Far East Fuel Corporation v. Airtropolis Consolidators Philippines
REITERATIONFacts
The Antecedents: Respondent Airtropolis Consolidators Philippines, Inc. (ACPI) filed a Complaint for Collection of Sum of Money against petitioner Far East Fuel Corporation (FEFC) for alleged unpaid services in the carriage of oil products from 2014 to 2015. ACPI presented waybills and delivery receipts as evidence of the transactions and claimed an outstanding obligation of PHP 1,721,800.00. Despite demands, FEFC failed to pay. Procedural History: Summons was served on FEFC on September 26, 2016. FEFC moved to dismiss on October 28, 2016, which was denied by the RTC on March 1, 2017. FEFC received the denial on April 18, 2017, but failed to file an answer within the reglementary period. ACPI moved to declare FEFC in default, which the RTC granted on September 4, 2017. FEFC's Motion to Lift Order of Default was denied by the RTC on January 8, 2018, and its motion for reconsideration was denied on March 19, 2018. The RTC subsequently rendered a Decision on November 27, 2018, ordering FEFC to pay PHP 1,721,800.00 with interest and attorney's fees. The Petition: FEFC appealed to the Court of Appeals (CA), which affirmed the RTC's denial of the Motion to Lift Order of Default and found no grave abuse of discretion. The CA modified the RTC Decision, holding FEFC liable for PHP 1,460,800.00, deleting the award of attorney's fees, and reducing the interest to 6% per annum. FEFC filed a Petition for Review on Certiorari with the Supreme Court, arguing that the CA erred in affirming the RTC's denial of its Motion to Lift Order of Default and in sustaining FEFC's liability for PHP 1,460,800.00.
Issue(s)
Whether the Court of Appeals committed a reversible error in affirming the trial court's denial of petitioner's Motion to Lift Order of Default. Whether the Court of Appeals erred in sustaining the trial court's ruling that petitioner is liable under waybills nos. 8355514, 137115, 1206415, and 940915 in the aggregate amount of PHP 1,460,800.00; and whether attorney's fees were properly awarded and legal interest correctly applied.
Ruling
The Supreme Court denied the petition and affirmed the Decision and Resolution of the Court of Appeals. The Court held that the trial court did not commit grave abuse of discretion in denying the Motion to Lift Order of Default. Furthermore, the Court found no reason to disturb the appellate court's factual findings regarding FEFC's liability for PHP 1,460,800.00.
Ratio Decidendi
On the denial of the Motion to Lift Order of Default: The Court reiterated that a motion to set aside an order of default must be under oath, show that the failure to answer was due to fraud, accident, mistake, or excusable negligence, and be accompanied by an affidavit of merit setting forth facts constituting a meritorious defense. The Court found that FEFC's Motion to Lift Order of Default lacked an affidavit of merit and that the attached Answer could not substitute for it, especially since the motion to admit the answer had already been denied. Moreover, the Court found that the explanation for the delay – the counsel's belief in ongoing settlement negotiations – did not constitute excusable negligence, as ordinary diligence could have prevented the oversight. The Court emphasized that courts are not bound to relax procedural rules when there is no justifiable reason for delay, and litigants who fail to comply with procedural rules do so at their own peril. On FEFC's liability and the award of attorney's fees and legal interest: The Court affirmed the appellate court's factual findings, noting that FEFC admitted receiving shipments under waybills nos. 8355514, 137115, 1206415, and 940915 but failed to present proof of payment. Regarding waybills nos. 740715, 441215, and 1398915, the Court agreed with the CA that ACPI failed to prove actual delivery to FEFC, as mere Memoranda from the Bureau of Customs lifting abandonment orders or BOC Import Entry forms do not constitute proof of delivery to the consignee. Therefore, ACPI could only prove its claim to the extent of PHP 1,460,800.00, representing the admitted deliveries for which payment was not proven. The Court also affirmed the CA's deletion of attorney's fees and reduction of legal interest to 6% per annum.
Main Doctrine
A motion to lift an order of default must be accompanied by an affidavit of merit setting forth facts constituting a meritorious defense, and the failure to file an answer due to the counsel's belief in ongoing settlement negotiations, without exercising ordinary diligence, does not constitute excusable negligence.