G.R. No. 62370. January 30, 1990.
PHILIPPINE NATIONAL BANK, petitioner, vs. HON. ROSALIO A. DE LEON, Presiding Judge of the Court of First Instance of Manila, Branch II and TOWERS ASSURANCE CORPORATION, respondents.

FACTS

The Philippine National Bank (PNB) extended an export advance line to Carmen Mindanao Mining Consolidated, Inc. (CMMCI), secured by promissory notes, a deed of assignment, and a surety bond executed by Towers Assurance Corporation (Towers). Upon CMMCI’s failure to fully pay, PNB sued Towers for the unpaid balance. Summons was received by Towers on October 21, 1981. The court granted its motion for a 15-day extension to file an Answer, making the deadline November 20, 1981. Towers failed to file on that date. Upon PNB’s motion, the court declared Towers in default on January 8, 1982. Coincidentally, on that same date, Towers filed its Answer, but the court ignored it. On March 29, 1982, the court rendered a judgment by default against Towers.
Towers filed a motion for reconsideration, alleging that its messenger could not file the Answer on November 20, 1981, due to the burning of Manila City Hall on November 19, 1981, which caused chaos and prevented access. The prepared Answer was misplaced internally and only discovered and filed on January 8, 1982. Towers also raised substantive defenses, including that the sued bond did not secure the specific promissory notes and that PNB failed to include CMMCI as a necessary party. Respondent Judge Rosalio A. De Leon, who had succeeded the original judge, granted the motion, set aside the default judgment, and admitted the Answer. PNB’s motions for reconsideration were denied, prompting this certiorari petition.

ISSUE

Whether the respondent judge committed grave abuse of discretion in setting aside the order of default and the subsequent judgment by default.

RULING

The Supreme Court ruled that the respondent judge did not commit grave abuse of discretion. The Court emphasized that default judgments are disfavored, and motions to set them aside should be considered with liberality when filed promptly and where the delay is sufficiently explained. The factual circumstance of the Manila City Hall fire on November 19, 1981, constituted a force majeure event that completely excused the late filing of the Answer. The resulting upheaval and dislocation of offices provided a valid justification for the failure to meet the deadline.
Furthermore, the Court noted that the Answer was filed on the very day the order of default was issued, indicating a lack of obstinate refusal or inordinate neglect. The substantive defenses raised by Towers, including the identity of the surety bond and the non-joinder of the principal debtor, were not frivolous and warranted a trial on the merits. Given the substantial amount of P600,000 involved, the interests of justice demanded that Towers be given a reasonable opportunity to present its case. The Court reiterated that default orders should be the exception, reserved for clear cases of contumacious conduct, not where a party’s failure is due to excusable events like force majeure. Therefore, the petition was denied for lack of merit.