YELLOW BALL FREIGHT LINES, INC., PLAINTIFF-APPELLEE, VS. BELFAST SURETY & INSURANCE COMPANY, INC., DEFENDANT-APPELLANT.

Plaintiff-appellee seeks recovery from defendant-appellant the
sum of P5,401.00 representing damages and costs of
repairs of its motor vehicle, bearing Plate No. TH-242,
insured by the defendant under Policy No. BS-CV-1166, alleging that the
insured vehicle figured in an accident which occurred in San Fernando, Pampanga
on May 26, 1965.

As a second cause of action, plaintiff alleged that on June 2,
1965, defendant cancelled the contract of insurance which covered the vehicle
which figured in the accident of May 26, 1965 and other vehicles of the
plaintiff; that upon receipt of the notice of cancellation, plaintiff demanded
from the defendant a refund of the premiums paid in advance corresponding to
the unexpired period amounting to P3,823.02; and that despite repeated demands
upon the defendant, the latter failed and refused to refund said premiums.

As a third cause of action, plaintiff alleged that defendant
issued a performance bond in the sum of P10,000.00 on behalf of Poblete Freight
Service to guarantee its per­formance to deliver to various warehouses in
Manila and suburban towns, RCA rice from the piers, South Harbor, Manila, which
plaintiff as a contractor has undertaken to perform; that plaintiff accepted
the Poblete Freight Service, as sub-contractor, to perform its obligation under
plaintiff’s contract of haulage on the strength of the performance bond issued
by the defendant on behalf of Poblete Freight Service to guarantee faithful
performance of its hauling and delivery of RCA rice; that the Poblete Freight
Service lost a truck load of RCA rice valued at P8,656.00 entrusted into its
custody for delivery pursuant to the contract of haulage by the plaintiff; and
that demands were made upon the defendant to reimburse
the value of the lost rice but said defendant failed and refused to pay.

The complaint was filed on September
9, 1965 and summons was served upon the defendant on September 25, 1965.

On September 30, 1965,
Atty. Loreto M. Guevarra, an employee of the defendant, resigned without filing
an answer.  On October 15, 1965, defendant designated its then
Corporate Secretary, Atty. Mauro T. Allarde, to take over the duties of its
former counsel, Atty. Guevarra.

Considering that service of summons and a copy of the complaint
were served upon the defendant on September
25, 1965, defendant should have filed its answer on or before October 10, 1965.  Defendant did not file its answer nor moved
for extension of time within which to file the same.  Thus, when Atty. Allarde was named counsel to
handle the case, the period for filing the answer had already expired.

On October 16, 1965,
the defendant was declared in default and reception of plaintiff’s evidence was
scheduled on October 20, 1965.

On October 23, 1965,
Atty. Allarde sent his clerk to the court to check the exact date when the
summons was served upon the defendant. 
It was then discovered that summons was served on September 25 and that
on October 16 the defendant was declared in default and that plaintiff had
already presented its evidence.

On October 27, 1965,
the defendant filed its motion to set aside the order of default.  This was followed by another motion filed on November 12, 1965 praying for a new
trial which, however, was denied.

On February 2, 1966,
defendant appealed from the decision of the trial court, dated October 23, 1965, ordering the
defendant to pay the plaintiff the amounts prayed for in the complaint, with
the exception of exemplary damages; as well as from the order denying the
motion for a new trial.

In its appeal to the Court of Appeals, defendant alleged that the
lower court erred (1) in denying the motion for new trial and, in effect, also
the motion to set aside the order of default; and, (2) in rendering judgment
for all the sums claimed in the complaint, with the exception of exemplary
damages.

Defendant contends that its failure to file the answer within the
reglementary period is due to excusable negligence; that while it is true that
when its former counsel, Atty. Loreto Guevarra, resigned on September 30, 1965
it still had ten (10) days within which to file the answer, it was only on
October 15, 1965 when Mr. Rimaludo Enerio, Assistant Manager of the defendant
corporation, turned over to the new counsel, Atty. Allarde, all the cases of
the defendant still pending in court; that the delay was “due to the
pressure of his (Atty. Allarde) duties and he did not realize the need of the
immediate action on any of the cases;” that notwithstanding the transfer
of the cases to the care of Atty. Allarde on October 15, 1965, the latter
“finally came to the folder of this case only on October 22, 1965 because
prior to that time he had to work over and take action on about 40 of the 60
cases turned over to him;” and that it was only then that Atty. Allarde
noticed that no answer to the complaint has yet been filed.  Further, appellant alleged that the copy of
the summons served on the defendant did not state the date when the service was
made so Atty. Allarde had to send his clerk to verify the date of the service
from the records of the court itself. 
This took place on October 23,
1965 and it was only then that Atty. Allarde learned that the
defendant had already been declared in default; that the plaintiff had already
presented its evidence ex-parte on October
20, 1965 and that a decision had been rendered on the merits.

The Court of Appeals, in a resolution, dated June 16, 1969, ordered the transmittal of the
records of this case to this Court because “this case does not involve any
question of fact but merely purely questions of law.”

Considering the sequence of events which followed after summons
had been served upon defendant-appellant, particularly the action taken by
defendant-appellant’s counsel, Atty. Allarde, in immediately filing a motion to
set aside the order of default on October 27, 1965, We hold that appellant
should be granted relief, if only to stress emphatically that the rule of
procedure may not be misused or abused as instrument for the denial of
substantial justice.  It will be observed
that defendant-appellant’s new counsel exercised more than ordinary diligence
in attending to the cases which were turned over to him.  It cannot be said that there was manifest
intention on his part to delay the trial of the case.  The error or inadvertence, if any, was on the
part of appellant’s employee, Mr. Enerio, who possibly did not know what the
consequence would be if immediate action is not taken on the cases left by the
former counsel, Atty. Guevarra.  At any
rate, judgments by default are not looked upon with favor for they are made
without contest from the defendant. 
Litigants should be given every opportunity to fight their cases in
court, fairly and in the open, so that where a defendant can give a credible
explanation for his failure to file the answer within the reglementary period,
the court should not hesitate to lift an order of default or vacate the
judgment already rendered thereon. 
“While a petition for relief as a rule is addressed to the sound
discretion of the court, however, when it appears that a party has a good and
meritorious defense and it would be unjust and unfair to deny him his day in
court, equity demands that the exercise of judicial discretion be reconsidered
if there are good reasons that warrant it (Tecson vs. Tecson, 49 O.G.
4308).”

WHEREFORE, the judgment of the lower court, dated October 23, 1965, is hereby SET
ASIDE and a new trial is ordered, giving the defendant an opportunity to file
its answer to the complaint.  Without costs.

SO ORDERED.

Melencio-Herrera, Plana, Vasquez, and
Gutierrez, Jr., JJ., concur.

Teehankee, Acting C.J., reserved
his vote.