Insular Life v. Feliciano - Concealment73 PHIL 201Facts:>  Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of its agents.>  It appears that during that time, Evaristo was already suffering from tuberculosis.  Such fact appeared during the medical exam, but the examiner and the company’s agent ignored it.>  After that, Evaristo was made to sign an application form and thereafter the blank spaces were filled by the medical examiner and the agent making it appear that Evaristo was a fit subject of insurance. (Evaristo could not read and understand English)>  When Evaristo died, Insular life refused to pay the proceeds because of concealment. 

Issue:Whether or not Insular Life was bound by their agent’s acts. 

Held:Yes.The insurance business has grown so vast and lucrative within the past century.  Nowadays, even people of modest means enter into insurance contracts.  Agents who solicit contracts are paid large commissions on the policies secured by them.  They act as general representatives of insurance companies. IN the case at bar, the true state of health of the insured was concealed by the agents of the insurer.  The insurer’s medical examiner approved the application knowing fully well that the applicant was sick.  The situation is one in which of two innocent parties must bear a loss for his reliance upon a third person.  In this case, it is the one who drafted and accepted the policy and consummated the contract.  It seems reasonable that as between the two of them, the one who employed and gave character to the third person as its agent should be the one to bear the loss.  Hence, Insular is liable to the beneficiaries.

Saturnino v. Philamlife - False Representation7 SCRA 316Facts:>  2 months prior to the insurance of the policy, Saturnino was operated on for cancer, involving complete removal of the right breast, including the pectoral muscles and the glands, found in the right armpit.>  Notwithstanding the fact of her operation, Saturnino did not make a disclosure thereof in her application for insurance.>  She stated therein that she did not have, nor had she ever had, among others listed in the application, cancer or other tumors; that she had not consulted any physician, undergone any operation or suffered any injury within the preceding 5 years.>  She also stated that she had never been treated for, nor did she ever have any illness or disease peculiar to her sex, particularly of the breast, ovaries, uterus and menstrual disorders.>  The application also recited that the declarations of Saturnino constituted a further basis for the issuance of the policy.

Issue:

Whether or not the insured made such false representation of material facts as to avoid the policy.

Held:YES.There can be no dispute that the information given by her in the application for insurance was false, namely, that she never had cancer or tumors or consulted any physician or undergone any operation within the preceding period of 5 years.

The question to determine is: Are the facts then falsely represented material?  The Insurance Law provides that “materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the proposed contract, or making his inquiries.

The contention of appellants is that the facts subject of the representation were not material in view of the non-medical nature of the insurance applied for, which does away with the usual requirement of medical examination before the policy is issued.  The contention is without merit.  If anything, the waiver of medical examination renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not.

Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured herself did not know, since her doctor never told her, that the disease for which she had been operated on was cancer.  In the first place, concealment of the fact of the operation itself was fraudulent, as there could not have been any mistake about it, no matter what the ailment.

Secondly, in order to avoid a policy, it is not necessary to show actual fraud on the part of the insured. In this jurisdiction, concealment, whether intentional or unintentional entitled the insurer to rescind the contract of insurance, concealment being defined as “negligence to communicate that which a party knows and ought to communicate.”  The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk, or accepting it at a rate of premium agreed upon.  The insurer, relying upon

the belief that the insured will disclose every material fact within his actual or presumed knowledge, is misled into a belief that the circumstances withheld does not exist, and he is thereby induced to estimate the risk upon a false basis that it does not exist.

Bonifacio Bros. v. Mora20 SCRA 262Facts:>  Enrique Mora mortgaged his Odlsmobile sedan car to HS Reyes Inc. with the condition that Mora would insure the car with HS Reyes as beneficiary.>  The car was then insured with State Insurance Company and the policy delivered to Mora.>  During the effectivity of the insurance contract, the car figured in an accident.  The company then assigned the accident to an insurance appraiser for investigation and appraisal of the damage.>  Mora without the knowledge and consent of HS Reyes, authorized Bonifacio Bros to fix the car, using materials supplied by the Ayala Auto Parts Company.>  For the cost of Labor and materials, Mora was billed P2,102.73.  The bill was sent to the insurer’s appraiser.  The insurance company drew a check in the amount of the insurance proceeds and entrusted the check to its appraiser for delivery to the proper party.>  The car was delivered to Mora without the consent of HS Reyes, and without payment to Bonifacio Bros and Ayala.>  Upon the theory that the insurance proceeds should be directly paid to them, Bonifacio and Ayala filed a complaint against Mora and the insurer with the municipal court for the collection of P2,102.73.>  The insurance company filed its answer with a counterclaim for interpleader, requiring Bonifacio and HS Reyes to interplead in order to determine who has a better right to the proceeds.

Issue:Whether or not there is privity of contract between Bonficacio and Ayala on one hand and State Insurance on the other.

Held:NONE.It is fundamental that contracts take effect only between the parties thereto, except in some specific instance provided by law where the contract contains some stipulation in favor of a third person.  Such stipulation is known as a stipulation pour autrui; or a provision in favor of a third person not a party to the contract.

Under this doctrine, a third person is ed to avail himself of a benefit granted to him by the terms of the contract, provided that the contracting parties have clearly and deliberately conferred a favor upon such person.  Consequently, a third person NOT a party to the contract has NO action against the aprties thereto, and cannot generally demand the enforcement of the same.

The question of whether a third person has an enforceable interest in a contract must be settled by determining whether the contracting parties intended to tender him such an interest by deliberately inserting terms in their agreement with the avowed purpose of conferring favor upon such third person.  IN this connection, this court has laid down the rule that the fairest test to determine whether the interest of a 3rd person in a contract is  a stipulation pour autrui or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract.

In the instant case the insurance contract does not contain any words or clauses to disclose an intent to give any benefit to any repairmen or material men in case of repair of the car in question. The parties to the insurance contract omitted such stipulation, which is a circumstance that supports the said conclusion. On the other hand, the "loss payable" clause of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes, Inc." indicating that it was only the H.S. Reyes, Inc. which they intended to benefit.

A policy of insurance is a distinct and independent contract between the insured and insurer, and third persons have no right either in a court of equity, or in a court of law, to the proceeds of it, unless there be some contract of trust, expressed or implied, by the insured and third person.  In this case, no contract of trust, express or implied. In this case, no contract of trust, expressed or implied exists. We, therefore, agree with the trial court that no cause of action exists in favor of the appellants in so far as the proceeds of insurance are concerned. The appellant's claim, if at all, is merely equitable in nature and must be made effective through Enrique Mora who entered into a contract with the Bonifacio Bros Inc. This conclusion is deducible not only from the principle governing the operation and effect of insurance contracts in general, but is clearly covered by the express provisions of section 50 of the Insurance Act (now Sec. 53).

The policy in question has been so framed that "Loss, if any, is payable to H. S. Reyes, Inc." which unmistakably shows the intention of the parties.

BPI vs. Posadas56 Phil 215Facts:The estate of Adolphe Oscar Schuetze is the sole beneficiary named in the life-insurance policy for $10,000, issued by the Sun Life Assurance Company of Canada. During the following five years the

insured paid the premiums at the Manila branch of the company. The deceased Adolphe Oscar Schuetze married the plaintiff-appellant Rosario Gelano. The plaintiff-appellant, the Bank of the Philippine Islands, was appointed administrator of the late Adolphe Oscar Schuetze's testamentary estate by an order, entered by the Court of First Instance of Manila. The Sun Life Assurance Company of Canada, whose main office is in Montreal, Canada, paid Rosario Gelano Vda. de Schuetze upon her arrival at Manila, the sum of P20,150, which was the amount of the insurance policy on the life of said deceased, payable to the latter's estate. On the same date Rosario Gelano Vda. de Schuetze delivered the money to said Bank of the Philippine Islands, as administrator of the deceased's estate, which entered it in the inventory of the testamentary estate, and then returned the money to said widow. The appellee alleges that it is a fundamental principle that a life-insurance policy belongs exclusively to the beneficiary upon the death of the person insured.Issue:Whether or not the life insurance policy belongs to the conjugalpartnership.Ruling:SC holds, (1) that the proceeds of a life-insurance policy payable tothe insured's estate, on which the premiums were paid by the conjugalpartnership, constitute community property, and belong one-half to thehusband and the other half to the wife, exclusively; and (2) that if thepremiums were paid partly with paraphernal and partly conjugal funds, theproceeds are likewise in like proportion paraphernal in part and conjugal inpart.That the proceeds of a life-insurance policy payable to theinsured's estate as the beneficiary, if delivered to the testamentaryadministrator of the former as part of the assets of said estate underprobate administration, are subject to the inheritance tax according to thelaw on the matter, if they belong to the assured exclusively, and it isimmaterial that the insured was domiciled in these Islands or outside

Philamlife v. Ansaldo - Jurisdiction of the Insurance Commissioner

234 SCRA 509Facts:>  Ramon M. Paterno sent a letter-complaint to the Insurance Commissioner alleging certain problems encountered by agents, supervisors, managers and public consumers of the Philamlife as a result of certain practices by said company.>  Commissioner requested petitioner Rodrigo de los Reyes, in his capacity as Philamlife's president, to comment on respondent Paterno's letter.>  The complaint prays that provisions on charges and fees stated in the Contract of Agency executed between Philamlife and its agents, as well as the implementing provisions as published in the agents' handbook, agency bulletins and circulars, be declared as null and void. He also asked that the amounts of such charges and fees already deducted and collected by Philamlife in connection therewith be reimbursed to the agents, with interest at the prevailing rate reckoned from the date when they were deducted>  Manuel Ortega, Philamlife's Senior Assistant Vice-President and Executive Assistant to the President, asked that the Commissioner first rule on the questions of the jurisdiction of the Insurance Commissioner over the subject matter of the letters-complaint and the legal standing of Paterno.>  Insurance Commissioner set the case for hearing and sent subpoena to the officers of Philamlife.  Ortega filed a motion to quash the subpoena alleging that the Insurance company has no jurisdiction over the subject matter of the case and that there is no complaint sufficient in form and contents has been filed.>  The motion to quash was denied. 

Issue:Whether or not the insurance commissioner had jurisdiction over the legality of the Contract of Agency between Philamlife and its agents. 

Held:No, it does not have jurisdiction.

The general regulatory authority of the Insurance Commissioner is described in Section 414 of the Insurance Code, to wit:"The Insurance Commissioner shall have the duty to see that all laws relating to insurance, insurance companies and other insurance matters, mutual benefit associations and trusts for charitable uses are faithfully executed and to perform the duties imposed upon him by this Code, . . . ." On the other hand, Section 415 provides:"In addition to the administrative sanctions provided elsewhere in this Code, the Insurance Commissioner is hereby authorized, at his discretion, to impose upon insurance companies, their directors and/or officers and/or agents, for any willful failure or refusal to comply with, or violation of any provision of this Code, or any order, instruction, regulation or ruling of the Insurance Commissioner, or any commission of irregularities, and/or conducting business in an unsafe or unsound manner as may be determined by the Insurance Commissioner, the following:a) fines not in excess of five hundred pesos a day; andb) suspension, or after due hearing, removal of directors and/or officers and/or agents." A plain reading of the above-quoted provisions show that the Insurance Commissioner has the authority to regulate the business of insurance, which is defined as follows:"(2)          The term 'doing an insurance business' or 'transacting an insurance business,' within the meaning of this Code, shall include (a) making or proposing to make, as insurer, any insurance contract; (b) making, or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental of the surety; (c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; (d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code. (Insurance Code, Sec. 2 [2])Since the contract of agency entered into between Philamlife and its agents is not included within the meaning of an insurance business, Section 2 of the Insurance Code cannot be invoked to give jurisdiction over the same to the Insurance Commissioner. Expressio unius est exclusio alterius.

Insular Life v. Ebrado - Insurance Proceeds80 SCRA 181Facts:>  Buenaventura Ebrado was issued by Insular Life Assurance Co. a whole life plan for P5,882.00 with a rider for Accidental Death Benefits for the same amount.>  Ebrado designated Carponia Ebrado as the revocable beneficiary in his policy, referring to her as his wife.>  Ebrado died when he was accidentally hit by a falling branch of tree.>  Insurer by virtue of the contract was liable for 11,745.73, and Carponia filed her claim, although she admitted that she and the insured were merely living as husband and wife without the benefit of marriage.>  Pascuala Ebrado also filed her claim as the widow of the deceased insured.>  Insular life filed an interpleader case and the lower court found in favor of Pascuala.

Issue:Between Carponia and Pascuala, who is entitled to the proceeds?

Held:Pascuala.It is quite unfortunate that the Insurance Act or our own Insurance Code does not contain a specific provision grossly resolutory of the prime question at hand.  Rather, the general rules of civil law should be applied to resolve this void in the insurance law.  Art. 2011 of the NCC states: The contract of insurance is governed by special laws.  Matters not expressly provided for in such special laws shall be regulated by this Code. When not otherwise specifically provided for in the insurance law, the contract of life insurance is governed by the general rules of civil law regulating contracts.

Under Art. 2012, NCC: Any person who is forbidden from receiving any donation under Art. 739 cannot be named beneficiary of a life insurance policy by a person who cannot make any donation to him, according to said article.  Under Art. 739, donations between persons who were guilty of adultery or concubinage at the time of the donation shall be void.

In essence, a life insurance policy is no different from civil donations insofar as the beneficiary is concerned.  Both are founded on the same consideration of liberality.  A beneficiary is like a donee because from the premiums of the policy which the insured pays, the beneficiary will receive the proceeds or profits of said insurance.  As a consequence, the proscription in Art. 739 should equally operate in life insurance contracts.

Therefore, since common-law spouses are barred from receiving donations, they are likewise barred from receiving proceeds of a life insurance contract.

RCBC v. CA - Insurance Proceeds289 SCRA 292 (1998)Facts:>  GOYU applied for credit facilities and accommodations with RCBC. After due evaluation, a credit facility in the amount of P30 million was initially granted. Upon GOYU's application increased GOYU's credit facility to P50 million, then to P90 million, and finally to P117 million>  As security for its credit facilities with RCBC, GOYU executed two REM and two CM in favor of RCBC, which were registered with the Registry of Deeds at. Under each of these four mortgage contracts, GOYU committed itself to insure the mortgaged property with an insurance company approved by RCBC, and subsequently, to endorse and deliver the insurance policies to RCBC.

>  GOYU obtained in its name a total of 10 insurance policies from MICO. In February 1992, Alchester Insurance Agency, Inc., the insurance agent where GOYU obtained the Malayan insurance policies, issued nine endorsements in favor of RCBC seemingly upon instructions of GOYU>  On April 27, 1992, one of GOYU's factory buildings in Valenzuela was gutted by fire. Consequently, GOYU submitted its claim for indemnity.>  MICO denied the claim on the ground that the insurance policies were either attached pursuant to writs of attachments/garnishments issued by various courts or that the insurance proceeds were also claimed by other creditors of GOYU alleging better rights to the proceeds than the insured.>  GOYU filed a complaint for specific performance and damages.  RCBC, one of GOYU's creditors, also filed with MICO its formal claim over the proceeds of the insurance policies, but said claims were also denied for the same reasons that AGCO denied GOYU's claims.>  However, because the endorsements do not bear the signature of any officer of GOYU, the trial court, as well as the Court of Appeals, concluded that the endorsements are defective and held that RCBC has no right over the insurance proceeds.

Issue:Whether or not RCBC has a right over the insurance proceeds.

Held:RCBC has a right over the insurance proceeds.It is settled that a mortgagor and a mortgagee have separate and distinct insurable interests in the same mortgaged property, such that each one of them may insure the same property for his own sole benefit. There is no question that GOYU could insure the mortgaged property for its own exclusive benefit. In the present case, although it appears that GOYU obtained the subject insurance policies naming itself as the sole payee, the intentions of the parties as shown by their contemporaneous acts, must be given due consideration in order to better serve the interest of justice and equity.

It is to be noted that 9 endorsement documents were prepared by Alchester in favor of RCBC. The Court is in a quandary how Alchester could arrive at the idea of endorsing any specific insurance policy in favor of any particular beneficiary or payee other than the insured had not such named payee or beneficiary been specifically disclosed by the insured itself. It is also significant that GOYU voluntarily and purposely took the insurance policies from MICO, a sister company of RCBC, and not just from any other insurance company. Alchester would not have found out that the subject pieces of property were mortgaged to RCBC had not such information been voluntarily disclosed by GOYU itself. Had it not been for GOYU, Alchester would not have known of GOYU's intention of obtaining insurance coverage in compliance with its undertaking in the mortgage contracts with RCBC, and verify, Alchester would not have endorsed the policies to RCBC had it not been so directed by GOYU.

On equitable principles, particularly on the ground of estoppel, the Court is constrained to rule in favor of mortgagor RCBC. RCBC, in good faith, relied upon the endorsement documents sent to it as this was only pursuant to the stipulation in the mortgage contracts. We find such reliance to be justified under the circumstances of the case. GOYU failed to seasonably repudiate the authority of the person or persons who prepared such endorsements. Over and above this, GOYU continued, in the meantime, to enjoy the benefits of the credit facilities extended to it by RCBC. After the occurrence of the loss insured against, it was too late for GOYU to disown the endorsements for any imagined or contrived lack of authority of Alchester to prepare and issue said endorsements. If there had not been actually an implied ratification of said endorsements by virtue of GOYU's inaction in this case, GOYU is at the very least estopped from assailing their operative effects.

To permit GOYU to capitalize on its non-confirmation of these endorsements while it continued to enjoy the benefits of the credit facilities of RCBC which believed in good faith that there was due endorsement pursuant to their mortgage contracts, is to countenance grave contravention of public policy, fair dealing, good faith, and justice. Such an unjust situation, the Court cannot sanction. Under the peculiar circumstances obtaining in this case, the Court is bound to recognize RCBC's right to the proceeds of the insurance policies if not for the actual endorsement of the policies, at least on the basis of the equitable principle of estoppel.

GOYU cannot seek relief under Section 53 of the Insurance Code which provides that the proceeds of insurance shall exclusively apply to the interest of the person in whose name or for whose benefit it is made. The peculiarity of the circumstances obtaining in the instant case presents a justification to take exception to the strict application of said provision, it having been sufficiently established that it was the intention of the parties to designate RCBC as the party for whose benefit the insurance policies were taken out. Consider thus the following:1.       It is undisputed that the insured pieces of property were the subject of mortgage contracts entered into between RCBC and GOYU in consideration of and for securing GOYU's credit facilities from RCBC. The mortgage contracts contained common provisions whereby GOYU, as mortgagor, undertook to have the mortgaged property properly covered against any loss by an insurance company acceptable to RCBC.2.       GOYU voluntarily procured insurance policies to cover the mortgaged property from MICO, no less than a sister company of RCBC and definitely an acceptable insurance company to RCBC.3.       Endorsement documents were prepared by MICO's underwriter, Alchester Insurance Agency, Inc., and copies thereof were sent to GOYU, MICO and RCBC. GOYU did not assail, until of late, the validity of said endorsements.4.       GOYU continued until the occurrence of the fire, to enjoy the benefits of the credit facilities extended by RCBC which was conditioned upon the endorsement of the insurance policies to be taken by GOYU to cover the mortgaged properties.

This Court can not over stress the fact that upon receiving its copies of the endorsement documents prepared by Alchester, GOYU, despite the absence written conformity thereto, obviously considered said endorsement to be sufficient compliance with its obligation under the mortgage contracts since RCBC accordingly continued to extend the benefits of its credit facilities and GOYU continued to benefit therefrom. Just as plain too is the intention of the parties to constitute RCBC as the beneficiary of the various insurance policies obtained by GOYU. The intention of the parties will have to be given full force and effect in this particular case. The insurance proceeds may, therefore, be exclusively applied to RCBC, which under the factual circumstances of the case, is truly the person or entity for whose benefit the policies were clearly intended.

IGNACIO SATURNINO vs. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANYG.R. No. L-16163, 28 February 1963

FACTS:Estefania Saturnino obtained a 20-year endowment non-medical insurance. This kind of policy dispenses with the medical examination of the applicant usually required in ordinary life policies. However, two months prior to the issuance of the policy, Saturnino was operated on for cancer, involving mastectomy of the right breast. She did not make a disclosure thereof in her application for insurance. On the contrary, she stated therein that she did not have, nor had she ever had, among other ailments listed in the application, cancer or other tumors.Sometime after, Saturnino died of pneumonia, secondary to influenza. Appellants here, who are her surviving husband and minor child, respectively, demanded payment of the face value of the policy. The claim was rejected and hence an action was subsequently instituted.

ISSUE:Whether or not the insured made such false representations of material facts as to avoid the policy

HELD:YES. The Insurance Law provides that “materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the proposed contract, or in making his inquiries.” The waiver of medical examination renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. It is logical to assume that if appellee had been properly apprised of the insured’s medical history she would at least have been made to undergo medical examination in order to determine her insurability.A concealment, whether intentional or unintentional, entitles the insurer to rescind the contract of insurance, concealment being defined as “negligence to communicate that which a party knows and ought to communicate”. The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk, or accepting it at the rate of premium agreed upon. The insurer, relying upon the belief that the assured will disclose every material facts within his actual or presumed knowledge, is misled into a belief that the circumstance withheld does not exist, and he is thereby induced to estimate the risk upon a false basis that it does not exist.The judgment appealed from, dismissing the complaint and awarding the return to appellants of the premium already, paid, with interest at 6% up to January 29, 1959, affirmed, with costs against appellants.

(46) Saturnino v. Philamlife

7 SCRA 316

Facts:

2 months prior to the insurance of the policy, Saturnino was operated on for cancer, involving complete removal of the right breast, including the pectoral muscles and the glands, found in the right armpit.

Notwithstanding the fact of her operation, Saturnino did not make a disclosure thereof in her application for insurance.

She stated therein that she did not have, nor had she ever had, among others listed in the application, cancer or other tumors; that she had not consulted any physician, undergone any operation or suffered any injury within the preceding 5 years.

She also stated that she had never been treated for, nor did she ever have any illness or disease peculiar to her sex, particularly of the breast, ovaries, uterus and menstrual disorders.

The application also recited that the declarations of Saturnino constituted a further basis for the issuance of the policy.

Issue: WON the insured made such false representation of material facts as to avoid the policy.

Held: YES.

There can be no dispute that the information given by her in the application for insurance was

false, namely, that she never had cancer or tumors or consulted any physician or undergone any

operation within the preceding period of 5 years.

The question to determine is: Are the facts then falsely represented material? The Insurance Law

provides that “materiality is to be determined not by the event, but solely by the probable and

reasonable influence of the facts upon the party to whom the communication is due, in forming his

estimate of the proposed contract, or making his inquiries.

The contention of appellants is that the facts subject of the representation were not material in

view of the non-medical nature of the insurance applied for, which does away with the usual

requirement of medical examination before the policy is issued. The contention is without merit. If

anything, the waiver of medical examination renders even more material the information required of

the applicant concerning previous condition of health and diseases suffered, for such information

necessarily constitutes an important factor which the insurer takes into consideration in deciding

whether to issue the policy or not.

Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the

insured herself did not know, since her doctor never told her, that the disease for which she had been

operated on was cancer. In the first place, concealment of the fact of the operation itself was

fraudulent, as there could not have been any mistake about it, no matter what the ailment.

Secondly, in order to avoid a policy, it is not necessary to show actual fraud on the part of the

insured. In this jurisdiction, concealment, whether intentional or unintentional entitled the insurer to

rescind the contract of insurance, concealment being defined as “negligence to communicate that

which a party knows and ought to communicate.” The basis of the rule vitiating the contract in cases

of concealment is that it misleads or deceives the insurer into accepting the risk, or accepting it at a

rate of premium agreed upon. The insurer, relying upon the belief that the insured will disclose every

material fact within his actual or presumed knowledge, is misled into a belief that the circumstances

withheld does not exist, and he is thereby induced to estimate the risk upon a false basis that it does

not exist.

(55) Insular Life v. Feliciano

73 PHIL 201

Facts:

Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of its agents. It appears that during that time, Evaristo was already suffering from tuberculosis. Such fact

appeared during the medical exam, but the examiner and the company’s agent ignored it. After that, Evaristo was made to sign an application form and thereafter the blank spaces were

filled by the medical examiner and the agent making it appear that Evaristo was a fit subject of insurance. (Evaristo could not read and understand English)

When Evaristo died, Insular life refused to pay the proceeds because of concealment.

Issue: WON Insular Life was bound by their agent’s acts.

Held: Yes.

The insurance business has grown so vast and lucrative within the past century. Nowadays, even

people of modest means enter into insurance contracts. Agents who solicit contracts are paid large

commissions on the policies secured by them. They act as general representatives of insurance

companies.

IN the case at bar, the true state of health of the insured was concealed by the agents of the

insurer. The insurer’s medical examiner approved the application knowing fully well that the applicant

was sick. The situation is one in which of two innocent parties must bear a loss for his reliance upon a

third person. In this case, it is the one who drafted and accepted the policy and consummated the

contract. It seems reasonable that as between the two of them, the one who employed and gave

character to the third person as its agent should be the one to bear the loss. Hence, Insular is liable to

the beneficiaries.

(56) Insular life v. Feliciano

74 PHIL 4681

Facts:

Insular life filed a motion for reconsideration of the decision in the preceding case.

Issue: WON Insular Life was bound by their agent’s acts.

Held: NO (what the f…?)

There was collusion between Evaristo and the agent and the medical examiner in making it appear

that Evaristo was a fit subject for insurance. When Evaristo authorized them to write the answers for

him, he made them his own agents for that purpose and he was responsible for their acts in that

connection.

If they falsified the answers for him, he could not evade liability for the falsification. He was not supposed to sign the application in blank. He knew that his answers would be the basis for the policy, and was required with his signature to vouch for their truth. The judgment rendered therefore in the preceding case is thus reversed, and Insular Life is absolved from liability. (bakit kaya nagreverse?... the plot thickens… Hmm….)

(85) Bonifacio Bros. v. Mora

20 SCRA 262

Facts:

Enrique Mora mortgaged his Odlsmobile sedan car to HS Reyes Inc. with the condition that Mora would insure the car with HS Reyes as beneficiary.

The car was then insured with State Insurance Company and the policy delivered to Mora. During the effectivity of the insurance contract, the car figured in an accident. The company then

assigned the accident to an insurance appraiser for investigation and appraisal of the damage. Mora without the knowledge and consent of HS Reyes, authorized Bonifacio Bros to fix the car,

using materials supplied by the Ayala Auto Parts Company. For the cost of Labor and materials, Mora was billed P2,102.73. The bill was sent to the insurer’s

appraiser. The insurance company drew a check in the amount of the insurance proceeds and entrusted the check to its appraiser for delivery to the proper party.

The car was delivered to Mora without the consent of HS Reyes, and without payment to Bonifacio Bros and Ayala.

Upon the theory that the insurance proceeds should be directly paid to them, Bonifacio and Ayala filed a complaint against Mora and the insurer with the municipal court for the collection of P2,102.73.

The insurance company filed its answer with a counterclaim for interpleader, requiring Bonifacio and HS Reyes to interplead in order to determine who has a better right to the proceeds.

Issue: WON there is privity of contract between Bonficacio and Ayala on one hand and State Insurance

on the other.

Held: NONE.

It is fundamental that contracts take effect only between the parties thereto, except in some

specific instance provided by law where the contract contains some stipulation in favor of a third

person. Such stipulation is known as a stipulation pour autrui; or a provision in favor of a third person

not a party to the contract.

Under this doctrine, a third person is allowed to avail himself of a benefit granted to him by the

terms of the contract, provided that the contracting parties have clearly and deliberately conferred a

favor upon such person. Consequently, a third person NOT a party to the contract has NO action

against the aprties thereto, and cannot generally demand the enforcement of the same.

The question of whether a third person has an enforceable interest in a contract must be settled by

determining whether the contracting parties intended to tender him such an interest by deliberately

inserting terms in their agreement with the avowed purpose of conferring favor upon such third

person. IN this connection, this court has laid down the rule that the fairest test to determine whether

the interest of a 3rd person in a contract is a stipulation pour autrui or merely an incidental interest, is

to rely upon the intention of the parties as disclosed by their contract.

In the instant case the insurance contract does not contain any words or clauses to disclose an

intent to give any benefit to any repairmen or material men in case of repair of the car in question. The

parties to the insurance contract omitted such stipulation, which is a circumstance that supports the

said conclusion. On the other hand, the "loss payable" clause of the insurance policy stipulates that

"Loss, if any, is payable to H.S. Reyes, Inc." indicating that it was only the H.S. Reyes, Inc. which they

intended to benefit.

A policy of insurance is a distinct and independent contract between the insured and insurer, and

third persons have no right either in a court of equity, or in a court of law, to the proceeds of it, unless

there be some contract of trust, expressed or implied, by the insured and third person. In this case, no

contract of trust, express or implied. In this case, no contract of trust, expressed or implied exists. We,

therefore, agree with the trial court that no cause of action exists in favor of the appellants in so far as

the proceeds of insurance are concerned. The appellant's claim, if at all, is merely equitable in nature

and must be made effective through Enrique Mora who entered into a contract with the Bonifacio Bros

Inc. This conclusion is deducible not only from the principle governing the operation and effect of

insurance contracts in general, but is clearly covered by the express provisions of section 50 of the

Insurance Act (now Sec. 53).

The policy in question has been so framed that "Loss, if any, is payable to H. S. Reyes, Inc." which

unmistakably shows the intention of the parties.

(88) Del Val v. Del Val

29 Phil 535

Facts:

Petitioners and private respondents are brothers and Sisters and are the only heirs and next of kin of Gregorio del Val who died intestate.

It was found out that the deceased took out insurance on his life for the sum of 40T and made it payable to private respondents as sole beneficiary.

After Gregorio’s death, Andres collected the proceeds of the policy. Of the said policy, Andres paid 18T to redeem some real property which Gregorio had sold to third

persons during his lifetime. Said redemption of the property was made by Andres’ laywer in the name of Andres and the

petitioners. (Accdg to Andres, said redemption in the name of Petitioners and himself was without his knowledge and that since the redemption, petitioners have been in possession of the property)

Petitioners now contend that the amount of the insurance policy belonged to the estate of the deceased and not to Andres personally.

Pet filed a complaint for partition of property including the insurance proceeds Andress claims that he is the sole owner of the proceeds and prayed that he be declared: Sole owner of the real property, redeemed with the use of the insurance proceeds and its

remainder; Petitioners to account for the use and occupation of the premises.

Issue: WON the petitioners have a right to the insurance proceeds?

Held: NOPE.

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 the subject. Our civil code has no provisions

which relate directly and specifically to life-insurance contracts of to the destination of life-insurance

proceeds that subject is regulated exclusively by the Code of Commerce. Thus, contention of

petitioners that proceeds should be considered as a dontation or gift and should be included in the

estate of the deceased is UNTENABLE.

Since the repurchase has been made n the names of all the heirs instead of the defendant alone,

petitioners claim that the property belongs to the heirs in common and not to the defendant alone.

The SC held that if it is established by evidence that that was his intention and that the real estate was

delivered to the plaintiffs with that understanding, then it is probable that their contention is correct

and that they are entitled to share equally with the defendant. HOWEVER, it appears from the

evidence that the conveyances were taken in the name of the plaintiffs without the knowledge and

consent of Andres, or that it was not his intention to make a gift to them of real estate, when it belongs

to him.

(89) Insular Life. Ebrado

80 SCRA 181

Facts:

Buenaventura Ebrado was issued al life plan by Insular Company. He designated Capriona as his beneficiary, referring to her as his wife.

The insured then died and Carponia tried to claim the proceeds of the said plan. She admitted to being only the common law wife of the insured. Pascuala, the legal wife, also filed a claim asserting her right as the legal wife. The company then

filed an action for interpleader.

Issue: WON the common law wife named as beneficiary can collect the proceeds.

Held: NOPE.

The civil code prohibitions on donations made between persons guilty of adulterous concubinage

applies to insurance contracts. On matters not specifically provided for by the Insurance Law, the

general rules on Civil law shall apply. A life insurance policy is no different from a civil donation as far

as the beneficiary is concerned, since both are founded on liberality.

Why was the common law wife not allowed to collect the proceeds despite the fact that she

was the beneficiary? Isn’t this against Sec. 53?

It is true that SC went against Sec. 53. However, Sec. 53 is NOT the only provision that the SC had

to consider. Art. 739 and 2012 of CC prohibit persons who are guilty of adultery or concubinage from

being beneficiaries of the life insurance policies of the persons with whom they committed adultery or

concubinage. If the SC used only Sec. 53, it would have gone against Art. 739 and 2012.

(90) RCBC v. CA

289 SCRA 292 (1998)

Facts:

GOYU applied for credit facilities and accommodations with RCBC. After due evaluation, a credit facility in the amount of P30 million was initially granted. Upon GOYU's application increased GOYU's credit facility to P50 million, then to P90 million, and finally to P117 million

As security for its credit facilities with RCBC, GOYU executed two REM and two CM in favor of RCBC, which were registered with the Registry of Deeds at. Under each of these four mortgage contracts, GOYU committed itself to insure the mortgaged property with an insurance company approved by RCBC, and subsequently, to endorse and deliver the insurance policies to RCBC.

GOYU obtained in its name a total of 10 insurance policies from MICO. In February 1992, Alchester Insurance Agency, Inc., the insurance agent where GOYU obtained the Malayan insurance policies, issued nine endorsements in favor of RCBC seemingly upon instructions of GOYU

On April 27, 1992, one of GOYU's factory buildings in Valenzuela was gutted by fire. Consequently, GOYU submitted its claim for indemnity.

MICO denied the claim on the ground that the insurance policies were either attached pursuant to writs of attachments/garnishments issued by various courts or that the insurance proceeds were also claimed by other creditors of GOYU alleging better rights to the proceeds than the insured.

GOYU filed a complaint for specific performance and damages. RCBC, one of GOYU's creditors, also filed with MICO its formal claim over the proceeds of the insurance policies, but said claims were also denied for the same reasons that AGCO denied GOYU's claims.

However, because the endorsements do not bear the signature of any officer of GOYU, the trial court, as well as the Court of Appeals, concluded that the endorsements are defective and held that RCBC has no right over the insurance proceeds.

Issue: WON RCBC has a right over the insurance proceeds.

Held: RCBC has a right over the insurance proceeds.

It is settled that a mortgagor and a mortgagee have separate and distinct insurable interests in the

same mortgaged property, such that each one of them may insure the same property for his own sole

benefit. There is no question that GOYU could insure the mortgaged property for its own exclusive

benefit. In the present case, although it appears that GOYU obtained the subject insurance policies

naming itself as the sole payee, the intentions of the parties as shown by their contemporaneous acts,

must be given due consideration in order to better serve the interest of justice and equity.

It is to be noted that 9 endorsement documents were prepared by Alchester in favor of RCBC. The

Court is in a quandary how Alchester could arrive at the idea of endorsing any specific insurance policy

in favor of any particular beneficiary or payee other than the insured had not such named payee or

beneficiary been specifically disclosed by the insured itself. It is also significant that GOYU voluntarily

and purposely took the insurance policies from MICO, a sister company of RCBC, and not just from any

other insurance company. Alchester would not have found out that the subject pieces of property were

mortgaged to RCBC had not such information been voluntarily disclosed by GOYU itself. Had it not

been for GOYU, Alchester would not have known of GOYU's intention of obtaining insurance coverage

in compliance with its undertaking in the mortgage contracts with RCBC, and verify, Alchester would

not have endorsed the policies to RCBC had it not been so directed by GOYU.

On equitable principles, particularly on the ground of estoppel, the Court is constrained to rule in

favor of mortgagor RCBC. RCBC, in good faith, relied upon the endorsement documents sent to it as

this was only pursuant to the stipulation in the mortgage contracts. We find such reliance to be

justified under the circumstances of the case. GOYU failed to seasonably repudiate the authority of the

person or persons who prepared such endorsements. Over and above this, GOYU continued, in the

meantime, to enjoy the benefits of the credit facilities extended to it by RCBC. After the occurrence of

the loss insured against, it was too late for GOYU to disown the endorsements for any imagined or

contrived lack of authority of Alchester to prepare and issue said endorsements. If there had not been

actually an implied ratification of said endorsements by virtue of GOYU's inaction in this case, GOYU is

at the very least estopped from assailing their operative effects.

To permit GOYU to capitalize on its non-confirmation of these endorsements while it continued to

enjoy the benefits of the credit facilities of RCBC which believed in good faith that there was due

endorsement pursuant to their mortgage contracts, is to countenance grave contravention of public

policy, fair dealing, good faith, and justice. Such an unjust situation, the Court cannot sanction. Under

the peculiar circumstances obtaining in this case, the Court is bound to recognize RCBC's right to the

proceeds of the insurance policies if not for the actual endorsement of the policies, at least on the

basis of the equitable principle of estoppel.

GOYU cannot seek relief under Section 53 of the Insurance Code which provides that the proceeds

of insurance shall exclusively apply to the interest of the person in whose name or for whose benefit it

is made. The peculiarity of the circumstances obtaining in the instant case presents a justification to

take exception to the strict application of said provision, it having been sufficiently established that it

was the intention of the parties to designate RCBC as the party for whose benefit the insurance

policies were taken out. Consider thus the following:

1. It is undisputed that the insured pieces of property were the subject of mortgage contracts entered into between RCBC and GOYU in consideration of and for securing GOYU's credit facilities from RCBC. The mortgage contracts contained common provisions whereby GOYU, as mortgagor, undertook to have the mortgaged property properly covered against any loss by an insurance company acceptable to RCBC.

2. GOYU voluntarily procured insurance policies to cover the mortgaged property from MICO, no less than a sister company of RCBC and definitely an acceptable insurance company to RCBC.

3. Endorsement documents were prepared by MICO's underwriter, Alchester Insurance Agency, Inc., and copies thereof were sent to GOYU, MICO and RCBC. GOYU did not assail, until of late, the validity of said endorsements.

4. GOYU continued until the occurrence of the fire, to enjoy the benefits of the credit facilities extended by RCBC which was conditioned upon the endorsement of the insurance policies to be taken by GOYU to cover the mortgaged properties.

This Court can not over stress the fact that upon receiving its copies of the endorsement

documents prepared by Alchester, GOYU, despite the absence written conformity thereto, obviously

considered said endorsement to be sufficient compliance with its obligation under the mortgage

contracts since RCBC accordingly continued to extend the benefits of its credit facilities and GOYU

continued to benefit therefrom. Just as plain too is the intention of the parties to constitute RCBC as

the beneficiary of the various insurance policies obtained by GOYU. The intention of the parties will

have to be given full force and effect in this particular case. The insurance proceeds may, therefore, be

exclusively applied to RCBC, which under the factual circumstances of the case, is truly the person or

entity for whose benefit the policies were clearly intended.