GR 192099; (July, 2015) (Digest)
G.R. No. 192099 , July 8, 2015.
PAULINO M. EJERCITO, JESSIE M. EJERCITO and JOHNNY D. CHANG, Petitioners, vs. ORIENTAL ASSURANCE CORPORATION, Respondent.
FACTS
On May 10, 1999, respondent Oriental Assurance Corporation issued a Surety Bond in favor of FFV Travel & Tours, Inc. to guarantee payment for airline tickets purchased on credit from IATA members, up to ₱3,000,000. On the same day, petitioners and Merissa C. Somes executed a Deed of Indemnity in favor of the respondent. The bond was effective for one year and was renewed for another year from May 10, 2000, to May 10, 2001, upon payment of the renewal premium by the insured corporation. FFV Travel & Tours, Inc. defaulted on its obligations, leading IATA to demand payment on the bond. Respondent paid the demand on November 28, 2000. Respondent then sent demand letters to petitioners and Somes for reimbursement pursuant to the indemnity agreement. Upon their failure to reimburse, respondent filed a collection suit. The Regional Trial Court (RTC) dismissed the complaint against petitioners, finding no written agreement showing their intention to renew the Deed of Indemnity, but held Somes liable. The Court of Appeals (CA) reversed the RTC, ruling petitioners were jointly and severally liable with Somes, as the Deed of Indemnity contained a clause authorizing the company to grant renewals of the bond.
ISSUE
1. Whether the Court of Appeals erred in ruling that petitioners are liable to indemnify the respondent under the deed of indemnity despite their claim that they did not consent to be bound beyond the one-year effectivity period of the original surety bond.
2. Whether the Court of Appeals erred in ruling that petitioners are liable to pay attorney’s fees.
RULING
The Supreme Court denied the petition and affirmed the CA Decision and Resolution. The Court held that the contract of indemnity is the law between the parties, and its clear and unequivocal terms control. The Deed of Indemnity expressly contained stipulations authorizing the company to grant renewals, extensions, modifications, or substitutions of the original bond and holding the signatories jointly and severally liable for such renewals until full payment. Petitioners voluntarily signed the agreement, and one of them being a lawyer, they could not feign ignorance of its legal effects. Their claim of an external agreement with Somes limiting liability to one year is not binding on the respondent, who was not privy to it. The Court also rejected the argument that the deed was a contract of adhesion, noting such contracts are not invalid per se, and petitioners, having entered into it with full knowledge, are estopped from denying its terms. Consequently, petitioners are liable for the principal amount with interest and attorney’s fees as stipulated.