FIRST DIVISION
[G.R. No. 218775. September 29, 2021.]
ROBERTO R. PEREZ, petitioner, vs.PHILIPPINE NATIONAL BANK, respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, First Division, issued a Resolution datedSeptember 29, 2021which reads as follows:
"G.R. No. 218775 (Roberto R. Perez v. Philippine National Bank). — On September 28, 2009, Roberto Perez (Roberto) filed a Complaint 1 for Cancellation of Mortgage and Removal of Encumbrance against the Philippine National Bank (PNB) and the Registry of Deeds before the Regional Trial Court (RTC). On December 21, 2009, the PNB received the Summons 2 and had 15 days from notice or until January 4, 2010 to file an answer. Before the 15-day period expired, PNB moved for an additional 30 days or until February 4, 2010 to submit a Responsive Pleading. 3 The RTC granted PNB's Motion. 4 Meanwhile, PNB engaged the services of an external counsel Atty. Nerio N.B. Bulado (Atty. Nerio) to handle the case and to ensure that an answer would be filed on time before the expiration of the extended period. 5
On February 17, 2010, Roberto moved to declare the PNB in default. 6 Immediately, PNB sent an electronic mail to Atty. Nerio inquiring about Roberto's Motion. Atty. Bulado responded through a phone call that he already filed a Second Motion for an extension of time to file an answer before the lapse of the February 4, 2010 deadline. On March 10, 2012, the RTC noted the appearance of Atty. Nerio and required PNB to comment on Roberto's Motion to declare the defendant in default. Thereafter, the PNB incessantly reminded Atty. Nerio to comply with the RTC's Order. Yet, PNB was surprised to discover that Atty. Nerio had left for the United States of America. 7
On June 16, 2010, the RTC issued an Order of Default 8 against PNB. The RTC pointed out that PNB's Second Motion for extension of time was filed on February 17, 2010 or beyond the February 4, 2010 deadline. 9 Aggrieved, PNB filed an Omnibus Motion 10 to reconsider the order of default with attached verified answer. 11 The PNB claimed that its external counsel grossly overlooked the reglementary period to file an answer and/or Motion for Extension of Time. On September 16, 2010, the RTC denied PNB's Omnibus Motion because it failed to comply with the requirements of a motion to set aside the Order of Default. Specifically, the Omnibus Motion was not filed under oath and was not accompanied by an Affidavit of Merit, 12 thus:
WHEREFORE, from the foregoing premises, the motion of defendant bank is denied for lack of merit, x x x.
Set, therefore, the ex-part[e] presentation of evidence for the plaintiff on February 8, 2011 at 8:30 o'clock in the morning. HEITAD
SO ORDERED.
Aggrieved, the PNB filed a Petition for Certiorari before the Court of Appeals (CA) docketed as CA-G.R. CEB SP No. 05876. 13 The PNB ascribed Grave Abuse of Discretion against the RTC when it ruled that the Omnibus Motion must be under oath and accompanied with an Affidavit of Merit. The PNB likewise maintained that its failure to file an answer was due to the Gross Negligence and Breach of Trust committed by its external counsel which led to the issuance of the Order of Default. 14 On November 18, 2014, the CA granted the Petition and set aside the Order of Default. Also, the CA ordered the RTC to admit PNB's answer and remanded the case for further proceedings. The CA explained that PNB substantially complied with the requirements of the Rules of Court and presented a meritorious defense, 15 to wit:
A perusal of petitioner's Omnibus Motion for Reconsideration of the Order dated June 16, 2010 with Motion for Leave of Court to File Answer and to Admit Answer reveals that it prayed that "the Order of Default date June 16, 2010 BE RECONSIDERED AND SET ASIDE." Evidently, the fundamental and prime objective of [the] petitioner's motion was to set aside, essentially to lift, the default order issued by the RTC. Hence, the RTC did not err in treating its motion as a motion to set aside/lift the order of default under Section 3 of Rule 9.
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In this case, albeit not accompanied by an affidavit of merit, [W]e hold that petitioner's motion was in the proper form. The motion of petitioner sets forth its reason for its failure to file its answer within the required period. x x x.
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Moreover, a perusal of the counter-allegations raised by petitioner in its motion and the answer attached thereto would readily reveal a meritorious defense. Thus, petitioner has substantially complied with the requirements set forth in Section 3 of Rule 9 of the Rules of Court.
Having ruled on the sufficiency in form of petitioner's motion, this Court will now resolve the propriety of the default order issued by the RTC.
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The general rule is that a client is bound by the acts, even mistakes, of his counsel in the realm of procedural technique. There are exceptions to this rule, such as when the reckless or gross negligence of counsel deprives the client of due process of law, or when the application of the general rule results in the outright deprivation of one's property through a technicality.
The Supreme Court has repeatedly admonished against precipitate orders of default as these have the effect of denying the litigant the chance to be heard. While there are instances, to be sure, when a party may be property defaulted, these should be the exception rather than the rule and should be allowed only in clear cases of an obstinate refusal or inordinate neglect to comply with the orders of the court. Absent such a showing, the party must be given every reasonable opportunity to present his side and to refute the evidence of the adverse party in deference to due process of law.
Clear from the foregoing reasons advanced by petitioner is that it extensively monitored the status of its case and the actions taken by its external counsel Atty. Bulado; hence, it cannot be held guilty of obstinate refusal or inordinate neglect to comply with the order of the RTC to file its responsive pleading.
Petitioner cannot be faulted in relying, in good faith, on the representation made by Atty. Bulado that he already timely filed the motion for [a] second extension of time to file an answer. x x x.
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What becomes apparent is that Atty. Bulado misrepresented to petitioner about the status of the case. Petitioner was made to believe that a timely motion for extension of time to file an answer was already filed. Such misrepresentation was so damning that it [sic] prejudiced petitioner and prevented it from fairly presenting its defense.
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WHEREFORE, the petition is GRANTED. The assailed orders of the Regional Trial Court, Branch 64 of Guihulngan City (RTC) in Civil Case No. 09-18-C are hereby SET ASIDE. (Emphases supplied.)
Roberto sought reconsideration but was denied. Hence, this recourse. Roberto argues that the CA erred in annulling the Order of Default because PNB did not comply with the Rules of Court that an order to set aside the Order of Default must be under oath and supported with Affidavit of Merit. On the other hand, PNB insists on substantial compliance with the requirements of the rules and that the grossly negligent acts of Atty. Nerio are not binding upon it.
The petition is unmeritorious.
Under the Rules of Court, a Motion to set aside an Order of Default must be under oath and supported with an Affidavit of Merit, to wit: "[a] party declared in default may at any time after notice thereof and before judgment file a motion under oath to set aside the order of default upon proper showing that his failure to answer was due to fraud, accident, mistake or excusable negligence and that he has a meritorious defense. In such case, the order of default may be set aside on such termsand conditions as the judge may impose in the interest of justice."16 In this case, the CA and the RTC properly treated PNB's Omnibus Motion with attached verified answer as a Motion to set aside the Order of Default. This is because the Omnibus Motion's primary relief is to reconsider the Order of Default. Yet, the RTC denied PNB's Omnibus Motion because it was not under oath and did not include an Affidavit of Merit. On this point, we join the CA's finding that the RTC committed Grave Abuse of Discretion. In Tanhu v. Ramolete, 17 the Court ruled that "when a motion to lift an order of default contains the reasons for the failure to answer as well as the facts constituting the prospective defense of the defendant and it is sworn to by said defendant, neither a formal verification nor a separate affidavit of merit is necessary." As the CA correctly observed, PNB's reasons for failure to file an answer and its meritorious defenses are incorporated in the Omnibus Motion itself. In other words, the allegations in an Affidavit of Merit required to be attached in the Motion to set aside Order of Default need not be embodied in a separate document. At any rate, the verified answer attached in the Omnibus Motion explicates the merits of PNB's claim and the circumstances that led to its deception of the grossly negligent counsel.
Moreover, persuasive reasons exist to lift the Order of Default. It is the avowed policy of the law to accord both parties every opportunity to pursue and defend their cases in the open and relegate technicality to the background in the interest of substantial justice. 18 The courts should be liberal in setting aside orders of default, for default judgments are frowned upon, thus:
The controlling principle ignored by respondent court is that it is within sound judicial discretion to set aside an order of default and to permit a defendant to file his answer and to be heard on the merits even after the reglementary period for the filing of the answer has expired. This discretion should lean towards giving party-litigants every opportunity to properly present their conflicting claims on the merits of the controversy without resorting to technicalities. Courts should be liberal in setting aside orders of default, for default judgments are frowned upon, and unless it clearly appears that reopening of the case is intended for delay, it is best that the trial courts give both parties every chance to fight their case fairly and in the open, without resort to [a] technicality. x x x
x x x Moreover, petitioners' answer shows that they have a prima facie meritorious defense. They should, therefore, be given their day in court to avoid the danger of committing a grave injustice if they were denied an opportunity to introduce evidence in their behalf. 19 (Emphases Supplied).
While there are instances when a party may be properly declared in default, these cases should be deemed exceptions to the rule and should be resorted to only in clear cases of obstinate refusal or inordinate neglect in complying with the orders of the court. 20 Here, there is no showing that PNB intended to delay the proceedings or that it is guilty of obstinate refusal or inordinate neglect. To be sure, PNB extensively monitored the status of the case and constantly reminded Atty. Nerio to file an answer. As soon as Atty. Nerio's blunder became obvious, PNB took the initiative to file an Omnibus Motion attaching its verified answer. In contrast, the records reveal that Atty. Nerio misrepresented to PNB about the status of the case and made it believed that he timely filed a Second Motion for an Extension of time to file an answer. Thus, Atty. Nerio's acts are not binding upon PNB because they amounted to Fraud or Gross Negligence depriving the client of due process of law. Indeed, PNB relied in good faith on upon Atty. Nerio's representation. Lastly, no prejudice was caused to Roberto. Taken together, the higher interests of justice demand that PNB should be allowed to present evidence on its defense.
The Court reiterates that judges should avoid issuing default orders that deny litigants the chance to be heard. Instead, they should give them every opportunity to present their conflicting claims on the merits of the controversy, as much as possible avoiding any resort to procedural technicalities. 21 Rigidity should not be affixed to procedural precepts when a party has a meritorious cause. 22 A straight-jacket application of the rules will do more injustice. Litigation is not a game of technicalities. The rules of procedure are designed to help secure and not defeat justice. 23 DETACa
FOR THESE REASONS, the petition is DENIED. The Court of Appeals' Decision dated November 18, 2014 in CA-G.R. CEB SP No. 05876 is AFFIRMED.
SO ORDERED."
By authority of the Court:
(SGD.) LIBRADA C. BUENADivision Clerk of Court
By:
MARIA TERESA B. SIBULODeputy Division Clerk of Court
Footnotes
1.Rollo, pp. 191-196.
2.Id. at 105.
3.Id. at 106-108.
4.Id. at 30.
5.Id. at 238-239.
6.Id. at 49.
7.Id. at 239-240.
8.Id. at 14, 31.
9.Id. at 31.
10.Id. at 130-142.
11.Id. at 143-154.
12.Id. at 30-32.
13.Id. at 29-38. Penned by Associate Justice Renato C. Francisco, with concurrence of Associate Justices Gabriel T. Ingles and Pamela Ann Abella Maxino.
14.Id. at 30-33.
15.Id. at 23-37.
16. Rules of Court, Rule 9, Section 3 (b).
17. 160 Phil. 1101, 1115 (1975). See also Capuz v. Court of Appeals, 303 Phil. 488, 493 (1994).
18.Republic of the Philippines v. Sandiganbayan, 309 Phil. 488, 493 (1994).
19.Akut v. Court of Appeals, 201 Phil. 680, 687-688 (1982).
20.Leyte v. Cusi, 236 Phil. 532, 535 (1987).
21.Tropical Homes, Inc. v. Villaluz, 252 Phil. 600, 605 (1989).
22.B. E. Berkenkotter vs. Court of Appealsand Isidro Climaco, 152 Phil. 588, 596 (1973); citing Carillo vs. Allied Workers Association, 133 Phil. 473, 480 (1968).
23.Cometa v. Court of Appeals, 404 Phil. 107, 120-121 (2002); and Dayag v. Canizares, 350 Phil. 629, 637 (1998).