Title
Viron Transportation Co., Inc. vs. Court of Appeals
Case Decision Date
G.R. No. 117020 Apr 4, 2003
A collision between two buses led to a damages claim. Trial court declared respondents in
default, but appellate court reversed, citing unauthorized second pre-trial and due process
violations. Supreme Court affirmed appellate decision.
448 Phil. 706
SECOND DIVISION
[ G.R. No. 117020, April 04, 2003 ]
VIRON TRANSPORTATION CO., INC., PETITIONER, VS. COURT OF APPEALS, PANTRANCO
NORTH EXPRESS INC. AND DAMASO V. VENTURA, RESPONDENTS.
DECISION
CALLEJO, SR., J.:
This is a petition for review of the Decision1 of the Court of Appeals in CA-G.R. CV No. 39066
reversing the Decision2 of the Regional Trial Court of Manila, Branch 41, in Civil Case No. 91-
58888 and remanding the case to the trial court for further proceedings.
The Antecedent Proceedings
On October 9, 1991, petitioner Viron Transportation Co., Inc., filed a complaint for damages
against respondents Pantranco North Express Co., Inc. and Damaso V. Ventura, docketed as
Civil Case No. 91-58888, with the Regional Trial Court of Manila, Branch 41. The petitioner
alleged, inter alia, in its complaint a quo that:
2. - That plaintiff (herein petitioner) being engaged in a land transportation business is the
registered owner of a passenger bus identified as Viron Transit Bus No. 58 with Plate No.
AVC-255;
3. - That defendant (respondent) Pantranco, being engaged in transportation business, is the
registered owner of Pantranco Bus No. 1104, Plate No. AVH-112 while defendant (respondent)
Ventura is the driver and person-in-charge of a northbound Pantranco Bus No. 1104 bearing
Plate No. AVH-112 on October 4, 1991;
4. - That on 4 October 1991 at 11:45 A.M. or thereabout, while said Viron Transit Bus No. 58
with Plate No. AVC-255 driven prudently and slowly by plaintiffas regular driver-employee
Alberto Casino, then proceeding slowly towards the north direction from the right shoulder
(eastern shoulder) of the National Highway with its left signal lights on at Brgy. Legaspi, San
Manuel, Tarlac, said defendant while driving said Pantranco Bus No. 1104 in a reckless and
imprudent manner hit and bumped from behind the rear left portion of said Viron Transit
Bus No. 58, thereby causing actual damage to herein plaintiff in the amount of P34,900.00
representing costs of repair and/or replacement of parts, plus labor as well as loss of
expected income;
5. - That by reason of the recklessness, imprudence and negligence of defendants and for
their failure to pay plaintiff the damages which the latter sustained despite repeated
demands, herein plaintiff was forced to engaged (sic) the services of counsel to file the
instant complaint at an agreed honorarium of 25% of the total claim hereof as and for
attorneyas fees;
6. - That to set an example for public good so that others who are similarly situated or
minded must, in the exercise of their right and performance of their duties, act with outmost
caution and extra care in handling his assigned vehicle, said defendant should be made to
pay plaintiff an amount of no less than P50,000.00 as exemplary damages;
7. - That the incident would have not ensued had defendant Pantranco North Express, Inc.
exercised due diligence of a good father of a family in selecting and supervising its driver,
herein defendant Damaso Ventura.3
The petitioner prayed therein as follows:
WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing a
judgment be rendered in favor of plaintiff and against defendants, ordering the defendants to
pay jointly and severally plaintiff the following:
a. P34,900.00, representing cost of materials, replacement of parts, labor and unearned
income of plaintiff;
b. P50,000.00 as exemplary damages;
c. 25% of the total claim hereof as and for attorneyas fees; and
d. Cost of litigation.
General relief is prayed therefor.4
The respondents, through counsel, Atty. Ricardo L. Saclayan, interposed special and
affirmative defenses in their answer to the complaint, thus:
SPECIAL and/or AFFIRMATIVE DEFENSES
5. Plaintiff has no cause of action against defendants;
6. The direct and proximate cause of the subject accident was due to the recklessness,
imprudence and negligence of the plaintiffas driver-employee a Alberto Casino and of
plaintiff itself, for failure to exercise the required diligence in the selection, supervision and
control of its employees including and particularly said driver A. Casino;
7. Defendant a Damaso Ventura is a professional, experienced and skilled driver. He has been
very careful and prudent, both before and during the subject accident;
8. Defendant a Pantranco North Express, Inc. has always exercised the due diligence of a
good father of the family in the selection, supervision and control of all its employees
including its driver, Damaso Ventura;
9. Plaintiffas claim is baseless, excessive, imaginary and speculative and filed for the purpose
of harassment;5
The respondents also incorporated in their answer compulsory counterclaims for the
amount of P20,000.00.
On December 9, 1991, the trial court issued a notice of pre-trial conference on January 10,
1992.6 However, the pre-trial was reset to February 7, 1992 at 8:30 a.m. on joint motion of the
parties on the ground that they were negotiating for the amicable settlement of the case.7
During the pre-trial on February 7, 1992, Ma. Josefina T. Payongayong appeared and informed
the court that she was representing Atty. Antonio P. Pekas, the counsel of the respondents,
and prayed for a resetting on the ground that said lawyer was not available for the pre-trial.
However, the court denied the motion upon finding that the counsel of record of the
respondents was Atty. Saclayan, not Atty. Pekas.
The court issued an order on said date declaring the respondents as in default and setting the
reception, ex parte, of the evidence of the petitioner on March 13, 1992.8 During the hearing,
the petitioner presented Alberto Casino and marked its documentary evidence. However, the
petitioner failed to complete its evidence and thus prayed for a continuance. The court
granted the motion and set the case for hearing for the continuation of the presentation of
petitioneras evidence on March 26, 1992.9 However, on March 24, 1992, respondent
Pantranco Co., Inc., through Atty. Pekas, filed a motion to lift order of default. Appended to the
motion was the Secretaryas Certificate that said counsel was authorized by the respondent
company to
a represent the corporation in the pre-trial proceedings of the said case, to negotiate or enter
into any compromise agreement pertaining to the same, and to execute any document
pertinent thereto, in accordance with Section 1, Rule 20 of the Revised Rules of Court. They
are also authorized to represent the corporation during the trial of the said case.10
On April 10, 1992, the court issued an order granting the motion and lifting its order of default
against the respondents.11 On April 27, 1992, the branch clerk of court issued a
mimeographed notice of hearing on May 22, 1992. However, typewritten on the notice were
the words aPre-Trial Conference.a12 The respondents and Atty. Saclayan, counsel of
respondent Ventura, received on May 5, 1992 their respective copies of said notice.
During the pre-trial conference on May 22, 1992, only petitioneras counsel appeared. Neither
respondent Ventura nor Atty. Saclayan and Atty. Pekas appeared. On petitioneras motion, the
court issued an order declaring the respondents as in default and allowing the petitioner to
continue presenting its evidence, ex parte, on June 19, 1992.13 The petitioner presented Atty.
Orlando N. Asuncion and Maximo CandaAo, its manager, as witnesses. The petitioner
forthwith offered its documentary evidence and rested its case. The court issued an order on
the same day declaring that the case was submitted for decision as of said date.14
On July 13, 1992, the Office of the Government Corporate Counsel (OGCC) entered its
appearance as counsel for the respondents.15 On July 16, 1992, the court rendered judgment
in favor of the petitioner, the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendants ordering the defendants to pay plaintiff the sum of P25,900.00 as and by way of
actual damage and the further sum of P5,000.00 as and by way of attorneyas fees and
expenses of litigation.
Costs against the defendants.
SO ORDERED.16
On July 24, 1992, the respondents, through the OGCC, filed a motion to lift and/or set aside
the trial courtas Order of Default, dated May 22, 1992, alleging, inter alia, that:
1. Defendant is now a government-owned and controlled corporation and as such it is
represented by the Office of the Government Corporate Counsel, the statutory counsel of all
government-owned and controlled corporations;
2. Prior to the appearance of the OGCC, Defendants were represented by a private counsel in
the person of Atty. Ricardo L. Saclayan, the counsel of record;
3. Because of the COA and statutory requirements that government-owned and controlled
corporations must be represented by the OGCC, Defendant Pantranco recently endorsed all
its cases to the OGCC;
4. Because of the numerous cases involved in the turn over, the previous counsel of record
failed to move for a reconsideration of the default order. Thus, when the instant case reached
the OGCC, the undersigned counsel made the discovery and is thus filing the instant motion.
The failure of the previous counsel may be considered as excusable negligence;17
The respondents prayed in their motion that:
WHEREFORE, premises considered, it is respectfully prayed that the order of default issued
by this Honorable Court be reconsidered and set aside and in lieu thereof Defendantsa rights
be restored and that, subsequently, Defendants be allowed to cross-examine the witnesses of
the plaintiff and to present their evidence in support of their defense.
Further relief and remedies which may be deemed just and equitable under the premises are
likewise prayed for.18
The respondents set the motion for hearing on August 7, 1992 at 8:30 a.m. appending thereto
an affidavit of merit reiterating their special and affirmative defenses in their answer to the
complaint.19
On July 27, 1992, the trial court issued an order merely noting the said motion considering
that it had already rendered a judgment against respondents.20 The respondents received a
copy of the trial courtas decision on July 31, 1992 and on August 10, 1992, they filed their
notice of appeal therefrom to the Court of Appeals.21
In their petition filed with the Court of Appeals, the respondents assailed the decision of the
trial court contending that:
THE LOWER COURT ERRED IN DECLARING THE DEFENDANTS AS IN DEFAULT AND IN
NOT LIFTING THE ORDER DECLARING DEFENDANT AS IN DEFAULT.
II
THE LOWER COURT ERRED IN FINDING THE DEFENDANTS LIABLE FOR DAMAGES22
On the first assignment of error, the respondents averred that they had meritorious defenses
and it behooved the trial court to liberally apply the Rules of Court in their favor and to lift its
Order of Default dated May 22, 1992 and set aside its judgment so that the respondents could
cross-examine petitioneras witnesses and adduce evidence on their defenses. On the second
assignment of error, the respondents averred that the proximate cause of the collision was
the negligence of respondent companyas driver, Alberto Casino; hence, the petitioner was
not entitled to damages. The respondents prayed that, after due proceedings, judgment be
rendered in their favor as follows:
PRAYE R
WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be rendered
reversing the decision of the lower court dated July 16, 1992, issued in favor of the defendant-
appellant as follows a
a) Ordering the court a quo to lift the order declaring defendant as in default.
b) Allowing the defendant-appellant to present its evidence.
c) Ordering the plaintiff-appellee to pay the defendant-appellant the amount of twenty
thousand pesos (P20,000.00) by way of attorneyas fees and expenses of litigation.
Such other reliefs and remedies as may be deemed just and equitable are likewise prayed
for.23
On the other hand, the petitioner averred in its brief that the proper remedy of the
respondents, after service of the trial courtas decision, was to file a motion for a new trial
under Rule 37 of the Rules of Court and not a motion to lift the May 22, 1992 Order of Default
conformably with the decision of this Court in Circle Finance Corporation v. Court of
Appeals.24 The petitioner further asserted that the respondents were not entitled to a liberal
application of the Rules of Court because their motion to lift order of default was merely
dilatory.
On the second assignment of error, the petitioner posited that the respondents could not
obtain relief from the Court of Appeals conformably with the decision of this Court in
Construction Service of Australia (Philippines) v. Court of Appeals,25 the respondents having
been declared as in default.
On June 26, 1994, the Court of Appeals rendered a decision reversing the decision of the trial
court and its Order dated May 22, 1992 declaring the respondents as in default. The appellate
court ordered the remand of the case to the trial court for further proceedings:
aWHEREFORE, PREMISES CONSIDERED, the decision appealed from is hereby REVERSED
and the order declaring defendant-appellant as in default is hereby set aside. Let the records
of this case be remanded to the trial court for further proceedings.
SO ORDERED.a26
The Court of Appeals declared that the trial court committed reversible error in setting the
case for a second pre-trial conference on May 22, 1992 after lifting its Order dated February 7,
1992. Citing the decision of this Court in Development Bank of the Philippines v. Court of
Appeals,27 the Court of Appeals declared that a second pre-trial conference after an order of
default had been lifted was not sanctioned by the Rules of Court and case law. What the trial
court should have done after lifting its Order of Default dated February 7, 1992 was to set the
case for hearing on the merits with due notice to the parties.
The petitioner moved for a reconsideration of the decision of the Court of Appeals
contending that the motion to lift order of default of the respondents was filed only after the
trial court had rendered its decision.28 The proper remedy of the respondents was allegedly
to file a motion for new trial under Rule 37 of the Rules of Court. The Court of Appeals denied
the motion in its Resolution dated August 30, 1994.29
The petitioner forthwith filed with this Court a petition for review of the decision and
resolution of the Court of Appeals under Rule 45 of the Rules of Court.
The petitioner avers that the Court of Appeals committed reversible error in (a) resolving an
issue which was not assigned by respondents as error in their brief; (b) not finding that the
pre-trial on May 22, 1992 was merely a continuation of the aborted pre-trial on February 7,
1992; and (c) setting aside the proceedings including the trial courtas Order dated May 22,
1992 and its Decision dated July 24, 1992.
For their part, the respondents argue that the Court of Appeals did not commit any grave
abuse of its discretion in setting aside the pre-trial conference on May 22, 1992 and the order
of the trial court on said date and its decision in light of the finding of the Court of Appeals
that the pre-trial conference on May 22, 1992 was the second pre-trial and, hence, was not
sanctioned by the Rules of Court and case law.
The petition is barren of merit.
On the first issue, the petitioner avers that the respondents in their brief with the Court of
Appeals did not assail the propriety or validity of the pre-trial conference set on May 22, 1992.
The Court of Appeals was allegedly precluded from considering and resolving an issue not
assigned as error by the respondents in their brief. The Court of Appeals nevertheless set
aside the pre-trial conference set on May 22, 1992 and the order of default of the trial court
on said date and its decision on the ground that the pre-trial on May 22, 1992 was not
sanctioned by the Rules of Court and case law. The petitioner submits that in so doing the
Court of Appeals committed reversible error.
We do not agree with the petitioner. While it may be true that in their brief with the Court of
Appeals the respondents did not assign as error the propriety of the pre-trial conference on
May 22, 1992, however, the Court of Appeals was not proscribed from delving into and
resolving the said issue. In Catholic Bishop of Balanga v. Court of Appeals,30 we held that:
Guided by the foregoing precepts, we have ruled in a number of cases that the appellate court
is accorded a broad discretionary power to waive the lack of proper assignment of errors and
to consider errors not assigned. It is clothed with ample authority to review rulings even if
they are not assigned as errors in the appeal. Inasmuch as the Court of Appeals may consider
grounds other than those touched upon in the decision of the trial court and uphold the same
on the basis of such other grounds, the Court of Appeals may, with no less authority, reverse
the decision of the trial court on the basis of grounds other than those raised as errors on
appeal. We have applied this rule, as a matter of exception, in the following instances:
(1) Grounds not assigned as errors but affecting jurisdiction over the subject matter;
(2) Matters not assigned as errors on appeal but are evidently plain or clerical errors within
contemplation of law;
(3) Matters not assigned as errors on appeal but consideration of which is necessary in
arriving at a just decision and complete resolution of the case or to serve the interests of
justice or to avoid dispensing piecemeal justice;
(4) Matters not specifically assigned as errors on appeal but raised in the trial court and are
matters of record having some bearing on the issue submitted which the parties failed to
raise or which the lower court ignored;
(5) Matters not assigned as errors on appeal but closely related to an error assigned; and
(6) Matters not assigned as errors on appeal but upon which the determination of a question
properly assigned, is dependent.
In this case, the respondents assailed the order of the trial court dated May 22, 1992 declaring
them as in default and prayed that the order and decision of the trial court be set aside and
the case remanded to the trial court to enable them to cross-examine petitioneras witnesses
as well as to adduce their evidence. The issue of the propriety of a second pre-trial
conference on May 22, 1992 after the trial court lifted its February 7, 1992 Order of Default
was intertwined with the issues posed by the respondents in their brief.
It was proper for the Court of Appeals to resolve the issue on the propriety of the pre-trial
conference on May 22, 1992 to enable said court to arrive at a just and complete resolution of
the appeal and serve the interests of justice. Besides, the petitioner did not assail in its
motion for reconsideration filed with the Court of Appeals the actuation of said court of
delving into and resolving the issue of the propriety of the trial court setting a second pre-
trial conference after lifting its February 7, 1992 Order. The petitioner merely alleged in its
motion for reconsideration that the proper remedy of the respondents was to file a motion
for new trial under Rule 37 of the Rules of Court and not to file a motion to lift the May 22,
1992 Order of the trial court.
On the second issue, we do not agree with the petitioneras contention that the pre-trial on
May 22, 1992 was only a continuation of the aborted pre-trial conference on February 7, 1992.
Nor do we agree with the petitioneras assertion that the respondents agreed to a pre-trial
conference on May 22, 1992. When the trial court issued its February 7, 1992 Order declaring
the respondents as in default and allowed the petitioners to adduce its evidence, ex parte, the
court terminated the pre-trial. Indeed, the petitioner commenced presenting its evidence on
March 13, 1992 although it failed to complete its evidence and rest its case on said date.31
When the trial court lifted on April 10, 1992 its February 7, 1992 Order and set the case for a
pre-trial conference on May 22, 1992, the said pre-trial conference was the second set by the
trial court and not merely a continuation of the pre-trial terminated on February 7, 1992. The
lifting on April 10, 1992 of the February 7, 1992 Order of the court had the effect of restoring to
the respondents their right to notice of subsequent proceedings and to take part in the trial.
The April 10, 1992 Order of the trial court did not revert the action to the pre-trial stage or
authorize much less render mandatory a second pre-trial:
The defendant Pioneer Insurance & Surety Corp, having complied with the order of the Court
to appear and attend this pre-trial, and had manifested its opposition to settling the case
amicably, said party may no longer be compelled to attend a second pre-trial hearing, and
neither may it be punished by the court by its order declaring said defendant as in default.
The mandatory character of a pre-trial and the serious consequences confronting the parties
in the event that each party fails to attend the same must impose a strict application of the
Rule such that where we find no authority for the Court to call another pre-trial hearing, as in
fact there is none in said Rule, the conclusion is inescapable that the respondent Judge
committed a grave and serious abuse of discretion and acted in excess of jurisdiction in
declaring defendant Pioneer Insurance & Surety Corp. as in default for failure to attend the
second pre-trial called by the Judge on February 29, 1972. In other words, there is nothing in
the Rules that empowers or authorizes the court to call a second pre-trial hearing after it has
called a first pre-trial duly attended by the parties, and lacking such authority, the court
perforce lacks the authority to declare a failure to prosecute on the part of plaintiff for failing
to attend such second pre-trial; it also lacks the authority to declare the defendant aas in
defaulta by reason of the latteras failure to be present at the said second pre-trial.32
Instead of setting the case for a second pre-trial on May 22, 1992, the trial court should have
set the case for hearing for the cross-examination by the respondents of the petitioneras first
witness and for it (petitioner) to present other witnesses and thereafter rest its case. By
setting the case for a second pre-trial, the trial court acted without authority; hence, the
notice of pre-trial conference issued by the branch clerk of court on April 25, 1992 setting the
pre-trial on May 22, 1992 and the trial courtas order of even date declaring the respondents
as in default for their failure to appear therein are null and void. Consequently, the judgment
of the trial court is likewise null and void. While it may be true that in Young v. Court of
Appeals,33 this Court held that the parties may agree to hold a second pre-trial after the first
pre-trial was aborted and the order of default of the court lifted, however, said ruling is not
applicable in this case because there is no proof on record that the respondents agreed to a
second pre-trial. Although the respondents received the April 27, 1992 Notice of Pre-Trial
Conference but did not file any motion to set aside the same, however, the omission did not
constitute consent to the second pre-trial. For if the respondents consented to a second pre-
trial, they should have appeared during the pre-trial conference set on May 22, 1992. The
respondents and their counsel did not.
In Circle Financial Corporation v. Court of Appeals,34 we held that upon service of a
judgment by default, the remedy of the losing party was to file a motion for a new trial under
Rule 37 of the old Rules of Court within the period for appeal in relation to Section 2 of Rule
41 of the same rules. However, said party is not precluded from appealing the judgment and
assailing the same for being contrary to the evidence or to the law even without first filing a
motion for new trial.35
In this case, the respondents interposed their appeal from the decision of the trial court to
the Court of Appeals and assailed therein the trial courtas judgment as contrary to the
evidence and law.
In fine, the Court of Appeals correctly held that the trial court acted without authority when it
set a second pre-trial conference on May 22, 1992, declared anew the respondents as in
default, received ex parte petitioneras evidence and rendered judgment based thereon. The
Court of Appeals likewise correctly ruled that the respondents were deprived of their right to
cross-examine the petitioneras witnesses and adduce evidence in their behalf. Consequently,
the nullification of the trial courtas May 22, 1992 Order and decision is proper.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decision, dated June 26,
1994, of the Court of Appeals in CA-G.R. CV No. 39066 is AFFIRMED. Costs against the
petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and Austria-Martinez, JJ., concur.
1Penned by Associate Justice Eugenio S. Labitoria with Associate Justices Emeterio C. Cui
and Fermin A. Martin, Jr. concurring.
2 Penned by Judge Domingo D. Panis.
3 Records, pp. 1-3.
4 Id. at 3.
5 Id. at 12.
6 Id. at 14.
7 Id. at 31.
8 Id. at 36.
9 Id. at 40.
10 Id. at 46.
11 Id. at 53.
12 Id. at 62.
13 Id. at 64.
14 Id. at 69.
15 Id. at 71.
16 Id. at 73.
17 Id. at 90-91.
18 Id. at 92.
19 Id. at 93-94.
20 Id. at 97.
21 Id. at 101.
22 CA Rollo, p. 20.
23 Id. at 23-24.
24 196 SCRA 166 (1991).
25 173 SCRA 344 (1989).
26 CA Rollo, p. 64.
27 169 SCRA 409 (1989).
28 CA Rollo, pp. 102-105.
29 Id. at 107.
30 264 SCRA 181 (1996).
31 Development Bank of the Philippines v. Court of Appeals, supra; Young v. Court of Appeals,
204 SCRA 584 (1991).
32 Development Bank of the Philippines v. Court of Appeals, supra.
33 Supra note 20.
34 Supra note 22.
35Sec. 2. Judgments or orders subject to appeal. a Only final judgments or orders shall be
subject to appeal. No interlocutory or incidental judgment or order shall stay the progress of
an action, nor shall it be the subject of appeal until final judgment or order is rendered for
one party or the other.
A judgment denying relief under Rule 38 is subject to appeal, and in the course thereof, a
party may also assail the judgment on the merits, upon the ground that it is not supported by
the evidence or it is contrary to law.
A party who has been declared in default may likewise appeal from the judgment rendered
against him as contrary to the evidence or to the law, even if no petition for relief to set aside
the order of default has been presented by him in accordance with Rule 38.
