Case Summary (G.R. No. 171750)
Receipt of the Motion and Response
UPPC requested the RTC to order Acropolis to pay the outstanding judgment amount after Unibox and Ortega defaulted on their payment obligations, which were later outlined in a compromise agreement. Acropolis contended it had not received proper notice regarding the demand for payment and that a novation had occurred due to the compromise agreement, thereby releasing it from liability.
Court of Appeals' Decision
In a pivotal ruling, the Court of Appeals reversed the RTC’s order compelling Acropolis to fulfill its obligations under the counter-bond. The appellate court found that UPPC had failed to properly notify Acropolis of the demand for payment and subsequently did not follow procedural requirements specified in Section 17, Rule 57 of the Rules of Court. The appellate decision emphasized Acropolis' non-involvement in the compromise agreement, which UPPC included in its argument against Acropolis’ liability.
Supreme Court's Evaluation of Liability and Demand
In evaluating the case, the Supreme Court emphasized that UPPC had indeed satisfied the legal prerequisites for recovery against the surety on the counter-bond. The Court held that UPPC's filing of a motion for payment constituted a sufficient demand, and it provided proper notice to Acropolis by personal service. The Court reaffirmed that the obligation to pay under a counter-bond arises upon proper demand and notice, both of which were met.
No Novation Despite Compromise Agreement
The Supreme Court further clarified that the compromise agreement between UPPC, Unibox, and Ortega did not effectively release Acropolis from its obligations under the counter-bond. It ruled that the terms of the counter-bond were explicit in securing any judgment UPPC might obtain, regardless of the means of that judgment. The Court rejected the argument that Acropolis had been released or that its liability had been novated merely due to its absence from the agreement among the other parties.
Implications of the Three-Day Notice Rule
The Supreme Court noted that although the three-day notice rule is not inflexible—allowing for substantial compliance—Acropolis was duly notified of the hearings
...continue readingCase Syllabus (G.R. No. 171750)
Background and Procedural History
- Case involves a petition for review under Rule 45 to annul the Court of Appeals' November 17, 2005 Decision and March 2, 2006 Resolution.
- The original civil case was filed by United Pulp and Paper Co., Inc. (UPPC) on May 14, 2002 against Unibox Packaging Corporation (Unibox) and Vicente Ortega for the collection of P42,844,353.14.
- UPPC sought a Writ of Preliminary Attachment against Unibox and Ortega’s properties fearing insolvency and fraudulent asset transfer.
- On August 29, 2002, RTC issued the writ of attachment after UPPC posted a bond equivalent to its claim amount.
- Following attachment, Unibox and Ortega filed a Motion for Discharge of Attachment and offered to file a counter-bond of equal amount.
- RTC allowed the discharge of attachment subject to posting of the counter-bond, which Acropolis Central Guaranty Corporation (formerly Philippine Pryce Assurance Corp.) issued on November 21, 2002.
Contentions Raised by Parties
- UPPC contested Acropolis’ counter-bond on grounds of Acropolis’ questionable licensing status, requesting its discharge and reinstatement of attachment.
- RTC initially denied UPPC's motion to discharge the counter-bond and approved the bond issued by Acropolis.
- A compromise agreement was later executed among UPPC, Unibox, and Ortega acknowledging the obligation of P35,089,544.00, which the trial court approved.
- Following breach of payment terms, UPPC secured a writ of execution against Unibox and Ortega but found them insolvent or unresponsive to garnishment.
- UPPC moved to oblige Acropolis, as surety on the counter-bond, to pay the unpaid judgment balance, which RTC granted on November 30, 2004.
- Acropolis filed a motion for reconsideration arguing lack of demand notice and that its obligation was novated by the compromise agreement; the motion was denied as untimely.
- Acropolis then petitioned the Court of Appeals (CA), which reversed the RTC and absolved Acropolis from liability.
Issues Presented
- Whether UPPC complied with the requirements of demand and notice to hold Acropolis liable under the counter-bond.
- Whether the compromise agreement entered by UPPC, Unibox, and Ortega effected a novation that released Acropolis from ...continue reading