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THIRDDIVISION

[G.R.No.137915.November15,2000]

NARRA INTEGRATED CORPORATION, petitioner, vs. THE COURT OF


APPEALSandNCINDUSTRIALTRADE,INC.,respondents.
DECISION
GONZAGAREYES,J.:

BeforeusisapetitionforreviewoncertiorariofthedecisionoftheCourtofAppeals[1]inC.A.G.R.
CV No. 54397, which affirmed the partial decision dated June 28, 1995 of the Regional Trial Court[2]
declaringpetitionertobeliabletoprivaterespondentintheamountofP1,485,776.93,attorneysfeesof
P10,000.00andcostsofsuit.
Thefactualantecedentsofthecase,asfoundbytheCourtofAppeals,areasfollows:
SometimeinNovember1991,NarraIntegratedCorporationcontractedfromNCIndustrialTrade,Inc.,
manpowerservicesandmaterialsfortheagreedconsiderationhereinbelowindicated,towit:
A. Supply of Labor, trader, tools, `equipment and supervision necessary to complete the installation,
layout, testing and commissioning of one (1) lot ELECTRICAL POWER DISTRIBUTION
SYSTEM for the factory of KyungIl Philippines at the construction site located in Dasmarinas,
Cavite
P3,683,710.00
B. For the supply of labor trades, tools, equipment and supervision necessary for piping installation,
spotting and positioning of WASTE WATER TREATMENT PLANT EQUIPMENT AND
MACHINERIES FOR KYUNGIL PHILIPPINES at Dasmarinas, Cavite
P1,344,100.00
C. For the supply of labor, materials, tools, consumables and supervision necessary for
FABRICATIONDELIVERYANDINSTALLATIONOFONE(1)LOTCATWALKRAILINGS
ANDLADDERatWasteWaterTreatmentProjectP1,485,776.93

TheabovestatedundertakingsareevidencedbythefollowingSalesInvoicesissuedbyNCIndustrial
Trade,Inc.,viz:InvoiceNos.106and107,respectivelydatedJune13andAugust11,1992forthefirst
projectInvoiceNos.105and108,respectivelydatedJune13andAugust11,1992forthesecond
undertakingandInvoiceNo.103,datedMay25,1992forthethirdproject.ForfailureofNarra
IntegratedCorporationtopayabalancetotalingP1,485,776.93outoftheconsiderationagreeduponfor
theaforesaidcontracts,NCIndustrialTrade,Inc.causedademandletterdatedOctober24,1992tobe
senttotheformer.
ClaimingthatNarraIntegratedCorporationrefusedtoheeditsdemandletterasaforesaid,andbasedon
theforegoingfactualantecedentsandtheactionabledocumentsevidencingthesame,NCIndustrial
TradeInc.fileditscomplaintforasumofmoneyanddamages.xxx
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xxx
Havingbeendulyservedwithsummons,thedefendantNarraIntegratedCorporationfileditsanswer
alleging,amongothermatters,thatitmerelyhiredtheplaintiffasasubcontractorintheprojectitwas
doingforKyungIlPhilippines,Inc.thatintheaforesaidcapacity,plaintiffwasawarethatitspayments
weresubjecttotheprogresspaymentsmadebytheprojectowner(KyungIl)tothedefendantthatithas,
itself,notbeenpaidbyKyungIlPhilippines,Inc.onaccountofsupposeddefectsintheworksdonein
theproject,includingthosedonebytheplaintiffand,thatthelatterwasapprisedofthesituationand,
alongwithitsothersubcontractors,hadagreedthatthedefendantbefirstallowedtopursuepayment
fromKyungIlPhilippines,Inc.Contendingthattheplaintiffhadnocauseofactionagainstitandthatthe
casewasprematurelyfiled,thedefendantprayedforthedismissalofthecomplaintandthegrantofits
counterclaimsformoralandexemplarydamages,attorneysfeesandlitigationexpenses.Ontheground
thatitstillhadanoutstandingbalanceinthesumofP4,102,661.01fromtheprojectownerandthatit
wouldnothavebeenhailedintotheinstantsuitbytheplaintiffhaditsdemandsforpaymentoftheworks
alreadycompletedunderthepremiseswereheeded,NarraIntegratedCorporationinturnfiledathird
partycomplaintagainstKyungIlPhilippines,Inc.xxx
xxx
Afterthetrialcourtsdenialofthemotiontodismissitfiledonthegroundofimproperserviceof
summons,thethirdpartydefendantKyungIlPhilippines,Inc.filedanothermotiontodismissforfailure
ofthedefendant/thirdpartyplaintifftoattachacertificationofnonforumshoppingtothethirdparty
complaint,andthesaidpleadingssupposedinadmissibilityandimpropriety.Overtheoppositionofthe
defendant/thirdpartyplaintiffNarraIntegratedCorp.,themotionwasgrantedbythetrialcourt
dismissingthethirdpartycomplaintinitsorderofOctober18,1993.However,thesaidorderofthe
dismissalwassetasidebythelowercourtuponthedefendant/thirdpartyplaintiffsmotionfor
reconsiderationandsubsequentcompliancewithSupremeCourtCircularNo.2891.
Withthedenialofitsmotionseekingthereconsiderationoftheorderthatreinstatedthethirdparty
complaint,thethirdpartydefendantfileditsanswer,specificallydenyingthematerialallegationsofthe
saidpleading.Asaffirmativedefenses,italleged,amongothermatters,thatdespitethefactthatitwas
theonewhodrewthecontractsbetweenthem,thedefendant/thirdpartyplaintiffviolatedthesameby
failingtosubmitadequateperformancebond,incurringsubstantialdelays,hiringsubcontractorswithout
priorapprovalandsubmittingdefective,ifnotsubstandard,constructionwork.Thethirdpartydefendant
soughtthedismissalofthethirdpartycomplaintandprayedforliquidated,moralandexemplary
damages,attorneysfeesandlitigationexpenses.
Theissuesthusjoined,thecourtaquosetthecaseforpretrial.Allegingthattheanswerfiledbythe
defendant/thirdpartyplaintiffdidnottenderanissueonaccountofthesaidpartysadmissionofthe
materialallegationsofthecomplaintandtheactionabledocumentsattachedthereto,theplaintifffileda
motionforsummaryjudgment.Thedefendant/thirdpartyplaintiffinterposeditsoppositionthereto.
Nevertheless,themotionwasgrantedbythetrialcourtinthepartialdecisionwhichisthesubjectmatter
oftheinstantappealxxx[3](citationsomitted)
Petitioner appealed the Partial Decision[4] dated June 25, 1995 of the trial court to the Court of
Appeals.TheappellatecourtupheldthejudgmentofthetrialcourtinitsDecision[5]datedNovember27,
1998.TheMotionforReconsiderationfiledbypetitionerwaslikewisedeniedbytheCourtofAppealsin
aResolution[6]datedMarch12,1999.
Hence,thispetitionforreviewoncertiorariwherepetitionerraisesthefollowingarguments[7]
I.
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THEHONORABLECOURTOFAPPEALSGROSSLYERREDINAFFIRMINGTHELOWER
COURTSERRONEOUSDECISIONALLOWINGAJUDGMENTONTHEPLEADINGSWHERE
THEREAREINFACTGENUINEISSUESRAISEDINPETITIONERSANSWERTHATWOULD
NECESSITATEATRIALORHEARINGONTHEMERITSUPONITSMISTAKENPERCEPTION
THATTHEALLEGATIONSTHEREOFMERELYGAVEAREASON,NOTJUSTIFICATION,OF
ITSFAILURETOPAYEVENASITFURTHERFAILEDTOTAKEINTOACCOUNTTHATTHE
MATTEROFTHECOMPLETIONOFTHEPROJECTISSTILLTHESUBJECTMATTEROFTHE
LITIGATIONPENDINGBEFORETHELOWERCOURT.
II.

THEHONORABLECOURTOFAPPEALS,BYDISREGARDINGTHEGLARINGAND
APPARENTEXISTENCEOFCONTENTIOUSISSUESRAISEDBYPETITIONERAPPELLANTIN
ITSANSWERFILEDBEFORETHEREGIONALTRIALCOURT,ANDAFFIRMINGTHELOWER
COURTSPARTIALDECISIONRENDEREDWITHOUTAWAITINGTHERESULTSOFTHE
THIRDPARTYCOMPLAINTWHICHPETITIONERSFILEDWITHLEAVEOFCOURTAGAINST
THEPROJECTOWNER,KYUNGI,PHILS.INC.,WHICHRULINGINEFFECTDEPARTEDFROM
THEUSUALCOURSEOFJUDICIALPROCEEDINGSANDHASDECIDEDTHEISSUESRAISED
BYPETITIONERAPPELLANTINAWAYNOTINACCORDWITHLAWANDWITHTHE
APPLICABLEDECISIONSOFTHESUPREMECOURT.
WeaffirmthedecisionoftheCourtofAppeals.
Attheonset,wenotethatthepetitioner,asshowninitsassignmentoferrors,isguiltyoftheusual
error of equating a summary judgment with a judgment on the pleadings. While the petitioner makes
mentionofthelowercourtspromulgationofajudgmentonthepleadings,wehavegoneovertherecords
anditisclearthatwhatthetrialcourtactuallyrenderedwasasummaryjudgment.
Theexistenceorappearanceofostensibleissuesinthepleadings,ontheonehand,andtheirshamor
fictitiouscharacter,ontheother,arewhatdistinguishapropercaseforsummaryjudgment[8]fromone
forajudgmentonthepleadings[9].Inapropercaseforjudgmentonthepleadings,thereisnoostensible
issueatallbecauseofthefailureofthedefendingpartysanswertoraiseanissue.Ontheotherhand,in
thecaseofasummaryjudgment,issuesapparentlyexisti.e.factsareassertedinthecomplaintregarding
whichthereisasyetnoadmission,disavowalorqualificationorspecificdenialsoraffirmativedefenses
areintruthsetoutintheanswerbuttheissuesthusarisingfromthepleadingsaresham,fictitiousornot
genuine,asshownbyaffidavits,depositions,oradmissions.Inotherwords,ajudgmentonthepleadings
isajudgmentonthefactsaspleaded,whileasummaryjudgmentisajudgmentonthefactsassummarily
provenbyaffidavits,depositions,oradmissions.[10]
As such, even if the answer does tender issues and therefore a judgment on the pleadings is not
properasummaryjudgmentmaystillberenderedontheplaintiff'smotionifhecanshowthattheissues
thustenderedarenotgenuine,sham,fictitious,contrived,setupinbadfaith,orpatentlyunsubstantial.[11]
Thetrialcourtcandeterminewhetherthereisagenuineissueonthebasisofthepleadings,admissions,
documents,affidavitsand/orcounteraffidavitssubmittedbythepartiestothecourt.[12]
Intheinstantcase,theanswer[13]submittedbythepetitionerinCivilCaseNo.923567appearson
its face to tender issues. The answer purports to deal with each of the material allegations of the
complaint[14], and either specifically denies, partially admits, or professes lack of knowledge or
informationtoformabeliefastothem.Theanswerlikewisesetsupaffirmativedefenses.
A cursory reading of petitioners answer in the trial court would therefore, show that it does
ostensiblyraiseissues.Thequestionthatmustbeansweredtheniswhetherornottheseissuesaresham
orfictitioussoastojustifyasummaryjudgment?[15]Inansweringthisquestion,thetrialcourtmayrely
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onthepleadings,admissions,affidavits,anddocumentssubmittedbytheprivaterespondentinsupportof
his Motion for Partial Summary Judgment[16] These include the affidavits of petitioners own General
Manager and of private respondents President and the Letter Contract dated November 6, 1991[17]
betweenpetitionerandprivaterespondent.
To begin with, petitioner, in its Answer, does not deny that it entered into the November 6, 1991
lettercontractwithprivaterespondentforthesupplyoflabor,trader,tools,equipmentandsupervision
necessaryfortheinstallationofanelectricalpowerdistributionsystem,wastewatertreatmentplant,and
catwalk railings and ladder. Neither did it specifically deny the invoices issued by private respondent
whichshowthevariousamountsowedbyittoprivaterespondent.Finally,petitionerdidnotdisputethe
unpaidbalanceofP1,485,776.93whichitstillallegedlyowesprivaterespondent.
Petitionerinsists,however,thattherearegenuineissuesraisedinitsAnswerwhichrequireafull
blowntrialonthemerits.Specifically, petitioner claims that paragraphs 7 to 10 of the Answer clearly
allege that the project undertaken by respondent is subject to the acceptance by the project owner,
KyungIlPhils.,Inc.and/orbythepetitioner,asGeneralContractor.Paragraphs7to10oftheAnsweris
quotedhereunder,asfollows:
7.AsoneofthenumeroussubcontractorsofdefendantinKyungil,Dasmarinas,CaviteProject,
Defendant,beforeenteringintothesubcontractoragreement,waswellawareofthefactthat:
a)theirbillingsaresubjecttoprogresspaymentswhich,beforeitsreleasetoplaintiff,mustfollowcertain
requirementsofinspection,approvaland/orcertificationfromdefendantsandtheprojectowners
representatives
b)progresspaymentsonplaintiffsprogressbillingsshallbesubjecttotheprogresspaymentsofthe
projectownertotheprincipalcontractor,defendantherein
c)paymentsofitsprogressbillingstodefendantissubjecttotheprojectownersacceptanceoftheworks
donebytheprincipalcontractordefendanthereinwhichnecessarilyincludesacceptanceofplaintiffs
worksasitisdefendantssubcontractor
8.Unfortunately,defendantherein,theprincipalcontractoroftheproject,hasnotbeenpaiduptothe
presenttimebytheprojectownerdespitenumerousoralaswellaswrittendemandsservedonit.
9.Theprojectowner,facedwithdefendantsdemandlettersforpaymentofthecontractpricewhich
includethebalanceofplaintiffsclaimagainstthedefendant,allegedandcontinuestoallegedefectsinthe
worksofthedefendant,includingthoseoftheplaintiffhereinasthebasisofitsrefusaltopaydefendant
thebalanceofitscontractprice
10.TheplaintiffisverymuchawareofthesituationandthatoneoftheworksallegedbyKyungiltobe
defectivearethoseoftheplaintiff.Severalmeetingsandconferenceswereheldbythedefendantwithits
subcontractorswholikewiseremainunpaid,anditwasdecided,byconsensus,thatdefendant,asthe
principalcontractor,pursueitsdemandforpaymentbytheprojectowner,KyungilPhilippines,Inc,for
itselfandinbehalfofthecontractors[18]
On these alleged special and affirmative defenses, we agree with the trial court and the Court of
Appealsthat,ratherthantenderinggenuineissues,theseallegationsmerelygiveanunjustifiedreasonfor
petitionersfailuretopaytheundisputedbalanceowingtoprivaterespondent.Wenotewithapprovalthe
followingpronouncementoftheCourtofAppeals:
Itwillbenotedthatratherthantenderinggenuineissuesinsofarasthecomplaintisconcerned,the
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foregoingallegationsmerelygiveareasonanunjustifiedoneatthatfortheappellantsfailuretopaythe
undisputedbalanceowingtotheplaintiffappellee.Thefactthattheappellantisnottherebyexcusedis
evidentfromitsownallegationschargingtheplaintiffappellee(hereinrespondent)onlywithawareness
ofnotconsenttothesupposedpaymentschemeithadenteredintowiththethirdpartydefendant
appellee.Absentanyallegationindicatingtheappelleesprivityand/orconsenttothecontractbetweenthe
appellantandthethirdpartydefendantappellee,wefindnoreasontodisturbthepartialjudgmentthe
courtaquorenderedinthepremises.InthecaseofD.D.ComendadorConstructionCorp.vs.Sayo(118
SCRA590),summaryjudgmentwaspronouncedproperwherethedefenseinterposedwasthesupposed
understandingbetweenthepartiesthatpaymentwillproceedfromthedefendantsowncollectibleswhich,
asintheinstantcase,isbeliedbythedocumentevidencingthetransactionsuedupon.[19]
Petitioner insists however, that these allegations do not merely set up an unjustified reason for its
failuretopaythebalanceduetoprivaterespondent.Foronething,petitionerarguesthatitsAnswerputs
intoissuethequestionofwhetherornottherehasbeenafinalacceptanceonitspartoftheworkdoneby
privaterespondents.PetitionerclaimsthatthisisagenuineissueandissupportedbyparagraphXIIIof
thelettercontractbetweenpetitionerandprivaterespondentwhichprovides,asfollows:
Thelettercontractshallbeterminateduponthecompletionandacceptanceoftheworkbythe
GENERALCONTRACTOR.Anypartialpaymentpriortotheterminationdoesnotwaivetherightof
theGENERALCONTRACTORtohavetheSUBCONTRACTORcorrectdeficienciesordefects
subsequentlyfoundorbecomeevident.xxx[20]
Admittedly, by the terms of the written contract, there is a need for the acceptance by herein
petitioner,asGeneralContractor,oftheworkundertakenbytheprivaterespondentbeforepaymentcan
bemade.However,theissueofwhetherornottherehasbeenanacceptanceintheinstantcasecanbe
resolvedwithouttheneedforalengthytrial.
Attheonset,wenotethatthetermsofthewrittencontractdonotspecifywhatformtheacceptance
oftheprojectshouldtake.Assuch,thesamecanbeinferredandimpliedfromtheactionsofpetitioner
regardingtheworkundertakenbyprivaterespondent.Inthisregard,petitionersownGeneralManager,
Mr. Francisco Overall, in an affidavit which formed part of petitioners thirdparty complaint against
KyungIl Phils., Inc and which was attached to private respondents Motion for Partial Summary
Judgment, admitted that the construction/project had been fully completed since May 1992 and that
KyungIl had been in full operation and use (sic) of all the facilities constructed by Narra under the
Construction Contract since said date.[21] It is clear from this statement that petitioner has already
regardedtheworkdoneontheprojectasfullycomplete.Assuch,thelogicalinferenceisthatpetitioner
hasalreadyacceptedtheportionsoftheprojectundertakenbyprivaterespondent,otherwise,itwouldnot
haveturnedoverthesametoKyungIl,Phils.,Inc.Havingthusacceptedandturnedovertheworkdone
by private respondent to KyungIl Phils., Inc., we see no reason why petitioner should not pay private
respondenttheunpaidbalanceduetothelatter.
Petitionerlikewiseclaimsthattheanswerputsintoissuetheallegedneedforthefinalacceptanceby
theprojectowner,KyungIlPhils.,Inc.oftheprojectsundertakenbyprivaterespondent.Allegedly,this
issupportedbyparagraphII(b)ofthecontractwhichreads,asfollows:
Thetenpercent(10%)retentionshallbereleasedtotheSUBCONTRACTORsixty(60)daysafterthe
finalacceptanceoftheprojectandaftertheSUBCONTRACTORhassubmittedanaffidavitor
undertakingunderoaththatallsalaries/wagesandallowancesduehisemployees/workersintheproject
havebeenpaidtotheirfullandcompletesatisfaction.[22]
Wearenotpersuaded.Itisaxiomaticthatcontractstakeeffectonlybetweenthepartieswhoexecute
them.[23] The paragraph cited by petitioner speaks only of the acceptance of the project and the
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submissionofanaffidavitorundertakingasprerequisitesbeforethe10%retentioncanbereleased.As
thecontractisonlybetweenthepetitionerandprivaterespondentandnomentionismadeoftheproject
owner, KyungIl, Phils., Inc., it follows that the acceptance referred to is the acceptance by petitioner
itself.Considering that, as previously discussed, petitioner has already accepted the project undertaken
by private respondent and respondent, further, has previously submitted the required
affidavit/undertaking[24],thereisnomorereasonforpetitionertoholdontothe10%retentionamount.
Finally,petitionerquestionstheproprietyofthepromulgationofasummaryjudgmentconsidering
that it has also filed a thirdparty complaint against the Project Manager, KyungIl, Phils., Inc. for
indemnityorcontributioninrespectofrespondentsclaim.
This issue is not one of first impression. We have previously held that a trial court may render a
judgmentonthepleadingsevenifthereispendingbeforethesamecourt,athirdpartycomplaint.Thus:
Utasscoclaimsthatthetrialcourtshouldhavewithheldjudgmentonthepleadingsuntilafterthethird
partyactionbroughtbyUtasscoagainsttheownerofLanuzaLumberontheindemnityagreement
executedbetweenthem,hadgoneforwardtojudgment.Thethirdpartycomplaintcould,ofcourse,have
beenproceededquiteseparatelyfromtheprincipalactionbetweenPNBandUtassco.Indeedtherewas
noreasonatallwhythetrialcourtshouldhavedeferredrenderingjudgmentonthepleadingsinthe
principalaction,consideringthatthePNBwasnotinterestedatallintheoutcomeofthethirdparty
complaint.UnderSection12,Rule6oftheRevisedRulesofCourt,thepurposeofathirdparty
complaintistoenableadefendingpartytoobtaincontribution,indemnity,subrogationorotherrelief
fromapersonnotapartytotheaction.Thus,notwithstandingthejudgmentofthepleadings,Utassco
couldstillproceedwiththeprosecutionofitsthirdpartycomplaint.[25]
Although the quoted decision deals with a judgment on the pleadings, we see no reason why the
samecannotbeappliedintheinstantcaseinvolvingasummaryjudgment.Inthecaseatbench,private
respondentislikewisenotinterestedintheoutcomeofthethirdpartycomplaintwhichpetitionerfiled
against the thirdparty respondent, KyungIl Phils., Inc. Petitioner, as thirdparty plaintiff, is suing
KyungIl Phils., Inc. on the basis of its own contracts[26]withthelatter. It must be stressed that these
contracts are only between petitioner and KyungIl Phils. and, in fact, no mention is made of private
respondent in these contracts, either as a party or a subcontractor. As such, the thirdparty complaint
could proceed quite separately from the principal action between petitioner and private respondent.
Consequently, there was no reason for the trial court to defer rendering a summary judgment until the
resolutionofthethirdpartycomplaint.
Underthecircumstanceshereinsetforth,thereareclearlynosubstantialtriableissuesintheinstant
case.Thefitnessandproprietyofasummaryjudgmentcannottherefore,bedisputed.
WHEREFORE, the decision of the Court of Appeals dated November 27, 1998 is hereby
AFFIRMED.TheinstantpetitionisDENIEDforlackofmerit.
SOORDERED.
Melo,(Chairman),Vitug,andPanganiban,JJ.,concur.
[1] PerJusticeFerminA.Martin,Jr.,withJusticeRomeoJ.CallejoandJusticeMarianoM.Umali,concurring.
[2] Branch141,MakatiCity,inCivilCaseNo.923567.
[3] Rollo,pp.4145.
[4] AnnexAofPetitionrollo,pp.2531.

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[5] AnnexBofPetitionrollo,pp.3951.
[6] AnnexDofPetitionrollo,pp.8182.
[7] Rollo,p.12.
[8] UnderRule34ofthe1964RulesofCourt(nowRule35ofthe1997RulesofCivilProcedure).
[9] UnderRule19ofthe1964RulesofCourt(nowRule34ofthe1997RulesofCivilProcedure).
[10] Dimanvs.Alumbres,299SCRA459.
[11] Vergara,Sr.vs.Suelto,156SCRA753.
[12] ExcelsaIndustries,Inc.vs.CourtofAppeals,247SCRA560.
[13] RTCRecords,pp.1923.
[14] RTCRecords,pp.110.
[15] Dimanvs.Alumbres,supra.Vergara,Sr.vs.Suelto,supra.
[16] AnnexDofMemorandumforPrivateRespondentrollo,pp.302305.
[17] AnnexBofMemorandumofPrivateRespondentrollo,pp.293298.
[18] RTCRecords,pp.2021.
[19] Rollo,p.49.
[20] Rollo,p.296.
[21] Rollo,p.291.
[22] Rollo,p.293.
[23] Article1311,NewCivilCode.
[24] Rollo,p.330.
[25] PhilippineNationalBankvs.UtilityAssuranceandSuretyCo.,177SCRA208.
[26] RTCRecords,pp.3664.

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