Cellpage International Corporation v. The Solid Guaranty

Summary

Cellpage sold cellcards worth P7,002,600 to JPMC under a credit arrangement secured by surety bonds from Solid Guaranty totaling P7,000,000. When JPMC's payment checks were dishonored and it failed to pay, Cellpage sued both companies. The RTC held both solidarily liable, but the CA dismissed the case against Solid Guaranty, ruling that the absence of a written principal contract precluded demands on the surety. The Supreme Court reversed, distinguishing the First Lepanto doctrine and holding that surety liability depends on the specific terms of the surety contract, not a blanket requirement for written principal agreements. The Court emphasized that oral contracts meeting validity requirements can be guaranteed by surety bonds, and that surety contract terms should be interpreted against the drafter. This ruling clarifies that sureties cannot escape liability through technical requirements not explicitly stated in their bonds, reinforcing the principle that surety liability is joint, several, and direct with the principal debtor.