G.R. No. 212734 - Mabuhay Holdings Corp. vs. Sembcorp Logistics Limited

The case involves a petition for review on certiorari by Plaridel Surety & Insurance Company (petitioner) against Artex Development Company, Inc. and the presiding judge of Branch XIII of the Court of First Instance of Manila (respondents).
The petitioner had initially filed a complaint in the Court of First Instance of Manila for the recovery of a sum of money amounting to P20,570.24, together with interest, attorneys’ fees (15% of the amount), and costs of suit.

The petitioner, acting as a surety, had posted surety bonds on behalf of the respondent. These bonds were required pursuant to Republic Act No. 4086 and its implementing regulations issued by the Bureau of Customs and the Board of Industries.
The surety bonds, along with the corresponding separate agreement of counterguaranty, mandated that the respondent pay renewal premiums and documentary stamp costs for a twelve-month period (commencing in March 1965) for the duration the bonds were in force.

It is an undisputed fact that the premiums and stamp costs for the initial period (March 1965 – March 1966) were duly paid as per the agreed terms in the counterguaranty.
On December 19, 1966, the respondent was granted tax exemption by the Board of Industries (BOI Certificate No. 22), which subsequently led to the respondent discontinuing the payment of renewal premiums and documentary stamp costs thereafter.

On September 11, 1968, the respondent filed a motion to dismiss the petitioner’s complaint on the basis that the complaint stated no cause of action and that any claim or demand had been extinguished.
After the petitioner opposed the motion and the respondent filed its reply, the trial court (presiding judge) granted the motion to dismiss, dismissing the complaint without pronouncement as to costs, and later denied the petitioner’s motion for reconsideration.

The respondent argued that the tax exemption rendered the surety bonds, and by extension the agreements of counterguaranty, null and void. They contended that since suretyship is accessory to the principal obligation, without a valid underlying obligation the surety bonds cannot exist.
The petitioner claimed that regardless of the tax exemption’s effect on the bonds, it retained the right to recover renewal premiums and costs accrued prior to the grant of tax exemption. It further argued that the surety bonds should remain in effect until an official cancellation was ordered, notwithstanding subsequent renewals.

Condition No. 2 of the original surety bonds explicitly provided that upon approval of the respondent’s application for tax exemption, the bonds would become null and void.
The agreements of counterguaranty stipulated the advance payment structure for the renewal premiums and costs associated with the surety bonds.

Whether the grant of tax exemption by the Board of Industries on December 19, 1966, extinguished the surety bonds and the attendant agreements of counterguaranty.

The core question is whether the release from customs duties via tax exemption nullified the petitioner’s continued obligation to secure the renewal premiums and documentary stamps.
Whether the respondent’s subsequent acts (cessation of payments) were justified as per the contractual stipulation in the surety bonds.

Whether the petitioner is entitled to recover payments for renewal premiums and documentary stamp costs already paid or accrued before and after the tax exemption.

Determining if the petitioner has any valid claim for renewal premiums accrued post tax exemption, given the absence of consideration for such renewals.
Examining if the petitioner can claim for premiums from March 1966 onward, especially considering both pre- and post-exemption periods.

The applicability of the legal principle that suretyship is accessory and dependent on the existence of a valid principal obligation.

Assessing if the continuity of the suretyship duty is affected by the invalidation of the surety bond under the specific condition provided.
Clarifying how the accessory nature of suretyship influences the recovery of obligations already performed or rendered null.