B2022 REPORTS ANNOTATED
DBP v CA
I. Recit-ready summary
Juan B. Dans, 76 years of age, together with his family, applied for
a loan worth Php 500, 000 at the Development Bank of the Philipppines on
May 1987. The loan was approved by the bank dated August 4, 1987 but in
the reduced amount of Php 300, 000. Mr. Dans was advised by DBP to
obtain a mortgage redemption insurance at DBP MRI pool. DBP deducted
the amount to be paid for MRI Premium that is worth Php 1476.00. The
insurance of Mr. Dans, less the DBP service fee of 10%, was credited by
DBP to the savings account of DBP MRI-Pool. Accordingly, the DBP MRI
Pool was advised of the credit. On September 3, 1987, Mr. Dans died of
cardiac arrest. DBP MRI notified DBP was not eligible for the coverage of
insurance for he was beyond the maximum age of 60. The wife, Candida,
filed a complaint to the Regional Trial Court Branch I Basilan against DBP
and DBP MRI pool for ‘Collection of Sum of Money with Damages’
Issue W/N DBP MRI POOL SHOLD BE HELD LIABLE?
HELD: No. DBP MRI Pool is not liable. Though the power to
approve the insurance is lodged to the pool, the DBP MRI Pool did not
approve the application of the deceased. There was no perfected contract
between the insurance pool and Mr. Dans. DBP was wearing two
legal hats: as a lender and insurance agent. As an insurance agent, DBP
made believed that the family already fulfilled the requirements for the said
insurance although DBP had a full knowledge that the application would
never be approved. DBP acted beyond the scope of its authority for
accepting applications for MRI. If the third person who contracted is
unaware of the authority conferred by the principal on the agent and he has
been deceived, the latter is liable for damages.
II. Facts of the case
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). Loan was reduced to 300k. DBP then reuced 1,476 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
G.R. NO: 177056
ARTICLE; TOPIC OF CASE: EmEquity Jurisdiction
VOL 32 [August 6, 1991]
Manila Public School Teacher’s Assoc v Laguio, Jr
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. 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.
The DBP and the DBP MRI Pool separately filed their answers, with
the former asserting a cross-claim against the latter.
The trial court found the case ripe for summary judgement and decided
in favor of Canida Dans. he 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. CA affirmed decision.
III. Issue/s
1. Whether or not the DBP MRI Pool should be held liable on the
ground that the contract was already perfected NO
IV. Ratio/Legal Basis
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.
PONENTE: Chico Nazario, J
DIGEST MAKER: Digest life
 B2022 REPORTS ANNOTATED VOL 32 [August 6, 1991]
DBP v CA
Manila Public School Teacher’s Assoc v Laguio, Jr

Undisputably, the power to approve MRI applications is lodged with been deceived by the non-disclosure thereof by the agent, then the latter is
the DBP MRI Pool. The pool, however, did not approve the application of liable for damages to him. The rule that the agent is liable when he acts
Dans. There is also no showing that it accepted the sum of P1,476.00, which without authority is founded upon the supposition that there has been some
DBP credited to its account with full knowledge that it was payment for Dan's wrong or omission on his part either in misrepresenting, or in affirming, or
premium. There was, as a result, no perfected contract of insurance; hence, concealing the authority under which he assumes to act. Inasmuch as the non-
the DBP MRI Pool cannot be held liable on a contract that does not exist. disclosure of the limits of the agency carries with it the implication that a
It was DBP, as a matter of policy and practice, that required Dans, the deception was perpetrated on the unsuspecting client, the provisions of
borrower, to secure MRI coverage. Instead of allowing Dans to look for his Articles 19, 20 and 21 of the Civil Code of the Philippines come into play.
own insurance carrier or some other form of insurance policy, DBP The DBP's liability, however, cannot be for the entire value of the insurance
compelled him to apply with the DBP MRI Pool for MRI coverage. When policy. It cannot be assumed that were it not for the concealment by DBP that
Dan's loan was released on August 11, 1987, DBP already deducted from the Dans would have gotten the loan from another company. One is entitled to
proceeds thereof the MRI premium. Four days latter, DBP made Dans fill up an adequate compensation only for such pecuniary loss suffered by him as he
and sign his application for MRI, as well as his health statement. The DBP has duly proved.
later submitted both the application form and health statement to the DBP
MRI Pool. V. Disposition
As an insurance agent, DBP made Dans go through the motion of
applying for said insurance, thereby leading him and his family to believe WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV
that they had already fulfilled all the requirements for the MRI and that the No. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to
issuance of their policy was forthcoming. Apparently, DBP had full REIMBURSE respondent Estate of Juan B. Dans the amount of P1,476.00
knowledge that Dan's application was never going to be approved. The with legal interest from the date of the filing of the complaint until fully paid;
maximum age for MRI acceptance is 60 years as clearly and specifically and (2) to PAY said Estate the amount of Fifty Thousand Pesos (P50,000.00)
provided in Article 1 of the Group Mortgage Redemption Insurance Policy as moral damages and the amount of Ten Thousand Pesos (P10,000.00) as
signed in 1984 by all the insurance companies concerned (Exh. "1-Pool"). attorney's fees. With costs against petitioner.
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 VI. Notes
he expressly binds himself or exceeds the limits of his authority without
giving such party sufficient notice of his powers."
The DBP is not authorized to accept applications for MRI when its clients
are more than 60 years of age (Exh. "1-Pool"). Knowing all the while that
Dans was ineligible for MRI coverage because of his advanced age, DBP
exceeded the scope of its authority when it accepted Dan's application for
MRI by collecting the insurance premium, and deducting its agent's
commission and service fee.
The liability of an agent who exceeds the scope of his authority depends upon
whether the third person is aware of the limits of the agent's powers. There is
no showing that Dans knew of the limitation on DBP's authority to solicit
applications for MRI.
If the third person dealing with an agent is unaware of the limits of the
authority conferred by the principal on the agent and he (third person) has

G.R. NO: 177056 PONENTE: Chico Nazario, J

ARTICLE; TOPIC OF CASE: EmEquity Jurisdiction DIGEST MAKER: Digest life