DELFIN NARIO, AND ALEJANDRA SANTOS-NARIO, PLAINTIFFS-APPELLANTS, VS. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, DEFENDANT-APPELLEE.

Direct appeal, on pure question of law, from a decision of the
Court of First Instance of Manila, in its Civil Case No. 54942, dis­missing
plaintiffs’ complaint as well as from a later order of the same court, denying
a motion to set aside and/or reconsider said decision of dismissal.

The facts of this case may be stated briefly as follows:

Mrs. Alejandra Santos-Nario was, upon application, issued, on June 12, 1959, by the Philippine
American Life Insurance Co., a life insurance policy (No. 503617) under a 20-year
endowment plan, with a face value of P5,000.00.  She designated thereon her husband, Delfin Nario, and their unemancipated minor son, Ernesto Nario,
as her irrevocable beneficiaries.

About the middle of June, 1963, Mrs. Nario
applied for a loan on the above stated policy with the Insurance Company, which
loan she, as policy-holder, has been entitled to avail of under one of the
provisions of said policy after the same has been in force for three (3) years,
for the purpose of using the proceeds thereof for the school expenses of her
minor son, Ernesto Nario.  Said application bore the written signature and consent of Delfin
Nario in two capac­ities:  first, as one of the irrevocable
beneficiaries of the policy; and the other, as the father-guardian of said
minor son and irrevoc­able beneficiary, Ernesto Nario,
and as the legal administrator of the minor’s properties, pursuant to Article
320 of the Civil Code of the Philippines.

The Insurance Company denied said application, manifesting to the
policyholder that the written consent for the minor son must not only be given
by his father as legal guardian but it must also be authorized by the court in
a competent guardianship proceeding.

After the denial of said policy loan application, Mrs. Nario signified her decision to surrender her policy to the
Insurance Com­pany, which she was also entitled to avail of under one of the
pro­visions of the same policy, and demanded its cash value which then amounted
to P520.00.

The Insurance Company also denied the surrender of the policy, on
the same ground as that given in disapproving the policy loan application;
hence, on September 10, 1963, Mrs. Alejandra Santos-Nario and her husband, Delfin Nario, brought suit against the Philippine American Life
Insurance Co. in the above mentioned court of first in­stance, seeking to
compel the latter (defendant) to grant their policy loan application and/or to
accept the surrender of said policy in ex­change for its cash value.

Defendant Insurance Company answered the complaint, virtually
admitting its material allegations, but it set up the affirmative defense that
inasmuch as the policy loan application and the surrender of the policy
involved acts of disposition and alienation of the property rights of the
minor, said acts are not within the powers of the legal adminis­trator, under
article 320 in relation to article 326 of the Civil Code; hence, mere written
consent given by the father-guardian, for and in behalf of the minor son,
without any court authority therefor, was not a
sufficient compliance of the law, and it (defendant Insurance Company) was,
therefore, justified in refusing to grant and in dis­approving the proposed
transactions in question.

There having been no substantial disagreement or dispute as to
any material fact, the parties, upon joint motion which the lower court
granted, dispensed with the presentation of evidence and submitted their
respective memoranda, after which the case was considered submitted for
decision.

The lower court found and opined that since the parties expressly
stipulated in the endorsement attached to the policy and which formed part
thereof that –

“It is hereby understood and agreed that, notwithstanding the
provisions of this Policy to the contrary, inasmuch as the designation of the
beneficiaries have been made by the Insured without reserving the right to
change said beneficiaries, the Insured may not de­signate a new beneficiary or
assign, release or sur­render this Policy to the Company and exercise any and
all other rights and privileges hereunder or agree with the Company to any
change in or amendment to this Policy, without the consent of the beneficiaries
originally designated.”;

that under the above quoted provision,
the minor son, as one of the designated irrevocable beneficiaries,
“acquired a vested right to all benefits accruing to the policy, including
that of obtaining a policy loan to the extent stated in the schedule of values
attached to the policy (Gercio vs. Sun Life Assurance
of Canada, 48 Phil. 53, 58)”; that the proposed transactions in question
(policy loan and surren­der of policy) involved acts of disposition or
alienation of the mi­nor’s properties for which the consent given by the
father-guardian, for and in behalf of the minor son, must be with the requisite
court authority (U.S.V.A. vs. Bustos, 92 Phil. 327 Visaya vs. Suguitan, G. R. No. L-8300, November 18, 1955, 99 Phil.
1004 [unrep.]); and in the case at bar, such consent
was given by the father-guardian without any judicial authority; said court,
agreeing with defendant’s contention, sustained defendant’s affirmative
defense, and rendered, on January 28, 1964, its decision dismissing plaintiffs’
complaint.

Unable to secure reconsideration of the trial Court’s ruling,
petitioner appealed directly to this Court, contending that the mi­nor’s
interest amounted to only one-half of the policy’s cash sur­render value of
P520.00; that under Rule 96, Section 2 of the Re­vised Rules of Court, payment
of the ward’s debts is within the powers
of the guardian, where no realty is involved; hence, there is no reason why the
father may not validly agree to the proposed transaction on behalf of the
minor, without need of court author­ity.

The appeal is unmeritorious. 
We agree with the lower court that the vested interest or right of the
beneficiaries in the policy should be measured on its full face value and not
on its cash surrender value, for in case of death of the insured, said
beneficiaries are paid on the basis of its face value and in case the insured
should discontinue paying premiums, the beneficiaries may continue paying it
and are entitled to automatic extended term or paid-up insurance options, etc.,
and that said vested right under the policy cannot be divisible at any given
time.  We likewise agree with the conclusion
of the lower court that the proposed transactions in question (policy loan and
surrender of policy) constitute acts of disposition or alienation of property
rights and not merely that of management or administra­tion because they
involve the incurring or termination of contractual obligations.

As above noted, the full face value of the policy is P5,000.00
and the minor’s vested interest therein, as one of the two (2) irrev­ocable
beneficiaries, consists of one-half (1/2) of said amount or P2,500.00.

Article 320 of the Civil Code of the Philippines
provides –

“The father, or in his absence the mother, is the legal
administrator of the property pertaining to the child under parental
authority.  If the property is worth more
than two thousand pesos, the father or mother shall give a bond subject to the
approval of the Court of First Instance.”,

and article 326
of the same Code reads –

“When the property of the child is worth more than two
thousand pesos, the father or mother shall be cons­idered as guardian of the
child’s property, subject to the duties and obligations of guardians under the
Rules of Court.”

The above quoted provisions of the Civil Code have already been
implemented and clarified in our Revised Rules of Court which provides –

“Sec. 7.  Parents as guardians.- When the property of the child under parental authority
is worth two thousand pesos or less, the father or the mother, with­out the
necessity of court appointment, shall be his legal guardian.  When the property of the child is worth more than
two thousand pesos, the father or the mother shall be considered guardian of
the child’s property, with the duties and obligations of guardians under these
rules, and shall file the petition required by section 2 hereof.  For good reasons, the court may, however, ap­point
another suitable person.” (Rule 93).

It appearing that the minor beneficiary’s vested interest or
right on the policy exceeds two thousand pesos (P2,000.00); that plaintiffs did
not file any guardianship bond to be approved by the court; and as later
implemented in the abovequoted Section 7, Rule 93 of
the Revised Rules of Court, plaintiffs should have, but had not, filed a formal
application or petition for guardianship, plain­tiffs-parents cannot possibly
exercise the powers vested on them, as legal administrators of their child’s
property, under articles 320 and 326 of the Civil Code.  As there was no such petition and bond, the
consent given by the father-guardian, for and in behalf of the minor son,
without prior court authorization, to the policy loan application and the
surrender of said policy, was insufficient and ineffective, and defendant-appellee was justified in disapproving the proposed
transactions in question.

The American cases cited by appellants are not applicable to the
case at bar for lack of analogy.  In
those cases, there were pend­ing guardianship proceedings and the guardians
therein were covered by bonds to protect the wards’ interests, which
circumstances are wanting in this case.

The result would be the same even if we regarded the interest of
the ward to be worth less than P2,000.00.  While the father or mother would in such
event be exempt from the duty of filing a bond, and securing judicial
appointment, still the parent’s authority over the estate of the ward as a
legal-guardian would not extend to acts of
encumbrance or disposition, as distinguished from acts of manage­ment or
administration.  The distinction between
one and the other kind of power is too basic in our law to be ignored.  Thus, under Art­icle 1877 of the Civil Code
of the Philippines, an agency in general terms does not include power to
encumber or dispose of the property of the principal; and the Code explicitly
requires a special power or authority for the agent “to loan or borrow
money, unless the latter act be urgent or indispensable for the preservation of
the thing under ad­ministration” (Art. 1878, no. 7).  Similarly, special powers are requir­ed to effect novations, to waive
any obligation gratuitously or obligate the principal as a guarantor or surety
(Do., nos. 2, 4 and 11).  By analogy, since the law merely constitutes the parent as legal adminis­trator
of the child’s property (which is a general power), the parent requires special
authority for the acts above specified, and this author­ity can be given only
by a court.  This restricted
interpretation of the parent’s authority becomes all the more necessary where
as in the case before us, there is no bond to
guarantee the ward against eventual losses.

Appellants seek to bolster their petition by invoking the
parental power (patria potestas)
under the Civil Code of 1889, which they claim to have been revived by the
Civil Code of the Philippines
(Rep. Act 386).  The appeal profits them
nothing.  For the new Civil Code has not
effected a restitutio in integrum of the Spanish patria potestad; the revival has been only in part.  And, significantly, the Civil Code now in force did not reenact Article 164
of the Civil Code of 1889, that prohibited the alienation by the parents of the
real property owned by the child without court authority and led the
commentators and interpreters of said Code to infer that the parents could by
themselves alienate the child’s movable property.  The omission of any equiv­alent precept in
the Civil Code now in force proves the absence of any authority in the parents
to carry out now acts of disposition or alienation of the child’s goods without
court approval, as contended by the appellee and the
court below.

WHEREFORE, the decision appealed from is affirmed.  Costs against appellants Nario.

SO ORDERED.

Concepcion, C.J., Dizon,
Makalintal, Bengzon, J.P., Zaldivar, Sanchez, and
Ruiz Castro, JJ., concur.