GR 77315; (April, 1991) (Digest)
G.R. No. 77315 ; April 22, 1991
CIRCLE FINANCIAL CORPORATION, petitioner, vs. COURT OF APPEALS and SPOUSES ROBERTO JURADO and FORTUNATA JURADO, respondents.
FACTS
The spouses Jurado executed a mortgage in favor of Tacing Regoso to secure a loan. Regoso subsequently assigned his rights to Circle Financial Corporation. Circle later extrajudicially foreclosed the mortgage, alleging the Jurados defaulted on their payments. The Jurados filed a complaint for annulment of the foreclosure sale, claiming full payment of the loan. During pre-trial, Circle and its counsel failed to appear despite notices. The trial court declared Circle in default, received the Jurados’ evidence ex parte, and rendered judgment annulling the foreclosure and awarding damages.
Circle filed a verified urgent motion to set aside the order of default and the judgment, claiming it did not receive the pre-trial notice and that it had meritorious defenses, including the dishonor of the Jurados’ checks. The trial court denied Circle’s motion peremptorily. The Court of Appeals affirmed the trial court’s decision, noting that registry receipt slips indicated proper service of the pre-trial notice and that Circle failed to substantiate its defenses with evidence like returned checks or a proper accounting.
ISSUE
Whether the trial court and the Court of Appeals correctly denied Circle Financial Corporation’s motion to set aside the order of default and the subsequent judgment.
RULING
Yes. The Supreme Court affirmed the denial. The legal logic rests on the requirements for setting aside a judgment by default under the Rules of Court. A party must show: (1) that the failure to appear was due to fraud, accident, mistake, or excusable negligence; and (2) that it has a meritorious defense. Circle’s motion was procedurally defective. It failed to allege with particularity, either in a separate affidavit or within the motion itself, the specific facts constituting excusable negligence for its non-appearance. More critically, it failed to satisfactorily demonstrate a meritorious defense. The Court found that Circle did not persuasively refute the Jurados’ evidence of payment, specifically the official receipts they presented. Circle’s general allegations about dishonored checks and unpaid balances, unsupported by convincing proof like the actual checks or a detailed accounting to offset the receipts, were insufficient. Since a motion to lift a default order must prove both grounds, the failure to establish a meritorious defense is fatal, rendering the question of proper notice moot. The courts below correctly found the motion lacking in substance.