[ G.R. NO. 163981. August 12, 2005 ] 504 Phil. 259
SECOND DIVISION
[ G.R. NO. 163981. August 12, 2005 ]
CONSTRUCTION & DEVELOPMENT CORPORATION OF THE PHILIPPINES (NOW PHILIPPINE NATIONAL CONSTRUCTION CORPORATION), PETITIONER, VS. RODOLFO M. CUENCA AND MALAYAN INSURANCE CO., INC., RESPONDENTS. D E C I S I O N
CALLEJO, SR., J.:
Before this Court is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 44660 and its Resolution denying a motion for reconsideration thereof.
The Backdrop
Ultra International Trading Corporation (UITC) applied for a surety bond from Malayan Insurance Co., Inc. (MICI), to guarantee its credits, indebtedness, obligations and liabilities of any kind to Goodyear Tire and Rubber Company of the Philippines (Goodyear). MICI approved the application and issued MICO Bond No. 65734[2] for an amount not exceeding P600,000.00. The surety bond was valid for 12 months, and was renewed several times, the last time being on May 15, 1983.[3] To protect MICI’s interests, UITC, Edilberto Cuenca, and Rodolfo Cuenca, herein respondent, executed an Indemnity Agreement[4] in favor of MICI. Edilberto was then the President, while Rodolfo was a member of the Board of Directors of UITC. Edilberto signed the indemnity agreement in his official and personal capacity, while Rodolfo signed in his personal capacity only. In the said agreement, UITC, Edilberto and Rodolfo bound themselves jointly and severally to indemnify MICI of any payment it would make under the surety bond. On February 18, 1983, Goodyear sent a letter[5] to MICI informing it of UITC’s default on its obligation. In the said letter, Goodyear requested MICI to pay P600,000.00 under the surety bond. MICI sent several demand letters to UITC, Edilberto and Rodolfo, requiring them to immediately settle Goodyear’s claim.[6] UITC, Edilberto and Rodolfo failed to settle the account with Goodyear. Thus, on April 25, 1983, MICI paid Goodyear P600,000.00.[7] On May 3, 1983, MICI sent a demand letter to UITC, Edilberto and Rodolfo for reimbursement of the payment it made to Goodyear, plus legal interest.[8] UITC replied that Construction & Development Corporation of the Philippines (CDCP), now Philippine National Construction Corporation (PNCC), had initiated a complete review of UITC’s financial plans to enable it to pay its creditors, like MICI.[9] UITC was a subsidiary of petitioner PNCC,[10] with the latter owning around 78% of the former’s shares of stock.[11] UITC requested MICI to delay the filing of any suit against it, to give it time to work out an acceptable repayment plan.[12] MICI agreed and gave UITC until May 20, 1983 to come up with an offer.[13] However, UITC, Edilberto and Rodolfo still failed to pay MICI. On July 1, 1983, MICI filed a Complaint[14] for sum of money against UITC, Edilberto and Rodolfo, praying for indemnity of the amount it paid to Goodyear, plus interest per annum compounded quarterly from April 25, 1983 until fully paid, and 20% of the amount involved as attorney’s fees and costs of the suit. On July 23, 1983, UITC wrote MICI proposing the following: Immediate payment of P150,000.00. Balance payable P50,000.00 per month until the obligation is fully liquidated. Interest and penalty charges are to be waived.[15] In the meantime, Rodolfo filed motion for leave to file a third-party complaint which the trial court granted.[16] The third-party complaint[17] against CDCP alleged that it had assumed Rodolfo’s liability under the indemnity agreement as indicated in a board resolution. In support of this allegation, he presented in evidence a certification of Antonio Roque, Assistant Corporate Secretary of CDCP, attesting to the correctness of an excerpt from the minutes of the Board of Directors’ meeting of January 10, 1978, which reads:
GUARANTEE MADE BY CDCP REPRESENTATIVES IN OTHER CORPORATIONS