MADRIGAL SHIPPING COMPANY, INC., PETITIONER, VS. JESUS G. OGILVIE, SALVADOR ORTILE, MIGUEL M. FERMIN, ANTONIO C. MILITAR AND THE COURT OF APPEALS, RESPONDENTS.

Jesus G. Ogilvie, Salvador Ortile, Miguel M. Fermin and
Antonio C. Militar brought an action in the Court of First Instance of
Manila to collect from the Madrigal Shipping Company, Inc., the
aggregate sum of P12,104.50 for salaries and subsistence from 19 March
to 30 September 1948 (Civil No. 8446, Annex A). The defendant moved for
the dismissal of the complaint on the ground of lack of jurisdiction
over the subject matter of the action (Annex B). The Court denied the
motion and directed the defendant to answer the complaint within ten
days from receipt of a copy of the order (Annex C). As the defendant
failed to answer the complaint as directed, upon motion of the
plaintiffs (Annex D) the Court declared it in default and set the case
for hearing on 30 September 1949 (Annex E). The defendant filed a
motion to set aside the order of default (Annex F) which was denied
(Annex I). A motion for reconsideration of the previous order (Annex J)
was likewise denied (Annex K). The defendant filed a petition for a
writ of certiorari with preliminary injunction in this Court to annul
and set aside the order of default, which was dismissed for the reason
that appeal was the proper remedy (Annex L).^[1] The trial
court then proceeded to hear the plaintiffs’ evidence and after the
hearing it rendered judgment dismissing the plaintiffs’ complaint upon
the sole ground that the plaintiffs failed to prove that the defendant
is a corporation duly organized and existing under the laws of the
Philippines. A motion was filed praying that plaintiffs be allowed to
submit evidence to prove that the defendant is a duly organized and
existing corporation under the laws of the Philippines (Annex O), which
was granted (Annex P). After hearing the additional evidence presented
by the plaintiffs showing that the defendant is an organized and
existing juridical entity under the laws of the Philippines, the trial
court dismissed the complaint on the ground that the evidence was not
new but forgotten (Annex Q). The plaintiffs appealed to the Court of
Appeals. The judgment appealed from was reversed and the defendant was
ordered to pay Jesus G. Ogilvie the sum of P3,226.50 and Salvador
Ortile, Miguel M. Fermin and Antonio C. Militar the sum of P2,934 each.
The defendant has brought the case to this Court by way of certiorari
to have the judgment of the Court of Appeals reviewed.

The respondents herein, appellants in the Court of Appeals,
did not furnish the herein petitioner, defendant in the court of first
instance, with a copy of their brief in the Court of Appeals for the
reason that as the petitioner had been declared in default by the trial
court it had lost its standing in court and hence was not entitled to
service of appellants’ brief on appeal. In a special division of five
justices of the Court of Appeals, a majority of four and one dissenting
upheld the respondents contention that the case was deemed submitted
and ready for disposition or judgment, and proceeded to determine the
case on appeal without the petitioner’s brief, a view now assailed by
the petitioner who claims that it had been deprived of its day in
court.

In Lim To Co vs. Go Fay, 80 Phil. 166, interpreting section 9, Rule 27, which provides:

No service of papers shall be necessary on a party in default
except when he files a motion to set aside the order of default, in
which event he is entitled to notice of all further proceedings, this
Court held that “a defendant in default is not entitled to
notice of the proceedings until the final termination of the case, and
therefore he has no right to be heard or file brief or memoranda on
appeal.”^[1]

A defendant in default loses his standing in or is
considered out of Court, and consequently can not appear in court;
adduce evidence; and be heard, and for that reason he is not entitled
to notice. If he is not entitled to notice of the proceedings in the
case and to be heard, he can not appeal from the judgment rendered by
the court on the merits, because he can not file a notice of appeal,
and file an appeal bond and the record on appeal, for approval by the
court. The only exception provided by law is when the defendant in
default files a motion to set aside the order of default on the grounds
stated in Rule 38 “in which event he is entitled to notice of
all further proceedings.” That a defendant in default can not
be heard in the suit, not only in the trial court but also in the final
hearing, that is, on appeal which is part of the proceedings in a suit,
is the ruling laid down for guidance of courts and practitioners by
this Court in the case of Velez vs. Ramos, 40 Phil.,
787, * * *. (Lim To Co vs. Go Fay,
supra, p. 169.)

And the remedy available to a party who was declared in
default to regain his standing in court and be entitled once more to
notice of the proceedings is to move for the setting aside of the order
of default under section 2, Rule 38 and to appeal therefrom if
denied.^[2]

Counsel argue that an order of default being interlocutory,
the petitioner could not appeal therefrom. True, but from a denial of a
motion to set aside an order of default, as the petitioner’s
“urgent motion to set aside order of default” (Annex
F), which may be deemed to fall under section 2, Rule 38, the
petitioner could have appealed. Instead of taking an appeal from such
denial, the petitioner chose to bring the matter to this Court by a
petition for a writ of certiorari with a prayer for a writ of
preliminary injunction which was correctly dismissed for the remedy was
an appeal from the order denying the motion to set aside the order of
default entered against the petitioner because of mistake or excusable
neglect. Not having appealed from the order denying the motion to set
aside the order of default under section 2, Rule 38, the order of
default remained in force with all the consequences that the party
against whom it had been entered must suffer. One of them is the loss
of the right to be served with the brief of tjie herein respondents,
appellants in the Court of Appeals.

Turning now to the merits of the case, the Court of Appeals
found that the services of Jesus G. Ogilvie, Salvador Ortile, Antonio
C. Militar and Miguel M. Fermin were engaged by Manuel
Mascuñana, master or captain employed by the petitioner
Madrigal Shipping Company, Inc., to man and fetch the vessel
“S.S. Bridge” from Sasebu, Japan, as evidenced by a
contract executed on 24 December 1947 in Manila (Exhibit A), the
pertinent provision of which is as follows:

(a) The several persons whose names are hereto subscribed,
and whose descriptions are contained herein, engaged as seamen, hereby
agree to serve on board the S.S. Bridge of which M.
MASCUÑANA is master, in the several capacities expressed
against their respective names, on a voyage from THE CREW WILL ENPLANE
FROM MANILA TO JAPAN. IN JAPAN THE CREW WILL MAN THE SHIP TO MANILA.
THIS CONTRACT EXPIRES ON THE ARRIVAL OF THIS BOAT AT THE PORT OF
MANILA. EXTENSION OF THIS CONTRACT IS VALID ONLY VWHEN SIGNED BY THE
OFFICIAL SKIPPER.

On 7 January 1948, another contract of similar terms and
conditions was executed in Manila before the Consul General of the
Republic of Panama (Exhibit A-1) for the reason that the S.S.
Bridge was registered under the laws of that
Republic. Pursuant thereto the respondents were flown to Sasebu, Japan,
and they manned the vessel out of the port of Sasebu. On 16 March 1948,
when the vessel reached Hongkong, the respondents were dismissed and
replaced by a crew of Chinese nationality. The respondents were flown
back to Manila and paid their respective salaries up to the date of
their dismissal. The total sum of P12,104.50 which the respondents seek
to collect represents salaries and subsistence allowance from 17 March
1948 to 30 September 1948 when the vessel arrived in the port of
Manila.

In its motion to dismiss the complaint the petitioner invoked
and relied solely upon lack of jurisdiction of the court over the
subject matter of the action and did not deny ownership of the
S.S. Bridge nor disavow the authority of Manuel
Mascuñana, its captain, to engage the services of the
respondents. More, in the answer of the petitioner (Annex H) attached
to its “urgent motion to set aside order of default”
(Annex F), the averments under its special defenses substantially admit
the allegations of the respondents’ complaint. The termination of the
services of the respondents as members of the crew was not due to their
fault. Upon the ship’s arrival in Hongkong it was found that repairs
had to be made on her before she could proceed on her voyage to Manila.
A motion to dismiss an action must include all the grounds available at
the time of its filing, and all grounds not so included are deemed
waived, except lack of jurisdiction over the subject matter.^[1] In the same
motion to dismiss the complaint the petitioner, defendant in the court
of first instance, alleged that “On the date of the execution
of the service contract between the plaintiffs and the
defendant (January 7, 1948), the subject vessel was in
Sasebu, Japan, * * *,” thereby implying that the petitioner in
truth and in fact contracted the services of the respondents,
plaintiffs in the court of first instance, to man its vessel.
Furthermore, Moises J. Lopez, manager of the defendant shipping
company, testified that he recalled having contracted the services of
several persons to form a crew to man the S.S. Bridge belonging to the
petitioner. How could the latter now disclaim ownership of the S.S.
Bridge and the authority of Manuel Mascunana, its
captain, to engage the services of the respondents?

Granting that the petitioner may not be sued for lack of
juridical personality, as held by the trial court, and pressed by its
counsel in this Court, it is now estopped from denying the existence of
such personality to evade responsibility on the contract it had entered
into, because it has taken advantage of the respondents’ services and
has profited thereby. Moreover, the trial court committed an error when
it refused to take into account the evidence presented by the
respondents to prove that the petitioner was a corporation duly
organized and existing under the laws of the Philippines, the documents
showing that fact having been reconstituted only after the first
hearing of the case, upon the sole ground that it was not new but
forgotten evidence. Such ground could be relied upon to deny a motion
for new trial, but not after the motion had been granted, for official
or public documents presented to show or prove the juridical
personality or entity of a party to an action not known or available at
the first hearing could not be ignored. The trial court could not close
its eyes to reality.

Again, granting that it was not the Madrigal Shipping Company,
Inc., that owned the S.S. Bridge but the Madrigal
& Company, a corporation with a juridical personality distinct
from the former, yet as the former was the subsidiary of the latter,
and that the former was a business conduit of the latter, as found by
the Court of Appeals, the fiction of corporate existence may be
disregarded and the real party ordered to pay the respondents their
just due.

The services of the respondents were engaged by the petitioner
to man its vessel for a determinate time or voyage, with an express
stipulation that “this contract expires on the arrival of this
boat at the port of Manila.” Article 605 of the Code of
Commerce provides:

If the contracts of the captain and members of the crew with
the ship agent should be for a definite period or voyage, they may not
be discharged until after the fulfillment of their contracts except by
reason of insubordination in serious matters, robbery, theft, habitual
drunkenness, or damage caused to the vessel or its cargo through malice
or manifest or proven negligence.

Not having been discharged for any of the causes enumerated in
the foregoing article, the respondents are entitled to the amounts they
respectively seek to collect from the petitioner.

The petition is denied, with costs against the petitioner.

Paras, C. J., Bengzon, Montemayor, Bautista Angelo,
Labrador, Concepcion, Reyes, J. B. L., and Endencia,
JJ., concur.

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^[1]Minute
Resolution of 29 December 1949, Madrigal Shipping , Inc. va. Pecson,
G. R. No. L-3484.

^[1]Sitchon
vs. Provincial Sheriff of Occidental Negros, 45 Off.
Gaz. Supp.No. 9, 25; 80 Phil., 397, Gequillana vs.
Buenaventura, 48 Off. Gaz., 63, 87 Phil., 301.

^[2]Tecson
vs. Melendres, 88 Phil., 703.

^[1]Section 8,
Rule 26; Rili vs. Chunaco, 48 Off. Gaz. 614; 87
Phil, 545.