PETITIONER: BONIFACIO BROS., INC., ET AL.

RESPONDENT: ENRIQUE MORA, ET AL.

DATE: May 29, 1967
G.R. No. L-20853
DOCTRINE: Mora mortgaged his car with H.S. Reyes with the
condition that Mora should insure the car making H.S. reyes the
beneficiary of the insurance policy. The car went into and
accident and was repaired by Bonifacio bros and ayala Auto
parts. Now they are asking from the insurance company for the
proceeds of the insurance because they repaired the car. The
court ruled that the money should go to H.S. Reyes and not the
other party because the other party does not have privity of
contract between them
Relevant Provisions:
Article 1311 of Civil Code
Contracts take effect only between the parties, their assigns
and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature,
or by stipulation or by provision of law. The heir is not liable
beyond the value of the property he received from the
decedent.
If a contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is
not sufficient. The contracting parties must have clearly and
deliberately conferred a favor upon a third person. (1257a)
FACTS:
Enrique Mora is an owner of an Oldmobile sedan model 1956
He mortgage the car to H.S. Reyes Inc with the condition
that Enrique shall insure the car and H.S. Reyes shall be the
beneficiary of the policy.
On June 23, 1959, Mora insured the policy with State
Bonding & Insurance Co., Inc. and in the policy it said that if
Mora was to have the car fixed, the money would be
payable to H.S. Reyes as the policy was in its favor and as
the company was the mortagagee

The car met with an accident. The insurance company

assigned the accident to Bayne Adjustment Co. for
investigation and appraisal of the damage.
Mora, without knowledge and consent of HS Reyes,
authorized Bonifiacio Bros. to furnish the labor and the
materials (which some were supplied by Ayala Auto Parts
Co.)
For the labor and materials, Enrique Mora was billed at
P2,102.73 through the H.H. Bayne Adjustment Co.
Bonifacio Bros and Ayala Auto Parts filed a case in the
Municipal courts saying that the proceeds should be given
directly to them.
The Municipal courts declared that H.S. Reyes has the better
right to the money and ordered State Bonding Insurance Co
to pay H.S. Reyes.
The case was elavate4d to Court of first Instance and the
court affirmed the decision of the trial court.
They moved for a reconsideration but it was denied. Hence
this appeal.

ISSUE/s:
1. W/N there was privity of contract between Bonifacio Bros
and Ayala Auto Parts on one hand and the insurance
company on the other
HELD:
1. No
It can be seen from the contract between Mora and the
insurance company that there was no mention of the Bonifacio
Bros and Ayala Auto in the contract, nor is there any clause or
provision that can be inferred that there isw the obligtation on
the part of the insurance company to pay Bonifacio Bros and
Ayala Auto Parts. 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 pay 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. 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 case at bar, the insurance contract does not contain any
words or clauses to disclose an intent to give any person or
company repairing the insured item any benefit. They only
intended H.S. Reyes to benefit from the policy.
The petitioners reliance on paragraph 4 of the contract ( 4. The
Insured may authorize the repair of the Motor Vehicle necessitated by damage
for which the Company may be liable under this Policy provided that: (a) The
estimated cost of such repair does not exceed the Authorized Repair Limit, (b) A
detailed estimate of the cost is forwarded to the Company without delay,
subject to the condition that "Loss, if any is payable to H.S. Reyes, Inc.," by
virtue of the fact that said Oldsmobile sedan was mortgaged in favor of the said
H.S. Reyes, Inc. and that under a clause in said insurance policy, any loss was
made payable to the H.S. Reyes, Inc. as Mortgagee) cannot hold because

it merely established the procedure the insured has to follow in

order to be entitled to indemnity for repair.
And finally, another reason for not allowing the petition to be
granted is the fact 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 between the insured and
third person." In this case, no contract of trust, expressed or
implied exists
DISPOSITIVE: Accordingly, the judgment appealed from is
hereby affirmed, at appellants' cost.