G.R. No. L-28093. January 30, 1971.
BASILIA BERDIN VDA. DE CONSUEGRA, ET AL., petitioners-appellants, vs. GOVERNMENT SERVICE INSURANCE SYSTEM, ET AL., respondents-appellees.

FACTS

The late Jose Consuegra, a government employee, contracted two marriages. His first marriage was to respondent Rosario Diaz in 1937, which produced two children who predeceased him. While this first marriage was still subsisting, he contracted a second marriage in good faith with petitioner Basilia Berdin in 1957, which produced seven children. Upon Consuegra’s death, the GSIS paid the proceeds of his life insurance policy to Basilia Berdin and her children, as they were the named beneficiaries. However, a separate retirement insurance benefit was also due. Consuegra had not designated a beneficiary for this retirement benefit, leading to conflicting claims.
Rosario Diaz, as the widow from the first marriage, claimed the entire retirement benefit as the sole legal heir. Basilia Berdin and her children also claimed the entire amount, arguing that as the designated beneficiaries in the life insurance policy, they should automatically be considered the beneficiaries for the retirement benefits. The GSIS resolved the conflict by ruling that both families were legal heirs, apportioning one-half of the benefit to Rosario Diaz and the other half to be divided equally among Basilia Berdin and her seven children.

ISSUE

Whether the designated beneficiaries in the deceased’s life insurance policy are automatically and exclusively entitled to his undesignated retirement insurance benefits, to the exclusion of the legal widow from the first marriage.

RULING

No. The Supreme Court affirmed the lower court’s decision, upholding the GSIS’s apportionment. The legal logic is clear: life insurance proceeds and retirement insurance benefits are distinct. The proceeds of a life insurance policy belong exclusively to the designated beneficiaries by contract. In contrast, retirement benefits for which no beneficiary is designated form part of the decedent’s estate and are subject to the laws on succession.
Since Jose Consuegra did not designate a beneficiary for his retirement benefits, these benefits devolved to his legal heirs. The Court applied the settled doctrine governing cases of a void second marriage contracted in good faith, as established in Lao v. Dee Tim. Both families are considered legitimate. Rosario Diaz, as the legal widow from the still-subsisting first marriage, and Basilia Berdin, as the wife from a void but supposedly innocent second marriage, along with their respective children, are all legitimate heirs. Consequently, the estate is divided equally between the two families. The first family (Rosario Diaz) is entitled to one-half, and the second family (Basilia Berdin and her seven children) is entitled to the other half, to be shared equally among them. The designation in the life insurance policy does not control the disposition of the separate retirement benefits.