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367 Phil. 539


[ G.R. No. 137172, June 15, 1999 ]




The case is an appeal via certiorari seeking to set aside the decision of the Court of Appeals,[1] affirming with modification that of the Regional Trial Court, Branch 58, Makati, ordering petitioner to pay respondent the sum of P18,645,000.00, as the proceeds of the insurance coverage of respondent's property razed by fire; 25% of the total amount due as attorney's fees and P25,000.00 as litigation expenses, and costs.

The facts are undisputed and may be related as follows:

On April 15, 1991, petitioner issued five (5) insurance policies covering respondent's various property described therein against fire, for the period from May 22, 1991 to May 22, 1992.

In March 1992, petitioner evaluated the policies and decided not to renew them upon expiration of their terms on May 22, 1992. Petitioner advised respondent's broker, Zuellig Insurance Brokers, Inc. of its intention not to renew the policies.

On April 6, 1992, petitioner gave written notice to respondent of the non-renewal of the policies at the address stated in the policies.

On June 13, 1992, fire razed respondent's property covered by three of the insurance policies petitioner issued.

On July 13, 1992, respondent presented to petitioner's cashier at its head office five (5) manager's checks in the total amount of P225,753.95, representing premium for the renewal of the policies from May 22, 1992 to May 22, 1993. No notice of loss was filed by respondent under the policies prior to July 14, 1992.

On July 14, 1992, respondent filed with petitioner its formal claim for indemnification of the insured property razed by fire.

On the same day, July 14, 1992, petitioner returned to respondent the five (5) manager's checks that it tendered, and at the same time rejected respondent's claim for the reasons (a) that the policies had expired and were not renewed, and (b) that the fire occurred on June 13, 1992, before respondent's tender of premium payment.

On July 21, 1992, respondent filed with the Regional Trial Court, Branch 58, Makati City, a civil complaint against petitioner for recovery of P18,645,000.00, representing the face value of the policies covering respondent's insured property razed by fire, and for attorney's fees.[2]

On October 23, 1992, after its motion to dismiss had been denied, petitioner filed an answer to the complaint. It alleged that the complaint "fails to state a cause of action"; that petitioner was not liable to respondent for insurance proceeds under the policies because at the time of the loss of respondent's property due to fire, the policies had long expired and were not renewed.[3]

After due trial, on March 10, 1993, the Regional Trial Court, Branch 58, Makati, rendered decision, the dispositive portion of which reads:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendant, as follows:

"(1) Authorizing and allowing the plaintiff to consign/deposit with this Court the sum of P225,753.95 (refused by the defendant) as full payment of the corresponding premiums for the replacement-renewal policies for Exhibits A, B, C, D and E;

"(2) Declaring plaintiff to have fully complied with its obligation to pay the premium thereby rendering the replacement-renewal policy of Exhibits A, B, C, D and E effective and binding for the duration May 22, 1992 until May 22, 1993; and, ordering defendant to deliver forthwith to plaintiff the said replacement-renewal policies;

"(3) Declaring Exhibits A & B, in force from August 22, 1991 up to August 23, 1992 and August 9, 1991 to August 9, 1992, respectively; and

"(4) Ordering the defendant to pay plaintiff the sums of: (a) P18,645,000.00 representing the latter's claim for indemnity under Exhibits A, B & C and/or its replacement-renewal policies; (b) 25% of the total amount due as and for attorney's fees; (c) P25,000.00 as necessary litigation expenses; and, (d) the costs of suit.

"All other claims and counterclaims asserted by the parties are denied and/or dismissed, including plaintiff's claim for interests.


"Makati, Metro-Manila, March 10, 1993.


In due time, petitioner appealed to the Court of Appeals.[5]

On September 7, 1998, the Court of Appeals promulgated its decision[6] affirming that of the Regional Trial Court with the modification that item No. 3 of the dispositive portion was deleted, and the award of attorney's fees was reduced to 10% of the total amount due.[7]

The Court of Appeals held that following previous practise, respondent was allowed a sixty (60) to ninety (90) day credit term for the renewal of its policies, and that the acceptance of the late premium payment suggested an understanding that payment could be made later.

Hence, this appeal.

By resolution adopted on March 24, 1999, we required respondent to comment on the petition, not to file a motion to dismiss within ten (10) days from notice.[8] On April 22, 1999, respondent filed its comment.[9]

Respondent submits that the Court of Appeals correctly ruled that no timely notice of non-renewal was sent. The notice of non-renewal sent to broker Zuellig which claimed that it verbally notified the insurance agency but not respondent itself did not suffice. Respondent submits further that the Court of Appeals did not err in finding that there existed a sixty (60) to ninety (90) days credit agreement between UCPB and Masagana, and that, finally, the Supreme Court could not review factual findings of the lower court affirmed by the Court of Appeals.[10]

We give due course to the appeal.

The basic issue raised is whether the fire insurance policies issued by petitioner to the respondent covering the period May 22, 1991 to May 22, 1992, had expired on the latter date or had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date after the occurrence of the risk (fire) insured against.

The answer is easily found in the Insurance Code. No, an insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual payment of the premium. Any agreement to the contrary is void.[11] The parties may not agree expressly or impliedly on the extension of credit or time to pay the premium and consider the policy binding before actual payment.

The case of Malayan Insurance Co., Inc. vs. Cruz-Arnaldo,[12] cited by the Court of Appeals, is not applicable. In that case, payment of the premium was in fact actually made on December 24, 1981, and the fire occurred on January 18, 1982. Here, the payment of the premium for renewal of the policies was tendered on July 13, 1992, a month after the fire occurred on June 13, 1992. The assured did not even give the insurer a notice of loss within a reasonable time after occurrence of the fire.

WHEREFORE, the Court hereby REVERSES and SETS ASIDE the decision of the Court of Appeals in CA-G.R. CV No. 42321. In lieu thereof, the Court renders judgment dismissing respondent's complaint and petitioner's counterclaims thereto filed with the Regional Trial Court, Branch 58, Makati City, in Civil Case No. 92-2023. Without costs.


Davide, Jr., C.J., (Chairman), Melo, Kapunan, and Ynares-Santiago, JJ., concur.

[1] In CA-G.R. CV No. 42321, promulgated on September 7, 1998. Aliño-Hormachuelos, J., ponente, Guerrero and Villarama, Jr., JJ., concurring.

[2] RTC Original Record, pp. 1-10.

[3] RTC Original Record, pp. 103-117.

[4] RTC Original record, pp. 454-466.

[5] Docketed as CA-G.R. CV No. 42321.

[6] Aliño-Hormachuelos, J., ponente, Guerrero and Villarama, Jr. JJ., concurring.

[7] Petition, Annex "A", Rollo, pp. 38-54.

[8] Rollo, p. 72.

[9] Rollo, pp. 73-106.

[10] Comment, Rollo, on p. 84.

[11] Section 77, Insurance Code of the Philippines; Valenzuela vs. Court of Appeals, 191 SCRA 1; South Sea Surety and Insurance Co., Inc. vs. Court of Appeals, 244 SCRA 744; Tibay vs. Court of Appeals, 275 SCRA 126.

[12] 154 SCRA 672.

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