SECOND DIVISION

[G.R. No. 89020. May 5, 1992.]

STRONGHOLD INSURANCE CO., INC., Petitioner, v. COURT OF

APPEALS, Respondent.

Gascon, Garcia & Associates, for Petitioners.

Castillo, Laman & Pantaleon for Northern Motors, Inc.

DECISION

PARAS, J.:

In this petition for review on certiorari, petitioner Stronghold Insurance Co., Inc. assails
the decision ** of the Court of Appeals in CA-G.R. CV No. 16154 affirming the order of
the Regional Trial Court, Branch 167, Pasig, Metro Manila in its Civil Case No. 52177.
The dispositive portion of this order of the Trial court reads:ClubJuris

"WHEREFORE, in view of the foregoing consideration, the claim of the defendant

against SICI Bond No. 11652 of the Stronghold Insurance Company, Inc, is
found to have been established and said surety company is adjudged liable for
damages suffered by the defendant as found by this Court in its decision dated June
9, 1986, to the extent of the amount of the replevin bond, which is P42,000.00" (p. 20,
Rollo).

The factual antecedents are not disputed.

On March 21, 1985, Leisure Club, Inc. filed Civil Case No. 52177 against Northern
Motors Inc. for replevin and damages. It sought the recovery of certain office furnitures
and equipments. In an order dated March 22, 1985, the lower court ordered the
delivery of subject properties to Leisure Club Inc. subject to the posting of the requisite
bond under Section 2, Rule 60 of the Rules of Court. Accordingly, Leisure Club Inc.
posted a replevin bond (SICI Bond No. 11652) dated March 25, 1985 in the amount of
P42,000.00 issued by Stronghold Insurance Co. Inc. In due course, the lower court
issued the writ of replevin, thereby enabling Leisure Club Inc. to take possession of the
disputed properties.clubjuris clubjuris.com:clubjuris.com.ph

Northern Motors Inc. filed a counterbond for the release of the disputed properties.
However, efforts to recover these properties proved futile as Leisure Club Inc. was
never heard of again.

For failure to appear in the pre-trial of the case, Leisure Club, Inc. was declared non-
suited. Northern Motors Inc. presented its evidence ex-parte and on June 9, 1986, the
lower court rendered its decision in favor of Northern Motors Inc., the dispositive
portion of which reads —
"PREMISES CONSIDERED, the instant petition is hereby dismissed and on the
counterclaim, plaintiff is ordered to pay defendant the following:
clubjuris

a) the actual value of the property sold at public auction by defendant, and repossessed
by plaintiff, of P20,900.00;

b) exemplary damages of P10,000.00;

c) attorney’s fees in the amount of P10,000.00; and

d) costs of suit.

SO ORDERED." (p. 21, Rollo)

In the said decision, the lower court ruled that: clubjuris

1. Northern Motors Inc. had rightful ownership and right of possession over the subject
properties.

2. Leisure Club Inc. is a sister company of Macronics Inc., a debtor of Northern Motors
Inc., and former owner of these properties.

3. Under the circumstances, Leisure Club Inc. instituted the action for replevin as part
of a scheme to spirit away these properties and pave the way for the evasion of lawful
obligations by its sister company. (Decision dated June 4, 1986, p. 4).

On July 3, 1986, Northern Motors Inc. filed a "Motion for Issuance of Writ of Execution
Against Bond of Plaintiff’s Surety", pursuant to Section 10, Rule 20 of the Rules of
Court, which was treated by the lower court as an application for damages against the
replevin bond.

At the hearing of the said motion as well as the opposition thereto filed by Stronghold
Insurance Co., Inc., Northern Motors Inc. presented one witness in the person of its
former manager Clarissa G. Ocampo, whose testimony proved that: clubjuris

(a) Northern Motors Inc. and Macronics Marketing entered into a lease
agreement wherein the latter leased certain premises from the former.

(b) Macronics failed to pay its bills to Northern Motors Inc., so the latter was
forced to terminate the lease.

(c) Because of Macronics’ unpaid liabilities to Northern Motors Inc., the latter
was forced to sell off the former’s properties in an auction sale wherein
Northern Motors Inc. was the buyer. Macronics was duly notified of the sale.

(d) These properties sold were the sole means available by which Northern
Motors Inc could enforce its claim against Macronics. (TSN dated January 30,
1987; pp. 94-95, Rollo).

Stronghold Insurance Co., Inc. did not cross-examine the said witness. Instead
it asked for continuance in order to present its own witness. Stronghold, however,
never presented any witness.

On July 21, 1987, the lower court issued its now disputed Order finding Stronghold
liable under its surety bond for the damages awarded to Northern Motors Inc. in the
June 8, 1986 Decision. In the said Order, the lower court held: ClubJuris

"Submitted for resolution is the ‘Motion for Issuance of Writ of Execution Against Bond
of Plaintiff’s Surety’ filed by the defendant and the opposition thereto filed by the
Stronghold Insurance Company, Inc.

"In the decision rendered by the Court on June 9, 1977, the defendant Northern
Motors, Inc. was the prevailing party and the judgment in its favor ordered the
plaintiff to pay the actual value of the property sold at public auction by the
defendant and repossessed by plaintiff in the amount of P20,900.00, which is in
favor of the plaintiff if the latter is found not entitled to the writ of replevin earlier
issued against the defendant. nad

"The thrust of the opposition of the bonding company is to the effect that the motion for
a writ of execution is not the proper remedy but an application against the bond should
have been the remedy pursued. The surety company contends that it is not a party to
the case and that the decision clearly became final and executory and, therefore, is no
longer liable on the bond. The surety company likewise raised the issue as to when the
decision became final and executory. Moreover, the surety company avers that the
defendant failed to prove any damage by reason of the issuance of replevin bond.

"Sec. 20 of Rule 57, in relation to Sec. 10 of Rule 60, provides that the party against
whom the bond was issued may recover on the bond for any damage resulting from the
issuance of the bond upon application and hearing. The application must be filed either:
before trial; before appeal is perfected; before judgment becomes final and executory.

"Being the prevailing party, it is undeniable that the defendant is entitled to recover
against the bond. The application for that purpose was made before the decision
became final and before the appeal was perfected. Both the prevailing and losing
parties may appeal the decision. In the case of the plaintiff it appears that its counsel
did not claim the decision which was sent by registered mail. Moreover, the defendant
which is the prevailing party received the decision by registered mail on June 20, 1986
and filed the motion for execution against the bond on July 3, 1986. Hence, with
respect to the defendant the motion against the bond was filed before any appeal was
instituted and definitely on or before the judgment became final.

"Although the claim against the bond was denominated as a motion for issuance of a
writ of execution, the allegations are to the effect that the defendant is applying for
damages against the bond. In fact, the defendant invokes Sec. 10, Rule 60, in relation
to Sec. 20, Rule 57, Rules of Court. Evidently, therefore, the defendant is in reality
claiming damages against the bond.

"It is undisputed that the replevin bond was obtained by the plaintiff to answer for
whatever damages the defendant may suffer for the wrongful issuance of the writ. By
virtue of the writ, the plaintiff took possession of the auctioned properties. Despite a
redelivery bond issued by the defendant, the plaintiff refused to return the properties
and in fact repossessed the same. Clearly, defendant suffered damages by reason of
the wrongful replevin, in that it has been deprived of the properties upon which it was
entitled to enforce its claim. Moreover, the extent of the damages has been qualified in
the decision dated June 9, 1986." (pp. 21-23, Rollo)

This Order was appealed by Stronghold to the Court of Appeals. In a decision dated July
7, 1989, the Court of Appeals affirmed the order of the lower court. This decision is now
the subject of the instant petition.

Petitioner raises the following assignments of error: ClubJuris

"1. The lower court erred in awarding damages against herein petitioner despite
complete absence of evidence in support of the application.

2. The lower court erred in just adopting the dispositive portion of the decision dated
June 7, 1986 as basis for the award of damages against herein petitioner.

3. The lower court erred in awarding exemplary damages in favor of Northern Motors,
Inc. and against petitioner Stronghold Insurance Co., Inc.

4. The lower court erred in awarding the attorney’s fees of P10,000.00 as damages
against the bond." (pp. 10-11, Rollo)

We find no merit in the petition.

In the case of Visayan Surety & Insurance Corp. v. Pascual, 85 Phil. 779, the Court
explained the nature of the proceedings to recover damages against a surety, in this
wise:clubjuris law library

"In such case, upon application of the prevailing party, the court must order the surety
to show cause why the bond should not respond for the judgment of damages. If the
surety should contest the reality or reasonableness of the damages claimed by the
prevailing party, the court must get the application and answer for hearing. The hearing
will be summary and will be limited to such new defense, not previously set up by the
principal, as the surety may allege and offer to prove." (Id. at 785; Emphasis supplied)
(p. 96, Rollo)

Stronghold Insurance Co., Inc., never denied that it issued a replevin bond. Under the
terms of the said bond, Stronghold Insurance together with Leisure Club Inc. solidarily
bound themselves in the sum of P42,000 —

(a) for the prosecution of the action,

(b) for the return of the property to the defendant if the return thereof be adjudged,
and

(c) for the payment of such sum as may in the cause be recovered against the plaintiff
and the costs of the action.
In the case at bar, all the necessary conditions for proceeding against the bond are
present, to wit:ClubJuris

"(i) the plaintiff a quo, in bad faith, failed to prosecute the action, and after retrieving
the property, it promptly disappeared;

(ii) the subject property disappeared with the plaintiff, despite a court order for their
return; and

(iii) a reasonable sum was adjudged to be due to respondent, by way of actual and
exemplary damages, attorney’s fees and costs of suit." (p. 63, Rollo)

On the propriety of the award for damages and attorney’s fees, suffice it to state, that
as correctly observed by the Court of Appeals, the record shows that the same is
supported by sufficient evidence. Northern Motors proved the damages it suffered thru
evidence presented in the hearing of the case itself and in the hearing of its motion for
execution against the replevin bond. No evidence to the contrary was presented by
Stronghold Insurance Co. Inc. in its behalf. It did not impugn said award of exemplary
damages and attorney’s fees despite having every opportunity to do so.

As correctly held by respondent Court of Appeals —

"Stronghold Insurance, Inc. has no ground to assail the awards against it in the
disputed Order. Unless it has a new defense, it cannot simplistically dissociate itself
from Leisure Club, Inc. and disclaim liability vis-a-vis the findings made in the Decision
of the lower court dated June 9, 1986. Under Section 2, Rule 60 the bond it filed is to
ensure "the return of the property to the defendant if the return thereof be adjudged,
and for the payment to the defendant of such sum as he may recover from the plaintiff
in the action." The bond itself ensures, inter alia, "the payment of such sum may in the
cause be recovered against the plaintiff and the cost of the action." (pp. 24-25, Rollo)

Besides, Leisure Club Inc.’s act of filing a replevin suit without the intention of
prosecuting the same but for the mere purpose of disappearing with the provisionally
recovered property in order to evade lawfully contracted obligations constitutes a
wanton, fraudulent, reckless, oppressive and malevolent breach of contract which
justifies award of exemplary damages under Art. 2232 of the Civil Code. clubjuris clubjuris.com:clubjuris.com.ph

The attorney’s fees awarded in favor of Northern Motors Inc. are likewise warranted
under Art. 2208 of the New Civil Code.

In any event, the trial court has decided with finality that the circumstances justifying
the award of exemplary damages and attorney’s fees exist. The obligation of
Stronghold Insurance Co. Inc., under the bond is specific. It assures "the payment of
such sum as may in the cause be recovered against the plaintiff, and the costs of the
action." (Italic supplied)

WHEREFORE, the petition is DENIED for lack of merit. No costs.

FIRST DIVISION
[ G.R. No. 147561. June 22, 2006 ]
STRONGHOLD INSURANCE COMPANY, INC., PETITIONER, VS. REPUBLIC-
ASAHI GLASS CORPORATION, RESPONDENT.

The Court's Ruling

The Petition has no merit.
Sole Issue:
Effect of Death on the Surety's Liability
Petitioner contends that the death of Santos, the bond principal, extinguished his liability under the surety bond.
Consequently, it says, it is automatically released from any liability under the bond.

As a general rule, the death of either the creditor or the debtor does not extinguish the obligation. [8] Obligations are
transmissible to the heirs, except when the transmission is prevented by the law, the stipulations of the parties, or the
nature of the obligation.[9] Only obligations that are personal[10] or are identified with the persons themselves are
extinguished by death.[11]
Section 5 of Rule 86[12] of the Rules of Court expressly allows the prosecution of money claims arising from a contract
against the estate of a deceased debtor. Evidently, those claims are not actually extinguished. [13] What is
extinguished is only the obligees action or suit filed before the court, which is not then acting as a probate court.[14]
In the present case, whatever monetary liabilities or obligations Santos had under his contracts with respondent were
not intransmissible by their nature, by stipulation, or by provision of law. Hence, his death did not result in the
extinguishment of those obligations or liabilities, which merely passed on to his estate. [15] Death is not a defense that
he or his estate can set up to wipe out the obligations under the performance bond. Consequently, petitioner as
surety cannot use his death to escape its monetary obligation under its performance bond.
The liability of petitioner is contractual in nature, because it executed a performance bond worded as follows:

"KNOW ALL MEN BY THESE PRESENTS:

"That we, JDS CONSTRUCTION of 208-A San Buena Building, contractor, of Shaw Blvd., Pasig, MM Philippines, as
principal and the STRONGHOLD INSURANCE COMPANY, INC. a corporation duly organized and existing under
and by virtue of the laws of the Philippines with head office at Makati, as Surety, are held and firmly bound unto the
REPUBLIC ASAHI GLASS CORPORATION and to any individual, firm, partnership, corporation or association
supplying the principal with labor or materials in the penal sum of SEVEN HUNDRED NINETY FIVE THOUSAND
(P795,000.00), Philippine Currency, for the payment of which sum, well and truly to be made, we bind ourselves, our
heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents.

"The CONDITIONS OF THIS OBLIGATION are as follows;

"WHEREAS the above bounden principal on the ___ day of __________, 19__ entered into a contract with the
REPUBLIC ASAHI GLASS CORPORATION represented by _________________, to fully and faithfully. Comply with
the site preparation works road and drainage system of Philippine Float Plant at Pinagbuhatan, Pasig, Metro Manila.

"WHEREAS, the liability of the Surety Company under this bond shall in no case exceed the sum of PESOS SEVEN
HUNDRED NINETY FIVE THOUSAND (P795,000.00) Philippine Currency, inclusive of interest, attorneys fee, and
other damages, and shall not be liable for any advances of the obligee to the principal.
"WHEREAS, said contract requires the said principal to give a good and sufficient bond in the above-stated sum to
secure the full and faithfull performance on its part of said contract, and the satisfaction of obligations for materials
used and labor employed upon the work;

"NOW THEREFORE, if the principal shall perform well and truly and fulfill all the undertakings, covenants, terms,
conditions, and agreements of said contract during the original term of said contract and any extension thereof that
may be granted by the obligee, with notice to the surety and during the life of any guaranty required under the
contract, and shall also perform well and truly and fulfill all the undertakings, covenants, terms, conditions, and
agreements of any and all duly authorized modifications of said contract that may hereinafter be made, without notice
to the surety except when such modifications increase the contract price; and such principal contractor or his or its
sub-contractors shall promptly make payment to any individual, firm, partnership, corporation or association supplying
the principal of its sub-contractors with labor and materials in the prosecution of the work provided for in the said
contract, then, this obligation shall be null and void; otherwise it shall remain in full force and effect. Any extension of
the period of time which may be granted by the obligee to the contractor shall be considered as given, and any
modifications of said contract shall be considered as authorized, with the express consent of the Surety.

"The right of any individual, firm, partnership, corporation or association supplying the contractor with labor or
materials for the prosecution of the work hereinbefore stated, to institute action on the penal bond, pursuant to the
provision of Act No. 3688, is hereby acknowledge and confirmed.[16]
As a surety, petitioner is solidarily liable with Santos in accordance with the Civil Code, which provides as follows:

"Art. 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, [17] Chapter 3, Title I of this
Book shall be observed. In such case the contract is called a suretyship.

xxx xxx xxx

"Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously.
The demand made against one of them shall not be an obstacle to those which may subsequently be directed against
the others, so long as the debt has not been fully collected.

Elucidating on these provisions, the Court in Garcia v. Court of Appeals[18] stated thus:

"x x x. The suretys obligation is not an original and direct one for the performance of his own act, but merely
accessory or collateral to the obligation contracted by the principal. Nevertheless, although the contract of a surety is
in essence secondary only to a valid principal obligation, his liability to the creditor or promisee of the principal is said
to be direct, primary and absolute; in other words, he is directly and equally bound with the principal. x x x."[19]
Under the law and jurisprudence, respondent may sue, separately or together, the principal debtor and the petitioner
herein, in view of the solidary nature of their liability. The death of the principal debtor will not work to convert,
decrease or nullify the substantive right of the solidary creditor. Evidently, despite the death of the principal debtor,
respondent may still sue petitioner alone, in accordance with the solidary nature of the latters liability under the
performance bond.

WHEREFORE, the Petition is DENIED and the Decision of the Court of Appeals AFFIRMED. Costs against
petitioner.
 FIRST DIVISION

[G.R. No. 88050. January 30, 1992.]

STRONGHOLD INSURANCE COMPANY, INC., Petitioner, v. HON. COURT OF

APPEALS AND ADRIANO URTESUELA, Respondents.

T. J. Sumawang & Associates for Petitioner.

Linsangan Law Office for Private Respondent.

DECISION

CRUZ, J.:

The petitioner invokes due process to escape liability on a surety bond executed for the
protection of a Filipino seaman. It is a familiar argument that will be denied, in light of
the following findings.

Acting on behalf of its foreign principal, Qatar National Fishing Co., Pan Asian Logistics
and Trading, a domestic recruiting and placement agency, hired Adriano Urtesuela as
captain of the vessel M/V Oryx for the stipulated period of twelve months. The required
surety bond, in the amount of P50,000.00, was submitted by Pan Asian and Stronghold
Insurance Co., Inc., the herein petitioner, to answer for the liabilities of the employer.
Urtesuela assumed his duties on April 18, 1982, but three months later his services
were terminated and he was repatriated to Manila. He thereupon filed a complaint
against Pan Asian and his former employer with the Philippine Overseas Employment
Administration for breach of contract and damages. chanrobles virtual lawlibrary

In due time, the POEA rendered a decision in his favor for the amount of P6,374.94,
representing his salaries for the unexpired portion of his contract and the cash value of
his unused vacation leave, plus attorney s fees and costs, which the respondents were
required to pay. The judgment eventually became final and executory, not having been
appealed on time. Pursuant thereto, a writ of execution was issued against Pan Asian
but could be enforced only against its cash bond of P10,000.00, the company having
ceased to operate. Urtesuela then filed a complaint with the Insurance Commission
against Stronghold on the basis of the aforementioned surety bond and prayed for the
value thereof plus attorney’s fees and litigation costs.

Under the bond, the petitioner and Pan Asian undertook —

To answer for all liabilities which the Philippine Overseas Employment Administration
may adjudge/impose against the Principal in connection with the recruitment of Filipino
seamen.

It is understood that notice to the Principal is notice to the surety. (Exh. "1-2")
WHEREAS, the liability of the surety under this Bond shall in no case exceed the sum of
PESOS: FIFTY THOUSAND ONLY (P50,000.00) Philippine Currency.

After hearing, the Insurance Commission held that the complaint should be reformed
because the provisions in the surety bond were not stipulations pour autrui to entitle
Urtesuela to bring the suit himself It held that the proper party was the POEA. 1 This
ruling was reversed on appeal by the respondent court in its decision dated April 20,
1989. 2 It was there declared that, as the actual beneficiary of the surety bond,
Urtesuela was competent to sue Stronghold, which as surety was solidarily liable with
Pan Asian for the judgment rendered against the latter by the POEA.

The petitioner asks for reversal of the Court of Appeals. It submits that the decision of
the POEA is not binding upon it because it was not impleaded in the complaint; it was
not notified thereof nor did it participate in the hearing; and it was not specifically
directed to pay the damages awarded to the complainant.

In support of its posture, the petitioner cites abundant jurisprudence, particularly

Aguasin v. Velasquez, 3 where the Court held: chanrob1es virtual 1aw library

If the surety is to be bound by his undertaking, it is essential according to Section 10 of

Rule 62 in connection with Section 20 of Rule 59 of the Rules of Court that the damages
be awarded upon application and after proper hearing and included in the judgment. As
a corollary to these requirements, due notice to the plaintiff and his surety setting forth
the facts showing his right to damages and the amount thereof under the bond is
indispensable. This has to be so if the surety is not to be condemned or made to pay
without due process of law. It is to be kept in mind that the surety in this case was not
a party to the action and had no notice of or intervention in the trial. It seems
elementary that before being condemned to pay, it was the elementary right of the
surety to be heard and to be informed that the party seeking indemnity would hold it
liable and was going to prove the grounds and extent of its liability. This case is
different from those in which the surety, by law and or by the terms of his contract, has
promised to abide by the judgment against the principal and renounced the right to be
sued or cited.

The Court has gone over the decision and finds that the petitioner is "hoist by its own
petard." For as the quoted excerpt itself says, the case is "different from those in which
the surety, by law and or by the terms of his contract, has promised to abide by the
judgment against the principal and renounced the right to be sued or cited." cralaw virtua1aw library

In the surety bond, the petitioner unequivocally bound itself: chanrob1es virtual 1aw library

To answer for all liabilities which the Philippine Overseas Employment Administration
may adjudge/impose against the Principal in connection with the recruitment of Filipino
seamen.

Strictly interpreted, this would mean that the petitioner agreed to answer for whatever
decision might be rendered against the principal, whether or not the surety was
impleaded in the complaint and had the opportunity to defend itself. There is nothing in
the stipulation calling for a direct judgment against the surety as a co-defendant in an
action against the principal. On the contrary, the petitioner agreed "to answer for all
liabilities" that "might be adjudged or imposed by the POEA against the principal." chanrobles virtual lawlibrary

But even if this interpretation were rejected, considering the well-known maxim that
"the surety is a favorite of the law," the petitioner would still have to explain its other
agreement that "notice to the Principal is notice to the surety." This was in fact another
special stipulation typewritten on the printed form of the surety bond prepared by the
petitioner. Under this commitment, the petitioner is deemed, by the implied notice, to
have been given an opportunity to participate in the litigation and to present its side, if
it so chose, to avoid liability. If it did not decide to intervene as a co-defendant (and
perhaps also as cross-claimant against Pan Asian), it cannot be heard now to complain
that it was denied due process.

The petitioner contends, however, that the said stipulation is unconstitutional and
contrary to public policy, because it is "a virtual waiver" of the right to be heard and
"opens wide the door for fraud and collusion between the principal and the bond
obligee" to the prejudice of the surety. Hence, disregarding the stipulation, the
petitioner should be deemed as having received no notice at all of the complaint and
therefore deprived of the opportunity to defend itself.

The Court cannot agree. The argument assumes that the right to a hearing is absolute
and may not be waived in any case under the due process clause. This is not correct. As
a matter of fact, the right to be heard is as often waived as it is invoked, and validly as
long as the party is given an opportunity to be heard on his behalf. 4

The circumstance that the chance to be heard is not availed of does not disparage that
opportunity and deprive the person of the right to due process. This Court has
consistently held in cases too numerous to mention that due process is not violated
where a person is not heard because he has chosen, for whatever reason, not to be
heard. It should be obvious that if he opts to be silent where he has a right to speak, he
cannot later be heard to complain that he was unduly silenced.

Neither is public policy offended on the wicked ground of fraud and collusion imagined
by the petitioner. For one thing, the speculation contravenes without proof the
presumption of good faith and unreasonably imputes dishonest motives to the principal
and the obligee. For another, it disregards the fiduciary relationship between the
principal and the surety, which is the legal and also practical reason why the latter is
willing to answer for the liabilities of the former.

In a familiar parallel, notice to the lawyer is considered notice to the client he

represents even if the latter is not actually notified. It has not been suspected that this
arrangement might result in a confabulation between the counsel and the other party to
the client’s prejudice.

At any rate, it is too late now for the petitioner to challenge the stipulation. If it
believed then that it was onerous and illegal, what it should have done was object when
its inclusion as a condition in the surety bond was required by the POEA. Even if the
POEA had insisted on the condition, as now claimed, there was still nothing to prevent
the petitioner from refusing altogether to issue the surety bond. The petitioner did
neither of these. The fact is that, whether or not the petitioner objected, it in the end
filed the surety bond with the suggested condition. The consequence of its submission
is that it cannot now argue that it is not bound by that condition because it was coerced
into accepting it.

This Court has always been receptive to complaints against the denial of the right to be
heard, which is the very foundation of a free society. This right is especially necessary
in the court of justice, where cases are decided after the parties shall have been given
an opportunity to present their respective positions, for evaluation by the impartial
judge. Nevertheless, a party is not compelled to speak if it chooses to be silent. If it
avails itself of the right to be heard, well and good; but if not, that is also its right. In
the latter situation, however, it cannot later complain that, because it was not heard, it
was deprived of due process.

Worthy of consideration also is the private respondent’s contention that he sought to

enforce the petitioner’s liability not in NSB Case No. 3810-82 as decided by the POEA,
but in another forum. What he did was file an independent action for that purpose with
the Insurance Commission on the basis of the surety bond which bound the petitioner
to answer for whatever liabilities might be adjudged against Qatar National Fishing Co.
by the POEA. In the proceedings before the Commission, the petitioner was given full
opportunity (which it took) to present its side, in its answer with counterclaim to the
complaint, in its testimony at the hearings, in its motion to dismiss the complaint, and
in its 10-page memorandum. There is absolutely no question that in that proceeding,
the petitioner was actually and even extensively heard.

The surety bond required of recruitment agencies 5 is intended for the protection of our
citizens who are engaged for overseas employment by foreign companies. The purpose
is to insure that if the rights of these overseas workers are violated by their employers,
recourse would still be available to them against the local companies that recruited
them for the foreign principal. The foreign principal is outside the jurisdiction of our
courts and would probably have no properties in this country against which an adverse
judgment can be enforced. This difficulty is corrected by the bond, which can be
proceeded against to satisfy that judgment.

Given this purpose, and guided by the benign policy of social justice, we reject the
technicalities raised by the petitioner against its established legal and even moral
liability to the private Respondent. These technicalities do not impair the rudiments of
due process or the requirements of the law and must be rejected in deference to the
constitutional imperative of justice for the worker.

WHEREFORE, the petition is DENIED and the challenged decision of the Court of
Appeals AFFIRMED in toto. The respondent court is directed to ENFORCE payment to
the private respondent in full, and with all possible dispatch of the amount awarded to
him by the POEA in its decision dated May 13, 1983. It is so ordered.
STRONGHOLD INSURANCE COMPANY, INCORPORATED, PETITIONER, VS.
TOKYU CONSTRUCTION COMPANY, LTD., RESPONDENT.
[ G.R. Nos. 158820-21. June 05, 2009 ]

The factual and procedural antecedents follow:

Respondent Tokyu Construction Company, Ltd., a member of a consortium of four (4) companies, was awarded by
the Manila International Airport Authority a contract for the construction of the Ninoy Aquino International Airport
(NAIA) Terminal 2 (also referred to as "the project"). On July 2, 1996, respondent entered into a Subcontract
Agreement[3] with G.A. Gabriel Enterprises, owned and managed by Remedios P. Gabriel (Gabriel), for the
construction of the project's Storm Drainage System (SDS) for P33,007,752.00 and Sewage Treatment Plant (STP)
for P23,500,000.00, or a total contract price of P56,507,752.00. The parties agreed that the construction of the SDS
and STP would be completed on August 10, 1997 and May 31, 1997, respectively.[4]

In accordance with the terms of the agreement, respondent paid Gabriel 15% of the contract price, as advance
payment, for which the latter obtained from petitioner Stronghold Insurance Company, Inc. Surety
Bonds[5] dated February 26, 1996[6] and April 15, 1996, to guarantee its repayment to respondent. Gabriel also
obtained from petitioner Performance Bonds to guarantee to respondent due and timely performance of the
work.[9] Both bonds were valid for a period of one year from date of issue.

In utter defiance of the parties' agreements, Gabriel defaulted in the performance of her obligations. On
February 10, 1997, in a letter sent to Gabriel, respondent manifested its intention to terminate the subcontract
agreement. Respondent also demanded that petitioner comply with its undertaking under its bonds.

On February 26, 1997, both parties (respondent and Gabriel) agreed to revise the scope of work, reducing the
contract price for the SDS phase from P33,007,752.00 to P1,175,175.00 and the STP from P23,500,000.00 to
P11,095,930.50, fixing the completion time on May 31, 1997.

Gabriel thereafter obtained from Tico Insurance Company, Inc. (Tico) Surety [13] and Performance[14] Bonds to
guarantee the repayment of the advance payment given by respondent to Gabriel and the completion of the work for
the SDS, respectively.

Still, Gabriel failed to accomplish the works within the agreed completion period. Eventually, on April 26, 1997,
Gabriel abandoned the project. On August 8, 1997, respondent served a letter[15] upon Gabriel terminating
their agreement since the latter had only completed 63.48% of the SDS project, valued at P744,965.00; and
46.60% of the STP, valued at P5,171,032.48. Respondent thereafter demanded from Gabriel the return of the
balance of the advance payment. Respondent, likewise, demanded the payment of the additional amount that it
incurred in completing the project.[16] Finally, respondent made formal demands against petitioner and Tico to
make good their obligations under their respective performance and surety bonds. However, all of them
failed to heed respondent's demand. Hence, respondent filed a complaint against petitioner, Tico, and Gabriel,
before the Construction Industry Arbitration Commission (CIAC).

In the complaint, respondent prayed that Gabriel, Tico, and petitioner be held jointly and severally liable for the
payment of the additional costs it incurred in completing the project covered by the subcontract agreement; for
liquidated damages; for the excess downpayment paid to Gabriel; for exemplary damages; and for attorney's fees.[18]

Gabriel denied liability and argued that the delay in the completion of the project was caused by respondent. She
also contended that the original subcontract agreement was novated by the revised scope of work and
completion schedule. To counter respondent's monetary demands, she claimed that it was, in fact, respondent who
had an unpaid balance.
For its part, Tico averred that it actually treated respondent's demand as a claim on the performance and surety
bonds it issued; but it could not make payment since the claim was still subject to determination, findings, and
recommendation of its assigned independent adjuster.

On the other hand, petitioner interposed the following special and affirmative defenses: 1) the surety and
performance bonds had expired; 2) the premium on the bonds had not been paid by Gabriel; 3) the contract for
which the bonds were issued was set aside/novated; 4) the requisite notices were not made which thus barred
respondent's claims against it; and 5) the damages claimed were not arbitrable.

REGARDING THE JURISDICTION OF THE CIAC:

Section 4 of Executive Order (E.O.) No. 1008, or the Construction Industry Arbitration Law, provides:

SEC. 4. Jurisdiction. - The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected
with, contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or
after the completion of the contract, or after the abandonment or breach thereof. These disputes may involve
government or private contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit
the same to voluntary arbitration.

The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials and workmanship,
violation of the terms of agreement, interpretation and/or application of contractual time and delays, maintenance and
defects, payment, default of employer or contractor, and changes in contract cost.

Excluded from the coverage of the law are disputes arising from employer-employee relationships which shall
continue to be covered by the Labor Code of the Philippines.
Clearly, E.O. 1008 expressly vests in the CIAC original and exclusive jurisdiction over disputes arising from or
connected with construction contracts entered into by parties that have agreed to submit their dispute to voluntary
[27]
arbitration.

In this case, the CIAC validly acquired jurisdiction over the dispute. Petitioner submitted itself to the jurisdiction of the
[28]
Arbitral Tribunal when it signed the TOR. The TOR states:

II. STIPULATION/ADMISSION OF FACTS

xxxx
11. The Construction Industry Arbitration Commission has jurisdiction over the instant case by virtue of
Section 12.10 (Arbitration Clause) of the Subcontract Agreement.[29]
After recognizing the CIAC's jurisdiction, petitioner cannot be permitted to now question that same authority it earlier
accepted, only because it failed to obtain a favorable decision. This is especially true in the instant case since
petitioner is challenging the tribunal's jurisdiction for the first time before this Court.

With the issue of jurisdiction resolved, we proceed to the merits of the case.

It is well to note that Gabriel did not appeal the CIAC decision and Tico's petition before this Court has been denied
with finality. Hence, the CIAC and CA decisions have become final and executory as to Gabriel and Tico, and in that
respect, they shall not be disturbed by this Court.

Thus, the sole issue that confronts us is whether or not petitioner is liable under its bonds. To resolve the
same, we need to inquire into the following corollary issues:

1) whether the bonds (surety and performance) are null and void having been secured without a valid and existing
principal contract;

2) whether the bonds were invalidated by the modification of the subcontract agreement without notice to the surety;
and

3) whether the bonds for which petitioner was being made liable already expired.
Initially, petitioner argued that the surety and performance bonds (which were accessory contracts) were of no force
and effect since they were issued ahead of the execution of the principal contract. To support this contention, it now
adds that the bonds were actually secured through misrepresentation, as petitioner was made to believe that the
principal contract was already in existence when the bonds were issued, but it was, in fact, yet to be executed.

We are not persuaded.

In the first place, as correctly observed by respondent, the claim of misrepresentation was never raised by petitioner
as a defense in its Answer. Settled is the rule that points of law, theories, issues, and arguments not adequately
brought to the attention of the trial court need not be, and ordinarily will not be, considered by a reviewing court. They
cannot be raised for the first time on appeal. To allow this would be offensive to the basic rules of fair play, justice,
and due process.

Besides, even if we look into the merit of such contention, the CA is correct in holding that there was no evidentiary
support of petitioner's claim of misrepresentation. This being a factual issue, we respect the finding made in the
assailed decision. We have repeatedly held that we are not a trier of facts. We generally rely upon, and are bound
by, the conclusions on factual matters made by the lower courts, which are better equipped and have better
opportunity to assess the evidence first-hand, including the testimony of the witnesses.

Petitioner also contends that the principal contract (original subcontract agreement) was novated by the revised
scope of work and contract schedule, without notice to the surety, thereby rendering the bonds invalid and
ineffective. Finally, it avers that no liability could attach because the subject bonds expired and were replaced by the
Tico bonds.

Again, we do not agree.

Petitioner's liability was not affected by the revision of the contract price, scope of work, and contract
schedule. Neither was it extinguished because of the issuance of new bonds procured from Tico.

As early as February 10, 1997, respondent already sent a letter to Gabriel informing the latter of the delay incurred in
the performance of the work, and of the former's intention to terminate the subcontract agreement to prevent further
losses. Apparently, Gabriel had already been in default even prior to the aforesaid letter; and demands had
been previously made but to no avail. By reason of said default, Gabriel's liability had arisen; as a
consequence, so also did the liability of petitioner as a surety arise.

A contract of suretyship is an agreement whereby a party, called the surety, guarantees the performance by
another party, called the principal or obligor, of an obligation or undertaking in favor of another party, called
the obligee. By its very nature, under the laws regulating suretyship, the liability of the surety is joint and
several but is limited to the amount of the bond, and its terms are determined strictly by the terms of the
contract of suretyship in relation to the principal contract between the obligor and the obligee.

By the language of the bonds issued by petitioner, it guaranteed the full and faithful compliance by Gabriel of its
obligations in the construction of the SDS and STP specifically set forth in the subcontract agreement, and
the repayment of the 15% advance payment given by respondent. These guarantees made by petitioner gave
respondent the right to proceed against the former following Gabriel's non-compliance with her obligation.

Confusion, however, transpired when Gabriel and respondent agreed, on February 26, 1997, to reduce the scope of
work and, consequently, the contract price. Petitioner viewed such revision as novation of the original subcontract
agreement; and since no notice was given to it as a surety, it resulted in the extinguishment of its obligation.

We wish to stress herein the nature of suretyship, which actually involves two types of relationship --- the underlying
principal relationship between the creditor (respondent) and the debtor (Gabriel), and the accessory surety
relationship between the principal (Gabriel) and the surety (petitioner).The creditor accepts the surety's solidary
undertaking to pay if the debtor does not pay. Such acceptance, however, does not change in any material way the
creditor's relationship with the principal debtor nor does it make the surety an active party to the principal creditor-
debtor relationship. In other words, the acceptance does not give the surety the right to intervene in the principal
contract. The surety's role arises only upon the debtor's default, at which time, it can be directly held liable
by the creditor for payment as a solidary obligor.

The surety is considered in law as possessed of the identity of the debtor in relation to whatever is adjudged touching
upon the obligation of the latter. Their liabilities are so interwoven as to be inseparable. Although the contract of
a surety is, in essence, secondary only to a valid principal obligation, the surety's liability to the creditor is
direct, primary, and absolute; he becomes liable for the debt and duty of another although he possesses no direct
[39]
or personal interest over the obligations nor does he receive any benefit therefrom.

Indeed, a surety is released from its obligation when there is a material alteration of the principal contract in
connection with which the bond is given, such as a change which imposes a new obligation on the promising
party, or which takes away some obligation already imposed, or one which changes the legal effect of the original
contract and not merely its form. However, a surety is not released by a change in the contract, which does not have
the effect of making its obligation more onerous.

In the instant case, the revision of the subcontract agreement did not in any way make the obligations of both the
principal and the surety more onerous. To be sure, petitioner never assumed added obligations, nor were there any
additional obligations imposed, due to the modification of the terms of the contract. Failure to receive any notice of
such change did not, therefore, exonerate petitioner from its liabilities as surety.

Neither can petitioner be exonerated from liability simply because the bonds it issued were replaced by those issued
by Tico.

The Court notes that petitioner issued four bonds, namely: 1) Performance Bond No. 43601 which guaranteed the full
and faithful compliance of Gabriel's obligations for the construction of the SDS; 2) Performance Bond No. 13608 for
the construction of the STP; 3) Surety Bond No. 065493 which guaranteed the repayment of the 15% advance
payment for the SDS project; and 4) Surety Bond No. 068189 for the STP project. Under the surety agreements, the
first and third bonds were to expire on February 25, 1997 or one year from date of issue of the bonds, while the
second and fourth bonds were to expire one year from April 15, 1996.

The impending expiration of the first and third bonds prompted respondent to require Gabriel to arrange for their (the
bonds) immediate revalidation. Thus, in a letter dated February 21, 1997, respondent asked that the performance
[41]
bond for the SDS phase be extended until May 31, 1998; and for the surety bond, until June 30, 1997. Contrary to
petitioner's contention, this should not be construed as a recognition on the part of respondent that the bonds were
no longer valid by reason of the modification of the subcontract agreement. There was indeed a need for the renewal
of petitioner's bonds because they were about to expire, pursuant to the terms of the surety agreements. Since
petitioner refused to revalidate the aforesaid bonds, Gabriel was constrained to secure the required bonds from Tico
which issued, on February 25, 1997, the new performance and surety bonds (for the SDS phase) replacing those of
petitioner's. The performance bond was coterminous with the final acceptance of the project, while the surety bond
was to expire on February 26, 1998.

Notwithstanding the issuance of the new bonds, the fact remains that the event insured against, which is the default
in the performance of Gabriel's obligations set forth in the subcontract agreement, already took place. By such
default, petitioner's liability set in. Thus, petitioner remains solidarily liable with Gabriel, subject only to the limitations
on the amount of its liability as provided for in the Bonds themselves.

Considering that the performance bonds issued by petitioner were valid only for a period of one year, its liabilities
should further be limited to the period prior to the expiration date of said bonds. As to Performance Bond No. 43601
for the SDS project, the same was valid only for one year from February 26, 1996; while Performance Bond No.
13608 was valid only for one year from April 15, 1996. Logically, petitioner can be held solidarily liable with
Gabriel only for the cost overrun and liquidated damages accruing during the above periods. The assailed
CA decision is, therefore, modified in this respect.

WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals dated January
21, 2003 and its Resolution dated June 25, 2003 are AFFIRMED with the MODIFICATION that petitioner Stronghold
Insurance, Company, Inc. is jointly and severally liable with Remedios P. Gabriel only for the cost overrun and
liquidated damages accruing during the effectivity of its bonds.
All other aspects of the assailed decision STAND.