Title
Great Pacific Life Assurance Corp. vs. Court of Appeals
Case
G.R. No. 113899
Decision Date
Oct 13, 1999
A group life insurance dispute arose after Grepalife denied a claim due to alleged concealment of hypertension by the insured, Dr. Leuterio. Courts ruled in favor of his widow, affirming her right to sue and ordering Grepalife to pay P86,200 to heirs upon proof of mortgage settlement.
insurance claim
widow
late husband

Case Summary (G.R. No. 113899)

Factual Background

A group life insurance contract existed between GREAT PACIFIC LIFE ASSURANCE CORPORATION and the Development Bank of the Philippines to insure eligible DBP housing loan mortgagors. On November 11, 1983, Dr. Wilfredo Leuterio applied for membership in the group plan and answered that he had not consulted a physician for any enumerated ailments and that he was in good health. On November 15, 1983, Grepalife issued Certificate No. B-18558 covering the mortgagor to the extent of his DBP mortgage indebtedness of P86,200.00. The insured died on August 6, 1984, of massive cerebral hemorrhage. DBP submitted a death claim, which Grepalife denied, alleging concealment of hypertension by the insured.

Trial Court Proceedings

On October 20, 1986, respondent widow MEDARDA V. LEUTERIO filed Civil Case No. 10788 against Grepalife for specific performance with damages. The trial court heard testimony, including that of the attending physician, Dr. Hernando Mejia, who stated that the deceased had complained of headaches possibly due to high blood pressure, but admitted no autopsy was performed and no prior hospital confinements were known. On February 22, 1988, the trial court rendered judgment in favor of the widow and against Grepalife.

Court of Appeals Decision

The Court of Appeals reviewed the evidence and affirmed the trial court's judgment on May 17, 1993. The appellate court found insufficient proof that the insured had suffered from hypertension prior to the policy issuance and held that Grepalife failed to establish concealment by clear and convincing evidence. The appellate court therefore sustained the trial court’s award that Grepalife was liable under Group Policy No. G-1907 in relation to Certificate No. B-18558.

Issues Presented on Review

Petitioner raised several assignments of error which the Supreme Court synthesized into three principal issues for resolution: (1) whether the appellate court erred in holding Grepalife liable to DBP as beneficiary in a group life insurance contract when the widow, and not DBP, filed the complaint; (2) whether the appellate court erred in not finding that the insured concealed hypertension, thereby vitiating the contract; and (3) whether there was error in awarding P86,200.00 without proof of the actual outstanding mortgage at the time of death.

Parties' Contentions

Grepalife contended that the suit was not properly prosecuted because DBP, as the mortgagee and alleged beneficiary, was an indispensable party and was not joined; that the trial court lacked jurisdiction over the person and subject matter; that no evidence established the exact amount payable to DBP; and that the insured had concealed material information regarding hypertension which justified denial of the claim. Medarda V. Leuterio maintained that as the insured’s widow and heir she was the real party in interest entitled to sue, that Grepalife failed to prove concealment, and that the policy was a valued policy fixing the sum payable.

Insurable Interest and Real Party in Interest

The Court explained the nature of mortgage redemption group insurance as protecting both mortgagee and mortgagor and noted that where the mortgagor pays the premium and designates loss payable to the mortgagee, the mortgagor remains a party to the contract. Citing Section 8, Philippine Insurance Code, and authorities, the Court held that the mortgagor (the insured) remained the real party in interest and that the widow, as successor in interest, could sue on the policy even though the mortgagee had a prior claim to the proceeds. The Court relied on precedents recognizing that an insured may sue in his own name despite clauses making the policy payable to another.

Concealment and Evidence Analysis

The Court analyzed the concealment defense under the rule that concealment exists where the assured knowingly withholds a fact material to the risk. It held that Grepalife bore the burden to prove fraudulent intent and concealment by clear and convincing evidence. The Court found Grepalife relied primarily on the attending physician's opinion and the widow's uncertain statements, both of which failed to establish a prior history of hypertension. The attending physician had not performed an autopsy and had no knowledge of prior hospital confinements. The Court therefore concluded that Grepalife failed to prove concealment and could not avoid liability.

Valuation of the Policy and Application of Proceeds

The Court observed that life insurance is a valued policy and that when the insured's interest is not susceptible to exact pecuniary measurement the sum fixed in the policy governs. The policy expressly provided that upon proof of death a death benefit of P86,200.00 would be paid, with the outstanding indebtedness to the creditor to be paid first and any balance to the beneficiary designated by the debtor. The Court held that the insured paid premiums for the coverage fixed by the policy and that the sum assured therefore determined the recoverable amount absent contrary proof.

Supervening Event and Equity Consideration

The Court noted a supervening event disclosed in respondent’s memorandum: DBP foreclosed on the mortgaged property in 1995 and thereby satisfied the mortgagor's outstanding loan. The Court reasoned that equity prevented unjust enrichment of DBP by collecting insurance proceeds after it had already foreclosed and realized on the mortgage debt. Applying the maxim Nemo cum alterius detrimenio potest uti, the Court concluded that the proceeds should inure to the heirs of the deceased rather than to DBP following foreclosure.

Supreme Court Ruling and Modification

The Supreme Court denied the petition and affirmed the Decision and Resolution of the Court of Appeals with modification. The Court o

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