Alpha v.

Castor

G.R. No. 198174, September 2, 2013 (PERALTA, J.)

FACTS:

Arsenia Sonia Castor (Castor) obtained a Motor Car Policy for her Toyota Revo DLX DSL with Alpha Insurance and Surety Co (Alpha).
The contract of insurance obligates the petitioner to pay the respondent the amount of P630,000 in case of loss or damage to said
vehicle during the period covered.

On April 16, 2007, respondent instructed her driver, Jose Joel Salazar Lanuza to bring the vehicle to nearby auto-shop for a tune up.
However, Lanuza no longer returned the motor vehicle and despite diligent efforts to locate the same, said efforts proved futile.
Resultantly, respondent promptly reported the incident to the police and concomitantly notified petitioner of the said loss and demanded
payment of the insurance proceeds.

Alpha, however, denied the demand of Castor claiming that they are not liable since the culprit who stole the vehicle is employed with
Castor. Under the Exceptions to Section III of the Policy, the Company shall not be liable for (4) any malicious damage caused by the
insured, any member of his family or by A PERSON IN THE INSUREDS SERVICE.

Castor filed a Complaint for Sum of Money with Damages against Alpha before the Regional Trial Court of Quezon City. The trial court
rendered its decision in favor of Castor which decision is affirmed in toto by the Court of Appeals. Hence, this Petition for Review on
Certiorari.

ISSUE:

Whether or not the loss of respondents vehicle is excluded under the insurance policy

HELD:

NO. The words loss and damage mean different things in common ordinary usage. The word loss refers to the act or fact of losing,
or failure to keep possession, while the word damage means deterioration or injury to property. Therefore, petitioner cannot exclude
the loss of Castors vehicle under the insurance policy under paragraph 4 of Exceptions to Section III, since the same refers only to
malicious damage, or more specifically, injury to the motor vehicle caused by a person under the insureds service. Paragraph 4
clearly does not contemplate loss of property.

A contract of insurance is a contract of adhesion. So, when the terms of the insurance contract contain limitations on liability, courts
should construe them in such a way as to preclude the insurer from non-compliance with his obligation. Thus, in Eternal Gardens
Memorial Park Corporation vs. Philippine American Life Insurance Company, this Court ruled that it must be remembered that an
insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in
order to safeguard the latters interest.

Gulf Resorts vs PCIC

G.R. No. 156167 May 16, 2005

Lessons Applicable: Stipulations Cannot Be Segregated (Insurance)

FACTS:

Gulf Resorts, Inc at Agoo, La Union was insured with American Home Assurance Company which includes loss or damage to
shock to any of the property insured by this Policy occasioned by or through or in consequence of earthquake

July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the properties and 2 swimming pools in its Agoo Playa
Resort were damaged

August 23, 1990: Gulf's claim was denied on the ground that its insurance policy only afforded earthquake shock coverage to the
two swimming pools of the resort

Petitioner contends that pursuant to this rider, no qualifications were placed on the scope of the earthquake shock
coverage. Thus, the policy extended earthquake shock coverage to all of the insured properties.

RTC: Favored American Home - endorsement rider means that only the two swimming pools were insured against earthquake
shock

CA: affirmed RTC

ISSUE: W/N Gulf can claim for its properties aside from the 2 swimming pools

HELD: YES. Affirmed.

It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance with each other.
All its parts are reflective of the true intent of the parties.
Insurance Code
Section 2(1)
contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss,
damage or liability arising from an unknown or contingent event

An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril.

In the subject policy, no premium payments were made with regard to earthquake shock coverage, except on the two swimming

pools.
Philamcare v CA G.R. No. 125678. March 18, 2002
J. Ynares-Santiago

Facts:
Ernani Trinos applied for a health care coverage with Philam. He answered no to a question asking if he or his family members were
treated to heart trouble, asthma, diabetes, etc.
The application was approved for 1 year. He was also given hospitalization benefits and out-patient benefits. After the period expired,
he was given an expanded coverage for Php 75,000. During the period, he suffered from heart attack and was confined at MMC. The
wife tried to claim the benefits but the petitioner denied it saying that he concealed his medical history by answering no to the
aforementioned question. She had to pay for the hospital bills amounting to 76,000. Her husband subsequently passed away. She filed
a case in the trial court for the collection of the amount plus damages. She was awarded 76,000 for the bills and 40,000 for damages.
The CA affirmed but deleted awards for damages. Hence, thisappeal.

Issue: WON a health care agreement is not an insurance contract; hence the incontestability clause under the Insurance Code does
not apply.

Held: No. Petition dismissed.

Ratio:
Petitioner claimed that it granted benefits only when the insured is alive during the one-year duration. It contended that there was no
indemnification unlike in insurance contracts. It supported this claim by saying that it is a health maintenance organization covered by
the DOH and not the Insurance Commission. Lastly, it claimed that the Incontestability clause didnt apply because two-year and not
one-year effectivity periods were required.

Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or contingent event.
Section 3 states: every person has an insurable interest in the life and health:
(1)

of himself, of his spouse and of his children.

In this case, the husbands health was the insurable interest. The health care agreement was in the nature of non-life insurance, which
is primarily a contract of indemnity. The provider must pay for the medical expenses resulting from sickness or injury.
While petitioner contended that the husband concealed materialfact of his sickness, the contract stated that:
that any physician is, by these presents, expressly authorized to disclose or give testimony at anytime relative to any information
acquired by him in his professional capacity upon any question affecting the eligibility for health care coverage of the Proposed
Members.
This meant that the petitioners required him to sign authorization to furnish reports about his medical condition. The contract also
authorized Philam to inquire directly to his medical history.
Hence, the contention of concealment isnt valid.
They cant also invoke the Invalidation of agreement clause where failure of the insured to disclose information was a grounds for
revocation simply because the answer assailed by the company was the heart condition question based on the insureds opinion. He
wasnt a medical doctor, so he cant accurately gauge his condition.
Henrick v Fire- in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry.
Fraudulent intent must be proven to rescind the contract. This was incumbent upon the provider.
Having assumed a responsibility under the agreement, petitioner is bound to answer the same to the extent agreedupon. In the end,
the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or
whenever he avails of the covered benefits which he has prepaid.
Section 27 of the Insurance Code- a concealment entitles the injured party to rescind a contract of insurance.
As to cancellation procedure- Cancellation requires certain conditions:
1.

Prior notice of cancellation to insured;

2.

Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned;

3.

Must be in writing, mailed or delivered to the insured at the address shown in the policy;

4.

Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on

which cancellation is based

None were fulfilled by the provider.
As to incontestability- The trial court said that under the title Claim procedures of expenses, the defendant Philamcare Health Systems
Inc. had twelve months from the date of issuance of the Agreement within which to contest themembership of the patient if he had
previous ailment of asthma, and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. The
periods having expired, the defense of concealment or misrepresentation no longer lie.
PHIL. HEALTH CARE PROVIDERS, INC vs. COMMISSIONER OF INTERNAL REVENUE
July 2, 2014 Leave a comment

GR. NO. 1677330 September 18, 2009, SPECIAL FIRST DIVISION (CORONA, J.)

FACTS:

Petitioner is a domestic corporation whose primary purpose is to establish, maintain, conduct and operate a prepaid group practice
health care delivery system or a health maintenance organization to take care of the sick and disabled persons enrolled in the health

care plan and to provide for the administrative, legal, and financial responsibilities of the organization. On January 27, 2000, respondent
CIR sent petitioner a formal deman letter and the corresponding assessment notices demanding the payment of deficiency taxes,
including surcharges and interest, for the taxable years 1996 and 1997 in the total amount of P224,702,641.18. The deficiency
assessment was imposed on petitioners health care agreement with the members of its health care program pursuant to Section 185 of
the 1997 Tax Code. Petitioner protested the assessment in a letter dated February 23, 2000. As respondent did not act on the protest,
petitioner filed a petition for review in the Court of Tax Appeals (CTA) seeking the cancellation of the deficiency VAT and DST
assessments. On April 5, 2002, the CTA rendered a decision, ordering the petitioner to PAY the deficiency VAT amounting to
P22,054,831.75 inclusive of 25% surcharge plus 20% interest from January 20, 1997 until fully paid for the 1996 VAT deficiency and
P31,094,163.87 inclusive of 25% surcharge plus 20% interest from January 20, 1998 until fully paid for the 1997 VAT deficiency.
Accordingly, VAT Ruling No. [231]-88 is declared void and without force and effect. The 1996 and 1997 deficiency DST assessment
against petitioner is hereby CANCELLED AND SET ASIDE. Respondent is ORDERED to DESIST from collecting the said DST
deficiency tax. Respondent appealed the CTA decision to the (CA) insofar as it cancelled the DST assessment. He claimed that
petitioners health care agreement was a contract of insurance subject to DST under Section 185 of the 1997 Tax Code.
On August 16, 2004, the CA rendered its decision which held that petitioners health care agreement was in the nature of a non-life
insurance contract subject to DST. Respondent is ordered to pay the deficiency Documentary Stamp Tax. Petitioner moved for
reconsideration but the CA denied it.

ISSUES:

(1) Whether or not Philippine Health Care Providers, Inc. engaged in insurance business.

(2) Whether or not the agreements between petitioner and its members possess all elements necessary in the insurance contract.

HELD:

NO. Health Maintenance Organizations are not engaged in the insurance business. The SC said in June 12, 2008 decision that it is
irrelevant that petitioner is an HMO and not an insurer because its agreements are treated as insurance contracts and the DST is not a
tax on the business but an excise on the privilege, opportunity or facility used in the transaction of the business. Petitioner, however,
submits that it is of critical importance to characterize the business it is engaged in, that is, to determine whether it is an HMO or an
insurance company, as this distinction is indispensable in turn to the issue of whether or not it is liable for DST on its health care
agreements. Petitioner is admittedly an HMO. Under RA 7878 an HMO is an entity that provides, offers or arranges for coverage of
designated health services needed by plan members for a fixed prepaid premium. The payments do not vary with the extent, frequency
or type of services provided. Section 2 (2) of PD 1460 enumerates what constitutes doing an insurance business or transacting an
insurance businesswhich are making or proposing to make, as insurer, any insurance contract; making or proposing to make, as
surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety;
doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business

within the meaning of this Code; doing or proposing to do any business in substance equivalent to any of the foregoing in a manner
designed to evade the provisions of this Code.

Overall, petitioner appears to provide insurance-type benefits to its members (with respect to its curative medical services), but these
are incidental to the principal activity of providing them medical care. The insurance-like aspect of petitioners business is miniscule
compared to its noninsurance activities. Therefore, since it substantially provides health care services rather than insurance services, it
cannot be considered as being in the insurance business.
Philippine Health Care Providers v CIR G.R. No. 167330 June 12, 2008
J. Corona

Facts:
The petitioner, a prepaid health-care organization offering benefits to its members. The CIR found that the organization had a deficiency
in the payment of the DST under Section 185 of the 1997 Tax Code which stipulated its implementation:
On all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage, or liability made or renewed by any
person, association or company or corporation transacting the business of accident, fidelity, employer's liability, plate, glass,
steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance)
The CIR sent a demand for the payment of deficiency taxes, including surcharges and interest, for 1996-1997 in the totalamount of
P224,702,641.18.
The petitioner protested to the CIR, but it didnt act on the appeal. Hence, the company had to go to the CTA. The latter declared
judgment against them and reduced the taxes. It ordered them to pay 22 million pesos for deficiency VAT for 1997 and 31 million
deficiency VAT for 1996.
CA denied the companys appeal an d increased taxes to 55 and 68 million for 1996 to 1997.

Issues: WON a health care agreement in the nature of an insurance contract and therefore subject to the documentary stamp tax (DST)
imposed under Section 185 of Republic Act 8424 (Tax Code of 1997)

Held: Yes. Petition dismissed.

Ratio:
The DST is levied on the exercise by persons of certain privileges conferred by law for the creation, revision, or termination of specific
legal relationships through the execution of specific instruments.
The DST is an excise upon the privilege, opportunity, or facility offered at exchanges for the transaction of the business. In particular,
the DST under Section 185 of the 1997 Tax Code is imposed on the privilege of making or renewing any policy of insurance (except
life, marine, inland and fire insurance), bond or obligation in the nature of indemnity for loss, damage, or liability.
Petitioner's health care agreement is primarily a contract of indemnity. And in the recent case of Blue Cross Healthcare, Inc. v. Olivares,
this Court ruled that a health care agreement is in the nature of a non-life insurance policy.
Its health care agreement is not a contract for the provision of medical services. Petitioner does not actually provide medical or hospital
services but merely arranges for the same
It is also incorrect to say that the health care agreement is not based on loss or damage because, under the said agreement, petitioner
assumes the liability and indemnifies its member for hospital, medical and related expenses (such asprofessional fees of physicians).
The term "loss or damage" is broad enough to cover the monetary expense or liability a member will incur in case of illness or injury.
Philamcare Health Systems, Inc. v. CA.- The health care agreement was in the nature of non-life insurance, which is primarily a
contract of indemnity.

Similarly, the insurable interest of every member of petitioner's health care program in obtaining the health care agreement is his own
health. Under the agreement, petitioner is bound to indemnify any member who incurs hospital, medical or any other expense arising
from sickness, injury or other stipulated contingency to the extent agreed upon under the contract.
White Gold Marine v Pioneer
154514 July 28, 2005
Lessons Applicable: Mutual Insurance Companies (Insurance)
FACTS: (White Gold > Pioneer > Steamship Mutual)

White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity coverage for its vessels from The Steamship
Mutual Underwriting Association (Bermuda) Limited (Steamship Mutual) through Pioneer Insurance and Surety Corporation
(Pioneer)

When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage

Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latters unpaid balance

White Gold filed a complaint before the Insurance Commission

Steamship Mutual violated Sections 186[4] and 187[5] of the Insurance Code

Pioneer violated Sections 299,[6] 300[7] and 301[8] in relation to Sections 302 and 303, thereof

Insurance Commission: dismissed the complaint

no need for Steamship Mutual to secure a license because it was a Protection and Indemnity Club (P & I Club) (NOT engaged in
the insurance business)

Pioneer need not obtain another license as insurance agent and/or a broker for Steamship Mutual because Steamship Mutual was
not engaged in the insurance business

Moreover, Pioneer was already licensed

CA: affirmed Insurance Commission

ISSUE:
1. W/N Steamship Mutual, a P & I Club, is engaged in the insurance business in the Philippines - YES.
2. W/N Pioneer as resident agent of Steamship Mutual is required to obtain a license as an insurance agent/broker - YES
HELD: petition is PARTIALLY GRANTED. CA affirmed. the revocation of Pioneers Certificate of Authority and removal of its directors
and officers, is DENIED
1. YES
Insurance Code
Sec. 2(2)
(2) The term "doing an insurance business" or "transacting an insurance business", within the meaning of this Code,
shall include:

(a) making or proposing to make, as insurer, any insurance contract;

(b) making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to
any other legitimate business or activity of the surety;

(c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of
an insurance business within the meaning of this Code;

(d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to
evade the provisions of this Code.

In the application of the provisions of this Code the fact that no profit is derived from the making of insurance
contracts, agreements or transactions or that no separate or direct consideration is received therefor, shall not be
deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance
business.

The test to determine if a contract is an insurance contract or not, depends on the nature of the promise, the act required to be
performed, and the exact nature of the agreement in the light of the occurrence, contingency, or circumstances under which the
performance becomes requisite

a marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to a marine adventure

a mutual insurance company is a cooperative enterprise where the members are both the insurer and insured

the members all contribute, by a system of premiums or assessments, to the creation of a fund from which all losses and liabilities
are paid, and where the profits are divided among themselves, in proportion to their interest

provide 3 types of coverage:

protection and indemnity

war risks

defense costs

P & I Club

a form of insurance against third party liability, where the third party is anyone other than the P & I Club and the members

Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance business

Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer or insurance company
is allowed to engage in the insurance business without a license or a certificate of authority from the Insurance Commission

2. YES.

Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for
Steamship Mutual.
Insurance Code
Sec. 299
Sec. 299. No insurance company doing business in the Philippines, nor any agent thereof, shall pay any commission
or other compensation to any person for services in obtaining insurance, unless such person shall have first procured
from the Commissioner a license to act as an insurance agent of such company or as an insurance broker as
hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications
for insurance, or receive for services in obtaining insurance, any commission or other compensation from any
insurance company doing business in the Philippines, or any agent thereof, without first procuring a license to act
from the Commissioner, which must be renewed annually on the first day of January, or within six months thereafter.
Such license shall be issued by the Commissioner only upon the written application of the person desiring it, such
application if for a license to act as insurance agent, being approved and countersigned by the company such person
desires to represent, and shall be upon a form prescribed by the Commissioner giving such information as he may
require, and upon payment of the corresponding fee hereinafter prescribed. The Commissioner shall satisfy himself
as to competence and trustworthiness of the applicant and shall have the right to refuse to issue or renew and to
suspend or revoke any such license in his discretion. No such license shall be valid after the thirtieth day of June of
the year following its issuance unless it is renewed.

White Gold v Pioneer G.R. No. 154514. July 28, 2005

J. Quisimbing

Facts:
White Gold procured a protection and indemnity coverage for its vessels from The Steamship Mutual through Pioneer Insurance and
Surety Corporation. White Gold was issued a Certificate of Entry and Acceptance. Pioneer also issued receipts. When White Gold
failed to fully pay its accounts, Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the unpaid balance. White Gold
on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual and Pioneer violated provisions
of the Insurance Code.
The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a license because
it was not engaged in the insurance business and that it was a P & I club. Pioneer was not required to obtain another license as
insurance agent because Steamship Mutual was not engaged in the insurance business.
The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the appellate court distinguished between P
& I Clubs vis--vis conventional insurance. The appellate court also held that Pioneer merely acted as a collection agent of Steamship
Mutual.
Hence this petition by White Gold.

Issues:
1. Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?
2. Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?

Held: Yes. Petition granted.

Ratio:
White Gold insists that Steamship Mutual as a P & I Club is engaged in the insurance business. To buttress its assertion, it cites the
definition as an association composed of shipowners in general who band together for the specific purpose of providing insurance
cover on a mutual basis against liabilities incidental to shipowning that the members incur in favor of third parties.
They argued that Steamship Mutuals primary purpose is to solicit and provide protection and indemnity coverage and for this purpose,
it has engaged the services of Pioneer to act as its agent.
Respondents contended that although Steamship Mutual is a P & I Club, it is not engaged in the insurance business in the
Philippines. It is merely an association of vessel owners who have come together to provide mutual protection against liabilities
incidental to shipowning.
Is Steamship Mutual engaged in the insurance business?
A P & I Club is a form of insurance against third party liability, where the third party is anyone other than the P & I Club and the
members. By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance
business.
The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of authoritymandated by
Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to collect payments in its
behalf. Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue
doing business here, Steamship Mutual or through its agent Pioneer, must secure a license from the Insurance Commission.
Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer or insurance company is
allowed to engage in the insurance business without a license or a certificate of authority from the Insurance Commission.
2. Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration issued by the Insurance
Commission. It has been licensed to do or transact insurance business by virtue of the certificate of authority issued by the same
agency. However, a Certification from the Commission states that Pioneer does not have a separate license to be an agent/broker of
Steamship Mutual.
Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for Steamship
Mutual. Section 299 of the Insurance Code clearly states:
SEC. 299 No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement ofapplications for
insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance company doing
business in the Philippines or any agent thereof, without first procuring a license so to act from the Commissioner
Guingon vs. Del Monte

G.R. No. L-22042

August 17, 1967

Lessons Applicable: Stipulation Pour Autrui (Insurance)

FACTS:

Julio Aguilar owner and operator of several jeepneys insured them with Capital Insurance & Surety Co., Inc.

February 20, 1961: Along the intersection of Juan Luna and Moro streets, City of Manila, the jeepneys operated by Aguilar driven
by Iluminado del Monte and Gervacio Guingon bumped and Guingon died some days after

Iluminado del Monte was charged with homicide thru reckless imprudence and was penalized 4 months imprisonment

The heirs of Gervacio Guingon filed an action for damages praying that P82,771.80 be paid to them jointly and severally by the
driver del Monte, owner and operator Aguilar, and the Capital Insurance & Surety Co., Inc.

CFI: Iluminado del Monte and Julio Aguilar jointly and severally to pay plaintiffs the sum of P8,572.95 as damages for the death of
their father, plus P1,000.00 for attorney's fees plus costs

Capital Insurance and Surety Co., Inc. is hereby sentenced to pay P5,000 plus P500 as attorney's fees and costs to be applied in
partial satisfaction of the judgment rendered against Iluminado del Monte and Julio Aguilar in this case

ISSUE:
1. W/N there a stipulation pour autriu to enable that will enable the heirs to sue against Capital Insurance and Surety Co., Inc.? - YES
2. W/N the heirs can sue the insurer and insured jointly? - YES

HELD: Affirmed in toto.

1. YES

policy: the insurer agreed to indemnify the insured "against all sums . . . which the Insured shall become legally liable to pay in
respect of: a. death of or bodily injury to any person . . . ." - indemnity against liability

TEST: Where the contract provides for indemnity against liability to third persons, then third persons to whom the insured is liable,
CAN sue the insurer. Where the contract is for indemnity against actual loss or payment, then third persons CANNOT proceed
against the insurer, the contract being solely to reimburse the insured for liability actually discharged by him thru payment to third
persons, said third persons' recourse being thus limited to the insured alone.

2. YES

policy: expressly disallows suing the insurer as a co-defendant of the insured in a suit to determine the latter's liability

no action close: suit and final judgment be first obtained against the insured; that only "thereafter" can the person injured recover
on the policy

Sec. 5 of Rule 2 on "Joinder of causes of action" and Sec. 6 of Rule 3 on "Permissive joinder of parties" cannot be superseded, at
least with respect to third persons not a party to the contract, as herein, by a "no action" clause in the contract of insurance.

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 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 3rd 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.