9/7/2016 G.R.No.

L109937

TodayisWednesday,September07,2016

RepublicofthePhilippines
SUPREMECOURT
Manila

FIRSTDIVISION

G.R.No.L109937March21,1994

DEVELOPMENTBANKOFTHEPHILIPPINES,petitioner,
vs.
COURTOFAPPEALSandtheESTATEOFTHELATEJUANB.DANS,representedbyCANDIDAG.DANS,
andtheDBPMORTGAGEREDEMPTIONINSURANCEPOOL,respondents.

OfficeoftheLegalCounselforpetitioner.

Reyes,Santayana,Molo&AlegreforDBPMortgageRedemptionInsurancePool.

QUIASON,J.:

ThisisapetitionforreviewoncertiorariunderRule45oftheRevisedRulesofCourttoreverseandsetasidethe
decisionoftheCourtofAppealsinCAG.RCVNo.26434anditsresolutiondenyingreconsiderationthereof.

WeaffirmthedecisionoftheCourtofAppealswithmodification.

In May 1987, Juan B. Dans, together with his wife Candida, his son and daughterinlaw, applied for a loan of
P500,000.00 with the Development Bank of the Philippines (DBP), Basilan Branch. As the principal mortgagor,
Dans,then76yearsofage,wasadvisedbyDBPtoobtainamortgageredemptioninsurance(MRI)withtheDBP
MortgageRedemptionInsurancePool(DBPMRIPool).

Aloan,inthereducedamountofP300,000.00,wasapprovedbyDBPonAugust4,1987andreleasedonAugust
11, 1987. From the proceeds of the loan, DBP deducted the amount of P1,476.00 as payment for the MRI
premium. On August 15, 1987, Dans accomplished and submitted the "MRI Application for Insurance" and the
"HealthStatementforDBPMRIPool."

OnAugust20,1987,theMRIpremiumofDans,lesstheDBPservicefeeof10percent,wascreditedbyDBPto
thesavingsaccountoftheDBPMRIPool.Accordingly,theDBPMRIPoolwasadvisedofthecredit.

OnSeptember3,1987,Dansdiedofcardiacarrest.TheDBP,uponnotice,relayedthisinformationtotheDBP
MRIPool.OnSeptember23,1987,theDBPMRIPoolnotifiedDBPthatDanswasnoteligibleforMRIcoverage,
beingovertheacceptanceagelimitof60yearsatthetimeofapplication.

OnOctober21,1987,DBPapprisedCandidaDansofthedisapprovalofherlatehusband'sMRIapplication.The
DBP offered to refund the premium of P1,476.00 which the deceased had paid, but Candida Dans refused to
accept the same, demanding payment of the face value of the MRI or an amount equivalent to the loan. She,
likewise,refusedtoacceptanexgratiasettlementofP30,000.00,whichtheDBPlateroffered.

On February 10, 1989, respondent Estate, through Candida Dans as administratrix, filed a complaint with the
RegionalTrialCourt,BranchI,Basilan,againstDBPandtheinsurancepoolfor"CollectionofSumofMoneywith
Damages." Respondent Estate alleged that Dans became insured by the DBP MRI Pool when DBP, with full
knowledgeofDans'ageatthetimeofapplication,requiredhimtoapplyforMRI,andlatercollectedtheinsurance
premium thereon. Respondent Estate therefore prayed: (1) that the sum of P139,500.00, which it paid under
protest for the loan, be reimbursed (2) that the mortgage debt of the deceased be declared fully paid and (3)
thatdamagesbeawarded.

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TheDBPandtheDBPMRIPoolseparatelyfiledtheiranswers,withtheformerassertingacrossclaimagainstthe
latter.

At the pretrial, DBP and the DBP MRI Pool admitted all the documents and exhibits submitted by respondent
Estate.Asaresultoftheseadmissions,thetrialcourtnarroweddowntheissuesand,withoutoppositionfromthe
parties, found the case ripe for summary judgment. Consequently, the trial court ordered the parties to submit
theirrespectivepositionpapersanddocumentaryevidence,whichmayserveasbasisforthejudgment.

OnMarch10,1990,thetrialcourtrenderedadecisioninfavorofrespondentEstateandagainstDBP.TheDBP
MRIPool,however,wasabsolvedfromliability,afterthetrialcourtfoundnoprivityofcontractbetweenitandthe
deceased. The trial court declared DBP in estoppel for having led Dans into applying for MRI and actually
collectingthepremiumandtheservicefee,despiteknowledgeofhisageineligibility.Thedispositiveportionofthe
decisionreadasfollows:

WHEREFORE,inviewoftheforegoingconsiderationandinthefurtheranceofjusticeandequity,the
CourtfindsjudgmentfortheplaintiffandagainstDefendantDBP,orderingthelatter:

1. To return and reimburse plaintiff the amount of P139,500.00 plus legal rate of interest as
amortizationpaymentpaidunderprotest

2.ToconsiderthemortgageloanofP300,000.00includingallinterestaccumulatedorotherwiseto
havebeensettled,satisfiedorsetoffbyvirtueoftheinsurancecoverageofthelateJuanB.Dans

3.TopayplaintifftheamountofP10,000.00asattorney'sfees

4.TopayplaintiffintheamountofP10,000.00ascostsoflitigationandotherexpenses,andother
reliefjustandequitable.

TheCounterclaimsofDefendantsDBPandDBPMRIPOOLareherebydismissed.TheCrossclaim
ofDefendantDBPislikewisedismissed(Rollo,p.79)

TheDBPappealedtotheCourtofAppeals.InadecisiondatedSeptember7,1992,theappellatecourtaffirmed
intotothedecisionofthetrialcourt.TheDBP'smotionforreconsiderationwasdeniedinaresolutiondatedApril
20,1993.

Hence,thisrecourse.

II

WhenDansappliedforMRI,hefilledupandpersonallysigneda"HealthStatementforDBPMRIPool"(Exh."5
Bank")withthefollowingdeclaration:

Iherebydeclareandagreethatallthestatementsandanswerscontainedhereinaretrue,complete
andcorrecttothebestofmyknowledgeandbeliefandformpartofmyapplicationforinsurance.Itis
understoodandagreedthatnoinsurancecoverageshallbeeffectedunlessanduntilthisapplication
isapprovedandthefullpremiumispaidduringmycontinuedgoodhealth(Records,p.40).

Under the aforementioned provisions, the MRI coverage shall take effect: (1) when the application shall be
approvedbytheinsurancepooland(2)whenthefullpremiumispaidduringthecontinuedgoodhealthofthe
applicant.Thesetwoconditions,beingjoinedconjunctively,mustconcur.

Undisputably,thepowertoapproveMRIapplicationsislodgedwiththeDBPMRIPool.Thepool,however,didnot
approve the application of Dans. There is also no showing that it accepted the sum of P1,476.00, which DBP
credited to its account with full knowledge that it was payment for Dan's premium. There was, as a result, no
perfectedcontractofinsurancehence,theDBPMRIPoolcannotbeheldliableonacontractthatdoesnotexist.

TheliabilityofDBPisanothermatter.

ItwasDBP,asamatterofpolicyandpractice,thatrequiredDans,theborrower,tosecureMRIcoverage.Instead
ofallowingDanstolookforhisowninsurancecarrierorsomeotherformofinsurancepolicy,DBPcompelledhim
to apply with the DBP MRI Pool for MRI coverage. When Dan's loan was released on August 11, 1987, DBP
alreadydeductedfromtheproceedsthereoftheMRIpremium.Fourdayslatter,DBPmadeDansfillupandsign
his application for MRI, as well as his health statement. The DBP later submitted both the application form and
health statement to the DBP MRI Pool at the DBP Main Building, Makati Metro Manila. As service fee, DBP
deducted10percentofthepremiumcollectedbyitfromDans.

In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second as an insurance
agent.
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As an insurance agent, DBP made Dans go through the motion of applying for said insurance, thereby leading
himandhisfamilytobelievethattheyhadalreadyfulfilledalltherequirementsfortheMRIandthattheissuance
oftheirpolicywasforthcoming.Apparently,DBPhadfullknowledgethatDan'sapplicationwasnevergoingtobe
approved.ThemaximumageforMRIacceptanceis60yearsasclearlyandspecificallyprovidedinArticle1of
the Group Mortgage Redemption Insurance Policy signed in 1984 by all the insurance companies concerned
(Exh."1Pool").

UnderArticle1987oftheCivilCodeofthePhilippines,"theagentwhoactsassuchisnotpersonallyliabletothe
party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without
givingsuchpartysufficientnoticeofhispowers."

TheDBPisnotauthorizedtoacceptapplicationsforMRIwhenitsclientsaremorethan60yearsofage(Exh."1
Pool"). Knowing all the while that Dans was ineligible for MRI coverage because of his advanced age, DBP
exceeded the scope of its authority when it accepted Dan's application for MRI by collecting the insurance
premium,anddeductingitsagent'scommissionandservicefee.

Theliabilityofanagentwhoexceedsthescopeofhisauthoritydependsuponwhetherthethirdpersonisaware
of the limits of the agent's powers. There is no showing that Dans knew of the limitation on DBP's authority to
solicitapplicationsforMRI.

Ifthethirdpersondealingwithanagentisunawareofthelimitsoftheauthorityconferredbytheprincipalonthe
agentandhe(thirdperson)hasbeendeceivedbythenondisclosurethereofbytheagent,thenthelatterisliable
for damages to him (V Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, p. 422
[1992], citing Sentencia [Cuba] of September 25, 1907). The rule that the agent is liable when he acts without
authority is founded upon the supposition that there has been some wrong or omission on his part either in
misrepresenting,orinaffirming,orconcealingtheauthorityunderwhichheassumestoact(Francisco,V.,Agency
307[1952],citingHallv.Lauderdale,46N.Y.70,75).Inasmuchasthenondisclosureofthelimitsoftheagency
carries with it the implication that a deception was perpetrated on the unsuspecting client, the provisions of
Articles19,20and21oftheCivilCodeofthePhilippinescomeintoplay.

Article19provides:

Everypersonmust,intheexerciseofhisrightsandintheperformanceofhisduties,actwithjustice
giveeveryonehisdueandobservehonestyandgoodfaith.

Article20provides:

Everypersonwho,contrarytolaw,willfullyornegligentlycausesdamagetoanother,shallindemnify
thelatterforthesame.

Article21provides:

Anyperson,whowillfullycauseslossorinjurytoanotherinamannerthatiscontrarytomorals,good
customsorpublicpolicyshallcompensatethelatterforthedamage.

TheDBP'sliability,however,cannotbefortheentirevalueoftheinsurancepolicy.Toassumethatwereitnotfor
DBP's concealment of the limits of its authority, Dans would have secured an MRI from another insurance
company,andthereforewouldhavebeenfullyinsuredbythetimehedied,ishighlyspeculative.Consideringhis
advanced age, there is no absolute certainty that Dans could obtain an insurance coverage from another
company.ItmustalsobenotedthatDansdiedalmostimmediately,i.e.,onthenineteenthdayafterapplyingfor
theMRI,andonthetwentythirddayfromthedateofreleaseofhisloan.

Oneisentitledtoanadequatecompensationonlyforsuchpecuniarylosssufferedbyhimashehasdulyproved
(Civil Code of the Philippines, Art. 2199). Damages, to be recoverable, must not only be capable of proof, but
mustbeactuallyprovedwithareasonabledegreeofcertainty(RefractoriesCorporationv.IntermediateAppellate
Court, 176 SCRA 539 [1989] Choa Tek Hee v. Philippine Publishing Co., 34 Phil. 447 [1916]). Speculative
damages are too remote to be included in an accurate estimate of damages (Sun Life Assurance v. Rueda
Hermanos,37Phil.844[1918]).

WhileDansisnotentitledtocompensatorydamages,heisentitledtomoraldamages.Noproofofpecuniaryloss
isrequiredintheassessmentofsaidkindofdamages(CivilCodeofPhilippines,Art.2216).Thesamemaybe
recoveredinactsreferredtoinArticle2219oftheCivilCode.

The assessment of moral damages is left to the discretion of the court according to the circumstances of each
case(CivilCodeofthePhilippines,Art.2216).ConsideringthatDBPhadofferedtopayP30,000.00torespondent
EstateinexgratiasettlementofitsclaimandthatDBP'snondisclosureofthelimitsofitsauthorityamountedtoa
deceptiontoitsclient,anawardofmoraldamagesintheamountofP50,000.00wouldbereasonable.

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The award of attorney's fees is also just and equitable under the circumstances (Civil Code of the Philippines,
Article2208[11]).

WHEREFORE,thedecisionoftheCourtofAppealsinCAG.R.CV
No.26434isMODIFIEDandpetitionerDBPisORDERED:(1)toREIMBURSErespondentEstateofJuanB.Dans
theamountofP1,476.00withlegalinterestfromthedateofthefilingofthecomplaintuntilfullypaidand(2)to
PAY said Estate the amount of Fifty Thousand Pesos (P50,000.00) as moral damages and the amount of Ten
ThousandPesos(P10,000.00)asattorney'sfees.Withcostsagainstpetitioner.

SOORDERED.

Cruz,Davide,Jr.,BellosilloandKapunan,JJ.,concur.

TheLawphilProjectArellanoLawFoundation

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