De Lim vs. Sun Life of Canada

G.R. No.
L-15774 November 29, 1920
PILAR C. DE LIM, plaintiff-appellant,

vs.
SUN LIFE ASSURANCE COMPANY OF CANADA, defendant-appellee.
Sanz and Luzuriaga for appellant.

Cohn and Fisher for appellee.
MALCOLM, J.:
This is an appeal by plaintiff from an order of the Court of First Instance of Zamboanga
sustaining a demurrer to plaintiff's complaint upon the ground that it fails to state a
cause of action.
As the demurrer had the effect of admitting the material facts set forth in the complaint,
the facts are those alleged by the plaintiff. On July 6, 1917, Luis Lim y Garcia of
Zamboanga made application to the Sun Life Assurance Company of Canada for a
policy of insurance on his life in the sum of P5,000. In his application Lim designated his
wife, Pilar C. de Lim, the plaintiff herein, as the beneficiary. The first premium of P433
was paid by Lim, and upon such payment the company issued what was called a
"provisional policy." Luis Lim y Garcia died on August 23, 1917, after the issuance of the
provisional policy but before approval of the application by the home office of the
insurance company. The instant action is brought by the beneficiary, Pilar C. de Lim, to
recover from the Sun Life Assurance Company of Canada the sum of P5,000, the
amount named in the provisional policy.
The "provisional policy" upon which this action rests reads as follows:
Received (subject to the following stipulations and agreements) the sum of

four hundred and thirty-three pesos, being the amount of the first year's
premium for a Life Assurance Policy on the life of Mr. Luis D. Lim y Garcia
of Zamboanga for P5,000, for which an application dated the 6th day of
July, 1917, has been made to the Sun Life Assurance Company of
Canada.
The above-mentioned life is to be assured in accordance with the terms

and conditions contained or inserted by the Company in the policy which
may be granted by it in this particular case for four months only from the
date of the application, provided that the Company shall confirm this
agreement by issuing a policy on said application when the same shall be
submitted to the Head Office in Montreal. Should the Company not issue
such a policy, then this agreement shall be null and void ab initio, and the
Company shall be held not to have been on the risk at all, but in such case
the amount herein acknowledged shall be returned.
[SEAL.] (Sgd.) T. B. MACAULAY, President.

(Sgd.) A. F. Peters, Agent.
Our duty in this case is to ascertain the correct meaning of the document above quoted.
A perusal of the same many times by the writer and by other members of the court
leaves a decided impression of vagueness in the mind. Apparently it is to be a
provisional policy "for four months only from the date of this application." We use the
term "apparently" advisedly, because immediately following the words fixing the four
months period comes the word "provided" which has the meaning of "if." Otherwise
stated, the policy for four months is expressly made subjected to the affirmative
condition that "the company shall confirm this agreement by issuing a policy on said
application when the same shall be submitted to the head office in Montreal." To
reenforce the same there follows the negative condition —
Should the company not issue such a policy, then this agreement shall be null and
void ab initio, and the company shall be held not to have been on the risk." Certainly,
language could hardly be used which would more clearly stipulate that the agreement
should not go into effect until the home office of the company should confirm it by
issuing a policy. As we read and understand the so-called provisional policy it amounts
to nothing but an acknowledgment on behalf of the company, that it has received from
the person named therein the sum of money agreed upon as the first year's premium
upon a policy to be issued upon the application, if the application is accepted by the
company.
It is of course a primary rule that a contract of insurance, like other contracts, must be
assented to by both parties either in person or by their agents. So long as an application
for insurance has not been either accepted or rejected, it is merely an offer or proposal
to make a contract. The contract, to be binding from the date of the application, must
have been a completed contract, one that leaves nothing to be done, nothing to be
completed, nothing to be passed upon, or determined, before it shall take effect. There
can be no contract of insurance unless the minds of the parties have met in agreement.
Our view is, that a contract of insurance was not here consummated by the parties. lawph!l.net
Appellant relies on Joyce on Insurance. Beginning at page 253, of Volume I, Joyce

states the general rule concerning the agent's receipt pending approval or issuance of
policy. The first rule which Joyce lays down is this: If the act of acceptance of the risk by
the agent and the giving by him of a receipt, is within the scope of the agent's authority,
and nothing remains but to issue a policy, then the receipt will bind the company. This
rule does not apply, for while here nothing remained but to issue the policy, this was
made an express condition to the contract. The second rule laid down by Joyce is this:
Where an agreement is made between the applicant and the agent whether by signing
an application containing such condition, or otherwise, that no liability shall attach until
the principal approves the risk and a receipt is given buy the agent, such acceptance is
merely conditional, and it subordinated to the act of the company in approving or
rejecting; so in life insurance a "binding slip" or "binding receipt" does not insure of itself.
This is the rule which we believe applies to the instant case. The third rule announced
by Joyce is this: Where the acceptance by the agent is within the scope of his authority
a receipt containing a contract for insurance for a specific time which is not absolute but
conditional, upon acceptance or rejection by the principal, covers the specified period
unless the risk is declined within that period. The case cited by Joyce to substantiate the
last principle is that a Goodfellow vs. Times & Beacon Assurance Com. (17 U. C. Q. B.,
411), not available.
The two cases most nearly in point come from the federal courts and the Supreme
Court of Arkansas.
In the case of Steinle vs. New York Life Insurance Co. ([1897], 81 Fed., 489} the facts
were that the amount of the first premium had been paid to an insurance agent and a
receipt given therefor. The receipt, however, expressly declared that if the application
was accepted by the company, the insurance shall take effect from the date of the
application but that if the application was not accepted, the money shall be returned.
The trite decision of the circuit court of appeal was, "On the conceded facts of this case,
there was no contract to life insurance perfected and the judgment of the circuit court
must be affirmed."
In the case of Cooksey vs. Mutual Life Insurance Co. ([1904], 73 Ark., 117) the person
applying for the life insurance paid and amount equal to the first premium, but the
application and the receipt for the money paid, stipulated that the insurance was to
become effective only when the application was approved and the policy issued. The
court held that the transaction did not amount to an agreement for preliminary or
temporary insurance. It was said:
It is not an unfamiliar custom among life insurance companies in the operation of the
business, upon receipt of an application for insurance, to enter into a contract with the
applicant in the shape of a so-called "binding receipt" for temporary insurance pending
the consideration of the application, to last until the policy be issued or the application
rejected, and such contracts are upheld and enforced when the applicant dies before
the issuance of a policy or final rejection of the application. It is held, too, that such
contracts may rest in parol. Counsel for appellant insists that such a preliminary contract
for temporary insurance was entered into in this instance, but we do not think so. On the
contrary, the clause in the application and the receipt given by the solicitor, which are to
be read together, stipulate expressly that the insurance shall become effective only
when the "application shall be approved and the policy duly signed by the secretary at
the head office of the company and issued." It constituted no agreement at all for
preliminary or temporary insurance; Mohrstadt vs. Mutual Life Ins. Co., 115 Fed., 81, 52
C. C. A., 675; Steinle vs. New York Life Ins. Co., 81 Fed., 489, 26 C. C. A., 491." (See
further Weinfeld vs. Mutual Reserve Fund Life Ass'n. [1892], 53 Fed, 208' Mohrstadt vs.
Mutual Life Insurance Co. [1902], 115 Fed., 81; Insurance co. vs. Young's Administrator
[1875], 90 U. S., 85; Chamberlain vs. Prudential Insurance Company of America [1901],
109 Wis., 4; Shawnee Mut. Fire Ins. Co. vs. McClure [1913], 39 Okla., 509; Dorman vs.
Connecticut Fire Ins. Co. [1914], 51 contra, Starr vs. Mutual Life Ins. Co. [1905], 41
Wash., 228.)
We are of the opinion that the trial court committed no error in sustaining the demurrer
and dismissing the case. It is to be noted, however, that counsel for appellee admits the
liability of the company for the return of the first premium to the estate of the deceased.
It is not to be doubted but that the Sun Life Assurance Company of Canada will
immediately, on the promulgation of this decision, pay to the estate of the late Luis Lim
y Garcia the of P433.
The order appealed from, in the nature of a final judgment is affirmed, without special
finding as to costs in this instance. So ordered.
Mapa, C.J., Johnson, Araullo, Avanceña and Villamor, JJ., concur.

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G.R. No.

L-15774 November 29, 1920

PILAR C. DE LIM, plaintiff-appellant,

Sanz and Luzuriaga for appellant.

Received (subject to the following stipulations and agreements) the sum of

The above-mentioned life is to be assured in accordance with the terms

[SEAL.] (Sgd.) T. B. MACAULAY, President.

Appellant relies on Joyce on Insurance. Beginning at page 253, of Volume I, Joyce

Mapa, C.J., Johnson, Araullo, Avanceña and Villamor, JJ., concur.

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