FACTS:

Teodoro Cortez applied for a 20-year endowment policy with Great Pacific Insurance Corporation, upon the solicitation of Margarita Siega, an underwriter for the company. Cortez's application was accepted and approved, and Endowment Policy No. 221944 was issued in his name. The policy was released for delivery on January 24, 1973, and actually delivered to him on January 25, 1973. The effective date indicated on the policy was December 25, 1972. The annual premium was P1,416.60. Cortez was assured by Siega that the first premium may be paid within a grace period of 30 days from the delivery of the policy. Cortez paid the first premium in three installments, evidenced by temporary receipts. However, in a letter dated June 1, 1973, the defendant advised Cortez that the policy was not in force and asked him to remit the balance of the initial premium and undergo another medical examination. Cortez immediately cancelled the policy and demanded a refund of his premium. When the company ignored his demand, Cortez filed a complaint for damages. The court ruled in favor of Cortez and ordered the insurer to pay him the refund of the premium, moral damages, litigation expenses, attorney's fees, and costs of suit. The insurer appealed the decision, but the Court of Appeals affirmed the lower court's decision with a modification to reduce the amount of moral damages. The insurer filed a motion for reconsideration, which was denied. Hence, it filed a petition for review. The only issue in the case is whether Cortez is entitled to a refund of his premium.

ISSUES:

1. Whether Cortez is entitled to a refund of his premium.

RULING:

1. The Court held that Cortez is entitled to a refund of his premium. The lower court's decision was affirmed by the Appellate Court, reducing only the amount of moral damages awarded to Cortez. The Appellate Court observed that the policy was issued on December 25, 1972, and delivered on January 25, 1973, with a grace period of 30 days from the delivery date for the premium payment. The premium was fully paid on February 21, 1973, which falls within the grace period. Therefore, the Court ruled that Cortez is entitled to a refund of his premium.

PRINCIPLES:

• An insured is entitled to a refund of the premium if the policy never took effect, despite the premium payment.

• The grace period for premium payment allows the insured additional time to pay the premium without the policy losing effect.