Malayan Insurance Co., Inc. V. Arnaldo (1987) G.R. No.

L-67835 October 12, 1987

FACTS:

June 7, 1981: Malayan insurance co., inc. (MICO) issued to Coronacion Pinca, Fire Insurance Policy for her
property effective July 22, 1981, until July 22, 1982
October 15,1981: MICO allegedly cancelled the policy for non-payment, of the premium and sent the
corresponding notice to Pinca
December 24, 1981: payment of the premium for Pinca was received by Domingo Adora, agent of MICO
January 15, 1982: Adora remitted this payment to MICO,together with other payments
January 18, 1982: Pinca's property was completely burned
February 5, 1982: Pinca's payment was returned by MICO to Adora on the ground that her policy had been
cancelled earlier but Adora refused to accept it and instead demanded for payment
Under Section 416 of the Insurance Code, the period for appeal is thirty days from notice of the decision of the
Insurance Commission. The petitioner filed its motion for reconsideration on April 25, 1981, or fifteen days such
notice, and the reglementary period began to run again after June 13, 1981, date of its receipt of notice of the
denial of the said motion for reconsideration. As the herein petition was filed on July 2, 1981, or nineteen days
later, there is no question that it is tardy by four days.
Insurance Commission: favored Pinca
MICO appealed

ISSUE: W/N MICO should be liable because its agent Adora was authorized to receive it

HELD: YES. petition is DENIED

SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is exposed to the peril insured
against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance
company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an
industrial life policy whenever the grace period provision applies.
SEC. 306. xxx xxx xxx

Any insurance company which delivers to an insurance agant or insurance broker a policy or contract of insurance shall
be demmed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on
such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon.
Payment to an agent having authority to receive or collect payment is equivalent to payment to the principal
himself; such payment is complete when the money delivered is into the agent's hands and is a discharge of the
indebtedness owing to the principal.
SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof
to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the
effective date of the policy, of one or more of the following:
 (a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the hazard insured against;
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;
(e) physical changes in the property insured which result in the property becoming uninsurable;or
(f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer
in violation of this Code.

As for the method of cancellation, Section 65 provides as follows:

SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to
the named insured at the address shown in the policy, and shall state (a) which of the grounds set forth in section
sixty-four is relied upon and (b) that, upon written request of the named insured, the insurer will furnish the facts
on which the cancellation is based.
A valid cancellation must, therefore, require concurrence of the following conditions:
(1) There must be prior notice of cancellation to the insured;
(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the grounds mentioned;
(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the address shown in the policy;
(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon written request of
the insured, the insurer will furnish the facts on which the cancellation is based.
All MICO's offers to show that the cancellation was communicated to the insured is its employee's testimony that
the said cancellation was sent "by mail through our mailing section." without more
It stands to reason that if Pinca had really received the said notice, she would not have made payment on the
original policy on December 24, 1981. Instead, she would have asked for a new insurance, effective on that date
and until one year later, and so taken advantage of the extended period.
Incidentally, Adora had not been informed of the cancellation either and saw no reason not to accept the said
payment
Although Pinca's payment was remitted to MICO's by its agent on January 15, 1982, MICO sought to return it to
Adora only on February 5, 1982, after it presumably had learned of the occurrence of the loss insured against on
January 18, 1982 make the motives of MICO highly suspicious
 G.R. No. 95546 November 6, 1992
MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner, vs. THE COURT OF APPEALS, AMERICAN
HOME ASSURANCE CO., represented by American International Underwriters (Phils.), Inc., respondent.

FACTS:
Sometime in early 1982, private respondent American Home Assurance Co. (AHAC), represented by American
International Underwriters (Phils.), Inc., issued in favor of petitioner Makati Tuscany Condominium Corporation
(TUSCANY) Insurance Policy No. AH-CPP-9210452 on the latter's building and premises, for a period beginning 1
March 1982 and ending 1 March 1983, with a total premium of P466,103.05. The premium was paid on installments
on 12 March 1982, 20 May 1982, 21 June 1982 and 16 November 1982, all of which were accepted by private
respondent.
Successive renewals of the policies were made in the same manner. On 1984, the policy was again renewed and
petitioner made two installment payments, both accepted by private respondent, the first on 6 February 1984 for
P52,000.00 and the second, on 6 June 1984 for P100,000.00. Thereafter, petitioner refused to pay the balance of the
premium.

Private respondent filed an action to recover the unpaid balance of P314,103.05 for Insurance Policy. Petitioner
explained that it discontinued the payment of premiums because the policy did not contain a credit clause in its favor.
Petitioner further claimed that the policy was never binding and valid, and no risk attached to the policy. It then
pleaded a counterclaim for P152,000.00 for the premiums already paid for 1984-85, and in its answer with amended
counterclaim, sought the refund of P924,206.10 representing the premium payments for 1982-85.

DECISION OF LOWER COURTS:

(1) Trial Court: dismissed the complaint and counterclaim
(2) CA: ordering herein petitioner to pay the balance of the premiums due

ISSUE:
Whether payment by installment of the premiums due on an insurance policy invalidates the contract of insurance, in
view of Sec. 77 of P.D. 612, otherwise known as the Insurance Code, as amended, which provides:
Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing is exposed to the peril insured
against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance
company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an
industrial life policy whenever the grace period provision applies

RULING:
No, the contract remains valid even if the premiums were paid on installments. Certainly, basic principles of equity and
fairness would not allow the insurer to continue collecting and accepting the premiums, although paid on installments,
and later deny liability on the lame excuse that the premiums were not prepared in full.
At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily
accepted.

Moreover, as correctly observed by the appellate court, where the risk is entire and the contract is indivisible, the
insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk insured for any period,
however brief or momentary. The obligation to pay premiums when due is ordinarily as indivisible obligation to pay
the entire premium.
 South Sea v CA G.R. No. 102253 June 2, 1995

Facts:
Valenzuela Hardwood entered into an agreement with the defendant Seven Brothers whereby the latter undertook to
load the former's 940 lauan logs for shipment to Manila.
South Sea insured the logs for P2,000,000.00 in its marine policy. Valenzuela then gave the check in payment of the
premium on the insurance policy to Mr. Victorio Chua.
Seven Brothers ship sank resulting in the loss of the logs.
A check for P5,625.00 to cover payment of the premium tendered to the insurer but was not accepted. Instead, the
South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of inception for non-
payment of the premium due in accordance with Section 77 of the Insurance Code.
Valenzuela demanded from South Sea the payment of the proceeds of the policy but the latter denied liability under the
policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation for the value of the
lost logs but the latter denied the claim.
Valenzuela filed a complaint a complaint for the recovery of the value of lost logs and freight charges from Seven
Brothers Shipping Corporation or from South Sea Surety and Insurance Company, the insurer.
The trial court rendered judgment in favor of plaintiff Valenzuela. The Court of Appeals affirmed the judgment only
against the insurance corporation and absolved the shipping entity from liability. The court held that there was a
stipulation in the charter party exempted the ship owner from liability in case of loss.
In the SC petition, petitioner argues that it should have been freed from any liability to Hardwood. It faults the
appellate court (a) for having disregarded Section 77 of the insurance Code and (b) for holding Victorio Chua to have
been an authorized representative of the insurer.
Issue:
WON Mr. Chua acted as an agent of the surety company or of the insured when he received the check for insurance
premiums.
Held: Agent of the surety. Petition denied.
To determine if there was a valid contract of insurance, it must be determine if the premium was validly paid to the
company or its agents at the time of the loss.
The appellate and trial courts have found that Chua acted as an agent.
South Sea insisted that Chua has been an agent for less than ten years of the Columbia Insurance Brokers, a different
company. Appellant argued that Mr. Chua, having received the premiums, acted as an agent under Section 301 of the
Insurance Code which provides:
Sec. 301. Any person who for any compensation, commission or other thing of value, acts, or aids in soliciting,
negotiating or procuring the making of any insurance contract or in placing risk or taking out insurance, on behalf of an
insured other than himself, shall be an insurance broker within the intent of this Code, and shall thereby become liable
to all the duties requirements, liabilities and penalties to which an insurance broker is subject.
Valenzuela claimed that the second paragraph of Section 306 of the Insurance Code provided:
Sec. 306 Any insurance company which delivers to an insurance agent or insurance broker a policy or contract of
insurance shall be deemed to have authorized such agent or broker to receive on its behalf payment of any premium
which is due on such policy of contract of insurance at the time of its issuance or delivery or which becomes due
thereon.
Mr. Chua testified that the marine cargo insurance policy logs was by South Sea to be given to the wood company.
When South Sea delivered to Mr. Chua the marine cargo insurance policy for Valenzuelas logs, he is deemed to have
been authorized by former to receive the premium which is due on its behalf.
When the logs were lost, the insured had already paid the premium to an agent of the South Sea Surety and Insurance
Co., Inc., which is consequently liable to pay the insurance proceeds under the policy it issued to the insured.
The court followed the factual evidence of the lower courts and held that they didnt try questions of fact.
 Tibay v CA G.R. No. 119655. May 24, 1996
Facts: Fortune Life issued a fire insurance Policy to Tibay on her two-storey residential building at Zobel Street,
Makati City. The insurance was for P600,000.00 covering the period from January 23, 1987 to January 23, 1988. On
January 23 1987, Tibay only paid P600.00 of 3,000 peso premium and left a balance.
The insured building was completely destroyed by fire. Tibay then paid the balance. On the same day, she filed a claim
on the policy. Her claim was accordingly referred to the adjuster, Goodwill, which immediately wrote Violeta
requesting her to furnish it with the necessary documents for the investigation and processing of her claim. Petitioner
complied, and she signed a non-waiver agreement.
Fortune denied the claim for violation of the Insurance Code. Tibay sued for damages in the amount of P600,000.00
representing the total coverage of the policy.
The trial court ruled for petitioners and made fortune liable for the total value of the insured building and personal
properties. The Court of Appeals reversed the court by removing liability from Fortune after returning the premium.
Hence this petition for review.
The petitioner contended that Fortune remained liable under the subject fire insurance policy in spite of the failure of
petitioners to pay their premium in full.
Issue: May a fire insurance policy be valid, binding and enforceable upon mere partial payment of premium?
Held: No. Petition dismissed.
The pertinent provisions read: This policy including any renewal thereof and/or any endorsement thereon is not in
force until the premium has been fully paid to and duly receipted by the Company in the manner provided herein.
This policy shall be deemed effective, valid and binding upon the Company only when the premiums therefor have
actually been paid in full and duly acknowledged in a receipt signed by any authorized official of the company.
Where the premium has only been partially paid and the balance paid only after the peril insured against has occurred, the
insurance contract did not take effect and the insured cannot collect at all on the policy. The Insurance Code which says that no
policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium has been paid.
What does unless and until the premium thereof has been paid mean?
Petitioners used Philippine Phoenix v. Woodworks, where partial payment of the premium made the policy effective
during the whole period of the policy.
The SC didnt consider the 1967 Phoenix case as persuasive due to the different factual scenario.
In Makati Tuscany v CA, the parties mutually agreed that the premiums could be paid in installments, hence, this Court
refused to invalidate the insurance policy.
Nothing in Article 77 of the Code suggested that the parties may not agree to allow payment of the premiums in
installment, or to consider the contract as valid and binding upon payment of the first premium.
Phoenix and Tuscany demonstrated the waiver of prepayment in full by the insurer. In this case however, there was no
waiver. There was a stipulation that the policy wasnt in force until the premium has been fully paid and receipted.
There was no juridical tie of indemnification from the fractional payment of premium. The insurance contract itself
expressly provided that the policy would be effective only when the premium was paid in full.
Verily, it is elemental law that the payment of premium is requisite to keep the policy of insurance in force. If the
premium is not paid in the manner prescribed in the policy as intended by the parties the policy is ineffective. Partial
payment even when accepted as a partial payment will not keep the policy alive.
South Sea v CA stipulated 2 exceptions to the requirement of payment of the entire premium as a prerequisite to the validity of the
insurance contract. These are when in case the insurance coverage relates to life or insurance when a grace period applies, and
when the insurer makes a written acknowledgment of the receipt of premium to be conclusive evidence of payment.
Hence, in the absence of clear waiver of prepayment in full by the insurer, the insured cannot collect on the proceeds of the policy.
The terms of the insurance policy constitute the measure of the insurers liability. In the absence of statutory
prohibition to the contrary, insurance companies have the same rights as individuals to limit their liability and to
impose whatever conditions they deem best upon their obligations not inconsistent with public policy.
 UCPB v Masagana G.R. No. 137172. April 4, 2001

Facts:
In our decision of 15 June 1999 in this case, we reversed and set aside the assailed decision[1] of the Court of Appeals,
which affirmed with modification the judgment of the trial court (a) allowing Respondent to consign the sum of
P225,753.95 as full payment of the premiums for the renewal of the five insurance policies on Respondents properties;
(b) declaring the replacement-renewal policies effective and binding from 22 May 1992 until 22 May 1993; and (c)
ordering Petitioner to pay Respondent P18,645,000.00 as indemnity for the burned properties covered by the renewal-
replacement policies. The modification consisted in the (1) deletion of the trial courts declaration that three of the
policies were in force from August 1991 to August 1992; and (2) reduction of the award of the attorneys fees from
25% to 10% of the total amount due the Respondent.

Masagana obtained from UCPB five (5) insurance policies on its Manila properties.

The policies were effective from May 22, 1991 to May 22, 1992. On June 13, 1992, Masaganas properties were razed
by fire. On July 13, 1992, plaintiff tendered five checks for P225,753.45 as renewal premium payments. A receipt was
issued. On July 14, 1992, Masagana made its formal demand for indemnification for the burned insured properties.
UCPB then rejected Masaganas claims under the argument that the fire took place before the tender of payment.

Hence Masagana filed this case.

The Court of Appeals disagreed with UCPBs argument that Masaganas tender of payment of the premiums on 13
July 1992 did not result in the renewal of the policies, having been made beyond the effective date of renewal as
provided under Policy Condition No. 26, which states:
26. Renewal Clause. -- Unless the company at least forty five days in advance of the end of the policy period mails or
delivers to the assured at the address shown in the policy notice of its intention not to renew the policy or to condition
its renewal upon reduction of limits or elimination of coverages, the assured shall be entitled to renew the policy upon
payment of the premium due on the effective date of renewal.

Both the Court of Appeals and the trial court found that sufficient proof exists that Masagana, which had procured
insurance coverage from UCPB for a number of years, had been granted a 60 to 90-day credit term for the renewal of
the policies. Such a practice had existed up to the time the claims were filed. Most of the premiums have been paid for
more than 60 days after the issuance. Also, no timely notice of non-renewal was made by UCPB.

The Supreme Court ruled against UCPB in the first case on the issue of whether the fire insurance policies issued by
petitioner to the respondent covering the period from May 22, 1991 to May 22, 1992 had been extended or renewed by
an implied credit arrangement though actual payment of premium was tendered on a later date and after the occurrence
of the risk insured against.

UCPB filed a motion for reconsideration.

The Supreme Court, upon observing the facts, affirmed that there was no valid notice of non-renewal of the policies in
question, as there is no proof at all that the notice sent by ordinary mail was received by Masagana. Also, the premiums
were paid within the grace period.

Issue: Whether Section 77 of the Insurance Code of 1978 must be strictly applied to Petitioners advantage despite its
practice of granting a 60- to 90-day credit term for the payment of premiums.

Held: No. Petition denied.

Ratio:
Section 77 of the Insurance Code provides: No policy or contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been paid
An exception to this section is Section 78 which provides: Any acknowledgment in a policy or contract of insurance of
the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any
stipulation therein that it shall not be binding until premium is actually paid.

Makati Tuscany v Court of Appeals- Section 77 may not apply if the parties have agreed to the payment
in installments of the premium and partial payment has been made at the time of loss.

Section 78 allows waiver by the insurer of the condition of prepayment and makes the policy binding despite the fact
that premium is actually unpaid. Section 77 does not expressly prohibit an agreement granting credit extension. At the
very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted.

The Tuscany case has provided another exception to Section 77 that the insurer may grant credit extension for the
payment of the premium. If the insurer has granted the insured a credit term for the payment of the premium and loss
occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid
after the loss but within the credit term.

Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit term
within which to pay the premiums. That agreement is not against the law, morals, good customs, public order or public
policy. The agreement binds the parties.

It would be unjust if recovery on the policy would not be permitted against Petitioner, which had consistently granted a
60- to 90-day credit term for the payment of premiums. Estoppel bars it from taking refuge since Masagana relied in
good faith on such practice. Estoppel then is the fifth exception.
 American Home v Chua G.R. No. 130421. June 28, 1999

Facts:
Chua obtained from American Home a fire insurance covering the stock-in-trade of his business. The insurance was
due to expire on March 25, 1990.

On April 5, 1990, Chua issued a check for P2,983.50 to American Homes agent, James Uy, as payment for
the renewal of the policy. The official receipt was issued on April 10. In turn, the latter a renewal certificate. A new
insurance policy was issued where petitioner undertook to indemnify respondent for any damage or loss arising from
fire up to P200,000 March 20, 1990 to March 25, 1991.

On April 6, 1990, the business was completely razed by fire. Total loss was estimated between P4,000,000 and
P5,000,000. Respondent filed an insurance claim with petitioner and four other co-insurers, namely, Pioneer
Insurance, Prudential Guarantee, Filipino Merchants and Domestic Insurance. Petitioner refused to honor the claim
hence, the respondent filed an action in the trial court.

American Home claimed there was no existing contract because respondent did not pay the premium. Even with a
contract, they contended that he was ineligible bacue of his fraudulent tax returns, his failure to establish the actual
loss and his failure to notify to petitioner of any insurance already effected. The trial court ruled in favor of respondent
because the respondent paid by way of check a day before the fire occurred and that the other insurance companies
promptly paid the claims. American homes was made to pay 750,000 in damages.

The Court of Appeals found that respondents claim was substantially proved and petitioners unjustified refusal to pay
the claim entitled respondent to the award of damages.

American Home filed the petition reiterating its stand that there was no existing insurance contract between the
parties. It invoked Section 77 of the Insurance Code, which provides that no policy or contract of insurance issued by
an insurance company is valid and binding unless and until the premium thereof has been paid and the case of Arce v.
Capital Insurance that until the premium is paid there is no insurance.

Issues:
1. Whether there was a valid payment of premium, considering that respondents check was cashed after the occurrence
of the fire

Held: Yes. No. Yes, but not all damages valid. Petition granted. Damages modified.

Ratio:
1. The trial court found, as affirmed by the Court of Appeals, that there was a valid check payment by respondent to
petitioner. The court respected this.

The renewal certificate issued to respondent contained the acknowledgment that premium had been paid.

In the instant case, the best evidence of such authority is the fact that petitioner accepted the check and issued
the officialreceipt for the payment. It is, as well, bound by its agents acknowledgment of receipt of payment.

Section 78 of the Insurance Code explicitly provides:

An acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its
payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until
the premium is actually paid.
 Paulin vs. Insular
47 OG 3012

Facts:
This action was instituted by the minors Vicentita Antigua Paulin and Silvina Paulin, who are sisters assisted
by their guardian ad-litem, for the purpose of collecting the amount of three life insurance policies issued by the
defendant, the Insular Life Assurance Co. ltd. In favor of their father, Estaban Paulin, who is alleged to have been
killed by the guerillas, on or about December 10, 1943.
The aforementioned policies are Policy no. 84029 in the sum of P 2,000, issued on August 1, 1940, with
premiums payable on the first day of August of each year, for 20 years and the second Policy No. 84683, in the sum of
P 2, 000, issued on October 1, 1940, with premiums payable on the first day of October of each year, for 20 years and
Policy No. 85061, in the sum of P7, 000 issued on October 1, 1940, with premiums payable on the first day of every
month, for 20 years. The three policies carried an accidental death benefit clause, providing for double indemnity in
case of death, under the conditions therein set forth, and named the plaintiffs as beneficiaries in such case.
Upon demand, made on behalf of the plaintiffs, the defendant refused to pay the sums stated in said policies,
on the ground that the same had lapsed, prior to the date of death of Esteban Paulin, for non-payment of premiums.
Hence complaint herein, which, after due trial, was dismissed by the RTC.
Appellee admits having received, in connection with policy no 84029, the annual premiums due on August 1, 1940 and
August 1, 1941; in connection with policy no. 84683, the annual premiums due on October 1, 1940, and October 1,
1941; and in connection with policy no. 85061, fifteen monthly premiums which fell due from October 1, 9140 to
December 1, 1941, inclusive.

Issue:
Whether or not the policies have lapsed for the non-payment of premium

Ruling:
Despite appellants assertion to the contrary, no evidence whatsoever of such payment, in relation to the policies nos.
84029 and 84683, has been introduced. Despite appellants testimonial and documentary evidence, they do not bear
any contention.
Exhibit B only showed a provisional receipt for the initial premium paid on October 11, 1940 and the acceptance letter
by Esteban Paulin were only submitted in connection with Policy No. 84683.
Exhibit c, with reference to Policy no. 85061, were letters written by Esteban Paulin to the defendant on the first day of
May, July and November 1942 and March, April, June and July 1943, respectively, each stating that it enclosed a post
office money order for P36.12, which, presumably represented the monthly premiums falling due in the months already
mentioned. But these were not part of the records of the defendant company but found among the personal belongings
of the deceased Esteban Paulin. Each of the letters in the exhibit bore the signature of Esteban which the Court finds
them to be originals. Having remained in the possession of its writer, it tends to show that the premiums for the months
specified were not forwarded to the defendant.
It is urged also that, in view of the Executive Order No. 25, series of 1944, as amended by Executive Order No. 32,
series of 1945, providing for a moratorium in the enforcement of payment of all debts or monetary obligations
contracted prior to the liberalization of the Philippines by the American forces, the policies could not and did not lapse
for non-payment of the premiums. This contention is untenable, for an insured is not under the obligation to pay
premiums. The same do not constitute a debt and the insurance company cannot compel payment thereof, which is one
only of the conditions for the subsistence or effectivity of an insurance policy.
While the payment of premiums or assessments as specified in the insurance contract is necessary to bind the insurer to
discharge its obligations imposed by the contract, it is generally true in the case of life insurance contracts that there is
no absolute undertaking to pay the premiums or assessment and, consequently, no personal liability of the insurer, and
the insured, if he has not expressly promised to pay, is at liberty to refuse to make the payment.
 Pioneer v Yap G.R. No. L-36232 December 19, 1974

Facts:
Respondent Oliva Yap was the owner of a store in a two-storey building where she sold shopping bags and footwear.
Chua Soon Poon, her son-in-law, was in charge of the store.
Yap took out a Fire Insurance Policy No. 4216 from Pioneer Insurance with a value of P25,000.00 covering her stocks,
office furniture, fixtures and fittings.
Among the conditions in the policy executed by the parties are the following:
unless such notice be given and the particulars of such insurance or insurances be stated in, or endorsed on
this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits under
this Policy shall be forfeited Any false declaration or breach or this condition will render this policy null and void.
Another insurance policy for P20,000.00 issued by Great American covering the same properties. The endorsement
recognized co-insurance by Northwest for the same value.
Oliva Yap took out another fire insurance policy for P20,000.00 covering the same properties from
the Federal Insurance Company, Inc., which was procured without notice to and the written consent of Pioneer.
A fire broke out in the building, and the store was burned. Yap filed an insurance claim, but the same was denied for a
breach.
Oliva Yap filed a case for payment of the face value of her fire insurance policy. The insurance company refused to
pay because she never informed Pioneer of another insurer. The trial court decided in favor of Yap. The CA affirmed.

Issue:
Whether or not petitioner should be absolved from liability on the Pioneeer policy on account of any violation of the
co-insurance clause

Held: No. Petition dismissed.

There was a violation. The insurance policy for P20,000.00 issued by the Great American, ceased to be recognized by
them as a co-insurance policy.
The endorsement shows the clear intention of the parties to recognize on the date the endorsement was made, the
existence of only one co-insurance, the Northwest one. The finding of the Court of Appeals that
the Great American Insurance policywas substituted by the Federal Insurance policy is indeed contrary to said
stipulation.
Other insurance without the consent of Pioneer would avoid the contract. It required no affirmative act of election on
the part of the company to make operative the clause avoiding the contract, wherever the specified conditions should
occur. Its obligations ceased, unless, being informed of the fact, it consented to the additional insurance.
The validity of a clause in a fire insurance policy to the effect that the procurement of additional insurance without the
consent of the insurer renders the policy void is in American jurisprudence.
Milwaukee Mechanids' Lumber Co., vs. Gibson- "The rule in this state and practically all of the states is to the effect
that a clause in a policy to the effect that the procurement of additional insurance without the consent of the insurer
renders the policy void is a valid provision.
In this jurisdiction, General Insurance & Surety Corporation vs. Ng Hua- The annotation then, must be deemed to be a
warranty that the property was not insured by any other policy. Violation thereof entitled the insurer to rescind.
Furthermore, even if the annotations were overlooked the defendant insurer would still be free from liability because
there is no question that the policy issued by General Indemnity has not been stated in nor endorsed on Policy No. 471
of defendant. The obvious purpose of the aforesaid requirement in the policy is to prevent over-insurance and thus
avert the perpetration of fraud where a fire would be profitable to the insured.
 G.R. No. L-27932 October 30, 1972
UNION MANUFACTURING CO., INC. and the REPUBLIC BANK, plaintiffs, REPUBLIC BANK, plaintiff-
appellant, vs. PHILIPPINE GUARANTY CO., INC., defendant-appellee.

In a suit arising from a fire insurance policy, the insurer, Philippine Guaranty Co., Inc., defendant in the lower court
and now appellee, was able to avoid liability upon proof that there was a violation of a warranty. There was no denial
thereof from the insured, Union Manufacturing Co., Inc. With such a legally crippling blow, the effort of the Republic
Bank, the main plaintiff and now the sole appellant, to recover on such policy as mortgagee, by virtue of the cover note
in the insurance policy providing that it is entitled to the payment of loss or damages as its interest may appear, was in
vain. The defect being legally incurable, its appeal is likewise futile. We affirm.

As noted in the decision, the following facts are not disputed: "(1) That on January 12, 1962, the Union Manufacturing
Co., Inc. obtained certain loans, overdrafts and other credit accommodations from the Republic Bank in the total sum
of P415,000.00 with interest at 9% per annum from said date and to secure the payment thereof, said Union
Manufacturing Co., Inc. executed a real and chattel mortgages on certain properties, which are more particularly
described and listed at the back of the mortgage contract ...; (2) That as additional condition of the mortgage contract,
the Union Manufacturing Co., Inc. undertook to secure insurance coverage over the mortgaged properties for the same
amount of P415,000.00 distributed as follows: (a) Buildings, P30,000.00; (b) Machineries, P300,000.00; and (c)
Merchandise Inventory, P85,000.00, giving a total of P415,000.00; (3) That as Union Manufacturing Co., Inc. failed to
secure insurance coverage on the mortgaged properties since January 12, 1962, despite the fact that Cua Tok, its
general manager, was reminded of said requirement, the Republic Bank procured from the defendant, Philippine
Guaranty Co., Inc. an insurance coverage on loss against fire for P500,000.00 over the properties of the Union
Manufacturing Co., Inc., as described in defendant's 'Cover Note' dated September 25, 1962, with the annotation that
loss or damage, if any, under said Cover Note is payable to Republic Bank as its interest may appear, subject however
to the printed conditions of said defendant's Fire Insurance Policy Form; (4) That on September 27, 1962, Fire
Insurance Policy No. 43170 ... was issued for the sum of P500,000.00 in favor of the assured, Union Manufacturing
Co., Inc., for which the corresponding premium in the sum of P8,328.12, which was reduced to P6,688.12, was paid by
the Republic Bank to the defendant, Philippine Guaranty Co., Inc. ...; (5) That upon the expiration of said fire policy on
September 25, 1963, the same was renewed by the Republic Bank upon payment of the corresponding premium in the
same amount of P6,663.52 on September 26, 1963; (6) That in the corresponding voucher ..., it appears that although
said renewal premium was paid by the Republic Bank, such payment was for the account of Union Manufacturing Co.,
Inc. and that the cash voucher for the payment of the first premium was paid also by the Republic Bank but for the
account Union Manufacturing Co., Inc.; (7) That sometime on September 6, 1964, a fire occurred in the premises of the
Union Manufacturing Co., Inc.; (8) That on October 6, 1964, the Union Manufacturing Co., Inc. filed its fire claim
with the defendant Philippine Guaranty Co., Inc., thru its adjuster, H. H. Bayne Adjustment Co., which was denied by
said defendant in its letter dated November 27, 1964 ..., on the following grounds: 'a. Policy Condition No. 3 and/or the
'Other Insurance Clause' of the policy violated because you did not give notice to us the other insurance which you had
taken from New India for P80,000.00, Sincere Insurance for P25,000.00 and Manila Insurance for P200,000.00 with
the result that these insurances, of which we became aware of only after the fire, were not endorsed on our policy; and
(b) Policy Condition No. 11 was not complied with because you have failed to give to our representatives the required
documents and other proofs with respect to your claim and matters touching on our liability, if any, and the amount of
such liability'; (9) That as of September, 1962, when the defendant Philippine Guaranty Co., issued Fire Insurance
Policy No. 43170 ... in the sum of P500,000.00 to cover the properties of the Union Manufacturing Co., Inc., the same
properties were already covered by Fire Policy No. 1533 of the Sincere Insurance Company for P25,000.00 for the
period from October 7, 1961 to October 7, 1962 ...; and by insurance policies Nos. F-2314 ... and F-2590 ... of the
Oceanic Insurance Agency for the total sum of P300,000.00 and for periods respectively, from January 27, 1962 to
January 27, 1963, and from June 1, 1962 to June 1, 1963; and (10) That when said defendant's Fire Insurance Policy
No. 43170 was already in full force and effect, the Union Manufacturing Co., Inc. without the consent of the defendant,
Philippine Guaranty Co., Inc., obtained other insurance policies totalling P305,000.00 over the same properties prior to
the fire, to wit: (1) Fire Policy No. 250 of New India Assurance Co., Ltd., for P80,000.00 for the period from May 27,
1964 to May 27, 1965 ...; (2) Fire Policy No. 3702 of the Sincere Insurance Company for P25,000.00 for the period
from October 7, 1963 to October 7, 1964 ...; and (3) Fire Policy No. 6161 of Manila Insurance Co. for P200,000.00 for
the period from May 15, 1964 to May 15, 1965 ... ."1 There is in the cover note2 and in the fire insurance policy3 the
following warranty: "[Co- Insurance Declared]: Nil."4

Why the appellant Republic Bank could not recover, as payee, in case of loss as its "interest may appear subject to the
terms and conditions, clauses and warranties" of the policy was expressed in the appealed decision thus: "However,
inasmuch as the Union Manufacturing Co., Inc. has violated the condition of the policy to the effect that it did not
reveal the existence of other insurance policies over the same properties, as required by the warranty appearing on the
face of the policy issued by the defendant and that on the other hand said Union Manufacturing Co., Inc. represented
that there were no other insurance policies at the time of the issuance of said defendant's policy, and it appearing
furthermore that while the policy of the defendant was in full force and effect the Union Manufacturing Co., Inc.
secured other fire insurance policies without the written consent of the defendant endorsed on the policy, the
conclusion is inevitable that both the Republic Bank and Union Manufacturing Co., Inc. cannot recover from the same
policy of the defendant because the same is null and void."5 The tone of confidence apparent in the above excerpts
from the lower court decision is understandable. The conclusion reached by the lower court finds support in
authoritative precedents. It is far from easy, therefore, for appellant Republic Bank to impute to such a decision a
failure to abide by the law. Hence, as noted at the outset, the appeal cannot prosper. An affirmance is indicated.

It is to Santa Ana v. Commercial Union Assurance Co.,6 a 1930 decision, that one turns to for the first explicit
formulation as to the controlling principle. As was made clear in the opinion of this Court, penned by Justice Villa-
Real: "Without deciding whether notice of other insurance upon the same property must be given in writing, or whether
a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral or written, we hold
that in the absolute absence of such notice when it is one of the conditions specified in the fire insurance policy, the
policy is null and void."7 The next year, in Ang Giok Chip v. Springfield Fire & Marine Ins. Co.,8 the conformity of the
insured to the terms of the policy, implied from the failure to express any disagreement with what is provided for, was
stressed in these words of the ponente, Justice Malcolm: "It is admitted that the policy before us was accepted by the
plaintiff. The receipt of this policy by the insured without objection binds both the acceptor and the insured to the terms
thereof. The insured may not thereafter be heard to say that he did not read the policy or know its terms, since it is his
duty to read his policy and it will be assumed that he did so." 9 As far back as 1915, in Young v. Midland Textile
Insurance Company, 10 it was categorically set forth that as a condition precedent to the right of recovery, there must be
compliance on the part of the insured with the terms of the policy. As stated in the opinion of the Court through Justice
Johnson: "If the insured has violated or failed to perform the conditions of the contract, and such a violation or want of
performance has not been waived by the insurer, then the insured cannot recover. Courts are not permitted to make
contracts for the parties. The function and duty of the courts consist simply in enforcing and carrying out the contracts
actually made. While it is true, as a general rule, that contracts of insurance are construed most favorably to the
insured, yet contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the
terms which the parties themselves have used. If such terms are clear and unambiguous they must be taken and
understood in their plain, ordinary and popular sense." 11 More specifically, there was a reiteration of this Santa Ana
ruling in a decision by the then Justice, later Chief Justice, Bengzon, in General Insurance & Surety Corp. v. Ng
Hua. 12 Thus: "The annotation then, must be deemed to be a warranty that the property was not insured by any other
policy. Violation thereof entitles the insurer to rescind. (Sec. 69, Insurance Act) Such misrepresentation is fatal in the
light of our views in Santa Ana v. Commercial Union Assurance Company, Ltd. ... . The materiality of non-disclosure
of other insurance policies is not open to doubt." 13As a matter of fact, in a 1966 decision, Misamis Lumber Corp. v.
Capital Ins. & Surety Co., Inc., 14 Justice J.B.L. Reyes, for this Court, made manifest anew its adherence to such a
principle in the face of an assertion that thereby a highly unfavorable provision for the insured would be accorded
recognition. This is the language used: "The insurance contract may be rather onerous ('one sided', as the lower court
put it), but that in itself does not justify the abrogation of its express terms, terms which the insured accepted or
adhered to and which is the law between the contracting parties." 15

There is no escaping the conclusion then that the lower court could not have disposed of this case in a way other than it
did. Had it acted otherwise, it clearly would have disregarded pronouncements of this Court, the compelling force of
which cannot be denied. There is, to repeat, no justification for a reversal.

WHEREFORE, the decision of the lower court of March 31, 1967 is affirmed. No costs.
 UNION MANUFACTURING CO., INC. VS. PHILIPPINE GUARANTYCO., INC.47 SCRA 271
(G.R. NO. L-27932)OCTOBER 30, 1972
Petitioner: Republic Bank Respondent: Philippine Guaranty Co.. Inc.

FACTS:
On January 12, 1962, the Union Manufacturing Co., Inc. obtained certain l o a n s f r o m t h e R e p u b l i c B a n k i n
t h e t o t a l s u m o f 4 1 5 , 0 0 0 . 0 0 . T o secure the payment thereof, UMC executed real and chattel
mortgage on certain properties. The Republic Bank procured from the defendant Philippine Guaranty Co.,
Inc. an insurance coverage on loss against fire for 500,000.00 over the properties of the UMC, as described
in defendants cover note dated September 25, 1962, with the annotation that loss or damage, if any,
under said cover note is payable to Republic Bank as its interest
may appear, subject however to the printed conditions of said defendants Fire
Insurance Policy Form. On September 6, 1964, a fire occurred in the premises of UMC and on October 6, 1964,
UMC filed its fire claim with the PGC Inc., thru its
a d j u s t e r , H . H . B a y n e A d j u s t m e n t C o . , w h i c h w a s d e n i e d b y s a i d defendant in its letter dated
November 26, 1964 on the following ground: Policy Condition No. 3 and/or the Other Insurance Clause of the
policy was violated because you did not give notice to us of the other insurance which you had taken from New India
for 80,000.00. Sincere Insurance for 25,000.00 and Manila Insurance for 200,000.00 with the result that
these insurances of which we became aware of only after the fire,were not endorsed on our policy.

ISSUE: Whether Republic Bank can recover.

HELD: Without deciding- whether notice of other insurance upon the same property must be given in
writing, or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral
or written, we hold that in the absolute absence of such notice when it is one of the conditions specified in
the fire insurance policy, the policy is null and void. (Santa Ana vs. Commercial Union Ass. Co., 55 Phil. 128).I f t h e
i n s u r e d h a s v i o l a t e d o r f a i l e d t o p e r f o r m t h e c o n d i t i o n s o f t h e contract, and such a violation
or want of performance has not been waived by the insurer, then the insured cannot recover. Courts are not
permitted to make contracts for the parties. The functions and duty of the courts consist simply in enforcing and
carrying out the contracts actually made. W h i l e i t i s t r u e , a s a g e n e r a l r u l e , t h a t c o n t r a c t s
o f i n s u r a n c e a r e construed most favorably to the insured, yet contracts of insurance, like other contracts, are to be
construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are
clear and unambiguous they must be taken and understood in their plain, ordinary and popular sense. The annotation
then, must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitles
the insurer to rescind. The materiality of non-disclosure of other insurance policies is not open to doubt.

The insurance contract may be rather onerous, but that in itself does
not justify the abrogation of its express terms, terms which the insured accepted or adhered to and which is the
law between the contracting parties.
 Oriental v CA G.R. No. 94052 August 9, 1991

Facts:
Panama Sawmill shipped 1208 pieces of apitog logs to Manila and insured the logs with Oriental for the value of Php 1
million. Two barges were loaded with 610 and 598 logs. At sea, typhoons ravaged one of the barges, resulting in the
loss of 497 of 598 of the logs.
The Insurance contract provided for indemnity under the following conditions:
Warranted that this Insurance is against TOTAL LOSS ONLY. Subject to the following clauses:
Civil Code Article 1250 Waiver clause
Typhoon warranty clause
Omnibus clause.
Oriental didnt give an indemnity because there wasnt total loss of the shipment.
The sawmill filed a civil case against Oriental and the court ordered it to pay 410,000 as value for the missing logs. The
CA affirmed the lower court judgment but reduced the legal interest. Hence this appeal by Oriental.

Issue:
Whether or not Oriental Assurance can be held liable under its marine insurance policy based on the theory of a
divisible contract of insurance and, consequently, a constructive total loss.

Held: No. Petition granted.

Perla v CA- The terms of the contract constitute the measure of the insurer liability and compliance therewith is a
condition precedent to the insured's right to recovery from the insurer.

Whether a contract is entire or severable is a question of intention to be determined by the language employed by the
parties. The policy in question shows that the subject matter insured was the entire shipment of 2,000 cubic meters of
apitong logs. The fact that the logs were loaded on two different barges did not make the contract several and
divisible as to the items insured. The logs on the two barges were not separately valued or separately insured. Only one
premium was paid for the entire shipment, making for only one cause or consideration. The insurance contract must,
therefore, be considered indivisible.

Also, the insurer's liability was for "total loss only" as stipulated. A total loss may be either actual or constructive. An
actual total loss under Sec 130 of the Insurance Code is caused by:
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking, or by being broken up;
(c) Any damage to the thing which renders it valueless to the owner for the purpose for which he held it; or
(d) Any other event which effectively deprives the owner of the possession, at the port of destination, of the
thing insured.

A constructive total loss, gives to a person insured a right to abandon and it means:
SECTION 139. A person insured by a contract of marine insurance may abandon the thing insured, or any particular
portion thereof separately valued by the policy, or otherwise separately insured, and recover for a total loss thereof,
when the cause of the loss is a peril injured against,
(a) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it from the peril;
(b) If it is injured to such an extent as to reduce its value more than three-fourths

The appellate court considered the cargo in one barge as separate from the other and ruled that 497 of 598 was more
than of the amount lost, showing a constructive total loss.

The SC, however, said that although the logs were placed in two barges, they were not separately valued by the policy,
nor separately insured. Of the entirety of 1,208, pieces of logs, only 497 pieces thereof were lost or 41.45% of the
entire shipment. Since the cost of those 497 pieces does not exceed 75% of the value of all 1,208 pieces of logs, the
shipment can not be said to have sustained a constructive total loss under Section 139(a) of the Insurance Code.
 Roque v. Intermediate Appellate Court
G.R. No. L-66935 Nov. 11, 1985

Facts:
Isabela Roque (Roque of Isabela Roque Timber Enterprises) hired the Manila Bay Lighterage Corp. (ManilaBay) to
load and carry its logs from Palawan to North Harbor, Manila. The logs were insured with Pioneer Insurance and
Surety Corp. (Pioneer). The logs never reached Manila due to certain circumstances (as alleged by Roque and found by
the appellate court), such as the fact that the barge was not seaworthy that it developed a leak, that oneof the hatches
were left open causing water to enter, and the absence of the necessary cover of tarpaulin causing more water to enter
the barge. When Roque demanded payment from Pioneer, but the latter refused on the ground that its liability
depended upon the Total Loss by Total Loss of Vessel Only. The trial court ruled in favor of Roque in the civil
complaint filed by the latter against Pioneer, but the decision was reversed by the appellate court.

Issue:
WON in cases of marine insurance, there is a warranty of seaworthiness by the cargo owner; WON the loss of the
cargo was due to perils of the sea, not perils of the ship.

Held:
Yes, there is. The liability of the insurance company is governed by law. Section 113 of the Insurance Code
provides that In every marine insurance upon a ship or freight, or freightage, or upon anything which is the subject of
marine insurance, a warranty is implied that the ship is seaworthy. Hence, there can be no mistaking the fact that the
term "cargo" can be the subject of marine insurance and that once it is so made, the implied warranty of seaworthiness
immediately attaches to whoever is insuring the cargo whether he be the shipowner or not. Moreover, the fact that
the unseaworthiness of the ship was unknown to the insured is immaterial in ordinary marine insurance and may not be
used by him as a defense in order to recover on the marine insurance policy. As to the second issue, by applying Sec.
113 of the Insurance Code, there is no doubt that the term 'perils of the sea' extends only to losses caused by sea
damage, or by the violence of the elements, and does not embrace all losses happening at sea; it is said to include only
such losses as are of extraordinary nature, or arise from some overwhelming power, which cannot be guarded against
by the ordinary exertion of human skill and prudence. t is also the general rule that everything which happens thru the
inherent vice of the thing, or by the act of the owners, master or shipper, shall not be reputed a peril, if not otherwise
borne in the policy. It must be considered to be settled, furthermore, that a loss which, in the ordinary course of
events, results from the natural and inevitable action of the sea, from the ordinary wear and tear of the ship, or from the
negligent failure of the ships owner to provide the vessel with proper equipment to convey the cargo under ordinary
conditions, is not a peril of the sea. Such a loss is rather due to what has been aptly called the "peril of the ship." The
insurer undertakes to insure against perils of the sea and similar perils, not against perils of the ship. Neither barratry
can be used as aground by Roque. Barratry as defined in American Insurance Law is "any willful misconduct on the
part of master or crew in pursuance of some unlawful or fraudulent purpose without the consent of the owners, and
to the prejudice of the owner's interest." Barratry necessarily requires a willful and intentional act in its commission.
No honest error of judgment or mere negligence, unless criminally gross, can be barratry. In the case at bar, there is no
finding that the loss was occasioned by the willful or fraudulent acts of the vessel's crew. There was only simple
negligence or lack of skill.
 Filipino Merchants Insurance v CA G.R. No. 85141 November 28, 1989

Facts:
Choa insured 600 tons of fishmeal for the sum of P267,653.59 from Bangkok, Thailand to Manila against all risks
under warehouse to warehouse terms. What was imported in the SS Bougainville was 59.940 metric tons at $395.42 a
ton. The cargo was unloaded from the ship and 227 bags were found to be in bad condition by the arrastre.
Choa made a formal claim against the defendant Filipino Merchants Insurance Company for P51,568.62 He also
presented a claim against the ship, but the defendant Filipino Merchants Insurance Company refused to pay the claim.
The plaintiff brought an action against the company and presented a third party complaint against the vessel and the
arrastre contractor.
The court below, after trial on the merits, rendered judgment in favor of private respondent, for the sum of P51,568.62
with interest at legal rate.
The common carrier, Compagnie, was ordered to pay as a joint debtor.
On appeal, the respondent court affirmed the decision of the lower court insofar as the award on the complaint is
concerned and modified the same with regard to the adjudication of the third-party complaint. A motion for
reconsideration of the aforesaid decision was denied. The AC made Filipino Merchants pay but absolved
the common carrier, Compagnie. Hence this petition.

Issues:
1. WON the "all risks" clause of the marine insurance policy held the petitioner liable to the private respondent for the
partial loss of the cargo, notwithstanding the clear absence of proof of some fortuitous event, casualty, or accidental
cause to which the loss is attributable.
2. WON The Court of Appeals erred in not holding that the private respondent had no insurable interest in the subject
cargo, hence, the marine insurance policy taken out by private respondent is null and void.

Held: No. No. Petition denied.

1. The "all risks clause" of the Institute Cargo Clauses read as follows:
5. This insurance is against all risks of loss or damage to the subject-matter insured but shall in no case be deemed to
extend to cover loss, damage, or expense proximately caused by delay or inherent vice or nature of the subject-matter
insured. Claims recoverable hereunder shall be payable irrespective of percentage.
An "all risks policy" should be read literally as meaning all risks whatsoever and covering all losses by an accidental
cause of any kind. Accident is construed by the courts in their ordinary and common acceptance.
The very nature of the term "all risks" must be given a broad and comprehensive meaning as covering any loss other
than a willful and fraudulent act of the insured. This is pursuant to the very purpose of an "all risks" insurance to give
protection to the insured in those cases where difficulties of logical explanation or some mystery surround the loss or
damage to property.
Institute Cargo Clauses extends to all damages/losses suffered by the insured cargo except (a) loss or damage or
expense proximately caused by delay, and (b) loss or damage or expense proximately caused by the inherent vice or
nature of the subject matter insured.
Generally, the burden of proof is upon the insured to show that a loss arose from a covered peril, but under an "all
risks" policy the burden is not on the insured to prove the precise cause of loss or damage for which it seeks
compensation. The insured under an "all risks insurance policy" has the initial burden of proving that the cargo was in
good condition when the policy attached and that the cargo was damaged when unloaded from the vessel. The burden
then shifts to the insurer to show the exception to the coverage. This creates a special type of insurance which extends
coverage to risks not usually contemplated and avoids putting upon the insured the burden of establishing that the loss
was due to the peril falling within the policy's coverage; the insurer can avoid coverage upon demonstrating that a
specific provision expressly excludes the loss from coverage.
Under an 'all risks' policy, it was sufficient to show that there was damage occasioned by some accidental cause of any
kind, and there is no necessity to point to any particular cause.
2. Section 13 of the Insurance Code- anyone has an insurable interest in property who derives a benefit from its
existence or would suffer loss from its destruction

Insurable interest in property may consist in (a) an existing interest; (b) an inchoate interest founded on an existing
interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises.
Choa, as vendee/consignee of the goods in transit, has such existing interest as may be the subject of a valid contract of
insurance. His interest over the goods is based on the perfected contract of sale. The perfected contract of sale between
him and the shipper of the goods operates to vest in him an equitable title even before delivery or before conditions
have been performed.

Further, Article 1523 of the Civil Code provides that where, in pursuance of a contract of sale, the seller is authorized
or required to send the goods to the buyer, delivery of the goods to a carrier, for the purpose of transmission to the
buyer is deemed to be a delivery of the goods to the buyer. The Court has heretofore ruled that the delivery of the
goods on board the carrying vessels partake of the nature of actual delivery since, from that time, the foreign buyers
assumed the risks of loss of the goods and paid the insurance premium covering them.
CHOA TIEK SENG vs. HON. COURT OF APPEALS, FILIPINO MERCHANTS' INSURANCE COMPANY,
INC., BEN LINES CONTAINER, LTD. AND E. RAZON, INC.

Facts: Petitioner imported some lactose crystals from Holland. The goods were loaded at the port at Rotterdam in sea
vans on board the vessel "MS Benalder' and thereafter another vessel "Wesser Broker V-25" of respondent Ben Lines
Container, Ltd.
The goods were insured by the respondent Filipino Merchants' Insurance Co., Inc., against all risks under the terms of
the insurance cargo policy. Upon arrival at the port of Manila, the cargo was discharged only to find out that of the 600
bags delivered to petitioner, 403 were in bad order. The surveys showed that the bad order bags suffered spillage.
(take not of the cause of damage)
Petitioner filed a claim for the loss against respondent insurance company.
Both RTC and CA favor the respondent insurance on the following ground:
In the case at bar, appellant failed to prove that the alleged damage was due to risks connected with navigation.
A distinction should be made between "perils of the sea" which render the insurer liable on account of the loss and/or
damage brought about thereof and "perils of the ship" which do not render the insurer liable for any loss or damage.
Perils of the sea or perils of navigation embrace all kinds of marine casualties, such as shipwreck, foundering,
stranding, collision and every specie of damage done to the ship or goods at sea by the violent action of the winds or
waves. They do not embrace all loses happening on the sea. A peril whose only connection with the sea is that it arises
aboard ship is not necessarily a peril of the sea; the peril must be of the sea and not merely one accruing on the sea. (so
since the spillage is not cause by perils of sea, then respondent Insurance is not liable)

Issue: Respondent Court erred in holding That An "All Risks" Coverage covers only losses occasioned by or Resulting
From "Extra And Fortuitous Events".
(meaning only perils by the sea are covered, which spillage is not one)

Ruling:
(Take note that the policy here is all risk policy)
In Gloren Inc. vs. Filipinas Cia. de Seguros, it was held that an all risk insurance policy insures against all causes of
conceivable loss or damage, except as otherwise excluded in the policy or due to fraud or intentional misconduct on the
part of the insured. It covers all losses during the voyage whether arising from a marine peril or not, including pilferage
losses during the war.
In the present case, the "all risks" clause of the policy sued upon reads as follows:
5. This insurance is against all risks of loss or damage to the subject matter insured but shall in no case be deemed to
extend to cover loss, damage, or expense proximately caused by delay or inherent vice or nature of the subject matter
insured. Claims recoverable hereunder shall be payable irrespective of percentage.
The terms of the policy are so clear and require no interpretation. The insurance policy covers all loss or damage to the
cargo except those caused by delay or inherent vice or nature of the cargo insured. It is the duty of the respondent
insurance company to establish that said loss or damage falls within the exceptions provided for by law, otherwise it is
liable therefor.
An "all risks" provision of a marine policy creates a special type of insurance which extends coverage to risks not
usually contemplated and avoids putting upon the insured the burden of establishing that the loss was due to peril
falling within the policy's coverage. The insurer can avoid coverage upon demonstrating that a specific provision
expressly excludes the loss from coverage.
In this case, the damage caused to the cargo has not been attributed to any of the exceptions provided for nor is there
any pretension to this effect. Thus, the liability of respondent insurance company is clear.
 Delsan vs CA

Facts:

Caltex entered into a contract of affreightment with Delsan Transport Lines, Inc., for a period of one year whereby the
said common carrier agreed to transport Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different
parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of
industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured
with the private respondent, American Home Assurance Corporation.

On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the
early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil.

The Respondent (insurance) paid the Caltex the amount of P5,096,635.57 representing the amount of the value of the
lost cargo.

Issue:
1. Whether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo
amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner.

2. Whether or not the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money
for lack of cause of action

Held:

No, under the law, extra ordinary diligence is required by the common carrier in taking good care of the goods. The
common carrier is presumed negligent unless the contrary provides otherwise. The right of subrogation has its roots in
equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate
payment of a debt by one who in justice and good conscience ought to pay. It is not dependent upon, nor does it grow
out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment by the insurance
company of the insurance claim.

The presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may
recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right. The
subrogation receipt, by itself, is sufficient to establish not only the relationship of herein private respondent as insurer
and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance
claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim.
 Del Val v Del Val G.R. No. L-9374 February 16, 1915

Fatcs:
This is an appeal from a judgment of the Court of First Instance of the city of Manila dismissing the complaint with costs.
The parties are siblings who were the only heirs at law and next of kin of Gregorio del Val, who passed away intestate.
An administrator was appointed for the estate of the deceased, and, after a partial administration, it was closed. During
the lifetime of the deceased he took out insurance on his life for the sum of P40,000 and made it payable to Andres del
Val as sole beneficiary. After his death, the defendant Andres collected the face of the policy. He paid the sum of
P18,365.20 to redeem certain real estate which the decedent had sold to third persons with a right to repurchase. The
redemption of said premises was made by the attorney of the defendant in the name of the plaintiff and
the defendant as heirs of the deceased vendor. Andres, on death of the deceased, took possession of most of his
personal property and that he has also the balance on the insurance policy amounting to P21,634.80.
Plaintiffs contend that the amount of the insurance policy belonged to the estate of the deceased and not to
the defendantpersonally, hence they are entitled to a partition not only of the real and personal property, but also of the
P40,000 life insurance. The complaint prays a partition of all the property, both real and personal, left by the deceased,
and that the defendant account for P21,634.80. They also wanted to divide this equally among the plaintiffs
and defendant along with the other property of deceased.
The defendants claim was that redemption of the real estate sold by his father was made in the name of the plaintiffs
and himself instead of in his name alone without his knowledge or consent. He also averred that it was not his intention
to use the proceeds of the insurance policy for the benefit of any person but himself, he alleging that he was and is the
sole owner thereof and that it is his individual property.
The trial court refused to give relief to either party and dismissed the action due to the argument that the action for
partition failed to comply with the Civil Procedure Code sec. 183, in that it does not 'contain an adequate description of
the real property of which partition is demanded.'
Issue: Can the proceeds of the policy be divided among the heirs?
Held: No. Petition dismissed.
The proceeds of the life-insurance policy belong exclusively to the defendant as his individual and separate property.
That the proceeds of an insurance policy belong exclusively to the beneficiary and not to the estate of the person whose
life was insured, and that such proceeds are the separate and individual property of the beneficiary, and not of the heirs of the
person whose life was insured, is the doctrine in America. The doctrine is embedded in the Code of Commerce where:
The amount which the underwriter must deliver to the person insured, in fulfillment of the contract, shall be the
property of the latter, even against the claims of the legitimate heirs or creditors of any kind whatsoever of the person
who effected the insurance in favor of the former.
The plaintiffs invoked Article 1035 of the Civil Code, where it reads:
An heir by force of law surviving with others of the same character to a succession must bring into
the hereditary estate the property or securities he may have received from the deceased during the life of the same, by
way of dowry, gift, or for any good consideration, in order to compute it in fixing the legal portions and in the account
of the division.
They also invoked Article 819. This article provides that "gifts made to children which are not betterments shall be
considered as part of their legal portion."
The court didnt agree because the contract of life insurance is a special contract and the destination of the proceeds is
determined by special laws which deal exclusively with that subject. The Civil Code has no provisions which relate
directly and specifically to life- insurance contracts or to the destination of life insurance proceeds. That was under the
Code of Commerce.
The plaintiffs claim that the property repurchased with the insurance proceeds belongs to the heirs in common and not
to the defendant alone. This wasnt agreed upon by the court unless the facts appeared that Andres acted as he did with
the intention that the other heirs should enjoy with him the ownership of the estate.
 BPI vs. Posadas
GR No. 34583, October 22, 1931

FACTS:
BPI, as administrator of the estate of deceased Adolphe Schuetze, appealed to CFI Manila absolving defendant,
Collector of Internal Revenue, from the complaint filed against him in recovering the inheritance tax amounting to
P1209 paid by the plaintiff, Rosario Gelano Vda de Schuetze, under protest, and sum of P20,150 representing the
proceeds of the insurance policy of the deceased.

Rosario and Adolphe were married in January 1914. The wife was actually residing and living in Germany when
Adolphe died in December 1927. The latter while in Germany, executed a will in March 1926, pursuant with its law
wherein plaintiff was named his universal heir. The deceased possessed not only real property situated in the
Philippines but also personal property consisting of shares of stocks in 19 domestic corporations. Included in the
personal property is a life insurance policy issued at Manila on January 1913 for the sum of $10,000 by the Sun Life
Assurance Company of Canada, Manila Branch. In the insurance policy, the estate of the deceased was named the
beneficiary without any qualification. Rosario is the sole and only heir of the deceased. BPI, as administrator of the
decedents estate and attorney in fact of the plaintiff, having been demanded by Posadas to pay the inheritance tax, paid
under protest. Notwithstanding various demands made by plaintiff, Posadas refused to refund such amount.

ISSUE: WON the plaintiff is entitled to the proceeds of the insurance.

HELD:
SC ruled that(1)the proceeds of a life-insurance policy payable to the insured's estate, on which the premiums were
paid by the conjugal partnership, constitute community property, and belong one-half to the husband and the other half
to the wife, exclusively; (2)if the premiums were paid partly with paraphernal and partly conjugal funds, the proceeds
are likewise in like proportion paraphernal in part and conjugal in part; and (3)the proceeds of a life-insurance policy
payable to the insured's estate as the beneficiary, if delivered to the testamentary administrator of the former as part of
the assets of said estate under probate administration, are subject to the inheritance tax according to the law on the
matter, if they belong to the assured exclusively, and it is immaterial that the insured was domiciled in these Islands or
outside.

Hence, the defendant was ordered to return to the plaintiff one-half of the tax collected upon the amount of P20,150,
being the proceeds of the insurance policy on the life of the late Adolphe Oscar Schuetze, after deducting the
proportional part corresponding to the first premium.
 Insular v Ebrado G.R. No. L-44059 October 28, 1977

Facts:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with a rider for Accidental Death.
He designated Carponia T. Ebrado as the revocable beneficiary in his policy. He referred to her as his wife.
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made liable to pay the coverage in the
total amount of P11,745.73, representing the face value of the policy in the amount of P5,882.00 plus the additional
benefits for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as the designated beneficiary therein, although she
admited that she and the insured were merely living as husband and wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is the one
entitled to the insurance proceeds.
Insular commenced an action for Interpleader before the trial court as to who should be given the proceeds. The court
declared Carponia as disqualified.

Issue: WON a common-law wife named as beneficiary in the life insurance policy of a legally married man can claim
the proceeds in case of death of the latter?

Held: No. Petition

Section 50 of the Insurance Act which provides that "the insurance shall be applied exclusively to the proper interest of
the person in whose name it is made"
The word "interest" highly suggests that the provision refers only to the "insured" and not to the beneficiary, since a
contract of insurance is personal in character. Otherwise, the prohibitory laws against illicit relationships especially on
property and descent will be rendered nugatory, as the same could easily be circumvented by modes of insurance.
When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is governed by the
general rules of the civil law regulating contracts. And under Article 2012 of the same Code, any person who
is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a fife insurance policy by
the person who cannot make a donation to him. Common-law spouses are barred from receiving donations from each
other.
Article 739 provides that void donations are those made between persons who were guilty of adultery or concubinage
at the time of donation.
There is every reason to hold that the bar in donations between legitimate spouses and those between illegitimate ones
should be enforced in life insurance policies since the same are based on similar consideration. So long as marriage
remains the threshold of family laws, reason and morality dictate that the impediments imposed upon married couple
should likewise be imposed upon extra-marital relationship.
A conviction for adultery or concubinage isnt required exacted before the disabilities mentioned in Article 739 may
effectuate. The article says that in the case referred to in No. 1, the action for declaration of nullity may be brought by
the spouse of the donor or donee; and the guilty of the donee may be proved by preponderance of evidence in the same
action.
The underscored clause neatly conveys that no criminal conviction for the offense is a condition precedent. The law
plainly states that the guilt of the party may be proved in the same acting for declaration of nullity of donation. And,
it would be sufficient if evidence preponderates.
The insured was married to Pascuala Ebrado with whom she has six legitimate children. He was also living in with his
common-law wife with whom he has two children.
 Manufacturers v Meer G.R. No. L-2910 June 29, 1951

Facts:
Manufacturer Life Insurance Company was engaged in such business in the Philippines for more than five years before
and including the year 1941. But due to war it closed the branch office at Manila during 1942 up to 1945. Plaintiff
issued a number of life insurance policies in the Philippines containing stipulations known as non-forfeiture clauses.
Since the insured failed to pay from 1942 to 1946, the company applied the provision of the automatic premium loan
clauses; and the net amount of premiums so advanced or loaned totaled P1,069,254.98. On this sum
the defendant Collector of Internal Revenue assessed P17,917.12. The assessment was made pursuant to section 255 of
the NIRC which put taxes on insurance premiums paid by money, notes, credits or any substitutes for money.
Manufacturer contended that when it made premium loans or premium advances by virtue of the non-forfeiture clauses,
it did not collect premiums within the meaning of the above sections of the law, and therefore it is not amendable to the
tax provided.
Issues:
1. Whether or not premium advances made by plaintiff-appellant under the automatic premium loan clause of its
policies are "premium collected" by the Company are subject to tax
Held: Yes.
1. A person secures a 20-years endowment policy for P5,000 from Manufacturers and pays an annual premium of
P250. He pays the first ten yearly premiums amounting to P2,500 and on this amount plaintiff-appellant pays the taxes.
Also, the cash value of said policy after the payment of the 10th annual premium amounts to P1,000." When on the
eleventh year the annual premium fell due and the insured remitted no money within the grace period, the insurer
treated the premium then overdue as paid from the cash value, the amount being loan to the policyholder who could
discharge it at anytime with interest at 6 per cent. The insurance contract, therefore, continued in force for the eleventh year.
Under the circumstances described, did the insurer collect the amount of P250 as the annual premium for the eleventh
year on the said policy? In effect the Manufacturers Life Insurance Co. loaned to the person P250 and the latter in turn
paid with that sum the annual premium on his policy. The Company therefore collected the premium for the eleventh year.
"How could there be such a collection when insurer becomes a creditor, acquires a lien on the policy and is entitled to
collect interest on the amount of the unpaid premiums?".
Wittingly, the "premium" and the "loan" have been interchanged in the argument. The insurer "became a creditor" of the
loan, but not of the premium that had already been paid. And it is entitled to collect interest on the loan, not on the premium.
The insured paid the premium for the eleventh; but in turn he became a debtor of the company for the sum of P250.
This debt he could repay either by later remitting the money to the insurer or by letting the cash value compensate for it. The
debt may also be deducted from the amount of the policy should he die thereafter during the continuance of the policy.
There was new credit for the advances made. True, the company could not sue the insured to enforce that credit. But it
has means of satisfaction out of the cash surrender value.
Here again it may be urged that if the credit is paid out of the cash surrender value, there were no new funds added to
the company's assets. Cash surrender value "as applied to life insurance policy, is the amount of money the company
agrees to pay to the holder of the policy if he surrenders it and releases his claims upon it. The more premiums the
insured has paid the greater will be the surrender value; but the surrender value is always a lesser sum than the total
amount of premiums paid."
The cash value or cash surrender value is therefore an amount which the insurance company holds in trust for the
insured to be delivered to him upon demand. It is therefore a liability of the company to the insured. Now then, when
the company's credit for advances is paid out of the cash value or cash surrender value, that value and the company's
liability is thereby dismissed. Consequently, the net assets of the insurance company increase.
 DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs. COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented by CANDIDA G. DANS,
and the DBP MORTGAGE REDEMPTION INSURANCE POOL, respondents.
G.R. No. L-109937 March 21, 1994

Facts: In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for a loan of
P500,000.00 with the Development Bank of the Philippines (DBP), Basilan Branch. As the principal mortgagor, Dans,
then 76 years of age, was advised by DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage
Redemption Insurance Pool (DBP MRI Pool).

A loan, in the reduced amount of P300,000.00, was approved by DBP on August 4, 1987 and released on August 11,
1987. From the proceeds of the loan, DBP deducted the amount of P1,476.00 as payment for the MRI premium. On
August 15, 1987, Dans accomplished and submitted the MRI Application for Insurance and the Health Statement
for DBP MRI Pool.

On August 20, 1987, the MRI premium of Dans, less the DBP service fee of 10 percent, was credited by DBP to the
savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was advised of the credit.

On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this information to the DBP MRI
Pool. On September 23, 1987, the DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage, being
over the acceptance age limit of 60 years at the time of application.

On October 21, 1987, DBP apprised Candida Dans of the disapproval of her late husbands MRI application. The DBP
offered to refund the premium of P1,476.00 which the deceased had paid, but Candida Dans refused to accept the
same, demanding payment of the face value of the MRI or an amount equivalent to the loan. She, likewise, refused to
accept an ex gratia settlement of P30,000.00, which the DBP later offered.

On February 10, 1989, respondent Estate, through Candida Dans as administratrix, filed a complaint with the Regional
Trial Court, Branch I, Basilan, against DBP and the insurance pool for Collection of Sum of Money with Damages.
Respondent Estate alleged that Dans became insured by the DBP MRI Pool when DBP, with full knowledge of Dans
age at the time of application, required him to apply for MRI, and later collected the insurance premium thereon.
Respondent Estate therefore prayed: (1) that the sum of P139,500.00, which it paid under protest for the loan, be
reimbursed; (2) that the mortgage debt of the deceased be declared fully paid; and (3) that damages be awarded.
On March 10, 1990, the trial court rendered a decision in favor of respondent Estate and against DBP. The DBP MRI
Pool, however, was absolved from liability, after the trial court found no privity of contract between it and the
deceased. The trial court declared DBP in estoppel for having led Dans into applying for MRI and actually collecting
the premium and the service fee, despite knowledge of his age ineligibility.

Issue: 1) Whether or not there is a contract made between DBP MRI Pool and the late Juan Dans;
2) Whether or not DBP should be held liable.

Held: 1) No. When Dans applied for MRI, he filled up and personally signed a Health Statement for DBP MRI Pool
(Exh. 5-Bank) with the following declaration:

I hereby declare and agree that all the statements and answers contained herein are true, complete and correct to the
best of my knowledge and belief and form part of my application for insurance. It is understood and agreed that no
insurance coverage shall be effected unless and until this application is approved and the full premium is paid during
my continued good health (Records, p. 40).

Under the aforementioned provisions, the MRI coverage shall take effect: (1) when the application shall be approved
by the insurance pool; and (2) when the full premium is paid during the continued good health of the applicant. These
two conditions, being joined conjunctively, must concur.
Undisputably, the power to approve MRI applications is lodged with the DBP MRI Pool. The pool, however, did not
approve the application of Dans. There is also no showing that it accepted the sum of P1,476.00, which DBP credited
to its account with full knowledge that it was payment for Dans premium. There was, as a result, no perfected contract
of insurance; hence, the DBP MRI Pool cannot be held liable on a contract that does not exist.

2) Yes. As an insurance agent, DBP made Dans go through the motion of applying for said insurance, thereby leading
him and his family to believe that they had already fulfilled all the requirements for the MRI and that the issuance of
their policy was forthcoming. Apparently, DBP had full knowledge that Dans application was never going to be
approved. The maximum age for MRI acceptance is 60 years as clearly and specifically provided in Article 1 of the
Group Mortgage Redemption Insurance Policy signed in 1984 by all the insurance companies concerned (Exh. 1-
Pool).

Under Article 1987 of the Civil Code of the Philippines, the agent who acts as such is not personally liable to the
party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving
such party sufficient notice of his powers.

The DBPs liability, however, cannot be for the entire value of the insurance policy. To assume that were it not for
DBPs concealment of the limits of its authority, Dans would have secured an MRI from another insurance company,
and therefore would have been fully insured by the time he died, is highly speculative. Considering his advanced age,
there is no absolute certainty that Dans could obtain an insurance coverage from another company. It must also be
noted that Dans died almost immediately, i.e., on the nineteenth day after applying for the MRI, and on the twenty-
third day from the date of release of his loan.

One is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved (Civil
Code of the Philippines, Art. 2199).

WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV

No. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to REIMBURSE respondent Estate of Juan B. Dans
the amount of P1,476.00 with legal interest from the date of the filing of the complaint until fully paid; and (2) to PAY
said Estate the amount of Fifty Thousand Pesos (P50,000.00) as moral damages and the amount of Ten Thousand
Pesos (P10,000.00) as attorneys fees. With costs against petitioner.
 Philippine Pryce Assurance Corp. V. CA (1994)
G.R. No. 107062 February 21, 1994

FACTS:
Gegroco, Inc filed for a collection of the issued surety bond for P500K and P1M by Interworld Assurance
Corporation (now Philippine Pryce Assurance Corporation) in behalf of its principal Sagum General Merchandise
RTC: favored Gegroco, Inc
CA: affirmed RTC
Interworld: checks issued by its principal which were supposed to pay for the premiums bounced and it was not yet
authorized by the Insurance Commission to issue surety bonds

ISSUE: W/N Interworld Assurance Corp. should be liable for the surety bond that it issued as payment for the
premium

HELD: YES. RTC and CA: confirmed

Interworld did not and never attempted to pay the requisite docket fee and was not present during the scheduled
pre-trial so it is as if third-party complaint was never filed
Sec. 177. The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is
perfected and delivered to the obligor. No contract of suretyship or bonding shall be valid and binding unless and
until the premium therefor has been paid, except where the obligee has accepted the bond, in which case the bond
becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the
surety
Interworld's defense that it did not have authority to issue a Surety Bond when it did is an admission of fraud
committed against Gegroco. No person can claim benefit from the wrong he himself committed. A representation
made is rendered conclusive upon the person making it and cannot be denied or disproved as against the person
relying thereon.
 Tio Khe Chio v. CA
GR No. 76101-02 September 30, 1991

Facts: Petitioner shipped bags of imported fishmeals and insured the same with respondent insurance company Eastern
Assurance & Surety Corp (EASCO). During transit, the bags were found out to be damaged thus rendering the
fishmeals useless. Petitioner filed a claim before the EASCO which denied the same, prompting the former to sue the
latter at CFI Cebu who ordered EASCO to pay the petitioner's claim for insurance with damages. Upon execution,
respondent filed a petition for certiorari with the CA who set aside the lower court's decision arguing that the latter has
erred in fixing the legal interest on 12% per annum rather than the mandated 6%.

Issue: What should the legal interest be for damages arising from loss of property?

Held: The applicable law is Article 2209 of the Civil Code which reads that if the obligation consists in the payment of
a sum of money and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary,
shall be the payment of interest agreed upon, and in the absence of stipulation, the legal interest which is 6% per
annum.

The adjusted rate mentioned in the Circular No. 416, from which the CFI based its decision, refers only to loans or
forbearances of money, goods or credits and court judgments thereon but not to court judgments for damages arising
from injury to persons and loss of property which does not involve a loan.

Tio Khe Chio vs. Court of Appeals

(202 SCRA 119)Circular No. 416 of the Central Bank which took effect on July 29, 1974 pursuant to Presidential
Decree No. 116 (Usury Law) raised the legal rate of interest from six (6%) percent to twelve (12%) percent. The
adjusted rate mentioned in the circular refers only to loans or forbearances of money, goods or credits and court
judgments thereon but not to court judgments for damages arising from injury to persons and loss of property which
does not involve a loan. In the case of Philippine Rabbit Bus Lines, Inc. vs.
Cruz ,G.R. No. 71017, July 28, 1986, 143 SCRA 158, the Court declared that the legal rate of interest is six (6%)
percent per annum and not twelve (12%) percent, where a judgment award is based on an action for damages for
personal injury, not use or forbearance of money, goods or credit. In the same vein, the Court held in GSIS vs. Court
of Appeals G.R. No. 52478, October30, 1986, 145 SCRA 311, that the rates under the Usury Law(amended by P. D.
116) are applicable only to interest by way of compensation for the use or forbearance of money; interest by way of
damages is governed by Article 2209 of the Civil Code.