Nario v. Philamlife Insurance Company -  Loan Application and Surrender of Policy

20 SCRA 434

Facts:

>  Mrs. Nario applied for and was issued a life Insurance policy (no. 503617) by PHILAMLIFE under a 20-yr endowment plant, with a face value of 5T.  Her husband Delfin and their unemancipated son Ernesto were her revocable beneficiaries.

>  Mrs. Nario then applied for a loan on the above policy with PHILAMLIFE w/c she is entitled to as policy holder, after the policy has been in force for 3 years.  The purpose of such loan was for the school expenses of Ernesto.

>  The application bore the written signature and consent of Delfin in 2 capacities

o    As one of the irrevocable beneficiaries of the policy

o    As father-guardian of Ernesto and also the legal administrator of the minor’s properties pursuant to Art. 320 of the CC.

>  PHILAMLIFE denied the loan application contending that written consent of the minor son must not only be given by his father as legal guardian but it must also be authorized by the court in a competent guardianship proceeding.

>  Mrs. Nario then signified her decision to surrender her policy and demand its cash value which then amounted to P 520.

>  PHILAMLIFE also denied the surrender of the policy on the same ground as that given in disapproving the loan application.

>  Mrs. Nario sued PHILAMLIFE praying that the latter grant their loan application and/or accept the surrender of said policy in exchange for its cash value.

>  PHILAMLIFE contends that the loan application and the surrender of the policy involved acts of disposition and alienation of the property rights of the minor, said acts are not within the power of administrator granted under Art. 320 in relation to art. 326 CC, hence court authority is required.

Issue:

Whether or not PHILAMLIFE was justified in refusing to grant the loan application and the surrender of the policy.

Held: 

YES.

SC agreed with the trial court that the vested interest or right of the beneficiaries in the policy should be measured on its full face value and not on its cash surrender value, for in case of death of the insured, said beneficiaries are paid on the basis of its face value and in case the insured should discontinue paying premiums, the beneficiaries may continue paying it and are entitled to automatic extended term or paid-up insurance options and that said vested right under the policy cannot be divisible at any given time.

SC also agreed with TC that the said acts (loan app and surrender) constitute acts of disposition or alienation of property rights and not merely management or administration because they involve the incurring or termination of contractual obligations.

Under the laws (CC and rules of Court) The father is constituted as the minor’s legal administrator of the propty, and when the propty of the child is worth more than P2T (as in the case at bar, the minor’s propty was worth 2,500 his ½ share as beneficiary), the father a must file a petition for guardianship and post a guardianship bond.  In the case at bar, the father did not file any petition for guardianship nor post a guardianship bond, and as such cannot possibly exercise the powers vested on him as legal administrator of the minor’s property.  The consent give for and in behalf of the son without prior court authorization to the loan application and the surrender was insufficient and ineffective and PHILAMLIFE was justified in disapproving the said applications.

Assuming that the propty of the ward was less than 2T, the effect would be the same, since the parents would only be exempted from filing a bond and judicial authorization, but their acts as legal administrators are only limited to acts of management or administration and not to acts of encumbrance or disposition.