G.R. No. L-24566 July 29, 1968
AGRICULTURAL CREDIT & COOPERATIVE FINANCING ADMINISTRATION (ACCFA), plaintiff-appellant, vs. ALPHA INSURANCE & SURETY CO., INC., defendant-appellee, RICARDO A. LADINES, ET AL., third party-defendants-appellees.

FACTS

The Agricultural Credit Cooperative and Financing Administration (ACCFA) filed a suit against Alpha Insurance & Surety Co., Inc. on May 30, 1960. ACCFA’s claim arose from a fidelity bond issued by Alpha on February 14, 1958, guaranteeing against losses due to the personal dishonesty of Ricardo A. Ladines, the secretary-treasurer of the Asingan Farmers’ Cooperative Marketing Association, Inc. (FACOMA). The rights under the bond were assigned to ACCFA with the approval of the principal and surety. During the bond’s effectivity, Ladines misappropriated FACOMA funds. ACCFA discovered the loss, notified Alpha in writing on October 10, 1958, and presented proof of loss within the period fixed in the bond. After repeated demands for payment were refused by Alpha, ACCFA filed the suit. Alpha moved to dismiss the complaint, arguing it was filed more than one year after ACCFA made its claim for loss, violating Condition Eight of the bond which limited the time for commencing an action to one year from the making of a claim. The Court of First Instance initially denied the motion but upon reconsideration dismissed the complaint on the ground of the contractual limitation period.

ISSUE

Whether the provision in the fidelity bond (Condition Eight) limiting the time to commence an action to one year from the making of a claim for loss is valid or void in light of Section 61-A of the Insurance Act.

RULING

The Supreme Court reversed the order of dismissal and remanded the case. The Court ruled that Condition Eight of the bond is null and void. A fidelity bond is in the nature of a contract of insurance and is governed by the same principles. Section 61-A of the Insurance Act voids any condition in an insurance policy limiting the time for commencing an action to less than one year from the time the cause of action accrues. A cause of action accrues only when the party obligated refuses to comply with its duty (to pay). Therefore, the one-year period cannot be counted from the mere filing of the claim but must be reckoned from the surety’s refusal to pay. The stipulation requiring action within one year from filing the claim contradicts public policy under Section 61-A. Consequently, action may be brought within the statutory period for written contracts. The other grounds for dismissal were also found untenable as the condition of previous conviction had been deleted and the surety’s solidary liability allowed the creditor to proceed against it directly.