Gercio v CA September 28, 1925 G.R. No. 23703

J. Malcolm

Facts:

Gercio bought a Sunlife policy for 2000 pesos naming his wife Zialcita as the beneficiary. However, Zialcita was convicted for adultery after Gercio bought the policy. Gercio filed for divorce and married a new woman, Adela. He informed Sunlife that he wanted to put in his new wife as the beneficiary and revoke Adela.  The trial court ruled in his favor and order Sun to cancel the former wife as the beneficiary and name the new one as such. The company refused to obey. Hence, this appeal.

Issue:

1. Whether the case be considered in the light of the Code of Commerce, the Civil Code, or the Insurance Act.

2. Whether the insured – the husband – has the power to change the beneficiary – the former wife – and to name instead his actual wife, where the insured and the beneficiary have been divorced and where the policy of insurance does not expressly reserve to the insured the right to change the beneficiary.

Held: No. None of these. American authorities considered. Judgment reversed

Ratio:

1. Nothing in the Code of Commerce states a provision either permitting or prohibiting the insured to change the beneficiary.

The Civil Code has no provisions which relate directly and specifically to life-insurance contracts or to the destination of life-insurance proceeds.

As for Insurance Act, there is likewise no provision either permitting or prohibiting the insured to change the beneficiary.

Hence, the courts gathered rules from American authorities given that the Insurance Act was taken from the California Code.

2. One of the cases in the American jurisdiction applicable to the case at hand is Yore vs. Booth which stated:

“A person who procures a policy upon his own life, payable to a designated beneficiary, although he pays the premiums himself, and keeps the policy in his exclusive possession, has no power to change the beneficiary, unless the policy itself, or the charter of the insurance company, so provides.”

Connecticut Mutual Life Insurance Company vs Schaefer- “We do not hesitate to say, however, that a policy taken out in good faith and valid at its inception, is not avoided by the cessation of the insurable interest, unless such be the necessary effect of the provisions of the policy itself”

Central National Bank of Washington City vs. Hume- “It is indeed the general rule that a policy, and the money to become due under it, belong, the moment it is issued, to the person or persons named in it as the beneficiary or beneficiaries, and that there is no power in the person procuring the insurance, by any act of his, by deed or by will, to transfer to any other person the interest of the person named.”

In Louisiana, the civil law reconciled with modern insurance laws was considered as having been similar to that of the Philippines.

Lambert vs Penn Mutual Life-  “where a policy is of the semitontine variety, as in this case, the beneficiary has a vested right in the policy, of which she cannot be deprived without her consent.”

Entwistle vs. Travelers Insurance Company- “We agree entirely with the suggestion that “holder” or “holders”, as used in this connection, means those who in law are the owners of the policy, and are entitled to the rights and benefits which may accrue under it; in other words, all the beneficiaries; in the present case, not only the wife, by the children of the insured. If for any reason, prudence required the conversion of the policy into cash, a guardian would have no special difficulty in reasonable protecting the interest of his wards. But however that may be, it is manifest that the option can only be exercised by those having the full legal interest in the policy, or by their assignee. Neither the husband, nor the wife, nor both together had power to destroy the vested interest of the children in the policy.”

Wallace vs Mutual Benefit Life Insurance Co.- “As soon as the policy was issued Mrs. Wallace acquired a vested interest therein, of which she could not be deprived without her consent, except under the terms of the contract with the insurance company. No right to change the beneficiary was reserved. Her interest in the policy was her individual property, subject to be divested only by her death, the lapse of time, or by the failure of the insured to pay the premiums. She could keep the policy alive by paying the premiums, if the insured did not do so. It was contingent upon these events, but it was free from the control of her husband.”

“We are unable to see how the plaintiff’s interest in the policy was primary or superior to that of the husband. Both interests were contingent, but they were entirely separate and distinct, the one from the other. The wife’s interest was not affected by the decree of court which dissolved the marriage contract between the parties. It remains her separate property, after the divorce as before.”