The Supreme Court (SC) affirmed a Court of Appeals (CA) decision sustaining a lower court’s ruling against an insurance company which stemmed from a failed dredging project of the Cebu International Port in 1991.
In a decision penned by Associate Justice Diosdado Peralta, the SC’s Third Division affirmed the CA’s ruling dated September 29, 2005 and resolution dated September 25, 2006 and likewise denied the petition for review filed by American Home Insurance Co. of New York (American Home).
Peralta’s ponencia was concurred by Associate Justices Antonio Carpio, Presbitero Velasco, Jr., Arturo Brion, Ma. Lourdes Sereno.
In June 1990, the Philippine Ports Authority (PPA) conducted a bidding of a project for the dredging of the entrance channel and harbor basin of the Cebu International Port in Cebu City.
The PPA awarded the contract to the winning bidder, F.F. Cruz & Co., Inc. (FF Cruz). Pursuant to their earlier agreement, FF Cruz and Genaro Reyes Construction, Inc. executed a Sub-Contract Agreement whereby the latter agreed to undertake the performance of 50% of the dredging project’s estimated volume of 600,000 cubic meters.
FF Cruz gave G. Reyes an advance payment of P2.2 million guaranteed by a surety bond for the same amount issued by American Home.
The surety bond was issued to guarantee payment of the advance payment made by FF Cruz to G. Reyes for the dredging project in the event that the latter fail to comply with the terms and conditions of the sub-contract.
On October 21, 1991, G. Reyes complained to the PPA about the great deal of silt and waste materials that had accumulated in the area which adversely affected its work accomplishment.
In December 1991, G. Reyes informed FF Cruz that the equipment used for the project had been encountering difficulties because of siltation problems.
G. Reyes admitted that continuing the project was no longer a wise investment and called on FF Cruz to take over the project.
FF Cruz thus took over the unfinished project.
Consequently, FF Cruz demanded from American Home the payment of P2.2 million representing the amount of the bond.
When the case reached the lower court, it ordered American Home, Genaro G. Reyes Construction, Incorporated, “jointly and severally, to pay third-party defendant F.F. Cruz and Company the amount of P2,200,000.00…”
The said ruling was likewise sustained by the appellate court which prompted the insurance company to elevate the case before SC.
American Home faulted the CA in considering the surety bond as a performance bond.
It insisted that the bond guaranteed only the payment of the 15% advance payment made by FF Cruz to G. Reyes amounting to P2.2 million and not the performance of the latter’s obligations nor the completion of the dredging operations.
The insurance company also averred that making it (American Home) liable under the bond because of G. Reyes’ abandonment of the project is tantamount to enlarging its liability.
It further claimed that it was not informed that G. Reyes already abandoned the project and that FF Cruz took over to complete the same, adding that it was a material alteration of the terms of the surety bond which thus discharged it of liability on the surety agreement.
However, in its decision, the SC stated that its jurisdiction over a petition for review on certiorari “is limited to reviewing only errors of law, not of facts, unless the factual findings complained of are devoid of support from the evidence on record or the assailed judgment is based on a misapprehension of facts.”
“With the foregoing disquisition, we need not discuss the other issues raised by American Home,” the high court noted.
“Factual findings of the trial court, particularly when affirmed by the CA, are generally binding on the Court. We have repeatedly held that we are not a trier of facts. We generally rely upon, and are bound by, the conclusions on factual matters made by the lower courts, which are better equipped and have better opportunity to assess the evidence first-hand, including the testimony of the witnesses,” it stressed.
The SC added that “for lack of evidence to show the fact of payment, we find no reason to disturb the findings of the trial court as affirmed by the appellate court that P2.2 million is due FF Cruz.”
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