Delos Santos vs. Carpio

A trial court gravely abuses its discretion in declaring a defending party in default before the scheduled hearing of the motion to declare default, especially where the defendant has filed an answer raising a prima facie meritorious defense of litis pendentia prior to the hearing, and the late filing of the answer was due to excusable negligence without intent to delay.

Metropolitan Bank and Trust Company (Metrobank) filed a complaint for sum of money against spouses Humberto and Carmencita delos Santos before the Regional Trial Court of Davao City, Branch 16, docketed as Civil Case No. 28,362-2001, based on a promissory note for ₱500,000.00. The spouses had previously filed a separate civil case against Metrobank in another branch (Civil Case No. 27,875-2000) involving a ₱12,500,000.00 loan, which they claimed included the ₱500,000.00 obligation subject of the present complaint. Upon receipt of summons on January 22, 2001, the spouses sought the services of Atty. Philip Pantojan, but were only able to meet with him on February 12, 2001, causing them to miss the February 6, 2001 deadline to file their answer.

• The Loan Obligation: Metrobank filed a complaint for sum of money against the spouses Delos Santos based on a ₱500,000.00 promissory note.
• Prior Pending Case: The spouses had previously filed Civil Case No. 27,875-2000 against Metrobank in RTC Davao City, Branch 10, involving a ₱12,500,000.00 loan. The spouses asserted that the ₱500,000.00 obligation in the present case was part of this larger loan.
• Failure to Answer: Served with summons on January 22, 2001, the spouses had until February 6, 2001 to file an answer. They sought the services of Atty. Pantojan but could only meet with him on February 12, 2001, causing them to miss the deadline.
• Premature Default Order: On February 9, 2001, Metrobank filed a motion to declare the spouses in default, setting the hearing for February 16, 2001. The trial court, however, issued the default order on February 12, 2001, four days before the scheduled hearing.
• Subsequent Filings: On February 15, 2001, the spouses filed an opposition to the default motion, a motion to admit answer, and the answer itself, which raised the affirmative defense of litis pendentia. The trial court disregarded these filings and denied the motion to admit answer. A subsequent motion to lift the default order and a motion for reconsideration were likewise denied.

• Grave Abuse of Discretion: Petitioner argued that the trial court committed grave abuse of discretion by issuing the default order four days before the scheduled hearing of the motion, thereby depriving them of the opportunity to be heard.
• Excusable Negligence: Petitioner maintained that their failure to file an answer on time was due to the unavailability of their counsel of choice, which constituted excusable negligence.
• Meritorious Defense: Petitioner contended that the affirmative defense of litis pendentia raised in their answer constituted a meritorious defense, as it is a ground for the dismissal of the complaint.
• Duty to Dismiss: Petitioner averred that under Section 1, Rule 9 of the Rules of Court, the trial court should have taken cognizance of the defense of litis pendentia despite its not being seasonably raised, as it is among the grounds the court may dismiss motu proprio.

• Procedural Lapse Not Fatal: Respondent countered that even if the trial court committed a procedural lapse in declaring petitioners in default before the scheduled hearing, it did not constitute grave abuse of discretion because the reglementary period had already expired and a hearing would not change the outcome.
• Inexcusable Negligence: Respondent argued that petitioners' negligence was not excusable because they could have consulted the associates of their chosen counsel to request an extension of time.
• No Meritorious Defense: Respondent maintained that the claim of litis pendentia was misplaced because the two cases had separate and distinct causes of action, and petitioners' affidavit of merit merely stated general terms without discussing the facts supporting the defense.
• Unadmitted Answer: Respondent argued that the trial court correctly refused to rule on litis pendentia because the answer containing the defense was not admitted as part of the records.

• Premature Default Order: Whether the trial court committed grave abuse of discretion in declaring petitioners in default before the scheduled hearing of the motion to declare default.
• Meritorious Defense: Whether the defense of litis pendentia raised in the answer constitutes a meritorious defense sufficient to set aside the default order.

• Premature Default Order: The trial court gravely abused its discretion. Under Section 3, Rule 9 and Section 4, Rule 15 of the Rules of Court, a motion to declare default must be set for hearing with notice to the defending party. Issuing the order before the hearing defeats the purpose of the notice requirement, which is to avoid surprise and allow the opposing party time to meet the arguments. By disregarding the scheduled hearing and the petitioners' filings made prior to it, the trial court acted in a capricious and despotic manner.
• Meritorious Defense: The defense of litis pendentia constitutes a prima facie meritorious defense. The answer alleged that the ₱500,000.00 obligation in the present case is part of the ₱12,500,000.00 loan in a previously filed case between the same parties. Under Section 1, Rule 9, the court may motu proprio dismiss a claim when litis pendentia is apparent from the pleadings. Furthermore, the late filing of the answer was due to excusable negligence, the answer was filed before the scheduled hearing showing no intent to delay, and no prejudice was caused to the plaintiff. Default judgments are disfavored, and courts should be liberal in setting them aside to resolve cases on the merits.

• Declaration of Default — Three requisites must be complied with before a defending party may be declared in default: (1) the claiming party must file a motion asking the court to declare the defending party in default; (2) the defending party must be notified of the motion to declare him in default; and (3) the claiming party must prove that the defending party has failed to answer within the period provided by the Rule. The motion must be heard, as the present rule expressly requires notice to the defending party, the purpose of which is to avoid surprise and give time to meet the arguments.
• Disfavor of Default Judgments — Default judgments are generally disfavored. Courts should be liberal in setting aside orders of default, and unless it clearly appears that reopening the case is intended for delay, both parties should be given every chance to fight their case fairly and in the open, without resort to technicality. It is within sound judicial discretion to set aside an order of default and permit a defendant to file an answer and be heard on the merits even after the reglementary period has expired.

• "Clearly, there are three requirements which must be complied with by the claiming party before the court may declare the defending party in default, to wit: (1) the claiming party must file a motion asking the court to declare the defending party in default; (2) the defending party must be notified of the motion to declare him in default; (3) the claiming party must prove that the defending party has failed to answer within the period provided by the Rule."
• "The controlling principle ignored by respondent court is that it is within sound judicial discretion to set aside an order of default and to permit a defendant to file his answer and to be heard on the merits even after the reglementary period for the filing of the answer has expired. This discretion should lean towards giving party-litigants every opportunity to properly present their conflicting claims on the merits of the controversy without resorting to technicalities."

• Akut v. Court of Appeals, 201 Phil. 680 (1982) — Followed. Held that trial courts should be liberal in setting aside orders of default and permit defendants to be heard on the merits, as default judgments are frowned upon.
• Mercader v. Bonto, G.R. No. L-48564, August 20, 1979 — Followed. Held that the late filing of an answer due to excusable negligence, the presence of a meritorious defense, the filing of the answer before declaration of default, and the lack of prejudice to the plaintiff constitute abuse of discretion in declaring defendants in default.
• Indiana Aerospace University v. Commission on Higher Education, G.R. No. 139371, April 4, 2001 — Followed. Reiterated that default judgments are generally disfavored and an answer filed before a default declaration should be admitted if no prejudice is caused.

• Section 3, Rule 9, Rules of Court — Governs the declaration of default. Applied to emphasize that the claiming party's motion must be with notice to the defending party, and the defending party's failure to answer must be proven.
• Section 4, Rule 15, Rules of Court — Requires every written motion to be set for hearing by the applicant. Applied to show that the trial court prematurely acted on the motion before the scheduled hearing, violating the defending party's right to be heard.
• Section 1, Rule 9, 1997 Rules of Civil Procedure — Provides that defenses not pleaded are deemed waived, except for lack of jurisdiction, litis pendentia, res judicata, and prescription, which the court may dismiss motu proprio. Applied to establish that the trial court had a compelling reason to recall the default order because litis pendentia was apparent from the answer.
• Section 11, Rule 11, Rules of Court — Allows the court to extend the time to plead or allow an answer to be filed after the fixed period. Applied to support the discretion of the trial court to admit the belated answer given the excusable negligence and lack of intent to delay.

Panganiban, C.J. (Chairperson), Ynares-Santiago, Callejo, Sr., Chico-Nazario, J.J.