G.R. No. L-25317 - Philippine Phoenix Surety and Insurance Co. vs. Woodworks, Inc.

On July 21, 1960, defendant Woodworks, Inc. applied for a fire insurance policy.
Plaintiff Philippine Phoenix Surety & Insurance Company issued Fire Insurance Policy No. 9749, insuring the defendant’s building, machinery, and equipment for a one‐year period (July 21, 1960, to July 21, 1961) against fire losses.
The premium and other charges (including a margin fee surcharge of P590.76 and documentary stamps amounting to P156.60) summed to P10,593.36.
It is undisputed that defendant failed to pay the required premium at issuance and thereafter.

On April 19, 1961—before the policy’s expiration—plaintiff issued Indorsement No. F-6963/61, notifying defendant of policy cancellation allegedly upon its request (a request which the defendant later denied).
In the indorsement, plaintiff credited defendant with P3,110.25 for the unexpired period (94 days) and claimed P7,483.11 as “earned premium” covering 271 days (from July 21, 1960, to April 18, 1961).
On July 6, 1961, plaintiff demanded in writing the payment of the earned premium.

On January 30, 1962, plaintiff initiated an action in the Court of First Instance of Manila, Branch IV (Civil Case No. 49468) seeking recovery of P7,483.11 as earned premium.
Defendant, through counsel, argued that failure to pay the premium nullified the insurance contract, rendering the policy unenforceable.
On September 13, 1962, the trial court rendered judgment in favor of plaintiff, ordering defendant to pay P7,483.11 with 6% per annum interest from January 30, 1962, attorney’s fees, and other costs.

Defendant appealed the trial court decision.
The Court of Appeals, in its Resolution of October 4, 1965, certified the case to the Supreme Court on a pure question of law, noting its similarity to a previous case (CA-G.R. No. 32017-R) involving the same parties.

The Policy explicitly required pre-payment of premium, stating that the insurer’s obligation to indemnify arises “after payment of premium.”
It contained a receipt requirement (Paragraph 2) whereby any payment must be evidenced by a printed form signed by a duly-appointed agent of the company.
Another provision (Paragraph 10) allowed termination by either party, with the insurer repaying for the unexpired term upon cancellation, only when premium was already paid.
There was no clear agreement in the policy that extended credit to the defendant by accepting delayed premium payments.

Whether a fire insurance policy remains binding, and the insurer is obligated to indemnify, even if the premium stipulated in the policy is not paid.

Is the insurer’s obligation to indemnify conditioned upon the payment of premium?

Whether the earned premium claimed by the insurer is demandable or enforceable when the policy has effectively lapsed due to non-payment.

Whether any extension of credit was clearly agreed upon that would render acceptance of late premium payment valid.

Can the delivery of the policy without prepayment be construed as an offer of credit, and did the defendant accept such offer?

How the present case differs from the earlier related case where partial payment had been made, resulting in a partially performed contract.