Case Summary (G.R. No. 159731)
Agreement and Performance Bond
On November 23, 1995, Con-Field entered into an agreement with Freezinhot, a subcontractor, requiring that Freezinhot provide necessary resources for the project, with an agreed payment of P1,730,150.00. The contract mandated that Freezinhot furnish a performance bond worth P346,150.00 from EASCO to ensure compliance with its obligations.
Termination and Project Management Issues
Freezinhot initiated performance on the project, but concerns about slow progress and defects were communicated by Con-Field on April 8, 1996. On May 4, 1996, Freezinhot’s president expressed the intent to terminate the contract. Con-Field responded clarifying that the termination was unilateral, and outlined Freezinhot's deficiencies, leading Con-Field to take over the work.
Lawsuit Initiation and RTC Proceedings
On January 8, 1997, Con-Field filed a complaint in the Regional Trial Court (RTC) for P616,961.14 to recover costs incurred due to Freezinhot's inability to perform and sought the performance bond from EASCO. Freezinhot and its president failed to respond to the complaint, resulting in a declaration of default against them, while EASCO submitted an answer with a counterclaim.
RTC Judgment
The RTC ruled in favor of Con-Field, ordering Freezinhot to pay the principal obligation and jointly with EASCO for the performance bond amount. EASCO's liability for attorney's fees was also ordered, which was subsequently appealed.
Court of Appeals Decision
The CA partially granted EASCO’s appeal, modifying the RTC's decision to relieve EASCO from the obligation to pay attorney’s fees while upholding the other parts of the judgment. EASCO’s claims regarding the mutual termination of the agreement were denied, as the court found Freezinhot had unilaterally terminated the contract.
Petitioner’s Arguments
EASCO argued that the evidence indicated the subcontracting agreement was ineffective because Freezinhot could not fulfill its obligations. EASCO claimed that the project resembled a "labor-only" subcontracting arrangement due to Freezinhot's financial and operational deficiencies, thus absolving it from liability under the performance bond.
Respondent's Counterarguments
Con-Field maintained that the grounds raised by EASCO were not relevant to the case, asserting that the issue of "labor-only" contracting was never contested in the original trial. Con-Field emphasized that the termination of the agreement was due to Freezinhot's breach of obligations, making EASCO solidarily liable for the performance bond.
Supreme Court Findings
The Supreme Court found EASCO's petition to be without merit. It ruled that critical ar
...continue readingCase Syllabus (G.R. No. 159731)
Case Overview
- The case revolves around a Petition for Review on Certiorari filed by Eastern Assurance and Surety Corporation (EASCO) against Con-Field Construction and Development Corporation (Con-Field).
- The petition challenges the March 28, 2003 Decision and the August 26, 2003 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 68409.
Facts of the Case
- Con-Field, a domestic corporation, was contracted by ABS-CBN Corporation to construct a centralized air-conditioning system in Bacolod City.
- An Agreement was entered into on November 23, 1995, between Con-Field and Freezinhot, wherein Freezinhot was to act as a sub-contractor, providing necessary resources for the project.
- Freezinhot was required to furnish a performance bond of P346,150.00, which EASCO issued.
- Con-Field raised concerns regarding Freezinhot's slow progress and defects in the work on April 8, 1996.
- On May 4, 1996, Freezinhot's President, Demetrio de Guzman, expressed the desire to terminate the contract, citing technical reasons.
- Con-Field responded on May 7, 1996, clarifying they did not initiate the termination but acknowledged Freezinhot's decision and cited multiple deficiencies in Freezinhot’s performance.
- Con-Field completed the project and filed a complaint against Freezinhot, de Guzman, and EASCO for recovery of costs incurred