Angel v. Aledo
REITERATIONFacts
The Antecedents: Spouses Rufino and Emerita Angel engaged the services of Felixberto Modales for the construction of a two-storey residential building. Due to Modales being an employee of the Department of Public Works and Highways, his father-in-law, Simplicio Aledo, was made to appear as the contractor in the construction agreements. Aledo later filed a collection case against the spouses Angel for unpaid balance and cost of materials. The spouses Angel countered that Aledo was a dummy, that they contracted with Modales, and that there were defects in the construction and unused materials. They also filed a third-party complaint against Modales for alleged defects. Procedural History: The Regional Trial Court (RTC) declared Aledo non-suited and dismissed his complaint. The RTC later clarified that the dismissal was only for the original complaint, reserving the spouses Angel's right to pursue their counterclaim and third-party complaint. The spouses Angel presented evidence ex-parte, and the RTC rendered judgment in their favor, ordering Aledo to pay attorney's fees and litigation expenses, and Modales to pay actual and moral damages. Aledo's appeal was dismissed for failure to file an appellant's brief. Modales' appeal was also dismissed but his motion for reconsideration was granted, allowing him to file his brief. The Court of Appeals (CA) reversed the RTC decision, dismissing the spouses Angel's counterclaim and third-party complaint, holding that the construction agreements were contrary to law and public policy, and the parties were in pari delicto. The Petition: The spouses Angel filed a petition for review on certiorari, arguing that the CA erred in reversing the RTC decision which they claimed was final and executory, and in holding that the parties were in pari delicto.
Issue(s)
Whether the Court of Appeals erred in reversing the decision of the trial court which the petitioners claim had long been final and executory. Whether the Court of Appeals erred in holding that the parties were in pari delicto, thus barring any action between them.
Ruling
The petition is dismissed. The Court of Appeals did not err in holding that the construction agreements were contrary to law and public policy, and that the parties were in pari delicto. Consequently, the spouses Angel's counterclaim and third-party complaint were correctly dismissed.
Ratio Decidendi
On the issue of the Court of Appeals' jurisdiction and the finality of the RTC decision: The Court clarified that Aledo had nothing to appeal from as his complaint was dismissed. The RTC's Order of April 16, 1991, which clarified the dismissal of only the original complaint and allowed the counterclaim, was deemed void ab initio because the counterclaim was compulsory and could not remain pending for independent adjudication after the dismissal of the original complaint. Therefore, the subsequent RTC decision based on this void order was also void. Regarding Modales' appeal, his motion for reconsideration was considered timely filed as the date of mailing, not receipt, governs the filing of such pleadings. On the issue of parties being in pari delicto: The Court affirmed the Court of Appeals' finding that the construction agreements were contrary to law and public policy. This was because Modales, an employee of the Department of Public Works and Highways, was prohibited from contracting without the requisite permission, and his father-in-law, Aledo, was merely a dummy. The Court applied Article 1412 of the Civil Code, which states that when the fault is on the part of both contracting parties in an act that is unlawful or forbidden but not a criminal offense, neither may recover what they have given by virtue of the contract, nor demand performance of the other's undertaking. The principle of ex dolo malo non oritur actio (from fraud, no action arises) and in pari delicto potior est conditio defendentis (in pari delicto, the condition of the defendant is stronger) were invoked. Therefore, the spouses Angel, having knowingly entered into these agreements with a prohibited contractor (through a dummy), were also at fault and could not recover damages from Aledo or Modales.
Main Doctrine
Construction agreements entered into with the knowledge that one party is prohibited from contracting without proper government authority are contrary to law and public policy. When both parties are at fault, they are considered in pari delicto, and neither may recover what they have given by virtue of the contract, nor demand performance of the other's undertaking.