FERNANDO GO, PETITIONER, VS. MICHAEL TAN AND LOLITA TAN, RESPONDENTS.

Fernando Go versus Michael Tan and Lolita Tan

The Case

This is a petition for review on certiorari brought by Fernando Go against Michael Tan and his mother Lolita Tan. The dispute began as a complaint for specific performance and damages arising from a contract of lease over three parcels of land in Quezon City, and it reached the Supreme Court after the trial court declared Fernando Go in default and rendered judgment against him ex parte. The case matters to a reviewee because it is the Court's clearest statement on the liberal treatment of procedural rules, and specifically on why an order of default and a judgment by default are frowned upon and should be the exception rather than the rule.

Procedural History

Michael Tan and Lolita Tan filed a complaint for specific performance and damages with a prayer for a temporary restraining order and for prohibitory and mandatory injunction before the Regional Trial Court of Quezon City, Branch 96, against Fernando Go and brothers Juanito and William Siy. The trial court issued a temporary restraining order and later a writ of preliminary prohibitory injunction. When Fernando Go failed to file his answer on the last day allowed, the trial court declared him in default, conducted an ex parte hearing, and rendered judgment in favor of the Tans. Fernando Go's motions for reconsideration and to nullify the proceedings were denied.

Fernando Go appealed to the Court of Appeals, which affirmed the trial court's decision with the modification that the first two paragraphs of the dispositive portion were deleted for having become moot and academic because the Tans had already been evicted from the leased premises. Fernando Go's motion for reconsideration was denied, so he filed the present petition for review on certiorari before the Supreme Court.

Facts

Fernando Go, as owner, and Michael Tan, as lessee, entered into a contract of lease dated December 14, 1989 over three parcels of land in Quezon City. Paragraph 4 of the lease provided that any improvements built by the lessee would automatically belong to the lessor without any obligation to reimburse the lessee. Paragraph 5 provided that the lessee could not sublet or assign the lease, and that any sublease or assignment would be null and void, giving the lessor the right to terminate the contract at once.

Fernando Go later learned that Michael Tan was subleasing the property to brothers Juanito and William Siy, in violation of the lease. Before Fernando Go could file a complaint for illegal detainer, Michael Tan and Lolita Tan filed their complaint for specific performance and damages, alleging that Fernando Go and the Siy brothers conspired to harass and evict them. The trial court issued a temporary restraining order on November 8, 1991. Meanwhile, Fernando Go, unaware of the order, filed an illegal detainer case before the Metropolitan Trial Court of Quezon City, which was eventually decided in his favor.

During the hearing on November 25, 1991, which was the last day for Fernando Go to file his answer, his counsel said no answer had been filed, and the trial judge remarked that the court would wait for the answer. Relying on that remark, Fernando Go filed a motion for extension of time the next day. The Tans filed a motion to declare him in default. On November 29, 1991, with only the Tans and their counsel present, the trial court denied Fernando Go's motion for postponement, declared him in default, and conducted an ex parte hearing. Judgment was rendered against him, awarding the Tans rentals in advance, actual damages, moral damages, exemplary damages, attorney's fees, and costs.

Issues

• Whether or not the trial court prematurely declared Fernando Go in default when the judge had stated in open court that the court would wait for him to file his answer.
• Whether or not the order of default and the judgment by default should be set aside in the interest of substantial justice.

Applicable Provisions

The decision does not quote a specific statutory provision; it rests on the settled procedural rule on default, which the Court states as follows:

Issuance of orders of default should be the exception, rather than the rule, to be allowed only in clear cases of obstinate refusal by the defendant to comply with the orders of the trial court.

This rule governs whether the trial court properly declared Fernando Go in default for his failure to file an answer seasonably.

The Court also states the governing principle on procedural rules:

Procedural rules are intended to aid the courts in the dispensation of justice.

This principle supports exempting a case from a stringent application of the rules when that application would thwart rather than promote substantial rights.

Ruling

On the first issue, the Court held that the trial court did not grant Fernando Go any extension of time to file an answer. He had until that day to file it and failed to do so, inadvertently relying on the trial judge's utterance that the court would wait for his answer. His reliance on the judge's remark may have been misplaced, but the record showed no taint of stubbornness or bad faith, and no scheme to delay the proceedings or flagrantly transgress the rules.

On the second issue, the Court ruled that the order of default and the judgment by default should be set aside. It stressed that default judgments are frowned upon and looked with disfavor because they may amount to a positive and considerable injustice to the defendant. It is a far better and more prudent course to excuse a technical lapse and afford the parties a review of the case on the merits than to dispose of the case on technicality and cause a grave injustice. The Court noted that although the Tans had been evicted from the premises, there still remained a controversy regarding the damages they claimed, and a full-blown trial would allow both parties to present their evidence and protect their respective rights.

Doctrine

An order of default is the exception, not the rule, and may be issued only in clear cases of obstinate refusal by the defendant to comply with the orders of the trial court. Default judgments are frowned upon and looked with disfavor because they may cause grave injustice to a defendant who is deprived of the chance to present his side.

Procedural rules are mere tools designed to facilitate the attainment of justice, and the Court may suspend their operation or exempt a particular case when a rigid application would frustrate rather than promote the ends of justice. A liberal interpretation of the rules, giving both parties the fullest opportunity to adduce their proofs, is the best way to ferret out the truth, for court litigations are primarily a search for truth.

Disposition

The petition was partly granted. The Court affirmed the ruling that the order to maintain the Tans in peaceful possession had become moot because they had been evicted, but reversed the ruling upholding the order of default, set aside the judgment by default, and ordered the trial court to allow Fernando Go to file his answer and to conduct the proper proceedings on the Tans' claim for damages and attorney's fees.

Remember This

The single line worth memorizing is that an order of default is the exception rather than the rule, allowed only in clear cases of obstinate refusal to comply with the court's orders. Examiners like to use this case in civil procedure questions on default, motions for extension, and the liberal application of procedural rules in the interest of substantial justice.