William Golangco Construction Corporation vs. Philippine Commercial and International Bank

Construction Contract, Defect, and Initial CIAC Awards

On October 20, 1989, WGCC and PCIB entered into a construction contract involving, among others, the application of granite wash-out finish on the building’s exterior walls. WGCC turned over the completed work on June 1, 1992. In line with the contract requirements, WGCC submitted a guarantee bond issued by Malayan Insurance Company, Inc., to answer for defects that might arise within one year.

In 1993, portions of the granite wash-out finish peeled off and fell. WGCC made minor repairs. The following year, PCIB engaged Brains and Brawn Construction and Development Corporation to redo the entire finishing work after WGCC manifested that it was “not in a position to do the new finishing work,” although it was willing to share part of the cost. PCIB incurred PHP 11,665,000.00 for the repair work and sought arbitration reimbursement through the CIAC.

The CIAC likewise adjudicated WGCC’s counterclaim for PHP 5,777,157.84 as material cost adjustment. In its Decision, the CIAC ruled that PCIB was entitled to recover PHP 9,741,829.00 from WGCC, representing cost of repairs done by another contractor, while it awarded WGCC its counterclaim in the amount of PHP 5,777,157.84.

Early Execution and Interest Dispute Before the Court of Appeals

After the CIAC Decision, WGCC sought execution and specifically prayed for inclusion of six percent (six) legal interest computed from June 21, 1996. On January 22, 2007, the CIAC issued a Writ of Execution for the principal award of PHP 5,777,157.84 without expressly mentioning the interest sought. WGCC then moved to amend the writ to include six percent (6%) legal interest per annum computed from June 21, 1996 on the principal award, and to clarify that references to PCIB include Equitable-PCI Bank and its successors-in-interest.

The CIAC granted the motion to amend and ordered PCIB to pay twelve percent (12%) legal interest on the principal award of PHP 5,777,157.84, computed from April 27, 2006 until full payment. After the denial of WGCC’s motion for reconsideration, WGCC elevated the issue to the Court of Appeals, which partially granted its petition. The CA ruled that the writ of execution must include six percent (6%) legal interest on the principal award to WGCC, computed from June 21, 1996 until fully paid. Both WGCC’s subsequent motion for clarification and PCIB’s motion for reconsideration were denied.

Both parties then filed separate petitions for review on certiorari to the Supreme Court.

Supreme Court’s Prior Decision and the Direction to Recompute Remaining Liability

In the Supreme Court’s prior rulings in G.R. Nos. 195372 and 195375, the Court granted PCIB’s petition and denied WGCC’s petition. The dispositive portion affirmed the CA decision and directed the CIAC to compute the remaining liability of PCIB (now BDO) and to effect payment in favor of WGCC within thirty (30) days from receipt of the records of the case. An Entry of Judgment later certified that the decisions in G.R. Nos. 195372 and 195375 became final and executory on December 27, 2019.

The record also showed that, as early as March 10, 2009, BDO delivered checks to WGCC totaling PHP 7,742,974.29. The Supreme Court’s later resolution corrected the dispositive portion of its decision for the proper grant and denial of the petitions in the referenced docket numbers, and reiterated the directive for CIAC computation of the remaining liability.

CIAC Computation Proceedings After Finality and the Denial of Consignation

After finality, WGCC manifested with a motion for computation of liability and issuance of a writ of execution on August 25, 2022. The CIAC granted the manifestation and issued an order directing computation and implementation through the CIAC ex-officio sheriff.

Subsequently, WGCC sought clarification and/or correction of the CIAC order and submitted an updated computation as of October 31, 2022. WGCC also informed the CIAC that during the pendency of the Supreme Court case, it ceased to legally exist upon the expiration of its corporate term on April 6, 2013, and that it liquidated its assets and paid its thirteen (13) stockholders their respective shares. WGCC provided the stockholders’ names, their corresponding shares, the names of their successors-in-interest, and their pro rata percentage shares in BDO’s remaining liability.

In the ensuing proceedings, the CIAC denied WGCC’s Motion for Consignation through an order that denied consignation and required the respondent recipients, as a group, to file and submit for CIAC approval (a) a surety bond in the amount of PHP 8,630,646.46 in favor of the claimant and any third party asserting a claim against WGCC and/or deceased stockholders, together with (b) a Release, Waiver and Quitclaim and Indemnification form. The order further provided an opportunity for the claimant to comment or oppose and required individual recipients to sign waivers in favor of WGCC prior to release of payment.

WGCC’s Attempt to Expand Legal Interest, and CIAC’s Refusal

After the denial of consignation, WGCC filed a motion for inclusion of legal interest until full payment in the computation of BDO’s remaining liability, relying on the distinction between compensatory interest and legal interest and citing Lara’s Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc. It argued that, apart from compensatory interest, a final award of sum of money becomes a forbearance of credit upon finality and that the legal interest rate of six percent (6%) per annum should run from finality of judgment until full satisfaction.

In the Omnibus Order, the CIAC denied the motion. The CIAC reasoned that its latest Supreme Court resolution had already varied the starting and ending points: the starting date was fixed as June 21, 1996, while the ending point was reckoned only until finality of the judgment, not until full payment. The CIAC concluded it lacked authority to vary the Supreme Court’s resolution and resolved that any claims for interest beyond December 27, 2019 remained without prejudice to an option to pursue additional claims in court.

Issues Raised in the Supreme Court Petition

WGCC elevated the CIAC orders through a petition for review on certiorari, contending that the CIAC failed to correctly appreciate the concept of compensatory interest versus legal interest, and that the computation excluding legal interest until full payment contravened the Court’s directive on interest accrual after finality. WGCC insisted that the six percent (6%) legal interest should be computed from the date of finality of the Court’s decisions in G.R. Nos. 195372 and 195375 until full satisfaction.

BDO opposed the petition. It raised procedural challenges, including alleged defects in the Verification and Certification Against Forum Shopping, particularly the assertion that it was signed by Melissa Katrina G. Favis, who allegedly lacked proper personality, and by counsel allegedly without effective authority due to WGCC’s dissolution. BDO also argued that the CIAC lacked power to determine rightful recipients of a judgment award, asserted that WGCC’s belated disclosure of its dissolution caused delays in settling payment issues, and characterized the inclusion of interest until full payment as unjust enrichment beyond the adjudged liability. BDO also disclosed that partial payments had been received by certain named recipients in May 8, 2024 amounts.

Court’s Treatment of Verification and Certification Against Forum Shopping

The Court first addressed BDO’s request for dismissal on the ground of procedural infirmities. It noted that the alleged defect related to the Verification and Certification Against Forum Shopping signed by Atty. Tugday, and Favis, an alleged stockholder. The Court invoked the guidelines in Altres v. Empleo, which distinguished between defective verification and defective certification against forum shopping. The Court emphasized that defects in verification were not necessarily fatal and could be dispensed with for substantial compliance and ends of justice, while certification defects were generally not curable except in cases of substantial compliance under special circumstances, such as a common cause of action and common interest, and while recognizing that certification must be executed by the party-pleader or by special power of attorney when the party is unable to sign.

The Court then harmonized these principles with corporate representation doctrine. It reiterated that a corporation exercises powers through its board of directors and that no corporate power may be exercised by corporate officers or agents without board authority. It acknowledged that a Secretary’s Certificate may in certain instances serve as proof of authority for representation. The Court analyzed the Secretary’s Certificate executed on December 5, 1995, which stated that the Santos Parungao Aquino and Santos law firm, including its lawyers, was authorized in a specified CIAC case to represent the corporation and take actions connected to the arbitration.

The Court observed that WGCC had dissolved in 2013. It recognized that a dissolved corporation is generally prohibited from continuing its business but may continue with limited personality to settle and close affairs, and that Section 122 of Batas Pambansa Blg. 68 (later amended as Section 139 of the Revised Corporation Code) provides a three-year corporate continuation for the purpose of prosecuting and defending suits. It also applied the doctrine recognized in Gelano v. Court of Appeals, where the Court held that a corporation with a pending action that cannot be terminated within the three-year period may continue prosecuting and defending suits, with counsel potentially considered as a trustee of the corporate interests for litigation only.

Applying these principles, the Court held that Atty. Tugday had authority to sign based on the Secretary’s Certificate issued when WGCC still