paid.
Makati Tuscany v Court of Appeals- Section 77 may not apply if the parties have agreed to the payment in
installments of the premium and partial payment has been made at the time of loss.
Section 78 allows waiver by the insurer of the condition of prepayment and makes the policy binding despite
the fact that premium is actually unpaid. Section 77 does not expressly prohibit an agreement granting credit
extension. At the very least, both parties should be deemed in estoppel to question the arrangement they have
voluntarily accepted.
The Tuscany case has provided another exception to Section 77 that the insurer may grant credit extension for
the payment of the premium. If the insurer has granted the insured a credit term for the payment of the
premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even
though the premium is paid after the loss but within the credit term.
Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit
term within which to pay the premiums. That agreement is not against the law, morals, good customs, public
order or public policy. The agreement binds the parties.
It would be unjust if recovery on the policy would not be permitted against Petitioner, which had consistently
granted a 60- to 90-day credit term for the payment of premiums. Estoppel bars it from taking refuge since
Masagana relied in good faith on such practice. Estoppel then is the fifth exception.

G.R. No. 107062 February 21, 1994

PHILIPPINE PRYCE ASSURANCE CORPORATION, petitioner,
vs.
THE COURT OF APPEALS, (Fourteenth Division) and GEGROCO, INC., respondents.
Ocampo, Dizon & Domingo and Rey Nathaniel C. Ifurung for petitioner.
A.M. Sison, Jr. & Associates for private respondent.

NOCON, J.:
Two purely technical, yet mandatory, rules of procedure frustrated petitioner's bid to get a favorable decision from the Regional Trial
Court and then again in the Court of Appeals. 1 These are non-appearance during the pre-trial despite due notice, and non-payment of
docket fees upon filing of its third-party complaint. Just how strict should these rules be applied is a crucial issue in this present
dispute.
Petitioner, Interworld Assurance Corporation (the company now carries the corporate name Philippine Pryce Assurance Corporation),
was the butt of the complaint for collection of sum of money, filed on May 13, 1988 by respondent, Gegroco, Inc. before the Makati
Regional Trial Court, Branch 138. The complaint alleged that petitioner issued two surety bonds (No. 0029, dated July 24, 1987 and
No. 0037, dated October 7, 1987) in behalf of its principal Sagum General Merchandise for FIVE HUNDRED THOUSAND
(P500,000.00) PESOS and ONE MILLION (1,000,000.00) PESOS, respectively.
On June 16, 1988, summons, together with the copy of the complaint, was served on petitioner. Within the reglementary period, two
successive motions were filed by petitioner praying for a total of thirty (30) days extention within which to file a responsible pleading.
In its Answer, dated July 29, 1988, but filed only on August 4, 1988, petitioner admitted having executed the said bonds, but denied
liability because allegedly 1) the checks which were to pay for the premiums bounced and were dishonored hence there is no contract
to speak of between petitioner and its supposed principal; and 2) that the bonds were merely to guarantee payment of its principal's
obligation, thus, excussion is necessary. After the issues had been joined, the case was set for pre-trial conference on September 29,
1988. the petitioner received its notice on September 9, 1988, while the notice addressed to its counsel was returned to the trial court
with the notation "Return to Sender, Unclaimed." 2
On the scheduled date for pre-trial conference, only the counsel for petitioner appeared while both the representative of respondent
and its counsel were present. The counsel for petitioner manifested that he was unable to contract the Vice-President for operations of
petitioner, although his client intended to file a third party complaint against its principal. Hence, the pre-trial was re-set to October
14, 1988. 3
On October 14, 1988, petitioner filed a "Motion with Leave to Admit Third-Party Complaint" with the Third-Party Complaint
attached. On this same day, in the presence of the representative for both petitioner and respondent and their counsel, the pre-trial
conference was re-set to December 1, 1988. Meanwhile on November 29, 1988, the court admitted the Third Party Complaint and
ordered service of summons on third party defendants. 4
On scheduled conference in December, petitioner and its counsel did not appear notwithstanding their notice in open court. 5 The pretrial was nevertheless re-set to February 1, 1989. However, when the case was called for pre-trial conference on February 1, 1989,
petitioner was again nor presented by its officer or its counsel, despite being duly notified. Hence, upon motion of respondent,
petitioner was considered as in default and respondent was allowed to present evidenceex-parte, which was calendared on February
24, 1989. 6 Petitioner received a copy of the Order of Default and a copy of the Order setting the reception of respondent's
evidence ex-parte, both dated February 1, 1989, on February 16, 1989. 7
On March 6, 1989, a decision was rendered by the trial court, the dispositive portion reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Interworld Assurance
Corporation to pay the amount of P1,500,000.00 representing the principal of the amount due, plus legal interest
thereon from April 7, 1988, until date of payment; and P20,000.00 as and for attorney's fees. 8

Petitioner's "Motion for Reconsideration and New Trial" dated April 17, 1989, having been denied it elevated its case to the Court of
Appeals which however, affirmed the decision of the trial court as well as the latter's order denying petitioner's motion for
reconsideration.
Before us, petitioner assigns as errors the following:
I. The respondent Court of Appeals gravely erred in declaring that the case was already ripe for pre-trial conference
when the trial court set it for the holding thereof.
II. The respondent Court of Appeals gravely erred in affirming the decision of the trial court by relying on the ruling
laid down by this Honorable Court in the case of Manchester Development Corporation v. Court of Appeals, 149
SCRA 562, and disregarding the doctrine laid down in the case of Sun Insurance Office, Ltd. (SIOL) v. Asuncion,
170 SCRA 274.
III. The respondent Court of Appeals gravely erred in declaring that it would be useless and a waste of time to
remand the case for further proceedings as defendant-appellant has no meritorious defense.
We do not find any reversible error in the conclusion reached by the court a quo.
Relying on Section 1, Rule 20 of the Rules of court, petitioner argues that since the last pleading, which was supposed to be the thirdparty defendant's answer has not been filed, the case is not yet ripe for pre-trial. This argument must fail on three points. First, the trial
court asserted, and we agree, that no answer to the third party complaint is forthcoming as petitioner never initiated the service of
summons on the third party defendant. The court further said:
. . . Defendant's claim that it was not aware of the Order admitting the third-party complaint is preposterous. Sec. 8,
Rule 13 of the Rules, provides:
Completeness of service . . . Service by registered mail is complete upon actual receipt by the
addressee, but if he fails to claim his mail from the post office within five (5) days from the date of
first notice of the postmaster, service shall take effect at the expiration of such time. 9
Moreover, we observed that all copies of notices and orders issued by the court for petitioner's counsel were returned with the notation
"Return to Sender, Unclaimed." Yet when he chose to, he would appear in court despite supposed lack of notice.
Second, in the regular course of events, the third-party defendant's answer would have been regarded as the last pleading referred to in
Sec. 1, Rule 20. However, petitioner cannot just disregard the court's order to be present during the pre-trial and give a flimsy excuse,
such as that the answer has yet to be filed.
The pre-trial is mandatory in any action, the main objective being to simplify, abbreviate and expedite trial, if not to fully dispense
with it. Hence, consistent with its mandatory character the Rules oblige not only the lawyers but the parties as well to appear for this
purpose before the Court 10 and when a party fails to appear at a pre-trial conference he may be non-suited or considered as in
default. 11
Records show that even at the very start, petitioner could have been declared as in default since it was not properly presented during
the first scheduled pre-trial on September 29, 1988. Nothing in the record is attached which would show that petitioner's counsel had a
special authority to act in behalf of his client other than as its lawyer.
We have said that in those instances where a party may not himself be present at the pre-trial, and another person substitutes for him,
or his lawyer undertakes to appear not only as an attorney but in substitution of the client's person, it is imperative for that
representative or the lawyer to have "special authority" to enter into agreements which otherwise only the client has the capacity to
make. 12
Third, the court of Appeals properly considered the third-party complaint as a mere scrap of paper due to petitioner's failure to pay the
requisite docket fees. Said the court a quo:
A third-party complaint is one of the pleadings for which Clerks of court of Regional Trial Courts are mandated to
collect docket fees pursuant to Section 5, Rule 141 of the Rules of Court. The record is bereft of any showing tha(t)
the appellant paid the corresponding docket fees on its third-party complaint. Unless and until the corresponding
docket fees are paid, the trial court would not acquire jurisdiction over the third-party complaint (Manchester

Development Corporation vs. Court of Appeals, 149 SCRA 562). The third-party complaint was thus reduced to a
mere scrap of paper not worthy of the trial court's attention. Hence, the trial court can and correctly set the case for
pre-trial on the basis of the complaint, the answer and the answer to the counterclaim. 13
It is really irrelevant in the instant case whether the ruling in Sun Insurance Office, Ltd. (SIOL) v. Asuncion 14 or that in Manchester
Development Corp. v. C.A. 15 was applied. Sun Insurance and Manchester are mere reiteration of old jurisprudential pronouncements
on the effect of non-payment of docket fees. 16 In previous cases, we have consistently ruled that the court cannot acquire jurisdiction
over the subject matter of a case, unless the docket fees are paid.
Moreover, the principle laid down in Manchester could have very well been applied in Sun Insurance. We then said:
The principle in Manchester [Manchester Development Corp. v. C.A., 149 SCRA 562 (1987)] could very well be
applied in the present case. The pattern and the intent to defraud the government of the docket fee due it is obvious
not only in the filing of the original complaint but also in the filing of the second amended complaint.
xxx xxx xxx
In the present case, a more liberal interpretation of the rules is called for considering that, unlike Manchester, private
respondent demonstrated his willingness to abide by the rules by paying the additional docket fees as required. The
promulgation of the decision in Manchester must have had that sobering influence on private respondent who thus
paid the additional docket fee as ordered by the respondent court. It triggered his change of stance by manifesting
his willingness to pay such additional docket fees as may be ordered. 17
Thus, we laid down the rules as follows:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed
docket fee, that vests a trial court with jurisdiction over the subject-matter or nature of the action. Where the filing of
the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee
within a reasonable time, but in no case beyond the applicable prescriptive or reglamentary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be
considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of said
fee within a prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of
the prescribed filing fee, but subsequently, the judgment awards a claim nor specified in the pleading, or if specified
the same has not been left for determination by the court, the additional filing fee therefor shall constitute a lien on
the judgment. It shall be the responsibility of the clerk of court or his duly authorized deputy to enforce said lien and
assess and collect the additional
fee. 18
It should be remembered that both in Manchester and Sun Insurance plaintiffs therein paid docket fees upon filing of their respective
pleadings, although the amount tendered were found to be insufficient considering the amounts of the reliefs sought in their
complaints. In the present case, petitioner did not and never attempted to pay the requisite docket fee. Neither is there any showing
that petitioner even manifested to be given time to pay the requisite docket fee, as in fact it was not present during the scheduled pretrial on December 1, 1988 and then again on February 1, 1989. Perforce, it is as if the third-party complaint was never filed.
Finally, there is reason to believe that partitioner does not really have a good defense. Petitioner hinges its defense on two arguments,
namely: a) that the checks issued by its principal which were supposed to pay for the premiums, bounced, hence there is no contract of
surety to speak of; and 2) that as early as 1986 and covering the time of the Surety Bond, Interworld Assurance Company (now Phil.
Pryce) was not yet authorized by the insurance Commission to issue such bonds.
The Insurance Code states that:
Sec. 177. The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is perfected
and delivered to the obligor. No contract of suretyship or bonding shall be valid and binding unless and until the
premium therefor has been paid, except where the obligee has accepted the bond, in which case the bond becomes
valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the surety. . . .
(emphasis added)

The above provision outrightly negates petitioner's first defense. In a desperate attempt to escape liability, petitioner further asserts
that the above provision is not applicable because the respondent allegedly had not accepted the surety bond, hence could not have
delivered the goods to Sagum Enterprises. This statement clearly intends to muddle the facts as found by the trial court and which are
on record.
In the first place, petitioner, in its answer, admitted to have issued the bonds subject matter of the original action. 19 Secondly, the
testimony of Mr. Leonardo T. Guzman, witness for the respondent, reveals the following:
Q. What are the conditions and terms of sales you extended to Sagum General Merchandise?
A. First, we required him to submit to us Surety Bond to guaranty payment of the spare parts to be
purchased. Then we sell to them on 90 days credit. Also, we required them to issue post-dated
checks.
Q. Did Sagum General merchandise comply with your surety bond requirement?
A. Yes. They submitted to us and which we have accepted two surety bonds.
Q Will you please present to us the aforesaid surety bonds?
A. Interworld Assurance Corp. Surety Bond No. 0029 for P500,000 dated July 24, 1987 and
Interworld Assurance Corp. Surety Bond No. 0037 for P1,000.000 dated October 7, 1987. 20
Likewise attached to the record are exhibits C to C-18 21 consisting of delivery invoices addressed to Sagum General Merchandise
proving that parts were purchased, delivered and received.
On the other hand, petitioner's defense that it did not have authority to issue a Surety Bond when it did is an admission of fraud
committed against respondent. No person can claim benefit from the wrong he himself committed. A representation made is rendered
conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon. 22
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dismissing the petition before them and affirming the
decision of the trial court and its order denying petitioner's Motion for Reconsideration are hereby AFFIRMED. The present petition is
DISMISSED for lack of merit.

Double insurance

Pioneer v Yap G.R. No. L-36232 December 19, 1974

J. Fernandez
Facts:
Respondent Oliva Yap was the owner of a store in a two-storey building where she sold shopping bags and footwear.
Chua Soon Poon, her son-in-law, was in charge of the store.
Yap took out a Fire Insurance Policy No. 4216 from Pioneer Insurance with a value of P25,000.00 covering her stocks,
office furniture, fixtures and fittings.
Among the conditions in the policy executed by the parties are the following:
unless such notice be given and the particulars of such insurance or insurances be stated in, or endorsed on this Policy by
or on behalf of the Company before the occurrence of any loss or damage, all benefits under this Policy shall be
forfeited Any false declaration or breach or this condition will render this policy null and void.
Another insurance policy for P20,000.00 issued by Great American covering the same properties. The endorsement
recognized co-insurance by Northwest for the same value.
Oliva Yap took out another fire insurance policy for P20,000.00 covering the same properties from the Federal Insurance
Company, Inc., which was procured without notice to and the written consent of Pioneer.
A fire broke out in the building, and the store was burned. Yap filed an insurance claim, but the same was denied for
a breach.
Oliva Yap filed a case for payment of the face value of her fire insurance policy. The insurance company refused to pay
because she never informed Pioneer of another insurer. The trial court decided in favor of Yap. The CA affirmed.
Issue:
Whether or not petitioner should be absolved from liability on the Pioneeer policy on account of any violation of the coinsurance clause
Held: No. Petition dismissed.
Ratio:
There was a violation. The insurance policy for P20,000.00 issued by the Great American, ceased to be recognized by
them as a co-insurance policy.
The endorsement shows the clear intention of the parties to recognize on the date the endorsement was made, the
existence of only one co-insurance, the Northwest one. The finding of the Court of Appeals that the Great American
Insurance policy was substituted by the Federal Insurance policy is indeed contrary to said stipulation.
Other insurance without the consent of Pioneer would avoid the contract. It required noaffirmative act of election on the
part of the company to make operative the clause avoiding the contract, wherever the specified conditions should occur.
Its obligations ceased, unless, being informed of the fact, it consented to the additional insurance.
The validity of a clause in a fire insurance policy to the effect that the procurement of additional insurance without the
consent of the insurer renders the policy void is in American jurisprudence.
Milwaukee Mechanids' Lumber Co., vs. Gibson- "The rule in this state and practically all of the states is to the effect that
a clause in a policy to the effect that the procurement of additional insurance without the consent of the insurer renders the
policy void is a valid provision.
In this jurisdiction, General Insurance & Surety Corporation vs. Ng Hua- The annotation then, must be deemed to be a
warranty that the property was not insured by any other policy. Violation thereof entitled the insurer to rescind.
Furthermore, even if the annotations were overlooked the defendant insurer would still be free from liability because there
is no question that the policy issued by General Indemnity has not been stated in nor endorsed on Policy No. 471 of
defendant. The obvious purpose of the aforesaid requirement in the policy is to prevent over-insurance and thus avert the
perpetration of fraud where a fire would be profitable to the insured.

UNION MANUFACTURING CO., INC. VS. PHILIPPINE GUARANTYCO., INC.47 SCRA 271 (G.R. NO.
L-27932)OCTOBER 30,

FACTS: On January 12, 1962, the Union Manufacturing Co., Inc. obtained certain loans from the Republic
Bank in the total sum of 415,000.00. To secure the payment thereof, UMC executed real and chattel mortgage
on certain properties. The Republic Bank procured from the defendant Philippine Guaranty Co., Inc. an
insurance coverage on loss against fire for 500,000.00 over the properties of the UMC, as described in
defendants cover note dated September 25, 1962, with the annotation that loss or damage, if any, under said
cover note is payable to Republic Bank as its interest may appear, subject however to the printed conditions of
said defendants Fire Insurance Policy Form. On September 6, 1964, a fire occurred in the premises of UMC
and on October 6, 1964, UMC filed its fire claim with the PGC Inc., thru its adjuster, H.H. Bayne Adjustment
Co., which was denied by said defendant in its letter dated November 26, 1964 on the following ground:
Policy Condition No. 3 and/or the Other Insurance Clause of the policy was violated because you did not
give notice to us of the other insurance which you had taken from New India for 80,000.00. Sincere Insurance
for 25,000.00 and Manila Insurance for200,000.00 with the result that these insurances of which we became
aware of only after the fire, werenot endorsed on our policy.
ISSUE: Whether Republic Bank can recover.
HELD: Without deciding- whether notice of other insurance upon the same property must be given in writing,
or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral or
written, we hold that in the absolute absence of such notice when it is one of the conditions specified in the fire
insurance policy, the policy is null and void. (Santa Ana vs. Commercial Union Ass. Co., 55 Phil. 128).If the
insured has violated or failed to perform the conditions of the contract, and such a violation or want of
performance has not been waived by the insurer, then the insured cannot recover. Courts are not permitted to
make contracts for the parties. The functions and duty of the courts consist simply in enforcing and carrying out
the contracts actually made. While it is true, as a general rule, that contracts of insurance are construed most
favorably to the insured, yet contracts of insurance, like other contracts, are to be construed according to the
sense and meaning of the terms which the parties themselves have used. If such terms are clear and
unambiguous they mus tbe taken and understood in their plain, ordinary and popular sense. The annotation then,
must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof
entitles the insurer to rescind. The materiality of non-disclosure of other insurance policies is not opento doubt.
The insurance contract may be rather onerous, but that in itself does not justify the abrogation of its express
terms, terms which the insured accepted or adhered to and which is the law between the contracting parties.

Geagonia v CA G.R. No. 114427 February 6, 1995

Facts: Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00. The 1
year policy and covered thestock trading of dry goods.
The policy noted the requirement that "3. The insured shall give notice to the Company of any insurance
or insurances already effected, or which may subsequently be effected, covering any of the property or
properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless
notice be given and the particulars of such insurance or insurances be stated therein or endorsed in this policy
pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of
any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this
condition shall not apply when the total insurance orinsurances in force at the time of the loss or damage is not
more than P200,000.00."
The petitioners stocks were destroyed by fire. He then filed a claim which was subsequently denied because the
petitioners stocks were covered by two other fire insurance policies for Php 200,000 issued by PFIC. The basis
of the private respondent's denial was the petitioner's alleged violation of Condition 3 of the policy.
Geagonia then filed a complaint against the private respondent in the Insurance Commission for the recovery of
P100,000.00 under fire insurance policy and damages. He claimed that he knew the existence of the
other two policies. But, he said that he had no knowledge of the provision in the private respondent's policy
requiring him to inform it of the prior policies and this requirement was not mentioned to him by the private
respondent's agent.
The Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge of the
existence of the two fire insurance policies obtained from the PFIC; that it was Cebu Tesing Textiles w/c
procured the PFIC policies w/o informing him or securing his consent; and that Cebu Tesing Textile, as his
creditor, had insurable interest on the stocks.
The Insurance Commission then ordered the respondent company to pay complainant the sum of P100,000.00
with interest and attorneys fees.
CA reversed the decision of the Insurance Commission because it found that the petitioner knew of the
existence of the two other policies issued by the PFIC.
Issues:
1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire insurance and
thereby violated Condition 3 of the policy.
2. WON he is prohibited from recovering
Held: Yes. No. Petition Granted
1. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC. His letter of
18 January 1991 to the private respondent conclusively proves this knowledge. His testimony to the contrary
before the Insurance Commissioner and which the latter relied upon cannot prevail over a
written admission made ante litem motam. It was, indeed, incredible that he did not know about the prior
policies since these policies were not new or original.
2. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of
insurance policies should be construed most strictly against those for whose benefits they are inserted, and most
favorably toward those against whom they are intended to operate.

With these principles in mind, Condition 3 of the subject policy is not totally free from ambiguity and must be
meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to double
insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies
obtained.
Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total insurance in
force at the time of loss does not exceed P200,000.00, the private respondent was amenable to assume a coinsurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to discourage over-insurance.
Indeed, the rationale behind the incorporation of "other insurance" clause in fire policies is to prevent overinsurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies
from two or more insurers in a total amount that exceeds the property's value, the insured may have an
inducement to destroy the property for the purpose of collecting the insurance. The public as well as the insurer
is interested in preventing a situation in which a fire would be profitable to the insured.