Frilou Construction v. Aegis Integrated Structure
REITERATIONFacts
The Antecedents: Respondent Aegis Integrated Structure Corporation (Aegis) filed a suit for Sum of Money against petitioner Frilou Construction, Inc. (Frilou). Aegis alleged that Frilou engaged its services for structural steel requirements under two Purchase Orders: PO No. 0461 for P5,000,000.00 dated October 5, 2004, and PO No. 0500 for P1,024,306.00 dated November 19, 2004, totaling P6,024,306.00. Aegis claimed that Frilou paid only P4,490,014.32, leaving an unpaid balance of P1,534,291.68, despite repeated demands. Aegis sought payment of the balance, legal interest, and attorney's fees. Procedural History: The Regional Trial Court (RTC), Branch 58, Makati City, dismissed the complaint for insufficiency of evidence, finding that Aegis failed to prove the remaining liability. The RTC rejected Aegis's argument that Frilou admitted liability by admitting paragraphs 2 and 3 of the complaint, as this admission was qualified by Frilou's Special and Affirmative Defenses. The RTC held that Frilou paid P4,490,014.32 and Aegis did not present further evidence of the remaining balance, thus failing to discharge the burden of proof. The Petition: On appeal, the Court of Appeals (CA) reversed the RTC's decision, ruling that Frilou's judicial admission of the Purchase Orders established Aegis's claim by a preponderance of evidence. The CA found that Frilou's failure to specifically deny Aegis's allegation of complete performance deemed admitted the same. The CA concluded that Frilou was estopped from claiming a reduced contract price and that Frilou failed to present evidence of Aegis's partial compliance. The Supreme Court granted Frilou's petition for review on certiorari.
Issue(s)
Whether Frilou's Answer constituted a specific denial of Aegis's claim for the unpaid balance, and whether Frilou's failure to specifically deny the material allegations in Aegis's complaint resulted in the admission of those allegations. Whether Aegis sufficiently proved its claim for the unpaid balance by a preponderance of evidence. Whether Frilou is liable for legal interest. Whether Frilou is liable for attorney's fees.
Ruling
The petition is DENIED. The Decision of the Court of Appeals is AFFIRMED with MODIFICATION.
Ratio Decidendi
On the issue of specific denial and admission of allegations: The Court held that Frilou's denial of paragraph 4 of the complaint, stating it was "contrary to the facts and circumstances surrounding the case," was a general denial and not a specific denial as required by Section 10, Rule 8 of the Rules of Court. A specific denial requires stating the truth of the matter relied upon to support the denial. Frilou's statement was merely an assertion that Aegis lacked evidence, not an assertion of facts supporting Frilou's position. Consequently, Frilou was deemed to have admitted all material averments in paragraph 4 of the complaint, including the existence of the contract, Aegis's complete performance, the amount paid, and the remaining unpaid balance. This judicial admission obviated the need for Aegis to prove these facts. On the sufficiency of evidence and burden of proof: The Court found that Frilou's general denial and failure to present specific facts supporting its claim of payment or partial performance meant it failed to discharge its burden of proof. Frilou did not allege specific reasons why the original contract price was only partially performed or which deliveries were not made. The Court noted that Frilou could not claim lack of knowledge or information as the matter was within its direct knowledge. Therefore, Aegis's claim, supported by the admitted Purchase Orders and the judicial admission of the unpaid balance, was sufficiently proven by a preponderance of evidence. On legal interest: The Court affirmed the appellate court's imposition of legal interest. It clarified that the unpaid deliveries constituted a forbearance of money. The legal interest rate was set at twelve percent (12%) per annum from April 11, 2005 (date of extra-judicial demand) to June 30, 2013, and subsequently reduced to six percent (6%) per annum from July 1, 2013, until finality of the decision, in accordance with Bangko Sentral ng Pilipinas Circular No. 799, Series of 2013. On attorney's fees: While the Court agreed that Aegis was compelled to litigate, it found that the P150,000.00 claimed by Aegis was not adequately proven. However, it affirmed the appellate court's award of P25,000.00 as reasonable attorney's fees, which would also earn legal interest from the finality of the decision.
Main Doctrine
A general denial in an Answer, particularly when it fails to specifically deny material averments in the complaint and to set forth the substance of the matters relied upon to support the denial, results in the admission of those averments. The failure to specifically deny the existence of a contract and the complete performance of obligations thereunder, as alleged in the complaint, leads to the admission of such allegations, obviating the need for the plaintiff to prove them.