Republic of the
SUPREME COURT
SECOND DIVISION
PARK CORPORATION,
Petitioner,
Present:
CARPIO
MORALES,
- versus - Acting
Chairperson,
TINGA,
VELASCO,
JR.,
CHICO-NAZARIO,* and
BRION, JJ.
THE PHILIPPINE AMERICAN Promulgated:
LIFE INSURANCE COMPANY,
Respondent. April 9, 2008
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D E C I S I
O N
VELASCO, JR., J.:
The Case
Central
to this Petition for Review on Certiorari under Rule 45 which seeks to reverse
and set aside the November 26, 2004 Decision[1] of
the Court of Appeals (CA) in CA-G.R. CV No. 57810 is the query: May the inaction
of the insurer on the insurance application be considered as approval of the
application?
The
Facts
On
The
relevant provisions of the policy are:
ELIGIBILITY.
Any
Lot Purchaser of the Assured who is at least 18 but not more than 65 years of
age, is indebted to the Assured for the unpaid balance of his loan with the
Assured, and is accepted for Life Insurance coverage by the Company on its
effective date is eligible for insurance under the Policy.
EVIDENCE OF INSURABILITY.
No
medical examination shall be required for amounts of insurance up to
P50,000.00. However, a declaration of good health shall be required for all Lot
Purchasers as part of the application. The Company reserves the right to
require further evidence of insurability satisfactory to the Company in respect
of the following:
1.
Any
amount of insurance in excess of P50,000.00.
2.
Any lot
purchaser who is more than 55 years of age.
LIFE
INSURANCE BENEFIT.
The
Life Insurance coverage of any Lot Purchaser at any time shall be the amount of
the unpaid balance of his loan (including arrears up to but not exceeding 2
months) as reported by the Assured to the Company or the sum of P100,000.00,
whichever is smaller. Such benefit shall be paid to the Assured if the Lot
Purchaser dies while insured under the Policy.
EFFECTIVE
DATE OF BENEFIT.
The
insurance of any eligible Lot Purchaser shall be effective on the date he
contracts a loan with the Assured. However, there shall be no insurance if the
application of the Lot Purchaser is not approved by the Company.[3]
Eternal
was required under the policy to submit to Philamlife a list of all new lot
purchasers, together with a copy of the application of each purchaser, and the
amounts of the respective unpaid balances of all insured lot purchasers. In
relation to the instant petition, Eternal complied by submitting a letter dated
December 29, 1982,[4]
containing a list of insurable balances of its lot buyers for October 1982. One
of those included in the list as “new business” was a certain John Chuang. His
balance of payments was PhP 100,000. On
Eternal
sent a letter dated
In reply, Philamlife wrote Eternal a letter
on November 12, 1984,[6]
requiring Eternal to submit the following documents relative to its insurance
claim for Chuang’s death: (1) Certificate of Claimant (with form attached); (2)
Assured’s Certificate (with form attached); (3) Application for Insurance
accomplished and signed by the insured, Chuang, while still living; and (4) Statement
of Account showing the unpaid balance of Chuang before his death.
Eternal transmitted the required
documents through a letter dated
After more than a year, Philamlife had
not furnished Eternal with any reply to the latter’s insurance claim. This
prompted Eternal to demand from Philamlife the payment of the claim for PhP 100,000
on
In response to Eternal’s demand, Philamlife
denied Eternal’s insurance claim in a letter dated
The deceased was 59 years old when he entered
into Contract #9558 and 9529 with
In accordance with our Creditor’s Group Life
Policy No. P-1920, under Evidence of Insurability provision, “a declaration of
good health shall be required for all Lot Purchasers as party of the
application.” We cite further the provision on Effective Date of Coverage under
the policy which states that “there shall be no insurance if the application is
not approved by the Company.” Since no application had been submitted by the
Insured/Assured, prior to his death, for our approval but was submitted instead
on
With regard to our acceptance of premiums,
these do not connote our approval per se of the insurance coverage but are held
by us in trust for the payor until the prerequisites for insurance coverage
shall have been met. We will however, return all the premiums which have been
paid in behalf of John Uy Chuang.
Consequently,
Eternal filed a case before the Makati City Regional Trial Court (RTC) for a
sum of money against Philamlife, docketed as Civil Case No. 14736. The trial
court decided in favor of Eternal, the dispositive portion of which reads:
WHEREFORE,
premises considered, judgment is hereby rendered in favor of Plaintiff ETERNAL,
against Defendant PHILAMLIFE, ordering the Defendant PHILAMLIFE, to pay the sum
of P100,000.00, representing the proceeds of the Policy of John Uy Chuang, plus
legal rate of interest, until fully paid; and, to pay the sum of P10,000.00 as
attorney’s fees.
SO
ORDERED.
The RTC found that Eternal submitted
Chuang’s application for insurance which he accomplished before his death, as testified
to by Eternal’s witness and evidenced by the letter dated December 29, 1982, stating,
among others: “Encl: Phil-Am Life Insurance Application Forms & Cert.”[10] It
further ruled that due to Philamlife’s inaction from the submission of the requirements
of the group insurance on
Philamlife appealed to the CA, which
ruled, thus:
WHEREFORE, the decision of the Regional Trial Court of
Makati in Civil Case No. 57810 is REVERSED
and SET ASIDE, and the complaint is DISMISSED.
No costs.
SO ORDERED.[11]
The
CA based its Decision on the factual finding that Chuang’s application was not
enclosed in Eternal’s letter dated
Hence,
we have this petition with the following grounds:
The Honorable Court of Appeals has decided a
question of substance, not therefore determined by this Honorable Court, or has
decided it in a way not in accord with law or with the applicable
jurisprudence, in holding that:
I.
The
application for insurance was not duly submitted to respondent PhilamLife before
the death of John Chuang;
II.
There
was no valid insurance coverage; and
III.
Reversing
and setting aside the Decision of the Regional Trial Court dated
The Court’s Ruling
As a general rule, this Court is not
a trier of facts and will not re-examine factual issues raised before the CA
and first level courts, considering their findings of facts are conclusive and
binding on this Court. However, such rule is subject to exceptions, as
enunciated in Sampayan v. Court of Appeals:
(1) when the findings are grounded entirely on speculation,
surmises or conjectures; (2) when the inference made is manifestly mistaken,
absurd or impossible; (3) when there is grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; (5) when the findings of facts
are conflicting; (6) when in making its findings the [CA] went beyond the
issues of the case, or its findings are contrary to the admissions of both the
appellant and the appellee; (7) when the
findings [of the CA] are contrary to the trial court; (8) when the findings
are conclusions without citation of specific evidence on which they are based;
(9) when the facts set forth in the petition as well as in the petitioner’s
main and reply briefs are not disputed by the respondent; (10) when the
findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; and (11) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different conclusion.[12] (Emphasis supplied.)
In
the instant case, the factual findings of the RTC were reversed by the CA; thus,
this Court may review them.
Eternal
claims that the evidence that it presented before the trial court supports its
contention that it submitted a copy of the insurance application of Chuang
before his death. In Eternal’s letter dated
On
the other hand, Philamlife claims that the evidence presented by Eternal is
insufficient, arguing that Eternal must present evidence showing that Philamlife
received a copy of Chuang’s insurance application.
The
evidence on record supports Eternal’s position.
The
fact of the matter is, the letter dated
To
reiterate, it was Philamlife’s bounden duty to make sure that before a transmittal
letter is stamped as received, the contents of the letter are correct and
accounted for.
Philamlife’s
allegation that Eternal’s witnesses ran out of credibility and reliability due
to inconsistencies is groundless. The trial court is in the best position to determine
the reliability and credibility of the witnesses, because it has the
opportunity to observe firsthand the witnesses’ demeanor, conduct, and
attitude. Findings of the trial court on such matters are binding and
conclusive on the appellate court, unless some facts or circumstances of weight
and substance have been overlooked, misapprehended, or misinterpreted,[14] that, if considered, might affect
the result of the case.[15]
An
examination of the testimonies of the witnesses mentioned by Philamlife,
however, reveals no overlooked facts of substance and value.
Philamlife
primarily claims that Eternal did not even know where the original insurance
application of Chuang was, as shown by the testimony of Edilberto Mendoza:
Atty. Arevalo:
Q
Where is the original of the
application form which is required in case of new coverage?
[
A It is [a] standard operating procedure
for the new client to fill up two copies of this form and the original of this
is submitted to Philamlife together with the monthly remittances and the second
copy is remained or retained with the marketing department of
Atty. Miranda:
We
move to strike out the answer as it is not responsive as counsel is merely
asking for the location and does not [ask] for the number of copy.
Atty. Arevalo:
Q Where is the original?
[
A As far as I remember I do not know
where the original but when I submitted with that payment together with the new
clients all the originals I see to it before I sign the transmittal letter the
originals are attached therein.[16]
In other words, the witness admitted
not knowing where the original insurance application was, but believed that the
application was transmitted to Philamlife as an attachment to a transmittal
letter.
As to the seeming inconsistencies between
the testimony of Manuel Cortez on whether one or two insurance application
forms were accomplished and the testimony of Mendoza on who actually filled out
the application form, these are minor inconsistencies that do not affect the
credibility of the witnesses. Thus, we ruled in People v. Paredes that minor inconsistencies are too
trivial to affect the credibility of witnesses, and these may even serve to
strengthen their credibility as these negate any suspicion that the testimonies
have been rehearsed.[17]
We
reiterated the above ruling in Merencillo
v. People:
Minor discrepancies or inconsistencies do not impair
the essential integrity of the prosecution’s evidence as a whole or reflect on
the witnesses’ honesty. The test is whether the testimonies agree on
essential facts and whether the respective versions corroborate and
substantially coincide with each other so as to make a consistent and coherent
whole.[18]
In
the present case, the number of copies of the insurance application that Chuang
executed is not at issue, neither is whether the insurance application
presented by Eternal has been falsified. Thus, the inconsistencies pointed out
by Philamlife are minor and do not affect the credibility of Eternal’s
witnesses.
However, the question arises as to
whether Philamlife assumed the risk of loss without approving the application.
This question must be answered in the
affirmative.
As earlier stated, Philamlife and
Eternal entered into an agreement denominated as Creditor Group Life Policy No.
P-1920 dated
EFFECTIVE
DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser
shall be effective on the date he contracts a loan with the Assured. However,
there shall be no insurance if the application of the Lot Purchaser is not
approved by the Company.
An examination of the above provision
would show ambiguity between its two sentences. The first sentence appears to
state that the insurance coverage of the clients of Eternal already became
effective upon contracting a loan with Eternal while the second sentence
appears to require Philamlife to approve the insurance contract before the same
can become effective.
It must be remembered that an
insurance contract is a contract of adhesion which must be construed liberally in
favor of the insured and strictly against the insurer in order to safeguard the
latter’s interest. Thus, in Malayan
Insurance Corporation v. Court of Appeals, this Court held that:
Indemnity and liability insurance policies
are construed in accordance with the general rule of resolving any ambiguity
therein in favor of the insured, where the contract or policy is prepared by
the insurer. A contract of insurance,
being a contract of adhesion, par
excellence, any ambiguity therein should be resolved against the insurer;
in other words, it should be construed liberally in favor of the insured and
strictly against the insurer. Limitations of liability should be regarded with
extreme jealousy and must be construed in such a way as to preclude the insurer
from noncompliance with its obligations.[19]
(Emphasis supplied.)
In the more recent case of Philamcare Health Systems, Inc. v. Court of
Appeals, we reiterated the above ruling, stating that:
When the terms of insurance contract contain
limitations on liability, courts should construe them in such a way as to
preclude the insurer from non-compliance with his obligation. Being a contract
of adhesion, the terms of an insurance contract are to be construed strictly
against the party which prepared the contract, the insurer. By reason of the
exclusive control of the insurance company over the terms and phraseology of
the insurance contract, ambiguity must be strictly interpreted against the
insurer and liberally in favor of the insured, especially to avoid forfeiture.[20]
Clearly, the vague contractual
provision, in Creditor Group Life Policy No. P-1920 dated
On the other hand, the seemingly
conflicting provisions must be harmonized to mean that upon a party’s purchase
of a memorial lot on installment from Eternal, an insurance contract covering
the lot purchaser is created and the same is effective, valid, and binding
until terminated by Philamlife by disapproving the insurance application. The
second sentence of Creditor Group Life Policy No. P-1920 on the Effective Date
of Benefit is in the nature of a resolutory condition which would lead to the cessation
of the insurance contract. Moreover, the mere inaction of the insurer on the
insurance application must not work to prejudice the insured; it cannot be
interpreted as a termination of the insurance contract. The termination of the
insurance contract by the insurer must be explicit and unambiguous.
As a final note, to characterize the
insurer and the insured as contracting parties on equal footing is inaccurate
at best. Insurance contracts are wholly prepared by the insurer with vast
amounts of experience in the industry purposefully used to its advantage. More
often than not, insurance contracts are contracts of adhesion containing
technical terms and conditions of the industry, confusing if at all
understandable to laypersons, that are imposed on those who wish to avail of
insurance. As such, insurance contracts are imbued with public interest that
must be considered whenever the rights and obligations of the insurer and the
insured are to be delineated. Hence, in order to protect the interest of insurance
applicants, insurance companies must be obligated to act with haste upon
insurance applications, to either deny or approve the same, or otherwise be bound
to honor the application as a valid, binding, and effective insurance contract.[21]
WHEREFORE, we GRANT the petition. The November 26, 2004 CA Decision in CA-G.R. CV
No. 57810 is REVERSED and SET ASIDE. The May 29, 1996 Decision of
the Makati City RTC, Branch 138 is MODIFIED.
Philamlife is hereby ORDERED:
(1)
To pay Eternal the amount of PhP 100,000 representing the proceeds of the Life
Insurance Policy of Chuang;
(2)
To pay Eternal legal interest at the rate of six percent (6%) per annum of PhP
100,000 from the time of extra-judicial demand by Eternal until Philamlife’s
receipt of the May 29, 1996 RTC Decision on June 17, 1996;
(3)
To pay Eternal legal interest at the rate of twelve percent (12%) per annum of
PhP 100,000 from June 17, 1996 until full payment of this award; and
(4)
To pay Eternal attorney’s fees in the amount of PhP 10,000.
No
costs.
SO ORDERED.
PRESBITERO
J. VELASCO, JR.
Associate Justice
WE CONCUR:
CONCHITA CARPIO MORALES
Acting Chairperson
DANTE O.
TINGA ARTURO D. BRION
Associate
Justice Associate
Justice
MINITA V. CHICO-NAZARIO
Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the
above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Court’s Division.
CONCHITA CARPIO MORALES
Acting Chairperson
C E R T I F
I C A T I O N
Pursuant to Section 13, Article VIII of the
Constitution, and the Division Acting Chairperson’s Attestation, I certify that
the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
[1] Rollo, pp. 45-54. Penned by Associate Justice Santiago Javier Ranada and concurred in by Associate Justices Marina L. Buzon (Chairperson) and Mario L. Guariña III.
[2] Records, pp. 57-62.
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10] Rollo, p. 44.
[11]
[12] G.R. No. 156360,
[13] Rules of Court, Rule 130, Sec. 26.
[14] People v. Jaberto, G.R. No. 128147,
[15] People v. Oliquino, G.R. No. 171314,
[17]
G.R. No. 136105,
[18]
G.R. Nos. 142369-70,
[19]
G.R. No. 119599,
[20]
G.R. No. 125678,