G.R. No. L-64677 September 13, 1990
NORA LUMIBAO, petitioner, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT AND EUGENIO TRINIDAD, respondents.

FACTS

Petitioner Nora Lumibao, an insurance agent, convinced private respondent Eugenio Trinidad to purchase a life insurance policy. The annual premium was set at P93,180.00. To induce Trinidad, Lumibao verbally promised to return to him 50% of this first premium, equivalent to her commission. Relying on this promise, Trinidad issued two checks totaling the premium amount to the insurance company. Lumibao subsequently received her commission of P51,249.00 but failed to give the promised rebate to Trinidad. After a demand letter was ignored, Trinidad filed an action for specific performance and damages.
The trial court found as a fact that Lumibao made the promise of a rebate. However, it dismissed the complaint, ruling the agreement was void for being contrary to the Insurance Code (Presidential Decree No. 612) and public policy. On appeal, the Intermediate Appellate Court reversed, ordering Lumibao to pay Trinidad P46,590.00. Lumibao elevated the case to the Supreme Court.

ISSUE

Whether the courts can enforce the agreement wherein an insurance agent promised to rebate part of her commission to the insured as an inducement to purchase a policy.

RULING

The Supreme Court reversed the appellate court and reinstated the trial court’s dismissal. The agreement is void and unenforceable. The factual finding that Lumibao promised a rebate is conclusive. This promise directly violates Section 361 of the Insurance Code, which prohibits any insurance agent from paying or allowing any rebate from the premium specified in the policy as an inducement to insurance.
The legal logic is rooted in public policy. Such anti-rebate statutes are designed to prevent unfair discrimination and ensure that all policyholders of the same class are treated equally, preventing ruinous competition and safeguarding the integrity of the insurance industry. To allow a party to recover under an agreement expressly prohibited by law would be to sanction the very evil the statute seeks to prevent. The law protects the general body of policyholders, not an individual who enters into such an illicit bargain seeking to profit from it. Since the promise was illegal, no cause of action arises from it, and the courts will leave the parties where they are, providing no remedy for the enforcement of a void contract. The Court also directed that a copy of the decision be furnished to the Insurance Commissioner for possible administrative action against the agent.