G.R. No. L-33209 and G.R. No. L-38737, May 31, 1982
JESUSA DEL ROSARIO, petitioner, vs. COURT OF APPEALS, LEONORA T. ROXAS, and PEDRO M. ROXAS, respondents. / LEONORA T. ROXAS and PEDRO M. ROXAS, petitioners, vs. COURT OF APPEALS and ELENA DEL ROSARIO, respondents.

FACTS

These consolidated cases involve collection suits filed by the Del Rosario sisters, Jesusa and Elena, against the spouses Leonora and Pedro Roxas. In G.R. No. L-33209, Jesusa sued to recover loans totaling P40,000, evidenced by three promissory notes signed by Leonora with the marital consent of Pedro. After being summoned, the Roxas spouses, through counsel, secured a 10-day extension to file an answer but failed to do so. The trial court declared them in default, allowed Jesusa to present evidence ex parte, and rendered a judgment in her favor. The Roxas spouses later filed a petition to set aside the default judgment, alleging an agreement with Elena del Rosario to hold the case in abeyance for an amicable settlement, which they claimed was fraudulently violated. The trial court denied their petition. The Court of Appeals initially affirmed the trial court’s decision but, upon motion for reconsideration heard by a Special Division of Five, reversed itself, set aside the default order and subsequent proceedings, and ordered the case remanded for new trial.
In G.R. No. L-38737, Elena del Rosario filed a separate suit to recover a P50,000 loan from the same spouses, evidenced by a promissory note. The Roxas spouses raised the defense that the amounts in both cases were not their personal loans but were merely entrusted to them for delivery to a third party, William Lim. The Court of Appeals in this case affirmed the trial court’s judgment in favor of Elena.

ISSUE

The core issues are: (1) Whether the Court of Appeals in G.R. No. L-33209 erred in setting aside the default judgment and ordering a new trial based on the alleged out-of-court agreement; and (2) Whether the Roxas spouses are the real debtors obligated under the promissory notes.

RULING

The Supreme Court reversed the Court of Appeals’ resolution in G.R. No. L-33209 and reinstated its original decision affirming the trial court’s judgment. It affirmed the Court of Appeals’ decision in G.R. No. L-38737. The legal logic is twofold. First, on procedural grounds, the alleged out-of-court agreement to hold the case in abeyance did not constitute extrinsic fraud that would justify setting aside a final judgment. The Roxas spouses were not prevented from presenting their case; their failure to file an answer was due to their own negligence, not the plaintiff’s deceit. A default judgment is valid when the defendant fails to answer within the reglementary period, and a subsequent claim of a pending settlement, without more, does not override this rule.
Second, on substantive grounds, the Roxas spouses are unequivocally the debtors. The promissory notes are clear, unambiguous, and signed by them, containing no mention of William Lim as the real obligor. Under the “best evidence rule” and the principles governing contracts, the promissory notes themselves are conclusive evidence of the loan agreements. The spouses cannot vary the terms of these written instruments by parol evidence claiming the money was for a third party. Their liability is direct and primary as signatories to the notes. Therefore, the default judgment was correctly based on the evidence presented, which conclusively established their indebtedness.