EN BANC
[G.R. No. L-2668. September 30, 1950. ]
NATIONAL LEATHER CO., INC., Plaintiff-Appellant, v. THE UNITED STATES LIFE INSURANCE CO., Defendant-Appellee.
David Guevara and Jose G. Flores, for Appellant.
Perkins, Ponce Enrile, Contreras & Gomez, for Appellee.
SYLLABUS
1. INSURANCE; LIFE INSURANCE; NON-PAYMENT OF STIPULATED PREMIUM DUE TO WAR; FORFEITURE OF POLICY. — The nonpayment 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. The rule is not affected by the fact that the nonpayment is due to war or that the insured has not been negligent. (Ruling in the case of Constantino v. Asia Life Insurance Company, G.R. No. L-1669, August 31, 1950, reiterated.)
D E C I S I O N
REYES, J.:
This is an appeal from a decision of the Court of First Instance of Manila dismissing plaintiff’s action for the recovery of the proceeds of a life insurance policy. Though the amount sought to be recovered is only P10,000, the case has been elevated to this court by agreement of the parties upon representation that only questions of law are involved.
It appears from the stipulation of facts that plaintiff is a Philippine corporation with offices in the City of Manila, while defendant is a foreign life insurance company incorporated under the laws of New York, U. S. A., and licensed to do business in the Philippines (except during the period of the Japanese occupation) with main office in New York but with a branch office in Manila. On April 14, 1939, plaintiff insured with the defendant the life of Pedro Alejandrino for P5,000 under a 10-year term non-participating policy in consideration of the payment to the defendant, in advance, of the sum of $23.11 as quarterly premium beginning April 14, 1939, and the payment of a like sum every quarter, thereafter, also in advance, for a period of 10 years or until the prior death of said Pedro Alejandrino. The stipulated quarterly premiums on the policy were regularly paid up to October 14, 1941, when the last quarterly premium payment was made, covering the period from that date to January 14, 1942. Thereafter no more premiums were paid, it appearing that, because defendant was an American corporation, its branch office in Manila was closed when that city was occupied by the Japanese forces on January 2, 1942, and it had remained closed during the entire period of enemy occupation. It was not reopened until March, 1945. Pedro Alejandrino died on September 23, 1943, that is, beyond the period covered by the premiums paid by the insured. But just the same, after the liberation of Manila in 1945, plaintiff, as the beneficiary named in the policy, made a claim for the proceeds thereof and tendered a check for P323.54, the total unpaid premiums from January 14, 1942, to October 14, 1943. Defendant, however, rejected the claim and returned the check on the ground that the policy had ceased to be in force as of January 14, 1942, for non-payment of the stipulated premiums. It was to secure the judicial enforcement of this claim that plaintiff brought the present action and took this appeal when its complaint was dismissed by the court below.
Among the provisions of the policy issued by the defendant to plaintiff are the following:jgc:chanrobles.com.ph
"This policy is issued in consideration of the application therefor, copy of which application is attached hereto and made a part hereof, and of the payment, on or before delivery hereof, of the quarterly premium of $23.11 and of the payment of a like amount upon each 14th day of April, July, October and January hereafter during the term of ten years or until the prior death of the insured.
"Payment of Premiums. — Except as herein provided the payment of a premium or installment shall not maintain this policy in force beyond the date when the next premium or installment thereof is payable.
"All premiums are payable in advance at the Shanghai or New York City Office or to any agent of the company upon delivery, on or before date due, of a receipt signed by an executive officer, viz: the Chairman of the Board of Directors, President, Vice-President, Secretary, Assistant Secretary, Actuary, Assistant Actuary or Cashier of the Company and countersigned by said agent.
"A grace of one month or thirty days (whichever period is the longer) shall be granted for the payment of every premium after the first, during which time the insurance shall continue in force. If death occur within the days of grace the unpaid portion of the premium for the then current policy year shall be deducted from the amount payable hereunder.
"Upon written request therefor, approved by the company at its Shanghai or New York City Office, premium payments may be changed at any anniversary of this policy so as to be payable annually, semi- annually, or quarterly in accordance with the published rates in force at the date of issue of this policy. If this policy become a claim by death any unpaid portion of the annual premium for the policy year in which death occurs shall be an indebtedness to be deducted from the amount payable hereunder.
"Reinstatement. — If this policy shall lapse in consequence of default in payment of any premium, it may be reinstated at any time upon evidence of insurability satisfactory to the company and the payment of all overdue premiums with interest at six per centum per annum to the date of reinstatement."cralaw virtua1aw library
As correctly stated by the appellee, the sole question at issue in this case is whether or not a life insurance policy lapses pursuant to its terms because of non payment of the stipulated premium when such non-payment occurred at a time when the insurer and the assured were separated by the lines of war. This question, though new in this jurisdiction, has already been determined in the recent decision of this court in the case of Lopez de Constantino v. Asia Life Insurance Company, G. R. No. L-1669 * , and that of Peralta v. Asia Life Insurance Company, G. R. No. L-1670 (August 31, 1950). * It would, therefore, be idle to discuss the question again, it being sufficient for the purposes of the present action that we quote the following from that decision:jgc:chanrobles.com.ph
"Professor Vance of Yale, in his standard treatise on insurance, says that in determining the effect of non-payment of premiums occasioned by war, the American cases may be divided into three groups, according as they support the so-called Connecticut Rule, the New York Rule, or the United States Rule.
"The first holds the view that ’there are two elements in the consideration for which the annual premium is paid — First, the mere protection for the year, and, second, the privilege of renewing the contract for each succeeding year by paying the premium for that year at the time agreed upon. According to this view of the contract, the payment of premiums is a condition precedent, the nonperformance of which, even when performance would be illegal, necessarily defeats the right to renew the contract.’
"The second rule, apparently followed by the greater number of decisions, holds that ’war between states in which the parties reside merely suspends the contract of life insurance, and that, upon tender of all premiums due by the insured or his representative after the war has terminated, the contract revives and becomes fully operative.’
"The United States rule declares that the contract is not merely suspended, but is abrogated by reason of non-payment of premiums, since the time of the payments is peculiarly of the essence of the contract. It additionally holds that it would be unjust to allow the insurer to retain the reserve value of the policy, which is the excess of the premium paid over the actual risk carried during the years when the policy had been in force. This rule was announced in the well- known Statham 6 case which, in the opinion of Professor Vance, is the correct rule. 7
"The appellants and some amici curi
It appears from the stipulation of facts that plaintiff is a Philippine corporation with offices in the City of Manila, while defendant is a foreign life insurance company incorporated under the laws of New York, U. S. A., and licensed to do business in the Philippines (except during the period of the Japanese occupation) with main office in New York but with a branch office in Manila. On April 14, 1939, plaintiff insured with the defendant the life of Pedro Alejandrino for P5,000 under a 10-year term non-participating policy in consideration of the payment to the defendant, in advance, of the sum of $23.11 as quarterly premium beginning April 14, 1939, and the payment of a like sum every quarter, thereafter, also in advance, for a period of 10 years or until the prior death of said Pedro Alejandrino. The stipulated quarterly premiums on the policy were regularly paid up to October 14, 1941, when the last quarterly premium payment was made, covering the period from that date to January 14, 1942. Thereafter no more premiums were paid, it appearing that, because defendant was an American corporation, its branch office in Manila was closed when that city was occupied by the Japanese forces on January 2, 1942, and it had remained closed during the entire period of enemy occupation. It was not reopened until March, 1945. Pedro Alejandrino died on September 23, 1943, that is, beyond the period covered by the premiums paid by the insured. But just the same, after the liberation of Manila in 1945, plaintiff, as the beneficiary named in the policy, made a claim for the proceeds thereof and tendered a check for P323.54, the total unpaid premiums from January 14, 1942, to October 14, 1943. Defendant, however, rejected the claim and returned the check on the ground that the policy had ceased to be in force as of January 14, 1942, for non-payment of the stipulated premiums. It was to secure the judicial enforcement of this claim that plaintiff brought the present action and took this appeal when its complaint was dismissed by the court below.
Among the provisions of the policy issued by the defendant to plaintiff are the following:jgc:chanrobles.com.ph
"This policy is issued in consideration of the application therefor, copy of which application is attached hereto and made a part hereof, and of the payment, on or before delivery hereof, of the quarterly premium of $23.11 and of the payment of a like amount upon each 14th day of April, July, October and January hereafter during the term of ten years or until the prior death of the insured.
x x x
"Payment of Premiums. — Except as herein provided the payment of a premium or installment shall not maintain this policy in force beyond the date when the next premium or installment thereof is payable.
"All premiums are payable in advance at the Shanghai or New York City Office or to any agent of the company upon delivery, on or before date due, of a receipt signed by an executive officer, viz: the Chairman of the Board of Directors, President, Vice-President, Secretary, Assistant Secretary, Actuary, Assistant Actuary or Cashier of the Company and countersigned by said agent.
"A grace of one month or thirty days (whichever period is the longer) shall be granted for the payment of every premium after the first, during which time the insurance shall continue in force. If death occur within the days of grace the unpaid portion of the premium for the then current policy year shall be deducted from the amount payable hereunder.
"Upon written request therefor, approved by the company at its Shanghai or New York City Office, premium payments may be changed at any anniversary of this policy so as to be payable annually, semi- annually, or quarterly in accordance with the published rates in force at the date of issue of this policy. If this policy become a claim by death any unpaid portion of the annual premium for the policy year in which death occurs shall be an indebtedness to be deducted from the amount payable hereunder.
x x x
"Reinstatement. — If this policy shall lapse in consequence of default in payment of any premium, it may be reinstated at any time upon evidence of insurability satisfactory to the company and the payment of all overdue premiums with interest at six per centum per annum to the date of reinstatement."cralaw virtua1aw library
As correctly stated by the appellee, the sole question at issue in this case is whether or not a life insurance policy lapses pursuant to its terms because of non payment of the stipulated premium when such non-payment occurred at a time when the insurer and the assured were separated by the lines of war. This question, though new in this jurisdiction, has already been determined in the recent decision of this court in the case of Lopez de Constantino v. Asia Life Insurance Company, G. R. No. L-1669 * , and that of Peralta v. Asia Life Insurance Company, G. R. No. L-1670 (August 31, 1950). * It would, therefore, be idle to discuss the question again, it being sufficient for the purposes of the present action that we quote the following from that decision:jgc:chanrobles.com.ph
"Professor Vance of Yale, in his standard treatise on insurance, says that in determining the effect of non-payment of premiums occasioned by war, the American cases may be divided into three groups, according as they support the so-called Connecticut Rule, the New York Rule, or the United States Rule.
"The first holds the view that ’there are two elements in the consideration for which the annual premium is paid — First, the mere protection for the year, and, second, the privilege of renewing the contract for each succeeding year by paying the premium for that year at the time agreed upon. According to this view of the contract, the payment of premiums is a condition precedent, the nonperformance of which, even when performance would be illegal, necessarily defeats the right to renew the contract.’
"The second rule, apparently followed by the greater number of decisions, holds that ’war between states in which the parties reside merely suspends the contract of life insurance, and that, upon tender of all premiums due by the insured or his representative after the war has terminated, the contract revives and becomes fully operative.’
"The United States rule declares that the contract is not merely suspended, but is abrogated by reason of non-payment of premiums, since the time of the payments is peculiarly of the essence of the contract. It additionally holds that it would be unjust to allow the insurer to retain the reserve value of the policy, which is the excess of the premium paid over the actual risk carried during the years when the policy had been in force. This rule was announced in the well- known Statham 6 case which, in the opinion of Professor Vance, is the correct rule. 7
"The appellants and some amici curi
