G.R. No. L-57834. November 12, 1981
TOMAS R. NODA AND JOSELINA S. NODA, PLAINTIFFS-APPELLEES, VS. SOCIAL SECURITY SYSTEM, DEFENDANT-APPELLANT.
ABAD SANTOS, J.:
This is an appeal by the Social Security System (SSS) from the decision
dated February 22, 1977, in
Civil Case No. 23416 of the Court of First Instance of Rizal at Pasig
(Branch XIX), the dispositive portion of which provides:
“WHEREFORE, the real estate mortgage in favor of the defendant
Social Security System on the property of the plaintiffs Tomas Noda and
Joselina Noda described in TCT No. 192096-Rizal is hereby cancelled. The defendant Provincial Sheriff of Rizal is
ordered to cancel the encumbrance on the plaintiffs TCT No.
192096-Rizal.”
Tomas R. Noda, as an employee of Squires Bingham & Co. ?????ac., was an enrolled member of the
Social Security System.
On October 17, 1967,
the spouses Tomas R. Noda and Joselina S. Noda were granted a housing loan by
the Social Security System in the amount of P47,900.00, payable in fifteen
years, with interest at the rate of 6% per annum for the first P30,000.00 and
9% per annum for the amount in excess of P30,000.00.
The loan was secured by a mortgage on the spouses’ 792 square
meter lot in Marikina, Rizal (TCT
No. 192096-Rizal). It was further
secured by a mortgage redemption insurance policy, procured by the SSS on the
life of its principal debtor, Tomas R. Noda.
The provisions of the insurance policy pertinent to this case
are:
“ARTICLE III – INSURANCE BENEFITS –
Sec. 2. When and How
Insurance Payable.
‘The death benefit with respect to an insured Mortgagor is payable
to the Creditor upon receipt and approval of such proofs of death of the
Mortgagor as may be required by the Subscribing Companies. The Creditor will apply to the account of the
Mortgagor the full proceeds if such proceeds do not exceed the actual indebtedness
of the Mortgagor at the time of his death.
If the proceeds exceed such indebtedness, a sufficient part of the proceeds
will first be applied to cancel such indebtedness, and the balance will be paid
by the Creditor to the beneficiary of the Mortgagor as determined by the
Creditor.
‘The Subscribing Companies will have no responsibility with regard
to the payment of policy proceeds to beneficiaries.
‘The Creditor will obtain the required proofs of death whenever a
claim arises. The Subscribing Companies
will normally rely on the
Creditor to process such proofs, but reserve the right to request inspection of
them. The Subscribing Companies will
determine what proofs are required.'”
The loan was released to the spouses in three installments and
the SSS Investment Accounts Department set the monthly amortization on the loan
at P483.36, inclusive of the insurance premiums.
As to when the payment on the monthly amortization began, the
appellant and the appellees differ.
According to the appellant, payment started in September, 1968. The appellees, on the other hand, claim that
when the last installment on the loan was released on July 18, 1968, the amortization and insurance
premiums corresponding to the months of April to June 1968, were deducted from
the amount released.
At any rate, before the last installment was released, misfortune
visited the Nodas. On May 11, 1968, Tomas R. Noda suffered
a serious cerebral thrombosis. He was
unconscious for three months in the hospital.
He revived but became a paralytic attached to a wheelchair.
On January 1, 1970,
Noda as an SSS member was declared totally and permanently disabled by the
medical department of the SSS. He
received monthly disability benefits from the SSS.
Meanwhile, Mrs. Joselina Noda by whom he had twelve children (two
were married and the rest were with the family) had to support the family
single handedly, with her meager salary as an employee of the National
Mental Hospital.
It should be mentioned that, as found by the court a quo,
Mrs. Joselina Noda continued paying amortizations on the loan after Tomas Noda,
her husband, was declared disabled. As
of November 29, 1971, Mrs.
Noda had paid the SSS, P7,463.27, equivalent to 17 monthly amortizations for
July 1968 to November, 1969.
The court a quo also found that as early as 1967,
Mrs. Joselina Noda inquired about the coverage of the mortgage redemption
insurance policy (MRI), from Atty. Ernesto Duran, head of the SSS Real Estate
Department. The latter replied that it
covers death as well as permanent disability.
On November 17, 1969, Teofila Sapalicio, (Mrs. Noda’s sister who
at the time lived with the Nodas) sent a query to the “Action Line”
column of the daily newspaper “The Manila Times,” on the coverage of
the mortgage redemption insurance policy for SSS members. Atty. Duran to whom the question was
directed, answered that:
“x x x the SSS also has a Mortgage Redemption Insurance
Program to cover the repayment of the balance of the loan in case the borrower
dies or becomes permanently disabled.
This MRI Program, however, became compulsory only effective January,
1965 so that all loans filed on or after January, 1965 are compulsorily covered
by our MRI Program. Prior to January
1965, the MRI Program is on an optional basis.
In other words, it is left to the choice of the borrower whether he will
secure an MRI or not.”
Parenthetically, it should be mentioned that the appellant only
admits having answered Sapalicio’s query and maintains that the Nodas cannot
invoke its statement to Sapalicio.
On July 1, 1974, the Investment Accounts Department received a
letter requesting, (in behalf of Mrs. Joselina Noda) that the mortgage
redemption insurance be applied to their loan due to permanent total disability
of her husband. This request was denied
through the Manager of the Investment Accounts Department on the ground that
permanent total disability is not covered by the MRI.
On July 17, 1974, the Investment Accounts Department referred
the Noda’s account to the SSS Legal Department for foreclosure of the real
estate mortgage due to default in the payment of their monthly amortization for
71 months covering April 1968 to June 30, 1974.
After two unanswered telegraphic notices to the Nodas, the SSS
filed on April 7, 1976, an application with the Provincial Sheriff of Rizal for
foreclosure of the mortgage. Thereupon,
the foreclosure sale was set for May 12, 1976.
According to the SSS, the arrears of the spouses as of January 30, 1976
amounted to P47,239.00, exclusive of penalties for 86 months.
The Nodas reacted to the impending foreclosure by filing a
complaint dated May 16, 1976, in the Court of First Instance of Rizal, Pasig
(Branch XIX), against the SSS and the Provincial Sheriff of Rizal. The complaint (docketed therein as Civil Case
No. 23416), sought to enjoin the defendants-appellants from foreclosing the
mortgage and to have the same cancelled for the reason that the application of
the mortgage redemption insurance on the loan balance had extinguished the
mortgage.
In its answer with a counterclaim for moral damages and
attorney’s fees, the SSS invoked the terms of the mortgage redemption insurance
policy. It contended that the only contingency
covered therein is the death of the mortgagor-debtor; and that the policy does
not apply to permanent disability. As to
the pronouncements of the real estate department manager that the policy also
covered permanent disability, it alleged that the same was an honest mistake
and could not bind the SSS.
On February 22, 1977, the Court of First Instance decided the
case in favor of the Noda spouses, on the question of “whether the SSS may
be compelled to discharge the balance of Noda’s mortgage loan obligation on the
basis of Atty. Duran’s representation to Mrs. Noda that her husband’s MRI
coverage embraced death as well as total permanent disability,” or
whether “the SSS is estopped to claim that Noda’s MRI coverage did not
include permanent total disability on account of the erroneous representation
of the head of its Real Estate Department.”
The court ruled that under Article 1431 of the Civil Code,
estoppel in pais lies on the SSS.
Article 1431 reads as follows:
“Through estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon.” It held that the elements of estoppel
are present in this case, thus:
“1) The SSS, through the head of its Real Estate
Department – the department that entered into the mortgage contract with Noda –
represented to Noda as early as 1967 that his MRI coverage included risk of
death and permanent total disability (Exh. 1).
“2) Atty. E. Duran, who made the representation,
was the head of the real estate department of the SSS. A man in his responsible position ought to
have known, or should have
taken due care to know, that it was not so.
It is clear therefore that he
made the representation through culpable negligence, i.e., he was
negligent in failing to ascertain the actual MRI coverage for housing loan
mortgagors of the SSS.
“3) Noda was ignorant of the scope of his MRI
insurance coverage because the SSS did not furnish him with a copy of the MRI
policy.
“4) Noda acted on the representation of the SSS by
paying the required MRI premiums. He
paid the monthly mortgage amortizations on his mortgage until the SSS declared
him to have suffered total permanent disability on January 1, 1970.”
The SSS appealed to the Court of Appeals but that court certified
the case to Us since it involves pure question of law.
Before the parties’ submission of their respective briefs, the
appellees through counsel, filed a notice of the death of Tomas R. Noda and,
subsequently, a motion for substitution of parties-appellees. The certificate of death attached to the
records shows that Tomas R. Noda died on December 6, 1979, in Marikina, Rizal.
The basic question raised in this appeal is estoppel ?
whether the SSS is precluded from claiming that the mortgage redemption
insurance policy covers only death of the mortgagor debtor.
We do not consider that the utterances and representation of
Atty. Duran to Mrs. Noda or to Teofila Sapalicio had placed the SSS in estoppel
to claim that the MRI covers the risk of death alone.
As explained by the appellant SSS, the statement of Atty. Duran
was made on the honest belief that the plan of the SSS to include permanent total disability within the coverage of the MRI
would be approved by the Social Security Commission. As it turned out, the plan did not
materialize because to include permanent disability would have required the
borrowers to pay much higher premiums.
Apparently, what Atty.
Duran disclosed was a mere plan which he mistakenly believed would be approved
by the Social Security Commission.
In Ramiro v. Graño, (54
Phil. 744 [1930]), if the act, conduct or misrepresentation of the party
sought to be estopped is due to ignorance founded on innocent mistake, estoppel
will not arise.
Estoppel being a principle in equity, it is certainly not
equitable to allow the Nodas to profit by such mistake.
In another light, it
cannot be said that Atty. Duran as manager of the Real Estate Department, had
by his utterances, made representation concerning a matter which was not known
or could not have been known to the appellees.
This notwithstanding that as claimed by the appellees they were not
parties to the MRI contract or that they were not furnished a copy thereof.
The MRI policy appears to
be an integral part of the contract of mortgage to which the Nodas were
parties. They knew that they were the
beneficiaries of the policy. And when
the last installment of the loan was released and the monthly amortizations
corresponding to the months of April to June 1968 were discounted, they knew
that the amortizations included the corresponding monthly premiums for the MRI
policy.
It could thus be seen
that at the very start of their transactions with the SSS, the Nodas had notice
of facts and circumstances which through diligence and ascertainment could have
led them to know the exact risk coverage of the MRI policy as explicitly
written therein.
But they failed to do so.
They cannot now be heard to say that they were led to believe that the
MRI policy extended to permanent total disability, when as it turned out what
was told Mrs. Noda was a mere plan.
Neither can it be said that as otherwise contended by the
appellees, the SSS had in effect ratified the statement of Atty. Duran by
failing to rectify the “erroneous opinion” until as late as July 5,
1974. As explained by the appellant the
SSS policy-making body was not given the chance to correct the error
immediately because the matter never reached its attention. The opportunity came when in response to Mrs.
Noda’s request to apply the MRI policy on their loan, Atty. Benjamin B. Alamar,
manager of the Investment Accounts Department, wrote her on July 5, 1974,
categorically stating:
“That MRI is
limited to and applied only in case of death of the principal borrower, and
does not extend to death disability.
Such being the case, the status of the real estate loan account remains
unchanged.”
Atty. Duran’s statement cannot be the basis of estoppel because
the Noda’s did not actually rely on it.
For estoppel to lie, the person who claims estoppel must have relied or
acted on such representation. This is
what Article 1431 of the Civil Code provides:
“Through estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon.” Thus, in KALALO vs. LUZ (No. L-27782,
July 31, 1970, 34 SCRA 337), it was held that an essential element of estoppel
is that the person invoking it has been influenced and has relied on the representation
or conduct of the person to be estopped.
But this is not the case of the appellees. For while Tomas R. Noda was declared disabled
on January 1, 1970, it was not until July 1, 1974, when Mrs. Noda asked that
the MRI be applied to the loan due to the disability of her husband. This delayed action is not compatible with
the claim that the Nodas had relied on the Duran statement.
We cannot sustain the decision of the court a quo. We, however commiserate with the Noda family
for the total disability which was suffered by Tomas and which eventually
caused his death – an event which would have entitled the Nodas to the benefits
of the MRI if their amortization payments had been current. Accordingly, We commend to the SSS a
compassionate attitude. The SSS perhaps
can write-off all claims due after December 6, 1979, when Tomas died and
re-structure past dues in a liberal manner.
WHEREFORE, the decision of the court a quo
is reversed and judgment is hereby rendered dismissing the complaint. No costs.
SO ORDERED.
Barredo, (Chairman), Concepcion, Jr., Fernandez, and De Castro, JJ., concur.