Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. L-44588 May 9, 1989

LAURA VELASCO and GRETA ACOSTA, petitioners, vs.HON.

SERGIO A. F. APOSTOL and MAHARLIKA INSURANCE CO.,
INC., respondents.

Ramon A. Gonzales for petitioner.

Inocentes, Crisostomo, Tomas, Garcia & Associates for respondents.

REGALADO, J.:

Petitioners Laura Velasco and Greta Acosta were the plaintiffs in Civil
Case No. Q-19118 the former Court of First Instance of Rizal, Branch
XVI, of which public respondent Hon. Sergio A. F. Apostol was the
presiding judge. The case was an offshoot of an incident adequately
alleged in their complaint, dated July 22, 1974, as follows:

That on November 27, 1973, at about 2:30 p.m. plaintiffs were riding in
their Mercury car, with Plate No. 44-43 (H-Manila-73), owned by plaintiff
Laura Velasco, and driven by their driver Restitute Guarra, along Quezon
Boulevard near the corner of Speaker Perez Street, Quezon City, toward
the direction of Manila, when, before reaching said corner, an N/S taxicab
driven by defendant Dominador Santos and with Plate No. 75-25L (TX QC-
73), registered in the name of defendants Alice Artuz, c/o Norberto Santos,
crossed the center island towards their direction, and finally collided with
their car at the left front part, and thereafter, the said taxicab tried to return
to its original lane, but was unable to climb the island, and instead,
backtracked, hitting again plaintiffs' 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 going toward Manila also; 1

and amply substantiated in detail at the trial. 2

Originally sued as defendants were Dominador Santos, Alice Artuz,

and Norberto Santos, with plaintiffs claiming actual, moral and
exemplary damages plus attorney's fees. After an answer was filed
by said defendants, private respondent Maharlika Insurance Co., Inc.
was impleaded as a defendant in an amended complaint filed by the
petitioner on April 4, 1975, with an allegation that the N/S taxicab
involved was insured against third party liability for P20,000.00 with
private respondent at the time of the accident. 3

In its answer to the amended complaint, respondent Maharlika

Insurance Co., Inc. 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 thereon. 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. 4

The trial court rendered judgment in favor of the plaintiff finding that
the evidence on the negligence of defendant Dominador Santos was
uncontroverted and the proximate cause of the accident was his
negligence. 5 Defendants Dominador Santos, Alice Artuz, and
Norberto Santos were adjudged jointly and severally liable to
petitioners for the sums of Pl 7,061.95 for the repair of their car,
P17,000.00 for their medical expenses P10,000.00 as moral
damages and P10,000.00 as attorney's fees. 6 However, Maharlika
Insurance Co. was exonerated on the ground that the policy was not
in force for failure of the therein defendants to pay the initial premium
and for their concealment of a material fact.

From the decision of the court a quo, petitioners elevated the case to
this Court by a petition for review on certiorari, with the averment that
only questions of law are involved.

Petitioners fault the respondent-judge for considering private

respondent's defense of late payment of premium when, according to
them, "the same was waived at the pre-trial" 7 hence private
respondent's evidence of late payment should be disregarded
supposedly because, as We understand petitioners' argument,
private respondent had thereby admitted that such fact was not in
issue. They theorize that what was stipulated in the pre-trial order
"does not include the issue on whether defendant Maharlika
Insurance Co., Inc. is liable under the insurance policy, even as the
premium was paid after the accident in question." 8

The records show that at the pre-trial conference the issues

stipulated by the parties for trial were the following:

Whether it was the driver of the plaintiffs' car or the driver of the
defendants' car who was negligent.

Whether defendant Maharlika Insurance Co. Inc. is liable under the

insurance policy on account of the negligence of defendant Dominador
Santos. 9

Petitioners' position is bereft of merit. We have carefully examined

the pre-trial order but We fail to discern any intimation or semblance
of a waiver or an admission on the part of Maharlika Insurance Co.,
Inc. Although there is no express statement as to the fact of late
payment, this is necessarily deemed included in or ineluctably
inferred from the issue of whether the company is liable under the
insurance policy it had allegedly issued for the vehicle involved and
on which petitioners seek to recover. A pre-trial order is not meant to
be a detailed catalogue of each and every issue that is to be or may
be taken up during the trial. Issues that are impliedly included therein
or may be inferable therefrom by necessary implication are as much
integral parts of the pre-trial order as those that are expressly
stipulated.

In fact, it would be absurd and inexplicable for the respondent

company to knowingly disregard or deliberately abandon the issue of
non-payment of the premium on the policy considering that it is the
very core of its defense. Correspondingly, We cannot but perceive
here an undesirable resort to technicalities to evade an issue
determinative of a defense duly averred.

Furthermore, as private respondent correctly points out, evidence to

prove such late payment was introduced without any objection by the
adverse party. 10 This lack of objection amounts to an implied consent
conferring jurisdiction on the court to try said issue. 11

Noteworthy, too is petitioners' vacillation on this particular score. In

their reply to respondents' comment, petitioners categorically stated
that respondents' point regarding the lack of objection to the evidence
is well taken, hence they do not insist on this ground to review
respondent court's decision. 12 However, in their amended reply, they
reverted to their original position that it was a mistake for the trial
court to have considered the defense of lack of payment of premium.
At any rate, We consider that matter as duly disposed of by the
preceding discussion.

Digressing from the procedural aspects of this case, We now

consider petitioners' curative assertion that private respondent had
agreed to grant the then prospective insured a credit extension for the
premium due. It should be noted at the outset that this controversy
arose under the aegis of the old insurance law, Act No. 2427, as
amended. The accident occurred on November 27, 1973 while the
complaint by reason thereof was filed on July 20, 1974, both before
effectivity on December 18, 1974 of Presidential Decree No. 612, the
subsequent insurance law which repealed its predecessor.

The former insurance law, which applies to the case under

consideration, 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. 13

Consequently, 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.

Petitioners quote and rely on the following as authority for their

cause:

A condition requiring pre-payment of the premium is waived by a parol

agreement to that effect, acceptance of the premium after delivery of the
policy, the unconditional delivery of the policy, the giving of credit for the
premiums, ... or any other circumstances showing that pre-payment was
not intended to be insisted upon, as where there are any words or acts
from which a reasonable inference may be drawn that the insurer does not
stand upon its rights to demand pre-payment. (Couch on Insurance, 2d,
Vol. 1, pp. 402-403. ) 14

As earlier stated, the accident for which respondent insurance

company is sought to be held liable occurred on November 27, 1973
while the initial premium was paid only on December 11, 1973.

Petitioners maintain that in spite of this late payment, the policy is

nevertheless binding because 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
estops the respondent company from asserting that the policy is
ineffective. 15

We see no cogent proof of any such implied agreement. The

purported nexus between the delivery of the policy and the grant of
credit extension is too tenuous to support the conclusion for which
petitioners contend. The delivery of the policy made on March 28,
1974 and only because the premium was had been paid, in fact,
more than three months before such delivery. 16 As found by the court
below, said payment was accepted by the insurer without any
knowledge that the risk insured against had already occurred since
such fact was concealed by the insured and was not revealed to the
insurer. 17 Thus, the delivery of the policy was far from being
unconditional. Had there really been a credit extension, the insured
would not have had any apprehension or hesitation to inform the
respondent insurance company 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. In fact, there is authority to hold that
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. 18

Aside from the supposed unconditional delivery of the policy, which

has been demonstrated to be baseless, petitioners 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. Indubitably their insurance claim must
fail.
It may not be amiss to parenthetically mention in this regard that, in
the present law, Section 77 of the Insurance Code of 1978 19 has
deleted the clause "unless there is clear agreement to grant the
insured credit extension of the premium due" which was then
involved in this controversy.

There is no need to elaborate on the finding of the lower court that

there was concealment by therein defendants of a material fact,
although legal effects of pertinence to this case could be drawn
therefrom. The fact withheld could not in any event have influenced
the respondent company in entering into the supposed contract or in
estimating the character of the risk or in fixing the rate premium, for
the simple reason that no such contract existed between the
defendants and the company at the time of the accident. Accordingly,
there was nothing to rescind at that point in time. What should be
apparent from such actuations of therein defendants, however, 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. 20

WHEREFORE, finding no reversible error, the judgment appealed

from is hereby AFFIRMED.

SO ORDERED.

Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.