SECOND DIVISION
G.R. No. 216566, February 17, 2016
MAGELLAN AEROSPACE CORPORATION, Petitioner, v. PHILIPPINE AIR FORCE, Respondent.
D E C I S I O N
MENDOZA, J.:
In this petition1 for review on certiorari under Rule 45 of the Rules of Court, petitioner Magellan Aerospace Corporation (MAC) seeks the review of the November 18, 2013 Decision2 and January 26, 2015 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 96589, insofar as they sustained the February 14, 2011 Order4 of the Regional Trial Court, Branch 211, Mandaluyong City (RTC), in dismissing the complaint5 filed by MAC against the respondent, Philippine Air Force (PAF).
The Antecedents
On September 18, 2008, PAF contracted Chervin Enterprises, Inc. (Chervin) for the overhaul of two T76 aircraft engines in an agreement denominated as "Contract for the Procurement of Services and Overhaul of Two (2) OV10 Engines."6 Due to its lack of technical capability to effect the repair and overhaul required by PAF, Chervin commissioned MAC to do the work for US$364,577.00. MAC, in turn, outsourced the overhaul service from another subcontractor, National Flight Services, Inc. (NFSI). Eventually, the engines were overhauled and delivered to the PAF. Satisfied with the service, PAF accepted the overhauled engines.7
On December 15, 2008, MAC demanded from Chervin the payment of US$264,577.00 representing the balance of the contract price. In a letter to the Trade Commission of the Canadian Embassy, dated December 21, 2009, PAF confirmed that it had already released to Chervin the amount of P23,760,000.00, on November 7, 2008, as partial payment for the overhaul service, and that it withheld the amount of P2,376,000.00 as retention fund.8
Notwithstanding the release of funds to Chervin, MAC was not paid for the services rendered despite several demands. Unpaid, MAC demanded from PAF the release of the retained amount. In a letter, dated March 3, 2010, however, PAF rejected the demand and informed MAC that the amount could not be released as it was being held in trust for Chervin.9
On July 6, 2010, MAC filed a complaint10 for sum of money before the RTC against Chervin together with its Managing Director, Elvi T. Sosing (Sosing), and the PAF. It prayed that Chervin be ordered to pay the amount of US$264,577.00, plus 12% legal interest from January 15, 2009 until full payment; that in the event of failure of Chervin to pay the amount claimed, PAF be ordered to pay the said amount with interest and to release the retained amount of P2,376,000.00 plus attorneys fees and litigation expenses amounting to P500,000.00; and that the defendants pay the costs of suit. MAC alleged that Chervin merely acted as an agent of PAF.
On August 24, 2010, PAF moved to dismiss the complaint averring that its contract with Chervin was one for repair and overhaul and not for agency; that it was never privy to any contract between Chervin and MAC; and that it already paid Chervin on January 22, 2009, and on July 13, 2010 in full settlement of its obligations.11
Chervin also asked the RTC to dismiss the complaint against them asserting that MAC had no capacity to sue because of its status as a nonresident doing business in the Philippines without the required license, and that no disclosure was made that it was suing on an isolated transaction which would mean that the real party-in-interest was not MAC, but NFSI.12
On February 14, 2011, the RTC granted both motions to dismiss and ordered the dismissal of the complaint filed by MAC. The decretal portion of the said order reads:
WHEREFORE, finding defendants CHERVIN ENTERPRISES, INC. AND ELVI T. SOSING, and public defendant PHILIPPINE AIR FORCE'S motions to be impressed with merit, the same are hereby GRANTED.
SO ORDERED.13ChanRoblesVirtualawlibrary
We PARTIALLY GRANT the appeal, and REVERSE the Order dated 14 February 2011 of the Regional Trial Court, Branch 211, Mandaluyong City, insofar as it dismissed the Complaint against defendants-appellees Chervin Enterprises, Inc., and Elvi T. Sosing. We REMAND the case to the RTC for the continuation of proceedings against said defendants-appellees.
IT IS SO ORDERED.14ChanRoblesVirtualawlibrary
GROUNDS IN SUPPORT OF THE PETITION
- THE COURT OF APPEALS ERRED IN RULING THAT THE COMPLAINT DOES NOT STATE A CAUSE OF ACTION AGAINST RESPONDENT PAF, WHEN THE COMPLAINT CLEARLY AND SUFFICIENTLY ALLEGED ULTIMATE FACTS THAT WILL SHOW AND SUPPORT SUCH CAUSE OF ACTION.
- THE COURT OF APPEALS DECIDED IN A MANNER CONTRARY TO LEGAL PRECEDENT WHEN IT RULED THAT THERE WAS NO AGENCY RELATIONSHIP BETWEEN RESPONDENT PAF AND CHERVIN/SOSING, AND DISMISSED THE COMPLAINT BASED ON FAILURE TO STATE A CAUSE OF ACTION.
- THE COURT OF APPEALS DECIDED IN A MANNER CONTRARY TO LAW AND LEGAL PRECEDENT WHEN IT FAILED TO CONSIDER THAT RESPONDENT PAF'S MOTION TO DISMISS VIOLATED THE MANDATORY RULE ON NOTICE FOR MOTIONS AND SHOULD NOT HAVE BEEN TAKEN COGNIZANCE BY THE RTC IN THE FIRST PLACE.15
5. On or about 18 September 2008, defendant PAF contracted defendant Chervin for the overhaul of two (2) T76 aircraft engines, with serial numbers GE-00307 and GE-00039, respectively.
6. Defendant Chervin did not and does not have the capacity, technical skilled personnel or tools to directly perform the overhaul of aircraft engines. In order to perform the overhaul services, defendant Chervin and its Managing Director/Proprietor, defendant Sosing, acting for and on behalf or for the benefit of defendant PAF, commissioned plaintiff to perform the services and to overhaul the subject aircraft engines for the price of US$364,577.00.xxx
10. Meanwhile, on or about 7 November 2008, defendant PAF released the amount of Twenty Three Million Seven Hundred Sixty Thousand Pesos (£23,760,000.00) to its agents, defendants Chervin and Sosing, as payment of 90% of the total price of the overhaul services. Defendant PAF retained a 10% retention fund in the amount of Two Million Three Hundred Seventy Six Thousand Pesos (P2,376,000.00). A copy of defendant PAF's letter dated 21 December 2009 to Trade Commissioner of the Canadian Embassy, affirming the PAF's release and retention of the aforestated sums of money, is attached hereto as Annex "I".
11. However, notwithstanding defendant PAF's release of funds covering 90% payment for the repair of the subject aircraft engines, defendant PAF's agents - defendants Chervin and Sosing - did not pay plaintiff for the services rendered, leaving an indebtedness to plaintiff in the amount of Two Hundred Sixty Four Thousand Five Hundred Seventy Seven US Dollars (US$264,577.00).xxx
18. Meanwhile, plaintiff also sent to defendant PAF - as the principal of defendants Chervin and Sosing, and the beneficiary of plaintiffs overhaul and repair services which were commissioned by defendants Chervin and Sosing for and on its behalf - a demand letter dated 26 January 2010, demanding the release of the 10% retention amount of Two Million Three Hundred Seventy Six Thousand Pesos (P2,376,000.00) directly to plaintiff, as partial payment of the amount owed to it. A copy of plaintiffs demand letter to defendant PAF is attached hereto as Annex "M".
19. However, in a reply letter dated 3 March 2010, defendant PAF rejected plaintiffs demand, alleging that 'the amount of retention money (P2,376,000.00) withheld by the PAF is kept in trust for Chervin Enterprises who is the owner thereof. A copy of defendant PAF's reply letter dated 3 March 2010 is attached hereto as Annex "N".
20. As defendants Chervin's and Sosing's principal, defendant PAF must comply with all the obligations which its agents, defendants Chervin and Sosing, may have contracted within the scope of their authority (Article 1910, Civil Code of the Philippines). These obligations include paying plaintiff in full for the overhaul and repair services performed on defendant PAF's aircraft engines, which services were commissioned by defendants Chervin and Sosing for and on behalf of defendant PAF.
21. Hence, as the principal of defendants Chervin and Sosing, and the beneficiary of plaintiffs overhaul and repair services, defendant PAF must be made answerable for defendants Chervin's and Sosing's failure to pay plaintiff. Therefore, as an alternative cause of action in the event that the First Cause of Action is not and/or cannot be fully satisfied by defendants Chervin and Sosing, defendant PAF must be held liable for the outstanding amount of Two Hundred Sixty Four Thousand Five Hundred Seventy Seven US Dollars (US$264,577.00), plus 12% legal interest thereon from 15 January 2009 until full payment is received.25ChanRoblesVirtualawlibrary
In Somera Vda. De Navarro v. Navarro, the Court held that there was substantial compliance of the rule on notice of motions even if the first notice was irregular because no prejudice was caused the adverse party since the motion was not considered and resolved until after several postponements of which the parties were duly notified.
Likewise, in Jehan Shipping Corporation v. National Food Authority, the Court held that despite the lack of notice of hearing in a motion for reconsideration, there was substantial compliance with the requirements of due process where the adverse party actually had the opportunity to be heard and had filed pleadings in opposition to the motion. The Court held:
chanRoblesvirtualLawlibraryThis Court has indeed held time and again, that under Sections 4 and 5 of Rule 15 of the Rules of Court, mandatory is the requirement in a motion, which is rendered defective by failure to comply with the requirement. As a rule, a motion without a notice of hearing is considered pro forma and does not affect the reglementary period for the appeal or the filing of the requisite pleading.32
Generally, a supplier may be allowed to subcontract a portion of the contract or project. However, the supplier should not be allowed to subcontract a material or significant portion of the contract or project, which portion must not exceed twenty percent (20%) of the total project cost. The bidding documents must specify what are considered as significant/material component(s) of the project. All subcontracting arrangements must be disclosed at the time of bidding, and subcontractors must be identified in the bid submitted by the supplier. Any subcontracting arrangements made during project implementation and not disclosed at the time of the bidding shall not be allowed. The subcontracting arrangement shall not relieve the supplier of any liability or obligation under the contract. Moreover, subcontractors are obliged to comply with the provisions of the contract and shall be jointly and severally liable with the principal supplier, in case of breach thereof, in so far as the portion of the contract subcontracted to it is concerned. Subcontractors are also bound by the same nationality requirement that applies to the principal suppliers.34[Emphases Supplied]
Endnotes:
1Rollo, pp. 9-31.
2 Id. at 37-48. Penned by Associate Justice Nina G. Antonio-Valenzuela, with Associate Justices Isaias P. Dicdican and Michael P. Elbinias, concurring.
3 Id. at 65-66. Penned by Associate Justice Nina G. Antonio-Valenzuela, with Associate Justices Isaias P. Dicdican and Amy C. Lazaro-Javier, concurring.
4 Id. at 235-242. Penned by Presiding Judge Ofelia L. Calo.
5 Id. at 73-88.
6 Id. at 207-217.
7 Id. at 38.
8 Id. at 79.
9 Id. at 38.
10 Id. at 73-88.
11 Id. at 39.
12 Id.
13 Id. at 242.
14 Id. at 47.
15 Id. at 17.
16Soloil Inc. v. Philippine Coconut Authority, 642 Phil. 337 (2010). citing Section 2, Rule 2 of the Rules of Court.
17Philippine Daily Inquirer v. Hon. Alameda, 573 Phil. 338, 345 (2008).
18 Spouses Noynay v. Citihomes Builder and Development, Inc., G.R. No. 204160, September 22, 2014, 735 SCRA 708, citing Fluor Daniel Inc. v. KB. Villarosa Partners Co., Ltd., 555 Phil. 295, 301 (2007), citing further Alberto v. Court of Appeals, 393 Phil. 253, 268 (2000).
19 The Rules of Court, Rule 16, Section 1. Grounds. — Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds:
(a) That the court has no jurisdiction over the person of the defending party;
(b) That the court has no jurisdiction over the subject matter of the claim;
(c) That venue is improperly laid;
(d) That the plaintiff has no legal capacity to sue;
(e) That there is another action pending between the same parties for the same cause;
(f) That the cause of action is barred by a prior judgment or by the statute of limitations;
(g) That the pleading asserting the claim states no cause of action;
(h) That the claim or demand set forth in the plaintiffs pleading has been paid, waived, abandoned, or otherwise extinguished;
(i) That the claim on which the action is founded is enforceable under the provisions of the statute of frauds; and
(j) That a condition precedent for filing the claim has not been complied with.(Emphasis supplied)
20Twombly v. Bell Atl. Corp., 425 F.3d 99, 106 (2d Cir. 2005).
21Heirs of Marcelo Sotto v. Palicto, G.R. No. 159691, February 17, 2014, 716 SCRA 175, 183-184.
22Ulpiano Balo, CA, 508 Phil. 224, 231 (2005), citing Ventura v. Bernabe, 148 Phil. 610 (1971), cited in Dabuco v. Court of Appeals, 379 Phil. 939 (2000).
23Jan-Dec Construction Corporation v. CA, 517 Phil. 96, 108 (2006), citing Vda. de Daffon v. Court of Appeals, 436 Phil. 233, 239 (2002). judiciary/supreme_court/jurisprudence/2002/aug2002/129017.htm
24 See Unicapital, Inc. v. Coming, Jr., G.R. Nos. 175277 and 175285, September 11, 2013, 705 SCRA 511, 526; citations omitted.cralawred
25 See Petition, rollo, pp. 18-20.
26 Black's Law Dictionary, Fourth Ed., citing McDuffie v. California Tehama Land Corporation, 138 Cal App. 245, 32 P.2d 385, 386.cralawred
27 See Abacan, Jr. v. Northwestern University, Inc., 495 Phil. 123, 133 (2005).
28 The Rules of Court, Rule 8, Section 1.
29Saint Mary of the Woods School, Inc. v. Office of the Registry of Deeds of Makati City, 596 Phil. 778, 804 (2009).
30Cabrera v. Ng, G.R. No. 201601, March 12, 2014, citing Jehan Shipping Corporation v. National Food Authority, 514 Phil. 166, 173 (2005).
31 680 Phil. 305 (2012), citing Fausto R, Preysler, Jr. v. Manila South Coast Development Corporation, 635 Phil. 598, 604-605 (2010).
32Anama v. Court of Appeals, supra note 31, at 317-318.
33Rollo, pp. 223-234.