J. Artie Vergel de Dios v. Court of Appeals and Eduardo Lopingco
REITERATIONFacts
The Antecedents: Philippine Veterans Bank conveyed a parcel of land under a conditional sale to Averdi Marketing and Development Corporation. Petitioner J. Artie Vergel de Dios, as general manager of Averdi, transferred his rights to respondent Eduardo Lopingco, subject to a Memorandum of Agreement and its Addendum. Procedural History: Lopingco filed a complaint against de Dios and the bank for revocation of the board resolution and rescission of their contract. The bank filed a motion to dismiss. Lopingco filed an amended complaint, serving a copy on de Dios by registered mail. De Dios's counsel entered an appearance and moved for an extension to file a responsive pleading, which was granted. De Dios later filed an omnibus motion asking for a copy of the amended complaint, which was opposed. At the hearing, Lopingco moved for de Dios's declaration of default. The trial court deferred resolution pending proof of service of the amended complaint. Upon presentation of a certification from the post office that de Dios received the amended complaint, he was declared in default, and evidence was received ex parte. The trial court rendered a decision ordering the rescission of the contract and awarding damages to Lopingco. De Dios filed a motion for new trial, alleging error in the default declaration and denial of his omnibus motion. The motion was denied. De Dios appealed to the Court of Appeals, which affirmed the trial court's decision. The Petition: De Dios filed a petition with the Supreme Court, contending that the Court of Appeals committed grave abuse of discretion in holding that he was properly declared in default, in not setting aside the judgment by default, in not declaring that reformation, not rescission, was the proper remedy, and in not declaring the decision tainted with excessive damages and insufficiency of evidence.
Issue(s)
Whether the trial court erred in declaring petitioner J. Artie Vergel de Dios in default without first ruling on his omnibus motion and without issuing a new summons for the amended complaint, thereby denying petitioner his constitutional right to be heard and to due process. Whether the proper remedy for respondent Eduardo Lopingco was reformation of the contract, or rescission. Whether the damages awarded by the trial court were excessive and unsupported by evidence.
Ruling
The petition is DENIED. The decision of the Court of Appeals is AFFIRMED.
Ratio Decidendi
On the propriety of the declaration of default and denial of due process: The Court held that procedural rules are designed to ensure the orderly administration of justice and should not be used to frustrate substantive law. The petitioner's argument that a new summons was required for the amended complaint was rejected. The Court reiterated the rule that a new summons is only necessary when new causes of action are alleged in an amended complaint filed before the defendant has appeared. In this case, the amended complaint merely supplemented an incomplete allegation and did not change the cause of action, which remained the rescission of the contract and refund of the down payment. Furthermore, the Court found that the petitioner was properly served with a copy of the amended complaint via registered mail, as evidenced by the post office certification, and that such service was in accordance with Section 2 of Rule 13 of the Rules of Court, allowing direct service on a party not yet represented by counsel. The trial court's cautious deferral of the default motion until proof of service was presented, and the subsequent grant of an extension to file an answer, demonstrated adherence to due process. The petitioner's failure to diligently follow up with his counsel upon receipt of the amended complaint was deemed negligence, not excusable mistake, thus justifying the trial court's refusal to set aside the default order. On the proper remedy of rescission versus reformation: The Court affirmed that rescission was the proper remedy. The Memorandum of Agreement stipulated that upon Lopingco's down payment, de Dios would execute a deed of assignment. De Dios failed to execute this deed, which the Court considered a substantial breach of the reciprocal obligation. Citing Article 1191 of the Civil Code and the ruling in Universal Food Corporation vs. Court of Appeals, the Court stated that rescission is warranted when the breach is substantial enough to defeat the object of the agreement. The petitioner's contention that reformation was the exclusive remedy was dismissed, as Lopingco had the right to choose rescission as a more effective relief. On the award of damages: The Court found no error in the damages awarded by the trial court, stating they were not excessive. The petitioner's failure to execute the deed of assignment, despite receiving payments, constituted a wrong enforceable against him, entitling Lopingco to rescission and indemnity for damages as provided under Article 1385 of the Civil Code.
Main Doctrine
Procedural rules are designed to ensure the orderly and expeditious administration of justice and are not intended to frustrate substantive law. A party who fails to exercise due diligence in complying with procedural requirements, particularly in filing responsive pleadings after proper service of an amended complaint, cannot invoke due process to set aside a default judgment. Rescission is a proper remedy when there is a substantial breach of a reciprocal obligation.