THE INSULAR LIFE ASSURANCE, COMPANY, LTD., PETITIONER, VS. COURT OF APPEALS AND CESAR M. RAMOS, RESPONDENT.

Insular Life Assurance versus Ramos

The Case

This is a petition for review brought by the Insular Life Assurance Company, Ltd. against Cesar M. Ramos, an insured who sought to surrender his life insurance policy for its cash surrender value. The insurer refused, insisting that the consent of the irrevocable beneficiaries named in the policy was required. The case matters because it frames a single, clean question of insurance law: whether an insured may exercise a surrender option written into his own policy without the consent of irrevocable beneficiaries, and what happens to that question when the beneficiaries themselves later give their conformity.

Procedural History

Cesar M. Ramos took the dispute to the City Court, and the case reached the Court of First Instance, which ordered the insurer to pay him the cash surrender value of 831 pesos and 72 centavos, with legal interest from 10 October 1968. The insurer appealed, and the Court of Appeals affirmed the judgment of the lower court, sustaining the right of the insured to avail of the option granted to him under the policy to surrender it for its net cash value. The insurer then filed the present petition for review in the Supreme Court, raising the same issue litigated below. Because the beneficiaries had a clear interest in the issues being litigated, the Supreme Court required their appearance and asked them to state whether they were agreeable to the surrender of the policy in exchange for its cash value. The beneficiaries filed a Manifestation signed by all of them, stating that they were themselves unable to pay the premiums and that they were all agreeable to the surrender of the policy in exchange for its cash value rather than allow the policy to lapse.

Facts

Cesar M. Ramos took out a 5,000 peso insurance on his life under the endowment plan from the Insular Life Assurance Company, Ltd., and was issued a policy on 1 November 1958. The policy designated as irrevocable beneficiaries his wife, Angelina V. Ramos, if living, and otherwise their minor children, Erlinda, Cesar, Jr., Randolfo, Ranilito, and Elizabeth, all surnamed Ramos.

On 10 October 1968, and presumably during the lifetime of his wife, the insured offered to surrender the policy to the insurer, as expressly provided for in the policy, for its cash surrender value, which then amounted to 831 pesos and 72 centavos. The insurer required, for its acceptance of the tender, the consent of all the designated irrevocable beneficiaries, and the necessary court authority for the guardian of the minor contingent beneficiaries to give consent to the surrender.

The insured objected to this requirement and failed to submit the needed consent, so the insurer refused to allow the surrender. The insured went to court, and the case wound its way up to the Supreme Court, where the beneficiaries themselves confirmed that they were agreeable to the surrender rather than allow the policy to lapse.

Issues

• Whether or not an insured may surrender his life insurance policy for its cash surrender value without obtaining the consent of the irrevocable beneficiaries designated in the policy.
• Whether or not the conformity of the beneficiaries to the surrender renders the insurer's appeal moot and academic.

Applicable Provisions

The decision does not quote any statutory provision. It rests on the surrender option expressly written into the policy itself, which the Court described as the option granted to the insured under the policy to surrender it for its net cash value. That contractual option is the provision the Court applies, and it bears on the case because it is the source of the insured's right to demand the cash value.

Ruling

On the first issue, the Court held that the petition lacked merit, citing the doctrine of Stahel versus Prudential Insurance Company of America. The insured was entitled to avail of the surrender option granted to him under the policy, and the insurer could not insist on a consent the policy did not make a condition of that option.

On the second issue, the Court held that the conformity of the beneficiaries had cured all the objections of the insurer, thereby rendering the appeal moot and academic. The beneficiaries had manifested that they were themselves unable to pay the premiums and that they were all agreeable to the surrender of the policy in exchange for its cash value rather than allow the policy to lapse. With their consent on record, nothing remained to be litigated.

Doctrine

An insured may surrender his life insurance policy for its cash surrender value in accordance with the surrender option expressly provided in the policy, without the consent of the irrevocable beneficiaries designated therein. The beneficiaries' consent, when later given, cures any objection the insurer may raise and renders the controversy moot and academic. For the Bar candidate, the rule is simple: the surrender option is a contractual right of the insured, and the insurer cannot impose a consent requirement beyond what the policy provides.

Disposition

The Supreme Court dismissed the insurer's appeal as moot, without costs, leaving the insured entitled to the cash surrender value as affirmed by the Court of Appeals.

Remember This

Memorize this line: an insured may surrender his policy for its cash surrender value under the policy's own option without the consent of irrevocable beneficiaries, and their later conformity moots the insurer's appeal. Examiners use this case to test the contractual nature of the surrender option and the doctrine of mootness cured by supervening consent.