Philippine Phoenix Surety vs. Woodworks, Inc. ; G.R. L-22684, August 31, 1967

FACTS

Phoenix issued a Fire Policy insurance to Woodworks for the amount of P300,000.00 which was paid by the latter under official receipt. However, for some reason, Woodworks stopped payment, thus, Phoenix made several demands on Woodworks to pay the amount of P3,522.09. Phoenix Surety & Insurance Co., Inc. then commenced an action to recover from Woodworks, Inc. the sum of P3,522.09, representing the unpaid balance of the premiums on a fire insurance policy it issued for a term of one year from April 1, 1960 to April 1, 1961. 

The MTC ruled in favor of Woodworks and which was reversed by the CoFI ordering Woodworks, Inc. to pay’ Philippine Phoenix Surety & Insurance, Inc., the sum of P3,522.09 with interest thereon at the legal rate of 6% per annum from the date of the filing of the complaint until fully paid, and costs of the suit. Hence, this petition. 

ISSUE

Whether the non-payment by it of the premium due, produced the cancellation of the contract of insurance.

HELD

No. Woodwork’s theory that nonpayment by it of the premium due, produced the cancellation of the contract of insurance is not tenable. Such theory would place exclusively in the hands of one of the contracting parties the right to decide whether the contract should stand or not. Rather the correct view would seem to be this: as the contract had become perfected, the parties could demand from each other the performance of whatever obligations they had assumed. In the case of the insurer, it is obvious that it had the right to demand from the insured the completion of the payment of the premium due or sue for the rescission of the contract. As it chose to demand specific performance of the insured’s obligation to pay the balance of the premium, the latter’s duty to pay is indeed indubitable. 

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