[G.R. No. 125678.

March 18, 2002]

PHILAMCARE HEALTH SYSTEMS, INC., petitioner, vs. COURT OF APPEALS
and JULITA TRINOS, respondents.
DECISION
YNARES-SANTIAGO, J.:
Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a
health care coverage with petitioner Philamcare Health Systems, Inc. In the standard
application form, he answered no to the following question:
Have you or any of your family members ever consulted or been treated for high
blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic
ulcer? (If Yes, give details).[1]
The application was approved for a period of one year from March 1, 1988 to
March 1, 1989. Accordingly, he was issued Health Care Agreement No.
P010194. Under the agreement, respondents husband was entitled to avail of
hospitalization benefits, whether ordinary or emergency, listed therein. He was also
entitled to avail of out-patient benefits such as annual physical examinations,
preventive health care and other out-patient services.
Upon the termination of the agreement, the same was extended for another
year from March 1, 1989 to March 1, 1990, then from March 1, 1990 to June 1,
1990. The amount of coverage was increased to a maximum sum of P75,000.00 per
disability.[2]
During the period of his coverage, Ernani suffered a heart attack and was
confined at the Manila Medical Center (MMC) for one month beginning March 9,
1990. While her husband was in the hospital, respondent tried to claim the benefits
under the health care agreement. However, petitioner denied her claim saying that
the Health Care Agreement was void. According to petitioner, there was a
concealment regarding Ernanis medical history. Doctors at the MMC allegedly
discovered at the time of Ernanis confinement that he was hypertensive, diabetic
and asthmatic, contrary to his answer in the application form. Thus, respondent paid
the hospitalization expenses herself, amounting to about P76,000.00.
After her husband was discharged from the MMC, he was attended by a
physical therapist at home. Later, he was admitted at the Chinese General
Hospital. Due to financial difficulties, however, respondent brought her husband
home again. In the morning of April 13, 1990, Ernani had fever and was feeling very
weak. Respondent was constrained to bring him back to the Chinese General
Hospital where he died on the same day.
On July 24, 1990, respondent instituted with the Regional Trial Court of Manila,
Branch 44, an action for damages against petitioner and its president, Dr. Benito
Reverente, which was docketed as Civil Case No. 90-53795. She asked for
reimbursement of her expenses plus moral damages and attorneys fees. After trial,
the lower court ruled against petitioners, viz:
WHEREFORE, in view of the forgoing, the Court renders judgment in favor of the
plaintiff Julita Trinos, ordering:
1. Defendants to pay and reimburse the medical and hospital coverage of the late
Ernani Trinos in the amount of P76,000.00 plus interest, until the amount is fully paid
to plaintiff who paid the same;

2. Defendants to pay the reduced amount of moral damages of P10,000.00 to

plaintiff;
3. Defendants to pay the reduced amount of P10,000.00 as exemplary damages to
plaintiff;
4. Defendants to pay attorneys fees of P20,000.00, plus costs of suit.
SO ORDERED.[3]
On appeal, the Court of Appeals affirmed the decision of the trial court but
deleted all awards for damages and absolved petitioner Reverente. [4] Petitioners
motion for reconsideration was denied. [5]Hence, petitioner brought the instant
petition for review, raising the primary argument that a health care agreement is not
an insurance contract; hence the incontestability clause under the Insurance
Code[6]does not apply.
Petitioner argues that the agreement grants living benefits, such as medical
check-ups and hospitalization which a member may immediately enjoy so long as he
is alive upon effectivity of the agreement until its expiration one-year
thereafter. Petitioner also points out that only medical and hospitalization benefits
are given under the agreement without any indemnification, unlike in an insurance
contract where the insured is indemnified for his loss. Moreover, since Health Care
Agreements are only for a period of one year, as compared to insurance contracts
which last longer,[7] petitioner argues that the incontestability clause does not apply,
as the same requires an effectivity period of at least two years. Petitioner further
argues that it is not an insurance company, which is governed by the Insurance
Commission, but a Health Maintenance Organization under the authority of the
Department of Health.
Section 2 (1) of the Insurance Code defines a contract of insurance as an
agreement whereby one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent event. An
insurance contract exists where the following elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the
designated peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual
losses among a large group of persons bearing a similar risk; and
5. In consideration of the insurers promise, the insured pays a premium. [8]
Section 3 of the Insurance Code states that any contingent or unknown event,
whether past or future, which may damnify a person having an insurable interest
against him, may be insured against. Every person has an insurable interest in the
life and health of himself. Section 10 provides:
Every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children;
(2) of any person on whom he depends wholly or in part for education or
support, or in whom he has a pecuniary interest;
(3) of any person under a legal obligation to him for the payment of
money, respecting property or service, of which death or illness
might delay or prevent the performance; and
(4) of any person upon whose life any estate or interest vested in him
depends.
In the case at bar, the insurable interest of respondents husband in obtaining
the health care agreement was his own health. The health care agreement was in
the nature of non-life insurance, which is primarily a contract of indemnity. [9] Once
the member incurs hospital, medical or any other expense arising from sickness,

injury or other stipulated contingent, the health care provider must pay for the same
to the extent agreed upon under the contract.
Petitioner argues that respondents husband concealed a material fact in his
application. It appears that in the application for health coverage, petitioners
required respondents husband to sign an express authorization for any person,
organization or entity that has any record or knowledge of his health to furnish any
and all information relative to any hospitalization, consultation, treatment or any
other medical advice or examination.[10] Specifically, the Health Care Agreement
signed by respondents husband states:
We hereby declare and agree that all statement and answers contained herein and
in any addendum annexed to this application are full, complete and true and bind all
parties in interest under the Agreement herein applied for, that there shall be no
contract of health care coverage unless and until an Agreement is issued on this
application and the full Membership Fee according to the mode of payment applied
for is actually paid during the lifetime and good health of proposed Members; that
no information acquired by any Representative of PhilamCare shall be binding upon
PhilamCare unless set out in writing in the application; that any physician is, by
these presents, expressly authorized to disclose or give testimony at anytime
relative to any information acquired by him in his professional capacity upon any
question affecting the eligibility for health care coverage of the Proposed
Members and that the acceptance of any Agreement issued on this application shall
be a ratification of any correction in or addition to this application as stated in the
space for Home Office Endorsement.[11] (Underscoring ours)
In addition to the above condition, petitioner additionally required the applicant
for authorization to inquire about the applicants medical history, thus:
I hereby authorize any person, organization, or entity that has any record or
knowledge of my health and/or that of __________ to give to the PhilamCare Health
Systems, Inc. any and all information relative to any hospitalization, consultation,
treatment or any other medical advice or examination. This authorization is in
connection with the application for health care coverage only. A photographic copy
of this authorization shall be as valid as the original.[12] (Underscoring ours)
Petitioner cannot rely on the stipulation regarding Invalidation of agreement
which reads:
Failure to disclose or misrepresentation of any material information by the member
in the application or medical examination, whether intentional or unintentional, shall
automatically invalidate the Agreement from the very beginning and liability of
Philamcare shall be limited to return of all Membership Fees paid. An undisclosed or
misrepresented information is deemed material if its revelation would have resulted
in the declination of the applicant by Philamcare or the assessment of a higher
Membership Fee for the benefit or benefits applied for.[13]
The answer assailed by petitioner was in response to the question relating to
the medical history of the applicant. This largely depends on opinion rather than
fact, especially coming from respondents husband who was not a medical
doctor. Where matters of opinion or judgment are called for, answers made in good
faith and without intent to deceive will not avoid a policy even though they are
untrue.[14]Thus,

(A)lthough false, a representation of the expectation, intention, belief, opinion, or

judgment of the insured will not avoid the policy if there is no actual fraud in
inducing the acceptance of the risk, or its acceptance at a lower rate of premium,
and this is likewise the rule although the statement is material to the risk, if the
statement is obviously of the foregoing character, since in such case the insurer is
not justified in relying upon such statement, but is obligated to make further
inquiry. There is a clear distinction between such a case and one in which the
insured is fraudulently and intentionally states to be true, as a matter of expectation
or belief, that which he then knows, to be actually untrue, or the impossibility of
which is shown by the facts within his knowledge, since in such case the intent to
deceive the insurer is obvious and amounts to actual fraud.[15] (Underscoring ours)
The fraudulent intent on the part of the insured must be established to warrant
rescission of the insurance contract. [16] Concealment as a defense for the health care
provider or insurer to avoid liability is an affirmative defense and the duty to
establish such defense by satisfactory and convincing evidence rests upon the
provider or insurer. In any case, with or without the authority to investigate,
petitioner is liable for claims made under the contract. Having assumed a
responsibility under the agreement, petitioner is bound to answer the same to the
extent agreed upon. In the end, the liability of the health care provider attaches
once the member is hospitalized for the disease or injury covered by the agreement
or whenever he avails of the covered benefits which he has prepaid.
Under Section 27 of the Insurance Code, a concealment entitles the injured
party to rescind a contract of insurance. The right to rescind should be exercised
previous to the commencement of an action on the contract. [17] In this case, no
rescission was made. Besides, the cancellation of health care agreements as in
insurance policies require the concurrence of the following conditions:
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of the policy of one
or more of the grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the address shown in the
policy;
4. Must state the grounds relied upon provided in Section 64 of the Insurance Code
and upon request of insured, to furnish facts on which cancellation is based. [18]
None of the above pre-conditions was fulfilled in this case. When the terms of
insurance contract contain limitations on liability, courts should construe them in
such a way as to preclude the insurer from non-compliance with his obligation.
[19]
Being a contract of adhesion, the terms of an insurance contract are to be
construed strictly against the party which prepared the contract the insurer. [20] By
reason of the exclusive control of the insurance company over the terms and
phraseology of the insurance contract, ambiguity must be strictly interpreted
against the insurer and liberally in favor of the insured, especially to avoid forfeiture.
[21]
This is equally applicable to Health Care Agreements. The phraseology used in
medical or hospital service contracts, such as the one at bar, must be liberally
construed in favor of the subscriber, and if doubtful or reasonably susceptible of two
interpretations the construction conferring coverage is to be adopted, and
exclusionary clauses of doubtful import should be strictly construed against the
provider.[22]

Anent the incontestability of the membership of respondents husband, we

quote with approval the following findings of the trial court:
(U)nder the title Claim procedures of expenses, the defendant Philamcare Health
Systems Inc. had twelve months from the date of issuance of the Agreement within
which to contest the membership of the patient if he had previous ailment of
asthma, and six months from the issuance of the agreement if the patient was sick
of diabetes or hypertension. The periods having expired, the defense of concealment
or misrepresentation no longer lie.[23]
Finally, petitioner alleges that respondent was not the legal wife of the
deceased member considering that at the time of their marriage, the deceased was
previously married to another woman who was still alive. The health care agreement
is in the nature of a contract of indemnity. Hence, payment should be made to the
party who incurred the expenses. It is not controverted that respondent paid all the
hospital and medical expenses. She is therefore entitled to reimbursement. The
records adequately prove the expenses incurred by respondent for the deceaseds
hospitalization, medication and the professional fees of the attending physicians. [24]
WHEREFORE, in view of the foregoing, the petition is DENIED. The assailed
decision of the Court of Appeals dated December 14, 1995 is AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, and Kapunan, JJ., concur.

THIRD DIVISION
VIOLETA R. LALICAN, Petitioner, v THE INSULAR LIFE ASSURANCE COMPANY
LIMITED, AS REPRESENTED BY THE PRESIDENT VICENTE R. AVILON,
Respondent.
G.R. No. 183526Promulgated:August 25, 2009
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
Challenged in this Petition for Review on Certiorari[1] under Rule 45 of the
Rules of Court are the Decision[2] dated 30 August 2007 and the Orders dated 10
April 2008[3] and 3 July 2008[4] of the Regional Trial Court (RTC) of Gapan City, Branch
34, in Civil Case No. 2177. In its assailed Decision, the RTC dismissed the claim for
death benefits filed by petitioner Violeta R. Lalican (Violeta) against respondent
Insular Life Assurance Company Limited (Insular Life); while in its questioned Orders
dated 10 April 2008 and 3 July 2008, respectively, the RTC declared the finality of
the aforesaid Decision and denied petitioners Notice of Appeal.
The factual and procedural antecedents of the case, as culled from the
records, are as follows:
Violeta is the widow of the deceased Eulogio C. Lalican (Eulogio).
During his lifetime, Eulogio applied for an insurance policy with Insular
Life. On 24 April 1997, Insular Life, through Josephine Malaluan (Malaluan), its agent
in GapanCity, issued in favor of Eulogio Policy No. 9011992, [5] which contained a 20Year Endowment Variable Income Package Flexi Plan worth P500,000.00,[6] with two

riders valued at P500,000.00 each.[7] Thus, the value of the policy amounted
to P1,500,000.00. Violeta was named as the primary beneficiary.
Under the terms of Policy No. 9011992, Eulogio was to pay the premiums
on a quarterly basis in the amount of P8,062.00, payable every 24 April, 24 July, 24
October and 24 January of each year, until the end of the 20-year period of the
policy. According to the Policy Contract, there was a grace period of 31 days for the
payment of each premium subsequent to the first. If any premium was not paid on
or before the due date, the policy would be in default, and if the premium remained
unpaid until the end of the grace period, the policy would automatically lapse and
become void.[8]
Eulogio paid the premiums due on 24 July 1997 and 24 October 1997.
However, he failed to pay the premium due on 24 January 1998, even after the lapse
of the grace period of 31 days. Policy No. 9011992, therefore, lapsed and became
void.
Eulogio submitted to the Cabanatuan District Office of Insular Life, through
Malaluan, on 26 May 1998, an Application for Reinstatement[9] of Policy
No. 9011992,together with the amount of P8,062.00 to pay for the premium due
on 24 January 1998. In a letter[10] dated 17 July 1998, Insular Life notified Eulogio
that his Application for Reinstatement could not be fully processed because,
although he already deposited P8,062.00 as payment for the 24 January
1998 premium, he left unpaid the overdue interest thereon amounting
to P322.48. Thus, Insular Life instructed Eulogio to pay the amount of interest and to
file another application for reinstatement. Eulogio was likewise advised by Malaluan
to pay the premiums that subsequently became due on 24 April 1998 and 24 July
1998, plus interest.
On 17 September 1998, Eulogio went to Malaluans house and submitted a
second Application for Reinstatement [11] of Policy No. 9011992, including the amount
ofP17,500.00, representing payments for the overdue interest on the premium
for 24 January 1998, and the premiums which became due on 24 April 1998 and 24
July 1998. As Malaluan was away on a business errand, her husband received
Eulogios second Application for Reinstatement and issued a receipt for the amount
Eulogio deposited.
A while later, on the same day, 17 September 1998, Eulogio died of cardiorespiratory arrest secondary to electrocution.
Without knowing of Eulogios death, Malaluan forwarded to the Insular Life
Regional Office in the City of San Fernando, on 18 September 1998, Eulogios second
Application
for
Reinstatement
of
Policy
No.
9011992
and P17,500.00
deposit. However, Insular Life no longer acted upon Eulogios second Application for
Reinstatement, as the former was informed on 21 September 1998 that Eulogio had
already passed away.
On 28 September 1998, Violeta filed with Insular Life a claim for payment of
the full proceeds of Policy No. 9011992.
In a letter[12] dated 14 January 1999, Insular Life informed Violeta that her
claim could not be granted since, at the time of Eulogios death, Policy No. 9011992
had already lapsed, and Eulogio failed to reinstate the same. According to the
Application for Reinstatement, the policy would only be considered reinstated upon
approval of the application by Insular Life during the applicants lifetime and good
health, and whatever amount the applicant paid in connection thereto was
considered to be a deposit only until approval of said application. Enclosed with

the 14 January 1999 letter of Insular Life to Violeta was DBP Check No.
0000309734, for the amount of P25,417.00, drawn in Violetas favor, representing
the full refund of the payments made by Eulogio on Policy No. 9011992.
On 12 February 1998, Violeta requested a reconsideration of the
disallowance of her claim. In a letter[13] dated 10 March 1999, Insular Life stated that
it could not find any reason to reconsider its decision rejecting Violetas claim. Insular
Life again tendered to Violeta the above-mentioned check in the amount
of P25,417.00.
Violeta returned the letter dated 10 March 1999 and the check enclosed
therein to the Cabanatuan District Office of Insular Life. Violetas counsel
subsequently sent a letter [14] dated 8 July 1999 to Insular Life, demanding payment
of the full proceeds of Policy No. 9011992. On 11 August 1999, Insular Life
responded to the said demand letter by agreeing to conduct a re-evaluation of
Violetas claim.
Without waiting for the result of the re-evaluation by Insular Life, Violeta
filed with the RTC, on 11 October 1999, a Complaint for Death Claim Benefit,
[15]
which was docketed as Civil Case No. 2177. Violeta alleged that Insular Life
engaged in unfair claim settlement practice and deliberately failed to act with
reasonable promptness on her insurance claim. Violeta prayed that Insular Life be
ordered to pay her death claim benefits on Policy No. 9011992, in the amount
of P1,500,000.00, plus interests, attorneys fees, and cost of suit.
Insular Life filed with the RTC an Answer with Counterclaim, [16] asserting
that Violetas Complaint had no legal or factual bases. Insular Life maintained that
Policy No. 9011992, on which Violeta sought to recover, was rendered void by the
non-payment of the 24 January 1998 premium and non-compliance with the
requirements for the reinstatement of the same. By way of counterclaim, Insular Life
prayed that Violeta be ordered to pay attorneys fees and expenses of litigation
incurred by the former.
Violeta, in her Reply and Answer to Counterclaim, asserted that the
requirements for the reinstatement of Policy No. 9011992 had been complied with
and the defenses put up by Insular Life were purely invented and illusory.
After trial, the RTC rendered, on 30 August 2007, a Decision in favor of
Insular Life.
The RTC found that Policy No. 9011992 had indeed lapsed and Eulogio
needed to have the same reinstated:
[The] arguments [of Insular Life] are not without basis. When the premiums
for April 24 and July 24, 1998 were not paid by [Eulogio] even after the
lapse of the 31-day grace period, his insurance policy necessarily
lapsed. This is clear from the terms and conditions of the contract between
[Insular Life] and [Eulogio] which are written in [the] Policy provisions of
Policy No. 9011992 x x x.[17]
The RTC, taking into account the clear provisions of the Policy Contract
between Eulogio and Insular Life and the Application for Reinstatement Eulogio
subsequently signed and submitted to Insular Life, held that Eulogio was not able to
fully comply with the requirements for the reinstatement of Policy No. 9011992:

The well-settled rule is that a contract has the force of law between the
parties. In the instant case, the terms of the insurance contract between
[Eulogio] and [Insular Life] were spelled out in the policy provisions of
Insurance Policy No. 9011992. There is likewise no dispute that said
insurance contract is by nature a contract of adhesion[,] which is defined
as one in which one of the contracting parties imposes a ready-made form
of contract which the other party may accept or reject but cannot modify.
(Polotan, Sr. vs. CA, 296 SCRA 247).
xxxx
The New Lexicon Websters Dictionary defines ambiguity as the quality of
having more than one meaning and an idea, statement or expression
capable of being understood in more than one sense. In Nacu vs. Court of
Appeals, 231 SCRA 237 (1994), the Supreme Court stated that[:]
Any ambiguity in a contract, whose terms are susceptible of
different interpretations as a result thereby, must be read and
construed against the party who drafted it on the assumption that
it could have been avoided by the exercise of a little care.
In the instant case, the dispute arises from the afore-quoted
provisions written on the face of the second application for
reinstatement. Examining the said provisions, the court finds the
same clearly written in terms that are simple enough to admit of
only one interpretation. They are clearly not ambiguous, equivocal
or uncertain that would need further construction. The same are
written on the very face of the application just above the space
where [Eulogio] signed his name. It is inconceivable that he signed
it without reading and understanding its import.
Similarly, the provisions of the policy provisions (sic) earlier mentioned are
written in simple and clear laymans language, rendering it free from any
ambiguity that would require a legal interpretation or construction. Thus,
the court believes that [Eulogio] was well aware that when he filed the said
application for reinstatement, his lapsed policy was not automatically
reinstated and that its approval was subject to certain conditions. Nowhere
in the policy or in the application for reinstatement was it ever
mentioned that the payment of premiums would have the effect of
an automatic and immediate renewal of the lapsed policy. Instead,
what was clearly stated in the application for reinstatement is that
pending approval thereof, the premiums paid would be treated as a
deposit only and shall not bind the company until this application
is finally approved during my/our lifetime and good health[.]
Again, the court finds nothing in the aforesaid provisions that would even
suggest an ambiguity either in the words used or in the manner they were
written. [Violeta] did not present any proof that [Eulogio] was not
conversant with the English language. Hence, his having personally signed
the application for reinstatement[,] which consisted only of one page, could
only mean that he has read its contents and that he understood them. x x x
Therefore, consistent with the above Supreme Court ruling and finding no
ambiguity both in the policy provisions of Policy No. 9011992 and in the
application for reinstatement subject of this case, the court finds no merit in
[Violetas] contention that the policy provision stating that [the lapsed policy
of Eulogio] should be reinstated during his lifetime is ambiguous and should

be construed in his favor. It is true that [Eulogio] submitted his application

for reinstatement, together with his premium and interest payments, to
[Insular Life] through its agent Josephine Malaluan in the morning
of September 17, 1998. Unfortunately, he died in the afternoon of that
same day. It was only on the following day, September 18, 1998 that Ms.
Malaluan brought the said document to [the regional office of Insular Life]
in San Fernando, Pampanga for approval. As correctly pointed out by
[Insular Life] there was no more application to approve because
the applicant was already dead and no insurance company would
issue an insurance policy to a dead person.[18] (Emphases ours.)
The RTC, in the end, explained that:
While the court truly empathizes with the [Violeta] for the loss of her
husband, it cannot express the same by interpreting the insurance
agreement in her favor where there is no need for such interpretation. It is
conceded that [Eulogios] payment of overdue premiums and interest was
received by [Insular Life] through its agent Ms. Malaluan. It is also true that
[the] application for reinstatement was filed by [Eulogio] a day before his
death. However, there is nothing that would justify a conclusion
that such receipt amounted to an automatic reinstatement of the
policy that has already lapsed. The evidence suggests clearly that
no such automatic renewal was contemplated in the contract
between [Eulogio] and [Insular Life]. Neither was it shown that Ms.
Malaluan was the officer authorized to approve the application for
reinstatement and that her receipt of the documents submitted by
[Eulogio] amounted to its approval.[19] (Emphasis ours.)
The fallo of the RTC Decision thus reads:
WHEREFORE, all the foregoing premises considered and finding that
[Violeta] has failed to establish by preponderance of evidence her cause of action
against the defendant, let this case be, as it is hereby DISMISSED.[20]
On 14 September 2007, Violeta filed a Motion for Reconsideration [21] of the aforementioned RTC Decision. Insular Life opposed[22] the said motion, averring that the
arguments raised therein were merely a rehash of the issues already considered and
addressed by the RTC. In an Order[23] dated 8 November 2007, the RTC denied
Violetas Motion for Reconsideration, finding no cogent and compelling reason to
disturb its earlier findings. Per the Registry Return Receipt on record, the 8
November 2007 Order of the RTC was received by Violeta on 3 December 2007.
In the interim, on 22 November 2007, Violeta filed with the RTC a Reply[24] to the
Motion for Reconsideration, wherein she reiterated the prayer in her Motion for
Reconsideration for the setting aside of the Decision dated 30 August 2007. Despite
already receiving on 3 December 2007, a copy of the RTC Order dated 8 November
2007, which denied her Motion for Reconsideration, Violeta still filed with the RTC,
on 26 February 2008, a Reply Extended Discussion elaborating on the arguments
she had previously made in her Motion for Reconsideration and Reply.
On 10 April 2008, the RTC issued an Order, [25] declaring that the Decision dated 30
August 2007 in Civil Case No. 2177 had already attained finality in view of Violetas
failure to file the appropriate notice of appeal within the reglementary period. Thus,
any further discussions on the issues raised by Violeta in her Reply and Reply
Extended Discussion would be moot and academic.

Violeta filed with the RTC, on 20 May 2008, a Notice of Appeal with Motion,
[26]
praying that the Order dated 10 April 2008 be set aside and that she be allowed
to file an appeal with the Court of Appeals.
In an Order[27] dated 3 July 2008, the RTC denied Violetas Notice of Appeal with
Motion given that the Decision dated 30 August 2007 had long since attained
finality.
Violeta directly elevated her case to this Court via the instant Petition for Review
on Certiorari, raising the following issues for consideration:
1. Whether or not the Decision of the court a quo dated August 30, 2007,
can still be reviewed despite having allegedly attained finality and despite
the fact that the mode of appeal that has been availed of by Violeta is
erroneous?
2. Whether or not the Regional Trial Court in its original jurisdiction has
decided the case on a question of law not in accord with law and applicable
decisions of the Supreme Court?
Violeta insists that her former counsel committed an honest mistake in filing a Reply,
instead of a Notice of Appeal of the RTC Decision dated 30 August 2007; and in the
computation of the reglementary period for appealing the said judgment. Violeta
claims that her former counsel suffered from poor health, which rapidly deteriorated
from the first week of July 2008 until the latters death just shortly after the filing of
the instant Petition on 8 August 2008. In light of these circumstances, Violeta
entreats this Court to admit and give due course to her appeal even if the same was
filed out of time.
Violeta further posits that the Court should address the question of law
arising in this case involving the interpretation of the second sentence of Section 19
of the Insurance Code, which provides:
Section. 19. x x x [I]nterest in the life or health of a person insured
must exist when the insurance takes effect, but need not exist
thereafter or when the loss occurs.
On the basis thereof, Violeta argues that Eulogio still had insurable interest
in his own life when he reinstated Policy No. 9011992 just before he passed away
on 17 September 1998. The RTC should have construed the provisions of the Policy
Contract and Application for Reinstatement in favor of the insured Eulogio and
against the insurer Insular Life, and considered the special circumstances of the
case, to rule that Eulogio had complied with the requisites for the reinstatement of
Policy No. 9011992 prior to his death, and that Violeta is entitled to claim the
proceeds of said policy as the primary beneficiary thereof.
The Petition lacks merit.
At the outset, the Court notes that the elevation of the case to us via the
instant Petition for Review on Certiorari is not justified. Rule 41, Section 1 of the
Rules of Court,[28] provides that no appeal may be taken from an order disallowing or
dismissing an appeal. In such a case, the aggrieved party may file a Petition
for Certiorari under Rule 65 of the Rules of Court.[29]
Furthermore, the RTC Decision dated 30 August 2007, assailed in this
Petition, had long become final and executory. Violeta filed a Motion for
Reconsideration thereof, but the RTC denied the same in an Order dated 8
November 2007. The records of the case reveal that Violeta received a copy of the 8
November 2007 Order on 3 December 2007. Thus, Violeta had 15 days[30] from
said date of receipt, or until 18 December 2007, to file a Notice of Appeal. Violeta

filed a Notice of Appeal only on 20 May 2008, more than five months after receipt
of the RTC Order dated 8 November 2007 denying her Motion for Reconsideration.
Violetas claim that her former counsels failure to file the proper remedy
within the reglementary period was an honest mistake, attributable to the latters
deteriorating health, is unpersuasive.
Violeta merely made a general averment of her former counsels poor
health, lacking relevant details and supporting evidence. By Violetas own admission,
her former counsels health rapidly deteriorated only by the first week of July
2008. The events pertinent to Violetas Notice of Appeal took place months before
July 2008, i.e., a copy of the RTC Order dated 8 November 2007, denying Violetas
Motion for Reconsideration of the Decision dated 30 August 2007, was received on 3
December 2007; and Violetas Notice of Appeal was filed on 20 May 2008. There is
utter lack of proof to show that Violetas former counsel was already suffering from ill
health during these times; or that the illness of Violetas former counsel would have
affected his judgment and competence as a lawyer.
Moreover, the failure of her former counsel to file a Notice of Appeal within
the reglementary period binds Violeta, which failure the latter cannot now disown on
the basis of her bare allegation and self-serving pronouncement that the former was
ill. A client is bound by his counsels mistakes and negligence. [31]
The Court, therefore, finds no reversible error on the part of the RTC in
denying Violetas Notice of Appeal for being filed beyond the reglementary
period. Without an appeal having been timely filed, the RTC Decision dated 30
August 2007 in Civil Case No. 2177 already became final and executory.
A judgment becomes "final and executory" by operation of law. Finality becomes a
fact when the reglementary period to appeal lapses and no appeal is perfected
within such period. As a consequence, no court (not even this Court) can exercise
appellate jurisdiction to review a case or modify a decision that has become final.
[32]
When a final judgment is executory, it becomes immutable and unalterable. It
may no longer be modified in any respect either by the court, which rendered it or
even by this Court. The doctrine is founded on considerations of public policy and
sound practice that, at the risk of occasional errors, judgments must become final at
some definite point in time.[33]
The only recognized exceptions to the doctrine of immutability and unalterability are
the correction of clerical errors, the so-called nunc pro tunc entries, which cause no
prejudice to any party, and void judgments. [34] The instant case does not fall under
any of these exceptions.
Even if the Court ignores the procedural lapses committed herein, and proceeds to
resolve the substantive issues raised, the Petition must still fail.
Violeta makes it appear that her present Petition involves a question of law,
particularly, whether Eulogio had an existing insurable interest in his own life until
the day of his death.
An insurable interest is one of the most basic and essential requirements in an
insurance contract. In general, an insurable interest is that interest which a person is
deemed to have in the subject matter insured, where he has a relation or connection
with or concern in it, such that the person will derive pecuniary benefit or advantage
from the preservation of the subject matter insured and will suffer pecuniary loss or
damage from its destruction, termination, or injury by the happening of the event
insured against.[35] The existence of an insurable interest gives a person the legal

right to insure the subject matter of the policy of insurance. [36] Section 10 of the
Insurance Code indeed provides that every person has an insurable interest in his
own life.[37] Section 19 of the same code also states that an interest in the life or
health of a person insured must exist when the insurance takes effect, but need not
exist thereafter or when the loss occurs.[38]
Upon more extensive study of the Petition, it becomes evident that the matter of
insurable interest is entirely irrelevant in the case at bar. It is actually beyond
question that while Eulogio was still alive, he had an insurable interest in his own
life, which he did insure under Policy No. 9011992. The real point of contention
herein is whether Eulogio was able to reinstate the lapsed insurance policy on his
life before his death on 17 September 1998.
The Court rules in the negative.
Before proceeding, the Court must correct the erroneous declaration of the
RTC in its 30 August 2007 Decision that Policy No. 9011992 lapsed because of
Eulogios non-payment of the premiums which became due on 24 April
1998 and 24 July 1998. Policy No. 9011992 had lapsed and become void earlier,
on 24 February 1998, upon the expiration of the 31-day grace period for payment
of the premium, which fell due on 24 January 1998, without any payment having
been made.
That Policy No. 9011992 had already lapsed is a fact beyond
dispute. Eulogios filing of his first Application for Reinstatement with Insular Life,
through Malaluan, on 26 May 1998, constitutes an admission that Policy
No. 9011992 had lapsed by then. Insular Life did not act on Eulogios first Application
for Reinstatement, since the amount Eulogio simultaneously deposited was sufficient
to cover only the P8,062.00 overdue premium for 24 January 1998, but not
the P322.48 overdue interests thereon. On 17 September 1998, Eulogio submitted a
second Application for Reinstatement to Insular Life, again through Malaluan,
depositing at the same time P17,500.00, to cover payment for the overdue interest
on the premium for 24 January 1998, and the premiums that had also become due
on 24 April 1998 and 24 July 1998. On the very same day, Eulogio passed away.
To reinstate a policy means to restore the same to premium-paying status after it
has been permitted to lapse.[39] Both the Policy Contract and the Application for
Reinstatement provide for specific conditions for the reinstatement of a lapsed
policy.
The Policy Contract between Eulogio and Insular Life identified the following
conditions for reinstatement should the policy lapse:
10. REINSTATEMENT - You may reinstate this policy at any time within three years
after it lapsed if the following conditions are met: (1) the policy has not been
surrendered for its cash value or the period of extension as a term insurance has not
expired; (2) evidence of insurability satisfactory to [Insular Life] is furnished; (3)
overdue premiums are paid with compound interest at a rate not exceeding that
which would have been applicable to said premium and indebtedness in the policy
years prior to reinstatement; and (4) indebtedness which existed at the time of
lapsation is paid or renewed.[40]
Additional conditions for reinstatement of a lapsed policy were stated in the
Application for Reinstatement which Eulogio signed and submitted, to wit:
I/We agree that said Policy shall not be considered reinstated until this
application is approved by the Company during my/our lifetime and good

health and until all other Company requirements for the reinstatement of
said Policy are fully satisfied.
I/We further agree that any payment made or to be made in connection with
this application shall be considered as deposit only and shall not bind the
Company until this application is finally approved by the Company during
my/our lifetime and good health. If this application is disapproved, I/We also
agree to accept the refund of all payments made in connection herewith, without
interest, and to surrender the receipts for such payment. [41] (Emphases ours.)
In the instant case, Eulogios death rendered impossible full compliance with the
conditions for reinstatement of Policy No. 9011992. True, Eulogio, before his death,
managed to file his Application for Reinstatement and deposit the amount for
payment of his overdue premiums and interests thereon with Malaluan; but Policy
No. 9011992 could only be considered reinstated after the Application for
Reinstatement had been processed and approved by Insular Life during Eulogios
lifetime and good health.
Relevant herein is the following pronouncement of the Court in Andres v. The Crown
Life Insurance Company,[42] citing McGuire v. The Manufacturer's Life Insurance Co.
[43]
:
The stipulation in a life insurance policy giving the insured the privilege to reinstate
it upon written application does not give the insured absolute right to such
reinstatement by the mere filing of an application. The insurer has the right to
deny the reinstatement if it is not satisfied as to the insurability of the insured
and if the latter does not pay all overdue premium and all other indebtedness to the
insurer. After the death of the insured the insurance Company cannot be
compelled to entertain an application for reinstatement of the policy because
the conditions precedent to reinstatement can no longer be determined and
satisfied. (Emphases ours.)
It does not matter that when he died, Eulogios Application for Reinstatement and
deposits for the overdue premiums and interests were already with Malaluan. Insular
Life, through the Policy Contract, expressly limits the power or authority of its
insurance agents, thus:
Our agents have no authority to make or modify this contract, to extend
the time limit for payment of premiums, to waive any lapsation, forfeiture
or any of our rights or requirements, such powers being limited to our
president, vice-president or persons authorized by the Board of Trustees
and only in writing.[44] (Emphasis ours.)
Malaluan did not have the authority to approve Eulogios Application for
Reinstatement. Malaluan still had to turn over to Insular Life Eulogios Application for
Reinstatement and accompanying deposits, for processing and approval by the
latter.

The Court agrees with the RTC that the conditions for reinstatement under
the Policy Contract and Application for Reinstatement were written in clear and
simple language, which could not admit of any meaning or interpretation other than
those that they so obviously embody. A construction in favor of the insured is not
called for, as there is no ambiguity in the said provisions in the first place. The words
thereof are clear, unequivocal, and simple enough so as to preclude any mistake in
the appreciation of the same.
Violeta did not adduce any evidence that Eulogio might have failed to fully
understand the import and meaning of the provisions of his Policy Contract and/or
Application for Reinstatement, both of which he voluntarily signed. While it is a
cardinal principle of insurance law that a policy or contract of insurance is to be
construed liberally in favor of the insured and strictly as against the insurer
company, yet, contracts of insurance, like other contracts, are to be construed
according to the sense and meaning of the terms, which the parties themselves
have used. If such terms are clear and unambiguous, they must be taken and
understood in their plain, ordinary and popular sense. [45]
Eulogios death, just hours after filing his Application for Reinstatement and
depositing his payment for overdue premiums and interests with Malaluan, does not
constitute a special circumstance that can persuade this Court to already
consider Policy No. 9011992 reinstated. Said circumstance cannot override the clear
and express provisions of the Policy Contract and Application for Reinstatement, and
operate to remove the prerogative of Insular Life thereunder to approve or
disapprove the Application for Reinstatement.Even though the Court commiserates
with Violeta, as the tragic and fateful turn of events leaves her practically emptyhanded, the Court cannot arbitrarily burden Insular Life with the payment of
proceeds on a lapsed insurance policy. Justice and fairness must equally apply to all
parties to a case. Courts are not permitted to make contracts for the parties. The
function and duty of the courts consist simply in enforcing and carrying out the
contracts actually made.[46]
Policy No. 9011992 remained lapsed and void, not having been reinstated
in accordance with the Policy Contract and Application for Reinstatement before
Eulogios death.Violeta, therefore, cannot claim any death benefits from Insular Life
on the basis of Policy No. 9011992; but she is entitled to receive the full refund of
the payments made by Eulogio thereon.
WHEREFORE, premises considered, the Court DENIES the instant Petition
for Review on Certiorari under Rule 45 of the Rules of Court. The Court AFFIRMS the
Orders dated 10 April 2008 and 3 July 2008 of the RTC of Gapan City, Branch 34, in
Civil Case No. 2177, denying petitioner Violeta R. Lalicans Notice of Appeal, on the
ground that the Decision dated 30 August 2007 subject thereof, was already final
and executory. No costs.
SO ORDERED.