FAJ Construction & Development Corporation v. Saulog
REITERATIONFacts
The Antecedents: Petitioner FAJ Construction and Development Corporation (FAJ) and respondent Susan M. Saulog entered into a construction agreement for a residential building. FAJ commenced work and received payments totaling P10,592,194.80. However, Saulog refused to pay P851,601.58 for progress billings and additional work. FAJ terminated the contract, citing Article 27(b) of the Uniform General Conditions of Contract. Saulog claimed defective work by FAJ and demanded damages. Procedural History: FAJ filed a collection case against Saulog. The RTC dismissed the case twice for failure to prosecute due to FAJ's counsel's repeated absences and requests for postponement, despite warnings. FAJ filed motions for reconsideration, which were denied. FAJ filed a petition for certiorari with the CA, which affirmed the RTC's dismissal, finding FAJ guilty of employing dilatory maneuvers. This Court, in G.R. No. 166336, denied FAJ's petition for review on certiorari, finding no reversible error by the CA. The RTC then proceeded to hear Saulog's counterclaim, awarding actual damages, lost rentals, moral damages, exemplary damages, penalties for delay, and attorney's fees. The CA affirmed with modification, deleting the awards for moral damages, exemplary damages, attorney's fees, and lost rentals, but sustaining actual damages and penalties for delay. FAJ's partial motion for reconsideration was denied. The Petition: FAJ seeks to set aside the CA's decision and resolution, arguing that res judicata does not apply, that the dismissal was due to counsel's gross negligence, that it should not be liable for damages, that the witness was not competent, that damages were not adequately proven, that it was justified in stopping work, that the penalty for delay was excessive, and that interest was improperly awarded.
Issue(s)
Whether the principle of res judicata applies to the dismissal of FAJ's complaint for failure to prosecute. Whether FAJ should be held liable for the negligence of its counsel. Whether FAJ is liable for actual damages due to defective and incomplete work, delay, and abandonment of the project. Whether the penalty for delay imposed on FAJ is excessive. Whether interest on the awarded amounts is proper.
Ruling
The Supreme Court denied the petition, affirming the Court of Appeals' decision with modifications. The Court held that the dismissal of FAJ's complaint for failure to prosecute operates as an adjudication on the merits and is subject to res judicata. The Court also reiterated that the mistakes of counsel generally bind the client, and FAJ failed to prove gross negligence. The Court found no reason to disturb the findings of the lower courts regarding FAJ's liability for defective work, delay, and abandonment, and upheld the award of actual damages and penalties for delay, while affirming the imposition of interest.
Ratio Decidendi
On the applicability of res judicata: The Court affirmed the CA's conclusion that res judicata applies. It explained that the minute resolutions of the Supreme Court dismissing petitions, such as the one in G.R. No. 166336, constitute actual adjudications on the merits. These resolutions are the result of thorough deliberation and signify agreement with the findings and conclusions of the appellate court, making the decision sought to be reviewed correct. Therefore, FAJ could no longer prove its case on the merits and was limited to presenting controverting evidence on the counterclaim. On the negligence of counsel: The Court reiterated the general rule that the mistakes of counsel bind the client. It found no reason to reverse the CA's ruling that FAJ should not be excused for its counsel's actions, noting that FAJ itself was neglectful and continued to retain the same counsel even after witnessing the alleged lack of care. The Court emphasized that relief is only granted in cases of gross or palpable negligence, which FAJ failed to establish. The Court also pointed out that FAJ changed counsel only after the RTC's decision on the counterclaim, suggesting a pattern of delay rather than a genuine attempt to rectify the situation. On liability for actual damages, defective work, delay, and abandonment: The Court found no reason to disturb the identical findings of the RTC and CA that FAJ violated the construction agreement through defective and incomplete work, delay, and unjustified abandonment. The Court cited Article 1715 of the Civil Code, which allows employers to have defects removed or work redone at the contractor's cost if the contractor fails to comply. The Court also found no ground to doubt the testimony of Architect Rhodora Calinawan, whose observations on the defective workmanship were readily apparent and did not require expert qualification. The principle of damnum absque injuria was deemed inapplicable as there was an abuse of right. On the penalty for delay: The Court found the awarded penalty for delay of P1,387,500.00 to be not excessive, but rather liberal. The Court calculated that FAJ was delayed by more than nine months, which, at the agreed penalty of P12,500.00 per day, should have resulted in a liability of approximately P3,375,000.00. The awarded amount was significantly less than this calculated figure, and since the respondent (Saulog) accepted this amount without question, the Court found no reason to disturb it. On the imposition of interest: The Court affirmed the imposition of 6% interest per annum on the awarded amounts. Citing established jurisprudence, the Court held that when an obligation, not constituting a loan or forbearance of money, is breached, interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum from the filing of the complaint until its full satisfaction.
Main Doctrine
The dismissal of a case for failure to prosecute operates as an adjudication on the merits and is subject to the principle of res judicata. Furthermore, the mistakes or negligence of counsel generally bind the client, barring relief unless gross or palpable negligence is proven.