G.R. No. 189563 - Gilat Satellite Networks, Ltd. vs. UCPB General Insurance Co., Inc.

Purchase Agreement and Surety Bond
On September 15, 1999, One Virtual placed a purchase order with Gilat Satellite Networks, Ltd. for telecommunications equipment, accessories, spares, services and software, totaling USD 2,128,250.00.
To secure payment of USD 1.2 million under a payment schedule (dated November 22, 1999), One Virtual obtained from UCPB General Insurance Co., Inc. a surety bond dated December 3, 1999, amended on December 23, 1999 to extend its expiry from May 30, 2001 to July 30, 2001.

Delivery, Non-Payment and Extrajudicial Demands
Between September 1999 and June 2000, Gilat shipped and delivered all contracted goods and software, as evidenced by airway bills and Bills of Lading.
One Virtual defaulted on the USD 400,000.00 installment due May 30, 2000, prompting Gilat’s demand letter to UCPB on June 5, 2000. One Virtual also failed to pay the USD 800,000.00 installment due November 30, 2000, leading to Gilat’s second demand on January 24, 2001 for the full USD 1.2 million plus interests and expenses.

Trial Court Proceedings
On April 24, 2002, Gilat filed a Complaint in RTC Makati, Branch 141, against UCPB to recover USD 1.2 million under the surety bond, plus interests and litigation expenses.
On December 28, 2006, the RTC rendered judgment ordering UCPB to pay USD 1.2 million with 12% legal interest per annum from finality until full settlement, and USD 44,004.04 for attorney’s fees; UCPB’s counterclaim was dismissed.

Court of Appeals Proceedings
UCPB appealed. On October 6, 2008, the CA dismissed the case for lack of jurisdiction, vacated the RTC decision, and ordered Gilat and One Virtual to arbitrate under the Purchase Agreement’s arbitration clause, invoking the doctrine that accessory and principal contracts are construed together.
The CA denied Gilat’s motion for reconsideration on September 16, 2009, leading to Gilat’s petition for review on certiorari to the Supreme Court filed November 6, 2009.

Arbitration
Whether the Court of Appeals erred in dismissing the case and ordering Gilat and One Virtual to arbitrate under the Purchase Agreement’s arbitration clause.

Legal Interest
Whether Gilat is entitled to legal interest on the USD 1.2 million from extrajudicial demand due to UCPB’s delay in fulfilling its obligation under the Suretyship Agreement.