Supreme Court E-Library
Information At Your Fingertips

  View printer friendly version

The Case

This Petition for Review on Certiorari under Rule 45 seeks to reverse and set aside the Decision^[1] dated May 28, 2002 of the Court of Appeals (CA) in CA-G.R. No. 67126 entitled D.M. Consunji, Inc. v. Honorable Tranquil P. Salvador, Jr., presiding judge, Branch 63, Regional Trial Court, Makati City and DUVAZ Corporation, and its Resolution^[2] of September 12, 2002 denying petitioner's motion for reconsideration.

The Facts

On August 30, 1996, petitioner D.M. Consunji, Inc. (DMCI) and respondent Duvaz Corporation (Duvaz) entered into a contract, denominated as Construction Contract No. AP-CC-A-0007,^[3] whereby DMCI undertook to construct, for Duvaz, the substructure/foundation of the Alfaro's Peak building project located on 106 Alfaro St., Salcedo Village, Makati City. Actual construction works on the project started in early 1997.

Immediately adjacent to the Alfaro's Peak site is a condominium building, called the Peak, which was constructed in 1990-1993, with DMCI as the general construction contractor. Ownership of the Peak--formerly developed by RDR Property Holdings, Inc., once a subsidiary of Duvaz--eventually became vested in the latter.

By virtue of a Certificate of Completion and Acceptance of Work^[4] Duvaz issued, the foundation project was deemed completed on October 31, 1997 and, as stated in the certificate, the one-year defect liability period would end on October 31, 1998. As DMCI claimed, at the time of project completion, there was an unpaid balance on the contract price in the amount of PhP 29,209,735.85.

On December 22, 1997, Duvaz filed with the Securities and Exchange Commission (SEC) a petition^[5] for the declaration of a state of suspension of payments, docketed as SEC Case No. 12-97-5850. In the petition in which DMCI was listed as "admitted creditor" for the amount of PhP 29,209,735.85, Duvaz claimed having more than sufficient assets to satisfy its debts but cannot answer its maturing obligations as they fall due. In due time, SEC granted the petition.

To protect its interest, DMCI filed on January 29, 1998 with the Regional Trial Court (RTC), Branch 66 in Makati City a petition^[6] for the annotation of contractor's lien on TCT No. 200089 registered in the name of Duvaz, docketed as LRC No. M-3839. TCT No. 200089 covered the landsite of the Alfaro's Peak. In this petition, DMCI alleged that Duvaz's indebtedness, as of January 12, 1998, arising from the foundation project was in the amount of PhP 32,422,387.11, inclusive of interest, an allegation which Duvaz, in a Manifestation^[7] dated September 23, 1998, controverted, albeit it admitted having "an account with [DMCI] in the amount of [PhP] 29,209,735.85." By Order dated October 28, 1998^[8] the Makati City RTC directed the annotation of a contractor's lien on TCT No. 200089 in the amount of PhP 29,209,735.85.

Later, Duvaz withdrew its petition before the SEC, prompting DMCI to demand from Duvaz payment of the unpaid balance of the contract price. In one of those demand-letters,^[9] the amount of PhP 32,422,387.11 appeared as the outstanding unpaid balance.

In a letter of January 21, 1999^[10] in reply to DMCI's demand-letter dated January 19, 1999, Duvaz, without indicating any specific amount representing its supposed indebtedness, proposed to pay DMCI PhP 1 million a year for at least next three years and larger payments afterwards. DMCI obviously found the settlement proposal unacceptable, for, on July 22, 1999, it filed a suit with the RTC in Makati City against respondent for a sum of money. In its complaint^[11] docketed as Civil Case No. 99-1354 and raffled to Branch 63, DMCI prayed for the recovery of the sum of PhP 38,765,956.53 plus interests, attorneys' fees, and litigation expenses.

In its Answer with Compulsory Counterclaims,^[12] Duvaz specifically denied DMCI's averment that it owes the latter PhP 38,765,956.53, as of June 1999. And by way of affirmative defenses to support its counterclaims, Duvaz alleged serious defects in the construction of the substructure of both the Alfaro's Peak and the Peak for which it prayed that DMCI be ordered to pay PhP 35 million, more or less, for rectification works; USD 226,600 and PhP 2,015,235 to answer for additional costs and charges claimed by the project engineer and others, as a result of rectification-related delays; and attorneys fees, without prejudice to other quantifiable claims. With respect to the defects adverted to needing rectification, Duvaz alleged, among others, the following:

(1) In the course of the substructure construction in 1997 at the Alfaro's Peak Project, it was discovered that significant portions of the substructure of the Peak were encroaching and abutting beyond and into the property line of Alfaro's Peak. Rectification works undertaken by DMCI, as the Peak's construction contractor, to address the effects of the protruding substructure of the Peak resulted in the delay of the Alfaro's Peak Project;

(2) During the above rectification works, damages were incurred by the substructure and basement walls of the Peak that would require further rectification works; and

(3) The mal-execution of the construction works on the Peak and Alfaro's Peak and DMCI's substandard work practices created, among other things, underground water seepage problem and rendered necessary a determination of whether the substructures of the Alfaro's Peak also encroached into the adjacent vacant lot.

Thereafter, on September 23, 1999, DMCI, as plaintiff a quo, moved for summary judgment,^[13] alleging that there is no valid defense to its complaint. As DMCI argued in the motion, Duvaz' counterclaims have already prescribed, the construction of the Peak having been finished in 1993 and the Alfaro's Peak in 1997; thus, the respective defects' liability periods for both projects had already lapsed.

To the above motion, Duvaz interposed an opposition, appending, as exhibits, documents and photographs bearing on matters asserted in its defense and counterclaims. An exchange of pleadings then followed.

On May 2, 2000, in Civil Case No. 99-1354, the RTC issued an Order^[14] denying the motion for summary judgment, pertinently stating:

After due consideration of plaintiff's motion for summary judgment together with defendant's opposition thereto and their respective pleadings that followed, this Court opts for a full-blown trial to determine the allegations of estoppels and warranty against hidden defects (relative to the subject construction contract) by plaintiff and defendant, respectively.

Another Order dated August 28, 2001^[15] denied DMCI's motion for reconsideration.

Therefrom, DMCI went to the CA via a petition for certiorari, docketed as CA-G.R. SP No. 67126, and asked for the nullification of the twin orders of the RTC on the following stated grounds:

a. Respondent Judge acted with grave abuse of discretion amounting to lack or in excess of jurisdiction in refusing to render a summary judgment despite the fact that on the basis of the pleadings, admissions, exhibits and documents extant on the records, there is no genuine issue as to any material fact and that petitioner is entitled to a summary judgment as a matter [of] law x x x.

On May 28, 2002, the CA issued the assailed decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly DISMISSED, for lack of merit. Consequently, the assailed Orders dated May 2, 2000 and August 28, 2001 are hereby both AFFIRMED and REITERATED.

With costs against the petitioner.

SO ORDERED.

Subsequently, on September 12, 2002, the CA issued the assailed resolution denying DMCI's motion for reconsideration.

Hence, DMCI filed this petition.

The Issue

The Honorable [CA] committed serious errors of law in dismissing the Petition for Certiorari which in effect denied petitioner's Motion for Summary Judgment considering that:

I

Petitioner's principal claim under the complaint is admitted by the respondent or is already a settled issue under the principle of res judicata, and therefore, can no longer be denied or controverted;

II

Respondent's defenses/counterclaims under the admitted facts and circumstances are sham, fictitious, or patently unsubstantial or speculative and/or were clearly contrived or concocted for purposes of delay only.

III

At any rate, even assuming arguendo that there was a defect in the work done, petitioner is not liable for such defect under the law and contract executed by the parties.

IV

The reasons cited by the Honorable [CA] for the dismissal of the Petition for Certiorari are untenable for being contrary to law and jurisprudence.^[16]

The Ruling of the Court

The issue in this case is really whether summary judgment in accordance with the Rules of Court is proper. We rule in the negative and, thus, deny the instant petition.

Sections 1 and 3, Rule 35 of the Rules on summary judgment provide:

Section 1. Summary judgment for claimant. - A party seeking to recover upon a claim, counterclaim, or cross-claim x x x may, at any time after the pleading in answer thereto has been served, move with supporting affidavits, depositions or admissions for a summary judgment in his favor upon all or any part thereof.

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.

In Solidbank Corp. v. CA,^[17] the Court, explaining when summary judgment may be allowed, wrote:

Summary judgment is a procedural device resorted to in order to avoid long drawn out litigations and useless delays. When the pleadings on file show that there are no genuine issues of fact to be tried, the Rules of Court allows a party to obtain immediate relief by way of summary judgment. That is, when the facts are not in dispute, the court is allowed to decide the case summarily by applying the law to the material facts.

Conversely, where the pleadings tender a genuine issue, summary judgment is not proper. A "genuine issue" is such issue of fact which [requires] the presentation of evidence as distinguished from a sham, fictitious, contrived or false claim.

Rule 34, Section 3 of the Rules of Court provides two (2) requisites for summary judgment to be proper: (1) there must be no genuine issue as to any material fact, except for the amount of damages; and (2) the party presenting the motion for summary judgment must be entitled to a judgment as a matter of law.

Elaborating on the concept of a "genuine issue," we held in Asian Construction and Development Corporation v. Philippine Commercial Industrial Bank,^[18] as follows:

Under the Rules, summary judgment is appropriate when there are no genuine issues of fact which call for the presentation of evidence in a full-blown trial. Even if on their face the pleadings appear to raise issues, when the affidavits, depositions and admissions show that such issues are not genuine, then summary judgment as prescribed by the Rules must ensue as a matter of law. The determinative factor, therefore, in a motion for summary judgment, is the presence or absence of a genuine issue as to any material fact.

A "genuine issue" is an issue of fact which requires the presentation of evidence as distinguished from a sham, fictitious, contrived or false claim. When the facts as pleaded appear uncontested or undisputed, then there is no real or genuine issue or question as to the facts, and summary judgment is called for. The party who moves for summary judgment has the burden of demonstrating clearly the absence of any genuine issue of fact x x x. Trial courts have limited authority to render summary judgments and may do so only when there is clearly no genuine issue as to any material fact. When the facts as pleaded by the parties are disputed or contested, proceedings for summary judgment cannot take the place of trial.

From the foregoing provisions and pronouncements, it is clear that summary or accelerated judgment is proper only when, based on the pleadings, depositions, and admissions on file, and after hearing, it is shown that save as to the amount of damages, there is no veritable issue regarding any material fact in the action and the movant is entitled to judgment as a matter of law. Conversely, where the pleadings tender an issue, that is, an issue of fact the resolution of which calls for a presentation of evidence, as distinguished from an issue which is sham or contrived, summary judgment is not proper.

In this case, we are convinced that genuine issues exist. DMCI anchors its case on the following premises: Its principal claim against Duvaz is undisputed as the latter is in fact estopped to deny it. According to DMCI, Duvaz had admitted--and, hence, can no longer be heard to disclaim--its liability in its Answer in Civil Case No. 991354 before the RTC; in the pleadings in SEC Case No. 12-97-5850; in the pleadings in LRC Case No. M-3839 before the Makati City RTC; and in its reply^[19] to one of DMCI's demand letters. Pushing the point further, DMCI states that the order in LRC Case No. M-3839 has the effect of res judicata.

DMCI's posture on estoppel is untenable. Far from containing an admission of liability, Duvaz's Answer in Civil Case No. 991354 contained a specific denial of petitioner's claim, thus:

4. [Duvaz] specifically denies the allegations in paragraph 5 of the complaint to the effect that [Duvaz] owes [DMCI] P38,765,956.53 inclusive of interest as of 15 June 1999, the truth of the matter being: - (a) that [DMCI's] charging of interest thereon at the rate of 2% has no contractual or legal basis whatsoever, and (b) as stated in the Special and Affirmative Defenses and the Compulsory Counterclaims set forth below.

As may be noted, Civil Case No. 99-1354 came after the proceedings in SEC Case No. 12-97-5850, and LRC Case No. M-3839 had finally been terminated. Be that as it may, the answer in Civil Case No. 99-1354 diluted any admission, if there were indeed admissions, made in the SEC and LRC cases and, as the CA put it, "engenders a cloud of doubt as to the certainty of the facts as alleged." Such doubt should be resolved against the grant of the motion for summary judgment.^[20] To paraphrase what we said in Tan v. De la Vega,^[21] lower courts, when faced with a motion for summary judgment, should resolve doubts in favor of the party against whom it is directed, giving such party the benefit of all favorable inferences.

And lest it be overlooked, the Manifestation^[22] Duvaz submitted in relation to LRC Case No. M-3839 was not a categorical admission of absolute liability to DMCI, Duvaz, as it were, limiting itself to saying that it has an account with DMCI in the amount of PhP 29,209,735.85.

DMCI's contention that the Makati City RTC's order in LRC Case No. M-3839 is, under the principle of res judicata, conclusive as between it and Duvaz as regards the contractor's claim for the unpaid balance against Duvaz strikes the Court as a bit incredulous. LRC Case No. M-3839, to stress, was an action to annotate a contractor's lien, not a collection suit where the purported debtor is expected to present its defenses and counterclaims, if there be any, to defeat the suitor's claim. At any rate, the order adverted to cannot be accorded the force of res judicata vis-à-vis the sum-of-money case at bench owing to the lack of identity of rights asserted or causes of action and identity of relief sought.

Finally, Duvaz's January 21, 1999 letter-reply wherein it offered to settle its account with DMCI does not necessarily mean that Duvaz had waived its right to question the principal amount of its obligation. For one, the said letter does not contain a specific amount of how much Duvaz owed DMCI. And for another, the phrase "WITHOUT PREJUDICE" was written on the letter, suggesting the conditional or tentative nature of the offer.

At any event, assuming arguendo that the principal amount of the petitioner's claim is now beyond question, its plea for a summary judgment would still not be proper in the light of the compulsory counterclaims that involve an even larger amount than the claim stated in the underlying complaint. For perspective, the counterclaims are premised mainly on consequential damages Duvaz suffered owing to DMCI's mal-execution of the construction works on the Peak which adversely affected the prosecution of the Alfaro's Peak project, such that rectification works had to be undertaken, e.g., demolitions of abutments and re-alignment of protruding/encroaching bars. The rectification process in turn spawned other serious problems, such as cracks in the basement walls, water leakage, and flooding of the several portions of the basement,^[23] not to mention the delay in the prosecution of the Alfaro Peak project.

Ironically, DMCI's attempt to depict the counterclaims as sham even in the face of documents and exhibits lending prima facie support to Duvaz's opposition to the motion for summary judgment tends to raise more factual questions rather than prove the absence of the counterclaims. To be sure, the trial court did not find the counterclaims to be false or contrived. We, too, are of a similar disposition.

DMCI's argument that Duvaz's counterclaims have already prescribed--the defects' liability periods for both project having elapsed, i.e., in October 1998 for Alfaro's Peak and 1994 for the Peak--does not convince us. Suffice it to reiterate that one of Duvaz's claim is: the poor rectification works done by DMCI to address the abutments of the substructure of the Peak damaged the basement walls of the Peak, resulting in the worsening of the water seepage problem already existing. In other words, Duvaz appears to seek, by way of counterclaim, recovery not on the basis of the breach on the warranty against hidden defects but rather damage caused by DMCI to Duvaz's property in the construction of another project. The expiration of the defects' liability periods for the two projects is immaterial to this claim of Duvaz.

With the parties' conflicting postures on, among others, the issues of estoppel, prescription, and DMCI's liability and Duvaz's corollary right for damages arising from the alleged mal-execution of the construction works, the only way to ascertain whose position jibes with facts on the ground is obviously through the presentation of evidence by the parties in a full blown trial on the merits. This is as it should be for, as we indicated earlier, any doubt as to the propriety of the rendition of a summary judgment must be resolved against it.^[24] With the tender of genuine issues before it, the RTC acted properly, and within its sound discretion, in denying petitioner's motion for summary judgment.

WHEREFORE, the instant petition is DENIED. The CA's May 28, 2002 Decision and September 12, 2002 Resolution in CA-G.R. SP No. 67126 are hereby AFFIRMED. This case is accordingly REMANDED to the trial court for trial on the merits.

Costs against petitioner.

SO ORDERED.

Ynares-Santiago, (Chairperson), Chico-Nazario, Nachura, and Peralta, JJ., concur.

---

^[1] Rollo, pp. 46-55. Penned by Associate Justice Martin S. Villarama, Jr. and concurred in by Associate Justices Conchita Carpio Morales (now a member of this Court) and Mariano C. Del Castillo.

^[2] Id. at 56.

^[3] Id. at 58-60.

^[4] Id. at 89.

^[5] Id. at 90-98.

^[6] Id. at 102-104.

^[7] Id. at 105.

^[8] Id. at 107.

^[9] Id. at 115. The demand letter was dated January 12, 1999.

^[10] Id. at 117.

^[11] Id. at 118-126.

^[12] Id. at 127-135.

^[13] Id. at 136-142.

^[14] Id. at 314.

^[15] Id. at 388.

^[16] Id. at 12.

^[17] G.R. No. 120010, October 3, 2002, 390 SCRA 241, 249.

^[18] G.R. No. 153827, April 25, 2006, 488 SCRA 192, 203.

^[19] Supra note 10.

^[20] Excelsa Industries, Inc. v. Court of Appeals, G.R. No. 105455, August 23, 1995, 247 SCRA 560, 569.

^[21] G.R. No. 168809, March 10, 2006, 484 SCRA 538, 553-554.

^[22] Supra note 7.

^[23] Rollo, pp. 730-732.

^[24] Regalado, Remedial Law Compendium, 399 (9^th revised ed.)