Philippines Pryce Assurance v.

CA
NOCON, J. | G.R. No. 107062 February 21, 1994
Topic: Motor vehicle
Nature: Collection of sum of money

PARTIES:
PHILIPPINE PRYCE ASSURANCE CORPORATION, petitioner, vs. THE COURT OF
APPEALS, (Fourteenth Division) and GEGROCO, INC., respondents.

DISPUTED MATTER:
Existence of a contract of surety in cases of nonpayment of premium

DOCTRINE:
No contract of suretyship or bonding shall be valid and binding unless and until the
premium therefor has been paid, except where the obligee has accepted the bond, in
which case the bond becomes valid and enforceable irrespective of whether or not the
premium has been paid by the obligor to the surety.

FACTS:

 13 May 1988: Respondent Gegroco Inc. (Gegroco) filed a complaint for collection of
money against then-Interworld Asusrance Corporation (now Petitioner Philippine Pryce
Assurance Corporation [PPAC]),

o The complaint alleged that PPAC issued 2 surety bonds in behalf of its principal
Sagum General Merchandise (Sagum) for P500K and P1M, respectively.

 PPCA’s Answer: admitted having executed the said bonds, but denied liability because
allegedly:

o the checks which were to pay for the premiums bounced and were dishonored
hence there is no contract to speak of between petitioner and its supposed
principal; and

o that the bonds were merely to guarantee payment of its principal's obligation,
thus, excussion is necessary.
 EXCUSSION: process or proceedings whereby a creditor must proceed
against a principal debtor before proceeding against a surety or
subsidiary debtor.
 After multiple failures of PPAC and/or its counsel to appear during the pre-trials (which
kept on being rescheduled due to their non-appearance), PPAC was considered in
default upon Gegroco’s motion. In between such times, PPAC’s counsel once
manifested that PPAC intended to file a third party complaint against Sagum. The court
admitted the Third Party Complaint and ordered service of summons on third party
defendants. Still, PPAC and its counsel did not appear during the pre-trial.
  After Gegroco’s presentation of evidence and notice to PPAC on the Order of Default,
the trial court ruled in favor of Gegroco. PPAC’s MR was denied. CA affirmed TC’s ruling

ISSUES/HELD:

W/N there was no contract of surety because the checks issued by Sagum, which were
supposed to pay for the premium, bounced - NO, THERE WAS STILL A CONTRACT OF
SURETY
 Sec. 177, Insurance Code: The surety is entitled to payment of the premium as soon as
the contract of suretyship or bond is perfected and delivered to the obligor. No contract
of suretyship or bonding shall be valid and binding unless and until the premium
therefor has been paid, except where the obligee has accepted the bond, in which
case the bond becomes valid and enforceable irrespective of whether or not the
premium has been paid by the obligor to the surety. . . .
 PPAC admitted to have issued the bonds subject matter of the original action. Further,
the testimony of Mr. Leonardo T. Guzman, Gegroco’s witness, reveal that Sagum has
submitted to them 2 bonds.
 Likewise attached to the record are exhibits consisting of delivery invoices addressed to
Sagum proving that parts were purchased, delivered and received.
DISPOSITIVE:
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dismissing the
petition before them and affirming the decision of the trial court and its order denying petitioner's
Motion for Reconsideration are hereby AFFIRMED. The present petition is DISMISSED for lack
of merit. SO ORDERED.

NO SEPARATE OPINIONS