G.R. No. 79436-50; January 17, 1990
EASTERN ASSURANCE & SURETY CORPORATION, petitioner, vs. SECRETARY OF LABOR, PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, ELVIRA VENTURA, ESTER TRANGUILLAN, et al., respondents.

FACTS

Petitioner Eastern Assurance and Surety Corporation (EASCO) executed a surety bond on January 2, 1985 in favor of the Philippine Overseas Employment Administration (POEA, now Department of Migrant Workers), binding itself jointly and severally with its principal, J & B Manpower Specialist, Inc., in the amount of P150,000.00. The bond was conditioned upon the faithful performance by J & B of its duties under POEA rules and its license. The bond contained a clause stating that notice to the principal was also notice to the surety, and that liability would expire on January 2, 1986, with the bond to be automatically cancelled ten days after expiration. Multiple complainants filed cases against J & B before the POEA between April and October 1985 for illegal exaction of fees and non-deployment, violations of the Labor Code. J & B failed to appear or answer despite summons.
The POEA Administrator found J & B liable and ordered it, jointly and severally with EASCO, to refund twenty-nine complainants. On appeal, the Secretary of Labor modified the order, holding EASCO jointly and severally liable with J & B to refund only nineteen complainants, in the aggregate amount of P140,817.75, which was within the bond’s P150,000 limit. EASCO filed this certiorari petition, challenging the POEA and Labor Secretary’s orders.

ISSUE

Whether the Secretary of Labor committed grave abuse of discretion in holding petitioner EASCO liable on its surety bond despite claims that the complaints were filed outside the bond’s validity period and that EASCO was not properly notified.

RULING

The Supreme Court dismissed the petition, finding no grave abuse of discretion. The legal logic is anchored on the nature of a compensated surety bond and the specific terms of the contract. First, the Court upheld the Secretary’s finding that the claims arose from acts covered by the bond, as the illegal exactions and violations occurred during the bond’s effectivity. Second, EASCO’s argument that claims were presented after the bond’s ten-day cancellation period was rejected. The bond stipulated that notice to the principal (J & B) was also notice to the surety (EASCO). The record showed that J & B received summons for several complaints before the bond’s expiration date of January 12, 1986. This constructive notice to J & B was deemed sufficient notice to EASCO. Third, the Court cited the doctrine that contracts of compensated sureties, like EASCO, are to be interpreted liberally in favor of the obligees and beneficiaries—the migrant workers and the POEA—rather than strictly against the surety. This policy aims to protect overseas workers and ensure compliance with recruitment regulations. Finally, the Court noted that the imposed aggregate liability of P140,817.75 did not exceed the bond’s penal sum of P150,000.00. The factual findings of the administrative agencies, including due service of summons, were sustained in the absence of grave error. Thus, the Secretary of Labor’s order was affirmed as a valid exercise of quasi-judicial power.