ZENITH INSURANCE CORPORATION, PETITIONER, VS. HON. FIDEL P. PURISIMA, PRESIDING JUDGE OF BRANCH VIII, CFI, MANILA AND PERLA COMPANIA DE SEGUROS, RESPONDENTS.

Zenith Insurance versus Purisima

The Case

This is a petition for review on certiorari brought by Zenith Insurance Corporation against Judge Fidel P. Purisima, presiding judge of Branch Eight of the Court of First Instance of Manila, and against Perla Compania de Seguros. The action below was one for damages arising from a vehicular accident, in which Zenith was sued as a co-defendant. Zenith asks the Supreme Court to annul a default judgment rendered against it after it failed to appear at a scheduled pre-trial. The case matters because it fixes the rule that a party may not be declared in default without due notice of the pre-trial, and because it gathers into one place the Court's settled aversion to default judgments.

Procedural History

Perla Compania de Seguros sued Manalang, Garcia, and Zenith Insurance Corporation for damages in the Court of First Instance of Manila. Zenith filed its Answer with a counterclaim. When Zenith failed to appear at the pre-trial set on January 16, 1981, the trial court declared it in default and allowed the plaintiff to present evidence ex parte. Judgment by default followed, ordering the defendants to pay the plaintiff 35,000 pesos with twelve percent interest per annum from January 17, 1979, plus 2,000 pesos as attorney's fees. Zenith then filed a Motion for Reconsideration and to Set Aside Order of Default, which the trial court denied. The trial court later ordered a writ of execution, but held in abeyance the resolution of Zenith's motion to quash that writ pending the Supreme Court's resolution of this petition. Zenith came to the Supreme Court by petition for review on certiorari, invoking grave abuse of discretion.

Facts

Perla Compania de Seguros brought an action for damages against Manalang, Garcia, and Zenith Insurance Corporation before the Court of First Instance of Manila, arising from a vehicular accident. Zenith, as defendant, filed its Answer with a counterclaim and thus joined the issues.

The trial court set the case for pre-trial on January 16, 1981. Its order setting that date stated that the parties and their counsel were notified in open court. Zenith did not appear. It later insisted that it never received any notice of that pre-trial, and that its counsel was sick with influenza from January 15 to January 18, 1981 and was advised to rest for a week, as shown by a verified medical certificate. Because of its non-appearance, Zenith was declared in default and the plaintiff was allowed to present evidence ex parte.

On examining the records, the Supreme Court found no notification to the parties or counsel of the January 16, 1981 pre-trial, unlike the trial court's other orders, such as those for the pre-trial on November 17, 1980, for December 18, 1980, and for the presentation of evidence on February 4, 1980, each of which bore proof of notice. Due notice not having been clearly established, the Court held that the trial court committed grave abuse of discretion.

Issues

• Whether or not the trial court acted with grave abuse of discretion in declaring Zenith in default for non-appearance at the pre-trial of January 16, 1981, when due notice of that pre-trial was not clearly established.
• Whether or not certiorari was the proper remedy, given that an appeal was technically available to Zenith.
• Whether or not the default order and all the proceedings that followed it, including the default judgment, may be sustained.

Applicable Provisions

The decision does not quote a statute; it rests on the procedural requirement of due notice of pre-trial and on the Court's settled policy against default judgments, which it states in its own words:

We maintain fealty to the principle that courts should be liberal in setting aside orders of default for default judgment is frowned upon, and unless it clearly appears that the reopening of the case is intended for delay, it is best that the trial Courts give both parties every chance to fight their case fairly and in the open, with out resort to technicality.

This principle governs the whole case: it is the standard against which the trial court's declaration of default is measured.

Ruling

On the first issue, the Court ruled for Zenith. An examination of the records failed to reveal any notification to the parties or counsel of the pre-trial set for January 16, 1981, unlike the trial court's other orders, which carried proof of notice. Due notice not having been clearly established, the trial court committed grave abuse of discretion in considering Zenith in default and in denying its motion to set aside the order of default.

On the second issue, the Court held that certiorari was proper even though appeal was technically available. Certiorari lies when appeal does not prove to be a speedy and adequate remedy, and it is the more speedy and efficacious remedy to have a judgment by default set aside as a nullity where a party has been illegally declared in default. The Court noted that the trial court had already ordered a writ of execution, so that even if appeal were available, it was no longer speedy and adequate.

On the third issue, the Court held that the validity of the order of default and of all the proceedings that transpired subsequent thereto cannot be sustained. It added that the defenses Zenith wished to raise, as listed in the affidavit of merit of its senior vice president, should be heard: that there was no documentary evidence that the vehicle of defendant Roman Garcia was insured with Zenith; that assuming such insurance, the action had already prescribed under the New Insurance Code; that any liability is subject to the terms and conditions of the policy; and that there is no record that the accident was reported to the company. To afford Zenith its day in court, it should be allowed to present evidence to substantiate those defenses.

Doctrine

A party may not be declared in default for failure to appear at a pre-trial unless due notice of that pre-trial is clearly established. Where the records show no such notice, the declaration of default is tainted with grave abuse of discretion, and the default order, the default judgment, and all proceedings subsequent thereto are void and cannot be sustained.

Default judgments are frowned upon. Courts should be liberal in setting aside orders of default, and unless it clearly appears that the reopening of the case is intended for delay, both parties should be given every chance to fight their case fairly and in the open, without resort to technicality.

Certiorari lies, despite the availability of appeal, when appeal does not prove to be a speedy and adequate remedy, as where a writ of execution has already been ordered. It is the more speedy and efficacious remedy to have a judgment by default set aside as a nullity where a party has been illegally declared in default.

Disposition

The Supreme Court granted certiorari, set aside the default order and the default judgment, and directed the respondent judge to re-set the case for pre-trial and trial and to render judgment accordingly, with no costs.

Remember This

Memorize this line: no due notice of pre-trial, no valid default, and the default judgment and all that follows are a nullity. Examiners use this case on the requisites of a valid declaration of default and on certiorari as a substitute for a lost appeal.