G.R. No.
L-10436 January 24, 1916
FRANCISCA EGUARAS, plaintiff-appellee,
vs.
THE GREAT EASTERN LIFE ASSURANCE COMPANY, LTD., and WEST
G. SMITH, defendants.
THE GREAT EASTERN LIFE ASSURANCE COMPANY, LTD., appellant.
Crossfield and O'Brien for appellant.
Pedro Guevara for appellee.
TORRES, J.:
This is an appeal filed through bill of exceptions by the counsel for
the defendant, the Great Eastern Life Assurance Company, Ltd.,
from the judgment of September 14, 1914, whereby the Court of
First Instance of Laguna sentenced it to pay to the plaintiff the sum
of P5,000, the value of the insurance policy in question, with legal
interest from April 15, 1913, the date when the complaint was filed,
and the costs. W.G. Smith was absolved from the complaint, and the
claim fro damages dismissed, as they were not proven.
On April 14, 1913, counsel for Francisca Eguaras filed a written
complaint in the said Laguna court, alleging as a cause of action that
about October 14, 1912, her son-in-law Dominador Albay had
applied in writing to the defendant insurance company to insure his
life for the sum of P5,000, naming as the beneficiary in case of his
death the plaintiff Francisca Eguaras; that after compliance with the
requisites and the investigation carried on by the defendant
company, and it had been satisfied concerning the physical
condition of the applicant, it accepted the application for insurance
and on November 6, 1912, issued policy No. 5592, Exhibit A, which
has been made a part of the complaint, whereby the said insurance
company insured the life of the said Dominador Albay in the sum of
P5,000, payable in the event of his death to Francisca Eguaras; that
on December 6, 1912, said policy No. 5592 being in force, the
insured Dominador Albay, died in the municipality of Santa Cruz,
Laguna, and despite the fact that the beneficiary submitted
satisfactory proofs of his death and that the defendant company
investigated the event, still it refused and continues to refuse to pay
to the plaintiff the value of the policy, Exhibit A, thereby causing
damages estimated at P1,000. The court was therefore asked to
render judgment against the Great Eastern Life Assurance Company,
Ltd., and its general agent, West G. Smith, by sentencing them to
pay to the plaintiff the sum of P5,000, the value of policy No. 5592,
plus the sum of P1,000 for damages inflicted upon them, in addition
to the costs of the suit.
The demurrer filed to the foregoing complaint having been
overruled, counsel for the insurance company and for West G. Smith
replied thereto, admitting the allegations of the complaint with
respect to the legal status of the parties by denying all the rest, and
setting forth in special defense that the insurance policy issued in
the name of Dominador [Albay] had been obtained through fraud
and deceit known and consented to by the interested parties and is
therefore completely illegal, void, and ineffective; wherefore he
prayed that the defendants be absolved from the complaint, with
the costs against the plaintiff.
In answer to the reply of the defendants the plaintiff alleged that
the grounds set forth in the special defense had been made the
basis of a criminal complaint against the plaintiff, Francisca Eguaras,
and Ponciano Remegio for the crime of frustrated estafa in the Court
of First Instance of Laguna, but that they had been acquitted on said
complaint, as is demonstrated by the copy of the judgment, marked
Exhibit b, which was made an integral part of the answer, and
therefore the plaintiff prayed that the relief sought in her complaint
be granted.
After trial and examination of the evidence submitted by both
parties, the court rendered the judgment that has been set forth,
whereto the defendant, The Great Eastern Life Assurance Company,
Ltd., saved its exception, and in writing moved for a reopening of the
case and a new trial. This motion was denied, with exception on
appellant's part, so the corresponding bill of exceptions was filed,
approved and forwarded to the clerk of this court.
The question to be determined in this suit consists in whether the
life insurance obtained by Dominador Albay, with the assistance of
the insurance agent, Ponciano Remegio, is legal and valid or whether
on the contrary it was issued through fraud and deceit, and in such
case, whether the defendant, The Great Eastern Life Assurance
Company, Ltd., is still under obligation to pay the value thereof to
the plaintiff.
It is demonstrated in the case by evidence submitted by the plaintiff
that on October 14, 1912, through the efforts of the defendant
company's agent, Ponciano Remigio, Dominador Albay got the
insurance company to insure his life for the sum of P5,000 and that
through the representations and statements made by said
Dominador Albay in his application and the favorable medical
examination made by Dr. Jose A. Vidal (record, p. 126), the company
agreed to the life insurance sought, and on November 6,. 1912,
issued the policy No. 5592, the value whereof was payable to the
insured's mother-in-law, Francisca Eguaras. One month after said
insurance policy had been issued, that is, on December 6, 1912, the
insured Dominador Albay died in the municipality of Santa Cruz,
Laguna, of intestinal occlusion, according to the certificate of Dr. R.
Kamatoy, after an illness of three days, wit medical attendance.
(Exhibit B, p. 154; Exhibit B, criminal case No. 2616.) The defendant
company, according to the declaration of its own agent in these
Islands, despite having received satisfactory proofs of the death of
the insured, refused to pay the amount of the insurance, alleging
that it had been secured through fraud and deceit and was therefore
illegal and void.
The contract of life insurance executed between The Great Eastern
Life Assurance Company, Ltd., and Dominador Albay is set forth in
the policy itself and in the original and supplementary applications
signed apparently by Dominador Albay, it appearing to have been
stipulated that "This insurance is granted in consideration of the
foregoing statements and agreement in the application presented to
obtain this policy, which application forms a part of the present
contract." This condition is repeated in Clause VIII of the conditions
and the privileges granted to the insured, that "This policy and the
application presented to secure it, taken together, constitute the
whole contract, which cannot be altered except in writing by the
general manager or some person expressly appointed therefor by
the board of directors."
Now then, in the supplementary application presented by the
insured on October 14, 1912, to the question: "Do you think that
you are free from disease and that you have a good constitution?"
he answered: "Yes;" and to another question: "Have you suffered
from any affection of ... (c) Chest Cough, asthma, spitting blood,
pleurisy?" the applicant answered: "No." (p. 126.)
The physician of the insurance company in charge of the physical
examination of the person applying for insurance in Laguna, Dr. Jose
A. Vidal, made the physical examination of the person who
presented himself to him as Dominador Albay and in his report to
the said company (pp. 126-127), dated October 14, 1912, he
recorded that the development, expansion, percussion, and
auscultation of the applicant's chest were "normal" and
recommended to the company that it could "take the risk" of
insuring the applicant Dominador Albay and on said professional
report a certain Lunn, who must be the medical officer of the
company, placed his O.K. On the basis of these medical reports and
of the exact and faithful performance of its obligations on the part of
the insurance agent, Ponciano Remigio, The Great Eastern Life
Assurance Company issued the corresponding policy in favor of
Dominador Albay, insuring his life for P5,000. The first premium,
amounting to P82.25, was paid on November 6, 1912, and while said
policy was in full force and effect the death of the death of the
insured Albay occurred the next month.
It appears from the record that the insured had knowledge of the
false replied contained in the two applications for insurance and
knowing permitted fraud to be practised upon the insurance
company, for in his acknowledgment and consent his mother-in-law
was designated as the beneficiary of the insurance, despite the fact
that he had children and his mother was still living. In the present
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case the fraud consisted in the fact that a healthy and robust person
was substituted in place of insured invalid when Dr. Vidal made the
physical examination of the one who seeking to be insured, for the
real person who desired to be insured and who ought to have been
examined was in bad health on and before the date of executing the
insurance contract of which facts the insured Dominador Albay and
the insurance agent Ponciano Remigio had full knowledge.
The insurance company endeavored to prove by means of cross-
examination of Ponciano Remigio, while he was testifying as a
witness for the plaintiff, and by means of the declaration of another
insurance agent, Jose D. Arce, that said Ponciano Remigio had
always been in the habit of securing the insurance of sick persons,
who died shortly after it was issued, in fraud and to the serious
injury of the defendant company; but at the request of the
opposition party the court overruled this attempt of the defendant
and did not permit proof of specific fraudulent acts performed by its
agent Remegio. It is to be observed that the said Remegio has
already been convicted of the crime of estafa and sentenced to two
months and one day of arresto and to the restitution of P20 to The
Insular Life Insurance Company, as stated in the copy of the
sentence. (Record, p. 158.)
It is unquestionable that the person who on October 14, 1912,
presented himself to Dr. Vidal to be examined under the name of
Dominador Albay, and who signed the supplementary application
before said physician, was not the real Dominador Albay, who died
on December 6, 1912. In case No. 2616, prosecuted against
Ponciano Remegio, Castor Garcia, and Francisca Eguaras for
frustrated estafa, part of which was exhibited at the hearing in this
suit, Dr. Vidal testified that on October 14, 1912, while he was in the
employ of the defendant company as a physician, he proceeded to
examine, in San Pablo, Laguna, a person presented to him by the
insurance agent, Ponciano Remegio, who said that such person was
named Dominador Albay and desired to insured; that after he had
conducted the examination for the space of about an hour the
person examined by him signed the supplementary application
(Exhibit F) with the name of Dominador Albay; that the person
whom he examined and who signed the application with the name
of Dominador Albay, if he were not mistaken, was the individual he
saw before him, the accused Castor Garcia. When he saw urged to
state positively whether he had any doubt that the person he had
examined was the accused Castor Garcia, he first asked permission
to examine the latter's body, and finally reaffirmed that, judging
from the general appearance of the accused, Castor Garcia, the
latter was the very person he had examined in San Pablo and that he
had assured Major Grove of the Constabulary and the attorney of
the defendant company that said Garcia was the person who had
presented himself to him, saying that his name was Dominador
Albay. He further stated that about March 24, 1913, Ponciano
Remegio had visited his house in Manila to request that he should
testify in favor of said Remegio, who at the same time had offered
him P600 not to identify the person of Castor Garcia at the trial.
Major Grove of the Constabulary affirmed under oath at the trial of
the same case that on April 4, 1913, when Dr. Vidal and the accused
Castor Garcia were in his house, Dr. Vidal had told him that he had
not the least doubt that Castor Garcia was the person whom he had
examined in San Pablo.
Attorney O'Brien, among other things, stated in a sworn declaration,
that Ponciano Remegio interviewed him in his office about March
15, 1914, telling him that the signatures affixed to the original
application for insurance and the supplementary application signed
before Dr. Vidal at the time of the physical examination were false,
and then indicated where he could get documents with authentic
signatures of the said Albay. Remegio further told him that he
(Remegio) was disgusted with his accomplices because they could
not reach an agreement regarding the distribution among them of
the amount of the policy when it should be collected. All the
statements of said Remegio were made before him under oath as a
notary public in the presence of Jose D. Arce, which statements
were annotated in the memorandum, Exhibit 3, he being unable to
draw up a formal document for signature as the day of the interview
was Sunday and he had no stenographer in his office. Jose D. Arce
corroborated the statements of the foregoing witness, and added
that as the said Ponciano Remegio lodged in his house, the latter
had told him the details of the substitution of another person in
place of Dominador Albay at the examination made by the physician
of the company, and that the cedulas of said Albay and two letters
(pp. 171, 173), in which authentic signatures of Albay appeared,
were delivered to Attorney O'Brien by Albay's mother, named
Manuela Flores. Captain Barrows of the Constabulary testified how
Ponciano Remegio had promised O'Brien in a conference held by the
three in his house in Santa Cruz some ten days before the trial, that
on the day of the trial he would testify that the person who had
signed the applications with the name of Dominador Albay was
Castor Garcia, who was then outside of the Philippine Islands (p. 35).
It is true that said Remegio denied all this in his testimony given at
the trial in favor of the plaintiff, but it is to be observed that the said
Remegio in March, 1914, told Attorney O'Brien in his office in Manila
that the person who had signed the insurance applications had left
the Philippines, but afterwards he stated to said O'Brien and
Barrows that the person mentioned was Castor Garcia, and it the
said Remegio did not so testify at the trial it was through fear of
being prosecuted for perjury.
Dr. Getrudo Reyes stated at the trial that in March, 1912, he had
been consulted by Dominador Albay regarding the cough he had and
after a medical examination witness had reached the conclusion that
the person concerned was suffering from tuberculosis in the first
stage, although it does not appear that said physician made a
microscopic analysis of the patient's sputum; but there is
circumstantial evidence in the case that the said Dominador Albay
died of tuberculosis, for his own mother, Manuela Flores, so
affirmed in the affidavit (p. 199) drawn up before a notary on April
17, 1914, although said affidavit was not admitted as evidence
because she repudiated its contents in the courts. The motive for
this change of front on the part of the said Manuela Flores seems to
have been due to the fact that the insurance company was unwilling
to give her and her husband money for the statements they would
make in the court, for in the letter (Exhibit 9) of Leodegario v.
Lambonga, Manuela Flores' husband, addressed to Jose D. Arce on
August 26, 1914, Lambonga informed Arce that they would not
appear the next day, not saying where, because they first wanted to
agree upon the sum that they would receive in the event Smith,
defendant's agent, should win the case, and accordingly it execute
"an instrument we can hold to" (literal). Jose Valencia testified that
on November 27, 1912, he went to the municipal building to sign a
declaration in the name Dominador Albay because the latter was
then ill and could not leave his house a fact admitted by plaintiff.
Attorney O'Brien also testified that Ponciano Remegio had assured
him that Dominador Albay was suffering from tuberculosis, and also
that Remegio had told him that there was a physician in Santa Cruz,
who must have been Dr. Reyes, that could attest that said Albay was
really affected with tuberculosis.
It is immaterial that Albay may have died of intestinal occlusion, as
Dr. Kamatoy affirms in the death certificate (p. 154), because said
aliment does not demonstrate that Albay was not suffering from
some other chronic disease; or that in the month of October, 1912,
when he applied for insurance on his life, he was not affected by
malady that would have been sufficient cause for his rejection by
the physician of the insurance company.
To secure the insurance on the life of Dominador Albay, the parties
interested used a person who signed the name of Dominador Albay
as the insured in all the documents connected with his application,
for the signatures to the letter and the document relating to the
insurance, exhibited at the trial, and signed by "Dominador Albay"
(pp. 50, 54), are different from the authentic signatures of the real
Dominador Albay which appear in the official documents and the
instruments of conveyance of reality. (Exhibits 12, 13, 15, pp. 207-
211 of the record.) The signatures on these three documents of an
official nature, as well as those on the letters (Exhibits 7 and 8; pp.
171, 173) addressed by the said Albay to his sister Odang and his
relative Lambonga, although not admitted as evidence because they
were not duly identified are the genuine signatures of the real
Dominador Albay, who was accustomed to fashion his letters in the
Spanish style of handwriting. The documents exhibited under the
letters D, E, F, and G by the plaintiff, which bear the signatures of
"Dominador Albay," appear to have been signed by the same hand,
and therefore it is not strange that the signatures on these
2
documents are similar, for it is to be observed that the characters in
these signatures are firm and strong, demonstrating that the person
who made them had learned to write in American schools where the
style of handwriting taught is very different from the Spanish.
Plaintiff's claim is based especially on the genuineness of the
signatures of "Dominador Albay" in the elector's oath (Exhibit G, p.
124), which was signed before the board of election inspectors on
May 4, 1912, and duly identified by the chairman of said board,
Proceso Maximo, on the contention that if the signature on said
elector's oath is genuine, those which appear on the insurance
applications, Exhibits E and F (pp. 125-127), and that affixed to the
letter, Exhibit D (p. 50), addressed by said Albay in November, 1912,
to the insurance also be true and genuine. But if the real Dominador
Albay wrote in the Spanish style in the months of January, February,
and March of the year 1912, as demonstrated by the signatures
affixed to the documents Exhibits 7, 8, and 15, it is impossible to
believe that he should have radically changed his form of writing,
two months later by adopting a different handwriting, as can be
seen in the alleged signature, said to be authentic, in the elector's
oath, Exhibit G, written on May 4, 1912, and subsequently imitated
in the months of October and November of the same year in the
Exhibits E, F, and D. The signatures that appear on the papers
referring to the insurance are so different from those which appear
on the other documents which unquestionably bear the signature of
the real Dominador Albay that, in consideration of the short time
which elapsed between the last genuine signature in March, 1912,
when he sold a tract of land, and his oath as elector in May of the
same year 1912, and the great difference that exist between the two
signatures, we can do no less than reach the conclusion already
stated that there was a person who passed himself off as Dominador
Albay and said person was the one who went to signing the
documents relating to the alleged insurance of Dominador Albay
who died on December 6, 1912.
Moreover, Dominador Albay's age, according to the alleged
insurance application and the insurance policy, was 40 years in 1912,
while according to his personal cedulas he was only 32 years of age
in 1911, so that when he was insured he must have been only 33.
It is therefore proven that the signatures on the insurance
applications reading "Dominador Albay" are false and forged; that
the person who presented himself to Dr. Vidal to be examined was
not the real Dominador Albay, but another different person; that at
the time of the application for insurance and the issuance of the
policy which is the subject matter of this suit the real Dominador
Albay was informed of all those machinations, wherefore it is plain
that the insurance contract between the defendant and Dominador
Albay is null and void because it is false, fraudulent and illegal.
Article 1269 of the Civil Code states:
There is deceit when by words or insidious machinations on the part
of one of the contracting parties the other is induced to execute a
contract which without them he would not have made.
It is essential to the nature of the deceit, to which the foregoing
article refers, that said deceit be prior to or contemporaneous with
the consent that is a necessary requisite for perfecting the contract,
but not that it may have occurred or happened thereafter. A
contract is therefore deceitful, for the execution whereof the
consent of one of the parties has been secured by means of fraud,
because he was persuaded by words or insidious machinations,
statements or false promises, and a defective consent wrung from
him, even though such do not constitute estafa or any other criminal
subject to the penal law.
The defendant company accepted the application for insurance
made by Dominador Albay and executed the contract comprised
under articles 416 of the Code of Commerce, although for the
perfecting thereof the insured, Albay, as he was not in good health,
by connivance with the insurance company's agent, presented
Castor Garcia to the physician Vidal, who was commissioned by the
company to examine applicants for life insurance and in view of the
favorable report of the said physician, who reported and certified
that the person examined by him under the name of Dominador
Albay was in good health and possessed the qualifications required
by said insurance company for perfecting the contract, so the
company freely and willingly consented to the execution thereof,
effectively induced thereto by the result of the medical examination
and of the favorable professional report issued in view of the
appearance of an individual who was in good health, but different
from the individual who was seeking to be insured and who died one
month and twenty-three days after the insurance had been granted.
The fraud which gave rise to the mistaken consent, given by the
defendant company to the application for insurance made by Albay
and to the execution of the contract through deceit, is plain and
unquestionable. This fraud consisted in the substitution at the
examination of Castor Garcia in place of the insured Dominador
Albay, and as the deceit practiced in the said contract is of a serious
nature, the same is ipso facto void and ineffective, in accordance
with the provisions of article 1270 of the Civil Code.
If there had been no substitution, if the insured Dominador Albay
had been the person who appeared and was examined by the
physician Vidal, said Albay being manifestly different from Castor
Garcia, the said physician would not have affirmed at the trial that it
was Garcia who presented himself for the physical examination,
accompanied by the insurance company's agent, at his residence in
San Pablo, and he would have failed to recognize him when he saw
him in the court, nor is any mistake on the physician's part possible
as the inspection and physical examination of the individual lasted
for something like the space of an hour.
The supposition that Dominador Albay was not ill in October, 1912,
would not explain why he did not present himself in person to be
examined by the physician Vidal; and when he failed to do so and by
agreement with the agent Remegio was willing to be substituted by
Castor Garcia to the end that in any event no defect or personal
quality should be discovered to hinder the perfecting of the
insurance contract, such a change in the person constitutes one of
the means of fraud which, although it may not partake of the nature
of a crime, essentially nullifies the insurance contract executed.
With this array of circumstantial evidence derived from facts duly
proven as a result of the present suit, we get, if not a moral
certainly, at least a full conviction that when Castor Garcia
presented himself to be examined by the physician Vidal in place of
Dominador Albay, serious deceit occurred in perfecting the
insurance contract, for had the agent of the company not been
deceived it would not have granted the insurance applied for by
Albay, nor would it have executed the contract by virtue of whereof
payment is claimed of the value of policy obtained through fraud;
and consequently on such assumptions it is improper, nor is it
permitted by the law, to order collection of the amount claimed.
With reference to the effect produced by the final judgment
rendered in the cae for estafa in connection with this suit, it is
unquestionable that said judgment does not give rise to the
presumption of res adjudicata, applicable to the present case (art.
1252, Civil Code), nor does it constitute an estoppel to the matters
litigated in the said criminal case for estafa and consequently there
cannot be applied in the present suit the principle laid down in the
decision of Pealosa vs. Tuason (22 Phil. Rep., 303), for the reason
that said case was instituted by virtue of an information on the
charge that the deceitful acts executed by the company's agent and
others interested in the result of the fraud constitute the crime of
estafa to the injury of the said insurance company, even though the
court acquitted the accused on account of the lack of satisfactory
proof of the acts ascribed to them and of their guilt, while the
exception taken by the defendant company is based on the nullity of
the insurance contract because deceit occurred in the perfecting and
execution thereof.
In view of that acquittal the beneficiary of the insurance, Francisca
Eguaras, instituted the present suit against The Great Eastern Life
Assurance Company, Ltd., claiming payment of the sum of P5,000,
the value of policy No. 5592, Exhibit A, which claim the defendant
opposed with the contention that said policy was void and illegal
because it had been obtained by means of deceit and fraud.
3
The judgment of acquittal rendered in the criminal case for estafa
against the said Francisca Eguaras does not produce the effect of res
adjudicata in the present suit to the extent that because she was
acquitted of the crime of estafa she has necessarily acquired as a
plaintiff the right to collect the value of the insurance, or that the
insurance company cannot contend that the insurance contract is
null and void because it was executed by means of deceit, which
upon being proven, as it has been in this case, invalidates the
contract that gave rise to the obligation to pay the value of said
policy.
In the said criminal case the question raised was whether the acts
performed by Eguaras and her co-accused partook of the nature of
the crime of estafa, and when it was decided in the negative, the
said Eguaras was not therefore unquestionably entitled to collect
the value of the insurance, for after deceit had once been proven in
the contract, no obligation rested upon the insurance company to
pay the sum stipulated.
In the present civil suit it is not a question whether the acts
performed by Eguaras and others interested in the proceeds of the
insurance were criminal, but whether in taking out the insurance on
the life of Dominador Albay there occurred in the operation deceit
and fraud of a civil nature, in the form and under the conditions
defined by the Civil Code.
In a contract executed with the requisites fixed in article 1261, one
of the contracting parties may have given his consent through error,
violence, intimidation, or deceit, and in any of such cases the
contract is void, even though, despite this nullity, no crime was
committed. (Article 1265, Civil Code.) There may not have been
estafa in the case at bar, but it was conclusively demonstrated by
the trial that deceit entered into the insurance contract, fulfillment
whereof is claimed, and therefore the conclusions reached by the
court in the judgment it rendered in the criminal proceedings for
estafa do not affect this suit, nor do they influence the decision
proper herein, nor can they produce in the present suit, over the
exception of the defendant, the force of res adjudicata.
For all the foregoing reasons the first part of the judgment appealed
from, with reference to the payment of P5,000 to the plaintiff, must
be reversed and the defendant, The Great Eastern Life Assurance
Company, Ltd., absolved from the complaint, as we do absolve it;
and we affirm the second part of said judgment in so far it absolves
W. G. Smith and dismissed the petition for damages; without special
finding as to the costs in both instances. So ordered.
G.R. No. L-41794 August 30, 1935
SEGUNDINA MUSGI, ET AL., plaintiffs-appellees,
vs.
WEST COAST LIFE INSURANCE CO., defendant-appellant.
Courtney Whitney for appellants.
Laurel, Del Rosario and Sabido for appellees.
IMPERIAL, J.:
The plaintiffs, as beneficiaries, brought suit against the defendant to
recover the value of two life insurance policies. The defendant
appealed from a judgment sentencing it to pay the plaintiffs the
amount of said policies, and the costs.
The principal facts of the case are embodied in the following written
stipulation entered into by the parties:
1. That Arsenio T. Garcia was insured by the defendant company in
the sum of P5,000 as evidenced by Policy No. 129454 effective as of
July 25, 1931, hereby attached and marked as Exhibit A;
2. That the said Arsenio T. Garcia was again insured by the
defendant company in the sum of P10,000 effective as of October
20, 1931, as evidenced by Policy No. 130381 hereby attached and
marked as Exhibit B;
3. That the two policies aforementioned were valid and subsisting at
the time of the death of the insured on December 30, 1932; the fact
of said death is evidenced by the accompanying death certificate
issued by the Civil Register of Pasay, Rizal, which is marked as Exhibit
C;
4. That the plaintiffs herein are the beneficiaries in said policies,
Segundina Musgi of Policy No. 129454, and Buenaventura Garcia of
Policy No. 130381;
5. That demand was made upon the defendant company for the
payment of the two policies above referred to, but the defendant
company refused to pay on the grounds stated in the answer.
The two policies were issued upon applications filed by the insured
on July 20, 1931 and October 15, of the same year, respectively. In
both applications, the insured had to answer inquiries as to his state
of health and that of his family, which he did voluntarily. In each of
the said applications the following question was asked: "1. What
physician or practitioner or any other person not named above have
you consulted or been treated by, and for what illness, or ailment?
(If none, so state.)" In the first application, the insured answered
"None", and in the second, "No". These answers of the insured as
well as his other statements contained in his applications were one
of the causes or considerations for the issuance of the policies, and
they so positively appear therein. After the death of the insured and
as a result of the demand made by the beneficiaries upon the
defendant to pay the value of the policies, the latter discovered that
the aforementioned answers were false and fraudulent, because the
truth was that the insured, before answering and signing the
applications and before the issuance of the policies, had been
treated in the General Hospital by a lady physician for different
ailments. It indisputably appears that between May 13 and 19, 1929,
the insured had entered the General Hospital in Manila, and was
treated by Doctor Pilar V. Cruz for peptic ulcer and chronic catarrhal
nasopharyngitis; on August 5, 1930, he entered the same hospital
and was treated by the same physician for chronic pyelocystitis and
for incipient pulmonary tuberculosis; on the 13th of the same month
he returned to the hospital and was treated by the same physician
for chronic suppurative pyelocystitis and for chronic bronchitis; on
the 20th of the same month he again entered the hospital and was
treated by the same doctor for acute tracheo-bronchitis and chronic
suppurative pyelocystitis; on the 27th of the same month he again
entered the same hospital and was treated for the same ailments;
on December 11, 1930, he again entered the hospital and was
treated for the same ailments; on the 18th of the same month, he
again entered the hospital and was treated for the same ailments;
on the 28th of the same month he again entered the hospital and
was treated for the same ailments, and, finally, on January 11, 1931,
he again entered the hospital and was treated by the same doctor
for the same ailments.
The defendant contended at the outset that the two policies did not
create any valid obligation because they were fraudulently obtained
by the insured. The appealed decision holds that the health of the
insured before the acceptance of his applications and the issuance
of the policies could neither be discussed nor questioned by the
defendant, because the insured was examined by three physicians of
the company and all of them unanimously certified that he was in
good health and that he could be properly insured. The question
here is not whether the physicians' reports or the answers which the
insured gave to them relative to his health were correct or not. It is
admitted that such information was substantially correct, in the
sense that the physicians of the defendant who examined the
insured, for failure to make a detailed examination, did not discover
the ailments suffered by the insured. However, the question raised
for our determination is whether the two answers given by the
insured in his applications are false, and if they were the cause, or
one of the causes, which induced the defendant to issue the policies.
On the first point, the facts above set out leave no room for doubt.
The insured knew that he had suffered from a number of ailments,
including incipient pulmonary tuberculosis, before subscribing the
applications, yet he concealed them and omitted the hospital where
he was confined as well as the name of the lady physician who
treated him. That this concealment and the false statements
constituted fraud, is likewise clear, because the defendant by reason
4
thereof accepted the risk which it would otherwise have flatly
refused. When not otherwise specially provided for by the Insurance
Law, the contract of life insurance is governed by the general rules
of the civil law regarding contracts. Article 1261 of the Civil Code
provides that there is no contract unless there should be, in addition
to consent and a definite object, a consideration for the obligation
established. And article 1276 provides that the statement of a false
consideration shall render the contract void. The two answers being
one of the considerations of the policies, and it appearing that they
are false and fraudulent, it is evident that the insurance contracts
were null and void and did not give rise to any right to recover their
value or amount. A similar case was already decided by this court in
Argente vs. West Coast Life Insurance Co. (51 Phil., 725). In that case
the insured concealed from the physician who examined her that
she had consulted and had been treated by another physician for
cerebral congestion and Bell's Palsy, and that she was addicted to
alcohol, so much so that on one occasion she was confined in the
San Lazaro Hospital suffering from "alcoholism"; this court held that
such concealments and false and fraudulent statements rendered
the policy null and void. In discussing the legal phase of the case, this
court said:
One ground for the rescission of a contract of insurance under the
Insurance Act is a "concealment", which in section 25 is defined as
"A neglect to communicate that which a party knows and ought to
communicate". Appellant argues that the alleged concealment was
immaterial and insufficient to avoid the policy. We cannot agree. In
an action on a life insurance policy where the evidence conclusively
shows that the answers to questions concerning diseases were
untrue, the truth or falsity of the answers become the determining
factor. If the policy was procured by fraudulent representations, the
contract of insurance apparently set forth therein was never legally
existent. It can fairly be assumed that had the true facts been
disclosed by the assured, the insurance would never have been
granted.
In Joyce, The Law of Insurance, second edition, volume 3, Chapter
LV, is found the following:
"Concealment exists where the assured has knowledge of a fact
material to the risk, and honesty, good faith and fair dealing requires
that he should communicate it to the assured, but he designedly and
intentionally withholds the same.
"Another rule is that if the assured undertakes to state all the
circumstances affecting the risk, a full and fair statement of all is
required.
"It is also held that the concealment must, in the absence of
inquiries, be not only material, but fraudulent, or the fact must have
been intentionally withheld; so it is held under English law that if no
inquiries are made and no fraud or design to conceal enters into the
concealment the contract is not avoided. And it is determined that
even though silence may constitute misrepresentation or
concealment it is not of itself necessarily so as it is a question of fact.
Nor is there a concealment justifying a forfeiture where the fact of
insanity is not disclosed no questions being asked concerning the
same. . . .
"But it would seem that if a material fact is actually known to the
assured, its concealment must of itself necessarily be a fraud, and if
the fact is one which the assured ought to know, or is presumed to
know, the presumption of knowledge ought to place the assured in
the same position as in the former case with relation to material
facts; and if the jury in such cases find the fact material, and one
tending to increase the risk, it is difficult to see how the inference of
a fraudulent intent or intentional concealment can be avoided. And
it is declared that if a material fact is concealed by assured it is
equivalent to a false representation that it does not exist and that
the essentials are the truth of the representations whether they
were intended to mislead and did insurer accept them as true and
act upon them to his prejudice. So it is decided that under a
stipulation voiding the policy for concealment or misrepresentation
of any material fact or if his interest is not truly stated or is other
than the sole and unconditional ownership the facts are
unimportant that insured did not intend to deceive or withhold
information as to encumbrances even though no questions were
asked. And if insured while being examined for life insurance, and
knowing that she had heart disease, falsely stated that she was in
good health, and though she could not read the application, it was
explained to her and the questions asked through an interpreter,
and the application like the policy contained a provision that no
liability should be incurred unless the policy was delivered while the
insured was in good health, the court properly directed a verdict for
the insurer, though a witness who was present at the examination
testified that the insured was not asked whether she had heart
disease.
xxx xxx xxx
"The basis of the rule vitiating the contract in cases of concealment
is that it misleads or deceives the insurer into accepting the risk, or
accepting it at the rate of premium agreed upon. The insurer, relying
upon the belief that the assured will disclose every material fact
within his actual or presumed knowledge, is misled into a belief that
the circumstance withheld does not exist, and he is thereby induced
to estimate the risk upon a false basis that it does not exist. The
principal question, therefore, must be, Was the assurer misled or
deceived into entering a contract obligation or in fixing the premium
of insurance by a withholding of material information or facts within
the assured's knowledge or presumed knowledge?
"It therefore follows that the assurer in assuming a risk is entitled to
know every material fact of which the assured has exclusive or
peculiar knowledge, as well as all material facts which directly tend
to increase the hazard or risk which are known by the assured, or
which ought to be or are presumed to be known by him. And a
concealment of such facts vitiates the policy. "It does not seem to be
necessary ... that the ... suppression of the truth should have been
willful." If it were but an inadvertent omission, yet if it were material
to the risk and such as the plaintiff should have known to be so, it
would render the policy void. But it is held that if untrue or false
answers are given in response to inquiries and they relate to
material facts the policy is avoided without regard to the knowledge
or fraud of assured, although under the statute statements are
representations which must be fraudulent to avoid the policy. So
under certain codes the important inquiries are whether the
concealment was willful and related to a matter material to the risk.
xxx xxx xxx
"If the assured has exclusive knowledge of material facts, he should
fully and fairly disclose the same, whether he believes them material
or not. But notwithstanding this general rule it will not infrequently
happen, especially in life risks, that the assured may have a
knowledge actual or presumed of material facts, and yet entertain
an honest belief that they are not material. ... The determination of
the point whether there has or has not been a material concealment
must rest largely in all cases upon the form of the questions
propounded and the exact terms of the contract. Thus, where in
addition to specifically named diseases the insured was asked
whether he had had any sickness within ten years, to which he
answered "No", and it was proven that within that period he had
had a slight attack of pharyngitis, it was held a question properly for
the jury whether such an inflammation of the throat was a
"sickness" within the intent of the inquiry, and the court remarked
on the appealed decision that if it could be held as a matter of law
that the policy was thereby avoided, then it was a mere devise on
the part of insurance companies to obtain money without rendering
themselves liable under the policy. . . .
". . . The question should be left to the jury whether the assured
truly represented the state of his health so as not to mislead or
deceive the insurer; and if he did not deal in good faith with the
insurer in that matter, then the inquiry should be made, Did he
know the state of his health so as to be able to furnish a proper
answer to such questions as are propounded. A Massachusetts case,
if construed as it is frequently cited, would be opposed to the above
conclusion; but, on the contrary, it sustains it, for the reason that
symptoms of consumption had so far developed themselves within a
few months prior to effecting the insurance as to induce a
reasonable belief that the applicant had that fatal disease, and we
5
should further construe this case as establishing the rule that such a
matter cannot rest alone upon the assured's belief irrespective of
what is a reasonable belief, but that it ought to be judged by the
criterion whether the belief is one fairly warranted by the
circumstances. A case in Indiana, however, holds that if the assured
has some affection or ailment of one or more of the organs inquired
about so well-defined and marked as to materially derange for a
time the functions of such organ, as in the case of Bright's disease,
the policy will be avoided by a nondisclosure, irrespective of the fact
whether the assured knew of such ailment or not. . . ."
In view of the foregoing, we are of the opinion that the appellant's
first two assignments of error are well founded, wherefore, the
appealed judgment is reversed and the defendant absolved from the
complaint, with the costs of both instances to the plaintiffs. So
ordered.
G.R. No. L-16163 February 28, 1963
IGNACIO SATURNINO, in his own behalf and as the JUDICIAL
GUARDIAN OF CARLOS SATURNINO, minor, plaintiffs-appellants,
vs.
THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, defendant-
appellee.
Eleazaro A. Samson for plaintiffs-appellants.
Abello & Macias for defendant-appellee.
MAKALINTAL, J.:
Plaintiffs, now appellants, filed this action in the Court of First
Instance of Manila to recover the sum of P5,000.00, corresponding
to the face value of an insurance policy issued by defendant on the
life of Estefania A. Saturnino, and the sum of P1,500.00 as attorney's
fees. Defendant, now appellee, set up special defenses in its answer,
with a counterclaim for damages allegedly sustained as a result of
the unwarranted presentation of this case. Both the complaint and
the counterclaim were dismissed by the trial court; but appellants
were declared entitled to the return of the premium already paid;
plus interest at 6% up to January 8, 1959, when a check for the
corresponding amount P359.65 was sent to them by appellee.
The policy sued upon is one for 20-year endowment non-medical
insurance. This kind of policy dispenses with the medical
examination of the applicant usually required in ordinary life
policies. However, detailed information is called for in the
application concerning the applicant's health and medical history.
The written application in this case was submitted by Saturnino to
appellee on November 16, 1957, witnessed by appellee's agent
Edward A. Santos. The policy was issued on the same day, upon
payment of the first year's premium of P339.25. On September 19,
1958 Saturnino died of pneumonia, secondary to influenza.
Appellants here, who are her surviving husband and minor child,
respectively, demanded payment of the face value of the policy. The
claim was rejected and this suit was subsequently instituted.
It appears that two months prior to the issuance of the policy or on
September 9, 1957, Saturnino was operated on for cancer, involving
complete removal of the right breast, including the pectoral muscles
and the glands found in the right armpit. She stayed in the hospital
for a period of eight days, after which she was discharged, although
according to the surgeon who operated on her she could not be
considered definitely cured, her ailment being of the malignant type.
Notwithstanding the fact of her operation Estefania A. Saturnino did
not make a disclosure thereof in her application for insurance. On
the contrary, she stated therein that she did not have, nor had she
ever had, among other ailments listed in the application, cancer or
other tumors; that she had not consulted any physician, undergone
any operation or suffered any injury within the preceding five years;
and that she had never been treated for nor did she ever have any
illness or disease peculiar to her sex, particularly of the breast,
ovaries, uterus, and menstrual disorders. The application also recites
that the foregoing declarations constituted "a further basis for the
issuance of the policy."
The question at issue is whether or not the insured made such false
representations of material facts as to avoid the policy. There can be
no dispute that the information given by her in her application for
insurance was false, namely, that she had never had cancer or
tumors, or consulted any physician or undergone any operation
within the preceding period of five years. Are the facts then falsely
represented material? The Insurance Law (Section 30) provides that
"materiality is to be determined not by the event, but solely by the
probable and reasonable influence of the facts upon the party to
whom the communication is due, in forming his estimate of the
proposed contract, or in making his inquiries." It seems to be the
contention of appellants that the facts subject of the representation
were not material in view of the "non-medical" nature of the
insurance applied for, which does away with the usual requirement
of medical examination before the policy is issued. The contention is
without merit. If anything, the waiver of medical examination
renders even more material the information required of the
applicant concerning previous condition of health and diseases
suffered, for such information necessarily constitutes an important
factor which the insurer takes into consideration in deciding
whether to issue the policy or not. It is logical to assume that if
appellee had been properly apprised of the insured's medical history
she would at least have been made to undergo medical examination
in order to determine her insurability.
Appellants argue that due information concerning the insured's
previous illness and operation had been given to appellees agent
Edward A. Santos, who filled the application form after it was signed
in blank by Estefania A. Saturnino. This was denied by Santos in his
testimony, and the trial court found such testimony to be true. This
is a finding of fact which is binding upon us, this appeal having been
taken upon questions of law alone. We do not deem it necessary,
therefore, to consider appellee's additional argument, which was
upheld by the trial court, that in signing the application form in blank
and leaving it to Edward A. Santos to fill (assuming that to be the
truth) the insured in effect made Santos her agent for that purpose
and consequently was responsible for the errors in the entries made
by him in that capacity.
In the application for insurance signed by the insured in this case,
she agreed to submit to a medical examination by a duly appointed
examiner of appellee if in the latter's opinion such examination was
necessary as further evidence of insurability. In not asking her to
submit to a medical examination, appellants maintain, appellee was
guilty of negligence, which precluded it from finding about her
actual state of health. No such negligence can be imputed to
appellee. It was precisely because the insured had given herself a
clean bill of health that appellee no longer considered an actual
medical checkup necessary.
Appellants also contend there was no fraudulent concealment of the
truth inasmuch as the insured herself did not know, since her doctor
never told her, that the disease for which she had been operated on
was cancer. In the first place the concealment of the fact of the
operation itself was fraudulent, as there could not have been any
mistake about it, no matter what the ailment. Secondly, in order to
avoid a policy it is not necessary to show actual fraud on the part of
the insured. In the case of Kasprzyk v. Metropolitan Insurance Co.,
140 N.Y.S. 211, 214, it was held:
Moreover, if it were the law that an insurance company could not
depend a policy on the ground of misrepresentation, unless it could
show actual knowledge on the part of the applicant that the
statements were false, then it is plain that it would be impossible for
it to protect itself and its honest policyholders against fraudulent
and improper claims. It would be wholly at the mercy of any one
who wished to apply for insurance, as it would be impossible to
show actual fraud except in the extremest cases. It could not rely on
an application as containing information on which it could act. There
would be no incentive to an applicant to tell the truth.
Wherefore, the parties respectfully pray that the foregoing
stipulation of facts be admitted and approved by this Honorable
6
Court, without prejudice to the parties adducing other evidence to
prove their case not covered by this stipulation of facts. 1wph1.t
In this jurisdiction a concealment, whether intentional or
unintentional, entitles the insurer to rescind the contract of
insurance, concealment being defined as "negligence to
communicate that which a party knows and ought to communicate"
(Sections 24 & 26, Act No. 2427). In the case of Argente v. West
Coast Life Insurance Co., 51 Phil. 725, 732, this Court said, quoting
from Joyce, The Law of Insurance, 2nd ed., Vol. 3:
of Reliance Insurance whom he asked to accompany him to the
office of the company so that he can file his claim. He averred that in
support of his claim, he submitted the fire clearance, the insurance
policies and inventory of stocks. He further testified that the three
insurance companies are sister companies, and as a matter of fact
when he was following-up his claim with Equitable Insurance, the
Claims Manager told him to go first to Reliance Insurance and if said
company agrees to pay, they would also pay. The same treatment
was given him by the other insurance companies. Ultimately, the
three insurance companies denied plaintiffs' claim for payment.

"The basis of the rule vitiating the contract in cases of concealment
is that it misleads or deceives the insurer into accepting the risk, or
accepting it at the rate of premium agreed upon. The insurer, relying
upon the belief that the assured will disclose every material fact
within his actual or presumed knowledge, is misled into a belief that
the circumstance withheld does not exist, and he is thereby induced
to estimate the risk upon a false basis that it does not exist."
The judgment appealed from, dismissing the complaint and
awarding the return to appellants of the premium already paid, with
interest at 6% up to January 29, 1959, affirmed, with costs against
appellants.
G.R. No. 94071 March 31, 1992
NEW LIFE ENTERPRISES and JULIAN SY, petitioners,
vs.
HON. COURT OF APPEALS, EQUITABLE INSURANCE CORPORATION,
RELIANCE SURETY AND INSURANCE CO., INC. and WESTERN
GUARANTY CORPORATION, respondents.
REGALADO, J.:
This appeal by certiorari seeks the nullification of the decision 1 of
respondent Court of Appeals in CA-G.R. CV No. 13866 which
reversed the decision of the Regional Trial Court, Branch LVII at
Lucena City, jointly deciding Civil Cases Nos. 6-84, 7-84 and 8-84
thereof and consequently ordered the dismissal of the aforesaid
actions filed by herein petitioners.
The undisputed background of this case as found by the court a quo
and adopted by respondent court, being sustained by the evidence
on record, we hereby reproduce the same with approval. 2
In its letter of denial dated March 9, 1983, (Exhibit "C" No. 8-84)
Western Guaranty Corporation through Claims Manager Bernard S.
Razon told the plaintiff that his claim "is denied for breach of policy
conditions." Reliance Insurance purveyed the same message in its
letter dated November 23, 1982 and signed by Executive Vice-
President Mary Dee Co (Exhibit "C" No. 7-84) which said that
"plaintiff's claim is denied for breach of policy conditions." The letter
of denial received by the plaintiff from Equitable Insurance
Corporation (Exhibit "C" No. 6-84) was of the same tenor, as said
letter dated February 22, 1983, and signed by Vice-President Elma R.
Bondad, said "we find that certain policy conditions were violated,
therefore, we regret, we have to deny your claim, as it is hereby
denied in its entirety."
In relation to the case against Reliance Surety and Insurance
Company, a certain Atty. Serafin D. Dator, acting in behalf of the
plaintiff, sent a letter dated February 13, 1983 (Exhibit "G-l" No 7-
84) to Executive Vice-President Mary Dee Co asking that he be
informed as to the specific policy conditions allegedly violated by the
plaintiff. In her reply-letter dated March 30, 1983, Executive Vice-
President Mary Dee Co informed Atty. Dator that Julian Sy violated
Policy Condition No. "3" which requires the insured to give notice of
any insurance or insurances already effected covering the stocks in
trade. 3
Because of the denial of their claims for payment by the three (3)
insurance companies, petitioner filed separate civil actions against
the former before the Regional Trial Court of Lucena City, which
cases were consolidated for trial, and thereafter the court below
rendered its decision on December 19, l986 with the following
disposition:
WHEREFORE, judgment in the above-entitled cases is rendered in
the following manner, viz:

The antecedents of this case show that Julian Sy and Jose Sy Bang
have formed a business partnership in the City of Lucena. Under the
business name of New Life Enterprises, the partnership engaged in
the sale of construction materials at its place of business, a two
storey building situated at Iyam, Lucena City. The facts show that
Julian Sy insured the stocks in trade of New Life Enterprises with
Western Guaranty Corporation, Reliance Surety and Insurance. Co.,
Inc., and Equitable Insurance Corporation.
On May 15, 1981, Western Guaranty Corporation issued Fire
Insurance Policy No. 37201 in the amount of P350,000.00. This
policy was renewed on May, 13, 1982.
1. In Civil Case No. 6-84, judgment is rendered for the
plaintiff New Life Enterprises and against the defendant Equitable
Insurance Corporation ordering the latter to pay the former the sum
of Two Hundred Thousand (P200,000.00) Pesos and considering that
payment of the claim of the insured has been unreasonably denied,
pursuant to Sec. 244 of the Insurance Code, defendant is further
ordered to pay the plaintiff attorney's fees in the amount of Twenty
Thousand (P20,000.00) Pesos. All sums of money to be paid by
virtue hereof shall bear interest at 12% per annum (pursuant to Sec.
244 of the Insurance Code) from February 14, 1983, (91st day from
November 16, 1982, when Sworn Statement of Fire Claim was
received from the insured) until they are fully paid;

On July 30,1981, Reliance Surety and Insurance Co., Inc. issued Fire
Insurance Policy No. 69135 in the amount of P300,000.00 (Renewed
under Renewal Certificate No. 41997) An additional insurance was
issued by the same company on November 12, 1981 under Fire
Insurance Policy No. 71547 in the amount of P700,000.00.
On February 8, 1982, Equitable Insurance Corporation issued Fire
Insurance Policy No. 39328 in the amount of P200,000.00.
2. In Civil Case No. 7-84, judgment is rendered for the
plaintiff Julian Sy and against the defendant Reliance Surety and
Insurance Co., Inc., ordering the latter to pay the former the sum of
P1,000,000.00 (P300,000.00 under Policy No. 69135 and
P700,000.00 under Policy No. 71547) and considering that payment
of the claim of the insured has been unreasonably denied, pursuant
to Sec. 244 of the Insurance Code, defendant is further ordered to
pay the plaintiff the amount of P100,000.00 as attorney's fees.

Thus when the building occupied by the New Life Enterprises was
gutted by fire at about 2:00 o'clock in the morning of October 19,
1982, the stocks in the trade inside said building were insured
against fire in the total amount of P1,550,000.00. According to the
certification issued by the Headquarters, Philippine Constabulary
/Integrated National Police, Camp Crame, the cause of fire was
electrical in nature. According to the plaintiffs, the building and the
stocks inside were burned. After the fire, Julian Sy went to the agent
All sums of money to be paid by virtue hereof shall bear interest at
12% per annum (pursuant to Sec. 244 of the Insurance Code) from
February 14, 1983, (91st day from November 16, 1982 when Sworn
Statement of Fire Claim was received from the insured) until they
are fully paid;
3. In Civil Case No. 8-84, judgment is rendered for the
plaintiff New Life Enterprises and against the defendant Western
7
Guaranty Corporation ordering the latter to pay the sum of
P350,000.00 to the Consolidated Bank and Trust Corporation,
Lucena Branch, Lucena City, as stipulated on the face of Policy No.
37201, and considering that payment of the aforementioned sum of
money has been unreasonably denied, pursuant to Sec. 244 of the
Insurance Code, defendant is further ordered to pay the plaintiff
attorney's fees in the amount of P35,000.00.
All sums of money to be paid by virtue hereof shall bear interest at
12% per annum (pursuant to Sec. 244 of the Insurance Code) from
February 5, 1982, (91st day from 1st week of November 1983 when
insured filed formal claim for full indemnity according to adjuster
Vetremar Dela Merced) until they are fully paid. 4
As aforestated, respondent Court of Appeals reversed said judgment
of the trial court, hence this petition the crux wherein is whether or
not Conditions Nos. 3 and 27 of the insurance contracts were
violated by petitioners thereby resulting in their forfeiture of all the
benefits thereunder.
Condition No. 3 of said insurance policies, otherwise known as the
"Other Insurance Clause," is uniformly contained in all the
aforestated insurance contracts of herein petitioners, as follows:
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 such notice be given and the
particulars of such insurance or insurances be stated therein or
endorsed on 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 or insurances in force at the time of loss or
damage not more than P200,000.00. 5
Petitioners admit that the respective insurance policies issued by
private respondents did not state or endorse thereon the other
insurance coverage obtained or subsequently effected on the same
stocks in trade for the loss of which compensation is claimed by
petitioners. 6 The policy issued by respondent Western Guaranty
Corporation (Western) did not declare respondent Reliance Surety
and Insurance Co., Inc. (Reliance) and respondent Equitable
Insurance Corporation (Equitable) as co-insurers on the same stocks,
while Reliance's Policies covering the same stocks did not likewise
declare Western and Equitable as such co-insurers. It is further
admitted by petitioners that Equitable's policy stated "nil" in the
space thereon requiring indication of any co-insurance although
there were three (3) policies subsisting on the same stocks in trade
at the time of the loss, namely, that of Western in the amount of
P350,000.00 and two (2) policies of Reliance in the total amount of
P1,000,000.00. 7
In other words, the coverage by other insurance or co-insurance
effected or subsequently arranged by petitioners were neither
stated nor endorsed in the policies of the three (3) private
respondents, warranting forfeiture of all benefits thereunder if we
are to follow the express stipulation in the aforequoted Policy
Condition No. 3.
Petitioners contend that they are not to be blamed for the
omissions, alleging that insurance agent Leon Alvarez (for Western)
and Yap Kam Chuan (for Reliance and Equitable) knew about the
existence of the additional insurance coverage and that they were
not informed about the requirement that such other or additional
insurance should be stated in the policy, as they have not even read
policies.8 These contentions cannot pass judicial muster.
The terms of the contract are clear and unambiguous. The insured is
specifically required to disclose to the insurer any other insurance
and its particulars which he may have effected on the same subject
matter. The knowledge of such insurance by the insurer's agents,
even assuming the acquisition thereof by the former, is not the
"notice" that would estop the insurers from denying the claim.
Besides, the so-called theory of imputed knowledge, that is,
knowledge of the agent is knowledge of the principal, aside from
being of dubious applicability here has likewise been roundly refuted
by respondent court whose factual findings we find acceptable.
Thus, it points out that while petitioner Julian Sy claimed that he had
informed insurance agent Alvarez regarding the co-insurance on the
property, he contradicted himself by inexplicably claiming that he
had not read the terms of the policies; that Yap Dam Chuan could
not likewise have obtained such knowledge for the same reason,
aside from the fact that the insurance with Western was obtained
before those of Reliance and Equitable; and that the conclusion of
the trial court that Reliance and Equitable are "sister companies" is
an unfounded conjecture drawn from the mere fact that Yap Kam
Chuan was an agent for both companies which also had the same
insurance claims adjuster. Availment of the services of the same
agents and adjusters by different companies is a common practice in
the insurance business and such facts do not warrant the speculative
conclusion of the trial court.
Furthermore, when the words and language of documents are clear
and plain or readily understandable by an ordinary reader thereof,
there is absolutely no room for interpretation or construction
anymore.9 Courts are not allowed to make contracts for the parties;
rather, they will intervene only when the terms of the policy are
ambiguous, equivocal, or uncertain. 10 The parties must abide by
the terms of the contract because such terms constitute the
measure of the insurer's liability and compliance therewith is a
condition precedent to the insured's right of recovery from the
insurer. 11
While it is a cardinal principle of insurance law that a policy or
contract of insurance is to be construed liberally in favor of the
insured and strictly against the insurer company, 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 must be taken
and understood in their plain, ordinary and popular sense. 12
Moreover, obligations arising from contracts have the force of law
between the contracting parties and should be complied with in
good faith. 13
Petitioners should be aware of the fact that a party is not relieved of
the duty to exercise the ordinary care and prudence that would be
exacted in relation to other contracts. The conformity of the insured
to the terms of the policy is implied from his failure to express any
disagreement with what is provided for.14 It may be true that the
majority rule, as cited by petitioners, is that injured persons may
accept policies without reading them, and that this is not negligence
per se. 15 But, this is not without any exception. It is and was
incumbent upon petitioner Sy to read the insurance contracts, and
this can be reasonably expected of him considering that he has been
a businessman since 196516 and the contract concerns indemnity in
case of loss in his money-making trade of which important
consideration he could not have been unaware as it was pre-in case
of loss in his money-making trade of which important consideration
he could not have been unaware as it was precisely the reason for
his procuring the same.
We reiterate our pronouncement in Pioneer Insurance and Surety
Corporation vs. Yap: 17
. . . And considering the terms of the policy which required the
insured to declare other insurances, the statement in question must
be deemed to be a statement (warranty) binding on both insurer
and insured, that there were no other insurance on the property. . . .
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 (Sec. 69, Insurance Act). Such
misrepresentation is fatal in the light of our views in Santa Ana vs.
Commercial Union Assurance Company, Ltd., 55 Phil. 329. The
materiality of non-disclosure of other insurance policies is not open
to doubt.
xxx xxx xxx
8
The obvious purpose of the aforesaid requirement in the policy is to
prevent over-insurance and thus avert the perpetration of fraud.
The public, as well as the insurer, is interested in preventing the
situation in which a fire would be profitable to the insured.
According to Justice Story: "The insured has no right to complain, for
he assents to comply with all the stipulations on his side, in order to
entitle himself to the benefit of the contract, which, upon reason or
principle, he has no right to ask the court to dispense with the
performance of his own part of the agreement, and yet to bind the
other party to obligations, which, but for those stipulations, would
not have been entered into."
Subsequently, in the case of Pacific Banking Corporation vs. Court of
Appeals, et al., 18 we held:
It is not disputed that the insured failed to reveal before the loss
three other insurances. As found by the Court of Appeals, by reason
of said unrevealed insurances, the insured had been guilty of a false
declaration; a clear misrepresentation and a vital one because
where the insured had been asked to reveal but did not, that was
deception. Otherwise stated, had the insurer known that there were
many co-insurances, it could have hesitated or plainly desisted from
entering into such contract. Hence, the insured was guilty of clear
fraud (Rollo, p. 25).
Petitioner's contention that the allegation of fraud is but a mere
inference or suspicion is untenable. In fact, concrete evidence of
fraud or false declaration by the insured was furnished by the
petitioner itself when the facts alleged in the policy under clauses
"Co-Insurances Declared" and "Other Insurance Clause" are
materially different from the actual number of co-insurances taken
over the subject property. Consequently, "the whole foundation of
the contract fails, the risk does not attach and the policy never
becomes a contract between the parties." Representations of facts
are the foundation of the contract and if the foundation does not
exist, the superstructure does not arise. Falsehood in such
representations is not shown to vary or add to the contract, or to
terminate a contract which has once been made, but to show that
no contract has ever existed (Tolentino, Commercial Laws of the
Philippines, p. 991, Vol. II, 8th Ed.,) A void or inexistent contract is
one which has no force and effect from the very beginning, as if it
had never been entered into, and which cannot be validated either
by time or by ratification (Tongoy vs. C.A., 123 SCRA 99 (1983); Avila
v. C.A., 145 SCRA, 1986).
As the insurance policy against fire expressly required that notice
should be given by the insured of other insurance upon the same
property, the total absence of such notice nullifies the policy.
To further warrant and justify the forfeiture of the benefits under
the insurance contracts involved, we need merely to turn to Policy
Condition No. 15 thereof, which reads in part:
15. . . . if any false declaration be made or used in support
thereof, . . . all benefits under this Policy shall be forfeited . . . . 19
Additionally, insofar as the liability of respondent Reliance is
concerned, it is not denied that the complaint for recovery was filed
in court by petitioners only on January 31, 1984, or after more than
one (1) year had elapsed from petitioners' receipt of the insurers'
letter of denial on November 29, 1982. Policy Condition No. 27 of
their insurance contract with Reliance provides:
27. Action or suit clause. If a claim be made and rejected
and an action or suit be not commenced either in the Insurance
Commission or any court of competent jurisdiction of notice of such
rejection, or in case of arbitration taking place as provided herein,
within twelve (12) months after due notice of the award made by
the arbitrator or arbitrators or umpire, then the claim shall for all
purposes be deemed to have been abandoned and shall not
thereafter be recoverable hereunder. 20
On this point, the trial court ruled:
. . . However, because of the peculiar circumstances of this case, we
hesitate in concluding that plaintiff's right to ventilate his claim in
court has been barred by reason of the time constraint provided in
the insurance contract. It is evident that after the plaintiff had
received the letter of denial, he still found it necessary to be
informed of the specific causes or reasons for the denial of his claim,
reason for which his lawyer, Atty. Dator deemed it wise to send a
letter of inquiry to the defendant which was answered by
defendant's Executive Vice-President in a letter dated March 30,
1983, . . . . Assuming, gratuitously, that the letter of Executive Vice-
President Mary Dee Co dated March 30, 1983, was received by
plaintiff on the same date, the period of limitation should start to
run only from said date in the spirit of fair play and equity. . . . 21
We have perforce to reject this theory of the court below for being
contrary to what we have heretofore declared:
It is important to note the principle laid down by this Court in the
case of Ang vs. Fulton Fire Insurance Co. (2 SCRA 945 [1961]) to wit:
The condition contained in an insurance policy that claims must be
presented within one year after rejection is not merely a procedural
requirement but an important matter essential to a prompt
settlement of claims against insurance companies as it demands that
insurance suits be brought by the insured while the evidence as to
the origin and cause of destruction have not yet disappeared.
In enunciating the above-cited principle, this Court had definitely
settled the rationale for the necessity of bringing suits against the
Insurer within one year from the rejection of the claim. The
contention of the respondents that the one-year prescriptive period
does not start to run until the petition for reconsideration had been
resolved by the insurer, runs counter to the declared purpose for
requiring that an action or suit be filed in the Insurance Commission
or in a court of competent jurisdiction from the denial of the claim.
To uphold respondents' contention would contradict and defeat the
very principle which this Court had laid down. Moreover, it can
easily be used by insured persons as a scheme or device to waste
time until any evidence which may be considered against them is
destroyed.
xxx xxx xxx
While in the Eagle Star case (96 Phil. 701), this Court uses the phrase
"final rejection", the same cannot be taken to mean the rejection of
a petition for reconsideration as insisted by respondents. Such was
clearly not the meaning contemplated by this Court. The insurance
policy in said case provides that the insured should file his claim first,
with the carrier and then with the insurer. The "final rejection" being
referred to in said case is the rejection by the insurance company. 22
Furthermore, assuming arguendo that petitioners felt the legitimate
need to be clarified as to the policy condition violated, there was a
considerable lapse of time from their receipt of the insurer's
clarificatory letter dated March 30, 1983, up to the time the
complaint was filed in court on January 31, 1984. The one-year
prescriptive period was yet to expire on November 29, 1983, or
about eight (8) months from the receipt of the clarificatory letter,
but petitioners let the period lapse without bringing their action in
court. We accordingly find no "peculiar circumstances" sufficient to
relax the enforcement of the one-year prescriptive period and we,
therefore, hold that petitioners' claim was definitely filed out of
time.
WHEREFORE, finding no cogent reason to disturb the judgment of
respondent Court of Appeals, the same is hereby AFFIRMED.
SO ORDERED.
G.R. No. 186983 February 22, 2012
MA. LOURDES S. FLORENDO, Petitioner,
vs.
PHILAM PLANS, INC., PERLA ABCEDE MA. CELESTE ABCEDE,
Respondents.
DECISION
9
ABAD, J.:
This case is about an insureds alleged concealment in his pension
plan application of his true state of health and its effect on the life
insurance portion of that plan in case of death.
The Facts and the Case
On October 23, 1997 Manuel Florendo filed an application for
comprehensive pension plan with respondent Philam Plans, Inc.
(Philam Plans) after some convincing by respondent Perla Abcede.
The plan had a pre-need price of 997,050.00, payable in 10 years,
and had a maturity value of 2,890,000.00 after 20 years.1 Manuel
signed the application and left to Perla the task of supplying the
information needed in the application.2 Respondent Ma. Celeste
Abcede, Perlas daughter, signed the application as sales counselor.3
Aside from pension benefits, the comprehensive pension plan also
provided life insurance coverage to Florendo.4 This was covered by
a Group Master Policy that Philippine American Life Insurance
Company (Philam Life) issued to Philam Plans.5 Under the master
policy, Philam Life was to automatically provide life insurance
coverage, including accidental death, to all who signed up for Philam
Plans comprehensive pension plan.6 If the plan holder died before
the maturity of the plan, his beneficiary was to instead receive the
proceeds of the life insurance, equivalent to the pre-need price.
Further, the life insurance was to take care of any unpaid premium
until the pension plan matured, entitling the beneficiary to the
maturity value of the pension plan.7
On October 30, 1997 Philam Plans issued Pension Plan Agreement
PP430055848 to Manuel, with petitioner Ma. Lourdes S. Florendo,
his wife, as beneficiary. In time, Manuel paid his quarterly
premiums.9
Eleven months later or on September 15, 1998, Manuel died of
blood poisoning. Subsequently, Lourdes filed a claim with Philam
Plans for the payment of the benefits under her husbands plan.10
Because Manuel died before his pension plan matured and his wife
was to get only the benefits of his life insurance, Philam Plans
forwarded her claim to Philam Life.11
On May 3, 1999 Philam Plans wrote Lourdes a letter,12 declining her
claim. Philam Life found that Manuel was on maintenance medicine
for his heart and had an implanted pacemaker. Further, he suffered
from diabetes mellitus and was taking insulin. Lourdes renewed her
demand for payment under the plan13 but Philam Plans rejected
it,14 prompting her to file the present action against the pension
plan company before the Regional Trial Court (RTC) of Quezon
City.15
On March 30, 2006 the RTC rendered judgment,16 ordering Philam
Plans, Perla and Ma. Celeste, solidarily, to pay Lourdes all the
benefits from her husbands pension plan, namely: 997,050.00, the
proceeds of his term insurance, and 2,890,000.00 lump sum
pension benefit upon maturity of his plan; 100,000.00 as moral
damages; and to pay the costs of the suit. The RTC ruled that
Manuel was not guilty of concealing the state of his health from his
pension plan application.
On December 18, 2007 the Court of Appeals (CA) reversed the RTC
decision,17 holding that insurance policies are traditionally contracts
uberrimae fidae or contracts of utmost good faith. As such, it
required Manuel to disclose to Philam Plans conditions affecting the
risk of which he was aware or material facts that he knew or ought
to know.18
Issues Presented
The issues presented in this case are:
1. Whether or not the CA erred in finding Manuel guilty of
concealing his illness when he kept blank and did not answer
questions in his pension plan application regarding the ailments he
suffered from;
2. Whether or not the CA erred in holding that Manuel was bound
by the failure of respondents Perla and Ma. Celeste to declare the
condition of Manuels health in the pension plan application; and
3. Whether or not the CA erred in finding that Philam Plans
approval of Manuels pension plan application and acceptance of his
premium payments precluded it from denying Lourdes claim.
Rulings of the Court
One. Lourdes points out that, seeing the unfilled spaces in Manuels
pension plan application relating to his medical history, Philam Plans
should have returned it to him for completion. Since Philam Plans
chose to approve the application just as it was, it cannot cry
concealment on Manuels part. Further, Lourdes adds that Philam
Plans never queried Manuel directly regarding the state of his
health. Consequently, it could not blame him for not mentioning
it.19
But Lourdes is shifting to Philam Plans the burden of putting on the
pension plan application the true state of Manuels health. She
forgets that since Philam Plans waived medical examination for
Manuel, it had to rely largely on his stating the truth regarding his
health in his application. For, after all, he knew more than anyone
that he had been under treatment for heart condition and diabetes
for more than five years preceding his submission of that
application. But he kept those crucial facts from Philam Plans.
Besides, when Manuel signed the pension plan application, he
adopted as his own the written representations and declarations
embodied in it. It is clear from these representations that he
concealed his chronic heart ailment and diabetes from Philam Plans.
The pertinent portion of his representations and declarations read
as follows:
I hereby represent and declare to the best of my knowledge that:
xxxx
(c) I have never been treated for heart condition, high blood
pressure, cancer, diabetes, lung, kidney or stomach disorder or any
other physical impairment in the last five years.
(d) I am in good health and physical condition.
If your answer to any of the statements above reveal otherwise,
please give details in the space provided for:
Date of confinement : ____________________________
Name of Hospital or Clinic : ____________________________
Name of Attending Physician : ____________________________
Findings : ____________________________
Others: (Please specify) : ____________________________
x x x x.20 (Emphasis supplied)
Since Manuel signed the application without filling in the details
regarding his continuing treatments for heart condition and
diabetes, the assumption is that he has never been treated for the
said illnesses in the last five years preceding his application. This is
implicit from the phrase "If your answer to any of the statements
above (specifically, the statement: I have never been treated for
heart condition or diabetes) reveal otherwise, please give details in
the space provided for." But this is untrue since he had been on
"Coumadin," a treatment for venous thrombosis,21 and insulin, a
drug used in the treatment of diabetes mellitus, at that time.22
Lourdes insists that Manuel had concealed nothing since Perla, the
soliciting agent, knew that Manuel had a pacemaker implanted on
his chest in the 70s or about 20 years before he signed up for the
pension plan.23 But by its tenor, the responsibility for preparing the
10
application belonged to Manuel. Nothing in it implies that someone
else may provide the information that Philam Plans needed. Manuel
cannot sign the application and disown the responsibility for having
it filled up. If he furnished Perla the needed information and
delegated to her the filling up of the application, then she acted on
his instruction, not on Philam Plans instruction.
Lourdes next points out that it made no difference if Manuel failed
to reveal the fact that he had a pacemaker implant in the early 70s
since this did not fall within the five-year timeframe that the
disclosure contemplated.24 But a pacemaker is an electronic device
implanted into the body and connected to the wall of the heart,
designed to provide regular, mild, electric shock that stimulates the
contraction of the heart muscles and restores normalcy to the
heartbeat.25 That Manuel still had his pacemaker when he applied
for a pension plan in October 1997 is an admission that he remained
under treatment for irregular heartbeat within five years preceding
that application.
Besides, as already stated, Manuel had been taking medicine for his
heart condition and diabetes when he submitted his pension plan
application. These clearly fell within the five-year period. More, even
if Perlas knowledge of Manuels pacemaker may be applied to
Philam Plans under the theory of imputed knowledge,26 it is not
claimed that Perla was aware of his two other afflictions that
needed medical treatments. Pursuant to Section 2727 of the
Insurance Code, Manuels concealment entitles Philam Plans to
rescind its contract of insurance with him.
Two. Lourdes contends that the mere fact that Manuel signed the
application in blank and let Perla fill in the required details did not
make her his agent and bind him to her concealment of his true
state of health. Since there is no evidence of collusion between
them, Perlas fault must be considered solely her own and cannot
prejudice Manuel.28
But Manuel forgot that in signing the pension plan application, he
certified that he wrote all the information stated in it or had
someone do it under his direction. Thus:
APPLICATION FOR PENSION PLAN
(Comprehensive)
I hereby apply to purchase from PHILAM PLANS, INC. a Pension Plan
Program described herein in accordance with the General Provisions
set forth in this application and hereby certify that the date and
other information stated herein are written by me or under my
direction. x x x.29 (Emphasis supplied)
Assuming that it was Perla who filled up the application form,
Manuel is still bound by what it contains since he certified that he
authorized her action. Philam Plans had every right to act on the
faith of that certification.
Lourdes could not seek comfort from her claim that Perla had
assured Manuel that the state of his health would not hinder the
approval of his application and that what is written on his
application made no difference to the insurance company. But,
indubitably, Manuel was made aware when he signed the pension
plan application that, in granting the same, Philam Plans and Philam
Life were acting on the truth of the representations contained in
that application. Thus:
DECLARATIONS AND REPRESENTATIONS
xxxx
I agree that the insurance coverage of this application is based on
the truth of the foregoing representations and is subject to the
provisions of the Group Life Insurance Policy issued by THE
PHILIPPINE AMERICAN LIFE INSURANCE CO. to PHILAM PLANS,
INC.30 (Emphasis supplied)
As the Court said in New Life Enterprises v. Court of Appeals:31
It may be true that x x x insured persons may accept policies without
reading them, and that this is not negligence per se. But, this is not
without any exception. It is and was incumbent upon petitioner Sy
to read the insurance contracts, and this can be reasonably expected
of him considering that he has been a businessman since 1965 and
the contract concerns indemnity in case of loss in his money-making
trade of which important consideration he could not have been
unaware as it was precisely the reason for his procuring the same.32
The same may be said of Manuel, a civil engineer and manager of a
construction company.33 He could be expected to know that one
must read every document, especially if it creates rights and
obligations affecting him, before signing the same. Manuel is not
unschooled that the Court must come to his succor. It could
reasonably be expected that he would not trifle with something that
would provide additional financial security to him and to his wife in
his twilight years.
Three. In a final attempt to defend her claim for benefits under
Manuels pension plan, Lourdes points out that any defect or
insufficiency in the information provided by his pension plan
application should be deemed waived after the same has been
approved, the policy has been issued, and the premiums have been
collected. 34
The Court cannot agree. The comprehensive pension plan that
Philam Plans issued contains a one-year incontestability period. It
states:
VIII. INCONTESTABILITY
After this Agreement has remained in force for one (1) year, we can
no longer contest for health reasons any claim for insurance under
this Agreement, except for the reason that installment has not been
paid (lapsed), or that you are not insurable at the time you bought
this pension program by reason of age. If this Agreement lapses but
is reinstated afterwards, the one (1) year contestability period shall
start again on the date of approval of your request for
reinstatement.35 1wphi1
The above incontestability clause precludes the insurer from
disowning liability under the policy it issued on the ground of
concealment or misrepresentation regarding the health of the
insured after a year of its issuance.
Since Manuel died on the eleventh month following the issuance of
his plan,36 the one year incontestability period has not yet set in.
Consequently, Philam Plans was not barred from questioning
Lourdes entitlement to the benefits of her husbands pension plan.
WHEREFORE, the Court AFFIRMS in its entirety the decision of the
Court of Appeals in CA-G.R. CV 87085 dated December 18, 2007.
SO ORDERED.
G.R. No. 125678 March 18, 2002
PHILAMCARE HEALTH SYSTEMS, INC., petitioner,
vs.
COURT OF APPEALS and JULITA TRINOS, respondents.
YNARES-SANTIAGO, J.:
Ernani Trinos, deceased husband of respondent Julita Trinos, applied
for a health care coverage with petitioner Philamcare Health
Systems, Inc. In the standard application form, he answered no to
the following question:
Have you or any of your family members ever consulted or been
treated for high blood pressure, heart trouble, diabetes, cancer, liver
disease, asthma or peptic ulcer? (If Yes, give details).1
The application was approved for a period of one year from March
1, 1988 to March 1, 1989. Accordingly, he was issued Health Care
Agreement No. P010194. Under the agreement, respondents
husband was entitled to avail of hospitalization benefits, whether
11
ordinary or emergency, listed therein. He was also entitled to avail
of "out-patient benefits" such as annual physical examinations,
preventive health care and other out-patient services.
Upon the termination of the agreement, the same was extended for
another year from March 1, 1989 to March 1, 1990, then from
March 1, 1990 to June 1, 1990. The amount of coverage was
increased to a maximum sum of P75,000.00 per disability.2
During the period of his coverage, Ernani suffered a heart attack and
was confined at the Manila Medical Center (MMC) for one month
beginning March 9, 1990. While her husband was in the hospital,
respondent tried to claim the benefits under the health care
agreement. However, petitioner denied her claim saying that the
Health Care Agreement was void. According to petitioner, there was
a concealment regarding Ernanis medical history. Doctors at the
MMC allegedly discovered at the time of Ernanis confinement that
he was hypertensive, diabetic and asthmatic, contrary to his answer
in the application form. Thus, respondent paid the hospitalization
expenses herself, amounting to about P76,000.00.
After her husband was discharged from the MMC, he was attended
by a physical therapist at home. Later, he was admitted at the
Chinese General Hospital. Due to financial difficulties, however,
respondent brought her husband home again. In the morning of
April 13, 1990, Ernani had fever and was feeling very weak.
Respondent was constrained to bring him back to the Chinese
General Hospital where he died on the same day.
On July 24, 1990, respondent instituted with the Regional Trial Court
of Manila, Branch 44, an action for damages against petitioner and
its president, Dr. Benito Reverente, which was docketed as Civil Case
No. 90-53795. She asked for reimbursement of her expenses plus
moral damages and attorneys fees. After trial, the lower court ruled
against petitioners, viz:
WHEREFORE, in view of the forgoing, the Court renders judgment in
favor of the plaintiff Julita Trinos, ordering:
1. Defendants to pay and reimburse the medical and hospital
coverage of the late Ernani Trinos in the amount of P76,000.00 plus
interest, until the amount is fully paid to plaintiff who paid the same;
2. Defendants to pay the reduced amount of moral damages of
P10,000.00 to plaintiff;
3. Defendants to pay the reduced amount of P10,000.00 as
exemplary damages to plaintiff;
4. Defendants to pay attorneys fees of P20,000.00, plus costs of
suit.
SO ORDERED.3
On appeal, the Court of Appeals affirmed the decision of the trial
court but deleted all awards for damages and absolved petitioner
Reverente.4 Petitioners motion for reconsideration was denied.5
Hence, petitioner brought the instant petition for review, raising the
primary argument that a health care agreement is not an insurance
contract; hence the "incontestability clause" under the Insurance
Code6 does not apply.1wphi1.nt
Petitioner argues that the agreement grants "living benefits," such
as medical check-ups and hospitalization which a member may
immediately enjoy so long as he is alive upon effectivity of the
agreement until its expiration one-year thereafter. Petitioner also
points out that only medical and hospitalization benefits are given
under the agreement without any indemnification, unlike in an
insurance contract where the insured is indemnified for his loss.
Moreover, since Health Care Agreements are only for a period of
one year, as compared to insurance contracts which last longer,7
petitioner argues that the incontestability clause does not apply, as
the same requires an effectivity period of at least two years.
Petitioner further argues that it is not an insurance company, which
is governed by the Insurance Commission, but a Health Maintenance
Organization under the authority of the Department of Health.
Section 2 (1) of the Insurance Code defines a contract of insurance
as an agreement whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an
unknown or contingent event. An insurance contract exists where
the following elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the
designated peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute
actual losses among a large group of persons bearing a similar risk;
and
5. In consideration of the insurers promise, the insured pays a
premium.8
Section 3 of the Insurance Code states that any contingent or
unknown event, whether past or future, which may damnify a
person having an insurable interest against him, may be insured
against. Every person has an insurable interest in the life and health
of himself. Section 10 provides:
Every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children;
(2) of any person on whom he depends wholly or in part for
education or support, or in whom he has a pecuniary interest;
(3) of any person under a legal obligation to him for the payment of
money, respecting property or service, of which death or illness
might delay or prevent the performance; and
(4) of any person upon whose life any estate or interest vested in
him depends.
In the case at bar, the insurable interest of respondents husband in
obtaining the health care agreement was his own health. The health
care agreement was in the nature of non-life insurance, which is
primarily a contract of indemnity.9 Once the member incurs
hospital, medical or any other expense arising from sickness, injury
or other stipulated contingent, the health care provider must pay for
the same to the extent agreed upon under the contract.
Petitioner argues that respondents husband concealed a material
fact in his application. It appears that in the application for health
coverage, petitioners required respondents husband to sign an
express authorization for any person, organization or entity that has
any record or knowledge of his health to furnish any and all
information relative to any hospitalization, consultation, treatment
or any other medical advice or examination.10 Specifically, the
Health Care Agreement signed by respondents husband states:
We hereby declare and agree that all statement and answers
contained herein and in any addendum annexed to this application
are full, complete and true and bind all parties in interest under the
Agreement herein applied for, that there shall be no contract of
health care coverage unless and until an Agreement is issued on this
application and the full Membership Fee according to the mode of
payment applied for is actually paid during the lifetime and good
health of proposed Members; that no information acquired by any
Representative of PhilamCare shall be binding upon PhilamCare
unless set out in writing in the application; that any physician is, by
these presents, expressly authorized to disclose or give testimony at
anytime relative to any information acquired by him in his
professional capacity upon any question affecting the eligibility for
health care coverage of the Proposed Members and that the
acceptance of any Agreement issued on this application shall be a
ratification of any correction in or addition to this application as
stated in the space for Home Office Endorsement.11 (Underscoring
ours)
12

In addition to the above condition, petitioner additionally required
the applicant for authorization to inquire about the applicants
medical history, thus:
I hereby authorize any person, organization, or entity that has any
record or knowledge of my health and/or that of __________ to give
to the PhilamCare Health Systems, Inc. any and all information
relative to any hospitalization, consultation, treatment or any other
medical advice or examination. This authorization is in connection
with the application for health care coverage only. A photographic
copy of this authorization shall be as valid as the original.12
(Underscoring ours)
Petitioner cannot rely on the stipulation regarding "Invalidation of
agreement" which reads:
Failure to disclose or misrepresentation of any material information
by the member in the application or medical examination, whether
intentional or unintentional, shall automatically invalidate the
Agreement from the very beginning and liability of Philamcare shall
be limited to return of all Membership Fees paid. An undisclosed or
misrepresented information is deemed material if its revelation
would have resulted in the declination of the applicant by
Philamcare or the assessment of a higher Membership Fee for the
benefit or benefits applied for.13
The answer assailed by petitioner was in response to the question
relating to the medical history of the applicant. This largely depends
on opinion rather than fact, especially coming from respondents
husband who was not a medical doctor. Where matters of opinion
or judgment are called for, answers made in good faith and without
intent to deceive will not avoid a policy even though they are
untrue.14 Thus,
(A)lthough false, a representation of the expectation, intention,
belief, opinion, or judgment of the insured will not avoid the policy if
there is no actual fraud in inducing the acceptance of the risk, or its
acceptance at a lower rate of premium, and this is likewise the rule
although the statement is material to the risk, if the statement is
obviously of the foregoing character, since in such case the insurer is
not justified in relying upon such statement, but is obligated to make
further inquiry. There is a clear distinction between such a case and
one in which the insured is fraudulently and intentionally states to
be true, as a matter of expectation or belief, that which he then
knows, to be actually untrue, or the impossibility of which is shown
by the facts within his knowledge, since in such case the intent to
deceive the insurer is obvious and amounts to actual fraud.15
(Underscoring ours)
The fraudulent intent on the part of the insured must be established
to warrant rescission of the insurance contract.16 Concealment as a
defense for the health care provider or insurer to avoid liability is an
affirmative defense and the duty to establish such defense by
satisfactory and convincing evidence rests upon the provider or
insurer. In any case, with or without the authority to investigate,
petitioner is liable for claims made under the contract. Having
assumed a responsibility under the agreement, petitioner is bound
to answer the same to the extent agreed upon. In the end, the
liability of the health care provider attaches once the member is
hospitalized for the disease or injury covered by the agreement or
whenever he avails of the covered benefits which he has prepaid.
Under Section 27 of the Insurance Code, "a concealment entitles the
injured party to rescind a contract of insurance." The right to rescind
should be exercised previous to the commencement of an action on
the contract.17 In this case, no rescission was made. Besides, the
cancellation of health care agreements as in insurance policies
require the concurrence of the following conditions:
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of
the policy of one or more of the grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the
address shown in the policy;
4. Must state the grounds relied upon provided in Section 64 of the
Insurance Code and upon request of insured, to furnish facts on
which cancellation is based.18
None of the above pre-conditions was fulfilled in this case. When
the terms of insurance contract contain limitations on liability,
courts should construe them in such a way as to preclude the insurer
from non-compliance with his obligation.19 Being a contract of
adhesion, the terms of an insurance contract are to be construed
strictly against the party which prepared the contract the
insurer.20 By reason of the exclusive control of the insurance
company over the terms and phraseology of the insurance contract,
ambiguity must be strictly interpreted against the insurer and
liberally in favor of the insured, especially to avoid forfeiture.21 This
is equally applicable to Health Care Agreements. The phraseology
used in medical or hospital service contracts, such as the one at bar,
must be liberally construed in favor of the subscriber, and if doubtful
or reasonably susceptible of two interpretations the construction
conferring coverage is to be adopted, and exclusionary clauses of
doubtful import should be strictly construed against the provider.22
Anent the incontestability of the membership of respondents
husband, we quote with approval the following findings of the trial
court:
(U)nder the title Claim procedures of expenses, the defendant
Philamcare Health Systems Inc. had twelve months from the date of
issuance of the Agreement within which to contest the membership
of the patient if he had previous ailment of asthma, and six months
from the issuance of the agreement if the patient was sick of
diabetes or hypertension. The periods having expired, the defense of
concealment or misrepresentation no longer lie.23
Finally, petitioner alleges that respondent was not the legal wife of
the deceased member considering that at the time of their marriage,
the deceased was previously married to another woman who was
still alive. The health care agreement is in the nature of a contract of
indemnity. Hence, payment should be made to the party who
incurred the expenses. It is not controverted that respondent paid
all the hospital and medical expenses. She is therefore entitled to
reimbursement. The records adequately prove the expenses
incurred by respondent for the deceaseds hospitalization,
medication and the professional fees of the attending physicians.24
WHEREFORE, in view of the foregoing, the petition is DENIED. The
assailed decision of the Court of Appeals dated December 14, 1995
is AFFIRMED. SO ORDERED.
G.R. No. 204736, November 28, 2016
MANULIFE PHILIPPINES, INC.,1 Petitioners, v. HERMENEGILDA
YBAEZ, Respondent.
DECISION
DEL CASTILLO, J.:
Assailed in this Petition for Review on Certiorari2 are the April 26,
2012 Decision3 of the Court of Appeals (CA) in CA-G.R. CV No. 95561
and its December 10, 2012 Resolution4 which affirmed the April 22,
2008 Decision5 and the June 15, 2009 Order6 of the Regional Trial
Court (RTC), Branch 57, Makati City in Civil Case No. 04-1119.
Factual Antecedents
Before the RTC of Makati City, Manulife Philippines, Inc. (Manulife)
instituted a Complaint7 for Rescission of Insurance Contracts against
Hermenegilda Ybaez (Hermenegilda) and the BPI Family Savings
Bank (BPI Family). This was docketed as Civil Case No. 04-1119.
It is alleged in the Complaint that Insurance Policy Nos. 6066517-18
and 6300532-69 (subject insurance policies) which Manulife issued
on October 25, 2002 and on July 25, 2003, respectively, both in favor
of Dr. Gumersindo Solidum Ybaez (insured), were void due to
13
concealment or misrepresentation of material facts in the latter's
applications for life insurance, particularly the forms entitled Non-
Medical Evidence dated August 28, 2002 (NME),10 Medical Evidence
Exam dated September 10, 2002 (MEE),11 and the Declaration of
Insurability in the Application for Life Insurance (DOI) dated July 9,
2003;12 that Hermenegilda, wife of the said insured, was revocably
designated as beneficiary in the subject insurance policies; that on
November 17, 2003, when one of the subject insurance policies had
been in force for only one year and three months, while the other
for only four months, the insured died; that on December 10, 2003,
Hermenegilda, now widow to the said insured, filed a Claimant's
Statement-Death Claim13 with respect to the subject insurance
policies; that the Death Certificate dated November 17, 200314
stated that the insured had "Hepatocellular CA., Crd Stage 4,
secondary to Uric Acid Nephropathy; SAM Nephropathy recurrent
malignant pleural effusion; NASCVC"; that Manulife conducted an
investigation into the circumstances leading to the said insured's
death, in view of the aforementioned entries in the said insured's
Death Certificate; that Manulife thereafter concluded that the
insured misrepresented or concealed material facts at the time the
subject insurance policies were applied for; and that for this reason
Manulife accordingly denied Hermenegilda's death claims and
refunded the premiums that the insured paid on the subject
insurance policies.15
Manulife also set forth in said Complaint the details of the insured's
supposed misrepresentation/s or concealment/s, to wit:
2.6. On the basis of the authority granted by [Hermenegilda] in her
Claimant's Statement (Annex "H"), [Manulife] conducted an
investigation [into] the Insured's medical records and history, and
discovered that the Insured concealed material facts which the law,
good faith, and fair dealing required him to reveal when he
answered the [NME] (Annex "C"), [the MEE] (Annex "D"), and [the
DOI] (Annex "E"), as follows:
(1) Insured's confinement at the Cebu Doctors' Hospital [CDH] from
27 December 2000 to 31 December 2000, wherein he underwent
total parotidectomy on 28 December 2000 due to the swelling of his
right parotid gland and the presence of a tumor, and was found to
have had a history of being hypertensive, and his kidneys have
become atretic or shrunken. A copy of each of the Admission and
Discharge Record and PGIS' Interns' Progress Notes and Operative
Record of the [CDH] is attached hereto and made an integral part
hereof as Annex "K", "K-1", and "K-2", respectively.
(2) Insureds confinement at the CDH from 9 May 2002 to 14 May
2002, wherein he was diagnosed to have acute pancreatitis, in
addition to being hypertensive. A copy [of] each of the Insured's
Admission and Discharge Record and Doctor's History/Progress
Notes is attached hereto and made an integral part hereof as Annex
"L" and "L-1", respectively.
(3) Insured's diagnosis for leptospirosis in 2000. A copy [of] each of
the Insured's Admission and Discharge Record and History Sheet is
attached hereto and made an integral part hereof as Annex "M" and
"M-1", respectively.
xxxx
2.8. Due to the Insured's concealment of material facts at the time
the subject insurance policies were applied for and issued,
[Manulife] exercised its right to rescind the subject insurance
contracts and denied the claims on those policies.
x x x x16
Manulife thus prayed that judgment be rendered finding its act of
rescinding the subject insurance policies proper; declaring these
subject insurance policies null and void; and discharging. it from any
obligation whatsoever under these policies.17
In her Answer, Hermenegilda countered that:
6. [Manulife's own insurance agent, Ms. Elvira Monteclaros herself]
assured [the insured,] that there would be no problem regarding the
application for the insurance policy. In tact, it was Monteclaros who
filled up everything in the questionnaire (Annex "C" of the
[C]omplaint), so that [all that the insured needed to do was sign it,]
and it's done. [It was also Ms. Monteclaros who herself] checked in
advance all the boxes in Annex "C," [that the insured himself was
required to answer or check].
xxxx
10. The four grounds for denial as enumerated in Annex "N" of the
complaint are refuted as follows:
1) [The insured's] hospital confinement on 27 December 2000 at
[the CDH was] due to right parotid swelling secondary to tumor [for
which he] underwent Parotidectomy on 28 December 2000. (There
is an obvious scar and disfigurement in the right side of [the
insured's] face, in front, and below his ear. This [ought to] have been
easily noticed by [Manulife's company] physician, Dr. [Winifredo]
Lumapas.
2) [The insured's] history of Hypertension [has been] noted 03 years
prior to [the insured's] admission on 27 December 2000. (This is not
something serious or fatal)
3) [The insured's] history of Leptospirosis in 2000. (This is not
confirmed)
4) [The insured's] hospital confinement [at the CDH] on 09 May 2002
with findings of Agute Pancreatitis (This is related to the gallstones
of [the insured]. When the gallbladder is diseased, distention is
impossible and its pressure regulating function is lost - a fact that
may explain high incidence of pancreatitis in patient with cholecystic
disease. [The insured] had cholecystitis, so his acute pancreatitis is
related to the cholecystitis and chol[e]lithiasis (gallstones).
xxxx
11. [Manulife] accepted [the insured's] application, and now that a
claim for the benefits [is] made, [Manulife now] says that [the
insured] misrepresented and concealed his past illnesses[!] In the
form filled up by [Dr. Winifredo F. Lumapas,] Manulife's [company]
physician, dated 9/10/02, [the insured] checked the column which
says ''yes" (to] the following questions:
Have you had electrocardiograms, when, why, result? ([Manulife's
company physician] wrote the answer which stated that result was
normal.)
Have you seen a doctor, or had treatment operation on hospital
case during the last five years?
12. x x x It is rather strange that [the insured's] parotidectomy was
not included in the report when the scar of that operation can not
be concealed because it caused a disfigurement in the right side of
his face in front and below his ear. This is just too obvious to be
overlooked by [Manulife's company physician] who examined and
interviewed [the insured] before accepting the policy. x x x
13. x x x [Undoubtedly, Manulife] had the option to inquire further
[into the insured's physical condition, because the insured had given
it authority to do so] based on the authority given by [the insured.
And how come that Manulife] was able to gather all [these]
information now and not before [the insured] was ensured? x x x
xxxx
16. Moreover, in the comments of [the said] Dr. Lumapas, (Annex
"D" of the Complaint), he said the physical condition of [the] then
prospective insurance policy holder, [the insured, was] "below
average". x x x [Estoppel now bars Manulife from claiming the
contrary.]
17. [Especially] worth noting are the [following] comments of [the
said Dr. Lumapas, on the insured's answer to the questionnaires] -
(Annex "D" of the Complaint), [to wit:]
"4. d. Have you had any electrocardiograms, when, why, result.
"Yes"
- on June 2002 at CDH, Cebu City
= Cardiac clearance for surgery
= Result normal
14
16. Have you seen a doctor, or had treatment, operation or hospital
care during the last 5 years? "Yes" admitted at [CDH,] Cebu City by
Dr. Lamberto Garcia and Dr. Jorge Ang for Chronic Calculous
Chol[e]cystitis
= Cholecystectomy done [J]une 7[,] 2002 by Dr. Ang
= Biopsy: Gallbladder Chronic Calculous Cholecystitis
= CBC, Hepatitis Panel done - all negative results except hepatitis
antigen (+)
18. Do you. consume alcohol beverages? If so, how much? Yes,
consumes 12 shots of whisky during socials.
25. The abdomen - Abnormality of any viscus, genitalia or evidence
of hernia or operation - post cholecystectomy scar.
26. The head and neck - vision, optic, fundi, hearing, speech, thyroid
etc. Yes wears eyeglasses for reading. (This is where [Manulife's
company physician] should have written the scar of [the insured's]
parotidectomy as shown in the picture).
32. From your knowledge of this person would you consider his/ her
health to be Average [ ] Below average [/] Poor [ ]
(Underscoring ours)
18. It is interesting to note that the answers in the insurance agent's
form for [the insured] (Annex "C" of the Complaint) did not jibe with
the answers [made by] Dr. Lumapas in Annex "D" of the Complaint.
This only boosts Hermenegilda's claim that x x x indeed, it was the
Manulife's agent herself, (Ms. Montesclaros) who checked all the
items in the said form to speed up the insurance application and its
approval, [so she could] get her commission as soon as possible.
19. In fine, at the time when both insurance policies in question
were submitted for approval to [Manulife, the latter had had all the
forewarnings that should have put it on guard or on notice that
things were not what it wanted them to be, reason enough to bestir
it into exercising greater prudence and caution to further inquire
into) the health or medical history of [the insured]. In particular,
Manulife ought to have noted the fact that the insured was at that
time already 65 years old, x x x that he had a previous operation,
and x x x that his health was "below average. x x x18
On November 25, 2005, BPI Family filed a Manifestation19 praying
that either it be dropped from the case or that the case be dismissed
with respect to it (BPI Family), because it no longer had any interest
in the subject insurance policies as asssignee because the insureds
obligation with it (BPI Family) had already been settled or paid. Since
no objection was interposed to this prayer by either Manulife or
Hermenegilda, the RTC granted this prayer in its Order of November
25, 2005.20
Then in the Second Order dated November 25, 2005,21 the RTC
considered the pre-trial as terminated. Trial then ensued.
Manulife presented its sole witness in the person of Ms. Jessiebelle
Victoriano (Victoriano), the Senior Manager of its Claims and
Settlements Department.22 The oral testimony of this witness
chiefly involved identifying herself as the Senior Manager of
Manulife's Claims and Settlements Department and also identifying
the following pieces of evidence;23 the subject insurance policies;
NME, MEE, DOI; the Assignment of Policy No. 6066517-1 to BPI
Family as collateral, dated July 9, 2003; its Letter dated July 10, 2003
re: assignment of said Policy; death claim filed by Hermenegilda on
December 10, 2003; the insured's Death Certificate; the Marriage
Contract between the insured and Hermenegilda; copies of CDH's
Admission and Discharge Records of the insured for December 2000
re: parotidectomy; copies of CDH's PGIS' Interns' Notes and CDH
Operative Record dated December 28, 2000 re: hypertension; copies
of CDH's Admission and Discharge Record of the insured for May
2002, and the Doctor's History/Progress Notes re: acute pancreatitis
and hypertension; copies of CDH's Admission and Discharge Record
of the insured for October 2003 re: leptospirosis; letters dated
March 24, 2004 to Hermenegilda and BPI Family; and BPI Checks
deposited on April 10, 2004 and May 14, 2004 to the bank accounts
of BPI Family and Hermenegilda, respectively, representing the
premium refund.
In its Order of October 2, 2006,24 the RTC admitted all these
exhibits.
Like Manulife, Hermenegilda, in an1plication of her case, also called
only one witness to the witness stand: her counsel of record, Atty.
Edgardo Mayol (Atty. Mayol), whose testimony focused on his
professional engagement with Hermenegilda and the monetary
expenses he incurred in attending to the hearings in this
case.25cralawred Hermenegilda thereafter filed her Formal Offer of
Evidence26 wherein she proffered the following: NME, MEE, DOI,
the insured's driver's license, her letter dated May 8, 2004
protesting the denial by Manulife of her insurance claim, the
contract of services between her and Atty. Mayol, the official
receipts for plane tickets, terminal fees, and boarding passes,
attesting to Atty. Mayol's plane travels to and from Cebu City to
attend to this case. These were all admitted by the RTC.27
Ruling of the Regional Trial Court
After due proceedings, the RTC dismissed Manulife's Complaint,
thus:
WHEREFORE, premises duly considered, judgment is hereby
rendered DISMISSING the instant case for insufficiency of evidence.
[Manulife] is hereby ordered to pay [Hermenegilda] actual expenses
in the sum of P40,050.00 and attorney's fees in the sum of P100,000.
[Hermenegilda's] claim for moral and exemplary damages is denied
for lack of evidence.
SO ORDERED.28
The RTC found no merit at all in Manulife's Complaint for rescission
of the subject insurance policies because it utterly failed to prove
that the insured had committed the alleged misrepresentation/s or
concealment/s. In fact, Victoriano, the one and only witness that
Manulife called to the witness stand, gave no first-hand, direct
evidence at all relative to the particulars of the alleged
misrepresentation/s or concealment/s that the insured allegedly
practiced or committed against it. This witness did not testify at all
in respect to the circumstances under which these documentary
exhibits were executed, nor yet about what these documentary
exhibits purported to embody. The RTC stressed that the CDH
medical records that might or could have established the insured's
misrepresentation/s or concealment/s were inadmissible for being
hearsay, because Manulife did not present the physician or doctor,
or any responsible official of the CDH, who could confirm the due
execution and authenticity of its medical records; that if anything,
Manulife itself admitted in its Reply29 that its very own company
physician, Dr. Winifredo Lumapas, had duly noted the insured's scar,
even as the same company physician also categorized in the MEE
the insured's health as "below average"; and that in short, it is
evident that Manulife thus had had ample opportunity to verify and
to inquire further into the insured's medical history commencing
from the date of the MEE but opted not to do so; and that if things
did not come up to its standards or expectations, it was totally at
liberty to reject the insured's applications altogether, or it could
have demanded a higher premium for the insurance coverage.
The RTC further ruled that Hermenegilda was entitled to attorney's
fees in the sum of P100,000.00 and actual expenses in the amount
of P40,050.00, because she was compelled to litigate to defend her
interest against Manulife's patently unjustified act in rejecting her
clearly valid and lawful claim. The RTC also found merit in
Hermenegilda's claims relative to the expenses she paid her Cebu-
based counsel.
In its Order of June 15, 2009,30 the RTC denied tor lack of merit
Manulife's motion for reconsideration31 and Hermenegilda's motion
for partial reconsideration.32
From the RTC's Decision, Manulife filed a Notice of Appeal33 which
was given due course by the RTC in its Order of June 11, 2010.34
15
Ruling of the Court of Appeals
In its appellate review, the CA virtually adopted en toto the findings
of facts made by, and the conclusions of law arrived at, by the RTC.
Thus, the CA decreed:
WHEREFORE, the instant appeal is DENIED. TI1e assailed Decision
dated April 22, 2008 and Order dated Jtn1e 15, 2009 of the Regional
Trial Court of Makati, Branch 57, are hereby AFFIRMED.
SO ORDERED.35
The CA, like the RTC, found Manulife's Complaint bereft of legal and
factual bases. The CA ruled that it is settled that misrepresentation
or concealment in insurance is an affirmative defense, which the
insurer must establish by convincing evidence if it is to avoid liability;
and that in this case the one and only witness presented by Manulife
utterly failed to prove the basic elements of the alleged
misrepresentation/s or concealment/s of material facts imputed by
Manulife against the now deceased insured. The CA held that there
is no basis for Manulife's claim that it is exempted from the duty of
proving the insured's supposed misrepresentation/s or
concealment/s, as these had allegedly been admitted already in
Hermenegilda's Answer; that in the absence of authentication by a
competent witness, the purported CDH medical records of the
insured are deemed hearsay hence, inadmissible, and devoid of
probative value; and that the medical certificate, even if admitted in
evidence as an exception to the hearsay rule, was still without
probative value because the physician or doctor or the hospital's
official who issued it, was not called to the witness stand to validate
it or to attest to it.
Manulife moved for reconsideration36 of the CA's Decision, but this
was denied by the CA in its Resolution of December 10, 2012;37
hence, the present recourse.
Issue
against him. The RTC correctly held that the CDH's medical records
that might have established the insured's purported
misrepresentation/s or concealment/s was inadmissible for being
hearsay, given the fact that Manulife failed to present the physician
or any responsible official of the CDH who could confirm or attest to
the due execution and authenticity of the alleged medical records.
Manulife had utterly failed to prove by convincing evidence that it
had been beguiled, inveigled, or cajoled into selling the insurance to
the insured who purportedly with malice and deceit passed himself
off as thoroughly sound and healthy, and thus a fit and proper
applicant for life insurance. Manulife's sole witness gave no
evidence at all relative to the particulars of the purported
concealment or misrepresentation allegedly perpetrated by the
insured. In fact, Victoriano merely perfunctorily identified the
documentary exhibits adduced by Manulife; she never testified in
regard to the circumstances attending the execution of these
documentary exhibits much less in regard to its contents. Of course,
the mere mechanical act of identifying these documentary exhibits,
without the testimonies of the actual participating parties thereto,
adds up to nothing. These documentary exhibits did not
automatically validate or explain themselves. "The fraudulent intent
on the part of the insured must be established to entitle the insurer
to rescind the contract. Misrepresentation as a defense of the
insurer to avoid liability is an affirmative defense and the duty to
establish such defense by satisfactory and convincing evidence rests
upon the insurer."39 For failure of Manulife to prove intent to
defraud on the part of the insured, it cannot validly sue for
rescission of insurance contracts.
WHEREFORE, the Petition is DENIED. The assailed Decision of the
Court of Appeals dated April 26, 2012 in CA-G.R. CV No. 95561 and
its December 10, 2012 Resolution, are AFFIRMED.
SO ORDERED.

Whether the CA committed any reversible error in affirming the RTC

Decision dismissing Manulife's Complaint for rescission of insurance
contracts for failure to prove concealment on the part of the
insured.

Our Ruling

The present recourse essentially challenges anew the findings of fact

by both the RTC and the CA that the Complaint for rescission of the
insurance policies in question will not prosper because Manulife
failed to prove concealment on the part of the insured. This is not
allowed. It is horn-book law that in appeal by certiorari to this Court
under Rule 45 of the Revised Rules of Court, the findings of fact by
the CA especially where such findings of fact are affirmatory or
confirmatory of the findings of fact of the RTC, as in this case, are
conclusive upon this Court. The reason is simple: this Court not
being a trial court, it does not embark upon the task of dissecting,
analyzing, evaluating, calibrating or weighing all over again the
evidence, testimonial or documentary, that the parties adduced
during trial. Of course, there are exceptions to this rule, such as (1)
when the conclusion is grounded upon speculations, surmises or
conjectures; (2) when the inference is manifestly mistaken, absurd
or impossible; (3) when there is a grave abuse of discretion; (4)
when the judgment is based on a misapprehension of facts; (5)
when the findings of fact are conflicting; (6) when there is no
citation of specific evidence on which the factual findings are based;
(7) when the findings of absence of facts is contradicted by the
presence of evidence on record; (8) when the findings of the CA are
contrary to the findings of the RTC; (9) when the CA manifestly
overlooked certain relevant and undisputed facts that, if properly
considered, would justify a different conclusion; (10) when the
findings of the CA are beyond the issues of the case; and, (11) when
the CA's findings are contrary to the admission of both parties.38
We are satisfied that none of these exceptions obtains in the
Petition at bench. Thus, this Court must defer to the findings of fact
of the RTC - as affirmed or confirmed by the CA - that Manulife's
Complaint for rescission of the insurance policies in question was
totally bereft of factual and legal bases because it had utterly failed
to prove that the insured had committed the alleged
misrepresentation/s or concealment/s of material facts imputed
16