the manila insurance company

8/13/2019 The Manila Insurance Company

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The Manila Insurance Company, Inc. vs.Spouses Roberto and Aida Amurao

G.R. No. 179628. January 16, 2013

Contract; contract of suretyship; efinition; nature of !ia"i!ity of surety;

surety#s !ia"i!ity is irect, pri$ary an a"so!ute as %e!! as &oint anse'era!.

(acts)

*pouses +$urao entere into a construction aree$ent %ith +eean-e'e!op$ent Corp %here"y the !atter %as to construct a 6 storey co$$ercia!"ui!in. +ean poste perfor$ance "on secure "y etitioner /ani!a nsuranceCo$pany nc. an ntra *trata +ssurance Corp. hen +eean fai!e to finish theconstruction, spouses +$urao fi!e a case aainst /ani!a nsurance an ntra *trata./ani!a nsurance arue that %hen it eecute the surety aree$ent, theconstruction contract %as not yet sine. herefore, spouses +$urao ha'e no cause

of action aainst the$.

Ratio)

+ contract of suretyship is efine as 4an aree$ent %here"y a party, ca!!ethe surety, uarantees the perfor$ance "y another party, ca!!e the principa! oro"!ior, of an o"!iation or unerta5in in fa'or of a thir party, ca!!e the o"!iee. tinc!ues officia! reconiances, stipu!ations, "ons or unerta5ins issue "y anyco$pany "y 'irtue of an uner the pro'isions of +ct No. 36, as a$ene "y +ctNo. 2206 (An Act Relative to Recognizances, Stipulations, Bonds and Undertakings,and to Allow Certain Corporations to be Accepted as Surety Thereon. e ha'e

consistent!y he! that a surety#s !ia"i!ity is &oint an se'era!, !i$ite to the a$ount ofthe "on, an eter$ine strict!y "y the ter$s of contract of suretyship in re!ation tothe principa! contract "et%een the o"!ior an the o"!iee. t "ears stressin,ho%e'er, that a!thouh the contract of suretyship is seconary to the principa!contract, the surety#s !ia"i!ity to the o"!iee is ne'erthe!ess irect, pri$ary, ana"so!ute.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 179628 January 16, 2013

THE MAN!A NSURANCE COMPAN", NC., Petitioner, vs.SPOUSES RO#ERTO an$ A%A AMURAO, Respondents.

D E C I S I O N
http://sc.judiciary.gov.ph/jurisprudence/2013/january2013/179628.pdfhttp://sc.judiciary.gov.ph/jurisprudence/2013/january2013/179628.pdf


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%E! CAST!!O, J.:

he !urisdiction of the Construction Industr" #rbitrationCo$$ission %CI#C& is conferred b" la'. Section ()of E*ecutive

Order %E.O.& No. I ++, other'ise -no'n as the ConstructionIndustr" #rbitration a', /is broad enou0h to cover an" disputearisin0 fro$, or connected 'ith construction contracts, 'hetherthese involve $ere contractual $one" clai$s or e*ecution of the'or-s./1

his Petition for Revie' on Certiorari2under Rule (3 of the Rulesof Court assails the Decision( dated 4une 5, 1++5 and theResolution3dated Septe$ber 5, 1++5 of the Court of #ppeals %C#&in C#67.R. SP No. 89)3.

:actual #ntecedents

On March 5, 1+++, respondent6spouses Roberto and #ida #$uraoentered into a Construction Contract #0ree$ent %CC#&9 'ith#e0ean Construction and Develop$ent Corporation %#e0ean& forthe construction of a si*6store" co$$ercial buildin0 in o$asMorato corner E. Rodri0ue; #venue,


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1++1. hus, petitioner filed an #ns'er 'ith Counterclai$ andCross6clai$,)8 follo'ed b" a hird Part" Co$plaint1+ a0ainst#e0ean and spouses Ronald and Susana Nicdao.

Durin0 the pre6trial, petitioner and Intra Strata discovered that theCC# entered into b" respondent6spouses and #e0ean containedan arbitration clause.1)

>ence, the" filed separate Motions to Dis$iss11on the 0rounds oflac- of cause of action and lac- of !urisdiction.

Rulin0 of the Re0ional rial Court

On Ma" 3, 1++9, the RC denied both $otions.12Petitioner and

Intra Strata separatel" $oved for reconsideration but their $otions'ere denied b" the RC in its subse?uent Order1( datedSepte$ber )), 1++9.

#00rieved, petitioner elevated the case to the C# b" 'a" of specialcivil action for certiorari.13

Rulin0 of the Court of #ppeals

On 4une 5, 1++5, the C# rendered a Decision19 dis$issin0 thepetition. he C# ruled that the presence of an arbitration clause inthe CC# does not $erit a dis$issal of the case because under theCC#, it is onl" 'hen there are differences in the interpretation of#rticle I of the construction a0ree$ent that the parties can resort toarbitration.15he C# also found no 0rave abuse of discretion onthe part of the RC 'hen it disre0arded the fact that the CC# 'asnot "et si0ned at the ti$e petitioner issued the perfor$ance bondon :ebruar" 18, 1+++.1he C# e*plained that the perfor$ancebond 'as intended to be coter$inous 'ith the construction of the

buildin0.18It pointed out that /if the deliver" of the ori0inal contractis conte$poraneous 'ith the deliver" of the suret"@s obli0ation,each contract beco$es co$pleted at the sa$e ti$e, and theconsideration 'hich supports the principal contract li-e'isesupports the subsidiar" one./2+he C# li-e'ise said that, althou0hthe contract of suret" is onl" an accessor" to the principal contract,the suret"@s liabilit" is direct, pri$ar" and absolute.2)husA

B>ERE:ORE, 'e resolve to DISMISS the petition as 'e find that

no 0rave abuse of discretion attended the issuance of the order ofthe public respondent den"in0 the petitioner@s $otion to dis$iss.


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I IS SO ORDERED.21

Petitioner $oved for reconsideration but the C# denied the sa$ein a Resolution22dated Septe$ber 5, 1++5.

Issues

>ence, this petition raisin0 the follo'in0 issuesA

#.

>E >ONOR#=E C# ERRED B>EN I >ED ># I ISON B>EN >ERE #RE DI::ERENCES IN >EINERPRE#ION O: #RICE I O: >E CONSRCION

#7REEMEN ># >E P#RIES M# RESOR O#R=IR#ION = >E CI#C.

=.

>E >ONOR#=E C# ERRED IN RE#IN7 PEIIONER #S #SOID#R DE=OR INSE#D O: # SOID#R 7#R#NOR.

C.

>E >ONOR#=E C#F OVEROOGED #ND :#IED OCONSIDER >E :#C ># >ERE B#S NO #C# #NDEHISIN7 CONSRCION #7REEMEN # >E IME >EM#NI# INSR#NCE =OND NO. 7 %)2& 1+1 B#S ISSED ON:E=R#R 18, 1+++.2(

Petitioner@s #r0u$ents

Petitioner contends that the C# erred in rulin0 that the parties $a"

resort to arbitration onl" 'hen there is difference in theinterpretation of the contract docu$ents stated in #rticle I of theCC#.23Petitioner insists that under Section ( of E.O. No. )++, it isthe CI#C that has ori0inal and e*clusive !urisdiction overconstruction disputes, such as the instant case.29

Petitioner li-e'ise i$putes error on the part of the C# in treatin0petitioner as a solidar" debtor instead of a solidar" 0uarantor.25

Petitioner ar0ues that 'hile a suret" is bound solidaril" 'ith theobli0or, this does not $a-e the suret" a solidar" co6debtor.2 #

suret" or 0uarantor is liable onl" if the debtor is hi$self liable.28In


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this case, since respondent6spouses and #e0ean a0reed to sub$itan" dispute for arbitration before the CI#C, it is i$perative that thedispute bet'een respondent6spouses and #e0ean $ust first bereferred to arbitration in order to establish the liabilit" of #e0ean.(+

In other 'ords, unless the liabilit" of #e0ean is deter$ined, thefilin0 of the instant case is pre$ature.()

:inall", petitioner puts in issue the fact that the perfor$ance bond'as issued prior to the e*ecution of the CC#.(1 Petitioner clai$sthat since there 'as no e*istin0 contract at the ti$e theperfor$ance bond 'as e*ecuted, respondent6spouses have nocause of action a0ainst petitioner.(2hus, the co$plaint should bedis$issed.((

Respondent spouses@ #r0u$ents

Respondent6spouses, on the other hand, $aintain that the CI#Chas no !urisdiction over the case because there is no a$bi0uit" inthe provisions of the CC#.(3=esides, petitioner is not a part" to theCC#.(9>ence, it cannot invo-e #rticle HVII of the CC#, 'hichprovides for arbitration proceedin0s.(5 Respondent6spouses alsoinsist that petitioner as a suret" is directl" and e?uall" bound 'iththe principal.(he fact that the perfor$ance bond 'as issued prior

to the e*ecution of the CC# also does not affect the latter@s validit"because the perfor$ance bond is coter$inous 'ith theconstruction of the buildin0.(8

Our Rulin0

he petition has $erit.

Nature of the liabilit" of the suret"

# contract of suret"ship is defined as /an a0ree$ent 'hereb" apart", called the suret", 0uarantees the perfor$ance b" anotherpart", called the principal or obli0or, of an obli0ation or underta-in0in favor of a third part", called the obli0ee. It includes officialreco0ni;ances, stipulations, bonds or underta-in0s issued b" an"co$pan" b" virtue of and under the provisions of #ct No. 329, asa$ended b" #ct No. 11+9./3+ Be have consistentl" held that asuret"@s liabilit" is !oint and several, li$ited to the a$ount of thebond, and deter$ined strictl" b" the ter$s of contract of suret"ship

in relation to the principal contract bet'een the obli0or and theobli0ee.3)It bears stressin0, ho'ever, that althou0h the contract of


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suret"ship is secondar" to the principal contract, the suret"@sliabilit" to the obli0ee is nevertheless direct, pri$ar", andabsolute.31

In this case, respondent6spouses %obli0ee& filed 'ith the RC aCo$plaint a0ainst petitioner %suret"& to collect on the perfor$ancebond it issued. Petitioner, ho'ever, see-s the dis$issal of theCo$plaint on the 0rounds of lac- of cause of action and lac- of!urisdiction.

he respondent6spouses have cause of action a0ainst thepetitioner the perfor$ance bond is coter$inous 'ith the CC#

Petitioner clai$s that respondent6spouses have no cause of action

a0ainst it because at the ti$e it issued the perfor$ance bond, theCC# 'as not "et si0ned b" respondent6spouses and #e0ean.

Be do not a0ree.

# careful readin0 of the Perfor$ance =ond reveals that the /bondis coter$inous 'ith the final acceptance of the pro!ect./32hus, thefact that it 'as issued prior to the e*ecution of the CC# does notaffect its validit" or effectivit".

=ut 'hile there is a cause of action a0ainst petitioner, theco$plaint $ust still be dis$issed for lac- of !urisdiction.

he CI#C has !urisdiction over the case

Section ( of E.O. No. )++ provides thatA

SEC. (. 4urisdiction. J he CI#C shall have ori0inal and e*clusive!urisdiction over disputes arisin0 fro$, or connected 'ith, contracts

entered into b" parties involved in construction in the Philippines,'hether the dispute arises before or after the co$pletion of thecontract, or after the abandon$ent or breach thereof. hesedisputes $a" involve 0overn$ent or private contracts. :or the=oard to ac?uire !urisdiction, the parties to a dispute $ust a0ree tosub$it the sa$e to voluntar" arbitration.

he !urisdiction of the CI#C $a" include but is not li$ited toviolation of specifications for $aterials and 'or-$anship, violation

of the ter$s of a0ree$ent, interpretation andKor application ofcontractual ti$e and dela"s, $aintenance and defects, pa"$ent,


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in interpretation of the contract/ because /the $atter ofascertainin0 the duties and obli0ations of the parties under theircontract all involve interpretation of the provisions of thecontract./3:ollo'in0 our reasonin0 in that case, 'e find that the

issue of 'hether respondent6spouses are entitled to collect on theperfor$ance bond issued b" petitioner is a /dispute arisin0 in thecourse of the e*ecution and perfor$ance of the CC# b" reason ofdifference in the interpretation of the contract docu$ents./

he fact that petitioner is not a part" to the CC# cannot re$ovethe dispute fro$ the !urisdiction of the CI#C because the issue of'hether respondent6spouses are entitled to collect on theperfor$ance bond, as 'e have said, is a dispute arisin0 fro$ orconnected to the CC#.

In fact, in Prudential 7uarantee and #ssurance, Inc. v. #nscorand, Inc.,38'e re!ected the ar0u$ent that the !urisdiction of CI#Cis li$ited to the construction industr", and thus, cannot e*tend tosuret" contracts. In that case, 'e declared that /althou0h not theconstruction contract itself, the perfor$ance bond is dee$ed as anassociate of the $ain construction contract that it cannot beseparated or severed fro$ its principal. he Perfor$ance =ond issi0nificantl" and substantiall" connected to the construction

contract that there can be no doubt it is the CI#C, under Section (of E.O. No. )++, 'hich has !urisdiction over an" dispute arisin0fro$ or connected 'ith it./9+

In vie' of the fore0oin0, 'e a0ree 'ith the petitioner that!uriisdiction over the instant case lies 'ith the CI#C, and not 'iththe RC. hus, the Co$plaint filed b" respondent6spouses 'iththe RC $ust be dis$issed.

B>ERE:ORE, the petition is hereb" 7R#NED. he Decisiondated 4une 5, 1++5 and the Resolution dated Septe$ber 5, 1++5of the Court of #ppeals in C#67.R. SP No. 89)3 are hereb"#NNED and SE #SIDE. he Presidin0 4ud0e of the Re0ionalrial Court of


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ANTONO T. CARPO#ssociate 4usticeChairperson

TERESTA J. !EONAR%O&%E CASTROL

#ssociate 4usticeJOSE PORTUG

#ssociate 4u

MAR(C MARO (CTOR ). !EONENLL

#ssociate 4ustice

# E S # I O N

I attest that the conclusions in the above Decision had beenreached in consultation before the case 'as assi0ned to the 'riterof the opinion of the Courts Division.

ANTONO T. CARPO#ssociate 4usticeChairperson

C E R I : I C # I O N

Pursuant to Section )2, #rticle VIII of the Constitution and theDivision Chairpersons #ttestation, I certif" that the conclusions inthe above Decision had been reached in consultation before thecase 'as assi0ned to the 'riter of the opinion of the CourtsDivision.

MARA !OUR%ES P. A. SERENOChief 4ustice

)oo*no*+

LPer raffle dated 4anuar" )(.1+)2.

LLPer Special Order No. )(+ dated 4anuar" )3, 1+)2.

)SEC. (. 4urisdiction. 6he Cl#C shall have ori0inal and e*clusive!urisdiction over disputes arisin0 fro$. or connected 'ith. contracts

entered into b" parties involved in construction in the Philippines.'hether the dispute arises before or after the co$pletion of thecontract, or after the abandon$ent or breach thereof. hesedisputes $a" involve 0overn$ent or private contracts. :or the=oard to ac?uire !urisdiction. the parties to a dispute $ust a0ree tosub$it the sa$e to voluntar" arbitration.

he !urisdiction of the Cl#C $a" include but is not li$ited toviolation of specifications for $aterials and 'or-$anship. violationof the ter$s of a0ree$ent, interpretation andKor application ofcontractual ti$e and dela"s. $aintenance and defects. pa"$ent.


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default of e$plo"er or contractor, and chan0es in contract cost.

E*cluded fro$ the covera0e of this la' are disputes arisin0 fro$e$plo"er6e$plo"ee relationships 'hich shall continue to be

covered b" the abor Code of the Philippines.1 ICOMCEN, lncorporated v. :oundation Specialists, Inc., 7.R.Nos. )95+11 and )9895. #pril (, 1+)), 9(5 SCR# 2, 8).

2Rollo, pp. )2625.

(Id. at 286(5 penned b" #ssociate 4ustice #polinario D. =ruselas,4r. and concurred in b" #ssociate 4ustices =ienvenido . Re"es%no' a $e$ber of this Court& and #urora Santia0o6a0$an.

3Id. at (8.

9Id. at 5163.

5Id. at 286(+.

Id. at 9698.

8Id. at 5+65).

)+Id. at 92695.

))Id. at 99.

)1Records, Volu$e I, pp. 18621.

)2Id. at 2628.

)(Id. at (+6(1.

)3Id. at 1961.

)9Id. at 19.

)5Id. at 15.

)Id. at (863+ penned b" 4ud0e "dia


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1+Id. at 856)++.

1)Id. at (+.

11Id. at ))56)1( and ))+6))9.

12Records, Volu$e II, pp. 3((63(9.

1(Id. at 38.

13C# rollo, pp. 1611.

19Rollo, pp. 286(5.

15

Id. at (16((.1Id. at (36(9.

18Id. at (9.

2+Id.

2)Id. at (3.

21

Id. at (96(5.22Id. at (8.

2(Id. at )96)98.

23Id. at )98.

29Id. at )5).

25

Id. at )5(.

2Id. at )53.

28Id.

(+Id. at )+.

()Id. at )1.

(1Id. at )2.


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(2Id. at )3.

((Id. at )9.

(3Id. at )816)82.

(9Id. at )82.

(5Id.

(Id. at )83.

(8Id. at )89.

3+

INSR#NCE CODE, Section )53.3) Intra6Strata #ssurance Corporation v. Republic, 7.R. No.)3935), 4ul" 8, 1++, 335 SCR# 292, 298.

31 Prudential 7uarantee and #ssurance, Inc. v. E?uino* andCorporation, 7.R. Nos. )313+36+9, Septe$ber )2, 1++5, 322SCR# 135, 19.

32Rollo, p. 9.

3(Prudential 7uarantee and #ssurance, Inc. v. #nscor and, Inc.,7.R. No. )551(+, Septe$ber , 1+)+, 92+ SCR# 29, 259.

33Rollo, p. 2.

39Id.

357.R. No. )9231, #u0ust 8, 1+)+, 915 SCR# 5(.

3Id. at 3.

38Supra note 3( at 2526258.

9+Id. at 255.

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