40 LUI ENTERPRISES v ZUELLIG PROCEDURAL HISTORY:
March 12, 2014 | J. Leonen | Relief from Default; Remedies RTC Makati
Petitioner: Lui Enterprises, Inc.
Respondents: Zuellig Pharma Corporation, Philippine Bank of Communications
SUMMARY: Zuellig and Lui Enterprises entered into a contract of lease over a land
owned by Lui. On the 8th year of the lease, Zuellig received a letter from PBCom
claiming to be the new owner and asking that payments be made to it. Zuellig
informed Lui of this but the Lui insisted on its right to collect. This led Zuellig to file
an interpleader with the Makati RTC. Lui filed a motion to dismiss which Zuellig
opposed on the ground that Lui should be declared in default for filing the motion to
dismiss 4 days after the reglementary period. The Makati RTC declared Lui in
default. After one year, Lui filed a motion to set aside the order of default on the
ground of excusable negligence. It claimed that it failed to file the motion to dismiss
on time due to the negligence of its former counsel. The CA declared Lui in default
for failing to prove the presence of excusable negligence. The issue is whether the
CA was correct in declaring Lui in default. YES. Lui’s excuse is not enough to
warrant the granting of its motion to set aside the order. A defendant declared in
default, loses standing in court, is deprived of the right to take part in the trial, forfeits
rights as a party litigant, has no right to present evidence supporting his allegations,
has no right to control the proceedings or cross-examine witnesses and has no right
to expect that the court would act upon his pleadings or may oppose motions filed
against him.
He has the following remedies, which are mutually exclusive: (1) motion to set aside
order of default; (2) motion for new trial; (3) relief from judgment. He may also file
an ordinary appeal or a Rule 65 petition. (see ruling for explanations)
DOCTRINE: Relief from default: motion to set aside order of default, motion for
new trial, relief from judgment, appeal, petition for certiorari
FACTS:
1. Zuellig and Lui Enterprises entered into a 10-year contract of lease over a
parcel of land in Davao City, which was registered under Eli Lui.
2. On the 8th year of the lease, Zuellig received a letter from Philippine Bank of
Communications (PBCom) claiming to be the new owner of the leased
property and asking that Zuelling pay directly to it.
3. Zuellig informed Lui of this but the latter insisted on its right to collect. Due to
this, Zuellig filed a complaint for interpleader with the RTC of Makati and also
consigned in court the rental payments due to either Lui or PBCom.
1. Zuellig filed an interpleader.
a. Lui filed a motion to dismiss on the ground that Zuellig’s
representative did not have the authority to file the complaint.
b. There is a pending nullification of deed of dation in payment case
against PBCom in RTC Davao and this barred the filing of the
interpleader case as the nullification case involved the property
leaded to Zuellig
2. Zuellig opposed the motion to dismiss. It moved that Lui be declared in
default.
a. It should be denied for having been filed late. A motion to dismiss
should be filed within the required time given to file an answer to
the complaint, which is 15 days from service of summons on the
defendant.
b. It claims that summons was served on Lui on July 4 2003 and it
had until July 19 to file a motion to dismiss but Lui filed the motion
only on July 23 (4 days late).
c. It was not a party to the nullification case. Hence, the same did
not bar the filing of an interpleader case.
3. RTC Makati found that Lui Enterprises failed to file its motion to dismiss
within the reglementary period. It declared Lui in default.
4. Lui did not move for reconsideration. Thus, RTC Makati heard the
interpleader case without Lui Enterprises’ participation.
5. One year after the issuance of the order of default, Lui filed a motion to
set aside the order of default on the ground of excusable negligence.
a. It argued that its failure to file a motion to dismiss on time was
caused by the negligence of its former counsel. It is excusable
because Lui Enterprises was prejudiced and prevented from
fairly presenting its case.
6. In addition to the motion to set aside the order of default, Lui also field a
manifestation and motion to dismiss. It manifested that the Davao RTC
issued an order in the nullification case directing PBCom to inform Zuellig
to pay rent to Lui Enterprises while the case was subsisting.
7. Without resolving the motion to set aside order of default, Makati RTC
denied the manifestation and motion to dismiss on the ground that Lui
already lost its standing in court.
8. Lui appealed to the Court of Appeals.
Court of Appeals
1. The CA found Lui’s appellant’s brief insufficient.
2. It affirmed the RTC’s denial of Lui’s motion to dismiss.
3. As to the motion to set aside order of default, CA ruled that Lui failed to
show the excusable negligence hat prevented it from filing its motion to
dismiss on time.
1

Present petition
1. Lui claims that the CA applied the rules of procedure strictly and dismissed
its appeal on technicalities. The CA should have taken a liberal stance and
allowed its appeal despite the insufficiency of its brief.
2. It also claims that the the order of default should have been set aside since
its failure to file on time was due to excusable negligence.
ISSUE/S:
1. W/N Lui complied with the rules on the contents of appellant’s brief - NO
2. W/N Lui was in default - YES
3. W/N the nullification case barred the filing of the interpleader - NO
RATIO:
On whether Lui complied with the rules on the contents of appellant’s brief - NO
1. Lui Enterprises’ appellants brief lacked a subject index, page references to
the record, and table of cases, textbooks and statutes cited. The CA correctly
dismissed Lui’s appeal.
2. Except for cases provided in the Constitution, an appeal is a purely statutory
right. It requires strict compliance with the Rules of Court on appeal.
Otherwise, the appeal shall be dismissed and its dismissal shall not be a
deprivation of due process.
3. The only exception to this rule is when appellants substantially comply with
the rules on the contents of the brief.
4. In this case, Lui failed to substantially comply with the rules. It admitted that
its brief lacked the required contents and yet, did not correct its admitted
“technical omissions” by filing an amended appellant’s brief.
On whether Lui Enterprises is in default - YES
1. When a defendant is served with summons and a copy of the complaint, he
or she is required to answer within 15 days from the service. The defendant
may also move to dismiss the complaint within the time for but before filing
the answer.
2. The defendant who fails to answer within the 15-day period either has no
defense against the plaintiff’s allegations or was prevented from filing the
same within the required period due to fraud, accident, mistake or excusable
negligence. In either case, the court may declare the defendant in default and
shall try the case until judgment without the defendant’s participation.
3. A defendant declared in default:
a. Loses standing in court
b. Deprived of the right to take part in the trial
c. Forfeits rights as a party litigant
d. Has no right to present evidence supporting his allegations
e. Has no right to control the proceedings or cross-examine witnesses
f. Has no right to expect that the court would act upon his pleadings
or may oppose motions filed against him
4. However, a defendant declared in default dos not waive all of his rights.
He still has the right to receive notice of subsequent proceedings and the
plaintiff must still present evidence supporting his allegations.
5. Default is not meant to punish the defendant but to enforce prompt filing
of the answer to the complaint.
6. Remedies when in default:
a. After notice of the declaration of default but before the court
renders the default judgment – Motion to set aside order of
default
Elements
i. Must challenge default order before judgment
ii. Must have been prevented due to fraud, accident,
mistake or excusable negligence
iii. Must have meritorious defense
b. After default judgment but prior to the judgment becoming final
and executory – Motion for New Trial
c. After the default judgment has become final and executory –
Petition for Relief from Judgment
d. Ordinary Appeal
i. May appeal even if no prior petition to set aside order
of default
ii. No right to present evidence; can only appeal the
judgment for being contrary to plaintiff’s evidence or law
e. Petition for certiorari
i. Cannot present evidence; can only argue that the trial
court committed grave abuse of discretion
7. The first three remedies mentioned above are mutually exclusive. A
defendant declared in default may avail of only one of the three remedies.
This is to compel defendants to remedy their default at the earliest
possible opportunity.
8. Here, Lui discovered its default before the Makati RTC rendered
judgment. It filed a motion to set aside the order of default on the ground
of excusable negligence.
9. The Court ruled that its failure to answer within the required period is
inexcusable. It did not also immediately take steps to remedy its default
and took one year from discovery of default to file a motion to set aside/
On whether the nullification case barred the filing of the interpleader – NO
1. There is no litis pendentia in this case since the parties, and the rights
asserted and reliefs prayed for are not the same.
2. The nullification case was filed by Lui against PBCom while the
interpleader was filed by Zuellig against Lui and PBCom.

2
OTHER NOTES:
1. No award for attorney’s fees as there is no bad faith on Lui Enterprises’
part.

DISPOSITION: WHEREFORE, in view of the foregoing, the petition for review

oncertiorariis DENIED. The Court of Appeals' decision and resolution in CA-G.R. CV
No. 88023 are AFFIRMED with MODIFICATION. The award of P50,000.00
attorney's fees to Zuellig Pharma Corporation is DELETED.