Case Digest (G.R. No. L-9542)
Facts:
The case, Plaridel Surety & Insurance Co., Inc. vs. P. L. Galang Machinery Co., Inc., was decided by the Supreme Court of the Philippines on January 11, 1957, under G.R. No. L-9542. The dispute arose from a contractual agreement executed on November 4, 1950, between P. L. Galang Machinery Co., Inc. and Constancio San Jose, wherein San Jose committed to deliver 2,550,000 board feet of peeler and veneer logs at a price of P60 per thousand board feet, starting in January 1951. P. L. Galang intended to export these logs to Japan. To secure San Jose's commitment, Plaridel Surety & Insurance Co. issued a performance bond of P30,600 on November 9, 1950, making them jointly and severally liable for San Jose's obligations under the contract.
By mid-February 1951, San Jose had failed to deliver the logs as stipulated, prompting P. L. Galang to notify Plaridel of this breach and demand payment of the bond. Subsequently, on May 8, 1951, P. L. Galang Machinery Co. filed a co
Case Digest (G.R. No. L-9542)
Facts:
- Background and Contractual Arrangement
- Parties Involved:
- P. L. Galang Machinery Co., Inc. (creditor)
- Constancio San Jose (principal debtor)
- Plaridel Surety & Insurance Co., Inc. (surety company)
- Contract Formation:
- On November 4, 1950, P. L. Galang Machinery Co., Inc. and Constancio San Jose executed an agreement wherein San Jose undertook to cut, deliver, and sell 2,550,000 board feet of peeler and veneer logs.
- The logs were to be delivered in three consecutive months beginning January 1951, with each delivery comprising 850,000 board feet.
- The price was fixed at P60 per thousand board feet, f.o.b. vessel at the port of Polilio.
- Related Transactions:
- The logs were intended for export to Japan.
- Shortly after the agreement, relying on its terms, P. L. Galang Machinery Co., Inc. sold logs to Marubeni Co., Ltd. of Tokyo at P845 per thousand board feet, f.o.b. vessel at the port of Polilio.
- Surety Bond and Financial Arrangements
- Performance Bond Issuance:
- On November 9, 1950, Plaridel Surety & Insurance Co. executed a performance bond in the sum of P30,600.
- The bond bound the surety jointly and severally with Constancio San Jose to secure the faithful performance of the contract.
- Advance Payment by the Creditor:
- In accordance with the contractual agreement, P. L. Galang Machinery Co., Inc. advanced to Constancio San Jose the sum of P16,300.
- This advance carried interest at a rate of 10 percent per annum.
- Breach of Contract and Subsequent Default
- Failure to Deliver:
- Constancio San Jose failed to deliver the corresponding quantity of logs for January 1951.
- San Jose requested an extension of time to complete the delivery, citing the recent acquisition of logging machinery and equipment.
- The creditor verbally denied his request.
- Further Developments of Default:
- Although some logs were delivered in February 1951, San Jose continued to default on the contractual terms.
- On March 7, 1951, he advised the corporation through a letter that he expected to deposit with the surety company an amount of P30,000 (noting a discrepancy with the bond amount of P30,600).
- Formal Notification and Demand:
- On February 8, 1951, due to San Jose’s failure to comply with the contractual terms, P. L. Galang Machinery Co., Inc. formally notified the surety company of his default.
- The creditor demanded payment of the performance bond amount (P30,600).
- The surety company refused to pay the demanded sum.
- Filing of the Lawsuit and Relief Sought
- Initiation of Legal Action:
- On May 8, 1951, P. L. Galang Machinery Co., Inc. filed a complaint against both Constancio San Jose and Plaridel Surety & Insurance Co.
- The complaint sought recovery of the principal amount along with legal interest from the filing date, attorney’s fees, and other costs.
- Surety’s Objections:
- The surety objected to the imposition of interest and attorney’s fees, contending that these were not mentioned in the bond.
- It argued that extending its liability beyond the bond’s stipulated amount would be contrary to the terms of the suretyship.
- The surety cited Articles 1966 and 2208 of the New Civil Code, emphasizing that no interest or attorney’s fees should be imposed unless expressly stipulated.
Issues:
- Whether the surety is liable to pay interest and attorney’s fees in addition to the principal sum of the bond.
- Does the absence of an express stipulation in the bond preclude the recovery of interest?
- Does the imposition of attorney’s fees extend the liability of the surety beyond the stipulated bond sum?
- Whether the additional recovery for interest and attorney’s fees is justified as part of damages for delay in payment.
- Do established precedents and statutory provisions permit such an extension of liability to cover damages incurred due to delay?
- Is the amended award, which includes a reduction of attorney’s fees, within the discretion of the court considering the uncomplicated nature of the case?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)