G.R. No.

L-31845 April 30, 1979

GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner,
vs.
HONORABLE COURT OF APPEALS, respondents.
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G.R. No. L-31878 April 30, 1979
LAPULAPU D. MONDRAGON, petitioner,
vs.
HON. COURT OF APPEALS and NGO HING, respondents.

FACTS:
Ngo Hing (Insured) filed an application with the Great Pacific Life Assurance Company (Insurer) for a
(20) twenty-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 petitioner Lapulapu D. Mondragon, Branch Manager of the
Pacific Life in Cebu City wrote on the corresponding form in his own handwriting. Ngo Hing (Insured) paid the
annual premium the sum of P1,077.75. Upon the payment of the insurance premium, the binding deposit
receipt was issued to private respondent Ngo Hing (Insured). Thereafter, manager 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 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 manager
Mondragon to private respondent Ngo Hing (Insured). Instead, manager Mondragon wrote back Pacific Life
again strongly recommending the approval of the 20-year endowment insurance plan to children.

Thereafter, Helen Go died of influenza with complication of bronchopneumonia. Thereupon, private

respondent 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 the
adverse decision as earlier referred to against both petitioners.

ISSUE:
Whether the binding deposit receipt constituted a temporary contract of the life insurance in question

DECISION:
Petition is GRANTED absolving petitioners Branch Manager Lapulapu D. Mondragon and Great Pacific
Life Assurance Company (Insurer) from their civil liabilities.

RULING:

NO!

At the back of the deposit receipt are condition precedents required before a deposit is considered a BINDING
RECEIPT.
Such conditions 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 able 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.

It bears repeating that 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.
 G.R. No. 137172 April 4, 2001
UCPB GENERAL INSURANCE CO., INC., petitioner,
vs.
MASAGANA TELAMART, INC., respondent.
RESOLUTION
FACTS:
Masagani Telmart (Insured) obtained from UCPB General Insurance (Insurer) five (5) insurance
policies on its properties in Pasay City and Manila. All five (5) policies reflect on their face the effectivity term:
"from 22 May 1991 to 22 May 1992." Masagani Telmart’s (Insured) properties located at Pasay City were razed
by fire. Masagani tendered, and UCPB Insurance accepted, five (5) Equitable Bank Manager's Checks in the total
amount of P225,753.45 as renewal premium payments for which Official Receipt Direct Premium was issued
by UCPB. On July 14, 1992, Masagana made its formal demand for indemnification for the burned insured
properties. On the same day, UCPB Insurance (Insurer) returned the five (5) manager's checks stating in its
letter that it was rejecting Masagana's (Insured)claim on the following grounds:
a) Said policies expired and were not renewed for another term;
b) UCPB (Insurer) had notified Masagana Telmart (Insured) and its alleged broker of non-renewal
earlier; and
c) The properties covered by the said policies were burned in a fire that took place before tender of
premium payment.
The Court of Appeals disagreed with UCPB's (Insurer) stand that Masagana Telmart's 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.
Both the Court of Appeals and the trial court found that sufficient proof exists that Masagana Telmart
(Insured), which had procured insurance coverage from UCPB (Insurer) for a number of years, had been
granted a 60 to 90-day credit term for the renewal of the policies. Such a practice had existed up to the time the
claims were filed.

ISSUE:
WON the acceptance of later premium payment effectively renewed the Insurance policy.
DECISION:
Petition DENIED.
RULING:
Yes!
Although Section 77 of the Insurance Code of 1978 provides:
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.

The same admits of EXCEPTIONS!

The first is provided by Section 77 itself, and that is, in case of a life or industrial life policy whenever
the grace period provision applies.
The second is that covered by Section 78 of the Insurance Code, which provides:
“Any 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 premium is actually
paid.”
The third was laid down in Makati Tuscany Condominium Corporation vs. Court of Appeals, 5 wherein
it ruled that Section 77 may not apply if the parties have agreed to the payment in installments of the
premium and partial payment has been made at the time of loss.
The fourth, in the case of Tuscany namely, that the insurer may grant credit extension for the payment
of the premium. This simply means that 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.
Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit
term within which to pay the premiums. That agreement is not against the law, morals, good customs, public
order or public policy. The agreement binds the parties.
Fifth exception, in the instant case, it would be unjust and inequitable if recovery on the policy would
not be permitted against Petitioner, which had consistently granted a 60- to 90-day credit term for the
payment of premiums despite its full awareness of Section 77. Estoppel bars it from taking refuge
under said Section, since Respondent relied in good faith on such practice. Estoppel then is the fifth
exception to Section 77.
 G.R. No. 171379 January 10, 2011
JOSE MARQUES and MAXILITE TECHNOLOGIES, INC., Petitioners,
vs.
FAR EAST BANK AND TRUST COMPANY, FAR EAST BANK INSURANCE BROKERS, INC., and MAKATI
INSURANCE COMPANY, Respondents.
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G.R. No. 171419
FAR EAST BANK AND TRUST COMPANY and MAKATI INSURANCE COMPANY, Petitioners,
vs.
JOSE MARQUES and MAXILITE TECHNOLOGIES, INC., Respondents.
DECISION

FACTS
Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged in the importation and trading
of equipment for energy-efficiency systems. Jose N. Marques is the President and controlling stockholder of
Maxilite. Far East Bank and Trust Co. (FEBTC) is a local bank which handled the financing and related
requirements of Marques and Maxilite. Marques and Maxilite maintained accounts with FEBTC. Accordingly,
FEBTC financed Maxilite’s capital and operational requirements through loans secured with properties of
Marques under the latter’s name.
Far East Bank Insurance Brokers, Inc. (FEBIBI) is a local insurance brokerage corporation while Makati
Insurance Company7 is a local insurance company. Both companies are subsidiaries of FEBTC.
Maxilite and Marques entered into a trust receipt transaction with FEBTC for the shipment of various
high-technology equipment from the United States,9 with the merchandise serving as collateral. FEBIBI, upon
the advice of FEBTC, facilitated the procurement and processing from Makati Insurance Company of four
separate and independent fire insurance policies over the trust receipted merchandise. Maxilite paid the
premiums for these policies through debit arrangement. FEBTC would debit Maxilite’s account for the
premium payments, as reflected in statements of accounts sent by FEBTC to Maxilite.
Finding that Maxilite failed to pay the insurance premium for Insurance Policy No. 1024439, FEBIBI
sent written reminders to FEBTC to debit Maxilite’s account. A fire gutted the Aboitiz Sea Transport Building
along M.J. Cuenco Avenue, Cebu City, where Maxilite’s office and warehouse were located. As a result, Maxilite
suffered losses amounting to at least ₱2.1 million, which Maxilite claimed against the fire insurance policy with
Makati Insurance Company. Makati Insurance Company denied the fire loss claim on the ground of non-
payment of premium. FEBTC and FEBIBI disclaimed any responsibility for the denial of the claim. Hence,
Maxilite and Marques sued FEBTC, FEBIBI, and Makati Insurance Company.
RTC ruled in favor of Maxilite and Marques. The Court of Appeals then affirmed the trial court’s decision.

ISSUE:
Whether or not the premium for the subject insurance policy has in fact been paid.

DECISION:
Petition GRANTED with MODIFICATION

RULING
Yes!
As a consequence of its negligence, FEBTC must be held liable for damages pursuant to Article 2176 of the Civil
Code which states "whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done." Indisputably, had the insurance premium been paid, through the
automatic debit arrangement with FEBTC, Maxilite’s fire loss claim would have been approved. Hence, Maxilite
suffered damage to the extent of the face value of the insurance policy or the sum of ₱2.1 million.
Both trial and appellate courts basically agree that FEBTC is estopped from claiming that the insurance
premium has been unpaid. Since (1) FEBTC committed to debit Maxilite’s account corresponding to the
insurance premium; (2) FEBTC had insurable interest over the property prior to the settlement of the trust
receipt account; and (3) Maxilite’s bank account had sufficient funds to pay the insurance premium prior to the
settlement of the trust receipt account, FEBTC should have debited Maxilite’s account as what it had repeatedly
done, as an established practice, with respect to the previous insurance policies.
However, FEBTC failed to debit and instead disregarded the written reminder from FEBIBI to debit
Maxilite’s account. FEBTC’s conduct clearly constitutes negligence in handling Maxilite’s and Marques’
accounts. Negligence is defined as "the omission to do something which a reasonable man, guided upon those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something
which a prudent man and reasonable man could not do.