phil realty
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[G. R. No. 165548, June 13, 2011]
PHILIPPINE REALTY AND HOLDINGS CORPORATION, PETITIONER, VS. LEY CONSTRUCTION AND DEVELOPMENT CORPORATION, RESPONDENT.
[G. R. No. 167879]
LEY CONSTRUCTION AND DEVELOPMENT CORPORATION, PETITIONER, VS. PHILIPPINE REALTY AND HOLDINGS CORPORATION, RESPONDENT.
D E C I S I O N
SERENO, J.:
These are consolidated petitions for review under Rule 45 of the New Rules of Civil Procedure filed by both parties from a Court of Appeals (CA) Decision in CA-GR No. 71293 dated 30 September 2004. This Decision reversed a Decision of the Regional Trial Court (RTC), National Capital Judicial Region (NCJR), Branch 135 in Makati City dated 31 January 2001 in Civil Case No. 96-160.
The foregoing are the facts culled from the record, and from the findings of the CA and the RTC.
Ley Construction and Development Corporation (LCDC) was the project contractor for the construction of several buildings for Philippine Realty & Holdings Corporation (PRHC), the project owner. Engineer Dennis Abcede (Abcede) was the project construction manager of PRHC, while Joselito Santos (Santos) was its general manager and vice-president for operations.
Sometime between April 1988 and October 1989, the two corporations entered into four major construction projects, as evidenced by four duly notarized "construction agreements." LCDC committed itself to the construction of the buildings needed by PRHC, which in turn committed itself to pay the contract price agreed upon. These were the four construction projects the parties entered into involving a Project 1, Project 2, Project 3 (all of which involve the Alexandra buildings) and a Tektite Building:
Construction Agreement dated 25 April 1988 - Alexandra-Cluster C - involving the construction of two units of seven-storey buildings with basement at a contract price of P 68,000,000 (Project 1);
Construction Agreement dated 25 July 1988 - Alexandra-Cluster B - involving the construction of an eleven-storey twin-tower building with a common basement at a contract price of P 140,500,000 (Project 2);
Construction Agreement dated 23 November 1988 - Alexandra-Cluster E - involving the construction of an eleven-storey twin-tower building with common basement at a contract price of P 140,500,000 (Project 3); and
Construction Agreement dated 10 October 1989 - Tektite Towers Phase I - involving the construction of Tektite Tower Building I at Tektite Road at a contract price of P 729,138,964 (Tektite Building).
The agreement covering the construction of the Tektite Building was signed by a Mr. Campos under the words "Phil. Realty & Holdings Corp." and by Santos as a witness. Manuel Ley, the president of LCDC, signed under the words "Ley Const. & Dev. Corp."
The terms embodied in the afore-listed construction agreements were almost identical. Each agreement provided for a fixed price to be paid by PRHC for every project.
All the aforementioned agreements contain the following provisions:ARTICLE IV - CONTRACT PRICEThe Contract Price shall not be subject to escalation except due to work addition, (approved by the OWNER and the ARCHITECT) and to official increase in minimum wage as covered by the Labor Adjustment Clause below. All costs and expenses over and above the Contract Price except as provided in Article V hereof shall be for the account of the CONTRACTOR. It is understood that there shall be no escalation on the price of materials. However, should there be any increase in minimum daily wage level, the adjustment on labor cost only shall be considered based on conditions as stipulated below.
ARTICLE VII - TIME OF COMPLETIONShould the work be delayed by any act or omission of the OWNER or any other person employed by or contracted by the OWNER in the project, including days in the delivery or (sic) materials furnished by the OWNER or others, or by any appreciable additions or alterations in the work ordered by the OWNER or the ARCHITECT, under Article V or by force majeure, war, rebellion, strikes, epidemics, fires, riots, or acts of the civil or military authorities, the CONTRACTOR shall be granted time extension.
Sometime after the execution of these agreements, two more were entered into by the parties:
Letter-agreement dated 24 August 1989 - Project 3 - for the construction of the drivers' quarters in Project 3; and
Agreement dated 7 January 1993 - Tektite Towers - for the concreting works on "GL, 5, 9, & A" (ground floor to the 5th floor) of the Tektite Towers.
Santos signed the letter-agreement on the construction of the drivers' quarters in Project 3, [1] while both he and Abcede signed the letter-agreement on the concreting works on GL, 5, 9, and A, and also of Project 3. [2]
In order to jump-start the construction operations, LCDC was required to submit a performance bond as provided for in the construction agreements. As stated in these agreements, as soon as PRHC received the performance bond, it would deliver its initial payment to LCDC. The remaining balance was to be paid in monthly progress payments based on actual work completed. In practice, these monthly progress payments were used by LCDC to purchase the materials needed to continue the construction of the remaining parts of the building.
In the course of the construction of the Tektite Building, it became evident to both parties that LCDC would not be able to finish the project within the agreed period. Thus, through its president, LCDC met with Abcede to discuss the cause of the delay. LCDC explained that the unanticipated delay in construction was due mainly to the sudden, unexpected hike in the prices of cement and other construction materials. It claimed that, without a corresponding increase in the fixed prices found in the agreements, it would be impossible for it to finish the construction of the Tektite Building. In their analysis of the project plans for the building and of all the external factors affecting the completion of the project, the parties discovered that even if LCDC were able to collect the entire balance from the contract, the collected amount would still be insufficient to purchase all the materials needed to complete the construction of the building.
Both parties agreed that their foremost objective should be to ensure that the Tektite Building project would be completed. To achieve this goal, they entered into another agreement. Abcede asked LCDC to advance the amount necessary to complete construction. Its president acceded, on the absolute condition that it be allowed to escalate the contract price. It wanted PRHC to allow the escalation and to disregard the prohibition contained in Article VII of the agreements. Abcede replied that he would take this matter up with the board of directors of PRHC.
The board of directors turned down the request for an escalation agreement. [3] Neither PRHC nor Abcede gave notice to LCDC of the alleged denial of the proposal. However, on 9 August 1991 Abcede sent a formal letter to LCDC, asking for its conformity, to the effect that should it infuse P36 million into the project, a contract price escalation for the same amount would be granted in its favor by PRHC. [4]
This letter was signed by Abcede above the title "Construction Manager," as well as by LCDC. [5] A plain reading of the letter-agreement will reveal that the blank above the words "PHIL. REALTY & HOLDINGS CORP." was never signed, [6] viz:
Very truly yours,(Signed)DENNIS A. ABCEDEConstruction ManagerC O N F O R M E : (Signed) LEY CONST. & DEV. CORP.APPROVED & ACCEPTED :______________________________PHIL. REALTY & HOLDINGS CORP.
Notwithstanding the absence of a signature above PRHC's name, LCDC proceeded with the construction of the Tektite Building, expending the entire amount necessary to complete the project. From August to December 1991, it infused amounts totaling P 38,248,463.92. These amounts were not deposited into the joint account of LCDC and PRHC, but paid directly to the suppliers upon the instruction of Santos. [7]
LCDC religiously submitted to PRHC monthly reports [8] that contained the amounts of infusion it made from the period August 1991 to December 1991. These monthly reports all had the following heading:MR. JOSELITO L. SANTOSVICE PRESIDENT OPERATIONPHIL. REALTY & HOLDINGS CORP.4TH Floor Quad Alpha Centrum Bldg.125 Pioneer St., Mandaluyong, M.M.T H R U : D.A. ABCEDE & ASSOCIATES Construction ManagersSUBJECT : P 36.0M INFUSION-TEKTITE TOWERS PROJECTFrom these monthly reports, it can be gleaned that the following were the cash infusions made by LCDC:
Month Amount Date of monthly report
August 1991 PhP 6,724,632.26 15 October 1991 [9]
September 1991 PhP 7,326,230.69 7 October 1991 [10]
October 1991 PhP 7,756,846.88 7 November 1991 [11]
November 1991 PhP 8,553,313.50 7 December 1991 [12]
December 1991 PhP 7,887,440.50 9 January 1992 [13]
PhP 38,248,463.92
PRHC never replied to any of these monthly reports.
On 20 January 1992, LCDC wrote a letter addressed to Santos stating that it had already complied with its commitment as of 31 December 1991 and was requesting the release of P 2,248,463.92. It attached a 16 January 1992 letter written by D.A. Abcede & Associates, informing PRHC of the total cash infusion made by LCDC to the project, to wit:
in compliance with the commitment of Ley Construction and Dev't Corp. to infuse P36.00M for the above subject project x x x
x x x we would like to present the total cash infusion by LCDC for the period covering the month of August, 1991 to December 1991 broken down as follows:T O T A L: P 38,248,463.92PRHC never replied to this letter.
In another letter dated 7 September 1992, there was a reconciliation of accounts between the two corporations with respect to the balances due for Projects 1, 2, and 3. The reconciliation of accounts resulted in PRHC owing LCDC the sum of P 20,862,546.41, broken down as follows:
Project 1 P 1,783,046.72
Project 2 P 13,550,003.93
Project 3 P 5,529,495.76
P 20,862,546.41
In a letter dated 8 September 1992, [14] when 96.43% of Tektite Building had been completed, LCDC requested the release of the P 36 million escalation price. PRHC did not reply, but after the construction of the building was completed, it conveyed its decision in a letter on 7 December 1992. [15] That decision was to set off, in the form of liquidated damages, its claim to the supposed liability of LCDC, to wit:
. . . . . . . . .
In this regard, please be advised that per owner's decision; your claim of P36,000,00.00 adjustment will be applied to the liquidated damages for concreting works computed in the amount of Thirty Nine Million Three Hundred Twenty Six Thousand Eight Hundred Seventeen & 15/100 (P39,326,817.15) as shown in the attached sheet.
Further, the net difference P 3,326,817.15 will also be considered waived as additional consideration.
. . . . . . . . .
In a letter dated 18 January 1993, LCDC, through counsel, demanded payment of the agreed escalation price of P 36 million. In its reply on 16 February 1993, PRHC suddenly denied any liability for the escalation price. In the same letter, it claimed that LCDC had incurred 111 days of delay in the construction of the Tektite Building and demanded that the latter pay P 39,326,817.15 as liquidated damages. This claim was set forth in PRHC's earlier 7 December 1992 letter.
LCDC countered that there were many times when its requests for time extension - although due to reasonable causes sanctioned by the construction agreement such as power failures, water supply interruption, and scarcity of construction materials - were unreasonably reduced to shorter periods by PRHC. In its letter dated 9 December 1992, LCDC claimed that in a period of over two years, out of the 618 days of extension it requested, only 256 days - or not even half the number of days originally requested - were considered. It further claimed that its president inquired from Abcede and Santos why its requests for extension of time were not granted in full. The two, however, assured him that LCDC would not be penalized with damages for even a single day of delay, because the fact that it was working hard on the Tektite Building project was known to PRHC. [16]
Thereafter, in a letter dated 18 January 1993, LCDC demanded payment of the agreed total balance for Projects 1, 2, and 3. Through a reply letter dated 16 February 1993, PRHC denied any liability. During the course of the proceedings, both parties conducted another reconciliation of their respective records. The reconciliation showed the following balances in favor of LCDC:
Project 1 P 1,703,955.07
Project 2 P 13,251,152.61
Project 3 P 5,529,495.76
Total: P 20,484,603.44
In addition to the agreed-upon outstanding balance in favor of LCDC, the latter claimed another outstanding balance of P 232,367.96 in its favor for the construction of the drivers' quarters in Project 3.
It also further claimed the amount of P 7,112,738.82, representing the balance for the concreting works from the ground floor to the fifth floor of the Tektite Building.
Seeking to recover all the above-mentioned amounts, LCDC filed a Complaint with Application for the Issuance of a Writ of Preliminary Attachment on 2 February 1996 before the RTC in Makati City docketed as Civil Case No. 96-160:
WHEREFORE, it is respectfully prayed that:
1.Immediately upon the filing of this Complaint, an order of preliminary attachment be issued over defendant Philrealty's properties as security for any judgment which plaintiff may recover against said defendant; and2.After trial, judgment be rendered as follows:2.1.On the first, second and third alternative causes of action,(a)Ordering defendant Philrealty to pay plaintiff actual damages in the amount of P36,000,00.00 with legal interest thereon from the filing of this Complaint until fully paid;(b)In the alternative, ordering defendants Abcede and Santos to jointly and severally, in the event that they acted without necessary authority, to pay plaintiff actual damages in the amount of P36,000,00.00 with legal interest thereon from the filing of this Complaint until fully paid; and(c)Ordering defendant Philrealty or defendants Abcede and Santos to pay plaintiff exemplary damages in the amount to be determined by the Honorable Court but not less than P5,000,000.002.2.On the fourth cause of action, ordering defendant Philrealty to pay plaintiff(a)Actual damages in the amount of P7,112,738.82 with legal interest thereon from the filing of this Complaint until fully paid; and(b)Exemplary damages in the amount to be determined by the Honorable Court but not less than P1,000,000.002.3.On the fifth cause of action, ordering defendant Philrealty to pay plaintiff(a)Actual damages in the amount of P20,862,546.41 with legal interest thereon from the filing of this Complaint until fully paid; and(b)Exemplary damages in an amount to be determined by the Honorable Court but not less than P5,000,000.00.2.4.On the sixth cause of action, ordering defendant Philrealty to pay plaintiff(a)Actual damages in the amount of P232,367.96 with legal interest thereon from the filing of this Complaint until fully paid; and(b)Exemplary damages in the amount to be determined by the Honorable Court but not less than P100,000.002.5.On the seventh cause of action, ordering defendant Philrealty and/or defendants Abcede and Santos to pay plaintiff attorney's fees in the amount of P750,000.00 and expenses of litigation in the amount of P50,000.00, plus costs.Plaintiff prays for such other just and equitable reliefs as may be warranted by the circumstances.
On 23 July 1999, a joint Stipulation of Facts [17] was filed by the parties. In the said stipulation, they reconciled their respective claims on the payments made and the balances due for the construction of the Tektite Building project, Project 1, and Project 2. The reconciliation shows that the following amounts are due and/or overpaid:
Due to LCDC Overpaid to LCDC
Tektite Building P4,646,947.35
Project 1 P1,703,955.07
Project 2 P3,251,152.61
P14,955,107.68 P4,646,947.35
Both parties agreed that the only remaining issues to be resolved by the court, with respect to the Tektite Building project and Projects 1 to 3, were as follows:
a)The validity of Ley Construction's claim that Philrealty had granted the former a contract price escalation for Tektite Tower I in the amount of P36,000,000.00b)The validity of the claim of Philrealty that the following amounts should be charged to Ley Construction:
Payments/Advances without LCDC's conformity and recommendation of the Construction Manager, D.A. Abcede & Associates that subject items are LCDC's account:a. Esicor, Inc. - waterproofing works Cluster B P1,121,000.00b. Ideal Marketing, Inc. - waterproofing works at Cluster B, Quadrant 2 P885,000.00P2,006,000.00c)The claim of Philrealty for liquidated damages for delay in completion of the construction as follows:d)Tektite Tower I-P39,326,817.15Alexandra Cluster B -12,785,000.00Alexandra Cluster C -1,100,000.00ande)The claim of Ley Construction for additional sum of P2,248,463.92 which it allegedly infused for the Tektite Tower I project over and above the original P36,000,000.00 it had allegedly bound itself to infuse.[18]
On 31 January 2001, the RTC promulgated its Decision. LCDC filed a Motion for Partial Reconsideration, which was granted.
It must be noted that in the Stipulation of Facts, the parties had jointly agreed that the P7,112,738.82 unpaid account in the concreting of Tektite Building would no longer be included in the list of claims submitted to the RTC for decision. Nonetheless, this amount was still included as an award in the trial court's 7 May 2001 amended Decision, the dispositive portion of which provides:
WHEREFORE, premises considered, judgment is hereby rendered:Dismissing the counter-claim of defendant DENNIS ABCEDE and the cross-claim of defendant JOSELITO SANTOS; and
Ordering defendant PHILIPPINE REALTY AND HOLDING CORPORATION to pay plaintiff LEY CONSTRUCTION AND DEVELOPMENT CORPORATION:
P33,601,316.17, for the Tektite Tower I Project with legal interest thereon from date of the filing of the complaint until fully paid;
P13,251,152.61 for Alexandra Cluster B with legal interest thereon from date of the filing of the complaint until fully paid;
P1,703,955.07 for Alexandra Cluster C with legal interest thereon from date of the filing of the complaint until fully paid;
P7,112,738.82 in actual damages for the concreting works of Tektite Tower I, with legal interest thereon from the date of the filing of the complaint until fully paid;
P5,529,495.76 in actual damages for the construction of Alexandra Cluster E, with legal interest thereon from the date of the filing of the complaint until fully paid;
P232,367.96 in actual damages for the construction of the driver's quarters of Alexandra Cluster E, with legal interest thereon from the date of the filing of the complaint until fully paid;
P750,000.00 for attorney's fees and expenses of litigation; and
Costs.
SO ORDERED. [19]
PRHC filed a Notice of Appeal on 14 June 2001. The Court of Appeals, in CA-G.R. CV No. 71293, [20] reversed the lower court's amended Decision on 30 September 2004 and ruled thus:
WHEREFORE, premises considered, the assailed January 31, 2001 decision and the May 7, 2001 amended decision are hereby REVERSED and SET ASIDE and a new one is entered:
I. FINDING plaintiff-appellee LCDC LIABLE to defendant-appellant PRHC in the amount of Sixty million Four Hundred Sixty Four (Thousand) Seven Hundred Sixty Four 90/100 (P60,464,764.90) PESOS detailed as follows:
[1] P39,326,817.15 liquidated damages pursuant to contract for delay incurred by plaintiff-appellee LCDC in the construction of Tektite Tower Phase I, the length of delay having been signed and confirmed by LCDC;
[2] P12,785,000.00 liquidated damages pursuant to contract for delay incurred by plaintiff-appellee LCDC in the construction of Alexandra Cluster B, the length of delay having been signed and confirmed by LCDC;
[3] P1,700,000.00 liquidated damages pursuant to contract for delay incurred by plaintiff appellee LCDC in the construction of Alexandra Cluster C, the length of delay having been confirmed by LCDC;
[4] P4,646,947.75 overpayment by defendant-appellant PRHC to plaintiff-appellee LCDC for the Tektite Tower Phase I Project;
[5] P1,121,000.00 expenses incurred by defendant-appellant PRHC for corrective works to redo/repair allegedly defective Waterproofing construction work or plaintiff-appellee LCDC in the Alexander Cluster B Project which was paid by defendant-appellant PRHC to contractor Escritor, Inc.;
[6] P885,000.00 expenses incurred by defendant-appellant PRHC for corrective works to redo/repair allegedly defective Waterproofing construction work of plaintiff-appellee LCDC at the Alexandra Cluster B Quadrant in the Alexander Cluster B Project which was paid by defendant-appellant PRHC to contractor Ideal Marketing Inc., and
II. FINDING defendant-appellant PRHC LIABLE to plaintiff-appellee LCDC in the amount of Fifty Six million Seven Hundred Sixteen Thousand Nine Hundred Seventy One 40/100 (P56,716,971.40) detailed as follows:
[1] P36,000,000.00 as acknowledged and agreed to by PHRC as a loan by LCDC, reimbursable when the Tektite Tower I project was 95% completed, but this was not classified by this Court as an escalation for increase in price of materials because an escalation for price increase of cost of materials is expressly prohibited by 10 October 1989 original contract;
[2] All expenditures for the projects are at the risk of the contractor LCDC who is to be paid, according to the contract, a fixed contract price so that there is no such thing as overinfusion of expenses by plaintiff-appellee LCDC guaranteed under the contract that it would pay all costs of materials irregardless (sic) of any increase in costs;
[3] P13,251,152.61 balance yet unpaid by defendant-appellant in the Alexandra Cluster B Project;
[4] P1,703,955.07 balance yet unpaid by defendant-appellant in the Alexander Cluster C Project;
[5] Defendant-appellant PRHC is hereby held not liable for P750,000.00 attorney's fees;
[6] Plaintiff-appellee LCDC is not entitled to claim P7,112,738.82 for concreting works for Tektite Towers Phase I which cause of action had already been dismissed by the parties in the 23 July 1999 Joint Stipulation of Facts that the contract price for the October 10, 1989 Construction Agreement had been fully paid;
[7] P5,529,495.76 balance yet unpaid in the Alexandra Cluster E Project;
[8] P232,367.96 balance yet unpaid for construction of the drivers' quarters at the Alexandra Cluster E.
The respective liabilities of the parties as set forth above are hereby SET OFF against each other and plaintiff-appellee LCDC is hereby DIRECTED to pay defendant-appellant PRHC the net amount due of Three million Seven Hundred Forty Seven Thousand Seven Hundred Ninety Three 50/100 (P3,747,793.50) PESOS with legal interest from date of filing of complaint.
SO ORDERED.
PRHC came directly to this Court and filed a petition for review on certiorari docketed as SC-G.R. No. 165548 to assail in part the appellate court's Decision. LCDC, on the other hand, filed on 25 October 2004 a Motion for Reconsideration with the Court of Appeals. In its Resolution dated 12 April 2005, the appellate court denied the motion. LCDC then filed its own Petition for Review on certiorari, which was docketed as SC-G.R. No. 167879.
In a Resolution dated 6 August 2008, this Court consolidated G.R. Nos. 165548 and 16789.
PRHC, in its Petition for Review [21] in G.R. No. 165548, submits the following issues for resolution:
Whether the finding and ruling of the Court of Appeals that the letter dated 07 December 1992 was a counter-offer on the part of LCDC and a confirmation to treat the P36,000,000.00 as a loan deductible from liquidated damages is contrary to the allegations in the pleadings and the evidence on record.
Whether the finding and ruling of the Court of Appeals that LCDC is liable to PRHC in the amount of P5,529,495.76 representing the balance of the contract price for the construction of Alexandra Cluster E Project is contrary to the Stipulation of Facts jointly submitted by the parties to the Trial Court.
Whether the finding and ruling of the Court of Appeals that LCDC is liable to PRHC in the amount of P232,367.96 representing the cost of the construction of the driver's quarters at Alexandra Cluster E Project is contrary to the Stipulation of Facts jointly submitted by the parties to the trial court. [22]
For its part, LCDC submits the following grounds in support of its Petition for Review [23] docketed as G.R. No. 167879:
The Court of Appeals seriously erred in ruling that there is no P36 million escalation agreement between LCDC and PRHC.
. . . . . . . . .
The Court of Appeals seriously erred in ruling that PHRC is not obliged to pay LCDC the sum of P2,248,463.92 representing the cash infused by LCDC over and above the P36 million escalation price.
The Court of Appeals seriously erred in ruling that PRHC is not obliged to pay LCDC the P7,112,738.82 balance for the concreting works of the ground floor to the fifth floor of the PSE.
The Court of Appeals seriously erred in awarding liquidated damages to PHRC under the TTI Project Agreement and the Alexandra-Clusters B and C agreements.
The Court of Appeals seriously erred in ruling that LCDC is liable for the corrective works in Alexandra-Cluster B.
The Court of Appeals seriously erred in deleting the lower court's award of P750,000.00 attorney's fees and expenses of litigation to LCDC and holding the latter liable to pay costs. [24]
At the outset, it must be noted that PRHC does not question the following amounts granted by the Court of Appeals:
(a)P13,251,152.61 awarded to LCDC as balance yet unpaid by PRHC for Project 2;(b)P1,703,955.07 awarded to LCDC as balance yet unpaid by PRHC for Project 1; and(c)P4,646,947.75 awarded to PRHC for its overpayment to LCDC for the Tektite Building.
No appeal having been filed from the immediately preceding rulings, they attained finality.
We reduce the issues to the following:
IWhether or not a valid escalation agreement was entered into by the parties and, if so, to what amount;
IIWhether or not LCDC was delayed in the performance of its obligation to construct the buildings for PRHC and, corollary thereto, whether or not the latter is entitled to liquidated damages for this supposed delay in the construction of the Tektite Building and Projects 1 and 2;
IIIWhether or not the CA can make an award or should have made an award for the following causes of action not alleged in the pleadings or omitted in the stipulation of facts:
The supposed remaining balance of P5,529,495.76 for Project 3, which was awarded by the appellate court;
The supposed remaining balance of P232,367.96, which the appellate court also awarded, representing the cost of the construction of the drivers' quarters in Project 3; and
The supposed remaining balance of P7,112,738.82, the cost of the concreting works from the ground floor to the fifth floor of the Tektite Building, which was not awarded by the CA but was awarded by the lower court;
IV
Whether or not LCDC should be held liable for the amount of P2,006,000 for the corrective works to redo or repair the defective waterproofing in Project 2; and
V
Whether or not LCDC is entitled to the appellate court's award of P750,000 for attorney's fees and expenses of litigation and costs.
We shall review the findings of fact of the Court of Appeals in view of some inconsistencies with those of the trial court and the evidence on record, and as a result of our analysis of the threshold legal issues.
A subsequent escalation agreement was validly entered into by the parties, butonly to the extent of P 36 million.
The construction agreements, including the Tektite Building agreement, expressly prohibit any increase in the contracted price. It can be inferred from this prohibition that the parties agreed to place all expenses over and above the contracted price for the
account of the contractor. [25] PRHC claims that since its board of directors never acceded to the proposed escalation agreement, the provision in the main agreement prohibiting any increase in the contract price stands.
LCDC, on the other hand, claims that the fact that any increase in the contract price is prohibited under the Tektite Building agreement does not invalidate the parties' subsequent decision to supersede or disregard this prohibition. It argues that all the documentary and testimonial evidence it presented clearly established the existence of a P 36 million escalation agreement. [26]
LCDC now comes to this Court, asking that the escalation agreement with PRHC, as represented by Abcede and Santos, be declared to have effectively novated the prohibition in the Tektite Building agreement.
After examining the extensive evidence presented by both parties, we resolve to rule in favor of LCDC.
LCDC relies in part on PRHC's 19 August 1991 letter-agreement, [27] which provides as follows:
August 09, 1991LEY CONSTRUCTION DEV. CORP.10th Flr., Pacific Star Bldg.Makati Avenue, MakatiMetro Manila
Attention: Mr. Manuel LeySubject: TEKTITE TOWERSGentlemen:
Relative to your contract for subject project this will confirm agreement between your goodselves and Philippine Realty & Holdings Corporation as follows:
1.0 Ley Construction & Development Corporation shall put in funds for Tektite project with a total amount of THIRTY SIX MILLION PESOS (P36,000,000.00) ONLY in accordance with the following schedule:
2.0 If Ley Construction & Dev. Corp. faithfully complies with above commitment then Philippine Realty & Holdings Corporation shall grant a contract price escalation to Ley Const. & Dev. Corp. in the amount of THIRTY SIX MILLION PESOS (P36,000,000.00) ONLY in view of the increase in cost of materials during the construction period which amount shall be payable to Ley Const. & Dev. Corp. when the LCDC contract work is at least 95% complete.(over)Very truly yours,
(Signed)DENNIS A. ABCEDEConstruction Manager
C O N F O R M E :
(Signed) LEY CONST. & DEV. CORP.
APPROVED & ACCEPTED :
_______________________________PHIL. REALTY & HOLDINGS CORP.
It is apparent from its face that the letter was not signed by PRHC. This fact allegedly proves, according to PRHC, that it never expressed its consent to the letter and, hence, cannot and should not be bound by the contents thereof. It further claims that its internal rules require the signatures of at least two of its officers to bind the corporation.
LCDC, for its part, submits that the fact that the letter is unsigned by PRHC is insignificant, considering that other pieces of documentary and testimonial evidence were presented to prove the existence of the escalation agreement. [28]
The appellate court found for PRHC and ruled that an unsigned letter does not bind the party left out, [29] viz:
But it is patent on the face of that letter that PRHC did not sign the document. It is patent on its face that between the words: "APPROVED:" and the name "Philippine Realty & Holdings Corporation", there is no signature. Apparent therefore on its face, there was no meeting of the minds between the parties LCDC and PRHC in the P36,000,000.00 escalation for materials. [30]
The Court of Appeals further held that a simple letter cannot novate a notarized agreement. [31]
The appellate court is incorrect. The 9 August 1991 letter is not a simple letter, but rather a letter-agreement--a contract--which because of the existence of the consent of both parties become valid and binding. It is true that no representative of PRHC
signed under its typewritten name, where a signature should traditionally appear, to show the company's acceptance and approval of the contents of the letter-agreement. This Court, however, finds that the signature of Abcede is sufficient to bind PRHC. As its construction manager, his very act of signing a letter embodying the P36 million escalation agreement produced legal effect, even if there was a blank space for a higher officer of PHRC to indicate approval thereof. At the very least, he indicated authority to make such representation on behalf of PRHC.
On direct examination, Abcede admitted that, as the construction manager, he represented PRHC in running its affairs with regard to the execution of the aforesaid projects. He testified as follows: [32]
Q.What is your profession by the way?A.I'm a Civil Engineer by profession and presently, I am engaged in the construction management.Q.And what is your company engaged in the construction management?A.We actually, as construction managers, we represent the owners, of the construction.[33]
All throughout the existence and execution of the construction agreements, it was the established practice of LCDC, each time it had concerns about the projects or something to discuss with PRHC, to approach Abcede and Santos as representatives of the latter corporation. As far as LCDC was concerned, these two individuals were the fully authorized representatives of PRHC. Thus, when they entered into the P 36 million escalation agreement with LCDC, PRHC effectively agreed thereto.
In fact, correspondences to the construction manager that were addressed to or that had to be noted by PRHC were most of the time coursed through and noted by Santos. Likewise, its correspondences to LCDC were signed by him alone. [34]
Santos testified that, as the vice president and general manager of PRHC, he was responsible for the implementation of the policies of the board, [35] to wit:
Q:Why do you know the defendant Philippine Realty and Holding Corporation?A:I used to serve that company as Vice President and Director, sir.Q:During what year did you serve as Vice President and Director of Philippine Realty.A:I started serving that company as General Manager in 1987 and I resigned in 1993, sir.Q:Will you state your duties and functions as General Manager and Director of the company?A:I was responsible for the implementation of the policies approved by the board and the day to day general management of the company from operation to administration to finance and marketing, sir. [36]
In addition, LCDC was able to establish that Abcede and Santos had signed, on behalf of PRHC, other documents that were almost identical to the questioned letter-agreement. [37] Santos was actually the one who signed for PRHC in the letter-agreement for the construction of the drivers' quarters in Project 3. [38] He signed under the words "Approved: Phil. Realty & Holdings Corp." [39] While both he and Abcede signed the letter-agreement for concreting works on "GL, 5, 9, and A," [40] Santos again signed under the word "Approved." [41] PRHC does not question the validity of these agreements; it thereby effectively admits that these two individuals had actual authority to sign on its behalf with respect to these construction projects.
We cannot fault LCDC for relying on the representation of PRHC that the authority to contract with the former, in matters relating to the construction agreements, resided in Abcede and Santos.
Furthermore, PRHC does not question the validity of its 7 December 1992 letter to LCDC wherein it seeks to apply LCDC's claim for the P 36 million escalation price to its counterclaim for liquidated damages, which was signed by Santos under the words "Approved: Phil. Realty & Holdings Corp.":
07 December 1992LEY CONST. & DEV. CORP.23rd Floor Pacific Star Bldg.Sen. Gil Puyat Ave. cornerMakati Avenue, Makati, Metro Manila.
Attention : MR. MANUEL T. LEY
Subject : TEKTITE TOWERS
Gentlemen :
This is in connection with your previous request for materials cost adjustment in the amount of Thirty Six Million & 0/100 (P36,000,000.00).
In this regard, please be advised that per owner's decision; your claim of P36,000,00.00 adjustment will be applied to the liquidated damages for concreting works computed in the amount of Thirty Nine Million Three Hundred Twenty Six Thousand Eight Hundred Seventeen & 15/100 (P39,326,817.15) as shown in the attached sheet.
Further, the net difference P3,326,817.15 will also be considered waived as additional consideration.
We trust you will find the above fair and equitable.
Very truly yours,
(Signed)DENNIS A. ABCEDEConstruction Manager
Approved:
(Signed by Santos)PHIL. REALTY & HOLDINGS CORP.
This letter was signed by Abcede, again as the construction manager, while Santos signed above "PHIL. REALTY & HOLDINGS CORP.," which was notably the unsigned part in the 9 August 1991 letter. PRHC claims that neither one of them had the authority to sign on behalf of the corporation; yet, it is not questioning the validity of the above-quoted letter.
We consider this letter as additional evidence that PRHC had given Abcede and Santos the authority to act on its behalf in making such a decision or entering into such agreements with LCDC.
LCDC additionally argues that a subsequent escalation agreement was validly entered into, even on the following assumptions: (a) that Abcede and Santos had no authority to agree to the escalation of the contract price without the approval of the board of directors; and (b) that the 7 December 1992 letter cannot be construed as an acknowledgment by PRHC that it owed LCDC P36 million. It posits that the actions of Abcede and Santos, assuming they were beyond the authority given to them by PRHC which they were representing, still bound PRHC under the doctrine of apparent authority. [42] Thus, the lack of authority on their part should not be used to prejudice it, considering that the two were clothed with apparent authority to execute such agreements. In addition, PRHC is allegedly barred by promissory estoppel from denying the claims of the other corporation.
We agree with LCDC.
In Yao Ka Sin Trading v. Court of Appeals, et al,. [43] this Court discussed the applicable rules on the doctrine of apparent authority, to wit:
The rule is of course settled that "[a]lthough an officer or agent acts without, or in excess of, his actual authority if he acts within the scope of an apparent authority with which the corporation has clothed him by holding him out or permitting him to appear as having such authority, the corporation is bound thereby in favor of a person who deals with him in good faith in reliance on such apparent authority, as where an officer is allowed to exercise a particular authority with respect to the business, or a particular branch of it, continuously and publicly, for a considerable time." Also, "if a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it, the corporation will be estopped to deny that such apparent authority is real, as to innocent third persons dealing in good faith with such officers or agents." [44]
In People's Aircargo and Warehousing Co. Inc. v. Court of Appeals, et al., [45] we held that apparent authority is derived not merely from practice:
Its existence may be ascertained through (1) the general manner in which the corporation holds out an officer or agent as having the power to act or, in other words, the apparent authority to act in general, with which it clothes him; or (2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary powers.
We rule that Santos and Abcede held themselves out as possessing the authority to act, negotiate and sign documents on behalf of PRHC; and that PRHC sanctioned these acts. It would be the height of incongruity to now allow PRHC to deny the extent of the authority with which it had clothed both individuals. We find that Abcede's role as construction manager, with regard to the construction projects, was akin to that of a general manager with regard to the general operations of the corporation he or she is representing.
Consequently, the escalation agreement entered into by LCDC and Abcede is a valid agreement that PRHC is obligated to comply with. This escalation agreement - whether written or verbal - has lifted, through novation, the prohibition contained in the Tektite Building Agreement.
In order for novation to take place, the concurrence of the following requisites is indispensable:
There must be a previous valid obligation.The parties concerned must agree to a new contract.The old contract must be extinguished.There must be a valid new contract. [46]
All the aforementioned requisites are present in this case. The obligation of both parties not to increase the contract price in the Tektite Building Agreement was extinguished, and a new obligation increasing the old contract price by P 36 million was created by the parties to take its place.
What makes this Court believe that it is incorrect to allow PRHC to escape liability for the escalation price is the fact that LCDC was never informed of the board of directors' supposed non-approval of the escalation agreement until it was too late. Instead, PRHC, for its own benefit, waited for the former to finish infusing the entire amount into the construction of the building before informing it that the said agreement had never been approved by the board of directors. LCDC diligently informed PRHC each month of the partial amounts the former infused into the project. PRHC must be deemed estopped from denying the existence of the escalation agreement for having allowed LCDC to continue infusing additional money spending for its own project, when it could have promptly notified LCDC of the alleged disapproval of the proposed escalation price by its board of directors.
Estoppel is an equitable principle rooted in natural justice; it is meant to prevent persons from going back on their own acts and representations, to the prejudice of others who have relied on them. [47] Article 1431 of the Civil Code provides:
Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.
Article 1431 is reflected in Rule 131, Section 2 (a) of the Rules of Court, viz.:
Sec. 2. Conclusive presumptions. -- The following are instances of conclusive presumptions:
(a) Whenever a party has by his own declaration, act or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission be permitted to falsify it.
This Court has identified the elements of estoppel as:
[F]irst, the actor who usually must have knowledge, notice or suspicion of the true facts, communicates something to another in a misleading way, either by words, conduct or silence; second, the other in fact relies, and relies reasonably or justifiably, upon that communication; third, the other would be harmed materially if the actor is later permitted to assert any claim inconsistent with his earlier conduct; and fourth, the actor knows, expects or foresees that the other would act upon the information given or that a reasonable person in the actor's position would expect or foresee such action. [48]
This liability of PRHC, however, has a ceiling. The escalation agreement entered into was for P 36 million--the maximum amount that LCDC contracted itself to infuse and that PRHC agreed to reimburse. Thus, the Court of Appeals was correct in ruling that the P 2,248,463.92 infused by LCDC over and above the P 36 million should be for its account, since PRHC never agreed to pay anything beyond the latter amount. While PRHC benefited from this excess infusion, this did not result in its unjust enrichment, as defined by law.
Unjust enrichment exists "when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience." [49] Under Art. 22 of the Civil Code, there is unjust enrichment when (1) a person is unjustly benefited, and (2) such benefit is derived at the expense of or with damages to another. [50] The term is further defined thus:
Unjust enrichment is a term used to depict result or effect of failure to make remuneration of or for property or benefits received under circumstances that give rise to legal or equitable obligation to account for them; to be entitled to remuneration, one must confer benefit by mistake, fraud, coercion, or request. [51]
In order for an unjust enrichment claim to prosper, one must not only prove that the other party benefited from one's efforts or the obligations of others; it must also be shown that the other party was unjustly enriched in the sense that the term "unjustly" could mean "illegally" or "unlawfully." [52] LCDC was aware that the escalation agreement was limited to P36 million. It is not entitled to remuneration of the excess, since it did not confer this benefit by mistake, fraud, coercion, or request. Rather, it voluntarily infused the excess amount with full knowledge that PRHC had no obligation to reimburse it.
Parenthetically, we note that the CA had ruled that the 7 December 1992 letter demonstrates that PRHC treated the P 36 million as a loan deductible from the liquidated damages for which LCDC is supposedly liable. [53] It ruled that when PRHC informed
LCDC that it would apply the P36 million to the liquidated damages, PRHC, in effect, acknowledged that it was in debt to LCDC in the amount of P 36 million, and that forms the basis for PRHC's liability to LCDC for the said amount.
We disagree with this analysis.
In a contract of loan, ownership of the money is transferred from the lender to the borrower. [54] In this case, ownership of the P 36 million was never transferred to PRHC. As previously mentioned, such amount was paid directly to the suppliers. [55] We find that arrangement between PRHC and LCDC cannot be construed as a loan agreement but rather, it was an agreement to advance the costs of construction. In Liwanag v. Court of Appeals et al., we state:
Neither can the transaction be considered a loan, since in a contract of loan once the money is received by the debtor, ownership over the same is transferred. Being the owner, the borrower can dispose of it for whatever purpose he may deem proper. In the instant petition, however, it is evident that Liwanag could not dispose of the money as she pleased because it was only delivered to her for a single purpose, namely, for the purchase of cigarettes, and if this was not possible then to return the money to Rosales.
LCDC is not liable for liquidated damages for delay in the constructionof the buildings for PRHC.
There is no question that LCDC was not able to fully construct the Tektite Building and Projects 1, 2, and 3 on time. It reasons that it should not be made liable for liquidated damages, because its rightful and reasonable requests for time extension were denied by PRHC. [56]
It is important to note that PRHC does not question the veracity of the factual representations of LCDC to justify the latter's requests for extension of time. It insists, however, that in any event LCDC agreed to the limits of the time extensions it granted. [57]
The practice of the parties is that each time LCDC requests for more time, an extension agreement is executed and signed by both parties to indicate their joint approval of the number of days of extension agreed upon.
The applicable provision in the parties' agreements is as follows:
ARTICLE VII - TIME OF COMPLETION
. . . . . . . . .
Should the work be delayed by any act or omission of the OWNER or any other person employed by or contracted by the OWNER in the project, including days in the delivery or (sic) materials furnished by the OWNER or others, or by any appreciable additions or alterations in the work ordered by the OWNER or the ARCHITECT, under Article V or by force majeure, war, rebellion, strikes, epidemics, fires, riots, or acts of the civil or military authorities, the CONTRACTOR shall be granted time extension.
In case the CONTRACTOR encounters any justifiable cause or reason for delay, the CONTRACTOR shall within ten (10) days, after encountering such cause of delay submit to the OWNER in writing a written request for time extension indicating therein the requested contract time extension. Failure by the CONTRACTOR to comply with this requirements (sic) will be adequate reason for the OWNER not to grant the time extension.
The following table shows the dates of LCDC's letter-requests, the supposed causes justifying them, the number of days requested, and the number of days granted by PRHC and supposedly conformed to by LCDC:
Cause # of days requested # of days granted
1 Mar 1990 Due to additional works and shortage of supplies and cement 30 11
14 Apr 1990 Shortage of cement supply 18 6
10 May 1990 Frequent power failures 10 2
9 Jul 1990 Bad weather which endangered the lives of the construction workers ("heavy winds")
10 2
4 Sep 1990 Inclement weather that endangered the lives of the construction workers 10 3
28 Feb 1991 Architectural and structural revisions of R.C. beams at the 8th floor level 20 8
28 Aug 1991 For change order work and revisions in the plans initiated by the architect and Abcede's delay in giving the revised plans to contractor
271 136
2 Sep 1991 Inclement weather and scarcity of cement 25 17
13 Oct 1991 Water supply interruption and power failures preventing the mixing of cement 15 6
5 Dec 1991 Typhoon Uring and water supply interruption (typhoon Uring alone caused a 15 2
delay for more than 10 days due to strong and continuous rains)
2 Apr 1992 Inadequate supply of Portland cement and frequent power failures 15 12
5 May 1992 Inadequate supply of cement and frequent power failures 17 12
456 217
additions and alterations in the work ordered by the owner and architect 108 20
564 237
As previously mentioned, LCDC sent a 9 December 1992 letter to PRHC claiming that, in a period of over two years, only 256 out of the 618 days of extension requested were considered. We disregard these numbers presented by LCDC because of its failure to present evidence to prove its allegation. The tally that we will accept--as reflected by the evidence submitted to the lower court--is as follows: out of the 564 days requested, only 237 were considered.
Essentially the same aforementioned reasons or causes are presented by LCDC as defense against liability for both Projects 1 and 2. [58] In this regard, the CA ruled:
Plaintiff-appellee's allegation that determination by PHRC of extensions of time were unreasonable or arbitrary is untenable in the light of express provisions of the Construction Agreements which prescribed precise procedures for extensions of time. In fact the procedure is fool-proof because both OWNER and CONTRACTOR sign to indicate approval of the number of days of extension. Computation of the penalty becomes mechanical after that. Each extension as signed by the parties is a contract by itself and has the force of law between them.
In fact, the parties followed that prescribed procedure strictly - the CONTRACTOR first requested the OWNER to approve the number of days applied for as extension of time to finish the particular project and the OWNER will counter-offer by approving only a lower number of days extension of time for CONTRACTOR to finish the contract as recommended by the CONSTRUCTION MANAGER ABCEDE, and in the end, both CONTRACTOR and OWNER sign jointly the approved number of days agreed upon. That signed extension of time is taken to be the contract between the parties. [59]
The appellate court further ruled that each signed extension is a separate contract that becomes the law between the parties: [60]
there is nothing arbitrary or unreasonable about the number of days extension of time because each extension is a meeting of the minds between the parties, each under joint signature OWNER and CONTRACTOR witnessed by the CONSTRUCTION MANAGER. [61]
Inasmuch as LCDC's claimed exemption from liability are beyond the approved time extensions, LCDC, according to the majority of the CA, is liable therefor.
Justice Juan Q. Enriquez, in his Dissenting Opinion, held that the reasons submitted by LCDC fell under the definition of force majeure. [62] This specific point was not refuted by the majority.
We agree with Justice Enriquez on this point and thereby disagree with the majority ruling of the CA.
Article 1174 of the Civil Code provides: "Except in cases expressly specified by the law, or when it is otherwise declared by stipulation or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable." A perusal of the construction agreements shows that the parties never agreed to make LCDC liable even in cases of force majeure. Neither was the assumption of risk required. Thus, in the occurrence of events that could not be foreseen, or though foreseen were inevitable, neither party should be held responsible.
Under Article 1174 of the Civil Code, to exempt the obligor from liability for a breach of an obligation due to an "act of God" or force majeure, the following must concur:
(a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor.[63]
The shortage in supplies and cement may be characterized as force majeure. [64] In the present case, hardware stores did not have enough cement available in their supplies or stocks at the time of the construction in the 1990s. Likewise, typhoons, power failures and interruptions of water supply all clearly fall under force majeure. Since LCDC could not possibly continue constructing the building under the circumstances prevailing, it cannot be held liable for any delay that resulted from the causes aforementioned.
Further, PRHC is barred by the doctrine of promissory estoppel from denying that it agreed, and even promised, to hold LCDC free and clear of any liquidated damages. Abcede and Santos also promised that the latter corporation would not be held liable for liquidated damages even for a single day of delay despite the non-approval of the requests for extension. [65] Mr. Ley testified to this fact as follows:
Q: So, Mr. Witness in all those requests for extension and whenever the D.A. Abcede & Associates did not grant you the actual number of days stated in your requests for extension, what did Ley construction and Development do, if any?
A: We talked to Dennis Abcede and Mr. Santos, Ma'am.
Q: And what did you tell them?
A: I will tell them why did you not grant the extension for us, Ma'am.
Q: What was the response of Mr. Abcede and Mr. Santos?
A: Mr. Abcede and Mr. Santos told me, Mr. Ley don't worry, you will not be liquidated of any single day for this because we can see that you worked so hard for this project, Ma'am.
Q: And what did you do after you were given that response of Mr. Abcede and Mr. Santos?
A: They told me you just relax and finish the project, and we will pay you up to the last centavos, Ma'am.
Q: What did you do after taking that statement or assurance?
A: As gentleman's agreement I just continued working without complaining anymore, Ma'am. [66]
The above testimony is uncontradicted. Even assuming that all the reasons LCDC presented do not qualify as fortuitous events, as contemplated by law, this Court finds that PRHC is estopped from denying that it had granted a waiver of the liquidated damages the latter corporation may collect from the former due to a delay in the construction of any of the buildings.
Courts may rule on causes ofaction not included in the Complaint,as long as these have been proven during trial without the objection of the opposing party.
PRHC argues that since the parties had already limited the issues to those reflected in their joint stipulation of facts, neither the trial court nor the appellate court has the authority to rule upon issues not included therein. Thus it was wrong for the trial court and the CA to have awarded the amounts of P 5,529,495.76 representing the remaining balance for Project 3 as well as for the P 232,367.96 representing the balance for the construction of the drivers' quarters in Project 3. PRHC claims that in the Stipulation of Facts, all the issues regarding Project 3 were already made part of the computation of the balances for the other projects. It thus argues that the computation for the Tektite Building showed that the overpayment for Project 3 in the amount of P 9,531,181.80 was credited as payment for the Tektite Tower Project. [67] It reasons that, considering that it actually made an overpayment for Project 3, it should not be made liable for the remaining balances for Project 3 and the drivers' quarters in Project 3. [68] It is LCDC's position, however, that the Stipulation of Facts covers the balances due only for the Tektite Tower Project, Project 1, and Project 2. [69] Since Project 3 was not included in the reconciliation contained in the said stipulation, it maintains that the balance for Project 3 remains at P 5,529,495.76, [70] and that the balance for the construction of the drivers' quarters in Project 3 remains at P 232,367.96.
On its part, LCDC disputes the deletion by the CA of the lower court's grant of the alleged P 7,112,738.82 unpaid balance for the concreting works in the Tektite Building. The CA had ruled that this cause of action was withdrawn by the parties when they did not include it in their Joint Stipulation of Facts. LCDC argues that to the contrary, the silence of the Stipulation of Facts on this matter proves that the claim still stands. [71]
Considering that the unpaid balances for Project 3, its driver's quarters, and the concreting works in the Tektite Building were not covered by the Stipulation of Facts entered into by the parties, we rule that no judicial admission could have been made by LCDC regarding any issue involving the unpaid balances for those pieces of work.
We affirm in this case the doctrine that courts may rule or decide on matters that, although not submitted as issues, were proven during trial. The admission of evidence, presented to support an allegation not submitted as an issue, should be objected to at the time of its presentation by the party to be affected thereby; otherwise, the court may admit the evidence, and the fact that such evidence seeks to prove a matter not included or presented as an issue in the pleadings submitted becomes irrelevant, because of the failure of the appropriate party to object to the presentation.
No objection was raised when LCDC presented evidence to prove the outstanding balances for Project 3, its driver's quarters, and the concreting works in the Tektite Building.
In Phil. Export and Foreign Loan Guarantee Corp. v. Phil. Infrastructures, et al., [72] this Court held:
It is settled that even if the complaint be defective, but the parties go to trial thereon, and the plaintiff, without objection, introduces sufficient evidence to constitute the particular cause of action which it intended to allege in the original complaint, and the defendant voluntarily produces witnesses to meet the cause of action thus established, an issue is joined as fully and as effectively as if it had been previously joined by the most perfect pleadings. Likewise, when issues not raised by the
pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings.
Considering the absence of timely and appropriate objections, the trial court did not err in admitting evidence of the unpaid balances for Project 3, its driver's quarters, and the concreting works in the Tektite Building. Furthermore, both the lower and the appellate courts found that the supporting evidence presented by LCDC were sufficient to prove that the claimed amounts were due, but that they remained unpaid.
LCDC should be held liable forthe corrective works to redo or repairthe defective waterproofing in Project 2.
The waterproofing of Project 2 was not undertaken by LCDC. Instead, Vulchem Corporation (Vulchem), which was recommended by Santos and Abcede, was hired for that task. Vulchem's waterproofing turned out to be defective. In order to correct or repair the defective waterproofing, PRHC had to contract the services of another corporation, which charged it P2,006,000.
Denying liability by alleging that PRHC forced it into hiring Vulchem Corporation for the waterproofing works in Project 2, LCDC argues that under Article 1892, an agent is responsible for the acts of the substitute if he was given the power to appoint a substitute. Conversely, if it is the principal and not the agent who appointed the substitute, the agent bears no responsibility for the acts of the sub-agent. [73] The provision reads:
"Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent."
LCDC argues that because PRHC, as the principal, had designated Vulchem as sub-agent, LCDC, as the agent, should not be made responsible for the acts of the substitute, even in the instance where the latter were notoriously incompetent. [74]
LCDC's reliance on Art. 1892 is misplaced. The principles of agency are not to be applied to this case, since the legal relationship between PRHC and LCDC was not one of agency, but was rather that between the owner of the project and an independent contractor under a contract of service. Thus, it is the agreement between the parties and not the Civil Code provisions on agency that should be applied to resolve this issue.
Art. XIV of the Project 2 Agreement clearly states that if the contractor sublets any part of the agreement to a third party, who in effect becomes a sub-contractor, the losses or expenses that result from the acts/inactions of the sub-contractor should be for the contractor's account, to wit:
ARTICLE XIV - ASSIGNMENT
This Agreement, and/or any of the payments to be due hereunder shall not be assigned in whole or in part by the CONTRACTOR nor shall any part of the works be sublet by CONTRACTOR without the prior written consent of OWNER, and such consent shall not relieve the CONTRACTOR from full responsibility and liability for the works hereunder shall not be granted in any event until CONTRACTOR has furnished OWNER with satisfactory evidence that the Sub-Contractor is carrying ample insurance to the same extent and in the same manner as herein provided to be furnished by CONTRACTOR. If the agreement is assigned or any part thereof is sublet, CONTRACTOR shall exonerate, indemnify and save harmless the OWNER from and against any and all losses or expenses caused thereby. [75]
LCDC had every right to reject Vulchem as sub-contractor for the waterproofing work of Project 2 but it did not do so and proceeded to hire the latter. It is not unusual for project owners to recommend sub-contractors, and such recommendations do not diminish the liability of contractors in the presence of an Article XIV-type clause in the construction agreement. The failure of LCDC to ensure that the work of its sub-contractor is satisfactory makes it liable for the expenses PRHC incurred in order to correct the defective works of the sub-contractor. The CA did not err in ruling that the contract itself gave PRHC the authority to recover the expenses for the "re-do" works arising from the defective work of Vulchem. [76]
LCDC is entitled to attorney's fees and the expenses of litigation and costs.
According to the CA, LCDC was not entitled to attorney's fees, because it was not the aggrieved party, but was the one that violated the terms of the construction agreements and should thus be made to pay costs. [77] LCDC claims, on the other hand, that the CA seriously erred in deleting the lower court's award of P750,000 attorney's fees and the expenses of litigation in its favor, since this award is justified under the law. [78] To support its claim, LCDC cites Article 2208(5), which provides:
ART. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim;
Attorney's fees may be awarded when the act or omission of the defendant compelled the plaintiff to incur expenses to protect the latter's interest. [79] In ABS-CBN Broadcasting Corp. v. CA, [80] we held thus:
The general rule is that attorney's fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate. They are not to be awarded every time a party wins a suit. The power of the court to award attorney's fees under Article 2208 demands factual, legal, and equitable justification. Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still attorney's fees may not be awarded where no sufficient showing of bad faith could be reflected in a party's persistence in a case other than an erroneous conviction of the righteousness of his cause.
LCDC has failed to establish bad faith on the part of PRHC so as to sustain its position that it is entitled to attorney's fees. Nevertheless, the CA erred in reversing the lower court's Decision granting LCDC's claim for attorney's fees considering that the construction agreements contain a penal clause that deals with the award of attorney's fees, as follows:
In the event the OWNER/CONTRACTOR institutes a judicial proceeding in order to enforce any terms or conditions of this Agreement, the CONTRACTOR/OWNER should it be adjudged liable in whole or in part, shall pay the OWNER/CONTRACTOR reasonable attorney's fees in the amount equivalent to Twenty Percent (20%) of the total amount claimed in addition to all expenses of litigation and costs of the suit.
Equivalent to at least Twenty Percent (20%) of the total amount claimed in addition to all expenses of litigation and costs of the suit.
As long as a stipulation does not contravene the law, morals, and public order, it is binding upon the obligor. [81] Thus, LCDC is entitled to recover attorney's fees. Nevertheless, this Court deems it proper to equitably reduce the stipulated amount. Courts have the power to reduce the amount of attorney's fees when found to be excessive, [82] viz:
We affirm the equitable reduction in attorney's fees. These are not an integral part of the cost of borrowing, but arise only when collecting upon the Notes becomes necessary. The purpose of these fees is not to give respondent a larger compensation for the loan than the law already allows, but to protect it against any future loss or damage by being compelled to retain counsel - in-house or not--to institute judicial proceedings for the collection of its credit. Courts have has the power to determine their reasonableness based on quantum meruit and to reduce the amount thereof if excessive. [83]
We reverse the appellate court's Decision and reinstate the lower court's award of attorney's fees, but reduce the amount from P750,000 to P200,000.
WHEREFORE, we SET ASIDE the Decision of the Court of Appeals and RULE as follows:
We find Philippine Realty and Holdings Corporation (PRHC) LIABLE to Ley Construction Development Corporation (LCDC) in the amount of P 64,029,710.22, detailed as follows:
P 13,251,152.61 as balance yet unpaid by PRHC for Project 2;P 1,703,955.07 as balance yet unpaid by PRHC for Project 1;P 5,529,495.76 as balance yet unpaid by PRHC for Project 3;P 232,367.96 as balance yet unpaid by PRHC for the drivers quarters for Project 3;P 36,000,000.00 as agreed upon in the escalation agreement entered into by PRHC's representatives and LCDC for the Tektite Building;P 7,112,738.82 as balance yet unpaid by PRHC for the concreting works from the ground floor to the fifth floor of the Tektite Building;P 200,000.00 s LCDC's reduced attorney's fees.
Further, we find LCDC LIABLE to PRHC in the amount of P6,652,947.75 detailed as follows:P 4,646,947.75 for the overpayment made by PRHC for the Tektite Building;P 2,006,000.00 for the expenses incurred by PRHC for corrective works to redo/repair the allegedly defective waterproofing construction work done by LCDC in Project 2.
The respective liabilities of the parties as enumerated above are hereby SET OFF against each other, and PRHC is hereby DIRECTED to pay LCDC the net amount due, which is P 57,376,762.47, with legal interest from the date of the filing of Complaint.SO ORDERED.
G.R. No. 158768 February 12, 2008TITAN-IKEDA CONSTRUCTION & DEVELOPMENT CORPORATION, petitioner, vs. PRIMETOWN PROPERTY GROUP, INC., respondent.
D E C I S I O NCORONA, J.:This petition for review on certiorari1 seeks to set aside the decision of the Court of Appeals (CA) in CA-G.R. CV No. 613532 and its resolution3 denying reconsideration.
In 1992, respondent Primetown Property Group, Inc. awarded the contract for the structural works4 of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-Ikeda Construction and Development Corporation.5 The parties formalized their agreement in a construction contract6 dated February 4, 1993.7
Upon the completion of MPT's structural works, respondent awarded the P130,000,000 contract for the tower's architectural works8 (project) to petitioner. Thus, on January 31, 1994, the parties executed a supplemental agreement.9 The salient portions thereof were:
1. the [project] shall cover the scope of work of the detailed construction bid plans and specifications and bid documents dated 28 September 1993, attached and forming an integral part hereof as Annex A.
2. the contract price for the said works shall be P130 million.
3. the payment terms shall be "full swapping" or full payment in condominium units. The condominium units earmarked for the [petitioner] are shown in the attached Annex B.
4. the [respondent] shall transfer and surrender to [petitioner] the condominium units abovestated in accordance with the following schedule:
(a) 80% of units — upon posting and acceptance by [respondent] of the performance bond [and]
(b) 20% or remaining balance — upon completion of the project as provided in the construction contract and simultaneous with the posting by [petitioner] of the reglementary guarantee bond.
5. the contract period shall be fifteen (15) months reckoned from the release of the condominium certificates of title (CCTs) covering eighty percent (80%) of the units transferable to [petitioner] as aforesaid[.]
Significantly, the supplemental agreement adopted those provisions of the construction contract which it did not specifically discuss or provide for.10 Among those carried over was the designation of GEMM Construction Corporation (GEMM) as the project's construction manager.11
Petitioner started working on the project in February 1994.
On June 30, 1994, respondent executed a deed of sale12 (covering 114 condominium units and 20 parking slots of the MPT collectively valued by the parties at P112,416,716.88)13 in favor of petitioner pursuant to the "full-swapping" payment provision of the supplemental agreement.
Shortly thereafter, petitioner sold some of its units to third persons.14
In September 1995, respondent engaged the services of Integratech, Inc. (ITI), an engineering consultancy firm, to evaluate the progress of the project.15 In its September 7, 1995 report,16 ITI informed respondent that petitioner, at that point, had only accomplished 31.89% of the project (or was 11 months and six days behind schedule).17
Meanwhile, petitioner and respondent were discussing the possibility of the latter’s take over of the project’s supervision. Despite ongoing negotiations, respondent did not obtain petitioner’s consent in hiring ITI as the project’s construction manager. Neither did it inform petitioner of ITI’s September 7, 1995 report.
On October 12, 1995, petitioner sought to confirm respondent's plan to take over the project.18 Its letter stated:
The mutual agreement arrived at sometime in the last week of August 1995 for [respondent] to take over the construction supervision of the balance of the [project] from [petitioner's] [e]ngineering staff and complete [the] same by December 31, 1995 as promised by [petitioner's] engineer.
The [petitioner's] accomplished works as of this date of [t]ake over is of acceptable quality in materials and workmanship.
This mutual agreement on the take over should not be misconstrued in any other way except that the take over is part of the long range plan of [respondent] that [petitioner], in the spirit of cooperation, agreed to hand over the construction supervision to [respondent] as requested. (emphasis supplied)19
Engineers Antonio Co, general construction manager of respondent, and Luzon Y. Tablante, project manager of petitioner, signed the letter.
Integratech’s (ITI’s) Report
In its September 7, 1995 report, ITI estimated that petitioner should have accomplished 48.71% of the project as of the October 12, 1995 takeover date.20 Petitioner repudiated this figure21 but qualifiedly admitted that it did not finish the project.22 Records showed that respondent did not merely take over the supervision of the project but took full control thereof.23
Petitioner consequently conducted an inventory.24 On the basis thereof, petitioner demanded from respondent the payment of its balance amounting to P1,779,744.85.25
On February 19, 1996, petitioner sent a second letter to respondent demanding P2,023,876.25. This new figure included the cost of materials (P244,331.40) petitioner advanced from December 5, 1995 to January 26, 1996.26
On November 22, 1996, petitioner demanded from respondent the delivery of MPT's management certificate27 and the keys to the condominium units and the payment of its (respondent's) balance.28
Because respondent ignored petitioner's demand, petitioner, on December 9, 1996, filed a complaint for specific performance29 in the Housing and Land Use Regulatory Board (HLURB).
While the complaint for specific performance was pending in the HLURB, respondent sent a demand letter to petitioner asking it to reimburse the actual costs incurred in finishing the project (or P69,785,923.47).30 In view of the pendency of the HLURB case, petitioner did not heed respondent's demands.
On April 29, 1997, the HLURB rendered a decision in favor of petitioner.31 It ruled that the instrument executed on June 30, 1994 was a deed of absolute sale because the conveyance of the condominium units and parking slots was not subject to any condition.32 Thus, it ordered respondent to issue MPT’s management certificate and to deliver the keys to the condominium units to petitioner.33 Respondent did not appeal this decision. Consequently, a writ of execution was issued upon its finality.34
Undaunted by the finality of the HLURB decision, respondent filed a complaint for collection of sum of money35 against petitioner in the Regional Trial Court (RTC) of Makati City, Branch 58 on July 2, 1997. It prayed for the reimbursement of the value of the project’s unfinished portion amounting to P66,677,000.36
During trial, the RTC found that because respondent modified the MPT's architectural design, petitioner had to adjust the scope of work.37 Moreover, respondent belatedly informed petitioner of those modifications. It also failed to deliver the concrete mix and rebars according to schedule. For this reason, petitioner was not responsible for the project's delay.38 The trial court thus allowed petitioner to set-off respondent's other outstanding liabilities with respondent’s excess payment in the project.39 It concluded that respondent owed petitioner P2,023,876.25.40 In addition, because respondent refused to deliver the keys to the condominium units and the management certificate to petitioner, the RTC found that petitioner lost rental income amounting to US$1,665,260.41 The dispositive portion of the RTC decision stated:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered dismissing [respondent's] [c]omplaint for lack of merit. On the other hand, finding preponderance of evidence to sustain [petitioner's] counterclaim, judgment is hereby rendered in favor of [petitioner] ordering [respondent] to pay the former:
1. The unpaid balance of the consideration for [petitioner's] services in [the project] in the amount of P2,023,867.25 with legal interest from the date of demand until fully paid;
2. Compensatory damages in the amount of US$1,665,260 or its peso equivalent at the current foreign exchange rate representing lost rental income due only as of July 1997 and the accrued lost earnings from then on until the date of actual payment, with legal interest from the date of demand until fully paid; and
3. Attorney's fees in the amount of P100,000 as acceptance fee, P1,000 appearance fee per hearing and 25% of the total amount awarded to [petitioner].
With costs against the [respondent].
SO ORDERED.42
Respondent appealed the RTC decision to the CA.43 The appellate court found that respondent fully performed its obligation when it executed the June 30, 1994 deed of absolute sale in favor of petitioner.44 Moreover, ITI's report clearly established that petitioner had completed only 48.71% of the project as of October 12, 1995, the takeover date. Not only did it incur delay in the performance of its obligation but petitioner also failed to finish the project. The CA ruled that respondent was entitled to recover the value of the unfinished portion of the project under the principle of unjust enrichment.45 Thus:
WHEREFORE, the appealed decision is REVERSED and a new one entered dismissing [petitioner's] counterclaims of P2,023,867.25 representing unpaid balance for [its] services in [the project]; US$1,665,260 as accrued lost earnings, and attorney's fees. [Petitioner] is hereby ordered to return to [respondent] the amount of P66,677,000 representing the value of unfinished [portion of the project], plus legal interest thereon until fully paid. Upon payment by [petitioner] of the aforementioned amount, [respondent] is hereby ordered to deliver the keys and [m]anagement [c]ertificate of the [Makati Prime Tower] paid to [petitioner] as consideration for the [project].46
Petitioner moved for reconsideration but it was denied. Hence, this petition.
Petitioner contends that the CA erred in giving weight to ITI's report because the project evaluation was commissioned only by respondent,47 in disregard of industry practice. Project evaluations are agreed upon by the parties and conducted by a disinterested third party.48
We grant the petition.
Review of Conflicting Factual Findings
As a general rule, only questions of law may be raised in a petition for review on certiorari. Factual issues are entertained only in exceptional cases such as where the findings of fact of the CA and the trial court are conflicting.49
Here, a glaring contradiction exists between the factual findings of the RTC and the CA. The trial court found that respondent contributed to the project's delay because it belatedly communicated the modifications and failed to deliver the necessary materials on time. The CA, however, found that petitioner incurred delay in the performance of its obligation. It relied on ITI's report which stated that petitioner had accomplished only 48.71% of the project as of October 12, 1995.
January 31, 1994 Supplemental Agreement Was Extinguished
A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.50 This case involved two contracts entered into by the parties with regard to the project.
The parties first entered into a contract for a piece of work51 when they executed the supplemental agreement. Petitioner as contractor bound itself to execute the project for respondent, the owner/developer, in consideration of a price certain (P130,000,000). The supplemental agreement was reciprocal in nature because the obligation of respondent to pay the entire contract price depended on the obligation of petitioner to complete the project (and vice versa).
Thereafter, the parties entered into a second contract. They agreed to extinguish the supplemental agreement as evidenced by the October 12, 1995 letter-agreement which was duly acknowledged by their respective representatives.52
While the October 12, 1995 letter-agreement stated that respondent was to take over merely the supervision of the project, it actually took over the whole project itself. In fact, respondent subsequently hired two contractors in petitioner's stead.53 Moreover, petitioner's project engineer at site only monitored the progress of architectural works undertaken in its condominium units.54 Petitioner never objected to this arrangement; hence, it voluntarily surrendered its participation in the project. Moreover, it judicially admitted in its answer that respondent took over the entire project, not merely its supervision, pursuant to its (respondent’s) long-range plans.55
Because the parties agreed to extinguish the supplemental agreement, they were no longer required to fully perform their respective obligations. Petitioner was relieved of its obligation to complete the project while respondent was freed of its obligation to pay the entire contract price. However, respondent, by executing the June 30, 1994 deed of absolute sale, was deemed to have paid P112,416,716.88. Nevertheless, because petitioner applied part of what it received to respondent’s outstanding liabilities,56 it admitted overpayment.
Because petitioner acknowledged that it had been overpaid, it was obliged to return the excess to respondent. Embodying the principle of solutio indebiti, Article 2154 of the Civil Code provides:
Article 2154. If something is received when there is no right to demand it and it was unduly delivered through mistake, the obligation to return it arises.
For the extra-contractual obligation of solutio indebiti to arise, the following requisites must be proven:
1. the absence of a right to collect the excess sums and
2. the payment was made by mistake.57
With regard to the first requisite, because the supplemental agreement had been extinguished by the mutual agreement of the parties, petitioner became entitled only to the cost of services it actually rendered (i.e., that fraction of the project cost in proportion to the percentage of its actual accomplishment in the project). It was not entitled to the excess (or extent of overpayment).
On the second requisite, Article 2163 of the Civil Code provides:
Article 2163. It is presumed that there was a mistake in the payment if something which had never been due or had already been paid was delivered; but, he from whom the return is claimed may prove that the delivery was made out of liberality or for any other just cause. (emphasis supplied)
In this instance, respondent paid part of the contract price under the assumption that petitioner would complete the project within the stipulated period. However, after the supplemental agreement was extinguished, petitioner ceased working on the project. Therefore, the compensation petitioner received in excess of the cost of its actual accomplishment as of October 12, 1995 was never due. The condominium units and parking slots corresponding to the said excess were mistakenly delivered by respondent and were therefore not due to petitioner.
Stated simply, respondent erroneously delivered excess units to petitioner and the latter, pursuant to Article 2154, was obliged to the return them to respondent.58 Article 2160 of the Civil Code provides:
Article 2160. He who in good faith accepts an undue payment of a thing certain and determinate shall only be responsible for the impairment or loss of the same or its accessories and accessions insofar as he has thereby been benefited. If he has alienated it, he shall return the price or assign the action to collect the sum.
One who receives payment by mistake in good faith is, as a general rule, only liable to return the thing delivered.59 If he benefited therefrom, he is also liable for the impairment or loss of the thing delivered and its accessories and accessions.60 If he sold the thing delivered, he should either deliver the proceeds of the sale or assign the action to collect to the other party.61
The situation is, however, complicated by the following facts:
a) the basis of the valuation (P112,416,716.99) of the condominium units and parking slots covered by the June 30, 1994 deed of sale is unknown;
b) the percentage of petitioner's actual accomplishment in the project has not been determined and
c) the records of this case do not show the actual number of condominium units and parking slots sold by petitioners.
Because this Court is not a trier of facts, the determination of these matters should be remanded to the RTC for reception of further evidence.
The RTC must first determine the percentage of the project petitioner actually completed and its proportionate cost.62 This will be the amount due to petitioner. Thereafter, based on the stipulated valuation in the June 30, 1994 deed of sale, the RTC shall determine how many condominium units and parking slots correspond to the amount due to petitioner. It will only be the management certificate and the keys to these units that petitioner will be entitled to. The remaining units, having been mistakenly delivered by respondent, will therefore be the subject of solutio indebiti.
What exactly must petitioner give back to respondent? Under Article 2160 in relation to Article 2154, it should return to respondent the condominium units and parking slots in excess of the value of its actual accomplishment (i.e., the amount due to it) as of October 12, 1995. If these properties include units and/or slots already sold to third persons, petitioner shall deliver the proceeds of the sale thereof or assign the actions for collection to respondent as required by Article 2160.
Delay In The Completion Of The Project
Mora or delay is the failure to perform the obligation in due time because of dolo (malice) or culpa (negligence).63 A debtor is deemed to have violated his obligation to the creditor from the time the latter makes a demand. Once the creditor makes a demand, the debtor incurs mora or delay.64
The construction contract65 provided a procedure for protesting delay:
Article XIV
DELAYS AND ABANDONMENT
15.1. If at any time during the effectivity of this contract, [PETITIONER] shall incur unreasonable delay or slippages of more than fifteen percent (15%) of the scheduled work program, [RESPONDENT] should notify [PETITIONER] in writing to accelerate the work and reduce, if not erase, slippage. If after the lapse of sixty (60) days from receipt of such notice, [PETITIONER] fails to rectify the delay or slippage, [RESPONDENT] shall have the right to terminate this contract except in cases where the same was caused by force majeure. "FORCE MAJEURE" as contemplated herein, and in determination of delay includes, but is not limited to, typhoon, flood, earthquake, coup d'etat, rebellion, sedition, transport strike, stoppage of work, mass public action that prevents workers from reporting for work, and such other causes beyond [PETITIONER'S] control.66 (emphasis supplied)
xxx xxx xxx
Respondent never sent petitioner a written demand asking it to accelerate work on the project and reduce, if not eliminate, slippage. If delay had truly been the reason why respondent took over the project, it would have sent a written demand as required by the construction contract. Moreover, according to the October 12, 1995 letter-agreement, respondent took over the project for the sole reason that such move was part of its (respondent's) long-term plan.
Respondent, on the other hand, relied on ITI's September 7, 1995 report. The construction contract named GEMM, not ITI, as construction manager.67 Because petitioner did not consent to the change of the designated construction manager, ITI's September 7, 1995 report could not bind it.
In view of the foregoing, we hold that petitioner did not incur delay in the performance of its obligation.
Recovery Of Additional Costs Resulting From Changes
The supplemental agreement was a contract for a stipulated price.68 In such contracts, the recovery of additional costs (incurred due to changes in plans or specifications) is governed by Article 1724 of the Civil Code.
Article 1724. The contractor who undertakes to build a structure or any other work for a stipulated price, in conformity with plans and specifications agreed upon with the landowner, can neither withdraw from the contract nor demand an increase in the price on account of higher cost of labor or materials, save when there has been a change in plans and specifications, provided:
1. such change has been authorized by the proprietor in writing; and
2. the additional price to be paid to the contractor has been determined in writing by both parties.
In Powton Conglomerate, Inc. v. Agcolicol,69 we reiterated that a claim for the cost of additional work arising from changes in the scope of work can only be allowed upon the:
1. written authority from the developer/owner ordering/allowing the changes in work; and
2. written agreement of parties with regard to the increase in cost (or price) due to the change in work or design modification. 70
Furthermore:
Compliance with the two requisites of Article 1724, a specific provision governing additional works, is a condition precedent of the recovery. The absence of one or the other bars the recovery of additional costs. Neither the authority for the changes made nor the additional price to be paid therefor may be proved by any other evidence for purposes of recovery.71 (emphasis supplied)
Petitioner submitted neither one. In addition, petitioner’s project coordinator Estellita Garcia testified that respondent never approved any change order.72 Thus, under Article 1724 and pursuant to our ruling in Powton Conglomerate, Inc., petitioner cannot recover the cost it incurred in effecting the design modifications. A contractor who fails to secure the owner or developer's written authority to changes in the work or written assent to the additional cost to be incurred cannot invoke the principle of unjust enrichment.73
Recovery Of Compensatory Damages
Indemnification for damages comprehends not only the loss suffered (actual damages or damnum emergens) but also the claimant's lost profits (compensatory damages or lucrum cessans). For compensatory damages to be awarded, it is necessary to prove the actual amount of the alleged loss by preponderance of evidence.74
The RTC awarded compensatory damages based on the rental pool rates submitted by petitioner75 and on the premise that all those units would have been leased had respondent only finished the project by December 31, 1995.76 However, other than bare assertions, petitioner submitted no proof that the rental pool was in fact able to lease out the units. We thus hold that the "losses" sustained by petitioner were merely speculative and there was no basis for the award.
Remand Of Other Claims
Since respondent did not repudiate petitioner's other claims stated in the inventory77 in the RTC and CA, it is estopped from questioning the validity thereof.78 However, because some of petitioner's claims have been disallowed, we remand the records of this case to the RTC for the computation of respondent's liability.79
WHEREFORE, the petition is hereby GRANTED.
The March 15, 2002 decision and May 29, 2003 resolution of the Court of Appeals in CA-G.R. CV No. 61353 and the August 5, 1998 decision of the Regional Trial Court, Branch 58, Makati City in Civil Case No. 97-1501 are hereby SET ASIDE. New judgment is entered:
1. ordering petitioner Titan-Ikeda Construction and Development Corporation to return to respondent Primetown Property Group, Inc. the condominium units and parking slots corresponding to the payment made in excess of the proportionate (project) cost of its actual accomplishment as of October 12, 1995, subject to its (petitioner’s) allowable claims as stated in the inventory and
2. dismissing petitioner Titan-Ikeda Construction and Development Corporation’s claims for the cost of additional work (or change order) and damages.
The records of this case are remanded to the Regional Trial Court of Makati City, Branch 58 for:
1. the reception of additional evidence to determine
(a) the percentage of the architectural work actually completed by petitioner Titan-Ikeda Construction and Development Corporation as of October 12, 1995 on the Makati Prime Tower and
(b) the number of condominium units and parking slots sold by petitioner Titan-Ikeda Construction and Development Corporation to third persons;
2. the computation of petitioner Titan-Ikeda Construction and Development Corporation's actual liability to respondent Primetown Property Group, Inc. or vice-versa, and the determination of imposable interests and/or penalties, if any.
SO ORDERED.
G.R. No. 146807 May 9, 2002
PADCOM CONDOMINIUM CORPORATION, petitioner, vs.ORTIGAS CENTER ASSOCIATION, INC., respondent.
DAVIDE, JR., C.J.:
Challenged in this case is the 30 June 2000 decision1 of the Court of Appeals in CA-G.R. CV No. 60099, reversing and setting aside the 1 September 1997 decision2 of the Regional Trial Court of Pasig City, Branch 264, in Civil Case No. 63801.3
Petitioner Padcom Condominium Corporation (hereafter PADCOM) owns and manages the Padilla Office Condominium Building (PADCOM Building) located at Emerald Avenue, Ortigas Center, Pasig City. The land on which the building stands was originally acquired from the Ortigas & Company, Limited Partnership (OCLP), by Tierra Development Corporation (TDC) under a Deed of Sale dated 4 September 1974. Among the terms and conditions in the deed of sale was the requirement that the transferee and its successor-in-interest must become members of an association for realty owners and long-term lessees in the area later known as the Ortigas Center. Subsequently, the said lot, together with improvements thereon, was conveyed by TDC in favor of PADCOM in a Deed of Transfer dated 25 February 1975.4
In 1982, respondent Ortigas Center Association, Inc. (hereafter the Association) was organized to advance the interests and promote the general welfare of the real estate owners and long-term lessees of lots in the Ortigas Center. It sought the collection of membership dues in the amount of two thousand seven hundred twenty-four pesos and forty centavos (P2,724.40) per month from PADCOM. The corporate books showed that PADCOM owed the Association P639,961.47, representing membership dues, interests and penalty charges from April 1983 to June 1993.5 The letters exchanged between the parties through the years showed repeated demands for payment, requests for extensions of payment, and even a settlement scheme proposed by PADCOM in September 1990.
In view of PADCOM’s failure and refusal to pay its arrears in monthly dues, including interests and penalties thereon, the Association filed a complaint for collection of sum of money before the trial court below, which was docketed as Civil Case No. 63801. The Association averred that purchasers of lands within the Ortigas Center complex from OCLP are obligated under their contracts of sale to become members of the Association. This obligation was allegedly passed on to PADCOM when it bought the lot from TDC, its predecessor-in-interest.6
In its answer, PADCOM contended that it is a non-stock, non-profit association, and for it to become a special member of the Association, it should first apply for and be accepted for membership by the latter’s Board of Directors. No automatic membership was apparently contemplated in the Association’s By-laws. PADCOM added that it could not be compelled to become a member without violating its right to freedom of association. And since it was not a member of the Association, it was not liable for membership dues, interests and penalties.7
During the trial, the Association presented its accountant as lone witness to prove that PADCOM was, indeed, one of its members and, as such, did not pay its membership dues.1âwphi1.nêt
PADCOM, on the other hand, did not present its evidence; instead it filed a motion to dismiss by way of demurrer to evidence. It alleged that the facts established by the Association showed no right to the relief prayed for. It claimed that the provisions of the Association’s By-laws and the Deed of Transfer did not contemplate automatic membership. Rather, the owner or long-term lessee becomes a member of the Association only after applying with and being accepted by its Board of Directors. Assuming further that PADCOM was a member of the Association, the latter failed to show that the collection of monthly dues was a valid corporate act duly authorized by a proper resolution of the Association’s Board of Directors.8
After due consideration of the issues raised in the motion to dismiss, the trial court rendered a decision dismissing the complaint.9
The Association appealed the case to the Court of Appeals, which docketed the appeal as CA-G.R. CV No. 60099. In its decision10 of 30 June 2000, the Court of Appeals reversed and set aside the trial court’s dismissal of Civil Case No. 63801, and decreed as follows:
WHEREFORE, the appealed decision dated September 1, 1997 is REVERSED and SET ASIDE and, in lieu thereof, a new one is entered ordering the appellee (PADCOM) to pay the appellant (the Association) the following:
1) P639,961.47 as and for membership dues in arrears inclusive of earned interests and penalties; and
2) P25,000.00 as and for attorney’s fees.
Costs against the appellees.
SO ORDERED.
The Court of Appeals justified its ruling by declaring that PADCOM automatically became a member of the Association when the land was sold to TDC. The intent to pass the obligation to prospective transferees was evident from the annotation of the same clause at the back of the Transfer Certificate of Title covering the lot. Despite disavowal of membership, PADCOM’s membership in the Association was evident from these facts: (1) PADCOM was included in the Association’s list of bona fide members as of 30 March 1995; (2) Narciso Padilla, PADCOM’s President, was one of the Association’s incorporators; and (3) having received the demands for payment, PADCOM not only acknowledged them, but asked for and was granted repeated extensions, and even proposed a scheme for the settlement of its obligation. The Court of Appeals also ruled that PADCOM cannot evade payment of its obligation to the Association without violating equitable principles underlying quasi-contracts. Being covered by the Association’s avowed purpose to promote the interests and welfare of its members, PADCOM cannot be allowed to expediently deny and avoid the obligation arising from such membership.
Dissatisfied with the adverse judgment of the Court of Appeals, PADCOM filed the petition for review in this case. It raises the sole issue of whether it can be compelled to join the association pursuant to the provision on automatic membership appearing as a condition in the Deed of Sale of 04 September 1974 and the annotation thereof on Transfer Certificate of Title No. 457308.
PADCOM contends that it cannot be compelled to be a member of the Association solely by virtue of the "automatic membership" clause that appears on the title of the property and the Deed of Transfer. In 1975, when it bought the land, the Association was still inexistent. Therefore, the provision on automatic membership was anticipatory in nature, subject to the actual formation of the Association and the subsequent formulation of its implementing rules.
PADCOM likewise maintains that the Association’s By-laws requires an application for membership. Since it never sought membership, the Court of Appeals erred in concluding that it was a member of the Association by implication. Aside from the lack of evidence proving such membership, the Association has no basis to collect monthly dues since there is no board resolution defining and prescribing how much should be paid.
For its part, the Association claims that the Deed of Sale between OCLP and TDC clearly stipulates automatic membership for the owners of lots in the Ortigas Center, including their successors-in-interest. The filing of applications and acceptance thereof by the Board of Directors of the Association are, therefore, mere formalities that can be dispensed with or waived. The provisions of the Association’s By-laws cannot in any manner alter or modify the automatic membership clause imposed on a property owner by virtue of an annotation of encumbrance on his title.
The Association likewise asserts that membership therein requires the payment of certain amounts for its operations and activities, as may be authorized by its Board of Directors. The membership dues are for the common expenses of the homeowners for necessary services.
After a careful examination of the records of this case, the Court sees no reason to disturb the assailed decision. The petition should be denied.
Section 44 of Presidential Decree No. 152911 mandates that:
SEC. 44. Statutory liens affecting title. – Every registered owner receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land taking a certificate of title for value and in good faith, shall hold the same free from all encumbrances except those noted on said certificate and any of the following encumbrances which may be subsisting, namely: xxx
Under the Torrens system of registration, claims and liens of whatever character, except those mentioned by law, existing against the land binds the holder of the title and the whole world.12
It is undisputed that when the land in question was bought by PADCOM’s predecessor-in-interest, TDC, from OCLP, the sale bound TDC to comply with paragraph (G) of the covenants, conditions and restrictions of the Deed of Sale, which reads as follows:13
G. AUTOMATIC MEMBERSHIP WITH THE ASSOCIATION:
The owner of this lot, its successor-in-interest hereby binds himself to become a member of the ASSOCIATION which will be formed by and among purchasers, fully paid up Lot BUYERS, Building Owners and the COMPANY in respect to COMPANY OWNED LOTS.
The OWNER of this lot shall abide by such rules and regulations that shall be laid down by the ASSOCIATION in the interest of security, maintenance, beautification and general welfare of the OFFICE BUILDING zone. The ASSOCIATION when organized shall also, among others, provide for and collect assessments which shall constitute a lien on the property, junior only to liens of the Government for taxes.
Evidently, it was agreed by the parties that dues shall be collected from an automatic member and such fees or assessments shall be a lien on the property.
This stipulation was likewise annotated at the back of Transfer Certificate of Title No. 457308 issued to TDC.14 And when the latter sold the lot to PADCOM on 25 February 1975, the Deed of Transfer expressly stated:15
NOW, THEREFORE, for and in consideration of the foregoing premises, the DEVELOPER, by these presents, cedes, transfers and conveys unto the CORPORATION the above-described parcel of land evidenced by Transfer Certificate of Title No. 457308, as well as the Common and Limited Common Areas of the Condominium project mentioned and described in the Master Deed with Declaration of Restrictions (Annex "A" hereof), free from all liens and encumbrances, except those already annotated at the back of said Transfer Certificate of Title No. 457308, xxx
This is so because any lien annotated on previous certificates of title should be incorporated in or carried over to the new transfer certificates of title. Such lien is inseparable from the property as it is a right in rem, a burden on the property whoever its owner may be. It subsists notwithstanding a change in ownership; in short, the personality of the owner is disregarded.16 As emphasized earlier, the provision on automatic membership was annotated in the Certificate of Title and made a condition in the Deed of Transfer in favor of PADCOM. Consequently, it is bound by and must comply with the covenant.1âwphi1.nêt
Moreover, Article 1311 of the Civil Code provides that contracts take effect between the parties, their assigns and heirs. Since PADCOM is the successor-in-interest of TDC, it follows that the stipulation on automatic membership with the Association is also binding on the former.
We are not persuaded by PADCOM’s contention that the By-laws of the Association requires application for membership and acceptance thereof by the Board of Directors. Section 2 of the By-laws17 reads:
Section 2. Regular Members. – Upon acceptance by the Board of Directors of Ortigas Center Association, Inc., all real estate owners, or long-term lessees of lots within the boundaries of the Association as defined in the Articles of Incorporation become regular members, provided, however that the long-term lessees of a lot or lots in said area shall be considered as the regular members in lieu of the owners of the same. Likewise, regular membership in the Association automatically ceases upon the cessation of a member to be an owner or long-term lessee of real estate in the area.
A lessee shall be considered a long-term lessee if his lease is in writing and for a period of two (2) years or more. Membership of a long-term lessee in the Association shall be co-terminus with his legal possession (or his lease) of the lot/s in the area. Upon the lessee’s cessation of membership in the Association, the owner shall automatically succeed the lessee as member thereat.
As lot owner, PADCOM is a regular member of the Association. No application for membership is necessary. If at all, acceptance by the Board of Directors is a ministerial function considering that PADCOM is deemed to be a regular member upon the acquisition of the lot pursuant to the automatic membership clause annotated in the Certificate of Title of the property and the Deed of Transfer.
Neither are we convinced by PADCOM’s contention that the automatic membership clause is a violation of its freedom of association. PADCOM was never forced to join the association. It could have avoided such membership by not buying the land from TDC. Nobody forced it to buy the land when it bought the building with the annotation of the condition or lien on the Certificate of Title thereof and accepted the Deed. PADCOM voluntarily agreed to be bound by and respect the condition, and thus to join the Association.
In addition, under the principle of estoppel, PADCOM is barred from disclaiming membership in the Association. In estoppel, a person, who by his act or conduct has induced another to act in a particular manner, is barred from adopting an inconsistent position, attitude or course of conduct that thereby causes loss or injury to another.18
We agree with the Court of Appeals’ conclusion from the facts or circumstances it enumerated in its decision and enumerated above that PADCOM is, indeed, a regular member of the Association. These facts and circumstances are sufficient grounds to apply the doctrine of estoppel against PADCOM.
Having ruled that PADCOM is a member of the Association, it is obligated to pay its dues incidental thereto. Article 1159 of the Civil Code mandates:
Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.
Assuming in gratis argumenti that PADCOM is not a member of the Association, it cannot evade payment without violating the equitable principles underlying quasi-contracts. Article 2142 of the Civil Code provides:
Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.
Generally, it may be said that a quasi-contract is based on the presumed will or intent of the obligor dictated by equity and by the principles of absolute justice. Examples of these principles are: (1) it is presumed that a person agrees to that which will benefit him; (2) nobody wants to enrich himself unjustly at the expense of another; or (3) one must do unto others what he would want others to do unto him under the same circumstances.19
As resident and lot owner in the Ortigas area, PADCOM was definitely benefited by the Association’s acts and activities to promote the interests and welfare of those who acquire property therein or benefit from the acts or activities of the Association.1âwphi1.nêt
Finally, PADCOM’s argument that the collection of monthly dues has no basis since there was no board resolution defining how much fees are to be imposed deserves scant consideration. Suffice it is to say that PADCOM never protested upon receipt of the earlier demands for payment of membership dues. In fact, by proposing a scheme to pay its obligation, PADCOM cannot belatedly question the Association’s authority to assess and collect the fees in accordance with the total land area owned or occupied by the members, which finds support in a resolution dated 6 November 1982 of the Association’s incorporating directors20 and Section 2 of its By-laws.21
WHEREFORE, the petition is hereby DENIED for lack of merit.
Costs against petitioner.
SO ORDERED.
G.R. No. 104047 April 3, 2002
MC ENGINEERING, INC., petitioner, vs.THE COURT OF APPEALS, GERENT BUILDERS, INC. and STRONGHOLD INSURANCE CO., INC., respondents.
CARPIO, J.:
The Case
This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking the reversal of the decision of the Court of Appeals dated November 14, 19911 and its resolution dated February 5, 1992.2 The Court of Appeals reversed the decision dated July 15, 1989 of the Regional Trial Court, Branch 85,3 Quezon City, in Civil Case No. Q-44392 dismissing the Complaint for Sum of Money With Preliminary Attachment and Damages filed by respondent Gerent Builders, Inc. ("respondent Gerent" for brevity) against petitioner MC Engineering, Inc., ("petitioner" for brevity). The trial court ordered respondents Gerent and Stronghold Surety and Insurance Company ("respondent Surety" for brevity) to pay petitioner, jointly and severally, damages and attorney’s fees.
The Facts
The undisputed facts in this case as found by the trial court and quoted by the Court of Appeals in its assailed decision are as follows:
"x x x On October 29, 1984, Mc Engineering, Inc. and Surigao Coconut Development Corporation (Sucodeco, for short) signed a contract (Exh. B, also Exh. 5), for the restoration of the latter’s building, land improvement, electrical, and mechanical equipment located at Lipata, Surigao City, which was damaged by typhoon Nitang. The agreed consideration was P5,150,000.00** of which P2,500,000.00*** was for the restoration of the damaged buildings and land improvement, while the P3,000,000.00 was for the restoration of the electrical and mechanical works.
The next day, on October 30, 1984 defendant Mc Engineering and plaintiff Gerent Builders, Inc. entered into an agreement wherein defendant subcontracted to plaintiff the restoration of the buildings and land improvement phase of its contract with Sucodeco but defendant retained for itself the restoration of the electrical and mechanical works. The subcontracted work covered the restoration of the buildings and improvement for P1,665,000.00 (Exh. C, also Exh. 6).
Two (2) months later, on December 3, 1984, Sucodeco and defendant Mc Engineering entered into an agreement amending provision No. VII, par 1 of their contract dated October 29, 1984, by increasing the price of the civil works from P2,250,000.00 to P3,104,851.51, or an increase of P854,851.51, with the express proviso that ‘except for the amendment above specified, all the other provisions of the original contract shall remain the same’ (Exh. L).
The civil work aspect consisting of the building restoration and land improvement from which plaintiff would get P1,665,000.00 was completed (TSN., p. 14, July 30, 1986) and the corresponding certificate of acceptance was executed (Exh. F), but the electrical works were cancelled (Tsn., p. 8, July 30, 1986; Tsn., p. 19, Feb. 11, 1987). On January 2, 1985, plaintiff received from defendant the amount of P1,339,720.00**** as full payment of the sub-contract price, after deducting earlier payments made by defendant to plaintiff, as evidenced by the affidavit executed by plaintiff’s president, Mr. Narciso C. Roque (Exh. 1), wherein the latter acknowledged complete satisfaction for such payment on the basis of the Statement of Account (Exh. 2, 2-a & 2-b) which plaintiff had earlier forwarded to defendant.
Nevertheless, plaintiff is still claiming from defendant the sum of P632,590.13 as its share in the adjusted contract cost in the amount of P854,851.51, alleging that the sub-contract is subject to the readjustment provided for in Section VII of the agreement, and also the sum of P166,252.00 in payment for additional electrical and civil works outside the scope of the sub-contract."4
Petitioner refused to pay respondent Gerent. Thus, on March 21, 1985, respondent Gerent filed the complaint against petitioner. On March 28, 1985, the trial court issued the corresponding writ of preliminary attachment upon the filing by respondent Gerent of
a P632,590.13 bond issued by respondent Surety.5 On April 24, 1985, petitioner moved to quash the writ on the ground that it was improperly issued. The trial court denied the motion.
Petitioner assailed the denial in a petition for certiorari6 filed with the Court of Appeals. In a resolution dated October 17, 1986, the Court of Appeals7 rendered a decision granting the petition, as follows:
"Wherefore, finding merit to the petition, the writ of attachment dated March 28, 1985, and the order dated August 14, 1985, denying the motion to quash writ of attachment should be as it is hereby declared null and void, and the execution made by respondent Deputy Sheriff Cristobal C. Florendo, under the writ of attachment issued should be as it is hereby nullified. The respondent Sheriff is hereby directed to restore ownership of the properties heretofore seized and attached to petitioner. No pronouncement as to costs."8
On July 13, 1987, the trial court ordered the return of petitioner’s properties that deputy sheriff Cristobal C. Florendo attached and seized. The sheriff reported to the court that he never seized a single property of petitioner but merely conducted a "paper levy".
On January 5, 1988, petitioner filed an application against the attachment bond to recover damages it suffered due to the wrongful issuance of the writ of attachment. Respondent Surety opposed the application.
In its Answer, petitioner vigorously denied respondent Gerent’s causes of action. Petitioner counterclaimed for damages and attorney’s fees due to the improper issuance of the writ of attachment.
On July 15, 1989, after trial on the merits, the trial court rendered its decision, the dispositive portion of which reads:
"WHEREFORE, judgment is hereby rendered against the plaintiff and in favor of the defendant, as follows:
1. Dismissing the instant case;
2. Ordering the plaintiff and Stronghold Surety And Insurance Company to pay defendant M.C. Engineering, Inc., jointly and severally, the sum of P70,000.00 as moral damages; P30,000.00 as exemplary damages; and P50,000.00 as attorney’s fees, plus costs.
SO ORDERED."9
From the foregoing decision, respondents filed separate notices of appeal on September 5, 1989 and November 2, 1989, respectively.10
The Court of Appeals rendered the assailed Decision on November 14, 1991.11 On February 5, 1992, the Court of Appeals denied petitioner’s motion for reconsideration.12
The Ruling of the Court of Appeals
The Court of Appeals ruled respondent Gerent’s claim meritorious, declaring that Gerent is entitled to share 74% of the price increase in the civil works portion of the main contract.
First, the Court of Appeals found that the price increase arose from a second detailed estimate of the costs of civil works allegedly submitted by respondent Gerent to petitioner. Thus, the Court of Appeals stated:
"xxx. To obtain an adjustment in the contract price, it appears that plaintiff-appellant, as sub-contractor, submitted a second detailed estimate of the costs of civil works (Exh. D) to appellee which, after marking up the figures therein to reflect its share, attached the same to its letter of proposal for an increase in the contract price eventually submitted to SUCODECO. On the basis of the estimates, the latter agreed to increase the cost for the full restoration of its typhoon damaged buildings and land improvement (civil works) from P2,250,000.00 to P3,104,851.51 (Exh. L). Payment of this adjustment was made by SUCODECO on December 27, 1984 (Exh. N). It is from this increase of P854,851.51 that plaintiff-appellant sought to recover its share from the appellee."13
"Appellee denies the submission of the second detailed estimates by plaintiff-appellant. It must be observed, however, that appellee is an electro-mechanical engineering firm which becomes an accredited civil contractor only for as long as it has civil engineers to do the civil works. Thus, in the SUCODECO project, appellee hired plaintiff-appellant, an undisputed civil contractor, to furnish civil engineering services. Taking into account the technical expertise required to draw up such a detailed estimate of civil works as Exh. D and the absence of proof that other civil contractors apart from plaintiff-appellant was ever engaged by appellee, it is undoubtedly plausible that plaintiff-appellant made the estimates which appellee submitted to SUCODECO, with the corresponding adjustments in the costs."14
Second, the Court of Appeals noted that the price increase preceded the cancellation of petitioner’s electrical and mechanical works portion of the main contract.
Petitioner’s president, Mario Cruel, testified that on December 3, 1984, Sucodeco approved the price increase for the civil works portion of the main contract. A week later, or on December 14, 1984, Sucodeco wrote to petitioner canceling the electrical and mechanical works portion of the main contract.15 The Court of Appeals thus reasoned:
"From the foregoing, it is apparent that the adjustment in the price of civil works preceded the cancellation of the electro-mechanical works. If it is indeed true that the adjustment was for the sole benefit of appellee for its preparatory expenses and lost profits, the increase would have been effected simultaneously with or after the cancellation of the electrical and mechanical works. The fact that the amendment in the contract was made before the cancellation could only mean that SUCODECO agreed to increase the cost of the civil works not to compensate appellee for the then still subsisting original agreement but as a result of the higher estimates submitted by the contractor and subcontractor on the expenses for the civil works."16
Third, the Court of Appeals did not consider the absence of an itemized listing of material and labor costs relevant to respondent Gerent’s right to a share in the price increase.
The Court of Appeals ruled that it is Sucodeco, the project owner, and not petitioner who can question the true value of the material and labor costs. Since Sucodeco did not raise any question, it must have agreed to the price increase even without the submission of the true value. Consequently, the Court of Appeals held that it was petitioner’s obligation to pay respondent Gerent its share of the price increase in accordance with the subcontract.17
Fourth, the Court of Appeals found no evidence that petitioner spent substantial amounts on the electrical and mechanical portion of the main contract to justify petitioner’s claim to the entire price increase.
The Court of Appeals rejected petitioner’s claim that the price increase was intended to compensate petitioner for the losses it suffered due to the cancellation of the electrical and mechanical portion of the main contract. The Court of Appeals stated that:
"It is important to note that despite appellee’s posturing that it incurred expenses prior to the cancellation of its contract, thus entitling it to the whole adjustment price, the records are bereft of proof showing substantial amounts expended by appellee. To justify its entitlement to the whole amount, it could have presented receipts reflecting purchases of materials, drawing plans of engineering designs, detailed estimates of electrical and mechanical works and testimonies of engineers allegedly mobilized to start the planning. As it is, the most that appellee could produce were three (3) purchase invoices totaling P110,000.00. xxx."18
Fifth, the Court of Appeals found the quitclaim executed by respondent Gerent on January 2, 1985 vitiated with fraud since petitioner intentionally withheld from Gerent the information that on December 3, 1984 Sucodeco had already agreed to the price increase. The Court of Appeals ruled:
"xxx. The mere fact that an affidavit or quitclaim was executed by Mr. Roque on behalf of his company does not preclude or estop plaintiff-appellant from recovering its just share for it appears that appellee intentionally withheld from Mr. Roque a vital information. Had he known, it is highly unlikely that he will sign the quitclaim. We are more apt to believe Mr. Roque’s protestations that he did not know about the adjustment. His testimony is straightforward, consistent and unwavering. Moreover, a prudent man engaged in the business of construction for decades and whose interests are amply protected by a written instrument will not be easily convinced to acquiesce to have appellee get P1.4M of the whole contractual price. Appellee apparently led Mr. Roque to believe that no adjustment was made to hide its big share in the contract. Considering the fraud employed against plaintiff-appellant, the quitclaim is not binding at all."19
Thus, in the dispositive portion of the assailed decision the Court of Appeals decreed:
"WHEREFORE, premises considered, judgment is hereby rendered setting aside the appealed decision of the lower court, and in lieu thereof defendant-appellee is ordered to pay plaintiff-appellant the sum of P632,590.13 representing the increased contract price in the sub-contract agreement, with the civil works by SUCODECO, and attorney’s fees equivalent to 25% of P632,590.13. Plaintiff-appellant and the surety-appellant are hereby adjudged to solidarily pay appellee the sum of P5,000.00 as attorney’s fees, in connection with the wrongful obtention of the writ of attachment. With costs against defendant-appellee.
SO ORDERED."
Hence, this petition.
The Issues
In its Memorandum, petitioner raises the following issues:
1. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AND GROSSLY ERRED IN HOLDING THAT RESPONDENT GERENT IS ENTITLED TO P632,590.13 OR 74% OF THE PRICE INCREASE IN THE CIVIL WORKS PORTION OF THE MAIN CONTRACT BETWEEN PETITIONER AND SUCODECO.
2. WHETHER OR NOT THE QUITCLAIM EXECUTED BY GERENT WAS VITIATED WITH FRAUD.
3. WHETHER OR NOT PETITIONER IS ENTITLED TO ACTUAL, MORAL, AND EXEMPLARY DAMAGES DUE TO THE WRONGFUL ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT.
4. WHETHER OR NOT THE AMOUNT OF P5,000.00 AS ATTORNEY’S FEES IS SUFFICIENT.
5. WHETHER OR NOT RESPONDENT GERENT IS ENTITLED TO ATTORNEY’S FEES IN THE AMOUNT EQUIVALENT TO TWENTY FIVE PERCENT (25%) OF P632,590.13.
The Ruling of the Court
The Court finds for petitioner MC Engineering, Inc.
The Quitclaim of Respondent Gerent
We begin with the issue of whether the so-called quitclaim executed by respondent Gerent is valid. If the quitclaim is valid, then the quitclaim settles with finality all the claims of respondent Gerent, rendering its complaint against petitioner without any legal basis. If fraud vitiated the quitclaim, then it becomes necessary to determine if petitioner still owes respondent Gerent any amount under their subcontract.
The quitclaim is embodied in the Affidavit executed on January 2, 1985 by respondent Gerent’s president, Narciso Roque. The Affidavit is not the usual quitclaim which expressly discharges and releases a party from any and all liabilities. The Affidavit does not contain such express language. However, the Affidavit expressly acknowledges receipt by Gerent of "full payment" of the subcontract price20 from petitioner. The effect, nevertheless, is the same because a creditor who receives and acknowledges full payment from his debtor causes the extinguishment of his claim against the debtor.21 Roque, however, now claims that had petitioner informed him of the price increase granted by Sucodeco on December 3, 1984, he would not have signed the Affidavit of January 2, 1985.
The primary question to resolve is whether petitioner misled, deceived or coerced respondent Gerent into signing the Affidavit. We rule petitioner did not. The Court of Appeals erred in declaring that fraud vitiated the Affidavit.
Fraud is never presumed but must be established by clear and convincing evidence. There is no evidence that petitioner misled, deceived or coerced respondent Gerent’s president into signing the Affidavit. A mere preponderance of evidence is not even adequate to prove fraud. Thus, in Maestrado vs. Court of Appeals, 22 the Court ruled that:
"The deceit employed must be serious. It must be sufficient to impress or lead an ordinarily prudent person into error, taking into account the circumstances of each case. Silence or concealment, by itself, does not constitute fraud, unless there is a special duty to disclose certain facts. Moreover, the bare existence of confidential relation between the parties, standing alone, does not raise the presumption of fraud."23 (Emphasis supplied)
There was no proof of fraud presented by respondent Gerent other than its bare and unsubstantiated allegations. On the contrary, respondent Gerent’s president, Roque, admitted that he was fully aware and certain of the impending price increase. Thus, Roque testified:
"Q: Is it really true that you knew that there will be an increase because you were discussing that already?
A: I know that there will be an increase.
Q: Because you were discussing it?
A: Yes. I know that there will be an increase, that is why I am always inquiring from Mr. Cruel whether there was already an increase made and adjustment of the contract.
Q: When was the increase being discussed?
A: Even during the time of the initial start of the project it was already discussed.
Q: What particular month?
A: About November.
Q: And the contract was signed by Mario Cruel and Sucodeco in October? October 29, 1984?
A: Yes, sir." 24 (Emphasis supplied)
Despite his certainty that a price increase was imminent, Roque still signed the Affidavit without any reservation. Since respondent Gerent was fully aware of the impending price increase, it cannot claim that it was misled or deceived into signing the Affidavit. The non-disclosure by petitioner of the price increase did not mislead or deceive respondent Gerent because Roque fully knew that the price increase would in any event happen. Based on his own testimony, Roque voluntarily, willingly and freely signed the Affidavit without any compulsion or coercion from anyone. Thus, Roque testified:
"Q: But you know before hand that what you signed is supposed to be an affidavit?
A: Yes, sir.
Q: Did you make any complaint to MC Engineering?
A: No, sir.
xxx.
Q: When you signed that affidavit Exh. "1", did you not make any protests?
A: No, I did not make any protest."25
Petitioner was under no obligation to disclose to respondent Gerent, a subcontractor, any price increase in petitioner’s main contract with Sucodeco. Respondent Gerent is not a party to the main contract. The subcontract between petitioner and respondent Gerent does not require petitioner to disclose to Gerent any price increase in the main contract. The non-disclosure by petitioner of the price increase cannot constitute fraud or breach of any obligation on the part of petitioner.
Moreover, the record shows that the P139,720.30 representing final and full payment of the subcontract price was paid by petitioner to respondent Gerent based on the statement of account Gerent itself prepared and submitted to petitioner. This can be gleaned from the testimony of Roque, to wit:
"Q: You have submitted likewise a statement of account?
A: Yes, sir.
Q: And this statement of account is this Annex "1" of the Answer?
A: Yes, sir.
ATTY. AGUINALDO
May we request that this statement of account be marked as Exh. "2".
And the signature above the typewritten name Narciso Roque including the words submitted by, be marked as Exh. 2-A and the figure P139,720.30 be encircled and be marked as Exh. 2-B."26
The Statement of Account signed and submitted by respondent Gerent’s president Roque to petitioner provides as follows:
"January 2, 1985
MC ENGINEERING, INC.98 Sgt. J. Catolos St.,Cubao, Quezon City
Subject: Breakdown for sub-contracted work at Sucodeco Proj.
STATEMENT OF ACCOUNT
CONTRACT AMOUNT………………………
P1,665,000.00
Less: Previous Payments:
October 30 - 50% downpayment -
P832,500.00
December 4 – 2nd partial payments. -
400,000.00
December 13- 3rd partial payments. -
200,000.00
P1432,500.00
Deduction for cost of materials taken from Sucodeco.
92,779.70
1,525,279.70
BALANCE DUE & COLLECTIBLE
P139,720.30
Submitted by:
NARCISO C. ROQUEChairman
Conforme:
__________________"27 (Emphasis supplied)
Again, nothing in the Statement of Account indicates any reservation relating to the impending price increase. Thus, respondent Gerent was paid what it actually believed, estimated and demanded should be its fair compensation for its subcontract work. The voucher issued by petitioner to respondent Gerent in full payment of the subcontract price states as follows:
"MC ENGINEERING, INC.Quezon City
CHECK VOUCHER NO. 21324
Date
January 2, 1985
TO: GERENT BUILDERS INCORPORATED
Full payment for subcontracted work at Sucodeco Project………..................................…………………
139,720.30
Less: 3% of 15% withholding tax………………
628.74
P139,091.56
Amount paid by Check No. RCBC # 479476
P139,091.56
Received the sum of PESOS one hundred thirty nine thousand ninety one pesos & 56/100 only from MC ENGINEERING, INC.in full payment of account.
By:
_____________________ Payee
Checked and recommended by:
_______________________Office Assistant
APPROVED BY:
_______________________President"28
(Emphasis supplied)
This voucher, stating that the amount of P139,091.56 was in "full payment" for the subcontract work, was signed by Roque at the same time he received the check payment for the same amount.
Finally, the Affidavit that Roque signed provides as follows:
"A F F I D A V I T
I, NARCISO C. ROQUE, of legal age, Filipino, married with residence and postal address at No. 58 Lanzones Street, Quezon City, Metro Manila, Philippines, after being sworn to in accordance with law, do hereby depose and say:
1. That I am the CHAIRMAN/PRESIDENT of GERENT BUILDERS, INC.;
2. That my Company, GERENT BUILDERS, INC., has sub-contracted with MC ENGINEERING, INC. for the restoration works of building and land improvement of SUCODECO OIL HILLS, INC. located at Bo. Lipata, Surigao City;
3. That in the prosecution of restoration works and land improvement of SUCODECO OIL MILLS, INC. Buildings, GERENT BUILDERS, INC. had fully paid the wages of laborers, rentals of equipment and machineries used; and fully paid materials used in the fabrication, delivery and erection of same, and that no supplier, laborer, equipment and machinery owner has standing claim against my company;
4. That all taxes due in accordance with the project have been fully paid as of date;
5. That the ONE HUNDRED THIRTY NINE THOUSAND SEVEN HUNDRED TWENTY PESOS AND 30/100 (P139,720.30) ONLY, released on January 2, 1985 REPRESENTS FULL PAYMENT OF MY CONTRACT WITH MC ENGINEERING, INC.; (Emphasis supplied)
6. That this affidavit is being executed for purpose of collecting from MC ENGINEERING, INC.;
7. That affiant, further sayeth none.
NARCISO C. ROQUEAffiant" 29
(Emphasis supplied)
The inescapable conclusion is that the Affidavit was meant to be a total quitclaim by respondent Gerent, fully discharging petitioner from whatever amounts it may have owed Gerent under the subcontract. There is nothing in the Affidavit that reserves respondent Gerent’s right to collect a portion of any price increase in the main contract. On the other hand, the Affidavit is clear, unequivocal and absolute that respondent Gerent had received "full payment" under the subcontract. Respondent Gerent is now estopped from impugning the validity of the Affidavit simply because petitioner secured a higher price for the main contract.
Thus, in Maestrado vs. Court of Appeals30 we stated that:
"The freedom to enter into contracts, such as the quitclaims, is protected by law and the courts are not quick to interfere with such freedom unless the contract is contrary to law, morals, good customs, public policy or public order. Quitclaims, being contracts of waiver, involve the relinquishment of rights, with knowledge of their existence and intent to relinquish them. xxx.
Quitclaims being duly notarized and acknowledged before a notary public, deserve full credence and are valid and enforceable in the absence of overwhelming evidence to the contrary."
In the instant case, the Affidavit is indisputably intended to document the fact that petitioner had fully paid respondent Gerent for the subcontract work. Roque’s signature thereon attests to the truth of the contents of the Affidavit. Thus, Roque again testified:
"Q: But you read the contents of the affidavit?
A: Yes, sir.
Q: You understand the contents of the affidavit when you signed?
A: Yes, sir."31
The execution of the Affidavit by Roque, president of respondent Gerent, finally puts to rest all the claims of Gerent against petitioner under the subcontract. The very purpose of the Affidavit, just like a quitclaim, is precisely to finally settle all the claims of respondent Gerent, regardless of the merits of the claims. The Affidavit can be annulled only if it was procured through fraud. There is no convincing evidence to establish that fraud vitiated the Affidavit. The fact that petitioner received a windfall because of the price increase is not a reason to annul the Affidavit. Consequently, the Affidavit renders moot and academic all the other issues raised in this petition. Nevertheless, the Court will still painstakingly discuss and resolve the remaining issues raised by petitioner.
The 74%-26% Sharing.
The Court of Appeals upheld respondent Gerent’s theory that the subcontract provides for a 74%-26% sharing between Gerent and petitioner in any price increase for the civil woks portion of the main contract. Ruled the Court of Appeals:
"The question left to be determined is the amount of appellant’s share in the adjusted price. The record reveals that out of the P2,250,000.00 originally earmarked for civil works, plaintiff-appellant, as sub-contractor, was awarded P1,665,000.00 which is 74% of the first amount. Moreover, in the second detailed estimate submitted by plaintiff-appellant to appellee, the total cost of P2,297,590.00 was charged for civil works. This amount was subsequently increased by appellee to P3,104,851.00***** when it submitted the estimates to SUCODECO. Again, the mark-up was 26% of plaintiff-appellant’s estimate. Under the circumstances, the parties had clearly intended to split the cost award to 74%-26% in plaintiff-appellant’s favor. This entitles plaintiff-appellant to the sum of P632,590.13 as its share in the adjusted price."32
Again, we do not agree. A perusal of the subcontract reveals the following stipulations:
"ARTICLE II
SUB-CONTRACT PRICE
2.1. In consideration of the full and satisfactory performance of the works by the SUB-CONTRACTOR the CONTRACTOR shall pay the SUB-CONTRACTOR the Lump Sum amount of ONE MILLION SIX HUNDRED SIXTY FIVE THOUSAND (P1,665,000.00) PESOS.
2.2. The SUB-CONTRACT PRICE above is subject to section VIII of MAIN CONTRACT. By reason thereof, parties hereby declare and understand that the SUB-CONTRACT PRICE of P1.665 is subject to change and verification pending the final submission of the true value as maybe determined by evaluation and inspection by representatives of OWNER, CONTRACTOR and SUB-CONTRACTOR."33 (Emphasis supplied)
On the other hand, the main contract between petitioner and Sucodeco provides as follows:
"VIII. SPECIAL SIDE AGREEMENT. – It is hereby declared and understood that Contract Price of P5.25M is subject to changes and verification pending the final submission of the true value as maybe determined by evaluation and inspection by representatives of both parties, SURIGAO COCONUT DEVELOPMENT CORPORATION and MC ENGINEERING, INC."34
(Emphasis supplied)
The Court of Appeals was correct in holding that:
"The above-cited stipulations are very clear and need no extraneous interpretation. The lump sum amount of P1,665,000.00 due to plaintiff-appellant in payment of the civil works subcontracted to it is subject to change depending on the true value to be submitted and evaluated by the parties to the contracts."35 (Emphasis supplied)
However, the Court of Appeals erred in upholding respondent Gerent’s claim that it was entitled to a 74% share in the price increase of the main contract.
Respondent Gerent alleges that as a customary business practice petitioner and respondent Gerent agreed to a 74%-26% sharing in the main contract price for the civil works portion. The alleged 74%-26% sharing can be upheld only if such specific sharing was agreed upon in the subcontract, or if the subcontract is a joint venture. A textual examination of the terms of the subcontract shows no provision regarding any 74%-26% sharing between petitioner and respondent Gerent. Instead, the subcontract specifically provides for a fixed price for the civil works in the amount of P1,665,000.00, subject to change only upon submission of the "true value" of the work undertaken by the subcontractor.
Neither is there any stipulation in the subcontract indicating a joint venture between petitioner and respondent Gerent. That the subcontract price corresponds to 74% of the main contract price cannot by itself be interpreted to mean that the parties agreed to a 74%-26% sharing of any price increase in petitioner’s main contract with Sucodeco. Roque, respondent Gerent’s president, testified that the 74%-26% arrangement was not incorporated in the subcontract and was a mere gentleman’s agreement. This can be gleaned from the testimony of Roque, to wit:
"Q: Mr. Witness, you mentioned under page 5 of the transcript when you gave your direct testimony that the agreement between you and the defendant was a joint venture, is that correct?
A: Yes, sir.
Q: Where is that agreement?
A: It was a verbal agreement between us. Among contractors there is such a thing as gentleman’s agreement.
Q: Are you referring to…you mean to say that that agreement is not in writing?
A: It is not in writing but it was verbally agreed between the defendant and myself.
xxx.
"Q: Why was that 74%-26% sharing not placed in the agreement with MC Engineering by your company?
xxx.
A: Prior to entering into our proposal we have already an agreement with Mr. Cruel that whatever contract we will get, the civil work will be awarded to me on subcontract wherein 26% will be for MC Engineering and 74% will be for us.
Q: That is verbal agreement?
A: Verbal prior to the execution of the subcontract agreement.
Q: That was the verbal agreement prior to the execution and signing of the subcontract agreement?
A: It was.
xxx.
"Q: This agreement, to reiterate your testimony for the alleged 74% and 26% sharing, this has never been reduced into writing?
A: It is not, sir."36 (Emphasis supplied)
The terms of the subcontract are clear and explicit. There is no need to read into them any alleged intention of the parties. If the true intention of the parties was a 74%-26% sharing in any price increase in the main contract, the parties could have easily incorporated such sharing in the subcontract, being a very important matter. They did not because that was not their agreement.
Section 9, Rule 130 of the Revised Rules of Court provides that "[w]hen the terms of an agreement have been reduced to writing, it is to be considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement." Simply put, evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict, or defeat the operation of a valid contract.37 While parol evidence is admissible to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in writing, unless there has been fraud or mistake.38 It is basic that parties are bound by the terms of their contract which is the law between them.39
Respondent Gerent claims that petitioner cannot be allowed to evade its lawful obligation arising from the subcontract, citing the well-known principle of law against unjust enrichment. Article 22 of the Civil Code provides that "[e]very person who through an act or performance by another, or by any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him." Two conditions must generally concur before the rule on unjust enrichment can apply, namely: (a) a person is unjustly benefited, and (b) such benefit is derived at another’s expense or damage.40
Such a situation does not exist in this case. The benefit or profit derived by petitioner neither comes from respondent Gerent nor makes the Gerent any poorer. The profit derived by petitioner comes from Sucodeco by virtue of the main contract to which respondent Gerent is not a party. Respondent Gerent’s rights under the subcontract are not diminished in any way, and Gerent remains fully compensated according to the terms of its own subcontract. The profit derived by petitioner is neither unjust, nor made at the expense of respondent Gerent.
That a main contractor is able to secure a price increase from the project owner does not automatically result in a corresponding price increase to the subcontractor in the absence of an agreement to the contrary. In this case, there is no stipulation in the subcontract that respondent Gerent will automatically receive 74% of whatever price increase petitioner may obtain in the civil works portion of the main contract. Neither has the subcontract been changed to reflect a higher subcontract price.
In a subcontract transaction, the benefit of a main contractor is not unjust even if it does less work, and earns more profit, than the subcontractor. The subcontractor should be satisfied with its own profit, even though less than the main contractor’s, because that is what it bargained for and contracted with the main contractor. Article 22 of the Civil Code is not intended to insure that every party to a commercial transaction receives a profit corresponding to its effort and contribution. If a subcontractor knowingly agrees to receive a profit less than its proportionate contribution, that is its own lookout. The fact that a subcontractor accepts less does not make it dumb for that may be the only way to beat its competitors. The winning subcontractor cannot be allowed to later on demand a higher price after bagging the contract and beating competitors who asked for higher prices. Even if the subcontractor incurs a loss because of its low price, it cannot invoke Article 22 of the Civil Code to save it from financial loss. Article 22 is not a safety net against bad or overly bold business decisions.
Under the foregoing circumstances, we hold that Gerent is not entitled to any share in the price increase in the main contract. Whatever price increase petitioner obtained in the main contract, whether for the civil works portion or otherwise, was solely for the benefit of petitioner.
The First and Second Detailed Estimates
There is no true valuation of the civil works.
The main contract clearly provides that as a condition precedent for any upward or downward adjustment in the contract price, there must first be a true valuation of the materials and labor costs to be determined through evaluation and inspection by representatives of petitioner and Sucodeco.41 A similar provision is found in the subcontract requiring, before any change in the subcontract price, for a true valuation to be determined by Sucodeco, petitioner and respondent Gerent. The records establish that respondent Gerent was responsible for making the estimates of the actual cost of the civil works which served as basis for the original price of the main contract.
However, the Court of Appeals erred in finding that the price increase in the main contract was based on a second detailed estimate supplied by respondent Gerent.42 The evidence adduced reveals that the parties did not undertake any true valuation of the cost of the civil works. The price increase could not have been based on a true valuation because no true valuation was ever made as required by the main contract and subcontract. There is no substantial evidence to support respondent Gerent’s assertion that the price increase was based on a second estimate that Gerent allegedly supplied petitioner.
The true valuation of the works must be based on the true value or estimates of the actual materials and labor required for the work. An examination of the alleged second detailed estimate reveals nothing but a plain summary of computation. Not only is it undated but there is also nothing in the said estimate which indicates that it was indeed received, evaluated and marked-up by petitioner as claimed by respondent Gerent. Neither was it clearly established by convincing evidence that the same was the true and final valuation of the civil works pursuant to the terms of the subcontract and main contract. This is evident from the testimony of Roque, the president of respondent Gerent, to wit:
"Q: So your conclusion is that based on the payment of SUCODECO to MC Engineering, you are now entitled to your claim of alleged 74%?
A: Yes, sir.
Q: And it is not based on the actual determination of the true value of the materials and labor spent and utilized in the project?
A: In the same manner as MC Engineering.…it is not based on the true value.
Q: It is not based on the true value?
A: Yes sir."43 (Underscoring Supplied)
Clearly, the price increase did not result from a true valuation of materials and labor, which is the only valid ground for any adjustment in the subcontract price.
The second estimate is lower than the first estimate.
A further perusal of the testimony of Narciso Roque clearly shows that the alleged second estimate, assuming it was agreed to by petitioner and Sucodeco, was actually even lower than the first estimate which was the basis of the original contract price for the civil works. Thus, respondent Gerent’s Roque testified as follows:
"Q: Now, you made a second estimate?
A: Yes, sir, I made a second estimate on November 5."
xxx.
"Q: How much was that?
A: P2,297,590.00, for the restoration of the civil works and land development."
xxx.
"Q: How much again was the total of the first estimate?
A: In the first estimate the total…
Q: The breakdown first.
A: For building is P2,257,351.20 and the land improvement is P247,361.40.
Q: And this is the first estimate, am I correct?
A: Yes, sir.
Q: When was this made?
A: That was October 15.
Q: Then there was a second estimate?
A: The second estimate is the final adjusted cost submitted to MC Engineering by Gerent Builders. The total for building and land improvement is P2,297,590.00."44 (Underscoring supplied)
If indeed the price increase in the main contract were based on the lower second estimate, then the actual price adjustment would have been downward and not upward. The fact that the main contract price went up from the original P2,250,000.00 to P3,104,851.51 shows that the price increase was not made on the basis of the second estimate.
There was no itemized listing of material and labor costs.
Moreover, the record is bereft of proof of an itemized listing of the costs of materials and labor to be used upon which respondent Gerent could have based its second estimate. This negates further respondent Gerent’s claim that the price increase was based on its second estimate.
The inevitable conclusion is that the price increase in the civil works portion of the main contract was based on other factors and not on the alleged second estimate submitted by respondent Gerent.
Third Issue: Award of actual, moral and exemplary damages.
We come to the issue of whether or not petitioner is entitled to its counterclaim for actual, moral and exemplary damages due to the wrongful issuance of the writ of attachment. The Court of Appeals held that:
"xxx. In the instant suit, appellee failed to establish bad faith and malice against plaintiff-appellant when it sought to attach the former’s properties. The lower court itself in its decision did not make any express pronouncement as to the existence of malice and bad faith in the procurement of the writ of attachment. Instead the trial court concluded that ‘as a result of such attachment, the defendant’s business operation and credit standing have been prejudiced and damaged’ and ‘the defendant is entitled to recover moral and exemplary damages by reason of the irregular issuance of the writ of attachment.’ Such conclusions do not immediately warrant the award of moral damages. It is true that the attachment was wrongful. But in the absence of proof of bad faith or malice, plaintiff-appellant’s application cannot be said to be harassing or oppressing but merely an act done to assert and protect a legal right. (Emphasis supplied)
The grant of exemplary damages is likewise improper. Since no moral damages is due to appellee and it appearing that no actual damages was awarded by the lower court, the grant of exemplary damages has no leg on which to stand (Art. 2234, Civil Code).
If at all, the wrongful issuance of the writ of attachment, as ruled out by this Court, merely resulted in actual damages to appellee. But such is not automatically awarded for it is subject to proof. Appellee’s claim that it lost major contracts after a credit investigation revealed that its accounts were garnished is a bare allegation not merely unsupported by solid evidence but is also speculative. The alleged $35,000.00 remittance refused by the Hongkong and Shanghai Bank does not inspire belief for failure of appellee to produce documentary proof to buttress its claim."45
We agree with the Court of Appeals that the trial court erred in awarding moral and exemplary damages to petitioner. The mere fact that a complaint is dismissed for lack of legal basis will not justify an award of moral damages to the prevailing party.46 Even the dismissal of a "clearly unfounded civil action or proceeding" will not entitle the winning party to moral damages.47 For moral damages to be awarded, the case must fall within the instances enumerated in Article 2219, or under Article 2220, of the Civil Code.48 Moreover, in the absence of fraud, malice, wanton recklessness or oppressiveness, exemplary damages cannot be awarded.49
Fourth and Fifth Issues : Award of Attorney’s Fees
The last matter to be determined is the reasonableness of the attorney’s fees awarded to both parties. The Court of Appeals held that:
"xxx, the award of attorney’s fees must vary. Considering the wrongful attachment made against appellee’s accounts, it is understandable that it incurred attorney’s fees in procuring the discharge of the attachment for which reason the amount of P5,000.00 may reasonably be awarded. However, inasmuch as plaintiff-appellant was constrained to file this suit to protect its legal interest, and pursuant to the terms of the sub-contract, appellee is adjudged to pay appellant 25% of P632,590.13, the amount involved in this suit."50
The award must be modified. The Court of Appeals was partly correct in holding that the award of attorney’s fees to petitioner is justified considering that petitioner was constrained to engage the services of counsel at an agreed attorney’s fees. To secure the lifting of the writ of attachment, petitioner’s counsel, Atty. Mario Aguinaldo testified that he was paid P1,250.00 on January 1985,
P10,000.00 on April 10, 1985 and another P10,000.00 on June 30, 1985 for his legal services, totaling P21,500.00.51 Accordingly, the award of P5,000.00 is hereby increased to P21,250.00. We deem it just and equitable that attorney’s fees be awarded when a party is compelled to incur expenses to lift a wrongfully issued writ of attachment.52
WHEREFORE, the petition is GRANTED and the assailed Decision of the Court of Appeals is SET ASIDE. The decision of the trial court is AFFIRMED WITH MODIFICATION. The complaint against petitioner is dismissed with prejudice. Respondents Gerent Builders, Inc. and Stronghold Surety and Insurance Company are ordered to pay petitioner MC Engineering, Inc., jointly and severally, the sum of P21,250.00 as attorney’s fees. Costs against respondents.
SO ORDERED.
G.R. No. L-62441 December 14, 1987
BANK OF THE PHILIPPINE ISLANDS, as Successor to Peoples Bank and Trust Company, petitioner, vs.BENJAMIN PINEDA, doing business under the name and style of PIONEER IRON WORKS, respondent.
BIDIN, J.:
This is a Petition for Review on certiorari, seeking the reversal of the Decision of the First Division 1 of the Court of Appeals in CA- G.R. No. 66365-R entitled "Benjamin Pineda, etc., plaintiff-appellee vs. Southern Industrial Projects Inc., Bacong Shipping Company, S.A. Gacet Inc., Interocean Shipping Corporation and Peoples Bank and Trust Co., defendant-appellant, " affirming the decision of the trial court, the dispositive portion of which reads:
Wherefore, the appealed decision being in accordance with the law and the evidence, the same is hereby affirmed, with proportionate cost against appellant.
The facts of this case as found by the Court of Appeals are as follows:
Southern Industrial Project, Inc. (SIP for short) is a corporation the majority stockholder of which is the Concon Family. Bacong Shipping Company, S.A. (Bacong, for short) is a Panamanian corporation organized to operate vessels purchased by SIP under Panamanian Flag and its president is Gregorio A. Concon.
SIP and/or Bacong purchased the vessels SS "Southern Comet," SS "Southern Express" and SS "Southern Hope," thru financing furnished by defendant Peoples Bank and Trust Company, now the Bank of the Philippine Islands. To secure the payment of whatever amounts maybe disbursed for the aforesaid purpose, the said vessels were mortgaged to Peoples Bank and Trust Company. For the operation of the said vessels, these were placed under the booking agency of defendant Interocean Shipping Corporation, with the undertaking that the freight revenues from their charter and operation shall be deposited with the Trust Department of Peoples Bank and Trust Company and that disbursements made therefrom shall be covered by vouchers bearing the approval of SIP.
As Peoples Bank and Trust Company and SIP were not satisfied with the amount of revenues being deposited with the said Bank, it being suggested that diversions thereof were being made, Gregorio A. Concon of SIP and/or Bacong and Roman Azanza of Peoples Bank and Trust Company, organized S.A. Gacet, Inc. to manage and supervise the operation of the vessels with Ezekiel P. Toeg as the manager thereof. Accordingly, on August 15, 1966, a Management Contract (Exh. A., Exh. 1-SIP and Exh. 3-Peoples Bank) was entered into between SIP and GACET, Inc., placing the supervision and management of the aforementioned vessels in the hands of GACET, Inc., which was to run for a period of six (6) months, renewable at the will of the parties, without however, terminating the booking agency of interocean Shipping Corporation.
The said Management Contract stipulates, among others, that —
The agent GACET may not borrow money for the husbanding of vessels "without special authority" from the appellant bank (5 [f])
All office records required as well as books of accounts" shall "be available for inspection" by the appellant bank and "may at any time temporarily take possession of such records and books to make a complete audit" (5 [h])
The appellant bank may-obtain copies of documents from any or all of GACET's booking agents pertaining to transactions entered into by said booking agents" (5 (h)) [1]);
The appellant bank has the right "(t)o inquire and obtain information, by telephone, or otherwise such data as the name of the shippers, nature of cargo, destination of cargo, freight rates, etc. " (5 (h)) [2]); and,
The appellant bank has the right "(t)o check on remittances made by shipper to the booking agent" etc. (5)[3]).
Likewise, under the terms of said Management Contract, the Peoples Bank and Trust Company was designated as depository of all revenues coming from the operation of the subject vessels thereby enabling it to control all expenses of GACET, Inc., since they win all be drawn against said deposit.
During the period comprising March 16, 1967 and August 25, 1967, GACET and Interocean in performing their obligations under said Management Contract, contracted the services of herein plaintiff-appellee, Benjamin Pineda doing business under the name and style "Pioneer Iron Works," to carry out repairs, fabrication and installation of necessary parts in said vessels in order to make them seaworthy and in good working operation. Accordingly, repairs on the vessels were made. Labor and materials supplied in connection therewith, amounted to P 84,522.70, P 18,141.75 of which was advanced by Interocean, thereby leaving a balance of P 62,095.95. For this balance, Interocean issued three checks (Exhibit I) and the third one for P 17,377.57 (Exh. J). When these checks were however presented to the drawee, Peoples Bank and Trust Company, they were dishonored as defendant Interocean stopped payment thereon (Exhs. H-2,I-2 & J-2).
Meanwhile and by reason of the inability of SIP and/or Bacong to pay their mortgage indebtedness which was past due since 1964, the mortgagee Peoples Bank and Trust Company threatened to foreclose the mortgage on said vessels. In order to avoid the inconvenience and expense of imminent foreclosure proceedings, SIP and/or Bacong sold said vessels to Peoples Bank by way of dacion en pago. The sale is evidenced by three (3) deeds of sale all dated January 19, 1968 (Exhs. C, D, & E). Immediately preceding the execution of said deeds of sale, SIP, Bacong and Peoples Bank executed a "Confirmation of Obligation" (Exh. "B") whereby SIP and Bacong (1) acknowledged being indebted to defendant bank, the payment of which indebtedness was secured by chattel mortgages on said vessels, (2) agreed to sell and convey to defendant bank the aforementioned vessels by separate deed of sale for the total purchase price of P 3,038,000.00 to be applied as partial payment on account of their mortgage indebtedness; and (3) expressly recognized that after such application, a substantial balance will still remain unpaid and owing by SIP and Bacong which remaining balance they have agreed to confirm and pay to the bank on demand with 12% interest per annum. Likewise, listed in the "Confirmation of Obligation" were some of the accounts acknowledged and confirmed by the parties to be outstanding at the time, in connection with the subject vessels as follows-
a) Accrued Salaries and allotments........................ P180,687.04
b) National Shipyard ......................................................31,068.57
c) Pioneer Iron Works : ..................................................82,877.57
d) Pacific Engineering Corporation .............................152,094.85
e) Esso Standard Eastern Account ..........................1,693,913.25
f) Cost of bailing out of the vessels
in Japan crews, salaries, etc.................................... 328,692.50
TOTAL.................................................................. P 2,954 833,34
The Deed of "Confirmation of Obligation" also provides
That Southern and/or Bacong acknowledge that the total purchase price of "TSS Southern Comet,
That Southern Hope" and "SS Southern Express" in the sum of THREE MILLION THIRTY EIGHT THOUSAND PESOS (P 3,038,000.00), Philippine currency shall be applied on account of their mortgage obligations, as they appear on the books of the BANK, and whatever amount remains outstanding after application (or set off) is hereby acknowledged to be owed to the BANK and shall be payable with interest at the rate of 12170 per annum." That part (sic) from the foregoing SOUTHERN and/or BACONG have authorized the BANK to pay certain expenses, accounts of charges in connection with the sold vessels, the principal items being those listed below." (These are the accounts listed above). "It is agreed that this is not a final or complete listing and the above expenses shall be subject to final adjustment after verification of the amounts actually paid or advanced by the BANK under the said authority from SOUTHERN and/or BACONG. It is further agreed that these expenses shall also be subject to the terms of condition No. 1 above." (Those enclosed in parenthesis are supplied).
On October 1, 1968, plaintiff instituted the present action (Civil Case No. 74379) before the Court of First Instance of Manila, seeking to recover from SIP, GACET, Interocean and the Peoples Bank and 'Trust Company the principal sum of P62,095.92 with interests thereon from the respective dates of each repair order until the same is fully paid, which amount was allegedly the total unpaid balance of the cost of repairs, fabrication and installation of necessary parts carried out by the said plaintiff on the aforenamed vessels.
Answering the complaint, defendants Peoples Bank and Trust Co., now Bank of P.I. and Southern Industrial Projects, Inc. (SIP) alleged that the abovementioned claim is the personal responsibility of Interocean Shipping Corporation and/or Gacet, Inc. and deny liability thereof Defendant Bacong Shipping Company, S.A. (Bacong on its part denies knowledge of the obligation claiming it did not have any transaction whatsoever with the plaintiff while defendant Interocean Shipping Corporation and GACET, Inc. also deny liability contending that the obligation being lien on the vessels upon which services and repairs were made by the plaintiff, defendant Peoples Bank & Trust Co., now Bank of P.I., being the ultimate owners thereof should be the one liable therefor.
After trial, the court a quo rendered judgment the dispositive portion of which reads as follows —
WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering defendants Southern Industrial Projects, Inc. and Peoples Bank and Trust Company, now Bank of P.I., to pay plaintiff Benjamin Pineda doing business under the name and style of Pioneer Iron Works, jointly and severally, the amount of P62,095.92, with legal rate of interest thereon from the date of the filing of the complaint, attorney's fees in the amount of P10,000.00, and the costs of the suit. The complaint is dismissed against defendants Interocean Shipping Corporation and Gacet, Inc.
SO ORDERED.
From the foregoing decision, defendants Bank of P.I. and Southern Industrial Projects, Inc. appealed to the Court of Appeals but the latter, finding the aforequoted decision to be in accordance with law and the evidence, affirmed the same, Hence, this petition.
Petitioner raised the following assignment of errors:
I. The Intermediate Appellate Court erred in affirming the findings of the lower court that petitioner, in purchasing the vessels, assumed the obligations of Southern Industrial Projects, Inc. and/or Bacong Shipping Company.
II. The Intermediate Appellate Court erred in affirming the ruling of the lower court that petitioner is liable to private respondent when the same was based on an erroneous interpretation of the "confirmation of obligation" in relation to the deeds of sale of the vessels.
III. The findings of the lower court as affirmed by the Intermediate Appellate Court that private respondent had a valid and subsisting repairer's lien is contrary to law as well as the rulings set forth by this Honorable Court.
IV. The Intermediate Appellate Court erred in not holding that the lower court has no jurisdiction over the subject matter of the action or suit which seeks to enforce a statutory lien under paragraph 5 of Article 2241 of the Civil Code of the Philippines.
As correctly pointed out by the Court of Appeals in its decision, the various assigned errors boil down to the issue of who should be liable for the cost of repairs undertaken on the subject vessels.
Petitioner raised the following questions: (1) whether the findings of the lower court are supported by facts and evidence; and (2) whether or not petitioner is liable to respondent on the basis of the "Confirmation of Obligation. "
The general rule is that findings of facts of the Court of Appeals are not subject to review by the Supreme Court. (Alaras vs. Court of Appeals, 64 SCRA 671; Perido vs. Perido, 13 SCRA 97: Mendoza vs. Court of Appeals, 84 SCRA 67; Manlapaz vs. Court of Appeals, 147 SCRA 236 [1987]; Baniqued vs. Court of Appeals, 127 SCRA 50 [1984]; Moran vs. Court of Appeals, 133 SCRA 88 [1984]; Collector of Customs vs. Court of Appeals, 137 SCRA 3 [1985]; Espiritu vs. Court of Appeals, 137 SCRA 50 [1985]; Premier Insurance & Surety Corp. vs. Intermediate Appellate Court, et al., 141 SCRA 423 [1986]: Director of Lands vs. Funtillar, 142 SCRA 57 [1986]; Republic vs. Intermediate Appellate Court, 144 SCRA 705 [1986]: subject to the following exceptions; (1) when the conclusion is a finding grounded entirely on speculation, surmises or conjectures (Joaquin vs. Navarro, 93 Phil. 257); (2) when the inference made is manifestly mistaken, absurd or impossible (Luna vs. Linatok 74 Phil. 15); (3) where there is a grave abuse of discretion (Buyco vs. People, 51 O.G. 2927); (4) when the judgment is based on a misapprehension of facts (Cruz vs. Sosing, L-4875, November 27, 1953; (5) when the findings of fact are conflicting (Casica vs. Villaseca, L-9590, April 30, 1957); and (6) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee (Evangelista vs. Alto Surety & Ins. Co., L-11139, April 23, 1958; Ramos vs. Pepsi Cola, L-22533, February 9, 1967, 19 SCRA 289)." (cited in Manlapaz vs. Court of Appeals, 147 SCRA 236 [1987]; Tolentino vs. de Jesus, 56 SCRA 167 [1974]; Carolina Industries, Inc. vs. CMS Stock Brokerage, Inc., et al., 97 SCRA 734 [1980]; Manero vs. Court of Appeals, 102 SCRA 317 [1981]; Moran, Jr. vs. Court of Appeals, supra Sacay vs. Sandiganbayan, 142 SCRA 593 [1983]; Director of Lands vs. Funtillar, et al., supra)
The petitioner argued that the findings of the lower court are contrary to, and are not supported by the evidence.
There is no question that at the time subject obligation was incurred, the vessels were owned by defendant Southern industrial Projects, Inc. although mortgaged to People's Bank and Trust Company. Hence, the former as owner is liable for the costs of repairs made on the vessels. On the other hand, Interocean Shipping Corporation and S.A. Gacet undeniably mere agents of the owner, a disclosed principal, cannot be held liable for repairs made on the vessels to keep them in good running condition in order to earn revenue, there being no showing that said agents exceeded their authority.
Ultimately therefore, the issue which remains is, whether or not People's Bank, now Bank of P.I. being the purchaser of said vessels, is jointly and severally liable for the outstanding balance of said repairs, admittedly a lien on the properties in question.
It appears that Bank of P.I. seeks shelter in a deed of "Confirmation of Obligation" entered into between buyer and seller before the execution of a deed of sale between them. Buyer, Bank of P.I., maintains that it has the option of whether or not to pay the obligations listed thereunder, one of which is the repairs undertaken by private respondent, as inferred from the phrase that the owner of the vessels merely authorized petitioner bank to pay certain expenses and charges in connection with said
vessels. The latter stressed the fact that nowhere in said deed was the bank placed under obligation to pay any of the listed indebtedness of the owner.
The cardinal rule in the interpretation of contracts is to the effect that the intention of the contracting parties should always prevail because their will has the force of law between them (Kasilag vs. Rodriguez, et al., 69 Phil. 217 [1939]; Sec. 10, Rule 130 of the New Rules of Court). Thus, in order to judge the intention of the contracting parties, regard must be had principally to their acts both contemporaneous and subsequent to the contract (Atlantic Gulf Co. vs. Insular Government, 10 Phil. 166 [1908]), "the circumstances under which it was made, including the situation of the subject thereof and of the parties to it, may be shown, so that the judge may be placed in the position of those whose language he is to interpret." (Sec. 11, Rule 130 of the New Rules of Court). It has been held that once this intention of the parties has been ascertained, it becomes an integral part of the contract as though it has been originally expressed therein in unequivocal terms (Nielson & Co., Inc. vs. Lepanto Consolidated Mining Co., 18 SCRA 1040 [19661). Likewise, well settled is the fact that in construing a writing particularly a written agreement, the reason behind the circumstances surrounding its execution are of paramount importance to place the interpreter in the situation of the parties concerned at the time the writing was executed (Vicente Gotamco Hermanos vs. Shotwell 38 SCRA 107 [1971]),
It is undisputed that S.A. Gacet, Inc., the managing corporation, is only a creation of Gregorio A. Concon of Southern Industrial Projects, Inc. and of Roman Azanza of People's Bank and Trust Company obviously for the protection of their respective interests on the properties in question, after both expressed dissatisfaction with the amount of revenue being deposited with the said bank which suggests that diversions thereof were being made. Thus, although it was SIP and GACET which entered into the Management Contract, it was expressly stipulated thereunder, among others, that GACET may not borrow money for the husbanding of vessels without special authority from the petitioner bank. In addition, all office records were required to be subject to inspection and complete audit by the latter, including all remittances made by the Shipper to the booking agent. Otherwise stated, petitioner was already in control of the vessels as early as August 15, 1966, the date the Management Contract was signed (Decision, CA G.R No. 66365-R), (Rollo, p. 28). In fact, the contract itself for the repairs of the vessels which is now the bone of contention, was entered into by GACET and INTEROCEAN with private respondent Benjamin Pineda with the approval of petitioner Bank. This lends credence to the claim of Pineda that he was led to believe that he will be paid the corresponding amount for the repairs, as in fact he was paid with checks which were later dishonored.
The records show that SIP incurred debts by reason of these vessels not only here in the Philippines but also in Japan, notably ESSO Standard Eastern which attached said vessels in Japan. As admitted by Gregorio A. Concon, fourteen banks were after the assets of the corporation. Under this distressed financial condition and with People's Bank also threatening to foreclose the mortgages on these vessels, SIP decided to sell the vessels to People's Bank (Record on Appeal, pp. 55-56). But a deed of "Confirmation of Obligation" was first entered into between SIP and/or Bacong Shipping and People's Bank, confirming and acknowledging the obligations outstanding at the time, among which is the obligation to private respondent in the amount corresponding to the repairs in question.
Petitioner however insists on its theory based on a separate interpretation of the deed of "Confirmation of Obligation" that on the authority granted thereunder by the seller (the previous owner), responsibility to pay the listed obligation was not compulsory or mandatory (Record on Appeal, pp. 59- 60).
Other fundamental rules in the interpretation of contracts no less important than those already indicated are to the effect that where the terms are doubtful, the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly (Art. 1374, Civil Code), and if some stipulation of any contract should admit of several meanings, it shall be understood as having that import which is most adequate to render it effectual (Art. 1373, Civil Code) and the words which may have different significations shall be understood in that which is most in keeping with the nature and object of the contract (Art. 1375, Civil Code). The reason for these rules is that it must be presumed that the parties had intended an effective act and not one that is impracticable or illusory (Caguioa Comments and Cases on Civil Law, p. 592,1983 Ed.).
It will be observed that the deed of "Confirmation of Obligation" is but a part or a corollary to the deeds of sale of the three vessels. In fact, specific reference thereto was made by said deeds of sale as to the settlement of obligations, among which are the repairs in question. Said provision in the deeds of sale reads:
Any amount or amounts that the Bank has voluntarily paid and/or has been compelled to pay, or hereafter will voluntarily and/or will be compelled to pay for any encumbrance, claim, lien or particular average in order to save the vessel from any legal seizure or suits by third parties, and for any repair, supplies, provisions, accrued salaries and allotment of crew, cost of bailing out of the vessel, and any other expenses or accounts of the said vessel, shall be for the account of Southern and/or Bacong in accordance with their agreement preceding this conveyance executed on January 19, 1968 ...
It will be observed that the above stipulation interpreted together with the deed of "Confirmation of Obligation" leaves no room for doubt that while the bank may indeed pay certain obligations voluntarily or by choice, there are those that the Bank will be compelled to pay to save the vessel from any legal seizure or suits by third parties. In other words, the primary purpose of the contracts is the protection of the vessels. Among them are liens on the same under which the obligation to private respondent properly belongs.
However, petitioner contends that assuming that such obligations are liens on said vessels, they are deemed to have been waived and discharged when respondent released and delivered said vessels to GACET and/or Interocean which ordered said repairs prior to their sale and conveyance to petitioner (Rollo, p. 117).
Such contention is untenable.
It will be recalled that private respondent was paid the sum of P18,141.75 and for the balance of P62,095.95 Interocean issued three checks. Under the circumstances, private respondent has no basis or necessity at that time to exercise his right of retention under Art. 1731 of the Civil Code. The fact that later said checks were dishonored, as correctly argued by private respondent, cannot give validity to petitioner's argument that the former has waived or abandoned his liens on the vessels. To pursue such view would put a premium on an act of deception which led private respondent to believe that he will be fully paid. Furthermore, when the checks were dishonored, it was impossible for private respondent to enforce his lien because the vessels were already in Japan, outside the territorial jurisdiction of the Philippine courts (Brief for Plaintiff-Appellee, p. 19, Rollo, p. 128).
In view of the foregoing facts, it was aptly stated by the trial court and affirmed by the Court of Appeals that when the parties executed the deed of "Confirmation of Obligation" they really intended to confirm and acknowledge the existing obligations for the purpose of the buyer assuming liability therefor and charging them to the seller after proper accounting, verification and set offs have been made. Indeed, there is merit in the trial court's view that if there was no intention on the part of People's Bank (now Bank of P.I., to assume responsibility y for these obligations at the time of the sale of the si it vessels, there is no sense in executing said Deed of Confirmation together with the deeds of sale and the stipulations thereunder would be pointless (Record on Appeal, pp. 61-62, Annex "C", Rollo, P. 33).
Finally, it is indisputable that the repairs made on the vessels ultimately redounded to the benefit of the new owner for without said repairs, those vessels would not be seaworthy. Under Art. 2142 of the Civil Code, such acts "give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another."
WHEREFORE, the petition is Denied and the decision appealed from is hereby AFFIRMED.
SO ORDERED.
G.R. No. 89767 February 19, 1992
STATE INVESTMENT HOUSE, INC., petitioner, vs.COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION, EDGAR OBLIMAR, ABE ESTRADA and the 2,081 complainants-laborers in NLRC Case No. 9-3296-84 represented by FLORANTE M. YAMBOT, respondents.
G. R. No. 96056 February 19, 1992
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, represented by the ASSET PRIVATIZATION TRUST, petitioner, vs.HONORABLE COURT OF APPEALS, HON. PEDRO N. LAGGUI, in his capacity as Presiding Judge of the Regional Trial Court, Branch 60, Makati, Metro Manila, BIENVENIDO HERMOGENES and SILVINO SANTOS, in their respective capacities as Labor Arbiter and Sheriff of the National Labor Relations Commission, ALFREDO ASIBAR, RICARDO ZURITA, FELIXBERTO ABARQUEZ, RODRIGO CELSO, and the other 31 complainants in NLRC Case No. NCR-9-3296-84, respondents.
G.R. No. 96437 February 19, 1992
PHOENIX IRON AND STEEL CORPORATION and WILFREDO LABAYEN, petitioners, vs.HON. COURT OF APPEALS, HON. EUTROPIO MIGRINO, in his capacity as the Presiding Judge of the Regional Trial Court of Pasig, Branch 151, and ALFREDO ASIBAR, respondents.
Jardeleza, Sobrevinas, Diaz, Hayudini & Bodegon for petitioner SIHI.
Florante M. Yambot for private respondents Laborers of Phil. Blooming Mills, Inc. and Zurita, et al.
Jose C. Sison, Florello E. Azura and Jose M. Suratos, Jr. for petitioner in G.R. No. 96056.
Jaime T. Capoquian for private respondent Alfredo Asibar.
Balgos and Perez for petitioning intervenors in G.R. 96056.
Feria, Feria, Lugtu and La'O for petitioners-movants in G.R. 96437
GUTIERREZ, JR., J.:
These consolidated petitions involve properties formerly owned by the Philippine Blooming Mills, Inc. (PBM) which is now under the rehabilitation and receivership of the Securities and Exchange Commission (SEC. Case No. 2250, "In the matter of the Petitioner for Suspension of Payments").
In G.R. No. 89767, the petitioner questions the decision of the Court of Appeals which affirmed the validity of the Order dated May 26, 1989 issued by the Securities and Exchange Commission (SEC) in SEC Case No. 2250 granting the respondents' motion for the issuance of a break-open Order for the purpose of implementing the Certificate of Sale of November 23, 1987 in NLRC Case No. 9-3296-84 covering certain PBM properties, located at the PBM Compound in Balintawak, Quezon City which were earlier sold at a public auction sale on the ground that the same properties already belonged to the petitioner before the auction sale.
In G.R. No. 96056, the petitioner questions the decision of the Court of Appeals which affirmed the earlier decision of the Regional Trial Court (RTC) of Makati, Branch 60 validating the auction sale of some PBM properties by respondent deputy sheriff Silvino Santos of the Department of Labor and Employment (DOLE) on the ground that the same properties already belonged to the government before the auction sale.
In G.R. No. 96437, the petitioner questions the decision and resolution of the Court of Appeals which also affirmed an earlier order of the Regional Trial Court of Pasig, Metro Manila, Branch 151. The Pasig RTC denied the petitioner's motion to dismiss a complaint (with application for a writ of preliminary attachment) seeking compliance with the provision of a deed of sale, the subject matter of which are some properties of the PBM bought by respondent Alfredo E. Asibar (also a respondent in G.R. No. 96056) as highest bidder in an auction sale executed between Asibar as vendor and petitioner Phoenix Iron and Steel Corporation (Piscor) as vendee on the ground that the complaint states no cause of action.
In 1981, the PBM stopped operations due to business losses and financial reverses. On April 1, 1982, the PBM filed with the SEC a petition seeking for a declaration of a state of suspension of payments. On April 6, 1982, the SEC assumed jurisdiction over the petition. On July 9, 1982, the SEC placed the PBM under rehabilitation receivership and appointed rehabilitation receivers. The employees of PBM then filed a complaint for illegal dismissal with money claims against PBM with the National Labor Relations Commission (NLRC). Those who filed belonged to the rank-and-file and managerial/technical employees identified and categorized by groups. Common claims of the employees were unpaid benefits under Wage Order No. 1, 15th month-pay, money value of unearned vacation and sick leaves and holiday pay. The case was docketed as NCR Case No. 3-1250-83.
On December 28, 1983, Labor Arbiter Bienvenido Hermogenes rendered a decision in favor of the employees. The employees were granted monetary benefits including separation pay.
On appeal, the Labor Arbiter's decision was modified by the NLRC, to wit:
WHEREFORE, except for the modification dismissing the claim for separation pay for lack of merit, the Decision appealed from is hereby AFFIRMED in all other respects. The injunction issued on 15 November 1984 is lifted. (Rollo — G.R. No. 79202, p. 18)
In G.R. No. 79202, we affirmed the NLRC decision in a resolution dated November 18, 1987. Thus, we dismissed the petition for certiorari filed by the employees questioning the deletion of the award of separation pay resulting from serious losses by PBM.
In the meantime, the employees of PBM numbering 2,081 filed another complaint for illegal dismissal and money claims with the NLRC. The case was docketed as NCR Case No. 9-3296-84.
On May 28, 1987, Labor Arbiter Bienvenido V. Hermogenes rendered a decision in favor of the employees including separation pay.
On appeal, the Labor Arbiter's decision was affirmed by the NLRC in a decision dated November 9, 1987. The NLRC ordered the remand of the records to the Labor Arbiter for the issuance of a writ of execution.
On November 13, 1987, the Labor Arbiter issued a writ of execution.
On November 17, 1987, Deputy Sheriff Silvino Santos of the NLRC issued a "Notice of Levy and Sale of Personal Properties On Execution" and scheduled a public auction of PBM properties to the highest bidder for cash on November 23, 1987.
On November 19, 1987, PBM filed with us a petition to review the decision of the NLRC on the ground that the November 9, 1987 decision did not take into account the fact that as found by this Court in G.R. No. 71318 the NLRC had already denied claims for separation pay of the employees. In addition, the petitioner prayed for the issuance of a temporary restraining order enjoining the scheduled sale of the properties. The petition was docketed as G.R. No. 80580.
In a resolution dated December 1, 1987, G.R. Nos. 79202 and 80580 were consolidated.
On May 2, 1988, we issued a resolution in the consolidated petitions, to wit:
On November 18, 1987, the Court issued a resolution dismissing the petition in G.R. No. 79202 for lack of merit. A motion for reconsideration was denied with finality on January 27, 1988. This Court has stated that in various and more appropriate cases involving consortiums of banks trying to recover even only a percentage of the loans extended to Philippine Blooming Mills (PBM), it was determined that PBM not only incurred serious losses but was in desperate straits leading to its collapse. This is a finding
which remains beyond serious dispute and it is pointless for the petitioners to keep on reiterating the same arguments on this issue in any motion for reconsideration in this or other petitions.
Any claims of laborers, including those enjoying preference over other credits, will have to be submitted in the course of the bankruptcy, liquidation or rehabilitation proceedings.
xxx xxx xxx
In G.R. No. 80580, the Solicitor General has taken sides with the petitioner and adopted the petitioner's reply to the private respondents' comment. No explanation is given and no substantial distinctions are cited to explain why the National Labor Relations Commission should take an action in G.R. No. 80580 which is different from and conflicts with its stand in G.R. No. 79202. This being the case, the Court reiterates its ruling in G.R. No. 79202.
xxx xxx xxx
Considering the foregoing, the COURT RESOLVED to SET ASIDE the decision of the National Labor Relations Commission dated November 9, 1987 in G.R. No. 80580 and to permanently enjoin the sale of properties in NLRC Case No. NCR-9-3296-84 until after the Securities and Exchange Commission in SEC Case No. 2250 has determined the procedures for settling the many claims, including the money claims for workers and employees, against the Philippine Blooming Mills Co. Inc. (Rollo — G.R. No. 80580, pp. 309-310).
The petitioners filed separate motions for clarification of the resolution as regards the portion that permanently enjoins the sale of properties of PBM until after the SEC has determined the procedures for settling the various money claims against PBM.
It turned out that during the pendency of G.R. No. 80580, deputy sheriff Silvino Santos pushed through with the scheduled auction sale of PBM properties on November 23, 1987 in NCR Case No. 9-3296-84 as a result of which a certificate of sale dated November 23, 1987 was issued in favor of the highest bidder, Alfredo Asibar, the respondent in G.R. Nos. 96056 and 96437. We did not issue the prayed for temporary restraining order to enjoin the scheduled auction sale on November 23, 1987.
On November 21, 1988, we issued a resolution, the pertinent portion of which reads:
xxx xxx xxx
The respondents claim that the injunction should not cover properties already sold before May 2, 1988 or more particularly the certificate of sale of November 23, 1987. On the other hand, the petitioner states that the sale of properties in G.R. No. 71318 is not the same as the sale of properties in the instant case.
The issues raised by the respondents call for ascertainment of facts. This Court is not a trier of facts. The question of exactly what properties may no longer be included in the liquidation proceedings but should be given to the workers pursuant to the decision of the National Labor Relations Commission is, therefore, referred to the Securities and Exchange Commission which is directed to hold hearings on the matter. This petition has been decided. A motion for reconsideration has been denied with finality. Entry of judgment has been effected. No further motions of the same nature as the one before the Court will be entertained.
CONSIDERING THE FOREGOING, THE COURT RESOLVED to REFER the respondents' motion for clarification to the Securities and Exchange Commission for resolution. Counsel of the parties are warned to follow regular procedures regarding their respective claims and not indiscriminately pass on to this Court questions which call for determination or action by other agencies or Tribunals. (Rollo — G.R. No. 96056, pp. 345-346, Emphasis supplied)
II
G.R. NO. 89767
On July 20, 1983, the petitioner filed with the Regional Trial Court of Pasig a complaint for foreclosure of mortgage with receivership against PBM, Four Seas Trading Corporation (Four Seas) and Alfredo Ching. The case was docketed as C.C. No. 49997.
On August 29, 1986, the court rendered a partial summary judgment, the dispositive portion of which read:
WHEREFORE, premises considered, this Court hereby resolves to GRANT plaintiff SIHI's motion for Partial Summary Judgment dated January 15, 1986 and hereby orders defendants Philippine Blooming Mills Co., Inc. and Alfredo Ching to pay plaintiff State Investment House, Inc. jointly and severally their unpaid obligations in the undisputed amount of P53,000,000.00 plus the stipulated attorney's fees in the amount equivalent to 25% thereof, as well as the costs of suit; and in the event the said defendants are unable to satisfy said judgment within the period prescribed by law, this Court hereby orders plaintiff State Investment House, Inc., as the court-appointed receiver, to apply the proceeds of the Receiver's sale of the mortgaged steel inventories, including any earnings thereon, if any, in partial satisfaction of said judgment and the Branch Sheriff of this Court is likewise ordered to sell at public auction the real properties mortgages (Annexes "E", "E-1" to "E-9" and "F" and "F-1", Complaint) and that the proceeds thereof be applied in satisfaction of said judgment and costs of suit, accordingly. (Rollo, p. 5)
On October 5, 1987, the court issued an Order granting the petitioner's Motion to Order Sale of Mortgaged Real Properties. Accordingly, Deputy Sheriff Mario J. Tamang sold at public auction said mortgaged properties belonging to PBM and Four Seas. The highest bidder was the petitioner as evidence by two (2) separate certificates of sale executed by the sheriff in its favor on November 9, and 10, 1987, respectively.
In response to the notice of levy and sale of personal properties on execution issued by Deputy Sheriff Silvino Santos in connection with the writ of execution in NCR Case No. 9-3296-84, setting for sale at public auction, among others, some properties of PBM located at PBM Compound Balintawak, Quezon City, the petitioner filed in Civil Case No. 49997 a motion for issuance of a writ of preliminary injunction to restrain Silvino Santos from selling at public auction the said properties. The petitioner contended that the said properties are among the mortgaged properties of Four Seas which were sold to the petitioner on November 9 and 10, 1987.
On November 20, 1987, the court issued an Order temporarily enjoining Silvino Santos from selling at public auction the questioned properties. Despite this temporary restraining order, Silvino Santos proceeded with the auction sale prompting the petitioner to file a motion to cite the sheriff guilty of contempt of court and declaring null and void the certificate of sale executed by him covering the properties located at PBM compound in Balintawak, Quezon City. The lower court granted the motion.
Silvino Santos tried unsuccessfully to have the contempt order set aside in both the Court of Appeals and this Court. The case docketed as G.R. No. 85242 will be discussed later. Suffice it to say at this point that the Court dismissed the petition for certiorari questioning the affirmance by the Court of Appeals of the contempt Order issued by the Regional Trial Court of Pasig.
As a result of our Resolution dated November 21, 1988 issued in G.R. Nos. 79202 and 80580 the private respondents filed an urgent motion with the SEC in SEC Case No. 2250 seeking clarification on the question of the scope of injunction referred to said agency by the Court.
On February 9, 1989, the SEC issued an Order ruling that the said injunction "does not cover properties already sold before May 2, 1988 or more particularly, the certificate of sale on November 23, 1987 in NLRC Case No. NCR-9-3296-84" (p. 100, Rollo, G.R. No. 89767)
On May 26, 1989, the SEC issued another Order granting the private respondent's motion for the issuance of a break-open Order, the dispositive portion of which reads:
WHEREFORE, the Urgent Motion For The Issuance of a Break-Open Order dated April 12, 1989 should be, as it is hereby GRANTED, for the purpose of implementing and carrying into effect the Certificate of Sale of November 23, 1987 in NLRC Case No. 9-3296-84 involving the properties subject-matter of such sale located at the PBM Compound in Balintawak, Quezon City, and Manggahan, Pasig, Metro Manila (Rollo, p. 11)
The petitioner questioned the SEC Order by filing a petition for certiorari with the Court of Appeals.
In a decision dated June 29, 1989, the appellate court denied due course and dismissed the petition. A motion for reconsideration was denied.
Hence, this petition.
G.R. NO. 96056
One of the creditors of PBM was the Philippine National Bank (PNB). When PBM failed to pay its obligations secured by mortgages, PNB extrajudicially foreclosed the real estate mortgages executed in its favor. Thus, on November 2, 1983, the mortgaged properties — a) seven [7] registered lots in Rosario, Pasig, Metro Manila, and b) seven [7] buildings and machineries and equipment, were publicly auctioned by the Sheriff and sold to PNB. The lots were sold for P21,930,000.00 (Exhibits B, B-1, and B-2), the buildings for P4,192,250.00 (Exhibits C and C-1), and the machineries and equipment (Exhibits A to A-17), inclusive — for P76,720,800.00 (Exhibit A).
In accordance with Administrative Order No. 14 implementing Proclamation No. 50 of the President dated December 8, 1986 (Exhibit F-1-B), PNB transferred to the national government through the Asset Privatization Trust (APT) the assets acquired from PBM as evidenced by the deed of transfer dated June 5, 1987.
The APT in turn sold machineries and equipment for P45,000,000.00 to Phoenix Iron and Steel Corporation and the others for P65 million to Killer Realty.
When respondent sheriff Silvino Santos issued the notice of levy and sale of the personal properties of PBM, and scheduled the public auction sale on November 23, 1987 in NCR Case No. 9-3296-84, the PNB filed with the NLRC a "NOTICE OF THIRD PARTY CLAIM" on November 20, 1987 (Exhibit F-3).
As stated earlier, deputy sheriff Santos proceeded with the scheduled auction sale on November 23, 1987. The highest bidder was respondent Asibar. His bid was P5,950,000.00. On the same day, Santos issued the corresponding Certificate of Sale in favor of Asibar.
On November 24, 1987, Labor Arbiter Hermogenes issued a "break open" order, ordering the "Sheriff assigned in the case and his assistance (sic)" to gain access to the place (PBM Compound). Between November 24 and November 28, 1987, some persons hauled and carried away personal properties from the compound. The guards listed the properties and the lists were given to the guards' supervisor. (Rollo — G.R. No. 96056, p. 31)
On November 27, 1987, the national government through APT filed an action for damages with preliminary injunction and/or temporary restraining order against Labor Arbiter Hermogenes, Deputy Sheriff Silvino Santos, Asibar and all the complainants in NCR Case No. 9-3296-84 with the Regional Trial Court of Makati, Metro Manila. The case was raffled to Branch 60 and was docketed as Civil Case No. 18426.
After due trial, the trial court on December 29, 1989 rendered a decision dismissing the complaint, to wit:
xxx xxx xxx
WHEREFORE, the Court hereby renders judgment as follows:
The complaint dated November 25, 1987 is DISMISSED;
The Order dated December 16, 1987 (pp. 87-90, Records) as clarified in the Order dated July 19, 1988 granting the plaintiffs' application for a writ of preliminary injunction (pp. 286-289, Id.) is LIFTED and SET ASIDE; and
The COUNTERCLAIMS of the defendants (other than SILVINO SANTOS and BIENVENIDO HERMOGENES) are DISMISSED. (Rollo, P. 42)
A motion for reconsideration filed by the petitioner APT was denied.
Petitioner APT then filed a petition for certiorari and prohibition with the Court of Appeals. The appellate court, however, dismissed the petition.
Hence, the instant petition.
On November 29, 1990, we issued a temporary restraining order enjoining respondent Asibar from taking the machineries, engines, and equipment (foreclosed chattels of the Philippine Blooming Mills, Co., Inc.) which were transferred and assigned by the Philippine National Bank in favor of the National Government as well as those already sold by the National Government to Phoenix Iron and Steel Corporation.
On January 10, 1991 Phoenix Iron and Steel Corporation and the Rehabilitation Receivers of PBM filed a motion for intervention alleging that its intervention is imperative because its possession of the chattels sold to it by the National Government and which are being used in the rehabilitation of PBM are being threatened to be taken by the private respondent. We granted the motion in a Resolution dated January 24, 1991.
The petition was given due course in the Resolution dated April 16, 1991.
In another Resolution dated November 26, 1991, we granted the intervenors' motion for leave to submit Additional Comment And/Or Argument.
G.R. NO. 96437
On February 10, 1988, a Deed of Sale was executed between respondent Alfredo Asibar as vendor and petitioner Phoenix Iron and Steel Corporation (co- petitioner Wilfredo Labayen is the vice-president of the corporation) as vendee involving machineries and equipment inside all the buildings at PBM compound in Manggahan, Pasig, Metro Manila. These properties were among the properties bought by Alfredo Asibar in the auction sale conducted by Deputy Sheriff Silvino Santos on November 23, 1987.
On December 26, 1988, respondent Asibar filed with the Regional Trial Court of Pasig, Metro Manila, Branch 151, a complaint with application for a writ of preliminary attachment, seeking the payment by the petitioners, jointly and severally of the amount of P8.5 million which he alleged was the balance already due at the time based on the terms of the contract, including penalty for late payment, moral, exemplary damages, litigation expenses, attorney's fees and costs of suit. The case was docketed as Civil Case No. 56806. On February 10, 1989, the petitioner filed a motion to dismiss on the ground that the complaint fails to state a cause of action.
On May 10, 1989, the trial court issued an order denying the motion. The petitioners were given ten (10) days from receipt within which to file their answers to the complaint.
The petitioners then filed with the Court of Appeals a petition for certiorari with prayer for the issuance of a writ of preliminary injunction questioning the May 10, 1989 order.
The Court of Appeals, however, dismissed the petition and ordered the return or remand of the records to the trial court for trial of the case on the merits.
A motion for reconsideration filed by the petitioners was denied. Hence, the instant petition.
On January 28, 1991, we issued a temporary restraining order enjoining the Regional Trial Court of Pasig, Metro Manila, Branch 151, from further proceeding with Civil Case No. 56806.
III
In G.R. No. 89767, the petitioner contends that:
a) By upholding the questioned Order of respondent SEC of 26 May 1989, the respondent Court of Appeals has in effect reversed the ruling of this Honorable Court in G.R. No. 85242.
b) By allowing respondent SEC to seize from petitioner SIHI the properties in dispute for the purpose of satisfying the money judgment obtained by the laborers of PBM despite the adverse claim of petitioner SIHI over the said properties, the respondent Court of Appeals has completely disregarded the right of petitioner SIHI to due process of law.
c) By permitting respondent SEC to execute the money judgment obtained against PBM by its laborers pending liquidation of PBM, the respondent Court of Appeals has in effect granted the PBM-Laborers undue preference contrary to the ruling of this Honorable Court. (Rollo, p. 16)
In G.R. NO. 96056, the petitioner raises the following issues:
I. WHETHER OR NOT THE CA ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN NOT FINDING THAT THE AUCTION SALE CONDUCTED BY SANTOS IS VOID.
II. WHETHER OR NOT THE CA ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN NOT FINDING THAT THE PROPERTIES SOLD TO ASIBAR ARE THE SAME AS THOSE FORECLOSED BY PNB AND NOW BELONGING TO THE NATIONAL GOVERNMENT. (Rollo — G.R. No. 96056, p.9)
These petitions are discussed jointly as the issues raised are interrelated.
In response to our directive in the November 21, 1988 resolution in G.R. No. 80580 which referred the respondents' motion for clarification as to whether or not the certificate of sale of November 23, 1987 is included in the order of permanent injunction to sell PBM properties in NLRC Case No. NCR-9-3296-84 until after the SEC in SEC Case No. 2250 (PBM liquidation proceedings) has determined the procedures for settling all the money claims against PBM ordered in the resolution dated December 2, 1987 in G.R. Nos. 79202 and 80580, the SEC issued an order dated February 9, 1989 in SEC Case No. 2250, to wit:
Acting upon the Urgent Motion To Resolve Clarification dated August 22, 1988 in G.R. No. 80580 which the Supreme Court referred to this Honorable Commission For Resolution, as per Order of the Supreme Court in its Resolution in G.R. No. 80580 dated November 21, 1988, filed by the counsel for the 2,081 laborers of PBM in NLRC Case No. NCR 9-3296-84, and considering the Manifestation dated February 2, 1989, filed by the petitioner and the rehabilitation receiver in the above-entitled case, the Hearing Panel hereby rules that the injunction issued therein, does not cover properties already sold before May 2, 1988 or more particularly the certificate of sale on November 23, 1987 in NLRC Case No. NCR-9-3296-84. (Rollo — G.R. No. 85242, p. 330; Emphasis Supplied)
Another order dated May 26, 1989, was issued in SEC Case No. 2250 involving PBM properties claimed by the State Investment House, Inc. wherein the SEC reiterated its February 9, 1989 clarificatory order regarding the certificate of sale dated November 23, 1987. This order was the subject matter in CA-G.R. SP No. 17698. The Court of Appeals affirmed the order prompting SIHI to challenge the appellate court's decision by filing a petition for certiorari with this Court. The case is docketed as G.R. No. 89767.
In G.R. No. 96056, the appellate court is of the view that the February 9, 1989 order of the SEC clarified the issue as to what properties are excluded from the liquidation proceedings but which should be given to the workers pursuant to the decision of the NLRC in Case No. NCR 9-3296-84 by ruling that "the hearing Panel hereby rules that the injunction issued therein does not cover properties already sold before May 2, 1988 more particularly the certificate of sale in November 23, 1987 in NLRC Case No. NCR 9-3296-84" (Rollo — G.R. No. 96056, p.25). With this finding, the appellate court, among others, dismissed the petition.
In this regard, we take note of another case (G.R. No. 85242 entitled "Sheriff Silvino Santos, et al. v. Court of Appeals, et al."). In this petition, SIHI filed an action before the Regional Trial Court of Pasig, Metro Manila, Branch 168 presided by Judge Benjamin Pelayo, to enjoin the implementation of a writ of execution issued in NLRC Case NCR No. 9-3296-84. Specifically, SIHI asked the court to enjoin Deputy Sheriff Silvino Santos from selling at the public auction sale on November 23, 1987 PBM properties which were allegedly owned by SIHI.
On November 20, 1987, Judge Pelayo issued an order, enjoining Sheriff Santos to desist from selling the properties being claimed by SIHI.
Sheriff Santos, however, ignored the order and went ahead with the November 23, 1987 auction sale. Judge Pelayo, then issued another order dated February 22, 1988 nullifying the sale and finding Sheriff Santos guilty of contempt.
Sheriff Santos then filed a petition for certiorari and prohibition with preliminary injunction with the Court of Appeals alleging that Judge Pelayo committed grave abuse of discretion and lack of jurisdiction in blocking the NLRC's writ of execution. The petition was dismissed.
Ricardo Zurita and 2,080 other laborers (complainants in NLRC Case No. 9-3296-84) in whose favor the writ of execution was issued by the NLRC filed with the Court a motion for leave to intervene as co-petitioners.
In a resolution dated March 15, 1989, we denied the petition for lack of merit. We stated:
xxx xxx xxx
Insofar as the money claims of the co-petitioners-intervenors are concerned., the law on the case is that announced in G.R. No. 71318, Philippine Blooming Mills, Co., Inc. v. National Labor Relations Commission, et al., January 20, 1986, where this Court ruled:
Considering all the foregoing, the Court Resolved to DISMISS the petition insofar as it seeks to nullify the decision of the National Labor Relations Commission on benefits due the respondent laborers and to restrain the disposition of properties in the satisfaction of the various obligations of the petitioner. However, the awards made by the Commission shall be referred to the Securities and Exchange Commission to determine the preference or priority under the law in the settlement of all claims. The restraining order dated July 22, 1985 which reads in part:
xxx xxx xxx
ENJOINING the respondents from enforcing the alias writ of execution and the sale of the properties of petitioner, and if already enforced, from turning over to the private respondents the proceeds of the auction sale in NLRC Case No. 3-1250-83, entitled "Pedro Ablaza, et al., Complainants, v. Philippine Blooming Mills Company, Inc., Respondent" of the National Labor Relations Commission, Ministry of Labor and Employment.'
is clarified as not covering the certificate of sale issued on July 19, 1985. However, all proceeds of that sale and earlier sales must be turned over to the Securities and Exchange Commission to be distributed according to law. This Court's temporary restraining order shall be lifted and set aside once the Securities and Exchange Commission has taken over the control of funds and assets as above indicated."
Any execution of the NLRC decision awarding benefits to the PBM workers and any disposition of PBM properties arising from the NLRC awards must be referred to the Securities and Exchange Commission pursuant to the above resolution.
Any attempt to execute on properties not belonging to PBM is properly a concern of civil courts and not of the NLRC. Either way, the action of the petitioner sheriff is premature or improper. (Rollo — G.R. No. 85242, pp. 271-272; Emphasis supplied)
xxx xxx xxx
The petitioner sheriff filed a motion for reconsideration. The movant-intervenors also filed a separate motion for reconsideration with clarification. The movant-intervenors specifically mentioned the February 9, 1989 order of the SEC in SEC Case No. 2250 clarifying the issue as to whether or not the certificate of sale dated November 23, 1987 in NLRC Case NCR No. 9-3296-84 is included in the permanent injunction of the sale of PBM properties under the resolution dated November 21, 1988 in G.R. No. 80580. The movant-intervenors contended:
It is an admitted fact that the properties subject of this controversy are included in the certificate of sale of November 23, 1987 and not by another execution which, this Honorable Court might misunderstand, and which the same was already clarified by this Honorable Court through its delegated authority, the Honorable Securities and Exchange Commission. It is very apparent and very important then, that in so far as the certificate of sale of November 23, 1987 is concerned, (which includes subject properties in controversy) be finally laid to rest as this Honorable Court said in that particular resolution . . . (Rollo — G.R. No. 85242, p. 306)
We denied the motions. We said in our resolution dated April 5, 1989:
The motion for reconsideration cites the Court's resolution dated March 15, 1989 out of context. The movant-intervenors play up paragraph 2, page 3 of the resolution but ignore the first paragraph on the same page which is more important.
The resolution of this Court rules that if, as the petitioners and the movant-intervenors insist, the disputed properties really belong to the Philippine Blooming Mills, then the execution must be referred to the Securities and Exchange Commission pursuant to the earlier resolution of this Court. On the other hand, if the properties belong to persons other than the Philippine Blooming Mills, the National Labor Relations Commission has no jurisdiction because the matters falls within the jurisdiction of the civil courts.
Therefore, if the movant-intervenors are correct and the disputed properties belong to the Philippine Blooming Mills, their action is premature and must await a determination by the Securities and Exchange Commission pursuant to the earlier
resolutions in the Philippine Blooming Mills cases. Once the SEC has decided the cases, the execution shall issue from it and not from the NLRC.
The Court further reiterates its resolution in G.R. No. 80580 and G.R. No. 79202 that the claims of the Philippine Blooming Mills laborers are not denied. The Court simply rules that all valid claims including those of the laborers must be submitted in the course of bankruptcy, liquidation and rehabilitation proceedings. This is a function of the Securities and Exchange Commission for appropriate action. (Rollo — G.R. No. 85242, p. 335; Emphasis supplied).
xxx xxx xxx
From the different resolutions in all the cases involving PBM properties in relation to SEC Case No. 2250 (liquidation proceedings of PBM) we reiterate the following: 1) all PBM properties including the proceeds of the various sales undertaken by the NLRC to implement its final decision in NCR 9-3296-84 should be turned over to the SEC for disposition according to law, and 2) for purposes of executing the NLRC final decision awarding monetary benefits to the former workers of PBM, the NLRC has no jurisdiction over properties belonging to persons other than PBM.
As far as the Sheriff's sale dated November 23, 1987 is concerned, the SEC issued the Order dated February 9, 1989, pursuant to our directive in our resolution of November 21, 1988 clarifying that the injunction against the sale of PBM properties does not include the November 23, 1987 certificate of sale. However, it does not necessarily follow from the auction sale of PBM properties conducted by Sheriff Santos resulting in the issuance of the certificate of sale dated November 23, 1987 in favor of the highest bidder, respondent Asibar, that all properties sold therein fall within the clarificatory order of the Securities and Exchange Commission (SEC). A distinction as to the ownership of these properties must be made. Thus, if some properties were sold which belonged to other persons over whom the NLRC does not have jurisdiction, necessarily, such properties must be considered not to fall within the February 9, 1989 order of the SEC. These should be returned to their rightful owners.
Under these circumstances, the pivotal issue to be resolved hinges on whether or not the disputed properties sold by Sheriff Santos belong to petitioner SIHI in G.R. No. 89767 and APT in G.R. No. 96056.
In G.R. No. 89767, the questioned Order dated May 26, 1989 of the SEC which was affirmed by the Court of Appeals states:
We found the grounds invoked by SIHI in its comment untenable and without merit. Firstly, the urgent motion for a break-open order is but an implementation of our final order of February 9, 1989 wherein it clearly states that "the injunction issued therein, does not cover properties already sold before May 2, 1988 or more particularly the certificate of sale on November 23, 1987 in NLRC Case No. NCR-9-3296-84;" secondly, this Commission is legally authorized and duly empowered by the Supreme Court pursuant to its Resolutions dated November 21, 1988 (G.R. No. 80580 and 79202) and April 5, 1989 (G.R. No. 86242) to determine the valid claims of subject laborers in all these cases; and thirdly, it is the function of this Commission to implement the Certificate of Sale on November 23, 1987 in NLRC Case No. NCR.-9-3296-84 for the reason above-stated and to issue forthwith any writ of execution, if necessary, to fully satisfy the valid claims of these complainants-laborers, as clearly mandated in the aforestated Resolution of the Supreme Court. (Emphasis supplied, Rollo, p. 32)
In affirming the Order, the appellate court said:
The SEC issued the "Break-Open Order" contained in the Order now being assailed for the purpose of implementing and carrying into effect the certificate of sale of properties involved in NLRC Case No. 9-3296-84 wherein the claims against PBM of private respondents — The 2,081 complainants former PBM laborers — were resolved. The authority of the SEC to act on this particular matter emanates from the Supreme Court Resolutions of November 21, 1988, March 15, 1989 and April 5, 1989. The first above-named Resolution was issued by the Supreme Court upon private respondents' motion for clarification of the scope of the injunction which the Court issued to stop the enforcement of the writ of execution already mentioned, which had been issued by the NLRC, against properties foreclosed by PBM creditors. In very certain terms, the Supreme Court in said Order states that it "cannot supervise the liquidation of PBM assets and declare what portion goes to laborers, what portion to creditor banks, etc." and that this is a function of the SEC; referred to the SEC the question of exactly what properties should be given to the workers pursuant to the decision of the NLRC; and directed the SEC "to hold hearings on the matter." The other two Resolutions (of March 15, 1989 and April 5, 1989) were issued by the Supreme Court precisely on the petition for review of the order of the RTC of Pasig in C.C. No. 49997, inter alia declaring null and void the certificate of sale executed by the NLRC Deputy sheriff covering the properties located at the PBM compound in Balintawak, Quezon City. In the March 15, 1989 order, the Supreme Court categorically stated that "any execution of the NLRC decision awarding benefits to the PBM workers and any disposition of PBM properties arising from the NLRC awards must be referred to the Securities and Exchange Commission." And in reiteration of said pronouncement, the Supreme Court in the April 5, 1989 Order, explicitly "REFERRED" the matter to the SEC "for appropriate action" after stating that all valid claims against PBM including those of the laborers "must be submitted" in the course of the bankruptcy, liquidation and rehabilitation proceedings" which is a function of the Securities and Exchange Commission. (Rollo, pp. 33-34)
Obviously, the SEC's May 26, 1989 Order has for its basis, the certificate of sale covering the Balintawak properties of PBM issued by Sheriff Silvino Santos as a result of the auction sale Santos held on November 23, 1989 pursuant to the writ of execution issued by the NLRC in NCR Case No. 9-3296-84. It is to be noted, however, that the certificate of sale issued to the highest bidder on the Balintawak properties of PBM was declared null and void in Civil Case No. 49997 and such declaration was affirmed by us in G.R. No. 85242.
Under these circumstances, the SEC had no authority to order the implementation of a certificate of sale which was earlier declared null and void. True, the SEC pursuant to our Resolution in the other related PBM cases has jurisdiction over all properties of the PBM which should be distributed among valid claimants including the private respondents in the liquidation proceedings. Such jurisdiction, however, does not include the power to reverse and set aside our own resolutions. It cannot issue a "break-open order" arbitrarily and to the prejudice of third persons seize PBM properties which were earlier in the lawful possession of third persons.
In the instant case, the Balintawak properties of PBM covered by the certificate of sale were earlier sold to the petitioner in an auction sale involving the said properties. Thus, in Civil Case No. 49997, the trial court issued an Order dated May 3, 1988, the pertinent portion of which reads:
In the light of the foregoing facts, the pertinent question is whether plaintiff, as purchaser at the auction sale of the aforementioned mortgaged properties, acquired valid titles not only to the land, subject of the mortgage of defendant Four Seas Trading Corporation, but also to all the buildings, improvements and machineries existing thereon. The answer to this question is determinative of the question of whether this court had the jurisdiction to issue the restraining order, and subsequently the writ of preliminary injunction, under consideration whereby this court enjoined Sheriff Santos from proceeding with the execution sale of the buildings, machineries and equipment located on the land of defendant Four Seas Trading Corporation in satisfaction of the judgment rendered against defendant Philippine Blooming Mills Co., Inc. in NLRC Case no. NCR-9-3296-84.
It is an admitted fact that the land, on which the buildings, machineries and equipment in question are located, are registered land in the name of defendant Four Seas Trading Corporation. It is also an admitted fact that no reservation of title in the name of defendant Philippine Blooming Mills Co., Inc. is noted in the certificates of title of defendant Four Seas Trading Corporation with respect to the buildings, machineries and equipment existing on the land covered by the said titles.
Such being the case, this court finds no cogent reason to disturb its findings contained in its Order, dated December 10, 1987, ordering the issuance of a writ of preliminary injunction against Sheriff Santos. For under the law and existing jurisprudence, plaintiff, as an innocent mortgagee and purchaser for value, acquires good and valid titles to the properties in question.
As long as this decision is not set aside or modified in proper legal proceedings, the SEC has no jurisdiction over the Balintawak properties, much less, to issue a break-open Order to implement a voided certificate of sale covering the said properties.
The trial court has the competence to identify and to secure properties and interests therein held by the judgment debtor for the satisfaction of a money judgment rendered against him. (Section 15, Rule 39, Revised Rules of Court). The exercise of its authority is premised on one important factor: that the properties levied upon, or sought to be levied upon, are properties unquestionably owned by the judgment debtor and are not exempt by law from execution, For the power of the Court in the execution of its judgment extends only over properties belonging to the judgment debtor. (See Reyes v. Grey, 21 Phil. 73 [1911], Misut v. West Coast San Francisco Life Insurance Co., 41 Phil. 258. [1920], Herald Publishing Co. v. Ramos, 88 Phil. 94 [1951]; and Bayer Philippines, Inc. v. Agana, 63 SCRA 355 [1975]; Consolidated Bank and Trust Corp. v. Court of Appeals, 193 SCRA 158 [1991])
In G.R. No. 96056 the petitioner contends that the appellate court committed grave abuse of discretion amounting to lack of jurisdiction in dismissing its petition for certiorari accusing the trial court of grave abuse of discretion in ruling that there is no identity between the PBM properties sold to the petitioner's predecessor PNB in 1983 and the PBM properties sold to respondent Asibar in the auction sale of November 23, 1987 on the ground that the appellate court did not consider the petitioner's allegations and evidence.
Petitioner APT contends that what took place was a simulated auction sale of properties already owned by PNB and transferred to the APT and that the Sheriff sold for P5,950,000.00 properties for which PNB had bid P76,720,800.00.
The petitioner claims that the Certificate of Sale (Exhibit "A", Annex "C", Petition) issued in favor of PNB shows that the chattels which were sold later by Sheriff Santos to Asibar in the questioned auction sale are housed at the following: (1) Oxygen Plant No. 2; (2) Carpentry Shop; (3) Electrical Shop and Instrumentation Building; (4) Machine Shop; (5) Scale house; (6) Wire Drawing Plant; (7) Nail Plant; (8) Bolt and Nut Making Plant; (9) Motorpool and Rebuilding Section; (10) Repair and Shifting Maintenance Section; (11) General Utility and Fire Section; (12) Oxygen Plant No. 1; (13) Topy Mill (Rolling Mill # 1); (14) Rolling Mill # 2; (15) Rolling Mill No. 3; (16) Wire Rod Mill; (17) Open Hearth Furnace; (18) and those at Building Nos. 24, 25, 26, 28 , 31, and 33 (Electric Arc Furnace), 34, 35, and 37 (Bailing Press Machine Building, Press Machine Building, Scale House No. 2 and Pump House No. 2). According to the petitioner, all the buildings, plants, shops, sections, and mills acquired in 1983 are located at the PBM Compound, Pasig, Metro Manila. All these chattels were transferred, assigned and conveyed by PNB in favor of the national government thru the Deed of Transfer dated February 27, 1987.
The petitioner claims that the Certificate of Sale issued to Asibar by Sheriff Santos conclusively shows that chattels inside nine (9) buildings which PNB bought, namely: Oxygen Plant No. 2, Carpentry Shop, Electrical Shop and Instrumentation Building, Machine Shop, Scale House, Wire Drawing Plant, Nail Plant, Bolt and Nut Making Plant, Motorpool and Rebuilding Section, Repair and Shifting Maintenance Section, General Utility and Fire Section, Oxygen Plant No. 1, Topy Mill (Rolling Mill No. 1), Rolling Mill No. 2, Rolling Mill No. 3, Wire Rod Mill, Open Hearth Furnace, and Bailing Press Machine Building all located at PBM compound, Manggahan, Pasig, Metro Manila were also sold to Asibar by Sheriff Santos.
It is to be noted that the appellate court's decision has no specific findings of facts regarding the issue as to whether or not the properties sold to Asibar are different from the properties previously sold to the PNB. Instead, the decision in a sweeping statement stated that the lower court did not commit grave abuse of discretion as the trial court's findings are duly supported by substantial evidence.
The lower court said:
PROPERTIESSOLD TO PNB
13. The plaintiff does not question in this case the auction sale of PBM's properties in Balintawak, Quezon City to ASIBAR. What it questions only is the auction sale of PBM's properties located in its Compound in Manggahan, Pasig. It is therefore necessary to determine what are the properties sold to PNB per the certificates of sales (Exhs. A to A-147 inclusive; and Exhs. C and CO1) and the properties of PBM at its Manggahan, Pasig, Compound sold to Asibar per the certificate of sale (Exhs. H, G-1 to H-4 or Exhs. 1, 1-A to 1-E- Asibar)
14. The properties which PNB bought are:
14.1. The machineries and equipments in sixteen (16) Buildings — Building Nos. 6 (Exhs. A-20 to A-32); 10 (Exh. A-32), 12 (Exhs. A-33 to A-43), 13 (Exhs. A-6; Exhs. A-43 to A-59), 16 (A-43 to A-59), 21 (Exhs. A-59 to A-85), 22 (Exhs. A-86 to A-108), 24 (Exhs. A-108 to A-112), 25 (Exhs. A-109 to A-112), 26 (Exhs. A-112-A to A-114), 28 (Exh. A-114) 13 (Exhs. A-114 and A-115), 33 (Exhs. A-125 to A-133); A-138 to A-140), 34 (Exhs. A-132 and A-133), 35 (Exhs. A-140 to A-147) and 37 (Exhs. A-134 to A-138) per Exhs. A, A-1 to A-147.
14.2. Four (4) buildings (sic) erected on the lots covered by TCT Nos. 43445, 853, 30196 and 32897, Registry of Deeds of Rizal; namely: (a) a CANTEEN 2-storey semi-concrete; (b) one-storey electrical shop; (c) OPEN WAREHOUSE and carpentry shop; and (d) scale house (wood and masonry) per Exhs. C and C-1.
PROPERTIES SOLDTO ASIBAR
15. On the other hand, Asibar bought the following properties per Exhs. 1 to 1-E-Asibar or Exhs. H to H-4;
15.1. Thirty four (34) buildings and fixtures, embedded pipes and metals obtained from the total demolition thereof;
15.2. The mill plant machineries, equipment, materials supplies, and all movable properties found in each of the thirty-four (34) buildings; and
15.3. Scrap iron and other metals, discarded or detached machine or equipment parts found in open areas and diggings.
NO IDENTITYOF PROPERTIES SOLD TOPNB AND TO ASIBAR
16. The question then is: were the properties sold to PNB as described in paragraph 14, the same properties sold to Asibar as described in paragraph 15 hereof? The evidence does not show that the properties sold to PNB are the same properties sold to Asibar. This is clear from the following considerations.
16.1. Exhs. A and A-1 to A-177 do not show that the material and equipments found in the sixteen (16) buildings are located at the PBM Compound in Manggahan, Pasig. They do not state where these buildings are located. Exh. A simply states that the auction sale of the properties listed in the "attached Annexes" took place on November 23, 1983 at 10:00 o' clock in the morning "at the compound of the mortgagors, located at Barrio Rosario, PBM Compound, Pasig, Metro Manila." Exh. T however shows that PBM has machineries and equipments in 12 buildings, namely Building Nos. 6, 12, 14 , 16, 18, 20, 21, 22, 23, 25, 26 and 31, at the PBM Compound in Manggahan, Pasig. Even if it were assumed that the twelve (12) buildings are the same buildings bearing the same number referred to in Exhs. A to A-147 the fact remains that the machineries and the equipments found in these twelve (12) buildings have not been shown to be the same machineries and equipments that may be found in the thirty four (34) buildings described in Exhs. 1-C and 1-D-Asibar. For there is even no proof that the twelve (12) buildings are among the thirty-four (34) buildings listed in Exhibits 1-C and 1-D-Asibar.
16.2. The four (4) buildings sold to PNB under Exhibits C and C-1 have not been shown to be among the same thirty-four (34) buildings. These four (4) buildings are (note: not legible) lots covered by TCT Nos. 43445, 853, 30196 and of Deeds of Rizal. This then suggests that the (not legible) the Province of Rizal. However, their . . . (not legible) Rizal has not been established much less does the evidence show that they are within the PBM Compound in Manggahan, Pasig, or that they are among the said thirty-four (34) buildings.
16.2.1. True it is that among the thirty-four (34) are: (a) scale house (No. 5, Exh. 1-C-Asibar); (b) a canteen (No. 27, Exh. 1-D-Asibar); (c) a carpentry/electrical shop (No. 30, Exh. 1-D-Asibar). However there is absolutely no proof that they are the same four (4) buildings described in Exhs. C and C-1.
16.3. PNB did not acquire any "scrap iron and other metals, discarded or detached machine parts found in open areas and diggings" from PBM. They are not among the properties which PNB acquired under the certificates of sale (Exhs. A, A-1 to A-147), B and B-1, C and C-1). PNB did not transfer any such property to the RP under the deed of transfer (Exhs. D to D-3). Obviously, these properties belonged to PBM when they were sold to Asibar.
17. In brief, RP failed to prove by any competent and satisfactory evidence that the properties which it acquired from PNB are the same properties levied upon and sold at public auction to ASIBAR. (Rollo — G.R. No. 96056, pp. 31-33; Decision-Civil Case No. 18426, pp. 5-7)
In an order dated June 6, 1990, the trial court amended "14.2" and "16.2" of the decision to read as follows:
xxx xxx xxx
14.2. Seven (7) buildings erected on the lots covered by TCT Nos. 43445, 853, 30196 and 32897, Registry of Deed of Rizal, namely: (a) a CANTEEN 2-storey semi-concrete; (b) one-storey electrical shop; (c) OPEN WAREHOUSE and carpentry shop; (d) scale house (wood and masonry); (e) Wire and Nail Plant (industrial) one-storey steel frame with an area of 6,489 erected on the lots covered by TCT Nos. 43445, 43338, 853 and 30196, land records of Rizal; (f) office building (commercial two-storey, wood and masonry, with an area of 240 square meters, first floor erected a lot covered by TCT No. 32343, Land records of Rizal; and (g) Mess Hall and dormitory, with a total area of 250 square meters, erected on the same above-mentioned lot (TCT No. 322843-Rizal) per Exhs. C and C-1.
19.3 The first sentence of paragraph 16.2 of the DECISION is AMENDED to read as follows:
16.2. The seven (7) buildings sold to PNB under Exhs. C and C-1 have not been shown to be among the said thirty-four (34) buildings.
xxx xxx xxx
(Rollo — G.R. No. 96056, p. 237)
Obviously, the trial court assumed that there are two (2) PBM compounds in Pasig, Metro Manila, one at Manggahan and one at Rosario. Under this premise, the trial court ruled that since the petitioner did not adduce evidence to prove that the buildings housing the chattels sold to PNB are located at the PBM Compound in Manggahan where the building machinery and equipment sold to Asibar were located, then there is no identity of properties between those sold earlier to PNB and later to Asibar. Such conclusion has no factual basis.
Asibar, himself, in his "Answer with Counterclaim" never raised the issue as regards the location of the buildings, machinery and equipment sold to him. Under his Answer with Counterclaim, captioned as "SPECIAL AND AFFIRMATIVE DEFENSES" Asibar alleged:
Assuming without admitting that the plaintiff's acquisition of the properties of the PBM in the alleged auction sale on November 23, 1983 by virtue of a foreclosure proceedings under a mortgage contract is true, its ownership is only limited to its rights as mortgagee and subject to other superior liens. It cannot affect the lien of the defendants Ricardo Zurita, et al. (complainants in NLRC Case No. 9-3296-84) over the properties of PBM already attached and existing to it at the time of the foreclosure and/or the plaintiff's acquisition of the PBM properties being said lien is a laborer's lien;
10. The lien of the defendants Ricardo Zurita, et al. and other laborers numbering 2,081 in all, complainants in the NLRC Case No. 9-3296-84 was already attached and existing over the PBM properties since 1981 the time when the said laborers were illegally dismissed or when PBM ceased its operations allegedly due to bankruptcy, and at the time when the PNB or the plaintiff allegedly acquired the PBM properties;
11. Said lien of the defendants Ricardo Zurita, et al. (complainants in NLRC Case No. NCR-9-3296-84) is superior and enjoys preference over the lien of the plaintiff as mortgagee and constitute an automatic first lien above all other earlier encumbrances on the PBM properties pursuant to the doctrine laid down by the Supreme Court in G.R. No. 68819-20, Ferrer, et al, v. Romillo, Jr., et al. promulgated on February 7, 1985; PCIB v. NAMAWU, 115 SCRA 873 and G.R. No. L-39742, Air Manila, Inc., et al. v. CIR;
12. The judgment award to the defendants Ricardo Zurita, et al. in NLRC Case No. NCR. 9-3296-84 which is in the nature of separation pay from PBM a corporation that had ceased operation due to bankruptcy, is superior to the rights of PNB as mortgagee and that of the plaintiff who just step into the shoes of the former over the properties of PBM pursuant to the doctrine laid down by the Supreme Court in G.R. No. 75161-62, PNB v. Delta Workers Union, et al., promulgated on April 1, 1987, that the rights of workers to separation pay from a bankrupt corporation is superior to a mortgagee's credit in the foreclosed property and considering further that Art. 110 of the Labor Code is constitutional because Police Power prevails over non-impairment of the obligation and contract clause in the Constitution;
13. So that what the PNB can rightfully claim on the PBM properties is only the residue after the lien of the laborers of PBM (defendants Ricardo Zurita, et al., complainants against the PBM in NLRC Case No. NCR 9-3296-84) has been fully satisfied. Thus, this residue, if there is any, is the only thing that the plaintiff can rightfully claim, and it cannot further claim that
the properties are already exempt from execution the fact that the plaintiff is the government as it merely steps into the shoes of the PNB. It is elementary that water cannot rise higher than its source;
14. Herein defendant being the purchaser of the properties of PBM transferred on account of the exercise of a superior and automatic first lien above all earlier encumbrances attached to the properties, evidenced by a certificate of sale, is therefore the rightful and legal owner of the properties subject hereof over and above and superior and paramount from the claim of ownership of the plaintiff; (Rollo, p. 215-217)
In fine, Asibar's defense to the complaint of the petitioner centered on his allegation that his right to the properties is superior to the right of the petitioner. The issue as to the proper disposition of the PBM properties has already been decided earlier by this court in the other PBM cases. The jurisprudence on the matter is now final and Asibar cannot resurrect the issue as to which is superior, the PNB foreclosure and purchase of the properties in 1983 or the claims of various creditors, including the workers, which we decided in 1985.
Moreover, it is worthy to note that respondent Sheriff Santos in itemizing the properties which he sold during the auction sale identified them as "Properties Located at PBM Compound, Pasig Metro Manila" (p. 194, Rollo, G.R. No. 96056) which signifies that there is only one PBM compound in Pasig, Metro Manila.
That there is only one PBM compound in Pasig is confirmed by the certification of Mayor Mario S. Raymundo of Pasig (Annex "B", Additional Argument filed by intervenor Phoenix Inc. and Steel Corporation [PISCOR]), to wit:
C E R T I F I C A T I O N
TO WHOM IT MAY CONCERN:
THIS IS TO CERTIFY that since 1981 up to the present time there is only one facility referred to as the Philippine Blooming Mills (P.B.M.) Compound in the Municipality of Pasig, Metro Manila.
The above-mentioned facility is located at the boundary of Barangay Rosario and Manggahan. And, therefore, the P.B.M. Compound is sometimes part of the Barangay Manggahan. In any case, there is only one facility known as the P.B.M. Compound in the Municipality of Pasig.
This certification is issued at the request of the Phoenix Iron and Steel Corporation (PISCOR) for location reference purposes.
Given this 5th day of March 1991 at Pasig, Metro Manila.
(Sgd.) MARIO S. RAYMUNDOMunicipal Mayor
(Rollo — G.R. No. 96056, p. 797)
Another certification issued by the Assessor's Office through Senior Taxmapper Bonifacio C. Maceda, Jr. clears the confusion as regards the address of the PBM Compound in Pasig which is referred to as Manggahan by some and Rosario by others, to wit:
October 30, 1991
TO WHOM IT MAY CONCERN:
This is to certify that as per Real Property Tax Records of this office, the properties of the former facility known as the Philippine Blooming Mills Co., Inc., located in the Municipality of Pasig, are officially part of Manggahan and not part of Rosario based on the Tax Declaration of the said property.
Furthermore, although the Pasig facility of the Philippine Blooming Mills Co., Inc. since existence carried the address of Rosario; the tax mapping of the Municipality of Pasig initiated by this office in the period between 1987-1988 officially pegged the boundary of Rosario and Manggahan to be the point where the Litton Mills property end and where the former Philippine Blooming Mills Co., Inc. begins.
This certification is issued for whatever purpose it may serve.
(Sgd.) BONIFACIO C. MACEDA, JR.Sr. Taxmapper
(Rollo — G.R. No. 96056, p. 798)
Any doubts regarding the existence of only one PBM Compound located at Pasig instead of two (2) as implied by the trial court is dispelled by Volume 2 of the 1989-1990 Metro Manila Citiguide (The Encyclopedic Map of Metro Manila) where Map 130 shows the PBM Compound, and Map 131 a portion thereof which indicates that the PBM compound in Pasig is only one and not made of two (2) parts, one in Rosario and another in Manggahan. (Annex "D", Additional Argument filed by PISCOR).
The location of the PBM Compound was never in issue before the trial court. It appears from the records that it was assumed to be a matter known to all the parties, that the parties were aware of the exact whereabouts of the compound in Pasig.
From the sole fact that some documents bore the address PBM, Rosario, Pasig, while other documents carried the address PBM, Manggahan, Pasig, the trial court jumped to the conclusion that there are two (2) PBM compounds in the same town, in two barangays adjacent to each other, with each compound containing identical sets of buildings and the buildings containing identical but separate sets of extremely expensive machineries and equipment.
It was relatively easy for the trial court, if it wanted to decide the case on matter not fully litigated by the parties, to ascertain the correct factual bases for its conclusion.
The PBM compound is at the boundary of the two barangays. This explains why in some documents, it used Rosario as an address while in others it used Manggahan. It is not logical for a steel company to establish two huge industrial complexes in two adjacent barangays of the same town and to treat them, as the trial court did, as two separate and distinct industrial complexes. The court should have received evidence to clearly establish what now appears from the records of these and earlier cases to be a wrong conclusion.
The chattels are clearly identified and numbered in the PNB and APT records of ownership. Conveniently for the private respondent, properties acquired by PNB for P76,720,800.00 in the 1983 were sold to Asibar for only P5,950,000.00 as scrap and machineries in lots, each lot being the contents of one entire building, with no specifying details and no identification as to what types of machineries, serial numbers, etc. were sold for a nominal sum.
The well-entrenched principle that findings of facts of the Court of Appeals are conclusive and binding upon this Court is not without exceptions. Such exceptions include the following: when the findings are not supported by the record, glaringly erroneous as to constitute grave abuse of discretion or when the findings are grounded entirely on speculation, surmise or conjecture. (See Chan v. Court of Appeals, 33 SCRA 737 [1970]; Baniqued v. Court of Appeals, 127 SCRA 596 [1984]; Moran, Jr. v. Court of Appeals, 133 SCRA 88 [1984]; Collector of Customs of Manila v. Intermediate Appellate Court, 137 SCRA 3 [1985]; Premier Insurance and Surety Corporation v. Intermediate Appellate Court, 141 SCRA 423 [1986]; Director of Lands, et al. v. Funtilar, et al., 142 SCRA 57 [1986]; Manlapaz v. Court of Appeals, 147 SCRA 236 [1987]; Chua Giok Ong v. Court of Appeals, 149 SCRA 115 [1987] Francisco v. Mandi, 152 SCRA 711 [1987]; Knecht v. Court of Appeals, 158 SCRA 80 [1988]; Garcia v. Court of Appeals, 33 SCRA 623 [1970]; Tolentino v. De Jesus, 56 SCRA 167 [1974]; Ramos v. Court of Appeals, 63 SCRA 331 [1975]; Rizal Cement Co., Inc. v. Villareal, 135 SCRA 15 [1985]; Municipality of Meycauayan v. Intermediate Appellate Court, 157 SCRA 640 [1988]; Remalante v. Tibe, et al., 158 SCRA 138 [1988]; Bunag v. Court of Appeals, 158 SCRA 306 [1988]; Santa Ana, Jr. v. Hernandez, 18 SCRA 973 [1986]; Joaquin v. Navarro, 93 Phil. 257 [1953]; Cruz v. Court of Appeals, G.R. No. 85685, September 11, 1991)
Certainly, the trial court's ruling that there is no identity as between the PBM properties sold to PNB and those sold to Asibar because the petitioners did not prove the location of the same, whether they are at the PBM compound located at Manggahan or at the PBM Compound located at Rosario on the premise that there are two (2) PBM Compounds in Pasig is patently and glaringly erroneous amounting to a grave abuse of discretion.
Moreover, the trial court's finding that the petitioner failed to show that the machineries and equipment sold to PNB found inside twelve (12) buildings inside the PBM compound are the same as those sold to Asibar found in the thirty four (34) buildings and that the twelve (12) buildings are the same twelve buildings forming part of thirty four (34 buildings) in which machineries and equipment were sold to Asibar is patently erroneous and not supported by the record.
The record shows that the petitioner mentions at least nine (9) buildings which are among the thirty four (34) buildings and that the machineries and equipment inside the said nine buildings were also sold to Asibar as indicated by Exhibits 1 to 1-"D", Annex "D" Petition). These are: (1) Scale House which is Bid Item No. 5; (2) Machine Shop which is Bid Item No. 8; (3) Open Hearth Furnace which is Bid Item No. 12; (4) Oxygen Plant which is Bid Item No. 14; (5) Rolling Mills which is Bid Item No. 19; (6) Boiling Press Machine Building which is Bid Item No. 24; (7) Carpentry and Electrical Shop which is Bid Item No. 30; (8) Nail Plant which is Bid Item No. 30; and (9) Motor Pool which is Bid Item No. 33. The certificate of sale (Annex "C" Petition) issued to PNB indicates that the chattels inside these buildings found at PBM Compound, Barrio Rosario, Pasig Metro Manila were sold to PNB. The certificate of sale describes with particularity the chattels found in these buildings. For example, citing only one building:
Nail Plant
Nail Making Machine "Yamamura" built 1950, weight 420, type YA, 500 rpm, Serial No. 244.
9 Nail Making Machine "Yamamura" built 1950, weight 550, type YB, 400 rpm, Serial Nos. 252, 246, 245, 217, 218, 251, 250, and 249. (Rollo — G.R. No. 96056, p.80)
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On the other hand, the certificate of sale issued to Asibar by Sheriff Santos referred to the chattels found in the thirty four (34) buildings which include the aforesaid nine (9) buildings sold to Asibar as follows:
. . . building materials and fixtures including imbedded pipes and metals and all kinds of materials obtained from the total demolition of each buildings, structure, or bid item described below; and all MILL/PLANT MACHINERY, EQUIPMENT, MATERIALS AND SUPPLIES and all movable properties found inside each building/structure described below.
Undoubtedly, the foregoing description of properties includes all chattels found inside the thirty four (34) buildings including those already sold to PNB in the nine (9) buildings.
Under these circumstances, the appellate court committed a reversible error in ruling that the lower court did not commit a grave abuse of discretion in its finding that there is no identity of PBM properties sold to PNB and Asibar.
With these findings, the inevitable conclusion is that the auction sale conducted by Sheriff Santos is null and void. As discussed earlier the NLRC has no jurisdiction over PBM properties which are already owned by third persons. As revealed by the records, the questioned PBM properties which were levied under a writ of execution dated November 13, 1987 issued in NLRC Case NO. 9-3296-84 and subsequently sold in a public auction sale were already owned by PNB as evidenced by a certificate of sale dated November 23, 1983. The validity of the sale was not challenged by the respondents at the time of the said properties' levy. We ruled in a long line of cases that the power of the court to execute its judgment extends only to properties unquestionably owned by the judgment debtor. (See Consolidated Bank and Trust Corporation(solid Bank) supra.
IV
The main issue in G.R. No. 96437 centers on whether or not the complaint filed by respondent Asibar against the petitioner states a cause of action.
In the lower court, the petitioner contended that the complaint is premature since paragraph 2 of the Deed of Sale states that the balance shall be payable only upon the dismissal of Civil Case No. 18426 (subject of the petition in G.R. No. 96056) and the same shall be secured within two (2) weeks from the signing of the Deed of Sale on February 10, 1988. In other words, the balance would be paid only when it is finally ascertained as to who between the APT and Asibar owns the properties sold by the latter. According to the petitioner, the private respondent still has to present proof of the dismissal of Civil Case No. 18426. Hence, the petitioner argues that based on the Deed of Sale, the contract between the two (2) parties, the private respondent possessed no demandable right arising from the Deed of Sale.
The appellate court dismissed the petition on the ground that it has become moot and academic in view of the December 29, 1989 decision of the Regional Trial Court of Makati, Branch 60 in Civil Case No. 18426. The dispositive portion of the decision reads:
WHEREFORE, the Court hereby renders judgment as follows:
The COMPLAINT dated November 25, 1987 is DISMISSED;
The Order dated December 16, 1987 (pp. 87-90, Records) as clarified in the Order dated July 19, 1988 granting the plaintiffs application for a writ of preliminary injunction (pp. 288-289, Id.) is LIFTED and SET ASIDE; and
The COUNTERCLAIMS of the defendants (other than SILVINO SANTOS and BIENVENIDO HERMOGENES) are DISMISSED. (Rollo — G.R. No. 96056, p. 42)
The appellate court ruled that the decision dismissing Civil Case No. 18426 and lifting the injunction rendered the petition moot and academic.
The petitioner now contends that the appellate court committed grave abuse of discretion in dismissing its petition for certiorari for being moot and academic. It argues that the dismissal of Civil Case No. 18426 provided in the Deed of Sale refers to a decision which is final and executory considering that Civil Case No. 18426 is for the annulment of the auction sale and certificate of sale from which respondent Asibar derived the properties which he sold to the petitioner. Until, therefore, the sale of these properties are declared valid by a final and executory decision, the respondent has no right and interest in the same properties which he could transfer and sell to the petitioner.
The well-settled rule is that when a party files a motion to dismiss the complaint for lack of cause of action he is deemed to hypothetically admit the allegations thereof. (Nicanor G. De Guzman, Jr. v. Court of Appeals, G.R. Nos. 92029-30, December 20, 1990)
It is clear from the Deed of Sale which was attached to the complaint and in fact the basis for the complaint, that the vendee, the petitioner herein, is obligated under that contract to pay the amount of P9,500,000.00 as follows:
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b. Fourteen (14) days from the date Civil Case No. 18426 pending in Branch 60, is dismissed, the VENDEE shall pay the amount of Four Million Pesos (P4,000,000.00) to the VENDOR;
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. . . In the event the restraining order is lifted, the payments under the above-schedule shall be resumed; (pp. 1-4, Deed of Sale, Annex "B", Petition)
When, therefore, the trial court rendered its decision and dismissed Civil Case No. 18426 and at the same time lifted the injunction issued therein, the vendor, respondent Asibar, acquired a demandable right against the petitioners in relation to their contract, the Deed of Sale.
The cause of action must always consist of two elements: (1) the plaintiff's primary right and the defendant's corresponding primary duty, whatever may be the subject to which they relate — person, character, property or contract; and (2) the delict or wrongful act or omission of the defendant, by which the primary right and duty have been violated. The cause of action is determined not by the prayer of the complaint but by the facts alleged. (R.C.L. 489 21; Section 126, C.C.P.I.; Cagibao v. Lim, 50 Phil. 844 [1924]; See Martin, supra) (De Guzman, Jr. v. Hon. Court of Appeals, et al. supra)
Under the facts as they then stood, the Court of Appeals did not commit grave abuse of discretion in dismissing the petition for being moot and academic.
Whether or not the Regional Trial Court's dismissal of Civil Case No. 18426 refers to a dismissal that is final and executory was a defense which should be raised in the answer and determined in the course of the proceedings of the case.
However, the issue in G.R. No. 96437 are inextricably intertwined with the issues in G.R. No. 96056. Since we have found that the Sheriff's sale to Asibar was null and void, it follows that Asibar could not have sold to Phoenix Iron and Steel Corporation the properties which did not lawfully belong to him.
This case started as a complaint seeking the payment to Asibar by petitioner Phoenix Iron and Steel Corporation (PISCOR) and Wilfredo Labayen, vice-president of PISCOR of the alleged balance based on the deed of sale executed by respondent Asibar in favor of PISCOR. The deed of sale covers PBM properties which Asibar acquired in the auction sale which is the subject matter in G.R. No. 96056 to wit:
WHEREAS, the VENDOR is the purchaser at an auction sale conducted in NLRC Case No. 9-3296-84 of machineries and equipment located inside all the buildings in the realty covered by TCT No. (11486) 41183, per certificate of sale dated November 23, 1987, executed and issued by Silvino S. Santos, as an incident in the execution of the decision in the aforementioned case entitled Ricardo Zurita, et al. v. Philippine Blooming Mills, Co., Inc., (PBM) and BPI Investment Corporation, . . . (Rollo — G.R. No. 96437, p. 38)
Considering our ruling in G.R. No. 96056 where we annulled that auction sale of February 23, 1987 conducted by Sheriff Silvino Santos, respondent Asibar has no rights and/or interest over the PBM properties, the same properties of which are concededly subject of the deed of sale between Asibar as vendor and petitioner PISCOR as vendee. In view of this development Asibar's complaint against the petitioner to recover the payment of the balance of the consideration agreed upon by the parties in the deed of sale has no more legal basis and should now be dismissed.
WHEREFORE, the Court renders judgment as follows:
1. In G.R. No. 89767, the petition is GRANTED. The questioned decision and resolution of the Court of Appeals are hereby reversed and set aside. The May 26, 1989 Order of the Securities and Exchange Commission is declared null and void;
2. In G.R. No. 96056, the petition is GRANTED. The questioned decision of the Court of Appeals is hereby SET ASIDE. The questioned auction sale conducted by Sheriff Silvino Santos is declared null and void and the certificate of sale issued to respondent Alfredo Asibar is cancelled. The Temporary Restraining Order issued on November 29, 1990 is made PERMANENT; and
3. In G.R. No. 96437, the petition is declared MOOT and ACADEMIC. The Regional Trial Court of Pasig Branch 151 is ordered to DISMISS Civil Case No. 56806.
SO ORDERED.