insurance batch 2.1
TRANSCRIPT
-
8/10/2019 Insurance Batch 2.1
1/39
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 114427 February 6, 1995
ARMANDO GEAGONIA, petitioner,
vs.
COURT OF APPEALS and COUNTRY BANKERS INSURANCE CORPORATION, respondents.
DAVIDE, JR., J.:
Four our review under Rule 45 of the Rules of Court is the decision1
of the Court of Appeals
in CA-G.R. SP No. 31916, entitled "Country Bankers Insurance Corporation versus Armando
Geagonia," reversing the decision of the Insurance Commission in I .C. Case No. 3340 which
awarded the claim of petitioner Armando Geagonia against private respondent Country
Bankers Insurance Corporation.
The petitioner is the owner of Norman's Mart located in the public market of San Francisco,
Agusan del Sur. On 22 December 1989, he obtained from the private respondent fire
insurance policy No. F-146222
for P100,000.00. The period of the policy was from 22
December 1989 to 22 December 1990 and covered the following: "Stock-in-trade consisting
principally of dry goods such as R TW's for men and women wear a nd other usual to assured's
business."
The petitioner declared in the policy under the subheading entitled CO -INSURANCE that
Mercantile Insurance Co., Inc. was the co-insurer for P50,000.00. From 1989 to 1990, the
petitioner had in his inventory stocks amounting to P392,130.50, itemized as follows:
Zenco Sales, Inc. P55,698.00
F. Legaspi Gen. Merchandise 86,432.50
Cebu Tesing Textiles 250,000.00 (on credit)
P392,130.50
The policy contained the following condition:
3. The insured shall give notice to the Company of any insurance or
insurances already affected, or which may subsequently be effected,
covering any of the property or properties consisting of stocks in trade,
goods in process and/or inventories only hereby insured, and unless such
notice be given and the particulars of such insurance or insurances be
stated therein or endorsed in this policy pursuant to Section 50 of the
Insurance Code, by or on behalf of the Company before the occurrence of
any loss or damage, all benefits under this policy shall be deemed
forfeited,provided however, that this condition shall not apply when the
total insurance or insurances in force at t he time of the loss or damage is
not more than P200,000.00.
On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m. at the public market
of San Francisco, Agusan del Sur. The petitioner's insured sto ck-in-trade were completely
destroyed prompting him to file with the private respondent a claim under the policy. On 28
December 1990, the private respondent denied the claim because it found that at the time of
the loss the petitioner's stocks-in-trade were likewise covered by f ire insurance policies No.
GA-28146 and No. GA-28144, for P100,000.00 each, issued by the Cebu Branch o f the
Philippines First Insurance Co., Inc. (hereinafter PFIC).3These policies indicate that the
insured was "Messrs. Discount Mart (Mr. Armando Geagonia, Prop.)" with a mortgage clause
reading:
MORTGAGE: Loss, if any shall be payable to Messrs. Cebu Tesing Textiles,
Cebu City as their interest may appear subject to the terms of this policy.
CO-INSURANCE DECLARED: P100,000. Phils. First CEB/F 24758.4
The basis of the private respondent's denial was the petitioner's alleged violation of
Condition 3 of the policy.
The petitioner then filed a complaint5against the private respondent with t he Insurance
Commission (Case No. 3340) for the recovery of P100,000.00 under fire insurance policy No.
F-14622 and for attorney's fees and co sts of litigation. He attached as Annex "AM"6
thereof
his letter of 18 January 1991 which asked for the reconsideration of the denial. He admitted
in the said letter that at the time he obtained the private respondent's fire insurance policy
he knew that the two policies issued by the PFIC were already in existence; however, he had
no knowledge of the provision in the private respondent's policy requiring him to inform it of
the prior policies; this requirement was not mentioned to him by the private respo ndent's
agent; and had it been mentioned, he would not have withheld such information. He further
asserted that the total of the amounts claimed under the three policies was below the actual
value of his stocks at the time of loss, which was P1,000,000.00.
In its answer,7
the private respondent specifically denied the allegations in the complaint and
set up as its principal defense the violation of Condition 3 of the policy.
In its decision of 21 June 1993,8
the Insurance Commission found that the petitioner did not
violate Condition 3 as he had no knowledge of the existence of the two fire insurance policies
obtained from the PFIC; that it was Cebu Tesing Textiles which procured the PFIC policies
without informing him or securing his consent; and that Cebu Tesing T extile, as his creditor,
had insurable interest on the stocks. These findings were based on the petitioner's testimony
that he came to know of the PFIC policies only when he filed his claim with the private
respondent and that Cebu Tesing Textile obtained them and paid for their premiums without
informing him thereof. The Insurance Commission then decreed:
WHEREFORE, judgment is hereby rendered ordering the respondent
company to pay complainant the sum of P100,000.00 with legal interest
from the time the complaint was filed until fully satisfied plus the amount
of P10,000.00 as attorney's fees. With costs. The compulsory
counterclaim of respondent is hereby dismissed.
-
8/10/2019 Insurance Batch 2.1
2/39
Its motion for the reconsideration of the decision9having been denied by the Insurance
Commission in its resolution of 20 August 1993,10
the private respondent appealed to the
Court of Appeals by way of a petition for review. The petition was docketed as CA-G.R. SP No.
31916.
In its decision of 29 December 1993,11
the Court of Appeals reversed th e decision of the
Insurance Commission because it found that the petitioner knew of the existence of the two
other policies issued by the PFIC. It said:
It is apparent from the face of Fire Policy GA 28146/Fire Policy No. 28144
that the insurance was taken in the name of private respondent
[petitioner herein]. The policy states that "DISCOUNT MART (MR.
ARMANDO GEAGONIA, PROP)" was the assured and that "TESING
TEXTILES" [was] only the mortgagee of the goods.
In addition, the premiums on both policies were paid for by private
respondent, not by the Tesing Textiles which is alleged to have taken out
the other insurance without the knowledge of private respondent. T his is
shown by Premium Invoices nos. 46632 and 46630. (Annexes M and N).
In both invoices, Tesing Textiles is indicated to be only the mortgagee of
the goods insured but the party to which they were issued were the
"DISCOUNT MART (MR. ARMANDO GEAGONIA)."
In is clear that it was t he private respondent [petitioner herein] who took
out the policies on the same property subject of the insurance with
petitioner. Hence, in failing to disclose the existence of these insurances
private respondent violated Condition No. 3 of Fire Policy No. 1462. . . .
Indeed private respondent's allegation of lack of knowledge of the
provisions insurances is belied by his letter to petitioner [of 18 January
1991. The body of the letter reads as follows;]
xxx xxx xxx
Please be informed that I have no knowledge of the
provision requiring me to inform your office about my
prior insurance under FGA-28146 and F-CEB-24758.
Your representative did not mention about said
requirement at the time he was convincing me to
insure with you. If he only die or even inquired if I had
other existing policies covering my establishment, I
would have told him so. You will note that at the time
he talked to me until I decided to insure with your
company the two policies aforementioned were
already in effect. Therefore I would have no reason to
withhold such information and I would have desisted
to part with my hard earned peso to pay the
insurance premiums [if] I know I could not recover
anything.
Sir, I am only an ordinary businessman interested in
protecting my investments. The actual value of my
stocks damaged by the fire was estimated by the
Police Department to be P1,000,000.00 (Please see
xerox copy of Police Report Annex "A"). My Income
Statement as of December 31, 1989 or five months
before the fire, shows my merchandise inventory was
already some P595,455.75. . . . These will support my
claim that the amount claimed under the t hree
policies are much below the value of my stocks lost.
xxx xxx xxx
The letter contradicts private respondent's pretension that he did not
know that there were other insurances taken on the stock-in-trade and
seriously puts in question his credibility.
His motion to reconsider the adverse decision having been denied, the petitioner filed the
instant petition. He contends therein that the Court of Appeals acted with grave abuse o f
discretion amounting to lack or excess of jurisdiction:
A . . . WHEN IT REVERSED THE FINDINGS OF FACTS OF THE INSURANCE
COMMISSION, A QUASI-JUDICIAL BODY CHARGED WITH THE DUTY OF
DETERMINING INSURANCE CLAIM AND WHOSE DECISION IS ACCORDED
RESPECT AND EVEN FINALITY BY THE COURTS;
B . . . WHEN IT CONSIDERED AS EVIDENCE MATTERS WHICH WERE NOT
PRESENTED AS EVIDENCE DURING THE HEARING OR TRIAL; AND
C . . . WHEN IT DISMISSED THE CLAIM OF THE PETITIONER HEREIN
AGAINST THE PRIVATE RESPONDENT.
The chief issues that crop up from the first and third grounds are (a) whether the petitioner
had prior knowledge of the two insurance policies issued by the PFIC when he obtained the
fire insurance policy from the private respondent, thereby, for not disclosing such fact,
violating Condition 3 of t he policy, and (b) if he had, whether he is precluded from recovering
therefrom.
The second ground, which is based on the Court of Appeals' reliance on the petitioner's letter
of reconsideration of 18 January 1991, is without merit. The petitioner claims that t he said
letter was not offered in evidence and thus should not have been considered in deciding the
case. However, as correctly pointed out by t he Court of Appeals, a copy of this letter was
attached to the petitioner's complaint in I.C. Case No. 3440 as Annex "M" thereof and made
integral partof the complaint.12
It has attained the status of a judicial admission and since its
due execution and authenticity was not denied by the other party, the petitioner is bound by
it even if it were not introduced as an independent evidence.13
As to the first issue, t he Insurance Commission found that the petitioner had no knowledge
of the previous two policies. The Court of Appeals disagreed and found otherwise in view o f
the explicit admission by the petitioner in his letter to the private respondent of 18 January
1991, which was quoted in the c hallenged decision of the Court of Appeals. These divergent
-
8/10/2019 Insurance Batch 2.1
3/39
findings of fact constitute an exception to the general rule that in petitions for review under
Rule 45, only questions of law are involved and findings of fact by the Court of Appeals are
conclusive and binding upon this Court.14
We agree with the Court of Appeals that the petitioner knew of the prior policies issued by
the PFIC. His letter of 18 January 1991 to the private respondent c onclusively proves this
knowledge. His testimony to the contrary before the Insurance Commissioner and which the
latter relied upon cannot prevail over a written admission made ante litem motam. It was,
indeed, incredible that he did not know about the prior policies since these policies were not
new or original. Policy No. GA-28144 was a renewal of Policy No. F-24758, while Policy No.
GA-28146 had been renewed twice, the previous policy being F-24792.
Condition 3 of the private respondent's Policy No. F-14622 is a condition which is not
proscribed by law. Its incorporation in the policy is allowed by Section 75 of the Insurance
Code15
which provides that "[a] policy may declare that a violation of specified provisions
thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the
policy." Such a condition is a provision which invariably appears in fire insurance policies and
is intended to prevent an increase in the moral hazard. It is commonly known as the
additional or "other insurance" clause and has been upheld as valid and as a warranty that no
other insurance exists. Its violation would thus avo id the
policy.16
However, in order to constitute a violation, the other insurance must be upon sam e
subject matter, the same interest therein, and the same risk.17
As to a mortgaged property, the mortgagor and the mortgagee have each an independent
insurable interest therein and both interests may be one policy, or each may take out a
separate policy covering his interest, either at the same or at separate times.18
The
mortgagor's insurable interest covers the full value of the mortgaged property, even though
the mortgage debt is equivalent to the full value of the property.19
The mortgagee's
insurable interest is to the extent of the debt, since the property is relied upon as security
thereof, and in insuring he is not insuring the property but his i nterest or lien thereon. His
insurable interest isprima faciethe value mortgaged and extends only to the amount of the
debt, not exceeding the value of the mortgaged property.20
Thus, separate insurances
covering different insurable interests may be obtained by the mortgagor and the mortgagee.
A mortgagor may, however, take out insurance for the benefit of the mortgagee, which is the
usual practice. The mortgagee may be made the beneficial payee in several ways. He may
become the assignee of the policy with the consent of the insurer; or the mere pledgee
without such consent; or the original policy may contain a mortgage clause; or a rider mak ing
the policy payable to the mortgagee "as his interest may appear" may be attached; or a
"standard mortgage clause," containing a collateral independent contract between the
mortgagee and insurer, may be attached; or the policy, though by its terms payable
absolutely to the mortgagor, may have been procured by a mortgagor under a contract duty
to insure for the mortgagee's benefit, in which case the mortgagee acquires an equitable lien
upon the proceeds.21
In the policy obtained by the mortgagor with loss payable clause in favor of the mortgagee as
his interest may appear, the mortgagee is only a beneficiary under the contract, and
recognized as such by the insurer but not made a party to the contract himself. Hence, any
act of the mortgagor which defeats his right will also defeat the right of the mortgagee.22
This kind of policy covers only such interest as the mortgagee has at the issuing of the policy.
23
On the other hand, a mortgagee may also procure a policy as a contracting party in
accordance with the terms of an agreement by which the mortgagor is to pay the premiums
upon such insurance.24
It has been noted, however, that although the mortgagee is himself
the insured, as where he applies for a policy, fully informs the authorized agent of his
interest, pays the premiums, and obtains on the assurance that it insures him, the policy is in
fact in the form used to insure a mortgagor with loss payable clause.25
The fire insurance policies issued by the PFIC name the petitioner as the assured and con tain
a mortgage clause which reads:
Loss, if any, shall be payable to MESSRS. TESING TEXTILES, Cebu City as
their interest may appear subject to the terms of this policy.
This is clearly a simple loss payable clause, not a standard mortgage clause.
It must, however, be underscored that unlike the "other insurance" clauses involved in
General Insurance and Surety Corp.vs.Ng Hua26
or in Pioneer Insurance & Surety Corp.vs.
Yap,27
which read:
The insured shall give notice to the company of any insurance or
insurances already effected, or which may subsequently be effected
covering any of the property hereby insured, and unless such notice be
given and the particulars of such insurance or insurances be stated in or
endorsed on this Policy by or on behalf of the Company before the
occurrence of any loss or damage, all benefits under this Policy shall be
forfeited.
or in the 1930 case of Santa Ana vs.Commercial Union Assurance
Co.28
which provided "that any outstanding insurance upon the whole or a portion
of the objects thereby assured must be declared by the insured in writing and he
must cause the company to add or insert it in the policy, without which such policy
shall be null and void, and t he insured will not be entitled to indemnity in case of
loss," Condition 3in the private respondent's policy No. F-14622 does not
absolutely declare void any violation thereof. It expressly provides that the
condition "shall not apply when the total insurance or insurances in force at the
time of the loss or damage is not more than P200,000.00."
It is a cardinal rule on i nsurance that a policy or insurance contract is to be interpreted
liberally in favor of the insured and str ictly against the company, the reason being,
undoubtedly, to afford the greatest protection which the insured was endeavoring to secure
when he applied for insurance. It is also a cardinal principle of law that forfeitures are not
favored and that any construction which would result in the forfeiture of the policy benefits
for the person claiming thereunder, will be avoided, if it is possible to construe the policy in a
manner which would permit recovery, as, for example, by finding a waiver for such
forfeiture. 29Stated differently, provisions, conditions or exceptions in policies which tend to
-
8/10/2019 Insurance Batch 2.1
4/39
work a forfeiture of insurance policies should be construed most strictly against those for
whose benefits they are inserted, and most favorably toward thos e against whom they are
intended to operate.30
The reason for this is that, except for riders which may later be
inserted, the insured sees the contract already in its final form and has had no voice in the
selection or arrangement of the words employed therein. On the other hand, the language of
the contract was carefully chosen and deliberated upon by experts and legal advisers who
had acted exclusively in the interest of the i nsurers and the technical language employed
therein is rarely understood by ordinary laymen.31
With these principles in mind, we are of the opinion that Condition 3 of the subject policy is
not totally free from ambiguity and must, perforce, be meticulously analyzed. Such analysis
leads us to conclude that (a) the prohibition applies only to double insurance, and (b) the
nullity of the policy shall only b e to the extent exceeding P200,000.00 of the total policies
obtained.
The first conclusion is supported by the portion of the condition referring to o ther insurance
"covering any of the property or properties consisting of stocks in trade, goo ds in process
and/or inventories only hereby insured," and the portion regarding the insured's declaration
on the subheading CO-INSURANCE that the co -insurer is Mercantile Insurance Co., Inc. in the
sum of P50,000.00. A double insurance exists where the same person is insured by several
insurers separately in respect of the same subject and interest. As earlier stated, the
insurable interests of a mortgagor and a mortgagee o n the mortgaged property are distinct
and separate. Since the two policies of the PFIC do not cover the same interest as t hat
covered by the policy of the private respondent, no double insurance exists. The non-
disclosure then of the former policies was not fatal to the petitioner's right to recover on the
private respondent's policy.
Furthermore, by stating within Condition 3 itself that such condition shall not apply if the
total insurance in force at the time of loss does not exceed P200,000.00, the private
respondent was amenable to assume a co-insurer's liability up to a loss not exceeding
P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the rationale
behind the incorporation of "other insurance" clause in fire policies is to prevent over-
insurance and thus avert the perpetration of fraud. When a property owner obtains
insurance policies from two or more insurers in a total amount that exceeds the property's
value, the insured may have an inducement to destroy the property for the purpose of
collecting the insurance. The public as well as the insurer is interested in preventing a
situation in which a fire would be profitable to the insured.32
WHEREFORE, the instant petition is hereby GRANTED. The decision o f the Court of Appeals in
CA-G.R. SP No. 31916 is SET ASIDE and the decision of the Insurance Co mmission in Case No.
3340 is REINSTATED.
Costs against private respondent Country Bankers Insurance Corpo ration.
SO ORDERED.
G.R. No. L-7667 November 28, 1955
CHERIE PALILEO,plaintiff-appellee,
vs.
BEATRIZ COSIO,defendant-appellant.
Claro M. Recto for appellant.
Bengson, Villegas, Jr. and Villar for appellee.
Plaintiff filed a complaint against defendant in the Court of First Instance of Manila praying
that (1) the transaction entered into between them on December 18, 1951 be declared as
one of loan, and the document executed covering t he transaction as one of equitable
mortgage to secure the payment of said loan; (2) the defendant be ordered to credit t o the
plaintiff with the necessary amount from the sum received by the defendant from the
Associated Insurance & Surety Co., Inc. and to apply the same to the payment of plaintiff's
obligation thus considering it as fully paid; and (3) the defendant be ordered to pay to
plaintiff the difference between the alleged indebtedness of plaintiff and the sum received
by defendant from the aforementioned insurance company, plus the sum allegedly paid to
defendant as interest on the alleged indebtedness.
On December 19, 1952, defendant filed her answer setting up as special defense that the
transaction entered into between the plaintiff and defendant is one of sale with option to
repurchase but that the period for repurchase had expired without plaintiff having returned
the price agreed upon as a result of which the ownership of the property had become
consolidated in the defendant. Defendant also set up certain counterclaims which involve a
total amount of P4,900.
On April 7, 1953, the case was set for trial on the merits, but because of several
postponements asked by the parties, the same has to be set anew for trial on January 12,
1954. On this date, neither the defendant nor her counsel appeared, even if the latter had
been notified of the postponement almost a month earlier, and so the court received the
evidence of the plaintiff. On January 18, 1954, the court, having in v iew the evidence
presented, rendered judgment granting the relief prayed for in the complaint.
On February 2, 1954, the original counsel for the defendant was substituted and the new
counsel immediately moved that the judgment be set aside on the ground that, due to
mistake or excusable negligence, defendant was unable to present her evidence and the
decision was contrary to law, and this motion having been denied, defendant took the
present appeal.
The important issue to be determined in this appeal is whether the lower court commi tted a
grave abuse of discretion in not reopening the case to give defendant an opportunity to
present her evidence considering that the failure of her original counsel to appear was due to
mistake or execusable negligence which ordinary prudence could not have guarded against.
The original counsel of defendant was Atty. Leon Ma. Guerrero. As early as February 11,
1953, said counsel showed interest in the early disposal of this case by moving the court to
have it set for trial. The first date set was April 7, 1953, but no hearing was had on that date
because plaintiff had moved to postpone it. The case was next set for hearing on April 28,
-
8/10/2019 Insurance Batch 2.1
5/39
1953, but on motion again of plaintiff, the hearing was transferred to November 6, 1953.
Then, upon petition of defendant, the trial had t o be moved to December 15, 1953, and
because Atty. Guerrero could not appear on said date because of a case he had in Cebu City,
the hearing was postponed to January 18, 1954.
And on January 4, 1954, o r nineteen days after receiving the notice of hearing, Atty. Guerrero
was appointed Undersecretary of Foreign Affairs. It is now contended that t he appointment
was so sudden and unexpected that Atty. Guerrero, after taking his oath, was unable to wind
up his private cases or make any preparation at all. It is averred that "The days that followed
his appointment were very busy days for defendant's former counsel. There was an
immediate need for clearing the backlog of official business, including the reorganization of
the Department of Foreign Affairs and our Foreign Service, and more importantly, he had to
assist the Secretary of Foreign Affairs in negotiations of national importance like t he
Japanese reparations, and the revision of the trade agreement with the U nited States, that,
Atty. Guerrero had to work as much as fourteen hours daily . . . Because of all these
unavoidable confusion that followed in the wake of Atty. Guerrero's sudden and unexpected
appointment, the trial of this case scheduled for January 18, 1954 escaped his memory, and
consequently, Atty. Guerrero and the defendant were unable to appear when the case was
called for trial." These reasons, it is intimated, constitute excusable negligence which
ordinary prudence could not have guarded against and should have been considered by the
trial court as sufficient justification to grant the petition of defendant for a rehearing.
It is a well-settled rule that the granting of a motion to set aside a judgment or order on the
ground of mistake or excusable negligence is addressed to the sound discretion of the court
(see Coombs vs.Santos, 24 Phil., 446; Daipan vs.Sigabu, 25, Phil., 184). And an order issued
in the exercise of such discretion is ordinarily not to be disturbed unless it is shown that the
court has gravely abused such discretion. (See Tell vs.Tell, 48 Phil., 70; Macke vs.Camps, 5
Phil., 185; Calvo vs.De Gutierrez, 4 Phil., 203; Manzanares vs.Moreta, 38 Phil., 821; Salva vs.
Palacio and Leuterio, 90 Phil., 731.) In denying the motion for reopening the trial court said:
"After going over the same arguments, this Court is of the opinion, and so holds that the
decision of this Court of January 18, 1954 should not be disturbed." Considering the stature,
ability and experience of counsel Leon Ma. Guerrero, and the fact that he was given almost
one month notice before the date set for trial, we are persuaded to conclude that the trial
court did not abuse its discretion in refusing to reconsider its decision.
Coming now to the merits of the case, we note that the lower court made the following
findings: On December 18, 1951, plaintiff obtained from defendant a loan in the sum of
P12,000 subject to the following conditions: (a) that plaintiff shall pay to defendant an
interest in the amount of P250 a month; (b) that defendant shall deduct from the loan
certain obligations of plaintiff to third persons amounting to P4,550, plus the sum of P250 as
interest for the first month; and (c) that after making the above deductions, defendant shall
deliver to plaintiff only the balance of the loan of P12,000.
Pursuant to their agreement, plaintiff paid to defendant as interest on the loan a total of
P2,250.00 corresponding to nine months from December 18, 1951, on the basis of P250.00 a
month, which is more than the maximum interest authorized by law. To secure the payment
of the aforesaid loan, defendant required plaintiff to sign a document known as "Conditional
Sale of Residential Building", purporting to convey to defendant, with right to repurchase, a
two-story building of strong materials belonging to plaintiff. This document did not express
the true intention of the parties which was merely to place said property as security for the
payment of the loan.
After the execution of the aforesaid document, defendant insured the building aga inst fire
with the Associated Insurance & Surety Co., Inc. for the sum of P15,000, the insurance policy
having been issued in the name of defendant. The building was partly destroyed by fire and,
after proper demand, defendant collected from the insurance company an indemnity o f
P13,107.00. Plaintiff demanded from defendant that she be credited with the necessary
amount to pay her obligation out of the insurance proceeds but defendant refused to do so.
And on the strength of these facts, the court rendered decision the dispositive part of which
reads as follows:
Wherefore, judgment is hereby rendered declaring the transaction had between
plaintiff and defendant, as shown in Exhibit A, an equitable mortgage to secure the
payment of the sum of P12,000 loaned by the defendant to plaintiff; ordering the
defendant to credit the sum of P13,107 received by the defendant from the
Associated Insurance & surety Co., Inc. to the payment of plaintiff's obligation in
the sum of P12,000.00 as stated in the complaint, thus considering the agreement
of December 18, 1951 between the herein plaintiff and defendant completely paid
and leaving still a balance in the sum of P1,107 from the insurance collected by
defendant; that as plaintiff had paid to the defendant the sum of P2,250.00 for
nine months as interest on t he sum of P12,000 loaned to plaintiff and the legal
interest allowed by law in this transaction does not exceed 12 per cent per a nnum,
or the sum of P1,440 for one year, so the herein plaintiff and o verpaid the sum of
P810 to the defendant, which this Co urt hereby likewise orders the said defendant
to refund to herein plaintiff, plus the balance of P1,107 representing the difference
of the sum loan of P12,000 and the collected insurance of P13,107 from the
insurance company abovementioned to which the herein plaintiff is entitled to
receive, and to pay the costs.
The question that now arises is: I s the trial court justified in considering the obligation of
plaintiff fully compensated by the insurance amount and in ordering defendant to refund to
plaintiff the sum of P1,107 representing the difference of the loan of P12,000 and the sum of
P13,107 collected by said defendant from the insurance company notwithstanding the fact
that it was not proven that the insurance was taken for the benefit of the mortgagor?
Is is our opinion that on this score the court is in error for its ruling runs counter to the rule
governing an insurance taken by a mortgagee independently of the mortgagor. The rule is
that "where a mortgagee, independently of the mortgagor, insures the mortgaged property
in his own name and for his own interest, he is entitled to the insurance proceeds in case of
loss,but in such case, he is not allowed to retain his claim against the mortgagor, but is
passed by subrogation to the insurer to the extent of t he money paid." (Vance on Insurance,
2d ed., p. 654)Or, stated in another way, "the mortgagee may insure his interest in the
-
8/10/2019 Insurance Batch 2.1
6/39
property independently of the mortgagor. In that event, upon the destruction of the
property the insurance money paid to the mo rtgageewill not inure to the benefit of the
mortgagor, and the amount due under the mortgage d ebt remains unchanged. The
mortgagee,however,is not allowed to retain his claim against the mortgagor, but it passes
by subrogation to the insurer, to the extent of the insurance money paid." (Vance on
Insurance, 3rd ed., pp. 772-773) This is the same rule upheld by this Court in a case that
arose in this jurisdiction. In the case mentioned, an insurance contract was taken out by the
mortgagee upon his own interest, it being stipulated that the proceeds would be paid to him
only and when the case came up for decision, this Court held that the mortgagee, in case of
loss, may only recover upon the policy to the extent of his credit at the time of the loss. It
was declared that the mortgaged had no right of action against the mortgagee on the policy.
(San Miguel Brewery vs.Law Union, 40 Phil., 674.)
It is true that there are authorities which hold that "If a mortgagee procures insurance on his
separate interest at his own expense and for his own benefit, without any agreement with
the mortgagor with respect thereto, the mortgagor has no interest in the policy, and is not
entitled to have the insurance proceeds applied in reduction of th e mortgage debt" (19
R.C.L., p. 405), and that, furthermore, the mortgagee "has still a right to recover his whole
debt of the mortgagor." (King vs.State Mut. F. Ins. Co., 7 Cush. 1; Suffolk F. Ins. Co. vs.
Boyden 9 Allen, 123; See also Loomis vs.Eagle Life & Health Ins. Co., 6 Gray, 396; Washington
Mills Emery Mfg. Co. vs.Weymouth & B. Mut. F. Ins. Co., 135 Mass. 506; Foster vs.Equitable
Mut. F. Ins. Co., 2 Gray 216.) But these authorities merely represent the minority view (See
case note, 3 Lawyers' Report Annotated, new series, p. 79). "The general rule and the weight
of authority is, that the insurer is thereupon subrogated to the rights of the mortgagee under
the mortgage. This is put upon the analogy of the situation of the insurer to that of a surety."
(Jones on Mortgages, Vol. I, pp. 671-672.)
Considering the foregoing rules, it would appear that the lower court erred in declaring that
the proceeds of the insurance taken out by the defendant on the property mortgaged inured
to the benefit of the plaintiff and in ordering said defendant to deliver to the plaintiff the
difference between her indebtedness and the amount of insurance received by the
defendant, for, in the light of the majority rule we have above enunciated, the correct
solution should be that the proceeds of the insurance should be delivered to the defendant
but that her claim against the plaintiff should b e considered assigned to the insurance
company who is deemed subrogated to the r ights of the defendant to t he extent of the
money paid as indemnity.
Consistent with the foregoing pronouncement, we therefore modify the judgment of the
lower court as follows:(1) the transaction had between the plaintiff and defendant as s hown
in Exhibit A is merely an equitable mortgage intended to secure the payment of t he loan of
P12,000;(2) that the proceeds of the insurance amounting to P13,107.00 was properly
collected by defendant who is not required to account for it to the plaintiff; (3) that the
collection of said insurance proceeds shall not be deemed to have compensated the
obligation of the plaintiff to the defendant, but bars the latter from claiming its payment
from the former; and (4) defendant shall pay to the plaintiff the sum of P810.00 representing
the overpayment made by plaintiff by way of interest on the loan. No pronouncement as to
costs.
G.R. No. L-44059 October 28, 1977
THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-appellee,
vs.
CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO, defendants-appellants.
MARTIN, J.:
This is a novel question in insurance law: Can a common-law wife named as beneficiary in the
life insurance policy of a legally married man claim the p roceeds thereof in case of death of
the latter?
On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance Co.,
Ltd., Policy No. 009929 on a whole-life for P5,882.00 with a, rider for Accidental Death for the
same amount Buenaventura C. Ebrado designated T. Ebrado as the revocable beneficiary in
his policy. He to her as his wife.
On October 21, 1969, Buenaventura C. Ebrado died as a result of an t when he was hit by a
failing branch of a tree. As the po licy was in force, The Insular Life Assurance Co., Ltd. liable
to pay the coverage in the total amount of P11,745.73, representing the face value of the
policy in the amount of P5,882.00 plus the additional benefits for accidental death also in the
amount of P5,882.00 and the refund of P18.00 paid for the premium due November, 1969,
minus the unpaid premiums and interest thereon due for January and February, 1969, in the
sum of P36.27.
Carponia T. Ebrado filed with the insurer a claim for the proceeds of the Policy as the
designated beneficiary therein, although she admits that she and the insured Buenaventura
C. Ebrado were merely living as h usband and wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She
asserts that she is the on e entitled to the insurance proceeds, not the common-law wife,
Carponia T. Ebrado.
In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life
Assurance Co., Ltd. commenced an action for Interpleader before the Court of First Instance
of Rizal on April 29, 1970.
After the issues have been joined, a pre-trial conference was held on July 8, 1972, after
which, a pre-trial order was entered reading as follows: +.wph!1
During the pre-trial conference, the parties manifested to the court. that
there is no possibility of amicable settlement. Hence, the Court
proceeded to have the parties submit their evidence for the purpose of
the pre-trial and make admissions for the purpose o f pretrial. During this
conference, parties Carponia T. Ebrado and Pascuala Ebrado agreed and
stipulated: 1) that the deceased Buenaventura Ebrado was married to
Pascuala Ebrado with whom she has six
(legitimate) namely;
-
8/10/2019 Insurance Batch 2.1
7/39
Hernando, Cresencio, Elsa, Erlinda, Felizardo and Helen, all surnamed
Ebrado; 2) that during the lifetime of the deceased, he was insured with
Insular Life Assurance Co. Under Policy No. 009929 whole life plan, dated
September 1, 1968 for the sum o f P5,882.00 with the rider for accidental
death benefit as evidenced by Exhibits A for plaintiffs and Exhibit 1 for
the defendant Pascuala and Exhibit 7 for Carponia Ebrado; 3) that during
the lifetime of Buenaventura Ebrado, he was living with his common-wife,
Carponia Ebrado, with whom she had 2 children although he was not
legally separated from his legal wife; 4) that Buenaventura in accident on
October 21, 1969 as evidenced by the death Exhibit 3 and affidavit of the
police report of his death Exhibit 5; 5) that complainant Carponia Ebrado
filed claim with the Insular Life Assurance Co. which was contested by
Pascuala Ebrado who also filed claim for the proceeds of said policy 6)
that in view ofthe adverse claims the insurance company filed this action
against the two herein claimants Carponia and Pascuala Ebrado; 7) that
there is now due from the Insular Life Assurance Co. as proceeds of the
policy P11,745.73; 8) that the beneficiary designated by the insured in
the policy is Carponia Ebrado and t he insured made reservation to
change the beneficiary but although the insured made the option to
change the beneficiary, same was never changed up to the tim e of his
death and the wife did not have any opportunity to write the com pany
that there was reservation to change the designation of the parties
agreed that a decision be rendered based on and stipulation o f facts as to
who among the two claimants is entitled to the policy.
Upon motion of the parties, they are given ten (10) days to file their
simultaneous memoranda from the receipt of this order.
SO ORDERED.
On September 25, 1972, the trial court rendered judgment declaring among others, Carponia
T. Ebrado disqualified from becoming beneficiary of the insured Buenaventura Cristor Ebrado
and directing the payment of the insurance proceeds to the estate of the deceased insured.
The trial court held: +.wph!1
It is patent from the last paragraph of Art. 739 of the Civil Code that a
criminal conviction for adultery or concubinage is not essential in order to
establish the disqualification mentioned therein. Neither is it also
necessary that a finding of such guilt o r commission of those acts be
made in a separate independent action brought for the purpose. The guilt
of the donee (beneficiary) may be proved by preponderance of evidence
in the same proceeding (the action brought to declare the nullity of the
donation).
It is, however, essential that such adultery or concubinage exists at the
time defendant Carponia T. Ebrado was made beneficiary in the p olicy in
question for the disqualification and incapacity to exist and t hat it is only
necessary that such fact be established by preponderance of evidence in
the trial. Since it is agreed in their stipulation above-quoted that the
deceased insured and defendant Carponia T. Ebrado were living together
as husband and wife without being legally married and that the marriage
of the insured with the other defendant Pascuala Vda. de Ebrado was
valid and still existing at the time the insurance in question was
purchased there is no question that defendant Carponia T. Ebrado is
disqualified from becoming the beneficiary of the policy in question and
as such she is not entitled to the proceeds of the insurance upon the
death of the insured.
From this judgment, Carponia T. Ebrado appealed to the Court of Appeals, but on July 11,
1976, the Appellate Court certified the case to Us as involving only questions of law.
We affirm the judgment of the lo wer court.
1. It is quite unfortunate t hat the Insurance Act (RA 2327, as amended) or even the new
Insurance Code (PD No. 612, as amended) does not contain any specific provision grossly
resolutory of the prime question at hand. Section 50 of the Insurance Act which provides that
"(t)he insurance shag be applied exclusively to the proper interest of the person in whose
name it is made"1cannot be validly seized upon to hold that the mm includes the
beneficiary. The word "interest" highly suggests that the prov ision refers only to the
"insured" and not to the beneficiary, since a contract of insurance is personal in character. 2
Otherwise, the prohibitory laws against illicit relationships especially on property and
descent will be rendered nugatory, as the same co uld easily be circumvented by modes of
insurance. Rather, the general rules of civil law should be applied t o resolve this void in t he
Insurance Law. Article 2011 of the New Civil Code states: "The contract of insurance is
governed by special laws. Matters not expressly provided for in such special laws shall be
regulated by this Code." When not otherwise specifically provided for by the Insurance Law,
the contract of life insurance is governed by the general rules of the civil law regulating
contracts.3And under Article 2012 of the same Code, "any person who is forbidden from
receiving any donation under Article 739 cannot be named beneficiary of a fife insurance
policy by the person who cannot make a donation to him.4Common-law spouses are,
definitely, barred from receiving donations from each other. Article 739 of the new Civil Code
provides: +.wph!1
The following donations shall be void:
1. Those made between persons who were guilty of adultery or
concubinage at the time of donation;
Those made between persons found guilty of t he same criminal offense,
in consideration thereof;
3. Those made to a public officer or his wife, descendants or ascendants
by reason of his office.
In the case referred to in No. 1, the action for declaration of nullity may
be brought by the spouse of the donor or donee; and the guilt of the
donee may be proved by preponderance of evidence in the same action.
-
8/10/2019 Insurance Batch 2.1
8/39
2. In essence, a life insurance policy is no different from a civil donation insofar as the
beneficiary is concerned. Both are founded upon the same consideration: liberality. A
beneficiary is like a donee, because from the premiums of the policy which the insured pays
out of liberality, the beneficiary will receive the proceeds or profits of said insurance. As a
consequence, the proscription in Article 739 of the new Civil Code should equally operate in
life insurance contracts. The mandate of Article 2012 cannot be laid aside: any person who
cannot receive a donation cannot be named as beneficiary in the life insurance policy of the
person who cannot make the donation.5Under American law, a policy of life insurance is
considered as a testament and in construing it, the courts will, so far as possible treat it as a
will and determine the effect of a clause designating the beneficiary by rules under which
wins are interpreted.6
3. Policy considerations and dictates of morality rightly justify the institution of a barrier
between common law spouses in record to Property relations since such hip ultimately
encroaches upon the nuptial and filial rights of the legitimate family There is every reason to
hold that the bar in donations between legitimate spouses and those between illegitimate
ones should be enforced in life insurance policies since the same are based on similar
consideration As above pointed out, a beneficiary in a fife insurance policy is no different
from a donee. Both are recipients of pure beneficence. So long as manage remains the
threshold of family laws, reason and morality dictate that t he impediments imposed upon
married couple should likewise be imposed upon extra-marital relationship. If legitimate
relationship is circumscribed by these legal disabilities, with more reason should an illicit
relationship be restricted by these disabilities. Thus, in Matabuena v. Cervantes,7this Court,
through Justice Fernando, said: +.wph!1
If the policy of the law is, in the language of the opinion of the then
Justice J.B.L. Reyes of that court (Court of Appeals), 'to prohibit donations
in favor of the other consort and his descendants because of and undue
and improper pressure and influence upon the donor, a prejudice deeply
rooted in our ancient law;" por-que no se enganen desponjandose el uno
al otro por amor que han de consuno' (According to) the Partidas (Part IV,
Tit. XI, LAW IV), reiterating the rationale 'No Mutuato amore invicem
spoliarentur' the Pandects (Bk, 24, Titl. 1, De donat, inter virum et
uxorem); then there is very reason to apply the same prohibitive policy to
persons living together as husband and wife without the benefit of
nuptials. For it is not to be doubted that assent to such irregular
connection for thirty years bespeaks greater influence of one party over
the other, so that the danger that the law seeks to avoid is
correspondingly increased. Moreover, as already pointed out by Ulpian
(in his lib. 32 ad Sabinum, fr. 1), 'it would not be just that such donations
should subsist, lest the condition 6f those who incurred guilt should turn
out to be better.' So long as marriage remains the cornerstone of our
family law, reason and morality alike demand that the disabilities
attached to marriage should likewise attach to concubinage.
It is hardly necessary to add that even in the absence of the above
pronouncement, any other conclusion cannot stand the test of scrutiny. It
would be to indict the frame of the Civil Code for a failure to apply a
laudable rule to a situation which in its essentials cannot be
distinguished. Moreover, if it is at all to be differentiated the policy of the
law which embodies a deeply rooted notion of what is just and what is
right would be nullified if such irregular relationship instead of being
visited with disabilities would be attended with benefits. Certainly a legal
norm should not be susceptible to such a reproach. If there is every any
occasion where the principle of statutory construction that what is within
the spirit of the law is as much a part of it as what is written, this is it.
Otherwise the basic purpose discernible in such codal provision would
not be attained. Whatever omission may be apparent in an interpretation
purely literal of the language used must be remedied by an adherence to
its avowed objective.
4. We do not think that a conviction for adultery or concubinage is exacted before the
disabilities mentioned in Article 739 may effectuate. More specifically, with record to the
disability on "persons who were guilty of adultery or concubinage at the time of t he
donation," Article 739 itself provides: +.wph!1
In the case referred to in No . 1, the action for declaration of nullity may
be brought by the spouse of the donor or donee; and the guilty of the
donee may be proved by preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the offense is a
condition precedent. In fact, it cannot even be from the aforequoted provision that a
prosecution is needed. On the contrary, the law plainly states that the guilt of the party may
be proved "in the same acting for declaration of nullity of donation. And, it would be
sufficient if evidence preponderates upon the guilt of the consort for the offense indicated.
The quantum of proof in criminal cases is not demanded.
In the caw before Us, the requisite proof of common-law relationship between the insured
and the beneficiary has been conveniently supplied by the stipulations between the parties
in the pre-trial conference of the case. It case agreed upon and stipulated therein that the
deceased insured Buenaventura C. Ebrado was married to Pascuala Ebrado with whom she
has six legitimate children; that during his lifetime, the deceased insured was living with his
common-law wife, Carponia Ebrado, with whom he has two children. These stipulations are
nothing less thanjudicial admissions which, as a consequence, no longer require proof and
cannot be contradicted.8Afortiori, on the basis of these admissions, a judgment may be
validly rendered without going through the rigors of a trial for the sole purpose of proving
the illicit liaison between the insured and the beneficiary. In fact, in that pretrial, the parties
even agreed "that a decision be rendered based on this agreement and stipulation of facts as
to who among the t wo claimants is entitled to the policy."
ACCORDINGLY, the appealed judgment of the lower court is hereby affirmed. Carponia T.
Ebrado is hereby declared disqualified to be the beneficiary of the late Buenaventura C.
-
8/10/2019 Insurance Batch 2.1
9/39
Ebrado in his life insurance policy. As a consequence, the proceeds of the policy are hereby
held payable to the estate of the deceased insured. Costs against Carponia T. Ebrado.
SO ORDERED.
G.R. No. L-6114 October 30, 1954
SOUTHERN LUZON EMPLOYEES' ASSOCIATION, plaintiff,
vs.
JUANITA GOLPEO, ET AL., defendants-appellants;
AQUILINO MALOLES , ET AL., defendants-appellees;
ELSIE HICBAN, ET AL., defendants;
MARCELINO CONCEPCION, ET AL., intervenors-appellants.
Enrique Al. Capistrano, Pio O. Golfeo, Jose E. Erfe and Hilario Mutuc for appellants.
Manuel Alvero and Elden B. Brion for appellees.
Juan A. Baes for defendant Elsie Hicban.
PARAS, C.J.:
The plaintiff, Southern Luzon Employees' Association is composed of laborers and employees
of Laguna tayabas Bus Co., and B atangas Transportation Company, and one of its purposes is
mutual aid of its members and their defendants in case of death. Roman A. Concepcion was a
member until his death on December 13, 1950. The association adopted on September 17,
1949 the following resolution:
RESOLVED: That a family record card of each member be printed wherein the
members will put down his dependents and/or beneficiaries.
BE IT RESOLVED, FURTHER, that a member may, if he chooses, put down his
common-law wife as his beneficiary and/or children had with her as the case may
be; that in case of a widower, he may put down his legitimate children with the
first marriage who are below 21 years of age, single, and may at the same time,
also name his common-law wife, if he has any, as dependents and/or beneficiaries;
and
BE IT RESOLVED: That such person so named by the member will be sole persons to
be recognized by the Association regarding claims for condolence contributions.
In the form required by the association t o be accomplished by its members, with reference to
the death benefit, Roman A. Concepcion listed as his beneficiaries Aquilina Maloles, Roman
M. Concepcion, Jr., Estela M. Concepcion, Rolando M. Concepcion and Robin M. Concepcion.
After the death of Roman A. Concepcion, the association was able to collect voluntary
contributions from its members amounting to P2,5055. Three sets of claimants presented
themselves, namely, (1) Juanita Golpeo, legal wife of Roman A. Concepcion, and her children,
named beneficiaries by the deceased; and (3) Elsie Hicban, another common law wife of
Roman A. Concepcion, and her child. The plaintiff association was accordingly constrained to
institute in the Court of First Instance of Laguna the present action for interpleading against
the three conflicting claimants as defendants. Marcelino and Josefina Concepcion, children of
the deceased Roman A. Concepcion with Juanita Golpeo, intervened in t heir own rights,
aligning themselves with the defendants, Juanita Golpeo and her minor children. After
hearing, the court rendered a decision, declaring the defendants Aquilina Maloles and her
children the sole beneficiaries of the sum of P2,505.00, and ordering the plaintiff to deliver
said amount to them. From this decision only the defendants Juanita Golpeo and her minor
children and the intervenors Marcelino and Josefina Concepcion have appealed to this court.
The decision is based mainly on t he theory that the contract between the plaintiff and the
deceased Roman A. Concepcion partook of the nature of an insurance and that, therefore,
the amount in question belonged exclusively to the beneficiaries, invoking the following
pronouncements of this Court in the case of Del Val vs. Del Val, 29 Phil., 534:
With the finding of the trial court that the proceeds of the life-insurance policy
belongs exclusively to the defendant as his individual and separate property, we
agree. That the proceeds of an insurance policy belong exclusively to the
beneficiary and not to the estate o f the person whose life was insured, and that
such proceeds are the separate and individual property of the beneficiary, and not
of the heirs of the p erson whose life was insured, is the doctrine in America. We
believe that the same doctrine obtains in t hese Islands by virtue of section 428 of
the Code of Commerce, which reads:
"The amounts which the underwriter must deliver to the person insured, in
fulfillment of the contract, shall be the property creditors of any kind whatsoever
of the person who effected the insurance in favor of the formers."
It is claimed by the attorney for the plaintiffs that the section just quoted in
subordinated to the provisions of the civil code as found in article 10035. This
article reads:
"An heir by force of law surviving with others of the same character to a succession
must bring into the hereditary estate the property or securities he may bring into
the hereditary estate the property or securities he may have been received from
the deceased during the life of the same, by way of dowry, gift, or for any good
consideration, in order to compute it in fixing the legal portions and in the amount
of the division."
Counsel also claims that the proceed of the insurance policy were donation or gift
made by the father during his lifetime to the defendant and that, as such, its
ultimate destination is determined by those provisions of the Civil Code which
relate to donations, especially article 819. This article provides that "gifts made to
children which are not betterments shall be considered as part of their legal
portion."
-
8/10/2019 Insurance Batch 2.1
10/39
We cannot agree with these contention. The contract of life insurance is a special
contract and the destination of the proceeds thereof is determined by special laws
which deal exclusively with that subject. The Civil Code has no provisions which
relate directly and specifically to life-insurance contract or to the destination of life-
insurance proceeds. That subject is regulate exclusively by the Code of Commerce
which provides for the terms of the contract, the relations of the parties and t he
destination of the proceeds of the policy. (Supra, pp. 540-541.)
It is argued for the appellants, however, that t he Insurance Law is not applicable because the
plaintiff is a mutual benefit association as defined in section 1628 of the Revised
Administrative Code. This argument evidently ignore the fact that the trial court has no
considered the plaintiff as a regular insurance company but merely ruled that th e death
benefit in question is analogous to an insurance. Moreover, section 1628 of the Revised
Administrative Code defines a mutual benefit association as one, among others, "providing
for any method of accident or life insurance among its members out of dues or assessments
collected from the membership." The comparison made in the appealed decision is,
therefore, well taken.
Appellant also contend that the stipulation between the plaintiff and the deceased Roman A.
Concepcion regarding the specification of the latter's beneficiaries, and the resolution of
September 17, 1949, are void for the b eing contrary to law, moral or public policy.
Specifically, the appellants cite article 2012 of the new Civil Code prov iding that "Any person
who is forbidden from receiving any donation under article 739 cannot be named beneficiary
of a life insurance policy and by the person who cannot make any donation to him, according
to said article." Inasmuch as, according to article 739 of the new Civil Code, a donation is
valid when made "between persons who are guilty or adultery or concubinage at the time of
the donation," it is alleged that the defendant-appellee Aquilina Maloles, cannot be named a
beneficiary, every assuming that the insurance law is applicable. Without considering the
intimation in the brief for the defendant appellees that appellant Juanita Golpeo, by her
silence and actions, had acquiesced in the illicit relations between her husband and appellee
Aquilina Maloles, appellant argument would certainly not apply to the children of Aquilina
likewise named beneficiaries by the deceased Roman A. Concepcion. As a matter of a fact the
new Civil Code recognized certain successional rights of illegitimate children. (Article 287.)
The other contention advanced rather exhaustively by counsel for appellants, and the
citations in support there of are either negative or rendered inapplicable by the decisive
considerations already stated. In this connection it is noteworthy that the estate of the
deceased Roman A. Concepcion was not entirely left without anything legally due it since it i s
an admitted fact that the sum of P2,500 was paid by Laguna Tayabas Bus Co., employer of
the deceased to the appellants under the Workmen's Compensation Act. Wherefore, the
appealed decision is affirmed, and it is so ordered without co sts.
G.R. No. 23703 September 28, 1925
HILARIO GERCIO,plaintiff-appellee,
vs.
SUN LIFE ASSURANCE OF CANADA, ET AL.,defendants.
SUN LIFE ASSURANCE OF CANADA,appellant.
Fisher, DeWitt, Perkins and Brady and Jesus Trinidad for appellant.
Vicente Romualdez, Feria and La O and P. J. Sevilla for appellee.
MALCOLM, J.:
The question of first impression in t he law of life insurance to be here decided is whether the
insured the husband has the power to change the beneficiary the former wife and
to name instead his actual wife, where the insured and the beneficiary have been divorced
and where the policy of insurance does not expressly reserve to the insured the right to
change the beneficiary. Although the authorities have been exhausted, no legal situation
exactly like the one before us has been encountered.
Hilario Gercio, the insured, is the plaintiff. The Sun Life Assurance Co. of Canada, the insurer,
and Andrea Zialcita, the beneficiary, are the defendants. The complaint is in the nature of
mandamus. Its purpose is to compel the defendant Sun Life Assurance Co. of Canada to
change the beneficiary in the policy issued by t he defendant company on the life of the
plaintiff Hilario Gercio, with one Andrea Zialcita as beneficiary.
A default judgment was taken in the lower court against the defendant Andrea Zialcita. The
other defendant, the Sun Life Assurance Co. of Canada, first demurred to the complaint and
when the demurrer was overruled, filed an answer in the nature of a general denial. The case
was then submitted for decision on an agreed statement of facts. The judgment o f the trial
court was in favor of the plaintiff without costs, and ordered the defendant company to
eliminate from the insurance policy the name of Andrea Zialcita as beneficiary and to
substitute therefor such name as the plaintiff might furnish to the defendant for that
purpose.
The Sun Life Assurance Co. of Canada has a ppealed and has assigned three errors alleged to
have been committed by the lower court. The appellee has countered with a motion which
asks the court to dismiss the appeal of the defendant Sun Life Assurance Co. of Canada, with
costs.
As the motion presented by the appellee and the first two errors assigned by the appellant
are preliminary in nature, we will pass upon th e first. Appellee argues that the "substantial
defendant" was Andrea Zialcita, and that since she was adjudged in default, the Sun Life
Assurance Co. of Canada has no i nterest in the appeal. It will be noticed, however, that the
complaint prays for affirmative relief against the insurance company. It will be noticed
further that it is stipulated that the insurance company has persistently refused to change
the beneficiary as desired by the plaintiff. As the rights of Andrea Zialcita in the policy are
rights which are enforceable by her only against th e insurance company, the defendant
insurance company will only be fully protected if t he question at issue is conclusively
determined. Accordingly, we have decided not to accede to the motion of the appellee and
not to order the dismissal o f the appeal of the appellant.
-
8/10/2019 Insurance Batch 2.1
11/39
This brings us to the main issue. Before, however, discussing its legal aspects, it is advisable
to have before us the essential facts. As t hey are stipulated, this part of t he decision can
easily be accomplished.
On January 29, 1910, the Sun Life Assurance Co. of Canada issued insurance policy No.
161481 on the life of Hilario Gercio. The policy was what is known as a twenty-year
endowment policy. By its terms, the insurance company agreed to insure the life of Hilario
Gercio for the sum of P/2,000, t o be paid him on February 1, 1930, or if the insured should
die before said date, then to his wife, Mrs. Andrea Zialcita, should she survive him; otherwise
to the executors, administrators, or assigns of the insured. The policy also contained a
schedule of reserves, amounts in cash, paid-up policies, and renewed insurance, guaranteed.
The policy did not include any pro vision reserving to the insured the right to change the
beneficiary.
On the date the policy was issued, Andrea Zialcita was the lawful wife of Hilario Gercio.
Towards the end of the year 1919, she was convicted of the crime of adultery. On September
4, 1920, a decree of divorce was issued in civil case no. 17955, which had the effect of
completely dissolving the bonds of matrimony contracted by Hilario Gercio and Andrea
Zialcita.
On March 4, 1922, Hilario Gercio formally notified the Sun Life Assurance Co. of Canada that
he had revoked his donation in favor of Andrea Zialcita, and that he had designated in her
stead his present wife, Adela Garcia de Gercio, as the beneficiary of the policy. Gercio
requested the insurance company to eliminate Andrea Zialcita as beneficiary. This, the
insurance company has refused and still refuses to do.
With all of these introductory matters disposed of and with the legal question to the
forefront, it becomes our first duty to determine what law should be applied to the facts. In
this connection, it should be remembered that the insurance policy was taken out in 1910,
that the Insurance Act. No. 2427, became effective in 1914, and that the effort to change the
beneficiary was made in 1922. Should the provisions of t he Code of Commerce and the Civi l
Code in force in 1910, or the provisions of the Insurance Act now in force, or the general
principles of law, guide the court in its decision?
On the supposition, first, that the Code of Commerce is applicable, yet there can be fou nd in
it no provision either permitting or prohibiting the insured to change the beneficiary.
On the supposition, next, that the Civil Code regulates insurance contracts, it would be most
difficult, if indeed it is practicable, to test a life insurance policy by its provisions. Should t he
insurance contract, whereby the husband names the wife as the beneficiary, be denominated
a donation inter vivos, a donation causa mortis, a contract in favor of a third person, or an
aleatory contract? The subject is further complicated by the fact that if an insurance contract
should be considered a donation, a husband may t hen never insure his life in favor o f his wife
and vice versa, inasmuch as article 1334 prohibits all donations between spouses during
marriage. It would seem, therefore, that this court was right when in the case of Del Val vs.
Del Val([1915]), 29 Phil., 534), it declined to consider the proceeds of the insurance policy as
a donation or gift, saying "the co ntract of life insurance is a special contract and the
destination of the proceeds thereof is determined by special laws which deal exclusively with
that subject. The Civil Code has no provisions which relate directly and s pecifically to life-
insurance contracts or to the destination of life-insurance proceeds. . . ." Some satisfaction is
gathered from the perplexities of the Louisiana Supreme Court, a c ivil law jurisdiction, where
the jurists have disagreed as to the classification of the insurance contract, but have agreed
in their conclusions as will hereafter see. (Re Succession of Leone Desforges [1914], 52 L.R.A.
[N.S.], 689; Lambert vs Penn Mutual Life Insurance Company of Philadelphia and L'Hote & Co.
[1898], 50 La. Ann., 1027.)
On the further supposition that t he Insurance Act applies, it will be found that in this Law,
there is likewise no provision either permitting or prohibiting the insured to change the
beneficiary.
We must perforce conclude that whether the case be considered as of 1910, or 1914, or
1922, and whether the case be considered in the light of the Code of Commerce, the Civil
Code, or the Insurance Act, the d eficiencies in the law will have to be supplemented by the
general principles prevailing on the subject. To that end, we have gathered the rules which
follow from the best considered American authorities. In adopting these rules, we do so with
the purpose of having the Philippine Law of Insurance conform as nearly as possible to the
modern Law of Insurance as found in th e United States proper.
The wife has an insurable interest in the life o f her husband. The beneficiary has an absolute
vested interest in the policy from the date of its issuance and delivery. So when a policy of
life insurance is taken out by t he husband in which the wife is named as beneficiary, she has
a subsisting interest in the policy. And this applies to a policy to which there are attached the
incidents of a loan value, cash surrender value, an automatic extension by premiums paid,
and to an endowment policy, as well as to an ordinary life insurance policy. If the husband
wishes to retain to himself the control and ownership of the policy he may so provide in the
policy. But if the policy co ntains no provision authorizing a change o f beneficiary without the
beneficiary's consent, the insured cannot make such change. Accordingly, it is held that a life
insurance policy of a husband made payable to the wife as beneficiary, is the separate
property of the beneficiary and beyond the control of the husband.
As to the effect produced by t he divorce, the Philippine Divorce Law, Act No. 2710, merely
provides in section 9 that th e decree of divorce shall dissolve the community property as
soon as such decree becomes final. Unlike the st atutes of a few jurisdictions, there is no
provision in the Philippine Law permitting the beneficiary in a policy for the benefit of the
wife of the husband to be changed after a divorce. It must follow, therefore, in the absence
of a statute to the contrary, that if a policy is taken out upon a husband's life the wife is
named as beneficiary therein, a subsequent divorce does not destroy her rights under the
policy.
These are some of the pertinent principles of th e Law of Insurance. To reinforce them, we
would, even at the expense of clogging t he decision with unnecessary citation of authority,
bring to notice certain decisions which seem to us to have controlling influence.
To begin with, it is said that our Insurance Act is mostly taken from the statute of California.
It should prove of interest, therefore, to know the stand taken by the Supreme Court of that
-
8/10/2019 Insurance Batch 2.1
12/39
State. A California decision oft cited in the Cyclopedias is Yore vs. Booth([1895]), 110 Cal.,
238; 52 Am. St. Rep., 81), in which we find the following:
. . . It seems to be the settled doctrine, with but slight dissent in the courts of this
country, that a person who procures a policy upon his own life, payable to a
designated beneficiary, although he pays the premiums himself, and keeps the
policy in his exclusive possession, has no power to change the beneficiary, unless
the policy itself, or the charter of the insurance company, so provides. In policy,
although he has parted with nothing, and is simply the object of another's bounty,
has acquired a vested and irrevocable interest in the policy, which he may keep
alive for his own benefit by paying the premiums or assessments if the person who
effected the insurance fails or refuses to do so.
As carrying great weight, there should also be taken into account two decisions coming from
the Supreme Court of the United States. The first of these decisions, in point o f time, is
Connecticut Mutual Life Insurance Company vs Schaefer([1877]), 94 U.S., 457). There, Mr.
Justice Bradley, delivering the opinion of the court, in part said:
This was an action on a policy of the court, in part said: July 25, 1868, on the joint
lives of George F. and Francisca Schaefer, then husband and wife, payable to the
survivor on the death of either. In January, 1870, they were divorced, and alimony
was decreed and paid to the wife, and there was never any issue of the marriage.
They both subsequently married again, after which, in February, 1871, George F.
Schaefer died. This action was brought by Francisca, the survivor.
xxx xxx xxx
The other point, relating to the alleged cessation of insurable interest by reason of
the divorce of the parties, is entitled to more serious consideration, although we
have very little difficulty in disposing of it.
It will be proper, in the first place, to ascertain what is an insurable interest. It is
generally agreed that mere wager policies, that is, policies in which the insured
party has no interest in its loss or destruction, are void, as against public policy. . . .
But precisely what interest is necessary, in order to take a policy out of the
category of mere wager, has been the subject o f much discussion. In marine and
fire insurance the difficulty is not so great, because there insurance is considered as
strictly an indemnity. But in life insurance the loss can seldom be measured by
pecuniary values. Still, an interest of some sort in the insured life must exist. A man
cannot take out insurance on the life of a total stranger, nor on that of one who is
not so connected with him as to make the continuance of the life a matter of some
real interest to him.
It is well settled that a man has an insurable interest in his own life and in that of
his wife and children; a woman in the life of her husband; and the creditor in the
life of his debtor. Indeed it may be said generally that any reasonable expectation
of pecuniary benefit or advantage from the continued life of another creates an
insurable interest in such life. And there is no doubt that a man may effect an
insurance on his own life for the benefit of a relative or fried; or two or more
persons, on their joint lives, for the benefit of the survivor or survivors. The old
tontines were based substantially on this principle, and their validity has never
been called in question.
xxx xxx xxx
The policy in question might, in our opinion, be sustained as a joint insurance,
without reference to any other interest, or to the question whether the cessation
of interest avoids a policy good at its inception. We do not hesitate to say,
however, that a policy taken out in good faith and valid at its inception, is not
avoided by the cessation of the insurable interest, unless such be the necessary
effect of the provisions of the policy itself. . . .
. . . .In our judgment of life policy, originally valid, does not cease to be so by the
cessation of the assured party's interest in the life insured.
Another controlling decision of the United States Supreme Court is that of the Central
National Bank of Washington City vs. Hume([1888], 128 U.S., 134). Therein, Mr. Chief Justice
Fuller, as the organ of the court, announced the following doctrines:
We think it cannot be doubted that in the instance of contracts of insurance with a
wife or children, or both, upon their insurable interest in the life of the husband or
father, the latter, while they are living, can exercise no power of disposition over
the same without their consent, nor has he any interest therein of which he can
avail himself; nor upon his death have his personal representatives or his creditors
any interest in the proceeds of su ch contracts, which belong to the beneficiaries to
whom they are payable.
It is indeed the general rule that a policy, and the money to become due under it,
belong, the moment it is issued, to the person or persons named in it as the
beneficiary or beneficiaries, and that there is no power in the person procuring the
insurance, by any act of his, by deed or by will, to transfer to any other person the
interest of the person named.
A jurisdiction which found itself in somewhat the same situation as the Philippines, because
of having to reconcile the civil law with the more modern principles of insurance, is
Louisiana. In a case coming before the Federal Courts, In re Dreuil & Co.([1915]), 221 Fed.,
796), the facts were that an endowment insurance policy provided for payment of the
amount thereof at the expiration of twenty years to the insured, or his executors,
administrators, or assigns, with the proviso that, if the insured die within s uch period,
payment was to be made to his wife if she survive him. It was held that the wife has a vested
interest in the policy, of which she cannot be deprived without her consent. Foster, District
Judge, announced:
In so far as the law of Louisiana is concerned, it may also be considered settled that
where a policy is of the semitontine variety, as in this case, the beneficiary has a
vested right in the policy, o f which she cannot be deprived without her consent.
(Lambert vs Penn Mutual Life Ins. Co., 50 La. Ann., 1027; 24 South., 16.) (See in
same connection a leading decision of the Louisiana Supreme Court, Re Succession
of Leonce Desforges, [1914], 52 L.R.A. [N.S.], 689.)
-
8/10/2019 Insurance Batch 2.1
13/39
-
8/10/2019 Insurance Batch 2.1
14/39
Life Insurance Co. ([1918], 183 Iowa, 658); with which compare Foster vs. Gile([1880], 50
Wis., 603) and Hatch vs. Hatch([1904], 35 Tex. Civ. App., 373).
On the admitted facts and the authorities supporting the nearly universally accepted
principles of insurance, we are irresistibly led to the conclusion that the question at issue
must be answered in the negative.
The judgment appealed from will be reversed and the complaint o rdered dismissed as to the
appellant, without special pronouncement as to the costs in either instance. So ordered.
G.R. No. L-28093 January 30, 1971
BASILIA BERDIN VDA. DE CONSUEGRA; JULIANA, PACITA, MARIA LOURDES, JOSE, JR.,
RODRIGO, LINEDA and LUIS, all surnamed CONSUEGRA, petitioners-appellants,
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, COMMISSIONER OF PUBLIC HIGHWAYS,
HIGHWAY DISTRICT ENGINEER OF SURIGAO DEL NORTE, COMMISSIONER OF CIVIL SERVICE,
and ROSARIO DIAZ, respondents-appellees.
Bernardino O. Almeda for petitioners-appellants.
Binag and Arevalo, Jr. for respondent-appellee Government Service Insurance System.
Office of the Solicitor General for other respondents-appellees.
ZALDIVAR,J.:
Appeal on purely questions of law from the decision of the Court of First Instance of Surigao
del Norte, dated March 7, 1967, in its Special Proceeding No. 1720.
The pertinent facts, culled from the stipulation of facts submitted by the parties, are the
following:
The late Jose Consuegra, at the time of his death, was employed as a shop foreman of the
office of the District Engineer in the province of Surigao del Norte. In his lifetime, Consuegra
contracted two marriages, the first with herein respondent Rosario Diaz, solemnized in the
parish church of San Nicolas de Tolentino, Surigao, Surigao, on July 15, 1937, o ut of which
marriage were born two children, namely, Jose Consuegra, Jr. and Pedro Consuegra, but both
predeceased their father; and the second, which was contracted in good faith while the first
marriage was subsisting, with herein petitioner Basilia Berdin, on May 1, 1957 in the same
parish and municipality, out of which marriage were born seven children, namely, Juliana,
Pacita, Maria Lourdes, Jose, Rodrigo, Lenida and Luz, all surnamed Consuegra.
Being a member of the Government Service Insurance System (GSIS, for short) when
Consuegra died on September 26, 1965, the proceeds of his life insurance under policy No.
601801 were paid by the GSIS to petitioner Basilia Berdin and her children who were the
beneficiaries named in the policy. Having been in the service of the government for 22.5028
years, Consuegra was entitled to retirement insurance benefits in the sum of P6,304.47
pursuant to Section 12(c) of Commonwealth Act 186 as amended by Republic Acts 1616 and
3836. Consuegra did not designate any beneficiary who wo uld receive the retirement
insurance benefits due to him. Respondent Rosario Diaz, the wido w by the first marriage,
filed a claim with the GSIS asking that the retirement insurance benefits be paid to her as the
only legal heir of Consuegra, considering that the deceased did not designate any beneficiary
with respect to his retirement insurance benefits. Petitioner Basilia Berdin and her children,
likewise, filed a similar claim with the GSIS, asserting that being the beneficiaries named in
the life insurance policy of Consuegra, they are the only ones entitled to receive the
retirement insurance benefits due the deceased Consuegra. Resolving the conflicting claims,
the GSIS ruled that the legal heirs of the late Jose Consuegra were Rosario Diaz, his widow by
his first marriage who is entitled t o one-half, or 8/16, of the retirement insurance benefits,
on the one hand; and Basilia Berdin, his widow by the second marriage and their seven
children, on the other hand, who are entitled t o the remaining one-half, or 8/16, each of
them to receive an equal share of 1/16.
Dissatisfied with the foregoing ruling and apportionment made by the GSIS, Basilia Berdin
and her children1filed on October 10, 1966 a petition for mandamus with preliminary
injunction in the Court of First Instance of Surigao, naming as respondents the GSIS, the
Commissioner of Public Highways, the Highway District Engineer of Surigao del Norte, the
Commissioner of Civil Service, and Rosario Diaz, praying that they (petitioners therein) be
declared the legal heirs and exclusive beneficiaries of the retirement insurance of the late
Jose Consuegra, and that a writ of preliminary injunction be issued restraining the
implementation of the adjudication made by the GSIS. On October 26, 1966, the trial court
issued an order requiring therein respondents to file their r espective answers, but refrained
from issuing the writ of preliminary injunction prayed for. On February 11, 1967, the parties
submitted a stipulation of facts, prayed that t he same be admitted and approved and that
judgment be rendered on the basis of the stipulation of facts. On March 7, 1967, the court
below rendered judgment, the pertinent portions of which are qu oted hereunder:
This Court, in conformity with the foregoing stipulation of facts, likewise
is in full accord with the parties with respect to the authority cited by
them in support of said stipulation and which is herein-below cited for
purposes of this judgment, to wit:
"When two women innocently and in good faith are legally united in holy
matrimony to the same man, they and their children, born of said
wedlock, will be regarded as legitimate children and each family be
entitled to one half of the estate. Lao & Lao vs. Dee Tim, 45 Phil. 739;
Estrella vs. Laong Masa, Inc., (CA) 39 OG 79; Pisalbon vs. Bejec, 74 Phil.
88.
WHEREFORE, in view of the above premises, this Court is of the o pinion
that the foregoing stipulation of facts is in order and in accordance with
law and the same is hereby approved. Judgment, therefore, is hereby
rendered declaring the petitioner Basilia Berdin Vda. de Consuegra and
her co-petitioners Juliana, Pacita, Maria Lourdes, Jose, Jr., Rodrigo, Lenida
and Luis, all surnamed Consuegra, beneficiary and entitled to one-half
(1/2) of the retirement benefit in the amount of Six Thousand Three
-
8/10/2019 Insurance Batch 2.1
15/39
Hundred Four Pesos and Fourty-Seven Centavos (P6,304.47) due to the
deceased Jose Consuegra from the Government Service Insurance System
or the amount of P3,152.235 to be divided equally among them in the
proportional amount of 1/16 each. Likewise, the respondent Rosario Diaz
Vda. de Consuegra is hereby declared beneficiary and entitled to the
other half of the retirement benefit of the late Jose Consuegra or the
amount of P3,152.235. The case with respect to the Highway District
Engineer of Surigao del Norte is hereby ordered dismissed.
Hence the present appeal by herein petitioners-appellants, Basilia Berdin and her children.
It is the contention of appellants that the lower court erred in not holding that the
designated beneficiaries in the life insurance of the late Jose Consuegra are also the exclusive
beneficiaries in the retirement insurance of said deceased. In other words, it is the
submission of appellants that because the deceased Jose Consuegra failed to designate the
beneficiaries in his retirement insurance, the appellants who were the beneficiaries named in
the life insurance should automati