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    This document summarizes a court case between Trade and Investment Development Corporation of the Philippines (TIDCORP) and several respondents. TIDCORP issued letters of guarantee to secure loans obtained by Asia Paces Corporation (ASPAC) from foreign banks. When ASPAC defaulted, TIDCORP had to pay on the guarantees. TIDCORP then demanded payment from respondent surety companies under surety bonds, but they refused, arguing the bonds were voided when the maturity dates on the guarantees were extended without their consent in a restructuring agreement between TIDCORP and the banks. The court had to determine if the surety companies' obligations under the bonds were extinguished due to the extension of the guaranteed obligations

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    This document summarizes a court case between Trade and Investment Development Corporation of the Philippines (TIDCORP) and several respondents. TIDCORP issued letters of guarantee to secure loans obtained by Asia Paces Corporation (ASPAC) from foreign banks. When ASPAC defaulted, TIDCORP had to pay on the guarantees. TIDCORP then demanded payment from respondent surety companies under surety bonds, but they refused, arguing the bonds were voided when the maturity dates on the guarantees were extended without their consent in a restructuring agreement between TIDCORP and the banks. The court had to determine if the surety companies' obligations under the bonds were extinguished due to the extension of the guaranteed obligations

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    37 views3 pages

    G12

    Uploaded by

    liks5poyongan
    This document summarizes a court case between Trade and Investment Development Corporation of the Philippines (TIDCORP) and several respondents. TIDCORP issued letters of guarantee to secure loans obtained by Asia Paces Corporation (ASPAC) from foreign banks. When ASPAC defaulted, TIDCORP had to pay on the guarantees. TIDCORP then demanded payment from respondent surety companies under surety bonds, but they refused, arguing the bonds were voided when the maturity dates on the guarantees were extended without their consent in a restructuring agreement between TIDCORP and the banks. The court had to determine if the surety companies' obligations under the bonds were extinguished due to the extension of the guaranteed obligations

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    of 3

    G.R. No.

    187403               February 12, 2014

    TRADE AND INVESTMENT DEVELOPMENT CORPORATION OF THE PHILIPPINES (Formerly PHILIPPINE


    EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION.), Petitioner,
    vs.
    ASIA PACES CORPORATION, PACES INDUSTRIAL CORPORATION, NICOLAS C. BALDERRAMA, SIDDCOR
    INSURANCE CORPORATION (now MEGA PACIFIC INSURANCE CORPORATION), PHILIPPINE PHOENIX
    SURETY AND INSURANCE, INC., PARAMOUNT INSURANCE CORPORATION,* AND FORTUNE LIFE AND
    GENERAL INSURANCE COMPANY, Respondents.

    DECISION

    PERLAS-BERNABE, J.:

    Assailed in this petition for review on certiorari1 are the Decision2 dated April 30, 2008 and
    Resolution3 dated March 27, 2009 of the Court of Appeals (CA) in CA-G.R. CV No. 86558 which affirmed
    the Decision4 dated April 29, 2005 of the Regional Trial Court of Makati, Branch 132 (RTC) in Civil Case
    No. 95-1812. The CA upheld the RTC’s finding that the liabilities of Paramount Insurance Corporation
    (Paramount), and respondents Philippine Phoenix Surety and Insurance, Inc. (Phoenix), Mega Pacific
    Insurance Corporation5 (Mega Pacific), and Fortune Life and General Insurance Company (Fortune) on
    their respective counter-surety bonds have been extinguished due to the extension of the principal
    obligations these bonds covered, to which said respondents did not give their consent.

    The Facts

    On January 19, 1981, respondents Asia Paces Corporation (ASPAC) and Paces Industrial Corporation
    (PICO) entered into a sub-contracting agreement, denominated as "200 KV Transmission Lines Contract
    No. 20-/80-II Civil Works & Electrical Erection," with the Electrical Projects Company of Libya (ELPCO), as
    main contractor, for the construction and erection of a double circuit bundle phase conductor
    transmission line in the country of Libya. To finance its working capital requirements, ASPAC obtained
    loans from foreign banks Banque Indosuez and PCI Capital (Hong Kong) Limited (PCI Capital) which, upon
    the latter’s request, were secured by several Letters of Guarantee issued by petitioner Trade and
    Investment Development Corporation of the Philippines (TIDCORP),6 then Philippine Export and Foreign
    Loan Guarantee Corp., a government owned and controlled corporation created for the primary
    purpose of, among others, "guarantee[ing], with the prior concurrence of the Monetary Board, subject
    to the rules and regulations that the Monetary Board may prescribe, approved foreign loans, in whole or
    in part, granted to any entity, enterprise or corporation organized or licensed to engage in business in
    the Philippines."7 Under the Letters of Guarantee, TIDCORP irrevocably and unconditionally guaranteed
    full payment of ASPAC’s loan obligations to Banque Indosuez and PCI Capital in the event of default by
    the latter.8 The denominations of these letters, including the loan agreements secured by each, are
    detailed as follows:9

    LETTER OF GUARANTEE LOAN AGREEMENT SECURED CREDITOR


    Letter of Guarantee No. 82-446 F Loan Agreement dated March 9, 1982 Banque
    dated March 11, 1982 (with an extension dated March 25, Indosuez
    (LG No. 82-446 F) 1983), in the amount of US$250,000.00

    Letter of Guarantee No. 82-498 F Loan Agreement dated June 10, 1982, in PCI
    dated June 10, 1982 the amount of US$250,000.00 Capital
    (LG No. 82-498 F)

    Letter of Guarantee No. 82-548 F Loan Agreement dated October 5, 1982, PCI
    dated October 5, 1982 in the amount of US$2,000,000.00 Capital
    (LG No. 82-548 F)

    As a condition precedent to the issuance by TIDCORP of the Letters of Guarantee, ASPAC, PICO, and
    ASPAC’s President, respondent Nicolas C. Balderrama (Balderrama) had to execute several Deeds of
    Undertaking,10 binding themselves to jointly and severally pay TIDCORP for whatever damages or
    liabilities it may incur under the aforementioned letters. In the same light, ASPAC, as principal debtor,
    entered into surety agreements (Surety Bonds) with Paramount, Phoenix, Mega Pacific and Fortune
    (bonding companies), as sureties, also holding themselves solidarily liable to TIDCORP, as creditor, for
    whatever damages or liabilities the latter may incur under the Letters of Guarantee.11 The details of said
    bonds, including their respective coverage amounts and expiration dates, among others, are as follows:

    SURETY BOND LETTER OF COVERAGE BONDING FINAL


    GUARANTEE AMOUNT12 COMPANY/ EXPIRATION
    COVERED SURETY DATE

    Surety Bond No.


    LG No. 82-446 F ₱2,752,000.00 Paramount March 5, 198614
    G(16)0194313

    Surety Bond No.


    ₱1,845,000.00 Paramount June 4, 198616
    G(16)0190615
    LG No. 82-498 F
    Surety Bond No. November 21,
    ₱1,849,000.00 Fortune
    G(16)1549517 198518

    Surety Bond No. September 28,


    ₱11,970,000.00 Phoenix
    G(16)0190319 198520
    LG No. 82-548 F
    Surety Bond No. Mega September 28,
    ₱5,030,000.00
    G(16)0149721 Pacific 198522

    ASPAC eventually defaulted on its loan obligations to Banque Indosuez and PCI Capital, prompting them
    to demand payment from TIDCORP under the Letters of Guarantee. The demand letter of Banque
    Indosuez was sent to TIDCORP on March 5, 1984,23 while that of PCI Capital was sent on February 21,
    1985.24 In turn, TIDCORP demanded payment from Paramount,25 Phoenix,26 Mega Pacific,27 and
    Fortune28 under the Surety Bonds. TIDCORP’s demand letters to the bonding companies were sent on
    May 28, 1985, or before the final expiration dates of all the Surety Bonds, but to no avail.29

    Taking into account the moratorium request30 issued by the Minister of Finance of the Republic of the
    Philippines (whereby members of the international banking community were requested to grant
    government financial institutions,31 such as TIDCORP, among others, a 90-day roll over from their foreign
    debts beginning October 17, 1983), TIDCORP and its various creditor banks, such as Banque Indosuez
    and PCI Capital, forged a Restructuring Agreement32 on April 16, 1986, extending the maturity dates of
    the Letters of Guarantee.33 The bonding companies were not privy to the Restructuring Agreement and,
    hence, did not give their consent to the payment extensions granted by Banque Indosuez and PCI
    Capital, among others, in favor of TIDCORP. Nevertheless, following new payment schedules,34 TIDCORP
    fully settled its obligations under the Letters of Guarantee to both Banque Indosuez and PCI Capital on
    December 1, 1992, and April 19 and June 4, 1991, respectively.35 Seeking payment for the damages and
    liabilities it had incurred under the Letters of Guarantee and with its previous demands therefor left
    unheeded, TIIDCORP filed a collection case36 against: (a) ASPAC, PICO, and Balderrama on account of
    their obligations under the deeds of undertaking; and (b) the bonding companies on account of their
    obligations under the Surety Bonds.

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