Lawyers Cooperative v. Tabora

LAWYERS COOPERATIVE PUBLISHING COMPANY v. PERFECTO A. TABORA

1965 / BAUTISTA ANGELO

FACTS

Perfecto Tabora bought from the Lawyers Cooperative Publishing Company a complete set of AmJur, plus a set of AmJur, General Index.

CONTRACT "Title to and ownership of the books shall remain with the seller until the purchase price shall have been fully paid. Loss or damage to the books after delivery to the buyer shall be borne by the buyer."

Tabora made a partial payment of P300.00, leaving a balance of P1,382.40. The books were delivered and receipted for by Tabora. On the same day, a fire broke out, burning down Tabora’s law office and library. Tabora immediately reported it to LCBC. The company replied and as a token of goodwill it sent to Tabora free of charge 4 Philippine Reports volumes.

As Tabora failed to pay the monthly installments agreed upon, LCBC filed an action to recover of the balance.

TABORA’S CONTENTIONS

• Contract: title to and the ownership of the books shall remain with the seller until the purchase price shall have been fully paid, so LCBC should bear the loss
• Even assuming that the ownership was transferred to Tabora, he should not answer for the loss: force majeure (no evidence that Tabora contributed in any way)

ISSUE & HOLDING

Who bears the loss? Tabora

RATIO

GENERAL RULE The loss of the object of the contract of sale is borne by the owner or in case of force majeure the one under obligation to deliver the object is exempt from liability

• THIS IS NOT APPLICABLE HERE Contract provides that loss or damage after delivery shall be borne by the buyer

FORCE MAJEURE DEFENSE FAILS

The rule only holds true when the obligation consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case of fortuitous event.

• NOT PRESENT IN THIS CASE

The obligation is pecuniary in nature, and the obligor bound himself to assume the loss after the delivery.

Quisaba v. Sta. Ines-Melale Veneer and Plywood

JOVITO QUISABA v. STA. INES-MELALE VENEER & PLYWOOD [SIMVP]

1974 / Castro

FACTS

Quisaba was an internal auditor of SIMVP for 18 years. On January 1973, SIMVP VP Robert Hyde instructed him to purchase logs for the company's plant, but Quisaba, he refused to do so, saying that such task is inconsistent with his position. The next day, Hyde informed Quisaba of his temporary relief as internal auditor so that he could carry out the instructions given. Hyde warned him that failure to comply would be considered a ground for his dismissal.

Quisaba filed a complaint for moral damages, exemplary damages, termination pay and attorney's fees against SIMVP and its VP Robert Hyde. Quisaba was NOT asking for backwages nor reinstatement. Quisaba alleged that due to SIMVP’s acts, he suffered mental anguish, serious anxiety, besmirched reputation, wounded feelings, moral shock and social humiliation.

SIMVP moved to dismiss the complaint on the ground of lack of jurisdiction of the CFI, asserting that the proper forum is the NLRC. Quisaba opposed this, and he informed the court that an NLRC representative said that NLRC has no jurisdiction over claims or suits for damages arising out of employee-employer relationship. Nonetheless, CFI granted the motion to dismiss on the ground that the complaint involves an employee-employer relation.

ISSUE & HOLDING

Who has jurisdiction over the case? CFI has jurisdiction. This is a CIVIL dispute, not a labor dispute.

RATIO

This case is concerned with a civil (not a labor) dispute, as it has to do with an alleged violation of Quisaba's rights as a member of society, and it does not involve an existing employee-employer relation within the meaning of PD 21, Sec. 2(1).

Civil law consists of that mass of precepts that determine or regulate the relations that exist between members of a society for the protection of private interests.

NLRC jurisdiction is defined by PD 21, Sec. 2.

• All matters involving employee-employer relations including all disputes and grievances which may otherwise lead to strikes and lockouts under RA 875
• All strikes overtaken by Proc. 1081
• All pending cases in the Bureau of Labor Relations.

Although the acts complained of seemingly appear to constitute "matters involving employee-employer relations," Quisaba’s complaint is grounded on the manner of his dismissal and the consequent effects of such dismissal, not on his dismissal per se, as he does not ask for reinstatement or backwages.

The "right" of SIMVP to dismiss Quisaba should not be confused with the manner in which the right was exercised and the effects flowing therefrom. If the dismissal was done anti-socially or oppressively, then SIMVP violated the following:

• NCC 1701 – prohibits acts of oppression by either capital or labor against the other
• NCC 21 – makes a person liable for damages if he willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy

Moral damages may be recovered in acts and actions referred to in NCC 21. [NCC 2219 (10)]

ORDER SET ASIDE; CASE REMANDED FOR FURTHER PROCEEDINGS

Que v. IAC

MAGTANGGOL QUE v. IAC and ANTONIO NICOLAS

1989 / Cruz

Human Relations Torts > Acts Contra Bonus Mores

In 1975, Antonio Nicolas ordered from Magtanggol Que canvass strollers, and Nicolas issued to Que 5 post-dated checks with a total face value of P7,600.00. Nicolas ordered a "stop payment" because of defects in the articles sold which Que had not corrected, so Que was unable to encash the checks.

Que filed a complaint for estafa against Nicolas. The charge was dismissed for lack of merit, as the investigating fiscal held that it was an accounting matter, which did not necessarily involve deceit on Nicolas’ part of Nicolas.

In 1976, Nicolas filed his own complaint for damages against Que for malicious prosecution. Que averred that Nicolas had maliciously filed the complaint in Bulacan although he was a resident of Caloocan City, and Nicolas was indebted to him in any case, and that it was he [Que] who suffered damages due to the unwarranted suit.

Judge Puno held in favor of Nicolas, finding that Que acted maliciously in filing the estafa charge and in alleging that Nicolas issued the dishonored checks with deceit. Que’s MfR was denied. A 2^nd MfR was filed, and Que averred the mere dismissal of the charge in the fiscal's office was not a ground for damages nor did it constitute an actionable wrong. The trial court reversed the original decision, so Que won.

Nicolas contended that the amended decision was null and void for several technical reasons. IAC reinstated the original decision of Judge Puno—so Nicolas won.

QUE NOT GUILTY OF MALICIOUS PROSECUTION

To constitute malicious prosecution, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person that it was initiated deliberately by the defendant knowing that his charges were false and groundless. The mere act of submitting a case to the authorities for prosecution does not make one liable for malicious prosecution.

One cannot be held liable in damages for maliciously instituting a prosecution where he acted with probable cause. The presence of probable cause signifies as a legal consequence the absence of malice. If the charge, although false, was made with an honest belief in its truth and justice, and there were reasonable grounds on which such a belief could be founded, the accusation could not be held to have been false in the legal sense. [Buchanan v. Esteban]

Proof and motive that the prosecution or institution of the action was prompted by a sinister design to vex and humiliate a person and to cast dishonor and disgrace must be clearly and preponderantly established to entitle the victims to damages and other rights granted by law. Otherwise, there would always be a civil action for damages after the prosecution's failure to prove its cause. The adverse result of an action does not per se make the act wrongful and subject the actor to the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate; such right is so precious that moral damages may not be charged on those who may exercise it erroneously.

Considering that the checks could not be encashed and the supposedly defective goods had not been returned, Que had reason to believe that Nicolas intended to deceive him. Que was not motivated by ill feeling but only by an anxiety to protect his rights. Even if the fiscal found that no deceit was involved and that Que’s claim was unfounded, the mistaken charge was not malicious.

The mere dismissal of the criminal complaint by the fiscal's office did not create a cause of action. What was inquired into was WON there was a prima facie showing of estafa. Nowhere in the fiscal's investigation report is there any statement imputing malice to Que.

SC finds Que’s claim of harassment more plausible. However, inasmuch as good faith is presumed, absent sufficient rebuttable evidence, neither of them is guilty of malice. SC denied both parties their respective claims for damages. Each of them must bear the financial consequences of one’s own acts, including the litigation expenses.

IAC DECISION SET ASIDE; AMENDED DECISION OF TRIAL COURT REINSTATED

Feliciano v. Pasicolan

PABLO FELICIANO v. CFI JUDGE LADISLAO PASICOLAN AND PROVINCIAL FISCAL UNION KAYANAN

1961 / Natividad

Bail > Nature and definition > Definition; persons covered or required to post bail

FACTS

Feliciano, upon learning that an amended information charging him and 17 others of kidnapping with murder had been filed, and that a warrant for his arrest had been issued, went into hiding. Without surrendering himself, he filed a motion through his lawyer in which he asks that the court fix at 10k the amount of the bail bond for his release pending trial.

The Provincial Fiscal opposed this motion, on the ground that the filing was premature as Feliciano had not yet been arrested. CFI Judge Pasicolan dismissed Feliciano’s motion on the ground that "pending his arrest or surrender, Pablo Feliciano has not the right to ask this court to admit him to bail."

Feliciano contends that the Constitution provides that “All persons shall before conviction be bailable by sufficient sureties, except those charged with capital offenses when evidence of guilt is strong.” It is further averred that the phrase "all persons” has been interpreted to mean "all persons, without distinction, whether formally charged or not yet so charged with any criminal offense." Therefore, mandamus lies to compel Judge Pasicolan to do so.

ISSUE & HOLDING

WON Feliciano is entitled to admission to bail. NO. Feliciano is a free man; therefore, he is not entitled to admission to bail.

RATIO

Bail is defined under the Rules of Court as security required and given for the release of a person who is in custody of the law.

There is no question as to the soundness of the rule invoked by Feliciano, but it is subject to the limitation that the person applying for admission to bail should be in the custody of the law, or otherwise deprived of his liberty.

Herras Teehankee v. Rovira

In order that a person can invoke the constitutional precept, it is not necessary that he should wait until a formal complaint or information is filed against him. From the moment he is placed under arrest, detention or restraint by the officers of the law, he can claim this guarantee of the Bill of Rights, and this right he retains unless and until he is charged with a capital offense and evidence of his guilt is strong.

Manigbas v. Luna

The right to bail only accrues when a person is arrested or deprived of his liberty. The purpose of bail is to secure one's release and it would be incongruous to grant bail to one who is free. 

Guingona v. City Fiscal Flaminiano

TEOFISTO GUINGONA, JR., ANTONIO MARTIN, and TERESITA SANTOS v.
CITY FISCAL FLAMINIANO, ASST. CITY FISCAL LOTA and CLEMENT DAVID

1984 / Makasiar

David invested several deposits with the Nation Savings and Loan Association [NSLA]. He said that he was induced into making said investments by an Australian national who was a close associate of the petitioners [NSLA officials]. On March 1981, NSLA was placed under receivership by the Central Bank, so David filed claims for his and his sister’s investments.

On June 1981, Guingona and Martin, upon David’s request, assumed the bank’s obligation to David by executing a joint promissory note. On July 1981, David received a report that only a portion of his investments was entered in the NSLA records.

On December 1981, David filed I.S. No. 81-31938 in the Office of the City Fiscal, which case was assigned to Asst. City Fiscal Lota for preliminary investigation. David charged petitioners with estafa and violation of Central Bank Circular No. 364 and related regulations on foreign exchange transactions.

Petitioners moved to dismiss the charges against them for lack of jurisdiction because David's claims allegedly comprised a purely civil obligation, but the motion was denied. After the presentation of David's principal witness, petitioners filed this petition for prohibition and injunction because:

a.     The production of various documents showed that the transactions between David and NSLA were simple loans (civil obligations which were novated when Guingona and Martin assumed them)

b.    David's principal witness testified that the duplicate originals of the instruments of indebtedness were all on file with NSLA.

A TRO was issued ordering the respondents to refrain from proceeding with the preliminary investigation in I.S. No. 81-31938.

Petitioners’ liability is civil in nature, so respondents have no jurisdiction over the estafa charge. TRO CORRECTLY ISSUED.

GENERAL RULE: Criminal prosecution may not be blocked by court prohibition or injunction.

EXCEPTIONS

1.     For the orderly administration of justice

2.     To prevent the use of the strong arm of the law in an oppressive and vindictive manner

3.     To avoid multiplicity of actions

4.     To afford adequate protection to constitutional rights

5.     In proper cases, because the statute relied upon is unconstitutional or was held invalid

When David invested his money on time and savings deposits with NSLA, the contract that was perfected was a contract of simple loan or mutuum and not a contract of deposit. The relationship between David and NSLA is that of creditor and debtor. While the Bank has the obligation to return the amount deposited, it has no obligation to return or deliver the same money that was deposited. NSLA’s failure to return the amount deposited will not constitute estafa through misappropriation, but it will only give rise to civil liability over which the public respondents have no jurisdiction.

Considering that petitioners’ liability is purely civil in nature and that there is no clear showing that they engaged in foreign exchange transactions, public respondents acted without jurisdiction when they investigated the charges against the petitioners. Public respondents should be restrained from further proceeding with the criminal case for to allow the case to continue would work great injustice to petitioners and would render meaningless the proper administration of justice.

Even granting that NSLA’s failure to pay the time and savings deposits would constitute a violation of RPC 315, paragraph 1(b), any incipient criminal liability was deemed avoided. When NSLA was placed under receivership, Guingona and Martin assumed the obligation to David, thereby resulting in the novation of the original contractual obligation. The original trust relation between NSLA and David was converted into an ordinary debtor-creditor relation between the petitioners and David. While it is true that novation does not extinguish criminal liability, it may prevent the rise of criminal liability as long as it occurs prior to the filing of the criminal information in court. 

Matilde v. Jabson

CRISANTO MATILDE, JR. v. CFI JUDGE RAMON JABSON and PEOPLE

1975 / Antonio

Institution of actions arising from crime > Criminal aspect > Form and content > Substantive > Cause of accusation

FACTS

Three informations were filed against Crisanto Matilde, Jr. and others [laborers at Markes Agro-Chemical Enterprises]. They were charged with qualified theft, in relation to PD 133. The items involved were boxes of insecticides belonging to the company.

The informations were amended twice — the first, on the value of the article involved in one case, and the second, on the nature and character of the offense, changing it from "qualified theft" to "simple theft" by deleting the phrase "with grave abuse of confidence". In view of said amendments, Matilde withdrew his previous plea of not guilty. Upon re-arraignment, Matilde pleaded guilty to the crime of simple theft alleged in the three informations. He was convicted in the three cases. Penalty under each case – 6 months & 1 day of prision correccional to 6 years & 1 day of prision mayor.

            Matilde filed a motion for reconsideration, contending that in the absence of any allegation in the information alleging specifically all the elements of the offense defined and penalized under PD 133, he cannot be convicted and penalized under said decree. CFI denied the MfR.

ISSUE & HOLDING

WON CFI can validly impose upon Matilde the penalty prescribed by PD 133. NO

RATIO

Constitution – In all criminal prosecutions, the accused shall be informed of the nature and cause of the accusation against him.

RoC Rule 110, Section 8 – The acts or omissions complained of as constituting the offense must be stated in an ordinary and concise language so as to enable a person of common understanding to know what offense is intended to be charged; and to enable the court to pronounce proper judgment.

The main purpose of this requirement is to enable the accused to prepare his defense. He is presumed to be innocent and has no independent knowledge of the facts that constitute the offense with which he is charged.

An accused person cannot be convicted of a higher offense than that with which he is charged in the complaint or information on which he is tried. He has a right to be informed as to the nature of the offense with which he is charged before he is put on trial, and to convict him of a higher offense than that charged in the complaint or information on which he is tried would be an authorized denial of that right.

The clear import of PD 133 is to eradicate graft and corruption in society and promote the economic and social welfare of the people, by placing a strong deterrent on workers and laborers from sabotaging the productive efforts of the industry where they are employed, through the imposition of heavier penalties for the theft of any material, spare part, product, or article that he is working on, using or producing. The real nature of the criminal charge is determined by the actual recital of facts in the information. It is not to be determined from the caption or preamble of the information, or from the specification of the provision of law allegedly violated, they being conclusions of law.

The informations charge Matilde simply with theft. Nowhere is it alleged that the articles stolen were materials or products which Matilde was "working on or using or producing" as employee or laborer of the complainant. The fact that Matilde is charged with simple theft "in relation to PD 133" is insufficient.

Appropriate penalty: RPC 309 (3). The penalty is prision correccional in its minimum and medium periods, if the value of the property stolen is more than P200 but does not exceed P6,000. Considering the plea of guilty, CFI should have imposed said penalty in its minimum period. 

Valenzuela v. CA

ARTURO VALENZUELA and HOSPITALITA VALENZUELA v. CA, BIENVENIDO ARAGON, ROBERT PARNELL, CARLOS CATOLICO and THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY

1990 / Gutierrez, Jr.

FACTS

Arturo Valenzuela [Valenzuela] is a general agent of Philippine American General Insurance Company [Philamgen] since 1965. As such, he was authorized to solicit and sell in behalf of Philamgen all kinds of non-life insurance, and in consideration of services rendered was entitled to receive the full agent's commission of 32.5% from Philamgen. From 1973 to 1975, Valenzuela solicited marine insurance from Delta Motors. However, Valenzuela did not receive his full commission.

In 1977, Philamgen started to become interested in and expressed its intent to share in the commission due Valenzuela on a 50-50 basis, but he refused. In 1978, Philamgen and its President [Aragon] insisted on the sharing of the commission with Valenzuela, but he firmly reiterated his objection to the proposals. Because of the refusal of Valenzuela, Philamgen and its officers took drastic action. They reversed the commission due him by not crediting in his account the commission earned from the Delta Motors insurance, placed agency transactions on a cash and carry basis, threatened the cancellation of policies issued by his agency, and started to leak out news that Valenzuela has a substantial account with Philamgen. This resulted in the decline of his business as insurance agent. Philamgen terminated the General Agency Agreement of Valenzuela in December 1978.

                Valenzuela filed a complaint against Philamgen, and the RTC ruled in his favor, as his termination was found to be unjustified. However, the CA ruled in favor of Philamgen, as CA ordered Valenzuela to pay Philamgen the amount corresponding to the unpaid and uncollected premiums.

ISSUE & HOLDING

WON Valenzuela should be held liable for unpaid and uncollected premiums. NO.

RATIO

Under Section 77 of the Insurance Code, the remedy for the non-payment of premiums is to put an end to and render the insurance policy not binding.

Philippine Phoenix Surety and Insurance v. Woodworks (1979)

• The non-payment of premium does not merely suspend but puts an end to an insurance contract since the time of the payment is peculiarly of the essence of the contract.
• An insurer cannot treat a contract as valid for the purpose of collecting premiums and invalid for the purpose of indemnity. (Citing Insurance Law and Practice by John Alan Appleman)
• The foregoing findings are buttressed by Section 776 of the Insurance Code (PD 612), which now provides that no contract of insurance by an insurance company is valid and binding unless and until the premium thereof has been paid, notwithstanding any agreement to the contrary

Arce v. The Capital Insurance and Surety

• Unless premium is paid, an insurance contract does not take effect.
• Delgado (Capital Insurance & Surety Co., Inc. v. Delgado) was decided in the light of the Insurance Act before Sec. 72 was amended by the underscored portion. Prior to the Amendment, an insurance contract was effective even if the premium had not been paid so that an insurer was obligated to pay indemnity in case of loss and correlatively he had also the right to sue for payment of the premium. But the amendment to Sec. 72 has radically changed the legal regime in that unless the premium is paid there is no insurance.

Since the premiums have not been paid, the policies issued have lapsed. The insurance coverage did not go into effect or did not continue and the obligation of Philamgen as insurer ceased. Hence, for Philamgen which had no more liability under the lapsed and inexistent policies to demand, much less sue Valenzuela for the unpaid premiums would be the height of injustice and unfair dealing. In this instance, with the lapsing of the policies through the nonpayment of premiums by the insured there were no more insurance contracts to speak of.

RTC DECISION REINSTATED

Velasco v. Apostol

LAURA VELASCO and GRETA ACOSTA v. JUDGE SERGIO APOSTOL and MAHARLIKA INSURANCE

1989 / Regalado

FACTS

On 27 Nov 1973, around 230 PM, Laura Velasco and Greta Acosta were riding in Velasco’s Mercury car when an N/S taxicab driven by Dominador Santos [registered in the name of Alice Artuz, c/o Norberto Santos] crossed the center island towards their direction, and collided with their car at the left front part. The taxicab tried to return to its original lane, but was unable to climb the island. It backtracked, hitting again Velasco’s car in the left near portion, causing the latter's back portion to turn toward the center hitting a jeepney on its right, which was travelling along their side.

                Velasco and Acosta sued the taxicab driver and its registered owners, claiming actual, moral and exemplary damages plus attorney's fees. Maharlika Insurance was impleaded as a defendant in an amended complaint, with an allegation that the N/S taxicab was insured against third party liability for 20k with Maharlika at the time of the accident.

Maharlika claimed that there was no cause of action against it because at the time of the accident, the alleged insurance policy was not in force due to non-payment of the premium. It further averred that even if the taxicab had been insured, the complaint would still be premature since the policy provides that the insurer would be liable only when the insured becomes legally liable.

RTC ruled in favor of Velasco and Acosta, finding that the proximate cause of the accident was the taxicab driver’s negligence. However, Maharlika was exonerated on the ground that the policy was not in force for failure to pay the initial premium and for their concealment of a material fact. The payment was accepted by Maharlika without any knowledge that the risk insured against had already occurred since such fact was concealed by the insured and was not revealed to Maharlika.

The accident occurred on 27 Nov 1973 while the initial premium was paid only on 11 Dec 1973. Velasco and Acosta maintain that in spite of this late payment, the policy is binding because there was an implied agreement to grant a credit extension so as to make the policy effective. To them, the subsequent acceptance of the premium and delivery of the policy estops Maharlika from asserting that the policy is ineffective.

ISSUE & HOLDING

WON Maharlika Insurance is liable. NOT LIABLE. RTC JUDGMENT AFFIRMED.

RATIO

It should be noted that this controversy arose under the aegis of the old insurance law, Act No. 2427, as amended. The former insurance law, which applies to this case, provided that:

An insurer is entitled to the payment of premium as soon as the thing insured is exposed to the peril insured against, unless there is clear agreement to grant the insured credit extension of the premium due. No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid.

The insurance policy in question would be valid and binding notwithstanding the non-payment of the premium if there was a clear agreement to grant to the insured credit extension. Such agreement may be express or implied.

SC finds no cogent proof of any such implied agreement. Had there really been a credit extension, the insured would not have had any apprehension or hesitation to inform Maharlika at the time of or before the payment of the premium that an accident for which the insurer may be held liable had already happened. Under such circumstances, notice alone is necessary and the insured need not pay the premium because whatever premium may have been due may already be deducted upon the satisfaction of the loss under the policy. Velasco and Acosta failed to point out any other circumstances showing that prepayment of premium was not intended to be insisted upon. They have thus failed to discharge the burden of proving their allegation of the existence of the purported credit extension agreement.

                SC noted that in the present law, Section 77 of the Insurance Code of 1978 has deleted the clause "unless there is clear agreement to grant the insured credit extension of the premium due" which was involved in this controversy.

The fact withheld could not have influenced Maharlika in entering into the supposed contract or in estimating the character of the risk or in fixing the rate premium, because no such contract existed at the time of the accident. There was nothing to rescind at that point in time. What should be apparent from such actuations of the taxicab owner/s is the presence of bad faith on their part, a reprehensible disregard of the principle that insurance contracts are uberrimae fidae and demand the most abundant good faith. 

UCPB General Insurance v. Masagana Telamart (2001)

UCPB GENERAL INSURANCE [UCPB] v. MASAGANA TELAMART [Masagana]

2001 / Davide, Jr.

FACTS [SEE 1999 CASE DIGEST FOR THE OTHER FACTS]

CA disagreed with UCPB’s stand that Masagana’s tender of payment of the premiums on 13 July 1992 did not result in the renewal of the policies, having been made beyond the effective date of renewal as provided under Policy Condition No. 26:

Renewal Clause. -- Unless the company at least 45 days in advance of the end of the policy period mails or delivers to the assured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages, the assured shall be entitled to renew the policy upon payment of the premium due on the effective date of renewal.

The following facts have been established:

1.  For years, UCPB had been issuing fire policies to th Masagana, and these policies were annually renewed.

2.  UCPB had been granting Masagana a 60-90-day credit term within which to pay the premiums on the renewed policies.

3.  There was no valid notice of non-renewal of the policies, as there is no proof that the notice sent by ordinary mail was received by Masagana, and the copy allegedly sent to Zuellig was ever transmitted to Masagana.

4.  The premiums for the policies were paid by Masagana within the 60- 90-day credit term and were duly accepted and received by UCPB’s cashier.

ISSUE & HOLDING

WON IC 77 must be strictly applied to UCPB’s advantage despite its practice of granting a 60- to 90-day credit term for the payment of premiums. NO. MASAGANA WINS THIS TIME. 1999 DECISION SET ASIDE; CA DECISION AFFIRMED

RATIO

SEC. 77.  An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against.  Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies.

This was formerly Act 2427, Section 72:

SEC. 72.  An insurer is entitled to payment of premium as soon as the thing insured is exposed to the peril insured against, unless there is clear agreement to grant the insured credit extension of the premium due.  No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid. (Underscoring supplied)

IC 77 does not restate the portion of IC 72 expressly permitting an agreement to extend the period to pay the premium.  However, there are exceptions to IC 77.

1. In case of a life or industrial life policy whenever the grace period provision applies [Sec. 77]
2. Any acknowledgment of the receipt of premium is conclusive evidence of payment [Sec. 78]
3. If the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss [Makati Tuscany Condominium v. CA]
4. The insurer may grant credit extension for the payment of the premium [Makati Tuscany Condominium] 
5. Estoppel

IC 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit extension, and such an agreement is not contrary to morals, good customs, public order or public policy. [Makati Tuscany Condominium v. CA]

ON EXCEPTION #4. If the insurer has granted the insured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term.

It would be unjust and inequitable if recovery on the policy would not be permitted against UCPB, which had consistently granted a 60-90-day credit term for the payment of premiums despite its full awareness of IC 77.  Estoppel bars it from taking refuge under said section, since Masagana relied in good faith on such practice.  

UCPB General Insurance v. Masagana Telamart (1999)

UCPB GENERAL INSURANCE [UCPB] v. MASAGANA TELAMART [Masagana]

1999 / Pardo

FACTS

In 1991, UCPB issued 5 fire insurance policies covering Masagana Telamart’s various properties for the period from 22 May 1991 to 22 May 1992.

On March 1992 [~2 months before policy expiration], UCPB evaluated the policies and decided not to renew them upon expiration of their terms on 22 May 1992.  UCPB advised Masagana’s broker of its intention not to renew the policies. On April 1992 [~1 month before policy expiration], UCPB gave written notice to Masagana of the non-renewal of the policies. On June 1992 [policy already expired], Masagana’s property covered by 3 UCPB-issued policies was razed by fire.

On 13 July 1992, Masagana presented to UCPB’s cashier 5 manager's checks, representing premium for the renewal of the policies for another year.

It was only on the following day, 14 July 1992, when Masagana filed with UCPB a formal claim for indemnification of the insured property razed by fire. On the same day, UCPB returned the 5 manager's checks, and rejected Masagana’s claim since the policies had expired and were not renewed, and the fire occurred on 13 June 1992 (or before tender of premium payment).

            Masagana filed a civil complaint for recovery of the face value of the policies covering the insured property razed by fire. RTC ruled in favor of Masagana, as it found it to have complied with the obligation to pay the premium; hence, the replacement-renewal policy of these policies are effective and binding for another year [22 May 1992 – 22 May 1993].

            CA affirmed RTC, holding that following previous practice, Masagana was allowed a 60-90 day credit term for the renewal of its policies, and that the acceptance of the late premium payment suggested that payment could be made later.

ISSUE & HOLDING

WON the fire insurance policies had expired on 22 May 1992, or had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date after the occurrence of the risk insured against [fire]. FIRE INSURANCE POLICIES HAD EXPIRED

RATIO

An insurance policy, other than life 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.

The case of Malayan Insurance v. Cruz-Arnaldo cited by the CA is not applicable. In that case, payment of the premium was made on before the occurrence of the fire.  In the present case, the payment of the premium for renewal of the policies was tendered a month after the fire occurred.  Masagana did not even give UCPB a notice of loss within a reasonable time after occurrence of the fire.

CA DECISION REVERSED