Archive for August, 2011


CASE 2011-0183: FELIXBERTO A. ABELLANA VS. PEOPLE OF THE PHILIPPINES AND SPOUSES SAAPIA B. ALONTO AND DIAGA ALONTO (G.R. NO. 174654, 17 AUGUST 2011,  DEL CASTILLO, J.) SUBJECTS: CIVIL LIABILITY; FALSIFICATION OF PUBLIC DOCUMENT (BRIEF TITLE: ABELLANA VS. PEOPLE)

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DISPOSITIVE:

 

          WHEREFORE, the petition is GRANTED.  The February 22, 2006 Decision of the Court of Appeals in CA-G.R. SP No. 78644 and its August 15, 2006 Resolution are AFFIRMED insofar as they set aside the conviction of the petitioner for the crime of falsification of public document.  The portion which affirmed the imposition of civil liabilities on the petitioner, i.e., the restoration of ownership and possession, the payment of P1,103,000.00 representing the value of the property, and the payment of nominal and exemplary damages, attorney’s fees and litigation expenses, is deleted for lack of factual and legal basis.

SO ORDERED.

 

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 SUBJECT/DOCTRINE/DIGEST

 

          It is an established rule in criminal procedure that a judgment of acquittal shall state whether the evidence of the prosecution absolutely failed to prove the guilt of the accused or merely failed to prove his guilt beyond reasonable doubt.[1][20]  In either case, the judgment shall determine if the act or omission from which the civil liability might arise did not exist.[2][21]  When the exoneration is merely due to the failure to prove the guilt of the accused beyond reasonable doubt, the court should award the civil liability in favor of the offended party in the same criminal action.[3][22]  In other words, the “extinction of the penal action does not carry with it the extinction of civil liability unless the extinction proceeds from a declaration in a final judgment that the fact from which the civil [liability] might arise did not exist.”[4][23]

 

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          In Banal v. Tadeo, Jr.,[5][26] we elucidated on the civil liability of the accused despite his exoneration in this wise:

 

While an act or omission is felonious because it is punishable by law, it gives rise to civil liability not so much because it is a crime but because it caused damage to another.  Viewing things pragmatically, we can readily see that what gives rise to the civil liability is really the obligation and moral duty of everyone to repair or make whole the damage caused to another by reason of his own act or omission, done intentionally or negligently, whether or not the same be punishable by law. x x x

 

 

Simply stated, civil liability arises when one, by reason of his own act or omission, done intentionally or negligently, causes damage to another.  Hence, for petitioner to be civilly liable to spouses Alonto, it must be proven that the acts he committed had caused damage to the spouses.

 

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Republic of thePhilippines

Supreme Court

Manila

 

FIRST DIVISION

 

FELIXBERTO A. ABELLANA,

Petitioner,

  G.R. No. 174654

 

     
    Present:
     

– versus –

  CORONA, C.J., Chairperson,
    LEONARDO-DE CASTRO,

BERSAMIN,

 

 

PEOPLE OF THE PHILIPPINES

and Spouses SAAPIA B. ALONTO

and DIAGA ALONTO,

Respondents.

  DELCASTILLO, and

VILLARAMA, JR., JJ.

 

Promulgated:

August 17, 2011

x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

 

D E C I S I O N

 

DEL CASTILLO, J.:

 

The only issue that confronts this Court is whether petitioner Felixberto A. Abellana could still be held civilly liable notwithstanding his acquittal.

 

Assailed before this Court are the February 22, 2006 Decision[6][1] of the Court of Appeals (CA) in CA-G.R. SP No. 78644 and its August 15, 2006 Resolution[7][2] denying the motion for reconsideration thereto.  The assailed CA Decision set aside the May 21, 2003 Decision[8][3] of the Regional Trial Court (RTC) of Cebu City, Branch 13, in Criminal Case No. CBU-51385 and acquitted the petitioner of the crime of falsification of public document by a private individual because the Information charged him with a different offense which is estafa through falsification of a public document.[9][4]  However, the CA still adjudged him civilly liable.[10][5]

 

Factual Antecedents

 

In 1985, petitioner extended a loan to private respondents spouses Diaga and Saapia Alonto (spouses Alonto),[11][6] secured by a Deed of Real Estate Mortgage over Lot Nos. 6471 and 6472 located in Cebu City.[12][7]  Subsequently, or in 1987, petitioner prepared a Deed of Absolute Sale conveying said lots to him.  The Deed of Absolute Sale was signed by spouses Alonto in Manila.  However, it was notarized in Cebu City allegedly without the spouses Alonto appearing before the notary public.[13][8]  Thereafter, petitioner caused the transfer of the titles to his name and sold the lots to third persons.

 

On August 12, 1999,[14][9] an Information[15][10] was filed charging petitioner with Estafa through Falsification of Public Document, the accusatory portion of which reads:

 

That on or about the 9th day of July, 1987, in the City of Cebu, Philippines, and within the jurisdiction of this Honorable Court, the said accused, with deliberate intent, and with intent to defraud, did then and there falsify a public document consisting of a Deed of Absolute Sale of a parcel of land consisting of 803 square meters executed before Notary Public Gines N. Abellana per Doc. No. 383, Page No. 77, Book No. XXIII, Series of 1987 of the latter’s Notarial Register showing that spouses Saapia B. Alonto and Diaga Alonto sold their parcel of land located at Pardo, Cebu City, for a consideration of P130,000.00 in favor of accused by imitating, counterfeiting, signing or [causing] to be imitated or counterfeited the signature[s] of spouses Saapia B. Alonto and Diaga Alonto above their typewritten names in said document as vendor[s], when in truth and in fact as the accused very well knew that spouses Saapia B. Alonto and Diaga Alonto did not sell their aforestated descri[b]ed property and that the signature[s] appearing in said document are not their signature[s], thus causing it to appear that spouses Saapia B. Alonto and Diaga Alonto participated in the execution of said document when they did not so participate[. Once] said document was falsified, accused did then and there cause the transfer of the titles of said land to his name using the said falsified document, to the damage and prejudice of spouses Saapia B. Alonto and Diaga Alonto in the amount of P130,000.00, the value of the land .

                CONTRARY TO LAW.[16][11]

 

 

            During arraignment, petitioner entered a plea of “not guilty”.[17][12]  After the termination of the pre-trial conference, trial ensued.

 

Ruling of the Regional Trial Court

 

            In its Decision dated May 21, 2003, the RTC noted that the main issue for resolution was whether petitioner committed the crime of estafa through falsification of public document.[18][13]             Based on the evidence presented by both parties, the trial court found that petitioner did not intend to defraud the spouses Alonto; that after the latter failed to pay their obligation, petitioner prepared a Deed of Absolute Sale which the spouses Alonto actually signed; but that the Deed of Absolute Sale was notarized without the spouses Alonto personally appearing before the notary public.  From these, the trial court concluded that petitioner can only be held guilty of Falsification of a Public Document by a private individual under Article 172(1)[19][14] in relation to Article 171(2)[20][15] of the Revised Penal Code (RPC) and not estafa through falsification of public document as charged in the Information.

            The dispositive portion of the RTC Decision reads:

 

            WHEREFORE, judgment is hereby rendered finding the accused Felixberto Abellana GUILTY of the crime of falsification of public document by private individuals under Article 172 of the Revised Penal Code and sentences him to an indeterminate penalty of  TWO (2) YEARS and FOUR (4) MONTHS of Prision Correccional, as minimum, to SIX (6)YEARS, as maximum.

 

                He is directed to institute reconveyance proceedings to restore ownership and possession of the real properties in question in favor of private complainants.  After private complainants shall have acquired full ownership and possession of the aforementioned properties, they are directed to pay the accused the sum of P130,000.00 [with] legal interest thereon reckoned from the time this case was instituted.

 

                Should the accused fail to restore full ownership and possession in favor of the private complainants [of] the real properties in question within a period of six (6) months from the time this decision becomes final and executory, he is directed to pay said complainants the sum of P1,103,000.00 representing the total value of the properties of the private complainants.

 

                He is likewise directed to pay private complainants the following:

 

                1.  P15,000.00 for nominal damages;

                2.  P20,000.00 for attorney’s fees;

                3.  P50,000.00 as and for litigation expenses;

                4.  P30,000.00 as and for exemplary damages;

 

plus the cost of this suit.

 

SO ORDERED.[21][16]

 

 

Ruling of the Court of Appeals

 

            On appeal, petitioner raised the issue of whether an accused who was acquitted of the crime charged may nevertheless be convicted of another crime or offense not specifically charged and alleged and which is not necessarily included in the crime or offense charged.  The CA, in its Decision dated February 22, 2006, ruled in the negative.[22][17]  It held that petitioner who was charged with and arraigned for estafa through falsification of public document under Article 171(1) of the RPC could not be convicted of Falsification of Public Document by a Private Individual under Article 172(1) in relation to Article 171(2).  The CA observed that the falsification committed in Article 171(1) requires the counterfeiting of any handwriting, signature or rubric while the falsification in Article 171(2) occurs when the offender caused it to appear in a document that a person participated in an act or proceeding when in fact such person did not so participate.  Thus, the CA opined that the conviction of the petitioner for an offense not alleged in the Information or one not necessarily included in the offense charged violated his constitutional right to be informed of the nature and cause of the accusation against him.[23][18]  Nonetheless, the CA affirmed the trial court’s finding with respect to petitioner’s civil liability.  The dispositive portion of the CA’s February 22, 2006 Decision reads as follows:

 

            WHEREFORE, premises considered, We resolve to set aside the Decision dated May 21, 2003 of the Regional Trial Court, 7th Judicial Region, Branch 13,CebuCity only insofar as it found the petitioner guilty of a crime that is different from that charged in the Information. The civil liability determinations are affirmed.

SO ORDERED.[24][19]

 

 

Petitioner filed a motion for reconsideration which was denied in the Resolution dated August 15, 2006.

 

Hence, petitioner comes before us through the present Petition for Review on Certiorari raising the lone issue of whether he could still be held civilly liable notwithstanding his acquittal by the trial court and the CA.

 

Our Ruling

 

            The petition is meritorious.

 

            It is an established rule in criminal procedure that a judgment of acquittal shall state whether the evidence of the prosecution absolutely failed to prove the guilt of the accused or merely failed to prove his guilt beyond reasonable doubt.[25][20]  In either case, the judgment shall determine if the act or omission from which the civil liability might arise did not exist.[26][21]  When the exoneration is merely due to the failure to prove the guilt of the accused beyond reasonable doubt, the court should award the civil liability in favor of the offended party in the same criminal action.[27][22]  In other words, the “extinction of the penal action does not carry with it the extinction of civil liability unless the extinction proceeds from a declaration in a final judgment that the fact from which the civil [liability] might arise did not exist.”[28][23]

 

            Here, the CA set aside the trial court’s Decision because it convicted petitioner of an offense different from or not included in the crime charged in the Information.  To recall, petitioner was charged with estafa through falsification of public document.  However, the RTC found that the spouses Alonto actually signed the document although they did not personally appear before the notary public for its notarization. Hence, the RTC instead convicted petitioner of falsification of public document. On appeal, the CA held that petitioner’s conviction cannot be sustained because it infringed on his right to be informed of the nature and cause of the accusation against him.[29][24]  The CA, however, found no reversible error on the civil liability of petitioner as determined by the trial court and thus sustained the same.[30][25] 

 

We do not agree.

            In Banal v. Tadeo, Jr.,[31][26] we elucidated on the civil liability of the accused despite his exoneration in this wise:

 

While an act or omission is felonious because it is punishable by law, it gives rise to civil liability not so much because it is a crime but because it caused damage to another.  Viewing things pragmatically, we can readily see that what gives rise to the civil liability is really the obligation and moral duty of everyone to repair or make whole the damage caused to another by reason of his own act or omission, done intentionally or negligently, whether or not the same be punishable by law. x x x

 

 

Simply stated, civil liability arises when one, by reason of his own act or omission, done intentionally or negligently, causes damage to another.  Hence, for petitioner to be civilly liable to spouses Alonto, it must be proven that the acts he committed had caused damage to the spouses.

 

Based on the records of the case, we find that the acts allegedly committed by the petitioner did not cause any damage to spouses Alonto.

 

First, the Information charged petitioner with fraudulently making it appear that the spouses Alonto affixed their signatures in the Deed of Absolute Sale thereby facilitating the transfer of the subject properties in his favor.  However, after the presentation of the parties’ respective evidence, the trial court found that the charge was without basis as the spouses Alonto indeed signed the document and that their signatures were genuine and not forged.

 

Second, even assuming that the spouses Alonto did not personally appear before the notary public for the notarization of the Deed of Absolute Sale, the same does not necessarily nullify or render void ab initio the parties’ transaction.[32][27]  Such non-appearance is not sufficient to overcome the presumption of the truthfulness of the statements contained in the deed. “To overcome the presumption, there must be sufficient, clear and convincing evidence as to exclude all reasonable controversy as to the falsity of the [deed].  In the absence of such proof, the deed must be upheld.”[33][28]  And since the defective notarization does not ipso facto invalidate the Deed of Absolute Sale, the transfer of said properties from spouses Alonto to petitioner remains valid.  Hence, when on the basis of said Deed of Absolute Sale, petitioner caused the cancellation of spouses Alonto’s title and the issuance of new ones under his name, and thereafter sold the same to third persons, no damage resulted to the spouses Alonto. 

 

            Moreover, we cannot sustain the alternative sentence imposed upon the petitioner, to wit: to institute an action for the recovery of the properties of spouses Alonto or to pay them actual and other kinds of damages.  First, it has absolutely no basis in view of the trial court’s finding that the signatures of the spouses Alonto in the Deed of Absolute Sale are genuine and not forged.  Second, “[s]entences should not be in the alternative.  There is nothing in the law which permits courts to impose sentences in the alternative.”[34][29]  While a judge has the discretion of imposing one or another penalty, he cannot impose both in the alternative.[35][30]  “He must fix positively and with certainty the particular penalty.”[36][31] 

 

            In view of the above discussion, there is therefore absolutely no basis for the trial court and the CA to hold petitioner civilly liable to restore ownership and possession of the subject properties to the spouses Alonto or to pay them P1,103,000.00 representing the value of the properties and to pay them nominal damages, exemplary damages, attorney’s fees and litigation expenses.

            WHEREFORE, the petition is GRANTED.  The February 22, 2006 Decision of the Court of Appeals in CA-G.R. SP No. 78644 and its August 15, 2006 Resolution are AFFIRMED insofar as they set aside the conviction of the petitioner for the crime of falsification of public document.  The portion which affirmed the imposition of civil liabilities on the petitioner, i.e., the restoration of ownership and possession, the payment of P1,103,000.00 representing the value of the property, and the payment of nominal and exemplary damages, attorney’s fees and litigation expenses, is deleted for lack of factual and legal basis.

SO ORDERED.

 

 

 

MARIANO C. DEL CASTILLO

Associate Justice

 

 

WE CONCUR:

 

RENATO C. CORONA

Chief Justice

Chairperson

 

 

 

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

LUCAS P. BERSAMIN

Associate Justice

 

 

 

MARTIN S. VILLARAMA, JR.

Associate Justice

 

 

 

 

 

 

 

C E R T I F I C A T I O N

 

            Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

 

 

 

RENATO C. CORONA

Chief Justice

 

 

 

 


 


[1][20] Herrera, Oscar M., “Remedial Law”, Volume IV, 2001 Ed., p. 178.

[2][21]Id.

[3][22]Id.

[4][23] Calalang v. Intermediate Appellate Court, G.R. No. 74613, February 27, 1991, 194 SCRA 514, 523-524.

[5][26] 240 Phil. 326, 331 (1987).

[6][1]   CA rollo, pp. 176-184; penned by Associate Justice Apolinario D. Bruselas, Jr. and concurred in by Associate Justices Arsenio J. Magpale and Vicente L. Yap.

[7][2]  Id. at 238.

[8][3]  Id. at30-41; penned by Judge Meinrado P. Paredes.

[9][4]  Id. at 180.

[10][5]Id. at 184.

[11][6]Id. at 33.

[12][7]Id.

[13][8]Id.

[14][9]Id. at 6.

[15][10]        Id. at 42-43.

[16][11]        Id.

[17][12]        Id. at 31.

[18][13]        Id. at 34.

[19][14]         ART. 172. Falsification by private individuals and use of falsified documents. – The penalty of prision correccional in its medium and maximum periods and a fine of not more than 5,000 [pesos] shall be imposed upon:

        1.  Any private individual who shall commit any of the falsifications enumerated in the next preceding article [Article 171] in any public or official document or letter of exchange or any other kind of commercial document; and

        x x x x

[20][15]         ART. 171. Falsification by public officer, employee; or notary or ecclesiastical minister. – The penalty of prision mayor and a fine not to exceed 5,000 pesos shall be imposed upon any public officer, employee, or notary who, taking advantage of his official position, shall falsify a document by committing any of the following acts:

        x x x x

        2.  Causing it to appear that persons have participated in any act or proceeding when they did not in fact so participate;

        x x x x

[21][16]         CA rollo, p. 41.

[22][17]        Id. at 180.

[23][18]        Id. at 183.

[24][19]        Id. at 183-184.

[25][20]         Herrera, Oscar M., “Remedial Law”, Volume IV, 2001 Ed., p. 178.

[26][21]        Id.

[27][22]        Id.

[28][23]         Calalang v. Intermediate Appellate Court, G.R. No. 74613, February 27, 1991, 194 SCRA 514, 523-524.

[29][24]         CA rollo, p. 183.

[30][25]        Id.

[31][26]         240 Phil. 326, 331 (1987).

[32][27]         St. Mary’s Farm, Inc. v. Prima Real Properties, Inc., G.R. No. 158144, July 31, 2008, 560 SCRA 704, 713.

[33][28]        Id.

[34][29]         United States v. Chong Ting and Ha Kang, 23 Phil. 120, 124 (1912).

[35][30]        Id. at 125.

[36][31]        Id.

CASE 2011-0182: AMERICAN HOME INSURANCE CO. OF NEW YORK VS. F.F. CRUZ & CO. INC. (G.R. NO. 174926, 10 AUGUST 2011, PERALTA, J.) SUBJECTS: SURETY BOND; CERTIORARI. (BRIEF TITLE: AMERICAN HOME INSURANCE VS. FF CRUZ)

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SUBJECT/DOCTRINE/DIGEST.

 

 

FF CRUZ WON DREDGING CONTRACT WITH PPA. IT SUBCONTRACTED PART OF WORK TO G. REYES. FF CRUZ ADVANCED P2.2M TO G. REYES AND THE LATTER POSTED SURETY BOND ISSUED BY AMERICAN HOME. G. REYES EXECUTED INDEMNITY AGREEMENT IN FAVOR OF AMERICAN HOME. G. REYES DID NOT FINISH THE PROJECT. FF CRUZ DEMANDED FROM AMERICAN HOME THE P2.2M.  AMERICAN HOME FILED CASE AGAINST G. REYES UNDER THE INDEMNITY AGREEMENT. G. REYES FILED CASE AGAINST FF CRUZ  FOR BALANCE. FF CRUZ FILED CASE AGAINST AMERICAN HOME. RTC RULED THAT AMERICAN HOME MUST PAY FF CRUZ P2.2M AND THT G. REYES PAY AMERICAN HOME P2.2M. CA AFFIRMED RTC.

 

ON CERTIORARI AMERICAN HOME ARGUES THAT IT IS NOT LIABLE TO FF CRUZ BECAUSE ITS OBLIGATION IS ONLY LIMITED TO THE NON-PAYMENT OF THE P2.2M ADVANCE PAYMENT AND NOT TO THE NON-PERFORMANCE OF THE OBLIGATION OF G. REYES IN THE SUBCONTRACT. IS THIS ARGUMENT CORRECT?

 

 

 

NO. THE SURETY BOND PROVIDES TWO CONDITIONS: THAT THE P2.2M ADVANCE PAYMENT BY FF CRUZ HAS NOT YET BEEN PAID AND THAT  G. REYES HAS NOT PERFORMED ITS OBLIGATION UNDER THE SUBCONTRACT. BOTH CONDITIONS EXIST. THE PAYMENT OF THE P2.2 MILLION ADVANCED BY FF CRUZ IS THE PRINCIPAL LIABILITY OF G. REYES. HOWEVER, WITH THE ISSUANCE OF THE SURETY BOND, A CONTRACT OF SURETYSHIP WAS ENTERED INTO MAKING AMERICAN HOME EQUALLY LIABLE.

 

 

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AMERICAN HOME RAISED ISSUES ON APPEAL NOT RAISED DURING TRIAL. IS THIS PROPER?

 

 

NO. POINTS OF LAW, THEORIES, ISSUES, AND ARGUMENTS NOT ADEQUATELY BROUGHT TO THE ATTENTION OF THE TRIAL COURT NEED NOT BE, AND ORDINARILY WILL NOT BE, CONSIDERED BY A REVIEWING COURT. THEY CANNOT BE RAISED FOR THE FIRST TIME ON APPEAL. TO ALLOW THIS WOULD BE OFFENSIVE TO THE BASIC RULES OF FAIR PLAY, JUSTICE AND DUE PROCESS.[1][23]

 

The Court also notes that the issues raised by American Home in this petition were not raised during the trial of the case before the RTC. It must be recalled that the case below was commenced by American Home for the collection of sum of money against G. Reyes pursuant to the Indemnity Agreement executed by the latter. The issue on American Home’s liability to FF Cruz was squarely raised only in the fourth-party complaint filed by the latter against the former.

Settled is the rule that points of law, theories, issues, and arguments not adequately brought to the attention of the trial court need not be, and ordinarily will not be, considered by a reviewing court. They cannot be raised for the first time on appeal. To allow this would be offensive to the basic rules of fair play, justice and due process.[2][23] In order, however, to remove doubt on its liability to FF Cruz, we will discuss the merits of American Home’s arguments.

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WHAT IS A CONTRACT OF SURETYSHIP?

 

 

A CONTRACT OF SURETYSHIP IS AN AGREEMENT WHEREBY A PARTY CALLED THE SURETY, GUARANTEES THE PERFORMANCE BY ANOTHER PARTY, CALLED THE PRINCIPAL OR OBLIGOR, OF AN OBLIGATION OR UNDERTAKING IN FAVOR OF ANOTHER PARTY CALLED THE OBLIGEE.  . . .

 

 

 

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WHAT ARE THE ELEMENTS OF SURETYSHIP?

 

 

1. THE LIABILITY OF THE SURETY IS JOINT AND SEVERAL; 2. IT IS LIMITED TO AMOUNT OF THE BOND; 3. ITS TERMS ARE DETERMINED STRICTLY BY THE TERMS OF THE CONTRACT OF SURETYSHIP IN RELATION TO THE PRINCIPAL CONTRACT BETWEEN THE OBLIGOR AND THE OBLIGEE.

 

. . . By its very nature, under the laws regulating suretyship, the liability of the surety is joint and several but is limited to the amount of the bond, and its terms are determined strictly by the terms of the contract of suretyship in relation to the principal contract between the obligor and the obligee.[3][27]

 

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WHAT IS THE RELATION OF SURETYSHIP  TO THE PRINCIPAL OBLIGATION?

 

 

IT IS ONLY SECONDARY.

 

 

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WHAT IS THE SURETY’S LIABILITY TO THE CREDITOR?

 

 

IT IS DIRECT, PRIMARY AND ABSOLUTE EVEN THOUGH HE HAS NO DIRECT OR PERSONAL INTEREST IN THE PRINCIPAL OBLIGATION NOR DOES HE RECEIVE ANY BENEFIT THEREFROM.[4][28]

 

The surety is considered in law as possessed of the identity of the debtor in relation to whatever is adjudged touching upon the obligation of the latter. Their liabilities are so interwoven as to be inseparable. Although the contract of suretyship is, in essence, secondary only to a valid principal obligation, the surety’s liability to the creditor is direct, primary, and absolute; he becomes liable for the debt and duty of another although he possesses no direct or personal interest over the obligations nor does he receive any benefit therefrom.[5][28]

XXXXXXXXXXXXXXXXXXXX

 

AMERICAN HOME  CLAIMS THAT P598,880.00 WAS PAID BY G. REYES TO F.F. CRUZ BUT THIS MATTER WAS RAISED ONLY ON APPEAL. CAN THIS BE GIVEN CREDENCE?

 

 

 

NO. AMERICAN HOME WAS DUTY-BOUND TO PROVE THAT IT WAS ENTITLED TO ITS CLAIM AGAINST G. REYES UNDER THE INDEMNITY AGREEMENT AND THAT IT WAS NOT LIABLE TO FF CRUZ UNDER THE SURETY BOND. YET, AMERICAN HOME CHOSE NOT TO PRESENT ITS EVIDENCE TO SUBSTANTIATE ITS CLAIM AND DEFENSE. FOR LACK OF EVIDENCE TO SHOW THE FACT OF PAYMENT, WE FIND NO REASON TO DISTURB THE FINDINGS OF THE TRIAL COURT AS AFFIRMED BY THE APPELLATE COURT THAT P2.2 MILLION IS DUE FF CRUZ.

 

As to the amount of American Home’s liability, the RTC found that G. Reyes did not pay back the full amount of P2.2 million advance payment. American Home, however, claims (for the first time) that G. Reyes actually reimbursed P598,880.52 to FF Cruz. As plaintiff in its complaint and defendant in FF Cruz’s fourth-party complaint, American Home was duty-bound to prove that it was entitled to its claim against G. Reyes under the Indemnity Agreement and that it was not liable to FF Cruz under the surety bond. Yet, American Home chose not to present its evidence to substantiate its claim and defense. For lack of evidence to show the fact of payment, we find no reason to disturb the findings of the trial court as affirmed by the appellate court that P2.2 million is due FF Cruz.

XXXXXXXXXXXXXXXXX

 

 

BUT CAN SUPREME COURT ENTERTAIN AMERICAN HOME’S FACTUAL ALLEGATIONS?

 

 

 

 

NO. FACTUAL FINDINGS OF THE TRIAL COURT, PARTICULARLY WHEN AFFIRMED BY THE CA, ARE GENERALLY BINDING ON THE COURT.[6][29] WE HAVE REPEATEDLY HELD THAT WE ARE NOT A TRIER OF FACTS. WE GENERALLY RELY UPON, AND ARE BOUND BY, THE CONCLUSIONS ON FACTUAL MATTERS MADE BY THE LOWER COURTS, WHICH ARE BETTER EQUIPPED AND HAVE BETTER OPPORTUNITY TO ASSESS THE EVIDENCE FIRST-HAND, INCLUDING THE TESTIMONY OF THE WITNESSES.[7][30]

 

 

The Court’s jurisdiction over a petition for review on certiorari is limited to reviewing only errors of law, not of facts, unless the factual findings complained of are devoid of support from the evidence on record or the assailed judgment is based on a misapprehension of facts.[8][31]

 

 

 

==============================

Republic of thePhilippines

Supreme Court

Manila

                       

THIRD DIVISION

AMERICAN HOME INSURANCE CO. OF NEW YORK,                                                        Petitioner,

versus

 

 

 

F.F. CRUZ & CO., INC.,

 

                                     Respondent.                                

G.R. No. 174926 

Present:

   CARPIO,* J.,

   VELASCO, JR., J., Chairperson,

   BRION,**

   PERALTA, and

   SERENO,*** JJ.

 

Promulgated:

           August 10, 2011

x—————————————————————————————–x

DECISION

PERALTA, J.:

 

          This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by American Home Insurance Co. of New York (American Home) assailing the Court of Appeals (CA) Decision[9][1] dated September 29, 2005 and Resolution[10][2] dated September 25, 2006 in CA-G.R. CV No. 73960. The assailed Decision affirmed the Decision[11][3] of the Regional Trial Court (RTC) ofMakati, Branch 137 in Civil Case No. 93-2585, while the assailed Resolution denied American Home’s motion for reconsideration.

The case stemmed from the following facts:

          In June 1990, the Philippine Ports Authority (PPA) conducted a bidding of a project for the dredging of the entrance channel and harbor basin of the CebuInternationalPortin CebuCity. The PPA awarded the contract to the winning bidder, F.F. Cruz & Co., Inc. (FF Cruz).  Pursuant to their earlier agreement, FF Cruz and Genaro Reyes Construction, Inc. (hereafter referred to as “G. Reyes”) executed a Sub-Contract Agreement[12][4] whereby the latter agreed to undertake the performance of 50% of the dredging project’s estimated volume of 600,000 cubic meters. The sub-contract was subject to the following terms and conditions:

x x x x

5. That the SUB-CONTRACTOR shall file immediately upon its receipt of NOTICE TO PROCEED, a PERFORMANCE BOND (callable anytime on demand) from a duly accredited surety company equivalent to 10% of the SUBCONTRACT’S TOTAL COST;

6. That the SUB-CONTRACTOR agrees to start to work on the PROJECT within thirty (30) calendar days or as directed by the PPA, from the date of NOTICE TO PROCEED for the PROJECT, and obligates itself to finish the work within the contract time stipulated in the contract entered into by the CONTRACTOR and PPA;

x x x x[13][5]

          FF Cruz gave G. Reyes an advance payment of P2.2 million guaranteed by a surety bond for the same amount issued by American Home. The surety bond was issued to guarantee payment of the advance payment made by FF Cruz to G. Reyes for the dredging project in the event that the latter fail to comply with the terms and conditions of the sub-contract.[14][6]

As a security for the issuance of the bond, Genaro Reyes, as president of G. Reyes, and his wife Lydia Reyes, executed an Indemnity Agreement where they agreed to jointly and severally indemnify American Home and keep the latter harmless against all damages, losses, costs, stamps, taxes, penalties, charges and expenses of whatever kind and nature which it may sustain or incur as a consequence of having become a surety, or any extension, renewal, substitution or alteration made thereof.[15][7] They likewise undertook to pay, reimburse and make good to American Home all sums which the latter shall pay on account of the bond.[16][8] It was also agreed upon that their liability attaches as soon as demand is received by American Home from FF Cruz, or as soon as it becomes liable to make payment under the terms of the surety bond.

          In a letter dated March 6, 1991, FF Cruz informed G. Reyes that the former mobilized its dredger and started operation on March 3, 1991. In the same letter, FF Cruz requested G. Reyes to mobilize its equipment on or before March 20, 1991.[17][9] 

          On October 21, 1991, G. Reyes complained to the PPA about the great deal of silt and waste materials that had accumulated in the area which adversely affected its work accomplishment. In December 1991, G. Reyes informed FF Cruz that the equipment used for the project had been encountering difficulties because of siltation problems. G. Reyes finally admitted that continuing the project was no longer a wise investment and called on FF Cruz to take over the project. FF Cruz thus took over the unfinished project.[18][10]

          Consequently, FF Cruz demanded from American Home the payment of P2.2 million representing the amount of the bond. American Home, in turn, informed G. Reyes of FF Cruz’s demand. As the claim left unheeded, FF Cruz made a final demand on American Home on July 10, 1993. G. Reyes likewise ignored American Home’s demand to fulfill its obligation set forth in the Indemnity Agreement it executed in favor of the latter.

          On July 29, 1993, American Home filed a Complaint for Sum of Money[19][11] against G. Reyes, Genaro G. Reyes and Lydia A. Reyes for the payment of P2,200,000.00 corresponding to the amount of the bond, plus attorney’s fees and litigation expenses.[20][12] In its complaint, American Home sought the enforcement of the Indemnity Agreement undertaken by G. Reyes in conjunction with FF Cruz’s demand for the payment of the amount of the surety bond.

          G. Reyes et al., in turn, filed an Answer with Counterclaim and Third-Party Complaint[21][13] against FF Cruz. G. Reyes denied liability to American Home on the ground that G. Reyes did not fail to comply with its obligation to FF Cruz.  It explained that its (G. Reyes’) liability would arise only in case of its failure to comply with the terms and conditions of the sub-contract. It insisted that it was FF Cruz who was guilty of breach of its obligations. In its Third-Party Complaint against FF Cruz, G. Reyes argued that the siltation problems caused by the former resulted in the reduction of G. Reyes’ project accomplishment and failure to finish the project.  It also claimed that FF Cruz still has an unpaid balance of more than P5 million as it recognized only the accomplishment of 57,284.44 cubic meters instead of 184,210 cubic meters claimed by G. Reyes.

          In answer to the third-party complaint of G. Reyes, FF Cruz denied that it caused the siltation problems and argued that the former abandoned the project because it was incapable of performing its obligations. It also explained that it had no unpaid obligation to G. Reyes as it paid its accomplishment based on the report of the PPA.[22][14]

          FF Cruz thereafter filed a Fourth-Party Complaint against American Home calling on the surety bond it provided in favor of G. Reyes.[23][15]  

          During the pre-trial, the parties agreed to limit the issues, to wit:

1)      Is the fourth-party defendant AMERICAN HOME free from liability on the claim of fourth-party plaintiff FF Cruz as set forth in the fourth-party complaint because:

a)      The provision in American Surety Bond No. 304-67535575 that the same is callable anytime on demand is null and void?

b)      Assuming that it is not, is fourth-party defendant AMERICAN HOME free from liability because Genaro G. Reyes Construction, Inc. had fulfilled all its obligations under the sub-contract it had with fourth-party plaintiff?

2)      Is AMERICAN HOME free from liability relative to the fourth-party plaintiff claim as set forth in the complaint because the damages suffered by fourth-party plaintiff arose from force majeure?

3)      If [fourth-party] defendant AMERICAN HOME is liable on the surety bond, what is the amount and nature of the damages that should be awarded to fourth-party plaintiff?[24][16]

After the presentation of the parties’ respective evidence, the RTC rendered a Decision,[25][17] the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered ordering plaintiff American Home Insurance Company of New Yorkand third-party plaintiff Genaro G. Reyes Construction, Incorporated, jointly and severally, to pay third-party defendant F.F. Cruz and Company the amount of P2,200,000.00 representing the full amount of the surety bond.

The third-party complaint of third-party plaintiff Genaro G. Reyes Construction, Incorporated, against third-party defendant F.F. Cruz and Company, and the counterclaim for attorney’s fees of third-party plaintiff Genaro G. Reyes Construction, Incorporated, against plaintiff American Home Insurance Company of New York, are both dismissed, for lack of sufficient merit.

On the counterclaim of third-party defendant F.F. Cruz and Company, judgment is hereby rendered ordering third-party plaintiff Genaro G. Reyes Construction, Incorporated, to pay said third-party defendant the following amounts:

1.      P310,150.21 representing the overpayment received by third-party plaintiff Genaro G. Reyes Construction, Incorporated, from third-party defendant F.F. Cruz and Company, with 6% interest per annum from the filing of the third-party complaint on 8 April 1994 until full payment;

2.      10% of the above amount as attorney’s fees; and

3.      costs of suit.

On the complaint of plaintiff American Home Insurance Company of New York against defendants and third-party plaintiff Genaro G. Reyes Construction, Incorporated, Genaro G. Reyes and Lydia A. Reyes, judgment is hereby rendered ordering defendants and third-party plaintiffs Genaro G. Reyes Construction, Incorporated, Genaro G. Reyes and Lydia A. Reyes, jointly and severally, to pay plaintiff American Home Insurance Company of New York the amount of P2,200,000.00, representing the full amount of the indemnity agreement, plus 10% thereof as attorney’s fees and costs of suit.

SO ORDERED.[26][18]

American Home and G. Reyes et al. appealed to the CA. On September 29, 2005, the appellate court rendered the assailed decision dismissing their appeal and, consequently, affirming the RTC decision. The CA sustained the findings of the RTC that G. Reyes indeed failed to fulfill its obligation to dredge 300,000 cubic meters as it only finished dredging 57,000 cubic meters. The court opined that there was no proof to show that the abandonment of the project by G. Reyes was caused by heavy siltation. Considering that such failure to finish the project constitutes a violation of G. Reyes’ agreement with FF Cruz, American Home was held liable under the bond it issued to G. Reyes.[27][19] G. Reyes’ and American Home’s motions for reconsideration were denied on September 25, 2006.

Aggrieved, G. Reyes assailed the CA decision and resolution before this Court in a petition for review on certiorari, [28][20] but the same was denied by the Court in a Minute Resolution[29][21] dated March 5, 2007.

In this petition under consideration, American Home likewise assails the same decision and resolution with the following assigned errors:

I.

            THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN CONSIDERING THE BOND ISSUED BY PETITIONER TO BE A PERFORMANCE BOND CONTRARY TO THE EXPRESS TERMS OF THE BOND ITSELF THAT IT WAS TO GUARANTEE PAYMENT FOR THE 15% ADVANCE PAYMENT MADE BY RESPONDENT TO GENARO G. REYES CONSTRUCTION CORPORATION.

II.

            THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT DISCHARGING PETITIONER FROM ITS OBLIGATIONS UNDER THE BOND DUE TO THE ABANDONMENT OF THE PROJECT BY GENARO G. REYES CONSTRUCTION CORPORATION AND THE TAKE-OVER BY RESPONDENT WITHOUT PETITIONER’S PRIOR NOTICE AND CONSENT.

III.

ASSUMING, WITHOUT ADMITTING, THAT PETITIONER IS LIABLE UNDER THE BOND, THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN ADJUDGING PETITIONER LIABLE FOR THE ENTIRE OR FACE VALUE OF THE BOND IN THE AMOUNT OF P2.2 MILLION CONSIDERING THAT THE BOND WAS NOT A PERFORMANCE BOND TO GUARANTEE THE COMPLETION OF THE PROJECT BUT MERELY TO GUARANTEE THE PAYMENT OF THE ADVANCES MADE BY RESPONDENT TO GENARO G. REYES CONSTRUCTION.[30][22]

American Home faults the CA in considering the surety bond as a performance bond. It insists that the bond guaranteed only the payment of the 15% advance payment made by FF Cruz to G. Reyes amounting to P2.2 million and not the performance of the latter’s obligations nor the completion of the dredging operations. It also avers that making it (American Home) liable under the bond because of G. Reyes’ abandonment of the project is tantamount to enlarging its liability.  American Home also claims that it was not informed that G. Reyes already abandoned the project and that FF Cruz took over to complete the same. This, according to American Home, is a material alteration of the terms of the surety bond which thus discharged it of liability on the surety agreement.

The petition is without merit.

The only issue for resolution is whether or not American Home is liable to FF Cruz for P2.2 million representing the face value of the surety bond it issued to G. Reyes.

We rule in the affirmative.

It is well to note that G. Reyes’ petition in G.R. No. 174913 has been denied by the Court. Hence, the same CA decision and resolution assailed in this present petition have become final and executory as to G. Reyes, Genaro Reyes and Lydia A. Reyes and, in that respect, it shall not be disturbed by the Court. Consequently, their liability to American Home pursuant to the Indemnity Agreement has been settled with finality. They are, therefore, bound to pay American Home P2,200,000.00 representing the full amount of the Indemnity Agreement, plus 10% thereof as attorney’s fees and costs of suit. Their liability to FF Cruz has also been resolved with finality. 

The Court also notes that the issues raised by American Home in this petition were not raised during the trial of the case before the RTC. It must be recalled that the case below was commenced by American Home for the collection of sum of money against G. Reyes pursuant to the Indemnity Agreement executed by the latter. The issue on American Home’s liability to FF Cruz was squarely raised only in the fourth-party complaint filed by the latter against the former.

Settled is the rule that points of law, theories, issues, and arguments not adequately brought to the attention of the trial court need not be, and ordinarily will not be, considered by a reviewing court. They cannot be raised for the first time on appeal. To allow this would be offensive to the basic rules of fair play, justice and due process.[31][23] In order, however, to remove doubt on its liability to FF Cruz, we will discuss the merits of American Home’s arguments.

It is undisputed that FF Cruz gave G. Reyes P2.2 million as advance payment. As a security thereof, G. Reyes posted a surety bond issued by American Home in favor of FF Cruz, the pertinent portion of which reads:

 To guarantee payment for the 15% advance payment made by the obligee [FF Cruz] to the herein principal [G. Reyes] for the Dredging of Entrance Channel and Harbor Basin of Cebu International Port Project in the event of the principal’s failure to comply with the terms and conditions of the Sub-Contract Agreement dated June 11, 1990, copy of which is hereto attached and made an integral part hereof; it being expressly understood that the liability of the surety under this bond shall in no case exceed the amount of PESOS TWO MILLION TWO HUNDRED THOUSAND ONLY (P2,200,000.00), Phil. Cy.”[32][24]

It is clear from the foregoing that indeed, the surety bond was issued to guarantee the payment of the 15% advance payment of P2.2 million made by FF Cruz to G. Reyes. The bond was not issued to guarantee the completion of the project. However, the above provision shows that in order for American Home’s liability to attach, two conditions must be fulfilled: first, that the advance payment made by FF Cruz to G. Reyes remains unpaid; and second, G. Reyes fails to comply with any of the terms and conditions set forth in the sub-contract.

          There may be a dispute as to the amount of liability as will be discussed later, but it has been adequately established that FF Cruz was not yet reimbursed of the advance payment it made. The fulfillment of the first condition is, therefore, settled.

 In the sub-contract agreement, G. Reyes agreed to finish the work within the time stipulated in the contract between FF Cruz and the PPA. Admittedly, not only did G. Reyes fail to finish the work on time, it did not altogether complete the project. If failure to finish the work on time is violation of the sub-contract agreement, with more reason that abandonment of the work is covered by the stipulation. As held by the CA:

By G. REYES’ own claim, it dredged only 184,000 cubic meters. There thus is no dispute that G. REYES failed to dredge the 300,000 cubic meters as agreed in the contract. But even if [w]e are to assume that G. REYES indeed dredged 184,210 cubic meters, this would still be short of the 300,000 cubic meters it bound itself under the contract.

In the middle of the project, G REYES unilaterally abandoned its dredging work and its obligations under the Sub-Contract Agreement. Without a doubt, G. REYES failed to fulfill its contractual obligation. x x x[33][25]     

The appellate court did not also sustain G. Reyes’ explanation that the abandonment of the project was due to force majeure. We quote with approval the CA ratiocination in this wise:

The proffered reason that the abandonment was due to force majeure fails to convince this Court. G. REYES’ excuse that it was forced to abandon the dredging work due to “heavy siltation” is not supported by facts on record. There is no evidence of the alleged “heavy siltation.” On the contrary, after G REYES abandoned its dredging work and FF CRUZ took over the dredging, FF CRUZ was still able to finish the dredging work on time. There is thus no basis for G REYES’ justification of force majeure. Such was a lame excuse for the abandonment of the project.[34][26]

With the violation of the sub-contract, which means fulfillment of the second condition, the liability to pay the advance payment arose.

The payment of the P2.2 million advanced by FF Cruz is the principal liability of G. Reyes. However, with the issuance of the surety bond, a contract of suretyship was entered into making American Home equally liable.

A contract of suretyship is an agreement whereby a party called the surety, guarantees the performance by another party, called the principal or obligor, of an obligation or undertaking in favor of another party called the obligee.  By its very nature, under the laws regulating suretyship, the liability of the surety is joint and several but is limited to the amount of the bond, and its terms are determined strictly by the terms of the contract of suretyship in relation to the principal contract between the obligor and the obligee.[35][27]

The surety is considered in law as possessed of the identity of the debtor in relation to whatever is adjudged touching upon the obligation of the latter. Their liabilities are so interwoven as to be inseparable. Although the contract of suretyship is, in essence, secondary only to a valid principal obligation, the surety’s liability to the creditor is direct, primary, and absolute; he becomes liable for the debt and duty of another although he possesses no direct or personal interest over the obligations nor does he receive any benefit therefrom.[36][28]

As to the amount of American Home’s liability, the RTC found that G. Reyes did not pay back the full amount of P2.2 million advance payment. American Home, however, claims (for the first time) that G. Reyes actually reimbursed P598,880.52 to FF Cruz. As plaintiff in its complaint and defendant in FF Cruz’s fourth-party complaint, American Home was duty-bound to prove that it was entitled to its claim against G. Reyes under the Indemnity Agreement and that it was not liable to FF Cruz under the surety bond. Yet, American Home chose not to present its evidence to substantiate its claim and defense. For lack of evidence to show the fact of payment, we find no reason to disturb the findings of the trial court as affirmed by the appellate court that P2.2 million is due FF Cruz.

Factual findings of the trial court, particularly when affirmed by the CA, are generally binding on the Court.[37][29] We have repeatedly held that we are not a trier of facts. We generally rely upon, and are bound by, the conclusions on factual matters made by the lower courts, which are better equipped and have better opportunity to assess the evidence first-hand, including the testimony of the witnesses.[38][30]

The Court’s jurisdiction over a petition for review on certiorari is limited to reviewing only errors of law, not of facts, unless the factual findings complained of are devoid of support from the evidence on record or the assailed judgment is based on a misapprehension of facts.[39][31]

With the foregoing disquisition, we need not discuss the other issues raised by American Home.

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated September 29, 2005 and Resolution dated September 25, 2006 in CA-G.R. CV No. 73960, are AFFIRMED.

 

SO ORDERED.

 

                                      DIOSDADO M. PERALTA

                                      Associate Justice

 

 

WE CONCUR:

ANTONIO T. CARPIO

                                                Associate Justice

 

 

 

                  

PRESBITERO J. VELASCO, JR.              ARTURO D. BRION                        

              Associate Justice                                   Associate Justice

                 Chairperson

                            

 

 

MARIA LOURDES P. A. SERENO

   Associate Justice

 

 

 

ATTESTATION

 

 

          I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                      PRESBITERO J. VELASCO, JR.

   Associate Justice

    Third Division, Chairperson

          CERTIFICATION

 

 

          Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                                   RENATO C. CORONA

                                                                             Chief Justice



[1][23]          Stronghold Insurance Company, Incorporated v. Tokyo Construction Company, Ltd., G.R. Nos. 158820-21, June 5, 2009, 588 SCRA 410, 420.

[2][23]          Stronghold Insurance Company, Incorporated v. Tokyo Construction Company, Ltd., G.R. Nos. 158820-21, June 5, 2009, 588 SCRA 410, 420.

[3][27]          Stronghold Insurance Company, Incorporated v. Tokyo Construction Company, Ltd., supra note 23, at 421-422.

[4][28]          Id. at 422-423.

[5][28]          Id. at 422-423.

[6][29]          Raquel-Santos v. Court of Appeals, G.R. Nos. 174986, 175071 and 181415, July 7, 2009, 592 SCRA 169, 195.

[7][30]          Stronghold Insurance Company, Incorporated v. Tokyo Construction Company, Ltd., supra note 23, at 420-421.

[8][31]          Raquel-Santos v. Court of Appeals, supra note 29, at 195-196.

*               Designated as an additional member in lieu of Associate Justice Roberto A. Abad, per Special Order No. 1059 dated August 1, 2011.

**             Designated as an additional member in lieu of Associate Justice Jose Catral Mendoza, per Special Order No. 1056 dated July 27, 2011.

***            Designated as an additional member, per Special Order No. 1028 dated June 21, 2011.

[9][1]           Penned by Associate Justice Vicente S.E. Veloso, with Associate Justices Amelita G. Tolentino and Danilo B. Pine, concurring; rollo, pp. 51-68.

[10][2]          Penned by Asociate Justice Amelita G. Tolentino, with Associate Justices Portia Aliño-Hormachuelos and Lucas P. Bersamin (now a member of this Court), concurring; rollo, pp. 71-72.

[11][3]          Penned by Judge Santiago Javier Ranada; CA rollo, pp. 101-118.

[12][4]          Rollo, pp. 181-183.

[13][5]          Id. at 133.

[14][6]          Id. at 64.

[15][7]          CA rollo, p. 103.

[16][8]          Rollo, p. 161.

[17][9]          CA rollo, p. 103.

[18][10]         Id. at 103-104.

[19][11]         Rollo, pp. 159-168.

[20][12]         Id. at 167.

[21][13]         Id. at 169-180.

[22][14]         CA rollo, p. 105.

[23][15]         Id.

[24][16]         Id.

[25][17]         Supra note 3.

[26][18]         CA rollo, pp. 117-118.

[27][19]         Rollo, pp. 61-67.

[28][20]         The petition was entitled “Genaro G. Reyes Construction, Inc. et al. v. American Home Insurance Co. of New York” and docketed as G.R. No. 174913.

[29][21]         The resolution reads:

x x x x

Considering the allegations, issues and arguments adduced in the petition for review on certiorari assailing the Decision dated 29 September 2005 of the Court of Appeals in CA-G.R. CV No. 73960, the Court resolves to DENY the petition for failure to sufficiently show that the Court of Appeals had committed any reversible error in the questioned judgment to warrant the exercise of this Court’s discretionary appellate jurisdiction, and for raising essentially factual issues.

[30][22]         Rollo, pp. 28-29.

[31][23]         Stronghold Insurance Company, Incorporated v. Tokyo Construction Company, Ltd., G.R. Nos. 158820-21, June 5, 2009, 588 SCRA 410, 420.

[32][24]         Rollo, p. 64.

[33][25]         Id. at 63-64.

[34][26]         Id. at 65.

[35][27]         Stronghold Insurance Company, Incorporated v. Tokyo Construction Company, Ltd., supra note 23, at 421-422.

[36][28]         Id. at 422-423.

[37][29]         Raquel-Santos v. Court of Appeals, G.R. Nos. 174986, 175071 and 181415, July 7, 2009, 592 SCRA 169, 195.

[38][30]         Stronghold Insurance Company, Incorporated v. Tokyo Construction Company, Ltd., supra note 23, at 420-421.

[39][31]         Raquel-Santos v. Court of Appeals, supra note 29, at 195-196.

CASE 2011-181: METROPOLITAN BANK and TRUST COMPANY, substituted by MERIDIAN (SPV-AMCI) CORPORATION VS. INTERNATIONAL EXCHANGE BANK (G.R. NO. 176008); CHUAYUCO STEEL MANUFACTURING VS. INTERNATIONAL EXCHANGE BANK (now UNION BANK OF THE PHILIPPINES) (G.R. NO. 176131) (PERALTA, J., 10 AUGUST 2011) SUBJECTS: ACTION PAULIANA; CERTIORARI; FORUM SHOPPING. (BRIEF TITLE: METROBANK VS. IEB)

===============================================

 

SUBJECT/DOCTRINE/DIGEST:

 

SSC, A STEEL MANUFACTURER, EXECUTED CHATTEL MORTGAGE OVER ITS EQUIPMENTS IN FAVOR OF IEB TO SECURE A LOAN. SSC DEFAULTED. IEB FILED ACTION FOR REPLEVIN AND FORECLOSURE. METROBANK FILED ACTION TO INTERVENE WITH PRAYER  TO ANNUL THE MORTGAGE AS THE SAME WAS EXECUTED IN FRAUD OF CREDITORS. RTC ADMITTED INTERVENTION OF METROBANK. IEB APPEALED TO CA WHICH DISMISSED METROBANK’S INTERVENTION. WAS CA ACTION CORRECT?

 

YES. ACCORDING TO CA METROBANK’S ACTION TO ANNUL THE MORTGAGE IS AN ACTION PAULIANA WHICH IS AN ACTION TO RESCIND CONTRACTS IN FRAUD OF CREDITORS. TO SUCCEED, METROBANK SHOULD HAVE EXHAUSTED FIRST THE PROPERTIES OF SSC BEFORE RESORTING TO ACTION PAULIANA. THERE IS NO EVIDENCE OR ALLEGATION THAT METROBANK COMPLIED WITH SUCH REQUIREMENT.

 

XXXXXXXXXXXXXXXXXXXXXX

 

 

WHAT IS ACCION PAULIANA?

 

IT IS AN ACTION TO RESCIND CONTRACTS IN FRAUD OF CREDITORS.

 

Under Article 1381 of the Civil Code, an accion pauliana is an action to rescind contracts in fraud of creditors.22

 

XXXXXXXXXXXXXXXXXXXXX

 

WHAT ARE THE SUCCESSIVE MEASURES TO BE TAKEN BY A CREDITOR BEFORE HE MAY BRING AN ACTION FOR  RESCISSION OF AN ALLEGEDLY FRAUDULENT CONTRACT?

 

THE MEASURES ARE:

(1) EXHAUST THE PROPERTIES OF THE DEBTOR THROUGH LEVYING BY ATTACHMENT AND EXECUTION UPON ALL THE PROPERTY OF THE DEBTOR, EXCEPT SUCH AS ARE EXEMPT BY LAW FROM EXECUTION;

 

(2) EXERCISE ALL THE RIGHTS AND ACTIONS OF THE DEBTOR, SAVE THOSE PERSONAL TO HIM (ACCION SUBROGATORIA);

 

AND (3) SEEK RESCISSION OF THE CONTRACTS EXECUTED BY THE DEBTOR IN FRAUD OF THEIR RIGHTS (ACCION PAULIANA).23

 

XXXXXXXXXXXXXXXXXX

 

 

WHAT IS THE NATURE OF ACTION PAULIANA?

 

IT MUST BE OF LAST RESORT AVAILED OF ONLY AFTER THE CREDITOR HAS EXHAUSTED ALL THE PROPERTIES OF THE DEBTOR NOT EXEMPT FROM EXECUTION OR AFTER ALL OTHER LEGAL REMEDIES HAVE BEEN EXHAUSTED AND HAVE BEEN PROVEN FUTILE.24

 

THE RIGHT OR REMEDY OF THE CREDITOR TO IMPUGN THE ACTS WHICH THE DEBTOR MAY HAVE DONE TO DEFRAUD THEM IS SUBSIDIARY IN NATURE.25

 

IT CAN ONLY BE AVAILED OF IN THE ABSENCE OF ANY OTHER LEGAL REMEDY TO OBTAIN REPARATION FOR THE INJURY.26

 

It is thus apparent that an action to rescind, or an accion pauliana, must be of last resort, availed of only after the creditor has exhausted all the properties of the debtor not exempt from execution or after all other legal remedies have been exhausted and have been proven futile.24

It does not appear that Metrobank sought other properties of SSC other than the subject lots alleged to have been transferred in fraud of creditors. Neither is there any showing that Metrobank subrogated itself in SSC’s transmissible rights and actions. Without availing of the first and second remedies, Metrobank simply undertook the third measure and filed an action for annulment of the chattel mortgages. This cannot be done. Article 1383 of the New Civil Code is very explicit that the right or remedy of the creditor to impugn the acts which the debtor may have done to defraud them is subsidiary in nature.25 It can only be availed of in the absence of any other legal remedy to obtain reparation for the injury.26 This fact is not present in this case. No evidence was presented nor even an allegation was offered to show that Metrobank had availed of the abovementioned remedies before it tried to question the validity of the contracts of chattel mortgage between IEB and SSC.

XXXXXXXXXXXXXXXXXXXXXX

 

METROBANK ARGUES THAT IN ACTION PAULIANA THERE MUST BE CONVEYANCE INVOLVED. HERE, THERE WAS ONLY A CHATTEL MORTGAGE, NOT A CONVEYANCE. IS METROBANK CORRECT?

 

NO. A MORTGAGE CONTRACT INVOLVES THE CONVEYANCE OF A PATRIMONIAL BENEFIT.

Metrobank also contends that in order to apply the concept of, and the rules pertaining to, accion pauliana, the subject matter must be a conveyance, otherwise valid, which is undertaken in fraud of creditors. Metrobank claims that since there is no conveyance involved in the contract of chattel mortgage between SSC and IEB, which Metrobank seeks to rescind, the CA erred in ruling that the latter’s Complaint-in-Intervention is an accion pauliana.

In the instant case, the contract of chattel mortgage entered into by and between SSC and IEB involves a conveyance of patrimonial benefit in favor of the latter as the properties subject of the chattel mortgage stand as security for the credit it extended to SSC. In a very recent case involving an action for the rescission of a real estate mortgage,27 while this Court found that some of the elements of accion pauliana were not present, it found that a mortgage contract involves the conveyance of a patrimonial benefit.

In sum, Metrobank may not be allowed to intervene and pray for the rescission of the chattel mortgages executed by SSC in favor of IEB. The remedy being sought by Metrobank is in the nature of an accion pauliana which, under the factual circumstances obtaining in the present case, may not be allowed. Based on the foregoing, the Court finds no error in the ruling of the CA that the RTC committed grave abuse of discretion in allowing Metrobank’s intervention.

 

 

===============================================

 

Republic of thePhilippines

Supreme Court

Manila

 

 

THIRD DIVISION

 

METROPOLITAN BANK and TRUST COMPANY, substituted by MERIDIAN (SPV-AMCI) CORPORATION,

Petitioner,

 

 

versus

 

 

INTERNATIONAL EXCHANGE BANK,

Respondent.

x——————————————–x

CHUAYUCO STEEL MANUFACTURING,

Petitioner,

 

 

 

– versus

 

 

 

INTERNATIONAL EXCHANGE BANK (now UNION BANK OF THE PHILIPPINES),

Respondent.

G.R. No. 176008

 

 

 

 

 

 

 

 

 

 

 

 

 

G.R. No. 176131

 

Present:

CARPIO,* J.,

VELASCO, JR., J., Chairperson,

BRION,**

PERALTA, and

SERENO,*** JJ.

 

Promulgated:

 

August 10, 2011

x—————————————————————————————–x

 

 

D E C I S I O N

 

 

PERALTA, J.:

 

 

Before the Court are two consolidated petitions for review on certiorari under Rule 45 of the Rules of Court, both of which are seeking the reversal and setting aside of the Decision1 and Resolution2 of the Court of Appeals (CA) dated May 5, 2006 and December 22, 2006, respectively, in CA-G.R. SP No. 00549-MIN which annulled and set aside the Orders dated September 6, 2004 and February 14, 2005, the Resolution dated March 15, 2005 and the Joint Resolution dated June 8, 2005 of the Regional Trial Court (RTC) of Misamis Oriental, Branch 17 in Civil Case Nos. 2004-197 and 2004-200.

 

The pertinent factual and procedural antecedents of the case are as follows:

 

Sacramento Steel Corporation (SSC) is a business entity engaged in manufacturing and producing steel and steel products, such as cold rolled coils and galvanized sheets, in its own steel manufacturing plant located at Tagoloan, Misamis Oriental.

 

For the purpose of increasing its capital, SSC entered into a Credit Agreement with herein respondent International Exchange Bank (IEB) on September 10, 2001 wherein the latter granted the former an omnibus credit line in the amount of P60,000,000.00, a loan of P20,000,000.00 and a subsequent credit line with a limit of P100,000,000.00.

As security for its loan obligations, SSC executed five separate deeds of chattel mortgage constituted over various equipment found in its steel manufacturing plant. The deeds of mortgage were dated September 17, 2001, February 26, 2003, April 16, 2003, May 25, 2004 and June 7, 2004.

 

Subsequently, SSC defaulted in the payment of its obligations. IEB’s demand for payment went unheeded. On July 7, 2004, the IEB filed with the RTC of Misamis Oriental an action for injunction for the purpose of enjoining SSC from taking out the mortgaged equipment from its premises. The case was docketed as Civil Case No. 2004-197. Thereafter, IEB filed a Supplemental Complaint praying for the issuance of a writ of replevin or, in the alternative, for the payment of SSC’s outstanding obligations and attorney’s fees.3

 

On the other hand, on July 18, 2004, SSC filed with the same RTC of Misamis Oriental a Complaint for annulment of mortgage and specific performance for the purpose of compelling the IEB to restructure SSC’s outstanding obligations. SSC also prayed for the issuance of a Temporary Restraining Order (TRO) and writ of preliminary injunction to prevent IEB from taking any steps to dispossess SSC of any equipment in its steel manufacturing plant as well as to restrain it from foreclosing the mortgage on the said equipment.4 The RTC issued a TRO. The case was docketed as Civil Case No. 2004-200 and was subsequently consolidated with Civil Case No. 2004-197.

 

On July 23, 2004, the RTC issued an Order5 granting IEB’s application for the issuance of a writ of replevin. However, upon agreement of the parties, the implementation of the said writ was held in abeyance pending the trial court’s resolution of the other incidents in the said case.6 The RTC also directed that there shall be “no commercial operation without court approval.7

 

On August 26, 2004, the IEB filed a petition for extrajudicial foreclosure of chattel mortgage.

 

SSC opposed IEB’s petition and prayed for the issuance of a writ of preliminary injunction.

 

On September 6, 2004, the RTC issued an Order disposing as follows:

 

WHEREFORE, let a Writ of preliminary injunction be issued restraining defendant iBank [IEB], the Sheriff, his agents and other person/s acting in their behalf as agents – privies or representative[s] in whatever capacity, from conducting foreclosure, whether judicial or extrajudicial, of any properties subject of the controversy and are further directed not to take any steps that will, in effect, dispossess plaintiff [SSC] of any of its machineries and equipment in its steel manufacturing plant pending determination of the case. Let a bond (cash or surety) of Five Hundred Thousand (P500,000.00) Pesos be posted by the plaintiff Sacramento Steel Corporation as required by law.

 

SO ORDERED.8

 

 

Meanwhile, on August 30, 2004, SSC entered into a Capacity Lease Agreement with herein petitioner Chuayuco Steel Manufacturing Corporation (CSMC) which allowed the latter to lease and operate the former’s cold rolling mill and galvanizing plant for a period of five years.

 

On October 21, 2004, herein petitioner Metropolitan Bank and Trust Company (Metrobank) filed a motion for intervention contending that it has legal interest in the properties subject of the litigation between IEB and SSC because it is a creditor of SSC and that the mortgage contracts between IEB and SSC were entered into to defraud the latter’s creditors.9 Metrobank prayed for the rescission of the chattel mortgages executed by SSC in favor of IEB.

 

On January 21, 2005, CSMC filed an Omnibus Motion for intervention and for allowance to immediately operate the cold rolling mill and galvanizing plant of SSC contending that its purpose in intervening is to seek the approval of the court to operate the said plant pursuant to the Capacity Lease Agreement it entered into with SSC.10IEB filed its Opposition to the said Motion.11

 

On February 14, 2005, the RTC issued an Order12 admitting the motions for intervention filed by CSMC and Metrobank.

 

On March 15, 2005, the RTC issued a Resolution, the dispositive portion of which reads, thus:

 

WHEREFORE, premises considered, the motion to operate the machineries pendente lite is hereby GRANTED based on law and equity as soon as practicable. This is without prejudice on the part of the I-bank [IEB] to assert the enforcement of the proposed schedule of payment submitted by SSC to the Court (Exh. “A” – Motion for Early Resolution, 2/16/2005 hearing) and to continually post their security guards unless withdrawn.

 

SO ORDERED.13

 

On June 8, 2005, the RTC issued a Joint Resolution14 reiterating its admission of CSMC’s motion for intervention and directing the latter to file its complaint-in-intervention.

 

On August 25, 2005, IEB filed a petition for certiorari, prohibition and mandamus with the CA assailing the RTC Orders dated September 6, 2004 and February 14, 2005, Resolution dated March 15, 2005 and Joint Resolution dated June 8, 2005.15

 

On May 5, 2006, the CA rendered its presently assailed Decision which disposed of the case as follows:

 

WHEREFORE, the petition is hereby GRANTED. The questioned Orders dated September 6, 2004, February 14, 2005, March 15, 2005 and June 8, 2005 issued by public respondent RTC, Branch 17, Misamis Oriental, presided by Hon. Florencia D. Sealana-Abbu in Civil Case Nos. 2004-197 and 2004-200 are hereby ANNULLED and SET ASIDE. Public respondent is hereby DIRECTED to turn-over the mortgaged properties covered by the writ of replevin to petitioner I-Bank for the eventual foreclosure thereof.

 

SO ORDERED.16

 

Metrobank, CSMC and SSC filed their respective motions for reconsideration, but these were all denied by the CA in its Resolution dated December 22, 2006.

 

Hence, the instant petitions for review on certiorari.

 

In G.R. No. 176008, petitioner Metrobank submits the following issues:

(A) WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT PETITIONER’S COMPLAINT-IN-INTERVENTION IS AN ACCION PAULIANA, A SUBSIDIARY ACTION, WHICH PRESUPPOSES AN UNSATISFIED JUDGMENT, WHICH UNSATISFIED JUDGMENT IS ABSENT IN THE CASE AT BAR.

 

(B) WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT THE TRIAL COURT COMMITTED GRAVE ABUSE OF DISCRETION IN ALLOWING PETITIONER’S COMPLAINT-IN-INTERVENTION.17

 

In G.R. No. 176131, petitioner CSMC raises the following grounds:

 

I. THE HONORABLE COURT ERRED IN NOT PASSING UPON THE ISSUE THAT HEREIN RESPONDENT IBANK IS GUILTY OF FORUM-SHOPPING.

 

II. THE HONORABLE COURT ERRED IN NOT RULING THAT HEREIN RESPONDENT IBANK’S FAILURE TO FILE A MOTION FOR RECONSIDERATION TO THE ORDER DATED 08 JUNE 2005 IS FATAL TO ITS PETITION.

 

III. THE HONORABLE COURT ERRED IN RULING THAT THE ORDER OF JUDGE SEALANA-ABBU ADMITTING THE INTERVENTION OF HEREIN PETITIONER CSMC IS WITHOUT LEGAL BASIS.18

 

 

In a Manifestation and Motion dated September 26, 2007, petitioner Metrobank manifested that it no longer has any interest in pursuing the instant case as the loan obligation owed by SSC to it has been sold by the latter to a corporation known as Meridian(SPV-AMC) Corporation (Meridian). Accordingly, Metrobank prayed that it be substituted by Meridianas petitioner in the instant case.19

 

In a Resolution20 dated November 12, 2007, this Court granted Metrobank’s Motion.

At the outset, the Court takes note that no arguments or questions were raised by petitioners with respect to the September 6, 2004 Order and March 15, 2005 Resolution of the RTC which were annulled by the CA. Hence, the only issues left for resolution in the instant petition are whether or not petitioners Metrobank and CSMC may be allowed to intervene in Civil Case Nos. 2004-197 and 2004-200.

 

The Court will dwell first on the issues raised by Metrobank in G.R. No. 176008.

 

In its first assigned error, Metrobank contends that the CA erred in ruling that its Complaint-in-Intervention is in the nature of an accion pauliana.

 

The Court does not agree.

 

A perusal of Metrobank’s Complaint-in-Intervention would show that its main objective is to have the chattel mortgages executed by SSC in favor of IEB rescinded. This is clearly evident in its prayer, which reads as follows:

 

WHEREFORE, premises considered, it is respectfully prayed unto the Honorable Court that judgment be rendered:

 

(1) RESCINDING the chattel mortgages executed by Defendants Sacramento and Delmo in favor of Defendant Ibank dated May 25, 2004 and June 7, 2004, respectively;

 

(2) Ordering defendantsSacramento, Delmo and Ibank to pay, jointly and severally, Plaintiff-Intervenor the amounts of:

 

(A) P500,000.00, as and by way of exemplary damages;

(B) P500,000.00, as and by way of attorney’s fees; and

(C) Costs of suit.

 

Other reliefs as may be just and equitable under the premises are likewise prayed for.

 

x x x x21

 

 

Under Article 1381 of the Civil Code, an accion pauliana is an action to rescind contracts in fraud of creditors.22

 

However, jurisprudence is clear that the following successive measures must be taken by a creditor before he may bring an action for rescission of an allegedly fraudulent contract: (1) exhaust the properties of the debtor through levying by attachment and execution upon all the property of the debtor, except such as are exempt by law from execution; (2) exercise all the rights and actions of the debtor, save those personal to him (accion subrogatoria); and (3) seek rescission of the contracts executed by the debtor in fraud of their rights (accion pauliana).23 It is thus apparent that an action to rescind, or an accion pauliana, must be of last resort, availed of only after the creditor has exhausted all the properties of the debtor not exempt from execution or after all other legal remedies have been exhausted and have been proven futile.24

 

It does not appear that Metrobank sought other properties of SSC other than the subject lots alleged to have been transferred in fraud of creditors. Neither is there any showing that Metrobank subrogated itself in SSC’s transmissible rights and actions. Without availing of the first and second remedies, Metrobank simply undertook the third measure and filed an action for annulment of the chattel mortgages. This cannot be done. Article 1383 of the New Civil Code is very explicit that the right or remedy of the creditor to impugn the acts which the debtor may have done to defraud them is subsidiary in nature.25 It can only be availed of in the absence of any other legal remedy to obtain reparation for the injury.26 This fact is not present in this case. No evidence was presented nor even an allegation was offered to show that Metrobank had availed of the abovementioned remedies before it tried to question the validity of the contracts of chattel mortgage between IEB and SSC.

Metrobank also contends that in order to apply the concept of, and the rules pertaining to, accion pauliana, the subject matter must be a conveyance, otherwise valid, which is undertaken in fraud of creditors. Metrobank claims that since there is no conveyance involved in the contract of chattel mortgage between SSC and IEB, which Metrobank seeks to rescind, the CA erred in ruling that the latter’s Complaint-in-Intervention is an accion pauliana.

 

The Court is not persuaded.

 

In the instant case, the contract of chattel mortgage entered into by and between SSC and IEB involves a conveyance of patrimonial benefit in favor of the latter as the properties subject of the chattel mortgage stand as security for the credit it extended to SSC. In a very recent case involving an action for the rescission of a real estate mortgage,27 while this Court found that some of the elements of accion pauliana were not present, it found that a mortgage contract involves the conveyance of a patrimonial benefit.

In sum, Metrobank may not be allowed to intervene and pray for the rescission of the chattel mortgages executed by SSC in favor of IEB. The remedy being sought by Metrobank is in the nature of an accion pauliana which, under the factual circumstances obtaining in the present case, may not be allowed. Based on the foregoing, the Court finds no error in the ruling of the CA that the RTC committed grave abuse of discretion in allowing Metrobank’s intervention.

 

The Court will now proceed to resolve the issues raised by petitioner CSMC in G.R. No. 176131.

 

Firstly, CSMC contends that IEB was forum shopping when it filed a petition for certiorari with the CA seeking, among others, the enjoinment of the commercial operation of the subject machineries and equipment when its Opposition28 to the implementation of the Capacity Lease Agreement between SSC and CSMC is still pending determination by the RTC.

 

The Court does not agree.

 

Forum shopping has been defined as an act of a party, against whom an adverse judgment has been rendered in one forum, of seeking and possibly getting a favorable opinion in another forum, other than by appeal or a special civil action for certiorari, or the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition.29

 

 

Forum shopping exists when two or more actions involve the same transactions, essential facts and circumstances, and raise identical causes of action, subject matter, and issues.30 Still another test of forum shopping is when the elements of litis pendencia are present or where a final judgment in one case will amount to res judicata in another – whether in the two or more pending cases, there is an identity of (a) parties (or at least such parties as represent the same interests in both actions); (b) rights or causes of action, and (c) reliefs sought.31

 

In the instant case on the one hand, IEB’s Opposition questions the legality and seeks to prevent the implementation of the Capacity Lease Agreement between CSMC and SSC which, in essence, authorizes CSMC to operate the subject machineries pendente lite. On the other hand, the petition for certiorari filed by IEB assails and seeks to nullify, among others, the March 15, 2005 and June 8, 2005 Orders of the RTC allowing SSC to operate the subject machineries pendente lite. It is, thus, clear that there is no identity of subject matter, cause of action and reliefs sought in IEB’s Opposition filed with the RTC and in its petition for certiorari filed with the CA. Hence, IEB is not guilty of forum shopping.

 

Secondly, CSMC argues that IEB’s failure to file a motion for reconsideration of the RTC Order dated June 8, 2005 is fatal to its petition for certiorari filed with the CA.

 

The Court is not persuaded.

 

While the general rule is that before certiorari may be availed of, petitioner must have filed a motion for reconsideration of the act or order complained of, the Court has dispensed with this requirement in several instances.32 Thus, a previous motion for reconsideration before the filing of a petition for certiorari is necessary unless: (i) the issue raised is one purely of law; (ii) public interest is involved; (iii) there is urgency; (iv) a question of jurisdiction is squarely raised before and decided by the lower court; and (v) the order is a patent nullity.33 In the instant case, the Court agrees with the CA that there is no need for such motion because the issue regarding the applicability of the rule on intervention raised by IEB in its petition for certiorari filed with the CA, insofar as the June 8, 2005 Order of the RTC is concerned, is one purely of law.

 

The foregoing notwithstanding, the Court finds that the CA erred in ruling that the allowance of CSMC’s motion for intervention is improper. CSMC’s intervention should be allowed.

 

The purpose of intervention is to enable a stranger to an action to become a party in order for him to protect his interest and for the court to settle all conflicting claims.34 Intervention is allowed to avoid multiplicity of suits more than on due process considerations.35 To warrant intervention under Rule 19 of the Rules of Court, two requisites must concur: (1) the movant has a legal interest on the matter in litigation; and (2) intervention must not unduly delay or prejudice the adjudication of the rights of the parties, nor should the claim of the intervenor be capable of being properly decided in a separate proceeding.36

 

In the present case, CSMC, being a lessee of the subject properties, has a legal interest therein. The RTC correctly held, thus:

 

Under the Rules of Court, intervention is permissive and maybe permitted by the Court when the applicant shows facts which satisfy the requirements of the law authorizing intervention. (Firestone Ceramics Inc. vs. CA 313 SCRA 522) Records of the case showed that on August 30, 2004, an agreement was finalized and entered into by applicant Chuayuco and defendant/plaintiff Sacramento Steel Corporation whereby the former shall lease and make use of the machineries of Sacramento Steel under the Capacity Lease Agreement (CLA). One of the terms and condition[s] under [the] CLA was for the monthly lease payments to take effect upon signing of the contract. A person seeking to intervene in a suit must show that he has legal interest which must be actual and material, direct and immediate. He must show that he will either gain or lose by direct legal operation and effect of a judgment. (Hrs. of Nicolas Orosa vs. Migrino 218 SCRA 311) The Court finds that Chuayuco had a constituted and sufficient legal interest in the machineries subject of the litigation which is actual and material. Any disposition of the case will adversely affect the standing of the intervenor.37

 

 

Moreover, considering that CSMC’s interest is limited only to the operation of the subject machineries pursuant to its lease contract with SSC, its intervention would not unduly delay or prejudice the adjudication of the rights of SSC and IEB. CSMC’s intervention should be treated as one pro interesse suo which is a mode of intervention in equity wherein a stranger desires to intervene for the purpose of asserting a property right in the res, or thing, which is the subject matter of the litigation, without becoming a formal plaintiff or defendant, and without acquiring control over the course of a litigation, which is conceded to the main actors therein.38

 

Lastly, the Court does not agree with the CA when it ruled that the applicable provision is Rule 3, Section 19 (erroneously cited as Section 20) of the Rules of Court on transfer of interest and substitution of parties. Being a mere lessee of the subject properties, CSMC is a stranger insofar as the dispute between SSC and IEB is concerned. The action filed by IEB against SSC is an action for the payment or satisfaction of the loans incurred by the latter, which includes a possible foreclosure of the subject properties given as security for the said loans. CSMC may not be considered a successor, and may not be substituted in place of SSC, insofar as these loans are concerned. If any, what has been transferred to CSMC is only the right of SSC to operate the subject equipment and machineries which it owns. As such, SSC may not be removed as defendant because its interest in the subject properties remains, being the owner thereof.

 

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 00549-MIN are AFFIRMED with MODIFICATION. The February 14, 2005 Order of the Regional Trial Court of Misamis Oriental, Branch 17, is MODIFIED by denying Metrobank’s Motion for Intervention, while the Joint Resolution of the same trial court, dated June 8, 2005, reiterating its admission of CSMC’s Motion for Intervention and directing the latter to file its complaint-in-intervention, is REINSTATED.

 

SO ORDERED.

 

 

 

DIOSDADO M. PERALTA

Associate Justice

 

 

 

 

WE CONCUR:

 

 

 

ANTONIO T. CARPIO

Associate Justice

 

 

 

 

 

 

PRESBITERO J. VELASCO, JR. ARTURO D. BRION

Associate Justice Associate Justice

Chairperson

 

 

 

 

 

MARIA LOURDES P. A. SERENO

Associate Justice

 

 

 

ATTESTATION

 

 

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

 

 

 

 

 

PRESBITERO J. VELASCO, JR.

Associate Justice

Third Division, Chairperson

 

 

 

 

 

CERTIFICATION

 

 

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

 

 

 

RENATO C. CORONA

Chief Justice

 

* Designated as an additional member in lieu of Associate Justice Roberto A. Abad, per Special Order No. 1059 dated August 1, 2011.

** Designated as an additional member in lieu of Associate Justice Jose Catral Mendoza, per Special Order No. 1056 dated July 27, 2011.

*** Designated as an additional member, per Special Order No. 1028 dated June 21, 2011.

1Penned by Associate Justice Rodrigo F. Lim, Jr., with Associate Justices Normandie B. Pizarro and Ramon R. Garcia, concurring.

2Penned by Associate Justice Rodrigo F. Lim, Jr., with Associate Justices Teresita Dy-Liacco Flores and Mario V. Lopez, concurring.

3CA rollo, p. 74.

4Id. at 94.

5 Id. at 84.

6See RTC 2nd Order dated July 30, 2004, id. at 160.

7Id.

8Id. at 56.

9Id. at 218; See also Complaint-in-Intervention, id. at 221-227.

10Id. at 236.

11Id. at 243.

12 Id. at 59-60.

13Id. at 68-69.

14 Id. at 70-73.

15Id. at 2.

16Rollo (G.R. No.176131), p. 65.

17Rollo (G.R. No. 176008), p. 13.

18Rollo (G.R. No. 176131), pp. 22-23.

19Id. at 519.

20 Id. at 523.

21CA rollo, p. 225. (Emphasis supplied.)

22Lee v. Bangkok Bank Public Company, Limited, G.R. No. 173349, February 9, 2011; Siguan v. Lim, G.R. No. 134685, November 19, 1999, 318 SCRA 725,

23Khe Hong Cheng v. Court of Appeals, G.R. No. 144169, March 28, 2001, 355 SCRA 701, 710; Adorable v. Court of Appeals, G.R. No. 119466, November 25, 1999, 319 SCRA 200, 207.

24Khe Hong Cheng v. Court of Appeals, supra at 708; Unionbank of the Philippines v. Spouses Ong, G.R. No. 152347, June 21, 2006, 491 SCRA 581, 596.

25Art. 1383. The action for rescission is subsidiary; it cannot be instituted except when the party suffering damage has not other legal means to obtain reparation for the same.

26Adorable v. Court of Appeals, supra note 23.

27See Lee v. Bangkok Bank Public Company, Limited, supra note 22.

28CA rollo, p. 576.

29PHILPHARMAWEALTH, Inc. v. Pfizer, Inc. and Pfizer (Phil.), Inc., G.R. No. 167715, November 17, 2010; Philippine Islands Corporation for Tourism Development, Inc. v. Victorias Milling Co., Inc., G.R. No. 167674, June 17, 2008, 554 SCRA 561, 569; Duvaz Corporation v. Export and Industry Bank, G.R. No. 163011, June 7, 2007, 523 SCRA 405, 416-417.

30Polanco v. Cruz, G.R. No. 182426, February 13, 2009, 579 SCRA 489, 495.

31Id. at 495-496.

32JP Latex Technology, Inc. v. Ballons Granger Balloons, Inc., G.R. No. 177121, March 16, 2009, 581 SCRA 553, 560-561; Llamzon v. Logronio, G.R. No. 167745, June 26, 2007, 525 SCRA 691, 706.

33Id.

34Heirs of Francisca Medrano v. De Vera, G.R. No. 165770, August 9, 2010, 627 SCRA 108, 122.

35Id.

36Office of the Ombudsman v. Sison, G.R. No. 185954, February 16, 2010, 612 SCRA 702, 713.

37CA rollo, p. 72.

38Perez v. Court of Appeals, G.R. No. 107737, October 1, 1999, 316 SCRA 43, 58.