Title
Cellpage International Corp. vs. The Solid Guaranty, Inc.
Case
G.R. No. 226731
Decision Date
Jun 17, 2020
Cellpage sued JPMC and Solid Guaranty for unpaid cellcard purchases. RTC held both liable; CA reversed, citing lack of written principal contract. SC reinstated RTC ruling, holding Solid Guaranty solidarily liable up to P7M, with modified interest rates.
surety bond
written principal contract
valid and enforceable
A

Case Digest (G.R. No. 226731)

Facts:

  • Background and Parties Involved
    • Cellpage International Corporation (Cellpage) extended a credit line to Jomar Powerhouse Marketing Corporation (JPMC) for the purchase of cellcards.
    • As a condition for the credit approval, Cellpage required JPMC to secure a good and sufficient bond.
    • The bond was provided by The Solid Guaranty, Inc. (Solid Guaranty) through the issuance of surety bonds.
  • Surety Bonds and Credit Conditions
    • JPMC secured multiple surety bonds from Solid Guaranty:
      • Surety Bond No. 007422 dated March 20, 2002 for ₱2,500,000.00.
      • Surety Bond No. 00474 dated April 24, 2002 for ₱2,500,000.00.
      • Surety Bond No. 00748 dated May 6, 2002 for ₱2,000,000.00.
    • The surety bonds were issued to guarantee the payment of JPMC’s purchases on credit from Cellpage.
    • The underlying condition was that the purchase of cellcards on credit must be secured by these bonds, which were meant to ensure payment in accordance with the terms and conditions of the credit arrangement.
  • Purchase Transactions
    • In August 2002, JPMC purchased cellcards from Cellpage amounting to a total of ₱7,002,600.00.
    • Detailed invoices and delivery dates were provided, including multiple transactions over several days (from August 8, 2002 to August 24, 2002).
    • The transaction details, such as invoice numbers, quantities, and amounts, were meticulously recorded.
  • Payment Default and Postdated Checks
    • JPMC made partial payments using several postdated checks amounting to a total of ₱2,457,000.00.
    • When Cellpage presented these checks for payment, all were dishonored due to insufficient funds.
    • As a result, Cellpage demanded full payment of the outstanding amount of ₱7,002,600.00 from JPMC.
    • Additionally, Cellpage demanded payment from Solid Guaranty under the surety bonds.
  • Judicial Proceedings at the Regional Trial Court (RTC)
    • Cellpage filed a complaint for the sum of money against JPMC and Solid Guaranty.
    • The RTC, in its Decision dated January 3, 2012, ruled in favor of Cellpage.
      • The RTC declared JPMC and Solid Guaranty jointly and solidarily liable.
      • The judgment awarded Cellpage the full amount along with interest, exemplary damages, attorney’s fees, and costs.
    • Solid Guaranty’s motion for reconsideration was filed but subsequently denied by the RTC on December 19, 2012.
  • Appeal to the Court of Appeals (CA)
    • Solid Guaranty appealed the RTC decision before the CA.
    • The main arguments raised by Solid Guaranty were:
      • A surety bond is an accessory or collateral contract whose extent of liability depends on the principal contract.
      • The absence of submission of a written credit line agreement by either JPMC or Cellpage should preclude a valid surety claim.
    • The CA ruled in favor of Solid Guaranty:
      • It held that the failure to submit the written credit line agreement affected only the creditor’s right to claim under the surety, not the surety bond’s validity.
      • The CA based part of its ruling on the decision in First Lepanto-Taisho Insurance Corporation v. Chevron Philippines, Inc.
  • Appeal to the Supreme Court
    • Not satisfied with the CA ruling, Cellpage elevated the case to the Supreme Court.
    • Cellpage raised errors including:
      • The CA erroneously exempted Solid Guaranty from liability merely on the basis that the written credit line agreement was not submitted.
      • The argument that Solid Guaranty should be estopped from questioning the surety bond’s binding effect, given its initial recognition of liability by issuing the bond.
    • The Supreme Court accepted the petition as meritorious and set aside the CA’s decision, reinstating the RTC ruling with modifications.

Issues:

  • Issue of Liability in the Absence of a Written Principal Agreement
    • Whether Solid Guaranty is liable under the surety bonds even when the alleged credit line agreement between JPMC and Cellpage was not reduced to writing.
    • Whether the condition of attaching a written principal agreement to the surety bonds was an essential requirement for the surety’s liability.
  • Issue on the Application of Estoppel
    • Whether Solid Guaranty is precluded, by estoppel, from denying its liability under the surety bonds.
    • Whether its issuance of the surety bond, thereby accepting the risk, binds it to the performance of the guarantee notwithstanding any deficiencies in the principal contract documentation.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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