CASES REPORTED SUPREME COURT REPORTS ANNOTATED G.R. No. 166245. April 9, 2008.” ETERNAL GARDENS, MEMORIAL PARK CORPORATION, petitioner, vs. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondent. Evidence; Witnesses; We ruled in People v. Paredes, 368 SCRA 102 (2001), that minor inconsistencies are too trivial to affect the credibility of witnesses, and these may even serve to strengthen have been Fehedrsed.—As to the seeming inconsistencies between the testimony of Manuel Cortez on whether one or two insurance application forms were accomplished and the testimony of Mendoza on who actually filled out the application form, these are minor inconsistencies that do not affect the redibility of the “witnesses. Thus, we ruled in People v. Paredes, 368 SCRA 102 (2001), that minor inconsistencies are too trivial to affect the credibility of witnesses, and * SECOND DIVISION. 2 SUPREME COURT REPORTS ANNOTATED Eternal Gardens Memorial Park Corporation us. Philippine American Life Insurance Company these may even serve to strengthen their credibility as these negate any suspicion that the testimonies have been rehearsed. Contracts; Insurance Law; It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strietly against ther in order to safeguard the latter's interest.—It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latter's interest. Thus, in Malayan Insurance Corporation v. Court of Appeals, 270 SCRA 242 (1997), this Court held that: Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared by the insurer. A. contract of insurance, being a contract of adhesion, par excellence, any ambiguity therein should be resolved against the insurer; in other words, it should be construed liberally in favor of the insured and strictly against the insurer. ‘Limitations of Hability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations: (Emphasis supplied.) Same; Same; The mere inaction of the insurer on the insurance application must not work to prejudice the insured; it cannot be interpreted as a termination of the insurance contract — ‘The seemingly conflicting provisions must be harmonized to mean that upon a party's purchase of a memorial lot on installment from Eternal, an insurance contract covering the lot purchaser is created and the same is terminated by Philamlife by application. The second sentence of Creditor Group Life Policy No. P-1920 on the Effective Date of Benefit is in the nature of a Jresolutory;condition which would lead to the cessation of the insurance contract. Moreover, the mere inaction of the insurer on the insurance application must not work to prejudice the insured; it qhemiereiemmmtenmination of the insurance contract. The termination of the insurance contract by the insurer must be explicitand unambiguous. Same; Same; Insurance contracts are imbued with public interest that must be considered whenever the rights and obligations of the VOL. 551, APRIL 9, 2008 3 Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company insurer and the insured are to be delineated. —To characterize the insurer and the insured as contracting parties on equal footing is inaccurate at best. Insurance contracts are wholly prepared by the insurer with vast amounts of experience in the industry purposefully used to its advantage. More often than not, insurance contracts are contracts of adhesion containing technical terms and conditions of the industry, confusing if at all understandable to laypersons, that are imposed on those who wish to avail of insurance. As such, insurance contracts are BEWSEIWGERUPUDLEGEGESEE that must be considered whenever the rights and obligations of the insurer and the insured are to be delineated. Hence, in order to protect the interest of insurance applicants, (qRuEaNESypompamiespmmuatybegubtinatedatogmctmithyhhasteupon insurance applications, to either deny er approve the same, or otherwise be bound to honor‘the application as a valid) _ binding, and effective insurance contract, PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Santiago, Arevalo, Asuncion & Associates for petitioner. Roland B. Ebbah, Jr. for respondent. VELASCO, JR., J: The Case Central to this Petition for Review on Certiorari under Rule 45 which seeks to reverse and set aside the November 26, 2004 Decision’ of the Court of Appeals (CA) in CA-G.R. CV No, 57810 is the query: May the inaction of the insurer — on the insurance application be considered as approval of - the application? 1 Rollo, pp. 45-54. Penned by Associate Justice Santiago Javier Ranada and concurred in by Associate Justices Marina L, Buzon (Chairperson) and Mario L. Guarifia IIL 4 SUPREME COURT REPORTS ANNOTATED Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company The Facts On December 10, 1980, respondent Philippine American Life Insurance Company (Philamlife) entered into an agreement denominated as Creditor Group Life Policy No. P-1920? with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. The amount of insurance coverage depended upon the existing balance of the purchased burial lots. The policy was to be effective for a period of one year, renewable on a yearly basis. The relevant provisions of the policy are: ELIGIBILIT® Any of the Assured who is at least 18 but not Inve thn 65 years €F-Ske, is indobted to the Sarre for the unpaid balance of his loan with the Assured, and is accepted for by the Company on its effective date is cligible for insurance under the Policy. EVIDENCE OF INSURABILITY. “No medical examination shall be required for amounts of insurance up to P50,000,00. However, a declaration of good health shall be required for all Lot Purchasers as part of the application.‘The Company reserves the right to require further evidence of insurability satisfactory to the Company in respect of the following: 1. Any amount of insurance in excess of P50,000.00. 2. Any lot purchaser who is more than 55 years of age. LIFE INSURANCE BENEFIT. The Life Insurance coverage of any Lot Purchaser at any time shall be the amount of the unpaid balance of his loan (including arrears up to but not exceeding 2 months) as reported by the Assured to the Company or the sum of P100,000.00, whichever is 2 Records, pp. 57-62. VOL. 551, APRIL 9, 2008 5 Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company smaller. Such benefit shall be paid to the Assured if the Lot Purchaser dies while insured under the Policy. EFFECTIVE DATE OF BENEFIT. The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not “approved by the Company.? _ Eternal was required under the policy to submit to - Philamlife a list of all new lot purchasers, together with a copy of the application of each purchaser, and the amounts of the respective ‘unpaid balances of all insured lot purchasers. In relation to the instant petition, Eternal complied by submitting a letter dated December 29, 1982,* containing a list of insurable balances of its lot buyers for October 1982. One of those included in the list as ‘new business” was igen, His balance of payments was . On August 2, 1984, Chuang died. Eternal sent a letter dated August 20, 1984° to Philamlife, which served as an \insurance/¢laim for Chuang’s death. Attached to the claim were the followi documents: (1) Chuang’s Certificate of Death; Identification Certificate stating that Chuang is a naturalized Filipino Citizen; (8) Certificate of Claimant Certificate of Attending Physician; and \() Assure Certificate. In reply, Philamlife wrote Eternal a letter on November 12, 1984,° requiring Eternal to submit the following documents relative to its insurance claim for Chuang’s death: (1) Certificate of Claimant (with form attached); (2) Assured’s Certificate (with form attached); (8) Application for Insurance accomplished and signed by the insured, Chuang, while still3 Id., at p. 58. 4 Id., at p. 139. 5 Id., at p. 160. 6 Id., at p. 162. 6 SUPREME COURT REPORTS ANNOTATED Eternal Gardens Memorial Park Corporation us. Philippine ‘American Life Insurance Company living; and (4) Statement of Account showing the unpaid balance of Chuang before his death. Eternal transmitted the required documents through a “letter dated November 14, 1984,” which was received by. ‘Philamlife on November 15, 1984. After more than a year, Philamlife had not furnished Eternal with any reply to the latter's insurance claim. This prompted Eternal to demand from Philamlife the payment of the claim for i 5 Eternal’s insurance claim in a letter dated May 20, 1986,° a portion of which reads: “The deceased was 59 years old when he entered into Contract #9568 and 9529 with Eternal Gardens Memorial Park in October 1982 for the total maximum insurable amount of P100,000.00 each. No/application for Group Insurance was submitted in our office prior to his death on August 2, 1984. In accordance with our Creditor’s Group Life Policy No. P-1920, under Evidence of Insurability provision, “a declaration of good “health shall be required for all Lot Purchasers as party of the application.” We cite further the provision on Effective Date of Coverage under the policy which states that “there shall be no insurance if the application is not approved by the Company.” Since no application had been submitted by the Insured/Assured, prior to his death, for our approval but was submitted instead on November 15, 1984, after his death, Mr. John Uy Chuang was not ‘covered under the Policy. We wish to point out that Eternal Gardens being the Assured was a party to the Contract and was therefore aware of these pertinent provisions: With regard to our acceptance of premiums, these do not connote out approval per'se of the insurance coverage but are held by us in trust for the payor until the prerequisites for insurance coverage shall 7 Ia. at p. 163. 8 Id, at p. 164. 9 Id. at p. 165.VOL. 551, APRIL 9, 2008 7 Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company have been met. We will however, return all the premiums which have been paid in behalf of John Uy Chuang.” Consequently, Eternal filed a case before the Makati City Regional Trial Court (RTC) for a si against Philamlife, docketed as Civil Case No. 14736. The trial court decided in favor of Eternal, the dispositive portion of which reads: “WHEREFORE, premises considered, judgment is hereby rendered in , against Defendant PHILAMLIFE, ordering the Defendant PHILAMLIFE, to pay the sum of P100,000.00, representing the proceeds of the Policy of John Uy Chuang, plus legal rate of interest, until fully paid; and, to pay the sum of P10,000.00 as attorney's fees. SO ORDERED.” The RTC found that Eternal submitted Chuang’s — application for insurance which he accomplished before his death, as testified to by Eternal’s witness and evidenced by — the letter dated December 29, 1982, stating, among others: “Encl: Phil-Am Life Insurance Application Forms & Cert.” It further ruled that due'to Philamlife’s inaction from the submission of the requirements of the group insurance on December 29, 1982 to Chuang’s death on August 2, 1984, _ as well as Philamlife’s acceptance of the premiums during the same period, P! Chuang’ application. The RTC said that since the contract is a group life insurance, quesntoofyoljdenthyieubmitteday payment must follow. ‘Philamlife appealed to the CA, which ruled, thus: “WHEREFORE, the decision of the Regional Trial Court of Makati in Civil Case No. 57810 is .d SET ASIDE, and the complaint is DISMISSED. No costs. 10 Rollo, p. 44. 8 SUPREME COURT REPORTS ANNOTATED Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company SO ORDERED.” The CA based its Decision on the factual finding that dated December 29, 1982. It further ruled that the non- -accomplishment of the submitted application form violatedSection 26 of the Insurance Code. Thus, the CA concluded, there being no application form, Chuang was not covered Hence, we have this petition with the following grounds: “The Honorable Court of Appeals has decided a question of substance, not therefore determined by this Honorable Court, or has decided it in a way not in accord with law or with the applicable jurisprudence, in holding that: I. The application for insurance was not duly submitted to respondent PhilamLife before the death of John Chuang; Il. There was no valid insurance coverage; and II. Reversing and setting aside the Decision of the Regional Trial Court dated May 29, 1996. The Court's Ruling As a general rule, this Court is not a trier of facts and will ed before the CA and first level courts, considering their findings of facts are conclusive and binding on this Court. However, such rule is subject to exceptions, as enunciated in Sampayan v. Court of Appeals: “() when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the [CA] went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the 11 Id, at p. 54. VOL. 551, APRIL 9, 2008 9 Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company appellee; (7) when the findings [of the CA] are ‘contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properlyconsidered, would justify a different conclusion.” (Emphasis supplied.) In the instant case, the factual findings of the RTC were ‘reversed by the CA; thus, this Court may review them. Eternal claims that the evidence that it presented before the trial court supports its contention that it submitted a copy of the insurance application of Chuang before his death. In Eternal’s letter dated December 29, 1982, a list of insurable interests of buyers for October 1982 was attached, including Chuang in the list of new businesses. Eternal added it was noted at the bottom of said letter that the corresponding “Phil-Am Life Insurance Application Forms & Cert.” were enclosed in the letter that was apparently received’ by Philamlife on January 15, 1983, Finally, Eternal alleged that it provided a copy of the If an On the other hand, Philamlife claims that the evidence presented by Eternal is arguing that Eternal nua! prosent exidonce showing that Pillaaife essived a copy of Chuang’s insurance application. The evidence on record supports Eternal’s position, The fact of the matter is, the letter dated December 29, 1982, which Philamlife stamped as received, states that the were attached to the letter. Such stamp of receipt has the effect of acknowledging receipt of the letter together with the attach- — 12 G.R. No. 156360, January 14, 2005, 448 SCRA 220, 228-229. 10 10 SUPREME COURT REPORTS ANNOTATED Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company Sments. Such receipt is an admission by Philamlife against The burden of evidence has shifted to which must prove that the letter did contain Chuang’s) insurance’ application;, However, ; thus, P| hi 8 To reiterate, it was Philamlife’s bounden duty to make sure that the contents of the letter are correct and accounted for. Philamlife’s allegation that Eternal’s witnesses ran out of credibility and reliability due to inconsistencies is groundless. The trial court is in the best position to determine the reliability and credibility of the witnesses, because it has the opportunity to observe firsthand the witnesses’ demeanor, conduct, and attitude. Findings of thetrial court on such matters are binding and conclusive on the appellate court, unless some facts or circumstances of weight and substance have been _ overlooked, misapprehended, or misinterpreted," that, if considered, might affect the result of the case.!* ‘An examination of the testimonies of the witnesses mentioned by Philamlife, however, reveals no overlooked facts of substance and value. Philamlife primarily claims that Eternal did not even know where the original insurance application of Chuang was, as shown by the testimony of Edilberto Mendoza: Atty. Arevalo: Q Where is the original of the application form which is required in case of new coverage? 18 Rouss oF Covnr, Rule 130, See. 26. 1M People v. Jaberto, G.R. No, 128147, May 12, 1999, 307 SCRA 93, 102. 15 People v. Oliquino, G.R. No. 171814, March 6, 2007, 617 SCRA 579, 888, un VOL. 551, APRIL 9, 2008 un Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company [Mendoza] A. Itis [a] standard operating procedure for the new client to fill up two copies of this form and the original of this is submitted to Philamlife together with the monthly remittances and the second copy is remained or retained with the marketing department of Eternal Gardens, Atty. Miranda: We move to strike out the answer as it is not responsive as counsel is merely asking for the location and does not [ask] for the number of copy. Atty. Arevalo: Q Where is the original? [Mendoza:] A. As far as T remember I do not know where the original but when I submitted with that payment together with the new clients all the originals I see to it before I sign the transmittal letter the originals are attached therein."* In other words, the witness admitted not knowing where the original insurance application was, but believed that the application was transmitted to Philamlife as an As to the seeming inconsistencies between the testimony of Manuel Cortez on whether one or two insurance application forms were accomplished and the testimony of Mendoza on who actually filled out the application form, these are minor inconsistencies that» donot affect the credibility of the witnesses. Thus, we ruled in People v. Paredes that minor inconsistencies are too trivial to affect the credibility of witnesses, and these may even serve tostrengthen their credibility as these negate any suspicion that the We reiterated the above ruling in Merencillo v. People: 16 TSN, September 13, 1990, p. 8. 17 G.R. No. 136105, October 23, 2001, 368 SCRA 102, 108. 12 12 SUPREME COURT REPORTS ANNOTATED Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company “Minor discrepancies or inconsistencies do not impair the essential integrity of the prosecution’s evidence as a whole or reflect on the witnesses’ honesty. The test is whether the testimonies agree on essential facts and whether the respective versions corroborate and substantially coincide with each other so as to make a consistent and coherent whole.””® In the present case, the number of copies of the insurance application that Chuang executed is not at issue, neither is whether the insurance application presented by Eternal has been |. Thus, the inconsistencies pointed out by Philamlife are minor and do not affect the credibility of Eternal’s witnesses. However, the question arises as to whether Philamlife a : , . ‘ation. This question must be answered in th As earlier stated, Philamlife and Eternal entered into an agreement denominated as Creditor Group Life Policy No. P-1920 dated December 10, 1980. In the policy, it is provided that: EFFECTIVE DATE OF BENEFIT. ‘The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company. ‘An examination of the above provision would show ambiguity between its two sentences. The first sentence appears to state that the insurance coverage of the clients of Eternal already became effective upon contracting a loan with Eternal while the second sentence appears to require Philamlife to approve the insurance contract before the same can become effective. 18 G.R, Nos, 142369-70, April 13, 2007, 521 SCRA 31, 43. 13VOL. 551, APRIL 9, 2008 13 Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company It must be remembered that an insurance contract is a jcontract of adhesion which must be construed liberally in favor of the insured)and strictly against the insurer in order to/safeguard the latter's interest, Thus, in Malayan Insurance Corporation v. Court of Appeals, this Court held that: “Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity — therein in favor of the insured, where the contract or policy is Prepared by the insurer. A contract of insurance, being a c ity therein should be ; should be construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations.”!® (Emphasis supplied.) In the more recent case of Philamcare Health Systems, Inc. v. Court of Appeals, we reiterated the above ruling, stating that: “When the terms of insurance contract contain! limitations on liability, courts should construe them in such a way as to preclude > the er ea aa Being a contract of adhesion, the terms of an insurance contract are to be construed strictly against the party which prepared the contract, the insurer. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract, ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured, especially to avoid forfeiture.” Clearly, the vague contractual provision, in Creditor Group Life Policy No. P-1920 dated December 10, 1980, must be construed in favor of the insured and in favor of the effectivity of the insurance contract. 19 G.R. No, 119599, March 20, 1997, 270 SCRA 242, 254. 10 G.R. No, 125678, March 18, 2002, 379 SCRA 356, 366, 14 14 SUPREME COURT REPORTS ANNOTATED Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance CompanyOn the other hand, the scemingly conflicting provisions must be harmonized to mean that upon a party's purchase of a memorial lot on installment from Eternal, an ‘insurance contract covering the lot purchaser is created and the same | is effective, valid, and” binding until te ‘application, The second sentence of Creditor Group Life Policy No. P-1920 on the Effective Date of Benefit is in the nature of a/resolutory condition which would lead to the cessation of the insurance contract. Moreover, the mere” inaction of the insurer on the insurance application must not work to prejudice the insured; it cannot be interproted as a termination of the insurance contract. The termination of the insurance contract by the insurer must be explicit» and As a final note, to characterize the insurer and the insured as contracting parties on Kcauslmioctinsgiy inaceurate at best. Insurance contracts are wholly prepare: by the insurer with vast amounts of experience in the industry purposefully used to its advantage: More often than not, insurance contracts are contracts of adhesion containing technical terms and conditions of the industry,’ confusing if at all understandable to laypersons, that are imposed on those who wish to avail of insurance. As such, insurance contracts are ii that must be considered whenever the rights and obligations of the insurer and the insured are to be delineated. Hence, in order to purotectmitheginterestgnigincurencomennticant ey upon Fr Tet either deny or approve the same, or otherwise be bound to honor the application as a valid, binding, and effective insurance contract.?! WHEREFORE, we GRANT the petition. The November 26, 2004 CA Decision in CA-G.R, CV No. 57810 is REVERSED and SET ASIDE. The May 29, 1996 Decision of the Makati 21 R. E, Keeton & A. I. Widiss, Insurance Law—A Guide to Fundamental Principles, Legal Doctrines and Commercial Practices 77-78. 15 VOL. 551, APRIL 9, 2008 15 Eternal Gardens Memorial Park Corporation vs. Philippine ‘American Life Insurance Company City RTC, Branch 138 is MODIFIED. Philamlife is hereby ORDERED: (1) To 1 the amount of |PhP100,000— representing the icy of Chuang; (2) To pay Eternal legal interest at the rate of six percent (6%) per annum of PhP100,000 from the time ofextrajudicial demand by Eternal until Philamlife’s receipt of the May 29, 1996 RTC Decision on June 17, 1996; (3) To pay Eternal legal interest at the rate of twelve percent (12%) per annum of PhP 100,000 from June 17, 1996 until full payment of this award; and (4) To pay Eternal attorney’s fees in the amount of PhP10,000. No costs. SO ORDERED. Carpio-Morales (Actg. Chairperson), Tinga, Brion and Chico-Nazario,” JJ., concur. Petition granted, judgment reversed and set aside. Notes—The mere fact that neither party signs a contract does not prevent it from assuming legal existence; consent may either be express or implied; once there is manifestation of the concurrence of the partics’ wills, written or otherwise, the stage of negotiation is terminated and the contract is finally perfected. (Luzon Development Bank vs. Angeles, 497 SCRA 264 [2006]) A party to a contract cannot deny its validity after enjoying its benefits without outrage to one’s sense of justice and fairness. (Development Bank of the Philippines vs. Court of Appeals, 494 SCRA 25 [2006]) ——000— ** Additional member as per February 6, 2008 raffle. © Copyright 2022 Central Book Supply, Inc. All rights reserved