Insurance Case Digest: South Sea Surety and Insurance Co., Inc. v. CA (1995)

G.R. No. 102253  June 2, 1995
Lessons Applicable: 

  • Authority to Receive Payment/Effect of Payment (Insurance)
  • Binding Effect of Payment (Insurance)
Laws Applicable: Section 77,Section 301, Section 306 of the Insurance Code

FACTS:

  • Valenzuela Hardwood and Industrial Supply, Inc. shipped with Seven Brothers' vessel M/V Seven Ambassador lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila
  • Valenzuela insured the logs against loss and/or, damage with South Sea Surety and Insurance Co., Inc. for P2,000,000 issuing a Marine Cargo Insurance Policy
  • January 24 1984: Valenzuela gave the check in payment of the premium on the insurance policy to Mr. Victorio Chua
  • January 25 1984: M/V Seven Ambassador sank
  • January 30 1984: The check was tendered to South Sea but it refused.  Instead it cancelled the insurance policy for non-payment of the premium
  • RTC: favored Valenzuela against South Sea and Seven Brothers
  • CA: Absolved Seven Brothers 
    • stipulation in the charter party that the ship owner would be exempted from liability in case of loss 
  • South Sea contends that it is cancelled and that Mr. Chua is not authorized
ISSUE: W/N  Mr. Chua is an authorized representative to receive the payment

HELD: YES. petition is DENIED

  • payment of the premium is a condition precedent to, and essential for, the efficaciousness of the contract.
    • The only two statutorily provided exceptions are 
      • (a) in case the insurance coverage relates to life or industrial life (health) insurance when a grace period applies and 
      • (b) when the insurer makes a written acknowledgment of the receipt of premium, this acknowledgment being declared by law to be then conclusive evidence of the premium payment
  • South Sea Surety and Insurance Co., Inc. delivered to him the policy on 21 January 1984 at his office to be delivered to the Valenzuela - deemed to have been authorized by the South Sea Surety and Insurance Co., Inc. to receive the premium