DEVELOPMENT BANK OF THE PHILIPPINES , petitioner, vs. COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented by CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION INSURANCE POOL, respondents..docx

DEVELOPMENT BANK OF THE PHILIPPINES , petitioner, vs.
COURT OF APPEALS and the ESTATE OF THE LATE

JUAN B. DANS, represented by CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION INSURANCE POOL,
respondents.
`Ex gratia is Latin for "by favour", and is most often used in a legal context. When something has been done ex
gratia, it has been done voluntarily, out of kind or grace. In law, an ex gratia payment is a payment made without
the giver recognising any liability or legal obligation.
`(Ruling for Insurance)
1. One is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has
duly proved (Civil Code of the Philippines, Art. 2199).
2, Damages, to be recoverable, must not only be capable of proof, but must be actually proved with a
reasonable degree of certainty (Refractories Corporation v. Intermediate Appellate Court , 176 SCRA 539
[1989]; Choa Tek Hee v. Philippine Publishing Co. , 34 Phil. 447 [1916]).
3. Speculative damages are too remote to be included in an accurate estimate of damages (Sun Life
Assurance v. Rueda Hermanos, 37 Phil. 844 [1918]).
~ Under Article 1987 of the Civil Code of the Philippines, "the agent who acts as such is not personally liable to the
party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without
giving such party sufficient notice of his powers."
The liability of an agent who exceeds the scope of his authority depends upon whether the third person is aware of
the limits of the agent's powers. There is no showing that Dans knew of the limitation on DBP's authority to solicit
applications for MRI.
Facts:
A loan, in the reduced amount of P300,000.00, was approved by DBP on August 4, 1987 and released on August
11, 1987.
As the principal mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a mortgage redemption
insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool).
From the proceeds of the loan, DBP deducted the amount of P1,476.00 as payment for the MRI premium. On
August 15, 1987, Dans accomplished and submitted the "MRI Application for Insurance" and the "Health Statement
for DBP MRI Pool."
On August 20, 1987, the MRI premium of Dans, less the DBP service fee of 10 percent, was credited by DBP to
the savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was advised of the credit.
On September 3, 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this information to the DBP MRI
Pool. On September 23, 1987, the DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage, being
over the acceptance age limit of 60 years at the time of application.
DBP apprised the spouse of the deceased of the disapproval and offered to return the premium deducted. DBP
also offered an ex gratia settlement of 30,000.
The spouse refused and demanded for the face value of the MRI.
Subsequently, the estate of Dans filed a case for collection of money and damages.
Respondent Estate alleged that Dans became insured by the DBP MRI Pool when DBP, with full knowledge of
Dans' age at the time of application, required him to apply for MRI, and later collected the insurance premium
thereon. Respondent Estate therefore prayed: (1) that the sum of P139,500.00, which it paid under protest for the
loan, be reimbursed; (2) that the mortgage debt of the deceased be declared fully paid; and (3) that damages be
awarded.
The DBP and the DBP MRI Pool separately filed their answers, with the former asserting a cross-claim against the
latter.
The trial court rendered a decision in favor of respondent Estate and against DBP. The DBP MRI Pool, however, was
absolved from liability, after the trial court found no privity of contract between it and the deceased. The trial
court declared DBP in estoppel for having led Dans into applying for MRI and actually collecting the premium and
the service fee, despite knowledge of his age ineligibility.
CA affirmed the trial court in toto.
Issue: Whether the estate of Juan Dans is entitled to the insurance proceeds.
Ruling:
WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV No. 26434 is MODIFIED and petitioner DBP is
ORDERED: (1) to REIMBURSE respondent Estate of Juan B. Dans the amount of P1,476.00 with legal interest from
the date of the filing of the complaint until fully paid; and (2) to PAY said Estate the amount of Fifty Thousand
Pesos (P50,000.00) as moral damages and the amount of Ten Thousand Pesos (P10,000.00) as attorney's fees.
With costs against petitioner.
Under the aforementioned provisions, the MRI coverage shall take effect:
(1) when the application shall be approved by the insurance pool; and
(2) when the full premium is paid during the continued good health of the applicant. These two conditions, being
joined conjunctively, must concur.
Indisputably, the power to approve MRI applications is lodged with the DBP MRI Pool. The pool, however, did not
approve the application of Dans. There is also no showing that it accepted the sum of P1,476.00, which DBP
credited to its account with full knowledge that it was payment for Dan's premium. There was, as a result, no
perfected contract of insurance; hence, the DBP MRI Pool cannot be held liable on a contract that does not exist.
In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second as an insurance agent.
As an insurance agent, DBP made Dans go through the motion of applying for said insurance, thereby leading
him and his family to believe that they had already fulfilled all the requirements for the MRI and that the
issuance of their policy was forthcoming. Apparently, DBP had full knowledge that Dan's application was never
going to be approved.
Under Article 1987 of the Civil Code of the Philippines, "the agent who acts as such is not personally liable to the
party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without
giving such party sufficient notice of his powers."
The liability of an agent who exceeds the scope of his authority depends upon whether the third person is aware
of the limits of the agent's powers. There is no showing that Dans knew of the limitation on DBP's authority to
solicit applications for MRI.
Inasmuch as the non-disclosure of the limits of the agency carries with it the implication that a deception was
perpetrated on the unsuspecting client, the provisions of Articles 19, 20 and 21 of the Civil Code of the Philippines
come into play.
Article 19 provides:
"Every person must, in the exercise of his rights and in the performance of his duties, act with justice give everyone
his due and observe honesty and good faith." LexLib
"Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for
the same."
"Any person, who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage."
The DBP's liability, however, cannot be for the entire value of the insurance policy. Considering his advanced
age, there is no absolute certainty that Dans could obtain an insurance coverage from another company. It must
also be noted that Dans died almost immediately, i.e., on the nineteenth day after applying for the MRI, and on
the twenty-third day from the date of release of his loan.
(Ruling for Insurance)

1. One is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has
duly proved (Civil Code of the Philippines, Art. 2199).
2, Damages, to be recoverable, must not only be capable of proof, but must be actually proved with a
reasonable degree of certainty (Refractories Corporation v. Intermediate Appellate Court , 176 SCRA 539
[1989]; Choa Tek Hee v. Philippine Publishing Co. , 34 Phil. 447 [1916]).
3. Speculative damages are too remote to be included in an accurate estimate of damages (Sun Life
Assurance v. Rueda Hermanos, 37 Phil. 844 [1918]).
While Dans is not entitled to compensatory damages, he is entitled to moral damages. No proof of pecuniary
loss is required in the assessment of said kind of damages (Civil Code of Philippines, Art. 2216). The same may be
recovered in acts referred to in Article 2219 of the Civil Code.
The assessment of moral damages is left to the discretion of the court according to the circumstances of each case
(Civil Code of the Philippines, Art. 2216). Considering that DBP had offered to pay P30,000.00 to respondent Estate
in ex gratia settlement of its claim and that DBP's non-disclosure of the limits of its authority amounted to a
deception to its client, an award of moral damages in the amount of P50,000.00 would be reasonable. The award
of attorney's fees is also just and equitable under the circumstances

DEVELOPMENT BANK OF THE PHILIPPINES , petitioner, vs. COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented by CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION INSURANCE POOL, respondents..docx

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DEVELOPMENT BANK OF THE PHILIPPINES , petitioner, vs. COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. DANS, represented by CANDIDA G. DANS, and the DBP MORTGAGE REDEMPTION INSURANCE POOL, respondents..docx

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DEVELOPMENT BANK OF THE PHILIPPINES , petitioner, vs.

COURT OF APPEALS and the ESTATE OF THE LATE

(Ruling for Insurance)

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