Jehan Shipping Corporation vs. National Food Authority

The three-day notice requirement in motions under Sections 4 and 5 of Rule 15 is mandatory, but substantial compliance suffices when the adverse party has actually had the opportunity to be heard and has indeed been heard through pleadings filed in opposition to the motion, rendering the purpose behind the rule duly served.

Jehan Shipping Corporation and the National Food Authority were parties to a shipping contract under which NFA hired Jehan's vessel, M/V Phannie, to transport 19,300 bags of imported rice from the M/V Altabith at the Cebu anchorage area to the Cebu City pier. The vessel sank on May 1, 1996, giving rise to reciprocal claims for earned freight and salvage expenses on one hand, and the value of the lost cargo on the other. The dispute over liability for the sinking and the resulting damages eventually reached the courts.

On April 30, 1996, the National Food Authority hired Jehan Shipping Corporation's vessel, the M/V Phannie, to transport 19,300 bags of imported rice from the M/V Altabith, berthed at the Cebu anchorage area, to the pier of Cebu City. The following day, May 1, 1996, the M/V Phannie capsized and sank. Jehan attributed the sinking to big waves generated by fast crafts and to NFA's fault and negligence, alleging that an NFA representative on board did not allow the vessel to leave despite the absence of berthing space at the pier. Jehan incurred ₱13,612,767.47 in salvaging and rehabilitating the vessel and sought payment of ₱139,030.00 in earned freight.

On August 2, 1997, Jehan filed a complaint against NFA before the Regional Trial Court of Cebu City, Branch 5, for collection of a sum of money with a prayer for injunction. NFA filed its Answer with Counterclaims on September 18, 1997, denying Jehan's allegations and asserting that the sinking was due to the fault, negligence, and lack of care of Jehan's own crew, the gross negligence in loading the rice, and the vessel's unseaworthiness. NFA counterclaimed for the value of the 19,300 bags of rice, transportation expenses, legal counsel fees, and other expenses.

On August 28, 2001, the RTC rendered a Decision ordering NFA to pay Jehan the claimed earned freight, salvage and rehabilitation expenses, interest, attorney's fees, litigation expenses, and costs. NFA received a copy of the Decision on October 1, 2001. On October 16, 2001—the last day of its appeal period—NFA filed a Motion for Reconsideration, and on November 12, 2001, a Supplemental Motion for Reconsideration. Neither motion contained a notice of hearing directed to the parties stating the time and place of hearing, as required by Sections 4 and 5 of Rule 15 of the Rules of Court.

Jehan filed an Opposition to the Motion for Reconsideration on November 15, 2001, and a 14-page Opposition on November 26, 2001, in which it both pointed out the procedural defect and ventilated its substantive arguments against the merits of the motions. The trial court's January 8, 2002 Joint Resolution recited Jehan's arguments at length but denied the motions solely on the ground that they lacked a notice of hearing, declaring them pro forma and consequently granting Jehan's motion for issuance of a writ of execution. A Writ of Execution was issued on January 16, 2002. NFA filed a Notice of Appeal on January 18, 2002, which the trial court denied on January 25, 2002, ruling that the Decision had already become final. NFA then elevated the matter to the Court of Appeals via a Petition for Certiorari and Prohibition with Application for Preliminary Injunction and Temporary Restraining Order.

• Finality of Judgment: Petitioner contended that the CA could no longer disturb, much less review and set aside on certiorari under Rule 65, a writ of execution issued by the trial court to implement a decision that had already become final and executory by operation of law.
• Fatal Procedural Defect: Petitioner argued that respondent's failure to include a notice of hearing rendered the Motion for Reconsideration and Supplemental Motion for Reconsideration worthless pieces of paper with no legal effect, citing various Supreme Court decisions holding that a motion without a notice of hearing is pro forma and does not toll the reglementary period for appeal.
• Merits of the Sinking: Petitioner additionally averred that the RTC was correct in finding that the sinking of M/V Phannie was attributable to NFA, which should therefore be liable for the resulting damages.

• Substantial Compliance: Respondent argued that the procedural lapse should not defeat its motions because petitioner was able to oppose squarely the issues raised in the Motion for Reconsideration, and that the purpose behind the notice requirement had been served.
• Grave Error: Respondent contended that the trial court manifestly committed a grave error in deciding against NFA, resulting in huge losses for the government.
• Relaxation of Procedural Rules: Respondent maintained that procedural rules, which are intended to secure substantial justice, may be relaxed when their rigid application would defeat the ends of justice.
• Setoff/Compensation: Respondent argued that the trial court should have applied the setoff or compensation principle.
• Reliance on SBMI Findings: Respondent contended that the trial court should not have relied merely upon the findings and recommendations of the Special Board of Marine Inquiry for holding NFA liable.

• Certiorari Review of Final Judgment: Whether the Court of Appeals committed a reversible error of law in granting the writ of certiorari and setting aside the trial court's orders implementing a decision it deemed final and executory.
• Notice of Hearing: Whether the lack of notice of hearing in the Motion for Reconsideration is fatal, such that the filing did not toll the period to appeal and the RTC Decision consequently became final and executory.

• Certiorari Review of Final Judgment: No. The CA committed no reversible error in granting the writ of certiorari, the trial court's Decision not having become final because NFA's Motion for Reconsideration was not pro forma and did toll the appeal period.
• Notice of Hearing: No, the lack of notice was not fatal under the circumstances. The requirements of procedural due process were substantially complied with, justifying a departure from a literal application of the rule on notice of hearing.

• Certiorari Review of Final Judgment: The resolution of this issue was contingent upon whether NFA's Motion for Reconsideration was pro forma. If the motion was not pro forma, it toled the appeal period, the RTC Decision did not become final, and the writ of execution was improperly issued. The CA therefore acted within its certiorari jurisdiction in reviewing and setting aside the trial court's orders. Because the motion was held not to be pro forma, the CA's grant of the writ was correct, and the petition was devoid of merit.

• Notice of Hearing: The three-day notice requirement under Sections 4 and 5 of Rule 15 is mandatory, and a motion without a notice of hearing is generally considered pro forma and does not affect the reglementary period. However, the notice requirement is not for the benefit of the movant but for the adverse party, to avoid surprises and to afford time to study and meet the arguments before resolution. The test is the presence of the opportunity to be heard and to meaningfully oppose or controvert the grounds of the motion. In this case, the trial court gave Jehan ten days to comment on the Motion for Reconsideration, and Jehan filed a 14-page Opposition that not only flagged the procedural defect but also addressed the substantive merits—arguments that the trial court itself recited at length in its January 8, 2002 Joint Resolution. Moreover, the trial court set the motions for hearing on December 7, 2001, during which Jehan's counsel appeared. Under established jurisprudence, lack of notice is cured when the trial court promptly resets a hearing with due notice to all parties. The purpose of the notice requirement was thus duly served, and substantial compliance justified a departure from literal application of the rule. The CA therefore committed no reversible error in ruling that the Motion for Reconsideration was not pro forma and in setting aside the trial court's orders. The Court declined to resolve the parties' additional arguments on the merits of the sinking, as those had not been raised before the CA and were not included as issues in the petition before the Supreme Court.

• Three-Day Notice Rule in Motions — Under Sections 4 and 5 of Rule 15 of the Rules of Court, every written motion required to be heard must be set for hearing by the applicant, with notice of hearing served to ensure receipt by the other party at least three days before the date of hearing. The notice must be addressed to all parties concerned and specify the time and date of hearing, which must not be later than ten days after filing of the motion. A motion without such notice is considered pro forma and does not toll the reglementary period for appeal.

• Substantial Compliance with Procedural Due Process — While the three-day notice requirement is mandatory and an integral component of procedural due process, its purpose is to avoid surprising the adverse party and to give that party time to study and oppose the motion. When the adverse party has actually had the opportunity to be heard and has indeed been heard through pleadings filed in opposition, and has appeared at a hearing set by the court, the purpose behind the rule is deemed served and the requirements of due process are substantially complied with. In such circumstances, a departure from literal application of the rule is justified.

• Cure of Notice Defect by Court-Set Hearing — Lack of notice of hearing in a motion is cured when, after learning of the defect, the trial court promptly sets or resets a hearing with due notice to all parties, and the adverse party appears and is heard.

• "The general rule is that the three-day notice requirement in motions under Sections 4 and 5 of the Rules of Court is mandatory. It is an integral component of procedural due process. But when the adverse party has actually had the opportunity to be heard, and has indeed been heard through pleadings filed in opposition to the motion, the purpose behind the rule is deemed duly served. The requirements of due process are substantially complied with." — This is the opening paragraph of the decision and articulates the controlling ratio decidendi: the interplay between the mandatory notice rule and the doctrine of substantial compliance.

• "As an integral component of procedural due process, the three-day notice required by the Rules is not intended for the benefit of the movant. Rather, the requirement is for the purpose of avoiding surprises that may be sprung upon the adverse party, who must be given time to study and meet the arguments in the motion before a resolution by the court." — This passage defines the rationale and purpose of the notice requirement, clarifying that it exists for the protection of the adverse party, not the movant.

• "The test is the presence of the opportunity to be heard, as well as to have time to study the motion and meaningfully oppose or controvert the grounds upon which it is based." — This formulation of the controlling test is frequently cited in subsequent jurisprudence on procedural due process in motions.

• Vlason Enterprises Corporation vs. CA, 369 Phil. 269 (1999) — Cited for the proposition that lack of notice is cured when the trial court promptly resets a hearing with due notice to all parties; also cited for the rule that the notice requirement is intended to avoid surprises to the adverse party.
• Juan vs. People, 322 SCRA 125 (2000) — Cited for the mandatory nature of the notice requirement under Sections 4 and 5 of Rule 15.
• Tan vs. Court of Appeals, 295 SCRA 755 (1998) — Cited for the rule that a motion without a notice of hearing is considered pro forma and does not affect the reglementary period for appeal.
• CMH Agricultural Corp. vs. Court of Appeals, 428 Phil. 610 (2002) — Cited for the principle that the requirement of notice of time and hearing in a pleading is necessary only to apprise the other party of the actions of the movant.
• Neri vs. De la Peña, 457 SCRA 538 (2005) — Cited for the purpose of the three-day notice requirement as avoiding surprises to the adverse party.

• Sections 4 and 5, Rule 15, Rules of Court — Section 4 (Hearing of Motion) requires that every written motion required to be heard be set for hearing by the applicant, with notice served to ensure receipt by the other party at least three days before the hearing date. Section 5 (Notice of Hearing) requires that the notice be addressed to all parties concerned and specify the time and date of hearing, not later than ten days after filing of the motion. The Court applied these provisions to determine whether NFA's Motion for Reconsideration was pro forma, ultimately holding that while the provisions are mandatory, substantial compliance was achieved under the circumstances.

Justices Angelina Sandoval-Gutierrez, Renato C. Corona, Conchita Carpio Morales, and Cancio C. Garcia concurred.