Philippine National Bank v. Towers Assurance Corporation
REITERATIONFacts
The Antecedents: The Philippine National Bank (PNB) extended an export advance line of P600,000 to Carmen Mindanao Mining Consolidated, Inc. (CMMCI), secured by two promissory notes and a deed of assignment of sales proceeds. CMMCI also posted a surety bond executed by itself and Towers Assurance Corporation (TOWERS) as surety, binding themselves solidarily for P600,000. Procedural History: PNB sued TOWERS for the unpaid balance of P712,895.22. Summons was received by TOWERS on October 21, 1981. TOWERS obtained an extension of 15 days to file its responsive pleading, until November 20, 1981. However, TOWERS failed to file its Answer by the deadline. On January 8, 1982, PNB's motion, TOWERS was declared in default, and coincidentally, TOWERS filed its Answer on the same date, which the court ignored. On March 29, 1982, Judge Abelardo M. Dayrit rendered judgment by default in favor of PNB, ordering TOWERS to pay P600,000 plus interest, attorney's fees, and costs. TOWERS received a copy of this decision on July 19, 1982. On August 9, 1982, TOWERS filed a Motion for Reconsideration and to Admit Answer, alleging that the burning of the Manila City Hall on November 19, 1981, prevented the timely filing of its Answer, and raising defenses regarding the surety bond and the impossibility of compliance due to Central Bank's takeover of gold exportation. Respondent Judge Rosalio A. De Leon, who succeeded Judge Dayrit, granted TOWERS' motion, set aside the default judgment, admitted the Answer, and set the case for pre-trial. PNB's subsequent motions for reconsideration were denied. The Petition: PNB filed a petition for certiorari and injunction, seeking to annul the order of Judge De Leon setting aside the default judgment and enjoining him from rehearing the case.
Issue(s)
Whether the respondent judge committed grave abuse of discretion in setting aside the order of default and the judgment by default. Whether the fire that gutted the Manila City Hall on November 19, 1981, constituted force majeure excusing the late filing of the Answer.
Ruling
The Supreme Court denied the petition for certiorari for lack of merit. The temporary restraining order issued was set aside, and the decision was immediately executory.
Ratio Decidendi
On the issue of grave abuse of discretion in setting aside the default judgment: The Court held that the respondent judge did not commit grave abuse of discretion. The fire that gutted the Manila City Hall on November 19, 1981, causing upheaval and dislocation, was not disputed and constituted force majeure, which completely excused the late filing of the defendant's answer. Furthermore, the records showed that the answer was filed on the same day that the order of default was issued. A motion to set aside an order of default should be considered with liberality when presented promptly and without unnecessary delay, causing no significant inconvenience to the court or the adverse party. Given that the claim of P600,000 was substantial, the court should afford the defendant a reasonable opportunity to prove its defenses. The Court reiterated its admonition against precipitate orders of default, as they deny a litigant the chance to be heard and increase appellate litigation. Such defaults should be the exception, allowed only in clear cases of obstinate refusal or inordinate neglect. On the issue of force majeure: The Court affirmed that the fire at the Manila City Hall was an event of force majeure. The factual circumstances surrounding the fire and its impact on the operations of government offices, including the court, were not contested by the petitioner. This event directly prevented the timely filing of the Answer by the respondent, Towers Assurance Corporation, thereby excusing the delay. The Court's consistent stance is that when a party is prevented from performing an obligation due to an event that is unforeseeable and unavoidable, such as a natural calamity or a similar extraordinary occurrence, the non-performance is excused.
Main Doctrine
The Supreme Court denied the petition for certiorari, holding that the respondent judge did not commit grave abuse of discretion in setting aside the default judgment. The Court emphasized that the fire that gutted the Manila City Hall constituted force majeure, excusing the late filing of the answer, and that in the interest of substantial justice, the defendant should be given a reasonable opportunity to prove its defenses.