G.R. No. 189401 - VIL-REY PLANNERS AND BUILDERS, VS. LEXBER, INC.. [G.R. NO. 189447] LEXBER, INC., VS. STRONGHOLD INSURANCE COMPANY, INC..D E C I S I O N - Supreme Court E-Library

Ruling

Accordingly, Stronghold, issued Surety Bond G(16) No. 077258 [8] (second surety bond) in the amount of P584,364.19 in favor of Lexber. Vil-Rey again obligated itself to indemnify Stronghold for whatever amount the latter might be held to pay under the surety bond. [9] In a letter dated 21 January 1997 [10] addressed to Lexber, Vil-Rey requested the extension of the contract period to 31 January 1997. Lexber granted the request for extension. [11] However, Vil-Rey failed to complete the works by the end of the extended period, or even after Lexber gave it another five days to finish the works. [12] Lexber then wrote Stronghold seeking to collect on the two surety bonds issued in favor of the former. [13] When negotiations failed, Lexber filed a Complaint [14] for sum of money and damages against Vil-Rey and Stronghold before the Regional Trial Court of Quezon City, Branch 93 (RTC). In its Answer (with Counterclaim), [15] Vil-Rey denied that it was guilty of breach of contract and insisted that it was Lexber that owed the amount of P1,960,558.40 to the former. Vil-Rey alleged that under the first contract, it was able to finish 75.33% of the works, but that Lexber paid an amount equivalent to only 50% of the contract, thereby leaving a balance of PI,291,830 in Vil-Rey's favor. Furthermore, considering that almost 100% of the works were finished under the third contract, Vil-Rey had receivables of P668/728.40 representing the contract amount of P1,168,728.37 less the downpayment of P500,000. It also prayed for the payment of moral damages and attorney's fees. Stronghold filed its Answer [16] alleging that its liability under the surety bonds was very specific. Under the first surety bond, it guaranteed only the mobilization down payment of 10% of the total consideration for the first contract. The mobilization downpayment was fully liquidated prior to the mutual termination of the first contract. Also, no collection could be made on the second surety bond, because Lexber failed to allege that there were defects in the materials used and workmanship utilized by Vil-Rey in undertaking the works. Stronghold put forward its counterclaim against Lexber for attorney's fees, litigation expenses, and cross-claim against Vil-Rey for any and all amounts Stronghold may be ordered to pay under the surety bonds pursuant to the indemnity agreements. RULING OF THE RTC In a Decision dated 12 December 2005, [17] the RTC adjudged Vil-Rey and Stronghold jointly and severally liable to Lexber in the amount of P2,988,700.20, with interest at the rate of 12% per annum as actual and compensatory damages from the time of the breach until full satisfaction. The trial court also ordered Vil-Rey and Stronghold to pay attorney's fees in the amount of P500,000 plus the costs of suit. It upheld the indemnity agreements and granted Stronghold's cross-claim against Vil-Rey. The RTC emphasized that parties to a contract are bound by the stipulations therein. When the contract requi