First Integrated Bonding & Insurance Co., Inc. v. Dizon
REITERATIONFacts
The Antecedents: Jaime L. Go filed a complaint for recovery of fire insurance proceeds against nine insurance companies, including First Integrated Bonding & Insurance Co., Inc. (hereinafter referred to as the firm). The firm had issued a policy for P100,000. Go claimed a loss of 63% of the insured properties, seeking P63,000 from the firm. Procedural History: Summons and an order of default were allegedly served upon lawyer Renato Villanueva, who the firm claimed was not its authorized representative to receive such processes. The firm's domicile and the address on the policy was Manila. A partial decision was rendered by the respondent judge ordering the firm to pay P63,000 plus interest, damages, and attorney's fees. This partial decision was served on the firm's branch secretary in Cebu City. The firm filed a motion for reconsideration and new trial, supported by an affidavit of merits from its authorized representative, enumerating defenses and asserting Villanueva's lack of authority. The respondent judge denied the motion, issued a writ of execution, levied office equipment, and garnished a bank deposit. The firm's subsequent motion for reconsideration of the denial was also denied. The Petition: The firm filed a petition for certiorari with the Supreme Court, assailing the orders of the respondent judge for allegedly acting with grave abuse of discretion amounting to lack of jurisdiction. The firm argued that the service of summons was improper, leading to a default judgment without affording it due process. The firm posted a bond of P74,000 to answer for the judgment, and the Supreme Court issued a preliminary mandatory injunction to reinstate the firm's standing and return its properties.
Issue(s)
Whether the respondent judge acted with grave abuse of discretion amounting to lack of jurisdiction in not setting aside the judgment by default, considering the allegation of improper service of summons. Whether the service of summons upon lawyer Renato Villanueva, who was allegedly not an authorized representative of the insurance firm, was valid and sufficient to confer jurisdiction upon the court.
Ruling
The Supreme Court granted the petition. The orders of the lower court dated June 29 and July 30, 1982, were reversed, and its judgment, writ of execution, levy, and garnishment were set aside. The firm was ordered to answer the complaint within ten (10) days from notice of the finality of the judgment. The lower court was directed to conduct further proceedings. The firm was also ordered to file a surety bond for P74,000 to replace its injunction bond. The sum of P17,826.14 garnished from the firm's bank account was ordered to be returned by respondent Go immediately to the firm's account.
Ratio Decidendi
On Issue 1: The Supreme Court held that the respondent judge acted with grave abuse of discretion amounting to lack of jurisdiction in not setting aside the judgment by default. The Court found that the service of summons was improper, as it was allegedly served on Renato Villanueva, who the firm claimed was not its authorized representative. This improper service resulted in a default judgment without the firm being afforded its substantial right to a hearing. The Court emphasized that such a situation deprives a party of due process, a fundamental right that cannot be lightly disregarded. The negligence, if not collateral fraud, of Villanueva in failing to answer the complaint, coupled with the improper service, warranted the setting aside of the default judgment. On Issue 2: The Supreme Court ruled that the service of summons upon lawyer Renato Villanueva was not valid and sufficient to confer jurisdiction upon the court over the person of the insurance firm. The firm's domicile was in Manila, and the policy indicated this as its address. The service was made in Cebu City upon Villanueva, who the firm explicitly stated was not authorized to receive such processes. The Court reasoned that for a default judgment to be valid, there must be proper service of summons upon the defendant or its authorized representative. In this case, the alleged service on Villanueva did not meet this requirement, thereby rendering the default judgment voidable. The Court noted that if the summons had been served at the firm's Manila office, there would have been no impression of collusive conduct between the insured and the insurer's agent.
Main Doctrine
The Supreme Court held that the respondent judge committed grave abuse of discretion amounting to lack of jurisdiction in not setting aside the judgment by default. The Court emphasized that the service of summons upon an unauthorized representative, leading to a default judgment, constitutes a denial of due process. Such a judgment, obtained through the negligence or possible collateral fraud of an agent, deprives the party of its substantial right to a hearing and must be annulled.