Construction Services of Australia Philippines, Inc. v. Peralta
REITERATIONFacts
The Antecedents: Petitioner Construction Services of Australia-Philippines, Inc. (Consaphil), through its representatives, purchased construction materials on account from private respondent Amado P. Peralta, owner of Bolinao Construction Supply, amounting to P252,520.39. Upon project completion, the account remained unsettled. Despite repeated demands, Consaphil paid only P50,504.08, leaving a balance. Procedural History: Private respondent filed a complaint for collection of sum of money and damages. Summons were served on petitioners. After an alias summons was served on Ely Conde, who was no longer connected with Consaphil, he filed an answer. Private respondent moved to declare petitioners Consaphil, Melchor Elegado, Isidro Cariño, and Gerry de Vera in default for failure to file an answer. The trial court granted the motion and allowed private respondent to present evidence ex-parte. Petitioners' counsel entered a formal appearance and filed a motion to dismiss grounded on lack of jurisdiction over their persons due to invalid summons. The trial court denied this motion, stating petitioners had lost their standing. Petitioners' motion for reconsideration was also denied. The trial court rendered a decision in favor of private respondent, ordering petitioners jointly and severally to pay the outstanding balance, attorney's fees, and litigation expenses. The Court of Appeals affirmed the trial court's decision in toto. The Petition: Petitioners seek review of the Court of Appeals' decision, arguing that the lower courts erred in not entertaining their motion to dismiss, in finding that they ordered and received the goods without proper signatures or purchase orders, in finding that the assistant treasurer acknowledged payment despite the conditional nature of the letter, and in awarding attorney's fees and litigation expenses.
Issue(s)
Whether the lower court erred in not entertaining the motion to dismiss filed by petitioners after they were declared in default. Whether the lower court erred in its findings of fact regarding the ordering, receipt, and acknowledgment of the construction materials. Whether the award of attorney's fees and litigation expenses is supported by fact and law.
Ruling
The petition is denied for lack of merit, and the decision of the Court of Appeals is affirmed.
Ratio Decidendi
On the issue of the motion to dismiss and loss of standing: The Court held that petitioners were correctly declared in default for failure to file their answer within the reglementary period. Under the Rules of Court, a defaulted party has specific remedies, such as filing a motion to set aside the order of default before judgment, a motion for new trial if judgment has been rendered but is not yet final, or a petition for relief if the judgment has become final and executory. By filing a motion to dismiss instead of seeking to set aside the default order, petitioners failed to avail themselves of the proper remedy. Consequently, they lost their standing in court and could not expect their subsequent pleadings to be acted upon. The Court reiterated that a party declared in default is considered out of court and forfeits the right to present defenses, control proceedings, or be heard. On the issue of the findings of fact regarding the goods: The Court found that petitioners' Assistant Treasurer made representations admitting the corporation's liability and confirming a payment schedule in response to demand letters. This conduct, coupled with the initial payment of P50,504.08, estopped petitioners from denying that they ordered, requisitioned, or received the goods. The doctrine of estoppel bars a party from taking inconsistent positions and making a mockery of justice. The admission and representation made by the Assistant Treasurer were rendered conclusive upon the corporation as against the private respondent who relied thereon. On the award of attorney's fees and litigation expenses: The Court affirmed the award, finding that the manifestly grave and evident bad faith displayed by petitioners in refusing to satisfy the private respondent's plainly valid, just, and demandable claim justified the award of attorney's fees and litigation expenses under Article 2208(5) of the Civil Code. The petitioners' refusal to pay the acknowledged debt, despite their initial partial payment and representations, demonstrated bad faith.
Main Doctrine
A party declared in default loses its standing in court and cannot have its subsequent pleadings acted upon, especially a motion to dismiss, unless the order of default is set aside. Furthermore, a party who makes representations admitting liability and confirming a payment schedule is estopped from later denying the obligation or the contract from which it arose.