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Case Digest: Tang vs. Court of Appeals | G.R. No. L-48563 | May 25, 1979

Tang vs. Court of Appeals 

G.R. No. L-48563 | May 25, 1979

ABAD SANTOS, J



FACTS:


The case of Tang v. Court of Appeals involves a 61-year-old illiterate widow named Lee See Guat who only spoke Chinese. She applied for two insurance policies on her life with the Philippine American Life Insurance Company (PALIC). The first policy was issued based on her answers indicating that she was healthy, with Vicente E. Tang as her beneficiary. She then applied for and was issued a second policy using the same answers from her previous application. However, five months after the second policy was issued, Lee See Guat passed away from lung cancer.

PALIC refused to pay the claim, alleging that Lee See Guat had concealed and misrepresented her health condition. The trial court dismissed the claim due to the insured's concealment, and the Court of Appeals affirmed the decision.

ISSUE: 

Whether or not Lee See Guat should be held guilty of concealment due to her illiteracy and inability to understand the English language in which the applications for insurance were written.

RULING:

The Supreme Court upheld the decision against Lee See Guat, affirming her guilt of concealment and misrepresentation in insurance applications. Consequently, PALIC's refusal to pay the claim was justified based on these grounds. The Court underscored the principle of good faith in insurance contracts, emphasizing the necessity for both parties to communicate all material facts within their knowledge. Failure to disclose such facts renders the contract voidable at the insurer's discretion.

Furthermore, the Court clarified that Article 1332 of the Civil Code, which mandates the insurer to fully explain contract terms to the insured, was not applicable in this context. PALIC sought to avoid performance rather than enforce the contracts, absolving them from the duty to prove full disclosure. Moreover, the Court observed no imputation of mistake or fraud by Lee See Guat, as her interests were represented by her beneficiary, Vicente E. Tang. Lee See Guat's deliberate concealment of material health facts warranted PALIC's right to rescind the contract.

 


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