Gilat Satellite V United Cocunot Planters - 6
Gilat Satellite V United Cocunot Planters - 6
Gilat Satellite V United Cocunot Planters - 6
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* FIRST DIVISION.
727
728
Same; Same; Delay arises from the time the obligee judicially
or extrajudicially demands from the obligor the performance of the
obligation, and the latter fails to comply.—Delay arises from the
time the obligee judicially or extrajudicially demands from the
obligor the performance of the obligation, and the latter fails to
comply. Delay, as used in Article 1169, is synonymous with
default or mora, which means delay in the fulfillment of
obligations. It is the nonfulfillment of an obligation with respect
to time. In order for the debtor (in this case, the surety) to be in
default, it is necessary that the following requisites be present: (1)
that the obligation be demandable and already liquidated; (2) that
the debtor delays performance; and (3) that the creditor requires
the performance judicially or extrajudicially.
Same; Same; The settled rule is that where there has been an
extrajudicial demand before an action for performance was filed,
interest on the amount due begins to run, not from the date of the
filing of the complaint, but from the date of that extrajudicial
demand.—As to the issue of when interest must accrue, our Civil
Code is explicit in stating that it accrues from the time judicial or
extrajudicial demand is made on the surety. This ruling is in
accordance with the provisions of Article 1169 of the Civil Code
and of the settled rule that where there has been an extrajudicial
demand before an action for performance was filed, interest on
the amount due begins to run, not from the date of the filing of
the complaint, but from the date of that extrajudicial demand.
Considering that respondent failed to pay its obligation on 30 May
2000 in accordance with the Purchase Agreement, and that the
extrajudicial demand of petitioner was sent on 5 June 2000, we
agree with the latter that interest must start to run from the time
petitioner sent its first demand letter (5 June 2000), because the
obligation was already due and demandable at that time.
729
SERENO, CJ.:
This is an appeal via a Petition for Review on
Certiorari[1] filed 6 November 2009 assailing the
Decision[2] and Resolution[3] of the Court of Appeals (CA)
in C.A.-G.R. CV No. 89263, which reversed the Decision[4]
of the Regional Trial Court (RTC), Branch 141, Makati City
in Civil Case No. 02-461, ordering respondent to pay
petitioner a sum of money.
The antecedent facts, as culled from the CA, are as
follows:
On September 15, 1999, One Virtual placed with GILAT
a purchase order for various telecommunications
equipment (sic), accessories, spares, services and software,
at a total purchase price of Two Million One Hundred
Twenty Eight Thousand Two Hundred Fifty Dollars
(US$2,128,250.00). Of the said purchase price for the goods
delivered, One Virtual promised to pay a portion thereof
totalling US$1.2 Million in accordance with the payment
schedule dated 22 November 1999. To ensure the prompt
payment of this amount, it obtained defendant UCPB
General Insurance Co., Inc.’s surety bond dated 3
December 1999, in favor of GILAT.
During the period between [sic] September 1999 and
June 2000, GILAT shipped and delivered to One Virtual
the purchased products and equipment, as evidenced by
airway bills/Bill of Lading (Exhibits “F,” “F-1” to “F-8’’).
All of the equipment (including the
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[1] Rollo, pp. 45-77.
[2] Id., at pp. 12-21; CA Decision dated 6 October 2008, penned by
Associate Justice Magdangal M. De Leon and concurred in by Associate
Justices Josefina Guevara-Salonga and Ramon R. Garcia.
[3] Id., at pp. 23-24; CA Resolution dated 16 September 2009.
[4] Id., at pp. 151-156; RTC Decision dated 28 December 2006 penned
by Pairing Judge Dina Pestaño Teves.
730
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[5] Id., at pp. 14-15.
[6] Id., at pp. 100-104.
[7] Supra note 4.
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In so ruling, the RTC reasoned that there is “no dispute
that plaintiff [petitioner] delivered all the subject
equipments [sic] and the same was installed. Even with the
delivery and installation made, One Virtual failed to pay
any of the payments agreed upon. Demand
notwithstanding, defendant failed and refused and
continued to fail and refused to settle the obligation.”[8]
Considering that its liability was indeed that of a surety, as
“spelled out in the Surety Bond executed by and between
One Virtual as Principal, UCPB as Surety and GILAT as
Creditor/Bond Obligee,”[9] respondent agreed and bound
itself to pay in accordance with the Payment Milestones.
This obligation was not made dependent on any condition
outside the terms and conditions of the Surety Bond and
Payment Milestones.[10]
Insofar as the interests were concerned, the RTC denied
petitioner’s claim on the premise that while a surety can be
held liable for interest even if it becomes more onerous
than the principal obligation, the surety shall only accrue
when the delay or refusal to pay the principal obligation is
without any justifiable cause.[11] Here, respondent failed to
pay its surety obligation because of the advice of its
principal (One Virtual) not to pay.[12] The RTC then
obligated respondent to pay peti-
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[8] Id., at p. 155.
[9] Id., at p. 154.
[10] Id., at p. 155.
[11] Id., at p. 156.
[12] Id.
732
The CA ruled that in “enforcing a surety contract, the
‘complementary-contracts-construed-together’ doctrine
finds application.” According to this doctrine, the accessory
contract must be construed with the principal agreement.
[15] In this case, the appellate court considered the
Purchase Agreement entered into between petitioner and
One Virtual as the principal contract,[16] whose
stipulations are also binding on the parties to the
suretyship.[17] Bearing in mind the arbitration clause
contained in the Purchase Agreement[18] and pursuant
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[13] Id., at pp. 176-191.
[14] Supra note 2.
[15] Rollo, p. 90.
[16] Id.
[17] Id., at p. 91.
[18] Id., at p. 92. The arbitration clause reads:
“20.1. In the event of a dispute between Buyer and Seller arising out
of, or relating to this Agreement, its interpretation or performance
hereunder, the parties shall exert their best efforts to resolve the dispute
amicably through negotiations.
20.2. In the event that a dispute cannot be resolved amicably by the
parties through negotiations within sixty (60) days of the com-
733
Issues
From the foregoing, we reduce the issues to the
following:
1. Whether or not the CA erred in dismissing the case
and ordering petitioner and One Virtual to arbitrate;
and
2. Whether or not petitioner is entitled to legal interest
due to the delay in the fulfilment by respondent of
its obligation under the Suretyship Agreement.
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mencement of such negotiations, the dispute shall be submitted to
arbitration in accordance with the laws of the United States, with such
arbitration to be held in New York, United States. Each party shall select
one arbitrator and then those two arbitrators shall in good faith select a
third arbitrator. The arbitration shall be conducted in English. Any
decision resulting from such arbitration shall be final and binding upon
the parties to this Agreement and on any other person participating in the
arbitration. Judgment upon the award may be entered in any court having
jurisdiction thereof.”
[19] Id., at p. 92.
[20] Supra note 3.
[21] Rollo, pp. 400-421.
[22] Id., at pp. 433-448.
734
735
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[29] Id., at p. 412.
[30] Id., at p. 413.
[31] Asset Builders Corporation v. Stronghold Insurance Co., Inc., G.R.
No. 187116, 18 October 2010, 633 SCRA 370, citing Security Pacific
Assurance Corporation v. Hon. Tria-Infante, 505 Phil. 609, 620; 468 SCRA
526, 536 (2005).
[32] Id., citing Stronghold Insurance Company, Inc. v. Republic-Asahi
Glass Corporation, 525 Phil. 270; 492 SCRA 179 (2006).
[33] Totanes v. China Banking Corporation, G.R. No. 179880, 19
January 2009, 576 SCRA 323, citing Tiu Hiong Guan v. Metropolitan
Bank and Trust Company, 530 Phil. 12; 498 SCRA 246 (2006).
[34] Intra-Strata Assurance Corporation & Philippine Home Assurance
Corp. v. Republic of the Philippines, 579 Phil. 631; 557 SCRA 363 (2008),
citing 74 Am. Jur. § 35, and Manila Surety & Fidelity Co., Inc. v. Batu
Construction & Co., 101 Phil. 494 (1957).
[35] Id., citing NASSCO v. Torrento, 126 Phil. 777; 20 SCRA 427 (1967);
CIVIL CODE, Article 1216.
736
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[36] Rollo, pp. 153-155.
[37] Id., at p. 155.
[38] G.R. Nos. 158820-21, 5 June 2009, 588 SCRA 410, 422.
[39] Rollo, p. 59.
737
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[40] Gonzales v. Climax Mining Ltd., 541 Phil. 143; 512 SCRA 148
(2007). See also Manila Electric Company v. Pasay Transportation Co., 57
Phil. 600, 603 (1932).
[41] Heirs of Augusto L. Salas, Jr. v. Laperal Realty Corp., 378 Phil.
369; 320 SCRA 610 (1999), citing Civil Code, Art. 1311.
[42] “An Act to Institutionalize the Use of an Alternative Dispute
Resolution System in the Philippines and to Establish the Office for
Alternative Dispute Resolution, and for Other Purposes” or the
“Alternative Dispute Resolution Act of 2004.”
[43] Totanes v. China Banking Corporation, supra note 33.
[44] See International Finance Corporation v. Imperial Textile Mills,
Inc., 511 Phil. 591; 475 SCRA 149 (2005).
[45] Intra-Strata Assurance Corp. v. Republic, 579 Phil. 631; 557 SCRA
363 (2008), citing Manila Surety & Fidelity Co., Inc. v. Batu Construction
& Co., 101 Phil. 494 (1957).
[46] 351 Phil. 664, 686; 288 SCRA 422, 441-442 (1998), citing 74 Am.
Jur. 2d, Principal and Surety, § 68, 53.
738
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[47] Rollo, pp. 69-75.
[48] Id., at p. 156.
[49] Id.
739
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[50] Social Security System v. Moonwalk Development & Housing Corp.,
G.R. No. 73345, 7 April 1993, 221 SCRA 119.
[51] Santos Ventura Hocorma Foundation, Inc. v. Santos, 484 Phil. 447;
441 SCRA 472 (2004), citing IV Arturo M. Tolentino, Civil Code of the
Philippines, p. 101 (1987 ed.).
[52] Id.
[53] Id., citing Tolentino at p. 102.
[54] Commonwealth Insurance Corporation v. Court of Appeals, 466
Phil. 104; 421 SCRA 367 (2004), citing Republic vs. Court of Appeals and
R & B Surety and Insurance Company, Inc., 406 Phil. 745; 354 SCRA 285
(2001).
[55] Id.
[56] G.R. No. 190601, 7 February 2011, 641 SCRA 591, 596-597.
740
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[57] 516 Phil. 725; 481 SCRA 384 (2006), citing FGU Insurance Corp. v.
G.P. Sarmiento Trucking Corp., 435 Phil. 333, 341-342; 386 SCRA 312,
320 (2002).
[58] Rollo, p. 156.
741
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[59] Id., at pp. 461-481.
[60] Commonwealth Insurance Corporation v. Court of Appeals, supra
note 54, citing Tolentino, Commentaries and Jurisprudence on the Civil
Code of the Philippines, 1991 Reprint, Vol. IV, p. 103; Padilla, Civil Code
Annotated, 1987 Edition, Vol. IV, p. 61.
[61] Rollo, pp. 48, 495.
[62] G.R. No. 189871, 13 August 2013, 703 SCRA 439.
[63] G.R. No. 97412, 12 July 1994, 234 SCRA 78, 95-97.
742
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself
earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 6% per
annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.
x x x x
3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether
the case falls under paragraph 1 or paragraph 2, above, shall
be 6% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a
forbearance of credit.
Applying the above-discussed concepts and in the
absence of an agreement as to interests, we are hereby
compelled to award petitioner legal interest at the rate of
6% per annum from 5 June 2000, its first date of
extrajudicial demand, until the satisfaction of the debt in
accordance with the revised guidelines enunciated in
Nacar.
WHEREFORE, the Petition for Review on Certiorari is
hereby GRANTED. The assailed Decision and Resolution
of the Court of Appeals in C.A.-G.R. CV No. 89263 are
REVERSED. The Decision of the Regional Trial Court,
Branch 141, Makati City is REINSTATED, with
MODIFICATION insofar as the award of legal interest is
concerned. Respondent is hereby ordered to pay legal
interest at the rate of 6% per annum from 5 June 2000
until the satisfaction of its obligation under the Suretyship
Contract and Purchase Agreement.
SO ORDERED.
743