G.R. No. 204689; January 21, 2015
STRONGHOLD INSURANCE COMPANY, INC., Petitioner, vs. SPOUSES RUNE and LEA STROEM, Respondents.

FACTS

Spouses Rune and Lea Stroem entered into an Owners-Contractor Agreement with Asis-Leif & Company, Inc. for the construction of a house. Pursuant to this agreement, Asis-Leif secured Performance Bond No. LP/G(13)83056 from Stronghold Insurance Company, Inc. in the amount of ₱4,500,000.00, with Stronghold binding itself jointly and severally with Asis-Leif to pay the Spouses Stroem the agreed amount if the project was not completed. Asis-Leif failed to finish the project on time, leading the Spouses Stroem to rescind the agreement. An independent appraiser evaluated the project’s percentage of completion. After Stronghold failed to secure a settlement from Asis-Leif, the Spouses Stroem filed a Complaint for breach of contract and sum of money against Asis-Leif and Stronghold. Only Stronghold was served summons. The Regional Trial Court ruled in favor of the Spouses Stroem, ordering Stronghold to pay ₱4,500,000.00 with interest and attorney’s fees. The Court of Appeals affirmed the decision with modification, increasing the attorney’s fees. Stronghold filed a Petition for Review, arguing the trial court lacked jurisdiction due to an arbitration clause in the construction contract, claiming the dispute fell under the exclusive jurisdiction of the Construction Industry Arbitration Committee (CIAC). The Spouses Stroem countered that Stronghold committed forum shopping and that the arbitration clause was not binding on Stronghold, a non-party to the construction agreement.

ISSUE

The main issues are: (1) Whether the dispute involves a construction contract and falls under the exclusive jurisdiction of the CIAC; (2) Whether the Regional Trial Court should have dismissed the case and referred it to arbitration; (3) Whether Stronghold is liable under the performance bond; and (4) Whether Stronghold committed forum shopping.

RULING

The Supreme Court denied the Petition. On the issue of forum shopping, the Court found Stronghold guilty for failing to disclose in its Certification Against Forum Shopping the pendency of the Spouses Stroem’s Motion for Partial Reconsideration of the Court of Appeals Decision, which involved the same parties and issues. On the substantive issues, the Court ruled that the dispute did not fall under the exclusive jurisdiction of the CIAC. The arbitration clause in the Owners-Contractor Agreement was binding only on the parties to that agreement—the Spouses Stroem and Asis-Leif. Stronghold was not a party to the construction contract but was a surety under a separate performance bond. The Court held that a surety’s liability under a performance bond is direct, primary, and absolute; it is not merely accessory to the principal obligation under the construction contract. The bond created an independent commitment by Stronghold to answer for the debt of Asis-Leif. Therefore, the Spouses Stroem could directly sue Stronghold on the bond without first resorting to arbitration under the construction contract. The Regional Trial Court properly exercised jurisdiction over the complaint for sum of money based on the surety agreement. The Court affirmed Stronghold’s liability under the performance bond for the full bond amount.