FILIPINAS LIFE
ASSURANCE v. NAVA
17 SCRA 210; BAUTISTA ANGELO; May 20,
1966
NATURE
Petition
for review of a decision of the Court of Appeals
FACTS
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Before the war, Nava entered into a contract of insurance with Insular Life
Assurance Co., Ltd. (face value of P5k), and 17 separate contracts of life
insurance with Filipinas Life Assurance Co. (total face value of P90k). Each
and everyone of the 18 policies issued by defendants to plaintiff contains a
loan clause of the following tenor:
Policy
loans. After three full years' premiums have been paid upon this Policy, if no
premium payment is in default, the Company, subject to its then existing rules,
will advance on proper assignment and delivery of this Policy and on the sole
security thereof a sum equal to, or at the option of the owner less than, the
cash value specified in the Schedule of Policy Values, less any existing
indebtedness on or secured by this Policy and any unpaid balance of the premium
for the current policy-year; provided interest at six per centum per annum on
the whole amount of the loan is paid in advance to the end of the current
policy-year. At the end of the current policy-year interest at the same rate
for one year in advance will be due and payable, and annually thereafter, and
if not so paid will be added to the principal and bear the same rate of
interest. Failure to repay any such loan or interest shall not avoid this
Policy
unless the total indebtedness shall equal or exceed the full amount of the loan
value available hereunder. Any indebtedness on this Policy shall first be
deducted from any money payable or in anysettlement under this Policy.
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Nava had so far paid to Insular a total of P2,574; and to Filipinas Life, a
total of P32,072.60.
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April 28, 1948: Nava applied to the companies for a P5k loan in line with the
loan clause, but they refused to grant it because certain regulations issued by
the Insurance Commissioner required the insurance companies to withhold the
payments on premiums made during the Japanese occupation because the same shall
be subject to future adjustments " as soon as debtor-creditor relationship
is established" and because of such process of "withholding"
plaintiff was not entitled to borrow any amount until such adjustment has been
made.
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Sept 30, 1948: Nava called the attention of the insurance companies to the SC
decision (Haw Pia v. China Banking Corporation) establishing and
recognizing the relationship of debtor and creditor with respect to payments in
fiat currency made during the Japanese occupation on pre-war obligations.
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Companies still refused saying that the SC decision was not applicable to
transactions undertaken during
Japanese
occupation when they relate to life insurance policies.
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Feb 4, 1949: Nava was again refused even if the total amount of the cash
surrender values of the 18 policies reached the sum of P9,468.29.
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Feb 10, 1949: Nava brought case to the CFI Manila praying for the rescission of
the abovementioned 18 policies and for the refund to him of all the premiums so
far paid by him to defendants in the amount of P31,633.80, plus 6% interest
thereon as damages
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Nov 28, 1951: companies passed a resolution which was approved by the Insurance
Commissioner, giving full credit to all premium payments made by their
policyholders in fiat currency during the Japanese occupation on account of
pre-war policies for which reason they filed an amended answer offering to pay
plaintiff the amount of P9,468.29 which represents the aggregate cash surrender
values of all the policies in question as of February 10, 1949, but apparently
this offer was refused.
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CFI: (1) rescinded the insurance contracts; (2) ordered defendant Filipinas
Life Assurance Co. to pay plaintiff the amount of P32,072.60; and (3) ordered
defendant Insular Life Assurance Co., Ltd. to pay plaintiff the amount of
P2,574.00
-
CA affirmed.
ISSUES
1.
WON CA erred in ruling that as a consequence of the decision in the Haw Pia
case petitioners violated the loan clause contained in the insurance policies
thereby entitling respondent to their rescission
2.
WON CA erred in ruling that by virtue of Article 1295 of the old Civil Code
petitioners should refund to defendant all the premiums paid on his insurance
policies as a consequence of their rescission
3.
WON CA erred in not ruling that, even if respondent is entitled to the
rescission of said insurance policies, he can only recover their cash surrender
value at the time the complaint was filed
HELD
1.
NO.
-
Even assuming the validity of the Insurance Commissioner’s regulations, the
fact however is that such requirement has already lost its legal effect and
value when our Supreme Court rendered its decision in the Haw Pia case wherein
it was declared, among others, that all payments made in fiat currency during
the Japanese occupation in relation with any contractual obligation executed
before the war were valid to all intents and purposes, and yet petitioners
apparently did not give any importance to such decision for in their opinion it
does not have any application to transactions which have any relation to
payment of premiums on life insurance policies.
-
It cannot be denied that a life insurance policy involves a contractual
obligation wherein the insured becomes duty bound to pay the premiums agreed
upon, lest he runs the risk of having his insurance policy lapse if he fails to
pay such premiums.
-
The fact that if the insured had paid in full the premiums corresponding to the
first 3 years of the life of his policy he cannot be considered delinquent that
would cause the lapse of his policy if the same contains an automatic premium
payment clause cannot divest such policy of its contractual nature, for the
result of such failure would only be for him to pay later the premium plus the
corresponding interest depending upon the condition of the policy. But
certainly it does not cease to be a contractual liability insofar as the
payment of that premium is concerned for whether he likes it or not that
premium has to be paid lest he allows the lapse of his policy. Consequently,
the payment of premiums on the life insurance policies made by Nava before and
during the war up to the time he applied for the loan in question with
petitioners should be considered likewise as valid payments upon the theory
that such insurance policies are in the nature of a contractual obligation
within the meaning of the civil law. In effect, therefore, those payments were
made by a debtor to a creditor within the meaning of the requirement of the
regulations of the Insurance Commissioner and as such they can offer no excuse
to petitioners for refusing to grant the loan as contemplated in the loan
clause embodied in the policies in question.
-
It is clear from the foregoing that the petitioners violated the loan clause
embodied in each of the 18 life insurance policies issued to respondent to
rescind all said policies under Section 69 of the Insurance Act, which
provides: "The violation of a material warranty, or other material
provision of a policy, on the part of either party thereto, entitles the other
to rescind."
-
"The general rule is that a breach of the agreement to make the loan does
not entitle the insured to rescind the contract," is not controlling in
this jurisdiction. Firstly, it was not shown that the insurance laws in the
states where said ruling prevails contain a provision identical to Section 69
of our Insurance Law we quoted above, and secondly, the rule cited by Vance is
not a rule uniformly followed by all states in the US, for on this matter there
is a marked divergence of opinion.
2.
NO
-
Considering that our Insurance Law does not contain an express provision as to
what the court should do in cases of rescission of an insurance policy under
Section 69, the provision that should apply is that embodied in Article 1225 of
the old Civil Code, as postulated in Article 16 of the same Code, which
provides that on matters which are not governed by special laws the provisions
of said Code shall supplement its deficiency. And said Article 1295 provides:
ART.
1295. Rescission makes necessary the return of the things which were the
subject-matter of the contract, with their fruits, and of the price paid, with
interest thereon. ...xxx
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Said the petitioners: "Recovery of the full amount of the premium after
the insurer has sustained for sometime the risk of the insurance and the
insured has enjoyed the benefit of protection is obviously unjust and is so
recognized by the better authorities." The ruling above quoted merely
represents the minority rule in the US, the majority rule being that the
insured can recover all premiums paid, in some cases with interest in case of
wrongful cancellation, repudiation, termination or rescission of the contract
of life insurance.
-
Contention that because respondent cannot restore to petitioners the
"value of the benefit of protection"
which
he might have received under the 18 life insurance policies in question he is
not entitled to rescind them under the provision of Article 1295 of the old
Civil Code, is untenable because said article only contemplates a transaction
whether material things are involved, and do not refer to intangible ones which
cannot be the subject of restoration, for to interpret it otherwise would be to
defeat the law itself with the result that rescission can never be had under
Section 69 of our Insurance Law.
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It cannot be denied that petitioners had in turn already derived material
benefits from the use of premiums paid to them by respondent before, during and
after the last war from which they must have realized huge profits, and in this
light alone petitioners cannot claim prejudice or unfairness if they are
ordered to refund the premiums paid by respondents.
3.
NO.
-
Issue is corollary to preceding issue. No need to refute.
Disposition
Decision appealed from is AFFIRMED.
Costs against petitioners
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