FIRST DIVISION

[G.R. No. 137172. June 15, 1999.]

UCPB GENERAL INSURANCE CO., INC. , petitioner, vs. MASAGANA

TELAMART, INC. , respondent.

Abello, Concepcion, Regala and Cruz for petitioner.

Arturo S. Santos for respondent.

SYNOPSIS

On April 15, 1991, petitioner issued ve (5) insurance policies covering respondent's
various properties against re. On April 6, 1992, petitioner gave written notice to
respondent of the non-renewal of the policies. On June 13, 1992, re razed respondent's
property covered by three of the insurance policies petitioner issued. On July 13, 1992,
respondent presented to petitioner's cashier ve (5) manager's checks representing
premium for the renewal of the policies from May 22, 1992 to May 22, 1993. No notice of
loss was led by respondent under the policies prior to July 14, 1992. On July 14, 1992,
respondent led with petitioner its claim for indemni cation of the insured property razed
by re. On the same day, petitioner returned to respondent the manager's checks it
tendered and at the same time rejected its claim. Respondent thus led a civil complaint
against petitioner with the Regional Trial Court (RTC) for recovery of the face value of the
policies. The RTC rendered judgment in favor of the plaintiff. The Court of Appeals
affirmed the decision rendered by the RTC. Hence, this appeal. CDASIA

The Court reversed the decision of the Court of Appeals. It held that an insurance
policy, other than life, issued originally or on renewal, is not valid and binding until actual
payment of the premium. Any agreement to the contrary is void. The parties may not agree
expressly or impliedly on the extension of credit or time to pay the premium and consider
the policy binding before actual payment.

SYLLABUS

1. MERCANTILE LAW; INSURANCE; NO INSURANCE CONTRACT, OTHER THAN

LIFE, IS VALID AND BINDING UNTIL ACTUAL PAYMENT OF PREMIUM. — An insurance
policy, other than life, issued originally or on renewal, is not valid and binding until actual
payment of the premium. Any agreement to the contrary is void. The parties may not agree
expressly or impliedly on the extension of credit or time to pay the premium and consider
the policy binding before actual payment. cdasia

2. ID.; ID.; ID.; CASE AT BAR. — The case of Malayan Insurance Co., Inc. vs. Cruz-
Arnaldo, cited by the Court of Appeals, is not applicable. In that case, payment of the
premium was in fact actually made on December 24, 1981, and the re occurred on
January 18, 1982. Here, the payment of the premium for renewal of the policies was
tendered on July 13, 1992, a month after the re occurred on June 13, 1992 . The assured
did not even give the insurer a notice of loss within a reasonable time after occurrence of
the fire.
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 DECISION

PARDO , J : p

The case is an appeal via certiorari seeking to set aside the decision of the Court of
Appeals, 1 a rming with modi cation that of the Regional Trial Court, Branch 58, Makati,
ordering petitioner to pay respondent the sum of P18,645,000.00, as the proceeds of the
insurance coverage of respondent's property razed by re; 25% of the total amount due as
attorney's fees and P25,000.00 as litigation expenses, and costs. prLL

The facts are undisputed and may be related as follows:

On April 15, 1991, petitioner issued ve (5) insurance policies covering respondent's
various property described therein against re, for the period from May 22, 1991 to May
22, 1992.
In March 1992, petitioner evaluated the policies and decided not to renew them
upon expiration of their terms on May 22, 1992. Petitioner advised respondent's broker,
Zuellig Insurance Brokers, Inc. of its intention not to renew the policies.
On April 6, 1992, petitioner gave written notice to respondent of the non-renewal of
the policies at the address stated in the policies.
On June 13, 1992, re razed respondent's property covered by three of the
insurance policies petitioner issued.
On July 13, 1992, respondent presented to petitioner's cashier at its head o ce ve
(5) manager's checks in the total amount of P225,753.95, representing premium for the
renewal of the policies from May 22, 1992 to May 22, 1993. No notice of loss was led by
respondent under the policies prior to July 14, 1992.
On July 14, 1992, respondent led with petitioner its formal claim for
indemnification of the insured property razed by fire. LibLex

On the same day, July 14, 1992, petitioner returned to respondent the ve (5)
manager's checks that it tendered, and at the same time rejected respondent's claim for
the reasons (a) that the policies had expired and were not renewed, and (b) that the re
occurred on June 13, 1992, before respondent's tender of premium payment.
On July 21, 1992, respondent led with the Regional Trial Court, Branch 58, Makati
City, a civil complaint against petitioner for recovery of P18,645,000.00, representing the
face value of the policies covering respondent's insured property razed by re, and for
attorney's fees. 2
On October 23, 1992, after its motion to dismiss had been denied, petitioner led an
answer to the complaint. It alleged that the complaint "fails to state a cause of action"; that
petitioner was not liable to respondent for insurance proceeds under the policies because
at the time of the loss of respondent's property due to re, the policies had long expired
and were not renewed. 3
After due trial, on March 10, 1993, the Regional Trial Court, Branch 58, Makati,
rendered decision, the dispositive portion of which reads: cdasia

"WHEREFORE, premises considered, judgment is hereby rendered in favor

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 of the plaintiff and against the defendant, as follows.

"(1) Authorizing and allowing the plaintiff to consign/deposit with this Court
the sum of P225,753.95 (refused by the defendant) as full payment of the
corresponding premiums for the replacement-renewal policies for Exhibits
A, B, C, D and E;

"(2) Declaring plaintiff to have fully complied with its obligation to pay the
premium thereby rendering the replacement-renewal policy of Exhibits A, B,
C, D and E effective and binding for the duration May 22, 1992 until May
22, 1993; and, ordering defendant to deliver forthwith to plaintiff the said
replacement-renewal policies;
"(3) Declaring Exhibits A & B, in force from August 22, 1991 up to August 23,
1992 and August 9, 1991 to August 9, 1992, respectively; and

"(4) Ordering the defendant to pay plaintiff the sums of: (a) P18,645,000.00
representing the latter's claim for indemnity under Exhibits A, B & C and/or
its replacement-renewal policies; (b) 25% of the total amount due as and
for attorney's fees; (c) P25,000.00 as necessary litigation expenses; and,
(d) the costs of suit.

"All other claims and counterclaims asserted by the parties are denied
and/or dismissed, including plaintiffs claim for interests.

"SO ORDERED.

"Makati, Metro-Manila, March 10, 1993.

"ZOSIMO Z. ANGELES
Judge." 4

In due time, petitioner appealed to the Court of Appeals. 5

On September 7, 1998, the Court of Appeals promulgated its decision 6 affirming
that of the Regional Trial Court with the modi cation that item No. 3 of the dispositive
portion was deleted, and the award of attorney's fees was reduced to 10% of the total
amount due. 7
The Court of Appeals held that following previous practise, respondent was allowed
a sixty (60) to ninety (90) day credit term for the renewal of its policies, and that the
acceptance of the late premium payment suggested an understanding that payment could
be made later.
Hence, this appeal.
By resolution adopted on March 24, 1999, we required respondent to comment on
the petition, not to le a motion to dismiss within ten (10) days from notice. 8 On April 22,
1999, respondent filed its comment. 9
Respondent submits that the Court of Appeals correctly ruled that no timely notice
of non-renewal was sent. The notice of non-renewal sent to broker Zuellig which claimed
that it verbally noti ed the insurance agency but not respondent itself did not su ce.
Respondent submits further that the Court of Appeals did not err in nding that there
existed a sixty (60) to ninety (90) days credit agreement between UCPB and Masagana,
and that, nally, the Supreme Court could not review factual ndings of the lower court
affirmed by the Court of Appeals. 1 0
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 We give due course to the appeal.
The basic issue raised is whether the re insurance policies issued by petitioner to
the respondent covering the period May 22, 1991 to May 22, 1992, had expired on the
latter date or had been extended or renewed by an implied credit arrangement though
actual payment of premium was tendered on a latter date after the occurrence of the risk
(fire) insured against. prLL

The answer is easily found in the Insurance Code. No, an insurance policy, other than
life, issued originally or on renewal, is not valid and binding until actual payment of the
premium. Any agreement to the contrary is void. 1 1 The parties may not agree expressly or
impliedly on the extension of credit or time to pay the premium and consider the policy
binding before actual payment. llcd

The case of Malayan Insurance Co., Inc. vs. Cruz-Arnaldo, 1 2 cited by the Court of
Appeals, is not applicable. In that case, payment of the premium was in fact actually made
on December 24, 1981, and the re occurred on January 18, 1982. Here, the payment of
the premium for renewal of the policies was tendered on July 13, 1992, a month after the
re occurred on June 13, 1992 . The assured did not even give the insurer a notice of loss
within a reasonable time after occurrence of the fire.
WHEREFORE, the Court hereby REVERSES and SETS ASIDE the decision of the Court
of Appeals in CA-G.R. CV No. 42321. In lieu thereof, the Court renders judgment dismissing
respondent's complaint and petitioner's counterclaims thereto led with the Regional Trial
Court, Branch 58, Makati City, in Civil Case No. 92-2023. Without costs. prLL

SO ORDERED.
Davide, Jr., C.J., Melo, Kapunan, and Ynares-Santiago, JJ., concur.

Footnotes
1. In CA-G.R. CV No. 42321, promulgated on September 7, 1998. Aliño-Hormachuelos, J.,
ponente, Guerrero and Villarama, Jr., JJ., concurring.
2. RTC Original Record, pp. 1-10.

3. RTC Original Record, pp. 103-117.

4. RTC Original Record, pp. 454-466.
5. Docketed as CA-G.R. CV No. 42321.

6. Aliño-Hormachuelos, J., ponente, Guerrero and Villarama, Jr. JJ., concurring.

7. Petition, Annex "A", Rollo, pp. 38-54.

8. Rollo, p. 72.
9. Rollo, pp. 73-106.
10. Comment, Rollo, on p. 84.
11. Section 77, Insurance Code of the Philippines; Valenzuela vs. Court of Appeals, 191
SCRA 1; South Sea Surety and Insurance Co., Inc. vs. Court of Appeals, 244 SCRA 744;
Tibay vs. Court of Appeals, 275 SCRA 126.
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 12. 154 SCRA 672.

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