G.R. No. 185066 - Philippine Charter Insurance Corp. vs. Philippine National Construction Corp.

Petitioner Philippine Charter Insurance Corporation (PCIC) is the surety issuer.
Respondent Philippine National Construction Corporation (PNCC) is engaged in construction and tollway operations.
Orlando Kalingo (Kalingo) was the winning bidder for a contract to fabricate and deliver tollbooths for PNCC.

On October 16, 1997, PNCC conducted a public bidding for the fabrication and delivery of 27 tollbooths.
Kalingo was awarded the contract and received two Purchase Orders (P.O.s) on November 13, 1997:

Each purchase order required a surety bond equivalent to 100% of the total down payment (50% of the total P.O. cost), continuing in effect until full compliance.
Kalingo posted two PCIC surety bonds:

Both bonds guaranteed the repayment of the down payment in case of contractor default and specified the surety’s liability would not exceed the bond amount.

The surety bonds expired on March 16, 1998.
A written extrajudicial demand must be presented to PCIC within 15 days from bond expiration; failure to do so bars claims and waives rights to recovery.
The bonds expressly contain a stipulation that PCIC will not be liable for claims not presented in writing within that 15-day period following expiration.

PNCC released down payment checks to Kalingo, properly receipted. The allegedly wrong date on the checks (1997 instead of 1998) was held a typographical error.
Kalingo delivered only four incomplete tollbooths under P.O. No. 71024L and failed to deliver the remaining units.
PNCC filed a written extrajudicial claim on March 9, 1998, against PCIC for Kalingo’s default on P.O. No. 71024L, demanding payment under Bond No. 27547.

PNCC filed a complaint for collection of sum of money on April 24, 2001, against Kalingo and PCIC, relying solely on Bond No. 27547.
PCIC argued that partial delivery by Kalingo reduced obligations.
The Regional Trial Court (RTC) ruled in favor of PNCC, ordering PCIC and Kalingo to pay ₱1,050,000.00 plus legal interest and ₱50,000.00 attorney’s fees. The RTC did not rule on Bond No. 27546 as it was not pleaded.
The Court of Appeals (CA) reversed in part and held PCIC jointly and severally liable for both bonds, including Bond No. 27546, despite it not being included in the complaint.
PCIC filed a petition for review on certiorari, which the Supreme Court initially denied due course.
PCIC filed a motion for reconsideration, raising the following issues:

Whether the Court of Appeals erred in holding PCIC liable under Bond No. 27546, which was not the subject of PNCC’s complaint for collection.
Whether the issuance of checks in 1997 implies material concealment that vitiates the surety bonds.
Whether PCIC is liable for attorney’s fees incurred by PNCC in the collection suit.