G.R. No.

L-25317 August 6, 1979

PHILIPPINE PHOENIX SURETY & INSURANCE COMPANY, plaintiff-appellee,
vs.
WOODWORKS, INC., defendant-appellant.
Zosimo Rivas for appellant.
Manuel O. Chan for appellee.

MELENCIO-HERRERA, J.:
This case was certified to this Tribunal by the Court of Appeals in its Resolution of October 4, 1965 on a pure question
of law and "because the issues raised are practically the same as those in CA-G.R. No. 32017-R" between the same
parties, which case had been forwarded to us on April 1, 1964. The latter case, "Philippine Phoenix Surety &
Insurance Inc. vs. Woodworks, Inc.," docketed in this Court as L-22684, was decided on August 31, 1967 and has
been reported in 20 SCRA 1270.
Specifically, this action is for recovery of unpaid premium on a fire insurance policy issued by plaintiff, Philippine
Phoenix Surety & Insurance Company, in favor of defendant Woodworks, Inc.
The following are the established facts:
On July 21, 1960, upon defendant's application, plaintiff issued in its favor Fire Insurance Policy No. 9749 for
P500,000.00 whereby plaintiff insured defendant's building, machinery and equipment for a term of one year from
July 21, 1960 to July 21, 1961 against loss by fire. The premium and other charges including the margin fee surcharge
of P590.76 and the documentary stamps in the amount of P156.60 affixed on the Policy, amounted to P10,593.36.
It is undisputed that defendant did not pay the premium stipulated in the Policy when it was issued nor at any time
thereafter.
On April 19, 1961, or before the expiration of the one-year term, plaintiff notified defendant, through its Indorsement
No. F-6963/61, of the cancellation of the Policy allegedly upon request of defendant. 1 The latter has denied having
made such a request. In said Indorsement, plaintiff credited defendant with the amount of P3,110.25 for the
unexpired period of 94 days, and claimed the balance of P7,483.11 representing ,learned premium from July 21, 1960
to 18th April 1961 or, say 271 days." On July 6, 1961, plaintiff demanded in writing for the payment of said
amount. 2 Defendant, through counsel, disclaimed any liability in its reply- letter of August 15, 1961, contending, in
essence, that it need not pay premium "because the Insurer did not stand liable for any indemnity during the period
the premiums were not paid." 3
On January 30, 1962, plaintiff commenced action in the Court of First Instance of Manila, Branch IV (Civil Case No.
49468), to recover the amount of P7,483.11 as "earned premium." Defendant controverted basically on the theory
that its failure "to pay the premium after the issuance of the policy put an end to the insurance contract and rendered
the policy unenforceable." 4

On September 13, 1962, judgment was rendered in plaintiff's favor "ordering defendant to pay plaintiff the sum of
P7,483.11, with interest thereon at the rate of 6%, per annum from January 30, 1962, until the principal shall have
been fully paid, plus the sum of P700.00 as attorney's fees of the plaintiff, and the costs of the suit." From this
adverse Decision, defendant appealed to the Court of Appeals which, as heretofore stated, certified the case to us on a
question of law.
The errors assigned read:
1. The lower court erred in sustaining that Fire Insurance Policy, Exhibit A, was a binding
contract even if the premium stated in the policy has not been paid.
2. That the lower court erred in sustaining that the premium in Insurance Policy, Exhibit B,
became an obligation which was demandable even after the period in the Policy has expired.
3. The lower court erred in not deciding that a premium not paid is not a debt enforceable by
action of the insurer.
We find the appeal meritorious.
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". "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
The provisions on premium in the subject Policy read:
THIS POLICY OF INSURANCE WITNESSETH, THAT in consideration of MESSRS.
WOODWORKS, INC. hereinafter called the Insured, paying to the PHILIPPINE PHOENIX
SURETY AND INSURANCE, INC., hereinafter called the Company, the sum of PESOS NINE
THOUSAND EIGHT HUNDRED FORTY SIX ONLY the Premium for the first period
hereinafter mentioned. ...
xxx xxx xxx
THE COMPANY HEREBY AGREES with the Insured ... that if the Property above described, or
any part thereof, shall be destroyed or 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 JULY
One Thousand Nine Hundred and SIXTY and 4:00 o'clock in the afternoon of the TWENTY
FIRST day of JULY One Thousand Nine Hundred and SIXTY ONE. ... (Emphasis supplied)
Paragraph "2" of the Policy further contained the following condition:
2. No payment in respect of any premium shall be deemed to be payment to the Company unless
a printed form of receipt for the same signed by an Official or duly-appointed Agent of the
Company shall have been given to the Insured.
Paragraph "10" of the Policy also provided:

10. This insurance may be terminated at any time at the request of the Insured, in which case the
Company will retain the customary short period rate for the time the policy has been in force.
This insurance may also at any time be terminated at the option of the Company, on notice to
that effect being given to the Insured, in which case the Company shall be liable to repay on
demand a ratable proportion of the premium for the unexpired term from the date of the
cancelment.
Clearly, the Policy provides for pre-payment of premium. Accordingly; "when the policy is tendered the insured must
pay the premium unless credit is given or there is a waiver, or some agreement obviating the necessity for
prepayment." 7 To constitute an extension of credit there must be a clear and express agreement therefor." 8
From the Policy provisions, we fail to find any clear agreement that a credit extension was accorded defendant. And
even if it were to be presumed that plaintiff had extended credit from the circumstances of the unconditional delivery
of the Policy without prepayment of the premium, yet it is obvious that defendant had not accepted the insurer's offer
to extend credit, which is essential for the validity of such agreement.
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 delivery of an insurance policy to an unconditional
delivery, as it is to make any other contract. Such an acceptance could not be merely a 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. vs. 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.

Case 1 Roque v. Intermediate Appellate Court

G.R. No. L-66935 Nov. 11, 1985 Justice Gutierrez, Jr.
Facts:
Isabela Roque (Roque of Isabela Roque Timber Enterprises) hired the Manila Bay Lighterage Corp. (Manila Bay) to
load and carry its logs from Palawan to North Harbor, Manila. The logs were insured with Pioneer Insurance and
Surety Corp. (Pioneer). The logs never reached Manila due to certain circumstances (as alleged by Roque and found
by the appellate court), such as the fact that the barge was not seaworthy that it developed a leak, that one of the
hatches were left open causing water to enter, and the absence of the necessary cover of tarpaulin causing more water
to enter the barge. When Roque demanded payment from Pioneer, but the latter refused on the ground that its
liability depended upon the Total Loss by Total Loss of Vessel Only. The trial court ruled in favor of Roque in the
civil complaint filed by the latter against Pioneer, but the decision was reversed by the appellate court.
Issue:
WON in cases of marine insurance, there is a warranty of seaworthiness by the cargo owner; WON the loss of the
cargo was due to perils of the sea, not perils of the ship.
Held:
Yes, there is. The liability of the insurance company is governed by law. Section 113 of the Insurance Code provides
that In every marine insurance upon a ship or freight, or freightage, or upon anything which is the subject of marine
insurance, a warranty is implied that the ship is seaworthy. Hence, there can be no mistaking the fact that the term
"cargo" can be the subject of marine insurance and that once it is so made, the implied warranty of seaworthiness
immediately attaches to whoever is insuring the cargo whether he be the shipowner or not. Moreover, the fact that
the unseaworthiness of the ship was unknown to the insured is immaterial in ordinary marine insurance and may not

The non-payment of premiums does not merely suspend but put, an end to an insurance
contract, since the time of the payment is peculiarly of the essence of the contract. 11
... 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
In fact, if the peril insured against had occurred, plaintiff, as insurer, would have had a valid defense against recovery
under the Policy it had issued. Explicit in the Policy itself is plaintiff's agreement to indemnify defendant for loss by
fire only "after payment of premium," supra. Compliance by the insured with the terms of the contract is a condition
precedent to the right of recovery.
The burden is on an insured to keep a policy in force by the payment of premiums, rather than
on the insurer to exert every effort to prevent the insured from allowing a policy to elapse
through a failure to make premium payments. The continuance of the insurer's obligation is
conditional upon the payment of premiums, so that no recovery can be had upon a lapsed policy,
the contractual relation between the parties having ceased. 13
Moreover, "an insurer cannot treat a contract as valid for the purpose of collecting premiums and invalid for the
purpose of indemnity." 14
The foregoing findings are buttressed by section 77 of the Insurance Code (Presidential Decree No. 612, promulgated
on December 18, 1974), which now provides that no contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been paid, notwithstanding any agreement to the contrary.
WHEREFORE, the judgment appealed from is reversed, and plaintiff's complaint hereby dismissed.

be used by him as a defense in order to recover on the marine insurance policy. As to the second issue, by applying
Sec. 113 of the Insurance Code, there is no doubt that the term 'perils of the sea' extends only to losses caused by sea
damage, or by the violence of the elements, and does not embrace all losses happening at sea; it is said to include only
such losses as are of extraordinary nature, or arise from some overwhelming power , which cannot be guarded
against by the ordinary exertion of human skill and prudence. t is also the general rule that everything which happens
thru the inherent vice of the thing, or by the act of the owners, master or shipper, shall not be reputed a peril, if not
otherwise borne in the policy. It must be considered to be settled, furthermore, that a loss which, in the ordinary
course of events, results from the natural and inevitable action of the sea, from the ordinary wear and tear of the ship,
or from the negligent failure of the ship's owner to provide the vessel with proper equipment to convey the cargo
under ordinary conditions, is not a peril of the sea. Such a loss is rather due to what has been aptly called the "peril of
the ship." The insurer undertakes to insure against perils of the sea and similar perils, not against perils of the ship.
Neither barratry can be used as a ground by Roque. Barratry as defined in American Insurance Law is "any willful
misconduct on the part of master or crew in pursuance of some unlawful or fraudulent purpose without the consent
of the owners, and to the prejudice of the owner's interest." Barratry necessarily requires a willful and intentional act
in its commission. No honest error of judgment or mere negligence, unless criminally gross, can be barratry. In the
case at bar, there is no finding that the loss was occasioned by the willful or fraudulent acts of the vessel's crew. There
was only simple negligence or lack of skill.
Case 2
G.R. No. L-43706 November 14, 1986
NATIONAL
POWER
CORPORATION, petitioner,
vs.
COURT OF APPEALS and PHILIPPINE AMERICAN GENERAL INSURANCE CO.,
FACTS

The National Power Corporation (NPC) entered into a contract with the Far Eastern Electric, Inc. (FFEI) on
December 26, 1962 for the erection of the Angat Balintawak 115-KW-3-Phase transmission lines for the Angat
Hydroelectric Project. FEEI agreed to complete the work within 120 days from the signing of the contract, otherwise
it would pay NPC P200.00 per calendar day as liquidated damages, while NPC agreed to pay the sum of P97,829.00
as consideration. On the other hand, Philippine American General Insurance Co., Inc. (Philamgen) issued a surety
bond in the amount of P30,672.00 for the faithful performance of the undertaking by FEEI, as required.
The condition of the bond reads:
The liability of the PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC. under this bond will expire
One (1) year from final Completion and Acceptance and said bond will be cancelled 30 days after its expiration,
unless surety is notified of any existing obligation thereunder.. Should the Contractor fail to complete the
construction of the work as herein specified and agreed upon, or if the work is abandoned, ... the Corporation shall
have the power to take over the work by giving notice in writing to that effect to the Contractor and his sureties of its
intention to take over the construction work. In the event the corporation takes over the work from the Contractor,
the latter and his bondsmen shall continue to be liable under this contract for any expense in the completion of the
work in excess of the contract price and the bond filed by the Contractor shall be answerable for the same and for any
and all damages that the Corporation may suffer as a result thereof
. The work was abandoned by FEEI due to unavailability of materials and financial difficulties, leaving the work
unfinished on June 26, 1963. ON July 19, 1963 NPC wrote Philamgen informing it of the withdrawal of FEEI from the
work and formally holding both FEEI and Philamgen liable for the cost of the work to be completed as of July 20,
1962 plus damages.
On January 30, 1967 NPC notified Philamgen that FEEI had an outstanding obligation in the amount of P75,019.85,
exclusive of interest and damages, and demanded the remittance of the amount of the surety bond the answer for the
cost of completion of the work. In reply, Philamgen requested for a detailed statement of account, but after receipt of
the same, Philamgen did not pay as demanded but contended instead that its liability under the bond has expired on
September 20, 1964 and claimed that no notice of any obligation of the surety was made within 30 days after its
expiration
ISSUE:
Whether or not THERE is compliance by NPC with the notice requirement as a condition in order to hold the surety
philamgen liable under the bond.
HELD:
Yes. evidence on record shows that as early as May 30, 1963, Philamgen was duly informed of the failure of its
principal to comply with its undertaking. In fact, said notice of failure was also signed by its Assistant Vice President.
On July 19, 1963, when FEEI informed NPC that it was abandoning the construction job, the latter forthwith
informed Philamgen of the fact on the same date. Moreover, on August 1, 1963, the fact that Philamgen was
seasonably notified, was even bolstered by its request from NPC for information of the percentage completed by the
bond principal prior to the relinquishment of the job to the latter and the reason for said relinquishment. The 30-day
notice adverted to in the surety bond applies to the completion of the work by the contractor. This completion by the
contractor never materialized.
The surety bond must be read in its entirety and together with the contract between NPC and the contractors. The
provisions must be construed together to arrive at their true meaning. Certain stipulations cannot be segregated and
then made to control.
Furthermore, it is well settled that contracts of insurance are to be construed liberally in favor of the insured and
strictly against the insurer. Thus ambiguity in the words of an insurance contract should be interpreted in favor of its
In the case at bar, it cannot be denied that the breach of contract in this case, that is, the abandonment of the
unfinished work of the transmission line of the petitioner by the contractor Far Eastern Electric, Inc. was within the
effective date of the contract and the surety bond. Such abandonment gave rise to the continuing liability of the bond
as provided for in the contract which is deemed incorporated in the surety bond executed for its completion. To rule
therefore that private respondent was not properly notified would be gross error.
Case 3
G.R. No. L-59919 November 26, 1986
MALAYAN INSURANCE CO., INC. vs. CA
FACTS:
Plaintiff Aurelio Lacson (private respondent herein) is the owner of a Toyota NP Land Cruiser, Model 1972, bearing
Plate No. NY-362 and with engine Number F-374325. Said vehicle was insured with defendant company (petitioner
herein) under "private car comprehensive" policy No. BIFC/PV-0767 for a one year period, from Dec. 3, 1974 to Dec.

3, 1975. On Dec. 1, 1975 plaintiff caused the delivery of subject vehicle to the shop of Carlos Jamelo for repair. On
Dec. 2, 1975 while the vehicle was in Carlos Jamelo's shop, a certain Rogelio Mahinay, together with his other coemployees in the shop, namely Johnny Mahinay, Rogelio Macapagong and Rogelio Francisco took and drove the
Toyota Land Cruiser, as a result of which it met with an accident at Bo. Taculing Bacolod City, causing damage
thereto, in an estimated amount of P21,849.62. Shop-owner Carlos Jamelo reported the incident to the police and
later on instituted a criminal case for Qualified Theft against his employees who had taken plaintiff's vehicle. Plaintiff
sought indemnification under his insurance policy from defendant company but the latter refused to pay on the
ground that the claim is not covered by the policy inasmuch as the driver of the insured vehicle at the time of the
accident was not a duly licensed driver. This act of defendant company prompted Plaintiff to file a civil case for
damages docketed as Civil Case No. 12447 of the CFI of Negros Occidental. Defendant in its answer raised among
other things as affirmative and special defenses that plaintiff has no cause of action, claim is not covered by the
insurance policy, and non-joinder of indispensable party.
ISSUE:
WON theft is necessary for claim to be compensable under the "theft" coverage of the insurance policy
RULING:
Petitioner's contentions hold no water. The first assignment of error was satisfactorily disposed of by the trial court
as well as by the appellate court as shown by the ruling that "the taking of the vehicle by another person without
permission or authority from the owner or person-in-charge thereof is sufficient to place it within the ambit of the
word theft as contemplated in the policy, and is therefore, compensable." The fact that one of the accused persons in
the criminal case (filed against those who took the jeep from the repair shop) pleaded guilty to the charge of having
unlawfully taken the insured vehicle did away with the necessity of a final disposition of the criminal case in order for
plaintiff to recover under his insurance policy. At any rate, accused Rogelio Mahinay was convicted of Theft after he
pleaded guilty to the charge.
There is no question that the vehicle of private respondent was damaged because the unlawful taker, accused Rogelio
Mahinay, drove it and met with a vehicular accident. The damages therefore were sustained in the course of the
unlawful taking. The testimonies of plaintiff and his witness in this respect remain unrebutted. The fact remains that
plaintiff's claim is substantiated by competent evidence.

Case 4 James Stokes vs. Malayan Insurance Co., Inc.

G.R. No. L-34768, 24 February 1984 127 SCRA 766
FACTS: Daniel Adolfson had a subsisting Malayan car insurance policy with coverage against own damage as well as
3rd party liability when his car figured in a vehicular accident with another car, resulting to damage to both vehicles.
At the time of the accident, Adolfsons car was being driven by James Stokes, who was authorized to do so by
Adolfson. Stokes, an Irish tourist who had been in the Philippines for only 90 days, had a valid and subsisting Irish
drivers license but without a Philippine drivers license. Adolfson filed a claim with Malayan but the latter refused to
pay contending that Stokes was not an authorized driver under the Authorized Driver clause of the insurance policy
in relation to Section 21 of the Land Transportation Office.
ISSUE: Whether or not Malayan is liable to pay the insurance claim of Adolfson.
HELD: NO. A contract of insurance is a contract of indemnity upon the terms and conditions specified therein. When
the insurer is called upon to pay in case of loss or damage, he has the right to insist upon compliance with the terms
of the contract. If the insured cannot bring himself within the terms and conditions of the contract, he is not entitled
as a rule to recover for the loss or damage suffered. For the terms of the contract constitute the measure of the
insurers liability, and compliance therewith is a condition precedent to the right of recovery. At the time of the
accident, Stokes had been in the Philippines for more than 90 days. Hence, under the law, he could not drive a motor
vehicle without a Philippine drivers license. He was therefore not an authorized driver under the terms of the
insurance policy in question, and Malayan was right in denying the claim of the insured. Acceptance of premium
within the stipulated period for payment thereof, including the agreed period of grace, merely assures continued
effectivity of the insurance policy in accordance with its terms. Such acceptance does not prevent the insurer from
interposing any valid defense under the terms of the insurance policy. The principle of estoppel is an equitable
principle rooted upon natural justice which prevents a person from going back on his own acts and representations to
the prejudice of another whom he has led to rely upon them. The principle does not apply to the instant case. In
accepting the premium payment of the insured, Malayan was not guilty of any inequitable act or representation.

There is nothing inconsistent between acceptance of premium due under an insurance policy and the enforcement of
its terms
Case 5
G.R. No. L-26827 June 29, 1984
AGAPITO GUTIERREZ, plaintiff-appellee,
vs.
CAPITAL INSURANCE & SURETY CO., INC., defendant-appellant.
Facts:
Capital Insurance & Surety Co., Inc. insured on December 7, 1961 for one year the jeepney of Agapito Gutierrez
against passenger and third-party liability. The passenger liability would not exceed P5,000 for any one person.The
policy provides in item 13 that the authorized driver must be the holder of a valid and subsisting professional driver's
license. "A driver with an expired Traffic Violation Receipt or expired Temporary Operator's Permit is not considered
an authorized driver." On May 29, 1962, the insured jeepney had an accident at Buendia Avenue, Makati, Rizal. As a
result of said accident, a passenger named Agatonico Ballega fell off the vehicle and died. Teofilo Ventura, the
jeepney driver, was duly licensed for the years 1962 and 1963. However, at the time of the accident he did not have
the license. Instead, he had a carbon copy of a traffic violation report (summons) issued by a policeman on February
22, 1962, with the notation that he had committed the violation: "Inattentive to driving (Inv. in accident) at 9:30
a.m., 2-22-62". The same traffic violation report, which served as a receipt for his license, required him to report to
Branch 8 of the traffic court at the corner of Arroceros and Concepcion Streets, Manila at nine o'clock in the morning
of March 2, 1962. The TVR would "serve as a temporary operator's permit for 15 days from receipt hereof". It is
indisputable that at the time of the accident (May 29, 1962), Ventura was holding an "expired Temporary Operator's
Permit." Capital Insurance refused to make any reimbursement with regard to Guttierez's payment to the widow,
hence he filed on October 14, 1963 in the city court of Manila an action for specific performance and damages.
Insurance Company contended that paragraph 13 of the policy, already cited, is decisive and controlling in this case.
It plainly provides, and we repeat, that "a driver with an expired Traffic Violation Receipt or expired Temporary
Operator's permit is not considered an authorized driver within the meaning" of the policy. Obviously, Ventura was
not an authorized driver. His temporary operator's permit had expired. The expiration bars recovery under the
policy. In liability insurance, "the parties are bound by the terms of the policy and the right of insured to recover is
governed thereby" (44 C.J.S. 934)
Issue:
Whether an insurance covers a jeepney whose driver's traffic violation report or temporary operator's permit had
already expired?
Rulling of the Court:
It was held that the following ruling has persuasive authority with regards to Insurance:
Insurance; Automobile; When insurer exempt from liability; Case at bar. The automobile insurance policy sued
upon in the instant case exempts the insurer company from liability for any accident loss, damage or liability caused,
sustained or incurred while the vehicle is being driven by any person other than an authorized driver.
The policy defines the term 'authorized driver' to be the insured himself or any person driving on the insured's order
or with his permission provided he is permitted to drive under the licensing laws.
In the given case, plaintiff's brother, who was at the wheel at the time of the collision, did not have a valid license
because the one he had obtained had already expired and had not been renewed as required by Section 31 of the
Motor Vehicle Law. That since he had renewed his license one week after the accident, it did not cure the delinquency
or revalidate the license which had already expired (Syllabus, Tanco, Jr. vs. Phil. Guaranty Co., 122 Phil. 709).
Wherefore the case is against Gutierrez.
Case 6 JEWEL VILLACORTA vs. THE INSURANCE COMMISSIONG.R. No. L-54171, 28 October 1980
100SCRA 467

FACTS:Villacorta had her Colt Lancer car insured with Empire Insurance Company against own damage, theft and
3rd party liability. While the car was in the repair shop, one of the employees of the said repair shop took it out for a
joyride after which it figured in a vehicular accident. This resulted to the death of the driver and some of the
passengers as well as to extensive damage to the car. Villacorta filed a claim for total loss with the said insurance
company. However, it denied the claim on the ground that the accident did not fall within the provisions of the policy
either for the Own Damage or Theft coverage, invoking the policy provision on Authorized Driver Clause. This was
upheld by the Insurance Commission further stating that the car was not stolen and therefore not covered by
the Theft Clause because it is not evident that the person who took the car for a joyride intends to permanently
deprive the insured of his/ her car.
ISSUE:Whether or not the insurer company should pay the said claim
HELD: Yes. Where the insureds car is wrongfully taken without the insureds consent from the car service and repair
shop to whom it had been entrusted for check-up and repairs (assuming that such taking was for a joy ride, in the
course of which it was totally smashed in an accident), respondent insurer is liable and must pay insured for the total
loss of the insured vehicle under the Theft Clause of the policy. Assuming, despite the totally inadequate evidence,
that the taking was temporary and for a joy ride, the Court sustains as the better view that which holds that when
a person, either with the object of going to a certain place, or learning how to drive, or enjoying a free ride, takes
possession of a vehicle belonging to another, without the consent of its owner, he is guilty of theft because by taking
possession of the personal property belonging to another and using it, his intent to gain is evident since he derives
therefrom utility, satisfaction, enjoyment and pleasure. ACCORDINGLY, the appealed decision is set aside and
judgment is hereby rendered sentencing private respondent to pay petitioner the sum of P35,000.00 with legal
interest from the filing of the complaint until full payment is made and to pay the costs of suit.
Case 7
Ng v Asian Crusader G.R. No. L-30685 May 30, 1983
Facts:
Kwong Nam applied for a 20-year endowment insurance on his life for the sum of P20,000.00, with his wife,
appellee Ng Gan Zee as beneficiary. On the same date, Asian Crusader, upon receipt of the required premium from
the insured, approved the application and issued the corresponding policy. Kwong Nam died of cancer of the liver
with metastasis. All premiums had been paid at the time of his death.
Ng Gan Zee presented a claim for payment of the face value of the policy. On the same date, she submitted the
required proof of death of the insured. Appellant denied the claim on the ground that the answers given by the
insured to the questions in his application for life insurance were untrue.
Appellee brought the matter to the attention of the Insurance Commissioner. The latter, after conducting an
investigation, wrote the appellant that he had found no material concealment on the part of the insured and that,
therefore, appellee should be paid the full face value of the policy. The company refused to settle its obligation.
Appellant alleged that the insured was guilty of misrepresentation when he answered "No" to the following question
appearing in the application for life insuranceHas any life insurance company ever refused your application for insurance or for reinstatement of a lapsed policy or
offered you a policy different from that applied for? If, so, name company and date.
The lower court ruled against the company on lack of evidence.
Appellant further maintains that when the insured was examined in connection with his application for life
insurance, he gave the appellant's medical examiner false and misleading information as to his ailment and previous
operation. The company contended that he was operated on for peptic ulcer 2 years before the policy was applied for
and that he never disclosed such an operation.
Issue: WON Asian Crusader was deceived into entering the contract or in accepting the risk at the rate of premium
agreed upon because of insured's representation?
Held: No. Petition dismissed.
Section 27 of the Insurance Law:
Sec. 27. Such party a contract of insurance must communicate to the other, in good faith, all facts within his
knowledge which are material to the contract, and which the other has not the means of ascertaining, and as to which
he makes no warranty.
"Concealment exists where the assured had knowledge of a fact material to the risk, and honesty, good faith, and fair
dealing requires that he should communicate it to the assurer, but he designedly and intentionally withholds the
same."

It has also been held "that the concealment must, in the absence of inquiries, be not only material, but fraudulent, or
the fact must have been intentionally withheld."
Fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. And as
correctly observed by the lower court, "misrepresentation as a defense of the insurer to avoid liability is an
'affirmative' defense. The duty to establish such a defense by satisfactory and convincing evidence rests upon the
defendant. The evidence before the Court does not clearly and satisfactorily establish that defense."
It bears emphasis that Kwong Nam had informed the appellant's medical examiner of the tumor. His statement that
said tumor was "associated with ulcer of the stomach" should be construed as an expression made in good faith of his
belief as to the nature of his ailment and operation.
While the information communicated was imperfect, the same was sufficient to have induced appellant to make
further inquiries about the ailment and operation of the insured.
Section 32 of Insurance Law:
Section 32. The right to information of material facts maybe waived either by the terms of insurance or by neglect to
make inquiries as to such facts where they are distinctly implied in other facts of which information is
communicated.
Where a question appears to be not answered at all or to be imperfectly answered, and the insurers issue a policy
without any further inquiry, they waive the imperfection of the answer and render the omission to answer more fully
immaterial.
The company or its medical examiner did not make any further inquiries on such matters from the hospital before
acting on the application for insurance. The fact of the matter is that the defendant was too eager to accept the
application and receive the insured's premium. It would be inequitable now to allow the defendant to avoid liability
under the circumstances."

Case 8 THE INSULAR LIFE ASSURANCE COMPANY, LTD. vs. CARPONIA T. EBRADO and
PASCUALA VDA. DE EBRADO
[G.R. No. L-44059 October 28, 1977]
Facts of the Case:
On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd., Policy No. 009929
on a whole-life for P5,882.00 with a, rider for Accidental Death for the same amount Buenaventura C. Ebrado
designated Carpponia T. Ebrado as the revocable beneficiary in his policy. He to her as his wife.
On October 21, 1969, Buenaventura C. 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 P11,745.73, representing
the face value of the policy in the amount of P5,882.00 plus the additional benefits for accidental death also in the
amount of P5,882.00 and the refund of P18.00 paid for the premium due November, 1969, minus the unpaid
premiums and interest thereon due for January and February, 1969, in the sum of P36.27.
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.
Pascuala Vda. de 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.
In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life Assurance Co., Ltd.
commenced an action for Interpleader before the Court of First Instance of Rizal on April 29, 1970.
After the issues have been joined, a pre-trial conference was held. In the pre-trial conference the parties submits
evidence and make admissions.xxx; 8) that the beneficiary designated by the insured in the policy is Carponia Ebrado
and the insured made reservation to change the beneficiary but although the insured made the option to change the
beneficiary, same was never changed up to the time of his death and the wife did not have any opportunity to write
the company that there was reservation to change the designation of the parties it agreed that a decision be rendered
based on and stipulation of facts as to who among the two claimants is entitled to the policy.
On September 25, 1972, 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. The trial court held that.It is patent from the last paragraph of Art.
739 of the Civil Code that a criminal conviction for adultery or concubinage is not essential in order to establish the

disqualification mentioned therein. Neither is it also necessary that a finding of such guilt or commission of those
acts be made in a separate independent action brought for the purpose. The guilt of the donee (beneficiary) may be
proved by preponderance of evidence in the same proceeding (the action brought to declare the nullity of the
donation).
Since it is agreed in their stipulation during the pre-trial that the deceased insured and defendant Carponia T. Ebrado
were living together as husband and wife without being legally married and that the marriage of the insured with the
other defendant Pascuala Vda. de Ebrado was valid and still existing at the time the insurance in question was
purchased there is no question that defendant Carponia T. Ebrado is disqualified from becoming the beneficiary of
the policy in question and as such she is not entitled to the proceeds of the insurance upon the death of the insured.
Issue of the Case:
Can a common-law wife named as beneficiary in the life insurance policy of a legally married man claim the proceeds
thereof in case of death of the latter?
Ruling:
The SC affirmed the decision of the trial court.
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. Commonlaw 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.
The underscored clause neatly conveys that no criminal conviction for the offense is a condition precedent. In fact, it
cannot even be from the aforequoted provision that a prosecution is needed. On the contrary, the law plainly states
that the guilt of the party may be proved "in the same acting for declaration of nullity of donation. And, it would be
sufficient if evidence preponderates upon the guilt of the consort for the offense indicated. The quantum of proof in
criminal cases is not demanded.
In the caw before Us, the requisite proof of common-law relationship between the insured and the beneficiary has
been conveniently supplied by the stipulations between the parties in the pre-trial conference of the case. It case
agreed upon and stipulated therein that the deceased insured Buenaventura C. Ebrado was married to Pascuala
Ebrado with whom she has six legitimate children; that during his lifetime, the deceased insured was living with his
common-law wife, Carponia Ebrado, with whom he has two children. These stipulations are nothing less than
judicial admissions which, as a consequence, no longer require proof and cannot be contradicted. A fortiori, on the
basis of these admissions, a judgment may be validly rendered without going through the rigors of a trial for the sole
purpose of proving the illicit liaison between the insured and the beneficiary. In fact, in that pretrial, the parties even
agreed "that a decision be rendered based on this agreement and stipulation of facts as to who among the two
claimants is entitled to the policy."
ACCORDINGLY, the appealed judgment of the lower court is hereby affirmed. Carponia T. Ebrado is hereby declared
disqualified to be the beneficiary of the late Buenaventura C. Ebrado in his life insurance policy. As a consequence,
the proceeds of the policy are hereby held payable to the estate of the deceased insured. Costs against Carponia T.
Ebrado.
SO ORDERED.
Case 9
GREAT PACIFIC LIFE ASSURANCE COMPANY vs. HONORABLE COURT OF APPEALS
[G.R. No. L-31845 April 30, 1979]
FACTS:
It appears that on March 14, 1957, private respondent Ngo Hing filed an application with the Great Pacific Life
Assurance Company (hereinafter referred to as Pacific Life) for a twenty-year endowment policy in the amount of
P50,000.00 on the life of his one-year old daughter Helen Go. Said respondent supplied the essential data which
petitioner Lapulapu D. Mondragon, Branch Manager of the Pacific Life in Cebu City wrote on the corresponding form
in his own handwriting. Mondragon finally type-wrote the data on the application form which was signed by private
respondent Ngo Hing. The latter paid the annual premium the sum of P1,077.75 going over to the Company, but he
retained the amount of P1,317.00 as his commission for being a duly authorized agent of Pacific Life. Upon the

payment of the insurance premium, the binding deposit receipt was issued to private respondent Ngo Hing. Likewise,
petitioner Mondragon handwrote at the bottom of the back page of the application form his strong recommendation
for the approval of the insurance application. Then on April 30, 1957, Mondragon received a letter from Pacific Life
disapproving the insurance application. The letter stated that the said life insurance application for 20-year
endowment plan is not available for minors below seven years old, but Pacific Life can consider the same under the
Juvenile Triple Action Plan, and advised that if the offer is acceptable, the Juvenile Non-Medical Declaration be sent
to the company.
The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner Mondragon
to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote back Pacific Life again strongly
recommending the approval of the 20-year endowment insurance plan to children, pointing out that since 1954 the
customers, especially the Chinese, were asking for such coverage.
It was when things were in such state that on May 28, 1957 Helen Go died of influenza with complication of
bronchopneumonia. Thereupon, private respondent sought the payment of the proceeds of the insurance, but having
failed in his effort, he filed the action for the recovery of the same before the Court of First Instance of Cebu, which
rendered the adverse decision as earlier referred to against both petitioners.
ISSUE:
Whether the respondent is entitled to the insurance
SC:
Since petitioner Pacific Life disapproved the insurance application of respondent Ngo Hing, the binding deposit
receipt in question had never become in force at any time.
As held by this Court, where an agreement is made between the applicant and the agent, no liability shall attach until
the principal approves the risk and a receipt is given by the agent. The acceptance is merely conditional and is
subordinated to the act of the company in approving or rejecting the application. Thus, in life insurance, a "binding
slip" or "binding receipt" does not insure by itself
It bears repeating that through the intra-company communication of April 30, 1957 Pacific Life disapproved the
insurance application in question on the ground that it is not offering the twenty-year endowment insurance policy to
children less than seven years of age. What it offered instead is another plan known as the Juvenile Triple Action,
which private respondent failed to accept. In the absence of a meeting of the minds between petitioner Pacific Life
and private respondent Ngo Hing over the 20-year endowment life insurance in the amount of P50,000.00 in favor
of the latter's one-year old daughter, and with the non-compliance of the above quoted conditions stated in the
disputed binding deposit receipt, there could have been no insurance contract duly perfected between then
Acordingly, the deposit paid by private respondent shall have to be refunded by Pacific Life.
We are not impressed with private respondent's contention that failure of petitioner Mondragon to communicate to
him the rejection of the insurance application would not have any adverse effect on the allegedly perfected temporary
contract In this first place, there was no contract perfected between the parties who had no meeting of their minds.
Private respondent, being an authorized insurance agent of Pacific Life at Cebu branch office, is indubitably aware
that said company does not offer the life insurance applied for. When he filed the insurance application in dispute,
private respondent was, therefore, only taking the chance that Pacific Life will approve the recommendation of
Mondragon for the acceptance and approval of the application in question along with his proposal that the insurance
company starts to offer the 20-year endowment insurance plan for children less than seven years. Nonetheless, the
record discloses that Pacific Life had rejected the proposal and recommendation. Secondly, having an insurable
interest on the life of his one-year old daughter, aside from being an insurance agent and an offense associate of
petitioner Mondragon, private respondent Ngo Hing must have known and followed the progress on the processing
of such application and could not pretend ignorance of the Company's rejection of the 20-year endowment life
insurance application.
This Court is of the firm belief that private respondent had deliberately concealed the state of health and physical
condition of his daughter Helen Go. Where private respondent supplied the required essential data for the insurance
application form, he was fully aware that his one-year old daughter is typically a mongoloid child. Such a congenital
physical defect could never be ensconced nor distinguished. Nonetheless, private respondent, in apparent bad faith,
withheld the fact material to the risk to be assumed by the insurance company. As an insurance agent of Pacific Life,
he ought to know, as he surely must have known. his duty and responsibility to such a material fact. Had he diamond
said significant fact in the insurance application form Pacific Life would have verified the same and would have had
no choice but to disapprove the application outright.

Whether intentional or unintentional the concealment entitles the insurer to rescind the contract of insurance.
Private respondent appears guilty thereof.
We are thus constrained to hold that no insurance contract was perfected between the parties with the
noncompliance of the conditions provided in the binding receipt, and concealment, as legally defined, having been
combated by herein private respondent.
Case 10
Philippine Phoenix and Insurance Company vs. Woodworks Inc.
[G.R. No. L-25317 August 6, 1979]
Facts:
Philippine Phoenix and Insurance Company ( Phil. Phoenix for short) issued a fire insurance policy in favor of
Woodworks, Inc. upon application of the latter insuring Woodworks building and equipments against loss by fire for
a one year term from from July 21, 1960 to July 21, 1961. After issuance of the policy, Woodworks did not pay the
premium as stipulated. On April 19, 1961, Phil. Phoenix notified Woodworks of the cancellation of the policy at the
same time claiming earned premiums still unpaid by Woodworks from July 21, 1960 to April 19, 1961 worth
P7,483.11 for 271 days). In said letter, Phil. Phoenix credited the remaining balance ( or from April 19, 1961 to July 21,
1961 equivalent to 3,110.25 for 94 days) to Woodworks account. Woodworks naturally refused to pay Phil. Phoenix s
alleged earned premiums averring that failure to pay the premium after the issuance of the policy rendered the
insurance policy unenforceable thereby prompting Phil. Phoenix legal action for recovery of premiums before the
lower court ( CFI) of which Phoenix won. Now on appeal before the SC on pure questions of law.
Issue:
1. WON non-payment or failure as the case may be of premiums after issuance of the fire insurance policy rendered
such policy invalid or of no effect
2. Even if the premium is unpaid after issuance of the policy by Phil. Phoenix, granting aguendo that indeed Phil.
Phoenix gave Woodworks credit extensions for purposes of giving effect of the policy, was there acceptance of such
credit extended in this case?
Ruling:
1. Insurance policy became ineffective by non-payment of premiums after issuance of policy. Section 77 of the
Insurance Code (Presidential Decree No. 612, promulgated on December 18, 1974), provides that no contract of
insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid,
notwithstanding any agreement to the contrary.
The insurance policy provides:
THE COMPANY HEREBY AGREES with the Insured ... that if the Property above described, or any part thereof,
shall be destroyed or 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 JULY One Thousand Nine Hundred and SIXTY and 4:00 o'clock in the
afternoon of the TWENTY FIRST day of JULY One Thousand Nine Hundred and SIXTY ONE. ... (Emphasis
supplied)
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." The consideration is the "premium". "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."
Since the premium had not been paid, the policy must be deemed to have lapsed.
The non-payment of premiums does not merely suspend but put, an end to an insurance contract, since the time of
the payment is peculiarly of the essence of the contract.
... 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.
In fact, if the peril insured against had occurred, plaintiff, as insurer, would have had a valid defense against recovery
under the Policy it had issued. Explicit in the Policy itself is plaintiff's agreement to indemnify defendant for loss by
fire only "after payment of premium," supra. Compliance by the insured with the terms of the contract is a condition
precedent to the right of recovery.
The burden is on an insured to keep a policy in force by the payment of premiums, rather than on the insurer to exert
every effort to prevent the insured from allowing a policy to elapse through a failure to make premium payments. The

continuance of the insurer's obligation is conditional upon the payment of premiums, so that no recovery can be had
upon a lapsed policy, the contractual relation between the parties having ceased.
Moreover, "an insurer cannot treat a contract as valid for the purpose of collecting premiums and invalid for the
purpose of indemnity."
2. No express acceptance of credit extensions, if any, by Woodworks. The Policy provides for pre-payment of
premium. Accordingly; "when the policy is tendered the insured must pay the premium unless credit is given or there

is a waiver, or some agreement obviating the necessity for prepayment." To constitute an extension of credit there
must be a clear and express agreement therefor."
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 delivery of an insurance policy to an unconditional delivery, as it is to make any other contract.
Such an acceptance could not be merely a mental act or state of mind, but would require a promise to pay made
known in some manner to defendant.