Group Developers and Financiers, Inc. v. Policarpio
REITERATIONFacts
The Antecedents: Petitioner Group Developers and Financiers, Inc. (GDFI) and respondent Lumen M. Policarpio entered into a 'Pre-need Purchase Agreement' for a Heritage Family Court Estate Block 7, with a downpayment made but subsequent installments unpaid despite demands. They also entered into a 'Supplemental Agreement' for the construction of a Family Court Unit on the same estate, with a downpayment made but installments for construction costs also unpaid despite demands. Subsequently, respondent requested interment services for her father, which GDFI provided, but respondent failed to pay for these services despite demand. Respondent admitted her indebtedness in a letter but requested time to pay, which she never utilized. Procedural History: The trial court rendered judgment for GDFI, rescinding the agreements, forfeiting the downpayments as liquidated damages, ordering payment for interment services and unit value, and awarding attorney's fees and costs. Upon GDFI's motion for reconsideration, the trial court amended its decision, ordering respondent to pay the entire balance due or, in the alternative, surrender the premises and pay damages, and authorizing disinterment if necessary. A second motion for reconsideration by GDFI further amended the dispositive portion to include payment for interment services and attorney's fees. The Petition: Both parties appealed. The Intermediate Appellate Court (IAC) set aside the trial court's order of default, finding that respondent had a meritorious defense, and rendered a new judgment remanding the case for further proceedings. GDFI filed a petition for review on certiorari, arguing that the IAC erred in ruling that respondent had a valid and meritorious defense.
Issue(s)
Whether the Intermediate Appellate Court gravely erred in ruling that respondent Policarpio had a valid and meritorious defense despite her failure to comply with the requirements for setting aside an order of default. Whether the Intermediate Appellate Court gravely erred in ruling that respondent had a valid and meritorious defense because petitioner allegedly allowed her to inter her father's remains even when she had not yet fully paid on the interment space she had contracted for, and whether the petitioner asking only for rescission instead of rescission and specific performance constitutes a valid defense.
Ruling
The Supreme Court set aside the decision of the respondent Appellate Court and reinstated the dispositive portion of the trial court's decision rendered on July 8, 1974. The Court ordered respondent Policarpio to pay the costs of suit.
Ratio Decidendi
On the issue of whether respondent Policarpio had a valid and meritorious defense: The Court held that the respondent appellate court committed reversible error in ruling that respondent Policarpio had a meritorious defense. Under Rule 18, Section 3 of the Rules of Court, a party declared in default may move to set aside the order by showing that failure to answer was due to fraud, accident, mistake, or excusable neglect, and that they possess a meritorious defense. The motion must be under oath and accompanied by a statement of the evidence intended to be presented, which would warrant a reasonable belief that the outcome would be different if a new trial were granted. Respondent Policarpio, instead of filing a motion to set aside the order of default, filed a motion for reconsideration without an accompanying affidavit of merit. The appellate court's finding that this was sufficient because it was signed and verified by the respondent was deemed erroneous. The Court emphasized that without a showing of a meritorious defense, granting the motion would be a useless exercise, serving only to waste time, effort, and expense, as stated in Arcilla v. Arcilla. On the alleged meritorious defenses cited by the IAC: The Court found that the defenses cited by the IAC – namely, that petitioner allowed respondent to inter her father's remains despite defaults, and that petitioner prayed solely for rescission, not specific performance – did not constitute meritorious defenses. The allowance of interment was considered an act of magnanimity by the petitioner, not proof of payment or waiver of rights. Furthermore, the respondent never denied her indebtedness in her pleadings. The issue of whether the court could grant specific performance when only rescission was prayed for was also addressed, noting that Rule 18, Section 5 of the Rules of Court states that a judgment against a party in default shall not exceed the amount or be different in kind from that prayed for. However, the primary issue was the procedural defect in setting aside the default order without a proper showing of a meritorious defense.
Main Doctrine
A motion to set aside an order of default must be accompanied by a statement of the evidence intended to be presented, demonstrating a meritorious defense, otherwise, the grant of the motion would be a useless exercise and would not serve the ends of justice.