PRUDENTIAL v. EQUINOX Commission (CIAC) which has jurisdiction over it.

The trial court granted

SURETYSHIP – DEFINITION AND EXTENT OF LIABILITY Prudential’s motion and dismissed the case.
G.R. Nos. 152505-06 / September 13, 2007  Equinox then filed with the CIAC a request for arbitration. Prudential argued that
the CIAC has no jurisdiction over it since it is not a privy to the construction
SUMMARY: Equinox employed the services of J’Marc for the construction of contract between Equinox and J’Marc; and that its surety and performance
additional floors to its existing building. J’Marc submitted to Equinox one surety bonds are not construction agreements. CIAC found for Equinox and held
bond and one performance bond both issued by Prudential. J’Marc violated some Prudential liable to it on its two bonds. CA affirmed, hence SC case.
terms of the construction contract (e.g. sending of monthly progress billings) so
Equinox terminated the contract. Equinox sent a letter to Prudential to claim relief ISSUE/S & RATIO:
from J’Marc’s breach. Equinox also filed a claim for sum of money upon the finding 1. W/N CIAC has jurisdiction over the case – YES
that it overpaid J’Marc. Prudential filed a motion to dismiss.  When Equinox lodged with the RTC its complaint for a sum of money against
J’Marc and Prudential, the latter filed a motion to dismiss on the ground of
DOCTRINE: While a surety and a guarantor are alike in that each promises to
lack of jurisdiction, contending that since the case involves a construction
answer for the debt or default of another, the surety assumes liability as a regular
dispute, jurisdiction lies with CIAC. Prudential’s motion was granted.
party to the undertaking and hence its obligation is primary.
However, after the CIAC assumed jurisdiction over the case, Prudential again
While a contract of surety is secondary only to a valid principal obligation,
moved for its dismissal, alleging that it is not a party to the construction
the surety’s liability to the creditor is said to be direct, primary, and absolute. In
contract between Equinox and J’Marc; and that the surety and performance
other words, the surety is directly and equally bound with the principal.
bonds it issued are not construction agreements. After having voluntarily
invoked before the RTC the jurisdiction of CIAC, Prudential is estopped to
FACTS:
question its jurisdiction.
 Equinox decided to construct five (5) additional floors to its existing building,
the Eastgate Centre in Mandaluyong. It sent invitations to contractors for
2. W/N Prudential is solidarily liable with J’Marc for damages – YES
bidding and eventually settled on J’Marc.
 In previous cases, the Court has held that while a surety and a guarantor are
 J’Marc submitted to Equinox two (2) bonds, namely: (1) a surety bond issued by
Prudential Guarantee and Assurance, Inc. (Prudential) of P9,250,000.00 to alike in that each promises to answer for the debt or default of another, the
guarantee the unliquidated portion of the advance payment payable to J’Marc; surety assumes liability as a regular party to the undertaking and hence its
and (2) a performance bond likewise issued by Prudential of P7,400,000.00 to obligation is primary.
guarantee J’Marc’s faithful performance of its obligations under the construction  While a contract of surety is secondary only to a valid principal obligation,
agreement. the surety’s liability to the creditor is said to be direct, primary, and absolute.
 Equinox and J’Marc signed the contract and related documents. Under the terms In other words, the surety is directly and equally bound with the principal.
of the contract, J’Marc would supply all the labor, materials, tools, equipment, Thus, Prudential is barred from disclaiming that its liability with J’Marc is
and supervision required to complete the project. However, J’Marc did not solidary.
adhere to the terms of the contract. It failed to submit monthly progress billings,
kept asking for cash advances (both for the work and the payment of the RULING: WHEREFORE, we DENY the petition. The assailed Decision of the Court of
laborers) despite numerous delays, and basically weren’t able to finish the Appeals (Third Division) dated November 23, 2001 in CA-G.R. SP No. 56491 and CA-
construction work on time. Due to this, Equinox terminated its contract with G.R. SP No. 57355 is AFFIRMED in toto. Costs against petitioner.
J’Marc and took over the project. On the same date, Equinox sent Prudential a
letter claiming relief from J’Marc’s violations of the contract.
 After the construction finished, Equinox and J’Marc conducted an inventory and
also measured the the amount of work actually accomplished. It was found that
there was an overpayment to J’Marc of P3.97 million and that Equinox paid the
laborers, suppliers and subcontractors of J’Marc in the total amount of P664k.
 Equinox filed a complaint with the for sum of money and damages against J’Marc
and Prudential, asking for the reimbursement of the advances and the
unliquidated portion of the downpayment. Equinox also prayed that Prudential
be ordered to pay its liability under the bonds.
 Prudential filed a motion to dismiss the complaint on the ground that pursuant
to Executive Order No. 1008, it is the Construction Industry Arbitration