COMMUNICATION v.

MARK SENSING operations, to have a Build Operate

AUSTRALIA PTY. LTD. Transfer (BOT) Agreement with PCSO
where it undertook to build a thermal
GR No. 192159, Jan 25, 2017
paper and bet slip manufacturing facility
PRINCIPLE: to supply all requirements of PCSO.
However, PCSO unilaterally cancelled
FACTS: the BOT Agreement and granted supply
Communication and Information contracts to Lamco Paper, Consolidated
Systems Corporation (herein petitioner) Paper and Trojan Computer Forms,
and Mark Sensing Australia Pty. Ltd. which ultimately resulted in litigation
(herein respondent) entered into a between the parties. Which was
Memorandum of Agreement (MOA) dated eventually settled when PCSO,
March 1, 2002 whereby respondent respondent, and the three other
appointed petitioner as its exclusive suppliers entered into the Supply
agent PCSO during the lifetime of the Contract, which was submitted and
MOA." The recent agreement referred to approved by the Regional Trial Court
in the MOA is the thermal paper and bet (RTC), Branch 224 of Quezon City, as a
slip supply contract (the Supply compromise agreement.
Contract) between the Philippine Charity As a result of respondent's refusal to
Sweepstakes Office (PCSO), respondent, pay, petitioner filed a complaint before
and three other suppliers, namely the RTC in Quezon City for specific
Lamco Paper Products Company, Inc. performance against respondent, Atty.
(Lamco Paper), Consolidated Paper Ofelia Cajigal, and PCSO praying that
Products, Inc. (Consolidated Paper) and the latter be ordered to comply with its
Trojan Computer Forms Manufacturing obligations under the MOA. The RTC
Corporation (Trojan Computer Forms). ordered the PCSO to hold the amount
As consideration for petitioner’s being contested until the final
services, respondent agreed to pay the determination of the case. It later
former a commission of 24.5% of future reversed itself, holding that its
gross sales to PCSO, exclusive of duties jurisdiction is limited to the amount
and taxes, for six years. stated in the complaint and therefore
had no jurisdiction to order PCSO to
After initially complying with its withhold payments in excess of such
obligation under the MOA, respondent amount. The CA later reversed the RTC
stopped remitting commissions to and ordered that the additional docket
petitioner during the second quarter of fees shall constitute a lien on the
2004. In doing so, respondent averred judgment.
that petitioner’s President, violated her
authority when she negotiated the On September 10, 2007, the RTC
Supply Contract with PCSO and three of granted petitioner's application for
it's competitors. According to issuance of a writ of preliminary
respondent, it lost almost one-half of its attachment, stating that "the non-
business with PCSO because of the payment of the agreed commission
Supply Contract provided that constitutes fraud on the part of the
respondent’s business with PCSO shall defendant MSAPL in their performance
be limited to the latter's Luzon of their obligation to the plaintiff." The
RTC found that MSAPL is a foreign CISC to pay docket fees within a
corporation based in Australia, and its reasonable time.[23]
Philippine subsidiary, MSPI, has no
other asset except for its collectibles On July 8, 2009, CISC posted a bond in
from PCSO. Thus, the RTC concluded the amount of P113,197,309.10 through
that CISC may be left without any Plaridel Surety and Insurance Company
security if ever MSAPL is found liable.[16] (Plaridel) in favor ofMSAPL, which the
But the RTC limited the attachment to RTC approved on the same date.[24] Two
P4,861,312.00, which is the amount days later, MSAPL filed a motion to
stated in the complaint, instead of the determine the sufficiency of the bond
amount sought to be attached by CISC, because of questions regarding the
i.e., P113,197,309.10.[17] The RTC financial capacity of Plaridel.[25] But
explained that it "will have to await the before the RTC could act on this motion,
Supreme Court judgment over the issue MSAPL, apparently getting hold of
of whether [it] has jurisdiction on the Plaridel's latest financial statements,
amounts in the excess of the amount moved to recall and set aside the
prayed for by the plaintiff in their approval of the attachment bond on the
complaint" since MSAPL appealed the ground that Plaridel had no capacity to
adverse judgment in CA-G.R. SP No. underwrite the bond pursuant to Section
96620 to us.[18] We later denied MSAPL's 215 of the old Insurance Code[26]
petition for review assailing the CA because its net worth was only
Decision in CA-G.R. SP No. 96620 P214,820,566.00 and could therefore
(subsequently docketed as G.R. No. only underwrite up to
179073) in a Resolution dated November P42,964,113.20.[27] On September 4,
12, 2007.[19] It became final and 2009, the RTC denied MSAPL's motion,
executory on March 25, 2008.[20] finding that although Plaridel cannot
underwrite the bond by itself, the
In view of this development, CISC moved amount covered by the attachment bond
to amend the order of attachment to "was likewise reinsured to sixteen other
include unpaid commissions in excess of insurance companies."[28] However, "for
the amount stated in the complaint. On the best interest of both parties," the
December 22, 2008, the RTC granted RTC ordered Plaridel to submit proof
CISC's motion and issued a new writ of that the amount of P95,819,770.91 was
preliminary attachment.[21] On April 13, reinsured. Plaridel submitted its
2009, the RTC, acting on the partial compliance on September 11, 2009,
motions for reconsideration by both attaching therein the reinsurance
CISC and MSAPL, modified the amount contracts.[29]
covered by the writ to reflect the correct
amount prayed for by CISC in its On September 18, 2009, MSAPL, MSPI
previous motion to amend the and Atty. Ofelia Cajigal[30] filed a petition
attachment order conditioned upon the for certiorari before the CA, docketed as
latter's payment of additional docket CA-G.R. SP No. 110511, assailing the
fees. It also denied MSAPL's opposition Orders of the RTC dated April 13, 2009,
to the attachment order for lack of July 2, 2009, July 8, 2009, and
merit.[22] On July 2, 2009, the RTC September 4, 2009. In its now-assailed
modified its order insofar as it allowed Decision elated November 25, 2009, the
CA granted the petition.[31] It concluded
that the petition for certiorari was filed MSAPL's theory is similar to that
on time because MSAPL did not abandon proffered by one of the parties in the case
their right to impugn the evidence of San Juan, Jr. v. Cruz.[37] The petitioner
submitted in the application for the writ therein filed second and third motions
of preliminary attachment, because they for reconsideration from an interlocutory
filed a motion to determine the order by the trial court. When he filed
sufficiency of the bond. On the merits, it the petition for certiorari with the CA, he
held that the RTC exceeded its authority counted the 60-day reglementary period
when it "ordered the issuance of the writ from the notice of denial of his third
[of preliminary attachment] despite a motion for reconsideration. He argued
dearth of evidence to clearly establish that since there is no rule prohibiting the
[CISC's] entitlement thereto, let alone filing of a second or third motion for
the latter's failure to comply with all reconsideration of an interlocutory
requirements therefor."[32] Noting that order, the 60-day period should be
the posting of the attachment bond is a counted from the notice of denial of the
jurisdictional requirement, the CA last motion for reconsideration. In
concluded that since Plaridel's capacity resolving the question of when the
for single risk coverage is limited to 20% reglementary period for filing a petition
of its net worth, or P57,866,599.80, the for certiorari shall be counted, we held
RTC "should have set aside the second that the "60-day period shall be
writ outright for non-compliance with reckoned from the trial court's denial of
Sections 3 and 4 of Rule 57."[33] his first motion for reconsideration,
otherwise indefinite delays will
After the CA perfunctorily denied CISC's ensue." [38]

motion for reconsideration on April 23,

2010,[34] it filed this petition for review on Applying the rule in San Juan, MSAPL's
certiorari. challenge to the order dated April 13,
2009 was clearly time-barred. The 60-
II
day reglementary period for challenging
the RTC's issuance of the amended writ
CISC argues that the CA erred in giving of attachment should be counted from
due course to the petition insofar as it April 27, 2009,[39] the date when MSAPL
challenged the Orders dated April 13, received a copy of the April 13, 2009
2009, July 2, 2009, and July 8, 2009 Order denying MSAPL's motion for
because the reglementary period to reconsideration of the December 22,
challenge these Orders already lapsed by 2008 Order which granted CISC's
the time private respondents filed their motion to amend the writ of preliminary
petition for certiorari below.[35] In attachment. The CA, however,
response, MSAPL contends that since considered MSAPL's act of filing a
they continued to assail the additional motion to determine the sufficiency of
attachment from the time it was first the bond as a definitive indication that
issued, the 60-day period should be private respondents have not
counted from the final denial of their "abandoned their right to impugn the
challenge to the additional attachment, evidence submitted in the application for
which was on September 4, 2009.[36] the second writ."[40] This is erroneous for
two reasons: first, MSAPL's motion never docket fees, was prematurely filed
impugned the propriety and factual because the RTC has yet to rule on this
bases of the RTC's issuance of the issue. A petition for certiorari may be
amended writ of attachment; and resorted to only when there is no plain,
second, even if it did, the motion would speedy, and adequate remedy in the
be considered as a second motion for ordinary course of law.[44] It is not up to
reconsideration, which could not have parties to preempt the trial court's action
stayed the reglementary period within on their motions. Absent any showing of
which to file a petition for certiorari unreasonable delay on the part of the
assailing an interlocutory order. We RTC-and there is none here, considering
emphasize that the provisions on the short period between the filing of the
reglementary periods are strictly motion and the petition for certiorari, as
applied, indispensable as they are to the well as the various incidents pending a
prevention of needless delays, and are quo-MSAPL's recourse to theCA was
necessary to the orderly and speedy premature. The more appropriate
discharge of judicial business. The remedy for MSAPL would have been to
timeliness of filing a petition for certiorari move for the RTC to resolve its pending
is mandatory and jurisdictional, and motion instead of precipitately raising
should not be trifled with.[41] this matter in its petition for certiorari.[45]

Meanwhile, the Orders dated July 2, This leaves the July 8, 2009 Order which
2009 and July 8, 2009 resolved approved the attachment bond Plaridel
incidental issues with respect to the submitted. It was directly challenged by
issuance of the amended writ of MSAPL when the latter tiled a motion to
attachment, namely: (1) when the determine the sufficiency of the bond
additional docket fees should be paid; because of questions regarding Plaridel's
and (2) the approval of the attachment financial capacity. Before the RTC could
bond. As regards the first incidental act on the motion, however, MSAPL filed
issue, the RTC allowed CISC to pay the an urgent motion to recall and set aside
additional docket fees "within a the approval of the attachment bond,
reasonable time but in no case beyond dated July 21, 2009,[46] on the ground
its applicable prescriptive or that the attachment bond underwritten
reglementary period." MSAPL, instead
[42] by Plaridel exceeded its retention limit
of filing a motion for reconsideration of under the Insurance Code. The RTC
the July 2, 2009 Order, elected to file a resolved these two motions jointly in its
motion to compel CISC to pay the September 4, 2009 Order, holding that
required docket fees on August 14, Section 215 allows insurance companies
2009.[43] Evidently, MSAPL already to insure a single risk in excess of
recognized the validity of the July 2, retention limits provided that the excess
2009 Order and sought CISC's amount is ceded to reinsurers, and
compliance with the Order. Notably, the consequently affirming its approval of
motion remained pending before the the attachment bond. In turn, the
RTC when MSAPL filed its petition for September 4, 2009 Order became the
certiorari with the CA. We find that the anchor of MSAPL's petition for certiorari.
petition for certiorari, insofar as it Although not captioned as "motions tor
questions the alleged non-payment of reconsideration," the twin motions filed
by MSAPL directly challenged the amount of P98,819,770.91 was ceded to
approval of the attachment bond, and 16 other insurance companies.[51] Thus,
the September 4, 2009 Order was the the risk retained by Plaridel is actually
second time the RTC passed upon the P40 Million below its maximum
issue concerning the sufficiency of the retention limit. Therefore, the approval
bond. Therefore, the petition for of the attachment bond by the RTC was
certiorari filed by MSAPL on September in order. Contrary to MSAPL's
18, 2009, insofar as it assailed both the contention that the RTC acted with grave
July 8, 2009 and September 4, 2009 abuse of discretion, we find that the RTC
Orders, was timely filed. not only correctly applied the law but
also acted judiciously when it required
III
Plaridel to submit proof of its
reinsurance contracts after MSAPL
We now resolve the sole substantive questioned Plaridel's capacity to
issue before us: whether the RTC underwrite the attachment bond.
committed grave abuse of discretion Apparently, MSAPL failed to appreciate
when it approved the attachment bond that by dividing the risk through
whose face amount exceeded the reinsurance, Plaridel's attachment bond
retention limit of the surety. actually became more reliable-as it is no
longer dependent on the financial
Section 215 of the old Insurance stability of one company-and, therefore,
Code,[47] the law in force at the time more beneficial to MSAPL.
Plaridel issued the attachment bond,
limits the amount of risk that insurance In cancelling Plaridel's insurance bond,
companies can retain to a maximum of the CA also found that because the
20% of its net worth. However, in reinsurance contracts were issued in
computing the retention limit, risks that favor of Plaridel, and not MSAPL, these
have been ceded to authorized failed to comply with the requirement of
reinsurers are ipso jure deducted.[48] In Section 4, Rule 57 of the Rules of Court
mathematical terms, the amount of requiring the bond to be executed to the
retained risk is computed by deducting adverse party.[52] This led the CA to
ceded/reinsured risk from insurable conclude that "the bond has been
risk.[49] If the resulting amount is below improperly and insufficiently posted."[53]
20% of the insurer's net worth, then the We reverse the CA and so hold that the
retention limit is not breached. In this reinsurance contracts were correctly
case, both the RTC and CA determined issued in favor of Plaridel. A contract of
that, based on Plaridel's financial reinsurance is one by which an insurer
statement that was attached to its (the "direct insurer" or "cedant")
certificate of authority issued by the procures a third person (the "reinsurer")
Insurance Commission, its net worth is to insure him against loss or liability by
P289,332,999.00.[50] Plaridel's retention reason of such original insurance.[54] It is
limit is therefore P57,866,599.80, which a separate and distinct arrangement
is below the Pl13,197,309.10 face value from the original contract of insurance,
of the attachment bond. However, it only whose contracted risk is insured in the
retained an insurable risk of reinsurance agreement.[55] The
P17,377,938.19 because the remaining reinsurer's contractual relationship is
with the direct insurer, not the original
insured, and the latter has no interest in
and is generally not privy to the contract
of reinsurance.[56] Put simply,
reinsurance is the "insurance of an
insurance."[57]

By its nature, reinsurance contracts are

issued in favor of the direct insurer
because the subject of such contracts is
the direct insurer's risk-in this case,
Plaridel's contingent liability to MSAPL
and not the risk assumed under the
original policy.[58] The requirement
under Section 4, Rule 57 of the Rules of
Court that the applicant's bond be
executed to the adverse party
necessarily pertains only to the
attachment bond itself and not to any
underlying reinsurance contract. With
or without reinsurance, the obligation of
the surety to the party against whom the
writ of attachment is issued remains the
same.

WHEREFORE, the petition is

GRANTED. The Decision dated
November 25, 2009 and Resolution
dated April 23, 2010 of the Court of
Appeals in CA-G.R. SP No. 110511 are
SET ASIDE.