Insurance Full Text 2nd Set

FIRST DIVISION
G.R. No. 169103
March 16, 2011
COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.
MANILA BANKERS' LIFE INSURANCE CORPORATION,
Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
This is a Petition for Review on Certiorari1 filed by the
Commissioner of Internal Revenue (CIR) of the April 29, 2005
Decision2 and July 27, 2005 Resolution3 of the Court of
Appeals in CA-G.R. SP No. 70600, which upheld the April 4,
2002 Decision4 of the Court of Tax Appeals (CTA) in CTA Case
No. 6189.
The facts as found by the CTA and Court of Appeals are
undisputed.
Respondent Manila Bankers Life Insurance Corporation is a
duly organized domestic corporation primarily engaged in the
life insurance business.5
On May 28, 1999, petitioner Commissioner of Internal
Revenue issued Letter of Authority No. 0000207056
authorizing a special team of Revenue Officers to examine the
books of accounts and other accounting records of respondent
for taxable year "1997 & unverified prior years."7
On December 14, 1999, based on the findings of the Revenue
Officers, the petitioner issued a Preliminary Assessment
Notice8 against the respondent for its deficiency internal
revenue taxes for the year 1997. The respondent agreed to all
the assessments issued against it except to the amount of
P2,351,680.90 representing deficiency documentary stamp
taxes on its policy premiums and penalties. 9
Thus, on January 4, 2000, the petitioner issued against the
respondent a Formal Letter of Demand10 with the
corresponding Assessment Notices attached, 11 one of which
was Assessment Notice No. ST-DST2-97-0054-200012
pertaining to the documentary stamp taxes due on
respondents policy premiums:
Documentary Stamp Tax on Policy Premiums
Assessment No. ST-DST2-97-0054-2000
Tax Due
3,954,955.00
Less: Tax Paid
2,308,505.74
Tax Deficiency
1,646,449.26
Add: 20% Int./a
680,231.64
Recommended
Compromise
Penalty-Late Payment
_____
25,000.00
Total Amount Due
2,351,680.90
.00
TAX RATE
P0.50/200.00
TAX DUE
P 3,954,955.00
LESS: TAX PAID
P 2,308,505.74
DEFICIENCY DST BASIC
P 1,646,499.26
- 20% INTEREST
680,231.64
- SURCHARGE
25,000.00
TOTAL
ASSESSMENT
P
2,351,680.9015
The amount of P818,919,000.00 comprises the increases in

the sum assured for the respondents ordinary insurance the
"Money Plus Plan" (P74,755,000.00), and group insurance
(P744,164,000.00).16
On February 3, 2000, the respondent filed its Letter of
Protest17 with the Bureau of Internal Revenue (BIR) contesting
the assessment for deficiency documentary stamp tax on its
insurance policy premiums. Despite submission of documents
on April 3, 2000,18 as required by the BIR in its March 20,
200019 letter, the respondents Protest was not acted upon by
the BIR within the 180-day period given to it by Section 228 of
the 1997 National Internal Revenue Code (NIRC) within which
to rule on the protest. Hence, on October 26, 2000, the
respondent filed a Petition for Review with the CTA for the
cancellation of Assessment Notice No. ST-DST2-97-0054-2000.
The respondent invoked the CTAs March 30, 1993 ruling in
the similar case of Lincoln Philippine Life Insurance Company,
Inc. (now Jardine-CMA Life Insurance Company, Inc.) v.
Commissioner of Internal Revenue,20 wherein the CTA held
that the tax base to be used in computing the documentary
stamp tax is the value at the time the instrument is issued
because the documentary stamp tax is levied and paid only
once, which is at the time the taxable document is issued.
On April 4, 2002, the CTA granted the respondents Petition
with the dispositive portion as follows:
WHEREFORE, in the light of all the foregoing, respondent
Commissioner of Internal Revenue is hereby ORDERED to
CANCEL and WITHDRAW Assessment Notice No. ST-DST2-970054-2000 dated January 4, 2000 in the amount of
P2,351,680.90 representing deficiency documentary stamp
taxes for the taxable year 1997.21
The CTA, applying the Tax Code Provisions then in force, held
that:
[T]he documentary stamp tax on life insurance policies is
imposed only once based on the amount insured at the time
of actual issuance of such policies. The documentary stamp
tax which is in the nature of an excise tax is imposed on the
document as originally issued. Therefore, any subsequent
increase in the insurance coverage resulting from policies
which have been subjected to the documentary stamp tax at
the time of their issuance, is no longer subject to the
documentary stamp tax.22
13
The tax deficiency was computed by including the increases in

the life insurance coverage or the sum assured by some of
respondents life insurance plans14:
ISSUED
INCREASED
ORDINARY
P648,127,000. P
00
74,755,000.00
GROUP
114,936,000.0
744,164,000.00
0
TOTAL
P763,063,000. P
00
818,919,000.00
GRAND TOTAL/TAX
BASE
P1,581,982,000
Aggrieved by the decision, the petitioner went to the Court of

Appeals on a Petition for Review23 docketed as CA-G.R. SP No.
70600 on the ground that:
THE TAX COURT ERRED IN RULING THAT INCREASES IN THE
COVERAGE OR THE SUM ASSURED BY AN EXISTING
INSURANCE POLICY IS NOT SUBJECT TO THE DOCUMENTARY
STAMP TAX. (DST).24
On April 29, 2005, the Court of Appeals sustained the
cancellation of Assessment Notice No. ST-DST2-97-0054-2000
in its Decision, the decretal portion of which reads:
WHEREFORE, all considered and finding no merit in the herein
appeal, judgment is hereby rendered upholding the April 4,
2002, CTA Decision in CTA Case No. 6189 entitled "Manila
Bankers Life Insurance Corporation, Petitioner, versus
Commissioner of Internal Revenue, Respondent. 25
Insurance full text (2nd set) | 1
The Court of Appeals, in upholding the decision of the CTA,

said that the subject of the documentary stamp tax is the
issuance of the instrument representing the creation, change
or cessation of a legal relationship.26 It further held that
because the legal status or nature of the relationship
embodied in the document has no bearing at all on the tax,
the fulfillment of suspensive conditions incorporated in the
respondents policies, as claimed by the petitioner, would still
not give rise to new documentary stamp tax payments.27
The petitioner asked for reconsideration of the above Decision
and cited this Courts March 19, 2002 Decision in
Commissioner of Internal Revenue v. Lincoln Philippine Life
Insurance Company, Inc.,28 the very same case the
respondent invoked before the CTA. The petitioner argued that
in Lincoln, this Court reversed both the CTA and the Court of
Appeals and sustained the validity of the deficiency
documentary stamp tax imposed on the increase in the sum
insured even though no new policy was issued because the
increase, by reason of the "Automatic Increase Clause," was
already definite at the time the policy was issued.
On July 27, 2005, the Court of Appeals sustained its ruling,
and stated that the Lincoln Case was not applicable because
the increase in the sum assured in Lincolns insurance policy
was definite and determinable at the time such policy was
issued as the automatic increase clause, which allowed for the
increase, formed an integral part of the policy; whereas in the
respondents case, "the tax base of the disputed deficiency
assessment was not [a] definite or determinable increase in
the sum assured."29
The petitioner is now before us praying for the nullification of
the Court of Appeals April 29, 2005 Decision and July 27,
2005 Resolution and to have the assessment for deficiency
documentary stamp tax on respondents policy premiums,
plus 25% surcharge for late payment and 20% annual
interest, sustained30 on the following arguments:
A.
THE APPLICABLE PROVISIONS OF THE NIRC AT THE TIME THE
ASSESSMENT FOR DEFICIENCY DOCUMENTARY STAMP TAX
WAS ISSUED PROVIDE THAT DOCUMENTARY STAMP TAX IS
COLLECTIBLE NOT ONLY ON THE ORIGINAL POLICY BUT ALSO
UPON RENEWAL OR CONTINUANCE THEREOF.
B.
THE AMOUNT INSURED BY THE POLICY AT THE TIME OF ITS
ISSUANCE NECESSARILY INCLUDED THE ADDITIONAL SUM AS
A RESULT OF THE EXERCISE OF THE OPTION UNDER THE
"GUARANTEED CONTINUITY" CLAUSE IN RESPONDENTS
INSURANCE POLICIES.
C.
THE "GUARANTEED CONTINUITY" CLAUSE OFFERS TO THE
INSURED AN OPTION TO AVAIL OF THE RIGHT TO RENEW OR
CONTINUE THE POLICY. IF AND WHEN THE INSURED AVAILS OF
SUCH OPTION AND SUCH GUARANTEED CONTINUITY CLAUSE
TAKES EFFECT, THE INSURER IS LIABLE FOR DEFICIENCY
DOCUMENTARY STAMP TAX CORRESPONDING TO THE
INCREASE OF THE INSURANCE COVERAGE.
D.
SECTION 198 OF THE 1997 NIRC CLEARLY STATES THAT THE
DOCUMENTARY STAMP TAX IS IMPOSABLE UPON RENEWAL OR
CONTINUANCE OF ANY POLICY OF INSURANCE OR THE
RENEWAL OR CONTINUANCE OF ANY CONTRACT BY ALTERING
OR OTHERWISE, AT THE SAME RATE AS THAT IMPOSED ON
THE ORIGINAL INSTRUMENT.31
As can be gleaned from the facts, the deficiency documentary
stamp tax was assessed on the increases in the life insurance
coverage of two kinds of policies: the "Money Plus Plan,"
which is an ordinary term life insurance policy; and the group
life insurance policy. The increases in the coverage of the life
insurance policies were brought about by the premium
payments made subsequent to the issuance of the policies.
The Money Plus Plan is a 20-year term ordinary life insurance
plan with a "Guaranteed Continuity Clause" which allowed the
policy holder to continue the policy after the 20-year term
subject to certain conditions. Under the plan, the policy
holders paid their premiums in five separate periods, with the
premium payments, after the first period premiums, to be

made only upon reaching a certain age. The succeeding
premium payments translated to increases in the sum
assured. Thus, the petitioner believed that since the
documentary stamp tax was affixed on the policy based only
on the first period premiums, then the succeeding premium
payments should likewise be subject to documentary stamp
tax. In the case of respondents group insurance, the
deficiency documentary stamp tax was imposed on the
premiums for the additional members to already existing and
effective master policies. The petitioner concluded that any
additional member to the group of employees, who were
already insured under the existing mother policy, should
similarly be subjected to documentary stamp tax. 32
The resolution of this case hinges on the validity of the
imposition of documentary stamp tax on increases in the
coverage or sum assured by existing life insurance policies,
even without the issuance of new policies.
In view of the fact that the assessment for deficiency
documentary stamp tax covered the taxable year 1997, the
relevant and applicable legal provisions are those found in the
1977 National Internal Revenue Code (Tax Code) as
amended,33 to wit:
Section 173. Stamp Taxes Upon Documents, Loan
Agreements, Instruments and Papers. Upon
documents, instruments, loan agreements and papers, and
upon acceptances, assignments, sales and transfers of the
obligation, right or property incident thereto, there shall be
levied, collected and paid for, and in respect of the
transaction so had or accomplished, the corresponding
documentary stamp taxes prescribed in the following sections
of this Title, by the person making, signing, issuing, accepting,
or transferring the same wherever the document is made,
signed, issued, accepted, or transferred when the obligation
or right arises from Philippine sources or the property is
situated in the Philippines, and the same time such act is
done or transaction had: Provided, That whenever one party
to the taxable document enjoys exemption from the tax
herein imposed, the other party who is not exempt shall be
the one directly liable for the tax. 34
Section 183. Stamp Tax on Life Insurance Policies. On
all policies of insurance or other instruments by whatever
name the same may be called, whereby any insurance shall
be made or renewed upon any life or lives, there shall be
collected a documentary stamp tax of fifty centavos on each
two hundred pesos or fractional part thereof, of the amount
insured by any such policy. 35 (Emphases ours.)
Documentary stamp tax is a tax on documents, instruments,
loan agreements, and papers evidencing the acceptance,
assignment, sale or transfer of an obligation, right or property
incident thereto.36 It is in the nature of an excise tax because
it is imposed upon the privilege, opportunity or facility offered
at exchanges for the transaction of the business. It is an
excise upon the facilities used in the transaction of the
business distinct and separate from the business itself. 37
To elucidate, documentary stamp tax is levied on the exercise
of certain privileges granted by law for the creation, revision,
or termination of specific legal relationships through the
execution of specific instruments. Examples of these
privileges, the exercise of which are subject to documentary
stamp tax, are leases of lands, mortgages, pledges, trusts and
conveyances of real property. Documentary stamp tax is thus
imposed on the exercise of these privileges through the
execution of specific instruments, independently of the legal
status of the transactions giving rise thereto. The
documentary stamp tax must be paid upon the issuance of
these instruments, without regard to whether the contracts
which gave rise to them are rescissible, void, voidable, or
unenforceable. 38
Accordingly, the documentary stamp tax on insurance
policies, though imposed on the document itself, is actually
levied on the privilege to conduct insurance business. Under
Section 173, the documentary stamp tax becomes due and
payable at the time the insurance policy is issued, with the
tax based on the amount insured by the policy as provided for
in Section 183.
Documentary Stamp Tax
on the "Money Plus Plan"
The petitioner would have us reverse both the CTA and the
Court of Appeals based on our decision in Commissioner of
Internal Revenue v. Lincoln Philippine Life Insurance Company,
Inc.39
The Lincoln case has been invoked by both parties in different
stages of this case. The respondent relied on the CTAs ruling
in the Lincoln case when it elevated its protest there; and
when we reversed the CTAs ruling therein, the petitioner
called the Court of Appeals attention to it, and prayed for a
decision upholding the assessment for deficiency
documentary stamp tax just like in the Lincoln case.
It is therefore necessary to briefly discuss the Lincoln case to
determine its applicability, if any, to the case now before us.
Prior to 1984, Lincoln Philippine Life Insurance Company, Inc.
(Lincoln) had been issuing its "Junior Estate Builder Policy," a
special kind of life insurance policy because of a clause which
provided for an automatic increase in the amount of life
insurance coverage upon attainment of a certain age by the
insured without the need of a new policy. As Lincoln paid
documentary stamp taxes only on the initial sum assured, the
CIR issued a deficiency documentary stamp tax assessment
for the year 1984, the year the clause took effect. Both the
CTA and the Court of Appeals found no basis for the deficiency
assessment. As discussed above, however, this Court
reversed both lower courts and sustained the CIRs
assessment.
This Court ruled that the increase in the sum assured brought
about by the "automatic increase" clause incorporated in
Lincolns Junior Estate Builder Policy was still subject to
documentary stamp tax, notwithstanding that no new policy
was issued, because the date of the effectivity of the increase,
as well as its amount, were already definite and determinable
at the time the policy was issued. As such, the tax base under
Section 183, which is "the amount fixed in the policy," is "the
figure written on its face and whatever increases will take
effect in the future by reason of the automatic increase
clause." 40 This Court added that the automatic increase
clause was "in the nature of a conditional obligation under
Article 1181,41 by which the increase of the insurance
coverage shall depend upon the happening of the event which
constitutes the obligation." 42
Since the Lincoln case, wherein the then CIRs arguments for
the BIR are very similar to the petitioners arguments herein,
was decided in favor of the BIR, the petitioner is now relying
on our ruling therein to support his position in this case.
Although the two cases are similar in many ways, they must
be distinguished by the nature of the respective "clauses" in
the life insurance policies involved, where we note a major
difference. In Lincoln, the relevant clause is the "Automatic
Increase Clause" which provided for the automatic increase in
the amount of life insurance coverage upon the attainment of
a certain age by the insured, without any need for another
contract. In the case at bar, the clause in contention is the
"Guaranteed Continuity Clause" in respondents Money Plus
Plan, which reads:
GUARANTEED CONTINUITY
We guarantee the continuity of this Policy until the Expiry
Date stated in the Schedule provided that the effective
premium is consecutively paid when due or within the 31-day
Grace Period.
We shall not have the right to change premiums on your
Policy during the 20-year Policy term.
At the end of each twenty-year period, and provided that you
have not attained age 55, you may renew your Policy for a
further twenty-year period. To renew, you must submit proof
of insurability acceptable to MBLIC and pay the premium due
based on attained age according to the rates prevailing at the
time of renewal.43
A simple reading of respondents guaranteed continuity clause
will show that it is significantly different from the "automatic
increase clause" in Lincoln. The only things guaranteed in the
respondents continuity clause were: the continuity of the
policy until the stated expiry date as long as the premiums
were paid within the allowed time; the non-change in
premiums for the duration of the 20-year policy term; and the
option to continue such policy after the 20-year period,
subject to certain requirements. In fact, even the continuity of
the policy after its term was not guaranteed as the decision to
renew it belonged to the insured, subject to certain

conditions. Any increase in the sum assured, as a result of the
clause, had to survive a new agreement between the
respondent and the insured. The increase in the life insurance
coverage was only corollary to the new premium rate imposed
based upon the insureds age at the time the continuity
clause was availed of. It was not automatic, was never
guaranteed, and was certainly neither definite nor
determinable at the time the policy was issued.
Therefore, the increases in the sum assured brought about by
the guaranteed continuity clause cannot be subject to
documentary stamp tax under Section 183 as insurance made
upon the lives of the insured.
However, it is clear from the text of the guaranteed continuity
clause that what the respondent was actually offering in its
Money Plus Plan was the option to renew the policy, after the
expiration of its original term. Consequently, the acceptance
of this offer would give rise to the renewal of the original
policy.
The petitioner avers that these life insurance policy renewals
make the respondent liable for deficiency documentary stamp
tax under Section 198.
Section 198 of the old Tax Code reads:
Section 198. Stamp Tax on Assignments and Renewals
of Certain Instruments. Upon each and every assignment
or transfer of any mortgage, lease or policy of insurance, or
the renewal or continuance of any agreement, contract,
charter, or any evidence of obligation or indebtedness by
altering or otherwise, there shall be levied, collected and paid
a documentary stamp tax, at the same rate as that imposed
on the original instrument.44
Section 198 speaks of assignments and renewals. In the case
of insurance policies, this section applies only when such
policy was assigned or transferred. The provision which
specifically applies to renewals of life insurance policies is
Section 183:
Section 183. Stamp Tax on Life Insurance Policies. On
all policies of insurance or other instruments by whatever
name the same may be called, whereby any insurance shall
be made or renewed upon any life or lives, there shall be
collected a documentary stamp tax of fifty centavos on each
two hundred pesos or fractional part thereof, of the amount
insured by any such policy. (Emphasis ours.)
Section 183 is a substantial reproduction of the earlier
documentary stamp tax provision, Section 1449(j) of the
Administrative Code of 1917. Regulations No. 26, or The
Revised Documentary Stamp Tax Regulations,45 provided the
implementing rules to the provisions on documentary stamp
tax under the Administrative Code of 1917. Section 54 of the
Regulations, in reference to what is now Section 183, explicitly
stated that the documentary stamp tax imposed under that
section is also collectible upon renewals of life insurance
policies, viz:
Section 54. Tax also due on renewals. The tax under this
section is collectible not only on the original policy or contract
of insurance but also upon the renewal of the policy or
contract of insurance.
To argue that there was no new legal relationship created by
the availment of the guaranteed continuity clause would
mean that any option to renew, integrated in the original
agreement or contract, would not in reality be a renewal but
only a discharge of a pre-existing obligation. The truth of the
matter is that the guaranteed continuity clause only gave the
insured the right to renew his life insurance policy which had a
fixed term of twenty years. And although the policy would still
continue with essentially the same terms and conditions, the
fact is, its maturity date, coverage, and premium rate would
have changed. We cannot agree with the CTA in its holding
that "the renewal, is in effect treated as an increase in the
sum assured since no new insurance policy was issued." 46 The
renewal was not meant to restore the original terms of an old
agreement, but instead it was meant to extend the life of an
existing agreement, with some of the contracts terms
modified. This renewal was still subject to the acceptance and
to the conditions of both the insured and the respondent. This
is entirely different from a simple mutual agreement between
the insurer and the insured, to increase the coverage of an

existing and effective life insurance policy.
It is clear that the availment of the option in the guaranteed
continuity clause will effectively renew the Money Plus Plan
policy, which is indisputably subject to the imposition of
documentary stamp tax under Section 183 as an insurance
renewed upon the life of the insured.
Documentary Stamp Tax
on Group Life Insurance
The petitioner is also asking this Court to sustain his
deficiency documentary stamp tax assessment on the
additional premiums earned by the respondent in its group life
insurance policies.
This Court, in Pineda v. Court of Appeals 47 has had the chance
to discuss the concept of "group insurance," to wit:
In its original and most common form, group insurance
provides life or health insurance coverage for the employees
of one employer.
The coverage terms for group insurance are usually stated in
a master agreement or policy that is issued by the insurer to a
representative of the group or to an administrator of the
insurance program, such as an employer. The employer acts
as a functionary in the collection and payment of premiums
and in performing related duties. Likewise falling within the
ambit of administration of a group policy is the disbursement
of insurance payments by the employer to the employees.
Most policies, such as the one in this case, require an
employee to pay a portion of the premium, which the
employer deducts from wages while the remainder is paid by
the employer. This is known as a contributory plan as
compared to a non-contributory plan where the premiums are
solely paid by the employer.
Although the employer may be the titular or named insured,
the insurance is actually related to the life and health of the
employee. Indeed, the employee is in the position of a real
party to the master policy, and even in a non-contributory
plan, the payment by the employer of the entire premium is a
part of the total compensation paid for the services of the
employee. Put differently, the labor of the employees is the
true source of the benefits, which are a form of additional
compensation to them.48 (Emphasis ours.)
When a group insurance plan is taken out, a group master
policy is issued with the coverage and premium rate based on
the number of the members covered at that time. In the case
of a company group insurance plan, the premiums paid on the
issuance of the master policy cover only those employees
enrolled at the time such master policy was issued. When the
employer hires additional employees during the life of the
policy, the additional employees may be covered by the same
group insurance already taken out without any need for the
issuance of a new policy.
The respondent claims that since the additional premiums
represented the additional members of the same existing
group insurance policy, then under our tax laws, no additional
documentary stamp tax should be imposed since the
appropriate documentary stamp tax had already been paid
upon the issuance of the master policy. The respondent
asserts that since the documentary stamp tax, by its nature,
is paid at the time of the issuance of the policy, "then there
can be no other imposition on the same, regardless of any
change in the number of employees covered by the existing
group insurance."49
To resolve this issue, it would be instructive to take another
look at Section 183: On all policies of insurance or other
instruments by whatever name the same may be called,
whereby any insurance shall be made or renewed upon any
life or lives.
The phrase "other instruments" as also found in the earlier
version of Section 183, i.e., Section 1449(j) of the
Administrative Code of 1917, was explained in Regulations No.
26, to wit:
Section 52. "Other instruments" defined. The term "other
instruments" includes any instrument by whatever name the
same is called whereby insurance is made or renewed, i.e., by
which the relationship of insurer and insured is created or

evidenced, whether it be a letter of acceptance, cablegrams,
letters, binders, covering notes, or memoranda. (Emphasis
ours.)
Whenever a master policy admits of another member, another
life is insured and covered. This means that the respondent,
by approving the addition of another member to its existing
master policy, is once more exercising its privilege to conduct
the business of insurance, because it is yet again insuring a
life. It does not matter that it did not issue another policy to
effect this change, the fact remains that insurance on another
life is made and the relationship of insurer and insured is
created between the respondent and the additional member
of that master policy. In the respondents case, its group
insurance plan is embodied in a contract which includes not
only the master policy, but all documents subsequently
attached to the master policy.50 Among these documents are
the Enrollment Cards accomplished by the employees when
they applied for membership in the group insurance plan. The
Enrollment Card of a new employee, once registered in the
Schedule of Benefits and attached to the master policy,
becomes evidence of such employees membership in the
group insurance plan, and his right to receive the benefits
therein. Everytime the respondent registers and attaches an
Enrollment Card to an existing master policy, it exercises its
privilege to conduct its business of insurance and this is
patently subject to documentary stamp tax as insurance
made upon a life under Section 183.
The respondent would like this Court to ignore the petitioners
argument that renewals of insurance policies are also subject
to documentary stamp tax for being raised for the first time.
This Court was faced with the same dilemma in Commissioner
of Internal Revenue v. Procter & Gamble Philippine
Manufacturing Corporation,51 when the petitioner also raised
an issue therein for the first time in the Supreme Court. In
addressing the procedural lapse, we said:
As clearly ruled by Us "To allow a litigant to assume a different
posture when he comes before the court and challenges the
position he had accepted at the administrative level," would
be to sanction a procedure whereby the Court - which is
supposed to review administrative determinations - would not
review, but determine and decide for the first time, a question
not raised at the administrative forum. Thus it is well settled
that under the same underlying principle of prior exhaustion
of administrative remedies, on the judicial level, issues not
raised in the lower court cannot generally be raised for the
first time on appeal. x x x.52
However, in the same case, we also held that:
Nonetheless it is axiomatic that the State can never be in
estoppel, and this is particularly true in matters involving
taxation. The errors of certain administrative officers should
never be allowed to jeopardize the government's financial
position.53 (Emphasis ours.)
Along with police power and eminent domain, taxation is one
of the three basic and necessary attributes of sovereignty. 54
Taxes are the lifeblood of the government and their prompt
and certain availability is an imperious need. It is through
taxes that government agencies are able to operate and with
which the State executes its functions for the welfare of its
constituents.55 It is for this reason that we cannot let the
petitioners oversight bar the governments rightful
claim.1avvphi1
This Court would like to make it clear that the assessment for
deficiency documentary stamp tax is being upheld not
because the additional premium payments or an agreement
to change the sum assured during the effectivity of an
insurance plan are subject to documentary stamp tax, but
because documentary stamp tax is levied on every document
which establishes that insurance was made or renewed upon
a life.
WHEREFORE, the petition is GRANTED. The April 29, 2005
Decision and the July 27, 2005 Resolution of the Court of
Appeals in CA-G.R. SP No. 70600 are hereby SET ASIDE.
Respondent Manila Bankers Life Insurance Corp. is hereby
ordered to pay petitioner Commissioner of Internal Revenue
the deficiency documentary stamp tax in the amount of
P1,646,449.26, plus the delinquency penalties of 25%
surcharge on the amount due and 20% annual interest from
January 5, 2000 until fully paid.
SO ORDERED.
FIRST DIVISION
The petitioner also cites one of the four exceptions provided

for in the insurance contract and contends that the private
petitioner's claim is barred by such provision. It is there
stated:
Exceptions
G.R. No. 92383 July 17, 1992

SUN INSURANCE OFFICE, LTD., petitioner,
vs.
THE HON. COURT OF APPEALS and NERISSA LIM,
respondents.
The company shall not be liable in respect of

1. Bodily injury
xxx xxx xxx
b. consequent upon
CRUZ, J.:
i) The insured person attempting to commit

suicide or willfully exposing himself to
needless peril except in an attempt to save
human life.
The petitioner issued Personal Accident Policy No. 05687 to

Felix Lim, Jr. with a face value of P200,000.00. Two months
later, he was dead with a bullet wound in his head. As
beneficiary, his wife Nerissa Lim sought payment on the policy
but her claim was rejected. The petitioner agreed that there
was no suicide. It argued, however that there was no accident
either.
To repeat, the parties agree that Lim did not commit suicide.
Nevertheless, the petitioner contends that the insured willfully
exposed himself to needless peril and thus removed himself
from the coverage of the insurance policy.
Pilar Nalagon, Lim's secretary, was the only eyewitness to his

death. It happened on October 6, 1982, at about 10 o'clock in
the evening, after his mother's birthday party. According to
Nalagon, Lim was in a happy mood (but not drunk) and was
playing with his handgun, from which he had previously
removed the magazine. As she watched television, he stood in
front of her and pointed the gun at her. She pushed it aside
and said it might he loaded. He assured her it was not and
then pointed it to his temple. The next moment there was an
explosion and Lim slumped to the floor. He was dead before
he fell. 1
It should be noted at the outset that suicide and willful

exposure to needless peril are in pari materia because they
both signify a disregard for one's life. The only difference is in
degree, as suicide imports a positive act of ending such life
whereas the second act indicates a reckless risking of it that is
almost suicidal in intent. To illustrate, a person who walks a
tightrope one thousand meters above the ground and without
any safety device may not actually be intending to commit
suicide, but his act is nonetheless suicidal. He would thus be
considered as "willfully exposing himself to needless peril"
within the meaning of the exception in question.
The widow sued the petitioner in the Regional Trial Court of

Zamboanga City and was sustained. 2 The petitioner was
sentenced to pay her P200,000.00, representing the face
value of the policy, with interest at the legal rate; P10,000.00
as moral damages; P5,000.00 as exemplary damages;
P5,000.00 as actual and compensatory damages; and
P5,000.00 as attorney's fees, plus the costs of the suit. This
decision was affirmed on appeal, and the motion for
reconsideration was denied. 3 The petitioner then came to this
Court to fault the Court of Appeals for approving the payment
of the claim and the award of damages.
The petitioner maintains that by the mere act of pointing the

gun to hip temple, Lim had willfully exposed himself to
needless peril and so came under the exception. The theory is
that a gun is per se dangerous and should therefore be
handled cautiously in every case.
The term "accident" has been defined as follows:

The words "accident" and "accidental" have never acquired
any technical signification in law, and when used in an
insurance contract are to be construed and considered
according to the ordinary understanding and common usage
and speech of people generally. In-substance, the courts are
practically agreed that the words "accident" and "accidental"
mean that which happens by chance or fortuitously, without
intention or design, and which is unexpected, unusual, and
unforeseen. The definition that has usually been adopted by
the courts is that an accident is an event that takes place
without one's foresight or expectation an event that
proceeds from an unknown cause, or is an unusual effect of a
known case, and therefore not expected. 4
An accident is an event which happens without any human
agency or, if happening through human agency, an event
which, under the circumstances, is unusual to and not
expected by the person to whom it happens. It has also been
defined as an injury which happens by reason of some
violence or casualty to the injured without his design, consent,
or voluntary co-operation. 5
In light of these definitions, the Court is convinced that the
incident that resulted in Lim's death was indeed an accident.
The petitioner, invoking the case of De la Cruz v. Capital
Insurance, 6 says that "there is no accident when a deliberate
act is performed unless some additional, unexpected,
independent and unforeseen happening occurs which
produces or brings about their injury or death." There was
such a happening. This was the firing of the gun, which was
the additional unexpected and independent and unforeseen
occurrence that led to the insured person's death.
That posture is arguable. But what is not is that, as the

secretary testified, Lim had removed the magazine from the
gun and believed it was no longer dangerous. He expressly
assured her that the gun was not loaded. It is submitted that
Lim did not willfully expose himself to needless peril when he
pointed the gun to his temple because the fact is that he
thought it was not unsafe to do so. The act was precisely
intended to assure Nalagon that the gun was indeed
harmless.
The contrary view is expressed by the petitioner thus:
Accident insurance policies were never
intended to reward the insured for his
tendency to show off or for his
miscalculations. They were intended to
provide for contingencies. Hence, when I
miscalculate and jump from the Quezon
Bridge into the Pasig River in the belief that
I can overcome the current, I have wilfully
exposed myself to peril and must accept the
consequences of my act. If I drown I cannot
go to the insurance company to ask them to
compensate me for my failure to swim as
well as I thought I could. The insured in the
case at bar deliberately put the gun to his
head and pulled the trigger. He wilfully
exposed himself to peril.
The Court certainly agrees that a drowned man cannot go to
the insurance company to ask for compensation. That might
frighten the insurance people to death. We also agree that
under the circumstances narrated, his beneficiary would not
be able to collect on the insurance policy for it is clear that
when he braved the currents below, he deliberately exposed
himself to a known peril.
The private respondent maintains that Lim did not. That is
where she says the analogy fails. The petitioner's hypothetical
swimmer knew when he dived off the Quezon Bridge that the
currents below were dangerous. By contrast, Lim did not know
that the gun he put to his head was loaded.
Lim was unquestionably negligent and that negligence cost

him his own life. But it should not prevent his widow from
recovering from the insurance policy he obtained precisely
against accident. There is nothing in the policy that relieves
the insurer of the responsibility to pay the indemnity agreed
upon if the insured is shown to have contributed to his own
accident. Indeed, most accidents are caused by negligence.
There are only four exceptions expressly made in the contract
to relieve the insurer from liability, and none of these
exceptions is applicable in the case at bar. **
It bears noting that insurance contracts are as a rule
supposed to be interpreted liberally in favor of the assured.
There is no reason to deviate from this rule, especially in view
of the circumstances of this case as above analyzed.
On the second assigned error, however, the Court must rule in
favor of the petitioner. The basic issue raised in this case is, as
the petitioner correctly observed, one of first impression. It is
evident that the petitioner was acting in good faith then it
resisted the private respondent's claim on the ground that the
death of the insured was covered by the exception. The issue
was indeed debatable and was clearly not raised only for the
purpose of evading a legitimate obligation. We hold therefore
that the award of moral and exemplary damages and of
attorney's fees is unjust and so must be disapproved.
In order that a person may be made liable to
the payment of moral damages, the law
requires that his act be wrongful. The
adverse result of an action does not per se
make the act wrongful and subject the act
or to the payment of moral damages. The
law could not have meant to impose a
penalty on the right to litigate; such right is
so precious that moral damages may not be
charged on those who may exercise it
erroneously. For these the law taxes costs. 7
The fact that the results of the trial were
adverse to Barreto did not alone make his
act in bringing the action wrongful because
in most cases one party will lose; we would
be imposing an unjust condition or limitation
on the right to litigate. We hold that the
award of moral damages in the case at bar
is not justified by the facts had
circumstances as well as the law.
If a party wins, he cannot, as a rule, recover
attorney's fees and litigation expenses,
since it is not the fact of winning alone that
entitles him to recover such damages of the
exceptional circumstances enumerated in
Art. 2208. Otherwise, every time a
defendant wins, automatically the plaintiff
must pay attorney's fees thereby putting a
premium on the right to litigate which
should not be so. For those expenses, the
law deems the award of costs as sufficient.
8
WHEREFORE, the challenged decision of the Court of Appeals
is AFFIRMED in so far as it holds the petitioner liable to the
private respondent in the sum of P200,000.00 representing
the face value of the insurance contract, with interest at the
legal rate from the date of the filing of the complaint until the
full amount is paid, but MODIFIED with the deletion of all
awards for damages, including attorney's fees, except the
costs of the suit.
SO ORDERED.
EN BANC
G.R. No. L-21574
June 30, 1966
SIMON DE LA CRUZ, plaintiff and appellee,

vs.
THE CAPITAL INSURANCE and SURETY CO., INC.,
defendant and appellant.
Achacoso, Nera and Ocampo for defendant and appellant.
Agustin M. Gramata for plaintiff and appellee.
This is an appeal by the Capital Insurance & Surety Company,

Inc., from the decision of the Court of First Instance of
Pangasinan (in Civ Case No. U-265), ordering it to indemnify
therein plaintiff Simon de la Cruz for the death of the latter's
son, to pay the burial expenses, and attorney's fees.
Eduardo de la Cruz, employed as a mucker in the ItogonSuyoc Mines, Inc. in Baguio, was the holder of an accident
insurance policy (No. ITO-BFE-170) underwritten by the
Capital Insurance & Surety Co., Inc., for the period beginning
November 13, 1956 to November 12, 1957. On January 1,
1957, in connection with the celebration of the New Year, the
Itogon-Suyoc Mines, Inc. sponsored a boxing contest for
general entertainment wherein the insured Eduardo de la
Cruz, a non-professional boxer participated. In the course of
his bout with another person, likewise a non-professional, of
the same height, weight, and size, Eduardo slipped and was
hit by his opponent on the left part of the back of the head,
causing Eduardo to fall, with his head hitting the rope of the
ring. He was brought to the Baguio General Hospital the
following day. The cause of death was reported as
hemorrhage, intracranial, left.
Simon de la Cruz, the father of the insured and who was
named beneficiary under the policy, thereupon filed a claim
with the insurance company for payment of the indemnity
under the insurance policy. As the claim was denied, De la
Cruz instituted the action in the Court of First Instance of
Pangasinan for specific performance. Defendant insurer set up
the defense that the death of the insured, caused by his
participation in a boxing contest, was not accidental and,
therefore, not covered by insurance. After due hearing the
court rendered the decision in favor of the plaintiff which is
the subject of the present appeal.
It is not disputed that during the ring fight with another nonprofessional boxer, Eduardo slipped, which was unintentional.
At this opportunity, his opponent landed on Eduardo's head a
blow, which sent the latter to the ropes. That must have
caused the cranial injury that led to his death. Eduardo was
insured "against death or disability caused by accidental
means". Appellant insurer now contends that while the death
of the insured was due to head injury, said injury was
sustained because of his voluntary participation in the
contest. It is claimed that the participation in the boxing
contest was the "means" that produced the injury which, in
turn, caused the death of the insured. And, since his inclusion
in the boxing card was voluntary on the part of the insured, he
cannot be considered to have met his death by "accidental
means".1wph1.t
The terms "accident" and "accidental", as used in insurance
contracts, have not acquired any technical meaning, and are
construed by the courts in their ordinary and common
acceptation. Thus, the terms have been taken to mean that
which happen by chance or fortuitously, without intention and
design, and which is unexpected, unusual, and unforeseen. An
accident is an event that takes place without one's foresight
or expectation an event that proceeds from an unknown
cause, or is an unusual effect of a known cause and,
therefore, not expected.1
Appellant however, would like to make a distinction between
"accident or accidental" and "accidental means", which is the
term used in the insurance policy involved here. It is argued
that to be considered within the protection of the policy, what
is required to be accidental is the means that caused or
brought the death and not the death itself. It may be
mentioned in this connection, that the tendency of court
decisions in the United States in recent years is to eliminate
the fine distinction between the terms "accidental" and
"accidental means" and to consider them as legally
synonymous.2 But, even if we take appellant's theory, the
death of the insured in the case at bar would still be entitled
to indemnification under the policy. The generally accepted
rule is that, death or injury does not result from accident or
accidental means within the terms of an
accident-policy if it is the natural result of the insured's
voluntary act, unaccompanied by anything unforeseen except
the death or injury. 3 There is no accident when a deliberate
act is performed unless some additional, unexpected,
independent, and unforeseen happening occurs which
produces or brings about the result of injury or death. 4 In
other words, where the death or injury is not the natural or
probable result of the insured's voluntary act, or if something
unforeseen occurs in the doing of the act which produces the
injury, the resulting death is within the protection of policies
insuring against death or injury from accident.
BARRERA, J.:
In the present case, while the participation of the insured in

the boxing contest is voluntary, the injury was sustained when
he slid, giving occasion to the infliction by his opponent of the
blow that threw him to the ropes of the ring. Without this
unfortunate incident, that is, the unintentional slipping of the
deceased, perhaps he could not have received that blow in
the head and would not have died. The fact that boxing is
attended with some risks of external injuries does not make
any injuries received in the course of the game not accidental.
In boxing as in other equally physically rigorous sports, such
as basketball or baseball, death is not ordinarily anticipated to
result. If, therefore, it ever does, the injury or death can only
be accidental or produced by some unforeseen happening or
event as what occurred in this case.
contending that murder and assault are not within the scope
of the coverage of the insurance policy.
On February 24, 1989, private respondent filed a complaint
with the Insurance Commission which subsequently rendered
a decision, the pertinent portion of which reads:
In the light of the foregoing. we find
respondent liable to pay complainant the
sum of P15,000.00 representing the
proceeds of the policy with interest. As no
evidence was submitted to prove the claim
for mortuary aid in the sum of P1,000.00,
the same cannot be entertained.
Furthermore, the policy involved herein specifically excluded

from its coverage
(e) Death or disablement consequent upon the
Insured engaging in football, hunting, pigsticking,
steeplechasing, polo-playing, racing of any kind,
mountaineering, or motorcycling.
Death or disablement resulting from engagement in boxing
contests was not declared outside of the protection of the
insurance contract. Failure of the defendant insurance
company to include death resulting from a boxing match or
other sports among the prohibitive risks leads inevitably to
the conclusion that it did not intend to limit or exempt itself
from liability for such death.5
Wherefore, in view of the foregoing considerations, the
decision appealed from is hereby affirmed, with costs against
appellant. so ordered.
SECOND DIVISION
G.R. No. 100970 September 2, 1992

FINMAN GENERAL ASSURANCE CORPORATION,
petitioner,
vs.
THE HONORABLE COURT OF APPEALS and JULIA
SURPOSA, respondents.
Aquino and Associates for petitioner.
Public Attorney's Office for private respondent.
NOCON, J.:
This is a petition for certiorari with a prayer for the issuance of
a restraining order and preliminary mandatory injunction to
annul and set aside the decision of the Court of Appeals dated
July 11, 1991, 1 affirming the decision dated March 20, 1990 of
the Insurance Commission 2 in ordering petitioner Finman
General Assurance Corporation to pay private respondent Julia
Surposa the proceeds of the personal accident Insurance
policy with interest.
It appears on record that on October 22, 1986, deceased,
Carlie Surposa was insured with petitioner Finman General
Assurance Corporation under Finman General Teachers
Protection Plan Master Policy No. 2005 and Individual Policy
No. 08924 with his parents, spouses Julia and Carlos Surposa,
and brothers Christopher, Charles, Chester and Clifton, all
surnamed, Surposa, as beneficiaries. 3
While said insurance policy was in full force and effect, the
insured, Carlie Surposa, died on October 18, 1988 as a result
of a stab wound inflicted by one of the three (3) unidentified
men without provocation and warning on the part of the
former as he and his cousin, Winston Surposa, were waiting
for a ride on their way home along Rizal-Locsin Streets,
Bacolod City after attending the celebration of the "Maskarra
Annual Festival."
Thereafter, private respondent and the other beneficiaries of
said insurance policy filed a written notice of claim with the
petitioner insurance company which denied said claim
WHEREFORE, judgment is hereby rendered

ordering respondent to pay complainant the
sum of P15,000.00 with legal interest from
the date of the filing of the complaint until
fully satisfied. With costs. 4
On July 11, 1991, the appellate court affirmed said decision.
Hence, petitioner filed this petition alleging grove abuse of
discretion on the part of the appellate court in applying the
principle of "expresso unius exclusio alterius" in a personal
accident insurance policy since death resulting from murder
and/or assault are impliedly excluded in said insurance policy
considering that the cause of death of the insured was not
accidental but rather a deliberate and intentional act of the
assailant in killing the former as indicated by the location of
the lone stab wound on the insured. Therefore, said death was
committed with deliberate intent which, by the very nature of
a personal accident insurance policy, cannot be indemnified.
We do not agree.
The terms "accident" and "accidental" as
used in insurance contracts have not
acquired any technical meaning, and are
construed by the courts in their ordinary and
common acceptation. Thus, the terms have
been taken to mean that which happen by
chance or fortuitously, without intention and
design, and which is unexpected, unusual,
and unforeseen. An accident is an event
that takes place without one's foresight or
expectation an event that proceeds from
an unknown cause, or is an unusual effect of
a known cause and, therefore, not expected.
. . . The generally accepted rule is that,
death or injury does not result from accident
or accidental means within the terms of an
accident-policy if it is the natural result of
the insured's voluntary act, unaccompanied
by anything unforeseen except the death or
injury. There is no accident when a
deliberate act is performed unless some
additional, unexpected, independent, and
unforeseen happening occurs which
produces or brings about the result of injury
or death. In other words, where the death or
injury is not the natural or probable result of
the insured's voluntary act, or if something
unforeseen occurs in the doing of the act
which produces the injury, the resulting
death is within the protection of the policies
insuring against death or injury from
accident. 5
As correctly pointed out by the respondent appellate court in
its decision:
In the case at bar, it cannot be pretended
that Carlie Surposa died in the course of an
assault or murder as a result of his
voluntary act considering the very nature of
these crimes. In the first place, the insured
and his companion were on their way home
from attending a festival. They were
confronted by unidentified persons. The
record is barren of any circumstance
showing how the stab wound was inflicted.
Nor can it be pretended that the malefactor
aimed at the insured precisely because the
killer wanted to take his life. In any event,
while the act may not exempt the unknown

perpetrator from criminal liability, the fact
remains that the happening was a pure
accident on the part of the victim. The
insured died from an event that took place
without his foresight or expectation, an
event that proceeded from an unusual effect
of a known cause and, therefore, not
expected. Neither can it be said that where
was a capricious desire on the part of the
accused to expose his life to danger
considering that he was just going home
after attending a festival. 6
Furthermore, the personal accident insurance policy involved
herein specifically enumerated only ten (10) circumstances
wherein no liability attaches to petitioner insurance company
for any injury, disability or loss suffered by the insured as a
result of any of the stimulated causes. The principle of "
expresso unius exclusio alterius" the mention of one thing
implies the exclusion of another thing is therefore
applicable in the instant case since murder and assault, not
having been expressly included in the enumeration of the
circumstances that would negate liability in said insurance
policy cannot be considered by implication to discharge the
petitioner insurance company from liability for, any injury,
disability or loss suffered by the insured. Thus, the failure of
the petitioner insurance company to include death resulting
from murder or assault among the prohibited risks leads
inevitably to the conclusion that it did not intend to limit or
exempt itself from liability for such death.
Article 1377 of the Civil Code of the Philippines provides that:
The interpretation of obscure words or
stipulations in a contract shall not favor the
party who caused the obscurity.
Moreover,
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
beneficiary. 7
WHEREFORE, finding no irreversible error in the decision of
the respondent Court of Appeals, the petition for certiorari
with restraining order and preliminary injunction is hereby
DENIED for lack of merit.
SO ORDERED.
EN BANC
G.R. No. L-12189
April 29, 1960
FRANCISCA GALLARDO, plaintiff-appellee,

vs.
HERMENEGILDA S. MORALES, defendant-appellant.
Cajulis and Dolorfino for appellee.
Filemon Cajator for appellant.
CONCEPCION, J.:
The issue before us is whether a personal accident insurance
which "insures for injuries and/or death as a result of murder
or assault or attempt thereat" is a life insurance, within the
purview of Rule 39, section 12, subdivision (k) of the Rules of
Court, exempting from execution.
All moneys, benefits, privileges, or annuities accruing
or in any manner growing out of any life insurance, if
the annual premiums paid do not exceed five
hundred pesos, and if they exceed that sum a like
exemption shall exist which shall bear the same
proportion to the moneys, benefits, privileges, and
annuities so accruing or growing out of such
insurance that said five hundred pesos bears to the
whole annual premiums paid.
In accordance with a compromise agreement between the

parties in the above-entitled case, a decision was rendered
therein by the Court of First Instance of Manila, on February 3,
1956, sentencing defendant Hermenegilda S. Morales to pay
to plaintiff Francisca Gallardo the sum of Seven Thousand
Pesos (P7,000.00). In due course, the corresponding writ of
execution was issued and delivered to the Sheriff of Manila,
who, on August 8, 1956, garnished and levied execution on
the sum of P7,000.00, out of the P30,000.00 a due from the
Capital Insurance & Surety Co., Inc., to said defendant, as
beneficiary under a personal accident policy issued by said
company to defendant's husband, Luis Morales, who died, on
August 26, 1950, by assassination. Invoking the above-quoted
provision of the Rules of Court, defendant asked the sheriff to
quash and lift said garnishment or levy on execution. Upon
denial of this request by the sheriff, defendant filed a motion
praying that the aforementioned sum of P7,000.00 be
declared exempt from execution under said provision of the
Rules of Court, and that the Sheriff of Manila be ordered to
quash or lift said garnishment or levy on execution. This
motion was denied by an order dated October 18, 1956.
Hence, the present appeal by the defendant, who maintains
that the policy in question is a life insurance policy, within the
purview of the aforementioned exemption, for it insured her
husband ". . . for injuries and/or death as a result of murder or
assault or attempt thereat."
In its order denying the claim for exemption set up by the
defendant, the lower court expressed itself as follows:
Upon a perusal of the authorities cited by the parties,
this Court is fully convinced that there is a
fundamental distinction between life insurance, and
accident insurance, and the insurance policy issued
to Luis G. Morales, husband of herein defendant, was
undoubtedly an accident insurance, as distinguished
from a life insurance. As conceded by the facts
appearing in the pleadings, the personal accident
policy, part of the proceeds of which is under
garnishment, was for P50,000.00 and yet the annual
premium was for P15.00. If it were an ordinary life
insurance policy, taking into account that the
insured, Luis G. Morales, was 38 years of age and the
amount of the policy was for P50,000.00 the annual
premium would have been around P1,206.00.
Besides, the period for the policy was stipulated for
one year, and considerations as to age, health,
occupation and other personal circumstances were
not taken into account in an accident insurance
policy. Even the certification issued by the insurance
commissioner on August 23, 1956, marked as Annex
"1" of the opposition, shows that the Capital
Insurance and Surety Company Inc. is a non-life
insurance company and that the only authority
granted to it to transact business covers fire, marine,
surety, fidelity, accident, motor car, and
miscellaneous insurance, except life insurance. From
this circumstance alone, not to mention many others,
there are abundant indications that there exists a
fundamental distinction between life insurance and
accident insurance. As counsel for oppositor has
clearly pointed out, an accident policy merely insures
the person from injury and or death resulting from
murder, assault, or an attempt thereat, while in life
insurance policy, what is insured is the life of the
subject for a definite number of years. From the
authorities quoted by the oppositor, this Court is fully
convinced that an accident policy is fundamentally
different from a life insurance policy, especially if this
Court takes into account that accident insurance is
an indemnity or casualty contract, while life
insurance is an investment contract.
It is not disputed that a life insurance is, generally speaking,
distinct and different from an accident insurance. However,
when one of the risks insured in the latter is the death of the
insured by accident, then there are authorities to the effect
that such accident insurance may, also, be regarded as a life
insurance.
"Life insurance" is a contract whereby one party
insures a person against loss by the death of another.
Petition of Robbins, 140 A. 366, 367, 126 Me. 555.
An insurance on life is a contract by which the
insurer, for a stipulated sum, engages to pay a
certain amount of money if another dies within the
time limited by the policy. Cason vs. Owens, 26 S. E.
75, 76, 100 Ga. 142.
Life insurance includes in which the payment of the

insurance money is contingent upon the loss of life.
Bowless vs. Mutual Ben. Health & Accident Ass'n,
C.C.A. Va. 99F. 2d 44. 48, 49.
A contract for life insurance is really a contract for
insurance for one year in consideration of an
advanced premium, with the right of assured to
continue it from year to year upon payment of a
premium as stipulated. Mutual Life Ins. Co. 100 Pa
172, 180.
In its broader sense, "life insurance" includes
accident insurance, since life is insured under either
contract. American Trust & Banking Co. vs. Lessly,
106 S.W. 2d. 551, 552, 171 Tenn. 561, 111 A.L.R. 59.
Under statute providing that 'any life insurance' on
life of husband shall insure to benefit of widow and
children exempt from husband's debt, proceeds of
policy insuring against death by accident insured to
widow's benefit free from husband's debts. Code
1932, B 8456. American Trust & Banking Co. vs.
Lessly, 106 S.W. 2d 551, 171 Tenn. 511 III A.L.R. 59.
Insurance policy, providing for payment in case of
accidental death, is "life insurance policy" to such
extent within state statue prescribing in-contestable
period for policies. Code S.C. 1932 ss 7986, 7987.
Pacific Mut. Life Ins. Co. of California vs. Parker,
C.C.A.S.C., 71 F. 2d 872, 875.
"Life insurance" includes all policies of insurance in
which payment of insurance money is contingent
upon loss of life. . . . Smith vs. Equitable Life Assur.
Soc. of U.S., 89 S.W. 2d 165, 167, 169 Tenn. 477.
Insurance policy including a death benefit and a
health or accident disability benefit constituted a "life
insurance policy" within meaning of laws 1926, c.
118, S. 134, imposing privilege tax on insurance
companies with different rates as between life
insurance companies and other companies, in view
of provisions of Code 1906, ss 2576, 2598
(Hemingway's Code 1927, ss 5830, 5856), and Law
1924, c. 191, s I (Hemingway's Code 1927, s 5995); it
being immaterial that in some policy forms the
health and disability feature was more valuable asent
a showing that death provision was inserted to avoid
the higher tax. Universal Life Ins. Co. vs. State, 121
So. 849, 850, 155 Miss. 358." (25 Words & Phrases
260, 261, 262.)
When the application was made, Harris W. Rimmer
carried life insurance with the Equitable Life
Assurance Society, for $10,000, payable upon proof
of death, with a provision that upon death by
accident the amount of insurance payable would be
increased to $20,000. The plaintiff insisted that this
was life insurance, a disclosure of which was not
called for in question 10, while the defendant insisted
it was accident insurance that should have been
disclosed and further insisted that, it being a fact
material to the risk the failure to disclose the policy
in the Equitable Life Assurance Society rendered the
policy issued to the applicant void. . . .
The court might have gone further and held that the
failure of the applicant to characterize the insurance
in the Equitable Life Assurance Society as accident
insurance did not constitute a false answer to the
inquiry of what accident or health insurance he was
carrying. The policy in the Equitable Life Assurance
Society covered loss of life from natural as well as
external and accidental causes, and was life
insurance. The mere addition of the double indemnity
clause providing for increased insurance upon proof
of death by accident did not divest the policy of its
character of insurance on life, or make the contract
other than life insurance, for insurance on life
includes all policies of insurance in which the
payment of the insurance money is contingent upon
the loss of life. Logan vs. Fidelity & Casualty Co., 146
Mo. 114, 47 S.W. 948. See also Johnson vs. Fidelity &
Guaranty Co., 148 Mich. 406, 151 N.W. 593, L.R.A.
1916A, 475; Zimmer vs. Central Accidental Co., 207
Pa. 472, 56 A. 1003; Wright vs. Fraternities Health &
Accident Ass'n. 107 Me. 418, 78A. 475, 32 L.R.A.
(N.S.)461; Metropolitan Life Ins. Co. vs. Ins. Com'r

208 Mass. 386, 94 N.E. 477; Standard Life & Accident
Ins. Co. vs. Caroll, 86 F. 567, 41 L.R.A. 194; Wahl vs.
Interstate Business Men's Accident Ass'n 201 Iowa;
1355, 207 N.W. 395, 50 A.L.R. 1377." (Provident Life
& Accident Ins. Co. vs. Rimmer, 12 S. W. 2d Series,
365, 367.)
For this reason, and because the above-quoted provision of
the Rules of Court makes reference to "any life insurance," we
are inclined to believe that the exemption there established
applies to ordinary life insurance contracts, as well as to those
which, although intended primarily to indemnify for risks
arising from accident, likewise, insure against loss of life due,
either to accidental causes, or to the willful and criminal act of
another, which, as such, is not strictly accidental in nature.
Indeed, it has been held that statutes of this nature seek to
enable the head of the family to secure his widow and
children from becoming a burden upon the community and,
accordingly, should merit a liberal interpretation.
The object of this statue was to enable a husband,
when death deprived wife and children of his
support, to secure them from want and to prevent
them from becoming a charge upon the public.
Necessities of the wife and children and the public
interest are none the less if the death of the husband
be brought about by accident rather than by disease.
The intent of the legislature in the enactment of this
statute would not be advanced by the construction of
the law upon which the petitioners insist. (American
Trust & Banking Co. vs. Lessly et al., Supreme Court
of Tenn., 106 S.W. 2d, 551, 552.)
Under statutes providing to that effect, the proceeds
of life insurance are exempt from the claims of
creditors, a limitation being sometimes imposed as to
amount, see infra Sec. 40, or as to the beneficiaries
entitled to the exemption, see infra subdivision of
this section. Statutes exempting life insurance are
regarded as exemption laws, and not as part of the
insurance from law of the state, nor as designed
simply to protect insurer from harassing litigation.
Such statutes should be construed liberally and in
the light of, and to give effect to, their purpose of
enabling an individual to provide a fund after his
death for his family which will be free from the
claims of creditors. The exemption privilege is
created not by contract but by legislative grant, and
grounds for the exemption of the proceeds of
insurance policies must be found in the statutes. (35
C.J.S. pp. 53-54.)
By weight of authority, exemption statutes or rules
should be liberally construed with a view to giving
effect to their beneficent and humane purpose. To
this end, every reasonable doubt as to whether a
given property is or is not exempt should be resolved
in favor of exemption. (Comments on the Rules of
Court by Moran [1957 ed.] Vol. 1, p. 564.)
Wherefore, the order appealed from is reversed, and the
garnishment in dispute hereby set aside and quashed, with
the costs of this instance against plaintiff Francisca Gallardo. It
is so ordered.
FIRST DIVISION
G.R. No. 105562 September 27, 1993

LUZ PINEDA, MARILOU MONTENEGRO, VIRGINIA
ALARCON, DINA LORENA AYO, CELIA CALUMBAG and
LUCIA LONTOK, petitioners,
vs.
HON. COURT OF APPEALS and THE INSULAR LIFE
ASSURANCE COMPANY, LIMITED, respondents.
Mariano V. Ampil, Jr. for petitioners.
Ramon S. Caguiao for private respondent.
DAVIDE, JR., J.:

This is an appeal by certiorari to review and set aside the
Decision of the public respondent Court of Appeals in CA-G.R.
SP No. 22950 1 and its Resolution denying the petitioners'
motion for reconsideration. 2 The challenged decision modified
the decision of the Insurance Commission in IC Case
No. RD-058. 3
The petitioners were the complainants in IC Case No. RD-058,
an administrative complaint against private respondent
Insular Life Assurance Company, Ltd. (hereinafter Insular Life),
which was filed with the Insurance Commission on 20
September 1989. 4 They prayed therein that after due
proceedings, Insular Life "be ordered to pay the claimants
their insurance claims" and that "proper sanctions/penalties
be imposed on" it "for its deliberate, feckless violation of its
contractual obligations to the complainants, and of the
Insurance Code." 5 Insular Life's motion to dismiss the
complaint on the ground that "the claims of complainants are
all respectively beyond the jurisdiction of the Insurance
Commission as provided in Section 416 of the Insurance
Code," 6 having been denied in the Order of 14 November
1989, 7 it filed its answer on 5 December 1989. 8 Thereafter,
hearings were conducted on various dates.
Second: The testimony of the complainants'

rebuttal witness,
Mrs. Trinidad Alarcon, who declared in no
uncertain terms that neither she nor her
husband, executed a special power of
attorney in favor of Captain Rosendo Nuval,
authorizing him to claim, receive, receipt
and take delivery of any insurance proceeds
from Insular Life arising out of the death of
their insured/seaman son, is not
convincingly refuted.
Third: Respondent Insular Life did not
observe Section 180 of the Insurance Code,
when it issued or released two checks in the
amount of P150,000.00 for the three minor
children (P50,000.00 each) of complainant,
Dina Ayo and another check of P40,000.00
for minor beneficiary Marissa Lontok,
daughter of another complainant Lucia
Lontok, there being no showing of any court
authorization presented or the requisite
bond posted.
Section 180 is quotes [sic] partly as follows:
On 20 June 1990, the Commission rendered its decision 9 in

favor of the complainants, the dispositive portion of which
reads as follows:
. . . In the absence of a
judicial guardian, the
father, or in the latter's
absence or incapacity, the
mother of any minor, who
is an insured or a
beneficiary under a
contract of life, health or
accident insurance, may
exercise, in behalf of said
minor, any right, under
the policy, without
necessity of court
authority or the giving of a
bond where the interest of
the minor in the particular
act involved does not
exceed twenty thousand
pesos . . . . 11
WHEREFORE, this Commission merely

orders the respondent company to:
a) Pay a fine of FIVE HUNDRED PESOS
(P500.00) a day from the receipt of a copy
of this Decision until actual payment
thereof;
b) Pay and settle the claims of DINA AYO and
LUCIA LONTOK, for P50,000.00 and
P40,000.00, respectively;
c) Notify henceforth it should notify
individual beneficiaries designated under
any Group Policy, in the event of the death
of insured(s), where the corresponding
claims are filed by the Policyholder;
d) Show cause within ten days why its other
responsible officers who have handled this
case should not be subjected to disciplinary
and other administrative sanctions for
deliberately releasing to Capt. Nuval the
check intended for spouses ALARCON, in the
absence of any Special Power of Attorney for
that matter, and for negligence with respect
to the release of the other five checks.
SO ORDERED.
10
In holding for the petitioners, the Insurance Commission made

the following findings and conclusions:
After taking into consideration the
evidences [sic], testimonial and
documentary for the complainants and the
respondent, the Commission finds that;
First: The respondent erred in appreciating
that the powers of attorney executed by five
(5) of the several beneficiaries convey
absolute authority to Capt. Nuval, to
demand, receive, receipt and take delivery
of insurance proceeds from respondent
Insular Life. A cursory reading of the
questioned powers of authority would
disclosed [sic] that they do not contain in
unequivocal and clear terms authority to
Capt. Nuval to obtain, receive, receipt from
respondent company insurance proceeds
arising from the death of the seamaninsured. On the contrary, the said powers of
attorney are couched in terms which could
easily arouse suspicion of an ordinary
man. . . .
Insular Life appealed the decision to the public respondent

which docketed the case as CA-G.R. SP No. 22950. The appeal
urged the appellate court to reverse the decision because the
Insurance Commission (a) had no jurisdiction over the case
considering that the claims exceeded P100,000.00,
(b) erred in holding that the powers of attorney relied upon by
Insular Life were insufficient to convey absolute authority to
Capt. Nuval to demand, receive and take delivery of the
insurance proceeds pertaining to the petitioners, (c) erred in
not giving credit to the version of Insular Life that the power
of attorney supposed to have been executed in favor of the
Alarcons was missing, and
(d) erred in holding that Insular Life was liable for violating
Section 180 of the Insurance Code for having released to the
surviving mothers the insurance proceeds pertaining to the
beneficiaries who were still minors despite the failure of the
former to obtain a court authorization or to post a bond.
On 10 October 1991, the public respondent rendered a
decision, 12 the decretal portion of which reads:
WHEREFORE, the decision appealed from is
modified by eliminating therefrom the award
to Dina Ayo and Lucia Lontok in the amounts
of P50,000.00 and P40,000.00, respectively.
13
It found the following facts to have been duly established:

It appears that on 23 September 1983,
Prime Marine Services, Inc. (PMSI, for
brevity), a crewing/manning outfit, procured
Group PoIicy
No. G-004694 from respondent-appellant
Insular Life Assurance Co., Ltd. to provide
life insurance coverage to its sea-based
employees enrolled under the plan. On 17
February 1986, during the effectivity of the
policy, six covered employees of the PMSI
perished at sea when their vessel, M/V
Nemos, a Greek cargo vessel, sunk
somewhere in El Jadida, Morocco. They were
survived by complainants-appellees, the

beneficiaries under the policy.
Following the tragic demise of their loved
ones, complainants-appellees sought to
claim death benefits due them and, for this
purpose, they approached the President and
General Manager of PMSI, Capt. Roberto
Nuval. The latter evinced willingness to
assist complainants-appellees to recover
Overseas Workers Welfare Administration
(OWWA) benefits from the POEA and to work
for the increase of their PANDIMAN and
other benefits arising from the deaths of
their husbands/sons. They were thus made
to execute, with the exception of the
spouses Alarcon, special powers of attorney
authorizing Capt. Nuval to, among others,
"follow up, ask, demand, collect and
receive" for their benefit indemnities of
sums of money due them relative to the
sinking of M/V Nemos. By virtue of these
written powers of attorney, complainantsappellees were able to receive their
respective death benefits. Unknown to
them, however, the PMSI, in its capacity as
employer and policyholder of the life
insurance of its deceased workers, filed with
respondent-appellant formal claims for and
in behalf of the beneficiaries, through its
President, Capt. Nuval. Among the
documents submitted by the latter for the
processing of the claims were five special
powers of attorney executed by
complainants-appellees. On the basis of
these and other documents duly submitted,
respondent-appellant drew against its
account with the Bank of the Philippine
Islands on 27 May 1986 six (6) checks, four
for P200,00.00 each, one for P50,000.00
and another for P40,00.00, payable to the
order of complainants-appellees. These
checks were released to the treasurer of
PMSI upon instructions of
Capt. Nuval over the phone to Mr. Mariano
Urbano, Assistant Department Manager for
Group Administration Department of
respondent-appellant. Capt. Nuval, upon
receipt of these checks from the treasurer,
who happened to be his son-in-law,
endorsed and deposited them in his account
with the Commercial Bank of Manila, now
Boston Bank.
On 3 July 1989, after complainantsappellees learned that they were entitled, as
beneficiaries, to life insurance benefits
under a group policy with respondentappellant, they sought to recover these
benefits from Insular Life but the latter
denied their claim on the ground that the
liability to complainants-appellees was
already extinguished upon delivery to and
receipt by PMSI of the six (6) checks issued
in their names. 14
On the basis thereof, the public respondent held that the
Insurance Commission had jurisdiction over the case on the
ground that although some of the claims exceed P100,000.00,
the petitioners had asked for administrative sanctions against
Insular Life which are within the Commission's jurisdiction to
grant; hence, "there was merely a misjoinder of causes of
action . . . and, like misjoinder of parties, it is not a ground for
the dismissal of the action as it does not affect the other
reliefs prayed for." 15 It also rejected Insular Life's claim that
the Alarcons had submitted a special power of attorney which
they (Insular Life) later misplaced.
On the other hand, the public respondent ruled that the
powers of attorney, Exhibits "1" to "5," relied upon by Insular
Life were sufficient to authorize Capt. Nuval to receive the
proceeds of the insurance pertaining to the beneficiaries. It
stated:
When the officers of respondent-appellant
read these written powers, they must have
assumed Capt. Nuval indeed had authority
to collect the insurance proceeds in behalf
of the beneficiaries who duly affixed their
signatures therein. The written power is

specific enough to define the authority of
the agent to collect any sum of money
pertaining to the sinking of the fatal vessel.
Respondent-appellant interpreted this power
to include the collection of insurance
proceeds in behalf of the beneficiaries
concerned. We believe this is a reasonable
interpretation even by an officer of
respondent-appellant unschooled in the law.
Had respondent appellant, consulted its
legal department it would not have received
a contrary view. There is nothing in the law
which mandates a specific or special power
of attorney to be executed to collect
insurance proceeds. Such authority is not
included in the enumeration of Art. 1878 of
the New Civil Code. Neither do we perceive
collection of insurance claims as an act of
strict dominion as to require a special power
of attorney. Moreover, respondent-appellant
had no reason to doubt Capt. Nuval. Not
only was he armed with a seemingly
genuine authorization, he also appeared to
be the proper person to deal with
respondent-appellant being the President
and General Manager of the PMSI, the
policyholder with whom respondentappellant always dealt. The fact that there
was a verbal agreement between
complainants-appellees and Capt. Nuval
limiting the authority of the latter to
claiming specified death benefits cannot
prejudice the insurance company which
relied on the terms of the powers of
attorney which on their face do not disclose
such limitation. Under the circumstances, it
appearing that complainants-appellees have
failed to point to a positive provision of law
or stipulation in the policy requiring a
specific power of attorney to be presented,
respondents-appellant's reliance on the
written powers was in order and it cannot be
penalized for such an act. 16
Insofar as the minor children of Dina Ayo and Lucia Lontok
were concerned, it ruled that the requirement in Section 180
of the Insurance Code which provides in part that:
In the absence of a judicial guardian, the
father, or in the latter's absence or
incapacity, the mother, of any minor, who is
an insured or a beneficiary under a contract
of life, health or accident insurance, may
exercise, in behalf of said minor, any right
under the policy, without necessity of court
authority or the giving of a bond, where the
interest of the minor in the particular act
involved does not exceed twenty thousand
pesos. Such a right, may include, but shall
not be limited to, obtaining a policy loan,
surrendering the policy, receiving the
proceeds of the policy, and giving the
minor's consent to any transaction on the
policy.
has been amended by the Family Code 17 which
grants the father and mother joint legal guardianship
over the property of their unemancipated common
child without the necessity of a court appointment;
however, when the market value of the property or
the annual income of the child exceeds P50,000.00,
the parent concerned shall be required to put up a
bond in such amount as the court may determine.
Hence, this petition for review on certiorari which we gave
due course after the private respondent had filed the required
comment thereon and the petitioners their reply to the
comment.
We rule for the petitioners.
We have carefully examined the specific powers of attorney,
Exhibits "1" to "5," which were executed by petitioners Luz
Pineda, Lucia B. Lontok, Dina Ayo, Celia Calumag, and Marilyn
Montenegro, respectively, on 14 May 1986 18 and uniformly
granted to Capt. Rosendo Nuval the following powers:
To follow-up, ask, demand, collect and

receipt for my benefit indemnities or sum of
money due me relative to the sinking of M.V.
NEMOS in the vicinity of El Jadida,
Casablanca, Morocco on the evening of
February 17, 1986; and
To sign receipts, documents, pertinent
waivers of indemnities or other writings of
whatsoever nature with any and all third
persons, concerns and entities, upon terms
and conditions acceptable to my said
attorney.
We agree with the Insurance Commission that the special
powers of attorney "do not contain in unequivocal and clear
terms authority to Capt. Nuval to obtain, receive, receipt from
respondent company insurance proceeds arising from the
death of the seaman-insured. On the contrary, the said
powers of attorney are couched in terms which could easily
arouse suspicion of an ordinary man." 19 The holding of the
public respondent to the contrary is principally premised on its
opinion that:
[t]here is nothing in the law which mandates
a specific or special power of attorney to be
executed to collect insurance proceeds.
Such authority is not included in the
enumeration of art. 1878 of the New Civil
Code. Neither do we perceive collection of
insurance claims as an act of strict dominion
as to require a special power of attorney.
If this be so, then they could not have been meant to
be a general power of attorney since Exhibits "1" to
"5" are special powers of attorney. The execution by
the principals of special powers of attorney, which
clearly appeared to be in prepared forms and only
had to be filled up with their names, residences,
dates of execution, dates of acknowledgment and
others, excludes any intent to grant a general power
of attorney or to constitute a universal agency. Being
special powers of attorney, they must be strictly
construed.
Certainly, it would be highly imprudent to read into the special
powers of attorney in question the power to collect and
receive the insurance proceeds due the petitioners from
Group Policy No. G-004694. Insular Life knew that a power of
attorney in favor of Capt. Nuval for the collection and receipt
of such proceeds was a deviation from its practice with
respect to group policies. Such practice was testified to by Mr.
Marciano Urbano, Insular Life's Assistant Manager of the
Group Administrative Department, thus:
taken by the employer as

an employee-benefit
program and as such, the
benefit should be awarded
by the policyholder to
make it appear that the
benefit really is given by
the employer. 20
On cross-examination, Urbano further elaborated that even
payments, among other things, are coursed through the
policyholder:
q What is the corporate
concept of group
insurance insofar as
Insular Life is concerned?
WITNESS:
a Group insurance is a
contract where a group of
individuals are covered
under one master
contract. The individual
underwriting
characteristics of each
individual is not
considered in the
determination of whether
the individual is insurable
or not. The contract is
between the policyholder
and the insurance
company. In our case, it is
Prime Marine and Insular
Life. We do not have
contractual obligations
with the individual
employees; it is between
Prime Marine and Insular
Life.
q And so it is part of that
concept that all inquiries,
follow-up, payment of
claims, premium billings,
etc. should always be
coursed thru the
policyholder?
a Yes that is our practice.
Can you explain to us why

in this case, the claim was
filed by a certain Capt.
Noval [sic]?
q And when you say claim

payments should always
be coursed thru the
policyholder, do you
require a power of
attorney to be presented
by the policyholder or
not?
WITNESS:
a Not necessarily.
a The practice of our

company in claim
pertaining to group
insurance, the
policyholder is the one
who files the claim for the
beneficiaries of the
deceased. At that time,
Capt. Noval [sic] is the
President and General
Manager of Prime Marine.
q In other words, under a

group insurance policy like
the one in this case,
Insular Life could pay the
claims to the policyholder
himself even without the
presentation of any power
of attorney from the
designated beneficiaries?
ATTY. CAGUIOA:
q What is the reason why

policyholders are the ones
who file the claim and not
the designated
beneficiaries of the
employees of the
policyholders?
a Yes because group
insurance is normally
xxx xxx xxx

WITNESS:
a No. Sir.
ATTY. AMPIL:
q Why? Is this case, the
present case different
from the cases which you
answered that no power of

attorney is necessary in
claims payments?
WITNESS:
a We did not pay Prime
Marine; we paid the
beneficiaries.
q Will you now tell the
Honorable Commission
why you did not pay Prime
Marine and instead paid
the beneficiaries, the
xxx xxx xxx
ATTY. AMPIL:
I will
rephrase
the
question
.
q Will you tell the
Commission what
circumstances led you to
pay the designated
beneficiaries, the
complainants in this case,
instead of the policyholder
when as you answered a
while ago, it is your
practice in group
insurance that claims
payments, etc., are
coursed thru the
policyholder?
WITNESS:
a It is coursed but, it is not
paid to the policyholder.
q And so in this case, you
gave the checks to the
policyholder only coursing
them thru said
policyholder?
a That is right, Sir.
q Not directly to the
a Yes, Sir.
21
This practice is usual in the group insurance business and is

consistent with the jurisprudence thereon in the State of
California from whose laws our Insurance Code has been
mainly patterned which holds that the employerpolicyholder is the agent of the insurer.
Group insurance is a comparatively new form of insurance. In
the United States, the first modern group insurance policies
appear to have been issued in 1911 by the Equitable Life
Assurance Society. 22 Group insurance is essentially a single
insurance contract that provides coverage for many
individuals. In its original and most common form, group
insurance provides life or health insurance coverage for the
employees of one employer.
The coverage terms for group insurance are usually stated in
a master agreement or policy that is issued by the insurer to a
representative of the group or to an administrator of the
insurance program, such as an employer. 23 The employer
acts as a functionary in the collection and payment of
premiums and in performing related duties. Likewise falling
within the ambit of administration of a group policy is the
disbursement of insurance payments by the employer to the
employees. 24 Most policies, such as the one in this case,
require an employee to pay a portion of the premium, which

the employer deducts from wages while the remainder is paid
by the employer. This is known as a contributory plan as
compared to a non-contributory plan where the premiums are
solely paid by the employer.
Although the employer may be the titular or named insured,
the insurance is actually related to the life and health of the
employee. Indeed, the employee is in the position of a real
party to the master policy, and even in a non-contributory
plan, the payment by the employer of the entire premium is a
part of the total compensation paid for the services of the
employee. 25 Put differently, the labor of the employees is the
true source of the benefits, which are a form of additional
compensation to them.
It has been stated that every problem concerning group
insurance presented to a court should be approached with the
purpose of giving to it every legitimate opportunity of
becoming a social agency of real consequence considering
that the primary aim is to provide the employer with a means
of procuring insurance protection for his employees and their
families at the lowest possible cost, and in so doing, the
employer creates goodwill with his employees, enables the
employees to carry a larger amount of insurance than they
could otherwise, and helps to attract and hold a permanent
class of employees. 26
In Elfstrom vs. New York Life Insurance Company, 27 the
California Supreme Court explicitly ruled that in group
insurance policies, the employer is the agent of the insurer.
Thus:
We are convinced that the employer is the
agent of the insurer in performing the duties
of administering group insurance policies. It
cannot be said that the employer acts
entirely for its own benefit or for the benefit
of its employees in undertaking
administrative functions. While a reduced
premium may result if the employer relieves
the insurer of these tasks, and this, of
course, is advantageous to both the
employer and the employees, the insurer
also enjoys significant advantages from the
arrangement. The reduction in the premium
which results from employer-administration
permits the insurer to realize a larger
volume of sales, and at the same time the
insurer's own administrative costs are
markedly reduced.
xxx xxx xxx
The most persuasive rationale for adopting
the view that the employer acts as the
agent of the insurer, however, is that the
employee has no knowledge of or control
over the employer's actions in handling the
policy or its administration. An agency
relationship is based upon consent by one
person that another shall act in his behalf
and be subject to his control. It is clear from
the evidence regarding procedural
techniques here that the insurer-employer
relationship meets this agency test with
regard to the administration of the policy,
whereas that between the employer and its
employees fails to reflect true agency. The
insurer directs the performance of the
employer's administrative acts, and if these
duties are not undertaken properly the
insurer is in a position to exercise more
constricted control over the employer's
conduct.
In Neider vs. Continental Assurance Company,
cited in Elfstrom, it was held that:
28
which was
[t]he employer owes to the employee the

duty of good faith and due care in attending
to the policy, and that the employer should
make clear to the employee anything
required of him to keep the policy in effect,
and the time that the obligations are due. In
its position as administrator of the policy,
we feel also that the employer should be
considered as the agent of the insurer, and
any omission of duty to the employee in its

administration should be attributable to the
insurer.
The ruling in Elfstrom was subsequently reiterated in the
cases of Bass vs. John Hancock Mutual Life Insurance Co.
and Metropolitan Life Insurance Co. vs. State Board of
Equalization. 30
29
In the light of the above disquisitions and after an

examination of the facts of this case, we hold that PMSI,
through its President and General Manager, Capt. Nuval, acted
as the agent of Insular Life. The latter is thus bound by the
misconduct of its agent.
Insular Life, however, likewise recognized Capt. Nuval as the
attorney-in-fact of the petitioners. Unfortunately, through its
official, Mr. Urbano, it acted imprudently and negligently in the
premises by relying without question on the special power of
attorney. In Strong vs. Repide, 31 this Court ruled that it is
among the established principles in the civil law of Europe as
well as the common law of American that third persons deal
with agents at their peril and are bound to inquire as to the
extent of the power of the agent with whom they contract.
And in Harry E. Keller Electric Co. vs. Rodriguez, 32 this Court,
quoting Mechem on Agency, 33 stated that:
be posted by the parents concerned to guarantee the

performance of the obligations of a general guardian.
It must, however, be noted that the second paragraph of
Article 225 of the Family Code speaks of the "market value of
the property or the annual income of the child," which means,
therefore, the aggregate of the child's property or annual
income; if this exceeds P50,000.00, a bond is required. There
is no evidence that the share of each of the minors in the
proceeds of the group policy in question is the minor's only
property. Without such evidence, it would not be safe to
conclude that, indeed, that is his only property.
WHEREFORE, the instant petition is GRANTED. The Decision of
10 October 1991 and the Resolution of 19 May 1992 of the
public respondent in CA-G.R. SP No. 22950 are SET ASIDE and
the Decision of the Insurance Commission in IC Case No. RD058 is REINSTATED.
Costs against the private respondent.
SO ORDERED.
The person dealing with an agent must also

act with ordinary prudence and reasonable
diligence. Obviously, if he knows or has
good reason to believe that the agent is
exceeding his authority, he cannot claim
protection. So if the suggestions of probable
limitations be of such a clear and
reasonable quality, or if the character
assumed by the agent is of such a
suspicious or unreasonable nature, or if the
authority which he seeks to exercise is of
such an unusual or improbable character, as
would suffice to put an ordinarily prudent
man upon his guard, the party dealing with
him may not shut his eyes to the real state
of the case, but should either refuse to deal
with the agent at all, or should ascertain
from the principal the true condition of
affairs. (emphasis supplied)
Even granting for the sake of argument that the special
powers of attorney were in due form, Insular Life was grossly
negligent in delivering the checks, drawn in favor of the
petitioners, to a party who is not the agent mentioned in the
special power of attorney.
Nor can we agree with the opinion of the public respondent
that since the shares of the minors in the insurance proceeds
are less than P50,000.00, then under Article 225 of the Family
Code their mothers could receive such shares without need of
either court appointments as guardian or the posting of a
bond. It is of the view that said Article had repealed the third
paragraph of Section 180 of the Insurance Code. 34 The
pertinent portion of Article 225 of the Family Code reads as
follows:
Art. 225. The father and the mother shall
jointly exercise legal guardianship over the
property of their unemancipated common
child without the necessity of a court
appointment. In case of disagreement, the
father's decision shall prevail, unless there
is judicial order to the contrary.
Where the market value of the property or
the annual income of the child exceeds
P50,000, the parent concerned shall be
required to furnish a bond in such amount
as the court may determine, but not less
than ten per centum (10%) of the value of
the property or annual income, to guarantee
the performance of the obligations
prescribed for general guardians.
It is clear from the said Article that regardless of the value of
the unemancipated common child's property, the father and
mother ipso jure become the legal guardian of the child's
property. However, if the market value of the property or the
annual income of the child exceeds P50,000.00, a bond has to

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FIRST DIVISION

G.R. No. 169103

March 16, 2011

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

Less: Tax Paid

Add: 20% Int./a

Total Amount Due

LESS: TAX PAID

DEFICIENCY DST BASIC

The amount of P818,919,000.00 comprises the increases in

The tax deficiency was computed by including the increases in

Aggrieved by the decision, the petitioner went to the Court of

The Court of Appeals, in upholding the decision of the CTA,

premium payments, after the first period premiums, to be

Insurance full text (2nd set) | 2

renew it belonged to the insured, subject to certain

Insurance full text (2nd set) | 3

the insurer and the insured, to increase the coverage of an

which the relationship of insurer and insured is created or

Insurance full text (2nd set) | 4

The petitioner also cites one of the four exceptions provided

G.R. No. 92383 July 17, 1992

The company shall not be liable in respect of

i) The insured person attempting to commit

The petitioner issued Personal Accident Policy No. 05687 to

Pilar Nalagon, Lim's secretary, was the only eyewitness to his

It should be noted at the outset that suicide and willful

The widow sued the petitioner in the Regional Trial Court of

The petitioner maintains that by the mere act of pointing the

The term "accident" has been defined as follows:

That posture is arguable. But what is not is that, as the

Lim was unquestionably negligent and that negligence cost

June 30, 1966

SIMON DE LA CRUZ, plaintiff and appellee,

This is an appeal by the Capital Insurance & Surety Company,

In the present case, while the participation of the insured in

Furthermore, the policy involved herein specifically excluded

G.R. No. 100970 September 2, 1992

WHEREFORE, judgment is hereby rendered

while the act may not exempt the unknown

April 29, 1960

FRANCISCA GALLARDO, plaintiff-appellee,

In accordance with a compromise agreement between the

Life insurance includes in which the payment of the

(N.S.)461; Metropolitan Life Ins. Co. vs. Ins. Com'r

G.R. No. 105562 September 27, 1993

Insurance full text (2nd set) | 9

DAVIDE, JR., J.:

Second: The testimony of the complainants'

On 20 June 1990, the Commission rendered its decision 9 in

WHEREFORE, this Commission merely

In holding for the petitioners, the Insurance Commission made

Insular Life appealed the decision to the public respondent

It found the following facts to have been duly established:

survived by complainants-appellees, the

signatures therein. The written power is

Insurance full text (2nd set) | 11

To follow-up, ask, demand, collect and

taken by the employer as

Can you explain to us why

q And when you say claim

a The practice of our

q In other words, under a

q What is the reason why