This is a petition for review of the decision^[1] of the Court of Appeals, dated February 4, 1988, affirming in toto the decision of the Regional Trial Court of Quezon City, Branch 89, which ordered petitioner to pay private respondent temperate damages, exemplary damages, and attorney's fees in the total amount of P75,000.00, plus the costs of the suit.

The facts are as follows:

Petitioner Adelaida Kalubiran is the owner of Kalmar Construction, a Cebu-based single proprietorship engaged in the construction business. Private respondent J. Ruby Construction and Maintenance Services (JRCM) is a corporation which is likewise engaged in the construction business.

The Philippine Long Distance Telephone Company (PLDT) entered into an agreement with private respondent JRCM for restoration work at Gen. Maxilom Avenue, Cebu City in line with PLDT's expansion program. On June 9, 1982, the project was considered completed and was accepted by the Cebu City Engineer. It was stated in the acceptance letter of the Cebu City Engineer, however, that the acceptance of the project did not relieve JRCM of its obligation to "undertake repair works on any failure that may occur in any section of the project within one (1) year from the date of acceptance."^[2]

On March 9, 1983, PLDT wrote the Cebu City Engineer requesting a permit for a right-of-way in Cebu City.^[3] The City Engineer informed PLDT that a permit would be granted only "upon restoration of the previously restored section affected by PLDT's expansion programs along Gorordo Avenue, General Maxilom Avenue, D. Jakosalem Street and M.J. Cuenco Avenue." He called attention to "some failures and sagging of the restored areas which need immediate repair to avoid further deterioration."^[4]

PLDT referred the complaint to private respondent JRCM as its project engineer. It called attention to the substandard quality of the materials used and the poor workmanship which it alleged was not in accordance with standard engineering practice.^[5]

On May 4, 1983, the PLDT wrote to the City Engineer requesting reconsideration of the denial of its application for a permit,^[6] but the Cebu City Engineer stood pat on his demand for immediate restoration of the areas affected as condition for the issuance of a permit.^[7]

There is a dispute as to who did the repair work, but the fact remains that it was done and the PLDT was finally granted on July 19, 1983 a permit for its expansion project.^[8]

On November 4, 1983, petitioner Adelaida Kalubiran and Kalmar Construction, through their counsel, wrote PLDT a letter claiming credit for the restoration work and demanding payment of P28,000.00 on the ground that private respondent JRCM refused to pay the amount. The letter reads:^[9]

                                                                                             November 4, 1983

Philippine Long Distance
Telephone Company
Makati General Office Building
Makati, Metro Manila

Attention: Mr. Ceasar Campos
           Senior Vice-President

S i r:

This is written in behalf of our client KALMAR CONSTRUCTION, in connection with the repair of restoration works of J. Ruby Construction and Maintenance Services Corporation and Communication Construction Incorporated undertaken by our client, xerox copy of the restoration work is hereto attached and made an integral part of this letter. The work has been done with the express approval of J. Ruby Construction and Maintenance Services Corporation and Communication Construction Incorporated and with the conformity of the City Engineer of Cebu.

The total claim of our client to J. Ruby Construction and Maintenance Services Corporation and Communication Construction Incorporated is in the amount of P28,000.00 more or less.

At present, J. Ruby Construction and Maintenance Services Corporation and Communication Construction Inc. refused to pay our client because Philippine Long Distance Telephone Company has not paid them for the works undertaken by said companies.

We are therefore directing our claim direct to your end so that whatever amount collectible by J. Ruby Construction and Maintenance Services Corp. and Communication Construction Inc. be deducted from our claim.

Trusting for your immediate attention on this matter.

                                                                       Very truly yours,

                                                                        (SGD.) ROLANDO M. LIM
                                                                         Counsel of Kalmar Construction

Copy furnished:

1) J. Ruby Const. and Maintenance Services Corp.
2) Communication Construction, Inc.
3) City Engineer's Office Cebu City

On December 19, 1983, private respondent JRCM filed a complaint for damages and attorney's fees against Adelaida M. Kalubiran and/or Kalmar Construction, alleging that it never authorized Kalmar Construction to undertake the repair work on PLDT's project. JRCM further claimed that as a result of the letter of Kalmar Construction's counsel to PLDT, the latter ceased giving them major contracts. JRCM also claimed that by writing to PLDT Kalmar Construction engaged in unfair competition because PLDT had a policy prohibiting its contractors to sub-contract work to third persons. A violation of the policy could result in the withdrawal of PLDT's accreditation and disqualification from its construction projects.^[10]

In her answer, petitioner claimed that the letter to PLDT was sent pursuant to the agreement of the parties, among which were PLDT and private respondent JRCM, at a conference held in the Office of the City Engineer of Cebu City in June 1983 and was not motivated by malice or a desire to place petitioner JRCM in a bad light. Petitioner filed a counterclaim for the sum of P20,004.00, for maintenance services allegedly rendered by her company, plus interest, and P500,000.00 as moral, actual, and exemplary damages, and P100,000.00 as attorney's fees.^[11]

On February 25, 1986, the trial court rendered a decision finding petitioner liable to private respondent for damages. The dispositive portion of its decision reads:^[12]

ACCORDINGLY, judgment is hereby rendered ordering the defendants to pay to the plaintiff jointly and severally the sum of P25,000.00, as temperate damages, and the additional sum of P25,000.00, by way of exemplary damages, plus reasonable attorney's fees in the amount of P25,000.00, with costs against the defendants. The counterclaim of the defendants is dismissed for lack of merit.

The trial court found that petitioner indeed made repairs on the restoration work of private respondent JRCM. However, the trial court said she did so without authority because the person (Ben Sayson) who told her to proceed with the repairs at a conference held in June 1983 was a mere laborer who had no authority to speak for private respondent. In addition, the trial court found that, contrary to petitioner's claim, PLDT had already paid private respondent for the work done at the time petitioner's counsel sent the letter to PLDT on November 4, 1983.

Petitioner appealed to the Court of Appeals, which on February 4, 1988, rendered a decision affirming that of the Regional Trial Court. The Court of Appeals found, however, that the repairs on the restoration work were actually made by private respondent and not by petitioner. It agreed with the trial court that in writing PLDT petitioner acted in bad faith.^[13]

Hence, this petition.

First. Petitioner contends that the Court of Appeals erred in reversing the trial court's finding that repairs on the restoration work were made by her although without authority of private respondent JRCM. Petitioner claims that this finding could no longer be revised by the Court of Appeals considering that private respondent JRCM never appealed from the decision of the trial court and did not even file an appellee's brief in the Court of Appeals.

This contention has no merit.

The question of who actually did the repairs is relevant to the appeal of petitioner because she claimed she had done the work but had been refused payment for her services. In determining, therefore, whether her claim from PLDT for payment for such work placed private respondent JRCM in a bad light since, as far as PLDT was concerned, the repairs were to be made by JRCM, it was necessary for the appellate court to pass on the question whether petitioner actually did the repairs. Moreover, it is settled that the appellate court can consider issues, although not specifically raised in the pleadings filed before it, as long as they were raised in the trial court or are matters of record having some bearing on the issues submitted which the parties failed to raise or the lower court ignored.^[14]

Indeed, the questions who actually repaired the restoration work previously done by private respondent JRCM and whether a conference actually took place in June 1983 during which petitioner was allegedly asked by private respondent JRCM to make the repairs are questions which were raised in the lower court. These questions have a bearing not only on petitioner's claim for P20,004.00, for costs of repair that it had allegedly performed, but also on petitioner's claim that in demanding payment of this amount from PLDT her purpose was not to place JRCM in a bad light in view of PLDT's prohibition against subcontracting of jobs being undertaken for it. Nor is there any dispute that, in reviewing the findings of the trial court on these issues, the Court of Appeals relied on the records of this case.

Second. Indeed, the records show that the restoration work was performed by private respondent and not by petitioner and it is doubtful whether a conference was really held in June 1983 during which petitioner was tasked with the repairs of the restoration work.

What happened was that private respondent JRCM purchased asphalt from petitioner and rented the latter's road roller which was operated by petitioner's employee in order to undertake the repairs. Engineer Rodolfo Marcia, project engineer of private respondent JRCM, testified:^[15]

ATTY. PORMENTO:
Q :	Do you remember whether on May 16, 1983 you went to Cebu City?
A :	Yes, sir.
Q :	And why did you go to Cebu City?
A :	I was sent to by my employer, J. Ruby Construction to undertake a repair.
Q :	What kind of repair was that?
A :	Restoration of the asphalt pavement.
Q :	Where did you come from when you went to Cebu City?
A :	From Manila
Q :	And what kind of transportation did you take?
A :	By boat.
Q :	Did you have a ticket.
A :	Yes, sir.
Q :	Will you be able to recognize that ticket if shown to you.
A :	Yes, sir.
Q :	Showing to you a freight ticket of Sulpicio Lines, Inc., already marked as Exhibit H, dated May 16, 1983, received from R. Marcia in the amount of P896.75, Receipt No. 529926 and also in the name of R. Marcia, do you recognize this receipt?
A :	Yes, sir.
Q :	Who is this R. Marcia?
A :	I am the one.
Q :	Did you arrive at Cebu City?
A :	Yes, sir.
Q :	When you arrived there, what did you do after you arrived there?
A :	I went to the Office of Local Manager of PLDT to coordinate with him and to deliver the letter coming from my employer, J. Ruby Construction.
Q :	And were you able to do that?
A :	Yes, sir.
Q :	Now, after you have delivered that letter and having presented yourself with the Local officer of the PLDT what did you do?
A :	I went to the jobsite, because I was then carrying the plan in order to examine and investigate the failure of the restoration.
Q :	Were you able to go to the jobsite and see for yourself the failure and investigate the failure of the project?
A :	Yes, sir.
Q :	Are you referring to the Project Estimate found at Gen. Maxillom Cebu City?
COURT:
	Is that marked already?
ATTY. PORMENTO:
	Exhibits A, A-1 to A-5.
Q :	And what did you do after you have investigated and inspected the jobsite?
A :	I ordered for asphalt.
Q :	And by the way, when you proceeded to Cebu City from Manila, what equipment did you bring with you?
A :	Jeep, water pump and accessories.
Q :	Are you referring to these items in Exhibit J, this jeep and water pump, these items here below the ticket No. 529926?
A :	Yes, sir.
Q :	Were you able to purchase asphalt material for the use of the repair, were you able to buy?
A :	Yes, sir.
Q :	From whom?
A :	Kalmar Construction.
Q :	Are you referring to the Kalmar Construction, one of the defendants in this case?
A :	Yes, sir.
Q :	And what construction material did you use in that repair?
A :	We brought with us tools like rake.
Q :	I am referring to the asphalt material?
A :	We were carrying with us the bituminous.
Q :	Now, after having purchased this asphalt mix from Kalmar and with the bituminous you brought with you from Manila, what did you do?
A :	I rented a road roller.
Q :	Why do you rent the road roller?
A :	We need it for levelling and to compact the mix.
Q :	Where you able to use that road roller?
A :	Yes, sir.
Q :	Who operated that road roller?
A :	Kalmar Construction operator.
Q :	Now, how many failure or false on that restoration work on that project did you find, more or less?
A :	More or less thirty (30).
Q :	Were you able to repair this more or less 30 failures?
A :	Yes, sir.
Q :	Now, how many purchases of asphalt did you make with Kalmar?
A :	More than 24.
Q :	Now, in connection with rent of road roller from Kalmar Construction, do you have any receipt to show?
A :	Yes, sir.
Q :	Showing to you this receipt dated June 4, 1983 Exhibit N, which says below, rental of one (1) compactor with the road roller?
A :	This is the proof that we rented the road roller.

Engineer Marcia's testimony is supported by documentary evidence.

(1) Exhibit H^[16] is a freight receipt issued by the Sulpicio Lines. It shows that a service jeep with accessories was shipped to Cebu City from Manila by Engineer Marcia in connection with the repairs made by his company;

(2) Exhibit M^[17] is a receipt issued by Kalmar Construction showing payment by private respondent JRCM of rent for the use of the former's compactor;

(3) Exhibits K and K-1^[18] are receipts, also issued by Kalmar Construction, acknowledging payments by private respondent JRCM for asphalt and other material;

(4) Exhibit K-2^[19] is another receipt issued by Kalmar Construction acknowledging payment of rent by private respondent JRCM for the use of a road roller.

Marcia's testimony was corroborated by no less than Engineer Evangeline Kalubiran and petitioner Adelaida Kalubiran herself. Engineer Kalubiran testified:^[20] 

ATTY. SAMSON:
Q	A certain Engr. Marcia testified that he works with plaintiff Jose Ruby, and he said that they bought asphalt from Kalmar Construction which they used in the said restoration of the failure, what can you say about that, is it true or not?
COURT:
	Which one?
ATTY. SAMSON:
	The fact that they bought asphalt, Your Honor.
WITNESS:
	Yes, they bought asphalt from us but they used it in the first restoration, in the original restoration.
ATTY. SAMSON:
Q	Now, about the asphalt material used in the restoration of the failure, the subject matter of this case, who provide[d] this asphalt?
A	We provided the asphalt used in the failure of their original restoration.
Q	Where did you get this asphalt?
A	From our plant.
Q	This plant is situated where?
A	In Cebu City.

On the other hand, petitioner Adelaida Kalubiran told the court:^[21] 

ATTY. SAMSON
Q	Since when have you been engaged in the construction and contractor business?
A	Our construction started since 1968 in Cebu City.
Q	In the course of your business as contractor of construction work, do you have any transaction with certain corporation . . . with the plaintiff J. Ruby?
Q	In the course of your business as contractor of construction work, do you have any transaction with certain corporation . . . with the plaintiff J. Ruby?
A	Yes, sir.
Q	What kind of construction [sic]?
A	They usually bought from us asphalt.
Q	More or less, in what year was this transaction?
A	It was in the year 1983.

Petitioner Adelaida Kalubiran never claimed her company made the repairs on the restoration work for private respondent. Much less did she mention any agreement between her company and private respondent for the repair of PLDT's restoration work. It thus appears that petitioner merely sold asphalt to private respondent and rented out their road roller and compactor to it but she did not actually make the repairs. The Court of Appeals correctly found that it was not petitioner but private respondent which performed PLDT's restoration work.

Nor is there evidence to show that a conference was held in June 1983 during which petitioner was contracted to make the repairs in question. One of those allegedly present at the conference, PLDT Project Inspector Venancio Atienza, denied there was such a conference held and said he had been asked by Engineer Kalubiran to sign an affidavit falsely stating that he was present at the alleged meeting. Atienza testified:^[22]

Q	Now, Engineer Evangeline Kalubiran, a witness for the defendant, testified in Court to the effect that there was a meeting or conference called by City Engineer of Cebu sometime on June or July, 1983 at the Office of the City Engineer of Cebu, according to her PLDT was present, their representative represented by you, that J. Ruby, represented by Ben Sayson and other company and that Kalmar was represented by Engineer Kalubiran and their corporation, it was agreed by you and all the parties that the repair of the failure of the restoration work conducted by J. Ruby on the PLDT East X4-OAC IV at General Maxillom, Cebu City, that Kalmar shall take over the repair of this failure in said place, what can you say on this?
A	I want to say to this Court that all the statement of Engineer Kalubiran was wrong.
Q	Why wrong?
A	Because, on that time June or July of 1983 I was already here in Manila.
Q	By the way, as Project Inspector of PLDT does the PLDT authorize project inspector to represent in meetings?
A	No, sir.
Q	Will the PLDT agree to such arrangement wherein another contractor which has no contract with PLDT will take over the other contractor, of which the PLDT ha[s] contract?
ATTY. SAMSON:
	Hypothetical.
COURT:
	May answer.
A	No, the PLDT will not permit that to give the contract to be taken over by another contractor.
ATTY. PORMENTO:
Q	Do you know personally Engineer Kalubiran?
A	Yes, sir.
Q	Do you remember having met them in Manila after you stayed in Cebu City?
A	Yes, sir, I met them.
Q	How did you meet them?
A	They called me thru telephone and they said they are coming to Manila to meet me.
Q	Where were you when you received that telephone call?
A	I was in my office.
Q	What was that telephone?
A	Long distance call from Cebu
Q	Did they appear on the date told to you?
A	They did not arrive because of some problem then they called me another long distance call and they said they are coming on the 4th day.
Q	And did they actually come on the 4th day on the second telephone call?
A	Yes, sir.
Q	Where did you meet?
A	PLDT office.
Q	What transpired then?
A	They gave me an affidavit and let me sign or confirm that affidavit that I am present on the meeting and I am the one representing the PLDT.
Q	Did you sign that affidavit?
A	No, sir.
Q	Why did you not sign?
A	Because that is not true.

It is noteworthy that no record of the alleged conference or of any agreement supposedly made therein was ever presented.

Third. Nonetheless, it is contended that petitioner cannot be held liable for the letter which gave rise to this action because it was written by petitioner's counsel. It is settled, however, that the mistake of counsel binds the client. It is only in case of gross or palpable negligence of counsel when the courts must step in and accord relief to a client who suffered thereby.^[23]

Petitioner's reliance on the ruling in Deles v. Aragona, Jr.,^[24] that pleadings filed in a case constitute privileged matter and are not actionable, is misplaced. In that case, it was held:

Since there is no doubt that the allegations made by the respondent in the questioned motion for contempt are statements made in the course of a judicial proceeding . . . they are absolutely privileged, thereby precluding any liability on the part of the respondent. ^[25]

The ruling is clearly inapplicable to the case at bar since the letter written by petitioner's counsel was not one made in the course of judicial proceedings. It was not, therefore, privileged.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

Bellosillo (Chairman), Puno and Maritnez JJ. concur.

---

^[1] Per Justice Manuel C. Herrera and concurred in by Justices Jorge S. Imperial and Jose A.R. Melo (now Associate Justice of the Supreme Court).

^[2] Records p. 44, Exh. E.

^[3] Id., p. 158, Exh. 7.

^[4] Id., p. 159, Exh. 8.

^[5] Id., p. 46, Exh. G.

^[6] Id., p. 160, Exh. 9.

^[7] Id., p. 161, Exh. 10.

^[8] Id., p. 166, Exh. 12.

^[9] Id., p. 70, Exh. 2.

^[10] Id., pp. 1-6.

^[11] Id., pp. 22-26.

^[12] Id., p. 211.

^[13] CA Rollo, pp. 47-56.

^[14] E.g., Chua v. Court of Appeals, 206 SCRA 339(1992); Tambunting v. Court of Appeals, 167 SCRA 16 (1988); Relativo v. Castro, 76 Phil. 563 (1946).

^[15] TSN, pp. 2-5, July 5, 1985.

^[16] Records, p. 47.

^[17] Id.,p. 54.

^[18] Id., p. 50.

^[19] Id., p. 50.

^[20] TSN, pp. 11-12, Aug. 16, 1985.

^[21] TSN, p. 3, March 22, 1985.

^[22] TSN, pp. 17-18, July 5, 1985.

^[23] Legarda v. Court of Appeals, 195 SCRA 418 (1991).

^[24] 27 SCRA 633 (1969).

^[25] Id,. at 641.