Hilario Gercio vs Sunlife Assurance of Canada

No. 23703; 28 September 1925

Malcolm, J.

Petitioner:
Hilario Gercia; insured

Respondents:
Sun Life Assurance; insurer
Andrea Zialcita; beneficiary

 On January 29 1910, respondent Sun Life issued a 20-year endowment insurance

policy on the life of petitioner Hilario Grecio.

 The terms of the policy holds that Sun Life agreed to insure the life of petitioner
Gercio for P2,000 to be paid on February 1, 1930, or if the insured should die before
the date, then to his wife, respondent Andrea Zialcita, should she survive him;
otherwise, to the executors.

 The policy did not include any provision reserving to the insured the right to change
the beneficiary.

 On the date the policy was issued, respondent Zialcita was the lawful wife of
petitioner Gercio. However, she was convicted of adultery and on Sept. 4, 1920, a
decree of divorce was issued which completely dissolved the bonds of matrimony
between them.

 On March 4 1922, petitioner Gercio formally requested Sun Life to eliminate Zialcita
as beneficiary, and designate instead his present wife, Adela, as the beneficiary.
However, Sun Life refused.

ISSUE + RULING: Whether the insured has the power to change the beneficiary
where the policy does not expressly reserve to the insured the right to change the
beneficiary

NO. The insured has no such right. Petition DENIED.

The SC discussed that when this case was being decided in 1922, there were still
deficiencies in the law that will have to be supplemented by general principles on
Insurance from American authorities. Thus, the SC adopted these rules with the purpose
of having the Philippine Law of Insurance conform to the modern Law of Insurance
found in the US.

The SC held that the wife, as beneficiary, has an absolute vested interest in the policy
from the date of its issuance and delivery. So when a life insurance policy is taken out by
the husband in which the wife is the beneficiary, she has a subsisting interest in the
policy. This applied to a policy where there are incidents of loan, and to an endowment
policy. If the husband wishes to retain to himself control and ownership of the policy, he
may so provide in the policy. However, if the policy contains no provision authorizing a
change of beneficiary without the beneficiary's consent, the insured cannot make such
change. It is held that a life insurance policy of a husband made payable to the wife as
beneficiary, is the separate property of the beneficiary and beyond the control of the
husband.

As to the effect produce by the Divorce, there is nothing in the Philippine Divorce Law
which says that if a policy is taken out upon a husband's life and the wife is named as
beneficiary, a subsequent divorce destroys her rights under the policy.

Wallace vs Mutual Benefit Life Insurance Co. (1906) - this case is most nearly on all fours with the case at bar

xxx As soon as the policy was issued, Mrs. Wallace acquired a vested interest therein, of which she could not be
deprived without her consent, except under the terms of the contract with the insurance company. No right to
change the beneficiary was reserved. Her interest in the policy was her individual property, subject to be
divested only by her death, lapse of time, or failure of the insured to pay the premiums . She could keep the policy
alive by paying the premiums if the insured failed to do so. It was contingent upon these events, but it was free from the
control of her husband.

He had no interest in her property in this policy, contingent or otherwise. Her interest was free from any claim on the
part of the insured or his creditors. He could deprive her of her interest absolutely in but one way, by living more than
20 years. Both husband and wife's interest were contingent, but they were entirely separate and distinct.

The wife's interest was not affected by the decree of court which dissolved the marriage contract between the parties. It
remains her separate property after the divorce just like before. The fact that she was his wife at the time the policy
was issued may have been the reason why she was made a beneficiary. But her property interest in the policy
after it was issued did not in any reasonable sense arise out of the marriage relation.

Article 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control.

If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former. (1281)

Article 1376. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a
contract, and shall fill the omission of stipulations which are ordinarily established. (1287)

Article 1378. When it is absolutely impossible to settle doubts by the rules established in the preceding articles, and the
doubts refer to incidental circumstances of a gratuitous contract, the least transmission of rights and interests shall
prevail. If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests.

If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what may have
been the intention or will of the parties, the contract shall be null and void. (1289)