Case Digest (G.R. No. 141968)
Facts:
The case, designated as G.R. No. 139290, was decided by the Special Second Division of the Supreme Court of the Philippines on May 19, 2006. The petitioner in this matter is the Trade and Investment Development Corporation of the Philippines (hereinafter referred to as "Philguarantee"), formerly known as the Philippine Export and Foreign Loan Guarantee Corporation. The respondents include Roblett Industrial Construction Corporation, Roberto G. Abiera, and Leticia Abiera, with Paramount Insurance Corporation also named as a respondent. The underlying events date back to June 5, 1990, when Roblett executed a subcontract agreement, backed by a bidder's bond issued by Paramount. The Regional Trial Court had earlier ruled in favor of Philguarantee, a decision later reversed by the Court of Appeals.
In the original lower court ruling, the Regional Trial Court ordered the respondents to pay a total of P11,775,611.25, along with a specified interest and penalty charges. P
Case Digest (G.R. No. 141968)
Facts:
- Parties Involved
- Petitioner:
- Trade & Investment Development Corporation of the Philippines (formerly Philippine Export & Foreign Loan Guarantee Corporation or Philguarantee).
- Respondents:
- Roblett Industrial Construction Corporation;
- Roberto G. Abiera and Leticia Abiera;
- Paramount Insurance Corporation.
- Procedural History
- Lower Court Proceedings:
- The Regional Trial Court issued a judgment which was later reversed by the Court of Appeals.
- Supreme Court Proceedings:
- The case was elevated to the Supreme Court where motions for reconsideration were filed by respondent Paramount on 23 December 2005 and a supplemental motion on 23 January 2006.
- On 11 November 2005, the Supreme Court rendered a Decision reversing the Court of Appeals and reinstating the Regional Trial Court’s judgment with modifications.
- Judgment Details and Modifications
- Payment Orders:
- Respondents (Roblett, the Abieras, and Paramount) were ordered, jointly and severally, to pay the amount of P11,775,611.25 with distinct interest and penalty rates:
- Paramount: 18% per annum from 5 June 1990 until fully paid.
- Roblett and the Abieras: 16% per annum and a penalty charge of 16% per annum compounded monthly from 5 June 1990 until fully paid.
- Additional Monetary Awards:
- Roblett and the Abieras were ordered to pay an additional P18,029,219.78 plus 12% interest from the time of finality of judgment until payment.
- Attorney’s fees were also awarded:
- 10% of P11,775,611.25 against Roblett and the Abieras plus litigation costs;
- P100,000.00 against Paramount, jointly and severally with Roblett and the Abieras.
- Further, Roblett and Benlot were to reimburse Paramount for payments (including interest, attorney’s fees, and costs) made to the petitioner.
- Legal Interest:
- All respondents and third-party defendants were jointly and severally ordered to pay legal interest of 12% per annum on the awarded sums from the time of judgment until paid.
- Arguments Raised in the Motions for Reconsideration
- Nature of the Bond:
- Paramount argued that it had issued a bidder’s bond—not a performance or guarantee bond—thus it should have been released from liability when Roblett executed the sub-contract agreement.
- Misrepresentation and Concealment:
- It contended that the petitioner misrepresented and concealed facts to secure Paramount’s continuing commitment to guarantee Roblett’s repayment.
- Rehabilitation Program and Novation:
- Paramount claimed that the rehabilitation program involving the petitioner and Roblett effectively novated the original principal obligation, discharging Paramount.
- Expiry of the Surety Bond:
- The bond was argued to have expired without any claim being made against it.
- Attorney’s Fees:
- Paramount contended that it should not be liable for attorney’s fees.
- Interest Charge Contention:
- The supplemental motion reiterated the earlier arguments and added that the interest charge on the principal debt, when computed from the time of judicial demand, was unconscionable, yielding an excessive amount.
- Supreme Court’s Analysis on the Interest Charge
- Stipulated Interest and Surety Bond Provisions:
- Paramount had bound itself jointly and severally with Roblett to pay the principal sum of P11,775,611.35 and agreed to an interest rate of 18% per annum, effective from the receipt of the petitioner’s first demand letter.
- Question of Validity of the Interest Rate:
- None of the parties challenged the validity of the stipulated interest rate at trial. The court recognized that, with the suspension of the Usury Law and removal of conventional interest ceilings, the parties’ agreement on the interest rate was binding absent evidence of fraud or undue influence.
- Commencement of Interest Liability:
- The court ruled that Paramount’s interest liability should commence from the date of judicial demand (5 June 1990) rather than from the petitioner’s formal notice of demand, attributing the delay to the petitioner’s incomplete communication regarding negotiations with Roblett.
- Comparative Jurisprudence and Equitable Reduction:
- In similar cases, notably Development Bank of the Philippines v. Court of Appeals, the court had equitably reduced interest rates when the interest accrued was disproportionate to the principal, serving as a precedent for the current case.
- Concerns on Prolonged Litigation
- Duration of the Case:
- The litigation spanned 16 years, beginning from the initial filing on 5 June 1990.
- Ballooning Interest:
- The extended period resulted in an excessively inflated amount of interest which, in the court’s view, rendered the interests altogether disproportionate to the principal sum.
Issues:
- Validity of the Motions for Reconsideration
- Whether Paramount’s motion for reconsideration, which raised issues already settled previously, warrants a change in the court’s original ruling.
- Interest Charge Computation
- Whether the stipulated interest rate starting from the judicial demand date (5 June 1990) was validly applied.
- The question on whether the interest charge computed at 18% per annum is excessive given the prolonged litigation period.
- Nature and Effect of the Bond
- Whether the classification of the bond as a bidder’s bond (and not a performance or guarantee bond) should have discharged Paramount from liability.
- Claims of Misrepresentation and Novation
- Whether the petitioner’s alleged misrepresentation and concealment, as well as the claimed novation via a rehabilitation program, effectively mitigate or discharge Paramount’s liability.
- Assessment of Attorney’s Fees
- Whether Paramount should be held liable for the attorney’s fees as ordered in the judgment.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)