Beruflich Dokumente
Kultur Dokumente
2018-2019
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Insurance Case Digests: Suretyship 3B; A.Y. 2018-2019
rise of the water level in the reservoir of its Angat Dam due to heavy rains brought about
by the typhoon was an extraordinary occurrence that could not have been foreseen.
ISSUE: WON the destruction and loss of the ECI's equipment and facilities were due to
force majeure.
RULING: No. NPC was undoubtedly negligent because it opened the spillway gates of
the Angat Dam only at the height of typhoon "Welming" when it knew very well that it
was safer to have opened the same gradually and earlier, as it was also undeniable that
NPC knew of the coming typhoon at least four days before it actually struck.
Even though the typhoon was an act of God or force majeure, NPC cannot escape liability
because its negligence was the proximate cause of the loss and damage (Nakpil and Sons).
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Insurance Case Digests: Suretyship 3B; A.Y. 2018-2019
FACTS: The Rizal Surety & Insurance Co. brings this appeal from an order of the Court
of First Instance of Manila which declared it liable for P6,051.57 on its bond it had given
in behalf of Victorio L. Rodriguez.
Rodriguez was the administrator of the estate of Honofre Leyson. On December 27, 1951,
the Manila Court of First Instance, in which the estate was at the time pending settlement,
ordered Rodriguez relieved of his trust after finding him guilty of maladministration. As
Rodriguez appealed the order of relief, the court, as a measure of “protection of this
estate,” required him to file an increased bond of P10.000 (which then was P500 only) to
answer for “the faithful execution of his trust as of the date of his appointment.”
Required to account for the period June 27, 1951 to August 30, 1954, Rodriguez was found
short of P6,248.22. (The amount of shortage was later found by final judgment of the
Court of Appeals to be P6,051.57.) Despite several deadlines given to him, Rodriguez
failed to pay the money in court, for which reason he was ordered arrested and declared
in contempt.
On November 8, 1962, the Court, acting on motion of the new administratrix, ordered the
confiscation of Rodriguez’ bond for the satisfaction of the amount of P6,051.57. It is from
this order that the surety company appeals. It is first of all contended that appellant
cannot be held liable on its bond because the defalcations, for which the bond was ordered
forfeited, were committed by the principal before the bond was filed. The rule is invoked
that a contract of suretyship must be strictly construed and since the contract in this case
contains no provision making it expressly retroactive, the point is made that the bond
cannot cover violations of trust by the administrator before the filing of that bond.
ISSUES: 1. WON is there any merit in the claim that the bond was confiscated without
giving the appellant a chance to be heard on “the reality and reasonableness of the
damages.”
2. WON the surety is liable to the extent of P6,051.57, which amount was found due from
the said former administrator.
RULING: No. the record shows that the surety was given an opportunity to be heard.
2. Yes. It has already been held that the nature of a surety’s obligation on an
administrator’s bond, which makes him privy to the proceedings against his principal, is
such that he is bound and concluded, in the absence of fraud or collusion, by a judgment
against his principal, even though the surety was not a party to the proceedings.
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Insurance Case Digests: Suretyship 3B; A.Y. 2018-2019
that the checks issued by its principal which were supposed to pay for the premiums,
bounced, hence there is no contract of surety to speak of; and 2) that as early as 1986 and
covering the time of the Surety Bond, Interworld Assurance Company (now Phil. Pryce)
was not yet authorized by the Insurance Commission to issue such bonds. The Insurance
Code states that: “SECTION 177. The surety is entitled to payment of the premium as soon
as the contract of suretyship or bond is perfected and delivered to the obligor. No contract
of suretyship or bonding shall be valid and binding unless and until the premium therefor
has been paid, except where the obligee has accepted the bond, in which case the bond
becomes valid and enforceable irrespective of whether or not the premium has been paid
by the obligor to the surety. x x x” (emphasis added) The above provision outrightly
negates petitioner’s first defense. In a desperate attempt to escape liability, petitioner
further asserts that the above provision is not applicable because the respondent allegedly
had not accepted the surety bond, hence could not have delivered the goods to Sagum
Enterprises. This statement clearly intends to muddle the facts as found by the trial court
and which are on record.
FACTS: Petitioner, Interworld Assurance Corporation (now Philippine Pryce Assurance
Corporation), was sued for collection of sum of money by respondent Gegroco, Inc.
The complaint alleged that Pryce issued two surety bonds in behalf of its principal Sagum
General Merchandise for P500,000.00 and P1,000,000.00 respectively.
Pryce admitted having executed the said bonds, but denied liability because allegedly 1)
the checks which were to pay for the premiums bounced and were dishonored hence there
is no contract to speak of between Pryce and its supposed principal Sagum; and 2) the
bonds were merely to guarantee payment of its principal's obligation, thus, there is a
benefit of excussion (a right under Art. 2066 which only a guarantor may invoke against
the creditor wherein the guarantor will point out to the creditor all the debtor’s properties
in the Philippines sufficient to cover amount of debt).
After the issues had been joined, the case was set for pre-trial conference. Pryce failed to
appear during the pre-trial that was reset 3 times because of the non-appearance of Pryce
and/or its counsel during the scheduled pre-trials. He also failed to pay the docket fees
for the Third-Party Complaint it filed against his principal Sagum. Pryce was considered
as in default and respondent was allowed to present evidence ex-parte.
RTC ruled in favor of respondent Gregoco.
CA affirmed the RTC ruling.
ISSUE: Whether or not there was a contract of suretyship between Pryce and its principal
Sagum which makes Pryce solidarily liable to Gregoco.
RULING: YES. The Supreme Court We did find any reversible error in the conclusion
reached by the court a quo.
The Insurance Code states that:
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Insurance Case Digests: Suretyship 3B; A.Y. 2018-2019
Sec. 177. The surety is entitled to payment of the premium as soon as the contract
of suretyship or bond is perfected and delivered to the obligor. No contract of
suretyship or bonding shall be valid and binding unless and until the premium
therefor has been paid, except where the obligee has accepted the bond, in which
case the bond becomes valid and enforceable irrespective of whether or not the
premium has been paid by the obligor to the surety. . .
The above provision outrightly negates petitioner's first defense. In a desperate attempt
to escape liability, petitioner further asserts that the above provision is not applicable
because the respondent allegedly had not accepted the surety bond, hence could not have
delivered the goods to Sagum Enterprises. This statement clearly intends to muddle the
facts as found by the trial court and which are on record.
Likewise attached to the record are exhibits consisting of delivery invoices addressed to
Sagum General Merchandise proving that parts were purchased, delivered and received.
On the other hand, petitioner's defense that it did not have authority to issue a Surety
Bond when it did is an admission of fraud committed against respondent. No person can
claim benefit from the wrong he himself committed. A representation made is rendered
conclusive upon the person making it and cannot be denied or disproved as against the
person relying thereon. The petition has been dismissed for lack of merit.
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Insurance Case Digests: Suretyship 3B; A.Y. 2018-2019
On April 6, 1998, the NLRC affirmed with modification the decision of the Labor Arbiter.
The NLRC found the herein private respondents constructively dismissed and ordered
Radon Security to pay them their separation pay, in lieu of reinstatement with backwages,
as well as their monetary benefits limited to three years, plus attorney’s fees equivalent to
10% of the entire amount, with Radon Security and Ever Emporium, Inc. adjudged jointly
and severally liable.
Radon Security duly moved for reconsideration, but this was denied by the NLRC in its
Resolution dated June 22, 1998. Radon Security then filed a Petition for Certiorari
docketed as G.R. No. 134891 with this Court, but we dismissed this petition in our
Resolution of August 31, 1998.
In dismissing the appeal of AFPGIC, the NLRC pointed out that AFPGIC’s theory that the
bond cannot anymore be proceeded against for failure of Radon Security to pay the
premium is untenable, considering that the bond is effective until the finality of the
decision. The NLRC stressed that a contrary ruling would allow respondents to simply
stop paying the premium to frustrate satisfaction of the money judgment.
AFPGIC then moved for reconsideration, but the NLRC denied the motion in its
Resolution dated February 29, 2000.
AFPGIC then filed a special civil action for certiorari, docketed as CA-G.R. SP No. 58763,
with the Court of Appeals, on the ground that the NLRC committed a grave abuse of
discretion in affirming the Order dated March 30, 1999 of the Labor Arbiter.
ISSUE: WON the Court of Appeals seriously erred in sustaining the public respondent
NLRC although the latter gravely abused its discretion when it arbitrarily ignored the fact
that subject appeal bond was already cancelled for non-payment of premium and thus it
could not be subject of execution or garnishment.
RULING: The filing of a cash or surety bond is a jurisdictional requirement in an appeal
involving monetary award, and the bond shall be in effect until the final disposition of the
case. A surety bond, once accepted by the obligee (the employee to whom money benefits
were due), becomes valid and enforceable, irrespective of whether or not the premiums
thereon have been paid by the obligor (the employer liable for payment).
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Insurance Case Digests: Suretyship 3B; A.Y. 2018-2019
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Insurance Case Digests: Suretyship 3B; A.Y. 2018-2019
appellees were under no obligation to pay the premiums and costs of documentary stamps
for the succeeding period it was in effect.
RULING: Yes, The bond was given to secure payment by appellees of such additional
freight as would already be due on the cargo when it actually arrived in Manila. The bond
was not executed to secure obligation or liability which was still to arise after its twelve
month life. While it was true that the lower court held that the bond was still in effect after
its expiry date, the effectivity was not due to a renewal made by the appellees but because
the surety bond provided that "the liability of the surety will not expire if, as in this case,
it was notified of an existing obligation thereunder".
The meaning of the bond's still being in effect was that, the suit on the bond instituted by
the obligees prior to the expiration of the "liability" thereunder was only for the purpose
of enforcing that liability and amounted to notice to appellant of an already existing or
accrued liability so as not to let that liability lapse or expire and thereby bar enforcement.
It must be noted that in the surety bond it was stipulated that the "liability of surety on
this bond would expire on May 5, 1963 and said bond would be cancelled 15 days after its
expiration, unless surety was notified of any existing obligations thereunder."
Under this stipulation the bond expired on the stated date and the phrase "unless surety
was notified of any existing obligations thereunder" refers to obligations incurred during
the term of the bond.
Under the Indemnity Agreement, the appellees "agreed to pay the COMPANY the sum of
ONE THOUSAND EIGHT HUNDRED ONLY (P1,800.00) Pesos, Philippine Currency, in
advance as premium thereof for every twelve (12) months or fraction thereof, while this
bond or any renewal or substitution thereof was in effect."
Obviously, the duration of the bond was for "every twelve (12) months or fraction thereof,
while this bond or any renewal or substitution was in effect." Since the appellees opted
not to renew the contract they cannot be obliged to pay the premiums.
More specifically, where a contract of surety is terminated under its terms, the liability of
the principal for premiums after such termination ceases notwithstanding the pendency
of a lawsuit to enforce a liability that accrued during its stipulated lifetime. The appeal
was dismissed for lack of merit. The decision of the court a quo was affirmed.
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