Rural Bank of Sta. Catalina, Inc. v. Land Bank of the Philippines
REITERATIONFacts
The Antecedents: Respondent Land Bank of the Philippines initiated a collection case against petitioner Rural Bank of Sta. Catalina, Inc. for the sum of P2,809,280.25, representing capitalized and accrued interests, penalties, and surcharges. The dispute stemmed from several rediscounting line agreements entered into by the parties, wherein the petitioner bank made multiple availments. The total amount due, including principal, capitalized interest, accrued interest, and accrued penalty, reached P5,781,991.39 as of July 23, 1997. Procedural History: The Land Bank filed its complaint on September 11, 1996. The petitioner bank failed to file an answer, leading to its declaration of default by the Regional Trial Court (RTC) on January 23, 1997. Despite receiving notice of the default order, the petitioner did not file a motion to set it aside. The respondent presented its evidence, and on April 7, 1998, the RTC rendered a default judgment against the petitioner. Subsequently, on January 14, 1998, the Monetary Board placed the petitioner bank under receivership and designated the Philippine Deposit Insurance Corporation (PDIC) as receiver. The petitioner, through the PDIC, appealed the RTC decision to the Court of Appeals (CA), which affirmed the RTC's ruling on January 12, 2002. The CA held that the petitioner was precluded from raising the issue of its receivership and subsequent exemption from liabilities due to its failure to move to set aside the default order in the lower courts. The Petition: The petitioner, represented by the PDIC, filed a petition for review on certiorari under Rule 45 of the Rules of Court, raising the sole issue of whether it is liable for interests and penalties on its account after January 14, 1998, when it was placed under receivership. The petitioner argued, citing Overseas Bank of Manila vs. Court of Appeals, that its liability should be limited to the aggregate amount of its outstanding liability as of its closure date. The petitioner also claimed that the PDIC was unaware of the case until served with the RTC decision. However, the Supreme Court found the petition without merit, emphasizing the petitioner's failure to file a motion to set aside the default order, its failure to appeal the default order itself, and its attempt to present new arguments and evidence only at the appellate level, which are barred by the declaration of default.
Issue(s)
Whether the petitioner bank is liable for interests and penalties on its account with the respondent after January 14, 1998, when its assets and affairs were placed under receivership by the Central Bank of the Philippines, considering the procedural implications of a prior default judgment. Whether the petitioner bank, having been declared in default and subsequently appealing the judgment by default, can raise the issue of its placement under receivership as a ground to exempt it from paying interests and penalties, and the effect of failing to set aside the default order.
Ruling
The petition is denied due course. The Decision of the Court of Appeals affirming the RTC's judgment by default is affirmed. No costs.
Ratio Decidendi
On the issue of liability for interests and penalties after receivership and the implications of default: The Supreme Court held that the petitioner bank is barred from raising the issue of its placement under receivership to exempt it from paying interests and penalties. The Court emphasized that the petitioner failed to file a motion to set aside the order of default despite receiving a copy thereof and failed to assign the default order as an error in its appeal to the Court of Appeals. The Court reiterated that a party declared in default loses its standing in court and its right to adduce evidence and present its defense, although it retains the right to appeal the judgment by default. However, such appeal is limited to grounds such as the amount of judgment being excessive, different in kind, or that the plaintiff failed to prove material allegations, or the decision is contrary to law. The petitioner's attempt to modify the decision based on events occurring after the default order, and without having the default order vacated, was deemed impermissible. On the procedural bar due to default and its effect on raising the receivership issue: The Court stressed that the petitioner was declared in default for failure to file an answer and did not file a motion to set aside the order of default. The trial court rendered judgment more than a year after the default order, yet no motion to set aside was filed. The PDIC, as receiver, should have been aware of the pending case. The subsequent appeal to the Court of Appeals did not assign the default order as an error, nor did it seek to have it set aside. The Court cited Cavili vs. Florendo and Lina vs. Court of Appeals to support the principle that a party declared in default loses its standing and right to present defenses, and that an appeal from a default judgment cannot be used to regain the right to adduce evidence lost in the trial court. The Court also distinguished the present case from Overseas Bank of Manila vs. Court of Appeals, stating that the specific issue of whether a party declared in default can seek relief based on evidence presented only in the appellate court, without the default order being vacated, was not resolved in the cited case.
Main Doctrine
A party declared in default who fails to file a motion to set aside the order of default before judgment is rendered, and subsequently appeals the judgment by default without assigning the default order as an error, is barred from raising issues that would require the presentation of evidence or a modification of the judgment based on grounds that should have been raised in a motion to set aside the default order.