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Digested by: Jr Abul Title:Artex Development Co VS Wellington Insurance Topic: Reinsurance FACTS: - Wellington insurance insured for P24,346,509

the building stocks and machinery of plaintiff Artex against loss or damage by fire or lightning upon august 2, 1963 with an additional sum of P833,034. - Another insurance against business interruption (use and occupancy)for P5,200,000. - On September 22, 1963 the building, and machineries were burned and a notice of loss and damage was given to Wellington. - Insurance adjusters computed the loss for the fire as P10,106,544.40 and Wellington paid only 6,481,870.07, leaving a balance of 3,624,683.43 - The computed business interruption loss was P3M but Wellington paid only P1,864,134.08 leaving a balance of P1,748,460 (computation based on case) - Artex through counsel Norberto Quisumbing made a manifestation that only about P397,ooo is the remaining balance and liability which was the subject of reinsurance with Alexander and Alexander Inc, of New York, Artex acknowledging here the receipt of P3,600,000 as FINAL and FULL SETTLEMENT of all claims against Welllington - Artex further prays to the court to affirm the lower courts decision of liquidation and prayed for modification of the amount of liability to be fixed to P397,813.00 plus 12% interest per annum thereof for the late payment until april 10, 1969 and attorneys fees of 15% of the recovery, expenses of litigation, no writ of execution however to be made within 3years from july 10, 1969 per collateral agreement of the parties. - Wellington in its brief raises the issue that Artex deemed to have agreed to look SOLELY to the reinsurers for indemnity in case of loss since their paid up capital stock is only P500,000 and that they have to secure such reinsurance coverage the over P24M fire insurance coverage of the policy issued by Wellington to Artex. Issue: WON reinsurance contract of the parties makes the insured to look SOLELY to the reinsurers for indemnity in case of loss Ruling: NO, the insured who is not directly a party or privy to the reinsurance contract between Wellington and Alexander and Alexander Inc., cannot demand enforcement of such insurance contracts. The Contracts take effect only between the parties, their assigns and heirs as provide by Art 1311 of our civil code. Further it provides that a contract with stipulations pour autrui or in favor of a third person not a party to the contract, the parties must have CLEARLY and DELIBERATELY conferred favor upon a third person.

The SC also stated that assuming that Artex directly sue the reinsurers for payment this does not in any way affect or cancel out Wellingtons direct contractual liability to Artex.

The SC dispose the case by affirming the prayer of Artex.

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