Manila Surety & Fidelity Co. v. Batu Construction

Summary

Manila Surety & Fidelity Company posted a surety bond for Batu Construction's government bridge project. When the construction contract was cancelled and workers sued for unpaid wages, the surety company sought security from the principal debtors under their indemnity agreement. The trial court dismissed the complaint, ruling that Article 2071 of the Civil Code (allowing guarantors to demand security when sued) applied only to guarantors, not sureties. The Supreme Court reversed, holding that sureties can also invoke Article 2071 since they assume greater liability than guarantors. The Court found the surety's cause of action valid under paragraph 1 of Article 2071 because it was sued in connection with the bond obligation. The case was remanded to determine the appropriate security amount, establishing important precedent on surety rights under Philippine civil law.