LCC Corporation v. Farrales
REITERATIONFacts
The Antecedents: LCC Corporation (formerly Luzon Commodities Corporation) filed a complaint against Jesus Farrales for the recovery of P4,749.49, representing the purchase price of cement allegedly delivered to Farrales. Farrales, however, contended that he was never privy to any transaction with the plaintiff involving cement. Procedural History: Farrales was served with summons on September 25, 1969. He filed an Answer on October 24, 1969, after seeking a ten-day extension to file. LCC Corporation moved to strike out the Answer for being late, and the City Court of Manila declared Farrales in default on November 15, 1969. Farrales' subsequent motions for reconsideration and new trial, asserting accident, mistake, and excusable negligence, and alleging a meritorious defense of lack of privity, were denied. He appealed to the Court of First Instance, which dismissed the appeal, ruling that a petition for relief under Rule 38 was the proper remedy, not an appeal from a default judgment. The Court of Appeals certified the case to the Supreme Court on a question of law. The Petition: This case was certified to the Supreme Court by the Court of Appeals on a question of law. The appellant, Farrales, argued that his motions for reconsideration and new trial before the City Court, along with an affidavit of merit, were substantial equivalents of a motion to lift the default judgment and a petition for relief. He also contended that his initial motion for an extension of time to answer was returned unclaimed, which, if proven, would affect the timeliness of his Answer. Furthermore, he asserted a valid defense of lack of privity of contract. The Supreme Court reviewed the case based on rules prior to Batas Pambansa Blg. 129.
Issue(s)
Whether the defendant, having been declared in default, lost his standing in court and thus could not appeal the default judgment. Also, whether the defendant's motions for reconsideration and new trial, filed before the judgment became final, constituted a valid attempt to regain standing in court, making his subsequent appeal from the denial of these motions proper. Whether the defendant's Answer was timely and whether the defense of lack of privity is valid.
Ruling
The Supreme Court reversed and set aside the orders of the Court of First Instance, remanding the case for further proceedings. The Court held that the defendant's motions for reconsideration and new trial, coupled with an affidavit of merit, could be considered substantial equivalents of a motion to lift the default judgment and a petition for relief, thereby allowing an appeal from the denial of these motions.
Ratio Decidendi
On the issue of lost standing, the right to appeal, and the attempt to regain standing: It is well-settled that a defendant declared in default loses his standing in court and, without regaining it, has no right to appeal a judgment by default. To regain this standing, a defendant may either ask the court to set aside the order of default within one day after notice by showing fraud, accident, mistake, or excusable negligence, or file a petition for relief in the Court of First Instance if the judgment has become final and executory. Alternatively, a motion to lift the default judgment and for a new trial may be filed before the judgment becomes final and executory. The defendant filed a Motion for Reconsideration and/or New Trial within fifteen days after receiving the default judgment, followed by a Supplemental Motion for Reconsideration and/or New Trial with an Affidavit of Merit. These actions, although not precisely titled as such, substantially equate to a motion to lift the default judgment and for a new trial under Section 16 of Rule 5 of the Rules of Court, and a petition for relief under Rule 38. The denial of these motions by the City Court meant that the subsequent appeal to the Court of First Instance was from the order denying relief, not from the default judgment itself, thus making the appeal proper. On the timeliness of the Answer and the defense of lack of privity: The defendant's assertion that his urgent motion for extension to file an Answer was returned unclaimed, if proven, would bear on the timeliness of his Answer, which was filed within the extended period prayed for. Furthermore, the defendant's allegation of lack of privity of contract with the plaintiff presents a potentially good and valid defense that should be heard.
Main Doctrine
A defendant declared in default who has not regained standing in court cannot appeal a judgment by default. However, motions for reconsideration or new trial filed before the judgment becomes final, even if not precisely titled as such, may be considered as attempts to regain standing, and if denied, the subsequent appeal may be from the denial of relief, not the default judgment itself.