Tan vs. Court of Appeals (Insurance Law)

Tan vs. Court of Appeals

174 SCRA 403 (G.R. No. 48049)

June 29, 1989

Petitioners:       Emilio Tan, Juanito Tan, Alberto Tan and Arturo Tan

Respondent:     Court of Appeals and the Philippine American Life Insurance Company

J. Gutierrez Jr.:

FACTS:

On September 23, 1973, Tan Lee Siong, father of herein petitioner, applied for life insurance in the amount of ₱80,000.00 with respondent Philippine American Life Insurance Company. Said application was approved and Policy No. 1082467 was issued effective November 6, 1973, with petitioners the beneficiaries thereof.

On April 26, 1975, Tan Lee Siong died of Hepatoma. Petitioner then filed with respondent company their claim for the proceeds of the life insurance policy. However, in a letter dated September 11, 1975, respondent company denied petitioner’s claim and rescinded the policy by reason of the alleged misrepresentation and concealment of material facts made by the deceased Tan Lee Sion in his application for insurance the premium paid on the policy were thereupon refunded.

Petitioners filed on November 27, 1975, a complaint against the former with the Office of the Insurance Commissioner.

The Petitioners contend that the respondent company no longer had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action.

ISSUE:

Whether the respondent company had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action.

HELD:

Yes. The [Petitioner’s] contention is without merit. The so-called “incontestability clause” precludes the insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force for at least two years during the insurer’s lifetime. The phrase “during the lifetime” found in Section 48 simply means that the policy is no longer considered in force after the insured has died. The key phrase in the second paragraph of Section 48 is “for a period of two years.”

As noted by the Court of Appeals, to wit: “The policy was issued on November 6, 1973 and the insured died on April 26, 1975. The policy was thus in force for a period of only one year and five months. Considering that the insured died before the two-year period had lapsed, respondent company is not, therefore, barred from proving that the policy is void ab initio by reason of the insured’s fraudulent concealment or misrepresentation. Moreover, respondent company rescinded the contract of insurance and refunded the premiums paid on September 11, 1975, previous to the commencement of this action on November 27, 1975.”

The insurer has two years from the date of insurance contract or of its last reinstatement within which to contest the policy, whether or not, the insured still lives within such period. After two years, the defenses of concealment or misrepresentation, no matter how patent or well founded, no longer lie. Congress felt this was a sufficient answer to the various tactics employed by insurance companies to avoid liability. The petitioners interpretation would give rise to the incongruous situation where the beneficiaries of an insured who dies right after taking out and paying for a life insurance policy, would be allowed to collect on the policy even if the insured fraudulently concealed material facts.

Great Pacific Life Assurance Company vs. Court of Appeals 89 SCRA 543 (Insurance Law)

Great Pacific Life Assurance Company vs. Court of Appeals

89 SCRA 543 (G.R. No. L-31845 and L-31878)

April 30, 1979

Petitioners:       Great Pacific Life Assurance Company (G.R. No. L-31845), Lapulapu Mondragon (G.R. No. L-31878)

Respondent:     Court of Appeals (both in G.R. No. L-31845 and L-31878), Ngo Hing (G.R. No. L-31878)

J. De Castro:

FACTS:

On March 4, 1957 respondent Ngo Hing filed an application with the Great Pacific Life Assurance Company for twenty-year endowment policy for ₱50,000.00 on the life of his one-year old Helen Go.

Upon payment of the insurance premium, a binding deposit receipt was issued to Hing by the branch manager of the insurer in Cebu.

On May 28, 1957, the child died of influenza with complication of broncho pneumonia.

ISSUE:

Whether the binding deposit receipt constituted a temporary contract of the life insurance in question.

HELD:

No. The provisions printed on the Binding Receipt show that the binding deposit receipt is intended to be merely a provisional or temporary insurance contract and only upon compliance of the following conditions:

1.  That the company shall be satisfied that the applicant was insurable on standard rates;

2.  That if the company does not accept the application and offers to issue a policy for different plan, the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise the deposit shall be refunded; and

3.  That if the applicant is not insurable according to the standard rates, and the company disapproves the application, the insurance applied for shall not be in force at any time, and the premium paid shall be returned to the applicant;

Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely acknowledgment on behalf of the company, that the latter’s branch office had received from the applicant the insurance premium and had accepted the application subject for processing by the insurance premium and had accepted the application subject for processing by the insurance company; and that the latter will either approve or reject the same on the basis of whether or not the applicant is “insurable on standard rates.”

Since Pacific Life disapproved the insurance application of Hing, the binding deposit receipt in question had never become in force at any time.

Upon this premise, the binding deposit receipt is, manifestly, merely conditional and does not insure outright. As held by this court, where an agreement is made between the applicant and the agent no liability shall attach until the principal approves the risk and receipt is given by the agent. The acceptance is merely conditional and is subordinated to the act of the company in approving or rejecting the application. Thus, in life insurance, “a binding slip” or “binding receipt” does not insure by itself. (De Lim vs. Sun Life Assurance Company of Canada, 41 Phil. 264)

It bears repeating that through the intra-company communication of April 30, 1957, Pacific Life disapproved the insurance application in question on the ground that it is not offering the twenty-year endowment insurance policy to children less than seven years of age. What it offered instead is another plan known as the Juvenile Triple Action, which private respondent failed to accept.

In the absence of a meeting of the minds between Pacific Life and Hing over the 20 year endowment life insurance in the amount of ₱50,000.00 in favor of the latter’s one year old daughter, and with non-compliance of the above-quoted conditions stated in the disputed binding deposit receipt, there could have been no insurance contract duly perfected between them. Accordingly, the deposit paid by private respondent shall have to be refunded by Pacific Life.

Bonifacio Bros, Inc. vs. Mora (Insurance Law)

Bonifacio Bros, Inc. vs. Mora

20 SCRA 261 (G.R. No. L-20853)

May 29, 1967

(Insurance Law)

Petitioners/Appellants: Bonifacio Bros. Inc. et. al.

Respondent/Appellees: Enrique Mora, et. al.

J. Castro

FACTS

Enrique Mora, owner of an Olds Mobile sedan model 1956, mortgaged the same to H.S. Reyes Inc., with the condition that the former would insure the automobile with the latter as beneficiary. The automobile was insured on June 23, 1959 with the State Bonding & Insurance Co., Inc. and a motor car insurance was issued to Enrique Mora

During the effectivity of the insurance contract the car met an accident. Mora, without knowledge of the H. S. Reyes Inc., authorized the Bonifacio Bros., Inc. to repair the car with some materials supplied by the Ayala Autoparts Co.

ISSUE

Whether there is privity of contract between the Bonifacio Bros. Inc and the Ayala Autoparts Co. on the one hand and the insurance company on the other.

HELD

No. A policy of insurance is a distinct and independent contract between the insured and insurer. A third person has no right in law or equity to the proceeds of an insurance unless there is a contract or trust, express or implied between the insured and the third person.

The Appellants are not mentioned in the contract as parties thereto, nor is there any clause or provision thereof from which we can infer that there is an obligation on the part of the insurance company to pay the cost directly to them.

The clause is an insurance policy, authorizing the owner of the damaged vehicle to contract for its repairs does not mean that the repairman is entitled to collect the cost of the repair out of the proceeds of the insurance. It merely establishes the procedure that the insured has to follow in order to be entitled to indemnity for repair.

On the other hand, the “loss payable” clause of the insurance policy stipulates “Loss, if any, is payable to H. S. Reyes, Inc.” indicating that it was only the H. S. Reyes Inc. which intended to be benefited.

Where the mortgagee is the beneficiary in a car insurance, it has a better right than the repairman to the insurance proceeds.

Heirs of Antonio Pael vs. Court of Appeals (Corporation Law)

CORPORATION LAW

Heirs of Antonio Pael vs. Court of Appeals

371 SCRA 587 (G.R. No. 133574)

December 7, 2001

Petitioner: Heirs of Antonio Pael and Andrea Alcantara and Crisanto Pael

Respondent: Court of Appeals

J. Ynares-Santiago

FACTS:

PFINA Properties, Inc. acquired by virtue of a deed of assignments dated January 25, 1983, certain parcels of land from the heirs of Antonio Pael. It appears that at the time PFINA acquired the land, it was known to be a a mining company. The transfer was also replete with badges of fraud and irregularities. Furthermore, the heirs of Pael had earlier disposed of their rights over the subject property long before the transfer to PFINA was made.

ISSUE:

Whether or not the acquisition of PFINA of the disputed properties was within its power and hence a valid corporate act.

HELD:

No.

At the time of PFINA acquired the disputed properties in 1983, its corporate name was PFINA Mining and Exploration, Inc., a mining company which had no valid grounds to engage in the highly speculative business of urban real estate development.

Republic vs. Acoje Mining Co., Inc. 7 SCRA 361 (Corporation Law)

CORPORATION LAW

Republic vs. Acoje Mining Co., Inc.

7 SCRA 361 (G.R. No. L-18062)

February 28, 1963

Petitioner/Appellant: Acoje Mining Company, Inc.

Respondent/Appellee: Republic of the Philippines

J. Bautista - Angelo

FACTS:

Acoje Mining wrote the Director of Posts requesting the opening of a post, telegraph and money order offices and its mining camp at Sta. Cruz, Zambales to serve its employees and their families that were said living in the camp. Acting on the request, Director of Posts replied that if aside from free quarters, the company would provide for all the essential equipment and assign responsible employee to perform a postmasters duties. It is also indicated that the company shall assure direct responsibility for whatever pecuniary loss the Bureau of Post may suffer. The post office branch was opened at the camp with one Hilario Sandrez as postmaster. The postmasters went on a 3 day leave but never returned. The company immediately informed the Manila Post Office of Sanchez's disappearance when the accounts were checked a shortage was found. Several demands made upon the company for the payment of shortage in line with the liability it has assumed having failed, the government brought the present action.

ISSUE:

Whether or not an act outside the scope of powers expressly conferred may be performed.

HELD:

Yes.

While as a rule an ultra vires act is one committed outside the object for which a corporation is created as defined by the law of its organization and therefore beyond the powers conferred upon it by law, there are however certain corporate acts that may be performed outside the scope of the powers expressly conferred if they are necessary to promote the interest and welfare of the corporation, such as the establishment, in the case at bar, of a local post office in a mining camp which is far removed from the postal facilities or means of communication accorded to people living in a city or municipality.

An illegal act is void and cannot be validated, while an ultra vires act is merely voidable and can be enforced by performance, ratification or estoppel, or on equitable grounds. In the present case the validity of the resolution of Board of Directors of the corporation accepting full responsibility in connection with funds to be received by its postmaster, should be upheld on the ground of estoppel.

AF Realty & Development, Inc. vs. Dieselman Freight Services, Co. 373 SCRA 385 (Corporation Law)

CORPORATION LAW

AF Realty & Development, Inc. vs. Dieselman Freight Services, Co.

373 SCRA 385 (G.R. No. 1114448)

January 16, 2002

Petitioner: AF Realty & Development, Inc.

Respondents: Dieselman Freight Services, Co., Manuel C. Cruz, Jr. and Midas Development Corporation

J. Sandoval Gutierrez

FACTS:

Dieselman Freight Service Co. is an owner of commercial lot consisting of 2,094 sqm., located at Pasig City. On May 10, 1988, Manuel C. Cruz, Jr. a member of the board of directors of Dieselman, issued a letter authorizing Cristeta N. Polintan "to look for a buyer and negotiate the sale" of the lot at ₱3,000.00 per sqm.. Cruz Jr. has no written authority from Dieselman to sell the lot. In turn Polintan authorized Felicisima Noble to sell the same lot. Noble offered the property to AF Realty & Development, Inc. at ₱2,500.00 per sqm. Zenaida Ranullo, board member and vice-president of AF Realty, accepted the offer and issued a check in the amount of ₱300,000.00. Ranullo asked Polintan for the board resolution of Dieselman  authorizing the sale. However, Polintan could only give Ranullo the original copy of TCT No. 39849, the tax declaration and tax receipt for the lot, and a photocopy of the Articles of Incorporation of Dieselman. Cruz, Sr. president of Dieselman, acknowledged receipt of the said ₱300,000.00 as "earnest money" but required AF Realty to finalize the sale at ₱4,000.00 per sqm. AF Realty replied that it is willing to pay the balance. However, Cruz, Sr. terminated the offer and demanded from AF Realty the return of the title of the lot claiming that there was a perfected contract of sale, AF Realty filed a complaint for specific performance against Dieselman and Cruz, Jr.. The complain prays that Dieselman be ordered to execute and deliver a final deed of sale in favor of AF Realty. In its answer Dieselman alleged that it did not authorize any person to enter into such transaction on its behalf. Meanwhile, on July 30, 1988, Dieselman and Midas Development Corporation (Midas) executed a Deed of Absolute Sale of the same property.

The CA held that Cruz, Jr. was not authorized in writing by Dieselman to sell the property to AF Realty, the sale was not perfected, and that the Deed of Absolute Sale between Dieselman and Midas is valid, there being no bad faith on the part of the latter.

ISSUE:

Whether or not there was a valid delegation of power.

HELD:

Yes.

Sec. 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors just as natural person may authorize another to do certain acts in his behalf, so may board of directors of a corporation may delegate some of its functions to individual officers or agents appointed by it. Thus contracts or acts of a corporation must be made either by the Board of Directors or by a corporate agent duly authorized by the board absent such valid delegation/authorization, the rule is that the declaration of an individual director director relating to the affairs of the corporation, but not in the course of , or connected with the performance of authorized duties of such director, are held not binding on the corporation.

Inter-Asia Investment Industries, Inc. vs. Court of Appeals 403 SCRA 452 (Corporation Law)

CORPORATION LAW

Inter-Asia Investment Industries, Inc. vs. Court of Appeals

403 SCRA 452 (G.R. No. 125778)

June 10, 2003

Petitioner: Inter-Asia Investments Industries, Inc.

Respondents: Court of Appeals and Asia Industries, Inc.

J. Carpio-Morales

FACTS:

Petitioner, by a Stock Purchase Agreement, sold to private respondent Asia Industries all its rights, title and interest in, and to all outstanding shares of stocks of FARMACOR, Inc.. Such was signed by Leonidas P. Gonzales and Jesus J. Vergara, presidents of respective corporations. It was provided that respondent may retain ₱7,500,000.00 out of the stipulated price of ₱19,500,000.00 from which may be deducted any shortfall on the Minimum Guaranteed Net Worth of ₱12,000,000.00. It turned out that the guaranteed net worth shortfall amounted to ₱13,244,225.00. Private respondent having already paid petitioner ₱12,000,000.00 was entitled to ₱5,744,225.00 refund since it was also stated that if the amount retained is not sufficient to make up for the deficiency in the Minimum Guaranteed Net Worth, petitioner shall pay the difference within 5 days from date of receipt of the audited financial statements. Petitioner thereafter proposed by letter signed by its president, that private respondent's claim for refund be reduced to ₱4,093,993.00, it promise to pay the cost of the Northern Cotabato Industries, Inc. superstructures in the amount of ₱759,570.00 to which respondent agreed. Petitioner, however, wielded on its promise. Private respondent filed a case against petitioner with RTC Makati. The trial court ruled in favor of respondent. Such was upheld by the Court of Appeals.

ISSUE:

Whether or not an officer of a corporation who is authorized purchased stock of another corporation has the implied power to perform all other obligations arising therefrom.

HELD:

Yes.

As correctly argued by private respondent, an officer of a corporation who is authorized to purchase the stock of another corporation has the implied power to perform all other obligations arising therefrom, such as payment of the shares of stock. By allowing, its president to sign the agreement on its behalf, petitioner clothed him with apparent capacity to perform all acts which are expressly, impliedly and inherently stated therein.