Case Summary (G.R. No. 173526)
Key Dates and Applicable Law
Compromise Agreement and Contract of Guaranty executed 17 April 2000.
Regional Trial Court partial summary judgment rendered 29 November 2002.
Court of Appeals Decision affirmed with modification 11 April 2006 (Resolution denying reconsideration 5 July 2006).
Supreme Court Decision rendered 28 August 2008.
Governing law: 1987 Philippine Constitution; Civil Code Articles 2058–2062; Rules of Court, Rule 35 and Rule 13, Section 6.
Factual Background
In March 1997, Pyramid commenced construction works for Macrogen Realty but was not paid for progress billings. Petitioner, as Macrogen’s President, assured payment and induced continued work. When Macrogen failed to settle its account, Pyramid suspended work in August 1998 and filed for arbitration in September 1999.
Compromise Agreement and Guaranty
On 17 April 2000, Macrogen and Pyramid executed a CIAC-approved Compromise Agreement obliging Macrogen to pay ₱6,000,000 in six monthly installments. Petitioner executed an irrevocable, unconditional guaranty covering the full ₱6,000,000.
Post-Agreement Default and Demand
Macrogen defaulted on the installments. CIAC issued execution; the sheriff’s return dated 29 November 2000 reported only a ₱20,242.33 bank deposit. On 3 January 2001, Pyramid demanded payment from petitioner and pointed out the sole asset. Petitioner neither paid nor identified further debtor assets.
RTC Proceedings and Summary Judgment
Pyramid filed a complaint for specific performance and damages, naming petitioner and Marilyn as defendants. Marilyn’s motion to dismiss was denied. Petitioner’s answer denied representation claims and asserted the benefit of excussion. On 20 September 2002, Pyramid moved for summary judgment. The RTC granted summary judgment on 29 November 2002, ordering both spouses to pay ₱6,000,000 less ₱20,242.23, plus costs.
Court of Appeals’ Modification
On appeal, the Court of Appeals affirmed the RTC’s summary judgment as to petitioner but held Marilyn not liable, emphasizing that non-parties to contracts cannot be bound merely by share ownership.
Issues on Supreme Court Review
- Whether genuine issues of material fact precluded summary judgment.
- Whether petitioner, as guarantor, properly invoked the benefit of excussion under Civil Code Articles 2058–2062.
Summary Judgment Standards
Under Rule 35, a summary judgment requires (a) no genuine issue of material fact and (b) the movant’s entitlement to judgment as a matter of law. The burden shifts to the opposing party to present substantial, plausible defenses supported by admissible evidence.
Service of Demand Letter
Petitioner contended improper service because the demand letter was delivered to “one Dette Ramos” at his office rather than to him personally. The Court held this a sham issue: service at his declared office address on a person of sufficient age and discretion complied with Rule 13, Section 6, and petitioner neither disputed receipt of the letter nor offered evidence to overturn the presumption of regularity.
Benefit of Excu
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Facts of the Case
- On March 26, 1997, Pyramid Construction Engineering Corporation (“Pyramid”) and Macrogen Realty Corporation (“Macrogen”), of which Benjamin Bitanga was President, agreed that Pyramid would construct the Shoppers Gold Building in Sucat, Parañaque City.
- Pyramid commenced work in May 1997 but Macrogen failed to pay progress billings.
- Petitioner Bitanga, through his agents, assured Pyramid that Macrogen’s outstanding account would be settled, inducing Pyramid to continue work.
- In August 1998, Pyramid suspended work due to non-payment of previous billings.
- On September 1, 1999, Pyramid filed an arbitration case with the CIAC against Macrogen for unpaid billings and costs.
Compromise Agreement and Contract of Guaranty
- Prior to trial, on April 17, 2000, Pyramid and Macrogen entered into a Compromise Agreement before the CIAC: Macrogen would pay PHP 6,000,000.00 in six equal monthly installments beginning June 15, 2000, with immediate execution allowed upon two successive defaults.
- On the same date, petitioner Bitanga executed an irrevocable and unconditional Contract of Guaranty in favor of Pyramid, personally guaranteeing full payment of the PHP 6,000,000.00.
- The CIAC approved the Compromise Agreement on April 25, 2000.
Default, Demand and Preliminary Proceedings
- Macrogen defaulted on its payments.
- On September 7, 2000, Pyramid obtained a writ of execution from the CIAC; the sheriff’s return (November 29, 2000) showed only a bank deposit of PHP 20,242.33 in Macrogen’s account.
- On January 3, 2001, Pyramid served a written demand on Bitanga as guarantor, demanding payment or identification of Macrogen assets sufficient to cover the debt; verbal demands were also made but unheeded.
- Pyramid alleged Bitanga’s obligation as guarantor became due and demandable.
Pleadings and Defenses
- Marilyn Andal Bitanga (petitioner’s wife) was impleaded; Pyramid alleged she controlled Macrogen through Asian Appraisal Holdings, Inc., and benefitted from the project, making