Philippine Pryce v CA

February 21, 1994 | Nocon, J. | Premium payment

PETITIONER: Philippine Pryce Assurancr Company
RESPONDENT: CA and Gegroco, Inc.
SUMMARY: Philippine Pryce issued surety bonds to Gregoco. Gregoco filed a complaint for the collection of the sum pertaining
to the bonds. Petitioner wanted to escape liability by alleging that the checks issued by its principal which were supposed to pay for
the premiums bounced and it was not yet authorized by the Insurance Commission to issue surety bonds. Court ruled in favor of
Gegroco.
DOCTRINE: Sec. 177 of the Inusrance Code provided that the contract must be binding where the obligee accepted the bond,
which becomes valid and bnding regardless of non-payment of premium

FACTS:
1. Philippine Pryce issued two surety bonds, on behalf of its
principal, to Gegroco, Inc. in the amounts of 500k and 1M.
Gegroco filed a complaint for collecton of sum of money for
such issuance.
2. Petitioner admitted to the execution of bonds but alleged
that they are free from liability because the checks which were
to pay for the premiums bounced, so there is no contract to
speak of; and that that the bonds were merely to guarantee
payment of its principal's obligation, thus, excussion is
necessary. The case was set for pre-trial but only its counsel
appeared. During their scheduled conference, petitioner did
not appear despite notice to appear in court. They neither
appeared on the date of pre-trial which was re-set to a later
date.
3. Trial court ruled in favor of Gegroco; ordered Philippine
Pryce to pay the amount of the principal amount due, in the
sum of 20k. CA affirmed.
ISSUE/S:
WON the case was already ripe for pre-trial conference when
the trial court set it for the holding thereof YES
WON Philippine Pryce Assurance Corp. should be liable for
the surety bond that it issued as payment for the premiumYES
WON Pryce was not yet authorized by the insurance
Commission to issue such bonds at the time of issuance - NO
RATIO:
1. [PROCEDURAL] No answer to the third party complaint is
forthcoming as petitioner never initiated the service of
summons on the third party defendant. Defendant's claim that

it was not aware of the Order admitting the third-party

complaint is preposterous. Sec. 8, Rule 13 of the Rules,
provides:
Completeness of service . . . Service by registered mail is
complete upon actual receipt by the addressee, but if he fails
to claim his mail from the post office within five (5) days from
the date of first notice of the postmaster, service shall take
effect at the expiration of such time.
Furthermore, all copies of notices and orders issued by the
court for petitioner's counsel were returned with the notation
"Return to Sender, Unclaimed." Yet when he chose to, he
would appear in court despite supposed lack of notice.
2. Sec. 177 of the Insurance Code that 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.
This negates petitioners defense. Also, petitioner even
admitted to having issued the bonds, and that they required
Gregoco to submit to them the Surety Bond to guaranty
payment of the spare parts to be purchased and to issue postdated checks, which were both complied with by the
complainant. The delivery invoices proving that parts were
purchased, delivered and received, were appended as part of
the documents presented.
Petitioner's defense that it did not have authority to issue a
Surety Bond when it did is an admission of fraud committed
against respondent. No person can claim benefit from the
wrong he himself committed. Barred by estoppel.