Bonifacio Bros. v. Mora

20 SCRA 262

Facts:

>  Enrique Mora mortgaged his Odlsmobile sedan car to HS Reyes Inc. with the condition that Mora would insure the car with HS Reyes as beneficiary.

>  The car was then insured with State Insurance Company and the policy delivered to Mora.

>  During the effectivity of the insurance contract, the car figured in an accident.  The company then assigned the accident to an insurance appraiser for investigation and appraisal of the damage.

>  Mora without the knowledge and consent of HS Reyes, authorized Bonifacio Bros to fix the car, using materials supplied by the Ayala Auto Parts Company.

>  For the cost of Labor and materials, Mora was billed P2,102.73.  The bill was sent to the insurer’s appraiser.  The insurance company drew a check in the amount of the insurance proceeds and entrusted the check to its appraiser for delivery to the proper party.

>  The car was delivered to Mora without the consent of HS Reyes, and without payment to Bonifacio Bros and Ayala.

>  Upon the theory that the insurance proceeds should be directly paid to them, Bonifacio and Ayala filed a complaint against Mora and the insurer with the municipal court for the collection of P2,102.73.

>  The insurance company filed its answer with a counterclaim for interpleader, requiring Bonifacio and HS Reyes to interplead in order to determine who has a better right to the proceeds.

Issue:

Whether or not there is privity of contract between Bonficacio and Ayala on one hand and State Insurance on the other.

Held:

NONE.

It is fundamental that contracts take effect only between the parties thereto, except in some specific instance provided by law where the contract contains some stipulation in favor of a third person.  Such stipulation is known as a stipulation pour autrui; or a provision in favor of a third person not a party to the contract.

Under this doctrine, a third person is ed to avail himself of a benefit granted to him by the terms of the contract, provided that the contracting parties have clearly and deliberately conferred a favor upon such person.  Consequently, a third person NOT a party to the contract has NO action against the aprties thereto, and cannot generally demand the enforcement of the same.

The question of whether a third person has an enforceable interest in a contract must be settled by determining whether the contracting parties intended to tender him such an interest by deliberately inserting terms in their agreement with the avowed purpose of conferring favor upon such third person.  IN this connection, this court has laid down the rule that the fairest test to determine whether the interest of a 3^rd person in a contract is  a stipulation pour autrui or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract.

In the instant case the insurance contract does not contain any words or clauses to disclose an intent to give any benefit to any repairmen or material men in case of repair of the car in question. The parties to the insurance contract omitted such stipulation, which is a circumstance that supports the said conclusion. On the other hand, the "loss payable" clause of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes, Inc." indicating that it was only the H.S. Reyes, Inc. which they intended to benefit.

A policy of insurance is a distinct and independent contract between the insured and insurer, and third persons have no right either in a court of equity, or in a court of law, to the proceeds of it, unless there be some contract of trust, expressed or implied, by the insured and third person.  In this case, no contract of trust, express or implied. In this case, no contract of trust, expressed or implied exists. We, therefore, agree with the trial court that no cause of action exists in favor of the appellants in so far as the proceeds of insurance are concerned. The appellant's claim, if at all, is merely equitable in nature and must be made effective through Enrique Mora who entered into a contract with the Bonifacio Bros Inc. This conclusion is deducible not only from the principle governing the operation and effect of insurance contracts in general, but is clearly covered by the express provisions of section 50 of the Insurance Act (now Sec. 53).

The policy in question has been so framed that "Loss, if any, is payable to H. S. Reyes, Inc." which unmistakably shows the intention of the parties.