G.R. No. 243733. January 12, 2021 (Case Brief / Digest)

Title: Edita A. De Leon, Lara Bianca L. Sarte, and Renzo Edgar L. Sarte vs. The Manufacturers Life Insurance Company (Phils.) Inc., et al.

The case involved a dispute over the proceeds from three life insurance policies issued by respondent Manufacturers Life Insurance Company (Phils.) Inc. (Manulife) on the life of Edgar H. Sarte, who died on December 23, 2003. Sarte had three sets of children from different relationships: with legitimate wife Zenaida S. Sarte, with Vilma C. Caparros, and with Edita De Leon. In March and July 2002, Sarte executed Beneficiary Designation Forms (BDFs) to change the beneficiaries of these policies. The July 31, 2002 BDFs named Sarte’s children with De Leon, Lara Bianca L. Sarte and Renzo Edgar L. Sarte, as beneficiaries, but these changes were not processed by Manulife due to internal policy requirements for designating a trustee for minors, which were not complied with. After Sarte’s death, the different claimants sought the proceeds, leading Manulife to file a complaint for interpleader to resolve the conflicting claims. The Regional Trial Court ruled in favor of the March 1, 2002 BDFs that included Zenaida and her children and Alvin (Sarte’s child with Caparros) as beneficiaries. The Court of Appeals affirmed the RTC decision. Subsequently, De Leon et al. filed a petition for review with the Supreme Court.

1. Whether the insurance policies required Sarte to designate a trustee for minor beneficiaries.
2. Whether the CA correctly applied the Best Evidence Rule to the photocopies of the BDFs dated July 31, 2002.
3. Whether Sarte effected a change of beneficiary designation through the submission of the BDFs dated July 31, 2002 to Manulife’s servicing agent.

Court’s Decision:
The Supreme Court granted the petition, reversing the Court of Appeals’ decision. It ruled that Sarte was not contractually required to designate a trustee for minor beneficiaries. The internal policies of Manulife did not form part of the contract between Sarte and Manulife, hence, they were not binding upon Sarte or his beneficiaries. The Court found that the BDFs dated July 31, 2002, substantially complied with the requirements for changing the beneficiaries in the policies, and as such, effectively designated Lara Bianca L. Sarte and Renzo Edgar L. Sarte as beneficiaries. The Supreme Court ordered Manulife to release the proceeds of the life insurance policies to Lara Bianca and Renzo Edgar, with six percent interest per annum from January 21, 2004, until fully paid.

The Supreme Court reiterated the doctrine that the terms of an insurance policy constitute the entire contract between the parties. Any internal policies of an insurance company not included in the policy do not bind the insured or the beneficiaries. Further, the substantial compliance rule in beneficiary designation was applied, holding that when an insured has done all within their power to comply with the requirements for changing a beneficiary, the designation should be deemed effective even if not recorded in the insurer’s records.

Class Notes:
– An insurance policy contract includes all terms agreed upon by the insurance company and the policy owner, excluding unincorporated company internal policies.
– The Best Evidence Rule, when it comes to documents, mandates the presentation of the original documents unless justified under specific exceptions.
– The substantial compliance rule allows for the effectivity of beneficiary designation changes when the insured has taken all reasonable steps under the circumstances to effect such changes.

Historical Background:
The complexity of this case highlights the evolving nature of insurance law in the Philippines, particularly regarding beneficiary designations in life insurance policies. It underscores the judiciary’s role in interpreting contractual provisions and the extent to which internal corporate policies impact contractual obligations and rights. This decision reflects the Court’s commitment to effective contract execution and the protection of intended beneficiaries’ rights, contributing to the broader discourse on insurance and contractual law in the Philippines.


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