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DEVELOPMENT BANK OF THE PHILIPPINES v.

CA and the
ESTATE OF THE LATE JUAN B. DANS
(WENCESLAO)
PRINCIPAL
AGENT
THIRD PARTY/INSURANCE

DANS
DBP
DBP MRI

DOCTRINES
I.
Liability of the agent who exceeds the scope of his
authority depends upon whether the 3 rd person is aware
of the limits of agents powers.
II.
If the third person dealing with an agent is unaware of
the limits of the authority conferred by the principal on
the agent and the third person has been deceived by the
non-disclosure by the agent, the the agent is liable for
damages to him.
III.
The rule that the agent is liable when he acts without
authority is founded upon the supposition that there has
been some wrong or omission on his part either in
misrepresenting or in affirming or concealing the
authority under which he assumes to act.
FACTS
May 1987Juan Dans with wife Candida, his son and
daughter-in-law applied for a loan of P500,000 with the DBP.
(May 1987 loan)
As the principal-mortgagor, Dans (76 years old) was advised
by the DPB to obtain a mortgage redemption insurance
(MRI) with the DBP MRI Pool in August 1987.
A loan with a reduced amount of P300,000 was approved
and released by DBP. From the proceeds of the May 1987
loan, DBP deducted the amount of P1,476 as payment for
the MRI premium with service fee of 10% of the premium
collected.
Dans accomplished and submitted the MRI Application for
Insurance and the Health Statement for DBP MRI Pool.
Sept 3, 1987Dans died of cardiac arrest. The DPB, upon
notice, relayed this information to the DBP MRI Pool. DBP
MRI Pool notified DBP that Dans was not eligible for MRI
Coverage being over the age limit (60 years old).
DBP apprised Candida of the disapproval of her husbands
MRI application. DBP offered to refund the premium paid by

late Dans, but Candida refused and demanded the payment


of the face value if the MRI or an amount equivalent to the
loan.
DBP offered an ex gratia (means given freely) settlement
of P30,000 which Candida refused to accept.
Estate
(respondent),
through
Candida
Dans
as
administratrix, filed a complaint against DBP and DBP MRI
Pool for Collection of Sum of Money.
Respondents alleged that Dans became insured by the DBP
MRI Pool with full knowledge of Dans age.
RTCrendered a decision in favor of the Estate of Dans.
o DBP MRI Pool was absolved from liability because of
the absence of privity of contract between it and the
deceased.
o DBP was declared in estoppel for having led Dans
into applying for MRI and actually collecting the
premium and service fee despite the knowledge of
his age ineligibility.
CA affirmed RTC in toto. Hence, this recourse.

ISSUE/S
Whether DBP is liable for damages to the Estae of Dans? YES
HELD/RATIO
Issue of Agency: YES, DBP is liable to pay moral damages to Dans.
Art. 1897: The agent who acts as such is not personally
liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority
without giving such party sufficient of his powers.
DBP is not authorized to accept applications for MRI when its
clients are more than 60 yeats of age (as shown in Exhibit 1
Article 1 of the Group Mortgage Redemption Insurance
Policy signed in 1984 by all insurance companies)
Knowing all the while that Dans was ineligible for MRI
coverage because of his advanced agewhen it
accepted Dans application for MRI and collected
insurance premium with the deduction of service hee
DBP exceeded its authority.
The liability of an agent who exceeds the scope of his
authority depends upon whether the 3rd person is aware of
the limits of the agents powers. There is no showing that
Dans knew of the limitation on DBPs authority to
solicit applications for MRI.
If the non-disclosure of the limits of the agency carries with
it the implication that a deception was perpetrated on the

clientArts 19,20 and 21 of CC shall apply (abuse of rights


doctrine = entitlement of damages)
DAMAGES: Dans is entitled to moral damagesno proof of
pecuniary loss. Court assessed and determined the amount
which is P50,000 (reasonable price daw yan sabi ng court)
Issue of Insurance: there was NO PERFECTED CONTRACT OF
INSURANCE
MRI applications os lodged with the DBP MRI Pool.
2 conditions for MRI coverage to take effect, there must
concur:
a) when the application shall be approved by the
insurance pool.

b) when full premium is paid during the continued


good health of the applicant
There was no showing that the pool approved of the loan
and that it axcepted the sum of P1,476 as premium. DBP
MRI Pool has no liability because the contract does not exist.
It is the DBP who compelled Dans to apply for MRI Coverage
with DBP MRI Pool.

RULING
DANS WON! Court ordered DBP to reimburse the Estate of the
amount of P1,476 with legal interest + P50,000 for moral damages
+ P10,000 as attorneys fees.

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