D&D 5E (2024) How do you handle surprised but won initiative?

[Maxperson]

Too late. The declared action has to already be happening, as you can't react to something that doesn't exist yet.

If rounds are simultaneous, then yes you can react to things as they are happening. If I'm moving towards the guy on the left, but the guy on the right starts moving towards the party wizard, I can alter my course to intercept. Or maybe throw the axe in my hand at him if I can't reach him. It's only if rounds are consecutive and not at all simultaneous that you can't react, because it hasn't happened yet.

 

[UngeheuerLich]

The only problem with that is I had no idea he was there, so I wasn't ready at all. It's not like I walked down that area behind the buildings with the idea that if anyone jumped out at me I was going to punch them in the face, and then my buddy set off the ready action trigger.

You jsut punched him. Without thinking (I hope so). So it was just a reaction you took.
The best way to handle it with D&D rules would be using the readied action "attack anyone that comes into range".