Great Pacific v CA G.R. No.

L-31845 April 30, 1979

J. De Castro

Facts:
Ngo Hing filed an application with the Great Pacific for a twenty-year endowment policy in the
amount of P50,000.00 on the life of his one-year old daughter Helen. He supplied the essential
data which petitioner Mondragon, the Branch Manager, wrote on the form. The latter paid the
annual premium the sum of P1,077.75 going over to the Company, but he retained the amount
of P1,317.00 as his commission for being a duly authorized agent of Pacific Life.
Upon the payment of the insurance premium, the binding deposit receipt was issued Ngo Hing.
Likewise, petitioner Mondragon handwrote at the bottom of the back page of the application
form his strong recommendation for the approval of the insurance application. Then 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
petitioner Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon
wrote back Pacific Life again strongly recommending the approval of the 20-year endowment
insurance plan to children, pointing out that since the customers were asking for such coverage.
Helen Go died of influenza. Ngo Hing sought the payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for the recovery before the Court of First Instance of
Cebu, which ruled against him.

Issues:
1. Whether the binding deposit receipt constituted a temporary contract of the life insurance in
question
2. Whether Ngo Hing concealed the state of health and physical condition of Helen Go, which
rendered void the policy

Held: No. Yes. Petition dismissed.

Ratio:
The receipt was intended to be merely a provisional insurance contract. Its perfection was
subject to 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 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.
The receipt is merely an acknowledgment 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. There was still approval or rejection the same on the basis of whether
or not the applicant is "insurable on standard rates." Since Pacific Life disapproved the
insurance application of respondent Ngo Hing, the binding deposit receipt in question had never
become in force at any time. The binding deposit receipt is conditional and does not insure
outright. This was held in Lim v Sun.
The deposit paid by private respondent shall have to be refunded by Pacific Life.
2. Ngo Hing had deliberately concealed the state of health of his daughter Helen Go. When he
supplied data, he was fully aware that his one-year old daughter is typically a mongoloid child.
He withheld the fact material to the risk insured.
The contract of insurance is one of perfect good faith uberrima fides meaning good faith,
absolute and perfect candor or openness and honesty; the absence of any concealment or
demotion, however slight.
The concealment entitles the insurer to rescind the contract of insurance.
 ETERNAL VS. PHILAMLIFE

G.R. No. 166245

April 09, 2008

FACTS: Respondent Philamlife entered into an agreement denominated as Creditor Group Life
Policy with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under the policy,
the clients of Eternal who purchased burial lots from it on installment basis would be insured by
Philamlife. The amount of insurance coverage depended upon the existing balance of the
purchased burial lots.

The relevant provisions of the policy are:

ELIGIBILITY.

xx
EVIDENCE OF INSURABILITY.
xx
LIFE INSURANCE BENEFIT.
xx

EFFECTIVE DATE OF BENEFIT.

The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan
with the Assured. However, there shall be no insurance if the application of the Lot Purchaser is
not approved by the Company.

xx

Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers,
together with a copy of the application of each purchaser, and the amounts of the respective
unpaid balances of all insured lot purchasers. Eternal complied by submitting a letter dated
December 29, 1982, containing a list of insurable balances of its lot buyers for October 1982.
One of those included in the list as new business was a certain John Chuang. His balance of
payments was 100K. on August 2, 1984, Chuang died.

Eternal sent a letter dated to Philamlife, which served as an insurance claim for Chuangs death.
Attached to the claim were certain documents. In reply, Philamlife wrote Eternal a letter
requiring Eternal to submit the additional documents relative to its insurance claim for Chuangs
death. Eternal transmitted the required documents through a letter which was received by
Philamlife.

After more than a year, Philamlife had not furnished Eternal with any reply to the latters
insurance claim. This prompted Eternal to demand from Philamlife the payment of the claim for
PhP 100,000.
In response to Eternals demand, Philamlife denied Eternals insurance claim in a letter a portion
of which reads:

The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal
Gardens Memorial Park in October 1982 for the total maximum insurable amount of
P100,000.00 each. No application for Group Insurance was submitted in our office prior to his
death on August 2, 1984

Eternal filed a case with the RTC for a sum of money against Philamlife, which decided in favor
of Eternal, ordering Philamlife to pay the former 100K representing the proceeds of the policy.

CA reversed. Hence this petition.

ISSUE: WON Philamlife should pay the 100K insurance proceeds

HELD: petition granted.

YES

An examination of the provision of the POLICY under effective date of benefit, would show
ambiguity between its two sentences. The first sentence appears to state that the insurance
coverage of the clients of Eternal already became effective upon contracting a loan with Eternal
while the second sentence appears to require Philamlife to approve the insurance contract
before the same can become effective.

It must be remembered that an insurance contract is a contract of adhesion which must be

construed liberally in favor of the insured and strictly against the insurer in order to safeguard
the latters interest

On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon
a partys purchase of a memorial lot on installment from Eternal, an insurance contract covering
the lot purchaser is created and the same is effective, valid, and binding until terminated by
Philamlife by disapproving the insurance application. The second sentence of the Creditor
Group Life Policy on the Effective Date of Benefit is in the nature of a resolutory condition which
would lead to the cessation of the insurance contract. Moreover, the mere inaction of the insurer
on the insurance application must not work to prejudice the insured; it cannot be interpreted as
a termination of the insurance contract. The termination of the insurance contract by the insurer
must be explicit and unambiguous.

Perez v CA G.R. No. 112329. January 28, 2000

J. Ynares-Santiago

Facts:
Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation for P20,000.00.
Sometime in October 1987, an agent of the insurance corporation, visited Perez in Quezon and
convinced him to apply for additional insurance coverage of P50,000.00. Virginia A. Perez,
Primitivos wife, paid P2,075.00 to the agent. The receipt issued indicated the amount received
was a "deposit." Unfortunately, the agent lost the application form accomplished by Perez and
he asked the latter to fill up another application form. The agent sent the application for
additional insurance of Perez to the Quezon office. Such was supposed to forwarded to the
Manila office.
Perez drowned. His application papers for the additional insurance of P50,000.00 were still with
the Quezon. It was only after some time that the papers were brought to Manila. Without
knowing that Perez died, BF Lifeman Insurance Corporation approved the application and
issued the corresponding policy for the P50,000.00.
Petitioner Virginia Perez went to Manila to claim the benefits under the insurance policies of the
deceased. She was paid P40,000.00 under the first insurance policy for P20,000.00 but the
insurance company refused to pay the claim under the additional policy coverage of
P50,000.00, the proceeds of which amount to P150,000.00.
The insurance company maintained that the insurance for P50,000.00 had not been perfected
at the time of the death of Primitivo Perez. Consequently, the insurance company refunded the
amount paid.
BF Lifeman Insurance Corporation filed a complaint against Virginia Perez seeking the
rescission and declaration of nullity of the insurance contract in question.
Petitioner Virginia A. Perez, on the other hand, averred that the deceased had fulfilled all his
prestations under the contract and all the elements of a valid contract are present.
On October 25, 1991, the trial court rendered a decision in favor of petitioner ordering
respondent to pay 150,000 pesos. The Court of Appeals, however, reversed the decision of the
trial court saying that the insurance contract for P50,000.00 could not have been perfected since
at the time that the policy was issued, Primitivo was already dead.
Petitioners motion for reconsideration having been denied by respondent court, the instant
petition for certiorari was filed on the ground that there was a consummated contract of
insurance between the deceased and BF Lifeman Insurance Corporation.

Issue: WON the widow can receive the proceeds of the 2nd insurance policy
Held: No. Petition dismissed.

Ratio:
Perezs application was subject to the acceptance of private respondent BF Lifeman Insurance
Corporation. The perfection of the contract of insurance between the deceased and respondent
corporation was further conditioned with the following requisites stated in the application form:
"there shall be no contract of insurance unless and until a policy is issued on
this application and that the said policy shall not take effect until the premium has been paid and
the policy delivered to and accepted by me/us in person while I/We, am/are in good health."
BF Lifeman didnt give its assent when it merely received the application form and all the
requisite supporting papers of the applicant. This happens only when it gives a policy.
It is not disputed, however, that when Primitivo died on November 25, 1987,
his application papers for additional insurance coverage were still with the branch office of
respondent corporation in Quezon. Consequently, there was absolutely no way the acceptance
of the application could have been communicated to the applicant for the latter to accept
inasmuch as the applicant at the time was already dead.
Petitioner insists that the condition imposed by BF that a policy must have been delivered to and
accepted by the proposed insured in good health is potestative, being dependent upon the will
of the corporation and is therefore void. The court didnt agree. A potestative condition depends
upon the exclusive will of one of the parties and is considered void. The Civil Code states: When
the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation
shall be void.
The following conditions were imposed by the respondent company for the perfection of the
contract of insurance: a policy must have been issued, the premiums paid, and the policy must
have been delivered to and accepted by the applicant while he is in good health.
The third condition isnt potestative, because the health of the applicant at the time of the
delivery of the policy is beyond the control or will of the insurance company. Rather, the
condition is a suspensive one whereby the acquisition of rights depends upon the happening of
an event which constitutes the condition. In this case, the suspensive condition was the policy
must have been delivered and accepted by the applicant while he is in good health. There was
non-fulfillment of the condition, because the applicant was already dead at the time the policy
was issued.
As stated above, a contract of insurance, like other contracts, must be assented to by both
parties either in person or by their agents. So long as an application for insurance has not been
either accepted or rejected, it is merely an offer or proposal to make a contract. The contract, to
be binding from the date of application, must have been a completed contract.
The insurance company wasnt negligent because delay in acting on the application does not
constitute acceptance even after payment. The corporation may not be penalized for the delay
in the processing of the application papers due to the fact that process in a week wasnt the
usual timeframe in fixing the application. Delay could not be deemed unreasonable so as to
constitute gross negligence.
Pacific Timber V. CA (1982)

G.R. No. L-38613 February 25, 1982

FACTS:

March 19, l963: Pacific Timber secured temporary insurance from Workmen's Insurance
Company, Inc. for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong
logs to be shipped from the Diapitan Bay, Quezon Province to Tokyo, Japan.
Workmen's issued Cover Note insuring the cargo "Subject to the Terms and Conditions
of the Workmen's Insurance Company, Inc."
April 2, 1963: regular marine cargo policies were issued for a total of 1,195.498 bd. ft.
Due to the bad weather some of the logs were lost during loading operations. 45 pieces of
logs were salvaged, but 30 pieces were lost. Pacific informed Workmen's who refused
stating that the logs covered in the 2 marine policies were received in good order at the
point of destination and that the cover note was null and void upon the issuance of the
Marine Policies
CFI: cover note is valid
CA: reversed
ISSUE: W/N the cover note is valid despite the absence of premium payment upon it

HELD: YES. CA set aside. CFI reinstated

it was not necessary to ask for payment of the premium on the Cover Note , for the loss
insured against having already occurred, the more practical procedure is simply to deduct
the premium from the amount due on the Cover Note
 Had all the logs been lost during the loading operations, but after the issuance of the
Cover Note, liability on the note would have already arisen even before payment of premium
cover note as a "binder"
supported by the doctrine that where a policy is delivered without requiring
payment of the premium, the presumption is that a credit was intended and policy is valid
it sent its adjuster to investigate and assess the loss to determine if petitioner was guilty
of delay in communicating the loss but there was none
Section 84
Delay in the presentation to an insurer of notice or proof of loss is waived if
caused by any act of his or if he omits to take objection promptly and specifically upon that
ground

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-38613 February 25, 1982

PACIFIC TIMBER EXPORT CORPORATION, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and WORKMEN'S INSURANCE COMPANY,
INC., respondents.

DE CASTRO, ** J.:

This petition seeks the review of the decision of the Court of Appeals reversing the decision of
the Court of First Instance of Manila in favor of petitioner and against private respondent which
ordered the latter to pay the sum of Pll,042.04 with interest at the rate of 12% interest from
receipt of notice of loss on April 15, 1963 up to the complete payment, the sum of P3,000.00 as
attorney's fees and the costs 1 thereby dismissing petitioner s complaint with costs. 2

The findings of the of fact of the Court of Appeals, which are generally binding upon this Court,
Except as shall be indicated in the discussion of the opinion of this Court the substantial
correctness of still particular finding having been disputed, thereby raising a question of law
reviewable by this Court 3 are as follows:

March 19, l963, the plaintiff secured temporary insurance from the defendant for
its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be
shipped from the Diapitan. Bay, Quezon Province to Okinawa and Tokyo, Japan.
The defendant issued on said date Cover Note No. 1010, insuring the said cargo
of the plaintiff "Subject to the Terms and Conditions of the WORKMEN'S
INSURANCE COMPANY, INC. printed Marine Policy form as filed with and
approved by the Office of the Insurance Commissioner (Exhibit A).
 The regular marine cargo policies were issued by the defendant in favor of the
plaintiff on April 2, 1963. The two marine policies bore the numbers 53 HO 1032
and 53 HO 1033 (Exhibits B and C, respectively). Policy No. 53 H0 1033 (Exhibit
B) was for 542 pieces of logs equivalent to 499,950 board feet. Policy No. 53 H0
1033 was for 853 pieces of logs equivalent to 695,548 board feet (Exhibit C). The
total cargo insured under the two marine policies accordingly consisted of 1,395
logs, or the equivalent of 1,195.498 bd. ft.

After the issuance of Cover Note No. 1010 (Exhibit A), but before the issuance of
the two marine policies Nos. 53 HO 1032 and 53 HO 1033, some of the logs
intended to be exported were lost during loading operations in the Diapitan Bay.
The logs were to be loaded on the 'SS Woodlock' which docked about 500
meters from the shoreline of the Diapitan Bay. The logs were taken from the log
pond of the plaintiff and from which they were towed in rafts to the vessel. At
about 10:00 o'clock a. m. on March 29, 1963, while the logs were alongside the
vessel, bad weather developed resulting in 75 pieces of logs which were rafted
together co break loose from each other. 45 pieces of logs were salvaged, but 30
pieces were verified to have been lost or washed away as a result of the
accident.

In a letter dated April 4, 1963, the plaintiff informed the defendant about the loss of
'appropriately 32 pieces of log's during loading of the 'SS Woodlock'. The said letter (Exhibit F)
reads as follows:

April 4, 1963

Workmen's Insurance Company, Inc. Manila, Philippines

Gentlemen:

This has reference to Insurance Cover Note No. 1010 for shipment of 1,250,000
bd. ft. Philippine Lauan and Apitong Logs. We would like to inform you that we
have received advance preliminary report from our Office in Diapitan, Quezon
that we have lost approximately 32 pieces of logs during loading of the SS
Woodlock.

We will send you an accurate report all the details including values as soon as
same will be reported to us.

Thank you for your attention, we wish to remain.

Very respectfully yours,

PACIFIC TIMBER EXPORT CORPORATION

(Sgd.) EMMANUEL S. ATILANO Asst. General Manager.

Although dated April 4, 1963, the letter was received in the office of the
defendant only on April 15, 1963, as shown by the stamp impression appearing
on the left bottom corner of said letter. The plaintiff subsequently submitted a
'Claim Statement demanding payment of the loss under Policies Nos. 53 HO
1032 and 53 HO 1033, in the total amount of P19,286.79 (Exhibit G).

On July 17, 1963, the defendant requested the First Philippine Adjustment
Corporation to inspect the loss and assess the damage. The adjustment
 company submitted its 'Report on August 23, 1963 (Exhibit H). In said report, the
adjuster found that 'the loss of 30 pieces of logs is not covered by Policies Nos.
53 HO 1032 and 1033 inasmuch as said policies covered the actual number of
logs loaded on board the 'SS Woodlock' However, the loss of 30 pieces of logs is
within the 1,250,000 bd. ft. covered by Cover Note 1010 insured for $70,000.00.

On September 14, 1963, the adjustment company submitted a computation of

the defendant's probable liability on the loss sustained by the shipment, in the
total amount of Pl1,042.04 (Exhibit 4).

On January 13, 1964, the defendant wrote the plaintiff denying the latter's claim,
on the ground they defendant's investigation revealed that the entire shipment of
logs covered by the two marines policies No. 53 110 1032 and 713 HO 1033
were received in good order at their point of destination. It was further stated that
the said loss may be considered as covered under Cover Note No. 1010
because the said Note had become 'null and void by virtue of the issuance of
Marine Policy Nos. 53 HO 1032 and 1033'(Exhibit J-1). The denial of the claim by
the defendant was brought by the plaintiff to the attention of the Insurance
Commissioner by means of a letter dated March 21, 1964 (Exhibit K). In a reply
letter dated March 30, 1964, Insurance Commissioner Francisco Y. Mandanas
observed that 'it is only fair and equitable to indemnify the insured under Cover
Note No. 1010', and advised early settlement of the said marine loss and salvage
claim (Exhibit L).

On June 26, 1964, the defendant informed the Insurance Commissioner that, on
advice of their attorneys, the claim of the plaintiff is being denied on the ground
that the cover note is null and void for lack of valuable consideration (Exhibit M). 4

Petitioner assigned as errors of the Court of Appeals, the following:

THE COURT OF APPEALS ERRED IN HOLDING THAT THE COVER NOTE

WAS NULL AND VOID FOR LACK OF VALUABLE CONSIDERATION BECAUSE
THE COURT DISREGARDED THE PROVEN FACTS THAT PREMIUMS FOR
THE COMPREHENSIVE INSURANCE COVERAGE THAT INCLUDED THE
COVER NOTE WAS PAID BY PETITIONER AND THAT INCLUDED THE
COVER NOTE WAS PAID BY PETITIONER AND THAT NO SEPARATE
PREMIUMS ARE COLLECTED BY PRIVATE RESPONDENT ON ALL ITS
COVER NOTES.

II

THE COURT OF APPEALS ERRED IN HOLDING THAT PRIVATE

RESPONDENT WAS RELEASED FROM LIABILITY UNDER THE COVER
NOTE DUE TO UNREASONABLE DELAY IN GIVING NOTICE OF LOSS
BECAUSE THE COURT DISREGARDED THE PROVEN FACT THAT PRIVATE
RESPONDENT DID NOT PROMPTLY AND SPECIFICALLY OBJECT TO THE
CLAIM ON THE GROUND OF DELAY IN GIVING NOTICE OF LOSS AND,
CONSEQUENTLY, OBJECTIONS ON THAT GROUND ARE WAIVED UNDER
SECTION 84 OF THE INSURANCE ACT. 5

1. Petitioner contends that the Cover Note was issued with a consideration when, by express
stipulation, the cover note is made subject to the terms and conditions of the marine policies,
and the payment of premiums is one of the terms of the policies. From this undisputed fact, We
uphold petitioner's submission that the Cover Note was not without consideration for which the
respondent court held the Cover Note as null and void, and denied recovery therefrom. The fact
that no separate premium was paid on the Cover Note before the loss insured against occurred,
does not militate against the validity of petitioner's contention, for no such premium could have
been paid, since by the nature of the Cover Note, it did not contain, as all Cover Notes do not
contain particulars of the shipment that would serve as basis for the computation of the
premiums. As a logical consequence, no separate premiums are intended or required to be paid
on a Cover Note. This is a fact admitted by an official of respondent company, Juan Jose
Camacho, in charge of issuing cover notes of the respondent company (p. 33, tsn, September
24, 1965).

At any rate, it is not disputed that petitioner paid in full all the premiums as called for by the
statement issued by private respondent after the issuance of the two regular marine insurance
policies, thereby leaving no account unpaid by petitioner due on the insurance coverage, which
must be deemed to include the Cover Note. If the Note is to be treated as a separate policy
instead of integrating it to the regular policies subsequently issued, the purpose and function of
the Cover Note would be set at naught or rendered meaningless, for it is in a real sense a
contract, not a mere application for insurance which is a mere offer. 6

It may be true that the marine insurance policies issued were for logs no longer including those
which had been lost during loading operations. This had to be so because the risk insured
against is not for loss during operations anymore, but for loss during transit, the logs having
already been safely placed aboard. This would make no difference, however, insofar as the
liability on the cover note is concerned, for the number or volume of logs lost can be determined
independently as in fact it had been so ascertained at the instance of private respondent itself
when it sent its own adjuster to investigate and assess the loss, after the issuance of the marine
insurance policies.

The adjuster went as far as submitting his report to respondent, as well as its computation of
respondent's liability on the insurance coverage. This coverage could not have been no other
than what was stipulated in the Cover Note, for no loss or damage had to be assessed on the
coverage arising from the marine insurance policies. For obvious reasons, it was not necessary
to ask petitioner to pay premium on the Cover Note, for the loss insured against having already
occurred, the more practical procedure is simply to deduct the premium from the amount due
the petitioner on the Cover Note. The non-payment of premium on the Cover Note is, therefore,
no cause for the petitioner to lose what is due it as if there had been payment of premium, for
non-payment by it was not chargeable against its fault. Had all the logs been lost during the
loading operations, but after the issuance of the Cover Note, liability on the note would have
already arisen even before payment of premium. This is how the cover note as a "binder"
should legally operate otherwise, it would serve no practical purpose in the realm of commerce,
and is supported by the doctrine that where a policy is delivered without requiring payment of
the premium, the presumption is that a credit was intended and policy is valid. 7

2. The defense of delay as raised by private respondent in resisting the claim cannot be
sustained. The law requires this ground of delay to be promptly and specifically asserted when a
claim on the insurance agreement is made. The undisputed facts show that instead of invoking
the ground of delay in objecting to petitioner's claim of recovery on the cover note, it took steps
clearly indicative that this particular ground for objection to the claim was never in its mind. The
nature of this specific ground for resisting a claim places the insurer on duty to inquire when the
loss took place, so that it could determine whether delay would be a valid ground upon which to
object to a claim against it.

As already stated earlier, private respondent's reaction upon receipt of the notice of loss, which
was on April 15, 1963, was to set in motion from July 1963 what would be necessary to
determine the cause and extent of the loss, with a view to the payment thereof on the insurance
agreement. Thus it sent its adjuster to investigate and assess the loss in July, 1963. The
adjuster submitted his report on August 23, 1963 and its computation of respondent's liability on
September 14, 1963. From April 1963 to July, 1963, enough time was available for private
respondent to determine if petitioner was guilty of delay in communicating the loss to
respondent company. In the proceedings that took place later in the Office of the Insurance
Commissioner, private respondent should then have raised this ground of delay to avoid liability.
It did not do so. It must be because it did not find any delay, as this Court fails to find a real and
substantial sign thereof. But even on the assumption that there was delay, this Court is satisfied
and convinced that as expressly provided by law, waiver can successfully be raised against
private respondent. Thus Section 84 of the Insurance Act provides:

Section 84.Delay in the presentation to an insurer of notice or proof of loss is

waived if caused by any act of his or if he omits to take objection promptly and
specifically upon that ground.

From what has been said, We find duly substantiated petitioner's assignments of error.

ACCORDINGLY, the appealed decision is set aside and the decision of the Court of First
Instance is reinstated in toto with the affirmance of this Court. No special pronouncement as to
costs.

SO ORDERED.

Teehankee (Chairman), Makasiar, Fernandez Guerrero, Melencio-Herrera and Plana, JJ.,

concur.
 COMMISSIONER OF INTERNAL REVENUE v. LINCOLN PHILIPPINE LIFE INSURANCE
COMPANY, INC. (now JARDINE-CMA LIFE INSURANCE COMPANY, INC.) and THE COURT
OF APPEALS. G.R. No. 119176. March 19, 2002. 379 SCRA 423.
FACTS:

Respondent Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life Insurance
Company, Inc.) is a domestic corporation engaged in life insurance business. Respondents
issued a special kind of life insurance policy known as the Junior Estate Builder Policy, in which
there is a clause providing for an automatic increase in the amount of life insurance coverage
upon attainment of a certain age by the insured without the need of issuing a new policy.

CIR then issued deficiency documentary stamps tax assessment corresponding to the amount
of automatic increase of the sum assured on the policy issued by respondent.

Respondent filed a petition with the CTA which was held in their favor. The CIR appealed with
the CA affirming the decision of the CTA.

ISSUE: Whether a new insurance policy is distinct from the main policy making it liable for
additional taxes.

RULING:

YES.

The subject insurance policy at the time it was issued contained an automatic increase clause.
Although the clause was to take effect on a later date, it was written into the policy at the time of
its issuance.
Section 173 of the NIRC provides that the payment of documentary stamp taxes is done at the
time the act is done. Section 183 of the NIRC provides that the tax base for the computation of
documentary stamp taxes on life insurance policies is the amount fixed in policy.

Here, although the automatic increase in the amount of life insurance coverage was to take
effect later on, the amount of the increase was already definite at the time of the issuance of the
policy. Thus, the amount insured by the policy at the time of its issuance necessarily included
the additional sum covered by the automatic increase clause because it was already
determinable at the time the transaction was entered into and formed part of the policy.

The additional insurance was an obligation subject to a suspensive obligation, but still a part of
the insurance sold to which respondent was liable for the payment of the documentary stamp
tax. The deficiency of documentary stamp tax imposed on respondent is not on the amount of
the original insurance coverage, but on the increase of the amount insured upon the effectivity
of the Junior Estate Builder Policy.

Insular v Ebrado G.R. No. L-44059 October 28, 1977

Facts:

J. Martin:

Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with a rider
for Accidental Death. He designated Carponia T. Ebrado as the revocable beneficiary in his
policy. He referred to her as his wife.

Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made liable to
pay the coverage in the total amount of P11,745.73, representing the face value of the policy in
the amount of P5,882.00 plus the additional benefits for accidental death.

Carponia T. Ebrado filed with the insurer a claim for the proceeds as the
designated beneficiary therein, although she admited that she and the insured 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 deceased insured. She
asserts that she is the one entitled to the insurance proceeds.

Insular commenced an action for Interpleader before the trial court as to who should be given
the proceeds. The court declared Carponia as disqualified.

Issue: WON a common-law wife named as beneficiary in the life insurance policy of a legally
married man can claim the proceeds in case of death of the latter?

Held: No. Petition

Ratio:
Section 50 of the Insurance Act which provides that "the insurance shall be applied exclusively
to the proper interest of the person in whose name it is made"

The word "interest" highly suggests that the provision refers only to the "insured" and not to
the beneficiary, since a contract of insurance is personal in character. Otherwise, the prohibitory
laws against illicit relationships especially on property and descent will be rendered nugatory, as
the same could easily be circumvented by modes of insurance.

When not otherwise specifically provided for by the Insurance Law, the contract of life insurance
is governed by the general rules of the civil law regulating contracts. And 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 barred from receiving donations from each other.

Article 739 provides that void donations are those made between persons who were guilty of
adultery or concubinage at the time of donation.

There is every reason to hold that the bar in donations between legitimate spouses and those
between illegitimate ones should be enforced in life insurance policies since the same are
based on similar consideration. So long as marriage remains the threshold of family laws,
reason and morality dictate that the impediments imposed upon married couple should likewise
be imposed upon extra-marital relationship.

A conviction for adultery or concubinage isnt required exacted before the disabilities mentioned
in Article 739 may effectuate. The article says that 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 guilty 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. The law plainly states 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.

The insured was married to Pascuala Ebrado with whom she has six legitimate children. He was
also living in with his common-law wife with whom he has two children.
Insurance Case Digest: Heirs Of Loreto C. Maramag V Maramag (2009)

G.R. No. 181132 June 5, 2009

Lessons Applicable: To whom insurance proceeds payable (Insurance)

FACTS:

Loreto Maramag designated as beneficiary his concubine Eva de Guzman Maramag

Vicenta Maramag and Odessa, Karl Brian, and Trisha Angelie (heirs of Loreto Maramag)
and his concubine Eva de Guzman Maramag, also suspected in the killing of Loreto and his
illegitimate children are claiming for his insurance.
Vicenta alleges that Eva is disqualified from claiming
RTC: Granted - civil code does NOT apply
CA: dismissed the case for lack of jurisdiction for filing beyond reglementary period
ISSUE: W/N Eva can claim even though prohibited under the civil code against donation

HELD: YES. Petition is DENIED.

Any person who is forbidden from receiving any donation under Article 739 cannot be
named beneficiary of a life insurance policy of the person who cannot make any donation to
him
If a concubine is made the beneficiary, it is believed that the insurance contract
will still remain valid, but the indemnity must go to the legal heirs and not to the concubine,
for evidently, what is prohibited under Art. 2012 is the naming of the improper beneficiary.
SECTION 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.
 GR: 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.
EX: situation 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. In such a
case, third parties may directly sue and claim from the insurer
It is only in cases where the insured has not designated any beneficiary, or when the
designated beneficiary is disqualified by law to receive the proceeds, that the insurance
policy proceeds shall redound to the benefit of the estate of the insured