PEREZ V CA

2000

FACTS: Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation since 1980 for
P20,000.00. Sometime in October 1987, an agent of the insurance corporation, Rodolfo Lalog, visited Perez
in Guinayangan, Quezon and convinced him to apply for additional insurance coverage of P50,000.00 . On
November 25, 1987, Perez died in an accident. It was only on November 27, 1987 that said papers were
received in Manila.

Without knowing that Perez died on November 25, 1987, BF Lifeman Insurance Corporation approved the
application and issued the corresponding policy for the P50,000.00 on December 2, 1987.

The trial court, in ruling for petitioner, held that the premium for the additional insurance of P50,000.00 had
been fully paid and even if the sum of P2,075.00 were to be considered merely as partial payment, the same
does not affect the validity of the policy.

The Court of Appeals, however, reversed the decision of the trial court saying that the insurance contract for
P50,000.00 could not have been perfected since at the time that the policy was issued, Primitivo was
already dead.

The instant petition for certiorari was filed on the ground that there was a consummated contract of insurance between
the deceased and BF Lifeman Insurance Corporation and that the condition that the policy issued by the corporation be
delivered and received by the applicant in good health, is potestative (A condition made in a contract the fulfillment
of which is entirely in the control of one of the parties to the contract), being dependent upon the will of the insurance
company, and is therefore null and void.

ISSUE: WON there was a perfected contract of insurance as to the insurance for P50,000.

RULING: There was no perfected contract of insurance.

Insurance is a contract whereby, for a stipulated consideration, one party undertakes to compensate the
other for loss on a specified subject by specified perils. A contract, on the other hand, is a meeting of the
minds between two persons whereby one binds himself, with respect to the other to give something or to
render some service.

Under Article 1318 of the Civil Code, there is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.

Condition in the application: “there shall be no contract of insurance unless and until a policy is issued on
this application and that the said policy shall not take effect until the premium has been paid and the policy
delivered to and accepted by me/us in person while I/We, am/are in good health”

A potestative condition depends upon the exclusive will of one of the parties. For this reason,
it is considered void. Article 1182 of the New Civil Code states: When the fulfillment of the condition
depends upon the sole will the debtor, the conditional obligation shall be void.

In the case at bar, the following conditions were imposed by the respondent company for the perfection of
the contract of insurance:
(a) a policy must have been issued;
(b) the premiums paid; and
(c) the policy must have been delivered to and accepted by the applicant while he is in good health.

The condition imposed by the corporation that the policy must have been delivered to and accepted by the
applicant while he is in good health can hardly be considered as a potestative or facultative condition.

On the contrary, the health of the applicant at the time of the delivery of the policy is beyond the control or will of
the insurance company. Rather, the condition is a suspensive one whereby the acquisition of rights
depends upon the happening of an event which constitutes the condition. In this case, the suspensive condition
was the policy must have been delivered and accepted by the applicant while he is in good health. There was
non-fulfillment of the condition, however, inasmuch as the applicant was already dead at the time the policy was
issued. Hence, the non-fulfillment of the condition resulted in the non-perfection of the contract .

Prescinding from the foregoing, respondent corporation cannot be held liable for gross negligence. It should be
noted that an application is a mere offer which requires the overt act of the insurer for it to ripen into
a contract. Delay in acting on the application does not constitute acceptance even though the insured has
forwarded his first premium with his application.

So long as an application for insurance has not been either accepted or rejected, it is merely an offer
or proposal to make a contract. The contract, to be binding from the date of application, must have been a
completed contract, one that leaves nothing to be done, nothing to be completed, nothing to be passed
upon, or determined, before it shall take effect. There can be no contract of insurance unless the minds of
the parties have met in agreement.

True, rescission presupposes the existence of a valid contract. A contract which is null and void is no
contract at all and hence could not be the subject of rescission.

A contract of insurance, like all other contracts, must be assented to by both parties, either in
person or through their agents and so long as an application for insurance has not been either
accepted or rejected, it is merely a proposal or an offer to make a contract
 FORTUNATA LUCERO VIUDA DE SINDAYEN vs. THE INSULAR LIFE ASSURANCE CO., LTD.,
1935

FACTS: Arturo Sindayen was employed as a linotype operator in the Bureau of Printing at Manila and had
been such for eleven years prior thereto. He and his wife went to Camiling, Tarlac, to spend the Christmas
vacation with his aunt, Felicidad Estrada. While there he made a written application on December 26, 1932,
to the defendant Insular Life Assurance Co., Ltd., through its agent, Cristobal Mendoza, for a policy of
insurance on his life in the sum of P1,000 and he paid to the agent P15 cash as part of the first premium.

It was agreed with the agent that the policy, when and if issued, should be delivered to his aunt. Felicidad
Estrada, with whom Sindayen left the sum of P26.06 to complete the payment of the first annual premium
of P40.06.

On January 1, 1933, Sindayen, who was then twenty-nine years of age, was examined by the company's
doctor who made a favorable report, to the company. On January 2, 1933, Sindayen returned to Manila and
resumed his work a linotype operator in the Bureau of Printing. On January 11, 1933, The company
accepted the risk and issued policy No. 47710 dated back to December 1, 1932, and mailed the same to its
agent, Cristobal Mendoza, in Camiling, Tarlac, for delivery to the insured.

On January 11, 1933, Sindayen was at work in the Bureau of Printing. On January 12, he complained of a
severe headache and remained at home. On January 15, he called a physician who found that he was
suffering from acute nephritis and uremia. His illness did not yield to treatment and on January 19, 1933, he
died.

Condition on the application: That the said policy shall not take effect until the first premium has been paid
and the policy has been delivered to and accepted by me, while I am in good health.

main defense of the company in this case, namely, that the said policy never took effect because of
paragraph 3 of the application above quoted, for at the time of its delivery by the agent as aforesaid the
insured was not in good health. that this condition precedent goes to the very essence of the contract and
cannot be waived by the agent making delivery of the policy,

Mendoza was authorized by the company to make the delivery of the policy when he received the payment
of the first premium and he was satisfied that the insured was in good health

ISSUE: WON the company assumed risk covered by the policy on the life of Sindayen on Jan 18, 1933.

RULING: The court held that the defendant company assumed the risk covered by policy No. 47710 on the
life of Arturo Sindayen on January 18, 1933, the date when the policy was delivered to the insured.

The power in the local agent to withhold the policy involves the power to deliver it; there is no escape
from that conclusion.

it is not necessarily a case of waiver or of estoppel, but a case where the local agents, in the exercise of
the powers lodged in them, accepted the premium and delivered the policy. That act binds their
principal, the defendant.

record shows that Mendoza had the authority, given him by the company, to withhold the delivery of the
policy to the insured "until the first premium has been paid and the policy has been delivered to and
accepted by me (the insured) while I am in good health"

Granted that Mendoza's decision that the condition had been met by the insured and that it was proper to
make a delivery of the policy to him is just as binding on the company as if the decision had been made by
its board of directors. Granted that Mendoza made a mistake of judgement because he acted on
insufficient evidence as to the state of health of the insured. But it is not charged that the mistake was
induced by any misconduct or omission of duty of the insured.

that we are constrained to hold, as we, do, that the delivery of the policy to the insured by an agent of the
company who is authorized to make delivery or without delivery is the final act which binds the company
(and the insured as well) in the absence of fraud or other legal ground for rescission. The fact that the
agent to whom it has entrusted this duty (and corporation can only act through agents) is derelict or
negligent or even dishonest in the performance of the duty which has been entrusted to him would create
a liability of the agent to the company but does not resolve the company's obligation based upon the
authorized acts of the agent toward a third party who was not in collusion with the agent.

In doing so, he acted within the authority conferred on him by his agency and his acts within that authority
bind the company.

The company therefore having decided that all the conditions precedent to the taking effect of the policy
had been complied with and having accepted the premium and delivered the policy thereafter to the
insured, the company is now estopped to assert that it never intended that the policy should take effect.

DISSENTING:

Reliance Life Ins. Co. vs. Hightower, Agents are not authorized to modify this policy or to extend the
time for paying a premium .

Reese vs. Fidelity Mutual Life Association

Then if the parties understood and agreed that the policy should not become effective unless the first
premium was paid and the policy was delivered to and received by the applicant during his lifetime
and while he was in good health, and both of those conditions failed, the contract of insurance was
never completed, and the policy was of no force and effect.

In life insurance contracts, the assent of both parties is required as in any other contract.

How, then, can a jury be permitted to find that he was in "good heath" at the time of the payment of
the premium in the absence of any evidence to warrant or support such finding?

The fact is that his physical condition was not disclosed to the company or its agent at the time of the
payment of the premium; it could be held that it was not totally sick at the time, of which fact the
company was ignorant; To hold that the policy was good under such circumstances, would be to
abrogate and set aside the contract of insurance, and hold the company liable for a payment of the
policy against the very terms of its contract.

the delivery of the policy by Mendoza does not bind the defendant, nor is the defendant estopped
from alleging its defense, for the simple reason that Mendoza was not an agent with authority to
issue policies or to accept risks in the name of his principle.

A careful perusal of the instrument will show that the real consideration of the plaintiff's waiver was
the unenforceability of the policy due to her husband's illness and the mutual desire of the plaintiff of
the insurer to settle amicably the cases instead of resorting to courts.