Bitanga v. Pyramid Construction Engineering Corporation
REITERATIONFacts
The Antecedents: Respondent Pyramid Construction Engineering Corporation (Pyramid) entered into an agreement with Macrogen Realty to construct a building. Macrogen Realty failed to settle progress billings. Petitioner Benjamin Bitanga, President of Macrogen Realty, assured Pyramid of payment and requested continuation of work. Pyramid suspended work due to non-payment. Pyramid filed an arbitration case against Macrogen Realty. Subsequently, Pyramid and Macrogen Realty entered into a Compromise Agreement, with petitioner signing for Macrogen Realty, agreeing to pay P6,000,000.00 in installments. Petitioner also executed a Contract of Guaranty, irrevocably and unconditionally guaranteeing Macrogen Realty's obligation. Macrogen Realty defaulted on payments, and a writ of execution against Macrogen Realty was returned unsatisfied. Pyramid demanded payment from petitioner as guarantor, but the demand was unheeded. Procedural History: Pyramid filed a complaint against petitioner and his wife, Marilyn Bitanga, for specific performance and damages. Marilyn moved to dismiss, arguing no cause of action against her. The RTC denied her motion, citing the rule that spouses must sue or be sued jointly. Petitioner argued he was entitled to the benefit of excussion and that Marilyn was not aware of the contracts. Pyramid moved for summary judgment, asserting no genuine issue of fact existed, as petitioner admitted the Contract of Guaranty and had failed to exhaust remedies against Macrogen Realty. The RTC granted the motion for summary judgment, ordering petitioner and Marilyn to pay P6,000,000.00 jointly and severally, less the garnished bank deposit. The RTC denied their motion for reconsideration. The Court of Appeals modified the RTC decision, absolving Marilyn Bitanga from liability, holding that a contract cannot be enforced against one who is not a party to it, and substantial ownership of shares was insufficient to hold her liable. The Court of Appeals denied petitioner's motion for reconsideration. The Petition: Petitioner filed a Petition for Review, assailing the Court of Appeals' affirmation of the summary judgment despite alleged genuine issues of fact and its failure to uphold his right to the benefit of excussion.
Issue(s)
Whether the Court of Appeals erred in affirming the summary judgment despite the existence of genuine issues of fact. Whether petitioner Benjamin Bitanga is entitled to the benefit of excussion under the Civil Code.
Ruling
The 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.
Ratio Decidendi
On the issue of summary judgment and genuine issues of fact: The Court held that the issue regarding the propriety of the service of the demand letter on petitioner was a sham issue and not a bar to summary judgment. A genuine issue requires the presentation of evidence, distinguishing it from a sham, fictitious, or false claim. Petitioner did not deny receipt of the demand letter but only questioned the manner of service. The Court emphasized that service by leaving the letter in the party's office with a person in charge is valid under Section 6, Rule 13 of the Rules of Court. The address where the demand letter was served was the same address petitioner used in the Contract of Guaranty. Petitioner's bare denial that the recipient was not an employee was unsubstantiated and insufficient to raise a genuine issue of fact. The Court reiterated that when facts appear uncontested or undisputed based on pleadings, admissions, and documents, summary judgment is proper. On the issue of the benefit of excussion: The Court affirmed the findings of the lower courts that petitioner could not avail himself of the benefit of excussion. Article 2060 of the Civil Code requires the guarantor to set up the benefit of excussion upon the creditor's demand and point out available property of the debtor sufficient to cover the debt. Petitioner failed to do so despite being served a demand letter at his office. Furthermore, Article 2059(5) of the Civil Code precludes excussion if it may be presumed that an execution on the debtor's property would not result in satisfaction of the obligation. The Sheriff's return indicated that Macrogen Realty's only found asset was a small bank deposit, and it was axiomatic that the guarantor's liability arises when the debtor's insolvency or inability to pay is proven by an unsatisfied writ of execution. The Court found the claim that Macrogen Realty had sufficient assets untenable against the Sheriff's return and the lack of genuine controversion.
Main Doctrine
A guarantor who fails to point out available property of the debtor sufficient to cover the debt upon demand, or where it may be presumed that execution on the debtor's property would not satisfy the obligation, cannot avail himself of the benefit of excussion. Furthermore, a claim regarding improper service of a demand letter, when met with bare denials unsubstantiated by facts, does not constitute a genuine issue of fact sufficient to defeat a motion for summary judgment.