NORA CANSING SERRANO, PETITIONER, VS. COURT OF APPEALS AND SOCIAL SECURITY COMMISSION, RESPONDENTS.

This petition for certiorari seeks to review the decision of
the then Court of Appeals (now Intermediate Appellate Court under BP
129) dated August 31, 1972, affirming the validity of the resolution of
the Social Security Commission denying favorable consideration of the
claim for benefits of the petitioner under the Group Redemption
Insurance plan of the Social Security System (SYSTEM). The dispositive
portion of the re­spondent Court’s decision reads as follows:

“WHEREFORE, the Court hereby upholds the validity of the appealed
resolution No. 1365, dated December 24, 1968, of appellee Social
Security Commis­sion; without pronouncement as to costs” (p. 31, Rec.).

The undisputed facts are as follows:

On or about January 1, 1965, upon application of the SYSTEM, Group
Mortgage Redemption Policy No. GMR-1 was issued by Private Life
Insurance Com­panies operating in the Philippines for a group life
insurance policy on the lives of housing loan mortgagors of the SYSTEM.
Under this Group Mortgage Redemption scheme, a grantee of a housing
loan of the SYSTEM is required to mortgage the house con­structed out of
the loan and the lot on which it stands. The SYSTEM takes a life
insurance on the eligible mortgagor to the extent of the mortgage
indebtedness such that it the mortgagor dies, the proceeds of his life
insurance under the Group Redemption Policy will be used to pay his
indebted­ness to the SYSTEM and the deceased’s heirs will thereby be
relieved of the burden of paying for the amortization of the deceased’s
still unpaid loan to the SYSTEM (p. 25, rec.).

Petitioner herein is the widow of the late Bernardo G. Serrano, who,
at the time of his death, was an airline pilot of Air Manila, Inc. and
as such was a member of the Social Security System.

On November 10, 1967, the SYSTEM approved the real estate mortgage
loan of the late Bernardo G. Serrano for P37,400.00 for the construction
of the applicant’s house (pp. 25-26, rec.).

On December 26, 1967, a partial release in the amount of P35,400.00
was effected and devoted to the construction of the house (p. 2, rec.).
As a consequence, a mortgage contract was executed in favor of the
SYSTEM by the late Captain Serrano with his wife as co-mortgagor.

On March 8, 1968, Captain Serrano died in a plane crash and because
of his death, the SYSTEM closed his housing loan account to the released
amount of P35,400.00 (p. 26, rec.).

On December 2, 1968, the petitioner sent a letter addressed to the
Chairman of the Social Security Commission requesting that the benefits
of the Group Mortgage Redemption Insurance be extended to her.

The letter of the petitioner was referred to the Administrator of
the SYSTEM, who recommended its disapproval on the ground that the late
Captain Serrano was not yet covered by the Group Mortgage Redemption
Insurance policy at the time of his death on March 8, 1968. In its
resolution No. 1365 dated December 24, 1968, the Social Security
Commission sustained the said stand of the SYSTEM and thereby formally
denied the request of the petitioner (p. 26, rec.).

On appeal to the then Court of Appeals, the respondent Court affirmed the decision of the Social Security Commission.

Hence, this petition.

The only issue to be resolved is the correct­ness of the interpretation
given by the respondent Commission which was upheld by the respondent
Court as to the applicability of the Mortgage Redemption Insurance plan
particularly on when coverage on the life of the mortgagor commences.

Article II (Insurance Coverage) of the Group Mortgage Redemption Policy No. GMR-1 provides:

“Section 1. Eligibility — Every mortgagor who is not
over age 65 nearest birthday at the time the Mortgage Loan is granted
(or, in the case of a Mortgagor applying for in­surance coverage, on a
Mortgage Loan granted before the Date of Issue, at the time he makes
such application) and who would not be over 75 nearest birthday on the
date on which the original term of the Mortgage Loan expires shall be
eligible for insurance coverage under this Policy, provided that if the
total indebtedness to the Creditor under the new Mortgage Loan and the
outstanding balance of any prior Mortgage Loan or Loans insured
hereunder, exceeds P70,000.00, he will be eligible for insurance
coverage up to this maximum limit only.

“Co-makers or co-signers of mortgage contract are not eligible for coverage under this Policy.

“Section 2. Mode of Acceptance — Any Mortgagor who is
eligible for coverage on or after the Date of Issue shall be
automatically insured, subject to the amount of insurance limit in
Section 1 hereof, without proof of insurability provided that he is not
more than age 60 nearest birthday at the time the Mortgage Loan is
granted. Such a mortgagor who is over age 60 nearest birthday at the
time the Mortgage Loan is granted may be accepted for insurance only
subject to the submission of evidence of insurability satisfactory to
the Subscribing Companies.

“Any eligible Mortgagor who was already a Mortgagor before the
Date of Issue shall be automatically insured, subject to the amount of
insurance limit in Section 1 hereof, without proof of insurability
provided that he is not more than age 60 nearest birthday on the Date of
Issue and that he makes written application to the Creditor for
coverage within ninety (90) days from the Date of Issue. If such a
Mortgagor applies for coverage after ninety (90) days from the Date of
Issue, he may be accepted for insurance upon written application
therefor, subject to the submission of evidence of insurability to the
Subscribing Companies.

“Section 3. Effective Date of Insurance — The insurance
on the life of each eligible Mortgagor Loan or partial release of
Mortgage Loan accepted for coverage who becomes a Mortgagor on or after
the Date of Issue shall take effect from the beginning of the amortization period of such Mortgage Loan or partial release of Mortgage Loan.

“The beginning of the amortization period as used herein shall
mean the first day of the month preceding the month in which the first
monthly amorti­zation payment falls due.

“It is hereby understood that before any release on any approved
Mortgage Loan is made by the Cre­ditor, the requisites binding the
Mortgagor and the Creditor as regards to said Mortgage Loan shall have
been completed.

xx xx xx

(pp. 59-60, rec.; Italics supplied).

A careful analysis of the provisions leads to the conclusion that the
respondent Court of Appeals erred in construing the effectivity date of
insurance coverage from the beginning of the amortization period of the
loan.

WE REVERSE.

There can be no doubt as to the eligibility of the late Captain Serrano
for coverage under Section 1 of Article II of the Group Mortgage
Redemption Insurance Policy as he was a mortgagor of the Social Security
System not over the age of 65 nearest his birthday at the time when the
mortgage loan was granted to him (p. 26, rec.). This fact was admitted
not only by the Social Security Commission but also accepted by the
Court of Appeals.

The problem manifests itself in Sections 2 and 3 of the same article of
the Group Mortgage Redemption Insurance Policy. Section 2 provides that
“any mortgagor who is eligible for coverage on or after the Date of Issue shall be automatically insured,
x x” (Italics supplied); while Section 3 provides that the insurance
“shall take effect from the beginning of the amortization period of such
Mortgage Loan or partial release of Mortgage Loan” (Italics supplied).

Section 2 of Article II of the Group Mortgage Redemption Insurance
Policy provides that insurance coverage shall be “automatic” and limited
only by the amount of insurance and age requirement. While the same
section has for its title the mode of accept­ance, what is controlling
is the meaning of the provision itself. The said section can only
convey the idea that the mortgagor who is eligible for coverage on or
after the date of issue shall be automatically insured. The only
condition is that the age requirement should be satisfied, which had
been complied with by the deceased mortgagor in the instant case.

Under said Section 2, mortgage redemption insurance is not just
automatic; it is compulsory for all qualified borrowers. This is the
same automatic redemption insurance applied to all qualified borrowers
by the GSIS (Government Service Insurance System) and the DBP
(Development Bank of the Philippines). Indeed, the Mortgage Redemption
Insurance Policy of the GSIS provides:

“Sec. 2. xx xx This policy is granted subject to the terms and
conditions set forth at the back hereof and in consideration of the
application therefor and shall take effect on the date of the first date of the aforementioned loan” (p. 126; CA rec.; Italics supplied).

WE take judicial notice of the Mortgage Contract being issued by the
Social Security System in connection with applications for housing
loans, specifically Section 16 thereof:

“Section 16 – (a) The loan shall be secured against the death of the borrower through the Mortgage Redemption Insurance Plan; (b) Coverage shall take effect on the date of the first release voucher of the loan and shall continue until the real estate mortgage loan is fully paid; x x x” (Italics supplied).

However, Section 3 of Article II presents an ambiguity. The effective
date of coverage can be interpreted to mean that the insurance contract
takes effect “from the beginning of the amortization period of such
Mortgage Loan” or “partial release of Mortgage Loan.”

Applying Article 1374 of the new Civil Code, the mortgagor in the
instant case was already covered by the insurance upon the partial
release of the loan.

Article 1374, NCC, reads thus:

“The various stipulations of a contract shall be interpreted
together, attributing to the doubtful ones that sense which may result
from all of them taken jointly.”

The ambiguity in Section 3 of Article II should be resolved in favor of
the petitioner. “The interpretation of obscure words or stipulations in a
con­tract shall not favor the party who caused the obscurity” (Article
1377, Civil Code). WE have held that provisions, conditions or
exceptions tending to work d forfeiture of insurance policies should be
construed most strongly against those for whose benefit they are
inserted, and most favorably toward those against whom they are intended
to operate (Trinidad vs. Orient Protective Ass. 67 Phil. 181).

While the issuance of the Group Mortgage Redemption Insurance
is a contract between the Social Security System and the Private Life
Insurance Companies, the fact is that the SYSTEM entered into such a
contract to afford protection not only to itself should the mortgagor
die before fully paying the loan but also to afford protection to the
mortgagor. WE take note of the following:

“I. Insurance Coverage.

“1. Fire insurance – The SSS – financed house shall be covered
by fire insurance equal to its appraised value or the amount of the
loan, whichever is lesser.

“2. Mortgage Redemption Insurance – Coverage shall be compulsory for any mortgagor who is not more than 60 years old.

“The insured indebtedness on the mortgage as provided in the
policy shall be deemed paid upon the death of a mortgagor covered under
the MRI” (Emplo­yees’ Benefits & Social Welfare, 1983 Rev. Ed., CBSI, pp. 50-51; Italics supplied).

It is imperative to dissect the rationale of the insurance scheme
envisioned by the Social Security System. The Mortgage Redemption
Insurance device is not only for the protection of the SYSTEM but also
for the benefit of the mortgagor. On the part of the SYSTEM, it has to
enter into such form of contract so that in the event of the unexpected
demise of the mortgagor during the subsistence of the mortgage contract,
the proceeds from such insurance will be applied to the payment of the
mortgage debt, thereby relieving the heirs of the mortgagor from paying
the obligation. The SYSTEM insures the payment to itself of the loan
with the insurance proceeds. It also negates any future problem that
can crop up should the heirs be not in a position to pay the mortgage
loan. In short, the process of amortization is hastened and possible
litigation in the future is avoided. In a similar vein, ample
pro­tection is given to the mortgagor under such a concept so that in
the event of his death, the mortgage obliga­tion will be extinguished by
the application of the insurance proceeds to the mortgage indebtedness.

The interpretation of the Social Security Commission goes against the
very rationale of the insurance scheme. It cannot unjustly enrich
itself at the expense of another (Nemo cum alterius detrimento protest).
“Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith” (Article 19, Civil Code). Simply put,
the SYSTEM cannot be allowed to have the advantage of collecting the
insurance benefits from the private life insurance companies and at the
same time avoid its responsibility of giving the benefits of the
Mortgage Redemption Insurance plan to the mortgagor. The very reason
for the existence of the Social Security System is to extend social
benefits. For SSS to be allowed to deny benefits to its members, is
certainly not in keeping with its policy “x x x to establish, develop,
promote and perfect a sound and viable tax-exempt social security
service suitable to the needs of the people throughout the Philippines,
which shall provide to covered employees and their families protection
against the hazards of disability, sickness, old age, and death with a
view to promote their well-­being in the spirit of social justice” (The
Social Security Law, R.A. No. 1161, as amended).

To sustain the position of the SSS is to allow it to collect twice the
same amount – first from the insurance companies which paid to it the
amount of the MRI and then from the heirs of the deceased mortgagor.
This result is unconscionable as it is iniquitous.

It is very clear that the spirit of social justice permeates the
insurance scheme under the Group Mortgaged Redemption Insurance. It is a
wel­come innovation in these times when the concept of social justice
is not just an empty slogan nor a mere shibboleth. Social justice is
explicitly institutionalized and guaranteed under the Constitution,
(Article II, Section 6, 1973 Constitution). The con­struction that
would enhance the State’s commitment on social justice mandates Us to
hold for the petitioner.

Usually, among the items to be deducted by the SYSTEM from the first
release of the loan is the premium corresponding to the mortgage
redemption insurance (MRI). However, if the premium corresponding to
the amount to be deducted from the first release of the loan was not
paid by the borrower, the deceased mortgagor, the said unpaid premium
should be refunded by the heirs of the borrower.

WHEREFORE, THE DECISION OF THE RESPONDENT COURT OF APPEALS AFFIRMING
RESOLUTION NO. 1365 OF RESPONDENT COMMISSION IS HEREBY SET ASIDE. THE
SOCIAL SECURITY SYSTEM IS HEREBY DIRECTED TO RELEASE THE PETITIONER FROM
PAYING THE MORTGAGE LOAN. THE PETITIONER IS HEREBY DIRECTED TO REFUND
TO THE SSS THE PREMIUM CORRESPONDING TO THE RELEASED AMOUNT, IF THE SAME
HAD NOT BEEN DEDUCTED THEREFROM. NO COSTS.

SO ORDERED.

Concepcion, Jr., Guerrero, Abad Santos, Escolin, and Cuevas, JJ., concur.

Aquino, J., in the result.