G.R. Nos. L-25836-37 January 31, 1981
THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee, vs. JOSE M. ARUEGO, defendant-appellant.

FACTS

The Philippine Bank of Commerce filed a complaint against Jose M. Aruego for the recovery of approximately P35,000, representing advances for printing his periodical, “World Current Events.” The bank’s claim was based on twenty-two transactions where it paid the printer, Encal Press, by drawing drafts against Aruego, who accepted them and executed trust receipts in favor of the bank. After being served the summons, Aruego filed a motion to dismiss, which the trial court initially granted but later set aside upon the bank’s motion for reconsideration. The court’s order setting aside the dismissal was served on Aruego on March 11, 1960, at 5:00 p.m.
Aruego filed his answer on March 12, 1960. The bank moved to declare him in default, arguing the answer was filed one day late, as the reglementary period ended on March 11. The trial court granted the motion and subsequently rendered a default judgment against Aruego. He moved to set aside the order of default and later the judgment, arguing that service of the order late in the afternoon on March 11 made it impossible to file an answer within office hours and that he had meritorious defenses. The trial court denied both motions.

ISSUE

Whether the trial court gravely abused its discretion in declaring Aruego in default and in denying his motions for relief.

RULING

The Supreme Court affirmed the trial court’s orders, finding no grave abuse of discretion. The legal logic is twofold. First, on procedural grounds, the Court held that service of the court order on the last day of the period, even at 5:00 p.m., was valid and commenced the running of the reglementary period. Aruego’s obligation to file his answer within that period was not excused by the late-hour service; he could have filed it the following morning, which he did, thereby admitting the lapse. The trial court’s discretion in denying the motion to lift the default was not exercised arbitrarily.
Second, and decisively, the Court examined the substantive merits of Aruego’s proffered defenses and found them nil. His primary defense was that he signed the drafts only as an accommodation party and not in his personal capacity. The Court ruled that under the Negotiable Instruments Law, by signing as an acceptor/drawee, he became primarily and personally liable on the instruments, irrespective of any accommodating intent. His other contention—that the drafts were not true bills of exchange because payment was made before acceptance—was also rejected, as the definition of a bill of exchange does not depend on the timing of payment. Since his defenses were ineffective as a matter of law, setting aside the default judgment would be a futile exercise, serving no purpose but to waste judicial time and resources.