View full case

PRUDENTIAL GUARANTEE v. EQUINOX LAND CORPORATION

FACTS:

This case involved a construction project by Equinox Land Corporation (Equinox) to add five additional floors to its building. Equinox invited various contractors to bid, and J'Marc Construction & Development Corporation (J'Marc) won the bid. J'Marc was awarded the contract, and Equinox paid a downpayment of P9,250,000.00. However, J'Marc failed to comply with the contract terms and encountered multiple issues, such as the non-submission of progress billings and project delays. Due to J'Marc's failures, Equinox terminated the contract and took over the project.

Equinox filed a complaint against J'Marc and Prudential Guarantee and Assurance, Inc. (Prudential), the issuer of the surety and performance bonds. Prudential filed a motion to dismiss the complaint, arguing that the Construction Industry Arbitration Commission (CIAC) had jurisdiction over the case. The trial court granted Prudential's motion and dismissed the complaint.

Subsequently, Equinox requested arbitration with the CIAC and the commission issued a decision in Equinox's favor.

ISSUES:

  1. Whether the Court of Appeals erred in upholding the jurisdiction of the CIAC over the case.

  2. Whether the Court of Appeals erred in finding Prudential solidarily liable with J'Marc for damages.

  3. Whether or not the Construction Industry Arbitration Commission (CIAC) has jurisdiction over the construction dispute between the parties.

  4. Whether or not Prudential Guarantee and Assurance, Inc. (Prudential) is bound as a surety to the construction contract between Equinox Construction and Development Corporation (Equinox) and J'Marc Builders, Inc. (J'Marc).

RULING:

  1. The Court of Appeals did not err in upholding the jurisdiction of the CIAC over the case. Section 4 of Executive Order No. 1008 grants the CIAC original and exclusive jurisdiction over disputes arising from or connected with construction contracts. The parties in this case agreed to submit their dispute to voluntary arbitration, thus falling within the jurisdiction of the CIAC.

  2. The Court of Appeals did not err in finding Prudential solidarily liable with J'Marc for damages. Based on the terms of the surety and performance bonds, Prudential assumed solidary liability with J'Marc. The Court of Appeals correctly affirmed the CIAC's determination of Prudential's liability.

  3. The Supreme Court held that Prudential is estopped from questioning the jurisdiction of the CIAC. Prudential initially invoked the jurisdiction of the Regional Trial Court (RTC) by filing a motion to dismiss on the ground of lack of jurisdiction, but after the CIAC assumed jurisdiction over the case, Prudential moved for its dismissal again. The Court ruled that Prudential's active participation in the case before the RTC constituted a recognition of the CIAC's jurisdiction, and it cannot now impugn the jurisdiction of the CIAC.

  4. The Supreme Court held that Prudential is considered a surety and as such, its liability to J'Marc is solidary. The Court cited relevant provisions of the Insurance Code and the Civil Code that define suretyship as a contract where the surety guarantees the performance of an obligation by the principal debtor. The Court also cited previous jurisprudence that emphasized the direct, primary, and absolute liability of a surety. Thus, Prudential is barred from denying its liability as a surety to the construction contract.

PRINCIPLES:

  • Administrative agencies are tribunals of limited jurisdiction and can only exercise the powers granted to them by their enabling statutes.

  • The Construction Industry Arbitration Commission (CIAC) has original and exclusive jurisdiction over disputes arising from or connected with construction contracts, provided the parties agree to submit their dispute to voluntary arbitration.

  • The liability of a surety under a bond is determined based on the terms of the bond itself. If the bond provides for solidary liability, the surety can be held solidarily liable with the principal debtor.

  • A party is estopped from questioning the jurisdiction of a court or quasi-judicial body if it voluntarily invokes and actively participates in the case before such court or body. (Lapanday Agricultural & Development Corporation v. Estita)

  • A surety's liability to the creditor is direct, primary, and absolute, and it is considered equally bound with the principal debtor. (Security Pacific Assurance Corporation v. Tria-Infante)