A.M. No. 333-CJ - Pabalan vs. Guevarra

On January 18, 1963, petitioner Strachan & Macmurray, Ltd. filed an action for recovery of money against respondent Jose Espinosa before the municipal court of Iloilo.
The case was brought as a suit to obtain a monetary judgment against the defendant.

Respondent failed to appear for the hearing and did not file an answer despite being duly summoned.
Due to respondent’s non-appearance, the municipal court declared him in default and, after allowing petitioner to present its evidence, rendered a judgment by default against him.

On February 14, 1963—eight days after the default order and judgment—respondent filed a petition to set aside the judgment by default, claiming excusable negligence for his failure to appear and asking for his answer to be admitted.
The municipal court denied this petition to set aside the default judgment.
Subsequently, on March 14, 1963, respondent filed a notice of appeal from both the default judgment (dated February 6, 1963) and the order denying his petition (dated February 18, 1963).

Petitioner opposed the appeal by filing a motion to dismiss it on the ground that a default judgment is not appealable.
The municipal court initially denied petitioner’s motion on the basis that the appeal had been perfected, transmitting the records to the court of first instance where the case was docketed as Civil Case No. 6273.
Petitioner refiled a motion to dismiss the appeal with the court of first instance, arguing that as a party declared in default, respondent had lost his right to appeal until his standing in court was restored through a timely motion to set aside the default.
On May 13, 1963, the court of first instance dismissed respondent’s appeal, ruling that a default judgment cannot be appealed unless the defendant first regains his standing by setting aside the default.
The same court denied petitioner’s request for reconsideration on June 1, 1963.

Respondent subsequently filed a petition for certiorari with the Court of Appeals (also considered as one for mandamus), disputing the dismissal of his appeal.
The appellate court observed that respondent had not filed the required motion to set aside the default order or a petition for relief from the judgment within the prescribed time limits under the applicable Rules of Court.
The appellate court, however, ruled that respondent’s unseasonable petition could be construed as a motion for a new trial under the old rules, effectively ordering the reinstatement of his appeal.

The Supreme Court reviewed the entire proceedings, noting that respondent had not satisfied the requirement of timely filing a motion to lift the default order.
The Court found that respondent’s right to appeal was lost once he was declared in default and was not properly restored as required under the law.
Relying on established jurisprudence and controlling cases like Luzon Rubber & Mfg. Co. vs. Estaris, the Supreme Court reversed the decision of the Court of Appeals and upheld the dismissal of the appeal.

Whether a defendant who has been declared in default loses his standing to appeal upon default.
Whether the filing of a petition to set aside a default judgment, when made unseasonably, can be regarded as a valid motion enabling the defendant to regain standing.

Whether the defendant’s failure to timely file a proper motion to set aside the order of default or petition for relief from judgment disqualifies him from appealing the judgment by default.
Whether the appellate court was warranted in treating the untimely petition as a motion for a new trial, thereby restoring the right to appeal.

Whether the Court of Appeals’ decision deviated from the controlling rules and precedents regarding appeal rights of defaulting parties.
The issue of whether the innovation under Section 2 of Rule 41, which allows appeal from a judgment contrary to evidence or law, applies to municipal and city courts.