Insurance Class

7/13/2019 Insurance Class

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INSURANCE | ATTY. MIGALLOS 1ST

Term, AY 2014 -2015

CLASS READER

Married Women and Minors

Insurance Code, Section 3

Sec. 3. Any contingent or unknown event, whether past or future, which

may damnify a person having an insurable interest, or create a liability

against him, may be insured against, subject to the provisions of this

chapter.

The consent of the husband is not necessary for the validity of an insurance

policy taken out by a married woman on her life or that of her children.

Any minor of the age of eighteen years or more, may, notwithstanding such

minority, contract for life, health and accident insurance, with any insurance

company duly authorized to do business in the Philippines, provided the

insurance is taken on his own life and the beneficiary appointed is the

minor's estate or the minor's father, mother, husband, wife, child, brother or

sister.

The married woman or the minor herein allowed to take out an insurance

policy may exercise all the rights and privileges of an owner under a policy.

All rights, title and interest in the policy of insurance taken out by an

original owner on the life or health of a minor shall automatically vest in the

minor upon the death of the original owner, unless otherwise provided for in

the policy.

Article 234.(Family Code)

When there is danger that a person obliged to give support may lose his or

her fortune because of grave mismanagement or on account of riotous

living, his or her spouse, if any, and a majority of those entitled to be

supported by him or by her may petition the Court of First Instance for the

creation of the family home.

Republic Act No. 6809 December 13, 1989

AN ACT LOWERING THE AGE OF MAJORITY FROM TWENTY-

ONE TO EIGHTEEN YEARS, AMENDING FOR THE PURPOSE

EXECUTIVE ORDER NUMBERED TWO HUNDRED NINE, AND

FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines

in Congress assembled::

Section 1. Article 234 of Executive Order No. 209, the Family Code of the

Philippines, is hereby amended to read as follows:

"Art. 234. Emancipation takes place by the attainment of majority. Unless

otherwise provided, majority commences at the age of eighteen years."

Section 2. Articles 235 and 237 of the same Code are hereby repealed.

Section 3. Article 236 of the same Code is also hereby amended to read as

follows:

"Art. 236. Emancipation shall terminate parental authority over the person

and property of the child who shall then be qualified and responsible for all

acts of civil life, save the exceptions established by existing laws in special

cases.

"Contracting marriage shall require parental consent until the age of twenty-

one.

"Nothing in this Code shall be construed to derogate from the duty or

responsibility of parents and guardians for children and wards below

twenty-one years of age mentioned in the second and third paragraphs of

Article 2180 of the Civil Code."

Section 4. Upon the effectivity of this Act, existing wills, bequests,

donations, grants, insurance policies and similar instruments containing


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references and provisions favorable to minors will not retroact to their

prejudice.

Section 5. This Act shall take effect upon completion of its publication in at

least two (2) newspapers of general circulation.

Mortgagor/Mortgagee

Insurance Code

Sec. 8. Unless the policy otherwise provides, where a mortgagor of property

effects insurance in his own name providing that the loss shall be payable to

the mortgagee, or assigns a policy of insurance to a mortgagee, the

insurance is deemed to be upon the interest of the mortgagor, who does not

cease to be a party to the original contract, and any act of his, prior to theloss, which would otherwise avoid the insurance, will have the same effect,

although the property is in the hands of the mortgagee, but any act which,

under the contract of insurance, is to be performed by the mortgagor, may

be performed by the mortgagee therein named, with the same effect as if it

had been performed by the mortgagor.

Sec. 9. If an insurer assents to the transfer of an insurance from a mortgagor

to a mortgagee, and, at the time of his assent, imposes further obligation on

the assignee, making a new contract with him, the act of the mortgagor

cannot affect the rights of said assignee.

Sec. 13. Every interest in property, whether real or personal, or any relation

thereto, or liability in respect thereof, of such nature that a contemplated

peril might directly damnify the insured, is an insurable interest.

Sec. 53. The insurance proceeds shall be applied exclusively to the proper

interest of the person in whose name or for whose benefit it is made unless

otherwise specified in the policy.

Palileo v. Cosio (1955)

Lessons Applicable: Mortgagor (Insurance)

FACTS:

Cherie Palileo (debtor-mortgagor) filed a complaint against BeatrizCosio (creditor-mortgagee) praying that their transaction be one ofa loan with an equitable mortgage to secure the payment of theloan. The original counsel of Cosio Atty. Guerrero beingappointed Undersecretary of Foreign Affairs so she forgot the dateof the trial and she was substituted.

it is a loan of P12,000 secured by a "Conditional Sale ofResidential Building" with right to repurchase. After the executionof the contract, Cosio insured in her name the buildingwith Associated Insurance & Surety Co. against fire.

The building was partly destroyed by fire so she claimed anindemnity of P13,107

Palileo demanded that the amount of insurance proceeds becredited to her loan

RTC: it is a loan with equitable mortgage so the insuranceproceeds should be credited to the loan and refund theoverpayment.

ISSUE:W/N Cosio as mortgagee is entitled to the insurance proceeds for her ownbenefit

HELD:YES. Modify. collection of insurance proceeds shall not be deemed to

have compensated the obligation of the Palileo to Cosio, but bars the Cosiofrom claiming its payment from the Palileo; and Cosio shall pay to PalileoP810 representing the overpayment made by Palileo by way of interest onthe loan.


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When the the mortgagee may insure his interest in the pr opertyindependently of the mortgagor , upon the destruction of theproperty the insurance money paid to the mortgagee will not inureto the benefit of the mortgagor, and the amount due under themortgage debt remains unchanged. The mortgagee, however, is

not allowed to retain his claim against the mortgagor, but it passesby subrogation to the insurer, to the extent of the insurance moneypaid

It is true that there are authorities which hold that "If a mortgageeprocures insurance on his separate interest at his own expense andfor his own benefit, without any agreement with the mortgagorwith respect thereto, the mortgagor has no interest in the policy,and is not entitled to have the insurance proceeds applied inreduction of the mortgage debt" But these authorities merelyrepresent the minority view.


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SAN MlGUEL BREWERY, ETC., plaintiff and appellee, vs. LAW

UNION AND ROCK INSURANCE Co. (LTD.) ET AL., defendants

and appellees. HENRY HARDING, defendant and appellant.

No. 14300. January 19, 1920. J. Street

Doctrine: Insurer cannot recover beyond the scope of the policy. A

purchaser of insured property who does not take the precaution. to obtain

a transfer of the policy of insurance cannot, in case of loss, recover upon

such contract, as the transfer of the property has the effect of suspending

the insurance until the purchaser becomes owner of the policy as well as of

the property insured.

Facts:

1. D. P. Dunn, then the owner of the property to which the insurance relates,mortgaged the same to the San Miguel Brewery to secure a debt of P10,000.

2. In the contract of mortgage Dunn agreed to keep the property insured at

his expense to the full amount of its value in companies to be selected by

the Brewery Company and authorized the latter in case of loss to receive the

proceeds of the insurance and to retain such part as might be necessary to

cover the mortgage debt.

3. At the same time, in order more conveniently to accomplish the end in

view, Dunn authorized and requested the Brewery Company to effect said

insurance itself.

4. Accordingly on the same date Antonio Brias, general manager of the

Brewery, made a verbal application to the Law Union and Rock Insurance

Company for insurance to the extent of P15,000 upon said property.

5. In reply to a question of the company's agent as to whether the Brewery

was the owner of the property, he stated that the company was interested

only as a mortgagee.

6. Tow insurance companies divided the risks. It therefore issued its own

policy for P7,500 and procured a policy in a like amount to beissued by the

"Filipinas" Compaa de Seguros.

7. Both policies were issued in the name of the San Miguel Brewery as the

assured, and contained no reference to any other interest in the property.

Both policies contain the usual clause requiring assignments to be approved

and noted on the policy.

8. The premiums were paid by the Brewery and charged to Dunn. A year

later the policies were renewed, without change, the renewal premiums

being paid by the Brewery, supposedly for the account of the owner.

9. In the month of March of the year 1917 Dunn sold the insured property to

the defendant Henry Harding, but no assignment of the insurance, 01" of the

insurance policies, was at any time made to him.

10. IN the complaint, Brewery prayed that judgment be entered in favor of

the plaintiff against the two companies named for the sum of P15,000, with

interest and costs, and further that upon satisfaction of the balance of

P4,505.30 due to the plaintiff upon the mortgage debt, and upon the

cancellation of the mortgage, the plaintiff be absolved from liability to the

defendants or any of them.

11. Accordingly, as was to be expected, Harding answered, admitting the

material allegations of the complaint and claiming for himself the right to

recover the difference between the plaintiff's mortgage credit and the face

value of the policies.

12. The two insurance companies also answered,' admitting in effect their

liability to the San Miguel Brewery to the extent of its mortgage- credit, but

denying liability to Harding on the ground that under the contracts of

insurance the liability of the insurance companies was limited to the

insurable interest of the plaintiff therein.


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Issues:

1. Does Harding have cause of action against the two insurance companies?

NO

2. Does the Brewery have insurable interest? YES

3. Is the policy intended to protect not only the interest of the mortgagee but

also the residual interest of the owner? NO

Held:

1. Harding is not a party in the case.

'maintain an action thereon.

made effective, if at all, through the San Miguel Brewery in whose name

the contracts are written.

"a change of i nterest in any part of a thing insured unaccompanied by a

corresponding change of interest in the insurance, suspends the

insurance to an equivalent extent, unti l the interest in the thing and th e

in terest in the insurance are vested in the same person."

" the mere transfer of a thing

insured does not transfer the poli cy, but suspends it unti l the same person

becomes the owner of both the poli cy and the thin g insured."

2. THE BREWERY has insurable interest but could recover on the

policy only to the extent of the credit secured by the mortgage.

company with which the insurance was placed that the Brewery was

interested only as a mortgagee. I t would, therefor e, be impossibl e for th e

Brewery to recover anyth ing beyond the amountsecur ed by its mortgage

on the insured property.

Section 16 of the Insurance Act, it is declared that "the measure of an

insurable interest in property is the extent to which the insured might be

damnified by loss or injury thereof"

Section 50 of the insurance act: "the insurance shall be applied

exclusively to the proper interest of the person in whose name it is made

unless otherwise specified in the policy" (sec. 50).

3. Undoubtedly these policies of insurance might have been so framed as to

have been "payable to the San Miguel Brewery, mortgagee, as its interest

may appear, remainder to whomsoever, during the continuance of the risk,

may become the owner of the interest insured." Such a clause would have

proved an intention to insure the entire interest in the property, not merely

the insurable interest of the San Miguel Brewery, and would have shown

exactly to whom the money, in case of loss, should be paid. BUT

THE POLICIES ARE NOT SO WRITTEN.

If during the negotiations which resulted in the writing of this insurance,

it had been agreed between the contracting parties that the insurance

should be so written as to protect not only the interest of the mortgagee but

also the residuary interest of the owner, and the policies had been, by

inadvertence, ignorance, or mistake written in the form in which they were

issued, a court would have the power to reform the contracts and give effect

to them in the sense in which the parties intended to be bound.

i. But in order to justify this, it must be made clearly to appear that the

minds of the contracting parties did actually meet in agreement and that

they labored under some mutual error or mistake in respect to the

expression of their purpose.


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and none other was

offeredthat the parties intended for the policy to cover the risk of the

owner in addition to that of the mortgagee. It results that the defendant

Harding is not entitled to relief in any aspect of the case.

BREWERY

AND NOT THE INSURANCE COMPANIES:

i. Dunn in the mortgage contract agreed, at his own expense, to insure the

mortgaged property for its full value and to indorse the policies in such

manner as to authorize the Brewery Company to receive the proceeds in

case of loss and to retain such part thereof as might be necessary to satisfy

the remainder then due upon the mortgage debt. Instead, however, of

effecting the insurance himself Dunn authorized and requested the Brewery

Company to procure insurance on the property in the amount of P15,000 at

Dunn's expense.

ii. The Brewery Company undertook to carry this mandate into effect, and it

of course became its duty to procure insurance of the character

contemplated, that is, to have the policies so written as to protect not only

the insurable interest of the Brewery, but also the owner.

iii. Brias seems to have supposed that the policies as written had this effect,

but in this he was mistaken. It was certainly a hardship on the owner to be

required to pay the premiums upon P15,000 of insurance when he was

receiving no benefit whatever except in protection to the extent of his

indebtedness to the Brewery.

Decision: The judgment is therefore affirmed, with costs against the

appellant.


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Gonzalez Lao v. Yek Tong Lin Fire & Marine Insurance - Insurance

Premiums

55 PHIL 386

Facts:> Gonzales was issued 2 fire insurance policies by Yek for 100T coveringhis leaf tobacco products.

> They were stored in Gonzales building on Soler St., which on Jan. 11,1928, burned down.

> Art. 3 of the Insurance policies provided that: Any insurance in forceupon all or part of the things unsured must be declared in writing by the

insured and he (insured) should cause the company to insert or mention it

in the policy. Without such requisite, such policy will be regarded as null

and void and the insured will be deprived of all rights of indemnity in case

of loss.

> Notwithstanding said provision, Gonzales entered into other insurancecontracts. When he sought to claim from Yek after the fire, the latter deniedany liability on the ground of violation of Art. 3 of the said policies.

> Gonzales however proved that the insurer knew of the other insurancepolicies obtained by him long efore the fire, and the insurer did NOTrescind the insurance polices in question but demanded and collected fromthe insured the premiums.

Issue:

Whether or not Yek is still entitled to annul the contract.

Held:

NO.The action by the insurance company of taking the premiums of the insurednotwithstanding knowledge of violations of the provisions of the policiesamounted to waiver of the right to annul the contract of insurance..

SYLLABUS1. FIRE INSURANCE; POLICIES MORTGAGED TO A THIRDPARTY; REAL PARTY IN INTEREST. The fact that the plaintiff

himself presented in evidence the policies mortgaged to the Bank of thePhilippine Islands gives rise to the presumption that the debt secured by themortgage has been paid, in accordance with article 1191 of the Civil Code.On the other hand, "Insured may be regarded as the real party in interest,although he has assigned the policy for the purpose of collection, or hasassigned as collateral security any judgment he may obtain." (33 C. J., pp.82 et seq.)

2. ID.; INSURANCE IN VARIOUS COMPANIES. The tobaccoinsured in the other companies was different from that insured with thedefendant, since the number of bales of tobacco in the warehouse greatlyexceeded that insured with the defendant and the other companies put

together. And according to the doctrine enunciated in 26 Corpus Juris, 188,"to be insurance of the sort prohibited the prior policy must have beeninsurance upon the same subject matter, and upon the same interest therein."

3. ID.; ID.; WAIVER TO AN ACTION FOR ANNULMENT OFCONTRACT.If, with the knowledge of the existence of other insuranceswhich the defendant deemed violations of the contract, it has preferred tocontinue the policy, its action amounts to a waiver of the annulment of thecontract (19 Cyc., 791, 792).

D E C I S I O NVILLAMOR, J p:

This is an action to recover of the defendant the Yek Tong Lin Fire &Marine Insurance Co., Ltd., the amount of two insurance policies totallingP100,000 upon leaf tobacco belonging to the plaintiff, which was damagedby the fire that destroyed the building on Soler Street No. 188, where saidtobacco was stored, on January 11, 1928.

The defendant filed a general and specific denial of each and everyallegation of the complaint, set up three special defenses, and prayed to beabsolved from the complaint with costs against the plaintiff.

After the case was tried, the court below rendered judgment as follows:


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"In this case and in Nos. 33458, 33868, and 33480 of this court, which, byagreement of the interested parties, were jointly tried, the plaintiff demandsP290,000 from the defendant assurance companies, alleging that to be theamount of the insurance on his leaf tobacco which was damaged by the firethat destroyed the warehouse at No. 188 Soler Street, Manila, where it was

stored, on January 11,1928, the plaintiff's claim against the hereindefendant, the Yek Tong Lin Fire & Marine Insurance Co. being forP100,000, and against the defendants in the three other cases mentionedabove, for P190,000.

"After the plaintiff had presented his evidence, the defendant companies incases Nos. 33458, 33868, and 33480, offered to compromise with him bypaying eighty-five per cent of his claim against them. In view of the factthat said defendants had in their answer raised the question of warranties Aand G of the plaintiff's policies, providing that the building used for theeffects insured would not be occupied by any other lessee, nor would beused for the deposit of other goods, without the consent of said defendants,

and inasmuch as the latter alleged in their answer that the owner of theburnt building had leased the warehouse to several persons for the storageof sundry articles, the plaintiff had to accept the proposed compromise, andin consequence thereof, the three cases aforesaid were dismissed.

"The present case followed the usual course of procedure because theplaintiff refused to accept the compromise which, in the same terms as thosemade by the defendants in the three cases mentioned, was proposed to himby the defendant the Yek Tong Lin Fire & Marine Insurance Company, theplaintiff contending that said defendant did not, nor could, raise the questionof warranties A and G heretofore mentioned for the simple reason that itwas the defendant itself, as owner, who had leased the building which later

was destroyed by fire, to another person after having already ceded aportion of it to said plaintiff.

"The only question to be determined, having been raised in the defendant'sanswer both parties agreeing that the plaintiff insured his leaf tobaccowith the defendant assurance company, and that said goods were damagedby the fire which destroyed the warehouse where they were stored, onJanuary 11, 1928 is whether said goods were worth what the plaintiffclaims, that is, about equal to the amount for which they were insured in thefour above-mentioned assurance companies, including the defendant in thiscase.

"The plaintiff has conclusively shown by the Official Register Book(Exhibit I) and the Official Guide (Exhibit J), furnished by the Bureau ofInternal Revenue, and kept under the supervision thereof in the usual form,in accordance with articles 10, 34 to 38 of the Regulations of the same

promulgated under No. 17, by the Secretary of Finance; the Stock Book forrecording the quantity of tobacco, Exhibit K, kept by the plaintiff andpresented as part of the testimony of witnesses Claveria, Bonete, andLeoncio Jose; the testimony of Estanislao Lopez, Inspector of InternalRevenue, and the latter's report (Exhibit N), submitted to the Collector ofInternal Revenue in pursuance of article 33 of the aforementionedRegulations; the tobacco invoices of stock damaged by the fire, Exhibits Land L-1 to L-20; and by the testimony of Clemente Uson who went over theplaintiff's books as auditor and public accountant, and also preparedExhibits T and U, attached to the record, that the plaintiff had in thewarehouse at No. 188 Soler at the time of the fire, not less, but rather more,than 6,200 bales of leaf tobacco worth over P300,000, which is of course

more than the sum total of all the insurances taken out with the defendantherein and the defendants in the three aforementioned cases Nos. 33458,33868, and 33480.

"The reason why the entry showing that 258 bales of tobacco had beenremoved from the warehouse, appearing in the Official Register Book,Exhibit I, was not posted in the Stock Book, Exhibit K, has beensatisfactorily explained by the plaintiff's witnesses, who stated that it wasdue to the fact that there was no time to post it in the Stock Book, becausethe fire took place and the plaintiff told them not to touch, and to make nofurther entries in the books. Witness White, the defendant company'sadjuster, who carefully examined the plaintiff's books not only immediately

after the fire, but also during the hearing of this case, seems not to havefound any irregularity therein; at least he said nothing on the point when hetook the witness stand. On the contrary, in his report Exhibit UU sent to thedefendant herein in his capacity as adjuster, appointed by the latter, and inExhibits WW and XX, admitted by the Yek Tong Lin Ins. Co., Ltd., headmitted that the leaf tobacco belonging to the plaintiff in the warehousewhen the fire took place exceeded, in quantity and value, the amount of theinsurance.

"The defendant did not present any evidence to rebut the plaintiff'sevidence, but only presented witness Rowlands, whose testimony or opinion


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as to the probable number of bales of tobacco in the warehouse at the dateof the fire does not deserve serious consideration, not only because of theplaintiff's evidence, but because his opinion or estimate is based solely uponphotographs of the place taken after the fire.

"In view of the foregoing, the court hereby sentences the defendant the YekTong Lin Fire and Marine Insurance Company, Ltd., to pay the plaintiffEmilio Gonzalez La O, the amount of one hundred thousand pesos(P100,000), for which it had accepted the insurance on the leaf tobaccobelonging to said plaintiff, damaged by fire which destroyed the warehouseat No. 188 Soler Street, where it was stored, on January 11, 1928, and legalinterest upon said amount from June 27, 1928, when the complaint wasfiled in this case, plus the costs.

"So ordered."Manila, P. I., this 24th day of December, 1929.

"ANACLETO DIAZ

"Judge"The defendant duly appealed from this judgment, alleging that the trialcourt erred in making reference to the settlement arrived at by the plaintiffand other insurance companies, and in declaring that the only questioninvolved in the case is whether or not the tobacco damaged by the fire isworth at least P290,000.

There is no merit in these assignments of error. Since the settlementbetween the plaintiff and the other defendant companies was reached afterthe plaintiff had presented his evidence, and as those three cases were triedjointly with the instant case, there is no valid reason why the trial courtshould not refer to it in deciding this case. Furthermore, the court's holding

here assigned as error, granting there were other incidental matters to bedecided by the court, does not in itself constitute a reversible error.

In the third assignment of error, the defendant contends that the plaintiffcannot recover under the policy as he has failed to prove that the Bank ofthe Philippine Islands, to whom the policy was made payable, no longer hasany rights and interests in it. It should be noted that the defendant did not inits answer allege defect of parties plaintiff, and, besides, it does not appearthat the plaintiff ceded to the bank all his rights or interests in the insurance,the note attached to the policies merely stating: "There shall be paid to theBank of the Philippine Islands an indemnity for any loss caused by fire,

according to the interest appearing in its favor." And the fact that theplaintiff himself presented in evidence the policies mortgaged to the Bankof the Philippine Islands gives rise to the presumption that the debt thussecured has been paid, in accordance with article 1191 of the Civil Code.

Corpus Juris, volume 26, pages 483 et seq., states:"Insured, being the person with whom the contract was made, is primarilythe proper person to bring suit thereon. . . . Subject to some exceptions,insured may thus sue, although the policy is taken wholly or in part for thebenefit of another person named or unnamed, and although it is expresslymade payable to another as his interest may appear or otherwise. . . .Although a policy issued to a mortgagor is taken out for the benefit of themortgagee and is made payable to him, yet the mortgagor may sue thereonin his own name, especially where the mortgagee's interest is less than thefull amount recoverable under the policy, . . .."

And in volume 33, page 82, of the same work, we read the following:

"Insured may be regarded as the real party in interest, although he hasassigned the policy for the purpose of collection, or has assigned ascollateral security any judgment he may obtain."

It is also contended that the trial court erred in not declaring that inasmuchas the plaintiff failed to notify the defendant corporation in writing, of otherinsurance policies obtained by him, he has violated article 3 of theconditions of the policies in question, thereby rendering these policies nulland void. Article 3 of the conditions of the policies in question prescribes:"ART. 3. Any insurance in force upon all or part of the thingsinsured must be declared in writing by the insured and he should cause thecompany to insert or mention it in the policy, and without such requisite

said policy will be regarded as null and void, and the assured deprived of allrights of indemnity in case of loss."

The following clause has been inserted with a typewriter in the policies:"Subject to clauses G and A and other insurances with a special short periodattached to this policy." And attached to said policies issued by thedefendant there is a sheet of "Other insurances" with the amount and theassurance companies in blank, which, according to the appellee, constitutesa notification that there were other insurances existing at the time.


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In the case of Benedict vs. Ocean Insurance Co. (31 N. Y., 391-393), theconstruction of the clause, "privilege for $4,500 additional insurance," wasdiscussed. One of the printed clauses of the policy reads as follows:"If said assured, or his assigns, shall hereafter make any other insuranceupon the same property, and shall not, with all reasonable diligence, give

notice to this corporation, and have the same indorsed on this instrument, orotherwise acknowledged by them, in writing, this policy shall cease and beof no further effect."

The Supreme Court of New York held that the words "Privilege for $4,500additional insurance" made it unnecessary for the assured to inform theinsurer of any other policy up to that amount.

In the case cited the same goods insured by the defendant company werereinsured to the amount of $4,500 in accordance with the clause "privilegefor $4,500 additional insurance," but in the instant case it may be said thatthe tobacco insured in the other companies was different from that insured

with the defendant, since the number of bales of tobacco in the warehousegreatly exceeded that insured with the defendant and the other companiesput together. And according to the doctrine enunciated in 26 Corpus Juris,188, "to be insurance of the sort prohibited the prior policy must have beeninsurance upon the same subject matter, and upon the same interest therein."Furthermore, the appellant cannot invoke the violation of article 3 of theconditions of the insurance policies for the first time on appeal, havingfailed to do so in its answer; besides, as the appellee correctly contends inhis brief, Guillermo Cu Unjieng, who was then president and majorityshareholder of the appellant company, the Yek Tong Lin Fire & MarineInsurance Co., knew that there were other insurances, at least from theattempt to raise the insurance premium on the warehouse and the appellee's

tobacco deposited therein to 1 per centum, and it was later reduced uponpetition of the appellant itself and other assurance companies to 0.75 percentum presented to the association of assurance companies in the year1927, and notwithstanding this, said appellant did not rescind the insurancepolicies in question, but demanded and collected from the appellee theincreased premium.

That the defendant had knowledge of the existence of other policiesobtained by the plaintiff from other insurance companies, is specificallyshown by the defendant's answer wherein it alleges, by way of specialdefense, the fact that there exist other policies issued by the companies

mentioned therein. If, with the knowledge of the existence of otherinsurances which the defendant deemed violations of the contract, it haspreferred to continue the policy, its action amounts to a waiver of theannulment of the contract, in accordance with the following doctrine in 19Cyc., 791, 792:

"FAILURE TO ASSERT FORFEITURE IN GENERAL. While theweight of authority is that a policy conditioned to become void upon abreach of a warranty is void ipso facto upon such a breach without formalproceedings on the part of the insurer, yet it is true that such conditions areinserted for the benefit of the insurer and may be waived, and that theinsurer may elect to continue the policy despite the breach. If it does thepolicy is revived and restored. Its failure to assert a forfeiture therefore is atleast evidence tending to show a waiver thereof. Many authorities gofurther, however, and hold that the failure to assert a forfeiture afterknowledge of a ground thereof will amount of itself to a waiver. . . ."

The fifth and sixth assignments of error refer to the quantity of tobacco in

the Soler warehouse at the time of the fire, which, according to theappellant, did not exceed 4,930 bales. As may be seen, these assignments oferror by the appellant involved purely questions of fact, and it is for thiscourt to decide whether the findings of the trial court are supported by theevidence. The judgment appealed from sets forth clearly the evidencepresented to the court in order to determine the quantity of tobacco in thewarehouse at the time of the fire. We have studied the evidence aforesaid,and are fully convinced that the court's findings are well supported by thesame. Inasmuch as it has not, in our opinion, been shown that the trial judgeoverlooked any fact, which, if duly considered would have changed theresult of the case, we do not feel justified in altering or modifying hisfindings.

Finally, the appellant contends that the trial court erred in arriving at thedamages that plaintiff may recover under the policies in question by the costprice of the tobacco damaged by the fire, instead of computing the same onthe market price of the said tobacco at the time of the fire; and in declaringthat the tobacco damaged was worth more than P300,000. This error is notwell taken, for it is clear that the cost price is competent evidence tending toshow the value of the article in question. And it was so held the case ofGlaser vs. Home Ins. Co. (47 Misc. Rep., 89; 93 N. Y. Supp., 524; Abbott'sProof of Facts, 3d ed., p. 874), where it was declared that the cost of thegoods destroyed by fire is some evidence of value, in an action against the


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insurance company. Exhibits L to L-20, which are invoices for tobaccopurchased by the appellee, and the testimony of the public accountantClemente Uson, who went over them and the rest of the appellee's booksafter the fire, taken in connection with reports T and Z, adduced as part ofhis testimony, show that the cost price of each bale of tobacco belonging to

the appellee, damaged by the fire, was P51.8544, which, multiplied by6,264, the number of bales, yields a total of over P320,000.

The adjusters of the appellant, White & Page, in ascertaining the marketprice of the plaintiff's tobacco deposited in the burnt warehouse, taking theinformation furnished by the Tabacalera and by M. Pujalte, S. en C., as abasis, thus conclude their report: "We therefore are obliged to theconclusion that the value of the tobacco destroyed was not less thanP290,000." And, indeed, said adjusters, in behalf of the appellant, appraisedthe appellee's tobacco assured and damaged by the fire at P303,052.32,collecting from the proceeds of the sale of the tobacco saved from the fireP3,000, the appellant's share in proportion to the insurance of P100,000

belonging to it, and P190,000 belonging to the other assurance companies,and considered the appellee himself as his own assurer in the amount ofP13,052.32 which was the difference between the total value of the tobaccodamaged and the total amount of the insurance, P290,000, for which reasonthe appellee received P129.21, as his proportionate share of the tobaccosaved, as shown by Exhibits UU, WW, and XX.

Hence the last assignment of error is without merit.

Wherefore, the judgment appealed from is in accordance with law, and mustbe, as it is hereby, affirmed, with costs against the appellant. So ordered.Johnson, Street, Malcolm, Ostrand, Johns, Romualdez and Villa- Real, JJ.,

concur.


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Geagonia v CA

G.R. No. 114427

February 6, 1995

Facts:

Geagonia, owner of a store, obtained from Country Bankers fire insurancepolicy for P100,000.00. The 1 year policy and covered thestock tradingofdry goods.

The policy noted the requirement that"3. The insured shall give notice to the Company of any insurance orinsurances already effected, or which may subsequently be effected,covering any of the property or properties consisting of stocks in trade,goods in process and/or inventories only hereby insured, and unless noticebe given and the particulars of such insurance or insurances be statedtherein or endorsed in this policy pursuant to Section 50 of the InsuranceCode, by or on behalf of the Company before the occurrence of any loss or

damage, all benefits under this policy shall be deemed forfeited, providedhowever, that this condition shall not apply when the total insurance orinsurances in force at the time of the loss or damage is not more thanP200,000.00."

The petitioners stocks were destroyed by fire. He then filed a claim whichwas subsequently denied because the petitioners stocks were covered by

two otherfire insurancepolicies for Php 200,000 issued by PFIC. The basisof the private respondent's denial was the petitioner's alleged violation ofCondition 3 of the policy.

Geagonia then filed a complaint against the private respondent in the

Insurance Commission for the recovery of P100,000.00 underfire insurancepolicy and damages. He claimed that heknewthe existence of the other twopolicies. But, he said that he had no knowledge of the provision in theprivate respondent's policy requiring him to inform it of the prior policiesand this requirement was not mentioned to him by the private respondent'sagent.

The Insurance Commission found that the petitioner did not violateCondition 3 as he had no knowledge of the existence of the two fireinsurancepolicies obtained from the PFIC; that it was Cebu Tesing Textilesw/c procured the PFIC policies w/o informing him or securing his consent;

and that Cebu Tesing Textile, as his creditor, had insurable interest on thestocks.

The Insurance Commission then ordered the respondent company to paycomplainant the sum of P100,000.00 with interest and attorneys fees.

CA reversed the decision of the Insurance Commission because it foundthat the petitionerknewof the existence of the two other policies issued bythe PFIC.

Issues:1. WON the petitioner had not disclosed the two insurance policies when heobtained thefire insuranceand thereby violated Condition 3 of the policy.2. WON he is prohibited from recovering

Held: Yes. No. Petition Granted

Ratio:

1. The court agreed with the CA that the petitioner knew of the priorpolicies issued by the PFIC. His letter of 18 January 1991 to the privaterespondent conclusively proves this knowledge. His testimony to thecontrary before the Insurance Commissioner and which the latter reliedupon cannot prevail over a written admission made ante litem motam. Itwas, indeed, incredible that he did not know about the prior policies sincethese policies were not new or original.

2. Stated differently, provisions, conditions or exceptions in policies whichtend to work a forfeiture of insurance policies should be construed moststrictly against those for whose benefits they are inserted, and mostfavorably toward those against whom they are intended to operate.

With these principles in mind, Condition 3 of the subject policy is nottotally free from ambiguity and must be meticulously analyzed. Suchanalysis leads us to conclude that (a) the prohibition applies only to doubleinsurance, and (b) the nullity of the policy shall only be to the extentexceeding P200,000.00 of the total policies obtained.


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Furthermore, by stating within Condition 3 itself that such condition shallnot apply if the total insurance in force at the time of loss does not exceedP200,000.00, the private respondent was amenable to assume a co-insurer'sliability up to a loss not exceeding P200,000.00. What it had in mind was todiscourage over-insurance. Indeed, the rationale behind the incorporation of

"other insurance" clause in fire policies is to prevent over-insurance andthus avert the perpetration of fraud. When a property owner obtainsinsurance policies from two or more insurers in a total amount that exceedsthe property's value, the insured may have an inducement to destroy theproperty for the purpose of collecting the insurance. The public as well asthe insurer is interested in preventing a situation in which a fire would beprofitable to the insured.


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SAURA IMPORT & EXPORT CO., INC., plaintiff-appellant, vs.

PHILIPPINE INTERNATIONAL SURETY CO., INC., and

PHILIPPINE NATIONAL BANK,

defendants-appellees.

G.R. No. L-15184; May 31, 1963;

Doctrine: Actual personal notice to the insured is essential to a cancellationunder a provision for cancellation by notice. It is condition precedent to acancellation of the policy by the insurer, and consequently a lettercontaining notice of cancellation which is mailed by the insurer but notreceived by the insured, is ineffective as cancellation

FACTS:

1. December 26, 1952: the Saura Import & Export Co Inc., mortgaged to thePhil. National Bank, a parcel of land, to secure the payment of promissorynote of P27,000.00

2. April 30, 1953: the mortgage was amended to guarantee an increasedamount, bringing the total mortgaged debt to P37,000.00

3. The provisions of the mortgaged contact, pertinent to the resolution of thepresent case, provide as follows

a. 2. . . . he shall insure the mortgaged property at all times againstfire and earthquake for an amount and with such company satisfactory tothe Mortgagee, indorsing to the latter the corresponding policies; he shallkeep the mortgaged property in good condition, making repairs andprotecting walls that may be necessary; . . .

4. Erected on the land mortgaged, was a building of strong materials ownedby the mortgagor Saura Import & Export Co., Inc., which had always beencovered by insurance, many years prior to the mortgage contract.

5. Saura insured the building and its contents with the Philippine

International Surety, an insurance firm acceptable to mortgagee Bank,

for P29,000.00 against fire for the period of one year from October 2,

1954

a. the insurance policy was endorsed to the mortgageePNB, in a Memo which states

i. Loss if any, payable to the Philippine National Bank as theirinterest may appear, subject to the terms, conditions and warranties of thispolicy

6. On October 15, 1954, barely thirteen (13) days after the issuance of

the fire insurance policy, the insurer cancelled the same, effective as ofthe date of issue

a. Notice of the cancellation was given to appellee bank in

writing

7. On April 6, 1955, the building and its contents, worth P40,685.69 wereburned.

8. Saura filed a claim with the Insurer and mortgagee Bank.

9. Upon the presentation of notice of loss with the PNB, Saura learned forthe first time that the policy had previously been cancelled on October 2,

1954, by the insurer, when Saura's folder in the Bank's filed was opened andthe notice of cancellation (original and duplicate) sent by the Insurer to theBank, was found.

10. Upon refusal of the Insurer Philippine International Surety to pay theamount of the insurance, Civil Case No. 26847 was filed with the ManilaCFI against the Insurer, and the PNB was later included as party defendant,after it had refused to prosecute the case jointly with Saura Import & ExportCo., Inc.

11. At the trial, it was established that neither the Insurer nor the mortgageeBank informed the plaintiff Saura of the cancellation of the policy

12. Trial court dismissed the complaint

ISSUE: 1. Whether the notice of cancellation to the bank is notice to Sauraas well? NO


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HELD:her contracts of insurance upon property, in

addition to the common provision for cancellation of the policy uponrequest of the insured, generally provide for cancellation by the insurer bynotice to the insured for a prescribed period, which is usually 5 days, and

the return of the unearned portion of the premium paid by the insured

ions for notice to the insured, is toprevent the cancellation of the policy, without allowing the insured ampleopportunity to negotiate for other insurance in its stead.

o The form and sufficiency of a notice of cancellation is determined bypolicy provisions.

in any particular form, in the absence ofa statute or policy provision prescribing such form, and it is sufficient, solong as it positively and unequivocally indicates to the insured, that it is the

intention of the company that the policy shall cease to be binding.

certain number of daysnotice shall be given, a reasonable notice and opportunity to obtain otherinsurance must be given

o the insured is essential to a cancellation under aprovision for cancellation by notice.

o condition precedent to a cancellation of the policy by the insurer, andconsequently a letter containing notice of cancellation which is mailed bythe insurer but not received by the insured, is ineffective as cancellation

ide for the notice, its form or period.

a clear and unequivocal manner,preferably in writing, in view of the importance of an insurance contract,should be given by the insurer to the insured, so that the latter might begiven an opportunity to obtain other insurance for his own protection.

o The notice should be personal to the insured and not to and/or through anyunauthorized person by the policy.

he defendant-appellee insurance company to notify theinsured, but it did not.

April 6, 1955, at the time when the policy was enforced (October 2, 1954 toOctober 2, 1955); and that under the facts, as found by the trial court, towhich We are bound, it is evident that both the insurance company and theappellee bank failed, wittingly or unwittingly, to notify the insuredappellant Saura of the cancellation made.

to the bank, as far appellant herein is concerned, is not effectivenotice

t the property insured, and the policy

contains a clause stating that loss, if any, shall be payable to such mortgageeor the holder of such lien as interest may appear, notice of cancellation tothe mortgagee or lienholder alone is ineffective as a cancellation of thepolicy to the owner of the property.

DISPOSITION: WHEREFORE, the decision appealed from is herebyreversed, and another is entered, condemning the defendant-appelleePhilippine International Surety Co., Inc., to pay Saura Import & Export Co.,Inc., appellant herein, the sum of P29,000.00, the amount involved in PolicyNo. 429, subject-matter of the instant case. Without costs.


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[G.R. No. L-43766. February 26, 1988.]

PHILIPPINE NATIONAL BANK, petitioner, vs. THE HON. COURT OFAPPEALS (SPECIAL THIRD DIVISION), IGNACIO DESIDERIO ANDVICTORIA F. DESIDERIO, respondents.

SYLLABUS1. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF THECOURT OF APPEALS, BINDING ON APPEAL. We find no cogentreasons to disturb the ruling of the Court of Appeals. Indeed, and as foundby the lower courts, the petitioner could have collected the insuranceproceeds if only it were not negligent. It had ample time and enough legalremedies, not to mention resources, to collect the insurance proceeds wherethe same became due, yet, it merely sent demand letters to the insurancecompany. And when the company did not act on the letters, the petitionerdid not pursue other remedies to press its claim. It did not even file a suit forthe recovery of the insurance proceeds against the insurance company

before and even during the liquidation of the company. It allowed sevenlong years to pass before finally deciding to file a collection case. Realizingthat it could no longer collect from the insurance company because thesame had already folded up, the petitioner directed the collection suitagainst the private respondents whose obligation with the petitioner hadlong been extinguished. For, indeed, under the facts obtaining, the privaterespondents cannot have been expected to initiate moves for the collectionof the insurance proceeds. It was the petitioner which was duty bound toenforce the claim for the insurance proceeds, being, as earlier mentioned,the attorney-in-fact of the private respondents and the beneficiary of theinsurance policy.

2. MERCANTILE LAW; INSURANCE; ATTORNEY-IN-FACTDESIGNATED AS BENEFICIARY OF AN INSURANCE POLICY HASTHE OBLIGATION TO COLLECT THE PROCEEDS THEREOF. Thepetitioner as the attorney-in-fact of the private respondents and as thebeneficiary of the insurance policy had the obligation to collect the proceedsof the policy. For "under the chattel mortgage covering the goods offered assecurity for payment of the loan, the private respondents as mortgagorsconstituted and appointed the petitioner as mortgagee their attorney-in-factwith full power and authority to collect and receive any interest, income orbenefits produced by the mortgaged property and apply such amountcollected and received in payment of the interest accruing and of the

principal obligation. The petitioner was itself the beneficiary of theinsurance policy to which it was duly indorsed and made payable, and wasin possession thereof."

D E C I S I O N

SARMIENTO, J p:In its resolve to recover the trifling sum of P3,855.60, petitioner PhilippineNational Bank (PNB), a premier banking institution, incredulous of theadverse decisions of three lower courts, to wit: the City Court ofZamboanga City which rendered a decision the dispositive portion of whichreads:WHEREFORE, this Court hereby renders judgment in the following tenor:That the complaint for the unpaid balance of the contractual loan of theDefendant Ignacio Desiderio and Victoria F. Desiderio filed by thePhilippine National Bank, is hereby ordered dismissed and that the amountof P1,089.60 which the Defendants paid as partial payment to the PlaintiffBank on account of the loss contracted, is here by declared unrecoverable

and the same shall inure to the benefit of the Philippine National Bank.That no pronouncement as to damages, costs and attorney's fees is herebymade, as the loss of the things mortgaged were presumed to be caused byaccident, no evidence having been presented to prove the contrary; 1

the then CFI of Zamboanga City which affirmed the above in a decision thedispositive portion of which reads:

IN VIEW OF THE FOREGOING, the appealed judgment of the City Courtis affirmed insofar as it dismisses the complaint as well as the counter-claimfiled in the above entitled case; 2

and the Court of Appeals which likewise affirmed the above in a decisionthe dispositive portion of which reads:

WHEREFORE, the appealed judgment, being in accordance with law andthe evidence, is hereby affirmed in toto, with costs against the petitioner; 3has elevated this case to the highest court of the land with the followingerrors assigned:


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ITHE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER,AS ATTORNEY-IN-FACT OF PRIVATE RESPONDENTS IS BOUNDTO SUCCESSFULLY COLLECT THE INSURANCE PROCEEDS OFTHE MORTGAGED PROPERTY OF THE LATTER

.IITHE COURT OF APPEALS ERRED IN EXONERATING PRIVATERESPONDENTS, BY WAY OF IMPLIED OFF-SETTING, FROM ITSLOAN ACCOUNT WITH PETITIONER, THERE BEING NOCOUNTERCLAIM FOR DAMAGES FILED BASED ON BREACH OFDUTY.

The facts of the case are as follows:More than a quarter century ago, on January 10, 1963, the privaterespondents-spouses applied for a retailers' loan with the petitioner. Theloan which was subsequently approved was secured by a chattel mortgage

consisting of the verified inventory of stocks in the store of the privaterespondents, located at Marahui Street, Zamboanga City. In addition to this,the goods and merchandise, subject matter of the mortgage, were insuredwith the Cosmopolitan Insurance Co. in the amount of P4,000.00 with thepetitioner as the beneficiary pursuant to the requirements of the latter.

On August 1, 1964, while the insurance and the chattel mortgage were stillin force, and after the private respondents had paid the petitioner the amountof P1,089.60 as partial payment of the loan in accordance with the loanagreement, the insured building and merchandise of the private respondentswere totally destroyed by fire.

The petitioner sent several letters to the insurance company for the purposeof recovering the proceeds of the insurance but to no avail. Sometime in1966, the said insurance company became the subject of liquidation. Sevenyears after the insured chattels mortgaged were burned, the petitioner filed acomplaint for collection against the private respondents.

We find no cogent reasons to disturb the ruling of the Court of Appeals.The petitioner as the attorney-in-fact of the private respondents and as thebeneficiary of the insurance policy had the obligation to collect the proceedsof the policy. The argument of the petitioner to the effect that there is noexpress provision in the Chattel Mortgage Contract which compels the

petitioner to collect the proceeds of the insurance in case of loss is a mererationalization of one trying hard to put the blame on another for its ownfault or negligence. For "under the chattel mortgage covering the goodsoffered as security for payment of the loan, the private respondents asmortgagors constituted and appointed the petitioner as mortgagee their

attorney-in-fact with full power and authority to collect and receive anyinterest, income or benefits produced by the mortgaged property and applysuch amount collected and received in payment of the interest accruing andof the principal obligation. The petitioner was itself the beneficiary of theinsurance policy to which it was duly indorsed and made payable, and wasin possession thereof." 5

Indeed, and as found by the lower courts, the petitioner could have collectedthe insurance proceeds if only it were not negligent. It had ample time andenough legal remedies, not to mention resources, to collect the insuranceproceeds where the same became due, yet, it merely sent demand letters tothe insurance company. And when the company did not act on the letters,

the petitioner did not pursue other remedies to press its claim. It did noteven file a suit for the recovery of the insurance proceeds against theinsurance company before and even during the liquidation of the company.It allowed seven long years to pass before finally deciding to file acollection case. Realizing that it could no longer collect from the insurancecompany because the same had already folded up, the petitioner directed thecollection suit against the private respondents whose obligation with thepetitioner had long been extinguished.

For, indeed, under the facts obtaining, the private respondents cannot havebeen expected to initiate moves for the collection of the insurance proceeds.It was the petitioner which was duty bound to enforce the claim for the

insurance proceeds, being, as earlier mentioned, the attorney-in-fact of theprivate respondents and the beneficiary of the insurance policy.

It is sad that the private respondents, small time sari-sari store keepers, hadto be dragged into this suit if only because of the petitioner's resoluteness torecover what, to our minds, is too measly an amount, not really worthlitigating upon, in fact, not even worth wasting the time of this Court.

WHEREFORE, the petition is hereby DISMISSED and the appealedjudgment AFFIRMED, in toto, with triple costs against the petitioner.SO ORDERED.


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Insurable Interest

Insurance Code

Sec. 18. No contract or policy of insurance on property shall be enforceableexcept for the benefit of some person having an insurable interest in the

property insured.

Sec. 25. Every stipulation in a policy of insurance for the payment of loss

whether the person insured has or has not any interest in the property

insured, or that the policy shall be received as proof of such interest, and

every policy executed by way of gaming or wagering, is void.

Violeta R. Lalican v. Insular Life Assurance Co. Ltd.

Facts:

Eulogio Lalican applied for an insurance policy with the Insular

Life amounting to Php 1,500,000. Under the terms of the policy, Eulogio

was to pay the premiums on a quarterly basis, having a grace period of 31

days, for the payment of each premium subsequent to the first. If any

premium was not paid on or before the due date, the policy would be in

default and if the premium remained unpaid until the end of the grace

period, the policy would automatically lapse and become void.

Eulogio paid the premiums due on the first two succeeding

payment dates but failed to pay subsequent premiums even after the lapse o f

the grace period thereby rendering the policy void. He submitted an

application for reinstatement of policy through Josephine Malaluan, an

agent of Insular Life, together with the payment of the unpaid premiums.

However, the Insular Life notified him that his application could not be

processed because he failed to pay the overdue interest of the unpaid

premiums.

On Sept. 17, 1998, Eulogio submitted to Malaluans house a

second application for reinstatement including the payment for the overdue

interest as well as for the premiums due for April and July of that year,

which was received by Malaluans husband on her behalf and was thereby

issued a receipt for the amount Eulogio deposited. However, on that same

day, Eulogio died of cardio-respiratory arrest secondary to electrocution.

Violeta, Eulogios widow filed with the Insular Life a claim for

payment of the full proceeds of the policy but the latter informed her that

the claim could not be granted since at the time of Eulogios death, his

policy has already lapsed and he failed to reinstate the same. Violeta

requested a reconsideration of her claim but the same was also rejected.

Therefore, she filed a complaint for death claim benefits with the RTC

alleging the unfair claim settlement practice of Insular Life and its

deliberate failure to act with reasonable promptness on her insurance claim.

The trial court rendered a decision in favour of Insular Life and after theformer denied her motion for reconsideration, she directly elevated her case

to the Supreme Court via the petition for review on Certiorari.

Issue:

Whether or not the policy of Eulogio was reinstated before his death.

Ruling:

To reinstate a policy means to restore the same to preium-paying

status after it has been permitted to lapse. Both the policy contract and

application for reinstatement provide for specific conditions for the

reinstatement of a lapsed policy.

According to the Application for Reinstatement, the policy would

only be considered reinstated upon the approval of the application by

Insular Life during the applicants lifetime and good health and whatever

amount the application paid in connection was considered to be a deposit

only until approval of said application.


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Eulogios death rendered impossible full compliance with the

conditions for reinstatement of policy even though, before his death, he

managed to file his application for reinstatement and deposit the amount for

payment of his overdue premiums and interest thereon with Malaluan. As

expressly provided on the policy contract, agents of Insular Life have no

authority to approve any application for reinstatement. They still had to turn

over to Insular Life the application for reinstatement and accompanying

deposit, for processing and approval of the latter.


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El Oriente Fabrica de Tabacos, Inc. vs. Juan Posadas, Collector of

Internal Revenue

[G.R. No. 34774, September 21, 1931]

Facts:

Insurer: Manufacturers Life Insurance Co., of Toronto, Canada, thru its

local agent E.E. Elser

Insured: A. Velhagen (manager of El Oriente)

Beneficiary: El Oriente Fabrica de Tabacos, Inc.

El Oriente, in order to protect itself against the loss that it might

suffer by reason of the death of its manager, whose death would be a serious

loss to El Oriente procured from the Insurer an insurance policy on the life

of the said manager for the sum of 50,000 USD with El Oriente as the

designated sole beneficiary. The insured has no interest or participation in

the proceeds of said life insurance policy.

El Oriente charged as expenses of its business all the said

premiums and deducted the same from its gross incomes as reported in its

annual income tax returns, which deductions were allowed by Posadas

(Collector of Internal Revenue) upon showing by El Oriente that such

premiums were legitimate expenses of the business.

Upon the death of the manager, El Oriente received all the

proceeds of the life insurance policy together with the interest and the

dividends accruing thereon, aggregating P104,957.88. Posadas assessed

and levied the sum of P3,148.74 as income tax on the proceeds of the

insurance policy, which was paid by El Oriente under protest. El Oriente

claiming exemption under Section 4 of the Income Tax Law.

Issue:

Whether or not the proceeds of insurance taken by a corporation on the life

of an important official to indemnify it against loss in case of his death, are

taxable as income under the Philippine Income Tax Law?

Ruling:

The Income Tax Law for the Philippines is Act No. 2833, as

amended. In chapter I On Individuals, is to be found section 4 which

provides that, "The following incomes shall be exempt from the provisions

of this law: (a) The proceeds of life insurance policies paid to beneficiaries

upon the death of the insured ... ." The Chapter on Corporationsdoes not

provide as above. It is certain that the proceeds of life insurance policies

are exempt. It is not so certain that the proceeds of life insurance policiespaid to corporate beneficiaries upon the death of the insured are likewise

exempt.

The situation will be better elucidated by a brief reference to laws

on the same subject in the United States. The Income Tax Law of 1916

extended to the Philippine Legislature, when it came to enact Act No. 2833,

to copy the American statute. Subsequently, the Congress of the United

States enacted its Income Tax Law of 1919, in which certain doubtful

subjects were clarified. Thus, as to the point before us, it was made clear,

when not only in the part of the law concerning individuals were

exemptions provided for beneficiaries, but also in the part concerning

corporations, specific reference was made to the exemptions in favor of

individuals, thereby making the same applicable to corporations. This was

authoritatively pointed out and decided by the United States Supreme Court

in the case of United States vs. Supplee-Biddle Hardware Co. ( [1924], 265

U.S., 189), which involved facts quite similar to those before us.


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To quote the exact words in the cited case of Chief Justice Taft

delivering the opinion of the court:

It is earnestly pressed upon us that proceeds of life insurance paid

on the death of the insured are in fact capital, and cannot be taxed as income

that proceeds of a life insurance policy paid on the death of the insured

are not usually classed as income.

Considering, therefore, the purport of the stipulated facts,

considering the uncertainty of Philippine law, and considering the lack of

express legislative intention to tax the proceeds of life insurance policies

paid to corporate beneficiaries, particularly when in the exemption in favor

of individual beneficiaries in the chapter on this subject, the clause is

inserted "exempt from the provisions of this law," we deem it reasonable to

hold the proceeds of the life insurance policy in question as representing an

indemnity and not taxable income.

The foregoing pronouncement will result in the judgment being

reversed and in another judgment being rendered in favor of El Oriente.


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Beneficiaries

New Civil Code

Article 2012. Any person who is forbidden from receiving any donation

under article 739 cannot be named beneficiary of a life insurance policy bythe person who cannot make any donation to him, according to said article

Article 739.The following donations shall be void:

(1) Those made between persons who were guilty of adultery or

concubinage at the time of the donation;

(2) Those made between persons found guilty of the same criminal offense,

in consideration thereof;

(3) Those made to a public officer or his wife, descendants and ascendants,

by reason of his office.

In the case referred to in No. 1, the action for declaration of nullity may be

brought by the spouse of the donor or donee; and the guilt of the donor and

donee may be proved by preponderance of evidence in the same action.

Insurance Code:

Sec. 11. The insured shall have the right to change the beneficiary he

designated in the policy, unless he has expressly waived this right in said

policy.

Sec. 12. The interest of a beneficiary in a life insurance policy shall be

forfeited when the beneficiary is the principal, accomplice, or accessory in

willfully bringing about the death of the insured; in which event, the nearest

relative of the insured shall receive the proceeds of said insurance if not

otherwise disqualified.

THE INSULAR LIFE ASSURANCE COMPANY, LTD. vs.

CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO

[G.R. No. L-44059 October 28, 1977]

Facts of the Case:

On September 1, 1968, Buenaventura Cristor Ebrado was issued by The

Life Assurance Co., Ltd., Policy No. 009929 on a whole-life for P5,882.00

with a, rider for Accidental Death for the same amount Buenaventura C.

Ebrado designated Carpponia T. Ebrado as the revocable beneficiary in his

policy. He to her as his wife.

On October 21, 1969, Buenaventura C. Ebrado died when he was hit by a

failing branch of a tree. As the policy was in force, The Insular Life

Assurance Co., Ltd. liable to pay the coverage in the total amount of

P11,745.73, representing the face value of the policy in the amount ofP5,882.00 plus the additional benefits for accidental death also in the

amount of P5,882.00 and the refund of P18.00 paid for the premium due

November, 1969, minus the unpaid premiums and interest thereon due for

January and February, 1969, in the sum of P36.27.

Carponia T. Ebrado filed with the insurer a claim for the proceeds of the

Policy as the designated beneficiary therein, although she admits that she

and the insured Buenaventura C. Ebrado were merely living as husband and

wife without the benefit of marriage.

Pascuala Vda. de Ebrado also filed her claim as the widow of the deceasedinsured. She asserts that she is the one entitled to the insurance proceeds,

not the common-law wife, Carponia T. Ebrado.

In doubt as to whom the insurance proceeds shall be paid, the insurer, The

Insular Life Assurance Co., Ltd. commenced an action for Interpleader

before the Court of First Instance of Rizal on April 29, 1970.


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After the issues have been joined, a pre-trial conference was held. In the

pre-trial conference the parties submits evidence and make admissions.xxx;

8) that the beneficiary designated by the insured in the policy is Carponia

Ebrado and the insured made reservation to change the beneficiary but

although the insured made the option to change the beneficiary, same was

never changed up to the time of his death and the wife did not have any

opportunity to write the company that there was reservation to change the

designation of the parties it agreed that a decision be rendered based on and

stipulation of facts as to who among the two claimants is entitled to the

policy.

On September 25, 1972, the trial court rendered judgment declaring among

others, Carponia T. Ebrado disqualified from becoming beneficiary of the

insured Buenaventura Cristor Ebrado and directing the payment of the

insurance proceeds to the estate of the deceased insured. The trial court held

that.It is patent from the last paragraph of Art. 739 of the Civil Code that acriminal conviction for adultery or concubinage is not essential in order to

establish the disqualification mentioned therein. Neither is it also necessary

that a finding of such guilt or commission of those acts be made in a

separate independent action brought for the purpose. The guilt of the donee

(beneficiary) may be proved by preponderance of evidence in the same

proceeding (the action brought to declare the nullity of the donation).

Since it is agreed in their stipulation during the pre-trial that the deceased

insured and defendant Carponia T. Ebrado were living together as husband

and wife without being legally married and that the marriage of the insured

with the other defendant Pascuala Vda. de Ebrado was valid and stillexisting at the time the insurance in question was purchased there is no

question that defendant Carponia T. Ebrado is disqualified from becoming

the beneficiary of the policy in question and as such she is not entitled to the

proceeds of the insurance upon the death of the insured.

Issue of the Case:

Can a common-law wife named as beneficiary in the life insurance policy of

a legally married man claim the proceeds thereof in case of death of the

latter?

Ruling:

The SC affirmed the decision of the trial court.

under Article 2012 of the same Code, "any person who is forbidden from

receiving any donation under Article 739 cannot be named beneficiary of a

fife insurance policy by the person who cannot make a donation to him.

Common-law spouses are, definitely, barred from receiving donations from

each other. Article 739 of the new Civil Code provides: The following

donations shall be void:

1. Those made between persons who were guilty of adultery or concubinage

at the time of donation;

2. Those made between persons found guilty of the same criminal offense,

in consideration thereof;

3. Those made to a public officer or his wife, descendants or ascendants by

reason of his office.

In the case referred to in No. 1, the action for declaration of nullity may be

brought by the spouse of the donor or donee; and the guilt of the donee may

be proved by preponderance of evidence in the same action.

The underscored clause neatly conveys that no criminal conviction for the

offense is a condition precedent. In fact, it cannot even be from the

aforequoted provision that a prosecution is needed. On the contrary, the law

plainly sta tes that the guilt of the party may be proved " in the same acting

for declaration of nullity of donation. And, it would be sufficient if evidence

preponderates upon the guilt of the consort for the offense indicated. The

quantum of proof in criminal cases is not demanded.


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In the caw before Us, the requisite proof of common-law relationship

between the insured and the beneficiary has been conveniently supplied by

the stipulations between the parties in the pre-trial conference of the case. It

case agreed upon and stipulated therein that the deceased insured

Buenaventura C. Ebrado was married to Pascuala Ebrado with whom she

has six legitimate children; that during his lifetime, the deceased insured

was living with his common-law wife, Carponia Ebrado, with whom he has

two children. These stipulations are nothing less than judicial admissions

which, as a consequence, no longer require proof and cannot be

contradicted. Afortiori, on the basis of these admissions, a judgment may

be validly rendered without going through the rigors of a trial for the sole

purpose of proving the illicit liaison between the insured and the

beneficiary. In fact, in that pretrial, the parties even agreed "that a decision

be rendered based on this agreement and stipulation of facts as to who

among the two claimants is entitled to the policy."

ACCORDINGLY, the appealed judgment of the lower court is hereby

affirmed. Carponia T. Ebrado is hereby declared disqualified to be the

beneficiary of the late Buenaventura C. Ebrado in his life insurance policy.

As a consequence, the proceeds of the policy are hereby held payable to the

estate of the deceased insured. Costs against Carponia T. Ebrado.

SO ORDERED.


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Vda. De Consuegra v. GSIS

Facts:

Appeal on purely questions of law from the decision of the Court of First

Instance of Surigao del Norte, dated March 7, 1967, in its SpecialProceeding No. 1720.

The late Jose Consuegra was employed as a shop foreman in the province of

Surigao del Norte. He contracted two marriages, the first with Rosario Diaz

and the second, which was contracted in good faith while the first marriage

was subsisting, with Basilia Berdin.

Consuegra died, while the proceeds of his GSIS life insurance were paid to

petitioner Basilia Berdin and her children who were the beneficiaries named

in the policy. They received Php 6,000.

Consuegra did not designate any beneficiary who would receive the

retirement insurance benefits due to him. Respondent Rosario Diaz, the

widow by the first marriage, filed a claim with the GSIS asking that the

retirement insurance benefits be paid to her as the only legal heir of

Consuegra, considering that the deceased did not designate any beneficiary

with respect to his retirement insurance benefits.

Petitioner Berdin and her children, likewise, filed a similar claim with the

GSIS, asserting that being the beneficiaries named in the life insurance

policy of Consuegra, they are the only ones entitled to receive the

retirement insurance benefits due the deceased Consuegra.

The GSIS ruled that the legal heirs of the late Jose Consuegra were Rosario

Diaz, his widow by his first marriage who is entitled to one-half, or 8/16, of

the retirement insurance benefits, on the one hand; and Basilia Berdin, his

widow by the second marriage and their seven children, on the other hand,

who are entitled to the remaining one-half, or 8/16.

Basilia Berdin didnt agree. She filed a petition de claring her and her

children to be the legal heirs and exclusive beneficiaries of the retirement

insurance.

The trial court affirmed stating that: "when two women innocently and in

good faith are legally united in holy matrimony to the same man, they andtheir children, born of said wedlock, will be regarded as legitimate children

and each family be entitled to one half of the estate.

Hence the present appeal by Basilia Berdin and her children.

Issue: To whom should this retirement insurance benefits of Jose

Consuegra be paid, because he did not designate the beneficiary of his

retirement insurance?

Held: Both

Ratio:

Berdin averred that because the deceased Jose Consuegra failed to designate

the beneficiaries in his retirement insurance, the appellants who were the

beneficiaries named in the life insurance should automatically be considered

the beneficiaries to receive the retirement insurance benefits.

The GSIS offers two separate and distinct systems of benefits to its

members one is the life insurance and the other is the retirement

insurance. These two distinct systems of benefits are paid out from two

distinct and separate funds that are maintained by the GSIS.

In the case of the proceeds of a life insurance, the same are paid to whoever

is named the beneficiary in the life insurance policy. As in the case of a life

insurance provided for in the Insurance Act, the beneficiary in a life

insurance under the GSIS may not necessarily be a heir of the insured. The

insured in a life insurance may designate any person as beneficiary unless

disqualified to be so under the provisions of the Civil Code. And in the

absence of any beneficiary named in the life insurance policy, the proceeds

of the insurance will go to the estate of the insured.


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Retirement insurance is primarily intended for the benefit of the employee,

to provide for his old age, or incapacity, after rendering service in the

government for a required number of years. If the employee reaches the age

of retirement, he gets the retirement benefits even to the exclusion of the

beneficiary or beneficiaries named in his application for retirement

insurance. The beneficiary of the retirement insurance can only claim the

proceeds of the retirement insurance if the employee dies before retirement.

If the employee failed or overlooked to state the beneficiary of his

retirement insurance, the retirement benefits will accrue to his estate and

will be given to his legal heirs in accordance with law, as in the case of a

life insurance if no beneficiary is named in the insurance policy.

GSIS had correctly acted when it ruled that the proceeds should be divided

equally between his first living wife and his second. The lower court has

correctly applied the ruling of this Court in the case of Lao v Dee.

Gomez vs. Lipana- in construing the rights of two women who were married

to the same man, held "that since the defendant's first marriage has not been

dissolved or declared void the conjugal partnership established by that

marriage has not ceased. Nor has the first wife lost or relinquished her

status as putative heir of her husband under the new Civil Code, entitled to

share in his estate upon his death should she survive him. Consequently,

whether as conjugal partner in a still subsisting marriage or as such putative

heir she has an interest in the husband's share in the property here in

dispute....

With respect to the right of the second wife, although the second marriagecan be presumed to be void ab initio as it was celebrated while the first

marriage was still subsisting, still there is need for judicial declaration of

such nullity. And inasmuch as the conjugal partnership formed by the

second marriage was dissolved before judicial declaration of its nullity, "the

only lust and equitable solution in this case would be to recognize the right

of the second wife to her share of one-half in the property acquired by her

and her husband and consider the other half as pertaining to the conjugal

partnership of the first marriage."


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SOUTHERN LUZON EMPLOYEES ASSN. V. GOLPEO

Note:

A common law wife of the insured who has a legal wife is disqualified as

beneficiary. It is not required that there be a previous conviction foradultery or concubinage for the prohibition to apply. However, in an earlier

case (such as the present case), the common-law wife designated prevailed

over the legal wife because the case took place while the Old Civil Code

was still applicable, under which there was no provision similar to

Art.2012.

FACTS:

Southern Luzon Employees' Association is composed of laborers and

employees of Laguna tayabas Bus Co., and Batangas Transportation

Company, and one of its purposes is mutual aid of its members and theirdefendants in case of death.

Roman A. Concepcion was a member until his death on December 13,

1950. In the form required by the association to be accomplished by its

members, with reference to the death benefit, Roman A. Concepcion listed

as his beneficiaries Aquilina Maloles, Roman M. Concepcion, Jr., Estela M.

Concepcion, Rolando M. Concepcion and Robin M. Concepcion.

After the death of Roman A. Concepcion, the association was able to collect

voluntary contributions from its members amounting to P2,505. Three sets

of claimants presented themselves, namely, (1) Juanita Golpeo, legal wifeof Roman A. Concepcion, and her children; (2) Aquilina Maloles, common

law wife of Roman A. Concepcion, and her children, named beneficiaries

by the deceased; and (3) Elsie Hicban, another common law wife of Roman

A. Concepcion, and her child.

The court rendered a decision, declaring the defendants Aquiliana Malolos

and her children the sole beneficiaries of the sum of P2,505.00 and ordering

the plaintiff to deliver said amount to them.

ISSUE:

WHETHER OR NOT THE COURT COMMITED ERROR IN

DESIGNATING A COMMON LAW WIFE OF AN INSURED AS THE

BENEFICIARY INSTEAD OF THE LEGAL WIFE.

Remember: This case took place while the Old Civil Code was still

applicable.

HELD: Judgment affirmed.

The decision is based mainly on the theory that the contract between the

plaintiff and the deceased Roman A. Concepcion partook of the nature of aninsurance and that, therefore, the amount in question belonged exclusively

to the beneficiaries, invoking the following pronouncements of this Court in

the case ofDel Val vs. Del Val, 29 Phil., 534:

With the finding of the trial court that the proceeds of the life-insurance

policy belongs exclusively to the defendant as his individual and separate

property, we agree. That the proceeds of an insurance policy belong

exclusively to the beneficiary and not to the estate of the person whose life

was insured, and that such proceeds are the separate and individual property

of the beneficiary, and not of the heirs of the person whose life was insured,

is the doctrine in America. We believe that the same doctrine obtains inthese Islands by virtue of section 428 of the Code of Commerce, which

reads:

"The amounts which the underwriter must deliver to the person insured, in

fulfillment of the contract, shall be the property creditors of any kind

whatsoever of the person who effected the insurance in favor of the

formers."


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AS TO THE CONTENTION OF THE COUNSELS PLAINTIFF THAT

THE PROCEEDS OF THE INSURANCE POLICY WERE DONATION

OR GIFT MADE BY THE FATHER DURING HIS LIFETIME, SUCH

THAT UNDER THE CIVIL CODE ARE NOT BETTERMENTS AND

SHALL BE CONSIDERED AS PART OF THE LEGAL PORTION.

The court disagrees with this contention. The contract of life insurance is a

special contract and the destination of the proceeds thereof is determined by

special laws which deal exclusively with that subject. The Civil Code has

no provisions which relate directly and specifically to life-insurance

contract or to the destination of life-insurance proceeds. That subject is

regulate exclusively by the Code of Commerce which provides for the terms

of the contract, the relations of the parties and the destination of the

proceeds of the policy.


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HEIRS OF LORETO C. MARAMAG, represented by surviving spouse

VICENTA PANGILINAN MARAMAG, petitioners,vs. EVA VERNA DE

GUZMAN MARAMAG, ODESSA DE GUZMAN MARAMAG, KARL

BRIAN DE GUZMAN MARAMAG, TRISHA ANGELIE MARAMAG,

THE INSULAR LIFE ASSURANCE COMPANY, LTD., and GREAT

PACIFIC LIFE ASSURANCE CORPORATION, respondents.

G.R. No. 181132. June 5, 2009. J.Nachura

Doctrine: The only persons entitled to claim the insurance proceeds are

either the insured, if still alive or the beneficiary if the insured is already

deceased upon the maturation of the policy; Exception is where the

insurance contract was intended to benefit third persons who are not

parties to the same in the form of favorable stipulations or indemnity

Tickler: The petition alleged that petitioners being the legitimate wife and

children of Loreto Maramag (L

Insurance Class

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