Case Summary (G.R. No. 191353)
Factual Background
On December 8, 2003, Fermida Construction Services entered into a Contract Agreement with Ultra Mar Aqua Resource, Inc. for the construction of a warehouse in Wawandue, Subic, Zambales, at a contract price of PhP1,734,740. During construction, variations occurred as to roof coverage, drainage canal, painting and electrical work which Fermida said were made upon Ultra Mar’s request and instructions. Fermida completed the Project on January 17, 2004, and submitted a Billing Statement excluding the cost of variation orders and extra work. Fermida posted a Surety Bond to satisfy the ten percent retention and executed a Contractor’s Affidavit declaring settlement of claims for labor and materials. Ultra Mar protested aspects of the work, Fermida performed repairs, and Fermida presented another Billing Statement, which Ultra Mar refused to pay alleging absence of FDT Report and Building Permits, substandard work and delay.
Trial Court Proceedings
Fermida filed a Complaint for Collection of Sum of Money with Prayer for Injunction before the RTC. The RTC ordered an ocular inspection and appointed an independent engineer to inspect the Project. The case proceeded to pre-trial, but counsel for Ultra Mar repeatedly failed to appear and failed to file the required pre-trial brief despite multiple postponements. The RTC declared Ultra Mar in default, allowed Fermida to present its evidence ex parte, and rendered judgment in favor of Fermida on October 7, 2004 ordering Ultra Mar to pay P1,106,000.38 with legal interest from filing, plus P50,000 attorney’s fees, P10,000 litigation expenses, P100,000 nominal damages and costs. Ultra Mar filed an Omnibus Motion to Lift Order of Default citing counsel’s illness and later submitted a Medical Certificate, but the RTC denied relief, treating a later motion as a prohibited second motion for reconsideration under Section 2, Rule 52, Rules of Court.
Court of Appeals’ Findings and Ruling
On appeal, the Court of Appeals affirmed the RTC’s denial of the Omnibus Motion, finding counsel offered no plausible justification for failing to file the pre-trial brief and noting counsel failed to timely produce the Medical Certificate the RTC had required. On the merits, the CA relied on the independent engineer’s Report and Supplemental Report which found that variations had been made without written variation orders, that certain works deviated from approved plans and specifications, and that minor defective works and uncompleted items remained requiring repair. The CA concluded the Project was not without defects but that such defects were covered by the ten percent retention. The CA modified the RTC judgment and ordered Ultra Mar to pay Fermida P1,106,038.82 with legal interest from the date of filing, subject to the ten percent retention, and deleted awards of nominal damages, attorney’s fees and litigation expenses for lack of substantiation.
Issues Presented in the Petition
In its Rule 45 petition, Ultra Mar challenged the CA’s affirmance of the RTC’s denial of its Omnibus Motion to Lift Order of Default and denial of relief under Section 2, Rule 52, contending that it was denied the right to present evidence because of the gross negligence of its counsel. Ultra Mar asserted that counsel’s negligence deprived it of a meritorious defense and sought relief from the effects of counsel’s conduct.
Parties’ Contentions
Ultra Mar contended that its non-appearance and failure to file the pre-trial brief resulted from counsel’s illness and gross negligence, and that equity and fairness required relief to permit presentation of its defense. Fermida maintained that it had substantially proven the construction agreement and the outstanding obligation, that Ultra Mar repeatedly failed to comply with pre-trial orders, and that the trial court properly exercised discretion to allow ex parte presentation and render judgment based on the evidence presented.
Supreme Court Ruling
The Supreme Court denied the petition and affirmed the CA Decision dated July 28, 2009 and Resolution dated February 9, 2010 with modification. The Court affirmed the denial of Ultra Mar’s Omnibus Motion for lack of valid cause to excuse non-appearance and for failure to comply with the RTC’s directive to submit a Medical Certificate. The Court held that counsel’s negligence and mistakes are binding on the client and that Ultra Mar failed to show clear and manifest abuse of discretion by the trial court. On the merits, the Court affirmed the CA’s finding that Fermida established an outstanding contractual obligation but modified the CA’s allowance of a ten percent retention; the Court held that the ten percent retention was covered by the Surety Bond posted by Fermida pursuant to the parties’ Contract Agreement, and therefore Ultra Mar was no longer entitled to withhold the retention. Accordingly, the Court affirmed the order directing Ultra Mar to pay Fermida P1,106,038.82 with legal interest from the date of filing, and denied the petition.
Legal Basis and Reasoning
The Court grounded its decision on the pre-trial provisions of the Rules of Court. It emphasized that under Section 4, Rule 18, parties and counsel must appear at pre-trial and that failure to appear may be excused only for valid cause or by a fully authorized representative. The Court explained that under Section 5, Rule 18, failure of the defendant to appear authorizes the trial court to allow the plaintiff to present evidence ex parte and render judgment thereon, while Section 6, Rule 18 equates failure to file a pre-trial brief with failure to appear. The Court clarified that a trial court’s denial of relief for non-appearance is a discretionary act and will not be disturbed absent clear abuse. The Court applied the long-stand
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Case Syllabus (G.R. No. 191353)
Parties and Procedural Posture
- Ultra Mar Aqua Resource, Inc. was the petitioner below and the owner that contracted for construction of a warehouse.
- Fermida Construction Services was the respondent below and the contractor who completed the construction and sued for unpaid contract price and variations.
- The petition sought review under Rule 45 of the Decision of the Court of Appeals in CA G.R. CV No. 86540 affirming with modification the Regional Trial Court’s judgment.
- The Supreme Court denied the petition and affirmed the Court of Appeals’ decision with modification concerning the applicability of the retention.
Key Facts
- The parties executed a Contract Agreement dated December 8, 2003 for construction of a warehouse at Wawandue, Subic, Zambales with a contract price of PHP 1,734,740.
- Variations in roof coverage, drainage canal, painting, and electrical works were performed by Fermida allegedly upon Ultra Mar’s request and instruction.
- Fermida completed the Project on January 17, 2004 and submitted a Billing Statement exclusive of variation and extra work costs, and later submitted another Billing Statement after undertaking repairs.
- Fermida posted a Surety Bond and executed a Contractor’s Affidavit attesting settlement of claims for labor, materials, equipment, and tools.
- Ultra Mar refused payment citing Fermida’s alleged failure to submit the FDT Report and building permits, substandard work, and delay in completion.
Procedural History
- Fermida filed a Complaint for Collection of Sum of Money with Prayer for Injunction before the RTC.
- The RTC conducted an ocular inspection and appointed an independent engineer to inspect the Project.
- Ultra Mar’s counsel repeatedly failed to appear at the scheduled pre-trial conferences and failed to file the required pre-trial brief.
- The RTC declared Ultra Mar in default, allowed Fermida to present its evidence ex parte, and rendered judgment ordering Ultra Mar to pay PHP 1,106,000.38 with interest and awarded attorney’s fees, litigation expenses, and nominal damages.
- The RTC denied Ultra Mar’s Omnibus Motion to Lift Order of Default for noncompliance with the court’s requirement to file a supporting Medical Certificate and denied motions for reconsideration as second motions.
- The Court of Appeals affirmed in part and modified the RTC judgment by directing Ultra Mar to pay PHP 1,106,038.82 with legal interest subject to the ten percent retention and deleted awards for nominal damages, attorney’s fees, and litigation expenses.
- Ultra Mar filed the present Petition for Review under Rule 45 contesting the denial of its Omnibus Motion and invoking counsel’s alleged gross negligence.
Issues Presented
- Whether the Court of Appeals erred in upholding the RTC’s denial of Ultra Mar’s Omnibus Motion to Lift Order of Default and in refusing to relieve Ultra Mar from the consequences of its counsel’s alleged gross negligence.
- Whether Ultra Mar was liable to pay Fermida the outstanding contractual obligation, and whether such payment should be subject to the ten percent (10%) retention.
Independent Engineer Findings
- The court-appointed independent engineer reported that variations resulted in construction not conforming to the approved plans and specifications and identified completed works outside the contract scope.
- The engineer found no written variation orders approved by Ultra Mar but noted absence of written objection by Ultra Mar during constructio