G.R. No. 139290 November 11, 2005
Trade & Investment Development Corporation of the Philippines (Formerly Philippine Export & Foreign Loan Guarantee Corporation), Petitioner, vs. Roblett Industrial Construction Corporation, Roberto G. Abiera, Leticia Abiera, and Paramount Insurance Corporation, Respondents.

FACTS

Petitioner Philguarantee issued a counter-guarantee to the Bank of Kuwait and the Middle East (BKME) to secure a bid bond for respondent Roblett’s subcontract bid in Kuwait. As a condition, Philguarantee required Roblett to post security equivalent to 100% of the guarantee accommodation. To comply, Roblett obtained Surety Bond No. G-(16)488 from respondent Paramount Insurance Corporation. The bond explicitly bound Paramount, as surety, jointly and severally with Roblett to pay Philguarantee the sum of ₱11,775,611.35 for any damages or liabilities incurred under its guarantee, with the bond’s expiry date being co-terminous with Philguarantee’s counter-guarantee.
Roblett failed to secure the subcontract. Subsequently, BKME demanded payment from Philguarantee under the counter-guarantee. Philguarantee paid BKME and then demanded reimbursement from Roblett and Paramount under the surety bond. When Paramount refused, Philguarantee filed a complaint for sum of money. The Court of Appeals affirmed the trial court’s dismissal, discharging Paramount from liability, primarily on the finding that the surety bond was merely an accessory contract to an Indemnity Agreement between Roblett and Paramount, and that Philguarantee’s payment to BKME was premature and not in accordance with the terms of the underlying guarantee.

ISSUE

Whether respondent Paramount Insurance Corporation is liable to petitioner Philguarantee under the terms of Surety Bond No. G-(16)488.

RULING

Yes, Paramount is liable. The Supreme Court reversed the Court of Appeals, holding that the terms of the surety bond are clear and constitute the law between the parties. The bond is a contract of suretyship where Paramount bound itself solidarily with Roblett to answer for the principal obligation. The Court emphasized that a contract of suretyship is an accessory promise by which one binds themselves to answer for the debt or default of another. The bond’s stipulations are unequivocal: Paramount obligated itself to pay Philguarantee for whatever damages or liabilities it incurred under its guarantee to BKME.
The appellate court erred in relying on Paramount’s separate Indemnity Agreement with Roblett to exonerate the surety. That agreement is irrelevant to the independent contractual obligation Paramount directly assumed in favor of Philguarantee. The bond’s conditions were fulfilled: Philguarantee’s guarantee was called, it paid BKME, and it made a demand on the surety. The defense that Philguarantee’s payment was premature pertains to the principal obligation between Philguarantee and BKME/Roblett, which does not affect the surety’s direct, solidary liability to the creditor, Philguarantee, under the clear terms of the bond. Paramount’s obligation became due and demandable upon Philguarantee’s payment and demand.