G.R. No.

L-48563 May 25, 1979

time she applied for the two policies. Hence, the filing of Civil Case No. 90062 in the Court of First
Instance of Manila which dismissed the claim because of the concealment practised by the insured in
violation of the Insurance Law.

VICENTE E. TANG, petitioner,

vs.
HON. COURT OF APPEALS and PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondents.

On appeal, the Court of Appeals, affirmed the decision. In its decision, the Court of Appeals stated, inter
alia: "There is no doubt that she deliberately concealed material facts about her physical condition and
history and/or conspired with whoever assisted her in relaying false information to the medical examiner,
assuming that the examiner could not communicate directly with her."

Ambrosio D. Go for petitioner.

Ferry, De la Rosa, Deligero Salonga & Associates for private respondent.

The issue in this appeal is the application of Art. 1332 of the Civil Code which stipulates:
Art. 1332. When one of the parties is unable to read, or if the contract is in a language
not understood by him, and mistake or fraud is alleged, the person enforcing the
contract must show that the terms thereof have been fully explained to the former.

ABAD SANTOS, J.:

This is a petition to review on certiorari of the decision of the Court of Appeals (CA-G.R. No. 55407-R,
June 8, 1978) which affirmed the decision of the Court of First Instance of Manila in Civil Case No. 90062
wherein the petitioner herein was the plaintiff and Philippine American Life Insurance Co. the herein
respondent was the defendant. The action was for the enforcement of two insurance policies that had
been issued by the defendant company under the following circumstances.
On September 25, 1965, Lee See Guat, a widow, 61 years old, and an illiterate who spoke only Chinese,
applied for an insurance on her life for P60,000 with the respondent Company. The application consisted
of two parts, both in the English language. The second part of her application dealt with her state of
health and because her answers indicated that she was healthy, the Company issued her Policy No.
0690397, effective October 23, 1965, with her nephew Vicente E. Tang, herein Petitioner, as her
beneficiary,
On November 15, 1965, Lee See Guat again applied with the respondent Company for an additional
insurance on her life for P40,000. Considering that her first application had just been approved, no further
medical examination was made but she was required to accomplish and submit Part I of the application
which reads: "I/WE HEREBY DECLARE AND AGREE that all questions, statements answers contained
herein, as well as those made to or to be made to the Medical Examiner in Part II are full, complete and
true and bind all parties in interest under the policy herein applied for; that there shall be no contract of
insurance unless a policy is issued on this application and the fun first premium thereon, according to the
mode of payment specified in answer to question 4D above, actually paid during the lifetime and good
health of the Proposed Insured." Moreover, her answers in Part II of her previous application were used in
appraising her insurability for the second insurance. On November 28, 1965, Policy No. 695632 was
issued to Lee See Guat with the same Vicente E. Tang as her beneficiary.
On April 20, 1966, Lee See Guat died of lung cancer. Thereafter, the beneficiary of the two policies,
Vicente E. Tang claimed for their face value in the amount of P100,000 which the insurance company
refused to pay on the ground that the insured was guilty of concealment and misrepresentation at the

According to the Code Commission: "This rule is especially necessary in the Philippines where
unfortunately there is still a fairly large number of illiterates, and where documents are usually drawn up in
English or Spanish." (Report of the Code Commission, p. 136.) Art. 1332 supplements Art. 24 of the Civil
Code which provides that " In all contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age
or other handicap, the court must be vigilant for his protection.
It is the position of the petitioner that because Lee See Guat was illiterate and spoke only Chinese, she
could not be held guilty of concealment of her health history because the applications for insurance were
in English and the insurer has not proved that the terms thereof had been fully explained to her.
It should be noted that under Art. 1332 above quoted, the obligation to show that the terms of the contract
had been fully explained to the party who is unable to read or understand the language of the contract,
when fraud or mistake is alleged, devolves on the party seeking to enforce it. Here the insurance
company is not seeking to enforce the contracts; on the contrary, it is seeking to avoid their performance.
It is petitioner who is seeking to enforce them even as fraud or mistake is not alleged. Accordingly,
respondent company was under no obligation to prove that the terms of the insurance contracts were fully
explained to the other party. Even if we were to say that the insurer is the one seeking the performance of
the contracts by avoiding paying the claim, it has to be noted as above stated that there has been no
imputation of mistake or fraud by the illiterate insured whose personality is represented by her beneficiary
the petitioner herein. In sum, Art. 1332 is inapplicable to the case at bar. Considering the findings of
both the CFI and Court of Appeals that the insured was guilty of concealment as to her state of health, we
have to affirm.
WHEREFORE, the decision of the Court of Appeals is hereby affirmed. No special pronouncement as to
costs.
SO ORDERED.

Concepcion, Jr., and Santos, JJ., concur.

Aquino, J., concurs in the result.

honesty; the absence of any concealment or deception however slight. Here, the Court of Appeals found
that the insured "deliberately concealed material facts about her physical condition and history and/or
concealed with whoever assisted her in relaying false information to the medical examiner ... "

Separate Opinions

Certainly, petitioner cannot assume inconsistent positions by attempting to enforce the contract of
insurance for the purpose of collecting the proceeds of the policy and at the same time nullify the contract
by claiming that he executed the same thru fraud or mistake.
G.R. No. 105135 June 22, 1995
SUNLIFE ASSURANCE COMPANY OF CANADA, petitioner,
vs.
The Hon. COURT OF APPEALS and Spouses ROLANDO and BERNARDA BACANI, respondents.

ANTONIO, J., concurring:

I concur.
In a contract of insurance each party "must communicate to the other, in good faith, all facts within his
knowledgewhich are material to the contract, and which the other has not the means of ascertaining ...
(section 27, Act 2427, as amended. Emphasis supplied). As a general rule, a failure by the insured to
disclose conditions affecting the risk, of which he is aware makes the contract voidable at the option of
the insurer (45 C.J.S. 153). The reason for this rule is that insurance policies are traditionally contracts
"ubemae fidei" which means most abundant good faith absolute and perfect candor or openness and
honesty; the absence of any concealment or deception however slight. Here, the Court of Appeals found
that the insured "deliberately concealed material facts about her physical condition and history and/or
concealed with whoever assisted her in relaying false information to the medical examiner ... "

QUIASON, J.:

This is a petition for review for certiorari under Rule 45 of the Revised Rules of Court to reverse and set
aside the Decision dated February 21, 1992 of the Court of Appeals in CA-G.R. CV No. 29068, and its
Resolution dated April 22, 1992, denying reconsideration thereof.
We grant the petition.

Certainly, petitioner cannot assume inconsistent positions by attempting to enforce the contract of
insurance for the purpose of collecting the proceeds of the policy and at the same time nullify the contract
by claiming that he executed the same thru fraud or mistake.

# Separate Opinions

On June 26, 1987, the insured died in a plane crash. Respondent Bernarda Bacani filed a claim with
petitioner, seeking the benefits of the insurance policy taken by her son. Petitioner conducted an
investigation and its findings prompted it to reject the claim.

ANTONIO, J., concurring:

I concur.
In a contract of insurance each party "must communicate to the other, in good faith, all facts within his
knowledgewhich are material to the contract, and which the other has not the means of ascertaining ...
(section 27, Act 2427, as amended. Emphasis supplied). As a general rule, a failure by the insured to
disclose conditions affecting the risk, of which he is aware makes the contract voidable at the option of
the insurer (45 C.J.S. 153). The reason for this rule is that insurance policies are traditionally contracts
"ubemae fidei" which means most abundant good faith absolute and perfect candor or openness and

On April 15, 1986, Robert John B. Bacani procured a life insurance contract for himself from petitioner. He
was issued Policy No. 3-903-766-X valued at P100,000.00, with double indemnity in case of accidental
death. The designated beneficiary was his mother, respondent Bernarda Bacani.

In its letter, petitioner informed respondent Bernarda Bacani, that the insured did not disclose material
facts relevant to the issuance of the policy, thus rendering the contract of insurance voidable. A check
representing the total premiums paid in the amount of P10,172.00 was attached to said letter.
Petitioner claimed that the insured gave false statements in his application when he answered the
following questions:
5. Within the past 5 years have you:

a) consulted any doctor or other health practitioner?

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendant, condemning the latter to pay the former the amount of One Hundred
Thousand Pesos (P100,000.00) the face value of insured's Insurance Policy No.
3903766, and the Accidental Death Benefit in the amount of One Hundred Thousand
Pesos (P100,000.00) and further sum of P5,000.00 in the concept of reasonable
attorney's fees and costs of suit.

b) submitted to:
EGG?
X-rays?
blood tests?
other tests?

Defendant's counterclaim is hereby Dismissed (Rollo, pp. 43-44).

In ruling for private respondents, the trial court concluded that the facts concealed by the insured were
made in good faith and under a belief that they need not be disclosed. Moreover, it held that the health
history of the insured was immaterial since the insurance policy was "non-medical".

c) attended or been admitted to any hospital or other medical facility?

6. Have you ever had or sought advice for:
xxx xxx xxx
b) urine, kidney or bladder disorder? (Rollo, p. 53)
The deceased answered question No. 5(a) in the affirmative but limited his answer to a consultation with
a certain Dr. Reinaldo D. Raymundo of the Chinese General Hospital on February 1986, for cough and flu
complications. The other questions were answered in the negative (Rollo, p. 53).
Petitioner discovered that two weeks prior to his application for insurance, the insured was examined and
confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. During his
confinement, the deceased was subjected to urinalysis, ultra-sonography and hematology tests.

Petitioner appealed to the Court of Appeals, which affirmed the decision of the trial court. The appellate
court ruled that petitioner cannot avoid its obligation by claiming concealment because the cause of death
was unrelated to the facts concealed by the insured. It also sustained the finding of the trial court that
matters relating to the health history of the insured were irrelevant since petitioner waived the medical
examination prior to the approval and issuance of the insurance policy. Moreover, the appellate court
agreed with the trial court that the policy was "non-medical" (Rollo, pp. 4-5).
Petitioner's motion for reconsideration was denied; hence, this petition.
II
We reverse the decision of the Court of Appeals.

On November 17, 1988, respondent Bernarda Bacani and her husband, respondent Rolando Bacani, filed
an action for specific performance against petitioner with the Regional Trial Court, Branch 191,
Valenzuela, Metro Manila. Petitioner filed its answer with counterclaim and a list of exhibits consisting of
medical records furnished by the Lung Center of the Philippines.

The rule that factual findings of the lower court and the appellate court are binding on this Court is not
absolute and admits of exceptions, such as when the judgment is based on a misappreciation of the facts
(Geronimo v. Court of Appeals, 224 SCRA 494 [1993]).

On January 14, 1990, private respondents filed a "Proposed Stipulation with Prayer for Summary
Judgment" where they manifested that they "have no evidence to refute the documentary evidence of
concealment/misrepresentation by the decedent of his health condition (Rollo, p. 62).

In weighing the evidence presented, the trial court concluded that indeed there was concealment and
misrepresentation, however, the same was made in "good faith" and the facts concealed or
misrepresented were irrelevant since the policy was "non-medical". We disagree.

Petitioner filed its Request for Admissions relative to the authenticity and due execution of several
documents as well as allegations regarding the health of the insured. Private respondents failed to
oppose said request or reply thereto, thereby rendering an admission of the matters alleged.

Section 26 of The Insurance Code is explicit in requiring a party to a contract of insurance to

communicate to the other, in good faith, all facts within his knowledge which are material to the contract
and as to which he makes no warranty, and which the other has no means of ascertaining. Said Section
provides:

Petitioner then moved for a summary judgment and the trial court decided in favor of private respondents.
The dispositive portion of the decision is reproduced as follows:

A neglect to communicate that which a party knows and ought to communicate, is

called concealment.

Materiality is to be determined not by the event, but solely by the probable and reasonable influence of
the facts upon the party to whom communication is due, in forming his estimate of the disadvantages of
the proposed contract or in making his inquiries (The Insurance Code, Sec. 31).

WHEREFORE, the petition is GRANTED and the Decision of the Court of Appeals is REVERSED and
SET ASIDE.
SO ORDERED.

The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters
relating to his health.

G.R. No. L-16163

The information which the insured failed to disclose were material and relevant to the approval and
issuance of the insurance policy. The matters concealed would have definitely affected petitioner's
action on his application, either by approving it with the corresponding adjustment for a higher
premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of
the insured by petitioner in order for it to reasonably assess the risk involved in accepting the application.

IGNACIO SATURNINO, in his own behalf and as the JUDICIAL GUARDIAN OF CARLOS
SATURNINO, minor,plaintiffs-appellants,
vs.
THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, defendant-appellee.
Eleazaro A. Samson for plaintiffs-appellants.
Abello & Macias for defendant-appellee.

In Vda. de Canilang v. Court of Appeals, 223 SCRA 443 (1993), we held that materiality of the information
withheld does not depend on the state of mind of the insured. Neither does it depend on the actual or
physical events which ensue.
Thus, "goad faith" is no defense in concealment. The insured's failure to disclose the fact that he was
hospitalized for two weeks prior to filing his application for insurance, raises grave doubts about
his bonafides. It appears that such concealment was deliberate on his part.
The argument, that petitioner's waiver of the medical examination of the insured debunks the materiality
of the facts concealed, is untenable. We reiterate our ruling in Saturnino v. Philippine American Life
Insurance Company, 7 SCRA 316 (1963), that " . . . the waiver of a medical examination [in a non-medical
insurance contract] renders even more material the information required of the applicant concerning
previous condition of health and diseases suffered, for such information necessarily constitutes an
important factor which the insurer takes into consideration in deciding whether to issue the policy or not . .
."
Moreover, such argument of private respondents would make Section 27 of the Insurance Code, which
allows the injured party to rescind a contract of insurance where there is concealment, ineffective
(See Vda. de Canilang v. Court of Appeals, supra).
Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well
settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient
that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance
policy or in making inquiries (Henson v. The Philippine American Life Insurance Co., 56 O.G. No. 48
[1960]).
We, therefore, rule that petitioner properly exercised its right to rescind the contract of insurance by
reason of the concealment employed by the insured. It must be emphasized that rescission was
exercised within the two-year contestability period as recognized in Section 48 of The Insurance Code.

February 28, 1963

MAKALINTAL, J.:

Plaintiffs, now appellants, filed this action in the Court of First Instance of Manila to recover the sum of
P5,000.00, corresponding to the face value of an insurance policy issued by defendant on the life of
Estefania A. Saturnino, and the sum of P1,500.00 as attorney's fees. Defendant, now appellee, set up
special defenses in its answer, with a counterclaim for damages allegedly sustained as a result of the
unwarranted presentation of this case. Both the complaint and the counterclaim were dismissed by the
trial court; but appellants were declared entitled to the return of the premium already paid; plus interest at
6% up to January 8, 1959, when a check for the corresponding amount P359.65 was sent to them
by appellee.
The policy sued upon is one for 20-year endowment non-medical insurance. This kind of policy dispenses
with the medical examination of the applicant usually required in ordinary life policies. However, detailed
information is called for in the application concerning the applicant's health and medical history. The
written application in this case was submitted by Saturnino to appellee on November 16, 1957, witnessed
by appellee's agent Edward A. Santos. The policy was issued on the same day, upon payment of the first
year's premium of P339.25. On September 19, 1958 Saturnino died of pneumonia, secondary to
influenza. Appellants here, who are her surviving husband and minor child, respectively, demanded
payment of the face value of the policy. The claim was rejected and this suit was subsequently instituted.
It appears that two months prior to the issuance of the policy or on September 9, 1957, Saturnino was
operated on for cancer, involving complete removal of the right breast, including the pectoral muscles and
the glands found in the right armpit. She stayed in the hospital for a period of eight days, after which she
was discharged, although according to the surgeon who operated on her she could not be considered
definitely cured, her ailment being of the malignant type.

Notwithstanding the fact of her operation Estefania A. Saturnino did not make a disclosure thereof in her
application for insurance. On the contrary, she stated therein that she did not have, nor had she ever had,
among other ailments listed in the application, cancer or other tumors; that she had not consulted any
physician, undergone any operation or suffered any injury within the preceding five years; and that she
had never been treated for nor did she ever have any illness or disease peculiar to her sex, particularly of
the breast, ovaries, uterus, and menstrual disorders. The application also recites that the foregoing
declarations constituted "a further basis for the issuance of the policy."
The question at issue is whether or not the insured made such false representations of material facts as
to avoid the policy. There can be no dispute that the information given by her in her application for
insurance was false, namely, that she had never had cancer or tumors, or consulted any physician or
undergone any operation within the preceding period of five years. Are the facts then falsely represented
material? The Insurance Law (Section 30) provides that "materiality is to be determined not by the event,
but solely by the probable and reasonable influence of the facts upon the party to whom the
communication is due, in forming his estimate of the proposed contract, or in making his inquiries." It
seems to be the contention of appellants that the facts subject of the representation were not material in
view of the "non-medical" nature of the insurance applied for, which does away with the usual
requirement of medical examination before the policy is issued. The contention is without merit. If
anything, the waiver of medical examination renders even more material the information required of the
applicant concerning previous condition of health and diseases suffered, for such information necessarily
constitutes an important factor which the insurer takes into consideration in deciding whether to issue the
policy or not. It is logical to assume that if appellee had been properly apprised of the insured's medical
history she would at least have been made to undergo medical examination in order to determine her
insurability.
Appellants argue that due information concerning the insured's previous illness and operation had been
given to appellees agent Edward A. Santos, who filled the application form after it was signed in blank by
Estefania A. Saturnino. This was denied by Santos in his testimony, and the trial court found such
testimony to be true. This is a finding of fact which is binding upon us, this appeal having been taken
upon questions of law alone. We do not deem it necessary, therefore, to consider appellee's additional
argument, which was upheld by the trial court, that in signing the application form in blank and leaving it
to Edward A. Santos to fill (assuming that to be the truth) the insured in effect made Santos her agent for
that purpose and consequently was responsible for the errors in the entries made by him in that capacity.
In the application for insurance signed by the insured in this case, she agreed to submit to a medical
examination by a duly appointed examiner of appellee if in the latter's opinion such examination was
necessary as further evidence of insurability. In not asking her to submit to a medical examination,
appellants maintain, appellee was guilty of negligence, which precluded it from finding about her actual
state of health. No such negligence can be imputed to appellee. It was precisely because the insured had

given herself a clean bill of health that appellee no longer considered an actual medical checkup
necessary.
Appellants also contend there was no fraudulent concealment of the truth inasmuch as the insured herself
did not know, since her doctor never told her, that the disease for which she had been operated on was
cancer. In the first place the concealment of the fact of the operation itself was fraudulent, as there could
not have been any mistake about it, no matter what the ailment. Secondly, in order to avoid a policy it is
not necessary to show actual fraud on the part of the insured. In the case of Kasprzyk v. Metropolitan
Insurance Co., 140 N.Y.S. 211, 214, it was held:
Moreover, if it were the law that an insurance company could not depend a policy on the ground
of misrepresentation, unless it could show actual knowledge on the part of the applicant that the
statements were false, then it is plain that it would be impossible for it to protect itself and its
honest policyholders against fraudulent and improper claims. It would be wholly at the mercy of
any one who wished to apply for insurance, as it would be impossible to show actual fraud
except in the extremest cases. It could not rely on an application as containing information on
which it could act. There would be no incentive to an applicant to tell the truth.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to
prove their case not covered by this stipulation of facts.
1wph1.t

In this jurisdiction a concealment, whether intentional or unintentional, entitles the insurer to

rescind the contract of insurance, concealment being defined as "negligence to communicate that
which a party knows and ought to communicate" (Sections 24 & 26, Act No. 2427). In the case
of Argente v. West Coast Life Insurance Co., 51 Phil. 725, 732, this Court said, quoting from Joyce, The
Law of Insurance, 2nd ed., Vol. 3:
"The basis of the rule vitiating the contract in cases of concealment is that it misleads or
deceives the insurer into accepting the risk, or accepting it at the rate of premium agreed upon.
The insurer, relying upon the belief that the assured will disclose every material fact within his
actual or presumed knowledge, is misled into a belief that the circumstance withheld does not
exist, and he is thereby induced to estimate the risk upon a false basis that it does not exist."
The judgment appealed from, dismissing the complaint and awarding the return to appellants of the
premium already paid, with interest at 6% up to January 29, 1959, affirmed, with costs against appellants.