Facts:

This case revolves around Petitioner Igmedio Azajar and Respondent Cham Samco & Sons, Inc. In 1974, Azajar filed a complaint against Cham Samco in the Court of First Instance of Camarines Sur, alleging that he had purchased 100 kegs of nails through an agent, for which he paid the sum of P18,000.00. However, Cham Samco breached the contract by only offering to deliver a part of the ordered quantity. In response, Cham Samco filed a motion to dismiss the complaint on two grounds: first, they asserted that the complaint failed to state a cause of action, as it was not a perfected sale but rather an "offer to buy" partially accepted by Cham Samco; and second, they claimed that the venue was improper, stating that legal actions must be initiated in the City of Manila, as was customary in prior transactions.

The motion included a notice meant for the Clerk of Court, which later became a central issue. Azajar argued that this notice was defective and consequently filed a

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Facts:

Background of the Case

• Petitioner Igmedio Azajar initiated a complaint against Cham Samco & Sons, Inc. before the Court of First Instance (now Regional Trial Court) of Camarines Sur for breach of contract.
• Azajar alleged that he purchased 100 kegs of nails of various sizes through Cham Samco’s agent.
• He paid P18,000.00 in full payment for the nails as evidenced by Cham Samco’s printed order form.
• The dispute arose when Cham Samco delivered only part of the ordered quantity, purportedly breaching the contract.

Cham Samco’s Motion to Dismiss

• Cham Samco, through its counsel, filed a Motion to Dismiss on two substantive grounds:
• Failure of the complaint to state a cause of action—arguing that the complaint did not present a perfected sale but an “offer to buy” that was only partly accepted.
• Venue was improperly laid—the complaint did not follow the invariable condition known to the parties that legal actions arising from such transactions must be instituted in the City of Manila.
• The motion contained a notice addressed solely to the Clerk of Court, which omitted crucial details such as the specific time and place for a hearing.
• This omission meant that the notice did not comply with Section 5, Rule 15 of the Rules of Court regarding proper service to the adverse party.

Default and Judgment by the Trial Court

• Due to the defective notice, petitioner Azajar filed a motion on February 20, 1974, requesting that Cham Samco be declared in default.
• The trial court granted Azajar’s motion, and by Order dated February 22, 1974, Cham Samco was declared in default.
• On March 30, 1974, the trial court rendered a judgment by default against Cham Samco, which:
• Ordered Cham Samco to immediately deliver the nails as per Order Form No. 9020.
• Imposed the payment of P15,000.00 as actual damages, P10,000.00 as consequential damages (both with interest), and an additional P5,000.00 for exemplary damages.
• Directed Cham Samco to pay P7,500.00 for attorney’s fees and related litigation expenses along with other costs.

Cham Samco’s Post-Judgment Motions and Appeals

• Cham Samco filed a Motion for New Trial on April 9, 1974.
• The motion was premised on excusable negligence owing to the defective notice, arguing that the failure was technical and should be excused.
• Furthermore, Cham Samco asserted that it had affirmative defenses that, if proven, would absolve it from liability.
• The trial court denied the motion for a new trial.
• Cham Samco then sought relief in the Court of Appeals by arguing:
• The trial court had grave abuse of discretion by declaring it in default and rendering a default judgment.
• There was lack of jurisdiction in pronouncing the default.
• Initially, the Court of Appeals dismissed Cham Samco's petition for lack of merit on November 20, 1974.
• Upon a seasonable motion for reconsideration, the Court of Appeals reversed its earlier decision by Resolution dated March 25, 1975, thereby setting aside:
• The trial court’s order of default (February 22, 1974).
• The subsequent default judgment (rendered on March 30, 1974).
• The order denying the motion for new trial.
• The Court of Appeals then directed the lower court to allow Cham Samco to file an answer, join issues, and have the case tried on its merits.

Procedural and Substantive Considerations

• The defective notice cited by Cham Samco was substantially flawed since:
• It was directed to the Clerk of Court rather than to the adverse party.
• It did not include the requisite notice of the time and place for hearing.
• The ruling reiterated that such a technical defect is fatal as it denies the opposing party the opportunity to prepare and oppose the motion.
• Despite Cham Samco’s admission of error regarding the notice, the Court was persuaded by:
• The presence of affirmative defenses which, if proven at trial, could defeat Azajar’s claim.
• The imposition of excessive damages that disproportionately exceeded the actual value of the transaction.
• The Court also noted that even if the default had been properly declared, the excessive award of damages—coupled with the meritorious defenses—constituted grounds for relief under Section 1, Rule 37 of the Rules of Court.

Issue:

Sufficiency and Effect of the Notice in the Motion to Dismiss

• Whether the notice attached to Cham Samco’s Motion to Dismiss, which was directed solely to the Clerk of Court and lacked the mandatory particulars (time and place for hearing), complied with the requirements of the Rules of Court.
• Whether the defective notice should have had the effect of suspending the running period for Cham Samco to file a responsive pleading.

Validity of Declaring Default and Rendering a Default Judgment

• Whether the trial court was justified in declaring Cham Samco in default and rendering a default judgment based on the defective notice.
• Whether the default judgment, which imposed not only specific performance but also excessive damages, was a product of a grave abuse of discretion.

Appropriateness of Setting Aside the Default Judgment

• Whether the Court of Appeals had a sound basis to set aside both the order of default and the subsequent default judgment.
• Whether the existence of affirmative defenses and claims of excusable negligence by Cham Samco warranted a trial on the merits rather than reliance on technical defaults.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)