New Zealand Ins. Co., vs.
Intermediate Appellate Court
G.R. No. L-66596
Facts:
A cargo of oats was consigned to Muller and Phipps
(Manila) Ltd. The cargo was insured against all risks by The New Zealand
Insurance Co., Ltd., the petitioner herein. When the cargo was discharged
several cartons which contained the oats were in bad order. The consignee filed
a claim against the insurer for the value of the damaged goods which the latter
paid in the amount of 18,148 pesos. The insurer as subrogee of the consignee
sued E. Razon, Inc., the respondent herein, who was the arrastre operator. The
insurer demanded reimbursement in the amount of 17,025 pesos. The lower figure
is due to the fact that the carrier responded for its share of the loss in the
sum of 1,121 pesos.CFI gave judgment in
favor of the plaintiff.
E. Razon, Inc. appealed the adverse decision to the Court
of Appeals. The Intermediate Appellate Court which succeeded the Court of
Appeals reversed the decision of the trial court "On the ground of prescription,
appellee has no cause of action against the appellant."
The New Zealand Insurance Co. argued in the appellate
court that the bad order certificates which were issued by E. Razon, Inc. on
March 23 and 24, 1972, served the purpose of a formal claim so that the claim
was not filed out of time.
Issue:
Whether the appellee has cause of action against the
appellant.
Held:
Yes, the examination undertaken by the defendant’s own
inspector not only gave the defendant an opportunity to check the goods but is
itself a verification of its own liability.
In fact the respondent obliquely concedes the validity of
the petitioner’s argument by stating that if the petition be given due course
its liability should be in the reduced amount of 5,344 pesos only and not the
amount found by the lower court. Considering that the instant petition is
meritorious and the amount to be awarded is a question of fact said amount
cannot be reduced at this stage.
Buenaventura Ebrado was issued by The Life Assurance Company on a
whole-life for 5,882.00 pesos with a, rider for Accidental Death for the same
amount Buenaventura Ebrado designated T. Ebrado as the revocable beneficiary in
his policy. Buenaventura Ebrado died when he was hit by a failing branch of a
tree. As the policy was in force, The Insular Life Assurance Co., Ltd. liable
to pay the coverage in the total amount of 11,745.73 pesos.
Carponia T. Ebrado
filed with the insurer a claim for the proceeds of the Policy as the designated
beneficiary therein, although she admits that she and the insured Buenaventura
C. Ebrado were merely living as husband and wife without the benefit of
marriage. Legal Wife Pascuala Ebrado also filed her claim as the widow of the
deceased insured. She asserts that she is the one entitled to the insurance
proceeds, not the common-law wife, Carponia T. Ebrado.
The trial court
rendered judgment declaring among others, Carponia T. Ebrado disqualified from
becoming beneficiary of the insured Buenaventura Cristor Ebrado and directing
the payment of the insurance proceeds to the estate of the deceased insured.
Issue:
Whether common-law wife named as beneficiary in the life insurance policy
of a legally married man can claim the proceeds thereof in case of death of the
latter.
Held:
NO. 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, definitely, barred from receiving donations from each other.
Article 739 of the new Civil Code provides:
The following donations shall be
void:
1. Those made between persons who were guilty of adultery or concubinage
at the time of donation;
2. Those made between persons found guilty of the same criminal
offense, in consideration thereof;
3. Those made to a public officer or his wife, descendants or
ascendants by reason of his office.
In the case referred to in No. 1, the action for declaration of
nullity may be brought by the spouse of the donor or donee; and the guilt of
the donee may be proved by preponderance of evidence in the same action.
In essence, a life
insurance policy is no different from a civil donation insofar as the
beneficiary is concerned. Both are founded upon the same consideration:
liberality. A beneficiary is like a donee, because from the premiums of the
policy which the insured pays out of liberality, the beneficiary will receive
the proceeds or profits of said insurance. As a consequence, the proscription
in Article 739 of the new Civil Code should equally operate in life insurance
contracts. The mandate of Article 2012 cannot be laid aside: any person who
cannot receive a donation cannot be named as beneficiary in the life insurance
policy of the person who cannot make the donation.
Policy
considerations and dictates of morality rightly justify the institution of a
barrier between common law spouses in record to Property relations since such
hip ultimately encroaches upon the nuptial and filial rights of the legitimate
family 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 As
above pointed out, a beneficiary in a fife insurance policy is no different
from a donee. Both are recipients of pure beneficence. So long as manage
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. If legitimate relationship is circumscribed by
these legal disabilities, with more reason should an illicit relationship be
restricted by these disabilities.
In consideration of the sum of 176.04 pesos as
annual premium duly paid to it, the Asia Life Insurance Company; whereby it
insured the life of Arcadio Constantino for a term of twenty years. The first
premium covered the period up to September 26, 1942. The plaintiff Paz Lopez de
Constantino was regularly appointed beneficiary.
After
that first payment, no further premiums were paid. The insured died on
September 22, 1944. It is admitted that the defendant, being an American
corporation, had to close its branch office in Manila by reason of the Japanese
occupation, i.e. from January 2, 1942, until the year 1945.
Plaintiffs
maintain that, as beneficiaries, they are entitled to receive the proceeds of
the policies minus all sums due for premiums in arrears. They allege that
non-payment of the premiums was caused by the closing of defendant's offices in
Manila during the Japanese occupation and the impossible circumstances created
by war. The lower court absolved the defendant. Hence this appeal.
Issue:
Whether the beneficiary in a life insurance policy
may recover the amount thereof although the insured died after repeatedly
failing to pay the stipulated premiums, such failure having been caused by the
last war in the Pacific.
Held:
No. Since the year 1917, the Philippine law on
Insurance was found in Act Number 2427, as amended, and the Civil Code. Act Number
2427 was largely copied from the Civil Code of California.Pursuant to the express terms of the policy,
non-payment of premium produces its avoidance.
Professor
Vance of Yale, in his standard treatise on Insurance, says that in determining
the effect of non-payment of premiums occasioned by war, the American cases may
be divided into three groups, according as they support the so-called
Connecticut Rule, the New York Rule, or the United States Rule.
The
first holds the view that "there are two elements in the consideration for
which the annual premium is paid — first, the mere protection for the year, and
second, the privilege of renewing the contract for each succeeding year by
paying the premium for that year at the time agreed upon. According to this
view of the contract, the payment of premiums is a condition precedent, the
non-performance would be illegal necessarily defeats the right to renew the
contract."
The
second rule, apparently followed by the greater number of decisions, hold that
"war between states in which the parties reside merely suspends the
contracts of the life insurance, and that, upon tender of all premiums due by
the insured or his representatives after the war has terminated, the contract
revives and becomes fully operative."
The
United States rule declares that the contract is not merely suspended, but is
abrogated by reason of non-payments is peculiarly of the essence of the
contract. It additionally holds that it would be unjust to allow the insurer to
retain the reserve value of the policy, which is the excess of the premiums paid
over the actual risk carried during the years when the policy had been in
force. This rule was announced in the well-known Statham case which, in the
opinion of Professor Vance, is the correct rule.
The
appellants and some amici curiae contend that the New York rule should
be applied here. The appellee and other amici curiae contend that the
United States doctrine is the orthodox view.
We
have read and re-read the principal cases upholding the different theories.
Besides the respect and high regard we have always entertained for decisions of
the Supreme Court of the United States, we cannot resist the conviction that
the reasons expounded in its decision of the Statham case are logically and
judicially sound. Like the instant case, the policy involved in the Statham
decision specifies that non-payment on time shall cause the policy to cease and
determine. Reasoning out that punctual payments were essential, the court said:
.
. . it must be conceded that promptness of payment is essential in the business
of life insurance. All the calculations of the insurance company are based on
the hypothesis of prompt payments. They not only calculate on the receipt of
the premiums when due, but on compounding interest upon them. It is on this
basis that they are enabled to offer assurance at the favorable rates they do.
Forfeiture for non-payment is a necessary means of protecting themselves from
embarrassment. Unless it were enforceable, the business would be thrown into
confusion. It is like the forfeiture of shares in mining enterprises, and all
other hazardous undertakings. There must be power to cut-off unprofitable
members, or the success of the whole scheme is endangered. The insured parties
are associates in a great scheme. This associated relation exists whether the
company be a mutual one or not. Each is interested in the engagements of all;
for out of the co-existence of many risks arises the law of average, which
underlies the whole business. An essential feature of this scheme is the
mathematical calculations referred to, on which the premiums and amounts
assured are based. And these calculations, again, are based on the assumption
of average mortality, and of prompt payments and compound interest thereon.
Delinquency cannot be tolerated nor redeemed, except at the option of the
company. This has always been the understanding and the practice in this
department of business. Some companies, it is true, accord a grace of thirty
days, or other fixed period, within which the premium in arrear may be paid, on
certain conditions of continued good health, etc. But this is a matter of
stipulation, or of discretion, on the part of the particular company. When no
stipulation exists, it is the general understanding that time is material, and
that the forfeiture is absolute if the premium be not paid. The extraordinary
and even desperate efforts sometimes made, when an insured person is in
extremes to meet a premium coming due, demonstrates the common view of this
matter.
It
should be noted that the parties contracted not only for peacetime conditions
but also for times of war, because the policies contained provisions applicable
expressly to wartime days. The logical inference, therefore, is that the
parties contemplated uninterrupted operation of the contract even if armed
conflict should ensue.
After
perusing the Insurance Act, we are firmly persuaded that the non-payment of
premiums is such a vital defense of insurance companies that since the very
beginning, said Act number 2427 expressly preserved it, by providing that after
the policy shall have been in force for two years, it shall become
incontestable (i.e. the insurer shall have no defense) except for fraud, non-payment
of premiums, and military or naval service in time of war (sec. 184 [b],
Insurance Act). And when Congress recently amended this section (Rep. Act
Number 171), the defense of fraud was eliminated, while the defense of
non-payment of premiums was preserved. Thus the fundamental character of
the undertaking to pay premiums and the high importance of the defense of
non-payment thereof, was specifically recognized.
In
keeping with such legislative policy, we feel no hesitation to adopt the United
States Rule, which is in effect a variation of the Connecticut rule for the
sake of equity. In this connection, it appears that the first policy had no
reserve value, and that the equitable values of the second had been practically
returned to the insured in the form of loan and advance for premium.