Summary: Bonifacio Brothers Inc. vs. Mora (GR L-20853, 29 May 1967)

Bonifacio Brothers Inc. vs. Mora
[GR L-20853, 29 May 1967]
En Banc, Castro (J): 9 concur

Facts: Enrique Mora is the owner of an Oldsmobile sedan model 1956, bearing plate QC - 8088. He 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 23 June 1959 with the State Bonding & Insurance Co. Inc., and motor car insurance policy A-0615 was issued to Mora. During the effectivity of an insurance contract, the car met with an accident. The insurance company then assigned the accident to the H.H. Bayne Adjustment Co. for investigation and appraisal of the damage. 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. For the cost of labor and materials, Mora was billed at P2,102.73 through the H. H. Bayne Adjustment Co. The insurance company, after claiming a franchise in the amount of P100, drew a check in the amount of P2,002.73, as proceeds of the insurance policy, payable to the order of Mora or H.S. Reyes, Inc., and entrusted the check to the H.H. Bayne Adjustment Co. for disposition and delivery to the proper party. In the meantime, the car was delivered to Mora without the consent of the H.S. Reyes, Inc., and without payment to the Bonifacio Bros. Inc. and Ayala Auto Parts Co. of the cost of repairs and materials. Upon the theory that the insurance proceeds should be paid directly to them, the Bonifacio Bros. Inc. and the Ayala Auto Parts Co. filed on 8 May 1961 a complaint with the Municipal Court of Manila against Mora and the State Bonding & Insurance Co. Inc. for the collection of the sum of P2,002.73. The insurance company filed its answer with a counterclaim for interpleader, requiring the Bonifacio Bros. Inc. and the H.S. Reyes, Inc. to interplead in order to determine who has a better right to the insurance proceeds in question. Mora was declared in default for failure to appear at the hearing, and evidence against him was received ex parte. However, the counsel for the Bonifacio Bros. Inc., Ayala Auto Parts Co. and State Bonding & Insurance Co. Inc. submitted a stipulation of facts, on the basis of which 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. From this decision, Bonifacio Bros. Inc. et al. elevated the case to the Court of First Instance of Manila before which the stipulation of facts was reproduced. On 19 October 1962 the latter court rendered a decision, affirming the decision of the Municipal Court. The Bonifacio Bros. Inc. and the Ayala Auto Parts Co. moved for reconsideration of the decision, but the trial court denied the motion. Bonifacio Bros. Inc. et al. appealed.

Issue: Whether Bonifacio Bros. has any cause of action to claim indemnity from the insurance contract entered by State Bonding & Insurance Co. and Mora.

Held: 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. It is likewise observed from the brief of the State Bonding & Insurance Company that it has vehemently opposed the assertion or pretension of Bonifacio Bros. that they are privy to the contract. If it were the intention of the Insurance Company to make itself liable to the repair shop or material men, it could have easily inserted in the contract a stipulation to that effect. To hold now that the original parties to the insurance contract intended to confer upon Bonifacio Bros. the benefit claimed by them would require as to ignore the indispensable requisite that a stipulation pour autrui must be clearly expressed by the parties, which the Court cannot do. As regards paragraph 4 of the insurance contract, a perusal thereof would show that instead of establishing privity between Bonifacio Bros. and the insurance company, such stipulation merely establishes the procedure that the insured has to follow in order to be entitled to indemnity for repair. This paragraph therefore should not be construed as bringing into existence in favor of Bonifacio Bros. a right of action against the insurance company as such intention can never be inferred therefrom. Another cogent reason for not recognizing a right of action by Bonifacio Bros. against the insurance company is that "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." Herein, no contract of trust, expressed or implied exists. Thus, no cause of action exists in favor of Bonifacio Bros. in so far as the proceeds of insurance are concerned. Bonifacio Bros.' 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 which read that "the insurance shall be applied exclusively to the proper interest of the person in whose name it is made unless otherwise specified in the policy."

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