Hospicio de San Jose v. The Fidelity

Summary

The Supreme Court affirmed the lower court's judgment ordering Fidelity and Surety Company to pay P12,800 to Hospicio de San Jose under a construction contract surety bond. Contractor Romulo Machetti failed to complete building work per specifications and was later declared insolvent. The Court held that: (1) a 25-day extension granted without the surety's consent did not discharge the surety's liability since the guarantee covered work quality per specifications, not completion timeframes; (2) the surety waived its defense regarding premature payments by failing to plead it as a special defense; and (3) the action was not time-barred as the plaintiff had timely filed a cross-complaint and the Court had reserved the right to pursue the surety after exhausting remedies against the principal obligor. The decision establishes important precedents regarding surety obligations, proper pleading of defenses, and the scope of surety liability under construction contracts.