Construction & Development Corporation of the Philippines v. Cuenca
REITERATIONFacts
The Antecedents: Ultra International Trading Corporation (UITC) applied for a surety bond from Malayan Insurance Co., Inc. (MICI) to guarantee its obligations to Goodyear Tire and Rubber Company of the Philippines (Goodyear). UITC, Edilberto Cuenca, and Rodolfo Cuenca executed an Indemnity Agreement in favor of MICI, binding themselves jointly and severally to indemnify MICI for any payment made under the bond. Goodyear informed MICI of UITC's default, and MICI paid Goodyear ₱600,000.00. MICI demanded reimbursement from UITC, Edilberto, and Rodolfo, who failed to pay. UITC, a subsidiary of Construction & Development Corporation of the Philippines (CDCP), now Philippine National Construction Corporation (PNCC), requested a delay to arrange repayment. MICI agreed but UITC, Edilberto, and Rodolfo still failed to pay. Procedural History: MICI filed a complaint for sum of money against UITC, Edilberto, and Rodolfo. Rodolfo filed a third-party complaint against CDCP (PNCC), alleging that CDCP had assumed his liability under the indemnity agreement through a board resolution. The RTC held UITC and PNCC jointly and solidarily liable to MICI, dismissing the complaint against the Cuencas. UITC and PNCC appealed to the CA, which affirmed the RTC decision. The CA held UITC liable due to implied authorization and estoppel, and PNCC liable based on its assumption of liabilities of its officers in affiliated corporations. The CA denied PNCC's motion for reconsideration. The Petition: PNCC filed a petition for review on certiorari, assailing the CA's decision finding it jointly and severally liable with UITC and exempting Rodolfo Cuenca from liability, and the award of attorney's fees and costs.
Issue(s)
Whether petitioner PNCC is jointly and severally liable with UITC under the indemnity agreement. Whether respondent Rodolfo Cuenca should be held liable. Whether the award of attorney's fees and costs of suit is justified.
Ruling
The petition is GRANTED. The decision of the Court of Appeals is MODIFIED in that petitioner PNCC is absolved from any liability under the indemnity agreement. The third-party complaint against the petitioner is DISMISSED for lack of merit.
Ratio Decidendi
On the liability of PNCC: The Court held that PNCC cannot be made directly liable to MICI under the indemnity agreement simply because it is UITC's majority stockholder. The doctrine of separate corporate personality was emphasized, stating that the corporate veil may only be disregarded in specific instances of fraud or wrongdoing, which were not established here. Furthermore, PNCC was brought into the case by respondent Cuenca via a third-party complaint, not as a direct defendant by MICI. The petitioner's liability, if any, could only stem from its alleged assumption of respondent Cuenca's liability. However, the Court noted that the decision of the CA dismissing the case against respondent Cuenca had become final and executory. Since PNCC's liability was grounded on that of respondent Cuenca, and Cuenca was absolved, PNCC could not be held liable. The Court reiterated that a third-party defendant's liability is based on the third-party complaint, which is independent of the main action. When only the third-party defendant appeals, the judgment in the main case becomes final and executory. On the liability of Rodolfo Cuenca: The Court noted that the decision of the CA dismissing the complaint against Rodolfo Cuenca had become final and executory because MICI, the plaintiff in the main action, did not appeal the decision. Therefore, Rodolfo Cuenca was effectively absolved of liability. On the award of attorney's fees and costs of suit: Since the Court absolved PNCC from any liability under the indemnity agreement, the award of attorney's fees and costs of suit against it was consequently dismissed. The Court found no basis to hold PNCC liable for these amounts as it was not a party to the indemnity agreement and its liability was not established.
Main Doctrine
A third-party defendant who appeals a decision absolving them from liability in a third-party complaint, while the main case parties do not appeal, renders the judgment in the main case final and executory. The liability of a third-party defendant is contingent on the outcome of the third-party complaint, not the main action, unless the third-party complaint is for contribution, indemnity, or subrogation in respect of the plaintiff's claim.