GR 82506; (May, 1989) (Digest)
G.R. No. 82506 May 12, 1989
CONSTRUCTION SERVICES OF AUSTRALIA PHILIPPINES, INC., MELCHOR D. ELEGADO, ISIDRO D. CARIÑO and GERRY DE VERA, petitioners, vs. AMADO P. PERALTA, respondent.
FACTS
Petitioner corporation, Consaphil, undertook the Bolinao Dendro Thermal Project. Through its officers, it purchased construction materials on account from respondent Amado P. Peralta’s Bolinao Construction Supply, amounting to P252,520.39. After project completion, the account remained unsettled despite demands. Consaphil’s Assistant Treasurer acknowledged the debt and assured payment, leading to a partial payment of P50,504.08, leaving a balance. Respondent filed a collection suit. Summonses were served on the petitioners. However, petitioners Consaphil, Elegado, Cariño, and de Vera failed to file their answer. The trial court declared them in default and allowed respondent to present evidence ex-parte. Only later did petitioners’ counsel appear and file a motion to dismiss, challenging the court’s jurisdiction over their persons due to alleged invalid service of summons.
ISSUE
The core issues were whether the trial court correctly refused to entertain the motion to dismiss filed after the order of default, and whether the factual findings on the existence of the obligation were valid.
RULING
The Supreme Court denied the petition and affirmed the lower courts’ decisions. On the procedural issue, the Court ruled that a party declared in default loses standing as a litigant and forfeits the right to take part in the proceedings, including the filing of pleadings like a motion to dismiss, without first having the order of default lifted. The trial court, therefore, correctly refused to act on the motion to dismiss. Petitioners’ claim of invalid substituted service of summons was also unmeritorious, as the rules allow it when defendants cannot be served personally within a reasonable time, a condition satisfied here.
On the substantive issue, the Court upheld the finding of a valid obligation. Petitioners were estopped from denying the debt after their Assistant Treasurer made written representations admitting the liability and proposing a payment schedule, and after making a partial payment. This conduct constituted a judicial admission binding on the corporation. The doctrine of estoppel prevents a party from taking inconsistent positions to mock the courts. Consequently, the award for the unpaid balance, plus interest, attorney’s fees, and litigation expenses, was justified due to petitioners’ evident bad faith in refusing to settle a plainly valid claim.