G.R. No. 30247 , March 11, 1929
HOSPICIO DE SAN JOSE, represented by the ROMAN CATHOLIC ARCHBISHOP OF MANILA, plaintiff-appellee, vs. THE FIDELITY AND SURETY COMPANY OF THE PHILIPPINE ISLANDS, defendant-appellant.

FACTS

Hospicio de San Jose (plaintiff) entered into a contract with Romulo Machetti for the construction of a building. The Fidelity and Surety Company (defendant) guaranteed Machetti’s faithful performance of the contract up to P12,800. The contract stipulated a completion period of 150 working days. During construction, Machetti requested and was granted a 25-day extension by the plaintiff due to delays in material delivery. Machetti failed to complete the work on time and the constructed building was found to be defective and not in accordance with the plans and specifications. The plaintiff demanded fulfillment from the surety company.

ISSUES:
1. Whether the surety (defendant) was released from its obligation because the plaintiff granted an extension of time to the principal (Machetti) without the surety’s consent.
2. Whether the surety was released because the plaintiff made premature payments to the principal.
3. Whether the plaintiff’s action against the surety had prescribed.

RULING

The Supreme Court AFFIRMED the trial court’s judgment in favor of the plaintiff, ordering the defendant to pay P12,800.

1. On the extension of time: The surety was NOT released. The Court distinguished between an obligation to complete the work within a specific period and an obligation to construct according to plans and specifications. The surety bond guaranteed the latter (faithful compliance with the plans and specifications), not the former (timely completion). Since the extension pertained only to the time of performance and not to the nature or quality of the obligation guaranteed, and it did not cause injury to the surety, the surety remained liable.

2. On premature payments: This defense was NOT considered. The defendant failed to allege this fact as a special defense in its answer before the trial court. A surety raising such a defense must specifically plead the facts constituting the discharge and the resulting damage. Having failed to do so, the defense could not be raised for the first time on appeal.

3. On prescription: The action had NOT prescribed. The plaintiff’s right of action accrued upon Machetti’s breach on February 16, 1917. Within the 10-year prescriptive period for written contracts, the plaintiff had filed a cross-claim against the surety in a related case (Machetti v. Hospicio de San Jose) on February 7, 1920. In that case, the Supreme Court dismissed the cross-claim as premature but reserved the plaintiff’s right to file a separate action. The present action, filed thereafter, was therefore timely.