Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-15895 November 29, 1920

RAFAEL ENRIQUEZ, as administrator of the estate of the late Joaquin Ma. Herrer, plaintiff-
appellant,
vs.
SUN LIFE ASSURANCE COMPANY OF CANADA, defendant-appellee.

Jose A. Espiritu for appellant.

Cohn, Fisher and DeWitt for appellee.

MALCOLM, J.:

This is an action brought by the plaintiff ad administrator of the estate of the late Joaquin Ma. Herrer
to recover from the defendant life insurance company the sum of pesos 6,000 paid by the deceased
for a life annuity. The trial court gave judgment for the defendant. Plaintiff appeals.

The undisputed facts are these: On September 24, 1917, Joaquin Herrer made application to the
Sun Life Assurance Company of Canada through its office in Manila for a life annuity. Two days later
he paid the sum of P6,000 to the manager of the company's Manila office and was given a receipt
reading as follows:

MANILA, I. F., 26 de septiembre, 1917.

PROVISIONAL RECEIPT Pesos 6,000

Recibi la suma de seis mil pesos de Don Joaquin Herrer de Manila como prima dela Renta Vitalicia
solicitada por dicho Don Joaquin Herrer hoy, sujeta al examen medico y aprobacion de la Oficina
Central de la Compaia.

The application was immediately forwarded to the head office of the company at Montreal, Canada.
On November 26, 1917, the head office gave notice of acceptance by cable to Manila. (Whether on
the same day the cable was received notice was sent by the Manila office of Herrer that the
application had been accepted, is a disputed point, which will be discussed later.) On December 4,
1917, the policy was issued at Montreal. On December 18, 1917, attorney Aurelio A. Torres wrote to
the Manila office of the company stating that Herrer desired to withdraw his application. The
following day the local office replied to Mr. Torres, stating that the policy had been issued, and called
attention to the notification of November 26, 1917. This letter was received by Mr. Torres on the
morning of December 21, 1917. Mr. Herrer died on December 20, 1917.

As above suggested, the issue of fact raised by the evidence is whether Herrer received notice of
acceptance of his application. To resolve this question, we propose to go directly to the evidence of
record.
The chief clerk of the Manila office of the Sun Life Assurance Company of Canada at the time of the
trial testified that he prepared the letter introduced in evidence as Exhibit 3, of date November 26,
1917, and handed it to the local manager, Mr. E. E. White, for signature. The witness admitted on
cross-examination that after preparing the letter and giving it to he manager, he new nothing of what
became of it. The local manager, Mr. White, testified to having received the cablegram accepting the
application of Mr. Herrer from the home office on November 26, 1917. He said that on the same day
he signed a letter notifying Mr. Herrer of this acceptance. The witness further said that letters, after
being signed, were sent to the chief clerk and placed on the mailing desk for transmission. The
witness could not tell if the letter had every actually been placed in the mails. Mr. Tuason, who was
the chief clerk, on November 26, 1917, was not called as a witness. For the defense, attorney
Manuel Torres testified to having prepared the will of Joaquin Ma. Herrer, that on this occasion, Mr.
Herrer mentioned his application for a life annuity, and that he said that the only document relating to
the transaction in his possession was the provisional receipt. Rafael Enriquez, the administrator of
the estate, testified that he had gone through the effects of the deceased and had found no letter of
notification from the insurance company to Mr. Herrer.

Our deduction from the evidence on this issue must be that the letter of November 26, 1917,
notifying Mr. Herrer that his application had been accepted, was prepared and signed in the local
office of the insurance company, was placed in the ordinary channels for transmission, but as far as
we know, was never actually mailed and thus was never received by the applicant.

Not forgetting our conclusion of fact, it next becomes necessary to determine the law which should
be applied to the facts. In order to reach our legal goal, the obvious signposts along the way must be
noticed.

Until quite recently, all of the provisions concerning life insurance in the Philippines were found in the
Code of Commerce and the Civil Code. In the Code of the Commerce, there formerly existed Title
VIII of Book III and Section III of Title III of Book III, which dealt with insurance contracts. In the Civil
Code there formerly existed and presumably still exist, Chapters II and IV, entitled insurance
contracts and life annuities, respectively, of Title XII of Book IV. On the after July 1, 1915, there was,
however, in force the Insurance Act. No. 2427. Chapter IV of this Act concerns life and health
insurance. The Act expressly repealed Title VIII of Book II and Section III of Title III of Book III of the
code of Commerce. The law of insurance is consequently now found in the Insurance Act and the
Civil Code.

While, as just noticed, the Insurance Act deals with life insurance, it is silent as to the methods to be
followed in order that there may be a contract of insurance. On the other hand, the Civil Code, in
article 1802, not only describes a contact of life annuity markedly similar to the one we are
considering, but in two other articles, gives strong clues as to the proper disposition of the case. For
instance, article 16 of the Civil Code provides that "In matters which are governed by special laws,
any deficiency of the latter shall be supplied by the provisions of this Code." On the supposition,
therefore, which is incontestable, that the special law on the subject of insurance is deficient in
enunciating the principles governing acceptance, the subject-matter of the Civil code, if there be any,
would be controlling. In the Civil Code is found article 1262 providing that "Consent is shown by the
concurrence of offer and acceptance with respect to the thing and the consideration which are to
constitute the contract. An acceptance made by letter shall not bind the person making the offer
except from the time it came to his knowledge. The contract, in such case, is presumed to have
been entered into at the place where the offer was made." This latter article is in opposition to the
provisions of article 54 of the Code of Commerce.

If no mistake has been made in announcing the successive steps by which we reach a conclusion,
then the only duty remaining is for the court to apply the law as it is found. The legislature in its
wisdom having enacted a new law on insurance, and expressly repealed the provisions in the Code
of Commerce on the same subject, and having thus left a void in the commercial law, it would seem
logical to make use of the only pertinent provision of law found in the Civil code, closely related to
the chapter concerning life annuities.

The Civil Code rule, that an acceptance made by letter shall bind the person making the offer only
from the date it came to his knowledge, may not be the best expression of modern commercial
usage. Still it must be admitted that its enforcement avoids uncertainty and tends to security. Not
only this, but in order that the principle may not be taken too lightly, let it be noticed that it is identical
with the principles announced by a considerable number of respectable courts in the United States.
The courts who take this view have expressly held that an acceptance of an offer of insurance not
actually or constructively communicated to the proposer does not make a contract. Only the mailing
of acceptance, it has been said, completes the contract of insurance, as the locus poenitentiae is
ended when the acceptance has passed beyond the control of the party. (I Joyce, The Law of
Insurance, pp. 235, 244.)

In resume, therefore, the law applicable to the case is found to be the second paragraph of article
1262 of the Civil Code providing that an acceptance made by letter shall not bind the person making
the offer except from the time it came to his knowledge. The pertinent fact is, that according to the
provisional receipt, three things had to be accomplished by the insurance company before there was
a contract: (1) There had to be a medical examination of the applicant; (2) there had to be approval
of the application by the head office of the company; and (3) this approval had in some way to be
communicated by the company to the applicant. The further admitted facts are that the head office in
Montreal did accept the application, did cable the Manila office to that effect, did actually issue the
policy and did, through its agent in Manila, actually write the letter of notification and place it in the
usual channels for transmission to the addressee. The fact as to the letter of notification thus fails to
concur with the essential elements of the general rule pertaining to the mailing and delivery of mail
matter as announced by the American courts, namely, when a letter or other mail matter is
addressed and mailed with postage prepaid there is a rebuttable presumption of fact that it was
received by the addressee as soon as it could have been transmitted to him in the ordinary course of
the mails. But if any one of these elemental facts fails to appear, it is fatal to the presumption. For
instance, a letter will not be presumed to have been received by the addressee unless it is shown
that it was deposited in the post-office, properly addressed and stamped. (See 22 C.J., 96, and 49 L.
R. A. [N. S.], pp. 458, et seq., notes.)

We hold that the contract for a life annuity in the case at bar was not perfected because it has not
been proved satisfactorily that the acceptance of the application ever came to the knowledge of the
applicant.lawph!l. net

Judgment is reversed, and the plaintiff shall have and recover from the defendant the sum of P6,000
with legal interest from November 20, 1918, until paid, without special finding as to costs in either
instance. So ordered.

Mapa, C.J., Araullo, Avancea and Villamor, JJ., concur.

Johnson, J., dissents.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-109937 March 21, 1994

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,

vs.
COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented by
CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION INSURANCE POOL, respondents.

Office of the Legal Counsel for petitioner.

Reyes, Santayana, Molo & Alegre for DBP Mortgage Redemption Insurance Pool.

QUIASON, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court to reverse and
set aside the decision of the Court of Appeals in CA-G.R CV No. 26434 and its resolution denying
reconsideration thereof.

We affirm the decision of the Court of Appeals with modification.

In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for
a loan of P500,000.00 with the Development Bank of the Philippines (DBP), Basilan Branch. As the
principal mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a mortgage
redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool).

A loan, in the reduced amount of P300,000.00, was approved by DBP on August 4, 1987 and
released on August 11, 1987. From the proceeds of the loan, DBP deducted the amount of
P1,476.00 as payment for the MRI premium. On August 15, 1987, Dans accomplished and
submitted the "MRI Application for Insurance" and the "Health Statement for DBP MRI Pool."

On August 20, 1987, the MRI premium of Dans, less the DBP service fee of 10 percent, was
credited by DBP to the savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was
advised of the credit.

On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this information
to the DBP MRI Pool. On September 23, 1987, the DBP MRI Pool notified DBP that Dans was not
eligible for MRI coverage, being over the acceptance age limit of 60 years at the time of application.

On October 21, 1987, DBP apprised Candida Dans of the disapproval of her late husband's MRI
application. The DBP offered to refund the premium of P1,476.00 which the deceased had paid, but
Candida Dans refused to accept the same, demanding payment of the face value of the MRI or an
amount equivalent to the loan. She, likewise, refused to accept an ex gratia settlement of
P30,000.00, which the DBP later offered.

On February 10, 1989, respondent Estate, through Candida Dans as administratrix, filed a complaint
with the Regional Trial Court, Branch I, Basilan, against DBP and the insurance pool for "Collection
of Sum of Money with Damages." Respondent Estate alleged that Dans became insured by the DBP
MRI Pool when DBP, with full knowledge of Dans' age at the time of application, required him to
apply for MRI, and later collected the insurance premium thereon. Respondent Estate therefore
prayed: (1) that the sum of P139,500.00, which it paid under protest for the loan, be reimbursed; (2)
that the mortgage debt of the deceased be declared fully paid; and (3) that damages be awarded.

The DBP and the DBP MRI Pool separately filed their answers, with the former asserting a cross-
claim against the latter.

At the pre-trial, DBP and the DBP MRI Pool admitted all the documents and exhibits submitted by
respondent Estate. As a result of these admissions, the trial court narrowed down the issues and,
without opposition from the parties, found the case ripe for summary judgment. Consequently, the
trial court ordered the parties to submit their respective position papers and documentary evidence,
which may serve as basis for the judgment.

On March 10, 1990, the trial court rendered a decision in favor of respondent Estate and against
DBP. The DBP MRI Pool, however, was absolved from liability, after the trial court found no privity of
contract between it and the deceased. The trial court declared DBP in estoppel for having led Dans
into applying for MRI and actually collecting the premium and the service fee, despite knowledge of
his age ineligibility. The dispositive portion of the decision read as follows:

WHEREFORE, in view of the foregoing consideration and in the furtherance of

justice and equity, the Court finds judgment for the plaintiff and against Defendant
DBP, ordering the latter:

1. To return and reimburse plaintiff the amount of P139,500.00 plus legal rate of
interest as amortization payment paid under protest;

2. To consider the mortgage loan of P300,000.00 including all interest accumulated

or otherwise to have been settled, satisfied or set-off by virtue of the insurance
coverage of the late Juan B. Dans;

3. To pay plaintiff the amount of P10,000.00 as attorney's fees;

4. To pay plaintiff in the amount of P10,000.00 as costs of litigation and other

expenses, and other relief just and equitable.

The Counterclaims of Defendants DBP and DBP MRI POOL are hereby dismissed.
The Cross-claim of Defendant DBP is likewise dismissed (Rollo, p. 79)

The DBP appealed to the Court of Appeals. In a decision dated September 7, 1992, the appellate
court affirmed in toto the decision of the trial court. The DBP's motion for reconsideration was denied
in a resolution dated April 20, 1993.

Hence, this recourse.

 II

When Dans applied for MRI, he filled up and personally signed a "Health Statement for DBP MRI
Pool" (Exh. "5-Bank") with the following declaration:

I hereby declare and agree that all the statements and answers contained herein are
true, complete and correct to the best of my knowledge and belief and form part of
my application for insurance. It is understood and agreed that no insurance coverage
shall be effected unless and until this application is approved and the full premium is
paid during my continued good health (Records, p. 40).

Under the aforementioned provisions, the MRI coverage shall take effect: (1) when the application
shall be approved by the insurance pool; and (2) when the full premium is paid during the continued
good health of the applicant. These two conditions, being joined conjunctively, must concur.

Undisputably, the power to approve MRI applications is lodged with the DBP MRI Pool. The pool,
however, did not approve the application of Dans. There is also no showing that it accepted the sum
of P1,476.00, which DBP credited to its account with full knowledge that it was payment for Dan's
premium. There was, as a result, no perfected contract of insurance; hence, the DBP MRI Pool
cannot be held liable on a contract that does not exist.

The liability of DBP is another matter.

It was DBP, as a matter of policy and practice, that required Dans, the borrower, to secure MRI
coverage. Instead of allowing Dans to look for his own insurance carrier or some other form of
insurance policy, DBP compelled him to apply with the DBP MRI Pool for MRI coverage. When
Dan's loan was released on August 11, 1987, DBP already deducted from the proceeds thereof the
MRI premium. Four days latter, DBP made Dans fill up and sign his application for MRI, as well as
his health statement. The DBP later submitted both the application form and health statement to the
DBP MRI Pool at the DBP Main Building, Makati Metro Manila. As service fee, DBP deducted 10
percent of the premium collected by it from Dans.

In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second as an
insurance agent.

As an insurance agent, DBP made Dans go through the motion of applying for said insurance,
thereby leading him and his family to believe that they had already fulfilled all the requirements for
the MRI and that the issuance of their policy was forthcoming. Apparently, DBP had full knowledge
that Dan's application was never going to be approved. The maximum age for MRI acceptance is 60
years as clearly and specifically provided in Article 1 of the Group Mortgage Redemption Insurance
Policy signed in 1984 by all the insurance companies concerned (Exh. "1-Pool").

Under Article 1987 of the Civil Code of the Philippines, "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 notice of his powers."

The DBP is not authorized to accept applications for MRI when its clients are more than 60 years of
age (Exh. "1-Pool"). Knowing all the while that Dans was ineligible for MRI coverage because of his
advanced age, DBP exceeded the scope of its authority when it accepted Dan's application for MRI
by collecting the insurance premium, and deducting its agent's commission and service fee.
The liability of an agent who exceeds the scope of his authority depends upon whether the third
person is aware of the limits of the agent's powers. There is no showing that Dans knew of the
limitation on DBP's authority to solicit applications for MRI.

If the third person dealing with an agent is unaware of the limits of the authority conferred by the
principal on the agent and he (third person) has been deceived by the non-disclosure thereof by the
agent, then the latter is liable for damages to him (V Tolentino, Commentaries and Jurisprudence on
the Civil Code of the Philippines, p. 422 [1992], citing Sentencia [Cuba] of September 25, 1907). 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 (Francisco, V., Agency 307 [1952], citing Hall v.
Lauderdale, 46 N.Y. 70, 75). Inasmuch as the non-disclosure of the limits of the agency carries with
it the implication that a deception was perpetrated on the unsuspecting client, the provisions of
Articles 19, 20 and 21 of the Civil Code of the Philippines come into play.

Article 19 provides:

Every person must, in the exercise of his rights and in the performance of his duties,
act with justice give everyone his due and observe honesty and good faith.

Article 20 provides:

Every person who, contrary to law, willfully or negligently causes damage to another,
shall indemnify the latter for the same.

Article 21 provides:

Any person, who willfully causes loss or injury to another in a manner that is contrary
to morals, good customs or public policy shall compensate the latter for the damage.

The DBP's liability, however, cannot be for the entire value of the insurance policy. To assume that
were it not for DBP's concealment of the limits of its authority, Dans would have secured an MRI
from another insurance company, and therefore would have been fully insured by the time he died,
is highly speculative. Considering his advanced age, there is no absolute certainty that Dans could
obtain an insurance coverage from another company. It must also be noted that Dans died almost
immediately, i.e., on the nineteenth day after applying for the MRI, and on the twenty-third day from
the date of release of his loan.

One is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has
duly proved (Civil Code of the Philippines, Art. 2199). Damages, to be recoverable, must not only be
capable of proof, but must be actually proved with a reasonable degree of certainty (Refractories
Corporation v. Intermediate Appellate Court, 176 SCRA 539 [1989]; Choa Tek Hee v. Philippine
Publishing Co., 34 Phil. 447 [1916]). Speculative damages are too remote to be included in an
accurate estimate of damages (Sun Life Assurance v. Rueda Hermanos, 37 Phil. 844 [1918]).

While Dans is not entitled to compensatory damages, he is entitled to moral damages. No proof of
pecuniary loss is required in the assessment of said kind of damages (Civil Code of Philippines, Art.
2216). The same may be recovered in acts referred to in Article 2219 of the Civil Code.

The assessment of moral damages is left to the discretion of the court according to the
circumstances of each case (Civil Code of the Philippines, Art. 2216). Considering that DBP had
offered to pay P30,000.00 to respondent Estate in ex gratia settlement of its claim and that DBP's
non-disclosure of the limits of its authority amounted to a deception to its client, an award of moral
damages in the amount of P50,000.00 would be reasonable.

The award of attorney's fees is also just and equitable under the circumstances (Civil Code of the
Philippines, Article 2208 [11]).

WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV

No. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to REIMBURSE respondent Estate of
Juan B. Dans the amount of P1,476.00 with legal interest from the date of the filing of the complaint
until fully paid; and (2) to PAY said Estate the amount of Fifty Thousand Pesos (P50,000.00) as
moral damages and the amount of Ten Thousand Pesos (P10,000.00) as attorney's fees. With costs
against petitioner.

SO ORDERED.

Cruz, Davide, Jr., Bellosillo and Kapunan, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-31845 April 30, 1979

GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner,

vs.
HONORABLE COURT OF APPEALS, respondents.

G.R. No. L-31878 April 30, 1979

LAPULAPU D. MONDRAGON, petitioner,

vs.
HON. COURT OF APPEALS and NGO HING, respondents.

Siguion Reyna, Montecillo & Ongsiako and Sycip, Salazar, Luna & Manalo for petitioner Company.

Voltaire Garcia for petitioner Mondragon.

Pelaez, Pelaez & Pelaez for respondent Ngo Hing.

DE CASTRO, J.:

The two above-entitled cases were ordered consolidated by the Resolution of this Court dated April
29, 1970, (Rollo, No. L-31878, p. 58), because the petitioners in both cases seek similar relief,
through these petitions for certiorari by way of appeal, from the amended decision of respondent
Court of Appeals which affirmed in toto the decision of the Court of First Instance of Cebu, ordering
"the defendants (herein petitioners Great Pacific Ligfe Assurance Company and Mondragon) jointly
and severally to pay plaintiff (herein private respondent Ngo Hing) the amount of P50,000.00 with
interest at 6% from the date of the filing of the complaint, and the sum of P1,077.75, without interest.

It appears that on March 14, 1957, private respondent Ngo Hing filed an application with the Great
Pacific Life Assurance Company (hereinafter referred to as Pacific Life) for a twenty-year
endownment policy in the amount of P50,000.00 on the life of his one-year old daughter Helen Go.
Said respondent supplied the essential data which petitioner Lapulapu D. Mondragon, Branch
Manager of the Pacific Life in Cebu City wrote on the corresponding form in his own handwriting
(Exhibit I-M). Mondragon finally type-wrote the data on the application form which was signed by
private respondent Ngo Hing. The latter paid the annual premuim the sum of P1,077.75 going over
to the Company, but he reatined the amount of P1,317.00 as his commission for being a duly
authorized agebt of Pacific Life. Upon the payment of the insurance premuim, the binding deposit
receipt (Exhibit E) was issued to private respondent Ngo Hing. Likewise, petitioner Mondragon
handwrote at the bottom of the back page of the application form his strong recommendation for the
approval of the insurance application. Then on April 30, 1957, Mondragon received a letter from
Pacific Life disapproving the insurance application (Exhibit 3-M). The letter stated that the said life
insurance application for 20-year endowment plan is not available for minors below seven years old,
but Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the
offer is acceptable, the Juvenile Non-Medical Declaration be sent to the company.

The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by
petitioner Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote
back Pacific Life again strongly recommending the approval of the 20-year endowment insurance
plan to children, pointing out that since 1954 the customers, especially the Chinese, were asking for
such coverage (Exhibit 4-M).

It was when things were in such state that on May 28, 1957 Helen Go died of influenza with
complication of bronchopneumonia. Thereupon, private respondent sought the payment of the
proceeds of the insurance, but having failed in his effort, he filed the action for the recovery of the
same before the Court of First Instance of Cebu, which rendered the adverse decision as earlier
refered to against both petitioners.

The decisive issues in these cases are: (1) whether the binding deposit receipt (Exhibit E)
constituted a temporary contract of the life insurance in question; and (2) whether private respondent
Ngo Hing concealed the state of health and physical condition of Helen Go, which rendered void the
aforesaid Exhibit E.

1. At the back of Exhibit E are condition precedents required before a deposit is considered a
BINDING RECEIPT. These conditions state that:

A. If the Company or its agent, shan have received the premium deposit ... and the
insurance application, ON or PRIOR to the date of medical examination ... said
insurance shan be in force and in effect from the date of such medical examination,
for such period as is covered by the deposit ..., PROVIDED the company shall be
satisfied that on said date the applicant was insurable on standard rates under its
rule for the amount of insurance and the kind of policy requested in the application.

D. If the Company does not accept the application on standard rate for the amount of
insurance and/or the kind of policy requested in the application but issue, or offers to
issue a policy for a different plan and/or amount ..., the insurance shall not be in force
and in effect until the applicant shall have accepted the policy as issued or offered by
the Company and shall have paid the full premium thereof. If the applicant does not
accept the policy, the deposit shall be refunded.

E. If the applicant shall not have been insurable under Condition A above, and the
Company declines to approve the application the insurance applied for shall not have
been in force at any time and the sum paid be returned to the applicant upon the
surrender of this receipt. (Emphasis Ours).

The aforequoted provisions printed on Exhibit E show that the binding deposit receipt is intended to
be merely a provisional or temporary insurance contract and only upon compliance of the following
conditions: (1) that the company shall be satisfied that the applicant was insurable on standard rates;
(2) that if the company does not accept the application and offers to issue a policy for a different
plan, the insurance contract shall not be binding until the applicant accepts the policy offered;
otherwise, the deposit shall be reftmded; and (3) that if the applicant is not ble according to the
standard rates, and the company disapproves the application, the insurance applied for shall not be
in force at any time, and the premium paid shall be returned to the applicant.
Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely
an acknowledgment, on behalf of the company, that the latter's branch office had received from the
applicant the insurance premium and had accepted the application subject for processing by the
insurance company; and that the latter will either approve or reject the same on the basis of whether
or not the applicant is "insurable on standard rates." Since petitioner Pacific Life disapproved the
insurance application of respondent Ngo Hing, the binding deposit receipt in question had never
become in force at any time.

Upon this premise, the binding deposit receipt (Exhibit E) is, manifestly, merely conditional and does
not insure outright. As held by this Court, where an agreement is made between the applicant and
the agent, no liability shall attach until the principal approves the risk and a receipt is given by the
agent. The acceptance is merely conditional and is subordinated to the act of the company in
approving or rejecting the application. Thus, in life insurance, a "binding slip" or "binding receipt"
does not insure by itself (De Lim vs. Sun Life Assurance Company of Canada, 41 Phil. 264).

It bears repeating that through the intra-company communication of April 30, 1957 (Exhibit 3-M),
Pacific Life disapproved the insurance application in question on the ground that it is not offering the
twenty-year endowment insurance policy to children less than seven years of age. What it offered
instead is another plan known as the Juvenile Triple Action, which private respondent failed to
accept. In the absence of a meeting of the minds between petitioner Pacific Life and private
respondent Ngo Hing over the 20-year endowment life insurance in the amount of P50,000.00 in
favor of the latter's one-year old daughter, and with the non-compliance of the abovequoted
conditions stated in the disputed binding deposit receipt, there could have been no insurance
contract duly perfected between thenl Accordingly, the deposit paid by private respondent shall have
to be refunded by Pacific Life.

As held in De Lim vs. Sun Life Assurance Company of Canada, supra, "a contract of insurance, like
other contracts, must be assented to by both parties either in person or by their agents ... The
contract, to be binding from the date of the application, must have been a completed contract, one
that leaves nothing to be dione, nothing to be completed, nothing to be passed upon, or determined,
before it shall take effect. There can be no contract of insurance unless the minds of the parties have
met in agreement."

We are not impressed with private respondent's contention that failure of petitioner Mondragon to
communicate to him the rejection of the insurance application would not have any adverse effect on
the allegedly perfected temporary contract (Respondent's Brief, pp. 13-14). In this first place, there
was no contract perfected between the parties who had no meeting of their minds. Private
respondet, being an authorized insurance agent of Pacific Life at Cebu branch office, is indubitably
aware that said company does not offer the life insurance applied for. When he filed the insurance
application in dispute, private respondent was, therefore, only taking the chance that Pacific Life will
approve the recommendation of Mondragon for the acceptance and approval of the application in
question along with his proposal that the insurance company starts to offer the 20-year endowment
insurance plan for children less than seven years. Nonetheless, the record discloses that Pacific Life
had rejected the proposal and recommendation. Secondly, having an insurable interest on the life of
his one-year old daughter, aside from being an insurance agent and an offense associate of
petitioner Mondragon, private respondent Ngo Hing must have known and followed the progress on
the processing of such application and could not pretend ignorance of the Company's rejection of the
20-year endowment life insurance application.

At this juncture, We find it fit to quote with approval, the very apt observation of then Appellate
Associate Justice Ruperto G. Martin who later came up to this Court, from his dissenting opinion to
the amended decision of the respondent court which completely reversed the original decision, the
following:

Of course, there is the insinuation that neither the memorandum of rejection (Exhibit
3-M) nor the reply thereto of appellant Mondragon reiterating the desire for
applicant's father to have the application considered as one for a 20-year endowment
plan was ever duly communicated to Ngo; Hing, father of the minor applicant. I am
not quite conninced that this was so. Ngo Hing, as father of the applicant herself, was
precisely the "underwriter who wrote this case" (Exhibit H-1). The unchallenged
statement of appellant Mondragon in his letter of May 6, 1957) (Exhibit 4-M),
specifically admits that said Ngo Hing was "our associate" and that it was the latter
who "insisted that the plan be placed on the 20-year endowment plan." Under these
circumstances, it is inconceivable that the progress in the processing of the
application was not brought home to his knowledge. He must have been duly
apprised of the rejection of the application for a 20-year endowment plan otherwise
Mondragon would not have asserted that it was Ngo Hing himself who insisted on the
application as originally filed, thereby implictly declining the offer to consider the
application under the Juvenile Triple Action Plan. Besides, the associate of
Mondragon that he was, Ngo Hing should only be presumed to know what kind of
policies are available in the company for minors below 7 years old. What he and
Mondragon were apparently trying to do in the premises was merely to prod the
company into going into the business of issuing endowment policies for minors just
as other insurance companies allegedly do. Until such a definite policy is however,
adopted by the company, it can hardly be said that it could have been bound at all
under the binding slip for a plan of insurance that it could not have, by then issued at
all. (Amended Decision, Rollo, pp- 52-53).

2. Relative to the second issue of alleged concealment. this Court is of the firm belief that private
respondent had deliberately concealed the state of health and piysical condition of his daughter
Helen Go. Wher private regpondeit supplied the required essential data for the insurance application
form, he was fully aware that his one-year old daughter is typically a mongoloid child. Such a
congenital physical defect could never be ensconced nor disguished. Nonetheless, private
respondent, in apparent bad faith, withheld the fact materal to the risk to be assumed by the
insurance compary. As an insurance agent of Pacific Life, he ought to know, as he surely must have
known. his duty and responsibility to such a material fact. Had he diamond said significant fact in the
insurance application fom Pacific Life would have verified the same and would have had no choice
but to disapprove the application outright.

The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute
and perfect candor or openness and honesty; the absence of any concealment or demotion,
however slight [Black's Law Dictionary, 2nd Edition], not for the alone but equally so for the insurer
(Field man's Insurance Co., Inc. vs. Vda de Songco, 25 SCRA 70). Concealment is a neglect to
communicate that which a partY knows aDd Ought to communicate (Section 25, Act No. 2427).
Whether intentional or unintentional the concealment entitles the insurer to rescind the contract of
insurance (Section 26, Id.: Yu Pang Cheng vs. Court of Appeals, et al, 105 Phil 930; Satumino vs.
Philippine American Life Insurance Company, 7 SCRA 316). Private respondent appears guilty
thereof.

We are thus constrained to hold that no insurance contract was perfected between the parties with
the noncompliance of the conditions provided in the binding receipt, and concealment, as legally
defined, having been comraitted by herein private respondent.
WHEREFORE, the decision appealed from is hereby set aside, and in lieu thereof, one is hereby
entered absolving petitioners Lapulapu D. Mondragon and Great Pacific Life Assurance Company
from their civil liabilities as found by respondent Court and ordering the aforesaid insurance
company to reimburse the amount of P1,077.75, without interest, to private respondent, Ngo Hing.
Costs against private respondent.

SO ORDERED.

Teehankee (Chairman), Makasiar, Guerrero and Melencio-Herrera, JJ., concur.

Fernandez, J., took no part.