VIRGINIA A. PEREZ, petitioner, vs.

COURT OF Same; Same; Same; A contract of insurance must be

APPEALS and BF LIFEMAN INSURANCE assented to by both parties either in person or by their
CORPORATION, respondents. agents.A contract of insurance, like other contracts, must
be assented to by both parties either in person or by their
Actions; Contracts; Obligations; A potestative condition agents. So long as an application for
depends upon the exclusive will of one of the parties. For ________________
that reason, it is considered void.A potestative condition
depends upon the exclusive will of one of the parties. For
* FIRST DIVISION.
this reason, it is considered void. Article 1182 of the New 614
Civil Code states: When the fulfillment of the condition
depends upon the sole will of the debtor, the conditional 6 SUPREME
obligation shall be void. In the case at bar, the following 14 COURT REPORTS
conditions were imposed by the respondent company for the ANNOTATED
perfection of the contract of insurance: (a) a policy must Perez vs. Court of
have been issued; (b) the premiums paid; and (c) the policy Appeals
must have been delivered to and accepted by the applicant
insurance has not been either accepted or rejected, it is
while he is in good health.
merely an offer or proposal to make a contract. The contract,
Same; Same; Same; The condition is a suspensive one
to be binding from the date of application, must have been a
whereby the acquisition of rights depends upon the
completed contract, one that leaves nothing to be done,
happening of an event which constitutes the condition.The
nothing to be completed, nothing to be passed upon, or
condition imposed by the corporation that the policy must
determined, before it shall take effect. There can be no
have been delivered to and accepted by the applicant while
contract of insurance unless the minds of the parties have
he is in good health can hardly be considered as a
met in agreement.
potestative or facultative condition. On the contrary, the
Same; Same; Same; A contract which is null and void
health of the applicant at the time of the delivery of the
is no contract at all and hence could not be the subject of
policy is beyond the control or will of the insurance
rescission.A final note. It has not escaped our notice that
company. Rather, the condition is a suspensive one whereby
the Court of Appeals declared Insurance Policy 056300 for
the acquisition of rights depends upon the happening of an
P50,000.00 null and void and rescinded. The Court of
event which constitutes the condition. In this case, the
Appeals corrected this in its Resolution of the motion for
suspensive condition was the policy must have been
reconsideration filed by petitioner, thus: Anent the
delivered and accepted by the applicant while he is in good
appearance of the word rescinded in the dispositive portion
health. There was non-fulfillment of the condition, however,
of the decision, to which defendant-appellee attaches undue
inasmuch as the applicant was already dead at the time the
significance and makes capital of, it is clear that the use of
policy was issued. Hence, the nonfulfillment of the condition
the words and rescinded is, as it is hereby declared, a
resulted in the non-perfection of the contract.
superfluity. It is apparent from the context of the decision
that the insurance policy in question was found null and thereby reversing the decision rendered by the
void, and did not have to be rescinded. True, rescission Regional Trial Court of Manila, Branch XVI.
presupposes the existence of a valid contract. A contract The facts of the case as summarized by respondent
which is null and void is no contract at all and hence could Court of Appeals are not in dispute.
not be the subject of rescission.
Primitivo B. Perez had been insured with the BF
Lifeman Insurance Corporation since 1980 for
PETITION for review on certiorari of a decision of the
P20,000.00. Sometime in October 1987, an agent of the
Court of Appeals.
insurance corporation, Rodolfo Lalog, visited Perez in
The facts are stated in the opinion of the Court. Guinayangan, Quezon and convinced him to apply for
Ida R. Javier for petitioner. additional insurance coverage of P50,000.00, to avail of
Balgos & Perez for private respondent. the ongoing promotional discount of P400.00 if the
premium were paid annually.
YNARES-SANTIAGO, J.: On October 20, 1987, Primitivo B. Perez
accomplished an application form for the additional
A contract of insurance, like all other contracts, must insurance coverage of P50,000.00. On the same day,
be assented to by both parties, either in person or petitioner Virginia A. Perez, Primitivos wife, paid
through their agents and so long as an application for P2,075.00 to Lalog. The receipt issued by Lalog
insurance has not been either accepted or rejected, it is indicated the amount received was a
merely a proposal or an offer to make a contract. deposit. Unfortunately, Lalog lost the application
1

615 form accomplished by Perez and so on October 28,

VOL. 323, JANUARY 615 1987, he asked the latter to fill up another application
28, 2000 form. On November 1, 1987, Perez was made to
2

Perez vs. Court of Appeals undergo the required medical examination, which he
Petitioner Virginia A. Perez assails the decision of passed. 3

respondent Court of Appeals dated July 9, 1993 in CA- Pursuant to the established procedure of the
G.R. CV 35529 entitled, BF Lifeman Insurance company, Lalog forwarded the application for
Corporations, Plaintiff-Appellant versus Virginia A. additional insurance of Perez, together with all its
Perez, Defendant-Appellee,which declared Insurance supporting papers, to the office of BF Lifeman
Policy 056300 for P50,000.00 issued by private Insurance Corporation at Gumaca, Quezon which
respondent corporation in favor of the deceased office was supposed to forward the papers to the
Primitivo B. Perez, null and void and rescinded, Manila office.
________________
 1 Exh. B. that the insurance for P50,000.00 had not been
Exh. A.
perfected at the time of the death of Primitivo Perez.
2

3 Exh. C.

Consequently, the insurance comptshiy refunded the

616 amount of P2,075.00 which Virginia Perez had paid.
616 SUPREME COURT On September 21, 1990, private respondent BF
REPORTS Lifeman Insurance Corporation filed a complaint
ANNOTATED against Virginia A. Perez seeking the rescission and
Perez vs. Court of Appeals declaration of nullity of the insurance contract in
On November 25, 1987, Perez died in an accident. He question.
was riding in a banca which capsized during a storm. Petitioner Virginia A. Perez, on the other hand,
At the time of his death, his application papers for the averred that the deceased had fulfilled all his
additional insurance of P50,000.00 were still with the prestations under the contract and all the elements of
Gumaca office. Lalog testified that when he went to a valid contract are present. She then filed a
follow up the papers, he found them still in the counterclaim against private respondent for the
Gumaca office and so he personally brought the papers collection of P150,000.00 as actual damages,
to the Manila office of BF Lifeman Insurance P100,000.00
Corporation. It was only on November 27, 1987 that ________________
said papers were received in Manila. 4 Exh. D.
Without knowing that Perez died on November 25,
1987, BF Lifeman Insurance Corporation approved the 617
application and issued the corresponding policy for the VOL. 323, JANUARY 617
P50,000.00 on December 2, 1987. 4 28, 2000
Petitioner Virginia Perez went to Manila to claim Perez vs. Court of Appeals
the benefits under the insurance policies of the as exemplary damages, P30,000.00 as attorneys fees
deceased. She was paid P40,000.00 under the first and P10,000.00 as expenses for litigation.
insurance policy for P20,000.00 (double indemnity in On October 25, 1991, the trial court rendered a
case of accident) but the insurance company refused to decision in favor of petitioner, the dispositive portion of
pay the claim under the additional policy coverage of which reads as follows:
P50,000.00, the proceeds of which amount to WHEREFORE PREMISES CONSIDERED, judgment is
P150,000.00 in view of a triple indemnity rider on the hereby rendered in favor of defendant Virginia A. Perez,
insurance policy. In its letter of January 29, 1988 to ordering the plaintiff BF Lifeman Insurance Corporation to
Virginia A. Perez, the insurance company maintained pay to her the face value of BF Lifeman Insurance Policy
No. 056300, plus double indemnity under the SARDI or in REPORTS
the total amount of P150,000.00 (any refund made and/or ANNOTATED
premium deficiency to be deducted therefrom). Perez vs. Court of Appeals
SO ORDERED. 5

been delivered to and accepted by me/us in person while

The trial court, in ruling for petitioner, held that the I/we, am/are in good health
premium for the additional insurance of P50,000.00 the Court of Appeals held that the contract of
had been fully paid and even if the sum of P2,075.00 insurance had to be assented to by both parties and so
were to be considered merely as partial payment, the long as the application for insurance has not been
same does not affect the validity of the policy. The trial either accepted or rejected, it is merely an offer or
court further stated that the deceased had fully proposal to make a contract.
complied with the requirements of the insurance Petitioners motion for reconsideration having been
company. He paid, signed the application form and denied by respondent court, the instant petition for
passed the medical examination. He should not be certiorari was filed on the ground that there was a
made to suffer the subsequent delay in the transmittal consummated contract of insurance between the
of his application form to private respondents head deceased and BF Lifeman Insurance Corporation and
office since these were no longer within his control. that the condition that the policy issued by the
The Court of Appeals, however, reversed the corporation be delivered and received by the applicant
decision of the trial court saying that the insurance in good health, is potestative, being dependent upon
contract for P50,000.00 could not have been perfected the will of the insurance company, and is therefore
since at the time that the policy was issued, Primitivo null and void.
was already dead. Citing the provision in the
6
The petition is bereft of merit.
application form signed by Primitivo which states that: Insurance is a contract whereby, for a stipulated
x x x there shall be no contract of insurance unless and
consideration, one party undertakes to compensate the
until a policy is issued on this application and that the
policy shall not take effect until the first premium has been
other for loss on a specified subject by specified
paid and the policy has perils. A contract, on the other hand, is a meeting of
7

________________ the minds between two persons whereby one binds

himself, with respect to the other to give something or
RTC Records, p. 260-A.
to render some service. Under Article 1318 of the Civil
5
8
6 Rollo, pp. 29-37.
Code, there is no contract unless the following
618 requisites concur:
618 SUPREME COURT
 1. (1)Consent of the contracting parties; The assent of private respondent BF Lifeman
2. (2)Object certain which is the subject matter of Insurance Corporation therefore was not given when it
the contract; merely received the application form and all the
3. (3)Cause of the obligation which is established. requisite supporting papers of the applicant. Its assent
was given when it issues a corresponding policy to the
Consent must be manifested by the meeting of the applicant. Under the abovementioned provision, it is
offer and the acceptance upon the thing and the cause only when the applicant pays the premium and
which are to constitute the contract. The offer must be receives and accepts the policy while he is in good
certain and the acceptance absolute. health that the contract of insurance is deemed to
________________ have been perfected.
7 Black,
It is not disputed, however, that when Primitivo
Henry Campbell. Blacks Law Dictionary, 6th Edition,
1990, p. 802. died on November 25, 1987, his application papers for
8 Article 1305 of the New Civil Code. additional insurance coverage were still with the
619
branch office of respondent corporation in Gumaca and
VOL. 323, JANUARY 619 it was only two days later, or on November 27, 1987,
28, 2000 when Lalog personally delivered the application
papers to the head office in Manila. Consequently,
Perez vs. Court of Appeals
there was absolutely no way the acceptance of the
When Primitivo filed an application for insurance,
application could have been communicated to the
paid P2,075.00 and submitted the results of his
applicant for the latter to accept inasmuch as the
medical examination, his application was subject to
applicant at the time was already dead. In the case
the acceptance of private respondent BF Lifeman
of Enriquez vs. Sun Life Assurance Co. of
Insurance Corporation. The perfection of the contract
Canada, recovery on the life insurance of the deceased
10

of insurance between the deceased and respondent

was disallowed on the ground that the contract for
corporation was further conditioned upon compliance
annuity was not perfected since it had not been proved
with the following requisites stated in the application
satis-
form: ________________
there shall be no contract of insurance unless and until a
policy is issued on this application and that the said policy 9 Exh. A-5
shall not take effect until the premium has been paid and 10 41 Phil. 269 (1920).
the policy delivered to and accepted by me/us in person
620
while I/We, am/are in good health. 9

620 SUPREME COURT

 REPORTS the delivery of the policy is beyond the control or will
ANNOTATED of the insurance company. Rather, the condition is a
Perez vs. Court of Appeals suspensive one whereby the acquisition of rights
factorily that the acceptance of the application ever depends upon the happening of an event which
reached the knowledge of the applicant. constitutes the condition. In this case, the suspensive
Petitioner insists that the condition imposed by condition was the policy must have been delivered and
respondent corporation that a policy must have been accepted by the applicant while he is in good health.
delivered to and accepted by the proposed insured in There was non-fulfillment of the condition, however,
good health is potestative being dependent upon the inasmuch as the applicant was already dead at the
will of the corporation and is therefore null and void. time the policy was issued. Hence, the non-fulfillment
We do not agree. of the condition resulted in the non-perfection of the
A potestative condition depends upon the exclusive contract.
621
will of one of the parties. For this reason, it is
considered void. Article 1182 of the New Civil Code VOL. 323, JANUARY 621
states: When the fulfillment of the condition depends 28, 2000
upon the sole will of the debtor, the conditional Perez vs. Court of Appeals
obligation shall be void. As stated above, a contract of insurance, like other
In the case at bar, the following conditions were contracts, must be assented to by both parties either in
imposed by the respondent company for the perfection person or by their agents. So long as an application for
of the contract of insurance: insurance has not been either accepted or rejected, it is
merely an offer or proposal to make a contract. The
1. (a)a policy must have been issued; contract, to be binding from the date of application,
2. (b)the premiums paid; and must have been a completed contract, one that leaves
3. (c)the policy must have been delivered to and nothing to be done, nothing to be completed, nothing to
accepted by the applicant while he is in good be passed upon, or determined, before it shall take
health. effect. There can be no contract of insurance unless the
minds of the parties have met in agreement. 11

The condition imposed by the corporation that the Prescinding from the foregoing, respondent
policy must have been delivered to and accepted by the corporation cannot be held liable for gross negligence.
applicant while he is in good health can hardly be It should be noted that an application is a mere offer
considered as a potestative or facultative condition. On which requires the overt act of the insurer for it to
the contrary, the health of the applicant at the time of ripen into a contract. Delay in acting on the
application does not constitute acceptance even though Anent the appearance of the word rescinded in the
the insured has forwarded his first premium with his dispositive portion of the decision, to which defendant-
application. The corporation may not be penalized for appellee attaches undue significance and makes capital of,
the delay in the processing of the application papers. it is clear that the use of the words and rescinded is, as it
is hereby declared, a superfluity. It is apparent from the
Moreover, while it may have taken some time for the
context of the decision that the insurance policy in question
application papers to reach the main office, in the case
was found null and void, and did not have to be
at bar, the same was acted upon less than a week after rescinded.
13

it was received. The processing of applications by

respondent corporation normally takes two to three True, rescission presupposes the existence of a valid
weeks, the longest being a month. In this case,
12 contract. A contract which is null and void is no
however, the requisite medical examination was contract at all and hence could not be the subject of
undergone by the deceased on November 1, 1987; the rescission.
application papers were forwarded to the head office WHEREFORE, the decision rendered by the Court
on November 27, 1987; and the policy was issued on of Appeals in CA-G.R. CV No. 35529 is AFFIRMED
December 2, 1987. Under these circumstances, we hold insofar as it declared Insurance Policy No. 056300 for
that the delay could not be deemed unreasonable so as P50,000.00 issued by BF Lifeman Insurance
to constitute gross negligence. Corporation of no force and effect and hence null and
A final note. It has not escaped our notice that the void. No costs.
Court of Appeals declared Insurance Policy 056300 for SO ORDERED.
P50,000.00 null and void and rescinded. The Court of Davide, Jr. (C.J.,
Appeals corrected this in its Resolution of the motion Chairman), Puno, Kapunanand Pardo, JJ., concur.
for reconsideration filed by petitioner, thus:
________________
Judgment affirmed.
Note.When a contract is subject to a suspensive
11 De Lim v. Sun Life Assurance Co. of Canada, 41 Phil. 263 at condition, its birth or effectivity can take place only if
266 (1920). and when the event which constitutes the condition
12 TSN, May 14, 1991, p. 29.
happens or is fulfilled. If the suspensive condition does
622 not take place, the parties would stand as if the
622 SUPREME COURT conditional obligation had never existed. (Cheng vs.
REPORTS Genato, 300 SCRA 722 [1998])
ANNOTATED
Perez vs. Court of Appeals