G.R. No. L-28173 September 30, 1971
NAGA DEVELOPMENT CORPORATION, petitioner, vs. THE COURT OF APPEALS and PACIFIC MERCHANDISING CORPORATION, respondents.

FACTS

Pacific Merchandising Corporation filed a collection suit against Naga Development Corporation in the Court of First Instance of Manila to recover the balance of the contract price for roofing materials supplied and installed for the Naga City public market. Naga, through counsel, was granted an initial 15-day extension to file its answer, citing counsel’s workload. It then sought a second 10-day extension, alleging a need to verify material facts in Naga City. The trial court denied the second motion. Despite this, Naga filed a motion for reconsideration and a supplemental motion to admit its answer the following day. The trial court denied these motions and declared Naga in default. Naga moved to set aside the default order, arguing it had tendered an answer, needed time for verification given the substantial amount involved, and possessed meritorious defenses including premature filing of the claim and issues regarding completion and acceptance of the work.
The trial court denied the motion to lift the default, finding Naga’s reasons for extension insufficient and its proffered defenses unsubstantial. It subsequently rendered a judgment by default against Naga. The Court of Appeals affirmed both the order of default and the default judgment. Naga then appealed to the Supreme Court via certiorari.

ISSUE

Whether the trial court committed a grave abuse of discretion in denying Naga’s motions for extension and in declaring it in default.

RULING

No, the trial court did not commit a grave abuse of discretion. The Supreme Court affirmed the decisions of the lower courts. The grant of an extension to file a pleading is discretionary upon the court. Naga’s first motion was granted. Its second motion, however, offered a vague and unsubstantiated reason—the need to verify facts—without demonstrating that such verification could not have been accomplished during the initial extension period. The trial court’s denial was a proper exercise of its discretion to prevent dilatory tactics. Furthermore, the filing of the motion for reconsideration and the supplemental motion did not cure the default, as they were filed after the expiration of the granted period. On the merits of the defenses, the Court agreed with the lower courts that Naga’s claim of premature filing was untenable. The contract stipulated payment of the balance within 45 days after completion of installation, and the complaint alleged completion by January 15, 1963, with the suit filed in July 1963, well beyond the grace period. Allegations regarding non-acceptance of work and pending GSIS loan releases did not constitute a complete and meritorious defense warranting setting aside the default. However, in the interest of justice, the Supreme Court modified the execution of the judgment, allowing Naga to prove during execution any partial payments made to Pacific that would constitute a proper deduction from the principal sum awarded.