ACCFA v.

Alpha Insurance Facts: According to the allegations of the complaint, in order to guarantee the Asingan Farmers' Cooperative Marketing Association, Inc. (FACOMA) against loss on account of personal dishonest!, amounting to larcen! or estafa of its "ecretar!#$reasurer, %icardo A. &adines, the appellee, Alpha Insurance ' "uret! Compan! had issued, on () Fe*ruar! (+,-, its *ond, .o. /#FI0#(,#,-, for the sum of Five $housand /esos (/,,111.11) 2ith said %icardo &adines as principal and the appellee as solidar! suret!. On the same date, the Asingan FACOMA assigned its rights to the appellant, Agricultural Credit Cooperative and Financing Administration (ACCFA for short), 2ith approval of the principal and the suret!. 0uring the effectivit! of the *ond, %icardo &adines converted and misappropriated, to his personal *enefit, some /((,,(3.44 of the FACOMA funds, of 2hich /5,316.33 *elonged to the ACCFA. 7pon discover! of the loss, ACCFA immediatel! notified in 2riting the surve! compan! on (1 Octo*er (+,-, and presented the proof of loss 2ithin the period fi8ed in the *ond9 *ut despite repeated demands the suret! compan! refused and failed to pa!. :hereupon, ACCFA filed suit against appellee on 31 Ma! (+51. Issue: :hether or not the provision of a fidelit! *ond that no action shall *e had or maintained thereon unless commenced 2ithin one !ear from the making of a claim for the loss upon 2hich the action is *ased, is valid or void, in vie2 of "ection 5(#A of the Insurance Act invalidating stipulations limiting the time for commencing an action thereon to less than one !ear from the time the cause of action accrues. Held: "ince ;cause of action< re=uires as essential elements not onl! a legal right of the plaintiff and a correlated o* ligation of the defendant *ut also ;an act or omission of the defendant in violation of said legal right,< the cause of action does not accrue until the party obligated refuses, expressly or impliedly, to comply with its duty. A fidelit! *ond is, in effect, in the nature of a contract of insurance against loss from misconduct and is governed *! the same principle of interpretation. Conse=uentl!, the condition of the *ond limiting the period for *ringing action thereon, is su*>ect to the provisions of ?"ection 53@. $he !ear for instituting action in court must *e reckoned, therefore, from the time of appelleeAs refusal to compl! 2ith the *ond. In so far, therefore, as condition eight of the *ond re=uires action to *e filed 2ithin one !ear from the filing of t he claim of loss, such stipulation contradicts pu*lic polic! e8pressed in ?"ection 53@. Condition eight of the *ond, therefore, is null and void, and the appellant is not *ound to compl! 2ith its provisions. Action must *e *rought 2ithin the statutor! period of limitation ((1 !ears) for 2ritten contracts. :BC%CFO%C, the appealed order granting the motion to dismiss is reversed and set aside, and the records are remanded to the Court of First Instance, 2ith instructions to re=uire defendant to ans2er and thereafter proceed in conformit! 2ith the la2 and the %ules of Court. Costs against appellee. "o ordered.