J.A.B. Bulao & Associates

CASE 2011-0184: ATIKO TRANS INC. AND CHENGLIE NAVIGATION CO., LTD. VS. PRUDENTIAL GUARANTEE AND ASSURANCE INC. (G.R. NO. 167545, 17 AUGUST 2011, DEL CASTILLO, J.) SUBJECT: COURT JURISDICTION (BRIEF TITLE: ATIKO VS. PRUDENTIAL GUARANTEE)

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DISPOSITIVE:

          WHEREFORE, the instant petition is PARTIALLY GRANTED.  The assailed December 10, 2004 Decision of the Court of Appeals in CA-G.R. SP No. 82547 is AFFIRMED with the MODIFICATION that the judgment insofar as Cheng Lie Navigation Co., Ltd. is concerned is declared VOID for failure to acquire jurisdiction over its person as there was improper service of summons.

          SO ORDERED.

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SUBJECT/DOCTRINE/DIGEST

A cursory reading of the issues raised readily reveals that they involve factual matters which are not within the province of this Court to look into. Well-settled is the rule that in petitions for review on certiorari under Rule 45, only questions of law can be raised.  While there are recognized exceptions to this rule,^[1][18]  none is present in this case.  “[A]s a matter of x x x procedure, [this] Court defers and accords finality to the factual findings of trial courts, [especially] when such findings were [affirmed by the RTC and the CA. These] factual determination[s], as a matter of long and sound appellate practice, deserve great weight and shall not be disturbed on appeal x x x.  [I]t is not the function of the Court to analyze and weigh all over again the evidence or premises supportive of the factual holding of the lower courts.”^[2][19]

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We are not persuaded.  True, when the defendant is a domestic corporation, service of summons may be made only upon the persons enumerated in Section 11, Rule 14 of the Rules of Court.^[3][20]  However, jurisdiction over the person of the defendant can be acquired not only by proper service of summons but also by defendant’s voluntary appearance without expressly objecting to the court’s jurisdiction, as embodied in Section 20, Rule 14 of the Rules of Court, viz:

SEC. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall be equivalent to service of summons.  The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance.

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On this score, we find for the petitioners.  Before it was amended by A.M. No. 11-3-6-SC,^[4][30] Section 12 of Rule 14 of the Rules of Court reads:

SEC. 12. Service upon foreign private juridical entity.  – When the defendant is a foreign private juridical entity which has transacted business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines.

Elucidating on the above provision of the Rules of Court, this Court declared in Pioneer International, Ltd. v. Guadiz, Jr.^[5][31] that when the defendant is a foreign juridical entity, service of summons may be made upon:

1. Its resident agent designated in accordance with law for that purpose;

1. The government official designated by law to receive summons if the corporation does not have a resident agent; or,

1. Any of the corporation’s officers or agents within thePhilippines.

In the case at bench, no summons was served upon Cheng Lie in any manner prescribed above.  It should be recalled that Atiko was not properly served with summons as the person who received it on behalf of Atiko, cashier Cristina Figueroa, is not one of the corporate officers enumerated in Section 11 of Rule 14 of the Rules of Court.  The MeTC acquired jurisdiction over the person of Atiko not thru valid service of summons but by the latter’s voluntary appearance.  Thus, there being no proper service of summons upon Atiko to speak of, it follows that the MeTC never acquired jurisdiction over the person of Cheng Lie.  To rule otherwise would create an absurd situation where service of summons is valid upon the purported principal but not on the latter’s co-defendant cum putative agent despite the fact that service was coursed thru said agent.  Indeed, in order for the court to acquire jurisdiction over the person of a defendant foreign private juridical entity under Section 12, Rule 14 of the Rules of Court, there must be prior valid service of summons upon the agent of such defendant.

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Republic of thePhilippines

Supreme Court

Manila

FIRST DIVISION

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D E C I S I O N

DEL CASTILLO, J.:

            Where service of summons upon the defendant principal is coursed thru its co-defendant agent, and the latter happens to be a domestic corporation, the rules on service of summons upon a domestic private juridical entity^[6][1] must be strictly complied with.  Otherwise, the court cannot be said to have acquired jurisdiction over the person of both defendants.  And insofar as the principal is concerned, such jurisdictional flaw cannot be cured by the agent’s subsequent voluntary appearance.

            This Petition for Review on Certiorari assails the December 10, 2004 Decision^[7][2] of the Court of Appeals (CA) in CA-G.R. SP No. 82547 which affirmed the April 8, 2003 Decision^[8][3] of the Regional Trial Court (RTC), Branch 150, Makati City.  Said Decision of the RTC affirmed the August 6, 2002 Decision^[9][4] of the Metropolitan Trial Court (MeTC), Branch 63, Makati City, which disposed as follows:

                WHEREFORE, judgment is rendered declaring defendants Cheng Lie Navigation Co., Ltd. and Atiko Trans, Inc. solidarily liable to pay plaintiff Prudential Guarantee & Assurance, Inc. the following amounts:

1. P205,220.97 as actual damages with interest of 1% per month from 14 December 1999 until full payment;

1. P10,000.00 as Attorney’s fees; and

1. Costs of suit.

SO ORDERED.^[10][5]

            Likewise assailed is the CA’s Resolution^[11][6] dated March 16, 2005 which denied the Motion for Reconsideration of the said December 10, 2004 Decision.

Factual Antecedents

            On December 11, 1998, 40 coils of electrolytic tinplates were loaded on board M/S Katjana in Kaohsiung, Taiwanfor shipment to Manila.  The shipment was covered by Bill of Lading No. KNMNI-15126^[12][7] issued by petitioner Cheng Lie Navigation Co., Ltd. (Cheng Lie) with Oriental Tin Can & Metal Sheet Manufacturing Co., Inc. (Oriental) as the notify party.  The cargoes were insured against all risks per Marine Insurance Policy No. 20RN-18749/99 issued by respondent Prudential Guarantee and Assurance, Inc. (Prudential).

On December 14, 1998, M/S Katjana arrived in theportofManila.  Upon discharge of the cargoes, it was found that one of the tinplates was damaged, crumpled and dented on the edges.  The sea van in which it was kept during the voyage was also damaged, presumably while still on board the vessel and during the course of the voyage.

Oriental then filed its claim against the policy.  Satisfied that Oriental’s claim was compensable, Prudential paid Oriental P205,220.97 representing the amount of losses it suffered due to the damaged cargo.

Proceedings before the Metropolitan Trial Court

On December 14, 1999, Prudential filed with the MeTC of Makati City a Complaint^[13][8] for sum of money against Cheng Lie and Atiko Trans, Inc. (Atiko).  In addition to the above undisputed facts, Prudential alleged that:

1. Plaintiff (Prudential) is a domestic insurance corporation duly organized and existing under the laws of thePhilippineswith office address at Coyiuto House, 119 Carlos Palanca[,]Jr. St.,LegaspiVillage,MakatiCity;

1. Defendant Cheng Lie Navigation Co. Ltd., is [a] foreign shipping company doing business in the Philippines [thru] its duly authorized shipagent   defendant Atiko Trans Inc. which is a domestic corporation duly established and created under the laws of the Philippines with office address at 7^th Floor, Victoria Bldg., United Nation[s] Ave., Ermita, Manila, where both defendants may be served with summons and other court processes;

1. At all times material to the cause of action of this complaint, plaintiff was and still is engaged in, among others, marine insurance business; Whereas Defendant Cheng Lie Navigation Co. Ltd. was and still is engaged in, among others, shipping, transportation and freight/cargo forwarding business, and as such, owned, operated and/or chartered the ocean going vessel M/S “Katjana” as common carrier to and from any Philippine [port] in international trade [thru] its duly authorized shipagent defendant Atiko Trans Inc. (Both defendants are hereinafter referred to as the “CARRIER”);     

x x x x

9.     Plaintiff, as cargo-insurer and upon finding that the consignee’s insurance claim was in order and compensable, paid the latter’s claim in the amount of P205,220.97 under and by virtue of the aforesaid insurance policy, thereby subrogating herein plaintiff to all the rights and causes of action appertaining to the consignee against the defendants;^[14][9]

On March 20, 2000, Prudential filed a Motion to Declare Defendant in Default,^[15][10] alleging among others that on March 1, 2000 a copy of the summons was served upon petitioners thru cashier Cristina Figueroa and that despite receipt thereof petitioners failed to file any responsive pleading.  Acting on the motion, the MeTC issued an Order^[16][11] declaring Cheng Lie and Atiko in default and allowing Prudential to present its evidence ex-parte.

On August 6, 2002, the MeTC rendered its judgment by default.  Atiko then filed a Notice of Appeal^[17][12] dated November 4, 2002.

Proceedings before the Regional Trial Court and the Court of Appeals

In its Memorandum of Appeal,^[18][13] Atiko argued that Prudential failed to prove the material allegations of the complaint.  Atiko asserted that Prudential failed to prove by preponderance of evidence that it is a domestic corporation with legal personality to file an action; that Cheng Lie is a private foreign juridical entity operating its shipping business in the Philippines thru Atiko as its shipagent; that Cheng Lie is a common carrier, which owns and operates M/S Katjana; that Prudential was subrogated to the rights of Oriental; and, that Atiko can be held solidarily liable with Cheng Lie. 

Although assisted by the same counsel, Cheng Lie filed its own Memorandum of Appeal^[19][14] maintaining that the MeTC never acquired jurisdiction over its person. 

On April 8, 2003, the RTC rendered its Decision dismissing the appeal and affirming the Decision of the MeTC.  Atiko and Cheng Lie challenged the RTC Decision before the CA via a Petition for Review^[20][15] under Rule 42 of the Rules of Court but the appellate court affirmed the RTC’s Decision.

Hence, this petition.

Issues

In their Memorandum,^[21][16] petitioners raised the following issues:

1. WHETHER X X X THE DECISION OF MAKATI [MeTC] WHICH WAS AFFIRMED BY MAKATI RTC AND THE COURT OF APPEALS IS NULL AND VOID FOR FAILURE TO ACQUIRE JURISDICTION OVER THE PERSONS OF THE PETITIONERS-DEFENDANTS CONSIDERING THAT THE SUMMONS WERE NOT PROPERLY SERVED ON THEM AS REQUIRED BY RULE 14 OF THE RULES OF COURT.

1. WHETHER X X X THE RESPONDENT-PLAINTIFF IS REQUIRED TO PROVE THE MATERIAL ALLEGATIONS IN THE COMPLAINT EVEN IN DEFAULT JUDGMENT OR WHETHER OR NOT IN DEFAULT JUDGMENT, ALL ALLEGATIONS IN THE COMPLAINT ARE DEEMED CONTROVERTED, HENCE, MUST BE PROVED BY COMPETENT EVIDENCE.

2.1.  WHETHER X X X RESPONDENT-PLAINTIFF IS OBLIGED TO PROVE ITS LEGAL PERSONALITY TO SUE EVEN IN DEFAULT JUDGMENT.

2.2.  WHETHER X X X RESPONDENT-PLAINTIFF IS OBLIGED TO PROVE THAT PETITIONER-DEFENDANT ATIKO IS THE SHIPAGENT OF PETITIONER-DEFENDANT CHENG LIE EVEN IN DEFAULT JUDGMENT.

2.3.  WHETHER X X X THE TESTIMONIES OF THE WITNESSES AND THE DOCUMENTARY EXHIBITS CAN BE CONSIDERED FOR PURPOSES OTHER THAN THE PURPOSE FOR WHICH THEY WERE OFFERED.

2.4.  WHETHER X X X A MOTION TO DECLARE DEFENDANT IN DEFAULT ADDRESSED AND SENT TO ONLY ONE OF THE DEFENDANTS WOULD BIND THE OTHER DEFENDANT TO WHOM THE MOTION WAS NOT ADDRESSED AND NOT SENT.^[22][17]

Our Ruling

The petition is partly meritorious.  We shall first tackle the factual matters involved in this case, then proceed with the jurisdictional issues raised.

Petitioners raised factual matters which are not the proper subject of this appeal.

Petitioners contend that the lower courts grievously erred in granting the complaint because, even if they were declared in default, the respondent still has the burden of proving the material allegations in the complaint by preponderance of evidence.  Petitioners further argue that respondent miserably failed to discharge this burden because it failed to present sufficient proof that it is a domestic corporation.  Hence, respondent could not possibly maintain the present action because only natural or juridical persons or entities authorized by law can be parties to a civil action.  Petitioners also claim that respondent failed to present competent proof that Cheng Lie is a foreign shipping company doing business in thePhilippinesthru its duly authorized shipagent Atiko.  Lastly, petitioners assert that respondent failed to prove that Cheng Lie is a common carrier which owned, operated and/or chartered M/S Katjana thru its duly authorized shipagent Atiko.  Petitioners emphasize that there is no proof, testimonial or otherwise, which would support the material allegations of the complaint.  They also insist that respondent’s witnesses do not have personal knowledge of the facts on which they were examined.

Respondent, for its part, assails the propriety of the remedy taken by the petitioners.  It posits that petitioners advanced factual matters which are not the proper subject of a petition for review on certiorari.  Besides, the lower courts consistently held that the allegations in respondent’s complaint are supported by sufficient evidence.

We agree with respondent. 

A cursory reading of the issues raised readily reveals that they involve factual matters which are not within the province of this Court to look into. Well-settled is the rule that in petitions for review on certiorari under Rule 45, only questions of law can be raised.  While there are recognized exceptions to this rule,^[23][18]  none is present in this case.  “[A]s a matter of x x x procedure, [this] Court defers and accords finality to the factual findings of trial courts, [especially] when such findings were [affirmed by the RTC and the CA. These] factual determination[s], as a matter of long and sound appellate practice, deserve great weight and shall not be disturbed on appeal x x x.  [I]t is not the function of the Court to analyze and weigh all over again the evidence or premises supportive of the factual holding of the lower courts.”^[24][19]

MeTC properly acquired jurisdiction over the person of Atiko.

Petitioners also argue that the MeTC did not acquire jurisdiction over the person of Atiko as the summons was received by its cashier, Cristina Figueroa.  They maintain that under Section 11, Rule 14 of the Rules of Court, when the defendant is a domestic corporation like Atiko, summons may be served only upon its president, general manager, corporate secretary, treasurer or in-house counsel. 

We are not persuaded.  True, when the defendant is a domestic corporation, service of summons may be made only upon the persons enumerated in Section 11, Rule 14 of the Rules of Court.^[25][20]  However, jurisdiction over the person of the defendant can be acquired not only by proper service of summons but also by defendant’s voluntary appearance without expressly objecting to the court’s jurisdiction, as embodied in Section 20, Rule 14 of the Rules of Court, viz:

SEC. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall be equivalent to service of summons.  The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance.

In the case at bench, when Atiko filed its Notice of Appeal,^[26][21] Memorandum of Appeal,^[27][22] Motion for Reconsideration^[28][23] of the April 8, 2003 Decision of the RTC, and Petition for Review,^[29][24] it never questioned the jurisdiction of the MeTC over its person.  The filing of these pleadings seeking affirmative relief amounted to voluntary appearance and, hence, rendered the alleged lack of jurisdiction moot.  In Palma v. Galvez,^[30][25] this Court reiterated the oft-repeated rule that “the filing of motions seeking affirmative relief, such as, to admit answer, for additional time to file answer, for reconsideration of a default judgment, and to lift order of default with motion for reconsideration, are considered voluntary submission to the jurisdiction of the court.”

Moreover, petitioners’ contention is a mere afterthought.    It was only in their Memorandum^[31][26] filed with this Court where they claimed, for the first time, that Atiko was not properly served with summons.  In La Naval Drug Corporation v. Court of Appeals,^[32][27] it was held that the issue of jurisdiction over the person of the defendant must be seasonably raised.  Failing to do so, a party who invoked the jurisdiction of a court to secure an affirmative relief cannot be allowed to disavow such jurisdiction after unsuccessfully trying to obtain such relief.^[33][28]

It may not be amiss to state too that in our February 13, 2006 Resolution,^[34][29] we reminded the parties that they are not allowed to interject new issues in their memorandum. 

MeTC did not acquire jurisdiction over the person of Cheng Lie.

Petitioners likewise challenge the validity of the service of summons upon Cheng Lie, thru Atiko.  They claim that when the defendant is a foreign private juridical entity which has transacted business in thePhilippines, service of summons may be made, among others, upon its resident agent.  In this case, however, there is no proof that Atiko is the local agent of Cheng Lie.  

On this score, we find for the petitioners.  Before it was amended by A.M. No. 11-3-6-SC,^[35][30] Section 12 of Rule 14 of the Rules of Court reads:

SEC. 12. Service upon foreign private juridical entity.  – When the defendant is a foreign private juridical entity which has transacted business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines.

Elucidating on the above provision of the Rules of Court, this Court declared in Pioneer International, Ltd. v. Guadiz, Jr.^[36][31] that when the defendant is a foreign juridical entity, service of summons may be made upon:

1. Its resident agent designated in accordance with law for that purpose;

1. The government official designated by law to receive summons if the corporation does not have a resident agent; or,

1. Any of the corporation’s officers or agents within thePhilippines.

In the case at bench, no summons was served upon Cheng Lie in any manner prescribed above.  It should be recalled that Atiko was not properly served with summons as the person who received it on behalf of Atiko, cashier Cristina Figueroa, is not one of the corporate officers enumerated in Section 11 of Rule 14 of the Rules of Court.  The MeTC acquired jurisdiction over the person of Atiko not thru valid service of summons but by the latter’s voluntary appearance.  Thus, there being no proper service of summons upon Atiko to speak of, it follows that the MeTC never acquired jurisdiction over the person of Cheng Lie.  To rule otherwise would create an absurd situation where service of summons is valid upon the purported principal but not on the latter’s co-defendant cum putative agent despite the fact that service was coursed thru said agent.  Indeed, in order for the court to acquire jurisdiction over the person of a defendant foreign private juridical entity under Section 12, Rule 14 of the Rules of Court, there must be prior valid service of summons upon the agent of such defendant.

Also, the records of this case is bereft of any showing that cashier Cristina Figueroa is a government official designated by law to receive summons on behalf of Cheng Lie or that she is an officer or agent of Cheng Lie within the Philippines.  Hence, her receipt of summons bears no significance insofar as Cheng Lie is concerned.  At this point, we emphasize that the requirements of the rule on summons must be strictly followed,^[37][32] lest we ride roughshod on defendant’s right to due process.^[38][33]

With regard to Cheng Lie’s filing of numerous pleadings, the same cannot be considered as voluntary appearance.  Unlike Atiko, Cheng Lie never sought affirmative relief other than the dismissal of the complaint on the ground of lack of jurisdiction over its person.  From the very beginning, it has consistently questioned the validity of the service of summons and the jurisdiction of the MeTC over its person. 

It does not escape our attention though that Cheng Lie’s pleadings do not indicate that the same were filed by way of special appearance.  But these, to our mind, are mere inaccuracies in the title of the pleadings.  What is important are the allegations contained therein which consistently resisted the jurisdiction of the trial court.  Thus, Cheng Lie cannot be considered to have submitted itself to the jurisdiction of the courts.^[39][34]

In fine, since the MeTC never acquired jurisdiction over the person of Cheng Lie, its decision insofar as Cheng Lie is concerned is void.^[40][35]

Cheng Lie was improperly declared in default.

Applying the above disquisition, the MeTC likewise erred in declaring Cheng Lie in default. Settled is the rule that a defendant cannot be declared in default unless such declaration is preceded by a valid service of summons.^[41][36] 

WHEREFORE, the instant petition is PARTIALLY GRANTED.  The assailed December 10, 2004 Decision of the Court of Appeals in CA-G.R. SP No. 82547 is AFFIRMED with the MODIFICATION that the judgment insofar as Cheng Lie Navigation Co., Ltd. is concerned is declared VOID for failure to acquire jurisdiction over its person as there was improper service of summons.

            SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

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

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

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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 9^th 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, 7^th 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

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

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)

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

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.

XXXXXXXXXXXXX

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.  . . .

XXXXXXXXXXXXXXXXXXXX

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]

XXXXXXXXXXXXXXXXX

WHAT IS THE RELATION OF SURETYSHIP  TO THE PRINCIPAL OBLIGATION?

IT IS ONLY SECONDARY.

XXXXXXXXXXXXXXXXXX

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

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