Mediserv, Inc. v. China Banking Corporation
REITERATIONFacts
1. The Antecedents: Respondent China Banking Corporation filed a complaint for a sum of money to recover a deficiency judgment in foreclosure proceedings against petitioners Mediserv, Inc., Hernando B. Delizo, and Marissa C. Delizo, along with Kelly Salvador. The complaint alleged that petitioners executed three promissory notes totaling P18 million, secured by a real estate mortgage. Petitioners defaulted, and after foreclosure, a deficiency of P5,390,663.97 remained. Petitioners had previously filed a case against China Banking Corporation seeking the nullity of an auction sale and other reliefs, which they contended put in issue the same rights and obligations related to the mortgage and promissory notes. 2. Procedural History: Petitioners repeatedly sought extensions to file their responsive pleading or motion to dismiss. After the final extension was denied, they filed a motion to dismiss on May 26, 1998, alleging litis pendentia, lack of cause of action, and payment. On June 4, 1998, China Banking Corporation filed a motion to declare petitioners in default and a motion to strike out the motion to dismiss. On June 16, 1998, the trial court denied petitioners' motion to dismiss and granted the motion to declare them in default. Petitioners later filed an Omnibus Motion to lift the order of default, dismiss the complaint for forum shopping violations, and cite an individual for contempt. This Omnibus Motion was denied on September 30, 1998. The Court of Appeals dismissed petitioners' subsequent petition for certiorari, prohibition, and mandamus, and denied their motion for reconsideration. 3. The Petition: Petitioners seek review of the Court of Appeals' decision, arguing that the appellate court erred in not dismissing the complaint due to respondent bank's alleged failure to comply with the certification against forum shopping requirements. They contend that the person who signed the certification lacked authority and that the respondent bank was aware of a prior, related case filed by the petitioners. Petitioners also argue that their motion to dismiss was filed before the respondent's motion to declare them in default and should have been resolved first. The petition is filed under Rule 45 of the Rules of Court.
Issue(s)
Whether the Court of Appeals erred in dismissing the petition for certiorari, prohibition, and mandamus; and whether the Omnibus Motion to lift the order of default was properly denied. Whether the trial court erred in declaring the petitioners in default without first resolving their motion to dismiss based on forum shopping; and whether the complaint should have been dismissed for alleged violation of the rule on forum shopping. Whether the petitioners' motion to dismiss was timely filed. Whether the respondent bank engaged in forum shopping.
Ruling
The petition is denied for lack of merit. The Court of Appeals did not err in dismissing the petition. The trial court correctly denied the Omnibus Motion and upheld the order of default.
Ratio Decidendi
On the propriety of the default order and the Omnibus Motion: The Court found that the petitioners' motion to dismiss was filed ten days late, after the expiration of the extended period granted by the court. Consequently, the respondent bank's motion to declare them in default was properly filed and granted. The subsequent Omnibus Motion to lift the order of default was fatally flawed because it was not under oath as required by Rule 9, Section 3(b) of the Rules of Court, and the accompanying affidavit of merit was defective, failing to aver any good and substantial defense or excusable negligence. The Court reiterated that a party declared in default forfeits their right to participate in the trial and control proceedings, and to have their pleadings acted upon, unless the order of default is set aside by a timely and proper motion with a valid affidavit of merit. The petitioners failed to meet these requirements, thus they must suffer the consequences of the default order. On the issue of forum shopping and the timing of the motion to dismiss: The Court noted that the issue of forum shopping was raised in the Omnibus Motion, which was denied due to its fatal flaws. The Court emphasized that the second motion to dismiss, contained within the Omnibus Motion, and the motion to cite for contempt could not be entertained until the default order was lifted and the petitioners' standing as party litigants was restored. Therefore, the trial court did not err in not resolving the forum shopping issue prior to addressing the default status of the petitioners. On the timeliness of the motion to dismiss: The petitioners' contention that their motion to dismiss, filed on May 26, 1998, should have been resolved before the respondent bank's motion to declare them in default, filed on June 4, 1998, was rejected. The Court clarified that the petitioners' period to file a responsive pleading had already expired. Their motion to dismiss was filed beyond the granted extensions, and it was the respondent's motion to declare them in default that was filed subsequent to the expiration of their deadline. The Court found no rule mandating that a motion to dismiss filed late must be resolved before a motion to declare a party in default can be granted, especially when the default is based on the failure to file a timely responsive pleading. On the issue of forum shopping by the respondent bank: The Court also pointed out that the respondent bank did not institute twin actions; Civil Case No. 97-86152 was filed by Mediserv, Inc., while Civil Case No. 98-86794 was filed by the respondent bank. This distinction negated the claim of forum shopping against the respondent bank.
Main Doctrine
A party declared in default forfeits the right to participate in the trial and control proceedings, and to have their pleadings acted upon, unless the order of default is set aside by a timely and proper motion with a valid affidavit of merit.