Insurance Case

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[G.R. No. 124050. June 19, 1997] MAYER STEEL PIPE CORPORATION and HONGKONG GOVERNMENT SUPPLIES DEPARTMENT, petitioners, vs. COURT OF APPEALS, SOUTH SEA SURETY AND INSURANCE CO., INC. and the CHARTER INSURANCE CORPORATION, respondents. Facts: In 1983, petitioner Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and fittings. From August to October, 1983, Mayer shipped the pipes and fittings to Hongkong as evidenced by invoices. Prior to the shipping, petitioner Mayer insured the pipes and fittings against all risks with private respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter) with a total amount of US$149,470.00 were insured with respondent Charter. Petitioners Mayer and Hongkong jointly appointed Industrial Inspection (International) Inc. as third-party inspector to examine whether the pipes and fittings are manufactured in accordance with the specifications in the contract. Industrial Inspection certified all the pipes and fittings to be in good order condition before they were loaded in the vessel. Nonetheless, when the goods reached Hongkong, it was discovered that a substantial portion thereof was damaged. Petitioners filed a claim against private respondents for indemnity under the insurance contract. Respondent Charter paid petitioner Hongkong the amount of HK$64,904.75. Petitioners demanded payment of the balance of HK$299,345.30 representing the cost of repair of the damaged pipes. Private respondents refused to pay because the insurance surveyor's report allegedly showed that the damage is a factory defect. On April 17, 1986, petitioners filed an action against private respondents to recover the sum of HK$299,345.30. For their defense, private respondents averred that they have no obligation to pay the amount claimed by petitioners because the damage to the goods is due to factory defects which are not covered by the insurance policies. RTC ruled in favor of the petitioners. CA reversed and dismissed the case due to prescription under the COGSA (1 year). Issue: WON the CA erred in holding that petitioners' cause of action had already prescribed on the mistaken application of the Carriage of Goods by Sea Act and the doctrine of Filipino Merchants Co., Inc. v. Alejandro (145 SCRA 42) Decision: Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered. Under this provision, only the carrier's liability is extinguished if no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the contract of insurance. A close reading of the law reveals that the Carriage of Goods by Sea Act governs the relationship between the carrier on the one hand and the shipper, the consignee and/or the insurer on the other hand. It defines the obligations of the carrier under the contract of carriage. It does not, however, affect the relationship between the shipper and the insurer. The latter case is governed by the Insurance Code. Our ruling in Filipino Merchants Insurance Co., Inc. v. Alejandro and the other cases cited therein does not support respondent court's view that the insurer's liability prescribes after one year if no action for indemnity is filed against the carrier or the insurer. In that case, the shipper filed a complaint against the insurer for recovery of a sum of money as indemnity for the loss and damage sustained by the insured goods. The insurer, in turn, filed a third-party complaint against the carrier for reimbursement of the amount it paid to the shipper. The insurer filed the third-party complaint on January 9, 1978, more than one year after delivery of the goods on December 17, 1977. The court held that the Insurer was already barred from filing a claim against the carrier because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed within one year after delivery of the goods or the date when the goods should have been delivered. The court said that "the coverage of the Act includes the insurer of the goods." The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was the insurer which filed a claim against the carrier for reimbursement of the amount it paid to the shipper. In the case at bar, it was the shipper which filed a claim against the insurer. The basis of the shipper's claim is the "all risks" insurance policies issued by private respondents to petitioner Mayer. The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or the insurer. When the court said in Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the insurer, it meant that the insurer, like the shipper, may no longer file a claim against the carrier beyond the one-year period provided in the law. But it does not mean that the shipper may no longer file a claim against the insurer because the basis of the insurer's liability is the insurance contract. An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify another for loss or damage which he may suffer from a specified peril. An "all risks" insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the insured. Thus, when private respondents issued the "all risks" policies to petitioner Mayer, they bound themselves to indemnify the latter in case of loss or damage to the goods insured. Such obligation prescribes in ten years, in accordance with Article 1144 of the New Civil Code.

G.R. No. L-68037 July 29, 1992 PARAMOUNT INSURANCE CORPORATION, petitioner, vs. HON. MAXIMO M. JAPZON, Presiding Judge, Br. 36, RTC, Manila; City Sheriff and Deputy Sheriffs Nestor Macabilin & Teodoro Episcope, public respondents, JOSE LARA and ARSENIO PAED, private respondents. Facts: On May 27, 1978, Jose Lara contracted the services of a passenger jeepney with Plate No. PUJ K5-826, owned and operated by Willy Garcia (Garcia), to transport his family, relatives and friends from Manila to Pangasinan. The said jeepney was then driven by Emilio Macasieb (Macasieb). On the very same date, within the vicinity of Barangay Parsolingan in Gerona, Tarlac, a Ford truck F-600 with Plate No. WL-628, then driven by Willy Manuel (Manuel) while cruising the National Highway on its way to Manila, overtook an unidentified motor vehicle and in the process hit and sideswept the said passenger jeepney then driven by Macasieb. As a consequence of such mishap, the two (2) passengers of the jeepney, namely: Jose Lara (Lara) and Arsenio Paed (Paed) sustained physical injuries of varying degrees. The insurer of said truck is herein petitioner Paramount Surety and Insurance Co. Inc. After the said accident, Natividad filed a notice of claim with Paramount and the latter lost no time in dispatching and/or contracting an independent adjuster handling casualty and marine claims, the EM Salvatierra Adjustment Office. Thereafter, the adjustment of Natividad's claims were transferred to Speedway Adjustment and Appraisal Corporation which investigated the facts surrounding the incident and recommended petitioner to pay Natividad under its policy, using the "no fault" clause under the Insurance Code as its basis of liability. A check in the amount of Eight Hundred Pesos (P800.00) was paid to Paed's wife, Priscilla Paed. In addition to said amount, another check in the amount of Five Thousand Pesos (P5,000.00) was paid by Paramount to Central Luzon Doctor's Hospital covering the expense for medical treatment and hospitalization of the victims, Lara and Paed. Lara and Paed, consequently, filed both criminal and civil cases. RTC ruled, as to the civil case, in favor of the Lara and Paed:
WHEREFORE, finding the evidence presented by plaintiff sufficient to prove the allegations of the complaint, judgment is hereby rendered in favor of the plaintiffs and against the defendants ordering the latter to pay jointly and severally plaintiff Jose Lara, the amount of P15,000.00 for medical and hospitalization expenses; the sum of P80,000.00 as moral and exemplary damages; the sum of P50,000.00 as compensatory damages; to pay jointly and severally plaintiff Arsenio Paed the sum of P20,000.00 as moral and actual damages and to pay the sum of P10,000.00 by way of attorney's fees and the costs of suit.

Issue: WON RTC erred in deciding the amount of liability of the insurer Decision: However, there is merit in petitioner's contention that its liability is limited only to P50,000.00 as expressed in Insurance Policy No. CV-3466 issued on February 23, 1978. The said insurance policy clearly and categorically placed the petitioners liability for all damages arising out of death or bodily injury sustained by one person as a result of any one accident at P50,000.00. Said amount complied with the minimum fixed by law then prevailing, Section 377 of Presidential Decree No. 6123 (which was retained by P.D. No. 1460, the Insurance Code of 1978), which provided that the liability of land transportation vehicle operators for bodily injuries sustained by a passenger arising out of the use of their vehicles shall not be less than P12,000.00. Since the petitioner's liability under the insurance contract is neither less than P12,000.00 nor contrary to law, morals, good customs, public order or public policy, said stipulation must be upheld as effective and binding between the parties. Therefore, the terms of the contract constitute the measure of the insurer's liability.

G.R. No. 116940 June 11, 1997 THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner, vs. COURT OF APPEALS and FELMAN SHIPPING LINES, respondents. Facts: On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a vessel owned and operated by respondent Felman Shipping Lines (FELMAN), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transported from Zamboanga City to Cebu City for consignee Coca-Cola Bottlers Philippines, Inc., Cebu. The shipment was insured with petitioner Philippine American General Insurance Co., Inc. (PHILAMGEN). The vessel left the port of Zamboanga in fine weather at eight o'clock in the evening of the same day. At around eight forty-five the following morning, 7 July 1983, the vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles. Coca-cola filed a claim against FELMAN for recovery of damages but the latter denied the same so Coca-cola was prompted to file an Insurance claim against PHILAMGEN which paid its claim of P755,250.00. Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which disclaimed any liability for the loss and sued the ship owner for sum of money and damages. FELMAN filed a motion to dismiss based on the affirmative defense that no right of subrogation in favor of PHILAMGEN was transmitted by the shipper. RTC denied the motion to dismiss but was reversed by CA and remanded the case back to the RTC for decision. The lower court further ruled that assuming " MV Asilda" was unseaworthy, still PHILAMGEN could not recover from FELMAN since the assured (Coca-Cola) had breached its implied warranty on the vessel's seaworthiness. Resultantly, the payment made by PHILAMGEN to the assured was an undue, wrong and mistaken payment. Since it was not legally owing, it did not give PHILAMGEN the right of subrogation so as to permit it to bring an action in court as a subrogee. CA rendered judgment finding "MV Asilda" unseaworthy for being top-heavy as 2,500 cases of Coca-Cola softdrink bottles were improperly stowed on deck. In other words, while the vessel possessed the necessary Coast Guard certification indicating its seaworthiness with respect to the structure of the ship itself, it was not seaworthy with respect to the cargo. Nonetheless, the appellate court denied the claim of PHILAMGEN on the ground that the assured's implied warranty of seaworthiness was not complied with. Perfunctorily, PHILAMGEN was not properly subrogated to the rights and interests of the shipper. Furthermore, respondent court held that the filing of notice of abandonment had absolved the shipowner/agent from liability under the limited liability rule. Issue: WON the insurer (PHILAMGEN) has the right of the insurer to be subrogated to the rights of the insured upon payment of the insurance claim. Decision: PHILAMGEN's action against FELMAN is squarely sanctioned by Art. 2207 of the Civil Code which provides:
“Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.”

In Pan Malayan Insurance Corporation v. Court of Appeals, we said that payment by the assurer to the assured operates as an equitable assignment to the assurer of all the remedies which the assured may have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of any privity of contract or upon payment by the insurance company of the insurance claim. It accrues simply upon payment by the insurance company of the insurance claim. The doctrine of subrogation has its roots in equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice, equity and good conscience ought to pay. Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave the former the right to bring an action as subrogee against FELMAN. Having failed to rebut the presumption of fault, the liability of FELMAN for the loss of the 7,500 cases of 1-liter Coca-Cola softdrink bottles is inevitable. It was already established at the outset that the sinking of " MV Asilda" was due to its unseaworthiness even at the time of its departure from the port of Zamboanga. It was top-heavy as an excessive amount of cargo was loaded on deck. Closer supervision on the part of the shipowner could have prevented this fatal miscalculation. As such, FELMAN was equally negligent. It cannot therefore escape liability through the expedient of filing a notice of abandonment of the vessel by virtue of Art. 587 of the Code of Commerce.

G.R. No. L-27427 April 7, 1976 FIREMAN'S FUND INSURANCE COMPANY and FIRESTONE TIRE AND RUBBER COMPANY OF THE PHILIPPINES, plaintiffs-appellants, vs. JAMILA & COMPANY, INC. and FIRST QUEZON CITY INSURANCE CO., INC., defendants-appellees. Facts: Jamila or the Veterans Philippine Scouts Security Agency contracted to supply security guards to Firestone. Jamila assumed responsibility for the acts of its security guards and First Quezon City Insurance Co., Inc. executed a bond in the sum of P20,000.00 to guarantee Jamila's obligations under that contract. On May 18, 1963, properties of Firestone valued at P11,925.00 were lost allegedly due to the acts of its employees who connived with Jamila's security guard and Fireman's Fund, as insurer, paid to Firestone the amount of the loss. Fireman's Fund was subrogated to Firestone's right to get reimbursement from Jamila, and that Jamila and its surety, First Quezon City Insurance Co., Inc., failed to pay the amount of the loss in spite of repeated demands. Upon defendants' motions, the lower court, in its order, dismissed the complaint as to Jamila on the ground that there was no allegation that it had consented to the subrogation and, therefore, Fireman's Fund had no cause of action against it. Issue: WON the insurer (Fireman’s Fund) has the right to subrogation from the insured (Firestone) Decision: The insurance company has a right to subrogation. Fireman's Fund's action against Jamila is squarely sanctioned by article 2207. As the insurer, Fireman's Fund is entitled to go after the person or entity that violated its contractual commitment to answer for the loss insured against (Cf. Philippine Air Lines, Inc. vs. Heald Lumber Co., 101 Phil. 1032; Rizal Surety & Insurance Co. vs. Manila Railroad Company, L-24043, April 25, 1968, 23 SCRA 205). The trial court erred in applying to this case the rules on novation. The plaintiffs in alleging in their complaint that Fireman's Fund "became a party in interest in this case by virtue of a subrogation right given in its favor by" Firestone, were not relying on the novation by change of creditors as contemplated in articles 1291 and 1300 to 1303 of the Civil Code but rather on Article 2207. Article 2207 is a restatement of a settled principle of American jurisprudence. Subrogation has been referred to as the doctrine of substitution. It "is an arm of equity that may guide or even force one to pay a debt for which an obligation was incurred but which was in whole or in part paid by another" (83 C.J.S. 576, 678, note 16, citing Fireman's Fund Indemnity Co. vs. State Compensation Insurance Fund, 209 Pac. 2d 55). "Subrogation is founded on principles of justice and equity, and its operation is governed by principles of equity. It rests on the principle that substantial justice should be attained regardless of form, that is, its basis is the doing of complete, essential, and perfect justice between all the parties without regard to form"(83 C.J.S. 579- 80) Subrogation is a normal incident of indemnity insurance (Aetna L. Ins. Co. vs Moses, 287 U.S. 530, 77 L. ed. 477). Upon payment of the loss, the insurer is entitled to be subrogated pro tanto to any right of action which the insured may have against the third person whose. negligence or wrongful act caused the loss (44 Am. Jur. 2nd 745, citing Standard Marine Ins. Co. vs. Scottish Metropolitan Assurance Co., 283 U. S. 294, 75 L. ed. 1037). The right of subrogation is of the highest equity. The loss in the first instance is that of the insured but after reimbursement or compensation, it becomes the loss of the insurer (44 Am. Jur. 2d 746, note 16, citing Newcomb vs. Cincinnati Ins. Co., 22 Ohio St. 382). "Although many policies including policies in the standard form, now provide for subrogation, and thus determine the rights of the insurer in this respect, the equitable right of subrogation as the legal effect of payment inures to the insurer without any formal assignment or any express stipulation to that effect in the policy" (44 Am. Jur. 2nd 746). Stated otherwise, when the insurance company pays for the loss, such payment operates as an equitable assignment to the insurer of the property and all remedies which the insured may have for the recovery thereof. That right is not dependent upon, nor does it grow out of, any privity of contract, or upon written assignment of claim, and payment to the insured makes the insurer an assignee in equity (Shambley v. Jobe-Blackley Plumbing and Heating Co., 264 N. C. 456,142 SE 2d 18). Whether the plaintiffs would be able to prove their cause of action against Jamila is another question.

G.R. No. L-2294 May 25, 1951 FILIPINAS COMPAÑIA DE SEGUROS, petitioner, vs. CHRISTERN, HUENEFELD and CO., INC., respondent. Facts: On October 1, 1941, the respondent corporation, Christern Huenefeld, & Co., Inc., after payment of corresponding premium, obtained from the petitioner ,Filipinas Cia. de Seguros, fire policy in the sum of P100,000, covering merchandise contained in a building located at No. 711 Roman Street, Binondo Manila. During the Japanese military occupation, the building and insured merchandise were burned and in due time the respondent submitted to the petitioner its claim under the policy. The salvage goods were sold at public auction and, after deducting their value, the total loss suffered by the respondent was fixed at P92,650. The petitioner refused to pay the claim on the ground that the policy in favor of the respondent had ceased to be in force on the date the United States declared war against Germany, the respondent Corporation (though organized under and by virtue of the laws of the Philippines) being controlled by the German subjects and the petitioner being a company under American jurisdiction when said policy was issued on October 1, 1941. The petitioner, however, in pursuance of the order of the Director of Bureau of Financing, Philippine Executive Commission, dated April 9, 1943, paid to the respondent the sum of P92,650 on April 19, 1943. The present action was filed on August 6, 1946, in the Court of First Instance of Manila for the purpose of recovering from the respondent the sum of P92,650 above mentioned. The theory of the petitioner is that the insured merchandise were burned up after the policy issued in 1941 in favor of the respondent corporation has ceased to be effective because of the outbreak of the war between the United States and Germany on December 10, 1941, and that the payment made by the petitioner to the respondent corporation during the Japanese military occupation was under pressure. After trial, the Court of First Instance of Manila dismissed the action without pronouncement as to costs. Upon appeal to the Court of Appeals, the judgment of the Court of First Instance of Manila was affirmed, with costs. The case is now before us on appeal by certiorari from the decision of the Court of Appeals. Issue: WON the insurer is a public enemy which would render the contract of insurance void. Decision: There is no question that majority of the stockholders of the respondent corporation were German subjects. This being so, we have to rule that said respondent became an enemy corporation upon the outbreak of the war between the United States and Germany. The English and American cases relied upon by the Court of Appeals have lost their force in view of the latest decision of the Supreme Court of the United States in Clark vs. Uebersee Finanz Korporation, in which the control test has been adopted. The respondent having become an enemy corporation on December 10, 1941, the insurance policy issued in its favor on October 1, 1941, by the petitioner (a Philippine corporation) had ceased to be valid and enforcible, and since the insured goods were burned after December 10, 1941, and during the war, the respondent was not entitled to any indemnity under said policy from the petitioner. However, elementary rules of justice (in the absence of specific provision in the Insurance Law) require that the premium paid by the respondent for the period covered by its policy from December 11, 1941, should be returned by the petitioner. The Court of Appeals, in deciding the case, stated that the main issue hinges on the question of whether the policy in question became null and void upon the declaration of war between the United States and Germany on December 10, 1941, and its judgment in favor of the respondent corporation was predicated on its conclusion that the policy did not cease to be in force. The Court of Appeals necessarily assumed that, even if the payment by the petitioner to the respondent was involuntary, its action is not tenable in view of the ruling on the validity of the policy. As a matter of fact, the Court of Appeals held that "any intimidation resorted to by the appellee was not unjust but the exercise of its lawful right to claim for and received the payment of the insurance policy," and that the ruling of the Bureau of Financing to the effect that "the appellee was entitled to payment from the appellant was, well founded." Factually, there can be no doubt that the Director of the Bureau of Financing, in ordering the petitioner to pay the claim of the respondent, merely obeyed the instruction of the Japanese Military Administration, as may be seen from the following: "In view of the findings and conclusion of this office contained in its decision on Administrative Case dated February 9, 1943 copy of which was sent to your office and the concurrence therein of the Financial Department of the Japanese Military Administration, and following the instruction of said authority, you are hereby ordered to pay the claim of Messrs. Christern, Huenefeld & Co., Inc. The payment of said claim, however, should be made by means of crossed check." It results that the petitioner is entitled to recover what paid to the respondent under the circumstances on this case. However, the petitioner will be entitled to recover only the equivalent, in actual Philippines currency of P92,650 paid on April 19, 1943, in accordance with the rate fixed in the Ballantyne scale.

G.R. No. 120959 November 14, 1996 PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. YIP WAI MING, accused-appellant. Facts: Accused-appellant Yip Wai Ming and victim Lam Po Chun, both Hongkong nationals, came to Manila on vacation on July 10, 1993. The two were engaged to be married. Hardly a day had passed when Lam Po Chun was brutally beaten up and strangled to death in their hotel room. On the day of the killing, July 11, 1993, Yip Wai Ming, was touring Metro Manila with Filipino welcomers while Lam Po Chun was left in the hotel room allegedly because she had a headache and was not feeling well enough to do the sights. RTC rendered decision convicting Yip Wai Ming of the crime of murder. Issue: WON the accused, Yip Wai Ming, has an insurable interest in the life of the victim, Lam Po Chun. Decision: There are other suspicious circumstances about the insurance angle. Lam Po Chun was working for the National insurance Company. Why then should she insure her life with the New Zealand Insurance Company? Lam's monthly salary was only HK $5,000.00. The premiums for the insurance were HK $5,400.00 or US $702.00 per month. Why should Lam insure herself with the monthly premiums exceeding her monthly salary? And why should any insurance company approve insurance, the premiums of which the supposed insured obviously con not afford to pay, in the absence of any showing that somebody else is paying for said premiums. It is not even indicated whether or not there are rules in Hongkong allowing a big amount of insurance to be secured where the beneficiary is not a spouse, a parent, a sibling, a child, or other close relative. (FROM THE BOOK: Under our law, in order that one may have an insurable interest in the life of another, it must be one of those mentioned in ([a], [b], [c], and [d]) in Section 10 of the Insurance Code, i.e., the interest is pecuniary or founded upon the close relationship between the parties. Hence, the mere fact that two persons are engaged to be married does not give one an insurable interest in the life of the other.)

G.R. No. L-54216 July 19, 1989 THE PHILIPPINE AMERICAN INSURANCE COMPANY, petitioner, vs. HONORABLE GREGORIO G. PINEDA in his capacity as Judge of the Court of First Instance of Rizal, and RODOLFO C. DIMAYUGA, respondents. Facts: On January 15, 1968, private respondent procured an ordinary life insurance policy from the petitioner company and designated his wife and children as irrevocable beneficiaries of said policy. Under date February 22, 1980 private respondent filed a petition which was docketed as Civil Case No. 9210 of the then Court of First Instance of Rizal to amend the designation of the beneficiaries in his life policy from irrevocable to revocable. Issue: WON the designation of the irrevocable beneficiaries could be changed or amended without the consent of all the irrevocable beneficiaries. Decision: Needless to say, the applicable law in the instant case is the Insurance Act, otherwise known as Act No. 2427 as amended, the policy having been procured in 1968. Under the said law, the beneficiary designated in a life insurance contract cannot be changed without the consent of the beneficiary because he has a vested interest in the policy (Gercio v. Sun Life Ins. Co. of Canada, 48 Phil. 53; Go v. Redfern and the International Assurance Co., Ltd., 72 Phil. 71). In this regard, it is worth noting that the Beneficiary Designation Indorsement in the policy which forms part of Policy Number 0794461 in the name of Rodolfo Cailles Dimayuga states that the designation of the beneficiaries is irrevocable (Annex "A" of Petition in Sp. Proc. No. 9210, Annex "C" of the Petition for Review on Certiorari), to wit:
It is hereby understood and agreed that, notwithstanding the provisions of this policy to the contrary, inasmuch as the designation of the primary/contingent beneficiary/beneficiaries in this Policy has been made without reserving the right to change said beneficiary/ beneficiaries, such designation may not be surrendered to the Company, released or assigned; and no right or privilege under the Policy may be exercised, or agreement made with the Company to any change in or amendment to the Policy, without the consent of the said beneficiary/beneficiaries. (Petitioner's Memorandum, p. 72, Rollo)

Be it noted that the foregoing is a fact which the private respondent did not bother to disprove. Inevitably therefore, based on the aforequoted provision of the contract, not to mention the law then applicable, it is only with the consent of all the beneficiaries that any change or amendment in the policy concerning the irrevocable beneficiaries may be legally and validly effected. Both the law and the policy do not provide for any other exception, thus, abrogating the contention of the private respondent that said designation can be amended if the Court finds a just, reasonable ground to do so. Similarly, the alleged acquiescence of the six (6) children beneficiaries of the policy (the beneficiary-wife predeceased the insured) cannot be considered an effective ratification to the change of the beneficiaries from irrevocable to revocable. Indubitable is the fact that all the six (6) children named as beneficiaries were minors at the time,** for which reason, they could not validly give their consent. Neither could they act through their father insured since their interests are quite divergent from one another. In point is an excerpt from the Notes and Cases on Insurance Law by Campos and Campos, 1960, readingThe insured ... can do nothing to divest the beneficiary of his rights without his consent. He cannot assign his policy, nor even take its cash surrender value without the consent of the beneficiary. Neither can the insured's creditors seize the policy or any right thereunder. The insured may not even add another beneficiary because by doing so, he diminishes the amount which the beneficiary may recover and this he cannot do without the beneficiary's consent.

Therefore, the parent-insured cannot exercise rights and/or privileges pertaining to the insurance contract, for otherwise, the vested rights of the irrevocable beneficiaries would be rendered inconsequential. Of equal importance is the well-settled rule that the contract between the parties is the law binding on both of them and for so many times, this court has consistently issued pronouncements upholding the validity and effectivity of contracts. Where there is nothing in the contract which is contrary to law, good morals, good customs, public policy or public order the validity of the contract must be sustained. Likewise, contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of their stipulations, if their terms are clear and leave no room for doubt as to the intention of the contracting parties, for contracts are obligatory, no matter in what form they may be, whenever the essential requisites for their validity are present (Phoenix Assurance Co., Ltd. vs. United States Lines, 22 SCRA 675, Phil. American General Insurance Co., Inc. vs. Mutuc, 61 SCRA 22.) Finally, the fact that the contract of insurance does not contain a contingency when the change in the designation of beneficiaries could be validly effected means that it was never within the contemplation of the parties. The lower court, in gratuitously providing for such contingency, made a new contract for them, a proceeding which we cannot tolerate. Ergo, We cannot help but conclude that the lower court acted in excess of its authority when it issued the Order dated March 19, 1980 amending the designation of the beneficiaries from "irrevocable" to "revocable" over the disapprobation of the petitioner insurance company.

G.R. No. L-44059 October 28, 1977 THE INSULAR LIFE ASSURANCE COMPANY, LTD., plaintiff-appellee, vs. CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO, defendants-appellants. Facts: On September 1, 1968, Buenaventura C. Ebrado was issued by The Insular Life Assurance Co., Ltd., (Insular) a whole-life for P5,882.00 with a rider for Accidental Death for the same amount Buenaventura C. Ebrado designated to Carponia T. Ebrado as the revocable beneficiary in his policy as his wife. On October 21, 1969, Buenaventura C. Ebrado died as a result of an aacident when he was hit by a failing branch of a tree. As the policy was in force, Insular liable to pay the coverage in the total amount of P11,745.73, representing the face value of the policy in the amount of P5,882.00 plus the additional benefits for accidental death also in the amount of P5,882.00 and the refund of P18.00 paid for the premium due November, 1969, minus the unpaid premiums and interest thereon due for January and February, 1969, in the sum of P36.27. Carponia T. Ebrado filed with the insurer a claim for the proceeds of the Policy as the designated beneficiary therein, although she admits that she and the insured Buenaventura C. Ebrado were merely living as husband and wife without the benefit of marriage. Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is the one entitled to the insurance proceeds, not the common-law wife, Carponia T. Ebrado. Insular commenced an action for Interpleader before the Court of First Instance of Rizal on April 29, 1970. the trial court rendered judgment declaring among others, Carponia T. Ebrado disqualified from becoming beneficiary of the insured Buenaventura Cristor Ebrado and directing the payment of the insurance proceeds to the estate of the deceased insured. Carponia T. Ebrado appealed to the CA, but CA certified the case to Us as involving only questions of law. Issue: WON a common-law wife named as beneficiary in the life insurance policy of a legally married man claim the proceeds thereof in case of death of the latter Decision: Article 2011 of the New Civil Code states: "The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code." When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is governed by the general rules of the civil law regulating contracts. And under Article 2012 of the same Code, "any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a fife insurance policy by the person who cannot make a donation to him. Common-law spouses are, definitely, barred from receiving donations from each other. Article 739 of the new Civil Code provides:
The following donations shall be void: 1. Those made between persons who were guilty of adultery or concubinage at the time of donation; Those made between persons found guilty of the same criminal offense, in consideration thereof; 3. Those made to a public officer or his wife, descendants or ascendants by reason of his office. In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilt of the donee may be proved by preponderance of evidence in the same action.

In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is concerned. Both are founded upon the same consideration: liberality. A beneficiary is like a donee, because from the premiums of the policy which the insured pays out of liberality, the beneficiary will receive the proceeds or profits of said insurance. As a consequence, the proscription in Article 739 of the new Civil Code should equally operate in life insurance contracts. The mandate of Article 2012 cannot be laid aside: any person who cannot receive a donation cannot be named as beneficiary in the life insurance policy of the person who cannot make the donation. 5 Under American law, a policy of life insurance is considered as a testament and in construing it, the courts will, so far as possible treat it as a will and determine the effect of a clause designating the beneficiary by rules under which wins are interpreted.

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