27

[No. 41702.
September 4, 1935]
FORTUNATA LUCERO VlUDA DE SINDAYEN, plaintiff

and appelvs. THE INSULAR LIFE ASSURANCE Co.,
LTD., defendant and appellee.
1. INSURANCE; LIFE INSURANCE POLICY; DELIVERY OF

POLICY TO INSURED PERSON.·It is suggested in
appellee's brief that there was no delivery of the policy in
this case because the policy was not delivered to and
accepted by the Insured in person. Delivery to the insured
In person is not necessary, Delivery may be made by mail or
a duly constituted. agent.
2. ID.; ID.; ID.; CONDITION OF HEALTH OF INSURED AT

THE TIME OF DELIVERY OF POLICY.·A number of
American decisions go to the extent 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; that
when the delivery is made notwithstanding this knowledge
of the defect, the company is deemed to have waived
3. ID.; lD.; ID.·Although that appears to be the prevailing

view in the American decisions (14 R, C. L., 900) and leads
to the same conclusion, namely, that the act -of delivery of
the policy in the absence of fraud or other ground for
rescission
10
10 PHILIPPINE REPORTS ANNOTATED
Lucero Vda. de Sindayen vs. Insular Life Assurance Co.
consummates the insurance, 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 M the agent
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.
4. ID, ; ID. ; ID. ; ID. ; AGENT'S DISCRETION.·The evidence

in the record shows that M 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". Whether that condition
had been met or not plainly calls for the exercise of
discretion. M's decision that the condition had been met by
the insured and that it was proper to make 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. Granted
that M made a mistake of judgment because he acted on
insufficient evidence as to the state of health of the insured.
But it is not charged that the mistake was induced by any
misconduct or omission of duty of the insured.
5. ID. ; ID. ; ID. ; ID. ; ID.·It is in the interest not only of 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. This
sense of security and of peace of mind that one's dependents
are provided for without risk either of loss of litigation is the
bedrock of life insurance. 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 inquired
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.
6. ID.; ID.; ID.; ID.; ID.·When the policy is issued and

delivered, in the absence of fraud or other grounds for
rescission, it is plainly not within the intention of the
parties that there should be any questions held in abeyance
or reserved for future determination that leave the very
existence of the contract in suspense and doubt. If this were
not so, the entire business world which deals so
voluminously in insurance would be affected by this
uncertainty. Policies that have been delivered to the insured
are constantly being assigned for credit
11
VOL. 62, SEPTEMBER 4, 1935 11
and other purposes. Although such policies are not

negotiable instruments and are subject to defenses for
fraud, 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.
7. ID.; ID. ; ID ; ID. ; ID.·The delivery of the policy to the

insured by an agent of the company who is authorized to
make delivery or withhold delivery is the final act which
binds the company (and the insured as well) in the absence
of fraud or other legal ground for rescission. The fact that
the agent to whom it has entrusted this duty (and
corporations can only act through agents) 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.
8. ID.; ID.; ID.; ID.; ID.; COMPANY'S LIABILITY.·The

company having decided that all the conditions precedent to
the taking effect of the policy had been complied with and
having accepted the premium and delivered the policy
thereafter to the insured, the company is now estopped to
assert that it never intended that the policy should take
effect. (Cf. Northwestern Life Association vs. Findley, 29
Tex. Civ. App., 494; 68 S. W., 696; McLaurin vs. Mutual Life
Insurance Co., 115 S. C., 59; 104 S. E., 327; 14 Cal. Jur., par.
12, pages 425-427.)
APPEAL from a judgment of the Court of First Instance of

Manila. Albert, J.
The facts are stated in the opinion of the court.
Jos. N. Wolfson for appellant.
Araneta, Zaragoza & Araneta for appellee.
BUTTE, J.:
This is an appeal from a judgment of the Court of First

Instance of Manila in an action brought by the plaintiff-
appellant as beneficiary to recover P1,000 upon a life
insurance policy issued by the defendant on the life of her
deceased husband, Arturo Sindayen.
12

The essential facts upon which this case turns are not In
dispute and may be stated as follows:
Arturo Sindayen, up to the time of his death on January
19, 1933, was employed as a linotype operator in the
Bureau of Printing at Manila and had been such for eleven
years prior thereto. He and his wife went to Camiling,
Tarlac, to spend the Christmas vacation with his aunt,
Felicidad Estrada. While there he made a written
application on December 26, 1932, to the defendant Insular
Life Assurance Co., Ltd., through its agent, Cristobal
Mendoza, for a policy of insurance on his life in the sum of
P1,000 and he 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,
Felicidad Estrada, with whom Sindayen left the sum of
P25.06 to complete the payment of the first annual
premium of P40.060 On January 1, 1933, Sindayen, who
was then twenty-nine years of age, was examined by the
company's doctor who made a favorable report to the
company. On January 2, 1933, Sindayen returned to
Manila and resumed his work as linotype operator In the
Bureau of Printing. On January 11, 1933, the company
accepted the risk and issued policy No. 47710 dated back to
December 1, 1932, and mailed the same to its agent,
Cristobal Mendoza, in Camiling, Tarlac, for delivery to the
insured. On January 11, 1933, Sindayen was at work in the
Bureau of Printing. On January 12, he complained of a
severe headache and remained at home,, On January 15,
he called a physician who found that he was suffering from
acute nephritis and uremia. His illness did not yield to
treatment and on January 19, 1933, he died.
The policy which the company issued and mailed in
Manila on January 11, 1933, was received by its agent in
Camiling, Tarlac, on January 16, 1933. On January 18,
1933, the agent, in accordance with his agreement with the
insured, delivered the policy to Felicidad Estrada upon
13

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
because she had no information that he was sick and he
thereupon delivered to her the policy.
On January 20, 1933, the agent learned of the death of
Arturo Sindayen and called on Felicidad Estrada and asked
her to return the policy. He testified: "pedía a ella que me
devolviera la póliza para traerla a Manila para esperar la
decision de la compañia" (t. s. n. p. 19). But he did not
return or offer to return the premium paid. Felicidad
Estrada on his aforesaid statement gave him the policy.
On February 4, 1933, under circumstances which it is
not necessary to relate here, the company obtained from
the beneficiary, the widow of Arturo Sindayen, her
signature to a legal document entitled "ACCORD,
SATISFACTION AND RELEASE" whereby in
consideration of the sum of P40.06 paid to her by a check of
the company, she "assigns, releases and' f orever discharges
said Insular Life Assurance Co., Ltd., its successors and
assigns, of all claims, obligation or indebtedness which she,
as such beneficiary ever had or now has, hereafter can,
shall, or may have, for, upon, or by reason of said policy of
life insurance numbered 47710 upon the life of said Arturo
Sindayen, the latter now deceased, or arising therefrom or
connected therewith in any manner", which appears in the
record' as Exhibit A,, attached to the deposition of the
notary who executed the fraudulent acknowledgment to
Exhibit A. The said check for P40.06 was never cashed but
returned to the company and appears in the record of this
case as Exhibit D. Thereupon this action was brought to
enforce payment of the policy.
By the terms of the policy, an annual premium of P40.06
is due on the first day of December of each year, the first
premium already paid by the insured covering the period
from December 1, 1932, to December 1, 1933. It is to be
14

noted that the policy was not issued and the company
assumed no actual risk prior to January 11, 1933.
The policy contains the following paragraph:
"THE CONTRACT. This Policy and the application
herefor constitute the entire contract between the parties
hereto. All statements made by the Insured shall, in the
absence of fraud, be deemed representations and not
warranties, and no such statement shall void the Policy
unless it is contained in the written application, a copy of
which is attached to this Policy. Only the President, or the
Manager, acting jointly with the Secretary or Assistant
Secretary (and then only in writing signed by them) have
power in behalf of the Company to issue permits, or to
modify this or any contract, or to extend the time for
making any premium payment, and the Company shall not
be bound by any promise or representation heretofore or
hereafter given by any person other than the above-named
officials, and by them only in writing and signed conjointly
as stated."
The application which the insured signed in Camiling,
Tarlac, on December 26, 1932, contained among others the
following provisions:
"2. That if this application is accepted and a policy

issued in my f avor, I bind myself to accept the same
and! to pay at least the first year's premium
thereon in the City of Manila.
"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.
"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."
The insurance company does not set up any defense of

fraud', misconduct or omission of duty of the insured or his
agent, Felicidad Estrada or of the beneficiary. In its answer
it pleads the "ACCORD, SATISFACTION AND RELEASE"
(Exhibit A) signed by the widow of Arturo Sindayen, the
plaintiff-appellant. With respect to Exhibit A, it suffices to
say that this release is so inequitable, not to say
15

fraudulent, that we are pleased to note that counsel for the

defendant company, on page 51 of their brief, state: "si
resultara que la póliza aquí en cuestión es válida la
apelada sería la primera en no dar validez alguno al
documento Exhibit A aunque la apelante hubiera afirmado
que lo otorgó con conocimiento de causa."
It is suggested in appellee's brief that there was no
delivery of the policy in this case because the policy was not
delivered to and accepted by the insured in person.
Delivery to the insured in person is not necessary. Delivery
may be made by mail or to a duly constituted agent.
Appellee cites no authorities to support its proposition and
none need be cited to refute it.
We come now to the main defense of the company in this
case, namely, that the said policy never took effect because
of paragraph 3 of the application above quoted, for at the
time of its delivery by the agent as aforesaid the insured
was not in good health. We have not heretofore been called
upon to interpret and apply this clause in a life insurance
application, but identical or substantially identical clauses
have been construed and' applied in a number of cases in
the United States and the decisions thereon are far from
uniform or harmonious. We do not find it practicable to
attempt to determine where the weight of authority lies
and propose to resolve this case on its own facts.
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; that this condition precedent goes to the very
essence of the contract and cannot be waived by the agent
making delivery of the policy. (Rathbun vs. New York Life
Insurance Co., 30 Idaho, 34; 165 Pac., 997; American
Bankers Insurance Co. vs. Thomas, 53 Okla., 11; 154 Pac.,
44; Gordon vs. Prudential Insurance Co., 231 Pa., 404;
Reliance Life Insurance Co. vs. Hightower, 148 Ga., 843; 98
S. E., 469.)
16

On the other hand, a number of American decisions hold

that an agent to whom a lif e insurance policy similar to
the one here involved was sent with instructions to deliver
it to the insured has authority to bind the company by
making such delivery, although the insured' was not in
good health at the time of delivery, on the theory that the
delivery of the policy being the final act to the
consummation of the contract, the condition as to the
insured's good health was waived by the company. (Kansas
City Life Insurance Co. vs. Ridout, 147 Ark., 563; 228 S. W.,
55; Metropolitan Life Insurance Co. vs. Willis, 37 Ind. App.,
48; 76 N. E., 560; Grier vs. Mutual Life Insurance Co. of
New York, 132 N. C., 543; 44 S. E., 38; Bell vs. Missouri
State Life Insurance Co., 166 Mo. App., 390; 149 S. W., 33.)
A number of these cases go to the extent 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; that when the delivery is made notwithstanding
this knowledge of the defect, the company is deemed to
have waived the defect. Although that appears to be the
prevailing view in the American decisions (14 R. C. L., 900)
and leads to the same conclusion, namely, that the act of
delivery of the policy in the absence of fraud or other
ground for rescission consummates the insurance, 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.. As was well said in the case of
McLaurin vs. Mutual Life Insurance Co. (115 S. C., 59; 104
S. E.. 327):
"So much comes from the necessity of the case; the
president the vice-president, and the secretary cannot
solicit,
17

or collect, or deliver; they must commit that to others, and

along with it the discretions we have adverted to. * * * The
power in the local agent to withhold the policy involves the
power to deliver it; there is no escape from that conclusion.
"But the appellant says, even though the local agent
should have concluded that the applicant was in good
health, yet, if the fact be the contrary, then the policy never
operated. The parties intended to make a contract, and
that involved the doing of everything necessary to carry it
into operation, to wit, the acceptance of the applicant as a
person in good health. They never intended to leave open
that one essential element of the contract, when the parties
dealth fairly one with the other. 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."
Mendoza was duly licensed by the Insurance
Commissioner to act as the agent of the def endant
insurance company. The well known custom of the
insurance business and the evidence in this case prove that
Mendoza was not regarded by the company as a mere
conduit or automaton for the performance of the physical
act of placing the policy in the hands of the insured. If
Mendoza were only an automaton then the legally effective
delivery of the policy and the consummation- of the
contract occurred when the company expressed its will to
release fee policy by mailing it to its agent, namely, on
January 11, 1933. In such a case the agent would perform a
purely ministerial act and' have no discretion. He could do
nothing but make unconditional delivery. The legal result
would be the same as if the company had mailed the policy
on January 11, 1933, to the insured directly using the post-
office as Its conduit for delivery. On January 11, 1933, the
insured was in good
18

health performing his regular duties in the Bureau of

Printing.
But we are not inclined to take such a restrictive view of
the agent's authority because 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". Whether that
condition had been met or not plainly calls for the exercise
of discretion. Mendoza's decision that the condition had
been met by the insured and that it was proper to make
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. Granted that Mendoza made a mistake of
judgment because he acted on insufficient evidence as to
the state of health of the insured. But it is not charged that
the mistake was induced by any misconduct or omission of
duty of the insured.
It is in the interest not only of 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'. This sense of security and
of peace of mind that one's dependents are provided for
without risk either of loss or of litigation is the bedrock of
life insurance. 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 inquired into
years afterward's 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. Suppose in the
present instance that Sindayen had recovered his health,
but was killed in an automobile accident six months after
the delivery of the policy; and that when called on to pay
the loss, the company learns of Sindayen's grave illness on
January 18, 1933, and alleges that the policy had never
taken effect. It is difficult to imagine that the
19

insurance company would take such a position in the face

of the common belief of the insuring public that when the
policy is delivered, in the absence of fraud or other grounds
for rescission, the contract of insurance is consummated.
The insured rests and acts on that faith. So does the
insurance company, for that matter, for from the date of
delivery of the policy it appropriates to its own use the
premium paid by the insured. When the policy is issued
and delivered, in the absence of fraud or other grounds for
rescission, it is plainly not within the intention of the
parties that there should be any questions held in abeyance
or reserved for future determination that leave the very
existence of the contract in suspense and doubt. If this
were not so, the entire business world which deals so
vóluminously in insurance would be affected by this
uncertainty. Policies that have been delivered to the
insured are constantly being assigned for credit and other
purposes. Although such policies are not negotiable
instruments and are subject to defenses for fraud, 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. It is therefore in the public interest, for the
public is profoundly and generally interested in life
insurance, as well as in the interest of the insurance
companies themselves by giving certainty and' security to
their policies, that we are constrained to hold, as we do,
that the delivery of the policy to the insured' by an agent of
the company who is authorized to make delivery or
withhold delivery is the final act which binds the company
(and the insured as well) in the absence of fraud or other
legal ground for rescission. The fact that the agent to whom
it has entrusted this duty (and corporations can only act
through agents) 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
20
agent toward a third party who was not in collusion with

the agent
Paragraph 4 of the application to the effect "that the
agent taking this application has no authority to make,
modify or discharge contracts or to waive any of the
company's rights or requirements" 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
and having accepted the premium and' delivered! the policy
thereafter to the insured, the company is now estopped to
assert that it never intended that the policy should take
effect. (Cf. Northwestern Life Association vs. Findley, 29
Tex. Civ. App., 494; 68 S. W., 695; McLaurin vs, Mutual Life
Insurance Co., 115 S. C., 59; 104 S. E., 327; 14 Cal. Jur.,
par. 12, pages 425-427.)
In view of the premises, we hold that the defendant
company assumed the risk covered by policy No. 47710 on
the life of Arturo Sindayen on January 18, 1933, the date
when the policy was delivered to the insured. The judgment
appealed from is therefore reversed with directions to enter
judgment against the appellee in the sum of P1,000
together with interest at the legal rate from and after May
4, 1933, with costs in both instances against the appellee.
Malcolm, Villa-Real, Abad Santos, Hull, Vickers,

Goddard, and Recto, JJ., concur.
AVANCEÑA, C. J., concurring:
I concur in the result of this decision. I agree with the

conclusion arrived in the majority opinion in the sense
21
that the contract in question was consummated. I am of the

opinion, however, that this contract was consummated by
the defendant due to an error regarding an essential
condition, to wit: the good health of the insured. There is no
doubt but that the defendant would not have consummated'
the contract had it known that the insured was hopelessly
ill, inasmuch as this consideration is essential in this kind
of contracts. It is not true that the defendant or its agent
had waived this condition inasmuch as it consummated the
contract in the belief that this condition had been complied
with, in view of the information given to it in good faith by
the agent of the insured to the effect that the latter might
continue to be in good health for the reason that she had
not received any information from him to the contrary. This
being so, the defendant's consent is vitiated by error, and,
inasmuch as it affects an essential condition of the
contract, it may give rise to the nullity thereof.
However, inasmuch as the nullity of the contract has not
been set up as a defense in this case, I concur with the
majority in the result.
IMPERIAL, J., dissenting:
The plaintiff, as beneficiary, brought this action to recover

from the defendant, an insurance company, the sum of
P1,000, the value of a life insurance policy issued in the
name of Arturo Sindayen, the plaintiff's husband
The plaintiff appealed from the judgment dismissing the
complaint, without special pronouncement as to costs, On
December 26, 1932, Arturo Sindayen signed Exhibit 6
wherein he applied for life insurance in the sum of P1,000
under certain conditions, among others, the follow
"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.
22

"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."
On the back of the policy said conditions were endorsed
as follows:
"THE CONTRACT. This Policy and the application
herefor constitute the entire contract between the parties
hereto. All statements made by the Insured' shall, in the
absence of fraud, be deemed representations and not
warranties, and no such statement shall void the Policy
unless it is contained in the written application, a copy of
which is attached to this Policy. Only the President, or the
Manager, acting jointly with the Secretary or Assistant
Secretary (and then only in writing signed by them) have
power in behalf of the Company to issue permits, or to
modify this or any contract, or to extend! the time for
making any premium payment, and the Company shall not
be bound by any promise or representation heretofore or
hereafter given by any person other than the above-named
officials, and by them only in writing and signed conjointly
as stated."
The insurance was secured by the defendant's agent
Cristobal Mendoza in Camiling, Tarlac. The first premium
to be paid by the insured' amounted to P40.06 and on
account of this sum he paid the agent P15 after he signed
the application, with the understanding between them that
the balance of P25.06 would be paid in the same town on
the date the policy would be delivered. The insured
designated his aunt Felicidad Estrada to act as his
representative and to receive in his name the policy and to
pay the balance of the premium. On January 11, 1933, the
defendant issued insurance policy No. 47710, dated
December 1, 1932 and sent it by registered mail to its agent
in Camiling, Tarlac. On January 16th the agent got the
policy from the post office and on the 18th he looked for the
insured, but Felicidad Estrada informed him that the
insured had returned to Manila. The agent asked
23

Lucero Vda. de Sindayen vs. lnsular Life Assurance Co.
her whether the insured continued' to be sound and in good

health, to which she replied that she believed that he was
in good health inasmuch as she received no information
that he was sick, whereupon the agent delivered the policy
to Felicidad Estrada with instruction to hand it to the
insured and, after receiving the sum of P25.06, he issued
the receipt for the payment of the premium of P40.06,
signing it as defendant's agent. On January 19th Felicidad
Estrada came to Manila, to the home of the insured at No.
14 Teresa Street, to deliver the policy, but she found that he
died a few hours before her arrival and there she saw his
lifeless body. Felicidad Estrada delivered the policy to the
plaintiff as beneficiary. On January 20th of the same year
the agent had knowledge of the death of the insured and
went to see Felicidad Estrada whom he requested to return
the policy so that the defendant would decide what was to
be done. On that occasion the agent conveyed to Felicidad
Estrada his belief that the insured was not in good health
when he delivered the policy to her. Felicidad Estrada
returned the policy to the agent on the afternoon of said
date. The agent gave notice to the defendant of the death of
the insured and of the circumstances under which he had
delivered the policy, and the defendant on February 4th of
the same year returned to the plaintiff by check all the
premium theretofore received, and furthermore secured
from her Exhibit A (Accord, Satisfaction and Release), by
virtue of which said plaintiff acknowledged having received
the aforesaid premium and that in further consideration
thereof she formally waived whatever right she might
have, as beneficiary, in the insurance policy issued in the
name of her deceased husband.
With respect to the sickness of the deceased, it appears
that on January 1, 1933 he was examined by the physician
of the defendant company. On the 12th of the same month
he felt ill and consulted Dr. Alfredo L. Guerrero who, after
an examination, found him suffering from ne-
24

phritis. On the 15th he was treated for the second time by

the physician, who found him seriously 111 and with fever.
In the afternoon of January 19, 1933, he died from
nephritis and uremia in his home in Manila.
In its answer the defendant set up two special defenses:
(1) That the plaintiff has lost any and all right to collect the
value of the policy because at the time the first premium
was paid and the policy was delivered to the insured, the
latter was not in good health, thus violating clause 3 of the
application which he signed and was made an integral part
of the policy as one of the conditions thereof; and (2) that
the plaintiff by means of the document known as "Accord,
Satisfaction and Release" has waived whatever right she
might derive from the insurance policy.
A stipulation or contract between the company and the
applicant in the sense that the insurance policy will
produce no effect or will not be binding on the company
unless the first premium shall have been paid while the
applicant is alive and in good health, is valid and will be
enforced' in accordance with the terms thereof; it is a
condition precedent to the liability of the company, and
compliance therewith or its waiver are necessary for the
enforcement and fulfillment of the insurance contract,
unless the case should come under the provisions of an
uncontestable clause. ([Perry vs. Security L., etc., Co., 150
N. C., 143; 63 S. E., 679; Rathbun vs. New York L. Ins. Co.,
30 Ida., 34; 165 P., 997; Hawley vs. Michigan Mut. L. Ins.
Co., 92 lowa, 593; 61 N. W., 201; Whiting vs. Massachusetts
Mut L. Ins, Co., 129 Mass., 240; 37 Am. Rep., 317; Missouri
State L. Ins. Co, vs. Salisbury, 279 Mo., 40; 213 S. W., 786;
Ormond vs. Fidelity Life Assoc., 96 N. C., 158; 1 S. E., 796;
Bowen vs. New York Mut. L. Ins. Co., 20 S. D., 103; 104 N.
W., 1040; Rositer vs, Aetna L. Ins. Co., 91 Wis., 121; 64 N.
W., 876," Anders vs. Life Ins. Clearing Co., 62 Neb., 586; 87
N. W., 331; Reliance L. Ins. Co. vs. Hightower, .148 Ga.,
848; 98 S. E., 469; Clark vs. Mutual L. Ins. Co., 129 Ga.,
571; 59 8. E., 283; Reese vs. Fidelity Mut. Life Assoc., 111
25

Ga., 482; 36 S. E., 637 [foll. Williams vs. Empire L. Ins. Co.,
146 Ga., 246; 91 S. E., 44); Oliver vs. New York Mut. L. Ins.
Co., 97 Va., 134; 33 S. E., 526; Reese vs. Fidelity Mut. Life
Assoc., 111 Ga., 482; 36 S. E., 637; Anders vs. Life Ins.
Clearing Co., 62 Neb., 585; 87 N. W., 331; Perry vs. Security
L. etc., Co., 150 N. C., 143; 63 S. E.; 679; Strigham vs.
Mutual Ins. Co., 44 Ore., 447; 75 Pac., 822; Dibble vs.
Reliance L. Ins. Co., 170 Cal., 199; 149 Pac., 171.] Ann.
Cas. 1917E, 34.)
In the case of Reliance Life Ins. Co. vs. Hightower,
supra, the Supreme Court of Georgia, in a similar case,
said the following:
"* * * An application for life insurance, signed by the
applicant, contained a provision as follows:
" I hereby declare and agree that all statements and
answers written in this application * * * are true, full, and

complete, and are offered to the company as a consideration
for the contract of insurance, which I hereby agree to
accept, and which shall not take effect until the first
premium shall have been actually paid while I am in good
health and the policy shall have been signed by the duly
authorized officers of the company and issued.'
"The policy itself contained, among others, the following
provisions:
" ' Agents are not authorized to modify this policy or to
extend the time for paying a premium * * *. All insurance
provided by this policy is based upon the application
therefore, a copy of which is hereto attached and made a
part of this policy/
* * * * * *
"Applying to the facts above stated the principles
recognized in Reese vs. Fidelity Mutual Life Association
(111 Ga., 482; 36 S. E., 637), it must be ruled: (1) It was
within the power of the insurance company, as between
itself and its agent, to define and limit the powers of the
latter. Limitations upon the power of the agent affect all
third persons dealing with him, who have knowledge or
notice
26

thereof; and any notice of limitations upon the agent's

power which a prudent man is bound to regard, is the
equivalent of knowledge to the insured; (2) the stipulation
in the signed application, that the insurance 'shall not take
effect until the first premium shall have been actually paid
while I am in good health/ coupled with the words in the
policy, 'Agents are not authorized to modify this policy or to
extend the time for paying a premium/ were sufficient to
charge the applicant with notice that he was dealing with a
special agent with limited powers; (3) the actual payment
of the first premium during the good health of the
applicant was a condition precedent to liability under the
policy, and the agent of the company could not waive such
condition."
In the case of Missouri State Life Ins. Co. vs. Salisbury,
supra, the Supreme Court of Missouri, in another similar
case, said:
"The application has this clause:
" '6. That the insurance hereby applied for shall not take
effect unless the first premium is paid and the policy
delivered to and accepted by me during my lifetime and
good health.'
"Another reason why the contract was never completed
was because the first premium was not paid nor tendered
during the good health of Mrs. Salisbury, as required by the
stipulation in the application quoted above.
"A stipulation of that character, requiring the payment
of a first premium in advance as a condition upon which
the policy was to take effect, is always recognized and
enforced by the courts. The policy, in such case, is not
effective until that condition is complied with. (Kilcullen vs.
Life Ins. Co., 108 Mo. App., 61; 82 S. W., 966; Wallingford
vs. Home Mut. Fire & Marine Ins. Co., 30 Mo., 46; Ormond
vs. Insurance Co., 96 N. C., 158; 1 S. E., 796; Bowen vs.
Mutual Life Ins. Co., 20 S. D., 103; 104 N. W., 1040.)"
27

In the case of Rathbun vs. New York Life Ins. Co., supra,
the Supreme Court of Idaho said:
"In its answer and on the trial of the case, the main
contention of the insurance company were: First, that
under the terms of the contract the first premium was to be
paid in cash; and, second, the policy was not to take effect
unless the insured was in good health at the time it was
delivered to him. Said contentions are partly based upon
the stipulations above quoted from the application for said
insurance.
"The court in its findings of fact, among other things,
found as follows:
" The court further finds that Ernest C. Rathbun, the
plaintiffs' son, applied in writing for insurance on his life,
agreeing therein that the insurance thereby applied for
should not take effect unless the first premium was paid
and the policy was delivered to and received by him during
his lifetime and good health. After applying for the policy
and before its delivery, the applicant was taken with
appendicitis, from which he died. While he was in the
hospital, the soliciting agent at Spokane, in total ignorance
of the changed condition of the applicant's health, mailed
him the policy. The applicant's friends thereafter paid the
first premium, which the company promptly returned when
it discovered the facts.'
"The evidence is clearly sufficient to sustain this finding
of fact.
"Then if the parties understood and agreed that the
policy should not become effective unless the first premium
was paid and the policy was delivered to and received by
the applicant during his lifetime and while he was in good
health, and both of those conditions failed, the contract of
insurance was never completed, and the policy was of no
force and effect. It is a well-recognized rule that life
insurance results from contract, and that the true rule is
that no other or different rule is to be applied to a contract
of insurance than is applied to other contracts. (Quinlan
28

vs. Providence-Washington Ins. Co., 133 N. Y., 356; 28 Am.

St. Rep., 645; 31 N. E., 31.) In life insurance contracts, the
assent of both parties is required as in any other contract.
(Stephens vs. Capital Ins. Co., 87 lowa, 283; 54 N. W., 136;
Weidenaar vs. N. Y. Life Ins. Co., 36 Mont., 592; 122 Am.
St., 330; 94 Pac., 1.)
"In the determination of this case, the application and
the policy itself must be examined and considered in order
to ascertain the true situation of the parties under the
negotiations and agreements between them. (lowa Life Ins.
Co. vs. Lewis, 187 U. S., 335; 23 Sup. Ct., 126; 47 Law. ed.,
204; Behling vs. N. W. Nat, Life Ins. Co., 117 Wis., 24; 93 N.
W., 800.)
"If we concede in this case that the first premium was
paid by the payment of the $5 and' the delivery of the
insured's promissory note to the agent of the company for
the balance, the plaintiffs would not be entitled to recover,
for the reason that the policy was not delivered to and
received by the applicant while he was in good health, but
when he was fatally ill. He became ill with appendicitis on
the 28th of April, 1913, was operated on that day and
thereafter died on the 10th day of May, 1913, five days
after receiving the policy."
In the case of Gordon vs. Prudential Insurance Company
(231 Pa., 404), the Supreme Court of Pennsylvania said:
"* * * In the case at bar, the policy was issued and
handed to the agent, who delivered it to the insured before
payment of the premium, and upon the insured giving a
receipt, in which it was stated that the policy was 'received
for the purpose of inspection only and upon the
understanding that it is not to be in force until the first
premium payable thereunder has been paid by me and the
official receipt of the company delivered' to me during my
lifetime and in good health, as provided in my application
upon which the above numbered policy was issued.' This,
therefore, was a conditional delivery of the policy and the
contract could not be consummated except upon perform-
29

ance of that condition, namely, payment of the premium,

thereafter, while the insured was alive and in good health,
as provided in both the application and receipt for the
policy.
* * * * * * *
"It is therefore undisputed that on the day of the
payment of the premium, Mr. Gordon was ill of the disease
which caused his death within sixty-four hours after such
payment. There was no dispute, nor contradictory
testimony as to the condition of Mr. Gordon's health on the
day of payment, and, therefore, nothing for the jury to pass
upon in this respect.
* * * * * * *
"In the case at bar, there was no question of the
condition of the health of the insured on the day of the
payment of the premium, and no conflicting testimony as to
the serious nature of his illness on that day, nor as to any
other material fact in the cause. No person testified that
Mr. Gordon was in 'good health' on Saturday, May 16, the
day the premium was paid, but on the contrary, every
witness who had knowledge of his condition and who was
asked the question, including the plaintiff herself, said that
he was not in 'good health' on that day. How, then, can a
jury be permitted to find that he was in 'good health' at the
time of the payment of the premium in the absence of any
evidence to warrant or support such finding?
* * * * * * * * *
"In this case it is impossible to find from the evidence
that on Saturday, May 16, the day of the payment of the
premium, and' at the time of such payment, the applicant
had no grave, important or serious disease, or that he was
free from any ailment that seriously affected the general
soundness and healthfulness of his system, or that he
suffered a mere temporary indisposition which did not tend
to weaken or undermine his constitution at the time of
paying the premium. Nor is it possible to find' that he
enjoyed such health and strength as to justify a reason-
30

able belief that he was free from derangement of organic

functions, or free from symptoms calculated to cause a
reasonable apprehension of such derangement, and that to
ordinary observation and outward appearance his health
was reasonably such that he might, with ordinary safety, be
insured and upon ordinary terms which only would satisfy
the requirement of 'good health'. But on the contrary, the
testimony conclusively shows that on Saturday, May 16,
1908, at the time of the payment of the premium, the
condition of Mr. Gordon's health was both a serious and a
dangerous one, and such as would preclude the possibility
of any life insurance company, with knowledge of his
condition, issuing its policy upon his life for anything like
the ordinary premium; in other words, his condition at that
time was such as to render him a hazardous and dangerous
risk, which would not be assumed' by any insurance
company upon receipt of the ordinary premium for
insurance upon the life of an ordinary risk.
"With the question of good faith on the part of the
insured at the time of paying the premium, we have
nothing to do. The fact is that his physical condition was
not disclosed to the company or its agent at the time of the
payment of the premium; and that his condition was not at
that time such as, in his application for insurance, he
stated it to be. This being true, it is no legal hardship upon
the beneficiary in the policy to say that the premium paid
under such conditions does not entitle her to recover the
amount of the insurance from the defendant company."
In the case of Powell vs. Prudential Insurance Co. of
America (153 Ala., 611), the Supreme Court of Alabama, in
a similar cause, said:
"On June 22, 1904, Claude D. Powell applied to the
defendant company for insurance on his life for $1,000. In
his application for insurance, he stated: 'I am in good
health, * * * and all the statements and answers to the
above questions are complete and true, and that the
31

foregoing, together with this declaration, shall constitute

the application, and become a part of the contract for
insurance hereby applied for. And it is agreed that the
policy herein applied for shall be accepted subject to the
privileges and provisions therein contained, and said policy
shall not take effect until the same shall be issued and
delivered by the said' company, and the first premium paid
thereon in full, while my health is in the same condition as
described in this application.'
* * * * * * *
"Here we find that two absolute conditions precedent of
the contract of insurance, were set aside or annulled, in
what the friends of the deceased attempted to do, in that,
the first premium was never paid by the assured nor any
one for him, and if, by any possible construction, it could be
held that it was paid, it is not pretended that the assured
was not fatally sick at the time, of which fact the company
was ignorant; and further, it is not denied that the policy
was never delivered·if what was done could possibly
amount to a delivery·until after the death of the assured.
To hold that the policy was good under such circumstances,
would' be to abrogate and set aside the contract of
insurance, and hold the company liable for a payment of
the policy against the very terms of its contract."
The same principle controls and applies when, as in the
instant case, it is stipulated that the policy shall be of no
effect if at the time of its delivery to the insured he is not in
good health. The condition is valid! and binding when it
refers only to the payment of the first premium as well as
to the delivery of the policy, or to both. In the case of
Nyman vs. Manufacturers' & Merchants' Life Ass'n. (104 N.
E., 653), the Supreme Court of Illinois said:
"* * * The proof is direct and positive that on the last-
named date she was not in good health, and that two
months and three days later she died from the disease the
proof showed she was suffering f rom on that day. If there
32

Lucero Vda. de Sindayen vs. Insular Life Assurance Co,
had been no proof of the condition of Mrs. Nyman's health

on the day the certificate was delivered, then there would
be some force in plaintiff's contention that the inference
might be indulged that, if she was in good health on April
11th, she so continued until the 19th. But no such inference
can be indulged, when the uncontradicted proof shows she
was in bad health the day the certificate was delivered, and
so continued until her death. Defendant proved its third
special plea, and, in our opinion, plaintiff offered no
evidence that legitimately tended to rebut defendant's
evidence. The trial court therefore erred in refusing to
direct a verdict in favor of defendant under the issue made
by the third special plea. (Libby, McNeill & Libby vs. Cook,
222 111., 206; 78 N. E., 599.)"
In the case of American Bankers' Ins. Co. vs. Thomas,
(53 Okla. Rep., 11), the Supreme Court of Oklahoma said:
"That part of the policy which provides that the same
shall not take effect until it is delivered by the company
while the insured is in good health prescribes a condition
precedent to the attachment of the risk under the policy. (1
Cooley's Briefs on the Law of Insurance, p. 451.)
Recognizing it to be such, plaintiff properly pleaded a
waiver thereof by setting up the facts as stated. (Western,
etc., Ins. Co. vs. Coon, 38 Okla., 453; 134 Pac., 22; Anders
vs. Life Ins. Clearing Co., 62 Neb., 585; 87 N. W., 331.)"
In the case of Steinsultz vs. Illinois Bankers Life
Association (229 111. App. Rep., 199), the third district of
the Appellate Courts, in a similar cause, said:
'The policy of insurance contains the following clause: "'I
agree to accept the Policy issued hereon and that the same
shall not take effect until the first payment shall have been
made and the Policy issued and actually delivered to me
during my continuance in good health.
"The main question in this case, in the opinion of this
court, is the question as to whether a valid and legal policy
ever was issued and actually delivered to the insured, Myr-
33

tle May Steinsultz. It is argued that the clause in question

is a condition precedent and requires that the insured shall
be in good health at the time of the payment of the first
premium and the actual delivery of the policy to her,
otherwise that the policy never became operative and for
the purposes of this suit is void. It will be noticed that
plaintiff in representing his main case made no effort to
submit or show anything as to the health of the insured
prior to the claimed delivery of the policy. If the clause in
question is a condition precedent to recovery, which we
shall discuss later, the general issue filed by the defendant
denied the existence of a valid policy and raised this ques
tion and required proof on the part of the plaintiff to show
that the insured was in good health at the time of the
claimed delivery of the policy. No such proof was shown and
the defendant, appellant, at the close of plaintiff's case,
moved the court to instruct the jury, under the pleadings
and evidence in the case, to find a verdict for the defendant
and a form of verdict was submitted with the motion. This
motion the court overruled, to which ruling appellant duly
excepted and this issue is therefore squarely raised by the
proceedings as to the existence of a legal and binding policy
in the case under the terms of said contract.
"In Ellis vs. State Mut. Life Assur. Co. of Worcester (206
III. App., 226), the appellant insurance company filed a
plea of the general issue with notice of special matter of
defense, the special matter being that the policy was not to
be in effect until actually delivered and the first premium
paid during the lifetime of the assured, and while he was in
the same condition of health as when his application was
signed, and that the policy was not so delivered. There was
a trial, verdict and judgment in favor of appellee, being the
amount of the policy and interest. To reverse said judgment
the appellant prosecuted appeal. In this case the
application, signed by Ellis, contained, among other things,
the following provision: That the contract or policy ap-
34

plied for shall not take effect until the first premium
thereon shall have been actually paid and the policy
delivered to me during my lifetime and the present
condition of health.
"The policy issued thereon contained this provision: This
policy shall not take effect until actually delivered and the
first premium paid thereon during the lifetime of the
insured.'
"Said policy contained the further provisions: 'This
policy and the application therefor shall constitute the
entire contract between the parties hereto.'
"In this case, likewise, the appellant at the close of
appellee's evidence and then again at the close of all the
evidence, moved the court to direct a verdict in its favor.
Appellant objected to the admission of the policy, sued
upon, in evidence. In this case on December 14, 1914, the
insured was injured and was carried to his home and died
between 4.30 and 5 p. m. on that day, and it appears that
the policy of insurance had been returned to the office of
the agent of the insurance company the evening before but
had not been delivered personally to the insured at the
time of his death. In this case the contention was made by
the holders of the policy that the delivery to the agent was
a delivery to the insured.
"The court goes into the question in the Ellis case very
exhaustively, quoting from a great many cases and quoting
from Devine vs. Federal Life Ins. Co. (250 111., 203), in
which the Supreme Court in discussing the question of the
delivery of an insurance policy, at page 206, says:
" The application may or may not provide that the
insurance shall take effect only upon the delivery of the
policy to the insured. Unless expressly made so by the
contract itself, an actual delivery of a policy of insurance to
the insured is not essential to the validity of the contract,
and the rule under such circumstances is that a policy
becomes binding upon the insurer when signed and
forwarded to the
35

insurance broker to whom the application for insurance

was made, to be delivered to the insured.'
"And quoting 25 Cyc., 718, 719, it is stated with
reference to the delivery of insurance policies that: 'The
placing of the completed policy in the hands of the agent for
delivery, without condition, to the insured completes the
contract, though the actual delivery by the agent to the
insured is not made before the death of the insured. But if
the delivery to the agent of the company is with the
understanding that it is to be delivered by the agent to the
insured only after the performance of some condition, then,
until the condition is performed and it becomes the duty of
the agent to deliver the policy to the insured, the contract
is not complete. * * * It is a usual condition of a life
insurance policy that the delivery shall not be effectual to
create a binding contract unless the insured is alive and in
good health when the policy is delivered and the first
premium paid, and under such conditions the death of the
insured before the delivery of the policy will prevent its
becoming effectual.
"It was held in the Ellis case that in view of the
foregoing authorities, numerous of which we have not cited
here, that the policy sued on was never delivered and that
the court erred in not directing a verdict in favor of
appellant and reversed the judgment with a finding of fact.
"The language in the policy in question, 'I agree to
accept the Policy issued hereon and that the same shall not
take effect until the first payment shall have been made
and the Policy issued and actually delivered to me during
my continuance in good health,' is a condition precedent to
the existence of any binding legal contract of insurance
upon the appellant. It means just what it says and it was
entered into and signed by the insured. The statement was
a warranty that the insured was in good health at the time
she signed said application and further was a binding
obligation that she should continue in good health and
should be in good health at the time the policy was
36

Lucero Vda, de Sindayen vs. Insular Life Assurance Co,
delivered to her, otherwise the policy never should become

binding and obligatory. It is condition that goes to the very
existence of the policy and Its validity, and under the facts
in this case it is insisted strenuously that no binding policy
was ever issued and' delivered by the appellant."
And in the case of Federal Life Ins. Co. vs. Wright (230
S. W., 795), the Civil Appellate Court of Texas said:
"* * * The application and the policy contain, the entire
contract between the parties, and it is not only agreed in
the application that all of the statements therein 'are full,
true, and' complete,' but it is stipulated therein, as above
shown, that the policy of insurance applied for shall not
take effect until the policy shall have been actually
delivered to the insured and the first premium paid during
his life and while he was in good health. The purpose and
meaning of this provision, standing alone or taken in
connection with any or all other provisions of the contract,
is clear, without ambiguity, and not open to construction. It
unquestionably means that the policy should not take effect
as a contract of insurance unless actually delivered to the
applicant therefor while he was in good health. This being
the meaning of the provision, and the appellee having
admitted in her pleadings and in open court at the trial
that the applicant or insured was afflicted with
tuberculosis of the lungs at the time the policy was
delivered' to him, and that such disease caused his deaths
the policy by its terms never became an obligation of the
appellant.
"Applications for policies of life insurance .frequently
provide, as In the present instance, that the policy shall not
take effect unless it is delivered to the insured and the first
premium paid! while he is in good health, and the great
weight of authority is to the effect that such provision is
valid, and that if the insured was not in fact in good health
on the date the policy was delivered the company is not
liable. (Gallant vs. Metropolitan L. Ins. Co., 167 Mass., 79;
44 N. E., 1073; Murphy vs. Metropolitan Life Ins. Co.,
37

106 Minn., 112; 118 N. W., 355; Logan vs, New York L.
Insurance Co., 107 Wash., 253; 181 Pac., 906; Metropolitan
L. Insurance Co. vs. Willis, 37 Ind. App., 48; 76 N. E,, 560;
Gallop vs. Royal Neighbors of America, 167 Mo. App., 85;
150 S. W., 1118; Metropolitan L. Insurance Co. vs. Betz, 44
Tex. Civ. App., 557; 99 S. W., 1140; American Nat.
Insurance Co. vs. Anderson, 179 S. W., 66; Security Mut. L.
Ins. Co. vs. Calvert, 39 Tex. Civ. App., 382; 87 S. W., 889;
Seaback vs. Metropolitan L. Ins. Co., 274 111., 516; 113 N.
E., 862; Mutual L. Insurance Co. vs. Willey, 133 Md., 665;
106 Atl., 163.) It is also held that it is immaterial that the
condition of the insured's health has changed" since his
application was made, or that he was ignorant of his
condition. (Carmichael vs. Hancock Mut. Ins. Co., 116 App.
Div., 291; 101 N. Y. Supp., 602; Metropolitan L. Ins. Co. vs.
Howle, 62 Ohio, 204; 56 N. E., 908; Id., 68 Ohio, 614; 68 N.
E., 4; Oliver vs. Mutual L. Ins. Co., 97 Va., 134; 33 S. E.,
536; Packard vs. Metropolitan L. Ins. Co., 72 N. H,, 1; 54
Atl, 287.)
"This defense, as we now view it, is separate and distinct
from the defense that misrepresentations were made in the
application for the policy, and our conclusion is that the
failure of the appellant to give notice to the insured or
beneficiary, within a reasonable time after discovering that
the insured had tuberculosis of the lungs, that it would not
be bound by the contract of insurance did not render
unavailing the provision that unless the policy was
delivered while the insured was in good health the contract
should not take effect. Under article 4948 of the statute, it
was necessary for the appellant, in order to avail itself of
the defense based upon misrepresentations made in the
application to secure the policy, to show that it gave the
insured or beneficiary notice within a reasonable time after
discovering the falsity of such representations that 'it
would not be bound by the contract of insurance; but in
order to sustain the first-mentioned defense, the same
having been asserted within the contestable period, it was
necessary only to
38

show that the insured was not in good health when the
policy was delivered. We do not agree with the contention
to the effect that by pleading and proving that the first
premium was paid and' received when the application for
the policy was made, which was a few days prior to the
delivery of the policy, the appellee showed an express
waiver of the provision in the application making the
assumption of any liability on the part of appellant
dependent upon the good health of the insured at the time
the policy was delivered.
"The provision, as before stated, is clear and
unambiguous and susceptible of but one construction. By
its plain and unmistakable terms the insured agrees that
all the statements and answers contained in the
application are full, true, and complete in every respect,
and are offered to the insurance company as a
consideration for a contract of insurance, which shall not
take effect unless the policy shall have been actually
delivered to him while he was in good health. Nor shall it
take effect unless the first premium shall have been
actually paid during his life and paid while he was in good
health. In other words, if the insured was not in good
health at the time the policy was delivered to him, or if he
was dead or in bad health when the first premium was
paid, then, in either event, no obligation on the part of the
insurance company was assumed, and, of course, there was
no contract of insurance. It was as much a condition
precedent to the taking effect of the contract that the first
premium be paid during the life of the insured and while
he was in good health as that the policy be delivered while
he was in good health, and the fact that the premium was
paid when the application was made, and a few days in
advance of the delivery of the policy, can furnish no basis
for the holding that thereby the other condition was
abrogated or waived. We can see no good reason for saying
that the provision relative to good health at the time of the
payment of the first premium of the policy was inserted
39

to cover cases 'when the first premium was collected at a

time subsequent to the issuance of the policy, either at or
prior to the delivery thereof.' The provision under
consideration is not one which the insurance company may
avail itself of to avoid an executed contract, or one which in
the ordinary sense constitutes a warranty of the good
health of the insured, but its effect was to prevent the
taking effect of the contemplated contract, unless there was
a compliance with the conditions precedent named therein.
Differently stated, with such a provision in the application
for the policy the contract is not a completed one, is not
absolute but conditional, and in this case it is the fact of
sound' health, etc., in the insured on the date of the
delivery of the policy that determines the liability of the
appellant.
"In her motion for a rehearing the appellee asserts that
our holding on the appellant's motion for rehearing, to the
effect that since the application f or the policy sued on,
which was a part of the contract of insurance, stipulated
that the policy should not take effect until the same was
actually delivered to the insured and the first premium
paid during his life and while he was in good health, and
since it was admitted by the appellee and conclusively
shown that the insured had tuberculosis of the lungs at the
time the policy was delivered to him and the first premium
paid, the policy by its terms never became an obligation of
the appellant, is different from or in conflict with the
decision in the cases of American National Life Insurance
Co. vs. Rowell (175 S. W., 170); American National
Insurance Co. vs. Burnside (175 S. W., 169) ; American
National Life Insurance Co. vs. Fawcett (162 S. W., 10);
National Fire Ins. Co. vs. Carter (199 S. W., 507) ; and
Mecca Fire Insurance Co. vs. Stricker (136 S. W., 599).
"The first three of the cases mentioned were decided by
this court, the fourth by the Court of Civil Appeals for the
First District, and the fifth by the Court of Civil Appeals
for the 'Third District. Our conclusion is that neither of
40

these cases is in conflict with the decision in the first case

referred to and the present case, but it seems manifest,
from a careful examination and analysis of the opinion in
that case, that the court did not have in mind the precise
question here involved, and did not there expressly pass on
it. There it was urged that the trial court erred in
overruling the insurance company's demurrers to Rowell's
petition, because it was not alleged that the insured was in
sound health at the time the policy sued on was issued, and
this court held that there was no error in overruling the
demurrers, since, if the insured was not, in fact, in sound
health at that time, such fact was a matter of defense to be
pleaded by the company. It was further there held that
while the defendant averred that the insured was not in
sound health when the policy was issued, such defense was
not sufficiently pleaded to justify the admission of
testimony to establish it. The opinion also indicates that
the insurance company in its pleadings and assignments of
error treated the provision in the policy, that no obligation
was assumed by it unless on the date of issuance the
insured was in good health, as a representation or
warranty, and that this court, discussing the matter as
presented, after stating in substance the provisions of
article 4948 of the statute said that the failure to give the
notice prescribed in that statute absolutely barred the
insurance company from defending an action on the policy
because of alleged misrepresentations. We also declared
that said statute applied to covenants of warranty as well
'as to statements in the application not made warranties by
the contract, citing Mecca Fire Ins. Co. vs. Stricker, supra."
Moreover, the stipulation that the insurance contract
shall produce no effect unless the payment of the first
premium and the delivery of the policy be made when the
insured is in good health, is not in conflict with any
provision of the Insurance Law now in force, nor with any
other law of a general character; neither is said stipulation
contrary to
41

morals or public order, and therefore the same is valid and

binding upon the parties. (Articles 1255, 1257 and 1258,
Civil Code.)
The majority opinion states that the delivery of the
policy by the agent after he has made use of the discretion
conferred upon him by the defendant to deliver or to
withhold said policy, is binding upon the defendant and the
latter cannot evade the consequences thereof. This same
legal question has been raised before various appellate
courts of several states of the Union, which made a
distinction between agents whose only power consisted in
soliciting insurance and in delivering policies and those
who, in addition to such power, were authorized to issue
policies and accept risks on behalf of insurance companies.
In the first case the doctrine is uniform that the acts of
agents with limited powers are not binding upon the
insurance companies, whereas in the second case the acts
of the agents bind and' prejudice the insurance companies
represented by them. This legal question has been
extensively considered and squarely decided in the case of
American Bankers' Ins. Co. vs. Thomas, supra, as follows:
"Favoring liability, she contends that the knowledge of
Martin of the ill health of the insured at the time the
policies were delivered was the knowledge of the company
and a waiver of the condition. Not so. Assuming that
Martin was the agent of the company at that time, with
authority to deliver the policies, it f ailing to appear that he
had anything to do with the execution thereof or the
acceptance of the risk, his knowledge was not that of the
company. In Merchants' & Planters' Ins. Co. vs. Marsh (34
Okla., 453; 125 Pac., 1100), we held that the knowledge of
the agent was the knowledge of the company only where
the authority of such agent, derived' from the company, was
to solicit applications and execute and deliver contracts of
insurance as an alter ego of the company, and that it was
only in such case that he had power to waive the conditions
of the policy.
42

In that case the agent was, as here, a local or soliciting

agent, and there the policy sued on was, as here, a 'home
office policy', or one issued direct by the president and
secretary of the company as distinguished from one issued
by the local agent. There, in the syllabus, we said:
" 'A local agent of an insurance company, whose only
power is to solicit applications for insurance, and forward
them to the company for approval, when, if approved, the
company issues the policy and causes it to be delivered to
the insured, has no power to waive any of the provisions of
the policy so delivered/ * * *
"Also in keeping with this rule is Des Moines Ins. Covs.
Moon (33 Okla., 437; 126 Pac., 753). There we said: "'* * *
Where the local agent has the power to accept a risk and
deliver a policy of insurance, and is advised and has full
knowledge, at the time of the delivery of the policy, that
certain conditions of the policy, which may be waived, are
violated, such policy is binding upon the company,
notwithstanding the fact that it contains a provision that
none of the company's officers or agents can waive any of
its provisions, except in writing, indorsed upon the policy.
This case (referring to Western National Ins. Co. vs. Marsh,
34 Okla., 414; 125 Pac., 1094), unanimously concurred in
by the members of the courts, settles the rule in this
jurisdiction as to contracts of insurance written after the
admission of the state: * * *'
"Of course, if the local agent had not power, as here, to
accept the risk, he had no power to waive the condition
precedent in the policy. Cases relied on by plaintiff which
hold the contrary practically under the same state of facts
fail to draw this distinction, and seem to hold that the
knowledge of a mere soliciting agent of the company of the
ill health of the insured at the time of the delivery of the
policy is the knowledge of the company, and hence a
delivery with such knowledge constitutes a waiver of the
condition under consideration. They are Roe vs. National
Life, etc. Co. (137 lowa, 696; 115 N. W., 500; 17 L. R. A. [N.
S.], 1144) ;
43
Connecticut, etc. Ins. Co. vs. Grogan ([Ky.] 52 S. W., 959);

N. W. Life Ins. Co. vs. Findley (29 Tex. Civ. App., 494; 68 S.
W., 695); National Life Ins. Co. vs. Twiddel ([Ky.], 58 S. W.,
699) ; Home Forum Ben. Order vs. Varnado ([Tex. Civ.
App.], 55 S. W., 364), and others. But the distinction is
referred to in Bell vs. Ins. Co. (166 Mo. App., 390; 149 S. W.,
33). In that case the insured, who was plaintiff's brother,
died at Nogales, Ariz., as a result of injuries received while
working as a telegraph lineman. On July 17, 1909, he made
application to defendant for a policy of life insurance,
payable in event of his death to plaintiff. He made it to
defendants' soliciting agents at that place, and paid the
first annual premium cash in hand. The application was
forwarded to defendant by mail, and duly received in St.
Louis, Mo., on July 23, 1909. The policy was conditioned
the same as here. On July 27, the application was duly
accepted, and the policy issued and was mailed August 4,
1909, to the soliciting agents for delivery to the insured.
Upon its arrival on August 8, 1909, pursuant to
instructions, the policy was deposited for him in the safe of
the soliciting agents, along with other private papers of the
insured kept there by him- Two days before that time the
insured received a fatal injury, from which he died on the
night of August 11th. On August 6th, one of the soliciting
agents visited the insured and knew of his injury. The court
said:
"'There can be no doubt that it is competent for the
parties to stipulate in the application for insurance, as
here, that the policy shall not be effective or binding until
delivered to, and accepted by, the insured while in good
health and the payment of the first permium is made. It is
said that a contract of life insurance is not complete until
the last act necessary to be done by the insured, under the
conditions of the contract, after acceptance of the
application by the company, has been done by him, and the
courts, therefore, in proper cases, sustain such agreements
which operate to postpone the taking effect of the policy
until the
44
delivery and premium payment while the insured is in good

health. (See 1 Bacon, Life Ins. [3d ed.], sec. 272; Kilcullen
vs. Met. Life Ins. Co., 108 Mo. App., 61; 82 S. W., 966;
Misselhorn vs. Mutual Reserve, etc-, Life Ins. Co., 30 Mo.
App., 589; McGregor vs. Met. Life Ins. Co. [143 Ky., 488],
136 S. W., 889.) But though such be true, the provision for
thus suspending the policy, as an effective contract, until
the first premium is paid and its delivery, while the insured
is in good health, is for the benefit of the insurer, and
obviously may be waived by it or by its agent possessing
authority with respect to that matter. (See Rhodus vs.
Kansas City, etc., Ins. Co., 156 Mo. App., 281; 137 S. W.,
907.) * * * But it is insisted that a mere soliciting agent,
such as Cummings, is without authority to waive the
condition in the policy here relied upon, and', for the
purpose of the case, the proposition may be conceded as
true.
"Whereupon the court proceeded to consider whether the
company, under the facts in that case, had waived the
condition in the policy relied upon. We are therefore of
opinion that Martin was without authority to waive the
condition relied on, and that plaintiff cannot recover unless
defendant is estopped to deny that liability attached by
reason of receiving and retaining the premiums as alleged
in the petition. Joining issue on these allegations,
defendant by answer in effect admitted accepting the
premiums as stated, but pleaded in avoidance that it
tendered them back to a representative of the assured and
demanded a return of the policies, which was refused, and
for that reason, it is urged, defendant is not estopped to
assert that no liability attached under the policies."
It is clear, therefore, that the delivery of the policy by
Mendoza does not bind the defendant, nor is the defendant
estopped from alleging its defense, for the simple reason
that Mendoza was not an agent with authority to issue
policies or to accept risks in the name of his principal.
45

There is another ground upon which the majority opinion is
based, namely, that the defendant waived the defense it
now invokes, by reason of the delivery of the policy by its
agent. It is admitted that if the delivery of the policy was
due to fraud, legally there could have been no waiver. In
view of the facts established and admitted, there is no
doubt as to the existence of the fraud. A restatement of the
facts will show such existence. It will be remembered that
before the delivery of the policy Mendoza asked Estrada
whether the insured continued enjoying good health, to
which she answered that she thought he was in good
health because she had had no information that he was
sick. It will likewise be noted that the information, far from
being correct or truthful, was incorrect and misleading
because, in reality, on that occasion the insured was
seriously ill from nephritis and uremia, almost in a
moribund state. Estrada, as a representative of the insured
was not only bound to give a truthful information on the
state of health of the insured, but it was her duty to find
out his true state of health in order to give a true and
correct information. When she gave Mendoza an incorrect
information tending to create the impression that the
insured was well when in fact he was seriously ill, there is
no doubt that she committed fraud and imparted a
deceitful information to the defendant's agent. It matters
not that the fraud was involuntary and not chargeable to
Estrada; the truth is that it existed and that by reason of
such fraud the policy was delivered, and both the agent and
the defendant were misled into believing that the insured
was enjoying good health. In the case of Cable vs. United
States Life Ins. Co. (111 Fed. Rep., 19), the seventh circuit
of the United States Circuit Courts of Appeals, in deciding
the same question of waiver, said:
"It is, however, urged that sufficient information was
disclosed by Lord to McCabe to put the company upon
inquiry, and that, with such notice, McCabe delivered the
46

policy and received the premium;, that McCabe was the

agent of the company, and notice to him was notice to the
company, and the delivery of the policy constituted a
waiver of the condition and warranty. Upon the assumption
that McCabe was such agent of the company, and that his
action must be treated as the action of the company,
questions which we do not determine,·it becomes us to
inquire of the sufficiency of the notice given, and' whether
the act of delivery of the policy involved a waiver of the
warranty.
"* * * The holder of the policy cannot be permitted to
conceal from the company an important fact, like that of
the assured being in extremis, and then to claim a waiver
of the forfeiture created by the act which brought the
insured to that condition. To permit such concealment, and
yet to give to the action of the company the same effect as
though no concealment were made, would tend to sanction
fraud on the part of the policy holder, instead of protecting
him against the commission of one by the company.
(Insurance Co. vs. Wolff, 95 U. S., 326, 333; 24 Law. ed.,
387, 390.)
"It cannot here be doubted that if the insurance
company, or McCabe as its agent, had been informed of the
fact, within the personal knowledge of Lord, that Cable was
seriously ill with acute pneumonia, the policy would not
have been delivered. It is difficult for us to believe that
Lord, with that knowledge, could think he had a right to
accept this policy; but, whether so or not, the concealment
of the fact was a fraud upon the company. The statement
made was deceptive and misleading, whatever were the
intentions of Lord, and a court of equity ought not to
permit the completion of the wrong. Courts of equity cannot
sustain an insurance upon the life of a dying man, when
the nature of his malady and the seriousness of his illness
are concealed' from the insurer."
The same doctrine has been applied when there is an
attempt to show that the waiver or estoppel arises from
47

the payment of the premium. In the case of Nyman vs.

Manufacturers' & Merchants' Life Assn., supra, the court
said:
"It is further insisted by plaintiff that defendant, by
accepting and retaining premiums or assessments from the
insured, is estopped from denying the validity of the
certificate. The first premium was paid on the day the
policy was delivered, and the last one two days before the
insured's death. There is no proof whatever that defendant
or its agent knew, before the death of Mrs. Nyman, that, at
the time the policy was delivered and the first premium
paid, she was not in good health. Receiving premiums
subsequently, with knowledge that she was then ill, could
have no significance, if defendant was ignorant of the fact
that the insured was in bad health when the policy was
delivered and the first premium paid. If Mrs. Nyman had
been in good health when she received the policy and paid
the first premium, defendant would not have been justified
in refusing to accept premiums if she afterwards became
ill. The knowledge that would estop defendant from
denying liability in this case must be knowledge that the
insured was not in good health when the policy was
delivered."
The case presents another aspect, namely, the waiver
made by the plaintiff of any and all benefits accruing from
the policy, which waiver expressly appears in document
Exhibit A, known as "Accord, Satisfaction and Release".
The pertinent clauses of the document read as follows:
"Whereas, the Insular Life Assce. Co., Ltd., claims that
the delivery of the said policy No. 47710 was not valid
because said delivery was made while the said Arturo
Sindayen was not in good health;
"Whereas, the undersigned, Fortunata Lucero Sindayen,
widow of the said Arturo Sindayen, is named as beneficiary
in the said policy of life insurance; and
"Whereas, it is the desire of the Insular Life Assce. Co.,
Ltd., and of the beneficiary, Fortunata Lucero Sindayen
48

that all differences, controversies and disputes that may

grow out of the issuance of the said policy of life insurance
and out of the claims that the said beneficiary may make
under the said policy of life insurance be settled and
compromised; and
"Whereas, the said Insular Life Assce. Co., Ltd. has at
the date hereof paid Fortunata Lucero Sindayen, the
beneficiary named in said policy of life insurance, the sum
of Forty Pesos and Six Centavos (P40.06), lawful money of
the Philippine Islands, the receipt whereof is hereby
acknowledged;
"Now, therefore, in consideration of the promises and of
the sum of Forty Pesos and Six Centavos (P40.06), said
Fortunata Lucero Sindayen, for herself, her heirs,
executors, administrators and assigns, release and forever
discharge said Insular Life Assurance Co., Ltd., its
successors, and assigns, of all claims, obligation or
indebtedness which she, as such beneficiary ever had or
now has, hereafter can, shall, or may have, for, upon, or by
reason of said policy of life insurance numbered 47710 upon
the life of said Arturo Sindayen, the latter now deceased, or
arising therefrom or connected therewith in any manner."
There is no dispute that the aforesaid document was
signed by the plaintiff. There was irregularity in its
execution because it was authenticated by the notary
public in the absence of the plaintiff. It is admitted that
due to this irregularity the document is not a public
instrument, but there is no doubt that it is an authentic
private instrument whose evidentiary value cannot be
disregarded'. Its terms are binding upon the plaintiff, who
understood the same notwithstanding her denial.
However, it is said that the defendant likewise waived
the defense which has hereinbefore been extensively
considered, because it failed to return the first premium
collected, and this alleged failure is predicated upon the
statement contained in the penultimate paragraph of the
instrument stating that the check for P40.06 was returned
to
49

Central Azucarera de Tarlac vs. De Leon and Fernandez
the plaintiff in consideration of her waiver of any claim

whatsoever. A careful reading of the instrument will
convince the mind that what was really meant is that the
delivery of the check was another consideration of the
plaintiff's waiver, it being self-evident that said check
constituted, in effect, a refund of the first premium paid by
the insured and received by the insurer. It is ridiculous to
think that such a negligible amount has been the only
consideration of the plaintiff's waiver of any right or benefit
accruing to her from the policy. A careful perusal of the
instrument will show that the real consideration of the
plaintiff's waiver was the unenforceability of the policy due
to her husband's illness and the mutual desire of the
plaintiff and the insurer to settle amicably the case instead
of resorting to courts.
In conclusion it is my opinion: (1) That the policy has not
produced any effect from which the plaintiff may derive
any right, and (2) that she has expressly waived any and
all rights accruing from the policy; and for these reasons I
dissent from the majority opinion.
Judgment reversed and case remanded with directions.
_________________
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[No. 41702.

FORTUNATA LUCERO VlUDA DE SINDAYEN, plaintiff

1. INSURANCE; LIFE INSURANCE POLICY; DELIVERY OF

2. ID.; ID.; ID.; CONDITION OF HEALTH OF INSURED AT

3. ID.; lD.; ID.·Although that appears to be the prevailing

10 PHILIPPINE REPORTS ANNOTATED

Lucero Vda. de Sindayen vs. Insular Life Assurance Co.

consummates the insurance, we are inclined to the view

4. ID, ; ID. ; ID. ; ID. ; AGENT'S DISCRETION.·The evidence

6. ID.; ID.; ID.; ID.; ID.·When the policy is issued and

VOL. 62, SEPTEMBER 4, 1935 11

Lucero Vda. de Sindayen vs. Insular Life Assurance Co.

and other purposes. Although such policies are not

7. ID.; ID. ; ID ; ID. ; ID.·The delivery of the policy to the

8. ID.; ID.; ID.; ID.; ID.; COMPANY'S LIABILITY.·The

APPEAL from a judgment of the Court of First Instance of

This is an appeal from a judgment of the Court of First

12 PHILIPPINE REPORTS ANNOTATED

VOL. 62, SEPTEMBER 4, 1935 13

her payment of the balance of the first year's annual

14 PHILIPPINE REPORTS ANNOTATED

"2. That if this application is accepted and a policy

The insurance company does not set up any defense of

VOL. 62, SEPTEMBER 4, 1935 15

fraudulent, that we are pleased to note that counsel for the

16 PHILIPPINE REPORTS ANNOTATED

On the other hand, a number of American decisions hold

VOL. 62, SEPTEMBER 4, 1935 17

or collect, or deliver; they must commit that to others, and

18 PHILIPPINE REPORTS ANNOTATED

health performing his regular duties in the Bureau of

VOL. 62, SEPTEMBER 4, 1935 19

insurance company would take such a position in the face

agent toward a third party who was not in collusion with

Malcolm, Villa-Real, Abad Santos, Hull, Vickers,

AVANCEÑA, C. J., concurring:

I concur in the result of this decision. I agree with the

that the contract in question was consummated. I am of the

IMPERIAL, J., dissenting:

The plaintiff, as beneficiary, brought this action to recover

22 PHILIPPINE REPORTS ANNOTATED

VOL. 62, SEPTEMBER 4, 1935 23

her whether the insured continued' to be sound and in good

24 PHILIPPINE REPORTS ANNOTATED

phritis. On the 15th he was treated for the second time by

VOL. 62, SEPTEMBER 4, 1935 25

answers written in this application * * * are true, full, and

26 PHILIPPINE REPORTS ANNOTATED

thereof; and any notice of limitations upon the agent's

VOL. 62, SEPTEMBER 4, 1935 27

28 PHILIPPINE REPORTS ANNOTATED

vs. Providence-Washington Ins. Co., 133 N. Y., 356; 28 Am.

VOL. 62, SEPTEMBER 4, 1935 29

ance of that condition, namely, payment of the premium,

30 PHILIPPINE REPORTS ANNOTATED

able belief that he was free from derangement of organic

VOL. 62, SEPTEMBER 4, 1935 31

foregoing, together with this declaration, shall constitute

32 PHILIPPINE REPORTS ANNOTATED

had been no proof of the condition of Mrs. Nyman's health