LCC CORPORATION (FORMERLY LUZON COMMODITIES CORPORATION), PLAINTIFF-APPELLEE, VS. JESUS FARRALES, DEFENDANT-APPELLANT.

A case certified to this Tribunal by the then Court of Appeals on a
question of law, herein being resolved on the basis of rules prior to
Batas Pambansa Blg. 129.

In their chronological order, the facts follow:

1. On September 4, 1969, LCC Corporation filed a complaint
against Jesus Farrales with the then City Court of Manila (Case No.
183562) for the recovery of P4,749.49 representing the purchase price of
“Union” brand cement allegedly delivered to Farrales.

2. (a) On September 25, 1969, defendant Farrales was served with summons.

(b) On October 15, 1969, defendant sent by registered mail an
Urgent Petition for extension of ten days within which to file an
Answer, or up to October 25, 1969.

(c) On October 24, 1969, defendant filed his Answer, also by
registered mail, contending principally that he was never privy to any
transaction with plaintiff involving cement.

3. (a) On November 12, 1969, plaintiff filed a Motion to Strike
Out Answer for having been filed 9 days late and for a declaration of
default.

(b) On November 15, 1969, the City Court acted favorably on the Motion.

4. (a) On November 18, 1969, defendant filed an Urgent Motion
for Reconsideration alleging “that the registered letter bearing the
original copy of the Urgent Petition for Extension addressed to the
Clerk of Court, City of Manila Branch III, was returned unclaimed,”
attaching the necessary Annexes (“A” & “B”) as proof thereof, and
praying that his Answer be admitted. Defendant also averred that
plaintiff’s counsel was sent and had received a copy of the motion for
extension (Annexes “C” & “D”).

(b) The City Court denied reconsideration on November 29, 1969.

5. (a) On December 10, 1969, defendant received copy of the
City Court Decision in plaintiff’s favor, also rendered on November 15,
1969.

(b) On December 26, 1969, defendant filed a Motion for
Reconsideration and/or New Trial reiterating the previous ground alleged
by him, invoking in addition accident, mistake, and/or excusable
negligence which could not have been guarded against, and alleging that
he had a good, valid, and meritorious defense, particularly, lack of
privity of contract.

(c) On January 7, 1970, defendant filed a Supplemental Motion
for Reconsideration and/or New Trial with an Affidavit of Merit.

(d) On January 10, 1970, the City Court denied both the first
and the Supplemental Motion for Reconsideration and/or New Trial.

6. (a) Defendant appealed to the then Court of First Instance of Manila, Branch V (Civil Case No. 78840).

(b) Upon plaintiff’s Motion, the Court of First Instance
dismissed the appeal, over defendant’s opposition, on the ground that no
appeal may be taken from a judgment by default rendered by an inferior
Court, the proper remedy being a Petition for Relief under Rule 38 of
the Rules of Court, and that a defendant must justify his failure to
answer by fraud, accident, mistake or excusable negligence.

7. Defendant appealed to the Appellate Court (CA-G.R. No.
47337-R), which elevated the case to this Tribunal, no question of fact
being involved.

It is well settled that a party in default cannot appeal until his standing in Court is regained.

“It is well settled in our jurisdiction that a defendant who has been
declared in default loses his standing in court and without having
regained the same has no right to appeal from the judgment by default
(Lim Toco vs. Go Fay, 80 Phil., 1966; Manila Motor Co., Inc. vs. San
Juan, G. R. No. L-9163, May 29, 1959).” x x x^[1]

To regain that lost standing, the same case recites:

“The rule in this jurisdiction is that a defendant, who has been
declared in default by the municipal or city court, in order to enable
him to restore his standing in court, may avail himself of either of two
remedies, i.e., (1) he may ask the court, within one (1) day after
notice of the order of default, to set aside such order, by appearing
and showing to the satisfaction of the court that his failure to appeal
was due to fraud, accident, mistake or excusable negligence under
Section 13, Rule 5 of the Revised Rules of Court; or (2) he may, if he
fails to avail himself of this remedy and the judgment has become final
and executory, file a petition for relief in the Court of First Instance
under Section 1 of Rule 38 of the Revised Rules of Court. He may also
file a motion to lift the default judgment and ask for new trial, before
the judgment becomes final and executory under Section 16 of Rule 5.”^[2]

The foregoing authoritative precedent was reiterated in and applied in Strachan & Macmurray, Ltd. vs. Court of Appeals.^[3]

Applying the foregoing criteria, of note is the fact that, before the
City Court, defendant did file a Motion for Reconsideration and/or New
Trial within fifteen (15) days after receipt of the default judgment of
the City Court, followed by a Supplemental Motion for Reconsideration
and/or New Trial to which was attached an Affidavit of Merit signed by
defendant. It was after receiving the City Court Order denying his
first Motion and Supplemental Motion that defendant appealed to the
Court of First Instance.

It is apparent, therefore, that defendant availed of remedies in an
attempt to regain his lost standing before the City Court. His first
Motion for Reconsideration and/or New Trial may substantially be said to
be the equivalent of a Motion to lift the default judgment and for new
trial under Section 16 of Rule 5, Rules of Court;^[4]
his Supplemental Motion for Reconsideration and/or New Trial to which
was attached an Affidavit of Merit alleging accident, mistake and/or
excusable negligence, the equivalent of a Petition for Relief under Rule
38 of the Rules of Court, although not so entitled. With the denial of
both said Motions by the City Court, the appeal to the Court of First
Instance interposed by defendant, therefore, was more of an appeal from
the City Court order denying relief and not from the judgment by default
itself. Consequently, contrary to the ruling of the Court of First
Instance, it could have entertained the appeal.

Further, defendant had alleged before the City Court that his Urgent
Motion for extension of time to file his Answer sent to the City Court
by registered mail had been returned unclaimed, which, if proven, would
have a bearing on the timeliness of the filing of the Answer. The
latter pleading was filed within the ten-day extension prayed for by
defendant. We also note that in pleading absence of privity of contract
with plaintiff, defendant could have a good and valid defense.

ACCORDINGLY, the Orders of the then Court of First Instance of Manila,
Branch V, appealed from, are hereby REVERSED and SET ASIDE, and this
case remanded to the Metropolitan Trial Court corresponding to the
former City Court of Manila, Branch III, for further proceedings. No
costs.

SO ORDERED.

Teehankee, (Chairman), Plana, Relova, Gutierrez, Jr., and De la Fuente, JJ., concur.

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^[1] Luzon Rubber & Mfg. Co. vs. Estaris, 52 ESCRA 391, 392 (1973).

^[2] Luzon Rubber & Mfg. Co. vs. Estaris, supra.

^[3] 62 SCRA 109 (1975).

^[4] “Section 16, New trial. –
Within the time provided for perfecting an appeal from a judgment
rendered by an inferior court and before an appeal is so perfected, the
court may grant a new trial to correct an error or injustice it may have
committed.”