Laws Applicable: Art. 1910,Article 1191
FACTS:
- December 17, 1984: Prudential Guarantee And Assurance, Inc. issued collector's provisional receipt amounting to P1,609.65
- June 29, 1985: 7 months after the issuance of petitioner Santos Areola's Personal Accident Insurance Policy, Prudential Guarantee And Assurance, Inc. unilaterally cancelled it for failing to pay his premiums through its manager Teofilo M. Malapit
- Shocked by the cancellation of the policy, Santos approached Carlito Ang, agent of Prudential and demanded the issuance of an official receipt. Ang told Santos that it was a mistake and assured its rectification.
- July 15, 1985: Santos demanded the same terms and same rate increase as when he paid the provincial receipt but Malapit insisted that the partial payment he made was exhausted and that he should pay the balance or his policy will cease to operate
- July 25, 1985 : Assistant Vice-President Mariano M. Ampil III apologized
- August 6, 1985 had filed a complaint for breach of contract with damages before the lower court
- August 13, 1985: Santos received through Carlito Ang the leeter of Assistant Vice-President Mariano M. Ampil III finding error on their part since premiums were not remitted Malapit, proposed to extend its lifetime to December 17, 1985
- RTC: favored Santos - Prudential in Bad Faith
- CA: Reversed - not motivated by negligence, malice or bad faith in cancelling subject policy
ISSUE: W/N the Areolas can file against damages despite the effort to rectify the cancellation
HELD: YES. RTC reinstated
- Malapit's fraudulent act of misappropriating the premiums paid is beyond doubt directly imputable to Prudential
- Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority.
- Subsequent reinstatement could not possibly absolve Prudential there being an obvious breach of contract
- a contract of insurance creates reciprocal obligations for both insurer and insured
- Article 1191
- choice between fulfillment or rescission of the obligation in case one of the obligors fails to comply with what is incumbent upon him
- entitles the injured party to payment of damages, regardless of whether he demands fulfillment or rescission of the obligation
- Nominal damages are "recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind, or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown.
