[G.R. No. L-38613. February 25, 1982.] PACIFIC TIMBER EXPORT CORPORATION, Petitioner, v. THE HONORABLE COURT OF APPEALS and WORKMEN’S INSURANCE COMPANY, INC., Respondents. Jose J. Ferrer, Jr. & Augusto Z. Fajardo for Petitioner. Augustin J. Guillermo for respondent Workmen’s Ins. Co., Inc. SYNOPSIS After respondent insurance company issued to petitioner a Cover Note for the temporary insurance of 1,250,000 board feet of logs for exportation to Okinawa and Japan, which included loss during loading operations, but before the issuance of the regular marine cargo policies which covered only loss during transit, thirty pieces of said logs were lost while being loaded in petitioner’s vessel. Petitioner sought to recover the loss but private respondent refused on the ground that although said loss was covered under the Cover Note, nevertheless, the same became null and void upon the issuance of the marine policies which did not cover said loss. The Court of First Instance of Manila rendered a decision in favor of petitioner but on appeal, said decision was reversed by the Court of Appeals.chanroblesvirtual|awlibrary On review, the Supreme Court held that a Cover Note is not a mere application for insurance but in a real sense a contract to be integrated to the regular policies subsequently issued and the fact that no separate premium was paid on the Cover Note before the loss occurred does not militate against recovery thereunder. Appealed decision, set aside. SYLLABUS 1. COMMERCIAL LAW; INSURANCE; COVER NOTE; NO SEPARATE PREMIUMS ARE REQUIRED TO BE PAID THEREON. — The fact that no separate premium was paid on the Cover Note before the loss insured against occurred, does not militate against the validity of petitioner’s contention that the Cover Note is not without a consideration, for no such Page FIRST DIVISION 1 Insurance Part V Cases Atty. Reyes premium could have been paid, since by the nature of the Cover Note it did not contain, as all Cover Notes do not contain, particulars of the shipment that would serve as basis for the computation of the premiums. As a logical consequence, no separate premiums are intended or required to be paid on a Cover Note. 2. ID.; ID.; ID.; A CONTRACT AND NOT A MERE APPLICATION FOR INSURANCE; DEEMED INTEGRATED TO THE REGULAR POLICIES SUBSEQUENTLY ISSUED. — Where the note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, the purpose and function of the Cover Note would be set at naught or rendered meaningless, for it is in a real sense a contract, not a mere application for insurance which is a mere offer. 3. ID.; ID.; ID.; RISK INSURED AGAINST NOT INCLUDED IN THE REGULAR MARINE INSURANCE POLICIES; IMMATERIAL AS LOSS CAN BE DETERMINED INDEPENDENTLY; CASE AT BAR. — While it may be true that the marine insurance policies issued were for logs no longer including those which had been lost during loading operations, this had to be so because the risk insured against is not for loss during loading operations anymore, but for loss during transit, the logs having already been safely placed aboard. This would make no difference, however, insofar as the liability on the cover note is concerned, for the number or volume of logs lost can be determined independently, as in fact it had been so ascertained as the instance of private respondent itself when it sent its own adjuster to investigate and assess the lost, after the issuance of the marine insurance policies. 4. ID.; ID.; ID.; FUNCTIONS AS A "BINDER" ; SUPPORTED BY PRESUMPTION OF VALIDITY OF POLICY DELIVERED WITHOUT REQUIRING PAYMENT OF THE PREMIUM. — Now payment of premium on the Cover Note is no cause for the petitioner to lose what is due it as if there had been payment of premium, for non-payment by it was not chargeable against its fault. This is how the cover note as a "binder" should legally operate; otherwise, it would serve no practical purpose in the realm of commerce, and is supported by the doctrine that where a policy is delivered without requiring payment of the premium, the presumption is that a credit was intended and policy is valid (Miller v. Brooklyn L. Inc., Co. (U.S.) 12 Wall, 285, 20 Led. 39 Am. Jur. New ‘Insurance’ Sec. 1845, p. 907, note 2; Sec. 1079, p. 246, note 20.). 5. ID.; ID.; CLAIM ON THE INSURANCE AGREEMENT; DEFENSE OF DELAY MUST BE PROMPTLY AND SPECIFICALLY ASSERTED; CASE AT BAR. — Section 84 of the Insurance Act requires that the ground of delay must be promptly and specifically asserted when a claim on the insurance 53 HO 1032 and 53 HO 1033. which are generally binding upon this Court. thereby raising a question of law reviewable by this Court 3 are as follows:jgc:chanrobles. ft. "After the issuance of Cover Note No. The logs were to be loaded on the ‘SS Woodlock’ which Docked about 500 meters from the shortline of the Diapitan Bay. 53 HO 1033 was for 853 pieces of logs equivalent to 695. 2 Insurance Part V Cases Atty. We will send you an accurate report all the details including values as soon as same will be reported to us. Japan. Inc. except as shall be indicated in the discussion of the opinion of this Court the substantial correctness of such particular finding having been disputed. 548 board feet (Exhibit C). Quezon Province to Okinawa and Tokyo.250. 1963. Reyes HO 1032 (Exhibit B) was for 542 pieces of logs equivalent to 499. 1963 up to the complete payment. Philippine Lauan and Apitong Logs.498 bd.com.ph "On March 19. Woodlock. but 30 pieces were verified to have been lost or washed away as a result of the accident. 1010 for shipment of 1. bad weather developed resulting in 75 pieces of logs which were rafted together to break loose from each other 45 pieces of logs were salvaged.: This petition seeks the review of the decision of the Court of Appeals reversing the decision of the Court of First Instance of Manila in favor of petitioner and against private respondent which ordered the latter to pay the sum of P11.00 as attorney’s fees and the costs 1 thereby dismissing petitioner’s complaint with costs. Very respectfully yours. the plaintiff informed the defendant about the loss of ‘approximately 32 pieces of logs’ during loading of the ‘SS Woodlock’.S. The defendant issued on said date Cover Note No. 1963. Manila. The nature of this specific ground for resisting a claim places the insurer on duty to inquire when the loss took place.m. respondent company took steps clearly indicative that this particular ground for objection to the claim was never in its mind. 2chanroblesvirtual|awlibrary The findings of fact of the Court of Appeals. on March 29. we wish to remain. 1010. Quezon that we have lost approximately 32 pieces of logs during loading of the S. while the logs were alongside the vessel.395 logs. The said letter (Exhibit F) reads as follows:chanrob1es virtual 1aw library ‘April 4. We would like to inform you that we have received advance preliminary report from our Office in Diapitan. or the equivalent of 1.04 with interest at the rate of 12% interest from receipt of notice of loss on April 15. The total cargo insured under the two marine policies accordingly consisted of 1. 1963. insuring the said cargo of the plaintiff "Subject to the Terms and Conditions of the WORKMEN’S INSURANCE COMPANY. At about 10:00 o’clock a. 1963 Workmen’s Insurance Company. ft.250. 1963. INC.042. Thank you for your attention. Policy No. respectively). the Supreme Court is satisfied and convinced. "The regular marine cargo policies were issued by the defendant in favor of the plaintiff on April 2. some of the logs intended to be exported were lost during loading operations in the Diapitan Bay.000 board feet of Philippine Lauan and Apitong logs to be shipped from the Diapitan Bay. "In a letter dated April 4.000 bd. even on the assumption that there was delay.195. 53 Page agreement is made. Policy No. J. the plaintiff secured temporary insurance from the defendant for its exportation of 1. Philippines Gentlemen:chanrob1es virtual 1aw library This has reference to Insurance Cover Note No.950 board feet.000. printed Marine Policy form as filed with and approved by the Office of the Insurance Commissioner" (Exhibit A). The logs were taken from the log pond of the plaintiff and from which they were towed in rafts to the vessel..DECISION DE CASTRO. In the case at bar. the sum of P3. so that it could determine whether delay would be a valid ground upon which to object to a claim against it. that waiver can successfully be raised against private Respondent. 1010 (Exhibit A). but before the issuance of the two marine policies Nos. The two marine policies bore the numbers of 53 HO 1032 and 53 HO 1033 (Exhibits B and C. where the undisputed facts show that instead of invoking the ground of delay in objecting to petitioner’s claim of recovery on the cover note. PACIFIC TIMBER EXPORT CORPORATION . on the ground that defendant’s investigation revealed that the entire shipment of logs covered by the two marine policies No. The adjustment company submitted its ‘Report’ on August 23. by express stipulation. General Manager Although dated April 4. OBJECTIONS ON THAT GROUND ARE WAIVED UNDER SECTION 84 OF THE INSURANCE ACT. 33.ATILANO 3 Insurance Part V Cases Atty. tsn. "On July 17. 1010 because the said Note had become ‘null and void by virtue of the issuance of Marine Policy Nos. the adjuster found that ‘the loss of 30 pieces of logs is not covered by Policies Nos. "On January 13. the adjustment company submitted a computation of the defendant’s probable liability on the loss sustained by the shipment. Mandanas observed that ‘it is only fair and equitable to indemnify the insured under Cover Note No. From this undisputed fact. the letter was received in the office of the defendant only on April 15. We uphold petitioner’s submission that the Cover Note was not without consideration for which the respondent court held the Cover Note as null and void. 1964. 1963. and 53 HO 1033. which must be deemed . ft.00. the loss of 30 pieces of logs is within the 1. Reyes I "THE COURT OF APPEALS ERRED IN HOLDING THAT THE COVER NOTE WAS NULL AND VOID FOR LACK OF VALUABLE CONSIDERATION BECAUSE THE COURT DISREGARDED THE PROVEN FACTS THAT PREMIUMS FOR THE COMPREHENSIVE INSURANCE COVERAGE THAT INCLUDED THE COVER NOTE WAS PAID BY PETITIONER AND THAT NO SEPARATE PREMIUMS ARE COLLECTED BY PRIVATE RESPONDENT ON ALL ITS COVER NOTES. as shown by the stamp impression appearing on the left bottom corner of said letter.286. "On September 14. 53 HO 1033. As a logical consequence. 1963 (Exhibit H). The fact that no separate premium was paid on the Cover Note before the loss insured against occurred.000 bd. 1963. the defendant informed the Insurance Commissioner that.04 (Exhibit 4). The denial of the claim by the defendant was brought by the plaintiff to the attention of the Insurance Commissioner by means of a letter dated March 21. thereby leaving no account unpaid by petitioner due on the insurance coverage.’ and advised early settlement of the said marine loss and salvage claim (Exhibit L). 1964. the defendant requested the First Philippine Adjustment Corporation to inspect the loss and assess the damage. the cover note is made subject to the terms and conditions of the marine policies. in the total amount of P19. the claim of the plaintiff is being denied on the ground that the cover note is null and void for lack of valuable consideration (Exhibit M). However. 1964 (Exhibit K). since by the nature of the Cover Note. in charge of issuing cover notes of the respondent company (p. covered by Cover Note No. 1963. 1965). 1963. as all Cover Notes do not contain particulars of the shipment that would serve as basis for the computation of the premiums. it is not disputed that petitioner paid in full all the premiums as called for by the statement issued by private respondent after the issuance of the two regular marine insurance policies.Asst. does not militate against the validity of petitioner’s contention. no separate premiums are intended or required to be paid on a Cover Note. 53 HO 1032 and 1033 inasmuch as said policies covered the actual number of logs loaded on board the ‘SS Woodlock’.000. It was further stated that the said loss may not be considered as covered under Cover Note No. in the total amount of P11. it did not contain." 5 1. 1010. "On June 26. CONSEQUENTLY. 1010 insured for $70. In said report. Juan Jose Camacho. II "THE COURT OF APPEALS ERRED IN HOLDING THAT PRIVATE RESPONDENT WAS RELEASED FROM LIABILITY UNDER THE COVER NOTE DUE TO UNREASONABLE DELAY IN GIVING NOTICE OF LOSS BECAUSE THE COURT DISREGARDED THE PROVEN FACT THAT PRIVATE RESPONDENT DID NOT PROMPTLY AND SPECIFICALLY OBJECT TO THE CLAIM ON THE GROUND OF DELAY IN GIVING NOTICE OF LOSS AND. and denied recovery therefrom. 53 HO 1032 and 1033’ (Exhibit J-1)." 4 Petitioner assigned as errors of the Court of Appeals. the defendant wrote the plaintiff denying the latter’s claim. Insurance Commissioner Francisco Y. on advice of their attorneys. 1964. At any rate. EMMANUEL S.79 (Exhibit G). 53 HO 1032 and 53 HO 1033 were received in good order at their point of destination. for no such premium could have been paid. This is a fact admitted by an official of respondent company.042. In a reply letter dated March 30. September 24. The plaintiff subsequently submitted a ‘Claim Statement’ demanding payment of the loss under Policies Nos. the following:chanrob1es virtual 1aw library Page (Sgd). and the payment of premiums is one of the terms of the policies.250. Petitioner contends that the Cover Note was issued with a consideration when. but for loss during transit. the purpose and function of the Cover Note would be set at naught or rendered meaningless. — Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of his or if he omits to take objection promptly and specifically upon that ground. We find duly substantiated petitioner’s assignments of error. was to set in motion from July 1963 what would be necessary to determine the cause and extent of the loss.com:chanrobles. but after the issuance of the Cover Note. The adjuster submitted his report on August 23. the appealed decision is set aside and the decision of the Court of First Instance is reinstated in toto with the affirmance of this Court. it took steps clearly indicative that this particular ground for objection to the claim was never in its mind. for the number or volume of logs lost can be determined independently. Guerrero. ACCORDINGLY. private respondent’s reaction upon receipt of the notice of loss. . Makasiar. insofar as the liability on the cover note is concerned. 1963. waiver can successfully be raised against private Respondent. enough time was available for private respondent to determine if petitioner was guilty of delay in communicating the loss to respondent company. for no loss or damage had to be assessed on the coverage arising from the marine insurance policies. as in fact it had been so ascertained at the instance of private respondent itself when it sent its own adjuster to investigate and assess the loss. not a mere application for insurance which is a mere offer. liability on the note would have already arisen even before payment of premium. the presumption is that a credit was intended and policy is valid.It may be true that the marine insurance policies issued were for logs no longer including those which had been lost during loading operations. for the loss insured against having already occurred. SO ORDERED. otherwise. concur.ph : virtual law library "Section 84. Melencio-Herrera and Plana. The nature of this specific ground for resisting a claim places the insurer on duty to inquire when the loss took place. which was on April 15.ph The adjuster went as far as submitting his report to respondent. it was not necessary to ask petitioner to pay premium on the Cover Note. Teehankee. It must be because it did not find any delay. This had to be so because the risk insured against is not for loss during loading operations anymore. In the proceedings that took place later in the Office of the Insurance Commissioner. as well as its computation of respondent’s liability on the insurance coverage. 1963. this Court is satisfied and convinced that as expressly provided by law. for it is in a real sense a contract. The non-payment of premium on the Cover Note is. The law requires this ground of delay to be promptly and specifically asserted when a claim on the insurance agreement is made. after the issuance of the marine insurance policies. This would make no difference. private respondent should then have raised this ground of delay to avoid liability. No special pronouncement as to costs. The defense of delay as raised by private respondent in resisting the claim cannot be sustained. however. This is how the cover note as a "binder" should legally operate.1963 to July 1963. As already stated earlier. If the Note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued. 7 2. with a view to the payment thereof on the insurance agreement. Reyes to a claim against it.com."cralaw virtua1aw library From what has been said. the logs having already been safely placed aboard. But even on the assumption that there was delay.chanrobles virtualawlibrary chanrobles. the more practical procedure is simply to deduct the premium from the amount due the petitioner on the Cover Note. From April 15.com. 1963. no cause for the petitioner to lose what is due it as if there had been payment of premium. so that it could determine whether delay would be a valid ground upon which to object Page to include the Cover Note. Thus Section 84 of the Insurance Act provides:chanrobles. Fernandez. as this Court fails to find a real and substantial sign thereof. JJ. Thus it sent its adjuster to investigate and assess the loss in July. The undisputed facts show that instead of invoking the ground of delay in objecting to petitioner’s claim of recovery on the cover note. 1963 and his computation of respondent’s liability on September 14. therefore. for non-payment by it was not chargeable against its fault. it would serve no practical purpose in the realm of commerce. It did not do so. For obvious reasons.. 6 4 Insurance Part V Cases Atty. and is supported by the doctrine that where a policy is delivered without requiring payment of the premium. This coverage could not have been no other than what was stipulated in the Cover Note. Had all the logs been lost during the loading operations. "BINDING DEPOSIT RECEIPT. ID. Page [G. v. FAILURE OF AGENT TO COMMUNICATE THE REJECTION TO APPLICANT. ID. INSURANCE CONTRACT. Instead. Salazar. 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. 2. He paid the premium and was issued a binding deposit receipt. L-31878. CONCEALMENT OF MATERIAL FACT. HONORABLE COURT OF APPEALS. v. The manager wrote back and again strongly recommended the approval of the application. where an agreement is made between the applicant and the agent. on behalf of the insurance company.. Secondly. the child died of influenza with complication of bronchopneumonia. Pelaez & Pelaez for respondent Ngo Hing. In the first place. Reyes SYLLABUS 1. must have been a completed contract. a mongoloid. COURT OF APPEALS and NGO HING. nothing to be passed upon. PERFECTION OF CONTRACT. the applicant 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. to be binding from the date of the application. April 30." — Where the binding deposit receipt is intended to be merely a provisional or temporary insurance contract. No. having an insurable interest on the life of his daughter.. a duly authorized agent of Pacific Life. — A contract of insurance. When he filed the insurance application in dispute he was therefore only taking a chance that the company will approve the recommendation of the agent for the acceptance and approval of the application in question. MONDRAGON. 3.R. L-31845.. or determined.] 5 Insurance Part V Cases Atty. must be assented to by both parties either in person or by their agents. ID. He did not divulge each physical defect of his daughter. the Company disapproved the application. and is subordinated to the act of the company in approving or rejecting the application. The Court of Appeals in its amended decision affirmed the trial court’s decision in toto. Luna & Manalo for petitioner Company. 4. absolute and perfect candor or openness and honestly. ID. The decisive issues in these cases are: (1) whether the binding deposit receipt constituted a temporary contract of the life insurance in question. such binding deposit receipt does not become in force until the application is approved. April 30. — The contract of insurance is one of perfect good faith (uberrima fides meaning good faith. ID.GREAT PACIFIC LIFE ASSURANCE COMPANY. despite the branch manager’s favorable recommendation.. the trial court rendered judgment adverse to both petitioners. The contract. MEETING OF THE MIND. In a suit filed by private respondent to recover the proceeds of the insurance.] LAPULAPU D. there was no contract perfected between the parties who had no meeting of their minds. 1979. — A binding deposit receipt which is merely conditional does not insure outright. and (2) whether private respondent concealed the state of health and physical condition of his child. ID. and that the receipt merely acknowledged. before it shall take effect. At this point. like other contracts. Pelaez. one that leaves nothing to be done. The acceptance is merely conditional. Respondents. that no insurance contract was perfected between the parties with the noncompliance of the conditions provided in the binding receipt and concealment having been committed by private Respondent. The Supreme Court held that a "binding receipt" does not insure by itself.. because a 20-year endowment plan is not available for minors.R. applied for a 20year endowment policy on the life of his one-year old daughter. Petitioner. SYNOPSIS Private respondent. Thus. Voltaire Garcia for petitioner Mondragon. nothing to be completed. No.. being an authorized agent is indubitably aware that said company does not offer the life insurance applied for. no liability will attack until the principal approves the risk and a receipt is given by the agent. Siguion Reyna. 5. aside from being an insurance agent and office associate of the branch. [G. Private respondent. There can be no contract of insurance unless the minds of the parties have met in agreement. — The failure of the insurance company’s agent to communicate to the applicant the rejection of the insurance application would not have any adverse effect on the allegedly perfected temporary contract. Montecillo & Ongsiako and Sycip. the absence of any concealment . it offered the Juvenile Triple Action Plan. Petitioner. However. 1979.Respondents. . DECISION DE CASTRO. .6. he ought to know. . however slight [Black’s Law Dictionary. J. as he surely must have known.000. In its original decision. ID. and (2) whether private respondent Ngo Hing concealed the state of health and physical condition of Helen Go. private respondent sought the payment of the proceeds of the insurance. No. through these petitions for certiorari by way of appeal. Act 2427). 1957 Helen Go died of influenza with complication of broncho-pneumonia.00 as his commission for being a duly authorized agent of Pacific Life. 1."cralaw virtua1aw library Page or deception. It was when things were in such state that on May 28. constitutes such concealment as to render the policy void. CASE AT BAR. the Juvenile Non-Medical Declaration be sent to the Company. a congenital physical defect that could never be disguised. The letter stated that the said life insurance application for 20-year endowment plan is not available for minors below seven years old.077. Instead. Whether intentional or unintentional.000. the respondent Court of Appeals set aside the appealed decision of the Court of First Instance of Cebu. Reyes Mondragon. 1970. shall have received the premium deposit .ph "A. Mondragon finally type-wrote the data on the application form which was signed by private respondent Ngo Hing. If the Company or its agent. because the petitioners in both cases seek similar relief. the binding deposit receipt (Exhibit E) was issued to private respondent Ngo Hing. he filed the action for the recovery of the same before the Court of First Instance of Cebu. These conditions state that:jgc:chanrobles. were asking for such coverage (Exhibit 4-M).317. Concealment is a neglect to communicate that which a party knows and ought to communicate (Section 25. especially the Chinese. and his failure to divulge such significant fact is deemed to have been done in bad faith.077. which rendered void the aforesaid Exhibit E. (Rollo.00 as attorney’s fees plus costs of suits. but he retained the amount of P1. private respondent Ngo Hing filed an application with the Great Pacific Life Assurance Company (hereinafter referred to as Pacific Life) for a twenty-year endowment policy in the amount of P50.. 1957. and advised that if the offer is acceptable. The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner Mondragon to private respondent Ngo Hing. from the amended decision of respondent Court of Appeals which affirmed in toto the decision of the Court of First Instance of Cebu. 6 Insurance Part V Cases Atty. p.000. And where the applicant himself is an insurance agent. petitioner Mondragon handwrote at the bottom of the back page of the application form his strong recommendation for the approval of the insurance application. It appears that on March 14. The latter paid the annual premium. Said respondent supplied the essential data which petitioner Lapulapu D. Branch Manager of the Pacific Life in Cebu City wrote on the corresponding form in his own handwriting (Exhibit I-M). not for the insured alone but equally so for the insurer.00 on the life of his one-year old daughter Helen Go. ordering "the defendants (herein petitioners Great Pacific Life Assurance Company and Mondragon) jointly and severally to pay plaintiff (herein private respondent Ngo Hing) the amount of P50. but having failed in his effort. Mondragon wrote back Pacific Life again strongly recommending the approval of the 20-year endowment life insurance on the ground that Pacific Life is the only insurance company not selling the 20year endowment insurance plan to children. At the back of Exhibit E are condition precedents required before a deposit is considered a BINDING RECEIPT. ID.: The two above-entitled cases were ordered consolidated by the Resolution of this Court dated April 29. Then on April 30. L-31878.00 with interest at 6% from the date of the filing of the complaint. 1957. his duty and responsibility to supply such a material fact. 2nd Edition]. without interest. 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. Thereupon. Mondragon received a letter from Pacific Life disapproving the insurance application (Exhibit 3-M). and absolved the petitioners from liability on the insurance policy. 1957. pointing out that since 1954 the customers. Upon the payment of the insurance premium. and the sum of P10. but Pacific Life can consider the same under the Juvenile Triple Action Plan. the concealment entities the insurer to rescind the contract of insurance.75 going over to the Company.75. — The failure of the father who applied for a life insurance policy on the life of his daughter to divulge the fact that his daughter is a mongoloid. on May 6. but ordered the reimbursement to appellee (herein private respondent) the amount of P1. 58). Likewise. which rendered the adverse decision as earlier referred to against both petitioners..com. the sum of P1. before it shall take effect. therefore. In the first place. Nonetheless. in life insurance. Thus. . no liability shall Page and the insurance application. or determined. . 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. 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. . and the company disapproves the application. the insurance contract shall not be binding until the applicant accepts the policy offered. having an insurable interest on the life of his one-year old daughter. 41 Phil. is indubitably aware that said company does not offer the life insurance applied for. . . There can be no contract of insurance unless the minds of the parties have met in agreement. Accordingly. Secondly. on behalf of the company. 1957 (Exhibit 3-M). the binding deposit receipt (Exhibit E) is. If the applicant does not accept the policy. Upon this premise. . nothing to be completed." Since petitioner Pacific Life disapproved the insurance application of respondent Ngo Hing. nothing to be passed upon. and the premium paid shall be returned to the applicant. 13-14). .00 in favor of the latter’s one-year old daughter. must have been a completed contract. there was no contract perfected between the parties who had no meeting of their minds. the deposit paid by private respondent shall have to be refunded by Pacific Life. As held by this Court. where an agreement is made between the applicant and the agent." (Emphasis ours). otherwise. a "binding slip" or "binding receipt" does not insure by itself (De Lim v. 7 Insurance Part V Cases Atty. 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. In the absence of a meeting of the minds between petitioner Pacific Life and private respondent Ngo Hing over the 20year endowment life insurance in the amount of P50. aside from being an insurance agent and an office associate of . The acceptance is merely conditional. the deposit shall be refunded. being an authorized insurance agent of Pacific Life at Cebu branch office. 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. one that leaves nothing to be done. manifestly. private respondent was. and (3) that if the applicant is not insurable according to the standard rates. pp. or offers to issue a policy for a different plan and/or amount . . and the Company declines to approve the application. 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. the binding deposit receipt in question had never become in force at any time. What it offered instead is another plan known as the Juvenile Triple Action. E.. for such period as is covered by the deposit . there could have been no insurance contract duly perfected between them. It bears repeating that through the intra-company communication of April 30. and is subordinated to the act of the company in approving or rejecting the application. ON or PRIOR to the date of medical examination . 264). Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely an acknowledgment. the deposit shall be refunded. Reyes attach until the principal approves the risk and a receipt is given by the agent. 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."cralaw virtua1aw library 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. When he filed the insurance application in dispute. If the applicant shall not have been insurable under Condition A above.. The contract. like other contracts. "a contract of insurance. Private respondent. the record discloses that Pacific Life bad rejected the proposal and recommendation. 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. 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. Sun Life Assurance Company of Canada. the insurance applied for shall not be in force at any time. supra. which private respondent failed to accept. must be assented to by both parties either in person or by their agents. . said insurance shall be in force and in effect from the date of such medical examination.chanrobles law library As held in De Lim v. merely conditional and does not insure outright.000. to be binding from the date of the application. and with the non-compliance of the abovequoted conditions stated in the disputed binding deposit receipt.D. (2) that if the company does not accept the application and offers to issue a policy for a different plan. Sun Life Assurance Company of Canada. 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. Had he divulged said significant fact in the insurance application form.chanrobles. I am not quite convinced that this was so. 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 implicitly declining the offer to consider the application under the Juvenile Triple Action Plan." Under these circumstances. When private respondent supplied the required essential data for the insurance application form.077. Besides. Whether intentional or unintentional the concealment entitles the insurer to rescind the contract of insurance (Section 26.com : virtual law library 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. 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. Vda de Songco. Relative to the second issue of alleged concealment. Private respondent appears guilty thereof. his duty and responsibility to supply such a material fact. Martin who later came up to this Court. Such a congenital physical defect could never be ensconced nor disguised.At this juncture. Ngo Hing.. 25 SCRA 70). it is inconceivable that the progress in the processing of the application was not brought home to his knowledge. withheld the fact material to the risk to be assumed by the insurance Page petitioner Mondragon. 2nd Edition]. as he surely must have known. Until such a definite policy is. from his dissenting opinion to the amended decision of the respondent court which completely reversed the original decision. id. one is hereby entered absolving petitioners Lapulapu D. this Court is of the firm belief that private respondent had deliberately concealed the state of health and physical condition of his daughter Helen Go. by then. not for the insured alone but equally so for the insurer (Field man’s Insurance Co. Pacific Life would have verified the same and would have had no choice but to disapprove the application outright. Nonetheless. The unchallenged statement of appellant Mondragon in his letter of May 6. 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.. . 2427). 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. Philippine American Life Insurance Company. adopted by the company. v. as legally defined." (Amended Decision. in apparent bad faith. 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. 8 Insurance Part V Cases Atty. Saturnino v. issued at all. Costs against private Respondent. Rollo. as father of the applicant herself. however. and concealment. 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. Et Al. and in lieu thereof. We find it fit to quote with approval. 2. the following:chanrob1es virtual 1aw library Of course. WHEREFORE. Court of Appeals. 930. the very apt observation of then Appellate Associate Justice Ruperto G. SO ORDERED. the absence of any concealment or deception. having been committed by herein private Respondent. to private respondent. without interest. the decision appealed from is hereby set aside. he was fully aware that his one-year old daughter is typically a mongoloid child. Inc. 52-53). Act No. Concealment is a neglect to communicate that which a party knows and ought to communicate (Section 25. pp. father of the minor applicant. Ngo Hing should only be presumed to know what kind of policies are available in the company for minors below 7 years old. Reyes company. 1957) (Exhibit 4-M). however slight [Black’s Law Dictionary. was precisely the "underwriter who wrote this case" (Exhibit H-1). As an insurance agent of Pacific Life. the associate of Mondragon that he was. 7 SCRA 316). absolute and perfect candor or openness and honesty.: Yu Pang Cheng v.75. he ought to know. 105 Phil. private respondent. 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. The contract of insurance is one of perfect good faith (uberrima fides meaning good faith. Ngo Hing. CELSO Z. 25-26). 5 AUSTRIA-MARTINEZ. Reyes insured Faustino when he asserted in his application for insurance coverage that he had not been treated for indication of "chest pain. 1982. J. portions of which read as follows:jgc:chanrobles.[G. rheumatic fever. 1999 be reversed and set aside and that the Complaint filed against it by private respondents Eduardo Z. 1305486 with a face value of P50.00. pp. Lumaniog.000. in a letter dated July 11. it had denied private respondents’ claim in a letter dated March 12. Branch 56. 1 and so. Celso Z. Notify parties and counsels. their father died of "coronary thrombosis" on November 25.R. dated April 30. 1995 (Rollo. 47885) under Rule 65 of the Rules of Court in the Court of Appeals and after the comment of the private respondents and reply of petitioner. despite repeated demands for payment and/or settlement of the claim due from petitioner. 1996. The facts of the case:chanrob1es virtual 1aw library "SO ORDERED. considering that the calendar of the Court is already filled up until the end of July.chanrob1es virtua1 1aw 1ibrary Petitioner filed a petition for certiorari (docketed as CA-G. Lumaniog and Ruben Z. 2002. 1980. 1995. high blood pressure. the appellate court rendered its Decision. reiterating the early request for reconsideration which it denied in a letter dated February 14. or on December 1." 6 On June 20. Camarines Sur. private respondents sent a letter dated May 25. Camarines Sur. it received a letter from Jose C. private respondents. the date when the petitioner finally rejected the claim of .com. Lumaniog before the Regional Trial Court of Libmanan. the RTC issued an Order which reads:jgc:chanrobles. filed with the aforesaid RTC. 1983 2 requesting for reconsideration of the denial. the necessity of a trial on the merits.] PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY. 3 more than ten (10) years later. they claimed and continuously claimed for all the proceeds and interests under the life insurance policy in the amount of P641. Claro. 1995. 1995 when petitioner finally decided to deny their claim that the 10-year period began to run. petitioner finally refused or disallowed said claim on February 14. Petitioner. 139776. they filed their complaint on June 20.. hence.: On June 7. 7 Petitioner filed an Answer with Counterclaim and Motion to Dismiss. 1983. 1995. 1996 at 8:30 a.Respondents. Regional Trial Court of Libmanan. this Court of the opinion and so holds that the prescriptive period to bring the present action commences to run only on February 14. No. 4 Private respondents opposed the motion to dismiss. 1997 upholding however in the same Order the claim of private respondents’ counsel that the running of the 10-year period was "stopped" on May 25. 1994. Faustino Lumaniog.000. LUMANIOG.ph Before us is a petition for review on certiorari under Rule 45 of the Rules of Court. and EDUARDO Z. LUMANIOG.chanrob1es virtua1 1aw 1ibrary "After a perusal of the motion to dismiss filed by defendants’ counsel and the objection submitted by plaintiff’s counsel. on June 22. L-787 be ordered dismissed on ground of prescription of action.m. palpitation. docketed as Civil Case No.R.00. a provincial board member of the province of Camarines Sur. 1981.com. the Court finds that the matters treated in their respective pleadings are evidentiary in nature. it reiterated its decision to deny the claim for payment of the proceeds. Amado Dimalanta. the last of which is on December 1. a complaint for recovery of sum of money against petitioner alleging that: their father was insured by petitioner under Life Insurance Policy No. Petitioner’s motion for reconsideration was denied by the RTC in its Order dated December 12. 1994. heart murmur. on ground of concealment on the part of the deceased "Set therefore the hearing in this case on August 1. contending that: the cause of action of private respondents had prescribed and they are guilty of laches. 1999. VALENCIA-BAGALACSA. LUMANIOG and RUBEN Z.ph "Thus. JUDGE LORE R. 1983 when private respondents requested for a reconsideration of the denial and it was only on February 14. v. 1995. DECISION Page 9 Insurance Part V Cases Atty. signed by its then Assistant Vice President. Petitioner Philippine American Life and General Insurance Company prays that the decision of the Court of Appeals promulgated on April 30. August 1. heart attack or other disorder of the heart or blood vessel" when in fact he was a known hypertensive since 1974. as legitimate children and forced heirs of their late father. SP No. Hearing and order. Whether or not the complaint filed by private respondents for payment of life insurance proceeds is already barred by prescription of action. 10 private respondents and not in 1983. 1996 and December 12."This fact was supported further by the letter of the petitioner to Atty. "Costs against the petitioner. Petitioner posits the following issues:jgc:chanrobles. 1997. the cause of action does not accrue until the party obligated refuses. as essential elements. Whether or not an extrajudicial demand made after an action has prescribed shall cause the revival of the action. — After hearing the court may deny or grant the motion or allow amendment of pleading. of the Rules of Court. 1996 and dated December 12. De Guzman (151 SCRA 389. Notably. the instant petition for certiorari with prayer for issuance of temporary restraining order and/or preliminary injunction is DENIED DUE COURSE and is accordingly DISMISSED by this Court for lack of merit. denying the motion to dismiss. dated July 11. 13 It is for the above reason that the RTC committed a grave abuse of discretion when.ph "A perusal of the record will likewise reveal that plaintiffs’ counsel explained that the running of the ten (10) year period was stopped on May 25. we must necessarily first ascertain whether or not the RTC committed grave abuse of discretion in issuing the Orders dated June 7. stating that they were reviewing the claim and shall advise Atty. or may defer the hearing and determination of the motion until the trial if the ground alleged therein does not appear to be indubitable. in resolving the motion for reconsideration of petitioner. the RTC was initially correct in issuing the Order dated June 7. the Supreme Court held that:chanrob1es virtual 1aw library ‘The plaintiff’s cause of action did not accrue until his claim was finally rejected by the insurance company."cralaw virtua1aw library before it was amended by the 1997 Rules of Civil Procedure." 9 Page Insurance Part V Cases Atty. before such final rejection.’cralaw : red "Hence.. their Reply. in effect. "WHEREFORE.ph "A. 1983.. the case of ACCFA v. Ltd. 1997 read:jgc:chanrobles.. Chia Yu. "In the case of Summit Guaranty and Insurance Co. 1983. there was no real necessity for bringing suit. 1996 when it set the case below for hearing as there are matters in the respective pleadings of the parties "that are evidentiary in nature. 397-398). that the period of ten (10) years had not yet lapsed. Al. 12 Hence. Claro dated December 20. it arbitrarily ruled in its Order dated December 12. 1994. Rule 16." 8 Hence. hence the necessity of a trial on the merits "10 . "B. "SO ORDERED. p. Vs. It based its finding on a mere explanation of the private respondents’ counsel and not on evidence presented by the parties as to the date when to reckon the prescriptive period. Before we determine whether the Court of Appeals had committed any reversible error. due process demands that it be given the opportunity to prove that private respondents had received said letter. v. 53). effective July 1. citing the case of Eagle Star Insurance Co. Et. 3. Reyes Private respondents filed their Comment and petitioners. 1997. 1997. Portions of the Order dated December 12. 11 It must be emphasized that petitioner had specifically alleged in the Answer that it had denied private respondents’ claim per its letter dated July 11. not only a legal right of the plaintiff and a correlative of the defendant but also ‘an act or omission of the defendant in violation of said legal right’.’ "In the same case. to comply with its duty.com. to wit:jgc:chanrobles. This is because. 1997. Claro of their action regarding his request for reconsideration (Id. Said letter is crucial to petitioner’s defense that the filing of the complaint for recovery of sum of money in June.. 1995 — since this is the time when the cause of action accrues.com. the present petition for review. We find no grave abuse of discretion committed by the court a quo when it issued the Orders dated June 7. was likewise cited where the Supreme Court ruled in this wise:chanrob1es virtual 1aw library ‘Since a ‘cause of action’ requires.. Alpha Insurance and Surety Co. The ten year period should instead be counted from the date of rejection by the insurer in this case February 14.ph "Sec. pursuant to the then prevailing Section 3. 1983. 1995 is beyond the 10-year prescriptive period. upon demand of Celso Lomaniog for the compliance of the contract and . Inc.com. expressly or impliedly. Reyes dated December 12. Abis sent a letter to counsel. Abis finally decided plaintiffs’ claim. L-787. Thus. asking for reconsideration. 1997. A new judgment is entered reversing and setting aside the Order dated December 12. Said RTC is directed to proceed with dispatch with Civil Case No.chanrob1es virtua1 1aw 1ibrary 11 Insurance Part V Cases Atty. SO ORDERED. 1995. when the instant case was filed on June 20. it committed a reversible error when it declared that the RTC did not commit any grave abuse of discretion in issuing the Order Page reconsideration of the decision.’ On February 14. the petition is partly GRANTED. Hence. The letter was answered by the Assistant Vice President of the Claims Department of Philamlife. Certiorari is an appropriate remedy to assail an interlocutory order (1) when the tribunal issued such order without or in excess of jurisdiction or with grave abuse of discretion and (2) when the assailed interlocutory order is patently erroneous and the remedy of appeal would not afford adequate and expeditious relief. 1995. 1995. 1997 of the Regional Trial Court of Libmanan. 1995. 1986 Order of the RTC. when Atty. The assailed decision of the Court of Appeals dated April 30. the period of prescription should commence to run only from February 14. is arbitrary and patently erroneous for not being founded on evidence on record." 14 (Emphasis supplied) The ruling of the RTC that the cause of action of private respondents had not prescribed. thus. Camarines Sur (Branch 56) and affirming its Order dated June 20. 16 Said Order was issued with grave abuse of discretion for being patently erroneous and arbitrary. The appellate court should have granted the petition for certiorari assailing said Order of December 12. with the advise ‘that the company is reviewing the claim. 1995. while the Court of Appeals did not err in upholding the June 7. . 1997. Moreover. finally deciding the plaintiffs’ claim. The final determination denying the claim was made only on February 14. 15 Consequently. the ten year period has not yet lapsed. the same is void. WHEREFORE. and therefore. depriving petitioner of due process. as discussed earlier. defendant’s counsel failed to comply with the requirements of the Rules in filing his motion for reconsideration. 1994.chanrob1es virtua1 1aw 1ibrary No costs. 1999 insofar only as it upheld the Order dated December 12."It is evident from the foregoing that the ten (10) year period for plaintiffs to claim the insurance proceeds has not yet prescribed. 1997 is REVERSED and SET ASIDE. Atty. Counsel also wrote the President of the Company on December 1.