Denso (Phils.), Inc. v. Intermediate Appellate Court
REITERATIONFacts
1. The Antecedents: A fire occurred on June 23, 1984, at the Nippondenso Building, leased by Denso (Phils.), Inc. (DENSO) from Kayamanan Development Corporation (KAYAMANAN). The fire caused significant damage to both DENSO and KAYAMANAN. Subsequently, KAYAMANAN filed a lawsuit against DENSO in the Regional Trial Court (RTC) seeking recovery of unpaid rentals, the cost of repairing fire damage to the building as stipulated in the lease agreement, and attorney's fees. 2. Procedural History: DENSO received summons on June 10, 1985. After a delay in referring the summons to counsel, DENSO filed a motion for a 15-day extension to file its answer on June 25, 1985. This motion was denied by the RTC on June 26, 1985, due to a perceived lack of proof of service. On the same day, KAYAMANAN filed an ex-parte motion to declare DENSO in default, which was granted, and KAYAMANAN's evidence was received ex-parte the following day. A default judgment was rendered against DENSO on July 1, 1985. DENSO filed an answer on July 8, 1985, and later a motion for reconsideration, which the RTC granted on September 3, 1985, setting aside the default order and judgment but denying DENSO the right to cross-examine KAYAMANAN's witnesses. Subsequent motions by DENSO to allow cross-examination were denied, and on January 9, 1986, the RTC revived the default judgment. DENSO then filed a petition for certiorari with the Intermediate Appellate Court (IAC). 3. The Petition: DENSO petitioned the Supreme Court for review of the IAC's decision, arguing that the IAC erred in upholding the denial of its right to cross-examine KAYAMANAN's witnesses. DENSO contended that the initial order of default was improperly issued because its motion for an extension to file an answer should have been considered ex-parte and was improperly denied for lack of notice. Furthermore, DENSO argued that even after the default order was set aside, the denial of the right to cross-examine KAYAMANAN's witnesses constituted a violation of due process. The petition sought the annulment of the IAC's decision and the vacating of all orders and proceedings that prejudiced DENSO's right to a fair trial.
Issue(s)
Whether the denial of DENSO's motion for extension of time to file an answer was proper, and whether the order declaring DENSO in default was valid. Whether the RTC gravely abused its discretion in setting aside the default order and judgment but denying DENSO the right to cross-examine KAYAMANAN's witnesses. Whether DENSO waived its right to cross-examine or was guilty of laches.
Ruling
The petition is granted. The Decision of the Intermediate Appellate Court is reversed and set aside. Petitioner's answer to the respondent's complaint is ordered admitted. All the orders issued in said case and complained of in the petition, the judgment by default rendered therein, and the ex parte proceeding of June 27, 1985, at which the respondent presented its evidence, are vacated. Civil Case No. 10768 shall stand for proceedings de novo as if only complaint and answer had been filed therein. Costs against the respondent.
Ratio Decidendi
On the propriety of denying the motion for extension and declaring DENSO in default: The Court held that the denial of DENSO's motion for extension of time to file an answer was improper. The Court reiterated the established jurisprudence that a motion for extension of time to file a pleading is an ex parte motion and does not require notice to the adverse party. The reason for this exception to the rule on notice of motions is that such motions are non-contentious and do not typically involve the substantial rights of the other party. Therefore, the RTC's order denying the motion for extension for lack of proof of service was erroneous. Consequently, the subsequent order declaring DENSO in default, based on the assumption that the reglementary period had expired without a valid extension, was arbitrary and should be set aside. The Court emphasized that the motion for extension was seasonably filed and presented prima facie meritorious reasons. The answer was filed well within the period prayed for in the motion for extension, which alleged defenses that could defeat the respondent's claim. On the RTC's order setting aside the default but denying cross-examination: The Court found that while the RTC acted correctly in setting aside the order of default and the default judgment in the interest of substantial justice, it committed a grave abuse of discretion by failing to afford DENSO complete relief. The Court reasoned that if a defendant is improperly declared in default, their responsive pleading should be admitted, and they should be restored to their full rights. This includes the right to cross-examine the witnesses presented by the plaintiff and to object to documentary evidence submitted in their absence. Denying the right to cross-examine, as done by the RTC, would amount to a denial of due process and would be grossly unwarranted and unfair. The Court stated that the slate should have been wiped clean, allowing the case to proceed as if the default had not occurred, or at least allowing DENSO to fully participate in the proceedings, including cross-examination. On the IAC's ruling regarding waiver and laches: The Court disagreed with the IAC's conclusion that DENSO waived its right to cross-examine or was guilty of laches. The Court clarified that the order of September 3, 1985, which set aside the default but denied cross-examination, was interlocutory in nature, not final and appealable. Therefore, it could not become final and executory, and the 15-day period for appeal did not apply. Consequently, DENSO's motion for reconsideration, filed 38 days after receiving the order, was not untimely. The Court also found that the defense of laches was not applicable, as there was no unreasonable and unexplained delay that would render the grant of relief unjust or inequitable. The Court noted that no perceivable prejudice would attach to the respondent if DENSO were allowed to cross-examine, as truthfulness would only enhance the credibility of the witnesses.
Main Doctrine
An order denying a motion for extension of time to file an answer, which is an ex parte motion, is improperly issued for lack of proof of service on the respondent, as such motion does not require notice to the adverse party. Consequently, a subsequent order declaring the defendant in default based on failure to file an answer is arbitrary and should be set aside. Furthermore, an order setting aside a default judgment but denying the defendant the right to cross-examine the plaintiff's witnesses is an abuse of discretion, as the defendant should be restored to their full rights, including cross-examination and objection to evidence, to ensure due process.