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THIRD DIVISION

G.R. No. 145260. July 31, 2003]

CITY OF ILIGAN, Represented by Hon. FRANKLIN M. QUIJANO in His Capacity as City Mayor, Petitioner, vs. PRINCIPAL MANAGEMENT GROUP, INC. (PMGI), Represented by Its President & Chief Executive Officer, FERNANDO M. SOPOT, respondent.

D E C I S I O N

PANGANIBAN, J.:

The ascertainment of good reasons for execution pending appeal lies within the sound discretion of the trial court. Normally, its finding will not be disturbed by a reviewing court, in the absence of grave abuse of discretion.

The Case

Before this Court is a Petition1 for Review under Rule 45 of the Rules of Court, assailing the May 4, 2000 Decision2 and the July 14, 2000 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 56952. The decretal portion of the Decision reads as follows:

WHEREFORE, the Petition for Certiorari is hereby DISMISSED.[4]

The assailed Resolution denied petitioners Motion for Reconsideration.

The Facts

The facts of the case are summarized by the CA in this wise:

On October 19, 1998, Mayor Franklin M. Quijano, acting for and in behalf of [petitioner] City of Iligan, requested from the Sangguniang Panlungsod for: (a) Resolution authorizing him to open a domestic Standby Letter of Credit (SLC) in the amount of P14,000,000.00 in favor of the Land Bank Realty Development Corporation and/or PNCC with the Principal Management Group, Inc. (herein private respondent) as the funder/financial managers in connection with the development of a project on a turn-key basis; and (b) Resolution authorizing him to open a high yielding depository account with the Land Bank of the Philippines in the amount of P14,000,000.00 as a hold-out collateral for the domestic SLC.

The City Council approved Mayor Quijanos requests and passed Resolutions Nos. 1050 and 1051 series of 1998 on October 20, 1998.

On December 29, 1998, a Memorandum of Agreement (MOA) on a turn-key arrangement was drawn by Mayor Quijano, representing the City of Iligan, with Land Bank Realty Development Corporation (LBRDC) as General Contractor and Principal Management Group, Inc. (PMGI) as Developer - Financing Manager. The project to be undertaken was the construction of a Sports Complex which upon completion shall be turned over to Iligan City for acceptance and the issuance of Certificate of Acceptance and Authority to Pay to enable Land Bank Realty-PMGI to call on the SLC.

The project started on November 26, 1998 despite the fact that some drawings had not yet been completed, since the MOA provides for a construction period of one hundred twenty days from the date of the signing.

The construction site of the Sports Complex was donated by San Miguel (Iligan) Enterprises, Inc. wherein the City of Iligan as donee was bound to provide for all expenses for the transfer of the occupants therein.

On or about January 1999, the work on the project stopped due to the refusal of some of the occupants to vacate the premises claiming that they have not been paid x x x their disturbance compensation. By then, PMGI had already accomplished 78.27% of the contracted project equivalent to P10,957,800.00 of the total project cost of P14,000,000.00.

On February 24, 1999, PMGI requested from the City of Iligan for a deductive change order to enable it to collect the above-stated amount based on the 78.27% accomplishment of the project. The City of Iligan, however, claimed that PMGIs accomplishment was only 52.89% or equivalent only to P6,958,861.59 based on the Accomplishment Report as of February 9, 1999.

The City of Iligan refused to pay for the reason that the mutually agreed price of P14 Million shall only be paid after the completion of the project and acceptance by it and since the project is not yet complete, no payment can be paid.

The problem on the payment of the affected occupant, which was the cause of the work stoppage, was accordingly brought to the attention of the Sangguniang Panlungsod which favorably acted on it through Resolution No. 99-765 dated June 8, 1999 authorizing the payment of the affected occupants in the project site.

On November 8, 1999, PMGI filed a complaint against the City of Iligan for rescission of the MOA and damages. After the filing of City of Iligans Answer, a Motion for Partial Summary Judgment was filed by PMGI which claimed that there was no genuine issue as to the fact of the obligation of the City of Iligan since it admitted the accomplishment of 52.89% or equivalent to P6,958,861.59 of PMGI and that the City of Iligan had not specifically denied under oath the genuineness of the Letter of Credit and Memorandum of Agreement.

An Opposition to the Motion for Partial Summary Judgment was filed by the City of Iligan on December 7, 1999 which stated that: it never admitted that PMGI made any accomplishment at all but merely stated that with respect to the work accomplishment, it was only 52.89% based on the report of Engr. Maatas team; the MOA or the contract for the construction of the sports complex is between the City of Iligan, as owner, and the Land Bank Realty Development Corporation as General Contractor, PMGI only entered into the picture to support LBRDC in accordance with their own separate agreement; the grounds of lack of cause of action and jurisdiction raised in the Answer should be set for hearing; LBRDC as an indispensable party should be impleaded; and the court does not have jurisdiction over the case in view of Sec. 4 of Executive Order No. 1008 which vests exclusive jurisdiction over construction disputes to Construction Industry Arbitration Commission (CIAC).

In private respondents Rejoinder to Opposition, it was alleged that PMGI and LBRDC are solidary creditors, hence, there was no need to implead the latter since the suit redounds to the benefit of LBRDC, there was no disagreement or dispute as to the accomplishment of 52.89% or equivalent to P6,958,861.59, hence, there was no need to resort to arbitration; and the turn-key provision in the MOA is not applicable since the 120-day construction period lapsed due to the failure of the City of Iligan to perform its obligation.

In the Order dated December 20, 1999, the trial court granted the Motion for Partial Summary Judgment and rendered the following judgment/order:

WHEREFORE, foregoing premises considered, [respondents] motion is GRANTED.

Partial summary judgment is hereby issued in favor of [respondent] in the amount of Six Million Nine Hundred Fifty-eight Thousand Eight Hundred Sixty one & 59/100 (P6,958,861.59) Pesos Only.

The Manager of the LAND BANK OF THE PHILIPPINES (Iligan City Branch), or his authorized representative, or any competent officer of said bank is hereby ORDERED to pay the amount of P6,958,861.59 out of LC NO. 98003/D to Mr. Fernando M. Sopot, President and CEO of [respondent].

In the event said LC NO. 98003/D is insufficient or has expired, the Manager and/or any competent officer of said LAND BANK OF THE PHILIPPINES (Iligan City Branch) is hereby ORDERED to pay to said Mr. Fernando M. Sopot the amount of P6,958,861.59 out of any accounts or moneys of [petitioner].

SO ORDERED.

The Motion for Reconsideration filed by the City of Iligan to the December 20, 1999 Order was denied in the Resolution dated January 17, 2000.

A Notice of Appeal was filed by the City of Iligan on January 26, 2000.

A Motion for Execution Pending Appeal x x x filed on January 18, 2000 by PMGI which alleged that when the appeal is clearly dilatory, order for execution upon good reasons may be issued with the discretion of the court, was granted on January 24, 2000 over the opposition of the City of Iligan, to justify the same, the dispositive portion of which was earlier quoted. The trial court further stated that:

The Court is convinced that there are good reasons to allow the immediate execution pending appeal. Its adjudication is based on [petitioners] own admission hence, any appeal would be unmeritorious and would only serve to delay execution of the final order subject of the instant motion. The fact that an appeal in this case if taken by [petitioner] will be a merely dilatory tactic has been declared by the Supreme Court as a good and sufficient reason upon which to issue execution of the order under Section 2, Rule 39 of the Revised Rules of Court.

A Demand Letter and Notice of Garnishment, both dated January 26, 2000, were served on even date by Sheriff Montoy B. Lomondot to herein petitioner.5 (Citations omitted)

Ruling of the Court of Appeals

The CA held that the trial court did not commit grave abuse of discretion in granting the execution pending appeal since the appeal filed by petitioner was a dilatory tactic and is not allowed in the first place.6 Ruling that the trial court could grant executions pending appeal, provided that a good reason therefor was stated in a special order, the appellate court upheld dilatory tactic as one such good reason.

The appellate court also ruled that certiorari would not be allowed in this case, because there were other remedies still available to petitioner, like the filing of a supersedeas bond to stay the execution or the filing of a motion for reconsideration.

Hence, this Petition.7

The Issues

Petitioner raises the following issues for our consideration:

A

Whether or not the Honorable Court of Appeals erred in affirming the Order of the trial court granting a Writ of Execution Pending Appeal to implement its previous Order dated December 20, 1999 approving respondents Motion for Partial Summary Judgment;

B

Whether or not the Honorable Court of Appeals erred in affirming the Order of the trial court that there were good reasons to allow the immediate execution pending appeal; and

C

Whether or not the Honorable Court of Appeals erred in affirming the Order of the trial court in spite of the latters failure to take into consideration the provision in paragraph 8 of the Memorandum of Agreement entered into by the herein parties.8 (Citations omitted)

Simply put, the main issue is whether the Order granting execution pending appeal was proper.

The Courts Ruling

The Petition has no merit.

Main Issue:

Propriety of Execution Pending Appeal

Executions pending appeal are governed by Section 2 of Rule 39 of the Rules of Court, which reads:

SEC. 2. Discretionary execution.--

(a) Execution of a judgment or a final order pending appeal. On motion of the prevailing party with notice to the adverse party filed in the trial court while it has jurisdiction over the case and is in possession of either the original record or the record on appeal, as the case may be, at the time of the filing of such motion, said court may, in its discretion, order execution of a judgment or final order even before the expiration of the period to appeal.

After the trial court has lost jurisdiction, the motion for execution pending appeal may be filed in the appellate court.

Discretionary execution may only issue upon good reasons to be stated in a special order after due hearing.

There are three requisites for the execution of a judgment pending appeal: a) a motion must be filed by the prevailing party with notice to the adverse party; b) there must be good reasons for execution pending appeal; and c) the good reasons must be stated in a special order.9cräläwvirtualibräry

Execution pending appeal is, of course, the exception to the general rule.10 Normally, execution cannot be obtained until and unless (a) the judgment has become final and executory; (b) the right of appeal has been renounced or waived; (c) the period for appeal has lapsed without an appeal having been filed; or (d) having been filed, the appeal has been resolved and the records of the case have been returned to the court of origin -- in which case, execution shall issue as a matter of right.11cräläwvirtualibräry

On the other hand, when the period of appeal has not yet expired, the execution of a judgment should not be allowed except if, in the courts discretion, there are good reasons therefor.12cräläwvirtualibräry

Since the execution of a judgment pending appeal is an exception to the general rule, the existence of good reasons is essential. These reasons must be stated in a special order, because unless these are divulged, it will be difficult to determine on appeal whether judicial discretion has been properly exercised by the lower court.13cräläwvirtualibräry

Good reasons consist of compelling circumstances that justify the immediate execution of a judgment, lest it become illusory; or the prevailing party be unable to enjoy it after the lapse of time, considering the tactics of the adverse party who may have no recourse but to delay.14cräläwvirtualibräry

In the present case, the good reason relied upon by both the trial and the appellate courts was that the partial adjudication of the case was based on petitioners own admission; hence, any appeal based on that point would be unmeritorious and merely dilatory. Indeed, both courts ruled that an appeal by petitioner would only serve as a good and sufficient reason upon which to issue execution.15cräläwvirtualibräry

The ascertainment of good reasons for execution pending appeal lies within the sound discretion of the trial court, and the appellate court will not normally disturb such finding. Intervention by the latter may be proper, if it is shown that there has been an abuse of discretion.16cräläwvirtualibräry

Like the CA, we find no abuse of discretion in the trial courts grant of execution pending appeal. Indeed, this Court has held that a good and sufficient reason upon which to authorize immediate execution is when an appeal is clearly dilatory.17cräläwvirtualibräry

Normally, the trial court is not allowed to assess its own judgment and to hold that an appeal may not prosper, or that it would merely be dilatory. In the present case, however, there are circumstances that undisputedly serve as cogent bases for arriving at such a conclusion.

First, it is not seriously disputed that the judgment is anchored upon material facts as follows: (1) there is a Memorandum of Agreement (MOA) for the site development of Sports Complex Project No. 1 signed by the parties; (2) petitioner failed to pay the occupants of the project site on time, thereby preventing respondent from fully complying with its obligation under the MOA; (3) respondent admitted that the work accomplished was 52.89 percent, which was equivalent to P6,958,861.59. Obviously, there is no genuine issue as to any material fact on this point.

Second, Article 1191 of the Civil Code states:

The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. x x x.

By failing to pay the occupants of the project site within the time required for the completion of the project, petitioner did not comply with what was incumbent upon it. Applying the law to the undisputed facts, the trial court had prima facie bases for rendering its partial summary judgment holding that respondent was entitled to rescission and to the payment of P6,958,861.59.

Verily, the trial court committed no abuse of discretion in granting execution pending appeal. Its conclusion was upheld by the CA, which found that the appeal filed by the petitioner was a dilatory tactic and was not allowed in the first place. Consequently, the appellate court did not err in refusing to attribute grave abuse of discretion to the trial courts Order granting execution pending appeal.

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioner.

SO ORDERED.

Puno, (Chairman), Corona, and Carpio-Morales, JJ., concur.

Sandoval-Gutierrez, J., on official leave.



Endnotes:

1 Rollo, pp. 9-32.

2 Annex B of the Petition; rollo, pp. 33-43. Penned by Justice Remedios A. Salazar-Fernando and concurred in by Justices Angelina Sandoval-Gutierrez (Division chairman and now a member of this Court) and Salvador J. Valdez Jr. (member).

3 Annex C of the Petition; id., pp. 45-46.

4 CA Decision, pp. 11 & 43.

5 CA Decision, pp. 2-6 & 34-38.

6 Id., pp. 10 & 42.

7 The case was deemed submitted for decision on August 16, 2001, upon this Courts receipt of Petitioners Memorandum, signed by Asst. City Legal Officer Rafael A. Benedictos Jr. and City Legal Consultant Wilson C. Namocot of the City of Iligan. Respondents Memorandum, received on August 13, 2001, was signed by Attys. Gerardo B. Padilla, Roberto C. Padilla and Eduardo D. Ulindang of Padilla and Padilla.

8 Petitioners Memorandum, pp. 6-7; rollo, pp. 224-225. Original in upper case.

9 Maceda v. Development Bank of the Philippines, 313 SCRA 233, August 26, 1999; Provident International Resources Corporation v. CA, 328 Phil. 871, July 26, 1996.

10 Philippine Bank of Communications v. CA, 344 Phil. 777, September 23, 1997; David v. CA, 342 Phil. 387, July 28, 1997; Roxas v. CA, 157 SCRA 370, January 28, 1988.

11 Philippine Bank of Communications v. CA, supra; David v. CA, supra; Roxas v. CA, supra. See also 1 of Rule 39 of the Revised Rules of Court.

12 Philippine Bank of Communications v. CA, supra; David v. CA, supra; Roxas v. CA, supra.

14 Corona International, Inc. v. Court of Appeals, 343 SCRA 512, October 18, 2000; Intramuros Tennis Club, Inc. v. Philippine Tourism Authority, supra; Yasuda v. Court of Appeals, 330 SCRA 385, April 12, 2000.

15 Annex W of the Petition; Order of the RTC dated January 24, 2000, p. 3; rollo, p. 162.

16 Planters Products, Inc. v. CA, 317 SCRA 195, October 22, 1999.

17 De Vera v. Santos, 79 SCRA 72, September 22, 1977; Home Insurance Company v. Court of Appeals, 184 SCRA 318, April 17, 1990; Rodriguez v. Court of Appeals, 105 Phil.777, May 23, 1959.




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