G.R. No.

92492 June 17, 1993

THELMA VDA. DE CANILANG, petitioner,
vs.
HON. COURT OF APPEALS and GREAT PACIFIC LIFE ASSURANCE
CORPORATION, respondents.
Simeon C. Sato for petitioner.
FELICIANO, J.:
On 18 June 1982, Jaime Canilang consulted Dr. Wilfredo B. Claudio and was diagnosed as suffering
from "sinus tachycardia." The doctor prescribed the following fro him: Trazepam, a tranquilizer;
and Aptin, a beta-blocker drug. Mr. Canilang consulted the same doctor again on 3 August 1982 and
this time was found to have "acute bronchitis."
On next day, 4 August 1982, Jaime Canilang applied for a "non-medical" insurance policy with
respondent Great Pacific Life Assurance Company ("Great Pacific") naming his wife, Thelma
Canilang, as his beneficiary. 1 Jaime Canilang was issued ordinary life insurance Policy No. 345163, with
the face value of P19,700, effective as of 9 August 1982.
On 5 August 1983, Jaime Canilang died of "congestive heart failure," "anemia," and "chronic
anemia." 2 Petitioner, widow and beneficiary of the insured, filed a claim with Great Pacific which the
insurer denied on 5 December 1983 upon the ground that the insured had concealed material information
from it.
Petitioner then filed a complaint against Great Pacific with the Insurance Commission for recovery of
the insurance proceeds. During the hearing called by the Insurance Commissioner, petitioner
testified that she was not aware of any serious illness suffered by her late husband 3 and that, as far
as she knew, her husband had died because of a kidney disorder. 4 A deposition given by Dr. Wilfredo
Claudio was presented by petitioner. There Dr. Claudio stated that he was the family physician of the
deceased Jaime Canilang 5 and that he had previously treated him for "sinus tachycardia" and "acute
bronchitis." 6 Great Pacific for its part presented Dr. Esperanza Quismorio, a physician
and a medical underwriter working for Great Pacific. 7 She testified that the deceased's insurance
application had been approved on the basis of his medical declaration. 8 She explained that as a rule,
medical examinations are required only in cases where the applicant has indicated in his application for
insurance coverage that he has previously undergone medical consultation and hospitalization. 9
In a decision dated 5 November 1985, Insurance Commissioner Armando Ansaldo ordered Great
Pacific to pay P19,700 plus legal interest and P2,000.00 as attorney's fees after holding that:
1. the ailment of Jaime Canilang was not so serious that, even if it had been
disclosed, it would not have affected Great Pacific's decision to insure him;
2. Great Pacific had waived its right to inquire into the health condition of the
applicant by the issuance of the policy despite the lack of answers to "some of the
pertinent questions" in the insurance application;

3. there was no intentional concealment on the part of the insured Jaime Canilang as
he had thought that he was merely suffering from a minor ailment and simple
cold; 10 and
4. Batas Pambansa Blg. 847 which voids an insurance contract, whether or not
concealment was intentionally made, was not applicable to Canilang's case as that
law became effective only on 1 June 1985.
On appeal by Great Pacific, the Court of Appeals reversed and set aside the decision of the
Insurance Commissioner and dismissed Thelma Canilang's complaint and Great Pacific's
counterclaim. The Court of Appealed found that the use of the word "intentionally" by the Insurance
Commissioner in defining and resolving the issue agreed upon by the parties at pre-trial before the
Insurance Commissioner was not supported by the evidence; that the issue agreed upon by the
parties had been whether the deceased insured, Jaime Canilang, made a material concealment as
the state of his health at the time of the filing of insurance application, justifying respondent's denial
of the claim. The Court of Appeals also found that the failure of Jaime Canilang to disclose previous
medical consultation and treatment constituted material information which should have been
communicated to Great Pacific to enable the latter to make proper inquiries. The Court of Appeals
finally held that the Ng Gan Zee case which had involved misrepresentation was not applicable in
respect of the case at bar which involves concealment.
Petitioner Thelma Canilang is now before this Court on a Petition for Review on Certiorari alleging
that:
1. . . . the Honorable Court of Appeals, speaking with due respect, erred in not
holding that the issue in the case agreed upon between the parties before the
Insurance Commission is whether or not Jaime Canilang "intentionally" made
material concealment in stating his state of health;
2. . . . at any rate, the non-disclosure of certain facts about his previous health
conditions does not amount to fraud and private respondent is deemed to have
waived inquiry thereto. 11
The medical declaration which was set out in the application for insurance executed by Jaime
Canilang read as follows:
MEDICAL DECLARATION
I hereby declare that:
(1) I have not been confined in any hospital, sanitarium or infirmary, nor receive any
medical or surgical advice/attention within the last five (5) years.
(2) I have never been treated nor consulted a physician for a heart condition, high
blood pressure, cancer, diabetes, lung, kidney, stomach disorder, or any other
physical impairment.
(3) I am, to the best of my knowledge, in good health.

EXCEPTIONS:
___________________________________________________________________
_____________
GENERAL DECLARATION
I hereby declare that all the foregoing answers and statements are complete, true
and correct. I hereby agree that if there be any fraud or misrepresentation in the
above statements material to the risk, the INSURANCE COMPANY upon discovery
within two (2) years from the effective date of insurance shall have the right to
declare such insurance null and void. That the liabilities of the Company under the
said Policy/TA/Certificate shall accrue and begin only from the date of
commencement of risk stated in the Policy/TA/Certificate, provided that the first
premium is paid and the Policy/TA/Certificate is delivered to, and accepted by me in
person, when I am in actual good health.
Signed at Manila his 4th day of August, 1992.
Illegible

Signatu
re of
Applica
nt. 12
We note that in addition to the negative statements made by Mr. Canilang in paragraph 1 and 2 of
the medical declaration, he failed to disclose in the appropriate space, under the caption
"Exceptions," that he had twice consulted Dr. Wilfredo B. Claudio who had found him to be suffering
from "sinus tachycardia" and "acute bronchitis."
The relevant statutory provisions as they stood at the time Great Pacific issued the contract of
insurance and at the time Jaime Canilang died, are set out in P.D. No. 1460, also known as the
Insurance Code of 1978, which went into effect on 11 June 1978. These provisions read as follows:
Sec. 26. A neglect to communicate that which a party knows and ought to
communicate, is called a concealment.
xxx xxx xxx
Sec. 28. Each party to a contract of insurance must communicate to the other, in
good faith, all factorswithin his knowledge which are material to the contract and as
to which he makes no warranty, and which the other has not the means of
ascertaining. (Emphasis supplied)

Under the foregoing provisions, the information concealed must be information which the concealing
party knew and "ought to [have] communicate[d]," that is to say, information which was "material to
the contract." The test of materiality is contained in Section 31 of the Insurance Code of 1978 which
reads:
Sec. 31. Materially is to be determined not by the event, but solely by the probable
and reasonable influence of the facts upon the party to whom the communication is
due, in forming his estimate of the disadvantages of the proposed contract, or in
making his inquiries. (Emphasis supplied)
"Sinus tachycardia" is considered present "when the heart rate exceeds 100 beats per
minute." 13 The symptoms of this condition include pounding in the chest and sometimes faintness and
weakness of the person affected. The following elaboration was offered by Great Pacific and set out by
the Court of Appeals in its Decision:
Sinus tachycardia is defined as sinus-initiated; heart rate faster than 100 beats per
minute. (Harrison' s Principles of Internal Medicine, 8th ed. [1978], p. 1193.) It is,
among others, a common reaction to heart disease, including myocardial
infarction, and heart failure per se. (Henry J.L. Marriot, M.D.,Electrocardiography, 6th
ed., [1977], p. 127.) The medication prescribed by Dr. Claudio for treatment of
Canilang's ailment on June 18, 1982, indicates the condition that said physician was
trying to manage. Thus, he prescribed Trazepam, (Philippine Index of Medical
Specialties (PIMS), Vol. 14, No. 3, Dec. 1985, p. 112) which is anti-anxiety, anticonvulsant, muscle-relaxant; and Aptin, (Idem, p. 36) a cardiac drug, for palpitations
and nervous heart. Such treatment could have been a very material information to
the insurer in determining the action to be take on Canilang's application for life
insurance coverage. 14
We agree with the Court of Appeals that the information which Jaime Canilang failed to disclose was
material to the ability of Great Pacific to estimate the probable risk he presented as a subject of life
insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made and medicines
prescribed by such doctor, in the insurance application, it may be reasonably assumed that Great
Pacific would have made further inquiries and would have probably refused to issue a non-medical
insurance policy or, at the very least, required a higher premium for the same coverage. 15 The
materiality of the information withheld by Great Pacific did not depend upon the state of mind of Jaime
Canilang. A man's state of mind or subjective belief is not capable of proof in our judicial process, except
through proof of external acts or failure to act from which inferences as to his subjective belief may be
reasonably drawn. Neither does materiality depend upon the actual or physical events which ensue.
Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom
the communication should have been made, in assessing the risk involved in making or omitting to make
further inquiries and in accepting the application for insurance; that "probable and reasonable influence of
the facts" concealed must, of course, be determined objectively, by the judge ultimately.
The insurance Great Pacific applied for was a "non-medical" insurance policy. In Saturnino v.
Philippine-American Life Insurance Company, 16 this Court held that:
. . . if anything, the waiver of medical examination [in a non-medical insurance
contract] renders even more material the information required of the applicant
concerning previous condition of health and diseases suffered, for such information

necessarily constitutes an important factor which the insurer takes into consideration
in deciding whether to issue the policy or not . . . . 17 (Emphasis supplied)
The Insurance Commissioner had also ruled that the failure of Great Pacific to convey certain
information to the insurer was not "intentional" in nature, for the reason that Jaime Canilang believed
that he was suffering from minor ailment like a common cold. Section 27 of the Insurance Code of
1978 as it existed from 1974 up to 1985, that is, throughout the time range material for present
purposes, provided that:
Sec. 27. A concealment entitles the injured party to rescind a contract of insurance.
The preceding statute, Act No. 2427, as it stood from 1914 up to 1974, had provided:
Sec. 26. A concealment, whether intentional or unintentional, entitles the injured
party to rescind a contract of insurance. (Emphasis supplied)
Upon the other hand, in 1985, the Insurance Code of 1978 was amended by
B.P. Blg. 874. This subsequent statute modified Section 27 of the Insurance Code of 1978 so as to
read as follows:
Sec. 27. A concealment whether intentional or unintentional entitles the injured party
to rescind a contract of insurance. (Emphasis supplied)
The unspoken theory of the Insurance Commissioner appears to have been that by deleting the
phrase "intentional or unintentional," the Insurance Code of 1978 (prior to its amendment by B.P.
Blg. 874) intended to limit the kinds of concealment which generate a right to rescind on the part of
the injured party to "intentional concealments." This argument is not persuasive. As a simple matter
of grammar, it may be noted that "intentional" and "unintentional" cancel each other out. The net
result therefore of the phrase "whether intentional or unitentional" is precisely to leave
unqualified the term "concealment." Thus, Section 27 of the Insurance Code of 1978 is properly read
as referring to "any concealment" without regard to whether such concealment is intentional or
unintentional. The phrase "whether intentional or unintentional" was in fact superfluous. The deletion
of the phrase "whether intentional or unintentional" could not have had the effect of imposing an
affirmative requirement that a concealment must be intentional if it is to entitle the injured party to
rescind a contract of insurance. The restoration in 1985 by B.P. Blg. 874 of the phrase "whether
intentional or unintentional" merely underscored the fact that all throughout (from 1914 to 1985), the
statute did not require proof that concealment must be "intentional" in order to authorize rescission
by the injured party.
In any case, in the case at bar, the nature of the facts not conveyed to the insurer was such that the
failure to communicate must have been intentional rather than merely inadvertent. For Jaime
Canilang could not have been unaware that his heart beat would at times rise to high and alarming
levels and that he had consulted a doctor twice in the two (2) months before applying for nonmedical insurance. Indeed, the last medical consultation took place just the day before the insurance
application was filed. In all probability, Jaime Canilang went to visit his doctor precisely because of
the discomfort and concern brought about by his experiencing "sinus tachycardia."
We find it difficult to take seriously the argument that Great Pacific had waived inquiry into the
concealment by issuing the insurance policy notwithstanding Canilang's failure to set out answers to

some of the questions in the insurance application. Such failure precisely constituted concealment
on the part of Canilang. Petitioner's argument, if accepted, would obviously erase Section 27 from
the Insurance Code of 1978.
It remains only to note that the Court of Appeals finding that the parties had not agreed in the pretrial
before the Insurance Commission that the relevant issue was whether or not Jaime Canilang
had intentionally concealed material information from the insurer, was supported by the evidence of
record, i.e., the Pre-trial Order itself dated 17 October 1984 and the Minutes of the Pre-trial
Conference dated 15 October 1984, which "readily shows that the word "intentional" does not
appear in the statement or definition of the issue in the said Order and Minutes." 18
WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the Court of
Appeals dated 16 October 1989 in C.A.-G.R. SP No. 08696 is hereby AFFIRMED. No
pronouncement as to the costs.
SO ORDERED.
G.R. No. 105135 June 22, 1995
SUNLIFE ASSURANCE COMPANY OF CANADA, petitioner,
vs.
The Hon. COURT OF APPEALS and Spouses ROLANDO and BERNARDA
BACANI, respondents.

QUIASON, J.:
This is a petition for review for certiorari under Rule 45 of the Revised Rules of Court to reverse and
set aside the Decision dated February 21, 1992 of the Court of Appeals in CA-G.R. CV No. 29068,
and its Resolution dated April 22, 1992, denying reconsideration thereof.
We grant the petition.
I
On April 15, 1986, Robert John B. Bacani procured a life insurance contract for himself from
petitioner. He was issued Policy No. 3-903-766-X valued at P100,000.00, with double indemnity in
case of accidental death. The designated beneficiary was his mother, respondent Bernarda Bacani.
On June 26, 1987, the insured died in a plane crash. Respondent Bernarda Bacani filed a claim with
petitioner, seeking the benefits of the insurance policy taken by her son. Petitioner conducted an
investigation and its findings prompted it to reject the claim.
In its letter, petitioner informed respondent Bernarda Bacani, that the insured did not disclose
material facts relevant to the issuance of the policy, thus rendering the contract of insurance
voidable. A check representing the total premiums paid in the amount of P10,172.00 was attached to
said letter.

Petitioner claimed that the insured gave false statements in his application when he answered the
following questions:
5. Within the past 5 years have you:
a) consulted any doctor or other health practitioner?
b) submitted to:
EGG?
X-rays?
blood tests?
other tests?
c) attended or been admitted to any hospital or other medical facility?
6. Have you ever had or sought advice for:
xxx xxx xxx
b) urine, kidney or bladder disorder? (Rollo, p. 53)
The deceased answered question No. 5(a) in the affirmative but limited his answer to a consultation
with a certain Dr. Reinaldo D. Raymundo of the Chinese General Hospital on February 1986, for
cough and flu complications. The other questions were answered in the negative (Rollo, p. 53).
Petitioner discovered that two weeks prior to his application for insurance, the insured was examined
and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. During
his confinement, the deceased was subjected to urinalysis, ultra-sonography and hematology tests.
On November 17, 1988, respondent Bernarda Bacani and her husband, respondent Rolando
Bacani, filed an action for specific performance against petitioner with the Regional Trial Court,
Branch 191, Valenzuela, Metro Manila. Petitioner filed its answer with counterclaim and a list of
exhibits consisting of medical records furnished by the Lung Center of the Philippines.
On January 14, 1990, private respondents filed a "Proposed Stipulation with Prayer for Summary
Judgment" where they manifested that they "have no evidence to refute the documentary evidence
of concealment/misrepresentation by the decedent of his health condition (Rollo, p. 62).
Petitioner filed its Request for Admissions relative to the authenticity and due execution of several
documents as well as allegations regarding the health of the insured. Private respondents failed to
oppose said request or reply thereto, thereby rendering an admission of the matters alleged.
Petitioner then moved for a summary judgment and the trial court decided in favor of private
respondents. The dispositive portion of the decision is reproduced as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendant, condemning the latter to pay the former the amount of One Hundred

Thousand Pesos (P100,000.00) the face value of insured's Insurance Policy No.
3903766, and the Accidental Death Benefit in the amount of One Hundred Thousand
Pesos (P100,000.00) and further sum of P5,000.00 in the concept of reasonable
attorney's fees and costs of suit.
Defendant's counterclaim is hereby Dismissed (Rollo, pp. 43-44).
In ruling for private respondents, the trial court concluded that the facts concealed by the insured
were made in good faith and under a belief that they need not be disclosed. Moreover, it held that
the health history of the insured was immaterial since the insurance policy was "non-medical".
Petitioner appealed to the Court of Appeals, which affirmed the decision of the trial court. The
appellate court ruled that petitioner cannot avoid its obligation by claiming concealment because the
cause of death was unrelated to the facts concealed by the insured. It also sustained the finding of
the trial court that matters relating to the health history of the insured were irrelevant since petitioner
waived the medical examination prior to the approval and issuance of the insurance policy.
Moreover, the appellate court agreed with the trial court that the policy was "non-medical" (Rollo, pp.
4-5).
Petitioner's motion for reconsideration was denied; hence, this petition.
II
We reverse the decision of the Court of Appeals.
The rule that factual findings of the lower court and the appellate court are binding on this Court is
not absolute and admits of exceptions, such as when the judgment is based on a misappreciation of
the facts (Geronimo v. Court of Appeals, 224 SCRA 494 [1993]).
In weighing the evidence presented, the trial court concluded that indeed there was concealment
and misrepresentation, however, the same was made in "good faith" and the facts concealed or
misrepresented were irrelevant since the policy was "non-medical". We disagree.
Section 26 of The Insurance Code is explicit in requiring a party to a contract of insurance to
communicate to the other, in good faith, all facts within his knowledge which are material to the
contract and as to which he makes no warranty, and which the other has no means of ascertaining.
Said Section provides:
A neglect to communicate that which a party knows and ought to communicate, is
called concealment.
Materiality is to be determined not by the event, but solely by the probable and reasonable influence
of the facts upon the party to whom communication is due, in forming his estimate of the
disadvantages of the proposed contract or in making his inquiries (The Insurance Code, Sec. 31).
The terms of the contract are clear. The insured is specifically required to disclose to the insurer
matters relating to his health.

The information which the insured failed to disclose were material and relevant to the approval and
issuance of the insurance policy. The matters concealed would have definitely affected petitioner's
action on his application, either by approving it with the corresponding adjustment for a higher
premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination
of the insured by petitioner in order for it to reasonably assess the risk involved in accepting the
application.
In Vda. de Canilang v. Court of Appeals, 223 SCRA 443 (1993), we held that materiality of the
information withheld does not depend on the state of mind of the insured. Neither does it depend on
the actual or physical events which ensue.
Thus, "goad faith" is no defense in concealment. The insured's failure to disclose the fact that he
was hospitalized for two weeks prior to filing his application for insurance, raises grave doubts about
his bonafides. It appears that such concealment was deliberate on his part.
The argument, that petitioner's waiver of the medical examination of the insured debunks the
materiality of the facts concealed, is untenable. We reiterate our ruling in Saturnino v. Philippine
American Life Insurance Company, 7 SCRA 316 (1963), that " . . . the waiver of a medical
examination [in a non-medical insurance contract] renders even more material the information
required of the applicant concerning previous condition of health and diseases suffered, for such
information necessarily constitutes an important factor which the insurer takes into consideration in
deciding whether to issue the policy or not . . . "
Moreover, such argument of private respondents would make Section 27 of the Insurance Code,
which allows the injured party to rescind a contract of insurance where there is concealment,
ineffective (See Vda. de Canilang v. Court of Appeals, supra).
Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is
well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is
sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the
proposed insurance policy or in making inquiries (Henson v. The Philippine American Life Insurance
Co., 56 O.G. No. 48 [1960]).
We, therefore, rule that petitioner properly exercised its right to rescind the contract of insurance by
reason of the concealment employed by the insured. It must be emphasized that rescission was
exercised within the two-year contestability period as recognized in Section 48 of The Insurance
Code.
WHEREFORE, the petition is GRANTED and the Decision of the Court of Appeals is REVERSED
and SET ASIDE.
SO ORDERED.
G.R. No. L-30685 May 30, 1983
NG GAN ZEE, plaintiff-appellee,
vs.
ASIAN CRUSADER LIFE ASSURANCE CORPORATION, defendant-appellant.

Alberto Q. Ubay for plaintiff-appellee.

Santiago F. A lidio for defendant-appellant.

ESCOLIN, J.:
This is an appeal from the judgment of the Court of First Instance of Manila, ordering the appellant
Asian-Crusader Life Assurance Corporation to pay the face value of an insurance policy issued on
the life of Kwong Nam the deceased husband of appellee Ng Gan Zee. Misrepresentation and
concealment of material facts in obtaining the policy were pleaded to avoid the policy. The lower
court rejected the appellant's theory and ordered the latter to pay appellee "the amount of P
20,000.00, with interest at the legal rate from July 24, 1964, the date of the filing of the complaint,
until paid, and the costs. "
The Court of Appeals certified this appeal to Us, as the same involves solely a question of law.
On May 12, 1962, Kwong Nam applied for a 20-year endowment insurance on his life for the sum of
P20,000.00, with his wife, appellee Ng Gan Zee as beneficiary. On the same date, appellant, upon
receipt of the required premium from the insured, approved the application and issued the
corresponding policy. On December 6, 1963, Kwong Nam died of cancer of the liver with metastasis.
All premiums had been religiously paid at the time of his death.
On January 10, 1964, his widow Ng Gan Zee presented a claim in due form to appellant for payment
of the face value of the policy. On the same date, she submitted the required proof of death of the
insured. Appellant denied the claim on the ground that the answers given by the insured to the
questions appealing in his application for life insurance were untrue.
Appellee brought the matter to the attention of the Insurance Commissioner, the Hon. Francisco Y.
Mandamus, and the latter, after conducting an investigation, wrote the appellant that he had found
no material concealment on the part of the insured and that, therefore, appellee should be paid the
full face value of the policy. This opinion of the Insurance Commissioner notwithstanding, appellant
refused to settle its obligation.
Appellant alleged that the insured was guilty of misrepresentation when he answered "No" to the
following question appearing in the application for life insuranceHas any life insurance company ever refused your application for insurance or for
reinstatement of a lapsed policy or offered you a policy different from that applied
for? If, so, name company and date.
In its brief, appellant rationalized its thesis thus:
... As pointed out in the foregoing summary of the essential facts in this case, the
insured had in January, 1962, applied for reinstatement of his lapsed life insurance
policy with the Insular Life Insurance Co., Ltd, but this was declined by the insurance
company, although later on approved for reinstatement with a very high premium as

a result of his medical examination. Thus notwithstanding the said insured answered
'No' to the [above] question propounded to him. ... 1
The lower court found the argument bereft of factual basis; and We quote with approval its
disquisition on the matterOn the first question there is no evidence that the Insular Life Assurance Co., Ltd.
ever refused any application of Kwong Nam for insurance. Neither is there any
evidence that any other insurance company has refused any application of Kwong
Nam for insurance.
... The evidence shows that the Insular Life Assurance Co., Ltd. approved Kwong
Nam's request for reinstatement and amendment of his lapsed insurance policy on
April 24, 1962 [Exh. L-2 Stipulation of Facts, Sept. 22, 1965). The Court notes from
said application for reinstatement and amendment, Exh. 'L', that the amount applied
for was P20,000.00 only and not for P50,000.00 as it was in the lapsed policy. The
amount of the reinstated and amended policy was also for P20,000.00. It results,
therefore, that when on May 12, 1962 Kwong Nam answered 'No' to the question
whether any life insurance company ever refused his application for reinstatement of
a lapsed policy he did not misrepresent any fact.
... the evidence shows that the application of Kwong Nam with the Insular Life
Assurance Co., Ltd. was for the reinstatement and amendment of his lapsed
insurance policy-Policy No. 369531 -not an application for a 'new insurance policy.
The Insular Life Assurance Co., Ltd. approved the said application on April 24, 1962.
Policy No. 369531 was reinstated for the amount of P20,000.00 as applied for by
Kwong Nam [Exhs. 'L', 'L-l' and 'L-2']. No new policy was issued by the Insular Life
Assurance Co., Ltd. to Kwong Nam in connection with said application for
reinstatement and amendment. Such being the case, the Court finds that there is no
misrepresentation on this matter. 2
Appellant further maintains that when the insured was examined in connection with his application
for life insurance, he gave the appellant's medical examiner false and misleading information as to
his ailment and previous operation. The alleged false statements given by Kwong Nam are as
follows:
Operated on for a Tumor [mayoma] of the stomach. Claims that Tumor has been
associated with ulcer of stomach. Tumor taken out was hard and of a hen's egg size.
Operation was two [2] years ago in Chinese General Hospital by Dr. Yap. Now,
claims he is completely recovered.
To demonstrate the insured's misrepresentation, appellant directs Our attention to:
[1] The report of Dr. Fu Sun Yuan the physician who treated Kwong Nam at the Chinese General
Hospital on May 22, 1960, i.e., about 2 years before he applied for an insurance policy on May 12,
1962. According to said report, Dr. Fu Sun Yuan had diagnosed the patient's ailment as 'peptic ulcer'
for which, an operation, known as a 'sub-total gastric resection was performed on the patient by Dr.
Pacifico Yap; and

[2] The Surgical Pathology Report of Dr. Elias Pantangco showing that the specimen removed from
the patient's body was 'a portion of the stomach measuring 12 cm. and 19 cm. along the lesser
curvature with a diameter of 15 cm. along the greatest dimension.
On the bases of the above undisputed medical data showing that the insured was operated on for
peptic ulcer", involving the excision of a portion of the stomach, appellant argues that the insured's
statement in his application that a tumor, "hard and of a hen's egg size," was removed during said
operation, constituted material concealment.
The question to be resolved may be propounded thus: Was appellant, because of insured's
aforesaid representation, misled or deceived into entering the contract or in accepting the risk at the
rate of premium agreed upon?
The lower court answered this question in the negative, and We agree.
Section 27 of the Insurance Law [Act 2427] provides:
Sec. 27. Such party a contract of insurance must communicate to the other, in good
faith, all facts within his knowledge which are material to the contract, and which the
other has not the means of ascertaining, and as to which he makes no warranty. 3
Thus, "concealment exists where the assured had knowledge of a fact material to the risk, and
honesty, good faith, and fair dealing requires that he should communicate it to the assurer, but he
designedly and intentionally withholds the same." 4
It has also been held "that the concealment must, in the absence of inquiries, be not only material,
but fraudulent, or the fact must have been intentionally withheld." 5
Assuming that the aforesaid answer given by the insured is false, as claimed by the appellant. Sec.
27 of the Insurance Law, above-quoted, nevertheless requires that fraudulent intent on the part of
the insured be established to entitle the insurer to rescind the contract. And as correctly observed by
the lower court, "misrepresentation as a defense of the insurer to avoid liability is an 'affirmative'
defense. The duty to establish such a defense by satisfactory and convincing evidence rests upon
the defendant. The evidence before the Court does not clearly and satisfactorily establish that
defense."
It bears emphasis that Kwong Nam had informed the appellant's medical examiner that the tumor for
which he was operated on was "associated with ulcer of the stomach." In the absence of evidence
that the insured had sufficient medical knowledge as to enable him to distinguish between "peptic
ulcer" and "a tumor", his statement that said tumor was "associated with ulcer of the stomach, "
should be construed as an expression made in good faith of his belief as to the nature of his ailment
and operation. Indeed, such statement must be presumed to have been made by him without
knowledge of its incorrectness and without any deliberate intent on his part to mislead the appellant.
While it may be conceded that, from the viewpoint of a medical expert, the information
communicated was imperfect, the same was nevertheless sufficient to have induced appellant to
make further inquiries about the ailment and operation of the insured.

Section 32 of Insurance Law [Act No. 24271 provides as follows:

Section 32. The right to information of material facts maybe waived either by the
terms of insurance or by neglect to make inquiries as to such facts where they are
distinctly implied in other facts of which information is communicated.
It has been held that where, upon the face of the application, a question appears to be not answered
at all or to be imperfectly answered, and the insurers issue a policy without any further inquiry, they
waive the imperfection of the answer and render the omission to answer more fully immaterial. 6
As aptly noted by the lower court, "if the ailment and operation of Kwong Nam had such an important
bearing on the question of whether the defendant would undertake the insurance or not, the court
cannot understand why the defendant or its medical examiner did not make any further inquiries on
such matters from the Chinese General Hospital or require copies of the hospital records from the
appellant before acting on the application for insurance. The fact of the matter is that the defendant
was too eager to accept the application and receive the insured's premium. It would be inequitable
now to allow the defendant to avoid liability under the circumstances."
Finding no reversible error committed by the trial court, the judgment appealed from is hereby
affirmed, with costs against appellant Asian-Crusader life Assurance Corporation.
SO ORDERED.
Makasiar (Chairman), Aquino, Concepcion, Jr., Guerrero and De Castro), JJ., concur.
Abad Santos, J., I reserve my vote.

G.R. No. L-16163

February 28, 1963

IGNACIO SATURNINO, in his own behalf and as the JUDICIAL GUARDIAN

OF CARLOS SATURNINO, minor, plaintiffs-appellants,
vs.
THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, defendantappellee.
Eleazaro A. Samson for plaintiffs-appellants.
Abello & Macias for defendant-appellee.
MAKALINTAL, J.:
Plaintiffs, now appellants, filed this action in the Court of First Instance of Manila to
recover the sum of P5,000.00, corresponding to the face value of an insurance policy
issued by defendant on the life of Estefania A. Saturnino, and the sum of P1,500.00 as
attorney's fees. Defendant, now appellee, set up special defenses in its answer, with a

counterclaim for damages allegedly sustained as a result of the unwarranted

presentation of this case. Both the complaint and the counterclaim were dismissed by
the trial court; but appellants were declared entitled to the return of the premium
already paid; plus interest at 6% up to January 8, 1959, when a check for the
corresponding amount P359.65 was sent to them by appellee.
The policy sued upon is one for 20-year endowment non-medical insurance. This kind
of policy dispenses with the medical examination of the applicant usually required in
ordinary life policies. However, detailed information is called for in the application
concerning the applicant's health and medical history. The written application in this
case was submitted by Saturnino to appellee on November 16, 1957, witnessed by
appellee's agent Edward A. Santos. The policy was issued on the same day, upon
payment of the first year's premium of P339.25. On September 19, 1958 Saturnino
died of pneumonia, secondary to influenza. Appellants here, who are her surviving
husband and minor child, respectively, demanded payment of the face value of the
policy. The claim was rejected and this suit was subsequently instituted.
It appears that two months prior to the issuance of the policy or on September 9, 1957,
Saturnino was operated on for cancer, involving complete removal of the right breast,
including the pectoral muscles and the glands found in the right armpit. She stayed in
the hospital for a period of eight days, after which she was discharged, although
according to the surgeon who operated on her she could not be considered definitely
cured, her ailment being of the malignant type.
Notwithstanding the fact of her operation Estefania A. Saturnino did not make a
disclosure thereof in her application for insurance. On the contrary, she stated therein
that she did not have, nor had she ever had, among other ailments listed in the
application, cancer or other tumors; that she had not consulted any physician,
undergone any operation or suffered any injury within the preceding five years; and
that she had never been treated for nor did she ever have any illness or disease
peculiar to her sex, particularly of the breast, ovaries, uterus, and menstrual disorders.
The application also recites that the foregoing declarations constituted "a further basis
for the issuance of the policy."
The question at issue is whether or not the insured made such false representations of
material facts as to avoid the policy. There can be no dispute that the information
given by her in her application for insurance was false, namely, that she had never had
cancer or tumors, or consulted any physician or undergone any operation within the
preceding period of five years. Are the facts then falsely represented material? The

Insurance Law (Section 30) provides that "materiality is to be determined not by the
event, but solely by the probable and reasonable influence of the facts upon the party
to whom the communication is due, in forming his estimate of the proposed contract,
or in making his inquiries." It seems to be the contention of appellants that the facts
subject of the representation were not material in view of the "non-medical" nature of
the insurance applied for, which does away with the usual requirement of medical
examination before the policy is issued. The contention is without merit. If anything,
the waiver of medical examination renders even more material the information
required of the applicant concerning previous condition of health and diseases
suffered, for such information necessarily constitutes an important factor which the
insurer takes into consideration in deciding whether to issue the policy or not. It is
logical to assume that if appellee had been properly apprised of the insured's medical
history she would at least have been made to undergo medical examination in order to
determine her insurability.
Appellants argue that due information concerning the insured's previous illness and
operation had been given to appellees agent Edward A. Santos, who filled the
application form after it was signed in blank by Estefania A. Saturnino. This was
denied by Santos in his testimony, and the trial court found such testimony to be true.
This is a finding of fact which is binding upon us, this appeal having been taken upon
questions of law alone. We do not deem it necessary, therefore, to consider appellee's
additional argument, which was upheld by the trial court, that in signing the
application form in blank and leaving it to Edward A. Santos to fill (assuming that to
be the truth) the insured in effect made Santos her agent for that purpose and
consequently was responsible for the errors in the entries made by him in that
capacity.
In the application for insurance signed by the insured in this case, she agreed to
submit to a medical examination by a duly appointed examiner of appellee if in the
latter's opinion such examination was necessary as further evidence of insurability. In
not asking her to submit to a medical examination, appellants maintain, appellee was
guilty of negligence, which precluded it from finding about her actual state of health.
No such negligence can be imputed to appellee. It was precisely because the insured
had given herself a clean bill of health that appellee no longer considered an actual
medical checkup necessary.
Appellants also contend there was no fraudulent concealment of the truth inasmuch as
the insured herself did not know, since her doctor never told her, that the disease for
which she had been operated on was cancer. In the first place the concealment of the

fact of the operation itself was fraudulent, as there could not have been any mistake
about it, no matter what the ailment. Secondly, in order to avoid a policy it is not
necessary to show actual fraud on the part of the insured. In the case of Kasprzyk v.
Metropolitan Insurance Co., 140 N.Y.S. 211, 214, it was held:
Moreover, if it were the law that an insurance company could not depend a
policy on the ground of misrepresentation, unless it could show actual
knowledge on the part of the applicant that the statements were false, then it is
plain that it would be impossible for it to protect itself and its honest
policyholders against fraudulent and improper claims. It would be wholly at the
mercy of any one who wished to apply for insurance, as it would be impossible
to show actual fraud except in the extremest cases. It could not rely on an
application as containing information on which it could act. There would be no
incentive to an applicant to tell the truth.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts
be admitted and approved by this Honorable Court, without prejudice to the
parties adducing other evidence to prove their case not covered by this
stipulation of facts. 1wph1.t
In this jurisdiction a concealment, whether intentional or unintentional, entitles the
insurer to rescind the contract of insurance, concealment being defined as "negligence
to communicate that which a party knows and ought to communicate" (Sections 24 &
26, Act No. 2427). In the case of Argente v. West Coast Life Insurance Co., 51 Phil.
725, 732, this Court said, quoting from Joyce, The Law of Insurance, 2nd ed., Vol. 3:
"The basis of the rule vitiating the contract in cases of concealment is that it
misleads or deceives the insurer into accepting the risk, or accepting it at the
rate of premium agreed upon. The insurer, relying upon the belief that the
assured will disclose every material fact within his actual or presumed
knowledge, is misled into a belief that the circumstance withheld does not exist,
and he is thereby induced to estimate the risk upon a false basis that it does not
exist."
The judgment appealed from, dismissing the complaint and awarding the return to
appellants of the premium already paid, with interest at 6% up to January 29, 1959,
affirmed, with costs against appellants.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L.,

Barrera, Paredes, Dizon and Regala, JJ., concur.
G.R. No. L-34200 September 30, 1982
REGINA L. EDILLON, as assisted by her husband, MARCIAL EDILLON, petitioners-appellants,
vs.
MANILA BANKERS LIFE INSURANCE CORPORATION and the COURT OF FIRST INSTANCE
OF RIZAL, BRANCH V, QUEZON CITY, respondents-appellees.
K.V. Faylona for petitioners-appellants.
L. L. Reyes for respondents-appellees.

VASQUEZ, J.:
The question of law raised in this case that justified a direct appeal from a decision of the Court of
First Instance Rizal, Branch V, Quezon City, to be taken directly to the Supreme Court is whether or
not the acceptance by the private respondent insurance corporation of the premium and the
issuance of the corresponding certificate of insurance should be deemed a waiver of the
exclusionary condition of overage stated in the said certificate of insurance.
The material facts are not in dispute. Sometime in April 1969, Carmen O, Lapuz applied with
respondent insurance corporation for insurance coverage against accident and injuries. She filled up
the blank application form given to her and filed the same with the respondent insurance corporation.
In the said application form which was dated April 15, 1969, she gave the date of her birth as July
11, 1904. On the same date, she paid the sum of P20.00 representing the premium for which she
was issued the corresponding receipt signed by an authorized agent of the respondent insurance
corporation. (Rollo, p. 27.) Upon the filing of said application and the payment of the premium on the
policy applied for, the respondent insurance corporation issued to Carmen O. Lapuz its Certificate of
Insurance No. 128866. (Rollo, p. 28.) The policy was to be effective for a period of 90 days.
On May 31, 1969 or during the effectivity of Certificate of Insurance No. 12886, Carmen O. Lapuz
died in a vehicular accident in the North Diversion Road.
On June 7, 1969, petitioner Regina L. Edillon, a sister of the insured and who was the named
beneficiary in the policy, filed her claim for the proceeds of the insurance, submitting all the
necessary papers and other requisites with the private respondent. Her claim having been denied,
Regina L. Edillon instituted this action in the Court of First Instance of Rizal on August 27, 1969.
In resisting the claim of the petitioner, the respondent insurance corporation relies on a provision
contained in the Certificate of Insurance, excluding its liability to pay claims under the policy in behalf
of "persons who are under the age of sixteen (16) years of age or over the age of sixty (60) years ..."
It is pointed out that the insured being over sixty (60) years of age when she applied for the
insurance coverage, the policy was null and void, and no risk on the part of the respondent
insurance corporation had arisen therefrom.

The trial court sustained the contention of the private respondent and dismissed the complaint;
ordered the petitioner to pay attorney's fees in the sum of ONE THOUSAND (P1,000.00) PESOS in
favor of the private respondent; and ordered the private respondent to return the sum of TWENTY
(P20.00) PESOS received by way of premium on the insurancy policy. It was reasoned out that a
policy of insurance being a contract of adhesion, it was the duty of the insured to know the terms of
the contract he or she is entering into; the insured in this case, upon learning from its terms that she
could not have been qualified under the conditions stated in said contract, what she should have
done is simply to ask for a refund of the premium that she paid. It was further argued by the trial
court that the ruling calling for a liberal interpretation of an insurance contract in favor of the insured
and strictly against the insurer may not be applied in the present case in view of the peculiar facts
and circumstances obtaining therein.
We REVERSE the judgment of the trial court. The age of the insured Carmen 0. Lapuz was not
concealed to the insurance company. Her application for insurance coverage which was on a printed
form furnished by private respondent and which contained very few items of information clearly
indicated her age of the time of filing the same to be almost 65 years of age. Despite such
information which could hardly be overlooked in the application form, considering its prominence
thereon and its materiality to the coverage applied for, the respondent insurance corporation
received her payment of premium and issued the corresponding certificate of insurance without
question. The accident which resulted in the death of the insured, a risk covered by the policy,
occurred on May 31, 1969 or FORTY-FIVE (45) DAYS after the insurance coverage was applied for.
There was sufficient time for the private respondent to process the application and to notice that the
applicant was over 60 years of age and thereby cancel the policy on that ground if it was minded to
do so. If the private respondent failed to act, it is either because it was willing to waive such
disqualification; or, through the negligence or incompetence of its employees for which it has only
itself to blame, it simply overlooked such fact. Under the circumstances, the insurance corporation is
already deemed in estoppel. It inaction to revoke the policy despite a departure from the
exclusionary condition contained in the said policy constituted a waiver of such condition, as was
held in the case of "Que Chee Gan vs. Law Union Insurance Co., Ltd.,", 98 Phil. 85. This case
involved a claim on an insurance policy which contained a provision as to the installation of fire
hydrants the number of which depended on the height of the external wan perimeter of the bodega
that was insured. When it was determined that the bodega should have eleven (11) fire hydrants in
the compound as required by the terms of the policy, instead of only two (2) that it had, the claim
under the policy was resisted on that ground. In ruling that the said deviation from the terms of the
policy did not prevent the claim under the same, this Court stated the following:
We are in agreement with the trial Court that the appellant is barred by waiver (or
rather estoppel) to claim violation of the so-called fire hydrants warranty, for the
reason that knowing fully an that the number of hydrants demanded therein never
existed from the very beginning, the appellant nevertheless issued the policies in
question subject to such warranty, and received the corresponding premiums. It
would be perilously close to conniving at fraud upon the insured to allow appellant to
claim now as void ab initio the policies that it had issued to the plaintiff without
warning of their fatal defect, of which it was informed, and after it had misled the
defendant into believing that the policies were effective.
The insurance company was aware, even before the policies were issued, that in the
premises insured there were only two fire hydrants installed by Que Chee Gan and
two others nearby, owned by the municipality of Tabaco, contrary to the requirements

of the warranty in question. Such fact appears from positive testimony for the insured
that appellant's agents inspected the premises; and the simple denials of appellant's
representative (Jamiczon) can not overcome that proof. That such inspection was
made it moreover rendered probable by its being a prerequisite for the fixing of the
discount on the premium to which the insured was entitled, since the discount
depended on the number of hydrants, and the fire fighting equipment available
(See"'Scale of Allowances" to which the policies were expressly made subject). The
law, supported by a long line of cases, is expressed by American Jurisprudence (Vol.
29, pp. 611-612) to be as follows:
It is usually held that where the insurer, at the time of the issuance of
a policy of insurance, has knowledge of existing facts which, if
insisted on, would invalidate the contract from its very inception, such
knowledge constitutes a waiver of conditions in the contract
inconsistent with the known facts, and the insurer is stopped
thereafter from asserting the breach of such conditions. The law is
charitable enough to assume, in the absence of any showing to the
contrary, that an insurance company intends to execute a valid
contract in return for the premium received; and when the policy
contains a condition which renders it voidable at its inception, and
this result is known to the insurer, it will be presumed to have
intended to waive the conditions and to execute a binding contract,
rather than to have deceived the insured into thinking he is insured
when in fact he is not, and to have taken is money without
consideration.' (29 Am. Jur., Insurance, section 807, at pp. 611-612.)
The reason for the rule is not difficult to find.
The plain, human justice of this doctrine is perfectly apparent. To
allow a company to accept one's money for a policy of insurance
which it then knows to be void and of no effect, though it knows as it
must, that the assured believes it to be valid and binding, is so
contrary to the dictates of honesty and fair dealing, and so closely
related to positive fraud, as to be abhorent to fairminded men. It
would be to allow the company to treat the policy as valid long
enough to get the premium on it, and leave it at liberty to repudiate it
the next moment. This cannot be deemed to be the real intention of
the parties. To hold that a literal construction of the policy expressed
the true intention of the company would be to indict it, for fraudulent
purposes and designs which we cannot believe it to be guilty of
(Wilson vs. Commercial Union Assurance Co., 96 Atl. 540, 543544).
A similar view was upheld in the case of Capital Insurance & Surety Co., Inc. vs. Plastic Era Co.,
Inc., 65 SCRA 134, which involved a violation of the provision of the policy requiring the payment of
premiums before the insurance shall become effective. The company issued the policy upon the
execution of a promissory note for the payment of the premium. A check given subsequent by the
insured as partial payment of the premium was dishonored for lack of funds. Despite such deviation
from the terms of the policy, the insurer was held liable.

Significantly, in the case before Us the Capital Insurance accepted the promise of
Plastic Era to pay the insurance premium within thirty (30) days from the effective
date of policy. By so doing, it has impliedly agreed to modify the tenor of the
insurance policy and in effect, waived the provision therein that it would only pay for
the loss or damage in case the same occurs after the payment of the premium.
Considering that the insurance policy is silent as to the mode of payment, Capital
Insurance is deemed to have accepted the promissory note in payment of the
premium. This rendered the policy immediately operative on the date it was
delivered. The view taken in most cases in the United States:
... is that although one of conditions of an insurance policy is that "it
shall not be valid or binding until the first premium is paid", if it is
silent as to the mode of payment, promissory notes received by the
company must be deemed to have been accepted in payment of the
premium. In other words, a requirement for the payment of the first or
initial premium in advance or actual cash may be waived by
acceptance of a promissory note...
WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE. In lieu thereof,
the private respondent insurance corporation is hereby ordered to pay to the petitioner the sum of
TEN THOUSAND (P10,000.00) PESOS as proceeds of Insurance Certificate No. 128866 with
interest at the legal rate from May 31, 1969 until fully paid, the further sum of TWO THOUSAND
(P2,000.00) PESOS as and for attorney's fees, and the costs of suit.
SO ORDERED.

MA. LOURDES S. FLORENDO, G.R. No. 186983

Petitioner,
Present:
VELASCO, JR., J., Chairperson,
- versus - PERALTA,
ABAD,
MENDOZA, and
PERLAS-BERNABE, JJ.
PHILAM PLANS, INC.,
PERLA ABCEDE and Promulgated:
MA. CELESTE ABCEDE,
Respondents. February 22, 2012
x --------------------------------------------------------------------------------------- x

DECISION
ABAD, J.:

This case is about an insureds alleged concealment in his pension plan

application of his true state of health and its effect on the life insurance portion of
that plan in case of death.
The Facts and the Case
On October 23, 1997 Manuel Florendo filed an application for
comprehensive pension plan with respondent Philam Plans, Inc. (Philam Plans)
after some convincing by respondent Perla Abcede. The plan had a pre-need price
of P997,050.00, payable in 10 years, and had a maturity value of P2,890,000.00
after 20 years.[1] Manuel signed the application and left to Perla the task of
supplying the information needed in the application. [2] Respondent Ma. Celeste
Abcede, Perlas daughter, signed the application as sales counselor.[3]
Aside from pension benefits, the comprehensive pension plan also provided
life insurance coverage to Florendo.[4] This was covered by a Group Master Policy
that Philippine American Life Insurance Company (Philam Life) issued to Philam
Plans.[5] Under the master policy, Philam Life was to automatically provide life
insurance coverage, including accidental death, to all who signed up for Philam
Plans comprehensive pension plan.[6] If the plan holder died before the maturity of
the plan, his beneficiary was to instead receive the proceeds of the life insurance,
equivalent to the pre-need price. Further, the life insurance was to take care of any
unpaid premium until the pension plan matured, entitling the beneficiary to the
maturity value of the pension plan.[7]
On October 30, 1997 Philam Plans issued Pension Plan Agreement
PP43005584[8] to Manuel, with petitioner Ma. Lourdes S. Florendo, his wife, as
beneficiary. In time, Manuel paid his quarterly premiums.[9]
Eleven months later or on September 15, 1998, Manuel died of blood
poisoning. Subsequently, Lourdes filed a claim with Philam Plans for the payment
of the benefits under her husbands plan.[10] Because Manuel died before his pension
plan matured and his wife was to get only the benefits of his life insurance, Philam
Plans forwarded her claim to Philam Life.[11]

On May 3, 1999 Philam Plans wrote Lourdes a letter,[12] declining her

claim. Philam Life found that Manuel was on maintenance medicine for his heart
and had an implanted pacemaker. Further, he suffered from diabetes mellitus and
was taking insulin. Lourdes renewed her demand for payment under the plan [13] but
Philam Plans rejected it,[14] prompting her to file the present action against the
pension plan company before the Regional Trial Court (RTC) of Quezon City.[15]
On March 30, 2006 the RTC rendered judgment, [16] ordering Philam Plans,
Perla and Ma. Celeste, solidarily, to pay Lourdes all the benefits from her husbands
pension plan, namely: P997,050.00, the proceeds of his term insurance,
and P2,890,000.00 lump sum pension benefit upon maturity of his
plan; P100,000.00 as moral damages; and to pay the costs of the suit. The RTC
ruled that Manuel was not guilty of concealing the state of his health from his
pension plan application.
On December 18, 2007 the Court of Appeals (CA) reversed the RTC
decision,[17] holding that insurance policies are traditionally contracts uberrimae
fidae or contracts of utmost good faith. As such, it required Manuel to disclose to
Philam Plans conditions affecting the risk of which he was aware or material facts
that he knew or ought to know.[18]
Issues Presented
The issues presented in this case are:
1. Whether or not the CA erred in finding Manuel guilty of concealing his
illness when he kept blank and did not answer questions in his pension plan
application regarding the ailments he suffered from;
2. Whether or not the CA erred in holding that Manuel was bound by the
failure of respondents Perla and Ma. Celeste to declare the condition of Manuels
health in the pension plan application; and
3. Whether or not the CA erred in finding that Philam Plans approval of
Manuels pension plan application and acceptance of his premium payments
precluded it from denying Lourdes claim.

Rulings of the Court

One. Lourdes points out that, seeing the unfilled spaces in Manuels pension plan
application relating to his medical history, Philam Plans should have returned it to
him for completion. Since Philam Plans chose to approve the application just as it
was, it cannot cry concealment on Manuels part. Further, Lourdes adds that Philam
Plans never queried Manuel directly regarding the state of his
health. Consequently, it could not blame him for not mentioning it.[19]
But Lourdes is shifting to Philam Plans the burden of putting on the pension plan
application the true state of Manuels health. She forgets that since Philam Plans
waived medical examination for Manuel, it had to rely largely on his stating the
truth regarding his health in his application. For, after all, he knew more than
anyone that he had been under treatment for heart condition and diabetes for more
than five years preceding his submission of that application. But he kept those
crucial facts from Philam Plans.
Besides, when Manuel signed the pension plan application, he adopted as his own
the written representations and declarations embodied in it. It is clear from these
representations that he concealed his chronic heart ailment and diabetes from
Philam Plans. The pertinent portion of his representations and declarations read as
follows:
I hereby represent and declare to the best of my knowledge that:
xxxx
(c) I have never been treated for heart condition, high blood pressure,
cancer, diabetes, lung, kidney or stomach disorder or any other
physical impairment in the last five years.
(d) I am in good health and physical condition.
If your answer to any of the statements above
otherwise, please give details in the space provided for:

reveal

Date of confinement : ____________________________

Name of Hospital or Clinic : ____________________________
Name of Attending Physician : ____________________________

Findings : ____________________________
Others: (Please specify) : ____________________________
x x x x.[20] (Emphasis supplied)
Since Manuel signed the application without filling in the details regarding
his continuing treatments for heart condition and diabetes, the assumption is that he
has never been treated for the said illnesses in the last five years preceding his
application. This is implicit from the phrase If your answer to any of the statements
above (specifically, the statement: I have never been treated for heart condition or
diabetes) reveal otherwise, please give details in the space provided for. But this is
untrue since he had been on Coumadin, a treatment for venous thrombosis, [21] and
insulin, a drug used in the treatment of diabetes mellitus, at that time.[22]

Lourdes insists that Manuel had concealed nothing since Perla, the soliciting
agent, knew that Manuel had a pacemaker implanted on his chest in the 70s or
about 20 years before he signed up for the pension plan. [23] But by its tenor, the
responsibility for preparing the application belonged to Manuel. Nothing in it
implies that someone else may provide the information that Philam Plans
needed. Manuel cannot sign the application and disown the responsibility for
having it filled up. If he furnished Perla the needed information and delegated to
her the filling up of the application, then she acted on his instruction, not on Philam
Plans instruction.
Lourdes next points out that it made no difference if Manuel failed to reveal
the fact that he had a pacemaker implant in the early 70s since this did not fall
within the five-year timeframe that the disclosure contemplated. [24] But a
pacemaker is an electronic device implanted into the body and connected to the
wall of the heart, designed to provide regular, mild, electric shock that stimulates
the contraction of the heart muscles and restores normalcy to the heartbeat. [25] That
Manuel still had his pacemaker when he applied for a pension plan in October
1997 is an admission that he remained under treatment for irregular heartbeat
within five years preceding that application.
Besides, as already stated, Manuel had been taking medicine for his heart
condition and diabetes when he submitted his pension plan application. These
clearly fell within the five-year period. More, even if Perlas knowledge of Manuels
pacemaker may be applied to Philam Plans under the theory of imputed

knowledge,[26] it is not claimed that Perla was aware of his two other afflictions that
needed medical treatments. Pursuant to Section 27[27] of the Insurance Code,
Manuels concealment entitles Philam Plans to rescind its contract of insurance with
him.
Two. Lourdes contends that the mere fact that Manuel signed the application in
blank and let Perla fill in the required details did not make her his agent and bind
him to her concealment of his true state of health. Since there is no evidence of
collusion between them, Perlas fault must be considered solely her own and cannot
prejudice Manuel.[28]
But Manuel forgot that in signing the pension plan application, he certified that he
wrote all the information stated in it or had someone do it under his
direction. Thus:
APPLICATION FOR PENSION PLAN
(Comprehensive)
I hereby apply to purchase from PHILAM PLANS, INC. a Pension
Plan Program described herein in accordance with the General
Provisions set forth in this application and hereby certify that the date
and other information stated herein are written by me or under my
direction. x x x.[29] (Emphasis supplied)

Assuming that it was Perla who filled up the application form, Manuel is
still bound by what it contains since he certified that he authorized her
action. Philam Plans had every right to act on the faith of that certification.
Lourdes could not seek comfort from her claim that Perla had assured
Manuel that the state of his health would not hinder the approval of his application
and that what is written on his application made no difference to the insurance
company. But, indubitably, Manuel was made aware when he signed the pension
plan application that, in granting the same, Philam Plans and Philam Life were
acting on the truth of the representations contained in that application. Thus:
DECLARATIONS AND REPRESENTATIONS
xxxx

I agree that the insurance coverage of this application is based

on the truth of the foregoing representations and is subject to the
provisions of the Group Life Insurance Policy issued by THE
PHILIPPINE AMERICAN LIFE INSURANCE CO. to PHILAM
PLANS, INC.[30] (Emphasis supplied)

As the Court said in New Life Enterprises v. Court of Appeals:[31]

It may be true that x x x insured persons may accept policies without
reading them, and that this is not negligence per se. But, this is not
without any exception. It is and was incumbent upon petitioner Sy to
read the insurance contracts, and this can be reasonably expected of him
considering that he has been a businessman since 1965 and the contract
concerns indemnity in case of loss in his money-making trade of which
important consideration he could not have been unaware as it was
precisely the reason for his procuring the same. [32]

The same may be said of Manuel, a civil engineer and manager of a

construction company.[33] He could be expected to know that one must read every
document, especially if it creates rights and obligations affecting him, before
signing the same. Manuel is not unschooled that the Court must come to his
succor. It could reasonably be expected that he would not trifle with something that
would provide additional financial security to him and to his wife in his twilight
years.
Three. In a final attempt to defend her claim for benefits under Manuels pension
plan, Lourdes points out that any defect or insufficiency in the information
provided by his pension plan application should be deemed waived after the same
has been approved, the policy has been issued, and the premiums have been
collected. [34]
The Court cannot agree. The comprehensive pension plan that Philam Plans issued
contains a one-year incontestability period. It states:
VIII. INCONTESTABILITY

After this Agreement has remained in force for one (1) year, we
can no longer contest for health reasons any claim for insurance under
this Agreement, except for the reason that installment has not been paid
(lapsed), or that you are not insurable at the time you bought this pension
program by reason of age. If this Agreement lapses but is reinstated
afterwards, the one (1) year contestability period shall start again on the
date of approval of your request for reinstatement. [35]

The above incontestability clause precludes the insurer from disowning

liability under the policy it issued on the ground of concealment or
misrepresentation regarding the health of the insured after a year of its issuance.
Since Manuel died on the eleventh month following the issuance of his plan,
the one year incontestability period has not yet set in. Consequently, Philam
Plans was not barred from questioning Lourdes entitlement to the benefits of her
husbands pension plan.
[36]

WHEREFORE, the Court AFFIRMS in its entirety the decision of the Court of
Appeals in CA-G.R. CV 87085 dated December 18, 2007.
SO ORDERED.
ROBERTO A. ABAD
Associate Justice
[G.R. No. 113899. October 13, 1999]
GREAT PACIFIC LIFE ASSURANCE CORP., petitioner vs. COURT OF
APPEALS AND MEDARDA V. LEUTERIO, respondents.
DECISION
QUISUMBING, J.:

This petition for review, under Rule 45 of the Rules of Court, assails the Decision [1] dated
May 17, 1993, of the Court of Appeals and its Resolution [2] dated January 4, 1994 in CA-G.R.
CV No. 18341.The appellate court affirmed in toto the judgment of the Misamis Oriental

Regional Trial Court, Branch 18, in an insurance claim filed by private respondent against Great
Pacific Life Assurance Co. The dispositive portion of the trial courts decision reads:

WHEREFORE, judgment is rendered adjudging the defendant GREAT PACIFIC

LIFE ASSURANCE CORPORATION as insurer under its Group policy No. G-1907,
in relation to Certification B-18558 liable and ordered to pay to the DEVELOPMENT
BANK OF THE PHILIPPINES as creditor of the insured Dr. Wilfredo Leuterio, the
amount of EIGHTY SIX THOUSAND TWO HUNDRED PESOS (P86,200.00);
dismissing the claims for damages, attorneys fees and litigation expenses in the
complaint and counterclaim, with costs against the defendant and dismissing the
complaint in respect to the plaintiffs, other than the widow-beneficiary, for lack of
cause of action.[3]
The facts, as found by the Court of Appeals, are as follows:
A contract of group life insurance was executed between petitioner Great Pacific Life
Assurance Corporation (hereinafter Grepalife) and Development Bank of the Philippines
(hereinafter DBP).Grepalife agreed to insure the lives of eligible housing loan mortgagors of
DBP.
On November 11, 1983, Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP
applied for membership in the group life insurance plan. In an application form, Dr. Leuterio
answered questions concerning his health condition as follows:
7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure, cancer,
diabetes, lung, kidney or stomach disorder or any other physical impairment?
Answer: No. If so give details ___________.
8. Are you now, to the best of your knowledge, in good health?
Answer: [ x ] Yes [ ] No.[4]

On November 15, 1983, Grepalife issued Certificate No. B-18558, as insurance coverage of
Dr. Leuterio, to the extent of his DBP mortgage indebtedness amounting to eighty-six thousand,
two hundred (P86,200.00) pesos.
On August 6, 1984, Dr. Leuterio died due to massive cerebral hemorrhage. Consequently,
DBP submitted a death claim to Grepalife. Grepalife denied the claim alleging that Dr. Leuterio
was not physically healthy when he applied for an insurance coverage on November 15,
1983. Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from
hypertension, which caused his death.Allegedly, such non-disclosure constituted concealment
that justified the denial of the claim.

On October 20, 1986, the widow of the late Dr. Leuterio, respondent Medarda V. Leuterio,
filed a complaint with the Regional Trial Court of Misamis Oriental, Branch 18, against
Grepalife for Specific Performance with Damages. [5] During the trial, Dr. Hernando Mejia, who
issued the death certificate, was called to testify. Dr. Mejias findings, based partly from the
information given by the respondent widow, stated that Dr. Leuterio complained of headaches
presumably due to high blood pressure. The inference was not conclusive because Dr. Leuterio
was not autopsied, hence, other causes were not ruled out.
On February 22, 1988, the trial court rendered a decision in favor of respondent widow and
against Grepalife. On May 17, 1993, the Court of Appeals sustained the trial courts
decision. Hence, the present petition. Petitioners interposed the following assigned errors:
"1. THE LOWER COURT ERRED IN HOLDING DEFENDANT-APPELLANT LIABLE TO
THE DEVELOPMENT BANK OF THE PHILIPPINES (DBP) WHICH IS NOT A PARTY
TO THE CASE FOR PAYMENT OF THE PROCEEDS OF A MORTGAGE
REDEMPTION INSURANCE ON THE LIFE OF PLAINTIFFS HUSBAND WILFREDO
LEUTERIO ONE OF ITS LOAN BORROWERS, INSTEAD OF DISMISSING THE CASE
AGAINST DEFENDANT-APPELLANT [Petitioner Grepalife] FOR LACK OF CAUSE OF
ACTION.
2. THE LOWER COURT ERRED IN NOT DISMISSING THE CASE FOR WANT OF
JURISDICTION OVER THE SUBJECT OR NATURE OF THE ACTION AND OVER
THE PERSON OF THE DEFENDANT.
3. THE LOWER COURT ERRED IN ORDERING DEFENDANT-APPELLANT TO PAY TO
DBP THE AMOUNT OF P86,200.00 IN THE ABSENCE OF ANY EVIDENCE TO SHOW
HOW MUCH WAS THE ACTUAL AMOUNT PAYABLE TO DBP IN ACCORDANCE
WITH ITS GROUP INSURANCE CONTRACT WITH DEFENDANT-APPELLANT.
4. THE LOWER COURT ERRED IN - HOLDING THAT THERE WAS NO CONCEALMENT
OF MATERIAL INFORMATION ON THE PART OF WILFREDO LEUTERIO IN HIS
APPLICATION FOR MEMBERSHIP IN THE GROUP LIFE INSURANCE PLAN
BETWEEN DEFENDANT-APPELLANT OF THE INSURANCE CLAIM ARISING
FROM THE DEATH OF WILFREDO LEUTERIO.[6]

Synthesized below are the assigned errors for our resolution:

1. Whether the Court of Appeals erred in holding petitioner liable to DBP as beneficiary in a
group life insurance contract from a complaint filed by the widow of the
decedent/mortgagor?
2. Whether the Court of Appeals erred in not finding that Dr. Leuterio concealed that he had
hypertension, which would vitiate the insurance contract?

3. Whether the Court of Appeals erred in holding Grepalife liable in the amount of eighty six
thousand, two hundred (P86,200.00) pesos without proof of the actual outstanding mortgage
payable by the mortgagor to DBP.

Petitioner alleges that the complaint was instituted by the widow of Dr. Leuterio, not the real
party in interest, hence the trial court acquired no jurisdiction over the case. It argues that when
the Court of Appeals affirmed the trial courts judgment, Grepalife was held liable to pay the
proceeds of insurance contract in favor of DBP, the indispensable party who was not joined in
the suit.
To resolve the issue, we must consider the insurable interest in mortgaged properties and the
parties to this type of contract. The rationale of a group insurance policy of mortgagors,
otherwise known as the mortgage redemption insurance, is a device for the protection of both the
mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such form of
contract so that in the event of the unexpected demise of the mortgagor during the subsistence of
the mortgage contract, the proceeds from such insurance will be applied to the payment of the
mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. [7] In a
similar vein, ample protection is given to the mortgagor under such a concept so that in the event
of death; the mortgage obligation will be extinguished by the application of the insurance
proceeds to the mortgage indebtedness.[8] Consequently, where the mortgagor pays the insurance
premium under the group insurance policy, making the loss payable to the mortgagee, the
insurance is on the mortgagors interest, and the mortgagor continues to be a party to the
contract. In this type of policy insurance, the mortgagee is simply an appointee of the insurance
fund, such loss-payable clause does not make the mortgagee a party to the contract.[9]
Section 8 of the Insurance Code provides:

Unless the policy provides, where a mortgagor of property effects insurance in his
own name providing that the loss shall be payable to the mortgagee, or assigns a
policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of
the mortgagor, who does not cease to be a party to the original contract, and any act of
his, prior to the loss, which would otherwise avoid the insurance, will have the same
effect, although the property is in the hands of the mortgagee, but any act which,
under the contract of insurance, is to be performed by the mortgagor, may be
performed by the mortgagee therein named, with the same effect as if it had been
performed by the mortgagor.
The insured private respondent did not cede to the mortgagee all his rights or interests in the
insurance, the policy stating that: In the event of the debtors death before his indebtedness with
the Creditor [DBP] shall have been fully paid, an amount to pay the outstanding indebtedness
shall first be paid to the creditor and the balance of sum assured, if there is any, shall then be paid
to the beneficiary/ies designated by the debtor.[10] When DBP submitted the insurance claim
against petitioner, the latter denied payment thereof, interposing the defense of concealment

committed by the insured. Thereafter, DBP collected the debt from the mortgagor and took the
necessary action of foreclosure on the residential lot of private respondent. [11] In Gonzales La O
vs. Yek Tong Lin Fire & Marine Ins. Co.[12] we held:

Insured, being the person with whom the contract was made, is primarily the proper
person to bring suit thereon. * * * Subject to some exceptions, insured may thus sue,
although the policy is taken wholly or in part for the benefit of another person named
or unnamed, and although it is expressly made payable to another as his interest may
appear or otherwise. * * * Although a policy issued to a mortgagor is taken out for the
benefit of the mortgagee and is made payable to him, yet the mortgagor may sue
thereon in his own name, especially where the mortgagees interest is less than the full
amount recoverable under the policy, * * *.
And in volume 33, page 82, of the same work, we read the following:
Insured may be regarded as the real party in interest, although he has assigned the
policy for the purpose of collection, or has assigned as collateral security any
judgment he may obtain.[13]
And since a policy of insurance upon life or health may pass by transfer, will or succession
to any person, whether he has an insurable interest or not, and such person may recover it
whatever the insured might have recovered,[14] the widow of the decedent Dr. Leuterio may file
the suit against the insurer, Grepalife.
The second assigned error refers to an alleged concealment that the petitioner interposed as
its defense to annul the insurance contract. Petitioner contends that Dr. Leuterio failed to disclose
that he had hypertension, which might have caused his death. Concealment exists where the
assured had knowledge of a fact material to the risk, and honesty, good faith, and fair dealing
requires that he should communicate it to the assured, but he designedly and intentionally
withholds the same.[15]
Petitioner merely relied on the testimony of the attending physician, Dr. Hernando Mejia, as
supported by the information given by the widow of the decedent. Grepalife asserts that Dr.
Mejias technical diagnosis of the cause of death of Dr. Leuterio was a duly documented hospital
record, and that the widows declaration that her husband had possible hypertension several years
ago should not be considered as hearsay, but as part of res gestae.
On the contrary the medical findings were not conclusive because Dr. Mejia did not conduct
an autopsy on the body of the decedent. As the attending physician, Dr. Mejia stated that he had
no knowledge of Dr. Leuterios any previous hospital confinement.[16] Dr. Leuterios death
certificate stated that hypertension was only the possible cause of death. The private respondents
statement, as to the medical history of her husband, was due to her unreliable recollection of

events. Hence, the statement of the physician was properly considered by the trial court as
hearsay.
The question of whether there was concealment was aptly answered by the appellate court,
thus:

The insured, Dr. Leuterio, had answered in his insurance application that he was in
good health and that he had not consulted a doctor or any of the enumerated ailments,
including hypertension; when he died the attending physician had certified in the
death certificate that the former died of cerebral hemorrhage, probably secondary to
hypertension. From this report, the appellant insurance company refused to pay the
insurance claim. Appellant alleged that the insured had concealed the fact that he had
hypertension.
Contrary to appellants allegations, there was no sufficient proof that the insured had
suffered from hypertension. Aside from the statement of the insureds widow who was
not even sure if the medicines taken by Dr. Leuterio were for hypertension, the
appellant had not proven nor produced any witness who could attest to Dr. Leuterios
medical history...
xxx

Appellant insurance company had failed to establish that there was concealment made
by the insured, hence, it cannot refuse payment of the claim. [17]
The fraudulent intent on the part of the insured must be established to entitle the insurer to
rescind the contract.[18] Misrepresentation as a defense of the insurer to avoid liability is an
affirmative defense and the duty to establish such defense by satisfactory and convincing
evidence rests upon the insurer.[19] In the case at bar, the petitioner failed to clearly and
satisfactorily establish its defense, and is therefore liable to pay the proceeds of the insurance.
And that brings us to the last point in the review of the case at bar. Petitioner claims that
there was no evidence as to the amount of Dr. Leuterios outstanding indebtedness to DBP at the
time of the mortgagors death. Hence, for private respondents failure to establish the same, the
action for specific performance should be dismissed. Petitioners claim is without merit. A life
insurance policy is a valued policy.[20] Unless the interest of a person insured is susceptible of
exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or
health is the sum fixed in the policy.[21] The mortgagor paid the premium according to the
coverage of his insurance, which states that:

The policy states that upon receipt of due proof of the Debtors death during the terms
of this insurance, a death benefit in the amount of P86,200.00 shall be paid.

In the event of the debtors death before his indebtedness with the creditor shall have
been fully paid, an amount to pay the outstanding indebtedness shall first be paid to
the Creditor and the balance of the Sum Assured, if there is any shall then be paid to
the beneficiary/ies designated by the debtor.[22] (Emphasis omitted)
However, we noted that the Court of Appeals decision was promulgated on May 17, 1993. In
private respondents memorandum, she states that DBP foreclosed in 1995 their residential lot, in
satisfaction of mortgagors outstanding loan. Considering this supervening event, the insurance
proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries. Equity
dictates that DBP should not unjustly enrich itself at the expense of another (Nemo cum alterius
detrimenio protest). Hence, it cannot collect the insurance proceeds, after it already foreclosed on
the mortgage. The proceeds now rightly belong to Dr. Leuterios heirs represented by his widow,
herein private respondent Medarda Leuterio.
WHEREFORE, the petition is hereby DENIED. The Decision and Resolution of the Court
of Appeals in CA-G.R. CV 18341 is AFFIRMED with MODIFICATION that the petitioner is
ORDERED to pay the insurance proceeds amounting to Eighty-six thousand, two hundred
(P86,200.00) pesos to the heirs of the insured, Dr. Wilfredo Leuterio (deceased), upon
presentation of proof of prior settlement of mortgagors indebtedness to Development Bank of the
Philippines. Costs against petitioner.
SO ORDERED.

G.R. No. L-11555

January 6, 1917

THE UNITED STATES, plaintiff-appellee,

vs.
GABINO SOLIMAN, defendant-appellant.
Francisco Sevilla for appellant.
Attorney-General Avancea for appellee.
CARSON, J.:
The evidence of record conclusively discloses that the defendant and appellant in this
case, Gabino Soliman, testifying in his on behalf in the course of another criminal
case in which he, with several others, was charged with estafa, swore falsely to certain
material allegations of fact.
On that occasion he testified falsely that a sworn statement offered in evidence in
support of the charge ofestafa, which was in effect an extrajudicial confession of his

guilt, had not been executed voluntarily, and that its execution had not been procured
by the police by the use of force, intimidation and prolonged torture.
The trial judge who presided in the former case acquitted the accused on the ground
that there was room for reasonable doubt as to whether the extrajudicial confession
had been made voluntarily, and his action in this regard clearly establishes the
materiality of the false testimony submitted in that case; moreover, the materiality of
the evidence is manifest without considering the judgment in the case in which it was
submitted, since, if accepted as true, this false testimony necessarily had the effect of
rendering wholly incompetent the evidence as to the extrajudicial confession which
otherwise would almost conclusively sustain and necessitate a conviction. (U.
S. vs. Estraa, 16 Phil. Rep., 520.)
There can be no doubt that the accused was guilty of the crime of perjury as defined
and penalized in section 3 of Act No. 1697 and that the sentence of six months'
imprisonment and P300 fine imposed by the trial judge was correctly imposed under
the provisions of that statute.
It appears however that since judgment was entered in this case on November 23,
1915, section 3 of Act No. 1697 has been expressly repealed by the enactment of the
Administrative Code, which became effective on July 1, 1916, and it has been
suggested that the judgment convicting and sentencing the accused under the
provisions of that statute should not be sustained, and that the repeal of the statute
should be held to have the effect of remitting and extinguishing the criminal
responsibility of the accused incurred under the provisions of the repealed law prior to
the enactment of the Administrative Code. We cannot agree with the proposition thus
stated.
In the case of United States vs. Cuna (12 Phil. Rep., 241), we held as follows:
The rule of interpretation of English and American common law, by virtue of
which the repeal of a law prescribing penalties is held to have the effect of
remitting or extinguishing any penalty, loss of rights or responsibility incurred
under such law, as to all persons who have not been convicted and sentenced
under the provisions of such law prior to the enactment of the repealing law, is
not and has not been the accepted doctrine in these Islands.
Where an Act of the Commission or of the Philippine Legislature which
penalizes an offense, such repeal does not have the effect of thereafter
depriving the courts of jurisdiction to try, convict and sentence offenders
charged with violations of the old law prior to its repeal.

A question does arise, however, as to the penalty which should be impose upon the
convict.
If the repealing statute provides or has the effect of providing new penalties for the
commission of the acts penalized under the repealed statute, should the penalty be
imposed in accordance with the old or the new statute?
Article 1 of the Penal Code in force in these Islands defines crimes and misdemeanors
as voluntary acts or omissions penalized by law; and complementary to this provision,
article 21 provides that no crime or misdemeanor shall be punished with a penalty
which has not been prescribed by law prior to its commission. In accordance with
these provisions the question whether an act is punishable or not depends upon the
question whether or not at the time of its commission, there was a law in force which
penalized it; this rule being modified, however, by article 22 of the same code, which
provides that penal laws shall have a retroactive effect in so far as they favor persons
convicted of a crime or misdemeanor.
The courts of Spain and the learned commentators on Spanish law have construed
these provisions to mean that such penal laws are to be given a retroactive effect only
in so far as they favor the defendant charged with a crime or a misdemeanor, and that,
when a penal law is enacted repealing a prior law, such repeal does not have the effect
of relieving an offender in whole or in part of penalties already incurred under the old
law, unless the new law favors the defendant by diminishing the penalty or doing
away with it altogether, and then only to the extent to which the new law is favorable
to the offender. In other words, that the enactment of new penal laws, notwithstanding
the fact that they contain general repealing clauses, doe not deprive the courts of
jurisdiction to try, convict and sentence persons charged with violations of the old law
prior to the date when the repealing law goes into effect, unless the new law wholly
fails to penalties the acts which constituted the offense defined and penalized in the
repealed law.
Thus Pacheco, commenting upon the new Penal Code of 1848-1850, of which article
506 provided that all general penal laws were repealed by its publication, says:
At this time when the Penal Code is being put into effect and given force, we
have in fact two criminal laws in Spain, and close attention is necessary to
apply them properly. There may be prosecutions which it is necessary to
dismiss, as, for example, those for sodomy; others which it may be necessary to
decide in conformity with the provisions of the new codes, as, for example,
those for carrying concealed weapons; and others which must be judged in
accordance with the old provisions, as, for example. many cases of robbery.
The rules of procedure in one or other manner being furnished us by the former

article (article 19 of the Penal Code of Spain identical with article 21 of the
Penal Code of the Philippines), and the present article (article 20 of the Penal
Code of Spain and article 22 of the Philippine Code). Has the code increased
the penalty? Then it is not applicable to crimes committed prior to its
enactment. Has it extinguished or diminished them? Then it is clearly
applicable to them. (1 Pacheco, 296.)
And a similar construction was placed upon the provisions of the Penal Code of 1870
by the supreme court of Spain. Article 626 of this code (which is substantially
identical with article 506 of the Penal Code of 1848 and article 611 of the Penal Code
of the Philippine Islands) repealed all general penal laws prior to its promulgation, but
the court held that, where a crime was committed prior to the publication of the
reformed code, the penalty prescribed by the code of 1850 (the code prior to that of
1870) being more favorable to the accused, that must be applied. (Decision of the
supreme court of Spain, 17th of January, 1873.)
We conclude therefore that in any case in which a statute prescribing a penalty for the
commission of a specific offense is repealed, and in which the new statute provides
new and distinct penalties for the commission of such offense, the penalty which must
be imposed on one who committed the offense prior to the enactment of the repealing
statute is that one which is more favorable to the convict. (U. S. vs. Cuna, 12 Phil.
Rep., 241.)
It seems important, then, to determine whether the repeal of section 3 of Act No. 1697
by the enactment of the Administrative Code had the effect of providing new and
distinct penalties for the commission of the crime of perjury, and whether the new
penalties are or are not more favorable to the convict in the case at bar than those
imposed by the trial judge.
Section 3 of Act No. 1697, which defined and penalized the crime of perjury, repealed
the provisions of the Penal Code defining and penalizing the crime of perjury, not
expressly, but by implication, and we are of opinion that the repeal of Act No. 1697
revived those provisions of the code. (U. S. vs. Concepcion, 13 Phil. Rep., 424; U.
S. vs. Estraa, 16 Phil. Rep., 520.)
In the absence of the most express language to the contrary it will not be presumed
that it was the intention of the legislator to let false swearing as to a material matter in
a court of justice go unpunished, and such would be the effect of the repeal of section
3 of Act No. 1697, unless we held that the repeal had the effect of reviving the old
statute.

At the common law the repeal of a repealing act revived the former act (6 Co., 199; 1
Gray, 163; 7 W. & S., 263; 2 Blackstone, 32; 54 N. J. L. J., 175); and the Supreme
Court of the United States has held that the repeal of a repealing law has this effect,
unless the language of the repealing statute or some general statute provides
otherwise. (U. S. vs. Otis, 120 U. S., 52 [115].)
Manifestly, with this rule in mind, section 12 of the Administrative Code (Act No.
2657) which is found in Article III, [Chapter I] dealing with the form and effect of
laws in general, provides that "when a law which expressly repeals a prior law is itself
repealed the law first repealed shall not be thereby revived unless expressly so
provided." From which it may fairly be inferred that the old rule continues in force
where a law which repeals a prior law, not expressly but by implication, it itself
repealed; and that in such cases the repeal of the repealing law revives the prior law,
unless the language of the repealing statute provides otherwise.
Applying this rule, we conclude that the express repeal of section 3 of Act No. 1697
by the enactment of the Administrative Code (Act No. 2657) revived the provisions of
the Penal Code touching perjury, which were themselves repealed, not expressly but
by implication, by the enactment of Act No. 1697.
A comparison of the penalties prescribed in the Penal Code for the commission of the
acts of which the accused in the case at bar was convicted, giving him as we should
the benefit of the provisions of Act No. 2142, discloses that the penalty prescribed
therein is less than that imposed upon the appellant under the provisions of section 3
of Act No. 1697, and we conclude from what has been said already that the penalty
imposed by the court below should be revoked and that in lieu thereof the penalty
prescribed in the Penal Code should be imposed upon the convict.
A question has been raised as to whether, admitting that the provisions of the Penal
Code touching perjury have been revived, the accused can be convicted and penalized
thereunder, it appearing that at the time when he testified falsely he was testifying in
his own behalf in a criminal case in which he himself was the accused, on trial for the
commission of a grave offense.
In the case of United States vs. Gutierrez (12 Phil. Rep., 529), we said, speaking
through Chief Justice Arellano, that, "Perjury committed by a party in his own cause
would not be punishable under Spanish legislation, because in said legislation no one
was a witness in his own cause, and could not therefore become guilty of giving false
testimony in a civil cause in which he was either the plaintiff or the defendant; but
under the procedure in force by virtue of Act No. 190, a party to a suit may testify in
his own behalf, and if he declares falsely under oath as a witness in his own cause,
like any other witness, he incurs the penalty by which false testimony in civil matters

is repressed and punished. This court has so held, it being a settled rule, that the false
testimony given by a litigant as a witness constitutes the crime of giving false
testimony inasmuch as such a declaration, according to the new laws in force, may
determine a judgment in his favor and to the prejudice of the adverse party, and that a
litigant who, in sworn testimony given by him as a witness in a civil cause, shall
pervert the truth and give false testimony, incurs as such witness the penalties imposed
by article 321 of the Penal Code."
Analogous reasoning leads to a like conclusion as to the criminal liability for perjury
of a defendant in a criminal case testifying falsely in his own behalf. Under the
provisions of General Orders No. 58 an accused person may, if he so desires, testify
under oath in his own behalf, and in that event, "if he declares falsely as a witness in
his own cause, like any other witness, he incurs the penalty by which false testimony"
in criminal matters "is repressed and punished."
It has been suggested that such a ruling will have a tendency to expose accused
persons to vexatious criminal prosecutions by prosecuting officers, who, having failed
to secure a conviction on the original charge, may be disposed to institute criminal
prosecutions for perjury from a vindictive unwillingness to let the defendant escape
scot free from the meshes of the law. It is said also that the fear of subsequent
prosecution for perjury will tend to embarrass accused persons in their efforts to
defend themselves by testifying in their own behalf. But similar objections may be
advanced against the prosecution of any of the witnesses called for the defense on
charges of perjury, and it must not be forgotten that the right of an accused person to
testify under oath in his own behalf is secured to him, not that he may be enabled to
introduce false testimony into the record, but to enable him to spread upon the record
the truth as to any matter within his knowledge which will tend to establish his
innocence.
Of course much must be left to the good sense and sound judgment of the prosecuting
officer in determining whether a prosecution for perjury should be instituted against
an accused person whose testimony in his own behalf would seem to be perjured.
Due regard for the situation in which an accused person finds himself when testifying
in his own behalf in a criminal proceeding will restrain a prudent prosecuting officer
from the filing of charges of perjury in every case in which he may have reason to
believe that the accused has not adhered strictly to the truth, in his anxiety to shield
himself from punishment. But when, as in the case at bar, an accused person
voluntarily goes upon the witness stand and falsely imputes some other person the
commission of a grave offense, it would seem to be highly proper that he should be
called to account in a criminal action for perjury upon the complaint of the person
against whom such false charges are made.

Article 319 of the Penal Code is as follows:

Any person who shall give false testimony in favor of a defendant in a criminal
case shall suffer a penalty ranging from arresto mayor in its maximum degree
to prision correccional in its medium degree and a fine of not less than three
hundred and seventy-five and not more than three thousand seven hundred and
fifty pesetas, if the case were for a felony, and the penalty of arresto mayor if it
were for a misdemeanor.
We conclude that the judgment of conviction entered in the court below should be
affirmed but that the sentence imposed therein should be reversed, and that giving the
accused the benefit of the provisions of Act No. 2142, a penalty of 4 months and 1 day
of arresto mayor and a fine of P75 with subsidiary imprisonment as prescribed by law
should be imposed upon him in lieu of that imposed by the trial judge, with the costs
of this instance de officio. So ordered.
Torres, Johnson and Araullo, JJ., concur.

Separate Opinions
MORELAND, J., dissenting:
I agree that the provisions of the Penal Code relative to false swearing were revived
by the repeal of Act No. 1697 by the Administrative Code.
I cannot believe, however, that the Penal Code intended to include a defendant in a
criminal action among those who are to be punished for false swearing.
The defendant in the case at bar is charged with having sworn falsely when testifying
in his own behalf while on trial charged with estafa, in that, on that trial, he testified
that a certain written confession of his guilt alleged to have been made by him and put
in evidence against him was false in its statement of the facts and had been obtained
from him by threats, intimidation and violence.
On the trial for estafa the court accepted as a true enough of the testimony of the
accused as to the manner in which the confession had been obtained to raise in his
mind a reasonable doubt as to the voluntary character of the confession; and, there not
being other evidence sufficient to sustain a conviction, the accused was acquitted.

I cannot bring myself to believe, as I have already stated, that the provisions of the
Penal Code defining false swearing include the false testimony of a defendant in a
criminal action given in his own behalf.
In the first place, the wording of the law does not include him. Article 319 provides:
Any person who shall give false testimony in favor of a defendant in a criminal
case shall suffer a penalty ranging from arresto mayor in its maximum degree
to prision correccional in its medium degree and a fine of not less than three
hundred and seventy-five and not more than three thousand seven hundred and
fifty pesetas, if the case were for a felony, and the penalty of arresto mayor if it
were for a misdemeanor.
The language itself plainly shows that the "person who shall give false testimony" is
not the defendant in the action but a different person a witness and not a party, an
outsider and not one whose life or liberty depends on the result of the action.
In the second place, the defendant in a criminal action could not be a witness when the
Penal Code was adopted and, accordingly, the framers of the Penal Code could not
have contemplated him as the "person who shall give false testimony." (U.
S. vs. Gutierrez, 12 Phil. Rep., 529.)
Thirdly, there is a reason given by Viada why the Spanish law did not punish a party
for false swearing even in those proceedings in which false swearing was punishable
and in which he was allowed to testify. In volume 2 of his commentaries on the Penal
Code, at page 465 and 466, he puts this question "Will a party who testifies falsely in
his answers to interrogatories prepared in a civil case be guilty of false swearing?"
And answers it as follows:
It is worth while to consider this question here was we have recently seen a
judge in this city order prepared a copy of the testimony given by a defendant
in answer to interrogatories prepared in a civil suit as a basis for a criminal
action against him because the judge believed that he had testified falsely in
answering said interrogatories. A party who testifies falsely in reply to
interrogatories cannot be prosecuted for false swearing for the simple reason
that he is not a witness, for, as the Digest says, nullus indoneus testis in re sua
intelligitur; and, besides, if the legislator had wished to punish the perjury of a
party he would have done so by including in the Penal Code a special provision
to that effect, as was done in the French Penal Code by art. 366. The Spanish
law took into consideration the frailty of human nature; it believed that a false
oath given by a party was sufficiently punished by his conscience, especially in
view of the fact that, as a learned author has said, for a man to testify against

himself for mere love of or respect for the truth is certainly heroic, and by
reason of the very fact that it is heroic no one should be condemned criminally
for not doing it.
If it is true that it was not the intention of the framers of the Penal Code to make a
defendant in a criminal action who should testify falsely in his own behalf guilty of
perjury, the mere fact of making him a competent witness in the case is not sufficient
to include him within the provisions relating to false swearing, when, but for the fact
of being a competent witness, he would not be included. If there is any doubt that a
given class of person is included in a penal provision it should be excluded.
For the reason stated, I have grave doubts of the intention of the Spanish lawmakers to
include a defendant in a criminal action as one of the "witnesses" who could commit
the crime of false swearing; and it is the Spanish law of crimes we are applying and
not the American law of the competency of witnesses. The intention of the law being
to exclude a party from its operation, that intention cannot logically be held to have
been changed by giving the party an additional attribute. Although he may be made a
witness he still remains a party; and Viada says that the Spanish law never intended to
hold a defendant who testified falsely to save his neck from the gallows to the same
responsibility as a mere witness who has absolutely nothing to lose by his testimony.
Groizard makes a suggestion which approaches the question in hand very closely and
shows the trend of judicial as well as legislative thought on the subject under
discussion. Speaking of the person who, under the Penal Code, may be punished for
false swearing, he says "There is one exception which we could have wished our code
to make in connection with the matter we are discussing, and that is that its provisions
shall not apply to those witnesses whose honor would be sullied by the truth or who, if
they testified truthfully, would be exposed to the risk of a criminal prosecution. Nor
should he be held to answer to a charge of false swearing who testifies falsely to save
his parents, his brothers or sisters, or his relations within the fourth degree. The law
should not so far forget the power and influence of personal interest and family ties as
to require as a legal duty something which not all regard even as a moral duty. Blood
has its law. . . ."
Spanish law and Spanish legal thought are against the position of the court in this
case. American law does not expressly, or even clearly, undertake to change it.
Making a person a witness does not deprive him of his character as a party; and it is
precisely in his character as a party that the Spanish law protects him.
The case of United States vs. Gutierrez, already cited, is not conclusive of the case
before us. There the false testimony was given in a civil action. Here it was given in a
criminal action.

There is strong doubt in my mind also with respect to the correct resolution of another
question presented in this case which has been decided by this court adversely to the
defendant. As I have already stated, the defendant in this case is on trial for perjury for
having testified falsely in a criminal action in which he was a defendant charged with
the crime of estafa. The testimony which he gave and which is alleged in the present
action to have been false related, as already stated, to the voluntary and spontaneous
character of a written confession which he is alleged to have made with regard to the
commission of the crime with which he was charged. He contended, as a witness for
himself on his trial for estafa, that the confession was false in its statement of facts
and had been obtained from him by threats, intimidation and violence. He was
acquitted in that case upon the ground that his testimony in that regard was true, or
was of such a character as to produce in the mind of the court doubt sufficient to
require an acquittal. The judge who presided at the trial of the accused
for estafapresided also at the trial of the accused for perjury. In his opinion acquitting
the defendant of the charge ofestafa the court said, speaking of the alleged confession
and of the testimony relating to it given in that case:
This is not a new occurrence in this court. It is frequently resorted to in
important cases, where confessions have been secured by the secret service. We
are fully convinced that every precaution is taken by the chief of the Secret
Service Bureau with a view to avoiding the maltreatment of persons who have
been apprehended by that Bureau, and who are under suspicion of crime, and in
the majority of cases we pay no heed to the testimony of criminals who have
come to look upon this allegation of maltreatment as a stock defense. But in
this case there were some circumstances in connection with the testimony of
the defendants which raised a grave doubt at least as to the voluntary character
and spontaneity of these confessions, and in view therefore, of this grave doubt,
and of the unsatisfactory character of the evidence generally, the defendants are
acquitted and the costs are taxed de officio.
In the present case the same judge says with regard to the same matter:
In the case in which the defendant was charged with estafa and in which he is
accused of having testified falsely, the case turned largely upon the truth of the
confessions of the defendant and his codefendants, which were alleged to have
been made while they were under detention in secret service headquarters. If it
were true that such confessions were extracted under threats and torture, it is
unnecessary to state that it would be a very serious matter. Indeed the court
considered it so serious at the time the accused in question was tried with his
codefendants, that it preferred to enter an acquittal rather than to risk a
conviction on confessions which appear to be tainted with this suspicion."

I am inclined to believe that the finding of the trial court in the case of estafa with
regard to the testimony of the defendant in relation to the confession is a bar to a
subsequent trial of the same defendant for perjury for giving the testimony to which
the finding of the court relates. In the case of Cooper vs. Commonwealth (106 Ky.,
909) it appeared that the appellant in that case and one Libbie Purvis were jointly
indicted in the Rowan Circuit Court for the offense of adultery. The trial under that
indictment resulted in a verdict of acquittal for appellant. The grand jury of Rowan
County thereupon reported an indictment against him in which it was charged that,
upon the trial of appellant and Libbie Purvis upon the charge of adultery, "he did
knowingly, willfully, and corruptly swear that he had not had carnal sexual intercourse
with Libbie Purvis, when same was false and untrue, and was known by him to be
false and untrue." The trial under this indictment resulted in a verdict of guilty, and
judgment sentencing appellant to confinement in the penitentiary was entered and the
case came to the Supreme Court of the State of Kentucky upon an appeal from that
judgment. In its opinion for a reversal the court said:
The principal question to be considered is the effect which is to be given to the
indictment, trial, verdict and judgment of acquittal of appellant under the
indictment for adultery, as it is manifest that appellant can not be guilty in this
case if he was innocent of the charge contained in the indictment.
His guilt or innocence of the offense of having had carnal sexual intercourse
with Libbie Purvis was the exact question which was tried in the first
proceeding, and as a result of that trial the defendant was found not guilty. In
order to convict him in this case, it was necessary for the jury to believe that he
was guilty of the identical offense for which he had been tried and acquitted
under the other indictment, as it is evident that, if he was innocent of having
had carnal sexual intercourse with Libbie Parvis, he was not guilty of false
swearing when he stated that he had not had such intercourse with her. We
therefore have, as a result of the trial of appellant under these two indictments,
a verdict and judgment finding him not guilty of the offense of having had
carnal sexual intercourse with Libbie Purvis, and in the second case a verdict
and judgment finding him guilty of false swearing when he testified that he had
not had such intercourse with her; in other words, the first jury found him
innocent of the misdemeanor with which he was charged, and the second jury
found him guilty of the felony because he testified that he was not guilty of
such misdemeanor. It certainly was never intended that the enginery of the law
should be used to accomplish such inconsistent results. It appears to us from the
conflicting character of the testimony in the case upon the question of
defendant's guilt or innocence that a verdict of the jury might have been upheld
in the first case whether it found one way or the other, but certainly the finding
of the jury must be conclusive of the fact considered as against the

Commonwealth, and preclude any further prosecution which involves the

ascertainment of such fact.
xxx

xxx

xxx

Appellant in this case had already been tried and acquitted of the offense of
having had carnal sexual intercourse with Libbie Purvis, and the judgment in
that case is res judicata against the Commonwealth, and he can not again be put
on trial where the truth or falsity of the charge in that indictment is the gist of
the question under investigation. It therefore follows that appellant was entitled
to a peremptory instruction to the jury to find him not guilty.
In the case of United States vs. Butler (38 Fed. Rep., 498) a defendant, who had been
acquitted upon an indictment for selling liquors without payment of the special tax
required by law, was subsequently put upon trial for perjury for having sworn upon
his preliminary examination before a commissioner that he did not sell. It was held
that his acquittal for selling liquor was a conclusive adjudication in his favor upon the
subsequent trial for perjury, and that the Government could not show that his oath was
false. In that case the court said:
But I am clearly of the opinion that upon the trial of this case the defendant
would be entitled to show that he had been acquitted of the offense concerning
which he is charged to have committed perjury, and that such acquittal would
be conclusive. Whenever the same fact has been put in issue between the same
parties, the verdict of the jury upon such issue is a complete estoppel. This case
contains all the elements of a plea of res judicata; the parties as the same; the
point issue, viz, whether he did in fact sell liquor, is the same, and the quantum
of proof requisite in both cases is also the same. Had he sworn before the
commissioner that he had paid his tax and had been acquitted by the jury upon
the ground that he did not sell liquor, the issue would have been different, and
perhaps such difference might have been shown by parol, but in this case the
two issues were identically the same.
In Commonwealth vs. Ellis (160 Mass., 165), it was held that the record of the
conviction and sentence of a father upon a complaint, under the statute of 1885, c.
176, for unreasonably neglecting to support his minor child, was conclusive evidence
that the paternity of the child was determined, and the father was estopped to set up
the illegitimacy of the child as a defense to a subsequent complaint under the same
statute for a similar offense. In arriving at this conclusion the court said:
The question of the paternity of the child was necessarily involved in the prior
conviction of the defendant. That fact having been determined, it cannot again

be litigated between the same parties unless a different rule applies to criminal
proceedings from that which obtains in civil proceedings. See Sly vs.Hunt, 159
Mass., 15, and cases cited. It is well settled that the rule is the same in both
classes of cases. Thus, in Commonwealth vs. Evans, 101 Mass., 25, it was held,
on the trial of an indictment for manslaughter, that the record of a conviction of
the defendant for the assault which caused the death was conclusive evidence
that the assault was unjustifiable. So in Commonwealth vs. Feldman, 131
Mass., 588, where the defendant was indicted for an assault upon a public
officer, committed while the defendant was under arrest for drunkenness; it was
held that a record of his conviction and sentence for drunkenness at the time of
his arrest was conclusive evidence of that fact.
In the case of Coffey vs. United States (116 U. S. 436) the principal question
presented for determination was stated by the court as follows:
The principal question is as to the effect of the indictment, trial, verdict and
judgment of acquittal set up in the fourth paragraph of the answer. The
information is founded on sections 3257, 3450, and 3453; and there is no
question, on the averments in the answer, that the fraudulent acts and attempts
and intents to defraud, alleged in the prior criminal information and covered by
the verdict and judgment of acquittal, embraced all of the acts, attempts and
intents averred in the information in this suit.
The question, therefore, is distinctly presented, whether such judgment of
acquittal is a bar to this suit. We are of opinion that it is.
It is true that section 3257, after denouncing the single act of a distiller
defrauding or attempting to defraud the United States of the tax on the spirits
distilled by him, declares the consequences of the commission of the act to be:
(1) That certain specific property shall be forfeited, and (2) that the offender
shall be fined and imprisoned. It is also true that the proceeding to enforce the
forfeiture against the res named must be a proceeding in rem and a civil action;
while that to enforce the fine and imprisonment must be a criminal proceeding,
as was held by this court in The Palmyra (12 Wheat., 1, 14 [25 U. S., bk. 6, L.
ed. 531, 535]). Yet, where an issue raised as to the existence of the act or fact
denounced has been tried in a criminal proceeding, instituted by the United
States, and a judgment of acquittal has been rendered in favor of a particular
person, that judgment is conclusive in favor of such person, on the subsequent
trial of a suit in rem by the United States, where, as against him, the existence
of the same act or fact is the matter in issue, as a cause for the forfeiture of the
property prosecuted in such suit in rem. It is urged as a reason for not allowing
such effect to the judgment, that the acquittal in the criminal case may have

taken place because of the rule requiring guilt to be proved beyond a reasonable
doubt; and that, on the same evidence, on the question of preponderance of
proof, there might be a verdict for the United States, in the suit in rem.
Nevertheless, the fact or act has been put in issue and determined against the
United States; and all that is imposed by the statute, as a consequence of guilt,
is a punishment therefor. There could be no new trial of the criminal
prosecution after the acquittal in it; and a subsequent trial of the civil suit
amounts substantially to the same thing, with a difference only in the
consequences following a judgment adverse to the claimant.
When an acquittal in a criminal prosecution in behalf of the Government is
pleaded or offered in evidence, by the same defendant, in an action against him
by an individual, the rule does not apply, for the reason that the parties are not
the same; and often for the additional reason that a certain intent must be
proved to support the indictment, which need not be proved to support the civil
action. But upon this record, as we have already seen, the parties and the matter
in issue are the same.
Whether a conviction on an indictment under section 3257 could be availed of
as conclusive evidence, in law, for a condemnation, in a subsequent suit in
rem under that section, and whether a judgment of forfeiture in a suit in
rem under it would be conclusive evidence, in law, for a conviction on a
subsequent indictment under it, are questions not now presented.
The conclusion we have reached is in consonance with the principles laid down
by this court in Gelstonvs. Hoyt (3 Wheat., 246 [16 U. S., bk. 4, L. ed., 381]).
In that case Hoyt sued Gelston the collector, and Schenck the surveyor, of the
Port of New York, in trespass, for taking and carrying away a vessel. The
defendants pleaded that they had seized the vessel, by authority of the
President, as forfeited for a violation of the statute against fitting out a vessel to
commit hostilities against a friendly foreign power, and that she had been so
fitted out and was forfeited. At the trial it was shown that after seizure, the
vessel was proceeded against by the United States, by libel, in the United States
District Court, for the alleged offense, and Hoyt had claimed her and she was
acquitted and ordered to be restored, and a certificate of reasonable cause of
seizure was denied. The defendants offered to prove facts showing the
forfeiture. The trial court excluded the evidence. In this court, the question was
presented whether the sentence of the district court was or was not conclusive
on the defendants, on the question of forfeiture. This court held that the
sentence of acquittal, with a denial of a certificate of reasonable cause of
seizure, was conclusive evidence that no forfeiture was incurred, and that the

seizure was tortious; and that these questions could not again be litigated in any
forum.
This doctrine is peculiarly applicable to a case like the present, where, in both
proceedings, criminal and civil, the United States is the party on one side and
this claimant the party on the other. The judgment of acquittal in the criminal
proceeding ascertained that the facts which were the basis of that proceeding,
and are the basis of this one, and which are made by the statute the foundation
of any punishment, personal or pecuniary, did not exist. This was ascertained
once for all, between the United States and the claimant, in the criminal
proceeding, so that the facts can not again be litigated between them, as the
basis of any statutory punishment denounced as a consequence of the existence
of the facts. This is a necessary result of the rules laid down in the unanimous
opinion of the judges in the case of Rex vs. Duchess of Kingston(20 Howell, St.
Tr., 355, 538), and which were formulated thus: the judgment of a court of
concurrent jurisdiction, directly upon the point, is as a plea a bar, or as evidence
conclusive, between the same parties, upon the same matter directly in question
in another court; and the judgment of a court of exclusive jurisdiction, directly
upon the point, is, in like manner, conclusive upon the same matter, between
the same parties, coming incidentally in question in another court for a different
purpose. In the present case, the court is the same court and had jurisdiction;
and the judgment was directly on the point now involved and between the same
parties.
In a case before Mr. Justice Miller and Judge Dillon (U. S. vs. McKee, 4 Dill.,
128), the defendant had been convicted and punished under a section of the
Revised Statutes, for conspiring with certain distillers to defraud the United
States, by unlawfully removing distilled spirits without payment of the taxes
thereon. He was afterwards sued in a civil action by the United States, under
another section, to recover a penalty of double the amount of the taxes lost by
the conspiracy and fraud. The two alleged transactions were but one; and it was
held that the suit for the penalty was barred by the judgment in the criminal
case. The decision was put on the ground that the defendant could not be twice
punished for the same crime, and that the former conviction and judgment were
a bar to the suit for the penalty.
I am rather inclined to believe that these decisions cover the case at bar. It is true that
the fact determined by the court on the trial for estafa was not a fact necessary to be
alleged in the information charging the crime as an essential element thereof; and that
consequently it was not one of the facts necessary to be established in order to
convict. Reasoning from these facts it might be claimed that, whether the confession
offered in evidence in the estafa case was voluntary or was obtained by threat,

intimidation and violence, was not the fact in issue on that trial, and that, therefore,
the judgment in the estafa case determining that question was not a bar to the
presentation of the same question in the present action for perjury. I am of the opinion,
however, that the principles enunciated in the cases cited, and especially the Coffey
case, are sufficiently broad to cover the case at bar. It is well settled that a right,
question or fact definitely put in issue and directly determined by a court of competent
jurisdiction, as a ground of recovery, cannot be discussed in a subsequent suit between
the same parties or their privies; and that even if the second suit is for a different cause
of action, the right, question, or fact once so determined must, as between the same
parties or their privies, be taken as conclusively established, so long as the judgment
in the first suit remains unmodified. This is substantially the rule stated in the case of
Southern Pacific Railroad vs. United States (168 U. S., 1).
It is clear from the decision of the trial court in the estafa case that the question most
strongly fought by the parties in that action was whether or not the confession was
voluntary or had been obtained by threats, intimidation and violence. The evidence
which the Government was able to produce was, apart from the confession,
insufficient to convict; and, as a necessary consequence, whether or not the defendant
was convicted in that case depended, in the main, upon the character of the
confession. In all respects an issue was joined by the parties with reference thereto
(Lizarraga Hermanos vs. Yap Tico, 24 Phil. Rep., 504). It was accepted by both parties
and a large part of the evidence in the estafa case, so far as we can judge from the
opinion of the trial court in that case, related to that issue. The question of fact
involved was decided adversely to the Government and, as we have seen from the
opinion of the trial court in that and the present case, the acquittal was based wholly
upon the defeat of the Government on that issue.
It would seem to me, therefore, that the character of the confession was as thoroughly
litigated and decided by the trial court as if it had been a fact necessary to have been
alleged in the information to describe the crime sought to be charged. If that is so then
the Government in the present case cannot be allowed to put that question again in
issue and can not be heard to charge that the testimony given by the defendant in
relation thereto was false.
For these reason I am of the opinion that the conviction can not stand and that the
accused should be acquitted.
G.R. No. L-12707

August 10, 1918

MRS. HENRY E. HARDING, and her husband, plaintiffs-appellees,

vs.
COMMERCIAL UNION ASSURANCE COMPANY, defendant-appellant.

Lawrence & Ross for appellant.

Gibbs, McDonough & Johnson for appellees.
FISHER, J.:
This was an action by plaintiffs to recover from defendant the sum of P3,000 and interest, alleged to
be due under the terms of a policy of insurance. The trial court gave plaintiffs judgment for the
amount demanded, with interest and costs, and from that decision the defendant appeals.
The court below stated the issues made by the pleadings in this case, and its finding of fact, as
follows:
It is alleged by plaintiffs and admitted by defendant that plaintiffs are husband and wife and
residents of the city of Manila; that the defendant is a foreign corporation organized and
existing under and by virtue of the laws of Great Britain and duly registered in the Philippine
Islands, and Smith, Bell & Co. (limited), a corporation organized and existing under the laws
of the Philippine Islands, with its principal domicile in the city of Manila, is the agent in the
Philippine Islands of said defendant.
The plaintiffs alleged that on February 16, 1916, the plaintiff Mrs. Henry E. Harding was the
owner of a Studebaker automobile, registered number 2063, in the city of Manila; that on
said date; in consideration of the payment to the defendant of the premium of P150, by said
plaintiff, Mrs. Henry E. Harding, with the consent of her husband, the defendant by its duly
authorized agent, Smith, Bell & Company (limited), made its policy of insurance in writing
upon said automobile was set forth in said policy to be P3,000 that the value of said
automobile was set forth in said policy (Exhibit A) to be P3,000; that on March 24, 1916, said
automobile was totally destroyed by fire; that the loss thereby to plaintiffs was the sum of
P3,000; that thereafter, within the period mentioned in the said policy of insurance, the
plaintiff, Mrs. Henry E. Harding, furnished the defendant the proofs of her said loss and
interest, and otherwise performed all the conditions of said policy on her part, and that the
defendant has not paid said loss nor any part thereof, although due demand was made upon
defendant therefor.
The defendant, by its answer, admitted the allegations of the residence and status of the
parties and denied all the other allegation of the said complaint, and for a separate and
affirmative defense alleged (1) that on February 17, 1916, at the city of Manila, P.I. the
defendant upon request of plaintiff, Mrs. Henry E. Harding, issued to the said plaintiff the
policy of insurance on an automobile alleged by the said plaintiff to be her property; that the
said request for the issuance of said policy of insurance was made by means of a proposal
in writing signed and delivered by said plaintiff to the defendant, guaranteeing the truth of the
statements contained therein which said proposal is referred to in the said policy of
insurance made a part thereof; (2) that certain of the statements and representations
contained in said proposal and warranted by said plaintiff to be true, to wit: (a) the price paid
by the proposer for the said automobile; (b) the value of said automobile at the time of the
execution and delivery of the said proposal and (c) the ownership of said automobile, were
false and known to be false by the said plaintiff at the time of signing and delivering the said
proposal and were made for the purpose of misleading and deceiving the defendant, and
inducing the defendant, relying upon the warranties, statements, and representations

contained in the said proposal and believing the same to be true, issued the said policy of
insurance.
The defendant prays that judgment be entered declaring the said policy of insurance to be
null and void, and that plaintiffs take nothing by this action; and for such further relief as to
the court may seem just and equitable.
The evidence in this case shows that some time in the year 1913 Levy Hermanos, the
Manila agents for the Studebaker automobile, sold the automobile No. 2063 to John Canson
for P3,200 (testimony of Mr. Diehl); that under date of October 14, 1914, John Canson sold
the said automobile to Henry Harding for the sum of P1,500 (Exhibit 2); that under date of
November 19, 1914, the said Henry Harding sold the said automobile No. 2063 to J.
Brannigan, of Los Baos, Province of Laguna, P.I., for the sum of P2,000 (Exhibit 3); that
under date of December 20, 1915, J. C. Graham of Los Baos, Province of Laguna, P.I., sold
the said automobile No. 2063 to Henry Harding of the city of Manila for the sum of P2,800
(Exhibit 4 and testimony of J. C. Graham); that on or about January 1, 1916, the said Henry
Harding gave the said automobile to his wife; Mrs. Henry E. Harding, one of the plaintiffs, as
a present; that said automobile was repaired and repainted at the Luneta Garage at a cost of
some P900 (testimony of Mr. Server); that while the said automobile was at the Luneta
Garage; the said Luneta Garage, acting as agent for Smith, Bell & Company, (limited),
solicited of the plaintiff Mrs. Harding the insurance of said automobile by the defendant
Company (testimony of Mrs. Henry Harding and Mr. Server); that a proposal was filled out by
the said agent and signed by the plaintiff Mrs. Henry E. Harding, and in said proposal under
the heading "Price paid by proposer," is the amount of "3,500" and under another heading
"Present value" is the amount of "3,000" (Exhibit 1).
The evidence tends to show that after the said proposal was made a representative of the
Manila agent of defendant went to the Luneta Garage and examined said automobile No.
2063 and Mr. Server, the General Manager of the Luneta Garage, an experienced
automobile mechanic, testified that at the time this automobile was insured it was worth
about P3,000, and the defendant, by and through its said agent Smith, Bell & Company
(limited), thereafter issued a policy of insurance upon proposal in which policy the said
automobile was described as of the "present value" of P3,000 and the said defendant
charged the said plaintiff Mrs. Henry E. Harding as premium on said policy the sum of P150,
or 5 per cent of the then estimated value of P3,000. (Exhibit A.)
The "Schedule" in said policy of insurance describes the automobile here in question, and
provides in part of follows:
"Now it is hereby agreed as follows:
"That during the period above set forth and during any period for which the company
may agree to renew this policy the company will subject to the exception and
conditions contained herein or endorsed hereon indemnify the insured against loss of
or damage to any motor car described in the schedule hereto (including accessories)
by whatever cause such loss or damage may be occasioned and will further
indemnify the insured up to the value of the car or P3,000 whichever is the greater
against any claim at common law made by any person (not being a person in the
said motor car nor in the insured's service) for loss of life or for accidental bodily

injury or damage to property caused by the said motor car including law costs
payable in connection with such claim when incurred with the consent of the
company."
The evidence further shows that on March 24, 1916, the said automobile was totally
destroyed by fire, and that the iron and steel portions of said automobile which did not burn
were taken into the possession of the defendant by and through its agent Smith, Bell &
Company (limited), and sold by it for a small sum, which had never been tendered to the
plaintiff prior to the trial of this case, but in open court during the trial the sum of P10 as the
proceeds of such sale was tendered to plaintiff and refused.
Upon the facts so found, which we hold are supported by the evidence, the trial judge decided that
there was no proof of fraud on the part of plaintiff in her statement of the value of the automobile, or
with respect to its ownership; that she had an insurable interest therein; and that defendant, having
agreed to the estimated value, P3,000, and having insured the automobile for that amount, upon the
basis of which the premium was paid, is bound by it and must pay the loss in accordance with the
stipulated insured value. The assignments of error made on behalf of appellant put in issue the
correctness of those conclusions of law, and some others of minor importance relating to the
exclusion of evidence. Disposing of the minor objections first, as we have reached the conclusion
that the trial court was right in holding that the defendant is bound by the estimated value of the
automobile upon which policy was issued, and that the plaintiff was not guilty of fraud in regard
thereto, the exclusion of the testimony of the witness Diehl is without importance. It merely tended to
show the alleged actual value of the automobile, and in the view we take of the case such evidence
was irrelevant.
Appellant contends that Mrs. Harding was not the owner of the automobile at the time of the
issuance of the policy, and, therefore, had no insurable interest in it. The court below found that the
automobile was given to plaintiff by her husband shortly after the issuance of the policy here in
question. Appellant does not dispute the correctness of this finding, but contends that the gift was
void, citing article 1334 of the Civil Code which provides that "All gifts between spouses during the
marriage shall be void. Moderate gifts which the spouses bestow on each other on festive days of
the family are not included in this rule."
We are of the opinion that this contention is without merit. In the case of Cook vs. McMicking 27 Phil.
Rep., 10), this court said:
It is claimed by the appellants that the so-called transfer from plaintiff's husband to her was
completely void under article 1458 of the Civil Code and that, therefore, the property still
remains the property of Edward Cook and subject to levy under execution against him.
In our opinion the position taken by appellants is untenable. They are not in a position to
challenge the validity of the transfer, if it may be called such. They bore absolutely no relation
to the parties to the transfer at the time it occurred and had no rights or interests inchoate,
present, remote, or otherwise, in the property in question at the time the transfer occurred.
Although certain transfers from husband to wife or from wife to husband are prohibited in the
article referred to, such prohibition can be taken advantage of only by persons who bear
such a relation to the parties making the transfer or to the property itself that such transfer
interferes with their rights or interests. Unless such a relationship appears the transfer cannot
be attacked.

Even assuming that defendant might have invoked article 1334 as a defense, the burden would be
upon it to show that the gift in question does not fall within the exception therein established. We
cannot say, as a matter of law, that the gift of an automobile by a husband to his wife is not a
moderate one. Whether it is or is not would depend upon the circumstances of the parties, as to
which nothing is disclosed by the record.
Defendant contends that the statement regarding the cost of the automobile was a warranty, that the
statement was false, and that, therefore, the policy never attached to the risk. We are of the opinion
that it has not been shown by the evidence that the statement was false on the contrary we
believe that it shows that the automobile had in fact cost more than the amount mentioned. The
court below found, and the evidence shows, that the automobile was bought by plaintiff's husband a
few weeks before the issuance of the policy in question for the sum of P2,800, and that between that
time and the issuance of the policy some P900 was spent upon it in repairs and repainting. The
witness Server, an expert automobile mechanic, testified that the automobile was practically as good
as new at the time the insurance was effected. The form of proposal upon which the policy was
issued does not call for a statement regarding the value of the automobile at the time of its
acquisition by the applicant for the insurance, but merely a statement of its cost. The amount stated
was less than the actual outlay which the automobile represented to Mr. Harding, including repairs,
when the insurance policy was issued. It is true that the printed form calls for a statement of the
"price paid by the proposer," but we are of the opinion that it would be unfair to hold the policy void
simply because the outlay represented by the automobile was made by the plaintiff's husband and
not by his wife, to whom he had given the automobile. It cannot be assumed that defendant should
not have issued the policy unless it were strictly true that the price representing the cost of the
machine had been paid by the insured and by no other person that it would no event insure an
automobile acquired by gift, inheritance, exchange, or any other title not requiring the owner to make
a specific cash outlay for its acquisition.
Furthermore, the court below found and the evidence shows, without dispute, that the proposal upon
which the policy in question was issued was made out by defendant's agent by whom the insurance
was solicited, and that appellee simply signed the same. It also appears that an examiner employed
by the defendant made an inspection of the automobile before the acceptance of the risk, and that
the sum after this examination. The trial court found that Mrs. Harding, in fixing the value of the
automobile at P3,000, acted upon information given her by her husband and by Mr. Server, the
manager of the Luneta Garage. The Luneta Garage, it will be remembered, was the agent of the
defendant corporation in the solicitation of the insurance. Mrs. Harding did not state of her own
knowledge that the automobile originally cost P3,000, or that its value at the time of the insurance
was P3,000. She merely repeated the information which had been given her by her husband, and at
the same time disclosed to defendant's agent the source of her information. There is no evidence to
sustain the contention that this communication was made in bad faith. It appears that the statements
in the proposal as to the price paid for the automobile and as to its value were written by Mr. Quimby
who solicited the insurance on behalf of defendant, in his capacity as an employee of the Luneta
Garage, and wrote out the proposal for Mrs. Harding to sign. Under these circumstances, we do not
think that the facts stated in the proposal can be held as a warranty of the insured, even if it should
have been shown that they were incorrect in the absence of proof of willful misstatement. Under
such circumstance, the proposal is to be regarded as the act of the insurer and not of the insured.
This question was considered in the case of the Union Insurance Company vs. Wilkinson (13 Wall.,
222; 20 L. ed., 617), in which the Supreme Court of the United States said:

This question has been decided differently by courts of the highest respectability in cases
precisely analogous to the present. It is not to be denied that the application logically
considered, is the work of the assured, and if left to himself or to such assistance as he might
select, the person so selected would be his agent, and he alone would be responsible. On
the other hand, it is well-known, so well that no court would be justified in shutting its eyes to
it, that insurance companies organized under the laws of one State, and having in that State
their principal business office, send these agents all over the land, with directions to solicit
and procure applications for policies furnishing them with printed arguments in favor of the
value and necessity of life insurance, and of the special advantages of the corporation which
the agent represents. They pay these agents large commissions on the premiums thus
obtained, and the policies are delivered at their hands to the assured. The agents are
stimulated by letters and instructions to activity in procuring contracts, and the party who is in
this manner induced to take out a policy, rarely sees or knows anything about the company
or its officers by whom it is issued, but looks to and relies upon the agent who has persuaded
him to effect insurance as the full and complete representative of the company, in all that is
said or done in making the contract. Has he not a right to so regard him? It is quite true that
the reports of judicial decisions are filled with the efforts of these companies, by their
counsel, to establish the doctrine for the acts of these agents to the simple receipt of the
premium and delivery of the policy, the argument being that, as to all other acts of the agent,
he is the agent of the assured. This proposition is not without support in some of the earlier
decision on the subject; and, at a time when insurance companies waited for parties to come
to them to seek assurance, or to forward applications on their own motion, the doctrine had a
reasonable foundation to rest upon. But to apply such a doctrine, in its full force, to the
system of selling policies through agents, which we have described, would be a snare and a
delusion, leading, as it has done in numerous instances, to the grossest frauds, of which the
insurance corporations receive the benefits, and the parties supposing themselves insured
are the victims. The tendency of the modern decisions in this country is steadily in the
opposite direction. The powers of the agent are, prima facie, co-extensive with the business
intrusted to his care, and will not be narrowed by limitations not communicated to the person
with whom he deals. (Bebee vs. Ins. Co., 25 Conn., 51; Lycoming Ins.
Co. vs. Schoolenberger, 44 Pa., 259; Beal vs. Ins. Co., 16 Wis., 241; Davenport vs. Ins. Co.,
17 Iowa, 276.) An insurance company, establishing a local agency, must be held responsible
to the parties with whom they transact business, for the acts and declarations of the agent,
within the scope of his employment, as if they proceeded from the principal. (Sav. Bk. vs. Ins.
Co., 31 Conn., 517; Hortwitz vs. Ins. Co., 40 Mo., 557; Ayres vs. Ins. Co., 17 Iowa, 176;
Howard Ins. Co. vs. Bruner, 23 Pa., 50.)
In the fifth edition of American Leading Cases, 917, after a full consideration of the
authorities, it is said:
"By the interested or officious zeal of the agents employed by the insurance
companies in the wish to outbid each other and procure customers, they not
unfrequently mislead the insured, by a false or erroneous statement of what the
application should contain; or, taking the preparation of it into their own hands,
procure his signature by an assurance that it is properly drawn, and will meet the
requirements of the policy. The better opinion seems to be that, when this course is
pursued, the description of the risk should, though nominally proceeding from the
insured, be regarded as the act of the insurers." (Rowley vs. Empire Ins. Co., 36
N.Y., 550.)

The modern decisions fully sustain this proposition, and they seem to us founded on reason
and justice, and meet our entire approval. This principle does not admit oral testimony to
vary or contradict that which is in writing, but it goes upon the idea that the writing offered in
evidence was not the instrument of the party whose name is signed to it; that it was procured
under such circumstances by the other side as estops that side from using it or relying on its
contents; not that it may be contradicted by oral testimony, but that it may be shown by such
testimony that it cannot be lawfully used against the party whose name is signed to it. (See
also Am. Life Ins. Co. vs. Mahone, 21 Wallace, 152.)
The defendant, upon the information given by plaintiff, and after an inspection of the automobile by
its examiner, having agreed that it was worth P3,000, is bound by this valuation in the absence of
fraud on the part of the insured. All statements of value are, of necessity, to a large extent matters of
opinion, and it would be outrageous to hold that the validity of all valued policies must depend upon
the absolute correctness of such estimated value. As was said by the Supreme Court of the United
States in the case of the First National Bank vs. Hartford Fire Insurance Co. (5 Otto, 673; 24 L. ed.,
563), at. p. 565 of the Lawyers Edition:
The ordinary test of the value of property is the price it will commend in the market if offered
for sale. But that test cannot, in the very nature of the case, be applied at the time application
is made for insurance. Men may honestly differ about the value of property, or as to what it
will bring in the market; and such differences are often very marked among those whose
special business it is to buy and sell property of all kinds. The assured could do no more than
estimate such value; and that, it seems, was all that he was required to do in this case. His
duty was to deal fairly with the Company in making such estimate. The special finding shows
that he discharged that duty and observed good faith. We shall not presume that the
Company, after requiring the assured in his application to give the "estimated value," and
then to covenant that he had stated all material facts in regard to such value, so far as
known to him, and after carrying that covenant, by express words, into the written contract,
intended to abandon the theory upon which it sought the contract, and make the absolute
correctness of such estimated value a condition precedent to any insurance whatever. The
application, with its covenant and stipulations, having been made a part of the policy, that
presumption cannot be indulged without imputing to the Company a purpose, by studied
intricacy or an ingenious framing of the policy, to entrap the assured into incurring obligations
which, perhaps, he had no thought of assuming.
Section 163 of the Insurance Law (Act No. 2427) provides that "the effect of a valuation in a policy of
fire insurance is the same as in a policy of marine insurance."
By the terms of section 149 of the Act cited, the valuation in a policy of marine insurance is
conclusive if the insured had an insurable interest and was not guilty of fraud.
We are, therefore, of the opinion and hold that plaintiff was the owner of the automobile in question
and had an insurable interest therein; that there was no fraud on her part in procuring the insurance;
that the valuation of the automobile, for the purposes of the insurance, is binding upon the defendant
corporation, and that the judgment of the court below is, therefore, correct and must be affirmed,
with interest, the costs of this appeal to be paid by the appellant. So ordered.
G.R. No. L-47593 December 29, 1943

THE INSULAR LIFE ASSURANCE CO., LTD., petitioner,

vs.
SERAFIN D. FELICIANO ET AL., respondents.
Manuel Roxas and Araneta, Zaragoza, Araneta and Bautista for petitioner.
Deflfin Joven and Pablo Lorenzo for respondents.
Ramirez and Ortigas as amici curiae.

OZAETA, J.:
In a four-to-three decision promulgated on September 13, 1941, 1 this Court affirmed the judgment of
the Court of Appeals in favor of the respondents and against the petitioner for the sum of P25,000,
representing the value of two insurance policies issued by the petitioner on the life of Evaristo
Feliciano. A motion to reconsider and set aside said decision has been filed by the petitioner, and
both parties have submitted exhaustive and luminous written arguments in support of their
respective contentions.
The facts of the case are set forth in the majority and dissenting opinions heretofore handed down
by this Court, the salient points of which may be briefly restated as follows:
Evaristo Feliciano, who died on September 29, 1935, was suffering with advanced pulmonary
tuberculosis when he signed his applications for insurance with the petitioner on October 12, 1934.
On that same date Doctor Trepp, who had taken X-ray pictures of his lungs, informed the respondent
Dr. Serafin D. Feliciano, brother of Evaristo, that the latter "was already in a very serious ad
practically hopeless condition." Nevertheless the question contained in the application "Have you
ever suffered from any ailment or disease of the lungs, pleurisy, pneumonia or asthma?" appears
to have been answered , "No" And above the signature of the applicant, following the answers to the
various questions propounded to him, is the following printed statement:
1awphil.net

I declare on behalf of myself and of any person who shall have or claim any interest in any
policy issued hereunder, that each of the above answers is full, complete and true, and that
to the best of my knowledge and belief I am a proper subject for life insurance. (Exhibit K.)
The false answer above referred to, as well as the others, was written by the Company's soliciting
agent Romulo M. David, in collusion with the medical examiner Dr. Gregorio Valdez, for the purpose
of securing the Company's approval of the application so that the policy to be issued thereon might
be credited to said agent in connection with the inter-provincial contest which the Company was then
holding among its soliciting agents to boost the sales of its policies. Agent David bribed Medical
Examiner Valdez with money which the former borrowed from the applicant's mother by way of
advanced payment on the premium, according to the finding of the Court of Appeals. Said court also
found that before the insured signed the application he, as well as the members of his family, told the
agent and the medical examiner that he had been sick and coughing for some time and that he had
gone three times to the Santol Sanatorium and had X-ray pictures of his lungs taken; but that in spite
of such information the agent and the medical examiner told them that the applicant was a fit subject
for insurance.
Each of the policies sued upon contains the following stipulations:

This policy and the application herefor constitute the entire contract between the parties
hereto. . . . Only the President, or the Manager, acting jointly with the Secretary or Assistant
Secretary (and then only in writing signed by them) have power in behalf of the Company to
issue permits, or to modify this or any contract, or to extend the same time for making any
premium payment, and the Company shall not be bound by any promise or representation
heretofore or hereafter given by any person other than the above-named officials, and by
them only in writing and signed conjointly as stated.
The application contains, among others, the following statements:
18. I [the applicant] hereby declare that all the above statements and answers as well as
all those that I may make to the Company's Medical Examiner in continuation of this
application, to be complete, true and correct to the best of my knowledge and belief, and I
hereby agree as follows:
1. That his declaration, with the answers to be given by me to the Medical Examiner, shall be
the basis of the policy and form part of same.
xxx

xxx

xxx

3. That the said policy shall not take effect until the first premium has been paid and the
policy has been delivered to and accepted by me, while I am in good health.
4. That the agent taking this application has no authority to make, modify or discharge
contracts, or to waive any of the Company's rights or requirements.
5. My acceptance of any policy issued on this application will constitute a ratification by me of
any corrections in or additions to this application made by the Company in the space
provided "For Home Office Corrections or Additions Only." I agree that photographic copy of
this applications as corrected or added to shall constitute sufficient notice to me of the
changes made. (Emphasis added.)
The petitioner insists that upon the facts of the case the policies in question are null and void ab
initio and that all that the respondents are entitled to is the refund of the premiums paid thereon.
After a careful re-examination of the facts and the law, we are persuaded that petitioner's contention
is correct. To the reasons adduced in the dissenting opinion heretofore published, we only desire to
add the following considerations:
When Evaristo Feliciano, the applicant for insurance, signed the application in blank and authorized
the soliciting agent and/or medical examiner of the Company to write the answers for him, he made
them his own agents for that purpose, and he was responsible for their acts in that connection. If
they falsified the answers for him, he could not evade the responsibility for he falsification. He was
not supposed to sign the application in blank. He knew that the answers to the questions therein
contained would be "the basis of the policy," and for that every reason he was required with his
signature to vouch for truth thereof.
Moreover, from the facts of the case we cannot escape the conclusion that the insured acted in
connivance with the soliciting agent and the medical examiner of the Company in accepting the
policies in question. Above the signature of the applicant is the printed statement or representation: "

. . . I am a proper subject for life insurance." In another sheet of the same application and above
another signature of the applicant was also printed this statement: "That the said policy shall not take
effect until he first premium has been paid and the policy as been delivered to and accepted by me,
while I am in good health." When the applicant signed the application he was "having difficulty in
breathing, . . . with a very high fever." He had gone three times to the Santol Sanatorium and had Xray pictures taken of his lungs. He therefore knew that he was not "a proper subject for life
insurance." When he accepted the policy, he knew that he was not in good health. Nevertheless, he
not only accepted the first policy of P20,000 but then and there applied for and later accepted
another policy of P5,000.
We cannot bring ourselves to believe that the insured did not take the trouble to read the answers
contained in the photostatic copy of the application attached to and made a part of the policy before
he accepted it and paid the premium thereon. He must have notice that the answers to the questions
therein asked concerning his clinical history were false, and yet he accepted the first policy and
applied for another. In any event, he obligated himself to read the policy when he subscribed to this
statement: "My acceptance of any policy issued on this application will constitute a ratification by me
of any corrections in or additions to this application made by the Company . . ." By accepting the
policy he became charged with knowledge of its contents, whether he actually read it or not. He
could not ostrich-like hide his head from it in order to avoid his part of the bargain and at the same
time claim the benefit thereof. He knew, or was chargeable with knowledge, from the very terms of
the two policies sued upon (one of which is printed in English and the other in Spanish) that the
soliciting agent and the medical examiner had no power to bind the Company by any verbal promise
or oral representation. The insured, therefore, had no right to rely and we cannot believe he relied
in good faith upon the oral representation. The insured, therefore, had no right to rely and we
cannot believe he relied in good faith upon the oral representation of said agent and medical
examiner that he (the applicant) was a fit subject for insurance notwithstanding that he had been and
was still suffering with advanced pulmonary tuberculosis.
From all the facts and circumstances of this case, we are constrained to conclude that the insured
was a coparticipant, and coresponsible with Agent David and Medical Examiner Valdez, in the
fraudulent procurement of the policies in question and that by reason thereof said policies are
void ab initio.
Wheretofore, the motion for reconsideration is sustained and the judgment of the Court of Appeals is
hereby reversed. Let another judgment be entered in favor of the respondents and against the
petitioner for the refund of the premiums amounting to P1,389, with legal interest thereon from the
date of the complaint, and without any finding as to costs.
Moran, Paras and Bocobo, JJ., concur.

Separate Opinions

YULO, C.J., concurring:

I can find no quarrel with the legal considerations and conclusions set forth in the original decision
promulgated by this Court. As general rules of law they find full support not only in reason and in
logic, but also in simple human sense of justice. More so, modern and complicated practices
attendant to the ever growing trade in life insurance demand the strictest accountability by insurance
companies for acts of their authorized agents. In this way only may the State afford reasonable
protection to the unwary public from abuse by such organizations as may be found to be of
questionable moral standards.
But a careful consideration of the evidentiary facts as set forth in the decision of the Court of Appeals
leads me to conclude that the ends of justice would not be serve by the application to the present
case of the rules so enunciated. Rather, to serve the ends of justice the case of the respondents
should be removed from the protection of such rules.
The subject of the insurance policies under consideration is the life of the assured. It is contended by
his beneficiaries that they took these policies on the basis of a life expectancy of a person gravely
stricken with tuberculosis. They have consistently made protestations that they had so informed the
agents of the insurance company. But the policies were issued upon the life of the assured, as a
perfectly normal and healthy person. The error is vital and goes to the very existence of the contract
itself. Who is responsible for the error?
The direct cause, of course, is the false recitals in the application for insurance. While it is true that it
was the agents of the insurance company who filled out such application, yet it was the assured
who, by signing the application in blank, made it possible for the said agents to procure the issuance
of the policies on the basis of false information, in order to suit their own purposes. Upon the
admitted facts, I am of the opinion that in justice and in equity, the responsibility for the falsifications
made by the insurance agents in the preparation of the insurance application should be laid at the
door of the assured and his beneficiaries.
I vote with the majority in granting the motion for reconsideration and in reversing the decision under
review.
HONTIVEROS, J., dissenting:
The reasons given in the dissenting opinion in this case, as published in the Official Gazette of
October 4, 1941 (pp. 2847 to 2855), supplemented by those in the resolution of the majority on the
motion for reconsideration, do not seem to me sufficient to overthrow the decision rendered by the
Court of First Instance, confirmed by the Court of Appeals, and sustained by this Supreme court in
its decision of September 18, 1941. The alleged connivance between the insured Evaristo Feliciano,
the agent Romulo M. David, and the medical examiner Dr. Gregorio Valdez not only does not clearly
appear of record, but on the contrary is denied in the finding of facts of the court a quo and of the
Court of Appeals which cannot be reviewed or altered by this Court.
The mere fact that the insured signed at the bottom of the application for insurance when some of its
lines intended for answers to certain questions were still in blank, answers which according to the
evidence and to the findings of the two inferior courts he had grounds to believe will be made in
accordance with the information which he and his family had given to agent David and to Dr. Valdez,
does not convert these two persons into agents of the insured in a way as to make the latter

responsible for the acts of the former. That the photostatic copies of said forms which are attached to
the policies object of this case are almost illegible, is a fact which should be taken into account,
together with the other fact that Evaristo Feliciano does not know English, the language in which
those documents are written. In support of this dissenting opinion, the following authorities may be
cited:
The mere failure of the insured to inform himself of the insertion of false answers in the
application which has been filled out by the agent of the insurer does not convict him of lack
of good faith. (Vol. 5, Cooley's Briefs on Insurance, 2nd Ed., p. 4136, and many cases cited.)
The insured is not chargeable with such negligence as will render him liable for false
answers inserted by the agent merely because he signed the application in blank and trusted
the agent to fill out by the agent, without reading it. (Id., p. 4136, and many cases cited.)
An illiterate person or one who does not understand the English language (as is the case
with Evaristo Feliciano) is not guilty of inexcusable negligence in failing to read the
application or having it read to him, nor can it be said that such person deliberately made a
false statement because he did not read over the application. (81 ALR 865, 866, W. 117 ALR
796.)
Nor can it be said that the assured, who has fully, frankly, truthfully, and in good faith
answered all the required questions, is guilty of negligence in signing, without reading, the
application which is thereupon prepared by the agent. He is justified in assuming that the
agent, has, with equal good faith, truthfully recorded the answers give. He may well say to
the Company: 'You accredited this man to me as your representative, and I signed the
application thus prepared by him, relying upon the character which you gave him, when you
commissioned him to come to me as your agent. If he acted dishonestly in the matter, you,
and not I, must suffer the consequences . . .! (Germania Life Ins. Co. vs. Lunkeheimer [1931]
Ind., 538; 26 N. E., 1052)
In such case the acceptance of the policy, with this application attached, does not require the
insured to institute an investigation into its provisions, or the conditions upon which is was
issued, to ascertain whether the agent has acted in good faith, since, under such
circumstances, the insured may rely upon the presumption that he has been honestly dealt
with the insurer. (Otto vs. Hartford Ins. Co., 38 Minn., 423).
Besides, the principles that the insured is not bound to know the contents of the application,
and may rely on the agent's assurances that his answers have been correctly written will, of
course, apply with special force where the insured is illiterate and unable to read, or is
ignorant of the language. (Vol. 5, Cooley's Briefs on Insurance, 2nd Ed. p. 4138, cases
cited.)
And also where the photostatic copies of the application embodied in the policy are
practically illegible, the insured is not bound to know the contents of the application. (New
York Ins. Co. vs. Holpem D.C. 57 Fed. 2nd, 200).
According to the great weight of authority, if an agent of the insurer, after obtaining from an
applicant for insurance a correct and truthful answer to interrogations contained in the
application for insurance, without knowledge of the applicant fills in false answers, either

fraudulently or otherwise, the insurer cannot assert the falsity of such answers as a defense
to the liability on the policy and this is generally without regard to the subject matter of the
answers or the nature of the agent's duties or limitations on his authority, at least if not
brought to the attention of the applicant. It is equally well settled that if a correct
representation is made in a written application, or the insurance agent issuing the policy is
appraised of the true facts concerning the matter in question, as for instance the title to the
insured premises, but the agent inserts an incorrect statement in the policy, the insurer
cannot rely upon the error in avoidance of its liability". Home Ins. Co. vs. Mendenhall, 154 Ill.,
452, 45 NE., 1078, 36 LRA., 374; Phoenix Ins. Co. vs. Tucker, 92 Ill., 64, 34 Am Rep.,
106; Commercial Ins. Co. vs. Spanknoble, 52 Ill., 53, 4 Am. Report, 582; Young vs. Hartford
F. Ins. Co. 45 Iowa, 377, 24 Am. Rep., 754; Welsh vs. London Assur. 151 Pa., 607, 25 A,
142, 21 Am St. Rep., 726 (Taken from Am Juris. on Insurance Vol. 29, par. 843).
An insured may be justified in signing an application in blank at the request of the insurer's
agent, who agrees to fill it in from data furnished by the insured or from an old application. In
fact, an insurer cannot urge the falsity of representations contained in the policy issued, or in
the application, where such representations were inserted therein, either by the company or
its agent, after the application was signed, without the knowledge or consent of the insured,
who has made no such representations. (Couch on Insurance, Vol. 4, par. 842 b.)
I believe that the motion for reconsideration presented in this case should be denied, not only
because of the weighty reasons relied upon in the decision which it attacks, but also because a
dangerous precedent would otherwise be established, for, with the destruction of the confidence
which the public has hitherto reposed in the duly accredited agents of insurance companies and in
their examining physicians, this branch of the economic life of the people will have to be unfavorably
affected.
Imperial, J., dissents.
G.R. No. L-47593

September 13, 1941

THE INSULAR LIFE ASSURANCE CO., LTD., petitioner,

vs.
SERAFIN D. FELICIANO and ANGEL, FLORENDA, EUGENIO, HERMINIO and LETICIA, all
surnamed FELICIANO, represented by their guardian ad litem SERAFIN D.
FELICIANO, respondents.
Araneta, Zaragosa, Araneta & Bautista for petitioner.
Delfin Joven for respondents.
LAUREL, J.:
One Evaristo Feliciano filed an application for insurance with the herein petitioner upon the
solicitation of one of its agents. Two insurance policies to the aggregate amount of P25,000 were
issued to him. Feliciano died on September 29, 1935. The defendant company refused to pay on the
ground that the policies were fraudulently obtained, the insured having given false answers and
statements in the application as well as in the medical report. The present action was brought to
recover on said policies. The lower court rendered judgment in favor of the plaintiffs. The lower court
found that at the time Feliciano filed his application and at the time he was subjected to physical
examination by the medical examiner of the herein petitioner, he was already suffering from

tuberculosis. This fact appears in the negative both in the application and in the medical report. The
lower court, after an exhaustive examination of the conflicting testimonies, also found that Feliciano
was made to sign the application and the examiner's report in blank, and that afterwards the blank
spaces therein were filled in by the agent and the medical examiner, who made it appear therein that
Feliciano was a fit subject for insurance. The lower court also held that neither the insured nor any
member of his family concealed the real state of health of the insured. That as a matter of fact the
insured, as well as the members of his family, told the agent and the medical examiner that the
applicant had been sick and coughing for sometime and that he had also gone three times to the
Santol Sanatarium. On appeal, this finding of facts of the lower court was sustained by the Court of
Appeals. This concludes the controversy over the facts in so far as this Court is concerned.
The first assignment of error of the petitioner raises the question we are now called upon to decide:
The Court of Appeals erred in holding that an insurance company has no right to avoid a policy
where its agent knowingly and intentionally wrote down the answers in the application differing from
those made by the insured, in disregard of the exception that when the agent, instead of serving the
interests of his principal, acts in his own or another's interest and adversely to that of his principal,
the said principal is not bound by said acts of the agent."
On the proposition thus presented, there are two main avenues of approach indicated: one leading
to the validation of a policy where its agent, without fraud, collusion or bad faith on the part of the
insured, falsified the answers given by the insured; and the other, leading to the avoidance of the
policy under the circumstances. We see no need for an extended discussion of the conflicting
authorities. Whenever courts are given the choice between two conflicting principles, the
determinative fact which should sway them is the conformity of its contemplated course to reason
and to "the common sense of the situation." The life of the law is not only logic but experience.
The phenomenal growth of insurance from almost nothing a hundred years ago to its present
gigantic proportion is not of the outstanding marvels of present-day business life. The demand for
economic security, the growing need for social stability, and the clamor for protection against the
hazards of cruel-crippling calamities and sudden economic shocks, have made insurance one of the
felt necessities of modern life. Insurance is no longer a rich man's monopoly. Upon it are heaped the
assured hopes of many families of modest means. It is woven, as it were, into the very warp and
woof of national economy. It touches the holiest and most sacred ties in the life of man-love of
parents, love of wives and love of children. It is of common knowledge that the selling of insurance
today is subjected to the whilrlwind pressure of modern salesmanship. Insurance companies send
detailed instructions to their agents to solicit and procure applications. These agents are to be found
all over the length and breadth of the land. They are stimulated to more active efforts by contests
and by the keen competition offered by other rival insurance companies. They are supplied with
blank applications and paid large commissions on the policies secured by them. All transactions are
generally done through these agents. They act, in fact and in theory, as the general representatives
of the insurance companies. They supply all the information , prepare and answer the applications,
submit the applications to their companies, conclude the transactions, and otherwise smooth out all
difficulties. The agents, in short, do what the company set them to do.
In the present case, the agent knew all the time the true state of health of the insured. The insurer's
medical examiner approve the application knowing full well that the applicant was sick. The situation
is one in which one of two innocent parties must bear a loss for his reliance upon a third person. In
this case, it was the insurer who gave the agent authority to deal with the applicant. It was the one
who selected the agent, thus implying that the insured could put his trust on him. It was the one who
drafted and accepted the policy and consummated the contract. It seems reasonable that as

between the two of them, the one who employed and gave character to the third person as its agent
should be the one to bear the loss.
The company received the money of the applicant as the price of the risk to be taken by it. If the
policy should be avoided, it must be because it was void from the very beginning, and the result
would be that the insurer, while it received the money, never assumed any risk. The result would be,
in the language of one of the cases, "to place every simple or uneducated person seeking insurance
at the mercy of the insurer who could, through its agent, insert in every application, unknown to the
applicant and over his signature, some false statements which would enable him to avoid all liability
while retaining the price paid for the supposes insurance." (State Insurance Company v. Taylor, 14
Colo. 499, 24 Pac. 333.) The weight of authority is that if an agent of the insurer, after obtaining from
an applicant for insurance a correct and truthful answer to interrogatories contained in the
application for insurance, without knowledge of the applicant fills in false answers, either fraudulently
or otherwise, the insurer cannot assert the falsity of such answers as a defense to liability on the
policy, and this is true generally without regard to the subject matter of the answers or the nature of
the agent's duties or limitations on his authority, at least if not brought to the attention of the
applicant.
The fact that the insured did not read the application which he signed, is not indicative of bad faith. It
has been held that it is not negligence for the insured to sign an application without first reading it if
the insurer by its conduct in appointing the agent influenced the insured to place trust and
confidence in the agent. (Den Hartog v. Home Nat. Ins. Asso., 197 Iowa, 143 196 N. W. 944.) As the
court said in the case of Germania L. Ins. Co. v. Lunkebiemer, 127 Ind. 538, 26 N. E. 1082, "Nor can
it be said that the assured, who has fully, frankly, truthfully, and in good faith answered all the
required questions, is guilty of negligence in signing, without reading, the application which is
thereupon prepared by the agent. He is justified in assuming that the agent has, with equal good
faith, truthfully recorded the answers given him. He may well say to the company: "You accredited
this man to me as your representative and I signed the application thus prepared by him, relying
upon the character which you gave him when you commissioned him to come to me as your agent.
If he acted dishonestly in the matter, you and not I must suffer the consequences.' ..." In the instant
case, it has been proved that the insured could not read English, the language in which the
application was written, and that after the contract was signed, it was kept by his mother. As a
consequence, the insured had no opportunity to read or correct any misstatement therein. (Bill of
Exceptions, pp. 60-61.)
We have not been insensible to the appeal that the course we have followed may lead to fraud and
work hardship on insurance companies, for it would be easy for insurance agents and applicants to
insert false answers in their applicants to insert false answers in their applications for insurance. This
means that it is to the particular interest of these companies to exercise greater care in the selection
of their agents and examiners. Their protection is still in their own hands and which may be achieved
by other means. Withal, the attainment of a common good may involve impairment and even
sacrifice of beneficial interests of a particular group, but in life, compromise is inevitable until the
hour of doom strikes.
The petition is hereby dismissed and the judgment sought to be reviewed is affirmed with costs
against the petitioner. So ordered.
Abad Santos, Diaz, and Horrilleno, JJ., concur.

Separate Opinions
OZAETA, J., with whom concur AVANCEA, C.J., and MORAN, J., dissenting:
Altho a dissenting opinion is but a voice in the wilderness, we have to write it because the
Constitution so requires.
The material facts are not disputed in this instance, but they are not adequately stated in the majority
opinion, and we apprehend that the significance of those not stated therein may have been
overlooked by the majority of the Court.
This is a suit on two life insurance policies issued by the petitioner (hereinafter referred to as the
Company) to Evaristo Feliciano as of October 1 and November 1, 1934, for P20,000 and P5,000,
respectively. The application for the first policy was signed on October 12, and that for the second
policy, on October 28, 1934. On those dates Feliciano "had an advanced disease of the lungs ... He
was breathless, having difficulty in breathing, and he had the appearance of one with high fever." As
a matter of fact, on October 12, 1934, the very day the insured signed the first applications, after the
last X-ray examination of his lungs had been made at the Santol Sanatorium by Doctor Trepp, the
latter informed the respondent Serafin D. Feliciano, brother of the insured, of the result of the X-ray
examination and told him that in his opinion his brother "was already in a very serious and practically
hopeless condition." (Trial court's decision, P.27, B. of E.) After the first application for insurance of
P20,000 had been approved and the corresponding policy issued, the insured applied on October
28, 1934, for another insurance of P5,000, and the policy therefor was issued as of November 1,
1934. Less than one year later, to wit, on September 29, 1935, the insured died of the same malady
he had been suffering-pulmonary tuberculosis.
The Court of Appeals found in effect that the Company's soliciting agent Romulo M. David, in
conclusion with the medical examiner Dr. Gregorio Valdez, knowingly wrote false answers to the
question contained in the applications and in the medical examiner's reports which they had made
the applicant sign in blank in order to secure the Company's approval thereof and have the
corresponding policies credited to the agent in connection with the interprovincial contest which the
Company was then holding among its soliciting agents to boost the sales of its policies. The Court of
Appeals intimates that Agent David bribed Medical Examiner Valdez with money which the former
borrowed from the applicant's mother by way of advanced payment on the premium. In this
connection, it may be mentioned that the premium paid on the first policy was P1,111.20, and that on
the second policy, P277.80, or a total of P1,389, which the Company offers to refund.
The Court of Appeals also found that before the insured signed the first application and medical
examiner's report, he and the members of his family told the agent and the medical examiner that he
had been sick and coughing for some time and that he had gone three times to the Santol
Sanatorium and had X-ray pictures of his lungs taken; but that in spite of such information the agent
and the medical examiner told them that the applicant was a fit subject for insurance.
Each of the policies sued upon contains the following stipulations:
This policy and the application therefor constitute the entire contract between the parties
hereto. ... Only the President, or the Manager, acting jointly with the Secretary of Assistant
Secretary (and then only in writing signed by them) have power in behalf of the Company to
issue permits or to modify this or any contract, or to extend the time for making any premium
payment, and the Company shall not be bound by any promise or representation heretofore
or hereafter given by any person other than the above-named officials, and by them only in
writing and signed conjointly as stated.

The application referred to in and made a part of the policy contains, among others, the following
statements:
18. I [the applicant] hereby declare that all the above statements and answers as well as
those that I may make to the Company's Medical Examiner in continuation of this application,
to be complete, true and correct to the best of my knowledge and belief, and I hereby agree
as follows:
1. That this declaration, with the answers to be given by me to the Medical Examiner, shall
be the basis of the policy and from part of same.
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3. That the said policy shall not take effect until the first premium has been paid and the
policy has been delivered to and accepted by me, while I am in good health.
4. That the agent taking this application has no authority to make, modify or discharge
contracts, or to waive any of the company's rights or requirements.
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Upon the facts above set forth, we are of the opinion that respondents are not entitled to recover the
amounts of the policies in question but only the premiums paid thereon, for the following reasons:
1. Under the very terms of the policies sued upon there is no valid contract of insurance here. The
policies were issued on the basis of the statement subscribed to by the applicant to the effect that he
was and had been in good health. The basis being false, there was no real meeting of the minds of
the parties. The agents had no authority to bind the company thru oral representations, and less so
when such representations were false and fraudulent.
2. The insured and the members of his family who are the respondents herein were not entirely
innocent of bad faith. They were not candid, unsophisticated rustics. They were well to do and well
educated. They were not ignorant of the practices in the life insurance business. In 1924, the insured
had taken an insurance policy of P10,000 from the Sun Life Insurance Company, which, however, he
allowed to lapse. The insured was a "proprietor and agriculturist" (see policy Exhibit E). The
respondent Serafin D. Feliciano, brother of the insured, is a physician who for some years had
worked in the Santol Sanatorium with Doctor Trepp (Exhibit B, p. 16). The most charitable view that
one could take of the insured's part in the transaction is that he, with the approval of his relatives,
particularly his mother who furnished the money with which to pay the premiums and who was
named beneficiary to the extent of P12,000, allowed himself to be used as instrument in the wrongful
issuance of the policies in question by the Company to defraud the latter. It is difficult to believe that
in so doing he and his relatives were not actuated by the desire for lucre. They knew that a person in
bad health let alone one who was "in a very serious and practically hopeless condition" was
not insurable. So they must also have known, or at least they had good reason to suspect, that
Agent David and Medical Examiner Valdez were not acting in good faith when they made the
applicant sign the application in blank and told him (the hopelessly sick man) that he was fit of
insurance. If the applicant and his relatives were acting in good faith, they would have been curious
enough to scrutinize the application and the medical examiner's report contained in the first policy
upon receipt of it, to see whether the medical examiner had correctly stated therein the state of the
applicant's health. It is significant that shortly after they had received the first policy of P20,000, the
insured applied for and secured another policy of P5,000. As held by the Supreme Court of the
United States in the analogous case on New York Life Insurance company v. Fletcher, 117 U. S. 519:

"He could not hold the policy without approving the action of the agents and thus becoming a
participant in the fraud committed. The retention of the policy was an approval of the application and
of its statements. The consequences of that approval cannot after his death be avoided."
3. Life insurance is a savings institution; it is not a gambling scheme. The premiums paid by the
insured, plus a participation in the profits realized by the life insurance company from the investment
of those premiums, are returned to him if he survives the policy. If, contrary to the life expectancy of
the insured, he dies before the policy matures, the full amount of the insurance is paid to his
beneficiary. The insured is not expected to lose, but neither is he supposed to expect a windfall or an
inordinate gain. That is elemental in every sound business. The life insurance business is a cooperative enterprise in the sense that the policy-holders as well as the company are interested in
making profits and in avoiding unnecessary or bad losses. The company is, to a certain extent, a
trustee of the funds paid to it by its policyholders. No insurance company which would issue policies
indiscriminately could expect to survive or, for that matter, be licensed by the Government to do
business. That is fundamental. Every fraud perpetrated upon the company affects the policy-holders
because their share in the profits is thereby unduly minimized. That is why the Government, thru the
Insurance Commissioner, closely supervises the insurance business (see section 169 et seq., The
Insurance Act). We think it is bad law to hold valid a policy procured thru fraud on the life of a person
who was almost on the brink of his grave. Avaricious persons, with the connivance of unscrupulous
agents of insurance companies, could make money on the lives of their relatives who were expected
to die soon, by fraudulently insuring them, and could get away with it, as in the instant case. The real
or ultimate victim is not the company alone but also its numerous policyholders who have put their
savings in it.
It is suggested that the remedy is for the insurance companies to exercise greater care in the
selection of their agents and examiners. As a matter of fact, under the law no one may act as
soliciting agent of an insurance company without authority or license from the Insurance
Commissioner(section 189, The Insurance Act); and the Insurance Commissioner makes a careful,
confidential investigation of the conduct and reputation of the applicant for such license before
issuing the same. But no amount of care taken by both the company and the Insurance
Commissioner in the selection of soliciting agents and medical examiners can insure the company
against bad faithly and the cupidity of the evil-minded. The company would have to exact a huge
bond of every one of its numerous agents and medical examiners to guarantee his fidelity, and that
would be too expensive to make the insurance business profitable. In other words, the suggested
remedy is, we believe, impracticable. The only safe and sound policy is, not to condone but to
condemn fraud under any and all circumstances.
4. If we are to be guided and persuaded by cases adjudicated in other jurisdictions as the Court of
Appeals was in deciding this case, we should follow that decided by the Supreme Court of the
United States upon facts similar or analogous to those obtaining in the instant case, instead of
adopting doctrines laid down by the state supreme courts and inferior federal courts in cases the
facts of which bear little or no anology to those of the case at bar. The case squarely in point, but
which the Court of Appeals rejected, is New York Life Insurance Company v. Fletcher, supra. In that
case it was stated in the application for insurance that the applicant never had a disease of the
kidneys or any serious disease, and had never been seriously ill, and had no regular medical
attendant, whereas he had been afflicted with diabetes, which is a serious disease of the kidneys,
and had been under medical treatment for it, and he actually died of that disease. The plaintiff
therein, however, alleged, and adduced evidence to show:
. . . That two agents of the company at St. Louis, who were personally acquainted with the assured
and knew his past and then physical condition, had solicited him on different occasions to take out a
policy in the company; that he told each of them on those occasions that he did not believe he was

insurable; that they knew he had been in bad health and had been under medical treatment for
diabetes, though he thought he was then well; that they assured him that he was insurable, that the
fact that he had the disease made no difference, and that if he would take out a policy and pay the
premiums required he would have no trouble; that finally, about the 18th of December, 1877, he
consented to take a policy; that they then told him it would be necessary for him to answer certain
questions as a matter of form; that one of them thereupon read to him certain questions from a
printed blank, and as he answered them the other pretended to take down and write in the blank the
substance of the answers as given, not reading over to the assured what he had written, nor
consulting him about it, nor informing him what it was, but saying that what he did was a mere
formality; that when he was asked with respect to his having any disease of the kidneys he replied
that his condition was well known to the agents, who were aware that he had been sick and under
treatment by Doctor Brokaw for diabetes, and that the doctor's office was opposite, and they could
go there and find out everything they wanted to know; that the assured had faithfully answered all
the questions, but the agents inserted in the blanks false answers; that he had no reason to suppose
that the answers were taken down differently from those given; that after answering all their question
he was asked to sign his name to the paper to identify him as the party for whose benefit the policy
was to be issued, and for that purpose he signed the paper twice, without reading it or the written
answers; that the agents did not read to him any part of the application except the questions, and did
not read the clause set forth in the defendant's answer, nor call the attention to the fact that his
signatures were intended as an acceptance or assent to that clause; that when the policy was
delivered to him he neither read it nor the copy of the application attached to it, that the agent who
delivered it informed him that it was right, and he was insured, and he gave no further attention to
the matter; that the annual premiums, as they fell due, were paid to said agent, who received them
with full knowledge of all the facts; and that, therefore, the company was estopped form pretending
that any of the answers as written rendered the policy void." (117 U.S. 521-523.)
In reversing the judgment rendered by the trial court in favor of the plaintiff, the Federal Supreme
Court held "that the agent had no authority from the company to falsify the answers," and that "the
assured could acquire no right by virtue of his falsified answers." The Court further said:
. . . Both he and the company were deceived by the fraudulent conduct of the agent. The
assured was placed in the position of making false representations in order to secure a
valuable contract which, upon a truthful report of his condition, could not have been
obtained. By them the company was imposed upon and induced to enter into the contract. In
such a case, assuming that both parties acted in good faith, justice would require that the
contract be cancelled and the premiums returned. As the present action is not for such a
cancellation, the only recovery which the plaintiff could properly have upon the facts he
asserts, taken in connection with the limitation upon the powers of the agent, is for the
amount of the premiums paid, and to that only would he be entitled by virtue of the statute of
Missouri.
But the case as presented by the record is by no means as favorable to him as we have
assumed. It was his duty to read the application he signed. He knew that upon it the policy
would be issued, if issued at all. It would introduce great uncertainty in all business
transactions, if a party making written proposals for a contract, with representations to induce
its execution, should be allowed to show, after it had been obtained, that he did not know the
contents of his proposals, and to enforce it, notwithstanding their falsity as to matters
essential to its obligation and validity. Contracts could not be made, or business fairly
conducted, if such a rule should prevail; and there is no reason why it should be applied
merely to contract of insurance. There is nothing in their nature which distinguishes them in
this particular from others. But here the right is asserted to prove not only that the assured
did not make the statements contained in his answers, but that he never read the
application, and to recover upon a contract obtained by representations admitted to be false,

just as though they were true. If he had read even the printed lines of his application, he
would have seen that it stipulated that the rights of the company could in no respect be
affected by his verbal statements, or by those of its agents, unless the same were reduced to
writing and forwarded with his application to the home office. The company, like any other
principal, could limit the authority of its agents, and thus bind all parties dealing with them
with knowledge of the limitation. It must be presumed that he read the application, and was
cognizant of the limitations thereon expressed.
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There is another view of this case equally fatal to a recovery. Assuming that the answers of
the assured were falsified, as alleged, the fact would be at once disclosed by the copy of the
application, annexed to the policy, to which his attention was called. He would have
discovered by inspection that a fraud had been perpetrated, not only upon himself but upon
the company, and it would have been his duty to make the fact known to the company. He
could not hold the policy without approving the action of the agents and thus becoming a
participant in the fraud committed. The retention of the policy was an approval of the
application and of its statements. The consequences of that approval cannot after his death
be avoided.
. . . No one can claim the benefit of an executory contract fraudulently obtained, after the
discovery of the fraud, without approving and sanctioning it. (117 U. S. 529-530, 534, 535.)
Our attention has been called to al later case Continental Life Insurance
Company v. Chamberlain, 132 U. S. 304 in which the court held the company liable upon a policy
of insurance of the life of one Richard Stevens issued under the following circumstances, as stated
in the decision:
The application for insurance was taken in Iowa by one Boak, a district agent of the company
in certain named counties of the States, fourteen in number, having written authority "to
prosecute the business of soliciting and procuring applications for life insurance policies
within and throughout said territory."
Among the numerous questions propounded in the application was the following: "Has the
said party [the applicant] any other insurance on his life; if so, where and for what amounts?"
The answer, as it appears in the application, is: "No other." That answer, as were all the
answers to questions propounded to the applicant, was written by the company's agent,
Boak. In reference to the above question and answer, the latter testified: "I asked him
[Stevens] the question if he had any other insurance, as printed in the application and as we
ask every applicant, and he told me he had certain certificates of membership with certain
cooperative societies, and he enumerated different ones, and said he did not know whether I
would consider them insurance or not. I told him emphatically that I did not consider them
insurance and we had considerable conversation about it. He wanted to know my authority
for saying I did not consider them insurance. I gave him my authority give him my reasons
and he agreed with me that these cooperative societies were in no sense insurance
companies, and in that light I answered the question "No" after he had stated the facts? A.
I did. Q. Who wrote the answer in there? A. I did."
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It was admitted on the trial that at the date of Stevens' application he had insurance in
cooperative companies to the amount of $12,000. (132 U. S. 306, 308.)

The court, after quoting the pertinent provision of the statute of Iowa, observed that "by force of the
statute, he was the agent of the company in soliciting and procuring the application. He could not, by
any of his, shake of the character of agent for the company. Nor could the company by any provision
in the application or policy convert him into an agent of the assured." Referring to the incorrectness
propounded by him to the applicant in relation to the stipulation in the policy that the terms thereof
could not be varied except in writing signed by the president or the secretary of the company, the
court said:
. . . The purport of the word "insurance" in the question, "Has the said party any other
insurance on his life?" is not so absolutely certain as, in an action upon the policy, to
preclude proof as to what kind of life insurance the contracting parties had in mind when that
question was answered. Such proof does not necessarily contradict the written contract.
Consequently, the above clause, printed on the back of the policy, is to be interpreted in the
light of the statute and of the understanding reached between the assured and the company
by its agent when the application was completed, namely, that the particular kind of
insurance inquired about did not include insurance in cooperative societies. In view of the
statute and of that understanding, upon the faith of which the assured made his application,
paid the first premium, and accepted the policy, the company is estopped, by every principle
of justice, from saying that its question embraced insurance in cooperative associations. The
answer of "No other" having been written by its own agent, invested with authority to solicit
and procure applications, to deliver policies, and, under certain limitations, to receive
premiums, should be held as properly interpreting both the question and the answer as to
other insurance. (132 U. S. 311-312.)
There is no conflict between the two cases. They were decided differently because the facts were
different. Suffice it for us to say that the facts of the instant case are analogous to those of the
Fletcher case and different from those of the Chamberlain case.
We have examined the three cases cited in the majority opinion, from the supreme courts of
Colorado, Iowa, and Indiana, respectively, and we find that the facts of each and everyone of them
bear no analogy to those of the present case.
5. The majority opinion says: "The situation is one in which one of two innocent parties must bear a
loss for his reliance upon a third person." We cannot subscribe to this proposition (1) because, as we
have pointed out above, the insured and his relatives, the herein respondents, were not innocent of
bad faith and (2) because, even if the policies in question should be held invalid, the respondents
would not suffer any loss since the Company has offered to return the premiums paid, and it could
be ordered to make such refund with legal interest. By such judgment neither party would be
permitted to enrich himself at the expense of the other. This, we feel, is urged by justice, reason, and
"the common sense of the situation."