Enriquez vs.
Sun Life Assurance Company of is identical with the principles announced by a
Canada [GR 15895, 29 November 1920] En Banc,
Malcolm (J): 4 concur, 1 dissents
Facts: On 24 September 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. The application was immediately
forwarded to the head office of the company at
Montreal, Canada. On 26 November 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 to Herrer that the
application had been accepted, is a disputed point.)
On 4 December 1917, the policy was issued at
Montreal. On 18 December 1917, attorney Aurelio A.
Torres wrote to the Manila office of the company
stating that Herrer desired to withdraw his 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 26 November 1917. This
letter was received by Mr. Torres on the morning of 21
December 1917. Mr. Herrer died on 20 December
1917. An action was brought by Rafaek Enriquez as
administrator of the estate of the late Joaquin Ma.
Herrer to recover from Sun Life Assurance Company
of Canada the sum of P6,000 paid by the deceased
for a life annuity. The trial court gave judgment for
Sun Life. Enriquez appealed.
Issue: Whether Herrer received notice of acceptance
of his application, to hold that the contract for a life
annuity was perfected.
Held: NO. The letter of 26 November 1917, notifying
Mr. Ferrer 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 was never actually
mailed and thus was never received by the applicant.
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, it
DBP v CA
considerable number of respectable, courts in the
United States. The courts who take this view have
Facts: In May 1987, Juan B. Dans, together with his
expressly held that an acceptance of an offer of
wife Candida, his son and daughter-in-law, applied for
insurance not actually or constructively communicated
a loan of P500,000.00 with the Development Bank of
to the proposer does not make a contract. Only the
the Philippines (DBP), Basilan Branch. As the
mailing of acceptance, it has been said, completes the
principal mortgagor, Dans, then 76 years of age, was
contract of insurance, as the locus poienitentise is
advised by DBP to obtain a mortgage redemption
ended when the acceptance has passed beyond the
insurance (MRI) with the DBP Mortgage Redemption
control of the party. In resume, therefore, the law
Insurance Pool (DBP MRI Pool). A loan, in the
applicable to the case is found to be the second
reduced amount of P300,000.00, was approved by
paragraph of article 1262 of the Civil Code providing
DBP on 4 August 1987 and released on 11 August
that an acceptance made by letter shall not bind the
1987. From the proceeds of the loan, DBP deducted
person making the offer except from the time it came
the amount of P1,476.00 as payment for the MRI
to his knowledge. The pertinent fact is, that according
premium. On 15 August 1987, Dans accomplished
to the provisional receipt, three things had to be
and submitted the "MRI Application for Insurance" and
accomplished by the insurance company before there
the "Health Statement for DBP MRI Pool." On 20
was a contract: (1) There had to be a medical
August 1987, the MRI premium of Dans, less the DBP
examination of the applicant; (2) there had to be
service fee of 10%, was credited by DBP to the
approval of the application by the head office of the
savings account of the DBP MRI Pool. Accordingly,
company; and (3) this approval had in some way to be
the DBP MRI Pool was advised of the credit. On 3
communicated by the company to the applicant. The
September 1987, Dans died of cardiac arrest. The
further admitted facts are that the head office in
DBP, upon notice, relayed this information to the DBP
Montreal did accept the application, did cable the
MRI Pool. On 23 September 1987, the DBP MRI Pool
Manila office to that effect, did actually issue the
notified DBP that Dans was not eligible for MRI
policy and did, through its agent in Manila, actually
coverage, being over the acceptance age limit of 60
write the letter of notification and place it in the usual
years at the time of application. On 21 October 1987,
channels for transmission to the addressee. The fact
DBP apprised Candida Dans of the disapproval of her
as to the letter of notification thus fails to concur with
late husband's MRI application. The DBP offered to
the essential elements of the general rule pertaining
refund the premium of P1,476.00 which the deceased
to the mailing and delivery of mail matter as
had paid, but Candida Dans refused to accept the
announced by the American courts, namely, when a
same, demanding payment of the face value of the
letter or other mail matter is addressed and mailed
MRI or an amount equivalent to the loan. She,
with postage prepaid there is a rebuttable
likewise, refused to accept an ex gratia settlement of
presumption of fact that it was received by the
P30,000.00, which the DBP later offered. On 10
addressee as soon as it could have been transmitted
February 1989, the Estate of the Late Juan B. Dans,
to him in the ordinary course of the mails. But if any
through Candida Dans as administratrix, filed a
one of these elemental facts fails to appear, it is fatal
complaint with the Regional Trial Court, Branch I,
to the presumption. For instance, a letter will not be
Basilan, against DBP and the insurance pool for
presumed to have been received by the addressee
collection of Sum of Money with Damages. On 10
unless it is shown that it was deposited in the post-
March 1990, the trial court rendered a decision in
office, properly addressed and stamped. The contract
favor of the Estate and against DBP. The DBP MRI
for a life annuity in the case at bar was not perfected
Pool, however, was absolved from liability, after the
because it has not been proved satisfactorily that the
trial court found no privity of contract between it and
acceptance of the application ever came to the
the deceased. The trial court declared DBP in
knowledge of the applicant.
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
court ordered DBP to return and reimburse the Estate
the amount of P139,500.00 plus legal rate of interest
as amortization payment paid under protest; 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; to pay the Estate
the amount of P10,000.00 as attorney's fees; to pay
the Estate the amount of P10,000.00 as costs of
litigation and other expenses, and other relief just and
equitable. The DBP appealed to the Court of Appeals.
In a decision dated 7 September 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 20 April 1993. DBP filed the petition
for review on certiorari.
Issue [1]: Whether there was a perfected contract of
insurance for DBP MRI Pool to be held liable.
Held [1]: NO. When Dans applied for MRI, he filled up
and personally signed a "Health Statement for DBP
Pool" 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."
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.
Issue [2]: Whether DBP is liable for the entire value of
the insurance policy, as it led Dans to believe that he
has fulfilled all the requirements for the MRI and that
the issuance of his policy was forthcoming.
Held [2]: 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 11 August 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% 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. The DBP is not authorized to
accept applications for MRI when its clients are more
than 60 years of age. 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. 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.
Great Pacific Life Assurance Company vs. Court
of Appeals [GR L-31845, 30 April 1979];
also Mondragon vs. Court of Appeals [GR L-31878]
First Division, De Castro (J): 4 concur, 1 took no part
See case entry 17
Facts: On 14 March 1957, Ngo Hing filed an
application with the Great Pacific Life Assurance
Company for a 20-year endowment policy in the
amount of P50,000.00 on the life of his one-year old
daughter Helen Go. Ngo Hing supplied the essential
data which Lapulapu D. Mondragon, Branch Manager
of the Pacific Life in Cebu City wrote on the
corresponding form in his own handwriting .
Mondragon finally type-wrote the data on the
application form which was signed by 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 was issued to Ngo Hing. Likewise,
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 30
April 1957, Mondragon received a letter from Pacific
Life disapproving the insurance application. The letter
stated that the said life insurance application for 20-
year endowment plan is not available for minors
below 7 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 Mondragon
to Ngo Hing. Instead, on 6 May 1957, Mondragon
wrote back Pacific Life again strongly recommending
the approval of the 20-year endowment life insurance
on the ground that Pacific Life is the only insurance
company not selling 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 28 May 1957 Helen Go died of
influenza with complication of broncho-pneumonia.
Thereupon, Ngo Hing 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 a decision against Pacific Life and
Mondragon, orderig them to solidarily pay 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
P10,000.00 as attorney's fees plus costs of suits. On
appeal, the Court of Appeals set aside the appealed
decision of the Court of First Instance of Cebu, and
absolved Pacific Life and Mondragon from liability on
the insurance policy, but ordered the reimbursement
to Ngo Hing the amount of P1,077.75, without
interest. On reconsideration, however, the appellate
court affirmed in toto the decision of the Court of First
Instance of Cebu, ordering Pacific Life and
Mondragon jointly and severally to pay Ngo Hing. Two
petitions for certiorari by way of appeal were filed by
Pacific Life and Mondragon. The petitons were
consolidated by the Supreme Court in a resolution
dated 29 April 1970.
Issue: Whether the binding deposit receipt constituted
a temporary contract of the life insurance in question,
and thus negate the claim that the insurance contract
was perfected. Held: YES. The provisions printed on
the binding deposit receipt 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 Pacific Life disapproved the
insurance application of Ngo Hing, the binding deposit
receipt in question had never become in force at any
time. Upon this premise, the binding deposit receipt is,
manifestly, merely conditional and does not insure
outright. 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. It bears repeating that through the
intra-company communication of 30 April 1957,
Pacific Life disapproved the insurance application in
question on the ground that it is not offering the 20-
year endowment insurance policy to children less than
7 years of age. What it offered instead is another plan
known as the Juvenile Triple Action, which Ngo Hing
failed to accept. In the absence of a meeting of the
minds between Pacific Life and 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 them. Accordingly,
the deposit paid by Ngo Hing shall have to be
refunded by Pacific Life.