Southern Luzon Employees' Association vs. Golpeo

A death benefit paid by a mutual benefit association to beneficiaries designated by a deceased member is analogous to insurance proceeds and belongs exclusively to the named beneficiaries, notwithstanding that one beneficiary is the member's common-law wife, provided the contract was perfected before the effectivity of the new Civil Code and the designation does not violate existing law at the time of perfection.

The Southern Luzon Employees' Association was composed of laborers and employees of the Laguna Tayabas Bus Co. and the Batangas Transportation Company, and one of its purposes was mutual aid of its members and their dependents in case of death. On September 17, 1949, the association adopted a resolution allowing members to designate their beneficiaries—including common-law wives and children born of such relations—on family record cards, and providing that only persons so named would be recognized by the association for claims for condolence contributions. Roman A. Concepcion was a member of the association until his death on December 13, 1950.

The Southern Luzon Employees' Association, composed of laborers and employees of the Laguna Tayabas Bus Co. and the Batangas Transportation Company, existed for the mutual aid of its members and their dependents in case of death. On September 17, 1949, the association adopted a resolution requiring each member to fill out a family record card designating his dependents and/or beneficiaries. The resolution expressly allowed a member to name his common-law wife as beneficiary, and in the case of a widower, to name both his legitimate children from a first marriage and his common-law wife as dependents and/or beneficiaries. Only persons so named would be recognized by the association for claims for condolence contributions.

Roman A. Concepcion, a member of the association, accomplished the required form and listed as his beneficiaries Aquilina Maloles, Roman M. Concepcion, Jr., Estela M. Concepcion, Rolando M. Concepcion, and Robin M. Concepcion. He died on December 13, 1950. After his death, the association collected voluntary contributions from its members amounting to ₱2,505. Three sets of claimants then presented themselves: first, Juanita Golpeo, the legal wife of Roman A. Concepcion, and her children; second, Aquilina Maloles, a common-law wife of the deceased, and her children, who had been named as beneficiaries; and third, Elsie Hicban, another common-law wife of the deceased, and her child.

Unable to determine the rightful claimant, the association filed an interpleader action in the Court of First Instance of Laguna against the three conflicting sets of claimants. Marcelino and Josefina Concepcion, children of the deceased with Juanita Golpeo, intervened in their own rights, aligning themselves with Juanita Golpeo and her minor children. After hearing, the trial court declared Aquilina Maloles and her children the sole beneficiaries of the ₱2,505 and ordered the association to deliver the amount to them. Only Juanita Golpeo, her minor children, and the intervenors Marcelino and Josefina Concepcion appealed to the Supreme Court.

• Inapplicability of Insurance Law: Appellants argued that the Insurance Law was not applicable because the plaintiff association was a mutual benefit association as defined in section 1628 of the Revised Administrative Code, not a regular insurance company.
• Void Designation as Contrary to Law and Public Policy: Appellants contended that the stipulation regarding the specification of beneficiaries and the resolution of September 17, 1949 were void for being contrary to law, morals, or public policy, citing Article 2012 of the new Civil Code, which provides that any person forbidden from receiving any donation under Article 739 cannot be named beneficiary of a life insurance policy. Since Article 739 prohibits donations between persons guilty of adultery or concubinage, appellants asserted that Aquilina Maloles, as a common-law wife, could not be named a beneficiary.
• Collation and Legitime: Counsel for appellants also claimed that the proceeds were a donation or gift made by the deceased during his lifetime and that, as such, its ultimate destination was determined by the Civil Code provisions relating to donations, particularly Article 819 on collation of gifts to legal portions.

• Acquiescence of the Legal Wife: The appellees intimated that appellant Juanita Golpeo, by her silence and actions, had acquiesced in the illicit relations between her husband and appellee Aquilina Maloles, which would undermine the appellants' reliance on Article 739.
• Successional Rights of Illegitimate Children: The appellees pointed out that the new Civil Code recognized certain successional rights of illegitimate children under Article 287, such that even if the prohibition applied to the common-law wife, it would not affect the children of Aquilina Maloles who were likewise named beneficiaries.

• Nature of the Death Benefit: Whether the death benefit paid by a mutual benefit association to beneficiaries designated by a deceased member is analogous to insurance proceeds and governed by insurance principles.
• Validity of the Beneficiary Designation: Whether the designation of a common-law wife as beneficiary is void under Article 2012 of the new Civil Code in relation to Article 739, which prohibits donations between persons guilty of adultery or concubinage.

• Nature of the Death Benefit: Yes. The death benefit is analogous to insurance proceeds, and the proceeds belong exclusively to the named beneficiaries, not to the estate of the deceased, pursuant to the doctrine in Del Val vs. Del Val and section 428 of the Code of Commerce.
• Validity of the Beneficiary Designation: No, the designation is not void. Even assuming Article 2012 applied, the prohibition in Article 739 would not affect the children of Aquilina Maloles who were likewise named beneficiaries, as the new Civil Code recognizes certain successional rights of illegitimate children under Article 287.

• Nature of the Death Benefit: The trial court did not consider the plaintiff association as a regular insurance company but merely ruled that the death benefit was analogous to insurance. Section 1628 of the Revised Administrative Code itself defines a mutual benefit association as one providing for "any method of accident or life insurance among its members out of dues or assessments collected from the membership," confirming the analogy. The Court relied on Del Val vs. Del Val, which held that insurance proceeds belong exclusively to the beneficiary and not to the estate of the insured, pursuant to section 428 of the Code of Commerce. The contract of life insurance is a special contract, and the destination of its proceeds is determined by special laws—the Code of Commerce—which deal exclusively with that subject. The Civil Code has no provisions relating directly and specifically to life-insurance contracts or to the destination of life-insurance proceeds, so the provisions on collation of donations (Article 10035 of the old Civil Code) and on gifts to children (Article 819) do not govern.

• Validity of the Beneficiary Designation: Appellants invoked Article 2012 of the new Civil Code, which prohibits naming as beneficiary any person who cannot receive a donation under Article 739—i.e., persons guilty of adultery or concubinage. Without ruling on whether Juanita Golpeo had acquiesced in the illicit relationship, the Court held that even if the prohibition applied to Aquilina Maloles as common-law wife, it would certainly not apply to the children of Aquilina who were likewise named beneficiaries, since the new Civil Code recognizes certain successional rights of illegitimate children under Article 287. The Court further noted that the estate of the deceased was not entirely left without anything, as ₱2,500 had been paid to the appellants under the Workmen's Compensation Act.

• Insurance Proceeds Belong Exclusively to the Beneficiary — The proceeds of an insurance policy belong exclusively to the beneficiary and not to the estate of the person whose life was insured; they are the separate and individual property of the beneficiary. This doctrine, drawn from Del Val vs. Del Val and section 428 of the Code of Commerce, was applied to hold that the death benefit collected by the association belonged exclusively to the named beneficiaries, not to the estate or heirs of the deceased member.
• Life Insurance as a Special Contract — The contract of life insurance is a special contract, and the destination of its proceeds is determined by special laws—the Code of Commerce—which deal exclusively with that subject. The Civil Code provisions on donations and collation do not apply to insurance proceeds. This principle was invoked to reject appellants' argument that the proceeds were a donation subject to collation under the Civil Code.
• Mutual Benefit Association Providing Life Insurance — A mutual benefit association, as defined in section 1628 of the Revised Administrative Code, is one providing for "any method of accident or life insurance among its members out of dues or assessments collected from the membership." The death benefit paid by such an association is therefore analogous to insurance and governed by insurance principles.

• "The contract of life insurance is a special contract and the destination of the proceeds thereof is determined by special laws which deal exclusively with that subject. The Civil Code has no provisions which relate directly and specifically to life-insurance contract or to the destination of life-insurance proceeds. That subject is regulate exclusively by the Code of Commerce which provides for the terms of the contract, the relations of the parties and the destination of the proceeds of the policy." — This passage, quoting Del Val vs. Del Val, articulates the ratio decidendi that insurance proceeds are governed by special law, not the Civil Code provisions on donations, and is the doctrinal basis for awarding the death benefit to the named beneficiaries.

• "The amounts which the underwriter must deliver to the person insured, in fulfillment of the contract, shall be the property creditors of any kind whatsoever of the person who effected the insurance in favor of the formers." — This is the text of section 428 of the Code of Commerce, cited as the statutory basis for the rule that insurance proceeds belong exclusively to the beneficiary and not to the estate of the insured.

• Del Val vs. Del Val, 29 Phil. 534 — Controlling precedent followed. The Court adopted its holding that insurance proceeds belong exclusively to the beneficiary and not to the estate of the insured, and that life insurance is a special contract governed by the Code of Commerce rather than the Civil Code provisions on donations and collation.

• Section 428, Code of Commerce — Provides that amounts the underwriter must deliver to the insured in fulfillment of the contract shall be the property of the beneficiary, free from the claims of creditors of the person who effected the insurance. Applied as the statutory basis for awarding the death benefit exclusively to the named beneficiaries.
• Section 1628, Revised Administrative Code — Defines a mutual benefit association as one providing for "any method of accident or life insurance among its members out of dues or assessments collected from the membership." Cited to confirm that the death benefit paid by the association was analogous to insurance.
• Article 2012, New Civil Code — Provides that any person forbidden from receiving any donation under Article 739 cannot be named beneficiary of a life insurance policy by the person who cannot make any donation to him. Appellants invoked this to void the designation of the common-law wife as beneficiary; the Court held that even if applicable, it would not affect the illegitimate children likewise named.
• Article 739, New Civil Code — Prohibits donations between persons guilty of adultery or concubinage. Appellants relied on this provision through Article 2012 to challenge the beneficiary designation; the Court found it inapplicable to the children of the common-law wife.
• Article 287, New Civil Code — Recognizes certain successional rights of illegitimate children. Cited to support the conclusion that even if the prohibition in Article 739 applied to the common-law wife, the children named as beneficiaries could still validly receive the proceeds.
• Article 10035, Old Civil Code — Provides for collation into the hereditary estate of property received from the deceased by way of dowry, gift, or for any good consideration. Appellants argued the insurance proceeds were subject to collation; the Court rejected this, holding that insurance is a special contract governed by the Code of Commerce.
• Article 819, Old Civil Code — Provides that gifts made to children which are not betterments shall be considered as part of their legal portion. Appellants invoked this to treat the proceeds as a collatable gift; the Court rejected the argument for the same reason.

• Bengzon, J. — concurred.
• Jugo, J. — concurred.
• Bautista Angelo, J. — concurred.
• Padilla, J. — concurred in the result.
• Reyes, A., J. — concurred in the result.
• Reyes, J.B.L., J. — concurred in the result, on the ground that the contract was perfected before the new Civil Code took effect, and hence its provisions cannot be made to apply retroactively. Concepcion, J., and Montemayor, J., concurred in this separate concurrence.