G.R. No. 166245 - Eternal Gardens Memorial Park Corp. vs. Philippine American Life Insurance Co.

On December 10, 1980, Eternal Gardens Memorial Park Corporation (Eternal) and Philippine American Life Insurance Company (Philamlife) executed Creditor Group Life Policy No. P-1920 covering instalment purchasers of burial lots.
Key policy terms:

Eligibility – Lot purchaser aged 18–65, indebted to Eternal, and “accepted for Life Insurance coverage by the Company.”
Evidence of Insurability – No medical exam for coverage ≤ P50,000; declaration of good health required for all purchasers; insurer may demand further evidence for coverage > P50,000 or age > 55.
Life Insurance Benefit – Unpaid balance of the loan (including up to two months’ arrears), capped at P100,000, payable to Eternal upon death of insured while insured.
Effective Date of Benefit – Coverage effective on the loan date, “provided the application … is approved by the Company.”

December 29, 1982 – Eternal sent Philamlife a transmittal letter (received January 15, 1983) listing new lot purchasers, including John Uy Chuang (balance P100,000), and stating “Encl: Phil-Am Life Insurance Application Forms & Cert.”
August 2, 1984 – Chuang died. On August 20, 1984, Eternal filed a claim attaching death certificate, proof of citizenship, claimant’s certificate, attending physician’s certificate, and assured’s certificate.
November 12, 1984 – Philamlife requested additional documents, including the insured’s signed insurance application and statement of account.
November 14, 1984 – Eternal transmitted the requested documents (received November 15, 1984). No reply followed.
April 25, 1986 – Eternal demanded payment. May 20, 1986 – Philamlife denied the claim, asserting no pre-death approval of application and retaining premiums in trust.

RTC Makati (Branch 138) rendered judgment on May 29, 1996 in favor of Eternal for P100,000 plus interest and P10,000 attorney’s fees, finding that Philamlife’s inaction and acceptance of premiums amounted to approval.
CA (Second Division) on November 26, 2004 (CA-G.R. CV No. 57810) reversed and dismissed the complaint, ruling Chuang’s application was not submitted pre-death and coverage was invalid.
Eternal filed a Rule 45 petition before the Supreme Court, challenging the CA’s factual and legal conclusions.

Whether Chuang’s insurance application was duly submitted to and received by Philamlife before his death.
Whether Philamlife’s inaction on the application, combined with acceptance of premiums, constitutes approval and binds it to coverage effective from the loan date.
How ambiguous provisions in a contract of adhesion—specifically concerning effective date and approval requirement—should be interpreted.