Magtoto vs. Court of Appeals

A party declared in default may obtain relief only upon a sworn showing that the failure to answer was due to fraud, accident, mistake, or excusable negligence, and that a meritorious defense exists. Negligence is not excusable when it could have been avoided by ordinary diligence and prudence. A defendant’s own inaction and lack of vigilance in prosecuting his cause precludes the lifting of a default order.

On January 11, 1999, respondent Leonila Dela Cruz sold three parcels of land in Mabalacat, Pampanga to petitioner Ruben C. Magtoto for P11,952,750.00. Petitioner spouses Ruben and Artemia Magtoto took possession of the properties, exercised acts of ownership, and caused the transfer of the titles in Ruben’s name. Payment was made through postdated checks; however, most of the checks were dishonored. The spouses paid only P2,455,000.00, leaving an unpaid balance of P9,497,750.00. Despite repeated demands, the balance remained unsettled, prompting Leonila to file a complaint for specific performance with damages in the Regional Trial Court.

• The Sale and Non-Payment: On January 11, 1999, respondent Leonila Dela Cruz sold her three parcels of land in Mabalacat, Pampanga to petitioner Ruben C. Magtoto for P11,952,750.00. Ruben and his wife Artemia Magtoto executed a Deed of Absolute Sale, took possession of the properties, and transferred the certificates of title in Ruben’s name. As payment, Ruben issued several postdated checks, but most of these were dishonored. Out of the total purchase price, only P2,455,000.00 was paid, leaving a balance of P9,497,750.00 that remained unpaid despite repeated demands.

• The Proceedings and Default: On May 15, 2003, Leonila filed a Complaint for Specific Performance with Damages against the spouses Magtoto before the RTC. Summons was served on June 6, 2003, giving them 15 days to answer. The spouses filed three successive motions for extension of time to file their Answer. The RTC granted a final extension until August 2, 2003. Instead of filing an Answer, they filed a Motion to Dismiss on August 4, 2003 — two days late. The RTC denied the motion on September 11, 2003. Meanwhile, on September 25, 2003, their counsel, Atty. Noel T. Canlas, filed an Ex-Parte Motion to Withdraw Appearance, claiming he had lost contact with his clients despite reasonable efforts. The case was initially dismissed on December 12, 2003 for Leonila’s lack of interest to prosecute, but was later reinstated on February 19, 2004. On January 23, 2004, Leonila moved to declare the spouses in default, pointing out that they had failed to file an Answer within the balance of the reglementary period after the denial of their Motion to Dismiss and reminding them not to use their counsel’s withdrawal as an excuse. The motion to declare default was heard on March 18, 2004, with Ruben Magtoto present. The trial court noted that the spouses had not yet engaged new counsel despite Atty. Canlas’s withdrawal as early as September 25, 2003. The RTC declared the spouses in default on March 23, 2004. Leonila presented her evidence ex parte and formally offered exhibits.

• The Omnibus Motion to Lift Default: On June 25, 2004 — almost three months after the default order and after Leonila had completed her ex parte presentation — the spouses Magtoto, through new counsel, filed an Omnibus Motion to Lift Order of Default and to Admit Attached Answer, together with their Answer. The RTC denied the motion. It noted that the period to file a responsive pleading had expired on August 2, 2003, and that more than ten months had elapsed before the spouses filed their responsive pleading. The Omnibus Motion was also fatally defective because it was not accompanied by an Affidavit of Merit showing that the failure to answer was due to fraud, accident, mistake, or excusable negligence and that they had a good and meritorious defense, as required by Rule 9, Section 3(b) of the Rules of Court. A motion for reconsideration was likewise denied.

• The RTC Decision on the Merits: On November 22, 2004, the RTC rendered judgment in favor of Leonila, finding that the spouses Magtoto had failed to comply with their obligation to pay the full purchase price. The court ordered the spouses to pay P9,497,750.00 with 6% interest per annum from the time of judicial demand until full payment, attorney’s fees equivalent to 10% of the total amount due, and costs of suit.

• The Appeal to the Court of Appeals: The spouses Magtoto appealed to the CA, arguing that the trial court erred in denying their Omnibus Motion to lift default and in refusing to admit their Answer. They claimed they had sufficiently explained their delay, that the RTC never resolved Atty. Canlas’s withdrawal motion, that Leonila was partly to blame for delay because the case was initially dismissed for her lack of interest, and that the trial court elevated technicality over substantive justice. The CA dismissed the appeal on May 31, 2006, holding that the principal cause of delay was the spouses Magtoto’s own inaction. Their Motion for Reconsideration was denied on October 25, 2006.

• The Petition Before the Supreme Court: The spouses Magtoto received the CA Resolution denying reconsideration on October 30, 2006. Instead of filing a petition for review on certiorari under Rule 45 within 15 days (until November 14, 2006), they filed the present Petition for Certiorari under Rule 65 on December 29, 2006 — after the period for a Rule 45 petition had expired.

• Allocation of Fault for Delay: Petitioners maintained that the Court of Appeals committed grave abuse of discretion in heaping all the blame for the delay upon them. They argued that the trial court and respondent Leonila shared responsibility: the RTC failed to act on their former counsel’s motion to withdraw, leaving them uncertain about the need to secure new representation, and Leonila’s lack of interest to prosecute caused the initial dismissal of the case, contributing to the overall delay.

• Right to File Motion to Dismiss: Petitioners contended that their filing of a motion to dismiss was a right expressly provided under the Rules of Court, and that the CA erred in treating the motion as a dilatory tactic. They insisted that the case should have been decided on the merits rather than on a technicality.

• Failure to File Answer After Denial of Motion to Dismiss: Respondent Leonila Dela Cruz argued that after the denial of their Motion to Dismiss on September 11, 2003, petitioners had the balance of the period prescribed by Rule 11 within which to file their Answer, but allowed more than three months to elapse without doing so. She cautioned petitioners that their counsel’s withdrawal of appearance did not excuse the failure to file a responsive pleading.

• Defective Motion to Lift Default: Respondent asserted that the Omnibus Motion to Lift Order of Default was fatally defective because it lacked an Affidavit of Merit demonstrating excusable negligence and a meritorious defense, as required under Rule 9, Section 3(b). The motion was also filed more than two months after notice of the default order, without a sufficient explanation for the additional delay.

• Propriety of the Petition for Certiorari: Whether the special civil action for certiorari under Rule 65 was a proper remedy to assail the Court of Appeals’ decision and resolution, or whether it was an impermissible substitute for a lost appeal under Rule 45.

• Correctness of the Default Order: Whether the Regional Trial Court correctly declared petitioners in default, given the sequence of extensions, the belated motion to dismiss, the subsequent non-filing of an answer within the remaining reglementary period, and petitioners’ failure to engage new counsel.

• Relief from Default under Rule 9, Section 3(b): Whether petitioners demonstrated that their failure to file a timely answer was due to fraud, accident, mistake, or excusable negligence, and that they possessed a meritorious defense sufficient to set aside the order of default.

• Propriety of the Petition for Certiorari: The petition was procedurally infirm and could have been dismissed outright. Petitioners’ remedy from an adverse decision of the Court of Appeals was a petition for review on certiorari under Rule 45, not a special civil action for certiorari under Rule 65. Petitioners received the CA Resolution on October 30, 2006, giving them until November 14, 2006 to file a Rule 45 petition. They filed the present petition only on December 29, 2006, long after the period had expired. The petition for certiorari was an improper substitute for a lost appeal and could not be allowed.

• Correctness of the Default Order: The RTC correctly declared petitioners in default. After being served summons, petitioners requested and received three extensions; the final extension lapsed on August 2, 2003 without an Answer being filed. Instead, petitioners filed a Motion to Dismiss two days late. The RTC nevertheless resolved the motion and denied it on September 11, 2003. Under Section 4, Rule 16, petitioners were required to file their Answer within the balance of the period prescribed by Rule 11 computed from receipt of the notice of denial. They failed to do so. Their counsel’s subsequent withdrawal on September 25, 2003 did not excuse the delay because the reglementary period to answer had already expired before the withdrawal was filed. Moreover, after the withdrawal, petitioners did not promptly engage new counsel, even though they had more than three months before the motion to declare default was heard. The delay of nine months between the denial of the motion to dismiss and the eventual filing of the Answer was unreasonable and unjustified. Petitioners’ inaction constituted inexcusable neglect; the blame could not be shifted to the trial court, their former counsel, or the respondent.

• Relief from Default under Rule 9, Section 3(b): Petitioners failed to satisfy the twin requirements for relief from an order of default. First, their negligence was not excusable. Excusable negligence is that which ordinary diligence and prudence could not have guarded against. In this case, petitioners failed to maintain communication with their counsel, did nothing to secure new representation despite ample time, and ignored repeated opportunities to remedy their situation. Second, petitioners failed to establish a meritorious defense. Their Answer and the attached Affidavit of Merit contained only bare allegations — such as a claimed lower purchase price of P10,000,000.00, additional financial support to Leonila for the settlement of an estate, and total payments of P4,500,000.00 — that were unsubstantiated by any evidence. Consequently, the denial of the Omnibus Motion to Lift Default was proper.

• Relief from Order of Default (Rule 9, Section 3[b]) — A party declared in default may seek to set aside the order by filing a sworn motion showing (a) that the failure to answer was due to fraud, accident, mistake, or excusable negligence, and (b) that the party has a meritorious defense. Negligence to be “excusable” must be one which ordinary diligence and prudence could not have guarded against. Unsubstantiated allegations in an answer do not constitute a meritorious defense. The court applied this standard to hold that petitioners’ prolonged inaction and lack of vigilance precluded the lifting of the default order.

• Rule 65 Cannot Substitute for a Lost Appeal — A special civil action for certiorari under Rule 65 is not a substitute for a lost appeal; the proper remedy to assail an adverse decision of the Court of Appeals is a petition for review on certiorari under Rule 45, which must be filed within 15 days from receipt of the judgment or denial of a motion for reconsideration. The court dismissed the petition because it was filed after the expiration of the reglementary period for a Rule 45 petition.

• Time to Plead After Denial of Motion to Dismiss (Rule 16, Section 4) — When a motion to dismiss is denied, the movant must file the answer within the balance of the period prescribed by Rule 11 for filing an answer, but not less than five days in any event, computed from receipt of the notice of the denial. The court applied this rule in concluding that petitioners’ period to answer had long expired by the time they filed their Answer.

• “Clearly, even before Atty. Canlas moved for the withdrawal of his appearance, the period within which spouses Magtoto should have filed their Answer had already expired. This means that as early as that time, they had already compromised their case. Hence, they cannot shift the blame to the RTC for not resolving Atty. Canlas’s motion to withdraw.”

• “Negligence, to be ‘excusable,’ must be one which ordinary diligence and prudence could not have granted against. Certainly, this is not the kind of negligence committed by the spouses Magtoto in this case.”

• “In fine, the belated filing of the Answer is solely attributable to the spouses Magtoto. They miserably failed to be vigilant in protecting and defending their cause. The RTC thus properly declared them in default.”

N/A (The decision text provided does not disclose specific case citations; footnotes containing citations are illegible).

• Rule 9, Section 3(b), Rules of Court — Governs relief from an order of default. Requires a motion under oath showing that the failure to answer was due to fraud, accident, mistake, or excusable negligence and that the party has a meritorious defense. The court enforced this provision against petitioners, finding neither excusable negligence nor a meritorious defense.

• Rule 11, Section 1, Rules of Court — Prescribes the period for filing an answer to the complaint: 15 days after service of summons, unless a different period is fixed by the court.

• Rule 16, Section 4, Rules of Court — States that if a motion to dismiss is denied, the movant shall file the answer within the balance of the period prescribed by Rule 11, but not less than five days from receipt of the notice of denial. Applied to hold that petitioners’ extended delay beyond this balance period rendered their default proper.

Associate Justice Antonio T. Carpio (Chairperson), Associate Justice Arturo D. Brion, Associate Justice Jose Portugal Perez, and Associate Justice Estela M. Perlas-Bernabe.