Vlason Enterprises Corporation vs. Court of Appeals

A default judgment cannot bind a defendant who was never validly served summons, never declared in default, and against whom no cause of action was alleged in the complaint; furthermore, a default judgment cannot award relief different in kind or greater in amount than that prayed for. The Court held that service of summons on the secretary of a corporation's president is invalid when the secretary is an employee of a separate corporate entity, as piercing the corporate veil cannot be resorted to for service of process. The Court also held that while a motion without a notice of hearing is generally a mere scrap of paper, an exception applies where rigid application would result in manifest injustice, such as when the movant was never validly summoned and had no knowledge of the adverse party's current counsel.

M/V Star Ace, a vessel represented by Poro Point Shipping Services for Omega Sea Transport Company, sought permission to unload cargo at the Philippine Ports Authority (PPA) compound in San Fernando, La Union. Customs personnel seized the vessel and cargo on suspicion of smuggling. While seizure proceedings were pending, typhoons caused the vessel to run aground. Private respondent Duraproof Services entered into a salvage agreement with the vessel's authorized representative. After the Bureau of Customs forfeited the vessel and cargo, Duraproof filed a petition for certiorari, prohibition, and mandamus in the Regional Trial Court (RTC) of Manila to enforce its preferred salvor's lien, impleading multiple parties including VEC.

• The Salvage Dispute: Private respondent Duraproof Services entered a salvage agreement for M/V Star Ace. After the Bureau of Customs forfeited the vessel and cargo, Duraproof filed a petition with the RTC to enforce its salvor's lien.
• Impleading VEC: Duraproof amended its petition to include VEC, represented by its president Vicente Angliongto. However, the petition contained no specific allegation of ultimate facts constituting a cause of action against VEC, nor any prayer for relief against it.
• Service of Summons: Summons was served on Betty Bebero, secretary of Angliongto. Bebero, however, was an employee of Vlasons Shipping, Inc. (VSI), a corporate entity separate and distinct from VEC.
• Default and Judgment: The RTC denied an initial motion to declare all defendants in default but later declared several foreign defendants in default. No order of default was ever issued against VEC. Nevertheless, the RTC rendered judgment on February 18, 1991, ordering VEC to pay P3,000,000.00 in damages based on ex parte evidence presented by Duraproof.
• Execution and Levy: Duraproof moved for execution, and the RTC issued a writ. Sheriffs levied upon VEC's vessels (tugboat Den Den and barges FC99 and Lawin) and sold them at auction.
• Motion for Reconsideration: VEC filed a motion for reconsideration, which the RTC granted, setting aside the default judgment against VEC. Duraproof then sought relief from the CA, which nullified the RTC's orders and upheld the original judgment's execution against VEC.

• Petitioner VEC argued that the RTC never acquired jurisdiction over its person because (1) it was not properly impleaded in the title of the complaint, (2) summons was invalidly served on an employee of a separate corporation (VSI), and (3) no new summons was served for the amended petitions.
• Petitioner contended that it was never declared in default, rendering any default judgment against it void.
• Petitioner maintained that the judgment was fatally defective because the damages awarded were not prayed for in the complaint and no filing fees were paid for such unpleaded damages.
• Petitioner asserted that its motion for reconsideration was timely and not a mere scrap of paper despite the notice of hearing defect, thereby tolling the reglementary period for appeal.

• Respondent Duraproof Services countered that the RTC Decision had become final and executory because VEC's motion for reconsideration was a mere scrap of paper lacking a proper notice of hearing addressed to Duraproof's current counsel.
• Respondent argued that there was no need to serve summons anew for the amended petition impleading VEC, citing the rule that amended pleadings supersede the original without requiring new summons if jurisdiction has already been acquired.
• Respondent maintained that the trial court had validly acquired jurisdiction over VEC and that the default judgment was proper.

• Procedural Issues: Whether the RTC Decision became final and executory as against VEC despite the filing of a motion for reconsideration that lacked a proper notice of hearing; whether the levy and execution on VEC's properties were valid.
• Substantive Issues: Whether the RTC acquired jurisdiction over VEC through service of summons on the secretary of VEC's president who was employed by a separate corporation; whether a default judgment can bind a party that was never declared in default and against whom no cause of action was pleaded; whether a default judgment can award relief not prayed for in the complaint.

• Procedural: The Court ruled that VEC's motion for reconsideration was not a mere scrap of paper despite the defective notice of hearing. While a motion without notice of hearing is generally pro forma, exceptions exist where rigid application results in manifest injustice. VEC was not validly summoned and thus unaware of the parties and counsels; furthermore, Duraproof's counsel was furnished a copy in open court and did not object. Consequently, the motion tolled the reglementary period, and the RTC Decision did not become final as against VEC. The levy and execution on VEC's properties were declared null and void.
• Substantive: The Court held that the RTC never acquired jurisdiction over VEC. Service of summons on the secretary of VEC's president was invalid because the secretary was an employee of VSI, a separate corporate entity; piercing the corporate veil cannot be used to justify service of summons. Because the initial service was invalid, new summons was required for the amended petition. The Court also ruled that the default judgment was void as against VEC because the RTC never declared VEC in default, nor authorized ex parte evidence against it. Finally, the Court held that even assuming VEC was properly in default, the RTC could not award P3,000,000 in damages because the complaint contained no prayer for damages against VEC; a default judgment cannot grant relief different in kind or greater in amount than that prayed for.

• Service of Summons on Domestic Corporations — Summons must be served on officers, agents, or employees sufficiently integrated with the corporation to ensure notice of the action reaches the corporation. Service on the secretary of the corporation's president is valid only if the secretary is an employee of the corporation sued, not of a separate corporate entity. Piercing the corporate veil is improper for the purpose of service of summons.
• Effect of Amended Pleading on Jurisdiction — When a court has not yet acquired jurisdiction over a defendant because of invalid service of summons, new summons must be served for the amended complaint. The necessity of new summons depends on whether jurisdiction over the person has already been acquired.
• Notice of Hearing in Motions — A motion lacking a notice of hearing is generally a mere scrap of paper that does not toll the period to appeal. However, exceptions apply: (1) where rigid application results in manifest failure or miscarriage of justice; (2) where substantial justice will be served; (3) where the resolution is addressed to the court's sound discretion; and (4) where the injustice to the adverse party is not commensurate to the movant's thoughtlessness.
• Default Judgments — An order of default is a condition sine qua non for a valid default judgment. A default judgment cannot exceed the amount or be different in kind from that prayed for in the complaint. The plaintiff must still prove their claim, and the court cannot receive evidence for relief not sought in the pleadings.

• "Summons to a domestic or resident corporation should be served on officers, agents or employees, who are responsible enough to warrant the presumption that they will transmit to the corporation notice of the filing of the action against it."
• "The piercing of the corporate veil cannot be resorted to when serving summons... Quite the contrary, the piercing of the corporate veil in this case will result in manifest injustice."
• "It is not the change of cause of action that gives rise to the need to serve another summons for the amended complaint, but rather the acquisition of jurisdiction over the persons of the defendants. If the trial court has not yet acquired jurisdiction over them, a new service of summons for the amended complaint is required."
• "The issuance of an order of default is a condition sine qua non in order that a judgment by default be clothed with validity."
• "A judgment by default cannot decree a relief not prayed for... The plaintiff cannot be granted an award greater than or different in kind from that specified in the complaint."

• Pan-Asiatic Travel Corp. v. Court of Appeals, 164 SCRA 623 (1988) — Cited by the CA for the proposition that new summons is unnecessary for amended pleadings. The Court distinguished this, noting that because VEC was never validly summoned, new summons was required.
• Manchester Development Corporation v. Court of Appeals, 149 SCRA 562 (1987) — Cited regarding the rule that courts acquire jurisdiction only upon payment of docket fees.
• Sun Insurance Office, Ltd. v. Asuncion, 170 SCRA 274 (1989) — Cited modifying Manchester, holding that additional filing fees for awards not specified in the pleading constitute a lien on the judgment and do not invalidate the award.
• Goldloop Properties, Inc. v. Court of Appeals, 212 SCRA 498 (1992) — Cited as an exception to the strict application of the notice of hearing rule, applying it where rigid application would result in manifest injustice.

• Rule 15, Sections 4 and 5, Rules of Court — Govern notice of hearing for motions. The Court held that while strict compliance is generally required, exceptions exist to prevent manifest injustice.
• Rule 18, Section 1, Rules of Court — Governs judgment by default. The Court held that a declaration of default is a condition sine qua non for a valid default judgment, and the court can only grant relief warranted by the complaint and facts proven.
• Rule 18, Section 5, Rules of Court — Provides that a judgment against a party in default shall not exceed the amount or be different in kind from that prayed for. The Court applied this to nullify the damages award against VEC, which was not prayed for in the complaint.
• Rule 7, Section 3, Rules of Court — Requires the inclusion of names of all parties in the title of the complaint. The Court held that while this is a formal requirement, non-inclusion is not fatal if the body of the petition indicates the party was made a defendant.

Purisima, J., and Gonzaga-Reyes, J., concurred. Vitug, J., concurred in the result.