Paramount Insurance v. Ordoñez Corporation
REITERATIONFacts
1. The Antecedents: On September 10, 1997, a vehicular accident occurred between a truck mixer owned by A.C. Ordoñez Corporation, driven by Franklin A. Suspine, and a Honda City sedan owned by Maximo Mata. Paramount Insurance Corporation, as subrogee of Maximo Mata, subsequently filed a complaint for damages against the respondents. 2. Procedural History: Paramount Insurance Corporation filed a complaint for damages with the Metropolitan Trial Court (MeTC) of Makati City. After issues arose regarding the service of summons and the admission of the respondents' Answer, the MeTC admitted the Answer and set the case for pre-trial. Paramount Insurance Corporation then filed a petition for certiorari and mandamus with the Regional Trial Court (RTC) of Makati City, assailing the MeTC's orders. The RTC granted the petition, setting aside the MeTC's orders and remanding the case for action on the motion to declare defendants in default. A.C. Ordoñez Corporation appealed to the Court of Appeals (CA), which reversed the RTC's decision and reinstated the MeTC's orders admitting the Answer and setting the case for pre-trial. Paramount Insurance Corporation's motion for reconsideration was denied by the CA. 3. The Petition: Paramount Insurance Corporation filed the present petition for review on certiorari under Rule 45 of the Rules of Court, seeking to annul and set aside the decision of the Court of Appeals. The petition raises issues concerning the validity of the service of summons on A.C. Ordoñez Corporation, the legal personality of a party without corporate existence to file an appeal, the Court's alleged error in not calling the parties into mediation, and allegations of fraud committed by the petitioner in its pleadings. The core of the petition challenges the CA's reinstatement of the MeTC's orders that admitted the respondents' Answer despite alleged procedural defects in service and filing.
Issue(s)
Whether there was valid service of summons on respondent A.C. Ordoñez Construction Corporation. Whether a party without corporate existence may file an appeal. Whether the Supreme Court erred in not calling the parties into mediation. Whether there was fraud committed by the petitioner in its pleadings.
Ruling
The petition is denied. The assailed Decision of the Court of Appeals, which reinstated the Orders of the Metropolitan Trial Court admitting respondent corporation's Answer and setting the case for pre-trial, is affirmed.
Ratio Decidendi
On the validity of service of summons: The Court held that service of summons upon a corporation must strictly comply with Section 11, Rule 14 of the Rules of Court, which provides an exclusive enumeration of authorized officers (president, managing partner, general manager, corporate secretary, treasurer, or in-house counsel). Service upon an employee in the Receiving Section, who is not among the enumerated officers, is defective and not binding on the corporation. The Court emphasized that the new rule is restricted, limited, and exclusive, disallowing arguments of substantial compliance. Consequently, the motions for declaration of default were premature. The Court found no grave abuse of discretion on the part of the Metropolitan Trial Court in admitting the respondent corporation's Answer. Although filed beyond the requested extension period, Section 11, Rule 11 of the Rules of Court grants the trial court discretion to allow pleadings to be filed after the reglementary period upon motion and on just terms. The Court reiterated the hornbook rule that default judgments are generally disfavored, and an answer should be admitted if filed before a defendant is declared in default and no prejudice is caused to the plaintiff. On the capacity to file an appeal: The Court ruled that respondent corporation had the legal personality to file an appeal. While the cancellation of a corporation's certificate of registration ends its juridical personality, Section 122 of the Corporation Code provides that a dissolved corporation continues to be a body corporate for three years for the purpose of prosecuting and defending suits and settling its affairs. Furthermore, Section 145 of the Corporation Code protects the rights and remedies of a corporation, its stockholders, members, directors, trustees, or officers from being impaired by subsequent dissolution. On the issue of mediation: The Court clarified that the decision to refer a case to mediation involves judicial discretion. While mediation fees are required upon filing certain pleadings, the final decision rests with the ponente, subject to the concurrence of other members. The Court noted that petitioner failed to specify the case as "mediatable" on its pleading or submit a written request for mediation, thus not complying with the guidelines for referring cases to mediation. On the alleged fraud: The Court found no merit in the petitioner's claim of fraud committed in its pleadings, as the issues were resolved based on the procedural and substantive legal arguments presented.
Main Doctrine
Service of summons upon a corporation must strictly comply with Section 11, Rule 14 of the Rules of Court, which enumerates exclusively the officers authorized to receive summons. Service upon an employee not among the enumerated officers is defective. Default judgments are disfavored, and trial courts have discretion to admit an answer filed beyond the reglementary period if no prejudice is caused to the plaintiff and the defendant has not yet been declared in default.