Susana Glaraga vs Sun Life

July 23, 1924, the defendant, a licensed corporation, duly authorized to do business in the Philippine
Islands, issued its insurance policy No. 585625 on the life of Jose Concepcion Juares in and by which it
promised and agreed to pay P5,000 to the legal representatives of the insured, if, and upon the condition
that, the policy was in legal force and effect at the time of the death of the insured. Jose Concepcion Juares
died in January, 1925.

The plaintiff, Susana Glaraga, was duly appointed as administratrix of his estate, and a demand was made
upon the company for the amount of the policy and payment refused. Plaintiff alleges that the defendant
0. 0. Hanson was the agent of the insurance company, who insured the life of Jose Concepcion Juares, and
was the identical person to whom the first premium on the policy was paid on June 3, 1924, and that
Hanson was one of the agents authorized by the company to collect premiums; that the second premium
should have been paid in December, 1924, and that the deceased was prepared to send the amount of it to
the defendant at Manila, and that he would have sent it in due time, but that before remitting the money, he
received from the defendant Hanson written instructions not to send the amount of the premium to Manila,
and stating that he, Hanson, would pay it to the insurance company; that when Hanson came to Negros in
the month of January, 1925, he would collect the premium to reimburse himself, and plaintiff avers that
Hanson did pay the second premium to the company at its maturity; that after the death of Juares, and
before this action was brought, plaintiff made a demand upon the company for the payment of the policy,
which was refused. Wherefore, she prays for judgment against the insurance company for P5,000, with
legal interest and costs, and that should it develop that Hanson has not paid the insurance company the
second premium, which he undertook to pay, that judgment be rendered against him jointly and severally
with the company for the full amount of the policy, with legal interest.

As a special defense, alleges that the policy expressly provides:

"No persons, except the President, Managing-Director or Secretary has power to alter this contract, to
extend the time for paying a premium, to bind the Company by making any promise or by receiving" any
representation or information not contained in the application for this policy. No payment made to any
person, except in exchange for the Company's official receipt, will be recognized by the Company. This
policy does not take effect until the first premium has been actually paid, during the life and good health of
the insured." That this defendant at no time authorized or empowered its codefendant O. O, Hanson or any
other person, to modify the terms of the policy, and that Hanson is not an official of the defendant
corporation.

For a third special defense, the company alleges that it did not have any knowledge of the alleged promise of
its co-defendant Hanson to pay the second premium upon the policy, and that it never received from him
any payment whatever on behalf of the insured within the thirty-day period of grace or ever at all, and it
prays that the action be dismissed, and that this defendant go hence without day, with costs.

The testimony is conclusive that the second premium was never paid to the defendant company.

Assuming that fact to be true, plaintiff contends that Hanson, who was the agent of the company, wrote to
the deceased during his lifetime the letter or postscript, known in the record as Exhibit D, as follows:

"I am going to pay your policy. Have money ready when I come in January. Your brother Hanson."
The defendant Hanson vigorously denies that he ever wrote it. That is a purely question of fact upon which
the trial court found for the plaintiff.

The remaining question is the legal force and effect of the letter, and as to whether or not it is binding upon
the defendant company.

The testimony is conclusive that the second premium was never paid to the defendant company by any one.
The policy is in writing, and it was issued and delivered to the deceased in June, 1924, and, among other
things, upon its face, recites:

"II. Days of Grace. Thirty days of grace are allowed for the payment of renewal premiums, without interest
charge, during which times the insurance shall continue in full force. If any premium is not paid within the
days of grace this policy shall thereupon become void, subject, however, to the non-forfeiture provision of
section

By its express terms, the non-payment of any premium when due or within the thirty-day period of
grace, ipso facto causes the policy to lapse, and relieves the insurance company from all liability.

The policy in question was issued in June, 1924, and, exclusive of the first no other premium was ever paid.
Among other things, the policy further provides:

By the simple reading of the policy, the deceased would or should have known that by its express
provisions, a payment made to any person, except in exchange for the company's official receipt would not
be recognized by the company, and that no person, except the President, Managing-Director or Secretary,
had any power to alter the contract or to extend the time for the payment of the premium, or to bind the
company itself by the making of any promise, and that if the premium was not paid within the thirty-day
period of grace, his policy would lapse and become null and void.

Again, the policy expressly recites that the amount of the premiums are to be paid in pesos which, without
the consent of the company, could not be paid any other manner. Upon this point, Corpus Juris, vol. 32, p.
1201, says:

There is a marked distinction between the legal force and effect of the powers and duties of a life insurance
agent in soliciting insurance and what he says or does before the policy is issued and his powers and duties,
and the legal force of what he says and does after the policy is issued. In the one case, the powers and duties
of the agent, and as to what he says and does are all previous to the issuance of the policy, and when the
policy is once issued, the insurance company is then estopped to deny the authority of its agent, and in that
case, there is no written contract between the insured and the insurance company. In the other case, the
policy has been written, signed by the respective parties, and issued and delivered to the insured, and there
is a written contract with provisions which specifically define and limit the powers and duties of the agent.
In the instant case, there was a written contract between the defendant company and the insured, which
was duly signed and accepted by both parties, and it specifically defines how, when and to whom, and in
what manner the premiums are to be paid, and specifies and limits the powers and duties of the agent to the
delivery of the official receipt of the company upon the payment to him of the amount of the premium.

For all of such reasons, we are clearly of the opinion that the policy had lapsed, and was of no legal force and
effect at the time of the death of the deceased.

As to the defendant Hanson, the proof is conclusive that the deceased had the money and was able, ready
and willing to pay the premium at the time he received Exhibit D. After its receipt, he relied upon Hanson
to pay the premium, and for that reason, and that reason only, the deceased failed to pay the premium.
Because of the fact that Hanson failed to keep his promise to pay the premium, it was never paid, which
resulted in the loss to the deceased of the full amount of the policy. Hanson having promised and agreed to
pay the premium, and the deceased having relied upon that promise, and Hanson having failed to pay the
premium, the judgment as to him must be affirmed, with costs.

The judgment against the defendant company, Sun Life Assurance Company of Canada, is reversed, and
the complaint dismissed, with costs against the plaintiff and in favor of the defendant company. So
ordered.

Areola vs. CA G.R. No. 95641

On June 29, 1985, seven months after the issuance of petitioner Santos Areola's Personal Accident Insurance
Policy No. PA-20015, respondent insurance company unilaterally cancelled the same since company records
revealed that petitioner-insured failed to pay his premiums.
On August 3, 1985, respondent insurance company offered to reinstate same policy it had previously
cancelled and even proposed to extend its lifetime to December 17, 1985, upon a finding that the cancellation
was erroneous and that the premiums were paid in full by petitioner-insured but were not remitted by
Teofilo M. Malapit, respondent insurance company's branch manager.
These, in brief, are the material facts that gave rise to the action for damages due to breach of contract
instituted by petitioner-insured before Branch 40 RTC, Dagupan City against respondent insurance
company.
There are two issues for resolution in this case:
(1) Did the erroneous act of cancelling subject insurance policy entitle petitioner-insured to payment of
damages?
(2) Did the subsequent act of reinstating the wrongfully cancelled insurance policy by respondent insurance
company, in an effort to rectify such error, obliterate whatever liability for damages it may have to bear, thus
absolving it therefrom?
The nature of damages to be awarded, however, would be in the form of nominal damages[17] contrary to that
granted by the court below. Although the erroneous cancellation of the insurance policy constituted a breach
of contract, private respondent insurance company, within a reasonable time took steps to rectify the wrong
committed by reinstating the insurance policy of petitioner. Moreover, no actual or substantial damage or
injury was inflicted on petitioner Areola at the time the insurance policy was cancelled. Nominal damages
are "recoverable where a legal right is technically violated and must be vindicated against an invasion that
has produced no actual present loss of any kind, or where there has been a breach of contract and no
substantial injury or actual damages whatsoever have been or can be shown."[18]
South Sea Surety vs CA

Two issues on the subject of insurance are raised in this petition, that assails the decision of the Court of
Appeals (in CA-G.R. No. CV-20156), the first dealing on the requirement of premium payment and the
second relating to the agency relationship of parties under that contract.

The court litigation started when Valenzuela Hardwood and Industrial Supply, Inc. ("Hardwood"), filed a
complaint for the recovery of the value of lost logs and freight charges from Seven Brothers Shipping
Corporation or, to the extent of its alleged insurance cover, from South Sea Surety and Insurance Company.

"It appears that on 16 January 1984, plaintiff [Valenzuela Hardwood and Industrial Supply, Inc.] entered
into an agreement with the defendant Seven Brothers whereby the latter undertook to load on board its
vessel M/V Seven Ambassador the former's lauan round logs numbering 940 at the port of Maconacon,
Isabela for shipment to Manila.

"On 20 January 1984, plaintiff insured the logs against loss and/or, damage with defendant South Sea
Surety and Insurance Co., Inc. the latter issued its Marine Cargo Insurance Policy on said date.

"On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to Mr.
Victorio Chua. "In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting
in the loss of the plaintiff's insured logs.

"On 30 January 1984, a check for P5,625.00 (Exh. 'E') to cover payment of the premium and documentary
stamps due on the policy was tendered to the insurer but was not accepted. Instead, the South Sea Surety
and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of inception for non-payment
of the premium due in accordance with Section 77 of the Insurance Code.

"On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the
payment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed a
formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latter
denied the claim."[1]

"The primary issue to be resolved before us is whether defendants shipping corporation and the surety
company are liable to the plaintiff for the latter's lost logs.

"It appears that there is a stipulation in the charter party that the ship owner would be exempted from
liability in case of loss.

Section 77 of the Insurance Code provides: 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."

Undoubtedly, the payment of the premium is a condition precedent to, and essential for, the efficaciousness
of the contract. The only two statutorily provided exceptions are (a) in case the insurance coverage relates to
life or industrial life (health) insurance when a grace period applies and (b) when the insurer makes a
written acknowledgment of the receipt of premium, this acknowledgment being declared by law to be then
conclusive evidence of the premium payment (Secs. 77-78, Insurance Code). The appellate court, contrary to
what the petition suggests, did not make any pronouncement to the contrary. Indeed, it has said:

"Concerning the issue as to whether there is a valid contract of insurance between plaintiff-appellee and
defendant-appellant South Sea Surety and Insurance Co., Inc., Section 77 of the Insurance Code explicitly
provides that notwithstanding any agreement to the contrary, no policy issued by an insurance company is
valid and binding unless and until the premium thereof has been paid. It is therefore important to
determine whether at the time of the loss, the premium was already paid."[3]

"In the instant case, the Marine Cargo Insurance Policy No. 84/24229 was issued by defendant insurance
company on 20 January 1984. At the time the vessel sank on 25 January 1984 resulting in the loss of the
insured logs, the insured had already delivered to Victorio Chua the check in payment of premium. But, as
Victorio Chua testified, it was only in the morning of 30 January 1984 or 5 days after the vessel sank when
his messenger tendered the check to defendant South Sea Surety and Insurance Co., Inc. (TSN, pp. 3-27, 16-
17, 22 October 1985).

"The pivotal issue to be resolved to determine the liability of the surety corporation is whether Mr. Chua
acted as an agent of the surety company or of the insured when he received the check for insurance
premiums.

"'Section 306. x x x Any insurance company which delivers to an insurance agent or insurance broker a
policy or contract of insurance shall be deemed to have authorized such agent or broker to receive on its
behalf payment of any premium which is due on such policy of contract of insurance at the time of its
issuance or delivery or which becomes due thereon.'

"When therefore the insured logs were lost, the insured had already paid the premium to an agent of the
South Sea Surety and Insurance Co., Inc., which is consequently liable to pay the insurance proceeds under
the policy it issued to the insured."[4]

We see no valid reason to discard the factual conclusions of the appellate court. Just as so correctly pointed
out by private respondent, it is not the function of this Court to assess and evaluate all over again the
evidence, testimonial and documentary, adduced by the parties particularly where, such as here, the findings
of both the trial court and the appellate court on the matter coincide.

WHEREFORE, the resolution, dated 01 February 1993, granting due course to the petition is RECALLED,
and the petition is DENIED. Costs against petitioner.

SO ORDERED.