- Petitioner
- The Mercantile Insurance Co.
- Respondent
- Dmci-Laing Construction
- Citation
- G.R. No. 205007
- Court
- Supreme Court
- Division
- Second Division
- Ponente
- Caguioa, J.
- Decided
- September 16, 2019
Summary
This Supreme Court case involves a performance bond dispute in a construction project. DLCI contracted with Altech as subcontractor for glazed aluminum installation at Rockwell Center, with Mercantile providing a P90.4 million performance bond. When Altech consistently failed to meet deadlines and quality standards, DLCI terminated the contract and demanded payment under the performance bond. The CIAC dismissed DLCI's claim for untimely filing and invalid demand. The Court of Appeals reversed, finding Mercantile liable as surety. The Supreme Court affirmed with modifications, emphasizing that sureties have immediate, primary liability upon demand regardless of the principal's ability to perform. The Court distinguished suretyship from guaranty, ruling that Article 2080's release provisions apply only to guarantors. Mercantile was ordered to pay P31.6 million plus interest and litigation expenses for acting in bad faith by refusing a plainly valid demand under the performance bond terms.