AUTHORSHIP INFORMATION

Digest Author Grace Ann Tamboon

Topic Suretyship Obligation of the Surety
CASE INFORMATION
Petitioner(s) Prudential Guarantee And Assurance Inc.
Respondent(s) Anscor Land, Inc
Reference G.R. No. 177240 September 8, 2010
Ponente Villarama, Jr., J.
DOCTRINE(S)
A surety's obligation is merely collateral or secondary and is dependent on the principal
debtor's existence and liability.

CASE SUMMARY

Prudential Guarantee and Assurance Inc. (PGAI)

issued a fire insurance policy covering the properties of
ANSCOR Land Inc. (ALI), which were destroyed by fire.
PGAI only partially paid the claim of ALI. Consequently,
ALI filed a complaint for collection of sum of money and
Pertinent Facts damages against PGAI before the Regional Trial Court
(RTC). During the trial, PGAI sought to introduce
evidence to prove that the properties were overinsured,
but the RTC denied its request. The RTC then ruled in
favor of ALI, ordering PGAI to pay the remaining
amount of the claim, plus interest and damages. PGAI
appealed the RTC's decision to the Court of Appeals
(CA), but its appeal was dismissed. PGAI then filed a
petition for review with the Supreme Court.

PROCEDURAL HISTORY

CIAC Construction Industry Arbitration Commission declared

PGAI solidarily liable with its principal Kraft Realty and
Development Corporation (KRDC) under the
performance bond.

CA CA modified the decision of CIAC.

Relevant Issue(s) Whether or not the petitioner is liable as a surety for

the loan obtained by the respondent.

In this case, the Supreme Court held that the surety

Analysis agreement was invalid due to the lack of consent of the
surety to the amendments made to the principal
contract. The Court also ruled that the surety's liability
under the original contract was extinguished when the
principal debtor was released from his obligation, even
 if the release was made without the consent of the
surety. This case emphasizes the importance of
obtaining the consent of the surety before making any
changes to the principal contract and the need for strict
compliance with the terms of the surety agreement.

The ruling of the court is that the petitioner is liable as a

surety for the loan obtained by the respondent. The
court held that the petitioner's obligation as a surety
under the surety agreement is separate and distinct
from the respondent's obligation as the principal debtor.
Ruling(s) & Rationale The court also held that the petitioner's obligation as a
surety is not affected by any extension of the loan
granted to the respondent by the bank, as the surety
agreement did not contain any provision for such
extension. Therefore, the petitioner must fulfill its
obligation as a surety and pay the loan to the bank in
case of default by the respondent.