Case Digest: Bitanga v. Pyramid Construction Engineering Corporation, G.R. No. 173526, August 28, 2008

Commercial Law | When Excussion Not Required

Facts: 

• Respondent Pyramid Construction and Engineering Corporation filed a Complaint against the Benjamin Bitanga and his wife, Marilyn Bitanga for specific performance and damages, with an application for a writ of preliminary attachment.
• Pyramid Construction and Engineering Corporation entered into an agreement with Macrogen Realty, of which Benjamin Bitanga is the President, to construct the Shoppers Gold Building in Parañaque City.
• Macrogen Realty failed to settle respondent's progress billings.
• Pyramid Construction and Engineering Corporation assured Benjamin Bitanga that the outstanding account would be paid, prompting respondent to continue construction.
• Despite assurances, Macrogen Realty failed to pay the agreed installments under the Compromise Agreement, leading respondent to move for a writ of execution, which was granted by Construction Industry Arbitration Commission.
• The sheriff reported inability to locate Macrogen Realty's properties, except for a bank deposit of P20,242.33.
• Respondent demanded payment from petitioner as guarantor, but it was left unheeded.
• Marilyn filed a Motion to Dismiss, arguing she had no part in the Contract of Guaranty and Compromise Agreement.
• RTC: Denied Marilyn's Motion to Dismiss, citing Rule 3, Section 4 of the Revised Rules of Court.
• "SEC. 4. Spouses as parties. – Husband and wife shall sue or be sued jointly, except as provided by law."
• Petitioner filed an Answer, that respondent failed to exhaust all legal remedies to collect from Macrogen the amount due under the Compromise Agreement, considering that Macrogen Realty still had uncollected credits which were more than enough to pay for the same. Given these premise, petitioner could not be held liable as guarantor.
• RTC: Rendered a partial Decision ordering both defendants to pay the respondent, subject to respondent's decision on pursuing other claims.
• CA: Held Marilyn not liable based on the principle that a contract cannot be enforced against one who is not a party to it.

Issue: 

• Whether petitioner is entitled to the benefit of excussion. NO

Held:

We are not persuaded by petitioner’s arguments.

Rule 35 of the Revised Rules of Civil Procedure provides:

Section 1. Summary judgment for claimant. – A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto has been served, move with supporting affidavits, depositions or admissions for a summary judgment in his favor upon all or any part thereof.

For a summary judgment to be proper, the movant must establish two requisites: (a) there must be no genuine issue as to any material fact, except for the amount of damages; and (b) the party presenting the motion for summary judgment must be entitled to a judgment as a matter of law. Where, on the basis of the pleadings of a moving party, including documents appended thereto, no genuine issue as to a material fact exists, the burden to produce a genuine issue shifts to the opposing party. If the opposing party fails, the moving party is entitled to a summary judgment.

In a summary judgment, the crucial question is: are the issues raised by the opposing party not genuine so as to justify a summary judgment?

First off, we rule that the issue regarding the propriety of the service of a copy of the demand letter on the petitioner in his office is a sham issue. It is not a bar to the issuance of a summary judgment in respondent’s favor.

A genuine issue is an issue of fact which requires the presentation of evidence as distinguished from an issue which is a sham, fictitious, contrived or false claim. To forestall summary judgment, it is essential for the non-moving party to confirm the existence of genuine issues, as to which he has substantial, plausible and fairly arguable defense, i.e., issues of fact calling for the presentation of evidence upon which reasonable findings of fact could return a verdict for the non-moving party, although a mere scintilla of evidence in support of the party opposing summary judgment will be insufficient to preclude entry thereof.

Significantly, petitioner does not deny the receipt of the demand letter from the respondent. He merely raises a howl on the impropriety of service thereof, stating that "the address to which the said letter was sent was not his residence but the office of Macrogen Realty, thus it cannot be considered as the correct manner of conveying a letter of demand upon him in his personal capacity."

Section 6, Rule 13 of the Rules of Court states:

SEC. 6. Personal service. – Service of the papers may be made by delivering personally a copy to the party or his counsel, or by leaving it in his office with his clerk or with a person having charge thereof. If no person is found in his office, or his office is not known, or he has no office, then by leaving the copy, between the hours of eight in the morning and six in the evening, at the party’s or counsel’s residence, if known, with a person of sufficient age and discretion then residing therein.

The affidavit of Mr. Robert O. Pagdilao, messenger of respondent’s counsel states in part:

2. On 4 January 2001, Atty. Jose Vicente B. Salazar, then one of the Associates of the ACCRA Law Offices, instructed me to deliver to the office of Mr. Benjamin Bitanga a letter dated 3 January 2001, pertaining to Construction Industry Arbitration Commission (hereafter, "CIAC") Case No. 99-56, entitled "Pyramid Construction Engineering Corporation vs. Macrogen Realty Corporation."

3. As instructed, I immediately proceeded to the office of Mr. Bitanga located at the 12th Floor, Planters Development Bank Building, 314 Senator Gil Puyat Avenue, Makati City. I delivered the said letter to Ms. Dette Ramos, a person of sufficient age and discretion, who introduced herself as one of the employees of Mr. Bitanga and/or of the latter’s companies.

We emphasize that when petitioner signed the Contract of Guaranty and assumed obligation as guarantor, his address in the said contract was the same address where the demand letter was served.

 He does not deny that the said place of service, which is the office of Macrogen, was also the address that he used when he signed as guarantor in the Contract of Guaranty. Nor does he deny that this is his office address; instead, he merely insists that the person who received the letter and signed the receiving copy is not an employee of his company. Petitioner could have easily substantiated his allegation by a submission of an affidavit of the personnel manager of his office that no such person is indeed employed by petitioner in his office, but that evidence was not submitted.33 All things are presumed to have been done correctly and with due formality until the contrary is proved. This juris tantum presumption stands even against the most well-reasoned allegation pointing to some possible irregularity or anomaly.34 It is petitioner’s burden to overcome the presumption by sufficient evidence, and so far we have not seen anything in the record to support petitioner’s charges of anomaly beyond his bare allegation. Petitioner cannot now be heard to complain that there was an irregular service of the demand letter, as it does not escape our attention that petitioner himself indicated "314 Sen. Gil Puyat Avenue, Makati City" as his office address in the Contract of Guaranty.

Moreover, under Section 6, Rule 13 of the Rules of Court, there is sufficiency of service when the papers, or in this case, when the demand letter is personally delivered to the party or his counsel, or by leaving it in his office with his clerk or with a person having charge thereof, such as what was done in this case.

We have consistently expostulated that in summary judgments, the trial court can determine a genuine issue on the basis of the pleadings, admissions, documents, affidavits or counter affidavits submitted by the parties. When the facts as pleaded appear uncontested or undisputed, then there is no real or genuine issue or question as to any fact, and summary judgment is called for.35

The Court of Appeals was correct in holding that:

Here, the issue of non-receipt of the letter of demand is a sham or pretended issue, not a genuine and substantial issue. Indeed, against the positive assertion of Mr. Roberto O. Pagdilao (the private courier) in his affidavit that he delivered the subject letter to a certain Ms. Dette Ramos who introduced herself as one of the employees of [herein petitioner] Mr. Benjamin Bitanga and/or of the latter’s companies, said [petitioner] merely offered a bare denial. But bare denials, unsubstantiated by facts, which would be admissible in evidence at a hearing, are not sufficient to raise a genuine issue of fact sufficient to defeat a motion for summary judgment.36

We further affirm the findings of both the RTC and the Court of Appeals that, given the settled facts of this case, petitioner cannot avail himself of the benefit of excussion.

Under a contract of guarantee, the guarantor binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. The guarantor who pays for a debtor, in turn, must be indemnified by the latter. However, the guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor and resorted to all the legal remedies against the debtor. This is what is otherwise known as the benefit of excussion.

Article 2060 of the Civil Code reads:

Art. 2060. In order that the guarantor may make use of the benefit of excussion, he must set it up against the creditor upon the latter’s demand for payment from him, and point out to the creditor available property of the debtor within Philippine territory, sufficient to cover the amount of the deb 

The afore-quoted provision imposes a condition for the invocation of the defense of excussion. Article 2060 of the Civil Code clearly requires that in order for the guarantor to make use of the benefit of excussion, he must set it up against the creditor upon the latter’s demand for payment and point out to the creditor available property of the debtor within the Philippines sufficient to cover the amount of the debt.

It must be stressed that despite having been served a demand letter at his office, petitioner still failed to point out to the respondent properties of Macrogen Realty sufficient to cover its debt as required under Article 2060 of the Civil Code. Such failure on petitioner’s part forecloses his right to set up the defense of excussion.

Worthy of note as well is the Sheriff’s return stating that the only property of Macrogen Realty which he found was its deposit of P20,242.23 with the Planters Bank.

Article 2059(5) of the Civil Code thus finds application and precludes petitioner from interposing the defense of excussion. We quote:

Art. 2059. This excussion shall not take place:

x x x x

(5) If it may be presumed that an execution on the property of the principal debtor would not result in the satisfaction of the obligation.

As the Court of Appeals correctly ruled:

We find untenable the claim that the [herein petitioner] Benjamin Bitanga cannot be compelled to pay Pyramid because the Macrogen Realty has allegedly sufficient assets. Reason: The said [petitioner] had not genuinely controverted the return made by Sheriff Joseph F. Bisnar, who affirmed that, after exerting diligent efforts, he was not able to locate any property belonging to the Macrogen Realty, except for a bank deposit with the Planter’s Bank at Buendia, in the amount of P20,242.23. It is axiomatic that the liability of the guarantor arises when the insolvency or inability of the debtor to pay the amount of debt is proven by the return of the writ of execution that had not been unsatisfied.

WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The Decision of the Court of Appeals dated 11 April 2006 and its Resolution dated 5 July 2006 are AFFIRMED. Costs against petitioner.

SO ORDERED.