CONTINENTAL CEMENT CORPORATION, PETITIONER, VS. COURT OF APPEALS AND MUNICIPALITY OF NORZAGARAY, RESPONDENTS.

The question involved in this case is quite simple and not even
new.  A little research could have easily
resolved it and avoided this litigation that has come up all the way to this
Court.  If we are rendering a full-blown
decision instead of disposing of the issue by a short resolution, it is not
only because we see the need to reiterate certain basic rules that should be
well-settled by now.  What we especially
intend is to impress upon bench and bar the value of keeping abreast of the
doctrines announced by the Court in the interpretation of its Rules.

The facts are easily recounted.

On February 1, 1985,
the Municipality of Norzagaray filed a complaint
for recovery of taxes against the petitioner in the Regional Trial Court of Malolos, Bulacan.  Before the expiration of the 15-day reglementary period to answer, the petitioner filed two
successive motions for extension of time to file responsive pleadings, which
were both granted.  The last day of the
second extension was May 28, 1985.  On May
25, 1985, the petitioner filed a motion to dismiss the complaint on
the ground of the plaintiff’s lack of capacity to sue and lack of a cause of
action.  The motion was denied on July 16, 1985, “both for lack of
merit and for having been improperly filed.” On July 25, 1985, the plaintiff moved to declare the
petitioner in default for having filed only the motion to dismiss and not a
responsive pleading during the extension granted.  This declaration was made on August 2, 1985, and evidence for the
plaintiff was thereafter received ex parte,
resulting in a judgment in its favor on February
4, 1986.  The judgment was
affirmed by the respondent court in its decision dated April 7, 1989,^[1]
which is the subject of the present petition.

Our ruling follows.

The default order was clearly erroneous and should not have been
sustained on appeal.  There is no
question that the motion to dismiss was filed seasonably, within the period of
the second extension granted by the trial court.  It is true that such a motion could not be
considered a responsive pleading as we have held in many cases.^[2]
Nevertheless, it is also true that in Section 1 of Rule 16 of the Rules of
Court, it is provided that “within the time for pleading, a motion
to dismiss the action may be made” on the grounds therein enumerated,
including the grounds invoked by the petitioner.

Moreover, it is clearly provided in Section 4 of the same Rule
that:

Sec. 4. 
Time to plead.  – If the motion to dismiss is denied or if
determination thereof is deferred, the movant shall
file his answer within the period prescribed by Rule 11, computed from the time
he received notice of the denial or deferment, unless the court provides a
different period.

The motion to dismiss was filed on May 25, 1985, three days before the expiration of the
second extension.  Notice of its denial
was served on the petitioner on July
29, 1985.  From that date,
the petitioner had 15 days within which to file its answer, or until August 13, 1985.  It was unable to do so, however, because of
the default order issued by the trial court on August 2, 1985.  On
that date, the petitioner still had eleven days before the expiration of the
15-day reglementary period during which the
petitioner was supposed to file his answer.

The respondents are reminded of our ruling in Barraza
v. Campos,^[3]
to wit:

Under the facts of the case at bar, respondent judge had granted
petitioners an extension of fifteen (15) days to file their answer, or up to November 18, 1978.  Instead of filing the answer, petitioners
filed a Motion to Dismiss the Complaint on November 17, 1978, one (1) day before the expiration of
the period as extended by the court. 
This is clearly allowed under Section 1, Rule 16, Rules
of Court.  A motion to dismiss is the
usual, proper and ordinary method of testing the legal sufficiency of a
complaint.  The issue raised by a motion
to dismiss is similar to that formerly raised by a demurrer under the Code of
Civil Procedure.  (Zobel
v. Abreu, 98 Phil. 343).  A motion to dismiss under any of the grounds
enumerated in Section 1, Rule 8 (now Section 1, Rule 16) of the Rules of Court,
must be filed within the time for pleading, that is, within the time to
answer.  (J.M. Tuason v. Rafor, L-15537, June
30, 1962, 5 SCRA 478.)

Private respondents’ argument that although a motion to dismiss
interrupts the running of the period within which to file an answer, this
refers to the original period of fifteen (15) days within which to file the
responsive pleading and not to the extension of time within which to file the
answer, is without merit.  There is
nothing in the Rules which provides, directly or indirectly, that the
interruption of the running of the period within which to file an answer when a
motion to dismiss the complaint is filed and pending before the court, refers ony to the original period of fifteen (15) days and not to
the extension of time to file the answer as granted by the court.  It may be true that under Section 4 of Rule
16, if the motion to dismiss is denied or if the termination thereof is
deferred, the movant shall file his answer within the
time prescribed by Rule 11, computed from the time he received notice of the
denial or deferment, unless the court provides a different period.

This Section 1 of Rule 11 in relation to Section 4 of Rule 16
allows the defendant to file his answer not only within the original fifteen
(15) days period but also within “a different period (as) fixed by the
court.” (Emphasis supplied.)

The above ruling was a reiteration of Mandac
v. Gumarad,^[4]
where we also set aside a default order upon a showing that the motion to
dismiss was filed before the expiration of the extension granted by the trial
court for the filing of the answer.

As for the period allowed the defendant to file its answer
following the denial of the motion to dismiss, the Court clearly held thus in
Acosta-Ofalia v. Sundiam:^[5]

x x x the
period for filing a responsive pleading commences to run all over
again from the time the defendant receives notice of the denial of his motion
to dismiss.

In the case at bar, the petitioners received the notice of the
denial of their motion to dismiss on September
24, 1975.  Hence, they had
fifteen (15) days from said date or up to October 9, 1975, within which to file their answer.  The petitioners were declared in default on September 29, 1975, i.e., ten (10)
days before the expiration of the time for filing their answer.  Obviously, the order of default made on
September 19, 1975, was premature and is, therefore, null and void as well as
the reception of private respondents’ evidence ex parte,
the decision rendered thereon, and the writ of execution, having been
predicated on a void order of default.

Manifestly, respondent Judge acted with grave abuse of discretion
when he declared the petitioners in default. 
(Emphasis supplied.)

On the basis of the above doctrines, the Court recapitulates the
rules as follows:

1.     The
trial court may in its discretion and on proper motion extend the 15-day reglementary period for the filing of responsive pleadings.

2.     During
the original reglementary 15-day period, or any
extension of such period, the defendant may file a motion to dismiss the
complaint.

3.     If
the motion to dismiss is denied, the defendant is allowed another fifteen days
from notice of the denial to file the responsive pleading.  The full 15-day reglementary
period starts all over again.

Accordingly, we hold that in issuing the order of default before
the expiration of the period for the filing of its answer, the trial court
deprived the petitioner of the opportunity to be heard in its defense.  The judgment by default thereafter rendered,
on the basis only of the evidence of the plaintiff, was therefore also invalid.

We do not agree with the respondent court that the petitioner
should have first filed a motion to set aside the default order before
challenging the judgment by default on appeal. 
The evidence that the default order was not served on the petitioner has
not been refuted.  It is not explained
why the default judgment was served on the correct counsel of the petitioner
but the default order was not.^[6]
At any rate, the default order was a total nullity and
produced no legal effect whatsoever because it was issued even before the
petitioner could file its answer.  This
was clearly a violation of due process.

We come finally to the timeliness of the present petition.

The private respondent contends that it was filed out of time on July 22, 1989, because the appealed
decision had already become final and executory
before that date.

The record shows that the decision of the Court of Appeals was
rendered on April 7, 1989,
and notice thereof was served on the petitioner on April 17, 1989. 
On April 28, 1989,
the petitioner filed a motion for reconsideration, which was denied on June 1, 1989.  Notice of the denial was served on June 8,
1989, and on June 21, 1989, the petitioner asked this Court for a 30-day
extension within which to file the present petition.  The extension was granted up to July 23, 1989.

The private respondent contends that the petition was filed late
because the 15-day reglementary period should be
counted from April 17, 1989,
when the decision of the respondent court was served on the petitioner.  Its reason is that the motion for
reconsideration was pro forma and did not suspend the running of
the said period, which thus expired on May
3, 1989.  The basis of this
argument is the wording of the denial, which ran as follows:

The issues raised and the arguments contended in the Motion for
Reconsideration of defendant-appellant are the same issues and arguments
presented in the appellant’s brief, reply brief and supplemental reply brief,
which have been discussed in plaintiff-appellee’s
brief and resolved in the decision of this Court dated April 7, 1989.

After close scrutiny of the Motion for Reconsideration, We find no
cogent reason to reverse Our decision.

WHEREFORE, the Motion for Reconsideration is DENIED for lack of
merit.^[7]

While mindful of the decision cited by the private respondent,^[8]
we call attention to our later pronouncement on this matter, in the case of Siy v. Court of Appeals:^[9]

In the first place, the very purpose of a motion for
reconsideration is to point out the findings and conclusions of the decision
which in the movant’s view,
are not supported by law or the evidence. 
The movant, therefore, is very often confined
to the amplification on further discussion of the same issues already passed
upon by the court.  Otherwise, his remedy
would not be a reconsideration of the decision but a new trial or some other
remedy.

Conformably, we must hold that the motion for reconsideration was
not pro forma.  Hence, it
did have the effect of suspending the reglementary
period of appeal until the denial of the motion was notified to the petitioner.

The rest of the petition deals with the substantive issue of
whether the respondent Municipality
of Norzagaray
has the power to impose business taxes on the petitioner as a manufacturer and
distributor of cement.  This issue
involves not only legal but also factual considerations that have not been
fully examined because the petitioner was not given its day in court.  A fair resolution of this issue requires a
hearing where both parties will be given an opportunity to present their
respective sides in accordance with the procedure prescribed by the Rules of
Court.  No less than full compliance with
procedural due process will suffice. 
Hence, it is imperative that this case be remanded to the court a
quo for a full trial on the merits.

WHEREFORE, the decision of the respondent court dated April 7, 1989, the default order of the trial court dated August 2, 1985,
and the judgment by default dated February 4, 1986, are
SET ASIDE.  Civil Case No. 7971-M is
REMANDED to the Regional Trial Court of Malolos, Bulacan, for further proceedings in accordance with the
rules laid down in this decision.  Costs against respondent Municipality of Norzagaray.

SO ORDERED.

Narvasa, (Chairman), Gancayco, Griño-Aquino, and Medialdea, JJ., concur.

^[1] Penned by Ejercito, J., with the
concurrence of Pe and Victor, JJ.

^[2] Ong Peng v. Custodio, 1 SCRA 780; Rodriguez, Sr. v. Fernan, 3 SCRA 486; Rep. v. Ilao,
41 SCRA 106; Soledad v. Manañgun, 8 SCRA 110; Dauden-Hernandez v. De los
Angeles, 27 SCRA 1276.

^[3]
120 SCRA 881; see also B.A. Finance Corp. v. Pineda 119 SCRA 493.

^[4] 87 Phil. 278.

^[5] 85 SCRA 412.

^[6] Rollo,
pp. 9, 10, 88.

^[7]
Resolution denying the petitioner’s motion for reconsideration promulgated on June 1, 1989; rollo, p. 80.

^[8] Dacanay v. Alvendia, 30
SCRA 40.

^[9] 138 SCRA 536.