G.R. No.
L-15895 November 29, 1920 office of the company stating that Herrer desired to withdraw his
RAFAEL ENRIQUEZ, as administrator of the estate of the late Joaquin Ma.
Herrer, plaintiff-appellant, vs. SUN LIFE ASSURANCE COMPANY OF
CANADA, defendant-appellee.
MALCOLM, J.:
This is an action brought by the plaintiff ad administrator of the estate of
the late Joaquin Ma. Herrer to recover from the defendant life insurance
company the sum of pesos 6,000 paid by the deceased for a life annuity.
The trial court gave judgment for the defendant. Plaintiff appeals.
The undisputed facts are these: On September 24, 1917, Joaquin Herrer
made application to the Sun Life Assurance Company of Canada through its
office in Manila for a life annuity. Two days later he paid the sum of P6,000
to the manager of the company's Manila office and was given a receipt
reading as follows:
MANILA, I. F., 26 de septiembre, 1917.
PROVISIONAL RECEIPT Pesos 6,000
Recibi la suma de seis mil pesos de Don Joaquin Herrer de Manila como
prima dela Renta Vitalicia solicitada por dicho Don Joaquin Herrer hoy,
sujeta al examen medico y aprobacion de la Oficina Central de la
Compañia.
The application was immediately forwarded to the head office of the
company at Montreal, Canada. On November 26, 1917, the head office
gave notice of acceptance by cable to Manila. (Whether on the same day
the cable was received notice was sent by the Manila office of Herrer that
the application had been accepted, is a disputed point, which will be
discussed later.) On December 4, 1917, the policy was issued at Montreal.
On December 18, 1917, attorney Aurelio A. Torres wrote to the Manila
application. The following day the local office replied to Mr. Torres, stating
that the policy had been issued, and called attention to the notification of
November 26, 1917. This letter was received by Mr. Torres on the morning
of December 21, 1917. Mr. Herrer died on December 20, 1917.
As above suggested, the issue of fact raised by the evidence is whether
Herrer received notice of acceptance of his application. To resolve this
question, we propose to go directly to the evidence of record.
The chief clerk of the Manila office of the Sun Life Assurance Company of
Canada at the time of the trial testified that he prepared the letter
introduced in evidence as Exhibit 3, of date November 26, 1917, and
handed it to the local manager, Mr. E. E. White, for signature. The witness
admitted on cross-examination that after preparing the letter and giving it
to he manager, he new nothing of what became of it. The local manager,
Mr. White, testified to having received the cablegram accepting the
application of Mr. Herrer from the home office on November 26, 1917. He
said that on the same day he signed a letter notifying Mr. Herrer of this
acceptance. The witness further said that letters, after being signed, were
sent to the chief clerk and placed on the mailing desk for transmission. The
witness could not tell if the letter had every actually been placed in the
mails. Mr. Tuason, who was the chief clerk, on November 26, 1917, was
not called as a witness. For the defense, attorney Manuel Torres testified
to having prepared the will of Joaquin Ma. Herrer, that on this occasion,
Mr. Herrer mentioned his application for a life annuity, and that he said
that the only document relating to the transaction in his possession was
the provisional receipt. Rafael Enriquez, the administrator of the estate,
testified that he had gone through the effects of the deceased and had
found no letter of notification from the insurance company to Mr. Herrer.
Our deduction from the evidence on this issue must be that the letter of
November 26, 1917, notifying Mr. Herrer that his application had been
accepted, was prepared and signed in the local office of the insurance
company, was placed in the ordinary channels for transmission, but as far
as we know, was never actually mailed and thus was never received by the
applicant.
Not forgetting our conclusion of fact, it next becomes necessary to
determine the law which should be applied to the facts. In order to reach
our legal goal, the obvious signposts along the way must be noticed.
Until quite recently, all of the provisions concerning life insurance in the
Philippines were found in the Code of Commerce and the Civil Code. In the
Code of the Commerce, there formerly existed Title VIII of Book III and
Section III of Title III of Book III, which dealt with insurance contracts. In the
Civil Code there formerly existed and presumably still exist, Chapters II and
IV, entitled insurance contracts and life annuities, respectively, of Title XII
of Book IV. On the after July 1, 1915, there was, however, in force the
Insurance Act. No. 2427. Chapter IV of this Act concerns life and health
insurance. The Act expressly repealed Title VIII of Book II and Section III of
Title III of Book III of the code of Commerce. The law of insurance is
consequently now found in the Insurance Act and the Civil Code.
While, as just noticed, the Insurance Act deals with life insurance, it is
silent as to the methods to be followed in order that there may be a
contract of insurance. On the other hand, the Civil Code, in article 1802,
not only describes a contact of life annuity markedly similar to the one we
are considering, but in two other articles, gives strong clues as to the
proper disposition of the case. For instance, article 16 of the Civil Code
provides that "In matters which are governed by special laws, any
deficiency of the latter shall be supplied by the provisions of this Code." On
the supposition, therefore, which is incontestable, that the special law on
the subject of insurance is deficient in enunciating the principles governing
acceptance, the subject-matter of the Civil code, if there be any, would be
controlling. In the Civil Code is found article 1262 providing that "Consent
is shown by the concurrence of offer and acceptance with respect to the
thing and the consideration which are to constitute the contract. An
acceptance made by letter shall not bind the person making the offer
except from the time it came to his knowledge. The contract, in such case,
is presumed to have been entered into at the place where the offer was
made." This latter article is in opposition to the provisions of article 54 of
the Code of Commerce.
If no mistake has been made in announcing the successive steps by which
we reach a conclusion, then the only duty remaining is for the court to
apply the law as it is found. The legislature in its wisdom having enacted a
new law on insurance, and expressly repealed the provisions in the Code of
Commerce on the same subject, and having thus left a void in the
commercial law, it would seem logical to make use of the only pertinent
provision of law found in the Civil code, closely related to the chapter
concerning life annuities.
The Civil Code rule, that an acceptance made by letter shall bind the
person making the offer only from the date it came to his knowledge, may
not be the best expression of modern commercial usage. Still it must be
admitted that its enforcement avoids uncertainty and tends to security.
Not only this, but in order that the principle may not be taken too lightly,
let it be noticed that it is identical with the principles announced by a
considerable number of respectable courts in the United States. The courts
who take this view have expressly held that an acceptance of an offer of
insurance not actually or constructively communicated to the proposer
does not make a contract. Only the mailing of acceptance, it has been said,
completes the contract of insurance, as the locus poenitentiae is ended
when the acceptance has passed beyond the control of the party.
In resume, therefore, the law applicable to the case is found to be the
second paragraph of article 1262 of the Civil Code providing that an
acceptance made by letter shall not bind the person making the offer
except from the time it came to his knowledge. The pertinent fact is, that
according to the provisional receipt, three things had to be accomplished
by the insurance company before there was a contract: (1) There had to be
a medical examination of the applicant; (2) there had to be approval of the
application by the head office of the company; and (3) this approval had in
some way to be communicated by the company to the applicant. The
further admitted facts are that the head office in Montreal did accept the
application, did cable the Manila office to that effect, did actually issue the
policy and did, through its agent in Manila, actually write the letter of
notification and place it in the usual channels for transmission to the
addressee. The fact as to the letter of notification thus fails to concur with
the essential elements of the general rule pertaining to the mailing and
delivery of mail matter as announced by the American courts, namely,
when a letter or other mail matter is addressed and mailed with postage
prepaid there is a rebuttable presumption of fact that it was received by
the addressee as soon as it could have been transmitted to him in the
ordinary course of the mails. But if any one of these elemental facts fails to
appear, it is fatal to the presumption. For instance, a letter will not be
presumed to have been received by the addressee unless it is shown that it
was deposited in the post-office, properly addressed and stamped.
We hold that the contract for a life annuity in the case at bar was not
perfected because it has not been proved satisfactorily that the
acceptance of the application ever came to the knowledge of the
applicant.
Judgment is reversed, and the plaintiff shall have and recover from the
defendant the sum of P6,000 with legal interest from November 20, 1918,
until paid, without special finding as to costs in either instance. So ordered.
G.R. No. L-31845 April 30, 1979
GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner, vs. HONORABLE
COURT OF APPEALS, respondents.
G.R. No. L-31878 April 30, 1979
LAPULAPU D. MONDRAGON, petitioner, vs. HON. COURT OF APPEALS
and NGO HING, respondents.
DE CASTRO, J.:
The two above-entitled cases were ordered consolidated by the Resolution
of this Court dated April 29, 1970, (Rollo, No. L-31878, p. 58), because the
petitioners in both cases seek similar relief, through these petitions for
certiorari by way of appeal, from the amended decision of respondent
Court of Appeals which affirmed in toto the decision of the Court of First
Instance of Cebu, ordering “the defendants (herein petitioners Great
Pacific Life Assurance Company and Mondragon) jointly and severally to
pay plaintiff (herein private respondent Ngo Hing) the amount of
P50,000.00 with interest at 6% from the date of the filing of the complaint,
and the sum of P1,077.75, without interest.
It appears that on March 14, 1957, private respondent Ngo Hing filed an
application with the Great Pacific Life Assurance Company (hereinafter
referred to as Pacific Life) for a twenty-year endowment policy in the
amount of P50,000.00 on the life of his one-year old daughter Helen Go.
Said respondent supplied the essential data which petitioner Lapulapu D.
Mondragon, Branch Manager of the Pacific Life in Cebu City wrote on the
corresponding form in his own handwriting (Exhibit I-M). Mondragon
finally type-wrote the data on the application form which was signed by
private respondent Ngo Hing. The latter paid the annual premium the sum
of P1,077.75 going over to the Company, but he retained the amount of
P1,317.00 as his commission for being a duly authorized agent of Pacific
Life. Upon the payment of the insurance premium, the binding deposit
receipt (Exhibit E) was issued to private respondent Ngo Hing. Likewise,
petitioner Mondragon handwrote at the bottom of the back page of the
application form his strong recommendation for the approval of the
insurance application. Then on April 30, 1957, Mondragon received a letter
from Pacific Life disapproving the insurance application (Exhibit 3-M). The
letter stated that the said life insurance application for 20-year
endowment plan is not available for minors below seven years old, but
Pacific Life can consider the same under the Juvenile Triple Action Plan,
and advised that if the offer is acceptable, the Juvenile Non-Medical
Declaration be sent to the company.
The non-acceptance of the insurance plan by Pacific Life was allegedly not
communicated by petitioner Mondragon to private respondent Ngo Hing.
Instead, on May 6, 1957, Mondragon wrote back Pacific Life again strongly
recommending the approval of the 20-year endowment insurance plan to
children, pointing out that since 1954 the customers, especially the
Chinese, were asking for such coverage.
It was when things were in such state that on May 28, 1957 Helen Go died
of influenza with complication of bronchopneumonia. Thereupon, private
respondent sought the payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for the recovery of the same
before the Court of First Instance of Cebu, which rendered the adverse
decision as earlier referred to against both petitioners.
The decisive issues in these cases are: (1) whether the binding deposit
receipt (Exhibit E) constituted a temporary contract of the life insurance in
question; and (2) whether private respondent Ngo Hing concealed the
state of health and physical condition of Helen Go, which rendered void
the aforesaid Exhibit E.
1. At the back of Exhibit E are condition precedents required before a
deposit is considered a BINDING RECEIPT. These conditions state that:
A. If the Company or its agent, shan have received the premium deposit …
and the insurance application, ON or PRIOR to the date of medical
examination … said insurance shall be in force and in effect from the date
of such medical examination, for such period as is covered by the deposit
…, PROVIDED the company shall be satisfied that on said date the applicant
was insurable on standard rates under its rule for the amount of insurance
and the kind of policy requested in the application.
D. If the Company does not accept the application on standard rate for the
amount of insurance and/or the kind of policy requested in the application
but issue, or offers to issue a policy for a different plan and/or amount …,
the insurance shall not be in force and in effect until the applicant shall
have accepted the policy as issued or offered by the Company and shall
have paid the full premium thereof. If the applicant does not accept the
policy, the deposit shall be refunded.
E. If the applicant shall not have been insurable under Condition A above,
and the Company declines to approve the application the insurance
applied for shall not have been in force at any time and the sum paid be
returned to the applicant upon the surrender of this receipt. (Emphasis
Ours).
The aforequoted provisions printed on Exhibit E show that the binding
deposit receipt is intended to be merely a provisional or temporary
insurance contract and only upon compliance of the following conditions:
(1) that the company shall be satisfied that the applicant was insurable on
standard rates; (2) that if the company does not accept the application and
offers to issue a policy for a different plan, the insurance contract shall not
be binding until the applicant accepts the policy offered; otherwise, the
deposit shall be refunded; and (3) that if the applicant is not insurable
according to the standard rates, and the company disapproves the
application, the insurance applied for shall not be in force at any time, and
the premium paid shall be returned to the applicant.
Clearly implied from the aforesaid conditions is that the binding deposit
receipt in question is merely an acknowledgment, on behalf of the
company, that the latter’s branch office had received from the applicant
the insurance premium and had accepted the application subject for
processing by the insurance company; and that the latter will either
approve or reject the same on the basis of whether or not the applicant is
“insurable on standard rates.” Since petitioner Pacific Life disapproved the
insurance application of respondent Ngo Hing, the binding deposit receipt
in question had never become in force at any time.
Upon this premise, the binding deposit receipt (Exhibit E) is, manifestly,
merely conditional and does not insure outright. As held by this Court,
where an agreement is made between the applicant and the agent, no
liability shall attach until the principal approves the risk and a receipt is
given by the agent. The acceptance is merely conditional and is
subordinated to the act of the company in approving or rejecting the
application. Thus, in life insurance, a “binding slip” or “binding receipt”
does not insure by itself (De Lim vs. Sun Life Assurance Company of
Canada, 41 Phil. 264).
It bears repeating that through the intra-company communication of April
30, 1957 (Exhibit 3-M), Pacific Life disapproved the insurance application in
question on the ground that it is not offering the twenty-year endowment
insurance policy to children less than seven years of age. What it offered
instead is another plan known as the Juvenile Triple Action, which private
respondent failed to accept. In the absence of a meeting of the minds
between petitioner Pacific Life and private respondent Ngo Hing over the
20-year endowment life insurance in the amount of P50,000.00 in favor of
the latter’s one-year old daughter, and with the non-compliance of the
abovequoted conditions stated in the disputed binding deposit receipt,
there could have been no insurance contract duly perfected between thenl
Accordingly, the deposit paid by private respondent shall have to be
refunded by Pacific Life.
As held in De Lim vs. Sun Life Assurance Company of Canada, supra, “a
contract of insurance, like other contracts, must be assented to by both
parties either in person or by their agents … The contract, to be binding
from the date of the application, must have been a completed contract,
one that leaves nothing to be done, nothing to be completed, nothing to
be passed upon, or determined, before it shall take effect. There can be no
contract of insurance unless the minds of the parties have met in
agreement.”
We are not impressed with private respondent’s contention that failure of
petitioner Mondragon to communicate to him the rejection of the
insurance application would not have any adverse effect on the allegedly
perfected temporary contract (Respondent’s Brief, pp. 13-14). In this first
place, there was no contract perfected between the parties who had no
meeting of their minds. Private respondent, being an authorized insurance
agent of Pacific Life at Cebu branch office, is indubitably aware that said
company does not offer the life insurance applied for. When he filed the
insurance application in dispute, private respondent was, therefore, only
taking the chance that Pacific Life will approve the recommendation of
Mondragon for the acceptance and approval of the application in question
along with his proposal that the insurance company starts to offer the 20-
year endowment insurance plan for children less than seven years.
Nonetheless, the record discloses that Pacific Life had rejected the
proposal and recommendation. Secondly, having an insurable interest on
the life of his one-year old daughter, aside from being an insurance agent
and an offense associate of petitioner Mondragon, private respondent Ngo
Hing must have known and followed the progress on the processing of
such application and could not pretend ignorance of the Company’s
rejection of the 20-year endowment life insurance application.
At this juncture, We find it fit to quote with approval, the very apt
observation of then Appellate Associate Justice Ruperto G. Martin who
later came up to this Court, from his dissenting opinion to the amended
decision of the respondent court which completely reversed the original
decision, the following:
Of course, there is the insinuation that neither the memorandum of
rejection (Exhibit 3-M) nor the reply thereto of appellant Mondragon
reiterating the desire for applicant’s father to have the application
considered as one for a 20-year endowment plan was ever duly
communicated to Ngo Hing, father of the minor applicant. I am not quite
convinced that this was so. Ngo Hing, as father of the applicant herself,
was precisely the “underwriter who wrote this case” (Exhibit H-1). The
unchallenged statement of appellant Mondragon in his letter of May 6,
1957) (Exhibit 4-M), specifically admits that said Ngo Hing was “our
associate” and that it was the latter who “insisted that the plan be placed
on the 20-year endowment plan.” Under these circumstances, it is
inconceivable that the progress in the processing of the application was
not brought home to his knowledge. He must have been duly apprised of
the rejection of the application for a 20-year endowment plan otherwise
Mondragon would not have asserted that it was Ngo Hing himself who
insisted on the application as originally filed, thereby implicitly declining
the offer to consider the application under the Juvenile Triple Action Plan.
Besides, the associate of Mondragon that he was, Ngo Hing should only be
presumed to know what kind of policies are available in the company for
minors below 7 years old. What he and Mondragon were apparently trying
to do in the premises was merely to prod the company into going into the
business of issuing endowment policies for minors just as other insurance
companies allegedly do. Until such a definite policy is however, adopted by
the company, it can hardly be said that it could have been bound at all
under the binding slip for a plan of insurance that it could not have, by
then issued at all. (Amended Decision, Rollo, pp- 52-53).
2. Relative to the second issue of alleged concealment. this Court is of the
firm belief that private respondent had deliberately concealed the state of
health and physical condition of his daughter Helen Go. When private
respondent supplied the required essential data for the insurance
application form, he was fully aware that his one-year old daughter is
typically a mongoloid child. Such a congenital physical defect could never
be ensconced nor disguised. Nonetheless, private respondent, in apparent
bad faith, withheld the fact material to the risk to be assumed by the
insurance company. As an insurance agent of Pacific Life, he ought to
know, as he surely must have known, his duty and responsibility to such a
material fact. Had he diamond said significant fact in the insurance
application form Pacific Life would have verified the same and would have
had no choice but to disapprove the application outright.
The contract of insurance is one of perfect good faith (uberrima fides
meaning good faith, absolute and perfect candor or openness and honesty;
the absence of any concealment or demotion, however slight [Black’s Law
Dictionary, 2nd Edition], not for the alone but equally so for the insurer
(Fieldman’s Insurance Co., Inc. vs. Vda de Songco, 25 SCRA 70).
Concealment is a neglect to communicate that which a party knows and
ought to communicate (Section 25, Act No. 2427). Whether intentional or
unintentional the concealment entitles the insurer to rescind the contract
of insurance (Section 26, Id.: Yu Pang Cheng vs. Court of Appeals, et al, 105
Phil 930; Saturnino vs. Philippine American Life Insurance Company, 7
SCRA 316). Private respondent appears guilty thereof.
We are thus constrained to hold that no insurance contract was perfected
between the parties with the noncompliance of the conditions provided in
the binding receipt, and concealment, as legally defined, having been
comraitted by herein private respondent.
WHEREFORE, the decision appealed from is hereby SET ASIDE, and in lieu
thereof, one is hereby entered absolving petitioners Lapulapu D.
Mondragon and Great Pacific Life Assurance Company from their civil
liabilities as found by respondent Court and ordering the aforesaid
insurance company to reimburse the amount of P1,077.75, without
interest, to private respondent, Ngo Hing. Costs against private
respondent.
SO ORDERED.
G.R. No. L-109937 March 21, 1994
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF
APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented by
CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION INSURANCE
POOL, respondents.
QUIASON, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules
of Court to reverse and set aside the decision of the Court of Appeals in
CA-G.R CV No. 26434 and its resolution denying reconsideration thereof.
We affirm the decision of the Court of Appeals with modification.
I
In May 1987, Juan B. Dans, together with his wife Candida, his son and
daughter-in-law, applied for a loan of P500,000.00 with the Development
Bank of the Philippines (DBP), Basilan Branch. As the principal mortgagor,
Dans, then 76 years of age, was advised by DBP to obtain a mortgage
redemption insurance (MRI) with the DBP Mortgage Redemption
Insurance Pool (DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by DBP on
August 4, 1987 and released on August 11, 1987. From the proceeds of the
loan, DBP deducted the amount of P1,476.00 as payment for the MRI
premium. On August 15, 1987, Dans accomplished and submitted the "MRI
Application for Insurance" and the "Health Statement for DBP MRI Pool."
On August 20, 1987, the MRI premium of Dans, less the DBP service fee of
10 percent, was credited by DBP to the savings account of the DBP MRI
Pool. Accordingly, the DBP MRI Pool was advised of the credit.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice,
relayed this information to the DBP MRI Pool. On September 23, 1987, the
DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage,
being over the acceptance age limit of 60 years at the time of application.
On October 21, 1987, DBP apprised Candida Dans of the disapproval of her
late husband's MRI application. The DBP offered to refund the premium of
P1,476.00 which the deceased had paid, but Candida Dans refused to
accept the same, demanding payment of the face value of the MRI or an
amount equivalent to the loan. She, likewise, refused to accept an ex gratia
settlement of P30,000.00, which the DBP later offered.
On February 10, 1989, respondent Estate, through Candida Dans as
administratrix, filed a complaint with the Regional Trial Court, Branch I,
Basilan, against DBP and the insurance pool for "Collection of Sum of
Money with Damages." Respondent Estate alleged that Dans became
insured by the DBP MRI Pool when DBP, with full knowledge of Dans' age
at the time of application, required him to apply for MRI, and later
collected the insurance premium thereon. Respondent Estate therefore
prayed: (1) that the sum of P139,500.00, which it paid under protest for
the loan, be reimbursed; (2) that the mortgage debt of the deceased be
declared fully paid; and (3) that damages be awarded.
The DBP and the DBP MRI Pool separately filed their answers, with the
former asserting a cross-claim against the latter.
At the pre-trial, DBP and the DBP MRI Pool admitted all the documents and
exhibits submitted by respondent Estate. As a result of these admissions,
the trial court narrowed down the issues and, without opposition from the
parties, found the case ripe for summary judgment. Consequently, the trial
court ordered the parties to submit their respective position papers and
documentary evidence, which may serve as basis for the judgment.
On March 10, 1990, the trial court rendered a decision in favor of
respondent Estate and against DBP. The DBP MRI Pool, however, was
absolved from liability, after the trial court found no privity of contract
between it and the deceased. The trial court declared DBP in estoppel for
having led Dans into applying for MRI and actually collecting the premium
and the service fee, despite knowledge of his age ineligibility. The
dispositive portion of the decision read as follows:
WHEREFORE, in view of the foregoing consideration and in the furtherance
of justice and equity, the Court finds judgment for the plaintiff and against
Defendant DBP, ordering the latter:
1. To return and reimburse plaintiff the amount of P139,500.00 plus
legal rate of interest as amortization payment paid under protest;
2. To consider the mortgage loan of P300,000.00 including all
interest accumulated or otherwise to have been settled, satisfied or set-off
by virtue of the insurance coverage of the late Juan B. Dans;
3. To pay plaintiff the amount of P10,000.00 as attorney's fees;
4. To pay plaintiff in the amount of P10,000.00 as costs of litigation
and other expenses, and other relief just and equitable.
The Counterclaims of Defendants DBP and DBP MRI POOL are hereby
dismissed. The Cross-claim of Defendant DBP is likewise dismissed.
The DBP appealed to the Court of Appeals. In a decision dated September
7, 1992, the appellate court affirmed in toto the decision of the trial court.
The DBP's motion for reconsideration was denied in a resolution dated
April 20, 1993.
Hence, this recourse.
II
When Dans applied for MRI, he filled up and personally signed a "Health
Statement for DBP MRI Pool" (Exh. "5-Bank") with the following
declaration:
I hereby declare and agree that all the statements and answers contained
herein are true, complete and correct to the best of my knowledge and
belief and form part of my application for insurance. It is understood and
agreed that no insurance coverage shall be effected unless and until this
application is approved and the full premium is paid during my continued
good health (Records, p. 40).
Under the aforementioned provisions, the MRI coverage shall take effect:
(1) when the application shall be approved by the insurance pool; and (2)
when the full premium is paid during the continued good health of the
applicant. These two conditions, being joined conjunctively, must concur.
Undisputably, the power to approve MRI applications is lodged with the
DBP MRI Pool. The pool, however, did not approve the application of Dans.
There is also no showing that it accepted the sum of P1,476.00, which DBP
credited to its account with full knowledge that it was payment for Dan's
premium. There was, as a result, no perfected contract of insurance;
hence, the DBP MRI Pool cannot be held liable on a contract that does not
exist.
The liability of DBP is another matter.
It was DBP, as a matter of policy and practice, that required Dans, the
borrower, to secure MRI coverage. Instead of allowing Dans to look for his
own insurance carrier or some other form of insurance policy, DBP
compelled him to apply with the DBP MRI Pool for MRI coverage. When
Dan's loan was released on August 11, 1987, DBP already deducted from
the proceeds thereof the MRI premium. Four days latter, DBP made Dans
fill up and sign his application for MRI, as well as his health statement. The
DBP later submitted both the application form and health statement to the
DBP MRI Pool at the DBP Main Building, Makati Metro Manila. As service
fee, DBP deducted 10 percent of the premium collected by it from Dans.
In dealing with Dans, DBP was wearing two legal hats: the first as a lender,
and the second as an insurance agent.
As an insurance agent, DBP made Dans go through the motion of applying
for said insurance, thereby leading him and his family to believe that they
had already fulfilled all the requirements for the MRI and that the issuance
of their policy was forthcoming. Apparently, DBP had full knowledge that
Dan's application was never going to be approved. The maximum age for
MRI acceptance is 60 years as clearly and specifically provided in Article 1
of the Group Mortgage Redemption Insurance Policy signed in 1984 by all
the insurance companies concerned (Exh. "1-Pool").
Under Article 1987 of the Civil Code of the Philippines, "the agent who acts
as such is not personally liable to the party with whom he contracts, unless
he expressly binds himself or exceeds the limits of his authority without
giving such party sufficient notice of his powers."
The DBP is not authorized to accept applications for MRI when its clients
are more than 60 years of age (Exh. "1-Pool"). Knowing all the while that
Dans was ineligible for MRI coverage because of his advanced age, DBP
exceeded the scope of its authority when it accepted Dan's application for
MRI by collecting the insurance premium, and deducting its agent's
commission and service fee.
The liability of an agent who exceeds the scope of his authority depends
upon whether the third person is aware of the limits of the agent's powers.
There is no showing that Dans knew of the limitation on DBP's authority to
solicit applications for MRI.
If the third person dealing with an agent is unaware of the limits of the
authority conferred by the principal on the agent and he (third person) has
been deceived by the non-disclosure thereof by the agent, then the latter
is liable for damages to him (V Tolentino, Commentaries and Jurisprudence
on the Civil Code of the Philippines, p. 422 [1992], citing Sentencia [Cuba]
of September 25, 1907). The rule that the agent is liable when he acts
without authority is founded upon the supposition that there has been
some wrong or omission on his part either in misrepresenting, or in
affirming, or concealing the authority under which he assumes to act
(Francisco, V., Agency 307 [1952], citing Hall v. Lauderdale, 46 N.Y. 70, 75).
Inasmuch as the non-disclosure of the limits of the agency carries with it
the implication that a deception was perpetrated on the unsuspecting
client, the provisions of Articles 19, 20 and 21 of the Civil Code of the
Philippines come into play.
Article 19 provides:
Every person must, in the exercise of his rights and in the performance of
his duties, act with justice give everyone his due and observe honesty and
good faith.
Article 20 provides:
Every person who, contrary to law, willfully or negligently causes damage
to another, shall indemnify the latter for the same.
Article 21 provides:
Any person, who willfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the
latter for the damage.
The DBP's liability, however, cannot be for the entire value of the
insurance policy. To assume that were it not for DBP's concealment of the
limits of its authority, Dans would have secured an MRI from another
insurance company, and therefore would have been fully insured by the
time he died, is highly speculative. Considering his advanced age, there is
no absolute certainty that Dans could obtain an insurance coverage from
another company. It must also be noted that Dans died almost
immediately, i.e., on the nineteenth day after applying for the MRI, and on
the twenty-third day from the date of release of his loan.
One is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved (Civil Code of the Philippines, Art.
2199). Damages, to be recoverable, must not only be capable of proof, but
must be actually proved with a reasonable degree of certainty
(Refractories Corporation v. Intermediate Appellate Court, 176 SCRA 539
[1989]; Choa Tek Hee v. Philippine Publishing Co., 34 Phil. 447 [1916]).
Speculative damages are too remote to be included in an accurate
estimate of damages.
While Dans is not entitled to compensatory damages, he is entitled to
moral damages. No proof of pecuniary loss is required in the assessment of
said kind of damages (Civil Code of Philippines, Art. 2216). The same may
be recovered in acts referred to in Article 2219 of the Civil Code.
The assessment of moral damages is left to the discretion of the court
according to the circumstances of each case (Civil Code of the Philippines,
Art. 2216). Considering that DBP had offered to pay P30,000.00 to
respondent Estate in ex gratia settlement of its claim and that DBP's non-
disclosure of the limits of its authority amounted to a deception to its
client, an award of moral damages in the amount of P50,000.00 would be
reasonable.
The award of attorney's fees is also just and equitable under the
circumstances (Civil Code of the Philippines, Article 2208 [11]).
WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV
No. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to REIMBURSE
respondent Estate of Juan B. Dans the amount of P1,476.00 with legal
interest from the date of the filing of the complaint until fully paid; and (2)
to PAY said Estate the amount of Fifty Thousand Pesos (P50,000.00) as
moral damages and the amount of Ten Thousand Pesos (P10,000.00) as
attorney's fees. With costs against petitioner.
SO ORDERED.
[G.R. No. 112329. January 28, 2000]
VIRGINIA A. PEREZ, petitioner, vs. COURT OF APPEALS and BF LIFEMAN
INSURANCE CORPORATION, respondents.
YNARES-SANTIAGO, J.:
A contract of insurance, like all other contracts, must be assented to by
both parties, either in person or through their agents and so long as an
application for insurance has not been either accepted or rejected, it is
merely a proposal or an offer to make a contract.
Petitioner Virginia A. Perez assails the decision of respondent Court of
Appeals dated July 9, 1993 in CA-G.R. CV 35529 entitled, "BF Lifeman
Insurance Corporations, Plaintiff-Appellant versus Virginia A. Perez,
Defendant-Appellee," which declared Insurance Policy 056300 for
P50,000.00 issued by private respondent corporation in favor of the
deceased Primitivo B. Perez, null and void and rescinded, thereby reversing
the decision rendered by the Regional Trial Court of Manila, Branch XVI.
The facts of the case as summarized by respondent Court of Appeals are
not in dispute.
Primitivo B. Perez had been insured with the BF Lifeman Insurance
Corporation since 1980 for P20,000.00. Sometime in October 1987, an
agent of the insurance corporation, Rodolfo Lalog, visited Perez in
Guinayangan, Quezon and convinced him to apply for additional insurance
coverage of P50,000.00, to avail of the ongoing promotional discount of
P400.00 if the premium were paid annually.
On October 20, 1987, Primitivo B. Perez accomplished an application form
for the additional insurance coverage of P50,000.00. On the same day,
petitioner Virginia A. Perez, Primitivos wife, paid P2,075.00 to Lalog. The
receipt issued by Lalog indicated the amount received was a "deposit."[1]
Unfortunately, Lalog lost the application form accomplished by Perez and
so on October 28, 1987, he asked the latter to fill up another application
form.[2] On November 1, 1987, Perez was made to undergo the required
medical examination, which he passed.
Pursuant to the established procedure of the company, Lalog forwarded
the application for additional insurance of Perez, together with all its
supporting papers, to the office of BF Lifeman Insurance Corporation at
Gumaca, Quezon which office was supposed to forward the papers to the
Manila office.
On November 25, 1987, Perez died in an accident. He was riding in a banca
which capsized during a storm. At the time of his death, his application
papers for the additional insurance of P50,000.00 were still with the
Gumaca office. Lalog testified that when he went to follow up the papers,
he found them still in the Gumaca office and so he personally brought the
papers to the Manila office of BF Lifeman Insurance Corporation. It was
only on November 27, 1987 that said papers were received in Manila.
Without knowing that Perez died on November 25, 1987, BF Lifeman
Insurance Corporation approved the application and issued the
corresponding policy for the P50,000.00 on December 2, 1987.[4] Ncm
Petitioner Virginia Perez went to Manila to claim the benefits under the
insurance policies of the deceased. She was paid P40,000.00 under the first
insurance policy for P20,000.00 (double indemnity in case of accident) but
the insurance company refused to pay the claim under the additional
policy coverage of P50,000.00, the proceeds of which amount to
P150,000.00 in view of a triple indemnity rider on the insurance policy. In
its letter of January 29, 1988 to Virginia A. Perez, the insurance company
maintained that the insurance for P50,000.00 had not been perfected at
the time of the death of Primitivo Perez. Consequently, the insurance
company refunded the amount of P2,075.00 which Virginia Perez had paid.
On September 21, 1990, private respondent BF Lifeman Insurance
Corporation filed a complaint against Virginia A. Perez seeking the
rescission and declaration of nullity of the insurance contract in question.
Petitioner Virginia A. Perez, on the other hand, averred that the deceased
had fulfilled all his prestations under the contract and all the elements of a
valid contract are present. She then filed a counterclaim against private
respondent for the collection of P150,000.00 as actual damages,
P100,000.00 as exemplary damages, P30,000.00 as attorneys fees and
P10,000.00 as expenses for litigation.
On October 25, 1991, the trial court rendered a decision in favor of
petitioner, the dispositive portion of which reads as follows:
WHEREFORE PREMISES CONSIDERED, judgment is hereby rendered in
favor of defendant Virginia A. Perez, ordering the plaintiff BF Lifeman
Insurance Corporation to pay to her the face value of BF Lifeman Insurance
Policy No. 056300, plus double indemnity under the SARDI or in the total
amount of P150,000.00 (any refund made and/or premium deficiency to
be deducted therefrom).
SO ORDERED.
The trial court, in ruling for petitioner, held that the premium for the
additional insurance of P50,000.00 had been fully paid and even if the sum
of P2,075.00 were to be considered merely as partial payment, the same
does not affect the validity of the policy. The trial court further stated that
the deceased had fully complied with the requirements of the insurance
company. He paid, signed the application form and passed the medical
examination. He should not be made to suffer the subsequent delay in the
transmittal of his application form to private respondents head office since of the Civil Code, there is no contract unless the following requisites
these were no longer within his control. concur:

The Court of Appeals, however, reversed the decision of the trial court (1).......Consent of the contracting parties;
saying that the insurance contract for P50,000.00 could not have been
perfected since at the time that the policy was issued, Primitivo was (2).......Object certain which is the subject matter of the contract;
already dead. Citing the provision in the application form signed by
(3).......Cause of the obligation which is established.
Primitivo which states that: Ncmmis
Consent must be manifested by the meeting of the offer and the
"x x x there shall be no contract of insurance unless and until a policy is
acceptance upon the thing and the cause which are to constitute the
issued on this application and that the policy shall not take effect until the
contract. The offer must be certain and the acceptance absolute.
first premium has been paid and the policy has been delivered to and
accepted by me/us in person while I/we, am/are in good health" When Primitivo filed an application for insurance, paid P2,075.00 and
submitted the results of his medical examination, his application was
the Court of Appeals held that the contract of insurance had to be
subject to the acceptance of private respondent BF Lifeman Insurance
assented to by both parties and so long as the application for insurance has
Corporation. The perfection of the contract of insurance between the
not been either accepted or rejected, it is merely an offer or proposal to
deceased and respondent corporation was further conditioned upon
make a contract.
compliance with the following requisites stated in the application form:
Petitioners motion for reconsideration having been denied by respondent
"there shall be no contract of insurance unless and until a policy is issued
court, the instant petition for certiorari was filed on the ground that there
on this application and that the said policy shall not take effect until the
was a consummated contract of insurance between the deceased and BF
premium has been paid and the policy delivered to and accepted by me/us
Lifeman Insurance Corporation and that the condition that the policy
in person while I/We, am/are in good health."[9] Scnc m
issued by the corporation be delivered and received by the applicant in
good health, is potestative, being dependent upon the will of the insurance The assent of private respondent BF Lifeman Insurance Corporation
company, and is therefore null and void. therefore was not given when it merely received the application form and
all the requisite supporting papers of the applicant. Its assent was given
The petition is bereft of merit.
when it issues a corresponding policy to the applicant. Under the
Insurance is a contract whereby, for a stipulated consideration, one party abovementioned provision, it is only when the applicant pays the premium
undertakes to compensate the other for loss on a specified subject by and receives and accepts the policy while he is in good health that the
specified perils.[7] A contract, on the other hand, is a meeting of the minds contract of insurance is deemed to have been perfected.
between two persons whereby one binds himself, with respect to the
It is not disputed, however, that when Primitivo died on November 25,
other to give something or to render some service.[8] Under Article 1318
1987, his application papers for additional insurance coverage were still
with the branch office of respondent corporation in Gumaca and it was
only two days later, or on November 27, 1987, when Lalog personally
delivered the application papers to the head office in Manila.
Consequently, there was absolutely no way the acceptance of the
application could have been communicated to the applicant for the latter
to accept inasmuch as the applicant at the time was already dead. In the
case of Enriquez vs. Sun Life Assurance Co. of Canada,[10] recovery on the
life insurance of the deceased was disallowed on the ground that the
contract for annuity was not perfected since it had not been proved
satisfactorily that the acceptance of the application ever reached the
knowledge of the applicant.
Petitioner insists that the condition imposed by respondent corporation
that a policy must have been delivered to and accepted by the proposed
insured in good health is potestative being dependent upon the will of the
corporation and is therefore null and void.
We do not agree.
A potestative condition depends upon the exclusive will of one of the
parties. For this reason, it is considered void. Article 1182 of the New Civil
Code states: When the fulfillment of the condition depends upon the sole
will of the debtor, the conditional obligation shall be void.
In the case at bar, the following conditions were imposed by the
respondent company for the perfection of the contract of insurance:
(a).......a policy must have been issued;
(b).......the premiums paid; and
(c).......the policy must have been delivered to and accepted by the
applicant while he is in good health.
The condition imposed by the corporation that the policy must have been
delivered to and accepted by the applicant while he is in good health can
hardly be considered as a potestative or facultative condition. On the
contrary, the health of the applicant at the time of the delivery of the
policy is beyond the control or will of the insurance company. Rather, the
condition is a suspensive one whereby the acquisition of rights depends
upon the happening of an event which constitutes the condition. In this
case, the suspensive condition was the policy must have been delivered
and accepted by the applicant while he is in good health. There was non-
fulfillment of the condition, however, inasmuch as the applicant was
already dead at the time the policy was issued. Hence, the non-fulfillment
of the condition resulted in the non-perfection of the contract. Sdaa miso
As stated above, a contract of insurance, like other contracts, must be
assented to by both parties either in person or by their agents. So long as
an application for insurance has not been either accepted or rejected, it is
merely an offer or proposal to make a contract. The contract, to be binding
from the date of application, must have been a completed contract, one
that leaves nothing to be done, nothing to be completed, nothing to be
passed upon, or determined, before it shall take effect. There can be no
contract of insurance unless the minds of the parties have met in
agreement.
Prescinding from the foregoing, respondent corporation cannot be held
liable for gross negligence. It should be noted that an application is a mere
offer which requires the overt act of the insurer for it to ripen into a
contract. Delay in acting on the application does not constitute acceptance
even though the insured has forwarded his first premium with his
application. The corporation may not be penalized for the delay in the
processing of the application papers. Moreover, while it may have taken
some time for the application papers to reach the main office, in the case
at bar, the same was acted upon less than a week after it was received.
The processing of applications by respondent corporation normally takes
two to three weeks, the longest being a month.[12] In this case, however,
the requisite medical examination was undergone by the deceased on
November 1, 1987; the application papers were forwarded to the head
office on November 27, 1987; and the policy was issued on December 2,
1987. Under these circumstances, we hold that the delay could not be
deemed unreasonable so as to constitute gross negligence.

A final note. It has not escaped our notice that the Court of Appeals
declared Insurance Policy 056300 for P50,000.00 null and void and
rescinded. The Court of Appeals corrected this in its Resolution of the
motion for reconsideration filed by petitioner, thus:

"Anent the appearance of the word rescinded in the dispositive portion of

the decision, to which defendant-appellee attaches undue significance and
makes capital of, it is clear that the use of the words and rescinded is, as it
is hereby declared, a superfluity. It is apparent from the context of the
decision that the insurance policy in question was found null and void, and
did not have to be rescinded."

True, rescission presupposes the existence of a valid contract. A contract

which is null and void is no contract at all and hence could not be the
subject of rescission.

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

No. 35529 is AFFIRMED insofar as it declared Insurance Policy No. 056300
for P50,000.00 issued by BF Lifeman Insurance Corporation of no force and
effect and hence null and void. No costs.

SO ORDERED.