In D.M. Consunji, Inc. v. Duvaz Corporation, the Supreme Court ruled that summary judgment was not appropriate in a construction dispute, as genuine issues of material fact existed, requiring a full trial. The Court emphasized that summary judgment is only proper when there is no real dispute regarding the facts and the moving party is entitled to judgment as a matter of law. This decision underscores the importance of presenting evidence and allowing a trial when factual disputes arise between parties in construction contracts. The presence of genuine issues, particularly regarding the extent and validity of counterclaims, necessitates a thorough examination through trial proceedings.

When Cracks Appear: Can Summary Judgment Patch Up a Construction Dispute?

D.M. Consunji, Inc. (DMCI) sought to recover an unpaid balance from Duvaz Corporation (Duvaz) for the construction of the substructure of the Alfaro’s Peak building. Duvaz, however, claimed there were serious defects in the construction of both Alfaro’s Peak and an adjacent building, the Peak, and filed counterclaims against DMCI. DMCI then moved for summary judgment, arguing that Duvaz’s counterclaims were already prescribed. The Regional Trial Court (RTC) denied the motion, opting for a full trial, and the Court of Appeals (CA) affirmed this decision. The central legal question was whether there were genuine issues of material fact that would preclude summary judgment, requiring a full trial to resolve the dispute.

The Supreme Court agreed with the lower courts that a full trial was necessary. The Court stated that summary judgment is appropriate only when there is no genuine issue as to any material fact, except for the amount of damages. Quoting Solidbank Corp. v. CA, the Court explained that summary judgment avoids lengthy litigations and delays when facts are not in dispute. However, it is improper when the pleadings present a genuine issue that requires the presentation of evidence.

Section 3. Motion and proceedings thereon. – The motion shall be served at least ten (10) days before the time specified for the hearing. The adverse party may serve opposing affidavits, depositions, or admissions at least thee (3) days before the hearing. After the hearing, the judgment sought shall be rendered forthwith if the pleadings, supporting affidavits, depositions, and admissions on file, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

Building on this principle, the Court cited Asian Construction and Development Corporation v. Philippine Commercial Industrial Bank, emphasizing that a “genuine issue” requires evidence, unlike a sham or false claim. The moving party bears the burden of demonstrating the absence of any genuine issue of fact. Here, the Court found that DMCI failed to prove the absence of such issues.

The Court addressed DMCI’s argument that Duvaz had already admitted its liability. The Court highlighted that Duvaz’s Answer in Civil Case No. 991354 specifically denied DMCI’s claim, creating doubt as to the certainty of the facts. The Supreme Court reiterated a stance that lower courts should resolve any doubts in favor of the party opposing summary judgment. Also, the Court addressed DMCI’s argument of res judicata, stemming from a previous order related to the contractor’s lien annotation; because the annotation action was not a collection suit it does not serve to resolve issues of debt and the res judicata argument falters due to differing causes of action and relief sought.

Furthermore, the Court considered Duvaz’s letter offering to settle the account with DMCI did not equate to an explicit acknowledgement of complete liability, especially since the letter was marked with “WITHOUT PREJUDICE.” Even if DMCI’s principal claim was undisputed, Duvaz’s compulsory counterclaims involved a larger amount and were based on damages resulting from DMCI’s alleged mal-execution of construction works. DMCI’s assertion that the counterclaims were frivolous only raised more factual questions, highlighting the need for a trial.

The Court dismissed DMCI’s prescription argument, clarifying that Duvaz sought recovery not on the basis of breach of warranty against hidden defects, but for damages caused by DMCI’s construction work. Thus, the expiration of the defects’ liability periods was irrelevant to Duvaz’s claim. Consequently, the conflicting positions of the parties on issues such as estoppel, prescription, and liability necessitated a full trial for evidence presentation.

FAQs

What was the key issue in this case?	The central issue was whether summary judgment was appropriate given the presence of genuine issues of material fact in a construction dispute between D.M. Consunji, Inc. and Duvaz Corporation.
What is a summary judgment?	Summary judgment is a procedural tool used to expedite cases where there is no genuine issue of material fact, allowing the court to make a decision based on the law without a full trial.
Why was summary judgment denied in this case?	Summary judgment was denied because the Court found that there were genuine issues of fact, particularly concerning the validity and extent of Duvaz Corporation’s counterclaims against D.M. Consunji, Inc.
What are genuine issues of material fact?	Genuine issues of material fact are factual disputes that require the presentation of evidence and witness testimony to resolve, as opposed to sham or contrived issues.
What did D.M. Consunji, Inc. (DMCI) claim in its complaint?	DMCI claimed that Duvaz Corporation owed them an unpaid balance for the construction of the Alfaro’s Peak building substructure.
What counterclaims did Duvaz Corporation make against DMCI?	Duvaz Corporation asserted that DMCI had performed substandard construction work on both the Alfaro’s Peak and an adjacent building, The Peak, resulting in damages that needed rectification.
What was the significance of Duvaz Corporation’s letter offering to settle the account?	The Court noted that the letter, marked “WITHOUT PREJUDICE,” did not equate to an explicit acknowledgment of liability and did not prevent Duvaz from disputing the amount owed.
How does this ruling affect construction disputes?	This ruling underscores that summary judgment is inappropriate in construction disputes with genuine factual disagreements, emphasizing the necessity of a full trial for proper resolution.

This case serves as a reminder that summary judgment is not a shortcut when genuine factual issues remain unresolved. The Supreme Court’s decision affirms the importance of a full trial to ensure a just and thorough resolution of disputes, particularly in complex construction cases involving counterclaims and questions of liability.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: D.M. Consunji, Inc. v. Duvaz Corporation, G.R. No. 155174, August 04, 2009