LAURA VELASCO AND GRETA ACOSTA, PETITIONERS, VS. HON. SERGIO A. F. APOSTOL AND MAHARLIKA INSURANCE, CO., INC., RESPONDENTS.

Petitioners Laura Velasco and Greta Acosta were the plaintiffs in
Civil Case No. Q-19118 in the former Court of First Instance
of Rizal, Branch XVI, of which public respondent Hon.
Sergio A. F. Apostol was the presiding judge.  The case was an offshoot of an incident
adequately alleged in their complaint, dated July 22, 1974, as follows:

“That on November 27, 1973, at about 2:30 p.m. plaintiffs were
riding in their Mercury car, with Plate No. 44-43 (H-Manila-73), owned by
plaintiff Laura Velasco, and driven by their driver Restituto
Guarra, along Quezon
Boulevard near the corner of Speaker Perez Street, Quezon
City, toward the direction of Manila, when, before reaching said corner, an N/S
taxicab driven by defendant Dominador Santos and with
Plate No. 75-25L (TX-QC-73), registered in the name of defendants Alice Artuz, c/o Norberto Santos,
crossed the center island towards their direction, and finally collided with
their car at the left front part, and thereafter, the said taxicab tried to
return to its original lane, but was unable to climb the island, and instead,
backtracked, hitting again plaintiffs’ car in the left rear portion, causing
the latter’s back portion to turn toward the center hitting a jeepney on its right, which was travelling
along their side going toward Manila also;”^[1]

and amply
substantiated in detail at the trial.^[2]

Originally sued as defendants were Dominador
Santos, Alice Artuz and Norberto Santos, with
plaintiffs claiming actual, moral and exemplary damages plus attorney’s
fees.  After an answer was filed by said
defendants, private respondent Maharlika Insurance
Co., Inc. was impleaded as a defendant in an amended
complaint filed by the petitioner on April
4, 1975, with an allegation that the N/S taxicab involved was
insured against third party liability for P20,000.00
with private respondent at the time of the accident.^[3]

In its answer to the amended complaint, respondent Maharlika Insurance Co., Inc. claimed that there was no
cause of action against it because at the time of the accident, the alleged
insurance policy was not in force due to non-payment of the premium
thereon.  It further averred that even if
the taxicab had been insured, the complaint would still be premature since the
policy provides that the insurer would be liable only when the insured becomes
legally liable.^[4]

The trial court rendered judgment in favor of the plaintiffs, finding
that the evidence on the negligence of defendant Dominador
Santos was uncontroverted and the proximate cause of
the accident was his negligence.^[5] Defendants Dominador
Santos, Alice Artuz and Norberto Santos were adjudged
jointly and severally liable to petitioners for the sums of P17,061.95 for the
repair of their car, P17,000.00 for their medical expenses, P10,000.00 as moral
damages and P10,000.00 as attorney’s fees.^[6] However, Maharlika
Insurance Co. was exonerated on the ground that the policy was not in force for
failure of the therein defendants to pay the initial premium and for their
concealment of a material fact.

From the decision of the
court a quo, petitioners elevated the case to this Court by a
petition for review on certiorari, with the averment that only questions
of law are involved.

Petitioners fault the
respondent judge for considering private respondent’s defense of late payment
of premium when, according to them, “the same was waived at the pre-trial”,^[7] hence private respondent’s evidence of late
payment should be disregarded supposedly because, as We understand petitioners’
argument, private respondent had thereby admitted that such fact was not in
issue.  They theorize that what was
stipulated in the pre-trial order “does not include the issue on whether
defendant Maharlika Insurance. Co., Inc. is liable
under the insurance policy, even as the premium was paid after the accident in question”.^[8]

The records show that at
the pre-trial conference the issues stipulated by the parties for trial were
the following:

“Whether it was the
driver of the plaintiffs’ car or the driver of the defendants’ car who was
negligent.

“Whether defendant Maharlika Insurance Co., Inc. is liable under the insurance
policy on account of the negligence of defendant Dominador
Santos.”^[9]

Petitioners’ position is
bereft of merit.  We have carefully
examined the pre-trial order but We fail to discern
any intimation or semblance of a waiver or an admission on the part of Maharlika Insurance Co., Inc.  Although there is no express statement as to the fact of late payment, this is
necessarily deemed included in or ineluctably inferred from the issue of
whether the company is liable under the insurance policy it had allegedly
issued for the vehicle Involved and on which petitioners seek to recover.  A pre-trial order is not meant to be a
detailed catalogue of each and every issue that is to be or may be taken up
during the trial.  Issues that are
impliedly included therein or may be inferable therefrom
by necessary implication are as much integral parts of the pre-trial order as
those that are expressly stipulated.

In fact, it would be
absurd and inexplicable for the respondent company to knowingly disregard or
deliberately abandon the issue of non-payment of the premium on the policy
considering that it is the very core of its defense.  Correspondingly, We
cannot but perceive here an undesirable resort to technicalities
to evade an issue determinative of a defense duly averred.

Furthermore, as private
respondent correctly points out, evidence to prove such late payment was
introduced without any objection by the adverse party.^[10] This lack of objection
amounts to an implied consent conferring jurisdiction on the court to try said
issue.^[11]

Noteworthy, too is
petitioners’ vacillation on this particular score.  In their reply to respondents’ comment,
petitioners categorically stated that respondents’ point regarding the lack of
objection to the evidence is well taken, hence they do not insist on this
ground to review respondent court’s decision.^[12] However, in their amended reply, they
reverted to their original position that it was a mistake for the trial court
to have considered the defense of lack of payment of premium.  At any rate, We
consider that matter as duly disposed of by the preceding discussion.

Digressing from the
procedural aspects of this case, We now consider
petitioners’ curative assertion that private respondent had agreed to grant the
then prospective insured a credit extension for the premium due.  It should be noted at the outset that this
controversy arose under the aegis of the old insurance law, Act No. 2427, as
amended.  The accident occurred on November
27, 1973 while the
complaint by reason thereof was
filed on July 20, 1974, both before effectivity
on December 18, 1974 of Presidential Decree No. 612, the subsequent
insurance law which repealed its predecessor.

The former insurance law,
which applies to the case under consideration, provided that:

“An insurer is entitled to the payment of premium as soon as
the thing insured is exposed to the peril insured against, unless there is
clear agreement to grant the insured credit extension of the premium due.  No policy issued by an insurance company is
valid and binding unless and until the premium thereof has been paid.”^[13]

Consequently, the
insurance policy in question would be valid and binding notwithstanding the
non-payment of the premium if there was a clear agreement to grant to the
insured a credit extension.  Such
agreement may be express or implied.

Petitioners quote and
rely on the following as authority for their cause:

“A condition requiring pre-payment of the premium is waived by
a parol agreement to that effect, acceptance of the
premium after delivery of the policy, the unconditional delivery of the policy,
the giving of credit for the premiums, x x x or any other circumstances showing that pre-payment was
not intended to be insisted upon, as where there are any words or acts from
which a reasonable inference may be drawn that the insurer does not stand upon
its rights to demand pre-payment. (Couch on Insurance, 2d,
Vol. 1, pp. 402-403.)”^[14]

As earlier stated, the accident for which respondent insurance company
is sought to be held liable occurred on November 27, 1973 while the initial premium was paid only
on December 11, 1973.

Petitioners maintain that in spite of this late payment, the
policy is nevertheless binding because there was an implied agreement to grant
a credit extension so as to make
the policy effective.  To them, the
subsequent acceptance of the premium and delivery of the policy estops the respondent company from asserting
that the policy is ineffective.^[15]

We see no cogent proof of
any such implied agreement.  The
purported nexus between the delivery of the policy and the grant of credit
extension is too tenuous to support the conclusion for which petitioners
contend.  The delivery of the policy was
made on March 28, 1974 and only because the premium had been paid, in fact, more than three months before such delivery.^[16] As found by the court below, said payment
was accepted by the insurer without any knowledge that the risk insured against
had already occurred since such fact was concealed by the insured and was not
revealed to the insurer.^[17] Thus, the delivery of the policy was far
from being unconditional.  Had there
really been a credit extension, the insured would not have had any
apprehension or hesitation to inform the respondent insurance company at the
time of or before the payment of the premium that an accident for which the
insurer may be held liable had
already happened.  In fact, there is
authority to hold that under such circumstances notice alone is necessary and
the insured need not pay the premium because whatever premium may have been due
may already be deducted upon the satisfaction of the loss under the policy.^[18]

Aside from the supposed unconditional delivery of the policy,
which has been demonstrated to be baseless,
petitioners failed to point out “any other circumstances
showing that prepayment of premium was not intended to be insisted
upon”.  They have thus failed to
discharge the burden of proving their allegation of the existence of the purported credit extension
agreement.  Indubitably, their insurance
claim must fail.

It may not be amiss to parenthetically mention in this regard
that, in the present law, Section 77 of the Insurance Code of 1978^[19]
has deleted the clause “unless there is clear agreement to grant the
insured credit extension of the premium due” which was then involved in
this controversy.

There is no need to elaborate on the finding of the lower court
that there was concealment by therein defendants of a material fact, although
legal effects of pertinence to this case could be drawn therefrom.  The fact withheld could not in any event have
influenced the respondent company in entering into the supposed contract or in
estimating the character of the risk or in fixing the rate premium, for the
simple reason that no such contract existed between the defendants and the company at the time of the accident.  Accordingly, there was nothing to rescind at
that point in time.  What should be
apparent from such actuations of therein defendants, however, is the presence
of bad faith on their part, a reprehensible disregard of the principle that
insurance contracts are uberrimae fidae and demand the most abundant good
faith.^[20]

WHEREFORE, finding no reversible error, the
judgment appealed from is hereby AFFIRMED.

SO ORDERED.

Melencio-Herrera, (Chairman), Paras, Padilla, and Sarmiento, JJ., concur.

^[1]
Annex A, Petitioner; Rollo, 16-17.

^[2]
Rollo, 50-51.

^[3]
Ibid., 20-21.

^[4]
Annex D, Petition; Rollo,
22.

^[5]
Rollo, 62-63.

^[6]
Ibid., 66-67.

^[7]
Ibid., 9.

^[8]
Ibid., 131.

^[9]
Annex E, Petition; Rollo,
23.

^[10]
Ibid., 147.

^[11]
Sec. 5, Rule 10, Rules of Court.

^[12]
ibid., 113.

^[13]
Sec. 72, Act No. 2427.

^[14]
Rollo, 11-12.

^[15]
Ibid., 12.

^[16]
Ibid., 150.

^[17]
Ibid., 65.

^[18]
Capital Insurance & Surety Co., Inc. vs. Plastic
Era Co., Inc., 65 SCRA 134 (1975).

^[19]
Presidential Decree
No. 1460, superseding Presidential Decree No. 612.

^[20]
Fieldmen’s
Insurance Co., Inc. vs. Vda. de Songco, et al., 25 SCRA 70
(1968).