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The facts as found by the CA, are as follows: On January 23, 2001, PASAR signed a subrogation
receipt in favor of Malayan. To recover the amount
paid and in the exercise of its right of subrogation,
Loadstar International Shipping, Inc.(Loadstar
Malayan demanded reimbursement from Loadstar
Shipping) and Philippine Associated Smelting and
Shipping, which refused to comply. Consequently, on
Refining Corporation (PASAR) entered into a Contract
September 19, 2001, Malayan instituted with the RTC
of Affreightment for domestic bulk transport of the
a complaint for damages. The complaint was later
latter’s copper concentrates for a period of one year
amended to include Loadstar International as party
from November 1, 1998 to October 31, 1999. The
defendant.
contract was extended up to the end of October 2000.
In its amended complaint, Malayan mainly alleged
On September 10, 2000, 5,065.47 wet metric tons
that as a direct and natural consequence of the
(WMT) of copper concentrates were loaded in Cargo
unseaworthiness of the vessel, PASAR suffered loss
Hold Nos. 1 and 2 of MV "Bobcat", a marine vessel
of the cargo. It prayed for the amount of
owned by Loadstar International Shipping Co., Inc.
[P]33,934,948.75, representing actual damages plus
(Loadstar International) and operated by Loadstar
legal interest fromdate of filing of the complaint until
Shipping under a charter party agreement. The
fully paid, and attorney’s fees in the amount of not
shipper and consignee under the Bill of Lading are
less than [P]500,000.00. It also sought to declare the
Philex Mining Corporation (Philex) and PASAR,
respectively. The cargo was insured with Malayan
bill of lading as void since it violates the provisions of was attached to Malayan’s compliance was still an
Articles 1734 and 1745 of the Civil Code. unreadable machine copy thereof.5 (Citations omitted)
Article 364. If the effect of the damage referred to in Malayan also failed to establish the legal basis of its
Article 361 is merely a diminution in the value of the decision to sell back the rejected copper concentrates
goods, the obligation of the carrier shall be reduced to to PASAR. It cannot be ascertained how and when
the payment of the amount which, in the judgment of Malayan deemed itself asthe owner of the rejected
experts, constitutes such difference in value. copper concentrates to have these validly disposed
of. If the goods were rejected, it only means there was
Article 365. If, in consequence of the damage, the no acceptance on the part of PASAR from the carrier.
goods are rendered useless for sale and consumption Furthermore, PASAR and Malayan simply agreed on
for the purposes for which they are properly destined, the purchase price of US$90,000.00 without any
the consignee shall not be bound to receive them, allegation or proof that the said price was the
and he may have them in the hands of the carrier, depreciated value based on the appraisal of experts
demanding of the latter their value at the current price as provided under Article 364 of the Code of
on that day. Commerce.
If among the damaged goods there should be some II. Subrogation of Malayan to the rights of PASAR
pieces in good condition and without any defect, the
foregoing provision shall be applicable with respect to Malayan’s claim against the petitioners is based on
those damaged and the consignee shall receive those subrogation to the rights possessed by PASAR as
which are sound, this segregation to be made by consignee of the allegedly damaged goods. The right
distinct and separate pieces and without dividing a of subrogation stems from Article 2207 of the New
single object, unless the consignee proves the Civil Code which states:
impossibility of conveniently making use of them in
this form. Art. 2207. If the plaintiff’s property has been insured,
and he has received indemnity from the insurance
The same rule shall be applied to merchandise in company for the injury or loss arising out of the wrong
bales or packages, separating those parcels which or breach of contract complained of, the insurance
appear sound. company shall be subrogated to the rights of the
insured against the wrong doer or the person who has
From the above-cited provisions, if the goods are violated the contract. If the amount paid by the
delivered but arrived at the destination in damaged insurance company does not fully cover the injury or
condition, the remedies to be pursued by the loss, the aggrieved party shall be entitled to recover
consignee depend on the extent of damage on the the deficiency from the person causing the loss or
goods. injury.
If the goods are rendered useless for sale, "The right of subrogation is not dependent upon, nor
consumption or for the intended purpose, the does it grow out of, any privity of contract or upon
consignee may reject the goods and demand the written assignment of claim. It accrues simply upon
payment of such goods at their marketprice on that payment of the insurance claim by the insurer."20 The
day pursuant to Article 365. In case the damaged right of subrogation is however, not absolute. "There
portion of the goods can be segregated from those are a few recognized exceptions to this rule. For
delivered in good condition, the consignee may reject instance, if the assured by his own act releases the
those in damaged condition and accept merely those wrongdoer or third party liable for the loss or damage,
which are in good condition. But if the consignee is from liability, the insurer’s right of subrogation is
able to prove that it is impossible to use those goods defeated. x x x Similarly, where the insurer pays the
which were delivered in good condition without the assured the value of the lostgoods without notifying
others, then the entire shipment may be rejected. To the carrier who has in good faith settled the assured’s
reiterate, under Article 365, the nature of damage claim for loss, the settlement is binding on both the
must be such that the goods are rendered useless for assured and the insurer, and the latter cannot bring
sale, consumption or intended purpose for the an action against the carrier on his right of
consignee to be able to validly reject them. subrogation. x x x And where the insurer pays the
assured for a loss which is not a risk covered by the
policy, thereby effecting ‘voluntary payment,’ the "The burden of proof is on the party who would be
former has no right of subrogation against the third defeated if no evidence would be presented on either
party liable for the loss x x x."21 side. The burden is to establish one’s case by a
preponderance of evidence which means that the
The rights of a subrogee cannot be superior to the evidence, as a whole, adduced by one side, is
rights possessed by a subrogor. "Subrogation is the superior tothat of the other. Actual damages are not
substitution of one person in the place of another with presumed. The claimant must prove the actual
reference to a lawful claim or right, so that he who is amount of loss with a reasonable degree of certainty
substituted succeeds to the rights of the other in premised upon competent proof and on the best
relation to a debt or claim, including its remedies or evidence obtainable. Specific facts that could afford a
securities. The rights to which the subrogee succeeds basis for measuring whatever compensatory or actual
are the same as, but not greaterthan, those of the damages are borne must be pointed out. Actual
person for whom he is substituted, that is, he cannot damages cannot be anchored on mere surmises,
acquire any claim, security or remedy the subrogor speculations or conjectures."24
did not have. In other words, a subrogee cannot
succeed to a right not possessed by the subrogor. A Having ruled that Malayan did not adduce proof of
subrogee in effect steps into the shoes of the insured pecuniary loss to PASAR for which the latter was
and can recover only ifthe insured likewise could have questionably indemnified, there is no necessity to
recovered."22 Consequently, an insurer indemnifies the expound further on the other issues raised by the
insured based on the loss or injury the latter actually petitioners and Malayan in this case.
suffered from. If there is no loss or injury, then there is
no obligation on the part of the insurer to indemnify WHEREFORE, the petition is GRANTED. The
the insured. Should the insurer pay the insured and it Decision dated April 14, 2008 and Resolution dated
turns out that indemnification is not due, or if due, the December 11, 2008 of the Court of Appeals in CA-
amount paid is excessive, the insurer takes the risk of G.R. CV No. 82758 are hereby REVERSED and SET
not being able to seek recompense from the alleged ASIDE. The Decision dated March 31, 2004 of the
wrongdoer. This is because the supposed subrogor Regional Trial Comi of Manila, Branch 34 in Civil
did not possessthe right to be indemnified and Case No·. 01-101885 is REINSTATED.
therefore, no right to collect is passed on to the
subrogee. As regards the determination of actual SO ORDERED.
damages, "[i]t is axiomatic that actual damages must
be proved with reasonable degree of certainty and a
party is entitled only to such compensation for the
pecuniary loss that was duly proven."23 Article 2199 of
the New Civil Code speaks of how actual damages
are awarded:
While the logs were alongside the vessel, bad It may be true that the marine insurance policies
weather developed resulting in 75 pieces of logs issued were for logs no longer including those which
which were rafted together co break loose from each had been lost during loading operations. This had to
other. 45 pieces of logs were salvaged, but 30 pieces be so because the risk insured against is for loss
were verified to have been lost or washed away as a during transit, because the logs were safely placed
result of the accident. aboard.
Pacific Timber informed Workmen’s about the loss of The non-payment of premium on the Cover Note is,
32 pieces of logs during loading of SS woodlock. therefore, no cause for the petitioner to lose what is
Although dated April 4, 1963, the letter was received due it as if there had been payment of premium, for
in the office of the defendant only on April 15, 1963. non-payment by it was not chargeable against its
The plaintiff claimed for insurance to the value of fault. Had all the logs been lost during the loading
P19,286.79. operations, but after the issuance of the Cover Note,
liability on the note would have already arisen even
Woodmen’s requested an adjustment company to before payment of premium. Otherwise, the note
assess the damage. It submitted its report, where it would serve no practical purpose in the realm of
found that the loss of 30 pieces of logs is not covered commerce, and is supported by the doctrine that
by Policies Nos. 53 HO 1032 and 1033 but within the where a policy is delivered without requiring payment
1,250,000 bd. ft. covered by Cover Note 1010 insured of the premium, the presumption is that a credit was
for $70,000.00. intended and policy is valid.
The adjustment company submitted a computation of 2. The defense of delay can’t be sustained. The facts
the defendant's probable liability on the loss sustained show that instead of invoking the ground of delay in
by the shipment, in the total amount of P11,042.04. objecting to petitioner's claim of recovery on the cover
Woodmen’s wrote the plaintiff denying the latter's note, the insurer never had this in its mind. It has a
claim on the ground they defendant's investigation duty to inquire when the loss took place, so that it
revealed that the entire shipment of logs covered by could determine whether delay would be a
the two marine policies were received in good order at valid ground of objection.
their point of destination. It was further stated that the
said loss may be considered as covered under Cover There was enough time for insurer to determine if
Note No. 1010 because the said Note had become petitioner was guilty of delay in communicating the
null and void by virtue of the issuance of Marine loss to respondent company. It never did in the
Policy Nos. 53 HO 1032 and 1033. Insurance Commission. Waiver can be raised against
it under Section 84 of the Insurance Act.
The denial of the claim by the defendant was brought
by the plaintiff to the attention of the
Insurance Commissioner. The
Insurance Commissioner ruled in favor of
indemnifying Pacific Timber. The company added that
the cover note is null and void for lack of valuable
Great Pacific v CA G.R. No. The receipt is merely an acknowledgment that the
latter's branch office had received from the applicant
L-31845 April 30, 1979 the insurance premium and had accepted the
J. De Castro application subject for processing by the insurance
company. There was still approval or rejection the
Facts: same on the basis of whether or not the applicant is
Ngo Hing filed an application with the Great Pacific for "insurable on standard rates." Since Pacific
a twenty-year endowment policy in the amount of Life disapproved the insurance application of
P50,000.00 on the life of his one-year old daughter respondent Ngo Hing, the binding deposit receipt in
Helen. He supplied the essential data which petitioner question had never become in force at any time. The
Mondragon, the Branch Manager, wrote on the form. binding deposit receipt is conditional and does not
The latter paid the annual premium the sum of insure outright. This was held in Lim v Sun.
P1,077.75 going over to the Company, but he
retained the amount of P1,317.00 as his commission The deposit paid by private respondent shall have to
for being a duly authorized agent of Pacific Life. be refunded by Pacific Life.
Upon the payment of the insurance premium, the 2. Ngo Hing had deliberately concealed the state of
binding deposit receipt was issued Ngo Hing. health of his daughter Helen Go. When he supplied
Likewise, petitioner Mondragon handwrote at data, he was fully aware that his one-year old
the bottom of the back page of the application daughter is typically a mongoloid child. He withheld
form his strong recommendation for the approval of the fact material to the risk insured.
the insurance application. Then Mondragon received
a letter from Pacific Life disapproving the insurance “The contract of insurance is one of perfect good faith
application. The letter stated that the said life uberrima fides meaning good faith, absolute and
insurance application for 20-year endowment plan is perfect candor or openness and honesty; the absence
not available for minors below seven years old, but of any concealment or demotion, however slight.”
Pacific Life can consider the same under the Juvenile The concealment entitles the insurer to rescind the
Triple Action Plan, and advised that if the offer is contract of insurance.
acceptable, the Juvenile Non-Medical Declaration be
sent to the company.
Issues:
1. Whether the binding deposit receipt constituted a
temporary contract of the life insurance in question
2. Whether Ngo Hing concealed the state of health
and physical condition of Helen Go, which rendered
void the policy
Ratio:
The receipt was intended to be merely a provisional
insurance contract. Its perfection was subject to
compliance of the following conditions: (1) that the
company shall be satisfied that the applicant was
insurable on standard rates; (2) that if the company
does not accept the application and offers to issue a
policy for a different plan, the insurance contract shall
not be binding until the applicant accepts the policy
offered; otherwise, the deposit shall be refunded; and
(3) that if the company disapproves the application,
the insurance applied for shall not be in force at any
time, and the premium paid shall be returned to the
applicant.
1. G.R. No. 211212, June 08, 2016
The respondents reiterated their claim against
SUN LIFE OF CANADA (PHILIPPINES), Sun Life thru a letter dated September 17, 2001.
INC., Petitioner, v. MA. DAISY'S. SIBYA, Sun Life, however, refused to heed the
JESUS MANUEL S. SIBYA III, JAIME LUIS S. respondents' requests and instead filed a
SIBYA, AND THE ESTATE OF THE DECEASED Complaint for Rescission before the RTC and
ATTY. JESUS SIBYA, JR., Respondents. prayed for judicial confirmation of Atty. Jesus
Jr.'s rescission of insurance policy.10
DECISION
In its Complaint, Sun Life alleged that Atty. Jesus
Jr. did not disclose in his insurance application his
REYES, J.:
previous medical treatment at the National
Kidney Transplant Institute in May and August of
Before this Court is a petition for review 1994. According to Sun Life, the undisclosed fact
on certiorari1 under Rule 45 of the Rules of Court suggested that the insured was in "renal failure"
seeking to annul and set aside the and at a high risk medical condition.
Decision2 dated November 18, 2013 and Consequently, had it known such fact, it would
Resolution3 dated February 13, 2014 of the Court not have issued the insurance policy in favor of
of Appeals (CA) in CA-G.R. CV. No. 93269. In Atty. Jesus Jr.11
both instances, the CA affirmed the
Decision4 dated March 16, 2009 of the Regional For their defense, the respondents claimed that
Trial Court (RTC) of Makati City, Branch 136, in Atty. Jesus Jr. did not commit misrepresentation
Civil Case No. 01-1506, ordering petitioner Sun in his application for insurance. They averred that
Life of Canada (Philippines), Inc. (Sun Life) to Atty. Jesus Jr. was in good faith when he signed
pay Ma. Daisy S. Sibya (Ma. Daisy), Jesus Manuel the insurance application and even authorized
S. Sibya III, and Jaime Luis S. Sibya Sun Life to inquire further into his medical history
(respondents) the amounts of P1,000,000.00 as for verification purposes. According to them, the
death benefits, P100,000.00 as moral damages, complaint is just a ploy to avoid the payment of
P100,000.00 as exemplary damages, and insurance claims.12
P100,000.00 as attorney's fees and costs of suit.
Insofar as the charges for violation of Sections Ruling of the RTC
241 and 242 of Presidential Decree No. 612, or
the Insurance Code of the Philippines, however, On March 16, 2009, the RTC issued its
the CA modified the decision of the RTC and Decision13 dismissing the complaint for lack of
absolved Sun Life therein. merit. The RTC held that Sun Life violated
Sections 241, paragraph 1(b), (d), and (e)14 and
Statement of Facts of the Case 24215 of the Insurance Code when it refused to
pay the rightful claim of the respondents.
On January 10, 2001, Atty. Jesus Sibya, Jr. (Atty. Moreover, the RTC ordered Sun Life to pay the
Jesus Jr.) applied for life insurance with Sun Life. amounts of P1,000,000.00 as death benefits,
In his Application for Insurance, he indicated that P100,000.00 as moral damages, P100,000.00 as
he had sought advice for kidney problems.5 Atty. exemplary damages, and P100,000.00 as
Jesus Jr. indicated the following in his attorney's fees and costs of suit.
application:
chanRoblesvirtualLawlibrary The RTC held that Atty. Jesus Jr. did not commit
"Last 1987, had undergone lithotripsy due to material concealment and misrepresentation
kidney stone under Dr. Jesus Benjamin Mendoza when he applied for life insurance with Sun Life.
at National Kidney Institute, discharged after 3 It observed that given the disclosures and the
days, no recurrence as waiver and authorization to investigate executed
claimed."6ChanRoblesVirtualawlibrary by Atty. Jesus Jr. to Sun Life, the latter had all
On February 5, 2001, Sun Life approved Atty. the means of ascertaining the facts allegedly
Jesus Jr.'s application and issued Insurance Policy concealed by the applicant.16
No. 031097335. The policy indicated the
respondents as beneficiaries and entitles them to Aggrieved, Sun Life elevated the case to the CA.
a death benefit of P1,000,000.00 should Atty.
Jesus Jr. dies on or before February 5, 2021, or a Ruling of the CA
sum of money if Atty. Jesus Jr. is still living on
the endowment date.7 On appeal, the CA issued its Decision17 dated
November 18, 2013 affirming the RTC decision in
On May 11, 2001, Atty. Jesus Jr. died as a result ordering Sun Life to pay death benefits and
of a gunshot wound in San Joaquin, Iloilo. As damages in favor of the respondents. The CA,
such, Ma. Daisy filed a Claimant's Statement with however, modified the RTC decision by absolving
Sun Life to seek the death benefits indicated in Sun Life from the charges of violation of Sections
his insurance policy.8 241 and 242 of the Insurance Code.18
In a letter dated August 27, 2001, however, Sun The CA ruled that the evidence on records show
Life denied the claim on the ground that the that there was no fraudulent intent on the part of
details on Atty. Jesus Jr.'s medical history were Atty. Jesus Jr. in submitting his insurance
not disclosed in his application. Simultaneously, application. Instead, it found that Atty. Jesus Jr.
Sun Life tendered a check representing the admitted in his application that he had sought
refund of the premiums paid by Atty. Jesus Jr.9 medical treatment for kidney ailment.19
misrepresentation.
Sun Life filed a Motion for Partial
Reconsideration20 dated December 11, 2013 but As correctly observed by the CA, Atty. Jesus Jr.
the same was denied in a Resolution21 dated admitted in his application his medical treatment
February 13, 2014. for kidney ailment. Moreover, he executed an
authorization in favor of Sun Life to conduct
Undaunted, Sun Life filed an appeal by way of investigation in reference with his medical
petition for review on certiorari under Rule 45 of history. The decision in part states:
the Rules of Court before this Court. chanRoblesvirtualLawlibrary
Records show that in the Application for
The Issue Insurance, [Atty. Jesus Jr.] admitted that he had
sought medical treatment for kidney ailment.
Essentially, the main issue of the instant case is When asked to provide details on the said
whether or not the CA erred when it affirmed the medication, [Atty. Jesus Jr.] indicated the
RTC decision finding that there was no following information: year ("1987"), medical
concealment or misrepresentation when Atty. procedure ("undergone lithotripsy due to kidney
Jesus Jr. submitted his insurance application with stone"), length of confinement ("3 days"),
Sun Life. attending physician ("Dr. Jesus Benjamin
Mendoza") and the hospital ("National Kidney
Ruling of the Court Institute").
The petition has no merit. It appears that [Atty. Jesus Jr.] also signed the
Authorization which gave [Sun Life] the
In Manila Bankers Life Insurance Corporation v. opportunity to obtain information on the facts
Aban,22 the Court held that if the insured dies disclosed by [Atty. Jesus Jr.] in his insurance
within the two-year contestability period, the application. x x x
insurer is bound to make good its obligation
under the policy, regardless of the presence or xxxx
lack of concealment or misrepresentation. The
Court held: Given the express language of the Authorization,
chanRoblesvirtualLawlibrary it cannot be said that [Atty. Jesus Jr.] concealed
Section 48 serves a noble purpose, as it his medical history since [Sun Life] had the
regulates the actions of both the insurer and the means of ascertaining [Atty. Jesus Jr.'s] medical
insured. Under the provision, an insurer is given record.
two years - from the effectivity of a life insurance
contract and while the insured is alive - to With regard to allegations of misrepresentation,
discover or prove that the policy is void ab we note that [Atty. Jesus Jr.] was not a medical
initio or is rescindible by reason of the fraudulent doctor, and his answer "no recurrence" may be
concealment or misrepresentation of the insured construed as an honest opinion. Where matters
or his agent. After the two-year period of opinion or judgment are called for, answers
lapses, or when the insured dies within the made in good faith and without intent to deceive
period, the insurer must make good on the will not avoid a policy even though they are
policy, even though the policy was obtained untrue.24 (Citations omitted and italics in the
by fraud, concealment, or original)
misrepresentation. This is not to say that Indeed, the intent to defraud on the part of the
insurance fraud must be rewarded, but that insured must be ascertained to merit rescission
insurers who recklessly and indiscriminately of the insurance contract. Concealment as a
solicit and obtain business must be penalized, for defense for the insurer to avoid liability is an
such recklessness and lack of discrimination affirmative defense and the duty to establish
ultimately work to the detriment of bona such defense by satisfactory and convincing
fide takers of insurance and the public in evidence rests upon the provider or insurer.25 In
general.23 (Emphasis ours) the present case, Sun Life failed to clearly and
In the present case, Sun Life issued Atty. Jesus satisfactorily establish its allegations, and is
Jr.'s policy on February 5, 2001. Thus, it has two therefore liable to pay the proceeds of the
years from its issuance, to investigate and verify insurance.
whether the policy was obtained by fraud,
concealment, or misrepresentation. Upon the Moreover, well-settled is the rule that this Court
death of Atty. Jesus Jr., however, on May 11, is not a trier of facts. Factual findings of the
2001, or a mere three months from the issuance lower courts are entitled to great weight and
of the policy, Sun Life loses its right to rescind respect on appeal, and in fact accorded finality
the policy. As discussed in Manila Bankers, the when supported by substantial evidence on the
death of the insured within the two-year period record.26
will render the right of the insurer to rescind the
policy nugatory. As such, the incontestability WHEREFORE, the petition for review
period will now set in. is DENIED. The Decision dated November 18,
2013 and Resolution dated February 13, 2014 of
Assuming, however, for the sake of argument, the Court of Appeals in CA-G.R. CV. No. 93269
that the incontestability period has not yet set in, are hereby AFFIRMED.
the Court agrees, nonetheless, with the CA when
it held that Sun Life failed to show that Atty. SO ORDERED.cralawlawlibrary
Jesus Jr. committed concealment and
2. G.R. No. 204736, November 28, 2016 being hypertensive, and his kidneys have become atretic or
shrunken. A copy of each of the Admission and Discharge
MANULIFE PHILIPPINES, Record and PGIS' Interns' Progress Notes and Operative
INC.,1 Petitioners, v. HERMENEGILDA Record of the [CDH] is attached hereto and made an integral
YBAÑEZ, Respondent. part hereof as Annex "K", "K-1", and "K-2", respectively.
Have you seen a doctor, or had treatment operation 19. In fine, at the time when both insurance policies in
on hospital case during the last five years? question were submitted for approval to [Manulife, the latter
had had all the forewarnings that should have put it on guard
or on notice that things were not what it wanted them to be,
12. x x x It is rather strange that [the insured's] parotidectomy reason enough to bestir it into exercising greater prudence and
was not included in the report when the scar of that operation caution to further inquire into) the health or medical history of
can not be concealed because it caused a disfigurement in the [the insured]. In particular, Manulife ought to have noted the
right side of his face in front and below his ear. This is just too fact that the insured was at that time already 65 years old, x x
obvious to be overlooked by [Manulife's company physician] x that he had a previous operation, and x x x that his health
who examined and interviewed [the insured] before accepting was "below average. x x x18
the policy. x x x On November 25, 2005, BPI Family filed a
Manifestation19 praying that either it be dropped from the case
13. x x x [Undoubtedly, Manulife] had the option to inquire or that the case be dismissed with respect to it (BPI Family),
further [into the insured's physical condition, because the because it no longer had any interest in the subject insurance
insured had given it authority to do so] based on the authority policies as asssignee because the insureds obligation with it
given by [the insured. And how come that Manulife] was able (BPI Family) had already been settled or paid. Since no
to gather all [these] information now and not before [the objection was interposed to this prayer by either Manulife or
insured] was ensured? x x x Hermenegilda, the RTC granted this prayer in its Order of
November 25, 2005.20
xxxx
Then in the Second Order dated November 25, 2005,21 the
16. Moreover, in the comments of [the said] Dr. Lumapas, RTC considered the pre-trial as terminated. Trial then ensued.
(Annex "D" of the Complaint), he said the physical condition
of [the] then prospective insurance policy holder, [the insured, Manulife presented its sole witness in the person of Ms.
was] "below average". x x x [Estoppel now bars Manulife Jessiebelle Victoriano (Victoriano), the Senior Manager of its
from claiming the contrary.] Claims and Settlements Department.22 The oral testimony of
this witness chiefly involved identifying herself as the Senior
17. [Especially] worth noting are the [following] comments of Manager of Manulife's Claims and Settlements Department
[the said Dr. Lumapas, on the insured's answer to the and also identifying the following pieces of evidence;23 the
questionnaires] - (Annex "D" of the Complaint), [to wit:] subject insurance policies; NME, MEE, DOI; the Assignment
"4. d. Have you had any electrocardiograms, when, why, of Policy No. 6066517-1 to BPI Family as collateral, dated
result. "Yes" July 9, 2003; its Letter dated July 10, 2003 re: assignment of
said Policy; death claim filed by Hermenegilda on December
- on June 2002 at CDH, Cebu City 10, 2003; the insured's Death Certificate; the Marriage
Contract between the insured and Hermenegilda; copies of
= Cardiac clearance for surgery CDH's Admission and Discharge Records of the insured for
December 2000 re: parotidectomy; copies of CDH's PGIS'
= Result normal Interns' Notes and CDH Operative Record dated December 28,
2000 re: hypertension; copies of CDH's Admission and
16. Have you seen a doctor, or had treatment, operation or Discharge Record of the insured for May 2002, and the
hospital care during the last 5 years? "Yes" admitted at Doctor's History/Progress Notes re: acute pancreatitis and
[CDH,] Cebu City by Dr. Lamberto Garcia and Dr. Jorge Ang hypertension; copies of CDH's Admission and Discharge
for Chronic Calculous Chol[e]cystitis Record of the insured for October 2003 re: leptospirosis;
letters dated March 24, 2004 to Hermenegilda and BPI
= Cholecystectomy done [J]une 7[,] 2002 by Dr. Ang Family; and BPI Checks deposited on April 10, 2004 and May
14, 2004 to the bank accounts of BPI Family and
= Biopsy: Gallbladder Chronic Calculous Cholecystitis Hermenegilda, respectively, representing the premium refund.
= CBC, Hepatitis Panel done - all negative results except In its Order of October 2, 2006,24 the RTC admitted all these
hepatitis antigen (+) exhibits.
18. Do you. consume alcohol beverages? If so, how Like Manulife, Hermenegilda, in an1plication of her case, also
much? Yes, consumes 12 shots of whisky during socials. called only one witness to the witness stand: her counsel of
record, Atty. Edgardo Mayol (Atty. Mayol), whose testimony
25. The abdomen - Abnormality of any viscus, genitalia or focused on his professional engagement with Hermenegilda
evidence of hernia or operation - post cholecystectomy scar. and the monetary expenses he incurred in attending to the
hearings in this case.25cralawred Hermenegilda thereafter filed
26. The head and neck - vision, optic, fundi, hearing, speech, her Formal Offer of Evidence26 wherein she proffered the
thyroid etc. Yes wears eyeglasses for reading. (This is where following: NME, MEE, DOI, the insured's driver's license, her
[Manulife's company physician] should have written the scar letter dated May 8, 2004 protesting the denial by Manulife of
of [the insured's] parotidectomy as shown in the picture). her insurance claim, the contract of services between her and
Atty. Mayol, the official receipts for plane tickets, terminal
32. From your knowledge of this person would you consider fees, and boarding passes, attesting to Atty. Mayol's plane
his/ her health to be Average [ ] Below average [/] Poor [ ] travels to and from Cebu City to attend to this case. These
were all admitted by the RTC.27
(Underscoring ours)
Ruling of the Regional Trial Court misrepresentation or concealment in insurance is an
affirmative defense, which the insurer must establish by
After due proceedings, the RTC dismissed Manulife's convincing evidence if it is to avoid liability; and that in this
Complaint, thus: case the one and only witness presented by Manulife utterly
WHEREFORE, premises duly considered, judgment is hereby failed to prove the basic elements of the alleged
rendered DISMISSING the instant case for insufficiency of misrepresentation/s or concealment/s of material facts imputed
evidence. by Manulife against the now deceased insured. The CA held
that there is no basis for Manulife's claim that it is exempted
[Manulife] is hereby ordered to pay [Hermenegilda] actual from the duty of proving the insured's supposed
expenses in the sum of P40,050.00 and attorney's fees in the misrepresentation/s or concealment/s, as these had allegedly
sum of P100,000. been admitted already in Hermenegilda's Answer; that in the
absence of authentication by a competent witness, the
[Hermenegilda's] claim for moral and exemplary damages is purported CDH medical records of the insured are deemed
denied for lack of evidence. hearsay hence, inadmissible, and devoid of probative value;
and that the medical certificate, even if admitted in evidence
SO ORDERED.28 as an exception to the hearsay rule, was still without probative
The RTC found no merit at all in Manulife's Complaint for value because the physician or doctor or the hospital's official
rescission of the subject insurance policies because it utterly who issued it, was not called to the witness stand to validate it
failed to prove that the insured had committed the alleged or to attest to it.
misrepresentation/s or concealment/s. In fact, Victoriano, the
one and only witness that Manulife called to the witness stand, Manulife moved for reconsideration36 of the CA's Decision,
gave no firsthand, direct evidence at all relative to the but this was denied by the CA in its Resolution of December
particulars of the alleged misrepresentation/s or concealment/s 10, 2012;37 hence, the present recourse.
that the insured allegedly practiced or committed against it.
This witness did not testify at all in respect to the Issue
circumstances under which these documentary exhibits were
executed, nor yet about what these documentary exhibits Whether the CA committed any reversible error in affirming
purported to embody. The RTC stressed that the CDH medical the RTC Decision dismissing Manulife's Complaint for
records that might or could have established the insured's rescission of insurance contracts for failure to prove
misrepresentation/s or concealment/s were inadmissible for concealment on the part of the insured.
being hearsay, because Manulife did not present the physician
or doctor, or any responsible official of the CDH, who could Our Ruling
confirm the due execution and authenticity of its medical
records; that if anything, Manulife itself admitted in its The present recourse essentially challenges anew the findings
Reply29 that its very own company physician, Dr. Winifredo of fact by both the RTC and the CA that the Complaint for
Lumapas, had duly noted the insured's scar, even as the same rescission of the insurance policies in question will not prosper
company physician also categorized in the MEE the insured's because Manulife failed to prove concealment on the part of
health as "below average"; and that in short, it is evident that the insured. This is not allowed. It is horn-book law that in
Manulife thus had had ample opportunity to verify and to appeal by certiorari to this Court under Rule 45 of the Revised
inquire further into the insured's medical history commencing Rules of Court, the findings of fact by the CA especially
from the date of the MEE but opted not to do so; and that if where such findings of fact are affirmatory or confirmatory of
things did not come up to its standards or expectations, it was the findings of fact of the RTC, as in this case, are conclusive
totally at liberty to reject the insured's applications altogether, upon this Court. The reason is simple: this Court not being a
or it could have demanded a higher premium for the insurance trial court, it does not embark upon the task of dissecting,
coverage. analyzing, evaluating, calibrating or weighing all over again
the evidence, testimonial or documentary, that the parties
The RTC further ruled that Hermenegilda was entitled to adduced during trial. Of course, there are exceptions to this
attorney's fees in the sum of P100,000.00 and actual expenses rule, such as (1) when the conclusion is grounded upon
in the amount of P40,050.00, because she was compelled to speculations, surmises or conjectures; (2) when the inference
litigate to defend her interest against Manulife's patently is manifestly mistaken, absurd or impossible; (3) when there is
unjustified act in rejecting her clearly valid and lawful claim. a grave abuse of discretion; (4) when the judgment is based on
The RTC also found merit in Hermenegilda's claims relative a misapprehension of facts; (5) when the findings of fact are
to the expenses she paid her Cebu-based counsel. conflicting; (6) when there is no citation of specific evidence
on which the factual findings are based; (7) when the findings
In its Order of June 15, 2009,30 the RTC denied tor lack of of absence of facts is contradicted by the presence of evidence
merit Manulife's motion for reconsideration31 and on record; (8) when the findings of the CA are contrary to the
Hermenegilda's motion for partial reconsideration.32 findings of the RTC; (9) when the CA manifestly overlooked
certain relevant and undisputed facts that, if properly
From the RTC's Decision, Manulife filed a Notice of considered, would justify a different conclusion; (10) when the
Appeal33 which was given due course by the RTC in its Order findings of the CA are beyond the issues of the case; and, (11)
of June 11, 2010.34 when the CA's findings are contrary to the admission of both
parties.38 We are satisfied that none of these exceptions
Ruling of the Court of Appeals obtains in the Petition at bench. Thus, this Court must defer to
the findings of fact of the RTC - as affirmed or confirmed by
In its appellate review, the CA virtually adopted en toto the the CA - that Manulife's Complaint for rescission of the
findings of facts made by, and the conclusions of law arrived insurance policies in question was totally bereft of factual and
at, by the RTC. Thus, the CA decreed: legal bases because it had utterly failed to prove that the
WHEREFORE, the instant appeal is DENIED. TI1e assailed insured had committed the alleged misrepresentation/s or
Decision dated April 22, 2008 and Order dated Jtn1e 15, 2009 concealment/s of material facts imputed against him. The RTC
of the Regional Trial Court of Makati, Branch 57, are hereby correctly held that the CDH's medical records that might have
AFFIRMED. established the insured's purported misrepresentation/s or
concealment/s was inadmissible for being hearsay, given the
SO ORDERED.35 fact that Manulife failed to present the physician or any
The CA, like the RTC, found Manulife's Complaint bereft of responsible official of the CDH who could confirm or attest to
legal and factual bases. The CA ruled that it is settled that the due execution and authenticity of the alleged medical
records. Manulife had utterly failed to prove by convincing
evidence that it had been beguiled, inveigled, or cajoled into Petitioner issued Insurance Policy No. 747411
selling the insurance to the insured who purportedly with (the policy), with a face value of P100,000.00, in
malice and deceit passed himself off as thoroughly sound and Sotero's favor on August 30, 1993, after the
healthy, and thus a fit and proper applicant for life insurance. requisite medical examination and payment of
Manulife's sole witness gave no evidence at all relative to the the insurance premium.6cralaw virtualaw library
particulars of the purported concealment or misrepresentation
allegedly perpetrated by the insured. In fact, Victoriano
On April 10, 1996,7 when the insurance policy
merely perfunctorily identified the documentary exhibits
had been in force for more than two years and
adduced by Manulife; she never testified in regard to the
circumstances attending the execution of these documentary seven months, Sotero died. Respondent filed a
exhibits much less in regard to its contents. Of course, the claim for the insurance proceeds on July 9, 1996.
mere mechanical act of identifying these documentary Petitioner conducted an investigation into the
exhibits, without the testimonies of the actual participating claim,8 and came out with the following findings:
parties thereto, adds up to nothing. These documentary
exhibits did not automatically validate or explain themselves. 1. Sotero did not personally apply for
"The fraudulent intent on the part of the insured must be insurance coverage, as she was
established to entitle the insurer to rescind the contract. illiterate;chanr0blesvirtualawlibrary
Misrepresentation as a defense of the insurer to avoid liability
is an affirmative defense and the duty to establish such 2. Sotero was sickly since
defense by satisfactory and convincing evidence rests upon the 1990;chanr0blesvirtualawlibrary
insurer."39 For failure of Manulife to prove intent to defraud
on the part of the insured, it cannot validly sue for rescission 3. Sotero did not have the financial capability
of insurance contracts.
to pay the insurance premiums on
Insurance Policy No.
WHEREFORE, the Petition is DENIED. The assailed
Decision of the Court of Appeals dated April 26, 2012 in CA- 747411;chanr0blesvirtualawlibrary
G.R. CV No. 95561 and its December 10, 2012 Resolution,
are AFFIRMED. 4. Sotero did not sign the July 3, 1993
application for insurance;9 [and]
SO ORDERED. cralawlawlibrary
5. Respondent was the one .who filed the
insurance application, and x x x
designated herself as the
3. G.R. No. 175666, July 29, 2013
beneficiary.10cralaw virtualaw library
Petitioner moved for reconsideration, but in In praying that the CA Decision be reversed and
another Order19 dated October 20, 1998, the trial that the case be remanded to the trial court for
court stood its ground. the conduct of further proceedings, petitioner
argues in its Petition and Reply24 that Section 48
Petitioner interposed an appeal with the CA, cannot apply to a case where the beneficiary
docketed as CA-G.R. CV No. 62286. Petitioner under the insurance contract posed as the
questioned the dismissal of Civil Case No. 97- insured and obtained the policy under fraudulent
867, arguing that the trial court erred in applying circumstances. It adds that respondent, who was
Section 48 and declaring that prescription has set merely Sotero's niece, had no insurable interest
in. It contended that since it was respondent - in the life of her aunt.
and not Sotero - who obtained the insurance, the
policy issued was rendered void ab initio for want Relying on the results of the investigation that it
of insurable interest. conducted after the claim for the insurance
proceeds was filed, petitioner insists that
Ruling of the Court of Appeals respondent's claim was spurious, as it appeared
that Sotero did not actually apply for insurance
On September 28, 2005, the CA issued the coverage, was unlettered, sickly, and had no
assailed Decision, which contained the following visible source of income to pay for the insurance
decretal portion: premiums; and that respondent was an impostor,
WHEREFORE, in the light of all the foregoing, posing as Sotero and fraudulently obtaining
the instant appeal is DISMISSED for lack of insurance in the latter's name without her
merit. knowledge and consent.
SO ORDERED.20cralaw virtualaw library Petitioner adds that Insurance Policy No. 747411
The CA thus sustained the trial court. Applying was void ab initio and could not have given rise
Section 48 to petitioner's case, the CA held that to rights and obligations; as such, the action for
petitioner may no longer prove that the subject the declaration of its nullity or inexistence does
policy was void ab initio or rescindible by reason not prescribe.25cralaw virtualaw library
of fraudulent concealment or misrepresentation
after the lapse of more than two years from its Respondent's Arguments
issuance. It ratiocinated that petitioner was
equipped with ample means to determine, within Respondent, on the other hand, essentially
the first two years of the policy, whether fraud, argues in her Comment26 that the CA is correct in
concealment or misrepresentation was present applying Section 48. She adds that petitioner's
when the insurance coverage was obtained. If it new allegation in its Petition that the policy is
failed to do so within the statutory two-year void ab initio merits no attention, having failed to
period, then the insured must be protected and raise the same below, as it had claimed originally
allowed to claim upon the policy. that the policy was merely voidable.
Petitioner moved for reconsideration,21 but the On the issue of insurable interest, respondent
CA denied the same in its November 9, 2006 echoes the CA's pronouncement that since it was
Resolution.22 Hence, the present Petition. Sotero who obtained the insurance, insurable
interest was present. Under Section 10 of the forewarns scheming individuals that their
Insurance Code, Sotero had insurable interest in attempts at insurance fraud would be timely
her own life, and could validly designate anyone uncovered - thus deterring them from venturing
as her beneficiary. Respondent submits that the into such nefarious enterprise. At the same time,
CA's findings of fact leading to such conclusion legitimate policy holders are absolutely protected
should be respected. from unwarranted denial of their claims or delay
in the collection of insurance proceeds occasioned
Our Ruling by allegations of fraud, concealment, or
misrepresentation by insurers, claims which may
The Court denies the Petition. no longer be set up after the two-year period
expires as ordained under the law.
The Court will not depart from the trial and
appellate courts' finding that it was Sotero who Thus, the self-regulating feature of Section 48
obtained the insurance for herself, designating lies in the fact that both the insurer and the
respondent as her beneficiary. Both courts are in insured are given the assurance that any
accord in this respect, and the Court is loath to dishonest scheme to obtain life insurance would
disturb this. While petitioner insists that its be exposed, and attempts at unduly denying a
independent investigation on the claim reveals claim would be struck down. Life insurance
that it was respondent, posing as Sotero, who policies that pass the statutory two-year period
obtained the insurance, this claim is no longer are essentially treated as legitimate and beyond
feasible in the wake of the courts' finding that it question, and the individuals who wield them are
was Sotero who obtained the insurance for made secure by the thought that they will be
herself. This finding of fact binds the Court. paid promptly upon claim. In this manner,
Section 48 contributes to the stability of the
With the above crucial finding of fact - that it was insurance industry.
Sotero who obtained the insurance for herself -
petitioner's case is severely weakened, if not Section 48 prevents a situation where the insurer
totally disproved. Allegations of fraud, which are knowingly continues to accept annual premium
predicated on respondent's alleged posing as payments on life insurance, only to later on deny
Sotero and forgery of her signature in the a claim on the policy on specious claims of
insurance application, are at once belied by the fraudulent concealment and misrepresentation,
trial and appellate courts' finding that Sotero such as what obtains in the instant case. Thus,
herself took out the insurance for herself. instead of conducting at the first instance an
"[Fraudulent intent on the part of the insured investigation into the circumstances surrounding
must be established to entitle the insurer to the issuance of insurance Policy No. 747411
rescind the contract"27 In the absence of proof of which would have timely exposed the supposed
such fraudulent intent, no right to rescind arises. flaws and irregularities attending it as it now
professes, petitioner appears to have turned a
Moreover, the results and conclusions arrived at blind eye and opted instead to continue collecting
during the investigation conducted unilaterally by the premiums on the policy. For nearly three
petitioner after the claim was filed may simply be years, petitioner collected the premiums and
dismissed as self-serving and may not form the devoted the same to its own profit. It cannot now
basis of a cause of action given the existence and deny the claim when it is called to account.
application of Section 48, as will be discussed at Section 48 must be applied to it with full force
length below. and effect.
Section 48 serves a noble purpose, as it The Court therefore agrees fully with the
regulates the actions of both the insurer and the appellate court's pronouncement that -
insured. Under the provision, an insurer is given [t]he "incontestability clause" is a provision in
two years - from the effectivity of a life insurance law that after a policy of life insurance made
contract and while the insured is alive - to payable on the death of the insured shall have
discover or prove that the policy is void ab been in force during the lifetime of the insured
initio or is rescindible by reason of the fraudulent for a period of two (2) years from the date of its
concealment or misrepresentation of the insured issue or of its last reinstatement, the insurer
or his agent. After the two-year period lapses, or cannot prove that the policy is void ab initio or is
when the insured dies within the period, the rescindible by reason of fraudulent concealment
insurer must make good on the policy, even or misrepresentation of the insured or his agent.
though the policy was obtained by fraud,
concealment, or misrepresentation. This is not to The purpose of the law is to give protection to
say that insurance fraud must be rewarded, but the insured or his beneficiary by limiting the
that insurers who recklessly and indiscriminately rescinding of the contract of insurance on the
solicit and obtain business must be penalized, for ground of fraudulent concealment or
such recklessness and lack of discrimination misrepresentation to a period of only two (2)
ultimately work to the detriment of bona years from the issuance of the policy or its last
fide takers of insurance and the public in general. reinstatement.
Section 48 regulates both the actions of the The insurer is deemed to have the necessary
insurers and prospective takers of life insurance. facilities to discover such fraudulent concealment
It gives insurers enough time to inquire whether or misrepresentation within a period of two (2)
the policy was obtained by fraud, concealment, years. It is not fair for the insurer to collect the
or misrepresentation; on the other hand, it premiums as long as the insured is still alive,
only to raise the issue of fraudulent concealment and not alter claims for insurance proceeds are
or misrepresentation when the insured dies in filed with them.
order to defeat the right of the beneficiary to
recover under the policy. Besides, if insurers cannot vouch for the integrity
and honesty of their insurance agents/salesmen
At least two (2) years from the issuance of the and the insurance policies they issue, then they
policy or its last reinstatement, the beneficiary is should cease doing business. If they could not
given the stability to recover under the policy properly screen their agents or salesmen before
when the insured dies. The provision also makes taking them in to market their products, or if
clear when the two-year period should commence they do not thoroughly investigate the insurance
in case the policy should lapse and is reinstated, contracts they enter into with their clients, then
that is, from the date of the last reinstatement. they have only themselves to blame. Otherwise
said, insurers cannot be allowed to collect
After two years, the defenses of concealment or premiums on insurance policies, use these
misrepresentation, no matter how patent or well- amounts collected and invest the same through
founded, will no longer lie. the years, generating profits and returns
therefrom for their own benefit, and thereafter
Congress felt this was a sufficient answer to the conveniently deny insurance claims by
various tactics employed by insurance companies questioning the authority or integrity of their own
to avoid liability. agents or the insurance policies they issued to
their premium-paying clients. This is exactly one
The so-called "incontestability clause" precludes of the schemes which Section 48 aims to
the insurer from raising the defenses of false prevent.
representations or concealment of material facts
insofar as health and previous diseases are Insurers may not be allowed to delay the
concerned if the insurance has been in force for payment of claims by filing frivolous cases in
at least two years during the insured’s lifetime. court, hoping that the inevitable may be put off
The phrase "during the lifetime" found in Section for years - or even decades — by the pendency
48 simply means that the policy is no longer of these unnecessary court cases. In the
considered in force after the insured has died. meantime, they benefit from collecting the
The key phrase in the second paragraph of interest and/or returns on both the premiums
Section 48 is "for a period of two years." previously paid by the insured and the insurance
proceeds which should otherwise go to their
As borne by the records, the policy was issued on beneficiaries. The business of insurance is a
August 30. 1993, the insured died on April 10, highly regulated commercial activity in the
1996, and the claim was denied on April 16, country,29 and is imbued with public
1997. The insurance policy was thus in force for a interest.30 "[A]n insurance contract is a contract
period of 3 years, 7 months, and 24 days. of adhesion which must be construed liberally in
Considering that the insured died after the two- favor of the insured and strictly against the
year period, the plaintiff-appellant is, therefore, insurer in order to safeguard the [former's]
barred from proving that the policy is void ab interest."31cralaw virtualaw library
initio by reason of the insured fraudulent
concealment or misrepresentation or want of WHEREFORE, the Petition is DENIED. The
insurable interest on the part of the beneficiary, assailed September 28, 2005 Decision and the
herein defendant-appellee. November 9, 2006 Resolution of the Court of
Appeals in CA-G.R. CV No. 62286
Well-settled is the rule that it is the plaintiff- are AFFIRMED.
appellant's burden to show that the factual
findings of the trial court are not based on SO ORDERED.
substantial evidence or that its conclusions are
contrary to applicable law and jurisprudence. The
plaintiff-appellant failed to discharge that 4. G.R. No. 195176
burden.28cralaw virtualaw library
Petitioner claims that its insurance agent, who THE INSULAR LIFE ASSURANCE COMPANY,
solicited the Sotero account, happens to be the LTD., Petitioner,
cousin of respondent's husband, and thus vs.
insinuates that both connived to commit PAZ Y. KHU, FELIPE Y. KHU, JR., and FREDERICK Y.
insurance fraud. If this were truly the case, then KHU, Respondents.
petitioner would have discovered the scheme
earlier if it had in earnest conducted an DECISION
investigation into the circumstances surrounding
the Sotero policy. But because it did not and it DEL CASTILLO, J.:
investigated the Sotero account only after a claim
was filed thereon more than two years later,
The date of last reinstatement mentioned in Section 48
naturally it was unable to detect the scheme. For of the Insurance Code pertains to the date that the
its negligence and inaction, the Court cannot insurer approved· the application for reinstatement.
sympathize with its plight. Instead, its case However, in light of the ambiguity in the insurance
precisely provides the strong argument for documents to this case, this Court adopts the
requiring insurers to diligently conduct interpretation favorable to the insured in determining the
investigations on each policy they issue within date when the reinstatement was approved.
the two-year period mandated under Section 48,
Assailed in this Petition for Review on Certiorari1 are the Antecedent cause: b. Congestive heart failure,
June 24, 2010 Decision2 of the Court of Appeals (CA), Diffuse myocardial ischemia.
which dismissed the Petition in CA-GR. CV No. 81730,
and its December 13, 2010 Resolution3 which denied Underlying cause: c. Diabetes Neuropathy,
the petitioner Insular Life Assurance Company Ltd. 's Alcoholism, and Pneumonia.12
(Insular Life) motion for partial reconsideration.4
On October 5, 2001, Paz Y. Khu, Felipe Y. Khu, Jr. and
Factual Antecedents Frederick Y. Khu (collectively, Felipe’s beneficiaries or
respondents) filed with Insular Life a claim for benefit
On March 6, 1997, Felipe N. Khu, Sr. (Felipe) applied for under the reinstated policy. This claim was denied.
a life insurance policy with Insular Life under the latter’s Instead, Insular Life advised Felipe’s beneficiaries that it
Diamond Jubilee Insurance Plan. Felipe accomplished had decided to rescind the reinstated policy on the
the required medical questionnaire wherein he did not grounds of concealment and misrepresentation by
declare any illness or adverse medical condition. Insular Felipe.
Life thereafter issued him Policy Number A000015683
with a face value of P1 million. This took effect on June Hence, respondents instituted a complaint for specific
22, 1997.5 performance with damages. Respondents prayed that
the reinstated life insurance policy be declared valid,
On June 23, 1999, Felipe’s policy lapsed due to non- enforceable and binding on Insular Life; and that the
payment of the premium covering the period from June latter be ordered to pay unto Felipe’s beneficiaries the
22, 1999 to June 23, 2000.6 proceeds of this policy, among others.13
On September 7, 1999, Felipe applied for the In its Answer, Insular Life countered that Felipe did not
reinstatement of his policy and paid P25,020.00 as disclose the ailments (viz., Type 2 Diabetes Mellitus,
premium. Except for the change in his occupation of Diabetes Nephropathy and Alcoholic Liver Cirrhosis with
being self-employed to being the Municipal Mayor of Ascites) that he already had prior to his application for
Binuangan, Misamis Oriental, all the other information reinstatement of his insurance policy; and that it would
submitted by Felipe in his application for reinstatement not have reinstated the insurance policy had Felipe
was virtually identical to those mentioned in his original disclosed the material information on his adverse health
policy.7 condition. It contended that when Felipe died, the policy
was still
On October 12, 1999, Insular Life advised Felipe that his
application for reinstatement may only be considered if contestable.14
he agreed to certain conditions such as payment of
additional premium and the cancellation of the riders Ruling of the Regional Trial Court (RTC)
pertaining to
On December 12, 2003, the RTC, Branch 39 of Cagayan
premium waiver and accidental death benefits. Felipe de Oro City found15 for Felipe’s beneficiaries, thus:
agreed to these conditions8 and on December 27, 1999
paid the agreed additional premium of P3,054.50.9
WHEREFORE, in view of the foregoing, plaintiffs having
substantiated [their] claim by preponderance of
On January 7, 2000, Insular Life issued Endorsement evidence, judgment is hereby rendered in their favor and
No. PNA000015683, which reads: against defendants, ordering the latter to pay jointly and
severally the
This certifies that as agreed by the Insured, the
reinstatement of this policy has been approved by the sum of One Million (P1,000,000.00) Pesos with legal
Company on the understanding that the following rate of interest from the date of demand until it is fully
changes are made on the policy effective June 22, 1999: paid representing the face value of Plan Diamond
Jubilee No. PN-A000015683 issued to insured the late
1. The EXTRA PREMIUM is imposed; and Felipe N. Khu[,] Sr; the sum of P20,000.00 as moral
damages; P30,000.00 as attorney’s fees; P10,000.00 as
2. The ACCIDENTAL DEATH BENEFIT (ADB) litigation expenses.
and WAIVER OF PREMIUM DISABILITY (WPD)
rider originally attached to and forming parts of SO ORDERED.16
this policy [are] deleted.
In ordering Insular Life to pay Felipe’s beneficiaries, the
In consequence thereof, the premium rates on this policy RTC agreed with the latter’s claim that the insurance
are adjusted to P28,000.00 annually, P14,843.00 semi- policy was reinstated on June 22, 1999. The RTC cited
annually and P7,557.00 quarterly, Philippine currency. 10 the ruling in Malayan Insurance Corporation v. Court of
On June 23, 2000, Felipe paid the annual premium in Appeals17 that any ambiguity in a contract of insurance
the amount of P28,000.00 covering the period from June should be resolved strictly against the insurer upon the
22, 2000 to June 22, 2001. And on July 2, 2001, he also principle that an insurance contract is a contract of
paid the same amount as annual premium covering the adhesion.18 The RTC also held that the reinstated
period from June 22, 2001 to June 21, 2002.11 insurance policy had already become incontestable by
the time of Felipe’s death on September 22, 2001 since
On September 22, 2001, Felipe died. His Certificate of more than two years had already lapsed from the date of
Death enumerated the following as causes of death: the policy’s reinstatement on June 22, 1999. The RTC
noted that since it was Insular Life itself that supplied all
the pertinent forms relative to the reinstated policy, then
Immediate cause: a. End stage renal failure,
it is barred from taking advantage of any
Hepatic failure
ambiguity/obscurity perceived therein particularly as
regards the date when the reinstated insurance policy policy" or to the subsequent phrase "changes are made
became effective. on the policy;" that granting that there was any obscurity
or ambiguity in the insurance policy, the same should be
Ruling of the Court of Appeals laid at the door of Insular Life as it was this insurance
company that prepared the necessary documents that
make up the same;27 and that given the CA’s finding
On June 24, 2010, the CA issued the assailed
which effectively affirmed the RTC’s finding on this
Decision19 which contained the following decretal
portion: particular issue, it stands to reason that the insurance
policy had indeed become incontestable upon the date
of Felipe’s death.28
WHEREFORE, the appeal is DISMISSED. The assailed
Judgment of the lower court is AFFIRMED with the
Our Ruling
MODIFICATION that the award of moral damages,
attorney’s fees and litigation expenses [is] DELETED.
We deny the Petition.
SO ORDERED.20
The Insurance Code pertinently provides that:
The CA upheld the RTC’s ruling on the non-
contestability of the reinstated insurance policy on the Sec. 48. Whenever a right to rescind a contract of
date the insured died. It declared that contrary to Insular insurance is given to the insurer by any provision of this
Life’s contention, there in fact exists a genuine ambiguity chapter, such right must be exercised previous to the
or obscurity in the language of the two documents commencement of an action on the contract.
prepared by Insular Life itself, viz., Felipe’s Letter of
Acceptance and Insular Life’s Endorsement; that given After a policy of life insurance made payable on the
the obscurity/ambiguity in the language of these two death of the insured shall have been in force during the
documents, the construction/interpretation that favors lifetime of the insured for a period of two years from the
the insured’s right to recover should be adopted; and date of its issue or of its last reinstatement, the insurer
that in keeping with this principle, the insurance policy in cannot prove that the policy is void ab initio or is
dispute must be deemed reinstated as of June 22, rescindible by reason of the fraudulent concealment or
1999.21 misrepresentation of the insured or his agent.
Insular Life moved for partial reconsideration22 but this The rationale for this provision was discussed by the
was denied by the CA in its Resolution of December 13, Court in Manila Bankers Life Insurance Corporation v.
2010.23 Hence, the present Petition. Aban,29
application was processed and approved by the insurer. I am/we are agreeable to the above condition/s. Please
There, we stressed that: proceed with the reinstatement of the policy.
xxxx
After Felipe accomplished this form, Insular Life, through
its Regional Administrative Manager, Jesse James R.
In the instant case, Eulogio’s death rendered impossible Toyhorada, issued an Endorsement33 dated January 7,
full compliance with the conditions for reinstatement of 2000. For emphasis, the Endorsement is again quoted
Policy No. 9011992. True, Eulogio, before his death, as follows:
managed to file his Application for Reinstatement and
deposit
ENDORSEMENT
Accordingly, the subject policy is deemed reinstated as 5. G.R. No. 186983 February 22, 2012
of June 22, 1999. Thus, the period of contestability has
lapsed.35 MA. LOURDES S. FLORENDO, Petitioner,
vs.
In Eternal Gardens Memorial Park Corporation v. The PHILAM PLANS, INC., PERLA ABCEDE MA.
Philippine American Life Insurance Company,36 we ruled CELESTE ABCEDE, Respondents.
in favor of the insured and in favor of the effectivity of the
insurance contract in the midst of ambiguity in DECISION
the insurance contract provisions. We held that:
ABAD, J.:
It must be remembered that an insurance contract is a
contract of adhesion which must be construed liberally in
This case is about an insured’s alleged concealment in
favor of the insured and strictly against the insurer in
his pension plan application of his true state of health
order to safeguard the latter’s interest. Thus,
and its effect on the life insurance portion of that plan in
in Malayan Insurance Corporation v. Court of Appeals,
case of death.
this Court held that:
The Facts and the Case
Indemnity and liability insurance policies are construed
in accordance with the general rule of resolving any
ambiguity therein in favor of the insured, where the On October 23, 1997 Manuel Florendo filed an
contract or policy is prepared by the insurer. A contract application for comprehensive pension plan with
of insurance, being a contract of adhesion, par respondent Philam Plans, Inc. (Philam Plans) after some
excellence, any ambiguity therein should be convincing by respondent Perla Abcede. The plan had a
resolved against the insurer; in other words, it should pre-need price of ₱997,050.00, payable in 10 years, and
be construed liberally in favor of the insured and strictly had a maturity value of ₱2,890,000.00 after 20
against the insurer. Limitations of liability should be years.1 Manuel signed the application and left to Perla
regarded with extreme jealousy and must be construed the task of supplying the information needed in the
in such a way as to preclude the insurer from application.2 Respondent Ma. Celeste Abcede, Perla’s
noncompliance with its obligations. daughter, signed the application as sales counselor.3
With regard to the alleged increase of risk, Malayan The records are bereft of any convincing and concrete
insists that there is evidence of an increase in risk as a evidence that Malayan was notified of the transfer of the
result of the unilateral transfer of the insured properties. insured properties from the Sanyo factory to the Pace
According to Malayan, the Sanyo Factory was occupied factory. The Court has combed the records and found
as a factory of automotive/computer parts by the nothing that would show that Malayan was duly notified
assured and factory of zinc & aluminum die cast and of the transfer of the insured properties.
plastic gear for copy machine by Sanyo Precision Phils.,
Inc. with a rate of 0.449% under 6.1.2 A, while Pace What PAP did to prove that Malayan was notified was to
Factory was occupied as factory that repacked silicone show that it relayed the fact of transfer to RCBC, the
sealant to plastic cylinders with a rate of 0.657% under entity which made the referral and the named beneficiary
6.1.2 A. in the policy. Malayan and RCBC might have been sister
companies, but such fact did not make one an agent of
PAP’s position the other. The fact that RCBC referred PAP to Malayan
did not clothe it with authority to represent and bind the
On the other hand, PAP counters that there is no said insurance company. After the referral, PAP dealt
evidence of any misrepresentation, concealment or directly with Malayan.
deception on its part and that its claim is not fraudulent.
It insists that it can still sue to protect its rights and The respondent overlooked the fact that during the
interest on the policy notwithstanding the fact that the November 9, 2006 hearing,13 its counsel stipulated in
proceeds of the same was payable to RCBC, and that it open court that it was Malayan’s authorized insurance
can collect interest at the rate of 12% per annum on the agent, Rodolfo Talusan, who procured the original policy
proceeds of the policy because its claim for indemnity from Malayan, not RCBC. This was the reason why
was unduly delayed without legal justification. Talusan’s testimony was dispensed with.
The Court’s Ruling Moreover, in the previous hearing held on November 17,
2005,14 PAP’s hostile witness, Alexander Barrera,
The Court agrees with the position of Malayan that it Administrative Assistant of Malayan, testified that he was
cannot be held liable for the loss of the insured the one who procured Malayan’s renewal policy, not
properties under the fire insurance policy. RCBC, and that RCBC merely referred fire insurance
clients to Malayan. He stressed, however, that no written
referral agreement exists between RCBC and Malayan. How many secretaries do you have at that time in your
He also denied that PAP notified Malayan about the office?
transfer before the renewal policy was issued. He added
that PAP, through Maricar Jardiniano (Jardiniano), A
informed him that the fire insurance would be renewed
on an "as is basis."15
Only one, sir.
Q Yes, sir.
Q Q
To notify whom? So how many secretaries did you have at that time?
A A
Q Q
You are referring to RCBC? What happened with the instruction that you gave to
your secretary Dory Ramos about the matter of
A informing the defendant Malayan Insurance Co of the
new location of the insured properties?
Yes, sir.
A
xxxx
She informed me that the notification was already given
Q to Malayan Insurance.
Dory Ramos. A
Q
Did you come to know who was that person who came The transfer from the Sanyo Factory to the PACE
to your place at Pace Pacific? Factory increased the risk.
Sytengco Enterprises Corporation (Sytengco) hired The RTC, in its Decision dated June 18, 2013, found in
respondent Transmodal International, Inc. (Transmodal)
favor of petitioner Equitable Insurance, thus, the 3. THE HONORABLE COURT OF APPEALS ERRED IN
following dispositive portion of said decision: NOT APPLYING THE CASE OF TISON V. COURT OF
WHEREFORE, based on the foregoing, judgment is APPEALS, 276 SCRA 582;
hereby rendered in favor of the plaintiff and against the
defendant, ordering the latter to pay the following: 4. THE HONORABLE COURT OF APPEALS ERRED IN
NOT APPLYING THE CASE OF COMPAÑA MARITIMA
(1) Actual damages in the amount of Php728,712.00 V. INSURANCE COMPANY OF NORTH AMERICA, 12
plus 6% interest from judicial demand until full payment; SCRA 213;
(2) Attorney's fees in the amount equivalent to 10% of 5. THE HONORABLE COURT OF APPEALS ERRED IN
the amount claimed; NOT APPLYING THE CASE OF DELSAN TRANSPORT
LINES, INC. V. COURT OF APPEALS, 273 SCRA 262;
(3) Costs of suit. SO ORDERED.4
According to the RTC, petitioner Equitable Insurance 6. THE HONORABLE COURT OF APPEALS ERRED IN
was able to prove by substantial evidence its right to NOT APPLYING THE STATUTORY PRESUMPTION
institute an action as subrogee of Sytengco. It also ruled OF FAULT AND NEGLIGENCE.6
that petitioner Equitable Insurance's non-presentation of It is the contention of petitioner Equitable Insurance that
the insurance policy and non-compliance with Section 7, the CA erred in not applying certain jurisprudence on this
Rule 8 of the Rules of Court on actionable document case which it deemed applicable. It also argues that the
were raised for the first time in respondent Transmodal's present case is not a suit between the insured Sytengco
memorandum and also noted that petitioner Equitable and the insurer but one between the consignee
Insurance had, in fact, submitted a copy of the insurance Sytengco and the respondent common carrier since
contract. petitioner Equitable Insurance merely stepped into the
shoes of the said insured who has a direct cause of
Respondent Transmodal appealed the RTC's decision to action against respondent Transmodal on account of the
the CA. The CA, on September 15, 2015, promulgated damage sustained by the subject cargo, thus, the carrier
its decision reversing the RTC's decision. It disposed of cannot set up as defense any defect in the insurance
the appeal as follows: policy because it cannot avoid its liability to the
consignee under the contract of carriage which binds it
WHEREFORE, the appeal is hereby GRANTED. The to pay any loss or damage that may be caused to the
June 18,2013 Decision of the Regional Trial Court, cargo involved therein.
Branch 26, Manila in Civil Case No. 06-114861 is
REVERSED and SET ASIDE. Accordingly, Equitable In its Comment7 dated July 25, 2016, respondent
Insurance Corp.'s complaint is DISMISSED for failure to Transmodal avers that the CA did not err in not applying
prove cause of action. certain jurisprudence in the latter's decision. Respondent
Transmodal further refutes all the assigned errors that
SO ORDERED.5 petitioner Equitable Insurance enumerated in its petition.
The CA ruled that there was no proof of insurance of the
cargoes at the time of the loss and that the subrogation A closer look at the arguments raised in the petition
was improper. According to the CA, the insurance would show that petitioner is indeed asking this Court to
contract was neither attached in the complaint nor review the factual findings of the CA which is not within
offered in evidence for the perusal and appreciation of the scope of a petition for review under Rule 45 of the
the RTC, and what was presented was just the marine Rules of Court. However, this Court has recognized
risk note. exceptions to the rule that the findings of fact of the CA
are conclusive and binding in the following instances: (1)
Hence, the present petition after the CA denied when the findings are grounded entirely on speculation,
petitioner Equitable Insurance's motion for surmises or conjectures; (2) when the inference made is
reconsideration. manifestly mistaken, absurd or impossible; (3) when
there is grave abuse of discretion; (4) when the
Petitioner Equitable Insurance enumerates the following judgment is based on a misapprehension of facts; (5)
assignment of errors: when the findings of facts are conflicting; (6) when in
making its findings the CA went beyond the issues of the
1. THE HONORABLE COURT OF APPEALS ERRED IN case, or its findings are contrary to the admissions of
NOT DECLARING THAT THE CASE OF MALAYAN both the appellant and the appellee; (7) when the
INSURANCE CO., INC. V. REGIS BROKERAGE CORP. findings are contrary to the trial court; (8) when the
(G.R. NO. 172156, NOVEMBER 23, 2007) IS NOT findings are conclusions without citation of specific
APPLICABLE IN THE INSTANT CASE; evidence on which they are based; (9) when the facts
set forth in the petition as well as in the petitioner's main
2. THE HONORABLE COURT OF APPEALS ERRED IN and reply briefs are not disputed by the respondent; (10)
NOT DECLARING THAT THE FACTS SURROUNDING when the findings of fact are premised on the supposed
THE CASE OF MALAYAN INSURANCE CO., INC. V. absence of evidence and contradicted by the evidence
REGIS BROKERAGE CORP. (G.R. NO. 172156, on record; and (11) when the CA manifestly overlooked
NOVEMBER 23, 2007) IS DIFFERENT FROM THE certain relevant facts not disputed by the parties, which,
FACTS ATTENDING THE INSTANT CASE; if properly considered, would justify a different
conclusion.8 Considering that the findings of facts of the
RTC and the CA are glaringly in contrast, this Court present the marine insurance policy whereas in the
deems it proper to review the present case. present case, petitioner has presented not only the
marine risk note but also Marine Open Policy No. MN-
In ruling that petitioner's subrogation right is improper, MOP-HO-000009913 which were all admitted in
the CA stated that it found no proof of insurance of the evidence.
cargoes at the time of their loss. It also found that what
was presented in court was the marine risk note and not Indeed, a perusal of the records would show that
the insurance contract or policy, thus: petitioner is correct in its claim that the marine insurance
policy was offered as evidence. In fact, in the questioned
A perusal of the complaint and the other documentary decision of the CA, the latter, mentioned such policy,
evidence submitted by Equitable Insurance such as the thus:
preliminary and final report clearly shows that the claims
for damages and subrogation were based on Policy No. Contrary to the ruling of the RTC, the marine policy was
MN-MRN-HO-0005479. However, said insurance not at all presented. As borne by the records, only the
contract was neither attached in the complaint nor marine risk note and EQUITABLE INSURANCE
offered in evidence for the perusal and CORPORATION Marine Policy No. MN-MOP-HO-
appreciation of the court a quo. Instead, Equitable 0000099 were offered in evidence. These pieces of
Insurance presented the marine risk note. For clarity, We evidence are immaterial to Equitable Insurance's cause
quote the pertinent portions of the marine risk note, of action. We have earlier pointed out that a marine risk
note is insufficient to prove the insurer's claim. Although
Line & Subline the marine risk note provided that it "has all the force
MARINE CARGO and effect of the terms and conditions of EQUITABLE
RISK NOTE INSURANCE CORPORATION Marine Policy No. MN-
Policy No.: MOP-HO-0000099," there is nothing in the records
MN-MRN-HO-0005479 showing that the said policy is related to Policy No. MN-
Issue date Sep. 08, 2004 MRN-HO-005479 which was the basis of Equitable
Invoice No. 59298 V Insurance's complaint. It did not escape our attention
that the second page of the marine risk note explicitly
Assured: SYTENGCO ENTERPRISES CORPORATION stated that it was "attached to and forming part of the
Address: 10RESTHAVEN ST. Policy No. MN-MRN-005479." Thus, without the
SAN FRANCISCO DEL MONTE presentation of Policy No. MN-MRN-005479, We cannot
SUBDIVISION, simply assume that the terms and conditions, including
QUEZON CITY, METRO MANILA the period of coverage, of such policy are similar to
Marine Policy No. MN-MOP-HO-0000099.14
We have this day noted the undermentioned risk in your As such, respondent had the opportunity to examine the
favor and hereby guarantee that this document has all said documents or to object to its presentation as pieces
the force and effect of the terms and conditions of of evidence. The records also show that respondent was
EQUITABLE INSURANCE CORPORATION Marine able to cross-examine petitioner's witness regarding the
Policy No. MN-MOP-HO-0000099. said documents. Thus, it was well established that
petitioner has the right to step into the shoes of the
L/C AMOUNT: USD 21,750.00 MARK-UP: 20% insured who has a direct cause of action against herein
SUM INSURED: PHP 1,457,424.00 EXCHANGE respondent on account of the damages sustained by the
RATE: 55.8400 cargoes. "Subrogation is the substitution of one person
in the place of another with reference to a lawful claim or
CARGO: 200 CTNS. GUM ARABIC POWDER KB-120 right, so that he who is substituted succeeds to the rights
of the other in relation to a debt or claim, including its
Supplier: JUMBO TRADING CO., LTD. remedies or securities."15 The right of subrogation
Vessel: ASIAN ZEPHYR VOYAGE No.: 062N springs from Article 2207 of the Civil Code which states:
BL#:MNL04086310
ETD: 09-AUG-04 ETA: 13-AUG-04
From: THAILAND To: Manila, Philippines9 Art. 2207. If the plaintiffs property has been insured, and
he has received indemnity from the insurance company
As such, according to the CA, the case of Eastern for the injury or loss arising out of the wrong or breach of
Shipping Lines, Inc. v. Prudential Guarantee and contract complained of, the insurance company shall be
Assurance, Inc.10 is applicable, wherein this Court held subrogated to the rights of the insured against the
that a marine risk note is not an insurance policy. The wrongdoer or the person who has violated the contract.
CA also found applicable this Court's ruling in Malayan If the amount paid by the insurance company does not
Insurance Co., Inc. v. Regis Brokerage Corp.,11 stating fully cover the injury or loss, the aggrieved party shall be
that a marine policy is constitutive of the insurer-insured entitled to recover the deficiency from the person
relationship, thus, such document should have been causing the loss or injury.
attached to the complaint as mandated by Section The records further show that petitioner was able to
7,12 Rule 8 of the Rules of Court. accomplish its obligation under the insurance policy as it
has paid the assured of its insurance claim in the
Petitioner, however, insists that the CA erred in applying amount of P728,712,00 as evidenced by, among others,
the case of Malayan because the plaintiff therein did not the Subrogation Receipt,16 Loss Receipt,17 Check
Voucher,18 and Equitable PCI Bank Check No. contract was deemed not fatal to the insurer's cause of
0000013925.19 The payment by the insurer to the action because the loss of the cargo undoubtedly
insured operates as an equitable assignment to the occurred while on board the petitioner's vessel.
insurer of all the remedies which the insured may have
against the third party whose negligence or wrongful act The same rationale was the basis of the judgment
caused the loss. The right of subrogation is not in International Container Terminal Services, Inc. v. FGU
dependent upon, nor does it grow out of any privity of Insurance Corporation, wherein the arrastre operator
contract or upon payment by the insurance company of was found liable for the lost shipment despite the failure
the insurance claim. It accrues simply upon payment by of the insurance company to offer in evidence the
the insurance company of the insurance claim.20 insurance contract or policy. As in Delsan, it was certain
that the loss of the cargo occurred while in the
This Court's ruling in Asian Terminals, Inc. v. First petitioner's custody.22
Lepanto-Taisho Insurance Corporation21 is highly In view thereof, the RTC did not err in its ruling,
instructive, thus: thus:.rary
Defendant in its memorandum, raised the issue that
As a general rule, the marine insurance policy needs to plaintiff failed to attach in its complaint a copy of the
be presented in evidence before the insurer may recover Marine Open Insurance Policy, thus, it failed to establish
the insured value of the lost/damaged cargo in the its cause of action as subrogee of the consignee quoting
exercise of its subrogatory right. In Malayan Insurance the case of Malayan Insurance Co., Inc. v. Regis
Co., Inc. v. Regis Brokerage Corp., the Court stated that Brokerage Corp.
the presentation of the contract constitutive of the
insurance relationship between the consignee and The above-mentioned case is not applicable in the
insurer is critical because it is the legal basis of the instant case. In Malayan Insurance Co. v. Regis
latter's right to subrogation. Brokerage, Malayan did not submit the copy of the
insurance contract or policy. In the instant case, plaintiff
In Home Insurance Corporation v. CA, the Court also submitted the copy of the insurance contract. In fact, the
held that the insurance contract was necessary to prove non-presentation of the insurance contract is not fatal to
that it covered the hauling portion of the shipment and its cause of action.
was not limited to the transport of the cargo while at sea.
The shipment in that case passed through six stages In the more recent case of Asian Terminals, Inc. v.
with different parties involved in each stage until it Malayan Insurance Co., Inc., it was held:
reached the consignee. The insurance contract, which
was not presented in evidence, was necessary to Similarly, in this case, the presentation of the insurance
determine the scope of the insurer's liability, if any, since contract or policy was not necessary. Although petitioner
no evidence was adduced indicating at what stage in the objected to the admission of the Subrogation Receipt in
handling process the damage to the cargo was its Comment to respondent's formal offer of evidence on
sustained. the ground that respondent failed to present the
insurance contract or policy, a perusal of petitioner's
An analogous disposition was arrived at in Answer and Pre-trial Brief shows that petitioner never
the Wallem case cited by ATI wherein the Court held questioned respondent's right to subrogation, nor did it
that the insurance contract must be presented in dispute the coverage of the insurance contract or policy.
evidence in order to determine the extent of its Since there was no issue regarding the validity of the
coverage. It was further ruled therein that the liability of insurance contract or policy, or any provision thereof,
the carrier from whom reimbursement was demanded respondent had no reason to present the insurance
was not established with certainty because the alleged contract or policy as evidence during the trial.
shortage incurred by the cargoes was not definitively
determined. Perusal of the records likewise show that the defendant
failed to raise the issue of non-compliance with Section
Nevertheless, the rule is not inflexible. In certain 7, Rule 8 of the 1997 Rules of Procedure and the non-
instances, the Court has admitted exceptions by presentation of insurance policy during the pre-trial. In
declaring that a marine insurance policy is dispensable the same case, it was held:.rary
evidence in reimbursement claims instituted by the Petitioner claims that respondent's non-presentation of
insurer. the insurance contract or policy between the respondent
and the consignee is fatal to its cause of action.
In Delsan Transport Lines, Inc. v. CA, the Court ruled
that the right of subrogation accrues simply upon We do not agree.
payment by the insurance company of the insurance
claim. Hence, presentation in evidence of the marine First of all, this was never raised as an issue before the
insurance policy is not indispensable before the insurer RTC. In fact, it is not among the issues agreed upon by
may recover from the common carrier the insured value the parties to be resolved during the pre-trial. As we
of the lost cargo in the exercise of its subrogatory right. have said, the determination of issues during the pre-trial
The subrogation receipt, by itself, was held sufficient to conference bars the consideration of other questions,
establish not only the relationship between the insurer whether during trial or on appeal. Thus, [t]he parties
and consignee, but also the amount paid to settle the must disclose during pre-trial all issues they intend to
insurance claim. The presentation of the insurance raise during the trial, except those involving privileged or
impeaching matters. x x x The basis of the rule is simple. Development Insurance and Surety Corporation
Petitioners are bound by the delimitation of the issues (respondent), viz.:ChanRoblesVirtualawlibrary
during the pre-trial because they themselves agreed to IN VIEW OF THE FOREGOING, the decision appealed
the same. from is reversed, and the defendant-appellant ordered to
Plaintiff was able to prove by substantial evidence their pay the plaintiff-appellee the sum of P55,620.60 with
right to institute this action as subrogee of the insured. interest at 6 percent per annum from the date of the
The defendant did not present any evidence or witness denial of the claim on October 9, 1996 until payment.
to bolster their defense and to contradict plaintiffs
allegation.23 SO ORDERED.5.rary
I
To reiterate, in this case, petitioner was able to present
as evidence the marine open policy that vested upon it, The facts are undisputed. Petitioner was the registered
its rights as a subrogee. Subrogation is designed to owner of a 1992 Mitsubishi Montero with plate number
promote and to accomplish justice and is the mode GTJ-777 (vehicle), while respondent is a domestic
which equity adopts to compel the ultimate payment of a corporation engaged in the insurance business.6 On
debt by one who injustice, equity and good conscience September 27, 1996, respondent issued a
ought to pay.24 7
comprehensive commercial vehicle policy to petitioner
in the amount of P1,500,000.00 over the vehicle for a
WHEREFORE, the Petition for Review period of one year commencing on September 27, 1996
on Certiorari under Rule 45 of the Rules of Court, dated up to September 27, 1997.8 Respondent also issued two
May 11, 2016, of petitioner Equitable Insurance other commercial vehicle policies to petitioner covering
Corporation is GRANTED. Consequently, the Decision two other motor vehicles for the same period.9
dated September 15, 2015 and Resolution dated March
17, 2016 of the Court of Appeals in CA-G.R. CV No. To collect the premiums and other charges on the
101296 are REVERSED and SET ASIDE, and the policies, respondent's agent, Trans-Pacific Underwriters
Decision dated June 18, 2013 of the Regional Trial Agency (Trans-Pacific), issued a statement of account to
Court, Branch 26, Manila petitioner's company, Noah's Ark Merchandising (Noah's
is AFFIRMED and REINSTATED. Ark).10 Noah's Ark immediately processed the payments
and issued a Far East Bank check dated September 27,
SO ORDERED. 1996 payable to Trans-Pacific on the same day.11 The
check bearing the amount of P140,893.50 represents
Carpio, (Chairperson), Mendoza, Leonen, and Martires, payment for the three insurance policies, with
JJ., concur. P55,620.60 for the premium and other charges over the
vehicle.12 However, nobody from Trans-Pacific picked up
the check that day (September 27) because its president
and general manager, Rolando Herradura, was
celebrating his birthday. Trans-Pacific informed Noah's
Ark that its messenger would get the check the next day,
September 28.13
In the desire to safeguard the interest of the assured, it The answer is in the affirmative.
must not be ignored that the contract of insurance is
primarily a risk-distributing device, a mechanism by The first exception is provided by Section 77 itself, and
which all members of a group exposed to a particular that is, in case of a life or industrial life policy whenever
risk contribute premiums to an insurer. From these the grace period provision applies.
contributory funds are paid whatever losses occur due to
exposure to the peril insured against. Each party The second is that covered by Section 78 of the
therefore takes a risk: the insurer, that of being Insurance Code, which
compelled upon the happening of the contingency to pay provides:ChanRoblesVirtualawlibrary
the entire sum agreed upon, and the insured, that of SEC. 78. Any acknowledgment in a policy or contract of
parting with the amount required as premium. without insurance of the receipt of premium is conclusive
receiving anything therefor in case the contingency does evidence of its payment, so far as to make the policy
not happen. To ensure payment tor these losses, the law binding, notwithstanding any stipulation therein that it
mandates all insurance companies to maintain a legal shall not be binding until premium is actually paid.
reserve fund in favor of those claiming under their A third exception was laid down in Makati Tuscany
policies. It should be understood that the integrity of this Condominium Corporation vs. Court of Appeals, wherein
fund cannot be secured and maintained if by judicial fiat we ruled that Section 77 may not apply if the parties
partial offerings of premiums were to be construed as a have agreed to the payment in installments of the
legal nexus between the applicant and the insurer premium and partial payment has been made at the time
despite an express agreement to the contrary. For what of loss. We said therein,
could prevent the insurance applicant from deliberately thus:ChanRoblesVirtualawlibrary
or willfully holding back full premium payment and wait We hold that the subject policies are valid even if the
for the risk insured against to transpire and then premiums were paid on installments. The records clearly
conveniently pass on the balance of the premium to be show that the petitioners and private respondent
deducted from the proceeds of the insurance? x x x intended subject insurance policies to be binding and
xxx effective notwithstanding the staggered payment of the
premiums. The initial insurance contract entered into in
And so it must be. For it cannot be disputed that 1982 was renewed in 1983, then in 1984. In those three
premium is the elixir vitae of the insurance business years, the insurer accepted all the installment payments.
because by law the insurer must maintain a legal Such acceptance of payments speaks loudly of the
reserve fund to meet its contingent obligations to the insurer's intention to honor the policies it issued to
public, hence, the imperative need for its prompt petitioner. Certainly, basic principles of equity and
payment and full satisfaction. It must be emphasized fairness would not allow the insurer to continue
here that all actuarial calculations and various collecting and accepting the premiums, although paid on
tabulations of probabilities of losses under the risks installments, and later deny liability on the lame excuse
insured against are based on the sound hypothesis of that the premiums were not prepaid in full.
prompt payment of premiums. Upon this bedrock Not only that. In Tuscany, we also quoted with approval
insurance firms are enabled to other the assurance of the following pronouncement of the Court of Appeals in
security to the public at favorable rates. x x x 50 (Citations its Resolution denying the motion for reconsideration of
omitted.) its decision:ChanRoblesVirtualawlibrary
Here, there is no dispute that the check was delivered to While the import of Section 77 is that prepayment of
and was accepted by respondent's agent, Trans-Pacific, premiums is strictly required as a condition to the validity
only on September 28, 1996. No payment of premium of the contract, We are not prepared to rule that the
had thus been made at the time of the loss of the vehicle request to make installment payments duly approved by
on September 27, 1996. While petitioner claims that the insurer would prevent the entire contract of
Trans-Pacific was informed that the check was ready for insurance from going into effect despite payment and
pick-up on September 27, 1996, the notice of the acceptance of the initial premium or first installment.
availability of the check, by itself, does not produce the Section 78 of the Insurance Code in effect allows waiver
effect of payment of the premium. Trans-Pacific could by the insurer of the condition of prepayment by making
not be considered in delay in accepting the check an acknowledgment in the insurance policy of receipt of
because when it informed petitioner that it will only be premium as conclusive evidence of payment so far as to
able to pick-up the check the next day, petitioner did not make the policy binding despite the fact that premium is
protest to this, but instead allowed Trans-Pacific to do actually unpaid. Section 77 merely precludes the parties
so. Thus, at the time of loss, there was no payment of from stipulating that the policy is valid even if premiums
premium yet to make the insurance policy effective. are not paid, but docs not expressly prohibit an
agreement granting credit extension, and such an
There are, of course, exceptions to the rule that no agreement is not contrary to morals, good customs,
insurance contract takes effect unless premium is paid. public order or public policy (De Leon,' The Insurance
In UCPB General Insurance Co., Inc. v. Masagana Code, p. 175). So is an understanding to allow insured to
Telamart, Inc.,51 we said:ChanRoblesVirtualawlibrary pay premiums in installments not so prescribed. At the
very least, both parties should be deemed in estoppel to Inc. Both contemplate situations where the insurers have
question the arrangement they have voluntarily consistently granted the insured a credit extension or
accepted. term for the payment of the premium. Here, however,
By the approval of the aforequoted findings and petitioner failed to establish the fact of a grant by
conclusion of the Court of Appeals, Tuscany has respondent of a credit term in his favor, or that the grant
provided a fourth exception to Section 77, namely, that has been consistent. While there was mention of a credit
the insurer may grant credit extension for the payment of agreement between Trans-Pacific and respondent, such
the premium. This simply means that if the insurer has arrangement was not proven and was internal between
granted the insured a credit term for the payment of the agent and principal.55 Under the principle of relativity of
premium and loss occurs before the expiration of the contracts, contracts bind the parties who entered into it.
term, recovery on the policy should be allowed even It cannot favor or prejudice a third person, even if he is
though the premium is paid after the loss but within the aware of the contract and has acted with knowledge.56
credit term.
We cannot sustain petitioner's claim that the parties
x x x agreed that the insurance contract is immediately
effective upon issuance despite non payment of the
Finally in the instant case, it would be unjust and premiums. Even if there is a waiver of pre-payment of
inequitable if recovery on the policy would not be premiums, that in itself does not become an exception to
permitted against Petitioner, which had consistently Section 77, unless the insured clearly gave a credit term
granted a 60- to 90-day credit term for the payment of or extension. This is the clear import of the fourth
premiums despite its full awareness of Section 77. exception in the UCPB General Insurance Co., Inc. To
Estoppel bars it from taking refuge under said Section, rule otherwise would render nugatory the requirement in
since Respondent relied in good faith on such practice. Section 77 that "[n]otwithstanding any agreement to the
Estoppel then is the fifth exception to Section contrary, no policy or contract of insurance issued by an
77.52 (Citations omitted.) insurance company is valid and binding unless and until
In UCPB General Insurance Co., Inc., we summarized the premium thereof has been paid, x x x." Moreover,
the exceptions as follows: (1) in case of life or industrial the policy itself states:ChanRoblesVirtualawlibrary
life policy, whenever the grace period provision applies, WHEREAS THE INSURED, by his corresponding
as expressly provided by Section 77 itself; (2) where the proposal and declaration, and which shall be the basis of
insurer acknowledged in the policy or contract of this Contract and deemed incorporated herein, has
insurance itself the receipt of premium, even if premium applied to the company for the insurance hereinafter
has not been actually paid, as expressly provided by contained, subject to the payment of the Premium as
Section 78 itself; (3) where the parties agreed that consideration for such insurance.57 (Emphasis supplied.)
premium payment shall be in installments and partial The policy states that the insured's application for the
payment has been made at the time of loss, as held insurance is subject to the payment of the premium.
in Makati Tuscany Condominium Corp. v. Court of There is no waiver of pre-payment, in full or in
Appeals;53 (4) where the insurer granted the insured a installment, of the premiums under the policy.
credit term for the payment of the premium, and loss Consequently, respondent cannot be placed in estoppel.
occurs before the expiration of the term, as held
in Makati Tuscany Condominium Corp.; and (5) where Thus, we find that petitioner is not entitled to the
the insurer is in estoppel as when it has consistently insurance proceeds because no insurance policy
granted a 60 to 90-day credit term for the payment of became effective for lack of premium payment.
premiums.
The consequence of this declaration is that petitioner is
The insurance policy in question does not fall under the entitled to a return of the premium paid for the vehicle in
first to third exceptions laid out in UCPB General the amount of P55,620.60 under the principle of unjust
Insurance Co., Inc.: (1) the policy is not a life or industrial enrichment. There is unjust enrichment when a person
life policy; (2) the policy does not contain an unjustly retains a benefit to the loss of another, or when
acknowledgment of the receipt of premium but merely a a person retains money or property of another against
statement of account on its face;54 and (3) no payment of the fundamental principles of justice, equity and good
an installment was made at the time of loss on conscience.58 Petitioner cannot claim the full amount of
September 27. P140,893.50, which includes the payment of premiums
for the two other vehicles. These two policies are not
Petitioner argues that his case falls under the fourth and affected by our ruling on the policy subject of this case
fifth exceptions because the parties intended the because they were issued as separate and independent
contract of insurance to be immediately effective upon contracts of insurance.59 We, however, find that the
issuance, despite non-payment of the premium. This award shall earn legal interest of 6% from the time of
waiver to a pre-payment in full of the premium places extrajudicial demand on July 7, 1997.60
respondent in estoppel.
WHEREFORE, the petition is DENIED. The assailed
We do not agree with petitioner. Decision of the CA dated September 11, 2009 and the
Resolution dated November 24, 2009
The fourth and fifth exceptions to Section 77 operate are AFFIRMED with the MODIFICATION that
under the facts obtaining in Makati Tuscany respondent should return the amount of P55,620.60 with
Condominium Corp. and UCPB General Insurance Co., the legal interest computed at the rate of 6% per
annum reckoned from July 7, 1997 until finality of this 1. the Resolution[3] dated June 26, 2007 and
judgment. Thereafter, the total amount shall earn interest Order[4] dated December 4, 2007 issued by the
at the rate of 6% per annum from the finality of this Insurance Commission (IC);
judgment until its full satisfaction. 2. the Decision[5] dated September 17, 2008 and
Resolution[6] dated April 29, 2009 issued by the
SO ORDERED..rary Department of Finance (DOF); and
3. the Decision[7] dated January 8, 2010 and
Resolution[8] dated June 1, 2010 issued by the
Office of the President (OP).