#32 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 insurers 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 parties 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 rd down the rule that the fairest test to determine whether the interest of a 3 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. #33 FIRST INTEGRATED BONDIGN VS. HERNANDO FACTS: Silverio Blanco was the owner of a passenger jeepney which he insured against liabilities for death and injuries to third persons with First Integrated Bonding and Insurance Company, Inc. (First Insurance) under Motor Vehicle Policy No. V0563751 with the face value of P30,000.00. On November 25, 1976, the said jeepney driven by Blanco himself bumped a five-year old child, DeograciasAdvincula, causing the latter's death. A complaint was filed by childs parents. RTC rendered a decision, thus: WHEREFORE, for moral damages, this court adjudicates to the plaintiffs P5,000.00; for the life of DeograciasAdvincula P12,000.00, for funeral expenses, P3,663.50 and for attomey's fees, P3,000.00. The satisfaction of these damages

divulged (sic) independently now upon the defendant insurance company and to pay the costs of the proceedings. The First Insurance filed a motion but the same was not granted, thus, this petition for certiorari. It is the contention of the petitioner that the Advincula spouses have no cause of action against it. As parents of the victim, they may proceed against the driver, Silverio Blanco on the basis of the provisions of the New Civil Code. However, they have no cause of action against First Insurance, because they are not parties to the insurance contract. ISSUE: whether or not the First Insurance can be held liable to pay the damages suffered by the child Advincula. DECISION: It is settled that where the insurance contract provides for indemnity against liability to a third party, such third party can directly sue the insurer. The liability of the insurer to such third person is based on contract while the liability of the insured to the third party is based on tort. First Insurance cannot evade its liability as insurer by hiding under the cloak of the insured. Its liability is primary and not dependent on the recovery of judgment from the insured. t is true that Blanco denied that he was negligent when the incident occurred. However, during the pre-trial conference, when respondent judge admitted all the exhibits of the plaintiffs to abbreviate the proceedings, no objection was interposed by Blanco. When a decision was rendered based only on the exhibits of the plaintiffs, Blanco likewise did not object. No motion for reconsideration was filed by either Blanco or First Insurance. Hence, the decision became final and may no longer be attacked. #34 SHERMAN SHAFER VS HON. JUDGE OF RTC-OLONGAPO CITY FACTS: On 2 January 1985, petitioner Sherman Shafer obtained a private car policy, GA No. 0889, 2 over his Ford Laser car with Plate No. CFN-361 from Makati Insurance Company, Inc., for third party liability (TPL). During the effectivity of the policy, the car hit a Volkswagen owned by FelinoIlino Y Legazpi, and causing physical injuries to its passenger named JovencioPoblete Sr. Shafer filed a third party complaint against Makati Insurance Company but the latter moved to dismiss the same and the. The RTC granted said motion, hence, this petition. It is the contention of herein petitioner that the dismissal of the third party complaint amounts to a denial or curtailment of his right to defend himself in the civil aspect of the case. Petitioner further raises the legal question of whether the accused in a criminal action for reckless imprudence, where the civil action is jointly prosecuted, can legally implead the insurance company as third party defendant under its private car insurance policy, as one of his modes of defense in the civil aspect of said proceedings.On the other hand, the insurance company submits that a third party complaint is, under the rules, available only if the defendant has a right to demand contribution, indemnity,

subrogation or any other relief in respect of plaintiff's claim, to minimize the number of lawsuits and avoid the necessity of bringing two (2) or more suits involving the same subject matter. The insurance company further contends that the contract of motor vehicle insurance, the damages and attorney's fees claimed by accused/third party plaintiff are matters entirely different from his criminal liability in the reckless imprudence case, and that petitioner has no cause of action against the insurer until petitioner's liability shall have been determined by final judgment, as stipulated in the contract of insurance. ISSUE: whether or not the insured can file a third party complaint in the criminal case filed against him. DECISION: Yes. A third party complaint is a device allowed by the rules of procedure by which the defendant can bring into the original suit a party against whom he will have a claim for indemnity or remuneration as a result of a liability established against him in the original suit. The injured party did not reserve his right to file a separate civil action, thus, the same was deemed instituted with the criminal action. Petitioner may thus raise all defenses available to him insofar as the criminal and civil aspects of the case are concerned. The injured for whom the contract of insurance is intended can sue directly the insurer.In the event that the injured fails or refuses to include the insurer as party defendant in his claim for indemnity against the insured, the latter is not prevented by law to avail of the procedural rules intended to avoid multiplicity of suits. Not even a "no action" clause under the policy-which requires that a final judgment be first obtained against the insured and that only thereafter can the person insured recover on the policy can prevail over the Rules of Court provisions aimed at avoiding multiplicity of suits. #35 TAN VS COURT OF APPEALS FACTS: On September 23,1973, Tan Lee Siong, father of herein petitioners, applied for life insurance in the amount of P 80,000.00 with respondent companyPHILIPPINE AMERICAN LIFE INSURANCE COMPANY. Said application was approved and Policy No. 1082467 was issued effective November 6,1973, with petitioners the beneficiaries (EMILIO TAN, JUANITO TAN, ALBERTO TAN and ARTURO TAN) thereof. On April 26,1975, Tan Lee Siong died of hepatoma. Petitioners filed a claim but the company denied the same due to a misrepresentation on the part of the insured. It then returned the premiums paid. The petitioners filed a complaint to the commissioner but the latter denied it. Petitioners filed an appeal but it was also denied by the CA, hence, this petition. The petitioners contend that the respondent company no longer had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action. Therefore, since the insured was already dead, the company was barred from raising the defense of concealment or misrepresentation.

ISSUE: whether or not the company can rescind the contract. DECISION: The contention is without merit.The so-called "incontestability clause" precludes the insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force for at least two years during the insured's lifetime. The phrase "during the lifetime" found in Section 48 simply means that the policy is no longer considered in force after the insured has died. The key phrase in the second paragraph of Section 48 is "for a period of two years."Considering that the insured died before the two-year period had lapsed, respondent company is not, therefore, barred from proving that the policy is void ab initio by reason of the insured's fraudulent concealment or misrepresentation. Moreover, respondent company rescinded the contract of insurance and refunded the premiums paid on September 11, 1975, previous to the commencement of this action on November 27,1975. #36 DEVELOPMENT INSURANCE CORP. VS IAC FACTS: A fire occurred in the building of the private respondent and it sued for recovery of damages from the petitioner on the basis of an insurance contract between them. The petitioner allegedly failed to answer on time and was declared in default by the trial court. A judgment of default was subsequently rendered on the strength of the evidence submitted ex parte by the private respondent, which was allowed full recovery of its claimed damages. On learning of this decision, the petitioner moved to lift the order of default, invoking excusable neglect, and to vacate the judgment by default. Its motion was denied. It then went to the respondent court, which affirmed the decision of the trial court in toto; thus, this petition. Petitioner insured the private respondent's building against fire for P2,500,000.00. #38 JACQUELINE JIMENEZ VDA. DE GABRIEL VS CA FACTS: Marcelino Gabriel, the insured, was employed by Emerald Construction & Development Corporation ("ECDC") at its construction project in Iraq. He was covered by a personal accident insurance in the amount of P100,000.00 under a group policy 2 procured from private respondent by ECDC for its overseas workers. The insured risk was for "(b)odily injury caused by violent accidental external and visible means which injury (would) solely and independently of any other cause" 3 result in death or disability.Jimenez filed a claim against ECDC. Private respondent filed its answer, which was not verified, admitting the genuineness and due execution of the insurance policy; it alleged, however, that since both the death certificate issued by the Iraqi Ministry of Health and the autopsy report of the NBI failed to disclose the cause of Gabriels death, it denied liability under the policy. In addition,

private respondent raised the defense of "prescription," invoking Section 384. The RTC ruled in favor of petitioner, stating that the action was filed within one year. The CA reversed said decision, thus, this petition. ISSUE: whether or not the petitioner was already barred by prescription. DECISION: Private respondent filed its answer, which was not verified, admitting the genuineness and due execution of the insurance policy; it alleged, however, that since both the death certificate issued by the Iraqi Ministry of Health and the autopsy report of the NBI failed to disclose the cause of Gabriels death, it denied liability under the policy. In addition, private respondent raised the defense of "prescription," invoking Section 384. #39 MALAYAN INSURANCE CO., INC. (MICO)vs. GREGORIA CRUZ ARNALDO FACTS: On June 7, 1981, the petitioner issued a fire insurance policy to Pincaon her property for the amount of P14,000.00 effective July 22, 1981, until July 22, 1982.the premium invoice issued to Pinca at the time of the delivery of the policy on June 7, 1981 was stamped "Payment Received" of the amount of P930.60 on "12-24-81" by Domingo Adora.On October 15,1981, MICO allegedly cancelled the policy for nonpayment, of the premium and sent the corresponding notice to Pinca.On December 24, 1981, payment of the premium for Pinca was received by DomingoAdora, agent of MICO.On January 15, 1982, Adora remitted this payment to MICO,together with other payments.On January 18, 1982, Pinca's property was completely burned.On February 5, 1982, Pinca's payment was returned by MICO to Adora on the ground that her policy had been cancelled earlier. Pinca filed an action for recovery. ISSUE: Whether or not the policy was already cancelled thus, the company has no liability for the loss. DECISION: Notably, the premium invoice issued to Pinca at the time of the delivery of the policy on June 7, 1981 was stamped "Payment Received" of the amoung of P930.60 on "12-24-81" by Domingo Adora. 14 This is important because it suggests an understanding between MICO and the insured that such payment could be made later, as agent Adora had assured Pinca. In any event, it is not denied that this payment was actually made by Pinca to Adora, who remitted the same to MICO.It is not disputed that the preium was actually paid by Pinca to Adora on December 24, 1981, who received it on behalf of MICO, to which it was remitted on January 15, 1982. What is questioned is the validity of Pinca's payment and of Adora's authority to receive it.MICO's acknowledgment of Adora as its agent defeats its contention that he was not authorized to receive the premium payment on its behalf.Any insurance company which delivers to an insurance agant or insurance broker a policy or contract of insurance shall be demmed to have authorized such agent or broker to

receive on its behalf payment of any premium which is due on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon. The policy started to be binding upon payment of the premium on Dec. 24, 1981 and was supposed to end on July 22, 1982. The loss occurred on January 18, 1982. It is therefore clear that the loss happened during the effectivity of the policy. The alleged cancellation was not duly proven by the petitioner. #40 MAKATI TUSCANY CONDOMINIUM CORPORATION, Petitioner, vs. THE COURT OF APPEALS FACTS: In 1982, the petitioner Makati Tuscany Condominium Corp. obtained an insurance policy from the American Home Assurance Co. (AHAC), represented by American International Underwriters (Phils.), Inc. for its building and premises to be effective from March 1 1982 to March 1 1983. Both parties agreed to pay the premium in the amount ofP466,103.05 on 4 separate dates. The policy was renewed for two more years; the mode of payment for the premium of which was the same as in the first policy. However, the petitioner refused to pay the policy on its third renewal after it had paid for two installments. The company thus filed an action to recover the unpaid balance. The petitioner filed a counter claim for the recovery of the entire premium paid from 1982 to the present, contending that the risk never attached based on a provision on the policy which is as follows: 2. Acceptance of this payment shall not waive any of the company rights to deny liability on any claim under the policy arising before such payments or after the expiration of the credit clause of the policy; and 3. Subject to no loss prior to premium payment. If there be any loss such is not covered. According to petitioner, Section 78 of the Insurance Code requires the acceptance of payment to be acknowledged in the policy for the contract to be binding. In this case, there was no such acknowledgement. ISSUE: Whether or not the petitioner can recover the entire amount of premiums paid. DECISION: While the import of Section 77 is that prepayment of premiums is strictly required as a condition to the validity of the contract, We are not prepared to rule that the request to make installment payments duly approved by the insurer, would prevent the entire contract of insurance from going into effect despite payment and acceptance of the initial premium or first installment. Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to make the policy binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit extension, and such an agreement is not contrary to

morals, good customs, public order or public policy. So is an understanding to allow insured to pay premiums in installments not so proscribed. At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted. The contract was binding, and thus, the petitioner cannot recover the amount of premiums paid because the risk has already attached. #41 SOUTH SEA SURETY AND INSURANCE COMPANY, INC vs. HON. COURT OF APPEALS FACTS: Valenzuela Hardwood and Industrial Supply, Inc. entered into a contract with Seven Brothers whereby the latter undertook to load on board its vessel M/V Seven Ambassador the former's lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila.On 20 January 1984, plaintiff insured the logs, against loss and/or, damage with defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00, and the latter issued a policy on said date. On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to Mr. Victorio Chua.In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the plaintiffs insured logs.On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment of the premium and documentary stamps due on the policy was tendered to the insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of inception for non-payment of the premium due in accordance with Section 77 of the Insurance Code. Valenzuela filed an action for recovery. ISSUE: Whether or not the contract was already binding at the time of the loss. DECISION: Yes. The delivery of the check was made one day before the loss. Mr. Chua is authorized to accept payment based on sec. 306 of the Insurance Code, thus, payment to him perfected the contract of insurance. Sec. 306. . . . Any insurance company which delivers to an insurance agent or insurance broker a policy or contract of insurance shall be deemed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy of contract of insurance at the time of its issuance or delivery or which becomes due thereon. On cross-examination in behalf of South Sea Surety and Insurance Co., Inc. Mr. Chua testified that the marine cargo insurance policy for the plaintiff's logs was delivered to him on 21 January 1984 at his office to be delivered to the plaintiff. #42 SPS.ANTONIO A. TIBAY and VIOLETA R. TIBAY VS.COURT OF APPEALS FACTS: Petitioners Antonio and VioletaTibay were issued by Fortune Life and General Insurance Co., Inc. an insurance poicy on their two story building. The

insurance was for P600,000.00 covering the period from 23 January 1987 to 23 January 1988.On 23 January 1987, of the total premium of P2,983.50, petitioner VioletaTibay only paid P600.00 thus leaving a considerable balance unpaid. On 8 March 1987 the insured building was completely destroyed by fire. Two days later or on 10 March 1987 VioletaTibay paid the balance of the premium. On the same day, she filed with FORTUNE a claim on the fire insurance policy. The company denied the claim and returned the premium paid because according to them the contract did not bind the parties. This contention was based on the provision of the policy which provides thus: 2. This policy including any renewal thereof and/or any endorsement thereon is not in force until the premium has been fully paid to and duly receipted by the Company in the manner provided herein. ISSUE: Was there a binding contract of insurance between the Tibays and Fortune? DECISION: In Phoenix, by accepting the initial payment of P3,000.00 and then later demanding the remainder of the premium without any other precondition to its enforceability as in the instant case, the insurer in effect had shown its intention to continue with the existing contract of insurance, as in fact it was enforcing its right to collect premium, or exact specific performance from the insured. This is not so here. In Makati Tuscany Condominium Corp. v. Court of Appeals 9 the parties mutually agreed that the premiums could be paid in installments, which in fact they did for three (3) years, hence, this Court refused to invalidate the insurance policy. These two (2) cases, Phoenix and Tuscany, adequately demonstrate the waiver, either express or implied, of prepayment in full by the insurer: impliedly, by suing for the balance of the premium as in Phoenix, and expressly, by agreeing to make premiums payable in installments as in Tuscany. But contrary to the stance taken by petitioners, there is no waiver express or implied in the case at bench.Conformably with the aforesaid stipulations explicitly worded and taken in conjunction with Sec. 77 of the Insurance Code the payment of partial premium by the assured in this particular instance should not be considered the payment required by the law and the stipulation of the parties. Rather, it must be taken in the concept of a deposit to be held in trust by the insurer until such time that the full amount has been tendered and duly receipted for. #43 UCPB GENERAL INSURANCE CO., INC. VS.MASAGANA TELAMART, INC. FACTS: On April 15, 1991, petitioner issued five (5) insurance policies covering respondent's various property described therein against fire, for the period from May 22, 1991 to May 22, 1992. In March 1992, petitioner evaluated the policies and decided not to renew them upon expiration of their terms on May 22, 1992. Petitioner advised respondent's broker, Zuellig Insurance Brokers, Inc. of its intention not to renew the policies.

On April 6, 1992, petitioner gave written notice to respondent of the non-renewal of the policies at the address stated in the policies. On June 13, 1992, fire razed respondent's property covered by three of the insurance policies petitioner issued. On July 13, 1992, respondent presented to petitioner's cashier at its head office five (5) manager's checks in the total amount of P225,753.95, representing premium for the renewal of the policies from May 22, 1992 to May 22, 1993. No notice of loss was filed by respondent under the policies prior to July 14, 1992. On July 14, 1992, respondent filed with petitioner its formal claim for indemnification of the insured property razed by fire. On the same day, July 14, 1992, petitioner returned to respondent the five (5) manager's checks that it tendered, and at the same time rejected respondent's claim for the reasons (a) that the policies had expired and were not renewed, and (b) that the fire occurred on June 13, 1992, before respondent's tender of premium payment. Masagana filed an action for the recovery of the proceed. Masagana contended that there existed a sixty (60) to ninety (90) days credit agreement between UCPB and Masagana following previous practice. The RTC decided in their favor. The CA affirmed the same. ISSUE: Whether or not the renewal was binding despite the fact that the premium was tendered after the occurrence of the loss. DECISION: The basic issue raised is whether the fire insurance policies issued by petitioner to the respondent covering the period May 22, 1991 to May 22, 1992, had expired on the latter date or had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date after the occurrence of the risk (fire) insured against. The answer is easily found in the Insurance Code. No, an insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual payment of the premium. Any agreement to the contrary is void. 11 The parties may not agree expressly or impliedly on the extension of creditor time to pay the premium and consider the policy binding before actual payment. #44 AMERICAN HOME ASSURANCE COMPANYvs. ANTONIO CHUA FACTS: Respondent obtained from petitioner a fire insurance in the amount of P200,000.00 covering the stock-in-trade of his business, Moonlight Enterprises. The insurance was due to expire on 25 March 1990.On 5 April 1990 respondent issued a check as payment for the renewal of the policy. The check was accepted by James Uy, an insurance agent, and respondent was given a renewal certificate. The official receipt was issued only on April 10, 1990. However, the property insured was already razed by fire on April 6, 1990.

The respondent filed a claim but the same was denied by petitioner, alleging that when the loss occurred there was no perfected contract of insurance. Respondent filed a case in the RTC. It decided in their favor. The judgment was affirmed by the CA. Thus, this petition. ISSUE: Whether or not there was a binding contract of insurance when the loss occurred. DECISION: According to the trial court the renewal certificate issued to respondent contained the acknowledgment that premium had been paid. It is not disputed that the check drawn by respondent in favor of petitioner and delivered to its agent was honored when presented and petitioner forthwith issued its official receipt to respondent on 10 April 1990. Section 306 of the Insurance Code provides that any insurance company which delivers a policy or contract of insurance to an insurance agent or insurance broker shall be deemed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon.[8 In the instant case, the best evidence of such authority is the fact that petitioner accepted the check and issued the official receipt for the payment. It is, as well, bound by its agents acknowledgment of receipt of payment. Section 78 of the Insurance Code explicitly provides: An acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid. This Section establishes a legal fiction of payment and should be interpreted as an exception to Section 77.[9