Bonifacio Bros., Inc. V.

Mora

FACTS: Enrique Mora, owner of Oldsmobile sedan model 1956, mortgaged it

to H.S. Reyes, Inc., with the condition that they would be the beneficiary of
its insurance.

On June 23, 1959 the sedan was insured with State Bonding & Insurance
Co., Inc. During the period of effectivity, the sedan met an accident and it
was appraised by Bayne Adjustment Co. and repaired it with Bonifacio Bros.
and the parts were supplied by Ayala Auto Parts Co. This was all done
without the knowledge of H.S. Reyes. Enrique was billed P2,102.73 through
Bayne. The insurance company drew a check deducting P100 for franchise
and entrusted it to Bayne payable to Enrique or H.S. Reyes. Still unpaid, the
sedan was delivered to Enrique without the Knowledge of H.S. Reyes.

Bonifacio Bros and Ayala Auto filed in the MTC on the theory that the
insurance proceeds should be paid directly to them.

CFI affirmed MTC’s decision that H.S. Reyes, Inc. as having a better right.

ISSUE: Whether or not there is privity between Bonifacio Bro and Ayala
Auto against the insurance company.

RULING: No, there is no privity between Bonifacio Bro and Ayala Auto
against the insurance company.  Judgment of the CFI is affirmed.

General rule is that, contracts take effect only between the parties thereto
exception is when some specific instances provided by law where the
contract contains some stipulation in favor of a third person - stipulation
pour autrui.

The provision is in favor of a third person not a party to the contract. The
third person is allowed 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.

The stipulation pour autrui must be clearly expressed, however, in the

[resent case no stipulation was expressed. 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. The stipulation merely establishes the procedure that the insured
has to follow in order to be entitled to indemnity for repair.
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 between the insured and third person.
The word "loss" in insurance law embraces injury or damage. The injury or
damage sustained by the insured in consequence of the happening of one or
more of the accidents or misfortune against which the insurer, in
consideration of the premium, has undertaken to indemnify the insured.

Heirs of Maramag v. Maramag

FACTS: The case stems from a petition filed against respondents with the
RTC for revocation and/or reduction of insurance proceeds for being void
and/or inofficious.

The petition alleged that:

(1) Petitioners were the legitimate wife and children of Loreto Maramag
(Loreto), while respondents were Loreto’s illegitimate family;
(2) Eva de Guzman Maramag (Eva) was a concubine of Loreto and a suspect
in the killing of the latter, thus, she is disqualified to receive any proceeds
from his insurance policies from Insular Life Assurance Company, Ltd.
(Insular) and Great Pacific Life Assurance Corporation (Grepalife)
(3) The illegitimate children of Loreto—Odessa, Karl Brian, and Trisha
Angelie—were entitled only to one-half of the legitime of the legitimate
children, thus, the proceeds released to Odessa and those to be released to
Karl Brian and Trisha Angelie were inofficious and should be reduced; and
(4) Petitioners could not be deprived of their legitimes, which should be
satisfied first.

Insular admitted that Loreto misrepresented Eva as his legitimate wife and

Odessa, Karl Brian, and Trisha Angelie as his legitimate children, and that
they filed their claims for the insurance proceeds of the insurance policies;
that when it ascertained that Eva was not the legal wife of Loreto, it
disqualified her as a beneficiary and divided the proceeds among
Odessa, Karl Brian, and Trisha Angelie, as the remaining designated
beneficiaries; and that it released Odessa’s share as she was of age, but
withheld the release of the shares of minors Karl Brian and Trisha Angelie
pending submission of letters of guardianship. Insular alleged that the
complaint or petition failed to state a cause of action insofar as it sought to
declare as void the designation of Eva as beneficiary, because
Loreto revoked her designation as such in Policy No. A001544070 and it
disqualified her in Policy No. A001693029; and insofar as it sought to declare
as inofficious the shares of Odessa, Karl Brian, and Trisha Angelie,
considering that no settlement of Loreto’s estate had been filed nor had the
respective shares of the heirs been determined. Insular further claimed that
it was bound to honor the insurance policies designating the children of
Loreto with Eva as beneficiaries pursuant to Section 53 of the
Insurance Code. Grepalife alleged that Eva was not designated as an
insurance policy beneficiary; that the claims filed by Odessa, Karl Brian, and
Trisha Angelie were denied because Loreto was ineligible for insurance due
to a misrepresentation in his application form that he was born on December
10, 1936 and, thus, not more than 65 years old when he signed it in
September 2001; that the case was premature, there being no claim filed
by the legitimate family of Loreto; and that the law on succession does
not apply where the designation of insurance beneficiaries is clear.

ISSUE: Whether or not illegitimate children can be beneficiaries in an

insurance contract.

RULING: Yes, illegitimate children can be beneficiaries in an

insurance contract. Section 53 of the Insurance Code states that the
insurance proceeds shall be applied exclusively to the proper interest of the
person in whose name or for whose benefit it is made unless otherwise
specified in the policy. Pursuant thereto, it is obvious that the only persons
entitled to claim the insurance proceeds are either the insured, if still alive;
or the beneficiary, if the insured is already deceased, upon the maturation
of the policy. The exception to this rule is a situation where the insurance
contract was intended to benefit third persons who are not parties to the
same in the form of favorable stipulations or indemnity. In such a case, third
parties may directly sue and claim from the insurer.

Petitioners are third parties to the insurance contracts with Insular and
Grepalife and, thus, are not entitled to the proceeds thereof. Accordingly,
respondents Insular and Grepalife have no legal obligation to turn over the
insurance proceeds to petitioners. The revocation of Eva as a beneficiary in
one policy and her disqualification as such in another are of no moment
considering that the designation of the illegitimate children as beneficiaries
in Loreto’s insurance policies remains valid. Because no legal
proscription exists in naming as beneficiaries the children of illicit
relationships by the insured, the shares of Eva in the insurance proceeds,
whether forfeited by the court in view of the prohibition on donations under
Article 739 of the Civil Code or by the insurers themselves for reasons based
on the insurance contracts, must be awarded to the said illegitimate
children, the designated beneficiaries, to the exclusion of petitioners. It
is only in cases where the insured has not designated any beneficiary, or
when the designated beneficiary is disqualified by law to receive the
proceeds, that the insurance policy proceeds shall redound to the benefit of
the estate of the insured.

Coquia v. Fieldmen’s Insurance Co.

FACTS: The Fieldmen’s Company (company) issued a common carrier
accident insurance policy to Manila Yellow Taxicab Co. Inc. (insured). In the
policy it stipulated that accident arising from a motor vehicle shall be insured
with respect to the death or bodily injured driver, conductor and/or inspector
riding in the motor vehicle.

Carlito Coquia met an accident while driving resulting in his death. The
insured asked the company for the insurance of Carlito. The company
refused to give insurance to the said insured, the paaboutts of Carlito filed a
complaint about a sum of money for the insurance of their dead child. The
company contends that parents had no contractual relation with the
company, thus they are not the proper parties in the said case.

ISSUE: Whether or not the policy in question belong to such class of

contracts pour autrui.

RULING: Yes, the policy in question belong to such class of contracts pour
autrui.

Pursuant to these stipulations, the Company “will indemnify any authorized

Driver who is driving the Motor Vehicle” of the Insured and, in the event of
death of said driver, the Company shall, likewise, “indemnify his personal
representatives.” In fact, the Company “may, at its option, make indemnity
payable directly to the claimants or heirs of claimants … it being the true
intention of this Policy to protect … the liabilities of the Insured towards the
passengers of the Motor Vehicle and the Public” — in other words, third
parties.

Thus, the policy under consideration is typical of contracts pour autrui, this

character being made more manifest by the fact that the deceased driver
paid fifty per cent (50%) of the corresponding premiums, which were
deducted from his weekly commissions. Under these conditions, it is clear
that the Coquias — who, admittedly, are the sole heirs of the deceased —
have a direct cause of action against the Company, and, since they could
have maintained this action by themselves, without the assistance of the
Insured, it goes without saying that they could and did properly join the
latter in filing the complaint herein.

Development Insurance Corp. v. IAC

Facts: Phil. Union Realty Development Corp. (PURDC) insured its building
against fire with Development Insurance Corp. (DIC). The policy contained
the following provision: “This is an open policy as defined in Section 57 of
the Insurance Act. In the event of loss, whether total or partial, it is
understood that the amount of the loss shall be subject to appraisal and the
liability of the company, if established, shall be limited to the actual loss,
subject to the applicable terms, conditions, warranties and clauses of this
Policy, and in no case shall exceed the amount of the policy." After a fire
consumed apart of the building, with PURDC suffering an appraised value of
loss of P508, 867 (later adopted by the trial court and the appellate
court), PURDC filed its claim with DIC, but the latter refused. DIC argued
that since the building was worth more than the sum insured, PURDC must
be considered its own insurer for the difference of the amount and the face
value of the policy and should share pro rata on the loss sustained.

Issue: Whether or not DIC is liable for the appraised value of actual loss
sustained by PURDC.

Held: Yes, DIC is liable for the appraised value of actual loss sustained by
PURDC.

As defined in the provision, which is now Section 60 of the Insurance Code,

"an open policy is one in which the value of the thing insured is not agreed
upon but is left to be ascertained in case of loss."

This means that the actual loss, as determined, will represent the total
indemnity due the insured from the insurer except only that the total
indemnity shall not exceed the face value of the policy. The actual loss
having been ascertained in this case, the Court will respect such factual
determination in the absence of proof that it was arrived at arbitrarily. There
is no such showing. Hence, applying the open policy clause as expressly
agreed upon by the parties in their contract, PURDC is entitled to the
payment of indemnity under the said contract in the full amount of the
appraised value of actual loss