Case Summary (G.R. No. 204689)
Petitioner and Respondent
Petitioner: Stronghold Insurance Company, Inc.
Respondents: Spouses Rune and Lea Stroem
Key Dates
• November 15, 1999 – Performance bond issued by Stronghold.
• April 5, 2001 – Stronghold’s demand letter to contractor.
• September 12, 2002 – Spouses Stroem filed complaint for collection of bond.
• July 13, 2010 – Regional Trial Court (RTC) of Makati rendered judgment ordering Stronghold to pay ₱4,500,000 plus interest and attorney’s fees.
• November 20, 2012 – Court of Appeals (CA) affirmed RTC decision with increased attorney’s fees.
• January 21, 2015 – Supreme Court denied petition and dismissed the case.
Applicable Law
• 1987 Philippine Constitution – judicial power and due process.
• Executive Order No. 1008 (Construction Industry Arbitration Committee jurisdiction).
• Republic Act No. 876 (arbitration in construction contracts).
• Republic Act No. 9285 (Alternative Dispute Resolution Act).
• Civil Code provisions on suretyship (Arts. 1311, 1374, 2047).
Factual Background
Under the Owners-Contractor Agreement, Asis-Leif was to construct and Stronghold guaranteed performance by bond. Contractor defaulted; upon rescission of the agreement by the Stroems, an independent appraisal showed partial completion. The Stroems sued Asis-Leif, Ms. Cynthia Asis-Leif, and Stronghold for ₱4,500,000. Only Stronghold was served, as Ms. Cynthia Asis-Leif had absconded.
Procedural History
RTC of Makati held Stronghold liable for full bond amount with 6% interest from first demand, attorney’s fees of ₱35,000 and costs. Both parties appealed. CA dismissed Stronghold’s appeal, granted interlocutory relief to Stroems by increasing attorney’s fees to ₱50,000, and otherwise affirmed. Stronghold filed a petition for review under Rule 45 before the Supreme Court; Stroems opposed.
Issues for Resolution
- Whether Stronghold committed forum shopping.
- Whether the arbitration clause in the construction contract ousted the RTC’s jurisdiction in favor of the CIAC.
- Whether Stronghold’s liability under the performance bond is limited to additional costs for completion or extends to the full bond amount.
- Whether the bond dispute falls within CIAC’s exclusive jurisdiction under EO 1008 and RA 9285.
Forum-Shopping Analysis
Supreme Court found that Stronghold omitted from its Certification Against Forum Shopping the pending Motion for Partial Reconsideration in the CA. The failure to disclose and promptly inform this Court of that motion constituted forum shopping in violation of Rules 42 and 45. As non-waivable jurisdictional rules, the omission warranted dismissal of the petition.
Arbitration and CIAC Jurisdiction
Even if the CIAC has exclusive jurisdiction over disputes “arising from or connected with” construction contracts, arbitration requires an agreement by the parties to submit to CIAC. The performance bond was not incorporated into the Owners-Contractor Agreement by reference to the arbitration clause. Stronghold, not a si
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Facts
- In November 1999, Spouses Rune and Lea Stroem (“Respondents”) entered into an Owners-Contractor Agreement with Asis-Leif & Company, Inc. (“Asis-Leif”) for the construction of a two-storey residence, garage, pool, fence, gate, and land development on their lot in Valley Golf Subdivision, Antipolo, Rizal.
- Asis-Leif secured Performance Bond No. LP/G(13)83056 in the amount of ₱4,500,000.00 from Stronghold Insurance Company, Inc. (“Petitioner”), with the Stroems as beneficiaries, to guarantee faithful performance.
- Asis-Leif failed to complete the project on time despite repeated demands; the Stroems rescinded the agreement and engaged Asian Appraisal Company, Inc., which assessed completion at 47.53% for the residence, 65.62% for the garage, and 13.32% for pool and site works.
- On April 5, 2001, Petitioner demanded Asis-Leif to settle its obligations; receiving no reply, the Stroems filed suit on September 12, 2002, against Asis-Leif, its owner Ms. Ma. Cynthia Asis-Leif, and Petitioner for breach of contract and recovery under the performance bond.
Procedural History
- The Regional Trial Court (Makati, Branch 133) rendered judgment on July 13, 2010, in favor of the Stroems, ordering Petitioner to pay ₱4,500,000.00 with 6% legal interest from first demand, ₱35,000.00 attorney’s fees, and costs.
- Both parties appealed to the Court of Appeals (CA-G.R. CV No. 96017). On November 20, 2012, the Court of Appeals affirmed with modification: attorney’s fees increased to ₱50,000.00; all other awards upheld.
- Petitioner filed a Petition for Review under Rule 45 before the Supreme Court on January 19, 2013. The Stroems filed their Comment on July 31, 2013; Petitioner’s Reply was noted December 9, 2013.
Issues Presented
- Whether the Regional Trial Court acquired jurisdiction despite an arbitration clause and exclusive CIAC jurisdiction over construction disputes.
- Whether Petitioner committed forum shopping by failing to disclose the Stroems’ Motion for Partial Reconsideration of the CA Decision.
- Whether CIAC has exclusive original jurisdiction over disputes connected with the performance bond.
- Whether Petitioner’s liability under the performance bond is limited to additional costs of completion or extends to the full bond amount.
- Whether the performance bond constitutes ordinary or corporate suretyship.