Philippine Supreme Court Jurisprudence > Year 2016 > July 2016 Decisions > G.R. No. 192477, July 27, 2016 - MOMARCO IMPORT COMPANY, INC., Petitioner, v. FELICIDAD VILLAMENA, Respondent.:

A default judgment is frowned upon because of the policy of the law to hear every litigated case on the merits. But the default judgment will not be vacated unless the defendant satisfactorily explains the failure to file the answer, and shows that it has a meritorious defense.

The Case

Under challenge by the petitioner is the affirmance on January 14, 2010 by the Court of Appeals (CA)¹ of the trial court's default judgment rendered against it on August 23, 1999 in Civil Case No. C-18066 by the Regional Trial Court (RTC), Branch 126, in Caloocan City.² The defendant hereby prays that the default judgment be undone, and that the case be remanded to the RTC for further proceedings, including the reception of its evidence.³chanrobleslaw

Antecedents

Civil Case No. C-18066 is an action the respondent initiated against the petitioner for the nullification of a deed of absolute sale involving registered real property and its improvements situation in Caloocan City as well as of the transfer certificate of title issued in favor of the latter by virtue of said deed of absolute sale on the ground of falsification.

The following factual and procedural antecedents are summarized by the CA in its assailed decision, to wit:ChanRoblesVirtualawlibrary

On September 23, 1997, plaintiff filed against defendant a complaint for "Nullification of Deed of Sale and of the Title Issued" pursuant thereto alleging that she is the owner of a parcel of land with improvements located in Caloocan City and covered by Transfer Certificate of Title No. 204755. A letter from defendant corporation dated June 12, 1997, informed plaintiff that TCT No. 204755 over aforesaid property had been cancelled and TCT No. C-319464 was issued in lieu thereof in favor of defendant corporation on the strength of a purported Special Power of Attorney executed by Dominador Villamena, her late husband, appointing her, plaintiff Felicidad Villamena, as his attorney-in-fact and a deed of absolute sale purportedly executed by her in favor of defendant corporation on May 21, 1997, the same date as the Special Power of Attorney. The Special Power of Attorney dated May 21, 1997 is a forgery. Her husband Dominador died on June 22, 1991. The deed of sale in favor of defendant corporation was falsified. What plaintiff executed in favor of Mamarco was a deed of real estate mortgage to secure a loan of P100,000.00 and not a deed of transfer/conveyance.

x x x x

On August 19, 1998, plaintiff filed a motion to declare defendant corporation in default for failure of aforesaid defendant to file its answer as of said date despite the filing of an Entry of Appearance by its counsel dated May 4, 1998.

On September 10, 1998 defendant corporation filed its Answer with Counterclaim which denied the allegations in the complaint; alleged that plaintiff and her daughter Lolita accompanied by a real estate agent approached the President of Momarco for a loan of P100,000.00; offered their house and lot as collateral; and presented a Special Power of Attorney from her husband. She was granted said loan. Aforesaid loan was not repaid. Interests accumulated and were added to the principal. Plaintiff offered to execute a deed of sale over the property on account of her inability to pay. Plaintiff presented to defendant corporation a deed of sale and her husband's Special of Power Attorney already signed and notarized.⁴chanroblesvirtuallawlibrary

Under the order dated October 15, 1998, the petitioner was declared in default, and its answer was ordered stricken from the records. Thereafter, the RTC allowed the respondent to present her evidence ex parte.

On August 23, 1999, the RTC rendered the default judgment nullifying the assailed deed of absolute sale and the transfer certificate of title issued pursuant thereto; and ordering the Register of Deeds of Caloocan, City to cancel the petitioner's Transfer Certificate of Title No. C-319464, and to reinstate the respondent's Transfer Certificate of Title No. 204755.⁵ It concluded that the act of the petitioner's counsel of formally entering an appearance in the case had mooted the issue of defective service of summons; and that the respondent had duly established by preponderance of evidence that the purported special power of attorney was a forgery.⁶chanrobleslaw

The petitioner appealed the default judgment to the CA, arguing that the RTC had gravely erred in nullifying the questioned deed of absolute sale and in declaring it in default.

On January 14, 2010, the CA promulgated the assailed decision affirming the default judgment upon finding that the RTC did not commit any error in declaring the petitioner in default and in rendering judgment in favor of the respondent who had successfully established her claim of forgery by preponderance of evidence.⁷chanrobleslaw

On May 31, 2010, the CA denied the petitioner's motion for reconsideration.⁸chanrobleslaw

Hence, this appeal by the petitioner.

Issue

The petitioner raises the lone issue of whether or not the CA gravely erred in upholding the default judgment of the RTC; in ordering its answer stricken off the records; in allowing the respondent to adduce her evidence exparte; and in rendering the default judgment based on such evidence.⁹chanrobleslaw

Ruling of the Court

The appeal lacks merit.

The petitioner claims denial of its right to due process, insisting that the service of summons and copy of the complaint was defective, as, in fact, there was no sheriff's return filed; that the service of the alias summons on January 20, 1998 was also defective; and that, accordingly, its reglementary period to file the answer did not start to run.

The claim of the petitioner is unfounded. The filing of the formal entry of appearance on May 5, 1998 indicated that it already became aware of the complaint filed against it on September 23, 1997. Such act of counsel, because it was not for the purpose of objecting to the jurisdiction of the trial court, constituted the petitioner's voluntary appearance in the action, which was the equivalent of the service of summons.¹⁰ Jurisdiction over the person of the petitioner as the defendant became thereby vested in the RTC, and cured any defect in the service of summons.¹¹chanrobleslaw

Under Section 3,¹² Rule 9 of the Rules of Court, the three requirements to be complied with by the claiming party before the defending party can be declared in default are: (1) that the claiming party must file a motion praying that the court declare the defending party in default; (2) the defending party must be notified of the motion to declare it in default; (3) the claiming party must prove that the defending party failed to answer the complaint within the period provided by the rule.¹³ It is plain, therefore, that the default of the defending party cannot be declared motu proprio.¹⁴chanrobleslaw

Although the respondent filed her motion to declare the petitioner in default with notice to the petitioner only on August 19, 1998, all the requisites for properly declaring the latter in default then existed. On October 15, 1998, therefore, the RTC appropriately directed the answer filed to be stricken from the records and declared the petitioner in default. It also received ex parte the respondent's evidence, pursuant to the relevant rule.¹⁵chanrobleslaw

The petitioner's logical remedy was to have moved for the lifting of the declaration of its default but despite notice it did not do the same before the RTC rendered the default judgment on August 23, 1999. Its motion for that purpose should have been under the oath of one who had knowledge of the facts, and should show that it had a meritorious defense,¹⁶ and that its failure to file the answer had been due to fraud, accident, mistake or excusable negligence. Its urgent purpose to move in the RTC is to avert the rendition of the default judgment. Instead, it was content to insist in its comment/opposition vis-a-vis the motion to declare it in default that: (1) it had already filed its answer; (2) the order of default was generally frowned upon by the courts; (3) technicalities should not be resorted to; and (4) it had a meritorious defense. It is notable that it tendered no substantiation of what was its meritorious defense, and did not specify the circumstances of fraud, accident, mistake, or excusable negligence that prevented the filing of the answer before the order of default issued - the crucial elements in asking the court to consider vacating its own order.

The policy of the law has been to have every litigated case tried on the merits. As a consequence, the courts have generally looked upon a default judgment with disfavor because it is in violation of the right of a defending party to be heard. As the Court has said in Coombs v. Santos:¹⁷

A default judgment does not pretend to be based upon the merits of the controversy. Its existence is justified on the ground that it is the one final expedient to induce defendant to join issue upon the allegations tendered by the plaintiff, and to do so without unnecessary delay. A judgment by default may amount to a positive and considerable injustice to the defendant; and the possibility of such serious consequences necessitates a careful examination of the grounds upon which the defendant asks that it be set aside.

In implementation of the policy against defaults, the courts have admitted answers filed beyond the reglementary periods but before the declaration of default.¹⁸chanrobleslaw

Considering that the petitioner was not yet declared in default when it filed the answer on September 10, 1998, should not its answer have been admitted?

The petitioner raised this query in its motion for reconsideration in the CA, pointing out that the RTC could no longer declare it in default and order its answer stricken from the records after it had filed its answer before such declaration of default. However, the CA, in denying the motion for reconsideration, negated the query, stating as follows:ChanRoblesVirtualawlibrary

Unfortunately, we find the foregoing arguments insufficient to reverse our earlier ruling. These points do little to detract from the fact that Defendant-Appellant filed its Answer only after a period of more than four months from when it entered its voluntary appearance in the case a quo, and only after almost a month from when Plaintiff-Appellee moved to have it declared in default.

Verily, Defendant-Appellant's temerity for delay is also betrayed (sic) by the fact that it had waited for a judgment to be rendered by the court a quo before it challenged the order declaring it in default. If it truly believed that it had a "meritorious defense[,] which if properly ventilated could have yielded a different conclusion [by the trial court]," then it could very well have moved to set aside the Order of Default immediately after notice thereof or anytime before judgment. Under the circumstances, that would have been the most expeditious remedy. Inauspiciously, Defendant-Appellant instead elected to wager on a favorable judgment. Defeated, Defendant-Appellant would now have us set aside the Order of Default on Appeal and remand the case for further proceedings. These we cannot do.

While we are aware that we are vested with some discretion to condone Defendant-Appellant's procedural errors, we do not find that doing so will serve the best interests of justice. To remand this case to the court a quo on the invocation that we must be liberal in setting aside orders of default, would be to reward Defendant-Appellant with more delay. It bears stating that the Rules of Procedure are liberally construed not to suit the convenience of a party, but "in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and proceeding." To this end, it has been rightly written:ChanRoblesVirtualawlibrary

Procedural rules are not to be disregarded as mere technicalities that may be ignored at will to suit the convenience of a party. x x x.

It cannot be overemphasized that procedural rules have their own wholesome rationale in the orderly administration of justice. Justice has to be administered according to the rules in order to obviate arbitrariness, caprice and whimsicality.¹⁹chanroblesvirtuallawlibrary

We concur with the CA's justification. The RTC and the CA acted in accordance with the Rules of Court and the pertinent jurisprudence. The petitioner was insincere in assailing the default judgment, and its insincerity became manifest from its failure to move for the lifting of the order of default prior to the rendition of the default judgment. The CA rightly observed that the petitioner had apparently forsaken its "expeditious remedy" of moving soonest for the lifting of the order of default in favor of "wager[ing]" on obtaining a favorable judgment. The petitioner would not do so unless it intended to unduly cause delay to the detriment and prejudice of the respondent.

The sincerity of the petitioner's actions cannot be presumed. Hence, it behooves it to allege the suitable explanation for the failure or the delay to file the answer through a motion to lift the order of default before the default judgment is rendered. This duty to explain is called for by the philosophy underlying the doctrine of default in civil procedure, which Justice Narvasa eruditely discoursed on in Gochangco v. CFI Negros Occidental,²⁰ to wit:ChanRoblesVirtualawlibrary

The underlying philosophy of the doctrine of default is that the defendant's failure to answer the complaint despite receiving copy thereof together with summons, is attributable to one of two causes: either (a) to his realization that he has no defenses to the plaintiff's cause and hence resolves not to oppose the complaint, or, (b) having good defenses to the suit, to fraud, accident, mistake or excusable negligence which prevented him from seasonably filing an answer setting forth those defenses. It does make sense for a defendant without defenses, and who accepts the correctness of the specific relief prayed for in the complaint, to forego the filing of the answer or any sort of intervention in the action at all. For even if he did intervene, the result would be the same: since he would be unable to establish any good defense, having none in fact, judgment would inevitably go against him. And this would be an acceptable result, if not being in his power to alter or prevent it, provided that the judgment did not go beyond or differ from the specific relief stated in the complaint. It would moreover spare him from the embarrassment of openly appearing to defend the indefensible. On the other hand, if he did have good defenses, it would be unnatural for him not to set them up properly and timely, and if he did not in fact set them up, it must be presumed that some insuperable cause prevented him from doing so: fraud, accident, mistake, excusable negligence. In this event, the law will grant him relief; and the law is in truth quite liberal in the reliefs made available to him: a motion to set aside the order of default prior to judgment, a motion for new trial to set aside the default judgment; an appeal from the judgment by default even if no motion to set aside the order of default or motion for new trial had been previously presented; a special civil action for certiorari impugning the court's jurisdiction.²¹chanroblesvirtuallawlibrary

It is true that the RTC had the discretion to permit the filing of the answer even beyond the reglementary period, or to refuse to set aside the default order where it finds no justification for the delay in the filing of the answer.²² Conformably with the judicious exercise of such discretion, the RTC could then have admitted the belated answer of the petitioner and lifted the order of default instead of striking the answer from the records. However, the RTC opted not to condone the inordinate delay taken by the petitioner, and went on to render the default judgment on August 23, 1999. Such actions were fully within its discretion.²³ We uphold the default. While the courts should avoid orders of default, and should be, as a rule, liberal in setting aside orders of default,²⁴ they could not ignore the abuse of procedural rules by litigants like the petitioner, who only had themselves to blame.

WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision of the Court of Appeals promulgated on January 14, 2010; and ORDERS the petitioner to pay the costs of suit.

SO ORDERED.chanRoblesvirtualLawlibrary

Sereno, C.J., Leonardo-De Castro, Perlas-Bernabe, and Caguioa, JJ., concur.

Endnotes:

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¹Rollo, pp. 20-24; penned by Associate Justice Arcangelita Romilla-Lontok (retired), with Associate Justice Andres B. Reyes, Jr. (now Presiding Justice) and Associate Justice Priscilla J. Baltazar-Padilla concurring.

²� CA rollo, pp. 10-12; penned by Judge Luisito C. Sardillo.

³Rollo, p. 16.

⁴ Id. at 21-22.

⁵ CA rollo, p. 12.

⁶ Supra note 2.

⁷ Supra note 1.

⁸Rollo, pp. 26-29; penned by Presiding Justice Reyes, Jr., with the concurrence of Associate Justice Baltazar-Padilla and Associate Justice Jane Aurora C. Lantion.

⁹ Id. at 13.

¹⁰ Rule 14, Section 20 of the Rules of Court provides:

chanRoblesvirtualLawlibrarySection. 20. Voluntary appearance. � The defendant's voluntary appearance in the action shall be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance.

¹¹Cezar v. Ricafort-Bautista, G.R. No. 136415, October 31, 2006, 506 SCRA 322, 334.

¹² Section. 3. Default; declaration of. � If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending party in default. Thereupon, the court shall proceed to render judgment granting the claimant such relief as his pleading may warrant, unless the court in its discretion requires the claimant to submit evidence. Such reception of evidence may be delegated to the clerk of court.

¹³Delos Santos v. Carpio, G.R. No. 153696, September 11, 2006, 501 SCRA 390, 398-399.

¹⁴Trajano v. Cruz, No. L-47070, December 29, 1977, 80 SCRA 712, 715.

¹⁵ Section 3, Rule 9, Rules of Court.

¹⁶Montinola, Jr. v. Republic Planters Bank, No. L-66183, May 4, 1988, 161 SCRA 45, 52.

¹⁷ 24 Phil. 446, 449-450 (1913).

¹⁸Cathay Pacific Airways, Ltd. v. Romillo, Jr., No. L-64276, March 4, 1986, 141 SCRA 451, 455.

¹⁹ Supra note 8, at 27-29.

²⁰ No. L-49396, January 15, 1088, 157 SCRA 40.

²¹ Id. at 54-55 (bold underscoring added for emphasis).

²²Malipod v. Tan, No. L-27730, January 21, 1974, 55 SCRA 202, 213.

²³Cathay Pacific Airways, Ltd. v. Romillo, Jr., supra note 18.

²⁴ Acance v. Court of Appeals, G.R. No. 159699, March 16, 2005, 453 SCRA 548, 563; Montinola, Jr. v. Republic Planters Bank, No. L-66183, May 4, 1988, 161 SCRA 45, 54.