G.R. No. L-52018




Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-52018 February 23, 1990 HON. EFREN I. PLANA, in his capacity as Commissioner of Internal Revenue, petitioner, vs. COURT OF TAX APPEALS and ENGINEERING DEVELOPMENT CORPORATION OF THE PHILIPPINES, respondents. Quiason, Makalintal, Barot & Torres for private respondent. REGALADO, J.: Private respondent Engineering Development Corporation (EDCORP, for short) is a domestic corporation duly organized under existing laws. Among others, it is authorized to render "general scientific, engineering and technological services in all the various branches thereof including but not limited to evaluation, appraisal, market studies, project reports, management, consultation, construction supervision, training and/or engagement in any work or plan." This may involve civil works projects, including roads and highways, bridges, ports and harbors, airfields and airports, building, land development, sewerage and sewerage disposal systems, building and structures of every kind with their mechanical, electrical and airconditioning systems and other civil works. 1 The partial stipulation of facts of the parties 2 shows that EDCORP entered into a contract with the Department of National Defense (DND, for brevity) on April 25, 1968 for the purpose of rendering engineering and technical services as a consultant in the development of a government arsenal at Lamao, Limay, Bataan. More particularly, EDCORP undertook to prepare and submit for approval by the DND preliminary studies, layout plans and preliminary estimates of cost of all structures, utilities and facilities as enumerated in their contract. Accordingly, EDCORP prepared the required reports, plans, preliminary and final drawings, layout maps and cost estimates. For this purpose, respondent corporation hired technical men including civil, mechanical, structural and geodetic engineers, surveyors and draftsmen. No actual construction work was undertaken by said respondent. For the services rendered, the DND obligated itself to pay the EDCORP the amount of P460,000.00. However, the entire amount was not received by the latter, for the amount of P13,800.00 representing the 3% contractor's tax was withheld by the DND auditor. That amount was later remitted to the Bureau of Internal Revenue on January 28, 1970.3 In a letter to petitioner dated July 15, 1969, EDCORP requested "clarification" as to the basis of the action of the representative of the Auditor General in the DND in withholding the 3% contractor's tax. Subsequently, on January 25, 1972, the said private respondent filed with the Appellate Division of the Bureau of Internal Revenue a letter demanding the return of the amount withheld for the following reasons: 1. This agreement involved only the furnishing of engineering and architectural services such as preparation of necessary reports, plans, preliminary and final drawings, lay-outs, maps and cost estimates of all structures, utilities and other data. 2. These fees were in payment for professional services d respondent on October 13, 1983. From October 28, 1983 up to January 9, 1984, private respondent's counsel, through four (4) of its lawyers filed no less than six (6) motions for extension of time asking for a total of ninety eight (98) days from October 13, 1983 to January 21, 1984 to answer the complaint. The lower court granted the five (5) motions and denied the sixth motion before it declared Philfinance in default. All in all, the lower court gave the private respondent eighty-eight (88) days to answer the complaint, so it can not be stated that the trial court has in any way unduly favored the petitioner neither can it be considered that private respondent has been denied due process. In reversing the default judgment, the respondent court relied on the contention that Philfinance was placed under receivership making it difficult for its lawyers to have access to the records of the corporation. The court stated: ... It is a matter of official record that the defendant Philippine Underwriters Finance Corporation (Philfinance for short) had been placed under receivership by the Securities and Exchange Commission (SEC), thus making it rather difficult for the defendant's counsel to have access to the records of said corporation. Such records, as would naturally be expected of a corporation of its size and type of business, are voluminous, and ferreting the relevant facts and documents to support them would not be an easy task, as it proved to be. Besides, the placing of the defendant under receivership by the SEC deprived the corporation's officers of the full control of its operations, assets and records. (Rollo, p. 93) Certainly, the trial court took into consideration the private respondent's situation which is the reason why it allowed the several extensions of time in the exercise of extreme leniency. But much as we would like to sympathize with private respondent's plight and agree that its counsel indeed had difficulty with the records of the corporation, such reason is not only insufficient to explain six motions for postponement but was also belatedly raised. It was a mere afterthought on the part of counsel when he raised such reason after they were already adjugded in default. In all of the six (6) motions, the private respondent's counsel chose to justify their requests on the basis of the inability to read the records because of too much work, or heavy pressure of work, illness of counsel or a rather frivolous reason such as the unexpected wedding of one of the counsel. The firm had several lawyers and the motions were alternately filed by the four counsel. If the sixth motion had not been denied then the court would probably have had another succession of requests for extensions of time. The pattern of inexcusable neglect, if not deliberate delay is all too clear. (Development Insurance Corporation v. Intermediate Appellate Court, 143 SCRA 62 [1986]). Equity and justice should also be considered for both party litigants. The private respondent was given extraordinary opportunity to have its day in court when the lower court had given it a total of eighty-eight (88) days from service of summons to file its answer to the complaint. The inability of four (4) lawyers to prepare the answer for this long period of time is to our mind not justified. We reiterate the Court's ruling in the case of Pahilanga v. Luna, 164 SCRA 725 [1988], where we stated that: It is within the sound discretion of the court to set aside an order of default and to permit a defendant to file his answer and to be heard on the merits even after the reglementary period for the filing of the answer has expired, but it is not error, or an abuse of discretion, on the part of the court to refuse to set aside its order of default and to refuse to accept the answer where it finds no justifiable reason for the delay in the filing of the answer. In motions for reconsideration of an order of default, the moving party has the burden of showing such diligence as would justify his being excused from not filing the answer within the reglementary period as provided by the Rules of Court, otherwise, these guidelines for an orderly and expeditious procedure would be rendered meaningless. Unless it is shown clearly that a party has justifiable reason for the delay the court will not ordinarily exercise its discretion in his favor (Emphasis supplied.) Going over the records, we agree that the motion to lift the order of default was properly denied in view of the absence of any meritorious defense interposed by the private respondent. Philfinance has not asserted any leasehold or other possessory right over the properties independent of their ownership. It mainly anchors its claim of ownership upon the contention that Filinvest's Torrens Title to the property is void because the original transfer of the properties from Philfinance to Filing vest's immediate predecessor-in-interest, Aboitiz and Company, Inc. (Aboitiz Group) was not authorized by Philfinance's Board of Directors. This Court gives more credence to the lower court's finding, to wit: Contrary to the allegation of the defendant that the deed of assignment of the premises in question executed by the former President of Philfinance was without the knowledge and approval by the Board of Directors, records show that said deed of assignment was executed pursuant to the authority given by the Board of Directors of Philfinance in Resolution No. SB-81 passed during the meeting of the Board of Directors held on February 25, 1981 as per Secretary's Certificate issued by Mr. Vivencio R. Alcasid, the duly elected and qualified Corporate Secretary of Philfinance (Annex 'A' — Plaintiffs opposition to defendant's motion/petition). In its efforts to prove that there was no meeting of the Board of Directors of defendant Philfinance on February 25, 1981 which passed Resolution No. SB-81 aforementioned, defendant, in its reply to opposition to motion/petition, submitted copies of the affidavits of several persons (Annexes K to K-15). Examination of these affidavits, however, disclosed that the affiants did not execute their affidavits as members of the Board of Directors or as officers of defendant Philfinance, but as members of the Board of Directors of Sterling Life Assurance Corporation and that of Filriters Guaranty Assurance Corporation attesting to the fact that there were no meetings of the Board of Directors of said corporation on February 25, 1981 whereby minutes were allegedly passed authorizing Atty. Hermilo V. Rodis to assign to Insular Bank of Asia and America its rights over the deed of sale with mortgage of Units A; B; C and D of the Sterling life Condominium and the assignment of the rights of Filriters Guaranty Corp. of the 3rd and 4th floors of Sterling life Condominium and the disposal of its CBCI'S. Defendant also attached in its reply, copy of the affidavit of Mr. Vivencio R. Alcasid, the duly elected and qualified Secretary to the Board of Directors of Philfinance who issued and signed the Secretary's Certificate (Annex A-Plaintiffs opposition). Said affidavit of Mr. Alcasid, however, was executed by him in his capacity as the duly elected and qualified Corporate Secretary of the Filriters Guaranty Assurance Corporation and he was talking on matters relative to assets of said company. There was nothing mentioned on resolution No. SB-81 by the Board of Directors of Philfinance. While it is true that Mr. Ricardo C. Silverio, Sr. executed his affidavit (Annex K) as the Chairman of the Board of Directors of defendant Philfinance, nevertheless, he only denied that there was board meeting on February 25, 1981 whereby a resolution was allegedly passed authorizing Mr. Hermilo V. Rodis to pledge the shares of stocks of Insular Bank of Asia and America and the assignment of rights over lst, 2nd, 3rd and 4th floors of Sterling Life Condominium, There was nothing therein which mentioned Resolution No. SB-81 and of the lot and building subject of the present case. The same manner also as to the affidavit of Mr. Bienvenido L. Reyes, the Assistant Corporate Secretary of Philfinance. All the said annexes, therefore, have no value or weight in assailing the due execution of Resolution No. SB-81 (Annex A — Opposition) as well as the Deed of Assignment executed by Mr. Hermilo V. Rodis (Annex A — Answer). So to speak, nothing has been done yet by the Board of Directors of defendant Philfinance in assailing the validity of said resolution and deed of assignment, not until now when the instant complaint was filed, but by mere allegations without documentary proofs. The inaction by the Board of Directors of defendant Philfinance in assailing Resolution No. SB-81 and the deed of assignment aforementioned for the last three (3) years and up to the present, clearly indicates its acquiescence or knowledge of the matters subject thereof. (Rollo, pp. 82-83) Considering the above, we fail to see how mere denials can prevail over convincing evidence on record. Furthermore, in assailing the transfer of said properties to Aboitiz Group, Philfinance alleges that there was no valid consideration given in exchange of the deed of assignment. It prayed that its third-party complaint against the Aboitiz Group be admitted considering that the money placement made by Aboitiz in the amount of P19,800,000.00 was illegal and anomalous and that the trading of commercial papers relative thereto was unlawful and fraudulent since said commercial papers were fake and spurious. Hence, the deed of assignment of the premises in question (in favor of Aboitiz) was null and void and without effect. We agree with the lower court that the third-party complaint of Philfinance against Aboitiz does not pass the test of admissibility. For a third-party complaint to be admissible, it must be shown that the third-party defendant may be held liable to the defendant or to the plaintiff for all of the latter's claim against the defendant. The allegations of the third-party complaint (re: legality or illegality of the money placements) involve transactions purely between Aboitiz and Philfinance. Whatever defenses the Aboitiz Group may have against Philfinance can not be validly raised against Filinvest's claim since said transaction between Philfinance and Aboitiz is entirely different and foreign to Filinvest's complaint for the recovery of possession of the subject premises. Filinvest merely relies on the indefeasibility and incontrovertibility of the Transfer Certificate of Title of the Aboitiz Group over the subject properties. As an innocent purchaser for value of a registered land, it has all the light to depend on the conclusiveness and indefeasibility of the title as guaranteed under the Torrens System of Registration. Considering private respondent's failure to establish a valid defense, we therefore do not find any abuse of discretion on the part of the lower court in denying the motion to lift the order of default. As we stated in the Pahilanga case, (supra): ... [N]othing would be gained by having the order of default set aside where the party held in default has no valid defense in his favor for in such case, he will just the same fail on the merits even if the default order is lifted [Development Insurance Corporation v. Intermediate Appellate Court, G.R. No. 71360, July 16, 1986, 143 SCRA 621]. This Court reiterates that it is concerned with the heavy caseloads of courts at all levels. Most of the delays for which the justice system is assailed come from failure of counsel to cooperate with candor and will in the speedy resolution of cases. We have instituted continuous trial. We are revising the Rules of Court to make them responsive to current problems. We call judges to task when their cases are not adjudicated with accuracy and dispatch. The least we can do is sustain them when they come across litigants like the private respondent in this case. WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby GRANTED. The questioned decision of the Court of Appeals is REVERSED and SET ASIDE and the resolution of the Regional Trial Court dated March 19, 1984 is REINSTATED. SO ORDERED. Fernan, C.J. (Chairman), Bidin and Cortes, JJ., concur. Feliciano, J., took no part. The Lawphil Project - Arellano Law Foundation