228 SUPREME COURT REPORTS ANNOTATED

Velasco vs. Apostol

*
G.R. No. 44588. May 9, 1989. 

LAURA VELASCO and GRETA ACOSTA, petitioners,  vs.HON. SERGIO A. F. APOSTOL and
MAHARLIKA INSURANCE CO., INC., respondents.

Remedial Law;  Civil Procedure;  Pre-Trial;  Pre-Trial Order;  Pre-trial order not meant to be a detailed
catalogue of each issue that is to be or may be taken up during trial. ___ 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.
Same; Same; Evidence; Jurisdiction; Failure to object to presentation of evidence is an implied consent
that confers jurisdiction on the court to try said issue. ___ Furthermore, as private respondent correctly points
out, evidence to prove such late payment was introduced without any objection by the adverse party. This
lack of objection amounts to an implied consent conferring jurisdiction on the court to try said issue.
Mercantile Law; Insurance; Credit Extension; Under the old Insurance Law, which is the law applicable
in the instant case, an insurance policy may be valid and binding notwithstanding non-payment of premium
if there was clear agreement to grant to the insured a credit extension.  ___  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.

________________

* SECOND DIVISION.

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Velasco vs. Apostol

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.” 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 a credit extension. Such agreement may be express or implied.
Same; Same; Same; Same; Petitioner’s insurance claim must fail for failure to discharge the burden of
proving their allegation of the existence of the purported credit extension agreement.  ___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.
Same; Same; Same; Same; Insurance Code of 1978 has deleted the provision allowing credit extension to
the insured.  ___  It may not be amiss to parenthetically mention in this regard that, in the present law,
Section 77 of the Insurance Code of 1978 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.
Same;  Same;  Insurance Contracts;  Insurance contracts are uberi mae fidae and demand the most
abundant good faith.  ___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

230

230 SUPREME COURT REPORTS

ANNOTATED

Velasco vs. Apostol

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.

PETITION for certiorari to review the decision of the Court of First Instance of Quezon City, Br.
16.
The facts are stated in the opinion of the Court.
     Ramon A. Gonzales for petitioner.
     Inocentes, Crisostomo, Tomas, Garcia & Associatesfor respondents.

REGALADO, J.:

Petitioners Laura Velasco and Greta Acosta were the plaintiffs in Civil Case No. Q-19118 in 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 Restituto 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, back-
tracked, hitting again plaintiffs’ car in the left near portion, causing the latter’s back portion to turn toward
1
the center hitting a jeepney on its right, which was travelling along their side going toward Manila also;” 

________________
1 Annex A, Petitioner, Rollo, 16-17.

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Velasco vs. Apostol
2
and amply substantiated in detail at the trial. 
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 against3
third party liability for P20,000.00 with
private respondent at the time of the accident. 
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 since4 the policy
provides that the insurer would be liable only when the insured becomes legally liable. 
The trial court rendered judgment in favor of the plaintiffs, finding that the evidence on the
negligence of defendant Dominador
5
Santos was uncontroverted and the proximate cause of the
accident was his negligence.  Defendants Dominador Santos, Alice Artuz and Norberto Santos
were adjudged jointly and severally liable to petitioners for the sums of P17,061.95 for the repair
of their car, P17,000.00
6
for their medical expenses P10,000.00 as moral damages and P10,000.00
as attorney’s fees.  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.

________________
2 Rollo, 50-51.
3 Ibid., 20-2l.
4 Annex D, Petition; Rollo, 22.
5 Rollo, 62-63.
6 Ibid.., 66-67.

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Velasco vs. Apostol

Petitioners fault the respondent judge for considering private respondent’s defense 7of late
payment of premium when, according to them, “the same was waived at the pre-trial,”    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. is8 liable under the insurance policy,
even as the premium was paid after the accident in question.” 
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 Insurance9 Co., Inc. is liable under the insurance policy on account of the
negligence of defendant Dominador Santos.” 

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.

________________
7 Ibid. 9.
8 Ibid. 131.
9 Annex E, Petition; Rollo, 23.

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Velasco vs. Apostol

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
10
to prove such late payment was introduced
without any objection by the adverse party.    This lack of 11
objection amounts to an implied
consent conferring jurisdiction on the court to try said issue. 
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 12is well taken, hence they do not insist on this ground to review
respondent court’s decision.    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, l974, 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:

________________
10 Ibid., 147.
11 Sec. 5, Rule 10, Rules of Court.
12 Ibid., 113.

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234 SUPREME COURT REPORTS ANNOTATED

Velasco vs. Apostol

“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 13
issued by an insurance company is valid and binding unless and until the premium thereof has been
paid.” 

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, x x x 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
insurer14 does not stand upon its rights to demand pre-payment. (Couch on Insurance, 2d, Vol. 1, pp. 402-
403.)” 

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 15delivery of the policy estops
the respondent company from asserting that the policy is ineffective. 
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 conclu-

________________
13 Sec. 72, Act No. 2427.
14 Rollo, 11-12.
15 Ibid., 12.

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VOL. 173, MAY 9 , 1989 235

Velasco vs. Apostol
sion for which petitioners contend. The delivery of the policy was made on March 28, 1974 and
only because
16
the premium had been paid, in fact, more than three months before such
delivery.   As found by the court below, said payment was accepted by the insurer without any
knowledge that the risk insured against had already 17
occurred since such fact was concealed by
the insured and was not revealed to the insurer.   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 18
may have
been due may already be deducted upon the satisfaction of the loss under the policy. 
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
19
mention in this regard that, in the present law, Section
77 of the Insurance Code of 1978    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

________________
16 Ibid.,150.
17 Ibid.,65.
18 Capital Insurance & Surety Co., Inc. vs. Plastic Era Co., Inc., 65 SCRA 134 (1975).
19 Presidential Decree No. 1460, superseding P.D. No. 612.

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236 SUPREME COURT REPORTS ANNOTATED

Velasco vs. Apostol

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
20
that insurance contracts are  uberrimae fidae  and demand the most abundant good
faith. 
WHEREFORE, finding no reversible error, the judgment appealed from is hereby AFFIRMED.
SO ORDERED.

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

Judgment affirmed.
 Note. ___ While jurisdiction is conferred by law and lack thereof may be assailed at any stage,
a party’s active participation in the proceedings before an officer without jurisdiction will estop
such party from assailing the officer’s lack of jurisdiction. (  Tajonera vs. Samoroza,  110 SCRA
438.)

——o0o——

________________
20 Fieldmen’s Insurance Co., Inc. vs. Vda. de Songco, et al., 25 SCRA 70(l968).