Bonifacio Bros. vs. Mora; No. L-20853. May 29, 1967.

FACTS:

Enrique Mora, owner of an Oldsmobile sedan model 1956, bearing plate No. QC-8088, mortgaged the same to the H.S. Reyes, Inc., with the condition that the former would insure the automobile with the latter as beneficiary. The automobile was thereafter insured on June 23, 1959 with the State Bonding & Insurance Co,, Inc. 

During the effectivity of the insurance contract, the car met with an accident. Enrique Mora, without the knowledge and consent of the H.S. Reyes, Inc., authorized the Bonifacio Bros. Inc. to furnish the labor and materials, some of which were supplied by the Ayala Auto Parts Co. The car was delivered to Enrique Mora without the consent of the H.S, Reyes, Inc., and without payment to the Bonifacio Bros. Inc. and the Ayala Auto Parts Co. of the cost of repairs and materials,

Bonifacio Bros. Inc. and the Ayala Auto Parts Co. filed on May 8, 1961 a complaint with the Municipal Court of Manila against Enrique Mora and State Bonding & Insurance Co., Inc. for the collection of the sum of P2,002.73.

The Municipal Court rendered a decision declaring the H.S. Reyes, Inc. as having a better right to the disputed amount, and ordering the State Bonding & Insurance Co. Inc. to pay to the H.S. Reyes, Inc. the said sum of P2,002.73.

ISSUES: 

1. WON there is no cause of action exists in favor of the appellants in so far as the proceeds of insurance are concerned.

2. WON the right of the H.S. Reyes, Inc. to the insurance proceeds arises only if there was loss and not where there is mere damage as in the instant case.

HELD: 

1. YES. It is fundamental that contracts take effect only between the parties thereto, except in some specific instances provided by law where the contract contains some stipulation in favor of a third person. Such stipulation is known as 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 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.2 Consequently, a third person not a party to the contract has no action against the parties thereto, and cannot generally demand the enforcement of the same.

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 materialmen 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.

2. NO. Suffice it to say that any attempt to draw a distinction between “loss” and “damage” is uncalled for, because the word “loss” in insurance law embraces injury or damage. 

“Loss in insurance, defined.—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.”

Indeed, according; to sec. 120 of the Insurance Act, a loss may be either total or partial.

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