G.R. No. 130421. June 28, 1999] AMERICAN HOME ASSURANCE COMPANY, petitioner, vs. ANTONIO CHUA, respondent.

DECISION DAVIDE, JR. C.J.: In this petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner seeks the reversal of the decision[1] of the Court of Appeals in CA-G.R. CV No. 40751, which affirmed in totothe decision of the Regional Trial Court, Makati City, Branch 150 (hereafter trial court), in Civil Case No. 91-1009. Petitioner is a domestic corporation engaged in the insurance business. Sometime in 1990, respondent obtained from petitioner a fire insurance covering the stock-intrade of his business, Moonlight Enterprises, located at Valencia, Bukidnon. The insurance was due to expire on 25 March 1990. On 5 April 1990 respondent issued PCIBank Check No. 352123 in the amount of P2,983.50 to petitioners agent, James Uy, as payment for the renewal of the policy. In turn, the latter delivered Renewal Certificate No. 00099047 to respondent. The check was drawn against a Manila bank and deposited in petitioners bank account in Cagayan de Oro City. The corresponding official receipt was issued on 10 April. Subsequently, a new insurance policy, Policy No. 2064234498-7, was issued, whereby petitioner undertook to indemnify respondent for any damage or loss arising from fire up to P200,000 for the period 25 March 1990 to 25 March 1991. On 6 April 1990 Moonlight Enterprises was completely razed by fire. Total loss was estimated between P4,000,000 and P5,000,000. Respondent filed an insurance claim with petitioner and four other co-insurers, namely, Pioneer Insurance and Surety Corporation, Prudential Guarantee and Assurance, Inc., Filipino Merchants Insurance Co. and Domestic Insurance Company of the Philippines. Petitioner refused to honor the claim notwithstanding several demands by respondent, thus, the latter filed an action against petitioner before the trial court. In its defense, petitioner claimed there was no existing insurance contract when the fire occurred since respondent did not pay the premium. It also alleged that even assuming there was a contract, respondent violated several conditions of the policy, particularly: (1) his submission of fraudulent income tax return and financial statements; (2) his failure to establish the actual loss, which petitioner assessed at P70,000; and (3) his failure to notify to petitioner of any insurance already effected to cover the insured goods. These violations, petitioner insisted, justified the denial of the claim.

The trial court ruled in favor of respondent. It found that respondent paid by way of check a day before the fire occurred. The check, which was deposited in petitioners bank account, was even acknowledged in the renewal certificate issued by petitioners agent. It declared that the alleged fraudulent documents were limited to the disparity between the official receipts issued by the Bureau of Internal Revenue (BIR) and the income tax returns for the years 1987 to 1989. All the other documents were found to be genuine. Nonetheless, it gave credence to the BIR certification that respondent paid the corresponding taxes due for the questioned years. As to respondents failure to notify petitioner of the other insurance contracts covering the same goods, the trial court held that petitioner failed to show that such omission was intentional and fraudulent. Finally, it noted that petitioners investigation of respondent's claim was done in collaboration with the representatives of other insurance companies who found no irregularity therein. In fact, Pioneer Insurance and Surety Corporation and Prudential Guarantee and Assurance, Inc. promptly paid the claims filed by respondent. The trial court decreed as follows: WHEREFORE, judgment is hereby rendered in favor of [respondent] and against the [petitioner] ordering the latter to pay the former the following: 1. P200,000.00, representing the amount of the insurance, plus legal interest from the date of filing of this case; 2. P200,000.00 as moral damages; 3. P200,000.00 as loss of profit; 4. P100,000.00 as exemplary damages; 5. P50,000.00 as attorneys fees; and 6. Cost of suit. On appeal, the assailed decision was affirmed in toto by the Court of Appeals. The Court of Appeals found that respondents claim was substantially proved and petitioners unjustified refusal to pay the claim entitled respondent to the award of damages. Its motion for reconsideration of the judgment having been denied, petitioner filed the petition in this case. Petitioner reiterates its stand that there was no existing insurance contract between the parties. It invokes Section 77 of the Insurance Code, which provides: An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the

contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of life or an industrial life policy whenever the grace period provision applies. and cites the case of Arce v. Capital Insurance & Surety Co., Inc.,[2] where we ruled that unless and until the premium is paid there is no insurance. Petitioner emphasizes that when the fire occurred on 6 April 1990 the insurance contract was not yet subsisting pursuant to Article 1249[3] of the Civil Code, which recognizes that a check can only effect payment once it has been cashed. Although respondent testified that he gave the check on 5 April to a certain James Uy, the check, drawn against a Manila bank and deposited in a Cagayan de Oro City bank, could not have been cleared by 6 April, the date of the fire. In fact, the official receipt issued for respondents check payment was dated 10 April 1990, four days after the fire occurred. Citing jurisprudence,[4] petitioner also contends that respondents non-disclosure of the other insurance contracts rendered the policy void. It underscores the trial courts neglect in considering the Commission on Audits certification that the BIR receipts submitted by respondent were, in effect, fake since they were issued to other persons. Finally, petitioner argues that the award of damages was excessive and unreasonable considering that it did not act in bad faith in denying respondents claim. Respondent counters that the issue of non-payment of premium is a question of fact which can no longer be assailed. The trial courts finding on the matter, which was affirmed by the Court of Appeals, is conclusive. Respondent refutes the reason for petitioners denial of his claim. As found by the trial court, petitioners loss adjuster admitted prior knowledge of respondents existing insurance contracts with the other insurance companies. Nonetheless, the loss adjuster recommended the denial of the claim, not because of the said contracts, but because he was suspicious of the authenticity of certain documents which respondent submitted in filing his claim. To bolster his argument, respondent cites Section 66 of the Insurance Code,[5] which requires the insurer to give a notice to the insured of its intention to terminate the policy forty-five days before the policy period ends. In the instant case, petitioner opted not to terminate the policy. Instead, it renewed the policy by sending its agent to respondent, who was issued a renewal certificate upon delivery of his check payment for the renewal of premium. At this precise moment the contract of insurance was executed and already in effect. Respondent also claims that it is standard operating procedure in the provinces to pay insurance premiums by check when collected by insurance agents.

On the issue of damages, respondent maintains that the amounts awarded were reasonable. He cites numerous trips he had to make from Cagayan de Oro City to Manila to follow up his rightful claim. He imputes bad faith on petitioner who made enforcement of his claim difficult in the hope that he would eventually abandon it. He further emphasizes that the adjusters of the other insurance companies recommended payment of his claim, and they complied therewith. In its reply, petitioner alleges that the petition questions the conclusions of law made by the trial court and the Court of Appeals. Petitioner invokes respondents admission that his check for the renewal of the policy was received only on 10 April 1990, taking into account that the policy period was 25 March 1990 to 25 March 1991. The official receipt was dated 10 April 1990. Anent respondents testimony that the check was given to petitioners agent, a certain James Uy, the latter points out that even respondent was not sure if Uy was indeed its agent. It faults respondent for not producing Uy as his witness and not taking any receipt from him upon presentment of the check. Even assuming that the check was received a day before the occurrence of the fire, there still could not have been any payment until the check was cleared. Moreover, petitioner denies respondents allegation that it intended a renewal of the contract for the renewal certificate clearly specified the following conditions: Subject to the payment by the assured of the amount due prior to renewal date, the policy shall be renewed for the period stated. Any payment tendered other than in cash is received subject to actual cash collection. Subject to no loss prior to premium payment. If there be any loss, and is not covered [sic]. Petitioner asserts that an insurance contract can only be enforced upon the payment of the premium, which should have been made before the renewal period. Finally, in assailing the excessive damages awarded to respondent petitioner stresses that the policy in issue was limited to a liability of P200,000; but the trial court granted the following monetary awards: P200,000 as actual damages; P200,000 as moral damages; P100,000 as exemplary damages; and P50,000 as attorneys fees. The following issues must be resolved: first, whether there was a valid payment of premium, considering that respondents check was cashed after the occurrence of the fire; second, whether respondent violated the policy by his submission of fraudulent documents and non-disclosure of the other existing insurance contracts; and finally, whether respondent is entitled to the award of damages.

The general rule in insurance laws is that unless the premium is paid the insurance policy is not valid and binding. The only exceptions are life and industrial life insurance.[6] Whether payment was indeed made is a question of fact which is best determined by the trial court. The trial court found, as affirmed by the Court of Appeals, that there was a valid check payment by respondent to petitioner. Wellsettled is the rule that the factual findings and conclusions of the trial court and the Court of Appeals are entitled to great weight and respect, and will not be disturbed on appeal in the absence of any clear showing that the trial court overlooked certain facts or circumstances which would substantially affect the disposition of the case. [7] We see no reason to depart from this ruling. According to the trial court the renewal certificate issued to respondent contained the acknowledgment that premium had been paid. It is not disputed that the check drawn by respondent in favor of petitioner and delivered to its agent was honored when presented and petitioner forthwith issued its official receipt to respondent on 10 April 1990. Section 306 of the Insurance Code provides that any insurance company which delivers a policy or contract of insurance to an insurance agent or insurance broker shall be deemed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon.[8] In the instant case, the best evidence of such authority is the fact that petitioner accepted the check and issued the official receipt for the payment. It is, as well, bound by its agents acknowledgment of receipt of payment. Section 78 of the Insurance Code explicitly provides: An acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid. This Section establishes a legal fiction of payment and should be interpreted as an exception to Section 77.[9] Is respondent guilty of the policy violations imputed against him? We are not convinced by petitioners arguments. The submission of the alleged fraudulent documents pertained to respondents income tax returns for 1987 to 1989. Respondent, however, presented a BIR certification that he had paid the proper taxes for the said years. The trial court and the Court of Appeals gave credence to the certification and it being a question of fact, we hold that said finding is conclusive. Ordinarily, where the insurance policy specifies as a condition the disclosure of existing co-insurers, non-disclosure thereof is a violation that entitles the insurer to avoid the policy. This condition is common in fire insurance policies and is known as the other insurance clause. The purpose for the inclusion of this clause is to

prevent an increase in the moral hazard. We have ruled on its validity and the case of Geagonia v. Court of Appeals[10] clearly illustrates such principle. However, we see an exception in the instant case. Citing Section 29[11] of the Insurance Code, the trial court reasoned that respondents failure to disclose was not intentional and fraudulent. The application of Section 29 is misplaced. Section 29 concerns concealment which is intentional. The relevant provision is Section 75, which provides that: A policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy. To constitute a violation the other existing insurance contracts must be upon the same subject matter and with the same interest and risk.[12] Indeed, respondent acquired several co-insurers and he failed to disclose this information to petitioner. Nonetheless, petitioner is estopped from invoking this argument. The trial court cited the testimony of petitioners loss adjuster who admitted previous knowledge of the co-insurers. Thus, COURT: Q The matter of additional insurance of other companies, was that ever discussed in your investigation? A Yes, sir. Q In other words, from the start, you were aware the insured was insured with other companies like Pioneer and so on? A Yes, Your Honor. Q But in your report you never recommended the denial of the claim simply because of the non-disclosure of other insurance? [sic] A Yes, Your Honor. Q In other words, to be emphatic about this, the only reason you recommended the denial of the claim, you found three documents to be spurious. That is your only basis? A Yes, Your Honor.[13] [Emphasis supplied] Indubitably, it cannot be said that petitioner was deceived by respondent by the latters non-disclosure of the other insurance contracts when petitioner actually had prior knowledge thereof. Petitioners loss adjuster had known all along of the other existing insurance contracts, yet, he did not use that as basis for his recommendation of denial. The loss adjuster, being an employee of petitioner, is deemed a representative of the latter whose awareness of the other insurance

contracts binds petitioner. We, therefore, hold that there was no violation of the other insurance clause by respondent. Petitioner is liable to pay its share of the loss. The trial court and the Court of Appeals were correct in awarding P200,000 for this. There is, however, merit in petitioners grievance against the damages and attorneys fees awarded. There is no legal and factual basis for the award of P200,000 for loss of profit. It cannot be denied that the fire totally gutted respondents business; thus, respondent no longer had any business to operate. His loss of profit cannot be shouldered by petitioner whose obligation is limited to the object of insurance, which was the stock-in-trade, and not the expected loss in income or profit. Neither can we approve the award of moral and exemplary damages. At the core of this case is petitioners alleged breach of its obligation under a contract of insurance. Under Article 2220 of the Civil Code, moral damages may be awarded in breaches of contracts where the defendant acted fraudulently or in bad faith. We find no such fraud or bad faith. It must again be stressed that moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant. Such damages are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to obviate the moral suffering he has undergone, by reason of the defendants culpable action. Its award is aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and it must be proportional to the suffering inflicted.[14] When awarded, moral damages must not be palpably and scandalously excessive as to indicate that it was the result of passion, prejudice or corruption on the part of the trial court judge.[15] The law[16] is likewise clear that in contracts and quasi-contracts the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. Nothing thereof can be attributed to petitioner which merely tried to resist what it claimed to be an unfounded claim for enforcement of the fire insurance policy. As to attorneys fees, the general rule is that attorneys fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate.[17] In short, the grant of attorneys fees as part of damages is the exception rather than the rule; counsels fees are not awarded every time a party prevails in a suit. It can be awarded only in the cases enumerated in Article 2208 of the Civil Code, and in all cases it must be reasonable.[18] Thereunder, the trial court may award attorneys fees where it deems just and equitable that it be so granted. While we respect the trial courts exercise of its discretion in this case, the award of P50,000 is unreasonable and excessive. It should be reduced to P10,000. WHEREFORE, the instant petition is partly GRANTED. The challenged decision of the Court of Appeals in CA-G.R. No. 40751 is hereby MODIFIED by a) deleting the awards of P200,000 for loss of profit,P200,000 as moral damages and P100,000 as

exemplary damages, and b) reducing the award of attorneys fees from P50,000 to P10,000. No pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 95546 November 6, 1992 MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner, vs. THE COURT OF APPEALS, AMERICAN HOME ASSURANCE CO., represented by American International Underwriters (Phils.), Inc., respondent.

BELLOSILLO, J.: This case involves a purely legal question: whether payment by installment of the premiums due on an insurance policy invalidates the contract of insurance, in view of Sec. 77 of P.D. 612, otherwise known as the Insurance Code, as amended, which provides: Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies. Sometime in early 1982, private respondent American Home Assurance Co. (AHAC), represented by American International Underwriters (Phils.), Inc., issued in favor of petitioner Makati Tuscany Condominium Corporation (TUSCANY) Insurance Policy No. AH-CPP-9210452 on the latter's building and premises, for a period beginning 1 March 1982 and ending 1 March 1983, with a total premium of P466,103.05. The premium was paid on installments on 12 March 1982, 20 May 1982, 21 June 1982 and 16 November 1982, all of which were accepted by private respondent. On 10 February 1983, private respondent issued to petitioner Insurance Policy No. AH-CPP9210596, which replaced and renewed the previous policy, for a term covering 1 March 1983 to 1 March 1984. The premium in the amount of P466,103.05 was again paid on installments on 13 April 1983, 13 July 1983, 3 August 1983, 9 September 1983, and 21 November 1983. All payments were likewise accepted by private respondent. On 20 January 1984, the policy was again renewed and private respondent issued to petitioner Insurance Policy No. AH-CPP-9210651 for the period 1 March 1984 to 1 March 1985. On this renewed policy, petitioner made two installment payments, both accepted by private respondent, the first on 6 February 1984 for P52,000.00 and the second, on 6 June 1984 for P100,000.00. Thereafter, petitioner refused to pay the balance of the premium. Consequently, private respondent filed an action to recover the unpaid balance of P314,103.05 for Insurance Policy No. AH-CPP-9210651. In its answer with counterclaim, petitioner admitted the issuance of Insurance Policy No. AH-CPP9210651. It explained that it discontinued the payment of premiums because the policy did not contain a credit clause in its favor and the receipts for the installment payments covering the policy for 1984-85, as well as the two (2) previous policies, stated the following reservations:

2. Acceptance of this payment shall not waive any of the company rights to deny liability on any claim under the policy arising before such payments or after the expiration of the credit clause of the policy; and 3. Subject to no loss prior to premium payment. If there be any loss such is not covered. Petitioner further claimed that the policy was never binding and valid, and no risk attached to the policy. It then pleaded a counterclaim for P152,000.00 for the premiums already paid for 1984-85, and in its answer with amended counterclaim, sought the refund of P924,206.10 representing the premium payments for 1982-85. After some incidents, petitioner and private respondent moved for summary judgment. On 8 October 1987, the trial court dismissed the complaint and the counterclaim upon the following findings: While it is true that the receipts issued to the defendant contained the aforementioned reservations, it is equally true that payment of the premiums of the three aforementioned policies (being sought to be refunded) were made during the lifetime or term of said policies, hence, it could not be said, inspite of the reservations, that no risk attached under the policies. Consequently, defendant's counterclaim for refund is not justified.
As regards the unpaid premiums on Insurance Policy No. AH-CPP-9210651, in view of the reservation in the receipts ordinarily issued by the plaintiff on premium payments the only plausible conclusion is that plaintiff has no right to demand their payment after the lapse of the term of said policy on March 1, 1985. Therefore, the defendant was justified in refusing to pay the same. 1

Both parties appealed from the judgment of the trial court. Thereafter, the Court of Appeals rendered a decision 2modifying that of the trial court by ordering herein petitioner to pay the balance of the premiums due on Policy No. AH-CPP-921-651, or P314,103.05 plus legal interest until fully paid, and affirming the denial of the counterclaim. The appellate court thus explained The obligation to pay premiums when due is ordinarily as indivisible obligation to pay the entire premium. Here, the parties herein agreed to make the premiums payable in installments, and there is no pretense that the parties never envisioned to make the insurance contract binding between them. It was renewed for two succeeding years, the second and third policies being a renewal/replacement for the previous one. And the insured never informed the insurer that it was terminating the policy because the terms were unacceptable. While it may be true that under Section 77 of the Insurance Code, the parties may not agree to make the insurance contract valid and binding without payment of premiums, there is nothing in said section which suggests that the parties may not agree to allow payment of the premiums in installment, or to consider the contract as valid and binding upon payment of the first premium. Otherwise, we would allow the insurer to renege on its liability under the contract, had a loss incurred (sic) before completion of payment of the entire premium, despite its voluntary acceptance of partial payments, a result eschewed by a basic considerations of fairness and equity.

To our mind, the insurance contract became valid and binding upon payment of the first premium, and the plaintiff could not have denied liability on the ground that payment was not made in full, for the reason that it agreed to accept installment payment. . . . 3

Petitioner now asserts that its payment by installment of the premiums for the insurance policies for 1982, 1983 and 1984 invalidated said policies because of the provisions of Sec. 77 of the Insurance Code, as amended, and by the conditions stipulated by the insurer in its receipts, disclaiming liability for loss for occurring before payment of premiums. It argues that where the premiums is not actually paid in full, the policy would only be effective if there is an acknowledgment in the policy of the receipt of premium pursuant to Sec. 78 of the Insurance Code. The absence of an express acknowledgment in the policies of such receipt of the corresponding premium payments, and petitioner's failure to pay said premiums on or before the effective dates of said policies rendered them invalid. Petitioner thus concludes that there cannot be a perfected contract of insurance upon mere partial payment of the premiums because under Sec. 77 of the Insurance Code, no contract of insurance is valid and binding unless the premium thereof has been paid, notwithstanding any agreement to the contrary. As a consequence, petitioner seeks a refund of all premium payments made on the alleged invalid insurance policies. We hold that the subject policies are valid even if the premiums were paid on installments. The records clearly show that petitioner and private respondent intended subject insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. The initial insurance contract entered into in 1982 was renewed in 1983, then in 1984. In those three (3) years, the insurer accepted all the installment payments. Such acceptance of payments speaks loudly of the insurer's intention to honor the policies it issued to petitioner. Certainly, basic principles of equity and fairness would not allow the insurer to continue collecting and accepting the premiums, although paid on installments, and later deny liability on the lame excuse that the premiums were not prepared in full. We therefore sustain the Court of Appeals. We quote with approval the well-reasoned findings and conclusion of the appellate court contained in its Resolution denying the motion to reconsider its Decision
While the import of Section 77 is that prepayment of premiums is strictly required as a condition to the validity of the contract, We are not prepared to rule that the request to make installment payments duly approved by the insurer, would prevent the entire contract of insurance from going into effect despite payment and acceptance of the initial premium or first installment. Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to make the policy binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit extension, and such an agreement is not contrary to morals, good customs, public order or public policy (De Leon, the Insurance Code, at p. 175). So is an understanding to allow insured to pay premiums in installments not so proscribed. At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted. 4

The reliance by petitioner on Arce vs. Capital Surety and Insurance Co. 5 is unavailing because the facts therein are substantially different from those in the case at bar. In Arce, no payment was made by the insured at all despite the grace period given. In the case before Us, petitioner paid the initial installment and thereafter made staggered payments resulting in

full payment of the 1982 and 1983 insurance policies. For the 1984 policy, petitioner paid two (2) installments although it refused to pay the balance. It appearing from the peculiar circumstances that the parties actually intended to make three (3) insurance contracts valid, effective and binding, petitioner may not be allowed to renege on its obligation to pay the balance of the premium after the expiration of the whole term of the third policy (No. AH-CPP-9210651) in March 1985. Moreover, as correctly observed by the appellate court, where the risk is entire and the contract is indivisible, the insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk insured for any period, however brief or momentary. WHEREFORE, finding no reversible error in the judgment appealed from, the same is AFFIRMED. Costs against petitioner. SO ORDERED.

FIRST DIVISION

[G.R. No. 137172. June 15, 1999]

UCPB GENERAL INSURANCE CO., INC., petitioner, vs. MASAGANA TELAMART, INC., respondent. DECISION
PARDO, J.:

The case is an appeal via certiorari seeking to set aside the decision of the Court of Appeals, affirming with modification that of the Regional Trial Court, Branch 58, Makati, ordering petitioner to pay respondent the sum of P18,645,000.00, as the proceeds of the insurance coverage of respondent's property razed by fire; 25% of the total amount due as attorney's fees and P25,000.00 as litigation expenses, and costs.
[1]

The facts are undisputed and may be related as follows: On April 15, 1991, petitioner issued five (5) insurance policies covering respondent's various property described therein against fire, for the period from May 22, 1991 to May 22, 1992. In March 1992, petitioner evaluated the policies and decided not to renew them upon expiration of their terms on May 22, 1992. Petitioner advised respondent's broker, Zuellig Insurance Brokers, Inc. of its intention not to renew the policies. On April 6, 1992, petitioner gave written notice to respondent of the non-renewal of the policies at the address stated in the policies. On June 13, 1992, fire razed respondent's property covered by three of the insurance policies petitioner issued. On July 13, 1992, respondent presented to petitioner's cashier at its head office five (5) manager's checks in the total amount of P225,753.95, representing premium for the renewal of the policies from May 22, 1992 to May 22, 1993. No notice of loss was filed by respondent under the policies prior to July 14, 1992. On July 14, 1992, respondent filed with petitioner its formal claim for indemnification of the insured property razed by fire. On the same day, July 14, 1992, petitioner returned to respondent the five (5) manager's checks that it tendered, and at the same time rejected respondent's claim for the reasons (a) that the policies had expired and were not renewed, and (b) that the fire occurred on June 13, 1992, before respondent's tender of premium payment. On July 21, 1992, respondent filed with the Regional Trial Court, Branch 58, Makati City, a civil complaint against petitioner for recovery of P18,645,000.00, representing the face value of the policies covering respondent's insured property razed by fire, and for attorney's fees.[2] On October 23, 1992, after its motion to dismiss had been denied, petitioner filed an answer to the complaint. It alleged that the complaint "fails to state a cause of action"; that petitioner was not liable to respondent for insurance proceeds under the policies because at the time of the loss of respondent's property due to fire, the policies had long expired and were not renewed.[3]

After due trial, on March 10, 1993, the Regional Trial Court, Branch 58, Makati, rendered decision, the dispositive portion of which reads:

"WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendant, as follows: "(1) Authorizing and allowing the plaintiff to consign/deposit with this Court the sum of P225,753.95 (refused by the defendant) as full payment of the corresponding premiums for the replacement-renewal policies for Exhibits A, B, C, D and E; "(2) Declaring plaintiff to have fully complied with its obligation to pay the premium thereby rendering the replacement-renewal policy of Exhibits A, B, C, D and E effective and binding for the duration May 22, 1992 until May 22, 1993; and, ordering defendant to deliver forthwith to plaintiff the said replacement-renewal policies; "(3) Declaring Exhibits A & B, in force from August 22, 1991 up to August 23, 1992 and August 9, 1991 to August 9, 1992, respectively; and "(4) Ordering the defendant to pay plaintiff the sums of: (a) P18,645,000.00 representing the latter's claim for indemnity under Exhibits A, B & C and/or its replacement-renewal policies; (b) 25% of the total amount due as and for attorney's fees; (c) P25,000.00 as necessary litigation expenses; and, (d) the costs of suit. "All other claims and counterclaims asserted by the parties are denied and/or dismissed, including plaintiff's claim for interests. "SO ORDERED. "Makati, Metro-Manila, March 10, 1993. "ZOSIMO Z. ANGELES
Judge.[4] In due time, petitioner appealed to the Court of Appeals.[5] On September 7, 1998, the Court of Appeals promulgated its decision [6] affirming that of the Regional Trial Court with the modification that item No. 3 of the dispositive portion was deleted, and the award of attorney's fees was reduced to 10% of the total amount due.[7] The Court of Appeals held that following previous practise, respondent was allowed a sixty (60) to ninety (90) day credit term for the renewal of its policies, and that the acceptance of the late premium payment suggested an understanding that payment could be made later. Hence, this appeal.

By resolution adopted on March 24, 1999, we required respondent to comment on the petition, not to file a motion to dismiss within ten (10) days from notice.[8] On April 22, 1999, respondent filed its comment.[9] Respondent submits that the Court of Appeals correctly ruled that no timely notice of nonrenewal was sent. The notice of non-renewal sent to broker Zuellig which claimed that it verbally notified the insurance agency but not respondent itself did not suffice. Respondent submits further that the Court of Appeals did not err in finding that there existed a sixty (60) to ninety (90) days credit agreement between UCPB and Masagana, and that, finally, the Supreme Court could not review factual findings of the lower court affirmed by the Court of Appeals.[10] We give due course to the appeal. The basic issue raised is whether the fire insurance policies issued by petitioner to the respondent covering the period May 22, 1991 to May 22, 1992, had expired on the latter date or had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date after the occurrence of the risk (fire) insured against. The answer is easily found in the Insurance Code. No, an insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual payment of the premium. Any agreement to the contrary is void.[11] The parties may not agree expressly or impliedly on the extension of credit or time to pay the premium and consider the policy binding before actual payment. The case of Malayan Insurance Co., Inc. vs. Cruz-Arnaldo,[12] cited by the Court of Appeals, is not applicable. In that case, payment of the premium was in fact actually made on December 24, 1981, and the fire occurred on January 18, 1982. Here, the payment of the premium for renewal of the policies was tendered on July 13, 1992, a month after the fire occurred on June 13, 1992. The assured did not even give the insurer a notice of loss within a reasonable time after occurrence of the fire. WHEREFORE, the Court hereby REVERSES and SETS ASIDE the decision of the Court of Appeals in CA-G.R. CV No. 42321. In lieu thereof, the Court renders judgment dismissing respondent's complaint and petitioner's counterclaims thereto filed with the Regional Trial Court, Branch 58, Makati City, in Civil Case No. 92-2023. Without costs. SO ORDERED. Davide, Jr., C.J., (Chairman), Melo, Kapunan, and Ynares-Santiago, JJ., concur.