Makati Tuscany

Lessons Applicable:
Installments and partial payment (Insurance)
Grounds on Return of Premium: No exposed to peril insured against (Insurance)
FACTS:
Early 1982: American Home Assurance Co. (AHAC), represented by American
International Underwriters (Phils.), Inc., issued in favor of Makati Tuscany
Condominium Corporation (Tuscany) on the latter's building and premises, for a
period beginning 1 March 1982 and ending 1 March 1983, with a total premium of
P466,103.05.
Premium were paid on installments on:
March 12 1982
May 20 1982
June 21 1982
November 16 1982
February 10 1983: AHAC replaced and renewed the previous policy, for a term
covering 1 March 1983 to 1 March 1984
premium of P466,103.05 was again paid on installments on:
April 13 1983
July 13 1983
August 3 1983
September 9 1983
November 21 1983
January 20 1984: policy was again renewed for the period March 1 1984 to
March 1 1985
Tuscany only paid two installment payments
February 6 1984 for P52k
June 6 1984 for P100k
AHAC filed an action to recover the unpaid balance of P314,103.05
RTC: dismissed the complaint
While it is true that the receipts issued to the defendant contained the
aforementioned reservations, it is equally true that payment of the premiums of the
three aforementioned policies (being sought to be refunded) were made during the
lifetime or term of said policies, hence, it could not be said, inspite of the
reservations, that no risk attached under the policies
counterclaim for refund is not justified
CA: ordered Tuscany to pay premiums when due is ordinarily as indivisible
obligation to pay the entire premium; insurance contract became valid and binding
upon payment of the first premium
ISSUE:
1. W/N payment by installment of the premiums due on an insurance policy invalidates
the contract of insurance on the basis of:
Sec. 77 of the Insurance Code, no contract of insurance is valid and binding unless the
premium thereof has been paid, notwithstanding any agreement to the contrary. As a
consequence, petitioner seeks a refund of all premium payments made on the alleged
invalid insurance policies.
2. W/N there is risk attached to the insurance so it cannot be refunded

HELD:

1. NO
Section 77 merely precludes the parties from stipulating that the policy is valid
even if premiums are not paid, but does not expressly prohibit an agreement
granting credit extension, and such an agreement is not contrary to morals, good
customs, public order or public policy
At the very least, both parties should be deemed in estoppel to question
the arrangement they have voluntarily accepted.
It paid the initial installment and thereafter made staggered payments resulting in
full payment of the 1982 and 1983 insurance policies. For the 1984 policy, petitioner
paid 2 installments although it refused to pay the balance. - appearing that they
actually intended to make 3 insurance contracts valid
2. NO.
where the risk is entire and the contract is indivisible, the insured is not entitled to
a refund of the premiums paid if the insurer was exposed to the risk insured for any
period, however brief or momentary
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 137172 June 15, 1999

UCPB GENERAL INSURANCE CO., INC., petitioner,

vs.
MASAGANA TELAMART, INC., respondent.

PARDO, J.:

The case is an appeal via certiorari seeking to set aside the decision of the Court
of Appeals, 1 affirming with modification that of the Regional Trial Court, Branch
58, Makati, ordering petitioner to pay respondent the sum of P18,645,000.00, as
the proceeds of the insurance coverage of respondent's property razed by fire;
25% of the total amount due as attorney's fees and P25,000.00 as litigation
expenses, and costs.

The facts are undisputed and may be related as follows:

On April 15, 1991, petitioner issued five (5) insurance policies covering
respondent's various property described therein against fire, for the period from
May 22, 1991 to May 22, 1992.

In March 1992, petitioner evaluated the policies and decided not to renew them
upon expiration of their terms on May 22, 1992. Petitioner advised respondent's
broker, Zuellig Insurance Brokers, Inc. of its intention not to renew the policies.

On April 6, 1992, petitioner gave written notice to respondent of the non-renewal

of the policies at the address stated in the policies.

On June 13, 1992, fire razed respondent's property covered by three of the
insurance policies petitioner issued.

On July 13, 1992, respondent presented to petitioner's cashier at its head office
five (5) manager's checks in the total amount of P225,753.95, representing
premium for the renewal of the policies from May 22, 1992 to May 22, 1993. No
notice of loss was filed by respondent under the policies prior to July 14, 1992.

On July 14, 1992, respondent filed with petitioner its formal claim for
indemnification of the insured property razed by fire.

On the same day, July 14, 1992, petitioner returned to respondent the five (5)
manager's checks that it tendered, and at the same time rejected respondent's
claim for the reasons (a) that the policies had expired and were not renewed, and
(b) that the fire occurred on June 13, 1992, before respondent's tender of
premium payment.

On July 21, 1992, respondent filed with the Regional Trial Court, Branch 58,
Makati City, a civil complaint against petitioner for recovery of P18,645,000.00,
representing the face value of the policies covering respondent's insured property
razed by fire, and for attorney's fees. 2

On October 23, 1992, after its motion to dismiss had been denied, petitioner filed
an answer to the complaint. It alleged that the complaint "fails to state a cause of
action"; that petitioner was not liable to respondent for insurance proceeds under
 the policies because at the time of the loss of respondent's property due to fire,
the policies had long expired and were not renewed. 3

After due trial, on March 10, 1993, the Regional Trial Court, Branch 58, Makati,
rendered decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiff and against the defendant, as follows:

(1) Authorizing and allowing the plaintiff to consign/deposit with this Court the
sum of P225,753.95 (refused by the defendant) as full payment of the
corresponding premiums for the replacement-renewal policies for Exhibits A, B,
C, D and E;

(2) Declaring plaintiff to have fully complied with its obligation to pay the premium
thereby rendering the replacement-renewal policy of Exhibits A, B, C, D and E
effective and binding for the duration May 22, 1992 until May 22, 1993; and,
ordering defendant to deliver forthwith to plaintiff the said replacement-renewal
policies;

(3) Declaring Exhibits A & B, in force from August 22, 1991 up to August 23, 1992
and August 9, 1991 to August 9, 1992, respectively; and

(4) Ordering the defendant to pay plaintiff the sums of: (a) P18,645,000.00
representing the latter's claim for indemnity under Exhibits A, B & C and/or its
replacement-renewal policies; (b) 25% of the total amount due as and for
attorney's fees; (c) P25,000.00 as necessary litigation expenses; and, (d) the
costs of suit.

All other claims and counterclaims asserted by the parties are denied
and/ordismissed, including plaintiff's claim for interests.

SO ORDERED.

UCPB

Makati, Metro-Manila, March 10, 1993.

ZOSIMO Z. ANGELES.

Judge. 4
 5
In due time, petitioner appealed to the Court of Appeals.

On September 7, 1998, the Court of Appeals promulgated its decision 6 affirming

that of the Regional Trial Court with the modification that item No. 3 of the
dispositive portion was deleted, and the award of attorney's fees was reduced to
10% of the total amount due. 7

The Court of Appeals held that following previous practise, respondent was
allowed a sixty (60) to ninety (90) day credit term for the renewal of its policies,
and that the acceptance of the late premium payment suggested an
understanding that payment could be made later.

Hence, this appeal.

By resolution adopted on March 24, 1999, we required respondent to comment

on the petition, not to file a motion to dismiss within ten (10) days from
notice. 8 On April 22, 1999, respondent filed its comment. 9

Respondent submits that the Court of Appeals correctly ruled that no timely
notice of non-renewal was sent. The notice of non-renewal sent to broker Zuellig
which claimed that it verbally notified the insurance agency but not respondent
itself did not suffice. Respondent submits further that the Court of Appeals did not
err in finding that there existed a sixty (60) to ninety (90) days credit agreement
between UCPB and Masagana, and that, finally, the Supreme Court could not
review factual findings of the lower court affirmed by the Court of Appeals. 10

We give due course to the appeal.

The basic issue raised is whether the fire insurance policies issued by petitioner
to the respondent covering the period May 22, 1991 to May 22, 1992, had
expired on the latter date or had been extended or renewed by an implied credit
arrangement though actual payment of premium was tendered on a later date
after the occurrence of the risk (fire) insured against.

The answer is easily found in the Insurance Code. No, an insurance policy, other
than life, issued originally or on renewal, is not valid and binding until actual
payment of the premium. Any agreement to the contrary is void. 11The parties
may not agree expressly or impliedly on the extension of creditor time to pay the
premium and consider the policy binding before actual payment.
 The case of Malayan Insurance Co., Inc. vs. Cruz-Arnaldo, 12 cited by the Court
of Appeals, is not applicable. In that case, payment of the premium was in fact
actually made on December 24, 1981, and the fire occurred on January 18,
1982. Here, the payment of the premium for renewal of the policies was tendered
on July 13, 1992, a month after the fire occurred on June 13, 1992. The assured
did not even give the insurer a notice of loss within a reasonable time after
occurrence of the fire.

WHEREFORE, the Court hereby REVERSES and SETS ASIDE the decision of
the Court of Appeals in CA-G.R. CV No. 42321. In lieu thereof the Court renders
judgment dismissing respondent's complaint and petitioner's counterclaims
thereto filed with the Regional Trial Court, Branch 58, Makati City, in Civil Case
No. 92-2023. Without costs.1wphi1.nt

SO ORDERED.

UCPB General Insurance v. Masagana Telamart (2001)

UCPB GENERAL INSURANCE [UCPB] v. MASAGANA TELAMART [Masagana]

2001 / Davide, Jr.
FACTS [SEE 1999 CASE DIGEST FOR THE OTHER FACTS]
CA disagreed with UCPBs stand that Masaganas tender of payment of the premiums
on 13 July 1992 did not result in the renewal of the policies, having been made beyond
the effective date of renewal as provided under Policy Condition No. 26:
Renewal Clause. Unless the company at least 45 days in advance of the end of the
policy period mails or delivers to the assured at the address shown in the policy notice
of its intention not to renew the policy or to condition its renewal upon reduction of limits
or elimination of coverages, the assured shall be entitled to renew the policy upon
payment of the premium due on the effective date of renewal.
The following facts have been established:
1. For years, UCPB had been issuing fire policies to th Masagana, and these policies
were annually renewed.
2. UCPB had been granting Masagana a 60-90-day credit term within which to pay the
premiums on the renewed policies.
3. There was no valid notice of non-renewal of the policies, as there is no proof that the
notice sent by ordinary mail was received by Masagana, and the copy allegedly sent to
Zuellig was ever transmitted to Masagana.
4. The premiums for the policies were paid by Masagana within the 60- 90-day credit
term and were duly accepted and received by UCPBs cashier.
ISSUE & HOLDING
WON IC 77 must be strictly applied to UCPBs advantage despite its practice of granting
a 60- to 90-day credit term for the payment of premiums. NO. MASAGANA WINS THIS
TIME. 1999 DECISION SET ASIDE; CA DECISION AFFIRMED
RATIO
SEC. 77. An insurer is entitled to payment of the premium as soon as the thing insured
is exposed to the peril insured against. Notwithstanding any agreement to the contrary,
no policy or contract of insurance issued by an insurance company is valid and binding
unless and until the premium thereof has been paid, except in the case of a life or an
industrial life policy whenever the grace period provision applies.
This was formerly Act 2427, Section 72:
SEC. 72. An insurer is entitled to payment of premium as soon as the thing insured is
exposed to the peril insured against, unless there is clear agreement to grant the
insured credit extension of the premium due. No policy issued by an insurance
company is valid and binding unless and until the premium thereof has been paid.
(Underscoring supplied)
IC 77 does not restate the portion of IC 72 expressly permitting an agreement to extend
the period to pay the premium. However, there are exceptions to IC 77.
In case of a life or industrial life policywhenever the grace period provision applies [Sec.
77]
Any acknowledgment of the receipt of premiumis conclusive evidence of payment [Sec.
78]
If the parties have agreed to the payment ininstallments of the premium and partial
payment has been made at the time of loss [Makati Tuscany Condominium v. CA]
The insurer may grant credit extensionfor the payment of the premium [Makati Tuscany
Condominium]
Estoppel
IC 77 merely precludes the parties from stipulating that the policy is valid even if
premiums are not paid, but does not expressly prohibit an agreement granting credit
extension, and such an agreement is not contrary to morals, good customs, public order
or public policy. [Makati Tuscany Condominium v. CA]
ON EXCEPTION #4. If the insurer has granted the insured a credit term for the payment
of the premium and loss occurs before the expiration of the term, recovery on the policy
should be allowed even though the premium is paid after the loss but within the credit
term.
It would be unjust and inequitable if recovery on the policy would not be permitted
against UCPB, which had consistently granted a 60-90-day credit term for the payment
of premiums despite its full awareness of IC 77. Estoppel bars it from taking refuge
under said section, since Masagana relied in good faith on such practice.

UCPB General Insurance Co., Inc.-vs-Masagana Telemart, inc.G.R. No. 137172, 04

April 2001
FACTS
Plaintiff [herein Respondent] obtained from defendant [herein Petitioner] five
(5)insurance policies on its properties. All five (5) policies reflect on their face the
effectivityterm: "from 4:00 P.M. of 22 May 1991 to 4:00 P.M. of 22 May 1992." On June
13, 1992,plaintiffs properties were razed by fire. On July 13, 1992, plaintiff tendered,
anddefendant accepted, five (5) Equitable Bank Manager's Checks as renewal
premiumpayments for which Official Receipt Direct Premium was issued by defendant.
Masaganamade its formal demand for indemnification for the burned insured properties.
On thesame day, defendant returned the five (5) manager's checks stating in its letter)
that itwas rejecting Masagana's claim on the following grounds:
a) Said policies expired last May 22, 1992 and were not renewed for another term;
b) Defendant had put plaintiff and its alleged broker on notice of non-renewalearlier; and
c) The properties covered by the said policies were burned in a fire that took placelast
June 13, 1992, or before tender of premium payment."
ISSUE
Whether Section 77 of the Insurance Code of 1978 (P.D. No. 1460) must be
strictlyapplied to Petitioner's advantage despite its practice of granting a 60- to 90-day
creditterm for the payment of premiums.
HELD
Section 77 of the Insurance Code of 1978 provides:SECTION 77. An insurer is entitled
to payment of the premium as soon as the thinginsured is exposed to the peril insured
against. Notwithstanding any agreement tothe contrary, no policy or contract of
insurance issued by an insurance company isvalid and binding unless and until the
premium thereof has been paid, except in thecase of a life or an industrial life policy
whenever the grace period provision applies.While the import of Section 77 is that
prepayment of premiums is strictly requiredas a condition to the validity of the contract,
We are not prepared to rule that the requestto make installment payments duly
approved by the insurer would prevent the entirecontract of insurance from going into
effect despite payment and acceptance of the initialpremium or first installment. So is an
understanding to allow insured to pay premiums ininstallments not so prescribed. At the
very least, both parties should be deemed inestoppel to question the arrangement they
have voluntarily accepted.

American

G.R. No. 130421 June 28, 1999

Lessons Applicable: Acknowledgement receipt (Insurance)

Laws Applicable: Section 29, Section 66,Section 75, Section 77,Section 78, Section
306 of the Insurance Code

FACTS:

April 5, 1990: Antonio Chua renewed the fire insurance for its stock-in-trade of
his business, Moonlight Enterprises with American Home Assurance Companyby
issuing a check of P2,983.50 to its agent James Uy who delivered the Renewal
Certificate to him.
April 6, 1990: Moonlight Enterprises was completely razed by fire with an est.
loss of P4,000,000 to P5,000,000
April 10, 1990: An official receipt was issued and subsequently, a policy was
issued covering March 25 1990 to March 25 1991
Antonio Chua filed an insurance claim with American Home and 4 other co-
insurers (Pioneer Insurance and Surety Corporation, Prudential Guarantee and
Assurance, Inc. and Filipino Merchants Insurance Co)
American Home refused alleging the no premium was paid
RTC: favored Antonio Chua for paying by way of check a day before the fire
occurred
CA: Affirmed

ISSUE:
1. W/N there was a valid payment of premium considering that the check was cashed
after the occurrence of the fire since the renewal certificate issued containing the
acknowledgement receipt
2. W/N Chua violated the policy by his submission of fraudulent documents and non-
disclosure of the other existing insurance contracts or other insurance clause"
HELD:petition is partly GRANTED modified by deleting the awards of P200,000 for loss
of profit, P200,000 as moral damages and P100,000 as exemplary damages, and
reducing the award of attorneys fees from P50,000 to P10,000

1. YES.

Section 77 of the Insurance Code

 An insurer is entitled to payment of the premium as soon as the thing
insured is exposed to the peril insured against. Notwithstanding any agreement to
the contrary, no policy or contract of insurance issued by an insurance company is
valid and binding unless and until the premium thereof has been paid, except in the
case of life or an industrial life policy whenever the grace period provision applies
Section 66 of the Insurance Code - not applicable since not termination but
renewal
renewal certificate issued contained the acknowledgment that premium had been
paid
Section 306 of the Insurance Code provides that any insurance company which
delivers a policy or contract of insurance to an insurance agent or insurance broker
shall be deemed to have authorized such agent or broker to receive on its behalf
payment of any premium which is due on such policy or contract of insurance at the
time of its issuance or delivery or which becomes due thereon
best evidence of such authority is the fact that petitioner accepted the check and
issued the official receipt for the payment. It is, as well, bound by its agents
acknowledgment of receipt of payment
Section 78 of the Insurance Code
An acknowledgment in a policy or contract of insurance of the receipt of
premium is conclusive evidence of its payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not be binding until the premium
is actually paid.
This Section establishes a legal fiction of payment and should be interpreted as
an exception to Section 77
2. NO.
purpose for the other insurance clause is to prevent an increase in the moral
hazard
failure to disclose was not intentional and fraudulent
Section 75
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.
American Home is estopped because its loss adjusters had previous knowledge
of the co-insurers
The loss adjuster, being an employee of petitioner, is deemed a
representative of the latter whose awareness of the other insurance contracts binds
petitioner
no legal and factual basis for the award of P200,000 for loss of profit
no such fraud or bad faith = no moral damages
grant of attorneys fees as part of damages is the exception rather than the rule
award attorneys fees where it deems just and equitable that it be so
granted
reduced to P10,000

Tibay, et. al v Court of Appeals

 GR No. 119655, 24 May 1996
Bellosillo, [J.]

Facts:

1. In January 22 1987, the Petitioner Violeta Tibay (and Nicolas Roralso) obtained a fire
insurance policy for their 2-storey from the Private Respondent Fortune Life Insurance
Co. The said policy covers the period from January 23, 1987 until January 23, 1988 or
one year for P600, 000 and at the agreed premium of P2, 983.50. On January 23 or the
next day, petitioner made a partial payment of the premium with P600.

2. Unfortunately, on March 8 1987, the said building was burned to the ground. It was
only two days after the fire that Petitioner Violeta advanced the full payment of the
policy premium which was accepted by the insurer. On this same day, petitioner likewise
filed the claim that was then referred to the insurer's adjuster. Investigation of the cause
of fire commenced and the petitioner submitted the required proof of loss.

3. Despite that, the private respondent Fortune refused to pay the insurance claim
saying it as not liable due to the non-payment by petitioner of the full amount of the
premium as stated in the policy.

4. The petitioner then brought the matter to the Insurance Commission but nothing
good came out. Hence this case filed.

5. The trial court rule in favor of the petitioner. Upon appeal, the Court of Appeals
reversed the lower court's decision and held that Fortune is not liable but ordered it to
return the premium paid with interest to the petitioner. Hence, this petition for review.

Issue: W/N the partial payment of the premium rendered the insurance policy
ineffective?

YES.
1. Insurance is a contract whereby one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an unknown or contingent event.
The consideration is the premium, which must be paid at the time, way and manner as
stated in the policy, and if not so paid as in this case, the policy is therefore forfeited by
its own terms. In this case, the policy taken out by the petitioner provides for payment of
premium in full. Since the petitioner only made partial payment with the remaining
balance paid only after the fire or peril insured against has occurred, the insurance
contract therefore did not take effect barring the insured from claiming or collecting from
the loss of her building.

2. Under Section 77 of the Insurance Code (Philippine), it provides therein that "An
insurer is entitled to payment of the premium as soon as the thing insured is exposed to
the peril insured against. Notwithstanding any agreement to the contrary, no policy or
contract of insurance issued by an insurance company is valid and binding unless and
until the premium thereof has been paid, except in the case of a life or an industrial life
policy whenever the grace period provision applies." Herein case, the controversy is on
the payment of the premium. It cannot be disputed that premium is the elixir vitae of the
insurance business because the insurer is required by law to maintain a reserve fund to
meet its contingent obligations to the public. Due to this, it is imperative that the
premium is paid fully and promptly. To allow the possibility of paying the premium even
after the peril has ensued will surely undermine the foundation of the insurance
business.

Phoenix

G.R. No. L-25317 August 6, 1979

Lessons Applicable: Estoppel and credit extension (Insurance)
Laws Applicable: Section 77 of the Insurance Code

FACTS:
July 21, 1960: Woodworks, Inc. was issued a fire policy for its building machinery
and equipment by Philippine Phoenix Surety & Insurance Co. for P500K
covering July 21, 1960 to July 21, 1961. Woodworks did not pay the premium
totalling to P10,593.36.
April 19, 1961: It was alleged that Woodworks notified Philippine Phoenix the
cancellation of the Policy so Philippine Phoenix credited P3,110.25 for the unexpired
period of 94 days and demanded in writing the payment of P7,483.11
Woodworks refused stating that it need not pay premium "because the Insurer
did not stand liable for any indemnity during the period the premiums were not
paid."
Philippine Phoenix filed with the CFI to recover its earned premium of P7,483.11
Woodworks: to pay the premium after the issuance of the policy put an
end to the insurance contract and rendered the policy unenforceable
CFI: favored Philippine Phoenix
ISSUE: W/N there was a valid insurance contract despite no premium payment was
paid

HELD: NO. Reversed

Policy provides for pre-payment of premium. To constitute an extension of credit

there must be a clear and express agreement therefor and there nust be acceptance
of the extension - none here
Since the premium had not been paid, the policy must be deemed to have
lapsed.
failure to make a payment of a premium or assessment at the time provided for,
the policy shall become void or forfeited, or the obligation of the insurer shall cease,
or words to like effect, because the contract so prescribes and because such a
 stipulation is a material and essential part of the contract. This is true, for instance,
in the case of life, health and accident, fire and hail insurance policies
Explicit in the Policy itself is plaintiff's agreement to indemnify defendant for loss
by fire only "after payment of premium" Compliance by the insured with the terms of
the contract is a condition precedent to the right of recovery.
The burden is on an insured to keep a policy in force by the payment of
premiums, rather than on the insurer to exert every effort to prevent the insured from
allowing a policy to elapse through a failure to make premium payments.