Golangco Construction Corporation v. Philippine Commercial and International Bank
CLARIFICATIONFacts
The Antecedents: William Golangco Construction Corporation (WGCC) entered into a contract with Philippine Commercial and International Bank (PCIB) for the construction of the PCIB Tower II extension. Following completion and turnover, defects in the granite wash-out finish appeared, leading PCIB to contract another company for repairs. PCIB then sought reimbursement from WGCC, which counterclaimed for material cost adjustments. The Construction Industry Arbitration Commission (CIAC) initially awarded PCIB a portion of its repair costs and WGCC its counterclaim amount. Procedural History: Subsequent proceedings involved WGCC's motion for execution of its counterclaim award, including legal interest, and amendments to the writ of execution. This led to appeals to the Court of Appeals (CA) and eventually to the Supreme Court (SC) in G.R. Nos. 195372 and 195375. The SC directed the CIAC to compute PCIB's remaining liability. After WGCC's corporate term expired and it was dissolved, it filed a motion with the CIAC for computation of liability and issuance of a writ of execution, seeking payment to its stockholders and their successors-in-interest. The CIAC denied PCIB's motion for consignation and ordered payment to the stockholders, but later denied WGCC's motion for inclusion of legal interest until full payment. The Petition: WGCC filed a Petition for Review on Certiorari with the Supreme Court, assailing the CIAC's denial of its motion for inclusion of legal interest until full payment and its order denying the motion for consignation. WGCC argues that the CIAC erred in not including 6% legal interest per annum until full payment, citing prevailing jurisprudence. The petition also addresses the CIAC's authority to determine the rightful recipients of the judgment award from a dissolved corporation and procedural issues raised by BDO regarding the verification and certification against forum shopping. The core of the petition is the correct computation of the remaining liability, including the proper application of legal and compensatory interest.
Issue(s)
First, whether the Petition should be dismissed for failure to attach a proper Verification and Certification Against Forum Shopping. Second, whether the Construction Industry Arbitration Commission has the authority to determine the rightful recipients of a judgment award of a dissolved corporation. Finally, whether the computation of compensatory and legal interest due to WGCC was proper.
Ruling
The Petition is GRANTED. The August 11, 2023 Order and October 19, 2023 Omnibus Order of the Construction Industry Arbitration Commission in CIAC No. 07-95 are AFFIRMED with MODIFICATION. Respondent BDO is ordered to pay petitioner WGCC: (1) PHP 8,630,646.46 less partial payments already made; (2) Interest on the remaining principal at 12% per annum from June 21, 1996 to June 30, 2013, and 6% per annum from July 1, 2013 until full payment. The total monetary awards shall, in turn, earn 6% interest per annum from the finality of this Decision until full payment.
Ratio Decidendi
On the first issue (Verification and Certification): No, the petition should not be dismissed. The Court held that there was substantial compliance with the procedural requirements. Applying the ruling in Gelano v. Court of Appeals, the counsel who prosecuted the case for WGCC while it was still an existing corporation may be considered a trustee for the limited purpose of the litigation, even beyond the three-year winding-up period. This authority extends to matters intrinsically related to the main case, such as the execution of the award. Additionally, the signature of a stockholder, Melissa Katrina G. Favis, is acceptable because all stockholders share a common interest in the enforcement of the judgment award. The Court invoked the doctrine of necessary implication to fill the gap in the law, stating that to deny stockholders the ability to act would lead to injustice, as no other entity could protect the dissolved corporation's interests. On the second issue (CIAC's Authority): Yes, the CIAC has the authority to determine the rightful recipients of the award. Section 18.8 of the CIAC Revised Rules of Procedure grants the arbitral tribunal broad executory powers, including the authority to decide matters and issue orders necessary and related to the execution of its award. This power necessarily includes determining the entities or individuals to whom the award must be given, especially in a situation where the judgment creditor is a dissolved corporation whose assets have been distributed to its stockholders. The Court found that identifying the recipients is an essential part of the execution process. Furthermore, BDO's partial payments to the identified stockholders constituted an implied admission of the correctness of the CIAC's determination. On the third issue (Computation of Interest): The CIAC's computation was improper and required modification. The Court applied its ruling in Lara's Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc., which distinguishes between compensatory interest and legal interest. WGCC is entitled to compensatory interest on the principal award (PHP 5,777,157.84) at the rate of 12% per annum from the date of the CIAC decision (June 21, 1996) until June 30, 2013, and at 6% per annum from July 1, 2013 until full payment. More importantly, the CIAC erred in not imposing legal interest. Once a judgment becomes final and executory, it becomes a forbearance of credit. Therefore, the total monetary award (principal plus accrued compensatory interest) shall itself earn legal interest at the rate of 6% per annum from the date of finality of the judgment until its full satisfaction.
Main Doctrine
The legal personality of a dissolved corporation for the purpose of prosecuting and defending pending suits does not terminate upon the expiration of the three-year winding-up period. Applying the doctrine in Gelano v. Court of Appeals, the counsel who represented the corporation during its existence may be considered a trustee for the limited purpose of concluding the litigation. Furthermore, the doctrine of necessary implication clothes stockholders with the authority to represent the dissolved corporation in enforcing a judgment award, especially when no liquidator is appointed, to prevent a miscarriage of justice and to make effective the rights granted by law.