FIRST DIVISION
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FIRST LEPANTO-TAISHO INSURANCE
CORPORATION (now known as FLT
PRIME INSURANCE CORPORATION), Petitioner, - versus - |
G.R. No. 177839 Present:
Chairperson, LEONARDO-DE
CASTRO, BERSAMIN, VILLARAMA,
JR., JJ. |
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CHEVRON PHILIPPINES, INC. (formerly known as CALTEX [ |
Promulgated:
January
18, 2012 |
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DECISION
VILLARAMA,
JR.,
J.:
Before
this Court is a Rule 45 Petition assailing the Decision[1]
dated November 20, 2006 and Resolution[2]
dated May 8, 2007 of the Court of Appeals (CA) in CA-G.R. CV No. 86623, which
reversed the Decision[3]
dated August 5, 2005 of the Regional Trial Court (RTC) of Makati City, Branch
Respondent
Chevron Philippines, Inc., formerly Caltex Philippines, Inc., sued petitioner
First Lepanto-Taisho Insurance Corporation (now known as FLT Prime Insurance
Corporation) for the payment of unpaid oil and petroleum purchases made by its
distributor Fumitechniks Corporation (Fumitechniks).
Fumitechniks, represented by Ma. Lourdes
Apostol, had applied for and was issued Surety Bond FLTICG (16) No. 01012 by
petitioner for the amount of P15,700,000.00. As stated in the attached rider, the bond was
in compliance with the requirement for the grant of a credit line with the
respondent to guarantee payment/remittance of the cost of fuel products withdrawn
within the stipulated time in accordance with the terms and conditions of the agreement. The surety bond was
executed on
Fumitechniks
defaulted on its obligation. The check
dated December 14, 2001 it issued to respondent in the amount of P11,461,773.10,
when presented for payment, was dishonored for reason of Account Closed. In a letter dated P15,084,030.30.
In its letter-reply dated
Simultaneously, a letter[6]
was sent to Fumitechniks demanding that the latter submit to petitioner the following: (1) its comment on
respondents February 6, 2002 letter; (2) copy of the agreement secured by the Bond, together with copies of documents
such as delivery receipts; and (3) information on the particulars, including
the terms and conditions, of any arrangement that [Fumitechniks] might have
made or any ongoing negotiation with Caltex in connection with the settlement
of the obligations subject of the Caltex letter.
In
its letter dated P15,000,000.00.[7]
Consequently, petitioner advised respondent of the non-existence of the
principal agreement as confirmed by Fumitechniks. Petitioner explained that being an accessory
contract, the bond cannot exist without a principal agreement as it is
essential that the copy of the basic contract be submitted to the proposed
surety for the appreciation of the extent of the obligation to be covered by
the bond applied for.[8]
On
Alleging
that petitioner unjustifiably refused to heed its demand for payment,
respondent prayed for judgment ordering petitioner to pay the sum of P15,080,030.30,
plus interest, costs and attorneys fees equivalent to ten percent of the total
obligation.[10]
Petitioner,
in its Answer with Counterclaim,[11]
asserted that the Surety Bond was issued for the purpose of securing the
performance of the obligations embodied in the Principal Agreement stated
therein, which contract should have been attached and made part thereof.
After
trial, the RTC rendered judgment dismissing the complaint as well as
petitioners counterclaim. Said court
found that the terms and conditions of the oral credit line agreement between
respondent and Fumitechniks have not been relayed to petitioner and neither
were the same conveyed even during trial. Since the surety bond is a mere
accessory contract, the RTC concluded that the bond cannot stand in the absence
of the written agreement secured thereby.
In holding that petitioner cannot be held liable under the bond it
issued to Fumitechniks, the RTC noted the practice of petitioner, as testified
on by its witnesses, to attach a copy of the written agreement (principal
contract) whenever it issues a surety bond, or to be submitted later if not yet
in the possession of the assured, and in case of failure to submit the said
written agreement, the surety contract will not be binding despite payment of
the premium.
Respondent filed a motion for
reconsideration while petitioner filed a motion for partial reconsideration as
to the dismissal of its counterclaim.
With the denial of their motions, both parties filed their respective
notice of appeal.
The CA ruled in favor of respondent, the
dispositive portion of its decision reads:
WHEREFORE,
the appealed Decision is REVERSED and SET ASIDE. A new judgment is hereby entered ORDERING
defendant-appellant First Lepanto-Taisho Insurance Corporation to pay
plaintiff-appellant Caltex (
SO
ORDERED.[12]
According to the appellate court,
petitioner cannot insist on the submission of a written agreement to be
attached to the surety bond considering that respondent was not aware of such
requirement and unwritten company policy.
It also declared that petitioner is estopped from assailing the oral
credit line agreement, having consented to the same upon presentation by
Fumitechniks of the surety bond it issued.
Considering that such oral contract between Fumitechniks and respondent
has been partially executed, the CA ruled that the provisions of the Statute of
Frauds do not apply.
With
the denial of its motion for reconsideration, petitioner appealed to this Court
raising the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN ITS INTERPRETATION OF
THE PROVISIONS OF THE SURETY BOND WHEN IT HELD THAT THE SURETY BOND SECURED AN
ORAL CREDIT LINE AGREEMENT NOTWITHSTANDING THE STIPULATIONS THEREIN CLEARLY
SHOWING BEYOND DOUBT THAT WHAT WAS BEING SECURED WAS A WRITTEN AGREEMENT,
PARTICULARLY, THE WRITTEN AGREEMENT A COPY OF WHICH WAS EVEN REQUIRED TO BE
ATTACHED TO THE SURETY BOND AND MADE A PART THEREOF.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT STRIKING OUT THE
QUESTIONED RESPONDENTS EVIDENCE FOR BEING CONTRARY TO THE PAROL EVIDENCE RULE,
IMMATERIAL AND IRRELEVANT AND CONTRARY TO THE STATUTE OF FRAUDS.
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT STRIKING OUT THE
RESPONDENTS MOTION FOR RECONSIDERATION OF THE RTC DECISION FOR BEING A MERE
SCRAP OF PAPER AND PRO FORMA AND,
CONSEQUENTLY, IN NOT DECLARING THE RTC DECISION AS FINAL AND EXECUTORY IN SO
FAR AS IT DISMISSED THE COMPLAINT.
IV.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE RTC
DECISION AND IN NOT GRANTING PETITIONERS COUNTERCLAIM.[13]
The
main issue to be resolved is one of first impression: whether a surety is
liable to the creditor in the absence of a written contract with the principal.
Section 175 of
the Insurance Code defines a suretyship as a contract or agreement
whereby a party, called the surety, guarantees the performance by another
party, called the principal or obligor, of an obligation or undertaking in
favor of a third party, called the obligee. It includes official recognizances,
stipulations, bonds or undertakings issued under Act 536,[14] as amended. Suretyship arises upon the solidary binding
of a person deemed the surety with the principal debtor, for the purpose of
fulfilling an obligation.[15] Such undertaking
makes a surety agreement an ancillary contract as it presupposes the existence
of a principal contract. Although the contract of a surety is in essence secondary only to a
valid principal obligation, the surety becomes liable for the debt or duty of
another although it possesses no direct or personal interest over the
obligations nor does it receive any benefit therefrom. And notwithstanding the fact that the surety
contract is secondary to the principal obligation, the surety assumes liability
as a regular party to the undertaking.[16]
The extent of a suretys liability is determined by
the language of the suretyship contract or bond itself. It cannot be extended by implication, beyond
the terms of the contract.[17] Thus, to determine whether petitioner is
liable to respondent under the surety bond, it becomes necessary to examine the
terms of the contract itself.
Surety Bond FLTICG (16) No. 01012 is a
standard form used by petitioner, which states:
That
we, FUMITECHNIKS CORP. OF THE
PHILS. of #154 Anahaw St., Project 7, Quezon City as principal and First Lepanto-Taisho
Insurance Corporation a corporation duly organized and existing under and by
virtue of the laws of the Philippines as Surety, are held firmly bound unto CALTEX PHILIPPINES, INC. of ______ in the sum of FIFTEEN MILLION SEVEN HUNDRED THOUSAND ONLY PESOS (P15,700,000.00), Philippine
Currency, for the payment of which sum, well and truly to be made, we bind
ourselves, our heirs, executors, administrators, successors, and assigns, jointly
and severally, firmly by these presents:
The
conditions of this obligation are as follows:
WHEREAS,
the above-bounden principal, on 15th
day of October, 2001 entered into [an] agreement with CALTEX PHILIPPINES, INC. of ________________ to fully and faithfully
a copy of which is attached hereto and
made a part hereof:
WHEREAS,
said Obligee__ requires said
principal to give a good and sufficient bond in the above stated sum to secure
the full and faithful performance on his part of said agreement__.
NOW
THEREFORE, if the principal shall well and truly perform and fulfill all the
undertakings, covenants, terms, conditions, and agreements stipulated in
said agreement__ then this obligation shall be
null and void; otherwise it shall remain in full force and effect.
The
liability of First Lepanto-Taisho Insurance Corporation under this bond will
expire on October 15, 2002__.
x x x
x[18]
(Emphasis
supplied.)
The rider attached to the bond sets
forth the following:
WHEREAS,
the Principal has applied for a Credit Line in the amount of PESOS: Fifteen Million Seven Hundred thousand only (P15,700,000.00),
Philippine Currency with the Obligee for the purchase of Fuel Products;
WHEREAS,
the obligee requires the Principal to post a bond to guarantee payment/remittance of the cost of fuel products withdrawn
within the stipulated time in accordance
with terms and conditions of the agreement;
IN NO
CASE, however, shall the liability of the Surety hereunder exceed the sum of
PESOS: Fifteen million seven hundred thousand only (P15,700,000.00),
Philippine Currency.
NOW
THEREFORE, if the principal shall well and truly perform and fulfill all the
undertakings, covenants, terms and conditions and agreements stipulated in said
undertakings, then this obligation shall be null and void; otherwise, it shall
remain in full force and effect.
The
liability of FIRST LEPANTO-TAISHO INSURANCE CORPORATION, under this Bond will
expire on 10.15.01_. Furthermore, it is hereby understood that
FIRST LEPANTO-TAISHO INSURANCE CORPORATION will not be liable for any claim not
presented to it in writing within fifteen (15) days from the expiration of this
bond, and that the Obligee hereby waives its right to claim or file any court
action against the Surety after the termination of fifteen (15) days from the
time its cause of action accrues.[19]
Petitioner
posits that non-compliance with the submission of the written agreement, which
by the express terms of the surety bond, should be attached and made part
thereof, rendered the bond ineffective.
Since all stipulations and provisions of the surety contract should be
taken and interpreted together, in this case, the unmistakable intention of the
parties was to secure only those terms and conditions of the written agreement. Thus, by deleting the required submission and
attachment of the written agreement to the surety bond and replacing it with
the oral credit agreement, the obligations of the surety have been extended
beyond the limits of the surety contract.
On
the other hand, respondent contends that the surety bond had been delivered by
petitioner to Fumitechniks which paid the premiums and delivered the bond to
respondent, who in turn, opened the credit line which Fumitechniks availed of
to purchase its merchandise from respondent on credit. Respondent points out that a careful reading
of the surety contract shows that there is no such requirement of submission of
the written credit agreement for the bonds effectivity. Moreover, respondents witnesses had already
explained that distributorship accounts are not covered by written distribution
agreements. Supplying the details of these agreements is allowed as an
exception to the parol evidence rule even if it is proof of an oral agreement. Respondent argues that by introducing
documents that petitioner sought to exclude, it never intended to change or
modify the contents of the surety bond but merely to establish the actual terms
of the distribution agreement between Fumitechniks and respondent, a separate
agreement that was executed shortly after the issuance of the surety bond. Because petitioner still issued the bond and
allowed it to be delivered to respondent despite the fact that a copy of the
written distribution agreement was never attached thereto, respondent avers
that clearly, such attaching of the copy of the principal agreement, was for
evidentiary purposes only. The real
intention of the bond was to secure the payment of all the purchases of
Fumitechniks from respondent up to the maximum amount allowed under the bond.
A
reading of Surety Bond
FLTICG (16) No. 01012 shows that it secures
the payment of purchases on credit by Fumitechniks in accordance with the terms
and conditions of the agreement it entered into with respondent. The word
agreement has reference to the distributorship agreement, the principal
contract and by implication included the credit agreement mentioned in the
rider. However, it turned out that respondent has executed written agreements only with its direct customers but not distributors
like Fumitechniks and it also never relayed the terms and conditions of its
distributorship agreement to the petitioner after the delivery of the bond.
This was clearly admitted by respondents Marketing Coordinator, Alden Casas
Fajardo, who testified as follows:
Atty. Selim:
Q : Mr. Fajardo[,] you mentioned during your
cross-examination that the surety bond as part of the requirements of
[Fumitechniks] before the Distributorship Agreement was approved?
A : Yes
Sir.
x x
x x
Q : Is
it the practice or procedure at Caltex to reduce distributorship account into
writing?
x x
x x
A : No, its not a practice to make an
agreement.
x x
x x
Atty. Quiroz:
Q : What was the reason why you are not
reducing your agreement with your client into writing?
A : Well,
of course as I said, there is no fix pricing in terms of distributorship
agreement, its usually with regards to direct service to the customers which
have direct fixed price.
x x
x x
Q : These supposed terms and conditions that
you agreed with [Fumitechniks], did you relay to the defendant
A : Yes Sir.
x x
x x
Q : How did you relay that, how did you relay
the terms and conditions to the defendant?
A : I dont know, it was during the time for
collection because I collected them and explain the terms and conditions.
Q : You testified awhile ago that you did not
talk to the defendant First Lepanto-Taisho Insurance Corporation?
A : I was confused with the question. Im
talking about Malou Apostol.
Q : So,
in your answer, you have not relayed those terms and conditions to the
defendant First Lepanto, you have not?
A : Yes Sir.
Q : And as of this present, you have not yet
relayed the terms and conditions?
A : Yes Sir.
x x
x x [20]
Respondent,
however, maintains that the delivery of the bond and acceptance of premium
payment by petitioner binds the latter as surety, notwithstanding the
non-submission of the oral distributorship and credit agreement which
understandably cannot be attached to the bond.
The
contention has no merit.
The
law is clear that a surety contract should be read and interpreted together
with the contract entered into between the creditor and the principal. Section 176 of the Insurance Code
states:
Sec.
176. The liability of the surety or
sureties shall be joint and several with the obligor and shall be limited to
the amount of the bond. It is determined
strictly by the terms of the
contract of suretyship in relation to
the principal contract between the obligor and the obligee. (Emphasis supplied.)
A
surety contract is merely a collateral one, its basis is the principal contract
or undertaking which it secures.[21]
Necessarily, the stipulations in such principal agreement must at least be
communicated or made known to the surety particularly in this case where the
bond expressly guarantees the payment of respondents fuel products withdrawn
by Fumitechniks in accordance with the terms and conditions of their agreement. The bond specifically makes reference to a written agreement. It is basic that if the terms of a contract
are clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control.[22] Moreover, being an
onerous undertaking, a surety agreement is strictly construed against the
creditor, and every doubt is resolved in favor of the solidary debtor.[23] Having accepted the bond, respondent as
creditor must be held bound by the recital in the surety bond that the terms
and conditions of its distributorship contract be reduced in writing or at the
very least communicated in writing to the surety. Such non-compliance by the creditor
(respondent) impacts not on the validity or legality of the surety contract but
on the creditors right to demand performance.
It
bears stressing that the contract of suretyship imports entire good faith and
confidence between the parties in regard to the whole transaction, although it
has been said that the creditor does not stand as a fiduciary in his relation
to the surety. The creditor is generally held bound to a faithful observance of
the rights of the surety and to the performance of every duty necessary for the
protection of those rights.[24] Moreover, in this jurisdiction, obligations
arising from contracts have the force of law between the parties and should be
complied with in good faith.[25] Respondent is charged with notice of the
specified form of the agreement or at least the disclosure of basic terms and
conditions of its distributorship and credit agreements with its client
Fumitechniks after its acceptance of the bond delivered by the latter. However, it never made any effort to relay
those terms and conditions of its contract with Fumitechniks upon the
commencement of its transactions with said client, which obligations are
covered by the surety bond issued by petitioner. Contrary to respondents assertion, there is
no indication in the records that petitioner had actual knowledge of its
alleged business practice of not having written
contracts with distributors; and even assuming petitioner was aware of such
practice, the bond issued to Fumitechniks and accepted by respondent
specifically referred to a written agreement.
As
to the contention of petitioner that respondents motion for reconsideration
filed before the trial court should have been deemed not filed for being pro forma, the Court finds it to be
without merit. The mere fact that a
motion for reconsideration reiterates issues already passed upon by the court
does not, by itself, make it a pro forma
motion. Among the ends to which a motion
for reconsideration is addressed is precisely to convince the court that its
ruling is erroneous and improper, contrary to the law or evidence; the movant
has to dwell of necessity on issues already passed upon.[26]
Finally,
we hold that the trial court correctly dismissed petitioners counterclaim for
moral damages and attorneys fees. The
filing alone of a civil action should not be a ground for an award of moral
damages in the same way that a clearly unfounded civil action is not among the
grounds for moral damages.[27]
Besides, a juridical person is generally not entitled to moral damages because,
unlike a natural person, it cannot experience physical suffering or such
sentiments as wounded feelings, serious anxiety, mental anguish or moral shock.[28] Although in some recent cases we have held
that the Court may allow the grant of moral damages to corporations, it is not
automatically granted; there must still be proof of the existence of the
factual basis of the damage and its causal relation to the defendants acts. This is so because moral damages, though incapable of
pecuniary estimation, are in the category of an award designed to compensate
the claimant for actual injury
suffered and not to impose a penalty on the wrongdoer.[29] There is no evidence presented to establish
the factual basis of petitioners claim for moral damages.
Petitioner is likewise not
entitled to attorneys fees. The settled
rule is that no premium should be placed on the right to litigate and that not
every winning party is entitled to an automatic grant of attorneys fees.[30] In pursuing its claim on the surety bond,
respondent was acting on the belief that it can collect on the obligation of
Fumitechniks notwithstanding the non-submission of the written principal
contract.
WHEREFORE, the
petition for review on certiorari is PARTLY
GRANTED. The Decision
dated
No pronouncement as to costs.
SO ORDERED.
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MARTIN S. VILLARAMA, JR. Associate
Justice |
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WE
CONCUR: RENATO
C. CORONA Chief Justice Chairperson |
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TERESITA J. LEONARDO-DE CASTRO Associate
Justice |
LUCAS
P. BERSAMIN Associate Justice |
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MARIANO
C. Associate
Justice |
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C E
R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the 1987 Constitution,
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
Courts Division.
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RENATO C. CORONA Chief
Justice |
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[1] Rollo, pp. 79-101. Penned by Presiding Justice (former Member of this Court) Ruben T. Reyes with Associate Justices Juan Q. Enriquez, Jr. and Vicente S.E. Veloso concurring.
[2] Id. at 103-104.
[3] Id. at 105-110. Penned by Judge Winlove M. Dumayas.
[4] Records, p. 129.
[5] Id. at 8, 26, 51-53, 131 and 132.
[6] Id. at 27-29.
[7] Id. at 30-34.
[8] Id. at 89.
[9] Id. at 90-91.
[10] Id. at 3.
[11] Id. at 14-25.
[12] Rollo, p. 100.
[13] Id. at 25.
[14] An Act Relative to Recognizances, Stipulations, Bonds, and Undertakings, and to Allow Certain Corporations to be Accepted as Surety Thereon.
[15] Philippine Bank of Communications v. Lim, G.R. No. 158138, April 12, 2005, 455 SCRA 714, 721, citing Art. 2047 of the Civil Code of the Philippines.
[16] Asset Builders Corporation v. Stronghold Insurance Company, Incorporated, G.R. No. 187116, October 18, 2010, 633 SCRA 370, 379-380, citing Security Pacific Assurance Corporation v. Hon. Tria-Infante, 505 Phil. 609, 620 (2005) and Philippine Bank of Communications v. Lim, id. at 721-722.
[17] Garon v. Project Movers Realty and Development Corporation, G.R. No. 166058, April 3, 2007, 520 SCRA 317, 329-330.
[18] Records, p. 129.
[19] Id.
[20] TSN, May 19, 2003, pp. 49, 51, 53, 57-59.
[21] Hector S. De Leon and Hector M. De Leon, Jr., The Insurance Code of the Philippines, 2010 Ed., p, 424.
[22] Art. 1370, Civil Code of the Philippines.
[23] See Security Bank and Trust Company, Inc. v. Cuenca, G.R. No. 138544, October 3, 2000, 341 SCRA 781, 801.
[24] 74 Am Jur 2d, 127, pp. 90-91.
[25] Art. 1159, Civil Code of the Philippines.
[26] Republic v. International Communications Corporation (ICC), G.R. No. 141667, July 17, 2006, 495 SCRA 192, 198.
[27] Rudolf Lietz, Inc. v. Court of Appeals, G.R. No. 122463, December 19, 2005, 478 SCRA 451, 460.
[28] Crystal v. Bank of the Philippine Islands, G.R. No. 172428, November 28, 2008, 572 SCRA 697, 705, citing People v. Manero, Jr., G.R. Nos. 86883-85, January 29, 1993, 218 SCRA 85, 96-97.
[29] Id. at 706, citing Development Bank of the Phil. v. Court of Appeals, 451 Phil 563, 586-587 (2003).
[30] Tanay Recreation Center and Development Corp. v. Fausto, G.R. No. 140182, April 12, 2005, 455 SCRA 436, 457.