481 Phil. 724
CALLEJO, SR., J.:
(hh) To take charge of the general operation, administration, disposition of the UNFINISHED PROJECT and to supervise and control all aspects of land development and maintenance of housing units thereon;The parties also agreed that the ASTRO would be paid by QRSI for its services, including a management fee. They, likewise, agreed that the PMA may be terminated or rescinded by the GSIS for valid cause without need of judicial action by giving sixty (60) days notice to that effect to both parties, which act shall be final and binding.
(ii) To market and sell, any and all completed housing units and/or lots within the UNFINISHED PROJECT, upon such terms and conditions as it may deem proper. For this purpose, QUEEN’S ROW shall execute and convey unto the PROJECT MANAGER special power(s) of attorney and all other necessary documents;
(jj) To request, demand, collect and receive from time to time any and all amounts accruing upon the contracts hereafter made for the sale of the housing units and/or lots aforesaid. All moneys paid to or collected by the PROJECT MANAGER, either upon contract or, otherwise, shall be distributed as follows:(a) To the GSIS, the payment of any and all loans, including interests and other charges, previously or hereafter granted to QUEEN’S ROW and/or the PROJECT MANAGER;
(b) To the PROJECT MANAGER the amount of the commission or compensation then due to it;
(c) Taxes and assessments against the property embraced within the UNFINISHED PROJECT when and as the same may be due; and
(d) Pro-rated payments to other creditors of QUEEN’S ROW as warranted by the cash flow projection and provided said payments do not adversely affect the working capital for the Project.[3]
For all the foregoing reasons, and because of the strained relations between QRSI and ASTRO, the undersigned respectfully recommends the following for the protection of the GSIS:On July 8, 1982, the Board of Trustees of the GSIS issued Resolution No. 587 approving the recommendations of the OGCC and appointing the CV Management Corporation as project manager, in lieu of ASTRO, to take effect upon the expiration of the sixty-day written notice thereof.[13] ASTRO did not file any request for the reconsideration of the resolution nor any judicial action to assail the same.
(a) That the GSIS, in order to preserve the viability of the Queen’s Row Subdivision Project, terminate the Project Management Agreement and the Supplemental Contract To Project Management Agreement, both dated September 30, 1980, between QRSI and ASTRO pursuant to Article 10.02, supra, by giving sixty-day written notice to both parties. Such termination is without prejudice to the right of ASTRO to the fees to which it is legally entitled as of date of termination;
(b) That all contracts with third parties engaged by ASTRO, which are, likewise, cancelled and revoked as a consequence, be paid on the basis of quantum meruit, i.e., for whatever work actually accomplished per plans and specifications.[12]
For management fees failed to realize on the balance of 1,741 units contracted, computed at five (5%) percent of sales value of 1,106 housing units; for accruing interests on accounts payable to Contractors up to December 31, 1982 at the prevailing rate of two (2%) percent a month; for accrued interest on management fees due at prevailing rate of two (2%) percent a month up to December 31, 1982; for administrative and operational expenses incurred during “winding-up” period from September 30, 1982 to December 31, 1982; for damages suffered resulting from the unilateral cancellation of the Project Management Agreement and non-payment of legitimate obligations due and payable to Astroland and Contractors, and violations of the Project Management and related agreements; for attorney’s fees and expenses of collection,However, QRSI and the GSIS refused to pay the claim of ASTRO. On April 22, 1984 and October 15, 1984, ASTRO again wrote the GSIS, reiterating its demand for the payment of management fees in the total amount ofP12,993,419.00
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(Itemized breakdown and supporting evidence of the above will be submitted in due course.)[17]
On March 26, 1986, ASTRO filed a complaint solely against the GSIS in the Regional Trial Court of Manila for damages and attorney’s fees, alleging, inter alia, the following:
- The claim of Astro Land Developers, Inc. should be addressed to QRSI and not to the GSIS, considering that all orders of payment covering sales proceeds of completed housing units under Astro Land Management have been fully paid.
- Contractors were hired by Astro Land Developers, Inc., Project Manager of QRSI, and not GSIS; hence, GSIS has no dealings with them. However, GSIS, in fact, accommodated them by granting loan to pay their pending claims at the time of termination of their management contract under quantum meruit basis, such loan, in effect, being additional loan granted to QRSI.
- At the time of termination of the project management contract, the amount representing partial accomplishment on land development works and house construction of Astro Land were jointly evaluated and agreed upon between QRSI and its Project Manager, which was coordinated by the Board Committee on Housing, then audited by COA and the team of Mr. Carlos Velayo, SGV, and Internal Audit representatives.
Therefore, the works accomplished by Astroland Developers, Inc. at the time of termination of the contract were duly paid for based on amount which all the parties have agreed upon. There was no pending claim of Astro Land that remained outstanding as of said date covering management fees and unpaid work accomplished.[19]
(11) That the provisions of the Tri-Party Agreement, Annex “B,” obliged QRSI to surrender and cede all its rights and prerogatives to the Project Manager in accordance with the designation of GSIS. (CF:2nd Whereas Clause, p. 2).ASTRO prayed that, after due proceedings, judgment be rendered in its favor, thus:
(12) That sometime in July 1981, Plaintiff ASTROLAND, as Project Manager, assumed actual land development and construction of the House-Lot Units comprised in the Unfinished Project as per designation of GSIS.
(13) That from the period 1 June 1982 to 31 August 1982, Plaintiff ASTROLAND completed the development and construction of 597 House-Lot Units duly accepted by GSIS and 38 House-Lot Units under various stages of construction or the total of 635 House-Lot Units.
(14) That on 8 July 1982, GSIS, without valid cause, unilaterally terminated and cancelled the Project Management Agreement and Supplemental Contract, Annexes “A” and “A-1,” and the corresponding designation of Plaintiff as Project Manager, unduly depriving Plaintiff ASTROLAND of the Management Fees which it could have earned in the development and construction of the remaining 1,106 House-Lot Units pursuant to the aforesaid Agreements in the amount of at least Five Million Pesos (P5,000,000.00), Philippine Currency, or such amount as will be proved during the trial.
(15) That due to the unilateral termination and cancellation of the Project Management Agreement and Supplemental Contract, Annexes “A” and “A-1,” and the corresponding designation of Plaintiff as Project Manager by GSIS, Plaintiff ASTROLAND suffered besmirched business reputation, the amount of which will be proven in due time.
(16) That in order to deter others similarly situated not to take their contractual obligations lightly and to serve as example to the public good, Defendant GSIS should be ordered to pay exemplary damages in such amount as may be proven in due time.
(17) That despite repeated demands, GSIS has failed and refused to pay the aforesaid claim of Plaintiff ASTROLAND for unearned Management Fees plus damages corresponding to the uncompleted 1,106 House-Lot Units resulting from the unilateral termination or cancellation of the abovesaid Agreements, Annexes “A” and “A-1,” by GSIS without valid cause.
Copies of demand letters dated 15 January 1983 and 22 April 1985 are attached hereto and made integral parts hereof as Annexes “C” and “C-1.”III. SECOND CAUSE OF ACTION
(1) That the allegations contained in the preceding paragraphs are incorporated herein by reference.
(2) That by reason of the unjustified and groundless refusal and failure of Defendant GSIS to pay the valid and existing claim of Plaintiff ASTROLAND in the above-stated amount, ASTROLAND has been compelled to retain the services of undersigned counsel in an amount to be proved during the trial as and for attorney’s fees, aside from costs and expenses of litigation.[20]
WHEREFORE, it is respectfully prayed that judgment be rendered against the Defendant GSIS and in favor of Plaintiff ASTROLAND as follows:In its answer to the complaint, the GSIS averred that under the PMA and the SCPMA, ASTRO had no cause of action against it; the claim, if any, should be addressed to the QRSI which was liable therefor under the PMA, as amended.
FIRST – That Defendant GSIS be ordered to pay the Plaintiff’s basic claim, representing unearned Management Fees and other benefits, in the amount ofP5,000,000.00, or such amount as may be proved during the trial.
SECOND – That Defendant GSIS be ordered to pay Plaintiff ASTROLAND such amounts as may be proven during the trial by way of (a) moral damages to its besmirched business reputation and (b) exemplary damages to be assessed against GSIS as example to the public good.
THIRD – That defendant GSIS be ordered to pay Plaintiff attorney’s fees and costs and expenses of litigation as may be proved during the trial.
PLAINTIFF prays for such other reliefs as may be deemed just and equitable in the premises.[21]
On October 9, 1990, the trial court rendered judgment in favor of the ASTRO and against the GSIS. The fallo of the decision reads:
- A reasonable compromise be reached upon by the parties on such acceptable terms and conditions, and to restore to ASTRO the project management of the housing subdivision.
- Further inquiries/investigation be undertaken by the System so as to determine the civil and criminal liabilities of the GSIS and GCC officials concerned; for, apparently, violations of sub-paragraphs e, f, g, i and j of Sec. 4 of the Anti-Graft and Corrupt Practices Act (RA 3019, as amended) exist.[23]
WHEREFORE, judgment is hereby rendered in favor of Plaintiff ASTROLAND and against Defendant GSIS, as follows:The trial court ruled that the cancellation of the PMA and SCPMA made by the GSIS was arbitrary and illegal. It held that the Legal Opinion and Recommendation of the OGCC dated June 28, 1982 was grossly unreasonable and unreliable, there being no prior consultations between ASTRO and the different sections in the GSIS involved in its housing program. It also held that the PMA between the GSIS and the CV Management Corporation was manifestly disadvantageous to ASTRO. The trial court gave full credence to the January 23, 1987 consolidation report to the president and general manager of the GSIS.
Defendant is hereby ordered to pay plaintiff the following amounts:
(a)P5,833,458.70, representing unearned management fees;
(b)P875,000.00, representing increase in management fees which plaintiff ASTROLAND could have earned had it not for the arbitrary cancellation of the management agreements;
(c)P693,819.00, representing actual and consequential damages by way of administrative and operational expenses during the winding up period from September 20, 1982 to March 31, 1983;
(d) Legal interest on the aforementioned amounts computed from July 8, 1982;
(e)P500,000.00 for exemplary damages;
(f)P300,000.00, representing attorney’s fees; and,
(g) Costs of suit.SO ORDERED.[24]
In its comment on the petition, the GSIS, now the respondent, asserts that the recommendation of the rescission of the PMA and the SCPMA and the designation of CV Management Corporation as the petitioner’s replacement was made by QRSI. The respondent contends that under the PMA and the SCPMA, QRSI is liable for any management fees to which the petitioner may be entitled. The respondent avers that QRSI is an indispensable party, and should have been impleaded by the petitioner as party-defendant, and that the absence of QRSI deprived the trial court of any authority to act on the complaint as to the present parties and as to QRSI. The respondent posits that its rescission of the said agreement is expressly authorized under Article X of the PMA, as amended by the SCPMA which decision is final.
- CONTRARY TO THE CONCLUSION OF THE COURT OF APPEALS, THE CLAIMS OF ASTROLAND AGAINST GSIS FOR THE ADMITTED UNEARNED MANAGEMENT FEES AND OTHER DAMAGES HAVE CONTRACTUAL BASIS.
- CONTRARY TO THE HOLDING OF THE COURT OF APPEALS, GSIS’S UNILATERAL TERMINATION/RESCISSION OF THE MANAGEMENT CONTRACTS BETWEEN ASTROLAND AND QRSI WAS PLAINLY ARBITRARY, IRREGULAR, UNJUSTIFIED AND COMPLETELY UNWARRANTED.
- EVEN ASSUMING THAT ASTROLAND’S CASE FOR DAMAGES AGAINST GSIS HAS NO CONTRACTUAL BASIS, IT IS EVIDENTLY FOUNDED ON AND IS JUSTIFIED UNDER THE SPECIFIC PROVISIONS OF THE CIVIL CODE, CONTRARY TO ERRONEOUS AND SPECULATIVE CONCLUSION OF THE COURT OF APPEALS.[26]
It bears emphasizing that appellant’s action was prompted by a Memorandum sent to it by the OGSS (sic) (Exh. J), which recommended the cancellation of the management contract between QRSI and appellee. In the said Memorandum appellant’s attention was called to the existence of a “serious dispute between QUEEN’S ROW and the PROJECT MANAGER” which tend to jeopardize the project which appellant was financially assisting. Needless to state, such a serious dispute between QRSI and the project manager could undermine the success of the project and thereby jeopardize appellant’s chances of recovering from or collecting the loan extended to QRSI. Given such situation, appellant had to act promptly and decisively in order to protect its interest. In that regard, appellant did not really have a choice since it was not possible to relieve QRSI which owned the subdivision project. Hence, its only option was to avail of the right granted to it by the parties in their management agreements (Exh. A & B), which was to terminate appellee’s services and have QRSI appoint or employ another project manager.Central to this issue are Sections 10.01 and 10.02 of Article X of the PMA, as amended by paragraph 8 of the SCPMA, thus:
In our perception, the mere existence of such a serious dispute between QRSI and appellee was enough to derail the completion of the project. Therefore, appellant was justified in terminating the management contract, as explicitly authorized therein, in order to save the project and protect its financial exposure therein. Hence, contrary to the lower court’s observation, we find that appellant’s actuation was far from arbitrary, for which reason, appellee has no cause of action against it both under its management agreements with QRSI or under the provisions of the Civil Code.[27]
8) With reference to Article X, Secs. 10.01 and 10.02, and Article XI, Sec. 11.03, QUEEN’S ROW and the PROJECT MANAGER hereby agree that as between themselves, their respective liabilities, if any, shall be governed by the following provisions:Irrefragably, the respondent is empowered, under the PMA, as amended, to unilaterally cancel or rescind the same, without need for judicial action. Upon the lapse of sixty (60) days from notice of the said cancellation or rescission, such act of the respondent is binding on the petitioner and QRSI. Thenceforth, the respondent had the right to dispense with the petitioner’s services as project manager, and to approve a substitute to complete the unfinished project. The respondent is not required, under the PMA, as amended, to first conduct an investigation with due notice to the petitioner and QRSI before exercising its right to cancel the PMA, as amended, the only requirement for a valid exercise of such right being a valid cause as provided in the PMA, the SCPMA, and the agreement of the parties, as well as the relevant provisions of the New Civil Code.…“10.02 Notwithstanding the preceeding (sic) paragraph, QUEEN’S ROW and the PROJECT MANAGER hereby recognize the right of the GSIS to terminate and/or rescind this Agreement for valid cause without need of judicial action by giving sixty (60) days’ notice to that effect to both parties, which act shall be final and binding on all parties. In such event, the GSIS shall have, among others, the right to demand the appointment of a new project manager for the unfinished project; in such event, the PROJECT MANAGER shall only be entitled to fees rightfully earned up to time of termination.“Within thirty (30) days after termination/rescission of this Agreement, the parties shall confer and settle their respective accountabilities and liabilities as of the date of rescission.
“10.03 In case of breach of violation by the PROJECT MANAGER or QUEEN’S ROW of any provision of this Agreement, the party at fault shall pay the other such damages as may have resulted from the breach or violation of this Agreement.”[28]
We are not saying that appellee is not entitled to compensation or fees due under the management contracts (Exhs. A & B). But then, as emphasized by appellant, if appellee has not yet been paid in full or if it is still entitled to certain amounts in accordance with the management contract, it should proceed against QRSI which hired its services and not against appellant which is not party to the contract. Significantly, the compensation or fee to which appellee as project manager is entitled is spelled out in Article III of the PMA (Exh. A), and as explicitly provided therein, it is QRSI which has the obligation to pay it.[31]The petitioner insists that the respondent is liable to it for management fees for the following reasons:
(3) It is a matter of record as it is not disputed by the parties that by way of implementing the granting by GSIS of an additional loan to Queen’s Row Subdivision, Inc. (QRSI) in the sum ofThe petitioner further posits that the respondent is liable for damages under Articles 19, 20 and 2176 of the New Civil Code, to wit:P8,000,000.00, three (3) agreements were admittedly [entered] into, to wit:(A) Project Management Agreement (or “PMA”) dated September 30, 1980, executed between QRSI and ASTROLAND (Exhibit “A”) and duly approved by GSIS pursuant to the explicit proviso therein that said Agreement “shall be invalid and of no force and effect unless and until the prior approval of the GSIS is secured;”(4) The salient features of these and undisputed Agreements relevant to ASTROLAND’s position and plea that the Court of Appeals’ conclusion of purported “no contractual basis” on ASTROLAND’s claims is completely speculative, absolutely unfounded and directly contravenes the evidence and admissions of the parties, deserve emphasis, thus:
(B) Supplemental Contract to Project Management Agreement (“SCPMA”) dated September 30, 1980 (Exhibit “B”) executed between QRSI and ASTROLAND, providing additional conditions to the PMA; and
(C) Tripartite Agreement dated November 15, 1980 (Exhibit “C”) executed by and among GSIS, QRSI and ASTROLAND which incorporated in its entirety the terms and conditions of the PMA as an integral part thereof.Under the PMA:(5) All the foregoing self-explanatory provisions of the three (3) Agreements (Exhibits “A,” “B” and “C”) present themselves as irrefutable indicia and incontestable proofs of GSIS’s contractual involvement and privity which is manifest from the start to the finish of the project.
(A) Funds to be utilized for the unfinished project (subdivision development) “shall be subject to periodic audit by the GSIS or its authorized representative;”
(B) QRSI and/or ASTROLAND “shall secure the consent and/or approval of the GSIS to any contract or arrangement entered into by QUEEN’S ROW and/or PROJECT MANAGER (Astroland) involving the disbursement of the funds for the UNFINISHED PROJECT, and any and all such contracts or arrangements entered into without the consent or approval of the GSIS first having had or obtained shall be the sole financial liability of QUEEN’S ROW and/or the PROJECT MANAGER (Astroland);
(C) QRSI and ASTROLAND “recognize the right of GSIS to terminate and/or rescind this Agreement (PMA) for VALID CAUSE xxxx. In such event, the GSIS shall have, among others, the right to demand the appointment of a new project manager for the UNFINISHED PROJECT xxxx;”
(D) In case of any dispute between QRSI and ASTROLAND arising from the PMA “the parties agree to submit the same to the GSIS as the sole arbitrator xxxx;”
(E) The PMA “shall be invalid and of no force and effect unless and until the prior approval of the GSIS is secured.”
Under the Tripartite Agreement:
(A) GSIS agreed to grant the additional loan ofP8 Million to QRSI “provided that the latter shall surrender and cede all the rights and prerogatives to a management group to be named by the GSIS;”
(B) GSIS, with the consent of QRSI “has designated and appointed ASTROLAND DEVELOPERS, INC. as the management group to handle the planning, execution and marketing, and other aspects of the unfinished housing project;”
(C) The Tripartite Agreement “is subject to the terms and conditions of the Project Management Contract;”
(D) Any and all releases of the loan shall be made and/or drawn in favor of ASTROLAND. “However, no disbursement shall be made by ASTROLAND out of the proceeds of the loan from GSIS without the written consent of GSIS and, for the purpose of implementing this provision, the proceeds of the loan shall be deposited in a bank in which the representative of the GSIS, as comptroller, shall be a co-signatory together with the authorized officer or officers of ASTROLAND;”
(E) At least two (2) representatives of the GSIS shall sit as ex-officio members of the Boards of Directors of both QRSI and ASTROLAND with all the rights and powers of members of the Board;
(F) “Neither QRSI nor ASTROLAND shall terminate said Agreement (the Tripartite Agreement) without the prior written consent of the GSIS.”
(6) They further eloquently portray the vital and indispensable role actively played by GSIS in the contractual relationship between QRSI and ASTROLAND. By its active participation in all the stages of the project implementation as specified in the aforequoted contracts, GSIS has made its indispensable presence and participation prominently felt.[32]
Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give every one his due, and observe honesty and good faith.We do not agree.…
Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.…
Art. 2176. Whoever by act or omission causes damages to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties is called quasi-delict and is governed by the provisions of this chapter.
The bare fact that the funds utilized for the unfinished project were subject to periodic audit by the respondent or its authorized representative; that the consent of the respondent to any contracts involving the disbursements of the funds for the unfinished project; that the respondent had the right to rescind or cancel the PMA, as amended; or that the respondent was made the sole arbitrator of any dispute between QRSI and the petitioner separately and in conjunto, does not render the respondent liable for management fees due to the petitioner under the agreements. All the foregoing, as well as the requirement that a representative of the respondent be made a co-signatory to a bank deposit of the proceeds of the loan of the petitioner, and for at least two representatives to act as ex officio members of the Board of Trustees of both the petitioner and the QRSI, were designed to insure that the proceeds of the loans obtained by the petitioner and QRSI from the respondent were used for the project and conformably to the agreements of the parties, and that the said loans would be paid from the proceeds of the sale of the housing units. The respondent did not thereby make itself liable to the petitioner for management fees owing from QRSI.ARTICLE III
CONTRACT PRICE
QUEEN’S ROW hereby agrees to pay the PROJECT MANAGER as compensation/commission for services satisfactorily rendered, a fee in an amount equivalent to five (5%) per cent of the gross sales of completed housing units and/or lots, payable immediately after every collection of the proceeds of the sales, but subject to the order of distribution set forth in Article I(jj) of this Agreement.[35]