The Supreme Court held that a defense not raised in a motion to dismiss or in the answer to a complaint is deemed waived, preventing its later assertion. This ruling clarifies the importance of timely and proper pleading of defenses in civil cases, particularly in construction disputes, and ensures that parties are not prejudiced by belated claims. Failure to assert a defense at the initial stages of litigation can result in its forfeiture, impacting the outcome of the case.
Untimely Objections: Can a Contractor Recover Without a Sworn Statement?
Edron Construction Corporation sued the Provincial Government of Surigao del Sur for unpaid construction works. The province argued that Edron failed to submit a sworn statement, a prerequisite for final payment under their contract. The Supreme Court addressed whether the province could raise this defense so late in the proceedings. This case underscores the critical role of procedural rules in contract disputes and highlights the consequences of failing to timely assert defenses.
The case originated from three construction agreements between Edron Construction Corporation (Edron) and the Provincial Government of Surigao del Sur (Province) for projects including a learning resource center and a public market. Edron completed the projects, and the Province accepted the works. However, the Province failed to pay the agreed amount of P8,870,729.67, leading Edron to file a complaint for specific performance and damages. In its initial Answer, the Province claimed non-liability due to underruns, defective works, prescription, and non-observance of specifications, but did not mention the lack of a sworn statement from Edron.
More than a year after filing its Answer, the Province filed a Motion to Dismiss, arguing that Edron failed to state a cause of action because it did not submit the sworn statement required by the construction agreements. This statement attested that all obligations for labor and materials had been fully paid. The Regional Trial Court (RTC) denied the motion. During trial, Edron admitted it did not execute a separate affidavit, arguing that all necessary information was included in the final billings. The RTC ruled in favor of Edron, ordering the Province to pay P4,326,174.50, attorney’s fees, and costs. The Court of Appeals (CA), however, reversed the RTC’s decision, dismissing the complaint due to the missing sworn statement.
The Supreme Court reversed the CA’s decision, emphasizing the importance of timely raising defenses as outlined in the Rules of Court. Section 1, Rule 9 of the Rules of Court states:
Section 1. Defenses and objections not pleaded. – Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim.
Building on this principle, the Court noted that the Province’s Answer did not include the lack of a sworn statement as a defense. This defense was only raised in the Motion to Dismiss, which was filed well after the deadline for filing an Answer. By failing to raise the defense in its initial pleading, the Province was deemed to have waived its right to assert it later in the proceedings. The Supreme Court referenced Boston Equity Resources, Inc. v. CA, 711 Phil. 451 (2013), underscoring the established principle that defenses not timely raised are considered waived.
The Supreme Court found that because the Province failed to raise the issue of the sworn statement in its Answer, it could not rely on this defense to avoid payment. The Court highlighted that the Motion to Dismiss was filed out of time, in violation of Section 1, Rule 16 of the Rules of Court, which requires motions to dismiss to be filed before the Answer. Furthermore, the defense did not fall under the exceptions listed in Section 1, Rule 9, such as lack of jurisdiction or prescription. Thus, the RTC was correct in denying the Motion to Dismiss and in not considering the issue of the sworn statement in its final decision. The absence of the sworn statement could not serve as a valid basis for the CA to dismiss Edron’s complaint.
The Supreme Court’s decision was also influenced by the fact that the Province issued Certificates of Final Acceptance for the projects. These certificates essentially confirmed that the projects were completed satisfactorily and free from major defects. The Court determined that the Province was liable to Edron for the reduced amount of P4,326,174.50, which was the valuation agreed upon based on the Presidential Flagship Committee’s assessment. The Court also addressed the issue of legal interest. It ordered that the principal amount would earn interest at 12% per annum from the date of first demand (June 20, 2000) to June 30, 2013, and 6% per annum from July 1, 2013, until the finality of the decision. All amounts, including attorney’s fees and costs of suit, would earn an additional 6% per annum from the finality of the decision until fully paid.
FAQs
| What was the key issue in this case? | The key issue was whether the Provincial Government could raise the lack of a sworn statement as a defense when it failed to include it in its initial Answer to the complaint. The Supreme Court ruled that the defense was waived due to its untimely assertion. |
| What is the significance of Rule 9, Section 1 of the Rules of Court? | Rule 9, Section 1 of the Rules of Court states that defenses not raised in a motion to dismiss or in the answer are deemed waived, except for issues of jurisdiction, litis pendentia, res judicata, and prescription. This rule ensures that parties timely assert their defenses. |
| Why did the Court rule in favor of Edron Construction? | The Court ruled in favor of Edron because the Provincial Government failed to raise the issue of the missing sworn statement in its initial Answer, which meant the defense was considered waived. Additionally, the Province issued Certificates of Final Acceptance for the projects. |
| What was the amount awarded to Edron Construction? | Edron Construction was awarded P4,326,174.50, representing the agreed-upon valuation of the completed projects, plus legal interest, attorney’s fees, and costs of suit. The interest rates varied depending on the period. |
| What are Certificates of Final Acceptance and why are they important? | Certificates of Final Acceptance are documents issued by the project owner, confirming that the construction works have been completed satisfactorily and are free from major defects. They are significant because they acknowledge the completion of the project. |
| What is the effect of filing a Motion to Dismiss out of time? | Filing a Motion to Dismiss out of time means that the motion will generally not be considered, especially if the grounds for the motion do not fall under the exceptions of Rule 9, Section 1 of the Rules of Court. The motion must be filed before filing the answer. |
| What legal interest rates were applied in this case? | The legal interest rate was 12% per annum from June 20, 2000, to June 30, 2013, and 6% per annum from July 1, 2013, until the finality of the decision. Post-judgment interest was set at 6% per annum until fully paid. |
| What is the practical implication of this decision for contractors? | This decision emphasizes the importance of properly documenting all project-related matters, including final billings and sworn statements, to ensure they can claim full payment. However, this case is more on the waiver of rights to defend. |
| What is the practical implication of this decision for project owners? | This decision emphasizes the importance of including all relevant defenses in the initial Answer to avoid waiving those defenses. Project owners should thoroughly review contracts and consult with legal counsel. |
In conclusion, the Supreme Court’s decision in Edron Construction Corp. v. Provincial Government of Surigao del Sur underscores the critical importance of timely and proper pleading of defenses in construction disputes. Failure to assert defenses at the initial stages of litigation can result in their forfeiture, impacting the outcome of the case. This ruling serves as a reminder for parties to diligently adhere to procedural rules and seek legal counsel to ensure their rights are protected.
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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: Edron Construction Corporation and Edmer Y. Lim, Petitioners, v. The Provincial Government of Surigao Del Sur, represented by Governor Vicente T. Pimentel, Jr., Respondent., G.R. No. 220211, June 05, 2017