No. 27541 – TAN CHAY HENG, plaintiff and appellee, vs. THE WEST COAST LIFE INSURANCE COMPANY, defendant and appellant.
Rule Synopsis
The defense by an insurer of fraudulent representations in the application of the insured is similar to alleging failure of the meeting of the minds, i.e. that the insurance contract was void ab initio. This is not the same as an action for rescission, which according to the laws then, must be exercised before an action to recover proceeds was brought before the courts.
Facts
One Tan Caeng was insured with West Coast for P10k, with Tan Chay Heng as sole beneficiary. The policy was issued on April 1925. About a month after, on May 10, Tan Caeng died. The following month, Tan Chay Heng filed a claim with West Coast, submitting proof of Tan Caeng’s death as required. West Coast refused.
Tan Chay filed an action for the recovery of the proceeds.
As special defense, West Coast alleged that Tan Chay, along with several others conspired to defraud it. The false representations alleged were:
| Alleged fraudulent representations | Alleged actual facts |
| Tan Caeng was single | He was legally married |
| He was a merchant and was worth P40k, earning about P8k to P10k, net annually | He was a mere employee of another Chinaman |
| Tan Chai Heng was his nephew | Tan Chai was not his nephew |
| Tan Caeng was in good health | He was suffering from Tuberculosis for 3 years |
| He was not a drug user One Dr. Locsin falsified the medical certificates | He was a morphine/cocaine/opium addict, and was convicted therefor |
On the basis of falsified medical report and another confidential report containing said fraudulent representations, West Coast provisionally accepted Tan Caeng’s application for insurance. But it alleged that the permanent policy was not delivered as the fraud had been discovered. West Coast also alleged that it was the modus of these conspirators to defraud it, and had in fact it is not the first time that they committed the same. Furthermore, that there were criminal (e.g. falsification of private documents in relation to a fraudulent insurance) and civil cases filed or pending as against them on ground of the same acts as committed in the present case.
The lower court ruled in favor of Tan Chay Heng. The SC reversed, remanding the case to the lower court to determine whether West Coast’s allegations were true.
Issue
Was West Coast’s special defense in the nature of an act to rescind “a contract of insurance”?
Ruling and Discussion
No. West Coast’s special defense was not in the nature of an act to rescind “a contract of insurance.”
West Coast’s defense was general and specific denial. it specifically denied that it ever issued the policy in question, or that it ever agreed with Tan Caeng in the event of his death. It made factual allegations as to why it never entered into the contract alleged.
Rescission is the unmaking of a contract, requiring
the same concurrence of wills as that which made it, and nothing short of this will suffice. There is a wide difference between the rescission of a contract and its mere termination or cancellation.
In the instant case, even in its prayer, West Coast did not seek to have the alleged insurance contract rescinded. It denies that it ever made any contract of insurance on the life of Tan Caeng, or that any such a contract ever existed. As there was no valid contract entered into, there was nothing to rescind.
An action for rescission presupposes the existence of a valid contract. If the facts alleged by West Coast were 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. Should the same be found true, the Court is of the opinion that they would constitute a valid defense to Tan Chay Heng’s cause of action. Thus, case remanded.
Dispositive
Judgment reversed.