Tan Chay Heng v. The West Coast Life Insurance Company

12. TAN CHAY HENG v.
THE WEST COAST LIFE INSURANCE COMPANY

GR NO. L-27541
November 21, 1927
Jon
Topic: Representation
Petitioners: TAN CHAY HENG
Respondents: THE WEST COAST LIFE INSURANCE COMPANY
Ponente: JOHNS, J.
Facts:
Plaintiff alleges that in the month of April, 1925, on his application the defendant accepted and approved a life insurance policy
of for the sum of P10,000 in which the plaintiff was the sole beneficiary; that the policy was issued upon the payment by the
said Tan Ceang of the first year's premium amounting to P936; that in and by its terms, the defendant agreed to pay the
plaintiff as beneficiary the amount of the policy upon the receipt of the proofs of the death of the insured while the policy was
in force; that without any premium being due or unpaid, Tan Ceang died on May 10, 1925; that in June, 1925, plaintiff
submitted the proofs of the death of Tan Ceang with a claim for the payment of the policy which the defendant refused to pay,
for which he prays for a corresponding judgment, with legal interest from the date of the policy, and costs.
In February, 1926, the defendant filed an answer to the complaint in which it made a general and specific denial
By way of special defense, defendant alleges:
1)
That the insurance policy on the life of Tan Ceang, upon which plaintiff's action is based, was obtained by the plaintiff in
confabulation with one Go Chulian, of Bacolod, Negros Occidental; Francisco Sanchez of the same place; and Dr. V. S. Locsin, of
La Carlota, Negros Occidental, thru fraud and deceit perpetrated against this defendant in the following manner, to wit:
On or about the 22d day of February, 1925, in the municipality of Pulupandan, Occidental Negros, the present plaintiff and the
said Go Chulian, Francisco Sanchez and Dr., V. S. Locsin, conspiring and confederating together for the purpose of defrauding
and cheating the defendant in the sum of P10,000, caused one Tan Caeng to sign an application for insurance with the
defendant in the sum of P10,000, in which application it was falsely represented to the defendant that the said Tan Ceang was
single and was a merchant, and that the plaintiff Tan Chai Heng, the beneficiary, was his nephew, whereas in truth and in fact
and as the plaintiff and his said coconspirators well knew, the said Tan Ceang was not single but was legally married to
Marcelina Patalita with whom he had several children; and that he was not a merchant but was a mere employee of another
Chinaman by the name of Tan Quina from whom he received only a meager salary, and that the present plaintiff was not a
nephew of the said Tan Ceang.
On said date, February 22, 1925, the said Tan Ceang was seriously ill, suffering from pulmonary tuberculosis of about three
years' duration, which illness was incurable and was well known to the plaintiff and his said coconspirators.
The said Dr. V. S. Locsin, in his capacity as medical examiner for the defendant insurance company, pursuant to the conspiracy
above mentioned, prepared and falsified the necessary medical certificate, in which it was made to appear, among other things,
that the said Tan Ceang had never used morphine, cocaine or any other drug; that he was then in good health and had never
consulted any physician; that he had never spit blood; and that there was no sign of either present or past disease of his lungs;
whereas in truth and in fact, as the plaintiff and his said coconspirators well knew, the said Tan Ceang was addicted to
morphine, cocaine, and opium and had been convicted and imprisoned therefor, and was then, and for about three year prior
thereto had been suffering from pulmonary tuberculosis.
The plaintiff and his said coconspirators, pursuant to the conspiracy above mentioned, cause a confidential report to the
defendant insurance company to be signed by one V. Sy Yock Kian, who was an employee of Go Chulian, in which confidential
report, among other things, it was falsely represented to the defendant insurance company that the said Tan Ceang was worth
about P40,000, had an annual income of from eight to ten thousand pesos net, had the appearance of good health, and never
had tuberculosis
After the said application for insurance, medical certificate and confidential report had been prepared and falsified, as
aforesaid, the plaintiff and his said coconspirators caused the same to be forwarded to the defendant at its office in Manila, the
medical certificate thru the said Dr. V. S. Locsin as medical examiner, and said application for insurance and confidential report
thru the said Francisco Sanchez in his capacity as one of the agents of the defendant insurance company in the Province of
Occidental Negros; that the defendant, believing that the representations made in said document were true, and relying
thereon, provisionally accepted the said application for insurance on the life of Tan Ceang in the sum of P10,000 and issued a
temporary policy pending the final approval or disapproval of said application by defendant's home-office in San Francisco,
California
2)
That the plaintiff Tan Chai Heng, on the dates herein-above mentioned, was, liked V. Sy Yock Kian who signed the confidential
report above mentioned, an employee of the said Go Chulian; that the latter was the ringleader of a gang of malefactors, who,
during, and for some years previous to the dates above mentioned, were engaged in the illicit enterprise of procuring
fraudulent life insurances from the present defendant, similar to the one in question, and which enterprise was capitalized by
him by furnishing the funds with which to pay the premium on said fraudulent insurance; that the said Go Chulian was the one
who furnished the money with which to pay the first and only annual premium on the insurance here in question, amounting to
P936.50; that the said Go Chulian, on August 28, 1926, was convicted by the Court of First Instance of the City of Manila, in
criminal case No. 31425 of that court, of the crime of falsification of private documents in connection with an fraudulent
insurance, similar to the present, committed against this defendant
3)
That by reason of all the facts above set forth, the temporary policy of insurance on the life of Tan Caeng for the sum of
P10,000 upon which the present action is base is null and void.
Lower Court: the lower court rendered judgment for the plaintiff for P10,000, with legal interest from January 4, 1926, and
costs
Issue: W/N West Coast Life’s action for rescission is barred
Held: No
The premium was paid on April 10, 1925, at which time the temporary policy was issued; that the plaintiff's action was
commenced on January 4, 1926; that the original answer of the defendant, consisting of a general and specific denial, was filed
on February 27, 1926; and that its amended answer was filed on August 31, 1926.
Based upon those facts the plaintiff vigorously contended in the lower court and now contends in the court, that section 47 of
the Insurance Act should be applied, and that when so applied, defendant is barred and estopped to plead and set forth the
matters alleged in its special defense. That section is as follows:
Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right
must be exercised previous to the commencement of an action on the contract.
The defendant contended in the lower court and now contends in this court, that section 47 does not apply to the new matters
alleged in the special defense. It specifically denied that if ever issued the policy in question, or that it ever agreed with Tan
Ceang in the even of his death to pay P10,000 to the plaintiff or any one else. In its amended answer the defendant again
makes a general and specific denial, and alleges the reasons, the specific facts, and the reasons why it never made or entered
into the contract alleged in the complaint, and based upon those alleged facts, defendant contends that it never did enter into
any contract of insurance on the life of Tan Caeng.
The word "rescind" has a well defined legal meaning, and as applied to contracts, it presupposes the existence of a contract to
rescind.
In the instant case, it will be noted that even in its prayer, the defendant does not seek to have the alleged insurance contract
rescinded. It denies that it ever made any contract of insurance on the life of Tan Ceang or that any such a contract ever
existed, and that is the question which it seeks to have litigated by its special defense. In the very nature of things, if the
defendant never made or entered into the contract in question, there is no contract to rescind, and, hence, section 47 upon
which the lower based its decision in sustaining the demurrer does not apply.
An action to rescind a contract is founded upon and presupposes the existence of the contract which is sought to be rescinded.
If all of the material matters set forth and alleged in the defendant's special plea are true, there was no valid contract of
insurance, for the simple reason that the minds of the parties never met and never agreed upon the terms and conditions of
the contract.
Dispositive Portion: The judgment of the lower court is reversed and the case is remanded for such other and further
proceedings as are not inconsistent with this opinion, with costs against the plaintiff. So ordered.

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12. TAN CHAY HENG v.

THE WEST COAST LIFE INSURANCE COMPANY

By way of special defense, defendant alleges:

Issue: W/N West Coast Life’s action for rescission is barred

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