GR 156162; (June, 2015) (Digest)
G.R. No. 156162; June 22, 2015
CCC INSURANCE CORPORATION, Petitioner, vs. KAWASAKI STEEL CORPORATION, F.F. MAÑACOP CONSTRUCTION CO., INC., and FLORANTE F. MAÑACOP, Respondents.
FACTS
On August 16, 1988, Kawasaki Steel Corporation (Kawasaki) and F.F. Mañacop Construction Co., Inc. (FFMCCI) executed a Consortium Agreement to form the Kawasaki-FFMCCI Consortium for the construction of the Pangasinan Fishing Port Network Project. The Philippine Government, through the DPWH, awarded the project to the Consortium. Kawasaki, as Consortium Leader, secured a Letter of Credit from PCIB to guarantee the Consortium’s performance. The Republic made an advance payment to the Consortium. For the release of its share in the advance payment and pursuant to the Consortium Agreement, FFMCCI secured from CCC Insurance Corporation (CCCIC) a Surety Bond (to guarantee repayment of the advance payment) and a Performance Bond (to guarantee completion of FFMCCI’s work) in favor of Kawasaki. FFMCCI and its President, Florante F. Mañacop, executed Indemnity Agreements in favor of CCCIC. In April 1989, FFMCCI ceased work due to financial problems. On August 24, 1989, Kawasaki and FFMCCI executed a new agreement wherein Kawasaki agreed to take over FFMCCI’s unfinished work. Kawasaki demanded payment from CCCIC on the bonds. Upon CCCIC’s refusal, Kawasaki filed a complaint. The Regional Trial Court dismissed the complaint, ruling that CCCIC’s bonds were mere counter-guarantees and that the obligation was extinguished when the Republic granted the Consortium a time extension without CCCIC’s consent. The Court of Appeals reversed the RTC, holding CCCIC liable.
ISSUE
Whether the Court of Appeals erred in holding CCCIC liable under its Surety and Performance Bonds issued in favor of Kawasaki.
RULING
The Supreme Court DENIED the petition and AFFIRMED the Decision of the Court of Appeals. CCCIC is liable under the bonds. The terms of the Surety and Performance Bonds are clear and constitute the law between the parties. The Surety Bond guaranteed the repayment of the advance payment made by Kawasaki to FFMCCI, and the Performance Bond guaranteed the full and faithful performance by FFMCCI of its obligation. Kawasaki’s right as obligee was not made subject to the condition that the Republic first claim against the Consortium’s bond. The Agreement dated August 24, 1989 between Kawasaki and FFMCCI did not novate the Consortium Agreement but was a mere implementation of its terms, and CCCIC’s consent was not required. The extension of time granted by the Republic did not extinguish CCCIC’s liability because the bonds had fixed expiry dates (October 26 and 27, 1989) which preceded the original contract completion date (December 30, 1989) and the default occurred around August 24, 1989, within the bond periods. The rule of strictissimi juris does not apply to surety companies. CCCIC’s liability to Kawasaki under the bonds is solidary with FFMCCI. CCCIC is entitled to be reimbursed by FFMCCI and Mañacop under the Indemnity Agreements.