LUZ B. PASCUA, PLAINTIFF AND APPELLANT, VS. THE EMPLOYEES SAVINGS AND LOAN ASSOCIATION OF THE MANILA WATER SYSTEM, DEFENDANT AND APPELLEE. BEATRIZ MANINGAS VDA. DE CABRERA, GUAR…

Pascua versus Employees Savings and Loan Association of the Manila Water System

The Case

This is a civil action for the delivery of death benefits. Luz B. Pascua sues the Employees Savings and Loan Association of the Manila Water System, a non-stock mutual benefit association, to recover in full the fund benefits accruing on the death of her husband, Leoncio G. Pascua, who had named her as his beneficiary. The Association admits the fund but withholds half of it, because the deceased, during his lifetime, had his son by another woman made a co-beneficiary in equal share. The case matters because it draws the line between ordinary life insurance, where a beneficiary's designation cannot be revoked without a reserved power, and a mutual benefit association, where the member may change his beneficiary at will.

Procedural History

Luz B. Pascua filed the action in the Court of First Instance of Manila against the Association. The son, Leoncio M. Pascua, Junior, through his guardian ad litem, was allowed by leave of court to intervene and claimed one-half of the benefits. After trial, the lower court rendered judgment ordering the Association to pay the intervenor one-half of the benefits, less the two thousand pesos already received by him, with costs against the plaintiff. The plaintiff appealed to the Court of Appeals. Upon joint motion by the intervenor and the defendant, with the plaintiff's conformity, the case was elevated to the Supreme Court, which decided it in June 1960.

Facts

Leoncio G. Pascua, who died in 1956, was formerly an employee of the Metropolitan Water District. In 1947, upon application, he became a member of the Employees Savings and Loan Association of the Manila Water System, a duly organized non-stock corporation to which any employee of the District is qualified to become a member. In his membership application he designated his wife, Luz B. Pascua, as his beneficiary.

By letter dated February 29, 1956 addressed to the Board of Directors, the deceased requested that his son, Leoncio M. Pascua, Junior, born of Beatriz M. Vda. de Cabrera, be made a co-beneficiary, in equal share, with his legal wife, Luz B. Pascua, in whatever interests he had in the Association. The Board approved the request in its resolution number 30, series of 1956.

After the death of Leoncio G. Pascua, the Association refused to deliver the fund benefits in full to the plaintiff. It expressed willingness to pay the rightful claimants but pointed to the modification made by the deceased during his lifetime, and further alleged that a document purporting to be his last will and testament, then under probate, named Beatriz M. Vda. de Cabrera a co-beneficiary with the minor Leoncio M. Pascua, Junior, to the half interest left by the deceased in the Association. The net amount credited in favor of the deceased and payable to his beneficiary or beneficiaries totalled six thousand sixty-seven pesos and twelve centavos. Upon the filing of an adequate bond, two thousand pesos was partially paid to the intervenor by the Association.

Issues

• Whether or not the deceased Leoncio G. Pascua validly changed his beneficiary as to a portion of the benefits by designating his son as co-beneficiary of his legal wife.
• Whether or not the principles of insurance, particularly the prohibition against change of beneficiary absent an express reservation, apply to mutual benefit associations.
• Whether or not the notarial will of the deceased, still under probate, abrogated the designation of the intervenor as co-beneficiary.

Applicable Provisions

Section 25 of the Constitution and By-Laws of the Association provides:

SEC. 25 Whenever any active member of the Association dies, all the other members shall contribute the sum of FIVE PESOS (P5.00) each and the amount thus collected shall be payable to the beneficiary named in the membership application papers of the deceased member.

This is the contractual text that fixes who receives the death benefit, and the Court reads it as naming a beneficiary who takes no vested right during the member's lifetime.

Ruling

On the first issue, the Court answered in the affirmative. A beneficiary named in the certificate of a benevolent and beneficial association does not acquire any vested right in it during the lifetime of the member, but merely an expectancy which becomes a vested or absolute right to its proceeds only upon the death of the member. Where the beneficiary is a mere volunteer having no contractual relations with either the association or the assured, the member is deemed to have the power to change his beneficiary at will, so long as the statutes of the state or the rules and regulations of the order do not expressly prohibit such a change. The Court found no law in this jurisdiction expressly prohibiting such a change, no showing that the plaintiff's designation was for a sufficient consideration, and no prohibition in the charter and by-laws, which, while not expressly authorizing a change, do not prohibit it. The Association itself approved the designation.

On the second issue, the Court held that the insurance rule does not govern. Unlike insurance contracts, where the insured cannot revoke a designation of beneficiary named in his policy unless he reserved the right to make such a change, in mutual benefit societies the member has the power to change his beneficiary at will. The Court noted that in the earlier case of Southern Employees Association versus Gulpeo it did not consider the mutual benefit association a regular insurance company, and that the difference between them on the right to change beneficiaries is firmly established. It quoted Bouvier's Law Dictionary:

For most purposes, mutual benefit associations are insurance companies and certificates issued by them are policies of life insurance. There are, however, some essential differences, one of which is the power on the part of the assured in mutual benefit associations to change the beneficiary. In a policy of insurance, the beneficiary has a vested right. In a benevolent society, the beneficiary has no vested right in the certificate before the death of the member. The member may change the beneficiary without the latter's consent; he may change as to a portion of the insurance.

On the third issue, the Court held that benefits from a mutual benefit association, like proceeds of an insurance policy, belong exclusively to the beneficiary and not to the member, who has no property in them but merely a power to appoint someone to receive them. Their disposition is therefore not governed by the law on succession. Moreover, an invalid or informal will, although inoperative as a bequest, may constitute a sufficient designation of beneficiaries, so the probate of a will is not a condition precedent to the payment of mutual aid benefits to the beneficiaries designated in it. Since Beatriz M. Vda. de Cabrera has not claimed any portion for herself, the Court saw no necessity for disturbing the judgment adjudicating one-half of the benefits to the intervenor.

Doctrine

A member of a mutual benefit association may change his beneficiary at will, so long as the statutes or the rules and regulations of the society do not expressly prohibit such a change. The original beneficiary, being a mere volunteer, acquires no vested right during the member's lifetime, but only an expectancy that ripens into a vested right upon the member's death. This contrasts with ordinary life insurance, where the insured cannot revoke the designation unless he reserved the right to do so. Benefits under a mutual benefit association belong exclusively to the beneficiary and are not governed by the law on succession, and an invalid or informal will may still serve as a sufficient designation of beneficiaries.

Disposition

The Supreme Court affirmed the decision of the lower court, adjudicating one-half of the benefits due from the Association to the intervenor, without costs.

Remember This

Memorize the line: in a mutual benefit association the member may change his beneficiary at will, because the beneficiary has no vested right before the member's death. Examiners use this case to test the distinction between mutual benefit associations and ordinary life insurance on the revocability of beneficiary designations.