Great Pacific Life Assurance Corp. vs. Court of Appeals and Medarda V. Leuterio

GREAT PACIFIC LIFE ASSURANCE CORP. vs.
COURT OF APPEALS AND

MEDARDA V. LEUTERIO
Insured may be regarded as the real party in interest, although he has assigned the policy for the
purpose of collection, or has assigned as collateral security any judgment he may obtain. And
since a policy of insurance upon life or health may pass by transfer, will or succession to any
person, whether he has an insurable interest or not, and such person may recover it whatever the
insured might have recovered
FACTS:
A contract of group life insurance was executed between petitioner Great Pacific Life Assurance
Corporation (hereinafter Grepalife) and Development Bank of the Philippines (hereinafter DBP).
Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. Dr. Wilfredo
Leuterio, a physician and a housing debtor of DBP applied for membership in the group life
insurance plan. Dr. Leuterio answered in his insurance application that he was in good health and
that he had not consulted a doctor or any of the enumerated ailments, including hypertension.
On November 15, 1983, Grepalife issued Certificate No. B-18558, as insurance coverage of Dr.
Leuterio, to the extent of his DBP mortgage indebtedness amounting to eighty-six thousand, two
hundred (P86,200.00) pesos.
On August 16, 1984, Dr.Leuterio died. The attending physician had certified in the death
certificate that the former died of cerebral hemorrhage, probably secondary to hypertension. From
this report, the appellant insurance company refused to pay the insurance claim. Appellant alleged
that the insured had concealed the fact that he had hypertension. Allegedly, such non-disclosure
constituted concealment that justified the denial of the claim.
The widow of the late Dr. Leuterio, respondent Medarda V. Leuterio, filed a complaint with the
Regional Trial Court of Misamis Oriental, Branch 18, against Grepalife for Specific Performance
with Damages. The trial court rendered a decision in favor of respondent widow and against
Grepalife. The Court of Appeals sustained the trial courts decision.
ISSUES:
1. Whether the Court of Appeals erred in holding petitioner liable to DBP as beneficiary in a group
life insurance contract from a complaint filed by the widow of the decedent/mortgagor?
(TOPIC)
**(Other issues)**
2. Whether the Court of Appeals erred in not finding that Dr. Leuterio concealed that he had
hypertension, which would vitiate the insurance contract?
3. Whether the Court of Appeals erred in holding Grepalife liable in the amount of eighty six
thousand, two hundred (P86,200.00) pesos without proof of the actual outstanding mortgage
payable by the mortgagor to DBP?
RULING:
1. Yes. (Petitioner alleges that the complaint was instituted by the widow of Dr. Leuterio, not
the real party in interest, hence the trial court acquired no jurisdiction over the case.) To
resolve the issue, we must consider the insurable interest in mortgaged properties and the
parties to this type of contract. The rationale of a group insurance policy of mortgagors,
otherwise known as the mortgage redemption insurance, is a device for the protection of
both the mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into
such form of contract so that in the event of the unexpected demise of the mortgagor during
the subsistence of the mortgage contract, the proceeds from such insurance will be applied
to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from
paying the obligation. In a similar vein, ample protection is given to the mortgagor under
such a concept so that in the event of death; the mortgage obligation will be extinguished
by the application of the insurance proceeds to the mortgage indebtedness. Consequently,
where the mortgagor pays the insurance premium under the group insurance policy, making
the loss payable to the mortgagee, the insurance is on the mortgagors interest, and the
mortgagor continues to be a party to the contract. In this type of policy insurance, the
mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not
make the mortgagee a party to the contract. In Gonzales La O vs. Yek Tong Lin Fire &
Marine Ins. Co., we held: Insured, being the person with whom the contract was made, is
primarily the proper person to bring suit thereon. * * * Subject to some exceptions, insured
may thus sue, although the policy is taken wholly or in part for the benefit of another person
named or unnamed, and although it is expressly made payable to another as his interest
may appear or otherwise. Insured may be regarded as the real party in interest, although he
has assigned the policy for the purpose of collection, or has assigned as collateral security
any judgment he may obtain. And since a policy of insurance upon life or health may pass
by transfer, will or succession to any person, whether he has an insurable interest or not,
and such person may recover it whatever the insured might have recovered, the widow of
the decedent Dr. Leuterio may file the suit against the insurer, Grepalife.
2. No. Concealment exists where the assured had knowledge of a fact material to the risk, and
honesty, good faith, and fair dealing requires that he should communicate it to the assured,
but he designedly and intentionally withholds the same.The medical findings were not
conclusive because Dr. Mejia, the attending physician, did not conduct an autopsy on the
body of the decedent. The fraudulent intent on the part of the insured must be established
to entitle the insurer to rescind the contract. Misrepresentation as a defense of the insurer
to avoid liability is an affirmative defense and the duty to establish such defense by
satisfactory and convincing evidence rests upon the insurer. In the case at bar, the petitioner
failed to clearly and satisfactorily establish its defense, and is therefore liable to pay the
proceeds of the insurance.
3. No. Petitioners claim is without merit. A life insurance policy is a valued policy. Unless
the interest of a person insured is susceptible of exact pecuniary measurement, the measure
of indemnity under a policy of insurance upon life or health is the sum fixed in the policy.
The policy states that upon receipt of due proof of the Debtors death during the terms of
this insurance, a death benefit in the amount of P86,200.00 shall be paid. In the event of
the debtors death before his indebtedness with the creditor shall have been fully paid, an
amount to pay the outstanding indebtedness shall first be paid to the Creditor and the
balance of the Sum Assured, if there is any shall then be paid to the beneficiary/ies
designated by the debtor. In private respondents memorandum, she states that DBP
foreclosed in 1995 their residential lot, in satisfaction of mortgagors outstanding loan.
Considering this supervening event, the insurance proceeds shall inure to the benefit of the
heirs of the deceased person or his beneficiaries. Equity dictates that DBP should not
unjustly enrich itself at the expense of another (Nemo cum alterius detrimenio protest).
Hence, it cannot collect the insurance proceeds, after it already foreclosed on the mortgage.
The proceeds now rightly belong to Dr. Leuterios heirs represented by his widow, herein
private respondent Medarda Leuterio.

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COURT OF APPEALS AND

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