INOCENCIA DELUAO AND FELIPE DELUAO, PLAINTIFFS-APPELLEES, VS. NICANOR CASTEEL AND JUAN DEPRA, DEFENDANTS, NICANOR CASTEEL, DEFENDANT-APPELLANT.

Inocencia Deluao and Felipe Deluao versus Nicanor Casteel and Juan Depra

The Case

This is the case of Inocencia Deluao and Felipe Deluao versus Nicanor Casteel and Juan Depra. The spouses Deluao sued Casteel for specific performance and damages, claiming that Casteel broke a contract of service by which Inocencia Deluao financed the construction of a fishpond and was to administer it, while Casteel was to serve as manager and sole buyer of its produce. The case matters for two reasons. First, it is a due process case: it teaches when a party who fails to appear at a hearing set intransferably by the court in open session may be validly tried in absentia. Second, it is a contracts case: it teaches that a private agreement over public land that is still the subject of a pending fishpond application cannot be dressed up as a contract of co-ownership or partnership, because everyone is conclusively presumed to know the law.

Procedural History

The Deluaos filed their complaint for specific performance and damages before the Court of First Instance of Davao in April 1951. They also secured a preliminary mandatory injunction ordering Casteel to let Inocencia Deluao continue administering the fishpond and to stop ejecting their encargado, Jesus Donesa. Casteel moved to dissolve the injunction, but the trial court denied the motion. The defendants then filed an answer with counterclaim, later amended, and a joint motion to dismiss for failure to state a claim, which the court likewise denied.

After several postponements, the trial court, through Judge Enrique Fernandez of Branch One, issued an order in open court on March 21, 1956, setting the case for hearing on May 2 and 3, 1956, and warning that no further transfer would be entertained. A notice of hearing later issued by a special deputy clerk of court set the case before a different branch, and the defendants filed a motion for postponement. On May 2, 1956, with neither the defendants nor their counsel appearing, the court received the plaintiffs' evidence ex parte and rendered judgment on May 4, 1956 in favor of the plaintiffs. Casteel's petition for relief from judgment was denied on May 21, 1956. Casteel appealed to the Court of Appeals, which certified the case to the Supreme Court because it involved only questions of law.

Facts

In 1940 Nicanor Casteel filed a fishpond application over a large tract of swampy land in Malalag, Davao. He filed again during the Japanese occupation, and a third time on December 12, 1945, covering 178.76 hectares. That third application was disapproved on May 13, 1946 because the area was still needed for firewood production. While his motion for reconsideration was pending, he was advised to file a new application, and so on May 27, 1947 he filed fishpond application 1717. Meanwhile, other persons filed applications over portions of the same area, among them Leoncio Aradillos, Victor Carpio, Alejandro Cacam, and later Felipe Deluao.

To protect his position against these rival applicants, Casteel needed to build dikes and cultivate fish, but he lacked funds. His uncle Felipe Deluao extended loans totaling more or less 27,000 pesos, and a wide productive fishpond was built. Casteel filed protests, and two administrative cases followed. Despite findings that Casteel had introduced improvements, the Director of Fisheries rejected his application on October 25, 1949 and ordered the land leased at public auction. Casteel appealed to the Secretary of Agriculture and Natural Resources.

On November 25, 1949, Inocencia Deluao, wife of Felipe, and Casteel executed a document denominated a contract of service. Inocencia was to finance the sum of 27,000 pesos, Casteel was to render only his services for the construction and improvement of the fishpond, Casteel was to be manager and sole buyer of all produce, and Inocencia was to be administrator. On September 15, 1950, the Secretary of Agriculture and Natural Resources reinstated Casteel's application and gave it due course, and cancelled the permits of Aradillos and Cacam. In January 1951, however, Casteel forbade Inocencia from further administering the fishpond and ejected Jesus Donesa from the premises, prompting the suit.

Issues

• Whether or not the trial court committed gross abuse of discretion when it received the plaintiffs' evidence in the absence of the appellant on May 2, 1956, thereby depriving him of his day in court and of his property without due process of law.
• Whether or not the trial court committed grave abuse of discretion when it denied the appellant's verified petition for relief from judgment.
• Whether or not the trial court erred in ordering the issuance ex parte of a writ of preliminary injunction against the appellant, and in not dismissing the complaint.

Applicable Provisions

Section 4 of Rule 31 of the Rules of Court, as cited in the decision, provides:

Section 4. Postponements. The court may postpone a trial upon good cause shown, and may also, in its discretion, postpone a trial or proceeding upon other grounds than those specified in this rule.

This provision is the anchor of the Court's holding that postponements and adjournments are controlled by the court and not by the clerk of court, and that no party may presume that a motion for postponement will be granted.

Ruling

On the first and second issues, the Court ruled against the appellant. An order given in open court is presumed received by the parties on the very date and time of its promulgation and amounts to legal notification for all legal purposes. The order of March 21, 1956 was therefore a valid notice, and the later notice of hearing signed by a special deputy clerk was a superfluity. As between the order of the court and the notice of a special deputy clerk, the court's order is the one legally binding, because the incidents of postponement and adjournment are controlled by the court and not by the clerk. The clerk's duty was simply to prepare the trial calendar, and he had no authority to transfer the case from one sala to another.

The Court added that the conformity of the plaintiffs' counsel to the postponement did not matter, since postponement depends on the court's discretion and not on the agreement of the parties. Notice to one of the appellant's twelve counsel of record was notice to all. Parties and their lawyers have no right to presume that their motions for postponement will be granted. Having had one month and ten days to prepare, the appellant in effect waived his right to appear, and the requirements of due process were satisfied: a competent court, lawful jurisdiction over the person and the subject matter, an opportunity to be heard, and judgment upon lawful hearing.

On the third issue, however, the Court found the appellant's contention meritorious. The trial court had relied on the contract of service as creating a contract of co-ownership and partnership over the fishpond. The Court held that everyone is conclusively presumed to know the law, and that the parties must be assumed to have entered into the contract cognizant of the mandatory and prohibitory laws governing fishpond applications, and therefore not to have intended to violate them. This negates the claim that the document created a co-ownership over the disputed fishpond.

Doctrine

First, an order issued by the court in open session setting a case for hearing is presumed received by the parties on the date of its promulgation and is a valid notice for all legal purposes; a party who fails to appear after such notice cannot claim deprivation of property without due process. Second, the setting of trials and the granting of postponements lie within the exclusive control and discretion of the court, not the clerk of court, and no party may presume that a motion for postponement will be granted. Third, everyone is conclusively presumed to know the law, so a private agreement over public land still covered by a pending fishpond application cannot be construed as creating a co-ownership or partnership, because the parties are presumed not to have intended to violate the mandatory and prohibitory laws governing fishpond permits.

Disposition

The Supreme Court affirmed the judgment of the trial court on the due process and relief issues but ruled in favor of the appellant on the injunction and complaint, holding that the contract of service did not create a co-ownership over the fishpond.

Remember This

Memorize this line: an order in open court is notice to all, and postponements belong to the court's discretion, not to the clerk or to the agreement of parties. Examiners use this case in civil procedure on notices of hearing and postponements, in constitutional law on due process, and in contracts on the conclusive presumption of knowledge of the law.