G.R. No. 72323 November 9, 1989
MANUEL VILLAR and LEONIDES DE LA CRUZ, petitioners, vs. PHILIPPINE DEPOSIT INSURANCE CORP. and ALEXANDER MALVEDA, respondents.

FACTS

Petitioner Leonides de la Cruz, a Deputy Sheriff, served a court order from Civil Case No. 1430 directing the closure of the Rural Bank of Pasacao. The Philippine Deposit Insurance Corporation (PDIC), through its examiner Alexander Malveda, was already in the process of paying insured deposits following the bank’s closure by the Central Bank. On February 15, 1982, de la Cruz, accompanied by petitioner Manuel Villar, enforced the order by taking custody of P16,270.25 and a cash box from Malveda’s possession. Malveda protested, claiming the funds belonged to PDIC. The sheriff issued a certification and deposited the items with the Clerk of Court, who later released them to Villar per a subsequent court order. PDIC’s motion for the funds’ return was denied as moot.
PDIC and Malveda subsequently filed a complaint for sum of money and damages against Villar and de la Cruz. During pre-trial, de la Cruz and his counsel failed to appear. The trial court declared de la Cruz in default and allowed ex-parte presentation of evidence, which included allegations that de la Cruz acted abusively by drawing his gun and shouting at Malveda during the seizure. Judgment was rendered against the defendants, holding them jointly and severally liable. The Intermediate Appellate Court affirmed with modification, reducing the moral damages award. Only de la Cruz appealed to the Supreme Court.

ISSUE

Whether the Intermediate Appellate Court erred in affirming the trial court’s declaration of default against petitioner de la Cruz and the subsequent judgment based on ex-parte evidence.

RULING

Yes. The Supreme Court reversed the appellate court’s decision and set aside the orders declaring de la Cruz in default. The Court emphasized that default orders are disfavored, especially when a party’s failure to attend a pre-trial is due to excusable neglect and a meritorious defense is apparent. The record showed that only de la Cruz’s counsel was notified in open court of the pre-trial resetting to August 23, 1983. Counsel attempted to inform de la Cruz, but the petitioner, as a deputy sheriff serving processes in remote areas of Camarines Sur, could not be easily reached. This constituted excusable negligence.
Crucially, de la Cruz demonstrated a substantial defense. He asserted that he was merely performing his official duty by enforcing a lawful court order, which presented a valid legal justification for his actions. The ex-parte allegations of abusive conduct, which formed the basis for the damages awarded, remained untested by cross-examination. The plaintiffs also failed to show any real injury from potentially lifting the default order. The denial of de la Cruz’s motion to lift the default and for a new trial deprived him of his constitutional right to be heard and constituted grave abuse of discretion. The case was remanded to the trial court for a full trial on the merits.