PEDRO ARCE V CAPITAL INSURANCE G.R. No. L-28501 September 30, 1982

FACTS

The Petitioner (insured) is the owner of a residential house in Tondo, Manila, which had been insured with the respondent insurance company since 1961. In November 1965, the respondent sent to the petitioner a Renewal Certificate to cover the period from December 5, 1965 to December 5,1966 and requested payment of the corresponding premium. Anticipating that the premium could not be paid on time, the petitioner asked for an extension which was granted by the respondent. After the lapse of the requested extension, petitioner still failed to pay the premium.

Thereafter, the house of the petitioner was totally destroyed by fire. Upon petitioner’s presentation of claim for indemnity, he was told that no indemnity was due because the premium was not paid. Nonetheless the respondent tendered a check for P300.00 as financial aid which was received by his daughter. The petitioner sued the respondent for indemnity. The trial court held the respondent liable to indemnify the petitioner on the ground that since the Insurance company could have demanded payment of the premium, mutuality of obligation required that it should be liable on the policy. Hence, this appeal by the respondent on question of law.

ISSUE

Whether or not the petitioners are entitled to claim from their policy despite non-payment of their premium.

RATIO

No. The parties in this case had stipulated that notwithstanding anything to the contrary contained in the policy, the insurance will be deemed valid and binding upon the Company only when the premium and documentary stamps therefor have actually been paid in full and duly acknowledged in an official receipt signed by an authorized official/representative of the Company.

It is obvious from both the Insurance Act, as amended, and the stipulation of the parties that time is of the essence in respect of the payment of the insurance premium so that if it is not paid the contract does not take effect unless there is still another stipulation to the contrary. In the instant case, the INSURED was given a grace period to pay the premium but the period having expired with no payment made, he cannot insist that the COMPANY is nonetheless obligated to him.

FALLO

WHEREFORE, the decision of the court a quo is reversed; the appellee's complaint is dismissed. No special pronouncement as to costs.