Ang Giok Chip v Springfield G.

Ang Giok Chip v Springfield G.R. No. L-33637 December 31, 1931
J. Malcolm

Facts:
Ang insured his warehouse for the total value of Php 60,000. One of these, amounting to 10,000, was with Springfield Insurance Company. His warehouse burned down, then he attempted to recover 8,000 from Springfield for the indemnity. The insurance company interposed its defense on a rider in the policy in the form of Warranty F, fixing the amount of hazardous good that can be stored in a building to be covered by the insurance. They claimed that Ang violated the 3 percent limit by placing hazardous goods to as high as 39 percent of all the goods stored in the building. His suit to recover was granted by the trial court. Hence, this appeal.

Issue: Whether a warranty referred to in the policy as forming part of the contract of insuranceand in the form of a rider to the insurance policy, is null and void because not complying with the Philippine Insurance Act.

Held: No. The warranty is valid. Petition dismissed.

Ratio:
The Insurance Act, Section 65, taken from California law, states:
“Every express warranty, made at or before the execution of a policy, must be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy, as making a part of it.”
Warranty F, indemnifying for a value of Php 20,000 and pasted on the left margin of the policy stated:
It is hereby declared and agreed that during the currency of this policy no hazardous goods be stored in the Building to which this insurance applies or in any building communicating therewith, provided, always, however, that the Insured be permitted to stored a small quantity of the hazardous goods specified below, but not exceeding in all 3 per cent of the total value of the whole of the goods or merchandise contained in said warehouse, viz; . . . .
Also, the court stated a book that said, “any express warranty or condition is always a part of the policy, but, like any other part of an express contract, may be written in the margin, or contained in proposals or documents expressly referred to in the policy, and so made a part of it.”
“It is well settled that a rider attached to a policy is a part of the contract, to the same extent and with like effect as it actually embodied therein. In the second place, it is equally well settled that an express warranty must appear upon the face of the policy, or be clearly incorporated therein and made a part thereof by explicit reference, or by words clearly evidencing such intention.”
The court concluded that Warranty F is contained in the policy itself, because by the contract ofinsurance agreed to by the parties it was made to be a part. It wasn’t aseparate instrument agreed to by the parties.
The receipt of the policy by the insured without objection binds him. It was his duty to read the policy and know its terms. He also never chose to accept a different policy by considering the earlier one as a mistake. Hence, the rider is valid.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-33637 December 31, 1931
ANG GIOK CHIP, doing business under the name and style of Hua Bee Kong Si, plaintiff-appellee,
vs.
SPRINGFIELD FIRE & MARINE INSURANCE COMPANY, defendant-appellant.
C.A. Sobral for appellant.
Paredes and Buencamino for appellee.
Gibbs and McDonough and Ramon Ozaeta as amici curiae.

MALCOLM, J.:
An important question in the law of insurance, not heretofore considered in this jurisdiction and, according to our information, not directly resolved in California from which State the Philippine Insurance Act was taken, must be decided on this appeal for the future guidance of trial courts and of insurance companies doing business in the Philippine Islands. This question, flatly stated, is whether a warranty referred to in the policy as forming part of the contract of insurance and in the form of a rider to the insurance policy, is null and void because not complying with the Philippine Insurance Act. The court has had the benefit of instructive briefs and memoranda from the parties and has also been assisted by a well prepared brief submitted on behalf of amici curiae.
The admitted facts are these: Ang Giok Chip doing business under the name and style of Hua Bee Kong Si was formerly the owner of a warehouse situated at No. 643 Calle Reina Regente, City of Manila. The contents of the warehouse were insured with the three insurance companies for the total sum of P60,000. One insurance policy, in the amount of P10,000, was taken out with the Springfield Fire & Marine Insurance Company. The warehouse was destroyed by fire on January 11, 1928, while the policy issued by the latter company was in force.
Predicated on this policy the plaintiff instituted action in the Court of First Instance of Manila against the defendant to recover a proportional part of the loss coming to P8,170.59. Four special defenses were interposed on behalf of the insurance company, one being planted on a violation of warranty F fixing the amount of hazardous goods which might be stored in the insured building. The trial judge in his decision found against the insurance company on all points, and gave judgment in favor of the plaintiff for the sum of P8,188.74. From this judgment the insurance company has appealed, and it is to the first and fourth errors assigned that we would address particular attention.
Considering the result at which we arrive, it is unnecessary for us to discuss three of the four special defenses which were made by the insurance company. We think, however, that it would be a reasonable deduction to conclude that more than 3 per cent of the total value of the merchandise contained in the warehouse constituted hazardous goods, and that this per cent reached as high as 39. We place reliance on the consular invoices and on the testimony of the adjuster, Herridge. Having thus swept to one side all intervening obstacle, the legal question recurs, as stated in the beginning of this decision, of whether or not warranty F was null and void.
To place this question in its proper light, we turn to the policy issued by the Springfield Fire & Marine Insurance Company in favor of the plaintiff. The description of the risk in this policy is as follows:lawphil.net
Ten thousand pesos Philippine Currency. – On general non-hazardous merchandise, chiefly consisting of chucherias, also produce, Cacao, Flour, all the property of the Insured, or held by them in trust, on commission or on joint account with others, or for which he is responsible, while contained during the currency of this policy in the godown, situate No. 643 Calle Reina Regent. . . .
This policy is subject to the hereon attached “Ordinary Short Period Rate Scale”Warranties A & F, Co-insurances Clause “and Three Fourths Loss Clause,” which are forming part of same. Co-insurance declared:
“P20,000. – Sun Insurance Office Ltd. (K & S).” (Emphasis inserted.) Securely pasted on the left hand margin of the face of the policy are five warranties and special clauses. One of them is warranty F, specially referred to on the face of the policy, reading in part as follows:
WARRANTY F
It is hereby declared and agreed that during the currency of this policy no hazardous goods be stored in the Building to which this insurance applies or in any building communicating therewith, provided, always, however, that the Insured be permitted to stored a small quantity of the hazardous goods specified below, but not exceeding in all 3 per cent of the total value of the whole of the goods or merchandise contained in said warehouse, viz; . . . .
The applicable law is found in the Instance Act, Act No. 2427, as amended, section 65 reading: “Every express warranty, made at or before the execution of a policy, must be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy, as making a part of it.” As the Philippine law was taken verbatim from the law of California, in accordance with well settled canons of statutory construction, the court should follow in fundamental points, at least, the construction placed by California courts on a California law. Unfortunately the researches of counsel reveal no authority coming from the courts of California which is exactly on all fours with the case before us. However, there are certain consideration lying at the basis of California law and certain indications in the California decisions which point the way for the decision in this case
Section 65 of the Philippine Insurance Act corresponds to section 2605 of the Civil Cod of California. The comments of the Code Examiners of California disclose that the language of section 2605 was quite different from that under the Code as adopted in 1872. That language was found too harsh as to insurance companies. The Code Examiners’ notes state: “The amendment restores the law as it existed previous to the Code: See Parsons on Maritime Law, 106, and Phillips on Insurance, sec. 756.” The passage referred to in Philips on Insurance, was worded by the author as follows:
“Any express warranty or condition is always a part of the policy, but, like any other part of an express contract, may be written in the margin, or contained in proposals or documents expressly referred to in the policy, and so made a part of it.” The annotator of the Civil Code of California, after setting forth these facts, adds:
. . . The section as it now reads is in harmony with the rule that a warranty may be contained in another instrument than the policy when expressly referred to in the policy as forming a part thereof: . . . .
What we have above stated has been paraphrased from the decision of the California Court of Appeals in the case of Isaac Upham Co. vs. United States Fidelity & Guaranty Co. ( [1922], 211 Pac., 809), and thus discloses the attitude of the California courts. Likewise in the Federal courts, in the case of Conner vs. Manchester Assur. Co. ([1904], 130 Fed., 743), section 2605 of the Civil Code of California came under observation, and it was said that it “is in effect an affirmance of the generally accepted doctrine applicable to such contracts.”
We, therefore, think it wrong to hold that the California law represents a radical departure from the basic principles governing the law of insurance. We are more inclined to believe that the codification of the law of California had exactly the opposite purpose, and that in the language of the Federal court it was but an affirmance of the generally accepted doctrine applicable to such contracts. This being true, we turn to two of such well recognized doctrines. In the first place, it is well settled that a rider attached to a policy is a part of the contract, to the same extent and with like effect as it actually embodied therein. (I Couch, Cyclopedia of Insurance Law, sec. 159.) In the second place, it is equally well settled that an express warranty must appear upon the face of the policy, or be clearly incorporated therein and made a part thereof by explicit reference, or by words clearly evidencing such intention. (4 Couch, Cyclopedia of Insurance Law, sec. 862.)
Section 65 of the Insurance Act and its counterpart, section 265 of the Civil Code of California, will bear analysis as tested by reason and authority. The law says that every express warranty must be “contained in the policy itself.” The word “contained,” according to the dictionaries, means “included,” inclosed,” “embraced,” “comprehended,” etc. When, therefore, the courts speak of a rider attached to the policy, and thus “embodied” therein, or of a warranty “incorporated” in the policy, it is believed that the phrase “contained in the policy itself” must necessarily include such rider and warranty. As to the alternative relating to “another instrument,” “instrument” as here used could not mean a mere slip of paper like a rider, but something akin to the policy itself, which in section 48 of the Insurance Act is defined as “The written instrument, in which a contract of insurance is set forth.” In California, every paper writing is not necessarily an “instrument” within the statutory meaning of the term. The word “instrument has a well defined definition in California, and as used in the Codes invariably means some written paper or instrument signed and delivered by one person to another, transferring the title to, or giving a lien, on property, or giving a right to debt or duty. (Hoag vs. Howard [1880], 55 Cal., 564; People vs. Fraser[1913], 137 Pac., 276.) In other words, the rider, warranty F, is contained in the policy itself, because by the contract of insurance agreed to by the parties it is made to form a part of the same, but is not another instrument signed by the insured and referred to in the policy as forming a part of it.
Again, referring to the jurisprudence of California, another rule of insurance adopted in that State is in point. It is admitted that the policy before us was accepted by the plaintiff. The receipt of this policy by the insured without objection binds both the acceptor and the insured to the terms thereof. The insured may not thereafter be heard to say that he did not read the policy or know its terms, since it is his duty to read his policy and it will be assumed that he did so. In California Jurisprudence, vol. 14, p. 427, from which these statements are taken with citations to California decisions, it is added that it has been held that where the holder of a policy discovers a mistake made by himself and the local agent in attaching the wrong rider to his application, elects to retain the policy issued to him, and neither requests the issuance of a different one nor offers to pay the premium requisite to insure against the risk which he believe the rider to cover, he thereby accepts the policy.
We are given to understand, and there is no indication to the contrary, that we have here a standard insurance policy. We are further given to understand, and there is no indication to the contrary, that the issuance of the policy in this case with its attached rider conforms to well established practice in the Philippines and elsewhere. We are further given to understand, and there is no indication to the contrary, that there are no less than sixty-nine insurance companies doing business in the Philippine Islands with outstanding policies more or less similar to the one involved in this case, and that to nullify such policies would place an unnecessary hindrance in the transaction of insurance business in the Philippines. These are matters of public policy. We cannot believe that it was ever the legislative intention to insert in the Philippine Law on Insurance an oddity, an incongruity, entirely out of harmony with the law as found in other jurisdiction, and destructive of good business practice.
We have studied this case carefully and having done so have reached the definite conclusion that warranty F, a rider attached to the face of the insurance policy, and referred to in contract of insurance, is valid and sufficient under section 65 of the Insurance Act. Accordingly, sustaining the first and fourth errors assigned, and it being unnecessary to discuss the remaining errors, the result will be to reverse the judgment appealed from and to order the dismissal of the complaint, without special pronouncement as to costs in either instance.
Street, Villamor, Ostrand, and Romualdez, JJ., concur.

Separate Opinions
VILLA-REAL, J., dissenting:
I fully concur in the dissenting opinion penned by Justice Imperial, and further say that a rider or slip attached to an insurance policy, though referred to therein as making a part of it, is not one of the forms prescribed by section 65 of the Insurance Law in which an express warranty may be made to appear validly so as to be binding between the insurer and the insured. There are two, and only two forms provided in said section by which an express warranty may be made to appear validly, to wit: by embodiment either in the insurance policy itself or in another instrument signed by the insured and referred to in the policy as making a part of it.
Now the question arises as to whether the rider or slip containing said warranty F attached to the policy in question and referred to therein as making a part thereof is one of the two forms provided in said section 65 of the Insurance Law.
It is admitted that it is not the second form, because not being signed by the insured it does not constitute an instrument. (Hoag vs. Howard [1880], 55 Cal., 564; People vs. Fraser [1913], 137 Pac., 276.)
Is it the first form required by law, that is, is it contained in the policy itself? It is so contended in the majority opinion and authorities are cited in support of such contention.
In 1 Couch, Cyclopedia of Insurance Law, par. 159, it is said that “as a general rule, a rider or slip attached to a policy or certificate of insurance is, prima facie at least, a part of the contract to the same extent, and with like effect, as if actually embodied therein, provided, of course, that it does not violate any statutory inhibition, and has been lawfully, and sufficiently attached, …” (See also 32 Corpus Juris, 1159, par. 270).
Does the attachment of a rider or slip containing an express warranty contravene the provisions of section 65 of the Insurance Law? When the law, in order to protect the insured, requires that an express warranty be contained in the policy or in another instrument referred to therein as making a part thereof, it could not have been its intention to permit that such express warranty be contained in a piece of paper not signed by the insured although it is attached to the policy and referred to therein as making a part thereof, because it would be contrary to the requirement that such express warranty be contained in an instrument signed by the insured. It is a general rule of statutory construction that a law should not be so construed as to produced an absurd result. It would certainly be an absurdity if section 65 of the Insurance Law were construed as requiring that an express warranty be contained only in the policy or in another instrument signed by the insured and referred to therein as making a part thereof for the protection of such insured, and at the same time pertaining that such, express warranty be contained in a piece of paper not signed by the insured but simply attached to the policy and referred to therein as making a part thereof, thus opening the door to fraud, – it being easy to detach such rider or slip and change it with another, – which is precisely what the law is trying to prevent. It will thus be seen that the attachment of a rider or slip containing an express warranty to a policy, although referred to therein as making a part thereof, is contrary to the evident intent and purpose of section 65 of the Insurance Law.
In the case of Isaac Upham Co. vs. United States Fidelity & Guaranty Co. (211 Pac., 809), cited in the majority opinion, the question was whether a warranty contained in an application for insurance, which was not referred to in the policy as making a part thereof, incorporated said warranty in the said policy and was valid. The Supreme Court of California held that it was not, for lack of such reference. Of course an application for insurance is a document signed by the insured, and an express warranty contained therein if referred to in the policy as making a part thereof, will be considered as contained therein in accordance with law.
In the case of Conner vs. Manchester Assur. Co. (130 Feb., 743), also cited in the majority opinion, the question was whether an open policy was a warranty and the Circuit Court of Appeals for the Northern District of California held that it was not, and further said that “section 2605 of the Civil Code of California (from which section 65 of the Insurance Law was taken) was evidently intended to express in statutory form the rule that no express warranty made by the insured shall affect the contract of insurance, unless it be contained in the policy or in the application, or some other instrument signed by the insured and made a part of the contract, and is in effect an affirmance of the generally accepted doctrine applicable to such contracts.” It will be seen from this statement that the court in enumerating the forms in which an express warranty may be express or made to appear does not mention any paper which is not signed by the insured.
The fact that for many years it has been the practice of the insurance companies to use riders or slips of paper containing express warranties without the signature of the insured in violation of the law is no reason why such practice should be permitted to continue when its legality is questioned.
In view of the foregoing consideration, I am constrained to dissent from the opinion of the majority.
IMPERIAL, J., dissenting:
The decision of this case depended principally, but wholly, on the validity of the warranty F, Exhibit A-2. This instrument consist of a slip of paper pasted on the margin of a page of the fire insurance policy. It contains the stipulation that the insured is permitted to store in the building concerned the hazardous goods specified, to an amount not exceeding three per cent of the total value of the merchandise stored. The policy makes reference to this rider as follows: “This policy is subject to the hereon attached `Ordinary Short Period Rate Scale,’ Warranties A and F, Co-insurance clause and `Three Fourths Loss Clause’ which are forming part of the same”; but the rider is not signed by the insured.
Section 65 of Act No. 2427 (Insurance Law) reads as follows:
Every express warranty, made at or before the execution of a policy, must be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy, as making a part of it.
An express warranty, then, made at or before the execution of the policy, like warranty F, is valid only if it is contained in the policy itself, or in another instrument signed by the insured and referred to in the policy as forming a part thereof. Examining warranty F, it may be seen that it does not form an integral part of the policy but appeals on another slip of paper pasted on the policy; it is therefore an instrument other than the policy and comes under the second paragraph provided for in section 65. And, according to this provision, warranty F cannot be valid or binding, for the simple reason that it is not signed by the insured, and has no weight, notwithstanding the fact that reference is made to it in a general way in the body of the policy. This reference is not equivalent to including it in the policy, for the simple reason, as we have said, that it was made in a general way. It is mentioned simply as warranty F, without giving any idea of its contents. The term of the rider might be changed and the heading “Warranty F” retained, and, following the appellant’s line of reasoning, it might, with equal plausibility, be defended as the express warranty agreed upon, because it was headed “Warranty F.” It is just such alterations as this that the law seeks to prevent in requiring that all warranties of the kind are to be signed by the insured and referred to in the policy.
Setting aside for the moment the legal question of the validity of the warranty, and assuming warranty F to be valid, we have to consider another circumstance which indicates that the insured did not violate it. The trial court found that at the time of the fire, the inflammable goods in the warehouse or building of the insured did not exceed the amount permitted by the insurance company, that is, three per cent of the total value of the merchandise stored. This finding is borne out by the evidence, and there is no reason for changing it and making another.
For these reasons, I believe the judgment appealed from should be affirmed in its entirely.
Avanceña, C.J., concurs.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-28501 September 30, 1982
PEDRO ARCE, plaintiff-appellee,
vs.
THE CAPITAL INSURANCE & SURETY CO., INC., defendant-appellant.

ABAD SANTOS, J.:
In Civil Case No. 66466 of the Court of First Instance of Manila, the Capital Insurance and Surety Co., Inc., (COMPANY) was ordered to pay Pedro Arce (INSURED) the proceeds of a fire insurance policy. Not satisfied with the decision, the company appealed to this Court on questions of law.
The INSURED was the owner of a residential house in Tondo, Manila, which had been insured with the COMPANY since 1961 under Fire Policy No. 24204. On November 27, 1965, the COMPANY sent to the INSURED Renewal Certificate No. 47302 to cover the period December 5, 1965 to December 5, 1966. The COMPANY also requested payment of the corresponding premium in the amount of P 38.10.
Anticipating that the premium could not be paid on time, the INSURED, thru his wife, promised to pay it on January 4, 1966. The COMPANY accepted the promise but the premium was not paid on January 4, 1966. On January 8, 1966, the house of the INSURED was totally destroyed by fire.
On January 10, 1966, INSURED’s wife presented a claim for indemnity to the COMPANY. She was told that no indemnity was due because the premium on the policy was not paid. Nonetheless the COMPANY tendered a check for P300.00 as financial aid which was received by the INSURED’s daughter, Evelina R. Arce. The voucher for the check which Evelina signed stated that it was “in full settlement (ex gratia) of the fire loss under Claim No. F-554 Policy No. F-24202.” Thereafter the INSURED and his wife went to the office of the COMPANY to have his signature on the check Identified preparatory to encashment. At that time the COMPANY reiterated that the check was given “not as an obligation, but as a concession” because the renewal premium had not been paid, The INSURED cashed the check but then sued the COMPANY on the policy.
The court a quo held that since the COMPANY could have demanded payment of the premium, mutuality of obligation requires that it should also be liable on its policy. The court a quo also held that the INSURED was not bound by the signature of Evelina on the check voucher because he did not authorize her to sign the waiver.
The appeal is impressed with merit.
The trial court cited Capital Insurance and Surety Co., Inc. vs. Delgado, L-18567, Sept. 30, 1963, 9 SCRA 177, to support its first proposition. In that case, this Court said:
On the other hand, the preponderance of the evidence shows that appellee issued fire insurance policy No. C-1137 in favor of appellants covering a certain property belonging to the latter located in Cebu City; that appellants failed to pay a balance of P583.95 on the premium charges due, notwithstanding demands made upon them. As with the issuance of the policy to appellants the same became effective and binding upon the contracting parties, the latter can not avoid the obligation of paying the premiums agreed upon. In fact, appellant Mario Delgado, in a letter marked in the record as Exhibit G, expressly admitted his unpaid account for premiums and asked for an extension of time to pay the same. It is clear from the foregoing that appellants are under obligation to pay the amount sued upon. (At p. 180.)
Upon the other hand, Sec. 72 of the Insurance Act, as amended by R.A. No. 3540 reads:
SEC. 72. An insurer is entitled to payment of premium as soon as the thing insured is exposed to the perils insured against, unless there is clear agreement to grant credit extension for the premium due. No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid ” (Italics supplied.) (p. 11, Appellant’s Brief.)
Morever, the parties in this case had stipulated:
IT IS HEREBY DECLARED AND AGREED that not. withstanding anything to the contrary contained in the within policy, this insurance will be deemed valid and binding upon the Company only when the premium and documentary stamps therefor have actually been paid in full and duly acknowledged in an official receipt signed by an authorized official/representative of the Company, ” (pp. 45-46, Record on Appeal.)
It is obvious from both the Insurance Act, as amended, and the stipulation of the parties that time is of the essence in respect of the payment of the insurance premium so that if it is not paid the contract does not take effect unless there is still another stipulation to the contrary. In the instant case, the INSURED was given a grace period to pay the premium but the period having expired with no payment made, he cannot insist that the COMPANY is nonetheless obligated to him.
It is to be noted that Delgado was decided in the light of the Insurance Act before Sec. 72 was amended by the addition of the underscored portion, supra, Prior to the amendment, an insurance contract was effective even if the premium had not been paid so that an insurer was obligated to pay indemnity in case of loss and correlatively he had also the right to sue for payment of the premium. But the amendment to Sec. 72 has radically changed the legal regime in that unless the premium is paid there is no insurance.
With the foregoing, it is not necessary to dwell at length on the trial court’s second proposition that the INSURED had not authorized his daughter Evelina to make a waiver because the INSURED had nothing to waive; his policy ceased to have effect when he failed to pay the premium.
We commiserate with the INSURED. We are wen aware that many insurance companies have fallen into the condemnable practice of collecting premiums promptly but resort to all kinds of excuses to deny or delay payment of just claims. Unhappily the instant case is one where the insurer has the law on its side.
WHEREFORE, the decision of the court a quo is reversed; the appellee’s complaint is dismissed. No special pronouncement as to costs.
SO ORDERED.
Barredo (Chairman), Aquino, Concepcion, Jr., Guerrero, De Castro and Escolin, JJ., concur.

Insurance Case Digest: Capital Insurance & Surety Co. Inc. V. Plastic Era Co. Inc (1975)
G.R.No. L-22375 July 18, 1975
Lessons Applicable: Estoppel and credit extension (Insurance)
Laws Applicable: Article 1249 of the New Civil Code
FACTS:
* December 17, 1960: Capital Insurance & Surety Co., Inc. delivered to the respondent Plastic Era Manufacturing Co., Inc. its open Fire Policy insuring its building, equipments, raw materials, products and accessories located at Sheridan Street, Mandaluyong, Rizal between December 15, 1960 1 pm – December 15, 1961 1 pm up to P100,000 but Plastic Era did not pay the premium
* January 8, 1961: Plastic Era delivered to Capital Insurance its partial payment through check P1,000 postdated January 16, 1961
* February 20, 1961: Capital Insurance tried to deposit the check but it was dishonored due to lack of funds. According to the records, on January 19, 1961 Plastic Era has had a bank balance of P1,193.41
* January 18, 1961: Plastic Era’s properties were destroyed by fire amounting to a loss of P283,875. The property was also insured to Philamgen Insurance Company for P200K.
* Capital Insurance refused Plastic Era’s claim for failing to pay the insurance premium
* CFI: favored Capital Insurance
* CA: affirmed
ISSUE: W/N there was a valid insurance contract because there was an extention of credit despite failing to encash the check payment
HELD: YES. Affirmed
* Article 1249 of the New Civil Code
* The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired
* Capital Insurance accepted the promise of Plastic Era to pay the insurance premium within 30 days from the effective date of policy. Considering that the insurance policy is silent as to the mode of payment, Capital Insurance is deemed to have accepted thepromissory note in payment of the premium. This rendered the policy immediately operative on the date it was delivered.
* By accepting its promise to pay the insurance premium within thirty (30) days from the effectivity date of the policy – December 17, 1960 Capital Insurance had in effect extended credit to Plastic Era.
* Where credit is given by an insurance company for the payment of the premium it has no right to cancel the policy for nonpayment except by putting the insured in default and giving him personal notice
* Having held the check for such an unreasonable period of time, Capital Insurance was estopped from claiming a forfeiture of its policy for non-payment even if the check had been dishonored later.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. L-22375 July 18, 1975
THE CAPITAL INSURANCE & SURETY CO., INC., petitioner,
vs.
PLASTIC ERA CO., INC., AND COURT OF APPEALS, respondents.
Salcedo, Del Rosario, Bito, Misa and Lozada for petitioner.
K.V. Faylona for Private respondent.

MARTIN, J.:
Petition for review of a decision of the Court of Appeals affirming the decision of the Court of First Instance of Manila in Civil Case No. 47934 entitled “Plastic Era Manufacturing Co., Inc. versus The Capital Insurance and Surety Co., Inc.”
On December 17, 1960, petitioner Capital Insurance & Surety Co., Inc. (hereinafter referred to as Capital Insurance) delivered to the respondent Plastic Era Manufacturing Co., Inc., (hereinafter referred to as Plastic Era) its open Fire Policy No. 22760 1 wherein the former undertook to insure the latter’s building, equipments, raw materials, products and accessories located at Sheridan Street, Mandaluyong, Rizal. The policy expressly provides that if the property insured would be destroyed or damaged by fire after the payment of the premiums, at anytime between the 15th day of December 1960 and one o’clock in the afternoon of the 15th day of December 1961, the insurance company shall make good all such loss or damage in an amount not exceeding P100,000.00. When the policy was delivered, Plastic Era failed to pay the corresponding insurance premium. However, through its duly authorized representative, it executed the following acknowledgment receipt:
This acknowledged receipt of Fire Policy) NO. 22760 Premium
x x x x x) (I promise to pay)
(P2,220.00) (has been paid)
THIRTY DAYS AFTER on effective date ———————
(Date)
On January 8, 1961, in partial payment of the insurance premium, Plastic Era delivered to Capital Insurance, a check 2 for the amount of P1,000.00 postdated January 16, 1961 payable to the order of the latter and drawn against the Bank of America. However, Capital Insurance tried to deposit the check only on February 20, 1961 and the same was dishonored by the bank for lack of funds. The records show that as of January 19, 1961 Plastic Era had a balance of P1,193.41 with the Bank of America.
On January 18, 1961 or two days after the insurance premium became due, at about 4:00 to 5:00 o’clock in the morning, the property insured by Plastic Era was destroyed by fire. In due time, the latter notified Capital Insurance of the loss of the insured property by fire 3 and accordingly filed its claim for indemnity thru the Manila Adjustment Company. 4 The loss and/or damage suffered by Plastic Era was estimated by the Manila Adjustment Company to be P283,875. However, according to the records the same property has been insured by Plastic Era with the Philamgen Insurance Company for P200,000.00.
In less than a month Plastic Era demanded from Capital Insurance the payment of the sum of P100,000.00 as indemnity for the loss of the insured property under Policy No. 22760 but the latter refused for the reason that, among others, Plastic Era failed to pay the insurance premium.
On August 25, 1961, Plastic Era filed its complaint against Capital Insurance for the recovery of the sum of P100,000.00 plus P25,000.00 for attorney’s fees and P20,000.00 for additional expenses. Capital Insurance filed a counterclaim of P25,000.00 as and for attorney’s fees.
On November 15, 1961, the trial court rendered judgment, the dispositive portion of which reads as follows:
WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendant for the sum of P88,325.63 with interest at the legal rate from the filing of the complaint and to pay the costs.
From said decision, Capital Insurance appealed to the Court of Appeals.
On December 5, 1963, the Court of Appeals rendered its decision affirming that of the trial court. Hence, this petition for review by certiorari to this Court.
Assailing the decision of the Court of Appeals petitioner assigns the following errors, to wit:
1. THE COURT OF APPEALS ERRED IN SENTENCING PETITIONER TO PAY PLASTIC ERA THE SUM OF P88,325.63 PLUS INTEREST, AND COST OF SUIT, ALTHOUGH PLASTIC ERA NEVER PAID PETITIONER THE INSURANCE PREMIUM OF P2,220.88.
2. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER SHOULD HAVE INSTITUTED AN ACTION FOR RESCISSION OF THE INSURANCE CONTRACT ENTERED INTO BETWEEN IT AND PLASTIC ERA BEFORE PETITIONER COULD BE RELIEVED OF RESPONSIBILITY UNDER ITS FIRE INSURANCE POLICY.
3. WE HAVE SHOWN ABOVE THAT PLASTIC ERA’S ACTION WAS UNWARRANTED AND THAT THE PETITIONER SHOULD HAVE BEEN ABSOLVED FROM THE COMPLAINT, AND CONSEQUENTLY, THE LOWER COURT SHOULD HAVE AWARDED PETITIONER A REASONABLE SUM AND AS ATTORNEY’S FEES P25,000.00.
The pivotal issue in this petition is whether or not a contract of insurance has been duly perfected between the petitioner, Capital Insurance, and respondent Plastic Era. Necessarily, the issue calls for a correct interpretation of the insurance policy which states:
This Policy of Insurance Witnesseth That in consideration of PLASTIC ERA MANUFACTURING COMPANY, INC. hereinafter called the Insured, paying to the Capital Insurance & Surety Co., Inc., hereinafter called the Company, the sum of PESOS TWO THOUSAND ONE HUNDRED EIGHTY EIGHT the premium for the first period hereinafter mentioned, for insuring against Loss or Damage by only Fire or Lightning, as hereinafter appears, the Property hereinafter described and contained, or described herein and not elsewhere, in the several sums following namely: PESOS ONE HUNDRED THOUSAND ONLY, PHILIPPINE CURRENCY; … THE COMPANY HEREBY AGREES with the Insured but subject to the terms and conditions endorsed or otherwise expressed hereon, which are to be taken as part of this Policy), that if the Property described, or any part thereof, shall be destroyed or damaged by Fire or Lightning after payment of the Premiums, at anytime between the 15th day of December One Thousand Nine Hundred and Sixty and 1 ‘clock in the afternoon of the 15th day of December One Thousand Nine Hundred and Sixty-One of the last day of any subsequent period in respect of which the insured, or a successor in interest to whom the insurance is by an endorsement hereon declared to be or is otherwise continued, shall pay to the Company and the Company shall accept the sum required for the renewal of this Policy, the Company will pay or make good all such loss or Damage, to an amount not exceeding during any one period of the insurance in respect of the several matters specified, the sum; set opposite thereto respectively, and not exceeding the whole sum of PESOS, ONE HUNDRED THOUSAND ONLY, PHIL. CUR….
In clear and unequivocal terms the insurance policy provides that it is only upon payment of the premiums by Plastic Era that Capital Insurance agrees to insure the properties of the former against loss or damage in an amount not exceeding P100,000.00.
The crux of the problem then is whether at the time the insurance policy was delivered to Plastic Era on December 17, 1960, the latter was able to pay the stipulated premium. It appears on record that on the day the insurance policy was delivered, Plastic Era did not pay the Capital Insurance, but instead executed an acknowledgment receipt of Policy No. 22760. In said receipt Plastic Era promised to pay the premium within thirty (30) days from the effectivity date of the policy on December 17, 1960 and Capital Insurance accepted it. What then is the effect of accepting such acknowledgment receipt from the Plastic Era? Did the Capital Insurance mean to agree to make good its undertaking under the policy if the premium could be paid on or before January 16, 1961? And what would be the effect of the delivery to Capital Insurance on January 8, 1961 of a postdated check (January 16, 1961) in the amount of P1,000.00, payable to the order of the latter? Could not this have been considered a valid payment of the insurance premium? Pursuant to Article 1249 of the New Civil Code:
xxx xxx xxx
The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.
xxx xxx xxx
In the meantime, the action derived from the original obligation shall be held in abeyance.
Under this provision the mere delivery of a bill of exchange in payment of a debt does not immediately effect payment. It simply suspends the action arising from the original obligation in satisfaction of which it was delivered, until payment is accomplished either actually or presumptively. 5 Tender of draft or check in order to effect payment that would extinguish the debtor’s liability should be actually cashed. 6 If the delivery of the check of Plastic Era to Capital Insurance were to be viewed in the light of the foregoing, no payment of the premium had been effected, for it is only when the check is cashed that it is said to effect payment.
Significantly, in the case before Us the Capital Insurance accepted the promise of Plastic Era to pay the insurance premium within thirty (30) days from the effective date of policy. By so doing, it has implicitly agreed to modify the tenor of the insurance policy and in effect, waived the provision therein that it would only pay for the loss or damage in case the same occurs after the payment of the premium. Considering that the insurance policy is silent as to the mode of payment, Capital Insurance is deemed to have accepted the promissory note in payment of the premium. This rendered the policy immediately operative on the date it was delivered. The view taken in most cases in the United States:
… is that although one of conditions of an insurance policy is that “it shall not be valid or binding until the first premium is paid”, if it is silent as to the mode of payment, promissory notes received by the company must be deemed to have been accepted in payment of the premium. In other words, a requirement for the payment of the first or initial premium in advance or actual cash may be waived by acceptance of a promissory note … 7
Precisely, this was what actually happened when the Capital Insurance accepted the acknowledgment receipt of the Plastic Era promising to pay the insurance premium within thirty (30) days from December 17, 1960. Hence, when the damage or loss of the insured property occurred, the insurance policy was in full force and effect. The fact that the check issued by Plastic Era in partial payment of the promissory note was later on dishonored did not in any way operate as a forfeiture of its rights under the policy, there being no express stipulation therein to that effect.
In the absence of express agreement or stipulation to that effect in the policy, the non-payment at maturity of a note given for and accepted as premium on a policy does not operate to forfeit the rights of the insured even though the note is given for an initial premium, nor does the fact that the collection of the note had been enjoined by the insured in any way affect the policy. 8
… If the check is accepted as payment of the premium even though it turns out to be worthless, there is payment which will prevent forfeiture. 9
By accepting its promise to pay the insurance premium within thirty (30) days from the effectivity date of the policy – December 17, 1960 Capital Insurance had in effect extended credit to Plastic Era. The payment of the premium on the insurance policy therefore became an independent obligation the non-fulfillment of which would entitle Capital Insurance to recover. It could just deduct the premium due and unpaid upon the satisfaction of the loss under the policy. 10 It did not have the right to cancel the policy for nonpayment of the premium except by putting Plastic Era in default and giving it personal notice to that effect. This Capital Insurance failed to do.
… Where credit is given by an insurance company for the payment of the premium it has no right to cancel the policy for nonpayment except by putting the insured in default and giving him personal notice…. 11
On the contrary Capital Insurance had accepted a check for P1,000.00 from Plastic Era in partial payment of the premium on the insurance policy. Although the check was due for payment on January 16, 1961 and Plastic Era had sufficient funds to cover it as of January 19, 1961, Capital Insurance decided to hold the same for thirty-five (35) days before presenting it for payment. Having held the check for such an unreasonable period of time, Capital Insurance was estopped from claiming a forfeiture of its policy for non-payment even if the check had been dishonored later.1äwphï1.ñët
Where the check is held for an unreasonable time before presenting it for payment, the insurer may be held estopped from claiming a forfeiture if the check is dishonored. 12
Finally, it is submitted by petitioner that:
We are here concerned with a case of reciprocal obligations, and respondent having failed to comply with its obligation to pay the insurance premium due on the policy within thirty days from December 17, 1960, petitioner was relieved of its obligation to pay anything under the policy, without the necessity of first instituting an action for rescission of the contract of insurance entered into by the parties.
But precisely in this case, Plastic Era has complied with its obligation to pay the insurance premium and therefore Capital Insurance is obliged to make good its undertaking to Plastic Era.
WHEREFORE, finding no reversible error in the decision appealed from, We hereby affirm the same in toto. Costs against the petitioner.
SO ORDERED.
Castro, Makasiar, Esguerra and Muñoz Palma, JJ., concur.
Teehankee, J., is on leave.

Footnotes
1 Exhibit “A”
2 Exhibit 4.
3 Exhibit 1.
4 Exhibit 2.
5 U.S. vs. Badoya, 14 Phil. 397.
6 Hidalgo et al. vs. Tuazon, Inc., 101 Phil. 363.
7 Sec. 409, 29 Am. Jur., p. 346.
8 Hodgson v. Marine Ins. Co. (U.S.) 5 Cranch 100, 3 L Ed. 48; Massachusetts Ben L. Asso. v. Robinson, 104 Ga 256, 30 SE 918; Union Trust Co. v. Chicago Nat. L. Ins. Co., 267 Ill. App. 470; Iner-Southern L. Ins. Co. v. Duff, 184 Ky 227, 211 SW 738; Trade Ins. Co. v. Barracliff, 45 NJL 543; Arkansas Ins. Co. v. Cox, 21 Okla. 873, 98 P 552; 43 Am Jur 2d p. 633.
9 29 Am. Jur. p. 342.
10 29-A Am. Jur. New “Insurance”, Sec. 587, op. 882 n2; 29-A Am. Jur. New “Insurance”, Sec. 1541, p. 645 n20.
11 Fernum v. Phoenix Ins. Co., 83 Cal. 246, 23 p. 869; 43 Am. Jur. p. 579.
12 Dulberg v. Equitable Life Assur. Soc. 277 NY 17, 12 NE 2d 238; 43 Am. Jur. 2d p. 1059.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-33131 December 13, 1930
EMILIO GONZALES LA O, plaintiff-appellee,
vs.
THE YEK TONG LIN FIRE AND MARINE INSURANCE CO., LTD., defendant-appellant.
Araneta and Zaragosa for appellant.
Feria and La O for appellee.

VILLAMOR, J.:
This is an action to recover of the defendant the Yek Tong Lin Fire & Marine Insurance Co., Ltd., the amount of two insurance policies totaling P100,000 upon leaf tobacco belonging to the plaintiff, which was damaged by the fire that destroyed the building on Soler Street No. 188, where said tobacco was stored, on January 11, 1928.
The defendant filed a general and specific denial of each and every allegation of the complaint, set up three special defenses, and prayed to be absolved from the complaint with costs against the plaintiff.
After the case was tried, the court below rendered judgment as follows:
In this case and in Nos. 334568, and 33480 of this court, which, by agreement of the interested parties, were jointly tried, the plaintiff demands P290,000 from the defendant assurance companies, alleging that to be the amount of the insurance on his leaf tobacco which was damaged by the fire that destroyed the warehouse at No. 188 Soler Street, Manila, where it was stored, on January 11, 1928, the plaintiff’s claim against the herein defendant, the Yek Tong Lin Fire & Marine Insurance Co. being for P100,000, and against the defendants in the three other cases mentioned above, for P190,000.
After the plaintiff had presented his evidence, the defendant companies in cases Nos. 33458, 33868, and 33480, offered to compromise with him by paying eighty-five per cent of his claim against them. In view of the fact that said defendants had in their answer raised the question of warranties A and G of the plaintiff’s policies, providing that the building used for the effects insured would not be occupied by any other lessee, nor would be used for the deposit of other goods, without the consent of said defendants, and inasmuch as the latter alleged in their answer that the owner of the burnt building had leased the warehouse to several persons for the storage of sundry articles, the plaintiff had to accept the proposed compromise, and in consequence thereof, the three cases aforesaid were dismissed.
The present case followed the usual course of procedure because the plaintiffs refused to accept the compromise which, in the same terms as those made by the defendants in the three cases mentioned, was proposed to him by the defendant the Yek Tong Lin Fire & Marine Insurance Company, the plaintiff contending that said defendant did not, nor could, raise the question of warranties A and G heretofore mentioned for the simple reason that it was the defendant itself, as owner, who had leased the building which later was destroyed by fire, to another person after having already ceded a portion of it to said plaintiff.
The only question to be determined, having been raised in the defendant’s answer – both parties agreeing that the plaintiff insured his leaf tobacco with the defendant assurance company, and that said goods were damaged by the fire which destroyed the warehouse where they were stored, on January 11, 1928 – is whether said goods were worth what the plaintiff claims, that is, about equal to the amount for which they were insured in the four above mentioned assurance companies, including the defendant in this case.
The plaintiff has conclusively shown by the Official Register Book (Exhibit 1) and the Official Guide (Exhibit J), furnished by the Bureau of Internal Revenue, and kept under the supervision thereof in the usual form, in accordance with articles 10, 34 to 38 of the Regulations of the same promulgated under No. 17, by the Secretary of Finance; the Stock Book for recording the quantity of tobacco, Exhibit K, kept by the plaintiff and presented as part of the testimony of witnesses Claveria, Bonete, and Leoncio Jose; the testimony of Estanislao Lopez, Inspector of Internal Revenue, and the latter’s report (Exhibit N), submitted to the Collector of Internal Revenue in pursuance of article 33 of the aforementioned Regulations; the tobacco invoices of stock damaged by the fire, Exhibits L and L-1 to L-20; and by the testimony of Clemente Uson who went over the plaintiff’s books as auditor and public accountant, and also prepared Exhibits T and U, attached to the record, that the plaintiff had in the warehouse at No. 188 Soler at the time of the fire, not less, but rather more, than 6,200 bales of leaf tobacco worth over P300,000, which is of course more than the sum total of all the insurances taken out with the defendant herein and the defendants in the three aforementioned cases Nos. 33458, 33868, and 33480.lawphi1>net
The reason why the entry showing that 258 bales of tobacco had been removed from the warehouse, appearing in the Official Register Book, Exhibit I, was not posted in the Stock Book, Exhibit K, has been satisfactorily explained by the plaintiff’s witnesses, who stated that it was due to the fact that there was no time to post it in the Stock Book, because the fire took place and the plaintiff told them not to touch, and to make no further entries in the books. Witness White, the defendant company’s adjuster, who carefully examined then plaintiff’s books not only immediately after the fire, but also during the hearing of this case, seems not to have found any irregularity therein; at least he said nothing on the point when he took the witness stand. On the contrary, in his report Exhibit UU sent to the defendant herein in his capacity as adjuster, appointed by the latter, and in Exhibits WW and XX, admitted by the Yek Tong Lin Ins. Co., Ltd., he admitted that the leaf tobacco belonging to the plaintiff in the warehouse when the fire took place exceeded, in quantity and value, the amount of the insurance.
The defendant did not present evidence to rebut the plaintiff’s evidence, but only presented witness Rowlands, whose testimony or opinion as to the probable number of bales of tobacco in the warehouse at the date of the fire does not deserve serious consideration, not only because of the plaintiff’s evidence, but because his opinion or estimate is based solely upon photographs of the place taken after the fire.
In view of the foregoing, the court hereby sentences the defendant the Yek Tong Lin Fire and Marine Insurance Company, Ltd., to pay the plaintiff Emilio Gonzales La O, the amount of one hundred thousand pesos (P100,000), for which it had accepted the insurance on the leaf tobacco belonging to said plaintiff, damaged by the fire which destroyed the warehouse at No. 188 Soler Street, where it was stored, on January 11, 1928, and legal interest upon said amount from June 27, 1928, when the complaint was filed in this case, plus the costs.
So ordered.
Manila, P. I., this 24th day of December, 1929.
ANACLETO DIAZ
Judge. The defendant duly appealed from this judgment, alleging that the trial court erred in making reference to the settlement arrived at by the plaintiff and other insurance companies, and in declaring that the only question involved in the case is whether or not the tobacco damaged by the fire is worth at least P290,000.
There is no merit in these assignments of error. Since the settlement between the plaintiff and the other defendant companies was reached after the plaintiff had presented his evidence, and as those three cases were tried jointly with the instant case, there is no valid reason why the trial court should not refer to it in deciding this case. Furthermore, the court’s holding here assigned as error, granting there were other incidental matters to be decided by the court, does not in itself constitute a reversible error.
In the third assignment of error, the defendant contends that the plaintiff cannot recover under the policy as he has failed to prove that the Bank of the Philippine Islands, to whom the policy was made payable, no longer has any rights and interests in it. It should be noted that the defendant did not in its answer allege defect of parties plaintiff, and, besides, it does not appear that the plaintiff ceded to the bank all his rights or interests in the insurance, the note attached to the policies merely stating: “There shall be paid to the Bank of the Philippine Islands an indemnity for any loss caused by fire, according to the interest appearing in its favor.” And the fact that the plaintiff himself presented in evidence the policies mortgaged to the Bank of the Philippine Islands gives rise to the presumption that the debt thus secured has been paid, in accordance with article 1191 of the Civil Code.
Corpus Juris, volume 26, pages 483 et seq., states:
Insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon. Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of another person named or unnamed, and although it is expressly made payable to another as his interest may appear or otherwise. Although a policy issued to a mortgagor is taken out for the benefit of the mortgagee and is made payable to him, yet the mortgagor may sue thereon in his own name, especially where the mortgagee’s interest is less than the full amount recoverable under the policy, . . . .
And in volume 33, page 82, of the same work, we read the following:
Insured may be regarded as the real party in interest, although he has assigned as collateral security any judgment he may obtain.
It is also contended that the trial court erred in not declaring that in as much as the plaintiff failed to notify the defendant corporation in writing, of other insurance policies obtained by him, he has violated article 3 of the conditions of the policies in question, thereby rendering these policies null and void. Article 3 of the conditions of the policies in question prescribes:
ART. 3. Any insurance in force upon all or part of the things insured must be declared in writing by the insured and he should cause the company to insert or mention it in the policy, and without such requisite said policy will be regarded as null and void, and the assured deprived of all rights of indemnity in case of loss.
The following clause has been inserted with a typewriter in the policies: “Subject to clauses G and A and other insurances with a special short period attached to this policy.” And attached to said policies issued by the defendant there is a sheet of “Other insurances” with the amount and the assurance companies in blank, which, according to the appellee, constitutes a notification that there were other insurances existing at the time.
In the case of Benedict vs. Ocean Insurance Co. (31 N.Y., 391-393), the construction of the clause, “privilege for $4,500 additional insurance,” was discussed. One of the printed clauses of the policy reads as follows:
If said assured, or his assigns, shall hereafter make any other insurance upon the same property, and shall not, with all reasonable diligence, give notice to this corporation, and have the same indorsed on this instrument, or otherwise acknowledged by them, in writing, this policy shall cease and be of no further effect.
The Supreme Court of New York held that the words “Privilege for $4,500 additional insurance” made it unnecessary for the assured to inform the insurer of any other policy up to that amount.
In the case cited the same goods insured by the defendant company were reinsured to the amount of $4,500 in accordance with the clause “privilege for $4,500 additional insurance;” but in the instant case it may be said that the tobacco insured in the other companies was different from that insured with the defendant, since the number of bales of tobacco in the warehouse greatly exceeded that insured with the defendant and the other companies put together. And according to the doctrine enunciated in 26 Corpus Juris, 188, “to be insurance of the sort prohibited the prior policy must have been insurance upon the same subject matter, and upon the same interest therein.
Furthermore, the appellant cannot invoke the violation of article 3 of the conditions of the insurance policies for the first time on appeal, having failed to do so in its answer; besides, as the appellee correctly contends in his brief, Guillermo Cu Unjieng, who was then president and majority shareholder of the appellant company, the Yek Tong Lin Fire & Marine Insurance Co., knew that there were other insurances, at least from the attempt to raise the insurance premium on the warehouse and the appellee’s tobacco deposited therein to 1 per centum, and it was later reduced upon petition of the appellant itself and other assurance companies to 0.75 per centum presented to the association of assurance companies in the year 1927, and notwithstanding this, said appellant did not rescind the insurance policies in question, but demanded and collected from the appellee the increased premium.
That the defendant had knowledge of the existence of other policies obtained by the plaintiff from other insurance companies, is specifically shown by the defendant’s answer wherein it alleges, by way of special defense, the fact that there exist other policies issued by the companies mentioned therein. If, with the knowledge of existence of other insurances which the defendant deemed violations of the contract, it has preferred to continue the policy, its action amounts to a waiver of the annulment of the contract, in accordance with the following doctrine in 19 Cyc., 791, 792:.
FAILURE TO ASSERT FORFEITURE – IN GENERAL. – While the weight of authority is that a policy conditioned to become void upon a breach of a warranty is void ipso facto upon such a breach without formal proceedings on the part of the insurer, yet it is true that such conditions are inserted for the benefit of the insurer and may be waived, and that the insurer may elect to continue the policy despite the breach. If it does the policy is revived and restored. Its failure to assert a forfeiture therefore is at least evidence tending to show a waiver thereof. Many authorities go further, however, and hold that the failure to assert a forfeiture after knowledge of a ground thereof will amount of itself to waiver. . . .
The fifth and sixth assignments of error refer to the quantity of tobacco in the Soler warehouse at the time of the fire, which, according to the appellant, did not exceed 4,930 bales. As may be seen, these assignments of error by the appellant involved purely questions of fact, and it is for this court to decide whether the findings of the trial court are supported by the evidence. The judgment appealed from sets forth clearly the evidence presented to the court in order to determine the quantity of tobacco in the warehouse at the time of the fire. We have studied the evidence aforesaid, are fully convinced that the court’s findings are well supported by the same. Inasmuch as it has not, in our opinion, been shown that the trial judge overlooked any fact, which, if duly considered would have change the result of the case, we do not feel justified in altering of modifying his findings.
Finally, the appellant contends that the trial court erred in arriving at the damages that plaintiff may recover under the policies in question by the cost price of the tobacco damaged by the fire, instead of computing the same on the market price of the said tobacco at the time of the fire; and in declaring that the tobacco damaged was worth more than P300,000. This error is not well taken, for it is clear that the cost price is competent evidence tending to show the value of the article in question. And it was so held the case of Glaser vs. Home Ins. Co. (47 Misc. Rep., 89; 93 N. Y. Supp., 524; Abbott’s Proof of Facts, 3d ed., p. 847), where it was declared that the cost of the goods destroyed by fire is some evidence of value, in an action against the insurance company. Exhibits L to L-20, which are invoices for tobacco purchased by the appellee, and the testimony of the public accountant Clemente Uson, who went over them and the rest of the appellee’s books after the fire, taken in connection with reports T and Z, adduced as part of his testimony, show that the cost price of each bale of tobacco belonging to the appellee, damaged by the fire, was P51.8544, which, multiplied by 6,264, the number of bales, yields a total of over P320,000.
The adjusters of the appellant, White & Page, in ascertaining the market price of the plaintiff’s tobacco deposited in the burnt warehouse, taking the information furnished by the Tabacalera and by M. Pujalte, S. en C., as a basis, thus conclude their report: “We therefore are obliged to the conclusion that the value of the tobacco destroyed was not less than P290,000.” And, indeed, said adjusters, in behalf of the appellant, appraised the appellee’s tobacco assured and damaged by the fire at P303,052.32, collecting from the proceeds of the sale of the tobacco saved from the fire P3,000, the appellants share in proportion to the to the insurance of P100,000 belonging to it, and P190,000 belonging to the other assurance companies, and considered the appellee himself as his own assurer in the amount of P13,052.32 which was the difference between the total value of the tobacco damaged and the total amount of the insurance, P290,000, for which reason the appellee received P129.21, as his proportionate share of the tobacco saved, as shown by Exhibits UU, WW, and XX.
Hence the last assignment of error is without merit.
Wherefore, the judgment appealed from is in accordance with law, and must be, as it is hereby, affirmed, with costs against the appellant. So ordered.
Johnson, Street, Malcolm, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.

GONZALEZ LAO V. YEK TONG LIN FIRE & MARINE INSURANCE – INSURANCE PREMIUMS
55 PHIL 386
Facts:
> Gonzales was issued 2 fire insurance policies by Yek for 100T covering his leaf tobacco prducts.
> They were stored in Gonzales’ building on Soler St., which on Jan. 11, 1928, burned down.
> Art. 3 of the Insurance policies provided that: “Any insurance in force upon all or part of the things unsured must be declared in writing by the insured and he (insured) should cause the company to insert or mention it in the policy. Without such requisite, such policy will be regarded as null and void and the insured will be deprived of all rights of indemnity in case of loss.”
> Notwithstanding said provision, Gonzales entered into other insurance contracts. When he sought to claim from Yek after the fire, the latter denied any liability on the ground of violation of Art. 3 of the said policies.
> Gonzales however proved that the insurer knew of the other insurance policies obtained by him long efore the fire, and the insurer did NOT rescind the insurance polices in question but demanded and collected from the insured the premiums.

Issue:
Whether or not Yek is still entitled to annul the contract.

Held:
NO.
The action by the insurance company of taking the premiums of the insured notwithstanding knowledge of violations of the provisions of the policies amounted to waiver of the right to annul the contract of insurance.

MALAYAN INSURANCE CO., INC. (MICO),
petitioner, vs.
GREGORIA CRUZ ARNALDO, in her capacity as theINSURANCE COMMISSIONER, and CORONACION PINCA,
respondents.
G.R. No. L-67835 October 12, 1987Facts of the Case:
On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private respondent, P14,000.00 effectiveJuly 22, 1981, until July 22, 1982.On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent thecorresponding notice to Pinca.On December 24, 1981, payment of the premium for Pinca was received by Domingo Adora, agent of MICO.On January 15, 1982, Adora remitted this payment to MICO,together with other payments.

On January 18, 1982, Pinca’s property was completely burned.On February 5, 1982, Pinca’s payment was returned by MICO to Adora on the ground that her policy had beencancelled earlier. But Adora refused to accept it.In due time, Pinca made the requisite demands for payment, which MICO rejected. She then went to the InsuranceCommission. It is because she was ultimately sustained by the public respondent that the petitioner has come to usfor relief.
Issue of the Case:
Whether or not petitioner liable, for it alleged that the insurance policy was already cancelled due to non-payment of premium.
Ruling:
On the merits, it must also fail. MICO’s arguments that there was no payment of premium and that the policy hadbeen cancelled before the occurence of the loss are not acceptable. Its contention that the claim was allowedwithout proof of loss is also untenable.The petitioner relies heavily on Section 77 of the Insurance Code providing that:SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is exposed to the peril insuredagainst. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurancecompany is valid and binding unless and until the premium thereof has been paid, except in the case of a life or anindustrial life policy whenever the grace period provision applies.The above provision is not applicable because payment of the premium was in fact eventually made in this case.Notably, the premium invoice issued to Pinca at the time of the delivery of the policy on June 7, 1981 was stamped”Payment Received” of the amoung of P930.60 on “12-24-81” by Domingo Adora. This is important because itsuggests an understanding between MICO and the insured that such payment could be made later, as agent Adorahad assured Pinca. In any event, it is not denied that this payment was actually made by Pinca to Adora, whoremitted the same to MICO.
it is not disputed that the premium was actually paid by Pinca to Adora on December 24, 1981, who received it onbehalf of MICO, to which it was remitted on January 15, 1982. What is questioned is the validity of Pinca’s paymentand of Adora’s authority to receive it.MICO’s acknowledgment of Adora as its agent defeats its contention that he was not authorized to receive thepremium payment on its behalf. It is clearly provided in Section 306 of the Insurance Code that:SEC. 306. xxx xxx xxx Any insurance company which delivers to an insurance agant or insurance broker a policy or contract of insuranceshall be demmed to have authorized such agent or broker to receive on its behalf payment of any premium which isdue on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon.On the other hand Article 64 (except “nonpayment of premium”) provided the cancellation was made in accordancetherewith and with Article 65.Section 64 reads as follows:
SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof tothe insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effectivedate of the policy, of one or more of the following:(a) non-payment of premium;(b) conviction of a crime arising out of acts increasing the hazard insured against;(c) discovery of fraud or material misrepresentation;(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;(e) physical changes in the property insured which result in the property becoming uninsurable;or
(f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code. As for the method of cancellation, Section 65 provides as follows:SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to thenamed insured at the address shown in the policy, and shall state (a) which of the grounds set forth in section sixty-four is relied upon and (b) that, upon written request of the named insured, the insurer will furnish the facts on whichthe cancellation is based. A valid cancellation must, therefore, require concurrence of the following conditions:(1) There must be prior notice of cancellation to the insured;
(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the groundsmentioned;(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the address shown in thepolicy;(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon written request of the insured, the insurer will furnish the facts on which the cancellation is based.

There is no proof that the notice, assuming it complied with the other requisites mentioned above, was actuallymailed to and received by Pinca. All MICO’s offers to show that the cancellation was communicated to the insured isits employee’s testimony that the said cancellation was sent “by mail through our mailing section.” without more. Thepetitioner then says that its “stand is enervated (sic) by the legal presumption of regularity and due performance of duty.” (not realizing perhaps that “enervated” means “debilitated” not “strengthened”).On the other hand, there is the flat denial of Pinca, who says she never received the claimed cancellation and who,of course, did not have to prove such denial Considering the strict language of Section 64 that no insurance policyshall be cancelled except upon prior notice, it behooved MICO’s to make sure that the cancellation was actually sentto and received by the insured. Adora. incidentally, had not been informed of the cancellation either and saw no reason not to accept the saidpayment.Petition denied. Malayan Insurance Co., Inc. is liable.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-67835 October 12, 1987
MALAYAN INSURANCE CO., INC. (MICO), petitioner,
vs.
GREGORIA CRUZ ARNALDO, in her capacity as the INSURANCE COMMISSIONER, and CORONACION PINCA, respondents.

CRUZ, J.:
When a person’s house is razed, the fire usually burns down the efforts of a lifetime and forecloses hope for the suddenly somber future. The vanished abode becomes a charred and painful memory. Where once stood a home, there is now, in the sighing wisps of smoke, only a gray desolation. The dying embers leave ashes in the heart.
For peace of mind and as a hedge against possible loss, many people now secure fire insurance. This is an aleatory contract. By such insurance, the insured in effect wagers that his house will be burned, with the insurer assuring him against the loss, for a fee. If the house does burn, the insured, while losing his house, wins the wagers. The prize is the recompense to be given by the insurer to make good the loss the insured has sustained.
It would be a pity then if, having lost his house, the insured were also to lose the payment he expects to recover for such loss. Sometimes it is his fault that he cannot collect, as where there is a defect imputable to him in the insurance contract. Conversely, the reason may be an unjust refusal of the insurer to acknowledge a just obligation, as has happened many times.
In the instant case the private respondent has been sustained by the Insurance Commission in her claim for compensation for her burned property. The petitioner is now before us to dispute the decision, 1 on the ground that there was no valid insurance contract at the time of the loss.
The chronology of the relevant antecedent facts is as follows:
On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private respondent, Coronacion Pinca, Fire Insurance Policy No. F-001-17212 on her property for the amount of P14,000.00 effective July 22, 1981, until July 22, 1982. 2
On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent the corresponding notice to Pinca. 3
On December 24, 1981, payment of the premium for Pinca was received by DomingoAdora, agent of MICO. 4
On January 15, 1982, Adora remitted this payment to MICO,together with other payments. 5
On January 18, 1982, Pinca’s property was completely burned. 6
On February 5, 1982, Pinca’s payment was returned by MICO to Adora on the ground that her policy had been cancelled earlier. But Adora refused to accept it. 7
In due time, Pinca made the requisite demands for payment, which MICO rejected. She then went to the Insurance Commission. It is because she was ultimately sustained by the public respondent that the petitioner has come to us for relief.
From the procedural viewpoint alone, the petition must be rejected. It is stillborn.
The records show that notice of the decision of the public respondent dated April 5, 1982, was received by MICO on April 10, 1982. 8 On April 25, 1982, it filed a motion for reconsideration, which was denied on June 4, 1982. 9 Notice of this denial was received by MICO on June 13, 1982, as evidenced by Annex “1” duly authenticated by the Insurance Commission. 10 The instant petition was filed with this Court on July 2, 1982. 11
The position of the petition is that the petition is governed by Section 416 0f the Insurance Code giving it thirty days wthin which to appeal by certiorari to this Court. Alternatively, it also invokes Rule 45 of the Rules of Court. For their part, the public and private respondents insist that the applicable law is B.P. 129, which they say governs not only courts of justice but also quasi-judicial bodies like the Insurance Commission. The period for appeal under this law is also fifteen days, as under Rule 45.
The pivotal date is the date the notice of the denial of the motion for reconsideration was received by MICO.
MICO avers this was June 18, 1982, and offers in evidence its Annex “B,” 12 which is a copy of the Order of June 14, 1982, with a signed rubber-stamped notation on the upper left-hand corner that it was received on June 18, 1982, by its legal department. It does not indicate from whom. At the bottom, significantly, there is another signature under which are the ciphers “6-13-82,” for which no explanation has been given.
Against this document, the private respodent points in her Annex “1,” 13 the authenticated copy of the same Order with a rubber-stamped notation at the bottom thereof indicating that it was received for the Malayan Insurance Co., Inc. by J. Gotladera on “6-13-82.” The signature may or may not habe been written by the same person who signed at the bottom of the petitioner’s Annex “B.”
Between the two dates, the court chooses to believe June 13, 1982, not only because the numbers “6-13-82” appear on both annexes but also because it is the date authenticated by the administrative division of the Insurance Commission. Annex “B” is at worst self-serving; at best, it might only indicate that it was received on June 18, 1982, by the legal department of MICO, after it had been received earlier by some other of its personnel on June 13, 1982. Whatever the reason for the delay in transmitting it to the legal department need not detain us here.
Under Section 416 of the Insurance Code, the period for appeal is thirty days from notice of the decision of the Insurance Commission. The petitioner filed its motion for reconsideration on April 25, 1981, or fifteen days such notice, and the reglementary period began to run again after June 13, 1981, date of its receipt of notice of the denial of the said motion for reconsideration. As the herein petition was filed on July 2, 1981, or nineteen days later, there is no question that it is tardy by four days.
Counted from June 13, the fifteen-day period prescribed under Rule 45, assuming it is applicable, would end on June 28, 1982, or also four days from July 2, when the petition was filed.
If it was filed under B.P. 129, then, considering that the motion for reconsideration was filed on the fifteenth day after MICO received notice of the decision, only one more day would have remained for it to appeal, to wit, June 14, 1982. That would make the petition eighteen days late by July 2.
Indeed, even if the applicable law were still R.A. 5434, governing appeals from administrative bodies, the petition would still be tardy. The law provides for a fixed period of ten days from notice of the denial of a seasonable motion for reconsideration within which to appeal from the decision. Accordingly, that ten-day period, counted from June 13, 1982, would have ended on June 23, 1982, making the petition filed on July 2, 1982, nine days late.
Whichever law is applicable, therefore, the petition can and should be dismissed for late filing.
On the merits, it must also fail. MICO’s arguments that there was no payment of premium and that the policy had been cancelled before the occurence of the loss are not acceptable. Its contention that the claim was allowed without proof of loss is also untenable.
The petitioner relies heavily on Section 77 of the Insurance Code providing that:
SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies.
The above provision is not applicable because payment of the premium was in fact eventually made in this case. Notably, the premium invoice issued to Pinca at the time of the delivery of the policy on June 7, 1981 was stamped “Payment Received” of the amoung of P930.60 on “12-24-81” by Domingo Adora. 14 This is important because it suggests an understanding between MICO and the insured that such payment could be made later, as agent Adora had assured Pinca. In any event, it is not denied that this payment was actually made by Pinca to Adora, who remitted the same to MICO.
The payment was made on December 24, 1981, and the fire occured on January 18, 1982. One wonders: suppose the payment had been made and accepted in, say, August 1981, would the commencement date of the policy have been changed to the date of the payment, or would the payment have retroacted to July 22, 1981? If MICO accepted the payment in December 1981 and the insured property had not been burned, would that policy not have expired just the same on July 22, 1982, pursuant to its original terms, and not on December 24, 1982?
It would seem from MICO’s own theory, that the policy would have become effective only upon payment, if accepted and so would have been valid only from December 24, 1981m but only up to July 22, 1981, according to the original terms. In others words, the policy would have run for only eight months although the premium paid was for one whole year.
It is not disputed that the preium was actually paid by Pinca to Adora on December 24, 1981, who received it on behalf of MICO, to which it was remitted on January 15, 1982. What is questioned is the validity of Pinca’s payment and of Adora’s authority to receive it.
MICO’s acknowledgment of Adora as its agent defeats its contention that he was not authorized to receive the premium payment on its behalf. It is clearly provided in Section 306 of the Insurance Code that:
SEC. 306. xxx xxx xxx
Any insurance company which delivers to an insurance agant or insurance broker a policy or contract of insurance shall be demmed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon.
And it is a well-known principle under the law of agency that:
Payment to an agent having authority to receive or collect payment is equivalent to payment to the principal himself; such payment is complete when the money delivered is into the agent’s hands and is a discharge of the indebtedness owing to the principal. 15
There is the petitioner’s argument, however, that Adora was not authorized to accept the premium payment because six months had elapsed since the issuance by the policy itself. It is argued that this prohibition was binding upon Pinca, who made the payment to Adora at her own riskl as she was bound to first check his authority to receive it. 16
MICO is taking an inconsistent stand. While contending that acceptance of the premium payment was prohibited by the policy, it at the same time insists that the policy never came into force because the premium had not been paid. One surely, cannot have his cake and eat it too.
We do not share MICO’s view that there was no existing insurance at the time of the loss sustained by Pinca because her policy never became effective for non-payment of premium. Payment was in fact made, rendering the policy operative as of June 22, 1981, and removing it from the provisions of Article 77, Thereafter, the policy could be cancelled on any of the supervening grounds enumerated in Article 64 (except “nonpayment of premium”) provided the cancellation was made in accordance therewith and with Article 65.
Section 64 reads as follows:
SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following:
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the hazard insured against;
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;
(e) physical changes in the property insured which result in the property becoming uninsurable;or
(f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code.
As for the method of cancellation, Section 65 provides as follows:
SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to the named insured at the address shown in the policy, and shall state (a) which of the grounds set forth in section sixty-four is relied upon and (b) that, upon written request of the named insured, the insurer will furnish the facts on which the cancellation is based.
A valid cancellation must, therefore, require concurrence of the following conditions:
(1) There must be prior notice of cancellation to the insured; 17
(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the grounds mentioned;18
(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the address shown in the policy; 19
(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon written request of the insured, the insurer will furnish the facts on which the cancellation is based. 20
MICO’s claims it cancelled the policy in question on October 15, 1981, for non-payment of premium. To support this assertion, it presented one of its employees, who testified that “the original of the endorsement and credit memo” – presumably meaning the alleged cancellation – “were sent the assured by mail through our mailing section” 21 However, there is no proof that the notice, assuming it complied with the other requisites mentioned above, was actually mailed to and received by Pinca. All MICO’s offers to show that the cancellation was communicated to the insured is its employee’s testimony that the said cancellation was sent “by mail through our mailing section.” without more. The petitioner then says that its “stand is enervated (sic) by the legal presumption of regularity and due performance of duty.” 22(not realizing perhaps that “enervated” means “debilitated” not “strengthened”).
On the other hand, there is the flat denial of Pinca, who says she never received the claimed cancellation and who, of course, did not have to prove such denial Considering the strict language of Section 64 that no insurance policy shall be cancelled except upon prior notice, it behooved MICO’s to make sure that the cancellation was actually sent to and received by the insured. The presumption cited is unavailing against the positive duty enjoined by Section 64 upon MICO and the flat denial made by the private respondent that she had received notice of the claimed cancellation.
It stands to reason that if Pinca had really received the said notice, she would not have made payment on the original policy on December 24, 1981. Instead, she would have asked for a new insurance, effective on that date and until one year later, and so taken advantage of the extended period. The Court finds that if she did pay on that date, it was because she honestly believed that the policy issued on June 7, 1981, was still in effect and she was willing to make her payment retroact to July 22, 1981, its stipulated commencement date. After all, agent Adora was very accomodating and had earlier told her “to call him up any time” she was ready with her payment on the policy earlier issued. She was obviously only reciprocating in kind when she paid her premium for the period beginning July 22, 1981, and not December 24, 1981.
MICO’s suggests that Pinca knew the policy had already been cancelled and that when she paid the premium on December 24, 1981, her purpose was “to renew it.” As this could not be done by the agent alone under the terms of the original policy, the renewal thereof did not legally bind MICO. which had not ratified it. To support this argument, MICO’s cites the following exchange:
Q: Now, Madam Witness, on December 25th you made the alleged payment. Now, my question is that, did it not come to your mind that after the lapse of six (6) months, your policy was cancelled?
A: I have thought of that but the agent told me to call him up at anytime.
Q: So if you thought that your policy was already intended to revive cancelled policy?
A: Misleading, Your Honor.
Hearing Officer: The testimony of witness is that, she thought of that.
Q: I will revise the question. Now, Mrs. Witness, you stated that you thought the policy was cancelled. Now, when you made the payment of December 24, 1981, your intention was to revive the policy if it was already cancelled?
A: Yes, to renew it. 23
A close study of the above transcript will show that Pinca meant to renew the policy if it had really been already cancelled but not if it was stffl effective. It was all conditional. As it has not been shown that there was a valid cancellation of the policy, there was consequently no need to renew it but to pay the premium thereon. Payment was thus legally made on the original transaction and it could be, and was, validly received on behalf of the insurer by its agent Adora. Adora. incidentally, had not been informed of the cancellation either and saw no reason not to accept the said payment.
The last point raised by the petitioner should not pose much difficulty. The valuation fixed in fire insurance policy is conclusive in case of total loss in the absence of fraud, 24 which is not shown here. Loss and its amount may be determined on the basis of such proof as may be offered by the insured, which need not be of such persuasiveness as is required in judicial proceedings. 25 If, as in this case, the insured files notice and preliminary proof of loss and the insurer fails to specify to the former all the defects thereof and without unnecessary delay, all objections to notice and proof of loss are deemed waived under Section 90 of the Insurance Code.
The certification 26 issued by the Integrated National Police, Lao-ang, Samar, as to the extent of Pinca’s loss should be considered sufficient. Notably,MICO submitted no evidence to the contrary nor did it even question the extent of the loss in its answer before the Insurance Commission. It is also worth observing that Pinca’s property was not the only building bumed in the fire that razed the commercial district of Lao-ang, Samar, on January 18, 1982. 27
There is nothing in the Insurance Code that makes the participation of an adjuster in the assessment of the loss imperative or indespensable, as MICO suggests. Section 325, which it cites, simply speaks of the licensing and duties of adjusters.
We see in this cases an obvious design to evade or at least delay the discharge of a just obligation through efforts bordering on bad faith if not plain duplicity, We note that the motion for reconsideration was filed on the fifteenth day from notice of the decision of the Insurance Commission and that there was a feeble attempt to show that the notice of denial of the said motion was not received on June 13, 1982, to further hinder the proceedings and justify the filing of the petition with this Court fourteen days after June 18, 1982. We also look askance at the alleged cancellation, of which the insured and MICO’s agent himself had no knowledge, and the curious fact that although Pinca’s payment was remitted to MICO’s by its agent on January 15, 1982, MICO sought to return it to Adora only on February 5, 1982, after it presumably had learned of the occurrence of the loss insured against on January 18, 1982. These circumstances make the motives of the petitioner highly suspect, to say the least, and cast serious doubts upon its candor and bona fides.
WHEREFORE, the petition is DENIED. The decision of the Insurance Commission dated April 10, 1981, and its Order of June 4, 1981, are AFFIRMED in full, with costs against the petitioner. This decision is immediately executory.
SO ORDERED.
Teehankee, C.J., Narvasa and Paras, JJ., concur.
Gancayco, J, is on leave.

Footnotes
1 I.C. Case No. 2698.
2 Rollo, p. 2.
3 Ibid., p. 3.
4 Decision, p. 6.
5 Ibid.
6 Id., p. 19, Rollo, pp. 3, 38.
7 Rollo, pp. 3-4.
8 Ibid., p. 41.
9 Annex “B”, Petition; Rollo, p. 34.
10 Rollo, p. 106.
11 Ibid., pp. 2, 95, 100.
12 Id., p.58.
13 Id., p. 106.
14 Id., pp. 12-13, 31; Original Records. p. 7.
15 Maryland Casualty Co. v. U.S. 342, 64 ed 291, 13 Am. Jur. 2d. p. 630:
16 Memorandum for the Petitioner, p. 8.
17 Insurance Code, Sec. 64.
18 Ibid.
19 Id., Sec. 65.
20 Id.
21 Memorandum for the Petitioner, p. 12.
22 Ibid., p. 13.
23 Id., pp. 13-14.
24 Insurance Code, Secs. 171 and 156; Harding v. Commercial Union Insurance Co., Phil. 484.
25 Insurance Code, Sec. 89.
26 Exh. “C”.
27 Original Records, p. 9.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. Nos. 89898-99 October 1, 1990
MUNICIPALITY OF MAKATI, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE GUZMAN, JR., as Judge RTC of Makati, Branch CXLII ADMIRAL FINANCE CREDITORS CONSORTIUM, INC., and SHERIFF SILVINO R. PASTRANA,respondents.
Defante & Elegado for petitioner.
Roberto B. Lugue for private respondent Admiral Finance Creditors’ Consortium, Inc.
R E S O L U T I O N

CORTÉS, J.:
The present petition for review is an off-shoot of expropriation proceedings initiated by petitioner Municipality of Makati against private respondent Admiral Finance Creditors Consortium, Inc., Home Building System & Realty Corporation and one Arceli P. Jo, involving a parcel of land and improvements thereon located at Mayapis St., San Antonio Village, Makati and registered in the name of Arceli P. Jo under TCT No. S-5499.
It appears that the action for eminent domain was filed on May 20, 1986, docketed as Civil Case No. 13699. Attached to petitioner’s complaint was a certification that a bank account (Account No. S/A 265-537154-3) had been opened with the PNB Buendia Branch under petitioner’s name containing the sum of P417,510.00, made pursuant to the provisions of Pres. Decree No. 42. After due hearing where the parties presented their respective appraisal reports regarding the value of the property, respondent RTC judge rendered a decision on June 4, 1987, fixing the appraised value of the property at P5,291,666.00, and ordering petitioner to pay this amount minus the advanced payment of P338,160.00 which was earlier released to private respondent.
After this decision became final and executory, private respondent moved for the issuance of a writ of execution. This motion was granted by respondent RTC judge. After issuance of the writ of execution, a Notice of Garnishment dated January 14, 1988 was served by respondent sheriff Silvino R. Pastrana upon the manager of the PNB Buendia Branch. However, respondent sheriff was informed that a “hold code” was placed on the account of petitioner. As a result of this, private respondent filed a motion dated January 27, 1988 praying that an order be issued directing the bank to deliver to respondent sheriff the amount equivalent to the unpaid balance due under the RTC decision dated June 4, 1987.
Petitioner filed a motion to lift the garnishment, on the ground that the manner of payment of the expropriation amount should be done in installments which the respondent RTC judge failed to state in his decision. Private respondent filed its opposition to the motion.
Pending resolution of the above motions, petitioner filed on July 20, 1988 a “Manifestation” informing the court that private respondent was no longer the true and lawful owner of the subject property because a new title over the property had been registered in the name of Philippine Savings Bank, Inc. (PSB) Respondent RTC judge issued an order requiring PSB to make available the documents pertaining to its transactions over the subject property, and the PNB Buendia Branch to reveal the amount in petitioner’s account which was garnished by respondent sheriff. In compliance with this order, PSB filed a manifestation informing the court that it had consolidated its ownership over the property as mortgagee/purchaser at an extrajudicial foreclosure sale held on April 20, 1987. After several conferences, PSB and private respondent entered into a compromise agreement whereby they agreed to divide between themselves the compensation due from the expropriation proceedings.
Respondent trial judge subsequently issued an order dated September 8, 1988 which: (1) approved the compromise agreement; (2) ordered PNB Buendia Branch to immediately release to PSB the sum of P4,953,506.45 which corresponds to the balance of the appraised value of the subject property under the RTC decision dated June 4, 1987, from the garnished account of petitioner; and, (3) ordered PSB and private respondent to execute the necessary deed of conveyance over the subject property in favor of petitioner. Petitioner’s motion to lift the garnishment was denied.
Petitioner filed a motion for reconsideration, which was duly opposed by private respondent. On the other hand, for failure of the manager of the PNB Buendia Branch to comply with the order dated September 8, 1988, private respondent filed two succeeding motions to require the bank manager to show cause why he should not be held in contempt of court. During the hearings conducted for the above motions, the general manager of the PNB Buendia Branch, a Mr. Antonio Bautista, informed the court that he was still waiting for proper authorization from the PNB head office enabling him to make a disbursement for the amount so ordered. For its part, petitioner contended that its funds at the PNB Buendia Branch could neither be garnished nor levied upon execution, for to do so would result in the disbursement of public funds without the proper appropriation required under the law, citing the case of Republic of the Philippines v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA 899].
Respondent trial judge issued an order dated December 21, 1988 denying petitioner’s motion for reconsideration on the ground that the doctrine enunciated in Republic v. Palacio did not apply to the case because petitioner’s PNB Account No. S/A 265-537154-3 was an account specifically opened for the expropriation proceedings of the subject property pursuant to Pres. Decree No. 42. Respondent RTC judge likewise declared Mr. Antonio Bautista guilty of contempt of court for his inexcusable refusal to obey the order dated September 8, 1988, and thus ordered his arrest and detention until his compliance with the said order.
Petitioner and the bank manager of PNB Buendia Branch then filed separate petitions for certiorari with the Court of Appeals, which were eventually consolidated. In a decision promulgated on June 28, 1989, the Court of Appeals dismissed both petitions for lack of merit, sustained the jurisdiction of respondent RTC judge over the funds contained in petitioner’s PNB Account No. 265-537154-3, and affirmed his authority to levy on such funds.
Its motion for reconsideration having been denied by the Court of Appeals, petitioner now files the present petition for review with prayer for preliminary injunction.
On November 20, 1989, the Court resolved to issue a temporary restraining order enjoining respondent RTC judge, respondent sheriff, and their representatives, from enforcing and/or carrying out the RTC order dated December 21, 1988 and the writ of garnishment issued pursuant thereto. Private respondent then filed its comment to the petition, while petitioner filed its reply.
Petitioner not only reiterates the arguments adduced in its petition before the Court of Appeals, but also alleges for the first time that it has actually two accounts with the PNB Buendia Branch, to wit:
xxx xxx xxx
(1) Account No. S/A 265-537154-3 – exclusively for the expropriation of the subject property, with an outstanding balance of P99,743.94.
(2) Account No. S/A 263-530850-7 – for statutory obligations and other purposes of the municipal government, with a balance of P170,098,421.72, as of July 12, 1989.
xxx xxx xxx
[Petition, pp. 6-7; Rollo, pp. 11-12.]
Because the petitioner has belatedly alleged only in this Court the existence of two bank accounts, it may fairly be asked whether the second account was opened only for the purpose of undermining the legal basis of the assailed orders of respondent RTC judge and the decision of the Court of Appeals, and strengthening its reliance on the doctrine that public funds are exempted from garnishment or execution as enunciated in Republic v. Palacio[supra.] At any rate, the Court will give petitioner the benefit of the doubt, and proceed to resolve the principal issues presented based on the factual circumstances thus alleged by petitioner.
Admitting that its PNB Account No. S/A 265-537154-3 was specifically opened for expropriation proceedings it had initiated over the subject property, petitioner poses no objection to the garnishment or the levy under execution of the funds deposited therein amounting to P99,743.94. However, it is petitioner’s main contention that inasmuch as the assailed orders of respondent RTC judge involved the net amount of P4,965,506.45, the funds garnished by respondent sheriff in excess of P99,743.94, which are public funds earmarked for the municipal government’s other statutory obligations, are exempted from execution without the proper appropriation required under the law.
There is merit in this contention. The funds deposited in the second PNB Account No. S/A 263-530850-7 are public funds of the municipal government. In this jurisdiction, well-settled is the rule that public funds are not subject to levy and execution, unless otherwise provided for by statute [Republic v. Palacio, supra.; The Commissioner of Public Highways v. San Diego, G.R. No. L-30098, February 18, 1970, 31 SCRA 616]. More particularly, the properties of a municipality, whether real or personal, which are necessary for public use cannot be attached and sold at execution sale to satisfy a money judgment against the municipality. Municipal revenues derived from taxes, licenses and market fees, and which are intended primarily and exclusively for the purpose of financing the governmental activities and functions of the municipality, are exempt from execution [See Viuda De Tan Toco v. The Municipal Council of Iloilo, 49 Phil. 52 (1926): The Municipality of Paoay, Ilocos Norte v. Manaois, 86 Phil. 629 (1950); Municipality of San Miguel, Bulacan v. Fernandez, G.R. No. 61744, June 25, 1984, 130 SCRA 56]. The foregoing rule finds application in the case at bar. Absent a showing that the municipal council of Makati has passed an ordinance appropriating from its public funds an amount corresponding to the balance due under the RTC decision dated June 4, 1987, less the sum of P99,743.94 deposited in Account No. S/A 265-537154-3, no levy under execution may be validly effected on the public funds of petitioner deposited in Account No. S/A 263-530850-7.
Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse. Where a municipality fails or refuses, without justifiable reason, to effect payment of a final money judgment rendered against it, the claimant may avail of the remedy of mandamus in order to compel the enactment and approval of the necessary appropriation ordinance, and the corresponding disbursement of municipal funds therefor [SeeViuda De Tan Toco v. The Municipal Council of Iloilo, supra; Baldivia v. Lota, 107 Phil. 1099 (1960); Yuviengco v. Gonzales, 108 Phil. 247 (1960)].
In the case at bar, the validity of the RTC decision dated June 4, 1987 is not disputed by petitioner. No appeal was taken therefrom. For three years now, petitioner has enjoyed possession and use of the subject property notwithstanding its inexcusable failure to comply with its legal obligation to pay just compensation. Petitioner has benefited from its possession of the property since the same has been the site of Makati West High School since the school year 1986-1987. This Court will not condone petitioner’s blatant refusal to settle its legal obligation arising from expropriation proceedings it had in fact initiated. It cannot be over-emphasized that, within the context of the State’s inherent power of eminent domain,
. . . [j]ust compensation means not only the correct determination of the amount to be paid to the owner of the land but also the payment of the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered “just” for the property owner is made to suffer the consequence of being immediately deprived of his land while being made to wait for a decade or more before actually receiving the amount necessary to cope with his loss [Cosculluela v. The Honorable Court of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA 393, 400. See also Provincial Government of Sorsogon v. Vda. de Villaroya, G.R. No. 64037, August 27, 1987, 153 SCRA 291].
The State’s power of eminent domain should be exercised within the bounds of fair play and justice. In the case at bar, considering that valuable property has been taken, the compensation to be paid fixed and the municipality is in full possession and utilizing the property for public purpose, for three (3) years, the Court finds that the municipality has had more than reasonable time to pay full compensation.
WHEREFORE, the Court Resolved to ORDER petitioner Municipality of Makati to immediately pay Philippine Savings Bank, Inc. and private respondent the amount of P4,953,506.45. Petitioner is hereby required to submit to this Court a report of its compliance with the foregoing order within a non-extendible period of SIXTY (60) DAYS from the date of receipt of this resolution.
The order of respondent RTC judge dated December 21, 1988, which was rendered in Civil Case No. 13699, is SET ASIDE and the temporary restraining order issued by the Court on November 20, 1989 is MADE PERMANENT.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

Municipality of Makati vs. Court of Appeals
G.R. Nos. 89898-99 October 1, 1990; Cortes, J.

Facts:
Petitioner Municipality of Makati expropriated a portion of land owned by private respondents, Admiral Finance Creditors Consortium, Inc. in 1986, In lieu of an expropriation proceeding filed in court, petitioner Municipality of Makati opened a bank account with the PNB Buendia Branch under petitioner’s name containing the sum of P417,510.00, pursuant to the provisions of Pres. Decree No. 42. RTC Makati determined the cost of the said land to be P5,291,666.00 minus the advanced payment of P338,160.00. It issued the corresponding writ of execution accompanied with a writ of garnishment of funds of the petitioner which was deposited in PNB. After this decision became final and executory, a writ of execution was issued and a Notice of Garnishment was served by respondent sheriff upon the manager of the PNB Buendia Branch. However, respondent sheriff was informed that a “hold code” was placed on the account of petitioner. Private respondent then filed a motion praying for the court to order the bank to deliver to the sheriff the unpaid balance, while petitioner also filed a motion to lift the garnishment.

While these motions are pending, however, a “Manifestation” was filed, informing the court that private respondent was no longer the owner of the subject property and that ownership to this has been transferred to Philippine Savings Bank, Inc. A compromise agreement was made between private respondent and Philippine Savings Bank, Inc., which was then approved by the court.

The court further ordered PNB Buendia Branch to immediately release to PSB the sum of P4,953,506.45 which corresponds to the balance of the appraised value of the subject property, from the garnished account of petitioner but the bank failed to comply as it was still waiting for proper authorization from the PNB head office enabling it to make a disbursement for the amount so ordered.

As the case was in the Supreme Court, petitioner raised for the first time that it had two accounts with PNB Buendia Branch: one was made exclusively for the expropriation of the subject property, and the other is for statutory obligations and other purposes of the municipal government

Issue:
WON the balance of the appraised value of the subject property may be levied upon the second account of petitioner municipality?

Held:
* It is well-settled is the rule that public funds are not subject to levy and execution, unless otherwise provided for by statute.
* More particularly, the properties of a municipality, whether real or personal, which are necessary for public use cannot be attached and sold at execution sale to satisfy a money judgment against the municipality.
* Municipal revenues are derived from taxes, licenses and market fees, and which are intended primarily and exclusively for the purpose of financing the governmental activities and functions of the municipality, are exempt from execution.
* Absent a showing that the municipal council of Makati has passed an ordinance appropriating from its public funds an amount corresponding to the balance due under the RTC decision dated June 4, 1987, less the sum of P99,743.94 deposited in Account No. S/A 265-537154-3, no levy under execution may be validly effected on the public funds of petitioner deposited in Account No. S/A 263-530850-7.

The court hereby orders petitioner Municipality of Makati to immediately pay Philippine Savings Bank, Inc. and private respondent the amount of P4,953,506.45. Petitioner is hereby required to submit to this Court a report of its compliance with the foregoing order within a non-extendible period of SIXTY (60) DAYS from the date of receipt of this resolution.

PACIFIC TIMBER V. CA
112 SCRA 199
Facts:
> On March 13, 1963, Pacific secured temporary insurance from the Workemen’s Insurance Co. for its exportation of logs to Japan. Workmen issued on said date Cover Note 1010 insuring said cargo.
> The regular marine policies were issued by the company in favor of Pacific on Apr 2, 1963. The 2 marine policies bore the number 53H01032 and 53H01033.
> After the issuance of the cover note but BEFORE the issuance of the 2 policies, some of the logs intended to be exported were lost due to a typhoon.
> Pacific filed its claim with the company, but the latter refused, contending that said loss may not be considered as covered under the cover note because such became null and void by virtue of the issuance of the marine policies.

Issue:

Whether or not the cover not was without consideration, thus null and void.

Held:
It was with consideration.
SC upheld Pacific’s contention that said cover not was with consideration. The fact that no separate premium was paid on the cover note before the loss was insured against occurred does not militate against the validity of Pacific’s contention, for no such premium could have been paid, since by the nature of the cover note, it did not contain, as all cover notes do not contain, particulars of the shipment that would serve as basis for the computation of the premiums. As a logical consequence, no separate premiums are required to be paid on a cover note.

If the note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, its purpose would be meaningless for it is in a real sense a contract, not a mere application.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-38613 February 25, 1982
PACIFIC TIMBER EXPORT CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and WORKMEN’S INSURANCE COMPANY, INC., respondents.

DE CASTRO, ** J.:
This petition seeks the review of the decision of the Court of Appeals reversing the decision of the Court of First Instance of Manila in favor of petitioner and against private respondent which ordered the latter to pay the sum of Pll,042.04 with interest at the rate of 12% interest from receipt of notice of loss on April 15, 1963 up to the complete payment, the sum of P3,000.00 as attorney’s fees and the costs 1 thereby dismissing petitioner s complaint with costs. 2
The findings of the of fact of the Court of Appeals, which are generally binding upon this Court, Except as shall be indicated in the discussion of the opinion of this Court the substantial correctness of still particular finding having been disputed, thereby raising a question of law reviewable by this Court 3 are as follows:
March 19, l963, the plaintiff secured temporary insurance from the defendant for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from the Diapitan. Bay, Quezon Province to Okinawa and Tokyo, Japan. The defendant issued on said date Cover Note No. 1010, insuring the said cargo of the plaintiff “Subject to the Terms and Conditions of the WORKMEN’S INSURANCE COMPANY, INC. printed Marine Policy form as filed with and approved by the Office of the Insurance Commissioner (Exhibit A).
The regular marine cargo policies were issued by the defendant in favor of the plaintiff on April 2, 1963. The two marine policies bore the numbers 53 HO 1032 and 53 HO 1033 (Exhibits B and C, respectively). Policy No. 53 H0 1033 (Exhibit B) was for 542 pieces of logs equivalent to 499,950 board feet. Policy No. 53 H0 1033 was for 853 pieces of logs equivalent to 695,548 board feet (Exhibit C). The total cargo insured under the two marine policies accordingly consisted of 1,395 logs, or the equivalent of 1,195.498 bd. ft.
After the issuance of Cover Note No. 1010 (Exhibit A), but before the issuance of the two marine policies Nos. 53 HO 1032 and 53 HO 1033, some of the logs intended to be exported were lost during loading operations in the Diapitan Bay. The logs were to be loaded on the ‘SS Woodlock’ which docked about 500 meters from the shoreline of the Diapitan Bay. The logs were taken from the log pond of the plaintiff and from which they were towed in rafts to the vessel. At about 10:00 o’clock a. m. on March 29, 1963, while the logs were alongside the vessel, bad weather developed resulting in 75 pieces of logs which were rafted together co break loose from each other. 45 pieces of logs were salvaged, but 30 pieces were verified to have been lost or washed away as a result of the accident.
In a letter dated April 4, 1963, the plaintiff informed the defendant about the loss of ‘appropriately 32 pieces of log’s during loading of the ‘SS Woodlock’. The said letter (Exhibit F) reads as follows:
April 4, 1963
Workmen’s Insurance Company, Inc. Manila, Philippines
Gentlemen:
This has reference to Insurance Cover Note No. 1010 for shipment of 1,250,000 bd. ft. Philippine Lauan and Apitong Logs. We would like to inform you that we have received advance preliminary report from our Office in Diapitan, Quezon that we have lost approximately 32 pieces of logs during loading of the SS Woodlock.
We will send you an accurate report all the details including values as soon as same will be reported to us.
Thank you for your attention, we wish to remain.
Very respectfully yours,
PACIFIC TIMBER EXPORT CORPORATION
(Sgd.) EMMANUEL S. ATILANO Asst. General Manager.
Although dated April 4, 1963, the letter was received in the office of the defendant only on April 15, 1963, as shown by the stamp impression appearing on the left bottom corner of said letter. The plaintiff subsequently submitted a ‘Claim Statement demanding payment of the loss under Policies Nos. 53 HO 1032 and 53 HO 1033, in the total amount of P19,286.79 (Exhibit G).
On July 17, 1963, the defendant requested the First Philippine Adjustment Corporation to inspect the loss and assess the damage. The adjustment company submitted its ‘Report on August 23, 1963 (Exhibit H). In said report, the adjuster found that ‘the loss of 30 pieces of logs is not covered by Policies Nos. 53 HO 1032 and 1033 inasmuch as said policies covered the actual number of logs loaded on board the ‘SS Woodlock’ However, the loss of 30 pieces of logs is within the 1,250,000 bd. ft. covered by Cover Note 1010 insured for $70,000.00.
On September 14, 1963, the adjustment company submitted a computation of the defendant’s probable liability on the loss sustained by the shipment, in the total amount of Pl1,042.04 (Exhibit 4).
On January 13, 1964, the defendant wrote the plaintiff denying the latter’s claim, on the ground they defendant’s investigation revealed that the entire shipment of logs covered by the two marines policies No. 53 110 1032 and 713 HO 1033 were received in good order at their point of destination. It was further stated that the said loss may be considered as covered under Cover Note No. 1010 because the said Note had become ‘null and void by virtue of the issuance of Marine Policy Nos. 53 HO 1032 and 1033′(Exhibit J-1). The denial of the claim by the defendant was brought by the plaintiff to the attention of the Insurance Commissioner by means of a letter dated March 21, 1964 (Exhibit K). In a reply letter dated March 30, 1964, Insurance Commissioner Francisco Y. Mandanas observed that ‘it is only fair and equitable to indemnify the insured under Cover Note No. 1010’, and advised early settlement of the said marine loss and salvage claim (Exhibit L).
On June 26, 1964, the defendant informed the Insurance Commissioner that, on advice of their attorneys, the claim of the plaintiff is being denied on the ground that the cover note is null and void for lack of valuable consideration (Exhibit M). 4
Petitioner assigned as errors of the Court of Appeals, the following:
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THE COVER NOTE WAS NULL AND VOID FOR LACK OF VALUABLE CONSIDERATION BECAUSE THE COURT DISREGARDED THE PROVEN FACTS THAT PREMIUMS FOR THE COMPREHENSIVE INSURANCE COVERAGE THAT INCLUDED THE COVER NOTE WAS PAID BY PETITIONER AND THAT INCLUDED THE COVER NOTE WAS PAID BY PETITIONER AND THAT NO SEPARATE PREMIUMS ARE COLLECTED BY PRIVATE RESPONDENT ON ALL ITS COVER NOTES.
II
THE COURT OF APPEALS ERRED IN HOLDING THAT PRIVATE RESPONDENT WAS RELEASED FROM LIABILITY UNDER THE COVER NOTE DUE TO UNREASONABLE DELAY IN GIVING NOTICE OF LOSS BECAUSE THE COURT DISREGARDED THE PROVEN FACT THAT PRIVATE RESPONDENT DID NOT PROMPTLY AND SPECIFICALLY OBJECT TO THE CLAIM ON THE GROUND OF DELAY IN GIVING NOTICE OF LOSS AND, CONSEQUENTLY, OBJECTIONS ON THAT GROUND ARE WAIVED UNDER SECTION 84 OF THE INSURANCE ACT. 5
1. Petitioner contends that the Cover Note was issued with a consideration when, by express stipulation, the cover note is made subject to the terms and conditions of the marine policies, and the payment of premiums is one of the terms of the policies. From this undisputed fact, We uphold petitioner’s submission that the Cover Note was not without consideration for which the respondent court held the Cover Note as null and void, and denied recovery therefrom. The fact that no separate premium was paid on the Cover Note before the loss insured against occurred, does not militate against the validity of petitioner’s contention, for no such premium could have been paid, since by the nature of the Cover Note, it did not contain, as all Cover Notes do not contain particulars of the shipment that would serve as basis for the computation of the premiums. As a logical consequence, no separate premiums are intended or required to be paid on a Cover Note. This is a fact admitted by an official of respondent company, Juan Jose Camacho, in charge of issuing cover notes of the respondent company (p. 33, tsn, September 24, 1965).
At any rate, it is not disputed that petitioner paid in full all the premiums as called for by the statement issued by private respondent after the issuance of the two regular marine insurance policies, thereby leaving no account unpaid by petitioner due on the insurance coverage, which must be deemed to include the Cover Note. If the Note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, the purpose and function of the Cover Note would be set at naught or rendered meaningless, for it is in a real sense a contract, not a mere application for insurance which is a mere offer. 6
It may be true that the marine insurance policies issued were for logs no longer including those which had been lost during loading operations. This had to be so because the risk insured against is not for loss during operations anymore, but for loss during transit, the logs having already been safely placed aboard. This would make no difference, however, insofar as the liability on the cover note is concerned, for the number or volume of logs lost can be determined independently as in fact it had been so ascertained at the instance of private respondent itself when it sent its own adjuster to investigate and assess the loss, after the issuance of the marine insurance policies.
The adjuster went as far as submitting his report to respondent, as well as its computation of respondent’s liability on the insurance coverage. This coverage could not have been no other than what was stipulated in the Cover Note, for no loss or damage had to be assessed on the coverage arising from the marine insurance policies. For obvious reasons, it was not necessary to ask petitioner to pay premium on the Cover Note, for the loss insured against having already occurred, the more practical procedure is simply to deduct the premium from the amount due the petitioner on the Cover Note. The non-payment of premium on the Cover Note is, therefore, no cause for the petitioner to lose what is due it as if there had been payment of premium, for non-payment by it was not chargeable against its fault. Had all the logs been lost during the loading operations, but after the issuance of the Cover Note, liability on the note would have already arisen even before payment of premium. This is how the cover note as a “binder” should legally operate otherwise, it would serve no practical purpose in the realm of commerce, and is supported by the doctrine that where a policy is delivered without requiring payment of the premium, the presumption is that a credit was intended and policy is valid. 7
2. The defense of delay as raised by private respondent in resisting the claim cannot be sustained. The law requires this ground of delay to be promptly and specifically asserted when a claim on the insurance agreement is made. The undisputed facts show that instead of invoking the ground of delay in objecting to petitioner’s claim of recovery on the cover note, it took steps clearly indicative that this particular ground for objection to the claim was never in its mind. The nature of this specific ground for resisting a claim places the insurer on duty to inquire when the loss took place, so that it could determine whether delay would be a valid ground upon which to object to a claim against it.
As already stated earlier, private respondent’s reaction upon receipt of the notice of loss, which was on April 15, 1963, was to set in motion from July 1963 what would be necessary to determine the cause and extent of the loss, with a view to the payment thereof on the insurance agreement. Thus it sent its adjuster to investigate and assess the loss in July, 1963. The adjuster submitted his report on August 23, 1963 and its computation of respondent’s liability on September 14, 1963. From April 1963 to July, 1963, enough time was available for private respondent to determine if petitioner was guilty of delay in communicating the loss to respondent company. In the proceedings that took place later in the Office of the Insurance Commissioner, private respondent should then have raised this ground of delay to avoid liability. It did not do so. It must be because it did not find any delay, as this Court fails to find a real and substantial sign thereof. But even on the assumption that there was delay, this Court is satisfied and convinced that as expressly provided by law, waiver can successfully be raised against private respondent. Thus Section 84 of the Insurance Act provides:
Section 84.-Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of his or if he omits to take objection promptly and specifically upon that ground.
From what has been said, We find duly substantiated petitioner’s assignments of error.
ACCORDINGLY, the appealed decision is set aside and the decision of the Court of First Instance is reinstated in toto with the affirmance of this Court. No special pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez Guerrero, Melencio-Herrera and Plana, JJ., concur.

Footnotes
* Mr. Justice de Castro was designated to sit with the First Division under Special Order No. 225.
1 Record on Appeal, pp. 42-43, p. 72, Rollo.
2 Appendix “A” to Petitioner’s Brief, p. 124. Rollo.
3 Alejandra Cunanan vs. Fidela Nuqui de Lazatin, et al., 74 Phil. 719; Ng Young vs. Ana Villa et al., 93 Phil. 21.
4 pp. 7-11, Brief for the Petitioner, p. 124, Rollo.
5 p. 7, Id p. 124, Rollo.
6 29 AM JUR p. 596.
7 Miller vs. Brooklyn L. Inc., Co. (U. S.) 12 Wall 285, 20 L ed. 39 Am. Jur. New ‘Insurance’ Sec. 1845, p. 907, note 2; Sec. 1079, p. 246, note 20.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-22684 August 31, 1967
PHILIPPINE PHOENIX SURETY & INSURANCE, INC., plaintiff-appellee,
vs.
WOODWORKS, INC., defendant-appellant.
Zosimo Rivas for defendant-appellant.
Manuel O. Chan for plaintiff-appellee.
DIZON, J.:
Appeal upon a question of law taken by Woodworks, Inc. from the judgment of the Court of First Instance of Manila in Civil Case No. 50710 “ordering the defendant, Woodworks, Inc. to pay to the plaintiff, Philippine Phoenix Surety & Insurance, Inc., the sum of P3,522.09 with interest thereon at the legal rate of 6% per annum from the date of the filing of the complaint until fully paid, and costs of the suit.”
Appellee Philippine Phoenix Surety & Insurance Co., Inc. commenced this action in the Municipal Court of Manila to recover from appellant Woodworks, Inc. the sum of P3,522.09, representing the unpaid balance of the premiums on a fire insurance policy issued by appellee in favor of appellant for a term of one year from April 1, 1960 to April 1, 1961. From an adverse decision of said court, Woodworks, Inc. appealed to the Court of First Instance of Manila (Civil Case No. 50710) where the parties submitted the following stipulation of facts, on the basis of which the appealed decision was rendered:
That plaintiff and defendant are both corporations duly organized and existing under and by virtue of the laws of the Philippines;
That on April 1, 1960, plaintiff issued to defendant Fire Policy No. 9652 for the amount of P300,000.00, under the terms and conditions therein set forth in said policy a copy of which is hereto attached and made a part hereof as Annex “A”;
That the premiums of said policy as stated in Annex “A” amounted to P6,051.95; the margin fee pursuant to the adopted plan as an implementation of Republic Act 2609 amounted to P363.72, copy of said adopted plan is hereto attached as Annex “B” and made a part hereof, the documentary stamps attached to the policy was P96.42;
That the defendant paid P3,000.00 on September 22, 1960 under official receipt No. 30245 of plaintiff;
That plaintiff made several demands on defendant to pay the amount of P3,522.09.1äwphï1.ñët
In the present appeal, appellant claims that the court a quo committed the following errors:
I. The lower court erred in stating that in fire insurance policies the risk attached upon the issuance and delivery of the policy to the insured.
II. The lower court erred in deciding that in a perfected contract of insurance non-payment of premium does not cancel the policy.
III. The lower court erred in deciding that the premium in the policy was still collectible when the complaint was filed.
IV. The lower court erred in deciding that a partial payment of the premium made the policy effective during the whole period of the policy.
It is clear from the foregoing that on April 1, 1960 Fire Insurance Policy No. 9652 was issued by appellee and delivered to appellant, and that on September 22 of the same year, the latter paid to the former the sum of P3,000.00 on account of the total premium of P6,051.95 due thereon. There is, consequently, no doubt at all that, as between the insurer and the insured, there was not only a perfected contract of insurance but a partially performed one as far as the payment of the agreed premium was concerned. Thereafter the obligation of the insurer to pay the insured the amount for which the policy was issued in case the conditions therefor had been complied with, arose and became binding upon it, while the obligation of the insured to pay the remainder of the total amount of the premium due became demandable.
We can not agree with appellant’s theory that non-payment by it of the premium due, produced the cancellation of the contract of insurance. Such theory would place exclusively in the hands of one of the contracting parties the right to decide whether the contract should stand or not. Rather the correct view would seem to be this: as the contract had become perfected, the parties could demand from each other the performance of whatever obligations they had assumed. In the case of the insurer, it is obvious that it had the right to demand from the insured the completion of the payment of the premium due or sue for the rescission of the contract. As it chose to demand specific performance of the insured’s obligation to pay the balance of the premium, the latter’s duty to pay is indeed indubitable.
Having thus resolved that the fourth and last assignment of error submitted in appellant’s brief is without merit, the first three assignments of error must likewise be overruled as lacking in merit.
Wherefore, the appealed decision being in accordance with law and the evidence, the same is hereby affirmed, with costs.
Concepcion, C.J., Reyes, J.B.L., Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Tibay, et. al v Court of Appeals
GR No. 119655, 24 May 1996
Bellosillo, [J.]

Facts:

1. In January 22 1987, the Petitioner Violeta Tibay (and Nicolas Roralso) obtained a fire insurance policy for their 2-storey from the Private Respondent Fortune Life Insurance Co. The said policy covers the period from January 23, 1987 until January 23, 1988 or one year for P600, 000 and at the agreed premium of P2, 983.50. On January 23 or the next day, petitioner made a partial payment of the premium with P600.

2. Unfortunately, on March 8 1987, the said building was burned to the ground. It was only two days after the fire that Petitioner Violeta advanced the full payment of the policy premium which was accepted by the insurer. On this same day, petitioner likewise filed the claim that was then referred to the insurer’s adjuster. Investigation of the cause of fire commenced and the petitioner submitted the required proof of loss.

3. Despite that, the private respondent Fortune refused to pay the insurance claim saying it as not liable due to the non-payment by petitioner of the full amount of the premium as stated in the policy.

4. The petitioner then brought the matter to the Insurance Commission but nothing good came out. Hence this case filed.

5. The trial court rule in favor of the petitioner. Upon appeal, the Court of Appeals reversed the lower court’s decision and held that Fortune is not liable but ordered it to return the premium paid with interest to the petitioner. Hence, this petition for review.

Issue: W/N the partial payment of the premium rendered the insurance policy ineffective?

YES.
1. Insurance is a contract whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. The consideration is the premium, which must be paid at the time, way and manner as stated in the policy, and if not so paid as in this case, the policy is therefore forfeited by its own terms. In this case, the policy taken out by the petitioner provides for payment of premium in full. Since the petitioner only made partial payment with the remaining balance paid only after the fire or peril insured against has occurred, the insurance contract therefore did not take effect barring the insured from claiming or collecting from the loss of her building.

2. Under Section 77 of the Insurance Code (Philippine), it provides therein that “An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies.” Herein case, the controversy is on the payment of the premium. It cannot be disputed that premium is the elixir vitae of the insurance business because the insurer is required by law to maintain a reserve fund to meet its contingent obligations to the public. Due to this, it is imperative that the premium is paid fully and promptly. To allow the possibility of paying the premium even after the peril has ensued will surely undermine the foundation of the insurance business.
UCPB v Masagana G.R. No. 137172. April 4, 2001
C.J. Davide

Facts:
In our decision of 15 June 1999 in this case, we reversed and set aside the assailed decision[1] of the Court of Appeals, which affirmed with modification the judgment of the trial court (a) allowing Respondent to consign the sum of P225,753.95 as full payment of the premiums for the renewalof the five insurance policies on Respondent’s properties; (b) declaring the replacement-renewalpolicies effective and binding from 22 May 1992 until 22 May 1993; and (c) ordering Petitioner to pay Respondent P18,645,000.00 as indemnity for the burned properties covered by the renewal-replacement policies. The modification consisted in the (1) deletion of the trial court’s declaration that three of the policies were in force from August 1991 to August 1992; and (2) reduction of the award of the attorney’s fees from 25% to 10% of the total amount due the Respondent.
Masagana obtained from UCPB five (5) insurance policies on its Manila properties.
The policies were effective from May 22, 1991 to May 22, 1992. On June 13, 1992, Masagana’sproperties were razed by fire. On July 13, 1992, plaintiff tendered five checks for P225,753.45 asrenewal premium payments. A receipt was issued. On July 14, 1992, Masagana made its formal demand for indemnification for the burned insured properties. UCPB then rejected Masagana’s claims under the argument that the fire took place before the tender of payment.
Hence Masagana filed this case.
The Court of Appeals disagreed with UCPB’s argument that Masagana’s tender of payment of thepremiums on 13 July 1992 did not result in the renewal of the policies, having been made beyond the effective date of renewal as provided under Policy Condition No. 26, which states:
26. Renewal Clause. — Unless the company at least forty five days in advance of the end of the policy period mails or delivers to the assured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages, the assured shall be entitled to renew the policy upon payment of the premium due on the effective date of renewal.
Both the Court of Appeals and the trial court found that sufficient proof exists that Masagana, which had procured insurance coverage from UCPB for a number of years, had been granted a 60 to 90-day credit term for the renewal of the policies. Such a practice had existed up to the time the claims were filed. Most of the premiums have been paid for more than 60 days after the issuance. Also, no timely notice of non-renewal was made by UCPB.
The Supreme Court ruled against UCPB in the first case on the issue of whether the fireinsurance policies issued by petitioner to the respondent covering the period from May 22, 1991 to May 22, 1992 had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date and after the occurrence of the risk insuredagainst.
UCPB filed a motion for reconsideration.
The Supreme Court, upon observing the facts, affirmed that there was no valid notice of non-renewal of the policies in question, as there is no proof at all that the notice sent by ordinary mail was received by Masagana. Also, the premiums were paid within the grace period.

Issue: Whether Section 77 of the Insurance Code of 1978 must be strictly applied to Petitioner’s advantage despite its practice of granting a 60- to 90-day credit term for the payment ofpremiums.

Held: No. Petition denied.

Ratio:
Section 77 of the Insurance Code provides: No policy or contract of insurance issued by aninsurance company is valid and binding unless and until the premium thereof has been paid…
An exception to this section is Section 78 which provides: Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until premium is actually paid.
Makati Tuscany v Court of Appeals- Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss.
Section 78 allows waiver by the insurer of the condition of prepayment and makes the policy binding despite the fact that premium is actually unpaid. Section 77 does not expressly prohibit an agreement granting credit extension. At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted.
The Tuscany case has provided another exception to Section 77 that the insurer may grant credit extension for the payment of the premium. If the insurer has granted the insured a credit term forthe payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term.
Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit term within which to pay the premiums. That agreement is not against the law, morals, good customs, public order or public policy. The agreement binds the parties.
It would be unjust if recovery on the policy would not be permitted against Petitioner, which had consistently granted a 60- to 90-day credit term for the payment of premiums. Estoppel bars it from taking refuge since Masagana relied in good faith on such practice. Estoppel then is the fifth exception.

EN BANC
[G.R. No. 137172. April 4, 2001]
UCPB GENERAL INSURANCE CO. INC., petitioner, vs. MASAGANA TELAMART, INC., respondent.
R E S O L U T I O N
DAVIDE, JR., C.J.:
In our decision of 15 June 1999 in this case, we reversed and set aside the assailed decision[1] of the Court of Appeals, which affirmed with modification the judgment of the trial court (a) allowing Respondent to consign the sum of P225,753.95 as full payment of the premiums for the renewal of the five insurance policies on Respondent’s properties; (b) declaring the replacement-renewal policies effective and binding from 22 May 1992 until 22 May 1993; and (c) ordering Petitioner to pay Respondent P18,645,000.00 as indemnity for the burned properties covered by the renewal-replacement policies. The modification consisted in the (1) deletion of the trial court’s declaration that three of the policies were in force from August 1991 to August 1992; and (2) reduction of the award of the attorney’s fees from 25% to 10% of the total amount due the Respondent.
The material operative facts upon which the appealed judgment was based are summarized by the Court of Appeals in its assailed decision as follows:
Plaintiff [herein Respondent] obtained from defendant [herein Petitioner] five (5) insurance policies (Exhibits “A” to “E”, Record, pp. 158-175) on its properties [in Pasay City and Manila]….
All five (5) policies reflect on their face the effectivity term: “from 4:00 P.M. of 22 May 1991 to 4:00 P.M. of 22 May 1992.” On June 13, 1992, plaintiff’s properties located at 2410-2432 and 2442-2450 Taft Avenue, Pasay City were razed by fire. On July 13, 1992, plaintiff tendered, and defendant accepted, five (5) Equitable Bank Manager’s Checks in the total amount of P225,753.45 as renewal premium payments for which Official Receipt Direct Premium No. 62926 (Exhibit “Q”, Record, p. 191) was issued by defendant. On July 14, 1992, Masagana made its formal demand for indemnification for the burned insured properties. On the same day, defendant returned the five (5) manager’s checks stating in its letter (Exhibit “R”/”8”, Record, p. 192) that it was rejecting Masagana’s claim on the following grounds:
“a) Said policies expired last May 22, 1992 and were not renewed for another term;
b) Defendant had put plaintiff and its alleged broker on notice of non-renewal earlier; and
c) The properties covered by the said policies were burned in a fire that took place last June 13, 1992, or before tender of premium payment.”
(Record, p. 5)
Hence Masagana filed this case.
The Court of Appeals disagreed with Petitioner’s stand that Respondent’s tender of payment of the premiums on 13 July 1992 did not result in the renewal of the policies, having been made beyond the effective date of renewal as provided under Policy Condition No. 26, which states:
26. Renewal Clause. — Unless the company at least forty five days in advance of the end of the policy period mails or delivers to the assured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages, the assured shall be entitled to renew the policy upon payment of the premium due on the effective date of renewal.
Both the Court of Appeals and the trial court found that sufficient proof exists that Respondent, which had procured insurance coverage from Petitioner for a number of years, had been granted a 60 to 90-day credit term for the renewal of the policies. Such a practice had existed up to the time the claims were filed. Thus:
Fire Insurance Policy No. 34658 covering May 22, 1990 to May 22, 1991 was issued on May 7, 1990 but premium was paid more than 90 days later on August 31, 1990 under O.R. No. 4771 (Exhs. “T” and “T-1”). Fire Insurance Policy No. 34660 for Insurance Risk Coverage from May 22, 1990 to May 22, 1991 was issued by UCPB on May 4, 1990 but premium was collected by UCPB only on July 13, 1990 or more than 60 days later under O.R. No. 46487 (Exhs. “V” and “V-1”). And so were as other policies: Fire Insurance Policy No. 34657 covering risks from May 22, 1990 to May 22, 1991 was issued on May 7, 1990 but premium therefor was paid only on July 19, 1990 under O.R. No. 46583 (Exhs. “W” and “W-1”). Fire Insurance Policy No. 34661 covering risks from May 22, 1990 to May 22, 1991 was issued on May 3, 1990 but premium was paid only on July 19, 1990 under O.R. No. 46582 (Exhs. “X’ and “X-1”). Fire Insurance Policy No. 34688 for insurance coverage from May 22, 1990 to May 22, 1991 was issued on May 7, 1990 but premium was paid only on July 19, 1990 under O.R. No. 46585 (Exhs. “Y” and “Y-1”). Fire Insurance Policy No. 29126 to cover insurance risks from May 22, 1989 to May 22, 1990 was issued on May 22, 1989 but premium therefor was collected only on July 25, 1990[sic] under O.R. No. 40799 (Exhs. “AA” and “AA-1”). Fire Insurance Policy No. HO/F-26408 covering risks from January 12, 1989 to January 12, 1990 was issued to Intratrade Phils. (Masagana’s sister company) dated December 10, 1988 but premium therefor was paid only on February 15, 1989 under O.R. No. 38075 (Exhs. “BB” and “BB-1”). Fire Insurance Policy No. 29128 was issued on May 22, 1989 but premium was paid only on July 25, 1989 under O.R. No. 40800 for insurance coverage from May 22, 1989 to May 22, 1990 (Exhs. “CC” and “CC-1”). Fire Insurance Policy No. 29127 was issued on May 22, 1989 but premium was paid only on July 17, 1989 under O.R. No. 40682 for insurance risk coverage from May 22, 1989 to May 22, 1990 (Exhs. “DD” and “DD-1”). Fire Insurance Policy No. HO/F-29362 was issued on June 15, 1989 but premium was paid only on February 13, 1990 under O.R. No. 39233 for insurance coverage from May 22, 1989 to May 22, 1990 (Exhs. “EE” and “EE-1”). Fire Insurance Policy No. 26303 was issued on November 22, 1988 but premium therefor was collected only on March 15, 1989 under O.R. NO. 38573 for insurance risks coverage from December 15, 1988 to December 15, 1989 (Exhs. “FF” and “FF-1”).
Moreover, according to the Court of Appeals the following circumstances constitute preponderant proof that no timely notice of non-renewal was made by Petitioner:
(1) Defendant-appellant received the confirmation (Exhibit “11”, Record, p. 350) from Ultramar Reinsurance Brokers that plaintiff’s reinsurance facility had been confirmed up to 67.5% only on April 15, 1992 as indicated on Exhibit “11”. Apparently, the notice of non-renewal (Exhibit “7,” Record, p. 320) was sent not earlier than said date, or within 45 days from the expiry dates of the policies as provided under Policy Condition No. 26; (2) Defendant insurer unconditionally accepted, and issued an official receipt for, the premium payment on July 1[3], 1992 which indicates defendant’s willingness to assume the risk despite only a 67.5% reinsurance cover[age]; and (3) Defendant insurer appointed Esteban Adjusters and Valuers to investigate plaintiff’s claim as shown by the letter dated July 17, 1992 (Exhibit “11”, Record, p. 254).
In our decision of 15 June 1999, we defined the main issue to be “whether the fire insurance policies issued by petitioner to the respondent covering the period from May 22, 1991 to May 22, 1992… had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date and after the occurrence of the (fire) risk insured against.” We resolved this issue in the negative in view of Section 77 of the Insurance Code and our decisions in Valenzuela v. Court of Appeals[2]; South Sea Surety and Insurance Co., Inc. v. Court of Appeals[3]; and Tibay v. Court of Appeals.[4] Accordingly, we reversed and set aside the decision of the Court of Appeals.
Respondent seasonably filed a motion for the reconsideration of the adverse verdict. It alleges in the motion that we had made in the decision our own findings of facts, which are not in accord with those of the trial court and the Court of Appeals. The courts below correctly found that no notice of non-renewal was made within 45 days before 22 May 1992, or before the expiration date of the fire insurance policies. Thus, the policies in question were renewed by operation of law and were effective and valid on 30 June 1992 when the fire occurred, since the premiums were paid within the 60- to 90-day credit term.
Respondent likewise disagrees with our ruling that parties may neither agree expressly or impliedly on the extension of credit or time to pay the premium nor consider a policy binding before actual payment. It urges the Court to take judicial notice of the fact that despite the express provision of Section 77 of the Insurance Code, extension of credit terms in premium payment has been the prevalent practice in the insurance industry. Most insurance companies, including Petitioner, extend credit terms because Section 77 of the Insurance Code is not a prohibitive injunction but is merely designed for the protection of the parties to an insurance contract. The Code itself, in Section 78, authorizes the validity of a policy notwithstanding non-payment of premiums.
Respondent also asserts that the principle of estoppel applies to Petitioner. Despite its awareness of Section 77 Petitioner persuaded and induced Respondent to believe that payment of premium on the 60- to 90-day credit term was perfectly alright; in fact it accepted payments within 60 to 90 days after the due dates. By extending credit and habitually accepting payments 60 to 90 days from the effective dates of the policies, it has implicitly agreed to modify the tenor of the insurance policy and in effect waived the provision therein that it would pay only for the loss or damage in case the same occurred after payment of the premium.
Petitioner filed an opposition to the Respondent’s motion for reconsideration. It argues that both the trial court and the Court of Appeals overlooked the fact that on 6 April 1992 Petitioner sent by ordinary mail to Respondent a notice of non-renewal and sent by personal delivery a copy thereof to Respondent’s broker, Zuellig. Both courts likewise ignored the fact that Respondent was fully aware of the notice of non-renewal. A reading of Section 66 of the Insurance Code readily shows that in order for an insured to be entitled to a renewal of a non-life policy, payment of the premium due on the effective date of renewal should first be made. Respondent’s argument that Section 77 is not a prohibitive provision finds no authoritative support.
Upon a meticulous review of the records and reevaluation of the issues raised in the motion for reconsideration and the pleadings filed thereafter by the parties, we resolved to grant the motion for reconsideration. The following facts, as found by the trial court and the Court of Appeals, are indeed duly established:
1. For years, Petitioner had been issuing fire policies to the Respondent, and these policies were annually renewed.
2. Petitioner had been granting Respondent a 60- to 90-day credit term within which to pay the premiums on the renewed policies.
3. There was no valid notice of non-renewal of the policies in question, as there is no proof at all that the notice sent by ordinary mail was received by Respondent, and the copy thereof allegedly sent to Zuellig was ever transmitted to Respondent.
4. The premiums for the policies in question in the aggregate amount of P225,753.95 were paid by Respondent within the 60- to 90-day credit term and were duly accepted and received by Petitioner’s cashier.
The instant case has to rise or fall on the core issue of whether Section 77 of the Insurance Code of 1978 (P.D. No. 1460) must be strictly applied to Petitioner’s advantage despite its practice of granting a 60- to 90-day credit term for the payment of premiums.
Section 77 of the Insurance Code of 1978 provides:
SEC. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies.
This Section is a reproduction of Section 77 of P.D. No. 612 (The Insurance Code) promulgated on 18 December 1974. In turn, this Section has its source in Section 72 of Act No. 2427 otherwise known as the Insurance Act as amended by R.A. No. 3540, approved on 21 June 1963, which read:
SEC. 72. An insurer is entitled to payment of premium as soon as the thing insured is exposed to the peril insured against, unless there is clear agreement to grant the insured credit extension of the premium due. No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid. (Underscoring supplied)
It can be seen at once that Section 77 does not restate the portion of Section 72 expressly permitting an agreement to extend the period to pay the premium. But are there exceptions to Section 77?
The answer is in the affirmative.
The first exception is provided by Section 77 itself, and that is, in case of a life or industrial life policy whenever the grace period provision applies.
The second is that covered by Section 78 of the Insurance Code, which provides:
SEC. 78. Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until premium is actually paid.
A third exception was laid down in Makati Tuscany Condominium Corporation vs. Court of Appeals,[5] wherein we ruled that Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss. We said therein, thus:
We hold that the subject policies are valid even if the premiums were paid on installments. The records clearly show that the petitioners and private respondent intended subject insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. The initial insurance contract entered into in 1982 was renewed in 1983, then in 1984. In those three years, the insurer accepted all the installment payments. Such acceptance of payments speaks loudly of the insurer’s intention to honor the policies it issued to petitioner. Certainly, basic principles of equity and fairness would not allow the insurer to continue collecting and accepting the premiums, although paid on installments, and later deny liability on the lame excuse that the premiums were not prepaid in full.
Not only that. In Tuscany, we also quoted with approval the following pronouncement of the Court of Appeals in its Resolution denying the motion for reconsideration of its decision:
While the import of Section 77 is that prepayment of premiums is strictly required as a condition to the validity of the contract, We are not prepared to rule that the request to make installment payments duly approved by the insurer would prevent the entire contract of insurance from going into effect despite payment and acceptance of the initial premium or first installment. Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to make the policy binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit extension, and such an agreement is not contrary to morals, good customs, public order or public policy (De Leon, The Insurance Code, p. 175). So is an understanding to allow insured to pay premiums in installments not so prescribed. At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted.
By the approval of the aforequoted findings and conclusion of the Court of Appeals, Tuscany has provided a fourth exception to Section 77, namely, that the insurer may grant credit extension for the payment of the premium. This simply means that if the insurer has granted the insured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term.
Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit term within which to pay the premiums. That agreement is not against the law, morals, good customs, public order or public policy. The agreement binds the parties. Article 1306 of the Civil Code provides:
ART. 1306. The contracting parties may establish such stipulations clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
Finally in the instant case, it would be unjust and inequitable if recovery on the policy would not be permitted against Petitioner, which had consistently granted a 60- to 90-day credit term for the payment of premiums despite its full awareness of Section 77. Estoppel bars it from taking refuge under said Section, since Respondent relied in good faith on such practice. Estoppel then is the fifth exception to Section 77.
WHEREFORE, the Decision in this case of 15 June 1999 is RECONSIDERED and SET ASIDE, and a new one is hereby enteredDENYING the instant petition for failure of Petitioner to sufficiently show that a reversible error was committed by the Court of Appeals in its challenged decision, which is hereby AFFIRMED in toto.
No pronouncement as to cost.
SO ORDERED.
Bellosillo, Kapunan, Mendoza, Panganiban, Buena, Gonzaga-Reyes, Ynares-Santiago, De Leon, Jr., and Sandoval-Gutierrez, JJ.,concur.
Vitug, J., Please see separate opinion.
Melo, J., I join the dissents of Justices Vitug and Pardo.
Pardo, J., I dissent. See attached.
Puno and Quisumbing, JJ., I join the dissent of J. Pardo.

[1] Rollo, 38.
[2] 191 SCRA 1 [1990].
[3] 244 SCRA 744 [1995].
[4] 257 SCRA 126 [1996] (erroneously stated in the decision as 275 SCRA, 126).
[5] 215 SCRA 463 [1992].

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
A.M. No. 21901-96 June 27, 1978
REPARATIONS COMMISSION, plaintiff-appellants,
vs.
UNIVERSAL DEEP-SEA FISHING CORPORATION and MANILA SURETY AND FIDELITY CO., INC., defendant-appellants.
MANILA SURETY & FIDELITY CO., INC., third-party plaintiff-appellee,
vs.
PABLO S. SARMIENTO, third-party defendant-appellant.

CONCEPCION JR., J.:
Appeal of the defendant Universal Deep-Sea Fishing Corporation, defendant and third-party plaintiff Manila Surety and Fidelity Co., Inc., and third-party defendant Pablo Sarmiento from the decision of the Court of First Instance of Manila, the dispositive portion of which reads as follows:
WHEREFORE, judgment is rendered as follows:
1. The defendant Universal Deep-Sea Fishing Corporation is hereby sentenced to pay the plaintiff the sum of P100,242.04 in the first cause of action, P141,343.45 in the second cause of action and P54,500.00 in the third cause of action, all with interest at the rate of 6% per annum from August 10, 1962, the date of the filing of the complaint, until fully paid;
2. Defendant Manila Surety & Fidelity Co., Inc., is hereby sentenced to pay the plaintiff, jointly and severally with defendant Universal Deep-Sea Fishing Corporation, the sum of P53,643.00 in the first cause of action, P68,777.77 in the second cause of action and P54,508.00 in the third cause of action;
3. Defendant Universal Deep-Sea Fishing Corporation and Pablo Sarmiento are hereby sentenced to pay, jointly and severally, the Manila Surety & Fidelity Co., Inc., the sum of P53,643.00 and P68,777.77 with interest thereon at the rate of 12% per annum from August 10, 1962 until fully paid plus P2,000.00 as attorney’s fees;
4. Defendant Universal Deep-Sea Fishing Corporation is hereby sentenced to pay the Manila Surety & Fidelity Co., Inc., the sum of P54,508.00 with interest thereon at the rate of 12% per annum from August 10, 1962, until fully paid;
5. Defendant Universal Deep-Sea Fishing Corporation shall pay the costs. 1
It is not disputed that the Universal Deep-Sea Fishing Corporation, hereinafter referred to as UNIVERSAL for short. was awarded six (6) trawl boats by the. Reparations Commission as end-user of reparations goods. These fishing boats, christened the M/S UNIFISH 1, M/S UNIFISH 2. M/S UNIFISH 3. M/S UNIFISH 4, M/S UNIFISH 5, and M/S UNIFISH 6. were delivered to UNIVERSAL two at a time, f.o.b. Japanese port.
The M/S UNIFISH 1 and M/S UNIFISH 2, with an aggregate purchase price of P536,428.44, were delivered to UNIVERSAL on November 20,1958, and the contract of Conditional Purchase and Sale of Reparations Goods, executed by and between the parties on February 12, 1960, provided among others, that “the first installment representing 10% of the amount or FIFTY THREE THOUSAND SIX HUNDRED FORTY TWO PESOS AND EIGHTY FOUR CENTAVOS (P53,642.84) shall be paid within 24 months from the date of complete delivery thereof, the balance shall be paid in the manner herein stated as shown in the Schedule of Payments, 2 … to wit:
TOTAL F.O.B. COST – P536,428.44
AMOUNT OF 1st INSTALLMENT (10% OF F.O.B. COST) – P53,642.84
DUE DATE OF 1st INSTALLMENT – May 8, 1961
TERM: Ten (10) EQUAL YEARLY INSTALLMENTS
RATE OF INTEREST: THREE PERCENT (3%) PER ANNUM
No. of Installments Date Due Amount 1 May 8, 1962 P56,597.20 2 May 8, 1963 P56,597.20 3 May 8, 1964 P56,597.20 4 May 8, 1965 P56,597.20 5 May 8, 1966 P56,597.2 6 May 8, 1967 P56,597.20 7 May 8, 1968 P56,597.20 8 May 8, 1969 P56,597.20 9 May 8, 1970 P56,597.20 10 May 8, 1971 P56,597.20 To guarantee the faithful compliance with the obligations under said contract, a performance bond in the amount of P53,643.00, with UNIVERSAL as principal and the Manila Surety & Fidelity Co., Inc., as surety, was executed in favor of the Reparations Commission. 3 A Corresponding indemnity agreement was executed to indemnify the surety company for any damage, loss charges, etc., which it may sustain or incur as a consequence of having become a surety upon the performance bond. 4
The M/S UNIFISH 3 and M/S UNIFISH 4, with a total purchase price of P687,777.76 were delivered to UNIVERSAL on April 20, 1959 and the Contract of Conditional Purchase and Sale Reparations Goods, dated November 25, 1959, 5 provided that “the first installment representing 10% of the amount or SIXTY-EIGHT THOUSAND SEVEN HUNDRED SEVENTY-SEVEN PESOS AND SEVENTY-SEVEN CENTAVOS shall be paid within 24 months from the date of complete delivery thereof, the balance shall be paid in the manner herein stated as shown in the Schedule of Payments, . . . , to wit:
TOTAL F.O.B. COSTS – P687,777.76
AMOUNT OF 1st INSTALLMENT (10% of F.O.B. COST) – P68,777.77
DUE DATE OF 1st INSTALLMENT – July, 1961
TERM: Ten (10) EQUAL YEARLY INSTALLMENTS
RATE OF INTEREST: THREE PERCENT (3%) PER ANNUM
No. of Installments Due Date Amount 1 July, 1962 P72,565.68 2 July, 1963 P72,565.68 3 July, 1964 P72,565.68 4 July, 1965 P72,565.68 5 July, 1966 P72,565.68 6 July, 1967 P72,565.68 7 July, 1968 P72,565.68 8 July, 1969 P72,565.68 9 July, 1970 P72,565.68 10 July, 1971 P72,565.68 A performance bond in the amount of P68,777.77, issued by the Manila Surety & Fidelity Co., Inc., was also submitted to guarantee the faithful compliance with the obligations set forth in the contract, 6 and indemnity agreement was executed in favor of the surety company in consideration of the said bond. 7
The delivery of the M/S UNIFISH 5 and M/S UNIFISH 6 is covered by a contract for the Utilization of Reparations Goods (M/S “UNIFISH 5” and M/S “UNIFISH 6”) executed by the parties on February 12, 1960, 8 and the Schedule of Payments attached thereto, provided, as follows:
AMOUNT OF 1st INSTALLMENT (10% of F.O.B. COST) – P54,500.00
DUE DATE OF 1st INSTALLMENT – Oct. 17, 1961
TERM: TEN (10) EQUAL YEARLY INSTALLMENTS
RATE OF INTEREST: THREE PERCENT (3%) PER ANNUM
No. of Installments Date Due Amount 1 Oct. 17, 1962 P57,501.57 2 Oct. 17, 1963 P57,501.57 3 Oct. 17, 1964 P57,501.57 4 Oct. 17, 1965 P57,501.57 5 Oct. 17, 1966 P57,501.57 6 Oct. 17, 1967 P57,501.57 7 Oct. 17, 1968 P57,501.57 8 Oct. 17, 1969 P57,501.57 9 Oct. 17, 1970 P57,501.57 10 Oct. 17, 1971 P57,501.57 9 A performance bond in judgment, amount of P54,500.00 issued by judgment, Manila Surety & Fidelity Co., Inc., 10was submitted, and an indemnity agreement was executed by UNIVERSAL in favor of judgment, surety company. 11
On August 10, 1962, judgment, Reparations Commission instituted judgment, present action against UNIVERSAL and judgment, surety company to recover various amounts of money due under these contracts. In answer, UNIVERSAL claimed that judgment, amounts of money sought to be collected are not yet due and demandable. The surety company also contended that judgment, action is premature, but set up a cross-claim against UNIVERSAL for reimbursement of whatever amount of money it may have to pay judgment, plaintiff by reason of judgment, complaint, including interest, and for judgment, collection of accumulated and unpaid premiums on judgment, bonds with interest thereon. With leave of courts first obtained, judgment, surety company filed a third-party complaint against Pablo S. Sarmiento, one of the indemnitors in judgment, indemnity agreements. The third-party defendant Pablo S. Sarmiento denied personal liability claiming that he signed judgment, indemnity agreements in question in his capacity as acting general manager of UNIVERSAL. After appropriate proceedings and upon judgment, preceding facts, judgment, trial court rendered judgment, judgment hereinbefore stated. hence, this appeal.
(1) The principal issue for resolution is whether or not judgment, first installments under judgment, three (3) contracts of conditional purchase and sale of reparations goods were already due and demandable when judgment, complaint was filed. UNIVERSAL contends that there is an obscurity in judgment, terms of judgment, contracts in question which were caused by the plaintiff as to judgment, amounts and due dates of judgment, first installments which should have been first fixed before a creditor can demand its payment from judgment, debtor. To be explicit. counsel points to judgment, Schedule of Payment attached to, and forming a part of, the contract for judgment, purchase and sale of judgment, M/S UNIFISH 1 and M/S UNIFISH 2 which states that judgment, amount of first installment is P53,642.84 and judgment, due date of its payment is May 8, 1961. However, judgment, amount of the first of succeeding itemized installments is P56,597.20 and judgment, due date is May 8, 1962. In the case of the M/S UNIFISH 3 and M/S UNIFISH 4, the first installments are P68,777.77 and due in July, 1961 and P72,565.68 and due in July 1962, respectively. In the contract for the purchase and sale of the M/S UNIFISH 5 and M/S UNIFISH 6, the amounts indicated as first installments are P54,500.00 and P57,501.57, and the due dates of payment are October 17, 1961 and October 17, 1962, respectively.
The terms of the contracts for the purchase and sale of the reparations vessels, however, are very clear and leave no doubt as to the intent of the contracting parties. Thus, in the contract concerning the M/S UNIFISH 1 and M/S UNIFISH 2, the parties expressly agreed that the first installment representing 10% of the purchase price or P53,642.84 shall be paid within 24 months from the date of complete delivery of the vessel or on May 8, 1961, and the balance to be paid in ten (10) equal yearly installments. The amount of P56,597.20 due on May 8, 1962, which is also claimed to be a “first installment,” is but the first of the ten (10) equal yearly installments of balance of judgment, purchase price. In judgment, case of Reparations Commission vs. Northern Lines, Inc. et al., 12 where judgment, Schedule of Payments, likewise on RC-LEGAL DEPT FORM NO. 1, also allegedly indicated two (2) due dates for judgment, payment of judgment, first installment, judgment, Court said:
(a) The major premise in appellants’ process of reasoning is that the first installments due on April 25, 1963, and May 26, 1963, are ‘first installments. although they are not so designated in judgment, schedule appended to each of judgment, contracts between judgment, parties. Appellant’s, moreover, assume that judgment, ‘first’ installment is included in judgment, ten (10) equal yearly installments’ mentioned subsequently to said ‘first’ installment. In feet, however, only one installment is labeled as ‘first’ in each one of said schedules, and that is judgment, installment due on ‘April 25, 1962’ – as regards M/S Don Salvador or Magsaysay – and that due on ‘May 26, 1962’- as regards M/S Don Amando or Estancia. The schedules do not describe judgment, ‘ten (10) equal yearly installments’ -following the one characterized therein as ‘first’ – meaning ‘number,’ not order or sequence, of installments – and the numerals 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 written before each of said ‘ten (10) equal yearly installments following the ‘first’ to accrue after the due date of said ‘first’ installment. Just the same, the parties have not so described (as ‘first’) – in the schedules forming part of their contracts – the installments numbered ‘1’ in the list contained in each. Moreover, considering that the words ‘TERMS: Ten (10) EQUAL YEARLY INSTALLMENTS,’ appear after the lines reading: ‘AMOUNT OF 1st INSTALLMENT (10% OF F.O.B. COSTS) P174,761.42’ and DUE DATE OF 1st INSTALLMENT April 25, 1962 (or May 26, 1962) and that, subsequently to said ‘TERM: Ten (10) EQUAL YEARLY INSTALLMENTS,’ there is a list of ten (10) equal yearly installments, it is clear that the latter do notinclude the one designated as ‘first’ installment.
xxx xxx xxx
(b) The pertinent part of Section 12 of Rep. Act No. 1789, pursuant to which the vessels in question were sold to the Buyer reads:
. . . Capital goods . . . disposed of to private parties as provided for in subsection (a) of Section two hereof shall be sold on a cash or credit basis, under rules and regulations as may be determined by the Commission. Sales on a credit basis shall be payable in installments: Provided, That judgment, first installment shall be paid within twenty-four months after complete delivery of judgment, capital goods and judgment, balance within a period not exceeding ten years, . . . plus judgment, service provided for in section ten thereof; Provided further, That judgment, unpaid balance of judgment, price thereof shall bear interest at judgment, rate of not more than three percent per annum. . . . .
It should be noted that, pursuant to judgment, schedules attached to judgment, contracts with judgment, Buyer, judgment, ‘complete delivery’ of judgment, vessels took place on April 25, and May 26, 1960, respectively, so that judgment, the 24 months taxed by law for judgment, payment of judgment, ‘First installment expired on April 25, 1962 and May 26,1962, which are judgment, very dates stated in judgment, aforementioned schedules for judgment, payment of judgment, respective ‘1st’ installments. What is more, in view of said legal provision, judgment, Commission had no authority to agree that the 1st installment shall be paid on any later date, and judgment, Buyer must have been aware of this fact. Hence, judgment, parties could not have intended judgment, first installments to become due on April 25, and May 26, 1963 It is, likewise, obvious – particularly when considered in relation to judgment, provision above quoted – that judgment, ‘ten (10) equal yearly installments.’ mentioned in the schedules, refer to the ‘balance’ of the price to be paid by the buyer,after deducting judgment, ‘first’ installment, so hat, altogether, there would be ‘eleven’ installments, namely, the first , which would be the 10% of the F.O.B. cost of the vessel – as agreed upon between ‘The Governments of the Philippines and Japan – and ‘ten (10) yearly installments,’ representing the balance of “he amount due to he Commission from judgment, Buyer, including tile interest thereon.
Viewing judgment, contracts between judgment, parties in judgment, light of the foregoing exposition, judgment, first installment on judgment, M/S UNIFISH 1 and M/S UNIFISH 2 of judgment, amount of P53,642.84 was due on May 8, 1961, while judgment, first installments on judgment, M/S UNIFISH 3 and M/S UNIFISH 4, and judgment, M/S UNIFISH 5 and M/S UNIFISH 6 in judgment, amounts of P68,777.77 and P54,500.00 were due on July 31, 1961 and October 17, 1961, respectively. Accordingly judgment, obligation of UNIVERSAL to pay judgment, first installments on the purchase price of judgment, six (6) reparations vessels was already due and demandable when the present action was commenced on August 10, 1962. Also due and demanded from UNIVERSAL were the first of the ten (10) equal yearly installments on the balance of the purchase price of the M/S UNIFISH I and M/S UNIFISH 2 in the amount of P56,597.20 and P72,565.68 on judgment, M/S UNIFISH 3 and M/S UNIFISH 4. The first accrued on May 8, 1962, while judgment, second fell due on July 31, 1962.
(2) The claim of judgment, surety company to the effect that the trial court erred in not awarding it the amount of P7,251.42, as premium is the performance bonds, is well taken. The payment of premiums on the bonds to the surety company had been expressly undertaken by UNIVERSAL in the indemnity agreements executed by it in favor of judgment, surety company. The premium is judgment, consideration for furnishing judgment, bonds and judgment, obligation to pay judgment, same subsists for as long as judgment, liability of judgment, surety shall exist. 13 Hence, UNIVERSAL should pay judgment, amount of P7,251.42 to judgment, surety company.
(3) The surety company also claims that judgment, trial court erred in not applying judgment, amount of P10,000.00, paid as down payment by UNIVERSAL to judgment, Reparations Commission, to judgment, guaranteed indebtedness. According to judgment, surety company, under Article 1254 of judgment, Civil rode, where there is no imputation of payment made by either judgment, debtor or creditor, The debt which is the most onerous to the debtor shall be deemed to have been satisfied, so that the amount of P10,000.00 paid by UNIVERSAL as down payment on the purchase of the, M/S UNIFISH 1 and M/S UNIFISH 2 should be applied to the guaranteed portion of the debt, this releasing part of the liability hence the obligation of ‘The surety company shall be only P43,643.00, instead of P53,643.00.
The rules contained in Articles 1252 to 1254 of judgment, Civil Code apply to a person owing several debts of judgment, same kind to a single creditor. They cannot be made applicable to a person whose obligation as a mere surety is both contingent and singular, 14 which in this case is the full and faithful compliance with the terms of the contract of conditional purchase and sale of reparations goods, The obligation included the payment, not only of the first installment in the amount of P53,643.00, but also of the ten (10) equal yearly installments of P56,597.20 per annum. The amount of P10,000.00 was, indeed, deducted from judgment, amount of P53,643.00, but then judgment, first of judgment, ten (10) equal yearly installments had also accrued, hence, no error was committed in holding judgment, surety company to judgment, full extent of its undertaking.
(4) Finally, We find no merit in judgment, claim of judgment, third-party defendant Pablo S. Sarmiento that he is not personally liable having merely executed judgment, indemnity agreements 15 in his capacity as acting general manager of UNIVERSAL. Pablo S. Sarmiento appears to have signed the indemnity agreement twice – the first, in this capacity as acting general manager of UNIVERSAL, and the second, in his individual capacity. The indemnity agreements in question state the following. among others:
In consideration of judgment, responsibility undertaken by judgment, Company, for judgment, original bond, and for any renewal, extension or substitution thereof, judgment, undersigned, jointly and severally, bind themselves in favor of judgment, said COMPANY in judgment, following terms:
xxx xxx xxx
Dated at City of Manila this – – – – day of July l969.
600 Cottage 3, UNIVERSAL DEEP-SEA FISHING CORP.
Aguinaldo Com- BY:
pound, Echague, s/PABLO S. SARMIENTO Manila t/PABLO S. SARMIENTO Signature
s/PABLO S. SARMIENTO Address t/PABLO S. SARMIENTO Signature
Besides, the “acknowledgment” stated that “Pablo S. Sarmiento for himself and on behalf of Universal Deep-Sea Fishing Corporation” personally appeared before the notary and acknowledged that judgment, document is his own free and voluntary act and deed.
WHEREFORE, judgment, judgment appealed from is hereby affirmed with judgment, modification that judgment, UNIVERSAL Deep-Sea Fishing Corporation is further ordered to pay judgment, Manila Surety & Fidelity Co., Inc., judgment, amount of P7,251.42 for judgment, premiums and documentary stamps on judgment, performance bonds. Appellants shall pay proportionate costs.
SO ORDERED.
Antonio, Aquino, Santos, and Guerrero, JJ., concur.
Fernando and Barredo, JJ., took no part.

Footnotes
1 Record on Appeal, pp. 239-240
2 Exhibit “A”.
3 Exhibit “B”
4 Exhibit “16-B-Surety”
5 Exhibit “C”.
6 Exhibit “D”
7 Exhibit 14-Surety.
8 Exhibit “E”.
9 Par. 5 of Affirm. Defense of UNIVERSAL, Record on Appeal, p. 152.
10 Exhibit “F”
11 Exhibit 15-Surety.
12 L-24835, July 31, 1970, 34 SCRA 203.
13 Arranz vs. Manila Surety & Fidelity Co., 101 Phil. 272.
14 Socony-Vacuum Corp. vs. Leon Miraflores, 67 Phil. 304.
15 Exh. 14-Surety and Exh. 16-Surety.

LAURA VELASCO and GRETA ACOSTA v. JUDGE SERGIO APOSTOL and MAHARLIKA INSURANCE
1989 / Regalado

FACTS
On 27 Nov 1973, around 230 PM, Laura Velasco and Greta Acosta were riding in Velasco’s Mercury car when an N/S taxicab driven by Dominador Santos [registered in the name of Alice Artuz, c/o Norberto Santos] crossed the center island towards their direction, and collided with their car at the left front part. The taxicab tried to return to its original lane, but was unable to climb the island. It backtracked, hitting again Velasco’s car in the left near portion, causing the latter’s back portion to turn toward the center hitting a jeepney on its right, which was travelling along their side.
Velasco and Acosta sued the taxicab driver and its registered owners, claiming actual, moral and exemplary damages plus attorney’s fees. Maharlika Insurance was impleaded as a defendant in an amended complaint, with an allegation that the N/S taxicab was insured against third party liability for 20k with Maharlika at the time of the accident.
Maharlika claimed that there was no cause of action against it because at the time of the accident, the alleged insurance policy was not in force due to non-payment of the premium. It further averred that even if the taxicab had been insured, the complaint would still be premature since the policy provides that the insurer would be liable only when the insured becomes legally liable.
RTC ruled in favor of Velasco and Acosta, finding that the proximate cause of the accident was the taxicab driver’s negligence. However, Maharlika was exonerated on the ground that the policy was not in force for failure to pay the initial premium and for their concealment of a material fact. The payment was accepted by Maharlika without any knowledge that the risk insured against had already occurred since such fact was concealed by the insured and was not revealed to Maharlika.
The accident occurred on 27 Nov 1973 while the initial premium was paid only on 11 Dec 1973. Velasco and Acosta maintain that in spite of this late payment, the policy is bindingbecause there was an implied agreement to grant a credit extension so as to make the policy effective. To them, the subsequent acceptance of the premium and delivery of the policy estopsMaharlika from asserting that the policy is ineffective.

ISSUE & HOLDING
WON Maharlika Insurance is liable. NOT LIABLE. RTC JUDGMENT AFFIRMED.

RATIO
It should be noted that this controversy arose under the aegis of the old insurance law, Act No. 2427, as amended. The former insurance law, which applies to this case, provided that:
An insurer is entitled to the payment of premium as soon as the thing insured is exposed to the peril insured against, unless there is clear agreement to grant the insured credit extension of the premium due. No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid.
The insurance policy in question would be valid and binding notwithstanding the non-payment of the premium if there was a clear agreement to grant to the insured credit extension. Such agreement may be express or implied.
SC finds no cogent proof of any such implied agreement. Had there really been a credit extension, the insured would not have had any apprehension or hesitation to inform Maharlika at the time of or before the payment of the premium that an accident for which the insurer may be held liable had already happened. Under such circumstances, notice alone is necessary and the insured need not pay the premium because whatever premium may have been due may already be deducted upon the satisfaction of the loss under the policy. Velasco and Acosta failed to point out any other circumstances showing that prepayment of premium was not intended to be insisted upon. They have thus failed to discharge the burden of proving their allegation of the existence of the purported credit extension agreement.
SC noted that in the present law, Section 77 of the Insurance Code of 1978 has deleted the clause “unless there is clear agreement to grant the insured credit extension of the premium due” which was involved in this controversy.
The fact withheld could not have influenced Maharlika in entering into the supposed contract or in estimating the character of the risk or in fixing the rate premium, because no such contract existed at the time of the accident. There was nothing to rescind at that point in time. What should be apparent from such actuations of the taxicab owner/s is the presence of bad faith on their part, a reprehensible disregard of the principle that insurance contracts are uberrimae fidae and demand the most abundant good faith.

Valenzuela v. CA

ARTURO VALENZUELA and HOSPITALITA VALENZUELA v. CA, BIENVENIDO ARAGON, ROBERT PARNELL, CARLOS CATOLICO and THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY
1990 / Gutierrez, Jr.

FACTS
Arturo Valenzuela [Valenzuela] is a general agent of Philippine American General Insurance Company [Philamgen] since 1965. As such, he was authorized to solicit and sell in behalf of Philamgen all kinds of non-life insurance, and in consideration of services rendered was entitled to receive the full agent’s commission of 32.5% from Philamgen. From 1973 to 1975, Valenzuela solicited marine insurance from Delta Motors. However, Valenzuela did not receive his full commission.
In 1977, Philamgen started to become interested in and expressed its intent to share in the commission due Valenzuela on a 50-50 basis, but he refused. In 1978, Philamgen and its President [Aragon] insisted on the sharing of the commission with Valenzuela, but he firmly reiterated his objection to the proposals. Because of the refusal of Valenzuela, Philamgen and its officers took drastic action. They reversed the commission due him by not crediting in his account the commission earned from the Delta Motors insurance, placed agency transactions on a cash and carry basis, threatened the cancellation of policies issued by his agency, and started to leak out news that Valenzuela has a substantial account with Philamgen. This resulted in the decline of his business as insurance agent. Philamgen terminated the General Agency Agreement of Valenzuela in December 1978.
Valenzuela filed a complaint against Philamgen, and the RTC ruled in his favor, as his termination was found to be unjustified. However, the CA ruled in favor of Philamgen, as CA ordered Valenzuela to pay Philamgen the amount corresponding to the unpaid and uncollected premiums.

ISSUE & HOLDING
WON Valenzuela should be held liable for unpaid and uncollected premiums. NO.

RATIO
Under Section 77 of the Insurance Code, the remedy for the non-payment of premiums is to put an end to and render the insurance policy not binding.

Philippine Phoenix Surety and Insurance v. Woodworks (1979)
* The non-payment of premium does not merely suspend but puts an end to an insurance contract since the time of the payment is peculiarly of the essence of the contract.
* An insurer cannot treat a contract as valid for the purpose of collecting premiums and invalid for the purpose of indemnity. (Citing Insurance Law and Practice by John Alan Appleman)
* The foregoing findings are buttressed by Section 776 of the Insurance Code (PD 612), which now provides that no contract of insurance by an insurance company is valid and binding unless and until the premium thereof has been paid, notwithstanding any agreement to the contrary

Arce v. The Capital Insurance and Surety
* Unless premium is paid, an insurance contract does not take effect.
* Delgado (Capital Insurance & Surety Co., Inc. v. Delgado) was decided in the light of the Insurance Act before Sec. 72 was amended by the underscored portion. Prior to the Amendment, an insurance contract was effective even if the premium had not been paid so that an insurer was obligated to pay indemnity in case of loss and correlatively he had also the right to sue for payment of the premium. But the amendment to Sec. 72 has radically changed the legal regime in that unless the premium is paid there is no insurance.

Since the premiums have not been paid, the policies issued have lapsed. The insurance coverage did not go into effect or did not continue and the obligation of Philamgen as insurer ceased. Hence, for Philamgen which had no more liability under the lapsed and inexistent policies to demand, much less sue Valenzuela for the unpaid premiums would be the height of injustice and unfair dealing. In this instance, with the lapsing of the policies through the nonpayment of premiums by the insured there were no more insurance contracts to speak of.

RTC DECISION REINSTATED
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