SECOND DIVISION
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PHILIPPINE CHARTER INSURANCE CORPORATION, Petitioner, |
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G.R. No.
185066 Present: |
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- versus - |
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*YNARES-SANTIAGO, **CARPIO-MORALES, Acting Chairperson, BRION, ABAD, JJ. |
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PHILIPPINE NATIONAL
CONSTRUCTION CORPORATION, Respondent. |
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Promulgated: October 2, 2009 |
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R E S O L U
T I O N
BRION, J.:
Petitioner Philippine Charter
Insurance Corporation (PCIC) submits the present motion for the
reconsideration[1] of our
Resolution dated
The facts, as drawn from the records,
are briefly summarized below.
PNCC
is engaged in the construction business and tollway operations. On
On November 13, 1997, PNCC issued –
in favor of Kalingo – Purchase Order (P.O.) No. 71024L for 25 units of
tollbooths for a total of P2,100,000.00, and P.O. No. 71025L for two
units of tollbooths amounting to P168,000.00. These issuances were subject to the
condition, among others, that each P.O. shall be covered by a surety bond
equivalent to 100% of the total down payment (50% of the total cost reflected
on the P.O.), and that the surety bond shall continue in full force until the
supplier shall have complied with all the undertakings and covenants to the
full satisfaction of PNCC.
Kalingo, hence, posted surety bonds –
Surety Bond Nos. 27546 and 27547 – issued by the PCIC and whose terms and
conditions read:
Surety Bond No. 27546
To
supply labor, materials, tools, supervision equipment, and other incidentals
necessary for the fabrication and delivery of Two (2) Units Toll Booth at San
Fernando Interchange SB Entry as per Purchase Order No. 71025L, copy of which is
attached as Annex “A.” This bond also guarantees the repayment of the down
payment or whatever balance thereof in the event of failure on the part of the
Principal to finish the project due to his own fault.
It
is understood that the liability of the Surety under this bond shall in no case
exceed the sum of P84,000.00, Philippine Currency.[6]
Surety Bond No. 27547
To
supply labor, materials, tools, supervision equipment, and other incidentals
necessary for the fabrication and delivery of Twenty-five (25) Units Toll Booth
at designated Toll Plaza as per Purchase Order No. 71024L, copy of which is
attached as Annex “A.” This bond also guarantees the repayment of the down
payment or whatever balance thereof in the event of failure on the part of the
Principal to finish the project due to his own fault.
It
is understood that the liability of the Surety under this bond shall in no case
exceed the sum of P1,050,000.00, Philippine Currency.[7]
To illustrate, the PCIC surety bonds
are in the amounts corresponding to down payments on each P.O., as follows:
|
Surety Bond No. |
Purchase Order |
Units Covered |
Total Cost |
Surety Amount (equivalent to 50% down payment) |
|
Bond No. 27547 |
P.O. No. 71024L |
25 |
|
|
|
Bond No. 27546 |
P.O. No. 71025L |
2 |
|
|
Both surety bonds also contain the
following conditions: (1) the
liability of PCIC under the bonds expires on March 16, 1998; and (2) a written extrajudicial demand must
first be tendered to the surety, PCIC, within 15 days from the expiration date;
otherwise PCIC shall not be liable thereunder and the obligee waives the right
to claim or file any court action to collect on the bond. The following stipulation appears in the last
paragraph of these bonds:
The
liability of PHILIPPINE CHARTER INSURANCE CORPORATION under this bond will
expire on
PNCC released two checks to Kalingo
representing the down payment of 50% of the total project cost, which were
properly receipted by Kalingo.[9] Kalingo in turn submitted the two PCIC surety
bonds securing the down payments, which bonds were accepted by PNCC.
On March 3, 4, and 5, 1998, Kalingo
made partial/initial delivery of four units of tollbooths under P.O. No.
71024L. However, the tollbooths
delivered were incomplete or were not fabricated according to PNCC specifications. Kalingo failed to deliver the other 23 tollbooths
up to the time of filing of the complaint; despite demands, he failed and
refused to comply with his obligation under the POs.
On March 9, 1998, six days before the
expiration of the surety bonds and after the expiration of the delivery period provided
for under the award, PNCC filed a written
extrajudicial claim against PCIC
notifying it of Kalingo’s default and demanding the repayment of the down
payment on P.O. No. 71024L as secured by PCIC
Bond No. 27547, in the amount of P1,050,000.00. The claim went
unheeded despite repeated demands. For
this reason, on P84,000.00 on P.O. No. 71025L.
PCIC, in its answer, argued that the
partial delivery of four out of the 25 units of tollbooth by Kalingo under P.O.
No. 71024L should reduce Kalingo's obligation.
The RTC, by Decision of P1,050,000.00, representing the value of PCIC Bond No. 27547,
plus legal interest from last demand, and P50,000.00 as attorney's
fees. Reconsideration of the trial
court's decision was denied. The trial court made no ruling on PCIC’s
liability under PCIC Bond No. 27546, a claim that was not pleaded in the
complaint.
On appeal, the CA, by Decision[11]
of January 7, 2008, held that the RTC erred in ruling that PCIC's liability is
limited only to the payment of P1,050,000.00 under PCIC Bond No. 27547
which secured the down payment on P.O. No. 71024L. The appellate court held that PCIC,
as surety, is liable jointly and severally with Kalingo for the amount of the
two bonds securing the two POs to Kalingo; thus, the CA also held PCIC liable
under PCIC Bond No. 27546 which secured the P84,000.00 down payment on P.O.
No. 71025L.
Reconsideration having been denied by
the appellate court in its Resolution[12]
of
The Court, by Resolution of
I. WHETHER THE APPELLATE COURT ERRED IN RULING THAT PCIC
SHOULD ALSO BE HELD LIABLE UNDER BOND NO. 27546, COLLECTION UNDER WHICH WAS NOT
SUBJECT OF RESPONDENT PNCC's COMPLAINT FOR COLLECTION OF SUM OF MONEY;
II. WHETHER THE CHECKS ISSUED IN “1997” BY RESPONDENT PNCC
TO KALINGO WERE GIVEN 10 MONTHS PRIOR TO THE AWARD OF THE PROJECT AND AMOUNTS
TO CONCEALMENT OF MATERIAL FACT VITIATING THE SURETY BONDS ISSUED BY THE
PETITIONER; and
III. WHETHER THE APPELLATE COURT ERRED IN HOLDING
PETITIONER PCIC LIABLE FOR ATTORNEY'S FEES.
The second issue is a factual matter
not proper in proceedings before this Court.
The PCIC’s position that the checks were issued 10 months prior to the
award had already been rejected by both the RTC and the CA; both found that the
year “1997” appearing on the checks was a mere typographical error which should
have been written as “1998.”[15] Consequently, we shall no longer discuss the PCIC's
allegation of material concealment; the factual findings of the RTC, as
affirmed by the CA, are conclusive on us.
Our consideration shall focus on the
remaining two issues.
The PCIC presents, as its first issue,
the argument that “[w]hen the Court of Appeals rendered judgment on Bond No.
27546, which was not subject of respondent's complaint, on the ground that
respondent was incorrect in not filing suit for Bond No. 27546, the Court of
Appeals virtually acted as lawyer for respondent.”[16]
We find the PCIC’s position
meritorious.
The issue before us calls for a
discussion of a court’s basic appreciation of allegations in a complaint. The fundamental rule is that reliefs granted
a litigant are limited to those specifically prayed for in the complaint; other
reliefs prayed for may be granted only when related to the specific prayer(s)
in the pleadings and supported by the evidence on record. Necessarily, any such relief may be granted
only where a cause of action therefor exists, based on the complaint, the
pleadings, and the evidence on record.
Section 2,
Rule 2 of the 1997 Rules of Civil Procedure defines a cause of action as the
act or omission by which a party violates the right of another. It is the delict or the wrongful act or
omission committed by the defendant in violation of the primary right of the
plaintiff.[17] Its
essential elements are as follows:
1. A right in favor of the plaintiff by whatever means
and under whatever law it arises or is created;
2. An obligation on the part of the named
defendant to respect or not to violate such right; and
3. Act or omission on the part of such
defendant in violation of the right of the plaintiff or constituting a breach
of the obligation of the defendant to the plaintiff for which the latter may
maintain an action for recovery of damages or other appropriate relief.[18]
Only upon the occurrence of the last element does a cause
of action arise, giving the plaintiff the right to maintain an action in court
for recovery of damages or other appropriate relief.[19]
Each of the surety bonds issued by
PCIC created a right in favor of PNCC to collect the repayment of the bonded
down payments made on the two POs if contractor Kalingo defaults on his
obligation under the award to fabricate and deliver to PNCC the tollbooths contracted
for. Concomitantly, PCIC, as surety, had
the obligation to comply with its undertaking under the bonds to repay PNCC the
down payments the latter made on the POs if Kalingo defaults.
It must be borne in mind that each of
the two bonds is a distinct contract by itself, subject to its own terms and
conditions. They each contain a provision that the surety, PCIC, will not be liable for any claim not
presented to it in writing within 15 days from the expiration of the bond, and
that the obligee (PNCC) thereby waives its right to claim or file any court
action against the surety (PCIC) after the termination of 15 days from the time
its cause of action accrues. This written claim provision creates a
condition precedent for the accrual of: (1) PCIC’s obligation to comply with its
promise under the particular bond, and of (2) PNCC's right to collect or sue on
these bonds. PCIC’s liability to repay
the bonded down payments arises only upon PNCC's filing of a written claim – notifying
PCIC of principal Kalingo’s default and demanding collection under the bond – within
15 days from the bond’s expiry date. PNCC’s failure to comply with the written
claim provision has the effect of extinguishing PCIC’s liability and constitutes
a waiver by PNCC of the right to claim or sue under the bond.
Liability
on a bond is contractual in nature and is ordinarily restricted to the
obligation expressly assumed therein. We have repeatedly held that the extent
of a surety's liability is determined only by the clause of the contract of
suretyship and by the conditions stated in the bond. It cannot be extended by
implication beyond the terms of the contract.[20] Equally basic is the principle that
obligations arising from contracts have the force of law between the parties
and should be complied with in good faith.[21]
Nothing can stop the parties from establishing stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.[22] Here, nothing in the records shows the
invalidity of the written claim provision; therefore, the parties must strictly
and in good faith comply with this requirement.
The records reveal that PNCC complied with the written claim
provision, but only with respect to PCIC Bond No. 27547. PNCC filed an extrajudicial demand with PCIC
informing it of Kalingo’s default under the award and demanding the repayment
of the bonded down payment on P.O. No. 71024L.
Conversely, nothing in the records shows that PNCC ever complied with
the provision with respect to PCIC Bond No. 27546. Why PNCC complied with the written claim
provision with respect to PCIC Bond No. 27547, but not with respect to PCIC
Bond No. 27546, has not been explained by PNCC.
Under the circumstances, PNCC’s cause of action with respect to PCIC
Bond No. 27546 did not and cannot exist, such that no relief for collection
thereunder may be validly awarded.
Hence, the trial court’s decision
finding PCIC liable solely under PCIC Bond No. 27547 is correct – not only
because collection under the other bond, PCIC Bond No. 27546, was not raised or
pleaded in the complaint, but for the more important reason that no cause of
action arose in PNCC’s favor with respect to this bond. Consequently, the appellate court was in
error for including liability under PCIC Bond No. 27546.
PNCC insists that conformably with
the ruling of the CA, it should be entitled to collection under PCIC Bond No.
27546, although collection thereunder was not specifically raised or pleaded in
its complaint, because the bond was attached to the complaint and formed part
of the records. Also, considering that
PCIC’s liability as surety has been duly proven before the trial and appellate
courts, PNCC posits that it is entitled to repayment under PCIC Bond No. 27546.
PNCC might be alluding to Section
2(c), Rule 7 of the Rules of Court, which provides that a pleading shall
specify the relief sought, but may add a general prayer for such further or
other reliefs as may be deemed just and equitable. Under this rule, a court can
grant the relief warranted by the allegation and the proof even if it is not
specifically sought by the injured party;[23]
the inclusion of a general prayer may justify the grant of a remedy different
from or together with the specific remedy sought,[24]
if the facts alleged in the complaint and the evidence introduced so warrant.[25]
We find PNCC’s
argument to be misplaced. A general prayer for “other reliefs just and
equitable” appearing on a complaint or pleading normally enables the court to award
reliefs supported by the complaint or other pleadings, by the facts admitted at
the trial, and by the evidence adduced by the parties, even if these reliefs
are not specifically prayed for in the complaint. We cannot, however, grant PNCC the “other
relief” of recovering under PCIC Bond No. 27546 because of the respect due the
contractual stipulations of the parties.
While it is true that PCIC’s liability under PCIC Bond No. 27546 would
have been clear under ordinary circumstances (considering that Kalingo's
default under his contract with PNCC is now beyond dispute), it cannot be denied
that the bond contains a written claim provision, and compliance with it is
essential for the accrual of PCIC’s liability and PNCC’s right to collect under
the bond.
As already discussed, this provision is the law between the parties on
the matter of liability and collection under the bond. Knowing fully well that PCIC Bond No. 27546
is a matter of record, duly proven and susceptible of the court’s scrutiny, the
trial and appellate courts must respect the terms of the bond and cannot just
disregard its terms and conditions in the absence of any showing that they are contrary to law,
morals, good customs, public order, or public policy. For its failure to file a written claim with
PCIC within 15 days from the bond’s expiry date, PNCC clearly waived its right
to collect under PCIC Bond No. 27546.
That, wittingly or unwittingly, PNCC did not collect under one bond in
favor of calling on the other creates no other conclusion than that the right
to collect under the former had been lost.
Consequently, PNCC’s cause of action with respect to PCIC Bond No. 27546
cannot juridically exist and no relief therefore may be validly given. Hence, the CA invalidly rendered judgment
with respect to PCIC Bond No. 27546, and
its award based on this bond must be deleted.
On the third issue, we hold that PCIC
should be held liable for the attorney's fees PNCC incurred in bringing
suit. PCIC’s unjust refusal to pay
despite PNCC’s written claim compelled the latter to hire the services of an
attorney to collect on PCIC Bond No. 27547.
WHEREFORE, premises considered, we SET ASIDE our Resolution of
SO ORDERED.
ARTURO
D. BRION
Associate
Justice
WE CONCUR:
CONCHITA CARPIO-MORALES
Associate Justice
Acting Chairperson
CONSUELO
YNARES-SANTIAGO MARIANO C.
Associate Justice Associate Justice
ROBERTO A. ABAD
Associate Justice
ATTESTATION
I attest that the conclusions in the
above Resolution had been reached in consultation before the case was assigned
to the writer of the opinion of the Court’s Division.
CONCHITA
CARPIO-MORALES
Associate Justice
Acting Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Acting
Division Chairperson’s Attestation, it is hereby certified that the conclusions
in the above Resolution were reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
REYNATO
S. PUNO
Chief Justice
* Designated additional Member of the
Second Division per Special Order No. 691 dated
** Designated Acting Chairperson of the
Second Division per Special Order No. 690 dated
[1] Rollo, pp. 59-68.
[2] Under Rule 45 of the Rules of Court.
[3] Penned by Associate Justice Monina Arevalo-Zenarosa, and concurred in by Associate Justice Conrado M. Vasquez, Jr. and Associate Justice Edgardo F. Sundiam; rollo, pp. 26-37.
[4]
[5]
[6] CA Decision, id., p. 30.
[7]
[8] PCIC's Motion for Reconsideration, id., pp. 64-65.
[9] The date appearing on the checks was
erroneously placed as “
[10]
[11]
[12]
[13]
[14]
[15]
[16] See Motion for Reconsideration, id., p. 59.
[17] Ferrer v. Ferrer, G.R. No. 166496, November 29, 2006, 508 SCRA 570, 578-579; Danfoss, Incorporated v. Continental Cement Corporation, G.R. No. 143788, September 9, 2005, 469 SCRA 505, 511.
[18] Agoy v. Court of Appeals, G.R. No. 162927, March 6, 2007, 517 SCRA 535, 541; Swagman Hotels and Travel, Inc. v. Court of Appeals, G.R. No. 161135, April 8, 2005, 455 SCRA 175, 183.
[19] Zepeda v. China Banking Corporation, G.R. No. 172175, October 9, 2006, 504 SCRA 126, 131; Swagman Hotels and Travel, Inc. v. Court of Appeals, supra note 18.
[20] Philippine Commercial & Industrial Bank v. Court of Appeals, G.R. No. L-34959, March 18, 1988, 159 SCRA 24, citing Zenith Insurance Corp. v. Court of Appeals, G.R. No. 57957, December 29, 1982, 119 SCRA 485.
[21] CIVIL CODE, Article 1159.
[22]
[23] De
Guzman v. NLRC, G.R. No. 90856,
[24] Sps. Gutierrez v. Sps. Valiente, G.R. No. 166802, July 4, 2008, 557 SCRA 211, 225-226; BPI Family Bank v. Buenaventura, G.R. Nos. 148196 & 148259, September 30, 2005, 471 SCRA 431.
[25] Eugenio,
Sr. v. Velez, G.R. No. 85140,