MA. THERESA COMMERCIAL, INC., AS REPRESENTED BY ITS PRESIDENT, JOSE LIM ONG, AND JOSE LIM ONG, AS SURETY, PETITIONERS, VS. HON. OFELIA L. CALO, AS PRESIDING JUDGE OF THE RTC-BRA…

Ma. Theresa Commercial versus Calo

The Case

This is a petition for certiorari under Rule 65 of the Rules of Court. Ma. Theresa Commercial, Incorporated, represented by its president Jose Lim Ong, and Jose Lim Ong in his own capacity as surety, ask the Supreme Court to annul two orders of Judge Ofelia Calo of the Regional Trial Court of Mandaluyong City, Branch 211, in a sum of money case brought against them by Banco de Oro Universal Bank. The trial court declared the petitioners in default and expunged their answer from the records. The case matters because it is the Court's cleanest recent statement on three connected points: when a default order may be struck down as grave abuse of discretion, why a pending petition for certiorari does not suspend the trial, and what a declaration of default actually takes away from a defendant.

Procedural History

Banco de Oro sued the petitioners for a sum of money in the Regional Trial Court of Mandaluyong City. The bank later filed an amended complaint. When the petitioners could not be served personally, the trial court allowed service of alias summons by publication, and the summons was published in a newspaper of general circulation. Instead of answering, the petitioners filed a motion to dismiss questioning the court's jurisdiction over them. The trial court denied the motion, and later denied their motion for reconsideration.

The petitioners then went up to the Court of Appeals on a petition for certiorari, attacking those two orders on the ground that the bank's motion for service by publication was fatally defective. While that petition was pending, the bank moved to declare the petitioners in default. The petitioners finally filed their answer before the trial court, explaining the delay by the pendency of their petition in the Court of Appeals. The bank moved to expunge the answer. The trial court granted the motion, declared the petitioners in default, and allowed the bank to present its evidence ex parte. Reconsideration was denied. The petitioners came to the Supreme Court on a petition for certiorari under Rule 65, and that is the petition the Court now resolves.

Facts

The bank filed its complaint in June 2005 and its amended complaint in August 2005. Service of summons by publication was allowed in May 2010, and the alias summons was published. Rather than answer, the petitioners filed a motion to dismiss challenging jurisdiction. The trial court denied it in April 2011 and denied reconsideration in July 2011.

On the first of August 2011, the petitioners filed a petition for certiorari before the Court of Appeals. No temporary restraining order and no writ of preliminary injunction was issued in that case. In April 2012, the bank moved to declare the petitioners in default. The petitioners filed their answer before the trial court only on the thirteenth of July 2012, more than six years after the amended complaint was filed.

The trial court granted the bank's motion, declared the petitioners in default under Section 3 of Rule 9, allowed the bank to present its evidence ex parte, and ordered the answer expunged. Reconsideration was denied, and the petitioners elevated the matter to the Supreme Court.

Issues

• Whether or not the trial court gravely abused its discretion in not admitting the petitioners' answer and in declaring them in default, thereby allowing the bank to present its evidence ex parte.
• Whether or not the trial court gravely abused its discretion in denying the petitioners' motion for reconsideration.

Applicable Provisions

Section 1 of Rule 11 of the Rules of Court fixes the period to answer:

Section 1. Answer to the complaint. The defendant shall file his answer to the complaint within fifteen (15) days after service of summons, unless a different period is fixed by the court.

The petitioners filed their answer more than six years after the amended complaint, so this period is the measure of their default.

Section 7 of Rule 65 of the Rules of Court governs the effect of a certiorari petition on the principal case:

Section 7. Expediting proceedings; injunctive relief. The court in which the petition is filed may issue orders expediting the proceedings, and it may also grant a temporary restraining order or a writ of preliminary injunction for the preservation of the rights of the parties pending such proceedings. The petition shall not interrupt the course of the principal case unless a temporary restraining order or a writ of preliminary injunction has been issued against the public respondent from further proceeding in the case.

Because no restraining order or injunction was issued in the Court of Appeals, the trial court's proceedings were never interrupted.

Ruling

On the first issue, the Court held that there was no grave abuse of discretion. Grave abuse of discretion means the arbitrary or despotic exercise of power due to passion, prejudice or personal hostility, or a whimsical, arbitrary or capricious exercise of power amounting to an evasion or refusal to perform a positive duty enjoined by law. The abuse must be patent and gross. Certiorari corrects errors of jurisdiction, not errors of judgment.

The Court found no persuasive reason to relax the rules. The answer came more than six years after the amended complaint, far beyond the fifteen day period. The Court accepted that litigation is not a game of technicalities, but held that every case must be prosecuted in accordance with the prescribed procedure, and that rules may be relaxed only for persuasive reasons, to relieve a litigant of an injustice not commensurate with the failure to comply.

The petitioners' excuse, that they awaited the Court of Appeals, failed. The Court quoted its earlier ruling that the pendency of a petition for certiorari does not suspend the proceedings before the trial court, because an application for certiorari is an independent action which is not part of or a continuation of the trial. The Court also rejected the fear of a default judgment, explaining that a defendant declared in default is not deprived of all rights, except the right to be heard and to present evidence, and that the plaintiff must still present the same quantum of evidence required if the defendant were present. If that evidence does not support a judgment, the complaint should be dismissed.

On the second issue, since there were valid grounds to withhold the leniency prayed for, the denial of reconsideration was likewise not grave abuse of discretion.

Doctrine

First, a petition for certiorari under Rule 65 lies only for grave abuse of discretion amounting to lack or excess of jurisdiction, meaning a patent and gross, arbitrary or despotic exercise of power, and not for mere errors of judgment.

Second, under Section 7 of Rule 65, a petition for certiorari does not interrupt the course of the principal case unless a temporary restraining order or a writ of preliminary injunction has been issued against the public respondent. A defendant who waits on such a petition instead of answering does so at his peril.

Third, under Section 1 of Rule 11, the answer must be filed within fifteen days after service of summons, and relaxation of the rules requires persuasive reasons.

Fourth, a declaration of default does not automatically entitle the plaintiff to judgment. The plaintiff must still present the same quantum of evidence required if the defendant were present, and the complaint should be dismissed if that evidence does not support a judgment.

Disposition

The petition was denied, and the orders of the trial court declaring the petitioners in default, expunging their answer, and denying reconsideration were affirmed.

Remember This

Memorize this line: a petition for certiorari does not interrupt the principal case unless a restraining order or writ of preliminary injunction has been issued. Examiners use this case to test the effect of a pending certiorari petition on the period to answer, and to test whether a defaulting defendant loses all rights or only the right to be heard and to present evidence.