Trade & Investment (Philguarantee) v Roblett et al, and Paramount Insurance Corp.

Facts: The general contractor of a foreign oil company (KNPC) opened for bidding in 1984 a subcontract for the supply of workers for a project in Kuwait. Roblett, to qualify as a bidder, was required to post a bid bond. Consequently, Roblett applied with the Bank of Kuwait (BKME) for a letter of guarantee to cover the amount. The bank consented on the condition that Roblett would obtain a counterguarantee to secure bond. Roblett then obtained from Philguarantee a counterguarantee in favor of BKME, however, its issuance was conditioned upon the execution by Roblett of a Deed of Undertaking. Under the terms of the Deed, Roblett bound itself to keep petitioner free and harmless from any damage or liability which may arise out of the issuance of its bid bond guarantee and to give their irrevocable consent and approval to any and all extensions of the period of the guarantee. Furthermore, the Deed required that the counterguarantee be secured by "a surety bond equivalent to 100% of the guarantee accommodation." Should the instrument be in the form of a surety bond, "the same must be issued by an insurance company acceptable to Philguarantee and must be coterminus with the guarantee to be issued." To comply with petitioners requirement of a counterguarantee, Roblett obtained from Paramount, a surety bond in the amount of P11M, the peso equivalent of petitioners guarantee accommodation. The term of the Surety Bond was coterminous with petitioners counterguarantee. The Surety Bond, which forms the crux of the present petition, reads in part: That we, ROBLETT INDUSTRIAL CONSTRUCTION CORPORATION, as principal, and PARAMOUNT INSURANCE CORPORATION, as surety, are held and firmly bound unto PHILGUARANTEE in the sum of P11M for the payment of which, well and truly to be made, we bind ourselves, our heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents. *** However, should the Surety and Principal receive a written notice from PHILGUARANTEE stating that PHILGUARANTEE has been called upon by _(Bank of Kuwait and the Middle East)_ to extend the validity of the guarantee, the Surety hereby agrees that it will either pay PHILGUARANTEE the full amount outstanding under this Surety Bond, or extend this Surety Bond to a new maturity date specified by PHILGUARANTEE. Roblett was awarded the subcontract by KNPC. The required performance bond was pending with the Central Bank, however, its application was disapproved. As a result, Roblett was not able to post the bond and was deemed by KNPC to have breached the subcontract. KNPC confiscated BKMEs bid bond, which in turn called on petitioner Philguarantees counterguarantee. Thus, Philguarantee notified Paramount of the payment it had made to BKME. Issue: WON Paramount is liable as surety to petitioner. Held: YES As a surety, Paramount is liable to petitioner solidarily with Roblett. In Jeanette D. Molino v. Security Diners International Corporation, we held: A surety is considered in law as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable. Although the contract of a surety is in essence secondary only to a valid principal obligation, his liability to the creditor is direct, primary and absolute; he becomes liable for the debt and duty of another although he possesses no direct or personal interest over the obligations nor does he receive any benefit therefrom. As solidary debtors, it is not necessary that Roblett failed to pay before Paramount could be made liable. It is enough that petitioner demanded payment from Paramount for liability to attach. Article 1216 of the Civil Code provides: 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.