G.R. No. 192477 July 27, 2016
MOMARCO IMPORT COMPANY, INC., Petitioner vs. FELICIDAD VILLAMENA, Respondent

FACTS

Respondent Felicidad Villamena filed a complaint against petitioner Momarco Import Company, Inc. for the nullification of a Deed of Absolute Sale and the Transfer Certificate of Title (TCT) issued to Momarco, alleging that the Special Power of Attorney used to execute the sale was a forgery as her husband, the purported principal, had already died in 1991, and that the document she executed was actually a deed of real estate mortgage to secure a loan. Petitioner, through counsel, filed a formal Entry of Appearance on May 5, 1998. However, it failed to file an Answer within the reglementary period. Respondent filed a motion to declare petitioner in default on August 19, 1998. Petitioner filed its Answer with Counterclaim only on September 10, 1998. The Regional Trial Court (RTC) issued an Order dated October 15, 1998, declaring petitioner in default, striking its Answer from the records, and allowing respondent to present evidence ex parte. The RTC rendered a default judgment on August 23, 1999, nullifying the deed of sale and TCT and ordering the reinstatement of respondent’s title. The Court of Appeals affirmed the default judgment. Petitioner appealed to the Supreme Court, arguing denial of due process due to alleged defective service of summons and error in declaring it in default.

ISSUE

Whether the Court of Appeals gravely erred in upholding the default judgment of the RTC, including the order striking petitioner’s Answer, allowing ex parte presentation of evidence, and rendering judgment based on such evidence.

RULING

The Supreme Court denied the petition and affirmed the assailed judgments. The Court held that petitioner’s filing of a formal Entry of Appearance constituted voluntary appearance, which is equivalent to service of summons and vested the RTC with jurisdiction over its person, curing any defect in the service of summons. The requisites for declaring a party in default under Section 3, Rule 9 of the Rules of Court were satisfied: respondent filed a motion with notice to petitioner, and petitioner failed to answer within the allowed period. Although courts generally disfavor default judgments and may admit answers filed late but before the declaration of default, petitioner’s Answer was filed not only beyond the reglementary period but also after respondent had already filed her motion to declare it in default. The Court emphasized that to have a default judgment set aside, a defendant must file a motion under oath showing a meritorious defense and that the failure to answer was due to fraud, accident, mistake, or excusable negligence. Petitioner failed to file such a motion before the RTC rendered judgment and did not substantiate its claim of a meritorious defense or explain its failure to timely answer. Its inaction and delay tactics warranted the affirmation of the default judgment.