G.R. No. 179628 - The Manila Insurance Co., Inc. vs. Spouses Amurao

On March 7, 2000, respondent-spouses Roberto and Aida Amurao entered into a Construction Contract Agreement (CCA) with Aegean Construction and Development Corporation for the construction of a six-storey commercial building in Quezon City.
To guarantee full compliance with the CCA, performance bonds were posted by Aegean, secured by petitioner The Manila Insurance Company, Inc. and Intra Strata Assurance Corporation.

On November 15, 2001, respondent-spouses filed a complaint with the Regional Trial Court (RTC) of Quezon City, Branch 217, seeking to collect on the performance bonds issued in the amounts of P2,760,000.00 and P4,440,000.00.
Intra Strata responded by filing an answer and later a motion to admit a third party complaint against Aegean, Ronald D. Nicdao, and Arnel A. Mariano.
Petitioner filed a motion to dismiss the complaint on the grounds of no cause of action and the premature filing of the complaint due to the non-impleading of the principal contractor, Aegean.

After the RTC denied petitioner’s motion to dismiss on May 8, 2002, petitioner filed an answer with counterclaim and cross-claim, along with a third party complaint against Aegean and other related parties.
During pre-trial proceedings, petitioner and Intra Strata discovered that the CCA contained an arbitration clause, prompting them to file separate motions to dismiss on the basis of lack of cause of action and lack of jurisdiction.

The RTC, on May 5, 2006, denied both motions to dismiss. Petitioner’s subsequent motions for reconsideration were also denied on September 11, 2006.
The Court of Appeals (CA) issued a decision on June 7, 2007, dismissing petitioner’s petition. The CA held that arbitration under the CCA applied only when there was a difference in the interpretation of Article I of the contract, and it treated petitioner as a solidary debtor rather than a solidary guarantor.
Petitioner’s motion for reconsideration was denied by the CA in its Resolution dated September 7, 2007.

Petitioner argued that the CA erred in confining arbitration to disputes over contract interpretation and in mischaracterizing its role as a surety by treating it as a solidary debtor.
Petitioner further contended that since the performance bond was issued before the CCA was executed, there was no valid cause of action against it.

Whether the Court of Appeals erred in holding that the parties may resort to arbitration only for disputes regarding the interpretation of Article I of the CCA.
Whether the Court of Appeals erred in treating petitioner as a solidary debtor instead of a solidary guarantor.
Whether the Court of Appeals overlooked the fact that no valid construction agreement existed at the time the performance bond was issued, thereby rendering the complaint premature.