Case Summary (G.R. No. 173526)
Petitioner, Respondent and Claims
Respondent sued petitioner and his wife for specific performance and damages, seeking payment of P6,000,000.00 under a Compromise Agreement between Pyramid and Macrogen Realty, and enforcement of a Contract of Guaranty executed by petitioner. Respondent also sought attorney’s fees and a writ of preliminary attachment.
Key Dates and Procedural Milestones
- Compromise Agreement and Guaranty executed: 17 April 2000.
- CIAC approved the Compromise Agreement: 25 April 2000.
- Demand letter by respondent to guarantor: 3 January 2001.
- Complaint filed with the RTC: 6 September 2001 (Civil Case No. Q-01-45041).
- RTC partial Decision granting summary judgment against the spouses: 29 November 2002.
- Court of Appeals Decision modifying RTC judgment (exonerating Marilyn): 11 April 2006.
- Supreme Court Decision denying the petition: affirmed CA, 28 August 2008 (decision date provided in the prompt).
Applicable constitutional framework: the 1987 Philippine Constitution (decision rendered after 1990). Applicable statutory and doctrinal sources recited in the record: Civil Code (Arts. 2058–2062), Rule 35 (Revised Rules of Civil Procedure) on summary judgment, Rule 13 Section 6 on service, and relevant jurisprudence cited in the record.
Factual Background
Pyramid entered into a construction agreement with Macrogen Realty to build the Shoppers Gold Building; Pyramid performed work beginning May 1997 but alleged nonpayment of progress billings by Macrogen. Petitioner, as President of Macrogen, assured Pyramid that outstanding accounts would be paid and requested continuation of work. Work was suspended in August 1998. Pyramid initiated arbitration with the CIAC on 1 September 1999 seeking unpaid billings. Before arbitration proceeded to trial, Pyramid and Macrogen executed a Compromise Agreement providing for payment of P6,000,000.00 in six monthly installments beginning 15 June 2000. Petitioner executed a separate Contract of Guaranty on 17 April 2000, irrevocably and unconditionally guaranteeing payment of the P6,000,000.00.
Compromise Agreement, Guaranty and Collection Efforts
Macrogen defaulted on the agreed installments. Pyramid obtained a writ of execution from CIAC on 7 September 2000. The sheriff’s return of 29 November 2000 indicated the sheriff could not locate Macrogen’s properties except for a bank deposit (record reflects P20,242.33). Respondent then demanded payment from petitioner as guarantor by letter dated 3 January 2001 and made verbal demands; petitioner did not pay nor point out assets of Macrogen sufficient to satisfy the obligation.
Pleadings, Motions and Issues Framed at Pretrial
Marilyn moved to dismiss, denying contractual participation; RTC denied her motion. Petitioner answered, denying representations and asserting entitlement to the benefit of excussion as a guarantor, claiming Macrogen had collectible credits sufficient to pay respondent. At pretrial the parties submitted issues including (1) liability under the guaranty, (2) Marilyn’s liability, (3) availability of the benefit of excussion and whether proper notice was received, and (4) damages and timing of invocation of excussion.
Motion for Summary Judgment and RTC Partial Decision
Respondent moved for summary judgment on grounds that petitioner admitted the genuineness and execution of the Contract of Guaranty and that petitioner’s excussion defense was not a genuine issue because respondent had exhausted legal remedies against Macrogen (evidenced by the sheriff’s return). The RTC granted partial summary judgment on 29 November 2002, ordering the spouses to pay P6,000,000.00 less P20,242.23 (the record reflects a deduction) jointly and severally, and allowed respondent to advise whether to pursue other claims.
Court of Appeals Modification and Reasoning on Marilyn’s Liability
On appeal the Court of Appeals affirmed with modification: it held that Marilyn was not liable, whether solidarily or otherwise, with her husband under the Compromise Agreement or the Contract of Guaranty. The appellate court relied on the principle that a contract cannot be enforced against one who is not a party to it and found that Marilyn’s substantial ownership of shares in entities related to Macrogen was insufficient to disregard corporate personality or to impose personal liability on her. The CA cited Ramos v. Court of Appeals in support.
Supreme Court Issues Presented on Review
Petitioner assigned errors arguing (1) the Court of Appeals erred in affirming summary judgment despite genuine and material factual disputes that required trial, and (2) the Court of Appeals erred in denying petitioner, as guarantor, the benefit of excussion under Articles 2058–2062 of the Civil Code.
Supreme Court Analysis — Standard for Summary Judgment and Service of Demand
The Supreme Court applied Rule 35's two-prong standard: no genuine issue as to any material fact and entitlement to judgment as a matter of law. The Court characterized petitioner’s contention regarding improper service of the demand letter as a sham issue because petitioner did not deny receipt of the demand letter; rather he alleged service at his office (314 Sen. Gil Puyat Avenue, Makati City) was improper. The Court applied Section 6, Rule 13 (service by leaving papers in the office with a clerk or person in charge) and relied on the courier’s affidavit stating delivery to Ms. Dette Ramos who identified herself as an employee of petitioner or his companies. The Court emphasized that petitioner had used that same office address in the Contract of Guaranty and that petitioner failed to substantiate his bare denial (no corroborating affidavit that Ms. Ramos was not an employee). The Court held that the presumption of regularity in service stands unless rebutted by evi
...continue readingCase Syllabus (G.R. No. 173526)
Case Summary
- Petition for Review under Rule 45 assailing: (1) Decision dated 11 April 2006 of the Court of Appeals in CA-G.R. CV No. 78007 affirming with modification the RTC partial Decision dated 29 November 2002 in Civil Case No. Q-01-45041 (Branch 96, Quezon City); and (2) Resolution dated 5 July 2006 of the Court of Appeals denying petitioner’s Motion for Reconsideration.
- RTC had granted respondent’s Motion for Summary Judgment and declared petitioner Benjamin Bitanga and his wife, Marilyn Bitanga, solidarily liable to pay P6,000,000.00 to respondent.
- The Supreme Court denied the petition for lack of merit and affirmed the Court of Appeals’ Decision and Resolution; costs against petitioner.
Parties and Roles
- Petitioner: Benjamin M. Bitanga (President of Macrogen Realty; guarantor under Contract of Guaranty).
- Co-defendant: Marilyn Andal Bitanga (wife of petitioner; alleged to have ownership/control links).
- Respondent: Pyramid Construction Engineering Corporation (contractor seeking specific performance and damages; claimant in CIAC case).
- Debtor: Macrogen Realty Corporation (contracted with respondent to construct Shoppers Gold Building).
Procedural History
- 26 March 1997: Alleged agreement between respondent and Macrogen Realty to construct Shoppers Gold Building.
- May 1997: Respondent commenced civil, structural, and architectural works.
- August 1998: Respondent suspended work due to unpaid progress billings.
- 1 September 1999: Respondent instituted arbitration with the Construction Industry Arbitration Commission (CIAC) against Macrogen Realty.
- 17 April 2000: Compromise Agreement executed between respondent and Macrogen Realty; petitioner signed on behalf of Macrogen Realty and executed a Contract of Guaranty in favor of respondent the same day.
- 25 April 2000: CIAC approved the Compromise Agreement.
- 7 September 2000: Respondent moved for issuance of writ of execution against Macrogen Realty; CIAC granted.
- 29 November 2000: Sheriff’s return indicated only a bank deposit of Macrogen Realty in the amount of P20,242.33 at Planters Bank, Buendia Branch.
- 3 January 2001: Respondent made written demand on petitioner as guarantor to pay P6,000,000.00 or point out available properties of Macrogen Realty; verbal demands were also made.
- 6 September 2001: Respondent filed Complaint for specific performance and damages with application for writ of preliminary attachment in RTC (Civil Case No. Q-01-45041).
- 12 November 2001: Petitioner filed Answer; Marilyn filed Motion to Dismiss on 12 November 2001.
- 24 January 2002: RTC denied Marilyn’s Motion to Dismiss.
- 5 September 2002: Pre-trial; parties submitted issues for resolution.
- 20 September 2002: Respondent filed Motion for Summary Judgment.
- 29 November 2002: RTC rendered partial Decision granting summary judgment ordering spouses to pay P6,000,000.00 less P20,242.23; directed respondent to inform court within 10 days if it wished to pursue remaining claims.
- 26 January 2003: RTC denied Motion for Reconsideration.
- Appeal filed to Court of Appeals (CA-G.R. CV No. 78007).
- 11 April 2006: Court of Appeals Decision modified RTC judgment to absolve Marilyn Bitanga of liability.
- 5 July 2006: Court of Appeals denied Motion for Reconsideration.
- 28 August 2008: Supreme Court Decision denying petition for review and affirming Court of Appeals’ Decision and Resolution; costs against petitioner.
Factual Background — Construction and Nonpayment
- 26 March 1997: Agreement between respondent and Macrogen Realty to construct Shoppers Gold Building at Dr. A. Santos Avenue corner Palayag Road, Sucat, Parañaque City.
- By May 1997: Respondent commenced civil, structural, and architectural works.
- Macrogen Realty failed to settle respondent’s progress billings; petitioner, through representatives and agents, assured respondent outstanding account would be paid and requested respondent to continue working.
- Respondent relied on petitioner’s assurances and continued construction; suspended work in August 1998 when Macrogen failed to comply with conditions for continuation, including payment of unsettled accounts.
CIAC Proceedings, Compromise Agreement, and Guaranty
- 1 September 1999: Respondent filed arbitration with the Construction Industry Arbitration Commission (CIAC) against Macrogen Realty seeking payment of unpaid billings and project costs.
- 17 April 2000: Respondent and Macrogen Realty executed a Compromise Agreement (with petitioner signing for Macrogen Realty). Terms:
- Total amount of P6,000,000.00 payable in six equal monthly installments.
- Each installment to be delivered on the 15th day of each month beginning 15 June 2000.
- Agreement provided that default in two successive monthly installments would permit immediate execution against Macrogen for unpaid balance without need of court judgment or decree.
- 17 April 2000: Petitioner executed a Contract of Guaranty in favor of respondent, by which he “irrevocably and unconditionally guaranteed the full and complete payment of the principal amount of liability of Macrogen Realty in the sum of P6,000,000.00.”
- 25 April 2000: CIAC approved the Compromise Agreement.
- Macrogen Realty defaulted on the Compromise Agreement; respondent sought and obtained writ of execution on 7 September 2000; sheriff could not locate sufficient property for satisfaction except bank deposit noted.
Sheriff’s Return and Demand for Payment
- 29 November 2000: Sheriff’s return reported only bank deposit of Macrogen Realty of P20,242.33 with Planters Bank, Buendia Branch.
- 3 January 2001: Respondent sent written demand to petitioner to pay P6,000,000.00 or point out available Macrogen properties sufficient to cover obligation; petitioner also received verbal demands according to respondent.
- Respondent considered petitioner’s obligation as guarantor due and demandable after demand left unheeded.
Respondent’s Complaints and Prayer for Relief
- Respondent alleged Marilyn’s liability on grounds that Macrogen Realty was owned and controlled by petitioner and Marilyn and/or corporations owned and controlled by them; Macrogen is 99% owned by Asian Appraisal Holdings, Inc. (AAHI) which is 99% owned by Marilyn.
- Respondent’s Complaint prayed the RTC to render judgment ordering petitioner and Marilyn to comply with the Contract of Guaranty by paying P6,000,000.00 less the bank deposit and P400,000.00 for attorneys’ fees and expenses; respondent also sought preliminary attachment as security for any judgment.
Marilyn’s Motion to Dismiss and RTC Ruling
- Marilyn filed Motion to Dismiss asserting:
- No cause of action against her as she did not co-sign the Contract of Guaranty nor was she party to the Compromise Agreement.
- She had no part in execution of said contracts.
- Mere ownership of nearly all shares is insufficient to disregard separate corporate personality.
- Respondent misread Section 4, Rule 3 of the Revised Rules of Court.
- RTC denied Marilyn’s Motion to Dismiss (Order dated 24 January 2002), referencing Section 4, Rule 3: “Husband and wife shall sue or be sued jointly, except as provided by law,” and decreed the Motion denied for lack of merit.
Petitioner’s Answer and Affirmative Defenses
- In Answer filed 12 November 2001, petitioner averred:
- He never made representations that Macrogen Realty would comply with Compromise Agreement.
- He did not offer guarantee to induce respondent; respondent required security before agreeing to compromise.
- Marilyn was not aware of obligations he assumed and did not consent.
- Special and affirmative defenses:
- Petitioner asserted entitlement to the benefit of excussion and that it