Vitarich Corporation vs. Dagmil

A defendant's answer must be admitted when filed before a declaration of default, provided there is no showing that the defendant intends to delay the proceedings and no prejudice is caused to the plaintiff, even if filed beyond the reglementary period; where the filing is made by registered mail, the date of mailing is considered the date of filing under Section 3, Rule 13 of the Rules of Court.

Vitarich Corporation instituted a civil action for sum of money against Femina R. Dagmil before the Regional Trial Court (RTC) of Malolos City, alleging an unpaid obligation of P15,829,840.00. Dagmil initially appeared through counsel who moved to dismiss on venue grounds. Following the denial of the motion to dismiss and the receipt of the order directing the filing of an answer, Dagmil's counsel failed to file a responsive pleading within the prescribed period due to health complications requiring hospitalization and clerical errors by office staff.

• Commencement of Action: On January 15, 2010, Vitarich Corporation instituted Civil Case No. 33-M-2010, an action for sum of money, against Femina R. Dagmil before the RTC Branch 11, Malolos City, seeking recovery of P15,829,840.00 representing principal obligation plus interest.
• Procedural Maneuvers: Upon receipt of summons, Dagmil, through counsel Atty. Nepthali Solilapsi, filed a motion to dismiss on the ground of improper venue. The RTC denied the motion on August 17, 2010 and directed Dagmil to file an answer. Atty. Solilapsi received the order on November 3, 2010, but no responsive pleading was submitted within the 15-day reglementary period.
• Default Proceedings: On January 5, 2011, Vitarich moved to declare Dagmil in default. Meanwhile, Dagmil engaged new counsel, Atty. Emilio Quianzon, Jr., who filed on January 31, 2011 a motion to admit answer. The RTC, however, declared Dagmil in default on February 8, 2011 and subsequently denied the entry of appearance and motion to admit answer on March 1, 2011.
• Judgment by Default: On April 1, 2011, the RTC rendered judgment by default ordering Dagmil to pay Vitarich P15,829,840.00 with 24% per annum interest, P200,000.00 attorney's fees, and costs of suit.
• Post-Judgment Remedies: Dagmil filed a petition for relief from judgment alleging excusable negligence on the part of former counsel (hospitalization for pulmonary tuberculosis and secretary's error in placing the order in the wrong case folder), and a motion for new trial claiming meritorious defense. The RTC denied the motion for new trial on June 7, 2012, emphasizing that a client is bound by the actions of counsel. On May 20, 2013, the RTC denied the motions for reconsideration and the petition for relief.
• Appellate Intervention: Dagmil filed a petition for certiorari before the Court of Appeals. On October 31, 2014, the CA granted the petition, reversed the default judgment, and remanded the case for further proceedings, finding that the RTC gravely abused its discretion in rendering judgment despite Dagmil's filing of the motion to admit answer prior to the declaration of default.

• Timeliness of Filing: Vitarich maintained that there exists no proof that Dagmil filed the motion to admit answer prior to the declaration of default, implying that the filing was belated.
• Nature of Negligence: Vitarich argued that the health issues of Atty. Solilapsi and the mistake committed by his secretary do not constitute excusable negligence warranting the setting aside of the default judgment.

• Premature Default: Dagmil countered that the motion to admit answer was filed on January 31, 2011, prior to the February 8, 2011 declaration of default, and that under Section 3, Rule 13 of the Rules of Court, the date of mailing constitutes the date of filing.
• Excusable Negligence: Dagmil argued that the delay was attributable to excusable circumstances, specifically the hospitalization of former counsel for pulmonary tuberculosis and the secretary's clerical error in misplacing the court order.
• Meritorious Defense: Dagmil maintained that her answer alleged a prima facie meritorious defense, specifically denying receipt of several deliveries and asserting that Vitarich's monetary claims were bloated, necessitating a full-blown trial.

• Admission of Belated Answer: Whether the RTC gravely abused its discretion in declaring Dagmil in default and refusing to admit her answer filed prior to the declaration of default.
• Excusable Negligence: Whether the belated filing of the answer was justified by excusable negligence on the part of counsel.
• Prejudice to Plaintiff: Whether Vitarich suffered prejudice by the delay in filing the answer.

• Admission of Belated Answer: The RTC gravely abused its discretion in declaring Dagmil in default where the motion to admit answer was filed on January 31, 2011, while the order of default was issued only on February 8, 2011. Under Section 3, Rule 13 of the Rules of Court, a pleading filed by registered mail is deemed filed on the date of mailing, not on the date of actual receipt by the court. Following the doctrine in Sablas v. Sablas, an answer filed before declaration of default must be admitted provided there is no intent to delay and no prejudice to the plaintiff.
• Excusable Negligence: The delay was justified by compelling circumstances. Records established that Atty. Solilapsi was hospitalized twice in January 2011 for Pulmonary Tuberculosis Class 3 and was advised to rest for two months, rendering him unable to attend to office matters. This was compounded by his secretary's error in placing the order to file answer in the wrong case folder. These circumstances constitute excusable negligence warranting liberal application of procedural rules.
• Absence of Intent to Delay: No intent to delay the proceedings was shown. Dagmil manifested a strong desire to file an answer by availing of multiple post-judgment remedies, including petition for relief, motion for new trial, and motion for reconsideration. Furthermore, Vitarich filed its motion to declare Dagmil in default only on January 5, 2011, or 48 days after the expiration of the 15-day reglementary period from receipt of the order (November 3, 2010), demonstrating that Vitarich was not prejudiced by the delay and had itself been lenient in asserting its rights.
• Meritorious Defense: Dagmil's answer raised a prima facie meritorious defense by denying receipt of several deliveries and questioning the bloated computation of the obligation, matters that require full trial on the merits. Default judgments are frowned upon where they risk denying a party the opportunity to present evidence and causing grave injustice.

• Admission of Answer Before Default — An answer filed before a declaration of default should be admitted where there is no showing that the defendant intends to delay the case and no prejudice is caused to the plaintiff. This principle applies even if the answer is filed beyond the reglementary period, provided it precedes the order of default. The Court applied this doctrine to reverse the default judgment where the defendant's motion to admit answer was filed (by registered mail) prior to the declaration of default.
• Excusable Negligence in Procedural Lapses — Negligence of counsel may be excused where it is attributable to circumstances beyond the counsel's control, such as serious illness requiring hospitalization and confinement, or clerical errors by office staff in handling court orders. The Court held that such excusable negligence justifies the liberal application of procedural rules to set aside orders of default.
• Date of Mailing as Date of Filing — Under Section 3, Rule 13 of the Rules of Court, a pleading filed by registered mail is deemed filed on the date of mailing, not on the date of receipt by the court. This rule is determinative of whether a pleading was seasonably filed prior to a declaration of default.
• Liberal Construction in Default Cases — Courts should be liberal in setting aside orders of default, as default judgments are frowned upon by the law. Technical rules should yield to substantial justice unless the reopening of the case is clearly intended for delay. A judgment by default rendered pursuant to a patently invalid order of default is intrinsically void.

• "The rule is that the answer should be admitted when it is filed before a declaration of default provided there is no showing that defendant intends to delay the proceedings and no prejudice is caused to the plaintiff."
• "Where the answer is filed beyond the reglementary period but before the defendant is declared in default and there is no showing that defendant intends to delay the case, the answer should be admitted."
• "Defendant's Answer should be admitted, because it had been filed before it was declared in default, and no prejudice was caused to plaintiff."
• "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. Courts should be liberal in setting aside orders of default, for default judgments are frowned upon..."
• "While there are instances when a party may be properly declared in default, these cases should be deemed exceptions to the rule and should be resorted to only in clear cases of obstinate refusal or inordinate neglect in complying with the orders of the court. Otherwise, any judgment by default that the trial court may subsequently render is intrinsically void for having been rendered pursuant to a patently invalid order of default."

• Sablas v. Sablas, 553 Phil. 271 (2007) — Controlling precedent establishing that an answer filed before declaration of default should be admitted absent intent to delay or prejudice to plaintiff. The Court followed this precedent in ruling that Dagmil's answer, filed prior to the default order, should have been admitted.
• Indiana Aerospace University v. Commission on Higher Education, 408 Phil. 483 (2001) — Controlling precedent holding that placing a defendant in default after the filing of an answer serves no practical purpose and constitutes grave abuse of discretion. The Court applied this principle in finding the RTC's default order invalid.
• Hernandez v. Agoncillo, 697 Phil. 459 (2012) — Distinguished by the Court; held that it is not mandatory to admit a belatedly filed answer if the defendant is guilty of inexcusable neglect or deliberate delay. The Court found this case distinguishable because Dagmil showed excusable negligence and no intent to delay.
• Akut v. Court of Appeals, 201 Phil. 680 (1982) — Cited for the principle that courts should be liberal in setting aside orders of default to avoid grave injustice and that default judgments are frowned upon.

• Section 3, Rule 13, Rules of Court — Provides that if a pleading is filed by registered mail, the date of mailing shall be considered as the date of filing. The Court applied this provision to determine that Dagmil's motion to admit answer, mailed on January 31, 2011, was deemed filed on that date, prior to the February 8, 2011 declaration of default.
• Rule 45, Rules of Court — Governs petitions for review on certiorari to the Supreme Court. Vitarich invoked this rule in assailing the Court of Appeals' decision.

Caguioa (Acting Chairperson), J. Reyes, Jr., Lazaro-Javier, and Delos Santos.