Edron Construction Corporation vs. Provincial Government of Surigao Del Sur

A defense not pleaded in a motion to dismiss or in the answer is deemed waived, except for lack of jurisdiction over the subject matter, litis pendentia, res judicata, and prescription.

Petitioners, a construction corporation and its president, entered into three construction agreements with the Provincial Government of Surigao Del Sur. After the projects were completed and accepted, the provincial government failed to pay the remaining balance, prompting petitioners to file a complaint for specific performance and damages.

• Original Filing: RTC of Quezon City, Branch 77, Civil Case No. Q-08-63154
• Lower Court Decision: December 28, 2010 — RTC ruled in favor of petitioners, ordering respondent to pay P4,326,174.50 with interest, attorney's fees, and costs of suit.
• Appeal: Respondent appealed to the CA (CA-G.R. CV No. 99539).
• CA Decision: November 26, 2014 — CA reversed the RTC and dismissed the complaint for lack of cause of action based on petitioners' failure to submit a sworn statement required by the contract.
• SC Action: Petition for Review on Certiorari assailing the CA Decision and subsequent Resolution denying reconsideration.

• The Contracts: Petitioners entered into three separate construction agreements with respondent for the Learning Resource Center of Tandag, Tandag Bus/Jeepney Terminal, and Tandag Public Market.
• Completion and Acceptance: Petitioners completed the works, and respondent issued Certificates of Final Acceptance stating the projects were satisfactorily completed and free from major defects.
• Non-Payment: Despite acceptance and repeated demands, respondent failed to pay the aggregate amount of P8,870,729.67.
• The Answer: Respondent admitted the contracts but claimed there was no unpaid balance, petitioners were liable for underruns/defective works, the claim had prescribed, and petitioners violated contract specifications. Respondent did not mention the lack of a sworn statement.
• The Belated Motion to Dismiss: More than a year after filing its Answer, respondent filed a Motion to Dismiss based on failure to state a cause of action, arguing that under Paragraph 4.3, Article IV of the contracts, the submission of a sworn statement attesting that all labor and material obligations were fully paid is a condition sine qua non for final payment. The RTC denied the motion.
• Trial Evidence: Petitioners' representative testified they accepted a reduced valuation of P4,326,174.50 by a Presidential Flagship Committee, but respondent still did not pay. He admitted no separate sworn statement was executed, claiming the final billings served this purpose. Respondent's witnesses admitted the projects were free from major defects but resisted payment due to alleged deviations from specifications.

• The CA erred in dismissing the complaint based on the non-submission of the sworn statement because respondent waived this defense.
• Respondent failed to raise the lack of a sworn statement in its Answer with Counterclaim.
• The defense was only raised more than a year later in a Motion to Dismiss, which was filed out of time under Section 1, Rule 16 of the Rules of Court.
• The defense of non-submission of a sworn statement does not fall under the exceptions to the waiver rule under Section 1, Rule 9 of the Rules of Court.

• Under Paragraph 4.3, Article IV of the construction agreements, the contractor's submission of a sworn statement attesting that all obligations for labor and materials have been fully paid is a condition sine qua non for demanding final payment.
• Petitioners admitted in open court that no such sworn statement was submitted.
• Because the condition precedent was not fulfilled, petitioners have no cause of action against respondent.

• Procedural Issues: Whether the CA correctly dismissed the complaint based on a defense (non-submission of sworn statement) that was not raised in the answer or a timely motion to dismiss.
• Substantive Issues: Whether the non-submission of a sworn statement under Paragraph 4.3, Article IV of the construction agreements bars petitioners' claim for final payment.

• Procedural: The CA erred in dismissing the complaint. Under Section 1, Rule 9 of the Rules of Court, defenses and objections not pleaded in a motion to dismiss or the answer are deemed waived, except for lack of jurisdiction over the subject matter, litis pendentia, res judicata, and prescription. The defense of non-submission of a sworn statement is not among these exceptions. Respondent failed to raise it in its Answer and only raised it in a Motion to Dismiss filed more than a year later, which was out of time under Section 1, Rule 16. Therefore, respondent is estopped from relying on this defense, and the RTC correctly ignored it.
• Substantive: Since the defense was waived, the SC upheld the RTC's finding of liability. Respondent issued Certificates of Final Acceptance confirming satisfactory completion free from major defects, and respondent's witnesses failed to prove the alleged deviations or defects. Thus, respondent is liable to pay the reduced amount of P4,326,174.50 accepted by petitioners based on the Presidential Flagship Committee's valuation.

• Waiver of Defenses (Section 1, Rule 9, Rules of Court) — Except for lack of jurisdiction over the subject matter, litis pendentia, res judicata, and prescription, defenses and objections not pleaded in a motion to dismiss or in the answer are deemed waived. The SC applied this strictly, ruling that respondent waived the condition precedent of the sworn statement by omitting it from its answer and raising it only in a belated motion to dismiss.
• Timeliness of Motion to Dismiss (Section 1, Rule 16, Rules of Court) — A motion to dismiss must be filed within the time for but before the filing of an answer. The SC noted respondent's motion was filed out of time, further supporting the waiver.

• Section 1, Rule 9, Rules of Court — Governs waiver of defenses and objections not pleaded. Applied to hold that respondent waived the defense of non-submission of a sworn statement because it is not among the excepted defenses (jurisdiction, litis pendentia, res judicata, prescription).
• Section 1, Rule 16, Rules of Court — Prescribes the period for filing a motion to dismiss (within the time for but before filing the answer). Applied to show respondent's motion to dismiss was filed out of time.
• Paragraph 4.3, Article IV of the Construction Agreements — Stipulates that final payment is subject to the contractor submitting a sworn statement attesting that all obligations for labor and materials have been fully paid. The SC held that while this is a condition for payment, the defense of its non-fulfillment was waived by respondent.