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Philippine Phoenix Surety & Insurance, Inc. vs.
Woodworks, Inc.

No. L-22684. August 31, 1967.

PHILIPPINE PHOENIX SURETY & INSURANCE, INC.,

plaintiffappellee, vs. WOODWORKS, INC.; defendant-
appellant.

Insurance; Perfected contract of insurance; Effect of partial

payments of premium.·Where, between the insurer and the
insured, there was not only a perfected contract of insurance but a
partially performed one as far ,as the payment of the agreed
premium was concerned, the obligation of the insurer to pay the
insured the amount for which the policy was issued in case the
conditions therefor had ,been complied with, arose and became
binding upon it, while the obligation of the insured to pay the
remainder of the total amount of premium due became demandable.
,
Same; Nonpayment of premium due does not produce
cancellation of insurance contract.·Nonpayment of the premium
due does not produce the cancellation of the contract of insurance.

1271

VOL. 20, AUGUST 31, 1967 1271

Philippine Phoenix Surety & Insurance, Inc. vs. Woodworks, Inc.

Such theory would place exclusively in the hands of one of the

contracting parties the right to decide whether the contract should
stand or not. Rather the correct view would seem to be this: as the

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contract had become perfected, the parties. could demand from each
other the performance of whatever obligations they had assumed.
In the case of the insurer, it is obvious that it had the right to
demand from the insured the completion of the payment of the
premium due or sue for the rescission of the contract. As it chose to
demand specific performance of the insured's obligation to pay the
balance of the premium, the latter's duty to pay is indubitable.

APPEAL from a decision of the Court of First Instance of

Manila.

The facts are stated in the opinion of the Court.

Zosimo Rivas for defendant-appellant.
Manuel O. Chan for plaintiff-appellee.

DIZON, J.:

Appeal upon a question of law taken by Woodworks, Inc.

from the judgment of the Court of First Instance of Manila
in Civil Case No. 50710 "ordering the defendant,
Woodworks, Inc. to pay', to the plaintiff, Philippine Phoenix
Surety & Insurance, Inc., the sum of P3,522.09 with
interest thereon at the legal rate of 6% per annum from the
date of the filing of the complaint until fully paid, and costs
of the suit."
Appellee Philippine Phoenix Surety & Insurance Co.,
Inc. commenced this action in the Municipal Court 'of
Manila to recover from appellant Woodworks, Inc. the sum
of P3,522.09, representing the unpaid balance of the
premiums on a fire insurance policy issued by appellee in
favor of appellant for a term of one year from April 1, 1960
to April 1, 1961. From an adverse decision of said court,
Woodworks, Inc. appealed to the Court of First Instance of
Manila (Civil Case No. 50710) where the parties submitted
the following stipulation of facts, on the basis of which the
appealed decision was rendered:

"That plaintiff and defendant "are both corporations duly organized

and existing under and by virtue of the laws of the Philippines;

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Philippine Phoenix Surety & Insurance, Inc. vs.

Woodworks, Inc.

"That on April 1, 1960, plaintiff issued to defendant Fire Policy No.

9652 for the amount of P300,000.00, under the terms and conditions
therein set forth in said policy a copy of which is hereto attached
and made a part hereof as Annex 'A';
"That the premiums of said policy as stated in Annex 'A'
amounted to P6,051.95; the margin fee pursuant to the adopted
plan as an implementation of Republic Act 2609 amounted to
P363.72, copy of said adopted plan is hereto attached as Annex 'B'
and made a part hereof, the documentary stamps attached to the
policy was P96.42;
'That the defendant paid P3,000.00 on September 22, 1960 under
official receipt No. 30245 of plaintiff;
"That plaintiff made several demands on defendant to pay the
amount of P3,522.09."

In the present appeal, appellant claims that the court a,

quo committed the following errors:

"I. The lower court erred in stating that in fire

insurance policies the risk attached upon the
issuance and delivery of the policy to the insured.
"II. The lower court erred in deciding that in a
perfected contract of insurance non-payment of
premium does not cancel the policy.
"III. The lower court erred in deciding that the premium
in the policy was still collectible when the complaint
was filed.
"IV. The lower court erred in deciding that a partial
payment of the premium made the policy effective
during the whole period of the policy."

It is clear from the foregoing that on April 1, 1960 Fire

Insurance Policy No. 9652 was issued by appellee and
delivered to appellant, and that on September 22 of the
same year, the latter paid to the former the sum of
P3,000.00 on account of the total premium of P6,051.95 due
thereon. There is, consequently, no doubt at all that, as
between the insurer and the insured, there was not only a
perfected contract of insurance but a partially performed

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one as far as the payment of the agreed premium was

concerned. Thereafter the obligation of the insurer to pay
the insured the amount for which the policy was issued in
case the conditions therefor had been complied with, arose
and became binding upon it, while the obligation of the
insured to pay the remainder of the total amount of the
premium due became demandable.

1273

VOL. 20, AUGUST 31, 1967 1273

Firemen's Ins. Co. vs. Manila Port Service

We can not agree with appellant's theory that nonpayment

by it of the premium due, produced the cancellation of the
contract of insurance. Such theory would place exclusively
in the hands of one of the contracting parties the right to
decide whether the contract should stand or not. Rather
the correct view would seem to be this: as the contract had
become perfected, the parties could demand from each
other the performance of whatever obligations they had
assumed. In the case of the insurer, it is obvious that it had
the right to demand from the insured the completion of the
payment of the premium due or sue for the rescission of the
contract. As it chose to demand specific performance of the
insured's obligation to pay the balance of the premium, the
latter's duty to pay is indeed indubitable,
Having thus resolved that the fourth and last
assignment of error submitted in appellant's brief is
without merit, the first three assignments of error must
likewise be overruled as lacking in merit.
Wherefore, the appealed decision being in accordance
with law and the evidence, the same is hereby affirmed,
with costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal,

Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and
Fernando, JJ., concur.

Decision affirmed.

_________

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