G.R. No. 118342, 5 January 1998


Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for a loan of P500,000.00 with the Development Bank of the Philippine on May 1987. The loan was approved by the bank in August 1987 but in the reduced amount of P300,000. 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).

On September 3, 1987, Dans died of cardiac arrest. DBP MRI notified DBP was not eligible for the coverage of the insurance for he was beyond the maximum age of 60. The wife, Candida, filed a complaint to the RTC against DBP and DBP MRI pool for the ‘Collection of Sum of money with Damages’. Prior to that, DBP offered Mrs. Dans a refund of the MRI payment but she refused for insisting that the family must receive the amount equivalent of the loan. DBP also offered and ex gratia for a settlement worth P30,000 but Mrs. Dans refused to take it.


Whether or not the DBP MRI Pool should be held liable on the ground that the contract was already perfected.


 No. DBP MRI Pool is not liable. Though the power to approve the insurance is lodged to the pool, it did not approve the application of Mr. Dans. Thus, there was no perfected contract between the insurance pool and Mr. Dans.

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 believed that the family already fulfilled the requirements of the said insurance although DBP had a full knowledge that the application would never be approved. DBP acted beyond the scope of its authority for accepting applications for the MRI. If the third person who contracted is unaware of the authority conferred by the principal on the agent and he has been deceived, the latter is liable for damages.

The DBP’s liability, however, cannot be for the entire value of the insurance policy. To assume that were it not for DBP’s concealment of the limits of its authority, Dans would have secured an MRI from another insurance company, and therefore would have been fully insured by the time he died, is highly speculative. 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.

Wherefore, 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.

* Case digest by Lady Rubygw Denura, LLB-1, Andres Bonifacio Law School, SY 2017-2018