Title
Lui Enterprises, Inc. vs. Zuellig Pharma Corp.
Case
G.R. No. 193494
Decision Date
Mar 7, 2014
Lui Enterprises and Zuellig Pharma disputed rent collection over leased land claimed by PBCom. Courts ruled against Lui for procedural lapses, dismissing appeal and denying default reversal. Attorney’s fees deleted.

Case Summary (G.R. No. L-3088)

Lease, Transfer of Title, and Conflicting Claims

Lui Enterprises, Inc. leased a parcel of land in Barrio Tigatto, Buhangin, Davao City to Zuellig Pharma under a 10-year contract (March 9, 1995). The land was originally under TCT No. T-166476 registered to Eli L. Lui. The Philippine Bank of Communications later presented TCT No. 336962 claiming ownership and demanded that Zuellig Pharma pay rent to the bank. Zuellig Pharma informed Lui Enterprises of the bank’s claim; Lui continued to assert its right to collect rents.

Zuellig’s Interpleader Action and Consignation

Because of the conflicting demands, Zuellig Pharma filed a complaint for interpleader in the Makati RTC and consigned P604,024.35 in court as rental payments, seeking permission to consign future rentals and to compel the claimants to litigate their competing claims. Zuellig relied on its corporate secretary’s certificate authorizing counsel Atty. Ana L.A. Peralta to initiate consignation-related proceedings; this authority was later clarified by an August 28, 2003 certificate expressly including interpleader.

Motions to Dismiss, Service, and Timeliness Issues

Lui Enterprises moved to dismiss the interpleader on the ground that Zuellig’s representative lacked authority and because a pending nullification of deed of dacion in payment case in Davao raised the same issue on entitlement to rents. Summons in the Makati interpleader was served on Lui Enterprises on July 4, 2003, giving it 15 days (until July 19, 2003) to answer or to file a motion to dismiss; Lui filed the motion on July 23, 2003, four days late.

RTC of Makati Declaration of Default and Proceedings Without Lui

Zuellig moved to declare Lui Enterprises in default for the late filing; the Philippine Bank of Communications joined that motion. The Makati RTC found Lui’s motion to dismiss untimely, denied the motion, and declared Lui in default in an October 6, 2003 order. Lui did not seek reconsideration and thus lost participatory standing; the Makati trial proceeded without Lui’s involvement.

Parallel Proceedings in Davao and Status Quo Orders

Lui maintained that the earlier Davao litigation (nullification of deed of dacion in payment) involved the same issue and had produced writs/orders directing status quo with respect to rentals and instructing lessees to continue remitting rents to Lui. The Davao RTC issued several orders directing status quo and directing the bank to notify Zuellig to pay rents to Lui while those orders subsisted. Lui repeatedly manifested these orders to the Makati court but, having been declared in default, was not recognized as a party entitled to participate in the Makati proceedings.

Motion to Set Aside Order of Default and Delay in Seeking Relief

One year after the default order, on October 21, 2004, Lui filed a motion to set aside the order of default alleging excusable negligence by its former counsel and asserting a meritorious defense (that the Davao nullification barred the interpleader). Zuellig opposed, arguing counsel’s failure to answer timely was inexcusable and that the Davao proceedings did not preclude the Makati interpleader because Zuellig was not a party to the Davao suit.

Makati RTC Judgment on the Interpleader

Without setting aside the default, the Makati RTC ruled (July 4, 2006) that Lui, having been declared in default, was barred from any claim to the consigned rentals. The RTC awarded the consigned funds (P6,681,327.30) to the Philippine Bank of Communications and ordered Lui to pay Zuellig P50,000 in attorney’s fees.

Court of Appeals Disposition and Reasons

On appeal, the Court of Appeals affirmed the Makati RTC in toto by decision promulgated May 24, 2010 and denied reconsideration on August 13, 2010. The CA dismissed Lui’s appeal for noncompliance with Rule 44 Section 13 requirements (absence of subject index, page references, table of cases/authorities). It further found Lui failed to prove excusable negligence to justify setting aside default and held the Davao nullification suit did not bar the interpleader because Zuellig was not a party to the Davao action. The CA sustained the attorney’s fees award.

Issues Presented to the Supreme Court

Lui’s petition for review raised four issues: (I) whether the CA erred in dismissing the appeal for lack of required brief contents; (II) whether the Makati RTC erred in denying the motion to set aside order of default; (III) whether the Davao nullification barred the subsequent Makati interpleader (litis pendentia); and (IV) whether Zuellig was entitled to attorney’s fees.

Supreme Court: Dismissal of Appeal for Defective Appellant’s Brief

The Supreme Court upheld the CA’s dismissal of the appeal. It reiterated that appeal is a statutory right requiring strict compliance with Rules of Court. Under Rule 50 Section 1(f) and Rule 44 Section 13, appellant’s briefs must contain specific elements (subject index, page references, table of cases/authorities, statement of case and facts, assignments of error and argument with record references). The Court explained the practical and efficiency rationales for these requirements and noted exceptions only when there is substantial compliance; Lui admitted omission and did not correct it. The CA therefore did not err in dismissing the appeal.

Supreme Court: Excusable Negligence and Motion to Set Aside Default

On the motion to set aside default, the Court applied Rule 9 Section 3(b): a defaulted party may move, under oath and before judgment, to set aside default upon proper showing that failure to answer was due to fraud, accident, mistake, or excusable negligence, and that a meritorious defense exists. The Court emphasized that excusable negligence is that which ordinary diligence could not have guarded against and must be properly alleged and proved. Lui’s counsel filed the motion-to-dismiss four days late and Lui delayed one year before filing the motion to set aside; Lui merely blamed prior counsel without supplying circumstances constituting excusable negligence. Accordingly, the Makati RTC did not err in refusing relief.

Supreme Court: Litis Pendentia (Nullification Suit Did Not Bar Interpleader)

The Court addressed litis pendentia, which requires identity of parties, identi

...continue reading

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster, building context before diving into full texts. AI-powered analysis, always verify critical details.

About Privacy Terms