G.R. No. 102253 June 2, 1995
SOUTH SEA SURETY AND INSURANCE COMPANY, INC., petitioner, vs. HON. COURT OF APPEALS and VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY, INC., respondents.

FACTS

Valenzuela Hardwood and Industrial Supply, Inc. (Hardwood) insured its shipment of lauan logs with South Sea Surety and Insurance Co., Inc. under Marine Cargo Insurance Policy No. 84/24229, issued on January 20, 1984, for P2,000,000. On January 24, 1984, Hardwood delivered a check for the insurance premium to Mr. Victorio Chua. The insured vessel, M/V Seven Ambassador, sank on January 25, 1984, resulting in the total loss of the logs. On January 30, 1984, the check was tendered to South Sea, which refused acceptance and instead cancelled the policy retroactively to its inception date, citing non-payment of premium under Section 77 of the Insurance Code.
Hardwood filed a complaint against both the shipping corporation and the insurer. The trial court ruled in favor of Hardwood. On appeal, the Court of Appeals affirmed the liability of South Sea but absolved the shipping company, holding it acted as a private carrier under a charter party containing a valid stipulation exempting it from liability.

ISSUE

Whether South Sea is liable under the insurance policy despite the tender of premium payment after the loss occurred, specifically focusing on whether Victorio Chua was authorized to receive the premium on behalf of the insurer.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ decision holding South Sea liable. The legal logic centers on the application of Section 306 of the Insurance Code, not Section 77. While Section 77 states that no insurance policy is valid and binding unless the premium is paid, the pivotal question is whether payment to Victorio Chua constituted payment to the insurer. The Court upheld the factual finding that Chua was authorized to receive the premium on South Sea’s behalf. Section 306 provides that any insurance company which delivers a policy to an insurance agent or broker is deemed to have authorized such agent to receive payment of the premium due. The evidence showed South Sea delivered the insurance policy to Chua for transmission to Hardwood. This delivery constituted implied authorization under the law for Chua to receive the premium payment. Consequently, when Hardwood delivered the check to Chua on January 24, 1984, before the loss on January 25, payment was effectively made to the insurer’s authorized representative. The subsequent tender of the same check to South Sea’s office days after the loss was immaterial, as the premium had already been paid through its agent. The Court declined to re-evaluate these factual findings, which were consistently upheld by both lower courts.