Republic of the Philippines

Court of Appeals
Manila

THIRTEENTH DIVISION

CENTENNIAL GUARANTEE CA-G.R. SP No. 161056

ASSURANCE CORPORATION,
Petitioner,
Members:

-versus- ANTONIO-VALENZUELA, N.G.,

Chairperson
ALIÑO-GELUZ, E.R., and
THE INSURANCE DELA ROSA, J.L.R., JJ.
COMMISSION and TRAVEL
MANAGERS INTERNATIONAL Promulgated:
INC., 31 August 2022
Respondents.

DECISION

ANTONIO-VALENZUELA, J.:

This is the Petition for Review (Under Rule 43 of the 1997 Rules of
Civil Procedure)1 (“Petition”) filed by Centennial Guarantee Assurance
Corporation (“petitioner CGAC”), assailing the Decision dated 27 October
20172 (“assailed Decision”), and Resolution dated 21 May 20193 (“assailed
Resolution”), both issued by the Insurance Commission (IC), Department of
Finance, in IC (CAD) Case No. 3971.

THE FACTS

Travel Managers International Inc. (“respondent Travel Managers”)

filed the Complaint4 before the IC, against the petitioner CGAC.

The Complaint alleged: the respondent Travel Managers was a travel

agency accredited by the International Air Transport Association (“IATA”),
1
C.A. Rollo, p. 9.
2
C.A. Rollo, p. 21.
3
C.A. Rollo, p. 39.
4
C.A. Rollo, p. 43.
CA-G.R. SP. No. 161056 2
DECISION

which was allowed to issue real-time electronic international and local

airline tickets to customers (i.e.: corporate accounts, individual travelers, or
travel agencies, that have no IATA accreditation); in March 2014, Great
Times Events and Tours (“Great Times”), a travel agency without IATA
accreditation, engaged the services of respondent Travel Managers to issue
international airline electronic tickets (“IAETs”) for Great Times' clients; the
parties agreed that Great Times would pay the respondent Travel Managers
within 15 days from Great Times' receipt of the Billing Invoices (“BIs”),
otherwise Great Times would pay ten percent interest per month, plus 25%
attorney's fees;5 the respondent Travel Managers required Great Times to
post the surety bond in the amount of ₱5,000,000.00; on 2 April 2014, the
petitioner CGAC (as surety), and Great Times (as principal), executed the
Surety Bond No. G(16) 213546 in the amount of ₱3,000,000.00, in favor of
respondent Travel Managers (as obligee); on 4 April 2014, the petitioner
CGAC issued the Endorsement No. 93123, 7 increasing the amount of Surety
Bond No. G(16) 21354 from ₱3,000,000.00 to ₱5,000,000.00.

In April 2014, the respondent Travel Managers issued 81 IAETs to

Great Times' clients, and billed Great Times the total amount of
₱5,289,194.34 by Billing Invoices (BIs) thus:
BI Number Amount covered Date of CGAC's receipt of BI
8
BI No. 11091 ₱85,644.95 23 April 2014 (per Transmittal Slip
dated 22 April 20149)
BI No. 1109210 ₱898,282.00 23 April 2014 (per Transmittal Slip
dated 22 April 2014)
BI No. 1110111 ₱150,188.50 23 April 2014 (per Transmittal Slip
dated 22 April 2014)
BI No. 11102,12 ₱478,788.20 23 April 2014 (per Transmittal Slip
dated 22 April 2014)
BI No. 1110313 ₱421,395.48 23 April 2014 (per Transmittal Slip
dated 22 April 2014)
BI No. 1096714 ₱275,394.15 8 May 2014 (per Transmittal Slip
dated 16 April 201415)
BI No. 1096816 ₱286,610.17 8 May 2014 (per Transmittal Slip
dated 16 April 2014)

5
See Judicial Affidavit of Zoraida B. Arcega, C.A. Rollo, p. 230.
6
C.A. Rollo, p. 61.
7
C.A. Rollo, p. 63.
8
C.A. Rollo, p. 190.
9
C.A. Rollo, p. 353.
10
C.A. Rollo, p. 191.
11
C.A. Rollo, p. 192.
12
C.A. Rollo, p. 193.
13
C.A. Rollo, p. 194.
14
C.A. Rollo, p. 69.
15
C.A. Rollo, p. 353.
16
C.A. Rollo, p. 70.
CA-G.R. SP. No. 161056 3
DECISION

BI No. 1209117 ₱121,324.00 8 May 2014 (per Transmittal Slip

dated 7 May 201418)
BI No. 1209219 ₱19,669.00 8 May 2014 (per Transmittal Slip
dated 7 May 2014)
BI No. 1209320 ₱117,294.00 8 May 2014 (per Transmittal Slip
dated 7 May 2014)
BI No. 1209421 ₱863,353.89 8 May 2014 (per Transmittal Slip
dated 7 May 2014)
BI No. 1208722 ₱340,168.00 27 May 2014 (per Transmittal Slip
dated 9 May 201423)
BI No. 1208824 ₱703,500.00 27 May 2014 (per Transmittal Slip
dated 9 May 2014)
BI No. 1208925 ₱467,871.00 27 May 2014 (per Transmittal Slip
dated 9 May 2014)
BI No. 1209026 ₱59,711.00 27 May 2014 (per Transmittal Slip
dated 9 May 2014)

In connection with the billings, Great Times issued in favor of the

respondent Travel Managers three Chinabank Checks for the total amount of
₱5,104,577.75 (i.e.: Chinabank Check No. 1050476 dated 24 April 2014 for
the amount of ₱1,000,000.00;27 Chinabank Check No. 1050477 dated 28
April 2014 for the amount of ₱1,500,000.00;28 Chinabank Check No.
1050478 dated 09 May 2014 for the amount of ₱2,604,577.7529); per the
Advice of Return Check30 issued by PNB, and the notice 31 issued by the
Metrobank, the drawee banks dishonored Chinabank Check No. 1050476
and Chinabank Check No. 1050477 upon presentment for payment for the
reason “DAIF”; the respondent Travel Managers via e-mail32 informed Great
Times of the dishonor of Chinabank Check No. 1050476 and Chinabank
Check No. 1050477, and required Great Times to pay ₱5,171,911.90 by 14
May 2014; the respondent Travel Managers deferred the deposit of Check
No. 1050478 after Great Times promised to pay in full all the unpaid
obligations by 14 May 2014; Great Times made several partial payments,
and the payments brought down Great Times' principal obligation to
₱4,869,594.34; respondent Travel Managers made several attempts to collect
the balance of amount due (₱4,869,594.34) from Great Times, to no avail,
17
C.A. Rollo, p. 199.
18
C.A. Rollo, p. 356.
19
C.A. Rollo, p. 200.
20
C.A. Rollo, p. 201.
21
C.A. Rollo, p. 202.
22
C.A. Rollo, p. 106.
23
C.A. Rollo, p. 354.
24
C.A. Rollo, p. 107.
25
C.A. Rollo, p. 108.
26
C.A. Rollo, p. 109.
27
C.A. Rollo, p. 179.
28
C.A. Rollo, p. 180.
29
C.A. Rollo, p. 181.
30
C.A. Rollo, p. 182.
31
C.A. Rollo, p. 183.
32
C.A. Rollo, pp. 184-185.
CA-G.R. SP. No. 161056 4
DECISION

thus, in the letter dated 14 June 2014,33 the respondent Travel Managers
made the demand on the petitioner CGAC to pay the ₱4,869,594.34 citing
Surety Bond No. G(16) 21354; although petitioner CGAC's EVP/GM Maria
Eden del Rosario promised the respondent Travel Managers that petitioner
CGAC would pay the surety claim by 7 November 2014, however, on 10
November 2014, petitioner CGAC's counsel Atty. Perfecto Corpus Jr.,
informed respondent Travel Managers that petitioner CGAC had denied the
surety claim; the respondent Travel Managers made another demand upon
the petitioner CGAC for the payment of Great Times' obligation, via the
letter dated 12 November 2014,34 but again, the petitioner CGAC did not
pay the obligation.

The Complaint prayed for the payment of: ₱4,869,594.34 as actual

damages; stipulated interest at the rate of ten percent from April 2014, until
fully paid; stipulated attorney's fees at the rate of 25 percent of
₱4,869,594.34, plus the stipulated interest; litigation expenses of not less
than ₱135,300.00; costs of suit.

The petitioner CGAC filed the Answer with Compulsory

Counterclaim,35 and countered: the Complaint was premature, as respondent
Travel Managers did not disprove Great Times' claim that respondent Travel
Managers did not give Great Times ₱1,500,000.00 worth of airline tickets;
the respondent Travel Managers discharged petitioner CGAC from any
liability under the surety bond, when respondent Travel Managers extended
via e-mail36 Great Times' period to pay the ₱5,289,194.34 (i.e.: although
initially, the entire obligation of Great Times to respondent Travel Managers
was due and demandable on 9 May 2014, subsequently, respondent Travel
Managers extended the period to pay the obligation to until 14 May 2019);
the IC did not acquire jurisdiction over the petitioner CGAC, because the
summons was served on the mere receiving clerk of petitioner CGAC; by
reason of the unfounded and baseless allegations of the respondent Travel
Managers, the petitioner CGAC was entitled to moral damages, attorney's
fees, expenses of litigation, and the costs of suit.

The parties did not arrive at an amicable settlement during mediation

conference and pre-trial conference.37

After trial, the IC issued the assailed Decision, and granted respondent
Travel Managers' Complaint. The dispositive portion of the assailed
Decision stated:

33
C.A. Rollo, p. 186.
34
C.A. Rollo, p. 219.
35
C.A. Rollo, p. 222.
36
C.A. Rollo, p. 184.
37
See Decision dated 17 October 2017, C.A. Rollo, p. 34.
CA-G.R. SP. No. 161056 5
DECISION

WHEREFORE, PREMISES CONSIDERED, judgment is

hereby rendered ordering the respondent Centennial Guarantee Assurance
Corporation to pay complainant, Travel Managers International, Inc., the
amount of Four Million Eight Hundred Sixty Nine Thousand Five
Hundred Ninety Four Pesos and Thirty Four Centavos (P4,869,594.34) as
actual damages plus interest of 12% p.a. of the amount of the claim due
starting September 21, 2014 until the principal is fully paid, attorney's fees
in the amount of P250,000.00 and a per appearance fee of complainant's
counsel for compelling the complainant to litigate its claims and which
this Commission deems just and equitable, and to pay costs of suit which
will include the filing fee, photocopying expenses, transportation
expenses, postage and mailing expenses, notarial expenses, and other
reasonable miscellaneous expenses.

The Compulsory Counterclaim is DISMISSED.

SO ORDERED.

The IC ruled: the petitioner CGAC (as surety) was liable to pay the
respondent Travel Managers (as obligee), ₱4,869,594.34 (representing the
unpaid obligation of Great Times [as principal or obligor] to respondent
Travel Managers), under the Surety Bond No. G(16) 21354 and the
Endorsement No. 93123; the petitioner CGAC did not dispute that Great
Times did not pay the ₱4,869,594.34 obligation to respondent Travel
Managers; the extension of time given by respondent Travel Managers to
Great Times did not extinguish petitioner CGAC's liability as surety, because
the extension was not made pursuant to an enforceable agreement between
respondent Travel Managers and Great Times, and because the extension did
not preclude respondent Travel Managers from collecting the amount from
Great Times within the extended period to pay the obligation; due to
petitioner CGAC's unreasonable denial of respondent Travel Manager's
claim, the petitioner CGAC was liable to pay respondent Travel Managers
12% per annum interest computed from 21 September 2014, pursuant to
Section 249,38 Insurance Code of the Philippines, and ₱250,000.00 as
attorney's fees.

The petitioner CGAC filed the Motion for Reconsideration. 39 In the

assailed Resolution, the IC denied the Motion for Reconsideration for lack
of merit.
38
Section 249. The amount of any loss or damage for which an insurer may be liable, under any policy
other than life insurance policy, shall be paid within thirty (30) days after proof of loss is received by
the insurer and ascertainment of the loss or damage is made either by agreement between the insured
and the insurer or by arbitration; but if such ascertainment is not had or made within sixty (60) days
after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid within ninety
(90) days after such receipt. Refusal or failure to pay the loss or damage within the time prescribed
herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the
delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to
pay is based on the ground that the claim is fraudulent.
39
C.A. Rollo, p. 534.
CA-G.R. SP. No. 161056 6
DECISION

Aggrieved, the petitioner CGAC files this Petition, 40 and raises the
following lone assignment of error:

RESPONDENT COMMISSION ERRED IN NOT RULING THAT

THE EXTENSION OF TIME GIVEN BY RESPONDENT TRAVEL
MANAGERS TO GREAT TIMES WITHOUT THE CONSENT OF
PETITIONER DISCHARGED THE LATTER FROM ITS
OBLIGATION AS SURETY.

The issue is whether the IC erred when it granted the respondent

Travel Managers' Complaint.

The petitioner CGAC answers in the affirmative. The IC erred when it

granted the respondent Travel Managers' Complaint.

The Petition thrusts: the petitioner CGAC was discharged from its
liability as surety, because the respondent Travel Managers gave Great
Times the extended period to pay the ₱5,289,194.34, without the consent of
petitioner CGAC, in violation of Article 2079, New Civil Code.

The respondent Travel Managers answers in the negative. The IC did

not err when it granted the respondent Travel Managers' Complaint.

The Comment (Re: Petition for Review of Centennial Guarantee

Assurance Corporation)41 parries: the respondent Travel Managers did not
give Great Times an extension of time to pay the ₱5,289,194.34 obligation,
as evidenced by the Judicial Affidavit of Atty. Elmer E. Manglangit; 42 the
petitioner CGAC waived its defense (that respondent Travel Managers'
grant of extension of time to pay in favor of Great Times, without the
consent of the petitioner CGAC, released the petitioner CGAC from its
liability as surety), when the petitioner CGAC presented for payment Great
Times' Chinabank Check in the amount of ₱3,000,000.00
(which was dishonored by the drawee-bank), and when the petitioner CGAC
filed the complaint for violation of Batas Pambansa Bilang 22, and for
Estafa, against Great Times; the alleged extension of time to pay given by
respondent Travel Managers to Great Times, did not deprive the petitioner
CGAC of its recourse against Great Times.

THE COURT'S RULING

We rule in the negative. The IC did not err when it granted the
respondent Travel Managers' Complaint.

40
Supra, note 1.
41
C.A. Rollo, p. 563.
42
C.A. Rollo, p. 468.
CA-G.R. SP. No. 161056 7
DECISION

Applicable is Article 2047, New Civil Code. Article 2047 states:

Article 2047. By guaranty a person, called the guarantor, binds himself to

the creditor to fulfill the obligation of the principal debtor in case the
latter should fail to do so.

If a person binds himself solidarily with the principal debtor, the

provisions of Section 4, Chapter 3, Title I of this Book shall be observed.
In such case the contract is called a suretyship.

Thus, a contract of suretyship is the contractual relationship resulting

from an agreement whereby one person, the surety, engages to be
answerable for the debt, default or miscarriage of another, known as the
principal. A surety's liability is joint and several, limited to the amount of the
bond, and determined strictly by the terms of contract of suretyship in
relation to the principal contract between the obligor and the obligee. It bears
stressing, however, that although the contract of suretyship is secondary to
the principal contract, the surety's liability to the obligee is nevertheless
direct, primary, and absolute.43

In this case, the petitioner CGAC executed the Surety Bond No. G(16)
21354, and bound itself to “guarantee the payment on billed services
rendered and tickets issued, domestic and international by the Obligee (the
respondent Travel Managers) for the principal (the petitioner CGAC) within
the agreed credit term/period” up to the extent of ₱3,000,000.00. The
petitioner CGAC and Great Times via the Endorsement No. 93123,
increased the amount of the surety bond to ₱5,000,000.00.

The petitioner CGAC and the respondent Travel Managers did not
dispute that, despite demand by respondent Travel Managers, Great Times
did not pay the balance of ₱4,869,594.34 for the tickets issued by respondent
Travel Managers in favor of Great Times. Thus, when Great Times failed to
pay the balance of ₱4,869,594.34, despite respondent Travel Managers's
demand to pay, the petitioner CGAC, as surety, became solidarily bound
with Great Times for the payment of the said amount to respondent Travel
Managers.

The petitioner CGAC, relying on Article 2047 of the New Civil Code,
contends that it (the petitioner CGAC) was discharged from its liability as
surety, because although the obligation was initially due on 9 May 2014, the
respondent Travel Managers, without the consent of the petitioner CGAC,
extended the period within which Great Times could pay the obligation (or
until 14 May 2014).

43
CCC Insurance Corporation v. Kawasaki Steel Corporation, G.R. No. 156162, 22 June 2015.
CA-G.R. SP. No. 161056 8
DECISION

We do not agree with the petitioner CGAC.

Article 2079 of the New Civil Code is not applicable.

Article 2079 states:

Article 2079. An extension granted to the debtor by the creditor without

the consent of the guarantor extinguishes the guaranty. The mere failure
on the part of the creditor to demand payment after the debt has become
due does not of itself constitute any extension of time referred to herein.

Article 2079, which provides that an extension granted to the debtor

by the creditor, without the consent of the guarantor, extinguishes the
guaranty, equally applies to both contracts of guaranty and contracts of
suretyship.44

The theory behind Article 2079, New Civil Code, is that an extension
of time given to the principal debtor by the creditor without the surety's
consent would deprive the surety of his right to pay the creditor and to be
immediately subrogated to the creditor's remedies against the principal
debtor upon the maturity date. The surety is said to be entitled to protect
himself against the contingency of the principal debtor or the indemnitors
becoming insolvent during the extended period.45

The surety has the burden to prove that the surety has been discharged
by some act of the creditor.46

In order to constitute an extension discharging the surety, the surety

must prove the following elements: (1) that the extension of the time was for
a definite period, pursuant to an enforceable agreement between the
principal and the creditor; (2) that the extension was made without the
consent of the surety or with the reservation of rights with respect to him; (3)
that the contract must be one which precludes the creditor from, or at least
hinders him/her in, enforcing the principal contract within the period during
which he/she could otherwise have enforced it, and which precludes the
surety from paying the debt.47

The petitioner CGAC did not prove the first element. The alleged
extension was not for a definite period, pursuant to an enforceable
agreement between respondent Travel Managers and Great Times.

44
Trade and Investment Development Corporation of the Philippines v. Asia Paces Corporation, G.R. No.
187403, 12 February 2014.
45
Security Bank and Trust Co., Inc. v. Cuenca, G.R. No. 138544, 3 October 2000.
46
Palmares v. Court of Appeals, G.R. No. 126490, 31 March 1998.
47
Carodan v. China Bank Corporation, G.R. No. 210542, 24 February 2016, citing Palmares v. Court of
Appeals, G.R. No. 126490, 31 March 1998.
CA-G.R. SP. No. 161056 9
DECISION

To summarize, the details of the BIs are as follows:

BI Number Amount covered Date of CGAC's Date payable

receipt of BI
BI No. 11091 ₱85,644.95 23 April 2014 8 May 2014
BI No. 11092 ₱898,282.00 23 April 2014 8 May 2014
BI No. 11101 ₱150,188.50 23 April 2014 8 May 2014
BI No. 11102 ₱478,788.20 23 April 2014 8 May 2014
BI No. 11103 ₱421,395.48 23 April 2014 8 May 2014
BI No. 10967 ₱275,394.15 8 May 2014 23 May 2014
BI No. 10968 ₱286,610.17 8 May 2014 23 May 2014
BI No. 12091 ₱121,324.00 8 May 2014 23 May 2014
BI No. 12092 ₱19,669.00 8 May 2014 23 May 2014
BI No. 12093 ₱117,294.00 8 May 2014 23 May 2014
BI No. 12094 ₱863,353.89 8 May 2014 23 May 2014
BI No. 12087 ₱340,168.00 27 May 2014 11 June 2014
BI No. 12088 ₱703,500.00 27 May 2014 11 June 2014
BI No. 12089 ₱467,871.00 27 May 2014 11 June 2014
BI No. 12090 ₱59,711.00 27 May 2014 11 June 2014

After the drawee bank dishonored Great Times' two checks (i.e.:
Chinabank Check No. 1050476 dated 24 April 2014; and Chinabank Check
No. 1050477) for insufficiency of funds, the respondent Travel Managers
required Great Times via e-mail to “settle all accounts due less all partial
payments by Wednesday, 14 May 2014.”

The alleged extension was not pursuant to an enforceable agreement

between the principal the respondent Travel Times, and debtor Great Times.

The petitioner CGAC did not prove that the respondent Travel
Managers' e-mail constituted an enforceable agreement between the
respondent Travel Managers (as obligee), and Great Times (as obligor), to
grant Great Times extension of time to pay respondent CGAC.

The mere fact that principal respondent Travel Times gave the debtor
Great Times an extended period of time within which to comply with its
obligation does not effectively absolve the surety petitioner CGAC from the
consequences of its undertaking. Leniency shown to a debtor in default, by
delay permitted by the creditor without change in time when the debt might
be demanded, does not constitute an extension of the time of payment,
which would release the surety.48

48
Supra, note 46.
CA-G.R. SP. No. 161056 10
DECISION

As correctly ruled by the IC, the alleged extension given by

respondent Travel Managers to Great Times was “not made pursuant to an
enforceable agreement since the extension of time was to actually to make
good on the checks issued by Great Times, and to settle its remaining
balance.”

Further, it is worthy to note that contrary to petitioner CGAC's

contention, only the amounts covered by BI No. 11091, BI No. 11092, BI
No. 11101, BI No. 11102, and BI No. 11103, were due on 9 May 2014.

The petitioner CGAC proved the second element. It is undisputed in

this case that the petitioner CGAC did not consent to the alleged extension
of time to pay granted by the respondent Travel Managers to Great Times.

The petitioner CGAC did not prove the third element. As discussed,
other than bare allegations, the petitioner CGAC did not adduce evidence to
prove that the alleged extension of time to pay prevented respondent Travel
Managers from enforcing the principal contract within the period during
which it could have enforced it, or that the alleged extension prevented the
petitioner CGAC from paying Great Times' obligation.

Clearly, the alleged extension of time granted to Great Times to pay

its obligation did not release the petitioner CGAC from its liability as surety.

ACCORDINGLY, absent error on the part of the Insurance

Commission, in issuing the Decision dated 27 October 2017, and the
Resolution dated 21 May 2019, we DISMISS Petition for Review (Under
Rule 43 of the 1997 Rules of Civil Procedure).

IT IS SO ORDERED.

Original Signed
NINA G. ANTONIO-VALENZUELA
Associate Justice

WE CONCUR:

Original Signed Original Signed

EMILY R. ALIÑO-GELUZ JOSE LORENZO R. DELA ROSA
Associate Justice Associate Justice
CA-G.R. SP. No. 161056 11
DECISION

C E RT I F I C AT I O N

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby

certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court.

Original Signed
NINA G. ANTONIO-VALENZUELA
Associate Justice
Chairperson,Thirteenth Division