### Facts:
The case revolves around a common carrier accident insurance policy issued by Fieldmen’s Insurance Company, Inc. (the Company) to Manila Yellow Taxicab Co., Inc. (the Insured), covering the period from December 1, 1961, to December 1, 1962. The policy promised indemnification for death or bodily injury to any fare-paying passenger or authorized driver in the event of an accident involving the insured vehicle. On February 10, 1962, an accident in Mañgaldan, Pangasinan, involving one of the Insured’s taxicabs resulted in the death of the driver, Carlito Coquia. Following the Company’s insufficient settlement offer, the Insured, alongside Carlito’s parents, Melecio Coquia and Maria Espanueva (the Coquias), initiated a lawsuit to claim the proceeds under the policy. The trial court ruled in favor of the plaintiffs, granting them P4,000.00. The Company appealed, raising issues about the standing of the Coquias to sue and alleging non-compliance with the policy’s arbitration provision.
### Issues:
1. Whether the Coquias had a direct cause of action against the Company despite not being parties to the insurance contract.
2. Whether the arbitration clause in the insurance policy was a condition precedent to any action upon the policy.
### Court’s Decision:
The Supreme Court affirmed the trial court’s decision, addressing each issue as follows:
1. **Direct Cause of Action**: The Court held that insurance policy provisions allowed any authorized driver and, in the event of death, their personal representatives to be indemnified, making the policy a contract pour autrui (for a third party). Notably, the deceased driver had contributed to the premium payments, further solidifying the Coquias’ standing to sue. Thus, the Court confirmed that the Coquias had a direct cause of action against the Company.
2. **Arbitration Clause**: The Court found that the arbitration clause was not invoked by either party during the dispute’s negotiation phase. Both parties’ failure to propose arbitration as a resolution mechanism amounted to a waiver of this requirement. Consequently, the Court held that the lack of arbitration was not a barrier to legal action on the policy.
### Doctrine:
This case reinforces the doctrine of contracts pour autrui, where a contract explicitly benefits a third party, granting them the standing to sue for its enforcement even if they are not a party to the contract. Additionally, it establishes that the non-invocation of an arbitration clause by either party in a dispute may result in an implied waiver of the requirement, allowing for direct judicial action.
### Class Notes:
– **Contracts pour autrui**: A third party may demand fulfillment of a contract made for their benefit if they communicate acceptance to the obligor before its revocation.
– **Arbitration Clause as a Condition Precedent**: The waiver of an arbitration clause can occur when parties engage in conduct indicating they do not intend to avail themselves of the provision.
– **Insurance Policies and Third Parties**: Beneficiaries not party to the insurance contract may still have direct action against the insurer if the policy is intended for their benefit.
### Historical Background:
This decision is situated within the broader context of the Philippine legal system’s recognition and enforcement of third-party rights under contracts pour autrui, particularly in insurance law. Such jurisprudence underscores the importance of direct benefits conferred by contracts and how these benefits are protected, especially in situations where the intended beneficiaries are not explicitly party to the contracts that secure these benefits.
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