Appellee, v. WOODWORKS, INC., Defendant-Appellant
Appellee, v. WOODWORKS, INC., Defendant-Appellant
Appellee, v. WOODWORKS, INC., Defendant-Appellant
"2. That the lower court erred in sustaining that the premium in Insurance
[G.R. No. L-25317. August 6, 1979.] Policy, Exhibit B, became an obligation which was demandable even
after the period in the Policy has expired.
PHILIPPINE PHOENIX SURETY & INSURANCE COMPANY, Plaintiff-
Appellee, v. WOODWORKS, INC., Defendant-Appellant. "3. The lower court erred in not deciding that a premium not paid is not a
debt enforceable by action of the insurer."cralaw virtua1aw library
Zosimo Rivas for Appellant.
We find the appeal meritorious.
Manuel O. Chan for Appellee. Insurance is "a contract whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an
unknown or contingent event." 5 The consideration is the "premium."
DECISION "The premium must be paid at the time and in the way and manner
specified in the policy and, if not so paid, the policy will lapse and be
forfeited by its own terms." 6
MELENCIO-HERRERA, J.: The provisions on premium in the subject Policy
read:jgc:chanrobles.com.ph
This case was certified to this Tribunal by the Court of Appeals in its "THIS POLICY OF INSURANCE WITNESSETH, THAT in consideration
Resolution of October 4, 1965 on a pure question of law and "because of — MESSRS. WOODWORKS, INC. — hereinafter called the Insured,
the issues raised are practically the same as those in CA-G.R. No. paying to the PHILIPPINE PHOENIX SURETY AND INSURANCE, INC.,
32017-R" between the same parties, which case had been forwarded to hereinafter called the Company, the sum of — PESOS NINE
us on April 1, 1964. The latter case, "Philippine Phoenix Surety & THOUSAND EIGHT HUNDRED FORTY SIX ONLY — the Premium for
Insurance Inc. v. Woodworks, Inc.," docketed in this Court as L-22684, the first period hereinafter mentioned, . . ."cralaw virtua1aw library
was decided on August 31, 1967 and has been reported in 20 SCRA
1270.chanrobles.com:cralaw:red x x x
Specifically, this action is for recovery of unpaid premium on a fire
insurance policy issued by plaintiff, Philippine Phoenix Surety &
"THE COMPANY HEREBY AGREES with the Insured . . . that if the
Insurance Company, in favor of defendant Woodworks, Inc.
Property above described, or any part thereof, shall be destroyed or
The following are the established facts:chanrob1es virtual 1aw library damaged by Fire or Lightning after payment of Premium, at any time
between 4:00 o’clock in the afternoon of the TWENTY FIRST day of
On July 21, 1960, upon defendant’s application, plaintiff issued in its JULY One Thousand Nine Hundred and SIXTY and 4:00 o’clock in the
favor Fire Insurance Policy No. 9749 for P500,000.00 whereby plaintiff afternoon of the TWENTY FIRST day of JULY One Thousand Nine
insured defendant’s building, machinery and equipment for a term of one Hundred and SIXTY ONE, . . ." (Emphasis supplied)
year from July 21, 1960 to July 21, 1961 against loss by fire. The
premium and other charges including the margin fee surcharge of Paragraph "2" of the Policy further contained the following
P590.76 and the documentary stamps in the amount of P156.60 affixed condition:jgc:chanrobles.com.ph
on the Policy, amounted to P10,593.36.
"2. No payment in respect of any premium shall be deemed to be
It is undisputed that defendant did not pay the premium stipulated in the
payment to the Company unless a printed form of receipt for the same
Policy when it was issued nor at any time thereafter.
signed by an Official or duly-appointed Agent of the Company shall have
On April 19, 1961, or before the expiration of the one-year term, plaintiff been given to the Insured."cralaw virtua1aw library
notified defendant, through its Indorsement No. F-6963/61, of the
cancellation of the Policy allegedly upon request of defendant. 1 The Paragraph "10" of the Policy also provided:jgc:chanrobles.com.ph
latter has denied having made such a request. In said Indorsement,
plaintiff credited defendant with the amount of P3,110.25 for the "10. "This insurance may be terminated at any time at the request of the
unexpired period of 94 days, and claimed the balance of P7,483.11 Insured, in which case the Company will retain the customary short
representing "earned premium from July 21, 1960 to 18th April 1961 or, period rate for the time the policy has been in force. This insurance may
say 271 days." On July 6, 1961, plaintiff demanded in writing for the also at any time be terminated at the option of the Company, on notice to
payment of said amount. 2 Defendant, through counsel, disclaimed any that effect being given to the Insured, in which case the Company shall
liability in its reply-letter of August 15, 1961, contending, in essence, that be liable to repay on demand a ratable proportion of the premium for the
it need not pay premium "because the Insurer did not stand liable for any unexpired term from the date of the cancelment."cralaw virtua1aw library
indemnity during the period the premiums were not paid." 3
Clearly, the Policy provides for pre-payment of premium. Accordingly;
On January 30, 1962, plaintiff commenced action in the Court of First
Instance of Manila, Branch IV (Civil Case No. 49468), to recover the "when the policy is tendered the insured must pay the premium unless
amount of P7,483.11 as "earned premium." Defendant controverted credit is given or there is a waiver, or some agreement obviating the
basically on the theory that its failure "to pay the premium after the necessity for prepayment." 7 To constitute an extension of credit there
issuance of the policy put an end to the insurance contract and rendered must be a clear and express agreement therefor." 8
the policy unenforceable." 4
From the Policy provisions, we fail to find any clear agreement that a
On September 13, 1962, judgment was rendered in plaintiff’s favor credit extension was accorded defendant. And even if it were to be
"ordering defendant to pay plaintiff the sum of P7,483.11, with interest presumed that plaintiff had extended credit from the circumstances of
thereon at the rate of 6% per annum from January 30, 1962, until the the unconditional delivery of the Policy without prepayment of the
principal shall have been fully paid, plus the sum of P700.00 as premium, yet it is obvious that defendant had not accepted the insurer’s
attorney’s fees of the plaintiff, and the costs of the suit." From this offer to extend credit, which is essential for the validity of such
adverse Decision, defendant appealed to the Court of Appeals which, as agreement.chanroblesvirtualawlibrary
heretofore stated, certified the case to us on a question of law.
The errors assigned read:jgc:chanrobles.com.ph "An acceptance of an offer to allow credit, if one was made, is as
essential to make a valid agreement for credit, to change a conditional
"1. The lower court erred in sustaining that Fire Insurance Policy, Exhibit delivery of an insurance policy to an unconditional delivery, as it is to
A, was a binding contract even if the premium stated in the policy has make any other contract. Such an acceptance could not be merely a
not been paid. mental act or state of mind, but would require a promise to pay made
known in some manner to defendant. 9
In this respect, the instant case differs from that involving the same
parties entitled Philippine Phoenix Surety & Insurance Inc. v.
Woodworks, Inc., 10 where recovery of the balance of the unpaid
premium was allowed inasmuch as in that case "there was not only a
perfected contract of insurance but a partially performed one as far as
the payment of the agreed premium was concerned." This is not the
situation obtaining here where no partial payment of premiums has been
made whatsoever.
Since the premium had not been paid, the policy must be deemed to
have lapsed.
". . . the rule is that under policy provisions that upon the failure to make
a payment of a premium or assessment at the time provided for, the
policy shall become void or forfeited, or the obligation of the insurer shall
cease, or words to like effect, because the contract so prescribes and
because such a stipulation is a material and essential part of the
contract. This is true, for instance, in the case of life, health and
accident, fire and hail insurance policies." 12
Moreover, "an insurer cannot treat a contract as valid for the purpose of
collecting premiums and invalid for the purpose of indemnity." 14
That on April 1, 1960, plaintiff issued to defendant Fire Policy No. 9652
for the amount of P300,000.00, under the terms and conditions therein
set forth in said policy a copy of which is hereto attached and made a
part hereof as Annex "A";
That the defendant paid P3,000.00 on September 22, 1960 under official
receipt No. 30245 of plaintiff;
I. The lower court erred in stating that in fire insurance policies the risk
attached upon the issuance and delivery of the policy to the insured.
III. The lower court erred in deciding that the premium in the policy was
still collectible when the complaint was filed.
IV. The lower court erred in deciding that a partial payment of the
premium made the policy effective during the whole period of the policy.
It is clear from the foregoing that on April 1, 1960 Fire Insurance Policy
No. 9652 was issued by appellee and delivered to appellant, and that on
September 22 of the same year, the latter paid to the former the sum of
P3,000.00 on account of the total premium of P6,051.95 due thereon.
There is, consequently, no doubt at all that, as between the insurer and
the insured, there was not only a perfected contract of insurance but a
partially performed one as far as the payment of the agreed premium
G.R. No. 95546 November 6, 1992 After some incidents, petitioner and private respondent moved for
summary judgment.
MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner,
vs. On 8 October 1987, the trial court dismissed the complaint and the
THE COURT OF APPEALS, AMERICAN HOME ASSURANCE CO., counterclaim upon the following findings:
represented by American International Underwriters (Phils.),
Inc., respondent.
While it is true that the receipts issued to the defendant contained the
aforementioned reservations, it is equally true that payment of the
BELLOSILLO, J.: premiums of the three aforementioned policies (being sought to be
refunded) were made during the lifetime or term of said policies, hence,
it could not be said, inspite of the reservations, that no risk attached
This case involves a purely legal question: whether payment by
under the policies. Consequently, defendant's counterclaim for refund is
installment of the premiums due on an insurance policy invalidates the
not justified.
contract of insurance, in view of Sec. 77 of P.D. 612, otherwise known
as the Insurance Code, as amended, which provides:
As regards the unpaid premiums on Insurance Policy No. AH-CPP-
9210651, in view of the reservation in the receipts ordinarily issued by
Sec. 77. An insurer is entitled to the payment of the premium as soon as
the plaintiff on premium payments the only plausible conclusion is that
the thing is exposed to the peril insured against. Notwithstanding any
plaintiff has no right to demand their payment after the lapse of the term
agreement to the contrary, no policy or contract of insurance issued by
of said policy on March 1, 1985. Therefore, the defendant was justified in
an insurance company is valid and binding unless and until the premium
refusing to pay the same. 1
thereof has been paid, except in the case of a life or an industrial life
policy whenever the grace period provision applies.
Both parties appealed from the judgment of the trial court. Thereafter,
the Court of Appeals rendered a decision 2modifying that of the trial court
Sometime in early 1982, private respondent American Home Assurance
by ordering herein petitioner to pay the balance of the premiums due on
Co. (AHAC), represented by American International Underwriters
Policy No. AH-CPP-921-651, or P314,103.05 plus legal interest until fully
(Phils.), Inc., issued in favor of petitioner Makati Tuscany Condominium
paid, and affirming the denial of the counterclaim. The appellate court
Corporation (TUSCANY) Insurance Policy No. AH-CPP-9210452 on the
thus explained —
latter's building and premises, for a period beginning 1 March 1982 and
ending 1 March 1983, with a total premium of P466,103.05. The
premium was paid on installments on 12 March 1982, 20 May 1982, 21 The obligation to pay premiums when due is ordinarily as indivisible
June 1982 and 16 November 1982, all of which were accepted by obligation to pay the entire premium. Here, the parties herein agreed to
private respondent. make the premiums payable in installments, and there is no pretense
that the parties never envisioned to make the insurance contract binding
between them. It was renewed for two succeeding years, the second
On 10 February 1983, private respondent issued to petitioner Insurance
and third policies being a renewal/replacement for the previous one. And
Policy No. AH-CPP-9210596, which replaced and renewed the previous
the insured never informed the insurer that it was terminating the policy
policy, for a term covering 1 March 1983 to 1 March 1984. The premium
because the terms were unacceptable.
in the amount of P466,103.05 was again paid on installments on 13 April
1983, 13 July 1983, 3 August 1983, 9 September 1983, and 21
November 1983. All payments were likewise accepted by private While it may be true that under Section 77 of the Insurance Code, the
respondent. parties may not agree to make the insurance contract valid and binding
without payment of premiums, there is nothing in said section which
suggests that the parties may not agree to allow payment of the
On 20 January 1984, the policy was again renewed and private
premiums in installment, or to consider the contract as valid and binding
respondent issued to petitioner Insurance Policy No. AH-CPP-9210651
upon payment of the first premium. Otherwise, we would allow the
for the period 1 March 1984 to 1 March 1985. On this renewed policy,
insurer to renege on its liability under the contract, had a loss incurred
petitioner made two installment payments, both accepted by private
(sic) before completion of payment of the entire premium, despite its
respondent, the first on 6 February 1984 for P52,000.00 and the second,
voluntary acceptance of partial payments, a result eschewed by a basic
on 6 June 1984 for P100,000.00. Thereafter, petitioner refused to pay
considerations of fairness and equity.
the balance of the premium.
To our mind, the insurance contract became valid and binding upon
Consequently, private respondent filed an action to recover the unpaid
payment of the first premium, and the plaintiff could not have denied
balance of P314,103.05 for Insurance Policy No. AH-CPP-9210651.
liability on the ground that payment was not made in full, for the reason
that it agreed to accept installment payment. . . . 3
In its answer with counterclaim, petitioner admitted the issuance of
Insurance Policy No. AH-CPP-9210651. It explained that it discontinued
Petitioner now asserts that its payment by installment of the premiums
the payment of premiums because the policy did not contain a credit
for the insurance policies for 1982, 1983 and 1984 invalidated said
clause in its favor and the receipts for the installment payments covering
policies because of the provisions of Sec. 77 of the Insurance Code, as
the policy for 1984-85, as well as the two (2) previous policies, stated the
amended, and by the conditions stipulated by the insurer in its receipts,
following reservations:
disclaiming liability for loss for occurring before payment of premiums.
2. Acceptance of this payment shall not waive any of the company rights
It argues that where the premiums is not actually paid in full, the policy
to deny liability on any claim under the policy arising before such
would only be effective if there is an acknowledgment in the policy of the
payments or after the expiration of the credit clause of the policy; and
receipt of premium pursuant to Sec. 78 of the Insurance Code. The
absence of an express acknowledgment in the policies of such receipt of
3. Subject to no loss prior to premium payment. If there be any loss such the corresponding premium payments, and petitioner's failure to pay said
is not covered. premiums on or before the effective dates of said policies rendered them
invalid. Petitioner thus concludes that there cannot be a perfected
contract of insurance upon mere partial payment of the premiums
Petitioner further claimed that the policy was never binding and valid, because under Sec. 77 of the Insurance Code, no contract of insurance
and no risk attached to the policy. It then pleaded a counterclaim for is valid and binding unless the premium thereof has been paid,
P152,000.00 for the premiums already paid for 1984-85, and in its notwithstanding any agreement to the contrary. As a consequence,
answer with amended counterclaim, sought the refund of P924,206.10 petitioner seeks a refund of all premium payments made on the alleged
representing the premium payments for 1982-85.
invalid insurance policies.
We hold that the subject policies are valid even if the premiums were
paid on installments. The records clearly show that petitioner and private
respondent intended subject insurance policies to be binding and
effective notwithstanding the staggered payment of the premiums. The
initial insurance contract entered into in 1982 was renewed in 1983, then
in 1984. In those three (3) years, the insurer accepted all the installment
payments. Such acceptance of payments speaks loudly of the insurer's
intention to honor the policies it issued to petitioner. Certainly, basic
principles of equity and fairness would not allow the insurer to continue
collecting and accepting the premiums, although paid on installments,
and later deny liability on the lame excuse that the premiums were not
prepared in full.
SO ORDERED.
G.R. No. 137172 June 15, 1999 policies for Exhibits A, B, C, D and E;
UCPB GENERAL INSURANCE CO., INC., petitioner, (2) Declaring plaintiff to have fully complied with its obligation to pay the
vs. premium thereby rendering the replacement-renewal policy of Exhibits A,
MASAGANA TELAMART, INC., respondent. B, C, D and E effective and binding for the duration May 22, 1992 until
May 22, 1993; and, ordering defendant to deliver forthwith to plaintiff the
said replacement-renewal policies;
PARDO, J.:
(3) Declaring Exhibits A & B, in force from August 22, 1991 up to August
The case is an appeal via certiorari seeking to set aside the decision of
23, 1992 and August 9, 1991 to August 9, 1992, respectively; and
the Court of Appeals, 1 affirming with modification that of the Regional
Trial Court, Branch 58, Makati, ordering petitioner to pay respondent the
sum of P18,645,000.00, as the proceeds of the insurance coverage of (4) Ordering the defendant to pay plaintiff the sums of: (a)
respondent's property razed by fire; 25% of the total amount due as P18,645,000.00 representing the latter's claim for indemnity under
attorney's fees and P25,000.00 as litigation expenses, and costs. Exhibits A, B & C and/or its replacement-renewal policies; (b) 25% of the
total amount due as and for attorney's fees; (c) P25,000.00 as necessary
litigation expenses; and, (d) the costs of suit.
The facts are undisputed and may be related as follows:
All other claims and counterclaims asserted by the parties are denied
On April 15, 1991, petitioner issued five (5) insurance policies covering
and/or dismissed, including plaintiff's claim for interests.
respondent's various property described therein against fire, for the
period from May 22, 1991 to May 22, 1992.
SO ORDERED.
In March 1992, petitioner evaluated the policies and decided not to
renew them upon expiration of their terms on May 22, 1992. Petitioner Makati, Metro-Manila, March 10, 1993.
advised respondent's broker, Zuellig Insurance Brokers, Inc. of its
intention not to renew the policies.
ZOSIMO Z. ANGELES.
On the same day, July 14, 1992, petitioner returned to respondent the By resolution adopted on March 24, 1999, we required respondent to comment on the
five (5) manager's checks that it tendered, and at the same time rejected petition, not to file a motion to dismiss within ten (10) days from notice. 8 On April 22,
respondent's claim for the reasons (a) that the policies had expired and 1999, respondent filed its comment. 9
were not renewed, and (b) that the fire occurred on June 13, 1992,
before respondent's tender of premium payment. Respondent submits that the Court of Appeals correctly ruled that no timely notice of non-
renewal was sent. The notice of non-renewal sent to broker Zuellig which claimed that it
verbally notified the insurance agency but not respondent itself did not suffice.
On July 21, 1992, respondent filed with the Regional Trial Court, Branch Respondent submits further that the Court of Appeals did not err in finding that there
58, Makati City, a civil complaint against petitioner for recovery of existed a sixty (60) to ninety (90) days credit agreement between UCPB and Masagana,
P18,645,000.00, representing the face value of the policies covering and that, finally, the Supreme Court could not review factual findings of the lower court
affirmed by the Court of Appeals. 10
respondent's insured property razed by fire, and for attorney's fees. 2
After due trial, on March 10, 1993, the Regional Trial Court, Branch 58, The answer is easily found in the Insurance Code. No, an insurance policy, other than
life, issued originally or on renewal, is not valid and binding until actual payment of the
Makati, rendered decision, the dispositive portion of which reads: premium. Any agreement to the contrary is void. 11 The parties may not agree expressly
or impliedly on the extension of creditor time to pay the premium and consider the policy
binding before actual payment.
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff and against the defendant, as follows:
The case of Malayan Insurance Co., Inc. vs. Cruz-Arnaldo, 12 cited by the Court of
Appeals, is not applicable. In that case, payment of the premium was in fact actually
(1) Authorizing and allowing the plaintiff to consign/deposit with this made on December 24, 1981, and the fire occurred on January 18, 1982. Here, the
payment of the premium for renewal of the policies was tendered on July 13, 1992, a
Court the sum of P225,753.95 (refused by the defendant) as full month after the fire occurred on June 13, 1992. The assured did not even give the insurer
payment of the corresponding premiums for the replacement-renewal a notice of loss within a reasonable time after occurrence of the fire.
WHEREFORE, the Court hereby REVERSES and SETS ASIDE the decision of the Court
of Appeals in CA-G.R. CV No. 42321. In lieu thereof the Court renders judgment
dismissing respondent's complaint and petitioner's counterclaims thereto filed with the
Regional Trial Court, Branch 58, Makati City, in Civil Case No. 92-2023. Without costs.SO
ORDERED.