J.A.B. Bulao & Associates

CASE 2013-0003: THE MANILA INSURANCE COMPANY, INC. VS. SPOUSES ROBERTO AND AIDA AMURAO (G.R. NO. 179628, 16 JANUARY 2013, DEL CASTILLO, J.) SUBJECT/S: JURISDICTION OF CIAC; LIABILITY OF SURETY; (BRIEF TITLE: MANILA INSURANCE VS. AMURAO)

DISPOSITIVE:

WHEREFORE, the petition is hereby GRANTED. The Decision dated June 7, 2007 and the Resolution dated September 7, 2007 of the Court of Appeals in CA-G.R. SP No. 96815 are hereby ANNULLED and SET ASIDE. The Presiding Judge of the Regional Trial Court of Quezon City, Branch 217 1s DIRECTED to dismiss Civil Case No. Q-01-45573 for lack of jurisdiction.

SO ORDERED.

SUBJECTS/DOCTRINES/DIGEST:

SPOUSES AMURAO ENTERED INTO A CONSTRUCTION AGREEMENT WITH AEGEAN DEVELOPMENT CORP WHEREBY THE LATTER WAS TO CONSTRUCT A 6 STOREY COMMERCIAL BUILDING. AGEAN POSTED PERFORMANCE BOND SECURED BY PETITIONER MANILA INSURANCE COMPANY INC AND INTRA STRATA ASSURANCE CORP. WHEN AGEAN FAILED TO FINISH THE CONSTRUCTION, SPOUSES AMURAO FILED A CASE AGAINST  MANILA INSURANCE AND INTRA STRATA. MANILA INSURANCE MOVED TO DISMISS THE CASE BECAUSE THERE IS AN ARBITRATION CLAUSE IN THE CONSTRUCTION AGREEMENT WHICH PROVIDES THAT ANY DISPUTE ON THE INTERPRETATION OF THE CONTRACT DOCUMENTS SHALL BE BROUGHT BEFORE THE CIAC. RTC DENIED THE MOTION TO DISMISS. CA SUSTAINED THE MOTION TO DISMISS. IS CA CORRECT.

NO. THE CASE SHOULD BE DISMISSED FOR LACK OF JURISDICTION. CIAC HAS JURISDICTION OVER THE CASE.

IN  ORDER FOR THE CIAC TO ACQUIRE JURISDICTION TWO REQUISITES MUST CONCUR: “FIRST, THE DISPUTE MUST BE SOMEHOW CONNECTED TO A CONSTRUCTION CONTRACT; AND SECOND, THE PARTIES MUST HAVE AGREED TO SUBMIT THE DISPUTE TO ARBITRATION PROCEEDINGS.” IN THIS CASE, BOTH REQUISITES ARE PRESENT.

 Section 4 of E.O. No. 1008 provides that:

 SEC. 4. Jurisdiction. – The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the completion of the contract, or after the abandonment or breach thereof. These disputes may involve government or private contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration. The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials and workmanship, violation of the terms of agreement, interpretation and/or application of contractual time and delays, maintenance and defects, payment, default of employer or contractor, and changes in contract cost. Excluded from the coverage of the law are disputes arising from employer-employee relationships which shall continue to be covered by the Labor Code of the Philippines.

. . . the issue of whether respondent-spouses are entitled to collect on the performance bond issued by petitioner is a “dispute arising in the course of the execution and performance of [the CCA] by reason of difference in the interpretation of the contract documents.”

The fact that petitioner is not a party to the CCA cannot remove the dispute from the jurisdiction of the CIAC because the issue of whether respondent spouses are entitled to collect on the performance bond, as we have said, is a dispute arising from or connected to the CCA.

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MANILA INSURANCE ARGUED THAT WHEN IT EXECUTED THE SURETY AGREEMENT THE CONSTRUCTION CONTRACT WAS NOT YET SIGNED. THEREFORE SPOUSES AMURAO HAVE NO CAUSE OF ACTION AGAINST THEM. IS THIS ARGUMENT CORRECT.

 NO.

A CAREFUL READING OF THE PERFORMANCE BOND REVEALS THAT THE “BOND IS COTERMINOUS WITH THE FINAL ACCEPTANCE OF THE PROJECT.”53 THUS, THE FACT THAT IT WAS ISSUED PRIOR TO THE EXECUTION OF THE CCA DOES NOT AFFECT ITS VALIDITY OR EFFECTIVITY.

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 WHAT IS A CONTRACT OF SURETYSHIP?

A CONTRACT OF SURETYSHIP IS DEFINED AS “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 A THIRD PARTY, CALLED THE OBLIGEE. IT INCLUDES OFFICIAL RECOGNIZANCES, STIPULATIONS, BONDS OR UNDERTAKINGS ISSUED BY ANY COMPANY BY VIRTUE OF AND UNDER THE PROVISIONS OF ACT NO. 536, AS AMENDED BY ACT NO. 2206.”50

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WHAT IS THE NATURE OF THE SURETY’S LIABILITY?

IT IS JOINT AND SEVERAL, LIMITED TO THE AMOUNT OF THE BOND, AND DETERMINED STRICTLY BY THE TERMS OF CONTRACT OF SURETYSHIP IN RELATION TO THE PRINCIPAL CONTRACT BETWEEN THE OBLIGOR AND THE OBLIGEE.

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 TO WHAT EXTENT IS THE LIABILITY OF THE SURETY.

 IT IS DIRECT, PRIMARY AND ABSOLUTE.

 It bears stressing, however, that although the contract of suretyship is secondary to the principal contract, the surety’s liability to the oblige is nevertheless direct, primary, and absolute.

TO READ THE DECISION, JUST DOWNLOAD THE FILE BELOW.

SCD-2013-0003- JAN 2013 – MANILA INSURANCE

CASE 2013-0002: ROMEO A. GONTANG, IN HIS OFFICIAL CAPACITY AS MAYOR OF GAINZA, CAMARINES SUR VS. ENGR. CECILIA ALA YAN (G.R. NO. 191691, 16 FEBRUARY 2013, PERLAS-BERNABE, J.) SUBJECT/S: AUTHORITY OF COUNSEL TO REPRESENT IN COURT A GOVERNMENT OFFICIAL (BRIEF TITLE: GONTANG VS. YAN)

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DISPOSITIVE:

WHEREFORE, the petition is GRANTED. The assailed May 26, 2009 and March 22, 2010 Resolutiems of the Court of Appeals (CA) in CAG. R. SP No. 107366 are hereby SET ASIDE. The case is REMANDED to the CA for further proceedings.

SO ORDERED.

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SUBJECTS/DOCTRINES/DIGEST:

ENGR. YAN FILED A CASE FOR MANDAMUS AND DAMAGES AGAINST MAYOR GONTANG. RTC ISSUED WRIT OF EXECUTION AGAINST THE MAYOR. THE MAYOR ENGAGED THE SERVICES OF  PRIVATE LAWYERS TO FILE PETITION FOR CERTIORARI AT THE CA. THE CA DISMISSED THE PETITION ON THE GROUND THAT THE PRIVATE LAWYERS CANNOT REPRESENT THE MAYOR.  IS THE CA RULING CORRECT?

NO. THE DEAMAGES COULD HAVE RESULTED TO PERSONAL LIABILITY ON THE PART OF THE MAYOR. THUS HE CANNOT BE DEEMED TO HAVE BEEN IMPROPERLY REPRESENTED BY A PRIVATE COUNSEL.

The present case stemmed from Special Civil Action No. 2002-0019 for mandamus and damages.13The damages sought therein could have resulted in personal liability, hence,petitionercannot be deemed to have been improperly represented by private counsel.14 In Alinsug v. RTC Br. 58, SanCarlos City, Negros Occidental,15 the Court ruled that in instances like the present case where personal liability on the part of local government officials is sought, they may properly secure the services of private counsel, explaining:

The petition for mandamus, inter alia seeks “that respondent be held personally liable for the

amount of One Hundred Thousand Pesos (P100,000) by way of moral damages suffered by the

petitioner; Fifty Thousand Pesos (P50,000) by way of exemplary damages; Ten Thousand Pesos

(P10,000) as and for attorney’s fees; One Thousand Pesos (P1,000) per appearance; plus costs of the

suit amounting to not less than Five Thousand Pesos (P5,000) all in favor of the petitioner.”

It can happen that a government official, ostensibly acting in his

official capacity and sued in that capacity, is later held to have exceeded

his authority. On the one hand, his defense would have then been

underwritten by the people’s money which ordinarily should have been his

personal expense. On the other hand, personal liability can attach to him

without, however, his having had the benefit of assistance of a counsel of

his own choice. In Correa v. CFI, the Court held that in the discharge of

governmental functions, ‘municipal corporations are responsible for the

acts of its officers, except if and when, and only to the extent that, they

have acted by authority of the law, and in conformity with the

requirements thereof.

In such instance, this Court has sanctioned the representation by

private counsel. In one case, We held that where rigid adherence to the

law on representation of local officials in court actions could deprive a

party of his right to redress for a valid grievance, the hiring of a private

counsel would be proper. And in Albuera v. Torres, this Court also said

that a provincial governor sued in his official capacity may engage the

services of private counsel when “the complaint contains other allegations

and a prayer for moral damages, which, if due from the defendants, must

be satisfied by them in their private capacity.16 (Citations omitted)

Consequently Attys.Fandiño and Saulonhad the authority to represent

petitioner at the initial stages of the litigation and this authority continued

even up to his appeal17 and the filing of the petition for certiorari with the

CA respecting the execution of the RTC judgment.18It was therefore an error for the CA to have dismissed the said petition for certiorari on the ground of unauthorized representation.

TO READ THE DECISION, JUST DOWNLOAD THE FILE BELOW.

SCD-2013-0002- JAN 2013 – GONTANG