Prudential Bank v. Macadaeg
REITERATIONFacts
The Antecedents: Prudential Bank & Trust Company initiated a lawsuit against Saura Import & Export Co., Inc. in the Manila Court of First Instance (Civil Case No. 26213) to recover P275,624.62 based on a letter of credit, bank draft, and trust receipt. As part of the proceedings, the Sheriff of Davao levied a preliminary attachment on two parcels of land owned by the defendant, which was subsequently annotated with the Register of Deeds of Davao City. Procedural History: Following the due service of summons, Saura Import & Export Co., Inc. failed to file an answer within the stipulated period. Consequently, the Court of First Instance issued an order of default against the defendant on August 23, 1955. Subsequently, on November 22, 1955, the defendant filed a petition to set aside the default order, citing mistake, accident, or excusable negligence. Prudential Bank opposed this petition, arguing it was untimely and that the grounds cited were unsubstantiated. Despite the opposition, on December 20, 1955, the respondent judge canceled the default order. Three days later, the respondent judge also decreed the dissolution of the preliminary attachment upon the filing of a counterbond, over the Bank's objection. The Bank's subsequent motion for reconsideration of these orders was denied. The Petition: Prudential Bank & Trust Company filed this petition for certiorari and mandamus seeking the annulment of the respondent judge's orders canceling the default and dissolving the attachment. The Bank contends that the petition to set aside the default was filed beyond the sixty-day period allowed by Rule 38 of the Rules of Court, as it was filed eighty days after Saura Import & Export Co., Inc. allegedly learned of the default order. The Bank argues that the respondent judge acted without or in excess of jurisdiction in lifting the default and dissolving the attachment. The petition also seeks a writ of mandamus to reinstate the attachment, necessitating the inclusion of the Sheriff and Register of Deeds as respondents.
Issue(s)
Whether the trial court lost jurisdiction to lift the order of default because the petition for relief was filed more than 60 days after the defendant learned of the order. Whether certiorari is the proper remedy to challenge an interlocutory order lifting a declaration of default.
Ruling
The Court declined to grant the petition, finding no excess of jurisdiction in the respondent judge's orders. The matter of the counterbond's sufficiency was remanded to the lower court.
Ratio Decidendi
On Issue 1: The Supreme Court ruled that the trial court retained jurisdiction to lift the default order. It clarified that while Rule 38 prescribes a 60-day period from knowledge and a 6-month period from entry, an order of default is interlocutory and thus remains under the court's control until final judgment is rendered. Reconciling prior jurisprudence like Lim Toco v. Go Pay and Larrobis v. Wislisenus, the Court established that a default order may be set aside at any time before final judgment, provided the application is made within six months of the entry of the order. In this case, the default entry was made on August 23, 1955, and the petition to lift it was filed on November 22, 1955. Since this occurred within the six-month window and before a final judgment was entered, the respondent judge had the legal authority to cancel the default. The 60-day requirement is not an absolute bar to the court's inherent power to manage its interlocutory orders before the case is concluded. On Issue 2: The Court held that an order lifting a default is interlocutory, and therefore, no appeal lies from such an order. Consequently, certiorari cannot be used to circumvent the prohibition against appeals from interlocutory orders. Allowing such petitions would lead to fragmented litigation and unnecessary delays, which the rules seek to avoid. Citing Smith v. Mijares, the Court emphasized that it will not entertain challenges to orders vacating default judgments through extraordinary remedies unless there is a clear showing of lack of jurisdiction or grave abuse. Since the trial court had jurisdiction to act within the six-month period, there was no excess of jurisdiction. The Bank's arguments regarding the reasons for vacating the default are matters of judgment that do not warrant certiorari review at this interlocutory stage.
Main Doctrine
An order of default may be set aside at any time before final judgment, provided the petition for vacating it is made within six months after entry of the order.