CATALINA CAYETANO, PLAINTIFF AND APPELLEE, VS. OSMUNDO CEGUERRA AND FELINA SERRANO, DEFENDANTS AND APPELLANTS.

On November 15, 1960, plaintiff Catalina Cayetano, instituted Civil Case No.
Q-5514, for Foreclosure of Real Estate Mortgage, against defendants-spouses
Osmundo Ceguerra and Felina Serrano. She prayed for the payment of the
principal, amounting to P4,000.00, plus one Percent (1%) per month on said
amount, computed from the date of execution of the mortgage, 20% on the total
amount due, for liquidated damages, plus the additional sum of 25% of said total
amount, for attorney’s fees. Summons and copy of the complaint for foreclosure
were served on the defendants on December 2, 1960, and on December 15, 1960,
within the reglementary period, the defendants filed an Answer in the form of a
letter, portion of which are hereunder reproduced:

“In answer therefore to the Plaintiff’s prayer, I respectfully aver the
following truth to wit;

1. The money which I borrowed from her was an emergency money. Our
understanding of the said amount shall be paid by tic first release of my
applied loan for construction purposes in the amount of TEN thousand pesos
(P10,000.00) from the GSIS

2. I religiously believed Miss Catalina Cayetano was benovolent to have lend
me the amount of two thousand pesos (P2,000.00) for payment of my lot to the
PHHC and in turn secure the title as prerequisite to my applied loan with the
GSIS.

3. That sometime on June 1957 the title was transferred to my name and was
registered at Quezon City in the Register of Deeds. The title bears at the back
of the annotation of a Real Estate Mortgage in favor of Miss Catalina Cayetano.
This title was therefore submitted to the GSIS in order to effect release of
said applied loan. Consequently release was approved. But unfortunately the next
day following said approved loan was held in abeyance due to the new rules which
was promulgated by the Board of Trustees of that good office (GSIS) suspending
temporarily all applications and releases pending settlement between the GSIS
and the PHHC.

4. That while the time of suspension of all applications and releases was
indefinite, Miss Cayetano urged me to withdraw my loan from the GSIS for the
meantime. She assured me of her help securing loan from other banking
institution for reason of saving my building from deterioration and by that I
shall be able also to pay her. I did withdraw my application already approved
for release. At this time Miss Cayetano failed in her proposal.

5.  That after weeks later she lend me an additional amount of one thousand
pesos (P1.000.00) making all in all THREE thousand pesos (P3.000.00) including
interest of ten percent (10%) which goes to her agent, ten percent (10%) goes to
her capital and other expenses goes to her counsel and registration of the Deed
of Mortgage. All these interest and other expenses were deducted from the amount
she lended me.

6.  That on or about September, 1959, she again offered without my asking,
the amount of P1,000.00 deducting the cor responding interest plus the interest
on P3,000.00 which she advanced. With this, the total amount becomes P4,000.00
thus contract of mortgage was then presented to us (• • •) signatures. She added
her assurance of saying that she will her best to negotiate my title with the
Republic Bank and further the said mortgage contract is but a formality in while
waiting for the controversy on the settlement between the two institutions, the
GSIS and the PHHC.

7.  That I, Osmundo V. Ceguerra and my spouse were happy to have learned the
stipulation interest if only (1%) one percent. We did not entertain doubt.
Therefore we religiously believed the instrument of Mortgage contract was
nothing but a formality fo we did not question in signing our names not in the
presence of a notary public either in the presence of witnesses. Because it was
Miss Cayetano herself who enlighten us about her willingness to help us.

8.  That sometime in August, 1960. I reftled my new application for the same
amount with the GSIS. Hut the management told me afterwards that they cannot act
on my application unless I submit to them my Title. I informed Miss Cayetano
about the prerequisite of the GSIS. But Miss Cayetano refuse and continued to
refuse of submitting my Title to the GSIS: The question now is as to whether I
am directly or indirectly liable and obligated to pay her is a matter of
consideration with justifying circumstances while in fact she acted contrary to
our original understanding during the first, second and third time of lending
the aforesaid amount.”

As a prayer in the letter-answer, defendants stated: ‘Considering therefore
the aforementioned statement above, the changing of the mind of Miss Cayetano in
refraining to submit (he title to the GSIS in order to effect reapproval and
release, aggravate my belief and confidence to such an extent of doubting that
the said instrument of Mortgage was deliberately planned in taking advantage of
my poverty. It is only now that 1 realise her plan was rather malicious and that
she said further if such unenforceable contract shall prevail I am afraid it
hamper and defeat the good purpose of the administration the late President
Magsaysay who benevolently distributed lot to the landless poor who needs ample
protection of the Government in order to enjoy little shelter, little food and
little laws

“May I conclude your honor of imploring that my title must be submitted to
the GSIS in order to follow the correct track of original
understanding.”

Inspite of the above letter-answer, the defendants were, motion of plaintiff
declared in default and plaintiff allowed to present her evidence ex-parte on
January 7, 1961. On January 11, 1961, the court a quo rendered judgment for the
plaintiff, the pertinent portions of which read:

“This is an action for foreclosure of mortgage instituted by the plaintiff
against the defendants. Having failed to file a responsive pleading to the
complaint within the reglementary period, the defendants were declared in
default and plaintiff was allowed to adduce evidence in support of her
complaint.

“Wherefore, the Court finds the complaint meritorious,, and jndg ment is
hereby rendered in this case, in favor of the plaintiff and against the
defendants, by ordering the latter to pay the former the sum of P4,000.00 with
interest thereon at 1% a month from September 17, 1959 until full payment is
made, within the period of ninety (90) days from the date this decision; the sum
of P500.00 as attorney’s fees; the sum of P300.00 as liquidated damages which
should be paid in both instances within the same period of ninety (90) days; and
to pay the costs.

“If within the said period of ninety (90) days, defendants could not pay the
aforesaid amount, the properties in question will be sold in public auction
pursuant to law, and the proceeds thereof to be applied to satisfy this judgment
and the costs of the sale of the said property.”

It appears that this decision never became known to appellants-spouses, the
same having been returned to the Court, as unclaimed.

Under date of April 21, 1961, defendants were served with a copy of a Writ of
Execution, dated February 10, 1961, addressed to the Sheriff of Quezon City,
commanding the latter to seize the goods and chattels of the
defendants-appellants in order to satisfy the judgment. The matter was referred
to counsel who, on June 17, 1961, presented a Petition for Relief, based on the
following grounds:

(1) the answer-letter was a substantial compliance with rules, for it
contained facts upon which defendants relied upon as defenses, and if said
letter-answer did not conform with the rules, the non-conformity could be
considered “an excusable mistake, taking into account that defendants are mere
ordinary lay-men not cognizant with the intricacies of the Rules of Court;

(2)  the defendants have substantial and valid defenses, which were contained
in the letter-answer;                 .

(3)  that defendants have been deprived of their day in court.

It was prayed that the Court, in the interest of justice, set aside the order
dated January 7, 1961, declaring them in default, together with the decision of
January 11,1961, and that the case be set for hearing on the merits. The
petition for relief was accompanied by the requisite affidavit of merit.       
         

Plaintiff-appellee interposed an opposition to the petition for relief,
claiming that the declaration of default was well-taken and proper since the
defendants failed to present a responsive pleading and/or to furnish the
plaintiff a copy of the letter-answer; that their belief that the letter-answer
was sufficient cannot be an excusable mistake; and that the defenses contained
in the letter-answer are not only false, but also not substantial or
meritorious. Plaintiff asked for the denial of the petition for relief.

Resolving the petition and the opposition, the Court a quo under date of June
24, 1961, handed down an Order of the following tenor:

“It appearing that the first registry notice for the decision of this Court
was received by the defendant on January 13, 1961, and according to the
provisions of the rules, five (5) days after the receipt of such first notice,
he is presumed to have received the same; and

“It appearing further that from January 13, 1961 up to June 17, when the
petition for relief was filed, more than 60 days has elapsed.

“Therefore, the said petition for relief was filed beyond the reglementary
period. “In view thereof, the instant petition for relief is hereby
denied.”

A motion to reconsider the above Order was filed on July 10, 1961, the main
ground being that the petition for relief was presented on time. The argument in
support of the contention is that defendants having actually known of the
adverse decision rendered, only on April 21, 1961, the presentation of the
petition on June 17, 1961,. was only 57 days from the the former date. To
bolster the argument, Sec. 3, Rule 38 of the Rules was cited, wherein it was
provided, among others, that petitions of this nature should be filed within
sixty days after the petitioner learns of the judgment, order, or other
proceeding to be set aside. This motion for reconsideration was likewise denied,
for failure to comply with the rules regarding the three (3) day notice and for
lack of merits. Appeal has been interposed directly to this Court, appellants
assigning four (4) errors allegedly committed by the court a quo, all of which
pose the following propositions—

(1)  was the letter-answer sufiicient in law;

(2)  was the petition for relief presented within the period provided for by
the rules.

The letter-answer contained a recital of facts relied upon, as defenses. The
mortgage debt was admitted, but defendants claimed that thru the machinations of
plaintiff, they were unable to pay the same. We believe that this was a
sufficient and substantial compliance with the requirements of the rules; after
all, a liberal interpretation has always been advocated. Having filed an answer,
defendants should have been entitled to notice of hearing. And if the answer was
not responsive, the trial court should have apprised the defendants of such
fact, considering that they were not lawyers. It appearing that they were not
informed of the scheduled hearing, all the proceedings undertaken therein became
a nullity, there being a deprivation of their day in court, amounting to lack of
due process.

While it is true that appellee was not furnished with a copy of the
letter-answer, the non-service, however, was not the ground for declaring them
in default, but the alleged failure to present a responsive pleading. We have
said that the letter-answer took the place of a responsive pleading and,
therefore, defendants should not have been declared in defaults; for a defendant
who has timely filed an answer cannot be in default (Ignacio vs. Racho, 78
Phil., 557). And even if We grant, for purposes of argument, that defendants
were validly declared in default, still We consider the petition for relief to
have been filed on time. This is so, because a petition for relief may likewise
be’taken from the order of execution, inasmuch as Sec. 2, Rule 38, Revised
Rules, does not only refer to judgments, but also to orders, or any other
proceedings (PHHC vs. Tiongco & Escasa, G.R. No. L-18891, Nov. 28, 1964).
From the time they had actual knowledge of the order of execution, on April 21,
1961, until the filing of the petition for relief, on June 17, 1961, only 57
days had elapsed.

It is conceded that defendants received a first registry notice on January
13, 1961, but they did not claim the letter, thereby giving rise to the
presumption that five (5) days after receipt of the first notice, the defendants
were deemed to have received the letter. This Court, however, cannot justly
attribute upon defendants actual knowledge of the decision, because there is no
showing that the registry notice itself contained any indication that the
registered letter was a copy of the decision, or that the registry notice
referred to the case being ventilated. We cannot exact a strict accounting of
the rules from ordinary mortals, like the defendants.

The subject matter of the case is a lot and house, which to all appearances,
constitute the only holdings of appellants. It would be in keeping with the best
interest of justice to afford them (appellants) a chance to prove whether the
machinations attributed to appellee existed and whether appellee can be
compelled to submit the title of appellants to the GSIS, with a view of having
the loan released.

Conformably with all the foregoing, the Order denying the petition for relief
and that denying the motion for reconsideration, are set aside and another
entered remanding the case to the court below, for hearing on the merits. No
costs.

Bengzon, C. J., Bautista Angelo, Concepcion, Reyes, J. B. L., Barrera,
Dizon, Regala, Makalintal, Bengzon, J. P. and Zaldivar, JJ.,
concur.