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Makati Tuscany vs. CA

Facts:

early 1982, private respondent American Home Assurance Co issued in favor of petitioner Makati TuscanyCondominium Corporation insurance policy on the latter's building and premises, for a period beginning 1March 1982 and ending 1 March 1983, with a total premium of P466,103.05. premium was paid oninstallments on 12 March 1982, 20 May 1982, 21 June 1982 and 16 November 1982, all of which wereaccepted by private respondent

1983:policy renewed, payment in installments again. Accepted by respondent. 1984: policy renewed again. On this renewed policy, petitioner made two installment payments, both

accepted by private respondent, the first on 6 February 1984 for P52,000.00 and the second, on 6 June1984 for P100,000.00. Thereafter, petitioner refused to pay the balance of the premium

respondent filed an action to recover the unpaid balance of P314,103.05

In its answer with counterclaim, petitioner admitted the issuance of policy. explained that it discontinued thepayment of premiums because the policy did not contain a credit clause in its favor and the receipts for theinstallment payments covering the policy for 1984-85, as well as the two (2) previous policies, stated thefollowing reservations:

2. Acceptance of this payment shall not waive any of the company rights to deny liability on any claimunder the policy arising before such payments or after the expiration of the credit clause of the policy; and

3. Subject to no loss prior to premium payment. If there be any loss such is not covered.

Petitioner further claimed that the policy was never binding and valid, and no risk attached to the policy

P filed counterclaim for premiums already paid in previous years

TC dismissed complaint and counterclaim: cannot be said that no risk attached (payment of premium) and

as for unpaid premiums, no right to demand w/ lapse of policy CA modified TC decision, asked Makati Tuscany to pay: nothing in section 77 which suggests that the

parties may not agree to allow payment of the premiums in installment

Petitioner now asserts that its payment by installment of the premiums for the insurance policies for 1982,1983 and 1984 invalidated said policies because of the provisions of Sec. 77 of the Insurance Code, asamended, and by the conditions stipulated by the insurer in its receipts, disclaiming liability for loss foroccurring before payment of premiums

P argues that where the premiums is not actually paid in full, the policy would only be effective if there is anacknowledgment in the policy of the receipt of premium pursuant to Sec. 78 of the Insurance Code. Theabsence of an express acknowledgment in the policies of such receipt of the corresponding premiumpayments, and petitioner's failure to pay said premiums on or before the effective dates of said policiesrendered them invalid. Petitioner thus concludes that there cannot be a perfected contract of insuranceupon mere partial payment of the premiums because under Sec. 77 of the Insurance Code, no contract ofinsurance is valid and binding unless the premium thereof has been paid, notwithstanding any agreementto the contrary. As a consequence, petitioner seeks a refund of all premium payments made on the allegedinvalid insurance policies

Issue: Whether or not policies are binding (YES)

Held:

subject policies are valid even if the premiums were paid on installments. The records clearly show thatpetitioner and private respondent intended subject insurance policies to be binding and effectivenotwithstanding the staggered payment of the premiums. The initial insurance contract entered into in 1982was renewed in 1983, then in 1984. In those three (3) years, the insurer accepted all the installmentpayments. Such acceptance of payments speaks loudly of the insurer's intention to honor the policies itissued to petitioner. Certainly, basic principles of equity and fairness would not allow the insurer to continuecollecting and accepting the premiums, although paid on installments, and later deny liability on the lameexcuse that the premiums were not prepared in full

Quoted w/ approval CA decision: Section 78 of the Insurance Code in effect allows waiver by the insurer ofthe condition of prepayment by making an acknowledgment in the insurance policy of receipt of premiumas conclusive evidence of payment so far as to make the policy binding despite the fact that premium isactually unpaid. Section 77 merely precludes the parties from stipulating that the policy is valid even if

premiums are not paid, but does not expressly prohibit an agreement granting credit extension, and suchan agreement is not contrary to morals, good customs, public order or public policy (De Leon, theInsurance Code, at p. 175). So is an understanding to allow insured to pay premiums in installments not soproscribed. At the very least, both parties should be deemed in estoppel to question the arrangement theyhave voluntarily accepted.

CA decision affirmed.

South Sea Surety vs. CA

Facts:

16 January 1984: Valenzuela Hardwood and Industrial Supply, Inc. (private resp) entered into anagreement with the defendant Seven Brothers whereby the latter undertook to load on board its vessel M/VSeven Ambassador the former's lauan round logs numbering 940 at the port of Maconacon, Isabela forshipment to Manila

20 January 1984, plaintiff insured the logs, against loss and/or, damage with defendant South Sea Suretyand Insurance Co., Inc. for P2,000,000.00 end the latter issued its Marine Cargo Insurance Policy on said

date 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to Mr.

Victorio Chua (agent)

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vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the plaintiffs insured logs

30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment of the premium and documentarystamps due on the policy was tendered to the insurer but was not accepted. Instead, the South Sea Suretyand Insurance Co., Inc. cancelled the insurance policy it issued as of the date of inception for non-paymentof the premium due in accordance with Section 77 of the Insurance Code

2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. thepayment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed aformal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latterdenied the claim

TC ruled in favor of Valenzuela Hardwood

CA affirmed liability of insurance corp

In this petition for review on certioraribrought by South Sea Surety and Insurance Co., Inc., petitionerargues that it likewise should have been freed from any liability to Hardwood. It faults the appellate court(a) for having Supposedly disregarded Section 77 of the insurance Code and (b) for holding Victorio Chuato have been an authorized representative of the insurer.

Issue: Whether or not South Sea liable (YES)

Held:

Undoubtedly, the payment of the premium is a condition precedent to, and essential for, theefficaciousness of the contract. The only two statutorily provided exceptions are (a) in case the insurancecoverage relates to life or industrial life (health) insurance when a grace period applies and (b) when theinsurer makes a written acknowledgment of the receipt of premium, this acknowledgment being declaredby law to be then conclusive evidence of the premium payment (Secs. 77-78, Insurance Code).

TC and CA found that Mr. Chua was agent, so payment was made: When the appellant South Sea Suretyand Insurance Co., Inc. delivered to Mr. Chua the marine cargo insurance policy for the plaintiffs logs, he isdeemed to have been authorized by the South Sea Surety and Insurance Co., Inc. to receive the premiumwhich is due on its behalf. When therefore the insured logs were lost, the insured had already paid thepremium to an agent of the South Sea Surety and Insurance Co., Inc., which is consequently liable to paythe insurance proceeds under the policy it issued to the insured

Petition denied.

Spouses Tibay vs. CA

Facts:

22 January 1987 private respondent Fortune Life and General Insurance Co., Inc. (FORTUNE) issued FireInsurance Policy No. 136171 in favor of Violeta R. Tibay and/or Nicolas Roraldo on their two-storeyresidential building located at 5855 Zobel Street, Makati City, together with all their personal effects therein.The insurance was for P600,000.00 covering the period from 23 January 1987 to 23 January 1988. On 23January 1987, of the total premium of P2,983.50, petitioner Violeta Tibay only paid P600.00 thus leaving aconsiderable balance unpaid

8 March 1987 the insured building was completely destroyed by fire. Two days later or on 10 March 1987Violeta Tibay paid the balance of the premium. On the same day, she filed with FORTUNE a claim on thefire insurance policy.

11 June 1987 FORTUNE denied the claim of Violeta for violation of Policy Condition No. 2 and of Sec. 77of the Insurance Code. Efforts to settle the case before the Insurance Commission proved futile. On 3March 1988 Violeta and the other petitioners sued FORTUNE for damages

TC: ruled in favor of Sps Tibay, Fortune liable

CA: reversed TC ruling, return premium, Fortune not liable

Issue: Whether or not Fortune liable (NO)

Held:

Clearly the Policy provides for payment of premium in full. Accordingly, where the premium has only beenpartially paid and the balance paid only after the peril insured against has occurred, the insurance contract

did not take effect and the insured cannot collect at all on the policy.

Supported by Sec. 77 Phoenix and Tuscany, adequately demonstrate the waiver, either express or implied, of prepayment in full

by the insurer: impliedly, by suing for the balance of the premium as inPhoenix, and expressly, by agreeingto make premiums payable in installments as in Tuscany. But contrary to the stance taken by petitioners,there is no waiver express or implied in the case at bench. Precisely, the insurer and the insured expresslystipulated that (t)his policy including any renewal thereof and/or any indorsement thereon is not in forceuntil the premium has been fully paid to and duly receipted by the Company x x x and that this policy shallbe deemed effective, valid and binding upon the Company only when the premiums therefor have actuallybeen paid in full and duly acknowledged

payment of partial premium by the assured in this particular instance should not be considered thepayment required by the law and the stipulation of the parties. Rather, it must be taken in the concept of adeposit to be held in trust by the insurer until such time that the full amount has been tendered and dulyreceipted for. In other words, as expressly agreed upon in the contract, full payment must be made beforethe risk occurs for the policy to be considered effective and in force.

insurance contract itself expressly provided that the policy would be effective only when the premium waspaid in full

intention of the parties must govern in the absence of clear waiver of prepayment in full by the insurer, the insured cannot collect on the

proceeds of the policy

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Petition denied.