G.R. No. L-29508 - Artex Development Co., Inc. vs. Wellington Insurance Co., Inc.

Plaintiff-appellee, Artex Development Co., Inc., secured insurance coverage from defendant-insurer, Wellington Insurance Co., Inc.
The insured properties included buildings, stocks, and machinery valued at P24,346,509.00, with an additional insurance sum of P883,034.00 for certain properties.
A separate policy for business interruption (use and occupancy) was issued for P5,200,000.00.

On September 22, 1963, a fire affected the insured properties, including the spinning department.
Adjusters, namely H. H. Bayne Adjustment Co. and Allied Adjustment Co., determined the total property loss at P10,106,554.40.
The corresponding business interruption loss was ascertained at P3,000,000.00.

Defendant-insurer had made partial payments: P6,481,870.07 towards property loss and P1,864,134.08 for business interruption loss.
This left a balance of P3,624,683.43 for the property loss and P1,748,460.00 for the business interruption claim.
The trial court, in its April 2, 1968 judgment, ordered defendant-insurer to pay the balance with interest and 15% attorney’s fees.

Defendant-appellant argued that it had obtained reinsurance coverage from other companies to cover its liability.
The contention was that the insured should have pursued recovery directly from the reinsurers, not the insurer, based on an alleged “stipulation pour autrui.”
Plaintiff-appellee maintained that there was no privity of contract between it (as the insured) and the reinsurers, since no express clause or assignment granted such direct cause for action.

On April 10, 1969, plaintiff-appellee executed Deeds of Discharge and a Collateral Agreement acknowledging partial settlements and defining that only the amount reinsured with Alexander and Alexander, Inc. (P397,813.00) remained subject to litigation.
Defendant-appellant admitted in its June 18, 1969 manifestation that additional partial payments were made by its reinsurers, albeit without addressing the legal issue of direct cause of action by the insured.
Plaintiff-appellee, in its August 8, 1969 brief, argued for affirmance of the lower court’s ruling but with modification reflecting the collateral agreement.
Subsequent to these proceedings, defendant-insurer became subject to liquidation, with the Insurance Commissioner taking over as receiver-liquidator, thus affecting the procedure for satisfying the judgment claim.

Whether a third party (the insured) who is not a party to the reinsurance contract may directly enforce its terms, particularly in the absence of a clearly expressed stipulation pour autrui.
The legitimacy of defendant-appellant's argument that the insured’s cause of action should have been directed solely against the reinsurers.

Whether the insurance contract and the underlying reinsurance arrangements created any enforceable rights in favor of the insured against the reinsurers.
The effect of the absence of any specific clause or assignment in the reinsurance contract that would grant the insured the right to look directly to the reinsurers for indemnity.

How the liquidation of defendant-insurer influences the satisfaction of the already judicially determined judgment claim by plaintiff-appellee.
Whether the claim for the balance due should be subject to the distribution rules established by the Insurance Act and the subsequent liquidation order.