FIRST DIVISION
SPOUSES NAPOLEON FLORES, G.R. No.
167131
SR. and VERONIDIA FLORES,
doing business under the name
and ALEXANDER J. FLORES,
in his capacity as Attorney-in-Fact Present:
of NAPOLEON M.
Petitioners,
PANGANIBAN,
C.J., Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
-
versus - CHICO-NAZARIO,
JJ.
Promulgated:
STRONGHOLD INSURANCE
COMPANY, INC.,
Respondent.
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CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision[1] of
the Court of Appeals (CA) in CA-G.R. CV No. 77593 and its Resolution denying
the motion for reconsideration thereof.
The assailed decision nullified the Order[2] of
the Regional Trial Court (RTC) of
Spouses
Napoleon M. Flores, Sr. and Veronidia J. Flores were engaged in business under
the business name Flojos Garments Manufacturing (FGM). On April 28, 1995, Stephen Liu and the
spouses Flores executed a Memorandum of Agreement (MOA),[3]
whereby the latter sold for P8,500,000.00 all their rights and interests
over their garments manufacturing business, including all its existing licenses
and government permits, machinery, supplies and spare parts, and its real
property located at No. 17, Jacamar St., Marikina Subdivision, Marikina City;
and all other accessories, raw materials, and other related items. For his
part, Liu obliged himself to assume the payment of the spouses’ obligations
with Metropolitan Bank and Trust Company as part of the purchase price, the
balance of the purchase price to be paid within 120 days from the date of the
signing of the MOA.
On
On P2,000,000.00 and
attachment bond in the amount of P3,000,000.00. The plaintiff thus posted Attachment Bond No.
00565 and Injunction Bond No. 00566 issued by Stronghold Insurance Corporation,
Inc. for P3,000,000.00 and P2,000,000.00, respectively.
In their Answer to the complaint,[6] the spouses Flores alleged that the complaint
failed to state a cause of action as there was no allegation that he complied
with his obligations under the MOA; it was Liu who failed to pay the balance of
the purchase price of the property, less the amounts due to their creditors;
such failure caused them (spouses Flores) actual damages in the form of
accumulated interests and penalties on their outstanding loans, loss of expected
profits on prospective and realizable business ventures and opportunities. They
prayed that they likewise be awarded moral damages for the mental anguish;
besmirched reputation, moral shock, sleepless nights and other similar injuries,
exemplary damages in order to serve as an example for the plaintiff and other
persons in maliciously and capriciously filing baseless and unjust suit; and
attorney’s fees as they were constrained to hire the services of counsel.[7] They interposed counterclaims and averred that
the ground relied upon for the issuance of preliminary attachment did not exist
at the time of the filing of the present suit.[8]
On
On P6,000,000.00;
however, the RTC denied
the prayer to lift the writ of preliminary injunction. Upon motion of the spouses Flores, the RTC reconsidered
its order and reduced the amount of the counterbond to P3,000,000.00. It rendered judgment on
WHEREFORE, judgment is
hereby rendered in favor of defendants, declaring the Memorandum of Agreement
rescinded, ordering both plaintiff and defendants to surrender that which they
have respectively received and to place each other as far as practicable in his
original situation, and ordering plaintiff to pay the following:
1.
The amount of P6,582,133.08 as payment to
all of defendants’ creditors;
2. The amount of P2,500,000.00 as compensation for the materials and machines lost; [and]
3. The amount of [P225,150.00] as attorney’s fees and expenses.
SO ORDERED.[12]
The trial court upheld the spouses
Flores’ claim that it was Liu who committed a breach of the MOA on the
following ratiocinations:
Unrebutted testimony for the defendants belied the
allegation of plaintiff. It was stated
that all records of the business including the licenses were turned over to
plaintiff, together with the factory premises; the same being kept therein. It
was, likewise, stated that the licenses, as of the date of the turnover, had
all been effective and valid. A
certification was obtained from the Bureau of Customs that no order of
revocation was ever issued against defendants’ business, to corroborate the
testimony. The accreditation from the Garments and Textile Export Board was
still valid at the time of the agreement’s execution and was even used to
export a load of garments.
On the other hand, it appears that it was plaintiff
who failed to perform his obligations. Despite full compliance on the part of
defendants, plaintiff failed to pay the P8,000,000.00 balance of the
purchase price less any deductions from payments to defendants’ creditors.
Indeed, plaintiff contends that no balance
remains to be paid defendants their debts to creditors having been found
by him to actually be in the amount of P14,631,082.00; P6,631,082.00
more than the purchase price. In other words, plaintiff wants the court to
believe that as there is more than P8,000,000.00 in debts to pay, no
further amount is due defendants outside of the downpayment. However, the court
observes that none of the debts had been paid; not even any such which may be
covered by the P8,000,000.00.
Plaintiff has not alleged payment of any creditors; neither those
covered by paragraph 5 of the agreement and Annex B thereof, nor those included
in plaintiff’s own inventory of accounts payable.
And although plaintiff alleged failure of payment due
to the unsatisfied requirement of special power of attorney, no proof of such
requirement was presented.
The foregoing considered, it is clear that plaintiff
and not defendants breached the Memorandum of Agreement. Ergo, defendants and
not plaintiff are entitled to rescission. For the same reasons and more, no
amount for damages nor attorney’s fees are due plaintiff. Defendants have faithfully performed their
obligations and in good faith. Any unrealized income or damage to reputation
asserted by plaintiff remain mere allegations and was caused by no act of
defendants but his own.
It is defendants who are entitled to damages and
attorney’s fees. Materials and machinery of the business have been found
missing and unaccounted for since turnover of possession and custody to
plaintiff. The redemption period for the
property and improvements mortgaged, an essential and intrinsic component of
said business, lapsed and were consequently foreclosed upon. Debts which should
have been paid in accordance with paragraph 5 of the agreement remain
outstanding. Defendants were constrained to engage the services of an attorney
in order to protect their rights and interest, and to pay the same P225,150.00.
(Exhs. 1, 2, and 9 to 12).[13]
On
On
In its Comment and/or Opposition[16]
to the said motion, SICI averred that the motion was premature, and that the
alleged damages suffered by the spouses Flores were not caused by the
injunction or attachment for which the bonds posted by it could be proceeded
against, thus:
a) With all due respect, said motion has no factual
and legal basis as all allegations therein contained did not set forth the
facts showing their right to damages, the nature of damages and the amount, if
any, corresponding to such damages directly or indirectly caused by either
injunction or the attachment;
b) The motion is prematurely filed as there is no
showing that either the injunction or the attachment was illegally and
improperly issued;
c) There is no evidence whatsoever on record to show that
either the injunction or the attachment was illegal or improper;
d) The damages, if any, incurred by defendants are not
by reason of either the injunction or the attachment for which the bonds put up
by Stronghold can be held liable;
e) In fact, the issue of the injunction or the
attachment was not even touched in the Decision rendered by this Honorable
Court dated
f) What is significant to note is the finding of the
Honorable Court that because of the “breach
of the Memorandum of Agreement”
by plaintiff “no amount of
damages nor attorney’s fees are due plaintiff.” The decision did not
say that because of the bonds, the defendants are entitled to damages;
g) The motion did not comply with Section 20, Rule 57
of the Rules of Court because it did not specify the amount for each item of
damages. More importantly, defendants have not shown in the motion the facts showing their rights to damages;
h) Both injunction and attachment bonds were issued by
Stronghold upon application by plaintiff and pursuant to the legal orders of
this Honorable Court and which orders were never questioned by defendants.[17]
Alexander Flores was presented as
witness to prove the damages which the spouses Flores claimed to have suffered
on account of the improper issuance of the writ of attachment/injunction. The spouses Flores did not testify. For its part, SICI opted not to present any
evidence to support its opposition to the motion, on its claim that there was
no factual
proof of damages. Besides, the spouses Flores’ application for damages was
time-barred because it was filed three days after the reglementary period to
appeal (July 1, 1999); hence, the period to appeal had lapsed.
On
WHEREFORE, Stronghold
Insurance Corporation is directed to pay the defendants the following:
1.) The amount of P2.5 million as actual damages for the materials and machines lost;
2.) The amount of P2.0 million as moral
damages;
3.) The amount of P225,150.00 as attorney’s fees; and
4.) The costs of the suit.
SO ORDERED.[19]
SICI filed a motion for
reconsideration, which the RTC denied in an Order[20]
dated
SICI appealed the Order of the RTC to
the CA, alleging that:
I
THE LOWER COURT PALPABLY COMMITTED GRAVE ERROR IN
ORDERING APPELLANT TO PAY THE DEFENDANTS THE AMOUNT OF P2.5 MILLION AS
ACTUAL DAMAGES FOR MATERIALS AND MACHINES LOST; THE AMOUNT OF P2.0
MILLION AS MORAL DAMAGES; AND THE AMOUNT OF P225,150.00 AS ATTORNEY’S
FEES.
II
THE
On November 10, 2004, the CA rendered
a Decision[22]
nullifying the Order of the RTC, holding that the spouses Flores’ motion for
damages against the bonds were filed on
The spouses Flores filed a motion for
reconsideration which the CA denied in a Resolution[23]
dated
The spouses Flores, now petitioners,
seek relief from this Court via petition
for review on certiorari, contending
that:
THE COURT OF APPEALS DECIDED
A QUESTION OF LAW NOT IN ACCORD WITH THE LAW OR APPLICABLE DECISIONS OF THE
HONORABLE COURT IN HOLDING THAT THE RTC HAD LOST JURISDICTION TO HEAR AND ACT
UPON THE MOTION FOR DAMAGES FILED BY THE PETITIONERS.[24]
The sole
issue in this case is whether the petition for application of damages against
the bonds posted by respondent SICI was already time-barred when petitioners filed
the same on
The
petition is meritorious.
Section
20 of Rule 57 of the 1997 Rules of Civil Procedure reads:
SEC. 20. Claim
for damages on account of improper, irregular or excessive attachment. – An
application for damages on account of improper, irregular or excessive
attachment must be filed before the trial or before appeal is perfected or
before the judgment becomes executory, with due notice to the attaching party
and his surety or sureties, setting forth the facts showing his right to
damages and the amount thereof. Such damages may be awarded only after proper
hearing and shall be included in the judgment on the main case.
An
application for damages against the bonds must be filed in the same case where
the bond was issued, either (a) before the trial or (b) before the appeal is
perfected or (c) before the judgment becomes executory.[25] The principal party and his surety or sureties
must be notified of said application. This
rule is mandatory.[26] In the absence of due notice to the surety,
no judgment for damages may be entered and executed against it.[27]
In this case, petitioners,
as defendants below, received the Decision
of the RTC dated
After the lapse of the fifteen-day
period, the judgment or final order becomes final and executory and is beyond
the power or jurisdiction of the court which rendered it to further amend or
reverse.[28] The court loses jurisdiction over the case
except to issue orders for the protection and preservation of the rights of the
parties which do not involve any matter litigated by the appeal, approve
compromises, permit appeals of indigent litigants, order execution pending
appeal, and allow withdrawal of the appeal.[29]
Article 13, last paragraph of the New
Civil Code provides that in computing a period, the first day shall be excluded
and the last day included. Section 1, Rule 22, of the Revised Rules of Court
also provides that, in computing any period of time prescribed or allowed by
the Rules, or by order of the court or by any applicable Statute, the day of
the act or event from which the designated period of time begins is to be
excluded and the date of the performance included.
In the present case, petitioners
received a copy of the decision on
Section 3, Rule 13 provides that a
pleading may be filed by registered mail, and the date of the mailing as shown
by the post office stamp on the envelope or the registry receipt shall be considered
as the date of the filing thereof.
SEC. 3. Manner
of filing. – The filing of pleadings, appearances, motions, notices,
orders, judgments and all other papers shall be made by presenting the original
copies thereof, plainly indicated as such, personally to the clerk of court or
by sending them by registered mail. In the first case, the clerk of court shall
endorse on the pleading the date and hour of filing. In the second case, the date of the mailing
of motions, pleadings, or any other papers or payments or deposits, as shown by
the post office stamp on the envelope or the registry receipt, shall be
considered as the date of their filing, payment, or deposit in court. The envelope shall be attached to the record
of the case.
Under Section 7, Rule 13 of the Rules
of Court, pleadings may be served by registered mail or by ordinary mail:
SEC. 7. Service
by mail. – Service by registered mail shall be made by depositing the copy
in the office, in a sealed envelope, plainly addressed to the party or his
counsel at his office, if known, otherwise at his residence, if known, with
postage fully pre-paid, and with instructions to the postmaster to return the
mail to the sender after ten (10) days if undelivered. If no registry service is available in the
locality of either the sender or the addressee, service may be done by ordinary
mail.
The Court notes that petitioners filed
their application and served a copy thereof on respondent by registered mail on
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED.
The Decision of the Court of Appeals
in CA-G.R. CV No. 77593 is REVERSED. The Court of Appeals is ordered to REINSTATE the appeal of petitioners and
to resolve the same in due course. No costs.
SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
WE
CONCUR:
Chief Justice
Chairperson
CONSUELO
YNARES-
Associate Justice Associate Justice
Associate Justice
Pursuant to Section 13, Article VIII of the
Constitution, it is hereby certified that the conclusions in the above decision
were reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
ARTEMIO
V. PANGANIBAN
Chief Justice
[1]
Penned by Associate Justice Andres B. Reyes, Jr., with Associate Justices Lucas
P. Bersamin and Celia C. Librea-Leagogo, concurring; rollo, pp. 10-17.
[2] Penned
by Presiding Judge Tranquil P. Salvador, Jr.; id. at 76-79.
[3] Records, pp. 402-405.
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12] Rollo, p. 75.
[13]
[14] Records, pp. 546-548.
[15]
[16]
[17] Records, pp. 692-693.
[18] Rollo, pp. 70-79.
[19]
[20] Records, p. 819.
[21] CA rollo, p. 37-38.
[22] Rollo, pp. 61-67.
[23]
[24]
[25] Carlos v. Sandoval, G.R. No. 135830,
[26] Ponce Enrile v. Capulong, G.R. No.
88373,
[27] Pioneer Insurance & Surety Corporation
v. De Dios Transportation, Co., Inc., 454 Phil. 409, 429 (2003).
[28] Heirs of the Late Flor Tungpalan v. Court of
Appeals, G.R. No. 136207, June 21, 2005, 460 SCRA 392, 397. (2005).
[29] Marawi Marantao General Hospital, Inc. v.
Court of Appeals, 402 Phil. 356, 369-370 (2001).