Prudential Guarantee v. Equinox Land
REITERATIONFacts
The Antecedents: Equinox Land Corporation (Equinox) decided to construct five additional floors to its building and awarded the contract to J’Marc Construction & Development Corporation (J’Marc) for P37,000,000.00. Prudential Guarantee and Assurance, Inc. (Prudential) issued a surety bond and a performance bond for J’Marc. Equinox paid J’Marc a downpayment of P9,250,000.00. J’Marc failed to comply with the contract terms, including submitting progress billings, proper site management, and timely completion. Equinox made several advance payments and direct payments to suppliers due to J’Marc's financial problems and delays. J’Marc accomplished only 19.0573% of the project by July 11, 1997, when Equinox terminated the contract. Equinox filed a complaint against J’Marc and Prudential for sum of money and damages. Procedural History: The Regional Trial Court (RTC) dismissed the case based on Prudential's motion, asserting that the Construction Industry Arbitration Commission (CIAC) had jurisdiction. Equinox then filed a request for arbitration with the CIAC. Prudential argued that the CIAC lacked jurisdiction over it as it was not a privy to the construction contract. The CIAC rendered a decision in favor of Equinox, holding both J’Marc and Prudential liable. Prudential filed a petition for review with the Court of Appeals (CA), which affirmed the CIAC's decision with modifications. Equinox also filed a petition for review with the CA regarding damages. The CA consolidated both petitions and affirmed its amended decision. Prudential's motion for reconsideration was denied. The Petition: Prudential filed a Petition for Review on Certiorari with the Supreme Court, assailing the CA's decision, primarily on the issues of CIAC's jurisdiction over Prudential and Prudential's solidary liability with J’Marc.
Issue(s)
Whether the Court of Appeals erred in upholding the jurisdiction of the CIAC over the case, specifically concerning Prudential. Whether the Court of Appeals erred in finding Prudential solidarily liable with J’Marc for damages.
Ruling
The Supreme Court DENIED the petition and AFFIRMED in toto the assailed Decision of the Court of Appeals (Third Division) dated November 23, 2001 in CA-G.R. SP No. 56491 and CA-G.R. SP No. 57355. Costs were against the petitioner.
Ratio Decidendi
On the issue of CIAC's jurisdiction over Prudential: The Court held that Prudential is estopped from questioning the jurisdiction of the CIAC. Prudential itself invoked the jurisdiction of the CIAC before the RTC by filing a motion to dismiss on the ground that the CIAC, not the RTC, had jurisdiction over the construction dispute. Having voluntarily invoked the jurisdiction of a quasi-judicial body, Prudential is barred from later impugning it. Furthermore, in its Reply to Equinox's Opposition to the Motion to Dismiss before the RTC, Prudential argued that as a surety, it is considered under the law to be the same party as the obligor in relation to whatever is adjudged regarding the latter's obligation, thereby admitting that the CIAC has jurisdiction over the case involving the construction contract. This admission binds Prudential and prevents it from claiming otherwise. On the issue of Prudential's solidary liability with J’Marc: The Court reiterated that a contract of suretyship arises upon the solidary binding of the surety with the principal debtor. Article 2047 of the Civil Code provides that suretyship arises upon the solidary binding of a person deemed the surety with the principal debtor for the purpose of fulfilling an obligation. The surety assumes liability as a regular party to the undertaking, making its obligation primary. While a contract of surety is secondary to a valid principal obligation, the surety's liability to the creditor is direct, primary, and absolute, meaning the surety is directly and equally bound with the principal. Therefore, Prudential is barred from disclaiming that its liability with J’Marc is solidary.
Main Doctrine
A party who voluntarily invokes the jurisdiction of a quasi-judicial body, such as the Construction Industry Arbitration Commission (CIAC), is estopped from later questioning its jurisdiction. Furthermore, a surety is solidarily liable with the principal debtor under the law and jurisprudence.