In a construction dispute between Hutama-RSEA/Supermax Phils., J.V. (Hutama) and KCD Builders Corporation (KCD), the Supreme Court affirmed that a court can declare a defendant in default for failing to file an answer within the prescribed time, provided the defendant is given an opportunity to explain their side. This ruling reinforces the importance of adhering to procedural rules in litigation and ensures that parties diligently pursue their cases to avoid adverse judgments.

When Delay Leads to Default: Examining Due Process in Construction Contracts

This case arose from a subcontract agreement where KCD was contracted by Hutama for site works in a Philips Semiconductors project. After completing the project, a billing dispute ensued, leading KCD to file a collection suit when Hutama allegedly refused to pay the agreed amount. The central legal question revolves around whether Hutama was denied due process when the trial court declared them in default for failing to file a timely answer, thereby preventing them from presenting their evidence.

The controversy began when KCD filed a complaint against Hutama for sum of money, seeking to recover the amount of P2,967,164.71. After summons was served, Hutama’s counsel filed a motion for extension of time to file a responsive pleading, which was granted until March 16, 2002. However, Hutama failed to file their answer within this extended period, prompting KCD to file a motion to declare Hutama in default.

On April 23, 2002, Hutama filed an Urgent Motion to Admit Attached Answer with Compulsory Counterclaim, along with the said answer. During the hearing on KCD’s motion to declare Hutama in default, the trial court noted that the filing of the answer on March 27, 2002, was beyond the extended period granted. Consequently, the trial court granted the motion to declare Hutama in default and directed KCD to present evidence ex parte.

Hutama then filed an Urgent Motion to Set Aside Order of Default. The trial court ordered KCD to file an opposition or comment. After KCD filed its manifestation, the trial court set another hearing on the motion to set aside the order of default. Hutama failed to appear and the trial court denied the motion. The RTC then ruled in favor of KCD. Hutama appealed to the CA, which affirmed the RTC decision with modification dismissing the complaint against Charles Yang.

The Supreme Court emphasized that petitions under Rule 45 of the Rules of Court should raise only questions of law. Factual findings of the trial court, when affirmed by the Court of Appeals, are generally binding on the Supreme Court. There are exceptions to this rule, such as when the findings are based on speculations or when there is a misappreciation of facts. However, none of these exceptions were found to be applicable in this case.

The Court cited Halili v. Court of Appeals, stating the limited scope of review under Rule 45:

“As a rule, findings of fact of a trial judge, when affirmed by the CA, are binding upon the Supreme Court. This rule admits of only a few exceptions, such as when the findings are grounded entirely on speculations, surmises or conjectures; when an inference made by the appellate court from its factual findings is manifestly mistaken, absurd or impossible; when there is grave abuse of discretion in the appreciation of facts…”

One of Hutama’s key arguments was that its right to due process was violated when the RTC issued the order of default, preventing it from presenting evidence. However, the Supreme Court found that the RTC acted within its discretion in issuing the order of default after Hutama failed to file an answer within the extended period. The Court noted that Hutama had been given an opportunity to explain its failure, but its reasons were deemed insufficient.

Regarding the verification and certification on non-forum shopping, the Court clarified the requirements under the Rules of Court. A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations are true and correct based on personal knowledge or authentic records. The certification of non-forum shopping, on the other hand, is a sworn statement by the plaintiff or principal party that they have not filed any similar action involving the same issues in any other court or tribunal.

The Court also addressed Hutama’s contention that the verification and certification were defective because they were signed by KCD’s president without proof of authority. The Supreme Court referred to previous rulings, such as Ateneo de Naga University v. Manalo and People’s Aircargo and Warehousing Co., Inc. v. CA, establishing that the president of a corporation is presumed to have the authority to act within the domain of the general objectives of its business.

Specifically, the Supreme Court explained the role and presumed authority of a corporation’s president, citing People’s Aircargo and Warehousing Co., Inc. v. CA:

“…the president of a corporation is presumed to have the authority to act within the domain of the general objectives of its business and within the scope of his or her usual duties. Moreover, even if a certain contract or undertaking is outside the usual powers of the president, the corporation’s ratification of the contract or undertaking and the acceptance of benefits therefrom make the corporate president’s actions binding on the corporation.”

The Court also dismissed Hutama’s argument that the Court of Appeals failed to state clearly and distinctly the factual and legal basis for denying its motion for reconsideration. The CA’s ruling that it found no plausible reason to depart from its earlier decision was deemed a sufficient legal basis. There was no need for the CA to restate the rationale for its decision.

This case provides valuable insights into the procedural aspects of litigation, particularly the consequences of failing to comply with court deadlines. It underscores the importance of filing pleadings on time and ensuring that verifications and certifications are properly executed. Furthermore, it reaffirms the principle that factual findings of lower courts, when affirmed by the appellate court, are generally binding on the Supreme Court. The case serves as a reminder to parties involved in litigation to take their responsibilities seriously and to diligently pursue their cases to avoid adverse consequences.

FAQs

What was the key issue in this case?	The key issue was whether the Court of Appeals erred in affirming the decision of the Regional Trial Court, which held Hutama liable to KCD for unpaid construction services, despite Hutama’s claims of abandonment and denial of due process.
Why was Hutama declared in default by the trial court?	Hutama was declared in default because it failed to file an answer to KCD’s complaint within the extended period granted by the court, leading to the ex parte presentation of evidence by KCD.
What did Hutama claim regarding the project?	Hutama claimed that KCD abandoned the project and was therefore liable to Hutama, a claim that the trial court and Court of Appeals did not find credible based on the evidence presented.
Was Hutama’s right to due process violated?	The Supreme Court held that Hutama’s right to due process was not violated because it had been given the opportunity to explain its failure to file a timely answer, but its reasons were deemed insufficient.
Who can sign the verification and certification of non-forum shopping for a corporation?	The president of a corporation is presumed to have the authority to sign the verification and certification of non-forum shopping, absent any charter or bylaw provision to the contrary.
What is the significance of the certification of non-forum shopping?	The certification of non-forum shopping is a sworn statement by the plaintiff affirming that they have not filed any similar action involving the same issues in any other court or tribunal.
What is the general rule regarding factual findings of lower courts?	Factual findings of the trial court, when affirmed by the Court of Appeals, are generally binding on the Supreme Court, with limited exceptions such as findings based on speculation or misappreciation of facts.
What was the final ruling of the Supreme Court in this case?	The Supreme Court denied Hutama’s petition and affirmed the decision of the Court of Appeals, which upheld the trial court’s ruling holding Hutama liable to KCD for the unpaid amount.

This case illustrates the importance of adhering to procedural rules and deadlines in legal proceedings. The consequences of failing to do so can be significant, including the loss of the opportunity to present evidence and defend one’s position. Companies and individuals involved in litigation should seek competent legal advice and ensure that they comply with all applicable rules and deadlines to protect their rights and interests.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Hutama-RSEA/Supermax Phils., J.V. vs. KCD Builders Corporation, G.R. No. 173181, March 03, 2010