Vda de Sindayen v Insular September 4, 1935 G.R. No. 41702

J. Butte

Facts:

Sindayen, employed in the Bureau of Printing at Manila went to Tarlac, to spend the Christmas vacation with his aunt. There he applied for for life insurance in the sum of P1,000 and paid to the agent P15 cash as part of the first premium. It was agreed with the agent that the policy, when and if issued, should be delivered to his aunt with whom he left sum of P26.06 to complete the payment of the first annual premium of P40.06. Sindayen returned to Manila and resumed his work a linotype operator. The company accepted the risk after examining Sindayen and issued a policy and to the same agent for delivery to the insured. Sindayen abruptly passed away.

The policy which the company issued was received by its agent in Tarlac. The agent delivered the policy to Felicidad Estrada upon her payment of the balance of the first year’s annual premium. The agent asked Felicidad Estrada if her nephew was in good health and she replied that she believed so. He gave her the policy. The agent learned of the death of Arturo Sindayen and the aunt to return the policy. He did not return or offer to return the premium paid. The aunt gave him the policy.

The company obtained from the beneficiary, the widow of Arturo Sindayen, her signature to a legal document entitled “ACCORD, SATISFACTION AND RELEASE” In consideration of the sum of P40.06 paid to her by a check of the company, she discharged the company for all claims . The said check for P40.06 was never cashed but returned to the company. The widow brought action to enforce payment of the policy. The first premium was already paid by the insured covering the period from December 1, 1932. It is to December 1, 1933. Hence, this appeal.

Issue: WON the said policy never took effect because of paragraph 3 of the application for at the time of its delivery by the agent the insured was not in good health.

Held: No. Petition granted.

Ratio:

The application which the insured signed in Tarlac, contained among others the following provisions:

3. That the said policy shall not take effect until the first premium has been paid and the policy has been delivered to and accepted by me, while I am in good health.

There is one line of cases which holds that the stipulation contained in paragraph 3 is in the nature of a condition precedent, that is to say, that there can be no valid delivery to the insured unless he is in good health at the time. A number of these cases, on the other hand, go to the of holding that the delivery of the policy by the agent to the insured consummates the contract even though the agent knew that the insured was not in good health at the time, the theory being that his knowledge is the company’s knowledge and his delivery of the policy is the company’s delivery.

We are inclined to the view that it is more consonant with the well known practice of life insurance companies and the evidence in the present case to rest our decision on the proposition that Mendoza was authorized by the company to make the delivery of the policy when he received the payment of the first premium and he was satisfied that the insured was in good health.

In the case of MeLaurin vs. Mutual Life Insurance Co. -It is plain, therefore, that upon the facts it is not necessarily a case of waiver or of estoppel, but a case where the local agents, in the exercise of the powers lodged in them, accepted the premium and delivered the policy. That act binds their principal, the defendant.

The evidence in the record shows that Mendoza had the authority, given him by the company, to withhold the delivery of the policy to the insured “until the first premium has been paid and the policy has been delivered to and accepted by me (the insured) while I am in good health. Mendoza’s decision that the condition had been met by the insured and that it was proper to make a delivery of the policy to him is just as binding on the company as if the decision had been made by its board of directors.

It is the interest not only the applicant but of all insurance companies as well that there should be some act which gives the applicant the definite assurance that the contract has been consummated. A cloud will be thrown over the entire insurance business if the condition of health of the insured at the time of delivery of the policy may be required into years afterwards with the view to avoiding the policy on the ground that it never took effect because of an alleged lack of good health, at the time of delivery.

When the policy is issued and delivered it is plainly not within the intention of the parties that there should be any questions held in abeyance or reserved for future determination. It would be a most serious handicap to business if the very existence of the contract remains in doubt even though the policy has been issued and delivered with all the formalities required by the law. The delivery of the policy to the insured by an agent is the final act which binds the company and insured in the absence of fraud or other legal ground for rescission. The fact that the agent to whom it has entrusted this duty is derelict or negligent or even dishonest in the performance of the duty which has been entrusted to him would create a liability of the agent to the company but does not resolve the company’s obligation based upon the authorized acts of the agent toward a third party who was not in collusion with the agent.

“4. That the agent taking this application has no authority to make, modify or discharge contracts, or to waive any of the Company’s right or requirements.”

Paragraph 4 of the application to the effect is not in point. Mendoza neither waived nor pretended to waive any right or requirement of the company. In fact, his inquiry as to the state of health of the insured discloses that he was endeavoring to assure himself that this requirement of the company had been satisfied. In doing so, he acted within the authority conferred on him by his agency and his acts within that authority bind the company. The company therefore having decided that all the conditions precedent to the taking effect of the policy had been complied with, it is now estopped to assert that it never intended that the policy should take effect.