Delos Santos v. Metropolitan Bank
REITERATIONFacts
The Antecedents: Metropolitan Bank and Trust Company (Metrobank) filed a complaint for sum of money against Spouses Humberto and Carmencita Delos Santos (petitioners). Petitioners failed to file an answer within the reglementary period. Metrobank filed a motion to declare petitioners in default, set for hearing on February 16, 2001. Procedural History: On February 12, 2001, the trial court declared petitioners in default, four days before the scheduled hearing. Petitioners filed an opposition to the motion to declare them in default and a motion to admit their answer on February 15, 2001, claiming they sought legal counsel immediately but were unable to meet with their lawyer until February 12, 2001, and were unaware of the consequences of delay. The trial court disregarded the opposition and denied the motion to admit answer. Petitioners filed a motion to lift the order of default, reiterating their reasons and claiming a meritorious defense. The trial court denied this motion and proceeded with the ex-parte presentation of Metrobank's evidence. Petitioners moved for reconsideration, which was also denied. The Court of Appeals (CA) denied their petition for certiorari, finding the excuse of ignorance of procedural rules and lawyer's unavailability as not constitutive of excusable negligence, and that the affidavit of merit did not show a meritorious defense. The Petition: Petitioners filed a petition for review on certiorari with the Supreme Court, assailing the CA Decision and the trial court's orders, alleging grave abuse of discretion amounting to lack of jurisdiction.
Issue(s)
Whether the procedural lapse of declaring petitioners in default four days before the scheduled hearing constitutes grave abuse of discretion. Whether litis pendentia, raised as an affirmative defense, is a meritorious defense. Whether it is beyond the authority of the trial court to rule on litis pendentia despite the defendants' failure to seasonably raise it. What constitutes an Affidavit of Merit.
Ruling
The Supreme Court granted the petition, reversed and set aside the Court of Appeals Decision, set aside the Order of Default of the Regional Trial Court, deemed the Answer filed by petitioners as admitted, and directed the trial court to continue with the proceedings with deliberate speed.
Ratio Decidendi
On the procedural lapse of declaring petitioners in default: The Court held that the trial court committed grave abuse of discretion in declaring petitioners in default on February 12, 2001, four days before the scheduled hearing on Metrobank's motion. The Rules of Court require a motion to declare a party in default to be set for hearing, and the defending party must be notified to avoid surprises and give them an opportunity to be heard. The trial court's hasty action, disregarding the opposition and motion to admit answer filed prior to the hearing, was deemed despotic and capricious. The Court emphasized that default judgments are generally disfavored, and courts should be liberal in setting aside orders of default to give parties every opportunity to present their case on the merits, in the interest of substantial justice. The premature order of default was declared null and void. On litis pendentia as a meritorious defense: The Court found that petitioners' Answer, attached to their Motion to Admit Answer, clearly raised the affirmative defense of litis pendentia. They alleged that the P500,000.00 obligation subject of the current case was part of a larger P12,500,000.00 loan that was the subject of a previously filed civil case (Civil Case No. 27,875-2000) between the same parties for related causes of action. The Court noted that under Section 1, Rule 9 of the Rules of Court, the court shall dismiss a claim if it appears from the pleadings or evidence that there is another action pending between the same parties for the same cause. Therefore, litis pendentia constituted a meritorious defense that the trial court should have considered. On the trial court's authority to rule on litis pendentia: The Court clarified that even if litis pendentia was not raised in a motion to dismiss or an answer filed within the reglementary period, the court is mandated to dismiss the claim if it appears from the pleadings or evidence on record that there is another action pending between the same parties for the same cause. The trial court, therefore, had the authority and duty to consider the defense of litis pendentia once it was brought to its attention through the Answer, especially when it was filed before the motion to declare petitioners in default could be heard. On the Affidavit of Merit: While the CA found the affidavit of merit insufficient, the Supreme Court's analysis focused on the Answer itself and the affirmative defense of litis pendentia raised therein. The Court implied that the existence of a meritorious defense, as evidenced by the claim of litis pendentia in the Answer, coupled with the circumstances of excusable negligence, was sufficient to warrant lifting the order of default. The Court reiterated that the policy is to accord parties every opportunity to pursue and defend their cases, relegating technicality to the background in the interest of substantial justice. The Court also noted that the late filing of the answer did not prejudice Metrobank and showed no intention to delay the case.
Main Doctrine
A trial court commits grave abuse of discretion in declaring a party in default before the scheduled hearing of the motion to declare such party in default, especially when an opposition and a motion to admit answer are filed prior to the hearing, and when the circumstances suggest excusable negligence and a potentially meritorious defense, such as litis pendentia.