PROPUESTAS DE MEJORA PARA EL CURSO ACADÉMICO 2016-17

FILIPINAS (PRE-FAB BLDG.) SYSTEMS, INC. v MRT DEVELOPMENT CORPORATION; COURT OF APPEALS; CONSTRUCTION INDUSTRY ARBITRATION COMMISSION; and VICTOR P. LAZATIN,

ELISEO I. EVANGELISTA, and JACINTO M. BUTALID G.R. Nos. 167829-30, November 13, 2007, Velasco Jr. J.

While the general rule is one cannot be bound to a contract entered into by another person, there are exceptions, such as when the contracting person was authorized to enter a contract on behalf of another, or when such contract was ratified.

Facts:

Filipinas Systems Inc (FSI), herein petitioner, is a contractor who submitted its bid to the Metro Rail Transit Development Corporation (MRTDC) herein respondent, for the construction of the North Triangle Project which is poised to be a major hub of the light rail transit line system along EDSA. Verily MRTDC engaged Parsons Interpro JV (PIJV) to act as the Project Management Team to supervise the project. It also engaged the services of one David Sampson (Sampson) who was designated as the Area Construction Manager tasked to monitor the day-to-day activities on the construction site. FSI won the bidding for the construction of the aforementioned project and was thus awarded with a Notice of Award. The Notice of Award provides that in case of early completion of construction by FSI, it shall be entitled to an early completion bonus. Thereafter, construction commenced. The deadline given to FSI was until January 14, 1999 however FSI was only able to finish construction on May 17, 1999. On October 8, 1999 FSI issued a letter to Sampson requesting an extension of time and verily move the project deadline. This was approved by Sampson. Thus, the deadline was moved from January 14, 1999 to August 2, 1999. Because of the change in deadline, FSI sought its early completion bonus from MRTDC. MRTDC refused to pay FSI the bonus. This prompted FSI to file its claim with the CIAC.

The CIAC held that MRTDC is liable for the bonus in favor of FSI. On appeal, the CA reversed the decision of the CIAC. Now, FSI comes before the Supreme Court assailing the decision of the CA. In its defense, MRTDC avers that Sampson had no authority as Area Construction Manager to authorize the extension of time for the deadline of the project, and therefore the extension was without legal effect. Hence this petition.

Issue:

Whether or not MRTDC is liable for the early completion bonus in favor of FSI.

Ruling:

Yes, MRTDC is liable. Article 1317 of the New Civil Code provides that a contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party.

David Sampson was clearly authorized to issue change orders as he was in charge of the daily activities of the project. David Sampson was the representative or agent of PIJV who was engaged as the Project Manager by MRTDC. Being clearly authorized, the acts of David Sampson shall bind MRTDC and therefore, it shall be held liable for the early completion bonus.

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ADRIATICO CONSORTIUM, INC., et al. v. LAND BANK OF THE PHILIPPINES G.R. No. 187838 December 23, 2009, Velasco, Jr., J.

In the construction or interpretation of a compromise agreement, the intention of the parties is to be ascertained from the contract and effect should be given to that intention. A contract must be interpreted from the language of the contract itself according to its plain and ordinary meaning.

Facts:

Respondent Land Bank approved the application of William Siy, the former president of ACI, for a credit line of P200M. A Mortgage Trust Indenture (MTI) was created to secure the loan. The MTI was amended to include J.V. Williams Realty and Development Corporation (JVWRDC), a majority-owned corporation of Siy, as borrower. It was later discovered that Siy did not remit ACI’s payments of the loan. Land Bank obliged petitioners ACI and PRC, with Benito Cu-Uy-Gam, ACI’s new president, to pay the maturing obligations of JVWRDC. Petitioners then filed a Petition for Declaration of Nullity, Specific Performance, Injunction, and Damages with Prayer for a TRO against Land Bank and Siy with the RTC of Manila.

The parties entered into a Partial Compromise Agreement wherein ACI agreed, among others, to pay and actually paid to Land Bank the amount of loan plus interests. The said Agreement was approved by the RTC. Land Bank, however, informed ACI that the JVWRDC loans were included in a sealed-bid public auction of Land Bank Non-Performing Assets under the Special Purpose Vehicle Act. Petitioners filed a Motion for Execution before the RTC stating that Land Bank violated Section 5 of the Partial Compromise Agreement, which provides that the parties agree “to suspend all actions

against each other x x x”. The RTC granted petitioners’ Motions and issued the corresponding Writ of

Execution and Writ of Preliminary Injunction. Land Bank filed a Petition for Certiorari and Prohibition with Prayer for TRO and/or Preliminary Injunction before the CA arguing that the sale of the MPCs is not prohibited by the Agreement. The CA granted the petition and found that the compromise agreement sought to prohibit only legal actions.

Issue:

Whether or not the act of Land Bank in selling the receivables violated the Partial Compromise Agreement, specifically Section 5.

Ruling:

YES. A compromise is a contract whereby the parties, by making reciprocal concessions,

avoid a litigation or put an end to one already commenced. In the construction or interpretation of a compromise agreement, the Court is guided by the fundamental and cardinal rule that the intention of the parties is to be ascertained from the contract and effect should be given to that intention. Likewise, it must be construed so as to give effect to all the provisions of the contract. Evidently, had the parties intended to limit the application of Sec. 5 to legal actions only, they would have written a specific word or phrase to pertain to legal actions and not just the word “actions” alone.

A contract must be interpreted from the language of the contract itself according to its plain and ordinary meaning. In the case at bar, the word “action” should be defined according to its plain and ordinary meaning, i.e., as the process of doing something; conduct or behavior; a thing done. It is not limited to actions before a court or a judicial proceeding. Therefore, the only logical conclusion

40 | P a g e that can be derived from the use of the word “action” in Sec. 5 is that the parties intentionally used it in its plain and ordinary sense and did not limit it to mean any specific legal term.

Furthermore, Sec. 5 of the Partial Compromise Agreement speaks of cooperation between the parties to determine the person or persons ultimately liable. By selling the receivables, Land Bank did not cooperate with petitioners. Thus, it can be safely concluded that the act of Land Bank is a clear and patent violation of Sec. 5 of the Partial Compromise Agreement.

ALEXANDER S. GAISANO v. BENJAMIN C. AKOL G.R. No. 193840, June 15, 2011, Velasco, Jr., J.

A compromise agreement is a contract whereby the parties make reciprocal concessions, avoid litigation, or put an end to one already commenced. Its validity depends on its fulfillment of the requisites and principles of contracts dictated by law; its terms and conditions being not contrary to law, morals, good customs, public policy and public order.

Facts:

Akol filed a complaint for recovery of shares of stock against Gaisano. The RTC dismissed the complaint while the CA reversed the decision of the RTC. While the case was pending with the SC, the parties jointly filed an Agreement to Terminate Action duly signed by them and their respective counsels.

Issue:

Whether or not the agreement filed by the parties allows to court to validly render judgment based on said agreement.

Ruling:

Yes. A compromise agreement is a contract whereby the parties make reciprocal concessions, avoid litigation, or put an end to one already commenced. Its validity depends on its fulfillment of the requisites and principles of contracts dictated by law; its terms and conditions being not contrary to law, morals, good customs, public policy and public order.

A scrutiny of the aforequoted agreement reveals it is a compromise agreement sanctioned under Article 2028 of the Civil Code. Its terms and conditions are not contrary to law, morals, good customs, public policy and public order. Hence, judgment can be validly rendered thereon.

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LOAN

SPOUSES TAGUMPAY N. ALBOS and AIDA C. ALBOS v. SPOUSES NESTOR M. EMBISAN and ILUMINADA A. EMBISAN, DEPUTY SHERIFF MARINO V. CACHERO, and the REGISTER OF DEEDS

OF QUEZON CITY

G.R. No. 210831. November 26, 2014. THIRD DIVISION. Velasco, JR., J.

Article 1956 provides that “No interest shall be due unless it has been expressly stipulated in writing.”

Facts:

Spouses Albos entered a loan agreement with Spouses Embisan in the amount P84,000.00 payable within 90 days with a monthly interest rate of 5% secured by a real estate mortgage. Due to the repeated failure of the petitioners to settle their obligation and their subsequent request for extensions, Spouses Embisan, imposed a condition that the monthly 5% interest from then on will be compounded. However this agreement was not reduced into writing. With the interest being compounded, the obligation of the petitioner ballooned to P296,658.70. Despite the extension given, Spouses Albos failed to pay their loan. This prompted Spouses Embisan to extra-judicially foreclose the property. Spouses Embisan emerged as the highest bidder and were issued a Sheriff’s Certificate of Sale. Due to failure to redeem the property, Spouses Emisan executed an Affidavit of Consolidation over the property and the property was later registered in their name.

Issue:

Whether or not the compounding of interest is valid.

Ruling:

NO. The compounding of interest should be in writing. As mandated by the foregoing

provision, payment of monetary interest shall be due only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for such payment was reduced in writing. Thus, the collection of interest without any stipulation thereof in writing is prohibited by law.

Given the circumstances, the first requirement––that there be an express stipulation for the payment of interest––is not sufficiently complied with, for purposes of imposing compounded interest on the loan. The requirement does not only entail reducing in writing the interest rate to be earned but also the manner of earning the same, if it is to be compounded. Failure to specify the manner of earning interest, however, shall not automatically render the stipulation imposing the interest rate void since it is readily apparent from the contract itself that the parties herein agreed for the loan to bear interest. Instead, in default of any stipulation on the manner of earning interest, simple interest shall accrue.

Settled is the rule that ambiguities in a contract are interpreted against the party that caused the ambiguity. Any ambiguity in a contract whose terms are susceptible of different interpretations must be read against the party who drafted it. In the extant case, respondent spouses, having imposed, unilaterally at that, the compounded interest rate, had the correlative duty of clarifying and reducing in writing how the said interest shall be earned. Having failed to do so, the silence of the agreement on the manner of earning interest is a valid argument for prohibiting them from charging interest at a compounded rate.