Defenses not pleaded in the Answer or in a timely Motion to Dismiss, except for lack of jurisdiction over the subject matter, litis pendentia, res judicata, and prescription, are deemed waived pursuant to Section 1, Rule 9 of the Rules of Court, and a party failing to raise such defenses is estopped from relying on them later in the proceedings.

The dispute originated from three separate construction agreements entered into by petitioners Edron Construction Corporation and Edmer Y. Lim with the respondent, the Provincial Government of Surigao Del Sur, for the construction of the Learning Resource Center of Tandag, Tandag Bus/Jeepney Terminal, and Tandag Public Market.

• Petitioners Edron Construction Corporation and Edmer Y. Lim entered into three separate construction agreements with respondent Provincial Government of Surigao Del Sur for building the Tandag Learning Resource Center, Bus/Jeepney Terminal, and Public Market.
• Petitioners completed the construction works, and respondent accepted them by issuing Certificates of Final Acceptance.
• Petitioners claimed an aggregate unpaid balance of P8,870,729.67 despite demands, prompting them to file a complaint for specific performance and damages.
• In its Answer, respondent admitted the contracts but denied any unpaid balance, alleging petitioners were liable for underruns/defects, had waived/abandoned collection rights, and failed to observe specifications.
• Over a year after filing its Answer, respondent filed a Motion to Dismiss, arguing petitioners failed to state a cause of action because they had not submitted a sworn statement attesting to full payment of labor/materials, allegedly required by Paragraph 4.3, Article IV of the contracts before final payment.
• The RTC denied the respondent's Motion to Dismiss.
• During trial, petitioner Lim testified they had accepted a reduced valuation of P4,326,174.50 determined by a Presidential Flagship Committee, but respondent still did not pay. Lim also stated that a separate sworn statement was deemed unnecessary as all required information was in the final billings submitted.
• Respondent's witnesses admitted accepting the projects as satisfactorily completed and free from major defects but resisted payment due to alleged valuation discrepancies from deviations in specifications.

• The Court of Appeals erred in dismissing the complaint based on the non-submission of the sworn statement, a defense not raised in the respondent's Answer.
• The defense related to the sworn statement requirement (Paragraph 4.3, Article IV of the contracts) was only raised belatedly in a Motion to Dismiss filed more than a year after the Answer.
• Under Section 1, Rule 9 of the Rules of Court, defenses not pleaded in the Answer or a timely Motion to Dismiss are deemed waived, barring specific exceptions not applicable here.
• Respondent was therefore estopped from raising the issue of the sworn statement.
• Petitioners are entitled to payment as the works were completed and formally accepted by the respondent through Certificates of Final Acceptance.

• Petitioners failed to comply with Paragraph 4.3, Article IV of the construction agreements, which requires the submission of a sworn statement attesting that all obligations for labor and materials have been fully paid as a condition precedent (sine qua non) for demanding final payment.
• Petitioners admitted during trial that no such sworn statement was submitted.
• Due to the non-fulfillment of this condition, petitioners' cause of action against the respondent for final payment has not yet accrued.
• (Initial arguments in Answer): There was no unpaid balance; petitioners were liable for underruns and defective works; petitioners had waived or abandoned their right to collect; petitioners did not observe project specifications.

• Whether the Court of Appeals correctly dismissed the petitioners' complaint for lack of cause of action based on the failure to submit the sworn statement required by the construction contracts.
• Whether the respondent waived the defense of non-submission of the sworn statement by failing to raise it in the Answer or in a timely Motion to Dismiss.

• The Supreme Court granted the petition, reversing the Court of Appeals' Decision and Resolution.
• The Court held that the respondent waived the defense related to the non-submission of the sworn statement (required by Paragraph 4.3, Article IV of the contracts) because it was not raised as a defense in its Answer with Counterclaim dated January 6, 2009.
• This defense was only raised in respondent's Motion to Dismiss filed on May 24, 2010, more than a year after the Answer, which is beyond the time allowed by Section 1, Rule 16 for filing such motions.
• Pursuant to Section 1, Rule 9 of the Rules of Court, defenses not pleaded in the answer or a timely motion to dismiss are deemed waived, unless they fall under specific exceptions (lack of jurisdiction over the subject matter, litis pendentia, res judicata, prescription), which was not the case here.
• Consequently, respondent was estopped from raising this defense, and the CA erred in dismissing the complaint on this ground.
• The RTC's finding of liability against the respondent was upheld, especially since respondent issued Certificates of Final Acceptance for the projects.
• The Court reinstated the RTC decision ordering respondent to pay P4,326,174.50 (the amount accepted by petitioners based on the Presidential Flagship Committee's valuation) and P50,000.00 attorney's fees, plus costs, but modified the applicable legal interest rates in line with current jurisprudence.

• Waiver of Defenses (Rules of Court, Rule 9, Section 1): This rule dictates that defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived, except for lack of jurisdiction over the subject matter, litis pendentia, res judicata, and prescription. The Court applied this doctrine to find that the respondent waived the defense concerning the non-submission of the sworn statement by failing to raise it in its Answer or in a timely motion to dismiss.
• Estoppel: This principle prevents a party from assuming a position inconsistent with a previous stance when it prejudices another. The Court held respondent was estopped from invoking the non-submission of the sworn statement as a defense because it had failed to plead it timely, thereby waiving it.
• Timeliness of Motion to Dismiss (Rules of Court, Rule 16, Section 1): This rule (prior to the 2019 amendments) provided that a motion to dismiss must be filed within the time for but before filing the answer to the complaint or pleading asserting a claim. The Court noted respondent's Motion to Dismiss raising the sworn statement issue was filed over a year after the Answer, hence out of time.
• Legal Interest Rates (Nacar v. Gallery Frames standard): This doctrine establishes the applicable rates of legal interest for monetary judgments. The Court applied this standard to modify the interest awarded by the RTC, setting it at 12% per annum from the first demand (June 20, 2000) to June 30, 2013, and 6% per annum from July 1, 2013, until finality, with an additional 6% per annum interest on the total amount due from finality until full payment.

• "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." (Quoting Section 1, Rule 9 of the Rules of Court).
• "Otherwise stated, if a defendant fails to raise a defense not specifically excepted in Section 1, Rule 9 of the Rules of Court either in a motion to dismiss or in the answer, such defense shall be deemed waived, and consequently, defendant is already estopped from relying upon the same in further proceedings."

• Boston Equity Resources, Inc. v. CA, 711 Phil. 451 (2013): Cited to affirm the rule that defenses not raised in the answer or a timely motion to dismiss are deemed waived under Rule 9, Section 1.
• Nacar v. Gallery Frames, 716 Phil. 267 (2013): Cited as the basis for modifying the legal interest rates applied to the monetary award, establishing the 12% (before July 1, 2013) and 6% (from July 1, 2013 onwards) regime, plus 6% interest on the total judgment amount from finality until full payment.

• Rules of Court, Rule 9, Section 1: Explicitly cited and applied regarding the waiver of defenses not pleaded in the Answer or timely Motion to Dismiss.
• Rules of Court, Rule 16, Section 1: Referenced implicitly regarding the timeliness requirement for filing a motion to dismiss, establishing that respondent's motion was filed out of time.
• Construction Agreements, Paragraph 4.3, Article IV: Cited as the contractual provision requiring the submission of a sworn statement for final payment, which became the focal point of the waived defense.