G.R. No. 220211 - Edron Construction Corp. vs. Provincial Government of Surigao del Sur

Petitioners, Edron Construction Corporation and Edmer Y. Lim, filed a Complaint for specific performance and damages before the Regional Trial Court (RTC) of Quezon City, Branch 77.
The Complaint arose from three separate construction agreements entered into with the Provincial Government of Surigao Del Sur for the construction of:

Petitioners claimed that despite the completion of the projects and the issuance of Certificates of Final Acceptance by the respondent, they had not been paid an aggregate amount of P8,870,729.67.
Additional claims included P500,000.00 as actual damages and P250,000.00 as attorney’s fees.

In its Answer with Counterclaim dated January 6, 2009, the respondent admitted the existence of the construction contracts but contended:

That there was no unpaid balance due;
Petitioners were liable for underruns and defective works;
Petitioners had waived or abandoned their right to collect due to prescription; and
Petitioners had not observed the project specifications.

More than a year later, on May 24, 2010, the respondent filed a Motion to Dismiss on the ground that petitioners failed to state a cause of action.

The argument centered on the non-submission of a sworn statement required by Paragraph 4.3, Article IV of the construction agreements, which was stipulated as a condition precedent to claim final payment.
The motion was denied by an Order dated August 11, 2010.

Lim testified that the matter had been referred to a Presidential Flagship Committee, which valued the alleged arrears at P4,326,174.50—a valuation that petitioners accepted despite the respondent’s non-payment.
Petitioners contended that they no longer executed the separate affidavit (sworn statement) required under Paragraph 4.3 since all necessary documentation was already attached to the final billings.
Respondent’s witnesses maintained that while the projects were accepted as free from major defects, discrepancies in valuation, allegedly due to deviations from specifications, justified non-payment.

It ordered the respondent to pay P4,326,174.50 (the valuation based on the Presidential Flagship Committee’s assessment), along with:

Interest computed at six percent (6%) per annum from June 20, 2000, then at twelve percent (12%) per annum from the filing of the complaint on August 5, 2008;
P50,000.00 as attorney’s fees; and
The costs of the suit.

The RTC based its ruling on the fact that respondent had accepted the completed projects through the issuance of Certificates of Final Acceptance.
A motion for reconsideration by the respondent was filed but subsequently denied in an Order dated September 16, 2011.

The Court of Appeals (CA), in its Decision dated November 26, 2014, reversed and set aside the RTC ruling, dismissing the Complaint for lack of cause of action.
The CA held that the absence of the sworn statement, as required by Paragraph 4.3, Article IV of the construction agreements, was fatal to the petitioners’ claim.
Even after petitioners moved for reconsideration, the CA affirmed its ruling in a Resolution dated September 8, 2015, prompting the petition for review upon certiorari.

Whether the Court of Appeals correctly reversed the RTC’s ruling by dismissing petitioners’ Complaint on the ground that the necessary sworn statement required under Paragraph 4.3, Article IV of the construction agreements had not been submitted.
Whether the late raising of the non-submission defense by the respondent, after its initial Answer with Counterclaim, constitutes a valid ground to bar petitioners’ right to claim final payment.