BERNARDO ARGENTE, PLAINTIFF AND APPELLANT, VS. WEST COAST LIFE INSURANCE CO., DEFENDANT AND APPELLEE.

This is an action upon a joint life insurance policy for
P15,000 issued by the defendant, the West Coast Life Insurance Co., on May 15,
1925, in favor of the plaintiff, Bernardo Argente, and his wife, Vicenta de
Ocampo, the latter having died on November 18, 1925. Fraud in obtaining the
policy was pleaded by way of special defense. On the issue thus suggested, the
court adopted the theory of the defendant, and held the insurance policy null
and void, with the result that the complaint was dismissed, with costs.

On February 9, 1925, Bernardo Argente signed an application for
joint insurance with his wife in the sum of P2,000. The wife, Vicenta de Ocampo,
signed a like application for the same policy. Both applications, with the
exception of the names and the signatures of the applicants, were written by
Jose Geronimo del Rosario, an agent for the West Coast Life Insurance Co. But
all the information contained in the applications was furnished the agent by
Bernardo Argente.

Pursuant to his application, Bernardo Argente was examined by
Dr. Cesareo Sta. Ana, a medical examiner for the West Coast Life Insurance Co.,
on February 10, 1925, in the office of the Customs House. The result of such
examination was recorded in the Medical Examiner’s Report, and with the
exception of the signature of Bernardo Argente, was in the hand-writing of
Doctor Sta. Ana. But the information or answers to the questions contained on
the face of the Medical Examiner’s Report were furnished the doctor by the
applicant, Bernardo Argente.

Pursuant to her application, Vicenta de Ocampo, wife of the
plaintiff, was examined by Dr. Cesareo Sta. Ana on February 10, 1925, at her
residence in Manila. The result of the medical examination, including, among
other things, the answers given by Vicenta de Ocampo to the questions propounded
to her by the physician, appears in the Medical Examiner’s Report.

On May 9, 1925, Bernardo Argente and his wife submitted to the
West Coast Life Insurance Co. an amended application for insurance, increasing
the amount thereof to P15,000, and asked that the policy be dated May 15, 1925.
The amended application was accompanied by the documents entitled “Short Form
Medical Report.” In both of these documents appear certain questions and
answers.

A temporary policy for P15,000 was issued to Bernardo Argente
and his wife as of May 15, 1925, but it was not delivered to Bernardo Argente
until July 2, 1925, when the first quarterly premium on the policy was paid. In
view of the fact that more than thirty days had elapsed since the applicants
were examined by the company’s physician, each of them was required to file a
certificate of health before the policy was delivered to them.

On November 18, 1925, Vicenta de Ocampo died of cerebral
apoplexy. Thereafter Bernardo Argente presented a claim in due form to the West
Coast Life Insurance Co. for the payment of the sum of P15,000 the amount of the
joint life insurance policy. Following investigation con ducted by the Manager
of the Manila office of the insurance company, it was apparently disclosed that
the answers given by the insured in their medical examinations with regard to
their health and previous illnesses and medical Attendance were untrue. For that
reason, the West Coast life Insurance Co. refused to pay the claim of Bernardo
Argente, and on May 25, 1926, wrote him to the effect that the claim was
rejected because the insurance was obtained through fraud and
misrepresentation.

It is admitted that it appears in the Medical Examiner’s Report
that Bernardo Argente in response to the question asked by the medical examiner,
“Have you ever consulted a physician for, or have you ever suffered from any
ailment or disease of, the brain or nervous system?” answered “No.” To the
question, “Have you consulted a physician for any ailment or disease not
included in your above answer,” answered “Yes. Nature of Ailment, Disease or
Injury. Scabies, Number of attacks 1, Date 1911. Duration 1 month, Severity
Fair, result and, if within five years, name and address of every physician
consulted. Dr. P. Guazon. Cured. Dr. Guazon is dead now.” And to the question,
“What physician or physicians, if any, not named above, have you consulted or
been treated by, within the last five years and for what illness or ailment? (If
none, so state)” answered “No.” It is, however, not dis puted that on January
10, 11, and 13, 1923, Bernardo Argente was confined in the Philippine General
Hospital where he was treated by Dr. Agerico B. M. Sison for cerebral
congestion and Bell’s Palsy.

It is further admitted that it appears in the Medical
Examiner’s Report that Vicenta de Ocampo, response to the question asked by the
medical examiner, “How frequently, if at all, and in what quantity do you use
beer, wine, spirits or other intoxicants?” answered “Beer only in small
quantities occasionally.” To the question, “Have you ever consulted a physician
for or have you ever suffered from any ailment or disease of the brain op
nervous system?” answered “No.” To the question, What physician or physicians,
if any, not named above, have you consulted or been treated by, within the last
five years and for what illness or ailment? (If none, so state)” answered
“None.” And to the question, “Are you in good health as far as you know and
believe?” answered “Yes.” It is, however, not disputed that Vicenta de Ocampo
was taken by a patrolman, at the request of her husband, Bernardo Argente, on
May 19, 1924, to the Meisic police station, and from there was transferred to
the San Lazaro Hospital. In San Lazaro Hospital, her case was diagnosed by the
admitting physician as “alcoholism,” but later Doctor Domingo made a diagnosis
of probable “manic-depressive psychosis,” and still, later in Mary Chiles
Hospital, made a final diagnosis of “phycho-neurosis.”

The plaintiff, Bernardo Argente, while readily conceding most
of the facts herein narrated, yet alleges that both he and his wife revealed to
the company’s physician, Doctor Sta. Ana, all the facts concerning their
previous illnesses and medical attendance, but that Doctor Sta. Ana, presumably
acting in collusion with the insurance agent, Jose Geronimo del Rosario, failed
to record them in the medical reports. The evidence on these points consists of
the testimony of the plaintiff and his subordinate clerk, Apolonio Espiritu, on
the one hand, and of the testimony of Doctor Sta. Ana and Jose Geronimo del
Rosario on the other. On the question of fact thus raised, the trial judge found
with the insurance company. In so doing, we believe that His Honor gave proper
inclination to the weight of the proof. There appears no motive whatever on the
part of Doctor Sta. Ana to falsify the Medical Examiner’s Reports and thereby
not only jeopardize his career as a physician, but also gravely implicate
himself criminally.

What has heretofore been stated in this decision is gleaned to
a great extent from the carefully prepared decision of the trial judge, the
Honorable George R. Harvey. The court found from the evidence that the
representations made by Bernardo Argente and by his wife in their applications
to the defendant for life insurance were false with respect to their state of
health during the period of five years preceding the date of such applications,
and that they knew the representations made by them in their applications were
false. The court further found from the evidence that the answers given by
Bernardo Argente and his wife at the time of the medical examination by Doctor
Sta. Ana were false with respect to the condition of their health at that time
and for a period of several years prior thereto. Based on these findings which
must here be accepted since the stenographic transcript is incomplete, the
question arises as to the state of the law in relation thereto.

One ground for the rescission of a contract of insurance under
the Insurance Act is “a concealment,” which in section 25 is defined as “A
neglect to communicate that which a party knows and ought to communicate.”
Appellant argues that the alleged concealment was immaterial and insufficient to
avoid the policy. We cannot agree. In an action on a life insurance policy where
the evidence conclusively shows that the answers to questions concerning
diseases were untrue, the truth or falsity of the answers become the determining
factor. If the policy was pro cured by fraudulent representations, the contract
of insurance apparently set forth therein was never legally existent. It can
fairly be assumed that had the true facts been disclosed by the assured, the
insurance would never have been granted.

In Joyce, The Law of Insurance, second edition, volume 3,
Chapter LV, is found the following:

“Concealment exists where the assured has knowledge of a fact
material to the risk, and honesty, good faith, and fair dealing requires that he
should communicate it to the assured, but he designedly and intentionally with
holds the same.

“Another rule is that if the assured undertakes to state all
the circumstances affecting the risk, a full and fair statement of all is
required.

“It is also held that the concealment must, in the absence of
inquiries, be not only material, but fraudulent, or the fact must have been
intentionally withheld; so it is held under English law that if no inquiries are
made and no fraud or design to conceal enters into the concealment the contract
is not avoided. And it is determined that even though silence may constitute
misrepresentation or concealment it is not of itself necessarily so as it is a
question of fact. Nor is there a concealment justifying a forfeiture where the
fact of insanity is not disclosed no questions being asked concerning the same.
* * *

“But it would seem that if a material fact is actually known to
the assured, its concealment must of itself necessarily be a fraud, and if the
fact is one which the assured ought to know, or is presumed to know, the
presumption of knowledge ought to place the assured in the same position as in
the former case with relation to material facts; and if the jury in such cases
find the fact material, and one tending to increase the risk, it is difficult to
see how the inference of a fraudulent intent or intentional concealment can be
avoided. And it is declared that if a material fact is concealed by assured it
is equivalent to a false representation that it does not exist and that the
essentials are the truth of the representations whether they were in tended to
mislead and did insurer accept them as true and act upon them to his prejudice.
So it is decided that under a stipulation voiding the policy for concealment or
misrepresentation of any material fact or if his interest is not truly stated
or is other than the sole and unconditional ownership the facts are unimportant
that insured did not intend to deceive or withhold information as to
encumbrances even though no questions were asked. And if insured while being
examined for life insurance and know ing that she had heart disease, falsely
stated that she was in good health, and though she could not read the
application, it was explained to her and the questions asked through an
interpreter, and the application like the policy contained a provision that no
liability should be incurred unless the policy was delivered while the insured
was in good health, the court properly directed a verdict for the insurer,
though a witness who was present at the examination, testified that the insured
was not asked whether she had heart disease.

“The basis of the rule vitiating the contract in cases of
concealment 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 principal question, therefore, must be, was
the assurer misled or deceived into entering a contract obligation or in fixing
the premium of insurance by a withholding of material information or facts
within the assured’s knowledge or presumed knowledge?

“It therefore follows that the assurer in assuming a risk is
entitled to know every material fact of which the assured has exclusive or
peculiar knowledge, as well as all material facts which directly tend to
increase the hazard or risk which are known by the assured, or which ought to be
or are presumed to be known by him. And a concealment of such facts vitiates
the policy. ‘It does not seem to be necessary * * * that the * * * suppression
of the truth should have been willful.’ If it were but an inadvertent
omission, yet if it were material to the risk and such as the plaintiff should
have known to be so, It would render the policy void. But it is held that if untrue or false answers are given in response to inquiries and they relate to
material facts the policy is avoided without regard to the knowledge or fraud of
assured, although under the statute statements are representations which must be
fraudulent to avoid the policy. So under certain codes the important inquiries
are whether the concealment was willful and related to a matter material to the
risk. *******

“If the assured has exclusive knowledge of material facts, he
should fully and fairly disclose the same, whether he believes them material or
not/ But notwithstanding this general rule it will not infrequently happen,
especially in life risks, that the assured may have a knowledge actual or
presumed of material facts, and yet entertain an honest belief that they are not
material. * * * The determination of the point whether there has or has not been
a material concealment must rest largely in all cases upon the form of the
questions propounded and the exact terms of the contract. Thus, where in
addition to specifically named diseases the insured was asked whether he had had
any sickness within ten years, to which he answered ‘No,’ and it was proven that
within that period he had had a slight attack of pharyngitis, it was held a
question properly for the jury whether such an inflammation of the throat was a
‘sickness’ within the intent of the inquiry, and the court remarked on the
appeal decision that if it could be held as a matter of law that the policy was
thereby avoided, then it was a mere device on the part of insurance companies to
obtain money without rendering themselves liable under the policy. * * *

” * * * The question should be left to the jury whether the
assured truly represented the state of his health so as not to mislead or
deceive the insurer; and if he did not deal in good faith with the insurer in
that matter, then the inquiry should be made, Did he know the state of his
health so as to be able to furnish a proper answer to such questions as are
propounded? A Massachusetts case, if construed as it is frequently cited, would
be opposed to the above conclusion; but, on the contrary, it sustains it, for
the reason that symptoms of consumption had so far developed themselves within a
few months prior to effecting the insurance as to induce a reasonable belief
that the applicant had that fatal disease, and we should further construe this
case as establishing the rule that such a matter cannot rest alone upon the
assured’s belief irrespective of what is a reasonable belief, but that it ought
to be judged by the criterion whether the belief is one fairly warranted by the
circumstances. A case in Indiana, however, holds that if the assured has some
affection or ailment of one or more of the organs inquired about so well defined
and marked as to materially derange for a time the functions of such organ, as
in the case of Bright’s disease, the policy will be avoided by a nondisclosure,
irrespective of the fact whether the assured knew of such ailment or not. * *
*”

Lastly, appellant contends that even if the insurance company
had a right to rescind the contract, such right cannot now be enforced in view
of the provisions of section 47 of the Insurance Act providing “Whenever a
right to rescind a contract of insurance is given to the insurer by any
provision of this chapter, such right must be exercised previous to the
commencement of an action on the contract.” This section was derived from
section 2583 of the California Civil Code, but in contrast thereto, makes use of
the imperative “must” instead of the permissive “may.” Nevertheless, there are
two answers to the problem as propounded. The first is that the California law
as construed by the code examiners, at whose recommendation it was adopted,
conceded that “A failure to exercise the right (of rescission), cannot, of
course, prejudice any defense to the action which the concealment may furnish.”
(Codes of California Annotated; Tan Chay Heng vs. West Coast Life Insurance
Company [1927], p. 80, ante.) The second answer is that the insurance
company more than one month previous to the commencement of the present action
wrote the plaintiff and informed him that the insurance contract was void
because it had been procured through fraudulent representations, and offered to
refund to the plaintiff the premium which the latter had paid upon the return of
the policy for cancellation. As held in California as to a fire insurance
policy, where any of the material representations are false, the insurer’s
tender of the premium and notice that the policy is canceled, before the
commencement of suit thereon, operate to rescind the con tract of insurance.
(Rankin vs. Amazon Insurance Co. [1891], 89 Cal., 203.)

We are content to rest our judgment on the findings of the
trial court, and on the law governing those facts, with the result that the
various assignments of error are found to be without persuasive merit.

Judgment affirmed, with the costs of this instance against the
appellant.

Villamor, Ostrand, Johns, Romualdez, and
Villa-Real, JJ., concur.