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[ GR No. L-47698, Apr 28, 1978 ]



172 Phil. 373


[ G.R. No. L-47698, April 28, 1978 ]




The stress of petitioner Ledesma Overseas Shipping Corporation in this certiorari  petition, and quite understandably too, is on the failure of respondent Judge Celso Avelino to abide by the mandate of procedural due process. Such allegation it would justify by the claim that notwithstanding the fact that under a compromise agreement, submitted to the Court as its answer, its liability was fixed in the amount of P8,388.74, the judgment sought to be set aside increased its liability to P16,388.74, plus the additional sums of P1,000.00 as attorney's fees and P1,000.00 as costs and expenses of litigation. Such decision, moreover, was arrived at after an ex-parte hearing, petitioner being declared in default. A motion under oath to have such order lifted and the decision reconsidered proved futile. Private respondent Cebu Stevedoring Co., Inc. could not very well deny that there was truth in the above assertions. An even more impressive argument for the stand taken by petitioner is that with the pleading submitted by it as its answer embodying the compromise agreement, a default order was not warranted. Respondent Judge apparently could not free himself from the fetters of technicality in acting the way he did. Petitioner, in the light of the above undisputed facts, had made out a case for certiorari. It has been the constant holding of this Court since the leading case of Coombs v. Santos[1]  that a motion to set aside an order of default should be viewed with sympathy, the appropriate judicial response being one of liberality. There is relevance to these words of Chief Justice Concepcion in Mata v. Flores:[2]  "[A] serious danger of committing a grave injustice would exist if [petitioner] were denied an opportunity, at least, to introduce evidence on their behalf."[3] That basic principle was ignored by respondent Judge. The procedure followed by respondent Judge is likewise marred by the fact that a default order could have been avoided in the first place as he had cognizance of the compromise entered into, although not formally submitted in the way it should be, but specifically referred to as the answer in a communication sent to him. Again, under a liberal interpretation of the Rules of Court, that ought to suffice and to preclude the issuance of an order of default.[4] The assailed decision must be set aside.

The compromise entered into on January 21, 1976 between petitioner and private respondent is in the form of a letter signed by Jaime L. Ledesma as Executive Vice-President of petitioner addressed to private respondent and worded thus: "This is in connection with our outstanding account balance of P18,834.69 due to the discharging of M/V 'LEDESCO UNO.' As per our agreement yesterday, we shall pay you the sum of P10,000.00 and the balance payable within 60 days. Furthermore, we agreed to waive our claims for a deduction of P726.28 per Bill No. 7-72 and on your part the interest thereof. Please sign on the space provided below to confirm your agreement. Thank you for your cooperation."[5] It was duly signed on behalf of private respondent by its official, Romulo Robles by name. As admitted by it in its answer, such "agreement between the [parties]" was furnished respondent Judge on January 22, 1976.[6]  Moreover, such letter contained the following explicit affirmation that it was intended as the answer: "In connection with the above case, please find enclosed copy of the agreement between the plaintiff and ourselves. By copy of this letter, we would advise that this is our Answer to the summons as stated above."[7]  Nonetheless, private respondent did rely on the fact that "petitioner did not file any responsive pleading and neither however did it pay the balance of P8,388.74 within the stipulated period as stated above."[8]  After several incidents before respondent Judge, private respondent, on February 7, 1977, filed a motion for declaration of default.[9] It was granted by respondent Judge in an order dated February 17, 1977. It was then allowed to present its evidence ex-parte, resulting in a decision dated June 2, 1977, increasing its liability to the much bigger amount, as noted at the outset.[10]  As likewise previously mentioned, the motion under oath to set aside the decision by default and for new trial proved futile. Hence this certiorari petition.

To repeat, the petition is impressed with merit.

1. As far back as 1913, in the aforesaid leading case of Coombs v. Santos, Justice Trent as ponente  explained why a default judgment may be tainted with infirmity: "A default judgment does not pretend to be based upon the merits of the controversy. Its existence is justified on the ground that it is the one final expedient to induce the defendant to join issue upon the allegations tendered by the plaintiff, and to do so without unnecessary delay. A judgment by default may amount to a positive and considerable injustice to the defendant; and the possibility of such serious consequences necessitates a careful examination of the grounds upon which the defendant asks that it be set aside."[11] Such a doctrine has been subsequently followed, the latest case being Pineda v. Court of Appeals.[12] In Amante v. Suñga,[13]  a 1975 decision, this Court, through Justice Antonio, reiterated in emphatic language the reason for such a liberal approach. Thus: "In the attendant circumstances, We cannot perceive how the interest of justice was served and promoted by the precipitate action of the trial court. A default judgment does not pretend to be based on the merits of the controversy. Its existence is justified by expediency. It may, however, amount to a positive and considerable injustice to the defendant. The possibility of such serious consequences necessarily requires a careful examination of the circumstances under which a default order was issued. And when no real injury would result to the interests of the plaintiff by the reopening of the case, the only objection to such action would, therefore, be solely on a technicality. On such an infirm foundation, it would be a grievous error to sacrifice the substantial rights of a litigant. For the rules should be liberally construed in order to promote their objective in assisting the parties in obtaining just, speedy and inexpensive determination of their cases."[14] It is obvious, in the light of the above excerpts from Chief Justice Concepcion and Justices Trent and Antonio, why a failure to abide by such controlling norm may raise a due process question. It cannot be denied that with the opportunity afforded the prevailing plaintiff to present evidence ex-parte, the defendant is denied the right to a hearing which is an indispensable element of due process. The probability of injustice being inflicted on one of the parties, repugnant to this basic constitutional law precept, precisely mandates a liberal approach to a motion to set aside a default order. In appropriate circumstances then, and this is one of them, the invocation of the protection of the procedural due process guarantee is warranted.

2. An infirmity of an equally serious character that calls for the grant of the certiorari  petition was the lack of support in law for the declaration of default. The answer of private respondent Cebu Stevedoring Co., Inc. cannot be any more explicit: "That under date Jan. 22, 1976, defendant through Mr. Jaime L. Ledesma, Executive Vice-President of Ledesma Overseas Shipping Corp. filed a letter with the Honorable Court below enclosing thereto an agreement between the plaintiff and defendant signed on Jan. 21, 1976. The letter of Jan. 22, 1976 reads in part: 'In connection with the above case, please find enclosed a copy of the agreement between the plaintiff and ourselves. By copy of this letter, we would advise that this is our Answer to the summons as stated above.' 4. That the agreement dated Jan. 21, 1976 referred to above by Capt. Romulo Robles, representing the plaintiff and Mr. Jaime L. Ledesma, representing the defendant reads in part: 'This is in connection with our outstanding account balance of P18,834.69 due to the discharging of M/V "LEDESCO UNO." As per our Agreement yesterday, we shall pay you the sum of P10,000.00 and the balance deducting P726.28 payable within 60 days.' (underscoring supplied)."[15]  Neither respondent Judge, therefore, much less private respondent, could very well assert that no answer was filed by petitioner. The Rules of Court cannot be any clearer. Only where there is failure by defendant to answer within the time specified may a court, upon motion of the plaintiff and proof of such failure, "declare the defendant in default."[16] It is to be admitted that counsel for petitioner, perhaps due to inexperience, failed to file its answer in the proper form. Nonetheless, respondent Judge ought to have been more cautious and prudent and ought to have refrained from taking the step he did. There was no default on the part of petitioner. Even private respondent, in the answer to this petition, admitted as much, as evidenced by the portion quoted above. This palpable fact adds reinforcement to the plea of petitioner that such order, improvidently and erroneously granted, ought to have been set aside and petitioner as defendant in the suit before respondent Judge allowed to present its evidence.

3. The liberal approach in the interpretation of procedural rules goes back to the leading case of Alonzo v. Villamor,[17]  a 1910 decision. In the oft-quoted language of Justice Moreland: "Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts. There should be no vested rights in technicalities."[18] An excerpt from the recent opinion of Justice Barredo in Lim Tanhu v. Ramolete[19] is apropos: "After careful scrutiny of all the above-related proceedings in the court below and mature deliberation, the Court has arrived at the conclusion that petitioners should be granted relief, if only to stress emphatically once more that the rules of procedure may not be misused and abused as instruments for the denial of substantial justice. A review of the record of this case immediately discloses that here is another demonstrative instance of how some members of the bar, availing of their proficiency in invoking the letter of the rules without regard to their real spirit and intent, succeed in inducing courts to act contrary to the dictates of justice and equity, and, in some instances, to wittingly or unwittingly abet unfair advantage by ironically camouflaging their actuations as earnest efforts to satisfy the public clamor for speedy disposition of litigations, forgetting all the while that the plain injunction of Section 2 of Rule 1 is that the 'rules shall be liberally construed in order to promote their object and to assist the parties in obtaining' not only 'speedy' but more imperatively, 'just * * * and inexpensive determination of every action and proceeding.'"[20]

4. It is thus obvious that petitioner is entitled to a remedy. The last question is what form it should take. As a matter of strict law, it would suffice if the case be remanded to respondent Judge to enable petitioner to present its evidence, after which a decision could be rendered. Since certiorari is equitable in character, however, this Court could fashion a remedy much more appropriate and thus put an end to the controversy, considering that the only defense of petitioner is the compromise agreement. It is worth noting that even in an ordinary appeal, not a special civil action, such a principle has been followed. The latest expression of such a doctrine comes from the pen of Justice Aquino, the ponente in Gayos v. Gayos:[21]  "Since the parties in their briefs and pleadings and the lower court in its order under appeal discussed the legality of whether the Gayos spouses could be regarded as the true owners of the homestead registered in their daughter's name, that issue might as well be passed upon in this appeal. For 'it is a cherished rule of procedure that a court should always strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation.'"[22] Private respondent should be held bound to the compromise agreement. The liability of petitioner then is limited to the amount of P8,388.74. That sum was due and owing sixty days from January 21, 1976. It ought to have been paid on March 21, 1976. Petitioner was remiss of its obligation. It failed to do so. As of the next day then, it is liable for interest in the above sum. With the view this Court takes of this litigation in the above manner, it could be closed and terminated.

WHEREFORE, the writ of certiorari is granted and the decision promulgated by respondent Judge inaccurately captioned by him as an order dated June 2, 1977 is nullified and set aside. A new decision is entered, petitioner being adjudged liable for the sum of P8,388.74 with legal interest at six per cent from and after March 22, 1976 until fully paid. No costs.

Antonio, Concepcion, Jr., and Santos, JJ., concur.

Barredo, J., concurs in a separate opinion.

Aquino, J., see concurring opinion attached.

[1] 24 Phil. 446 (1913).

[2] L-26047, October 30, 1968, 25 SCRA 876.

[3] Ibid, 881.

[4] Cf. Rosario v. Alonzo, 118 Phil. 404 (1963).

[5] Annex A of Complaint.

[6] Answer, Discussion, par. 3.

[7] Ibid.

[8] Ibid, par. 5.

[9] Ibid, par. 10.

[10] Petition, Annex B.

[11] 24 Phil. 446, 449-450.

[12] L-35583, September 30, 1975, 67 SCRA 228. The other cases follow: Bañares v. Flordeliza, 51 Phil. 786 (1928); Centeno v. Centeno, 52 Phil. 332 (1928); Camus v. Paulino, 59 Phil. 411 (1934); Quirino v. Philippine National Bank, 101 Phil. 705 (1957); Macaraig v. Dy Sun, 105 Phil. 332 (1959); Mendez v. Seng Kiam, 108 Phil. 109 (1960); Maribojoc v. De Guzman, 109 Phil. 833 (1960); Comeda v. Cajilog, 117 Phil. 789 (1963); Tuason v. Fernandez, 120 Phil. 1023 (1964); Quetulio v. Ganitano, L-21173, June 23, 1966, 17 SCRA 447; Tumambing v. Ganzon, L-17456, Oct. 22, 1966, 18 SCRA 411; Mata v. Flores, L-26047, Oct. 30, 1968, 25 SCRA 876.

[13] L-40491, May 28, 1975, 64 SCRA 192.

[14] Ibid, 196-197.

[15] Answer, Discussion, pars. 3-4.

[16] Section 1 of Rule 18 reads as follows: "Judgment by default. - If the defendant fails to answer within the time specified in these rules, the court shall, upon motion of the plaintiff and proof of such failure, declare the defendant in default. Thereupon the court shall proceed to receive the plaintiff's evidence and render judgment granting him such relief as the complaint and the facts proven may warrant. This provision applies where no answer is made to a counterclaim, cross-claim, or third-party complaint within the period provided in these rules."

[17] 16 Phil. 315.

[18] Ibid, 322.

[19] L-40098, August 29, 1975, 66 SCRA 425.

[20] Ibid, 441-442.

[21] L-27812, September 26, 1975, 67 SCRA 146.

[22] Ibid, 151. The opinion cited Marquez v. Marquez, 73 Phil. 74 (1941) and Keramil Industries, Inc. v. Guerrero, L-38866, November 20, 1974, 61 SCRA 285.