ACME SHOES 60 SCRA 714 Business Organization Corporation Law Rule on Moral Damages When It Comes to Corporations In June

une 1978, Acme Shoe, Rubber & Plastic Corporation executed a chattel mortgage in favor of Producers Bank of the Philippines in consideration of a loan in the amount of P3 million. The loan was paid. Thereafter, Producers Bank extended another P2.7 million loan to Acme. The same was paid. In 1984, Producers Bank extended a P1 million loan to Acme. This time, Acme was unable to pay and eventually, Producers Bank foreclosed the property subject of the chattel mortgage executed in June 1978. Acme opposed the foreclosure as it alleged that the 1984 loan was no longer covered by the chattel mortgage of 1978. Acme is also asking for moral damages (worth P3 million) for the groundless foreclosure done by Producers Bank. ISSUE: Whether or not Acme Shoe is entitled to moral damages. HELD: No. It is true that the chattel mortgage executed in 1978 for the initial P3 million loan only covers the initial loan and not the 1984 P1 million loan. However, Acme Shoes is not entitled to moral damages. Moral damages are granted in recompense for physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. A corporation, being an artificial person and having existence only in legal contemplation, has no feelings, no emotions, no senses; therefore, it cannot experience physical suffering and mental anguish. Mental suffering can be experienced only by one having a nervous system and it flows from real ills, sorrows, and griefs of life all of which cannot be suffered by Acme Shoes as an artificial person. Insurance Case Digest: Makati Tuscany v. CA (1992) G.R. No. 95546 November 6, 1992 Lessons Applicable:

FACTS:

Installments and partial payment (Insurance) Grounds on Return of Premium: No exposed to peril insured against (Insurance)

Early 1982: American Home Assurance Co. (AHAC), represented by American International Underwriters (Phils.), Inc., issued in favor of Makati Tuscany Condominium Corporation (Tuscany) on the 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. o Premium were paid on installments on: March 12 1982 May 20 1982 June 21 1982 November 16 1982 February 10 1983: AHAC replaced and renewed the previous policy, for a term covering 1 March 1983 to 1 March 1984 o premium of P466,103.05 was again paid on installments on: April 13 1983 July 13 1983 August 3 1983 September 9 1983 November 21 1983 January 20 1984: policy was again renewed for the period March 1 1984 to March 1 1985 o Tuscany only paid two installment payments February 6 1984 for P52k June 6 1984 for P100k AHAC filed an action to recover the unpaid balance of P314,103.05

RTC: dismissed the complaint o While it is true that the receipts issued to the defendant contained the aforementioned reservations, it is equally true that payment of the 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 under the policies counterclaim for refund is not justified CA: ordered Tuscany to pay premiums when due is ordinarily as indivisible obligation to pay the entire premium; insurance contract became valid and binding upon payment of the first premium

ISSUE: 1. W/N payment by installment of the premiums due on an insurance policy invalidates the contract of insurance on the basis of: Sec. 77 of the Insurance Code, no contract of insurance is valid and binding unless the premium thereof has been paid, notwithstanding any agreement to the contrary. As a consequence, petitioner seeks a refund of all premium payments made on the alleged invalid insurance policies. 2. W/N there is risk attached to the insurance so it cannot be refunded HELD: 1. NO

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 such an agreement is not contrary to morals, good customs, public order or public policy o At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted. It paid the initial installment and thereafter made staggered payments resulting in full payment of the 1982 and 1983 insurance policies. For the 1984 policy, petitioner paid 2 installments although it refused to pay the balance. appearing that they actually intended to make 3 insurance contracts valid

2. NO.

where the risk is entire and the contract is indivisible, the insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk insured for any period, however brief or momentary

UCPB General Insurance Co. Inc. vs. Masagana Telemart Inc. [G.R. No. 137172, April 4, 2001] Post under case digests, Commercial Law at Saturday, February 25, 2012 Posted by Schizophrenic Mind Facts: Plaintiff obtained from defendant fire insurance policies on its property effective from May 1991 - 1992. On June 1992, plaintiff's properties were raged by fire. On the same date plaintiff tendered, and defendant accepted five checks as renewal premium payments for which a receipt was issued. Masagana made a claim which was denied. the checks were then returned to plaintiff. According to defendant, the claim cannot be entertained for properties were burned before the tender of premium.

Issue: Whether or not section 77 of the insurance code must be strictly applied to petitioners advantage despite its practice of granting 60 to 70 day credit term for the payment of its premium

Held: The first exception is provided by Section 77 itself, and that is, in case of a life or industrial life policy whenever the grace period provision applies.

The second is that covered by Section 78 of the Insurance Code, which provides:

SECTION 78. Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until premium is actually paid.

A third exception was laid down in Makati Tuscany Condominium Corporation vs. Court of Appeals, wherein we ruled that Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss.

Tuscany case has provided a fourth exception to Section 77, namely, that the insurer may grant credit extension for the payment of the premium. This simply means that if the insurer has granted the insured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term.

Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit term within which to pay the premiums. That agreement is not against the law, morals, good customs, public order or public policy. The agreement binds the parties. Article 1306 of the Civil Code provides:

ARTICLE 1306. The contracting parties may establish such stipulations clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.

Finally in the instant case, it would be unjust and inequitable if recovery on the policy would not be permitted against Petitioner, which had consistently granted a 60- to 90-day credit term for the payment of premiums despite its full awareness of Section 77. Estoppel bars it from taking refuge under said Section, since Respondent relied in good faith on such practice. Estoppel then is the fifth exception to Section 77. Insurance Case Digest: Capital Insurance & Surety Co. Inc. v. Plastic Era Co. Inc (1975) G.R.No. L-22375 July 18, 1975 Lessons Applicable: Estoppel and credit extension (Insurance) Laws Applicable: Article 1249 of the New Civil Code FACTS:

December 17, 1960: Capital Insurance & Surety Co., Inc. delivered to the respondent Plastic Era Manufacturing Co., Inc. its open Fire Policy insuring its building, equipments, raw materials, products and accessories located at Sheridan Street, Mandaluyong, Rizal between December 15, 1960 1 pm - December 15, 1961 1 pm up to P100,000 but Plastic Era did not pay the premium January 8, 1961: Plastic Era delivered to Capital Insurance its partial payment through check P1,000 postdated January 16, 1961

February 20, 1961: Capital Insurance tried to deposit the check but it was dishonored due to lack of funds. According to the records, on January 19, 1961 Plastic Era has had a bank balance of P1,193.41 January 18, 1961: Plastic Era's properties were destroyed by fire amounting to a loss of P283,875. The property was also insured to Philamgen Insurance Company for P200K. Capital Insurance refused Plastic Era's claim for failing to pay the insurance premium CFI: favored Capital Insurance CA: affirmed

ISSUE: W/N there was a valid insurance contract because there was an extention of credit despite failing to encash the check payment HELD: YES. Affirmed

Article 1249 of the New Civil Code o The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired Capital Insurance accepted the promise of Plastic Era to pay the insurance premium within 30 days from the effective date of policy. Considering that the insurance policy is silent as to the mode of payment, Capital Insurance is deemed to have accepted the promissory note in payment of the premium. This rendered the policy immediately operative on the date it was delivered. By accepting its promise to pay the insurance premium within thirty (30) days from the effectivity date of the policy December 17, 1960 Capital Insurance had in effect extended credit to Plastic Era. Where credit is given by an insurance company for the payment of the premium it has no right to cancel the policy for nonpayment except by putting the insured in default and giving him personal notice Having held the check for such an unreasonable period of time, Capital Insurance was estopped from claiming a forfeiture of its policy for non-payment even if the check had been dishonored later.