G.R. No. 112795 June 27, 1994
Augusto Capuz, petitioner, vs. The Court of Appeals and Ernesto Banez, respondents.

FACTS

On July 15, 1992, private respondent Ernesto Banez filed a complaint for a sum of money against petitioner Augusto Capuz. Petitioner was served with summons on September 5, 1992. After petitioner failed to file an answer, private respondent filed an Ex parte Motion to Declare Defendant in Default on September 25, 1992. The trial court issued an order declaring petitioner in default on October 23, 1992, and private respondent presented his evidence ex parte on October 28, 1992. On November 6, 1992, the trial court rendered a decision ordering petitioner to pay the principal amount plus interest, attorney’s fees, and litigation expenses. Petitioner received a copy of the default order and the decision on November 13, 1992. On November 23, 1992, petitioner filed a verified motion to lift the order of default and to set aside the decision, alleging that his failure to file an answer was due to fraud, mistake, accident, and/or excusable neglect. He claimed that upon receiving the summons, he confronted private respondent, who assured him he would instruct his lawyer to withdraw the complaint, leading petitioner to believe he did not need to file an answer. The trial court denied this motion on December 7, 1992, and also denied petitioner’s motion for reconsideration on January 6, 1993. Petitioner then filed a petition for certiorari with the Court of Appeals, which dismissed it for lack of merit on November 18, 1993. The Court of Appeals held that the motion to lift the order of default was improper after a judgment by default, that petitioner’s remedy was either to appeal or file a motion for new trial under Rule 37, and that the motion could not be considered a motion for new trial because it was not accompanied by an affidavit of merit.

ISSUE

Whether the verified motion to lift the order of default and to set aside the decision can be treated as a motion for new trial under Rule 37, despite the lack of a separate affidavit of merit.

RULING

Yes. The Supreme Court granted the petition, reversed the decision of the Court of Appeals, and set aside the judgment of the trial court, remanding the case for further proceedings. The Court ruled that petitioner’s verified motion could be considered as a motion for new trial under Rule 37 because the grounds alleged (fraud, mistake, accident, or excusable negligence and a meritorious defense) are the same grounds for a new trial. The Court held that the allegations required for an affidavit of merit need not be in a separate document but may be incorporated in the verified motion itself, as established in Tanhu v. Ramolete and Circle Financial Corporation v. Court of Appeals. The Court further held that petitioner properly availed of certiorari under Rule 65 because an appeal under Rule 41, Section 2, which allows a party in default to appeal, was not a plain, speedy, and adequate remedy, as it would not allow him to adduce his own evidence, such as the receipt proving payment of the obligation.