IGNACIO SATURNINO, ET AL., PLAINTIFFS AND APPELLANTS, VS. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, DEFENDANT AND APPELLEE.

Plaintiffs, now appellants, filed this action in the Court of First Instance
of Manila to recover the sum of P5,000.00, corresponding to the face value of an
insurance policy issued by defendant on the life of Estefania A. Saturnino, and
the sum of P1,500.00 as attorney’s fees. Defendant, now appellee, set up special
defenses in its answer, with a counterclaim for damages allegedly sustained as a
result of the unwarranted presentation of this case. Both the complaint and the
counterclaim were dismissed by the trial court; but appellants were declared
entitled to the return of the premium already paid, plus interest at 62 up to
January 8, 1959, when a check for the corresponding amount—P359.65—was sent to
them by appellee.

The policy sued upon is one for 20-year endowment non-medical insurance. This
kind of policy dispenses with the medical examination of the applicant usually
required in ordinary life policies. However, detailed information is called for
in the application concerning the applicant’s health and medical history. The
written application in this ease was submitted by Saturnino to appellee on
November 16, 1957, witnessed by appellee’s agent Edward A. Santos. The policy
was issued on the same day, upon payment of the first year’s premium of P339.25.
On September 19, 1958, Saturnino died of pneumonia, secondly to influenza.
Appellants here, who are her surviving husband and minor child, respectively,
demanded payment of the face value of the policy. The claim was rejected and
this suit was subsequently instituted.

It appears that the months prior to the issuance of the policy, or on
September 9, 1957, Saturnino was operated on for cancer, involving complete
removal of the right breast, including the pectoral muscles and the glands found
in the right armpit. She stayed in the hospital for a period of eight days,
after which she was discharged, although according to the surgeon who operated
on her she could not be considered definitely cured, her ailment being of the
malignant type.

Notwithstanding the fact of her operation Estefania A Saturnino did not make
a disclosure thereof in her application for insurance. On the contrary, she
stated therein that she did not have, nor had she ever had, among other ailments
listed in the application, cancer or other tumors; that she had not consulted
any physician, undergone any operation or suffered any injury within the
preceding five years; and that she had never been treated for, nor did she ever
have any illness or disease peculiar to her sex, particularly of the breast,
ovaries, uterus and menstrual disorders. The application also recites that the
foregoing declarations constituted “a further basis for the issuance of the
policy.”

The question at issue is whether or not the insured made such false
representations of material facts as to avoid the policy. There can be no
dispute that the information given by her in her application for insurance was
false, namely, that she had never had cancer or tumors, or consulted any
physician or undergone any operation within the preceding period of five years.
Are the facts thus falsely represented material? The Insurance Law, (Section 30)
provides that “materiality is to be determined not by the event, but solely by
the probable and reasonable influence of the in forming his estimate of the
proposed contract, or in facts upon the party to whom the communication is due,
making his inquiries.” It seems to be the contention of appellants that the
facts subject of the representations were not material in view of the
“non-medical” nature of the insurance applied for, which does away with the
usual requirement of medical examination before the policy is issued. The
contention is without merit. If anything, the waiver of medical examination
renders even more material the information required of the applicant concerning
previous condition of health and diseases suffered, for such information
necessarily constitutes an important factor which the insurer takes into
consideration in deciding whether to issue the policy or not. It is logical to
assume that if appellee had been properly apprised of the insured’s medical
history she would at least have been made to undergo medical examination in
order to determine her insurability.

Appellants argue that due information concerning the insured’s previous
illness and operation had been given to appellee’s agent Edward A. Santos, who
filed the application term after it was signed in blank by Estefania A.
Saturnino. This was denied by Santos in his testimony, and the trial court found
such testimony to be true. This is a finding of fact which is binding upon us,
this appeal having been taken upon questions of law alone. We do not deem it
necessary therefore, to consider appellee’s additional argument, which was
upheld by the trial court, that in signing the application form in blank and
leaving it to Edward A. Santos to fill (assuming that to be the truth) the
insured in effect made Santos her agent for that purpose and consequently was
responsible for the errors in the entries made by him in that capacity.

In the application for insurance signed by the insured in this case, she
agreed to submit to a medical examination by a duly appointed examiner of
appellee if in the latter’s opinion such examination was necessary as further
evidence of insurability. In not asking her to submit to a medical examination,
appellants maintain, appellee was guilty of negligence, which, precluded it from
finding about, her actual state of health. No such negligence can be imputed to
appellee. It was precisely because the insured had given herself a clean bill of
health that appellee no longer considered an actual medical checkup necessary.

Appellants also contend there was no fraudulent concealment of the truth as
much as the insured herself did not know, since her doctor never told her, that
the disease for which she had been operated on was cancer. In the first place
the concealment of the fact of the operation itself was fraudulent, as there
could not have been any mistake about it, no matter what the ailment. Secondly,
in order to avoid a policy it is not necessary to show actual fraud on the part
of the insured. In the case of Kasprzyk vs. Metropolitan Insurance Go.,
140 N.Y.S. 211, 314, it was held:

“Moreover, if it were the law that an insurance company could not defend a
policy on the ground of misrepresentation, unless it could show actual knowledge
on the part of the applicant that the statements were false, then it is plain
that it would be impossible for it to protect itself and its honest
policyholders against fraudulent and improper claims. It would he wholly at the
mercy of any one who wished to apply for insurance, as it would be impossible to
show actual fraud except in the extremest cases. It could not rely on an
application as containing information on which it could act. There would be no
incentive to an applicant to tell the truth.”

In this jurisdiction, a concealment, whether intentional or unintentional,
entitles the insurer to rescind the contract of insurance, concealment being
defined as “negligence to communicate that which a party knows and ought to
communicate” (Sections 25 & 26, Act No. 2427). In the case of Argente
vs. West Coast Life Insurance Co., 51 Phil. 725, 732, this Court said,
quoting from Joyce, The Law of Insurance, 2nd ed. Vol. 3:

“The basis of the rule vitiating the contract in cases of concealmentt is
that it misleads or deceives the insurer into accepting the risk, or accepting
it at the rate of premium agreed upon. The insurer, relying upon the belief that
the assured will disclose every material fact within his actual or presumed
knowledge, is misled into a belief that the circumstance withheld does not
exist, and he is thereby induced to estimate the risk upon a false basis that it
does not exist.'”

The judgment appealed from, dismissing the complaint and awarding the return
to appellants of the premium already paid, with interest at 6% up to January 29,
1959, is affirmed, with costs against appellants.

Bengzon, C. J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.
B. L., Barrera, Paredes, Dizon, and Regala, JJ., concur.