Vlason Enterprises Corporation v. Court of Appeals
REITERATIONFacts
1. The Antecedents: The underlying dispute originated from the seizure of a vessel, the M/V Star Ace, and its cargo by customs authorities on suspicion of being hijacked and intended for smuggling. The vessel, owned by Omega Sea Transport Company, encountered engine trouble and requested permission to unload its cargo for transshipment. Despite initial approval, customs boarded the vessel and initiated seizure proceedings. Subsequently, the vessel ran aground and was abandoned. A salvage agreement was entered into with Duraproof Services, the private respondent, for securing and repairing the vessel and its cargo in exchange for a substantial fee and a percentage of the cargo. The District Collector of Customs initially lifted the seizure warrant, but the Customs Commissioner later ordered the forfeiture of the vessel and cargo. 2. Procedural History: Duraproof Services filed a Petition for Certiorari, Prohibition, and Mandamus with the Regional Trial Court (RTC) of Manila, assailing the actions of the Customs Commissioner and District Collector. Vlason Enterprises Corporation (VEC), the petitioner, was later impleaded as a respondent. The RTC initially denied motions to declare defendants in default, later dismissed the action against some respondents on grounds of litis pendentia and lack of jurisdiction. Duraproof Services moved to declare VEC and others in default, but there is no record of the court acting on these motions. The RTC eventually issued a Decision on February 18, 1991, holding various respondents, including VEC, liable. VEC filed a Motion for Reconsideration, which the RTC granted on May 22, 1991, setting aside the default judgment against VEC due to lack of jurisdiction and procedural defects. Duraproof Services then filed a Petition for Certiorari with the Court of Appeals (CA), assailing the RTC's recall of the writ of execution. The CA granted Duraproof's petition, nullifying the RTC's orders and reinstating the February 18, 1991 decision as final and executory. The CA also denied VEC's motion for clarification and partial reconsideration. Subsequently, the CA issued a Resolution allowing the RTC to take action on Duraproof's motion for execution, leading to the seizure of VEC's properties. 3. The Petition: Vlason Enterprises Corporation (VEC) filed a Petition for Review on Certiorari with the Supreme Court, assailing the Court of Appeals' decision and resolution. VEC argued that the RTC never acquired jurisdiction over its person because it was not properly impleaded and was not validly served summons. VEC contended that the trial court improperly rendered a default judgment against it, as no order of default was issued and no authorization was given for ex parte presentation of evidence. Furthermore, VEC argued that the default judgment was fatally defective because no filing fees were paid for the damages awarded and the award exceeded what was prayed for in the complaint. VEC also asserted that its motion for reconsideration was timely filed and should not have been disregarded, and that the recall of the writ of execution by the RTC was valid concerning VEC. The core of VEC's petition is that the February 18, 1991 RTC decision was void as against it, and therefore, it should not be bound by it or by subsequent execution proceedings.
Issue(s)
Whether the RTC's February 18, 1991 Decision became final and executory against VEC despite the filing of a Motion for Reconsideration with a defective notice of hearing. Whether the trial court acquired jurisdiction over the person of VEC through the service of summons on the secretary of its president. Whether a valid judgment by default can be rendered against a party who was not formally declared in default and for reliefs not prayed for in the complaint.
Ruling
The Supreme Court granted the petition, reversed and set aside the assailed Decision and Resolution of the Court of Appeals insofar as they affected petitioner. The levy and sale on execution of petitioner's properties were declared null and void, and the properties were ordered restored to petitioner.
Ratio Decidendi
On Issue 1: The Court ruled that the February 18, 1991 Decision did not become final against VEC because the Motion for Reconsideration (MR) was timely filed and validly tolled the appeal period. Although the notice of hearing in the MR was technically defective for being addressed to a deceased counsel, the Court applied a liberal construction of Rule 15, Sections 4 and 5. The SC held that a notice of hearing is intended to afford the adverse party a chance to be heard; here, the private respondent's counsel appeared at the hearing, was given a copy of the motion in open court, and was granted thirty days to file an opposition. Because the purpose of procedural due process was served, the motion was not a 'mere scrap of paper,' and the CA erred in treating it as such to declare the judgment final. On Issue 2: The trial court never acquired jurisdiction over VEC because the service of summons was invalid. While service on the secretary of a corporation's president is generally acceptable under jurisprudence like G & G Trading Corp. v. CA, the recipient must be an employee of the specific corporation being sued to ensure the notice reaches responsible officers. In this case, Betty Bebero was an employee of Vlasons Shipping, Inc. (VSI), not Vlason Enterprises Corporation (VEC). The Court emphasized that a corporation has a separate legal personality, and the 'piercing of the corporate veil' cannot be used to validate a defective service of summons on a sister company's employee, as doing so would cause manifest injustice to the petitioner. On Issue 3: The default judgment against VEC was procedurally indefensible and void for two reasons. First, the RTC record shows that VEC was never formally declared in default, which is a condition sine qua non under Rule 18, Section 1 for the court to receive evidence ex parte and render a valid judgment by default. Second, even if VEC had been in default, Rule 18, Section 5 (now Rule 9, Sec. 3[d]) mandates that a judgment in default shall not exceed the amount or be different in kind from that prayed for. Since Duraproof's petitions contained no prayer for damages against VEC, the RTC had no authority to award P3,000,000.00, rendering that portion of the judgment void.
Main Doctrine
A motion for reconsideration, even if defective in its notice of hearing, may be given due course if a rigid application of the rule would result in a manifest failure or miscarriage of justice, especially when the movant was not validly summoned and did not participate in the proceedings. Furthermore, a corporation is not bound by a default judgment if summons was not validly served upon it, and the service of summons on the secretary of the president of another corporation, even if the president is the same person, is defective if the secretary is not an employee of the corporation being summoned.