FIRST DIVISION

[G.R. No. 109937. March 21, 1994.]

DEVELOPMENT BANK OF THE PHILIPPINES , petitioner, vs. COURT OF

APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented
by CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION
INSURANCE POOL , respondents.

DECISION

QUIASON , J : p

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court
to reverse and set aside the decision of the Court of Appeals in CA-G.R CV No. 26434 and
its resolution denying reconsideration thereof.
We affirm the decision of the Court of Appeals with modification.
I
In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-in-
law, applied for a loan of P500,000.00 with the Development Bank of the Philippines (DBP),
Basilan Branch. As the principal mortgagor, Dans, then 76 years of age, was advised by
DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage
Redemption Insurance Pool (DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by DBP on August 4,
1987 and released on August 11, 1987. From the proceeds of the loan, DBP deducted the
amount of P1,476.00 as payment for the MRI premium. On August 15, 1987, Dans
accomplished and submitted the "MRI Application for Insurance" and the "Health
Statement for DBP MRI Pool."
On August 20, 1987, the MRI premium of Dans, less the DBP service fee of 10
percent, was credited by DBP to the savings account of the DBP MRI Pool. Accordingly, the
DBP MRI Pool was advised of the credit. Cdpr

On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed
this information to the DBP MRI Pool. On September 23, 1987, the DBP MRI Pool noti ed
DBP that Dans was not eligible for MRI coverage, being over the acceptance age limit of 60
years at the time of application. LibLex

On October 21, 1987, DBP apprised Candida Dans of the disapproval of her late
husband's MRI application. The DBP offered to refund the premium of P1,476.00 which the
deceased had paid, but Candida Dans refused to accept the same, demanding payment of
the face value of the MRI or an amount equivalent to the loan. She, likewise, refused to
accept anex gratia settlement of P30,000.00, which the DBP later offered.
On February 10, 1989, respondent Estate, through Candida Dans as administratrix,
led a complaint with the Regional Trial Court, Branch I, Basilan, against DBP and the
insurance pool for "Collection of Sum of Money with Damages." Respondent Estate alleged
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 that Dans became insured by the DBP MRI Pool when DBP, with full knowledge of Dans'
age at the time of application, required him to apply for MRI, and later collected the
insurance premium thereon. Respondent Estate therefore prayed: (1) that the sum of
P139,500.00, which it paid under protest for the loan, be reimbursed; (2) that the
mortgage debt of the deceased be declared fully paid; and (3) that damages be awarded.
LexLib

The DBP and the DBP MRI Pool separately led their answers, with the former
asserting a cross-claim against the latter.
At the pre-trial, DBP and the DBP MRI Pool admitted all the documents and exhibits
submitted by respondent Estate. As a result of these admissions, the trial court narrowed
down the issues and, without opposition from the parties, found the case ripe for summary
judgment. Consequently, the trial court ordered the parties to submit their respective
position papers and documentary evidence, which may serve as basis for the judgment. cdrep

On March 10, 1990, the trial court rendered a decision in favor of respondent Estate
and against DBP. The DBP MRI Pool, however, was absolved from liability, after the trial
court found no privity of contract between it and the deceased. The trial court declared
DBP in estoppel for having led Dans into applying for MRI and actually collecting the
premium and the service fee, despite knowledge of his age ineligibility. The dispositive
portion of the decision read as follows:
"WHEREFORE, in view of the foregoing consideration and in the
furtherance of justice and equity, the Court nds judgment for the plaintiff and
against Defendant DBP, ordering the latter:
1. To return and reimburse plaintiff the amount of P139,500.00
plus legal rate of interest as amortization payment paid under protest;
2. To consider the mortgage loan of P300,000.00 including all
interest accumulated or otherwise to have been settled, satis ed or set-off
by virtue of the insurance coverage of the late Juan B. Dans; .
3. To pay plaintiff the amount of P10,000.00 as attorney's fees;
4. To pay plaintiff the amount of P10,000.00 as costs of
litigation and other expenses, and other relief just and equitable.
The Counterclaims of Defendants DBP and DBP-MRI POOL are hereby
dismissed. The Cross-claim of defendant DBP is likewise dismissed" (Rollo, p. 79)

The DBP appealed to the Court of Appeals. In a decision dated September 7, 1992,
the appellate court a rmed in toto the decision of the trial court. The DBP's motion for
reconsideration was denied in a resolution dated April 20, 1993.
Hence, this recourse.
II
When Dans applied for MRI, he lled up and personally signed a "Health Statement
for DBP Pool" (Exh. "5-Bank") with the following declaration:
"I hereby declare and agree that all the statements and answers contained
herein are true, complete and correct to the best of my knowledge and belief and
form part of my application for insurance. It is understood and agreed that no
insurance coverage shall be effected unless and until this application is approved
and the full premium is paid during my continued good health" (Records, p. 40).

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 Under the aforementioned provisions, the MRI coverage shall take effect: (1) when
the application shall be approved by the insurance pool; and (2) when the full premium is
paid during the continued good health of the applicant. These two conditions, being joined
conjunctively, must concur.
Undisputably, the power to approve MRI applications is lodged with the DBP MRI
Pool. The pool, however, did not approve the application of Dans. There is also no showing
that it accepted the sum of P1,476.00, which DBP credited to its account with full
knowledge that it was payment for Dan's premium. There was, as a result, no perfected
contract of insurance; hence, the DBP MRI Pool cannot be held liable on a contract that
does not exist.
The liability of DBP is another matter. prcd

It was DBP, as a matter of policy and practice, that required Dans, the borrower, to
secure MRI coverage. Instead of allowing Dans to look for his own insurance carrier or
some other form of insurance policy, DBP compelled him to apply with the DBP MRI Pool
for MRI coverage. When Dan's loan was released on August 11, 1987, DBP already
deducted from the proceeds thereof the MRI premium. Four days latter, DBP made Dans
ll up and sign his application for MRI, as well as his health statement. The DBP later
submitted both the application form and health statement to the DBP MRI Pool at the DBP
Main Building, Makati Metro Manila. As service fee, DBP deducted 10 percent of the
premium collected by it from Dans.
In dealing with Dans, DBP was wearing two legal hats: the rst as a lender, and the
second as an insurance agent.
As an insurance agent, DBP made Dans go through the motion of applying for said
insurance, thereby leading him and his family to believe that they had already ful lled all the
requirements for the MRI and that the issuance of their policy was forthcoming.
Apparently, DBP had full knowledge that Dan's application was never going to be
approved. The maximum age for MRI acceptance is 60 years as clearly and speci cally
provided in Article 1 of the Group Mortgage Redemption Insurance Policy signed in 1984
by all the insurance companies concerned (Exh. "1-Pool").
Under Article 1987 of the Civil Code of the Philippines, "the agent who acts as such
is not personally liable to the party with whom he contracts, unless he expressly binds
himself or exceeds the limits of his authority without giving such party su cient notice of
his powers."
The DBP is not authorized to accept applications for MRI when its clients are more
than 60 years of age (Exh. "1-Pool"). Knowing all the while that Dans was ineligible for MRI
coverage because of his advanced age, DBP exceeded the scope of its authority when it
accepted Dan's application for MRI by collecting the insurance premium, and deducting its
agent's commission and service fee.
The liability of an agent who exceeds the scope of his authority depends upon
whether the third person is aware of the limits of the agent's powers. There is no showing
that Dans knew of the limitation on DBP's authority to solicit applications for MRI. LLphil

If the third person dealing with an agent is unaware of the limits of the authority
conferred by the principal on the agent and he (third person) has been deceived by the non-
disclosure thereof by the agent, then the latter is liable for damages to him (V Tolentino,
Commentaries and Jurisprudence on the Civil Code of the Philippines, p. 422 [1992], citing
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 Sentencia [Cuba] of September 25, 1907). The rule that the agent is liable when he acts
without authority is founded upon the supposition that there has been some wrong or
omission on his part either in misrepresenting, or in a rming, or concealing the authority
under which he assumes to act (Francisco, V., Agency 307 [1952], citing Hall v. Lauderdale,
46 N.Y. 70, 75). Inasmuch as the non-disclosure of the limits of the agency carries with it
the implication that a deception was perpetrated on the unsuspecting client, the provisions
of Articles 19, 20 and 21 of the Civil Code of the Philippines come into play.
Article 19 provides:
"Every person must, in the exercise of his rights and in the performance of
his duties, act with justice give everyone his due and observe honesty and good
faith." LexLib

Article 20 provides:
"Every person who, contrary to law, willfully or negligently causes damage
to another, shall indemnify the latter for the same."

Article 21 provides:
"Any person, who willfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the latter
for the damage."

The DBP's liability, however, cannot be for the entire value of the insurance policy. To
assume that were it not for DBP's concealment of the limits of its authority, Dans would
have secured an MRI from another insurance company, and therefore would have been fully
insured by the time he died, is highly speculative. Considering his advanced age, there is no
absolute certainty that Dans could obtain an insurance coverage from another company. It
must also be noted that Dans died almost immediately, i.e., on the nineteenth day after
applying for the MRI, and on the twenty-third day from the date of release of his loan. LLphil

One is entitles to an adequate compensation only for such pecuniary loss suffered
by him as he has duly proved (Civil Code of the Philippines, Art. 2199). Damages, to be
recoverable, must not only be capable of proof, but must be actually proved with a
reasonable degree of certainty (Refractories Corporation v. Intermediate Appellate Court ,
176 SCRA 539 [1989]; Choa Tek Hee v. Philippine Publishing Co. , 34 Phil. 447 [1916]).
Speculative damages are too remote to be included in an accurate estimate of damages
(Sun Life Assurance v. Rueda Hermanos, 37 Phil. 844 [1918]).
While Dans is not entitled to compensatory damages, he is entitled to moral
damages. No proof of pecuniary loss is required in the assessment of said kind of
damages (Civil Code of Philippines, Art. 2216). The same may be recovered in acts
referred to in Article 2219 of the Civil Code.
The assessment of moral damages is left to the discretion of the court according to
the circumstances of each case (Civil Code of the Philippines, Art. 2216). Considering that
DBP had offered to pay P30,000.00 to respondent Estate in ex gratia settlement of its
claim and that DBP's non-disclosure of the limits of its authority amounted to a deception
to its client, an award of moral damages in the amount of P50,000.00 would be
reasonable.
The award of attorney's fees is also just and equitable under the circumstances
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 (Civil Code of the Philippines, Article 2208 [11]). LLphil

WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV No. 26434 is

MODIFIED and petitioner DBP is ORDERED: (1) to REIMBURSE respondent Estate of Juan
B. Dans the amount of P1,476.00 with legal interest from the date of the ling of the
complaint until fully paid; and (2) to PAY said Estate the amount of Fifty Thousand Pesos
(P50,000.00) as moral damages and the amount of Ten Thousand Pesos (P10,000.00) as
attorney's fees. With costs against petitioner.
SO ORDERED.
Cruz, Davide, Jr., Bellosillo and Kapunan, JJ ., concur.

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