GREAT PACIFIC LIFE ASSURANCE CORP. vs. COURT OF APPEALS AND the trial courts decision.

the trial courts decision. Hence, the present petition. Petitioners interposed the
MEDARDA V. LEUTERIO following assigned errors:
Concealment| 13 Oct. 1999 | J. Quisimbing
Issues:
Nature of Case: Petition for Certiorari and Prohibition
Digest maker: Claudine Dungo
# 1 WON Dr. Leuterio concealed that he had hypertension, which would vitiate
the insurance contract? – No
SUMMARY: A contract group life insurance was executed between Grepalife and DBP.
One of the housing debtors of DBP, Dr. Leuterio died of a cerebral hemorrhage. While
he was alive, he signed a form stating that he was in good physical health. Grepalife  Concealment exists where the assured had knowledge of a fact material to the
later claimed that his widow and DBP could not get the proceeds because he concealed risk, and honesty, good faith, and fair dealing requires that he should
his hypertension, which was the alleged cause of his death. The Court held that communicate it to the assured, but he designedly and intentionally withholds
Grepalife was unable to prove that hypertension was indeed the cause of Leuterio’s the same.
death, and it could not escape paying the premium.  Grepalife merely relied on the testimony of the attending physician, Dr.
Hernando Mejia, as supported by the information given by the widow of the
decedent. Grepalife asserts that Dr. Mejias technical diagnosis of the cause of
DOCTRINE: The fraudulent intent on the part of the insured must be established to
death of Dr. Leuterio was a duly documented hospital record, and that the
entitle the insurer to rescind the contract. Misrepresentation as a defense of the insurer
widow’s declaration that her husband had possible hypertension several years
to avoid liability is an affirmative defense and the duty to establish such defense by
ago should not be considered as hearsay, but as part of res gestae.
satisfactory and convincing evidence rests upon the insurer.
 The medical findings were, however, not conclusive because Dr. Mejia did not
conduct an autopsy on the body of the decedent. He said that he had no
FACTS:
knowledge of Dr. Leuterios any previous hospital confinement.
 Dr. Leuterios death certificate stated that hypertension was only the possible
 A contract of group life insurance was executed between petitioner Great Pacific cause of death. The private respondents statement, as to the medical history of
Life Assurance Corporation (Grepalife) and Development Bank of the her husband, was due to her unreliable recollection of events. Hence, the
Philippines (DBP). Grepalife agreed to insure the lives of eligible housing loan statement of the physician was properly considered by the trial court as hearsay.
mortgagors of DBP.  Dr. Leuterio, had answered in his insurance application that he was in good
 Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for health and that he had not consulted a doctor or any of the enumerated
membership in the group life insurance plan. He answered questions about his ailments, including hypertension; when he died the attending physician had
health in a form, stating that he was in good physical health and did not have certified in the death certificate that the former died of cerebral hemorrhage,
himself checked for hypertension. probably secondary to hypertension.
 On November 15, 1983 Grepalife issued Certificate No. B-18558, as insurance  There was no sufficient proof that the insured had suffered from hypertension
coverage of Dr. Leuterio, to the extent of his DBP mortgage indebtedness and the appellant had not proven nor produced any witness who could attest to
amounting P86,200.00 Dr. Leuterios medical history. Hence, there is a failure on the part of Grepalife to
 On August 6, 1984, Dr. Leuterio died due to massive cerebral hemorrhage so establish that there was concealment made by Leuterio and they cannot refuse
 DBP submitted a death claim to Grepalife. Grepalife denied the claim alleging payment of the claim.
that Dr. Leuterio was not physically healthy when he applied for an insurance  The fraudulent intent on the part of the insured must be established to entitle the
coverage and insisted Leuterio did not disclose he had been suffering from insurer to rescind the contract. Misrepresentation as a defense of the insurer to
hypertension, which caused his death. They alleged that such non-disclosure avoid liability is an affirmative defense and the duty to establish such defense by
constituted concealment that justified the denial of the claim. satisfactory and convincing evidence rests upon the insurer.
 The widow of Leuterio filed a complaint with the RTC for Specific Performance
with Damages.
o Dr. Hernando Mejia, who issued the death certificate testidied that Dr.
Leuterio complained of headaches presumably due to high blood
pressure. The inference was not conclusive because Dr. Leuterio was #2 WON Grepalife is liable to DBP as beneficiary in a group life insurance
not autopsied, hence, other causes were not ruled out. contract from a complaint filed by the widow of Leuterio? – YES
 RTC – ruled in favor of respondent widow
 CA - affirmed  A group insurance policy of mortgagors (mortgage redemption
 On February 22, 1988, the trial court rendered a decision in favor of respondent insurance), is a device for the protection of both the mortgagee and the
widow and against Grepalife. On May 17, 1993, the Court of Appeals sustained mortgagor.
 o On the part of the mortgagee, it has to enter into such form of Ruling:
contract so that in the event of the unexpected demise of the
mortgagor during the subsistence of the mortgage contract, WHEREFORE, the petition is hereby DENIED. The Decision and Resolution of the
the proceeds from such insurance will be applied to the Court of Appeals in CA-G.R. CV 18341 is AFFIRMED with MODIFICATION that the
payment of the mortgage debt, thereby relieving the heirs of petitioner is ORDERED to pay the insurance proceeds amounting to Eighty-six
the mortgagor from paying the obligation. thousand, two hundred (P86,200.00) pesos to the heirs of the insured, Dr. Wilfredo
o In a similar vein, ample protection is given to the mortgagor Leuterio (deceased), upon presentation of proof of prior settlement of mortgagors
under such a concept so that in the event of death; the indebtedness to Development Bank of the Philippines. Costs against petitioner.
mortgage obligation will be extinguished by the application of
the insurance proceeds to the mortgage indebtedness.
o Consequently, where the mortgagor pays the insurance
premium under the group insurance policy, making the loss
payable to the mortgagee, the insurance is on the mortgagors
interest, and the mortgagor continues to be a party to the
contract. In this type of policy insurance, the mortgagee is
simply an appointee of the insurance fund, such loss-payable
clause does not make the mortgagee a party to the contract.
 The insured private respondent did not cede to the mortgagee all his
rights or interests in the insurance, the policy stating that: In the event
of the debtors death before his indebtedness with the Creditor [DBP]
shall have been fully paid, an amount to pay the outstanding
indebtedness shall first be paid to the creditor and the balance of sum
assured, if there is any, shall then be paid to the beneficiary/ies
designated by the debtor. When DBP submitted the insurance claim
against petitioner, the latter denied payment thereof, interposing the
defense of concealment committed by the insured. Thereafter, DBP
collected the debt from the mortgagor and took the necessary action of
foreclosure on the residential lot of private respondent.
 Gonzales La O vs. Yek Tong Lin Fire & Marine Ins. Co: The insured, being
the person with whom the contract was made, is primarily the proper
person to bring suit thereon. Subject to some exceptions, insured may
thus sue, although the policy is taken wholly or in part for the benefit
of another person named or unnamed, and although it is expressly
made payable to another as his interest may appear or otherwise.
Although a policy issued to a mortgagor is taken out for the benefit of
the mortgagee and is made payable to him, yet the mortgagor may sue
thereon in his own name, especially where the mortgagees interest is
less than the full amount recoverable under the policy.
 Insured may be regarded as the real party in interest, although he has
assigned the policy for the purpose of collection, or has assigned as
collateral security any judgment he may obtain.
 And since a policy of insurance upon life or health may pass by
transfer, will or succession to any person, whether he has an insurable
interest or not, and such person may recover it whatever the insured
might have recovered, the widow of the decedent Dr. Leuterio may file
the suit against the insurer, Grepalife.