The Supreme Court has denied the petition of the heirs of the late Indalicio Monera, affirming that Manila Bankers Life Insurance Corporation (MB Life) was entitled to rescind his life insurance policy because he concealed material facts about his health. The Court likewise upheld the validity of the extrajudicial foreclosure sale of his mortgaged property.
In its ruling, the Court affirmed the September 11, 2018 Decision and the March 18, 2019 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 104490.
The Case
Sometime in 1984, Indalicio Monera obtained a loan from Meycauayan Rural Bank, Incorporated (Meycauayan Bank) in the amount of PHP 78,000.00. The loan was partially secured by a mortgage on a parcel of land covered by Transfer Certificate of Title (TCT) No. (T-223330) 1088 and a life insurance policy from MB Life, issued as the First Policy, valid from February 16, 1984 until April 16, 1984, with proceeds payable to the bank upon Monera's death.
On April 17, 1984, Monera obtained another loan from Meycauayan Bank in the amount of PHP 85,000.00. He again applied for a life insurance policy with MB Life under its Group Creditors Life Insurance Plan, evidenced by the Second Policy. The application included a health declaration, which he signed, stating among others that he possessed sound health, had not been ill for seven or more consecutive days in the last five years, and had not consulted a physician for any illness or disease in the last five years.
Monera later procured another loan from Meycauayan Bank in the amount of PHP 45,000.00, also secured by a mortgage over the same parcel of land.
Monera died on May 14, 1984. Upon the maturity of his loans, Meycauayan Bank filed its claims with MB Life. The claims were disapproved based on MB Life's finding that Monera violated the terms of the Second Policy when he did not disclose that he previously underwent excision of mass at the right supra-clavicular with drainages and was diagnosed with metastatic cancer near his right collar bone at the time of the loan application.
Meycauayan Bank then proceeded with the extrajudicial foreclosure of the mortgaged property, emerging as the highest bidder during the public auction. Monera's heirs lodged a complaint for specific performance and/or damages for breach of contract before the Regional Trial Court (RTC) against MB Life, later amending it to implead Meycauayan Bank.
Assisting Presiding Judge Gamor B. Disalo first ruled in favor of the heirs. However, Presiding Judge Lilia Mercedes Encarnacion A. Gepty granted the motions for reconsideration of MB Life and Meycauayan Bank in the Resolution dated June 25, 2014, dismissing the complaint for lack of merit. The heirs appealed to the CA, which denied their appeal.
The Issue
The Court addressed whether MB Life was entitled to rescind the contract of insurance due to Monera's concealment of material health facts, and whether the extrajudicial foreclosure sale of the mortgaged property was valid.
The Ruling
The Court held that Monera's concealment of material information effectively entitled MB Life to rescind the contract of insurance. It noted that under Section 27 of the Insurance Code, no proof of fraudulent intent is necessary in cases of rescission due to concealment, as the provision negates any distinction between intentional and unintentional concealments.
The Court ruled that MB Life was not barred from rescinding the contract and establishing that the policy was void ab initio due to Monera's concealment of material facts. It found that the extrajudicial foreclosure sale conducted on November 26, 1986 was valid, and that the issuance of the certificate of sale and the corresponding registration with the Office of the Register of Deeds of Bulacan were in order.
The dispositive portion reads: "ACCORDINGLY, the Petition for Review on Certiorari is DENIED. The September 11, 2018 Decision and the March 18, 2019 Resolution of the Court of Appeals in CA-G.R. CV No. 104490 are AFFIRMED."
By the Numbers
- First loan (1984): PHP 78,000.00
- Second loan (April 17, 1984): PHP 85,000.00
- Third loan: PHP 45,000.00
- First Policy validity: February 16, 1984 until April 16, 1984
- Premium collected for the Second Policy: PHP 340.00
- Monera's death: May 14, 1984
- Extrajudicial foreclosure sale: November 26, 1986
- Moral damages originally awarded by Judge Disalo: PHP 50,000.00
- Exemplary damages originally awarded: PHP 30,000.00
The Court's Reasoning
The Court explained that the health declaration Monera voluntarily executed and signed expressly stated that MB Life reserved the right to reject and/or rescind the application or certificate if there was a failure on his part, whether intentional or unintentional, to disclose material facts pertinent to the risk.
On the incontestability rule, the Court found that the two-year incontestability requirement under Section 234(b) of the Insurance Code did not apply to Monera's contract. The threshold requirement is that the policy must have been in force for two years from its date of issue. The First Policy had a two-month term, while the Second Policy was deemed to have a three-month term. The Court observed a gap in the law concerning short-term policies and stated that it is for the legislature, rather than the Court, to determine the contestability requirements for such policies.
What was material, the Court said, was Monera's concealment, which affected MB Life's evaluation of his application and the premiums to be charged. It was undisputed that he failed to disclose that he had undergone an excision of a mass and consulted physicians at Manila Doctors Hospital.
On the foreclosure sale, the Court held that Monera's heirs failed to adduce evidence of fraud or irregularity. It stressed that in civil cases, he who alleges fraud or mistake must substantiate it, and that fraud is not presumed but must be proved by clear and convincing evidence. With the dearth of evidence, the sale was declared valid.
Source: Supreme Court decision in G.R. No. 246446, Intestate Heirs of the Late Indalicio Monera v. Manila Bankers Life Insurance Corp. and Meycauayan Rural Bank, Inc., penned by Justice Dimaampao.
This report summarizes a public Supreme Court decision and is not legal advice.