EDRON CONST. v. PROVINCE OF SURIGAO DEL SUR

EDRON CONSTRUCTION CORPORATION and EDMER Y. LIM, Petitioners vs THE PROVINCIAL GOVERNMENT OF SURIGAO DEL SUR, represented by GOVERNOR VICENTE T. PIMENTEL, JR., Respondent

G.R. No. 220211 

June 5, 2017 

FACTS: 

 The instant petition stemmed from a Complaint for specific performance and damages filed by petitioners Edron Construction Corporation and Edmer Y. Lim (Lim; collectively, petitioners) against respondent before the RTC. Petitioners alleged that they entered into three (3) separate construction agreements with respondent for the construction of the Leaming Resource Center of Tandag, Tandag Bus/Jeepney Terminal, and Tandag Public Market. Petitioners claimed that despite their completion and respondent's consequent acceptance of the works as evidenced by Certificates of Final Acceptance, the latter had yet to pay them the aggregate amount of ₱8,870,729.67, despite numerous oral and written demands. Thus, they filed the instant complaint to claim the aforesaid amount, plus ₱500,000.00 as actual damages and ₱250,000.00 as attorney's fees. In its Answer with Counterclaim dated January 6, 2009, respondent admitted the existence of the aforesaid construction contracts. However, it nevertheless maintained, inter alia, that: (a) there is no unpaid balance; (b) petitioners are in fact liable for underruns and defective works; (c) petitioners had already waived or abandoned their right to collect any amount on the ground of prescription; and (d) petitioners are guilty of nonobservance of the specifications indicated in the construction contracts. More than a year after the filing of its Answer, respondent filed a Motion to Dismiss dated May 24, 2010 on the ground of failure to state a cause of action. It argued that under Paragraph 4.3, Article IV of the construction agreements, final payment to petitioners shall be made only after the submission of a sworn statement attesting to the fact that all of the latter's obligations for labor and materials under the contracts have been fully paid. In this regard, respondent contended that since petitioners have yet to submit such sworn statement, then the latter do not have a cause of action against it. The motion was, however, denied in an Order14 dated August 11, 2010. Meanwhile, during trial, Lim testified that: (a) petitioners referred the instant matter to a Presidential Flagship Committee, which valued respondent's alleged arrears at ₱4,326,174.50, and that the former accepted such valuation and agreed to be paid such reduced amount, but respondent still failed to pay the same; and (b) petitioners no longer executed a separate affidavit referred to in Paragraph 4.3, Article IV of the construction agreements, maintaining that everything that was needed in claiming full payment from respondent were already attached in the final billings they submitted to the latter. On the other hand, witnesses for respondent testified, among others, that respondent accepted the projects subject of the construction agreements, free from major defects and deficiencies, but nonetheless resisted making payments due to discrepancies in the valuations arising from petitioners' alleged deviations from project specifications. The RTC ruled in favor to the petitioner. Respondent appealed to the CA. 

ISSUE: 

Whether or not the CA correctly reversed and set aside the RTC ruling, and consequently, dismissed petitioners' complaint for lack of cause of action 

RULING: 

 No. In light of the foregoing, the CA erred in dismissing petitioners' complaint on a ground belatedly and improperly raised by respondent. Thus, the Court is constrained to overturn said dismissal and in turn, uphold the RTC's finding of liability on the part of respondents, especially considering that it issued Certificates of Final Acceptance essentially stating that the projects were satisfactorily completed, free from major defects, and that it was formally accepting the same. 

As a result, respondent is hereby adjudged to be liable to petitioners in the amount of ₱4,326,174.50, which is the valuation of such liability according to the Presidential Flagship Committee's valuation accepted by petitioners. Finally and in line with prevailing jurisprudence, such amount shall earn legal interest of twelve percent (12%) per annum, computed from FIRST Demand on June 20, 2000 to June 30, 2013, and six percent (6%) per annum from July 1, 2013 until finality of the Decision. Said sum, as well as the other amounts awarded by the RTC (i.e., ₱50,000.00 as attorney's fees and the costs of suit) shall then earn legal interest of six percent (6%) per annumfrom finality of the Decision until fully paid. 

The petition is GRANTED. The Decision and the Resolution dated of the Court of Appeals in CA are hereby REVERSED and SET ASIDE.