G.R. No. L-10292; February 28, 1958
PAO CHUAN WEI, plaintiff-appellant, vs. REPOSITO NOMOROSA and GENERAL INDEMNITY CO., INC., defendants-appellees.

FACTS

The case is a suit to recover on a surety bond executed in favor of plaintiff Pao Chuan Wei by Reposito Nomorosa as principal debtor and General Indemnity Co., Inc. as surety, guaranteeing payment of Nomorosa’s mortgage debt of P2,500.00. Nomorosa died, and the case proceeded against the surety company. The surety bond contained a clause stating that the surety “will not be liable for any claim not discovered and presented to the company within THREE (3) months from the expiration of this bond and that the obligee hereby waives his right to file any court-action against the surety after the termination of the period of three months above mentioned.” Nomorosa failed to pay the entire debt, leaving a balance of P2,282.00. The plaintiff presented his claim to the surety within the three-month period, specifically on February 29, 1950, and March 29, 1950. However, the plaintiff filed the court action almost two years later, in February 1952. The surety refused payment, arguing its liability expired on May 22, 1950, and the action was filed beyond the three-month period stipulated in the bond. The trial court dismissed the case, holding the action was not filed within three months from the bond’s expiration.

ISSUE

Whether the three-month period stipulated in the surety bond constitutes solely a condition precedent for presenting a claim to the surety, or whether it also operates as a contractual limitation period requiring the court action itself to be filed within those same three months.

RULING

The Supreme Court reversed the trial court’s decision. It ruled that the three-month period stipulated in the bond established only a condition precedent for the presentation of the claim to the surety, not a limitation period for filing the court action. The Court interpreted the bond’s clauses together, noting the lack of punctuation separating them as an indication they refer to a single topic: presentation of claim and the effect of non-presentation. The Court found the surety’s interpretation—that the action must be filed within the same three months—would lead to absurd results, such as depriving the surety of time to decide on a claim presented on the last day and causing the cause of action to prescribe on that same day if no complaint was filed. The Court held such an agreement would be void for fixing an unreasonably short period of prescription. Furthermore, any ambiguity in the bond, prepared by the surety company, must be interpreted against it. Since the plaintiff presented his claim within the three-month period and filed the court action within the statutory period of prescription, the action was seasonable. Judgment was entered requiring General Indemnity Co., Inc. to pay the plaintiff the sum of P2,282.00 with 7% interest from January 27, 1949.